上工申贝(600843)2008年年度报告

上工申贝（集团）股份有限公司 600843 900924 2008 年年度报告 上工申贝（集团）股份有限公司 2008 年度报告 目录 一、重要提示 ............................................................... 1 二、公司基本情况简介 ....................................................... 1 三、主要财务数据和指标 ..................................................... 2 四、股本变动及股东情况 ..................................................... 3 五、董事、监事和高级管理人员 ............................................... 6 六、公司治理结构 ........................................................... 9 七、股东大会情况简介 ...................................................... 12 八、董事会报告 ............................................................ 12 九、监事会报告 ............................................................ 21 十、重要事项 .............................................................. 22 十一、财务会计报告 .........................................................27 十二、备查文件目录 ................................................................27 上工申贝（集团）股份有限公司 2008 年度报告 一、重要提示 1、本公司董事会、监事会及董事、监事、高级管理人员保证本报告所载资料不存在任何 虚假记载、误导性陈述或者重大遗漏，并对其内容的真实性、准确性和完整性承担个别及 连带责任。 2、公司全体董事出席董事会会议。 3、立信会计师事务所有限公司为本公司出具了标准无保留意见的审计报告。 4、公司董事长兼 CEO 张敏先生、总经理马民良先生、会计机构负责人孟祥云女士声明： 保证本年度报告中财务报告的真实、完整。 二、公司基本情况简介 1、 公司法定中文名称：上工申贝（集团）股份有限公司 公司法定中文名称缩写：上工申贝 公司英文名称：SGSB GROUP CO.,LTD. 公司英文名称缩写：SGSB 2、 公司法定代表人：张敏 3、 公司董事会秘书：张一枫 电话：021-68407515 传真：021-63302939 E-mail：zyf@sgsbgroup.com 联系地址：上海市浦东新区世纪大道 1500 号东方大厦 12 楼 公司证券事务代表：周勇强 电话：021-68407700*728 传真：021-63302939 E-mail：zyq@sgsbgroup.com 联系地址：上海市浦东新区世纪大道 1500 号东方大厦 12 楼 4、 公司注册地址：上海市浦东新区罗山路 1201 号 公司办公地址：上海市浦东新区世纪大道 1500 号东方大厦 12 楼 邮政编码：200122 公司国际互联网网址：http://www.sgsbgroup.com 公司电子信箱：sgsb@sgsbgroup.com 5、 公司信息披露报纸名称：《上海证券报》、香港《商报》 登载公司年度报告的中国证监会指定国际互联网网址：http://www.sse.com.cn 公司年度报告备置地点：公司办公室 6、 公司 A 股上市交易所：上海证券交易所 公司 A 股简称：上工申贝 公司 A 股代码：600843 公司 B 股上市交易所：上海证券交易所 公司 B 股简称：上工 B 股 公司 B 股代码：900924 7、 其他有关资料 公司首次注册登记日期：1993 年 12 月 16 日 公司首次注册登记地点：上海市工商行政管理局 公司变更注册登记日期：2005 年 2 月 7 日 公司变更注册登记地址：上海市工商行政管理局 1 上工申贝（集团）股份有限公司 2008 年度报告 公司法人营业执照注册号：310000400080303（市局） 公司税务登记号码：国地税沪字 310115132210544 公司组织机构代码：13221054-4 公司聘请的会计师事务所名称：立信会计师事务所有限公司 公司聘请的会计师事务所办公地址：上海市南京东路 61 号 4 楼 公司其他基本情况： 法律顾问:上海市震旦律师事务所 办公地址:上海市四川北路 1688 号 16 楼 三、主要财务数据和指标 (一)本报告期主要财务数据 单位:元 币种:人民币 项目 金额 营业利润 -16,597,305.54 利润总额 -14,853,767.98 归属于上市公司股东的净利润 -32,261,701.11 归属于上市公司股东的扣除非经常性损益后的净利润 -53,442,616.53 经营活动产生的现金流量净额 66,065,197.75 (二)扣除非经常性损益项目和金额 单位:元 币种:人民币 非经常性损益项目 金额 (一)非流动性资产处置损益，包括已计提资产减值准备的冲销部分； 60,854,393.28 (二)计入当期损益的政府补助，但与公司正常经营业务密切相关，符合国 2,071,917.00 家政策规定、按照一定标准定额或定量持续享受的政府补助除外； （三）与公司正常经营业务无关的或有事项产生的损益； -35,546,274.6 （四）除同公司正常经营业务相关的有效套期保值业务外，持有交易性金 融资产、交易性金融负债产生的公允价值变动损益，以及处置交易性金融 2,634,592.40 资产、交易性金融负债和可供出售金融资产取得的投资收益； （五）除上述各项之外的其他营业外收入和支出； 1,074,152.55 （六）少数股东权益的影响数； -1,049,904.49 （七）所得税影响额 -8,857,960.72 合计 21,180,915.42 (三)报告期末公司前三年主要会计数据和财务指标 单位:元 币种:人民币 本年比上年增 2006 年 主要会计数据 2008 年 2007 年 减(%) 调整前 调整后 营业收入 2,236,184,307.76 2,538,060,869.69 -11.89 2,406,584,588.29 2,440,723,981.83 利润总额 -14,853,767.98 91,643,070.06 -116.21 23,488,575.39 31,343,301.49 归属于上市公司股 东的净利润 -32,261,701.11 28,030,284.53 -215.10 4,893,123.59 6,571,852.74 归属于上市公司股 东的扣除非经常性 -53,442,616.53 -66,087,946.53 19.13 -41,085,145.16 -39,406,416.01 损益的净利润 基本每股收益 -0.0719 0.0624 -215.22 0.0109 0.0146 稀释每股收益 -0.0719 0.0624 -215.22 0.0109 0.0146 扣除非经常性损益 后的基本每股收益 -0.1191 -0.1472 19.09 -0.0915 -0.0878 2 上工申贝（集团）股份有限公司 2008 年度报告 全面摊薄净资产收 减少 11.14 个 益率（%） -6.3414 4.7958 0.8329 1.2279 百分点 加权平均净资产收 减少 10.78 个 益率（%） -5.6765 5.1037 0.8610 1.1546 百分点 扣除非经常性损益 增加 0.80 个百 后全面摊薄净资产 -10.5048 -11.3073 -6.9938 -7.3629 收益率（%） 分点 扣除非经常性损益 增加 2.63 个百 后的加权平均净资 -9.4032 -12.0330 -7.2290 -6.9234 产收益率（%） 分点 经营活动产生的现 金流量净额 66,065,197.75 30,669,664.85 115.41 116,517,385.91 116,517,385.91 每股经营活动产生 的现金流量净额 0.1472 0.0683 115.52 0.2596 0.2596 2006 年末 本年末比上年 2008 年末 2007 年末 末增减(%) 调整前 调整后 总资产 2,042,412,641.76 2,380,098,702.55 -14.19 2,486,972,366.78 2,440,929,062.47 所有者权益（或股东 权益） 508,744,914.20 584,473,598.84 -12.96 587,453,178.73 535,205,158.97 归属于上市公司股 东的每股净资产 1.1333 1.3021 -12.96 1.3087 1.1923 四、股本变动及股东情况 (一)股本变动情况 1、股份变动情况表 单位:股 本次变动前 本次变动增减（＋，－） 本次变动后 公 发 积 比例 行 送 比例 数量 金 其他 小计 数量 (%) 新 股 (%) 转 股 股 一、有限售条件股份 1、国家持股 87,275,319 19.44 -22,444,339 -22,444,339 64,830,980 14.44 2、国有法人持股 3、其他内资持股 其中： 境内法人持股 境内自然人持股 4、外资持股 其中： 境外法人持股 境外自然人持股 有限售条件股份合 87,275,319 19.44 -22,444,339 -22,444,339 64,830,980 14.44 计 二、无限售条件流通股份 1、人民币普通股 117,667,708 26.21 22,444,339 22,444,339 140,112,047 31.21 2、境内上市的外资 243,943,750 54.35 0 0 243,943,750 54.35 股 3、境外上市的外资 股 4、其他 无限售条件流通股 361,611,458 80.56 22,444,339 22,444,339 384,055,797 85.56 份合计 三、股份总数 448,886,777 100 0 0 448,886,777 100 3 上工申贝（集团）股份有限公司 2008 年度报告 2、限售股份变动情况表 单位:股 年初限售股 本年解除限售 本年增加限 年末限售股 解除限售日 股东名称 限售原因 数 股数 售股数 数 期 上海市浦东新区国有 2008 年 6 月 87,275,319 22,444,339 0 64,830,980 股改承诺 资产监督管理委员会 18 日 3、证券发行与上市情况 （1）前三年历次证券发行情况 截止本报告期末的前三年，公司未有增发新股、配售股份、可转换公司债券、分离交易的 可转换公司债券、公司债券及其他衍生证券的发行与上市情况。 （2）公司股份总数及结构的变动情况 1）报告期内没有因送股、转增股本、配股、增发新股等原因引起公司股份总数的变 动情况。 2）根据公司股权分置改革实施方案，公司于 2008 年 6 月 18 日安排有限售条件的流 通股 22,444,339 股上市流通（详见 2008 年 6 月 11 日本公司刊登在《上海证券报》、香 港《商报》007 号公告），公司股本结构发生变化，情况如下（单位：股） 本次上市前 变动数 本次上市后 1、国家持有股份 87,275,319 -22,444,339 64,830,980 有限售条件 2、国有法人持有股份 0 0 0 的流通股份 3、其他境内法人持有股份 0 0 0 有限售条件的流通股合计 87,275,319 -22,444,339 64,830,980 A股 117,667,708 22,444,339 140,112,047 无限售条件 B股 243,943,750 0 243,943,750 的流通股份 无限售条件的流股份合计 361,611,458 22,444,339 384,055,797 股份总数 448,886,777 0 448,886,777 (3) 现存的内部职工股情况 本报告期末公司无内部职工股。 (二)股东情况 1、股东数量和持股情况 单位:股 报告期末股东总数 55,948 户，其中 A 股股东 21,175 户，B 股股东 34,773 户 前十名股东持股情况 持有有限售 持股比例 报告期内增 质押或冻结的股份数 股东名称 股东性质 持股总数 条件股份数 (%) 减 量 量 上海市浦东新区 国有资产监督管 国家 24.44 109,719,658 0 64,830,980 0 理委员会 上海国际信托投 国有法人 3.80 17,047,371 -510,600 0 0 资有限公司 中国长城资产管 国家 2.02 9,060,514 0 0 0 理公司 HONOUR FORCE INVESTMENTS 境外法人 1.21 5,415,170 2,685,170 0 未知 LTD. NORMAL WIN 境外法人 0.57 2,560,630 -2,524,150 0 未知 ASSETS LIMITED 胡云菁 境内自然人 0.56 2,491,750 10,150 0 未知 4 上工申贝（集团）股份有限公司 2008 年度报告 胡柏君 境内自然人 0.49 2,192,300 6,300 0 未知 徐妙莲 境内自然人 0.44 1,975,750 1,975,750 0 未知 上海三毛企业 （集团）股份有 国有法人 0.39 1,763,303 -568,000 0 未知 限公司 是裕兴 境内自然人 0.31 1,381,695 1,381,695 0 未知 前十名无限售条件股东持股情况 股东名称 持有无限售条件股份数量 股份种类 上海市浦东新区国有资产监督管理委员会 44,888,678 人民币普通股 上海国际信托投资有限公司 17,047,371 人民币普通股 中国长城资产管理公司 9,060,514 人民币普通股 HONOUR FORCE INVESTMENTS LTD. 5,415,170 境内上市外资股 NORMAL WIN ASSETS LIMITED 2,560,630 境内上市外资股 胡云菁 2,491,900 境内上市外资股 胡柏君 2,192,300 境内上市外资股 徐妙莲 1,975,750 人民币普通股 上海三毛企业（集团）股份有限公司 1,763,303 人民币普通股 是裕兴 1,381,695 境内上市外资股 未知前十名流通股股东之间是否存在关联关系或一致行动人的情况。 上述股东关联关系或一致行动关系的说明 未知前十名流通股股东与前十名股东之间是否存在关联关系。 前十名有限售条件股东持股数量及限售条件 单位:股 有限售条件股份可上市交易情况 持有的有限 序 新增可上市 有限售条件股东名称 售条件股份 限售条件 号 可上市交易时间 交易股份数 数量 量 上海市浦东新区国有资产监督管理委 股改承诺 1 64,830,980 2009 年 6 月 15 日 64,830,980 员会 2、控股股东及实际控制人简介 (1) 法人控股股东情况 控股股东名称：上海市浦东新区国有资产监督管理委员会 法人代表：陆方舟 成立日期：1996 年 9 月 1 日 主要经营业务或管理活动：受上海市浦东新区人民政府委托，专司浦东新区国有资产管理 (2) 控股股东及实际控制人变更情况 本报告期内公司控股股东及实际控制人没有发生变更。 (3) 公司与实际控制人之间的产权及控制关系的方框图 上海市浦东新区国有资产监督管理委员会 24.44% 上工申贝（集团）股份有限公司 5 上工申贝（集团）股份有限公司 2008 年度报告 3、其他持股在百分之十以上的法人股东 截止本报告期末公司无其他持股在百分之十以上的法人股东。 五、董事、监事和高级管理人员 (一)董事、监事、高级管理人员情况 单位:股、万元 被 报告期被授予的股 持 是否 授 权激励情况 有 报告期 在股 予 本 内从公 东单 的 公 司领取 期 位或 限 可 已 职 性 年 任期起 任期终 年初持 年末持 司 股份增减 变动 的报酬 末 其他 姓名 制 行 行 行 务 别 龄 始日期 止日期 股数 股数 的 数 原因 总额 股 关联 性 权 权 权 股 (万元) 票 单位 股 股 数 价 票 （税 市 领取 票 数 量 期 前） 价 报酬、 数 权 津贴 量 董事 2006 年 6 2009 年 6 70,000 70,000 张敏 男 46 40.1 否 长、CEO 月 26 日 月 25 日 (B) (B) 副董事 2006 年 6 2009 年 6 顾坚 男 58 0 0 0 否 长 月 26 日 月 25 日 执行董 2006 年 6 2009 年 6 马民良 事、总 男 52 5,520 5,520 31.7 否 月 26 日 月 25 日 经理 2006 年 6 2009 年 6 贾春荣 董事 男 60 0 0 0.8 是 月 26 日 月 25 日 2006 年 6 2009 年 6 沈逸波 董事 男 42 0 0 0.8 是 月 26 日 月 25 日 2008 年 6 2009 年 6 鞠卫峰 董事 男 58 0 0 0 是 月 13 日 月 25 日 Alfred 2008 年 6 2009 年 6 董事 男 53 0 0 0 否 Wadle 月 13 日 月 25 日 独立董 2006 年 6 2009 年 6 刘仁德 男 63 0 0 6.00 否 事 月 26 日 月 25 日 独立董 2006 年 6 2009 年 6 王志乐 男 60 0 0 6.00 否 事 月 26 日 月 25 日 独立董 2006 年 6 2009 年 6 蒋衡杰 男 58 0 0 6.00 否 事 月 26 日 月 25 日 独立董 2008 年 6 2009 年 6 石良平 男 52 0 0 3.00 否 事 月 13 日 月 25 日 监事会 2006 年 6 2009 年 6 何忠源 男 60 10,792 10,792 25.3 否 主席 月 26 日 月 25 日 2006 年 6 2009 年 6 姜小书 监事 女 50 0 0 14 否 月 26 日 月 25 日 2008 年 6 2009 年 6 倪玥 监事 女 33 0 0 0 是 月 13 日 月 25 日 诸葛惠 副总经 2007 年 9 2009 年 6 女 40 0 0 13.4 否 玲 理 月3日 月 25 日 副总经 2008 年 4 2009 年 6 李嘉明 男 47 0 0 5.9 否 理 月 18 日 月 25 日 副总经 2008 年 4 2009 年 6 方海祥 男 41 0 0 5.3 否 理 月 18 日 月 25 日 2008 年 副总经 2009 年 6 郑莹 女 43 10 月 27 1,500 1,500 7.4 否 理 月 25 日 日 董事会 2006 年 6 2009 年 6 张一枫 男 58 5,058 5,058 14.6 否 秘书 月 26 日 月 25 日 合计 / / / / / 92,870 92,870 / / / / 180.3 / / / / / 董事、监事、高级管理人员最近 5 年的主要工作经历： (1)张敏,曾任上海冰箱压缩机股份有限公司总经理助理；上海扎努西电气机械有限公司 总经理；上海申贝办公机械有限公司党委副书记、总经理、副董事长、董事长。现任本公 司党委副书记、董事长兼 CEO。 (2)顾坚,曾任上海浦东国有资产投资管理公司总经理；上海浦东发展（集团）有限公司 副总经济师、总经济师；本公司董事。现任本公司党委书记、副董事长。 (3)马民良,曾任上海梅林正广和（集团）有限公司党委书记、总经理；上海轻工装备（集 团）有限公司党委书记、副总经理；上海申贝办公机械有限公司党委书记、副总经理、总 经理；本公司副董事长兼 CFO。现任本公司执行董事、总经理。 6 上工申贝（集团）股份有限公司 2008 年度报告 (4)贾春荣,曾任上投投资管理有限公司副总经理、总经理、董事长；报告期内任本公司 董事。 (5)沈逸波,曾任中国长城资产管理公司上海办事处综合管理部副处长、债权管理部副处 长、处长、资产经营一部处长。现任中国长城资产管理公司上海办事处副总经理，本公司 董事。 (6)鞠卫峰，曾任上海市浦东新区人民政府办公室主任、信访办主任、法制办主任，浦 东新区纪律检查委员会委员。现任上海市浦东发展（集团）有限公司党委委员、董事，本 公司董事。 (7)Alfred Wadle，曾任杜克普·阿德勒股份公司捷克公司执行董事、首席执行官。2007 年 1 月至今任杜克普·阿德勒股份公司执行董事、董事会发言人（首席执行官），本公司 董事。 (8)刘仁德,曾任上海东亚会计师事务所有限公司党支部书记、副主任会计师。现任上海 宏大东亚会计师事务所有限公司党支部书记、副主任会计师，本公司独立董事。 (9)王志乐,曾任中国人民大学讲师、副教授。现任商务部研究院跨国公司研究中心主任 兼国家产业政策咨询委员会委员，中国集团公司促进会副会长、中国投资协会外资投资委 员会副会长，中国经济体制改革研究会特约研究员，南开大学跨国公司研究中心兼职教授。 本公司独立董事。 (10)蒋衡杰,曾任中国丝绸工业总公司办公室主任、总经理助理、副总经理；中国服装 总公司总经理、中国服装协会理事长、中国服装集团公司党委书记、第一副总经理、中国 服装协会会长。现任中国服装协会常务副会长（法人代表），全国服装标准化技术委员会 主任、中国纺织工程学会常务理事、清华大学美术学院苏州大学、江西服装学院、北京服 装学院客座教授。本公司独立董事。 (11)石良平，曾任华东理工大学工商经济研究所所长、华东理工大学校长助理、商学院 院长。现任上海海关学院副院长，兼任上海市统计学会副会长、上海管理学会副理事长、 上海市社联常委、上海市人民政府决策咨询专家。本公司独立董事。 (12)何忠源,曾任本公司副董事长。现任本公司监事会主席。 (13)姜小书,曾任上海申贝办公机械总公司工会副主席、主席、上海申贝办公机械有限 公司党委委员、纪委书记、工会主席。现任本公司党委副书记、纪委书记、工会主席、监 事。 (14)倪玥，曾任上海静安城商贸总公司主办会计、上海市民办东方世纪学校兼上海泰龙 房地产有限公司主管会计、上海宝地置业有限公司财务主管、瑞安房地产发展有限公司会 计主任。2008 年 3 月至今在上海市浦东新区国有资产监督管理委员会国有企业监事工作 管理中心工作。本公司监事。 (15)诸葛惠玲,曾任本公司工会副主席、主席、公司党委副书记、第四届监事会职工监 事。现任公司副总经理。 (16)李嘉明，曾任上海感光材料公司研究所副所长（主持工作）、上海感光材料厂厂长 兼总工程师、上海达海照相机有限公司副总经理、上海申贝办公机械有限公司技术开发中 心主任、副总经理兼申贝感光材料厂厂长。现任上海申贝办公机械有限公司总经理、党委 副书记，本公司副总经理。 (17)方海祥，曾任飞人协昌缝纫机总公司副总经理、本公司技术中心副主任、主任。现 任本公司副总经理。 (18)郑莹，曾任上海申贝办公机械有限公司总经理助理、上海富士施乐复印机有限公司 党委书记、副总经理，2004 年 11 月至 2008 年 10 月，受本公司派遣，任上工欧洲（控股） 有限公司执行董事及德国杜克普·阿德勒股份有限公司执行董事。现任本公司副总经理。 7 上工申贝（集团）股份有限公司 2008 年度报告 (19)张一枫,曾任本公司资产管理办公室主任、董事会办公室主任。现任本公司董事会 秘书。 (二)在股东单位任职情况 担任的职 任期终 是否领取报 姓名 股东单位名称 任期起始日期 务 止日期 酬津贴 2008 年 7 贾春荣 上海市上投投资管理有限公司 董事长 2006 年 1 月 1 日 是 月1日 沈逸波 中国长城资产管理公司上海办事处 副总经理 2007 年 2 月 1 日 是 上海市浦东新区国有资产监督管理 倪 玥 — 2008 年 3 月 1 日 是 委员会国有企业监事工作管理中心 上海市浦东新区国有资产监督管理 鞠卫峰 — 是 委员会 在其他单位任职情况 是否 担任的职 领取 姓名 其他单位名称 任期起始日期 任期终止日期 务 报酬 津贴 贾春荣 上海海立（集团）股份有限公司 董事 2005 年 6 月 30 日 2008 年 6 月 30 日 否 贾春荣 上海联华合纤股份有限公司 董事 2005 年 8 月 18 日 否 贾春荣 上海绅士汽车商城有限公司 董事长 否 贾春荣 北京华南大厦有限公司 董事 否 王志乐 中国海洋石油总公司 高级顾问 是 王志乐 北京新世纪跨国公司研究所 所长 是 蒋衡杰 宁波杉杉股份有限公司 独立董事 2008 年 4 月 23 日 是 蒋衡杰 雅戈尔集团股份有限公司 独立董事 2008 年 5 月 15 日 是 (三)董事、监事、高级管理人员报酬情况 1、董事、监事、高级管理人员报酬的决策程序:独立董事报酬由股东大会决定。其他人员 报酬由公司董事会薪酬与考核委员会提出议案，报公司董事会审议批准。 2、董事、监事、高级管理人员报酬确定依据：公司实行基薪和加薪结合生产经营业绩指 标考核发放。 3、不在公司领取报酬津贴的董事、监事情况 不在公司领取报酬津贴的董事、监事的姓名 是否在股东单位或其他关联单位领取报酬津贴 倪 玥 是 鞠卫峰 是 Alfred Wadle 否 顾 坚 否 (四)公司董事、监事、高级管理人员变动情况 （1）聘任情况 1）2008 年 3 月 3 日，公司召开第五届董事会第十五次会议，根据总经理马民良先生提 名，聘任孟祥云女士为公司财务总监、财务负责人。 8 上工申贝（集团）股份有限公司 2008 年度报告 2）2008 年 4 月 18 日，公司召开第五届董事会第十六次会议，根据总经理马民良先生 提名，聘任李嘉明先生、方海祥先生为公司副总经理。 3）2008 年 10 月 27 日，公司召开第五届董事会第二十次会议，根据总经理马民良先 生提名，聘任郑莹女士为公司副总经理。 4）2008 年 6 月 13 日，公司召开 2007 年度股东大会，审议通过增补 Alfred Wadle 先 生、鞠卫峰先生为公司董事，增补石良平先生为公司独立董事，增补倪玥女士为公司监事。 （2）离任情况 1）2008 年 3 月 3 日，徐晓晖女士因到龄退休，不再担任公司财务负责人职务；常江 先生因工作变动，不再担任公司董事职务。 2）2008 年 5 月 23 日，王杰先生因工作变动，不再担任公司监事职务。 3）2008 年 10 月 29 日，孟祥云女士因工作变动，辞去公司财务总监、财务负责人职 务。 (五)公司员工情况 截止报告期末,公司员工为 2,327 人（不包括公司在海外的控股企业）。除各种原因 离岗外，实际在岗人数为 1,186 人。全公司现有离退休人员 6,117 人，需承担费用的离退 休职工为 0 人。员工的结构如下： 1、专业构成情况 专业类别 人数 生产人员 502 销售人员 127 工程技术人员 75 财务人员 59 其他人员 423 2、教育程度情况 教育类别 人数 研究生及本科生 119 大专 229 中专 141 高中及以下 697 六、公司治理结构 （一）公司治理的情况 1、公司治理整改情况 （1）按照中国证监会证监公司字[2007]28 号文《关于开展加强上市公司治理专项活动 有关事项的通知》（以下称《“通知”》）和上海证监局《关于开展上海辖区上市公司治 理专项活动的通知》（沪证监公司字[2007]39 号）的要求，本公司及时组织董事、监事、 高管及相关人员认真学习，周密安排，并明确董事长作为第一责任人，切实推进专项治理 活动，本公司先后完成了自查、公众评议和整改提高三个阶段等相关工作，并接受了上海 证监局对本公司治理情况专项检查，2007 年 10 月 30 日，公司召开五届十三次董事会议， 审议并通过了《公司治理专项活动的整改报告》（全文刊登于 2007 年 10 月 31 日《上海 证券报》、香港《商报》和上海证券交易所网站（www.sse.com.cn）上）。 （2）报告期内，中国证监会又以公告的形式向社会发布了《关于公司治理专项活动公 告的通知》（公告[2008]27 号），要求在巩固去年公司治理专项活动成果的基础上，把 9 上工申贝（集团）股份有限公司 2008 年度报告 该项活动继续推向深入，并提出了工作重点和具体要求，对此，公司董事长、总经理又分 别组织董事、监事、高管人员，认真学习有关文件，对《整改报告》的落实情况及整改效 果进行了审慎评估，认为：公司限期整改问题已整改完成，持续整改问题取得一定效果； 但加强公司治理规范化建设是一项长期而艰巨的任务，公司将坚持不懈地以加强内控制度 建设为重点，不断夯实管理基础，认真总结和创新具有自身特色的公司治理经验和做法， 努力提高上市公司的质量。 2、公司治理结构现状 通过开展专项治理活动，公司进一步健全了内部控制制度，完善了内部约束机制和责 任追究机制，夯实了管理基础，提高了公司的质量，推动了公司的规范化运作，目前公司 治理结构情况如下： （1）关于股东与股东大会：通过股权分置改革，公司与股东之间的利益趋于一致，公 司通过电话、传真、电子信箱、网站及不定期组织交流活动等方式，与广大股东（特别是 中小股东）建立起有效沟通的渠道，公司按照《股东大会议事规则》的要求召集、召开股 东大会，聘请律师出席会议并见证，保证了股东对公司重大事项的知情权、参与权和表决 权。 （2）关于控股股东与上市公司的关系：公司具有独立的业务及自主经营能力，公司董 事会、监事会和内部机构能够独立运作；公司控股股东行为规范，对上市公司的决策和经 营活动没有进行直接和间接地干预；公司与控股股东不存在同业竞争的行为；公司与控股 股东进行的关联交易活动，能遵循商业原则，定价依据充分披露，关联方在表决时，放弃 表决权。 （3）关于董事和董事会：公司严格按照《章程》的规定选聘董事，董事会建立了《董 事会议事规则》，全体董事能够依据《董事会议事规则》出席董事会召开的会议；董事会 下设的四个专业委员会能按规定开展活动，有效地提高了董事会运作质量和效率；独立董 事能履行职责，对公司重大决策能发表独立意见，确保公司重大决策的正确性。 （4）关于监事与监事会：公司监事会的人数和人员构成符合法律、法规的要求，监事 会建立了《监事会议事规则》，监事会会议严格按照规定的程序进行，会议记录完整、真 实。全体监事本着对公司负责、对股东负责的态度，对公司财务以及董事、总经理和其他 高级管理人员履行职责的合法合规性进行监督，并能独立发表意见。 （5）关于绩效评价与激励约束机制：公司建立了公开、透明的绩效评价与激励约束机 制，公司董事会设立的薪酬与考核委员会根据公司经营的状况和高层管理人员的工作实绩 进行审核，并确定报酬。 （6）关于利益相关者：公司重视自己的社会责任，努力维护银行及其他债权人、职工、 消费者、供应商、社区等利益相关者的合法权利，以实现股东、员工、社会等各方利益的 平衡，共同推动公司持续、健康、稳定地发展。 （7）关于信息披露与透明度：公司指定董事会秘书负责信息披露工作，接待投资者的 来访和咨询；公司指定《上海证券报》和香港《商报》为公司信息披露的报纸；公司按照 《上海证券交易所上市规则》及公司《信息披露事务管理制度》的规定，真实、准确、及 时、完整地披露有关信息，确保所有投资者有平等的机会获得有关信息。 (二)独立董事履行职责情况 1、独立董事参加董事会的出席情况 独立董事姓名 本年应参加董事会次数 亲自出席（次） 委托出席（次） 缺席（次） 备注 刘仁德 7 7 王志乐 7 7 蒋衡杰 7 7 石良平 4 4 10 上工申贝（集团）股份有限公司 2008 年度报告 报告期内，公司独立董事按照《独立董事工作制度》等法规要求，认真履行诚信和勤 勉义务，检查和指导公司的经济运行情况，对公司高级管理人员变动、结余的募集资金运 用、担保手续变更等事项发表了专业性的意见，出具了独立董事意见书。报告期内，独立 董事参与了公司发展战略研讨。王志乐先生提出了“整合全球资源，形成全球价值链”、 “改造传统制造业产业链，增强软性竞争力”、“加快吸纳和培养跨国经营人才”的建议； 蒋衡杰先生在介绍中国服装行业的发展趋势时，提出“整合也是创新”的观念，要求缝制 设备制造企业必须加快产品结构的调整，以适应服装行业调整重组的需要。刘仁德先生担 任董事会审计委员会主任，他和石良平先生一起，参与公司年度审计全过程，通过与注册 会计师沟通、现场调研，查阅审计报告，发表了专业意见。在董事会的日常工作及重要决 策中独立董事尽职尽责，维护了公司的整体利益和中小股东的合法权益。 2、独立董事对公司有关事项提出异议的情况 报告期内，公司独立董事未对公司本年度的董事会议案及其他非董事会议案提出异 议。 (三)公司相对于控股股东在业务、人员、资产、机构、财务等方面的独立情况 1、业务方面：公司拥有独立的原辅材料采购系统、生产系统和销售系统，具有独立 自主的经营能力，与控股股东之间不存在同业竞争的行为。 2、人员方面：公司建立了独立的劳动、人事及工资管理体系，公司的高级管理人员 均在本公司领取报酬，未在控股股东单位担任职务。 3、资产方面：公司资产独立、完整，拥有独立的土地使用权及知识产权。 4、机构方面：公司设置了独立的组织机构体系，所有职能部门均独立行使职权，不 存在与控股股东合署办公的情况。 5、财务方面：公司设置独立的财务管理部门，建立了独立的财务核算体系和财务管 理制度，在银行独立开户，独立依法纳税。 (四)高级管理人员的考评及激励情况 公司制定了相关的考核制度，对高管人员的绩效评价由公司人力资源部门进行考核和 测评，年末由薪酬与考核委员会综合评定，确定报酬情况，并提交董事会审议通过。 (五)公司内部控制制度的建立健全情况 根据中国证监会有关上市公司治理的规范文件以及《上海证券交易所上市公司内部控 制指引》的精神，公司高度重视内部控制制度的建设和执行，构建了公司风险控制框架， 全面系统地设立内部管理控制点，报告期内公司对内控制度的执行情况开展了专项检查， 进一步修订和完善了部分规章制度。公司确定审计室为内部控制日常检查监督机构，负责 对各项业务、分支机构、财务会计等进行定期或不定期的稽核和监督，并直接对董事会负 责。 公司建立了相关的控制程序，主要包括：交易授权控制、财务事权控制、责任分工控 制、凭证与记录控制、资产接触与记录使用控制、信息系统控制等。 公司现有的内部控制制度基本建立并注意不断完善，这些内控制度能够适应公司管理 的要求和公司发展的需要，并得以顺利贯彻执行，对经营风险起到有效的控制作用。 (六)公司披露董事会对公司内部控制的自我评估报告和审计机构的核实评价意见 公司建立了内部控制制度，公司审计室为公司内部控制检查监督部门，定期向公司 董事会审计委员会提交内部控制检查监督工作报告，并配合审计委员会完成内部控制自我 评估报告，该报告尚未正式对外披露也未请审计机构出具核实评价意见。 11 上工申贝（集团）股份有限公司 2008 年度报告 七、股东大会情况简介 (一)年度股东大会情况 公司于 2008 年 6 月 13 日召开 2007 年度股东大会。决议公告刊登在 2008 年 6 月 14 日的《上海证券报》、香港《商报》。 (二)临时股东大会情况 公司于 2008 年 12 月 29 日召开 2008 年第一次临时股东大会。决议公告刊登在 2008 年 12 月 30 日的《上海证券报》、香港《商报》。 八、董事会报告 (一)管理层讨论与分析 公司经营范围：本公司属缝纫设备机械制造行业，主营生产、销售工业用缝制设备及零部 件、缝纫机专用设备和家用缝纫机、技术开发与咨询。 1、报告期内公司总体经营情况 2008 年受金融危机影响，国际国内缝制设备市场均出现了大幅波动，自下半年开始， 产品订单不足，销售价格持续下跌，公司管理层根据市场变化情况，加强市场信息分析， 及时采取各种相应措施，在缝制设备制造全行业经营情况出现深幅调整的局面下，站稳了 阵脚。 报告期内，公司营业收入 223,618 万元，同比减少 11.89%；营业利润-1,660 万元， 同比减少-155.40%；净利润-3,226 万元，同比减少-215.10%。全年公司产品出口创汇 9,551 万美元，同比增长 26%（不含境外企业）。 报告期内，公司根据市场形势，有针对性地抓了以下几方面工作： （1）加强市场营销，完善销售网络 面对缝制设备市场需求萎缩的形势，公司下属各企业及时调整营销策略，完善销售网络， 并抓住各种会展等时机，主动出击，广泛推介本公司具有技术优势的新、名、特、优产品， 积极争取订单，同时，开展经销商诚信管理，积极培育合格经销商和潜在客户群，努力开 拓国际国内市场。 （2）采取有效措施，稳定海外经营 受亚洲地区缝制设备行业不景气影响，德国 DA 公司缝制设备销售同期相比也出现下 降，但 DA 公司的物料传输业务销售水平同比仍有增长。 德国 DA 公司及其在欧洲的子公司在工会的支持下，按生产实际需要，区别不同情况 分别采取减员、降薪、挖潜、降本等措施，全年在营业收入下降的情况下，仍然实现主业 盈利的目标。 （3）加快技术引进，提升产品能级 公司高度重视创新发展，努力增强核心竞争力，一方面加大 DA 公司新品研发力度， 保持其在全球工业缝制设备行业的技术领先地位；另一方面，发挥德国 DA 公司研发中心 在国内合资企业引进、消化、吸收 DA 产品技术中的积极作用，确保 DA 制造（上海）公司 “德国技术、上海制造”的各种类型的缝制设备产品能按计划提供市场。 （4）贯彻增收节支要求，落实降本增效措施 公司管理层带领管理部门采取减薪、控制日常费用等各项措施，为下属企业过“紧日 子”树立榜样，各企业也结合实际，制订并落实降本增效等具体目标措施，据统计，公司 全年增收节支费用就达 1,000 万元以上。 （5）强化企业管理，重视制度建设 根据深入开展公司治理和加强内控制度建设要求，公司一方面组织力量制订各类制 度，另一方面又对制度贯彻和延伸情况进行检查，根据检查情况，及时予以修订完善。 12 上工申贝（集团）股份有限公司 2008 年度报告 2008 年在继续推行全面预算管理和以落实重点任务为重点的经营者年度考核激励机 制的同时，公司又采取将年度主要任务以计划进度表形式，对目标任务进行分解，并落实 责任、定期检查，促进企业各项管理措施落到实处。 2、公司主营业务及其经营状况 （1）主营业务分行业或分产品构成情况 单位：元 币种：人民币 营业利润率 营业收入比上年 营业成本比 营业利润率比 分行业 营业收入 营业成本 （%） 增减（%） 上年增减（%） 上年增减率（%） 缝制及物料传输设 1,550,748,531.82 1,116,890,193.57 27.98 -25.26 -26.13 3.13 备 出口贸易 489,989,857.51 473,367,375.54 3.39 82.45 79.63 80.83 影像材料 70,477,724.76 64,177,063.54 8.94 5.21 3.69 17.57 办公机械 74,476,276.94 64,241,631.18 13.74 22.78 18.97 25.16 其他 50,491,916.73 21,129,173.55 58.15 -24.78 -39.86 22.02 合计 2,236,184,307.76 1,739,805,437.38 22.20 -11.89 -9.69 -7.84 （2）主营业务分地区情况 单位：元 币种：人民币 地区 营业收入 营业收入比上年增减 境内 920,820,721.76 2.23% 境外 1,315,363,586.00 -19.67% （3）各种主要产品的产销数量和市场占有率情况 报告期内，公司生产和销售上工牌、DA 牌工业缝纫机分别为 79,774 台和 80,549 台， 通过定牌组织生产的蝴蝶牌家用缝纫机出口量达到 466,374 台。 2008 年公司缝制设备工业缝纫机普通产品市场占有率低于 5%，德国 DA 公司生产的高 端产品在市场上具有绝对优势地位。 （4）主要供应商、客户情况 单位：万元 币种：人民币 前五名供应商采购金额合计 8,417 占采购总额比重（％） 4.95 前五名销售客户销售金额合计 36,643 占销售总额比重（％） 16.39 3、资产构成同比发生重大变化情况 单位：元 币种：人民币 项目 2008 年 12 月 31 日 2007 年 12 月 31 日 所占比重 变化原 金额 占资产比 金额 占资产比 同比增减 因 重% 重% 百分点 交易性金融资产 1,223,468.55 0．06 9,875,912.50 0.41 -87.61 注1 应收票据 1,517,662.30 0．07 3,070,470.00 0.13 -50.57 注2 应收账款 276,336,554.83 13.53 425,696,200.10 17.89 -35.09 注3 应收股利 78,000 0．004 879,792.24 0.04 -91.13 注4 可供出售金融资 4,420,579.68 0．22 24,458,496.92 1.03 -81.93 注5 产 在建工程 6,778,786.23 0．33 3,682,674.12 0.15 84.07 注6 应付票据 6,025,913.96 0．30 0 0 100 注7 应交税费 12,477,327.27 0．61 27,335,749.12 1.15 -54.36 注8 应付股利 1,634,717.91 0．08 2,865,309.70 0.12 -42.95 注9 其他应付款 121,566,474.38 5．95 192,288,791.73 8.08 -36.78 注 10 13 上工申贝（集团）股份有限公司 2008 年度报告 其他流动负债 891,742.25 0．04 1,626,725.18 0.07 -45.18 注 11 外币报表折算差 -20,169,554.87 -0.99 3,028,055.36 0.13 -766.09 注 12 额 注 1：系本期在二级市场出售中路股票所致。 注 2：系本期收到银行承兑汇票款项。 注 3：主要系本期上工(欧洲)控股有限责任公司加强货款回笼所致。 注 4：主要系本期结转被投资单位分回利润。 注 5：系本期在二级市场出售上海三毛股票所致。 注 6：主要系公司子公司上工(欧洲)控股有限责任公司本期增加缝制设备工程的投入。 注 7：系本期增加应付的银行承兑汇票。 注 8：主要是本期支付应交所得税而减少期末余额。 注 9：主要系本期结转部分应付利润所致。 注 10：主要系本期支付及结转暂收款项所致。 注 11：主要系本期转销的原记录的利息及租金费用。 注 12：主要系欧元汇率变动影响。 4、主要资产采用的计量属性 本公司资产中交易性金融资产和可供出售金融资产以公允价值计量，其他资产以历史 成本计量，具体计量方法见本公司会计政策相关表述。 5、财务数据同比发生重大变化情况 单位：元 币种：人民币 项目 2008 年 2007 年 同比增减% 变化原因 财务费用 71,535,758.20 36,732,016.70 94.75 注1 资产减值损失 -4,615,295.39 28,293,238.29 -116.31 注2 公允价值变动净收益 -6,595,211.11 70,231.94 -9,490.62 注3 营业利润 -16,597,305.54 29,961,108.03 -155.40 注4 营业外收入 38,764,055.21 62,654,560.87 -38.13 注5 营业外支出 37,020,517.65 972,598.84 3,706.35 注6 所得税 18,365,265.15 59,313,753.73 -69.04 注7 少数股东损益 -957,332.02 4,299,031.80 -122.27 注8 注 1：主要系公司子公司上工(欧洲)控股有限责任公司计提的养老金利息及银行贷款利息增加。 注 2：主要系本期因收回超信用额度的应收账款而调整坏账准备的计提数。 注 3：主要系本期出售股票，同时将出售股票所对应的公允价值变动损益调整计入投资收益所致 。 注 4：主要系营业收入同比下降，使主营业务毛利额大幅减少所致。 注 5：主要系同比减少地块转让收入所致。 注 6：主要系本期计提为上海华源企业发展股份有限公司提供担保的预计负债所致。 注 7: 主要系公司子公司上工(欧洲)控股有限责任公司递延所得税费用及本期所得税费用同比大幅减 少 所致。 注 8: 主要系少数股东享有的本期收益额同比减少。 6、现金流量构成同比发生重大变化情况 单位：元 币种：人民币 增减比例 变化 项目 2008 年 2007 年 增减金额 （％) 原因 经营活动产生的现金 66,065,197.75 30,669,664.85 35,395,532.90 115.41 注1 流量净额 投资活动产生的现金 12,138,646.54 17,773,364.53 -5,634,717.99 -31.70 注2 流量净额 14 上工申贝（集团）股份有限公司 2008 年度报告 筹资活动产生的现金 -127,153,505.01 -149,123,082.60 48,091,346.88 14.73 注3 流量净额 汇率变动对现金及现 -35,543,863.07 10,888,394.81 -46,432,257.88 -426.44 注4 金等价物的影响 注 1：主要系同比减少支付给职工以及为职工支付的现金及支付其他与经营活动有关的现金。 注 2：主要系同比减少出售股票收回的投资及地块处置取得的现金等。 注 3：主要系同比减少银行短期借款净偿还金额及支付的借款利息；同比增加权益资本收到的增资款。 注 4：主要系公司子公司上工(欧洲)控股有限责任公司的外币现金因汇率变动的影响所致。 7、公司技术创新情况 公司重视产品和技术的研发，报告期内，公司研制开发的 281 无油直驱电脑高速平缝 机、069 筒式厚料机、267 厚料平缝机在技术上都有重大创新，特别是 281 无油直驱电脑 高速平缝机结构设计紧凑，操作维护方便，该产品采用国际领先的直驱、伺服控制技术和 无油润滑技术，主要机构中某些关键零件使用新型材料，产品外型富有时代气息，并申请 了外型专利。公司缝制设备制造主要基地德国 DA 公司 2008 年投入的科技开发费达 640 万欧元，占其营业收入的比例为 4.6%。 8、同公允价值计量相关的内部控制制度情况 公司财务部门遵循谨慎性原则，严格按照企业会计准则规定的范围，在公允价值能够 可靠计量的前提下，合理预计并确定公允价值。 与公允价值计量相关的项目 单位:元 项目(1) 期初金额(2) 本期公允价值变动损 计入权益的累计公允价 本期 期末金额(6) 益(3) 值变动(4) 计提 的减 值(5) 金融资产 其中:1. 9,875,912.50 -6,595,211.11 1,223,468.55 以公允 价值计 量且其 变动计 入当期 损益的 金融资 产 其中:衍 生金融 资产 2.可供 24,458,496.92 -14,686,937.24 4,420,579.68 出售金 融资产 金融资 34,334,409.42 -6,595,211.11 -14,686,937.24 5,644,048.23 产小计 合计 34,334,409.42 -6,595,211.11 -14,686,937.24 5,644,048.23 9、持有外币金融资产、金融负债情况 报告期内，本公司未持有外币金融资产、金融负债。 15 上工申贝（集团）股份有限公司 2008 年度报告 10、主要控股公司及参股公司的经营情况及业绩分析 （1）主要控股、参股公司的经营情况及业绩 单位：元 币种：人民币 公司名称 业务性 主要产品或服 注册资本 持股比 总资产 净资产 营业收入 净利润 质 务 例 投资、资产管理 上工（欧洲） 资产管 以及生产、加 1,000 万 控股有限责 100% 1,174,364,761.02 290,653,210.87 1,315,363,586.00 14,912,220.05 理 工、销售工业缝 欧元 任公司 纫设备 上海申贝办 办公机械设备 12,500 公机械有限 生产 的制造和销售 100% 478,831,190.97 355,039,356.57 431,918,445.77 26,851,858.06 万元 公司 上海蝴蝶进 各类缝制设备、 1,000 万 出口有限公 贸易 机电产品进出 80% 51,499,835.65 35,431,779.67 221,036,610.94 7,368,918.11 元 司 口 （2）单个参股公司的投资收益对公司净利润影响达到 10%以上的情况 单位：万元 币种：人民币 公司名称 主营业务收入 主营业务利润 净利润 上海富士施乐有限公司 254,800 16,781 12,593 （二）对公司未来发展和展望 1、分析所处行业的发展趋势及公司面临的市场竞争格局等相关变化趋势，以及对公司可 能产生的影响程度。 中国是世界缝制机械制造大国，缝制机械设备及零部件的产销量占世界市场份额的比 重日益提高。 2008 年度，受服装、箱包等行业重挫、国际经济形势恶化、一系列宏观经济调控政 策和措施的叠加影响作用，我国缝制设备行业发展陷入困境，产销量全面下降，进出口贸 易首度下滑，特别是进入三季度后，行业下滑速度明显加快，企业生存环境日益严峻。 据中国缝制机械协会提供的资料：截止 2008 年 9 月末，我国累计出口缝纫机 812.76 万台，同比下降 6.40%，其中家用缝纫机 599.79 万台，同比下降 8.33%；工业用缝纫机 208.90 万台，同比增长 0.09%；绣花机 4.06 万台，同比下降 22.92%。累计进口缝纫机 10.54 万台，同比下降 46.63%，其中家用缝纫机 6.09 万台，同比下降 43.49%；工业用缝纫机 4.40 万台，同比下降 49.52%；绣花机 553 台，同比下降 79.30%。 面对严峻形势，国家发展与改革委员会提出了 2009 年—2011 年轻工业振兴规划，其 目标是，至 2011 年，使我国轻工重点行业结构调整和产业升级取得明显成效，形成一批 具有较强国际竞争力的骨干企业。振兴规划特别强调推进产业重组，根据产业政策和市场 化原则，利用商业银行并购贷款业务，鼓励引导缝制机械等行业龙头企业，瞄准国内外资 源、技术优势和市场空间，对具备较高技术含量、具有品牌价值的企业实行兼并重组，减 少技术开发周期和成本，加快企业做大做强。 财政部、国家税务总局又发布通知，从 2009 年 1 月 1 日起提高部分技术含量和附加 值高的机电产品的出口退税率，其中缝纫机产品的出口退税率由 11%、13%提高到 14%。 公司将抓住有利时机，加快转变经济发展模式，克服国内业务因地处上海商务成本偏 高及体制、机制方面的弊端，改变在采购、生产和销售方面对国际资源未能有效利用及引 进吸收 DA 公司高端技术缓慢的状况，通过扩大国内外并购、抓好欧亚资源整合，巩固企 业在缝制机械行业中的领先地位。 2、未来公司发展的机遇和挑战、发展战略 努力将公司建设成为国际缝制设备行业中具有一流技术水准和 国际著名品牌并能引 领世界缝制设备发展的优秀企业是公司追求的目标。 16 上工申贝（集团）股份有限公司 2008 年度报告 2009 年公司将继续坚定不移地推进缝制主业的整合重组，坚定不移地实施“稳定欧 洲、发展亚洲”的战略，认真分析各种有利条件和不利因素，抓住机遇，迎接挑战。 （1）公司将充分利用 DA 公司作为德国上市公司的有利条件，发挥其在资本市场上的 融资作用及其 DA 高端技术和品牌影响力，引入战略和财务投资者，通过实施进一步的经 营优化调整，积极引进同行技术人才，加速新品研发，并通过“中国制造”，扩充“上工” 与“DA”品牌产品的缺门机种，完整企业产品链，为做大缝制设备主业创造条件。 （2）公司将充分利用当前行业调整、产业升级这一时机和国内缝制产业集中位于长 三角地区具有低成本制造的优势，推进与民企和外资企业的整合，通过体制、机制的转换， 生产基地的转移，为提升国内缝制产业的盈利水平奠定基础。 3、新年度经营计划 2009 年公司计划:营业收入 20.40 亿元，营业成本 15.78 亿元。主要措施如下： （1）努力抓好市场销售。DA 贸易（上海）要按照市场细分原则实施产品的分渠道和 区域代理相结合的市场营销策略，进一步确立 DA 品牌在东南亚市场销售的龙头地位，扩 大 DA 产品在中国和亚洲地区的市场占有率。公司下属三个进出口公司都要扎实做好销售 网络建设工作，在加强核算、注重资金成本、规避经营风险的基础上，打好自主品牌，提 高自营业务比重，同时进一步开拓其他代理业务。 （2）全力做强缝制业务。德国 DA 公司是公司下属的缝制设备制造骨干企业，通过实 施进一步的经营优化调整，加速新品研发，实现缝制产品系列化，并通过增加“中国制造” 的品种，补充亚洲市场产品的需求。同时通过营销资源整合，提高经济效益，保持缝制设 备制造欧洲第一、全球第三的地位。国内缝制企业将通过实施梯度转移，降低制造成本， 增强盈利能力。 （3）加快产品升级步伐。要抓好 DA 产品引进开发计划的落实，2009 年重点是加快 厚料机系列的开发；要利用 DA 公司的先进技术提升国内品牌的技术能级；要抓好蝴蝶牌 家用机的选型和技术完善，组织好定牌生产和专买店的开设，以满足市场的需求。 （4）探索产业协调发展。要以现有的商贸经营、存量房产租赁业务以及物业管理基 础为平台，扩大现代服务业。通过吸纳外来资金，选择合适的存量房产，发展市场化的商 务楼宇和园区；通过提高自身业务水准，发展高档住宅区的物业管理服务，为主业发展提 供经济上的支持，为主业整合产生的富余人员提供再就业岗位，推动企业和谐发展。 （5）强化公司内部管理。要进一步加强内控管理，不断完善内控制度建设；要采取 有力措施压缩库存和减少应收帐款，提高资金使用效率；要加强对子公司和境外企业的投 资管理，努力降低企业经营风险；要继续抓好小企业的关、停、并、转、退工作，确保缝 制主业整合、转移顺利进行。 4、公司为实现发展战略所需的资金及使用计划、以及资金来源情况 （1）努力与银行保持良好的信誉关系，通过信用担保和资产抵押等措施，筹措资金， 保证企业正常的生产经营； （2）加强资金管理，制订严格措施，压缩库存，减少应收帐款，提高资金使用效率； （3）继续抓好资源优化配置，有计划地盘活存量资产，解决国内主业梯度转移资金 所需； （4）根据境外子公司系上市公司的特点，利用国际资本市场的条件，争取实现再融 资，解决国际业务资金所需。 5、对公司未来发展战略和经营目标的实现产生不利影响的所有风险因素以及已（或拟） 采取的对策和措施 （1）业务经营风险 由于各种原因，欧亚二地资源整合应产生的联动效应不明显，引进德国 DA 公司的技 术和产品的速度不快，国内缝制企业主业扭亏后长期稳定的目标未能如期实现。 17 上工申贝（集团）股份有限公司 2008 年度报告 对此，公司将集中主要力量，加快组织生产适合亚洲市场需求的产品，实现“DA 技 术、中国制造”，同时推进生产梯度转移，降低采购成本，降低劳动力成本，确保国内缝 制主业扭亏为盈的长期稳定。 （2）人才管理风险 公司积极贯彻实施“走出去”战略，迫切需要各方面的专业人才，随着市场竞争的加 剧，公司面临着吸引人才、保留人才的风险。 对此，公司将不断完善有利人才竞争的激励机制，同时加强培训，努力提高现有管理、 技术人员的业务素质，此外，重视从市场上积极引进高素质的各类专业人才。 （3）汇率风险 公司缝制机械生产经营活动在中国境外进行的比重较大，因此公司面临着汇率波动所 带来的风险。 对此，公司将高度关注汇率变动情况，制订相应措施，采取灵活多变的贸易形式和一 些必要的保值手段来回避和降低项目投资和产品经营中存在的外汇风险。 (三)公司投资情况 1、募集资金使用情况 单位:万元 币种:人民币 本年度已使用募集资金总额 3,440.82 募集资金总额 32,264 已累计使用募集资金总额 29,817.11 项目 是否已 可行 是否 变更项 原计划 实际投 项目建成时 是否符 性是 本年度投 累计已投 本年度实 符合 承诺项目 目（含 投入总 资进度 间或预计建 合计划 否发 入金额 入金额 现的收益 预计 部分变 额 （％） 成时间 进度 生重 收益 更） 大变 化 收购 DA 公 否 20,096 - 15,072.05 － 1,553.73 2005-07-01 是 是 否 司项目 利用德国 DA 公司技 术建设电 － 否 19,500 3,440.82 14,745.06 － 2008-08-31 是 否 否 脑特种工 2,572.47 业缝纫机 项目 合计 － 39,596 3,440.82 29,817.11 - -1,018.74 - - - - （1）2005 年 7 月 1 日，公司全资子公司上工（欧洲）控股有限责任公司完成了收购 德国 DA 公司股份的手续。当年度产生的收益金额为人民币 461.63 万元，2006 年度、2007 年度、2008 年度海外企业对母公司的净利润贡献分别为人民币 7,209.54 万元、5,984.70 万元、1,553.73 万元。 （2）为生产、销售高端技术含量的特种工业缝纫机，本公司与 DA 公司、香港远东友 诚公司分别以 40%、34%、26%比例出资组建杜克普爱华贸易（上海）有限公司，注册资 本为 400 万美元；同时本公司又与 DA 公司分别以 70%及 30%比例出资组建杜克普爱华工 业制造（上海）有限公司，注册资本为 1,000 万美元。上述二个公司作为亚洲的生产基 地和营销分部，2007 年正式独立运作，因生产和经营规模还在形成过程中，项目累计亏 损 4,923 万元，随着 DA 公司产品转移和消化吸收能力的提高，将为公司生产和销售高端 技术含量的特种工业机发挥出重要的作用。 （3）截止 2008 年 8 月 31 日，公司前次增发募集资金投入的项目已经完工，立信会 计师事务所有限公司对募集资金使用情况进行了专项审核并出具了报告[立信会师报字 （2008）第 12136 号]，公司前次募集资金投资项目实际投资额为 29,919.05 万元（其中 18 上工申贝（集团）股份有限公司 2008 年度报告 实际已使用 29,817.11 万元，应付待付 101.94 万元），募集资金结余金额为 2,344.94 万元；根据公司实际经营状况，经五届二十一次董事会议审议通过，将结余的募集资金 2,344.94 万元用于补充公司流动资金（详见公司 2008-017、019 号公告）。 2、非募集资金项目情况 报告期内，公司无非募集资金投资项目。 (四)公司会计政策、会计估计变更或重大会计差错更正的原因及影响 报告期内公司无会计政策、会计估计及重大会计差错更正事项。 (五)董事会日常工作情况 1、董事会会议情况及决议内容 （1）公司于 2008 年 3 月 3 日召开五届十五次董事会议，决议公告刊登在 2008 年 3 月 5 日的《上海证券报》、香港《商报》。 （2）公司于 2008 年 4 月 18 日召开五届十六次董事会议，决议公告刊登在 2008 年 4 月 22 日的《上海证券报》、香港《商报》。 （3）公司于 2008 年 4 月 28 日召开五届十七次董事会议，审议通过公司 2008 年第一季 度报告正文和全文。 （4）公司于 2008 年 7 月 18 日召开五届十八次董事会议，决议公告刊登在 2008 年 7 月 19 日的《上海证券报》、香港《商报》。 （5）公司于 2008 年 8 月 21 日召开五届十九次董事会议，决议公告刊登在 2008 年 8 月 23 日的《上海证券报》、香港《商报》。 （6）公司于 2008 年 10 月 27 日召开五届二十次董事会议，决议公告刊登在 2008 年 10 月 29 日的《上海证券报》、香港《商报》。 （7）公司于 2008 年 12 月 12 日召开五届二十一次董事会议，决议公告刊登在 2008 年 12 月 13 日的《上海证券报》、香港《商报》。 2、董事会对股东大会决议的执行情况 （1）根据公司《2007 年度股东大会》决议，报告期内公司继续聘请立信会计师事务 所有限公司为公司 2008 年审计机构；母公司计划通过质押、抵押、信用担保等方式向相 关银行申请贷款 50,000 万元，实际向相关银行贷款 32,560 万元；公司与上海浦东发展（集 团）有限公司（下称浦发集团）续签《股权质押合同》，本公司以上海申贝办公机械有限 公司部分股权作为浦发集团为本公司向银行借款提供 16,812 万元担保额度的反担保质押 标的。 （2）根据公司《2008 年第一次临时股东大会》决议，公司全资子公司上海申贝办公 机械有限公司将其所持上海新沪玻璃有限公司 20%股权有偿转让给上海浦东国有资产投 资管理有限公司，至本报告披露日前，公司已收到了股权转让全部款项并办理了工商变更 登记手续。 （3）报告期内，公司无利润分配、公积金转增股本执行事项，也无配股、增发新股 等事项。 3、董事会下设的审计委员会的履职情况汇总报告 报告期内，公司独立董事、董事会审计委员会根据《中华人民共和国公司法》、 《上市公司治理准则》、《公司章程》等有关法规，按照公司《董事会审计委员会实施细 则》的要求认真履行职责。 19 上工申贝（集团）股份有限公司 2008 年度报告 （1）认真审阅公司季度、半年度及年度报告，并通过听取相关部门的汇报，审阅相 关财务报表资料、咨询相关人员等方式，关注了解公司的经营情况和财务状况，审阅公司 的财务信息并督促要求按有关规定做好对外信息披露。 （2）重视关注公司的内部控制制度建设工作，年内审阅同意公司审计室《2008 年上 半年公司内部控制管理情况的检查汇报》，并形成了审计委员会关于《2008 年上半年内 部控制的自我评估报告》，同时肯定前期公司开展的规章制度修订、增订、整理、汇编、 颁布等工作，对加强公司的基础管理、规范经营行为和增强风险防范是非常必要的，并建 议公司及所属分、子公司应随着规章制度的颁布和贯彻实施的深入，进一步重视做好检查 督促和完善工作。 （3）根据中国证监会〔2008〕48 号公告、上海证券交易所《关于做好上市公司 2008 年年度报告工作的通知》和浦国资委〔2008〕288 号文《关于做好 2008 年度新区国有企 业财务决算审计工作的通知》的精神要求，董事会审计委员督促公司做好 2008 年度财务 会计报告的审计工作和相关信息的披露事项，为此： 1）起草制定了《公司审计委员会年报工作规程》。 2）在注册会计师进场审计前审阅了公司相关的财务报表，并于 2009 年 2 月 9 日组织专题会议就 2008 年度年报审计工作的安排情况与注册会计师及公司有关部门作 了沟通，听取了管理层关于 2008 年经营管理情况的汇报，对公司年度审计工作提出了建 议和要求。 3）2009 年 3 月 2 日听取了注册会计师会同公司审计室就年度审计工作阶段性的进展 情况汇报(分、子公司审计情况)，并提出了下一步的工作要求。 4）根据提供的年审初步结果（初稿），独立董事、董事会审计委员会成员审阅了相 关财务会计报表等资料，于 2009 年 3 月 13 日通过面谈及通讯方式与注册会计师进行沟 通交流，对公司财务会计报表有关事项作了进一步的了解，原则同意审计报告（初稿）内 容，并提出对审计报告的修改意见； 同时从经营管理角度，建议公司对应收帐款进一步 加强清理和催讨力量，争取不断改善；对涉及华源担保风险化解的重要事项、华源发展重 组情况，要求公司继续落实专人负责跟踪，及时将进展情况通报公司董事会；建议对存货 继续及时进行清理，以改进现金流量的周转。 5） 2009 年 3 月 16 日，独立董事、董事会审计委员会成员审阅了立信会计师事务所 有限公司为公司出具的 2008 年度标准无保留意见的审计报告后认为：公司经营和财务管 理规范，立信会计师事务所有限公司出具的本公司 2008 年度审计报告真实、公允地反映 了本公司的财务状况和经营成果，同意公司将 2008 年度财务会计报告及相关的审计报告 提交董事会审议。 （4）按照中国证监会、浦东新区国资委和上海证券交易所有关做好年度报告及审计工 作的要求，根据立信会计师事务所有限公司承担公司 2008 年年度审计的工作情况，董事 会审计委员认为，立信会计师事务所有限公司能够按照中国注册会计师独立审计准则实施 审计工作，基本遵循了独立、客观、公正的执业准则，较好地完成了公司的审计工作，因 此建议继续聘请立信会计师事务所有限公司为公司 2009 年度的审计机构，并同意将该项 议案提交董事会审议。 4、董事会下设的薪酬委员会的履职情况汇总报告 报告期内，公司董事会薪酬与考核委员会成员关心企业的经营状况，从公司实际出发， 参照市场行情对公司实行的薪酬方案作了修改，并提交董事会审议通过。 公司董事会薪酬与考核委员会认为，公司董事、监事和高级管理人员职责分明，勤勉 尽责，克服困难，努力完成企业的各项工作目标。经审核，年度内对公司董事、监事和高 级管理人员支付的薪酬比较合理，符合公司的薪酬政策和目标责任考核要求，披露的薪酬 20 上工申贝（集团）股份有限公司 2008 年度报告 真实、准确。 (六)利润分配或资本公积金转增预案 经立信会计师事务所有限公司审计，公司 2008 年度合并净利润为-33,219,033.13 元， 其中归属于母公司所有者的净利润为-32,261,701.11 元。 根据公司“章程”规定，在提取法定公积金之前，应当先用当年利润弥补亏损。由于 本年度发生亏损，公司不提取法定公积金，母公司当期净利润为-47,725,708.43 元，加 上 2008 年初未分配利润-496,149,270.77 元，本年度末实际可供分配利润为 -543,874,979.20 元，2008 年不进行利润分配，也不进行资本公积金转增。 上述预案需提交公司 2008 年度股东大会审议并通过。 (七)公司前三年现金分红情况 年度 实现的净利润金额（元） 现金分红金额（元） 分红数额与净利润的比例（%） 2005 年度 -276,608,231.59 0.00 0.00 2006 年度 6,571,852.74 0.00 0.00 2007 年度 28,030,284.53 0.00 0.00 合计 -242,006,094.32 0.00 0.00 由于公司 2005 年度经营亏损，净利润为负数，不能分派现金红利；2006 年度、2007 年度虽然盈利，但当期净利润冲抵可供分配利润后仍为负数，故前三年未能实施现金分红 及其他送配。 九、监事会报告 (一)监事会的工作情况 报告期内,监事会共召开了 5 次会议. 1、2008 年 4 月 18 日，公司监事会召开五届八次会议,审议通过了公司 2007 年度监 事会工作报告、2007 年度报告及摘要。 2、2008 年 4 月 28 日，公司监事会召开五届九次会议,审议通过了公司 2008 年第一 季度报告全文和正文。 3、2008 年 5 月 23 日，公司监事会召开五届十次会议，审议通过了监事人选变动的 议案。 4、2008 年 8 月 21 日，公司监事会召开五届十一次会议,审议通过了公司 2008 年半 年度报告全文和摘要、2008 年公司高管人员报酬预算方案、中国证监会上海证监局对公 司现场检查发现问题的整改报告。 5、2008 年 10 月 29 日，公司监事会召开五届十二次会议,审议通过了公司 2008 年第 三季度报告全文和正文。 (二)监事会对公司 2008 年度有关事项发表的意见 1、对公司依法运作情况的独立意见 公司董事会严格按照《公司法》、《证券法》、《公司章程》规范运作，严格执行股 东大会的各项决议，不断地健全和完善内部管理和内部控制制度，决策程序符合法律法规 的要求，公司董事、总经理及其他高级管理人员在履行职责时忠于职守，秉公办事，无违 反法律法规的有关规定，没有损害公司和股东权益行为的发生。 21 上工申贝（集团）股份有限公司 2008 年度报告 2、对检查公司财务情况的独立意见 报告期内，公司财务制度完善，管理规范，没有发生违反财务规定和损害股东利益的 现象。财务报告客观、真实地反映了公司财务状况和经营成果。立信会计师事务所有限公 司为公司出具的标准无保留意见的审计报告，客观、真实、公允地反映了公司的财务状况 和经营成果。 3、对公司最近一次募集资金实际投入情况的独立意见 公司募集资金投入项目已经结束，并经 2008 年第一次临时股东大会审议通过。结余 的募集资金根据相关规定，经董事会批准后转为公司的流动资金。 4、对公司收购出售资产情况的独立意见 公司收购、出售资产时，遵循了公开、公平、公正的原则，交易价格合理，未发现有 内幕交易及损害公司和股东权益的情况。 5、对公司关联交易情况的独立意见 报告期内，公司无重大的关联交易行为。 十、重要事项 (一)重大诉讼、仲裁事项 本公司与上海华源企业发展股份有限公司（下称“华源发展”）因正常经营业务需要 自 2001 年起建立了互为对方向银行借款提供等额担保的关系。此后华源发展因自身经营 原因未能按约向银行归还贷款，被银行提起诉讼，本公司也被卷入三起案件之中，二起案 件系中国建设银行股份有限公司上海市分行（下称“建行市分行”）、深圳发展银行上海 分行（下称“深发展上海分行”）分别诉本公司，另一起案件系公司诉华源发展（详见公 司 2007 年度报告：十、重要事项）。 报告期内，本公司已先后与华源发展、建行市分行、深发展上海分行达成了和解协议 （见公司临 2008-002、010、016 号公告）。 此外，公司为支持华源发展资产重组，根据其第一大股东中国华源集团有限公司与金 融债权人委员会要求，在华源发展重组计划能获得实施的前提下，同意办理债务平移所引 起的变更担保手续（见公司临 2008-011 号公告）。 因华源发展资产重组计划未能按期进行，2008 年度，公司根据会计谨慎性原则，对于 为华源发展向银行贷款提供人民币 11,849 万元的担保额计提了一定比例的预计负债。 (二)报告期内公司收购及出售资产、吸收合并事项 1、经公司 2008 年第一次临时股东大会批准，同意公司全资子公司上海申贝办公机械 有限公司将其所持上海新沪玻璃有限公司 20%股权有偿转让给上海浦东国有资产投资管 理有限公司，根据股权转让协议规定，至本报告披露之日，公司已收到上述股权转让的全 部款项 3,558.21 万元。 2、经公司董事会五届十二次会议审议通过，公司控股子公司杜克普爱华贸易（上海） 有限公司因资源整合，拟出资 50 万美元收购香港杜克普爱华远东有限公司 100%股权，报 告期内，上述股权收购事项已完成。 (三)报告期内公司重大关联交易事项 1、资产、股权转让的重大关联交易 本年度公司无重大关联交易事项。 2、关联债权债务事项 本年度公司无关联债权债务事项。 22 上工申贝（集团）股份有限公司 2008 年度报告 (四)托管情况 本年度公司无托管事项。 (五)承包情况 本年度公司无承包事项。 (六)租赁情况 本年度公司无租赁事项。 (七)担保情况 单位:万元 币种:人民币 公司对外担保情况（不包括对子公司的担保） 是否 发生日期 是否 为关 担保对象 （协议签署 担保金额 担保类型 担保期限 履行 联方 日） 完毕 担保 上海华源企 2004 年 11 月 连带责任担 2004 年 11 月 11 日～2005 业发展股份 3,000 否 否 11 日 保 年 11 月 9 日 有限公司 上海华源企 2005 年 3 月 29 连带责任担 2005 年 3 月 29 日～2005 年 业发展股份 849 否 否 日 保 9 月 29 日 有限公司 上海华源企 2005 年 5 月 27 连带责任担 2005 年 5 月 27 日～2006 年 业发展股份 1,000 否 否 日 保 5 月 23 日 有限公司 上海华源企 2005 年 6 月 13 连带责任担 2005 年 6 月 13 日～2005 年 业发展股份 1,000 否 否 日 保 9 月 29 日 有限公司 上海华源企 2005 年 6 月 6 连带责任担 2005 年 6 月 6 日～2006 年 6 业发展股份 3,000 否 否 日 保 月1日 有限公司 上海华源企 2005 年 7 月 14 连带责任担 2005 年 7 月 14 日～2006 年 业发展股份 3,000 否 否 日 保 7月4日 有限公司 上海浦东发 2008 年 6 月 9 连带责任担 2008 年 6 月 9 日～2009 年 6 展(集团)有 16,812 否 否 日 保 月8日 限公司 报告期内担保发生额合计 0 报告期末担保余额合计 28,661 公司对子公司的担保情况 报告期内对子公司担保发生额合计 0 报告期末对子公司担保余额合计 15,696 公司担保总额情况（包括对子公司的担保） 担保总额 44,357 担保总额占公司净资产的比例 78.5 其中： 为股东、实际控制人及其关联方提供担保的金额 0 直接或间接为资产负债率超过 70％的被担保对象提供的债务担保金额 27,545 担保总额超过净资产 50％部分的金额 0 上述三项担保金额合计 27,545 23 上工申贝（集团）股份有限公司 2008 年度报告 1、本公司与上海华源企业发展股份有限公司（下称“华源发展”）签订了互为对方 向银行贷款提供担保的协议，至报告期末，公司为“华源发展”提供的担保尚余六笔，逾 期金额为 11,849 万元，公司采取积极措施，妥善地处置由担保引起的诉讼事项（详见本 年度报告十、重要事项（一）重大诉讼、仲裁事项）。 2、根据本公司与德国 FAG Kugelfischer GmbH（下称“FAG 公司”）签订的德国 DA 公司股份转让协议，本公司需对下述事项承担一定的连带担保责任： （1）根据协议，收购德国 DA 公司除了支付 949,821 欧元的股份对价款之外，本公司 下属全资子公司上工（欧洲）控股有限责任公司（下称“上工欧洲”）还需承担对 FAG 公司 36,525,132.28 欧元的股东贷款对价。截止 2005 年末，已经支付了股份对价款以及 9,482,436.84 欧元的股东贷款，剩余的 27,042,695.44 欧元股东贷款原约定由“上工欧 洲”自 2005 年 6 月 30 日后第二个周年日（2007 年 6 月 30 日）开始分九年等额支付，分 期付款的利息自 2005 年 6 月 30 日起按照 6%的年利率计算利息，并从 2005 年 6 月 30 日 起每年支付一次。 对于上述“上工欧洲”的支付义务，本公司承担连带担保责任。但是对于剩余股东贷 款对价以及应计利息所承担的连带责任，以其实际数额的 50%为限，且最高额不超过 12,500,000.00 欧元。 截止收购完成日，DA 公司净资产约为 1,639.7 万欧元，但是由于上工欧洲需要承担 DA 公司对原大股东 FAG 的欠款，且本公司对此需要承担连带担保责任，故最终上工欧洲 为取得 89.932%股权支付的成本仅为 129.3 万欧元， 产生了约 1,510.4 万欧元的投资贷差。 鉴于相关的担保偿债风险，考虑到 DA 公司经营状况以及产生现金流的能力，公司将贷差 于合并时还原，调整了相关的主要经营资产，并根据担保风险的变化以及 DA 公司经营的 实际情况，适当地转回原调整的金额。 截止 2008 年末，“上工欧洲”已经归还 FAG 公司前二期贷款对价 600 万欧元，剩余 贷款对价为 2,103 万欧元。 （2）2005 年度，本公司为 DA 公司在美国子公司的房屋租赁向 FAG 公司出具了金额 不超过 530 万美元的担保函，担保期限从 2005 年 6 月 30 日至 2015 年 10 月 31 日；同时 “上工欧洲”于 2005 年 6 月 30 日向 FAG 公司提供了 63.5 万欧元、同等期限的现金质押， 用于对 FAG 公司为 DA 公司在美国的一家子公司与 UTF Norcross L.L.C.之间的房屋售后 回租交易所提供的担保提供再担保。 截止 2008 年 12 月 31 日止，本公司尚未因上述担保事项发生经济利益的流出。 (八)委托理财情况 本年度公司无委托理财事项。 (九)其他重大合同 本年度公司无其他重大合同。 (十)承诺事项履行情况 持有本公司 5％以上股份的股东为上海市浦东新区国有资产监督管理委员会，能严格 履行其在股权分置改革中作出的一般承诺。 (十一)聘任、解聘会计师事务所情况 报告期内，公司继续聘请立信会计师事务所有限公司为公司的审计机构，截至本报告 期末，该会计师事务所系第二年为本公司提供审计服务。 本年度公司支付给立信会计师事务所有限公司的财务审计费用为 75 万元（上年度支 付的审计费用为 75 万元），其他专项审计费用 11.2 万元，承担审计期内差旅费 2 万元（上 24 上工申贝（集团）股份有限公司 2008 年度报告 年度支付的差旅费（含境外审计调查）为 97,463 元）。 (十二)上市公司及其董事、监事、高级管理人员、公司股东、实际控制人处罚及整改情况 1、本报告期内，公司及其董事、监事、高级管理人员、公司股东、实际控制人均未 受中国证监会稽查、行政处罚、通报批评及上海证券交易所的公开谴责。 2、本报告期内，根据《证券法》、《上市公司检查办法》等规定，中国证监会上海 监管局于 2008 年 6 月 3 日起对公司进行了现场检查，并于 2008 年 8 月 8 日出具了《限期 整改通知书》（沪证监公司字[2008]187 号）。对此，公司高度重视，董事会、监事会分 别针对检查中发现的问题制订了整改措施，明确了整改责任部门和整改责任人。公司本着 对全体投资者负责的态度，贯彻边查边改的方针，对现场检查中查实的问题及时进行整改， 并将整改报告提交董事会五届十九次会议审议通过（详见 2008 年 8 月 23 日刊登在《上海 证券报》、香港《商报》上的公司临 2008-011 号公告）。 （十三）其它重大事项 公司海外全资子公司上工（欧洲）控股有限责任公司控股的德国杜克普·阿德勒股份 有限公司（下称“DA 公司”）为巩固和加强其在欧洲工业缝制设备市场占有率首位的优 势，并逐步实现其在全球销售规模第二位的目标，需要进一步增加缝制设备品种，特别是 适应亚洲市场需求的产品，以降低全球金融危机对企业的影响，拟向当地法院指定的破产 管理人提出购买德国百福工业机械股份有限公司部分资产的意向。 (十四)其它重大事项及其影响和解决方案的分析说明 1、证券投资情况 证 证 占期末 序 券 券 证券简 初始投资金额 持有数量 期末账面值 证券总 报告期损益 号 品 代 称 （元） （股） （元） 投资比 （元） 种 码 例（％） 华 基 安 1 160402 100,000.00 121,818.65 206,688.97 16.89 -343,809.51 金 A 股 期末持有的其他证券投 2,307,410.13 _ 1,016,779.58 83.11 -1,290,630.55 资 报告期已出售证券投资 - - - - 613,276.22 损益 合计 2,407,410.13 - 1,223,468.55 100 -1,021,163.84 2、持有其他上市公司股权情况 单位:元 证 占该公司 会计 证券代 券 初始投资金 报告期所有者 股份 股权比例 期末账面值 报告期损益 核算 码 简 额 权益变动 来源 （％） 科目 称 广 可供 法人 电 出售 600637 67,600.00 and Internet login designated by China Securities Regulatory Commission to carry the Company’s Annual Report: http://www.sse.com.cn Place for consulting the Company’s Annual Report: General Office of the Company 6. Authorized stock exchange for A shares: Shanghai Stock Exchange A shares stock-code 600843, abbreviated as SGSB Authorized stock exchange for B shares: Shanghai Stock Exchange B shares stock-code 900924, abbreviated as SGC 7. Other information: First-time registration date: December 16, 1993 Registration authority: Shanghai Municipal Industrial and Commercial Admin. Date of the latest registration modification: February 7, 2005 Authority for the latest modification: Shanghai Municipal Industrial and Commercial 3 Administration Business license registration code: 310000400080303 (Municipal Admin.) Tax registration code: GSHZ31011532210544 Organization code of the Company: 13221054-4 Auditor: Shulun Pan Certified Public Accountants Co., Ltd. Office address: 4F, 61 East Nanjing Road, Shanghai, PRC Advisor on legal affairs: Shanghai Zhendan Law Office Office address: 16/F, 1688 North Sichuan Road, Shanghai, PRC 4 Chapter III. Financial and Business Highlights 1. Business highlights during report year: RMB’ Item Sum Operating profits -16,597,305.54 Total profit -14,853,767.98 Net profit attributed to shareholders -32,261,701.11 Net profit attributed to shareholders after non-recurrent account profit/loss -53,442,616.53 Net cash flows generated from business operations 66,065,197.75 2. Deducted terms of non-recurrent account profit/loss: RMB’ Non-recurrent account profit/loss Sum 1. Profit/loss from disposal of non-current assets, including the write-off of 60,854,393.28 the accrued depreciation provision 2. Government subsidies accounted into current profit/loss, except the continuous ration subsidies directly related to the normal operations and 2,071,917.00 stipulated by the government 3. Profit/loss from contingent items without relationship to the normal -35,546,274.60 operation of the Company 4. Profit/loss from fair value changes of tradable financial assets/liabilities and investment profits from the transfer of tradable financial 2,634,592.40 assets/liabilities and financial assets available for sale, except futures’ hedging activities directly related to the normal operations 5. Other non-operating income/expenditure 1,074,152.55 6. Influence of minority interest -1,049,904.49 7. Influence of income tax -8,857,960.72 Total 21,180,915.42 3. The Company’s main accounting data and financial index in the last three years (combined statements): RMB’ Item Increase/ 2006 2008 2007 Decrease Adjusted Before adjustment (%) Operating income 2,406,584,588. 2,236,184,307.76 2,538,060,869.69 -11.89 2,440,723,981.83 29 Total profit -14,853,767.98 91,643,070.06 -116.21 23,488,575.39 31,343,301.49 Net profit attributed to -32,261,701.11 28,030,284.53 -215.10 4,893,123.59 6,571,852.74 shareholders Net profit attributed to shareholders after non-recurrent -53,442,616.53 -47,083,827.13 19.13 -41,085,145.16 -39,406,416.01 account profit/loss Earning per share, basic -0.0719 0.0624 -215.22 0.0109 0.0146 Earning per share, diluted -0.0719 0.0624 -215.22 0.0109 0.0146 EPS after non-recurrent account -0.1191 -0.1472 19.09 -0.0915 -0.0878 profit/loss, basic Return on net assets, diluted (%) -6.3414 4.7958 11.14 less 0.8329 1.2279 Return on net assets, weighted -5.6765 5.1037 10.78 less 0.8610 1.1546 (%) Return on net assets after -10.5048 -11.3073 0.80 more -6.9938 -7.3629 5 non-recurrent account profit/loss, diluted (%) Return on net assets after non-recurrent gain/loss, weighted -9.4032 -12.0330 2.63 more -7.2290 -6.9234 (%) Net cash flows generated from 66,065,197.75 30,669,664.85 115.41 116,517,385.91 116,517,385.91 operating activities Net cash flows per share generated from operating 0.1472 0.0683 115.52 0.2596 0.2596 activities Dec. 31, 2006 Dec. 31, 2008 Dec. 31, 2007 Adjusted Before adjustment Total assets 2,042,412,641.76 2,380,098,702.55 -14.19 2,486,972,366.78 2,440,929,062.47 Owners’ equity 508,744,914.20 584,473,598.84 -12.96 587,453,178.73 535,205,158.97 Net asset per share attributed to 1.1333 1.3021 -12.96 1.3087 1.1923 shareholders 6 Chapter IV. Variation of Share Capital and Information about Shareholders 1. Variation of share capital: (1) Changes in share capital (as of December 31, 2008): Increase/decrease in the report period Before current variation Shares by After current variation Ration Bonus shares shares public Other Total reserve Prop. Prop. Sum Sum (%) (%) 1. Shares subject to conditional sales 1) State-owned shares 87,275,319 19.44 -22,444,339 -22,444,339 64,830,980 14.44 2) Shares owned by state legal entities 3) Shares owned by other domestic investors Including: by domestic legal entities Including: by domestic natural persons 4) Shares owned by int’l investors Including: by int’l legal entities Including: by int’l natural persons Total shares subject to 87,275,319 19.44 -22,444,339 -22,444,339 64,830,980 14.44 conditional sales 2. Unconditionally tradable shares 1) Tradable A shares 117,667,708 26.21 22,444,339 22,444,339 140,112,047 31.21 2) Tradable B shares 243,943,750 54.35 0 0 243,943,750 54.35 3) Tradable shares issued abroad 4) Others Total tradable shares 361,611,458 80.56 22,444,339 22,444,339 384,055,797 85.56 3. Total equities 448,886,777 100 0 0 448,886,777 100 (2) Stock issuance and IPO progress ① Stock issuance during the last three years During the last three years, the Company didn’t launch new stock issuance, stock allotment, changeable corporation bonds, corporation bonds or other derivative securities. ② Variation of the Company’s stock capital and equity structure a. During report year, there were no bonus shares, new shares capitalized from capital reserve, allotted shares or newly-issued shares causing the variation of the Company’s stock capital and equity. b. According to the Company’s reform proposal on non-tradable shares, the Company permitted the circulation of 22,444,339 shares subject to conditional sales on June 18, 2008 (details for the resolution No. 007 carried in and dated June 11, 2008). Therefore, the equity structure of the Company has changed as following: Before the variation Changed portion After the variation 7 Shares subject to 1.State-owned shares 87,275,319 -22,444,339 64,830,980 conditional sales 2.State-owned corporate 0 0 0 shares 3.Other domestic 0 0 0 corporate shares Total shares subject to 87,275,319 -22,444,339 64,830,980 conditional sales Unconditionally A shares 117,667,708 22,444,339 140,112,047 tradable shares B shares 243,943,750 0 243,943,750 Total unconditionally 361,611,458 22,444,339 384,055,797 tradable shares Total equity 448,886,777 0 448,886,777 ③ Information about employee shares Till the end of report year, the Company hasn’t issued any employee shares. 2. Information about shareholders: (1) Information about shareholders and distribution of stock right: Number of shareholders at end of report 55,948 shareholders, among whom 21,175 are classified as A stock shareholders and 34,773 as year B stock shareholders. Top 10 shareholders Shareholder Shareholder Prop. Quantity of Current Shares subject Quantity status (%) shares increase to conditiona in pawn l sales or frozen Shanghai Pudong New Area State-owned 24.44 109,719,658 0 64,830,980 0 State-owned Assets Supervision and shareholder Admin. Commission Shanghai International Trust and State-owned 3.80 17,047,371 -510,600 0 0 Investment Company corporate shareholder China Great Wall Assets Management State-owned 2.02 9,060,514 0 0 0 Co., Ltd. shareholder Honour Force Investments Ltd. Foreign investor 1.21 5,415,170 2,685,170 0 Unknown Normal Win Assets Limited Foreign investor 0.57 2,560,630 -2,524,150 0 Unknown Hu Yunjing Domestic 0.56 2,491,900 10,150 0 Unknown natural person Hu Baijun Domestic 0.49 2,192,300 6,300 0 Unknown natural person Xu Miaolian Domestic 0.44 1,975,750 1,975,750 0 Unknown natural person Shanghai Sanmao Enterprise (Group) State-owned 0.39 1,763,303 -568,000 0 Unknown Co., Ltd corporate shareholder Shi Yuxing Domestic 0.31 1,381,695 1,381,695 0 Unknown natural person Top 10 unconditionally tradable stock shareholders Shareholder Quantity of shares Classification Shanghai Pudong New Area State-owned Assets 44,888,678 A shares Supervision and Admin. Commission Shanghai International Trust and Investment Company 17,557,971 A shares China Great Wall Assets Management Co., Ltd. 9,060,514 A shares Honour Force Investments Ltd. 5,415,170 B shares Normal Win Assets Limited 2,560,630 B shares Hu Yunjing 2,491,900 B shares Hu Baijun 2,192,300 B shares Xu Miaolian 1,975,750 A shares Shanghai Sanmao Enterprise (Group) Co., Ltd 1,763,303 A shares Shi Yuxing 1,381,695 B shares Explanation for affiliated It remains unknown to the Company if there exists any affiliated relationship or concerted-party relationship or concerted-action relationship among SGSB’s top ten unconditionally tradable stock shareholders. It remains relationship between the main unknown to the Company if there exists any affiliated relationship between SGSB’s top ten shareholders unconditionally tradable stock shareholders and top ten shareholders. Information about shareholders whose shares are subject to conditional sales Company Quantity Information Conditions to be Sales date Quantity unblocked sold 8 Shanghai Pudong New Area State-owned 64,830,980 June 15, 2009 64,830,980 As proposed in the Assets Supervision and Admin. Commission reform proposal (2) Profile of the holding shareholder and real controller of the Company: ① Profile of the holding shareholder Organization: Shanghai Pudong New Area State-owned Assets Supervision and Administration Commission Representative: Lu Fangzhou Date of foundation: September 1, 1996 Principal business or administration activities: especially engaged in the administration of state-owned assets in Pudong New Area, entrusted by Shanghai Pudong New Area People’s Government. ② Change of the holding shareholder and real controller of the Company During report period, there is no variation about the holding shareholder and real controller of the Company. ③ Relationship of the Company and its real controller: Shanghai Pudong New Area State-owned Assets Supervision and Administration Commission 24.44% SGSB Group Co., Ltd. (3) Other legal entity stock shareholders who take singly more than 10% equity of the Company: At the end of report year, none of other legal entity stock shareholders took singly more than 10% stock equity of the Company. 9 Chapter V. Information about Directors, Supervisors and Senior Managerial Team 1. Brief information about Directors, Supervisors and senior managers Name Position Sex Age Term of office (RMB’000, before tax) Salary during report year Stock option practice other associated parties Payment from shareholders or Increase/decrease Variation cause Blocked shares Stock option Year- begin Year- end Zhang Chairman 26/06/2006- 70,000 70,000 M 46 401 No Min & CEO 25/06/2009 B shares B shares Vice-Chair 26/06/2006- Gu Jian M 58 0 0 0 No man 25/06/2009 Executive Ma Director 26/06/2006- M 52 5,520 5,520 317 No Minliang General 25/06/2009 Manager Jia 26/06/2006- Director M 60 0 0 8 Yes Chunrong 25/06/2009 26/06/2006- Shen Yibo Director M 42 0 0 8 Yes 25/06/2009 Ju 13/06/2008- Director M 58 0 0 0 Yes Weifeng 25/06/2009 Alfred 13/06/2008- Director M 53 0 0 0 No Wadle 25/06/2009 Indep. 26/06/2006- Liu Rende M 63 0 0 60 No Director 25/06/2009 Wang Indep. 26/06/2006- M 60 0 0 60 No Zhile Director 25/06/2009 Jiang Indep. 26/06/2006- M 58 0 0 60 No Hengjie Director 25/06/2009 Shi Indep. 13/06/2008- M 52 0 0 30 No Liangping Director 25/06/2009 He Zhong Supervisory 26/06/2006- M 60 10,792 10,792 253 No yuan Chairman 25/06/2009 Jiang 26/06/2006- Supervisor F 50 0 0 140 No Xiaoshu 25/06/2009 13/06/2008- Ni Yue Supervisor F 33 0 0 0 Yes 25/06/2009 Zhuge 03/09/2007- Deputy GM F 40 0 0 134 No Huiling 25-06-2009 18/04/2008- Li Jiaming Deputy GM M 47 0 0 59 No 25/06/2009 Fang 18/04/2008- Deputy GM M 41 0 0 53 No Haixiang 25/06/2009 Zheng 27/10/2008- Deputy GM F 43 1,500 1,500 74 No Ying 25/06/2009 Zhang Secretary of 26/06/2006- M 58 5,058 5,058 146 No Yifeng BOD 25/06/2009 Total - - - - 92,870 92,870 - - - - 1,803 - - Experience of the Directors, Supervisors and senior managers during the last 5 years: (1) Mr. Zhang Min took successively the posts of Assistant to General Manager in Shanghai Refrigerator Compressor Co., Ltd., General Manager of Shanghai Zunussi Electromecanica Co., Ltd., Deputy Secretary of CCP Committee, General Manager, Vice Chairman and Chairman of BOD of Shanghai SMPIC Corporation. Currently as Deputy Secretary of CCP Committee, 10 Chairman of BOD and CEO of SGSB. (2) Mr. Gu Jian took successively the offices of General Manager of Shanghai Pudong State-owned Assets Investment and Management Co., Ltd., Deputy Chief Economist and Chief Economist of Shanghai Pudong Development (Group) Co., Ltd. Actually as Secretary of CCP Committee and Vice Chairman of BOD of SGSB. (3) Mr. Ma Minliang assumed successively the offices of Secretary of CCP Committee and General Manager of Shanghai Maling Acualius Co., Ltd., Secretary of CCP Committee and Deputy General Manager of Shanghai Light Industries Equipment Co., Ltd., Secretary of CCP Committee, Deputy General Manager and General Manager of SMPIC Corporation, Vice Chairman of BOD and CFO of SGSB. Actually as Executive Director and General Manager of SGSB. (4) Mr. Jia Chunrong was designated as Deputy General Manager of Shangtou Investment Management Co., Ltd. Now he assumes office of General Manager and Chairman of BOD of Shangtou Investment Management Co., Ltd. and Director of SGSB. (5) Mr. Shen Yibo took the positions as Vice Director of General Admin. Dept., Vice Director and Director of Creditor Rights Dept. of China Great Wall Assets Management Corporation Shanghai Branch. Now as Director of Assets Operation No.1 Division of the same company’s Shanghai branch and Director of SGSB. (6) Mr. Ju Weifeng took successively the seats as Director in General Office, Office for Petitions and Appeals and Office of Legislative Affairs in Shanghai Pudong New Area People’s Government, member of the Disciplinary Commission of Pudong New Area. Actually as member of CCP Committee and Director of Shanghai Pudong Development (Group) Co., Ltd. and Director of SGSB. (7) Mr. Alfred Wadle was Executive Director and CEO of Durkopp Adler AG Czech Company. Since January 2007, he has taken the seat of Executive Director, CEO and Spokesman of Durkopp Adler AG. Currently as Director of SGSB. (8) Mr. Liu Rende took the seat of CCP Committee Secretary and Vice Chief Accountant of NEXIA HDDY Certificated Public Accountants (Shanghai) Co., Ltd. Now he is CCP Committee Secretary and Vice Chief Accountant of NEXIA HDDY Certificated Public Accountants (Shanghai) Co., Ltd., and Independent Director of SGSB. (9) Mr. Wang Zhile was Docent and Associate Professor of People’s University of China. Actually he takes the places of Director of Transnational Corporations Studies Center of the Research Institute of the Ministry of Commerce, Member of State Industrial Policy Advisory Committee. Besides as Independent Director of SGSB, he also takes the positions of Vice Chairman of China Group Companies Promotion Association, Vice Chairman of Foreign Investment Committee of IAC (Investment Association of China), Invited Researcher of China Society of Economic Reform and Part-time Professor of the Multinational Companies Study Center of Nankai University. (10) Mr. Jiang Hengjie took successively the positions as Director of General Office, Assistant to General Manager, Deputy General Manager of China Silk Industrial & Trading Co., Chairman of China National Garment Association, Secretary of CCP Committee, First Deputy General Manager of China National Garment Group Co. and President of China National Garment Association. Currently as Executive Vice President (Legal entity representative) of China National Garment Association, Director of National Garment Standardization Tech. Committee, member of Standing Committee of China Textile Engineering Academy, Invited Professor of Tsinghua University, Suzhou University, Jiangxi Garment Institute, Beijing Institute of Clothing and Textiles, and Independent Director of the Company. (11) Mr. Shi Liangping was Director of the Institute of Business and Economy in East China University of Science and Technology, Assistant to President and Head of Business School of the same university. He is actually taking the duties as Deputy President of Shanghai Customs College. Besides, he is also Deputy Chairman of Shanghai Statistics Academy, Deputy Chairman of Shanghai Administration Academy, member of Standing Committee of Shanghai Social Sciences Association, expert councilor for Shanghai Municipal People’s Government, and Independent Director of the Company. (12) Mr. He Zhongyuan once took the seat of Vice Chairman of BOD of the Company and 11 actually as Chairman of Supervisory Board of the Company. (13) Ms. Jiang Xiaoshu successively took the position of Vice Chairman, Chairman of Labour Union of SMPIC General Company, Member of CCP Committee, Secretary of Disciplinary Board and Chairman of Labour Union of SMPIC Corporation. Actually as Deputy Secretary of CCP Committee, Secretary of Disciplinary Board, Chairwoman of Labour Union and Supervisor of the Company. (14) Ms. Ni Yue took successively the duties as Chief Accountant of Shanghai Jingan City Commercial Company, Shanghai Oriental Century School and Shanghai Qinlong Real Estates Co., Ltd., Accounting Head of Shanghai Baodi Properties Co., Ltd., and Accounting Director of Shui On Land Limited. Since March 2008, she is working for the Admin. Center of State-owned Enterprises’ Supervisory Affairs under Shanghai Pudong New Area State-owned Assets Supervision and Administration Commission. Actually as Supervisor of the Company. (15) Ms. Zhuge Huiling was once Deputy Chairwoman, Chairwoman of Labour Union, Deputy Secretary of CCP Committee and Supervisor of the Company. Currently as Deputy General Manager of the Company. (16) Mr. Li Jiaming took successively the duties as Acting Director in the Institute of Shanghai Photosensitive Material Co., Director and Chief Engineer of Shanghai Photosensitive Material Factory, Deputy GM of Shanghai Dahai Camera Co., Ltd., Director of Technology R&D Center of SMPIC Co., Deputy GM of SMPIC Co. and Director of Shanghai SMPIC Photosensitive Material Factory. Actually as General Manager, Deputy Secretary of CCP Committee of SMPIC Co., Ltd. and Deputy GM of SGSB. (17) Mr. Fang Haixiang took successively the posts as Deputy GM of Flying Man Xiechang Sewing Machine Co., Ltd., Deputy Director and Director of Technology Center of SGSB. Currently as Deputy General Manager of the Company. (18) Ms. Zheng Ying was Assistant to General Manager of SMPIC Co., Ltd., CCP Secretary and Deputy GM of Fuji-Xerox Shanghai Limited. From Nov. 2004 to Oct. 2008, she was designated by the Company as Executive Director of Shanggong Europe (Holding) Co., Ltd. and Durkopp Adler AG. Actually as Deputy General Manager of SGSB. (19) Mr. Zhang Yifeng once took the posts of Director of Assets Management Office and Head of BOD General Office. Currently as Secretary to BOD of SGSB. 2. Concurrent posts the senior officials take in the shareholder or other non-shareholder units: In the shareholder: Name Shareholder Position Term of Office Subsidy paid Initial date Conclusion or not date Jia Chunrong Shanghai Shangtou Investment Management Chairman of 01/081/2006 01/07/2008 Yes Co. BOD Shen Yibo China Great Wall Assets Management Co. Deputy General 01/02/2007 Yes Shanghai Branch Manager Ni Yue Admin. Center of State-owned Enterprises’ - 03/2008 Yes Supervisory Affairs of Shanghai Pudong New Area State-owned Assets Supervision and Administration Commission Ju Weifeng Shanghai Pudong New Area State-owned - Yes Assets Supervision and Administration Commission In other non-shareholder units: Name Entity Concurrent Post Beginning date Closing date of Compensation and of the post the post subsidies paid or not Jia Chunrong Shanghai Highly Group Co., Ltd. Director 30/06/2005 30/06/2008 No Shanghai Lian Hua Fiber Co., Director 18/08/2005 No Ltd. Shanghai Shenshi Auto. Chairman of BOD No Commercial City Co. 12 Beijing Southern China Mansion Director No Co., Ltd. China National Offshore Oil Senior Consultant Yes Corporation Wang Zhile Beijing New Century Transnational Companies Studies General Director Yes Center Jiang Hengjie Shanghai Nine Dragon Co., Ltd. Indep. Director 23/04/2008 Yes Youngor Group Co., Ltd. Indep. Director 15/05/2008 Yes 3. Annual compensation of the managerial personnel (1) Decision-making procedures for compensation of Directors, Supervisors and senior Managers: the compensation for Independent Directors is decided by the General Meeting of Shareholders and the remuneration for other senior Directors and executives is under the proposal of the Compensation & Appraisal Committee and approval of the Company’s Board of Directors. (2) The compensation and welfare system for senior managers is a combination of the basic salary, the bonus and the premium directly linked with target-oriented performance appraisal in business operations. (3) Directors and Supervisors who don’t get compensation from the Company: Directors and Supervisors who don’t get payment from the Company Paid by shareholder or other related units Ni Yue Yes Ju Weifeng Yes Alfred Wadle No Gu Jian No 4. Rotation of Directors, Supervisors and Managers during report year (1) Appointments ① On March 3, 2008, the 15th meeting of the Fifth Board of Directors considered the proposal of General Manager Mr. Ma Minliang and approved the nomination of Ms. Meng Xiangyun as Accounting Director and Chief of Accounting Affairs of the Company. ② On April 18, 2008, the 16th meeting of the Fifth Board of Directors considered the proposal of General Manager Mr. Ma Minliang and approved the nominations of Mr. Li Jiaming and Mr. Fang Haixiang as Deputy General Managers of the Company. ③ On Oct. 27, 2008, the 20th meeting of the Fifth Board of Directors considered the proposal of General Manager Mr. Ma Minliang and approved the nominations of Ms. Zheng Ying as Deputy General Manager of the Company. ④ On June 13, 2008, the 2007 Annual General Meeting of Shareholders discussed and agreed to augment respectively Mr. Alfred Wadle and Mr. Ju Weifeng as Directors, Mr. Shi Liangping as Independent Director and Ms. Ni Yue as Supervisor of SGSB. (2) Leave-offices ① On March 3, 2008, Ms. Xu Xiaohui left the seat of Accounting Leader for retirement and 13 Mr. Chang Jiang quitted from the Board of Directors for reason of job transfer. ② On May 23, 2008, Mr. Wang Jie resigned the post in the Board of Supervisors for job movement. ③ On Oct. 29, 2008, Ms. Meng Xiangyun resigned her position as Accounting Director and Chief Accountant for reason of job transfer. 5. Staff profile of the Company At the end of 2008, SGSB’s employment register counted 2,327 employees (employees in overseas subsidiaries excluded), among whom 1,186 are actually working in their positions. Besides, the Company takes a total number of 6,117 retired persons, whose pension and medical costs are covered by social pension security system. The profession and education structure of the staff shows as following: (1) Professional structure of the staff Profession division Number of employees Manufacture 502 Sales 127 Engineering 75 Financing 59 Others 423 (2) Educational structure of the staff Education level Number of employees Postgraduate & bachelor 119 Junior college 229 Technical school 141 Senior high school and below 697 14 Chapter VI. Corporate Governance of the Company 1. Overview of the Company’s corporate governance (1) Correction and improvement measures of corporate governance ① In line with the circular No. ZJGSZ2007-28 (abbreviated as The Notice) by China Securities Regulatory Commission and the No. GZJGSZ2007-39 by Shanghai Securities Regulatory Bureau, the Company organized studying activities for all the Directors, Supervisors and senior managers, prepared a detailed timetable of progress, and defined the mechanism of responsibility in which the Chairman of BOD was the chief responsible person. The Company has finished the three stages (self-checking, public evaluation and correction/improvement) of the special campaign, and received the inspection by Shanghai Securities Regulatory Bureau. On Oct. 30, 2007, the Company’s 13th meeting of the Fifth Board of Directors discussed and approved (the report was carried on , and www.sse.com.cn, website of Shanghai Stock Exchange dated Oct. 31, 2007). ② During report period, China Securities Regulatory Commission announced publicly its GG2008-27 , requiring all the listed companies to enforce the progress achieved in 2007 and put through the campaign to further. The Notice also listed the focal points and concrete requirements. According to these requirements, the Chairman of BOD and the General Manager respectively convened the meetings for Directors, Supervisors and management team again to study conscientiously all the documents and evaluate prudently the fulfillment of correction and improvement report. The Company made the conclusion that all the problems that should be modified in specific time have been fixed and the long-term problems also have been resolved to certain extent. But it should be recognized that the corporate governance is a long-term and hard task. The Company will continuously make the construction of internal control mechanism as focal point, enforce the administration base, sum up the experience in the campaign, innovate new measures suitable for itself, and endeavor to improve the qualification of the listed company. (2) Actual situation of corporate governance Through the development of special campaign of corporate governance, the Company perfected its internal control system, optimized internal restraint and responsibility mechanism, consolidated its administration, improved the corporate qualification, and pushed forward the regularized operation. ① About shareholders and the general meetings of shareholders: After the reform of non-tradable shares, the interests of the Company tend to be identical with the interests of its shareholders. Through telephone, facsimile, email, website and organizing irregular activities, the Company has established a bridge for efficient communication with its shareholders, especially the medium & minor ones. The Company also followed the Rules for the General Meetings of Shareholders in the organization and convention of general meetings, and invited lawyers as testimony of these meetings. All these measures assure the right to know, to participate and to vote the significant affairs for all the investors. ② About relationship between the holding shareholder and the Company: The Company is fully independent in business and management. The Board of Directors, the Supervisory Board and the internal departments of the Company can operate independently. The holding shareholder regularizes conscientiously its conduct and doesn’t intervene directly or indirectly in the decisions and operations of the Company. When running affiliated transactions with its holding shareholder, the Company can observe the business practice, disclose the pricing basis, and the related parties can abandon automatically their right to vote. ③ About Directors and the Board of Directors: The Company elects its Directors strictly following the and has established the for its highest executive unit. Under the , all the Directors attend the meetings of BOD. The four affiliated special committees develop regular activities and improve the quality and efficiency of BOD, and the Independent Directors fulfill diligently their duties and express independent opinion upon significant decisions of the Company. ④ About Supervisors and the Board of Supervisors: The quantity and composition of Supervisors satisfies strictly the requirements fixed in related regulations and laws. The Supervisory Board has set its Rules for the Meetings. All the meetings of the Board follow the legal procedures and keep intact and authentic records for reference. With the stand of responsible to the Company and the investors, all the Supervisors run consciously their duties of supervising the financial affairs of the Company, the legitimacy and regularity of which the Directors, Managers and other senior executives carry out their responsibilities, and expressing independently their opinions. ⑤ About performance evaluation, incentive and monitoring mechanism: The Company has elaborated open and transparent performance evaluation, incentives and monitoring, mechanism. The compensation and appraisal committee considers the business situation of the Company, evaluates the performance of senior managers and defines their salaries linked with their progress. ⑥ About interested parties: For keeping balance of interests among shareholders, employees, social communities, and maintaining the sustainable, healthy and stable development of the Company, SGSB pays much attention to keep its social responsibilities, soundly respects and protects legitimate rights and interests of the banks and creditors, employees, consumers, suppliers, community and other interested parties. ⑦ About information disclosure and transparency: The Company appoints Secretary to BOD to disclose the information, receive the investors and answer their consultations. and are newspapers designated by the Company for information disclosure. According to the spirits of the and the , the Company guarantees the authenticity, accuracy, integrity and promptness of information disclosure and ensures that all the shareholders have equal opportunity to obtain related 3 information. 2. Duty fulfillment of Independent Directors (1) Attendance records of Independent Directors in BOD meetings: Name Scheduled meetings Personal attendances Entrusted attendances Absences Note Liu Rende 7 7 Wang Zhile 7 7 Jiang Hengjie 7 7 Shi Liangping 4 4 During report year, under orientation of the , the Independent Directors fulfill their duties with honesty and diligence, inspect and supervise zealously the business operations of the Company, express professional opinions on the rotation of senior managers, the utilization of the surplus from raised funds, the change of guaranty procedures and other significant affairs, and summit written opinion of Independent Director. During report year, the Independent Directors participated in the discussion on the Company’s development strategy. Mr. Wang Zhile proposed the ideas such as “integrate global resources and forge global value-chain”, “transform traditional manufacturing industrial chain and enforce soft power”, and “accelerate the absorption and formation of transnational business talents”; Mr. Jiang Hengjie contributed the concept “integration is innovation”, and pointed out that sewing machinery producers should speed up the product structure adjustment to meet the demands of industrial adjustment and restructure of apparel sector; Mr. Liu Rende, as leader of BOD’s auditing committee, participated all the process of the annual audit together with Mr. Shi Liangping, and expressed professional opinions after the communication with the certified auditors, the on-site inspection and the review of audit report. As resume, all the Independent Directors were conscientious in the operation and decision of BOD, and safeguard the overall interests of the Company and legitimate rights of medium and minor shareholders. (2) Independent Directors’ objection against significant events of the Company: During report year, the Independent Directors haven’t expressed any objection against the proposals launched by the BOD or other non-BOD units. 3. Structural independence of the Company from the holding shareholder (1) In respect to its business, SGSB Co., Ltd. runs independently productive, auxiliary manufacture, accessories, purchasing and sales chains. The business structure of the Company is integrated, independent and without any conflict or repetition to that of the holding shareholder. (2) Concerning HR resources, the Company runs independent labor & personnel management structure and wage system. All the senior managers get salary from the Company, and none of them holds administrative positions in the holding shareholder (or the 4 real controller). (3) In respect to its assets, the Company owns independently and exclusively all the assets, including land utility right and intellectual property right. (4) Regarding institutional system, the Company has established an organic structure totally independent from its holding shareholder; all its functional departments can run independently their duties, and are separated from the holding shareholder in operation and location. (5) Besides, the Company has independent accounting sector, and has established accounting and financing administration system as well. SGSB Co., Ltd. has also opened its own banking account and pay taxes in conformity with legal provisions. 4. Appraisal and incentive system for senior executives The Company has elaborated incentive policies for senior executives. The Company’s HR department regularly examines and appraises the performance of all high-level managers, and the compensation and appraisal committee realizes annual comprehensive appraisal and determines compensation of every manager at year-end. 5. Construction and perfection of internal control mechanism According to the norms on corporate governance of listed companies by China Securities Regulatory Commission and , the Company pays high priority to the construction and implementation of internal control mechanism, has built the risk management framework, and established systematically internal administration points. During report year, SGSB has reviewed the operation of the internal control mechanism, revised and perfected further the internal systems and regulations. The Company designated Audit Dept. as inspection and supervision unit of internal control, which is in charge of regular and irregular inspection upon business, business units, accounting affairs, and reports directly to BOD. SGSB has fixed a variety of control programs, mainly including transaction authorization control, accounting affairs control, responsibility division control, receipts and records control, assets’ utilization control and information system control. The Company continues to perfect the existing basic internal control mechanism, which can adapt to the requirements of corporate administration and development, and its normal fulfillment makes effects on operation risk restraint. 6. Disclosure of self-appraisal report by BOD and verification opinion by auditor upon internal control mechanism 5 The Company has established internal control mechanism. The audit department, designated as internal control inspection and supervision division, regularly submits work report to the Audit Committee of BOD and supports the Audit Committee to complete the self-appraisal report of internal control. At the release of current annual report, this self-appraisal report hasn’t been disclosed, nor verified by the auditors. 6 Chapter VII. Brief Information about Shareholders’ General Meetings 1. Annual general meeting of shareholders On June 13, 2008, the Company convened its 2007 Annual General Meeting of Shareholders, and carried the resolution announcements in and dated June 14, 2008. 2. Provisional general meeting of shareholders On December 29, 2008, the Company held its 2008 First Provisional General Meeting of Shareholders. The resolutions were announced in and dated December 30, 2008. 7 Chapter VIII. Report by the Board of Directors 1. Retrospect and analysis from the view of management team Business fields of the Company: The Company, as sewing machinery manufacturer, is mainly engaged in production and sales of industrial sewing machines and components, special-purposed sewing equipments and household sewing machines, technical development and consulting services. (1) Retrospect of the overall business operation during report period In 2008, the sewing machinery industry suffered from the strong marketing fluctuation due to the global economic crisis. Since the second half of report year, the orders of products maintained at an insufficient level while the price continued dropping. According to the radical changes of the market, the managerial team of the Company strengthened the marketing analysis and took several in-time measures, which made the Company consolidate its position in the deep slide of the industry. During report year, the Company realized principal operating income of RMB 2,236,180,000, a decrease of 11.89%; principal operating profit of RMB -16,600,000, a decrease of 155.40%; and net profit of RMB -32,260,000, a decrease of 215.10%. The exportation (international subsidiaries excluded) increased by 26% to USD 95.51 million. During report year, in view of the actual marketing situation, the Company paid more attention to the following works: ① Strengthening the marketing sales and perfecting the sales network Facing the shrunk demand in the sewing machinery market, the Company’s subsidiaries adjusted immediately the marketing strategy, perfected the sales network, availed every exhibition and other occasions to promote actively the new, famous, specific and high-quality products of the Company, and canvassed for more orders. At the meantime, the Company endeavored to explore domestic and international markets by pursuing distributors’ credit administration and cultivating qualified agencies and potential customers. ② Taking effective measures and stabilizing overseas operations Suffering from the slump of the Asian sewing machinery industry, Durkopp Adler AG’s sales of sewing machinery also descended in comparison with that of the anterior year, but the sales of material transmission machinery showed an ascent. With the support of local labor unions and according to different business situations, DA and its subsidiaries in Europe, adopted corresponding measures such as trimming the staff, cutting the pay, exploring the potentiality and reducing the cost. As a result, DA achieved nearly the same earning as the anterior year when the turnover shrunk by 10%. ③ Speeding up the technology imports and elevating the rank of products The Company pays high attention to innovative development and tries to strengthen its core competitivity. For one thing, the Company enforced the investment in DA’s R&D with purpose of consolidating its leadership in global industrial sewing machinery sector, and for another, the Company played full advantage of DA Research Center’s positive role in the 8 import, digestion and absorption of DA’s advanced technology among domestic joint-venture units, and ensured that the variety of sewing machines produced by Durkopp Adler Industrial Manufacturing (Shanghai) Co., Ltd. characterized “Technology from Germany and Made in Shanghai” could put into market as scheduled. ④ Implementing cost-cut and income-increase, and fulfilling expense-reduction and efficiency-enhancement The management team of the Company took the measures such as cutting the pay, controlling the daily expenses, and set itself an example for the subsidiaries and associates. The sub-companies also elaborated and implemented concrete solutions for the cost-reduction. As calculated, the cost-cut and income-increase campaign created more than RMB 10 million for the Company in 2008. ⑤ Emphasizing the corporate governance and focusing on institutional construction According to the requirements to deepen the corporate governance and strengthen the internal control mechanism, the Company organized special team to elaborate institutions, checked the implementation and revised the regulations on thus basis. In 2008, parallel to the overall budget control and the annual valuation and incentive mechanism towards the managers focused on specific missions, the Company resolved the business targets through the adoption of program timetable, and pushed the practice of these administrative measures by periodic inspection and responsibility definition. (2) Principal operating activities and performance ① Principal operating activities, by sectors and products RMB’ Sector Operating income Operating Operating Income Expense Margin expense gross increase % increase % increase margin % % Sewing machines and 1,550,748,531.82 1,116,890,193.57 27.98 -25.26 -26.13 3.13 material conveyers International trade 489,989,857.51 473,367,375.54 3.39 82.45 79.63 80.83 Film materials 70,477,724.76 64,177,063.54 8.94 5.21 3.69 17.57 Office appliances 74,476,276.94 64,241,631.18 13.74 22.78 18.97 25.16 Others 50,491,916.73 21,129,173.55 58.15 -24.78 -39.86 22.02 Total 2,236,1847,307.76 1,739,805,437.38 22.20 -11.89 -9.69 -7.84 ② Principal operating activities, by regions RMB’ Region Principal operating income Increase/decrease with last year (%) Domestic 920,820,721.76 2.23 Overseas 1,315,363,586.00 -19.67 ③ Production/sales volume and market share of main products During report year, the Company manufactured and sold respectively 79,774 and 80,549 industrial sewing machines marked as Shanggong and DA. The exportation of OEM Butterfly household sewing machines reached 466,374 units. In 2007, the market share of the Company’s common industrial sewing machines is less than 5%, but the high-rank products of Durkopp Adler AG are overwhelmingly dominant in the market. ④ Main suppliers and customers RMB’000 Purchase from top 5 suppliers 84,170 Proportion in total purchase volume 4.95 Sale to top 5 customers 366,430 Proportion in total sales volume 16.39 9 (3) Significant change in assets’ structure RMB’ Dec 31, 2008 Dec 31, 2007 Increase/decrease Reason Sum % in Sum % in percentage points total total Trading financial assets 1,223,468.55 0.06 9,875,912.50 0.41 -87.61 Note1 Bills receivable 1,517,662.30 0.07 3,070,470.00 0.13 -50.57 Note2 Accounts receivable 276,336,554.83 13.53 425,696,200.10 17.89 -35.09 Note3 Dividend receivable 78,000 0.004 879,792.24 0.04 -91.13 Note4 Financial assets available for 4,420,579.68 0.22 24,458,496.92 1.03 -81.93 Note5 sale Construction in progress 6,778,786.23 0.33 3,682,674.12 0.15 84.07 Note6 Bills payable 6,025,913.96 0.30 0 0 100 Note7 Tax payable 12,477,327.27 0.61 27,335,749.12 1.15 -54.36 Note8 Dividend payable 1,634,717.91 0.08 2,865,309.70 0.12 -42.95 Note9 Other payables 121,566,474.38 5.95 192,288,791.73 8.08 -36.78 Note10 Other current liabilities 891,742.25 0.04 1,626,725.18 0.07 -45.18 Note11 Currency translation difference -20,169,554.87 -0.99 3,028,055.36 0.13 -766.09 Note12 Note1: the transfer of the shares of Zhonglu in secondary market in current year. Note2: the receipt of cash converted from bank acceptance in current year. Note 3: the strengthening of capital recovery by Shanggong (Europe) Holding Co., Ltd. in current year. Note 4: the inflow of profits from invested entities in current year. Note 5: the transfer of the shares of Sanmao in secondary market in current year. Note 6: the increase of investment in sewing machinery by Shanggong (Europe) Holding Co., Ltd. in current year. Note 7: the increase of payable bank acceptance in current year. Note 8: the payment of tax payable in current year. Note 9: the partial transfer of profits payable in current year. Note 10: the payment and transfer of temporary receipts in current year. Note 11: the write-off of originally booked rent and interest in current year. Note 12: the influence of Euros exchange fluctuation in current year. (4) Principles adopted for the calculation of assets The Company adopts fair value principle for the calculation of trading financial assets and available-for-sale financial assets, and other assets are calculated on historical cost. Detailed accounting methods are disclosed in accounting policy of current annual report. (5) Significant changes in financial highlights RMB’ Item Year 2008 Year 2007 Increase/ Reason decrease % Financial expense 71,535,758.20 36,732,016.70 94.75 Note1 Loss on assets depreciation -4,615,295.39 28,293,238.29 -116.31 Note2 Net income on changes in fair value -6,595,211.11 70,231.94 -9,490.62 Note3 Operating income -16,597,305.54 29,961,108.03 -155.40 Note4 Non-operating income 38,764,055.21 62,654,560.87 -38.13 Note5 Non-operating expense 37,020,517.65 972,598.84 3,706.35 Note6 Income tax 18,365,265.05 59,131,753.73 -69.04 Note7 Minority interest -957,332.02 4,229,031.80 -122.27 Note 8 Note1: the increase of staff pension and the interests paid for bank borrowings by Shanggong (Europe) Holding Co., Ltd. Note 2: the current-year recovery of the exceeding credit lines of accounts receivable and the 10 adjustment of provision for bad debts. Note 3: the investment profits converted from the profit/loss in the change of fair value of the transferred tradable shares. Note 4: the decline of operating income and the sharp slide of gross earning rate of principal operating activities. Note 5: the decrease of earning from the transfer of land parcels. Note 6: the anticipated liabilities accrued for the guarantee for Shanghai Worldbest Enterprise Development Co., Ltd. Note 7: the significant decline of deferred income tax expense and current-year income expenditure of Shanggong (Europe) Holding Co., Ltd. Note 8: the decrease of minority interest in current year. (6) Significant changes and differences in cash flows structure RMB’ Item Year 2008 Year 2007 Increase Increase Reason /decrease /decrease (%) Net cash flow from operating activities 66,065,197.75 30,669,664.85 35,395,532.90 115.41 Note1 Net cash flow from investing activities 12,138,646.54 17,773,364.53 -5,634,717.99 -31.70 Note2 Net cash flow from financing activities -127,153,505.01 -149,123,082.60 48,091,346.88 14.73 Note3 Influence of fluctuation of exchange rate Note4 -35,543,863.07 10,888,394.81 -46,432,257.88 -426.44 upon cash and cash equivalents Note 1: the decrease of cash paid to and for the staff and other payments related to operating activities. Note 2: the decrease of cash gained from stock transfer and disposal of land parcels. Note 3: the decrease of payment of principal and interest for short-term bank borrowings, the increase of receipt from equity capital. Note 4: the influence by the exchange rate fluctuation of foreign currency on hand by Shanggong (Europe) Holding Co., Ltd. (7) Technological innovation of the Company The Company pays high attention to the R&D of new products and technology. The No. 281 oil-free computerized high-speed sewing machines, No. 069 cylinder heavy duty sewing machines, and No. 267 heavy duty sewing machines developed by the Company itself have achieved significant technological progress. Particularly, the No. 281 oil-free computerized high-speed sewing machines are characterized for their simple appearance design, easy maintenance, direct current driven, servo control and oil-free lubrication. The appearance design of No. 281 has been applied for appearance patent. Durkopp Adler AG, key sewing machinery manufacturing unit of the Company, has invested € 6.4 million in the R&D in 2008, which represented 4.6% of its operating income. (8) Internal control mechanism related to the fair value accounting The accounting department follows the prudency principle in the estimation and definition of fair value strictly in line with the Accounting Standards for Business Enterprises. Beginning Profit/loss from Accumulated fair Currently accrued Ending current in fair value variation depreciation value into equity Financial assets Among which: 1. financial 9,875,912.50 -6,595,211.11 1,223,468.55 assets at fair value whose changes into current profit/loss 11 Including: derived financial assets 2. Financial assets available for 24,458,496.92 -14,686,937.24 4,420,579.68 sale Subtotal financial assets 34,334,409.42 -6,595,211.11 -14,686,937.24 5,644,048.23 Total 34,334,409.42 -6,595,211.11 -14,686,937.24 5,644,048.23 (9) Financial assets and liabilities in foreign currency In report year, the Company didn’t hold any financial assets and liabilities in foreign currency. (10) Business retrospect and analysis upon main subsidiaries and associate undertakings ① Business performance of main subsidiaries and associate undertakings RMB’ Company Type Products/ Register Total Net Operating Net Share-hold services capital assets assets income profit Shanggong Holding Investment, assets EUR 100 % 1,174,364,761.02 290,653,210.87 1,315,363,586.00 14,912,220.05 (Europe) Hol management, 10,000,000 ding Co., Lt production, d. processing and sales of industrial sewing machines SMPIC Manu. Production and sale 125,000,000 100 478,831,190.97 355,039,356.57 431,918,445.77 26,851,858.06 of office supplies Shanghai Trading Imp. & exp. of 10,000,000 80 51,499,835.65 35,431,779.67 221,036,610.94 7,368,918.11 Butterfly sewing machines and Imp. & Exp. M&E equipments Co., Ltd. ② Single associate which influences more than 10% of the Company’s net profits RMB’000 Company Principal operating income Principal operating profit Net profit Shanghai Fuji Xerox Limited 2,548,000 167,810 125,930 2. Prospects for the Company’s future development (1) Development trend of the industrial sewing machinery sector, market competition situation and their possible impacts on the Company China has been an important producer of sewing machines in the world, with more international marketing share in sewing machinery and components. In the year 2008, with the combined impacts of the slump of apparel and bag industry, the deterioration of global economy and the measures of macro-economic control, Chinese sewing machinery industry fell into difficulties, the volume of production and sales slid down, the import-export suffered the first-time descent in recent years (particularly from the third quarter), and the business environment was everyday more rigorous. According to information from China Sewing Machinery Association, till the end of Sep. 2008, China exported 8,127,600 sewing machines, a decrease of 6.40%, among which, the export of household units was of 5,997,900, 8.33% less than the anterior year, the export of industrial units was of 2,089,000, an increase of 0.09% and 40,600 units were embroidery machines, a slide of 22.92%. The import was of 105,400 units, a decent of 46.63%, among which, 60,900 were household machines, 44,000 for industrial use and 553 embroidery machines, respectively decreased by 43.49%, 49.52% and 79.30%. Facing the severe situation, National Development and Reform Commission has elaborated 12 2009-2011 Activation Program for Light Industries, which aims at the obvious achievements of structural transformation and industrial upgrade of light industries and the emergence of key enterprises with global competitivity till the end of 2011. The activation program specially emphasized to impulse the industrial restructure, which means the industrial leading companies should absorb or reorganize those counterparts with high technology and trademark value, depending on the industrial policies and marketing principle, availing M&A loans offered by commercial banks, and considering the factors such as domestic and international resources, technological advantages and marketing space. Through this way, the leading enterprises can save significantly the duration and cost of technological R&D, and speed up the process to make themselves larger and stronger. The Ministry of Finance and the State Administration of Taxation have announced that the export rebate rate would be elevated for some electronic and mechanical products with high technology and added value. The export rebate rate for some sewing machines would be elevated from 11% and 13% to 14%. The Company will seize the opportunities to accelerate the transformation of growth mode, conquer the disadvantages caused by institution, mechanism and the location in high business-cost city Shanghai, and change the underperformance in the use of international resources and the adoption of DA’s high-tech in the process of purchase, production and sales. Furthermore, the Company will consolidate its leadership in the sewing machinery sector by expanding domestic and international acquisition and perfecting the integration of resources from Europe and Asia. (2) Opportunities, challenges and development strategy of the Company The vision of the Company is to make itself a leading company that owns first-grade technology, globally famous trademarks and represents the development direction of the international sewing machinery industry. In the coming year, the Company will keep consistency to impulse the integration and reorganization of sewing machinery business, and to implement steadily the strategy of “Stabilize in Europe and Develop in Asia”. By analyzing all the positive and negative factors, the Company has the confidence to seize the opportunities and face the challenges. ① The Company will progress the M&A towards its principal competitors in Europe, through taking advantage of Durkopp Adler AG’s financing function in the capital market (DA is a listed company in Germany), its technological superiority and its brand reputation. Parallel to the introduction of strategic financial investors and the implementation of operating restructure, the Company will absorb actively talents in the industry, accelerate R&D of new products, perfect the products chain of Shanggong and DA and create conditions for a stronger sewing machinery sector as its principal business. ② The Company will seize the opportunities of the current industrial restructure and upgrade and take full advantage of the low cost production caused by the concentration of domestic sewing machinery in the Delta of Yangtze River to improve the integration with private companies and foreign-ventured business. Through the transformation of institution and mechanism, and the relocation of production bases, the Company plans to lay a solid foundation for the enhancement of earning ability of domestic sewing machinery industry. 13 (3) Business planning for the coming year The business target for the year 2009 is to achieve an operating income of RMB 2,040,000,000 and an operating expense of RMB 1,578,000,000. The main measures will be as following: ① Try to promote the marketing and sales Durkopp Adler Trading (Shanghai) Co., Ltd. should adopt the marketing strategy with the combination of channel sales and regional agency based on the principle of marketing segmentation, so as to consolidate the leadership of DA trademark in south-eastern Asian markets and enlarge its market share in China and Asian region. The three subsidiary import & export units should solidly build the sales network, and, on basis of a strong control and administration over budget, capital cost and operational risks, should build the self-owned brands, raise the proportion of self-support business and further explore other agent business. ② Strengthen the sewing machinery business Durkopp Adler AG, the pillar of the Company’s sewing machinery business, plans to perfect the products variety through operation restructure and R&D of new products, and meet the demands from Asian markets by supplementing the products Made in China. At the meanwhile, DA will defend its status as No.1 in Europe and No. 3 in the world by the integration of sales recourses and the enhancement of economic benefits. And the domestic sewing machinery units should reduce the production cost and strengthen the earning ability through the movement of manufacture installations from high-cost to low-cost regions. ③ Accelerate the process of product upgrade The Company will take concrete measures to implement the absorption and digestion of DA’s products and focus on the development of heavy duty sewing machines in 2009. DA’s advanced technology should be availed to improve the technology content of domestic products. Besides, the Company will choose suitable household products and perfect the technology for the products under the trademark Butterfly, and satisfy the market demands by organizing OEM production and opening franchised stores. ④ Explore the concerted development among different industries The Company should enlarge the modern services sector based on the platform integrated of the existing branch business such as commercial facilities, stocked properties, property rent and administration. Through absorbing outside capitals and, reactivating the stocked properties, and developing business office buildings, the Company plans to contract maintenance and services for high-ranked residential quarters, which will not only offer cash flows for its principal operations, but also create reemployment possibility for idle workers caused by the business integration, and push the harmonious development of the Company itself. ⑤ Emphasize the internal administration The Company should continuously strengthen the internal administration and perfect the construction of internal mechanism. As concrete measures to assure the smooth integration and transformation of principal operations, it will control the inventories, reduce the receivables, improve the capital efficiency, enforce the investment management upon subsidiaries and overseas undertakings, minimize the business risks, and progress the Closure, Suspension, Merger and Conversion of small companies. 14 (4) Funds demanded for the realization of development strategy, planning of capital utilization, and capital sources ① Maintain sound credit relations with banks, collect funds through credit guarantee, assets mortgage among other channels, and secure the normal operation of the company. ② Strengthen funds management and elaborate strict measures to control the inventories, reduce receivable accounts and improve funds efficiency. ③ Continue to optimize resources allocation, make perfect plan for reactivating the stocked assets and assure the funds for the domestic relocation of principal operations. ④ According to the characteristics of its overseas subsidiaries with status of listed company, try to realize the refinancing for raising funds to satisfy the demand of international operations. (5) Negative factors and risks possibly affecting the realization of the development strategies and business targets, and the countermoves and measures adopted or to be adopted ① Business risks For different factors, the recourses integration between the Company’s installations Europe and Asia hasn’t achieved expected concerted effects. The import of DA’s technology and products didn’t progress rapidly and the long-term stability after the turnaround of domestic principal operations wasn’t obtained as scheduled. As countermoves, the Company will concentrate on speeding up the production of those products suitable for Asian markets and realize “Technology from DA, Made in China”. At the meantime, the Company will push through the domestic relocation of productive installations, reduce the purchase and HR costs, and assure the long-term stability after the turnaround of its principal operations. ② HR administration risks Along with the active implementation of “Going outside” strategy, the Company needs urgently professional talents in different terms. The tightening of market competition will also put the Company to the challenges of how to attract and keep with talents. On one side, the Company will continuously perfect the incentive mechanism favorable for talent competence, and try to elevate HR qualification of managers and technicians through training. On the other side, it will pay attention to recruit qualified talents from the market. ③ Exchange rate risks There is a significant portion of the Company’s sewing machinery production realized outside China, and this will bring exchange rate risks to the operation of the Company. According to the reality, the Company will pay high attention to the fluctuation of exchange rates, elaborate and adopt flexible trading forms and necessary value preservation measures to avoid and minimize the impacts of exchange rate risks upon the investment and operations. 3. Investments by the Company during the report period (1) Utility of raised funds RMB’000 Total raised funds 322,640 Current-year utilized amount 34,408.2 15 Accumulated utilized amount 298,171.1 Project Any Planned Devoted Accumu- Rate of Current Comple- As Income as Significant variation investment amount lated progress year tion date planned anticipated variation or not amount in amount (%) earning schedule or not of (partial current or not feasibility variation year or not included) Acquisition of No 200,960 - 150,720.5 - 15,537. July 1, Yes Yes No Durkopp Adler AG 3 2005 Production project No 195,000 34408.2 147,450.6 - -25,724 Aug. 31, Yes No No of computerized .7 2008 special-purposed industrial sewing machines availing technology of DA Total - 395,960 34408.2 298,171.1 - -10,187 - - - - .4 a. On July 1, 2005, Shanggong (Europe) Holding Co., Ltd., wholly-owned subsidiary of the Company, finished all the acquisition procedures of Durkopp Adler AG. This acquisition created a profit of RMB 4,616,300 in the same year. In 2006, 2007 and 2008, the overseas business contributed respectively a net profit of RMB 72,095,400, RMB 59,847,000 and RMB 15,537,300 for the Company. b. For the production of high-rank special-purposed sewing machines, the Company, together with Durkopp Adler AG and Hong Kong Far East Honest Ltd., cofounded a USD 4 million register-capital Durkopp Adler Trading (Shanghai) Co., Ltd. at an investment distribution of 40%, 34% and 26%. At the same time, the Company cooperated with Durkopp Adler AG, at an investment share of 70:30, establishing Durkopp Adler Industrial Manufacturing (Shanghai) Co., Ltd. with register capital of USD 10 million. These two companies, as production base and sales dealer in Asian market, initiated their operations in the year 2007. For that their productive and operative abilities are still in process of formation, these two projects have registered an accumulated loss of RMB 49,230,000. But with the gradual adoption of DA’s technology and products, they will play an important role in the production and sales of high-rank special-purposed sewing machinery products. c. Till August 31, 2008, all the projects with the collected capitals in the additional issuance were completed. Shulun Pan Certified Public Accountants Co., Ltd. has issued special audit report LXKSBZ(2008)12136 for the use of the collected capitals, confirming that the real investment from the collected capitals was of RMB 299,190,500 (among which really used of RMB 298,171,100 and payable or to be paid of RMB 1,019,400), the surplus balance was of RMB 23,449,400. According to the actual operation of the Company, the 21st meeting of the Fifth Board of Directors agreed to supplement current funds with the surplus balance (details reference to the Resolutions 2008 No. 017 and No. 018). (2) Utility of non-raised funds During report year, the Company didn’t develop non-raised funds investment. 4. Reason and impact of accounting policy and accounting estimation’s change or important accounting errors There were no accounting policy or estimation changes or important accounting errors occurred during report year. 16 5. Routine activities of the Board of Directors (1) Meetings and resolutions of the Board of Directors during report year ① The Fifth Board of Directors held its 15th session on March 3, 2008, and the resolutions were published in and dated March 5, 2008. ② The 16th session of the Fifth Board of Directors was convened on April 18, 2008 and the resolutions were announced in and dated April 22, 2008. ③ The 17th session of the Fifth Board of Directors, convened on April 28, 2008, discussed and approved the First Quarter Report of the Company. ④ The Fifth Board of Directors convened its 18th meeting on July 18, 2008, and the resolutions were carried in and dated July 19, 2008. ⑤ The Fifth Board of Directors held the 19th gathering on August 21, 2008, and the resolutions were published in and dated August 23, 2008. ⑥ The 20th meeting of the Fifth Board of Directors was organized on October 27, 2008. The resolutions were carried in and dated October 29, 2008. ⑦ The Fifth Board of Directors held its 21st meeting on December 12, 2008, and the resolutions were published in and dated December 13, 2008. (2) Implementation of the resolutions made by General Meetings of Shareholders ① According to the resolutions made by 2007 Annual General Meeting of Shareholders, the Company contracted Shulun Pan Certified Public Accountants Co., Ltd. as auditor for the year 2008; the parent company planned to obtain bank borrowings totally RMB 500 million through mortgage, impawn and credit guaranty (really receiving borrowings of RMB 325.6 million); and the Company resigned equity mortgage agreement with Shanghai Pudong Development (Group) Co., Ltd., in which the Company offered partial equity of SMPIC to PUdong Development as counter-guarantee mortgage for the bank borrowing valued RMB 168.12 million. ② In line with the resolutions made by 2008 First Provisional General Meeting of Shareholders, SMPIC, wholly subsidiary of the Company, transferred the 20% equity of Shanghai Xinhu Glass Factory Co., Ltd. to Shanghai Pudong New Area State-owned Assets Supervision and Administration Commission. Till the disclosure of current report, the Company had received all the transfer price and finished all the variation procedures for industry and commerce register. ③ During report year, the Company didn’t developed profit appropriation, reserve fund capitalization, nor stock allotment or additional equity offer. (3) Report of Audit Committee under the Board of Directors 17 In report year, the Independent Directors and the Audit Committee of BOD carried out their duties in line with the spirits of , , , and the requirements of . ① The Independent Directors and the Audit Committee of BOD reviewed carefully the quarter reports, interim report and annual report of the Company, and paid close attention to the business operation of the Company through hearing reports from business units, checking financial statements and consulting in-charge persons. They also reviewed the financial information and pushed the information disclosure according to related regulations. ② The Independent Directors and the Audit Committee of BOD paid high attention to the building of internal control mechanism. During report year, they approved the prepared by the Audit Dept. They considered necessary the revision, amendment, collection, edition and promulgation of regulations and norms for the basic administration, business regularization and risk control of the Company. They also proposed the Company and its subsidiaries to implement with full efforts the examination and self-perfection in line with the above-mentioned documents. ③ According to the (2008) 048 by China Securities Regulatory Commission, and (2008) 288 , the Independent Directors and members of the Audit Committee of BOD supervised the Company to elaborate the 2008 annual report audit and information disclosure through the following concrete measures: a. elaborated ; b. reviewed all the financial materials before the auditors from Shulun Pan Certified Public Accountants Co., Ltd. realizing their audit work, exchanged ideas with the auditors about the annual audit timetable on February 9, 2009, got informed the progress of annual audit work, and expressed their opinion upon the audit of annual report; c. heard the stage report jointly by the auditors and Audit Dept. on March 2, 2009, and expressed its requirement for the next stage of audit work. ④ According to the preliminary opinion on annual audit offered by the Company, the Independent Directors and members of Audit Committee reviewed the financial statements and exchanged opinions with the auditors through face-to-face and telephone communication on March 13, 2009. Based on these activities, they expressed the following opinions: agreed in principle the draft audit report, and expressed some suggestion for amendment; reminded the Company to organize special force to collect debts and accounts receivable, and try to improve the performance in thus work for the coming year of 2009; asked the Company to designate representatives to follow the restructure progress of China Worldbest and inform without any delay the situation to the Board of Directors; and advised the Company to enforce the inventory control and clear in time the finished goods that stay long time in inventory, so as to improve the cash flow circulation. ⑤ On March 16, 2009, the Independent Directors and members of Audit Committee overlooked again the annual financial statements and reviewed the clear opinion audit report issued by Shulun Pan Certified Public Accountants Co., Ltd. In their opinion, the Company 18 is healthy in accounting management, financial status and capital turnover; the clear opinion audit report reflects truly, exactly and all-roundly the financial status and business performance of the Company. They agreed to submit the annual audit report to the consideration of BOD. ⑥ According to the related requirements by China Securities Regulatory Commission, Pudong New Area State-owned Assets Administration and Shanghai Stock Exchange, the Independent Directors and members of Audit Committee observed that Shulun Pan Certified Public Accountants Co., Ltd. developed the audit work under the orientation of , and completed well the audit work following basically the professional principles of independent, objective and open. They agreed to renew contracting Shulun Pan Certified Public Accountants Co., Ltd. as 2009 annual auditor of the Company and submit this proposal to the consideration of BOD. (4) Report of Compensation and Appraisal Committee under the Board of Directors During report year, the members of Compensation and Appraisal Committee paid close attention to the operation of the Company, revised the remuneration program from consideration of the actual situation and the market price, and submitted the revised program to the approval of the Board of Directors. In the opinion of Compensation and Appraisal Committee, all the Directors, Supervisors and senior managers of the Company can fulfill diligently and responsibly their duties and complete the working targets of the Company in line with the remuneration policy and requirements of target responsibility check. And the disclosed remuneration information reflected truly and exactly the truth. 6. Proposal on profit appropriation or reserve fund capitalization As audited by Shulun Pan Certified Public Accountants Co., Ltd., the consolidated net profit for the year 2008 amounted to RMB -33,219,033.13, and the net profit attributable to the holders of parent company totaled RMB -32,261,701.11. The current-year profits registered a negative index, together with the anterior-period profits of RMB -472,825,079.18, the current-year beginning distributable profits of RMB -496,149,270.77, the year-end distributable profits was of RMB -543,874,979.20. Because the distributable profits remain negative, the Company doesn’t propose profit appropriation or reserve fund capitalization for report year. The above-mentioned proposal is to be considered and approved by the 2008Annual General Meeting of Shareholders. 7. Cash dividend in the last three years RMB Year Net profits Cash dividend Cash dividend/net profit % 2005 -276,608,231.59 0.00 0.00 2006 6,571,852.74 0.00 0.00 2007 28,030,284.53 0.00 0.00 19 Total -242,006,094.32 0.00 0.00 The net profits of the year 2005 registered negative, and the net profits of the years 2006 and 2007 registered positive, but after the relief of losses in anterior data, the net profits still remained negative. As a result, the Company didn’t realize cash dividend or profit appropriation in the last three years. 20 Chapter IX. Report by the Board of Supervisors 1. Function of the Board of Supervisors The Board of Supervisors held five meetings during report year: (1) The Fifth Board of Supervisors had its 8th session on April 18, 2008, in which the Supervisors considered and approved and . (2) The 9st session of the Fifth Board of Supervisors, held on April 28, 2008, discussed and approved . (3) On May 23, 2008, the 10th meeting of the Fifth Board of Supervisors considered and passed the proposed adjustment of personal structure of the Board. (4) On August 21, 2008, the Fifth Board of Supervisors held the 11th meeting, in which the Supervisors discussed and approved , , and . (5) On October 29, 2008, the 12th meeting of the Fifth Board of Supervisors considered and passed . 2．Independent opinion on the related affairs of the Company (1) Independent opinion on the law-abiding operations of the Company During report year, the Board of Supervisors works strictly in line with , , , implements seriously the resolutions made by the General Meetings of Shareholders, and perfects continuously internal administration and control mechanisms. The decisions of the Company can progress strictly in conformity with legal procedures. All the Directors and senior managers run their duties with honesty, diligence, earnestness, and no behaviors have been found among them violating laws, regulations or articles of association of the Company, nor acts infringing rights and interests of the Company and its shareholders. (2) Independent opinion on accounting affairs of the Company During report year, the Company runs perfect accounting system and standardized financial administration. There are no facts found that violate accounting regulations or impair the interests of shareholders. The financial statements objectively and truly reflect the Company’s financial status and operation achievements. Shulun Pan Certified Public 21 Accountants Co., Ltd. offered a clear audit report, which gives a true, objective and accurate view of the Company’s financial position and the results of its operations. (3) Independent opinion on utility of collected capital of the Company The projects using the collected funds have been finished and approved by 2008 First Provisional General Meeting of Shareholders. The surplus part of those raised funds has been converted into current funds after the authorization by the related norms. (4) Independent opinion on acquisition and sale of assets of the Company On acquiring and selling of assets, the Company keeps the principles of Openness, Fairness and Justice, all the acquisitions and sales of assets are based on fair price. The Board of Supervisors found no behind-the-scene deals or behaviors harming the benefits of the Company and its shareholders. (5) Independent opinion on affiliated transactions of the Company During report year, there were no significant affiliated transactions. 22 Chapter X. Significant Events 1. Important arbitration and litigation proceedings Because of normal operations, the Company contracted mutual guarantee relationship with Shanghai Worldbest Industry Development Co., Ltd. (Worldbest Development) since the year 2001. For the reason of its own business problems, Worldbest Development couldn’t refund on time the borrowings raised from the banks, who launched lawsuits against the borrower. The Company was also involved into three lawsuits, among which two cases were China Construction Bank Shanghai Branch (CCB SH) and Shenzhen Development Bank Shanghai Branch (SDB SH) against the Company, and the third was the Company pursuing Worldbest Development (for details reference to 2007 Annual Report). Till the release of current report, the Company has reached reconciliation agreements respectively with Worldbest Development, CCB SH and SDB SH (for details reference to the resolutions L2008-002, L2008-010 and L2008-016). Besides, for supporting the assets restructure of Worldbest Development, on request of its biggest stockholder China Worldbest Group Co., Ltd. and the Financial Creditors’ Committee, the Company agreed to proceed to change the guaranty process caused by debts transplant under the precondition that the reorganization program could be in practice (for details reference to the resolution L2008-011). As the assets/liabilities reorganization of Worldbest Development wasn’t in progress as scheduled, and based on the prudency principle, the Company accrued partial anticipated liabilities for the guarantee related to Worldbest Development (total amount of RMB 118,490,000) in the year 2008. 2. Acquisition/sale of assets, M&A during report year (1) By the approval of 2008 First Provisional General Meeting of Shareholders, the Company’s wholly-owned subsidiary transferred 20% stock equity of Shanghai Xinhu Glass Co., Ltd. to Shanghai Pudong New Area State-owned Assets Investment and Management Co., Ltd. According to the transfer agreement, as at the release of current report, the Company has received all the transaction price of RMB 35,582,100. (2) As the decision of the 12th meeting of the Fifth Board of Directors, the subsidiary Durkopp Adler Trading (Shanghai) Co., Ltd., with purpose of resources’ integration, could acquire 100% equity of Durkopp Adler Far East Co., Ltd. HK at a price of USD 500,000. Till the end of report year, the acquisition has been completed. 3. Significant affiliated transactions during report year 23 (1) Significant affiliated transactions of assets and stock equity The Company didn’t acted significant affiliated transactions during report year. (2) Creditor rights and debts with affiliated parties The Company didn’t assume any creditor rights or debts with affiliated parties during report year. 4. Information about intrusting affairs The Company didn’t entrust its assets to other companies during report year. 5. Information about contract affairs The Company didn’t contract its assets to other companies during report year. 6. Information about lease affairs The Company didn’t lease its assets to other companies during report year. 7. Information about guarantee cases RMB’000 Company Incurred date Guaranteed Relationship Valid period Com- Affiliat- (dd/mm/yy) amount pleted ed-party or not guarante e or not Shanghai Worldbest Industry 11/11/2004 30,000 Joint-Liability 11/11/2004- No No Development Co., Ltd. Guarantee 09/11/2005 Shanghai Worldbest Industry 29/03/2005 8,490 Joint-Liability 29/03/2005- No No Development Co., Ltd. Guarantee 29/09/2005 Shanghai Worldbest Industry 27/05/2005 10,000 Joint-Liability 27/05/2005- No No Development Co., Ltd. Guarantee 23/05/2006 Shanghai Worldbest Industry 13/06/2005 10,000 Joint-Liability 13/06/2005- No No Development Co., Ltd. Guarantee 29/09/2005 Shanghai Worldbest Industry 06/06/2005 30,000 Joint-Liability 06/06/2005- No No Development Co., Ltd. Guarantee 01/06/2006 Shanghai Worldbest Industry 14/07/2005 30,000 Joint-Liability 14/07/2005- No No Development Co., Ltd. Guarantee 04/07/2006 Shanghai Pudong Development 09/06/2006 168,120 Joint-Liability 09/06/2006- No No (Group) Co., Ltd. Guarantee 08/06/2008 Guarantee sum incurred in report year 0 Remaining sum at end of report year 286,610 Guaranties for subsidiary undertakings Guarantee sum incurred in report year 0 Remaining sum at end of report year 156,960 Total guarantee amount (guaranties for subsidiary undertakings included) Total guarantee amount incurred 443,570 Proportion in the net assets 78.5% Including: Guarantee for holding shareholder, real controller 0 and their affiliated parties Direct or indirect guarantee for organizations 275,450 whose assets-liabilities ratio is more than 70% Exceedance of total guarantee amount than the half 0 of the net assets Total guarantee amount under these three items 275,450 24 (1) The Company contracted mutual credit guarantee relationship with Shanghai Worldbest Industry Development Co., Ltd. At end of report year, the Company acted as guarantor for six borrowings of Shanghai Worldbest Industry Development Co., Ltd., with an overdue amount of RMB 118,490,000. The Company is taking active measures to dispose the lawsuits caused by the joint liability guarantees. (2) According to related articles in the equity acquisition agreement signed with FAG Kugelfischer AG (FAG), the Company should take certain joint-liability responsibility for the following affairs: ① Besides the payment of € 949,821 for equity acquisition of Durkopp Adler AG, Shanggong (Europe) Holding Co., Ltd. (SG Europe), wholly-owned subsidiary of the Company, should bear the banking loans of DA’s original shareholders valued € 36,525,132.28. As at end of 2005, SG Europe had paid all the equity acquisition consideration and € 9,482,436.84 for banking loans. As originally agreed, the rest banking loans around € 27,042,695.44 would be covered with equal payment in nine years at an interest rate of 6% every June 30 since the year 2005. The Company assumed joint-liability responsibility for the equity acquisition, as well as the banking loans and interests. But the guarantee for banking loans and interests was maximum 50% of actual amount and € 12,500,000.00. As at the acquisition date, the net assets of DA valued € 16,397,000, and taking in consideration the joint guarantee duty of the Company for DA’s debts towards its original shareholder FAG, Shanggong Europe paid only € 1,293,000 for the 89.932% equity of DA, and the transaction incurred an investment difference of € 15,104,000. After the integral consideration of the guarantee risks, the operating situation of DA and its cash inflow ability, the Company adjusted its principal operating assets in combination of investment difference, and appropriately returned partial adjusted balance according to the actual situation of guarantee risks and DA’s operations. Till the end of report year, Shanggong Europe had paid first-period principal of banking loans € 6,000,000 for FAG, with the remaining amount to be € 21,030,000. ② In 2005, the Company offered a letter of guarantee valued USD 5,300,000 to FAG Kugelfischer AG for the housing lease contract of DA’s subsidiary in the United States, valid from June 30, 2005 to October 31, 2015. On the same day June 30, 2005, SG Europe offered a cash mortgage of € 635,000 to FAG (with the same period of validity) for re-guaranteeing the latter’s responsibility in the sale and lease-back deal between DA’s subsidiary and UTF Norcross L.L.C. Till December 31, 2008, this guarantee deal didn’t cause outflow of economic interest from the Company. 8. Information about trust investment The Company didn’t contract trust investment during report year. 9. Other significant contracts 25 The Company didn’t sign other significant contracts during report year. 10. Fulfillment of the commitments by the Company or the shareholders taking 5% or more of the Company’s stock right Shanghai Pudong New Area State-owned Assets Supervision and Administration Commission, shareholder with more than 5% stock right of the Company, can fulfill strictly the promises it has made during reform of non-tradable shares. 11. Engagement and dismissal of accounting firms During report year, the Company newly contracted Shulun Pan Certified Public Accountants Co., Ltd. as auditor of annual reports. The year 2008 is the second year that Shulun Pan in charge of the Company’s audit services. In current year, the Company paid RMB 750,000 to Shulun Pan Certified Public Accountants Co., Ltd. as auditor fee (RMB 750,000 in anterior year to BDO Shanghai Zhonghua Certified Public Accountants), RMB 112,000 for specific affairs auditor service, and RMB 20,000 as subsidy of accommodation and transportation (RMB 97,463 in the previous year to BDO Shanghai Zhonghua Certified Public Accountants). 12. Punishment upon the Company, its BOD, Directors, Supervisors, senior managers, shareholders, or the real controller, and the correction measures (1) During the report year, the Board of Directors, the Directors, or the Company itself, had neither received any check, administration punishment or criticism notice from China Securities Regulatory Committee, nor been publicly condemned by Shanghai Stock Exchange. (2) During report year, under the spirit of and , China Securities Regulatory Commission Shanghai Bureau realized a spot inspection since June 3, 2008, and issued (HZJGSZ2008-187) dated August 8, 2008. With high attention to this point, the Board of Directors and the Board of Supervisors respectively elaborated rectification measures and clarified responsible departments and persons. The Company, with full responsibility to all the shareholders, took immediate actions rectifying the problems found in the inspection, and submitted the rectification report to the consideration of the 19th meeting of the Fifth Board of Directors (reference to the Resolution L2008-011 in and dated August 23, 2008). 26 13. Other significant events Durkopp Adler AG, Shanggong (Europe) Holding Co., Ltd’s wholly-owned subsidiary, for consolidating its leading position in the European market of sewing machinery and pursuing the second place in worldwide sewing machinery industry, is facing the necessity to supplement its products line, meet the Asian market demands and reduce the influence of global financial crisis. DA is planning to propose its intention to acquire partial assets of PFAFF industrie Maschinen AG to the bankrupt trustee designated by local tribunal. 14. Other significant events, their impacts and the resolution proposals (1) Investment in stock exchange RMB’ Type Code Number Initial Quantity Year-end Prop. in investment Current investment of shares book value in stock exchange profit/loss Funds HuaAn A 160402 100,000.00 121,818.65 206,688.97 16.89% -343,809.51 Other investment in stock exchange 2,307,410.13 - 1,016,779.58 83.11% -1,290,630.55 Profit/loss current-year sale of - - - - 9,163,335.42 investment Total 2,407,410.13 - 1,223,468.55 100% 7,528,895.36 (2) Stock equity of other listed companies held by the Company RMB’ Code Entity Initial Prop. in the Year-end Profit Change in Account title Origin of investment invested book value /loss shareholder equity company equity 600637 SVA Info. 67,600.00 D44 2008-03-05 http://www.sse.com.cn Fifth BOD B9 Official website of Shanghai Stock Exchange Announcement D21 2008-04-03 http://www.sse.com.cn B7 Official website of Shanghai Stock Exchange Resolutions by the 16th meeting of the D61 2008-04-22 http://www.sse.com.cn Fifth BOD B5 Official website of Shanghai Stock Exchange 27 2007 Annual Report Summary D61 2008-04-22 http://www.sse.com.cn B5 Official website of Shanghai Stock Exchange Resolutions by the 8th meeting of the D61 2008-04-22 http://www.sse.com.cn Fifth Board of Supervisors B5 Official website of Shanghai Stock Exchange 2008 First Quarter Report D94 2008-04-29 http://www.sse.com.cn B4 Official website of Shanghai Stock Exchange Announcement for the convention of 26 2008-05-24 http://www.sse.com.cn 2007 Annual General Meeting of B4 Official website of Shareholders Shanghai Stock Exchange Resolutions by the 10th meeting of the 26 2008-05-24 http://www.sse.com.cn Fifth Board of Supervisors B4 Official website of Shanghai Stock Exchange Circulation of shares subject to D12 2008-06-11 http://www.sse.com.cn conditional sales B5 Official website of Shanghai Stock Exchange Resolutions by 2007 Annual General 21 2008-06-14 http://www.sse.com.cn Meeting of Shareholders A12 Official website of Shanghai Stock Exchange Resolutions by the 18th meeting of the 15 2008-07-19 http://www.sse.com.cn Fifth BOD B7 Official website of Shanghai Stock Exchange Announcement 11 2008-07-26 http://www.sse.com.cn B4 Official website of Shanghai Stock Exchange 2008 Interim Report Summary 36 2008-08-23 http://www.sse.com.cn B3 Official website of Shanghai Stock Exchange Resolutions by the 19th meeting of the 36 2008-08-23 http://www.sse.com.cn Fifth BOD B3 Official website of Shanghai Stock Exchange Resolutions by the 11th meeting of the 36 2008-08-23 http://www.sse.com.cn Fifth Board of Supervisors B3 Official website of Shanghai Stock Exchange Announcement reminding the decline of 31 2008-10-11 http://www.sse.com.cn business performance in the 3rd quarter A6 Official website of Shanghai Stock Exchange 2008 Third Quarter Report C7 2008-10-29 http://www.sse.com.cn A10 Official website of Shanghai Stock Exchange Resolutions by the 20th meeting of the C7 2008-10-29 http://www.sse.com.cn Fifth BOD A10 Official website of Shanghai Stock Exchange Announcement C7 2008-10-29 http://www.sse.com.cn A10 Official website of Shanghai Stock Exchange Announcement C7 2008-11-19 http://www.sse.com.cn B4 Official website of Shanghai Stock Exchange Resolutions by the 21st meeting of the 13 2008-12-13 http://www.sse.com.cn Fifth BOD C8 Official website of Shanghai Stock Exchange Announcement for the transfer of 20% 13 2008-12-13 http://www.sse.com.cn equity of Shanghai Xinhu Glass Factory C8 Official website of Co., Ltd. from SMPIC to Shanghai Shanghai Stock Exchange Pudong New Area State-owned Assets Investment & Management Co., Ltd. Report about the use of capitals raised 13 2008-12-13 http://www.sse.com.cn from the last funds collection C8 Official website of Shanghai Stock Exchange Announcement for the convention of 13 2008-12-13 http://www.sse.com.cn 2008 First Provisional General Meeting C8 Official website of of Shareholders Shanghai Stock Exchange Resolutions by 2008 First Provisional C19 2008-12-30 http://www.sse.com.cn General Meeting of Shareholders C13 Official website of Shanghai Stock Exchange 28 Chapter XI. Financial Statements by the Auditor The 2008 Annual Report of the Company has been audited by Li Ping and Zhang Qi, certified public accountants of Shulun Pan Certified Public Accountants Co., Ltd., who offers a clear audit opinion for the current Annual Report. The Audit Report, financial statements and financial annotations are carried in the attachments. 29 Chapter XII. For Reference 1. Financial Statements signed by the legal representative, chief accountant and accounting manager 2. Original audit report signed by the certified public accountants and sealed by the accounting firm 3. Original documentation and announcements about the Company, carried in the newspaper assigned by China Security Regulatory Committee within the report year SGSB (Group) Co., Ltd. Chairman of Board of Directors: Zhang Min March 26, 2009 If the English Version of this Annual Report involves any differences from the Chinese Version, the latter shall be effective. 30 Balance Sheet - Consolidated 2008-12-31 Prepared by SGSB Group Co., Ltd. Liabilities and Owners' Equity Assets No. Note Ending Balance Beginning Balance No. Note (or Shareholders' Equity) Current Assets: Current liabilities Cash and bank 1 6.1 379,921,085.97 438,292,840.47 Short-term loans 39 6.19 Settlement reserve 2 Central bank loan 40 Capital lent 3 Absorbing and bankers' deposit 41 Tradable financial assets 4 6.2 1,223,468.55 9,875,912.50 Capital borrowed 42 Bills receivable 5 6.3 1,517,662.30 3,070,470.00 Tradable financial liabilities 43 Accounts receivable 6 6.4 276,336,554.83 425,696,200.10 Bills payable 44 6.20 Prepayments 7 6.5 35,581,729.81 28,346,378.56 Accounts payable 45 6.21 Receivable premium 8 Advances on sale 46 6.22 Receivable rein. accounts 9 Sell repo. financial assets 47 Receivable rein. contract reserve 10 Commission unpaid 48 Interest receivable 11 Wages and salaries unpaid 49 6.23 Dividend receivable 12 78,000.00 879,792.24 Tax unpaid 50 6.24 Other receivables 13 6.6 60,418,127.44 78,523,031.12 Interest unpaid 51 Reverse repo. financial assets 14 Dividend unpaid 52 Inventories 15 6.7 522,511,005.88 539,757,696.79 Other payables 53 6.25 Long-term creditor-investment to be expired in one year 16 Payable rein. accounts 54 Other current assets 17 6.8 970,192.36 1,245,523.34 Insurance contract reserve 55 Total current assets 18 1,278,557,827.14 1,525,687,845.12 Securities trading agency accounts 56 Securities consignment accounts 57 Non-current Assets Long-term liabilities to be expired in one year 58 6.26 Loans launched and advances 19 Other current liabilities 59 6.27 Available for sale financial assets 20 6.9 4,420,579.68 24,458,496.92 Total current liabilities 60 Held-to-maturity investment 21 Non-current liabilities Long-term receivables 22 Long-term loans 61 6.28 Long-term investment on stocks 23 6.10 43,021,920.95 48,955,997.62 Bonds payable 62 Investment properties 24 6.11 150,404,623.75 161,003,519.93 Long-term accounts payable 63 6.29 Fixed assets 25 6.12 319,529,667.47 364,153,089.40 Specific payable 64 Construction in progress 26 6.13 6,778,786.23 3,682,674.12 Contingent liabilities 65 6.30 Construction materials 27 Deferred tax liability 66 6.17 Disposal of fixed assets 28 Other non-current liabilities 67 Consumable biological asset 29 Total non-current liabilities 68 Oil & gas asset 30 Total liabilities 69 Intangible assets 31 6.14 114,454,442.55 123,127,892.57 Owners' equity R&D expense 32 6.15 55,078,865.45 48,984,446.87 Paid-in capital (or stock) 70 6.31 Goodwill 33 6.16 28,142,462.40 31,079,079.84 Capital reserve fund 71 6.32 Long-term unamortized expense 34 Less: treasury stock 72 Deferred tax, asset 35 6.17 42,023,466.14 48,965,660.16 Surplus reserve fund 73 6.33 Other non-current assets 36 Common risk reserve 74 Total non-current assets 37 763,854,814.62 854,410,857.43 Undistributed profit 75 6.34 Difference of foreign currency translation 76 Total owners' equity attributable to parent company 77 Minority interests 78 Total owners' equity 79 Total assets 38 2,042,412,641.76 2,380,098,702.55 Total liabilities and owners' equity 80 Legal Representative: Financial Principal: CFO: Income Statement - Consolidated For the Year 2008 Prepared by SGSB Group Co., Ltd. Item No. Note Current Y 1. Total operating revenues 1 2,236,184,307 Including: Operating revenues 2 6.35 2,236,184,307 Interest revenue 3 Earned premium 4 Commissions earned 5 2. Total operating expense 6 2,299,140,782 Including: Operating expense 7 6.35 1,739,805,437 Interest expense 8 Commission expense 9 Surrender value 10 Loss expense net value 11 Insurance contract reserve net value 12 Policy dividend expense 13 Reinsurance expense 14 Sales tax and extra charges 15 6.36 4,053,225 Sales expense 16 254,794,274 Administration expense 17 233,567,382 Financial expense 18 6.37 71,535,758 Loss in assets' devaluation 19 6.38 -4,615,295 Add: Net income in fluctuation of fair value(less: net loss) 20 6.39 -6,595,211 Investment income 21 6.40 52,954,380 Including: Investment income in associated and joint-ventured enterprises 22 -488,962 Exchange gains and losses (less: loss) 23 3. Operating profit 24 -16,597,305 Add: Non-operating income 25 6.41 38,764,055 Less: Non-operating expense 26 6.42 37,020,517 Including: Net loss in disposal of non-current assets 27 997,412 4. Total profit 28 -14,853,767 Less: Income tax expense 29 6.43 18,365,265 5. Net profit 30 -33,219,033 Including: Net profit earned by mergeree before merger 31 Net profit attributable to parent company 32 -32,261,701 Minority interest 33 -957,332 6. Earning per share (1) Basic earning per share 34 -0.0 (2) Diluted earning per share 35 -0.0 Legal Representative: Financial Principal: CFO: Cash Flow Statement - Consolidated For the Year 2008 Prepared by SGSB Group Co., Ltd. 项 目 No. Note Current Year 1. Cash flows from operating activities: Cash inflow from sale of goods and provision of services 1 2,503,380,424.44 Net increase in customers and bankers' deposit 2 Net increase in borrowing from central bank 3 Net increase in capital borrowed from other financial institutions 4 Cash received from original insurance contract premium 5 Net cash received from reinsurance 6 Net increase in customers' deposit and investment 7 Net increase in disposal of tradable financial assets 8 Cash received as interest and commissions 9 Net increase in capital borrowed 10 Net increase in buy-back capital 11 Repayment of tax received 12 67,602,448.08 Other cash flow related to operating activities 13 5.42 52,075,515.52 Total cash inflow from operating activities 14 2,623,058,388.04 Cash outflow for purchase of goods and services 15 1,754,751,159.10 Net increase in customers loans and advance payment 16 Net increase in deposit in central bank and other bankers 17 Cash payment for original insurance contract loss 18 Cash for interest and commissions 19 Payment of policy dividend 20 Payment to and for staff 21 636,352,316.81 Taxation paid 22 32,254,818.50 Other payment related to operating activities 23 5.42 133,634,895.88 Total cash outflow from operating activities 24 2,556,993,190.29 Net cash in/outflow generated from operations 25 66,065,197.75 2. Cash flow from investing activities Cash inflow from retirement of investment 26 12,411,646.08 Cash inflow from profit of investment 27 17,205,699.89 Cash gain from disposal of fixed assets, intangible assets, and other long-term 28 investment 37,376,316.75 Cash inflow from disposal of subsidiaries and other operating units 29 17,791,100.00 Other proceeds related to investment activities 30 Total cash inflow from investing activities 31 84,784,762.72 Cash paid for acquisition of fixed assets, intangible assets and other long-term 32 assets 72,646,116.18 Cash paid for investment 33 Net increase in pledge loan 34 Cash paid for acquisition of subsidiaries and other operating units 35 Cash paid for other activities related to investment 36 5.42 Total cash outflow from investing activities 37 72,646,116.18 Net cash in/outflow generated from investment activities 38 12,138,646.54 3. Cash flow from financing activities Absorption of investment 39 3,699,538.78 Among which: absorption of stock investment of minority shareholders by 40 subsidiary companies Borrowings raised 41 442,200,000.00 Cash raised by bond flotation 42 Other cash inflow related to financing activities 43 Total cash inflow from financing activities 44 445,899,538.78 Borrowings repaid 45 500,307,620.94 Dividend, interest and profit paid 46 46,623,653.56 Among which: pay for dividends of minority shareholders 47 Other cash outflow related to financing activities 48 26,121,769.29 Total cash outflow from financing activities 49 573,053,043.79 Net cash in/outflow from financing activities 50 -127,153,505.01 4. Influence of fluctuation of exchange rate 51 -35,543,863.07 5. Net increase/decrease in cash and cash equivalents 52 -84,493,523.79 Add: beginning balance of cash and cash equivalents 53 438,292,840.47 6. Ending balance of cash and cash equivalents 54 353,799,316.68 Legal Representative: Financial Principal: CFO: Financial Dire Owner's Equity Movement - Consolidated For the Year 2008 Prepared by SGSB Group Co., Ltd. Current Year Owners' equity attributable to parent company Less: Treassury Common Risk Un-confirmed Item No. Paid-in Capital (Stock) Capital Reserve Stock Surplus Reserve Reserve Undistributed Profit Investment Loss 1 448,886,777.00 411,218,244.59 4,546,242.52 -283,205,720.63 1. Previous year ending balance 2 Add: accounting policy changes 3 Correction of previous-period accounting errors 4 448,886,777.00 411,218,244.59 - 4,546,242.52 - -283,205,720.63 - 2. Beginning balance 5 - -20,269,373.30 - - - -32,261,701.11 3. Increase/decrease 6 -32,261,701.11 (1) Net profit 7 -20,269,373.30 (2) Gains and losses directly into owners' equity a. Net value of fluctuation in fair value of tradable financial 8 -14,686,937.24 assets b. Influence of changes of other owners' equity from invested 9 -5,582,436.06 units under equity method 10 c. Influence of income tax related to owners' equity 11 d. Others 12 -20,269,373.30 -32,261,701.11 Subtotal of (1) and (2) 13 (3) Owner inputs and reducing capital 14 a. Owner inputs capital 15 b. Shares included in owners' equity 16 c. Others 17 - - (4) Profit distribution 18 a. Surplus reserve 19 b. Common risk reserve 20 c. Distribution to owners or shareholders 21 d. Others 22 (5) Internal transfer of owners' equity 23 a. Capital reserve turn to stock equity 24 b. Surplus reserve turn to stock equity 25 c. Surplus reserve to recover loss 26 d. Others 27 448,886,777.00 390,948,871.29 4,546,242.52 -315,467,421.74 4. Ending balance Legal Representative: Financial Principal: CFO: Owner's Equity Movement - Consolidated For the Year 2008 Prepared by SGSB Group Co., Ltd. Previous Year Owners' equity attributable to parent company Less: Treassury Common Risk Un-confirmed Item No. Paid-in Capital (Stock) Capital Reserve Stock Surplus Reserve Reserve Undistributed Profit Investment Loss 1 448,886,777.00 397,177,336.51 4,546,242.52 -251,161,084.31 -7,507,252 1. Previous year ending balance Add: accounting policy changes 2 -59,907,903.27 7,507,252 Correction of previous-period accounting errors 3 4 448,886,777.00 397,177,336.51 4,546,242.52 -311,068,987.58 2. Beginning balance 5 - 14,040,908.08 - - - 27,863,266.95 3. Increase/decrease 6 28,030,284.53 (1) Net profit 7 14,040,908.08 -167,017.58 (2) Gains and losses directly into owners' equity a. Net value of fluctuation in fair value of tradable financial 8 16,636,296.92 assets b. Influence of changes of other owners' equity from 9 16,862,640.73 invested units under equity method 10 c. Influence of income tax related to owners' equity 11 -19,458,029.57 -167,017.58 d. Others 12 14,040,908.08 27,863,266.95 Subtotal of (1) and (2) 13 (3) Owner inputs and reducing capital 14 a. Owner inputs capital 15 b. Shares included in owners' equity 16 c. Others 17 (4) Profit distribution 18 a. Surplus reserve 19 b. Common risk reserve 20 c. Distribution to owners or shareholders 21 d. Others 22 (5) Internal transfer of owners' equity 23 a. Capital reserve turn to stock equity 24 b. Surplus reserve turn to stock equity 25 c. Surplus reserve to recover loss 26 d. Others 27 448,886,777.00 411,218,244.59 4,546,242.52 -283,205,720.63 4. Ending balance Legal Representative: Financial Principal: CFO: Balance Sheet-Parent Company 2008-12-31 Prepared by SGSB Group Co., Ltd. Liabilities and Owners' Equity Assets No. Ending Balance Beginning Balance No. (or Shareholders' Equity) Current Assets: Current Liabilities Cash and bank 1 65,099,297.35 92,076,908.44 Short-term loans 33 Tradable financial assets 2 206,688.97 7,834,018.48 Tradable financial liabilities 34 Bills receivable 3 470,000.00 334,400.00 Bills payable 35 Accounts receivable 4 27,696,421.33 31,498,164.32 Accounts payable 36 Prepayments 5 17,295.00 1,478,532.26 Advances on sale 37 Interest receivable 6 Wages and salaries unpaid 38 Dividend receivable 7 2,209,894.09 2,261,201.23 Tax unpaid 39 Other receivables 8 67,772,917.46 67,991,151.45 Interest unpaid 40 Inventories 9 12,367,241.54 13,041,173.35 Dividend unpaid 41 Long-term creditor-investment to be expired in one Other payables 42 year 10 Other current assets 11 Long-term liabilities to be expired in one year 43 Total current assets 12 175,839,755.74 216,515,549.53 Other current liabilities 44 Non-current Assets 13 Total current liabilities 45 Available for sale financial assets 14 3,796,759.68 20,373,696.92 Non-current Liabilities Held-to-maturity investment 15 Long-term loans 46 Long-term receivables 16 Bonds payable 47 Long-term investment on stocks 17 540,648,462.77 533,629,462.77 Long-term accounts payable 48 Investment properties 18 50,942,570.84 53,764,823.92 Specific payable 49 Fixed assets 19 68,362,565.67 81,072,420.89 Contingent liabilities 50 Construction in progress 20 793,335.04 258,744.72 Deferred tax, debit 51 Construction materials 21 Other non-current liabilities 52 Disposal of fixed assets 22 Total non-current liabilities 53 Consumable biological asset 23 Total liabilities 54 Oil & gas asset 24 Owners' Equity (or Shareholders' Equity) Intangible assets 25 45,684,252.41 48,621,781.01 Paid-in capital (or stock) 55 R&D expense 26 Capital reserve fund 56 Goodwill 27 Less: treasury stock 57 Long-term unamortized expense 28 Surplus reserve fund 58 Deferred tax, asset 29 Undistributed profit 59 Other non-current assets 30 Total Owners' Equity (Shareholders' Equity) 60 Total non-current assets 31 710,227,946.41 737,720,930.23 Total assets 32 886,067,702.15 954,236,479.76 Total liabilities and owners' equity 61 Legal Representative: Financial Principal: CFO: Fin Income Statement-Parent Company For the Year 2008 Prepared by SGSB Group Co., Ltd. Item No. Current Year Total operating revenues 1 28,143,425.30 Less: operating costs 2 20,050,266.36 Principal operating tax and associate charge 3 401,999.43 Operating expense 4 792,338.77 Administration expense 5 28,039,690.86 Financial expense 6 26,199,263.77 Asset impairment loss 7 1,521,378.18 Add: Net income in fluctuation of fair value(less: net loss) 8 -5,148,026.78 Investment income 9 10,292,835.28 Including: investment income in associated and joint-ventured enterprises 10 Operating profit 11 -43,716,703.57 Non-operating income 12 32,262,832.76 Non-operating expense 13 36,271,837.62 Including: net loss in disposal of non-current assets 14 522,337.4 Total profit 15 -47,725,708.43 Less: Income tax 16 Net profit 17 -47,725,708.43 Profit per share Basic earning per share 18 Diluted earning per share 19 Legal Representative: Financial Principal: CFO: Cash Flow Statement-Parent Company For the Year 2008 Prepared by SGSB Group Co., Ltd. Item No. Current Year 1. Cash flow from operating activities Cash inflow from sale of goods and provision of services 1 37,307,017.22 Repayment of tax received 2 0.00 Other cash flow related to operating activities 3 34,205,805.21 Total cash inflow from operating activities 4 71,512,822.43 Cash outflow for purchase of goods and services 5 22,994,738.31 Payment to and for staff 6 26,281,144.80 Taxation paid 7 4,291,117.72 Other payment related to operating activities 8 66,083,695.80 Total cash outflow from operating activities 9 119,650,696.63 Net cash in/outflow generated from operations 10 -48,137,874.20 2. Cash flow from investing activities Cash inflow from retirement of investment 11 11,345,517.86 Cash inflow from profit of investment 12 4,582,799.65 Cash gain from disposal of fixed assets, intangible assets, and other long-term investment 13 30,134,451.68 Cash inflow from disposal of subsidiaries and other operating units 14 Other proceeds related to investment activities 15 Total cash inflow from investing activities 16 46,062,769.19 Cash paid for acquisition of fixed assets, intangible assets and other long-term assets 17 10,249,683.78 Cash paid for investment 18 7,019,000.00 Cash paid for acquisition of subsidiaries and other operating units 19 Cash paid for other activities related to investment 20 Total cash outflow from investing activities 21 17,268,683.78 Net cash in/outflow generated from investment activities 22 28,794,085.41 3. Cash flow from financing activities Absorption of investment 23 Borrowings raised 24 407,200,000.00 Other cash inflow related to financing activities 25 Total cash inflow from financing activities 26 407,200,000.00 Borrowings repaid 27 387,400,000.00 Dividend, interest and profit paid 28 21,970,661.71 Other cash outflow related to financing activities 29 10,000,000.00 Total cash outflow from financing activities 30 419,370,661.71 Net cash in/outflow from financing activities 31 -12,170,661.71 4. Influence of fluctuation of exchange rate 32 -5,463,160.59 5. Net increase/decrease in cash and cash equivalents 33 -36,977,611.09 Plus: Beginning balance of cash and cash equivalents 34 92,076,908.44 7. Ending balance of cash and cash equivalents 35 55,099,297.35 Legal Representative: Financial Principal: CFO: Financial D Owner's Equity Movement for the Year 2008 Prepared by SGSB Group Co., Ltd. Current Year Item No. Paid-in Capital (Stock) Capital Reserve Less: Treassury Stock Surplus Reserve 1. Previous Year-end balance 1 448,886,777.00 409,298,191.49 4,546,242.52 Add: accounting policy changes 2 Correction of previous-period accounting errors 3 2. Beginning balance 4 448,886,777.00 409,298,191.49 4,546,242.52 -14,686,937.24 3. Increase/decrease 5 (1) Net profit 6 (2) Gains and losses directly into owners' equity 7 -14,686,937.24 a. Net value of fluctuation in fair value of tradable financial assets 8 -14,686,937.24 b. Influence of changes of other owners' equity from invested units 9 under equity method c. Influence of income tax related to owners' equity 10 d. Others 11 Subtotal of (1) and (2) 12 -14,686,937.24 (3) Owner inputs and reducing capital 13 a. Owner inputs capital 14 b. Shares included in owners' equity 15 c. Others 16 (4) Profit distribution 17 a. Surplus reserve 18 b. General risk reserve 19 c. Others 20 (5) Internal Transfer of owners' equity 21 a. Capital reserve turn to stock equity 22 b. Surplus reserve turn to stock equity 23 c. Surplus reserve to recover loss 24 d. Others 25 4. Ending balance 26 448,886,777.00 394,611,254.25 4,546,242.52 Legal Representative: Financial Principal: CFO: Owner's Equity Movement for the Year 2008 Prepared by SGSB Group Co., Ltd. Current Year Item No. Paid-in Capital (Stock) Capital Reserve Less: Treassury Stock Surplus Reserve 1. Previous Year-end balance 1 448,886,777.00 397,177,336.51 4,546,242.52 Add: accounting policy changes 2 -4,515,441.94 Correction of previous-period accounting errors 3 2. Beginning balance 4 448,886,777.00 392,661,894.57 4,546,242.52 3. Increase/decrease 5 16,636,296.92 (1) Net profit 6 (2) Gains and losses directly into owners' equity 7 16,636,296.92 a. Net value of fluctuation in fair value of tradable financial assets 8 16,636,296.92 b. Influence of changes of other owners' equity from invested units under equity 9 method c. Influence of income tax related to owners' equity 10 d. Others 11 Subtotal of (1) and (2) 12 16,636,296.92 (3) Owner inputs and reducing capital 13 a. Owner inputs capital 14 b. Shares included in owners' equity 15 c. Others 16 (4) Profit distribution 17 a. Surplus reserve 18 b. General risk reserve 19 c. Others 20 (5) Internal Transfer of owners' equity 21 a. Capital reserve turn to stock equity 22 b. Surplus reserve turn to stock equity 23 c. Surplus reserve to recover loss 24 d. Others 25 4. Ending balance 26 448,886,777.00 409,298,191.49 4,546,242.52 Legal Representative: Financial Principal: CFO: Auditor’s Report: XinKuaiShiBaoZi (2009) No. 1066 To the Board of Directors of SGSB Group Co., Ltd. We have audited the accompanying financial statements of SGSB (Group) Co., Ltd. (hereafter referred to as SGSB) as of 31 December 2008, including the Company’s balance sheet, profits and losses and profit distribution statements, statement of changes in owners’ equity, cash flow statements, together with their consolidated versions, and related annotations for the year then ended. (1) Responsibility of the Company’s management Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the rules and regulations in . This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. (2) Responsibility of the certified public accountants Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with PRC Independent Standards on Audit for Certified Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 31 (3) Audit opinion In our opinion, the consolidated financial statements of the Company present fairly, in all material respects, the financial position of the Group as of 31 December 2008 and the results of its operations and its cash flows for the year then ended, in accordance with the regulations of “Accounting Norms for Business Enterprises” and “Accounting System for Limited Companies”. Shulun Pan Certified Public Accountants Co., Ltd. Li Ping PRC Certified Public Accountant Zhang Qi PRC Certified Public Accountant Shanghai, PRC, 26 March 2009 32 Annotations to Financial Statements 1. General information SGSB Group Co., Ltd. (the Company), joint stock limited company with publicly issued A & B shares on Shanghai Stock Exchange, is the first listed company in the sewing machinery sector of People’s Republic of China. The Company got the Corporate Business License authorized by local administration of industry and commerce in April, 1994. The Company, with register capital of RMB 448,886,777, has 1201 Luoshan Road, Pudong New Area, Shanghai PRC as register address, 12F, 1200 Century Avenue, Pudong New Area, Shanghai as headquarters address, and Mr. Zhang Min as legal representative. The Company is mainly engaged in the manufacture and sales of industrial sewing machines and equipment, with more than 10 major categories of products with a total of 21 series and over 100 different varieties of sewing machines, including high speed lockstitch sewing machines, high speed overlock sewing machines, leather products sewing machines, bartacking sewing machines, bag closing sewing machines, button hole sewing machines and other specialized sewing equipment. Almost all its products are marked with the five registered trademarks “Shanggong”, “Shuanggong”, “Butterfly”, “Bee” and “Flying Man”. During recent years, the Company pays priority to the R&D of new sewing machinery products. Particularly after the acquisition of Durkopp Adler AG (public listed company in Germany) in 2005, the Company has been availing the advanced technology of Durkopp Adler to realize the upgrade and development of the products’ structure, and moving gradually the production of DA’s products which are popular in Asian market to China with purpose of satisfying the growing demand of customers for auto-running sewing machines. At the meantime, the Company has also expanded its business in recent years, and entered material transmission equipment, office appliances, sensitive films, international trade and logistic industries. On May 22, 2006, the General Meeting of Shareholders considered and approved the non-tradable equity reform proposal, whose core content is that the non-tradable equity stockholders pay partially their shares to all the tradable equity shareholders at a ratio of 10:6 as consideration of getting tradable rights. After the payment, the total number of shares remains unchanged, but the equity structure has changed as following: as at Dec 31, 2008, the total number of shares is of 448,886,777, including 64,830,980 shares, 14.44% of total equity, subject to conditional sales, and 384,055,797 unconditionally tradable shares, 85.56% of total equity. 2. Basis for the formulation of financial statements and declaration for the adoption of the Accounting Standards for Enterprises 33 Based on the sustainable operation and according to really occurred transactions and affairs, the Company adopts “Accounting Standards for Business Enterprises-Basic Standards” and related additional regulations in the preparation of its financial statements. The financial statements and annotations prepared by the Company, strictly under the guideline of “Accounting Standards for Business Enterprises”, reflect truly and integrally the information such as financial status, business achievements and cash flows of the Company. 3. Principal accounting policies, estimations and early errors 3.1 Accounting Calendar The Company adopts the Gregorian calendar and defines every accounting year as beginning at January 1 and ending at the same December 31. 3.2 Measurement currency The Company maintains its books and records in Renminbi (RMB). The overseas subsidiaries of the Company adopt at their books respectively the currency adopted by the places where their principal operations are installed, and translate them into Renminbi on the preparation of financial statements. 3.3 Adoption of accounting measurements changed during report year Generally, the Company adopts historical cost convention for the preparation of its statements. In line with accounting systems for business enterprises, replacement cost, net realizable value, present value or fair value could be adopted for some accounting elements whose value can be reliably obtained and measured. 3.3.1 Accounting measurements of fair value Under the fair value measurement, the assets/liabilities are accounted at the price taken in a fair transaction between both parties who understand well the situation and are willing to exchange assets or liquidate liabilities. The accounting elements adopting fair value measurement are trading financial assets and financial assets available for sale. The Company adopts the last-trading-day closing price in report year as fair value of related assets. 3.3.2 Accounting measurements changed during report year There are no changes in accounting measurements during report year. 3.4 Cash equivalent For the purpose of the cash flow statement, cash equivalent comprises short-term investments with maturity within three months that are characterized with active fluidity, easy to transfer to realizable value and less risky for value fluctuation. 3.5 Foreign currency calculation 34 Foreign currency transactions are translated into the measurement currency using the spot exchange rate prevailing at the date of the transaction. The balance of foreign currency monetary items is adjusted and translated into measurement currency at balance sheet date using the spot exchange rate. Regarding the year-end differences of translation in foreign currency, except those special borrowing accounts under the acquisition, building or production of assets to be capitalized are capitalized and accounted into related assets cost, all the other differences are accounted into current profits and losses. The foreign currency non-monetary items at historical cost are translated using the spot exchange rate. And the foreign currency non-monetary items at fair value are adjusted and translated into measurement currency at adoption date of fair value using the spot exchange rate. The difference of translation between different currencies is accounted into current profits and losses or capital reserves. 3.6 Translation of financial statements in foreign currency All the assets and liabilities items in the Balance Sheet adopt for the translation the spot exchange rate at balance sheet date. The items under the owners’ equity, except the undistributed profits, are translated at their occurrence at the spot exchange rate. The spot exchange rate at the transaction date or the exchange rate approximate to spot rate defined by a systematic rational method should be adopted for the income/expense items, and the difference caused by such translations should be listed separately under the owners’ equity in the Balance Sheet. On disposal of overseas operations, the corresponding difference of foreign currency translation related to the overseas operations should be moved from owners’ equity to current profits and losses. On partial disposal of overseas operations, the partial proportion of difference should also be converted into current profits and losses. 3.7 Calculation of financial assets and liabilities 3.7.1 Classification of financial assets and liabilities The Company classifies the financial assets and liabilities by their purposes: financial assets or liabilities at fair value and accounted into current profits and losses (for example, tradable financial assets or liabilities); held to maturity investments; loans and receivable accounts; financial assets available for sale and other financial liabilities. 3.7.2 Definition and measurement of financial assets and liabilities 3.7.2.1 Financial assets and liabilities at fair value and accounted into current profits and losses The fair value (less than cash dividend to be distributed and bonds interest to be received) of the assets on the acquisition should be adopted as initial recognized value, and related transaction expenses should be accounted into current profits and losses. The interests and cash dividend received should be recognized as investment income during the period, and the difference of fair value between initial and spot dates should be accounted into current profits and losses. 35 On the disposal of the assets, the difference between the obtained price and the book value of investment should be recognized as investment income, and the accumulated fair value profits and losses should be accordingly adjusted. 3.7.2.2 Receivable accounts and loans The contract price charged to the buyers should be recognized as initial value for those receivable accounts which mainly composes of the receivable creditor’s right caused by the sale of goods and the providing of labor services, and receivables in other companies excluding debt instruments priced in active markets, includes but not limits in receivable bills, receivable accounts, other receivables, prepayments and long-term receivables. The differences between sale value and book value should be accounted into current profits and losses on its recovery or disposal. 3.7.2.3 Financial assets available for sale The fair value (less than cash dividend to be distributed and bonds’ interest to be received) and relevant transaction expenses of the assets on the acquisition should be adopted as initial recognized value. The interests and cash dividend received should be recognized as investment income during the period, and the difference of fair value between initial and spot dates should be accounted into capital reserve (other capital reserve). On the disposal of the assets, the difference between fair value and initial value should be recognized as investment profits and losses, and the accumulated variance of fair value caused by the disposal should be simultaneously moved from shareholders’ equity to investment profits and losses. 3.7.2.4 Other financial liabilities The Company adopts the fair value and relevant transaction expenses as initial recognized value and takes amortized cost for subsequent measurement. 3.7.3 Recognition and measurement of the financial assets transfer On the transfer of financial assets, these assets should be no longer recognized if nearly all the risks and rewards relating to the ownership have been transferred to the transferee; if in contrary cases, they should be still recognized as financial assets of the Company. The principle of “Substance over Form” is adopted in judging the termination or not of recognizing financial assets. The transfer of financial assets is also divided into two cases: entire transfer and partial transfer. If the transfer of an entire financial asset satisfies the conditions for stop recognition, the difference between the amounts of the following 2 items shall recorded in the profits and losses of the current period: (1) The carrying amount of the transferred financial asset; (2)The aggregate consideration received from the transfer, and the accumulative amount of the changes of the fair value originally recorded in the owner’s equities (in the event that the financial asset involved in the transfer is a financial asset available for sale). If the transfer of partial financial asset satisfies the conditions for stopping recognition, the carrying amount of the entire financial asset transferred shall, between the portion whose recognition has stopped and the portion whose recognition has not stopped (under such circumstance, the service asset retained 36 shall be deemed as a portion whose recognition has not stopped), be allocated at their respective relative fair value, and the difference between the amounts of the following 2 items: (1) The carrying amount of the portion whose recognition has stopped; (2) The aggregate consideration of the portion whose recognition has stopped, and the portion of the accumulative amount of the changes in the fair value originally recorded in the owner’s equities which is corresponding to the portion whose recognition has stopped (in the event that the financial asset involved in the transfer is a financial asset available for sale). The Company should recognize financial assets and recognize the reception of consideration as financial liabilities in case the transfer of these financial assets doesn’t satisfy the definition of termination. 3.7.4 Definition of fair value of financial assets and liabilities The Company adopts the year-end quotations in active markets as fair value of financial assets and liabilities. 3.7.5 Depreciation reserves for financial assets (1) Depreciation reserves for financial assets available for sale At end of report year, the accumulated loss caused by the fair value decrease should be reclassified from the original item of owners’ equity and recognized as impairment loss in case the fair value of financial assets available for sale has decreased significantly or the decrease trend is considered to be non-temporary under all the related conditions. (2) Depreciation reserves for held to maturity investments The impairment loss of held to maturity investments is calculated in the light of the treatment of accounts receivable’s depreciation. 3.8 Recognition and accruement of provision for bad debt in accounts receivable At end of report year, when objective evidences show that the accounts receivable are depreciated, the book value of these accounts receivable should be accounted into recoverable sum and the decrease should be recognized as impairment loss of current profits and losses. The recoverable sum should be calculated through the estimation of future cash flows (not including credit loss not occurred yet) discounted at original real interest rate and the price of related guarantee (after estimated disposal expenses). The original real interest rate means the real interest rate at the original recognition of the accounts receivable. The estimated future cash flow of short-term accounts receivable shouldn’t be discounted at the calculation of their impairment loss for the minor difference between their present value and future cash flow. At end of period, the Company takes individual depreciation test for those significant receivable accounts (including accounts receivable, bills receivable, prepayments, other receivables and long-term accounts receivable), determines the impairment loss and makes provision for bad debts based on the difference between their future cash flow value and book value. Significant receivable accounts refer to those accounts which are top five 37 big-ticket accounts receivable or other receivables. For those insignificant receivable accounts, the Company classifies them as several groups whose credit risk level is similar to those individually tested non-depreciation accounts, and determines the impairment loss and makes proportional provision for bad debts based on the end-of-period balance. Except those accounts receivable whose depreciation reserves have been individually accrued, the Company determines the following proportion of provision for bad debts based on the actual loss ratio of the anterior-periods receivable accounts with similar credit risk, and the consideration of actual situations: Age distribution Provision proportion Within one year 5% 1-2 years 20% 2-3 years 50% Over 3 years 100% 3.9 Accounting of inventories 3.9.1 Classification of inventories The inventories of the Company comprise: materials in transit, raw materials, inventory products, finished products, work in progress, material in outside processing, etc. 3.9.2 Inventory pricing method on their delivery (1) Inventory products are accounted with weighted average method on their delivery. (2) Amortization of circulating materials: the treatment of low value articles and packing materials adopts one-off amortization method. 3.9.3 Inventory system The Company adopts perpetual inventory system to take periodic or non-periodic inventory checkup. 3.9.4 Provision for depreciation reserves of inventories The Company takes inventory checkup at end of each accounting period, and states or adjusts depreciation reserves of inventories at the lower of cost or net realizable value. During normal production, the cash realizable value of inventories directly for sale, such as products, merchants and materials for sale is accounted by the estimated price less the estimated sales expenses and taxes. During normal production, the cash realizable value of materials to be processed is accounted by the estimated price of finished product less the estimated cost, sales expenses and taxes. For those inventories with purpose of implementing sales contract or labor contract, the cash realizable value is based on the contract price; if the inventories held more than fixed in the contract, the cash realizable value of surplus part is accounted based on the market price. At end of report year, the Company accrues individual provision for depreciation reserves of the inventories. In case of low-cost and numerous-in-variety inventories, the Company classifies the provision for depreciation of each kind of inventories. And the Company consolidates the provision for depreciation of 38 those inventories related to the production and sales of products in the same region, with the same or similar utilization and purpose, and difficult to calculate separately. In case the factors impacting the write-down of the inventories’ value disappear, the write-down amount should be recovered and the according provision of impairment should be returned to current profits and losses. 3.10 Calculation of long-term equity investment 3.10.1 Initial measurement (1) Long-term equity investment formed in the merger of enterprises For the merger of enterprises under the same control, if the consideration of the merging enterprise is that it makes payment in cash, transfers non-cash assets or bear its debts, it shall, on the date of merger, regard the share of the book value of the owner's equity of the merged enterprise as the initial cost of the long-term equity investment. The difference between the initial cost of the long-term equity investment and the payment in cash, non-cash assets transferred as well as the book value of the debts borne by the merging party shall offset against the capital reserve. If the capital reserve is insufficient to dilute, the retained earnings shall be adjusted. All the directly related expenses, including audit fee, appraisal fee, legal services fee etc, shall be accounted into current profits and losses. For the merger under different control, the merger cost should be accounted at the fair value of assets paid, liabilities carried and equity bonds issued by the merging party at the merger date, and other direct expenses related to the transaction. For the gradual merger realized by separate procedures, the merger cost should be the sum of every separate transaction. In case of any future events defined in merger contract whose predictable occurrence could influence the merger cost and the related amount could be reliably calculated at merger date, such amount should also be included in merger cost. (2) Long-term equity investment by other methods The initial cost of a long-term equity investment obtained by making payment in cash shall be the purchase cost which is actually paid. The initial cost of a long-term equity investment obtained on the basis of issuing equity securities shall be the fair value of the equity securities issued. The initial cost of a long-term equity investment of an investor shall be the value stipulated in the investment contract or agreement except the unfair value stipulated in the contract or agreement. Under the conditions that the exchange of non-monetary assets is characterized with business essence, and the fair value of the assets received or surrendered can be accounted in a reliable way, the book value of assets received is defined on basis of the fair value of assets surrendered, except there are conclusive evidences for the stronger reliability of the fair value of assets received. For the exchange of those non-monetary assets not meeting the above premises, the book value of assets surrendered and related taxes should be accounted as cost of assets received and the profits and losses shouldn’t be concluded. The initial cost of long-term equity investment obtained by recombination of liabilities shall be accounted at fair value. 39 3.10.2 Evidences for significant influences and the invested entity under joint control Certain control is considered as joint control with other parties over the invested entity when it happens over an economic activity in accordance with the contracts and agreements, which does not exist unless the investing parties of the economic activity with one an assent on sharing the control power over the relevant important financial and operating decisions. Certain case is considered as significant influences when the investing entity owns the power to participate in making decisions on the financial and operating policies of an enterprise, but not to control or do joint control together with other parties over the formulation of these policies. 3.10.3 Subsequent measurement and recognition of income Where an investing enterprise does joint control over or has significant influences on the invested entity, if the initial cost of a long-term equity investment is more than the investing enterprise' attributable share of the fair value of the invested entity's identifiable net assets for the investment, the initial cost of the long-term equity investment may not be adjusted; if the initial cost of a long-term equity investment is less than the investing enterprise' attributable share of the fair value of the invested entity's identifiable net assets for the investment, the difference shall be included in the current profits and losses and the cost of the long-term equity investment shall be adjusted simultaneously. For a long term equity investment on the subsidiary company of an investing enterprise, the investing enterprise shall accounted by employing the cost method as prescribed by these Standards, and shall make an adjustment by employing the equity method when it works out consolidated financial statements. The cost method shall be employed when a long-term equity investment of the investing enterprise that does not do joint control or does not have significant influences on the invested entity,, and has no offer in the active market and its fair value cannot be reliably measured. A long-term equity investment of the investing enterprise that does joint control or significant influences over the invested entity shall be measured by employing the equity method. Under cost method, the investment income recognized by the investing enterprise shall be limited to the amount received from the accumulative net profits that arise after the invested entity has accepted the investment. Where the amount of profits or cash dividends obtained by the investing entity exceeds the aforesaid amount, it shall be regarded as recovery of initial investment cost. Under equity method, an investing enterprise shall recognize the net losses of the invested enterprise as following process: firstly, it shall dilute the book value of the long-term equity investment; secondly, if the book value of the long-term equity investment is insufficient to dilute, it shall dilute the book value of the long-term receivables under the limit of other long-term rights and interests which substantially form the net investment made to the invested entity; lastly, after the above treatments, it shall recognize the accrued liabilities according to the 40 responsibilities in investment contract or agreement and account them into current profits and losses. If the invested entity realizes profits in posterior periods, the investing enterprise shall adopt the contrary process, after the unrecognized losses, to write down the balance of the accrued liabilities, recover the book value of other long-term rights and interests which substantially form the net investment made to the invested entity, and recognize the investment profits. Where any change is made to the owner's equity other than the net profits and losses of the invested entity, the book value of the long-term equity investment shall be adjusted and be included in the owner's equity, and the capital reserves (other capital reserves) shall be accordingly adjusted, in accordance with the attributable share of the net profits or losses of the invested entity. 3.11 Classification and measurement of investment real estate Investment real estate refers to the real estate held with purpose of rent earning, capital gaining or both of them, including land user which has been rented out or is held for transference after capital appreciation, and buildings which has been rented out. The Company adopts cost calculation mode for measurement of investment real estate. On calculating the depreciation, the Company adopts the same policy of fixed assets for measurement of investment real estate and assets for rent, and the same policy of intangible assets for measurement of right of land use for rent. On appearance of evidence for depreciation, the Company estimates the recoverable value and defines the impairment loss when the recoverable value is lower than its book value. 3.12 Calculation and depreciation of fixed assets 3.12.1 Definition of fixed assets The fixed assets of the Company refer to those tangible assets with service life more than one year and related to production, labor services, for lease or management. The Company recognizes the fixed assets when they meet the following conditions: (1) The economic benefits pertinent to the fixed asset are likely to flow into the enterprise; and (2) The cost of the fixed asset can be measured reliably. 3.12.2 Classification of fixed assets The fixed assets of the Company are composed of house and construction, machinery and equipment, motor vehicles, electronic equipments, office equipment and other equipments. 3.12.3 Initial measurement of fixed assets The initial measurement of a fixed asset shall be made at its real cost. The cost of a purchased fixed asset consists of the purchase price, the relevant taxes, freights, loading and unloading fees, professional service fees and other expenses that bring the fixed asset to the expected conditions for use and that may be relegated to the fixed asset. The cost of fixed assets shall be defined based on the actual purchase price if 41 such purchase price exceeds the normal credit and is characterized as financing expense. The cost of a self-constructed fixed asset shall be formed by the necessary expenses incurred for bringing the asset to the expected conditions for use. The book value of the fixed assets acquired as debt assets through the recombination of liabilities shall be accounted on basis of the fair value of the fixed assets, and the difference between the book value of recombined liabilities and the fair value of debt assets should be accounted into current profits and losses. Under the conditions that the exchange of non-monetary assets is characterized with business essence, and the fair value of the assets received or surrendered can be accounted in a reliable way, the book value of assets received is defined on basis of the fair value of assets surrendered, except there are conclusive evidences for the stronger reliability of the fair value of assets received. For the exchange of those non-monetary assets not meeting the above premises, the book value of assets surrendered and related taxes should be accounted as cost of assets received and the profits and losses shouldn’t be concluded. The book value of the fixed assets acquired through merger of enterprises under the same control should be accounted at the book value of the merged enterprise. The book value of the fixed assets acquired through merger of enterprise not under the same control should be accounted at the fair value of the acquired assets. Fixed assets under financing lease shall be booked at the lower price between the fair value of the fixed assets dated lease beginning and the minimum real payment. 3.12.4 Provision for depreciation of fixed assets The provision for decrease in value of fixed assets, except those with special approval, is made with straight-line method, with consideration of the category of the assets, their estimates of service life and net salvage. The fixed assets fit-up fee eligible for capitalization should be accrued individually in straight-line method adopting the shorter period between two fit-ups and the remaining service life. The estimated service life and depreciation rate of fixed assets by category is as following: Category Service year Estimated net scrap value Annual rate of rate depreciation House and construction 20-50 10% 1.8% - 4.5% Machinery and 5-15 10% 6% - 18% equipment Motor vehicles 5-10 10% 9 % - 18% Electric appliances 5-10 10% 9%-18% Fixtures 5-15 -- 6.6%-20% Others 5-10 10% 9% - 18% 3.13 Accounting of construction in progress 3.13.1 Category of construction in progress 42 The Company distinguishes the characteristics of each construction in progress in their real cost accounting. 3.13.2 Standards and conversion date from construction in progress to fixed assets The book value of construction in progress is accounted into fixed assets at all the expenses occurred before the build-up of such assets available for intended use. After available for intended use but before the final settlement, the built-up fixed assets are accounted at estimated value and accrued under the depreciation policy of fixed assets based on construction’s budget, cost or real cost. After the settlement, the Company should adjust the provisional estimate by real cost, but not the accrued. 3.14 Calculation of intangible assets 3.14.1 Pricing of intangible assets The Company accounts its intangible assets at their real acquisition cost. The intangible assets shall be initially measured according to its cost. The cost of outsourcing intangible assets shall include the purchase price, relevant taxes and other necessary expenditures directly attributable to intangible assets for the expected purpose. Where the payment of purchase price for intangible assets is delayed beyond the normal credit conditions, which is of financing intention, the cost of intangible assets shall be determined on the basis of the current value of the purchase price. The book value of the intangible assets acquired as debt assets through the recombination of liabilities shall be accounted on basis of the fair value of the intangible assets, and the difference between the book value of recombined liabilities and the fair value of debt assets should be accounted into current profits and losses. Under the conditions that the exchange of non-monetary assets is characterized with business essence, and the fair value of the assets received or surrendered can be accounted in a reliable way, the book value of assets received is defined on basis of the fair value of assets surrendered, except there are conclusive evidences for the stronger reliability of the fair value of assets received. For the exchange of those non-monetary assets not meeting the above premises, the book value of assets surrendered and related taxes should be accounted as cost of assets received and the profits and losses shouldn’t be concluded. The book value of the intangible assets acquired through merger of enterprises under the same control should be accounted at the book value of the merged enterprise. The book value of the intangible assets acquired through merger of enterprise not under the same control should be accounted at the fair value of the acquired assets. The cost of intangible assets developed internally includes: material and labor expenses, register fee, amortization of other patent and franchise fee, interest expense eligible for capitalization during development process, and other direct expenses for making the intangible assets available to its intended use. 3.14.2 Service life and amortization of intangible assets (1) Estimate of service life for the intangible assets with limited life 43 Classification Service life Land use right 50 years Others 10 years At end of report year, the Company should recheck the service life and amortization method of the limited-life intangible assets. The recheck in current period shows that there is no difference in the estimate of service life and adoption of amortization method. (2) Amortization of intangible assets The intangible assets with limited service life should be amortized by straight-line method during the period when the intangible asset can bring economic benefits to the enterprise. If it is unable to forecast the period when the intangible asset can bring economic benefits to the enterprise, it shall be regarded as an intangible asset with uncertain service life and not be amortized. 3.14.3 Division standards for research stage and development stage during R&D The R&D cost of internal projects, during development stage, is defined as intangible assets when satisfying the following conditions: (1) The completion of such intangible assets for use or sale is technically feasible. (2) The Company has the intention to use or sell the intangible assets after their completion. (3) The method in which the intangible assets bring economic benefits shows that there exists consumption market for the products with use of these intangible assets or the intangible assets themselves, or that they are useful in case of internal utilization. (4) The Company has sufficient technological, financial and other resources to complete the R&D of the intangible assets and the ability to make them available for use or sale. (5) The Company can measure in reliable way the expense of such intangible assets during the development stage. 3.15 Depreciation of other main assets except inventories, investment real estate and financial assets 3.15.1 Long-term equity investment For the long-term investments on stocks accounted with cost method, whose quotation can’t be found in active market and fair value can’t be precisely evaluated, the impairment loss is determined on basis of the difference between book value and present value defined by discounted future cash flow at current marketing rate of return of similar financial assets. For other long-term investments on stocks, the difference should be determined as impairment loss when the calculation shows that the recoverable value is the long-term investment is lower than its book value. The impairment loss of long-term investments on stocks can’t be recovered in posterior accounting periods once determined. 3.15.2 Fixed assets, construction in progress, intangible assets, goodwill and other long-term non-financial assets Concerning fixed assets, construction in progress, intangible assets, goodwill and other long-term non-financial assets, the Company judges the possibility of 44 impairment loss at end of each accounting period. Concerning the goodwill formed by the merger of enterprises and the intangible assets whose service life is uncertain, the Company makes devaluation test every year, no matter if exists indication of depreciation or not. After confirming the indication of depreciation, the Company will further estimate the recoverable value of the assets, which is determined as higher of the net value after fair value less disposal expense and the present value of predicted cash flow. If the estimates of recoverable value show that the recoverable value is lower than its book value, the Company will write-down the assets’ book value to recoverable value and the write-down difference will be determined as assets’ depreciation loss and accounted into current profits and losses. After determining the assets’ devaluation loss, the expenses of depreciation or amortization should be accordingly adjusted in future periods so that the adjusted book value (after salvage) could be amortized systematically during the rest service life of the assets. The impairment loss of assets can’t be recovered in posterior accounting periods once determined. If there are evidences showing the possibility of depreciation of certain individual asset, the Company estimates the recoverable value based on the asset itself. 3.16 Capitalization of the loan fees 3.16.1 Definition of capitalization of the loan fees Where the borrowing costs incurred to an enterprise can be directly attributable to the acquisition and construction or production of assets eligible for capitalization, it shall be capitalized and recorded into the costs of relevant assets. Other borrowing costs shall be recognized as expenses on the basis of the actual amount incurred, and shall be recorded into the current profits and losses. The term "assets eligible for capitalization" shall refer to the fixed assets, investment real estate, inventories and other assets, of which the acquisition and construction or production may take quite a long time to get ready for its intended use or for sale. The borrowing costs shall not be capitalized unless they simultaneously meet the following requirements: (1) The asset disbursements have already incurred, which shall include the cash, transferred non-cash assets or interest bearing debts paid for the acquisition and construction or production activities for preparing assets eligible for capitalization; (2) The borrowing costs has already incurred; and (3) The acquisition and construction or production activities which are necessary to prepare the asset for its intended use or sale have already started. Where the acquisition and construction or production of a qualified asset is interrupted abnormally and the interruption period lasts for more than 3 months, the capitalization of the borrowing costs shall be suspended. When the qualified asset under acquisition and construction or production is ready for the intended use or sale, the capitalization of the borrowing costs shall be ceased. 45 Where each part of a qualified asset under acquisition and construction or production is completed separately and is ready for use, the capitalization of the borrowing costs in relation to this part of asset shall be ceased. 3.16.2 Capitalization period The capitalization period shall refer to the period from the commencement to the cessation of capitalization of the borrowing costs, excluding the period of suspension of capitalization of the borrowing costs. 3.16.3 Calculation of capitalized loan fees The to-be-capitalized amount of interests of the specially borrowed loans (minus the income of interests earned on the unused borrowing loans as a deposit in the bank or as a temporary investment) and the ancillary expense incurred to the specifically borrowed loans incurred before a qualified asset under acquisition, construction or production is ready for the intended use or sale, shall be capitalized at the incurred amount when they are incurred. The enterprise shall calculate and determine the to-be-capitalized amount of interests on the general borrowing by multiplying the weighted average asset disbursement of the part of the accumulative asset disbursements minus the general borrowing by the capitalization rate of the general borrowing used. The capitalization rate shall be calculated and determined in light of the weighted average interest rate of the general borrowing. Where there is any discount or premium, the amount of discounts or premiums that shall be amortized during each accounting period shall be determined by the real interest rate method, and an adjustment shall be made to the amount of interests in each period. 3.17 Revenue recognition 3.17.1 Selling goods No revenue from selling goods may be recognized unless the following conditions are met simultaneously: the significant risks and rewards of ownership of the goods have been transferred to the buyer by the enterprise; the enterprise retains neither continuous management right that usually keeps relation with the ownership nor effective control over the sold goods; the relevant amount of revenue can be measured in a reliable way; the relevant economic benefits may flow into the enterprise; and the relevant costs incurred or to be incurred can be measured in a reliable way. 3.17.2 Providing labor services If an enterprise can, on the date of the balance sheet, reliably estimate the outcome of a transaction concerning the labor services it provides, it shall recognize the revenue from providing services employing the percentage-of-completion method. An enterprise may adopt the measurement of the work completed to ascertain the schedule of completion under the transaction concerning the providing of labor services. If an enterprise can’t, on the date of the balance sheet, measure the result of a transaction concerning the providing of labor services in a reliable way, it shall be conducted in accordance with the following circumstances, respectively: (1) If the cost of labor services incurred is expected to be compensated, the 46 revenue from the providing of labor services shall be recognized in accordance with the amount of the cost of labor services incurred, and the cost of labor services shall be carried forward at the same amount; or (2) If the cost of labor services incurred is not expected to compensate, the cost incurred should be included in the current profits and losses, and no revenue from the providing of labor services may be recognized. 3.17.3 Abalienating the Right to Use Assets No revenue from abalienating of right to use assets may be recognized unless the following conditions are met simultaneously: the relevant economic benefits are likely to flow into the enterprise; and the amount of revenues can be measured in a reliable way. 3.18 Income taxes The income taxes include current income tax expenses and deferred income tax expenses, which shall be accounted into current profits and losses as income tax expenses or incomes, except the adjusted goodwill arising from business combination or expenses related to the transactions or affairs directly accounted into owners’ equity. The current income tax expenses refer to the current payable income taxes based on the taxable income. The taxable income is measured on the adjustments according to the tax law upon pre-tax accounting profit. The current income tax liabilities (or assets) incurred in the current period or prior periods shall be measured in light of the expected payable (refundable) amount of income taxes according to the tax law. The Company shall employ balance sheet debt method to accrue deferred income tax based on the temporary difference between the assets/liabilities book value and tax basis on balance sheet date. Except for the deferred income tax liabilities arising from the following transactions, an enterprise shall recognize the deferred income tax liabilities arising from all taxable temporary differences: (1) The initial recognition of business reputation, or the initial recognition of assets or liabilities arising from the following transactions which are simultaneously featured by the following: the transaction is not business combination; and at the time of transaction, the accounting profits will not be affected, nor will the taxable amount (or the deductible loss) be affected. (2) The taxable temporary differences related to the investments of subsidiary companies, associated enterprises and joint enterprises, the investing enterprise can control the time of the reverse of temporary differences; and the temporary differences are unlikely to be reversed in the excepted future. An enterprise shall recognize the deferred income tax liabilities arising from a deductible temporary difference to the extent of the amount of the taxable income which it is most likely to obtain and which can be deducted from the deductible temporary difference. However, the deferred income tax assets, which are arising from the initial recognition of assets or liabilities during a transaction which is simultaneously featured by the following, shall not be recognized: 47 (1) This transaction is not business combination; and at the time of transaction, the accounting profits will not be affected, nor will the taxable amount (or the deductible loss) be affected. (2) Where the deductible temporary difference related to the investments of the subsidiary companies, associated enterprises and joint enterprises can meet the following requirements simultaneously, the enterprise shall recognize the corresponding deferred income tax assets: the temporary differences are likely to be reversed in the expected future; and it is likely to acquire any amount of taxable income tax that may be used for making up the deductible temporary differences. On the balance sheet day, the deferred income tax assets and deferred income tax liabilities shall be measured at the tax rate applicable to the period during which the assets are expected to be recovered or the liabilities are expected to be settled, and shall reflect the effect of the expected asset recovery or liability settlement method on the balance sheet day on the income taxes. The carrying amount of deferred income tax assets shall be reexamined on balance sheet day. If it is unlikely to obtain sufficient taxable income taxes to offset the benefit of the deferred income tax assets, the carrying amount of the deferred income tax assets shall be written down. When it is probable to obtain sufficient taxable income taxes, such write-down amount shall be subsequently reversed. 3.19 Changes in accounting policies, estimates, important correction of errors and the influences Not incurred. 4. Taxation Important taxes and tax rates Type Tax bases Tax rate V.A.T. Sales turnover 17% Business tax Business turnover 5% Income tax Taxable income 25%, 18% The overseas subsidiaries employ the tax rates according to their countries’ tax law. 5. Merger of enterprises and consolidated of financial statements The Company employs issued in February 2006 for the preparation of consolidated financial statements and puts all the subsidiaries under its control in the consolidation. 48 The consolidated financial statements, prepared by the parent company, take as basis the separate financial statements of the parent company and the consolidated subsidiaries, and adjust by equity method the long-term equity investment on the subsidiaries. Through the preparation of consolidated version, the internal equity investment and owners’ equity in subsidiaries, the internal investment earnings and the distribution of profits in subsidiaries, the internal transaction affairs and the internal creditor’s rights/liabilities shall be offset. If the merger cost is higher than the fair value of the acquired identifiable assets, the difference shall be defined as business reputation. If the merger cost is lower than the fair value of the acquired identifiable assets, the difference shall be booked into current profits and losses. The subsidiary shall adopt the same accounting policies with the parent company. (For the inconsistency between the policies of subsidiaries and parent company, necessary adjustments have been made upon those of subsidiaries.) Except specially noted, the monetary unit in this chapter is RMB’000. 5.1 About the subsidiaries 5.1.1 Subsidiaries acquired in business combinations under the same control Invested entity Register place Classification Register capital Business scope year end investment Real balance Net investment proportion % Equity Voting share % or not Consolidated at SMPIC Shanghai Office 125,000 Transport 125,000 125,000 100 100 Yes supplies and equipment Shanghai Shanghai Imp. & Exp. 10,000 Imp. & Exp. 8,000 8,000 80 80 Yes Butterfly of sewing of sewing Imp. & Exp. machines machines, Co. M&E products, etc. 5.1.2 Subsidiaries acquired not in business combinations Invested entity Register place Classification Register capital Business scope at year end Real investment balance Net % Equity proportion Voting share % voting share % Consolidated investment Shanggong Shangha Transport 2,100 Transport 2,100 2,100 100 100 100 Transport i Service Co. Durkopp Shangha Imp. & Exp. USD4,000 Wholesale, USD2,960 USD2,960 74 74 74 Adler Trading i of sewing broker and Shanghai Co. machines Imp. & Exp. of sewing machines Shanghai Shangha Imp. & Exp. 32,000 Imp. & Exp. 28,800 28,800 100 100 10 Shanggong i of sewing of M&E Imp. & Exp. machines products Co. and instruments Shanghai Shangha Sewing 12,000 Production 10,800 10,800 70 70 90 Shuangchong i machines, and Sewing etc. developmen 49 Machines Co. t of overlock sewing machines Shanghai Shangha Sewing 3,000 Production 2,400 2,400 60 60 80 Shanggong i machines, and sales of Fangtian etc. industrial Machinery sewing Co. machines and components Shanghai Shangha Sewing 3,100 Production 2,700 2,700 67.7 67.7 87.0 Shanggong i machines, and sales of 4 4 9 Xingda etc. zigzag Sewing industrial Machines Co. sewing machines Shanghai Shangha Sewing 3,000 Production 2,250 2,250 65 65 75 Shanggong i machines, and sales of Songda etc. sewing Machinery machines Co. and components Shanghai Shangha Industrial 27,000 Managemen 27,000 27,000 100 100 100 Shanggong i investment t consulting Sewing etc. of industrial Machines Co. investment Durkopp Shangha Sewing USD1,000 Design, USD7,000 USD7,000 70 70 100 Adler i machines, production Industrial etc. and sales of Manufacturin sewing g Shanghai machines, Co. consulting service Shanghai Shangha Sewing 3,000 Production 2,160 2,160 67 67 72 Shanggong i machines, and sales of Jiayuan M&E etc. sewing Co. machines and components Shanghai Shangha Real estate 5,000 Real estate 4,500 4,500 90 100 100 Gongfeng i developmen developmen Real Estate t t Development Co. Shanghai Shangha Real estate 13,000 Real estate 8,970 8,970 69 69 69 Suoying Real i developmen developmen Estate Co. t t Shanghai Shangha Sewing 4,650 Sales of 4,650 4,650 100 100 100 Industrial i machines, sewing Sewing etc. machines Machines and Materials components General Co. Shanghai Shangha Sales of M&E 2,000 Sales of 1,600 1,600 80 80 80 Yongde Eco. i products, electro. and Development etc. mechanical Co. equipments Shanghai Shangha Production USD1,000 Production USD550 USD550 55 55 55 Fuhua Light i and sales of and sales of Sewing apparel apparel Machines Co. machinery machinery Shanggong German Sewing EUR10,00 Sewing EUR10,00 EUR10,00 100 100 100 (Europe) y machines, 0 machines, 0 0 Holding Co. etc. etc. 5.2 Changes in the consolidation of financial statements In comparison with the financial statements of last year, the consolidation scope 50 hasn’t changed. 5.3 Strict restriction of fund transfer ability from subsidiaries to the parent company There is no strict restriction of fund transfer ability from subsidiaries to the parent company. 5.4 Minority interest income and losses RMB’ Current minorit Other increase Entity Year-beginning y interest incre /decrease Year-end ase/decrease Shanggong (Europe) Holding Co. 32,782,370.43 -625,048.76 -3,010,216.63 29,147,105.04 SMPIC Imp.&Exp. Co. 1,000,000.00 1,000,000.00 Shanghai Suoying Real Estate Co. 4,682,896.74 1,102,744.99 52,394.26 5,838,035.99 Shanghai Fengjian Properties Co. 54,083.60 3,639.80 -57,723.40 Pingxiang Dongxu Real Estate Development Co. 299,478.36 197.56 299,675.92 Shanghai Shanggong Imp.&Exp. Co. 1,243,733.36 -1.243,733.36 Shanghai Shanggong Jiayuan M&E Co. 2,075,043.55 4,028.98 2,079,072.53 Shanghai Shanggong Fangtian Machinery Co. 451,130.72 -224,115.88 227,014.84 Shanghai Fuhua Light Sewing Machines Co. 2,828,811.11 -377,685.77 2,451,125.34 Shanghai Butterfly Imp.&Exp. Co. 6,242,985.05 1,473,783.62 -630,412.74 7,086,355.93 Shanghai Yongde Eco. Development Co. 1,211,766.91 -307,495.90 -565,146.00 339,125.01 Shanghai Shanggong Songda Machinery Co. 1,153,078.64 -102,775.35 1,050,303.29 Durkopp Adler Trading Shanghai Co. 4,398,832.29 -1,834,071.49 3,445,557.92 6,010,318.72 Shanghai Shanggong Xingda Sewing Machines Co. 280,799.69 -70,533.82 210,265.87 Shanghai Gongfeng Real Estate Development Co. 500,000.00 500,000.00 Total 59,205,010.45 -957,332.02 -2,009,279.95 56,238,398.48 (1) The minority interest of Shanggong (Europe) Holding Co., Ltd. is caused by the consolidation of the financial statements, and the other increase/decrease is the result of the difference from the translation of foreign currency at the beginning of the period. (2) The other increase/decrease of minority interest of Shanghai Suoying Real Estate Co. is caused by the increase of capital reserve. (3) The other increase/decrease of minority interest of Shanghai Fengjian Properties Co. is the result of the equity transfer from minority shareholder to the Company. (4) The other increase/decrease of minority interest of Shanghai Shanggong Imp. & Exp. Co., Ltd. is caused by the capital reduction of minority shareholders. (5) The other increase/decrease of minority interest of Shanghai Butterfly Imp. & Exp. Co., Ltd. is the result of dividend distribution. 51 (6) The other increase/decrease of minority interest of Shanghai Yongde Economy Development Co., Ltd. is caused by the decrease of capital reserve. (7) The other increase/decrease of minority interest ofDurkopp Adler Trading Shanghai Co., Ltd. is the result of capital increase of minority shareholders. 6. Important notes for consolidated financial statements (All the following items adopt RMB’ and year-end data except those specially indicated.) 6.1 Cash and bank Year-end Year-beginning Item Original Exchange Amount to Original Exchange Amount to currency rate RMB currency rate RMB Cash Renminbi 790,687.70 1,371,446.76 EUR 59,164.99 10.6669 631,107.03 Subtotal cash in RMB 790,687.70 2,002,553.79 Bank Renminbi 161,270,303.32 168,851,432.49 USD 4,170,200.16 6.8346 28,501,650.01 6,321,231.79 7.3046 46,174,069.73 EUR 18,489,010.95 9.6590 178,585,356.77 20,422,550.16 10.6669 217,845,300.30 JPY 1.00 7.5650 7.57 HKD 299,676.40 8.8189 2,642,816.20 Subtotal bank in RMB 371,000,133.87 432,870,802.52 Other money-capitals Renminbi 8,130,264.40 3,419,484.16 Subtotal other 8,130,264.40 3,419,484.16 money-capitals Total 379,921,085.97 438,292,840.47 Accounts with limited cashability of mortgage or freeze: (1) The credit line guaranty of EUR 1,000,000 of Shanggong Europe Holding Co., Ltd. has been mortgaged to banks. (2) The deposit certificate of EUR 669,093 of Shanggong Europe Holding Co., Ltd. has been mortgaged to FAG Kugelfischer AG. (3) The time certificate of RMB 10,000,000 has been mortgaged to Shenzhen Development Bank Shanghai Branch. 6.2 Trading financial assets Year-end Year-beginning fair value fair value 1. Investment on tradable equity 1,016,779.58 9,325,414.02 2. Others 206,688.97 550,498.48 52 Total 1,223,468.55 9,875,912.50 Frozen trading financial assets Quantity of shares Year-end fair value JinJiang Investment 43,544.00 348,787.44 The year-end balance of trading financial assets is RMB 8,652,443.95 less than the year-beginning, a decline of 87.61%, mainly due to the sale of tradable equity of Zhong Lu Co., Ltd. held by the Company during the report year. 6.3 Bills receivable Year-end Year-beginning Bank acceptance 1,517,662.30 3,070,470.00 Total 1,517,662.30 3,070,470.00 6.3.1 At the year end, there was no bank acceptance belonging to any shareholder who individually holds 5% or more of the Company’s equity. 6.3.2 The bills receivable at the end of year is RMB 1,552,807.70 less than that of year beginning, a decrease of 50.57%. 6.4 Accounts receivable 6.4.1 Composition of accounts receivable Year-end Year-beginning Provision for Provision for Prop. Prop. Balance bad Balance bad (%) (%) debts/prop. debts/prop. 1. Significant accounts --- --- --- --- --- --- individually accrued 2. Insignificant accounts 219,720,683.48 26.27 43,522,929.42 73,444,027.38 12.01 59,907,731.38 individually accrued 19.81% 3. Other accounts with similar 538,115,738.87 87.99 125,955,834.77 risk nature and divided by age 4,755,289.57 Including: within 1 year 419,409,345.91 68.58 20,207,691.77 95,105,078.71 2.87 5% 1,274,664.14 1-2 years 14,115,886.43 2.31 2,823,177.28 6,373,320.67 0.77 20% 4,690,355.33 2-3 years 3,331,081.08 0.54 1,665,540.27 9,380,710.43 2.83 50% 111,456,368.80 Over 3 years 101,259,425.45 16.56 101,259,425.45 111,456,368.80 67.26 100% Total 611,559,766.25 100.00 185,863,566.15 442,036,162.09 100.00 165,699,607.26 Net value 276,336,554.83 425,696,200.10 6.4.2 Changes in the provision for accounts receivable Year Year beginning Accrued in Decrease in current year Year end current year Write-back Write-off 53 2008 185,863,566.15 4,167,211.81 13,848,970.56 10,482,200.14 165,699,607.26 6.4.3 Significant or insignificant accounts receivable that shall be accrued for provision Item Balance Proportion % Accrued sum Reason 219,720,683.48 19.81 43,522,929.42 Total 219,720,683.48 19.81 43,522,929.42 6.4.4 Among the year-end accounts receivable, there is no obligator who holds 5% or more equity of the Company. 6.4.5 The top five accounts receivable represent an amount of RMB 81,386,300.84, 18.41% of total year-end balance of accounts receivable. 6.5 Prepayments 6.5.1 Analysis of age Year-end Year-beginning Age distribution Balance Proportion Balance Proportion (%) (%) Within I year 35,364,377.20 99.39 27,810,701.07 98.11 1-2 years 193,187.32 0.54 55,652.67 0.20 2-3 years 2,478.14 0.01 12,203.18 0.04 Over 3 years 21,687.15 0.06 467,821.64 1.65 Total 35,581,729.81 100.00 28,346,378.56 100.00 6.5.2 Among the year-end prepayments, there is no creditor who holds 5% or more equity of the Company. 6.6 Other receivables 6.6.1 Composition of other receivables Year-end Year-beginning Prop. Provision for bad Prop. Provision for Balance Balance (%) debts/Prop. (%) bad debts 1.Significant accounts --- --- --- --- --- --- individually accrued 2.Insignificant accounts --- --- --- --- --- --- individually accrued 3.Other accounts with similar risk nature and 111,135,909.66 100.00 32,612,878.54 divided by age Including: within 1 year 50,405,350.20 56.00 2,520,267.51/5% 73,535,830.63 66.16 3,676,791.53 1,271,994.29/20 1-2 years 6,359,761.49 7.07 6,581,433.94 5.92 1,316,286.79 % 1,242,108.30/50 2-3 years 2,484,216.58 2.76 6,797,689.76 6.12 3,398,844.89 % 30,755,933.09 Over 3 years 30,755,933.09 34.17 24,220,955.33 21.80 24,220,955.33 /100% Total 90,005,261.36 100.00 35,790,303.19 111,135,909.66 100.00 32,612,878.54 Net value 54,214,958.17 78,523,031.12 6.6.2 Changes in the provision for accounts receivable Year Year beginning Accrued in Decrease in current year Year end current year Write-back Write-off 2008 32,612,878.54 3,090,428.59 289,590.57 -376,586.63 35,790,303.19 54 6.6.3 Among the year-end accounts receivable, there is no obligator who holds 5% or more equity of the Company. 6.6.4 The top five accounts receivable represent an amount of RMB 25,232,583.78, 28.03% of total year-end balance of accounts receivable. 6.7 Inventories and inventories falling price reserves Year-end Year-beginning Item Falling price Falling price Balance Balance reserves reserves Raw materials 245,006,700.07 49,995,200.13 274,646,521.49 59,012,276.38 Work in progress 158,065,029.20 32,722,113.73 177,555,202.59 33,445,158.92 Finished products 209,194,217.31 32,943,566.51 218,984,693.92 42,626,185.12 Revolving materials 2,677,713.81 Products in development 3,114,807.60 Purchased materials 206,898.22 65,740.90 Materials in transit 9,959,474.59 2,166,889.90 Material cost differences 7,279,042.71 41,716.63 -1,371,625.75 --- Goods in outside 2,760,833.60 354,774.01 1,678,448.38 25,573.13 processing Others 58,034.81 5,540,539.61 2,166,889.9 Total 638,322,751.92 118,290,001.81 677,033,780.24 137,276,083.45 Net value 520,032,750.11 539,757,696.79 The amount of EUR 4,273,701, equal to RMB 41,279,677.96, was mortgaged to banks for borrowing. Details referred to Mortgaged Assets in current financial statements. Falling price reserves Year-beginning Accrued in Current decrease Year-end report year Write-back Write-off balance Raw materials 59,012,276.38 3,167,943.11 3,656,908.89 9,043,728.29 49,479,582.31 Work in progress 33,445,158.92 2,613,839.84 4,943,982.36 31,115,016.40 Finished products 42,626,185.12 396,903.47 1,096,099.84 9,130,016.17 32,796,972.58 Goods in outside processing 25,573.13 211,400.55 23,133.37 213,840.31 Others 2,166,889.90 39,444.54 2,206,334.44 Total 137,276,083.45 6,429,531.51 4,753,008.73 23,140,860.19 115,811,746.04 6.8 Other current assets Item Year-end Year-beginning Rent and assurance 970,192,.36 1,178,329.14 Others 67,194.20 Total 970,192.36 1,245,523.34 6.9 Financial assets available for sale 6.9.1 Composition and classification Year-end fair value Year-beginning fair value 55 Equity instrument available for sale 4,420,579.68 24,458,496.92 Among which: stock equity without conditions of 4,420,579.68 24,458,496.92 trading Total 4,420,579.68 24,458,496.92 6.9.2 Information about the frozen stock equity at end of year Stock equity Quantity of frozen shares Year-end fair value Shanghai Sanmao 658,830 3,709,212.90 6.9.3 The year-end balance of financial assets available for sale has decreased by RMB 20,037,917.24, 81.93% of the year-beginning, for the partial of the stock equity named Shanghai Sanmao. 6.10 Long-term equity investment Year-end Year-beginning Balance Depreciation Balance Depreciation reserves reserves Long-term equity investment by equity method Associated undertakings 6,574,371.46 7,147,643.26 Subtotal 6,574,371.46 7,147,643.26 Long-term equity investment by 37,694,397.74 1,246,848.25 45,074,633.01 3,266,278.65 cost method Total 44,268,769.20 1,246,848.25 52,222,276.27 3,266,278.65 Net value 43,021,920.95 48,955,997.62 6.10.1 Information about associated undertakings RMB’000 Invested entity Register Representative Business Register Equity prop. Voting place capital prop. SMPIC Optical Shanghai Wu Communication Zhangxiong Manufacture 48,800 30% 30% Equipment Co. SMPIC Changfeng Shanghai Han Xiquan Manufacture 10,000 20.77% 20.77% Carbon Blocks Co. Year-end Year-end Turnover Net profit Relationship Org. code assets liabilities SMPIC Optical Communication 5,309.1 2,075.4 11,501.6 511.8 Association 74727118-3 Equipment Co. SMPIC Changfeng 19,875.7 12,180.4 30,854.4 -3,008.5 Association 76534013-8 Carbon Blocks Co. 6.10.2 Long-term equity investment by equity method Invested entity Original Year-beginning Current-year Year-end investment balance increase/decrease balance Subtotal Bonus SMPIC Optical Communication 510,000.00 892,391.35 75,545.90 78,000.00 967,937.25 Equipment Co. SMPIC Changfeng Carbon Blocks Co. 2,076,800.00 2,240,669.22 -642,508.60 1,598,160.62 56 Shanghai Number Machine Factory Sales 500,000.00 6,309.10 -6,309.10 Dept. Changshu Qixing Electric-plating 2,520,000.00 2,242,183.36 2,242,183.36 Hardware Co. Shanghai Baochi Great Wall Number 1,000,000.00 1,029,806.57 1,029,806.57 Prints Co. Shanghai Huazhijie Plastic Co. 1,766,689.38 736,283.66 736,283.66 Total 8,373,489.38 7,147,643.26 -573,271.80 6,574,371.46 6.10.3 Long-term equity investment by cost method Invested entity Current Original Year-beginnin increase / Year-end investment g balance decrease of balance investment Shanghai Xinguang Dyeing Weaving & Shirt Manufacturing Mill (South 308,033.99 308,033.99 308,033.99 Africa) Shanggong Anqing Sales Co.* 500,000.00 500,000.00 -500,000.00 Shanggong Liaoning Int’l Trading Co.* 500,000.00 500,000.00 -500,000.00 Shanghai Xinhu Glass Co. 6,168,235.27 6,168,235.27 -6,168,235.27 Shanghai Shensi Enterprise Development Co. 4,320,000.00 4,320,000.00 1,737,900.00 6,057,900.00 Shanghai Shanggong Jiahui Sewing Machines Co.* 1,160,000.00 1,160,000.00 -1,160,000.00 Wuxi Shanggong Sewing Machines Co. 153,814.26 153,814.26 153,814.26 Shanghai Hualian Sewing Machines Co. 400,000.00 400,000.00 400,000.00 Shanghai Fuji-Xerox Co. 29,140,749.49 29,140,749.49 29,140,749.49 Shanghai Shanggong Jiarong Sewing Machines Co. 500,000.00 500,000.00 500,000.00 Shanghai Nandie Sewing Machines Co. 285,000.00 285,000.00 285,000.00 Baoding Investment Co. 7,500.00 7,500.00 7,500.00 Bank of Shanghai Caoxi Credit Union 551,400.00 551,400.00 551,400.00 Shanghai St. Petersburg Trading Center Co. 500,000.00 500,000.00 -500,000.00 Shanghai Industrial Entities Real Estate United Co. 173,900.00 173,900.00 -173,900.00 China Perfect Machinery Industry Co., Ltd. 90,000.00 90,000.00 90,000.00 Shenying & Waiguo Securities Co. 200,000.00 200,000.00 200,000.00 Shanghai Hirose Precision Industrial Co., Ltd. 2,840,376.00 Others 116,000.00 116,000.00 -116,000.00 Total 45,074,633.01 45,074,633.01 -7,380,235.27 37,694,397.74 57 The entities marked with * have completed the cancellation of business registration. 6.10.4 Depreciation reserves for long-term equity investment Invested entity Year-beginning Current increase Current Year-end decrease Shanghai Xinguang Dyeing Weaving & Shirt Manufacturing Mill (South 308,033.99 308,033.99 Africa) Shanggong Anqing Sales Co. 500,000.00 500,000.00 Shanggong Liaoning Int’l Trading Co. 500,000.00 500,000.00 Shanghai Shanggong Jiahui Sewing Machines Co. 1,160,000.00 274,632.96 1,434,632.96 Wuxi Shanggong Sewing Machines Co. 153,814.26 153,814.26 Shanghai Shanggong Jiarong Sewing Machines Co. 470,530.40 29,469.60 500,000.00 Shanghai Nandie Sewing Machines Co. 285,000.00 285,000.00 Shanghai Industrial Entities Real Estate United Co. 173,900.00 173,900.00 Total 3,266,278.65 589,102.56 2,608,532.96 1,246,848.25 6.11 Investment real estate Year-beginning Current-year increase Current-year decrease Year-end Acquisition Transfer-i Depreciation Transfer- Other n from or out to purpose own use amortization own use (Note) real real estate or estate inventory 1. Original cost 209,183,521.51 6,269,664.14 202,913,857.37 a. Buildings 157,500,759.87 6,269,664.14 151,231,095.73 b. Land use right 51,682,761.64 51,682,761.64 2. Accumulate d depreciation 48,180,001.58 6,021,536.45 1,692,304.41 52,509,233.62 or amortization a. Buildings 44,141,724.39 4,747,679.09 1,692,304.41 47,197,099.07 b. Land use right 4,038,277.19 1,273,857.36 5,312,134.55 3. Accumulate d provision a. Buildings b. Land use right 4. Total book value 161,003,519.93 -6,021,536.45 4,577,359.73 150,404,623.75 a. Buildings 113,359,035.48 -4,747,679.09 4,577,359.73 104,033,996.66 58 b. Land use right 47,644,484.45 -1,273,857.36 46,370,627.09 Note: The difference in this column is caused by the currency translation difference of Shanggong (Europe) Holding Co., Ltd. Among the above-mentioned year-end balance of investment real estate, some properties have been mortgaged to the banks. Details are disclosed in mortgage assets column. 6.12 Fixed assets at cost and accumulated depreciation 6.12.1 Original cost of fixed assets Year-beginning Increase Decrease Year-end Plant & construction 463,558,152.23 1,393,266.22 32,175,278.82 432,776,139.63 Equipment and machines 702,292,277.55 16,200,676.79 48,589,472.52 669,903,481.82 Transport vehicles 26,256,718.45 2,278,006.50 1,192,278.55 27,342,446.40 Electric equipment 11,890,400.22 1,072,216.16 202,651.83 12,759,964.55 Fixture for fixed assets 1,106,670.40 255,699.00 494,973.00 867,396.40 Others 347,622,561.66 11,629,364.02 49,625,727.71 309,626,197.97 Total 1,552,726,780.51 32,829,228.69 132,280,382.43 1,453,275,626.77 In current year, an amount of RMB 3,208,861.42 was transferred from construction in progress into fixed assets at cost. Among the year-end fixed assets balance, some of the plant & construction, equipment and machines were mortgaged to bank for borrowings. Details disclosed in the column of mortgage assets. 6.12.2 Accumulated depreciation Year-beginning Increase Accrued Decrease Year-end Plant & construction 264,766,073.79 10,945,636.67 20,875,786.04 254,835,924.42 Equipment and machines 524,282,416.78 26,374,648.78 40,482,132.51 510,174,933.05 Transport vehicles 12,804,674.19 187,280.00 1,781,337.00 1,055,031.82 13,718,259.37 Electric equipment 6,730,986.59 511,311.75 281,681.32 192,831.25 7,331,148.41 Fixture for fixed assets 509,087.93 168,552.00 277,648.00 491,703.00 463,584.93 Others 304,242,386.35 141,031.60 12,731,932.29 45,076,659.60 272,038,690.64 Total 1,113,335,625.63 1,008,175.35 52,392,884.06 108,174,144.22 1,058,562,540.82 6.12.3 Depreciation reserves for fixed assets Year-beginning Increase Decrease Year-end Reason Plant & construction 4,913,777.92 4,913,777.92 Equipment and machines 70,198,101.93 70,198,101.93 Transport vehicles 29,807.00 29,807.00 Others 96,378.63 24,840.00 71,538.63 Total 75,238,065.48 54,647.00 75,183,418.48 59 6.12.4 Book value of fixed assets Year-beginning Increase Decrease Year-end Plant & construction 193,878,300.52 -9,552,370.45 11,299,492.78 173,026,437.29 Equipment and machines 107,811,758.84 8,107,340.01 89,530,446.84 -10,173,971.99 Transport vehicles 13,422,237.26 309,389.50 107,439.73 13,624,187.03 Electric equipment 5,159,413.63 279,223.09 9,820.58 5,428,816.14 Fixture for fixed assets 597,582.47 -190,501.00 3,270.00 403,811.47 Others 43,283,796.68 -1,243,599.87 4,524,228.11 37,515,968.70 Total 364,153,089.40 -20,571,830.72 24,051,591.21 319,529,667.47 6.12.5 Fixed assets actually without certificate of title Classification Original cost Accumulated Book value Reason for not obtaining depreciation certificate of title Plant & Self-developed construction, construction 4,127,703.00 3,368,970.14 758,732.86 formalities in process 6.13 Construction in progress Year-end balance Year-beginning balance Balance Depreciation Book value Balance Depreciation Book value provision provision Total 6,778,786.23 6,778,786.23 3,682,674.12 3,682,674.12 Project Year-beginning Current Decrease Year-end Fund increase Transfer-in Other sources fixed assets decrease Sewing Self-raised machinery 1,858,608.12 4,095,416.00 1,027,149.65 175,617.20 4,751,257.27 project ERP project Self-raised 1,018,542.50 83,752.00 1,102,294.50 Electric Self-raised equipment 16,601.00 81,830.96 12,200.00 86,231.96 Equipment and Self-raised machines 788,922.50 2,353,573.99 2,169,511.77 133,982.22 839,002.50 Total 3,682,674.12 6,614,572.95 3,208,861.42 309,599.42 6,778,786.23 There has been no interest capitalization during report year. 6.14 Intangible assets Item Year-beginning Current increase Current decrease Year-end 1. Original cost 176,646,311.90 989,488.19 5,586,845.02 172,048,955.07 Land use right 107,088,232.90 2,285,406.00 104,802,826.90 Trademark right 20,161,268.51 20,161,268.51 Computer software 175,650.00 175,650.00 Patents and specialized 49,115,719.56 957,180.92 3,301,439.02 46,771,461.46 60 technology Others 105,440.93 32,307.27 137,748.20 2. Accumulated amortization 53,518,419.33 7,626,621.52 3,550,528.33 57,594,512.52 Land use right 9,155,712.11 2,326,269.67 653,660.37 10,828,321.41 Trademark right 13,104,824.14 2,016,126.72 15,120,950.86 Computer software 8,832.48 17,515.02 26,347.50 Patents and specialized 31,249,050.60 3,243,113.64 2,896,867.96 31,595,296.28 technology Others --- 23,596.47 23,596.47 3. Accumulated provision for depreciation Land use right Trademark right Computer software Patents and specialized technology Others 4. Book value 123,127,892.57 -6,637,133.33 2,036,316.69 114,454,442.55 Land use right 97,932,520.79 -2,326,269.67 1,631,745.63 93,974,505.49 Trademark right 7,056,444.37 -2,016,126.72 5,040,317.65 Computer software 166,817.52 -17,515.02 149,302.50 Patents and specialized 17,866,668.96 -2,285,932.72 404,571.06 15,176,165.18 technology Others 105,440.93 8,710.80 114,151.73 Among the year-end intangible assets balance, land use right was partially mortgaged to bank for borrowings. Details disclosed in the column of mortgage assets. 6.15 R&D expenses Item Year-beginning Current Current transfer-out Year-end increase Into profits Defined as and losses intangible assets Expenses in R&D stage 48,984,446.87 24,272,656.58 18,178,238.00 55,078,865.45 Total 48,984,446.87 24,272,656.58 18,178,238.00 55,078,865.45 6.16 Business reputation (Goodwill) Invested entity Year-beginning Current increase Current decrease Year-end 61 Beisler GmbH 31,079,079.84 -2,936,617.44 28,142,462.40 Total 31,079,079.84 -2,936,617.44 28,142,462.40 The decline of business reputation is mainly due to the currency translation difference of Shanggong (Europe) Holding Co., Ltd. in the report year. 6.17 Deferred tax, assets and liabilities 6.17.1 Recognized deferred tax assets Item Year-end Year-beginning Depreciation reserves 19,816,471.75 22,337,719.70 Carrying back operational loss 22,206,994.39 26,627,940.46 Total 42,023,466.14 48,965,660.16 6.17.2 Recognized deferred tax liabilities Item Year-end Year-beginning Assets appraisal evaluation 37,237,656.54 19,316,601.48 Anticipated liabilities 347,474.27 Others 16,585,181.02 Total 37,237,656.54 36,249,256.77 6.18 Provision for assets impairment Year beginning Currently Decrease in current year Year end accrued Write-back Write-off balance 1. For bad debts 218,476,444.69 7,257,640.40 14,138,561.13 10,105,613.51 201,489,910.45 2. For decline of value in 137,276,083.45 6,429,531.51 4,753,008.73 23,140,860.19 115,811,746.04 inventory 3. For long-term equity 3,266,278.65 589,102.56 2,608,532.96 1,246,848.25 investment 4. For fixed assets 75,238,065.48 54,647.00 75,183,418.48 Total 434,256,872.27 14,276,274.47 18,891,569.86 35,909,653.66 393,731,923.22 6.19 Short-term borrowings Category Year-end Year-beginning Credit borrowings 348,148.62 348,148.62 Mortgage loans 33,000,000.00 Hypothecation loans 244,003,463.53 241,054,745.60 Secured borrowings 120,600,000.00 120,600,000.00 Total 364,951,612.15 395,002,894.22 (1) There are no overdue borrowings at end of report year. 62 (2) The year-end borrowings at foreign currency amounted to EUR 455,892.28, equal to RMB 4,403,463.53 at exchange rate of 9.659. (3) The Company mortgaged some assets to the banks, details disclosed in the column of Mortgaged Assets. (4) The secured borrowings amounts to RMB 120,600,000.00, among which, an amount of RMB 5,000,000.00 represents the borrowing to SMPIC Imp. & Exp. Co., Ltd. secured by the wholly-owned subsidiary SMPIC, and the rest RMB 115,600,000.00 secured by Shanghai Pudong Development (Group) Co., Ltd. Details disclosed in the column of Mortgaged Assets. 6.20 Bills payable Year-end Year-beginning Commercial acceptance bill 6,025,913.96 Total 6,025,913.96 (1) Among the year-end balance, there are no bills payable to creditor who holds 5% or more equity of the Company. (2) Among the year-end balance, there are no bills payable to connected parties. (3) The year-end balance is RMB 6,025,913.96 more than the year-beginning value mainly due to the appearance of the commercial acceptance bills payable. 6.21 Accounts payable Year-end Year-beginning Total 154,286,725.16 186,981,075.92 (1) Among the year-end balance, there are no accounts payable to creditor who holds 5% or more equity of the Company. (2) Among the year-end balance, there are no accounts payable to connected parties. 6.22 Advance receipts Year-end Year-beginning 89,348,979.40 99,253,883.25 (1) Among the year-end balance, there are no advances to creditor who holds 5% or more equity of the Company. (2) There are no big-ticket accounts payable aged more than three years. 6.23 Wages and salaries unpaid Year-beginning Current increase Current paid Year-end 1. Salary, bonus and subsidies 49,259,157.48 478,928,007.15 492,433,996.34 35,753,168.29 2. Employee welfare --- 112,408,433.67 112,408,433.67 3. Social insurance 429,205.56 20,924,472.65 20,863,086.46 490,591.75 4. Housing accumulation 47,752.00 5,415,513.74 5,463,265.74 funds 5. Labor union and staff education 945,224.01 1,559,725.36 1,936,345.42 568,603.95 63 expenditure 6. Non-monetary welfare 36,550.00 36,550.00 7. Compensation for the 2,872,716.84 2,872,716.84 cancellation of labor relationship 8.Others 522,876.98 618,899.84 957,719.70 184,057.12 Including: cash-settled share-based payments Total 51,204,216.03 622,764,319.25 636,972,114.17 36,996,421.11 Note: the year-end balance is mainly composed of staff pension and staff bonus reserves accrued by Shanggong Europe Holding Co., Ltd. according to local laws of the subsidiary’s residential country. 6.24 Tax unpaid Tax type Year-end Year-beginning Legal tax rate V.A.T. -2,473,821.09 -869,976.71 17% Business tax 111,607.58 236,676.69 5% Tax on city maintenance and construction 98,630.11 112,135.90 7%、1% Income tax 7,240,808.78 16,975,373.55 25%,18% Individual income tax 6,631,422.74 10,591,076.79 Housing property tax 203,521.88 173,429.19 Land appreciation tax 587,797.49 Stamp tax 31,979.00 50,000.00 Educational surtax 35,322.02 49,197.95 Embankment maintenance fee 5,951.14 6,796.48 Riverway management charges 3,294.78 9,214.76 Others 812.84 1,824.52 Total 12,477,327.27 27,335,749.12 Note: the foreign subsidiaries employ the local legal tax rate at their residential countries. In comparison with the beginning of year, the tax unpaid at year end was RMB 14,858,421.85 and 54.36% less, mainly due to the tax payment in current year. 6.25 Other payables Year-end Year-beginning 121,566,474.38 192,288,791.73 (1) Among the year-end balance, there are no payables to creditor who holds 5% or more equity of the Company. (2) Among the year-end balance, there are no payables to connected parties. 64 6.26 Non-current liabilities due within one year Item Year-end Year-beginning Long-term loans 520,000.00 520,000.00 Total 520,000.00 520,000.00 6.27 Other current liabilities Year-end Year-beginning 891,742.25 1,626,725.18 The year-beginning and year-end balance attributes to the interest and rent prepaid to the subsidiary of the Company Shanggong (Europe) Holding Co., Ltd. 6.28 Long-term loans Year-end Year-beginning Credit borrowings 1,489,984.87 1,489,984.87 Total 1,489,984.87 1,489,984.87 6.29 Long-term payable Type Year-end Year-beginning FAG loans 203,159,752.11 256,410,424.86 Others 1,832,334.37 1,626,944.32 Total 204,992,086.48 258,037,369.18 FAG loans represent the debts that Shanggong (Europe) Holding Co., Ltd. should repay to FAG Kugelfischer GmbH, the original holding shareholder of Durkopp Adler AG. 6.30 Anticipated liabilities Item Year-end Year-beginning Pension 395,680,935.00 452,863,239.50 External guarantee 35,546,274.60 Others 13,782,478.00 30,697,597.79 Total 445,009,687.60 483,560,837.29 (1) The pension refers to the staff pension program of Durkopp Adler AG according to the regulations of Germany. (2) The external guarantee refers to the contingent liabilities formed from the guarantee for Shanghai Worldbest Enterprise Development Co., Ltd. The Board of Directors decided to accrue anticipated liabilities in current report year. 6.31 Stock capital Actual receipt stock capital: Year-end Year-beginning Quantity Sum Quantity Sum Shares subject to conditional sales 64,830,980.00 64,830,980.00 87,275,319.00 87,275,319.00 A shares (face value RMB 1.00 per share) 140,112,047.00 140,112,047.00 117,667,708.00 117,667,708.00 65 B shares (face value RMB 1.00 per share) 243,943,750.00 243,943,750.00 243,943,750.00 243,943,750.00 Total 448,886,777.00 448,886,777.00 448,886,777.00 448,886,777.00 Current-year variations: Year-beginning Increase/decrease in report year Year-end Sum Prop Sum Prop Other Shares .% . Ration Bonus by Total shares shares public reserve 1. Shares subject to conditional sales 1) State-owned 87,275,319.0 64,830,980.0 19.44 -22,444,339.00 14.44 shares 0 0 2) Shares owned by state legal entities 3) Shares owned by other domestic investors Including: by domestic no state-owned legal entities Including: by domestic natural persons 4) shares owned by foreign investors Including: by foreign legal entities Including: by foreign natural persons Total shares subject 87,275,319.0 64,830,980.0 19.44 -22,444,339.00 14.44 to conditional sales 0 0 2. Unconditionally tradable shares 1) Tradable A shares 117,667,708 26.21 22,444,339.00 140,112,047 31.21 2) Tradable B shares 243,943,750 54.35 243,943,750 54.35 3)Tradable shares listed abroad 4)Others Total tradable shares 361,611,458 80.56 22,444,339.00 384,055,797 85.56 Total equities 448,886,777 100 0.00 448,886,777 100 6.32 Capital reserves Item Year-beginning Current-year Current-year Year-end increase decrease 1.Capital stock premium 313,159,549.73 313,159,549.73 2.Other capital reserves 81,422,397.94 5,582,436.06 75,839,961.88 66 3.Changes in fair value 16,636,296.92 14,686,937.24 1,949,359.68 Total 411,218,244.59 20,269,373.30 390,948,871.29 The year-end balance of capital reserves registers a decrease of 4.93% and RMB 20,269,373.30 less than that of year-beginning, mainly due to the changes in fair value of financial assets available for sale caused by the current-year transfer, and the decrease of capital reserves of subsidiaries under equity method. 6.33 Surplus reserves Item Year-beginning Current-year Current-year Year-end increase decrease Statutory surplus reserve 2,273,121.26 2,273,121.26 Free surplus reserve 2,273,121.26 2,273,121.26 Total 4,546,242.52 4,546,242.52 6.34 Undistributed profits Item Year-end balance Accrued or distribut ed proportion Anterior year-end balance -283,205,720.63 Add: changes in accounting policies correction of anterior accounting errors Beginning balance of report year -283,205,720.63 Add: current-year net profit of parent company -32,261,701.11 Less: statutory surplus reserve free surplus reserve payable common stock dividend End of year undistributed profits -315,467,421.74 6.35 Operating income and cost Current report year Anterior report year Income Expense Income Expense Principal operations 2,185,692,391.03 1,718,676,263.83 2,478,005,802.84 1,893,686,213.34 Other operations 50,491,916.73 21,129,173.55 60,055,066.85 32,770,018.95 Total 2,236,184,307.76 1,739,805,437.38 2,538,060,869.69 1,926,456,232.29 6.35.1 Principal operating income and expense, by business sector Current year Last year Principal operating Principal operating Principal operating Principal operating income expense income expense Sewing machines 1,119,493,499.82 750,108,986.57 1,669,338,471.39 1,194,119,071.67 67 Int’l trading agent 489,989,857.51 473,367,375.54 268,556,776.21 263,518,624.61 Material transmission 431,255,032.00 366,781,207.00 405,398,285.92 317,795,158.34 equipment Office supplies 32,245,746.86 29,208,132.77 60,658,367.14 53,998,023.18 Film equipment 70,477,724.76 64,177,063.54 66,987,266.00 61,893,651.83 Others 42,230,530.08 35,033,498.41 7,066,636.18 2,361,683.71 Total 2,185,692,391.03 1,718,676,263.83 2,478,005,802.84 1,893,686,213.34 6.35.2 Other operations’ income and expense Current year Last year Other operating Other operating Other operating Other operating income expense income expense Sales of materials 8,851,590.31 10,456,215.40 10,485,115.99 10,952,158.43 Rent 27,411,853.49 3,612,049.38 20,661,365.71 1,254,606.49 Services 5,221,780.61 1,348,016.43 2,645,884.28 177,358.40 Others 9,006,692.32 5,712,892.34 26,262,700.87 20,385,895.63 Total 50,491,916.73 21,129,173.55 60,055,066.85 32,770,018.95 6.35.3 Principal operating income and expense, by location of entities Current year Last year Principal operating Principal operating Principal operating Principal operating income expense income expense Domestic 952,511,878.26 886,568,658.82 901,511,243.22 840,274,853.36 Abroad 1,306,820,158.69 905,747,250.93 1,637,369,110.21 1,114,285,910.57 Subtotal 2,259,332,036.95 1,792,315,909.75 2,538,880,353.43 1,954,560,763.93 Less: write-off between regions 73,639,645.92 73,639,645.92 60,874,550.59 60,874,550.59 Total 2,185,692,391.03 1,718,676,263.83 2,478,005,802.84 1,893,686,213.34 Domestic and abroad refer to the location of subsidiaries. 6.35.4 The sales to the top five customers total RMB 366,426,522.58, 16.76% of the annual operating income. 6.36 Business tax and extra charges Current year Last year Business tax 1,615,298.50 1,574,369.15 Tax on city maintenance and 342,282.36 construction 459,900.14 House property tax 905,920.29 886,827.69 Extra fee for education 159,624.80 195,037.81 Others 1,030,099.58 819,924.84 Total 4,053,225.53 3,936,059.63 68 6.37 Financial expense Type Current year Last year Interest expenses 66,179,231.09 36,973,760.19 Less: interest income 11,203,919.66 14,282,930.32 Exchange loss 17,605,394.68 15,498,233.07 Less: exchange earning 2,842,412.57 2,689,981.15 Others 1,797,464.66 1,232,934.91 Total 71,535,758.20 36,732,016.70 6.38 Assets depreciation loss Current year Last year 1.Loss in bad debts -6,880,920.73 16,923,193.05 2.Loss in inventory devaluation 1,676,522.78 10,803,015.34 3.Loss in depreciation of long-term equity investment 589,102.56 567,029.90 Total -4,615,295.39 28,293,238.29 6.39 Income from changes in fair value Sources of income from changes in fair Current year Last year value Financial instruments -6,595,211.11 70,231.94 Total -6,595,211.11 70,231.94 6.40 Investment income Item Current year Last year 1.Financial assets investment income (1) From disposal of tradable financial assets 5,574,047.27 27,230,957.96 (2) From disposal of financial assets available for sale 3,655,756.24 2.Equity investment income (1)By cost method 17,502,888.58 13,213,294.41 (2)By equity method -488,962.70 -2,173,001.93 (3)Gain on disposal of investment 26,710,650.67 10,717,448.91 Total 52,954,380.06 48,988,699.35 Among which: 6.40.1 By cost method Invested entity Current-year volume Shanghai Hirose Precision Machinery Co., Ltd. 750,000.00 69 Shanghai Fuji-Xerox Co., Ltd. 14,869,874.09 Shanghai Shensi Enterprise Development Co. 1,737,900.00 6.40.2 By equity method Invested entity Current-year volume SMPIC Optical Communication Equipment Co. 153,545.90 SMPIC Changfeng Carbon Blocks Co. -642,508.60 6.40.3 Disposal of long-term equity investment Invested entity Current-year volume Shanghai Xinhu Glass Factory Co., Ltd. 29,413,871.42 There are no significant restrictions over the inflow of investment earnings. 6.41 Non-operating income Current year Last year 1. Gains from disposal of non-current assets 35,141,154.86 56,486,661.00 Among which: disposal of fixed assets 35,141,154.86 56,486,661.00 disposal of intangible assets 2.Gains from non-monetary assets transaction 3.Gains from debts reorganization 4.Gains from donations 5.Government subsidy 2,071,917.00 5,834,983.00 6.Gains from assets surplus 7.Amercement income and liquidated damages 600.00 19,071.76 8.Others 1,550,383.35 313,845.11 Total 38,764,055.21 62,654,560.87 Current non-operating income decreased by an amount of RMB 23,890,505.66 and 38.13%, mainly due to the decrease of gains from compensation of land parcels exchange and relocation. 6.42 Non-operating expense Current year Last year 1.Losses from disposal of non-current assets Among which: disposal of fixed assets 997,412.25 861,708.04 disposal of intangible assets 2.Losses from non-monetary assets transaction 3.Losses from debts reorganization 4.Expense in donations 221,500.00 5,484.27 Including: charitable donations 221,500.00 5,484.27 5.Extraordinary losses 11,000.00 70 6.Losses from scraped assets 7.Amercement expense 87,405.65 48,721.27 8.Compensation expense 33,001.77 20,730.04 9.Others 35,681,197.98 24,955.22 Total 37,020,517.65 972,598.84 The current non-operating expense increased by RMB 36,047,918.81 and 3706.35%, mainly due to the accruement of anticipated liabilities. 6.43 Income tax expense Item Current year Last year Current income tax expense 9,755,819.64 19,971,892.60 Deferred income tax expense 8,609,445.51 39,341,861.13 Total 18,365,265.15 59,313,753.73 6.44 Government subsidy Project Current Last year Observation year Government subsidy related to earnings and profits 1.Subsidy of R&D from Pudong New Area Science & Technology Development Fund 1,000,000.00 2.Special fund for speeding up the building of Chinese self-owned brands 1,000,000.00 3.Subsidy for commercial brands 71,917.00 4.Special fund for overseas economic and technological cooperation 5,790,000.00 5.Government bonus (for the exploration of international markets) 44,983.00 Total 2,071,917.00 5,834,983.00 6.45 Attachment of cash flow statement 6.45.1 Other cash inflow related to operating activities Item Current year Receipt of current account 37,919,862.77 Specific subsidies 2,071,917.00 Interest income 11,203,919.66 Non-operating income 879,816.09 Total 52,075,515.52 6.45.2 Other cash outflow related to operating activities Item Current year Current account 17,622,726.34 71 Sales expenditure 56,746,114.59 Admin. expenditure 56,941,818.50 Bank charges 1,797,464.66 Non-operating expense 526,771.79 Total 133,634,895.88 6.45.3 Other cash outflow related to financing activities Item Current year Bank deposits, guarantee bonds and other mortgages 26,121,769.29 Total 26,121,769.29 6.45.4 Supplements of cash flow statement Item Current year Last year 1.Net profits converted into cash flow from operating activities Net profits -33,219,033.13 32,329,316.33 Add: provision for assets depreciation -4,615,295.39 28,293,238.29 Depreciation of fixed assets, of oil/gas assets and productive biological assets 58,414,420.51 83,090,542.84 Amortization of intangible assets 25,804,859.52 24,257,502.51 Amortization of long-term deferred expenses 102,060.30 Losses in disposal of fixed assets, intangible and other long-term assets (less: income) -34,143,742.61 -55,624,952.96 Losses on scrapping of fixed assets (less: income) Losses on changes in fair value (less: income) 6,595,211.11 -70,231.94 Financial expense (less: income) 76,073,380.12 37,818,402.79 Investment loss (less: income) -52,954,380.06 -48,988,699.35 Decrease in deferred income tax assets (less: increase) 6,942,194.02 36,127,756.15 Increase in deferred income tax liabilities (less: decrease) 988,399.77 1,235,915.09 Decrease of inventories (less: increase) 30,985,000.64 -38,579,567.02 Decrease in receivables under operating activities (less: increase) 159,721,861.98 -80,745,467.83 Increase in payables under operating activities (less: decrease) -174,527,678.73 11,423,849.65 Others Net cash flows from operating activities 66,065,197.75 30,669,664.85 2.Investing and financing activities that do not involve cash receipts and payments Conversion of debt into capital Convertible bonds to be expired within one year Fixed assets under finance lease 3.Net increase in cash and cash equivalents 72 Cash at the end of the period 353,799,316.68 438,292,840.47 Less: Cash at the beginning of the period 438,292,840.47 528,084,498.88 Plus: Cash equivalents at the end of the period Less: Cash equivalents at the beginning of the period Net increase in cash and cash equivalents -84,493,523.79 -89,791,658.41 6.45.5 Composition of cash and cash equivalents Year-end Year-beginning 1.Cash 353,799,316.68 438,292,840.47 Including: cash on hand 790,687.70 2,002,553.79 Bank deposit immediately available for payment 344,878,364.58 432,870,802.52 Other monetary fund immediately available for payment 8,130,264.40 3,419,484.16 Deposit in Central Bank available for payment Deposit in other banks Borrowing from other banks 2.Cash equivalents Including: investment in bonds to be expired within three months 3.Year-end cash and cash equivalents 353,799,316.68 438,292,840.47 Including: restricted cash and cash equivalents of parent company or other subsidiaries in the group 7. Important notes for parent company financial statements (All the following items adopt RMB’ and year-end data except those specially indicated.) 7.1 Accounts receivable 7.1.1 Composition of accounts receivable Year-end Year-beginning Provision for Provision for Prop. Prop. Balance bad Balance bad (%) (%) debts/Prop. % debts/Prop. % 1.Significant accounts individually accrued 2.Insignificant accounts 12,593,493.35 individually accrued 12,593,493.35 10.72 /100 3.Other accounts with similar risk nature and divided by 111,954,451.89 100 84,258,030.56 104,854,357.53 89.28 73,356,193.21 age Including: within 1 year 24,708,786.86 22.07 1,235,439.34/5 23,772,104.31 20.24 1,188,605.22/5 1-2 years 1,057,734.54 0.94 211,546.91/20 11,143,331.54 9.49 2,228,666.31/20 2-3 years 6,753,772.38 6.03 3,376,886.20/50 0.00 0.00 0.00/50 73 79,434,158.11 69,938,921.68 Over 3 years 79,434,158.11 70.96 69,938,921.68 59.55 /100 /100 Total 111,954,451.89 100 84,258,030.56 117,447,850.88 100 85,949,686.56 Net value 27,696,421.33 31,498,164.32 7.1.2 Provision for bad debts Year Beginning Currently Currently decreased Ending accrued Write-back Write-off 2008 85,949,686.56 -1,179,451.46 512,204.54 84,258,030.56 7.1.3 There are no accounts receivable to obligator who holds 5% or more equity of the Company. 7.1.4 The accounts receivable related to affiliated parties represent RMB 15,039,492.94, 13.43% of total receivables. 7.1.5 The top five obligators’ year-end balance is of RMB 32,338,686.68, 28.89% of year-end accounts receivable. 7.2 Other receivables 7.2.1 Composition of other receivables Year-end Year-beginning Provision for Provision for Pro Prop. bad bad Balance Balance p. (%) debts/Prop. debts/Prop. (%) % % 1.Significant accounts individually accrued 2.Insignificant accounts individually accrued 3.Other accounts with similar risk nature and divided by 91,095,172.68 100 23,322,255.22 88,565,588.12 100 20,574,436.67 age Including: within 1 year 69,003,153.09 75.75 3,450,157.65/5 67,510,354.03 76.23 3,375,517.70/5 1-2 years 1,590,981.21 1.75 318,196.23/20 2,988,836.45 3.37 597,767.29/20 2-3 years 1,894,274.10 2.08 947,137.06/50 2,930,491.92 3.31 1,465,245.96/50 18,606,764.28 15,135,905.72 Over 3 years 18,606,764.28 20.42 15,135,905.72 17.09 /100 /100 Total 91,095,172.68 100 23,322,255.22 88,565,588.12 100 20,574,436.67 Net value 67,772,917.46 67,991,151.45 7.2.2 Provision for bad debts Year Beginning Currently Currently decreased Ending accrued Write-back Write-off 2008 20,574,436.67 2,700,829.64 -46,988.91 23,322,255.22 7.2.3 There are no accounts receivable to obligator who holds 5% or more equity of the Company. 7.2.4 The accounts receivable related to affiliated parties represent RMB 67.081.147.82, 73.64% of total receivables. 74 7.2.5 The top five obligators’ year-end balance is of RMB 67.295.996.56, 73.87% of year-end accounts receivable. 7.3 Long-term equity investment Year-end Year-beginning Balance Depreciation reserves Balance Depreciation reserves Long-term equity investment by cost 549,510,311.02 8,861,848.25 543,851,311.02 10,221,848.25 method Total 549,510,311.02 8,861,848.25 543,851,311.02 10,221,848.25 Net value 540,648,462.77 533,629,462.77 7.3.1 Long-term equity investment by cost method Invested entity Original Year-beginning Current increase / Year-end investment balance decrease of balance investment Durkopp Adler Industrial Manufacturing (Shanghai) Co. 53,223,926.00 53,223,926.00 --- 53,223,926.00 Shanghai Gongfeng Real Estate Development Co. 4,500,000.00 4,500,000.00 --- 4,500,000.00 Shanghai Shanggong Xingda Sewing Machines Co. 2,100,000.00 2,100,000.00 --- 2,100,000.00 Durkopp Adler Trading (Shanghai) Co. 4,811,443.11 4,811,443.11 7,019,000.00 11,830,443.11 Shanghai Industrial Sewing Machines Materials General Co. 4,600,000.00 4,600,000.00 --- 4,600,000.00 Shanghai Shanggong Songda Machinery Co. 1,950,000.00 1,950,000.00 --- 1,950,000.00 Shanghai Shanggong Transport Co. 2,100,000.00 2,100,000.00 --- 2,100,000.00 Shanghai Yongde Eco. Development Co. 1,600,000.00 1,600,000.00 --- 1,600,000.00 Shanghai Butterfly Imp.&Exp. Co. 10,318,153.64 10,318,153.64 --- 10,318,153.64 Shanghai Fuhua Light Sewing Machines Co. 3,168,000.00 3,168,000.00 --- 3,168,000.00 Shanghai Shanggong Fangtian Machinery Co. 1,800,000.00 1,800,000.00 --- 1,800,000.00 Shanghai Shanggong Jiayuan M&E Co. 2,170,728.50 2,170,728.50 --- 2,170,728.50 Shanghai Shuangchong Sewing Machines Co. 8,400,000.00 8,400,000.00 --- 8,400,000.00 Shanghai Suoying Real Estate Co. 10,313,953.16 10,313,953.16 --- 10,313,953.16 Shanghai Shanggong Imp.&Exp. Co. 28,800,000.00 28,800,000.00 --- 28,800,000.00 Shanghai Shanggong Sewing Machines Co. 27,000,000.00 27,000,000.00 --- 27,000,000.00 SMPIC 266,072,314.72 266,072,314.72 --- 266,072,314.72 Shanggong (Europe) Holding CO. 107,942,043.64 107,942,043.64 --- 107,942,043.64 Total 540,870,562.77 540,870,562.77 7,019,000.00 547,889,562.77 7.3.2 Other long-term equity investment by cost method Invested entity Original Year-beginning Current increase / Year-end investment balance decrease of balance 75 investment Shanghai Xinguang Dyeing Weaving & Shirt Manufacturing Mill 308,033.99 308,033.99 --- 308,033.99 (South Africa) Shanggong Anqing Sales Co.* 500,000.00 500,000.00 -500,000.00 --- Shanggong Liaoning Int’l Trading Co.* 500,000.00 500,000.00 -500,000.00 --- Shanghai Shanggong Jiahui Sewing Machines Co.* 360,000.00 360,000.00 -360,000.00 --- Wuxi Shanggong Sewing Machines Co. 153,814.26 153,814.26 --- 153,814.26 Shanghai Hualian Sewing Machines Co. 400,000.00 400,000.00 --- 400,000.00 Bank of Shanghai Caoxi Credit Union 551,400.00 551,400.00 --- 551,400.00 Baoding Investment Co. 7,500.00 7,500.00 --- 7,500.00 Shenyin & Waiguo Securities Co. 200,000.00 200,000.00 --- 200,000.00 Shanghai Hirose Precision Machinery Co. 2,840,376.00 --- --- --- Total 5,821,124.25 2,980,748.25 -1,360,000.00 1,620,748.25 The entities marked with * have completed the cancellation of business registration. 7.3.3 Depreciation reserves for long-term equity investment Invested entity Year-beginning Current increase Current Year-end decrease Shanghai Xinguang Dyeing Weaving & Shirt Manufacturing Mill (South 308,033.99 308,033.99 Africa) Shanggong Anqing Sales Co. 500,000.00 500,000.00 --- Shanggong Liaoning Int’l Trading Co. 500,000.00 500,000.00 --- Shanghai Shanggong Jiahui Sewing Machines Co. 360,000.00 360,000.00 --- Wuxi Shanggong Sewing Machines Co. 153,814.26 153,814.26 Shanghai Shuangchong Sewing Machines Co. 8,400,000.00 8,400,000.00 Total 10,221,848.25 1,360,000.00 8,861,848.25 7.3.4 The year-end long-term equity investment has increase by RMB 5,659,000.00, 1.049% more than that of the year-beginning, mainly due to the increase of cash investment in Durkopp Adler Trading (Shanghai) Co., Ltd. 7.4 Operating revenue and operating expense Current report year Anterior report year Income Expense Income Expense 76 Principal operations 18,529,956.63 17,154,798.79 70,460,500.74 77,467,564.45 Other operations 9,613,468.67 2,895,467.57 20,350,871.44 12,212,687.27 Total 28,143,425.30 20,050,266.36 90,811,372.18 89,680,251.72 The operating revenue was 69.01% and RMB 62,667,946.88 less than last-year index, mainly due to the structural adjustment of production and sales in 2007. 7.5 Investment income Invested entity Current year Last year 1.Financial assets investment income (1) From disposal of tradable financial assets 5,029,803.70 15,098,594.45 (2) From disposal of financial assets available for sale 3,448,227.47 2.Equity investment income (1)By cost method 1,666,512.97 773,521.59 (2)By equity method -5,648,522.06 (3)Gain on disposal of investment 148,291.14 5,910,847.13 Total 10,292,835.28 16,134,441.11 Among which: 7.5.1 By cost method Invested entity Current-year volume Shanghai Butterfly Imp. & Exp. Co., Ltd. 2,362,930.96 Shanghai Hirose Precision Machinery Co., Ltd. 750,000.00 Shanghai Shuangchong Sewing Machines Co. -1,495,468.68 Among which: the Company accrued for the excess losses in Shanghai Shuangchong Sewing Machines Co. in 2008. 7.5.2 Income from disposal of long-term equity investment Invested entity Current-year volume Shanghai Flying Man Imp. & Exp. Co., Ltd. 148,291.14 a. There are no significant restrictions over the inflow of investment earnings. b. Current investment income was 36.21% and RMB 5,841,605.83 less than that of last year, mainly due to the decrease of transfer of tradable shares in current year. 7.6 Supplements of cash flow statement Item Current year Last year 1.Net profits converted into cash flow from operating activities Net profits -47,725,708.43 -23,324,191.59 Add: provision for assets depreciation 1,521,378.18 19,448,452.00 77 Depreciation of fixed assets, of oil/gas assets and productive biological assets 15,020,280.79 20,440,143.73 Amortization of intangible assets 2,937,528.60 3,165,025.29 Amortization of long-term deferred expenses --- --- Losses in disposal of fixed assets, intangible and other long-term assets (less: income) -28,620,035.47 -56,738,579.77 Losses on scrapping of fixed assets (less: income) --- --- Losses on changes in fair value (less: income) 5,148,026.78 1,080,837.82 Financial expense (less: income) 27,460,358.53 12,990,589.07 Investment loss (less: income) -10,292,835.28 -16,134,441.11 Decrease in deferred income tax assets (less: increase) --- --- Increase in deferred income tax liabilities (less: decrease) --- --- Decrease of inventories (less: increase) 673,933.81 79,208,824.69 Decrease in receivables under operating activities (less: increase) 1,349,553.74 -38,860,523.70 Increase in payables under operating activities (less: decrease) -15,610,355.45 -52,720,907.65 Others --- --- Net cash flows from operating activities -48,137,874.20 -51,444,771.22 2.Investing and financing activities that do not involve cash receipts and payments Conversion of debt into capital Convertible bonds to be expired within one year Fixed assets under finance lease 3.Net increase in cash and cash equivalents Cash at the end of the period 55,099,297.35 92,076,908.44 Less: Cash at the beginning of the period 92,076,908.44 167,879,113.66 Plus: Cash equivalents at the end of the period Less: Cash equivalents at the beginning of the period Net increase in cash and cash equivalents -36,977,611.09 -75,802,205.22 8. Affiliated parties and affiliated transactions 8.1 Profile of affiliated parties 8.1.1 Profile of affiliated party who really controls the Company Controller In-charge Foundation Relationship Principal activities Change of Equity and person date holding control prop. shareholder or of the real controller controller Shanghai Pudong New Lu Sept. 1996 Holding Administration of No changes in 24.44% Area State-owned Fangzhou shareholder state-owned assets by current year Assets Supervision and entrust of Shanghai Administration Pudong New Area 78 Commission People’s Government 8.1.2 Information about the subsidiaries of the Company RMB’000 Subsidiary Classification Status Register place Business scope capital Registered % Equity proportion Voting share % code Organization Shanggong Transport Holding Non-comp Shanghai Transport 2,100 100 100 13374126-7 Service Co. subsidiary any syste m Durkopp Adler Trading Holding Co., Ltd. Shanghai Imp. & Exp. of USD4,000 40 74 78627462-7 Shanghai Co. subsidiary sewing machines, etc. Shanghai Shanggong Holding One-perso Shanghai Imp. & Exp. of 28,800 100 100 13228445-5 Imp. & Exp. Co. subsidiary n compan sewing y machines, etc. Shanghai Shuangchong Holding Co., Ltd. Shanghai Sewing 12,000 70 90 63132496-8 Sewing Machines Co. subsidiary machinery, etc. Shanghai Shanggong Holding Co., Ltd. Shanghai Sewing 3,000 60 80 70325891-3 Fangtian Machinery Co. subsidiary machinery, etc. Shanghai Shanggong Holding Co., Ltd. Shanghai Sewing 3,100 67.74 87.09 70315607-9 Xingda Sewing Machines subsidiary machinery, Co. etc. Shanghai Shanggong Holding Co., Ltd. Shanghai Sewing 3,000 65 75 70346641-3 Songda Machinery Co. subsidiary machinery, etc. Shanghai Shanggong Holding One-perso Shanghai Industrial 27,000 100 100 74809363-0 Sewing Machines Co. subsidiary n compan investment, y etc. Durkopp Adler Industrial Holding Co., Ltd. Shanghai Sewing USD10,000 70 100 79144591-0 Manufacturing Shanghai subsidiary machinery, Co. etc. Shanghai Shanggong Holding Co., Ltd. Shanghai Sewing 3,000 67 72 13214459-1 Jiayuan M&E Co. subsidiary machinery, etc. Shanghai Gongfeng Real Holding Co., Ltd. Shanghai Real estate 5,000 90 100 63056265-7 Estate Development Co. subsidiary development, etc. Shanghai Suoying Real Holding Co., Ltd. Shanghai Real estate 13,000 69 69 13246335-7 Estate Co. subsidiary development, etc. Shanghai Industrial Holding Non-comp Shanghai Sewing 4,650 100 100 13224151-9 Sewing Machines subsidiary any syste machinery, Materials General Co. m etc. Shanghai Yongde Eco. Holding Co., Ltd. Shanghai Sales of 2,000 80 80 13224080-7 Development Co. subsidiary electro. and mechanical equipments, etc. Shanghai Fuhua Light Holding Co., Ltd. Shanghai Production USD1,000 55 55 60725436-5 Sewing Machines Co. subsidiary and sales of apparel machinery Shanggong (Europe) Holding Co., Ltd. Germany Sewing EUR10,000 100 100 --- Holding Co. subsidiary machines, etc. Shanghai Butterfly Holding Co., Ltd. Shanghai Imp. & Exp. of 10,000 80 80 13225974-3 Imp.&Exp. Co. subsidiary sewing machines, etc. 79 SMPIC Holding One-perso Shanghai Office 125,000 100 100 13373695-1 subsidiary n compan equipments, y etc. Registered capital change of the subsidiaries RMB’000 Company Beginning Increase Decrease Ending Durkopp Adler Trading Shanghai USD1,500 USD2,500 USD4,000 Co. Shanghai Shanggong Imp. & Exp. 32,000 3,200 28,800 Co. 8.1.3 Information about the associated undertaking and associates of the Company can be found in current financial annotations 6.10. 8.1.4 Other affiliated parties of the Company Affiliated party Relationship with the Company Shanghai Hirose Precision Machinery Co., Ltd. Joint-stock company 8.2 Affiliated transactions 8.2.1 The transactions between the consolidated subsidiaries and between the Company and the consolidated subsidiary have been written-off. 8.2.2 Affiliated leasing Leaser Lessee Original Initial date Ending date Annual Recognition Influence value yyyy/mm/dd yyyy/mm/dd rent principal on the (RMB’000) (RMB’000) Company SGSB Co., Shanghai Hirose 3,088.7 2006/03/11 2011/03/11 250 Contract No Ltd. Precision significant Machinery Co., Ltd. 8.2.3 Information about the guarantees for affiliated parties by the Company can be found in current financial annotations 9.2. And information about the guarantees for the Company by affiliated parties can be found in current financial annotations 10.6. 8.2.4 Significant assets transfer and liabilities reorganization of affiliated parties a. The 2008 First Provision General Meeting of Shareholders agreed that SMPIC, wholly-owned subsidiary of the Company, transferred 20% equity of Shanghai Xinhu Glass Factory Co., Ltd. to Shanghai Pudong New Area State-owned Assets Investment and Management Co., Ltd. According to the transfer contract, SMPIC had received all the transfer price of RMB 35,582,200 as at the disclosure of current report. b. The 12th meeting of the Fifth Board of Directors approved that Durkopp Adler Trading (Shanghai) Co., Ltd., holding subsidiary of the Company, acquired 100% equity of Hong Kong Durkopp Adler Far East Co., Ltd. by USD 500,000. During report year, the acquisition has been completed. 8.2.5 Other affiliated transactions In 2008, the key managers of the Company received a remuneration totaled RMB 1,803,000 (RMB 1,772,000 in 2007). The key employees are composed of 19 managers including Directors, Supervisors, General Manager, Deputy General Manager, Accounting Head, etc (15 persons in 2007). 9. Contingent Items 80 9.1 Contingent liabilities arising from pending litigations or arbitrations Because of normal operations, the Company contracted mutual guarantee relationship with Shanghai Worldbest Industry Development Co., Ltd. (Worldbest Development). Till the end of 2008, the balance of Shanghai Worldbest’s borrowings from China Construction Bank Shanghai Branch (CCB SH) and Shenzhen Development Bank Shanghai Branch (SDB SH) was of RMB 118,488,000, details as following: RMB’000 Guarantee Sum Period Relationship Completed Influence on or not financial situation Shanghai Worldbest 30,000 2004/11/11-2005/11/09 Joint-liability Not Reconciliation Shanghai Worldbest 8,488 2005/03/29-2005/09/29 Joint-liability Not agreement Shanghai Worldbest 10,000 2005/05/27-2006/05/23 Joint-liability Not signed, the Shanghai Worldbest 10,000 2005/06/13-2005/09/29 Joint-liability Not joint-liability Shanghai Worldbest 30,000 2005/06/06-2006/06/01 Joint-liability Not guarantee Shanghai Worldbest 30,000 2005/07/14-2006/07/04 Joint-liability Not continuing Subtotal 118,488 In 2007, under the reason that Worldbest Development didn’t repay the borrowings on time, CCB SH and SDB SH launched lawsuits at Shanghai No. 1 Intermediate People’s Court (SH No.1 Inter. Court), claiming that the Company should complete the obligation as guarantor and repay the principal and interest totaled RMB 139,128,000 for Worldbest Development. Among which: 9.1.1 SDB SH claimed litigation preserving acts for its litigation object totaled RMB 22,408,000 (the principal RMB 18,488,000), sealing up some equity in the Company’s stock account and some of its banking accounts. SH No.1 Inter. Court has accepted the case and scheduled the hearing for September 11, 2007. On September 25, 2007, the same Court acted the first instance result, charging the Company to repay the principal RMB 18,487,582 and the interest to SDB SH, and the Company could conserve the right to claim recoupment to Worldbest Development. The Company lodged an appeal to the Higher People’s Court of Shanghai (Higher Court SH), which accepted the lawsuit on September 30, 2007. During the process of the second instance, the Company reached reconciliation agreement with SDB SH: (1) The Company should cover the litigation fee and property preservation fees paid by SDB SH. (2) The Company continued to carry out the joint-liability guarantee for Worldbest Development for the next two years since the signature of current agreement. During the period, in case SDB SH and Worldbest Development reached new agreement about the time limit of liabilities, the guarantee period would be renewed to two years after the expiration of the new time limit. (3) For assuring the recovery of right of SDB SH as creditor, the Company offered as mortgages the property of 1F business area of No. 419 Baoding Road, Shanghai, 81 which is under the name of SMPIC, subsidiary of the Company, and some other stock rights. (4) The Company strengthened further its business cooperation with SDB SH. (5) The Company withdrawn the lawsuit from Higher Court SH and covered the related charges. (6) In one year after the signature of current agreement, SDB SH wouldn’t claim the guarantee duty towards the Company. Furthermore, SDB SH wouldn’t apply to the courts for the execution based on the civil judgment No. (2007)HYZMSSCZ98. If the Company failed to fulfill its guarantee duties, it should accept that SDB SH chose lawsuit to resolve the problem. On September 23, 2008, the Company signed the reconciliation agreement with SDB SH. On November 5, 2008, the Company received the civil ruling No. (2007)HGMESZZ134 from Higher Court SH, in which allowed the Company to withdraw the appeal in light of the reconciliation agreement with SDB SH. 9.1.2 CCB SH claimed litigation preserving acts for its litigation object totaled RMB 11,672,000 (the principal RMB 100,000,000), sealing up some land parcels of the Company. SH No.1 Inter. Court has accepted the case and scheduled the hearing for August 7, 2007. On December 13, 2007, the same Court acted the first instance result, charging the Company to fulfill the joint liability responsibility. The Company lodged an appeal to the Higher Court SH, which accepted the lawsuit on January 2, 2008. During the process of the second instance, the Company reached reconciliation agreement with CCB SH: (1) The Company should cover the litigation fee, property preservation fees and lawyer charges paid by CCB SH in all the four lawsuits. (2) The Company continued to carry out the joint-liability guarantee for Worldbest Development for the next two years since the signature of current agreement. During the period, in case CCB SH and Worldbest Development reached new agreement about the time limit of liabilities, the guarantee period would be renewed to two years after the expiration of the new time limit. The renewal of guarantee period didn’t need the agreement of the Company and the Company should continue taking its guarantee duty. (3) For assuring the recovery of right of CCB SH as creditor, the Company offered as mortgages the property of No. 603 Dapu Road, Shanghai, which was fully owned by the Company. (4) The Company withdrawn the lawsuit from Higher Court SH and covered the related charges. (5) In one year after the signature of current agreement, CCB SH wouldn’t claim the guarantee duty towards the Company. Furthermore, CCB SH wouldn’t apply to the courts for the execution based on the civil judgments No. (2007)HYZMSSCZ77/78/79/80. If the Company failed to fulfill its guarantee duties, it should accept that SDB SH chose lawsuit to resolve the problem. On April 10, 2008, the Company signed the reconciliation agreement with CCB SH. On June 26, 2008, the Company received the civil ruling No. (2008)HGMESZZ25 82 from Higher Court SH, in which allowed the Company to withdraw the appeal in light of the reconciliation agreement with SDB SH. Worldbest Development offered as counter-mortgages for the Company’s guarantee towards its bank borrowings the 95% equity of Jiangxi Xinyu Worldbest Far East Textile Co., Ltd. and the 88.53% equity of Shanghai Worldbest Sweater Wears Co., Ltd. Without informing and getting the permission of the Company, Worldbest Development sold 95% equity of Jiangxi Xinyu Worldbest Far East Textile Co., Ltd. to Xinyu State-owned Assets Supervision & Administration Commission (XY S&A Commission). XY S&A Commission developed an open integral equity transfer through Jiangxi Assets and Equity Exchange. The Company has launched a litigation of properties and assets at SH No.1 Inter. Court, claiming invalid the transfer agreement. SH No.1 Inter. Court accepted the lawsuit. On March 27, 2008, SH No.1 Inter. Court issued respectively a civil ruling and a civil reconciliation letter (2007)HYZMSSCZ35 to seal the commercial dispute between the Company, Worldbest Development and XY S&A Commission. The civil ruling allowed the Company to withdraw the appeal. At the meantime, the Court presided the reconciliation between the Company and Worldbest Development, who promised to offer 23.715% equity of Zhangjiagang Middle East Petrochemical Industrial Co., Ltd. and 35.3259% equity of Jiangsu Yalu Industrial Co., Ltd. as substitution of the original tender of rights. For assuring the realization of counter-mortgages, the Company applied for property preservation to SH No.1 Inter. Court, which permitted to freeze the 23.715% equity of Zhangjiagang Middle East Petrochemical Industrial Co., Ltd., 35.3259% equity of Jiangsu Yalu Industrial Co., Ltd. and 88.53% equity of Shanghai Worldbest Sweater Wears Co., Ltd. The 23rd meeting of the Fifth Board of Directors considered and agreed that the Company accrued 30% of the guarantee principal amounted RMB 35,546,274.60 as anticipated liabilities. Besides, in favor of the reorganization of Worldbest Development, on request of its holding shareholder China Worldbest Group Co., Ltd. and Financial Creditors’ Committee, the Company agreed to fulfill the guarantee change register for liabilities transfer under the precondition that the reorganization program of Worldbest Development could take smooth progress. 9.2 Contingent liabilities arising from debt guarantees for affiliated parties and other entities as at Dec. 31, 2008 9.2.1 Contingent liabilities arising from debt guarantees for other entities as at Dec. 31, 2008 The Company contracted mutual guarantee relationship with Shanghai Worldbest Industry Development Co., Ltd. (Worldbest Development). Till the end of 2008, all the six bank borrowings of Worldbest Development were overdue, amounted to RMB 118,488,000 (reference to current financial annotations 9.1). 9.2.2 Contingent liabilities arising from debt guarantees for other entities Shanggong (Europe) Holding Co., Ltd. as at Dec. 31, 2008 RMB’000 Guarantee Sum Period Relationship Complet Influence on financial situation 83 ed or not Shanggong (Europe) EUR12,500 2005/06/30-2015/ Joint-liability Not Estimated not to be overdue, no Holding Co., Ltd. 06/30 negative influence upon the Shanggong (Europe) USD5,300 2005/06/30-2015/ Joint-liability Not Company’s operations. Holding Co., Ltd. 10/31 According to the agreement with FAG Kugelfischer GmbH (FAG) about the equity transfer of Durkopp Adler AG, the Company should take joint-liability for the following cases: (1) Besides the payment of € 949,821 for equity acquisition of Durkopp Adler AG, Shanggong (Europe) Holding Co., Ltd. (SG Europe), wholly-owned subsidiary of the Company, should bear the banking loans of DA’s original shareholders valued € 36,525,132.28. As at end of 2005, SG Europe had paid all the equity acquisition consideration and € 9,482,436.84 for banking loans. As originally agreed, the rest banking loans around € 27,042,695.44 would be covered with equal payment in nine years at an interest rate of 6% every June 30 since the year 2005. The Company assumed joint-liability responsibility for the equity acquisition, as well as the banking loans and interests. But the guarantee for banking loans and interests was maximum 50% of actual amount and € 12,500,000.00. As at the acquisition date, the net assets of DA valued € 16,397,000, and taking in consideration the joint guarantee duty of the Company for DA’s debts towards its original shareholder FAG, Shanggong Europe paid only € 1,293,000 for the 89.932% equity of DA, and the transaction incurred an investment difference of € 15,104,000. After the integral consideration of the guarantee risks, the operating situation of DA and its cash inflow ability, the Company adjusted its principal operating assets in combination of investment difference, and appropriately returned partial adjusted balance according to the actual situation of guarantee risks and DA’s operations. Till the end of report year, Shanggong Europe had paid first-period principal of banking loans € 6,009,487.85 for FAG, with the remaining amount to be € 21,033,207.59. (2) In 2005, the Company offered a letter of guarantee valued USD 5,300,000 to FAG Kugelfischer AG for the housing lease contract of DA’s subsidiary in the United States, valid from June 30, 2005 to October 31, 2015. On the same day June 30, 2005, SG Europe offered a cash mortgage of € 635,000 to FAG (with the same period of validity) for re-guaranteeing the latter’s responsibility in the sale and lease-back deal between DA’s subsidiary and UTF Norcross L.L.C. Till December 31, 2008, this guarantee deal didn’t cause outflow of economic interest from the Company. 9.2.3 Other contingent items There are no other contingent items that should be disclosed. 10. Commitments 84 10.1 External investment contract made and unfulfilled or not fully fulfilled and the related accounting expenditure Till Dec. 31, 2008, the Company hasn’t any contract made and unfulfilled or not fully fulfilled to be disclosed. 10.2 Big-ticket outsourcing contract made and in progress or to be fulfilled and the related accounting influence Till Dec. 31, 2008, the Company hasn’t any big-ticket outsourcing contract in progress or to be fulfilled to be announced. 10.3 Lease contract made and in progress or to be fulfilled and the related accounting influence Till Dec. 31, 2008, the Company hasn’t any lease contract made and in progress or to be fulfilled to be disclosed. 10.4 Merger agreement made and in progress or to be fulfilled Till Dec. 31, 2008, the Company hasn’t any merger agreement made and in progress or to be fulfilled to be announced. 10.5 Restructure program made and in progress or to be fulfilled Till Dec. 31, 2008, the Company hasn’t any restructure program made and in progress or to be fulfilled to be disclosed. 10.6 Other significant accounting commitments 10.6.1 Mortgaged assets RMB’000 Mortgage Purpose Sum Borrower 436 Jumen Road, 12F&17F 1500 Century Bank 50,000 SGSB Group Avenue borrowing Building at 1201 Luoshan Road Bank 31,600 SGSB Group borrowing 11A-11D, 1500 Century Avenue Bank 10,000 SGSB Group borrowing 190 Huyi Road Bank 14,000 SGSB Group borrowing 1407 South Tibet Road Bank 20,000 SGSB Group borrowing 20,000 SGSB Group 22,000 SGSB Group Building at 175 Xiangyang Road Bank 20,000 SGSB Group borrowing 22,000 SGSB Group 1-4F, 669 Wusong Road Bank 30,000 SMPIC Office building 1501-1506, 2699 Xietu Road borrowing EUR 1,000,000 Credit deposit Shanggong (Europe) Holding Co. EUR 669,100 Credit deposit Shanggong (Europe) Holding Co. Inventory EUR 4,273,700, accounts Bank EUR 372,000 Shanggong (Europe) receivable EUR 1,149,700 and bills borrowing Holding Co. receivable EUR 186,000 Fixed assets of EUR 219,500 Bank EUR 84,000 Shanggong (Europe) borrowing Holding Co. 85 10.6.2Affiliated parties or other entities offering guarantee for the Company as at Dec. 31, 2008 RMB’000 Guarantor Guarantee Type Purpose Sum Shanghai Pudong Development (Group) Co., Ltd. SGSB Group Joint Bank 17,500 liability borrowing Shanghai Pudong Development (Group) Co., Ltd. SGSB Group Joint Bank 27,100 liability borrowing Shanghai Pudong Development (Group) Co., Ltd. SGSB Group Joint Bank 22,000 liability borrowing Shanghai Pudong Development (Group) Co., Ltd. SGSB Group Joint Bank 20,000 liability borrowing Shanghai Pudong Development (Group) Co., Ltd. SGSB Group Joint Bank 29,000 liability borrowing Total 115,600 10.6.3Equity mortgage The Company has mortgaged the 48.96% among the 100% equity of SMPIC held by itself to Shanghai Pudong Development (Group) Co., Ltd. as counter guarantee for the guarantee quotation of RMB 168,120,000 (as at Dec. 31, 2008 real guaranteed borrowing RMB 115,600,000), the period of counter guarantee is from June 9,2008 to June 8, 2009. 11. Events occurring after balance sheet date 11.1 Profit appropriation proposal after balance sheet date According to the resolution by the 23rd meeting of the Fifth Board of Directors, the Company didn’t propose profit appropriation for the report year. 11.2 Significant litigation, arbitration or commitment after balance sheet date Till the disclosure of current report, there is no significant litigation, arbitration or commitment after balance sheet date. 11.3 Significant changes of assets’ price, tax policy and foreign currency rate after balance sheet date Till the disclosure of current report, there are no significant changes of assets’ price, tax policy and foreign currency rate after balance sheet date. 11.4 Important damage caused by natural disasters after balance sheet date Till the disclosure of current report, there is no important damage caused by natural disasters after balance sheet date. 11.5 Issuance of stocks, bonds and other significant big-ticket liabilities after balance sheet date Till the disclosure of current report, there is no issuance of stocks, bonds and other significant big-ticket liabilities after balance sheet date. 11.6 Capital increased by turning capital reserves after balance sheet date 86 Till the disclosure of current report, there is no Ccapital increased by turning capital reserves after balance sheet date. 11.7 Huge losses after balance sheet date Till the disclosure of current report, there are no huge losses after balance sheet. 11.8 Business combination or disposal of subsidiaries after balance sheet date Till the disclosure of current report, there is no business combination or disposal of subsidiaries after balance sheet date. 11.9 Important operation strategy adjustment within one year after balance sheet date Till the disclosure of current report, there is no important operation strategy adjustment within one year after balance sheet date. 11.10 Important liabilities reorganization after balance sheet date Till the disclosure of current report, there is no important liabilities reorganization after balance sheet date. 12. Supplementary information 12.1 Current-year non-current profit/loss attributable to ordinary shareholders RMB’ Item Sum 1. Disposal of non-current assets, including the written-off of accrued provision for 60,854,393.28 assets depreciation 2. Tax rebate and tax relief from approval without authorization, formal authorization or under occasional situation 3. Government subsidies accounted into current profit/loss, except the continuous 2,071,917.00 ration subsidies directly related to the normal operations and stipulated by the government 4. Dispossession surcharge to non-financial institutions accounted into current profit/loss 5. Earning from the difference between investment cost and the fair value of identifiable net assets when the company acquires subsidiaries, associates or joint-venture companies 6. Exchange of non-monetary assets 7. Assets under investment or management of trustee 8. Provision for assets’ depreciation under force majeure 9. Liabilities reorganization 10. Business reorganization, including staff arrangement and integration 11. Exceeding above the fair value in transactions whose price are obviously unfair 12. Business combination under the same control from the year-beginning to the combination date 13. Contingent affairs not related to normal operations -35,546,274.60 14. Fair value changes of tradable financial assets/liabilities and investment profits from 2,634,592.40 the transfer of tradable financial assets/liabilities and financial assets available for sale, except futures’ hedging activities directly related to the normal operations profit/loss from fair value changes of tradable financial assets/liabilities and 87 investment profits from the transfer of tradable financial assets/liabilities and financial assets available for sale, except futures’ hedging activities directly related to the normal operations 15. Return of provision for accounts receivable depreciation under individual test 16. Externally entrusted loans 17. Fair value changes in investment real estates adopting fair value method for subsequent calculation 18. Influence of once adjustment upon current profit/loss according to taxation and accounting regulations 19. Custodian fees from trust operation 20. Other non-operating income/expenditure 1,074,152.55 21. Other profit/loss items conformed to the definition of non-current profit/loss 22. Influence of minority interest -1,049,904.49 23. Influence of income tax -8,857,960.72 Total 21,180,915.42 12.2 Rate of return on net assets and earning per share Net profit Rate of return on net Earning per share assets Diluted Weighted Basic Diluted Net profit attributable to common shareholders -6.3414% -5.6765% -0.0719 -0.0719 Net profit attributable to common shareholders -10.5048% -9.4032% -0.1191 -0.1191 after non-current profit/loss 12.2.1 Calculation method The above-listed data is result of the following calculations: Diluted rate of return on net assets Diluted rate of return on net assets=P/E P represents the net profit attributable to common shareholders or the net profit attributable to common shareholders after non-current profits and losses. E represents the year-end net assets attributable to common shareholders. The net profit attributable to common shareholders doesn’t include minority interest. The net profit attributable to common shareholders after non-current profits and losses is the consolidated net profit excluding minority interest after non-current profits and losses of parent company and non-current profits and losses of subsidiaries attributable to common shareholders of parent company. The year-end net assets attributable to common shareholders don’t include minority interest. Weighted rate of return on net assets Weighted rate of return on net assets=P/(E0+NP/2+Ei*Mi/M0+/-Ek*Mk/M0) P represents the net profit attributable to common shareholders or the net profit attributable to common shareholders after non-current profits and losses. NP means the net profit attributed to common shareholders. E0 represents the year-beginning net assets attributable to common shareholders, Ei as net assets created in current report year by new equity or bonus stocks attributable to common shareholders, Ej as net assets decreased in current report year by buying-back or cash bonus attributed to common shareholders. M0 means the number of months of report year, Mi the number of months from the next one after newly-added net assets to the end of report year, and Mj the number of months from the next one after newly-transferred net assets to the end of report year. Ek means the increase/decrease of assets caused by other transactions or events, Mk is the number of months from the next month after the increase/decrease of 88 assets to the end of report year. Basic earning per share Basic earning per share=P/S S=S0+S1+Si*Mi/M0-Sj*Mj/M0-Sk P represents the net profit attributable to common shareholders or the net profit attributable to common shareholders after non-current profits and losses. S means the weighted mean of common equity publicly issued. S0 is the year-beginning equity number, S1 the added part of equity by capitalization of capital reserves or bonus shares, Si the added shares by newly issuance or debt-to-equity program, Sj the decreased part of equity by buying-back in report year, and Sk means the number of shrunk shares. M0 means the number of months of report year, Mi the number of months from the next one after newly-issued shares to the end of report year, and Mj the number of months from the next one after newly-decreased net assets to the end of report year. In case the enterprise owns dilutive potential common shares, it shall adjust respectively the current net profit attributable to common shareholders and the weighted mean of common shares, and calculate on thus basis the diluted earning per share. Diluted earning per share Diluted earning per share= 【 P+(dilutive potential common equity interest recognized as expense-transfer charge)*(1-income tax rate 】 /(S0+S1+Si*Mi/M0-Sj*Mj/M0-Sk+stock right warrants, stock option, convertible bonds and other newly-added weighted mean of common shares) P represents the net profit attributable to common shareholders or the net profit attributable to common shareholders after non-current profits and losses. On calculating the diluted earning per share, the enterprise has considered all the influences of dilutive potential common shares. 12.2.2 There are no common shares currently non-dilutive but possibly dilutive potential in posterior periods in the Company’s equity structure. 12.2.3 There are no significant changes in common shares or potential common shares from the balance sheet date to the disclosure of current financial report. 13 Authorization of the publication of financial statements The current financial statements have been authorized by the Board of Directors on March 26, 2009 to be submitted to the related authorities and the public. SGSB (Group) Co., Ltd. March 26, 2009 89