特力Ｂ(200025)2008年年度报告（英文版）

Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 深圳市特力（集团）股份有限公司 SHENZHEN TELLUS HOLDING CO., LTD. ANNUAL REPORT 2008 March 24, 2009 1 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 Important Notes: Board of Directors, Supervisory Committee, all directors, supervisors and senior executives of ShenZhen Tellus Holding Co., Ltd. (hereinafter referred to as the Company) hereby confirm that there are no any fictitious statements, misleading statements, or important omissions carried in this report, and shall take all responsibilities, individual and/or joint, for the reality, accuracy and completion of the whole contents. This report has been prepared in Chinese version and English version respectively. In the event of difference in interpretation between the two versions, the Chinese report shall prevail. Chairman of the Board of the Company, General Manager, and Chief Financial Officer hereby confirm that the Financial Report enclosed in the Annual Report is true and complete. COMPANY PROFILE------------------------------------------------------------------------------------ 2 SUMMARY OF FINANCIAL HIGHLIGHT AND BUSINESS HIGHLIGHT---------------3 CHANGES IN SHARE CAPITAL AND PARTICULARS ABOUT SHAREHOLDERS---4 PARTICULARS ABOUT DIRECTORS, SUPERVISORS, SENIOR EXECUTIVES AND EMPLOYEES------------------------------------------------------------------------------------------------8 ADMINISTRATIVE STRUCTURE---------------------------------------------------------------------11 BRIEF OF THE SHAREHOLDERS’ GENERAL MEETING------------------------------------12 REPORT OF BOARD OF DIRECTORS---------------------------------------------------------------12 REPORT OF SUPERVISORY COMMITTEE-------------------------------------------------------22 SIGNIFICANT EVENTS----------------------------------------------------------------------------------23 FINANCIAL REPORT-------------------------------------------------------------------------------------27 DOCUMENTS AVAILABLE FOR REFERENCE---------------------------------------------------27 2 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 Section I. Company Profile 1. Legal Name of the Company in Chinese: 深圳市特力（集团）股份有限公司 Legal Name of the Company in English: ShenZhen Tellus Holding Co., Ltd. 2. Legal Representative: Zhang Ruili 3. Secretary of the Board of Directors: Ren Yongjian Contact Tel: (86) 755-83989338 Fax: (86) 755-83989399 E-mail: ryj@tellus.cn Securities Affairs Representative: Deng Shu’e Contact Tel: (86)755-883989337 Fax: (86)755-83989399 E-mail: shuedeng@tellus.cn 4. Registered Address: the 3/F, Tellus Building, Shui Bei Er Road, Luohu District, Shenzhen Office Address: the 15/F, Zhonghe Building, Shennan Middle Road, Futian District, Shenzhen Post Code: 518031 Web site of the Company: www.tellus.cn E-mail: sztljtgf@public.szptt.net.cn 5. Newspapers Chosen by the Company for Disclosing the Information: Securities Times (Shenzhen) and Hong Kong Wen Wei Po Internet Website for Publishing the Annual Report: http://www.cninfo.com.cn The Place Where the Annual Report is Prepared and Placed: Secretariat of the Board of Directors of ShenZhen Tellus Holding Co., Ltd. 6. Stock Exchange Listed with: Shenzhen Stock Exchange Short Form of the Stock and Stock Code: Tellus-A (000025) Tellus-B (200025) 7. Other related information: (1) Initial registration date: Nov. 10, 1986 Initial Registration Place: No. 104, Shui Bei Er Road, Luohu District, Shenzhen Registration number of enterprise legal person’s business license: 19219221-0 (2) Registered number of taxation: SDS Zi 440303192192210 GS Zi 440301192192210 (3) Certified Public Accountants engaged by the Company: Shenzhen Nanfang Minhe Certified Public Accountants Address: the 8/F, Electronics Building, No. 2072 Shennan Middle Road, Shenzhen Section II. Summary of Financial Highlight and Business Highlight (I) Accounting data and financial indexes as of the year 2008 Unit: RMB Operating profit -511,272.45 Total profit 2,188,916.80 Net profit attributable to shareholders of the listed company 4,584,308.06 3 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 Net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses -4,369,676.82 Net cash flow arising from operating activities 35,478,077.98 Net increase amount of cash and cash equivalents -36,198,203.52 Note: Items of non-recurring gains and losses deducted and the relevant amount 1.Losses/gains from the disposal of noncurrent asset(Non-equity) 2,142,029.40 2. Losses/gains from the transferring of equity 2,745,504.62 3. Selling the financial asset available for sales 4. Losses/gains from the change of noncurrency asset 5,620,523.99 5. Losses/gains from debt restructuring 1,210,000.00 6. Funds occupied capital received from non-financial enterprises reckoned into this period 76,249.98 7. Administration expense deducted by balance of welfare payable 8. Net Non-operating income and expense 558,159.85 9. Non-recurring losses/gains of minority shareholders deducted -163,344.43 10 Impact on income tax -3,235,138.53 11. Subtotal amounts involved of the above items 8,953,984.88 Note: There were no differences on the results of CAS and IAS. (II) Major accounting data and financial indexes over the past three years (Unit: RMB) 2007 Increase/decrease 2006 this year Items 2008 Before After Before After compared with adjustment adjustment adjustment adjustment that last year (%) Operating income 637,896,590.03 991,036,624.74 991,036,624.74 -35.63 1,139,756,826.12 1,139,756,826.12 Total profit 2,188,916.80 6,733,593.23 8,250,128.88 -73.47 -87,222,546.28 -84,188,259.97 Net profit attributable to shareholders of the 4,584,308.06 10,795,254.16 12,311,789.81 -62.76 -92,148,791.60 -87,991,436.55 listed company Net profit attributable to shareholders of the listed company after deducting -4,369,676.82 -28,284,731.97 -26,768,196.32 83.68 -7,861,349.37 -5,818,085.31 non-recurring gains and losses Net cash flow arising from operating 35,478,077.98 -61,994,274.41 -61,994,274.41 157.23 5,551,011.33 5,551,011.33 activities Net cash flow per share arising from operating 0.16 -0.28 -0.28 157.23 0.025 0.025 activities Basic earnings per share 0.0208 0.049 0.0559 -62.79 -0.4183 -0.3994 Diluted earnings per share 0.0208 0.049 0.0559 -62.79 -0.4183 -0.3994 4 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 Basic earnings per share after deducting non-recurring gains and -0.0198 -0.1284 -0.1215 83.73 -0.0357 -0.0264 losses Fully diluted return on equity (%) 2.80 6.93 7.82 -5.02 -68.33 -59.80 Weighted average return on equity (%) 2.82 7.08 8.03 -5.21 -51.25 -46.03 Fully diluted return on equity after deducting non-recurring gains and -2.67 -18.14 -17.01 14.34 -5.83 -3.95 losses (%) Weighted average return on equity after deducting -2.69 -18.54 -17.46 14.77 -4.37 -3.04 non-recurring gains and losses (%) Total assets 614,544,088.77 835,575,307.22 837,091,842.87 -26.59 830,866,309.81 844,119,585.92 Owners’ equity(or Shareholders’ equity) 163,709,500.27 155,885,846.63 157,402,382.28 4.01 134,859,194.63 147,154,326.04 Net asset per share attributable to shareholders of listed 0.743 0.708 0.715 4.01 0.612 0.668 company (III) Supplemental statement of profit as of year 2008 Return on equity and earnings per share are calculated according to Preparing Regulations on the Information Disclosure of Companies Publicly Issuing Securities (No. 9) released by China Securities Regulatory Commission Items 2008 Return on equity (%) Earnings per share （RMB/share） Fully Weighted Basic Diluted diluted average Net profit 2.80 2.82 0.0208 0.0208 Net profit after deducting the non-recurring gains and -2.66 -2.69 -0.0198 -0.0198 losses Section III. Changes in Share Capital and Particulars about Shareholders I. Changes in share capital (I) Ended as Dec. 31, 2008, the stock structure of the Company was as follows: Unit: Share 5 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 Before the Changes Increase/Decrease in the Change (+, -) After the Change Issuance Capitalization Proportion Bonus Proportion Amount of new of public Other Subtotal Amount (%) shares (%) shares reserve I. Restricted shares 145870560 66.22 0 0 0 0 0145870560 66.22 1. State-owned 0 0 0 0 0 0 0 0 0 shares 2.State-owned legal person’s 145870560 66.22 0 0 0 0 0145870560 66.22 shares 3. Other domestic 0 0 0 0 0 0 0 0 shares Including: 0 0 0 0 0 0 0 0 0 Domestic legal 0 0 0 0 0 0 0 0 0 person’s shares Domestic natural 0 0 0 0 0 0 0 0 0 person’s shares 4. Foreign shares 0 0 0 0 0 0 0 0 0 Including: Foreign legal person’s 0 0 0 0 0 0 0 0 0 shares Foreign natural 0 0 0 0 0 0 0 0 person’s shares II. Unrestricted 74411040 27.55 0 0 0 0 0 74411040 33.78 shares 1. RMB Ordinary 48011040 15.57 0 0 0 0 0 48011040 21.80 shares 2. Domestically listed foreign 26400000 11.98 0 0 0 0 0 26400000 11.98 shares 3. Overseas listed 0 0 0 0 0 0 0 0 0 foreign shares 4. Others 0 0 0 0 0 0 0 0 0 III.Total shares 220281600 100 0 0 0 0 0220281600 100 (II) On Jan. 20, 2009, the restriction period for the restricted shares held by the controlling shareholder of the Company- Shenzhen SDG Co., Ltd. have been expired, 131,283,504 shares of the total restricted shares were listed for trading. Ended the report period, the equity structure of the Company was as follows: Share type Share amount Proportion(%) I. Tradable shares with restricted conditions 14,587,056 6.62 1. State-owned shares 2.State-owned legal person’s shares 14,587,056 6.62 Total tradable shares with restricted 14,587,056 6.62 conditions II. Tradable shares with unrestricted 205,694,544 93.38 conditions 1. RMB Ordinary shares 179,294,544 81.40 6 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 2.Domestically listed foreign shares 26,400,000 11.98 Total tradable shares with unrestricted 205,694,544 93.38 conditions III.Total shares 220,281,600 100 (III) Ended the report period, the changes of restricted shares of the Company were as follows: Statement on changes of restricted shares Restricted Date for Restricted Restricted Restricted Reason for Name of shares releasing shares in shares released shares in restricted shareholders increased restricted year-begin this year report date trade this year trade Relevant special commitment Shenzhen SDG 145,870,560 131,283,504 0 14,587,056 during Co., Ltd. Share Merger Reform Total 145,870,560 131,283,504 0 14,587,656 - - II. Share issuance and listing 1. Particulars about issuance of share and its derivative securities in the recent three years: the Company had issued neither additional shares nor derivative securities in recent three years. 2. In the year 2006, the stock structure of the Company changed due to the implementation of Share Merger Reform. After implementing the plan, the Company’s total share capital remained unchanged. In Jan. 2009, the stock structure of the Company have been changed due to that the tradable shares with restricted conditions held by the controlling shareholder of the Company were listed for trading, but the total share capital remained unchanged. Excluded the aforesaid situation, in the report period, the Company had never been involved in any events which may cause change of the total shares and the equity structure such as bonus shares, share capital converted, rationed share, additional issuance, absorption and combination, transferring convertible company bonds into shares, reduction of capital, listing of inner employees’ shares or company’s employees’ shares, etc.. 3. The company had no present inner employees’ share. III. Particulars about the main shareholders 1. Ended Dec. 31, 2008, the Company had totally 19,446 shareholders, including 15,551 shareholders of A-share and 3,895 shareholders of B-share. 2. Ended Dec. 31, 2008, particulars about shares held by the top ten shareholders Number of Shareholders and Particulars about Shares Held Unit: Share 19,446 shareholders (including 15,551 shareholders of A-share and Total number of shareholders 3,895 shareholders of B-share) Particulars about shares held by the top ten shareholders Number of Full name of Type of Proportion Total number Share pledged non-circulation Shareholder shareholders (%) of shares held or frozen shares held SHENZHEN SDG State-owned 66.22 145,870,560 145,870,560 0 CO., LTD. shareholder BOCI SECURITIES Other 0.41 902 ,292 0 Unknown LIMITED 7 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 JIANG XIN YUAN Other 0.30 666,050 0 Unknown THE FISRT SHANGHAI Other 0.21 454,200 0 Unknown SECURITIES CO., LTD. ZHANG ZI BIN Other 0.20 444,839 0 Unknown YE YING Other 0.20 440,000 0 Unknown HE XIN Other 0.19 417,200 0 Unknown XU AILAN Other 0.18 400,000 0 Unknown YE FEI Other 0.17 366,800 0 Unknown WU JING Other 0.16 344,909 0 Unknown Particulars about shares held by the top ten shareholders of circulation share Numbers of circulation share Name of shareholders Type of share held BOCI SECURITIES LIMITED 902 ,292 Domestically listed foreign shares JIANG XIN YUAN 666,050 Domestically listed foreign shares THE FISRT SHANGHAI 454,200 Domestically listed foreign shares SECURITIES CO., LTD. ZHANG ZI BIN 444,839 RMB ordinary shares YE YING 440,000 RMB ordinary shares HE XIN 417,200 Domestically listed foreign shares XU AILAN 400,000 Domestically listed foreign shares 366,800 RMB ordinary shares, YE FEI Domestically listed foreign shares WU JING 344,909 RMB ordinary shares CHEN MIAO FENG 344,700 Domestically listed foreign shares Among the top ten shareholders, there exists no associated relationship between the state-owned legal person’s shareholders Shenzhen SDG co., Explanation on associated Ltd and other shareholders, and they do not belong to the consistent relationship among the top ten actionist regulated by the Management Measure of Information shareholders or consistent action Disclosure on Change of Shareholding for Listed Companies. For the other shareholders of circulation share, the Company is unknown whether they belong to the consistent actionist. (III) Particulars about the controlling shareholder 1. Name of the controlling shareholder of the Company: Shenzhen SDG Co., Ltd. (state-owned shareholder) Legal representative: Liu Aiqun Date of establishment: In June 1982 Registered capital: RMB 1,582,820,000 Company type: Limited Company Business scope: development and operation of real estates, domestic trading, supply and marketing of materials (excluding monopoly products), consultant of economic information (excluding limit items), operating import and export business, industry traffic and transportation, tourism, finance and trust, issuance of securities and so on. Ended Dec. 31, 2008, the shares held by the shareholder of SDG: 43.30% equity of Shenzhen SDG Co., Ltd. was held by Shenzhen Investment Holdings Co., Ltd. 2. About the controlling shareholder or actual controller the of the Company’s controlling shareholder: Name of shareholder: Shenzhen Investment Holdings Co., Ltd. Legal representative: Chen Hongbo 8 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 Date of foundation: Oct. 13, 2004 Registered capital: RMB 4 billion Company type: Limited Company (State-owned Sole Corporation) Business scope: providing guarantee for municipal state-owned enterprises; management of state-owned equity except for enterprises supervised by the State-owned Assets Supervision and Administration Commission of Shenzhen; assets reorganization, reformation and capital operation of enterprises; investment; and other operations authorized by Municipal SASAC. The controlling relationship between the Company and the actual controller is as follows: Shenzhen Shenzhen ShenZhen Tellus 43.30% 5 66.22% Investment SDG Co., Ltd. Holdings Co., Holdings Co., Ltd. Ltd. (IV) Ended Dec. 31, 2008, the Company exist no shareholder of legal person’ share holding 10% equity (including 10%). Section IV. Particulars about directors, supervisors, senior executives and employees I. Basis information of directors, supervisors and senior executives Amount of shares held (Share) Reason Names Sex Age Titles Office term At the At the for period- period- change begin end Zhang Ruili Male Director, Chairman of Jun. 17, 2006- 45 0 0 - the Board Jun. 16, 2009 Director, General Jun. 17, 2006- Cheng Peng Male 45 0 0 - Manager Jun. 16, 2009 Jun. 17, 2006- Fu Bin Male 46 Director, CFO 0 0 - Jun. 16, 2009 Jun. 17, 2006- Li Mingjun Female 43 Director 0 0 - Jun. 16, 2009 Jun. 17, 2006- Chen Baojie Male 40 Director 0 0 - Jun. 16, 2009 Aug. 10, 2007- Luo Tao Male 46 Director 0 0 - Jun. 16, 2009 Jun. 17, 2006- Zhou Chengxin Male 53 Independent Director 0 0 - Jun. 16, 2009 Jun. 17, 2006- Shi Weihong Female 41 Independent Director 0 0 - Jun. 16, 2009 Jun. 17, 2006- Ji Dejun Male 64 Independent Director 0 0 - Jun. 16, 2009 Supervisor, Chairman of Jun. 17, 2006- Li Binxue Male 50 the Supervisory 0 0 - Jun. 16, 2009 Committee Jun. 17, 2006- Zhang Xinliang Male 38 Supervisor 0 0 - Jun. 16, 2009 May 15, 2008- Fu Chunlong Male 35 Supervisor 0 0 - June 16, 2009 Jun. 17, 2006- Wang Guangye Male 50 Employee Supervisor 0 0 - Jun. 16, 2009 Mar. 28, 2008- Deng Shu’e Female 33 Employee Supervisor 0 0 Jun. 16, 2009 Guo Dongri Male 43 Deputy General Jun. 17, 2006- 0 0 - Manager 9 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 Manager Jun. 16, 2009 Deputy General Jun. 17, 2006- Ren Yongjian Male 45 Manager, Secretary of 0 0 - Jun. 16, 2009 the Board Deputy General Jun. 17, 2006- Luo Bojun Male 46 0 0 - Manager Jun. 16, 2009 Deputy General Jun. 17, 2006- Feng Yu Male 41 0 0 - Manager Jun. 16, 2009 II. Main work experience of directors, supervisors and senior executives in the recently five years and particulars about holding the post or taking part-time job in other units barring the Shareholding Company Name Main work experience and holding the post or taking part-time job He ever took the posts of Divisional Manager of Financial Company of Shenzhen Special Economic Zone Development (Group) Company and Manager of Assets Department of Shenzhen Special Economic Zone Development (Group) Company; now, he takes the post of Chairman of the Board of the Group. At the same time, he concurrently Chairman of the Board in Shenzhen Auto Industries & Trading Zhang Ruili Corporation (the controlling subsidiaries of the Company), Chairman of the Board in Shenzhen Huari Automobile Co. Ltd. (the controlling subsidiaries of the Company), Vice Chairman of the Board in Shenzhen Renfu Tellus Automobile Service Co., Ltd. (the share-holding company of the Company) and Chairman of Shenzhen Tellus Gem Investment Co., Ltd.( the joint-stock company of the Company). He ever took the post of Director of General Office in Shenzhen Kaifeng Special Automobile Industry Co., Ltd., and successfully took the posts of Deputy Ministry and Ministry of Enterprise Management Department, General Manger and Vice Secretary of Party Committee in Shenzhen Auto Industries & Trading Corporation. He now acts as Director and General Manager of the Group. At the same time, he Cheng Peng concurrently took the post of Director of Shenzhen Auto Trading Corporation (the controlling subsidiaries of the Company), Director of Shenzhen Huari Automobile Co. Ltd. (the controlling subsidiaries of the Company) and Director of Shenzhen Telihang Investment Co., Ltd.(joint-venture of the Company) and China Pufa Machinery Industry Corporation (the share-holding company of the Company). He ever took the post of lecturer in Hunan College of Finance and Economics, Business Manager of Assets Operation Department in Shenzhen SDG Co., Ltd., Fu Bin CFO of Shenzhen SDG Xiaomeisha Tourism Center. He now acts as Director and CFO of the Group. At the same time, he concurrently took the post of Director of Shenzhen Auto Trading Corporation (the controlling subsidiaries of the Company). She ever took the post of Manger of Financial Department, Employee Supervisor of ShenZhen Tellus. CFO of Shenzhen SDG Xiaomeisha Tourism Center. She now acts Li Mingjun as Director of the Group and Minister of Planning and Financial Department of Shenzhen SDG Co., Ltd. He ever took the posts of Deputy Chief Engineer of Shenzhen Changhong Communication Equipment Co., Ltd., Manager of Enterprise Management Dept. and Manager of Investment Development Dept. and Minister of Enterprise Planning Luo Tao Dept. of Shenzhen Special Economic Zone Development (Group) Company. He now acts as Director of the Group, Minister of Enterprise Planning Department of Shenzhen SDG Co., Ltd. At the same time, he concurrently holds the post of Director of Shenzhen Tefa Information Co., Ltd. He ever took the post of inspector of Tianjin Military Procuratorate and Beijing Military Area Command Procuratorate; Deputy Director of Member Dept., Office Director of Shenzhen Enterprise Confederation and Shenzhen Entrepreneur Chen Baojie Association; Assistant to General Manger and Office Director of Beijing Youji Real-estate Development Co., Ltd. Now, he takes the post of director of the group, employee director and Secretary of Board of Directors of Shenzhen SDG Co., Ltd. 10 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 He ever took the post of Lector and Associate Professor in Law College of Wuhan University (during the period, visiting scholar of U.S.A Michigan University, further studied American Business Law and Law of International Commercial Arbitration); Deputy Director, Deputy Researcher of Law and Researcher of Institute of Shenzhen Legal System. Now, he acts Director and Law Research of Law and Researcher of Institute of Shenzhen Legal System. At the same time, he concurrently takes Intercessor of China International Economic and Trade Arbitration Commission and Zhou Chengxin social post of intercessor of Shenzhen, Zhuhai, Shanghai, Nanjing Arbitration Commissions; part-time lawyer in Guangdong Zhong’an Law Firm; Deputy of Shenzhen 4th People’s Congress and Committee for Legal Affairs; Expert of Shenzhen Expert Consultative Committee. Now, he acts as Independent Director of the Group and concurrently takes Independent Directors of Shenzhen Nanshan Power Co., Ltd, Shenzhen Chiwan Petroleum Supply Base Co., Ltd, Samsung Air China Life Insurance Co., Ltd. and Sanxin Glass Technology Co., Ltd. She successively took the post of Accountant in Shenzhen Sunshine Certified Public Accountants, Head of Sunshine Certified Public Accountants, as a convener of Sunshine Certified Public Accountants; she reformed the said CPA into a partnership with corporation responsibility system and acted as chief partner. She obtained certificate for CPA, Certificate for Chinese Certified Assets Appraiser, Certificate for Shi Weihong Chinese Certified Tax Agents and Certificate for Professional of Budgetary Estimation and Budget of Guangdong Province Construction Engineering. She took charge the auditing, evaluation and liquidation of all kind of enterprises early and late, and accumulated a plenty of experiences. She now acts as Independent Director of the Group. He ever took the post of GM of Shenzhen Industry Co., Ltd.; Chief Economist of Shenzhen Special Economic Zone Development (Group) Company; Chairman of Shenzhen SDG Information Co., Ltd and Shenzhen SDG Information Alcatel Fiber Ji Dejun Co., Ltd. Now, he acts the Independent Director of the group, and concurrently Independent Director of Shenzhen Century Plaza Hotel Co., Ltd and Guilin Tourism Corporation Limited. He successfully took the posts of Manager of Technology Dept. and Production Dept. of Shenzhen Shenguang Industrial Company, Business Manager of Enterprise Dept. in Shenzhen Special Economic Zone Development (Group) Company, Deputy Director of Technology Development Center and Deputy Manager of Investment Li Binxue Development Dept. of Shenzhen Special Economic Zone Development (Group) Company. Now he takes the post of Chairman of the Supervisory Committee of the Group, and concurrently acts as Secretary of Discipline Inspection Commission of the Group. He ever took the post of Manager of Financial Dept in Machinery And Equipment Import And Export Company, Deputy Manager of Shenzhen SDG Co., Ltd. Now, he Zhang Xinliang acts the supervisor of the group, Head of Audit and Supervision Dept. and concurrently the Secretary of the supervisor committee of Shenzhen SDG Co., Ltd. He ever took the Business Deputy General Manage of HR Department of Shenzhen SDG Co., Ltd., Deputy Team Leader in Work Team of Shenzhen Tefa Huatong Fu Chunlong Packaging Co., Ltd. Now, he is the Business General Manager of HR Department of Shenzhen SDG Co., Ltd. He ever took the post of Deputy General Manger of Financial Department and Deputy General Manager of Auditing Department in ShenZhen Tellus Holding Co., Wang Guangye Ltd. Now, he acts as the Manager of Auditing Department in ShenZhen Tellus Holing Co., Ltd and Employee Supervisor of the group. She ever worked in Party-masses Department and Secretariat of Board of Directors Deng Shu’e of ShenZhen Tellus Holding Co., Ltd. Now, she is the Securities Affairs Representative, Employee Supervisor of the Company. 11 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 He ever took the posts of Manager of China Marketing Department of Shanghai Pepsi Food Co., Ltd. and Assistant General Manager of the Group. He now acts as Deputy General Manager of the Group. At the same time, he concurrently took the Guo Dongri posts of Chairman in ShenZhen Tellus Automobile Service Development Co., Ltd. (the share-holding subsidiaries of the Company) and of Shenzhen Renfu Tellus Automobile Service Co., Ltd. (the share-holding company of the Company). He ever took the posts of Deputy Manager of Planning & Financial Dept. and Manager of Auditing Dept. in Shenzhen Special Economic Zone Development (Group) Company; Director and CFO in ShenZhen Tellus Holding Co., Ltd. He now acts as Deputy General Manager of the Group and concurrently holds the post of Ren Yongjian Secretary of the Board. At the same time, he concurrently takes the posts of Director of Shenzhen Auto Industrial Trading Corporation (the controlling subsidiary of the Company) and of ShenzhenTelihang Investment Co., Ltd. (the joint-venture company of the Company). He ever took the post of Deputy Manager of HR Dept. and Director of Human Resource Communication Training Center in Tellus Group, and Deputy General Manger of Shenzhen Auto Industrial Trading Corporation. Now he takes the post of Deputy General Manager of the Group, at the same time, he concurrently took the posts of Director of Shenzhen Auto Industrial Trading Corporation (the controlling subsidiary of the Company), Director of Shenzhen Huari Automobile Co. Ltd. (the Luo Bojun controlling subsidiaries of the Company), Chairman of the Board of Shenzhen SDG Tellus Real Estates Co., Ltd. (the controlling subsidiaries of the Company), Chairman of the Board of Shenzhen Teyao Investment Development Co., Ltd. (the controlling subsidiary of the Company) and director of Shenzhen Tellus Gem Investment Co., Ltd( the joint-stock company of the Company) and Shenzhen Xinglong Mold Co., Ltd. (the share-holding company of the Company). He ever took the Deputy General Manger of Shenzhen Xianke Real-estate Co., Ltd., Manager of Investment Department of China Sports Group Industry Co., Ltd.; Director to the Office of General Manger of Shenzhen SDG Co., Ltd; Supervisor of Feng Yu the group. Now, he acts as the Deputy General Manager of the group; and he concurrently took the post of director of Shenzhen Tefa Huari Automobiles Co., Ltd. (the controlling subsidiary of the Company). Note: Particulars about directors and supervisors holding the post in Shareholding Company. Name of Shareholding Title in Shareholding Name Office term Company Company Minister of Planning & Li Mingjun Shenzhen SDG Co., Ltd. March 2006 till now Financial Dept. Employee Director, Secretary Chen Baojie Shenzhen SDG Co., Ltd. Dec. 2006 till now of the Board of the Directors Minister of Enterprise Luo Tao Shenzhen SDG Co., Ltd. Dec. 2006 till now Planning Department Minister of Audit and Zhang Xinliang Shenzhen SDG Co., Ltd. March 2006 till now Supervision Dept. Business General Manager of Fu Chunlong Shenzhen SDG Co., Ltd. Feb. 2007 till now Human Resources Dept. III. Particulars about the annual remunerations of directors, supervisors and senior executives in office at present (I) In the report period, the remuneration and welfare of directors, supervisors and senior executives taking the position in the Company were determined in accordance with the present distribution system, welfare system of the Nation and the Company and work position in the Company. As decided by the Extraordinary Shareholders’ General Meeting 2002 of the Company, the allowance of three independent directors of the Company was respectively RMB 30,000 per year. (II) In the report period, the Company has 18 directors, supervisors and senior executives in office 12 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 at present, among them, 13 persons drew the remuneration from the Company. The total annual remuneration received from the Company was RMB 3,508,400 before taxation and RMB 2,878,900 after taxation. Unit: RMB’0000(before taxation) Name Total remuneration Name Total remuneration Zhang Ruili 45.50 Li Binxue 42.26 Cheng Peng 44.42 Wang Guangye 15.59 Fu Bin 37.49 Deng Shu’e 6.65 Zhou Chengxin 3.54 Guo Dongri 35.84 Shi Weihong 3.54 Ren Yongjian 37.49 Ji Dejun 3.54 Luo Bojun 37.49 Feng Yu 37.49 (III) Directors and supervisors taking the position in the Company received their remuneration according to their position in the Company, Li Mingjun, Chen Baojie, Luo Tao, Zhang Xinliang and Fu Chunlong took the positions in the shareholding companies of the Company and drew their remuneration from these companies, while received no payment from the Company. IV. During the report period, name of directors, supervisors and senior executives elected or leaving the office and the reasons (I) In the report period, because the former employee supervisor Yang Jianhui resigned his post of employee supervisor due to the work manoeuvre; on March 28, 2008, the Group held Enlarged Meeting of Union Committee, in which agreed Yang Jianhui to resign his post and elected Deng Shu’e as the employee supervisor of the 5th supervisory committee. The relevant resolution was published in Securities Times and Hong Kong Wen Wei Po dated April 2, 2008. (II) In the report period, Supervisor Guo Jian resigned his post of supervisor due to the work manoeuvre. On April 15, 2008, the 5th supervisory committee held the 13th meeting of the Company in which examined and approved the proposal. In according to the recommendation of the controlling shareholder of the Company Shenzhen SDG Co., Ltd, Fu Chunlong was recommended as the candidate for supervisor of the 5th supervisory committee; Guo Jian did not take the post of supervisor. On May 15, 2008, with the election in the 2007 Annual Shareholders’ General Meeting, Fu Chunlong was elected as the supervisor of the 5th Supervisory Committee. The relevant resolution was published in Securities Times and Hong Kong Wen Wei Po dated May 16, 2008. V. About employees By the end of the year 2008, the Group had totally 796 on-the-job employees, including 365 production personnel, 82 salespersons, 78 technical personnel, 58 financial personnel and 123 administration personnel; the Company has 14 persons with master degree, 80 persons with bachelor degree, 133 persons graduated from 3-years regular college and 569 other graduated from senior higher or lower. The Company needs bear the expenses of 549 retirees. Section V. Administrative Structure I. Administration of the Company In the report period, according to requirement of Company Law, Securities Law and relevant laws and regulations, the Company continuously completed legal-person administration structure of the Company, and further regulated the operation of the Company. In the report period, according to relevant regulation, the Company established the Audit Committee of the Board, stipulated Rules and Procedures of the Audit Committee and remedies 13 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 Working System of Independent Directors, examined and approved HR Management System SDG. The management and operation of the Company basically was in line with the requirements for administration principle of listed company. The administration of the Company was basically accorded with the regulated documents on administration of listed companies issued by CSRC. In the report period, according to the public notice (No.27 (2008)) of CSRC, and Notice on Further Promoting Relevant Work on Special Administration Activities of Listed Company (SZJGSZi(2008) No.62) released by Shenzhen Securities Regulatory Bureau, the Company made self-inspection over the administration as of the first half year of 2008 in July, 2008. The Explanation on Reform of the Special Administration Activities of the Company has been examined and approved in the 16th extraordinary meeting of the Board dated Jul. 15th of 2008, and been published in Securities Times and Hong Kong Wen Wei Po on Jul. 17th of 2008. II. Performance of Independent Directors: In the report period, independent directors of the Company performed their duties in line with the relevant laws and regulations, actively knew the Company’s business and operation situations and issued independent opinion to the significant events of the Company, and gave full play to active function in order to ensure the benefits of the Company and medium and small shareholders. (I) Particulars about independent directors’ presented the Board meeting: Times that Name of Times of Times of should attend Times of independent personal entrusted Remark the Board absence directors presence presence meeting Shi Weihong 10 10 0 0 Zhou Chengxin 10 9 1 0 Went out due to business Ji Dejun 10 9 1 0 Went out due to business (II) In the report period, the Company’s independent directors did not propose the objection on the relevant matters. III. The Company is separated from the controlling shareholder in terms of Business, Personnel, Assets, Organization and Finance; the Company possessed the whole business and independent operating capability. (I) Separation in Business: The Company was an independent corporate body. The Company was absolutely independent from its controlling shareholder in business, and had an independent and complete business system and independent management capability. The Company has independent production, sales and service system and own leading industry. There exists no competition in the same line among the Company, controlling shareholders and related parties. (II) Separation in Personnel: The Company was absolutely independent in management of labor, human affairs, and salaries, enacted an independent administration systems. All the senior executives of the Company receive emoluments from the Company and have taken no post concurrently in the Shareholder Company. (III) Separation in Assets: The Company was strictly separated from its controlling shareholder, and they conducted completely independent management. The Company has complete and independent purchase system, production system, marketing system and the relevant service systems. The Company exclusively owns such intangible assets as industrial property rights, trademarks and non-patent technologies. (IV) Separation in Finance: The Company set up an independent financial accounting department, and established a complete set of accounting systems and financial administration systems. The controlling shareholder has never disturbed the Company in fund operation; The Company has opened independent bank account and has never been involved in such activities as depositing funds in the accounts of the financial company or the clearing center controlled by any of the principal 14 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 shareholders or other related parties. The Company independently pays taxes according to the law. (V) Separation in Organization: The Board of Directors and the Supervisory Committee and the other inner organization operate independently. The Organizations of the Company were set up according to the standardized requirements of listed company and actual business features, and had independent office building. IV. At the end of report period, the Company’s Board of Directors evaluated senior executives aiming at work outstanding achievement according to relevant systems. Section VI. Brief of the Shareholders’ General Meeting During the report period, the Company held the 2007 Annual Shareholders’ General Meeting. The Board of Directors of the Company published the notification on holding 2007 Annual Shareholders’ General Meeting on the designated newspapers namely Securities Times and Hong Kong Wen Wei Po dated Apr 17th of 2008. On May 15th of 2008, the Company held the 2007 Annual Shareholders’ General Meeting of ShenZhen Tellus Holding Co., Ltd. at the meeting room of the Company on 15/F, Zhonghe Building. The Public Notice on Resolutions of the 2007 Annual Shareholders’ General Meeting was published respectively in Securities Times and Hong Kong Wen Wei Po dated May 16th of 2008. Section VII. Report of the Board of Directors I. Operating review of the Company in the report period (I)The overall operation of the Company in the report period 1. Influenced by global economic crisis in 2008, the whole operation situation of the Company was severe, but the Company united together from the top leader to the fundamental worker, and smoothly and successively got through year 2008 through grasping adjustment, revitalization and turning losses. .In the report period, the operating income realized by the Company amounted to RMB 637.9 million, 35.63% down compared with that of the same period of last year, which was mainly due to that subsidiary Shenzhen Biaoyuan Automobile Co., Ltd was sold in the report period and was not brought into the consolidation scope since July.. In the report period, the total profit realized by the Company was RMB 2.19 million; the net profit attributable to owners of parent company was RMB 4.58 million. 2. Main problems and difficulties existed in the Company For a long time, the Company had many problems left in history and heavy burdens. Though with hard efforts from all members of the Company, which made the situation had changed to be better, while a comparatively heavy operation pressure was still then faced. The pressure was mainly remained as the followings: (1) Macro economic situation had bigger influences on operation. The global economic crisis in 2008 led the macro fundamentals change, and the influences were deeper and deeper day by day. The sliding down of economy and the demand of market shrank which had bigger impacts on automobile industry and property lease business; the automobile market competition became severe day by day, the sales price went lower, the gross profit decreased, the inventory climbed; the lease ratio and price of property both dropped which had bigger impacts on operations of the Company. (2) Profit-gaining abilities of main business were not strong. At present, the proportion of automobile service, automobile sales, automobile maintenance and automobile inspection of the main business of the Company in total income of business exceeded 80 percent. The profit-gaining abilities were low, cost for employee was high, and the competitiveness was not strong compared with the same industry. Thus, the most challenges the Company faces in the future is to form main 15 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 business with outstanding, high income and certain influences in domestic market which is also the key points for whether the Company could sustainably bring satisfied returns for shareholder and ensure the hedge and increase of the state-owned assets. (3) The situation of lack of fund did not become better at all. The debts left in history were heavy; shortage of fund was still the key problem for the development of the Company in quite long time. Developing new project and cultivating new profit growth point only relied on the self strength of the Company which restricted the speed and scale of forming the leading industry of the Company. In addition, the dispute cases on Guarantee for Shenzhen Petrochemical Industry (Group) Co., Ltd and Yueyang Property which annoyed the Company increased the more difficulties on bank financing of the Company. (4)The system was incommensurate to the changes of the market. The Company is a state-owned enterprise engaged in full competitive industry, the operation management of the Company still could not integrate into the market completely, the number of redundant employees was large, the equipments were aging, the benefit was low, the historical burden was heavy, and was incommensurate to the changes of the market. (II) Scope of main operations and particulars about business in the report period 1. Scope of main operations and particulars about business The Company was mainly engaged in automobile inspection and maintenance, automobile trade and lease service etc. (1) In the report period, the Company’s income from operations and gross profit from operations was RMB 637.9 million and RMB 95.92 million respectively. The Company’s income from main operations was RMB 618.45 million, the gross profit from main operation was RMB 81.22 million, income from other business was RMB 19.45 million and profit from other business was RMB 14.7 million. The income from main operations was classified as follows according to industries: Unit: RMB Income from main Cost of main Profit ratio of main Industries operations operations operations (%) Automobile trade 464,108,950.17 440,121,170.40 5.17 Automobile inspection and maintenance 80,812,757.93 63,319,544.55 21.65 Lease service 73,530,728.03 33,792,914.46 54.04 (2) The operating activities of the Company’s business or main products taking over 10% in total amount of income from main operations or profit from main operations: Unit: RMB Increase or Increase or Increase or Profit decrease of decrease of decrease of ratio of main main main operating Income from main Cost of main Products main operating operating cost profit ratio over operations operations operation income over over that of that of last year s (%) that of last last year (%) (%) year (%) Automobile trade 464,108,950.17 440,121,170.40 5.17 -42.48 -43.60 1.89 Automobile inspection and 80,812,757.93 63,319,544.55 21.65 17.08 11.91 3.62 maintenance Lease service 73,530,728.03 33,792,914.46 54.04 -10.49 -9.39 -0.56 16 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 2. Main suppliers and customers of the Company In the report period, the Company’s total purchase amount from the top five suppliers was RMB 432.92 million, accounting for 90% in total purchase amount in the whole year. The Company’s main sales customers were terminal consumers and the sales income from the top five customers occupied no more than 3% in the income from main operations. 3. In the report period, there was no great change in the Company’s main operations and their structure and capability of main operations compared to those of last period. (III) In the report period, particulars about the great change situation in the Company’s assets structure, sales expense, administrative expense, financial expense and income tax compared with those of the same period of last year and the main influencing factors: 1. In the report period, particulars about the great change situation in the Company’s assets structure compared with that of the same period of last year and main influence factors: Unit: RMB Proportion in Proportion in total Items Dec.31, 2008 total assets Dec.31, 2007 assets (%) (%) Monetary assets 39,674,670.71 6.46% 75,872,874.23 9.06% 32,083,208.51 Accounts 12,965,748.61 2.11% 3.83% receivable Real estate 124,071,906.35 20.19% 130,294,651.25 15.57% investment Fixed assets 190,592,017.58 31.01% 203,865,355.53 24.35% Long-term deferred 1,214,041.15 0.20% 10,928,423.69 1.31% expense Deferred income tax 28,224,804.82 4.59% 24,733,193.41 2.95% assets Short-term loans 133,511,834.70 21.73% 258,131,109.01 30.84% Accounts payable 31,910,199.64 5.19% 41,697,566.62 4.98% Account received in 5,147,850.02 0.84% 24,574,657.41 2.94% advance Other payable 130,578,197.83 21.25% 165,447,450.02 19.76% (1) Assets constitution changed in the report period compared to that of the same period of last year mainly due to that subsidiary Shenzhen Biaoyuan Automobile Co., Ltd was sold in the report period and was not brought into the consolidation scope since July. (2)Due to that book value of assets was less than increased amount of basic items for taxation, and together with the change of tax rate for income tax, the proportion of deferred income tax assets in total assets increased compared with that in the same period of last year. (3) The proportion of short-term loan in total assets decreased compared with that in the same period of last year due to the Company repay the bank loan. 17 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 2. In the report period, particulars about the great change situation in the Company’s operation expense, administrative expense, financial expense and income tax compared with those of the same period of last year and main influence factors Unit: RMB Increase/decrease Items 2008 2007 Increase/decrease (%) Sales expense 31,980,546.16 40,257,190.0 -8,276,643.85 -20.56% Administrative expense 52,095,336.83 51,731,617.50 363,719.33 0.70% Financial expense 12,676,977.99 13,823,336.70 -1,146,358.71 -8.29% Income tax 344,018.49 107,824.99 236,193.50 219.05% (1) The Company transferred equities of its subsidiary Shenzhen Biaoyuan Automobile Co., Ltd, and did not bring it into the consolidation scope which made the sales expense decrease compared with that in the same period of last year; (2) The financial expense decreased compared with that in the same period of last year due to that the Company repaid the bank loan and the reduction of loaning interest rate. (3) The income tax increased compared with that in the same period of last year due to that the deferred income tax expense offset by the Company in the report period decreased compared to that of last year. (IV) Particulars about structure of cash flow arising from operating activities, investing activities and financing activities of the Company, change situation and reasons: Unit: RMB Increase/decrease Items 2008 2007 Increase/decrease (%) Net cash flows arising from 35,478,077.98 -61,994,274.41 97,472,352.39 157.23% operating activities Net cash flows arising from investing 3,040,179.28 62,745,668.16 -59,705,488.88 -95.15% activities Net cash flows arising from -74,689,421.85 29,996,290.14 -104,685,711.99 -349.00% financing activities (1) The Company enlarged to take back the sales income which made the net cash flows arising from operating activities increase with a great margin compared with that in the same period of last year; (2) The Company transferred equities of its subsidiary Shenzhen Biaoyuan Automobile Co., Ltd in the report period, the balance between the received transferring accounts and disposing daily cash was calculated into “cash flow arising from investing activities—cash paid for others relevant with investing activities”; but in the same period of last year, took back cash RMB 22.88 million by selling stock of Shanghai Raw Water and transferred the equities of shareholding company which made the net cash flows arising from investing activities decrease compared with that inthe same period of last year; (3) Net cash flows arising from financing activities decreased with a large margin compared with that in the same period of last year due to repay the bank loan. (V)Operations and achievements of main holding companies In the report period, the main holding companies of the Company were: Shenzhen Auto Industries Trading Corporation (hereinafter referred to as Auto Industrial Trading), ShenZhen Tellus New 18 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 Yongtong Automobile Development Co., Ltd. (hereinafter referred to as New Yongtong), Shenzhen Tefa Huari Automobile Co., Ltd. (hereinafter referred to as Huari Automobile), Shenzhen Huari Toyota Auto Sales Co., Ltd. (hereinafter referred to as Huari Auto Trading), Shenzhen New Yongtong Motor Vehicle Inspecting Equipments Company (hereinafter referred to as Inspecting Equipments), Shenzhen Tefa Tellus Property Management Co., Ltd. (hereinafter referred to as Property Company), Shenzhen Zhongtian Industrial Co., Ltd. (hereinafter referred to as Zhongtian Company), Shenzhen Tefa Tellus Real Estate Co., Ltd. (hereinafter referred to as Real Estate Company) and Shenzhen Tellus Real Estate Trade Co., Ltd. (hereinafter referred to as Trade Company). The main operations and business of the aforesaid holding enterprises was as follows: Unit: RMB’0000 Auto New Huari Huari Auto Inspecting Property Zhongtian Real Estate Industrial Trade Company Yongtong Automobile Trading Equipments Company Company Company Trading Sale of Lease auto and Maintenance Production Developme and Main its Maintena of auto, and sale of nt of land, Agency Sale of manage Property products or fittings, nce of production inspecting operating of real estat auto ment of lease service developm auto and sale of equipments of commercial es propertie ent of real auto fittings auto housing s estates Registered 5,896 3,290 USD500 200 1,000 705 725 3,115 200 capital Total assets 24,846 10,145 8,038 6,283 1,912 2,675 1,980 3,417 299 Net assets 17,648 5,208 4,588 477 591 1,065 1,683 1,787 278 Net profit 172 -819 151 152 -794 43 138 6 -15 2. Particulars of the influence received by the net profit of the Company over 10% originating from the net profit from single subsidiary or investment income from single share-join company Unit: RMB’0000 Name Proportion Operating Operating Net profit of shares income profit held (%) Shenzhen Auto Trade Corporation; 100 16,840 104 172 henzhen Tefa Huari Automobiles Co., Ltd 60 6,048 178 151 Shenzhen Huari Toyota Auto Sales Co., Ltd. 60 31,239 191 152 Shenzhen SDG Tellus Property Management Co., Ltd. 100 3,465 60 43 Shenzhen Zhongtian Industrial Co., Ltd. 100 822 178 138 Shenzhen Renfu Tellus Auto Service Co., Ltd. 35 148,776 5,337 4,475 (VI)Items measured by fair value Unit: RMB Gains and losses Accumulative Depreciation Amount at from change of fair value Amount at Item withdraw in the period-begin fair value in the change recorded period-end report period report period into equity Financial assets: 19 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 Including: 1. financial assets measured by fair value and whose change should be recorded into current gains and losses Including: derivative financial assets 2. Financial assets 3,123,319.56 -2,164,965.64 958,353.92 available for sale Subtotal of financial assets 3,123,319.56 -2,164,965.64 958,353.92 Financial liabilities Real estate investment Productive biological assets Others Total 3,123,319.56 -2,164,965.64 958,353.92 As for estimation for fair value of financial assets available for sale at period-end, fair value should be confirmed according to the closing price at securities market on the estimation day. II. Future development of the Company Year 2009 is the development transfer year for the Company. The guidance for the Company’s work: carrying out spirit of the 17th National Congress of the CPC, further practicing scientific development view, controlling the entire situation with thoughts of reform and innovation and market as direction, changing mechanism, strengthening power in debt restructure, financing and resource integrity, developing significant projects in steady progress, advancing competition ability, cohesion and risk-fighting ability of the enterprise and realizing development of the Company better and faster. In specific, the Company tried to realize one target, improve two abilities and establish and perfect three mechanisms. (I) Realize one target Realize one target meant to realize the 2009 operation index of the Company. This index was the general index of the Company and one which had to be completely finished. We would follow and inspect execution of budget as soon as possible; further strengthen overall budget management; intensify supervision and control on proceedings such as operation activities of various enterprises, significant capital expenditure, significant investment and guarantee, etc; strengthen cost control and reduce expense to ensure the successful accomplishment of the 2009 operation target. (II) Improve two abilities 1. Improve profit-making ability In 2008, the Company successfully finished operation task by strengthening management and activating assets. How to enhance blood-making function and improve profit-making ability of the enterprise is the next significant problem that needs to be solved. Works for the following 6 aspects were mainly made: ① Developing market, raising market occupancy and increasing sales income; ② further consolidating management, saving cost and reducing expense, to earn efficiency from management eliminating enterprise which received loss in operation to increase profit; ③activating inventory, cashing part dividends and equities of the share-join enterprises whose operation prospect were not so well, receiving back investment promptly and improving application efficiency of assets; ④fully taking advantage of property and increasing income steadily; ⑤doing well in debt restructure and tried the best to reduce expenditure of financial espense; ⑥well constructing industry park and cultivating new profit-increasing point. 2. Improve financing ability The significant project of the Company-Shuibei Jewelry Industry Park Reform would successively 20 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 start off as scheduled. However, with influence from many disadvantageous factors such as global financial crisis and declining economy, to completely finish the 2009 operation target and project investment plan was very hard and capital indentation was very big. In 2009, taking the opportunity that the nation lowered down loan benchmark interest rate for providing loan support for middle and small enterprises, the Company actively activated part dividends and equities of the share-join enterprises whose operation prospect were not so well, received back investment promptly, smoothed relationship with banks, and combined with the jewelry industry park project to carry out project financing, made overall restructure on the present debt of the Company, fundamentally solved the obstacles for development of the Company such as difficult financing and high cost by means of annual authorization credit limit. Meanwhile, the Company strived for overall elimination from loan guarantee responsibility for share-join companies, appropriately dealt with problems left over by history and controlled risk. (III)Establish and perfect three mechanisms 1. Perfect competition mechanism, enlarge leading industry and advance core competition ability (1)Made group development strategy and defined developing direction Taking actual condition of market demand and itself into consideration, the Company made its three year development program with high standard and in a high jumping-off point. It further defined developing direction of main business, integrated internal resource, formed integration advantage and enhanced Tellus Brand. (2) Enlarged leading industry, developed significant projects steadily and formed characteristic scale operation Taking improvement of market competition ability as core and characteristic operation of Industry Park as carrier, the Company completely played specialty and operation characteristic of enterprises into effect and tried for maximization of operation benefit of the Group. ①Started off the project of Tellus Gem Gold Jewelry as quickly as possible and implemented construction of Industry Park step by step Grasped firmly project declaration and proposal & confirmation, obtained the documents such as programming license and construction license necessary for starting off project and strived for improvement of plot ratio in maximized degree. With the premise that the Company’s income from property operation would not fluctuate greatly during the project developing period, that the general operation order was stable, debt controlling and reduce of financial risk, the Company made development on the Industry Park periodically and rolling, gradually figured Tellus Gem Gold Jewelry Industry Park to be the symbol industry park of Tellus Group with advanced management level and brand value, gradually enhanced assets value and brand value of property, increased income from property operation steadily, offered capital for development and improved risk-fighting ability of the Company. In June of 2009, the Company will strive for starting off construction of light factory and manage to fulfill the phase I project in 2010. Reform for the No.2 and 3 workshops matched to the light factory and project of Xinglong Building will be started off as quickly as possible. ② Reformed No.8 workshop in Buxin and gradually constructed Tellus Buxin Automobile Comprehensive Service Industry Park After establishment of Telihang Corporation, the joint venture enterprise for reforming the No.8 workshop in Buxin, firstly, procedure of proposal & confirmation of the project reforming workshop should be finished as soon as possible and then to start off the construction for the project; secondly, relevant management system and working rules should be made as quickly as possible, to strengthen management and cost control in view of system and ensure successful implementation of the project; thirdly, actively cooperated with programming of Luohu District government, tried to construct Tellus Buxin Automobile Comprehensive Service Industry Park and improved value of property assets and brand together. 21 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 2. Perfected competition mechanism for person with ability With reform in human resource for many years, the Company had already primarily established examination system for human resources. In 2009, on the basis of careful summary on the present human resources management, the Company should carefully absorb experience and lessons; establish open HR management system from perfection of appraisal mechanism, examination mechanism, incentive & punish mechanism and training mechanism as well for person with ability; activate internal mechanism; provide vast platform for these persons to play their abilities; through everyone tries their best and abilities, the Company realizes its substantial improvement of enterprise HR management gradually. Meanwhile, active adjustment on structure of the Company should be made, personnel should be further simplified, executives in cadre should be reduced and working efficiency should be improved to perfect the operation structure of the enterprise. 3. Perfected risk control and supervision mechanism Faced with the situation that lots varieties existed in the foreign and domestic economy environment and risk was big, we have to keep sober; strengthen research on market strategy to form a decision-making pattern with market as center; recognize market opportunity and risk promptly; adjust thought, power, rhythm and focus of operation; correctly deal with relationship among standardization, efficiency and energy; reduce cost from impact and keep steady and good development of the Company in vibration. Meanwhile, independent risk-control and supervision mechanism should be established forwardly, which not only guarantee firm practice of the Company’s right decision, but also foresightly control and supervise risks, thus improved market fluctuation-fighting ability of the Company. IV. Investments of the Company in the report period 1. In the report period, the Company had neither raised capital nor applied capital which was raised in previous periods in this report period; 2. In the report period, particulars of the significant projects invested with non-raised proceeds. On Oct 23rd of 2008, the Company officially signed Cooperation Agreement (hereinafter referred to as Agreement) with Shenzhen Hangtianyou Industry Co., Ltd. (hereinafter referred to as Hangtianyou Company) in Shenzhen, to establish Shenzhen Telihang Investment Co., Ltd. invested together in Shenzhen. The registered capital of the company was RMB 27.2 million. The Company took the No. 8 workshop located in Buxin, Cuizhu Office, Luohu District, Shenzhen whose appraisal value was RMB 13.6 million as investment, and the other party took cash RMB 13.6 million as investment. The two parties respectively took 50% equity of the target company. Relevant notice was published on Securities Times and Hong Kong Wen Wei Po dated Oct 27th of 2008. V. Shenzhen Nanfang Minhe Certified Public Accountants Co., Ltd has issued standard unqualified Auditor’s Reports for the Company. In the report period, the affiliated company of the Company Shenzhen Renfu Tellus Automobile Service Co., Ltd.(hereinafter refers as Renfu Tellus Company) made prophase mistakes correction; part of auto maintenance vouchers issued by Renfu Tellus Company in 2007 did not supply service in current period, and it should be recognized as deferred income in accordance with the accounting policy; due to the aforesaid mistakes, the income was calculated more with the amount of RMB 1,214,141.00 in 2007, and the deferred income was calculated less with the amount of RMB 1,214,141.00; in 2007, Renfu Tellus Company did not take accrual on the purchase returns supplied by suppliers which resulted in the more calculation in sales cost in 2007 with the amount of RMB 6,526,000.00, less calculation on account receivable with the amount of RMB 6,526,000.00, and less calculation on income tax payable and income tax expense with the amount of RMB 978,900.00. The Company made calculation on investment of its affiliated company Renfu Tellus Company in 22 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 equity method, thus, it led the Company made prophase mistakes correction, totally increasingly adjusted long-term equity investment in 2007 RMB 1,516,535.65, increasingly adjusted investment income in 2007 RMB 1,516,535.65 and increasingly adjusted undistributed profit at period-begin of 2008 RMB 1,516,535.65. The board of the directors of the Company thought: the retroactive adjustments on gains/losses in 2007 were in accordance with the regulations on Accounting Standards for Business Enterprises and Enterprise Accounting System, and objectively and fairly reflected the actual operations of the Company. VI. Routine work of the Board of Directors (I) Meetings held by the Board of Directors and contents of the resolutions In the year 2008, the Board of Directors of the Company held 10 meetings in total: 1. The 13th Extraordinary Meeting of the 5th Board of Directors was held on Jan. 25, 2008 in the meeting room of Shenzhen Huatong Bauhinia Hotel. 9 directors should present at the meeting, and actually 8 presented. Independent director Zhou Chengxin entrusted independent director Shi Weihong to present the meeting and exert the voting right. The meeting discussed and approved proposal on Rules of Procedure of the Audit Committee, proposal on Setting Audit Committee of the Board of Directors; proposal on Adjusting Members of Remuneration and Examination Committee of the Board of Directors; proposal on Purchase of New Stock with Owned Capital; proposal on Transferring Equity of Pengchi Company. Relevant notices were published on Securities Times and Hong Kong Wen Wei Po on Jan.30, 2008. 2. The 14th Extraordinary Meeting of the 5th Board of Directors was held by communication on Mar. 25, 2008, which discussed and approved proposal on commending directors of Shenzhen Huatong Automobile Industry Co., Ltd. 3. The 7th Meeting of the 5th Board of Directors was held on Apr.15, 2008 in the meeting room of the Company on 15/F in Zhonghe Building. 9 directors should present at the meeting, and actually 9 presented. The meeting discussed and approved proposals including the Annual Report 2007. Relevant resolution notices were published on Securities Times and Hong Kong Wen Wei Po on Apr.17, 2008. 4. The 8th Meeting of the 5th Board of Directors was held by communication on Apr.28, 2008. 9 directors should present at the meeting, and actually 9 presented. The meeting discussed and approved proposals including the First Quarter Report 2008. Relevant notices were published on Securities Times and Hong Kong Wen Wei Po on Apr.30, 2008. 5. The 15th Extraordinary Meeting of the 5th Board of Directors was held by communication on Jun.11, 2008. 9 directors should present at the meeting, and actually 9 presented. The meeting discussed and approved proposals on Change of Department Managers; proposal on Application for RMB 5 Million Loan from Bank of Communications; proposal on Application for RMB 6.5 Million Loan from Shenzhen Development Bank. 6. The 16th Extraordinary Meeting of the 5th Board of Directors was held by communication on Jul.15, 2008. 9 directors should present at the meeting, and actually 9 presented. The meeting discussed and approved proposal on Reform Explanation of Strengthening Special Administration Activities of the Company. Relevant notice was published on Securities Times and Hong Kong Wen Wei Po on Jul.17, 2008. 7. The 9th Meeting of the 5th Board of Directors was held in Dongguan on Aug.11, 2008. 9 directors should present at the meeting, and actually 8 presented. Independent director Ji Dejun entrusted independent director Zhou Chengxin to present and exert voting right. The meeting discussed and approved the Semi-annual Report 2008; Proposal on Increasing Investment and Stocks of Shenzhen Xinglong Mould Co., Ltd. and the Second Development of Factory; Proposal on Reform No.8 Factory in Buxin Industry District and Building Buxin Comprehensive Automobile Service Industry Park; Proposal on New Yongtong Company Selling Real Estate. Relevant notices were published on 23 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 Securities Times and Hong Kong Wen Wei Po on Aug.13, 2008. 8. The 10th Meeting of the 5th Board of Directors was held by communication on Oct.24, 2008. 9 directors should present at the meeting, and actually 9 presented. The meeting discussed and approved the Third Quarterly Report 2008, which was published on Securities Times and Hong Kong Wen Wei Po on Oct.27, 2008. 9. The 17th Extraordinary Meeting of the 5th Board of Directors was held by communication on Oct.28, 2008. 9 directors should present at the meeting, and actually 9 presented. The meeting discussed and approved Proposal on Commending Directors and Supervisors of Underling Enterprises. 10. The 18th Extraordinary Meeting of the 5th Board of Directors was held by communication on Dec.26, 2008. 9 directors should present at the Meeting, and actually 9 presented. The meeting discussed and approved Proposal on Transferring 30% Equity of Shenzhen Huatong Automobile Industry Co., Ltd.; Human Resource Management System in Tellus Group. Relevant Resolutions were published on Securities Times and Hong Kong Wen Wei Po on Dec.30, 2008. (II) Implementation of the resolutions made at the Shareholders’ General Meeting by the Board of Directors According to the resolutions approved by Annual Shareholders’ General Meeting 2007, the Board of the Company did not distribute any profit or transfer any reserve fund into share capital in 2008. (III) Summary of the duty performance of the Audit Committee of the board of directors In the report period, the Board of Directors of the Company set the Audit Committee. The Audit Committee of the board of directors is constituted by 5 directors, among which 3 members are independent directors and the director commissioner is also an independent director. The Audit Committee actively carried out its work in auditing the annual report according to the relevant regulations of the Article of Association and the Discussing Principles of the Audit Committee. Before the official entrance of the certified public accountants for annual audit, on Dec.2, 2008, the Audit Committee and the certified public accountants negotiated and confirmed the work arrangement for the 2008 Annual Report audit. The independent directors of the Company were handed with the work arrangement for the 2008 Annual Report audit. On Jan.11, 2009, the Audit Committee held meeting, in which they examined the financial accounting statements made by the Company and believed that the preparation for these statements was in line with the regulations of accounting standard; the statements really reflected the financial condition of the Company at the end of 2008 and operating achievement in 2008. It was agreed to take this financial accounting statement and relevant files to hand in to Nanfang Minhe Certified Public Accountants for audit. After the official entrance of the certified public accountants for annual audit, the members of the Audit Committee respectively made call inquire for the audit progress and supervised and urged the Certified Public Accountants Co., Ltd to finish the audit work in the regulated time according to the audit work arrangement, to make sure the annual report of the Company could be disclosed in time. At the same time, the Audit Committee made negotiation and communication with the certified public accountants on the problems existed in this audit. After the certified public accountants issued the initial audit opinion, the Audit Committee held meeting on Feb.19, 2009, in which they reexamined the financial accounting statement and formed written opinion and resolution on the annual financial accounting statement, summary report of the audit work and renewal of the engagement for the Certified Public Accountants Co., Ltd which were finally handed in to the Board of the Company for examination. 1. The initial examination opinion on the 2008 financial accounting statement of the Company issued by the Audit Committee of the board of directors: According to the requirement of the Discussing Principles of the Audit Committee, as the commissioner of the Audit Committee of Shenzhen Tellus Holding Co., Ltd (hereinafter referred to 24 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 as the Company), we made examination on the 2008 financial accounting statement of the Company before the official entrance of the certified public accountants for annual audit and presented the following opinion: With attitude of earnest and responsible, we made careful examination on the financial accounting statement prepared by the Company, including the balance sheet as of Dec.31, 2008, the 2008 annual profit sheet, the 2008 cash flow statement and statement of change in owners’ equity. We hold that: the preparation of the above financial statements is in line with the regulation of Accounting Standard for Enterprise and Accounting System for Enterprise; the statements really reflect the operating achievement of the Company in 2008 and financial condition of the Company at the end of 2008. It is agreed to carry out the financial audit work of 2008 taking the financial statements as the basis. 2. The second examination opinion on the 2008 financial accounting statement of the Company issued by the Audit Committee of the board of directors: Being the commissioners of the Audit Committee of Shenzhen Tellus Holding Co., Ltd, after the certified public accountants issued the initial audit opinion, we examined the financial accounting statements again and presented the following opinion: We consider that: the 2008 financial accounting statement of the Company fairly reflect the operating achievement of the Company in 2008 and financial condition of the Company at the end of 2008 in all significant aspects. The statements are real, accurate and complete and in line with the relevant regulations of CSRS, Shenzhen Stock Exchange and Accounting Standard for Enterprise. The Audit Committee has no objection over the audit opinion planned to issue by the accountants who are in charge of the annual audit. At the same time, we request the audit organization- Shenzhen Nanfang Minhe Certified Public Accountants Co., Ltd. to finish all the audit work as quickly as possible according to the general work arrangement and issue the audit report within the conventional time, to make sure that the Company could disclose its 2008 Annual Report in time. 3. Summary of the audit work conducted by Shenzhen Nanfang Minhe Certified Public Accountants Co., Ltd. to the Company issued by the Audit Committee of the board of directors: It makes the following summary on the 2008 annual audit work conducted by the audit organization of the Company-Shenzhen Nanfang Minhe Certified Public Accountants Co., Ltd (hereinafter called as Nanfang Minhe): Nanfang Minhe carried out the necessary audit procedure during the audit work for the Company and kept effective negotiation and contact with the Audit Committee. Nanfang Minhe carried out necessary negotiation with the Board, the Supervisory Committee and senior executives of the Company; carried out independent audit work in strict accordance to the regulations of independent audit standard for certified public accountant of China. Sufficient time for audit was arranged. The audit personnel were collocated rationally and the audit report that it issued could fully reflect the financial condition and operating achievement of the Company, and the conclusion of the audit report complied with the actual condition of the Company. During this audit work, the Certified Public Accountants Co., Ltd and accountants in charge of the audit all strictly observed the request presented by the professional morality for maintaining independence. The members of this audit team were all qualified with the necessary professional knowledge and characteristics and qualified for this audit. According to the audit standard for Chinese certified public accountant, the audit team acquired sufficient and adequate audit evidence for issuing audit opinion. According to the audit plan arrangement, Nanfang Minhe accomplished the audit work for the Company in time and issued standard and unqualified audit report. 4. Resolutions reached in the meeting of the Audit Committee of the board of directors: The Audit Committee of the board of directors held meeting on March 19, 2009, and the following proposals were unanimously examined and approved in this meeting, with 5 votes for agreement, 0 25 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 for denial and 0 for renunciation. (1) The 2008 Audit Report and Financial Accounting Statements; (2) Summary of the 2008 Audit Work Conducted by Shenzhen Nanfang Minhe Certified Public Accountants Co., Ltd for the Company; (3) Renewal of the Engagement of Shenzhen Nanfang Minhe Certified Public Accountants Co., Ltd as the Audit Organization of the Company for 2009. (IV) Summary of the duty performance of the Remuneration and Examination Committee of the board of directors During the report period, the Remuneration and Examination Committee of the board of directors made examination on the remuneration of the directors, supervisors and senior executives of the Company. With examination, all the members of the Remuneration and Examination Committee hold that the remuneration paid during the report period is in line with the performance-related evaluation system. The remuneration received by the directors, supervisors and senior executives of the Company is confirmed according to the relevant system of the Company. VII. Profit distribution preplan In the year 2008, the Company realized a net profit attributable to shareholders of parent company with RMB 4,584,308.06 and the net profit realized by the parent company was RMB 13,667,494.15 in the consolidated statement of the Company. And it is planned that no profit made by the Company in 2008 would be distributed or capitalized. The undistributed profit would be used to compensate the losses of previous years. This profit distribution preplan is still needed to be examined and approved by the Annual Shareholders’ General Meeting 2008. The independent directors of the Company-Zhou Chengxin, Shi Weihong and Ji Dejun issued the following independent opinion on the reason that why ho cash profit distribution preplan is made this year: it is agreed of the decision of the 2008 profit distribution made by the Board of the Company and the Company is planned that no profit made by the Company in 2008 would be distributed or capitalized. The undistributed profit would be used to compensate the losses of previous years. Particulars about the cash bonus of the Company in previous three years Unit: RMB Net profit attributable to Ratio of net profit Amount of cash bonus owners of parent attributable to owners of (tax included) company in consolidated parent company in statement consolidated statement 2007 0.00 12,311,789.81 0.00% 2006 0.00 -87,991,436.55 0.00% 2005 0.00 11,345,662.68 0.00% VIII. Other events The Company did not change the domestic and overseas newspapers designated for information disclosure in the report period, which were Securities Times and Hong Kong Wen Wei Po respectively, and the website for information disclosure was still Juchao Website. Section VIII. Report of the Supervisory Committee The Supervisory Committee held 5 meetings in total in the report period, with main contents as follows: 1. Deliberation on significant matters of the Company, the following proposals were successively examined and passed: Proposal on Transferring Equities of Pengchi Company; Proposal on Adjusting Remuneration and Examination Committee of the Board; Proposal on Establishing Audit Committee of the Board; Proposal on Rules and Procedures of Audit Committee; Proposal on Subscribe New Stock with Self-owned Fund of the Company; Proposal on Project of 26 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 Guangzhou Toyota; Proposal on Withdrawal of Losses of Asset Devaluation in 2007; Proposal on Revising Working System of Independent Director; Proposal on Offering Loan Guarantee for Shenzhen Auto Industry Import & Export Company from Shenzhen Auto Industry & Trade Corporation; Proposal on Shenzhen Xinglong Mould Co., Ltd’s Increase Fund and Expanding Equity and Plan for 2nd Development of Factory; Proposal on Reconstruction of Buxin No. 8 Factory of SDG and Plan on Establishing Buxin Auto Comprehensive Industrial Park; and Proposal on Selling Room 101, Building 1, No. 128, Renmin North Road of New Yongtong Company. 2. Deliberation on the Board’s Work Reports, Performance Reports of the Administration Team, Quarterly and Annual Financial Reports of the Company, and the Profit Distribution Plan, etc. 3. Approval of the Work Report 2007 of the Supervisory Committee and resolutions made. During the past one year, members of the Supervisory Committee had attended each meetings held by the Board as delegates, and, with the rights authorized by relevant laws, regulations and the Articles of Association, conducted surveys and supervision over the Company’s operation according to laws, the work and behaviors of members of the Board and other senior executives, etc. through the attendance as a nonvoting delegate at meetings of the Board, office meetings of General Manager and other various means. They had strictly and dutifully performed their supervisory responsibilities. Independent opinions of the Supervisory Committee on relevant events of the Company in 2008: I. Operation according to laws of the Company In accordance with the rules of relevant laws and regulations such as the Company Law, the Administration Rules of Listed Companies and the Articles of Association, etc, the Supervisory Committee of the Company had conducted supervision over the convening procedures and resolutions of the General Shareholders’ Meeting and the Board meetings, the Board’s implementation of the resolutions made by the General Shareholders’ Meeting, the work performance of the Company’s senior executives, and the management system of the Company, etc. The Committee believed that, for the current year, the operation of the Board and the administration team as well as the procedures of each resolution had all been in conformity with the Company Law, the Administration Rules of Listed Companies and the Articles of Association, and that resolutions of the General Shareholders’ Meeting could be implemented. No wrong doings against laws or regulations was detected that directors or senior executives had committed while performing their duties. II. Opinions after the inspection of the Company’s financial status The Supervisory Committee had conducted careful and prudent inspection over the financial system and financial status of the Company and believed that the Company’s inner controlling system is sound, and management is perfect. The Financial Report of this year can truly reflect the Company’s financial status and operation achievements. Shenzhen Nanfang Minhe Certified Public Accountants Ltd had issued standard unqualified Auditors’ Reports. III. No fund was raised in the report period. IV. During this accounting year, the Company had no significant purchases of assets, and acquisition & merger items, while sold part assets In the report period, Shenzhen Automobile Industry and Trade General Corporation, a controlling subsidiary of the Company, transferred 25.2285% equity of Shenzhen Biaoyuan Automobile Co., Ltd. held by it to Li Zhongming, etc. with the price of RMB 14.32 million. According to regulation of procedure, the Company made assets appraisal for equity transfer of Biaoyuan Company, and made public hanging-out transaction in Shenzhen Property Right Exchange Center. Account received from this asset sale would be used to make up cash flow of the Company. 27 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 V. The related transactions of the Company in the report period (I)The Company transferred the land and workshop which was located in Swan Industry Park, Pinghu, Shenzhen, to Shenzhen Tefa Real Estate Co., Ltd. (hereinafter referred to as Tefa Real Estate) by public bid according to the estimated price RMB 5.7 million. The registered information has been transferred already in this report period. Because that Tefa Real Estate is controlling subsidiary of SDG, the Company’s controlling shareholder, the transaction belongs to related transaction. This transaction has been examined and approved in the 7th temporary meeting of the 5th Board of Directors dated Sep. 3, 2007, in which related directors avoided voting and independent directors presented independent opinion for agreement. Income of RMB 2.33 million occurred from this transaction. (II)The holding subsidiary company Shenzhen Auto Industry & Trade Corporation transferred 32.94% equities of Shenzhen Pengchi Auto Co., Ltd. held by it to Shenzhen Longgang Great Industrial Zone Investment Development Co., Ltd. with the amount which was not lower than actual investment amount. Due to the Great Industrial Zone was the holding subsidiary company of the actual controller of the Company-Shenzhen Investment Holdings Co., Ltd., this transaction belongs to related transaction. This transaction has been examined and approved in the 13th temporary meeting of the 5th Board of Directors dated Jan. 25, 2008, in which related directors avoided voting and independent directors presented independent opinion for agreement. Section IX. Significant Events I. Significant lawsuits and arbitrations In the report period, the Company had no new significant lawsuits and arbitrations. The explanations on original significant lawsuits and arbitrations of the Company are as follows: (I) 40 owners of Yueyang Tellus Shopping City including Ji Jianjun and Zhou Linxia sued Tellus Shopping City which they thought was involved in quality problem. The Company had appealed to Yueyang Intermediate People's Courts in December of 2006. Yueyang Intermediate People's Courts kept the original verdict. However, the Company has never received relevant judgment. The Yueyang County Court has already forcibly executed the verdict. Relevant public notice was published on Securities Times and Ta Kung Pao on Mar. 8, 2007. (II) 64 owners of Tellus Shopping City, such as owner Fu Yuansi and Wu Shenbao, presented a lawsuit against Shenzhen Tellus Real Estate Yue Yang Co., Ltd.(hereinafter refers to Yueyang Company) for they thought Tellus Shopping City was involved in quality problem. The People's Courts in Yueyang County made the verdict dated Dec. 26th of 2007, which judged that the 64 owners gave back the houses they purchased to Shenzhen Tellus Real Estate Yue Yang Co., Ltd. and the defendants: Shenzhen Tellus Real Estate Yue Yang Co., Ltd., Shenzhen SDG Tellus Real Estate Co., Ltd., Shenzhen Tellus Holding Co., Ltd., and Shenzhen SDG Group Co., Ltd sent back RMB 6,572,025 to the 64 owners. Due to that the Company and other three defendants were unsatisfied with the verdict of the People's Courts in Yueyang County, they appealed to Yueyang Intermediate People's Courts. On May 16th of 2008, with judgment from Yueyang Intermediate People's Courts, the original verdict released by the People's Courts in Yueyang County has been canceled. This case has been dispatched to the People's Courts in Yueyang County for retrial. (III) On Jul. 26, 2007, the Company received notice of responses to action (2007) YMCZ No.794, No. 646, No. 817, No. 160 and No. 766 issued by the People's Courts in Yueyang County, Hunan Province, which informed that the Court had accepted the case of the controversy over the contract of sale housing of the Company started by Zhoubin and other 315 owners of Tellus Shopping City in Chengguan Town, Yueyang County, Hunan Province. Now, the house property involved in this case is receiving quality identification. (IV) As for the Company demanding that Jintian Industry (Group) Co., Ltd repay the Company with RMB 4,081,830 which had been deducted compulsively from the Company’s account because of the bank loan guarantee provided for it. The court pronounced that the Company won the lawsuit. 28 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 With the intermediation of the court, the following agreement was made between the Company and Jintian Company: Jintian Company should repay the Company with USD 2,960,490 before Oct. 31, 2008; the Company exempted its obligations of paying interests. If Jintian Company could not pay in schedule, overdue breach of contract damages would be paid in accordance with current benchmark lending rate of Renminbi publicized by The People's Bank of China. Relevant public notice was published on Securities Times and Hong Kong Wen Wei Po on August 26, 2008. Up to the disclosure date of this report, Jintian Company has not implemented the obligation in accordance with the agreement, the Company applied to the court for compulsive implementation. (V) As for the Company demanding that Zhonghao (Group) Co., Ltd repay the Company with RMB 16.62 million which had been deducted compulsively from the Company’s account because of the bank loan guarantee provided for it. The court pronounced that the Company won the lawsuit. Up to the disclosure date of this report, the Company applied to the court for compulsive implementation. The Company received Civil Judgment from Shenzhen Intermediate People's Court; because the Company did not supply clues of asset available for execution or asset of Zhonghao Company after the Company appealed to court for execution, the court also did not find the assets available for execution, thus the court terminated the execution for the case legally. After the terminating circumstances disappeared, the Company could apply the court for resuming execution. Relevant public notice was published on Securities Times and Hong Kong Wen Wei Po on August 26, 2008. (VI) As to the case on Shenzhen Shangbu Branch of Agricultural Bank of China suing Shenzhen Petrochemical Industry (Group) Co., Ltd for the overdue loan of RMB 57.6 million with guarantee provided by the Company, the Company refused to accept YGFMEZZ (2006) No.172 Civil Judgment issued by Guangdong Supreme Peoples’ Court, and applied Guangdong Supreme Peoples’ Court to retrial. After inspection, Guangdong Supreme Peoples’ Court thought that, the application of the Company accord with the condition for placing a case on file for retrial, and Guangdong Superior Peoples’ Court will form another collegial panel to retrial again. Relevant public notice was published on Securities Times and Hong Kong Wen Wei Po on Feb. 29, 2008. (VII) As to the case on the Company’s subsidiary Tellus Real Estate Company and Shenzhen Jinlu Industry & Trade Company suing Army 75731 and Guangzhou Military Shenzhen Real Estate Management Bureau on the cooperated construction contract dispute, there was no new progress made in this year. II. Particulars about equity of other listed companies held by the Company Unit: RMB Changes on Proportion Gains Initial Book owners’ Accounting Stock Short form in equity in the Share investment value at equity in calculation code of the stock of the report resources amount period-end the report items Company period period Financial China assets Promoter 600036 Merchants 60,581.05 0.00% 958,353.92 0.00 -2,164,965.64 available for share Bank sales Total 60,581.05 958,353.92 0.00 -2,164,965.64 78,812 tradable shares with restricted condition of China Merchants Bank Co. Ltd. (Short form of the stock: Merchants Bank, Stock code: 600036, hereinafter referred to as Merchants Bank) held by the Company which was listed in Shanghai Stock Exchange, received qualification of listing for trading on Feb. 27, 2008. III. The significant assets purchases, sales or merger in the report period In the report period, Shenzhen Automobile Industry Trade Corporation, the controlling subsidiary of the Company, transferred the 25.2285% equity of Shenzhen Biaoyuan Automobile Co., Ltd. 29 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 which was held by it to Li Zhongming with the price of RMB 14.32 million. The Company made assets estimation on the transferred equity of Biaoyuan Company according to relevant procedure and hanged out for trade in Shenzhen Assets and Equity Exchange Center. No personnel allocation and land leasing were involved in this trade and no related transaction would happen after this trade. The amount received from this equity transfer will be used for supplying the cash flow of the Company. Relevant notice has been published in Securities Times and Hong Kong WenWei Po dated Jun. 13th of 2008. IV. Significant related transactions in the report period (I) In the report period, the Company had no related transaction of purchase and sale of merchandise and supply of labor service with the related parties. (II) Related transaction of transfer of assets and equity with the related parties in the report period. In the report period, the Company transferred the land and workshop which was located in Swan Industry Park, Pinghu, Shenzhen, to Shenzhen Tefa Real Estate Co., Ltd. (hereinafter referred to as Tefa Real Estate) by public bid according to the estimated price RMB 5.7 million. The registered information has been transferred already in this report period. Because that Tefa Real Estate is controlling subsidiary of SDG, the Company’s controlling shareholder, the transaction belongs to related transaction. This transaction has been examined and approved in the 7th temporary meeting of the 5th Board of Directors dated Sep. 3, 2007, in which related directors made blenched voting and independent directors presented independent opinion for agreement. Income of RMB 2.33 million occurred from this transaction. In the report period, the holding subsidiary company Shenzhen Auto Industry & Trade Corporation transferred 32.94% equities of Shenzhen Pengchi Auto Co., Ltd. held by it to Shenzhen Longgang Great Industrial Zone Investment Development Co., Ltd. with the amount which was not lower than actual investment amount. Due to the Great Industrial Zone was the holding subsidiary company of the actual controller of the Company-Shenzhen Investment Holdings Co., Ltd., this transaction was related transaction. Relevant notice has published on Securities Times and Hong Kong Wen Wei Po on Jan. 30, 2008 and Feb. 27, 2008. (III) In the report period, the Company had no related transactions invested by the related parties and the Company. (IV) On credit and liability exchange and guarantee between the Company and the related parties, please refer to Note X of accounting statement for details. (V) In the report period, there was no other significant related transaction. V. Significant contracts and implementation (I) In the report period, the Company had no significant trusteeship, contract and lease of other companies’ assets and vice visa; (II) Significant guarantee: Unit: RMB’0000 Particulars about the external guarantee of the Company (Barring the guarantee for the controlling subsidiaries) Guarantee Name of the Date of happening Complete Amount of Guarantee Guarantee for related Company (Date of signing Implement guarantee type term party (Yes guaranteed agreement) ation or not or not) Shenzhen Auto Industry Import & Aug. 7, 2008 2,000.00 Credit One year No Yes Export Company Shenzhen Auto Nov. 18, 2008 1,366.92 Credit One year No Yes 30 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 Industry Import & Export Company Total amount of guarantee in the report 3,366.92 period Total balance of guarantee at the end of the 3,366.92 report period Guarantee of the Company for the controlling subsidiaries Total amount of guarantee for controlling 0.00 subsidiaries during the report period Total balance of guarantee for controlling 344.00 subsidiaries at the end of the report period Total amount of guarantee of the Company (including guarantee for controlling subsidiaries) Total amount of guarantees 3,710.92 Ratio of total guarantee to net assets of the 22.67% Company Including: Amount of guarantee for shareholders, 0.00 actual controller and its related parties The debts guarantee amount provided for the guarantee of which the assets-liability 3,366.92 ratio exceeded 70% directly or indirectly Proportion of total amount of guarantee in 0.00 net assets of the Company exceeded 50% Total amount of the aforesaid three 3,366.92 guarantees Note: In the above sheet, the guarantee that Auto Industry & Trade supplied for Shenzhen Auto Industry Import & Export Company was examined and approved in 2007 Annual Shareholders’ General Meeting held on May 15, 2008. 3. In the report period, Shenzhen Tefa Huari Automobile Co., Ltd., the subsidiary of the Company, purchased in T+0 financing products amounting to RMB 930,000 from Huangma Branch of Shenzhen Industrial and Commercial Bank of China on Dec 26th of 2008 with no fixed term. (III) In the report period, the Company’ subsidiary Shenzhen Tefa Huari Automobiles Co., Ltd purchased financing product of T+0 from Huangma Subbranch of Industrial and Commercial Bank of China amounting to RMB 930,000 on Dec. 26, 2008 without fixed period. The Company had not entrusted loans borrowings. (IV) In the report period, the Company had no other significant contracts. VI. Commitments (I) SDG, the shareholder of non-circulating shares, made the following commitments during the work of Share Merger Reform of the Company: 1. Commitments on Lock-up period (1) In accordance with the Measures for the Administration of the Share Merger Reform of Listed Companies, SDG would abide by the various laws, regulations and rules, and perform its statutory commitment duty. (2) Apart from the above-mentioned statutory commitment, SDG also made the following special commitment: with 36 months since the day the reform plan starts to take effect, SDG would not list at Shenzhen Stock Exchange and sell the ST Tellus it held (except for the shares used to promote the administration level of ST Tellus). (3) The administration level would abide by the laws, regulations and rules, and perform its statutory commitment duty. (4) SDG made the commitment: “The Promiser hereby promises that, if the Promiser failed to fulfill 31 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 its commitment or not fully fulfill its commitment, it would compensate other shareholders for their losses suffered thereafter”. (5) SDG declared: “The Promiser would dutifully fulfill its commitments and shoulder corresponding legal responsibilities. The Promiser would transfer the shares held by it only if the assignee agree and have the ability to shoulder the commitment responsibility.” 2. Special commitment concerning the incentive mechanism To effectively boost the core management level and business backbones for long, SDG would take out its shares, not exceeding 10% in total number after the Share Merger Reform, and apply them to the boost of the administration level. The shares would be sold to the Company’s administrative level over 3 years, with the selling price being the net asset value per share audited during the period nearest to the implementation. Before the implementation of the promoting plan by share selling each year, the administration level must prepay the Company a risk responsibility fund, i.e. 20% of the planned selling price; Should the work of the performance examination set by the Board failed to be finished, the paid risk responsibility fund would not be refunded and shall be owned by the Company. Detailed rules concerning the limitations on the administration level, such as the subscription conditions and risk responsibility fund, and boost plans would be set by the Board and submitted to relevant departments for approval. The implementation of the shares for promoting would be conducted strictly according to relevant laws and regulations, and the circulation conditions of these shares would be in conformity with relevant regulations set by the Shenzhen Stock Exchange. 3. Relevant expenses of this Share Merger Reform of ST Tellus would be paid by SDG. (II) The aforesaid commitments are in process of implementation by SDG. The restricted period for the shares held by SDG were expired on Jan. 20, 2009, in which 131,283,504 shares were listed for trading, and others were still in limited period due to special commitment of equity mechanism. VII. Particulars about reception of investigation and interview In the report period, the Company followed the regulations of Guidance to Listed Company Fair Information Disclosure. The Company and relevant person in charge of information disclosure strictly obey the principle of fair information disclosure. Besides the aforesaid situation of reporting unopened information to controlling shareholders, there were no situations of distinctively treatment, selectively and privately disclosure, impartment or omission of unopened information to specific persons in advance. In report period, the Company had no situation of reception of investigation and interview. VIII. CPAs engaged In the report period, the Company continued to engage Shenzhen Nanfang Minhe Certified Public Accountants Ltd as the financial auditing agency for the year 2008. The amount of the auditing charges totaled RMB 0.55 million. Up to now, the CPAs have provided the Company with auditing services for 8 successive years. IX. In the report period, neither the Company, nor its Board or directors had been inspected by the CSRC, received any administrative punishments or circulating criticism from the CSRC, or publicly criticized by the Stock Exchange. X. Other significant Events Significant events disclosed by the Company (I) Relevant Notice on Lawsuit and Its Progress of The Case on Real Estate Dispute of 64 Owner of Yueyang Tellus Shopping City was respectively published on Securities Times and Hong Kong 32 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 Wen Wei Po on Feb. 19, 2008 and May 20, 2008; (II) Relevant Public Notice on Lawsuit Progresses of The Case On Shenzhen Agricultural Bank Suing Shenzhen Petrochemical Industrial (Group) Co., Ltd. For The Overdue Loan and the Company’s Guarantee for It was respectively published on Securities Times and Hong Kong Wen Wei Po on Feb. 19, 2008; (III) Relevant Public Notice on Change of Employees’ Supervisor was published on Securities Times and Hong Kong Wen Wei Po on Apr. 2, 2008; (IV) Relevant Public Notice on Predicated Performance of Loss in the First Quarter of the Company was respectively published on Security Times and Hong Kong Wen Wei Po on Apr. 10, 2008; (V) Relevant Public Notice on Predicated Performance of Loss in Semi-Annual was respectively published on Securities Times and Hong Kong Wen Wei Po on Jul. 9, 2008; (VI) Relevant Public Notice on Lawsuit Progresses of the Case on the Company’s Accusation and Requirement on Jintian Company and Zhonghao Company for Paying Back the Supplied Guarantee was published on Securities Times and Hong Kong Wen Wei Po on Aug. 26, 2008; (VII) Relevant Public Notice on Predicated Performance of Loss in the Third Quarter of 2008 was respectively published on Securities Times and Hong Kong Wen Wei Po on Oct. 11, 2008; (VIII) Relevant Public Notice on Auto Industry & Trade Corporation Releasing the Guarantee for Biaoyuan Company was published on Securities Times and Hong Kong Wen Wei Po on Oct. 17, 2008; (IX) Relevant Public Notice on the Company Planning to Transfer 30% Equity of Shenzhen Huatong Automobile Industry Co., Ltd. was published on Securities Times and Hong Kong Wen Wei Po on Dec. 26, 2008. Section X. Financial Report AUDITORS’ REPORT 深南财审报(2009)CA208 号 AL L SHAREHOL DERS OF SHENZ HEN TEL L US HOL DING COM P ANY L IM ITED: (Incorporated in the People’s Republic of China with limited liability) We have audited the accompanying financial statements of Shenzhen Tellus Holding Company Limited (“the company”), which comprise the consolidated balance sheet as at 31 December 2008, and the consolidated income statement, the consolidated cash flow statement, the consolidated statement of changes in investors’ equity for the year then ended, and the notes to the financial statements. M anagem ent ’s Responsibilit y f or t he Financ ial St at em ent s The Company’s management is responsible for the preparation of these financial statements in accordance with the Accounting Standards for Business Enterprises. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and 33 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 applying appropriate accounting policies; and making accoungting estimates that are reasonable in the circumstances. Audit or’s Responsibilit y Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with China’s Auditing Standards for the Certified Public 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 judgement, 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 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 Company’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. Opinion In our opinion, the Group’s consolidated financial statements comply with the Accounting Standards for Business Enterprises and present fairly, in all material respects, the financial position of the Company as at 31 December 2008, and the consolidated results of operations and cash flows of the Company for the year then ended. Shenzhen Nanfang Minhe Accouting Firm Certified Public Accountants 34 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 Registered in the People’s Republic of China Certified Public Accountants Registered in the People’s Republic of China Shenzhen, China 20 March, 2009 Balance Sheet Prepared by ShenZhen Tellus Holding Co., Ltd. December 31, 2008 Unit: RMB Balance at period-end Balance at year-begin Items Merger Parent Company Merger Parent Company Current assets: Monetary funds 39,674,670.71 585,403.42 75,872,874.23 774,989.67 Settlement provisions Capital lent Transaction finance asset Notes receivable Accounts receivable 12,965,748.61 32,083,208.51 Accounts paid in advance 7,569,033.13 29,013,165.75 Insurance receivable Reinsurance receivables Contract reserve of reinsurance receivable Interest receivable Dividend receivable Other receivables 17,496,636.48 28,129,856.31 75,599,502.62 27,202,666.46 Purchase restituted finance asset Inventories 51,262,965.42 71,001,329.38 Non-current asset due within one year Other current assets Total current assets 128,969,054.35 28,715,259.73 283,570,080.49 27,977,656.13 Non-current assets: Granted loans and advances Finance asset available for 958,353.92 958,353.92 3,123,319.56 3,123,319.56 sales Held-to-maturity securities 1,051,300.00 121,300.00 Long-term account receivable Long-term equity investment 139,218,587.26 356,957,694.13 179,229,077.31 342,325,113.79 Investment property 124,071,906.35 70,745,180.16 130,294,651.25 76,192,747.62 Fixed assets 190,592,017.58 21,929,555.35 203,865,355.53 23,411,420.34 Construction in progress Engineering material Disposal of fixed asset Productive biological asset Oil and gas asset Intangible assets 244,023.34 244,023.34 1,226,441.63 1,226,441.63 Expense on Research and 35 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 Development Goodwill Long-term expenses to be 1,214,041.15 18,037.72 10,928,423.69 32,920.96 apportioned Deferred income tax asset 28,224,804.82 12,076,726.82 24,733,193.41 9,638,200.09 Other non-current asset Total non-current asset 485,575,034.42 462,929,571.44 553,521,762.38 455,950,163.99 Total assets 614,544,088.77 491,644,831.17 837,091,842.87 483,927,820.12 Current liabilities: Short-term loans 133,511,834.70 79,711,329.70 258,131,109.01 103,122,166.48 Loan from central bank Absorbing deposit and interbank deposit Capital borrowed Transaction financial liabilities Notes payable 1,194,477.04 Accounts payable 31,910,199.64 1,554.00 41,697,566.62 1,554.00 Accounts received in advance 5,147,850.02 24,574,657.41 Selling financial asset of repurchase Commission charge and commission payable Wage payable 9,576,937.52 1,381,270.28 14,016,085.82 3,454,267.72 Taxes payable 6,676,027.32 1,580,143.33 9,486,439.70 1,219,250.62 Interest payable Dividend payable Other accounts payable 130,578,197.83 203,603,126.36 165,447,450.02 182,265,702.31 Reinsurance payables Insurance contract reserve Security trading of agency Security sales of agency Noncurrent liabilities due within 1 year Other current liabilities 1,674,491.98 Total current liabilities 318,595,524.07 286,277,423.67 515,027,800.56 290,062,941.13 Non-current liabilities: Long-term loans 14,600,000.00 20,000,000.00 Bonds payable Long-term account payable 4,209,595.37 4,595,569.61 Special accounts payable Projected liabilities 87,568,728.57 87,568,728.57 87,568,728.57 87,568,728.57 Deferred income tax liabilities 2,583,414.85 179,554.57 3,267,374.30 459,410.78 Other non-current liabilities Total non-current liabilities 108,961,738.79 87,748,283.14 115,431,672.48 88,028,139.35 Total liabilities 427,557,262.86 374,025,706.81 630,459,473.04 378,091,080.48 Owner’s equity (or shareholders’ equity): Paid-in capital (or share 220,281,600.00 220,281,600.00 220,281,600.00 220,281,600.00 capital) Capital public reserve 7,162,681.81 5,197,400.53 5,439,871.88 7,082,509.96 Less: Inventory shares Surplus public reserve 2,952,586.32 2,952,586.32 2,952,586.32 2,952,586.32 Provision of general risk Retained profit -66,687,367.86 -110,812,462.49 -71,271,675.92 -124,479,956.64 Balance difference of foreign 36 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 currency translation Total owner’s equity attributable to 163,709,500.27 117,619,124.36 157,402,382.28 105,836,739.64 parent company Minority interests 23,277,325.64 49,229,987.55 Total owner’s equity 186,986,825.91 117,619,124.36 206,632,369.83 105,836,739.64 Total liabilities and owner’s equity 614,544,088.77 491,644,831.17 837,091,842.87 483,927,820.12 Profit Statement Prepared by ShenZhen Tellus Holding Co., Ltd. January-December, 2008 Unit: RMB Amount in this period Amount in last period Items Merger Parent Company Merger Parent Company I. Total operating income 637,896,590.03 26,344,857.98 991,036,624.74 43,128,531.62 Including: Operating income 637,896,590.03 26,344,857.98 991,036,624.74 43,128,531.62 Interest income Insurance gained Commission charge and commission income II. Total operating cost 645,714,971.11 23,625,042.83 1,012,721,328.61 40,638,979.87 Including: Operating cost 541,978,943.53 5,658,192.43 881,291,102.25 9,301,674.05 Interest expense Commission charge and commission expense Cash surrender value Net amount of expense of compensation Net amount of withdrawal of insurance contract reserve Bonus expense of guarantee slip Reinsurance expense Operating tax and extras 3,988,766.40 662,971.84 4,213,130.44 768,354.66 Sales expenses 31,980,546.16 40,257,190.01 Administration expenses 52,095,336.83 12,013,686.71 51,731,617.50 16,514,622.94 Financial expenses 12,676,977.99 4,783,960.98 13,823,336.70 8,769,388.63 Losses of devaluation of asset 2,994,400.20 506,230.87 21,404,951.71 5,284,939.59 Add: Changing income of fair value(Loss is listed with “-”) Investment income (Loss is 7,307,108.63 7,759,966.69 34,679,869.76 31,779,478.68 listed with “-”) Including: Investment income on affiliated company and joint 3,887,128.47 5,065,842.66 14,479,995.45 9,977,597.68 venture Exchange income (Loss is listed with “-”) III. Operating profit (Loss is listed -511,272.45 10,479,781.84 12,995,165.89 34,269,030.43 with “-”) Add: Non-operating income 3,703,116.80 2,325,214.63 5,231,312.03 422,387.96 Less: Non-operating expense 1,002,927.55 356,628.26 9,976,349.04 1,343,442.85 Including: Disposal loss of 253,159.46 8,496,293.96 non-current asset IV. Total Profit (Loss is listed with 2,188,916.80 12,448,368.21 8,250,128.88 33,347,975.54 37 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 “-”) Less: Income tax 344,018.49 -1,219,125.94 107,824.99 1,781,131.87 V. Net profit (Net loss is listed with 1,844,898.31 13,667,494.15 8,142,303.89 31,566,843.67 “-”) Net profit attributable to 4,584,308.06 12,311,789.81 owner’s equity of parent company Minority shareholders’ gains and -2,739,409.75 -4,169,485.92 losses VI. Earnings per share i. Basic earnings per share 0.02 0.06 ii. Diluted earnings per share 0.02 0.06 Cash Flow Statement Prepared by ShenZhen Tellus Holding Co., Ltd. January-December, 2008 Unit: RMB Amount in this period Amount in last period Items Merger Parent Company Merger Parent Company I. Cash flows arising from operating activities: Cash received from selling commodities and providing labor 813,219,898.65 12,749,457.98 1,203,616,967.95 8,219,406.13 services Net increase of customer deposit and interbank deposit Net increase of loan from central bank Net increase of capital borrowed from other financial institution Cash received from original insurance contract fee Net cash received from reinsurance business Insured savings and net increase of investment Net increase of disposal of transaction financial asset Cash received from interest, commission charge and commission Net increase of capital borrowed Net increase of returned business capital Write-back of tax received 1,199,190.09 1,102,527.20 164,839.99 Other cash received 27,327,069.52 26,907,693.96 11,019,447.20 41,413,029.02 concerning operating activities Subtotal of cash inflow 841,746,158.26 40,759,679.14 1,214,801,255.14 49,632,435.15 arising from operating activities Cash paid for purchasing commodities and receiving labor 646,342,443.16 1,131,789,611.54 service Net increase of customer loans and advances 38 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 Net increase of deposits in central bank and interbank Cash paid for original insurance contract compensation Cash paid for interest, commission charge and commission Cash paid for bonus of guarantee slip Cash paid to/for staff and 62,774,240.90 6,770,335.83 53,533,393.79 4,847,255.67 workers Taxes paid 23,099,213.01 3,551,854.46 21,728,078.09 2,784,916.49 Other cash paid concerning 74,052,183.21 5,992,108.50 69,744,446.13 28,995,434.42 operating activities Subtotal of cash outflow 806,268,080.28 16,314,298.79 1,276,795,529.55 36,627,606.58 arising from operating activities Net cash flows arising from 35,478,077.98 24,445,380.35 -61,994,274.41 13,004,828.57 operating activities II. Cash flows arising from investing activities: Cash received from 10,237,251.46 25,887,466.28 22,879,666.28 recovering investment Cash received from 586,074.08 547,184.35 228,331.18 228,331.18 investment income Net cash received from disposal of fixed, intangible and 5,337.27 5,143,379.36 other long-term assets Net cash received from disposal of subsidiaries and other units Other cash received 32,500,000.00 concerning investing activities Subtotal of cash inflow 10,828,662.81 547,184.35 63,759,176.82 23,107,997.46 from investing activities Cash paid for purchasing fixed, intangible and other 803,362.89 50,670.00 1,013,508.66 5,060.00 long-term assets Cash paid for investment 1,604,450.00 4,600.00 Net increase of mortgaged loans Net cash received from subsidiaries and other units Other cash paid concerning 5,380,670.64 investing activities Subtotal of cash outflow 7,788,483.53 55,270.00 1,013,508.66 5,060.00 from investing activities Net cash flows arising from 3,040,179.28 491,914.35 62,745,668.16 23,102,937.46 investing activities III. Cash flows arising from financing activities Cash received from 9,814,400.00 absorbing investment Including: Cash received from absorbing minority 9,814,400.00 shareholders’ investment by subsidiaries 39 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 Cash received from loans 120,999,990.00 248,764,000.00 13,000,000.00 Cash received from issuing bonds Other cash received concerning financing activities Subtotal of cash inflow 120,999,990.00 258,578,400.00 13,000,000.00 from financing activities Cash paid for settling debts 155,043,941.75 23,180,000.00 218,714,000.00 46,250,000.00 Cash paid for dividend and profit distributing or interest 40,645,470.10 1,930,508.78 9,868,109.86 3,524,183.03 paying Including: Dividend and profit of minority shareholder 1,431,293.12 968,731.67 paid by subsidiaries Other cash paid concerning financing activities Subtotal of cash outflow 195,689,411.85 25,110,508.78 228,582,109.86 49,774,183.03 from financing activities Net cash flows arising from -74,689,421.85 -25,110,508.78 29,996,290.14 -36,774,183.03 financing activities IV. Influence on cash due to -27,038.93 -16,372.17 -33,635.49 -18,651.49 fluctuation in exchange rate V. Net increase of cash and cash -36,198,203.52 -189,586.25 30,714,048.40 -685,068.49 equivalents Add: Balance of cash and cash equivalents at the period 75,872,874.23 774,989.67 45,158,825.83 1,460,058.16 -begin VI. Balance of cash and cash 39,674,670.71 585,403.42 75,872,874.23 774,989.67 equivalents at the period -end 40 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 Statement on Changes of Owners' Equity Prepared by ShenZhen Tellus Holding Co., Ltd. December 31, 2008 Unit: RMB Amount in this report period Amount last year Owners' equity attributable to the parent company Owners' equity attributable to the parent company Paid-up Surplu General Minorit Total Paid-up Minorit Total Items Less: Less: General capital Capital s risk Retaine y owners capital Capital Surplus Retained y owners Treasury Others Treasury risk Others (Share reserves reserve provisio d profit interest ’ equity (Share reserves reserves profit interest ’ equity Stock Stock provision capital) s n capital) 220,28 205,11 220,28 201,53 5,439,8 2,952,5 -72,788, 49,229, 7,503,6 2,952,5 -83,583, 54,378, I. Balance at the end of the last year 1,600.0 5,834.1 1,600.0 2,853.1 71.88 86.32 211.57 987.55 05.45 86.32 465.73 527.09 0 8 0 3 Add: Changes of accounting policy 1,516,5 1,516,5 Error correction of the last period 35.65 35.65 Others 220,28 206,63 220,28 201,53 II. Balance at the beginning of this 5,439,8 2,952,5 -71,271, 49,229, 7,503,6 2,952,5 -83,583, 54,378, 1,600.0 2,369.8 1,600.0 2,853.1 year 71.88 86.32 675.92 987.55 05.45 86.32 465.73 527.09 0 3 0 3 III. Increase/ Decrease in this -19,64 1,722,8 4,584,3 -25,952, -2,063, 10,795, -5,148,5 3,582,9 year (Decrease is listed 5,543.9 09.93 08.06 661.91 733.57 254.16 39.54 81.05 with'"-") 2 4,584,3 -2,739,4 1,844,8 10,795, -4,169,4 6,625,7 (I) Net profit 08.06 09.75 98.31 254.16 85.92 68.24 (II) Profits and losses calculating -1,301, 441,397 -860,5 1,558,8 1,558,8 into owners' equity 963.42 .72 65.70 61.95 61.95 1. Net changing amount of fair -1,885, -1,885, 1,558,8 1,558,8 41 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 value of financial assets 109.43 109.43 61.95 61.95 available for sale 2. Effect of changes of other owners' equity of invested units under equity method 3. Effect of income tax related to owners' equity 583,14 441,397 1,024,5 4. Others 6.01 .72 43.73 -1,301, 4,584,3 -2,298,0 984,33 1,558,8 10,795, -4,169,4 8,184,6 Total of (I)and (II) 963.42 08.06 12.03 2.61 61.95 254.16 85.92 30.19 -19,19 (III) Owners' devoted and decreased 3,024,7 -22,223, 8,583.4 capital 73.35 356.76 1 3,024,7 6,789,6 9,814,4 1. Owners' devoted capital 73.35 26.65 00.00 2. Amount calculated into owners' equity paid in shares -29,01 -29,012, 3. Others 2,983.4 983.41 1 -1,431,2 -1,431, -979,05 -979,0 (IV) Profit distribution 93.12 293.12 3.62 53.62 1. Withdrawal of surplus reserves 2. Withdrawal of general risk provisions 3. Distribution for owners -1,431,2 -1,431, -979,05 -979,0 (shareholders) 93.12 293.12 3.62 53.62 42 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. 深圳市特力(集团)股份有限公司 2007 年年度报告 4. Others (V) Carrying forward internal -3,622, -3,622, owners' equity 595.52 595.52 1. Capital reserves conversed to capital (share capital) 2. Surplus reserves conversed to capital (share capital) 3. Remedying loss with profit surplus -3,622, -3,622, 4. Others 595.52 595.52 220,28 186,98 220,28 205,11 IV. Balance at the end of the report 7,162,6 2,952,5 -66,687, 23,277, 5,439,8 2,952,5 -72,788, 49,229, 1,600.0 6,825.9 1,600.0 5,834.1 period 81.81 86.32 367.86 325.64 71.88 86.32 211.57 987.55 0 1 0 8 43 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan Not e 1. Com pany P rof ile 1 . C o m p an y S tatu s Shenzhen Tellus Machinery Co. Limited is a state-owned enterprise, established in Shenzhen in the People’s Republic of China (the PRC) On 11 December 1992, the Shenzhen Municipal People’s Government approved the reorganization of Shenzhen Tellus Machinery Co. Ltd. to become a public limited company. Shenzhen Tellus Machinery Co. Ltd. was renamed Shenzhen Tellus Holding Company Limited (hereinafter referred to as “the Company”) on 30 June 1994, with approval by the Shenzhen Administration for Industry and commerce. The company respectively obtained the approval certificates “Shen Zhen Ban Fu (1993) No. 34” and “Shen Zhen Shi Zi (1993) No. 22”from the Shenzhen Stock Management Office and Shenzhen Stock Exchange in June 1993. On 31 March 1997, with the approval of Shenzhen Municipal People’s Government “Shen Fu Han (1997) No.19” and China Security Regulatory Commission “Zhen Jian Han (1997) No.5”, Shenzhen Investment Administrative Company transferred its 159,588,000 shares to Shenzhen Te Fa (Group) Company Company Limited (hereinafter referred to as “the Te Fa Group”). The shares transferred represent 72.45% of the total issued shares of the Company. In order to circulate all the non-negotiable shares in the A share market, the Te Fa Group, as the one and only shareholder of non-negotiable shares in the Company, gave 13,717,440 shares to the holders of tradable shares of the company in the A share market(Per 10 tradable shares for 4 shares). The transferring was finished on 04 January 2006. After the split-share reform was completed, The Te Fa Group holds 66.22% of the shares capital of the Company. The Company holds the Business License(Shen Qi Fa Zi No. 01141). 2 . I n d u s tr y , B u s i n e s s S c o p e , m ai n p r o d u c ts o r s e r v i c e The company and its subsidiaries provided automobile overall services, including automobile retailing, inspection and maintenance, production of inspection equipment, property lease and property management service, etc. With the approval by Shenzhen Administration for Industry and Commerce, the Company’s business scope includes business, warehouse and transportation, mechanical accessory processing, mechanical equipment installation, mainland commerce, goods and materials business , (Government monopolistic goods and materials are not included.), import and export business of internal production materials and accessories. Import and export business complys with the approval certificate (Shen Mao Guan Zheng Zi 13 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan No.098). During the period reported, there was no change in the main operating business. 3 . Au th o r i ze d p e r s o n an d i s s u e d d ate o f th e f i n an c i al s tate m e n ts The financial statements of the Company are authorized to be issued to the public on 20 March 2009 by the Board of Directors. Not e 2. Basis P reparat ion of t he Financ ial St at em ent s The Company continues to operate as a going concern. These financial statements have been prepared on an accrual basis, according to the actual transations and events. The financial statements of the Company have been prepared in conformity with the requirements of the Accounting Standards for Business Enterprises issued by the Ministry of Finance of the PRC on 15 February 2006 and the Information Disclosure Standards for Listed Companies No.7—the Preparation & Disclosure of Comparative Financial Information in the Transition Period of New & Old Accounting Standards issued by the China Security Regulatory Commission on 15 February 2007. The financial statements of the Company have been prepared in accordance with the accounting policies and accounting estimates set out below. Not e 3. St at em ent of Com plianc e wit h t he Ac c o u n ti n g S tan d ar d s f o r B u s i n e s s E n te r p r i s e s The financial statements of the Company for the year ended 31 December 2008 are in conformity with the requirements of the Accounting Standard for Business Enterprises, and present fairly, in all material respects, the financial position, the results of operations, the cash flows and other relevant informations of the Company. Note 4. Accounting Policies, Accounting Estimates and Preparation Method of Consolidated Financ ial St at em ent s 1. F i s c al p e r i o d The accounting year of the company is from 1 January to 31 December of the Gregorian calendar year. 2. Currency used in book-keeping The Company’s reporting currency is the RMB Yuan. 3. B o o k - k e e p i n g b as i s an d m e as u r e m e n t attr i b u te s The accounting calculation is on an accrual basis. 14 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan The accounting elements are measured on the historic cost basis. In accordance with the requirements of the Accounting Standard for Business Enterprises, replacement cost, net realizable value, present value and fair value measurement will be adopted in order to make the value of accounting elements reliable. 4. C as h e q u i v al e n ts Cash equivalents represent short-term, highly liquid investments, which are readily convertible into known amounts of cash and are subject to an insignificant risk of change in value. 5. T r an s l ati o n o f f o r e i g n c u r r e n c y Foreign currency transactions during the accounting year are translated into RMB Yuan at the spot exchange rates quoted by the People’s Bank of China ruling at the transaction dates. 6. R e c o g n i ti o n an d m e as u r e m e n t o f th e F i n an c i al As s e ts an d F i n an c i al Li ab i l i ti e s 1) Financial Asset The initial Recognition of the Financila Assets are based on fair value and divided into the following four categories: trading financial assets; held-to-maturity investments; payments and accounts receivable; financial assets available for sale. Trading financial assets are measured at their fair values and whose variations are included into the current profit and loss. Financial assets available for sale are measured at their fair values and whose variations are included into the shareholders equity. Accounts receivial and held-to-maturity investments are measured at the amortized costs. Except for the financial asserts which are measured at their fair values and whose variations are included into the current profit and loss, the initial recognition should also include the transaction expenses related to the purchase of the financial assets. 2) Financial Liabilities Financial Liabilities are divided into the following two categories: trading financial liabilities and financial liabilities carried at amortized cost. 3) Fair values of financial assets and financial liabilities （ 1） The fair values of financial assets and financial liabilities in the principle market are measured by the offer of the principle market. （ 2） If there is no principle market for the financial instruments, the fair value is measured by valuation approach. 15 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan （ 3） The fair value of initial or originated financial assets and financial liabilities is measured on the basis of transaction prices. （ 4） The discount rate used to measure the fair values by the Discounted Future Cash Flow Method shall apply the rate of return of financial instruments in the market, which are the same in the contractual articles and characters. 4) Impairment of financial assets At the end of the accouting period, if there are approved evidences to clearly show the devaluation of financial assets (excluding the trading financial assets), Impairment losses are recognized at the balance of thecurrent value of future cash flow lower than the book value, and provisions for impairment of financial assets will be provided thereof. （ 1） Accounts receivable Allowance method is adopted in accounting of bad debt provision which may happen. At the end of fiscal year, impairment loss should be recognized if account receivable had devalued by approved evidence. Impairment losses are recognized at the balance of current value of future cash flow lower than the book value, and bad debt provisions will be provided thereof. At the end of fiscal year, impairment tests are performed separately on single account receivable which is with major amout or which is different from other account receivables by approved evidence. Impairment losses are recognized at the balance of current value of future cash flow lower than the book value, and bad debt provisions will be provided thereof. The individual account receivable with minor amount and those with major amount but suggested no impairment when separate impairment test was performed should be divided into several categories according to their risk characters. Impairment losses are recognized in proportion to their balances as at the date of balance sheet, and bad debt provisions will be drawn thereof. The propotion reflects the real impairment losses which my happen, namely the balance of the book value and the present value of future cash flow of each catergory. During the reporting period, based on the actual loss rate of account receivables group(i.e. account receivables age group ) of previous reporting period and the real situations, the company drew the bad debt provisions at the following schedule, 16 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan Age Rate % Within 1 year -- Over 1 year but within 2 years 5% Over 2 years but within 3 years 20% Over 3 years 50% 100% special bad debt provisions will be drawn for the estimated uncollectibles. The company does not draw bad debt provisions for current accounts between the parent company and the consolidated subsidiaries. Standard for bad bedts recognition, (1) When the debtor is eliminated, bankrupted, or dead, and the account cannot be retrieved or significant short in cash flow after liquidation of the debtor’s assets or heritages. (2) The debtor hasn’t fulfilled its obligations to clear the overdue debt, and clear evidence suggesting that the account is impossible to be recovered. Bad debt loss is recognized when conclusive evidence suggests that the account is not receivable, and the bad debt provisions will be neutralized thereafter. If the conclusive evidence suggests that the account is not receivable, bad debts will be written off with the approval of board of directors. （ 2） Held-to-maturity investment The recognition and measurement of impairment losses of held-to-maturity investments is based on the impairment losses methods of accounts receivable. （ 3） Financial assets available for sale If the fair values of financial assets available for sale have decreased by a great amount, and the decrease is not temporary after considering all relevant factors, Impairment losses are recognized at the balance of current value of future cash flow lower than the book value, and bad debt provisions will be provided thereof. If the impairment losses of financial assets available for sale have actually incurred, the accumulating losses owing to the decrease of fair values in owner’s equity must be transferred. Impairment losses are recognized and bad debt provisions will be provided thereof. 7. I n v e n to r y Inventories are: stock, raw materials, product-in-process, finished goods, consumables and product-in-development, finished products and leased products under the real estate development project.etc. 17 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan The inventories of non-real estate development enterprise should be initially measured in light of their cost. The cost of inventory consists of purchase costs, processing costs and other costs. Issuing inventories are measures by the weighted average method. Inventory accounting of real estate development enterprise inventory accounting includes: (1) The land for development: the expenditure of the Company to purchase land for development are initially measured as intangible assets and then amortized averagely at the remaining useful life years; transfer it to the product-in-developing recorded with net value after amortization started from the finished date of real estate project. (2) Public facilities fee: completion of the actual construction costs included in the product development, if a number of real estate projects benefit from a public facility, it will be amortized at a proportion according to its sales area. Real estate projects are recorded into finished products at predicted costs when they are completed. (3) Public facilities specific fund: record it by 2% of the total investment (exclude the land value) and classify it to product-in-develping. (4) Quality guarantee deposit: record it into finished products cost based on the contract amount, meanwhile, records it into accounts payable, and pay it when guarantee expired. (5) Lease product: for the product being aimed to be sold but now leased temporarily, it is amortized at the book value and the expected average useful life. Inventory system: the Company applys perpetual inventory system. The measurement of net realizable value of the inventory: the net realizable value of finished products, goods, materials for sale and other goods directly for sale is measured by the estimated sale price deducting the estimated sale expense and relevant taxes. The net realizable value of material needed to be processed is measured by the estimated sale price of products deducting the estimated cost of completion, estimated sale expense and relevant taxes. The provisions of value decrease of inventories: on the balance sheet date, the provisions of value decrease of inventories are recognized when the net reliable values of inventories are lower than its book values, and are included in the current profits and losses. If the value of inventories is recovered in latter period, the amount of write-down should be resumed and be reversed from the provisions of value decrease of inventories that has been made. The reversed amount should be transferred to the current profits and losses. 8. Lo n g - te r m e q u i ty i n v e s tm e n ts 18 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan 1) long-term equity investment category Long-term equity investments are: long-term equity investments on subsidiaries, long-term equity investments on joint enterprises, long-term equity investments on associated enterprises, long-term equity investments on enterprises with little control and influence,e which is not quoted in the principle market and whose fair value cannot be reliably measured (hereinafter referred to as "other long-term equity investments"). 2) Initial measurement of long-term equity investments （ 1） The initial cost of a long-term equity investment formed in the merger of an enterprise. The initial cost of the long-term equity investment incurred in the merger of an enterprise should be ascertained in accordance with the following provisions: For the merger of enterprises under the same control, 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 direct cost for the merger of the combining party should be recorded into the current profits and losses. For the merger under different control, the combination costs should be the fair values, on the acquisition date, of the assets paid, the liabilities incurred or assumed and the equity securities issued by the acquirer in exchange for the control on the acquiree. All relevant direct costs incurred to the acquirer for the merger should also be recorded into the initial cost of merger. （ 2） The initial cost of a long-term equity investment obtained by other means. The initial cost of a long-term equity investment obtained by making payment in cash shall be recognized at the purchase cost which is actually paid. The initial cost consists of the expenses directly relevant to the obtainment of the long-term equity investment, taxes and other necessary expenses. But the cash dividends in purchase payment, which is declared but not yet received, shall be included in a separate account receivable. The initial cost of a long-term equity investment obtained by issuing equity securities shall be recongnized at the fair valuse of the issued equity securities. The initial cost of a long-term equity investment of an investor shall be recognized at the contractual value, except the contractual value is unfair. If a long-term investment is obtained by the exchange of non-monetary assets, the transaction possesses commercial nature and the fair values of assets received or surrendered can be 19 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan measured reliably, the initial cost of the long-term equity investment shall be recognized at the fair values of assets surrendered and the relevant expenses. The balance of fair values and the book values of assets received is included in the current profits and losses. If the a long-term equity investment is obtained by liabilities restructuring, the initial cost of the long-term equity investment shall be recognized by the fair values of equity. The balance of the initial cost of long-term equity investment and book value of claim is included in the current profits and losses. 3) Subsequent measurement of a long-term equity investment For a long term equity investment on the subsidiaries, the Company shall be accounted by the cost method as prescribed by these Standards, and shall make an adjustment by the equity method when it works out consolidated financial statements. The following long-term equity investments of the joint venture and associated enterprises shall be measured by the equity method. On the date of balance sheet, if the long-term equity investments on the subsidiaries, the joint ventures and the associated ernterprises impair, the mpairment losses are recognized if the receivable values are lower than the book values. The impairment for long-term equity investment is drawn. If the other long-term equity investments impair, the mpairment losses are recognized at the balance of current value of future cash flow lower than the book value, and included in the current profits and losses. The impairment for long-term equity investment is drawn. The above-mentioned impairment for long-term equity investments can not be switched back in the future accounting periods. 4) Tthe recognizion of long-term equity investments The value of a long-term equity investment measured by the cost method shall be recognized at its initial investment cost. If there are additional investments or disinvestments, the cost of the long-term equity investment shall be adjusted. The dividends or profits declared to distribute by the investee shall be recognized as the current investment income. The current investment income recognized by the investee shall be limited to the allowed proportion of the accumulating net profits. The excess amount of the dividends or profits must be returned as cost of the initial investments. The long-term equity investment measured by the equity method shall recognize its investment profits and losses, and adjust the book value of long-term equity investments according to the attributable share of the net profits or losses of the investment. The investor shall, in the light 20 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan of the profits or cash dividends declared to distribute by the investee, calculate the proportion it shall obtain, and shall reduce the book value of the long-term equity investment accordingly. For any variations of the owner's equity other than the changes of net profits and losses of the investee, the book value of the long-term equity investments shall be adjusted and be included in the owner's equity. When disposing a long-term equity investment, the difference between its book value and the actual purchase price shall be included in the current profits and losses. For the long-term equity investment measured by the equity method, any variations other than the changes of net profits and losses of the nvestee are included in the owner's equity. The amount of previous long-term equity investment included in the owner's equity shall be transferred to the current profits and losses in a certain proportion. 9. I n v e s tm e n t r e al e s tate s 1) The classification of the investment real estates The investment real estates of the Company is the leased buildings. 2) Measurement of investment real estates The investment real estates shall be initially measured in light of their cost when getting it and make a follow-up measurement to the investment real estate through the cost pattern on the date of the balance sheet. The test method of depreciation or impairment of the buildings is the same as fixed assets’. 10. R e c o g n i ti o n , c l as s i f i c ati o n s an d d e p r e c i ati o n m e th o d s o f f i x e d as s e ts 1) Standard of fixed assets The Company’s fixed assets are: house & buildings, machines and equipments, transportation equipments, electronic devices and other devices. 2) Types of fixed assets Fixed assets of the company include: constructions like houses, machines, transport equipments, digital devices and other devices. 3) Measurement of fixed assets The initial measurement of a fixed asset shall be made at its cost. The cost of a purchased fixed asset consists of the purchase price, import duties, freights, insurance and other expenses that bring the fixed asset to the expected conditions for use and that may be relegated to the fixed asset. If the payment for a fixed asset is delayed beyond the normal credit conditions and it is of financing nature in effect, the cost of the fixed asset shall be ascertained based on the current value of the purchase price. The difference between the actual payment and the current value of the purchase price shall be included in the current profits and losses within the credit period, 21 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan unless it shall be capitalized. 4) Depreciation methods The company adopted the straight-line method as the depreciation method, and decided the depreciation rate based on the carrying value of all types of fixed assets and their estimated useful life minusing the salvage value(which was 3%of the carrying value).Annual depreciation rates regarding to types were as follows: Category Useful life Annual depreciation rate% Housing & building 35 years 2.77% machines 12 years 8.08% Transport equipment 7 years 13.86% Digital device 7 years 13.86% Other device 7 years 13.86% 5) Subsequent expenditures of fixed assets Subsequent expenditures of fixed assets shall not be capitalized unless they simultaneously meet the following requirements: (1) The relevant economic benefits may flow into the enterprise; and (2) The relevant costs to be incurred can be measured in a reliable way. If there was any replacement of the fixed assets, then the carrying value should be reduced.If the Subsequent expenditures of fixed assets could not comply with the above requirements, they should be credited to the current profits and losses. Improved expenditure of fixed assets acquired by operating lease should be capitalized as long-term prepaid expenses and amortizated in a reasonable period. 6) The impairment of fixed assets For fixed assets, at the balance sheet day, where any evidence shows that there is possible assets impairment, the recoverable amount of the assets shall be estimated. The recoverable amount shall be determined in light of the higher one of the net amount of the fair value of the assets minus the disposal expenses and the current value of the expected future cash flow of the assets.The estimation of recoverable amount should on the basis of individual asset. If it is difficult to estimate the recoverable amount, then it should be decided based on the asset group. Once any loss of asset impairment is recognized, it shall not be switched back in the future accounting periods. 11. C o n s tr u c ti o n i n p r o c e s s 22 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan Construction in process includes the pre-construction preparations, the construction under the constructing process, installation, and technical transformation projects, overhaul works. The cost of construction in process shall be measured in the light of actual expenditure. Construction in process is transferred to fixed asset as soon as the asset reaches its useful status as expected. Since the date when the construction in process reaches its useful status as expected, it is transferred to fixed asset. At the balance sheet date, as to construction in process which is long-term suspended and will not be re-started in three years, its loss accounted into Construction-in-progress impairment losses shall be calculated by the variance between the recoverable amount and the book value. Once any loss of asset impairment is recognized, it shall not be switched back in the future accounting periods. 12. Me as u r e m e n t an d am o r ti zati o n m e th o d o f i n tan g i b l e as s e ts Intangible assets include those with limited service life and those with uncertain service life. 1) Measurement of intangible assets The intangible assets shall be initially measured according to its actual cost. The cost of self-developed intangible assets shall include the total expenditures incurred during the period from the time when it meets the provisions of certain standards to the time when the expected purposes of use are realized. 2) Amortization of intangible assets (1) With regard to intangible assets with limited service life, its amortization amount shall be amortized within its service life systematically and reasonably. If it is unable to determine the expected realization pattern reliably, intangible assets shall be amortized by the straight-line method. (2) Intangible assets with uncertain service life may not be amortized. 3) The impairment of intangible assets Impairment tests should be conducted towards intangible assets with uncertain service life at the balance sheet day. For intangible assets with limited life, at the balance sheet day, where any evidence shows that there is possible assets impairment, the recoverable amount of the assets shall be estimated. If the recoverable amount is lower than its carrying value, the carrying value of the asset shall be recorded down to the recoverable amount, and the reduced amount shall be recognized as the 23 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan losses of intangible asset impairment and be recorded as thecurrent profits and losses. Simultaneously, a provision for the asset impairment shall be made accordingly. Once any loss of asset impairment is recognized, it shall not be switched back in the future accounting periods. 13. Am o r ti zati o n p o l i c y o f l o n g - te r m p r e p ai d e x p e n s e s Determine a reasonable benefit period for Long-term prepaid expenses, and amortize it according to its average benefit period. 14. B o r r o w i n g C o s ts The borrowing costs shall include interests on borrowings, amortization of discounts or premiums on borrowings, ancillary expenses, and exchange balance on foreign currency borrowings. 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. 1) Conditions of capitalization 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. 2) Recognition of capitalized amounts As for specifically borrowed loans for the acquisition and construction or production of assets eligible for capitalization, the to-be-capitalized amount of interests shall be determined in light of the actual cost incurred of the specially borrowed loan at the present period minus the income of interests earned on the unused borrowing loans as a deposit in the bank or as a temporary investment. 24 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan Where a general borrowing is used for the acquisition and construction or production of assets eligible for capitalization, 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. 3) Capitalize cost suspension Where the acquisition and construction or production of a qualified fixed asset is interrupted abnormally and the interruption period lasts for more than 3 months, the capitalization of the borrowing costs shall be suspended. The borrowing costs incurred during such period shall be recognized as expenses, and shall be recorded into the current profits and losses, till the acquisition and construction or production of the asset restarts. If the interruption is a necessary step for making the qualified fixed asset under acquisition and construction or production to be ready for the intended use or sale, the capitalization of the borrowing costs shall continue. 4) Cease to capitalize cost 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. The borrowing costs incurred after the qualified asset under acquisition and construction or production is ready for the intended use or sale shall be recognized as expenses at the incurred amount when they are incurred, and shall be recorded into the current profits and losses. 15. E m p l o y e e r e m u n e r ati o n The term "employee remuneration" refers to all kinds of payments and other relevant expenditures given by enterprises in exchange of the services offered by the employees. The employee remuneration shall include: (1) Wages, bonuses, allowances and subsidies for the employees; (2) Welfare expenses for the employees; (3) Medical insurance, endowment insurance, unemployment insurance, work injury insurance, maternity insurance and other social insurances; (4) Housing accumulation fund; (5) Labor union expenditure and employee education expenses; (6) Non-monetary welfare; 25 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan (7) Compensations for the cancellation of the labor relationship with the employees; and (8) Other relevant expenditures of services offered by the employees. During the accounting period of an employee' providing services to an enterprise, the enterprise shall recognize the remuneration payable as liabilities. Except for the remuneration for the cancellation of the labor relationship with the employee, the enterprise shall, in accordance with beneficiaries of the services offered by the employee, treat this liabilities as the product costs and service costs; construction costs of fixed asset; costs of intangible assets and the current profits or losses. 16. R e c o g n i ti o n o f p r e d i c te d d e b ts The obligation pertinent to contingencies shall be recognized as anestimated debts when the following conditions are satisfied simultaneously: (1) That obligation is a current obligation of the enterprise; (2) It is likely to cause any economic benefit to flow out of the enterprise as a result of performance of the obligation; and (3) The amount of the obligation can be measured in a reliable way. Where an executory contract turns to be a loss contract, the obligation generated from the loss contract and restructuring obligations undertaken by an enterprise which meets the provisions above shall be recognized as an estimated debts. The estimated debts shall be initially measured in accordance with the best estimate of the necessary expenses for the performance of the current obligation. 17. R e c o g n i ti o n o f i n c o m e (1) No revenue from selling goods may be recognized unless the following conditions are met simultaneously: a. The significant risks and rewards of ownership of the goods have been transferred to the buyer by the enterprise; b. The enterprise retains neither continuous management right that usually keeps relation with the ownership nor effective control over the sold goods; c. The relevant amount of revenue can be measured in a reliable way; d. The relevant economic benefits may flow into the enterprise; and e. The relevant costs incurred or to be incurred can be measured in a reliable way. (2) If an enterprise can, on the date of the balance sheet, reliably estimate the outcome of a 26 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan transaction concerning the labor services it provides, it shall recognize the revenue from providing services employing the percentageof-completion method. The company adopted the method which applied the proportion of the costs incurred against the estimated total costs to measure the work completed. If an enterprise can not, 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: a If the cost of labor services incurred is expected to be compensated, the 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 b 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) No revenue from abalienating of right to use assets may be recognized unless the relevant economic benefits are likely to flow into the enterprise. The amount of interest revenue should be measured and confirmed in accordance with the length of time for which the enterprise's cash is used by others and the actual interest rate. The amount of royalty revenue should be measured and confirmed in accordance with the period and method of charging as stipulated in the relevant contract or agreement. 18. Government Subsidies A government subsidy means the monetary or non-monetary assets obtained free by an enterprise from the government, but excluding the capital invested by the government as the owner of the enterprise. Government subsidies consist of the government subsidies pertinent to assets and government subsidies pertinent to income. If a government subsidy is a monetary asset, it shall be measured in the light of the received or receivable amount. If a government subsidy is a non-monetary asset, it shall be measured at its fair value. If its fair value cannot be obtained in a reliable way, it shall be measured at its nominal amount. The government subsidies pertinent to assets shall be recognized as deferred income, equally distributed within the useful lives of the relevant assets, and included in the current profits and losses. But the government subsidies measured at their nominal amounts shall be directly included in the current profits and losses. The government subsidies pertinent to incomes, which are used for compensating the related 27 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan future expenses or lossesof the enterprise shall be recognized as deferred income and shall included in the current profits and losses during the period when the relevant expenses are recognized while which are used for compensating the related expenses or losses incurred to the enterprise shall be directly included in the current profits and losses. 19. I n c o m e tax e s Where there is any difference between the carrying amount of an asset or liability and its tax base, it shall be recognized as a deferred income tax liability or deferred income tax asset according to the present Standards.At the balance sheet date, 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 As for any deductible loss or tax deduction that can be carried forward to the next year, the corresponding deferred income tax assets shall be determined to the extent that the amount of future taxable income to be offset by the deductible loss or tax deduction to be likely obtained. The taxable temporary differences related to the investments of subsidiaries, associated enterprises and joint ventures shall recognize corresponding deferred income tax liabilities. However, those shall be excluded if the period of time of temporary differences are under control and they can not be switched back in the foreseeable future. 20. B u s i n e s s C o m b i n ati o n s The term "business combinations" refers to a transaction or event bringing together two or more separate enterprises into one reporting entity. Business combinations are classified into the business combinations under the same control and the business combinations not under the same control. 1) A business combination under the same control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or the same parties both before and after the business combination and on which the control is not temporary. The assets and liabilities that the combining party obtains in a business combination shall be measured on the basis of their carrying amount in the combined party on the combining date. As for the balance between the carrying amount of the net assets obtained by the combining party and the carrying amount of the consideration paid by it (or the total par value of the shares issued),the additional paid-in capital shall be adjusted. If the additional paid-in capital is not sufficient to be offset, the retained earnings shall be adjusted. The direct cost for the business combination of the combining party shall, including the expenses for audit, assessment and legal services, be recorded into the profits and losses at the current period. The bonds issued for a business combination or the handling fees, commissions and other expenses for assuming other liabilities 28 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan shall be recordedinto the amount of initial measurement of the bonds or other debts. The handling fees, commissions and other expenses for the issuance of equity securities for the business combination shall be credited against the surplus of equity securities; if the surplus is not sufficient, the retained earnings shall be offset. The "combining date" refers to the date on which the combining partyactually obtains control on the combined party. 2) A business combination not under the same control is a business combination in which the combining enterprises are not ultimately controlled by the same party or the same parties both before and after the business combination. The acquirer shall, on the acquisition date, measure the assets given and liabilities incurred or assumed by an enterprise for a business combinationin light of their fair values. The acquirer shall recognize the positive balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree as business reputation. It shall reexamine the measurement of the fair values of the identifiable assets, liabilities and contingent liabilities it obtains from the acquiree as well as the combination costs if the balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree is negative. If, after the reexamination, the combination costs are still less than the fair value of the identifiable net assets it obtains from the acquiree, it shall record the balance into the profits and losses of the current period. The "acquisition date" refers to the date on which the acquirer actually obtains the control on the acquiree. 21. Pr e p ar ati o n m e th o d o f c o n s o l i d ate d f i n an c i al s tate m e n ts The combined financial statements include the Company and its subsidiaries. The Company stated the combination process right after acquiring the actual control right of the subsidiaries and stop it right after losing the actual control right of the subsidiaries. All the important balances between the Company and subsidiaries, transactions and unrealized profits within the Group were countered when preparing the combined financial statements. The investors’ equity of the subsidiary that is not attributable to the parent company will be listed separately in the minority interests in the consolidated finiancial statements. If the subsidiaries’ accouting policy and accouting period are different from the Company, the finiancial statements of the subsidiaries will be adjusted if needed, in accordance to the accouting policy and accounting period of the Company when preparing the consolidated financial statements. A subsidiary company getting from business combination not under the same control adjust the financial statements on the basis of the fair values of the identifiable net assets determined on the acquisition date when preparing consolidated financial statements.As to a subsidiary company getting from business combination under the same control, while preparing consolidated financial statements, it’s treated just like the business combination is happened from the earliest report term. The consolidated profit statement shall include the assets, liabilities, operating 29 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan results and cash flow incurred from the earliest report term. The net profit of the combined party which has been realized prior to the combination is reflected through an item separately presented in the profit statement. Note 5. Explainations on important accounting policies, changes in accounting estimates and ac c ount ing errors 1. Changes in ac c ount ing polic ies There were no important changes in accounting policies of the Company in this reporting period. 2. Changes in ac c ount ing est im at es During the reporting period, the company has changed the proportion of bad debts provision on account receivables. Before the change, the rates are as follows, 3% for bad bedts within 3 years (including 3 years), 50% for bad debts over 3 years, 100% special provision for estimated uncollectibles. After the change ,the bad debt provisions will be drawn at the following schedule: Age Rate % Within 1 year -- Over 1 year but within 2 years 5% Over 2 years but within 3 years 20% Over 3 years 50% 100% special bad debt provisions will be drawn for the estimated uncollectibles. The change in accouting estimates has reduced the net profits of 2008 by RMB Yuan 1,071,750.36. 3. Correc t ion of ac c ount ing errors During the reporting period, Shenzhen Zung Fu-Tellus Automotive Service Company Co. Ltd. (hereinafter referred to Zung Fu-Tellus), the company's affiliated company, made a correction of accounting errors. Zung Fu-Tellus had not provided services for some of the automotive repair coupons issued in 2007 by the end of 2007. Based on its accounting policies, this event should be recorded as deferred income. Owing to this error, the income of 2007 had overstated by RMB Yuan 1,214,141.00 and the deffered revenue of 2007 had been understated by RMB Yuan 1,214,141.00. Zung Fu-Tellus had not withheld accrued expenses for its procurement rebates, therefor, it had overstated cost of sales by RMB Yuan6,526,000.00. it had understated account receivables, income tax payable and income tax by RMB Yuan 6,526,000.00 and RMB Yuan978,900.00 respectively. 30 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan The company calculated the investment of Zung Fu-Tellus based on equity method, which resulted in the correction of early errors. The company has increased the long term equtiy investment of 2007 by RMB Yuan 1,516,535.65, has increased the investment income of 2007 by RMB Yuan 1,516,535.65, and has increased the undistributed profit at the beginning of the year 2008 by RMB Yuan 1,516,535.65. Not e 6. Tax at ions The t ypes of t ax applic able t o t he Com pany Their t ax rat es are as f ollows: Type Tax base Rate % Added value of sold goods 17% VAT Value of services 17% Operation tax Operation turnover 5% City maintaining & construction Taxalbe turnover 1% tax Corporation income tax Taxable income 18% The company was a resident enterprise and enjoyed a lower enterprise income tax rates of 15% . According to the “Notification of the State Council on Carrying out the Transitional Preferential Policies concerning Enterprise Income Tax”(Guo Fa〔 2007〕 No.39), the income tax for resident enterprises shall gradually shift from the lower rate to the 25% in a 5-year transitional period. The company shall gradually be subject to income tax rate of 18% in 2008, 20% in 2009, 22% in 2010, 24% in 2011 and 25% in 2012. 31 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan Not e 7.Ent erprise c onsolidat ion and c onsolidat ed f inanc ial st at em ent s 1 . C o n d i ti o n s o f s u b s i d i ar i e s i n c l u d e d i n th e c o n s o l i d ate d f i n i an c i al s tate m e n ts （ 1） Conditions of subsidiaries under the same control（ Expressed in 10,000 RMB Yuan） At the end of the year Actual net Registered Registered Business Real investment Holding Voting Name of subsidiary proportion% proportion% place capital scope investment balace in subsidiaries direct indirect direct indirect Shenzhen Automobile Automobile Industry and Trading and Co. Shenzhen 5896 12625 12625 100 -- 100 -- accessories (The Automobile Industry selling and Trading） Automobile Shenzhen Tefa Huari maintenance Automobile EnterpriseCo., Shenzhen USD500 & production 1922 1922 60 -- 60 -- Ltd and sales of (The Hua Ri ) accessories Shenzhen Zhongtianye Industrial Co., Ltd Shenzhen 725 Leasing 1070 1070 100 -- 100 -- (The Zhongtian) Shenzhen Huari Toyota Automobile Automobile Co., Ltd Shenzhen 200 181 181 60 -- 60 -- selling (The Huari Toyota) （ 2） Conditions of subsidiaries consolidated by other means (Expressed in 10,000 RMB Yuan） 31 December 2008 Actual net Place of Actual Holding Voting Registere Business investment Name of subsidiary registratio investmen proportion% proportion% d capital scope balace in n t amount subsidiaries direct indirect direct indirec t Shenzhen Tellus Automobile Xinyongtong Automobile Shenzhen 3290 inspection & 5767 5767 100 -- 100 -- Development Co., Ltd repair (The Xinyongtong) Shenzhen Tefa Tellus Property Management Co., Property Shenzhen 705 502 502 100 -- 100 -- Ltd management (The Tellus Property) Shenzhen Tefa Tellus Real Real estate Estate Co., Ltd Shenzhen 3115 3115 3115 100 -- 100 -- development (The Real Estate) Shenzhen Tellus Real Estate Real estate Exchange Co., Ltd Shenzhen 200 200 200 100 -- 100 -- agent (The Exchange) Shenzhen Xinyongtong Production of Automobile Inspection automobile Shenzhen 1961 1000 1000 5.1 45.9 51 -- Equipment Co., Ltd inspection (The Inspection) equipment 32 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan 2 . C h an g e o f m e r g e r i n g s c o p e d u r i n g th e r e p o r ti n g p e r i o d 31 December 2008 Place of Name of original subsidiary Business scope Holding proportion% Voting proportion% registration direct indirect direct indirect Shenzhen Biaoyuan Automobile Co., Ltd Shenzhen Automobile selling 25.23 -- 57.14 -- (The Biaoyuan Automobile) On July 1, 2008, the Company transferred 25.23% its ownership of Shenzhen Biaoyuan Automobile Co., Ltd. at the price of RMB Yuan 14.32 million. The transfer formalities was completed on July 23. Therefor, Shenzhen Biaoyuan Automobile Co., Ltd. will not be in the merging scope of the company. In the last accouting period, on the balance sheet date, the total asset, the total liabilities and the total amount of owner's equity of Shenzhen Biaoyuan Automobile Co., Ltd. was RMB Yuan 189,242,550.51, RMB Yuan 150,550,254.45 and RMB Yuan 38,692,296.06 respectively. On the settlement date, the the total liabilities and the total amount of owner's equity of Shenzhen Biaoyuan Automobile Co., Ltd. was RMB Yuan 166,519,212.60, RMB Yuan 127,897,310.70 and RMB Yuan 38,621,901.90 respectively. From the beginning of date the year to the settlement date, Shenzhen Biaoyuan Automobile Co., Ltd. had gained operating revenue of RMB Yuan 134,432,510.55 and net profit of RMB Yuan -17,760.45. The operating revenue and net profit of last year was RMB Yuan 481,868,278.65 and RMBYuan -8,798,207.40 respectively. 3 . Mi n o r i ty i n te r e s ts For the minority interests of the important subsidiaries of the company, amounts countered the profits and losses of minority interests and the balance of shareholders’ equity of parent company after deducting the net current losses of the minority interests of the subsidiaries, please see Note 8 minority interests and profits and losses. 33 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan Not e 8.Not es t o m ain it em s of f inanc ial st at em ent s 1、 M onet ary f und 31 December 2008 31 December 2007 category Original Exchange Original Exchange currence currence currency rate currency rate Cash RMB 332,678.22 332,678.22 4,936,896.30 4,936,896.3 HKD 19,664.85 0.8819 17,431.78 3,026.16 0.9364 2,833.70 USD 713.00 6.8309 4,870.42 1,433.0 7.3046 10,467.49 YEN 32,774.00 0.0756 2,477.71 -- -- Sub-total 357,458.13 4,950,197.49 Bank deposit RMB 38,808,726.09 38,808,726.09 70,473,720.60 70,473,720.6 HKD 198,744.38 0.8819 175,272.67 165,608.13 0.9364 155,446.38 USD 32,984.56 6.8309 225,436.27 29,962.98 7.3046 218,867.59 Sub-total 39,209,435.0 70,848,034.57 Other monetary 107,777.55 107,777.55 74,642.17 74,642.17 fund Total 39,674,670.71 75,872,874.23 Compaired to the end of last period, the decrease of 47.7% at the end of this period, was due to the reduction of the mergering scope of the company. 2、 Ac c ount s rec eivable (1) Statement of accounts receivable balances at the end of year grouped according to their ages 31 December 2008 31 December 2007 Age Bad debt Bad debt Amount Ratio l% Amount Ratio l% provision provision Within 1 3,349,512.38 6.42 -- 23,111,028.17 32.56 693,330.85 year Over 1 year but within 2 3,556,134.82 6.82 865,598.19 3,992,740.36 5.62 119,482.21 years 34 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan Over 2 years but 1,755,845.75 3.37 612,772.37 1,736,885.72 2.45 52,106.57 within 3 years Over 3 37,703,177.6 38,033,928.4 43,485,803.84 83.39 42,141,402.36 59.37 years 2 7 39,181,548.1 38,898,848.1 Total 52,147,296.79 100 8 70,982,056.61 100 0 (2) Statement of accounts receivable balances at the end of year grouped according to their risks. 31 December 2008 31 December 2007 Categories Bad debt Bad debt Amount Ratio l% Amount Ratio l% provision provision I. Single item with 22,985,003.26 44.08 16,370,210.44 27,215,984.34 38.34 15,379,873.06 major amount II. Single item with minor amount but with greater 11,491,387.63 22.03 9,900,587.54 21,418,648.49 30.18 11,145,243.79 risks when combined with other similar items III. Other 17,670,905.90 33.89 12,910,750.20 22,347,423.78 31.48 12,373,731.25 minor Total 52,147,296.79 100 39,181,548.18 70,982,056.61 100 38,898,848.10 Based on the company’s own conditions and industry characteristics, each account receivable over one million RMB Yuan will be recognized as single item with major amount. (3) The top 5 accounts receivable as at December 31,2008 amounted to RMB Yuan 19,454,866,10, accounting for 37.31% of the total account receivalbes. (4) There is no receivalbe due from shareholders who are holding 5% or above voting shares in the balance of account receivables at the end of the reporting period. (5) There was no receivalbe due from related parties in the balance of account receivables at the end of the reporting period. 3、 P aym ent s in advanc e Age At the end of the year At the beginning of the year 35 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan Propotrion in Proportion in Amount Amount total% total% Within 1 year 7,362,131.51 97.27 28,771,051.74 99.17 Over 1 year but within 2 156,290.86 2.06 92,275.02 0.31 years Over 2 years but within 3 50,610.76 0.67 135,282.40 0.47 years Over 3 years -- -- 14,556.59 0.05 Total 7,569,033.13 100 29,013,165.75 100 （1）There is no advance payment from shareholders who are holding 5% or above voting shares at the end of the reporting period. （ 2） There is no advance payment from associates. （ 3） The Balance of advance payment with age over 1 year was the unsettled payment due to the unacquirement of invoice. （ 4） The 74% decrease in balance at the end of the period was due to the reduction of payments in advance from Toyota Motor Huari (Shenzhen) Sales& Service Co.,Ltd , the company’s subsidiary. （ 5） The top 5 payments in advance as at December 31,2008 amounted to RMB Yuan, accounting for 37.31% of the total advance payments. 4、 Ot her rec eivables （ 1） Statement of other account receivable balances at the end of year grouped according to their ages: At the end of the year At the beginning of the year Age Proportion Bad debt Proportion Bad debt Amount Amount in total% provision in total% provision Within 1 54,874,345.69 4,671,548.62 7.06 565,181.61 44.00 1,669,624.37 year Over 1 year but 4,150,683.40 6.27 488,414.08 14,072,525.14 11.28 506,412.41 within 2 years Over 2 years but 5,274,821.55 7.97 635,648.51 5,197,550.40 4.17 155,926.51 within 3 years Over 3 52,098,202.51 78.70 47,009,375.40 50,569,572.29 40.55 46,782,527.61 years 36 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan 124,713,993.52 Total 66,195,256.08 100 48,698,619.60 100 49,114,490.90 （ 2） Statement of other accounts receivable balances at the end of year grouped according to their risks At the end of the year At the beginning of the year Categories Portion Bad debt Portion Bad debt Amount in total% provision Amount in total% provision I Single item with 38,297,534. 45,430,051.31 68.63 77,654,499.34 62.27 37,390,333.67 major amount 31 II. Single item with minor amount but 7,170,890.9 with greater risks 11,550,094.19 17.45 13,036,036.78 10.45 7,409,106.20 6 when combined with other similar items 3,230,194.3 III. Other minor 9,215,110.58 13.92 34,023,457.40 27.28 4,315,051.03 3 66,195,256.0 48,698,619. 124,713,993.5 49,114,490.9 Total 100 100 8 60 2 0 Based on the company’s own conditions and industry characteristics, each other account receivable over 500,000 RMB Yuan will be recognized as single item with major amount. （ 3） The top 5 other receivables as at December 31,2008 amounted to RMB Yuan 33,258,465.22, accounting for 50.24% of the total other account receivalbes. (4) There is no receivalbe due from shareholders who are holding 5% or above voting shares in the balance of other account receivables at the end of the reporting period. （ 5） Up to 14.15% of the total other receivables were from associates. See Note 10. for details. （ 6） The decrease of balance at the end of this period was due to the disposal of Shenzhen Biaoyuan Automobile Co., Ltd. which was no longer included in the mergering scope. 5、 Invent ory and invent ory im pairm ent provision 37 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan 31 December 2008 31 December 2007 Categories Provision for Net book Provision for Net book Amount Amount impairment value impairment value Raw materials 7,655,616.87 5,161,245.85 2,494,371.02 8,022,763.96 5,161,245.8 2,861,518.11 Consumables 19,885.27 -- 19,885.27 219,084.90 -- 219,084.90 Stock 58,594,160.58 13,040,368.05 45,553,792.5 77,037,245.30 13,185,484.0 63,851,761.29 products 3 1 Product in 7,226,179.05 4,031,262.45 3,194,916.60 6,606,901.25 4,031,262.45 2,575,638.80 process Product in -- -- -- 1,493,326.28 -- 1,493,326.28 developing Total 73,495,841.7 22,232,876.3 51,262,965.4 93,379,321.69 22,377,992.3 71,001,329.38 7 5 2 1 Basis of recognizing the cashable net value of above inventories is: individual recognition. Namely on the average unit price of the product in recent months, minus direct expenses and taxes may occurred upon cashing. 6、 Financ ial asset s available f or sale 31 December 31 December Items 2008 2007 Transactional equity 958,353.92 3,123,319.56 instrument investment include： 958,353.92 3,123,319.56 Shares of China Merchants Bank Total 958,353.92 3,123,319.56 7、 Held-t o-m at urit y invest m ent s 31 December 31 December Item 2008 2007 Corporate bond 121,300.00 121,300.00 Bank financial management 930,000.00 products Total 1,051,300.00 121,300.00 8、 L ong-t erm invest m ent 31 December 31 December 2008 2007 Items Impairment Impairment Book balance Net book value Book balance Net book value provision provision Investment on joint -- -- -- -- -- -- venture 38 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan Investment on 117,005,601.49 -- 117,005,601.49 140,803,653.77 -- 140,803,653.77 affiliateds Other equity 56,805,981.41 34,592,995.64 22,212,985.77 72,138,564.19 33,713,140.65 38,425,423.54 investment Total 173,811,582.90 34,592,995.64 139,218,587.26 212,942,217.96 33,713,140.65 179,229,077.31 （ 1） Affiliates companies on equity basis Proportion Name of the Registere Proportion Net asset at the Principal activities of shares Total Income Net profit Companies d place of votes end of term held Shenzhen Tellus Investment, leasing of Jimen Investment Shenzhen property, 50% 50% 55,946,194.70 1,404,503.12 -758,765.30 Co. administration Shenzhen Hua Tong Automobile repairs Automobile Co., Shenzhen 30% 30% 39,466.366.69 30,085,981.82 -7,817,235.02 and sales Ltd. Shenzhen Xing Long Manufacture and sell Mechanical Models Shenzhen steel moulds for 30% 30% 33,304,231.67 -- 77,767.41 Co. plastic product Shenzhen Tellus Provide automobile Automobile Services Shenzhen repairs and inspection 40% 40% -6,682,919.30 4,376,700.26 -746,738.62 Development services Co.,Ltd. Shenzhen Zung Fu Benz Automobile Tellus Automobiles Shenzhen 35% 35% 104,884,039.001,487,761,266.00 44,750,186.00 repairs and sales Services Co.,Ltd Shenzhen Automobile Automobile import and Shenzhen 35.75% 35.75% 21,253,961.69 128,843,760.63 -2,638,054.61 Industrial Import and export Export Co. Shenzhen Dongfeng Shenzhen Automobile selling 25% 25% 78,835,185.83 252,655,550.7 2,176,730.31 Automobile Co. Shenzhen Xinyongtong Automobile inspection Shenzhen 31% 31% 1,450,267.24 1,390,991.00 66,267.24 Inspection Tenology & repair Co.,Ltd Shenzhen Pump repair & Xinyongtong Pump Shenzhen environmental 31% 31% 500,000.00 -- -- and Environmental protection consulting Protection Co.,Ltd* Shenzhen Xinyongtong Automobile parts Shenzhen 30% 30% 210,000.00 -- -- Automobile Service marketing Co.,Ltd* 39 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan Shenzhen Xinyongtong Automobile parts Shenzhen 35% 35% 120,00.00 -- -- Dongxiao Automobile marketing Parts Sales Co.,Ltd* Shenzhen Test Equipment Xinyongtong Xinda Shenzhen Development and 40% 40% 610,854.62 417,212.31 -389,145.38 Test Eqiupment sales Co.,Ltd Shenzhen Tellus Invest in industrial Xing Investment Shenzhen 50% 50% 19,040,000.00 -- -- projects Co.,Ltd* * These are newly established companies without starting operating. 40 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan （ 2） Investment in affiliate companies on equity basis Original Beginning of the Additional Cash dividend Decrease in Accumulated 31 December Impairment Names of the companies Equity adjusted investment year Investment obtained investment change 2008 provision Shenzhen Jimen Investment Co.,Ltd 28,352,480.00 28,352,480.00 -- -379,382.65 -- -- -379,382.65 27,973,097.35 -- Shenzhen Hua Tong Automobile 19,076,879.43 15,645,153.67 -- -2,720,915.84 -- -- -6,152,641.60 12,924,237.83 -- Co. Shenzhen Xing Long Mechanical 2,554,392.64 7,934,558.39 -- -1,581,900.00 -- -- 3,798,265.75 6,352,658.39 -- Model Co. Shenzhen Tellus Automobile 800,000.00 -- -- -- -- -- -800,000.00 -- -- Service Development Co.,Ltd Shenzhen Zung Fu-Tellus 10,500,000.00 25,249,498.60 -- 15,662,565.10 4,200,000.00 -- 26,212,063.70 36,712,063.70 -- Automotive Service Co., Ltd Shenzhen Automobile Industrial 4,934,460.20 8,660,533.70 -- -986,077.65 -- -- 2,739,995.85 7,674,456.05 -- Import and Export Co. Shenzhen Dongfeng Automobile 14,527,044.85 15,629,544.85 -- 544,182.58 -- -- 1,646,682.58 16,173,727.43 -- Co., Ltd. Shenzhen Biaoyuan Chehui 454,000.00 946,543.93 -- -- -- 946,543.93 -- -- -- Co.,Ltd. *1 Shenzhen Biaoyuan Vehicle 15,752,599.4 6,620,415.00 15,752,599.46 -- -- -- -- -- -- Maintenance Co.,Ltd*1 6 Shenzhen BiaoYuan Driver Training 2,500,000.00 4,286,590.23 -- -- -- 4,286,590.23 -- -- -- Co.,Ltd*1 Shenzhen BiaoYuan Luhua 9,000,000.00 8,411,201.25 -- -- -- 8,411,201.25 -- -- -- 41 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan Original Beginning of the Additional Cash dividend Decrease in Accumulated 31 December Impairment Names of the companies Equity adjusted investment year Investment obtained investment change 2008 provision Automobile Sales and Service Co. *1 Shenzhen BiaoYuan Investment 9,000,000.00 9,934,949.69 -- -- -- 9,934,949.69 -- -- -- Co.,Ltd*1 Shenzhen Tellus Xing Investment 13,600,000.0 13,600,000.00 -- -5,620,523.95 -- -- -5,620,523.95 7,979,476.05 -- Co., Ltd*2 0 Shenzhen Xinyongtong Inspection 496,000.00 -- 496,000.00 20,542.84 -- -- 20,542.84 516,542.84 -- Tenology Co.,Ltd Shenzhen Xinyongtong Pump and 155,000.00 -- 155,000.00 -- -- -- -- 155,000.00 -- Environmental Protection Co.,Ltd Shenzhen Xinyongtong Automobile 200,000.00 -- 200,000.00 -- -- -- -- 200,000.00 -- Service Co.,Ltd Shenzhen Xinyongtong Dongxiao - 100,000.00 -- 100,000.00 -- -- -- -- 100,000.00 -- Automobile Parts Sales Co.,Ltd* - Shenzhen Xinyongtong Xinda Test 400,000.00 -- 400,000.00 -155,658.15 -- -- -155,658.15 244,341.85 -- Eqiupment Co.,Ltd 123,270,672.1 14,951,000.0 39,331,884.5 21,309,344.3 117,005,601.4 Sub-total 140,803,653.77 4,782,832.28 4,200,000.00 -- 2 0 6 7 9 *1 These companies are subordinate units invested by Shenzhen Biaoyuan Automobile Co.,Ltd, which was out the mergering scope of consolidated financial statements in this reporting period. All its investments had been transferred. *2 The company signed the agreement "Cooperation Agreement" with Shenzhen Xing Tianyou Industrial Co., Ltd. to set up Shenzhen Tellus Xing Investment Co., Ltd. The company 42 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan used investment property as capital and held 50% equity. The balance between the fair value and book value of the investment property has been recognized as other operating income. In accordance with the relevant provisions, the profits and losses arising from the above-mentioned transaction should be confirmed only when the profits and losses attributable to the other parties of the joint venture. In this regard, based on the amount attributable to the company, the company made profit and loss adjustment of long-term equity investment. 43 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan （ 3） Other equity investment on cost basis Proportion Beginning of At the end of Impairment Name of the companies of the Initiate costs Increase Decrease the year the year provision investment 中国浦发机械工业总公司 5.30% 10,176,617.20 10,176,617.20 -- -- 10,176,617.20 -- 湖南昌阳实业股份有限公司*1 36.55% 6,900,000.00 1,810,540.70 -- -- 1,810,540.70 1,810,540.70 深圳汉力高技术陶瓷有限公司*1 80% 3,466,000.00 1,956,000.00 -- -- 1,956,000.00 1,956,000.00 深圳捷成电子有限公司*1 45% 3,150,000.00 3,225,000.00 -- -- 3,225,000.00 3,225,000.00 深圳经纬实业股份有限公司 12.50% 4,000,000.00 4,000,000.00 -- -- 4,000,000.00 4,000,000.00 深圳（莫斯科）股份有限公司 7.00% 825,000.00 825,000.00 -- -- 825,000.00 825,000.00 武汉威特酒店 -- 640,000.00 640,000.00 -- -- 640,000.00 640,000.00 深圳先导化工新材料有限公司*1 40% 7,256,401.38 4,751,621.62 -- -- 4,751,621.62 4,751,621.62 深圳石油化工（集团）股份有限公司 10M 700,000.00 700,000.00 -- -- 700,000.00 700,000.00 南方汽车维修中心*1 100% 6,700,000.00 6,700,000.00 -- -- 6,700,000.00 6,700,000.00 中国汽车工业深圳贸易公司*1 40% 400,000.00 400,000.00 -- -- 400,000.00 400,000.00 凯丰特种汽车有限公司*1 30% 3,359,743.02 3,359,743.02 -- -- 3,359,743.02 3,359,743.02 深圳通用标准件有限公司*1 25% 500,000.00 500,000.00 -- -- 500,000.00 500,000.00 深圳火炬火花塞工业公司*2 49% 17,849.20 17,849.20 -- -- 17,849.20 17,849.20 中汽华南汽车销售公司*1 49% 2,250,000.00 2,250,000.00 -- -- 2,250,000.00 2,250,000.00 深圳鹏驰汽车公司*2 32.94% 9,898,382.78 9,898,382.78 -- 9,898,382.78 -- -- 44 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan （ 3） Other equity investment on cost basis(continued) At the At the end of Impairment Name of the companies Proportion Initiate costs beginning of Increased decreased the year provision the year 电动车项目 11.10% 600,000.00 600,000.00 -- -- 600,000.00 600,000.00 深圳市南方汽贸投资有限公司 14.73% 11,710,000.00 11,710,000.00 -- -- 11,710,000.00 -- 深圳金鹤标准件模具有限公司 15.00% 453,440.00 453,440.00 -- -- 453,440.00 453,440.00 中汽培训中心 6.25% 600,000.00 600,000.00 -- -- 600,000.00 600,000.00 深圳百力源电源有限公司*1 25.00% 1,320,000.00 1,320,000.00 -- -- 1,320,000.00 1,320,000.00 迷你龙（曾文刚） 6.25% 162,000.00 162,000.00 -- -- 162,000.00 162,000.00 深圳市益民汽车贸易公司 -- 200,001.10 200,001.10 -- -- 200,001.10 200,001.10 深圳市比斯克机械交通有限公司 15.00% 302,368.57 302,368.57 -- -- 302,368.57 -- 深圳市驰赫汽车有限公司 10.09% 4,000,000.00 4,000,000.00 -- 4,000,000.00 -- -- 深圳市车商服务有限公司 10.00% 80,000.00 80,000.00 -- 80,000.00 -- -- 深圳市车商投资有限公司 10.00% 1,500,000.00 1,500,000.00 1,500,000.00 -- -- 香港日深国际有限公司*5 7.50% 145,800.00 -- 145,800.00 -- 145,800.00 121,800.00 15,478,382.7 34,592,995.64 Sub-total 81,313,603.25 72,138,564.19 145,800.00 56,805,981.41 8 *1 These companies have stopped their business for years, and the company does not have material influence on them. *2 The companies do not have material influence on these companies. *3 The equity of this companny had been transferred in this reporting period. *4 These companies are associates of Shenzhen Biaoyuan Automobile Co.,Ltd. As Biaoyuan has been disposed in this reporting period, the investment decreased. 45 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan *5 These companies are subsidiaries of the Toyota Motor Huari (Shenzhen) Co., Ltd. Owning to the transfer of part of the equities of these companies, they were not in the mergering scope and the investment in these companies were recored in other investment. 46 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan （ 4） Long-term equity investment impairment provisions are as follows: At the At the end of Name of the companies beginning of Increased Decreased Reasons the year the year 深圳先导化工新材料有限公司 4,648,000.00 103,621.62 -- 4,751,621.62 *1 湖南昌阳实业股份有限公司 1,800,000.00 10,540.70 -- 1,810,540.70 *1 深圳汉力高技术陶瓷有限公司 1,956,000.00 -- -- 1,956,000.00 *1 深圳捷成电子有限公司 3,225,000.00 -- -- 3,225,000.00 *1 南方汽车维修中心 6,700,000.00 -- -- 6,700,000.00 *1 中国汽车工业深圳贸易公司 295,056.53 104,943.47 -- 400,000.00 *1 凯丰特种汽车有限公司 3,359,743.02 -- -- 3,359,743.02 *1 深圳通用标准件有限公司 500,000.00 -- -- 500,000.00 *2 中汽华南汽车销售公司 2,250,000.00 -- -- 2,250,000.00 *1 深圳经纬实业股份有限公司 4,000,000.00 -- -- 4,000,000.00 *1 深圳（莫斯科）股份有限公司 825,000.00 -- -- 825,000.00 *1 武汉威特酒店 640,000.00 -- -- 640,000.00 *1 深圳石油化工（集团）股份 686,900.00 13,100.00 -- 700,000.00 *3 有限公司 电动车项目 92,000.00 508,000.00 -- 600,000.00 *3 深圳金鹤标准件模具有限公司 453,440.00 -- -- 453,440.00 *3 中汽培训中心 600,000.00 -- -- 600,000.00 *2 深圳百力源电源有限公司 1,320,000.00 -- -- 1,320,000.00 *2 迷你龙（曾文刚） 162,000.00 -- -- 162,000.00 *2 深圳市益民汽车贸易公司 200,001.10 -- -- 200,001.10 *3 深圳火炬火花塞工业公司 -- 17,849.20 -- 17,849.20 *1 香港日深国际有限公司 -- 121,800.00 -- 121,800.00 *4 Total 33,713,140.65 879,854.99 -- 34,592,995.64 *1 These companies have stopped their business for years， and the investment on them is not expected to recover. *2 These companies have withdrawn or have been cancelled the business licenses， and the investment on them is not expected to recover. *3 These companies are seriously insolvent due to poor management，and the investment on them is not expected to recover. *4 The company transferred parts of the shares and withheld the impairment losses according to the recent transfer price. 47 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan 9、 Invest m ent real est at es 31 December 31 December Items Increase Decrease 2007 2008 Original value Buildings 184,862,279.34 1,493,326.28 5,353,161.91 181,002,443.71 Sub-total 184,862,279.34 1,493,326.28 5,353,161.91 181,002,443.71 depreciation Buildings 54,567,628.09 5,381,467.17 3,018,557.90 56,930,537.36 Sub-total 54,567,628.09 5,381,467.17 3,018,557.90 56,930,537.36 Book valud Buildings 130,294,651.25 124,071,906.35 Total 130,294,651.25 124,071,906.35 It decreased in 2008 because these companies disposed innvestment real estates. 10、 Fixed assets and accumulative depreciation 31 December 31 December Items Increase Decrease 2007 2008 Original value Houses & buildings 275,274,322.63 35,568.00 2,427,933.44 272,881,957.19 Machinery & 20,279,724.93 265,079.00 1,163,549.40 19,381,254.53 equipment Transportation 13,676,932.27 464,118.49 5,465,718.77 8,675,331.99 Tools Electric Equipment 10,866,144.90 309,203.90 3,115,861.88 8,059,486.92 Other equipment 9,176,044.16 86,610.00 647,636.95 8,615,017.21 Building fitting fee 2,950,275.30 89,382.00 -- 3,039,657.30 Total 332,223,444.19 1,249,961.39 12,820,700.44 320,652,705.14 depreciation Houses & buildings 84,567,923.12 8,151,208.39 1,887,488.60 90,831,642.91 Machinery & 15,526,953.03 387,054.84 1,076,763.72 14,837,244.15 equipment Transportation 8,811,708.17 967,209.34 3,333,026.57 6,445,890.94 Tools Electric Equipment 7,296,804.78 355,422.72 1,987,689.07 5,664,538.43 Other equipment 6,963,823.28 491,567.47 562,563.03 6,892,827.72 Building fitting fee 959,574.96 201,406.44 -- 1,160,981.40 Total 124,126,787.34 10,553,869.20 8,847,530.99 125,833,125.55 Less: impairment provisions Houses & buildings 3,555,385.70 -- -- 3,555,385.70 Machinery & 650,147.31 -- -- 650,147.31 equipment Other equipment 25,768.31 -- 3,739.31 22,029.00 48 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan Total 4,231,301.32 -- 3,739.31 4,227,562.01 10、 Fixed assets and accumulative depreciation(continued) 31 December 31 December Items Increase Decrease 2007 2008 Book value Houses & buildings 187,151,013.81 178,494,928.58 Machinery & 4,102,624.59 3,893,863.07 equipment Transportation 4,865,224.10 2,229,441.05 Tools Electric Equipment 3,569,340.12 2,394,948.49 Other equipment 2,186,452.57 1,700,160.49 Building fitting fee 1,990,700.34 1,878,675.90 Total 203,865,355.53 190,592,017.58 （ 4） For restricted property right of fix assets, please see Note 11. （5）Ended at Dec.31, 2008, the Company had not applied or obtained the property certificates of the buildings with book values of RMB161,690,000 and net values of RMB110,320,000. 11、 Int angible asset s Mode of Balance at the Retained Balance at the Item acquisiti beginning of Increased Decreased amortizin end of term on the year g period Original value Buying Patent technologies Buying 24,000.00 29,200.00 -- 53,200.00 1,699,998. Land use right Buying 1,699,998.80 -- -- 80 Software Buying -- 200,000.00 -- 200,000.00 1,699,998. Sub-total 1,723,998.80 229,200.00 253,200.00 80 Accumulated amortizing Patent technologies 3,200.00 2,643.33 -- 5,843.33 8 years Patent technologies 494,357.17 19,445.83 513,803.00 -- Software -- 3,333.33 -- 3,333.33 5 years Sub-total 497,557.17 25,422.49 513,803.00 9,176.66 Less ： Total of -- -- -- -- accumulative amount 49 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan of intangible asset impairment provisions Total of intangible asset 1,226,441.63 244,023.34 book value 12、 L ong-t erm def erred ex penses Balance at the Balance at Retained Original Accumulated Transferred Items beginning of Increase Amortize the amortizing Amount amortizing this term the year end of term period Fitment 351,641.11 99,339.06 104,685.20 104,804.50 252,421.35 -- 99,219.76 4 years Biaoyuan Automobile 10,501,154.86 9,477,154.86 -- -- -- 9,477,154.86 -- storee 4S Repairing fee 374,873.46 7,817.80 -- 7,817.80 374,873.46 -- -- Over 1 Web net year but constructure 116,412.00 32,920.96 -- 14,883.24 98,374.28 -- 18,037.72 within 2 fee years Hotel 2,461,596.59 981,933.45 -- 230,866.55 1,710,529.69 -- 751,066.90 equipment 1 year Over 1 Subsequent year but restructure 839,007.15 244,938.07 103,366.00 151,096.32 641,799.40 -- 197,207.75 within 10 fee years Over 1 year but Others 701,934.36 84,319.49 143,068.00 78,878.47 553,425.34 -- 148,509.02 within 4 years Total 15,346,619.53 10,928,423.69 351,119.20 588,346.88 3,631,423.52 9,477,154.86 1,214,041.15 The assets transferred are owned by Biaoyuan Automobile. During the reporting period, Biaoyuan Automobile have transferred its shares and was no longer in the merger scope. 13、 Def f ered inc om e t ax asset s 31 December 31 December Items 2008 2007 Items with assets book value lower 27,790,310.15 24,293,026.09 than tax base Items with liabilities book value higher 434,494.67 440,167.32 50 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan than tax base Total 28,224,804.82 24,733,193.41 14、 Asset Im pairm ent P rovision Decrease 31 December 31 December Items Increased Written 2007 Transferred 2008 back Bad debt provision 88,013,339.00 2,114,545.21 -- 2,247,716.43 87,880,167.78 Inventory 22,377,992.31 -- -- 145,115.96 22,232,876.35 impairment provision Long-term equity investment impairment 33,713,140.65 879,854.99 -- -- 34,592,995.64 provision Fixed assets and 4,231,301.32 -- -- 3,739.31 4,227,562.01 impairment provision Total 148,335,773.28 2,994,400.20 -- 2,396,571.70 148,933,601.78 The transferred amount included the beginning balances of bad debt provision RMB1,729,777.61 and inventory impairment provision RMB145,115.96. These balances owned by the company were out of the mergering scope. 15、 Short -t erm loans 31 December 31 December Type of loan 2008 2007 Credit loan 34,904,665.00 136,313,102.53 Mortgage loan 90,167,169.70 109,698,006.48 Guarantee loan 8,440,000.00 12,120,000.00 Total 133,511,834.70 258,131,109.01 It decreased by 48% mainly because of the smaller mergering scope and the repayment of bank loans. The overdued short-term loans are as follows: Name of the company Balance at the Type of the Time end of the year loan Industrial and Commercial * Bank of China, Shui Bei 28,500,000.00 Pledge 2004.7.30-2005.2.28 Branch Shenzhen Development * 13,000,000.00 Pledge 2006.5.8-2007.3.8 Bank, Ren Min Qiao Branch 51 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan Bank, Ren Min Qiao Branch China Merchants Bank, 2,367,169.70 Pledge 2001.6.28-2001.12.28 Off-shore Department Total 43,867,169.70 16、 Bills payable 31 December 31 December Mode of the note 2008 2007 Bank acceptance 1,194,477.04 -- Total 1,194,477.04 -- 17、 Ac c ount s payable （ 1） No accounts payable to shareholders with 5% or above voting shares of the C ompany. （ 2） Balance of accounts payable from associate are shown in Note 10. 18、 Rec eipt s in advanc e 31 December 2008 31 December 2007 Age Amount Proportion% Amount Proportion% Within 1 249,019.89 4.84 22,124,924.97 90.03 year Over 1 year but within 2 4,276,109.48 83.06 1,457,373.17 5.93 years Over 2 years but within 3 59,155.21 1.15 10,220.60 0.04 years Over 3 years 563,565.44 10.95 982,138.67 4.00 Total 5,147,850.02 100 24,574,657.41 100 （ 1） No account collected in advance from shareholders with 5% or above voting shares of the company. No account collected in advance from the associates. （ 2） The balances of account collected advance aging over one year are unsettled payment. （ 3） The fact that Biaoyuan Automobile no longer in the mergering scope and the reduction of payments in advance from car sales resulted in a 79% decreased. 52 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan 19、 Ac c rued payroll Increased Decreased 31 Items 31 December December 2007 2008 Wage, bonus, allowance and 11,144,457.23 41,617,816.88 45,248,481.79 7,513,792.32 subsidy Employees’ welfare 915,259.15 706,820.57 1,534,838.55 87,241.17 Social security 526,709.30 8,056,719.24 7,135,033.40 1,448,395.14 Trade union fee and education 977,450.46 1,102,494.60 1,642,826.17 437,118.89 fee Compensation for releasing of 419,359.68 8,238,391.79 8,604,711.47 53,040.00 labor service contract Others 32,850.00 125,203.13 120,703.13 37,350.00 Including：shares paid in cash -- -- -- -- Total 14,016,085.82 59,847,446.21 64,286,594.51 9,576,937.52 20、 Tax payable 31 December 31 December Taxation 2008 2007 VAT -4,169,988.32 -2,943,302.28 Business tax 1,061,756.81 1,251,022.63 City -17,885.87 -31,612.29 construction tax Enterprise 3,438,211.58 3,494,792.41 income tax Property tax 935,941.51 1,018,750.28 Land VAT 5,362,442.05 6,495,729.09 Personal income -17,401.22 14,932.66 tax Education surtax 49,171.54 154,467.22 Other 33,779.24 31,659.98 Total 6,676,027.32 9,486,439.70 21、 Ot her payables 53 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan （ 1） Other accounts payable to shareholders with 5% or above voting shares of the company are shown in Note 10. （ 2） Balances of the other account payable from associates are shown in Note 10. 22、 Ot her c urrent liabilit ies 31 December 31 December Name of the investor Cause of debt 2008 2007 Dividend of minor shareholders of Shenzhen -- 1,674,491.98 Biaoyuan Automobile Co. Total -- 1,674,491.98 Biaoyuan Automobile no longer in the mergering scope resulted in its reduction. 23、 L on-t erm L oans 31 December 31 December Mode of the loan 2008 2007 Mortgage loan 14,600,000.00 20,000,000.00 Total 14,600,000.00 20,000,000.00 Balances are as follows: Balance at the end Mode of the Name of the company Mature date of the year loan Constucture Bank of China, 14,600,000.00 pledged 2010-9-5 Shenzhen Branch 24、 L ong-t erm P ayables 31 December 31 December Iterm 2008 2007 Technical innovation 300,746.97 686,721.21 loan Employee housing 2,588,848.40 2,588,848.40 deposit Other loan 1,320,000.00 1,320,000.00 Total 4,209,595.37 4,595,569.61 25、 Ac c rued liabilit ies 31 December Increased Decreased 31 December Categories 2007 2008 External 87,568,728.57 -- -- 87,568,728.57 54 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan guarantee Total 87,568,728.57 -- -- 87,568,728.57 See 2(3) in Note 12 for details. 26、 Def f ered inc om e t ax liabilit y 31 December 31 December Items 2008 2007 Book value of assets 2,583,414.85 3,267,374.30 higher than tax base Total 2,583,414.85 3,267,374.30 27、 P aid_in Capit al 31 Increas Decreas Items December 31 December e e 2007 2008 I.Negotiable shares with selling restriction condition 1、State-owned shares -- -- -- -- 145,870,560.0 145,870,560.0 2、State-owned legal person shares 0 -- -- 0 3、Domestic legal person shares -- -- -- -- 4、Overseas legal person shares -- -- -- -- 5、Domestic nature person shares 13,300.00 -- -- 13,300.00 6、others -- -- -- -- 145,883,860.0 145,883,860.0 Sub-total 0 -- -- 0 II.Unconditional negotiable shares 1 、 RMB common shares placed in the country 47,997,740.00 -- -- 47,997,740.00 2、Foreign shares placed in the country 26,400,000.00 -- -- 26,400,000.00 3、Foreign shares placed abroad -- -- -- -- 4、Others -- -- -- -- Sub-total 74,397,740.00 -- -- 74,397,740.00 220,281,600.0 220,281,600.0 III.Total 0 -- -- 0 28、 Capit al reserve 31 31 December Items December Increase Decrease 2008 2007 55 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan Share capital premium -- 3,024,773.35 -- 3,024,773.35 Other capital reserves 5,439,871.88 583,146.01 1,885,109.43 4,137,908.46 include ： variations of fair values of 2,603,327.73 -- 1,885,109.43 718,218.30 financial assets available for sale Total 5,439,871.88 3,607,919.36 1,885,109.43 7,162,681.81 The “decrease” figure is due to the variations of fair values of the financial assets available for sale. The “increase” figure is due to the new capital from the subsidiary minority shareholders premium. 29、 Surplus reserve 31 December Increase Decrease 31 December Items 2007 2008 Statutory surplus 2,952,586.32 -- -- 2,952,586.32 reserves Arbitrary surplus -- -- -- -- reserves Total 2,952,586.32 -- -- 2,952,586.32 30、 Undist ribut ed prof it 31 December 31 December Items 2008 2007 Net profit belongs to owner of 4,584,308.06 12,311,789.81 parent company Add：Undistributed profit at -71,271,675.92 -83,583,465.73 beginning of the year Less：profit distributed -- -- Including ： distilled statutory -- -- surplus reserves Undistributed profit at -66,687,367.86 -71,271,675.92 end of year 31、 Equit y, prof it and loss of t he m inor shareholder Excess losses Proportion of the Borne by the Name of the company Equity Profit and loss share held% parent company Shenzhen Hua Ri 40% 18,347,216.46 602,277.97 -- Automobile Co. Toyota Huari 40% 1,909,022.79 609,225.73 -- 56 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan (Shenzhen) Sales& Service Co., Ltd Shenzhen Xinyongtong Auto -3,892,616.9 49% 2,897,009.72 -- Test Equipment Co., 3 Ltd Shenzhen Biaoyuan 74.77% -- -52,633.71 -- Automobile Co. Shenzhen Baoan Shiquan Industrial 5% 124,076.67 -5,662.81 -- Co., Ltd Total 23,277,325.64 -2,739,409.75 -- 32、 Inc om es and c ost s: Incomes Costs Gross profit Items Figures in Figures in 2008 Figures in 2007 Figures in 2008 Figures in 2007 Figures in 2008 2007 Major 618,452,436.1 business 958,004,501.93 537,233,629.41 874,273,069.61 81,218,806.72 83,731,432.32 3 income Other business 19,444,153.90 33,032,122.81 4,745,314.12 7,018,032.64 14,698,839.78 26,014,090.17 income Total 637,896,590.0 991,036,624.74 541,978,943.53 881,291,102.25 95,917,646.50 109,745,522.49 3 Operating income decreased by 36% while operating income decreased by 39%. That’s because Biaoyuan Automobile has been out of the mergering scope. （ 1） Main business income are classified according to the industrial trait: Main business incomes Main business costs Gross profit Items Figures in Figures in 2008 Figures in 2007 Figures in 2008 Figures in 2007 Figures in 2008 2007 Automobile 464,108,950.1 440,121,170.4 806,834,650.30 780,396,983.56 23,987,779.77 26,437,666.74 selling 7 0 Automobile imspection, 80,812,757.93 69,025,439.62 63,319,544.55 56,581,706.75 17,493,213.38 12,443,732.87 repairing and parts selling Leasing and 73,530,728.03 82,144,412.01 33,792,914.46 37,294,379.30 39,737,813.57 44,850,032.71 service 618,452,436.1 537,233,629.4 Total 958,004,501.93 874,273,069.61 81,218,806.72 83,731,432.32 3 1 57 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan （ 2） Proportion of sales income from top five clients: Figures in 2008 Figures in 2007 Items Proportion of the Proportion of the Turnover Turnover total amount% total amount% Amount 52,540,576.99 8.50 89,072,990.04 9.30 （ 3） Other business items: Other business income Other business cost Other business profit Item Figures in Figures in Figures in Figures in Figures in Figures in 2008 2007 2008 2007 2008 2007 Disposal of 28,352,480.0 23,321,551.5 iinvestment 13,595,400.00 2,354,352.01 5,030,928.49 11,241,047.99 0 1 real estate Leasing 5,355,375.86 2,569,161.57 2,098,303.78 1,910,954.39 3,257,072.08 658,207.18 service Others 493,378.04 2,110,481.24 292,658.33 76,149.76 200,719.71 2,034,331.48 Total 19,444,153.90 33,032,122.81 4,745,314.12 7,018,032.64 14,698,839.78 26,014,090.17 33、 Operational tax and surcharges Items Figures in 2008 Figures in 2007 Business tax 3,702,886.04 3,684,147.95 City maintenance and 103,761.72 160,432.47 construction tax Education surtax 182,087.95 368,550.02 Embankment fee 30.69 -- Total 3,988,766.40 4,213,130.44 34、 Financial expenses categories Figures in 2008 Figures in 2007 Interest expense 14,311,697.30 14,130,655.77 Less: interests income 1,877,190.22 855,400.80 Exchange loss 214,833.93 225,746.30 Less: Exchange gain 481,433.59 455,806.47 Others 509,070.57 778,141.90 Total 12,676,977.99 13,823,336.70 35、 Asset impairment losses categories Figures in 2008 Figures in 2007 Bad debt losses 2,114,545.21 14,374,335.33 58 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan Inventory impairment -- 7,030,616.38 losses Long-term investment on 879,854.99 -- stocks impairment losses Total 2,994,400.20 21,404,951.71 36、 Investment income Categories Figures in 2008 Figures in 2007 Gains from selling the trading financial assets 127,291.19 -- Gains from selling the financial assets available for -- 20,120,452.32 sale Gains from long-term equity investment 7,179,817.44 14,559,417.44 Include：dividends from investees 547,184.35 228,331.18 Gains from disposal of investments 2,745,504.62 -148,909.19 Increase or decrease of net profits from * 3,887,128.47 14,479,995.45 investee by equity method Total 7,307,108.63 34,679,869.76 The above investmeng gains exclude the gains from projects with severe restrictions. The 81% of decrease in this period is mainly due to the decrease of gains from selling the financial assets available for sale and the decrease of net profits from investees by equity method. 37、 Non-business income categories Figures in 2008 Figures in 2007 Net gain from disposal of 2,395,188.86 3,562,677.90 non-current assets Includ：net gain from disposal of 69,974.23 3,562,677.90 fixed assets Net gain from disposal of 2,325,214.63 -- intangible assets Net gain from debt reformation 1,210,000.00 1,268,742.96 Penalty 46,869.93 282,702.29 Others 51,058.01 117,188.88 Total 3,703,116.80 5,231,312.03 38、 Non-business expenditures Categories Figures in 2008 Figures in 2007 Net loss from disposal of 253,159.46 8,496,950.66 non-current assets Including：Net loss from disposal 247,082.36 8,496,950.66 59 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan of fixed assets Net loss from disposal of 6,077.10 -- intangible asset Penalty 6,333.23 31,506.26 Commonweal donation 60,260.00 -- Conpensation expenses 281,188.08 163,617.58 Extraordinary loss -- 1,179,800.00 Other 401,986.78 104,474.54 Total 1,002,927.55 9,976,349.04 The 90% decrease is mainly due to the disposal loss of Biaoyuan Automobile. 39、 Income tax Figures in Figures in Items 2008 2007 Income tax expenditure of 3,699,682.49 5,795,183.70 current term Defered income tax expenditure -3,355,664.00 -5,687,358.71 (income) Total 344,018.49 107,824.99 The 359% increase in this reporting period is mainly due to the effect of deferred income tax income arising form asset impairment loss. 40、 Earnings per share The calculation of earnings per share are as follows： Item Figures in 2008 Figures in 2007 Net attributable to owner of the 4,584,308.06 12,311,789.81 company Weighted average of issued common 220,281,600.00 220,281,600.00 shares Basic earnings per share 0.02 0.06 (RMB Yuan Per share) Deluted earnings per share 0.02 0.06 (RMB Yuan Per share) 41、 Cash flow Statement 60 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan （ 1） Cash received relating to operatin activities. Figures in Items Figures in 2007 2008 Current accounts from associates 23,620,076.62 9,764,155.23 Amount pledged and guaranteed 2,917,351.59 -- Interest income 742,771.38 855,400.80 Penalty and compensation 46,869.93 399,891.17 Total 27,327,069.52 11,019,447.20 （ 2） Cash paid relating to operating activities. Items Figures in 2008 Figures in 2007 Current accounts from associates 27,144,263.95 19,063,957.97 Internal short-term borrowings and 496,394.75 -- deposits Operating and administrating 49,201,089.78 46,344,931.28 expense Other expenditure 66,593.23 1,479,398.38 Total 74,052,183.21 69,744,446.13 （ 3） Cash received from investment activities. Item Figures in 2008 Figures in 2007 Recover of the pledged time -- 32,500,000.00 deposits Total -- 32,500,000.00 （ 4） Cash paid relating to other investing activities. Iitem Figures in 2008 Figures in 2007 Negative net cash from disposal of 5,380,670.64 -- subsidiaries Total 5,380,670.64 -- （ 5） Cash and cash equivalents Items Figures in Figures in 2007 2008 61 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan Cash 39,674,670.71 75,872,874.23 Including：Cash in stock 357,458.13 4,950,197.49 Bank deposit on demand 39,317,212.58 70,922,676.74 Cash equivalents -- -- Balance of cash and cash equivalents 39,674,670.71 75,872,874.23 （ 6） Information relating to the disposal of subsidiaries. Items Figures in 2008 Disposal price of subsidiaries 14,576,000.00 Cash and cash equivalents from disposal of subsidiaries 14,576,000.00 less：Cash and cash equivalents held by subsidiaries 19,956,670.64 Net cash from disposal of subsidiaries -5,380,670.64 Net assets from disposal of subsidiaries 38,621,901.90 Current assets： 112,491,929.42 Including：Accounts receivable 11,968,356.10 Inventories 26,869,215.23 Not-current assets： 54,027,283.18 Current liabilities： 127,897,310.70 Non-current liabilities： -- （ 7） Supplementary information of the Cash Flow Statement. Supplementary Information Figures in 2008 Figures in 2007 1、Net profit adjusted to cash flow of operation: Net profit 8,142,303.89 1,844,898.31 Plus: Asset impairment reserves 21,404,951.71 2,994,400.20 Fixed asset, productive materials, investment 18,554,995.35 property depreciation 15,935,336.37 Amortizing of intangible assets 41,291.66 25,422.49 Amortizing of long-term expenses 1,588,225.77 912,337.22 62 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan Supplementary Information Figures in 2008 Figures in 2007 Loss from disposal of fixed assets, intangible assets -18,387,278.75 and other long-term assets -2,142,029.40 Loss of disposing fixed assets -- -- Loss from change of fair value -- -- Financial expenses 13,419,749.37 14,908,797.67 Investment loss -34,679,869.76 -7,307,108.63 Decrease of differed income tax asset -2,066,265.94 -3,491,611.41 Increase of differed income tax liability -802,278.37 -683,959.45 Decrease of inventory 15,398,402.97 -6,985,735.31 Decrease of operating accounts receivable -31,979,043.24 -1,429,311.06 Increase of operating accounts payable -54,118,507.37 22,385,689.28 Net value -61,994,274.41 35,478,077.98 2、Material investment and financing not involved in cash flow 3、Net change of cash and cash equivalents Balance of cash at period end 39,674,670.71 75,872,874.23 Less: Initial balance of cash 75,872,874.23 45,158,825.83 Plus: Balance of cash equivalents at the period end -- -- Less: Initial balance of cash equivalents -- -- Net increase of cash and cash equivalents -36,198,203.52 30,714,048.40 Not e 9.Not es t o f inanc ial st at em ent s of parent c om pany 1、 Ac c ount s rec eivable (1) Statement of accounts receivable balances at the end of year grouped according to their ages. 31 December 2008 31 December 2007 Age Bad debt proportion Bad debt Amount proportion% Amount provision % provision Over 3 484,803.08 100 484,803.08 484,803.08 100 484,803.08 years Total 484,803.08 100 484,803.08 484,803.08 100 484,803.08 63 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan （ 2） Statement of accounts receivable balances at the end of year grouped according to their risks 31 December 2008 31 December 2007 Categories Proport Bad debt Proport Bad debt Balance Balance ion % provision ion % provision Single item with major -- -- -- -- -- -- amount Single item with minor amount but with greater 484,803.0 484,803.08 100 484,803.08 484,803.08 100 risks when combined with 8 other similar items Other minor -- -- -- -- -- -- 484,803.0 Total 484,803.08 100 484,803.08 484,803.08 100 8 2、 Ot her ac c ount s rec eivable ( 1 )Statement of other accounts receivable balances at the end of year grouped according to their ages: 31 December 2008 31 December 2007 Age Proportion Bad debt Proportion Bad debt Amount Amount % provision % provision 1within 1 46.26 20,344,319.59 50.25 176,586.70 19,333,696.93 -- year Over 1 year but within 2 4,096,109.98 9.80 204,805.50 3,065,029.43 7.57 176,187.54 years Over 2 years but 2,588,120.44 6.19 517,624.09 3,059,156.28 7.57 108,828.35 within 3 years Over 3 37.75 14,017,602.76 34.62 12,821,839.01 15,774,339.11 12,939,980.56 years Total 41,792,266.46 100 13,662,410.15 40,486,108.06 100 13,283,441.60 ( 2 )Statement of accounts receivable balances at the end of year grouped according to their risks 31 December 2008 31 December 2007 Categories Proporti Bad debt Proporti Bad debt Balance Balance on % provision on % provision Single item with major 35,696,746.8 11,230,333. 37,373,274.63 89.43 12,194,419.02 88.17 amount 1 20 64 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan Single item with minor amount but with greater 1,327,709.1 1,513,536.85 3.62 1,350,835.62 1,044,437.93 2.58 risks when combined 9 with other similar items Other minor 2,905,454.98 6.95 117,155.51 3,744,923.32 9.25 725,399.21 40,486,108.0 13,283,441. Total 41,792,266.46 100 13,662,410.15 100 6 60 （ 3） The top 5 other accounts receivable as at December 31, 2008 accounted for 42.52% with a sum of RMB17,121,741.78. 3、 L ong-t erm invest m ent on st oc k s 31 December 2008 31 December 2007 Items Impairment Impairment Amount Net value Amount Net value provision provision Investment in 254,839,543.6 254,839,543.6 254,839,543.6 254,839,543.6 -- -- subsidiaries 1 1 1 1 Investment in -- -- -- -- -- -- joint businesses Investment in cooperation 91,941,533.32 -- 91,941,533.32 77,181,690.66 -- 77,181,690.66 businesses Other equity 17,908,162.3 28,084,779.52 10,176,617.20 28,084,779.52 17,780,900.00 10,303,879.52 investment 2 Total 374,865,856.4 17,908,162.3 356,957,694.1 360,106,013.7 17,780,900.00 342,325,113.7 5 2 3 9 9 65 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan （ 1） Investment on equity basis Share Equity Cash Initial investment 31 December Decreas Accumulated 31 December Impairment Name of the company proport Increase changed this dividend cost 2007 e change 2008 provision -ion term obtained Shenzhen Tellus Fimen Investment 50% 28,352,480.00 28,352,480.00 -- -379,382.65 -- -- -379,382.65 27,973,097.35 -- Co., Ltd Shenzhen Hua Tong Automobile 30% -2,720,915.8 19,076,879.43 15,645,153.67 -- -- -- -6,152,641.60 12,924,237.83 -- Co. 4 Shenzhen Xing Long Mechanical 30% -1,581,900.0 2,554,392.64 7,934,558.39 -- -- -- 3,798,265.75 6,352,658.39 -- Model Co. 0 Shenzhen Tellus Automobile 40% 800,000.00 -- -- -- -- -- -800,000.00 -- -- Service Development Co., Ltd Shenzhen ZungFu-Tellus 15,662,565.1 4,200,000.0 Automobile Service Development 35% 10,500,000.00 25,249,498.60 -- -- 26,212,063.70 36,712,063.70 -- 0 0 Co., Ltd Shenzhen Tellus Xing investment 13,600,000.0 -5,620,523.9 50% 13,600,000.00 -- -5,620,523.95 7,979,476.05 -- Co., Ltd 0 5 Sub-total 74,883,752.07 77,181,690.66 13,600,000.00 5,359,842.66 4,200,000.00 -- 17,057,781.25 91,941,533.32 -- 66 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan （ 2） Investment on cost basis Share propor Initial investment 31 December 31 December Impairment Name of the company Increase Decrease -tion% cost 2007 2008 provision Investment in subsidiaries Shenzhen Tellus Tefa Real 100 31,152,888.87 31,152,888.87 -- -- 31,152,888.87 -- Estate Co. Shenzhen Tefa Tellus Property Management Co., 100 5,021,970.88 5,021,970.88 -- -- 5,021,970.88 -- Ltd Shenzhen Tefa Xinyongtong 100 57,672,885.22 57,672,885.22 -- -- 57,672,885.22 -- Industrial Co., Ltd Shenzhen Zhongtianye 100 10,708,622.90 10,708,622.90 -- -- 10,708,622.90 -- Industrial Co., Ltd Shenzhen Automobile 126,251,071.5 126,251,071.5 126,251,071.5 Industrial and Trading 100 -- -- -- 7 7 7 Co., Ltd Shenzhen Tefa Huari Automobile EnterpriseCo., 60 19,224,692.65 19,224,692.65 -- -- 19,224,692.65 -- Ltd Shenzhen Tellus Real Estate 100 2,000,000.00 2,000,000.00 -- -- 2,000,000.00 -- Exchange Co., Ltd Shenzhen Huari Toyota Automobile Sales and Service 60 1,807,411.52 1,807,411.52 -- -- 1,807,411.52 -- Co. Ltd Shenzhen Xinyongtong Automobile Test Equipment 5.1 1,000,000.00 1,000,000.00 -- -- 1,000,000.00 -- Co., Ltd 254,839,543.6 254,839,543.6 254,839,543.6 Sub-total -- -- -- 1 1 1 Other equity investment 深圳先导化工新材料有限公 4,751,621.6 40 7,256,401.38 4,751,621.62 -- -- 4,751,621.62 司 2 湖南昌阳实业股份有限公司 36.55 6,900,000.00 1,810,540.70 -- -- 1,810,540.70 1,810,540.70 深圳汉力高技术陶瓷 80 3,466,000.00 1,956,000.00 -- -- 1,956,000.00 1,956,000.00 有限公司 深圳捷成电子有限公司 45 3,150,000.00 3,225,000.00 -- -- 3,225,000.00 3,225,000.00 中国浦发机械工业总公司 5.30 10,176,617.20 10,176,617.20 -- -- 10,176,617.20 -- 67 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan 4,000,000.0 深圳经纬实业股份有限公司 12.50 4,000,000.00 4,000,000.00 -- -- 4,000,000.00 0 深圳（莫斯科）股份有限公 7.00 825,000.00 825,000.00 -- -- 825,000.00 825,000.00 司 武汉威特酒店 640,000.00 640,000.00 -- -- 640,000.00 640,000.00 深圳石油化工（集团）股份 10M 700,000.00 700,000.00 -- -- 700,000.00 700,000.00 有限公司 17,908,162. Sub-total 37,114,018.58 28,084,779.52 -- -- 28,084,779.52 32 291,953,562.1 282,924,323.1 282,924,323.1 17,908,162. Total -- -- 9 3 3 32 （ 3） Change of impairment provisions Impairment provision Name of the company 31 December 31 December Increase Decrease Reason 2007 2008 103,621.6 -- *2 深圳先导化工新材料有限公司 4,648,000.00 4,751,621.62 2 湖南昌阳实业股份有限公司 1,800,000.00 10,540.70 -- 1,810,540.70 *1 深圳汉力高技术陶瓷有限公司 1,956,000.00 -- -- 1,956,000.00 *1 深圳捷成电子有限公司 3,225,000.00 -- -- 3,225,000.00 *1 深圳经纬实业股份有限公司 4,000,000.00 -- -- 4,000,000.00 *1 深圳（莫斯科）股份有限公司 825,000.00 -- -- 825,000.00 *1 武汉威特酒店 640,000.00 -- -- 640,000.00 *1 深圳石油化工（集团）股份 686,900.00 13,100.00 -- 700,000.00 *2 有限公司 Total 17,780,900.00 127,262.3 -- 17,908,162.32 2 *1 These companies have stopped business for years, and the investment is unexpected to recover. *2 These companies are seriously insolvent due to poor management, and the investment is unexpected to recover. 4、 Operat ing inc om es and operat ing c ost s Operating income Operating cost Operating gross profit Categories Figures in Figures in Figures in Figures in Figures in Figures in 2008 2007 2008 2007 2008 2007 Main business 68 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan income Leasing service 12,749,457.98 14,776,051.6 3,303,840.42 4,270,745.56 9,445,617.56 10,505,306.0 2 6 Other business income Investment property 28,352,480.0 23,321,551.5 13,595,400.00 2,354,352.01 5,030,928.49 11,241,047.99 transferred 0 1 Total 26,344,857.98 43,128,531.6 5,658,192.43 9,301,674.0 20,686,665.55 33,826,857.5 2 5 7 5、 Invest m ent inc om e Categories Figures in 2008 Figures in 2007 Gains from disposal of trading financial assets -- -- Gains from disposal of held-to-sale financial assets -- 20,120,452.32 Gains from long-term equity investment 7,759,966.69 11,659,026.36 Including ：divident gained from invested company 2,694,124.03 1,681,428.68 Net profit change from invested company on 5,065,842.66 9,977,597.68 equity basis Total 7,759,966.69 31,779,478.68 The 75% decrease is mainly due to no gains from selling the financial assets available for sale this term. Not e 10. Relat ionship and t ransat ion wit h assoc iat es 1. St andards of assoc iat es The associate parties refer to those that one party can control, jointly control or have significant influence on the other party; and those that two parties or more are under control, jointly control, or significant influence by the other party. 2. Assoc iat e relat ionship (1) Associate parties except for the subsidiaries in Note 7 Share Name of the Registered Business Bisiness Registered Voting Institute holding parent company place trait scope capital proportion Code proportion% Shenzhen SDG Real estate & Limited Information Shenzhen Mainland 1,582,820,000 66.22% 66.22% 192194195 liability Co.,Ltd business (2) Change of registered capital of associates with controlling relationship (Expressed in 10, 000 RMB Yuan) 31 December 31 December Name Increase Decrease 2007 2008 Shenzhen SDG Information Co.,Ltd 158,282 -- -- 158,282 69 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan Shenzhen Tellus Xinyongtong 3,290 -- -- 3,290 Automobile Development Co., Ltd Shenzhen Tefa Tellus Property 705 -- -- 705 Management Co., Ltd Shenzhen Tefa Tellus Real Estate Co., 3,115 -- -- 3,115 Ltd Shenzhen Zhongtianye 725 -- -- 725 Industrial Co., Ltd Shenzhen Automobile Industrial and Trading 5,896 -- -- 5,896 Co., Ltd Shenzhen Tefa Huari USD500 -- -- USD500 Automobile EnterpriseCo., Ltd Shenzhen Huari Toyota 200 -- -- 200 Automobile Sales and Service Co. Ltd Shenzhen Tellus Real Estate Exchange 200 -- -- 200 Co., Ltd Shenzhen Xinyongtong Automobile Test 1,000 960.78 -- 1,960.78 Equipment Co., Ltd (3) Change of shares held by associates with controlling relationship (Expressed in 10, 000 RMB Yuan) 31 December 2007 Increase Decrease 31 December 2008 Name proport proporti Amount Amount Amount Amount ion% on% Shenzhen SDG Information Co.,Ltd 14,587 66.22 -- -- 14,587 66.22 Shenzhen Tellus Xinyongtong 3,290 100 -- -- 3,290 100 Automobile Development Co., Ltd Shenzhen Tefa Tellus Property 705 100 -- -- 705 100 Management Co., Ltd Shenzhen Tefa Tellus Real Estate Co., 3,115 100 -- -- 3,115 100 Ltd Shenzhen Zhongtianye 725 100 -- -- 725 100 Industrial Co., Ltd 70 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan Shenzhen Automobile Industrial and Trading 5,896 100 -- -- 5,896 100 Co., Ltd Shenzhen Tefa Huari 2,142.76 60 -- -- 2,142.76 60 Automobile EnterpriseCo., Ltd Shenzhen Huari Toyota 120 60 -- -- 120 60 Automobile Sales and Service Co. Ltd Shenzhen Tellus Real Estate Exchange 200 100 -- -- 200 100 Co., Ltd Shenzhen Xinyongtong Automobile Test 1,000 100 -- 49 1,000 51 Equipment Co., Ltd (4) Related parties without controlling relationship Name Relationship Institute number Shenzhen Tefa Swan Industrial Co Subsidiary 192473856 Shenzhen Mechanical Equipment Import Subsidiary and Export Co Shenzhen Tefa Real Estate Co., Ltd Subsidiary 279365997 Hong Kong Jia Yu Investment Co., Ltd Subsidiary Shenzhen Tellus Real Estate(Yue Yang) Co Subsidiary Shenzhen Development Center Subsidiary 192260957 Construction Management Co., Ltd Shenzhen Yang Chun Real Estate Co Subsidiary Shenzhen Tellus Real Estate(Long Gang) Subsidiary Co Shenzhen Tellus Group of Trade Unions Labor union of the Company 790488804 Shenzhen Xing Long Mechanical Model Co. Associate 192172420 Shenzhen Xing Dao New Chemical Materials Associate Co., Ltd. Shenzhen Hua Tong Automobile Co Associate 19217950X Name Relationship Institute number Shenzhen Tellus Automobile Service Associate 767583926 Development Co., Ltd Shenzhen ZungFu-Tellus Automobile Associate 774131792 Service Development Co., Ltd Shenzhen Chi He Automobile Co., Ltd Associate Shenzhen Automobile Industrial Import and Associate 192190506 Export Co Shenzhen Tellus Ji Meng Investment Co., Associate 71 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan Ltd Shenzhen Tellus Xing investment Co., Ltd. Associate Shenzhen Biao Yuan Jun Chi Automobile Associate Co., Ltd Shenzhen Chi He Automobile Co., Ltd Associate Shenzhen Long GangGrand Industrial Under the same untimate Investment Development Co., Ltd controller Please see Note 8.8 for the associates’ information of the Company. 3. Transac t ion wit h assoc iat es (1) Loan 1. In the reporting period, the Company borrowed RMB21,524,498.00 from Shenzhen SDG Information Co.,Ltd and has repaid RMB1,119,833.00. (2) Earnings of borrowings Figures in Figures in Name of associates 2008 2007 Shenzhen Xing Long Mechanical Model Co. 76,249.98 76,041.64 Total 76,249.98 76,041.64 Pricing policies: bank interest rate over the same period plus 10% (3) Payments of borrowings Figures in Figures in Name of associates 2008 2007 Shenzhen SDG Information Co.,Ltd 2,082,611.35 2,265,445.01 Shenzhen Tefa Development Center 789,525.00 755,040.00 Construction Management Ltd. Total 2,872,136.35 3,020,485.01 Pricing policies: bank interest rate over the same period plus 10% (4) Leased property The Company signed a leasing agreement with its associate, Shenzhen Ren Fu Te Li Automobile Service Co. Ltd, to lease it a land of 7,705.25 square meters and a five-floor building of 13,891.24 square meters with leasing period of 20 years started from 1 s t Juanuary 2005. In this leasing period, the Company collects RMB Yuan 5,000,000 for annual rent. From the fifth year since the first date of this leasing period, the rent will increase by 3% 72 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan year-on-year. (5) Equity Transfer During the reporting period, the Company's subsidiary, Automobile Industrial and Trading Co., Ltd and Longgang Grand Industrial Zone Investment and Development Co. Ltd signed a share transfer contract. It stated that the company will transfer 32.94% equity of the Shenzhen Peng Chi Automobile Co., Ltd to Longgang Grand Industrial Zone Investment and Development Co., Ltd in not less than the actual investment amount. (6) Guarantee and Guaranteeed 1. As at 31 December 2008, the Company made guarantee for a loan of RMB Yuan 20,000,000 for the Shenzhen Automobile Industry & Trading Co. Ltd, meanwhile, the Company also provided bank credit guarantee of not more than USD 2,000,000 for the same company. 2. As at 31 December 2008, the Tellus Group, the controlling shareholder of the Company, made guarantee for a bank loan of RMB Yuan 18,000,000 for the Company. (7) Annual remunerations of senior executives Figures in 2008 Figures in 2007 Item Value Number Value Number Sub-total of Annual remunerations 317.96 8 63.49 2 above RMB 300,000 Sub-total of Annual remunerations 22.24 2 174.76 8 below RMB 300,000 Total 340.20 10 238.25 10 (8) Accounts receivable and accouts payable of the associates （ exclude dividends receivable & dividends payable） Proportion in the total Item Name of the associates Balance at the end of the term receivables and payables % 73 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan 31 31 Dec. 31 Dec. 2008 31 Dec. 2007 Dec.2008 2007 Shenzhen Zung Fu-Tellus -- 6,642.73 -- 0.01 Automobile Service Co., Ltd Shenzhen Pilot New Chemical 708,072.26 708,072.26 1.07 0.57 Materials Co., Ltd. Other accountsreceivable Tellus Group of Trade Unions -- 1,200,000.00 -- 0.96 Shenzhen Tellus Xing investment 427,828.00 -- 0.65 -- Co., Ltd Shenzhen Tellus Automobile Service 6,652,719.60 6,625,538.10 10.05 5.31 Development Co. Shenzhen Xing Long Mechanical 1,577,836.49 1,501,586.51 2.38 1.20 Models Co. Sub-total 10,041,839.6 9,366,456.35 14.15 8.05 0 Shenzhen Tefa Real Estate Co., Ltd 6,054,855.46 6,054,855.46 18.97 14.52 account payable 6,054,855.46 18.97 Sub-total 6,054,855.46 14.52 Shor-term borrowings 20,404,665.0 21,524,498.0 Shenzhen SDG Information Co.,Ltd 15.28 8.34 0 0 Shenzhen Development Center 11,000,000.0 11,000,000.0 8.24 4.26 Construction Management Co., Ltd. 0 0 31,404,665.0 32,524,498.0 Sub-total 23.52 12.60 0 0 Shenzhen Tefa Real Estate Co., Ltd 335,701.34 2,395,526.25 0.26 1.45 Hongkong Yujia Investment Co., Ltd 2,137,855.29 2,279,955.85 1.64 1.38 Shenzhen Tefa Swan Industrial Co 20,703.25 20,703.25 0.02 0.01 Shenzhen Mechanical Equipment 257,536.50 224,310.36 0.20 0.14 Import and Export Co Shenzhen SDG Information Co.,Ltd 31,038,433.9 30,452,387.5 23.77 18.41 9 9 ther account payable Shenzhen Tellus Real Estate(Long 1,095,742.50 1,095,742.50 0.84 0.66 Gang) Co Shenzhen Yan Chun Real Estate Co 476,217.49 476,217.49 0.36 0.29 Shenzhen Development Center 603,510.00 205,730.00 0.46 0.12 Construction Management Co., Ltd Shenzhen Biao Yuan Jun Chi -- 8,829,904.03 -- 5.34 Automobile Co., Ltd Shenzhen Chi He Automobile Co., -- 3,088,590.19 -- 1.87 Ltd 35,965,700.3 49,069,067.5 Sub-total 27.55 29.67 6 1 74 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan Not e 11.P ledge of asset 1、 The original book value of fixed asset is total RMB Yuan 55,880,000 and net value RMB Yuan 24,820,000; the real estate with book value RMB Yuan 100,320,000 and net value of RMB Yuan 77,190,000 was pledged to bank, as the guaranty for a loan of RMB Yuan 102,400,000. 2、 The Company pledged bank its 95% shares of the Shenzhen Tellus Xin Yong Tong Automobile Development Co., Ltd. 30% shares of the Shenzhen Xing Long Mechanical Models Co. 60% shares of the Shenzhen Te Fa Hua Ri Automobile Co. Ltd., as the guaranty for a loan of RMB 33,000,000. 3、 35% shares of the Shenzhen Zung Fu Tellus Automobile Services Co., Ltd. held by the Company was pledged to the Zung Fu Automobile Management (Shenzhen) Co., Ltd. as the credit guarantee to bank for a loan for the Shenzhen Zung Fu Te Li Automobile Services Co., Ltd. Not e 12. Cont ingenc y 1. External guarantee As at 31 December 2008, except for the recognized predicted liabilities (See Note 8.25), the major contignecy of the Company includes its subsidiary, the Shenzhen Automobile Industrial & Trading Co., Ltd. made a guarantee for bank loans for Shenzhen Automobile import and export Co.,Ltd. Details are as follows: Name of the company Guarantee Amount guaranteed Term guaranteed mode Shenzhen Automobile RMB From Aug.7, 2008 Industrial import and export Loan 20,000,000 to Aug.6, 2009 Co.,Ltd Shenzhen Automobile From Nov.8, 2008 Industrial import and export USD 2,000,000 Letter of credit to Nov.18, 2009 Co.,Ltd 2. Significant lawsuits and arbitrations (1) In October of 2005, a lawsuit was brought before Shenzhen Luo Hu District People’s Court by the Company, which was the recognizor of Jintian Industrial (Group) Co., Ltd. (“Jintian”) to require Jintian to redress RMB 4,081,830 (principal: RMB 3,000,000, interest: RMB 1,051,380, legal fare: RMB 25,160 and executive fare: RMB 5,290, which were all dealt 75 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan as a loss in last report term.) It was the amount money that was distrained forcibly. The Fu Tian District People’s Court had adjudged that the Company won the lawsuit and the forcible execution had been applied by the Company. April 2006 Shenzhen Development Bank brought an accusation against Jintian’s overdueing loan two million U.S. dollars and the company who guaranteed for this case. The company took on the principal and all interest. After that, the company appealed to Shenzhen Luohu District People's Court, asking Jintian to repay 2,960,490 U.S. dollars and interest. In 2008, it reached Shen Luo No.937 Civil Reconciliation Agreement(2008) after the mediating action taken by the Shenzhen Luohu District People's Court. The agreement is as follows: If Jintian repay 2,960,490 U.S. dollars before October 31, 2008, the company will exempt all the interest. If Jintian can not settle the amount on time, it will pay the penalty in accordance with the People's Bank of China RMB benchmark lending rate over the same period. The company has not yet received the money from Jintian at the end of the Octorber 31, 2008. (2) On October of 2005, a lawsuit was brought to Shenzhen Intermediate People's Court by the company, which is the recognizor of Shenzhen Zhong Hao (Group) Co., Ltd. (“Zhong Hao”) to require Jin Hao to redress RMB 16,620,000 (principal: RMB 11,500,000, interest: RMB 5,000,000, legal fare and assessment fee: RMB 120,000, which were all dealt as a loss in last report term.). Shenzhen Intermediate People's Court had adjudged that the company won the lawsuit and the forcible execution had been applied by the company. In 2008, the Shenzhen Intermediate People's Court issued the Shen Zhong Fa No. 420 Civil Consultation (2007). A result of the company failing to provide the property club for the implementation, the court suspended the case. After the disappearance of the suspension, the company may apply to the court to recover the implementation. (3) The company signed a “Guarantee Contract for a limited loan” with Shenzhen Petroleum & Chemical Limited Company (“Petroleum & Chemical Limited”) and China Agricultural Bank Shenzhen Shangbu Subbranch on 14 December 1995. Our company guaranteed Petroleum & Chemical Limited to borrow a loan of RMB57,600,000 from China Agricultural Bank Shenzhen Shangbu Subbranch, which would expire on 14 December 2000. On 29 December 2000, China Agricultural Bank Shenzhen Branch, China Grate wall Asset Management Corporation Shenzhen Branch (“Grate Wall Corporation Shenzhen Branch” ) and Petroleum & Chemical Limited signed a “Loan for Investment & Stock Transfer Agreement ”. Three parties agreed that China Agricultural Bank Shenzhen Branch would 76 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan transfer a loan of RMB 270,000,000 (the above-mentioned loan of RMB 57,600,000 included), that he extended to Petroleum & Chemical Limited, to Great Wall Corporation Shenzhen Branch, as a way of investment. In the agreement, they promised that “From the date on which the contract become effective, Party A, Grate wall Corporation Shenzhen Branch, will be entitled with the rights as a investor; Party B, China Agricultural Bank Shenzhen Branch, will not be a lender again. “The agreement will become effective with the signatures of the representatives or agents from the three parties”. On the same date, Great wall Corporation Shenzhen Branch, Petroleum & Chemical Limited and Shenzhen Petroleum & Chemical Group Limited Company (“Petroleum & Chemical Group”) signed an “Agreement”. Three parties agreed that Grate wall Corporation Shenzhen Branch changed his investor’s equity of RMB 270,000,000 in Petroleum & Chemical Limited as the investment returns in Petroleum & Chemical Group. Meanwhile, Petroleum & Chemical Group and Great Wall Corporation Shenzhen Branch signed a “Stock Transfer Contract”. They agreed that Great Wall Corporation Shenzhen Branch would use his investment returns of RMB 270,000,000 in Petroleum & Chemical Group to invest as a stockholder in a newly-registered company of Petroleum & Chemical Group. The contract “will become effective with the signatures and chops from the two parties”. In 20 August 2004, the China Agricultural Bank Shenzhen Branch claimed that “Agreement”, “Loan for Investment & Stock Transfer Agreement” and “Stock Transfer Contract” had not been carried out. They appealed to the Shenzhen Intermediate People's Court and required the borrower, Petroleum & Chemical Limited, to repay the loan of RMB 57,600,000, interest of RMB 16,652,286.37 and other overdue penalty. He also required our company to assure the guarantee responsibility. In 9 May 2006, the Company received the civil judgment of (2004) Shen Zhong Fa Min No. 437 from the Shenzhen Intermediate People’s Court. In its judgment for first instance, the Shenzhen Intermediate People’s Court ordained that the company should assume the joint liability of satisfaction for the loan of Petroleum & Chemical Limited. The company shall repay the loan principal of RMB 57,600,000 and interests to the China Agricultural Bank Shenzhen Shangbu Subbranch, within 10 days upon effectiveness of this judgment. (The interests should be calculated in accordance with the overdue interest rate for the loan of the corresponding period issued by the People’s Bank of China from 30 December 2000 to the date of liquidation.) As Petroleum & Chemical Limited was delisted and its assets were seized by the creditors, the company made provision of RMB 87,568,728.57 for the relevant loss, in accordance with the Accounting Regulations for Business Enterprises. 77 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan The Company refused to accept the above-mentioned verdict and appealed to the Guangdong Provincial Higher People's Court (hereinafter referred to the Guangdong Higher Court). The Guangdong Higher Court rejected the appeal and upheld the original verdict by the Civil Judgement [2006] No. 172. The Company refused to accept the verdict of the Guangdong Higher Court and submitted Civil Retrial applications and asked for Revocation of Civil Judgement of [2004]No.437 and [2006] No. 172 by the Shenzhen Intermediate People's Court and the Guangdong Higher Court respectively. The Guangdong High Court accepted the application for retrial and convicted to retrial this case by Civil Judgement [2007]No.682 in Octorber 16, 2007. During the retrial, the enforcement of the lawsuit has been suspended. And the case had entered the trial supervision procedure in the Guangdong Higher Court. (4) Shenzhen Tellus Real Estate Development Co., Ltd. (“Real Estate Co.”), a wholly-owned subsidiary of the company, entered into a Joint Property Construction Contract with Shenzhen Jinlu Industrial and Trade Company (“Jinlu Company”) at November 29, 1994 to build a real estate in Shenzhen. Real Estate Co. paid RMB 9,800,000 to Jinlu Company as of December 31, 1996. However, Jinlu Company breached the contract and cooperated with Guangzhou Military Area Shenzhen Property Administrative Department (“GMAA”) to develop the real estate and paid the RMB9,800,000 received from Real Estate Co. to GMAA. Therefore, Real Estate Co. lodged a claim against Jinlu Company. The Futian District People’s Court admitted GMAA as the third party of this case according to the law of the PRC. It was ruled by the Futian District People’s Court that the contract was of no effect; GMAA shall repay Jinlu Company the principal of RMB9,800,000 plus interests, which shall be transferred to Real Estate Co. within three days of the reception by Jinlu Company. GMAA applied for further trial that was allowed, and the original judgement was suspended during the retrial. Since the target of the litigation was located out of Futian District, the second trial was undertaken by the Shenzhen Intermediate People’ Court at March 18, 2003, which overruled the judgment of the Futian District People’s Court. The Shenzhen Intermediate People’s Court admitted that the original contract entered between Real Estate Co. and Jinlu Company was still effective. The Group had made provision of RMB4,900,000. As Real Estate Co. was still under negotiation with Jinlu Company, in the opinion of directors, no further provision was deemed necessary as of the balance sheet date. Up to the date of the approval of these financial statements, the settlement consultation of the two parties was still on going. (5) Ji Jianjun, Zhou Linxia, together with other 40 property owners, purchased the houses and stores in the Yueyang Tellus Plaza, that were developed by the Yueyang Subsidiary of 78 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan Shenzhen Tellus Real Estate Company (“the Yueyang Company”), between 1995 and 1998. Owning to the quality problem of the plaza, they took the Yueyang Company, the company, Shenzhen Tellus Real Estate Company (the Company’s subsidiary), and the Shenzhen Te Fa Group (the holding shareholder of the Company) to court. At October, 12, 2006, the Yueyang County People’s Court adjudged that the Yueyang Company should redress RMB 2,980,000 to the plaintiffs for compensation. The company, Shenzhen Tellus Real Estate Company and Shenzhen Te Fa Group should assume joint liability. The force of the case took effect and already finished. The company had appealed to the Hunan Provincial Higer people’s Court and the Hunan Provincial Higer Procuratorate. Fu Yuansi, Wu Shenbao, together with other 64 property owners of Yueyang Tellus Plaza, took the Yueyang Company, the company, Shenzhen Tellus Real Estate Company (the Company’s subsidiary), and the Shenzhen Te Fa Group (the holding shareholder of the Company) to court for the same reason. At December 26, 2007, the Yueyang County People’s Court adjudged, by Civil Judgement [2007] No.10, that the Yueyang Company should lifted the contracts for the sale of housing with the plaintiff and the plaintiff should return the houses to Yueyang Company, which should be performed within three monthes since the effectiveness of the judgement; and the Yueyang Company, the Company, Shenzhen Tellus Real Estate Company and the Shenzhen Te Fa Group should repay the plaintiff RMB Yuan 6,572,025 for compensation, which should be performed within five days since the effectiveness of the judgement. The company refused to accept the ruling and appeal has been filed. At May 16, 2008, the company received the Yue Zhong Min No. 45 Civil Consultation(2008) from the Hunan Yueyang Intermediate People's Court, which stated the canceling of No.10 Civil Judgement [2007] and returned the case toYueyang County Court for retrial. Ended at the reporting period, the court was still at hearing. At present, 316 residents started legal proceeding, the court was still on going. Not e 13.Com m it m ent issues The Company has no material commitment issue needed to be disclosed as at the end of this reporting period. Not e 14.It em s in t he post -balanc e sheet dat e issues The board of directors of the company passed the Annual Profit Distribution Plan of 2008 at March 20, 2009, which decided that there was no profit distribution for 2008 and no capital increase out of earnings or capital reserves. The Plan has not been approved by the company 79 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan ‘s general meeting of shareholders. Not e 15. Ot her im port ant event s There is no other important evernts to be disclosed. Not e 16. Com parat ive f igures The figures of 2007 in the financial statements have been adjusted according to the reporting method of the year 2008. Suplem ent ary m at erials： 1. Non-recurring prof it s and losses The non-recurring profits and losses of the company in the reporting period are as follows: Item Figures in Figures in 2008 2007 Profits and losses from disposal of non-current assets 2,142,029.40 -4,934,272.76 (non-capital assets) Profits and losses from transferring equity investment 2,745,504.62 -4,934,272.76 Profits and losses from seeling financial assets available for sale -- 20,120,452.32 Earnings from borrowings to non-financail enterprises that 76,249.98 76,041.64 were included in the current profits and losses Profits and losses from the exchange of non-monetary assets 5,620,523.99 23,321,551.51 Profits and losses from liability restructuring 1,210,000.00 1,268,742.96 Net balance of other operations 558,159.85 -1,079,507.21 Staff welfare payable deducting the current general and -- 3,088,230.76 administrative expenses Less:profit and loss of the minor shareholder -163,344.43 3,624,505.60 Deducting the influence of income tax - -6,256,849.50 3,235,138.53 Total 8,953,984.88 39,079,986.13 The above-mentioned non-recurring profits and losses were prepared in accordance to the standards in the Information Disclosure Standards for Listed Companies No. 1-- Non-recurring Profits and Losses issued by the China Securities Regulatory Commission. 80 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan 2. Rat e of ret urn on net assest and earnings per share Profits Rate of return on net Earnings per share In the assets (%) ( RMB Yuan/Per share) Item reporting Fully Weighted period Diluted average Basic Diluted 2008 Net profits attributable to the Company’s 4,584,308.06 2.80 2.82 0.0208 0.0208 common shareholders Net profits attributable to the Company’s common shareholders by -4,369,676.82 -2.67 -2.69 -0.0198 -0.0198 deducting the non-reocurring profits and losses Relevant financial index of 2007 after recaculation： Profits Rate of return on net Earnings per share In the assets (%) ( RMB Yuan/Per share) Item reporting Fully Weighte period Diluted d average Basic Diluted Net profits attributable to the Company’s 12,311,789.81 7.82 8.03 0.0559 0.0559 common shareholders Net profits attributable to the Company’s common shareholders by -26,768,196.3 -17.01 -17.46 -0.1215 -0.1215 deducting the 2 non-reocurring profits and losses （ 1） The caculating fomula for the average rate of return on net assets is as follows: Itens Figures in 2008 Figures in 2007 1、The weighted average ordinary stocks Number of issued ordinary stocks at the 220,281,600.00 220,281,600.00 beginning of the year Number of issued ordinary stocks at the end of 220,281,600.00 220,281,600.00 the year The weighted average ordinary stocks at the 220,281,600.00 220,281,600.00 end of the year 2、The weighted average net assets attributable to the owner of the parent company The net assets attributable to ordinary 157,402,382.28 147,154,326.04 81 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan shareholders at the beginning of the year Net profit converted by 50% 2,292,154.03 6,155,894.91 The new shareholder premium of subsidiaries 3,024,773.35 -- The weighted average net assets attributable 162,719,309.66 153,310,220.95 to the owner of the parent company 3. Differences between IFRS and PRC Accounting Standards on Financial St at em ent s. After the adoption of the New Accouting Standards since 1st Juanuary 2007, there is no significant difference in financial statements based on the IFRS or the PRC Accounting Standards. 82 Generated by Foxit PDF Creator © Foxit Software http://www.foxitsoftware.com For evaluation only. SHENZHEN TELLUS HOLDING CO., LTD Notes to Financial Statements For the Year Ended Dec 31, 2008 Expressed in RMB Yuan Section XI. Documents Available for Reference Complete sets of documents are placed in the Company’s office for the reference of the CSRC, SSE, relevant authorities and vast numbers of investors, including: 1. Original of 2008 Accounting Statements carried with the signatures and seals of the legal representative, General Manager and Chief Financial Officer.; 2. Original of the Auditors’ Report carried with the seal of Certified Public Accountants as well as the signatures and seals of certified public accountants(Chinese and English version). 3. Original of the Company’s documents and manuscripts of the public notices disclosed in the newspapers designated by the CSRC; 4. Annual Report or its summary published in other stock exchange. Signature of Chairman of the Board: Zhang Ruili Board of Directors of ShenZhen Tellus Holding Co., Ltd. March 24, 2009 83