深深宝Ｂ(200019)2008年年度报告（英文版）

深圳市深宝实业股份有限公司 SHENZHEN SHENBAO INDUSTRIAL CO., LTD. ANNUAL REPORT 2008 March, 2009 Important Note Board of Directors, Supervisory Committee of Shenzhen Shenbao Industrial Co., Ltd. (hereinafter referred to as the Company) and its directors, supervisors and senior executives hereby confirm that there are no any important omissions, fictitious statements or serious misleading information carried in this report, and shall take all responsibilities, individual and/or joint, for the reality, accuracy and completion of the whole contents. Directors of the Company Mr. Zhu Junming and Mr. He Dong could not present the board meeting due to business, but they both entrusted Chairman Mr. Zeng Pai to vote on their behalves. Guangdong Dahua Delu Certified Public Accountants issued standard unqualified Auditors’ Report for the Company. Chairman of the Board Mr. Zeng Pai, General Manager Mr. Peng Ying and CFO Ms. Zeng Suyan hereby confirm that the Financial Report enclosed in the Annual Report is true and complete. This report has been prepared in Chinese and English version respectively. In the event of difference in interpretation between the two versions, the Chinese report shall prevail. Content Chapter I. Company Profile……………………………………………………… Chapter II. Abstract of Financial Highlights and Business Highlights…………. Chapter III. Changes in Share Capital and Particulars about Shareholders……. Chapter IV. Particulars about Directors, Supervisors and Senior Executives and Staffs………………………………………………………………………………….. Chapter V. Administrative Structure…………………………………………….. Chapter VI. Particulars about Shareholders’ General Meeting………………… Chapter VII. Report of the Board of Directors…………………………………. Chapter VIII. Report of the Supervisory Committee……………………………. Chapter IX. Significant Events…………………………………………………….. Chapter X. Financial Report…………………………………………………….. Documents Available for Reference……………………………………………….. Chapter I. Company Profile I. Legal Name of the Company In Chinese: 深圳市深宝实业股份有限公司(Abbr. 深宝) In English: SHENZHEN SHENBAO INDUSTRIAL CO., LTD. (Abbr.: SBSY) II. Legal Representative: Mr. Zeng Pai III. Secretary of Board of Directors: Mr. Liu Xiongjia Liaison Address: 28/F, B&C Block of Bao’an Plaza, No. 1002 Sungang Road, Shenzhen Tel: (86) 755-25507480 Fax: (86) 755-25507480 E-mail: a0019@21cn.com IV. Registered Address of the Company: 28/F, B&C Block of Bao’an Plaza, No. 1002 Sungang Road, Shenzhen Office Address of the Company: 28/F, B&C Block of Bao’an Plaza, No. 1002 Sungang Road, Shenzhen Post Code: 518020 Internet Web Site: http://www.sbsy.com.cn E-mail: sbsy@sbsy.com.cn V. Newspapers Chosen for Disclosing the Information of the Company: Securities Times, China Securities and Hong Kong Wen Wei Po Internet Web Site for Publishing the Annual Report Designated by CSRC: http://www.cninfo.com.cn Place Where the Annual Report is Prepared and Placed: Secretariat of the Board of Directors VI. Stock Exchange Listed with: Shenzhen Stock Exchange Short Form of the Stock: SHENSHENBAO-A, SHENSHENBAO-B Stock Code: 000019, 200019 VII. Other Relevant Information of the Company 1. The initial registration date and place: July 30, 1981, Shenzhen The changed registration date and place: Mar. 21, 2005, Shenzhen 2. Registration code for business license of corporation: 440301103223954 3. Number of taxation registration: GSDZi 440301192180754 DSDZi 440303192180754 4. Organization Code Certificate: 19218075－4 5. Name of the certified public accountants engaged by the Company: Guangdong Dahua Delu Certified Public Accountants Address: 11/F., Tower B, United Plaza, No. 5022, Binhe Av. Futian District, Shenzhen Chapter II. Abstract of Financial Highlights and Business Highlights Section I. Main Profit Index as of the Year 2008 I. Profit index of the year 2008 Unit: RMB Items Amount Operating income 12,407,989.81 Total profit 18,681,641.57 Net profit attributable to shareholders of the listed company 12,630,244.76 Net profit attributable to shareholders of the listed company after deducting 10,756,011.59 non-recurring gains and losses Net cash flow arising from operating activities 516,991.66 Note: Items of non-recurring gains and losses deducted and the involved amounts are as following: Government subsidy for project of tea industry 5,480,000.00 Income from land compensation of river renovation 759,341.73 Net non-operating income/expense -3,687.58 Others 37,997.61 Total non-recurring gains/losses before deductting minority shareholders’ gains/losses 6,273,651.76 Less: influenced amount of minority shareholders’ gains/losses 3,829,670.52 Total non-recurring gains/losses after deducting of minority shareholders’ gains/losses 2,443,981.24 Less: Impact on income tax 569,748.07 Total non-recurring gains/losses after deducting of impact on income tax 1,874,233.17 II. Discrepancy and explanation for the difference in the net profit and net asset as audited by domestic and international certified public accountants respectively. Unit: RMB Items CAS IAS Net profit 12,630,244.76 12,630,244.76 Net asset 332,742,310.34 335,149,949.02 In 2008, the net profit attributable to owners of the parent company calculated based on CAS was RMB 12,630,244.76, and the net profit attributable to owners of the Explanations on parent company calculated based on IAS was RMB 12,630,244.76; there were no differences differences between them. In 2008, the shareholders’ equity attributable to parent company calculated based on CAS was RMB 332,742,310.34 and the shareholders’ equity attributable to parent company calculated based on IAS was RMB 335,149,949.02; the differences between them are as follows: RMB 335,149,949.02 in accordance with IAS. 1. Adjustment on amortization of differences of equity investment: RMB -1,016,958.04; 2. Adjustment on cost of transferring Shenzhen Pepsi’s equity: RMB 254,239.51; 3. Adjustment on other account payable: RMB -1,067,000.00; 4. Capitalization of interest of land use right: RMB -577,920.15. RMB 332,742,310.34 in accordance with Accounting System For Business Enterprises. Section II. Principal Accounting Data and Financial Index over Previous Three Years Ended the Report Year I. Main business data Unit: RMB Increase/decrease 2006 this year 2008 2007 Items compared with After adjustment Before adjustment that last year (%) Operating income 151,118,088.61 192,241,044.90 -21.39 104,021,455.44 104,021,455.44 Total profit 18,681,641.57 46,936,227.65 -60.20 33,086,078.62 39,976,078.62 Net profit attributable to shareholders of the listed 12,630,244.26 43,690,242.34 -71.09 34,074,857.69 39,059,405.42 company Net profit attributable to shareholders of the listed 10,756,011.59 13,804,872.70 -22.09 -11,908,626.34 -17,826,078.19 company after deducting non-recurring gains and losses Net cash flow arising from 516,991.66 -2,450,233.38 121.10 -30,001,648.17 -30,001,648.17 operating activities Increase/decrease At the end of 2006 at the end of this At the end of At the end of year compared Items 2008 2007 with that at the After adjustment Before adjustment end of last year (%) Total assets 531,942,477.80 468,074,812.84 13.64 473,517,999.07 469,044,876.40 Shareholders’ equity 332,742,310.34 320,112,065.58 3.95 276,421,823.24 278,878,929.61 attributable to parent company Section II. Major financial index Unit: RMB/Share Increase/decrease 2006 this year Items 2008 2007 After Before compared with adjustment adjustment that last year (%) Basic earnings per share 0.07 0.24 -70.83 0.19 0.22 Diluted earnings per share 0.07 0.24 -70.83 0.19 0.22 Basic earnings per share after deducting non-recurring gains and 0.06 0.08 -25.00 -0.07 -0.098 losses Fully diluted return on equity (%) 3.80 13.65 -9.85 12.33 14.01 Weighted average return on equity 3.87 14.65 -10.78 13.14 15.06 (%) Fully diluted return on equity after deducting non-recurring gains and 3.23 4.31 -1.08 -4.31 -6.39 losses (%) Weighted average return on equity after deducting non-recurring gains 3.30 4.63 -1.33 -4.59 -6.87 and losses (%) Net cash flow per share arising from 0.0028 -0.01 128.00 -0.16 -0.16 operating activities Increase/decrease At the end of 2006 at the end of this At the end At the end year compared Items After Before of 2008 of 2007 with that at the end of last year adjustment adjustment (%) Net asset per share attributable to 1.83 1.76 3.98 1.52 1.53 shareholders of listed company Chapter III. Changes in Share Capital and Particulars about Shareholders Section I. Changes in Shares 1. Statement of changes in shares (Ended Dec. 31, 2008, Unit: Share) Before the change Increase / decrease this time (+, -) After the change Capital New ization Nature of shares Proportion Bonus Subtot Proportion Amount shares of Others Amount (%) shares al (%) issued public reserve I. Shares with conditional subscription 1. State-owned shares 2. State-owned legal 37,818,689 20.79 37,818,689 20.79 person shares 3. Other domestic shares 44,647,193 24.54 44,647,193 24.54 Including: Domestic non-state-owned 24.54 24.54 44,647,193 44,647,193 legal person shares Domestic natural person shares 4. Share held by foreign investors Including: Foreign legal person shares Foreign natural person shares Total of conditional shares 82,465,882 45.33 82,465,882 45.33 II. Shares with unconditional subscription 1. Common shares in 73,321,206 40.30 73,321,206 40.30 RMB 2. Foreign shares in 26,136,000 14.37 26,136,000 14.37 domestic market 3. Foreign shares in overseas market 4. Others Total of unconditional 99,457,206 54.67 99,457,206 54.67 shares III. Total of capital shares 181,923,088 100.00 181,923,088 100.00 II. Statement of change in conditional shares Unit: Share Conditional Conditional Name of the shares at Released Increased Reason of Date of shares at shareholder beginning this year this year condition releasing end of year of year Shenzhen Details are available in Agricultural Products 44,647,193 0 0 44,647,193 Section III of this chapter Co., Ltd. under title of “VI. Amounts and restricted Shenzhen Investment 37,818,689 0 0 37,818,689 conditions of top 10 Holdings Co., Ltd. conditional shareholders.” Section II. Issuance and listing of stock I. In the previous three years up to the end of the report period, the Company has not issued shares or derivated securities. II. Neither of the Company’s total share capital and shareg structure has been changed in the report term. Details are available in Section 1 of this chapter under title of “I. Change of share capital”. III. The Company has no inner employee’s shares as of the end of report term. Section III. Particulars about Shareholders I. As of the end of report term, the Company had totally 23,613 shareholders, including 19,127 shareholders of A-shares, 4,486 shareholders of B-shares. II. Ended Dec. 31, 2008, particulars about shares held by the top ten shareholders and the top ten shareholders with unconditional subscription Total shareholders at the end of the report 23,613 period Particulars about shares held by the top ten shareholders Proportion Amount of Shares Amount of Nature of of share conditional pledged or Names of shareholders share held shareholder held shares held frozen (share) (%) (share) (share) Shenzhen Agricultural Products Co., Ltd. Others 29.54 53,743,347 44,647,193 0 Shenzhen Investment Holdings Co., Ltd. State-owned 25.79 46,914,843 37,818,689 0 Zhong Jianlong Others 1.32 2,400,584 0 0 GUOTAI JUNAN SECURIES Others 0 0 0.85 1,548,547 (HONG KONG) LIMITED HANG SENG CONSUMER Others 0 0 0.60 1,088,111 SECTOR FLEXIPOEER FUND Song Gang Others 0.41 750,792 0 0 Chen Yongquan Others 0.36 659,372 0 0 Peng Ruihua Others 0.29 523,200 0 0 Zheng Bangya Others 0.27 485,700 0 0 Liu Honghai Others 0.23 420,000 0 0 Particulars about shares held by the top ten unconditional shareholders Amount of unconditional shares Name of shareholder Type of share held(share) Shenzhen Agricultural Products Co., Ltd. 9,096,154 A shares Shenzhen Investment Holdings Co., Ltd. 9,096,154 A shares Zhong Jianlong 2,400,584 A shares GUOTAI JUNAN SECURIES B shares 1,548,547 (HONG KONG) LIMITED HANG SENG CONSUMER B shares 1,088,111 SECTOR FLEXIPOEER FUND Song Gang 750,792 A shares Chen Yongquan 659,372 B shares Peng Ruihua 523,200 B shares Zheng Bangya 485,700 A shares Liu Honghai 420,000 A shares STATE-OWNED ASSETS SUPERVISION & ADMINISTRATION COMMISSION OF SHENZHEN MUNICIPALITY GOVERNMENT directly held 21.52% equities of Agricultural Products and indirectly held Explanation on associated relationship or 5.22% equities of Agricultural Products, and directly held 100% equities of accordant action among the top ten Shenzhen Investment Holdings; except that, it is unknown whether there shareholders of circulation share exists associated relationship or belongs to accordant actionist regulated by Administration of the Takeover of Listed Companies among the aforesaid listed other shareholders or not. Explanations on stipulated period of Stipulated period of shares Shareholders’ names rationed new shares held which were held participated by strategic investors or Naught Naught general legal person Note: Shenzhen Agricultural Products Co., Ltd.(hereinafter refers as Agricultural Products) and Shenzhen Investment Holdings Co., Ltd. (hereinafter refers as Shenzhen Investment Holdings) are two of the shareholders holding over 5% of the Company’s capital shares. None of them has changed in total amount of shares. III. Particulars about controlling shareholders of the Company 1. Name of controlling shareholder: Shenzhen Agricultural Products Co., Ltd. Legal representative: Chen Shaoqun Date of foundation: Jan. 14, 1989 Main business: The company is engaged in developing, constructing, operating and managing wholesale market of agricultural products; dealing in market lease and sale; supplying services of market trade; opening electron trading platform for large sums of agricultural products; dealing with the business on wholesale, chains operation, import and export of agricultural products, aquatic products, sugar, tobacco and alcohol; engaging in information, counseling, transportation, property management, storage, package, hotel management, auxiliary services of market, development and operation of property, etc.; carrying out investment relevant with its operating principles. Registration capital: RMB 452,063,442 2. The first largest shareholder of the controlling shareholder of the Company: State-owned Assets Supervision and Administration Commission of Shenzhen Municipality Government. State-owned Assets Supervision and Administration Commission of Shenzhen Municipality Government established with hanging out their shingle on Aug. 2004, as special entity directly under Shenzhen People’s Government, implements its qualification of provider on behalf of our nation and carry out supervision and administration according to law for state-owned assets which authorized to be supervised. 3. Property right and controlling relationship between the actual controller of the Company and the Company is as follows: State-owned Assets Supervision and Administration Commission of Shenzhen Municipality Government 100% 21.52% 100% Shenzhen Yuanzhi Investment Co., Ltd. Shenzhen Investment Holdings Co., Ltd. 5.22% SHENZHEN AGRICULTURAL PRODUCTS CO., LTD. 25.79% 29.54% SHENZHEN SHENBAO INDUSTRIAL CO., LTD. IV. Other legal person shares over 10% of the total share capital of the Company The second shareholder: Shenzhen Investment Holdings Co., Ltd. Legal representative: Chen Hongbo Date of foundation: Oct. 13, 2004 Main business and product: to provide guarantee to state-owned enterprise which belongs to municipality; to carry out management to the state-owned share equity excluding the enterprises directly under the supervision of State-owned Assets Supervision and Administration Commission of Shenzhen Municipality Government; assets reorganization, innovation and capital operation of subsidiary enterprise; investment and other business authorized by State-owned Assets Supervision and Administration Commission of Shenzhen Municipality Government. Registration capital: RMB 4,000,000,000 V. Schedule of releasing the conditional shares for trade Unit: Share Newly added tradable Balance of shares with Balance of unconditional Date shares conditional subscription shares August 8, 2007 18,192,308 82,465,882 99,457,206 July 27, 2008 18,192,308 64,273,574 117,649,514 July 27, 2009 64,273,574 0 181,923,088 The Company’s capital shares are totaled to 181,923,088 shares. Restriction conditions are available under title of “VI. Amounts and restricted conditions of top 10 conditional shareholders” hereinafter. VI. Amounts and restricted conditions of top 10 conditional shareholders (Ended December 31, 2008) Unit: Share Shares with Name of the Date when trading Newly added No. conditioned Conditions shareholder is allowed tradable shares subscription Shenzhen Since the implementation of July 27, 2008 9,096,154 Agricultural Share Merger Reform 1 44,647,193 Products Co., Plan(July 27, 2006), there is Ltd. July 27, 2009 35,551,039 no listed transaction or transfer in the market within July 27, 2008 9,096,154 12 months. After 12 months, the original non-tradable Shenzhen shares in listed transaction Investment on Shenzhen Stock 2 37,818,689 Holdings Co., Exchange are sold, and the Ltd. July 27, 2009 28,722,535 sales proportion of the total shares of the Company will not exceed 5% in 12 months and 10% in 24 months. Notes: Ended the report period, the application of releasing the restriction for respective Renminbi common shares amounted to 9,096,154 shares which could be listed on July 27, 2008 held by Shenzhen Agricultural Products Co., Ltd. (referred as “Agriculture Product” hereinafter) and Shenzhen Investment Holdings Co., Ltd. (referred as “Shenzhen Investment Holdings” hereinafter) have not been brought forward to the Board of Directors of the Company. Chapter IV. Particulars about Directors, Supervisors and Senior Executives and Staffs Section I. Particulars about the directors, supervisors and senior executives I. Basic status Number of shares ） held (share)） Amount of Amount Share Name Gender Age Title Office term Amount conditiona option at the l shares at the granted year-be year-end gin Chairman of the Board, Secretary Oct. 25, 2006- Zeng Pai Male 38 0 0 － － of the Party Oct. 25, 2009 Committee Oct. 25, 2006- Zhu Junming Male 45 Director 0 0 － － Oct. 25, 2009 He Dong Male 39 Director Oct. 25, 2006- 0 0 － － Oct. 25, 2009 Chen Oct. 25, 2006- Male 43 Director 0 0 － － Xiaohua Oct. 25, 2009 Independent Oct. 25, 2006- Fan Zhiqing Male 59 0 0 － － Director Oct. 25, 2009 Independent Oct. 25, 2006- Du Wenjun Female 41 0 0 － － Director Oct. 25, 2009 Independent Oct. 25, 2006- Deng Meixi Female 37 0 0 － － Director Oct. 25, 2009 47 Oct. 25, 2006- 0 0 Zheng Yuxi Male Director － － Oct. 25, 2009 Oct. 25, 2006- Zeng Suyan Female 54 Director and CFO 0 0 － － Oct. 25, 2009 Chairman of Oct. 25, 2006- Zong Haiyan Female 45 Supervisory 0 0 － — Committee Oct. 25, 2009 Oct. 25, 2006- Li Yiyan Female 43 Supervisor 0 0 － — Oct. 25, 2009 Oct. 25, 2006- Yan Zesong Male 39 Supervisor 0 0 － － Oct. 25, 2009 General Manager, Vice-Secretary of the Party Committee, Secretary of Oct. 25, 2006- Peng Ying Male 48 0 0 － － Commission of Oct. 25, 2009 Disciplinary Inspection and Chairman of Labor Union Deputy General Oct. 25, 2006- Guan Lihua Male 55 0 0 － － Manager Oct. 25, 2009 Secretary of the Oct. 25, 2006- Liu Xiongjia Male 37 Board of 0 0 － － Directors Oct. 25, 2009 Notes: Particulars about directors, supervisors and senior executives holding the position in Shareholding Company (1) Director Mr. Zhu Junming held the position of director and GM of Agricultural Products, with office term from Oct. 13, 2006 to Oct. 13, 2009. (2) Director Mr. Chen Xiaohua held the position of director and secretary of the Board of Agricultural Products, with office term from Oct.13, 2006 to Oct.13, 2009. (3) Director Mr. He Dong held the post of director of Asset Management Center in Shenzhen Investment Holdings Co., Ltd. (4) Director Mr. Zheng Yuxi held the position of Chairman of controlling subsidiary of Agricultural Products- Shenzhen Agro-Pastoral Enterprises Co., Ltd. since March 2008. II. Particulars about main work experience and posts or part-time job of present directors, supervisors and senior executives in other units except for shareholding units. Directors: 1. Mr. Zeng Pai, senior economist, was born in 1971 and graduated from Xi’an Jiaotong University with doctor degree of management science. He took turns of deputy general manager of futures business dept., manager of trade & development dept., assistance of general manager, etc. of agricultural company; since April 2001 he has taken the post of director and general manger of the Company and he has held the positions of chairman of the Board, general manager and secretary of the Party committee of the Company since January 2003. Now he is in charge of chairman of the Board and secretary of the Party committee of the Company. 2. Mr. Zhu Junming, an economist, was born in January 1964 with the master degree. He took turns of director, standing deputy general manager of the 3rd Board of Director of Shenzhen Agricultural Products Co., Ltd.; director and general manager of the 4th Board of Director of Shenzhen Agricultural Products Co., Ltd. Now he is in charge of director and general manager of the 5th Board of Directors of Shenzhen Agricultural Products Co., Ltd.; and director of the Company since Oct. 2006. 3. Mr. He Dong, master degree of law and MBA, was born in 1969. He has ever taken the deputy director of law issue office in Shenzhen Eastern Development Group, deputy office director of Shenzhen Construction Investment Holdings Co., he is now the director of assets management center of Shenzhen Investment Holdings Co., Ltd. and has taken the director of the Company since May 2005. 4. Mr. Chen Xiaohua, an economist with master degree, was born in 1966. He took turns of section chief of secretariat, director and concurrently secretary and deputy general manager of the Board of the Agriculture Products Company. He is now in charge of director, deputy general manager and secretary of the Board of Agriculture Products Company and he has taken the post of director of the Company since February 2000. 5. Mr. Fan Zhiqing, a senior accountant and senior economist with bachelor degree, was born in 1949 and he took turns of committeeman of senior professional title and concurrently member of expert group of Guangdong Province, financial manager and financial chief supervisor of Shenzhen large-scale state-run or joint-invested enterprises, and now he is in charge of visiting professor (mainly teaching courses of company financing) of Shenzhen manager advanced study, he has held the position of independent director of the Company since July 2002. 6. Ms. Du Wenjun, an economist, was born in 1968 with the master degree of engineering. She took the turns of senior researcher of Jun’an Securities Research, business director of Purchasing and Merger Headquarters of Guotai Jun’an Securities Co., Ltd. Now she is in charger of the director and general manger of Purchasing and Merger Headquarters of Guotai Jun’an Securities Co., Ltd; and independent director of the Company since Oct. 2006. 7. Ms. Deng Meixi, MBA, was born in 1972, non-professional member of the Chinese Institute of Certified Public Accountants, senior member of Association of Chartered Certified Accountants. She ever took the turns of auditor of Deloitte&Touche and ArthurAndersen CPA Ltd., financial manager of Shenzhen Shentou Investment Co., Ltd.; financial supervisor and development supervisor of suppliers of WAL★MART (China) Investment Co., Ltd.; senior financial supervisor of Best Buy Shanghai Limited. She takes the post of independent director of the Company since Oct. 2006. 8. Mr. Zheng Yuxi, bachelor degree of economics, was born in 1962. He has taken the post of director and deputy general manager of underling enterprise of Shenzhen Special Economic Region Free Commodities Enterprises since 1991; he took the turns of general manager assistant and deputy general manager of the Company as of May 2001. He was the director and general manager of the Company since Oct. 2006, he resigned hist post of general manger of the Company in Feb. 2008. Since March 2008, he takes the position of Chairman of controlling subsidiary of Agricultural Products- Shenzhen Agro-Pastoral Enterprises Co., Ltd. 9. Ms. Zeng Suyan, an accountant with junior collage degree, was born in 1955. She took the turns of chief accountant, deputy minister and minister of planning and financial dept. of the Company since 1994. She is now in charge of director and CFO the Company. Supervisors: 10. Ms. Zong Haiyan, bachelor degree and instructor, was born in 1964; she ever taught in Xiangtan University, Changsha University of Electric Power as an instructor; journalist and editor of Shenzhen Financial Morning Post, general manager assistant of Agricultural Company since Feb. 1998; ever took the posts of director of general manager office, secretary of Chinese Communist Youth League, supervisor of the 4th supervisory committee of Agricultural Products, chairman of the supervisory committee of Shen Zhen Agro-Pastoral Enterprise Co. Ltd.; since May 2005, she ever took the posts of Chairman of the Board of Shenzhen Minrun Agricultural Products Dispatch Chains Co., Ltd. and general manager of the Company. Now she is chairman of supervisory committee of the Company. 11. Ms. Li Yiyan, Master Degree of Professional in Human Resources, was born in 1966. She has taken the post of the Company after graduation since Aug., 1988. She is now in charge of ministry of human resources of the Company and has taken the post of supervisor of the Company since July 2003. 12. Mr. Yan Zesong, was born in 1970 with the undergraduate degree, standing board member of China Beverage Industry Association. He ever took director and general manger of Shenzhen Shenbao Huacheng Food Co., Ltd. Now he is chairman of Shenzhen Shenbao Huacheng Food Co., Ltd; and supervisor of the Company since Oct. 2006. Other Senior Executives: 13. Mr. Peng Ying, an economist with bachelor degree, was born in 1961. He took turns of office director of general manager, general manager assistant and concurrently minister of human resources of the Agriculture Products Company and chairman of Shenzhen Agriculture Products Flesh Dispatch Co., Ltd. He has taken the position of supervisor of 4th and 5th Supervisory Committee of the Company since February 2000 to October 2006 and the secretary of commission for disciplinary inspection of the Company since January 2005. Since October 2006, he is deputy general manager, vice secretary of party committee, secretary of commission for disciplinary inspection, chairman of labor union of the Company. Now, he is the general manager, vice secretary of party committee, secretary of commission for disciplinary inspection, chairman of labor union. 14. Mr. Guan Lihua, a senior engineer and senior economist with master degree, on-study doctor, was born in 1954. He took turns of general manager assistance of Shenzhen Huayang Bags Co., general manager of Shenzhen Yinzhu Plastic Products Co., Ltd.; since 1999 he took turns of director, deputy general manager and standing deputy general manager of the Company, and now he is deputy general manager of the Company. 15. Mr. Liu Xiongjia, master degree of Economics, was born in 1972. He held the post of secretary of the Board of the Company since Feb. 2002. He concurrently held the post of chairman of controlling subsidiary Guangdong Shenbao Grocery Co., Ltd. He was successively elected as one of No.1 Company Secretaries by New Fortune from year 2005 to year 2007. III. Particulars about the annual remuneration of directors, supervisors and senior executives In the report period, the annual remuneration of the directors(exclude independent directors), supervisors and senior executives drawing salaries from the Company is researched and confirmed based on Headquarters Remuneration Plan and the actual situation of the Company and personal achievements revaluations results. . In the report period, the Company has 15 directors, supervisors and senior executives at present. Of them, 8 persons received their salary from the Company, respectively the annual remuneration drew from the Company were as follows: Mr. Zeng Pai drawing RMB 366,400, Mr. Peng Ying RMB 298,400, Mr. Zheng Yuxi RMB 56,000 (remuneration before tax as general manager of the Company from Jan. to Feb 2008), Ms. Zeng Suyan RMB 269,300, Ms. Zong Haiyan RMB 273,500, Ms. Li Yiyan RMB 194,000, Mr. Guan Lihua RMB 246,300, Mr. Liu Xiongjia RMB 247,500. The current Directors, Supervisors and Senior Executives of the Company draw the annual remuneration totally amounting to RMB 1,951,400. According to the relevant regulation of Administration Rule of Listed Company and the Company’s actual situation, the Company paid allowances to independent directors per year and necessary fees (included but not limited to traffic fees and accommodation etc.), when independent directors attend the Shareholders’ General Meeting and the Board meeting or exercise other authority according to the relevant laws, regulations and Articles of Association of the Company; , the Company actually paid RMB 89,600(tax included) to independent directors Mr. Fan Zhiqing, Ms. Du Wenjun and Ms. Deng Meixi. In the report period, directors of the Company Mr. Zhu Junming and Mr. Chen Xiaohua drew remuneration from Agricultural Products; director Mr. He Dong drew remuneration from Shenzhen Investment Holdings; director Mr. Zheng Yuxi drew remuneration from the Company from Jan. to Feb. 2008, he did not receive remuneration from the Company since he resigned his post of general manager in Feb. 2008 but drew remuneration from controlling subsidiary of Agricultural Products-Shenzhen Agro-Pastoral Enterprises Co., Ltd.; supervisor Mr. Yan Zesong drew remuneration from Shenzhen Shenbao Huacheng Foods Co., Ltd. V. Particulars about changes of directors, supervisors and senior executives during the report period On Feb. 22, 2008, with the examination and approval of the 12th meeting of the 6th Board of Directors of the Company, Mr. Zheng Yuxi was ageed to resign his post of general manager of the Company, Mr. Fang Jianhui was agreed to resign his post of standing deputy general manager of the Company and Chairman Mr. Zeng Pai was engaged as the general manager of the Company concurrently.(For the details, please see the notice of the Company published on Securities Times, China Securities, Hong Kong Wen Wei Po and Juchao website dated Feb. 26, 2008). On June 16, 2008, with the examination and approval of the 15th meeting of the 6th Board of Directors of the Company, Mr. Zeng Pai was agreed to resign his currently-taken post of his general maanger and Mr. Peng Ying was engaged as the general manager of the Company. (For the details, please see the notice of the Company published on Securities Times, China Securities, Hong Kong Wen Wei Po and Juchao website dated June 18, 2008). Section II. About Employees At the end of the year 2008, the Company had totally 420 employees (included the enterprise employees of consolidated statement). Profession/Occupation Composition Education Background Proportion Proportion Profession Number Education Number (%) (%) Production personnel 205 48.81 Postgraduate or above 14 3.33 Salesperson 25 5.95 Undergraduate 63 15.00 3-years regular college Technicians 51 12.14 graduate 72 17.14 Financial personnel 21 5.00 Polytechnic school graduate 29 6.90 Senior middle school Administrative personnel 115 27.38 graduate or below 242 57.62 Laid-off worker 3 0.71 Total 420 100 Retirees whose expense 0 0 needs to be undertaken Total 420 100 Chapter V. Administrative Structure Section I. Company Administration The Company continuously consummates the governance structure of the Company and regulates the Company’s operations strictly in accordance with regulations of the Company Law, the Securities Law, Administration Rule of Listed Company and Listed Rules of Shares of Shenzhen Stock Exchange and Articles of Association. In the report period, according to relevant laws and regulations, the Company established System for Preventing Controlling Shareholders and Related Parties Occupying Capitals of the Company, System for Annual Report Work of Independent Directors and Annual Report Work Regulations for Audit Committee of the Board of Directos, and perfected Working Byelaw for Audit Committee of the Board of Directos and perfected Working Byelaw for Remuneration and Examination Committee of the Board of Directos. In the report period, according to unified deployment of CSRC and the spirit of Notice on Strengthening Relevant Work of Special Governance Campaign of the Company by Shenzhen Securities Supervisory Bureau (SZJGSZ [2008] No.62), compared with listed items in reform report of 2007, the Company seriously checked the reform work of special governance campaign, studied out Reform Explanation of the Company’s Administrating, and made explanation for the reform effect of constant improving problems and the next reform plan. The controlling shareholders seriously accorded with administration structure of the Company, exerted shareholders’ right and received relevant information through the shareholders’ general meeting and meeting of the board of directors, with no influence on the independence of production, operation management and finance. In 2008, there was no behavior of providing non-public information to large shareholders or actual controllers. Compared with standard documents on administration of listed company issued by CSRC, the actual status of the Company’s administration basically accorded with the requirements. The Company would continue to perfect the administration according to the requirements of Administration Rules of Listed Company and Opinions on Improving Qualities of Listed Company. Section II. Particulars about Performance of Duties of Independent Directors The Company has established Rules for Independent Directors according to Guidelines Opinion on Establishing Independent Director System in Listed Companies and Code of Corporate Governance for Listed Companies in China. At present, the Company has three independent directors and conformed to the relevant regulations. In the report period, held eight meetings of the Board, in which Ms. Deng Meixi did not present the 13th Meeting of the 6th Board of Directors and the 17th Meeting of the 6th Board of Directors due to work and entrusted independent director Ms. Du Wenjun to exert voting right on her behalf, and three indpendent directors all present other meetings in person. In the report period, the independent directors of the Company has been following with the relative laws and regulations and the Articles of Association, and expressed independent opinions on the issues such as engaging and dismissing senior executives, engaging external audit institution, profit distribution of 2007, self-evaluation of internal control and external guarantee in 2007 and the first half of 2008. The independent directors did not expressed dissenting opinion on the proposals examined at the board meetings nor other issues of the Company. During the period of auditing, the independent directors verified the auditing work schedule and the Financial Statements prepared by the Company, listened to the report made by the management on the Company’s business operation and material events in the report year and conducted onsite investigation before the annual certified public accountants entered the Company. Meanwhile, when the CPAs have issued their initial opinions, the independent directors conducted communications with the CPAs on the problems discovered in the auditing process. In the report period, the independent directors of the Company was diligent and responsible, earnestly performed their duties of independent directors, truly protected the whole interest of the Company and legal interests of the shareholders. Section III. Separation between the Company and its Controlling Shareholder in terms of Personnel, Assets, Finance, Organization and Business The Company keep strictly in accordance with the Code of Corporate Governance for Listed Companies in China and etc to separate right between the Company and its controlling shareholder in terms of personnel, assets, finance, organization and business， the detail as follows: I. In term of business: The Company is completely independent from the controlling shareholder in business and has independent and complete business and autonomous operation capacity. The Company owned independent purchase and sales system. The Company is responsible for purchasing all raw materials and distributing products. R&D, production, purchase and distribution departments are separate from each other. The Company has already been independent legal person operating in the market. II. In term of personnel & organization: 1. The Company is absolutely independent in the management of labor, personnel and salaries. Office and production sites are different from those of the controlling shareholder. There is no such situation of “One team, two brands”, operating and working together with controlling shareholder. 2. Senior executives work for the Company in full time and draw salary from the Company, without taking concurrent position or drawing remunerations in the controlling shareholder enterprises. III. In term of assets: The Company is totally independent from its controlling shareholder in term of assets and operates completely independent. The Company not only possesses independent production system, auxiliary production system and complementary facilities, but also enjoys such intangible assets as industrial property right, trademark, non-patent technology, etc. IV. In term of finance: 1. The Company has established independent financial department, independent and complete accounting system and financial management system. 2. The Company has financial decision-making right independently without interfere of its controlling shareholder. 3. The Company has independent bank account without depositing fund into accounts of the controlling shareholder, financial company or settlement center controlled by related parties 4. The Company pays the duties in compliance with laws. Section IV. Report for Self-evaluation of Internal Control of the Company I. Details could found in Report for Self-evaluation of Internal Control of the Company in 2008 on Juchao Information Website on the same day. II. Opinions of supervisory committee and independent directors on the self-evaluation report of internal control of the Company 1. Opinions of supervisory committee on the self-evaluation report of internal control of the Company According to the relevant regulations of Guidance of Inner Control for Listed Company and Notice of Strengthening the Work of 2008 Annual Report, the Supervisory Committee published out the opinions on the Self-evaluation Report of Internal Control of the Company 2008as following: In 2008, based on the own actual status, the Company established a whole-set rules of inner control involving all the operation procedures and kept the integrity and safety of company assets according to basic principles of inner-control and relevant rules issued by the China Securities Regulatory Commission and Shenzhen Stock Exchange. The Company was an integrative organization with qualified human resources, this assured the implementation sufficiently and efficiently of the principal activities for inner-control. In 2008, there was no disobeying to rules of inner-control and the Guidance of Inner-control for Listed Company issued by Shenzhen Stock Exchange. In summary, the supervisory committee thought: Report for Self-evaluation of Internal Control of the Company in 2008 completely, truly and accurately reflected the actual status of internal control of the Company. In the future, the COmpnay needs to further strengthen the perfection of internal control of the controlling subsidiaries and the check and supervison on information transfer among the companies, constantly revise and perfect the internal management system to adpat ot the demands of the development of the Company and promote the governance levels of the Company. 2. Opinions of all independent directors on the self-evaluation report of internal control of the Company According to the relevant regulations of Guidance of Inner Control for Listed Company and Notice of Strengthening the Work of 2008 Annual Report, all independent directors checked and approved the Self-evaluation Report of Internal Control of the Company in 2008 and thought that the Company established perfect internal control system, which accorded with the requirement of relevant laws of the state, administrative regulations and department rules, the internal control system had legality, rationality and effectiveness. Since the principal activities settled in accordance with the inner control systems, the Company’s inner control on subsidiary companies, related trading transactions, capital raising, major investment and information publication was strict and efficient, assured the operation of company and was reasonable and effective. The self-evaluation of internal control of the Company was in compliance with the reality of the Company. The self-evaluation report of internal control of the Company truly and objectively reflected actual situation of the construction, implementing and supervising of the internal control system. The Company should strenghten the inspection and supervisory of internal control’s effection, and establish relevant working system and responsibility tracing system. Section V. Performance Evaluation, Encouragement and Binding Mechanism for Senior Executives The Company fundamentally established scientific and reasonable performance evaluation system on senior executives, and definite responsibility division or evaluation standard on senior executives. During the report period, the Company implemented the Headquarters Remuneration Plan guided with annual operation or personnel achievements; the job (duty) salary and allowances of senior executives in the annual remuneration would be connected with the office duty; benefit salary would be connected with the Company’s operating performance. At present, the Company has not established equity encouragement mechanism for senior executives and mainstray of core business. Chapter VI. The Shareholders’ Meetings In the report period, the Company held two shareholders’ general meetings I. 2007 Annual Shareholders’ General Meeting Shareholders’ Annual Meeting 2007 was held on Apr. 18, 2008. The Public Notice on Resolutions of the 2007 Annual Shareholders’ General Meeting of the Company has been published on Securities Times, China Securities and Hong Kong Wen Wei Po and the official Website at http://www.cninfo.com.cn dated Apr. 19, 2008. II. The 1st Extraordinary Shareholders’ Meeting 2008 The 1st Extraordinary Shareholders’ General Meeting 2008 was held on July 30, 2008. The Public Notice on Resolutions of the 1st Extraordinary Shareholders’ General Meeting 2008 of the Company has been published on Securities Times, China Securities and Hong Kong Wen Wei Po and the official Website at http://www.cninfo.com.cn dated July 31, 2008. Chapter VII. Report of the Board of Directors Section I. Operation Review of the Company in the Report Period I. Overall operation of the Company in the report period In the report period, faced with serious economy, the Company held firmly strategic development target, built core tea industry chain, strengthened development of tea industry; effectively strengthened the Company’s core competition ability and brand influence by means of optimizing industry structure, advancing capacity, enriching product structure, perfecting construction of quality system as well as intensifying cost control and target management. The Company’s revenue, operation profit, net profit and the relative increasing and decreasing rates compared with those of the same period of last year is described as below for year 2008: Unit: RMB Increase or decrease compared to that of Item 2008 2007 the same period of last year Operating income 151,118,088.61 192,241,044.90 -21.39% Operating profit 12,407,989.81 13,309,682.52 -6.77% Net profit attributable to owners of 12,630,244.76 43,690,242.34 -71.09% parent company Decrease in operating income and operating profit was mainly due to the tea export decreased and sales income of condiment decreased, besides, there was sales income from selling Shenbao Apartment last year, while no such income in this year. Decrease in net profit was mainly due to that there was compensation income from government for land acquisition and sales income from selling Shenbao Apartment in last year, while no such income for this report period; and investment income on Shenzhen Pepsi-Cola Beverage Co., Ltd. (hereinafter called as Shenzhen Pepsi) deceased a little compared to that of the same period of last year, but the operating profit of Shenbao Huacheng and Guangdong Shenbao had rises this year. II. Main works of the Company in 2008 (I) Implemented scheduled strategic development target, built core tea industry chain, strengthened development of tea industry In June of 2008, the phase II reform project of Chaoyang Branch of Shenzhen Shenbao Huacheng Foods Co., Ltd.-a controlling subsidiary of the Company was finished, which greatly improved capacity of Shenbao Huacheng, effectively reduced production cost and improved gross profit ratio of products; in August of 2008, Shenbao Huafa Tea Industry Co., Ltd. in Wuyuan county(hereinafter referred as Wuyuan Shenbao)-a controlling subsidiary of Shenbao Huacheng, finished its construction of Green Tea Fine Manufacture Factory which was then put into operation. Since reform construction of the aforesaid production project for tea industry finished, capacity problem in tea industry of the Company would be effectively solved, which provided stable guarantee for strengthening tea industry. (II)Perfected construction of technic and quality guarantee systems and further strengthened core competition ability of the Company Since established Shenbao Huacheng Tea R&D Center and Trail Base for Further Processing Tea of Tea Research Institute of National Academy of Agricultural Sciences cooperated with Tea Research Institute of National Academy of Agricultural Sciences, in the report period, Shenbao Huacheng officially set application laboratory and product application platform in Tea Research Institute of National Academy of Agricultural Sciences, to provide advanced and practical scientific technology for Shenbao Huacheng in field of instant tea powder and tea concentration juice, thus to keep its leading advantage in this industry; Shenbao Huacheng successfully passed the supervison and check of ISO9001 management system, and the second re-appraisal and authentication work as well, meanwhile, it also successfully passed authentication and reestimation of HACCP quality system, and social responsibility check presented by its important customers. Wuyuan Shenbao was the biggest enterprise in Jiangxi province engaged in tea planting and tea processing, primarily, finely and further. Being the leading enterprise in agriculture of Jiangxi province, Wuyuan Shenbao had got organic authentication from BCS ko Garantie GmbH of Germany for its tea garden, factory and products as well, reaching the standard of EU 2092/91, byelaw of organic agriculture of European Union and State Organic Item (NOP/-Final Rule)of Agriculture Department of America (USDA); besides, Wuyuan Shenbao also passed quality system authentication for organic food, gained certificate for organic tea, and was put on records for authentication as export base for green tea in Jiangxi Commodity Inspection Bureau. Combined with the good agricultural working standard (GAP), organic tea authentication, good working standard (GMP), HACCP management system and together with the professional experience in managing tea quality for years, the Company established its Good Tea Working Standard (GTPP) with its own creation and characteristic, which meant that the Company made full-round supervision and control on various harms occurred from planting to processing, ensured stable quality of finished products and completely met demand of customers, by means of adopting strict management system in tea garden, establishing perfect activity record for tea agriculture and detailed management system on harms from pesticide, eyewinker and heavy metal. The Company is undertaking research and programming excellent tea beverage products, thus to establish and form retroactive management system with production management of tea garden, rough process and fine process integrated to ensure quality of products. The perfection of the aforesaid technic and quality guarantee systems provided with reliable technical guarantee and sustainable development for the Company to build the strategic programming with tea industry as core. (III)Optimized products structure and presented products with high added value promptly In the report period, the Company actively consolidated domestic and overseas client resource and sales network, greatly cooperated with customers in new product developing plan, successfully introduced material product of hot instant milk tea and received breakthrough in sales. The situation that production and sales was not so bad in off-season appeared. In order to avoid the influence brought by depreciation of US dollar on tea products exported, Shenbao Huacheng promptly adjusted sales strategy, and developed and upgraded products through strategic cooperation with Tea Research Institute of National Academy of Agricultural Sciences. The excellent tea beverage products sold to European Union market, with high added value-organic and low pesticide remnant, were particularly developed. Meanwhile, by the original sales channel, the Company spread tea raw material to the original customers of tea beverage. (IV)Strengthened management, strictly controlled production opeartion cost Through adjusting production and sale strategy promptly, advocating standardized and fine management and spreading cost control awareness into taches of production, sale and purchase, the Company actively fought against many disadvantages such as climbing price of raw material, appreciation of Renminbi, fluctuation of exchange rate and natural disasters, and effectively controlled the production operation cost. (V)Promoted overall budget management and controlled financial risk In 2008, overall budget management was promoted by the Company; every data of the indexes covered by the overall budget was detailed and decompounded; influence over operation performance of the Company brought by income and cost of various products was analysed repeatedly, which ensured accuracy and execution possibility for the whole year budget. Besides, the Company strengthened returning management on account receivable. At present, the situation that spot payment for spot goods has been basically realized in Guangdong Shenbao and Shenbao Sanjing. While to Shenbao Huacheng, goods were delivered and accounts were received in strict accordance to collection period by network management, thus effectively controled financial risk, speeded up circulation and turnover of capital and raised capital utilization efficiency. (VI)Strengthened security awareness in production and product quality The Company organized knowledge training for food security for many times, strengthened training of operation rules for production employees, practically ensured security of employee, equipment and product quality. By reeducation in quality knowledge for all employees, the Company boosted their consciousness and concept in product quality; besides, considering the actual condition, and practiced responsibility system for security management carefully. In the face of frequent food security accidents in the society, the Company’s underlying companies-Shenbao Huacheng, Shenbao Sanjing and Guangdong Shenbao strictly controlled quality; meanwhile, intensified self-check and sent-for-check work for their products, prevented any disadvantage endangering security production to guarantee sanitation and security for all products. In the report period, accident of product quality and security production of the Company was zero. (VII) Got hold of chances of promoting the industry position of the Company In the report period, the Company successfully undertook the 2008 Development Proseminar for Chinese Tea, Coffee and Vegetable Beverage sponsored by China Beverage Association. Over 100 famous domestic and foreign experts, scholars and enterprises were invited in the meeting. This brought important influence in this industry. This action not only enhanced popularity of the Company, but also consolidated its leading position in field of further process of tea and natural plant. In Oct. 2008, the Company organized a team to take part in SIAL Paris held in Paris, France, promoting its products, ability and scale to foreign customers, and got known of market demand from different type of customers, different products and different areas, established contact with customers, built its brand and figure and laid foundation to further develop international market. (VIII)Assisted the share-joining company-Shenzhen Pepsi to develop with principle of Active but No Interference as before The Company would continue to keep good cooperation with American shareholders of Shenzhen Pepsi, assist Shenzhen Pepsi to develop with principle of Activeness but No Interference as before, and create good production and operation environment for Shenzhen Pepsi. III. Scope of main operations and its operation Scope of main operations of the Company: production of canned food, beverage and local products; domestic commerce and supply and marketing of materials; import and export business; development and operation of real estate. Main operations of the Company were under the classification of food and beverage industry. The structure of the revenue from operations and profit from operations shows as follows: 1. Formation of main operations classified according to industries and products: Increase/decrease Increase/decrease Increase/decrease Gross Classified according Operation Operation in income from in cost of in gross profit Profit to industries Income(RMB) Cost(RMB) operations over operations over ratio over the last Ratio(%) the last year (%) the last year (%) year (%) Manufacture of 15,026,400.06 9,557,458.30 36.40 -29.74 -28.80 -0.83 condiments Manufacture of soft 42,242,622.54 35,056,196.92 17.01 5.18 0.62 3.76 drinks Manufacture of teas 93,026,523.16 73,249,817.95 21.26 -8.65 -15.33 6.21 Classified according to products Sanjing’ brand 15,026,400.06 9,557,458.30 36.40 -29.74 -28.80 -0.83 condiment Soft packing drinks 42,242,622.54 35,056,196.92 17.01 5.18 0.62 3.76 Tea powder and tea 74,626,496.07 55,208,469.18 26.02 20.18 14.29 3.81 juice series Tea leaf 18,400,027.09 18,041,348.77 1.95 -53.70 -52.78 -1.92 (1)Operation income from condiments had decreased, which was mainly due to that municipal road constructed, planned manufacturing base removed, influenced the production arrangement, and further influenced the normal promotion of sales plan, and the same kind of products in part regional market have malignant competition of low price and thus resulted in sliding down of sales amount. (2)Operation income from manufacture of soft drinks had increased, which was mainly due to that sales amount of leading varieties Chrysanthemum Tea increased; the operating profit ration increased mainly was by reforming producing technic, saving energy, reducing consumption, reducing manufacture cost and improvement in gross profit ratio; (3)Operation income from manufacture of teas had decreased, which was mainly due to that influenced by fluctuation of export exchange rate in the first half year, Shenbao Huacheng’s underlying company Wuyuan Shenbao promptly adjusted sales strategy, paused tea export to reduce loss, thus sales of tea products declined with a large margin compared to that of the same period of last year; (4)Sales of tea powder and tea juice series products increased compared to that of the same period of last year, which mainly originated from applicable production region of the series products in key clients expanded, and the purchase increased; the operating profit ratio increased was mainly due to that production technic was improved, and meanwhile, effectively reduced production cost. 2. Main business classified according to area Increase/decrease in income from operations Areas Operation Income(RMB) over the last year (%) South China 54,534,811.64 -32.63 East China 63,978,337.02 -10.88 Export 12,323,368.83 -53.34 Other areas 20,281,571.12 54.90 Total 151,118,088.61 -21.39 Business income in south China decreased due to that there was no income from real estate this year; decrease in export business was mainly due to decreasing tea export of Wuyuan Shenbao; increase in other areas was mainly due to increasing purchase of tea juice and tea powder products conducted by customers of other areas developed by Shenbao Huacheng. During the report period, the Company purchased from the top five suppliers amounting to RMB 39,701,064.86, accounting for 41.38% of total annual purchase, the Company sold to the top five customers amounting to RMB 59,013,928.78, accounting for 39.27% of total annual sales. IV. Formation of assets and changes on expenses of the Company 1. Formation of assets and changes on expenses of the Company in the report period Unit: RMB Dec 31st of 2008 Dec 31st of 2007 Increase/decrease Item Ratio to Ratio to of ratio to total Amount total Amount total asset assets assets Account paid in advance 3,104,860.81 0.58% 10,412,941.33 2.22% -1.64% Inventory 48,874,407.93 9.20% 36,926,614.66 7.89% 1.31% Construction in process 24,954,233.51 4.69% 5,507,263.40 1.18% 3.51% Intangible assets 116,465,312.63 21.91% 66,301,949.39 14.16% 7.75% Short-term loan 72,500,000.00 13.64% 22,000,000.00 4.70% 8.94% (1)Balance of account paid in advance for this period decreased 70.18% compared to that of last period, which was mainly due to that account paid in advance for purchasing land use right by Wuyuan Shenbao in this period had been transferred to intangible assets. (2)Increase in inventory mainly originated from increase of raw material inventory and finished-products of Shenbao Huacheng at period end. (3)Net value of construction in process increased compared to that of last period, which was mainly due to construction for production base of Wuyuan Shenbao. (4)Intangible assets increased compared to that of last period, which was mainly due to increasely purchase of land use right of industry lands in Ruhu town, Huizhou city and Wuyuan county purchased by Wuyuan Shenbao. (5)Short-term loan increased compared to that of last period, which was mainly due to increasing short-term loans borrowed from bank in the report period. 2. Measure attribute adopted for main assets of the Company in the report period The Company’s assets were accounted using real costs when acquired, if depreciation of assets happened, then corresponding assets depreciation reserve should be withdrawn. In the balance sheet day, tradable financial assets were following calculated according to fair value, and the change of fair value was considered into current term’s gain and loss. The Company’s present tradable financial asset was Haiguoshi investment, using the market price as the fair value. (For details, please go to Chapter IX, Section III – Holding of other listed companies’ shares) 3.Expense and its change of the Company in the report period Unit: RMB Increase/decrease Items 2008 2007 Reason of Change （%） Sales expense 10,053,242.41 9,943,077.63 1.11 -- Administration expense 33,133,739.28 38,028,192.11 -12.87 -- Financial expense 4,731,936.85 4,472,187.33 5.81 -- In the report period, the sales expense, administration expense and financial expense of the Company did not have great changes compared with the same period of last year. V. Change of relevant data in cash flow statement of the Company Unit: RMB Items 2008 2007 Increase/decrease(%) Cash flow arising from operation activities Subtotal of cash inflow 210,365,428.63 208,581,972.28 0.86 Subtotal of cash outflow 209,848,436.97 211,032,205.66 -0.56 Net cash flow arising from 516,991.66 -2,450,233.38 121.10 operation activities Cash flow arising from investment activities Subtotal of cash inflow 35,303,298.92 119,494,521.10 -70.46 Subtotal of cash outflow 82,463,140.70 79,389,736.98 3.87 Net cash flow arising from -47,159,841.78 40,104,784.12 -217.59 investment activities Cash flow arising from financing activities Subtotal of cash inflow 83,000,000.00 43,700,000.00 89.93 Subtotal of cash outflow 34,176,395.32 97,133,141.81 -64.81 Net cash flow arising from 48,823,604.68 -53,433,141.81 191.37 financing activities (1)Change of cash flow arising from operation activities occurred originating from cash received from selling goods increased(mainly was that the account receivable of Shenbao Huacheng decreased this year) and cash paid for employee decreased. (2)Change of cash flow arising from investment activities occurred due to that the Company received RMB 51 million for transfer balance of equity of Shenzhen Pepsi and RMB 44.34 million for land compensation from government last year, while no such income received this year. (3)Change of cash flow arising from financing activities occurred due to increasing borrowings from bank this year. VI. Discussion and analysis on other important information relevant to the Company’s operation During the period, there was no other important information relevant to the Company’s operation. VII. Operations and performance analysis of main subsidiaries and share participation companies of the Company (I) Shenzhen Shenbao Huacheng Food Co., Ltd. It was a controlling subsidiary of the Company, and share-holding proportion was 51.67%. The operation range: investing enterprise; information consultation; food technology development; sales of beverage and food additive series products such as ginger tea, condensed pumpkin powder, liquid beverage, condensed tea juice, instant tea powder; import and export business. The registered capital was RMB 103,451,300. Until Dec 31st of 2008, the total asset of Shenbao Huacheng reached RMB 209,256,948.97 and equity attributable to shareholders of parent company was RMB 85,790,645.90; during the report period, RMB 94,735,924.87 was realized in operation income, RMB -75,822.24 for operation profit, and RMB 4,212,947.23 for net profit attributable to owners of parent company, RMB 2,773,806.12 increased in net profit attributable to owners of parent company compared to that of the same period of last year. (II)Jiangxi Wuyuan Shenbao Huafa Tea Co., Ltd. It was a controlling subsidiary of Shenbao Huacheng, and share-holding proportion was 62%. The operation range: tea planting; primary, fine and further processing of tea; production, processing, sales and deliver of extending products of tea; processing and sales of instant tea and condensed tea juice; import and export business for tea and agricultural sideline products. The registered capital was RMB 20 million. Until Dec 31st of 2008, the total asset of Wuyuan Shenbao reached RMB 68,461,292.76 and equity attributable to shareholders of parent company was RMB 21,596,993.87; during the report period, RMB 31,367,386.37 was realized in operation income, RMB -3,386,182.24 for operation profit, and RMB 1,622,306.75 for net profit, RMB 1,594,831.60 increased in net profit compared to that of the same period of last year. (III) Shenzhen Shenbao Sanjing Food & Beverage Development Co., Ltd. It was an excusively-owned subsidiary of the Company, and its operation range: production and operation of beverage, subsidiary food, food additive, import and export business. The registered capital was RMB 30.15 million. Until Dec 31st of 2008, the total asset of Shenbao Sanjing reached RMB 104,941,845.22 and equity attributable to shareholders of parent company was RMB 27,028,534.66; during the report period, RMB 57,475,965.45 was realized in operation income, RMB 689,664.33 for operation profit, and RMB 84,146.51 for net profit attributable to owners of parent company, RMB 4,921,959.95 increased in net profit attributable to owners of parent company compared to that of the same period of last year. (IV)Guangdong Shenbao Foods Co., Ltd. It was a controlling subsidiary of Shenbao Sanjing, and share-holding proportion was 80%. The operation range: production, sales (produce with sanitation license) and material purchase of canned food, agricultural sideline foods (excluded commissariat, cotton and tea), non-alcoholic beverage, bean products and milk products. The registered capital was RMB 6 million. Until Dec 31st of 2008, the total asset of Guangdong Shenbao reached RMB 11,735,264.98 and equity attributable to shareholders of parent company was RMB 3,838,181.36; during the report period, RMB 42,449,565.39 was realized in operation income, RMB 3,584,777.42 for operation profit, and RMB 3,653,207.00 for net profit, RMB 2,450,547.76 increased in net profit compared to that of the same period of last year. (V)Shenzhen Pepsi Cola Beverage Co., Ltd. It was a share participation company of the Company and share-participation proportion was 30%. The operation range: production and operation of the American PEPSI beverages, soft drink with Chinese brand, other carbonic acid beverage and non-carbonic acid beverage, PEPSI cola athletic product, PEPSI cola stationery. The registered capital was USD 12.25 million. Until Dec 31st of 2008, the total asset of Shenzhen Pepsi reached RMB 750,924,728.81 and net asset was RMB 428,834,221.53; during the report period, RMB 1,814,940,798.17 was realized in operation income, RMB 130,742,408.85 for operation profit, and RMB 104,918,622.15 for net profit with respectively an increase of 12.98% and 1.77% and a decrease of 4.67%. VIII. No special-aimed subject under control in the Company. Section II. Prospect on Future Development and Operation Plan for the Following Year (I) Development trend and influence of this industry 1. As the gradual upgrade of consumption, food and beverage were consumed gradually transferring to brand and high-level market. Meanwhile, food safety problem was paid much more attention to. Especially after the occurrence of Sanlu Milk Powder Affair, China further strengthened supervision on food producer enterprises; new standards and measures were successively issued; demand for product quality was stricter day by day, which would eliminate some producers with small scale and poor production condition through market competition, which would also necessarily promote standardization and scale-expansion of food producer enterprises and was beneficial for industry integration. 2. The domestic beverage enterprises almost conducted decentralized operation and their scale was not so big; regional beverage brands were comparatively many and few of them enjoyed popularity in national beverage market as famous brand; besides, elements such as insufficient capital, singular financing channel, low technology content and weak self-ability restricted expansion of their market space. At present, the biggest threaten and challenge faced by the Company was mainly the strong expansion and occupation coming from foreign beverage brand and competition with the same quality among local beverage brands. In food and beverage industry with perfect competition, unique competition advantages such as management level of enterprises, construction of marketing network and brand value appeared to be especially important. (II)Development trend and influence of industry of tea beverage 1. At present, tea market has the following obvious developing tendency: consumption in tea market remained stable and rising, and price almost maintained stable; as people had strengthened awareness on food safety and import country presented improving standard for heavy metal and pesticide remnant standard, tea production would be paid much more attention to for pollution-free organic production. Construction of excellent tea production and ecological environment and strict non-contaminant processing procedure was very significant. 2. Meanwhile, development of tea industry also faced challenges: mechanical production degree of tea industry was relatively low. In the original producing area of tea, handcraft production still occupied leading position, so enterprise with ability and strength was in urgent need for industrialization operation management; compared to advanced countries, there still existed a gap in production equipments for pick-up tea juice and asepsis canning, and in technics of tea juice thickness, tea juice deposition and maintenance of flavor quality; taking tea export in 2008 into consideration, it could be seen that appreciation of Renminbi, fluctuation of exchange rate, rising price of raw material of tea and increasing cost for logistics all had brought comparatively big influence on tea export of our country. II. The opportunity of the Company for future development (I) The Company formed industry development strategy which centralized on extraction of tea and natural plant along with extension to both sides of tea planting base and terminal products. With several years development, the Company had already owned R&D and production technical team with substantial experiences, advanced equipment and technics, perfect quality guarantee system, operation management thought with innovation, and besides, more than 10 patent techniques with own intellectual property rights. With the aforesaid technique advantages the Company could form its competition bulwark. (II)The Company’s tea industry has a starting scale now. The Company established an international top-class further tea processing and natural plant extraction production base, built comparatively reasonable and perfect busniess chain and its business scope had already been concerned in plant, fine processing and deep processing of tea, import and export business of tea leaf and instant tea; ensured its advancing position in field of extraction of tea and natural plant; and the Company gradually extended to tea planting base and terminal products. III. Develop strategy of the Company The Company continues to centralize advanced resources of the Company, and develop the tea industry with all efforts. Taking the fine and deep processing of tea leaf as the core business; that was to say, to produce the condensed tea juice and tea powder, extending to the tea garden planting base and terminal product, and implement industrialization, standardization, internationalization management, establish the leading enterprise in the Chinese tea raw material industry. IV. Operation plan of the Company for 2009 (I)The Company steps forward to extend to tea planting base and terminal product, to build tea industry chain with competition advantage. (II)Guided by market, the Company insists on scientific innovation, continuously optimizes products production technics and speeds up R& D for new products and consolidates core competition ability of the Company. (III)The Company injects innovation into marketing pattern, consolidates present customers and sales channel, actively explores new customer source, improves penetration of products, accelerates cooperation with foreign customers and strives for bigger market occupation. (IV)The Company digges potential, develops traditional food and beverage industry steadily and makes good preparation for construction and removing of the Condiment manufacturing base. (V)The Company continues to strengthen budget management and cash flow management, to improve utilization efficiency of capital. (VI) The Company strengthens construction of internal control system, and guarantees normal carrying out of operation activity and realization of its integrated strategic target. (VII) The Company generally implements performance management, enhances human resource construction and reserve for person with ability, which provides talents guarantee for the Company’s strategy development. (VIII) The Company continues to follow the guidance spirit of Quality First and Safety Production. Everything is conducted around safety production. National laws and regulations related to food safety are insistently implemented, to make sure that accident of fire fighting, quality safety and other significant safety responsibility affair is zero for a whole year. V. Capital demand and application plan of the Company Revolved around the development strategy, the capital demand and application plan of the Company in the future three years are as follows: (I) Finishing the matching construction for the owned tea planting base in Jiangxi Wuyuan; expanding tea planting base by purchasing tea garden at proper time to provide a stable resource of original tea materials for the Company; developing the good quality green tea products, expanding tea industry product line. The capital of about RMB 80 million was predicted to be needed. (II)Continuously investing RMB 100 million to establish Huizhou Shenbao Manufacture Processing and Logistics Garden (named temporarily) in 1-3 years. (III) In 2009, investment of RMB 15 million was needed for cosntruction and removing the condiment manufacturing base. The funds needed in the aforesaid projects would be solved by the Company’s own capital or financing. VI. Disadvantages for development of the Company and countermeasures adopted (I)The proceeding that Shenzhen Agricultural Products Co., Ltd. and Shenzhen Investment Holdings Corporation transferred 42% equity of the Company to Fusion System (HK) Co., Ltd. has gone into procedure for arbitration. Whether this proceeding could be appropriately solved in short time would possibly influence long-term and healthy development of the Company. Countermeasures planned to take: continued to keep independence of the Company, to maintain normal operation of its management on production and operation and financial activity as well, and to supervise the relevant party to appropriately deal with the aforesaid proceeding as quickly as possible with interest of listed company as focus. (II)Higher demand on the Company’s industry chain management ability as the tea industry of the Company extended to tea garden planting base and terminal products. Countermeasures planned to take: integrated the internal resources of the Company, optimized management structure, cultivated and introduced specialized and professional persons with ability to advance the Company’s industry chain management ability. (III)Since continuous capital support was in need for upgrade and reform of the Company’s traditional products and construction of industry chain, the Company received pressure in cash flow. Countermeasures planned to take: strengthened management on project budget, controlled input of fixed assets, activated inventory assets, improved utilization efficiency of capital and optimized financing structure of the Company. Section III. Possible Changes of Accounting Policy and Accounting Estimation after Implementing New Accounting Standard for Business Enterprise And its Effect on Financial status and Achievements In the report period, there were no changes of accounting policy, accounting estimation or significant accounting error. Section IV. Investment of the Company I. Use of the the raised capital In the report period, there was no use of raised capital or that of the past year which continued to the reprot period. II. Investment of non-raised capital (I) Investment in Huizhou Shenbao Manufacture Processing and Logistics Garden on Dec 11 2006, in the 3rd Meeting of the 6th Board of Directors discussed and approved proposal on purchasing the using right of 199,800 square meters industrial land lot with price no more than RMB 75,724,200 in the Ruhu town of Huizhou city to construct Huizhou Shenbao Manufacture Processing and Logistics Garden. The price consisted: resumption compensation of land lot (including but not limited to land compensation, crop compensation, demolition compensation, land realignment), other labor costs for all relevant procedure of investing Huizhou Shenbao Manufacture Processing and Logistics Garden and finishing project and certificate fee for the use of state-owned land of the project land lot (including but not limited to land lot assignment fee, subsidiary fees, taxes and other administration fee, etc.) Form May 2007, the Huizhou government comprehensively regulated and consummated the listed transfer procedure of land load according to the national new land policy, which increased sharply the base price of listed transferring land lot when asking to transfer the land hanging out in accordance with regulated standard, and also other administrative taxes and fees, the government resumption fund and compensations and other compensations. According to the increasing of the listed transferring fee of land lot and other fees, and in order to keep the integrity of land for Huizhou Shenbao Manufacture Processing and Logistics Garden, the Board of Directors agreed to increase certificate fee of RMB 171 per square meter for the non-certificated land lot (about 115,000 square meters), that is RMB 550 per square meter, including land lot compensation, crop compensation, demolition compensation, other labor costs for finishing this project, certificate fee for the use of state-owned land. Till Dec31, 2008, the Company had transacted certificate for industrial land use of 149,848 square meters, accumulated paid accounts RMB 72,820,228.10, with land of 49,952 square meters being transacted relevant procedure. (Details could be referred in Securities Times, Hong Kong Wen Wei Po on Jan. 13, 2007 and Aug. 11, 2008 and company notice No. 2007-001 in website of www.cninfo.com.cn and the Semi-annual Report of the Company 2008.) Section V. Auditors’ Opinion and Accounting Policies For the report period, Guangdong Dahua Delu CPAs issued standard unqualified auditors’ report. Details of change in accounting policies in the report period could be found in Section III. - Possible Changes of Accounting Policy and Accounting Estimation after Implementing New Accounting Standard for Business Enterprise And its Effect on Financial status and Achievements. Section VI. Daily Work of the Board of Directors I. Particulars about meetings of the Board of Directors and resolutions in the report period In the report period, the Board of Directors totally held eight meetings: 1. The 10th meeting of the 6th term of the Board of Directors was held on Feb. 22, 2008. Resolutions were announced by Securities Times, China Securities and Hong Kong Wen Wei Po and www.cninfo.com.cn on Feb. 26, 2008. 2. The 13th meeting of the 6th term of the Board of Directors was held on Mar. 26, 2008. Resolutions were announced by Securities Times, China Securities and Hong Kong Wen Wei Po and www.cninfo.com.cn on Mar. 28, 2008. 3. The 14th meeting of the 6th term of the Board of Directors was held on Apr. 18, 2008, and approved the First Quarterly Report of the Company 2008. First Quarterly Report of the Company 2008 were announced by Securities Times, China Securities and Hong Kong Wen Wei Po and www.cninfo.com.cn on Apr. 19, 2008. 4. The 15th meeting of the 6th term of the Board of Directors was held on Jun. 16, 2008. Resolutions were announced by Securities Times, China Securities and Hong Kong Wen Wei Po and www.cninfo.com.cn on Jun. 18, 2008. 5. The 16th meeting of the 6th term of the Board of Directors was held on Jun. 27, 2008. Resolutions were announced by Securities Times, China Securities and Hong Kong Wen Wei Po and www.cninfo.com.cn on Jun. 28, 2008. 6. The 17th meeting of the 6th term of the Board of Directors was held on Jul. 30, 2008. Resolutions were announced by Securities Times, China Securities and Hong Kong Wen Wei Po and www.cninfo.com.cn on Jul. 31, 2008. 7. The 18th meeting of the 6th term of the Board of Directors was held on Aug. 7, 2008. Resolutions were announced by Securities Times, China Securities and Hong Kong Wen Wei Po and www.cninfo.com.cn on Aug. 11, 2008. 8. The 19th meeting of the 6th term of the Board of Directors was held on Oct. 21, 2008, and approved the Thrid Quarterly Report of the Company 2008. Thrid Quarterly Report of the Company 2008 were announced by Securities Times, China Securities and Hong Kong Wen Wei Po and www.cninfo.com.cn on Oct. 23, 2008. II. Execution of the resolutions of the Shareholders’ Meetings In the report period, the Board of the Company seriously implemented all resolutions passed by Shareholders’ General Meeting strictly in compliance with the resolutions and authorizations of Shareholders’ General Meeting. In 2008, the Company did not distribute profits or convert capital reserve into share capital. The Company had no shares allotment and additional issuance of new shares. III. Report of the Audit Committee on their performing of duties Audit Committee of the Board of Directors was formed by several independent directors, with the independent director of Mr. Fan Zhiqing as director commissary. Audit Committee have been performing its duties with compliance to the “Working Criteria of Auditing Committee” and Annual Report Work Regulations for Audit Committee of the Board of Directos , fully exerted its function of supervision. (I) in the report period, Audit Committee of the Board of Directors totally held four meetings 1. On Mar. 26, 2008, the 3rd meeting of Audit Committee of the 6th term Board of Directors was held. (1) Audited and approved the Financial Report of the Company 2007; (2) Audited and approved Summary Report of Audit Work in 2007 by Shenzhen Dahua Tiancheng CPAs; (3) Audited and approved Proposal on not Engaging International Auditors; (4) Audited and approved Proposal on Engaging Auditors for 2008. 2. On Apr. 18, 2008, the 4th meeting of Audit Committee of the 6th term Board of Directors was held. Audited and approved the First Quarterly Financial Report of 2008. 3. On Aug. 7, 2008, the 5th meeting of Audit Committee of the 6th term Board of Directors was held. Audited and approved the Semi-annual Financial Report of 2008. 4. On Oct. 21, 2008, the 6th meeting of Audit Committee of the 6th term Board of Directors was held. Audited and approved the Third Quarterly Financial Report of 2008. (II) Confirmed the time arrangement of annual finance report audit of 2008 with Certified Public Accountants, arranged overall annual finance report audit assignments. (III) Supervision on the Audit Assignments to Certified Public Accountants The Audit Committee supervised and urged the Certified Public Accountants to promote the audit assignment by official paper report in accordance with the plan before the leaving of certified public accountants and before submitting the first script of audit report and before submitting the final script of audit report (IV) Two Times Evaluating and Approving Opinions to Annual Financial Report of 2008 1. The Audit Committee issued the first official report on paper to the un-audited annual financial report before the entering of certified accountants, they thought: The accounting report material was actual and integrated with proper policy choice, accounting estimation was reasonable, no major mistake and misstatement and no occupying capital by large shareholder, no external irregular guarantee and abnormal relevant trading were discovered. Appealed the Company’s finance department to emphasize and strictly dispose relevant affairs based on the new accounting standard to ensure the fairness, realness and integrity of the financial report. The relevant finance report was fit for submitting to the certified audit accountant to audit. 2. After the basic audit opinion issued by certified audit accountant, the Audit Committee gave out the second official opinions on paper, they thought: Kept the audit opinion of the first time, the Company had disposed the relevant affairs strictly according to the new Accounting Standards for Business Enterprise, the finance report was composed based on the new Accounting Standards for Business Enterprise and the Company’s relevant accounting rules, it reflected the finance status as of Dec. 31, 2008 and the operation results and cash flow in 2008, the finance report reflected the Company’s overall status actually, accurately and fully in all significant aspects. Summarily, we had no objection to the annual report of 2008 elementarily audited by the certified accountants of Guangdong Dahua Delu CPAs. (V) Summary of Audit Work Implemented by the Certified Public Accountants Company in the last year The Board of directors: We evaluated and approved the Annual Audit Work Plan 2008 submitted on Jan. 16, 2008 by the Financial Department of the Company, communicated with the project leader of Guangdong Dahua Delu CPAs about the mentioned audit project plan, and got agreement of that: the plan was in composed detailed and had responsible person on each step, could ensure the smooth implementation of the audit work of 2008. According to the mentioned audit project plan, the auditors assigned by Guangdong Dahua Delu CPAs began to work on Jan. 7, 2008. On Feb. 11, 2008, they finished the field audit work of all relevant companies involved in the consolidated report. The project leader communicated entirely and continuously with the Audit Committee about the report combination, accounting adjustment, accounting policy deployed and other works need to be done in the audit project. In the period of field audit by certified annual audit accountants, our Audit Committee gave highly concerns on the issues happened in the audit procedure, and communicated with the certified annual audit accountants by phone and face-face conferences. The topics were mainly as follows: 1. Whether or not the finance report is based on the requirements of the new Accounting Standards for Business Enterprise, securities supervision departments and the relevant accounting rules of the company. 2. The accordance of the finance departments with law and rules, other external requirements and administrative policies, directions and other inner requirements. 3. Whether or not the inner accounting rules is established and completed. 4. Whether or not the cooperation between the company’s departments and certified accountants is enough to get the sufficient, proper documents and data need. The certified annual audit accountant affirmed the mentioned above positively, and submitted the basic audit opinions, which is the standard unqualified Audit Report for the Company on Feb. 23, 2009. In our opinions, the certified annual audit accountants implemented the audit strictly under the rule of Independent Audit Principle of Chinese Certified Accountants with sufficient time and properly configured fully qualified audit power. The submitted audit report entirely reflected the Company’s finance status eneded as Dec. 31, 2008 and operation results and cash flow in 2008. And the audit conclusion was in accordance with the actual status of the Company. IV. The Functions of Remuneration and Evaluation Committee The Remuneration and Evaluation Committee functioned strictly based on the Rule of procedure of the Company’s Remuneration and Evaluation Committee During the report period, the Remuneration and Evaluation Committee evaluated the remuneration of the directors, supervisors and senior executives mentioned in the annual financial report and they thought the remuneration was actual, accurate, and legal. The Company had no stock option incentive system, the Remuneration and Evaluation Committee would comprehend the promotion of the establishment of the stock option incentive system timely. Section VII. Profit Distribution Plan of 2008 and Profit Distribution in the Past Three Years I. Profit distribution plan of 2008 Through audit by Guangdong Dahua Delu Certified Public Accountants, the Company’s net profit attributable to the owners of the parent company in 2008 was RMB 12,630,244.26, plus the undistributed profit at the year-begin RMB 26,592,842.51, according to the regulations of the Company Law and Articles of Association, withdrew 10% statutory public reserve RMB 1,173,792.97 from the net profit the parent company realized in 2008 totalled RMB 11,737,929.66, thus, at the end of the report period, the profit available for distribution to shareholders was RMB 38,049,294.30. For the relatively smaller base of undistributed profits of the Company in 2008 and considering the needs of actual operations of the Company in 2009, the Board of Directors of the Company decided neither profit distribution nor capitalization of capital reserve will be carried out for year 2008. The undistributed profits would be mainly used for supporting the development of the Company’s core business. The aforesaid preplan should be submitted to 2008 Annual Shareholders’ General Meeting for examing and approval. II. The profit distribution of the past three years Due to the profit available for distribution to shareholders from year 2005 to year 2007 was small, and in order to satisfy the development of the Company’s main industry and daily operation demand, the Company did not make profit distribution in the past three years. Section VIII. Other Significant Issues I. On February 26, 2008, the Company added China Securities as one of the official information disclosure media. II. The Company received the informing letter from the audit institution of 2008 – Shenzhen Dahua Tiancheng CPAs on Dec. 26, 2008, in which which said that, Shenzhen Dahua Tiancheng CPAs and Guangdong Hengxin Delu CPAs combined and thus changed the name as Guangdong Dahua Delu Certified Public Accountants. So the audit institution of the Company of 2008 was changed to Guangdong Dahua Delu Certified Public Accountants. (Details could be refered in Securities Times, China Securities, Hong Kong Wen Wei Po and website of www.cninfo.com.cn dated Dec. 27, 2008.) Chapter VIII. Report of the Supervisory Committee I. Summary of the Supervisory Committee’s works in the report period In 2008, strictly according to the Company Law, Code of Corporate Governance for Listed Companies, Administrative Measures for the Disclosure of Information of Listed Companies and Articles of Association, the Supervisory Committee seriously performed duties endowed by shareholders’ meeting, closely concerned the production operation of the Company, presented the shareholders’ meetings held in the report report, observed the board meetings; monitored the holding procedures of the shareholders’ meetings and board meetings, as well as the execution of the resolutions made in these meetings. It practically maintained legal equity of the Company and shareholders. (I) The Supervisory Committee totally held four meetings in the report period: 1. On Mar.26, 2008, the 5th meeting of the 6th term of Supervisory Committee was held, in which the following proposals were discussed, audited and approved: (1) Supervisory Committee’s Report 2007 of the Company; (2) Annual Financial Settlement Report 2007 of the Company; (3) Report of Self-evaluation on Internal Control 2007 of the Company; (4) Annual Report of the Company 2007 and its Summary; (5) Profit Distribution Preplan 2007 of the Company. Resolutions of this meeting were released by Securities Times, China Securities, Hong Kong Wen Wei Po, and Juchao information website on Mar.28, 2008. 2. On Apr.18, 2008, the 6th meeting of the 6th term of Supervisory Committee was held, in which the First Quarterly Report 2008 was discussed, audited and approved. 3. On Aug.7, 2008, the 7th meeting of the 6th term of Supervisory Committee was held, in which Audit Opinions of the 6th term of Supervisory Committee on the Semi-annual Report 2008 was discussed, audited and approved. 4. On Oct.21, 2008, the 8th meeting of the 6th term of Supervisory Committee was held, in which Audit Opinions of the 6th term of Supervisory Committee on the Third Quarterly Report 2008 was discussed, audited and approved. II. Independent opinions of the Supervisory Committee on relevant proceedings (I) Operation according to the laws In the report period, the Supervisory Committee conducted supervision over the procedures of holding Board meetings and Shareholders’ General Meeting, resolutions, implementation of the resolutions of the Shareholders’ General Meeting by the Board of Directors, status of the senior executives in implementing their duties and the Company’s management system according to the relevant laws and regulations of the State. It was believed that in 2008, the Board of Directors actively carried out the operation in a standardized and legal way strictly according to the Company Law, the Securities Law, the Stock Listing Rules, the Articles of Association and other relevant regulations. The Company’s directors and managers worked carefully and responsibly; the Company’s decision-making was prudent and solid; the Company had established the relative perfect internal control system. We have found no directors, supervisors or senior executives ever involved in any actions against the law, rules and regulations, or the Articles of Association or harmful to the interest of the Company and the shareholders in the process of implementation of their duties. (II) Financial inspection The Supervisory Committee had made careful and serious inspection on the Company’s financial system and financial situation and believed that the Annual Report 2008 of the Company had truly reflected the Company’s financial situation and operation achievements. The auditors’ report and the auditors’ opinion on the relevant issues presented by Shenzhen Dahua Delu Certified Public Accountants are objective and fair. (III) The actual investment project funded by the latest proceedings is the same as the commitment. The change procedure is legal. (IV) In the report period, the price for purchase and sale of assets conducted by the Company is reasonable. There existed no inside transactions or actions harmful to part shareholders’ right and interest or in connection with loss of the Company’s assets. (V) In the report term, the Company conducted no related transactions. (VI) According to relevant regulations of Guidelines on Internal Control of Listed Companies and Circular of Annual Reports 2008 of Listed Companies issued by Shenzhen Stock Exchange, the Supervisory Committee issued independent opinions on Report of Self-evaluation on Internal Control of the Company 2008. Details could be found in Section IV Report of Self-evaluation on Internal Control in Chapter V. Chapter IX. Significant Events Section I. Lawsuits and Arbitrations I. The case concerning the joint-liability guarantee the Company provided for the RMB 7 million loan that Shenzhen China Bicycle Company (Holdings) Limited (hereinafter referred to as Shen China) had got from China Construction Bank Shenzhen Branch (hereinafter referred to as Construction Bank) has been closed with a reconciliation. In the year 2003, the Company and Construction Bank reached the Agreement on Interest Reduction and Cancellation, and according to the agreement, the Company had already paid back the RMB 7 million in two times for Shen China and fulfilled its guarantee liability (for details, please refer to Annual Report 2003 of the Company.); through the verdict of (1999) YFJYZZi No. 26 Civil Judgment Document made by Guangdong High People’s Court on the case concerning the joint-liability guarantee amounting to USD 0.8 million the Company provided for issue of Letter of Credit Shen China had applied for at Bank of China Shenzhen Branch, the Company should shoulder joint repayment liability. And ended the first half year of 2004, the Company had repaid RMB 6,631,600 (amounting to USD 0.8 million) for Shen China and fulfilled the guarantee responsibility (for details, please refer to Semi-Annual Report 2004 of the Company.). Latter, on Jul.22, 2004, the guarantee payment, which the Company had paid on its behalf, was enforced to conduct by Shenzhen Intermediate People’s Court that the Company applied to. To safeguard the rights and interests of the Company, the Company sued Shen China to Shenzhen Intermediate People’s Court, and requested for a verdict to order Shen China to repay RMB 7 million, which the Company had paid on its behalf, as well as to compensate relevant loss arising from the capital occupancy in 2004. Shenzhen Intermediate People’s Court judged and ordered Shen China to repay the RMB 7 million the Company had paid on its behalf, and the interest arising during the period of capital occupancy [(2004) SZFMECZi No.448]. Since Shen China had not fulfilled its repayment duty according to the time and contents stipulated in the judgment document, the Company applied to Shenzhen Intermediate People’s Court on Dec.20, 2004 for compulsory enforcement. Shenzhen Intermediate People’s Court sent Shen China (2004) SZFZZi No.1382 Civil Verdict and Mandamus, as well as (2005) SZFZZi No.208 Civil Verdict and Mandamus on Jan.14, 2005, and ruled that the property of Shen China (RMB 14,131,575.92 as the limit) should be sealed up and frozen, and that Shen China should fulfill the duties stipulated in effective legal papers or regulated by law within five days from the day the Mandamus arrived. Should Shen China defaulted beyond the time limit, Shenzhen Intermediate People’s Court would make compulsory enforcement according to law (for details, please refer to notifications of the Company published on Securities Times, Hong Kong Ta Kung Pao and Juchao Website dated Jul.30, 2004, Nov.20, 2004, Dec.16, 2004, Dec.29, 2004 and Jan.18, 2005.). Later, stipulated by the Higher People’s Court of Guangdong, the aforesaid two lawsuits were conducted by Guangzhou Railway Transportation Court, and the conductions were suspended in the report period because of discovering no property clues. As soon as circumstances of execution suspension ended, the Company may apply to Guangzhou Railway Transportation Court for resumption of execution. II. The case concerning the joint-liability guarantee the Company provided for the RMB 30 million loan obtained by Shenzhen Nanfang Tongfa Industrial Company (hereinafter referred to as Nanfang Tongfa) had been closed through mediation on Jan.11, 2002 (for details, please refer to notifications of the Company published on Securities Times, Hong Kong Ta Kung Pao and Juchao Website dated Mar.13, 2002.). Ended the year 2003, the Company had repaid on behalf of Nanfang Tongfa the principal, interest, as well as the legal fare for the trial of first instance and the cost of preservation, amounting to RMB 38,003,311.50, and fulfilled the guarantee liability according to the requirements of Civil Mediation Agreement. The Company had applied to Shenzhen Intermediate People’s Court to compulsorily enforce the property of Nanfang Tongfa. In November 2004 and January 2005, Shenzhen Intermediate People’s Court respectively issued the (2004) SZFZZI No.477 and No.115 Civil Order and ruled that, since Nanfang Tongfa had no executable property, (2001) YGFJEZZi No.111 Civil Mediation Agreement sent by Guangdong High People’s Court should be suspended, and that, after the case of execution suspension disappeared, the Company can applied to Shenzhen Intermediate People’s Court for resumption of execution. (For details, please refer to notifications of the Company published on Securities Times, Hong Kong Ta Kung Pao and Juchao Website on Jan.22, 2005.). The Company got informed that Nanfang Tongfa had applied to the People’s Intermediate Court of Shenzhen for bankruptcy and liquidation for debts. In July 2007, the Company had claimed its credit to the liquidation workgroup of Nanfang Tongfa. As confirmed by the liquidation workgroup of Nanfang Tongfa with Credit Verification Notice, the Company’s credit was confirmed to RMB 43,561,532.50 (in which RMB 38,003,311.50 was the repayment, and RMB 5,558,221.00 was interests). (Details are available with the Announcement of the Board of Directors released on Securities Times, Hong Kong Wen Wei Po, and Juchao Website dated July 18, 2007.) III. In December 2002, the case concerning the joint-liability guarantee the Company provided for the HKD 3 million loans that Guangdong Sunrise Holdings Co., Ltd. (the former Shenzhen Lionda Holdings Co., Ltd. hereinafter referred to as Sunrise Company for short) had obtained from Industrial and Commercial Bank of China Shenzhen Branch had been closed through mediation. On Jan.13, 2003, the Company repaid, on behalf of Sunrise Company, the principal of HKD 3 million as well as the interest amounting to HKD 0.1 million, while the rest interest was exempted. The Company would exercise relevant rights through legitimate means. IV. The case concerning the joint-liability guarantee the Company provided for the HKD 6 million loan Sunrise Company had obtained from Shenzhen Development Bank Nantou Subbranch (hereinafter referred to as Shenfazhan) had been closed with reconciliation. Ended the year 2003, the Company had repaid a sum of principal HKD 2 million and the interest arising on behalf of Sunrise Company. The remaining principal of HKD 4 million was transferred to loan, and the Company would continue to provide guarantee (For details, please refer to notifications of the Company published in Securities Times, Hong Kong Ta Kung Pao and Juchao Website dated May 13, 2003.). In year 2004, after this loan expired, Sunrise Company did not perform the repayment. In year 2006, the Company had repaid another HKD 2.5 million (equaling to RMB 2.55 million) of the principal on behalf of Sunrise Company. In the report period, the Company had repaid HKD 1,453,186.52 of the principal as well as HKD 620,734.25 of the interest (equaling to RMB 2,055,920.22) on behalf of Sunrise Company. The Company had fulfilled the guarantee liability, and would exercise relevant rights through legitimate means. V. The case concerning the joint-liability guarantee the Company provided for the RMB 8 million loans which Sunrise Company had obtained from Guangdong Development Bank Co., Ltd. Shenzhen Nanyuan Subbranch (formerly Guangdong Development Bank Co., Ltd. Shenzhen Branch Nanyuan Subbranch) had been closed with reconciliation. Ended the year 2005, the Company had repaid a sum of interest amounting to RMB 2,369,145.58 on behalf of Sunrise Company, while the remaining principal and interest amounting to RMB 8.58 million would continue to be provided as a loan to Guangdong Sunrise Holdings Co., Ltd., and the Company would continue to provide join-liability guarantee for it. The guarantee term was from Feb.6, 2005 to Aug.6, 2005. Sunrise Company had not repaid this loan by the expiration day of the loan. VI. The case concerning the joint-liability guarantee the Company provided for the HKD 32 million loans which Sunrise Company had obtained from Bank of China Shenzhen branch had been reconciled (For details, please refer to notifications of the Company published on Securities Times, Hong Kong Wen Wei Po and Juchao Website dated Jul.29, 2006 and Dec.13, 2006.), and on Dec.11, 2006, the Company signed the Reconciliation Agreement on GLENMORE INVESTMENT LIMITED Releasing Shenzhen Shenbao Industrial Co., Ltd from the Debt Guarantee Liabilities for Guangdong Sunrise Holdings Co., Ltd. with the creditor Glenmore Investment Limited; in 2006, the Company had paid RMB 29 million according to the aforesaid reconciliation agreement. Shenzhen Intermediate People's Court withdrew the lawsuit against the Company，and the Company had submitted a sue to Shenzhen Intermediate People's Court, to apply for recourse to Sunrise Company, and requested the Court to sentence the Sunrise Company to pay back the disbursement by the Company of RMB 29 million and relevant interests. The Court had officially filed the case with case number 2007 SZFMECZi No.123 and finished the trial in the first instance. On Aug.7, 2007, the Company received the civil judgment from Shenzhen Intermediate People's Court, in which it sentenced Sunrise Company to pay back the disbursement of RMB 29 million and its interest within ten days from the effect term of the sentence (from Dec.31, 2006, calculate based on bank loan rate of the same period 6.12% till paying off). If Sunrise Company did not pay back the debt in the stipulated time limit willingly, based on the regulations of No. 232 section of the CIVIL PROCEDURE LAW OF THE PEOPLE'S REPUBLIC OF CHINA, Sunrise Company should double pay the interest of the delay days. The lawsuit fee RMB 186,800 was paid by Sunrise Company. If not agree with the sentence, Sunrise Company could appeal to the Guangdong High People’s Court within 15 days since receiving the sentence. If Sunrise Company did not appeal within the statutory days, this sentence be legally effective (for details, please refer to notifications of the Company published on Securities times, Hong Kong Wen Wei Po and website of www.cninfo.com.cn respectively on Feb.6, 2007, Apr.21, 2007, Aug.8 2007). After the legal validity, Sunrise Company did not fulfill its repayment duty according to the time and contents stipulated in the judgment document, the Company applied to Shenzhen Intermediate People’s Court for compulsory enforcement. Shenzhen Intermediate People’s Court transacted the case, and issued Notice of Case Acceptance [case number was (2008) SZFZZi No. 127]. (For details, please refer to notifications of the Company published on Securities Times, Hong Kong Wen Wei Po and Juchao Website dated Jan.15,2008.) In the report period, the Company received the Civil Verdict Document issued by Shenzhen Intermediate People's Court [case number was (2008) SZFZZi No. 127-3], which judged the Civil Verdict Document (2007) SZFMECZi No. 123 being stopped implementing. After ceased execution disappeared, the Company could apply to Shenzhen Intermediate People's Court for resuming compulsory enforcement. (For details, please refer to notifications of the Company published on the Securities Times, China Securities, Hong Kong Wen Wei Po and website of Juchao Website dated Aug.1, 2008). Section II. Bankruptcy Reform and Relative Issues In the report period, there was no bankruptcy reform and relative issues happened to the Company. Section III. Holding Equity of Other Listed Company Unit: RMB Proportion in Amount Book value Gain/loss of Stock Stock Short form of Initial total securities held at the end the report category Code stock investment investment at (shares) of term term end of term (%) Stock (3rd 400005 Haiguoshi 272,288.09 150,000 102,000 100 -160,500 board) Other stock investment held at the end — — — — — of report term Gain/loss of disposed stock investment — — — — — in the report term Total 272,288.09 150,000 102,000 100 -160,500 Section IV. Purchase and Sales of Assets and Enterprise Combination I. In the report period, there was no purchase or sale of assets of the Company. II. There was no enterprise combination of the Company. Section V. Implementation of Share Option Incentive Program The Company has not implemented share option incentive program till now. Details are available in Chapter VIII. Section VI. Significant Related Transaction In the report period, there were neither significant related transactions nor related transactions in connection with daily operation between the Company and the related parties. Section VII. Important Contract and the Implementation I. Entrustment, contracting and leasing The Company had neither important entrustment, contracting and leasing in the report period, nor entrustment, contracting and leasing happened in previous years while lasted to this report period. II. Significant guarantee (I) External guarantees left over by history The external guarantees left over by history of the Company were all made before the year 1999. With Nanfang Tongfa, Sunrise Company, Shen China, Shen Tellus and the Company all being holding subsidiaries or wholly-owned subsidiaries of Shenzhen Investment Holdings Corporation as the historical background, the Company had provided the above-mentioned four companies loan guarantees with the guarantee principal amounting to RMB 50.28 million, HKD 41 million and USD 800 thousand. After being controlled by Shenzhen Agricultural Products Co., Ltd. in year end of 1999, the Company set down to solve the guarantee problems left over by history. Up to the end of report period, the Company has been released from the guarantee responsibilities over Shen China, Shen Tellus, and Nanfang Tongfa. At present the following is the only guarantee issued left over from the previous years: The lawsuit case that the Company offered guarantee for Sunrise Company’s loan amounting to RMB 8,000,000 from Guangdong Development Bank Shenzhen branch was settled with reconciliation. Expect the partial principal and its interest the Company needed to repay for Sunrise Company, the residuals amounting to RMB 8,580,000 were renewed by Sunrise Company and guaranteed by the Company continuously, which took 2.58% of the net assets of the Company as of period end. The term of guarantee was from Feb.6, 2005 to Aug.6, 2005. Sunrise Company had not repaid this loan by the expiration day of the loan. (II) Guarantees for holding subsidiaries By the end of the report period, the total guarantees that the Company had provided for holding subsidiaries amounted to RMB 31 million, taking up 9.32% of the Company’s net assets as of period end. Details were as follows: On January 8, 2008, Shenzhen Shenbao Huacheng Food & Beverage Development Co., Ltd., the controlling subsidiary of the Company, received circulating capital credit of RMB 15 million from Shenzhen Ping An Bank Co., Ltd. Shenzhen Jingtian Branch with term of one year. The Company provided guarantee for it. On January 11, 2008, a loan of RMB 15 million was granted. On May 30, 2008, Shenzhen Shenbao Huacheng Food & Beverage Development Co., Ltd., the controlling subsidiary of the Company, received circulating capital credit of not higher than RMB 20 million by Shanghai Pudong Development Bank Shenzhen Branch with term of one year. The Company provided guarantee for it. On May 30, 2008, a loan of RMB 20 million was granted. In the report period, RMB 4 million was returned accumulatively and account of RMB 16 million was left. (Details were published in Securities Times, China Securities and Hong Kong Wen Wei Po and Juchao website dated June 6, 2008.) In the report period, the total guarantee amount took up 11.90% of the Company’s net assets. The Company had not provided guarantee for its shareholders, actual controllers and related parties, nor had the Company provided guarantee for company whose liabilities rate of assets was over 70%. III. Entrustment of financial management In the report period, the Company didn’t entrusted others to manage cash assets or continued to do so in the report period. Section VIII. Commitment Issues I. Commitments made by the original non-tradable shareholders in the process of Share Merger Reform: (I) Shenzhen Agricultural Products Co., Ltd. and Shenzhen Investment Holdings Corporation will obey the laws, statutes and regulations, and perform the statutory commitment obligations in the process of Share Merger Reform; (II) Carrying out an effective and long-term encouragement to the management level, after the completion of share merger reform, Shenzhen Agricultural Products Co., Ltd. and Shenzhen Investment Holdings Corporation, the original non-tradable shareholders of the Company, will sell their possessed shares in 3 year to the management level of the Company according to their share holding proportion after the share merger reform, which took up 6%-8% of the Company’s total capital shares after the implementation of pricing. The aforesaid encouragement specific measures and rules for implementation for the management level was studied and formulated by listed company according to The Measures Governing Equity Incentive Plans of Listed Companies of CSRC and national relevant regulations, and were reported to the State-owned Assets Supervision and Administration Commission of Shenzhen Municipality Government for examination and approval and then implementation. The circulation condition of this part of shares will be implemented following relevant provisions. Both of Agriculture Products Co. and Investment Holdings Co. have been fulfilling their statutory responsibilities for their commitments. According to Trial Provisions for Implementing Stock Option Incentive in State-owned Controlling Listed Companies (Domestic) issued jointly by State-owned Assets Supervisory & Administration Committee and the Ministry of Finance dated December 6, 2006, the Company should detail its stock option incentive plan for management executives according to relevant regulations. The non-tradable share holders will push forward the implementation of stock option incentive plan for executives within the extent allowed by relevant national laws and regulations and in appropriate market situation. Section IX. Engagement and Dismission of CPAs In the year 2008, the Company renewed the engagement of Guangdong Dahua Delu Certified Public Accountants to provide audit service for the Company in 2008. The remunerations that the Company had paid the Certified Public Accountants for the recent two years were as follows: Unit: RMB Financial auditing fee Other fees Name of the CPAs Notes 2008 2007 2008 2007 Guangdong Dahua Delu Certified 350,000 238,000 — — — Public Accountants Guangdong Dahua Delu Certified Public Accountants had provided auditing services for the Company successively for eight years. Note: On Feb.26, 2008, the Company added China Securities Journal as one of the official information disclosure medium. II. The Company received the informing letter from the audit institution of 2008 – Shenzhen Dahua Tiancheng CPAs on Dec.26, 2008, which said that, Shenzhen Dahua Tiancheng CPAs and Guangdong Hengxin Delu CPAs combined and changed the name as Guangdong Dahua Delu CPAs. So the audit institution of the Company of 2008 changed to Guangdong Dahua Delu CPAs. (Details could be found in Securities Times, China Securities, Hong Kong Wen Wei Po and Juchao website On Dec.27, 2008.) Section X. Other Significant Events I. In the report term, none of the directors, supervisors, senior executives, shareholders, substantial controller, buyer of the Company was investigated by relative departments, executed by legal & discipline departments, delivered to legal departments, appeared for criminal responsibility, investigated or punished by China Securities Regulatory Commission, administratively punished by China Securities Regulatory Commission, restricted to security market, regarded as improper person, punished by other executive departments, or publicly condemned by the Stock Exchange. II. Progress of equity transfer of the Company: On Oct. 11, 2007, the first and second largest shareholders - Agriculture Products Co., Ltd. and Shenzhen Investment Holdings Co., Ltd. send letters respectively to the Company, saying that they have already signed the Share Equity Transfer Agreement with Fusion System (HK) Co., Ltd. (hereinafter refer to Fusion Company) to transfer 76,407,697 shares of the Company in total (account for 42% of the total capital shares of the Company). In which, Agriculture Products Co., Ltd. transferred 38,589,008 shares to Fusion System (account for 21.21% of the total capital shares of the Company), while Investment Holdings would transfer 37,818,689 shares to Fusion System (account for 20.79% of the total capital shares of the Company) with the price of RMB 8.63 per share. On the same day, the Company held meeting of the Board of Directors, discussed and approved Proposal on Fusion System (HK) Co., Ltd. Making Strategy Investment to the Company by Agreement Transfer. On the next day, the Company and relevant person in charge of information disclosure respectively disclosed Notice of the Board of Directors of Shenzhen Shenbao Industrial Co., Ltd. on the First and Second Largest Shareholders Planning to Transafer the Company’ Equity together, Brief Report of Equity Changes of Shenzhen Shenbao Industrial Co., Ltd., Summary of Purchase Report of Shenzhen Shenbao Industrial Co., Ltd., and Resolution Notice of the 10th Meeting of the 6th Board of Directors of Shenzhen Shenbao Industrial Co., Ltd. On Oct.26, 2007, Fusion Company paid guarantee money that was 30% of the total equity transferring price to Agriculture Products Co., Ltd. and Investment Holdings Co., Ltd. The Company disclosed Notice of the Board of Directors of Shenzhen Shenbao Industrial Co., Ltd about the proceeding dated Oct.30, 2007. On Oct.29, 2007, the shareholders’ meeting discussed and approved Proposal on Fusion System (HK) Co., Ltd. Making Strategy Investment to the Company by Agreement Transferring, and disclosed Resolution Notice of the 2nd Extraordinary Shareholders’ Meeting of Shenzhen Shenbao Industrial Co., Ltd. on the next day. On Apr.1, 2008, the State-owned Assets Supervision and Administration Commission of the State Council officially replied and agreed the equity transferring. The Company received reply on Apr.3, 2008, and disclosed Notice on the Development of Equity Transferring of Shenzhen Shenbao Industrial Co., Ltd. on Apr.8, 2008. On Jul.30, 2008, the Company Held shareholders’ meeting, discussed and approved Special Proposal on Standardizing the Expression of the Company’s Business Scope and Revising Relevant Items of Articles of Association. On Sep.26, 2008, the Company received letter from Fusion Company, which said that, due to that it had been 11 months since signing equity transferring agreement, it happened irresistible factors such as changes of relevant laws and regulations of the state, Fusion Company had to suggest the transferor to stop the Equity Transferring Agreement. On Oct.14, 2008, the Company received the Conference Summary on Equity Transferring of Shenzhen Shenbao Industrial Co., Ltd signed by Agriculture Products Co., Ltd., Shenzhen Investment Holdings Co., Ltd. and Fusion Company. The conferrence summary was as follows: (I) The equity transferee – Fusion Company suggested to stop the Equity Transferring Agreement. (II) The equity transferor definitely expressed disagreement on stopping the Equity Transferring Agreement, and required Fusion Company to continue to implement the agreement. (III) Whereas the two parties had great different opinions, they decided to submit to arbitration according to the Equity Transferring Agreement to solve the problem by laws. On Nov.7, 2008, the Company respectively received letters from Agriculture Products Co., Ltd., Investment Holdings, Co., Ltd. and Fusion Company. According to their letters, Fusion Company submitted arbitration application to South China Sub-commission of China International Economic and Trade Arbitration Commission for the Equity Transferring Agreement on Shenzhen Shenbao Industrial Co., Ltd. and relevant disputation dated Nov 7th of 2008, and South China Sub-commission of China International Economic and Trade Arbitration Commission had officially transacted the case. On Dec.9, 2008, the Company respectively received letters from Agriculture Products Co., Ltd. and Investment Holdings Co., Ltd. According to the letters, the two companies received the Arbitration Notice of the Case No.SHEN T2008179 ([2008] China MZSZi No. 3655) sent by South China Sub-commission of China International Economic and Trade Arbitration Commission on Dec.8, 2008 and Dec.9, 2008. Fusion Company had submitted arbitration application to South China Sub-commission of China International Economic and Trade Arbitration Commission for relevant dispution on the Equity Transferring Agreement of Shenzhen Shenbao Industrial Co., Ltd signed with Agriculture Products Co., Ltd. and Investment Holdings Co., Ltd. and South China Sub-commission of China International Economic and Trade Arbitration Commission had accepted the case, and the arbitration case number was SHEN T2008179. The Company would closely concern the latest development of the afiresaid issues and perform the duty of information disclosure. (Details could be found in the public notices published in Securities Times, Hong Kong Wen Wei Po and Juchao Information website respectively dated May 8th of 2007, Aug 17th of 2007, Aug 27th of 2007, Sep 3rd of 2007, Sep 10th of 2007, Sep 17th of 2007, Sep 24th of 2007, Oct 8th of 2007, Oct 12th of 2007, Apr 8th of 2008, Jul 31st of 2008, Sep 27th of 2008, Oct 15th of 2008, Nov 11th of 2008 and Dec 10th of 2008.) IV. Accepting of investigations, communication and interview of the Company during the report period. The Company accepted or conducted the following investigations, communications, or visiting events in the report period: Main content Time/date Place Way Visitors involved and material provided Meeting Spot Apr. 14, 2008 room of the Guangfa Securities Co., Ltd. Discuss the status of investigation Company the production and Meeting operation of the Spot Guotai Jinma Stable Return Apr. 18, 2008 room of the Company and its investigation Securities Investment Fund Company equity transfer. The Meeting China Jianyin Investment Company has never Spot Jun.5, 2008 room of the Securities Co., Ltd., Penghua disclosed and leaked investigation Company Fund Management Co., Ltd. non-public Meeting information to the Spot Fullgoal Fund Management Sep.2, 2008 room of the visitors. investigation Co., Ltd. Company V. In the report period, no other significant events of the Company happened while not disclosed in provisional report. Chapter X. Financial Report Section I. Auditor’s Report Dahua Delu GuSZi(2009)No. 24 To the shareholders of Shenzhen Shenbao Industrial Co., Ltd., We have audited the accompanying financial statements of Shenzhen Shenbao Industrial Co., Ltd. (“the Company”), including balance sheet and consolidated balance sheet of 31 December 2008, and profit statement and consolidated profit statement, and statement on changes of shareholders’ equity and consolidated statement on changes of shareholders’ equity, and cash flow statement and consolidated cash flow statement for the year ended, and notes to the financial statements for the year ended. I. Management's responsibility for the financial statements The Company's management is responsible for the preparation and fair presentation of the financial statements in accordance with the Enterprises Accounting Standards and Enterprises Accounting System. The responsibility includes: (1) designing, performing and maintaining internal control related to the preparation and fair presentation of the financial statements, which are free from material misstatements whether due to frauds or errors; (2) choosing and applying right accounting policies; (3) making reasonable accounting estimates. II. Auditor's responsibility An audit involves performing procedures to obtain audit evidence about the amounts and disclosures of the financial statements. The selective audit procedures depend on auditor's judgment, including the evaluation of the risk of material misstatement of the consolidated financial statements due to frauds or errors. When evaluating risk, we consider internal control related to financial statements, in order to design auditing procedures, but not for the purpose of expressing an opinion on the internal control's effectiveness. An audit also includes assessing the appropriateness of the accounting policies adopted and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that we have obtained sufficient and appropriate audit evidences to provide a basis for our audit opinion. III. Auditing opinion In our opinion, the Company’s financial statements have been prepared in accordance with the Enterprises Accounting Standards and Enterprises Accounting System, and they fairly present, in all material respects, the financial position of the Company as of December 31, 2008, and its operation results and cash flows for the year ended. Guangdong Dahua Delu Certified Public Accountants China Accountant: Gao Dehui (Special Common Partnership) China Accountant: Chen Baohua Shenzhen, P.R.C March 19, 2009 Section II. The Accounting Statements I. Balance Sheet Consolidated Balance Sheet of Shenzhen Shenbao Industrial Co., Ltd. Unit: RMB Assets Note Dec. 31, 2008 Dec. 31, 2007 Current assets: Monetary funds 1 22,501,768.29 20,238,034.23 Settlement provisions 2 102,000.00 262,500.00 Notes receivable 3 - 760,820.00 Accounts receivable 4 36,498,040.88 49,396,918.23 Accounts paid in advance 5 3,104,860.81 10,412,941.33 Interest receivable - - Other receivables 6 40,355,337.99 28,298,317.19 Inventories 7 48,874,407.93 36,926,614.66 Non-current asset due within one year - - Other current assets - - Total current assets 151,436,415.90 146,296,145.64 Non-current assets: Finance asset available for sales - - Held-to-maturity securities - - Long-term account receivable - - Long-term equity investment 8 139,474,830.94 147,121,472.87 Investment property - - Fixed assets: 9 96,036,889.01 96,799,262.53 Construction in progress 10 24,954,233.51 5,507,263.40 Engineering material - - Disposal of fixed asset - - Productive biological asset - - Intangible assets 11 116,465,312.63 66,301,949.39 Expense on Research and Development - - Goodwill - - Long-term expenses to be apportioned 12 1,119,092.19 1,640,763.74 Deferred income tax asset 13 2,455,703.62 4,407,955.27 Other non-current asset - - Total non-current asset 380,506,061.90 321,778,667.20 Total assets 531,942,477.80 468,074,812.84 Principal of the Company: Zeng Pai Person in Charge of Accounting Works: Zeng Suyan Person in Charge of Accounting Institution: Wang Zhiping Consolidated Balance Sheet of Parent Company of Shenzhen Shenbao Industrial Co., Ltd.(Con.) Unit: RMB Liabilities and shareholder’s equity Note Dec. 31, 2008 Dec. 31, 2007 Current liabilities: Short-term loans 15 72,500,000.00 22,000,000.00 Transaction financial liabilities - - Notes payable - - Accounts payable 16 28,057,487.23 30,572,085.24 Accounts received in advance 17 2,659,571.95 2,183,994.02 Wage payable 18 4,030,723.15 6,521,537.45 Taxes payable 19 410,164.54 655,400.80 Dividend payable 20 2,909,182.74 2,909,182.74 Other accounts payable 21 25,673,961.73 27,544,787.16 Non-current liabilities due within 1 year - - Other current liabilities - - Total current liabilities 136,241,091.34 92,386,987.41 Non-current liabilities: Long-term loans 22 4,000,000.00 - Bonds payable - - Long-term account payable - - Special accounts payable - - Projected liabilities 23 8,580,000.00 8,580,000.00 Deferred income tax liabilities - - Other non-current liabilities - - Total non-current liabilities 12,580,000.00 8,580,000.00 Total liabilities 148,821,091.34 100,966,987.41 Shareholders’ equity: Share capital 24 181,923,088.00 181,923,088.00 Capital public reserve 25 80,305,894.70 80,305,894.70 Less: Inventory shares - - Surplus public reserve 26 32,464,033.34 31,290,240.37 Retained profit 27 38,049,294.30 26,592,842.51 Balance difference of foreign currency - - translation Total owner’s equity attributable to parent company 332,742,310.34 320,112,065.58 Minority interests Note 3 50,379,076.12 46,995,759.85 Total shareholders equity 383,121,386.46 367,107,825.43 Total liabilities and owner’s equity 531,942,477.80 468,074,812.84 Principal of the Company: Zeng Pai Person in Charge of Accounting Works: Zeng Suyan Person in Charge of Accounting Institution: Wang Zhiping Balance Sheet of Shenzhen Shenbao Industrial Co., Ltd. Unit: RMB Assets Note Dec. 31, 2008 Dec. 31, 2007 Current assets: Monetary funds 10,374,648.49 9,331,760.93 Settlement provisions - - Notes receivable - - Accounts receivable 4 556,200.00 1,184,643.21 Accounts paid in advance - - Interest receivable - - Other receivables 6 187,454,715.42 187,437,031.71 Inventories 1,194,571.24 - Non-current asset due within one year - - Other current assets - - Total current assets 199,580,135.15 197,953,435.85 Non-current assets: Finance asset available for sales - - Held-to-maturity securities - - Long-term account receivable - - Long-term equity investment 8 292,189,473.30 298,086,115.23 Investment property - - Fixed assets: 31,954,397.27 32,040,876.68 Construction in progress 3,123,985.72 2,764,885.72 Engineering material - - Disposal of fixed asset - - Productive biological asset - - Intangible assets 7,496,325.01 6,504,619.55 Expense on Research and - - Development Goodwill - - Long-term expenses to be apportioned - 127,378.55 Deferred income tax asset 1,596,241.08 3,584,421.14 Other non-current asset - - Total non-current asset 336,360,422.38 343,108,296.87 Total assets 535,940,557.53 541,061,732.72 Principal of the Company: Zeng Pai Person in Charge of Accounting Works: Zeng Suyan Person in Charge of Accounting Institution: Wang Zhiping Balance Sheet of Shenzhen Shenbao Industrial Co., Ltd.(Con.) Unit: RMB Liabilities and shareholder’s equity Note Dec. 31, 2008 Dec. 31, 2007 Current liabilities: Short-term loans 20,000,000.00 22,000,000.00 Transaction financial liabilities - - Notes payable - - Accounts payable - - Accounts received in advance - - Wage payable 3,214,787.99 5,297,124.67 Taxes payable (1,335,858.83) 836,980.51 Dividend payable 2,909,182.74 2,909,182.74 Other accounts payable 55,309,763.42 65,913,692.25 Non-current liabilities due within 1 year - - Other current liabilities - - Total current liabilities 80,097,875.32 96,956,980.17 Non-current liabilities: Long-term loans - - Bonds payable - - Long-term account payable - - Special accounts payable - - Projected liabilities 8,580,000.00 8,580,000.00 Deferred income tax liabilities - - Other non-current liabilities - - Total non-current liabilities 8,580,000.00 8,580,000.00 Total liabilities 88,677,875.32 105,536,980.17 Shareholders’ equity: Share capital 181,923,088.00 181,923,088.00 Capital public reserve 80,305,894.70 80,305,894.70 Less: Inventory shares - - Surplus public reserve 32,464,033.34 31,290,240.37 Retained profit 152,569,666.17 142,005,529.48 Balance difference of foreign currency - - translation Total shareholder’s equity 447,262,682.21 435,524,752.55 Total liabilities and owner’s equity 535,940,557.53 541,061,732.72 Principal of the Company: Zeng Pai Person in Charge of Accounting Works: Zeng Suyan Person in Charge of Accounting Institution: Wang Zhiping II. Profit and Profit Distribution Statement Consolidated Profit Statement of Shenzhen Shenbao Industrial Co., Ltd. Unit: RMB Items Note 2008 2007 I. Total operating income 151,118,088.61 192,241,044.90 Including: Operating income 28 151,118,088.61 192,241,044.90 II. Total operating cost 166,916,715.86 212,266,571.21 Including: Operating cost 28 117,955,433.20 154,965,985.76 Operating tax and extras 29 775,249.09 2,194,485.88 Sales expenses 10,053,242.41 9,943,077.63 Administration expenses 33,133,739.28 38,028,192.11 Financial expenses 30 4,731,936.85 4,472,187.33 Losses of devaluation of asset 31 267,115.03 2,662,642.50 Add: Changing income of fair value 32 (160,500.00) 189,000.00 Investment income 33 28,367,117.06 33,146,208.83 Including: Investment income on affiliated company 29,192,117.06 33,146,208.83 and joint venture Exchange income - - III. Operating profit 12,407,989.81 13,309,682.52 Add: Non-operating income 34 6,522,810.91 34,365,118.79 Less: Non-operating expense 34 249,159.15 738,573.66 Including: Disposal loss of non-current asset 396,771.04 IV. Total Profit 18,681,641.57 46,936,227.65 Less: Income tax 35 2,668,080.54 2,298,813.36 V. Net profit 16,013,561.03 44,637,414.29 Net profit realized before merger by the mergered - - party under the common control Net profit attributable to owners of parent 12,630,244.76 43,690,242.34 company Minority shareholders’ gains and losses 3,383,316.27 947,171.95 VI. Earnings per share i. Basic earnings per share 0.07 0.24 ii. Diluted earnings per share 0.07 0.24 Principal of the Company: Zeng Pai Person in Charge of Accounting Works: Zeng Suyan Person in Charge of Accounting Institution: Wang Zhiping Profit Statement of Shenzhen Shenbao Industrial Co., Ltd. Unit: RMB Items Note 2008 2007 I. Total operating income 28 2,400,000.00 31,343,727.10 Less: Operating cost 28 - 20,978,294.43 Operating tax and extras 126,420.00 1,584,723.42 Sales expenses 594,879.37 127,936.80 Administration expenses 17,999,825.99 24,049,341.83 Financial expenses (1,127,631.19) 2,031,042.42 Losses of devaluation of asset 10,894.83 (1,380,879.70) Add: Changing income of fair value - - Investment income 33 28,367,117.06 33,146,208.83 Including: Investment income on affiliated 29,192,117.06 33,146,208.83 company and joint venture II. Operating profit 13,162,728.06 17,099,476.73 Add: Non-operating income 783,231.66 34,244,172.79 Less: Non-operating expense 219,850.00 69,158.21 Including: Disposal loss of non-current 37,703.33 asset III. Total Profit 13,726,109.72 51,274,491.31 Less: Income tax 1,988,180.06 2,201,404.78 IV. Net profit 11,737,929.66 49,073,086.53 V. Earnings per share i. Basic earnings per share 0.06 0.27 ii. Diluted earnings per share 0.06 0.27 Principal of the Company: Zeng Pai Person in Charge of Accounting Works: Zeng Suyan Person in Charge of Accounting Institution: Wang Zhiping III. Cash Flow Statement Consolidated Cash Flow Statement of Shenzhen Shenbao Industrial Co., Ltd. Unit: RMB Items Note 2008 2007 I. Cash flows arising from operating activities: Cash received from selling commodities and 186,109,629.53 169,753,461.79 providing labor services Write-back of tax received - - Other cash received concerning operating activities 36 24,255,799.10 38,828,510.49 Subtotal of cash inflow arising from operating 210,365,428.63 208,581,972.28 activities Cash paid for purchasing commodities and receiving 132,046,607.24 131,614,229.55 labor service Cash paid to/for staff and workers 24,613,922.06 30,274,300.73 Taxes paid 12,224,248.71 10,379,773.93 Other cash paid concerning operating activities 36 40,963,658.96 38,763,901.45 Subtotal of cash outflow arising from operating 209,848,436.97 211,032,205.66 activities Net cash flows arising from operating activities 516,991.66 (2,450,233.38) II. Cash flows arising from investing activities: Cash received from recovering investment - 51,000,000.00 Cash received from investment income 35,188,758.99 17,850,506.10 Net cash received from disposal of fixed, intangible 114,539.93 45,644,015.00 and other long-term assets Net cash received from disposal of subsidiaries and - - other units Other cash received concerning investing activities 37 - 5,000,000.00 Subtotal of cash inflow from investing activities 35,303,298.92 119,494,521.10 Cash paid for purchasing fixed, intangible and other 82,463,140.70 75,589,736.98 long-term assets Cash paid for investment - 3,800,000.00 Net increase of mortgaged loans - - Net cash received from subsidiaries and other units - - Other cash paid concerning investing activities 37 - - Subtotal of cash outflow from investing activities 82,463,140.70 79,389,736.98 Net cash flows arising from investing activities (47,159,841.78) 40,104,784.12 III. Cash flows arising from financing activities Cash received from absorbing investment - 21,700,000.00 Including: Cash received from absorbing minority - 21,700,000.00 shareholders’ investment by subsidiaries Cash received from loans 83,000,000.00 22,000,000.00 Cash received from issuing bonds - - Other cash received concerning financing activities - - Subtotal of cash inflow from financing activities 83,000,000.00 43,700,000.00 Cash paid for settling debts 28,500,000.00 92,055,920.22 Cash paid for dividend and profit distributing or 5,676,395.32 5,077,221.59 interest paying Including: Dividend and profit of minority - - shareholder paid by subsidiaries Other cash paid concerning financing activities Subtotal of cash outflow from financing activities 34,176,395.32 97,133,141.81 Net cash flows arising from financing activities 48,823,604.68 (53,433,141.81) IV. Influence on cash due to fluctuation in exchange rate 82,979.50 - V. Net increase of cash and cash equivalents 2,263,734.06 (15,778,591.07) Add: Balance of cash and cash equivalents at the 20,238,034.23 36,016,625.30 period -begin Balance of cash and cash equivalents at the period -end 38 22,501,768.29 20,238,034.23 Principal of the Company: Zeng Pai Person in Charge of Accounting Works: Zeng Suyan Person in Charge of Accounting Institution: Wang Zhiping Cash Flow Statement of Shenzhen Shenbao Industrial Co., Ltd. Unit: RMB Items Note 2008 2007 I. Cash flows arising from operating activities: Cash received from selling commodities and 628,443.21 13,881,486.00 providing labor services Write-back of tax received - - Other cash received concerning operating 43,424,085.96 35,673,300.00 activities Subtotal of cash inflow arising from operating 44,052,529.17 49,554,786.00 activities Cash paid for purchasing commodities and - 650,963.98 receiving labor service Cash paid to/for staff and workers 7,370,468.31 14,712,645.29 Taxes paid 3,328,864.41 3,458,465.63 Other cash paid concerning operating activities 14,457,825.07 92,713,847.43 Subtotal of cash outflow arising from operating 25,157,157.79 111,535,922.33 activities Net cash flows arising from operating activities 18,895,371.38 (61,981,136.33) II. Cash flows arising from investing activities: Cash received from recovering investment - 51,000,000.00 Cash received from investment income 35,188,758.99 17,850,506.10 Net cash received from disposal of fixed, intangible and 12,000.00 45,615,590.00 other long-term assets Net cash received from disposal of subsidiaries - - and other units Other cash received concerning investing - 5,000,000.00 activities Subtotal of cash inflow from investing activities 35,200,758.99 119,466,096.10 Cash paid for purchasing fixed, intangible and 46,539,209.00 2,032,319.31 other long-term assets Cash paid for investment 1,750,000.00 30,251,300.00 Net increase of mortgaged loans - - Net cash received from subsidiaries and other - - units Other cash paid concerning investing activities - - Subtotal of cash outflow from investing 48,289,209.00 32,283,619.31 activities Net cash flows arising from investing activities (13,088,450.01) 87,182,476.79 III. Cash flows arising from financing activities Cash received from absorbing investment - - Cash received from loans 20,000,000.00 22,000,000.00 Cash received from issuing bonds - - Other cash received concerning financing - - activities Subtotal of cash inflow from financing activities 20,000,000.00 22,000,000.00 Cash paid for settling debts 22,000,000.00 64,055,920.22 Cash paid for dividend and profit distributing or 2,759,639.95 4,751,567.13 interest paying Other cash paid concerning financing activities - - Subtotal of cash outflow from financing 24,759,639.95 68,807,487.35 activities Net cash flows arising from financing activities (4,759,639.95) (46,807,487.35) IV. Influence on cash due to fluctuation in exchange (4,393.86) - rate V. Net increase of cash and cash equivalents 1,042,887.56 (21,606,146.89) Add: Balance of cash and cash equivalents at the 9,331,760.93 30,937,907.82 period -begin Balance of cash and cash equivalents at the period 10,374,648.49 9,331,760.93 -end Principal of the Company: Zeng Pai Person in Charge of Accounting Works: Zeng Suyan Person in Charge of Accounting Institution: Wang Zhiping IV. Statement on Changes of Owners’ Equity Consolidated Statement on Changes of Shareholders’ Equity of Shenzhen Shenbao Industr Items Note 2008 Shareholders’ equity attributable to the parent company Less: Capital Surplus Retained Share capital Treasury reserves reserves profit Stock I. Balance at the end of the last year 181,923,088.00 80,305,894.70 - 31,290,240.37 26,592,842.51 Add: Changes of accounting policy - - - - - Error correction of the last period - - - - - II. Balance at the beginning of this year 181,923,088.00 80,305,894.70 - 31,290,240.37 26,592,842.51 III. Increase/ Decrease in this year - 1,173,792.97 11,456,451.79 - - (I) Net profit - - 12,630,244.76 - - (II) Profits and losses calculating into - - - shareholder' equity directly - - 1. Net changing amount of fair value of - - - financial assets available for sale - - 2. Effect of changes of other shareholder' equity - - - of invested units under equity method - - - 3. Effect of income tax related to shareholder’ - - - equity - - 4. Others - - - - - Total of (I) and (II) - - 12,630,244.76 - - (III) Shareholders’ devoted and decreased - - - capital - - 1. Shareholders’ devoted capital - - - - - 2. Amount calculated into shareholders’ equity - - - paid in shares - - 3. Others - - - - - (IV) Profit distribution - 1,173,792.97 (1,173,792.97) - - 1. Withdrawal of surplus reserves - 1,173,792.97 (1,173,792.97) - - 2. Distribution to shareholders - - - - - 3. Others - - - - - (V) Carrying forward internal owners' - - - - - equity 1.Capital reserves conversed to capital - - - - - (share capital) 2. Surplus reserves conversed to - - - - - capital (share capital) - - - 3.Remedying loss with profit surplus - - - - - 4.Others - - IV. Balance at the end of this year 181,923,088.00 80,305,894.70 - 32,464,033.34 38,049,294.30 Principal of the Company: Zeng Pai Person in Charge of Accounting Works: Zeng Suyan Person in Char Consolidated Statement on Changes of Shareholders’ Equity of Shenzhen Shenbao Industr Not Items 2007 e Shareholders’ equity attributable to the parent company Less: Capital Treasu Surplus R Share capital reserves ry reserves Stock 181,923,088 80,305,894. 12,998,864. I. Balance at the end of the last year - 3,65 .00 70 96 13,384,066. (15 Add: Changes of accounting policy - - - 76 Error correction of the last period - - - - 181,923,088 80,305,894. 26,382,931. (12 II. Balance at the beginning of this year - .00 70 72 4,907,308.6 38,7 III. Increase/ Decrease in this year - - - 5 43,6 (I) Net profit - - - - (II) Profits and losses calculating into shareholder' equity directly - - - - 1. Net changing amount of fair value of financial assets available for - - - - sale 2. Effect of changes of other shareholder' equity of invested units under - - - - equity method 3. Effect of income tax related to shareholder’ equity - - - - 4. Others - - - - 43,6 Total of (I) and (II) - - - - (III) Shareholders’ devoted and decreased capital - - - - 1. Shareholders’ devoted capital - - - - 2. Amount calculated into shareholders’ equity paid in shares - - - - 3. Others - - - - 4,907,308.6 (4,9 (IV) Profit distribution - - - 5 4,907,308.6 (4,9 1. Withdrawal of surplus reserves - - - 5 2. Distribution to shareholders - - - - 3. Others - - - - - - - - (V) Carrying forward internal owners' equity - - - - 1.Capital reserves conversed to capital (share capital) - - - - 2. Surplus reserves conversed to capital (share capital) - - - - 3.Remedying loss with profit surplus - - - - 4.Others 181,923,088 80,305,894. 31,290,240. 26,5 IV. Balance at the end of this year - .00 70 37 Principal of the Company: Zeng Pai Person in Charge of Accounting Works: Zeng Suyan Person in Ch Statement on Changes of Shareholders’ Equity of Shenzhen Shenbao Industrial Co., Items Note 2008 Shareholders’ equity attributable to the parent company Less: Capital Surplus Share capital Treasury Retained p reserves reserves Stock I. Balance at the end of the last year 181,923,088.00 80,305,894.70 - 31,290,240.37 142,005,5 Add: Changes of accounting policy - - - - Error correction of the last period - - - - II. Balance at the beginning of this year 181,923,088.00 80,305,894.70 - 31,290,240.37 142,005,5 III. Increase/ Decrease in this year - - - 1,173,792.97 10,564,13 (I) Net profit - - - - 11,737,92 (II) Profits and losses calculating into - - - - shareholder' equity directly 1. Net changing amount of fair value of financial - - - - assets available for sale 2. Effect of changes of other shareholder' equity of - - - - - invested units under equity method 3. Effect of income tax related to shareholder’ - - - - equity 4. Others - - - - Total of (I) and (II) - - - - 11,737,92 (III) Shareholders’ devoted and decreased capital - - - - 1. Shareholders’ devoted capital - - - - 2. Amount calculated into shareholders’ equity - - - - paid in shares 3. Others - - - - (IV) Profit distribution - - - 1,173,792.97 (1,173,79 1. Withdrawal of surplus reserves - - - 1,173,792.97 (1,173,79 2. Distribution to shareholders - - - - 3. Others - - - - (V) Carrying forward internal owners' - - - - equity 1.Capital reserves conversed to capital - - - - (share capital) 2. Surplus reserves conversed to capital - - - - (share capital) - - - - 3.Remedying loss with profit surplus - - - - 4.Others IV. Balance at the end of this year 181,923,088.00 80,305,894.70 - 32,464,033.34 152,569,6 Principal of the Company: Zeng Pai Person in Charge of Accounting Works: Zeng Suyan Person in C Statement on Changes of Shareholders’ Equity of Shenzhen Shenbao Industrial Co., Items Notes 2007 Shareholders’ equity attributable to the parent c Less: Capital Surplus Share capital Treasury Retained profi reserves reserves Stock I. Balance at the end of the last year 181,923,088.00 80,305,894.70 - 12,998,864.96 3,651,081.95 Add: Changes of accounting policy - - - 13,384,066.76 94,188,669.65 Error correction of the last period - - - - II. Balance at the beginning of this year 181,923,088.00 80,305,894.70 - 26,382,931.72 97,839,751.60 III. Increase/ Decrease in this year - - - 4,907,308.65 44,165,777.88 (I) Net profit - - - - 49,073,086.53 (II) Profits and losses calculating into - - - - shareholder' equity directly 1. Net changing amount of fair value of - - - - financial assets available for sale 2. Effect of changes of other shareholder' equity of - - - - - invested units under equity method 3. Effect of income tax related to shareholder’ - - - - equity 4. Others - - - - Total of (I) and (II) - - - - 49,073,086.53 (III) Shareholders’ devoted and decreased - - - - capital 1. Shareholders’ devoted capital - - - - 2. Amount calculated into shareholders’ equity - - - - paid in shares 3. Others - - - - (IV) Profit distribution - - - 4,907,308.65 (4,907,308.65 1. Withdrawal of surplus reserves - - - 4,907,308.65 (4,907,308.65 2. Distribution to shareholders - - - - 3. Others - - - - (V) Carrying forward internal owners' - - - - equity 1.Capital reserves conversed to capital - - - - (share capital) 2. Surplus reserves conversed to - - - - capital (share capital) - - - - 3.Remedying loss with profit surplus - - - - 4.Others IV. Balance at the end of this year 181,923,088.00 80,305,894.70 - 31,290,240.37 142,005,529.48 Principal of the Company: Zeng Pai Person in Charge of Accounting Works: Zeng Suyan Person in Ch Section III. Notes to the financial statements NOTES TO THE FINANCIAL STATEMENTS Dated Jan. 1, 2008-Dec. 31, 2008 All figures hereinafter are described in RMB Yuan except for being stated otherwise Note 1. Company profile Shenzhen Shenbao Industrial Co., Ltd. (the “Company”), formerly a state-owned enterprise incorporated in the People’s Republic of China (“PRC”) in 1975 (formerly named “Shenzhen Shenbao Canned Food Co.), obtained approval from the Shenzhen Municipal People’s Government to reorganize to a company limited by shares in 1991 (Document (1991)978). On the approval of the People’s Bank of China, Shenzhen Branch (Document (1991)126), the Company issued shares on the Shenzhen Stock Exchange and was granted the business license numbered Shen-Si-Zi N27358. The Company initially issued 107,312,935 shares in the stock exchange. In 1992, one bonus share was given to each 10 shares, totally increased 10,731,290 shares. In 1993, one bonus share and one allotted share were given to each 10 shares, totally increased 20,878,845 shares. In 1996, one bonus shares was given to each 10 shares upon the basis of total capital shares at the end of 1996, and capitalizing of capital reserves was carried out at one to ten basis, thus totally increased 27,784,614 shares. In 2001, upon the total capital shares at the end of 1999, 3 shares were allotted to each 10 shares, and totally increased 15,215,404 shares. The Company is now have registered capital of RMB181,923,088. Scope of main operations of the Company: production of food can, beverage and local products; domestic commerce and supply and marketing of materials (exclude government controlled or dominated merchandises); import and export business; development and operation of property on legally obtained land. The Company’s main products are: Seasoning series under “Sanjing” brand include oyster sauce, olive vegetable, and soy; beverages series under “Shenbao” brand include daisy tea, lemon tea, and wax gourd tea; tea series under “Jindiao” brand include instant tea powder and tea concentrate. Note 2. Basis of presentation of the financial statements and statement on compliance of Enterprise Accounting Standard The financial statements were prepared on the basis of constant operation, regarding to the trades and events practically happened, and recognition and measurement in accordance with the “Accounting Standards for Business Enterprise– Basic Standards” and other criteria of the accounting standard. At preparation of the financial statements under Enterprise Accounting Standard of PRC, certain estimations and assumptions were needed. These estimations and assumptions may influence the presentation of assets, liabilities, and contingent liabilities at the financial report date, as well as the gains and expenses in the report term. The financial statements prepared by the Company were in compliance with the requirements of the Enterprise Accounting Standard and frankly and fully reflecting the Company’s financial situation, business performance and cash flow. Note 3. Merger of enterprises and consolidated financial statements 1. Controlled subsidiaries Actual investment Registered Substantial Consolid at the end Reg. capital balance of ated Note Name of the controlled Business property of Add. (RMB’000 net voting subsidiaries report 0) investment share term(RMB ’0000) Subsidiaries formed not because of merger Shenzhen Shenbao 550.00 550.00 550.00 100% *3 Industrial Trading & Trading and Development Co., Ltd. Shenzhen wholesaling (“SBGM”) Shenzhen Shenbao 500.00 500.00 500.00 100% *3 Management of the Properties Management Shenzhen Company’s Co., Ltd. (“SBWY”) properties Shenzhen Shenbao Production and 200.00 200.00 200.00 100% *3 Biological Products Co., sales of health food Shenzhen Ltd. (“SWZP”) and food additive Shenzhen Sanjing Food & 3,015.00 8,052.08 8,052.08 100% *3 Manufacturing of Beverage Co., Ltd. Shenzhen beverage, food, and (“SBSJ”) food additives Shenzhen Shenbao 10,345.13 5,345.13 5,345.13 51.67% Huacheng Foods Co., Ltd. Tea concentrates Shenzhen (“SBHC”) and instant brew Industrial 500.00 500.00 500.00 100% *3 Huizhou Shenbao Industrial investment, Investment Co., Ltd. Huizhou logistics (“HZSBTZ”) information consulting Huizhou Shenbao 400.00 400.00 400.00 100% Property Technologies Co., Ltd. Huizhou development and (“HZSBKJ”) management Shenzhen Shenbao Fruit 0.00 0.00 0.00 0.00 *1 Juice Co., Ltd.(“SBGZ”) Shenzhen Fruit juice series Shenzhen Shenbao 237.80 5.76 5.76 53.5% *2 (Liaoyuan) Industrial Co., Business not Shenzhen Ltd. (“SBLY”) launched yet *1: Shenzhen Shenbao Fruit Juice Co., Ltd. – registered with capital of RMB 16.50 million. The Company was supposed to invest 70% of the capital, but actually fully invested by the Company. It was planned to manufacture fruit juice products. This company was not practically started operation since founded. At present it has an imported juice production line under possess. (it was out of supervision period by Customs). The Company started to clear in August 2008 and has accomplished procedure of registered written off on Feb. 4, 2009 and taken back the production euipment of fruit juice meanwhile. This company’s financial statements are not in the consolidation range. *2: Shenzhen Shenbao (Liaoyuan) Industrial Co., Ltd. – This company has been founded for years, but hasn’t been normally operated. The Company has provided long-term investment provision at the full amount of investment in this company This company’s financial statements are not in the consolidation range. *3. All of the above companies are direct or indirect shareholding subsidiaries with consolidated voting share of 100%. 2. Particulars about minor shareholders’ equity: Amount of minor Amount of minor shareholders’ shareholders’ equity Minor shareholders’ gains/losses offset Name of the subsidiaries used to offset minor equity from the owners’ shareholders’ equity of the parent gains/losses company SBSJ 741,597.60 741,597.60 (730,641.40) SBHC 49,637,478.52 49,637,478.52 (2,652,674.87) Total 50,379,076.12 50,379,076.12 (3,383,316.27) Note 4. Principal accounting policies, accounting estimations and preparation method of consolidated financial statements (1) The Company adopts the “Accounting Standards for Business Enterprise” and relevant regualtions by Ministry of Finance. (2) Fiscal year: The Company adopts Gregorian calendar year as the fiscal year, namely the fiscal year is the year started at January 1 and ended at December 31. (3) Standard currency The Company takes RMB as the standard currency for bookkeeping. (4) Accounting basis and pricing principles The Company adopts accrual basis in accounting. Except for provided otherwise in the note, normally actual cost is adopted in pricing. Assets are booked at actual costs when obtained. Asset impairment provisions are provided when impairment occurred. (5) Translation of foreign currencies Foreign currency transactions at initial confirmation shall be translated with the instant rate (or approximate exchange rate) on the exchange date. At the balance sheet day, foreign currency items are translated at the instant rate at the balance sheet day. Exchange differences between the amount recognized at instant rate of balance sheet date and the initially recognized, or the rate of previous balance sheet date, are accounted into current gains/losses account. Non-monetary foreign currency items measured at historic cost are still translated at the instant rate of the day when the transaction happened, its amount in standard currency shall not be changed. (6) Recognition of cash and cash equivalents Cash is referring to: cash, bank deposits, other monetary capital that can be drawn at any time; cash equivalents are those bonds, stocks, and foundation investments that can be cashed anytime within three months. (7) Transactional financial assets Transactional financial assets are divided into transactional financial assets and those financial assets appointed to be measured at fair value with their changes are accounted into current gains/losses accounts. Transactional financial assets are recognized initially at the fair value when obtained. Relative transaction expenses are accounted into current gains/losses account when happened. At the balance sheet date, successive measurement of transactional financial assets are at fair value, and the transaction expenses which may possibly happen when the financial asset is disposed of, shall not be deducted. Changes of the fair value of transactional financial assets are accounted into current gains/losses accounts. (8) Accounting of receivables and bad debts Accounts receivable are classified into account receivable and other account receivable. Accounts receivable are initially recognized at the fair value when obtained. Successive measurements are at actual interest rate basis and according to the amortized costs. Allowance method is adopted in accounting of bad debt losses which may happen. Impairment tests are performed on single account with major amount and minor amount respectively. Impairment tests are performed separately on single account receivable with major amount. 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. For individual account receivable with minor amount, and those with major amount but suggested no impairment when separate test was performed, bad debt provisions will be draw at the following schedule: Age Rate Within 1 year (include 1 year) 0% 1-2 years (include 2 years) 5% 2-3 years (include 3 years) 10% over 3 years 15% Bad debts are recognized when:(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 provision will be neutralized thereafter. (9) Inventory Inventories are: Raw materials (include auxiliary materials), packing materials, consumables, product-in-process, product-in-development, finished goods, OEM goods, commission goods, goods sold by way of segment payments, etc. Inventories are measured initially at their costs. Inventories obtained from debtors in term of non-monetary assets to makeup debts are measured at fair value. Accounting method of inventories obtained in term of non-monetary transaction is available under the headline of “Monetary asset transaction”. Costs of inventories inputted by investors are recognized at the value setout by the investment contracts or agreements. Costs of finished products and in-process products are costs of raw materials, direct labors, other direct costs, and those indirect costs amortized at an appropriate proportion at normal productivity. It also includes relative interest expenses. Inventories are priced at costs when purchased or delivered to stock, and by weighted average method when delivered out from stock. Perpetual inventory system is adopted with inventories. At the balance sheet day, inventories are measured at the lower of costs and cashable net values. At the end of year, inventories are measured at the lower of costs and cashable net values. If the cost of an inventory is higher than its cashable net value due to derogation, partially or fully out of date, or selling price is lower than the cost, the individual difference between the cashable net value and cost are provided as inventory impairment provision. Details are available in Note 6 and Note 7. Cashable net value is determined at the estimated value in normal operation less the estimated costs till it is finished and necessary sales expenses. For those inventories held for purpose of sales or service contracts, their cashable net value are accounted on the basis of contracted value. When the inventory amount is greater than the amount set by sales contract, the cashable value of exceeded part is accounted on the basis of common sales price. When the factor that caused reduction of inventory value has been eliminated, the inventory impairment provision provided previously shall be restored, within its amount, to the current gains/losses account. Cost of product-in-developing is accounted at the actual development cost, and transferred at individual development cost when sold. (10) Long-term equity investment For the long-term equity investment formed by corporate merger, if it is the long-term equity investment obtained from the corporate merger under the common control, the share of book value of owner's equity of the merged party on the merger date shall be taken as the initial investment cost. The direct expenses occurred in connection with the merger are accounted into current gains/losses account. For the long-term equity investments formed by merger of enterprises under different control, the merger cost is the asset given for obtaining of the controlling power, liabilities occurred or undertaken, and the fair value of equity securities issued. Expenses that are directly in connection with the merger are accounted into merger cost. Cost basis is adopted in accounting of those long-term equity investments by which the Company has substantial control over the invested enterprises, and those has no common control or major influence without quotation in an active market and the fair value cannot be reliably measured. Equity basis is adopted in accounting of those long-term equity investment by which the Company has joint control or major influence on the invested enterprise. Recognition of net loss incurred by the invested enterprise will be limited to when the book value of long-term equity investment and the substantial net investment as long-term equity has been reduced to zero, except for when the Company is responsible for extra losses. When the initial investment cost of a long-term equity investment is greater than the share of fair value of recognizable net asset of the invested enterprise, the initial investment cost will not be adjusted; when the initial investment cost of a long-term equity investment is lower than the share of fair value of recognizable net asset of the invested enterprise, the difference shall be accounted into current gains/losses account, and the cost of long-term equity investment shall be adjusted at the meantime. Recognition of the share of net gains/losses in the invested enterprise is on the basis of fair values of the recognizable assets of the invested enterprise when the investment is made, and adjusted by the net profit realized by the invested enterprise. Long-term investments are verified one after another at the end of year. If the retrievable value is lower than the book value due to falling of market price or fault of business operation, individual impairment provision will be provided at the balance of retrievable value lower than the book value. Retrievable value is determined at the higher one of fair value after deduction of disposal expenses and predicted future cash flow. Once the asset impairment loss is confirmed, it shall not be carried back in successive accounting periods. (11) Accumulative depreciation on fixed assets a. Fixed assets is defined as the tangible assets which are held for the purpose of producing goods, providing services, lease or for operation & management, and have more than one fiscal year of service life. b. Initial measurement shall be conducted on fixed assets according to the actual cost. Abandon expenses will be estimated if the fixed asset is expected for a greater expense at when being abandoned, and will be accounted into fixed asset cost at its current value. If a price paid for purchasing of fixed asset is overdue beyond the normal credit conditions, and substantially forms financing characters, the cost of such fixed asset is determined at the current value of the price paid. The difference between the practical price paid and the current value of the price, except for those should be capitalized according to the regulations, shall be accounted into current gains/losses account. c. Depreciation of fixed assets is on age average basis. According to the categories of fixed assets, predicted service life, and predicted residue value (except for electronic facilities), the depreciation rates are decided upon the original value, the estimated service life, and the residue value (5% of original value). Depreciation age and annual rates are as the followings: Annual Fixed asset categories Useful life depreciation ratio Buildings: Consistency – production buildings 35 2.71% - non-production buildings 40 2.38% Temporary buildings 9 10.57% Equipment & machinery 12 7.92% Transportation tools 9 10.56% Other equipment 6 15.83% At end of year, the useful life and net residue rate are reviewed. Adjustments are done on any difference with original estimation. For those fixed assets whose retrievable amounts are lower than the book value due to technically out-of-date, damage, or idle for a long period of time, the retrievable value shall be estimated individually or on group, and impairment provision shall be drawn according to the differences with their book values. Once asset impairment losses are recognized, they shall not be carried back in successive terms. If impairment provision has been provided upon an fixed asset which is in status of disposal, and it may produce no financial benefit by use or disposal, depreciation and providing of impairment provision shall be suspended. And estimation of net residue value shall be adjusted at the meantime. (12) Construction in process The cost of construction in process is accounted according to the direct construction and installation costs, practical loan interest, and exchange gains/losses, which occurred in connection with the project. 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 value estimated according to the budget, planned cost, or actual costs, and depreciation will start at the second day. Adjustment will be done upon completion of project settlement process. At the end of year, full verification will be performed on construction in process. Impairment provision will be provided at the balance between the retrievable value and the book value, and accounted into current gains/losses account. Once asset impairment losses are recognized, they shall not be carried back in successive terms. (13) Loan and loan expenses Loans are initially booked at costs when obtained, and measured at amortized cost on actual interest rate basis in successive measurement. Loan expenses shall be capitalized only when they are satisfying all of the conditions that: payment of asset already happened, loan expense already happened, and purchasing or construction activity for purpose of make the asset usable has started. Otherwise the loan expenses shall be recognized as current expenses. Loans borrowed particularly for purchasing or construction of assets which satisfies the conditions of capitalization, the expenses to be capitalized shall be decided by actual interest occurred for the particular loan, less interest obtained from saving of the unused fund saving in bank or temporary investment gains. If common loans have been used in purchasing or construction of assets satisfies the conditions of capitalization, the interest to be capitalized shall be calculated according to the weighted average of balance of accumulated capital expense over capital expense of the particular loan multiply the capitalization ratio of common loans used. Capitalization ratio is calculated at the weighted average interest of common loans. (14) Intangible assets and R&D costs Intangible assets are booked at the amount practically paid. When the payment for purchasing of intangible assets is delayed beyond the normal credit conditions, which has substantially formed financing activity, the cost of intangible assets shall be decided according to the current value of the price paid. The difference between the actual payment and the current value shall be accounted into current gains/losses account in the credit period, except for those shall be capitalized according regulations. Intangible assets with limited useful life are amortized at the amount of cost after deducting of predicted residue value upon their useful life on straight basis. Intangible assets without limited useful life are not amortized. a. Land using rights are amortized to 50 years; b. Patent technologies are amortized to 20 years; Expenditures of internal researching projects are divided into research expenditures and development expenditures. Expenditures occurred before scaled production or been used, using of the research fruit or other knowledge in particular project or design, to produce new products or materials, facilities, or products with substantial improvement, are regarded as development expenditures. When the following conditions are satisfied, the development period expenditures are recognized as intangible assets, or otherwise recognized as expenses. a. The intangible asset is completed and technically possible to be used or sold; b. With intention to complete the intangible asset for purpose of use or sale; c. Evidence showing that there are markets or the products produced with using of the intangible asset, or markets of the intangible asset itself, by which the intangible asset may produce financial benefits. Intangible assets used inside the Company must be approved for their usable characters. d. Developing of the intangible assets are supported by sufficient technical, financial, and other resources, and the intangible assets can be used or sold. e. Expenditures occurred in developing of the intangible asset may be reliably measured. Research expenditures are accounted into current expense account when occurred. At end of each year, intangible assets are inspected one after another. Those intangible assets which have been replaced by other new technologies and the financial benefit of the Company may be influenced negatively when they are used, or significant decline in market value and cannot restore in the retained amortizing period, they shall be estimated individually for their retrievable amount, and impairment provision shall be provided according to the balance of lower than their book value. Once an asset impairment loss is recognized, it shall not be restored in successive accounting period. No impairment provision was provided in the report term. (15) Goodwill At merger of enterprises under different control, the balance of merger cost over the share of fair value of net asset taken over is recognized as goodwill. At the end of each year, goodwill are divided into relative asset group to perform impairment test. Impairment provisions provided thereof are accounted into current gains/losses account. Impairment provisions will not be restored thereafter once provided. (16) Recognition of income Incomes are those generated by sales of goods, providing of services, and giving of assets. Income from sales of goods Sales incomes are recognized when all of the following conditions are satisfied: a. Major risks and rewards attached to the goods have been transferred to the purchaser; b. The Company holds neither successive management power which is normally attached to ownership, nor effective control, over the goods which have been sold out; c. Amount of income may be reliably measured; d. Financial benefits may inflow to the company; e. The costs, occurred or will occur, may be measured reliably. Sales incomes are recognized at the payments received or receivable according to the sales contracts, except for if the payment received or receivable according to the contract is not fairly acceptable. When a sales income is collected by way of differed payments, and practically have financing characters, the sales income is recognized at the fair value of the contract price. The balance of contract price and fair value is amortized to the contract period on practical interest basis, and accounted into current gains/losses account. Income from providing of services At balance sheet day, those service trades which can be reliably estimated are recognized at the percentage of completion. Progress of completion of service is decided by the portion of costs occurred over the estimated total costs. Costs of service providing are decided by total of income multiply completion percentage less service providing cost recognized and accumulated in previous years. Meanwhile, the amount of estimated total service cost multiply completion percentage less service providing cost recognized and accumulated in previous year is carried over to service costs. When the result of service providing cannot be reliably estimated at the balance sheet day, provided that the service cost may be compensated, the service income may be recognized at the cost already occurred, and carried over to service cost at same amount. If the cost of a service was predicted not able to be compensated, the cost occurred is recorded into current gains/losses account rather than recognized as service income. Income from giving of assets Incomes from giving of assets are recognized against following situations: a. Amount of interest income is calculated according to the time and actual interest rate of the monetary capital is used by other party. b. Income of using fee is calculated upon the charge period and calculation provided by the related contract or agreement. (17) Government subsidy Government subsidies are recognized only when all of the following conditions are satisfied: a. The enterprise satisfies the conditions attached to the government subsidy; b. The government subsidy can be obtained. When government subsidy is monetary capital, it is measured at the amount received or receivable. When government subsidy is no-monetary capital, it is measured at fair value; and if the fair value cannot be reliably obtained, it is measured at the nominal amount. Government subsidies are classified into asset-related subsidies and income-related subsidies. Asset-related subsidies are those granted to the enterprise for the purpose of purchasing, construction, or other forms of long-term assets. Asset-related subsidies are recognized as differed income and amortized to gains/losses account upon the useful life of the subsidies. Though government subsidies measured at nominal value are accounted directly into current gains/losses account. Income-related government subsidies are those other than asset-related government subsidies. Income-related government subsidies are treated separately under the following situations: a. The subsidies which are used to makeup relative expenses or losses of successive terms are recognized as differed income, and accounted to current gains/losses of the relative terms. b. Subsidies used to makeup relative expenses or losses already occurred, shall be accounted into current gains/losses account. If a recognized government subsidy needs to be returned, it shall be treated separately according to the following situations: a. When there is relative differed income, the book balance of relative differed income shall be deducted, the exceeding part shall be accounted into current gains/losses account. b. When there isn’t relative differed income, it shall be accounted into current gains/losses account directly. (18) Trade of non-monetary assets In case of the asset traded in is obviously different from the asset traded out in term of risks, time, and value, or with different current value of predicted cash flows, and the balance is relatively great comparing with the fair value of asset being traded, and the trade of non-monetary assets is substantially of commercial; When the trade of non-monetary assets is of commercial, and the asset traded out can be reliably measured for its fair value, then the initial value of the asset traded in will be decided by the fair value of the asset traded out. When the trade of non-monetary assets is of non-commercial, or none of the assets being traded can be reliably measured, the cost of asset traded in is recognized according to the book value of asset traded out and tax payable. (19) Employees’ remuneration Employees’ remunerations are the various terms of rewards and other relative expenses the Company paid to the employees for their services. The Company pays remunerations include: wages, bonus, allowances and subsidies; employee welfare; medical insurance, endowment insurance, unemployment insurance, labor injury insurance, and procreation insurance; housing reserves; trade union fee and education fee; non-monetary benefit; lay off compensation; and other expenses related to providing of services by the employees. In the accounting period when the employees are serving the Company, the remunerations payable are recognized as liabilities, and except for the lay off compensation, they shall be treated by one of the following means: a. Employees’ remunerations attributable to producing of products or providing of services shall be accounted into product costs or service costs. b. Employees’ remunerations attributable to construction-in-process or intangible assets, shall be accounted into costs of construction-in-process or intangible assets. c. Remunerations other than those described by a. and b. herein shall be accounted into current gains/losses account. (20) Recognition of predicted liabilities Responsibilities connected to contingent issues and satisfied all of the following conditions are recognized as predictive liabilities: (1) The responsibility is a current responsibility undertaken by the Company; (2) Fulfilling of the responsibility may lead to financial benefit outflow; (3) The responsibility can be measured reliably for its value. When a contract to be executed becomes a contract cause losses, and the responsibilities of the contract satisfy the conditions described above, it shall be recognized as predicted liabilities. Other responsibilities assumed by the Company (e.g. undertaking of excess losses, reorganization liabilities, or abandon expenses) that satisfy the above conditions, are recognized as predicted liabilities. (21) Accounting treatment method of income tax Enterprise Income Tax Rate is 18%, the income tax of the Company adopts accounting treatment method of Balance sheet debt method. When confirming the defereed income tax asset, judgement evidence for its temporary differences could be switched back in predicatable future is: the Company continues to operate in future predicatable period, no evidence could show that the profit-gaining ability of the Company declines and thus the Company could not obtain enough taxable income to deduct deductible temporary differences. (22) Compile basis fro consolidating financial statements The Company takes all subsidiaries which could be implemented control in the consolidation range. When the accounting policy adopted by a subsidiary is different with that of the Company, it should be adjusted according to the Company’s accounting policies before being consolidated. When the accounting period adopted by a subsidiary is different with that of the Company, it should be adjusted according to the parent company’s accounting period before being consolidated. The susbsidiaries acquired by merger of enterprise under common control will be treated in equity method, the consolidated profit statement is including the income, expenses, profit generated from the beginning of the term to the mergered day, the asset and book value of liabilities of the mergered party in merger day are measured as the obtained asset and liabilities. Megerring the subsidiaries not under the common control, it will be treated in purchasing method, recognizable asset and liabilities of purchased subsidiaries are measured in fair value for the accouting statement consolidating since the day of controlling subsidiaries. Based on that the investment, transactions between home office and branches, internal transaction among the controlling subsidiaries of the Company and affiliated companies with actural controlling rights do not realized all offsetting such as gains and losses, consolidated item by item, and calculated the minority shareholders’ equity; the minority shareholders’ equity indicates that the distributable profit(or losses which should be shouldered) by the Company and the third party excluded the subsidiaries in the subsidiaries of the Company. For the subordinate affiliated company, equity method is adopted for calculation. (23) Earnings per share Basic earnings per share Basic earnings per share is calculated as: net profit of the current term attributable to common shareholders, divided by weighted average of common shares issued to outside. While calculating of weighted average of common shares issued to outside is on the following formula: Weighted average of common shares issued to outside = common shares issued to outside at beginning of term + common shares newly issued in current term * period since issued ÷ period of report term – common shares repurchased in current term * period since repurchased ÷ period of report term Diluted earnings per share When there are dilution potential common shares in the Company, the current net profit attributable to common share holders and the weighted average of common shares issued to outside shall be adjusted respectively, and the diluted earnings per share is calculated according to this. Dilution potential common shares are those potential common shares which may reduce the earnings per share provided that they are converted to common shares in the current term. Calculating of dilution earnings per share shall adjust the current net profit attributable to the common share holders according to the following issues: a. The interests of dilution potential common shares which have been recognized as expenses; b. Gains or expenses expected to be generated by conversion of dilution potential shares. At calculating of dilution earnings per share: weighted average of common shares issued to outside = weighted average of common shares at calculating of basic earnings per share + weighted average of common shares increased by conversion of expected dilution potential common shares into common shares issued. At calculating of weighted average of common shares increased by conversion of dilution potential common shares to common shares issued, dilution potential common shares issued in previous terms shall be assumed to be converted in the current term; while dilution potential common shares issued in current shares shall be assumed to be converted on the day of issuing. When the exercising prices of share option certificates and future share options are lower than the average market price of common shares in the current term, their dilution shall be considered. The Company commits that when the repurchasing price provided by the repurchasing contract is lower than the market price, their dilution shall be considered. Diluted potential common shares shall be accounted into diluted earnings per share at the descending order according to their scales of dilution, until the diluted earnings per share reaches its minimum value. Recalculating When the amount of common shares or potential common shares has decreased due to distributing of dividend, capitalizing of common reserves, share splitting, or share consolidation, though the amount of owners’ equity is not influenced, the earnings per share of each report term shall be recalculated upon the adjusted amount of shares. When an above change happened between the balance sheet date and the approval date of the financial statement, the earnings per share of each report term shall be recalculated according to the adjusted amount of shares. When retrospective adjustment or restatement was carried out on the income of previous years according to “Enterprise Accounting Standard No.28 – Change of accounting policies, accounting estimations, and correction of accounting errors”, earnings per share of each report year shall be recalculated. (24) Segment report Report segments are decided upon businesses or geographic areas. Business segments are those identifiable parts which can provide a particular product or service, or a group of products or services. A segment is undertaking risks and rewards different from those of other segments. Geographic segments are those identifiable parts which can provide products or services in a particular economic environment. A geographic segment is undertaking risks and rewards different from those segments provide products or services in other economic environment. When most of the income of a business segment or geographic segment is from external trade, and one of the following conditions is satisfied, it shall be recognized as a report segment: a. The income of this segment accounts for 10% or above of the total income of all segments. b. The absolute amount of this segment’s profit (or loss) accounts for 10% or above of the greater one of the total of all profit-making segments’ profit or the absolute amount of total of all loss-making segments’ losses. c. The asset of this segment accounts for 10% or above of the total asset of all segments. Segment information is disclosed in form of principal report formation and secondary report formation according to the differences in risks and rewards. (25) Changes of accounting policies and accounting estimations The Company did not have changes of accounting policies and accounting estimations in 2008. Note 5. Taxations The Company is subject to: VAT, operation tax, city maintaining & construction tax, education surcharge, corporation income tax, and property tax. The turnover tax rates are: VAT 17%, operation tax 5%, city maintaining & construction tax is at 1% or 7% of the turnover tax, and education surcharge is at 3% of the turnover tax. Enterprise income tax rate of the Company and its controlling subsidiaries is: Name of the Company Note 2008 2007 The Company 18% 15% SBHC Controlling subsidiaries 18% 15% Including: Chaoyang Company of SBHC Filiale of SBHC 25% 33% Controlling subsidiaries 25% 33% Shenbao Huafa Tea Industry Co., Ltd. in Wuyuan County of SBHC Wholly-owned 18% 15% Shenzhen Sanjing Food & Beverage Co., Ltd. (“SBSJ”) subsidiary Controlling subsidiaries 25% 33% Including: Guangdong Shenbao Foods Co., Ltd. of SBSJ Shenzhen Shenbao Industrial Trading & Development Wholly-owned 18% 15% Co., Ltd. (“SBGM”) subsidiary Shenzhen Shenbao Properties Management Co., Ltd. Wholly-owned 18% 15% (“SBWY”) subsidiary Shenzhen Shenbao Biological Products Co., Ltd. Wholly-owned 18% 15% (“SWZP”) subsidiary Huizhou Shenbao Industrial Investment Co., Ltd. Wholly-owned 25% 33% (“HZSBTZ”) subsidiary Wholly-owned 25% 33% Huizhou Shenbao Technologies Co., Ltd. (“HZSBKJ”) subsidiary Note 6. Notes to main items of financial statements (the following figures are consolidated figures except for otherwise stated) 1. Monetary fund Original Exchange At the end of Beginning of Categories Currency currency rate term term Cash RMB 208,850.95 --- 208,850.95 69,635.71 HKD 664.02 0.8819 585.60 621.79 USD 7,134.73 6.8346 48,763.03 52,116.35 Sub-total 258,199.58 122,373.85 Bank deposit RMB 21,928,410.70 --- 21,928,410.70 19,396,302.86 EURO 418.29 9.6590 4,040.26 --- HKD 12,741.76 0.8819 11,236.96 11,870.42 USD 43,876.86 6.8346 299,880.79 707,487.10 Sub-total 22,243,568.71 20,115,660.38 Total 22,501,768.29 20,238,034.23 2. Transaction financial assets End of term Beginning of term Basis of fair value Items recognition Transactional equity 102,000.00 262,500.00 Market value instrument investment Total 102,000.00 262,500.00 3. Notes receivable Category At the end of term Beginning of term Bank acceptance --- 760,820.00 Total --- 760,820.00 Issuer Date of issue Date of expiration Amount Zhejiang Huafa Tea Co., Ltd. Dec. 3, 2007 June 3, 2008 410,820.00 Xinchang County Chengbao Nov. 16, 2007 May 16, 2008 200,000.00 Industry Co., Ltd. Xinchang County Chengbao Nov. 16, 2007 May 16, 2008 150,000.00 Industry Co., Ltd. 4. Account receivable (1) Statement of account receivable balances at the end of year grouped according to their risks At the end of term Beginning of term Portion Bad debt Portion Bad debt Categories Amount Amount in total provision in total provision RMB % RMB RMB % RMB I. Single item with major --- --- --- 13,533,789.10 19.79 --- amount II. Single item with minor amount but with greater risks 17,977,734.91 32.30 17,977,734.91 18,073,056.16 26.42 18,073,056.16 when combined with other similar items III. Other minor 37,686,533.15 67.70 1,188,492.27 36,787,804.65 53.79 924,675.52 Total 55,664,268.06 100.00 19,166,227.18 68,394,649.91 100.00 18,997,731.68 Total of top 5 12,609,771.31 22.65 1,584,441.10 22,363,652.73 32.70 1,434,446.95 Amount of receivable due --- --- --- --- --- --- from related parties Single item of receivable with major amount, the evidence for confirming that is 10% of balance of account receivable. Single item of receivable with minor amount but with greater risks when combined with other similar items, recognition of this combination was upon accounts overdue for over 3 years and have been provide full bad debt provision. There is no balance of account receivable due from shareholders holding 5% or over of shares at the end of term. (2) Statement of account receivable balances at the end of year grouped according to their ages: At the end of term Beginning of term Portion in Bad debt Portion Bad debt Age Amount Amount total provision in total provision RMB % RMB RMB % RMB Within 1 year 26,383,892.10 47.40 --- 40,129,225.87 58.67 --- Over 1 year but within 5,314,510.39 259,022.75 5,634,171.13 281,708.56 9.55 8.24 2 years Over 2 years but 2,205,523.48 220,611.24 1,322,885.12 132,288.51 3.96 1.93 within 3 years Over 3 years 21,760,342.09 39.09 18,686,593.19 21,308,367.79 31.16 18,583,734.61 Total 55,664,268.06 100.00 19,166,227.18 68,394,649.91 100.00 18,997,731.68 Details of account receivable: At the end of term Beginning of term Portion Bad debt Portion Bad debt Categories Amount Amount in total provision in total provision RMB % RMB RMB % RMB I. Single item with major 556,200.00 95.13 --- 1,184,643.21 97.65 --- amount II. Single item with minor amount but with greater 28,453.08 4.87 28,453.08 28,453.08 2.35 28,453.08 risks when combined with other similar items III. Other minor --- --- --- --- --- --- Total 584,653.08 100.00 28,453.08 1,213,096.29 100.00 28,453.08 Total of top 5 584,653.08 100.00 28,453.08 1,213,096.29 100.00 28,453.08 Amount of receivable due 556,200.00 95.13 --- 1,184,643.21 97.65 --- from related parties 5. Account paid in advance At the end of term Beginning of term Age Amount Portion in total Amount Portion in total RMB % RMB % Within 1 year 1,984,321.27 63.91 10,155,876.05 97.53 Over 1 year but within 2 927,739.14 29.88 71,939.79 0.69 years Over 2 years but within 3 102,629.90 3.31 185,125.49 1.78 years Over 3 years 90,170.50 2.90 --- --- Total 3,104,860.81 100.00 10,412,941.33 100.00 Balance of account paid in advance has reduced by RMB 7,308,080.52 (70.18%) over that of the previous year. This was caused by the subsiadiary of SBHC- Wuyuan Shenbao Huafa Tea Industry Co., Ltd. paid account of the land use right in advance, the paid account was transferred to intangible asset in this year. 6. Other receivables (1) Statement of other account receivable balances at the end of year grouped according to their risks At the end of term Beginning of term Portion Bad debt Portion Bad debt Categories Amount Amount in total provision in total provision RMB % RMB RMB % RMB I. Single item with major 26,652,474.70 45.56 --- 13,081,405.64 24.31 --- amount II. Single item with minor amount but with greater 17,665,513.21 30.20 17,665,513.21 25,130,470.54 46.70 25,130,470.54 risks when combined with other similar items III. Other minor 14,182,914.14 24.24 480,050.85 15,597,983.90 29.89 381,072.35 Total 58,500,902.05 100.00 18,145,564.06 53,809,860.08 100.00 25,511,542.89 Total of top 5 33,463,405.45 57.20 1,578,226.60 30,248,343.84 56.21 8,135,608.25 Amount of receivable due 16,318,649.90 27.89 --- 13,081,405.64 24.31 --- from related parties Details of single receivable account with major amount: Category Amount Rate of bad debt Causation Changzhou Sanjing Oil Internal transaction, no bad debt 16,318,649.90 --- provision provided Co., Ltd. Huizhou Shengli 10,333,824.80 0% The account age was within 1 year Property Single item of receivable with major amount, the evidence for confirming that is 10% of balance of account receivable. Single item of receivable with minor amount but with greater risks when combined with other similar items, recognition of this combination was upon accounts overdue for over 3 years and have been provide full bad debt provision. There is no balance of other account receivable due from shareholders holding 5% or over of shares at the end of term. (2) Statement of other account receivable balances at the end of year grouped according to their ages: At the end of term Beginning of term Portion in Bad debt Portion Bad debt Age Amount Amount total provision in total provision RMB % RMB RMB % RMB Within 1 year 21,177,490.83 36.20 --- 17,152,760.63 31.88 --- Over 1 year but within 8,089,014.08 13.83 155,735.92 3,375,900.45 6.27 31,158.95 2 years Over 2 years but 3,619,598.38 6.19 17,247.72 4,917,442.51 9.14 23,159.54 within 3 years Over 3 years 25,614,798.76 43.79 17,972,580.42 28,363,756.49 52.71 25,457,224.40 Total 58,500,902.05 100.00 18,145,564.06 53,809,860.08 100.00 25,511,542.89 Details of other account receivable: At the end of term Beginning of term Portion Bad debt Portion Bad debt Categories Amount Amount in total provision in total provision RMB % RMB RMB % RMB I. Single item with major 174,120,418.80 90.54 --- 162,738,528.10 81.47 --- amount II. Single item with minor amount but with greater 4,701,157.70 2.44 4,701,157.70 12,165,756.06 6.09 12,165,756.06 risks when combined with other similar items III. Other minor 13,495,104.80 7.02 160,808.18 24,848,416.96 12.44 149,913.35 Total 192,316,681.30 100.00 4,861,965.88 199,752,701.12 100.00 12,315,669.41 Total of top 5 174,120,418.80 90.54 --- 181,848,432.90 91.04 --- Amount of receivable due 163,786,594.00 94.07 --- 181,607,576.81 90.92 --- from related parties Details of single receivable account with major amount: Categories Amount Rate of Causation provision Huizhou Shenbao --- Internal transaction, no bad debt 69,167,944.10 Technology provision provided --- Internal transaction, no bad debt SBSJ 57,800,000.00 provision provided --- Internal transaction, no bad debt SBHC 20,500,000.00 provision provided Changzhou Sanjing Grease --- Transaction among related parties, 16,318,649.90 Co., Ltd. no bad debt provision provided Huizhou Shengli Property 10,333,824.80 0% Account age is within 1 year Investment Co., Ltd. Single item of receivable with major amount, the evidence for confirming that is 10% of balance of account receivable. There is no balance of other account receivable due from shareholders holding 5% or over of shares at the end of term. 7. Inventory and inventory impairment provision (1) Details are as followings: At the end of term Beginning of term Categories Book balance Book value Book balance Book value Raw materials 14,569,000.55 10,977,749.54 14,339,313.52 10,748,062.51 Packaging 4,164,568.46 4,156,212.52 3,583,927.74 3,575,418.19 materials Product in process 10,061,992.46 10,061,992.46 7,324,359.77 7,324,359.77 Stock products 22,623,731.65 22,158,594.60 13,429,351.56 12,964,214.51 Goods delivered 503,618.84 503,618.84 1,234,656.83 1,234,656.83 at segment payment OEM goods 5,424,148.51 129,646.19 5,392,518.12 98,015.80 Low price 886,593.78 886,593.78 981,887.05 981,887.05 consumable Total 58,233,654.25 48,874,407.93 46,286,014.59 36,926,614.66 (2) Inventory impairment provision: Decreased this year Carried Carried Beginning Increased back At the end Items out of term this year for Total of term for other restoring reason of price Raw materials 3,591,251.01 --- --- --- --- 3,591,251.01 Packaging 8,509.55 --- --- 153.61 153.61 8,355.94 materials OEM goods 5,294,502.32 --- --- --- --- 5,294,502.32 Stock products 465,137.05 --- --- --- --- 465,137.05 Total 9,359.399.93 --- --- 153.61 153.61 9,359,246.32 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. In which, partial of the OEM products has become impossible to be settled for years because the relative factories have released from the business relationship, and it is impossible to be recovered. Thus impairment provision was fully provided for these inventories. 8. Long-term equity investment (1) Details are as followings: At the end of term Beginning of term Items Impairment Impairment Book balance Book value Book balance Book value provision provision Long-term share 159,882,459.47 20,407,628.53 139,474,830.94 182,379,101.40 35,257,628.53 147,121,472.87 equity investment Incl. Investment in 57,628.53 57,628.53 --- 16,557,628.53 14,907,628.53 1,650,000.00 subsidiaries Investment in joint --- --- --- --- --- --- businesses Investment in 142,287,330.94 2,870,000.00 139,417,330.94 148,283,972.87 2,870,000.00 145,413,972.87 cooperation businesses Other equity 17,537,500.00 17,480,000.00 57,500.00 17,537,500.00 17,480,000.00 57,500.00 investment Long-term credit --- --- --- --- --- --- investment Total 159,882,459.47 20,407,628.53 139,474,830.94 182,379,101.40 35,257,628.53 147,121,472.87 Particulars about joint businesses and cooperation businesses: Share Name of the Reg. Business Registered propo Total asset at end Total of turnover at Net profit of the Companies Add. property capital rtion of term current term current term % Affiliates companies 1. SZ PEPSI Shenzhe Soft drink USD 12.5 mil. 30％ 750,924,728.81 1,814,940,798.17 104,918,622.15 n 2.Changzhou Sanjing Changzh Vegetable oil, RMB 45 mil. 33％ 40,820,154.20 261,356.67 (6,919,604.82) ou animal feed 3.Shenbao Property Shenzhe Property RMB 9 mil. 20％ 8,958,557.90 --- (20,044.90) n development 4. Shenzhen Shenzhe The business --- --- --- --- --- Shenbao(Xinmin) n license was Foods Co., Ltd. withdrawn. a. Investment on equity basis I. Other equity investment on equity basis Share in Equity Cash Name of the Additional Investment Accumulated Balance at the register Initial costs changed this dividend Companies investment retrieved change end of term ed term obtained capital Shenzhen Shenbao (Xinmin) 49.14 Foods Co., Ltd. 2,870,000.00 --- --- --- --- --- 2,870,000.00 Shenzhen 30 72,214,881.67 --- --- 31,475,586.65 35,188,758.9 56,435,384.79 128,650,266.46 Pepsi Cola 9 Beverage Co., Ltd. Changzhou (2,283,469.59 Sanjing Oil 33 Co., Ltd. 13,500,000.00 --- --- ) --- (4,528,656.08) 8,971,343.92 Shenzhen Shenbao Property 20 Development Co., Ltd. 1,800,000.00 --- --- --- --- (4,279.44) 1,795,720.56 35,188,758.9 Total 90,384,881.67 --- --- 29,192,117.06 9 51,902,449.27 142,287,330.94 b. Investment on cost basis I. Stock investment (on cost basis) Portion in Categor Amount Increase Decreas Name of the the Beginning of At the end y of of Initial costs d this ed this Companies registered term of term shares shares term term capital Legal Beijing Tiantan person’ 33,333 --- 57,500.00 57,500.00 --- --- 57,500.00 Holdings Co., Ltd.* shares Sub-total 57,500.00 57,500.00 --- --- 57,500.00 *. These shares were legal person shares purchased through STAQ trading system. It was former Beijing Shuanghesheng Five Star Beer Sanhuan Co., Ltd. The Company was originally holding 55,000 shares, and was changed to 33,333 shares after implementation of the share exchange and renaming program. II. Other equity investment on cost basis Incre Invest Share in Beginning of ased Decreased this At the end of Name of the Companies ment registered Initial costs term this term term term capital term Shenzhen Sanjiu Weitai --- 0.95% 2,480,000.00 2,480,000.00 --- --- 2,480,000.00 Holdings Co., Ltd. Shenzhen Taiji 15,000,000.0 Optical-Electric --- 3.77% 15,000,000.00 15,000,000.00 --- --- 0 Technologies Co., Ltd. Shenzhen Shenbao 10 (Liaoyuan) Industrial Co., 53.50% 57,628.53 57,628.53 --- --- 57,628.53 years Ltd. Shenzhen Shenbao Fruit 20 70% 16,500,000.00 16,500,000.00 --- 16,500,000.00 --- Juice Co., Ltd. years 17,537,628.5 Sub-total 34,037,628.53 34,037,628.53 --- 16,500,000.00 3 c. Change of impairment provisions Decreased this term Incre Carried Beginning of ased At the end of Name of the Companies back for Carried out for term this Total term restoring other reason term of price Shenzhen Taiji Optical-Electric * 15,000,000.00 --- --- --- --- 15,000,000.00 Technologies Co., Ltd. Shenzhen Sanjiu Weitai 2,480,000.00 --- --- --- --- 2,480,000.00 Holdings Co., Ltd. Shenzhen Shenbao (Xinmin) ** 2,870,000.00 --- --- --- --- 2,870,000.00 Foods Co., Ltd. Shenzhen Shenbao (Liaoyuan) ** 57,628.53 --- --- --- --- 57,628.53 Industrial Co., Ltd. Shenzhen Shenbao Fruit Juice *** 14,850,000.00 --- --- 14,850,000.00 14,850,000.00 --- Co., Ltd. Total 35,257,628.53 --- --- 14,850,000.00 14,850,000.00 20,407,628.53 *: Since this company was established, it was improperly managed and in loss condition. Impairment provision has been provided at the balance between the predicted retrievable amount and the book value. **: These two companies have been established for years. At present they have been shut down. Though for they haven’t been liquidated yet, impairment provisions was provided in full upon them. ***: Please refer to Note 3. Details of long-term investments: (1) Details are as followings At the end of term Beginning of term Items Impairment Impairment Book balance Book value Book balance Book value provision provision Long-term share 312,597,101.83 20,407,628.53 292,189,473.30 333,343,743.76 35,257,628.53 298,086,115.23 equity investment Incl. Investment in 152,829,770.89 57,628.53 152,772,142.36 167,579,770.89 14,907,628.53 152,672.142.36 subsidiaries Investment in joint --- --- --- --- --- --- businesses Investment in cooperation 142,287,330.94 2,870,000.00 139,417,330.94 148,283,972.87 2,870,000.00 145,413,972.87 businesses Other equity 17,480,000.00 17,480,000.00 --- 17,480,000.00 17,480,000.00 --- investment Long-term credit --- --- --- --- --- --- investment Total 312,597,101.83 20,407,628.53 292,189,473.30 333,343,743.76 35,257,628.53 298,086,115.23 Particulars about cooperation businesses are available at Note 6 –8(1). a. Investment on equity basis Share in registere Increase/decre Cash Name of the Initial costs Additional Investment Accumulated Balance at the d ase in equity dividend Companies investment retrieved change end of term capital( of the term obtained %) Shenzhen Shenbao (Xinmin) 49.14 Foods Co., Ltd. 2,870,000.00 --- --- --- --- --- 2,870,000.00 Shenzhen Pepsi Cola 35,188,758.9 30 Beverage Co., Ltd. 72,214,881.67 --- --- 31,475,586.65 9 56,435,384.79 128,650,266.46 Changzhou (2,283,469.59 Sanjing Oil 33 Co., Ltd. 13,500,000.00 --- --- ) --- (4,528,656.08) 8,971,343.92 Shenzhen Shenbao Property 20 Development Co., Ltd. 1,800,000.00 --- --- --- --- (4,279.44) 1,795,720.56 35,188,758.9 Total 90,384,881.67 --- --- 29,192,117.06 9 51,902,449.27 142,287,330.94 b. Investment on cost basis I. Other equity investment on cost basis Share in Name of the Investme Beginning of Increased this Decreased this At the end of registered Initial costs Companies nt term term term term term capital Shenzhen Sanjiu Weitai Holdings --- 0.95% 2,480,000.00 2,480,000.00 --- --- 2,480,000.00 Co., Ltd. Shenzhen Taiji Optical-Electric --- 3.77% 15,000,000.00 15,000,000.00 --- --- 15,000,000.00 Technologies Co., Ltd. SBSJ * 10 years 100% 80,520,842.36 80,520,842.36 --- --- 80,520,842.36 SBGM* 10 years 100% 5,500,000.00 5,500,000.00 --- --- 5,500,000.00 SWZP* 10 years 100% 2,000,000.00 2,000,000.00 --- --- 2,000,000.00 SBWY 10 years 51% 2,550,000.00 2,550,000.00 --- --- 2,550,000.00 SBHC 30 years 51.67% 31,000,000.00 53,451,300.00 --- --- 53,451,300.00 HZSBTZ 50 years 100% 4,750,000.00 3,000,000.00 1,750,000.00 --- 4,750,000.00 HZSBKJ 50 years 100% 4,000,000.00 4,000,000.00 --- --- 4,000,000.00 SBLY 10 years 53.50% 57,628.53 57,628.53 --- --- 57,628.53 SBGZ 20 years 70% 16,500,000.00 16,500,000.00 --- 16,500,000.00 --- Sub-total 164,358,470.89 185,059,770.89 1,750,000.00 16,500,000.00 170,309,770.89 *. Presented at consolidated voting rights. c. Change of impairment provitions Name of the Companies Beginning of Increas Decreased this term At the end of term ed this Carried term term back for Carried out for Total restoring other reason of price Shenzhen Taiji Optical-Electric 15,000,000.00 --- --- --- --- 15,000,000.00 Technologies Co., Ltd. Shenzhen Sanjiu Weitai Holdings 2,480,000.00 --- --- --- --- 2,480,000.00 Co., Ltd. Shenzhen Shenbao (Xinmin) 2,870,000.00 --- --- --- --- 2,870,000.00 Foods Co., Ltd. Shenzhen Shenbao (Liaoyuan) 57,628.53 --- --- --- --- 57,628.53 Industrial Co., Ltd. Shenzhen Shenbao Fruit Juice 14,850,000.00 --- --- 14,850,000.00 14,850,000.00 --- Co., Ltd. Total 35,257,628.53 --- --- 14,850,000.00 14,850,000.00 20,407,628.53 9. Fixed assets and accumulative depreciation Original value of Balance at the Increased this Decreased this Balance at the fixed assets beginning of year term term end of term Houses & buildings 50,282,401.84 50,282,401.84 Equipment & machinery 132,513,125.19 21,629,700.04 3,768,710.43 150,374,114.80 Transportation tools 7,862,045.69 566,128.40 420,210.00 8,007,964.09 Other equipment 5,163,425.20 239,331.10 15,100.00 5,387,656.30 Total 195,820,997.92 22,435,159.54 4,204,020.43 214,052,137.03 Accumulated Balance at the Increased this Decreased this Balance at the depreciation: beginning of year term term end of term Houses & buildings 4,447,140.59 1,165,266.52 5,612,407.11 Equipment & machinery 73,455,973.53 21,121,764.71 2,648,863.27 91,928,874.97 Transportation tools 5,166,655.78 416,037.54 398,512.03 5,184,181.29 Other equipment 3,700,632.68 441,897.85 12,015.87 4,130,514.66 Total 86,770,402.58 23,144,966.62 3,059,391.17 106,855,978.03 Carried back this term Carried Balance at the back for Impairment Increased this Carried out Balance at the beginning of restorin provision term for other Total end of term year g of reason asset price Houses & buildings 7,250,600.00 --- --- --- --- 7,250,600.00 Equipment & machinery 4,988,256.22 --- --- 1,086,502.74 1,086,502.74 3,901,753.48 Transportation tools 3,875.00 --- --- 3,875.00 3,875.00 0.00 Other equipment 8,601.59 --- --- 1,685.08 1,685.08 6,916.51 Total 12,251,332.81 --- --- 1,092,062.82 1,092,062.82 11,159,269.99 Net value 96,799,262.53 96,036,889.01 RMB 5,177,251.76 of construction in progree was transferred in increase amount in this term of fixed asset. The original value of fixed asset and accumulative depreciation at period-end increased compared with that in period-begin, the main reason was liquidating in this term on Shenzhen Shenbao Fruit Juice Co., Ltd. took back a series of imported fruit juice production equipment(it was out of supervision period by customs), the orgincal value increased RMB 16,500,000.00, the accumulative depreciation was RMB 15,675,000.00 and the net value was RMB 825,000.00. Please see the Note 3. 10. Construction in process Amount Portion of Balance at Other Increased this transferred Amount at the Fund project Project name Budget the beginning decrease in term into fixed end of term recourse input on of term this term asset budget Shenbao Plaza --- 3,842,333.64 --- --- --- 3,842,333.64 --- --- Front phase of 75 2,738,206.72 --- --- --- 2,738,206.72 Self-raised 10.35% Shenbao Building million Transportation --- 1,504,746.93 --- --- --- 1,504,746.93 --- --- equipment project Moving and reconstruction of --- 4,138,871.78 --- --- --- 4,138,871.78 Self-raised --- factories Huacheng production line --- 1,370,110.85 5,284,808.05 4,912,021.76 --- 1,742,897.14 Self-raised --- Wuyuan Production Line 19,090,418.8 Self-raised Project --- 1,238,031.80 5 --- --- 20,328,450.65 --- Shenbao Sanjing --- --- 118,000.00 --- --- 118,000.00 --- New Factory Self-raised Others --- 1,281,994.56 517,258.40 265,230.00 386,263.43 1,147,759.53 --- --- 16,114,296.2 25,010,485.3 Total 5,177,251.76 386,263.43 35,561,266.39 8 0 Construction-in-process impairment provisions are: Balance at the Carried back this Balance at the end of Project name Increased this term beginning of year term term Shenbao Plaza 3,842,333.64 --- --- 3,842,333.64 Transportation equipment 1,504,746.93 --- --- 1,504,746.93 project Moving and reconstruction 4,138,871.78 --- --- 4,138,871.78 of factories Others 1,121,080.53 --- --- 1,121,080.53 Total 10,607,032.88 --- --- 10,607,032.88 Net value 5,507,263.40 24,954,233.51 Net value of construction-in-process of the Company has increased by RMB 19,446,970.11 ( up 353.11%) from that of the previous year, which was caused by the increase in production line project of Wuyuan Shenbao Huafa Tea Industry Co., Ltd.-the controlling subsidiary of Shenbao Huacheng which is the susbsidiary of the Company. There were no amount of capitalization without interest in construction-in-process. Inspection on construction-in-process item by item at period-end, depreciation provision was withdrawn with the balance of that the recoverable amount is less that its book value. 11. Intangible assets Balance at the Increased this Decreased Balance at the Items beginning of Note term this term end of term year I. Total of original value 73,109,400.41 53,504,094.41 1,039,367.65 125,574,127.17 1. Land using right 51,815,446.57 50,354,041.10 1,039,367.65 101,130,120.02 *1 2. Patent technologies 21,293,953.84 1,281,863.66 --- 22,575,817.50 3. Use right of forest --- 1,868,189.65 --- 1,868,189.65 *2 II. Accumulated amortization 6,807,451.02 2,663,925.66 362,562.14 9,108,814.54 1. Land using right 1,162,264.84 1,452,159.28 362,562.14 2,251,861.98 2. Patent technologies 5,645,186.18 1,180,629.89 --- 6,825,816.07 3. Use right of forest --- 31,136.49 --- 31,136.49 III. Total of accumulative amount of intangible asset --- --- --- --- impairment provisions 1. Land using right --- --- --- --- 2. Patent technologies --- --- --- --- 3. Use right of forest --- --- --- --- IV. Total of intangible asset 66,301,949.39 116,465,312.63 book value 1. Land using right 50,653,181.73 98,878,258.04 2. Patent technologies 15,648,767.66 15,750,001.43 3. Use right of forest --- 1,837,053.16 *1. Land using rights of the Company were undertaking income. Land using rights were increased by RMB 50,354,041.10 in this term, which were: (1) HZSBKJ undertook the 65,894.00 square meters of land in Ruhu Town Huizhou with cost of RMB 36,241,700.00. (2) Wuyuan Shenbao Huafa Tea Industry Co., Ltd. – the subsidiary of SBHC has increasely inputted the industry land using right of 72,217.00 square meters in Wuyuan Country Ziyang Town Industry Zone amounted RMB 6,398,910.00; and the housing land using right of 40,000.00 square meters in Wuyuan Industry Zone undertaken with cost of RMB 9,278,840.00, and originally transferred industry land using right of 44,034.00 square meters in Wuyuan Country Ziyang Town Industry Zone amounted RMB 3,626,199.90 which deduccted RMB 1,565,408.90. Decreasing of orignal value of land using right was RMB1,039,367.65, which was the original value of land use right of RMB 3,343.24 square meters taken back by the government due to river regulation. *2. Increase of forest use right in the report term was RMB 1,868,189.65, which was because the Company purchased 423.41 mu tea garden in Wangkou Village, Jiangwan Town of Wuyuan County in Jiangxi Province(including the 17,532 mu farmers’ paddy field and barren field) and caused the purchase cost of 50-years forest use right. Including land using rights of: Area of Original value Retained land Accumulated Location of land using Dec. 31, 2008 amortizing (Squre amortizing right period meter) Shenzhen Henggang 2,361.76 734,238.92 261,678.42 472,560.50 420 months Industry City Shenzhen Tianbei 2,776.80 5,457,912.00 271,200.65 5,186,711.35 459 months Huizhou Ruhu Town 14,073.00 6,408,680.31 170,720.11 6,237,960.20 581 months Huizhou Ruhu Town 15,856.00 8,720,800.00 29,069.33 8,691,730.67 598 months Huizhou Ruhu Town * 11,282.90 4,539,631.33 136,873.29 4,402,758.04 579 months Huizhou Ruhu Town * 7,856.00 2,414,368.32 95,301.40 2,319,066.92 579 months Huizhou Ruhu Town * 17,860.00 7,185,902.17 216,660.39 6,969,241.78 579 months Huizhou Ruhu Town * 32,882.00 16,029,945.97 481,701.23 15,548,244.74 579 months Huizhou Ruhu Town * 50,038.00 27,520,900.00 293,817.42 27,227,082.58 556 months Wuyuan County Ziyang 44,034.00 2,060,791.00 59,078.33 2,001,712.67 576 months Town Industry Zone * Wuyuan County Ziyang 72,217.00 6,398,910.00 106,648.50 6,292,261.50 590 months Town Industry Zone * Wuyuan County Ziyang 40,000.00 9,278,840.00 11,046.24 9,267,793.76 839 months Town Industry Zone Wuyuan County Ziyang 4,176.00 4,379,200.00 118,066.67 4,261,133.33 794 months Town Dazhangshan Road Total 101,130,120.0 2,251,861.98 98,878,258.04 *: Asset mortgage is available in Note 10. 12. Long-term expenses to be amortized Balance at the Retained Original Increased Amortized Accumulated Balance at the Categories beginning of amortizing Amount this term this term amortization end of term term period Decoration fee 3,101,299.15 127,378.55 --- 127,378.55 3,101,299.15 --- Other projects 2,457,712.90 1,513,385.19 109,339.00 503,632.00 1,447,959.71 1,119,092.19 2 years Total 5,702,609.61 1,640,763.74 109,339.00 631,010.55 4,549,258.86 1,119,092.19 13. Deferred income tax asset Items End of term Beginning of term Bad debt provision 257,185.21 231,696.26 Long-term investment 2,227,500.00 --- impairment provision Fixed asset impairment 600,809.06 750,109.93 provision Construction-in-process 1,596,241.08 1,197,180.81 impairment provision Transaction financial 1,468.27 1,468.27 assets Total 2,455,703.62 4,407,955.27 Items not recognized as deffered income tax At the end of Beginning of Note assets term term Temporary difference may be neutralized For having a long time years, the evident on reporting assets losses 1. Bad debt provision 36,143,948.97 43,203,526.70 of Taxation Department could not be supplied which formed permanent differences. 2. Inventory impairment provision 9,359,246.32 9,359,399.93 Ditto 3. Fixed asset impairment provision 8,155,224.69 7,250,600.00 Ditto 4. Construction-in-process impairment 2,625,827.46 2,625,827.46 Ditto provision 5. Long-term equity investment impairment 20,407,628.53 20,407,628.53 Ditto provision Total 76,691,875.97 82,846,982.62 14. Asset impairment provision Balance at the Provided this Balance at the Items beginning of Decreased this term term end of term year Written Transferred back 1. Bad debt provision 44,509,274.57 267,115.03 --- 7,464,598.36 37,311,791.24 2. Inventory impairment 9,359,399.93 --- --- 153.61 9,359,246.32 provision 3. Long-term equity investment impairment 35,257,628.53 --- --- 14,850,000.00 20,407,628.53 provision 4. Fixed assets and 12,251,332.81 --- --- 1,092,062.82 11,159,269.99 impairment provision 5. Construction-in-process 10,607,032.88 --- --- --- 10,607,032.88 impairment provision Total 111,984,668.72 267,115.03 --- 23,406,814.79 88,844,968.96 15. Short-term loans Balance at the beginning Type of loan Balance at the end of term of year Original RMB currency Pledged loan RMB 21,500,000.00 --- Sub-total 21,500,000.00 --- Guarantee loan RMB 51,000,000.00 22,000,000.00 Sub-total 51,000,000.00 22,000,000.00 Total 72,500,000.00 22,000,000.00 No short-term loan is overdue. The amount of short-term loan in period-end increased RMB 50,500,000.00 compared with balance in period-begin with an increase of 229.55%, the main reason was the Company purchased land use right of Huizhou and Wuyuan and investment on establishment of Wuyuan Tea deep process production line. 16. Account payable End of term Beginning of term Age Amount Portion in total Amount Portion in total RMB % RMB % Within 1 year 24,891,960.53 88.72 27,893,822.21 91.24 Over 1 year but within 2 485,674.07 1.73 140,414.79 0.46 years Over 2 years but within 3 142,004.39 0.51 227,138.98 0.74 years Over 3 years 2,537,848.24 9.05 2,310,709.26 7.56 Total 28,057,487.23 100.00 30,572,085.24 100.00 No account payable to shareholders with 5% or above voting shares of the Company. 17. Account reveived in advance Balance at the end of term: RMB 2,659,571.95 No account received in advance from shareholders with 5% or above voting shares of the Company. 18. Employees’ wages payable Balance at the Occurred Paid in this Balance at the Items beginning of current term term end of term year I. Wage, bonus, allowance and 3,959,569.35 16,905,431.52 19,443,788.68 1,421,212.19 subsidy II. Employees’ welfare --- 3,133,735.56 3,133,735.56 --- III. Social security (347,024.21) 3,035,745.82 2,670,926.65 17,794.96 V. Trade union fee and education 762,276.31 569,976.71 627,802.75 704,450.27 fee VII. Compensation for releasing of 2,146,716.00 --- 259,450.27 1,887,265.73 labor service contract Total 6,521,537.45 23,644,889.61 26,135,703.91 4,030,723.15 *. Amount of Compensation for releasing of labor service contract at the beginning of term of RMB 6,890,000.00 which was caused by retrospective adjustment on year 2006 according to the new accounting standard. The amount drawn in 2006 but not implemented in 2007-2008 was because the payment procedures were not completed yet. 19. Tax payable Taxation At the end of term Beginning of term VAT 500,267.56 (634,338.01) Business tax 292,755.50 184,278.80 City construction tax 20,887.40 12,922.48 Enterprise income tax (510,550.43) 1,033,099.55 Personal income tax 26,624.94 28,534.83 Property tax 3,045.00 (4,305.40) Stamp tax 744.7 667.23 Embankment fee 3,187.93 2,224.09 Education surtax 37,088.42 18,699.14 Other tax 36,113.52 13,618.09 Total 410,164.54 655,400.80 20. Dividend payable Name of the investor Amount at the end of term Cause of debt Shares not consigned 218,212.60 Not paid Shenzhen Investment 2,690,970.14 Not paid Holdings Co., Ltd. Total 2,909,182.74 21. Other payables At the end of term Beginning of term Age Amount Portion in total Amount Portion in total RMB % RMB % Within 1 year 5,021,217.01 19.56 18,739,390.25 68.03 Over 1 year but within 2 13,616,281.50 53.04 1,779,377.82 6.46 years Over 2 years but within 208,777.82 0.81 260,669.80 0.95 3 years Over 3 years 6,827,685.40 26.59 6,765,349.29 24.56 Total 25,673,961.73 100.00 27,544,787.16 100.00 No other account payable to shareholders with 5% or above voting shares of the Company. Details of other account payable account for 10% or over of the total account payable: Name of the company Amount Property Shenzhen Investment Holdings Co., Ltd. 3,510,297.20 Current account Zejiang Huafa Tea Industry Co., Ltd. 3,801,305.93 Current account Total 7,311,603.13 22. Long-term loan Balnce at the beginning Type Balance at the end of term of term Original currency RMB Mortgaged loan RMB 4,000,000.00 --- Toal 4,000,000.00 --- No long-term loan is overdue. The amount of long-term loan in period-end increased RMB 4,000,000.00 compared with balance in period-begin, the main reason was the Company had an investment on establishment of Wuyuan Tea deep process production line. 23. Projected liabilities Items At the end of term Beginning of term Reason to draw External guarantee 8,580,000.00 8,580,000.00 * Total 8,580,000.00 8,580,000.00 *. In 1997, the Company provided guarantee to Guangdong Sunrise Holdings Co., Ltd. (former ShenZhen Lionda Holding Co.,Ltd., known as “Sunrise” hereinafter) for the loan of RMB8 million. On June 6, 2000, Shenzhen Futian People’s Court had judged the Company to undertake joint liabilities in repaying the debts. Through negotiation among the three parties, it was decided that the Company will pay RMB 1.4 million of interest on behalf of Sunrise, and the principal of RMB 8.58 million (including RMB 0.58 million of interest converted into principal) will still be secured by the Company. The share equity of Shenzhen Shenbao Sanjing Food & Beverage Development Co., Ltd. was used as pledge for the guarantee. If Sunrise failed to repay the loan on due, the Company shall provide predicted loss provision fully on this issue and accounted into “predicted liabilities” at amount of RMB 8,580,000.00. 24. Capital shares Increased (decreased) in this term Beginning Share Bonus At the end Items Others Sub-total of term allotted shares of term I. Tradable shares with selling restriction condition 1. Promoter’s shares 37,818,689 --- --- --- --- 37,818,689 Including: State-owned shares --- --- --- --- --- --- State-owned legal person 37,818,689 --- --- --- --- 37,818,689 shares Domestic legal person shares --- --- --- --- --- --- Overseas legal person shares --- --- --- --- --- --- Others --- --- --- --- --- --- 2. Non-promoters’ shares 44,647,193 --- --- --- --- 44,647,193 Including: State-owned shares State-owned legal person 44,647,193 --- --- 44,647,193 shares Domestic legal person shares --- --- --- --- --- --- Overseas legal person shares --- --- --- --- --- --- Employee shares --- --- --- --- --- --- Converted or allotted shares --- --- --- --- --- --- Shares allotted to fund --- --- --- --- --- --- Shares allotted to strategic --- --- --- --- --- --- investors Shares allotted to common --- --- --- --- --- --- legal person Individual shares not listed --- --- --- --- --- --- Others --- --- --- --- --- --- 3. Optional shares --- --- --- --- --- --- Total of tradable shares with 82,465,882 --- --- --- --- 82,465,882 selling restriction condition II. Unconditional tradable --- --- --- --- 73,321,206 73,321,206 shares 1. RMB common shares --- --- --- --- 26,136,000 26,136,000 placed in the country 2. Foreign shares placed in the --- --- --- --- --- --- country 3. Foreign shares placed --- --- --- --- --- --- abroad 4. Others 99,457,206 --- --- --- --- 99,457,206 Total of unconditional tradable 181,923,088 --- --- --- --- 181,923,088 shares Share capital and change of the Company has been verified by Shenzhen Zhongtianqin CPAs with Verification Report [2001] No. B-005. 25. Capital reserves Beginning of Increased Decreased this Items t the end of term term this term term Share capital premium 78,805,675.99 --- --- 78,805,675.99 Other capital reserves 1,500,218.71 --- --- 1,500,218.71 Total 80,305,894.70 --- --- 80,305,894.70 26. Surplus reserves Beginning of Increased this Decreased this At the end of Items term term term term Statutory surplus reserves 31,290,240.37 1,173,792.97 --- 32,464,033.34 Total 31,290,240.37 1,173,792.97 --- 32,464,033.34 The statutory surplus reserves increased in this year were provided at 10% of the net profit of the parent company according to the Company Law and relative regulations. 27. Undistributed profit Beginning of term Increased this term Decreased this term At the end of term 26,592,842.51 12,630,244.76 1,173,792.97 38,049,294.30 The increase of undistributed profit of the year amounted to RMB 12,630,244.76 was caused by realizing of net profit by the Company. The statutory surplus reserves in this year were provided at 10% of the net profit of the parent company according to the Company Law and relative regulations for the decreased undistributed profit in this year of RMB 1,173,792.97. 28. Operating income (1) Operating incomes and costs: Amount in this term Amount in last term Items Operating Operating Operating cost Operating cost income income 1. Main business income 150,295,545.76 117,588,148.44 187,940,225.97 152,959,785.73 2. Other business income 822,542.85 367,284.76 4,300,818.93 2,006,200.03 Total 151,118,088.61 117,955,433.20 192,241,044.90 154,965,985.76 (2) Portion of sales income from top five clients in the total sales income Amount in this term Amount in last term Total of sales to top 5 clients 59,013,928.78 46,120,429.17 Portion in total sales income 39.27% 23.99％ (3) Main business items Amount in this term Amount in last term Items Operating Operating Operating cost Operating cost income income 1. Beverage 42,242,622.54 33,879,199.34 40,161,078.48 34,840,130.84 2. Soft drinks 15,026,400.06 10,459,131.15 22,715,103.36 14,753,601.31 3. Deep processing of 107,703,284.15 87,926,578.94 103,830,475.69 88,505,880.13 tea 4. Real Estate --- --- 24,554,834.00 18,181,439.01 Offsetting in internal (14,676,760.99) (14,676,760.99) (3,321,265.56) (3,321,265.56) business of the Company Total 150,295,545.76 117,588,148.44 187,940,225.97 152,959,785.73 (4) Other business items: Amount in this term Amount in last term Operating Operating Items Operating cost Operating cost income income 1. House lease 615,600.00 --- 632,128.50 --- 2. Transferring of land --- --- 3,502,278.00 1,936,095.09 using rights 3. Others 206,942.85 367,284.76 166,412.43 70,104.94 Total 822,542.85 367,284.76 4,300,818.93 2,006,200.03 Details of main business income (1) Operating incomes and costs: Amount in this term Amount in last term Items Operating Operating Operating cost Operating cost income income 1. Main business --- --- 25,441,449.10 19,042,199.34 income 2. Other business 2,400,000.00 --- 5,902,278.00 1,936,095.09 income Total 2,400,000.00 --- 31,343,727.10 20,978,294.43 (2) Portion of sales income from top five clients in the total sales income Amount Amount in Total of sales to top 5 clients --- 31,343,727.10 Portion in total sales income --- 100％ (3) Main business items Amount in this term Amount in last term Items Operating Operating Operating cost Operating cost income income 1. Deep process of tea --- --- 886,615.10 860,760.33 2. Real estate --- --- 24,554,834.00 18,181,439.01 Total --- --- 25,441,449.10 19,042,199.34 (4) Other business items: Amount in this term Amount in last term Items Operating Operating Operating cost Operating cost income income 1. House lease 2,400,000.00 --- 2,400,000.00 --- 2. Transferring of land using --- --- 3,502,278.00 1,936,095.09 rights Total 2,400,000.00 --- 5,902,278.00 1,936,095.09 29. Operating tax and surcharges Class of tax Amount in this term Amount in last term Rate Income from general service, Business tax 204,780.00 1,680,662.00 transportation and others *5% City maintenance and Operational tax and VAT paid 293,305.41 253,046.59 construction tax *1% or 7% Operational tax and VAT paid Education surtax 246,958.97 240,878.48 *3% Embankment and enclosure maintenance 30,204.71 19,898.81 fee Total 775,249.09 2,194,485.88 30. Financial expenses Categories Amount in this term Amount in last term Interest expense 5,087,582.69 4,474,033.50 Less: Incoming interests 374,765.10 742,672.99 Exchange loss 18,330.10 674,813.65 Less: Exchange gain 158,292.15 --- Others 159,081.31 66,013.17 Total 4,731,936.85 4,472,187.33 31. Asset impairment loss Items Amount in this term Amount in last term I. Bad debt loss 267,115.03 (191,202.56) II. Inventory impairment loss --- 2,700,000.00 III. Fixed asset impairment loss --- 153,845.06 IV. Construction in process --- --- impairment loss Total 267,115.03 2,662,642.50 32. Gains from change of fair value Source of gains from change of Amount in this Amount in fair value term last term Transaction financial assets (160,500.00) 189,000.00 Total (160,500.00) 189,000.00 33. Investment gains Categories Amount in this term Amount in last term Gains in the holding period Gains from disposal of long-term (825,000.00) --- investment Amortizing of difference in long-term --- --- equity investment Net change of owners’ equity in invested 29,192,117.06 33,146,208.83 companies adjusted at end of year Total 28,367,117.06 33,146,208.83 Details of investment gains: Categories Amount in this term Amount in last term Gains in the holding period Gains from disposal of long-term (825,000.00) --- investment Amortizing of difference in long-term --- --- equity investment Net change of owners’ equity in invested 29,192,117.06 33,146,208.83 companies adjusted at end of year Total 28,367,117.06 33,146,208.83 34. Non-operating income/expense 1. Non-operating income Income items Amount in this term Amount in last term Disposal of fixed assets 39,632.61 3,145.00 Government subsidy 6,239,341.73 * 34,161,577.32 Others 243,836.57 200,396.47 Total 6,522,810.91 34,365,118.79 *：According to the regulations of Complementary Contract signed by Wuyuan Shenbao Huafa Tea Co., Ltd.(hereinafter called as Wuyuan Shenbao Huafa)-a controlling subsidiary of Shenbao Huacheng-an underlying company of the Company and the People’s Government of Wuyuan County dated Apr 26th of 2007, in order to encourage Wuyuan Shenbao Huafa to locate in Wuyuan Industry Park and do well tea processing project in Wuyuan, the People’s Government of Wuyuan County promised to reward Wuyuan Shenbao Huafa with RMB 5.32 million since the project was officially constructed and put into operation when construction finished. In December of 2008, Wuyuan Shenbao Huafa received this reward. Besides, it respectively received RMB 120,000 and RMB 40,000 for tea export reward and subsidy in June and February of this year. Meanwhile, according to Compensation Agreement for Land Acquisition (SGFLSHZi (2007) No.40) signed by the Company and Shenzhen State Land Resource and House Property Administration Longgang Branch (hereinafter called as Longgang State Land Bureau) dated Feb 1st of 2008, Longgang State Land Bureau took back the land use right for an area of 3,343.24 square meter in Henggang Industry Zone due to watercourse reform. For that, Longgang State Land Bureau gave RMB 1,417,969.80 compensation to the Company as the price for the aforesaid land use right. Till now, the Company has received this compensation already. Taking the compensation RMB 1,417,969.80 received in this year to deduct the cost and tax for initially acquiring this land, the Company took the balance RMB 759,341.73 as governmental subsidy income for this item. 2. Non-operating expenditures Expenditures Amount in this term Amount in last term Penalty and late fee paid 367.06 24,139.19 Net loss from fixed asset disposal 1,635.00 396,771.04 Commonweal donation 215,000.00 --- Others 32,157.09 317,663.43 Total 249,159.15 738,573.66 35. Income tax Items Amount in this term Amount in last term Income tax expenditure of current term 705,613.03 2,233,645.96 Incl. Income tax occurred in current year 705,613.03 2,233,645.96 Adjustment on income tax of previous years --- --- Differed income tax expenditure 1,962,467.51 65,167.40 Incl. Differed income tax occurred in 1,962,467.51 65,167.40 current term Adjustment on differed income tax of --- --- previous years Influence of tax rate change --- --- Total 2,668,080.54 2,298,813.36 36. Other cash related to business operation Items Amount in this Amount in term last term Other cash related to business operation received: Payment on behalf of Shenzhen Maoye (Group) 50,699.00 30,003,630.00 Holdings Co., Ltd. for cooperated construction Lans payment of Oumingda Company 500,000.00 --- Current amount from Guangdong Huacheng --- 500,000.00 Foods Co., Ltd. Payment of river regulation from Longgang --- 615,125.20 State-owned Asset and Supervision Bureau Compensation and subsidy of government --- 5,480,000.00 received by Wuyuan Shenbao Huafa Retrieving of land payment of industry park --- 5,426,260.00 received by Wuyuan Shenbao Huafa Personnel operation loan of Wuyuan Shenbao --- 4,510,000.00 Huafa Current account of shareholders on production --- 3,511,487.10 of Wuyuan Shenbao Huafa Shenzhen Minrun Agriculture Products --- 4,000,000.00 Logistics Franchise Co., Ltd. Trade from Shenbao Real Estate --- 1,669,670.00 Other trades 4,162,227.80 2,655,210.49 Sub-total 24,255,799.10 38,828,510.49 Other cash related to business operation paid: Trade to Changzhou Sanjing Oil Co., Ltd. 2,000,000.00 4,103,990.24 4,000,000.00 --- Shenzhen Minrun Agriculture Products Logistics Franchise Co., Ltd. Land payment for industry park of Wuyuan 11,670,310.00 --- Shenbao Huafa Shenzhen Yuantai Real Estate Development --- 7,350,000.00 Co., Ltd. Henggang He’ao Community Council --- 716,205.00 Company management fees 17,848,277.90 17,059,588.64 Marketing and sales expenses 4,354,491.07 7,234,117.57 Others 1,090,579.99 2,300,000.00 Sub-total 40,963,658.96 38,763.901.45 37. Other cash related to investment Items Amount in this term Amount in last term Other cash received related to investment Expiring of fixed term deposit pledge --- 5,000,000.00 Sub-total --- 5,000,000.00 Other cash paid related to investment Fixed term deposit pledge --- --- Sub-total --- --- 38. Cash and cash equivalents Items Amount in this term Amount in last term I. Cash 22,501,768.29 20,238,034.23 Incl. Cash in stock 258,199.58 122,373.85 Bank deposit on demand 22,243,568.71 20,115,660.38 Incl. Cash and cash equivalents of subsidiaries --- of the parent company with restriction of use --- II. Cash equivalents --- --- Incl. Bond investment due in 3 months --- --- III. Balance of cash and cash equivalents at end 20,238,034.23 of term 22,501,768.29 Note 7. Supplementary information of the Cash Flow Statement Supplementary Information Amount in this term Amount in last term 1.Net profit adjusted to cash flow of operation: Net profit 16,013,561.03 44,637,414.29 Plus: Asset impairment reserves 267,115.03 2,660,642.50 Fixed asset depreciation, discount of oil and gas, depreciation of production materials 7,469,966.62 8,724,078.73 Amortizing of intangible assets 2,663,925.66 1,932,662.27 Amortizing of long-term expenses 631,010.55 1,080,210.89 Loss from disposal of fixed assets, intangible (35,251,279.50) assets and other long-term assets (12,505.29) Loss of disposing fixed assets --- 396,771.04 Loss from change of fair value 160,500.00 (189,000.00) Financial expenses 4,852,112.48 (263,469.30) Investment loss (28,367,117.06) (33,146,208.83) Decrease of differed income tax asset 1,952,251.65 65,167.40 Increase of differed income tax liability --- --- Projected guarantee loss --- --- Decrease of inventory (11,947,793.27) 5,580,391.43 Decrease of operating receivable accounts 22,896,501.09 9,939,251.62 Increase of operating payable accounts (16,062,536.83) (8,616,865.92) Others --- --- Net csh flow arising from operating activities 516,991.66 (2,450,233.38) 2. Material investment and financing not involved in cash flow Liabilities converted to capital --- --- Convertible bond expire in 1 year --- --- Fixed assets leased through financing --- --- 3. Net change of cash and cash equivalents Balance of cash at period end 22,501,768.29 20,238,034.23 Less: Initial balance of cash 20,238,034.23 36,016,625.30 Plus: Balance of cash equivalents at the period end --- --- Less: Initial balance of cash equivalents --- --- (15,778,591.0 Net increasing of cash and cash equivalents 2,263,734.06 7) Note 8. Related Parties and Transactions (1) Related parties without controlling relationship Name of the related parties Relation with the Company Original controlling shareholders, Shenzhen Investment Holdings Co., Ltd. the secondary shareholder at present Shenzhen Pepsi Cola Beverage Co., Ltd. Partnership company Changzhou Sanjing Oil Co., Ltd. Partnership company Shenzhen shenbao Property development Partnership company Co., Ltd. Zeng Pai, Peng Ying, Zong Haiyan, Guan Lihua, Zeng Suyan, Liu Xiongjia, Zheng Key administrators of the Company Yuxi and Li Yiyan, etc. (2) Related parties with controlling relationship Legal Relation Name of the Type of Registered Business Share or represent with the related parties business capital range equity held ative Company Construction Shenzhen Agricultural Shareholding Chen Controlling Products Co., Ltd. Ltd. Shaoqun 452,063,442 and operation 29.54% shareholder of market (3) For details of the subsidiaries, joint businesses and cooperation businesses are available in Note 3. (4) Related transactions In the report period, the Company did not have material related transaction which should be disclosed. (5) Trade with related parties Financial Beginning of Trade items Name of the related parties At the end of term property term Other account Changzhou Sanjing Oil Current 16,318,649.90 13,081,405.64 receivable Co., Ltd. account Other account Shenzhen Investment Current 3,510,297.20 3,510,297.20 payable Management Co., Ltd. account Other account Shenzhen Pepsi Cola Current --- 1,248,600.00 payable Beverage Co., Ltd. account Other account Shenzhen shenbao Property Current 1,699,670.00 1,699,670.00 payable developmen Co., Ltd. account Dividend Shenzhen Investment Dividend 2,690,970.14 2,690,970.14 payable Management Co., Ltd. (6) Remuneration of administrators of the related party paid by the Company Amoun in this Amount in last Name Remarks period period Zeng Pai 366,391.00 699,836.00 Peng Ying 298,367.00 381,170.00 Zong Haiyan 273,494.00 424,890.00 Guan Lihua 246,303.00 381,155.00 Zeng Suyan 269,311.00 385,824.00 Liu Xiongjia 247,483.00 385,767.00 Zheng Yuxi 56,036.00 601,440.00 Li Yiyan 193,955.00 259,800.00 Total 1,951,340.00 3,519,882.00 Note 9. Contingent issues Guarantees and lawsuits: Influence on the financial situation, business Items Amount performance and cash flow Property of the current term and thereafter Guarantee provided to Guangdong 8,580,000.00 * Guarantee Sunrise Group Co., Ltd. Total 8,580,000.00 *. For details please go to Note 6-23. In 1997, the Company provided guarantee for loan amounting to HKD 6 million of Guangdong Sunrise Group Co., Ltd. (hereinafter referred as Sunrise Group), while Sunrise Company didn’t paid back the loan since expired. On Jul 26th of 2000, People’s Court of Nanshan District, Shenzhen judged the Company to take joint and several responsibilities. With negotiation among the Company, loan bank and Sunrise Group, the Company agreed to pay the principal amounting to HKD 2 million and relevant loaning interests to the bank for Sunrise Group. And the rest principal loan HKD 4 million was transferred to loan maturing within one year and the Company continued to provide guarantee for this loan. The guarantee term expired in January of 2004. On Jun 30th of 2004, the Company paid the principal amounting to RMB 43,290.04 for Sunrise Group. And in 2006, principal of RMB 2.55 million was paid back by the Company for Sunrise Group. On December 27th of 2006, the Company reached agreement with Nantou Branch of Shenzhen Development Bank, in which it was agreed that the Company should pay back the rest loan principal and relevant interests amounting to HKD 2,073,920.77 before Feb 28th of 2007. Until Dec 31st of 2007, the Company had accomplished its guarantee responsibility for providing guarantees for the loan of HKD 6 million of Sunrise Group. As to the lawsuit that the Company prosecuted Guangdong Sunrise Group Co., Ltd. for loan paying transacted by Shenzhen Intermediate People’s Court, the final judgment was issued in the first round session. Shenzhen Intermediate People’s Court had already issued Civil Judgment (SZFMECZi(2007)No.123). Since the judgment went into effect, Sunrise Group didn’t implement debt in the limit regulated by the judgment. The Company applied Shenzhen Intermediate People’s Court for enforcement on Sunrise Group. In January of 2008, the Company received Transaction Notice delivered by the court, noticing that the court had transacted this case. In August of 2008, the Company received Civil Verdict Paper delivered by Shenzhen Intermediate People’s Court, judging that Civil Judgment (SZFMECZi(2007)No.123) was stopped for execution. Since ceased execution disappeared, the Company could apply for recovery of enforcement in Shenzhen Intermediate People’s Court. Influence on gains and losses of the Company brought by the case could be measured according to the progress of this case. Note 10. Assets whose ownership was restricted Area Original value Type of assets restricted (square Net book value Loan amount Notes of assets meter) Land use right: Ruhu Town, Huizhou City 11,282.90 4,539,631.33 4,402,758.04 Ruhu Town, Huizhou City 7,856.00 2,414,368.32 2,319,066.92 Ruhu Town, Huizhou City 17,860.00 7,185,902.17 6,969,241.78 20,000,000.00 （1） Ruhu Town, Huizhou City 32,882.00 16,029,945.97 15,548,244.74 Ruhu Town, Huizhou City 50,038.00 27,520,900.00 27,227,082.58 Industry Park in Ziyang 44,034.00 2,060,791.00 2,001,712.67 4,000,000.00 （2） Town, Wuyuan County Industry Park in Ziyang 72,217.00 6,398,910.00 6,292,261.50 4,000,000.00 （3） Town, Wuyuan County (1)Shenbao Huacheng Company-an underlying company of the Company borrowed RMB 20 million circulating capital loan from China Construction Bank, Shenzhen Branch dated Jun 27th of 2008 and the term was one year. The principal balance RMB 17.5 million at year end was mortgaged by the land use right of 119,918.9 square meters land in Ruhu Town, Huizhou City owned by Huizhou Shenbao Science & Technology Corporation. (2)Wuyuan Shenbao Huafa Tea Co., Ltd (hereinafter called as Wuyuan Shenbao Company)-a controlling subsidiary of Shenbao Huacheng-an underlying company of the Company borrowed RMB 4 million agriculture short-term loan from Agricultural Development Bank of China Wuyuan Branch dated Apr 29th of 2008, and the term was one year, and the loan was mortgaged by the land use right of 44,034 square meter land in Wuyuan Industry Park owned by Wuyuan Shenbao Company. (3) Wuyuan Shenbao Company-a controlling subsidiary of Shenbao Huacheng-an underlying company of the Company borrowed RMB 4 million agricultural equipment purchase loan from the Sales Department of Wuyuan Rural Credit Cooperation Association Society dated Nov 26th of 2008 and the term was two years, and the loan was mortgaged by the land use right of 72,217 square meters land in Wuyuan Industry Park owned by Wuyuan Shenbao Company. Note 11. Commitment issues The Company has no material commitment issue need to be disclosed as of the end of report term. Note 12. Non-adjustment items in the post-balance sheet date issues The Company has no non-adjustment items in the post-balance sheet date issues need to be disclosed as of the end of report term. Note 13. Other important events On October 11, 2007, Agricultural Products Co. and Investment Holdings Co. entered the “Agreement on Share Equity Transferring” with Fusion System (HK) Co., Ltd (“Fusion System”), by which Agricultural Products Co., and Investment Holdings Co. were going to transfer 76,407,697 of the Company’s shares under their possession (account for 42% of the total shares of the Company). The proposal about this strategic investment has been approved by the Extraordinary Shareholders’ l Meeting held on October 29, 2007. This issue is under relative approving process at present. The substantial controller of Fusion and Xinyi Technologies Group Co., Ltd. Mr. Li Shengpo committed: 1. For the first whole fiscal year upon completion of the share transferring, the Company will achieve an net profit of not less than RMB 100 million; 2. At the 2nd and the 3rd complete fiscal year upon completion of the share transferring, the Company will achieve increase of net profit by at least 50%, i.e. at least RMB 150 million at the 2nd year and RMB 225 million at the 3rd year. If the Company failed to achieve the above target, the purchaser will compensate the shorted part by legal means (including but not limited to cash payment), to make the Company achieve the above targets. If the purchaser failed to fulfill the above commitments, the sellers or the Company are entitled to claim by legal means.” On April 3, 2008, the matters on equity transfer of the Company has got approval from State-owned Assets Supervision and Administration Commission of State Coucil, it still needs to perform the approval proxcedure of authorized department like Ministry of Commerce. On Sep. 26, 2008, with the reason of force majeure like revision of state laws and regulation during the period of equity transfer, Fusion System offered to terminate the share transfer to the transfer parties Agricultural Products and Shenzhen Investment Holdings On Oct. 14, 2008, the transfer parties Agricultural Products and Shenzhen Investment Holdings definitely expressed their disagreement on terminating the equity transfer. On Dec. 9, 2008, the Company received letters from Agricultural Products and Shenzhen Investment Holdings; according to the letters, the two companied respectively received Notice of Arbitration on No. SHEN T2008179 Case ([2008]China Mao Zhong ShenZiNo.3655) sent by South Branch of China lnternational Economic and Trade Arbitratlon Commission dated Dec. 8, 2008 and Dec. 9, 2008. Fusion System offered arbitration application to South Branch of China lnternational Economic and Trade Arbitratlon Commission on relevant arguments of Equity Transfer of Shenzhen Shenbao Industrial Co., Ltd. signed with Agricultural Products and Shenzhen Investment Holdings, the application was acceptd with the Arbitration No. SHEN T2008179. At present, the verdict was not judged. Note 14. Non-recurring gains/losses Amount before deducting of Amount after deducting of income tax influence income tax influence Sub-items Amount in Amount in last Amount in Amount in last this term term this term term 1. Gains/losses from disposal of non-current assets (1) Gains from disposal of long-term assets Incl. Gains from disposal of long-term equity investment --- --- --- --- Net inceom from transferring intangible assets --- 1,566,182.91 --- 1,331,255.47 Fixed asset disposal 39,632.61 3,145.00 32,498.74 2,673.25 Sub-total 39,632.61 1,569,327.91 32,498.74 1,333,928.72 (2) Expenses in disposal of long-term assets Incl. Net loss from disposal of fixed assets 1,635.00 396,771.04 1,226.25 337,255.38 Sub-total 1,635.00 396,771.04 1,226.25 337,255.38 Net gains/losses from disposal of non-current assets 37,997.61 1,172,556.87 31,272.49 996,673.34 2. Refunding or exemption of tax without formal approval documents --- --- --- --- 3. Government subsidy accounted into current gains/losses 6,239,341.73 34,161,577.32 4,732,660.22 29,037,340.72 4. Gains/losses from predicted liabilities without connection with main business --- --- --- --- 5. Net amount of other non-operating gains/losses other than above (1) Non-operating income: Incl. Others 243,836.57 200,396.47 184,539.22 170,337.00 Sub-total 243,836.57 200,396.47 184,539.22 170,337.00 (2)Less: Non-operating expenses Incl. Penalties paid 367.06 24,139.19 367.06 24,139.19 Others 247,157.09 317,663.43 201,618.81 270,013.92 Sub-total 247,524.15 341,802.62 201,985.87 294,153.11 None business income / expense, net (3,687.58) (141,406.15) (17,446.65) (123,816.11) 6. Other non-recurring gains/losses items designated by CSRC --- --- --- --- Incl. Asset impairment loss carried back --- --- --- --- Total of non-recurring gains/losses before deducting of minor shareholders’ gains/losses 6,273,651.76 35,192,728.04 4,746,486.06 29,910,200.95 Less: influence amount of minor shareholders’ gains/losses 3,829,670.52 24,396.81 2,872,252.89 24,831.11 Total of non-recurring gains/losses after deducting of minor shareholders’ gains/losses 2,443,981.24 35,168,331.23 1,874,233.17 29,885,369.64 Note 15. Return on equity Profit of the report period Return on equity Fully amortized Weighted average Amount in Amount in last Amount in Amount in this term term this term last term Net profit attributable to common shareholders of 3.80％ 13.65％ 3.87％ 14.65％ the Company Net profit attributable to holders of common shares after deducting of non-recurring 3.23％ 4.31％ 3.30％ 4.63％ gains/losses Note 16. Earnings per share Earnings per share Profit of the report period Basic gains per share Diluted gains per share Amount in this Amount in Amount in Amount in term last term this term last term Net profit attributable to common shareholders of 0.07 0.24 0.07 0.24 the Company Net profit attributable to holders of common shares after deducting of non-recurring 0.06 0.08 0.06 0.08 gains/losses Items 2008 2007 Calculating of basic earning per share and diluted earning per (I) The numerator Net profit after tax 16,013,561.03 44,637,414.29 Adjustment: Influence of preferential share dividend and --- --- other instruments Gains/losses attributable to the holders of common shares of 12,630,244.76 43,690,242.34 the parent company in calculating of basic earnings per share Adjustment: Dividends and interests related to diluted potential common shares --- --- Change of gains or expenses due to conversion of dilute --- --- potential common shares Gains/losses attributable to the holders of common shares of the parent company in calculating of diluted earnings per 12,630,244.76 43,690,242.34 share (II) Denominator Weighted average of common shares placed outside in 181,923,088.00 181,923,088.00 calculating of basic earnings per share Plus: Weighted average of dilute potential common shares --- --- when converted to common shares Weighted average of common shares placed outside in current 181,923,088.00 181,923,088.00 term in calculating of diluted earnings per share (III) Earnings per share Basic gains per share 0.07 0.24 Net profit attributable to common shareholders of the 12,630,244.76 43,690,242.34 Company Net profit attributable to holders of common shares after 10,756,011.59 13,804,872.70 deducting of non-recurring gains/losses Diluted gains per share 0.07 0.24 Net profit attributable to common shareholders of the 12,630,244.76 43,690,242.34 Company Net profit attributable to holders of common shares after 10,756,011.59 13,804,872.70 deducting of non-recurring gains/losses Note 17. Reconciliation Statement on Differences of Financial Statements Based on CAS and IAS Due to that Company issued B-shares, while preparing the financial report in accodance with Accounting System For Business Enterprises, the Company still compiled the financial statement based on IAS. The Company did not engage international certified public accountants The differences in net asset and net profit in the financial statement based on CAS and IAS were as follows: Net asset Net profit In accordance with IAS 335,149,949.02 12,630,244.76 1. Adjustment on amortization of differences of equity (1,016,958.04) --- investment 2. Adjustment on cost of transferring Shenzhen Pepsi’s 254,239.51 --- equity 3. Adjustment on other regulating fund of stock market (1,067,000.00) --- payable: 4. Capitalization of interest of land use right (577,920.15) --- In accordance with Accounting System For Business 332,742,310.34 12,630,244.76 Enterprises Note 18. Approval of financial statements The parent company of the Company is Shenzhen Agricutural Products Co., Ltd.; the final parent company is State-owned Assets Supervision and Administration Commission of Shenzhen Municipality Government. The Financial Statements of the Company has been approved by the Board of Directors (or superior authorities) on March 19, 2009. Documents available for Reference There are complete following documents in Secretariat of the Board of the Company provided for reference upon demand of China Securities Regulatory Commission, Shenzhen Stock Exchange and the shareholders of the Company, the documents including: 1. Financial Statements with the signatures and seals of the legal representative, CFO, and manager of the accounting department; 2. Original Auditor’s Report with seals and signatures of the CPAs; 3. Original and official copies of all documents which have been disclosed on Securities Times, China Securities, and Hong Kong Wen Wei Po in the report term; 4. The official copy of the Annual Report 2008 carried with tpersonal signature and seal of the Chairman of the Board. Chairman of the Board: Zeng Pai Shenzhen Shenbao Industrial Co., Ltd. March 21, 2009