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ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

Shenzhen China Bicycle Company (Holdings) Limited

ANNUAL REPORT 2015

April 2016

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Section I. Important Notice, Contents and Paraphrase

Board of Directors, Supervisory Committee, all directors, supervisors and senior

executives of Shenzhen China Bicycle Company (Holdings) Limited (hereinafter

referred to as the Company) hereby confirm that there are no any fictitious

statements, misleading statements, or important omissions carried in this report,

and shall take all responsibilities, individual and/or joint, for the reality,

accuracy and completion of the whole contents.

Li Hai, Principal of the Company, Sun Longlong, person in charge of accounting

works and Zhong Xiaojin, person in charge of accounting organ (accounting

principal) hereby confirm that the Financial Report of 2015 Annual Report is

authentic, accurate and complete.

Except the following director, other directors are attended the Board Meeting for

Quarterly Report deliberation in person.

Name of director not Title of director not

Reasons for absent Trustee

attended in person attended in person

Kong Na Director Due to work Yang Fenbo

Concerning the unqualified auditor¡¯s report with explanatory paragraph issued

by Ruihua Certified Public Accountant (LLP) for the financial report 2015 of

the Company, board of the directors and supervisory committee are

well-explained for relevant events, investors are advice to pay attention on

reading.

The Company has no plan of cash bonus, dividends and capitalizing of reserves

either.

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Contents

Section I Important Notice, Contents and Paraphrase ................................................................. 2

Section II Company Profile and Main Finnaical Indexes ............................................................. 9

Section III Summary of Company Business .................................................................................. 9

Section IV Discussion and Analysis by the Management Team ................................................. 11

Section V Important Events .......................................................................................................... 27

Section VI Changes in shares and particular about shareholders............................................... 34

Section VII Preferred Stock¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­.47

Section VIII Particulars about Directors, Supervisors,Senior Executives and Employees ...... 35

Section IX Corporate Governance ................................................................................................. 56

Section X Financial Report ............................................................................................................. 51

Section XI Documents available for reference .............................................................................. 51

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Paraphrase

Items Refers to Contents

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ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

Section II Company Profile and Main Finnaical Indexes

I. Company information

Short form of the stock Zhonghua ¨C A, Zhonghua -B Stock code 000017¡¢200017

Stock exchange for listing Shenzhen Stock Exchange

Name of the Company (in

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾

Chinese)

Short form of the Company

ÉîÖлª A¡¢B

(in Chinese)

Foreign name of the Company

China Bicycle Company (Holdings) Limited

(if applicable)

Short form of foreign name of

CBC

the Company (if applicable)

Legal representative Li Hai

Registrations add. No. 3008, Buxin Rd., Shenzhen

Code for registrations add 518020

Offices add. Room 1201, Wantong Building, No.3002, Sungang East Road, Shenzhen

Codes for office add. 518030

Company¡¯s Internet Web Site www.cbc.com.cn

E-mail dmc@szcbc.com

II. Person/Way to contact

Secretary of the Board Rep. of security affairs

Name Sun Longlong Cui Hongxia

Room 1201, Wantong Building, No.3002, Room 1201, Wantong Building, No.3002,

Contact add.

Sungang East Road, Shenzhen Sungang East Road, Shenzhen

Tel. 0755-25516998,28181666 0755-25516998,28181666

Fax. 0755-28181009 0755-28181009

E-mail dmc@szcbc.com dmc@szcbc.com

III. Information disclosure and preparation place

Newspaper appointed for information disclosure Securities Times; Hong Kong Commercial Daily

Website for annual report publish appointed by CSRC Juchao Website (www.cninfo.com.cn)

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Preparation place for annual report Room 1201, Wantong Building, No.3002, Sungang East Road, Shenzhen

IV. Registration changes of the Company

Organization code 440361883045-2

Changes of main business since listing (if

No change

applicable)

1. In March 1992, the Stock of the Company was listed in Shenzhen Stock Exchange,

and 23.28% equity of the Company was held by Shenzhen Lionda Holding Co., Ltd.

and Hong Kong Dahuan Bicycle Co., Ltd respectively. 2. In March 2002, legal shares

13.58% A-stock of the Company was obtained by China Huarong Asset Management

Co., Ltd. through court auction, and became the first majority shareholder of the

Company. 3. On 13 November 2006, the 65,098,412 legal shears of CBC held by

Huarong Company was acquired by Shenzhen Guosheng Energy Investment

Development Co., Ltd. via the ¡°Equity Transfer Agreement¡± signed, and first majority

Previous changes for controlling

of the Company comes to Guosheng Energy. Guosheng Energy is the wholly-owned

shareholders (if applicable)

subsidiary of National Investment, actual controller was Zhang Yanfeng. 4. In January

2011, controlling shareholder of Shenzhen Guosheng Energy Investment Development

Co., Ltd.¡ªShenzhen National Investment Development Co., Ltd. entered into equity

transfer agreement with Mr. Ji Hanfei, 100% equity of Guosheng Energy was transfer

to Mr. Ji Hanfei with price of 70 million. Shenzhen Guocheng Energy Investment

Development Co., Ltd. Shenzhen Guosheng Energy Investment Development Co., Ltd.

holds 63,508,747 A-stock of the Company with 11.52% in total share capital of the

Company.

V. Other relevant information

CPA engaged by the Company

Name of CPA Ruihua Certified Public Accountant (LLP)

Offices add. for CPA 4/F, Tower 2, No.16 XiSihuanZhongLu, Haidian District, Beijing, P.R.C

Signing Accountants Li Zehao, Ren Weixing

Sponsor engaged by the Company for performing continuous supervision duties in reporting period

¡õ Applicable ¡Ì Not applicable

Financial consultant engaged by the Company for performing continuous supervision duties in reporting period

¡õ Applicable ¡Ì Not applicable

VI. Main accounting data and financial indexes

Whether it has retroactive adjustment or re-statement on previous accounting data for accounting policy changed and accounting

error correction or not

¡õ Yes ¡Ì No

2015 2014 Changes over last year 2013

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Operating income (RMB) 170,990,030.10 212,070,585.77 -19.37% 271,111,736.07

Net profit attributable to

shareholders of the listed -138,355.58 4,885,678.56 -102.83% 1,575,223,894.89

company(RMB)

Net profit attributable to

shareholders of the listed company

-416,262.14 -6,073,439.70 -87.06% 4,360,002.01

after deducting non-recurring gains

and losses(RMB)

Net cash flow arising from

-3,029,023.82 3,921,048.18 -177.25% -28,210,167.86

operating activities(RMB)

Basic earnings per share

-0.0003 0.0089 -103.37% 2.8570

(RMB/Share)

Diluted earnings per share

-0.0003 0.0089 -103.37% 2.8570

(RMB/Share)

Return on Equity -1.17% 51.72% -52.89% 0.00%

Changes over end of

End of 2015 End of 2014 End of 2013

last year

Total assets (RMB) 45,869,094.97 51,489,647.55 -10.92% 151,511,429.85

Net assets attributable to

shareholder of listed company 11,765,046.11 11,903,347.67 -1.16% 7,003,335.40

(RMB)

VII. Difference of the accounting data under accounting rules in and out of China

1. Difference of the net profit and net assets disclosed in financial report, under both IAS (International

Accounting Standards) and Chinese GAAP (Generally Accepted Accounting Principles)

¡õ Applicable ¡Ì Not applicable

The Company had no difference of the net profit or net assets disclosed in financial report, under either IAS (International

Accounting Standards) or Chinese GAAP (Generally Accepted Accounting Principles) in the period.

2. Difference of the net profit and net assets disclosed in financial report, under both foreign accounting

rules and Chinese GAAP (Generally Accepted Accounting Principles)

¡õ Applicable ¡Ì Not applicable

The Company had no difference of the net profit or net assets disclosed in financial report, under either foreign accounting rules or

Chinese GAAP (Generally Accepted Accounting Principles) in the period.

VIII. Quarterly main financial index

In RMB

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First quarter Second quarter Third quarter Fourth quarter

Operating income 22,326,412.71 54,210,387.97 62,791,436.14 31,661,793.28

Net profit attributable to

272,334.51 143,838.35 121,934.11 -676,462.55

shareholders of the listed company

Net profit attributable to

shareholders of the listed company

228,302.51 154,846.35 63,666.61 -863,077.61

after deducting non-recurring gains

and losses

Net cash flow arising from

-2,814,082.91 -2,804,170.44 5,540,017.64 -2,950,788.11

operating activities

Whether there are significant differences between the above-mentioned financial index or its total number and the relevant financial

index disclosed in the company¡¯s quarterly report and semi-annual report

¡õYes ¡Ì No

IX. Items and amounts of extraordinary profit (gains)/loss

¡ÌApplicable ¡õ Not applicable

In RMB

Item 2015 2014 2013 Note

Gains/losses from the disposal of

non-current asset (including the write-off 33,851.46 1,611,690,513.84

that accrued for impairment of assets)

Gains/losses from debt reorganization 49,342,739.18

Reorganization expenses, such as

expenditure for allocation of employees and -70,732,704.23

integration fee

Other non-operating income and expenditure

369,201.08 27,177.40

except for the aforementioned items

Other loss/profit qualified definition of

14,622,462.77 72,934,048.27

extraordinary profit and loss

Less: Impact on income tax 92,300.27 3,664,078.56 92,393,298.62

Impact on minority shareholders¡¯

-1,005.75 33,117.41 4,582.96

equity (post-tax)

Total 277,906.56 10,959,118.26 1,570,863,892.88 --

Concerning the extraordinary profit (gain)/loss defined by Q&A Announcement No.1 on Information Disclosure for Companies

Offering Their Securities to the Public --- Extraordinary Profit/loss, and the items defined as recurring profit (gain)/loss according to

the lists of extraordinary profit (gain)/loss in Q&A Announcement No.1 on Information Disclosure for Companies Offering Their

Securities to the Public --- Extraordinary Profit/loss, explain reasons

¡õ Applicable ¡Ì Not applicable

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In reporting period, the Company has no particular about items defined as recurring profit (gain)/loss according to the lists of

extraordinary profit (gain)/loss in Q&A Announcement No.1 on Information Disclosure for Companies Offering Their Securities to

the Public --- Extraordinary Profit/loss

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ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

Section III Summary of Company Business

I. Main businesses of the company in the reporting period

The company is engaged in the main business for the bicycle business, including production, assembly, procurement, sales of bicycles

and electric bicycles, etc.

II. Major changes in main assets

1. Major changes in main assets

Major assets Note of major changes

Equity assets No major change

Fixed assets No major change

Intangible assets No major change

Construction in progress No major change

2. Main overseas assets

¡õ Applicable ¡Ì Not applicable

III. Core Competitiveness Analysis

Despite the fierce market competition in the bicycle industry as a conventional industry, the increased awareness of

green commuting, leisure and exercises as a result of the development of China¡¯s social economy and the change of

people¡¯s living concept creates structural development opportunity for the bicycle industry. The Company will

continue to do better in various aspects of operation such as market development, product development, quality

management and sales of e-commerce so as to maintain and improve the Company¡¯s ability to continue as a going

concern before the restructuring. On the other side, the Company has set out the condition of introduction of

investors in the restructuring plan with expectation to restore its ability to continue as a going concern and its

continuous profitability through the restructuring of assets.

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Section IV Discussion and Analysis by the Management Team

1. Introduction

Over the past year, the international environment has been complex and severe, and the international financial

market turmoil has intensified, which caused direct impact and influence on the economy of our country. China

has been facing multiple difficulties and severe challenges, deep-seated problems have been prominent, pressures

on economic downturn have increased, abnormal fluctuations of stock market and foreign currency market and

other various risks and challenges in financial field have exacerbated the influence on traditional manufacturing

industry and social consumption structure demand. Under the leadership of the central government and

governments at all levels, people across the country have strengthened their confidence, overcome difficulties,

forged ahead, achieved steady economic and social development, and continuously made new achievements.

As a member in traditional manufacturing field, bicycle industry has continued the predicament of increases in

labor costs, manufacturing costs, capital costs, and material costs. The low industry entry threshold and numerous

manufacturers has led to fierce market competition and intensified industry reshuffle. With China's social and

economic development and transformation of people's life concept, green travel, leisure and exercise awareness

enjoy popular supports, bicycle industry has structural development opportunities. In 2015, the company has

focused on the following work in business management: firstly, make every endeavor to maintain the company's

existing traditional model of business operation under the harsh business environment of traditional

manufacturing at home and abroad, and achieving overall stable of business. Secondly, comprehensively start the

e-commerce business model based on the traditional model, combine with the actual situation of the company,

learn from the successes and failures of social e-commerce suppliers, and carry out the e-commerce business

development ideas of e-commerce transformation, internal introduction and external association, and controllable

costs in accordance with the principles of efficiency and effectiveness. By the end of 2015, the e-commerce

development of the company¡¯s bicycle business has completed the basic layout, Emmelle flagship stores have

been gradually on the line of e-commerce platforms such as Tmall, Jingdong, Suning, Gome, official websites,

official Wechat, mutual benefit alliance, etc., and have achieved positive results, sustainable development ideas

of e-commerce business have been verified and implemented. Thirdly, continue to increase efforts to promote

research and development of medium-end and high-end products, the positively apply various new technologies,

closely track the cutting-edge innovative technology and exploration application like super-capacitor smart helmet,

establish Qinghu base, complete the recovery of the production permit of electric car and ISO9000 quality system

certification, and improve and extend the product lines. Fourthly, improve the supporting and cooperating level of

background departments to front desk business by strengthening the background management and office

automation. Fifthly, actively carry out the operation business, and seriously cooperate with the administrators to

carry out the unaccomplished matters related to the reorganization proceedings.

In the context of stagnant domestic traditional manufacturing industry, the company accelerates the transformation

of its own professionalization, informatization, and manufacturing miniaturization, intensifies the adjustment of

product structure, strengthens the quality management, enhances the costs management and control, makes efforts

to improve the adaptability of traditional businesses to economy new normal and the market competitiveness.

Through various efforts, in 2015, the company has achieved operating income of 170,990,000 yuan, net profits of

-105,900 yuan, thereinto, the net profits attributable to shareholders of listed companies are -138,400 yuan.

Statement of changes in the main financial indicators of the reporting period:

The period The same period of last Increase/decrease y-o-y Reason

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period

Operation income

170,990,030.10 212,070,585.77 -19.37% Sales decline

Operation cost

159,399,271.88 198,964,665.65 -19.89% Sales decline

Sales expenses

6,515,605.90 5,340,463.40 22.00% Increase in promotional

expenses

Administration expenses

5,391,566.14 14,108,887.56 -61.79% Paid the 2014 operating

expenses reserved by

reorganization plan in last

year

Financial expenses -675,198.21 -173,453.60 289.27% Increase in interest

income

Income tax expense 94,609.13 2,145,860.08 -95.59% Decrease in total profits

Net cash flow from

-3,029,023.82 3,921,048.18 -177.25% Received the 2014

operation activities

working capital

appropriated by the

custodian at the same

period of last year

Net cash flow from

-382,777.30 -591,352.99 -35.27% Fixed-asset investment

investment activities

has reduced in current

year

-3,411,801.12 3,329,695.19 -202.47% Received the 2014

working capital

Net increased amount of

appropriated by the

cash and cash equivalent

custodian at the same

period of last year

II. Main business analysis

1. Introduction

See the ¡°I-Introduction¡± in ¡°Discussion and Analysis by the Management Team¡±

2. Revenue and cost

(1) Constitute of operation revenue

In RMB

2015 2014

Increase/decrease

Ratio in operation Ratio in operation

Amount Amount y-o-y

revenue revenue

Total of operation 170,990,030.10 100% 212,070,585.77 100% -19.37%

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revenue

According to industries

Sales of bicycles and

accessories and 170,990,030.10 100.00% 212,070,585.77 100.00% -19.37%

fittings

According to products

Sales of bicycles and

accessories and 170,990,030.10 100.00% 212,070,585.77 100.00% -19.37%

fittings

According to region

Domestic 170,990,030.10 100.00% 212,070,585.77 100.00% -19.37%

(2) About the industries, products, or regions accounting for over 10% of the company¡¯s operating income

or operating profit

¡ÌApplicable ¡õ Not applicable

In RMB

Increase/decrease Increase/decrease Increase/decrease

Operating

Operating cost Gross profit ratio of operating of operating cost of gross profit

revenue

revenue y-o-y y-o-y ratio y-o-y

According to industries

Sales of bicycles

and accessories 170,990,030.10 159,399,271.88 6.78% -19.37% -19.89% 0.60%

and fittings

According to products

Sales of bicycles

and accessories 170,990,030.10 159,399,271.88 6.78% -19.37% -19.89% 0.60%

and fittings

According to region

Domestic 170,990,030.10 159,399,271.88 6.78% -19.37% -19.89% 0.60%

Under circumstances of adjustment in reporting period for statistic scope of main business data, adjusted main business based on

latest one year¡¯s scope of period-end

¡õ Applicable ¡Ì Not applicable

(3) Income from physical sales larger than income from labors

¡Ì Yes ¡õ No

Increase/decrease

Industries Item Unit 2015 2014

y-o-y

Sales volume In 10 thousand 21.19 27.69 -23.47%

Bicycles Output In 10 thousand 20.99 27.89 -24.74%

Storage In 10 thousand 0.6 0.8 -25.00%

Reasons for y-o-y relevant data with over 30% changes

¡õ Applicable ¡Ì Not applicable

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(4) Fulfillment of the company¡¯s signed significant sales contracts up to this reporting period

¡õ Applicable ¡Ì Not applicable

(5) Constitute of operation cost

Classification of industries

Classification of industries

In RMB

2015 2014

Increase/decrease

Industries Item Ratio in operation Ratio in operation

Amount Amount y-o-y

cost cost

Sales of bicycles

and accessories 159,399,271.88 100.00% 198,964,665.65 100.00% -19.89%

and fittings

Note

(6) Whether the changes in the scope of consolidation in Reporting Period

¡õYes ¡Ì¡õ No

(7) Major changes or adjustment in business, product or service of the Company in Reporting Period

¡õ Applicable ¡Ì Not applicable

(8) Major sales and main suppliers

Major sales client of the Company

Total top five clients in sales (RMB) 155,272,692.64

Proportion in total annual sales volume for top five clients 90.81%

Information of top five clients of the Company

Serial Name Sales (RMB) Proportion in total annual sales

1 Client 1 68,601,169.62 40.12%

2 Client 2 49,153,593.66 28.75%

3 Client 3 25,621,079.53 14.98%

4 Client 4 7,920,554.04 4.63%

5 Client 5 3,976,295.79 2.33%

Total -- 155,272,692.64 90.81%

Other situation of main clients

¡õ Applicable ¡Ì Not applicable

Main suppliers of the Company

Total purchase amount from top five suppliers (RMB) 144,625,287.99

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ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

Proportion in total annual purchase amount for top five

90.73%

suppliers

nformation of top five suppliers of the Company

Serial Name Purchase (RMB) Proportion in total annual puechase

1 Supplier 1 70,084,208.51 43.97%

2 Supplier 2 36,476,205.13 22.88%

3 Supplier 3 14,219,649.57 8.92%

4 Supplier 4 12,883,407.69 8.08%

5 Supplier 5 10,961,817.09 6.88%

Total -- 144,625,287.99 90.73%

Other notes of main suppliers

¡õ Applicable ¡Ì Not applicable

3. Expenses

In RMB

Increase/decrease

2015 2014 Note of major changes

y-o-y

Sales expense 6,515,605.90 5,340,463.40 22.00%

Paid the 2014 operating expenses

Management expense 5,391,566.14 14,108,887.56 -61.79% reserved by reorganization plan in last

year

Financial expense -675,198.21 -173,453.60 289.27% Increase in interest income

4. R&D investment

¡õ Applicable ¡Ì Not applicable

5. Cash flow

In RMB

Item 2015 2014 Y-o-y changes

Subtotal of cash in-flow from

100,041,540.65 223,967,528.32 -55.33%

operation activity

Subtotal of cash out-flow from

103,070,564.47 220,046,480.14 -53.16%

operation activity

Net cash flow from operation

-3,029,023.82 3,921,048.18 -177.25%

activity

Subtotal of cash in-flow from 100,500.00 -100.00%

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investment activity

Subtotal of cash out-flow from

382,777.30 691,852.99 -44.67%

investment activity

Net cash flow from investment

-382,777.30 -591,352.99 -35.27%

activity

Net increased amount of cash

-3,411,801.12 3,329,695.19 -202.47%

and cash equivalent

Main reasons for y-o-y major changes in aspect of relevant data

¡ÌApplicable ¡õ Not applicable

1. In 2015, the cash inflow from operating activities has significantly declined compared with 2014, mainly

because the 2013 corporate income tax of 92,388,200 yuan appropriated by the custodian and the 2014 operating

expenses reserved by reorganization plan have been received in 2014.

2. In 2015, cash outflow from operating activities has significantly declined compared with 2014, mainly because

the company has paid the 2013 corporate income tax and the 2014 operating expenses reserved by reorganization

plan in 2014.

Reasons of major difference between the cash flow of operation activity in report period and net profit of the Company

¡ÌApplicable ¡õNot applicable

Mainly to pay accounts payable etc. operating payable items

III. Analysis of the non-main business

¡ÌApplicable ¡õNot applicable

In RMB

Amount Ratio in total profit Note Whether be sustainable

Asset impairment 308,237.93 -2,723.04% Provision for bad debts No

Restructuring case to be

Non-operating

4,210,594.98 -37,197.25% disposed of asset No

income

management income

Restructuring case to be

Non-operating

3,841,393.90 -33,935.65% disposed of asset No

expense

management income

IV. Assets and liability

1. Major changes of assets composition

In RMB

End of 2015 End of 2014 Ratio

Notes of major changes

Amount Ratio in total Amount Ratio in total changes

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assets assets

Monetary fund 26,752,065.66 58.32% 30,163,866.78 58.58% -0.26%

Account

9,195,296.32 20.05% 6,790,982.50 13.19% 6.86%

receivable

Inventory 4,057,247.68 8.85% 6,171,307.53 11.99% -3.14%

Fix assets 1,007,906.43 2.20% 773,961.84 1.50% 0.70%

Note receivable 2,200,000.00 4.27% -4.27%

Advance payment 397,833.20 0.87% 348,277.01 0.68% 0.19%

Other receivables 395,523.78 0.86% 511,254.81 0.99% -0.13%

Intangible assets 3,765,000.00 8.21% 4,518,000.00 8.77% -0.56%

Deferred tax

89,066.31 0.19% 11,997.08 0.02% 0.17%

assets

Other current

209,155.59 0.46% 0.46%

assets

2. Assets and liability measured by fair value

¡õ Applicable ¡Ì Not applicable

V. Investment

1. Overall situation

¡õ Applicable ¡Ì Not applicable

2. The major equity investment obtained in the reporting period

¡õ Applicable ¡Ì Not applicable

3. The major non-equity investment doing in the reporting period

¡õ Applicable ¡Ì Not applicable

4. Financial assets investment

(1) Securities investment

¡õ Applicable ¡Ì Not applicable

The company had no securities investment in the reporting period.

(2) Derivative investment

¡õ Applicable ¡Ì Not applicable

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The Company has no derivatives investment in the Period

5. Application of raised proceeds

¡õ Applicable ¡Ì Not applicable

The company had no application of raised proceeds in the reporting period.

VI. Sales of major assets and equity

1. Sales of major assets

¡õ Applicable ¡Ì Not applicable

The Company had no sales of major assets in the reporting period.

2. Sales of major equity

¡õ Applicable ¡Ì Not applicable

VII. Analysis of main holding company and stock-jointly companies

¡ÌApplicable ¡õ Not applicable

Particular about main subsidiaries and stock-jointly companies net profit over 10%

In RMB

Company Main Register Operating Operating

Type Total assets Net Assets Net profit

name business capital revenue profit

Shenzhen

Sales of

Emmelle 39,689,215.8 170,989,389.

Subsidiary bicycles and 2000000 5,417,284.02 188,220.65 108,089.35

Industry Co., 1 07

accessories

Ltd.

Particular about subsidiaries obtained or disposed in report period

¡õ Applicable ¡Ì Not applicable

Notes of holding and shareholding companies

The Company holds 70 percent equity of the Shenzhen Emmelle Industry Co., Ltd., the balance of minority equity at year-end

amounting to 1,764,393.82 Yuan.

VIII. Structured vehicle controlled by the Company

¡õ Applicable ¡Ì Not applicable

IX. Future Development Prospects

1. Development trend of the industry the Company operates in and market competition pattern it deals with:

The Company has been engaging in the electric bicycle business since 2002. After going through the rapid

development in the past few years, the electric bicycle industry has witnessed obvious stagnation since 2007. The

short supply of batteries as the main component of electrical machine caused by the enhanced management of rare

18

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

earth industry and battery industry in 2011 has constrained, to some extent, the manufacturing of electric bicycle

industry. The new standard of electric bicycle industry and the uncertainty of its launch time have also caused a

negative impact on the selling of electric bicycles. Meanwhile, the electric bicycle industry as a conventional

manufacturing field is expected to remain in a hard situation with rising labor cost, manufacturing cost, financing

cost and parts. Due to the low entry threshold and numerous manufacturers, the market competition is extremely

fierce. However, with the development of China¡¯s social economy and the change of people¡¯s living concept, the

increased awareness of green commuting, leisure and exercises creates structural development opportunity for

bicycle industry.

2. Future development opportunity and new yearly business plan of the Company:

The fierce market competition creates structural development opportunity for the industry. At the end of 2013, the

Company completed the implementation of its restructuring plan and concluded its bankruptcy procedure, thereby

improving the legal environment its business faces with. The business plan of the Company for 2016 is:

(1) To continuously promote restructuring while in active cooperation with shareholders and the Board.

(2) To reform and perfect the internal operating mechanism; distributed the annual targets to every marketing

companies and every regional manager, evaluation based on manager responsibility system, following up month

by month and rolling evaluation

(3) Make great efforts to maintain the traditional business, closely watch the first-tier big customers, focus on

developing the second-tier customers, actively promote the extension of its distribution network terminal building,

further expand new markets, and support new customers.

(4) Create conditions in terms of human, finance, and materials, etc., continue to build a comprehensive

e-commerce business model and promote the information management based on the e-commerce work of last year,

further train the e-commerce team, focus on improving the marketing capacity and brand publicity coverage of

Emmelle flagship stores at various e-commerce platforms, improve the company's official shopping mall website

and Wechat shopping mall, expand the brand influence, drive the fast growth of network marketing, and improve

the enterprises¡¯ market competiveness and profitability.

(5) Improve the supporting work of offline business, bring the traditional network dealers, physical stores and

OEM plants into the offline supporting system of e-commerce business by reforming the mechanisms and sharing

the benefits, utilize Qinghu base to create effective support services of small manufacturing for market demand

and e-commerce business, and achieve win-win and common development.

(6) Increase the follow-up work to group purchase orders through the cooperation with government procurement

information center.

(7) Combine the e-commerce means with the traditional business means for brand and product publicity, utilize

the clubs to organize some special competitions and cycling races around Qinghai Lake and Hainan Island to

publicize and promote the brand.

(8) Adjust rebate policy, take the month-by-month activities, assessment and rebate to promote sales.

(9) To enhance the development of medium-to-high end bikes and lithium batteries electric bikes, and enhance the

development and promotion of medium-to-high end auxiliary parts.

(10) To strictly implement the entry and exit mechanism of OEM factories and suppliers and perform strict quality

management and control, and carry out staff supplement and training as planned.

(11) Strengthen the background management and office automation, and improve the support degree of

background departments to front desk business.

19

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

3. Risk factors adverse to the Company¡¯s development:

The tough international economic situation has a deep impact on the domestic consumption market where

significant amount of export-oriented manufacturing enterprises has shifted. The bicycle and electric bicycle

market is facing a complex environment that price war is a major competition means. Since the domestic economy

is at the structural adjustment stage, coupled with a difficult situation of continuously rising labor cost,

manufacturing cost, financing cost and parts the bicycle industry as a conventional manufacturing field recorded a

decline in the market turnover. Due to the low entry threshold and numerous manufacturers, the competition in the

market is extremely fierce.

To solve the above problems, the Company will on one hand strive to expand the main business while ensuring its

sustainable and stable development, especially the manufacturing and selling of electric bicycles and

medium-to-high end bicycles, and will on the other hand actively promote the restructuring.

X. Reception of research, communication and interview

1. In the report period, reception of research, communication and interview

¡ÌApplicable ¡õ Not applicable

Time Way Type Basic situation index of investigation

Consulting company restructuring

2015 Telephone communication Individual

problem

Reception (times) 8

Number of hospitality 0

Number of individual reception 8

Number of other reception 0

Disclosed, released or let out major undisclosed

No

information

20

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

Section V. Iimportant Events

I. Profit distribution plan of common stock and capitalizing of common reserves plan

Formulation, Implementation and Adjustment of common stock Profit Distribution Policy Especially Cash Dividend policy during

the Reporting Period

¡õ Applicable ¡Ì Not applicable

Profit distribution plan (pre-plan) of common stock and capitalizing of common reserves plan (pre-plan) in latest three years

(including the reporting period)

Nil

Cash dividend of common stock in latest three years (including the reporting period)

In RMB

Net profit Ratio in net profit

attributable to attributable to

common stock common stock

Year for bonus Amount for cash shareholders of shareholders of Amount for cash Proportion for cash

shares bonus (tax included) listed company in listed company bonus by other ways bonus by other ways

consolidation contained in

statement for bonus consolidation

year statement

2015 0.00 -138,355.58 0.00 0.00%

2014 0.00 4,885,678.56 0.00 0.00%

2013 0.00 1,575,223,894.89 0.00 0.00%

The Company gains profits in reporting period and the retained profit of common stock shareholders provided by parent company is

positive but no plan of cash dividend proposed of common stock

¡õ Applicable ¡Ì Not applicable

II. Profit distribution plan and capitalizing of common reserves plan for the Period

¡õ Applicable ¡Ì Not applicable

The Company has no plans of cash dividend distributed, no bonus shares and has no share converted from capital reserve either for

the year .

III. Implementation of commitment

1. Commitments that the company, shareholders, actual controller, offeror, directors, supervisors, senior

management or other related parties have fulfilled during the reporting period and have not yet fulfilled by

the end of reporting period

¡õ Applicable ¡Ì Not applicable

In the reporting period, the Company had no commitment that the company, shareholders, actual controller, offeror, directors,

supervisors, senior management or other related parties have fulfilled during the reporting period and have not yet fulfilled by the end

21

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

of reporting period.

2. Concerning assts or project of the Company, which has profit forecast, and reporting period still in

forecasting period, explain reasons of reaching the original profit forecast

¡õ Applicable ¡Ì Not applicable

IV. Non-operational fund occupation from controlling shareholders and its related party

¡õ Applicable ¡Ì Not applicable

No non-operational fund occupation from controlling shareholders and its related party in period.

V. Explanation from Board of Directors, Supervisory Committee and Independent Directors

(if applicable) for ¡°Qualified Opinion¡± that issued by CPA

¡Ì Applicable ¡õ Not applicable

th

On 11 , May 2012, the largest shareholder and biggest creditor of the Company, Shenzhen Guosheng Energy Investment and

Development Co., Ltd. applied to Shenzhen Municipal Intermediate People's Court for reforming the Company as the Company

couldn¡¯t pay off the matured debts and was seriously insolvent. On 12th, Oct., 2012, Shenzhen Municipal Intermediate People's Court

ruled to accept the application proposed by Guosheng Energy according to (2012) Shenzhen Intermediate Court Po Zi No. 30 civil

ruling. In late October, 2012, Shenzhen Municipal Intermediate People's Court ruled to reform the Company since 25th, Oct., 2012

according to (2012) Shenzhen Intermediate Court Po Zi No. 30-1 civil ruling, appointed King & Wood (Shenzhen) Mallesons and

Shenzhen ZhengYuan Liquidation Affairs Co., Ltd. as the custodians of the Company. At the same time, Shenzhen Municipal

Intermediate People's Court made (2012) Shenzhen Intermediate Court Po Zi No. 30-1 written decision, and approved the Company

to manage property and business affairs by itself under the supervision of custodians according to the law. On 5 November 2013, the

Shenzhen Intermediate People¡¯s Court (2012) Shen Zhong Fa Po Zi No. 30-6 Civil Ruling Paper judged that approved the

reorganization plan of the Company. On 27 December 2013, the Civil Ruling Paper Shenzhen Intermediate People¡¯s Court (2012)

Shen Zhong Fa Po Zi No. 30-10 ruled that the reorganization plan of CBC was completed and bankruptcy procedures of CBC closed

down.

The Company has solved the debt problem by reforming, realized the net assets with positive value, the main business of bicycle is

able to be maintained and realizes the stable development. The Company has set up the conditions for introducing the recombination

party in the reforming plan, and expects to restore the abilities of sustainable operation and sustained profitability by reorganization.

The conditions of introducing the recombination party includes: the assessed value of net assets should be no less than 2 billion Yuan,

the net assets in the same year for implementing the major reorganization should be no less than 200 million Yuan. The Company

doesn¡¯t have the recombination party at the moment. The Company will continue to carry out vary related works actively and

promote the reorganization work with all efforts.

VI. Particulars about the changes in aspect of accounting policy, estimates and calculation

method compared with the financial report of last year

¡õ Applicable ¡Ì Not applicable

No particulars about the changes in aspect of accounting policy, estimates or calculation method in Period.

VII. Major accounting errors within reporting period that needs retrospective restatement

¡õ Applicable ¡Ì Not applicable

No major accounting errors within reporting period that needs retrospective restatement for the Company in the period.

22

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

VIII. Compare with last year¡¯s financial report; explain changes in consolidation statement¡¯s

scope

¡õ Applicable ¡Ì Not applicable

No changes in consolidation statement¡¯s scope for the Company in the reporting.

IX. Appointment and non-reappointment (dismissal) of CPA

Accounting firm appointed

Name of domestic accounting firm Ruihua Certified Public Accountant (LLP)

Remuneration for domestic accounting firm (in 10

45

thousand Yuan)

Continuous life of auditing service for domestic

11

accounting firm

Name of domestic CPA Li Zehao, Ren Weixing

Re-appointed accounting firms in this period

¡õYes ¡ÌNo

Appointment of internal control auditing accounting firm, financial consultant or sponsor

¡ÌApplicable ¡õ Not applicable

In 2015, the Company appointed Ruihua Certified Public Accountant (LLP) as the auditing of the internal control, and auditing fee

RMB 150,000.

X. Particular about suspended and delisting after annual report disclosed

¡õ Applicable ¡Ì Not applicable

XI. Bankruptcy reorganization

¡õ Applicable ¡Ì Not applicable

No bankruptcy reorganization for the Company in reporting period

XII. Significant lawsuits and arbitrations of the Company

¡õApplicable ¡ÌNot applicable

No significant lawsuits and arbitrations occurred in the reporting period

XIII. Penalty and rectification

¡õ Applicable ¡Ì Not applicable

No penalty and rectification for the Company in reporting period.

23

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

XIV. Integrity of the company and its controlling shareholders and actual controllers

¡õ Applicable ¡Ì Not applicable

XV. Implementation of the company¡¯s stock incentive plan, employee stock ownership plan or

other employee incentives

¡õ Applicable ¡Ì Not applicable

The Company had no implementation of the company¡¯s stock incentive plan, employee stock ownership plan or other employee

incentives in the reporting period.

XVI. Major related transaction

1. Related transaction with routine operation concerned

¡õ Applicable ¡Ì Not applicable

No related transaction with daily operation concerned for the Company in reporting period

2. Related transactions by assets acquisition and sold

¡õ Applicable ¡Ì Not applicable

No related transactions by assets acquisition and sold for the Company in reporting period

3. Main related transactions of mutual investment outside

¡õ Applicable ¡Ì Not applicable

No main related transactions of mutual investment outside for the Company in reporting period

4. Contact of related credit and debt

¡Ì Applicable ¡õ Not applicable

Whether exist non-operating contact of related credit and debt or not

¡ÌYes ¡õNo

Claim receivable from related party

Whether Current

Balance at Current Current

has newly Balance at

period-begi recovery interest

Related Relationshi non-busines added period-end

Causes n (10 (10 Interest rate (10

party p s capital (10 (10 thousand

thousand thousand thousand

occupying thousand Yuan)

Yuan) Yuan) Yuan)

or not Yuan)

Influence on operation

result and financial

N/A

statue of the Company

from related credit

Debts payable to related party

Balance at Current Current Current Balance at

period-begin newly added recovery interest period-end

Related party Relationship Causes Interest rate

(10 thousand (10 thousand (10 thousand (10 thousand (10 thousand

Yuan) Yuan) Yuan) Yuan) Yuan)

24

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

Shenzhen

Guosheng

Subsidiary

Energy Controlling

Emmelle 650 650

Investment shareholder

loan

Development

Co., Ltd.

Influence on operation result

and financial statue of the No influence

Company from related debts

5. Other related transactions

¡õ Applicable ¡Ì Not applicable

The company had no other significant related transactions in reporting period.

XVII. Significant contract and implementations

1. Trusteeship, contract and leasing

(1) Trusteeship

¡õ Applicable ¡Ì Not applicable

No trusteeship for the Company in reporting period

(2) Contract

¡õ Applicable ¡Ì Not applicable

No contract for the Company in reporting period

(3) Leasing

¡õ Applicable ¡Ì Not applicable

No leasing for the Company in reporting period

2. Major guarantees

¡õ Applicable ¡Ì Not applicable

No guarantee for the Company in reporting period

3. Entrust others to cash asset management

(1) Trust financing

¡õ Applicable ¡Ì Not applicable

No trust financing for the Company in reporting period

(2) Entrusted loans

¡õ Applicable ¡Ì Not applicable

The company had no entrusted loans in the reporting period.

4. Other material contracts

25

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

¡õ Applicable ¡Ì Not applicable

No other material contracts for the Company in reporting period

XVIII. Explanation on other significant events

¡õ Applicable ¡Ì Not applicable

No explanation on other significant events for the Company in reporting period.

XIX. Significant event of subsidiary of the Company

¡õ Applicable ¡Ì Not applicable

XX. Social responsibility

¡õ Applicable ¡Ì Not applicable

XXI. Issuance of corporate bonds

Whether the company has corporate bonds that have been publicly issued and listed on the stock exchange, and not yet due or due but

not fully cashed on the approval date of annual report

No

26

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

Section VI. Changes in Shares and Particulars about Shareholders

I. Changes in Share Capital

1. Changes in Share Capital

In Share

Before the Change Increase/Decrease in the Change (+, -) After the Change

Capitaliza

New

Proportio Bonus tion of Proportio

Amount shares Others Subtotal Amount

n shares public n

issued

reserve

I. Restricted shares 6,207 0.00% 0 6,207 0.00%

1. State-owned shares 0 0.00% 0 0 0.00%

2. State-owned legal person¡¯s

0 0.00% 0 0 0.00%

shares

3. Other domestic shares 6,207 0.00% 0 6,207 0.00%

Including: Domestic legal

0 0.00% 0 0 0.00%

person¡¯s shares

Domestic natural person¡¯s

6,207 0.00% 0 6,207 0.00%

shares

4. Foreign shares 0 0.00% 0 0 0.00%

Including: Foreign legal

0 0.00% 0 0 0.00%

person¡¯s shares

Foreign natural person¡¯s

0 0.00% 0 0 0.00%

shares

551,341,7 551,341,7

II. Unrestricted shares 100.00% 0 100.00%

40 40

302,978,7 302,978,7

1. RMB Ordinary shares 54.95% 0 54.95%

58 58

2. Domestically listed foreign 248,362,9 248,362,9

45.05% 0 45.05%

shares 82 82

3. Overseas listed foreign

0 0.00% 0 0 0.00%

shares

4. Others 0 0.00% 0 0 0.00%

551,347,9 551,347,9

III. Total shares 100.00% 0 100.00%

47 47

Reasons for share changed

¡õ Applicable ¡Ì Not applicable

Approval of share changed

¡õ Applicable ¡Ì Not applicable

Ownership transfer of share changed

27

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

¡õ Applicable ¡Ì Not applicable

Influence on the basic EPS and diluted EPS as well as other financial indexes of net assets per share attributable to common

shareholders of Company in latest year and period

¡õ Applicable ¡Ì Not applicable

Other information necessary to disclose for the Company or need to disclosed under requirement from security regulators

¡õ Applicable ¡Ì Not applicable

2. Changes of restricted shares

¡õ Applicable ¡Ì Not applicable

II. Securities issuance and listing

1. Security offering (without preferred stock) in Reporting Period

¡õ Applicable ¡Ì Not applicable

2. Changes of total shares and shareholders structure as well as explanation on changes of assets and

liability structure

¡õ Applicable ¡Ì Not applicable

3. Existing internal staff shares

¡õ Applicable ¡Ì Not applicable

III. Particulars about shareholder and actual controller of the Company

1. Amount of shareholders of the Company and particulars about shares holding

In Share

Total preference

shareholders

Total preference

Total common with voting

Total common shareholders with

stock rights recovered

stock voting rights

shareholders at at end of last

shareholders in 49,038 52,931 recovered at end of 0 0

end of last month month before

reporting reporting period (if

before annual annual report

period-end applicable) (found

report disclosed disclosed (if

in note8)

applicable)

(found in note8)

Particulars about shares held above 5% by shareholders or top ten shareholders

Total Amount Amount Number of share pledged/frozen

Proportio Changes

Full name of Nature of n of sharehold of of

in report

Shareholders shareholder shares ers at restricted un-restrict State of share Amount

held period

the end of shares ed shares

28

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

report held held

period

Shenzhen

Guocheng Energy Domestic

63,508,74 63,508,74

Investment non-State-owned 11.52% 0 0

7 7

Development Co., legal person

Ltd.

UOB Koy Hian

Foreign legal 12,293,85 12,293,85

(Hongkong) Co., 2.23% 12293850 0

person 0 0

Ltd.

Specific account of

property Domestic

disposition for non-State-owned 1.53% 8,450,002 0 0 8,450,002

bankruptcy legal person

enterprise of CBC

Shenwan

Hongyuan

Foreign legal

Securities 1.15% 6,348,670 6348670 0 6,348,670

person

(Hongkong) Co.,

Ltd.

Guosen Securities

Foreign legal

(Hongkong) 0.99% 5,476,051 5476051 0 5,476,051

person

brokerage Co., Ltd.

Domestic nature

Zhu Xiaowei 0.73% 4,012,600 4012600 0 4,012,600

person

Domestic nature

Li Huili 0.71% 3,891,124 0 0 3,891,124

person

China Merchants

State-owned legal

Securities Hong 0.70% 3,870,972 3870972 0 3,870,972

person

Kong Co., Ltd.

Domestic nature

Xu Hongbo 0.57% 3,137,419 0 0 3,137,419

person

Domestic nature

Zong Bin 0.55% 3,056,400 3056400 0 3,056,400

person

Strategy investors or general

corporation comes top 10 shareholders

N/A

due to rights issue (if applicable) (see

note 3)

Li Huili, the spouse of actual controller Ji Hanfei, holding B-share of the Company on

Explanation on associated relationship

behalf of Shenzhen Guocheng Energy Investment Development Co., Ltd., beyond that, the

among the aforesaid shareholders

Company has no idea of whether other circulated shareholders belong to concerted action

29

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

persons ruled in the Administration Norms for Information Disclosure of Change on

Shareholding of Shareholders of Listed Companies.

Particular about top ten shareholders with un-restrict shares held

Type of shares

Shareholders¡¯ name Amount of un-restrict shares held at Period-end

Type Amount

Shenzhen Guocheng Energy RMB common

63,508,747 63,508,747

Investment Development Co., Ltd. shares

Domestically

UOB Koy Hian (Hongkong) Co., Ltd. 12,293,850 12,293,850

foreign shares

RMB common

Specific account of property 4,655,913 4,655,913

shares

disposition for bankruptcy enterprise

Domestically

of CBC 3,794,089 3,794,089

foreign shares

Shenwan Hongyuan Securities Domestically

6,348,670 6,348,670

(Hongkong) Co., Ltd. foreign shares

Guosen Securities (Hongkong) Domestically

5,476,051 5,476,051

brokerage Co., Ltd. foreign shares

RMB common

Zhu Xiaowei 4,012,600 4,012,600

shares

Domestically

Li Huili 3,891,124 3,891,124

foreign shares

China Merchants Securities Hong Domestically

3,870,972 3,870,972

Kong Co., Ltd. foreign shares

Domestically

Xu Hongbo 3,137,419 3,137,419

foreign shares

RMB common

Zong Bin 3,056,400 3,056,400

shares

Expiation on associated relationship or Li Huili, the spouse of actual controller Ji Hanfei, holding B-share of the Company on

consistent actors within the top 10 behalf of Shenzhen Guocheng Energy Investment Development Co., Ltd., beyond that, the

un-restrict shareholders and between Company has no idea of whether other circulated shareholders belong to concerted action

top 10 un-restrict shareholders and top persons ruled in the Administration Norms for Information Disclosure of Change on

10 shareholders Shareholding of Shareholders of Listed Companies.

Explanation on top 10 shareholders

involving margin business (if N/A

applicable) (see note 4)

Whether top ten common stock shareholders or top ten common stock shareholders with un-restrict shares held have a buy-back

agreement dealing in reporting period

¡õ Yes ¡Ì No

The top ten common stock shareholders or top ten common stock shareholders with un-restrict shares held of the Company have no

30

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

buy-back agreement dealing in reporting period.

2. Controlling shareholder of the Company

Nature of controlling shareholders: natural person holding

Type of controlling shareholders: legal person

Legal person/person

Controlling shareholders Date of foundation Organization code Main operation business

in charge of the unit

Industry development,

domestic commerce,

Shenzhen Guocheng Energy

materials supply and sale

Investment Development Co., Ji Hanfei 2005-04-26 440301105151303

(excluding specially run,

Ltd.

controlled and sold

merchandises)

Equity of other

domestic/oversea listed

company control by

N/A

controlling shareholder as

well as stock-joint in report

period

Changes of controlling shareholders in reporting period

¡õ Applicable ¡Ì Not applicable

The Company had no changes of controlling shareholders in reporting period

3. Actual controller of the Company

Nature of actual controller: domestic natural person

Type of actual controller: natural person

Whether obtained right of residence of other countries or

Actual controller Nationality

regions or not

Ji Hanfei P.R.C No

Profession and title in latest five years Legal person of Shenzhen Guocheng Energy Investment Development Co., Ltd.

Listed company in and out of China

N/A

controlled in past decades

Changes of actual controller in reporting period

¡õ Applicable ¡Ì Not applicable

No changes of actual controllers for the Company in reporting period.

Property right and controlling relationship between the actual controller and the Company is as follow:

31

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

Ji Hanfei

Hanfei

100%

Shenzhen Guocheng Energy Investment Development Co.,

Ltd.

11.52%

Shenzhen China Bicycle Company (Holding) Limited

˾

Actual controller controlling the Company by entrust or other assets management

¡õ Applicable ¡Ì Not applicable

4. Particulars about other legal person shareholders with over 10% shares held

¡õ Applicable ¡Ì Not applicable

5. Limitation and reducing the holdings of shares of controlling shareholders, actual controllers,

restructuring side and other commitment subjects

¡õ Applicable ¡Ì Not applicable

32

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

Section VII. Preferred Stock

¡õ Applicable ¡Ì Not applicable

The Company had no preferred stock in the Period.

33

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

Section VIII. Particulars about Directors, Supervisors, Senior

Executives and Employees

I. Changes of shares held by directors, supervisors and senior executives

Amount Amount

Shares Shares

of shares of shares

Worki held at Other held at

Se Start dated of End date of office increased decreased

Title ng Age period-be changes period-en

Name x office term term in this in this

status gin (share) d

period period

(Share) (Share)

(Share) (Share)

Curre

Director, ntly

Li Hai M 47 2013-09-26 2016-09-25 0 0 0 0 0

Chairman in

office

Curre

Yang

Director ntly in M 59 2013-09-26 2016-09-25 0 0 0 0 0

Fenbo

office

Curre

Yao

Zhengwa Director ntly in M 42 2013-09-26 2016-09-25 0 0 0 0 0

ng

office

Curre

ntly

Cao Fang Director M 42 2013-09-26 2016-09-25 0 0 0 0 0

in

office

Curre

Kong Na Director ntly in F 40 2013-09-26 2016-09-25 0 0 0 0 0

office

Curre

Independ ntly

Cui Jun ent M 52 2013-09-26 2016-09-25 0 0 0 0 0

director in

office

Curre

Independ

Chen

ent ntly in M 48 2013-09-26 2016-09-25 0 0 0 0 0

Shujun

director

office

Curre

Independ ntly

Li Bing ent F 41 2013-09-26 2016-09-25 0 0 0 0 0

director in

office

34

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

Curre

Superviso

Li Xiang ntly in M 42 2014-06-27 2017-06-26 0 0 0 0 0

r

office

Curre

Zheng

Superviso ntly

Zhonghua M 54 2014-06-27 2017-06-26 8,276 0 2,000 0 6,267

r in

n

office

Curre

Staff

Li Jialin Superviso ntly in M 55 2014-06-27 2017-06-26 0 0 0 0 0

r

office

Curre

Sun Secretary

ntly in M 43 2013-09-26 2016-09-25 0 0 0 0 0

Longlong of Board

office

Office

Luo

Director leavin M 53 2013-09-26 2015-04-13 0 0 0 0 0

Guiyou

g

Total -- -- -- -- -- -- 8,276 0 2,000 0 6,267

II. Changes of directors, supervisors and senior executives

Name Title Type Date Reasons

Appointed and

Li Hai Chairman 2015-04-15 Appointment of board of directors

removed

Director,

Luo Guiyou Office leaving 2015-04-13 Personal reasons to resign

Chairman

III. Post-holding

Professional background, major working experience and present main responsibilities in Company of directors, supervisors and

senior executive

1. Mr. Li Hai, born in 1969, graduated from Economic department of Shenzhen University in major of accounting;

he took the turns of deputy manager of finance department, chief supervisor associate of finance department,

secretary of the Board and vice president, etc. of the Company, and now he serves as chairman, legal

representative adn president of the Company.

2. Mr. Yang Fenbo, born in 1957, China senior economist with master degree of MBA and engineer, held the

position of minister of development department, concurrently minister of science and technology department,

assistant general manager, assistant to chairman, deputy chief engineer and chief engineer at Shenzhen Lionda

Group; took the chairman and concurrently general manager of Guangdong Sunrise Holding Co., Ltd.; now, he is

the chairman of Shenzhen Liona Group Co., Ltd.

3. Mr. Yao Zhengwang, born in 1975, with bachelor degree of law, successively took the post of Supervisor of

Supervision Office, Deputy Manager of Sales Department, and Deputy Manager of Legal Affairs Department of

35

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

Shenzhen Guomin Investment Development Co. Ltd. and deputy general manager of Administration Center of

Compliant Risk Control, as well as director, secretary of the Board and convener of supervisory committee of

CBC; now he serves as director of the Company.

4. Mr. Cao Fang, born in 1974, master degree; since May of 2007, he took post of item manager of marketing and

management department in headquarter of Life Insurance, associate of general manager of marketing and

management headquarter as well as general manager of market and business department, he acted as member of

planning team of Life Insurance Branch in Guangdong. And subsequently served in strategy and development

center, Office of the Chairman, Supervision office; he serves as deputy GM of Shanghai Branch of Life Insurance

since March 2012.

5. Ms. Kong Na, born in 1976, master degree; From Sep. of 2005 to Apr. of 2010, he took post of Assistant Chief

Executive in Ruifude Health Insurance Holding Co., Ltd. From Apr. of 2010 till now, he is in charge of associate

of president in Yingkong Holding Co., Ltd.

6. Mr. Cui Jun, born in1964, party member of CPC, doctor of engineering, master of law and a first-grade lawyer;

once he took posts of director of the 5th session of nationwide lawyers association, director of the 8th session and

the 9th session of Guangdong lawyer association, vice president of the 5th and the 6th session of Shenzhen lawyers

association, committee of international business commission of nationwide lawyers association, deputy director of

law business of intellectual property commission of Guangdong lawyers association, director of civil law business

commission of Guangdong lawyers association and director of culture construction committee of Guangdong

lawyers association. And now he is director of Guangdong Xingchen Law Firm, member of the CPPCC Shenzhen

Committee, committee of law business of intellectual property commission of nationwide lawyers association,

executive vice president of Shenzhen Patent Commission, vice president of Shenzhen promotion commission of

creative design and intellectual property, arbitrator of mediation center of south China International economy and

trade arbitration commission, mediation expert of mediation center and arbitrator of Shenzhen arbitration

commission.

7. Mr. Chen Shujun, born in1968, master of the Chinese University of Hong Kong, majoring in business

administration of finance, master of international accountant from City University of Hong Kong and he owes a

university degree from law school of Tsinghua University. And he is senior accountant, China Certified

Accountant, Chinese Certified Tax Agent, judicial authenticator and owes professional qualification of state laws;

served as the legislative consultants of standing committee of Guangdong Province 12th session of the National

People¡¯s Congress, government procurement review expert of Shenzhen Municipal Finance Committee, Science

and technology expert of Shenzhen Municipal Science & Technology Committee of Experts, Director of the eight

Shenzhen Institute of accounting and Deputy director of the Expert Committee on accounting standards of

enterprises in Shenzhen, Member of the five Shenzhen Institute of Certified Public Accountants in the

development of small and medium firms, and Vice president of the second session Accounting Society of Futian

District Shenzhen. He once took post of auditor and manager of Guangzhou CPAs. From 1998 till now he acted as

executive partner of Shenzhen Guangzhou-Shenzhen CPAs, legal representative of Guangdong

Guangzhou-Shenzhen Justice and Accounting judgment institution. And also independent director of Chiwan

Base-B, Funde Insurance Holding and Funde P&C, director of Vengood E-commerce and Cybemaut Yingke. And

he served as independent director of the Company since August 2010.

36

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

8. Ms. Li Bing, born in 1975, bachelor of law major and lawyer; From Jul. of 1998 to Jan. of 2002 she taught in

Guizhou University; from Jan. of 2002 to Jan. of 2006 she acted as lawyer in Guangdong Yunsheng Law Firm;

from Jan. of 2006 till now, she had been in charge of lawyer of Beijing Deheng Law Firm Branch in Shenzhen.

9. Mr. Li Xiang, born in 1974, a master degree, and he used to served as organ secretary, director-general of the

organiztion department, manager of H&R dept. of Jiangxi Branch of Pacific Life. He serves as deputy GM of

Shenzhen Guosheng Energy Investment Development Co., Ltd. since March 2008.

10. Mr. Zheng Zhonghuan, born in 1962, engineer with bachelor degree, successively took the post in Shenzhen

Light Textile Industry Company and Shenzhen Light Industry Company; since Oct. 1985, worked in Shenzhen

China Bicycle (Group) Holdings Co. Ltd. and successively took the post of Deputy Manager, Manager of

Planning Department, Manager of Material Department and manufacturing dept.; now he is the supervisor of the

Company and Manager of Purchasing Department of the Shenzhen Emmelle Industry Co., Ltd.

11. Mr. Li Jialin, born in 1961, a master degree with a title of senior engineer. He successively served as senior

engineer of the Company in electrical & mechanical engineering division, GM assistant of Hunan Guangdian

Motocycle Company, manager of the Company in H&R Dept. now he serves as commissioner of comprehensive

office of the Company and person in charge of the labor union.

12. Mr. Sun Longlong, born in 1973, graduated from Shanghai University of Finance and Economics in 1995 with

a bachelor degree, a bachelor of Economics. He successively worked as financial affairs in Shenzhen Qiongjiao

Industry Co., Ltd. and Shenzhen Solar Pipe Co., Ltd., he worked in the Company since May 1999, and

successively served as Deputy Manager of financial department, manager of comprehensive management

department, manager of enterprise management department, now he serves as secretary of the Board and manager

of financial department of the Company.

13. Mr. Luo Guiyou, born in 1963, graduated from Fudan University as a bachelor majoring in history. Since Mar.

of 2007, he worked in Life Insurance Holding Co., Ltd, and successively took posts of general manager of

headquarter of personal insurance business, temporary committee of operation and management commission,

associate of general manager of headquarter and committee of marketing management commission. From Mar. of

2010 to Oct. of 2010, he was committee of marketing management commission in planning team in Guangdong

Branch of Life Insurance Holding Co., Ltd and charger of planning team of Guangdong Branch; he served as

chairman and legal representative of the Company form August 2010 to April 2015. He resigned Director and

Chairman of the Company on 13 April 2015.

Post-holding in shareholder¡¯s unit

¡ÌApplicable ¡õ Not applicable

Received

Position in

Start dated of End date of remuneration from

Name Name of shareholder¡¯s unit shareholder¡¯s

office term office term shareholder¡¯s unit

unit n

(Y/N)

Yao Shenzhen Guocheng Energy Investment

Supervisor 2006-10-09 Yes

Zhengwang Development Co., Ltd.

Note of N/A

37

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

post-holding in

shareholder¡¯s

unit

Post-holding in other unit

¡ÌApplicable ¡õ Not applicable

Received

Position in Start dated of End date of office remuneration

Name Name of other units

other unit n office term term from other unit

(Y/N)

Shenzhen Fude Real Estate Investment

Luo Guiyou Yes

Development Co., Ltd.

Cao Fang Shanghai Branch of Life Insurance Deputy GM 2012-03-01 Yes

Yang Fenbo Shenzhen Lionda Group Co., Ltd. Chairman 2009-10-12 Yes

Non-staff

Yang Fenbo Fawer Auto Parts Co., ltd. 2013-03-25 2016-03-24 Yes

supervisor

President

Kong Na Yingkong Holding Co., Ltd. 2010-04-01 Yes

assistant

Cui Jun Guangdong Ange Laws Firm Attorney 2014-06-01 Yes

Managing

Chen Shujun Shenzhen Guangshen CPA 1998-01-01 Yes

partner

Guangdong Guangshen Judicial Accounting Legal

Chen Shujun 2002-12-01 No

Appraisal Institute representative

Independent

Chen Shujun Shenzhen Chiwan Base Co., Ltd. 2013-05-20 Yes

director

Independent

Chen Shujun Funde Insurance Holding Co., Ltd. 2015-07-01 2018-07-01 Yes

director

Independent

Chen Shujun Funde P&C Co., Ltd. 2015-06-04 2018-06-04 Yes

director

Chen Shujun Vengood E-commerce Director 2016-01-26 2019-01-26 No

Li Bing Cybemaut Yingke Director 2016-02-26 2019-02-26 No

Punishment of securities regulatory authority in recent three years to the company¡¯s current and outgoing directors, supervisors and

senior management during the reporting period

¡õ Applicable ¡Ì Not applicable

IV. Remuneration for directors, supervisors and senior executives

Decision-making procedures, recognition basis and payment for directors, supervisors and senior executives

Decision procedure of According to relevant rules of the Article of Association, the general meeting of shareholders decides

remuneration of directors, remuneration of directors and supervisors. The Board of Directors decides senior management¡¯s.

38

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

supervisors, senior

management

Confirmation basis of The Company refers to the position rank and comprehensive industry level. And then general meeting of

remuneration of directors, shareholders approves compensation standard and allowance of independent directors. According to the

supervisors and senior "Interim Measures to Annual Performance Assessment of Executives" and performance evaluation

management standards the Company issues annual performance salary.

Actual payment of The Company strictly paid remuneration of directors, supervisors and senior management accordingly

remuneration of directors, with decision procedure and confirmation basis. Total payment for remuneration of directors,

supervisors and senior supervisors and supervisors amounted to RMB 1,840,900 from January to December in 2015.

management

Remuneration for directors, supervisors and senior executives in reporting period

In 10 thousand Yuan

Total Whether

remuneration remuneration

Post-holding

Name Title Sex Age obtained from the obtained from

status

Company (before related party of

taxes) the Company

Currently in

Li Hai Director, GM M 47 97.21

office

Independent Currently in

Cui Jun M 52 4 No

director office

Independent Currently in

Chen Shujun M 48 4 No

director office

Independent Currently in

Li Bing F 41 4 No

director office

Zheng Currently in

Supervisor M 54 13.44

Zhonghuan office

Currently in

Li Jialin Staff Supervisor M 55 18.25

office

Secretary of Currently in

Sun Longlong M 43 43.19

Board office

Total -- -- -- -- 184.09 --

Delegated equity incentive for directors, supervisors and senior executives in reporting period

¡õ Applicable ¡Ì Not applicable

V. Particulars of workforce

1. Number of Employees, Professional composition, Education background

Employee in-post of the parent Company (people) 8

39

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

Employee in-post of main Subsidiaries (people) 46

The total number of current employees (people) 54

The total number of current employees to receive pay (people) 54

Retired employee¡¯ s expenses borne by the parent Company and

0

main Subsidiaries (people)

Professional composition

Category of professional composition Numbers of professional composition (people)

Production personnel 20

Sales personnel 10

Technical personnel 7

Financial personnel 6

Administrative personnel 11

Total 54

Education background

Category of education background Numbers (people)

Undergraduate 9

Junior college 17

Other 28

Total 54

2. Remuneration Policy

--

3. Training programs

Nil

4. Labor outsourcing

¡õ Applicable¡Ì Not applicable

40

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

Section IX. Corporate Governance

I. Corporate governance of the Company

During the reporting period, the Company was strictly in accordance with the "Company Law", "Securities Law"

as well as "Listing Corporation Management Standards" and other relevant laws, regulations and normative

documents. We combined the actual situation, constantly improved the corporate governance structure, and strived

to build a modern enterprise system. Operation, assembling and holding of general meeting of shareholders, the

Board of Directors and board of supervisors were strictly with relevant rules of procedure. Thus we protected

interests of the Company. The actual situation of corporate governance structure was in accordance with the

release of normative documents about the listing Corporation management rules from China Securities Regulatory

Commission.

Is there any difference between the actual condition of corporate governance and relevant regulations about corporate governance for

listed company from CSRC?

¡õYes ¡Ì No

There are no differences between the actual condition of corporate governance and relevant regulations about corporate governance

for listed company from CSRC.

II. Independency of the Company relative to controlling shareholders¡¯ in aspect of businesses,

personnel, assets, organization and finance

The Company separate business, personnel, assets, institute and finance with largest shareholder or other related parties, owes

independent and completed self-operation ability.

III. Horizontal competition

¡õ Applicable ¡Ì Not applicable

IV. In the report period, the Company held annual shareholders¡¯ general meeting and

extraordinary shareholders¡¯ general meeting

1. Annual Shareholders¡¯ General Meeting in the report period

Ratio of investor

Session of meeting Type Date Date of disclosure Index of disclosure

participation

No.: 2015015,

Resolution

24th General Meeting Annual General

12.21% 2015-06-29 2015-06-29 announcement 24th

(for 2014) Meeting

General Meeting (for

2014)

2. Request for extraordinary general meeting by preferred stockholders whose voting rights restore

¡õ Applicable ¡Ì Not applicable

V. Responsibility performance of independent directors

1. The attending of independent directors to Board meetings and general meeting

The attending of independent directors to Board Meeting

41

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

Times of Board

Absent the

meeting Times of Times of

Name of independent Times of Times of Meeting for the

supposed to attending by entrusted

director Presence Absence second time in a

attend in the communication presence

row (Y/N)

report period

Cui Jun 6 2 4 0 0 No

Chen Shujun 6 2 4 0 0 No

Li Bing 6 2 4 0 0 No

Times for attending general meeting

1

from independent directors

Explanation of absent the Board Meeting for the second time in a row

Nil

2. Objection for relevant events from independent directors

Independent directors come up with objection about Company¡¯s relevant matters

¡õYes ¡ÌNo

Independent directors has no objections for relevant events in reporting period

3. Other explanation about responsibility performance of independent directors

The opinions from independent directors have been adopted

¡Ì Yes ¡õ No

Explanation on advice that accepted/not accepted from independent directors

Nil

VI. Duty performance of the special committees under the board during the reporting period

Board of directors set up audit commission and remuneration and appraisal commission taking responsibility based on Governance

Rules of Listed Company, Article of Association as well as Procedure Rules of Board of Directors and other duties and rights various

departments endowed.

As for compiling and audit on annual financial report were checked and communicated by Audit commission in accordance with

rules of Working Procedure of Annual Report of Audit Commission, and they submitted decision to board of directors for approval.

Remuneration and appraisal commission of the Company, in reporting period, according to the ¡°Interim Measure on Assessment

Reward of Annual Performance for Senior Executives¡±, carry out evaluation on the management team members for operation works

in 2014, and propose a annual reward plans. In line with the requirement of internal control, and actual current operation condition of

the Company, propose the proposal of ¡°revised the ¡®Interim Measure on Assessment Reward of Annual Performance for Senior

Executives¡±, and submit for deliberation on general meeting.

VII. Works from Supervisory Committee

The Company has risks in reporting period that found in supervisory activity from supervisory committee

¡õ Yes ¡Ì No

Supervisory committee has no objection about supervision events in reporting period

VIII. Examination and incentives of senior management

The Company initially established the standard and incentive mechanism for open and transparent performance

evaluation on directors, supervisors and management layer. The appointment of senior management staff was open

42

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

and transparent, in accordance with provisions of the law.

IX. Internal Control

1. Details of major defects in IC appraisal report that found in reporting period

¡õYes ¡Ì No

2. Appraisal Report of Internal Control

Disclosure date of full internal control

2016-04-25

evaluation report

Disclosure index of full internal control Self-evaluation report of internal control for year of 2015 of China Bicycle Company

evaluation report (Holdings) Limited

The ratio of the total assets of units

included in the scope of evaluation

accounting for the total assets on the 100.00%

company's consolidated financial

statements

The ratio of the operating income of units

included in the scope of evaluation

accounting for the operating income on the 100.00%

company's consolidated financial

statements

Defects Evaluation Standards

Category Financial Reports Non-financial Reports

Material defect: (1) inefficiency of Material defect: (1) inefficiency of

environment control; (2) inefficiency of environment control; (2) inefficiency of

internal supervision; (3) direct impact on internal supervision; (3) direct impact on

major mistakes of investment decisions; (4) major mistakes of investment decisions;

directly make the significant error in the (4) directly make the significant error in

financial statements; (5) violation of the the financial statements; (5) violation of

laws, regulations, rules and other normative the laws, regulations, rules and other

documents, resulting in investigation of the normative documents, resulting in

Qualitative criteria central government and regulatory agencies, investigation of the central government

and being sentenced to a fine or penalty, and regulatory agencies, and being

being restricted industry exit, canceling sentenced to a fine or penalty, being

business license and being forced the closure restricted industry exit, canceling

of etc. Major defect: (1) indirect impact on business license and being forced the

major mistakes of investment decisions; (2) closure of etc. Major defect: (1) indirect

indirectly make the significant error in the impact on major mistakes of investment

financial statements; (3) Lack of important decisions; (2) indirectly make the

system; (4) violation of the laws, regulations, significant error in the financial

43

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

rules and other normative documents, statements; (3) Lack of important

resulting in investigation of the local system; (4) violation of the laws,

government and regulatory agencies, and regulations, rules and other normative

being sentenced to a fine or penalty, and documents, resulting in investigation of

being ordered to suspend business for the local government and regulatory

rectification and cause the Company¡¯s agencies, and being sentenced to a fine

business stop of etc. General defect: other or penalty, and being ordered to suspend

control defect besides material defect and business for rectification and cause the

major defect. Company¡¯s business stop of etc.

General defect: other control defect

besides material defect and major defect.

1. Potential loss or potential error of total

1. Potential loss or potential error of total profit: (1) General defect: less than or

profit: (1) General defect: less than or equal equal to pre-tax total profit of 3%, (2)

to pre-tax total profit of 3%, (2) Major Major defect: more than pre-tax total

defect: more than pre-tax total profit of profit of 3%( and absolute amount more

3%( and absolute amount more than RMB than RMB 0.5 million), (3) Material

0.5 million), (3) Material defect:: more than defect:: more than 5% of pre-tax total

5% of pre-tax total profit and absolute profit and absolute amount more than

amount more than RMB 1 million; 2. RMB 1 million; 2. Potential loss or

Potential loss or potential error of operating potential error of operating income: (1)

income: (1) General defect: less than or General defect: less than or equal to

equal to operating income of 1%, (2) Major operating income of 1%, (2) Major

Quantitative standard

defect: more than 1% of operating income defect: more than 1% of operating

and less than or equal to 3% of operation income and less than or equal to 3% of

income, (3) Material defect:: more than 3% operation income, (3) Material defect::

of operating income; 3. Potential loss or more than 3% of operating income; 3.

potential error of total assets: (1) General Potential loss or potential error of total

defect: less than or equal to 1% of total assets: (1) General defect: less than or

assets, (2) Major defect: more than 1% of equal to 1% of total assets, (2) Major

total profit and less than or equal to 3% of defect: more than 1% of total profit and

total profit, (3) Material defect:: more than less than or equal to 3% of total profit,

3% of total profit (3) Material defect:: more than 3% of

total profit

Amount of significant defects in financial

0

reports

Amount of significant defects in

0

non-financial reports

Amount of important defects in financial

0

reports

44

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

Amount of important defects in

0

non-financial reports

X. Auditing report of internal control

¡ÌApplicable ¡õ Not applicable

Deliberations in Internal Control Audit Report

We considers that China Bicycle Company (Holdings) Limited, in line with Basic Norms of Internal Control and relevant

regulations, shows an effectiveness internal control of financial report in all major aspects dated 31 December 2015.

Disclosure details of audit report of

Disclosed

internal control

Disclosure date of audit report of

2016-04-25

internal control (full-text)

Index of audit report of internal Rui Hua Zhuan Shen Zi [2016] No. 48030016 ¡°Auditing Report of Internal Control for year of

control (full-text) 2015¡±, Juchao website

Opinion type of auditing report of

Unqualified auditor¡¯s report with explanatory paragraph

IC

Whether the non-financial report

No

had major defects

Carried out modified opinion for internal control audit report from CPA

¡ÌYes ¡õNo

Explanation on modified audit opinions for internal control issued by CPA

RuihuaCertified Public Accountants (LLP) issued qualified audit opinions with explanatory notes for the internal

control of 2015. Ruihua CPA considers that the Company, in line with Basic Norms of Internal Control and

relevant regulations, shows an effectiveness internal control of financial report in all major aspects dated 31

December 2015. With the explanatory notes attached, remind users of the internal control auditing report, the

Company has completed implementation of the restructuring plan dated 27 December 2013 and terminate the

bankruptcy proceedings, in which the condition of introduction of investors has been set out with a view to restoring

its ability to continue as a going concern and its sustainable profitability through asset restructuring. Up to the

reporting date of auditing, the Company has not introduced any investor, but retained the business of bicycles so as

to maintain its ability to continue as a going concern before the injection of assets by investors. Therefore, there is

uncertainty in the ability of China Bicycle Company to continue as a going concern, and it is stressed that the

published opinions on auditing will not be impacted by the subject matter.

The internal control audit report, issued by CPA, has concerted opinion with self-evaluation report, issued from the Board

¡Ì Yes ¡õ No

45

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

Section X. Financial Report

I. Audit report

Type of audit opinion Unqualified auditor¡¯s report with explanatory paragraph

Signing date of audit report 2016-04-22

Name of audit institute Ruihua Certified Public Accountant (LLP)

Number of audit report Ruihua Shen Zi [2016] No. 48030032

Name of CPA Li Zehao, Ren Weixing

Text of auditor¡¯s Report

To all shareholders of Shenzhen China Bicycle Company (Holdings) Limited

We have audited the Companying consolidated and parent Company¡¯s financial statements of Shenzhen China

Bicycle Company (Holdings) Limited (¡°CBC¡±), including balance sheet of 31 December 2015, and profit

statement for year of 2015, cash flow statement and statement on changes of shareholders¡¯ equity for the year

ended, and notes to the financial statements for the year ended.

I. Management¡¯s responsibility for the financial statements

Management of the Company is responsible for prepare and present financial statement of the Company, which

including: (1) Prepare financial statements with fair presentation in line with Accounting Standards for Business

Enterprises; (2) Designing, executed and maintaining necessary internal control in order to prevent fundamental

miscarrying in financial statement from fraudulent or errors.

II. Auditor's responsibility

Our responsibility is to express an audit opinion on these financial statements based on our audit. We performed

our audit in accordance with Chinese Certified Public Accountants' Auditing Standards. Those standards require

us to comply with professional ethics, and to plan and perform our audit so as to obtain reasonable assurance

about whether the financial statements are free from material misstatement.

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

46

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

In our opinion, in all material aspects, CBC¡¯s financial statements have been prepared in accordance with the

Enterprises Accounting Standards and Enterprises Accounting System, and they fairly present the financial status

of the consolidated and parent company¡¯s as of December 31, 2015, and its operation results and cash flows for

the year ended.

IV. Emphasis of Matter

We bring to the attention of the users of the financial statements, as stated in note XII-1 of the financial statements

under the name of CBC, China Bicycle Company has completed implementation of the restructuring plan dated 27

December 2013 and terminate the bankruptcy proceedings, in which the condition of introduction of investors has

been set out with a view to restoring its ability to continue as a going concern and its sustainable profitability

through asset restructuring. Up to the reporting date of auditing, the Company has not introduced any investor, but

retained the business of bicycles so as to maintain its ability to continue as a going concern before the injection of

assets by investors. Therefore, there is uncertainty in the ability of China Bicycle Company to continue as a going

concern, and it is stressed that the published opinions on auditing will not be impacted by the subject matter.

II. Financial statement

Unit in note of financial statement refers to CNY: RMB (Yuan)

1. Consolidated Balance Sheet

Prepared by Shenzhen China Bicycle Company (Holdings) Limited

2015-12-31

In RMB

Item Closing balance Opening balance

Current assets:

Monetary funds 26,752,065.66 30,163,866.78

Settlement provisions

Capital lent

Financial liability measured by fair

value and with variation reckoned into

current gains/losses

Derivative financial liability

Notes receivable 2,200,000.00

Accounts receivable 9,195,296.32 6,790,982.50

Accounts paid in advance 397,833.20 348,277.01

Insurance receivable

Reinsurance receivables

Contract reserve of reinsurance

receivable

Interest receivable

Dividend receivable

47

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

Other receivables 395,523.78 511,254.81

Purchase restituted finance asset

Inventories 4,057,247.68 6,171,307.53

Divided into assets held for sale

Non-current asset due within one

year

Other current assets 209,155.59

Total current assets 41,007,122.23 46,185,688.63

Non-current assets:

Loans and payments on behalf

Finance asset available for sales

Held-to-maturity investment

Long-term account receivable

Long-term equity investment

Investment property

Fixed assets 1,007,906.43 773,961.84

Construction in progress

Engineering material

Disposal of fixed asset

Productive biological asset

Oil and gas asset

Intangible assets 3,765,000.00 4,518,000.00

Expense on Research and

Development

Goodwill

Long-term expenses to be

apportioned

Deferred income tax asset 89,066.31 11,997.08

Other non-current asset

Total non-current asset 4,861,972.74 5,303,958.92

Total assets 45,869,094.97 51,489,647.55

Current liabilities:

Short-term loans

Loan from central bank

Absorbing deposit and interbank

deposit

Capital borrowed

48

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

Financial liability measured by fair

value and with variation reckoned into

current gains/losses

Derivative financial liability

Notes payable

Accounts payable 7,787,813.83 10,278,377.96

Accounts received in advance 2,024,718.30 2,595,736.07

Selling financial asset of

repurchase

Commission charge and

commission payable

Wage payable 1,384,667.20 1,772,814.72

Taxes payable 1,271,303.96 2,232,187.80

Interest payable

Dividend payable

Other accounts payable 20,010,360.36 21,114,424.93

Reinsurance payables

Insurance contract reserve

Security trading of agency

Security sales of agency

Divided into liability held for sale

Non-current liabilities due within 1

year

Other current liabilities

Total current liabilities 32,478,863.65 37,993,541.48

Non-current liabilities:

Long-term loans

Bonds payable

Including: preferred stock

Perpetual capital

securities

Long-term account payable

Long-term wages payable

Special accounts payable

Projected liabilities

Deferred income

Deferred income tax liabilities

49

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

Other non-current liabilities

Total non-current liabilities

Total liabilities 32,478,863.65 37,993,541.48

Owner¡¯s equity:

Share capital 551,347,947.00 551,347,947.00

Other equity instrument

Including: preferred stock

Perpetual capital

securities

Capital public reserve 627,834,297.85 627,834,243.83

Less: Inventory shares

Other comprehensive income

Reasonable reserve

Surplus public reserve 32,673,227.01 32,673,227.01

Provision of general risk

Retained profit -1,200,090,425.75 -1,199,952,070.17

Total owner¡¯s equity attributable to

11,765,046.11 11,903,347.67

parent company

Minority interests 1,625,185.21 1,592,758.40

Total owner¡¯s equity 13,390,231.32 13,496,106.07

Total liabilities and owner¡¯s equity 45,869,094.97 51,489,647.55

Legal Representative: Li Hai Person in charge of Accounting Works: Sun Longlong

Person in charge of Accounting Institution: Zhong Xiaojin

2. Balance Sheet of Parent Company

In RMB

Item Closing balance Opening balance

Current assets:

Monetary funds 1,199,934.09 1,363,097.01

Financial liability measured by fair

value and with variation reckoned into

current gains/losses

Derivative financial liability

Notes receivable

Accounts receivable 694,416.00

50

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Account paid in advance 82,848.00 140,275.00

Interest receivable

Dividends receivable

Other receivables 12,579,547.00 13,714,033.12

Inventories

Divided into assets held for sale

Non-current assets maturing within

one year

Other current assets

Total current assets 13,862,329.09 15,911,821.13

Non-current assets:

Available-for-sale financial assets

Held-to-maturity investments

Long-term receivables

Long-term equity investments 10,379.73 10,379.73

Investment property

Fixed assets 740,727.77 624,330.89

Construction in progress

Project materials

Disposal of fixed assets

Productive biological assets

Oil and natural gas assets

Intangible assets 3,765,000.00 4,518,000.00

Research and development costs

Goodwill

Long-term deferred expenses

Deferred income tax assets

Other non-current assets

Total non-current assets 4,516,107.50 5,152,710.62

Total assets 18,378,436.59 21,064,531.75

Current liabilities:

Short-term borrowings

Financial liability measured by fair

value and with variation reckoned into

current gains/losses

51

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Derivative financial liability

Notes payable

Accounts payable 294,300.00

Accounts received in advance

Wage payable 290,130.11 568,210.39

Taxes payable -278,741.70 309,944.51

Interest payable

Dividend payable

Other accounts payable 10,383,721.15 11,694,785.72

Divided into liability held for sale

Non-current liabilities due within 1

year

Other current liabilities

Total current liabilities 10,395,109.56 12,867,240.62

Non-current liabilities:

Long-term loans

Bonds payable

Including: preferred stock

Perpetual capital

securities

Long-term account payable

Long-term wages payable

Special accounts payable

Projected liabilities

Deferred income

Deferred income tax liabilities

Other non-current liabilities

Total non-current liabilities

Total liabilities 10,395,109.56 12,867,240.62

Owners¡¯ equity:

Share capita 551,347,947.00 551,347,947.00

Other equity instrument

Including: preferred stock

Perpetual capital

securities

52

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Capital public reserve 627,834,297.85 627,834,243.83

Less: Inventory shares

Other comprehensive income

Reasonable reserve

Surplus reserve 32,673,227.01 32,673,227.01

Retained profit -1,203,872,144.83 -1,203,658,126.71

Total owner¡¯s equity 7,983,327.03 8,197,291.13

Total liabilities and owner¡¯s equity 18,378,436.59 21,064,531.75

3. Consolidated Profit Statement

In RMB

Item Current Period Last Period

I. Total operating income 170,990,030.10 212,070,585.77

Including: Operating income 170,990,030.10 212,070,585.77

Interest income

Insurance gained

Commission charge and commission

income

II. Total operating cost 171,370,550.82 218,798,040.74

Including: Operating cost 159,399,271.88 198,964,665.65

Interest expense

Commission charge and commission

expense

Cash surrender value

Net amount of expense of

compensation

Net amount of withdrawal of

insurance contract reserve

Bonus expense of guarantee slip

Reinsurance expense

Operating tax and extras 431,067.18 508,902.12

Sales expenses 6,515,605.90 5,340,463.40

Administration expenses 5,391,566.14 14,108,887.56

Financial expenses -675,198.21 -173,453.60

Losses of devaluation of asset 308,237.93 48,575.61

53

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Add: Changing income of fair

value(Loss is listed with ¡°-¡±)

Investment income (Loss is listed

with ¡°-¡±)

Including: Investment income on

affiliated company and joint venture

Exchange income (Loss is listed

with ¡°-¡±)

III. Operating profit (Loss is listed with

-380,520.72 -6,727,454.97

¡°-¡±)

Add: Non-operating income 4,210,594.98 14,685,352.23

Including: Disposal gains of

39,731.46

non-current asset

Less: Non-operating expense 3,841,393.90 29,038.00

Including: Disposal loss of

5,880.00

non-current asset

IV. Total Profit (Loss is listed with ¡°-¡±) -11,319.64 7,928,859.26

Less: Income tax expense 94,609.13 2,145,860.08

V. Net profit (Net loss is listed with ¡°-¡±) -105,928.77 5,782,999.18

Net profit attributable to owner¡¯s of

-138,355.58 4,885,678.56

parent company

Minority shareholders¡¯ gains and

32,426.81 897,320.62

losses

VI. Net after-tax of other comprehensive

income

Net after-tax of other comprehensive

income attributable to owners of parent

company

(I) Other comprehensive income

items which will not be reclassified

subsequently to profit of loss

1. Changes as a result of

re-measurement of net defined benefit

plan liability or asset

2. Share of the other

comprehensive income of the investee

accounted for using equity method which

will not be reclassified subsequently to

profit and loss

54

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(II) Other comprehensive income

items which will be reclassified

subsequently to profit or loss

1. Share of the other

comprehensive income of the investee

accounted for using equity method which

will be reclassified subsequently to profit

or loss

2. Gains or losses arising

from changes in fair value of

available-for-sale financial assets

3. Gains or losses arising

from reclassification of held-to-maturity

investment as available-for-sale financial

assets

4. The effect hedging portion

of gains or losses arising from cash flow

hedging instruments

5. Translation differences

arising on translation of foreign currency

financial statements

6. Other

Net after-tax of other comprehensive

income attributable to minority

shareholders

VII. Total comprehensive income -105,928.77 5,782,999.18

Total comprehensive income

-138,355.58 4,885,678.56

attributable to owners of parent Company

Total comprehensive income

32,426.81 897,320.62

attributable to minority shareholders

VIII. Earnings per share:

(i) Basic earnings per share -0.0003 0.0089

(ii) Diluted earnings per share -0.0003 0.0089

Enterprise combine under the same control in the Period, the combined party realized net profit of 0 Yuan before combination, and

realized 0 Yuan at last period for combined party

Legal Representative: Li Hai Person in charge of Accounting Works:Sun Longlong

Person in charge of Accounting Institution: Zhong Xiaojin

55

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4. Profit Statement of Parent Company

In RMB

Item Current Period Last Period

I. Operating income 3,183,534.28 7,287,880.92

Less: Operating cost 1,183,430.55 4,505,933.46

Operating tax and extras 154,451.03 195,188.86

Sales expenses

Administration expenses 2,412,060.36 13,181,561.45

Financial expenses 2,372.72 1,734.98

Losses of devaluation of asset -39.00 587.29

Add: Changing income of fair

value(Loss is listed with ¡°-¡±)

Investment income (Loss is

listed with ¡°-¡±)

Including: Investment income

on affiliated company and joint venture

II. Operating profit (Loss is listed

-568,741.38 -10,597,125.12

with ¡°-¡±)

Add: Non-operating income 4,210,594.98 14,532,283.73

Including: Disposal gains of

non-current asset

Less: Non-operating expense 3,836,923.90 23,158.00

Including: Disposal loss of

non-current asset

III. Total Profit (Loss is listed with

-195,070.30 3,912,000.61

¡°-¡±)

Less: Income tax expense 18,947.82 1,120,070.17

IV. Net profit (Net loss is listed with

-214,018.12 2,791,930.44

¡°-¡±)

V. Net after-tax of other comprehensive

income

(I) Other comprehensive income

items which will not be reclassified

subsequently to profit of loss

1. Changes as a result of

re-measurement of net defined benefit

plan liability or asset

56

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2. Share of the other

comprehensive income of the investee

accounted for using equity method

which will not be reclassified

subsequently to profit and loss

(II) Other comprehensive income

items which will be reclassified

subsequently to profit or loss

1. Share of the other

comprehensive income of the investee

accounted for using equity method

which will be reclassified subsequently

to profit or loss

2. Gains or losses arising

from changes in fair value of

available-for-sale financial assets

3. Gains or losses arising

from reclassification of held-to-maturity

investment as available-for-sale

financial assets

4. The effect hedging

portion of gains or losses arising from

cash flow hedging instruments

5. Translation differences

arising on translation of foreign

currency financial statements

6. Other

VI. Total comprehensive income -214,018.12 2,791,930.44

VII. Earnings per share:

(i) Basic earnings per share -0.0004 0.0051

(ii) Diluted earnings per share -0.0004 0.0051

5. Consolidated Cash Flow Statement

In RMB

Item Current Period Last Period

I. Cash flows arising from operating

activities:

Cash received from selling

commodities and providing labor 93,016,514.64 108,375,320.26

services

57

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Net increase of customer deposit

and interbank deposit

Net increase of loan from central

bank

Net increase of capital borrowed

from other financial institution

Cash received from original

insurance contract fee

Net cash received from reinsurance

business

Net increase of insured savings and

investment

Net increase of amount from

disposal financial assets that measured

by fair value and with variation

reckoned into current gains/losses

Cash received from interest,

commission charge and commission

Net increase of capital borrowed

Net increase of returned business

capital

Write-back of tax received

Other cash received concerning

7,025,026.01 115,592,208.06

operating activities

Subtotal of cash inflow arising from

100,041,540.65 223,967,528.32

operating activities

Cash paid for purchasing

commodities and receiving labor 80,757,205.50 96,445,270.32

service

Net increase of customer loans and

advances

Net increase of deposits in central

bank and interbank

Cash paid for original insurance

contract compensation

Cash paid for interest, commission

charge and commission

Cash paid for bonus of guarantee

slip

58

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Cash paid to/for staff and workers 6,970,654.49 9,113,860.33

Taxes paid 4,102,934.63 96,588,723.27

Other cash paid concerning

11,239,769.85 17,898,626.22

operating activities

Subtotal of cash outflow arising from

103,070,564.47 220,046,480.14

operating activities

Net cash flows arising from operating

-3,029,023.82 3,921,048.18

activities

II. Cash flows arising from investing

activities:

Cash received from recovering

investment

Cash received from investment

income

Net cash received from disposal of

fixed, intangible and other long-term 100,500.00

assets

Net cash received from disposal of

subsidiaries and other units

Other cash received concerning

investing activities

Subtotal of cash inflow from investing

100,500.00

activities

Cash paid for purchasing fixed,

382,777.30 691,852.99

intangible and other long-term assets

Cash paid for investment

Net increase of mortgaged loans

Net cash received from

subsidiaries and other units obtained

Other cash paid concerning

investing activities

Subtotal of cash outflow from investing

382,777.30 691,852.99

activities

Net cash flows arising from investing

-382,777.30 -591,352.99

activities

III. Cash flows arising from financing

activities

Cash received from absorbing

59

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

investment

Including: Cash received from

absorbing minority shareholders¡¯

investment by subsidiaries

Cash received from loans

Cash received from issuing bonds

Other cash received concerning

financing activities

Subtotal of cash inflow from financing

activities

Cash paid for settling debts

Cash paid for dividend and profit

distributing or 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

Net cash flows arising from financing

activities

IV. Influence on cash and cash

equivalents due to fluctuation in

exchange rate

V. Net increase of cash and cash

-3,411,801.12 3,329,695.19

equivalents

Add: Balance of cash and cash

30,163,866.78 26,834,171.59

equivalents at the period -begin

VI. Balance of cash and cash

26,752,065.66 30,163,866.78

equivalents at the period -end

6. Cash Flow Statement of Parent Company

In RMB

Item Current Period Last Period

I. Cash flows arising from operating

activities:

Cash received from selling 38,250.00

60

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commodities and providing labor

services

Write-back of tax received

Other cash received concerning

12,679,197.51 124,889,662.76

operating activities

Subtotal of cash inflow arising from

12,717,447.51 124,889,662.76

operating activities

Cash paid for purchasing

commodities and receiving labor 824,576.60

service

Cash paid to/for staff and workers 2,574,126.10 5,757,714.66

Taxes paid 1,050,776.71 93,606,825.19

Other cash paid concerning

8,208,908.80 24,682,497.75

operating activities

Subtotal of cash outflow arising from

12,658,388.21 124,047,037.60

operating activities

Net cash flows arising from operating

59,059.30 842,625.16

activities

II. Cash flows arising from investing

activities:

Cash received from recovering

investment

Cash received from investment

income

Net cash received from disposal of

fixed, intangible and other long-term

assets

Net cash received from disposal of

subsidiaries and other units

Other cash received concerning

investing activities

Subtotal of cash inflow from investing

activities

Cash paid for purchasing fixed,

222,222.22 560,364.97

intangible and other long-term assets

Cash paid for investment

Net cash received from

subsidiaries and other units

61

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Other cash paid concerning

investing activities

Subtotal of cash outflow from investing

222,222.22 560,364.97

activities

Net cash flows arising from investing

-222,222.22 -560,364.97

activities

III. Cash flows arising from financing

activities

Cash received from absorbing

investment

Cash received from loans

Cash received from issuing bonds

Other cash received concerning

financing activities

Subtotal of cash inflow from financing

activities

Cash paid for settling debts

Cash paid for dividend and profit

distributing or interest paying

Other cash paid concerning

financing activities

Subtotal of cash outflow from financing

activities

Net cash flows arising from financing

activities

IV. Influence on cash and cash

equivalents due to fluctuation in

exchange rate

V. Net increase of cash and cash

-163,162.92 282,260.19

equivalents

Add: Balance of cash and cash

1,363,097.01 1,080,836.82

equivalents at the period -begin

VI. Balance of cash and cash

1,199,934.09 1,363,097.01

equivalents at the period -end

7. Statement of Changes in Owners¡¯ Equity (Consolidated)

This Period

In RMB

62

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

This Period

Owners¡¯ equity attributable to parent company

Other

equity instrument

Item Less: Other Provisio Minorit Total

Perpet Reason

Share Capital Invento compre Surplus n of Retaine y owners¡¯

ual able

capital Prefer reserve ry hensive reserve general d profit interests equity

capita reserve

red Other shares income risk

l

stock

securi

ties

551,34 -1,199,9

I. Balance at the 627,834 32,673, 1,592,7 13,496,

7,947. 52,070.

end of the last year ,243.83 227.01 58.40 106.07

00 17

Add:

Changes of

accounting policy

Error

correction of the

last period

Enterprise

combine under

the same control

Other

II. Balance at the 551,34 -1,199,9

627,834 32,673, 1,592,7 13,496,

beginning of this 7,947. 52,070.

,243.83 227.01 58.40 106.07

year 00 17

III. Increase/

Decrease in this -138,35 32,426. -105,87

54.02

year (Decrease is 5.58 81 4.75

listed with ¡°-¡±)

(i) Total -138,35 32,426. -105,92

comprehensive

5.58 81 8.77

income

(ii) Owners¡¯

devoted and

decreased capital

1.Common shares

invested by

shareholders

2. Capital invested

by holders of other

equity instruments

3. Amount

reckoned into

owners equity with

share-based

payment

63

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4. Other

(III) Profit

distribution

1. Withdrawal of

surplus reserves

2. Withdrawal of

general risk

provisions

3. Distribution for

owners (or

shareholders)

4. Other

(IV) 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 surplus

reserve

4. Other

(V) Reasonable

reserve

1. Withdrawal in

the report period

2. Usage in the

report period

(VI)Others 54.02 54.02

IV. Balance at the 551,34 -1,200,0

627,834 32,673, 1,625,1 13,390,

end of the report 7,947. 90,425.

,297.85 227.01 85.21 231.32

period 00 75

Last Period

In RMB

Last Period

Owners¡¯ equity attributable to parent company

Other Minorit

Item Less: Other Provisio Total

equity instrument Reason y

Share Capital Invento compre Surplus n of Retaine interest owners¡¯

able equity

capital Prefer Perpet reserve ry hensive reserve general d profit s

red ual Other reserve

shares income risk

stock capita

64

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l

securi

ties

551,34 -1,204,8

I. Balance at the 627,819 32,673, 695,437 7,698,7

7,947. 37,748.

end of the last year ,910.12 227.01 .78 73.18

00 73

Add:

Changes of

accounting policy

Error

correction of the

last period

Enterprise

combine under

the same control

Other

II. Balance at the 551,34 627,819 32,673,

-1,204,8

695,437 7,698,7

beginning of this 7,947. 37,748.

,910.12 227.01 .78 73.18

year 00 73

III. Increase/

Decrease in this 14,333. 4,885,6 897,320 5,797,3

year (Decrease is 71 78.56 .62 32.89

listed with ¡°-¡±)

(i) Total 4,885,6 897,320 5,782,9

comprehensive

78.56 .62 99.18

income

(ii) Owners¡¯

devoted and

decreased capital

1.Common shares

invested by

shareholders

2. Capital invested

by holders of other

equity instruments

3. Amount

reckoned into

owners equity with

share-based

payment

4. Other

(III) Profit

distribution

1. Withdrawal of

surplus reserves

2. Withdrawal of

general risk

provisions

65

ÉîÛÚÖлª×ÔÐгµ(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾ 2015 ÄêÄê¶È±¨¸æÈ«ÎÄ

3. Distribution for

owners (or

shareholders)

4. Other

(IV) 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 surplus

reserve

4. Other

(V) Reasonable

reserve

1. Withdrawal in

the report period

2. Usage in the

report period

14,333. 14,333.

(VI)Others

71 71

IV. Balance at the 551,34 -1,199,9

627,834 32,673, 1,592,7 13,496,

end of the report 7,947. 52,070.

,243.83 227.01 58.40 106.07

period 00 17

8. Statement of Changes in Owners¡¯ Equity (Parent Company)

This Period

In RMB

This Period

Other

equity instrument

Other Total

Item Share Perpetu Less: Retaine

Capital comprehe Reasonab Surplus

al Inventory owners¡¯

capital Preferre reserve nsive le reserve reserve d profit

capital Other shares equity

d stock income

securiti

es

I. Balance at the 551,347, 627,834,2 32,673,22 -1,203,6 8,197,291

end of the last year 947.00 43.83 7.01 58,126. .13

66

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71

Add: Changes

of accounting

policy

Error

correction of the

last period

Other

II. Balance at the 551,347, -1,203,6

627,834,2 32,673,22 8,197,291

beginning of this 58,126.

947.00 43.83 7.01 .13

year 71

III. Increase/

Decrease in this -214,01 -213,964.

54.02

year (Decrease is 8.12 10

listed with ¡°-¡±)

(i) Total -214,01 -214,018.

comprehensive

8.12 12

income

(ii) Owners¡¯

devoted and

decreased capital

1.Common shares

invested by

shareholders

2. Capital invested

by holders of other

equity instruments

3. Amount

reckoned into

owners equity with

share-based

payment

4. Other

(III) Profit

distribution

1. Withdrawal of

surplus reserves

2. Distribution for

owners (or

shareholders)

3. Other

(IV) Carrying

forward internal

owners¡¯ equity

1. Capital reserves

conversed to

capital (share

capital)

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2. Surplus reserves

conversed to

capital (share

capital)

3. Remedying loss

with surplus

reserve

4. Other

(V) Reasonable

reserve

1. Withdrawal in

the report period

2. Usage in the

report period

(VI)Others 54.02 54.02

IV. Balance at the 551,347, -1,203,8

627,834,2 32,673,22 7,983,327

end of the report 72,144.

947.00 97.85 7.01 .03

period 83

Last period

In RMB

Last period

Other

equity instrument

Other Total

Item Perpetu Less:

Share Capital comprehe Reasonab Surplus Retaine

al Inventory owners¡¯

capital Preferre reserve nsive le reserve reserve d profit

capital Other shares equity

d stock income

securiti

es

-1,206,4

I. Balance at the 551,347, 627,819,9 32,673,22 5,391,026

50,057.

end of the last year 947.00 10.12 7.01 .98

15

Add: Changes

of accounting

policy

Error

correction of the

last period

Other

II. Balance at the 551,347, -1,206,4

627,819,9 32,673,22 5,391,026

beginning of this 50,057.

947.00 10.12 7.01 .98

year 15

III. Increase/ 2,791,9 2,806,264

Decrease in this 14,333.71

30.44 .15

year (Decrease is

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listed with ¡°-¡±)

(i) Total 2,791,9 2,791,930

comprehensive

30.44 .44

income

(ii) Owners¡¯

devoted and

decreased capital

1.Common shares

invested by

shareholders

2. Capital invested

by holders of other

equity instruments

3. Amount

reckoned into

owners equity with

share-based

payment

4. Other

(III) Profit

distribution

1. Withdrawal of

surplus reserves

2. Distribution for

owners (or

shareholders)

3. Other

(IV) 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 surplus

reserve

4. Other

(V) Reasonable

reserve

1. Withdrawal in

the report period

2. Usage in the

report period

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(VI)Others 14,333.71 14,333.71

IV. Balance at the 551,347, -1,203,6

627,834,2 32,673,22 8,197,291

end of the report 58,126.

947.00 43.83 7.01 .13

period 71

III. Company Profile

(I) Company History

According to the Approval Document SFBF (1991) No. 888 issued by the People¡¯s Government of

Shenzhen, Shenzhen China Bicycle Company (Holdings) Limited (hereinafter referred to as the

Company) was reincorporated as the company limited by shares in November 1991. On 28

December 1991, upon the Approval Document SRYFZ(1991) No. 119 issued by Shenzhen Special

Economic Zone Branch of the People¡¯s Bank of China, the Company got listed on Shenzhen Stock

Exchange. The Company reserves the business license for the enterprise legal person (QGYSZFZ

No.101165) [the registered number has been altered as 440301501122085] with the registered

capital of RMB551, 347,947.00.

(II) Business Scope and Operation

The Company belongs to the machinery manufacture industry and mainly engages in the production

and assembly of various bicycles and spare parts, components, parts, mechanical product, sport

machinery, fine chemicals, carbon fiber composites material, household electrical appliance and

affiliated components (products management by license excluded).

The Company is specialized in making the middle-top rank bicycles, the main brands are

EMMELLE and various electrical bicycles.

The majority of its products were previously exported, however, the sales volume sharply declined

in recent years because of the antidumping litigation. Hence, the Company commences on the debt

reorganization and the reorganization plan was completed on 27 December 2013 with bankruptcy

proceedings terminated. Meanwhile, makes greater efforts to develop and research the new products,

and creates a range of electrical bicycles to occupy the domestic market. Up to 31 December 2015,

shares issued by the Company counted as 551,347,947 shares accumulated.

The financial statement has been deliberated and approved on the Board dated 22 April 2016.

Nil

IV. Compilation Basis of Financial Statement

1. Compilation Basis

The Company proceed on continue operating as a premise, according to the actual occurred transactions and

events, based on Accounting Standard for Business Enterprise¡ªBasic Rules(Ministry of Finance Order No. 33,

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Ministry of Finance Order No. 76 Revised), 41 specific accounting rules issued and revised on 15 February 2006

and later, the Application Guide of Accounting Standard for Enterprise, the Accounting Standard Explanation and

other relevant regulations(together as ¡°Accounting Standards for Business Enterprises¡±) as well as the Information

Disclosure Rules of the Company who Publicly Issues Securities No.15¡ªGeneral Rules of Financial Report

(2015 Revised) issued by CSRC to prepare financial statements.

Accounting records of the Company is based on accrual basis in line with relevant regulations of Accounting

Standards for Enterprise. Except for some financial instruments, the financial statement is calculated based on

historical cost. As for the non-current assets ready for sold, amount after deducted estimated cost by fair value and

the original book value qualify with condition of hold ready for sold, calculated based on the lower one. If

impairment occurred for assets, accrual relevant impairment provision in line with relevant regulations.

2. Going concern

On 11 May 2012, the largest shareholder and biggest creditor of the Company, Shenzhen Guocheng Energy Investment Development

Co., Ltd. applied to Shenzhen Municipal Intermediate People's Court for reforming the Company as the Company couldn¡¯t pay off

the matured debts and was seriously insolvent. On 12th, Oct., 2012, Shenzhen Municipal Intermediate People's Court ruled to accept

the application proposed by Guocheng Energy according to (2012) Shenzhen Intermediate Court Po Zi No. 30 civil ruling. On the

last ten-day of October 2012, Shenzhen Municipal Intermediate People's Court ruled to reform the Company since 25th, Oct., 2012

according to (2012) Shenzhen Intermediate Court Po Zi No. 30-1 civil ruling, appointed King & Wood (Shenzhen) Mallesons and

Shenzhen ZhengYuan Liquidation Affairs Co., Ltd. as the custodians of the Company. On the same day, Shenzhen Municipal

Intermediate People's Court made (2012) Shenzhen Intermediate Court Po Zi No. 30-1 written decision, and approved the Company

to manage property and business affairs by itself under the supervision of custodians according to the law. On 5 November 2013, the

Shenzhen Intermediate People¡¯s Court (2012) Shen Zhong Fa Po Zi No. 30-6 Civil Ruling Paper judged that approved the

reorganization plan of the Company. On 27 December 2013, the Civil Ruling Paper Shenzhen Intermediate People¡¯s Court (2012)

Shen Zhong Fa Po Zi No. 30-10 ruled that the reorganization plan of CBC was completed and bankruptcy procedures of CBC closed

down.

The Company has solved the debt problem by reforming, realized the net assets with positive value, the main business of bicycle is

able to be maintained and realizes the stable development. The Company has set up the conditions for introducing the recombination

party in the reforming plan, and expects to restore the abilities of sustainable operation and sustained profitability by reorganization.

The conditions of introducing the recombination party includes: the assessed value of net assets should be no less than 2 billion Yuan,

the net assets in the same year for implementing the major reorganization should be no less than 200 million Yuan. The Company

doesn¡¯t have the recombination party at the moment.

V. Main accounting policy and Accounting Estimate

Tips for specific accounting policy and estimate:

Accounting policy and estimate are strictly in line with relevant regulations and laws.

1. Declaration on compliance with accounting standards

The financial statement prepared by the Company are compliance with the requirement of accounting rules, reflect

a true and completed financial status of the Company dated 31 December 2015 and operation results and cash

flows for the year of 2015. Furthermore, the financial statement, in all major aspects, conform to the Information

Disclosure Rules of the Company who Publicly Issues Securities No.15¡ªGeneral Rules of Financial Report

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issued by CSRC, revised in 2015, and relevant disclosure requirement and its notes.

2. Accounting period

Accounting period of the Company consist of annual and mid-term, mid-term refers to the reporting period shorter

than one annual accounting year. The company adopts Gregorian calendar as accounting period, namely form each

1 January to 31 December.

3. Business cycles

Normal business cycle is the period from purchasing assets used for process by the Company to the cash and cash

equivalent achieved. The Company¡¯s business cycle was 12 months, and it is the determining criterion for asses

liquidity and liability liquidity.

4. Recording currency

Renminbi is the operation location and main economy environment¡¯s currency for the Company and subsidiaries

in China, Renminbi is the book-keeping currency of the Company and subsidiaries. Renminbi is used for

recording in the financial statement under the name of the Company.

5. Accounting Treatment Method for Business Combinations

Business combination is the transaction or events that two or two above independent enterprises combined as a

reporting entity. Business combination including enterprise combined under the same control and business

combined under different control.

(1) The business combination under the same control

Enterprise combination under the same control is the enterprise who take part in the combination are have the

same ultimate controller or under the same controller, the control is not temporary. The combining party is the one,

on combination day, obtained controlling rights from other participant enterprise. Combination day is the date

when combining party obtained controlling rights from the combined party.

The assets and liability acquired by combining party are measured by book value of the combined party on

combination date. Balance of net assets¡¯s book value acquired by combining party and combine consideration

paid (or total book value of the shares issued), shall adjusted capital reserve (share premium); if the capital

reserves (share premium) is not enough for deducted, adjusted for retained earnings.

Vary directly expenses occurred for enterprise combination, the combining party shall reckoned into current

gains/losses while occurring.

(2) Combine not under the same control

A business combination not involving entities under common control is a business combination in which all of the

combining entities are not ultimately controlled by the same party or parties both before and after the combination.

For a business combination not involving entities under common control, the party that, on the acquisition date,

obtains control of another entity participating in the combination is the acquirer, while that other entity

participating in the combination is the acquiree. Acquisition date refers to the date on which the acquirer

effectively obtains control of the acquiree.

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For business combinations not under common control, the combination cost is the assets paid, liabilities incurred

or assumed and the equity securities issued by the acquirer, at fair value at the acquisition date, in exchange for

the control power over the acquiree. The direct cost, of the business combination including the expenses for audit,

legal service, valuation and other administrative expenses, is recorded into the profit or loss in the current period.

Transaction expenses of the issued equity securities or liability securities for the consideration are recorded into

the amount of initial measurement of the equity securities or liability securities. The relevant contingent

consideration is recorded into the combination costs at its fair value at the acquisition date, and the goodwill is

adjusted if the new or additional evidences of adjustment to contingent considerations emerged within 12 months

from the acquisition date. The cost of combination and identifiable net assets obtained by the acquirer in a

business combination is measured at fair value at the acquisition date. If the cost of combination exceeds the fair

value of the acquirer¡¯s share in the identifiable net assets, the difference is recognized as good will; if the cost of

combination is lower than the fair value of the acquirer¡¯s share in the identifiable net assets, the acquirer shall

firstly review the measurement of the fair value of the identifiable assets obtained, liabilities incurred and

contingent liabilities incurred, as well as the combination costs. after that, if the combination costs are still lower

than the fair value of the identifiable net assets obtained, the acquirer shall recognize the difference as the profit or

loss in the current period.

In relation to the deductible temporary difference acquired from the acquiree, which was not recognized as

deferred tax assets due to non-fulfillment of the recognition criteria at the date of the acquisition, if new or further

information that is obtained within 12 months after the acquisition date indicates that related conditions at the

acquisition date already existed, and that the implementation of the economic benefits brought by the deductible

temporary difference of the acquiree can be expected, the relevant deferred tax assets shall be recognized and

goodwill shall be deducted. When the amount of goodwill is less than the deferred tax assets that shall be

recognized, the difference shall be recognized in the profit or loss of the period. Except for the above

circumstances, deferred tax assets in relation to business combination are recognized in the profit or loss of the

period.

For a business combination not involving enterprises under common control and achieved in stages, the company

shall determine whether the business combination shall be regarded as ¡°a bundle of transactions¡± in accordance

with the standards in relation to judgment of a bundle of transactions in ¡°Notice issued by the Ministry of Finance

on Interpretation 5 on Accounting standards for Business Enterprises¡±(CK(2012)No.19) and rule No. 51 of ¡°No.

33 Accounting standards for Business Enterprises ¨C Consolidated Financial Statement¡± (Refer to note IV 5(2)).

When the business combination is regarded as ¡°a bundle of transactions¡±, the accounting treatment for the

business combination shall be in accordance with the previous paragraphs and note IV 4, 13 ¡°Long term equity

investment¡±; when the business combination is not regarded as ¡°a bundle of transactions¡±, the accounting

treatment for the business combination in the company¡¯s and the consolidated financial statements shall be as

follows:

In the company¡¯s financial statements, the initial cost of the investment shall be the sum of the carrying amount of

its previously-held equity interest in the acquiree prior to the acquisition date and the amount of additional

investment made to the acquiree at the acquisition date. other comprehensive income involved in the

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previously-held equity interest of the acquiree prior to the acquisition date shall be treated on the same basis as if

they were disposed of by the acquiree directly, namely be transferred to current investment income other than the

relevant part of the movement arising from re-measuring net liabilities or net assets under defined benefit scheme

by the acquiree which shall be calculated under equity method.

In the consolidated financial statements, the previously-held equity interest of the acquiree is re-measured

according to the fair value at the acquisition date; the difference between the fair value and the carrying amount is

recognized as investment income for the current period; other comprehensive income involved in the

previously-held equity interest of the acquiree prior to the acquisition date shall be treated on the same basis as if

they were disposed of by the acquiree directly, namely be transferred to current investment income other than the

relevant part of the movement arising from re-measuring net liabilities or net assets under defined benefit scheme

by the acquiree which shall be calculated under equity method.

6. Preparation method for consolidated financial statement

(1) Recognition principle of consolidated scope

The scope of consolidation of consolidated financial statements is ascertained on the basis of effective control.

Control is the right to govern an investee so as to obtain variable return through participating in the investee¡¯s

relevant activities and the ability to affect such return by use of the aforesaid right over the investee. The

consolidated financial statements comprise the financial statements of the Company and all of its subsidiaries.

Subsidiaries refer to entities regulated by the Company.

Once certain elements involved in the above definition of control change due to changes of relevant facts or

circumstances, the Company will make separate assessment.

(2) Preparation of consolidated financial statements

Subsidiaries are consolidated from the date on which the company obtains their net assets and actual control over

their operating decisions, and are deconsolidated from the date that such control ceases. For subsidiaries being

disposed, the operating results and cash flows prior to the date of disposal are included in the consolidated income

statement and consolidated cash flow statement; for subsidiaries disposed during the period, the opening balances

of the consolidated balance sheet would not be restated. For subsidiaries acquired from a business combination

not under common control, their operating results and cash flows subsequent to the acquisition date are included

in the consolidated income statement and consolidated cash flow statement, and the opening balances and

comparative figures of the consolidated balance sheet would not be restated. For subsidiaries acquired from a

business combination under common control, their operating results and cash flows from the date of

commencement of the accounting period in which the combination occurred to the date of combination are

included in the consolidated income statement and consolidated cash flow statement, and the comparative figures

of the consolidated balance sheet would be restated.

In preparing the consolidated financial statements, where the accounting policies or the accounting periods are

inconsistent between the company and subsidiaries, the financial statements of subsidiaries are adjusted in

accordance with the accounting policies and accounting period of the company. For subsidiaries acquired from a

business combination not under common control, the financial statements of the subsidiaries are adjusted based on

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the fair value of the identifiable net assets at the acquisition date.

All significant inter-group balances, transactions and unrealized profits are eliminated in the consolidated

financial statements.

The portion of a subsidiary¡¯s equity and the portion of a subsidiary¡¯s net profits and losses for the period not

attributable to company are recognized as minority interests and profits and losses attributable to minority

interests. Minority interest is presented separately in the consolidated balance sheet within shareholders¡¯ equity.

Net profit or loss attributable to minority shareholders is presented separately in the consolidated income

statement under the net profit line item. When the amount of loss for the current period attributable to the minority

shareholders of a subsidiary exceeds the minority shareholders¡¯ portion of the opening balance of shareholders¡¯

equity of the subsidiary, the excess is allocated against the minority interests.

When the control over a subsidiary is ceased due to disposal of a portion of an interest in a subsidiary, the fair

value of the remaining equity interest is re-measured on the date when the control ceased. The difference between

the sum of the consideration received from disposal of equity interest and the fair value of the remaining equity

interest, less the net assets attributable to the company since the acquisition date, is recognized as the investment

income from the loss of control. Other comprehensive income relating to original equity investment in

subsidiaries shall be treated on the same basis as if the relevant assets or liabilities were disposed of by the

acquiree directly when the control is lost, namely be transferred to current investment income other than the

relevant part of the movement arising from re-measuring net liabilities or net assets under defined benefit scheme

by the original subsidiary.. Subsequent measurement of the remaining equity interests shall be in accordance with

relevant accounting standards such as ¡°Accounting Standards for business Enterprises 2 ¨C Long-term Equity

Investments¡± or ¡°Accounting Standards for business Enterprises 22 ¨C Financial Instruments Recognition and

Measurement¡±, which are detailed in Note IV 13 ¡°Long-term equity investments¡± or Note IV 9 ¡°Financial

instruments¡±.

The company shall determine whether loss of control arising from disposal in a series of transactions should be

regarded as a bundle of transactions. When the economic effects and terms and conditions of the disposal

transactions met one or more of the following situations, the transactions shall normally be accounted for as a

bundle of transactions: (i) The transactions are entered into after considering the mutual consequences of each

individual transaction; (ii) The transactions need to be considered as a whole in order to achieve a deal in

commercial sense; (iii) The occurrence of an individual transaction depends on the occurrence of one or more

individual transactions in the series; (iv) The result of an individual transaction is not economical, but it would be

economical after taking into account of other transactions in the series. When the transactions are not regarded as

a bundle of transactions, the individual transactions shall be accounted as ¡°disposal of a portion of an interest in a

subsidiary which does not lead to loss of control¡± (detailed in Note IV 13 (2) (iv)) and ¡°disposal of a portion of an

interest in a subsidiary which lead to loss of control¡± (detailed in previous paragraph). When the transactions are

regarded as a bundle of transactions, the transactions shall be accounted as a single disposal transaction; however,

the difference between the consideration received from disposal and the share of net assets disposed in each

individual transactions before loss of control shall be recognized as other comprehensive income, and reclassified

as profit or loss arising from the loss of control when control is lost.

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7. Joint arrangement classification and accounting treatment for joint operations

A joint arrangement refers to an arrangement of two or more parties have joint control. In accordance with the

Company¡¯s rights and obligation ns under a joint arrangement, the Company classifies joint arrangements into:

joint ventures and joint operations. Joint operations refer to a joint arrangement during which the Company is

entitled to relevant assets and obligations of this arrangement. Joint ventures refer to a joint arrangement during

which the Company only is entitled to net assets of this arrangement.

The Company treats investments in joint ventures by using the equity method of accounting in accordance with

accounting policies as set out in Note IV.13.(2) ¢Ú ¡°long-term equity investment by using equity method of

accounting¡±.

The Company shall, as a joint venture, recognize the assets held and obligations assumed solely by the Company,

and recognize assets held and obligations assumed jointly by the Company in appropriation to the share of the

Company; recognize revenue from disposal of the share of joint operations of the Company; recognize fees solely

occurred by Company and recognize fees from joint operations in appropriation to the share of the Company.

When the Company, as a joint venture, invests or sells assets to or purchase assets (the assets dose not constitute a

business, the same below) from joint operations, the Company shall only recognize the part of profit or lost from

this transaction attributable to other parties of joint operations before these assets are sold to the third party. If the

occurrence of these assets meet the impairment loss of asset as set our in ¡°Accounting Standard for Business

Enterprises No. 8 ¨C Asset Impairment¡±, the Company shall recognize the full amount of this loss in relation to the

Company invests in or sells assets to joint operations; the Company recognize the loss according to the

Company¡¯s share of commitment in relation to the Company purchase assets from joint operations.

8. Determining standards for cash and cash equivalent

Cash and cash equivalent including stock cash, savings available for paid at any time and the cash held by the

Company with short terms(expired within 3 months since purchased), and liquid and easy to transfer as known

amount and investment with minor variation in risks.

9. Foreign currency business and conversion

(1) Conversion for foreign currency transaction

Foreign currency transactions are, on initial recognition, translated to the functional currency using the exchange

rates prevailing at the dates of the transactions, except when the Company carries on a business of currency

exchange or involves in currency exchange transactions, at which the actual exchange rates would be used.

(2) Foreign currency translations for foreign-currency monetary items and foreign-currency non-monetary items

At the balance sheet date, monetary items denominated in foreign currency are translated into the functional

currency using the spot rate of the balance sheet date. Exchange differences arising from these translations are

recognized in profit or loss for the current period, except for (i) those attributable to foreign currency borrowings

that have been taken out specifically for the acquisition, construction or production of qualifying assets, which are

capitalised as part of the cost of those assets; (ii)exchange difference of hedge instruments used as effective

hedging for net investment of overseas operations (this difference is included in other comprehensive income until

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such net investment is disposed of, and is recognized as profit or loss for the current period upon such disposal) ;

and (iii) exchange difference arising from changes in carrying amount of available for sale foreign-currency

monetary items other than changes in amortized cost, which is recognized in other comprehensive income.

In case that preparation of consolidated financial statement involves overseas operation, and if there is foreign

currency monetary items that indeed constitute net investment in overseas operation, the exchange difference

arising from movement of exchange rate shall be included in other comprehensive income, and transferred to

current profit or loss for the current period when the overseas operation is disposed of.

Non-monetary items denominated in foreign currency that are measured in terms of historical cost are translated

into the functional currency at the balance sheet date using the spot rate at the date of the transactions.

Non-monetary items denominated in foreign currency that are measured at fair value are translated into the

functional currency using the spot rate on the date when fair value is determined and the resulting exchange

differences will be recognized as fair value change (including exchange difference) in profit or loss or in other

comprehensive income as capital reserve in the current year.

(3) Translation of foreign currency financial statement

In case that preparation of consolidated financial statement involves overseas operation, and if there is foreign

currency monetary items that indeed constitute net investment in overseas operation, the exchange difference

arising from movement of exchange rate shall be recognized in other comprehensive income as ¡°foreign statement

translation difference¡±, and transferred to current profit or loss for the current period when the overseas operation

is disposed of.

The following displays the methods for translating financial statements involving foreign operations into the

statements in RMB: The asset and liability items in the balance sheets for overseas operations are translated at the

spot exchange rates on the balance sheet date. Among the shareholders¡¯ equity items, the items other than

¡°undistributed profits¡± are translated at the spot exchange rates of the transaction dates. The income and expense

items in the income statements of overseas operations are translated at the spot exchange rates of the transaction

dates. Opening balance of undistributed profits is equal to the closing balance of undistributed profits after

translation in last year; closing balance of undistributed profit is computed according to the items in profit

distribution after translation. The exchange difference arising from translation of assets, liabilities and equity items

are recognized in other comprehensive income and is shown separately under shareholders¡¯ equity in the balance

sheet, such exchange difference will be reclassified to profit or loss in current year when the foreign operation is

disposed according to the proportion of disposal.

The cash flows of overseas operations are translated at the spot exchange rates on the dates of the cash flows. The

effect of exchange rate changes on cash is presented separately in the cash flow statement.

The opening balance and the prior year¡¯s figures are presented according to the translated amounts of the prior

year.

On disposal of the entire owners¡¯ equity in a foreign operation of the Company, or upon a loss of control over a

foreign operation due to disposal of certain equity investment or other reasons, the Company transfers the

exchange differences arising on translation of financial statements of this foreign operation attributable to owners¡¯

equity of parent company presented under owners¡¯ equity in the balance sheet, to profit or loss in the period in

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which the disposal took place.

In case of partial disposal of equity investment or other reason that result in reduction in shareholding in a foreign

operation without losing control over it, the proportionate share of exchange differences arising from the

translation of financial statements will attributable to minority interests and will not recognized in profit or loss.

For partial disposals of equity interests in foreign operations which are associates or joint ventures, the

proportionate share of the exchange differences arising from the translation of financial statements of foreign

operations is reclassified to profit or loss.

10. Financial instrument

Financial asset or financial liability will be recognized when the Group became one of the parties under a financial

instrument contract. Financial assets and financial liabilities are initially recognized at fair value. For financial

assets and financial liabilities at fair value through profit or loss, relevant transaction costs are directly recognized

in profit or loss for the period. For financial assets and financial liabilities classified as other categories, relevant

transaction costs are included in the amount initially recognized.

(1) Determination of fair values for financial assets and financial liabilities

The fair value refers to the price that will be received when selling an asset or the price to be paid to transfer a

liability in an orderly transaction between market participants on the date of measurement. Financial instruments

exist in an active market. Fair value is determined based on the quoted price in such market. An active market

refers to where pricing is easily and regularly obtained from exchanges, brokers, industrial organizations and price

fixing service organizations, representing the actual price of a market transaction that takes place in a fair deal.

While financial instruments do not exist in an active market, the fair value is determined using valuation

techniques. Valuation technologies include reference to be familiar with situation and prices reached in recent

market transactions entered into by both willing parties, reference to present fair values of similar other financial

instruments, cash flow discounting method and option pricing models.

(2) Classification, recognition and measurement of financial assets

Conventionally traded financial assets shall be recognized and derecognized at the trading date. Financial assets

shall be classified into financial assets at fair value through profit and loss, held-to-maturity investment, loans and

accounts receivable and available-for-sale financial assets for initial recognition.

¢ÙFinancial assets at fair value through profit or loss

They include financial assets held for trading and financial assets designated as at fair value through profit or loss

for the current period.

Financial assets may be classified as financial assets held for trading if one of the following conditions is met: A.

the financial assets is acquired or incurred principally for the purpose of selling it in the near term; B. the financial

assets is part of a portfolio of identified financial instruments that are managed together and for which there is

objective evidence of a recent pattern of short-term profit-taking; or C. the financial assets is a derivative,

excluding the derivatives designated as effective hedging instruments, the derivatives classified as financial

guarantee contract, and the derivatives linked to an equity instrument investment which has no quoted price in an

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active market nor a reliably measured fair value and are required to be settled through that equity instrument.

A financial asset may be designated as at fair value through profit or loss upon initial recognition only when one

of the following conditions is satisfied: A. Such designation eliminates or significantly reduces a measurement or

recognition inconsistency that would otherwise result from measuring assets or recognizing the gains or losses on

them on different bases; or B. The financial asset forms part of a group of financial assets or a group of financial

assets and financial liabilities, which is managed and its performance is evaluated on a fair value basis, in

accordance with the Group¡¯s documented risk management or investment strategy, and information about the

grouping is reported to key management personnel on that basis.

A financial asset at fair value through profit or loss is subsequently measured at fair value. Any gains or losses

arising from changes in the fair value and any dividend or interest income earned on the financial asset are

recognized in profit or loss in the current period.

¢ÚHeld-to-maturity investment

The non-derivative financial assets with maturity date, fix return amount or amount able to determined, and the

Company held with specific intention and ability.

Held-to-maturity investment adopts effective interest method and carry out subsequent measure on amortized cost,

the incomes and losses arising from derecognition, impairment or amortization shall reckoned into current

gains/losses/

The effective interest method is a method of calculating the amortized cost of a financial asset and of allocating

interest income or expense over each period based on the effective interest of a financial asset or a financial

liability (including a group of financial assets or financial liabilities). The effective interest is the rate that

discounts future cash flows from the financial asset or financial liability over its expected life or (where

appropriate) a shorter period to the carrying amount of the financial asset or financial liability.

In calculating the effective interest rate, the Group will estimate the future cash flows (excluding future credit

losses) by taking into account all contract terms relating to the financial assets or financial liabilities whilst

considering various fees, transaction costs and discounts or premiums which are part of the effective interest rate

paid or received between the parties to the financial assets or financial liabilities contracts.

¢ÛLoan and account receivable

Refers to the non-derivative financial assets for which there is no quoted price in the active market and of which

the repo amount is fixed or determinable. The financial assets classify as loans and account receivables including

note receivable, account receivable, interest receivable, dividend receivable and other account receivables etc.

Loans and account receivables subsequently stated at amortized cost using the effective interest method; the gains

or losses arising from derecognition, impairment incurred or amortization shall reckoned into current gains/losses.

¢ÜFinancial assets available for sale

Including the non-derivative financial assets initial recognition that is appointed as available for sale, and except

for the financial assets measured by fair value and with its variation reckoned into current gains/losses as financial

assets, loans and receivables and held-to-maturity investment.

The closing cost of available-for-sale debt instrument investment is determined based on its amortized cost,

namely the initial recognition amount less the repaid principal plus or less the accumulated amortization amount

as amortized against the difference between the initial recognition amount and amount as of the maturity date at

effective interest method, and less the occurred impairment loss. The closing cost of available-for-sale equity

instrument investment refers to the acquisition cost.

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Available-for-sale financial assets are subsequently measured at fair value. The gain or loss on change in fair value

are recognized as other comprehensive income, except for impairment loss and exchange differences arising from

foreign monetary financial assets and amortized cost which are accounted for through profit or loss for the current

period. The financial assets will be transferred out of the financial assets on derecognition and accounted for

through profit or loss for the current period. However, equity investment that is not quoted in an active market and

the fair value of which cannot be measured reliably and derivative financial assets related to the equity instrument

which must be settled by delivery of such equity instrument are subsequently measured at cost.

Interests received from available-for-sale financial assets held and the cash dividends declared by the investee are

recognized as investment income.

(3) Impairment of financial assets

In addition to financial assets at fair value through profit or loss for the current period, the Group reviews the book

value of other financial assets at each balance sheet date and provide for impairment where there is objective

evidence that financial assets are impaired.

For a financial asset that is individually significant, the Group assesses the asset individually for impairment. For

a financial asset that is not individually significant, the Group assess the asset individually for impairment or

include the asset in a group of financial assets with similar credit risk characteristics and collectively assess them

for impairment. If it is determined that no objective evidence of impairment exists for an individually assessed

financial asset, whether the financial asset is individually significant or not, the financial asset is included in a

group of financial assets with similar credit risk characteristics and collectively assessed for impairment. Financial

assets for which an impairment loss is individually recognized are not included in the collective assessment for

impairment.

¢ÙImpairment of held-to-maturity investments, loans and receivables

The carrying amount of financial assets measured as costs or amortized costs are subsequently reduced to the

present value discounted from its projected future cash flow. The reduced amount is recognized as impairment

loss and recorded as profit or loss for the period. After recognition of the impairment loss from financial assets, if

there is objective evidence showing recovery in value of such financial assets impaired and which is related to any

event occurring after such recognition, the impairment loss originally recognized shall be reversed to the extent

that the carrying value of the financial assets upon reversal will not exceed the amortized cost as at the reversal

date assuming there is no provision for impairment.

¢ÚImpairment of available-for-sale financial assets

In the event that decline in fair value of the available-for-sale equity instrument is regarded as ¡°severe decline¡± or

¡°non-temporary decline¡± on the basis of comprehensive related factors, it indicates that there is impairment loss of

the available-for-sale equity instrument. In particular, ¡°severe decline¡± refers to fair value is lower than 50% of

the cost price and last for over one year. ¡°Non-temporary decline¡± refers to fair value is lower than 80% of the

cost price and last for over three years.

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When the available-for-sale financial assets impair, the accumulated loss originally included in the other

comprehensive income arising from the decrease in fair value was transferred out from the capital reserve and

included in the profit or loss for the period. The accumulated loss that transferred out from the capital reserve is

the balance of the acquired initial cost of asset, after deduction of the principal recovered, amortized amounts,

current fair value and the impairment loss originally included in the profit or loss.

After recognition of the impairment loss, if there is objective evidence showing recovery in value of such financial

assets impaired and which is related to any event occurring after such recognition in subsequent periods, the

impairment loss originally recognized shall be reversed. The impairment loss reversal of the available-for-sale

equity instrument will be recognized as other comprehensive income, and the impairment loss reversal of the

available-for-sale debt instrument will be included in the profit or loss for the period.

When an equity investment that is not quoted in an active market and the fair value of which cannot be measured

reliably, or the impairment loss of a derivative financial asset linked to the equity instrument that shall be settled

by delivery of that equity instrument, then it will not be reversed.

(4) Recognition and measurement of transfers of financial asset

Financial asset that satisfied any of the following criteria shall be derecognized: ¢Ù the contract right to recover

the cash flows of the financial asset has terminated; ¢Ú the financial asset, along with substantially all the risk and

return arising from the ownership of the financial asset, has been transferred to the transferee; and ¢Û the financial

asset has been transferred to the transferee, and the transferor has given up the control on such financial asset,

though it does not assign maintain substantially all the risk and return arising from the ownership of the financial

asset.

When the entity does not either assign or maintain substantially all the risk and return arising from the ownership

of the financial asset and does not give up the control on such financial asset, to the extent of its continuous

involvement in the financial asset, the entity recognizes it as a related financial asset and recognizes the relevant

liability accordingly. The extent of the continuous involvement is the extent to which the entity exposes to

changes in the value of such financial assets.

On derecognition of a financial asset, the difference between the following amounts is recognized in profit or loss

for the current period: the carrying amount and the sum of the consideration received and any accumulated gain or

loss that had been recognized directly in equity.

If a part of the financial assets qualifies for derecognition, the carrying amount of the financial asset is allocated

between the part that continues to be recognized and the part that qualifies for derecognition, based on the fair

values of the respective parts. The difference between the following amounts is recognized in profit or loss for the

period: the sum of the consideration received and the carrying amount of the part that qualifies for derecognition

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and the aforementioned carrying amount.

For financial assets that are sold or transferred with recourse or endorsement, the Company need to determine

whether the risk and rewards of ownership of the financial asset have been substantially transferred. If the risk and

rewards of ownership of the financial asset have been substantially transferred, the financial assets shall be

derecognized. If the risk and rewards of ownership of the financial asset have been retained, the financial assets

shall not be derecognized. If the Company neither transfers nor retains substantially all the risks and rewards of

ownership of the financial asset, the Company shall assess whether the control over the financial asset is retained,

and the financial assets shall be accounting for according to the above paragraphs.

(5) Category and measurement of financial liability

Financial liability divide into financial liability and other financial liability which are measured by fair value and

with its variation reckoned into current gains/losses, while initially recognized. The financial liability initially

recognized shall be measured at their fair values. As for the financial liability measured by fair value and with its

variation reckoned into current gains/losses, relevant transaction expenses shall reckoned into current gains/losses

directly; and for the other financial liability, relevant transaction expenses shall be reckoned as initial

recognization amount.

¢ÙFinancial liability measured by fair value and with its variation reckoned into current gains/losses

Financial liability held for trading and financial liability designated as at fair value through profit and loss meet

the same condition to classify financial assets as financial assets held for trading and financial assets designated as

at fair value through profit and loss.

Subsequent measurement of liability at fair value through profit or loss is based on fair value. The gain or loss

arising from the change in fair value and the dividend and interest expenses related to the financial liability are

included into the current profit or loss.

¢ÚOther financial liabilities

Other financial liabilities which have no quoted price in an active market, or are linked to equity instrument

without a reliably measured fair value and are required to be settled through that equity instrument are

subsequently measured based on cost. Other financial liabilities are subsequently measured based on amortized

cost using the effective interest rate method. The gain or loss arising from discontinuing recognition or

amortization is included in current profit or loss.

¢ÛFinancial guarantee contracts and loan commitment

Financial guarantee contracts other than those designated as financial liabilities at fair value through profit or loss

or loan commitments that are not designated at fair value through profit or loss and granted at a rate below market

rates are initially recognized at fair value, and shall be subsequently measured at the higher of the following: the

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amount determined in accordance with CAS 13 ¡°Contingencies¡± and the amount initially recognized less

cumulative amortization recognized in accordance with the principles set out in CAS No. 14¡±Revenue¡±.

(6) Derecognition of Financial Liabilities

The Group derecognizes a financial liability (or part of it) only when the underlying present obligation (or part of

it) is discharged. An agreement between the Group (an existing borrower) and an existing lender to replace the

original financial liability with a new financial liability with substantially different terms is accounted for as an

extinguishment of the original financial liability and the recognition of a new financial liability.

When the Group derecognizes a financial liability or a part of it, it recognizes the difference between the carrying

amount of the financial liability (or part of the financial liability) derecognized and the consideration paid

(including any non-cash assets transferred or new financial liabilities assumed) in profit or loss.

(7) Derivatives and embedded derivatives

Derivative financial instruments initially recognize at fair value at the contract date, and subsequently measured at

their fair value. Except for designated as hedge instrument and high effective hedging instruments, the gain or loss

arising from changes in fair value shall be recognized into related period profit or loss on the basis of accounting

standards of hedging accounting based on hedge characteristics, and fair value change of other derivative

instruments is recorded to current profit or loss.

For hybrid instrument with embedded derivatives, where the hybrid instrument is not designated as a financial

asset or financial liability at FVTPL, and the economic characteristics and risks of the embedded derivatives are

not closely related to that of the host contract and the conditions of which are the same as that of the embedded

derivatives and a separate instrument meet the definition of a derivative, the embedded derivatives are separated

from the hybrid instrument. If the Group is unable to measure the embedded derivative separately either at

acquisition or at a subsequent balance sheet date, it designates the entire hybrid instrument as a financial asset or

financial liability at FVTPL.

(8) Offsetting financial assets and financial liabilities

Where the Group has current enforceable legal rights to offset the recognized financial assets and financial

liabilities, and intends either to settle on a net basis, or to realize the financial asset and settle the financial liability

simultaneously, the amount after offsetting the financial assets and the financial liabilities is presented in the

balance sheet. Except for the above circumstances, financial assets and financial liabilities shall be presented

separately in the balance sheet and shall not be offset.

(9) Equity instruments

An equity instrument is a contract that evidences a residual interest in the assets of the Group after deducting all of

its liabilities. The Company issues (including refinancing), repurchases, sells or cancels equity instruments as

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treatment for change of equity. The Company does not recognize change of fair value of equity instrument.

Transaction fees related to equity transactions are deducted from equity.

All types of distributions (excluding share dividends) made by the Group to holders of equity instruments are

charged to shareholders¡¯ equity. The Group does not recognize any changes in the fair value of equity

instruments.

11. Account Receivable

(1) Account Receivable Withdrawal method on single significant amount and with bad debt provision

accrued for single item

Determine basis or amount standards for Single Significant

The account receivable over RMB 5 million

Amount

Impairment testing for the receivables independently with single

significant amount, if no impairment being found in financial

Withdrawal method on single significant amount and with bad

assets, testing in the assets portfolio with similar risk. If

debt provision accrued for single item

impairment losses being recognized, than not testing in the

receivable combination with similar risk.

(2) Receivables with bad debt provision accrual by credit portfolio

Combination Bad debt provision accrual

Age group Aging analysis

Adopt age analysis method for bad debt provision withdrawal in combination:

¡Ì Applicable ¡õ Not applicable

Age Accrued ratio for account receivable Accrued ratio for other account receivable

within one year (1 year included) 0.30% 0.30%

1£­2 years 0.30% 0.30%

2£­3 years 0.30% 0.30%

Over 3 years 100.00% 100.00%

3£­4 years 100.00% 100.00%

4£­5 years 100.00% 100.00%

Over 5 years 100.00% 100.00%

In combination, accrual bad debt provision with percentage of receivables:

¡õ Applicable ¡Ì Not applicable

In combination, accrual bad debt provision with other method:

¡õ Applicable ¡Ì Not applicable

(3) Account receivable with minor single amount but with withdrawal bad debt provision for single item:

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Reasons of withdrawal bad debt provision for single item Clearly evidence shows that the account hard to recover

Recognized impairment loss and accrued the bad debt provision

Withdrawal method for bad debt provision according to the balance between future cash flow on account

receivable and its book value

12. Inventory

(1) Classification of inventory

The inventory of the Company refers to such seven classifications as the raw materials, product in process, goods

on hand, wrap page, low value consumables, materials for consigned processing and goods sold.

(2)Valuing of the delivered and received inventory

Purchasing and storage for the inventory are priced at actual costs, inventory cost including purchasing cost,

processing cost and other expenses belongs to the inventory costs, and the expenses qualify capitalization of

borrowing costs condition. Determined the amount for inventory by perpetual inventory system.

(3) Basis for determining net realisable value of inventories and provision methods for decline in value of

inventories

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of

completion, the estimated costs necessary to make the sale and relevant taxes. Net realisable value is determined

on the basis of clear evidence obtained, and takes into consideration the purposes of holding inventories and effect

of post balance sheet events.

At the balance sheet date, inventories are measured at the lower of cost and net realisable value. If the net

realisable value is below the cost of inventories, a provision for decline in value of inventories is made. Provision

for decline in value of inventories is generally made based on the difference between the cost of single item of

inventory and its net realisable value. As for inventories with huge number and relatively low unit price, such

provision is made under categories of inventories; as for inventories related to a series of products produced and

sold in the same region, with same or similar ultimate usage or purpose and for which it is difficult to be measured

separately from other items, such provision can be made on a consolidated basis.

After the provision for decline in value of inventories is made, if the circumstances that previously caused

inventories to be written down below cost no longer exist so that the net realisable value of inventories is higher

than their cost, the original provision for decline in value is reversed and the reversal is included in profit or loss

for the period.

(4) Inventory system

Perpetual inventory system

(5) Amortization method for the low-value consumables and wrappage

The Company adopts one-off amortization method to amortize the low-value consumables.

The Company adopts one-off amortization method to amortize the wrappage at the time of receipt.

13. Classified as assets held for sale

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If a non-current asset can be promptly sold at its existing status only according to the practice terms in connection

with disposal of this kind of assets, and the Company has already made resolution on disposal of the non-current

asset and entered into irrevocable transfer agreement with the transferee, and this transfer will be completed

within one year, then the non-current asset would be calculated as non-current asset held for sale which would be

not applicable to depreciation or amortization since the date of classification as asset held for sale, and would be

measured at the lower of its carrying value less disposal cost and fair value less disposal cost. Non-current asset

held for sale consists of single item asset and disposal group. If a disposal group is a group of assets as defined by

No.8 of Business Accounting Standards-Assets Impairment, and goodwill arising from business combination shall

be allocated to the group of assets under this accounting principle, or the disposal group constitutes one operation

of the group of assets, then the disposal group includes the goodwill arising from business combination.

For single non-current asset and asset in disposal group classified as assets held for sale, they shall be presented in

balance sheet separately as current assets. For liabilities in disposal group relating to the transferred assets

classified as assets held for sale, they shall be presented in balance sheet separately as current liabilities.

If an asset or disposal group classified as held for sale no longer meets the recognition condition as non-current

asset held for sale, the Company will cease such recognition and measure the asset at the lower of (1)the carrying

value of the asset or disposal group prior to being classified as held for sale, based on the amount adjusted with

the depreciation, amortisation or impairment which should have been recognized assuming it had not been

classified as held for sale; (2)the recoverable amount on the date when the Company decides to cease disposal.

14. Long-term equity investments

Long-term equity investments under this section refer to long-term equity investments in which the Company has

control, joint control or significant influence over the investee. Long-term equity investment without control or

joint control or significant influence of the Group is accounted for as available-for-sale financial assets or

financial assets measured at fair value with any change in fair value charged to profit or loss. Details on its

accounting policy please refer to Note VI-10. ¡°Financial instruments¡±.

Joint control is the Company¡¯s contractually agreed sharing of control over an arrangement, which relevant

activities of such arrangement must be decided by unanimously agreement from parties who share control.

Significant influence is the power of the Company to participate in the financial and operating policy decisions of

an investee, but to fail to control or joint control the formulation of such policies together with other parties.

(1) Determination of investment cost

For a long-term equity investment acquired through a business combination involving enterprises under common

control, the initial investment cost of the long-term equity investment shall be the absorbing party¡¯s share of the

carrying amount of the owner¡¯s equity under the consolidated financial statements of the ultimate controlling

party on the date of combination. The difference between the initial cost of the long-term equity investment and

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the cash paid, non-cash assets transferred as well as the book value of the debts borne by the absorbing party shall

offset against the capital reserve. If the capital reserve is insufficient to offset, the retained earnings shall be

adjusted. If the consideration of the merger is satisfied by issue of equity securities, the initial investment cost of

the long-term equity investment shall be the absorbing party¡¯s share of the carrying amount of the owner¡¯s equity

under the consolidated financial statements of the ultimate controlling party on the date of combination. With the

total face value of the shares issued as share capital, the difference between the initial cost of the long-term equity

investment and total face value of the shares issued shall be used to offset against the capital reserve. If the capital

reserve is insufficient to offset, the retained earnings shall be adjusted. For business combination resulted in an

enterprise under common control by acquiring equity of the absorbing party under common control through a

stage-up approach with several transactions, these transactions will be judged whether they shall be treat as

¡°transactions in a basket¡±. If they belong to ¡°transactions in a basket¡±, these transactions will be accounted for a

transaction in obtaining control. If they are not belong to ¡°transactions in a basket¡±, the initial investment cost of

the long-term equity investment shall be the absorbing party¡¯s share of the carrying amount of the owner¡¯s equity

under the consolidated financial statements of the ultimate controlling party on the date of combination. The

difference between the initial cost of the long-term equity investment and the aggregate of the carrying amount of

the long-term equity investment before merging and the carrying amount the additional consideration paid for

further share acquisition on the date of combination shall offset against the capital reserve. If the capital reserve is

insufficient to offset, the retained earnings shall be adjusted. Other comprehensive income recognized as a result

of the previously held equity investment accounted for using equity method on the date of combination or

recognized for available-for-sale financial assets will not be accounted for.

For a long-term equity investment acquired through a business combination involving enterprises not under

common control, the initial investment cost of the long-term equity investment shall be the cost of combination on

the date of acquisition. Cost of combination includes the aggregate fair value of assets paid by the acquirer,

liabilities incurred or borne and equity securities issued. For business combination resulted in an enterprise not

under common control by acquiring equity of the acquire under common control through a stage-up approach with

several transactions, these transactions will be judged whether they shall be treat as ¡°transactions in a basket¡±. If

they belong to ¡°transactions in a basket¡±, these transactions will be accounted for a transaction in obtaining

control. If they are not belong to ¡°transactions in a basket¡±, the initial investment cost of the long-term equity

investment accounted for using cost method shall be the aggregate of the carrying amount of equity investment

previously held by the acquire and the additional investment cost. For previously held equity accounted for using

equity method, relevant other comprehensive income will not be accounted for. For previously held equity

investment classified as available-for-sale financial asset, the difference between its fair value and carrying

amount, as well as the accumulated movement in fair value previously included in the other comprehensive

income shall be transferred to profit or loss for the current period.

Agent fees incurred by the absorbing party or acquirer for the acquisition such as audit, legal service, and

valuation and consultation fees, and other related administration expenses are charged to profit or loss in the

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current period at the time such expenses incurred.

The long-term equity investment acquired through means other than a business combination shall be initially

measured at its cost. Such cost is depended upon the acquired means of long-term equity investments, which is

recognized based on the purchase cost actually paid by the Company in cash, the fair value of equity securities

issued by the Group, the agreed value of investment contract or agreement, the fair value or original carrying

amounts of the non-monetary asset exchange transaction which the asset will be transferred out of the Company,

and the fair value of long-term equity investment itself. The costs, taxes and other necessary expenses that are

directly attributable to the acquisition of the long-term equity investments are also included in the investment cost.

For additional equity investment made in order to obtain significant influence or common control over investee

without resulted in control, the relevant cost for long-term equity investment shall be the aggregate of fair value of

previously held equity investment and additional investment cost determined according to ¡°Accounting Standard

for Business Enterprises No. 22 ¨C Recognition and measurement of Financial Instruments¡±.

(2) Subsequent measurement and method for profit or loss recognition

Long-term equity investments with joint control (excluding those constitute joint ventures) or significant influence

on the investee are accounted for using equity method. In addition, long-term equity investments with control on

the investee are accounted for using cost method and record in the Company¡¯s financial statements.

¢ÙLong-term equity investments accounted for using the cost method

Under the cost method, a long-term equity investment is measured at its initial investment cost. The cost for

long-term equity investment is adjusted in the event of additional investment or investment recovery. Except

receiving the actual consideration paid for the investment or the declared but not yet distributed cash dividends or

profits which is included in the consideration, investment gains for the period is recognized as the cash dividends

or profits declared by the investee.

¢ÚLong-term equity investments accounted for using the equity method

Under the equity method, where the initial investment cost of a long-term equity investment exceeds the

investor¡¯s interest in the fair value of the investee¡¯s identifiable net assets at the acquisition date, no adjustment

shall be made to the initial investment cost. Where the initial investment cost is less than the investor¡¯s interest in

the fair value of the investee¡¯s identifiable net assets at the acquisition date, the difference shall be charged to

profit or loss for the current period, and the cost of the long term equity investment shall be adjusted accordingly.

Under the equity method, investment gain and other comprehensive income shall be recognized based on the

Group¡¯s share of the net profits or losses and other comprehensive income made by the investee, respectively.

Meanwhile, the carrying amount of long-term equity investment shall be adjusted. The carrying amount of

long-term equity investment shall be reduced based on the Group¡¯s share of profit or cash dividend distributed by

the investee. In respect of the other movement of net profit or loss, other comprehensive income and profit

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distribution of investee, the carrying value of long-term equity investment shall be adjusted and included in the

capital reserves. The Group shall recognise its share of the investee¡¯s net profits or losses based on the fair values

of the investee¡¯s individual separately identifiable assets at the time of acquisition, after making appropriate

adjustments thereto. In the event of inconformity between the accounting policies and accounting periods of the

investee and the Company, the financial statements of the investee shall be adjusted in conformity with the

accounting policies and accounting periods of the Company. Investment gain and other comprehensive income

shall be recognized accordingly. In respect of the transactions between the Group and its associates and joint

ventures in which the assets disposed of or sold are not classified as operation, the share of unrealised gain or loss

arising from inter-group transactions shall be eliminated by the portion attributable to the Company. Investment

gain shall be recognized accordingly. However, any unrealised loss arising from inter-group transactions between

the Group and an investee is not eliminated to the extent that the loss is impairment loss of the transferred assets.

In the event that the Group disposed of an asset classified as operation to its joint ventures or associates, which

resulted in acquisition of long-term equity investment by the investor without obtaining control, the initial

investment cost of additional long-term equity investment shall be the fair value of disposed operation. The

difference between initial investment cost and the carrying value of disposed operation will be fully included in

profit or loss for the current period. In the event that the Group sold an asset classified as operation to its

associates or joint ventures, the difference between the carrying value of consideration received and operation

shall be fully included in profit or loss for the current period. In the event that the Company acquired an asset

which formed an operation from its associates or joint ventures, relevant transaction shall be accounted for in

accordance with ¡°Accounting Standards for Business Enterprises No. 20 ¡°Business combination¡±. All profit or

loss related to the transaction shall be accounted for.

The Group¡¯s share of net losses of the investee shall be recognized to the extent that the carrying amount of the

long-term equity investment together with any long-term interests that in substance form part of the investor¡¯s net

investment in the investee are reduced to zero. If the Group has to assume additional obligations, the estimated

obligation assumed shall be provided for and charged to the profit or loss as investment loss for the period. Where

the investee is making profits in subsequent periods, the Group shall resume recognising its share of profits after

setting off against the share of unrecognized losses.

¢ÛAcquisition of minority interest

Upon the preparation of the consolidated financial statements, since acquisition of minority interest increased of

long-term equity investment which was compared to fair value of identifiable net assets recognized which are

measured based on the continuous measurement since the acquisition date (or combination date) of subsidiaries

attributable to the Group calculated according to the proportion of newly acquired shares, the difference of which

recognized as adjusted capital surplus, capital surplus insufficient to set off impairment and adjusted retained

earnings.

¢ÜDisposal of long-term equity investments

In these consolidated financial statements, for disposal of a portion of the long-term equity investments in a

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subsidiary without loss of control, the difference between disposal cost and disposal of long-term equity

investments relative to the net assets of the subsidiary is charged to the owners¡¯ equity. If disposal of a portion of

the long-term equity investments in a subsidiary by the parent company results in a change in control, it shall be

accounted for in accordance with the relevant accounting policies as described in Note 6. (2) ¡°Preparation Method

of the Consolidated Financial Statements¡±.

On disposal of a long-term equity investment otherwise, the difference between the carrying amount of the

investment and the actual consideration paid is recognized through profit or loss in the current period.

In respect of long-term equity investment accounted for using equity method with the remaining equity interest

after disposal also accounted for using equity method, other comprehensive income previously under owners¡¯

equity shall be accounted for in accordance with the same accounting treatment for direct disposal of relevant

asset or liability by investee on pro rata basis at the time of disposal. The owners¡¯ equity recognized for the

movement of other owners¡¯ equity (excluding net profit or loss, other comprehensive income and profit

distribution of investee) shall be transferred to profit or loss for the current period on pro rata basis.

In the event of loss of control over investee due to partial disposal of equity investment by the Group, in preparing

separate financial statements, the remaining equity interest which can apply common control or impose significant

influence over the investee after disposal shall be accounted for using equity method. Such remaining equity

interest shall be treated as accounting for using equity method since it is obtained and adjustment was made

accordingly. For remaining equity interest which cannot apply common control or impose significant influence

over the investee after disposal, it shall be accounted for using the recognition and measurement standard of

financial instruments. The difference between its fair value and carrying amount as at the date of losing control

shall be included in profit or loss for the current period. In respect of other comprehensive income recognized

using equity method or the recognition and measurement standard of financial instruments before the Group

obtained control over the investee, it shall be accounted for in accordance with the same accounting treatment for

direct disposal of relevant asset or liability by investee at the time when the control over investee is lost.

Movement of other owners¡¯ equity (excluding net profit or loss, other comprehensive income and profit

distribution under net asset of investee accounted for and recognized using equity method) shall be transferred to

profit or loss for the current period at the time when the control over investee is lost. Of which, for the remaining

equity interest after disposal accounted for using equity method, other comprehensive income and other owners¡¯

equity shall be transferred on pro rata basis. For the remaining equity interest after disposal accounted for using

the recognition and measurement standard of financial instruments, other comprehensive income and other

owners¡¯ equity shall be fully transferred.

In the event of loss of common control or significant influence over investee due to partial disposal of equity

investment by the Group, the remaining equity interest after disposal shall be accounted for using the recognition

and measurement standard of financial instruments. The difference between its fair value and carrying amount as

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at the date of losing common control or significant influence shall be included in profit or loss for the current

period. In respect of other comprehensive income recognized under previous equity investment using equity

method, it shall be accounted for in accordance with the same accounting treatment for direct disposal of relevant

asset or liability by investee at the time when equity method was ceased to be used. Movement of other owners¡¯

equity (excluding net profit or loss, other comprehensive income and profit distribution under net asset of investee

accounted for and recognized using equity method) shall be transferred to profit or loss for the current period at

the time when equity method was ceased to be used.

The Group disposes its equity investment in subsidiary by a stage-up approach with several transactions until the

control over the subsidiary is lost. If the said transactions belong to ¡°transactions in a basket¡±, each transaction

shall be accounted for as a single transaction of disposing equity investment of subsidiary and loss of control. The

difference between the disposal consideration for each transaction and the carrying amount of the corresponding

long-term equity investment of disposed equity interest before loss of control shall initially recognized as other

comprehensive income, and subsequently transferred to profit or loss arising from loss of control for the current

period upon loss of control.

15. Investment property

Measurement mode

Measured by cost method

Depreciation or amortization method

Investment property refers to real estate held to earn rentals or for capital appreciation, or both. Including the

leased land use right, land use right held for transfer upon appreciation, leased buildings, etc. in addition, in

connection with the vacant buildings held by the Company for operating lease, if the board of directors (or similar

organ) makes written resolution that the buildings are to be used for operating lease and the holding purpose will

not change in a short time, these buildings will be stated as investment properties.

Investment property is initially measured at cost. Subsequent expenditures related to an investment property shall

be included in cost of investment property only when the economic benefits associated with the asset will likely

flow to the Group and its cost can be measured reliably. All other expenditures on investment property shall be

included in profit or loss for the current period when incurred.

The Group adopts cost method for subsequent measurement of investment property, which is depreciated using

the same policy as that for buildings and land use rights.

Impairment test method and impairment provision method in relation to investment property is detailed in note

IV.22 ¡°Long term assets impairment¡±

In the event that an investment property is converted to an owner-occupied property, such property shall become

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fixed assets or intangible assets since the date of its conversion. In the event that an owner-occupied property is

converted to real estate held to earn rentals or for capital appreciation, such fixed assets or intangible assets shall

become an investment property since the date of its conversion. Investment property is measured at cost during its

conversion. Upon the conversion, the property shall be stated at the carrying amount prior to the conversion.

If an investment property is disposed of or if it withdraws permanently from use and no economic benefit will be

obtained from the disposal, the recognition of it as an investment property shall be terminated. When an

investment property is sold, transferred, retired or damaged, the amount of proceeds on disposal of the property

net of the carrying amount and related tax and surcharges is recognized in profit or loss for the current period.

16. Fixed assets

(1) Confirmation conditions

Fixed assets refer to the tangible assets for production of products, provision of labor, lease or operation, and with a service life in

excess of 1 financial year. Fixed assets are recognized while relevant economic interests flow into the Company and the cost is can be

reliably measured. Fixed assets shall be initially measured according to the cost and take the predicted discard expenses into

consideration.

(2) Depreciation methods

Categories Method Years of depreciation Scrap value rate Yearly depreciation rate

Housing buildings Straight-line depreciation 20 10% 4.5%

Machines and equipment Straight-line depreciation 10 10% 9%

Office equipment Straight-line depreciation 5 10% 18%

Electronic equipment Straight-line depreciation 5 10% 18%

Transportation

Straight-line depreciation 5 10% 18%

equipment

Other equipment Straight-line depreciation 5 10% 18%

(3) Recognization basis, valuation and depreciation method for financial lease assets

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and

rewards of asset ownership to the lessee and titles to the assets may or may not eventually be transferred. For

fixed assets acquired under finance leases, the basis for provision of leased assets depreciation is the same as that

of self-owned fixed assets. When it can be reasonably determined that the ownership of a leased asset will be

transferred at the end of the lease term, it is depreciated over the period of expected use; otherwise, the lease asset

is depreciated over the shorter period of the lease term and the period of expected use.

17. Project under Construction

Costs of construction in progress are recognized by actual construction expenses, including vary engineering

spending in construction period, the capitalized borrowing cost and other related costs before the construction

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reaches condition for planned use. When construction in progress reaches condition for planned use, it shall be

carried forward to fixed assets.

Impairment testing and provision for impairment found more in Note IV ¡°22. Long-term assets impairment¡±

18. Borrowing costs

Borrowing costs include interest, amortization of discounts or premiums related to borrowings, ancillary costs

incurred in connection with the arrangement of borrowings, and exchange differences arising from foreign

currency borrowings. For borrowing costs that are directly attributable to the acquisition, construction or

production of a qualifying asset, when expenditures for the asset and borrowing costs are being incurred, activities

relating to the acquisition, construction or production of the asset that are necessary to prepare the asset for its

intended use or sale have commenced, such borrowing costs shall be capitalized as part of the cost of that asset;

and capitalization shall discontinue when the qualifying asset is ready for its intended use or sale. Other borrowing

costs shall be recognized as expense in the period in which they are incurred.

Where funds are borrowed for a specific purpose, the amount of interest to be capitalized shall be the actual

interest expense incurred on that borrowing for the period less any bank interest earned from depositing the

borrowed funds before being used into banks or any investment income on the temporary investment of those

funds. Where funds are borrowed for general purpose, the Group shall determine the amount of interest to be

capitalized on such borrowings by applying a capitalization rate to the weighted average of the excess amounts of

cumulative expenditures on the asset over and above the amounts of specific-purpose borrowings. The

capitalization rate shall be the weighted average of the interest rates applicable to the general-purpose borrowings.

During the capitalization period, exchange differences on a specific purpose borrowing denominated in foreign

currency shall be capitalized. Exchange differences related to general-purpose borrowings denominated in foreign

currency shall be included in profit or loss for the current period.

Qualifying assets are assets (fixed assets, investment property, inventories, etc.) that necessarily take a substantial

period of time for acquisition, construction or production to get ready for their intended use or sale.

Capitalization of borrowing costs shall be suspended during periods in which the acquisition, construction or

production of a qualifying asset is interrupted abnormally, when the interruption is for a continuous period of

more than 3 months, until the acquisition, construction or production of the qualifying asset is resumed.

19. Biological assets

Nil

20. Oil-and-gas assets

Nil

21. Intangible assets

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(1) Valuation method, service life and impairment test

An intangible asset is an identifiable non-monetary asset without physical substance owned or controlled by the

Company.

An intangible asset shall be initially measured at cost. The expenditures incurred on an intangible asset shall be

recognized as cost of the intangible asset only if it is probable that economic benefits associated with the asset will

flow to the Company and the cost of the asset can be measured reliably. Other expenditures on an item asset shall

be charged to profit or loss when incurred.

Land use right acquired shall normally be recognized as an intangible asset. Self-constructed buildings (e.g.

plants), related land use right and the buildings shall be separately accounted for as an intangible asset and fixed

asset. For buildings and structures purchased, the purchase consideration shall be allocated among the land use

right and the buildings on a reasonable basis. In case there is difficulty in making a reasonable allocation, the

consideration shall be recognized in full as fixed assets.

An intangible asset with a finite useful life shall be stated at cost less estimated net residual value and any

accumulated impairment loss provision and amortized using the straight-line method over its useful life when the

asset is available for use.

Intangible assets with indefinite life are not amortized.

The Group shall review the useful life of intangible asset with a finite useful life and the amortization method

applied at least at each financial year-end. A change in the useful life or amortization method used shall be

accounted for as a change in accounting estimate. For an intangible asset with an indefinite useful life, the Group

shall review the useful life of the asset in each accounting period. If there is evidence indicating that the useful life

of that intangible asset is finite, the Company shall estimate the useful life of that asset and apply

the accounting policies accordingly.

(2)Internal accounting policies relating to research and development expenditures

Research and development expenditure of the Group was divided into expenses incurred during the research phase

and expenses incurred during the development phase.

Expenses incurred during the research phase are recognized as profit or loss in the current period.

Expenses incurred during the development phase that satisfy the following conditions are recognized as intangible

assets, while those that do not satisfy the following conditions are accounted for in the profit or loss for the current

period:

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¢Ùit is technically feasible that the intangible asset can be used or sold upon completion;

¢Úthere is intention to complete the intangible asset for use or sale;

¢Ûthe intangible asset can produce economic benefits, including there is evidence that the products produced using

the intangible asset has a market or the intangible asset itself has a market; if the intangible asset is for internal use,

there is evidence that there exists usage for the intangible asset;

¢Üthere is sufficient support in terms of technology, financial resources and other resources in order to complete

the development of the intangible asset, and there is capability to use or sell the intangible asset;

¢Ýthe expenses attributable to the development phase of the intangible asset can be measured reliably.

If the expenses incurred during the research phase and the development phase cannot be distinguished separately,

all development expenses incurred are accounted for in the profit or loss for the current period.

(3) Depreciation test method and depreciation allowance method for intangible assets

Depreciation test method and depreciation allowance method for intangible assets of the Company was been

shown on Note IV-20 ¡°Long-term assets depreciation¡±.

22. Impairment of long-term asset

The Company will judge if there is any indication of impairment as at the balance sheet date in respect of

non-current non-financial assets such as fixed assets, construction in progress, intangible assets with a finite useful

life, investment properties measured at cost, and long-term equity investments in subsidiaries, joint controlled

entities and associates. If there is any evidence indicating that an asset may be impaired, recoverable amount shall

be estimated for impairment test. Goodwill, intangible assets with an indefinite useful life and intangible assets

beyond working conditions will be tested for impairment annually, regardless of whether there is any indication of

impairment.

If the impairment test result shows that the recoverable amount of an asset is less than its carrying amount, the

impairment provision will be made according to the difference and recognized as an impairment loss. The

recoverable amount of an asset is the higher of its fair value less costs of disposal and the present value of the

future cash flows expected to be derived from the asset. An asset¡¯s fair value is the price in a sale agreement in an

arm¡¯s length transaction. If there is no sale agreement but the asset is traded in an active market, fair value shall be

determined based on the bid price. If there is neither sale agreement nor active market for an asset, fair value shall

be based on the best available information. Costs of disposal are expenses attributable to disposal of the asset,

including legal fee, relevant tax and surcharges, transportation fee and direct expenses incurred to prepare the

asset for its intended sale. The present value of the future cash flows expected to be derived from the asset over

the course of continued use and final disposal is determined as the amount discounted using an appropriately

selected discount rate. Provisions for assets impairment shall be made and recognized for the individual asset. If it

is not possible to estimate the recoverable amount of the individual asset, the Group shall determine the

recoverable amount of the asset group to which the asset belongs. The asset group is the smallest group of assets

capable of generating cash flows independently.

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For the purpose of impairment testing, the carrying amount of goodwill presented separately in the financial

statements shall be allocated to the asset groups or group of assets benefiting from synergy of business

combination. If the recoverable amount is less than the carrying amount, the Group shall recognize an impairment

loss. The amount of impairment loss shall first reduce the carrying amount of any goodwill allocated to the asset

group or set of asset groups, and then reduce the carrying amount of other assets (other than goodwill) within the

asset group or set of asset groups, pro rata on the basis of the carrying amount of each asset.

An impairment loss recognized on the aforesaid assets shall not be reversed in a subsequent period in respect of

the restorable value.

23. Long-term Deferred Expenses

Long term unamortized expenses represent the occurred expenses which should be shared by the current period

and future periods with term more than one year. And shall be amortized by straight-line method during the period

for estimated benefit.

24. Employee compensation

(1) Accounting treatment for short-term compensation

Short-term compensation including salary, bonus, allowance and subsidy, welfare expenses, medical insurance,

birth insurance premium, industrial injury insurance premium, housing fund, labor union expenditure, personnel

education fund and non-monetary welfare. During the accounting period when staff providing service to the

Company, the actual short-term compensation occurred shall recognized as liabilities and reckoned into current

gains/losses or relevant assets costs. The non-monetary welfare is measured by fair value.

(2) Accounting treatment for post-employment benefit

The post-employment benefit including the defined contribution plans. And defined contribution plans including

basic endowment insurance, unemployment insurance and annuity, corresponding payable amount will reckoned

into relevant assets costs or current gains/losses while occurred.

(3)Accounting for retirement benefits

When the Company terminates the employment relationship with employees before the end of the employment

contracts or provides compensation as an offer to encourage employees to accept voluntary redundancy, the

Company shall recognise employee compensation liabilities arising from compensation for staff dismissal and

included in profit or loss for the current period, when the Company cannot revoke unilaterally compensation for

dismissal due to the cancellation of labour relationship plans and employee redundant proposals; and the

Company recognise cost and expenses related to payment of compensation for dismissal and restructuring,

whichever is earlier. However, if the compensation for termination of employment is not expected to be fully paid

within 12 months from the reporting period, it shall be accounted for other long-term staff remuneration.

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The early retirement plan shall be accounted for in accordance with the accounting principles for compensation

for termination of employment. The salaries or wages and the social contributions to be paid for the employees

who retire before schedule from the date on which the employees stop rendering services to the scheduled

retirement date, shall be recognized (as compensation for termination of employment) in the current profit or loss

by the Group if the recognition principles for provisions are satisfied.

(4)Accounting for other long-term employee benefits

For other long-term employee benefits provided by the Company to its employees, if satisfy with the established

withdraw plan, then the benefits are accounted for under the established withdraw plan, otherwise accounted for

under defined benefit scheme.

25. Accrued liabilities

Obligations pertinent to the contingencies which satisfy the following conditions are recognized as accrued

liabilities: (1) The obligation is a current obligation borne by the Company; (2) it is likely that an outflow of

economic benefits will be resulted from the performance of the obligation; and (3) the amount of the obligation

can be reliably measured.

At the balance sheet date, accrued liabilities shall be measured at the best estimate of the necessary expenses

required for the performance of existing obligations, after taking into account relevant risks, uncertainties, time

value of money and other factors pertinent to the contingencies.

If all or some expenses incurred for settlement of accrued liabilities are expected to be borne by the third party, the

compensation amount shall, on a recoverable basis, be recognized as asset separately, and compensation amount

recognized shall not be more than the carrying amount of accrued liabilities.

(1) Contact in loss

Contact in loss is identified when the inevitable cost for performance of the contractual obligation exceeds the

inflow of expected economic benefits. When a contract in loss is identified and the obligations there under are

qualified by the aforesaid recognition criterion for contingent liability, the difference of estimated loss under

contract over the recognized impairment loss (if any) of the subject matter of the contract is recognized as

contingent liability.

(2) Restructuring obligations

For detailed, official and publicly announced restructuring plan, the direct expenses attributable to the

restructuring are recognized as contingent liabilities, provided that the aforesaid recognition criterion for

contingent liability is met. For restructuring obligations arising from disposal of part business, the Company will

recognise the obligations relating to restructuring only when it undertakes to dispose part business (namely

entering into finalized disposal agreement).

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26. Share-based payment

(1) Accounting for share-based payment

Share based payment refers to the transactions involving grant of equity instrument or assume liabilities as

determined based on equity instrument for the purpose of acquiring services from employees or other parties.

Share based payment is divided into the equity settled share based payment and cash settled share based payment.

¢Ùequity settled share based payment

Equity settled share based payment for exchange of service provided by employees is measured at the fair value of

the equity instrument granted to the employees as at the grant date. Subject to completion of services during the

vest period or satisfaction with the required performance conditions for exercising right, the amount of the fair

value is included in relevant cost or expense under straight line method based on the best estimate on the number

of exercisable equity instruments during the vest period. If it becomes exercisable immediately following the

relevant grant, it is included in relevant cost or expense on the grant date and accordingly increase capital reserve.

On each balance sheet date during the vest period, the Company makes the best estimate based on subsequent

information such as the latest available information about change of number of exercisable employees, thus to

amend the number of equity instruments which are expected to be exercisable. Impact of the above estimate is

included in relevant cost or expense for the current period, with corresponding adjustment in capital reserve.

Equity settled share based payment for exchange of service provided by others is measured at fair value of the

service as of the acquisition date provided that such fair value can be measured reliably. If such fair value can not

be measured reliably, while fair value of the equity instrument can be measured reliably, the payment shall be

measured at the fair value of equity instrument as of the acquisition date, and included in relevant cost or expense

with corresponding increase in shareholders¡¯ equity.

¢Úcash settled share based payment

As for cash settled share based payment, it is measured at the fair value of the liabilities assumed by the Company

as determined based on shares or other equity instruments. If it becomes exercisable immediately following the

relevant grant, it is included in relevant cost or expense on the grant date and accordingly increase liabilities. If it

is subject to completion of services during the vest period or satisfaction with the required performance conditions

for exercising right, on each balance sheet date during the vest period, the Company makes the best estimate on

the exercisable rights, and accounts for the service obtained in the current period in relevant cost or expense with

corresponding increase of liabilities based on the fair value of the liabilities assumed by the Company.

The Company re-measures the fair value of liabilities on each balance sheet date and settlement date prior to

settlement of relevant liabilities, with changes thereof included in profit or loss for the current period.

(2) Relevant accounting for amending or terminating share based payment plan

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In case that the Company amends share based payment plan which leads to increase of fair value of the granted

equity instruments, the Company will correspondingly increase recognition for services obtained according to the

increase of fair value of equity instrument. Increase of fair value of equity instrument refers to the difference of

fair values of equity instruments as at the revision date before and after such revision. In case that the amendment

results in decrease in total fair value of share based payment or adoption of other means which are not beneficial

to employees, the Company will continue account for the services obtained as if such amendment had never

occurred, unless the Company cancel part or all the granted equity instruments.

During the vest period, if the granted equity instruments are cancelled, the Company will accelerate exercise of

rights attaching to the granted equity instruments which are cancelled, and the remaining amount which should be

recognized during the vest period is included in profit or loss for the current period promptly, meanwhile to

recognise capital reserve. If employees or other parties who can choose to satisfy the non exercisable rights do not

satisfy such conditions during the vest period, the Company will regard them as cancellation of granted equity

instruments.

(3) Accounting for share based payment concerning the Company, its shareholders or actual controllers

As for share based payment concerning the Company, its shareholders or actual controllers, with either the

settlement entity or service-acceptance entity in the Company or not, it is accounted for in our consolidated

financial statement under the following provisions:

¢Ùfor settlement entity making settlement with its own equity instruments, the transaction is accounted for as

equity settled share based payment, otherwise it shall be accounted for as cash settled share based payment.

If the settlement entity is an investor of the service-acceptance entity, the transaction is recognized as long term

equity investment in the service-acceptance entity based on the fair value of the equity instruments as at the grant

date or the fair value of assumed liabilities, with recognition of capital reserve (other capital reserve) or liabilities.

¢ÚIf service-acceptance entity is not obliged to settle or grant its own equity instruments to its employees, the

share based payment transaction is accounted for as equity settled share based payment. If service-acceptance

entity is obliged to settle or the equity instruments granted to its employee are not the own instruments of the

entity, the share based payment transaction is accounted for as cash settled share based payment.

For intra-company share based payment transactions, if the service-acceptance entity and settlement entity are not

the same enterprise, the share based payment transaction shall be recognized and measured in the respective

financial statement of the two entities under the aforesaid principles.

27. Other financial instruments including senior shares and perpetual bonds

(1) Distinguish of senior shares and perpetual bonds

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The perpetual bonds and senior shares issued by the Company are treated as equity instruments subject to

satisfaction of all the below conditions:

¢Ùthe financial instrument excludes delivery of cash or other financial assets to others, or exchange for contractual

obligations on financial assets or financial liabilities with others under potential negative conditions;

¢Úif its own equity instruments are required or may be used to settle the financial instruments, it excludes the

contractual obligation to deliver varied numbers of own equity instruments for settlement provided that the

financial instruments are non-derivatives; if the financial instruments are derivatives, the Company can only settle

the financial instruments by fixed number of own equity instruments for exchange for fixed amount of cash or

other financial assets.

Other than the financial instruments which can be classified as equity instruments under the above conditions,

other financial instruments issued by the Company shall be classified as financial liabilities.

In case that financial instruments issued by the Company are compound financial instruments, they shall be

recognized as liabilities at the fair value of liabilities portion. The actual amount received less fair value of the

liabilities portion shall be recornised as other equity instrument. Transaction expenses occurred in issuance of

compound financial instruments are allocated to the portions of liabilities and equities according to their

respective proportion to the total issuance price.

2)Accounting for perpetual bonds and senior shares

For perpetual bonds and senior shares classified into financial liabilities, their relevant interest, dividends, gains or

losses and gains or losses arising from redemption or refinancing are all included in current profit or loss other

than those borrowing expenses which meet condition for capitalisation (please refer to note IV-18 ¡°borrowing

expenses¡±).

For perpetual bonds and senior shares classified into equity instruments, their issuance (including refinancing),

repurchase, sale or cancel are treated as change of equity, and relevant transaction fees are also deducted from

equity. The Company accounts for allocation of holders of equity instruments as profit distribution.

The Company dose not recognises change of fair value of equity instruments.

28. Revenue

(1) Income from goods sales

Income from goods sales are realized when the following conditions are met: the major risks and remuneration

entitled to the ownership of goods are transferred to buyer; neither retain the continued management right

generally related to ownership, nor exercise effective control over the sold products; the relevant economic

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benefits are probable to flow into the Company; the relevant income and costs can be measured reliably.

(2) Provision of labor services

When the outcome of a transaction involving the rendering of services can be reliably estimated, it shall, on the

balance sheet date, recognize the revenue from the rendering of services employing the percentage-of-completion

method.

The outcome of a transaction concerning the rendering of services can be reliably estimated, which shall

concurrently satisfy: ¢Ù The relevant amount of revenue can be reliably measured; ¢Ú it is probable that the

economic benefits will flow into the enterprise; ¢Û the completion schedule of the transaction can be reliably

ascertained; and ¢Ü transaction costs incurred and to be incurred can be reliably measured.

When the outcome of a transaction involving the rendering of services cannot be reliably estimated, it shall

recognize the revenue from the rendering of services based on the cost of rendering services already incurred and

expected to be compensated, and the cost of rendering services incurred shall be recognized as an expense for the

current period. If the cost of rendering services is expected not to be compensated, it shall be recognized as an

expense.

When a contract or agreement signed by the Group includes sales of goods and rendering of services, if sales of

goods and rendering of services can be differentiated and separately measured, they will be recognized

respectively. If sales of goods and rendering of services cannot be differentiated or cannot be separately measured,

they will be recognized as sales of goods in full.

(3) Income from charge for use

In line with relevant contract or agreement, recognized income on accrual basis

(4) Interest income

Recognized based on the times and real interest rates for the money used by others

29. Government Grants

(1)Determination basis and accounting for government grants related to assets

Government grants are transfer of monetary assets or non-monetary assets from the government to the Group at

no consideration, excluding capital considerations from the government as an owner of the Group. Government

grants are classified into government grants related to assets and government grants related to income.

If a government grant is in the form of a transfer of monetary asset, the item shall be measured at the amount

received or receivable. If a government grant is in the form of a transfer of non-monetary asset, the item shall be

measured at fair value. If fair value is not reliably determinable, the item shall be measured at a nominal amount

and recognized immediately in profit or loss for the current period.

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Government grants are generally recognized when received and measured at the amount actually received, but are

measured at the amount likely to be received when there is conclusive evidence at the end of the accounting

period that the Group will meet related requirements of such grants and will be able to receive the grants. The

government grants so measured should also satisfy the following conditions: (1) the amount of the grants be

confirmed with competent authorities in written form or reasonably deduced from related requirements under

financial fund management measures officially released without material

uncertainties; (2) the grants be given based on financial support projects and fund management policies officially

published and voluntarily disclosed by local financial authorities in accordance with the requirements under

disclosure of government information, where such policies should be open to any company satisfying conditions

required and not specifically for certain companies; (3) the date of payment be specified in related documents and

the payment thereof be covered by corresponding budget to ensure such grants will be paid on time as specified;

and (4)other relevant conditions which shall be met based on the specific situations of the Company and the

subject matter.

A government grant related to an asset shall be recognized as deferred income, and evenly amortized to profit or

loss over the useful life of the asset.

For the repayment of a government grant already recognized, if there is any related deferred income, the

repayment shall be off set against the carrying amount of the deferred income, and any excess shall be recognized

in profit or loss for the current period; if there is no related deferred income, the repayment shall be recognized

immediately in profit or loss for the current period.

(2) Determination basis and accounting for government grants related to income

Government grants are transfer of monetary assets or non-monetary assets from the government to the Group at

no consideration, excluding capital considerations from the government as an owner of the Group. Government

grants are classified into government grants related to assets and government grants related to income.

If a government grant is in the form of a transfer of monetary asset, the item shall be measured at the amount

received or receivable. If a government grant is in the form of a transfer of non-monetary asset, the item shall be

measured at fair value. If fair value is not reliably determinable, the item shall be measured at a nominal amount

and recognized immediately in profit or loss for the current period.

Government grants are generally recognized when received and measured at the amount actually received, but are

measured at the amount likely to be received when there is conclusive evidence at the end of the accounting

period that the Group will meet related requirements of such grants and will be able to receive the grants. The

government grants so measured should also satisfy the following conditions: (1) the amount of the grants be

confirmed with competent authorities in written form or reasonably deduced from related requirements under

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financial fund management measures officially released without material uncertainties; (2) the grants be given

based on financial support projects and fund management policies officially published and voluntarily disclosed

by local financial authorities in accordance with the requirements under disclosure of government information,

where such policies should be open to any company satisfying conditions required and not specifically for certain

companies; (3) the date of payment be specified in related documents and the payment thereof be covered by

corresponding budget to ensure such grants will be paid on time as specified; and (4)other relevant conditions

which shall be met based on the specific situations of the Company and the subject matter.

For a government grant related to income, if the grant is a compensation for related expenses or losses to be

incurred in subsequent periods, the grant shall be recognized as deferred income, and recognized in profit or loss

over the periods in which the related costs are recognized; if the grant is a compensation for related expenses or

losses already incurred, the grant shall be recognized immediately in profit or loss for the current period.

For the repayment of a government grant already recognized, if there is any related deferred income, the

repayment shall be off set against the carrying amount of the deferred income, and any excess shall be recognized

in profit or loss for the current period; if there is no related deferred income, the repayment shall be recognized

immediately in profit or loss for the current period.

30. Deferred tax assets / deferred income tax liabilities

(1) Current income tax

At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods shall be

measured at the amount expected to be paid (or recovered) according to the requirements of tax laws. Taxable

profits, which are the basis for calculating the current income tax expense, are determined after adjusting the

accounting profits before tax for the year in accordance with relevant requirements of tax laws.

(2) Deferred income tax assets and deferred income tax liabilities

Temporary differences arising from the difference between the carrying amount of an asset or liability and its tax

base, and the difference between the tax base and the carrying amount of those items that are not recognized as

assets or liabilities but have a tax base that can be determined according to tax laws, shall be recognized as

deferred income tax assets and deferred income tax liabilities using the balance sheet liability method.

Deferred income tax liabilities are not recognized for taxable temporary differences related to: the initial

recognition of goodwill; and the initial recognition of an asset or liability in a transaction which is neither a

business combination nor affects accounting profit or taxable profit (or deductible loss) at the time of the

transaction. In addition, the Group recognises the corresponding deferred income tax liability for taxable

temporary differences associated with investments in subsidiaries, associates and joint ventures, except when both

of the following conditions are satisfied: the Company able to control the timing of the reversal of the temporary

difference; and it is probable that the temporary difference will not reverse in the foreseeable future.

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Deferred income tax assets are not recognized for deductible temporary differences related to the initial

recognition of an asset or liability in a transaction which is neither a business combination nor affects accounting

profit or taxable profit (or deductible loss) at the time of the transaction. In addition, the Group recognises the

corresponding deferred income tax asset for deductible temporary differences associated with investments in

subsidiaries, associates and joint ventures to the extent that it is probable that taxable profits will be available

against which the deductible temporary differences can be utilised, except when both of the following conditions

are satisfied: it is not probable that the temporary difference will reverse in the foreseeable future; and it is not

probable that taxable profits will be available in the future, against which the temporary difference can be utilised.

The Company recognises a deferred income tax asset for the carry forward of deductible losses and tax credits to

subsequent periods, to the extent that it is probable that future taxable profits will be available against which the

deductible losses and tax credits can be utilised.

At the balance sheet date, deferred income tax assets and deferred income tax liabilities are measured at the tax

rates that are expected to apply to the period when the asset is realised or the liability is settled, according to the

requirements of tax laws.

At the balance sheet date, the Company shall review the carrying amount of a deferred income tax asset. If it is

probable that sufficient taxable profits will not be available in future periods to allow the benefit of the deferred

income tax asset to be utilised, the carrying amount of the deferred income tax asset shall be reduced. Any such

reduction in amount shall be reversed when it becomes probable that sufficient taxable profits will be available.

(3) Income tax expense

Income tax expense comprises current income tax expense and deferred income tax expense.

Current income tax expense (current income tax income) and deferred income tax expense (deferred income tax

income) are included in profit or loss for the current period, except for: recognized as other comprehensive

income or current income tax and deferred income tax related to transactions or events that are directly recognized

in other comprehensive income or owners¡¯ equity, which are recognized directly in owners¡¯ equity, and deferred

income tax arising from a business combination, which is adjusted against the carrying amount of goodwill.

(4) Presentation of income tax

When the Group has a legal right to settle on a net basis and intends either to settle on a net basis or to realise the

assets and settle the liabilities simultaneously, current tax assets and current tax liabilities are offset and presented

on a net basis.

When the Group has a legal right to settle current tax assets and liabilities on a net basis, and deferred tax assets

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and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable

entity or different taxable entities which intend either to settle current tax assets and liabilities on a net basis or to

realise the assets and liabilities simultaneously, in each future period in which significant amounts of deferred tax

assets or liabilities are expected to be reversed, deferred tax assets and deferred tax liabilities are offset and

presented on a net basis.

31. Lease

(1)Accounting for operating lease

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and

rewards of asset ownership to the lessee and titles to the assets may or may not eventually be transferred. All other

leases are classified as operating leases.

1) Operating lease business with the Group recorded as lessee

Lease payment for operating lease is recognized as related asset cost or profits and losses for the current period

using the straight-line method over the lease term. The initial direct cost is directly accounted in profit or loss for

the current period. Contingent rent is recognized as profit or loss for the current period upon occurrence.

2) Operating lease business with the Group recorded as lessor

Rental income is recognized in profit or loss for the current period using the straight-line method over the lease

term. The initial direct cost where the amount is larger is capitalised when incurred, and accounted for as profit or

loss for the current period on the same basis as recognition of rental income over the entire lease period; the initial

direct cost where the amount is fewer is included in the profit or loss for the period when incurred. Contingent

rental is accounted for as profit or loss for the period in which it is incurred.

(2) Accounting for financing lease

1) Financing lease business with the Group recorded as lessee

On the beginning date of the lease, the entry value of leased asset shall be at the lower of the fair value of the

leased asset and the present value of minimum lease payment at the beginning date of the lease. Minimum lease

payment shall be the entry value of long-term accounts payable, with difference recognized as unrecognized

financing expenses. In addition, initial direct costs attributable to leased items incurred during the process of lease

negotiation and signing of lease agreement shall be included in the value of leased assets. The balance of

minimum lease payment after deducting unrecognized financing expenses shall be accounted for long-term

liability and long-term liability due within one year.

Unrecognized financing expenses shall be recognized as financing expenses for the current period using effective

interest method during the leasing period. Contingent rent shall be included in profit or loss for the current period

at the time it incurred.

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2) Financing lease business with the Group recorded as lessor

On the beginning date of the lease, the entry value of lease receivable shall be the aggregate of minimum lease

receivable and initial direct costs at the beginning date of the lease. The unsecured balance shall be recorded. The

aggregate of minimum lease receivable, initial direct costs and unsecured balance and the different between their

present value shall be recognized as unrealised financing income. The balance of lease receivable after deducting

unrecognized financing income shall be accounted for long-term debt and long-term debt due within one year.

Unrecognized financing income shall be recognized as financing income for the current period using effective

interest method during the leasing period. Contingent rent shall be included in profit or loss for the current period

at the time it incurred.

32. Other important accounting policy and estimation

(1) Discontinued operation

Discontinued operation refers to the operation disposed or classified as held-for-sale by the Company and

presented separately under operation segments and financial statements, which has fulfilled one of the following

criteria: ¢Ù it represents an independent key operation or key operating region; ¢Ú it is part of the proposed

disposal plan on an independent key operation or proposed disposal in key operating region; or ¢Û it only

establishes for acquisition of subsidiary through disposal.

Accounting for discontinued operation is set out in note IV-13 ¡°classified as assets held for sale¡±.

33. Major accounting policy and changes

(1) Main accounting policy changes

¡õ Applicable ¡Ì Not applicable

(2) Changes of important accounting estimate

¡õ Applicable ¡Ì Not applicable

34. Other

Nil

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VI. Taxes

1. Mai tax category and tax rate

Tax category Tax calculation evidence Tax rate

Sales income, and income from

processing, maintenance, making repairs

Value added tax 17%

and supplying replacements, and labor

service

Sales tax Taxable labor income 5%

Amount of value-added tax and sales tax

Tax for maintaining and building cities 7%

payable

25%

Business income tax Taxable income

Amount of value-added tax and sales tax

Educational surtax 3%

payable

Amount of value-added tax and sales tax

2%

Local educational surtax

payable

1.2%

Property tax 70% of the original value of the property

Disclose reasons for different taxpaying body

Taxpaying body Income tax rate

2. Tax preference

Nil

3. Other

Nil

VII. Notes to Items in Consolidated Financial Statements

1. Monetary fund

In RMB

Item Ending balance Opening balance

Cash on hand 141,271.10 2,894.71

Cash in bank 26,610,794.56 30,160,972.07

Total 26,752,065.66 30,163,866.78

Other explanation

2. Financial assets measured by fair value and reckoned into current gains/losses with its variation

In RMB

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Item Ending balance Opening balance

Other explanation:

3. Derivative financial assets

¡õ Applicable ¡Ì Not applicable

4. Note receivables

(1) Classification of notes receivable

In RMB

Item Ending balance Opening balance

Bank acceptance bill 2,200,000.00

Total 2,200,000.00

(2) Pledge at period-end

In RMB

Item Amount pledge at period-end

Total 0.00

(3) Notes endorsement or discount and undue on balance sheet date

In RMB

Item Amount derecognition at period-end Amount not derecognition at period-end

Bank acceptance bill 47,314,732.69

Total 47,314,732.69

(4) Notes transfer to account receivable due for failure implementation by drawer at period-end

In RMB

Item Amount transfer to account receivable at period-end

Total 0.00

Other explanation

5. Accounts receivable

(1) Accounts receivable by category:

In RMB

Category Ending balance Opening balance

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Book balance Bad debt provision Book balance Bad debt provision

Book

Accrual Accrual Book value

Amount Ratio Amount value Amount Ratio Amount

ratio ratio

Receivables with bad

debt provision 9,591,99 1,374,95 8,217,039 8,101,9 1,310,937 6,790,982.5

88.69% 14.33% 100.00% 16.18%

accrual by credit 8.29 9.25 .04 19.90 .40 0

portfolio

Accounts with single

significant amount

1,222,82 244,564. 978,257.2

and bad debts 11.31% 20.00%

1.60 32 8

provision accrued

individually

10,814,8 1,619,52 9,195,296 8,101,9 1,310,937 6,790,982.5

Total 100.00% 12.75% 100.00% 16.18%

19.89 3.57 .32 19.90 .40 0

Receivable with single significant amount and withdrawal bad debt provision separately at end of period:

¡õ Applicable ¡Ì Not applicable

In combination, accounts receivable whose bad debts provision was accrued by age analysis:

¡Ì Applicable ¡õ Not applicable

In RMB

Ending balance

Age

Account receivable Bad debt provision Accrual ratio

within one year

Within 1 year 7,465,772.01 22,397.32 0.30%

Subtotal within one year 7,465,772.01 22,397.32 0.30%

1-2 years 658,485.35 1,975.46 0.30%

2-3 years 117,506.98 352.52 0.30%

Over 3 years 1,350,233.95 1,350,233.95 100.00%

Total 9,591,998.29 1,374,959.25

Explanation on combination determines:

According to the business scale, business nature, and customers¡¯ settlement, etc., the account receivable with single significant

amount is determined to be RMB 5 million. The account receivable with single significant amount has no depreciation reserve, and

the reserve for bad debt provision is withdrawn with age analysis method.

In combination, withdrawal proportion of bad debt provision based on balance proportion for account receivable:

¡õ Applicable ¡Ì Not applicable

In combination, withdrawal proportion of bad debt provision based on other methods for account receivable:

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(2) Bad debt provision accrual collected or switch back

Bad debt provision accrual was 308,586.17 Yuan; the amount collected or switches back amounting to 0.00 Yuan

Important bad debt provision collected or switch back:

In RMB

Company Collected or switch back amount Collection way

Total 0.00 --

(3) Account receivable actual charge off in the Period

In RMB

Item Amount written off

Written-off for the major receivable:

In RMB

Verification Arising from related

Company Nature Amount written off Reason for write-off

procedures transaction (Y/N)

Total -- 0.00 -- -- --

Explanation for write-off of receivables:

(4) Top 5 receivables at ending balance by arrears party

Total year-end balance of top five receivables by arrears party amounting to 8,267,969.20 Yuan, takes 76.45

percent of the total account receivable at year-end, bad debt provision accrual correspondingly at year-end

amounting as 1,196,764.45 Yuan.

(5) Receivable derecognition due to transfer of financial assets

(6) Assets and liability resulted by receivable transfer and continuous involvement

Other explanation:

6. Advance payment

(1) Advance payment by age

In RMB

Ending balance Opening balance

Age

Amount Ratio Amount Ratio

within one year 386,433.20 97.13% 348,277.01 100.00%

1-2 years 11,400.00 2.87%

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Total 397,833.20 -- 348,277.01 --

Explanation on reasons of failure to settle on important advance payment with age over one year:

(2) Top 5 advance payment at ending balance by prepayment object

Total year-end balance of top five advance payment by prepayment object amounting to 393,906.00 Yuan, takes

99.01 percent of the total advance payment at year-end

Other explanation

7. Interest receivable

(1) Category

In RMB

Item Ending balance Opening balance

(2) Important overdue interest

Overdue time Overdue Impairment (Y/N) and

Borrower Ending balance Overdue reason

time judgment basis

Total 0.00 -- -- --

Other explanation:

8. Dividend receivables

(1) Dividend receivables

In RMB

Item (or the invested entity) Ending balance Opening balance

(2) Major dividend receivables with over one year age

In RMB

Item or the invested Impairment (Y/N) and

Ending balance Age Reasons

entity) judgment basis

Total 0.00 -- -- --

Other explanation:

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9. Other accounts receivable

(1) Other accounts receivable by category

In RMB

Ending balance Opening balance

Book balance Bad debt provision Book balance Bad debt provision

Category Book

Accrual Accrual Book value

Amount Ratio Amount value Amount Ratio Amount

ratio ratio

Other receivables

with bad debt 845,449. 449,925. 395,523.7 961,528 450,273.9

100.00% 53.22% 100.00% 46.83% 511,254.81

provision accrual by 44 66 8 .71 0

credit portfolio

845,449. 449,925. 395,523.7 961,528 450,273.9

Total 100.00% 53.22% 100.00% 46.83% 511,254.81

44 66 8 .71 0

Other receivable with single significant amount and withdrawal bad debt provision separately at end of period:

¡õ Applicable ¡Ì Not applicable

In combination, other accounts receivable whose bad debts provision was accrued by age analysis

¡Ì Applicable ¡õ Not applicable

In RMB

Ending balance

Age

Other accounts receivable Bad debt provision Accrual ratio

within one year

within one year 93,271.92 279.81 0.30%

Subtotal within one year 93,271.92 279.81 0.30%

1-2 years 291,442.00 874.33 0.30%

2-3 years 12,000.00 36.00 0.30%

Over 3 years 448,735.52 448,735.52 100.00%

Total 845,449.44 449,925.66

Explanations on combination determine:

According to the business scale, business nature, and customers¡¯ settlement, etc., the other account receivable with single big amount

is determined to be RMB 5 million. The other account receivable with single big amount has no depreciation reserve, and the reserve

for bad debt provision is withdrawn with age analysis method.

In combination, withdrawal proportion of bad debt provision based on balance proportion for other account receivable:

¡õ Applicable ¡Ì Not applicable

In combination, withdrawal proportion of bad debt provision based on other methods for other account receivable:

¡õ Applicable ¡Ì Not applicable

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(2) Bad debt provision accrual collected or switch back

Bad debt provision accrual was 24,044.34 Yuan; the amount collected or switches back amounting to 348.24 Yuan

Important bad debt provision collected or switch back:

In RMB

Company Amount reversal or collected Collection way

Total 0.00 --

Nil

(3) Other receivables actually written-off during the reporting period

In RMB

Item Amount written off

Written-off for the major other receivable:

In RMB

Nature of other Verification Arising from related

Company Amount written off Reason for write-off

receivables procedures transaction (Y/N)

Total -- 0.00 -- -- --

Explanation for write-off of other receivables:

(4) Other receivables by nature

In RMB

Nature Ending book balance Opening book balance

Deposit 169,135.00 220,999.00

Current money 676,314.44 740,529.71

Total 845,449.44 961,528.71

(5) Top 5 other receivables at ending balance by arrears party

In RMB

Ratio in total ending

Ending balance of

Company Nature Ending balance Age balance of other

bad bet provision

receivables

Luwei Electrical

payment for goods 300,000.00 Over 3 years 35.48% 300,000.00

Equipment Co.,

Shenzhen Anjinheng

Deposit 90,100.00 Within one year 10.66% 270.30

Industrial Co., Ltd.

Total -- 390,100.00 -- 46.14% 300,270.30

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(6) Account receivable with government grants involved

In RMB

Time, amount and basis

Company Item Ending balance Ending age of amount collection

estimated

Total -- 0.00 -- --

(7) Other account receivable derecognition due to financial assets transfer

(8) Assets and liability resulted by other account receivable transfer and continuous involvement

Other explanation:

10. Inventory

(1) Inventory classification

In RMB

Ending balance Opening balance

Item Depreciation Depreciation

Book balance Book value Book balance Book value

reserve reserve

Raw materials 441,460.58 441,460.58 302,597.03 302,597.03

Finished goods 3,615,787.10 3,615,787.10 5,868,710.50 5,868,710.50

Total 4,057,247.68 4,057,247.68 6,171,307.53 6,171,307.53

(2) Inventory depreciation reserve

In RMB

Increase in the current period Decrease in the current period

Item Opening balance Switch back or Ending balance

Accrual Other Other

write-off

Total 0.00 0.00 0.00 0.00

(3) Explanation on capitalization of borrowing costs at ending balance of inventory

(4) Assets that completed without settlement from construction contract

In RMB

Item Amount

Other explanation:

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11. Assets holding ready for sold

In RMB

Expected disposal

Item Ending book value Fair value Expected disposal time

expenses

Total 0.00 0.00 0.00 --

Other explanation:

12. Non-current assets due within one year

In RMB

Item Ending balance Opening balance

Other explanation:

13. Other current assets

In RMB

Item Ending balance Opening balance

Prepaid tax 209,155.59

Total 209,155.59

Other explanation:

14. Financial assets available for sale

(1) Financial assets available for sale

In RMB

Ending balance Opening balance

Item Depreciation Depreciation

Book balance Book value Book balance Book value

reserves reserves

Total 0.00 0.00 0.00 0.00

(2) Financial assets available for sale measured by fair value at period-end

In RMB

Equity instrument Debt instrument

Type Total

available for sale available for sale

Cost /liability of equity

instrument/ amortization 0.00

cost of debt instrument

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Fair value 0.00

Amount of fair value

changes that

accumulatively reckoned 0.00

in other comprehensive

gains

Amount with impairment

0.00

accrual

(3) Financial assets available for sale measured by cost at period-end

In RMB

Book balance Depreciation reserves Ratio of

The share-holdi

Cash

invested Period-beg Period-beg ng in

Increased Decreased Period-end Increased Decreased Period-end dividend

entity inning inning invested

entity

Total 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -- 0.00

(4) Changes of impairment in Period

In RMB

Equity instrument Debt instrument

Type Total

available for sale available for sale

Balance of impairment

0.00

accrual at period-begin

Current accrual 0.00

Including: transfer-in

from other 0.00

comprehensive income

Current decrease 0.00

Including: switch back

due to fair value rebound 0.00

at period-end

Balance of impairment

0.00

accrual at period-end

(5) Fair value of equity instrument available for sale sharply declined or other-than-temporary declined at

period-end without depreciation reserves accrual

In RMB

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Fair value Time of drops Amount with

Reasons for

Item Investment cost Ending fair value declined relative persistently impairment

un-accrual

to cost (month) accrual

Total 0.00 0.00 -- -- 0.00 --

Other explanation

15. Held-to-maturity investment

(1) Held-to-maturity investment

In RMB

Ending balance Opening balance

Item Depreciation Depreciation

Book balance Book value Book balance Book value

reserves reserves

Total 0.00 0.00 0.00 0.00

(2) Important held-to-maturity investment at period-end

In RMB

Bond Face value Coupon value Actual rate Maturity date

Total 0.00 -- -- --

(3) Held-to-maturity investment reclassify in the Period

Other explanation

16. Long-term account receivable

(1) Long-term account receivable

In RMB

Ending balance Opening balance

Discount rate

Item Bad debt Bad debt

Book balance Book value Book balance Book value section

provision provision

Total 0.00 0.00 0.00 0.00 --

(2) Long-term account receivable derecognition due to transfer of financial assets

(3) Assets and liability resulted by long-term account receivable transfer and continuous involvement

Other explanation

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17. Long-term equity investment

In RMB

+,-

Ending

Other Cash

Investme balance

The Additiona comprehe dividend

Opening nt gains Other Ending of

invested l Capital nsive or profit Impairme

balance recognize equity Other balance impairme

entity investmen reduction income announce nt accrual

d under change nt

t adjustmen d to

equity provision

t issued

I. Joint venture

Subtotal 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

II. Associated enterprise

Subtotal 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Other explanation

18. Investment real estate

(1) Investment real estate measured at cost

¡õ Applicable ¡Ì Not applicable

(2) Investment real estate measured at fair value

¡õ Applicable ¡Ì Not applicable

(3) Certificate of title un-completed

In RMB

Item Book value Reasons for un-completed

Other explanation

19. Fixed assets

(1) Fixed assets

In RMB

Transportation Electronic and other

Item Machines and equipment Total

equipment equipment

I. original book value:

1.Opening balance 194,406.84 515,814.24 637,606.48 1,347,827.56

2. increased in the

222,222.22 122,831.69 37,723.39 382,777.30

Period

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(1) Purchase 222,222.22 122,831.69 37,723.39 382,777.30

(2) construction in

process transfer-in

(3) the increase in

business combination

3.DecreasedAmount

(1) Disposal or

scrap

4.Ending balance 416,629.06 638,645.93 675,329.87 1,730,604.86

II. accumulated

depreciation

1.Opening balance 1,474.16 155,799.08 416,592.48 573,865.72

2. increased in the

32,778.68 90,487.44 25,566.59 148,832.71

Period

(1) provision 32,778.68 90,487.44 25,566.59 148,832.71

3.DecreasedAmount

(1) Disposal or scrap

4.Ending balance 34,252.84 246,286.52 442,159.07 722,698.43

III. impairment of

preparation

1.Opening balance

2. increased in the

Period

(1) provision

3.DecreasedAmount

(1) Disposal or scrap

4.Ending balance

IV. book value

1.Ending book value 382,376.22 392,359.41 233,170.80 1,007,906.43

2. Opening book 192,932.68 360,015.16 221,014.00 773,961.84

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value

(2) Fixed assets temporary idle

In RMB

Accumulated Depreciation

Item Original book value Book value Note

depreciation reserves

(3) Fixed assets leased through operating lease

In RMB

Accumulated

Item Original book value Depreciation reserves Book value

depreciation

(4) Fixed assets leased through operating lease

In RMB

Item Ending book value

(5) Certificate of title un-completed

In RMB

Item Book value Reasons

Other explanation

20. Construction in progress

(1) Construction in progress

In RMB

Ending balance Opening balance

Item Depreciation Depreciation

Book balance Book value Book balance Book value

reserves reserves

Total 0.00 0.00 0.00 0.00

(2) Changes in significant construction in progress

In RMB

increased Fixed Other Proporti Accumul including Interest

Opening Ending Sourceof

Item Budget in the assets decrease on of Progress ated : interest capitaliz

balance balance funds

Period transfer-i d in the project amount capitaliz ation rate

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n in the Period investme of ed of the

Period nt in interest amount year

budget capitaliz of the

ation year

Total 0.00 0.00 0.00 0.00 0.00 0.00 -- -- 0.00 0.00 0.00% --

(3) Depreciation reserves accrual

In RMB

Item Accrual Amount Reasons

Total 0.00 --

Other explanation

21. Engineering materials

In RMB

Item Ending balance Opening balance

Other explanation:

22. Disposal of fixed assets

In RMB

Item Ending balance Opening balance

Other explanation:

23. Productive biological assets

(1) Productive biological assets measured by cost

¡õ Applicable ¡Ì Not applicable

(2) Productive biological assets measured by fair value

¡õ Applicable ¡Ì Not applicable

24. Oil-and-gas assets

¡õ Applicable ¡Ì Not applicable

121

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25. Intangible assets

(1) Intangible assets

In RMB

Non-patent

Item Land use right Patent Trademark Total

technology

I. original book

value:

1.Opening

5,271,000.00 5,271,000.00

balance

2. increased in

the Period

(1) Purchase

(2) internal R

&D

(3) the

increase in business

combination

3.DecreasedAmount

(1) Disposal

4.Ending

5,271,000.00 5,271,000.00

balance

II. accumulated

depreciation

1.Opening

753,000.00 753,000.00

balance

2. increased in

753,000.00 753,000.00

the Period

(1) provision 753,000.00 753,000.00

3.DecreasedAmount

(1) Disposal

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4.Ending

1,506,000.00 1,506,000.00

balance

III. impairment of

preparation

1.Opening

balance

2. increased in

the Period

(1) provision

3.DecreasedAmount

(1) Disposal

4.Ending

balance

IV. book value

1.Ending book

3,765,000.00 3,765,000.00

value

2. Opening

4,518,000.00 4,518,000.00

book value

Ratio of the intangible assets from internal R&D in balance of intangible assets at period-end

(2) Land use right without certificate of title completed

In RMB

Item Book value Reasons

Other explanation:

26. Development expense

In RMB

Opening

Item increased in the Period Decreased Amount Ending balance

balance

Total 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Other explanation

27. Goodwill

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(1) Original book value of goodwill

In RMB

The invested

Opening balance Increase during the year Decreased during the year Ending balance

entity or items

Total 0.00 0.00 0.00 0.00 0.00 0.00

(2) Depreciation reserves of goodwill

In RMB

The invested

Opening balance Increase during the year Decreased Ending balance

entity or items

Total 0.00 0.00 0.00 0.00 0.00 0.00

Process of impairment testing, parameter and recognition method for impairment losses:

Other explanation:

28. Long-term unamortized expenses

In RMB

increased in the Amortized in the

Item Opening balance Other decrease Ending balance

Period Period

Total 0.00 0.00 0.00

Other explanation

29. Deferred income tax assets and deferred income tax liabilities

(1) Deferred income tax assets un-offset

In RMB

Ending balance Opening balance

Item Deductible temporary Deferred income tax Deductible temporary Deferred income tax

difference assets difference assets

Asset depreciation

308,276.93 89,066.31 47,988.32 11,997.08

reserves

Total 308,276.93 89,066.31 47,988.32 11,997.08

(2) Deferred income tax liabilities un-offset

In RMB

Item Ending balance Opening balance

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Taxable temporary Deferred income tax Taxable temporary Deferred income tax

differences liabilities differences liabilities

Total 0.00 0.00 0.00 0.00

(3) Deferred income tax assets and deferred income tax liabilities listed after off-set

In RMB

Ending balance of Trade-off between the Opening balance of

Trade-off between the

deferred income tax deferred income tax deferred income tax

Item deferred income tax

assets or liabilities after assets and liabilities at assets or liabilities after

assets and liabilities

off-set period-begin off-set

Deferred income tax

308,276.93 89,066.31 47,988.32 11,997.08

assets

(4) Details of unrecognized deferred income tax assets

In RMB

Item Ending balance Opening balance

Total 0.00 0.00

(5) Deductible losses of un-recognized deferred income tax assets expired on the followed year

In RMB

Year Ending amount Opening amount Note

Total 0.00 0.00 --

Other explanation:

30. Other non-current assets

In RMB

Item Ending balance Opening balance

Other explanation:

31. Short-term loans

(1)Types of short-term loans

In RMB

Item Ending balance Opening balance

Explanation on short-term loans category

125

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(2) Overdue outstanding short-term loans

Total 0.00 Yuan overdue outstanding short-term loans at period-end, including the followed significant amount:

In RMB

Unit Ending balance Lending rate Overdue time Overdue rate

Total 0.00 -- -- --

Other explanation:

32. Financial liability measured by fair value and with its variation reckoned into current gains/losses

In RMB

Item Ending balance Opening balance

Other explanation:

33. derivative financial liabilities

¡õ Applicable ¡Ì Not applicable

34. Notes payable

In RMB

Type Ending balance Opening balance

Notes expired at year-end without paid was 0.00 Yuan

35. Account payable

(1) Account payable

In RMB

Item Ending balance Opening balance

Loans 7,787,813.83 10,278,377.96

Total 7,787,813.83 10,278,377.96

(2) Account payable with over one year book age

In RMB

Item Ending balance Reasons of un-paid or carry-over

Total 0.00 --

Other explanation:

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36. Account received in advance

(1) Account received in advance

In RMB

Item Ending balance Opening balance

Loans 2,024,718.30 2,595,736.07

Total 2,024,718.30 2,595,736.07

(2) Account received in advance with over one year book age

In RMB

Item Ending balance Reasons of un-paid or carry-over

Total 0.00 --

(3) Projects that settle without completed from construction contract at period-end

In RMB

Item Amount

Other explanation:

During the reporting period no significant advance payments for more than 1 years of age.

37. Wages payable

(1) Wages payable

In RMB

Item Opening balance Increase during the year Decreased Ending balance

I. Short-term compensation 1,767,497.76 6,876,171.33 7,264,318.85 1,379,350.24

II. Post-employment

welfare- defined 5,316.96 420,023.66 420,023.66 5,316.96

contribution plans

Total 1,772,814.72 7,296,194.99 7,684,342.51 1,384,667.20

(2) Short-term compensation

In RMB

Item Opening balance Increase during the year Decreased Ending balance

1. Wages, bonuses, allowances

1,526,329.12 6,030,079.98 6,408,167.91 1,148,241.19

andsubsidies

2. Welfare for workers

416,257.25 416,257.25

and staff

3. Social insurance 1,293.08 180,082.73 180,082.73 1,293.08

127

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Including: Medical

1,293.08 150,245.41 150,245.41 1,293.08

insurance

Work injury

6,964.73 6,964.73

insurance

Maternity

22,872.59 22,872.59

insurance

4. Housing accumulation

11,334.44 180,654.20 181,720.68 10,267.96

fund

5. Labor union

expenditure and

228,541.12 69,097.17 78,090.28 219,548.01

personnel education

expense

Total 1,767,497.76 6,876,171.33 7,264,318.85 1,379,350.24

(3) Defined contribution plans

In RMB

Item Opening balance Increase during the year Decreased Ending balance

1. Basic endowment

5,172.32 400,198.70 400,198.70 5,172.32

insurance

2. Unemployment

144.64 19,824.96 19,824.96 144.64

insurance

Total 5,316.96 420,023.66 420,023.66 5,316.96

Other explanation:

The Company participates in the pension insurance and unemployment insurance plans established by government

authorities by laws. Under these plans, the Company makes monthly contribution to these plans based on 14% and

2% of the paid salaries of its employees respectively. Other than the aforesaid monthly contribution, the Company

takes no further payment obligation. The relevant expenditure is included in current profit or loss or cost of

relevant assets when occurs.

38. Tax payable

In RMB

Item Ending balance Opening balance

Value-added tax 1,074,435.25 1,256,783.68

Business tax 28,175.45 25,782.60

Enterprise income tax 745,109.42

Individual income tax 30,039.52 40,662.68

Urban maintenance and construction tax 54,951.97 64,952.41

128

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Educational surtax 34,432.54 41,575.59

Embankment expenses 4,198.63 4,198.63

House property tax 45,070.60 53,122.79

Total 1,271,303.96 2,232,187.80

Other explanation:

The Company paid property tax on behalf of administrator.

39. Interest payable

In RMB

Item Ending balance Opening balance

Interest overdue without paid:

In RMB

Borrower Amount overdue Reasons

Total 0.00 --

Other explanation:

40. Dividends payable

In RMB

Item Ending balance Opening balance

Other explanation, including dividends payable with over one year age and disclosure un-payment reasons:

41. Other payable

(1) Classification of other payable according to nature of account

In RMB

Item Ending balance Opening balance

Custodian and common benefit debts 9,659,853.85 9,840,809.85

Current money 8,552,160.51 9,370,269.08

Margin 1,798,346.00 1,903,346.00

Total 20,010,360.36 21,114,424.93

(2) Significant other payable with over one year age

In RMB

Item Ending balance Reasons of un-paid or carry-over

Custodian and common benefit debts 9,659,853.85 Un-cleared

Guosheng Energy 6,500,000.00 Interest-free loans

Total 16,159,853.85 --

129

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Other explanation

42. Liability holding ready for sold

In RMB

Item Ending balance Opening balance

Other explanation:

43. Non-current liability due within one year

In RMB

Item Ending balance Opening balance

Other explanation:

Nil

44. Other current liability

In RMB

Item Ending balance Opening balance

Changes of short-term bond payable:

In RMB

Accrual Premium/

Face Release Bond Issuing Opening Issued in interest discount Paid in Ending

Bond

value date period amount balance the Period by face amortizati the Period balance

value on

Total -- -- -- 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Other explanation:

Nil

45. Long-term loans

(1) Classification of long-term loans

In RMB

Item Ending balance Opening balance

Explanation:

Nil

Other explanation, including interest rate section:

Nil

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46. Bonds payable

(1) Bonds payable

In RMB

Item Ending balance Opening balance

(2) Changes of bonds payable (not including the other financial instrument of preferred stock and

perpetual capital securities that classify as financial liability)

In RMB

Total -- -- -- 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

(3) Convertible conditions and time for shares transfer for the convertible bonds

Nil

(4) Other financial instruments classify as financial liability

Basic information of the outstanding preferred stock and perpetual capital securities at period-end

Nil

Changes of outstanding preferred stock and perpetual capital securities at period-end

In RMB

Outstanding Period-begin Increase during the year Decreased Period-end

financial

Amount Book value Amount Book value Amount Book value Amount Book value

instrument

Total 0 0.00 0 0.00 0 0.00 0 0.00

Basis for financial liability classification for other financial instrument

Nil

Other explanation

Nil

47. Long-term account payable

(1) Listed by nature

In RMB

Item Ending balance Opening balance

Other explanation:

131

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48. Long-term employee payable

(1) Long-term employee payable

In RMB

Item Ending balance Opening balance

(2) Changes of defined benefit plans

Present value of the defined benefit plans:

In RMB

Item Current amount Last amount

Scheme assets:

In RMB

Item Current amount Last amount

Net liability (assts) of the defined benefit plans

In RMB

Item Current amount Last amount

Content of defined benefit plans and relevant risks, impact on future cash flow of the Company as well as times and uncertainty:

Major actuarial assumption and sensitivity analysis:

Other explanation:

49. Special payable

In RMB

Increase during the

Item Opening balance Decreased Ending balance Causes

year

Total 0.00 0.00 --

Other explanation:

50. Accrued liability

In RMB

Item Ending balance Opening balance Causes

Other explanation, including relevant important assumptions and estimation:

51. Deferred income

In RMB

Increase during the

Item Opening balance Decreased Ending balance Causes

year

132

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Total 0.00 0.00 --

Item with government grants involved:

In RMB

Amount reckoned

New grants in the Assets-related/inc

Item Opening balance in non-operation Other changes Ending balance

Period ome related

revenue

Total 0.00 0.00 0.00 --

Other explanation:

52. Other non-current liability

In RMB

Item Ending balance Opening balance

Other explanation:

53. Share capital

In RMB

Changeduringtheyear(+,-)

Shares

Opening

New shares transferred Ending balance

balance Bonus share Other Subtotal

issued from capital

reserve

Total shares 551,347,947.00 551,347,947.00

Other explanation:

54. Other equity instrument

(1) Basic information of the outstanding preferred stock and perpetual capital securities at period-end

(2) Changes of outstanding preferred stock and perpetual capital securities at period-end

In RMB

Outstanding Period-begin Increase during the year Decreased Period-end

financial

Amount Book value Amount Book value Amount Book value Amount Book value

instrument

Total 0 0 0.00 0 0.00 0

Changes of other equity instrument, change reasons and relevant accounting treatment basis:

Other explanation:

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55. Capital reserve

In RMB

Item Opening balance Increase during the year Decreased Ending balance

Other capital reserve 627,834,243.83 54.02 627,834,297.85

Debt restructuring

482,580,588.23 482,580,588.23

income

Other 145,253,655.60 54.02 145,253,709.62

Total 627,834,243.83 54.02 627,834,297.85

Other explanation, including changes and reasons for changes:

Among the other capital reserves, 135,840,297.18 Yuan refers to the payment for creditor from shares assignment by whole

shareholders; majority shareholder Guosheng Energy donated 5,390,399.74 Yuan.

56. Treasury stock

In RMB

Item Opening balance Increase during the year Decreased Ending balance

Total 0.00 0.00

Other explanation, including changes and reasons for changes:

57. Other comprehensive income

In RMB

Current amount

Less: written in

other

Account comprehensive

Opening Belong to Belong to Ending

Item before income in

balance Less : income parent minority balance

previous period

income tax in and carried tax expense company after shareholders

tax after tax

the year forward to gains

and losses in

current period

Total other comprehensive income 0.00 0.00 0.00

Other explanation, including the active part of the hedging gains/losses of cash flow transfer to initial recognization adjustment for

the arbitraged items

58. Special reserves

In RMB

Item Opening balance Increase during the year Decreased Ending balance

Total 0.00 0.00

Other explanation, including changes and reasons for changes:

134

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59. Surplus reserves

In RMB

Item Opening balance Increase during the year Decreased Ending balance

Statutory surplus reserve 32,673,227.01 32,673,227.01

Total 32,673,227.01 0.00 0.00 32,673,227.01

Other explanation, including changes and reasons for changes:

60. Retained profit

In RMB

Item Current period Last period

Retained profit at period-end before adjustment -1,199,952,070.17 -1,204,837,748.73

Retained profit at period-begin after adjustment -1,199,952,070.17 -1,204,837,748.73

Add: net profit attributable to shareholders of

-138,355.58 4,885,678.56

parent company for this year

Retained profit at period-end -1,200,090,425.75 -1,199,952,070.17

Adjustment for retained profit at period-begin:

1). Retroactive adjustment due to the Accounting Standards for Business Enterprise and relevant new regulations, retained profit at

period-begin has 0.00 Yuan affected;

2) Due to the accounting policy changes, retained profit at period-begin has 0.00 Yuan affected;

3) Due to the major accounting errors correction, retained profit at period-begin has 0.00 Yuan affected;

4) Consolidation range changed due to the same control, retained profit at period-begin has 0.00 Yuan affected;

5) Total other adjustment impacts 0.00 Yuan retained profit at period-begin

61. Operating income and operating cost

In RMB

Current amount Last amount

Item

Income Cost Income Cost

Main business 169,765,416.68 158,247,892.61 206,787,455.39 194,455,356.12

Other business 1,224,613.42 1,151,379.27 5,283,130.38 4,509,309.53

Total 170,990,030.10 159,399,271.88 212,070,585.77 198,964,665.65

62. Business tax and surcharge

In RMB

Item Current amount Last amount

Business tax 180,489.66 250,697.67

135

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Urban maintenance and construction tax 146,170.20 150,619.25

Educational surtax 104,407.32 107,585.20

Total 431,067.18 508,902.12

Other explanation:

Details of the various business taxes and additional standards are in "tax".

63. Sales expense

In RMB

Item Current amount Last amount

Salary 3,046,778.67 2,403,392.34

market promotion costs 1,474,565.46 721,113.68

Lease and property management fee 562,901.30 666,701.92

Travel expenses 601,963.66 479,398.60

Other 829,396.81 1,069,856.86

Total 6,515,605.90 5,340,463.40

Other explanation:

64. Administration expense

In RMB

Item Current amount Last amount

Salary 3,341,944.77 4,776,645.93

Lease and property management fee 1,113,211.99 2,801,452.78

Repair charge 1,287,036.57

Intermediary services charge 636,037.72 1,495,493.10

Other 300,371.66 3,748,259.18

Total 5,391,566.14 14,108,887.56

Other explanation:

65. Financial expense

In RMB

Item Current amount Last amount

Interest expenditure

Less: Interest income 695,798.95 200,059.09

exchange loss 0.41 -18.12

Other 20,600.33 26,623.61

136

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Total -675,198.21 -173,453.60

Other explanation:

66. Loss from Assets depreciation

In RMB

Item Current amount Last amount

I. Bad debt losses 308,237.93 48,575.61

Total 308,237.93 48,575.61

Other explanation:

Loss of provision for bad debts of accounts receivable was RMB 308,586.17, reversal of bad debt losses of other receivables was

RMB 348.24.

67. Changes in fair value gains

In RMB

Changes resources Current amount Last amount

Other explanation:

68. Investment income

In RMB

Item Current amount Last amount

Other explanation:

69. Non-operation revenue

In RMB

Amount reckoned into

Item Current amount Last amount non-recurring gains/losses in

the Year

Total gains from disposal of

39,731.46

non-current assets

Income from fine and penalty 103,000.00

Other 4,210,594.98 14,542,620.77 4,210,594.98

Total 4,210,594.98 14,685,352.23 4,210,594.98

Government grants reckoned into current gains/losses:

In RMB

Whether the

Issuing Whether Amount of Amount of Assets

Item Issuing cause Property type impact of

subject special this period last period related/Incom

subsidies on

137

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the current subsidies e related

profit and

loss

Total -- -- -- -- -- 0.00 0.00 --

Other explanation:

70. Non-operating expenditure

In RMB

Amount reckoned into

Item Current amount Last amount non-recurring gains/losses in

the Year

Total non-current assets

5,880.00

disposal losses

Other 3,841,393.90 23,158.00 3,841,393.90

Total 3,841,393.90 29,038.00 3,841,393.90

Other explanation:

71. Income tax expense

(1) Income tax expense

In RMB

Item Current amount Last amount

Current income tax 171,678.36 2,157,857.16

Deferred income tax -77,069.23 -11,997.08

Total 94,609.13 2,145,860.08

(2) Adjustment on accounting profit and income tax expenses

In RMB

Item Current amount

Total profit -11,319.64

Income tax measured by statutory/applicable tax rate 0.00

Impact on cost, expenses and losses that unable to deducted 105,928.77

income tax expenses 94,609.13

Other explanation

72. Other comprehensive income

Found more in Note 57.

138

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73. Items of cash flow statement

(1) Other cash received in relation to operation activities

In RMB

Item Current amount Last amount

Interest and Rent and utilities etc. 5,087,819.08 4,171,494.61

Custodian (2013 annual income tax) 92,388,206.44

Custodian (common interest debt) 12,536,900.00

Custodian (employee claims) 2,360,640.00

Other Current money 1,937,206.93 4,134,967.01

Total 7,025,026.01 115,592,208.06

Explanation on other cash received in relation to operation activities

(2) Other cash paid in relation to operation activities

In RMB

Item Current amount Last amount

utilities 458,190.10 816,881.52

Market sales phase expenses as

1,474,565.46 2,937,071.06

advertisement promoted

Management phase expenses as listing

charge, agency fee and three Meetings 5,588,378.31 5,033,523.00

operations expenses and office expenses

Rent and property fee and maintenance fee 2,364,764.52 4,088,489.35

Deposit and Margin paid 1,353,871.46 2,800,580.55

Other Current money 2,222,080.74

Total 11,239,769.85 17,898,626.22

Explanation on other cash paid in relation to operation activities

(3) Cash received from other investment activities

In RMB

Item Current amount Last amount

Explanation on cash received from other investment activities

(4) Cash paid related with investment activities

In RMB

Item Current amount Last amount

Explanation on cash paid related with investment activities

(5) Other cash received in relation to financing activities

In RMB

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Item Current amount Last amount

Explanation on other cash received in relation to financing activities

(6) Cash paid related with financing activities

In RMB

Item Current amount Last amount

Explanation on cash paid related with financing activities

74. Supplementary information to statement of cash flow

(1) Supplementary information to statement of cash flow

In RMB

Supplementary information This Period Last Period

1. Net profit adjusted to cash flow of

-- --

operation activities:

Net profit -105,928.77 5,782,999.18

Add: Assets impairment provision 308,237.93 48,575.61

Depreciation of fixed assets, consumption of

oil assets and depreciation of productive 148,832.71 79,066.98

biology assets

Amortization of intangible assets 753,000.00 753,000.00

Loss from disposal of fixed assets, intangible

assets and other long-term assets(gain is -33,851.46

listed with ¡°-¡±)

Decrease of deferred income tax

-77,069.23 -11,997.08

asset( (increase is listed with ¡°-¡±)

Decrease of inventory (increase is listed with

2,114,059.85 -1,626,191.10

¡°-¡±)

Decrease of operating receivable accounts

-446,376.91 104,734,227.53

(increase is listed with ¡°-¡±)

Increase of operating payable accounts

-5,723,833.42 -105,804,781.48

(decrease is listed with ¡°-¡±)

Other 54.02

Net cash flow arising from operating

-3,029,023.82 3,921,048.18

activities

2. Material investment and financing not

-- --

involved in cash flow

3. Net change of cash and cash equivalents: -- --

Balance of cash at period end 26,752,065.66 30,163,866.78

Less: Balance of cash at year-begin 30,163,866.78 26,834,171.59

Net increasing of cash and cash equivalents -3,411,801.12 3,329,695.19

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(2) Net cash paid for obtaining subsidiary in the Period

In RMB

Amount

Including: --

Including: --

Including: --

Other explanation:

(3) Net cash received by disposing subsidiary in the Period

In RMB

Amount

Including: --

Including: --

Including: --

Other explanation:

(4) Constitution of cash and cash equivalent:

In RMB

Item Ending balance Opening balance

¢ñ. Cash 26,752,065.66 30,163,866.78

Including: Cash on hand 141,271.10 2,894.71

Bank deposit available for

26,610,794.56 30,160,972.07

payment at any time

¢ó. Balance of cash and cash equivalent at

26,752,065.66 30,163,866.78

period-end

Other explanation:

Cash and cash equivalents is excluding the parent company or subsidiary of the group using

restricted cash and cash equivalents.

75. Notes of changes of owners¡¯ equity

Explain the name and adjusted amount in ¡°Other¡± at end of last period:

76. Assets with ownership or use right restricted

In RMB

Item Ending book value Restriction reasons

Total 0.00 --

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Other explanation:

77. Foreign currency monetary items

(1) Foreign currency monetary items

In RMB

Ending foreign currency

Item Convert rate Ending RMB balance converted

balance

Other explanation:

(2) Explanation on foreign operational entity, including as for the major foreign operational entity,

disclosed main operation place, book-keeping currency and basis for selection; if the book-keeping

currency changed, explain reasons

¡õ Applicable ¡Ì Not applicable

78. Hedging

Disclosed hedging items and relevant hedging instrument based on hedging¡¯s category, disclosed qualitative and quantitative

information for the arbitrage risks:

Nil

79. Other

Nil

VIII. Changes of consolidation range

1. Enterprise combined under different control

(1) Enterprise combined under different control in the Period

In RMB

Income of Net profit of

Standard to

Time point Cost of Ratio of Acquired acquiree from acquiree from

Purchasing determine the

Acquiree for equity equity equity way Equity purchasing purchasing

date purchasing

obtained obtained obtained obtained way date to date to

date

period-end period-end

Other explanation:

The Company had no enterprise merger not under the same control.

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(2) Combination cost and goodwill

In RMB

Combination cost

Determination method for fair value of the combination cost and contingent consideration and changes:

Main reasons for large goodwill resulted:

Other explanation:

(3) Identifiable assets and liability on purchasing date under the acquiree

In RMB

Fair value on purchasing date Book value on purchasing date

Determination method for fair value of the identifiable assets and liabilities:

Contingent liability of the acquiree bear during combination:

Other explanation:

(4) Gains or losses arising from re-measured by fair value for the equity held before purchasing date

Whether it is a business combination realized by two or more transactions of exchange and a transaction of obtainted control rights in

the Period or not

¡õYes ¡ÌNo

(5) On purchasing date or period-end of the combination, combination consideration or fair value of

identifiable assets and liability for the acquiree are un-able to confirm rationally

(6) Other explanation

2. Enterprise combined under the same control

(1) Enterprise combined under the same control in the Period

In RMB

Income of the Net profit of

combined the combined

Income of the Net profit of

party from party from

Basis of Standard to combined the combined

Equity ratio period-begin period-begin

combined Combination determine the party during party during

Acquiree obtained in of of

under the date combination the the

combination combination combination

same control date comparison comparison

to the to the

period period

combination combination

date date

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Other explanation:

(2) Combination cost

Combination cost

Explanation on contingent consideration and its changes:

Other explanation:

(3) Assets and liability of the combined party on combination date

On purchasing date At end of last period

Contingent liability of the combined party bear during combination:

Other explanation:

3. Counter purchase

Basic transaction information, basis of counter purchase, whether making up business due to the assets and liability reserved by listed

company and basis, determination of combination cost, amount and calculation on adjusted equity by equity transaction

The Company had on counter purchase in the reporting period.

4. Subsidiary disposal

Whether lost controlling rights while dispose subsidiary on one time or not

¡õ Yes ¡Ì No

Whether lost controlling rights in the Period while dispose subsidiary on two or more steps or not

¡õ Yes ¡Ì No

5. Other reasons for consolidation range changed

Reasons for changed on consolidation range (such as new subsidiary established, subsidiary liquidated etc.)And relevant information

6. Other

Nil

IX. Equity in other entity

1. Equity in subsidiary

(1) Constitute of enterprise group

Main operation Share-holding ratio

Subsidiary Registered place Business nature Acquired way

place Directly Indirectly

Shenzhen Bicycle and spare

Shenzhen Shenzhen 70.00% Investment

Emmelle parts distribution

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Industrial Co.,

Ltd.

Explanation on share-holding ratio in subsidiary different from ratio of voting right:

Nil

Basis for controlling the invested entity with half or below voting rights held and without controlling invested entity but with over

half and over voting rights

Nil

Controlling basis for the structuring entity included in consolidated range

Nil

Basis on determining to be a agent or consignor:

Nil

Other explanation:

Nil

(2) Important non-wholly-owned subsidiary

In RMB

Dividend announced to

Share-holding ratio of Gains/losses attributable Ending equity of

Subsidiary distribute for minority in

minority to minority in the Period minority

the Period

Shenzhen Emmelle

30.00% 32,426.81 1,625,185.21

Industrial Co., Ltd.

Explanation on share-holding ratio of minority different from ratio of voting right:

Nil

Other explanation:

Nil

(3) Main finance of the important non-wholly-owned subsidiary

In RMB

Ending balance Opening balance

Subsidia Non-curr Non-curr Non-curr Non-curr

Current Total Current Total Current Total Current Total

ry ent ent ent ent

assets assets liability liability assets assets liability liability

assets liability assets liability

Shenzhe

n

Emmelle 39,332,9 356,244. 39,689,2 34,271,9 34,271,9 44,487,1 161,628. 44,648,7 39,339,5 39,339,5

Industria 70.84 97 15.81 31.79 31.79 41.91 03 69.94 75.27 75.27

l Co.,

Ltd.

In RMB

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Current amount Last amount

Cash flow Cash flow

Total Total

Subsidiary Operation from Operation from

Net profit comprehensi Net profit comprehensi

Income operation Income operation

ve income ve income

activity activity

Shenzhen

Emmelle 170,989,389. 208,519,758.

108,089.35 108,089.35 -3,088,083.12 2,991,068.74 2,991,068.74 3,078,423.02

Industrial 07 34

Co., Ltd.

Other explanation:

Nil

(4) Major restriction on using corporate assets and liquidate corporate debts

Nil

(5) Financial or other supporting provided to structuring entity that included in consolidated financial

statement

Nil

Other explanation:

Nil

2. Transaction that has owners equity shares changed in subsidiary but still with controlling rights

(1) Owners equity shares changed in subsidiary

Nil

(2) Impact on minority¡¯s interest and owners¡¯ equity attributable to parent company

In RMB

Other explanation

Nil

3. Equity in joint venture and cooperative enterprise

(1) Important joint venture and cooperative enterprise

Share-holding ratio Accounting

Main operation

Name Registered place Business nature treatment on

place Directly Indirectly

investment for

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joint venture and

cooperative

enterprise

Share-holding ratio or shares enjoyed different from voting right ratio:

Nil

Basis of the voting rights with 20% below but with major influence, or without major influence but with over 20% (20% included)

voting rights hold:

Nil

(2) Main financial information of the important joint venture

Closing balance/current amount Opening balance /last period amount

Other explanation

Nil

(3) Main financial information of the important cooperative enterprise

Closing balance/current amount opening balance /last period amount

Other explanation

Nil

(4) Financial summary for un-important joint venture or cooperative enterprise

In RMB

Ending balance /Current amount Opening balance /Last amount

Joint venture -- --

Total numbers measured by share-holding

-- --

ratio

Cooperative enterprise -- --

Total numbers measured by share-holding

-- --

ratio

Other explanation

Nil

(5) Assets transfer ability has major restriction from joint venture or cooperative enterprise

Nil

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(6) Excess losses from joint venture or cooperative enterprise

In RMB

Un-confirmed losses not

Cumulative un-confirmed Cumulative un-confirmed

Name recognized in the Period (or net

losses losses at period-end

profit enjoyed in the Period)

Other explanation

Nil

(7) Un-confirmed commitment with investment concerned with joint venture

Nil

(8) Contingent liability with investment concerned with joint venture or cooperative enterprise

Nil

4. Co-runs operation

Share-holding ratio/ share enjoyed

Name Main operation place Registered place Business nature

Directly Indirectly

Share-holding ratio or shares enjoyed different from voting right ratio:

Nil

If the co-runs entity is the separate entity, basis of the co-runs classification

Nil

Other explanation

Nil

5. Equity in structuring entity that excluding in the consolidated financial statement

Relevant explanation

Nil

6. Other

Nil

X. Risk related with financial instrument

Nil

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XI. Disclosure of fair value

1. Ending fair value of the assets and liabilities measured by fair value

In RMB

Ending fair value

Item

First-order Second-order Third-order Total

I. Sustaining measured by

-- -- -- --

fair value

(I) financial assets

measured at fair value and

0.00

changes accounted in the

current profits and losses

1. transaction financial

0.00

assets

(1) investment in debt

0.00

instruments

(2) investment in equity

0.00

instruments

(3) derivative financial

0.00

assets

2. financial assets

appointed to measure at

fair value and changes 0.00

accounted in the current

profits and losses

(1) investment in debt

0.00

instruments

(2) investment in equity

0.00

instruments

(II) financial assets

0.00

available for sale

(1) investment in debt

0.00

instruments

(2) investment in equity

0.00

instruments

(3) other 0.00

(III) investment real estate 0.00

1. rental land use rights 0.00

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2. rental buildings 0.00

3. land use rights holding

and preparing to transfer 0.00

after add value

(IV) biological assets 0.00

1. consumption biological

0.00

assets

2. productive biological

0.00

assets

Total assets continuously

0.00

measured by fair value

(V) transaction financial

0.00

liabilities

Among them: issue of

0.00

transaction bonds

Derivative

0.00

financial liabilities

Other 0.00

(VI) financial liabilities

appointed to measure at

fair value and changes 0.00

accounted in the current

profits and losses

Total liabilities

continuously measured by 0.00

fair value

II. Non-persistent measure -- -- -- --

(I) assets held for sale 0.00

Total assets

non-continuously 0.00

measured by fair value

Total liabilities

non-continuously 0.00

measured by fair value

2. Recognized basis for the market price sustaining and non-persistent measured by fair value on

first-order

Nil

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3. Valuation technique and qualitative and quantitative information on major parameters for the fair value

measure sustaining and non-persistent on second-order

Nil

4. Valuation technique and qualitative and quantitative information on major parameters for the fair value

measure sustaining and non-persistent on third-order

Nil

5. Adjustment information and sensitivity analysis of unobservable parameters for the fair value measure

sustaining and non-persistent on third-order

Nil

6. Sustaining items measured by fair value, as for the conversion between at all levels, reasons for

conversion and policy for conversion time point

Nil

7. Changes of valuation technique in the Period

Nil

8. Financial assets and liability not measured by fair value

Nil

9. Other

Nil

XII. Related party and related transactions

1. Parent company of the enterprise

Share-holding ratio

Voting right ratio on

Parent company Registration place Business nature Registered capital on the enterprise for

the enterprise

parent company

Industrial

Shenzhen Guosheng

investment, domestic

Energy Investment

Shenzhen commerce, supply RMB 220 million 11.52% 11.52%

Development Co.,

and marketing

Ltd.

materials (excluding

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monopolized

commodities, and

commodity under

special government

control)

Explanation on parent company of the enterprise

Nil

Ultimate controller of the Company is Ji Hanfei

Other explanation:

Nil

2. Subsidiary of the Enterprise

Found more in 1 of Note IX

3. Cooperative enterprise and joint venture

Found more in 3 of Note IX.

Other cooperative enterprise and joint venture that have related transaction with the Company in the Period or occurred in pervious

period

Name Relationship

Other explanation

Nil

4. Other related party

Other related party Relationship with the Enterprise

Other explanation

Nil

5. Related transaction

(1) Goods purchasing, labor service providing and receiving

Goods purchasing/labor service receiving

In RMB

Approved transaction Whether more than

Related party Content Current amount Last amount

amount the transaction amount

Goods sold/labor service providing

In RMB

Related party Content Current amount Last amount

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Explanation on goods purchasing, labor service providing and receiving

Nil

(2) Related trusteeship/contract and delegated administration/outsourcing

Trusteeship/contract

In RMB

Income from

Client/ Entrusting party/ Yield pricing

Assets type Starting date Maturity date trusteeship/contra

contract-out party contractor basis

ct

Explanation on related trusteeship/contract

Delegated administration/outsourcing

In RMB

Pricing basis of trustee

Client/

Entrusting party/ trustee fee/outsourcing

contract-out Assets type Starting date Maturity date

contractor fee/outsourcing fee recognized in

party

fee the Period

Explanation on related administration/outsourcing

(3) Related lease

As a lessor for the Company:

In RMB

Lease income in recognized in Lease income in recognized last

Lessee Assets type

the Period the Period

As a lessee for the Company:

In RMB

Lease income in recognized in Lease income in recognized last

Lessor Assets type

the Period the Period

Explanation on related lease

Nil

(4) Related guarantee

As a guarantor for the Company

In RMB

Guarantee completed

Secured party Amount guarantee Starting date Maturity date

(Y/N)

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As a secured party for the Company

In RMB

Guarantee completed

Guarantor Amount guarantee Starting date Maturity date

(Y/N)

Explanation on related guarantee

Nil

(5) Borrowed funds of related party

In RMB

Related party Borrowed funds Starting date Maturity date Note

Borrowing

Lending

(6) Assets transfer and debt restructuring of related party

In RMB

Related party Transaction content Current amount Last amount

(7) Remuneration of key manager

In RMB

Item Current amount Last amount

Remuneration of key manager 1,554,900.00 1,592,000.00

(8) Other related transactions

Nil

6. Receivable/payable items of related parties

(1) Receivable item

In RMB

Ending balance Opening balance

Item Related party

Book balance Bad debt provision Book balance Bad debt provision

(2) Payable item

In RMB

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Item Related party Ending book balance Opening book balance

Shenzhen Guosheng Energy

Other account payable Investment Development Co., 6,500,000.00 6,500,000.00

Ltd.

7. Commitments of related party

8. Other

Nil

XIII. Share-based payment

1. General share-based payment

¡õ Applicable ¡Ì Not applicable

2. Share-based payment settled by equity

¡õ Applicable ¡Ì Not applicable

3. Share-based payment settled by cash

¡õ Applicable ¡Ì Not applicable

4. Revised and termination on share-based payment

Nil

5. Other

Nil

XIV. Commitment or contingency

1. Important commitments

Important commitments in balance sheet date

The Company has no important commitments that need to disclose ended as 31 December 2015.

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2. Contingency

(1) Contingency on balance sheet date

Nil

(2) For the important contingency not necessary to disclosed by the Company, explained reasons

The Company has no important contingency that need to disclosed

3. Other

(1) Operating lease

Ended as balance sheet date, long-term lease contract signed outside by the Company as:

1. The Company entered into long-term house leasing contract with Shenzhen Material Group Co., Ltd. on 1 May

2014, leased the property of Room 1201, Wantong Building, No.3002 Sungang East Road, Luohu District,

Shenzhen, as the office place of the Company. Leasing contract terms from 1 May 2014 to 30 April 2017 with

floor areas of 681.34 m2; In line with the contract, the Company shall pay property rental annual since 1 May

2014 with 474,200 Yuan till the rental terms expired or contract terminated by two parties.

2. The Company entered into long-term house leasing contract with Shenzhen Anjinheng Industrial Co., Ltd. on

18 September 2014, leased the property of C section, 2/F, Tower D, Shengli Industrial Park, Southwest side,

Qinghua Road, Longhua Office, Longhua New Disstrict, Shenzhen, as the office place of the Company. Leasing

contract terms from 21 September 2014 to 19 September 2018with floor areas of 681.34 m2; In line with the

contract, the Company shall pay property rental annual since 21 September 2014 with 510,600 Yuan till the rental

terms expired or contract terminated by two parties.

XV. Events after balance sheet date

1. Important non-adjustment items

In RMB

Impact on financial status and Reasons on un-able to estimated

Item Content

operation results the impact number

2. Profit distribution

In RMB

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3. Sales return

4. Other events after balance sheet date

Up to 31st December 2015, the Company has no major contingency need to be disclosed.

XVI. Other important events

1. Previous accounting errors collection

(1) Retrospective restatement

In RMB

Impact items of statement

Content Treatment procedures Cumulative impacted number

during a comparison

(2) Prospective application

Reasons for prospective application

Accounting error correction Approval procedures

adopted

2. Debt restructuring

On 11th, May 2012, the largest shareholder and biggest creditor of the Company, Shenzhen Guosheng Energy

Investment and Development Co., Ltd. applied to Shenzhen Municipal Intermediate People's Court for reforming

the Company as the Company couldn¡¯t pay off the matured debts and was seriously insolvent. On 12th, Oct., 2012,

Shenzhen Municipal Intermediate People's Court ruled to accept the application proposed by Guosheng Energy

according to (2012) Shenzhen Intermediate Court Po Zi No. 30 civil ruling. In late October, 2012, Shenzhen

Municipal Intermediate People's Court ruled to reform the Company since 25th, Oct., 2012 according to (2012)

Shenzhen Intermediate Court Po Zi No. 30-1 civil ruling, appointed King & Wood (Shenzhen) Mallesons and

Shenzhen ZhengYuan Liquidation Affairs Co., Ltd. as the custodians of the Company. Subsequently, Shenzhen

Municipal Intermediate People's Court made (2012) Shenzhen Intermediate Court Po Zi No. 30-1 written decision,

and approved the Company to manage property and business affairs by itself under the supervision of custodians

according to the law. On 5 November 2013, the Shenzhen Intermediate People¡¯s Court (2012) Shen Zhong Fa Po

Zi No. 30-6 Civil Ruling Paper judged that approved the reorganization plan of the Company. On 27 December

2013, the Civil Ruling Paper Shenzhen Intermediate People¡¯s Court (2012) Shen Zhong Fa Po Zi No. 30-10 ruled

that the reorganization plan of CBC was completed and bankruptcy procedures of CBC closed down.

The Company has solved the debt problem by reforming, realized the net assets with positive value, the main

business of bicycle is able to be maintained and realizes the stable development. The Company has set up the

conditions for introducing the recombination party in the reforming plan, and expects to restore the abilities of

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sustainable operation and sustained profitability by reorganization. The conditions of introducing the

recombination party includes: the assessed value of net assets should be no less than 2 billion Yuan, the net assets

in the same year for implementing the major reorganization should be no less than 200 million Yuan. The

Company doesn¡¯t have the recombination party at the moment.

3. Assets replacement

(1) Non-monetary assets change

(2) Other assets replacement

4. Pension plan

5. Discontinued operations

In RMB

Discontinued

operations profit

Income tax

Item Revenue Expenses Total profit Net profit attributable to

expenses

owners of parent

company

Other explanation

6. Segment

(1) Recognition basis and accounting policy for reportable segment

(2) Financial information for reportable segment

In RMB

Item Offset between segments Total

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(3) The company has no reportable segments, or unable to disclose total assts and total liability for

reportable segments, explain reasons

(4) Other explanation

7. Major transaction and events makes influence on investor¡¯s decision

8. Other

XVII. Principle notes of financial statements of parent company

1. Accounts receivable

(1) Category

In RMB

Ending balance Opening balance

Book balance Bad debt provision Book balance Bad debt provision

Types Book

Accrual Accrual Book value

Amount Ratio Amount value Amount Ratio Amount

ratio ratio

Receivables with bad

debt provision 694,416

100.00% 694,416.00

accrual by credit .00

portfolio

694,416

Total 100.00% 694,416.00

.00

Receivable with single significant amount and withdrawal bad debt provision separately at end of period:

¡õ Applicable ¡Ì Not applicable

In combination, accounts receivable whose bad debts provision was accrued by age analysis:

¡Ì Applicable ¡õ Not applicable

In RMB

Ending balance

Age

Account receivable Bad debt provision Accrual ratio

within one year

Total 694,416.00

Explanations on combination determine:

Nil

In combination, withdrawal proportion of bad debt provision based on balance proportion for account receivable:

¡õ Applicable ¡Ì Not applicable

In combination, withdrawal proportion of bad debt provision based on other methods for account receivable:

Nil

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(2) Bad debt provision accrual, collected or reversed

Accrual bad debt provision 0.00 Yuan; collected or reversed 0.00 Yuan.

Major bad debt provision reversal or collected in the Period

In RMB

Company Amount reversal or collected Collection way

Total 0.00 --

(3) Receivables actually written-off during the reporting period

In RMB

Item Amount written off

Written-off for the major receivable

In RMB

Nature of Procedures Arising from related

Company Amount written off Reason for write-off

receivables implemented transactions

Total -- 0.00 -- -- --

Explanation for write-off of receivables

Nil

(4) Top 5 receivables at ending balance by arrears party

Nil

(5) Receivable derecognition due to transfer of financial assets

Nil

(6) Assets and liability resulted by receivable transfer and continuous involvement

Nil

Other explanation:

Nil

2. Other accounts receivable

(1) Classification

In RMB

Ending balance Opening balance

Type

Book balance Bad debt provision Book Book balance Bad debt provision Book value

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Accrual value Accrual

Amount Ratio Amount Amount Ratio Amount

ratio ratio

Other receivables

with bad debt 12,580,0 12,579,54 13,714, 13,714,033.

100.00% 548.29 100.00% 587.29

provision accrual by 95.29 7.00 620.41 12

credit portfolio

12,580,0 12,579,54 13,714, 13,714,033.

Total 100.00% 548.29 100.00% 587.29

95.29 7.00 620.41 12

Other receivable with single significant amount and withdrawal bad debt provision separately at end of period

¡õ Applicable ¡Ì Not applicable

In combination, other accounts receivable whose bad debts provision was accrued by age analysis

¡Ì Applicable ¡õ Not applicable

In RMB

Ending balance

Age

Other receivable bad debts provision Accrual ratio

Within one year

Within one year 12,580,095.29 548.29

Subtotal of within one year 12,580,095.29 548.29

Total 12,580,095.29 548.29

Explanations on combination determine:

Nil

In combination, withdrawal proportion of bad debt provision based on balance proportion for other account receivable

¡õ Applicable ¡Ì Not applicable

In combination, withdrawal proportion of bad debt provision based on other methods for other account receivable

¡õ Applicable ¡Ì Not applicable

(2) Bad debt provision accrual, collected or reversed

Accrual bad debt provision 0.00 Yuan; collected or reversed 39 Yuan.

Major bad debt provision reversal or collected in the Period

In RMB

Company Amount reversal or collected Collection way

Total 0.00 --

Nil

(3) Other receivables actually written-off during the reporting period

In RMB

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Item Amount written off

Written-off for the major other receivable:

In RMB

Nature of other Procedures Arising from related

Company Amount written off Reason for write-off

receivables implemented transactions

Total -- 0.00 -- -- --

Explanation for write-off of other receivables:

Nil

(4) Other receivables by nature

In RMB

Nature Ending book balance Opening book balance

Deposit 182,762.00 182,762.00

Current money 12,397,333.29 13,518,858.41

Employee loan 13,000.00

Total 12,580,095.29 13,714,620.41

(5) Top 5 other receivables at ending balance by arrears party

In RMB

Ratio in total ending

Ending balance of

Company Nature Ending balance Book age balance of other

bad bet provision

receivables

Shenzhen Emmelle

Current money 12,397,333.29 within one year 98.55%

Industrial Co., Ltd.

Shenzhen Anjingheng

Deposit 90,100.00 within two years 0.71% 548.29

Industrial Co. Ltd.

Shenzhen Materials

Deposit 79,035.00 within two years 0.63%

Group Co., Ltd.

Shenzhen Baifanghe

Deposit 13,627.00 within two years 0.11%

Property Co., Ltd.

Total -- 12,580,095.29 -- 100.00% 548.29

(6) Account receivable with government subsidy involved

In RMB

Time, amount and basis

Company Item Ending balance Ending book age

for money collected

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Total -- 0.00 -- --

(7) Other receivable derecognition due to transfer of financial assets

Nil

(8) Assets and liability resulted by other receivable transfer and continuous involvement

Nil

Other explanation:

Nil

3. Long-term equity investment

In RMB

Ending balance Opening balance

Item

Book balance Impairment Book value Book balance Impairment Book value

Investment for

1,400,000.00 1,389,620.27 10,379.73 1,400,000.00 1,389,620.27 10,379.73

subsidiary

Total 1,400,000.00 1,389,620.27 10,379.73 1,400,000.00 1,389,620.27 10,379.73

(1) Investment for subsidiary

In RMB

Ending balance of

Impairment

The invested entity Opening balance Increased Decreased Ending balance impairment

accrual

provision

Shenzhen

Emmelle Industrial 1,400,000.00 1,400,000.00 1,389,620.27

Co., Ltd.

Total 1,400,000.00 1,400,000.00 1,389,620.27

(2) Investment for associates and joint venture

In RMB

+,- Ending

Investme Other Cash balance

Additiona

Opening nt gains comprehe Other dividend Ending of

Company l Capital Impairme

balance recognize nsive equity or profit Other balance impairme

investmen reduction nt accrual

d under income change announce nt

t

equity adjustmen d to provision

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t issued

I. Joint venture

Subtotal 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

II. Associated enterprise

Subtotal 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

(3) Other explanation

Nil

4. Operating income and cost

In RMB

Current amount Last amount

Item

Income Cost Income Cost

Main business 32,692.31 32,051.28

Other business 3,150,841.97 1,151,379.27 7,287,880.92 4,505,933.46

Total 3,183,534.28 1,183,430.55 7,287,880.92 4,505,933.46

Other explanation:

5. Investment gains

In RMB

Item Current amount Last amount

6. Other

Nil

XVIII. Supplementary Information

1. Current non-recurring gains/losses

¡Ì Applicable ¡õ Not applicable

In RMB

Item Amount Note

Other non-operating income and expenditure

369,201.08

except for the aforementioned items

Less: Impact on income tax 92,300.27

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Impact on minority shareholders¡¯ equity -1,005.75

Total 277,906.56 --

Concerning the extraordinary profit (gain)/loss defined by Q&A Announcement No.1 on Information Disclosure for Companies

Offering Their Securities to the Public --- Extraordinary Profit/loss, and the items defined as recurring profit (gain)/loss according to

the lists of extraordinary profit (gain)/loss in Q&A Announcement No.1 on Information Disclosure for Companies Offering Their

Securities to the Public --- Extraordinary Profit/loss, explain reasons

¡õ Applicable ¡Ì Not applicable

2. REO and earnings per share

Earnings per share

Profits during report period Weighted average ROE Diluted EPS

Basic EPS (RMB/Share)

(RMB/Share)

Net profits belong to common stock

-1.17% -0.0003 -0.0003

stockholders of the Company

Net profits belong to common stock

stockholders of the Company after

-3.52% -0.0008 -0.0008

deducting nonrecurring gains and

losses

3. Difference of the accounting data under accounting rules in and out of China

(1) Difference of the net profit and net assets disclosed in financial report, under both IAS (International

Accounting Standards) and Chinese GAAP (Generally Accepted Accounting Principles)

¡õ Applicable ¡Ì Not applicable

(2) Difference of the net profit and net assets disclosed in financial report, under both foreign accounting

rules and Chinese GAAP (Generally Accepted Accounting Principles)

¡õ Applicable ¡Ì Not applicable

(3) Explain accounting difference over the accounting rules in and out of China; as for the difference

adjustment for data audited by foreign auditing organ, noted the name of such foreign organ

Nil

4. Other

Nil

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Section XII. Documents available for reference

1. Accounting statement carrying the signatures and seals of the legal representative, person in charge of

accounting and person in charge of accounting organ;

2. Original audit report with seal of the accounting firm and signature and seal of CPAs;

3. Originals documents of the Company and manuscripts of public notices that disclosed in the newspaper

designated by CSRC in the report period;

4. English version of the Annual Report 2015

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