SHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
1
深圳中华自行车（集团）股份有限公司
SHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED
2008 ANNUAL REPORT
April 25, 2009SHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
2
IMPORTANT NOTICES:
Directors, supervisors and senior executives of the Shenzhen China Bicycle Company (Holdings)
Limited (hereinafter referred to as the Company) hereby confirm that there are no any important
omissions, fictitious statements or serious misleading information carried in this report, and shall
take all responsibilities, individual and/or joint, for the reality, accuracy and completion of the
whole contents.
Shenzhen Pengcheng Certified Public Accountants issued auditor’s report with disclaimer of
opinions for the 2008 Financial Report of the Company. The Board of Directors of the Company
made specific explanations on the relevant matters; the Supervisory Committee of the Company
expressed definite opinions on the specific explanations by the Board of Directors. The investors
are suggested to read for details.
No director, supervisor and senior executives stated that they couldn’t ensure the correctness,
accuracy and completeness of the contents of 2008 Annual Report or have objection for this report.
Director Mr. Zhu Jianqi was absent from the board meeting due to business evection and he
entrusted Director Li Ronghui to attend and vote on his behalf.
Chairman and Person in Charge of the Company Mr. Shang Shijun, Person in Charge of Accounting
Works Mr. Jiang Houjin and Chief Accountant Ms. He Yili hereby confirm that the Financial Report
of 2008 Annual Report is true and complete.
Content
I. Company
Profile----------------------------------------------------------------------------------------------2
II. Summary of Accounting Highlight and Bussiness Highlight --------------------------------------3
III. Changes in Share Capital & Particulars about Shareholders------------------------------------6
IV Particulars about Directors, Supervisors, Senior Executives & Employees-------------------9
V. Administrative
Structure----------------------------------------------------------------------------------14
VI. Particulars about Shareholders’ General Meetings------------------------------------------------16
VII. Report of the Board of Directors---------------------------------------------------------------------
17
VIII. Report of the Supervisory Committee--------------------------------------------------------------25
IX. Significant
Events-----------------------------------------------------------------------------------------27
X. Financial
Report--------------------------------------------------------------------------------------------29
Documents Available for Documents-----------------------------------------------------------------------
87SHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
3
I. Company Profile
1. Legal Name of the Company in Chinese: 深圳中华自行车（集团）股份有限公司
In English: SHENZHEN CHINA BICYCLE COMPANY (HOLDINGS) LIMITED
Short form of English Name: CBC
2. Legal Representative: Shang Shijun
3. Secretary of the Board of Directors: Li Hai
Representatives for Securities Affairs: Cui Hongxia
Tel: (86) 755 –28181666, 25516998
Contact Address: Zhonghua Industrial Park, Yousong Industrial Zone, Longhua, Shenzhen,
Guangdong Province, China
Fax: (86) 755 –28181009
E-mail: dmc@szcbc.com
4. Registered Address and Office Address: No. 3008, Buxin Road, Shenzhen, Guangdong Province,
PRC
Post Code: 518019
Office Address: Zhonghua Industrial Park, Yousong Industrial Zone, Longhua, Shenzhen,
Guangdong Province, China
Post Code: 518131
The Company’s Internet Website: www.cbc.com.cn
E-mail: cbc@szcbc.com
5. Newspapers Chosen for Disclosing the Information: Securities Times and Hong Kong Wen Wei
Po
Internet Website Designated for Publishing the Annual Report: www.cninfo.com.cn
Place Where the Annual Report is Prepared and Placed: Secretariat of the Board of Directors
6. Stock Exchange Listed with, Short Form of the Stock and Stock Code:
Stock Exchange Listed with: Shenzhen Stock Exchange
Short Form of the Stock: SST ZHONGHUA – A, ST ZHONGHUA – B
Stock Code: 000017 for A-share, 200017 for B-share
7. Other Information about the Company
(1) Initial registered date: Aug. 24, 1984
(2) Initial registered place: Buxin Road, Shenzhen
(3) Registration number for business license of legal person of corporation: PGYSZZi No.101165
(4) Registration number of tax:
State Revenue SHEN ZI No. 440301618830452,
Land Tax SHEN ZI No. 440303618830452
(5) Name and office address of the Certified Public Accountants engaged by the Company:
Shenzhen Pengcheng Certified Public Accountants Co., Ltd.
Office Address: 5/F, Baofeng Building, 2006 South Dongmen Road, ShenzhenSHENZHEN CHINA BICYCLE COMPANY
（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
4
II. Summary of Accounting Highlight and Bussiness Highlight
1. Major profit indexes as of the year 2008
(1) Major profit indexes as of the year 2008 (Unit: RMB)
Operating profit -71,709,140.99
Total profit -44,489,780.00
Net profit attributable to the shareholders of the listed
company -44,893,006.40
Net profit attributable to the shareholders of the listed
company after deducting non-recurring gains and losses -60,660,142.06
Net cash flow arising from operating activities -14,392,427.25
(2) Items of non-recurring gains and losses (Unit: RMB)
Items of non-recurring gains and losses Year 2008 Year 2007
1. Gains and losses from disposal of non-current asset 8,666,548.80 757,452.53
2. Any tax refund or exemption illegally approved or without supporting
documents in writing --- ---
3.Governmental subsidy reckoned into current gains and losses --- ---
4. Income deriving from use by non-financial entities of an enterprise’s
own fund --- ---
5. Gains and losses caused by that the merger cost of merger enterprise is
smaller than the fair recognizable fair value of net asset enjoyable by the
merger unit when taking merger
--- ---
6. Exchanging gains and losses of non-currency assets --- ---
7. Gains and losses of entrusted investment --- ---
8. Accrual of provisions for asset impairment due to natural disasters and
other majure --- ---
9. Gains and losses caused by debts reorganization 17,360,832.24 138,127,300.95
10. Expenses caused by enterprises reconstruction -11,452,225.33 ---
11. Profit/loss attributable to unfair portion of the value resulting from
unfair priced transactions --- ---
12. Current net gains and losses during period-begin to merger date of
subsidiaries caused by merger of enterprises under the common control --- ---
13. Gains and losses caused by projected liabilities irrelevant to main
operations of the Company --- ---
14. Net amount of other non-operating income and cost excluded the
aforesaid items 1,191,979.95 -13,868.87
15. Other --- ---
Total 15,767,135.66 138,870,884.61
Less: Income tax relevant to non-recurring gains/losses --- ---
Less: Part enjoyed by minority shareholders --- ---
Net profit influenced by non-recurring gains/losses 15,767,135.66 138,870,884.61
Net profit in statement -44,489,780.00 63,036,241.24
Less: Gains/losses of minority shareholder 403,226.40 -
Net profit attributable to shareholders of parent company -44,893,006.40 63,036,241.24
Net profit attributable to the shareholders of parent company after
deducting non-recurring gains and losses -60,660,142.06 -75,834,643.37
2. Major accounting data and financial indexes over the recent three year at the end of report yearSHENZHEN
CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
5
(Unit: RMB)
(1) Main accounting data
Unit: RMB
2008 2007
Increase/de
crease this
year
compared
with that
last year
(%)
2006
Before adjustment After adjustment After
adjustment Before adjustment After adjustment
Operating income 274,202,840.48 234,601,314.71 234,601,314.71 16.88% 219,673,260.11 232,525,287.59
Total profit -44,489,780.00 72,885,796.46 72,885,796.46 -161.04% -12,024,258.74 -12,012,582.39
Net profit
attributable to
shareholders of the
listed company
-44,893,006.40 63,036,241.24 63,036,241.24 -171.22% -9,648,015.34 -12,012,582.39
Net profit
attributable to
shareholders of the
listed company after
deducting
non-recurring gains
and losses
-60,660,142.06 -6,276,043.85 -75,834,643.37 -20.01% -9,681,664.56 -12,046,231.61
Net cash flow arising
from operating
activities
-14,392,427.25 -2,591,980.11 -2,591,980.11 455.27% -9,953,587.30 -8,950,557.42
-0.0936 0.1315 0.1315 -171.18% -0.0201 -0.0251
-0.0936 0.1315 0.1315 -171.18% -0.0201 -0.0251
At the end of 2008 At the end of 2007
Increase/de
crease at the
end of this
year
compared
with that at
the end of
last year
(%)
At the end of 2006
Before adjustment After adjustment After
adjustment Before adjustment After adjustment
Total assets 190,897,705.53 214,381,530.57 214,381,530.57 -10.95% 282,611,118.07 282,611,118.07
Owners’
equity(Shareholders’
equity)
-1,803,059,381.3
9 -1,784,339,460.68 -1,807,032,302.68 -0.22% -1,847,375,701.9
2
-1,870,068,543.
92
Share capital 479,433,003.00 479,433,003.00 479,433,003.00 0.00% 479,433,003.00 479,433,003.00
(2) Main financial indexes (Unit: RMB)
2008 2007
Increase/decreas
e this year
compared with
that last year
(%)
2006
Before
adjustment
After
adjustment
After
adjustment
Before
adjustment
After
adjustmentSHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
6
Basic earnings per share
(RMB/Share) -0.0936 0.1315 0.1315 -171.18% -0.0201 -0.02508
Diluted earnings per share
(RMB/Share) -0.0936 0.1315 0.1315 -171.18% -0.0201 -0.02508
Earnings per share calculated
based on latest share
capital(RMB/Share)
-0.0936
0.1315 0.1315 -171.22% -0.0201 -0.02508
Basic earnings per share after
deducting non-recurring gains
and losses (RMB/Share)
-0.1265 -0.0131 -0.1582 -20.04% -0.0202 -0.0251
Fully diluted return on equity
(%) - - - - - -
Weighted average return on
equity (%) - - - - - -
Fully diluted return on equity
after deducting non-recurring
gains and losses (%)
- - - - - -
Weighted average return on
equity after deducting
non-recurring gains and
losses (%)
- - - - - -
Net cash flow per share
arising from operating
activities (RMB/Share)
-0.03 -0.0054 -0.0054 - -0.0208 -0.0187
At the end of
2008 At the end of 2007
Increase/decreas
e at the end of
this year
compared with
that at the end of
last year (%)
At the end of 2006
Before
adjustment
After
adjustment
After
adjustment
Before
adjustment
After
adjustment
Net asset per share attributable to
shareholders of listed company
(RMB/Share)
-3.7608 -3.72 -3.7691 - -3.85 -3.90SHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL
REPORT 2008
7
III. Changes in Share Capital & Particulars about Shareholders
(I) Particulars about change in share capital
1. Change in share capital
Unit: Share
Before the change Increase/decrease of this time (+, - ) After the change
Amount
Propo
rtion
（%）
Rat
ion
ed
sha
re
Bo
nus
sha
res
Conver
sion of
public
reserve
Additio
nal
issuing
Ot
he
rs
Subto
tal Amount Proport
ion (%)
I. Unlisted Shares 186,713,192 38.94 186,713,19
2
38.94
1. Sponsors’ shares 186,713,192 38.94 186,713,19
2
38.94
Including: State-owned
share
Domestic legal
person’s shares
111,607,002 23.28 111,607,002 23.28
Foreign legal person’s
shares
75,106,190 15.67 75,106,190 15.67
Others
2. Raised legal person’s
shares
3. Inner employees’
shares
4. Preference shares or
others
II. Listed Shares 292,719,811 61.06 292,719,811 61.06
1. RMB ordinary
shares
76,752,000 16.01 76,752,000 16.01
2. Domestically listed
foreign shares
215,967,811 45.05 215,967,811 45.05
3. Overseas listed
foreign shares
4. Others
III. Total shares 479,433,003 100.0
0
479,433,00
3
100.00
2. Issuance and listing of the share:
(1) The Company has not issued new shares and derivative securities over the recent three years
ended the report period.
(2) In the report period, the shares capital of the Company has not been changed. The Company
issued 5.3 million inner employee’s shares at the issuance price of RMB 3.75 per share dated Dec.
28, 1991. Of the total, the Company holds 135,000 inner employee’ shares now (of which 75,000
shares are held by present directors of the Company), and entrusted Shenzhen Securities
Registration Company Limited for the trusteeship; other 5,165,000 shares were all listed.
(II) About shareholders at the end of report period
1. In the report period, the Company had no changes on share capital. Ended Dec. 31, 2008, the
Company had 34,406 shareholders in total.
2. Particulars about shares held by the top ten shareholders (Unit: Share)SHENZHEN CHINA BICYCLE COMPANY
（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
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Full name of shareholders
Amount of
shares held
in year-end
Proport
ion (%)
Amount of
non-circulat
ing shares
held
Amount of
shares
pledged or
frozen
Nature of
shareholders
Shenzhen Guocheng Energy Investment
Development Co., Ltd. 65,098,412 13.58 65,098,412 0 Other
Hong Kong Zhuorun Technology Co.,
Ltd. 44,104,246 9.20 44,104,246 44,104,246 Foreign-funded
shareholder
Hong Kong (Link) Bicycles Limited 26,000,000 5.24 26,000,000 26,000,000 Foreign-funded
shareholder
Shenzhen Kangsheng Investment
Development Co., Ltd. 11,968,590 2.50 11,968,590 0 Other
Xinliyi Investment Management Co.,
Ltd. 11,200,000 2.34 11,200,000 0 State-owned
shareholder
Airline Trust and Investment Co., Ltd. 10,340,000 2.16 10,340,000 10,340,000 State-owned
shareholder
Shenzhen New Land Tool Consultants
PTE. LTD 9,857,556 2.06 0 0 Other
Shenzhen International Trust &
Investment Co., Ltd. 6,000,000 1.25 6,000,000 0 Other
Jingchao Investment Co., Ltd. 5,001,944 1.04 5,001,944 0 Foreign-funded
shareholder
Shanghai Yanxin Industrial Investment
Co., Ltd. 3,500,000 0.73 3,500,000 0 Other
Note: Among the top ten shareholders the Company was unaware of whether there existed
associated relationship or whether there existed consistent actionist regulated in the Management
Measure of Information Disclosure on Change of Shareholding for Listed Companies; among the
other circulating shareholders, the Company was unaware of whether there existed associated
relationship or whether there existed consistent actionist regulated in the Management Measure of
Information Disclosure on Change of Shareholding for Listed Companies
3. Introduction of the controlling shareholder or actual controller of the Company
(1) The controlling shareholder and the actual controller of the Company remained unchanged in
the report period.
(2) Introduction of the controlling shareholder or actual controller of the Company
i. Introduction to controlling shareholders: Shenzhen Guocheng Energy Investment Development
Co., Ltd.
Address: 501C Pacific Commercial Town of New Asia, No. 8 Zhonghang Road, Futian District,
Shenzhen; Legal representative: Shang Shijun; Registeration capital: RMB 70 million; Operation
scope: Establishing industry (additional application for specific items); domestic commerce,
industry of supply and distribution of materials (excluded commodities which were monopolized,
under special control and sold exclusively).
The controlling shareholder of Shenzhen Guocheng Energy Investment Development Co., Ltd was
Shenzhen Guomin Investment Development Co., Ltd with holding 100% shares.
ii. Introduction to actual controller: Shenzhen Guomin Investment Development Co., Ltd.
Controlling shareholder: Zhang Yanfen with holding 44% shares, Ji Hanfei with holding 20% shares,
Huang Yinquan with holding 36% shares.
Address: Pacific Commercial Town of New Asia, Junction between Zhenzhong Road and
Zhonghang Road, Futian District, Shenzhen; Legal representative: Zhang Yanfen; Registration
capital: RMB 250 million; Operation scope: Establishing industry (additional application forSHENZHEN CHINA
BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
9
specific items); domestic commerce, industry of supply and distribution of materials (excluded
commodities which were monopolized, under special control and sold exclusively); supply and
distribution of automobiles (excluded cars); and open and manage E-Town of New Asia. Main
business: Commerce, operation and management of real-estate, and industry investment.
3. The property relationship between the actual controller and the Company was as follows:
44% 20% 36%
100%
100%
13.58%
4. The top ten circulating shareholders of the Company.
Name of shareholders
Amount of circulating
shares held shareholders
(share)
Types
Shenzhen New Land Tool Consultants PTE.
LTD.
9,857,556 RMB common share
Zhang Huiling 2,071,372 Domestically listed foreign
shares
TANG JING YUAN 1,924,500 Domestically listed foreign
shares
Lu Huazhong 1,547,000 Domestically listed foreign
shares
Li Jinling 1,225,702 Domestically listed foreign
shares
Jiang Lan 1,215,800 Domestically listed foreign
shares
Xiao Lizhu 1,127,649 Domestically listed foreign
shares
Wang Zuoguang 1,025,700 Domestically listed foreign
shares
Liu Baohua 1,000,000 Domestically listed foreign
shares
Wei guobin 902,000 Domestically listed foreign
shares
Shenzhen Guomin Investment Development Co., Ltd.
Zhang Yanfen Ji Hanfei Huang Yinquan
Shenzhen Guocheng Energy Investment Development Co., Ltd.
Shenzhen China Bicycle Company (Holding) Limited
司SHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
10
IV. Particulars about Directors, Supervisors, Senior Executives & Employees
(I) Directors, supervisors and senior executives
1. Basis information:
Amount of shares held
（share）
Name Title Sex Age Office term Holding
shares at the
year-begin
Holding
shares at the
year-end
Shang Shijun Chairman of the Board Male 45 2007.7-2010.7 0 0
Jiang Houjin Director, President Male 39 2007.7-2010.7 0 0
Li Ronghui Director Male 37 2007.7-2010.7 0 0
Yang Fenbo Director Male 51 2007.7-2010.7 0 0
Liu Linfeng Director Male 51 2007.7-2010.7 0 0
Zhu Jianqi Director Male 34 2008.11-2010.7 0 0
Li Chun Independent Director Male 51 2007.7-2010.7 0 0
Shao Liangzhi Independent Director Male 44 2007.7-2010.7 0 0
Zhang
Xinmiao Independent Director Female 40 2007.7-2010.7 0 0
Wei Chuanyi Independent Director Male 37 2007.7-2010.7 0 0
Yao
Zhengwang
Convener of the
Supervisory
Committee
Male 33 2008.6-2010.6 0 0
Lan Qihua Supervisor Male 58 2008.6-2010.6 0 0
Zheng
Zhonghuan Supervisor Male 46 2008.6-2010.6 10,500 10,500
Li Hai
Vice President,
Secretary of the Board Male 40 2007.9-2010.9 0 0
Xia Bofu Vice President Male 38 2007.9-2010.9 0 0
He Yili Chief Accountant Female 36 2007.9-2010.9 0 0
Note: In the report period, the on-job supervisor Zheng Zhonghuan holds 10,500 A-shares of the
Company by purchasing from the secondary market, there was no shares of the Company held by
other directors, supervisors, and senior executives in the report period.
2. Particulars about directors or supervisors holding the position in Shareholding Company
Name Name of Shareholding Company
Title in
Shareholding
Company
Office term
Shang Shijun Shenzhen Guocheng Energy Investment
Development Co., Ltd.
Chairman of the
Board
2007 till now
Li Ronghui Shenzhen Guomin Investment Development
Co., Ltd.
Supervisor Nov. 2003 till now
Yao Zhengwang Shenzhen Guomin Investment Development
Co., Ltd.
Deputy General
Manager of
Feb. 2003 till nowSHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
11
Investment
Department
3. Main work experiences of directors, supervisors and senior executives
Mr. Shang Shijun, with master degree of management engineer, from 2002 till now, took post of
Deputy General Manager and General Manager of Shenzhen Guomin Investment Development Co.
Ltd.; Board Chairman and General Manager of Shenzhen Guoli Investment Development Co. Ltd.;
Board Chairman and General Manager of Shenzhen Guocheng Energy Investment Development
Co., Ltd.; Director of Sino Life Insurance Co., Ltd. He has engaged in industry of security
investment, and has lots of experiences on management.
Mr. Jiang Houiin, accountant with bachelor degree of management, from 2002 to Apr., 2006,
successively took the post of Senior Manager of Investment Department, Chief Financial Planner of
China Merchants Dichain Group Co. Ltd. and Vice Present of China Merchants Dichain Investment
Holding Co. Ltd. From May 2006 to August 2007, he took the post of General Manger of
Investment Management Center of Shenzhen Guomin Investment Development Co. Ltd.; now, he is
the Director and Vice President of the Company.
Mr. Li Ronghui, China certified public accountant and China Certified Tax Agents with master
degree of MBA. From 2001 to 2006, he took the post of auditor of Andersen.HuaQiang CPAs; from
2002 to 2003, he took the post of auditor of PricewaterhouseCoopers Zhong Tian CPAs Limited
Company; since Feb., 2003, he entered Shenzhen Guomin Investment Development Co. Ltd as
superbisor. Since 1997, he acted the supervisor of Chia Tai Energy Development (China) Co., Ltd,
and the superbisor of Shandong Century Electric Power Development Co.Ltd.
Mr. Zhu Jianqi, MBA, he was successively took the posts of Project Manager of Shanghai
Citic-Jiading Industrial Co., Ltd., Aissistant to President of Australian Tengda International
Industrial Co., Ltd., Deputy Operation Supervisor of Shanghai Citic-Sumber International, Assistant
to Vice President of Chai Tai Property Shanghai Co., Ltd. and Deputy General Manager of Strategy
Management Center of Shenzhen Guomin Investment Development Co., Ltd. He had experiences
on enteprise management for 10 years and good at strategy management and project management.
Mr. Yang Fenbo, 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.
Mr. Liu Linfeng, MBA, born in 1957, senior engineer, ever took the post of director, general
manager, standing deputy general manager and secretary of Communist Party of Shenzhen China
Bicycle Company (Holdings) Limited; now he is the Vice-president of Shenzhen Furuide Group Co.,
Ltd and Executive President of Shenzhen Angel Drinking Water Group Co., Ltd.
Mr. Li Chun, born in 1957, scholar of Company Law and Security Law, founder of the first legal
group of China- Grandall Legal Group, now took the post of Chairman of Shenzhen Lawyers
Association, Vice-Chairman of Guangdong Lawyers Association, Vice-director of DevelopmentSHENZHEN CHINA
BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
12
Strategy Committee of Chinese National Lawyers Association, Development Strategy Committee of
National Counsel Association, Finance and Securities Committee of National Counsel Association,
Chief Researcher of Venture Investment Law Research Center and Managing Partner of Grandall
Legal Group. He has ever been the first committee member of Listing Committee of Shenzhen
Security Exchange, Chief Expert of Law Committee of studying team of Natinal Debt
Reorganization of State-owned Enterprises; successively took part in the drafting and discussing
work of several laws and regulations such as Company Law, Security Law and Interim Provisions
on the Takeover of Domestic Enterprises by Foreign Investors.
Mr. Shao Liangzhi, born in 1964, senior accountant with master degree of economic, from Mar.,
2000 to Mar. 2004, took the post of Deputy Manager and Manager of Audit Department of
Shenzhen Nanyoh Group Co. Ltd., committee member of Discipline Inspection Committee and
Employee Supervisor of Supervisory Committee of Nanyoh Group Co. Ltd., and concurrently took
the post of Chief Supervosor of the subsidiary company of Nanyoh Group Co. Ltd.- Nanyoh Jujian
House Priority Company; from Mar. 2004 till now, took the post of Deputy General Manager
concurrent CFO of Shenzhen Square Automobile Zone Co. Ltd. He has ever concurrently took the
post of Vice Secretary of Chinese Institute of Finance and Cost for Young and Mid-career
Professionals, Standing Director of Shenzhen Internal Audit Association; now concurrently took the
post of Standing Director of Chinese Institute of Finance and Cost for Young and Mid-career
Professionals and committee member of the third Jury Committee of Guangdong senior accountant
qualification.
Ms. Zhang Xinmiao, born in 1968, with bachelor degree, successively engaged legal affairs in the
First Engineering Bureau of Water Resources & Electric Power Department, Shenzhen Jinhu Law
Firm, and Guangdong Guanghe Law Firm. She obtained certification of lawyer issued by Ministry
of Justice of People’s Republic of China in 1994. From 1999 till now, she took the post of
partnership lawyer of Guangdong Chuangji Law Firm.
Mr. Wei Chuanyi, born in 1971, economist with bachelor degree, took the post in Shenzhen
Zhonghe Group Co. Ltd., and now is the Chairman of the Board of Yibang Craftwork Co.
Ltd.(Shenzhen).
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 Shenzhen Guomin Investment Development Co. Ltd. Now he is
Deputy Manager of Investment Department of Shenzhen Guomin Investment Development Co. Ltd.
He has engaged in real estate development and investment business for ten years and has lots of
experiences of relevant business.
Mr. Lan Qihua, graduated from three-years regular college, has ever worked in the army, and taken
the post of director; successively took the post of Deputy Director of Supervision Office, Director
of Party Office and concurrent Secretary of Party Committee of Lionda Group Corporation, General
Manager and concurrent Secretary of Party Branch of Shenzhen Papermaking Company. Since Jun.,
2000, he has taken the post of Chairman of the Trade Union of Shenzhen China Bicycle (Group)
Holdings Co. Ltd. with lots of Experiences of management of enterprise.
Mr. Zheng Zhonghuan, engineer with bachelor degree, successively took the post in Shenzhen Light
Texile Industry Company and Shenzhen Light Industry Company; since Oct. 1985, entered
Shenzhen China Bicycle (Group) Holdings Co. Ltd. and successively took the post of Deputy
Manager, Manager of Planning Department and Manager of Material Department; now is ManagerSHENZHEN CHINA
BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
13
of Manufacture Department of the Company.
Mr. Li Hai graduated from Economic department of Shenzhen University in major of accounting,
on-study Doctorate of MBA; he took the turns of deputy manager of finance department, chief
supervisor associate of finance department and secretary of the Board, etc. of the Company, and
now is in charge of vice president of the Company.
Mr. Xia Bofu, graduated from the Central Party School with bachelor degree of law. He
successively took the post of Manager of Business Department of Shenzhen Jiabeinianhua Industry
Co. Ltd., Office Director of Shenzhen Lionda Technology Co. Ltd. and Chairman of the Board of
Shenzhen Taiyang PCCP Co. Ltd. Since Oct. 2007, he has taken the post of Vice Present of the
Company.
Ms. He Yili, two degrees of Economics and Law, China CPA. She respectively was the Chief
Accountant, principal of Investment Planning Department of Shenzhen Fountain Corporation,
Financing Manager, and Administration Manager of Embest Info & Tech Co., Ltd, Financing
Manager, Investment Consultant of China Shenzhen Color TV Corp. Since April 2005, she entered
the Company and holds the Chief Accountant of the Company.
II. Particulars about the annual salary of directors, supervisors and senior executives
Referring to the standard of the same industry and local salary situation, the Company decided the
annual salary of the above personnel integrated the operating achievements of the Company. In the
report year, the remuneration level of the director, supervisor and senior executives of the Company
remained the same as that of last year.
(1) There are total 17 of directors, supervisors and senior executives in the Company, total 7 persons
drew the remuneration from the Company, they are: Mr. Jiang Houjin amounting to RMB 355,800,
Mr. Lan Qihua amounting to RMB 125,800, Mr. Zheng Zhonghuan amounting to RMB 85,100, Mr.
Li Hai amounting to RMB 287,700, Mr. Xia Bofu amounting to RMB 267,000 and Ms. He Yili
amounting to RMB 267,000 and Mr. Ye Qing amounting to RMB 217,000(Jan.-July, 2008),.
The total annual remunerations of present directors, supervisors and senior executives received
from the Company were RMB 1,605,400.
(2) The Company paid the allowance of independent director of RMB 40,000 respectively. The
Company reimbursed the expenses for business trips according to the actual situation, which
independent directors attended the Board meeting and shareholders’ general meeting.
Present directors, supervisors and senior executives of the Company totally draw annual
remuneration of RMB 1,548,400 from the Company.
III. Directors, supervisors and senior executives leaving the office and the reason in the report year
1. Director Mr. Zhang Xiang brought forward to resign his post as the director of 7th Board to the
Board of Directors on July 12, 2008 due to personal work; in accordance with the recommendation
by the largest shareholder of the Company Shenzhen Guocheng Engergy Investment Development
Co., Ltd., Mr. Zhu Jianqi was chosen as the candidate for the director of the 7th Board which was
approved in the 1st Extraordinary Shareholders’ General Meeing 2008 held on Nov. 20, 2008.
2. Director Mr. Shi Zhanxiong brought forward the resignation report to the Board of Directors due
to personal reason. The Board of Diretors received the written resignation report from Director Mr.
Shi Zhanxiong on Nov. 27, 2008. In accordance with the regulation in Articles of Association, the
resignation report took effect since the report reached to the Board of Directors.
3. In the report period, the tenure of the fifth Board of Directors of the Company expired, and the
election of changes was held in 2007 Annual Shareholders’ General Meeting in which elected Mr.
Yao Zhengwang and Mr. Lan Qihua as the Supervisors of the 6th Supervisory Committee of theSHENZHEN CHINA
BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
14
Company with the office term of 3 years dated June 27, 2008; Mr. Zheng Zhonghuan was elected as
the Employee Representative Supervisor of the 6th Supervisory Committee of the Company with the
office term of 3 years in the Staff Representatives Conference held on June 4, 2008.
4. On June 27, 2008, the 1st meeting of the 6th Board of Directors of the Company elected Mr. Yao
Zhengwang as the Convenor of the 6th Supervisory Committee.
5. The Company held the 6th meeting of the 7th Board of Directors of the Company on July 28, 2008,
in which approved Ye Qing resigned posts of President of the Company and relevant positions due
to personal reason; in accordance with the nomination of Chairman Mr. Shang Shijun, Mr. Jiang
Houjin was engaged as the President of the Company with the office term was same as the office
term of the session management team.
IV. About staff
1. The Company has totally 188 employees at present, including:
(1) Classified according to professional/occupational composition: 102 production personnel; 15
salespersons; 17 technicians; 15 financial personnel and 39 administrative personnel.
(2) Classified according to the educational background: master degree or above: 3 persons of
Master degree, 25 persons of bachelor degree; 34 persons of junior college graduates. Proportion of
the personnel with education background of junior college or above in the whole staff: 33%.
2. The Company needs to bear the expenses of 2 retirees.SHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED
SUMMARY OF ANNUAL REPORT 2008
15
V. Corporate Governance Structure
I. Corporate Governance
In the report period, the company conformed to regulations of relevant laws and rules such as the
Company Law, Securities Law and Code of Corporate Governance for Listed Companies, in
comparison with the Company’s actual conditions, perfected the administrative structure and tried
to establish modern enterprise system.
In order to standardize the Company’s operation, the Company revised Rules of Procedure for
General Shareholders’ Meeting and Rules of Procedure for Supervisory Committee in Nov. 2008.
1. Particulars about starting special governance campaign
According to Notice on matter concerning Carrying out a Special Campaign to Strengthen the
Corporate Governance of Listed Company issued by CSRC and Notice on Deeply Promoting
Relevant Work of Special Campaign of Corporate Governance issued by Shenzhen Securities
Regulatory Bureau, the Company continued to promote special campaign of corporate governance,
made constant reform in the report period according to reform plan, and disclosed Reform Report of
Corporate Governance in Juchao Website on July 23, 2008, further strengthened the establishment
of internal control system and improved standard operation level.
2. Particulars about receiving spot inspection of Shenzhen Securities Regulatory Bureau and reform
In the first half year of 2008, Shenzhen Securities Regulatory Bureau made spot inspection of the
Company’ governance, information disclosure, financial management and accounting treatment
since 2005, and sent Notice on Requiring Shenzhen China Bicycle Company (Holdings) Limited to
Reform in Limited Period SZJGSZ [2008] No. 100 (hereinafter refer to as Reform Notice) on Sep.
22, 2008, which pointed out the problems existing in system of the Company, operation of Three
Meetings, information disclosure, financial management and accounting disposal. The Company
organized directors, supervisors and senior executives to seriously study requirements of the notice,
compared with laws and regulations such as the Company Laws, Securities Laws, and Code of
Corporate Governance for Listed Company, and By laws such as Articles of Association, found
resource of problems, and combined with deep promotion of special governance campaign to
establish detailed reform plan (Details could be found in Reform Plan of Problems in Spot
Inspection of Shenzhen Securities Regulatory Bureau disclosed in Juchao Website on Oct. 23, 2008),
and the reform was fulfilled before Nov. 30, 2008.
Through this inspection, the Company made an overall arrangement of problems existing in
governance, information disclosure, financial management, and accounting calculation, found basic
reason of the problems, gradually established reform plan and seriously fulfilled reform, which
made the governance level have improvement in some extent, and greatly promoted directors,
supervisors and senior executives to improve the concept of standard operation. In the future, the
board of directors would follow the requirements of the Company Laws, Securities Laws, Articles
of Association and relevant laws and regulations, perfected governance of the Company,
standardized behavior of the Company, timely, exactly and integrally made information disclosure
to ensure steady and healthy development of the Company.
II. Particulars about duty performance of independent directors
In the report period, independent directors of the Company could all earnestly take their
responsibility, actively took part in work of special committees of the board of directors, meeting of
the board of directors and general shareholders’ meeting, and expressed independent opinions on
significant events. In special governance campaign and spot inspection of Shenzhen Securities
Regulatory Bureau, they also made independent and objective judgment with their professional
knowledge, and made active contribution for the development of the Company. Particulars about
independent directors attending the Board Meeting are as follows:SHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）
LIMITED SUMMARY OF ANNUAL REPORT 2008
16
Name
This year should
attend (times)
Presence in
person (times)
Entrusted
presence (times)
Absence
(times)
Li Chun 4 4 0 0
Shao Liangzhi 4 4 0 0
Zhang Xinmiao 4 3 1 0
Wei Chuanyi 4 3 1 0
In the report period, independent directors of the Company had no different opinions on various
proposals approved by the Board of Directors of the Company or other significant events.
III. Separation from the Controlling Company in respect of Business, Personnel, Organization and
Finance etc.
The Company totally separated its Business, Personnel, Organization and Finance etc. with majority
shareholders and related parties, and had independent and complete operation ability.
IV. Establishment and perfection of internal control system
According to regulations of Basic Standard for Enterprise Internal Control issued by Ministry of
Finance and Shenzhen Stock Exchange and Guidelines for the Internal Control of Listed Companies
issued by Shenzhen Stock Exchange, the Company established Self-estimation Report of Internal
Control of the Company (2008) (Details could be found in Juchao Website.)
Independent directors expressed opinions on Self-estimation Report of Internal Control of the
Company as follows: in 2008, according to the requirements of Guidelines for the Internal Control
of Listed Companies issued by Shenzhen Stock Exchange,, combined with problems found in
special governance campaign by CSRC, the company timely revised and perfected internal control
system, and made a total reform of the problems found in inspection and self-inspection. The
self-estimation report of internal control could truly, objectively and integrally reflect the
implementation and effect of internal control system.
The supervisory committee expressed opinions on Self-estimation Report of Internal Control of the
Company as follows: according to relevant regulations of CSRC and Shenzhen Stock Exchange,
following basic principle of internal control, combined with self actual conditions, the Company
constantly established and perfected internal control system, ensured the normal operation of the
Company, and safeguarded the assets’ safety and integrality. In 2008, there was no behavior
violating Guidelines for the Internal Control of Listed Companies. The self-estimation of internal
control comprehensively, truly and exactly reflected the actual conditions of internal control of the
Company.
VI. Establishment and Implementation of Performance Evaluation and Encouragement Mechanism
and Relevant Rewarding System for Senior Executives
The Company firstly has established open and transparent performance evaluation criteria and
encouragement and restriction mechanism for directors, supervisors and managers. The engagement
of the managers conformed to the regulations of laws with openness and transparency.SHENZHEN CHINA BICYCLE
COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
17
VI. Brief Introduction to the Shareholders’ General Meeting
In the report period, the Company held Annual Shareholders’ General Meeting and one
Extraordinary Shareholders’ General Meeting. Basic information are as follows:
1. On Jun. 27, 2008, the 17th Shareholders’ General Meeting (2007) was held, and the resolution of
the meeting has been published on Securities Times and Hong Kong Wen Wei Po dated Jun. 28,
2008.
2. On Nov. 20, 2008, the 1st Extraordinary Shareholders’ General Meeting 2008 was held, and the
resolution of the meeting has been published on Securities Times and Hong Kong Wen Wei Po
dated Nov. 21, 2008.SHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
18
VII. Report of the Board of Directors
I. Discussion and analysis of whole operation in the report period
1. Overall operation of main business in the report period
In 2008, the Company carried out works mainly concerning development of its main business of
bicycle, promotion of integrity of human resource, respondance to lawsuits, promotion of debt
reorganization, progress of Share Merger Reform, as well as reform in systems of remuneration,
administration, operation and incentive mechanism. In front of double attack from inside and
outside, and under the situation that huge disadvantageous change happened to market environment,
the management team of the Company guided its all employees to almost successfully finish the
operation target made by the Board at year begin. From January to December of 2008, the Company
realized operating income of RMB 274,202,800, 16.88% up over the same period of last year; and
net profit was loss of RMB 44,893,000.
(1)Bicycle business. In 2008, in order to further adapt to change in market environment, the
Company actively adjusted operation strategy and product structure, and adopted many operation
strategies: strengthened network construction and after service, completed service system,
meanwhile strengthened R&D for products, rationally positioned production base, etc. also, the
Company strived to develop operation business, expanded electric bicycle business with hard
efforts, and realized steady growth in general for main business.
(2) Property lease and property management business. Present stock properties were fully utilized
and abundant abnormally-occupied properties were clean up. Many channels were adopted to
enlarge leasing area. Totally income of RMB 6.53 million was realized through leasing business for
the whole year, and RMB 0.5 million rents owed in history had been called back. By means of
rational layout for ground and integrity of production base in head office, workshop available for
leasing in Longhua production base approximately approached to 50,000 square meters. Currently,
the Company is taking various measures to clear stock materials, with the aim to ensure maximum
external leasing in 2009, thus to improve cash flow and economic benefit of the Company.
2. Analysis on main business and operation of the Company
The Company is mainly engaged in the production and sales of bicycles, electric bicycles and
accessories and fittings. In the report period, the Company realized revenue from main operation
amounting to RMB 264,600,683.98, and profit from main operation amounting to RMB
8,935,822.36.
(1) Statement of main operations classified according to products
Unit: RMB’0000
Main operations classified according to industries
Classified according to
industries or products
Operating
income Operating cost
Operating
profit ratio
(%)
Increase/decrea
se in operating
income over
last year (%)
Increase/decre
ase in
operating cost
over last year
(%)
Increase/decreas
e in operating
profit ratio over
last year (%)
Bicycles manufacture
and sales of
accessories and fittings
26,237.85 25,238.32 3.81% 16.85% 15.06% 64.64%
Property management
industry 222.22 328.17 -47.68% 9.56% -15.53% -47.92%
Main operations classified according to products
Bicycles manufacture
and accessories and
fittings
26,237.85 25,238.32 3.81% 16.85% 15.06% 64.64%SHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF
ANNUAL REPORT 2008
19
Property management 222.22 328.17 -47.68% 9.56% -15.53% -47.92%
(2)Particulars about main operations classified according to areas
Unit: RMB’0000
Areas Operating income Increase/decrease in operating
income over last year (%)
Shandong 7,235.35 21.85%
Henan 6,958.26 31.24%
Hebei 3,902.72 34.93%
Jiangsu 2,907.68 -0.70%
Shanxi 718.27 -19.90%
(3)Major suppliers and customers
In the report period, the purchasing amount of top five suppliers amounted to RMB 217,417,700,
taking 88.14% of annual purchasing amount; the sales amount to top five suppliers amounted to
RMB 217,222,800, taking 79.22% of annual sales amount.
3. Change on formation of asset and expenses of the Company in the report period.
Unit: RMB
2008 2007
Amount
Proportion
in total asset
（%）
Amount Proportion in
total asset（%）
Increase/
decrease ratio
in proportion
in total asset
(%)
Monetary fund
10,086,599.53 5.28% 14,062,198.43
6.56% -19.45%
Account receivable
385,033.41 0.20% 482,050.51
0.22% -8.32%
Inventory
36,197,343.93 18.96% 41,116,795.51
19.18% -1.14%
Long-term
investment of equity
2,619,840.50 1.37% 27,406,483.51
12.78% -89.26%
Net values of fixed
asset
56,010,305.12 29.34% 68,561,480.10
31.98% -8.25%
Short-term loan
399,661,355.3
5
209.36% 418,165,449.05
195.06%
7.33%
Long-term loans due
within one year
873,090,594.2
8
457.36% 915,134,453.92
426.87% 7.14%
2008 2007 Increase/decre
ase (%)
Operating expense 5,408,121.48
5,542,241.79 -2.42%
Administrative
expense 36,231,031.25 16,217,410.39 123.41%
Financial expense 32,083,564.27
35,273,002.48 -9.04%
Income tax 0.00
9,849,555.22 -100.00%
Note: Administrative expense of this report period increased by 123.41% over the same
period of last year, mainly coming from expense of RMB 11,452,200 used for compensation
for economic retirement and RMB 4,980,700 manufacture expense occurred duringSHENZHEN CHINA BICYCLE COMPANY
（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
20
production-cease period transferring to administrative expense
4. Changes on cash flow of the Company
Item 2008 2007 Increase/decrease amount
Increase/decre
ase proportion
(%)
Net cash flow arising from
operating activities -14,392,427.25 -2,591,980.11 -11,800,447.14 455.27%
Net cash flow arising from
investing activities 10,439,829.52 -277,032.46 10,716,861.98 -3,868.45%
Net cash flow arising from
financing activities --- --- --- ---
Note: 1. Net cash flow arising from operating activities of this report period decreased by RMB
11,800,500 over the same period of last year, mainly arising from expense of RMB 11,452,200 as
compensation for employees for economic retirement.
2. Net cash flow arising from investment activities of this report period increased by RMB
10,716,900 over the same period of last year, mainly due to that RMB 10,180,000 was received for
property disposal of Beijing Branch.
5. The operation and analysis to the operation and achievements of the main holding company and
shareholding companies of the Company
(1) Shenzhen Emmelle Industry Co., Ltd.: Its registered capital is RMB 2 million, with its main
business scope in establishing industry. The asset scale of the Company amounted to RMB
25,433,400 and the net profit amounted to RMB 1,957,400.
(2) Shenzhen Anjule Property Management Co., Ltd.: Its registered capital is RMB 2 million, with
its main business scope in property management. The asset scale of the Company amounted to
RMB 3,842,300 and the net profit amounted to RMB -1,533,000.
(3) China Bicycles (Hong Kong) Co., Ltd.: Its registered capital is HKD 5 million and its place of
registration is Hong Kong, with its main business scope in bicycle trading. The Company hasn’t any
trading business in recent years.
II. Prospect for the future development of the Company
1. The development trend in the industry of the Company and the market competitive pattern the
Company faces
The Company set foot in industry of electric bicycle since 2002. In 2007, the competition in
industry of electric bicycle and bicycle present more fury, while the uncertainty brought by the new
standard for industry of electric bicycle and the releasing time brings negative influence to sale of
electric bicycle. The industry starts to walk into the step of standardized riffle. At the same time, the
lasting sharp rise in prices for raw material, such as lead, steel, copper, rubber and oil, results in rise
in cost for manufacture and use electric bicycle. Particularly the sharp price rise in consume fittings
such as battery seriously affect the market demand trend, even the develop potential of the whole
industry of electric bicycle.
2. The challenges for future and operation plan of the Company for the next year
(1) Fully promote reform in mechanism and management, and fully improve operation management
level.
(2)Completely promote Share Merger Reform.SHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF
ANNUAL REPORT 2008
21
(3) Fully smooth and revise various bylaws and further perfect system of the Company.
(4) Strengthen cashing for spare stock properties in other place and stock materials, and effectively
improve economic benefit of stock assets.
(5) Put more efforts in written-off and liquidation of branches and underlying companies in various
places.
(6) Fully cooperate and actively promote overall reorganization of the Company.
3. The unfavorable risk factors for the development of the Company
(1) The international financial crisis burst out at year end of 2008 has already brought negative
influences on domestic industry economy, import and export for trade, labor occupation,
consumption market and consumotion prediction, moreover, the influence will impenetrate the
whole year of 2009.
(2) Huge debt approximately approaching to RMB 2 billion is still the biggest problem for the
Company. Due to that the debts have been made for a long time, situation is complicated, and
creditors are various, it is rather difficult to deal with the debts.
Faced with the aforesaid problems, on one hand, the Company tries to expand its products sales,
especially in the production and sales of electric bicycles with high additional values; on the other
hand, the Company actively promotes the integrated reorganization of the Company, including the
debts reorganization.
III. Investment of the Company
During the report period, the Company has not raised proceeds and significant investment.
IV. Auditor’s opinion and accounting policy
1. Auditor’s opinion offered by Shenzhen Pengcheng Certified Public Accountants Co., Ltd.:
Shenzhen Pengcheng Certified Public Accountants Co., Ltd. offered 2008 Financial Report with the
disclaimer of opinion.
2. Explanations of the Board of Directors about 2008 Financial Report of the Company with the
disclaimer of opinions issued by Shenzhen Pengcheng Certified Public Accountants Co., Ltd.:
The Board of Directors agreed the 2008 Auditor’s Report offered by Shenzhen Pengcheng Certified
Public Accountants Co., Ltd.
Due to that the debt reorganization work of the Company had not been completely finished in 2008,
so risk of bearing huge debt still remained with many significant uncertainties. The CPAs was not
able to offer opinion on the financial debt, tax payable, contingent proceedings, lawsuits and
sustainable operation.
In light of that, the Board of the Company made the following explanations:
i. Financial debt
Shenzhen Pengcheng CPAs held that: the letters replied from the financial creditors for the inquiry
showed that the Company missed to record an interest balance totaling to RMB 265,875,786.92,
and some letters were replied without confirmation on interest for the principal of loans totaling to
RMB 114,558,000.00, and principal of loans which haven’t been replied totaled to RMB
194,255,951.99, so it was not available to confirm influence on financial statement by financial
debt.
The Company provided explanation in Note 13.1 for details of interest confirmation balance: when
some creditors implemented the document ((2004) No.6) released by China Committee on Bank
Supervision, they had different understanding on this document with the Company. The document
noticed that: Bank of China and other 10 financial organizations stop calculating the interest of the
Company for 3 years since Jan 1st of 2002 and at the same time, exempt all the interest payable of
the Company (including penalty interest and compound interest) occurred before Dec 31st of 2001.SHENZHEN
CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
22
Some assets management companies and banks considered that the Company was expected to
return the interest exempted and stop-calculated, and some assets management companies had not
confirmed the proceeding of interest calculation. The Company had transferred all the interest of
loans payable owed before Dec 31st of 2001, RMB 357,993,665.24, (including penalty interest and
compound interest) to capital public reserve. Interest was stopped with calculation from Jan 1st of
2002 to Dec 31st of 2004. The exempt term was due on Dec 31st of 2004. The Company held it was
not necessary for him to return the interest exempted and stop-calculated, so when the term was due,
the Company started to withdraw interest according to normal loan for those interests which needed
to be returned. The stop-calculated interest and compound interest from Jan 1st of 2002 to Dec 31st
of 2004 was not accrued.
Besides, the financial debt of the Company was formed in history which had occurred for a long
time and the amount of period–end had not changed for years. Body qualification of some creditors
had been transferred and the particular personnel for handling had also changed, so the creditors
needed time to check clearly the amount of creditor and debt of both involved parties and that was
why some creditors had not replied the letters to confirm.
The Company would continuously advance the account-check work with the relevant creditors of
financial debt, trying as soon as possible to check clearly the interest on principal of the financial
debt. Once progress is made, relevant information would be disclosed according to relevant
regulation.
ii. Issues on tax payable
Shenzhen Pengcheng Certified Public Accountants Co., Ltd. thought that: in the audit process, the
CPAs implemented audit procedures including inspection and inquiry, inquiring book tax amount
payable, custom guarantee and penalty balance totaling to RMB 118,292,319.46. Until the audit
report day, no reply has been received, so it was impossible for us to confirm the influence on
financial statement of the Company.
Due to the Company’s tax payable was formed in the past, which had a long time, there was no
newl-increased tax payable in the report period, forming reasons were complex, personnel of
specific affairs had changed, and tax department needed time to check clear the debts rights and
amounts of both sides, therefore, we are not able to receive confirmation letter from tax department.
According to the regulations in Administration of Tax Collection regulated by the State, it is
possible to repay the penalties and overdue fine. The Company will continue to follow up the work
of checking account of tax department, check clear the amount of tax payable as soon as possible,
and will disclose information according to the requirements of relevant regulations if there is some
progress.
iii. Contingent events and lawsuits
Shenzhen Pengcheng Certified Public Accountants believed that: card information for loans of the
Company was not accordant because of system updating and other seasons; during the auditing, the
CPAs made field verification in relevant courts involved in lawsuits for external guarantee and
overdue loans of the Company as substitute audit procedure, while no confirmation document had
been obtained from the relevant courts. Besides, due to that it was hard to implement other effective
audit procedures, it was unable for us to judge whether the Company had disclosed complete
contingent events and lawsuits, and impacts on its financial statement.
The historically formed loan and guarantee lawsuit had existed rather long time; in the report period,
there was no newly-added undisclosed guarantee events and lawsuits; part courts in charge of those
lawsuits changed, and specific responsible people also altered; the court needs time to check details
and amount of the case, so the court didn’t write back for confirmation. The Company will continue
follow up the check work by certified public accountants with related courts, and checks clear theSHENZHEN
CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
23
contingent events and lawsuits as soon as possible. If there is any progress, information disclosure
will be made according to requirements of relevant regulations.
iv. Matters on sustainable operations
Shenzhen Pengcheng Certified Public Accountants thought that, the Company’ asset could
seriously not offset the debt; the measures on the reconciliation procedure of the bankruptcy to
settle the debts had no material progress and could not be able to get adequate and proper audit
evidence to confirm it could effectively improve the continuous operations of the Company; thus,
we could not judge whether the financial report 2008 prepared by the Company based on imagined
continuous operations was proper.
Since March 2003, the promotion on debt restructuring by the former largest creditor of the
Company-China Huarong Asset Management Corporation acquired breakthrough development, the
Plan on Reorganization of Shenzhen China Bicycle Company (Holdings) Limited has obtained the
approval from relevant department such as China Banking Regulatory Commission, in which all the
interests of the financial debts the Company owed ended Dec.31, 2004 were exempted and stopped
interest calculation , and it was under the stage of implementation.
The Company and International Finance Corporation signed Reconciled Agreement on Mar 29th of
2007, in which it was agreed to settle all the credits and liabilities between the two parties with
USD equivalent to RMB 2 million. The liabilities amount was consisted of principal approximately
amounting to USD 3.87 million and an accrued interest approximately amounting to RMB 42.78
million. The two largest creditors of the Company-Shenzhen Guocheng Energy Investment
Development Co., Ltd. and Guangdong Sunrise Holdings Co., Ltd. agreed to stop calculation of
interest of consolidated loan of RMB 69,558,600 for the whole year of 2007, and RMB 66,226,800
for 2008. The interest would also not be collected in future.
Besides progress is made in debt restructure, the Company also makes continuous growth in its
main operation and the main operation continues to make profit. Payment pressure of the Company
in short-term has been sharply brought down; the lasting operation ability has been improved
comparatively.
On Dec. 30, 2006, China Huarong Asset Management Corporation transferred its creditor right to
Shenzhen Guocheng Energy Investment Development Co., Ltd. After the change of the largest
creditor, the former largest creditor China Huarong Asset Management Corporation applied to
Shenzhen Intermediate People’ Court for bankruptcy of the Company on August 1, 2005, planning
to settle the debts of the Company completely through bankruptcy and reform measures; the new
creditor Shenzhen Guocheng Energy Investment Development Co., Ltd. was responsible for
promoting the restructuring works on relevant debts and reorganization, and speeded up making
scheme of debt restructuring and got certain development.
The Board of the Company believed that: as the debt and asset restructure of the Company
continuously made progress, together with the continuous growth of the Company’s performance,
its operation, operation status and sustainable operation ability would be improved further.
V. Routine work of the Board of Directors
(I) The board of directors of the Company totally held 4 meetings in the report period, details and
resolutions of the board meetings were listed as follows:
1. On Apr. 25th of 2008, the 5th meeting of the 7th board of directors was held, relevant resolutions
have been published on Securities Times and Hong Kong Wen Wei Po dated Apr. 29th of 2008.
2. On Jul. 28th of 2008, the 6th meeting of the 7th board of directors was held, relevant resolutions
have been published on Securities Times and Hong Kong Wen Wei Po dated Jul. 30th of 2008.
3. On Oct. 21st of 2008, the 7th meeting (extraordinary) of the 7th board of directors was held,
relevant resolutions have been published on Securities Times and Hong Kong Wen Wei Po dated
Oct. 23rd of 2008.SHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
24
4. On Nov. 4th of 2008, the 8th meeting of the 7th board of directors was held by communication
voting, relevant resolutions have been published on Securities Times and Hong Kong Wen Wei Po
dated Nov. 5th of 2008.
(II) Implementation of resolutions of Shareholders’ General Meeting by the board of directors:
1. The Board of Directors strictly implemented all resolutions of Shareholders’ General Meeting in
the report period with no material warps or errors.
2. In the report period, the Company had no profit distribution plan, plan of converting public
reserve into share capital, rights offering as well as additionally equity offerings.
3. Duty performance of the special committee of the board of directors:
The Audit Committee of the Board consists of 3 directors, 2 of which are independent directors and
independent director takes the post of convener. In the report period, according to regulations of
Working Rules of Audit Committee of the Board and Working Procedure of Audit Committee for
Annual Report, the Committee periodically checked the internal audit report, financial statement
and internal control system of the Company, and earnestly performed its obligation.
In the report period, with professional knowledge and experience, the members of the Committee
examined the annual financial statement prepared by the Company. According to relevant
regulations and demands of CSRC, the Audit Committee presented two examination opinions for
the annual financial statement.
Before the certified public accountants enter for annual audit, the Audit Committee issued the first
written opinion on the un-audited financial statements: according to the 38 detailed principles of
Accounting Standard for Enterprise-Basic Standard, Accounting Standard for Enterprise
No.1-Inventory and the relevant regulation in the Company’s financial system, the Audit Committee
takes close eye on the reality and completeness of the financial statements, and on the preparation
of the statements whether they were prepared in strict accordance to the new Accounting Standard
for Enterprise and relevant regulation in the Company’s financial system. With inquiry and analysis
on the financial files, the Audit Committee holds that: the Company stipulated its rational
accounting policy and adequate accounting estimation, according to the relevant request of the new
Accounting Standard for Enterprise and taking the actual status of the Company into consideration;
the transaction records were real and complete; and the financial accounting statements prepared by
the Company really reflected the financial status of the Company till Dec 31st of 2008, and the
operation achievement and cash flow of the Company in 2008. It is agreed to take these financial
statements as basis to carry out the financial audit work of 2008.
After the CPA issued the initial audit opinion, the Audit Committee read the first audit report in time
and negotiated with the CPA. The Audit Committee and the CPA had no disputation on the
important issues concerned by the annual financial report of the Company. The financial report of
the Company complies with the Accounting Standard for Enterprise and regulations of relevant
laws. The Audit Committee agreed to take these financial statements as basis to prepare the 2008
Annual Report and its Summary, which made it available for the Company to disclose the 2008
Annual Report in time.
4. Duty performance of the Remuneration and Examination Committee of the Board:
During the report period, the Remuneration and Examination Committee of the Board examined the
remuneration policy and scheme of the directors, supervisors and senior executives of the Company.
It is believed that the remuneration of the directors, supervisors and senior executives of the
Company disclosed in the V. of this report is real and accurate.SHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）
LIMITED SUMMARY OF ANNUAL REPORT 2008
25
VI. Profit distribution preplan or preplan of capitalization
As audited by Shenzhen Pengcheng Certified Public Accountants, the losses of the Company
amounted to RMB 44,893,000 in 2008. The Company has neither dividend distribution nor share
capital conversion from capital public reserve.
VII. Other issues
(I) Explanation on the external guarantees of the Company, accumulative total and the current ones,
issued by the independent directors:
According to the regulations of the notice (CSRCF (2003) No.56) on Standardize Fund Exchange
Between Listed Companies and Related Parties and on Problem of External Guarantee of Listed
Companies, as the independent directors of Shenzhen China Bicycle Company (Holdings) Limited,
we made inspection on the accumulative and current external guarantees of the Company and also
on the guarantee getting out of line, together according to the document (SPSZSZ[2008] No.262)
issued by Shenzhen Pengcheng CPAs on Special Explanation on Fund Occupancy and Guarantee
Getting out of Line of the Controlling Shareholders and Other Related Parties of Shenzhen China
Bicycle Company (Holdings) Limited and relevant data. Here comes the detail information:
During the report period, no guarantee or guarantee out of line has been provided by the Company
for its controlling shareholders and the enterprises where they take posts. The guarantees or
guarantees out of line provided by the Company for its controlling shareholders and the enterprises
where they take posts were those happened from year 1996 to year 1999, belonging to the events
left in history. Due to that most units receiving guarantee are not able to repay, the Company treated
most guarantees as projected liabilities which amounted to RMB 184,133,984.92.
(II) In the report period, the Company tried to promote the Share Merger Reform. Proposal of Share
Merger Reform was passed in Shareholders’ General Meeting on Share Merger Reform of A Share
Market held on Feb. 1, 2007, and it also got replies from Ministry of Commerce, PRC SZNo.1343
[2007] and Approval of Adding Total Capital Shares of Shenzhen China Bicycle (Holdings) Co.,
Ltd from Shenzhen Commerce and Industry Bureau SMGZFu No.2257 [2007] in which the Share
Merger Reform Prospectus passed in Shareholders’ General Meeting of the Company held in Feb. 1,
2007. According to Working Guidelines on Share Merger Reform for Listed Companies, related
Share Merger Reform procedures are under transaction in Shenzhen Branch of China Securities
Depository and Clearing Corporation Limited.SHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF
ANNUAL REPORT 2008
26
VIII. Report of Supervisory Committee
In the spirit of being responsible to shareholders and strictly according to regulations in PRC
Company Law, Securities Law and Articles of Association of the Company, the Supervisory
Committee has dutifully performed its obligations endowed by relevant laws and legislations,
carried out work positively and hard, and safeguarded the legal rights and interests of the Company
and shareholders in 2008. It has also put forward its opinions and suggestions promptly towards
significant decisions made for productions, management and investment, and supervised the
behaviors of directors and senior executives in terms of implementation of their obligations.
I. Work of the Supervisory Committee in the report period
In the report period, the Supervisory Committee of the Company held altogether 4 meetings.
1. The 9th meeting of the 5th Supervisory Committee was held on April 25, 2008. The public notice
of relevant resolutions was published on Securities Times and Hong Kong Wen Wei Po dated April
29, 2008.
2. The 10th meeting of the 5th Supervisory Committee was held on June 5, 2008. The public notice
of relevant resolutions was published on Securities Times and Hong Kong Wen Wei Po dated June 6,
2008
3. The 1st meeting of the 6th Supervisory Committee was held on June 27, 2008. The public notice
of relevant resolutions was published on Securities Times and Hong Kong Wen Wei Po dated June
28, 2008.
4. The 2nd meeting (extraordinary) of the 6th Supervisory Committee was held on Oct. 21, 2008. The
public notice of relevant resolutions was published on Securities Times and Hong Kong Wen Wei
Po dated Oct. 23, 2008.
II. Opinions on relevant issues in 2008 expressed by the Supervisory Committee
1. Operation according to law:
In accordance with relevant national laws and regulations, the Supervisory Committee has carried
out supervision work on the holding procedures of Shareholders’ General Meetings and Board
meetings, resolution, implementation of resolutions of Shareholders’ General Meetings by the
Board of Directors, performance of duties of senior executives as well as the Company’s
administration system etc.; it believes that, in 2008, the Board of Directors strictly complied with
PRC Company Law, Securities Law, Rules for Stock Listing, Articles of Association and other
relevant regulations and systems, operated in a standardized manner, worked conscientiously,
conducted business and made decisions in a scientific and reasonable way, and further improved
internal administration and internal control system; the directors and managers haven’t violated any
laws, regulations, the Articles of Association or done harm to the interests of the Company and
shareholders when performing duties.
2. Financial Inspection
In the report period, Shenzhen Pengcheng Certified Public Accountants issued auditor’s report with
disclaimer of opinion for the Financial Statement 2008 of the Company. The Financial Report of the
Company objectively and truly reflected the financial status and operation achievements of the
Company this year.
3. Use of raised funds:
The Company has not raised funds in the report period.
4. Purchases and sales of assets:
In the report period, the Company has no purchases or sales of assets.
5. Opinions towards related transactionsSHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL
REPORT 2008
27
Related transactions conducted by the Company are fair and square, and haven’t done harm to the
interests of the Listed Company, and there was no insider dealing.
6. Implementation on resolution of shareholders’ general meeting by the Board
Supervisors of the Company attended shareholders’ general meeting and presented meeting of the
Board without voting. The Supervisory of the Company supervised implementation on resolution of
shareholders’general meeting, and it thought that the Board earnestly implemented the various
resolutions of shareholders’general meeting.
III. Opinion issued by the Board on the auditor’s report with disclaimer of opinion issued by
Shenzhen Pengcheng Certified Public Accountants
Shenzhen Pengcheng CPAs issued the audit report with disclaimer of opinion for 2008. The Board
had made special explanation on the events concerned by the report. The Supervisory Committee
believed that: the audit report issued by Shenzhen Pengcheng CPAs truthfully reflected the financial
condition and operation achievement of the Company; the explanation presented by the Board of
the Company on the events concerned by the audit opinion complied with the actual condition of
the Company. The Supervisory Committee would actively cooperate with the Board to carry out its
works, supervise and urge the Board to intensify power in debt restructure and try to improve the
persistent operating ability of the Company.SHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF
ANNUAL REPORT 2008
28
IX. Significant Events
I. Material lawsuits and arbitrations in the report period:
The details about the material lawsuits or arbitrations that occurred in the previous years are in the
Notes 12 of the Financial Statement.
II. The Company had no active purchase and sales of assets in the report period.
III. Significant related transactions in the report period
In the report period, there was no new significant related transaction; details about the significant
related transactions that occurred in the previous years are in the Notes 10 of Financial Statement.
IV. Significant Contracts and Implementation of Contracts
1. In the report period, the Company had not entrusted, contracted or leased the assets of other
companies, nor had other companies entrusted, contracted or leased the assets of listed companies.
2. In the report period, the Company had not entrusted financing events.
3. In the report period, the Company did not happenthe situations of guarantees on controlling
subsidiary, the guaranteed occurred in previous years were as follows:
Unit: RMB’0000
Particulars about the external guarantee of the Company (Barring the guarantee for the controlling
subsidiaries)
Name of the Company
guaranteed
Date of happening
(Date of signing
agreement)
Amount
of
guarantee
Guarantee type Guarante
e term
Complete
Impleme
ntation or
not
Guarantee
for related
party (Yes or
no)
Guangdong Sunrise Group
Co., Ltd. June 20, 1996 504.55 Joint
responsibility 6 months No No
Guangdong Sunrise Group
Co., Ltd. July 26, 2006 2,800.00 Joint
responsibility 4 months No No
Guangdong Sunrise Group
Co., Ltd. Sep. 30, 1999 681.83 Joint
responsibility
12
months No No
Guangdong Sunrise Group
Co., Ltd. Apr. 30, 1998 260.00 Joint
responsibility
11
months No No
Guangdong Sunrise Group
Co., Ltd. July 30, 1997 250.00 Joint
responsibility 7 months No No
Guangdong Sunrise Group
Co., Ltd. June 4, 1997 300.00 Joint
responsibility 8 months No No
Gintian Industry (Group) Co.,
Ltd. Oct. 30, 1998 5,000.00 Joint
responsibility 6 months No No
Shenzhen Tianma Cosmetics
Co., Ltd. Sep. 30, 1994 800.00 Joint
responsibility
12
months No No
Total amount of guarantee in the report period 0.00
Total balance of guarantee at the end of the report
period 10,596.38
Guarantee of the Company for the controlling subsidiaries
Total amount of guarantee for
controlling subsidiaries during the
report period
0.00
Total balance of guarantee for
controlling subsidiaries at the end of
the report period
7,817.02
Total amount of guarantee of the Company (including guarantee for controlling subsidiaries)
Total amount of guarantees 18,413.40
Ratio of total guarantee to net assets of
the Company -10.21%
Including:SHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
29
Amount of guarantee for shareholders,
actual controller and its related parties 0.00
The debts guarantee amount provided
for the guarantee of which the
assets-liability ratio exceeded 70%
directly or indirectly
18,413.40
Proportion of total amount of
guarantee in net assets of the Company
exceeded 50%
18,413.40
Total amount of the aforesaid three
guarantees 36,826.80
Explanations on possibly bearing joint
and several responsibilities for undue
guarantees
Naught
Note: Guangdong Sunrise Group Co., Ltd. was the shareholder of the Company, its equity was
auctioned by the court and now it is not the shareholder of the Company.
V. Commitments of the Company and the shareholders holding more than 5% equity in the report
period or lasting to the report period
The Company or the shareholders holding more than 5% equity had no commitments made in the
report period or made in previous period but carried forward to the report period that were likely to
produce significant influence on the operation achievements and financial status of the Company.
VI. Engagement and Disengagement of Certified Public Accountants of the Company
In the report period, the Company engaged Shenzhen Pengcheng Certified Public Accountants as
the auditing organ in this year with term of one year. In 2008, the Company paid auditing fee
amounting to RMB 0.5 million to Shenzhen Pengcheng Certified Public Accountants.
VII. Particulars about punishment received by the Company, the Board of Directors of the Company
and the directors from supervisory department.
In the report period, the Company, the Board of Directors of the Company and the directors have
not been inspected, given administrative punishment or public criticism by CSRC, or publicly
condemned by Shenzhen Stock Exchange.
VIII. Particulars about the Company’s Reception of Investigation and Interview
In accordance with the requirements of Guidance for Fair Information Disclosure for Listed
Companies of Shenzhen Stock Exchange, the Company earnestly implements the System of
Reception and Popularization. The Company and relevant personnel in charge of information
disclosure strictly follow the principle of fair information disclosre. Situation that different treaty
policy is implemented, information is disclosed for appointed person or non-public significant
information is disclosed or leaked out has never happened.
Reception
date
Reception place Reception way Person receipted
Main content of talk and
information provided
2008
Office of the
Company
Phone
communication
Shareholders of
circulating shares
Progress of the share merger
reform and the debt restructure
project of the CompanySHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
30
X. Financial Report
Shenzhen China Bicycle Company (Holdings) Limited
2008 Financial Report
Content Pages
I. Auditor’s Report
Balance Sheet
Profit Statement
Statement on Changes of Shareholders' Equity
Cash Flow Statement
Notes to Financial StatementSHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
31
Auditors’ Report
Shenzhen Pengcheng GSZi [2009] No.086
To the shareholders of Shenzhen China Bicycle Company (Holdings) Limited,
We have audited the accompanying financial statements of Shenzhen China Bicycle Company
(Holdings) Limited (“the Company”), including consolidated balance sheet of the Company of 31
December 2008, and consolidated profit statement of the Company, and consolidated statement on
changes of shareholders’ equity of the Company, and consolidated cash flow statement of the
Company for the year ended, and notes to the financial statements for the year ended.
I. Management's responsibility for the financial statements
It is the responsibility for the management of the Company to prepare financial statements
according to the stipulations of the business accounting rules. This responsibility includes: (1)
devising, implementing and maintaining internal control related to the preparation of the financial
statements so as to ensure that the financial statements do not contain major errors caused by
fraudulence or mistake; (2) choosing and adopting appropriate accounting policies; and (3) making
reasonable accounting estimations.
II. Proceedings which result in disclaimer of opinion
We noticed that:
1. During the audit, we have specially implemented the audit procedures such as visit for inspection
and inquiry, focusing on the financial debts of Shenzhen China Bicycle Company (Holdings)
Limited which have expired for long time till the end of Dec 31st of 2009. Until the audit report day,
the replied letters told that a balance in interest of RMB 265,875,786.92 has been omitted by
Shenzhen China Bicycle Company (Holdings) Limited; besides, some letters were replied to show
unconfirmed interest on borrowing principal converting to RMB 114,558,000.00; to the un-replied
letters, the total borrowing principal was converted into RMB 194,255,951.99. As to the aforesaid
omitted interest balance, the Company provided explanation in Note 13.1 that when implementing
the document (YJBT (2004) No.6) released by China Committee on Bank Supervision for offering
a reference of the loan interest restructure of Shenzhen China Bicycle Company (Holdings) Limited,
the Company and some creditors had different understanding on this document, which brought the
aforesaid omission. Since the accounts had not been adjusted, we are not able to ensure the
influence of this balance to the financial statements of the Company.
2. During the audit, we have specially implemented the audit procedures such as visit for inspection
and inquiry, focusing on the tax payable of Shenzhen China Bicycle Company (Holdings) Limited
which have expired for long time till the end of Dec 31st of 2008, in want of verification that
whether the unpaid tax, tariff bond and amercement balance was totaling up to RMB
118,292,319.46 as the Company’s book said. While until the audit report day, nothing got replied.
Thus, it was impossible for us to ensure the influence on the financial statements of the Company
brought by the uncertainty.
3．In the process of audit, the information of credit card which we received from the account bank
of the Company is not able to be checked whether contingency such as related guarantee
information accord with disclosure, for it did not be annually inspected and credit card system did
not upgrade related information. Therefore, we implement substitutive audit procedure of field
checking the related courts to the claims of the Company caused by external guarantee and overdue
loan. However, related courts all only make some oral explanations or provide some information
which could only be used as reference. Otherwise, we are not able to implement other efficient audit
procedure, so that we are not able to judge the integrity of the contingency disclosed in Note 11 and
the lawsuits disclosed in Note 12 of the Company and possible effects of the issues on the
Company’s financial report.
4. Refer to Note 15, until Dec. 31, 2008, total asset of Shenzhen China Bicycle Company (Holdings)
Limited was RMB 190,897,705.5; total debt was RMB 1,993,553,860.52; net asset was RMBSHENZHEN CHINA BICYCLE
COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
32
-1,802,656,154.99 with debts beyond assets. Shenzhen China Bicycle Company (Holdings) Limited
disclosed improving methods in Note 15 of financial statement, however, the main measurement
adopted till 2006, that planed to accomplish the debt restructure of Shenzhen China Bicycle
Company (Holdings) Limited through reconciled procedure of bankruptcy has not made any
practical progress from year 2008 to the audit report day, thus making us unable to get complete and
appropriate auditing evidence to identify whether it can improve continuous operation ability for
Shenzhen China Bicycle Company (Holdings) Limited effectively. Therefore, we can not judge
whether the 2008 financial statement which was made under continuous operation assumption of
Shenzhen China Bicycle Company (Holdings) Limited is appropriate or not.
III. Auditing Opinion
Due to that the aforesaid events could possibly occur very significant and aboard influences, we
could not issue auditor’ opinion on the financial statement of the Company.
Shenzhen Pengcheng Certified
Public Accountants
China Certified
Accountant
Shenzhen .. P.R.C.
April 23, 2009
Li Hailin
China Certified
Accountant
Li ZehaoSHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
33
Balance Sheet
Prepared by Shenzhen China Bicycle Company (Holdings) Limited December 31, 2008 Unit: RMB
Balance at period-end Balance at year-begin
Items
Merger Parent Company Merger Parent Company
Current assets:
Monetary funds 10,086,599.53 417,444.51 14,062,198.43 477,660.27
Settlement provisions
Capital lent
Transaction finance
asset
Notes receivable 5,408,792.00 1,673,960.00
Accounts receivable 385,033.41 136,120,228.45 482,050.51 144,678,350.46
Accounts paid in advance 504,440.40 0.00 1,304,193.48 117,100.00
Insurance receivable
Reinsurance receivables
Contract reserve of
reinsurance receivable
Interest receivable
Dividend receivable
Other receivables 42,193,937.90 87,659,723.49 20,774,519.57 66,544,849.86
Purchase restituted
finance asset
Inventories 36,197,343.93 26,922,910.94 41,116,795.51 33,892,709.90
Non-current asset due
within one year
Other current assets
Total current assets 94,776,147.17 251,120,307.39 79,413,717.50 245,710,670.49
Non-current assets:
Granted loans and
advances
Finance asset available
for sales
Held-to-maturity
securities
Long-term account
receivable
Long-term equity
investment
2,619,840.50 2,619,840.50 27,406,483.51 27,406,483.51
Investment property 10,311,261.40 10,311,261.40 10,956,836.08 10,956,836.08
Fixed assets 56,010,305.12 55,334,097.37 68,561,480.10 67,962,140.33
Construction in
progress
Engineering material
Disposal of fixed asset
Productive biological
asset
Oil and gas asset
Intangible assets 27,180,151.34 27,180,151.34 28,043,013.38 28,043,013.38SHENZHEN CHINA BICYCLE COMPANY
（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
34
Expense on Research and
Development
Goodwill
Long-term expenses to be
apportioned
Deferred income tax
asset
Other non-current asset
Total non-current asset 96,121,558.36 95,445,350.61 134,967,813.07 134,368,473.30
Total assets 190,897,705.53 346,565,658.00 214,381,530.57 380,079,143.79
Current liabilities:
Short-term loans 399,661,355.35 338,713,085.90 418,165,449.05 353,451,323.08
Loan from central bank
Absorbing deposit and
interbank deposit
Capital borrowed
Transaction financial
liabilities
Notes payable
Accounts payable 130,714,884.86 324,940,555.98 135,329,891.70 338,652,954.48
Accounts received in
advance
21,333,035.66 14,605,306.04 18,086,124.15 14,605,306.04
Selling financial asset
of repurchase
Commission charge and
commission payable
Wage payable 1,686,297.83 1,550,365.19 1,392,052.21 1,250,670.90
Taxes payable 95,399,029.08 94,220,632.13 95,460,222.24 94,178,777.08
Interest payable
Dividend payable
Other accounts payable 168,604,764.50 134,698,784.49 167,601,705.14 131,309,401.97
Reinsurance payables
Insurance contract
reserve
Security trading of
agency
Security sales of agency
Non-current liabilities
due within 1 year
873,090,594.28 873,090,594.28 915,134,453.92 915,134,453.92
Other current
liabilities
118,929,914.04 118,881,087.74 86,109,949.92 86,097,636.52
Total current liabilities 1,809,419,875.60 1,900,700,411.75 1,837,279,848.33 1,934,680,523.99
Non-current liabilities:
Long-term loans
Bonds payable
Long-term account
payable
Special accountsSHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
35
payable
Projected liabilities 184,133,984.92 184,133,984.92 184,133,984.92 184,133,984.92
Deferred income tax
liabilities
Other non-current
liabilities
Total non-current
liabilities
184,133,984.92 184,133,984.92 184,133,984.92 184,133,984.92
Total liabilities 1,993,553,860.52 2,084,834,396.67 2,021,413,833.25 2,118,814,508.91
Owner’s equity (or
shareholders’ equity):
Paid-in capital (or
share capital)
479,433,003.00 479,433,003.00 479,433,003.00 479,433,003.00
Capital public reserve 410,893,564.33 410,893,564.33 362,027,636.64 362,027,636.64
Less: Inventory shares
Surplus public reserve 32,673,227.01 32,673,227.01 32,673,227.01 32,673,227.01
Provision of general
risk
Retained profit -2,726,059,175.73 -2,661,268,533.01 -2,681,166,169.33 -2,612,869,231.77
Balance difference of
foreign currency
translation
Total owner’s equity
attributable to parent
company
-1,803,059,381.39 -1,738,268,738.67 -1,807,032,302.68 -1,738,735,365.12
Minority interests 403,226.40
Total owner’s equity -1,802,656,154.99 -1,738,268,738.67 -1,807,032,302.68 -1,738,735,365.12
Total liabilities and
owner’s equity
190,897,705.53 346,565,658.00 214,381,530.57 380,079,143.79
Profit Statement
Prepared by Shenzhen China Bicycle Company (Holdings) Limited January-December, 2008 Unit: RMB
Amount in this period Amount in last period
Items
Merger Parent Company Merger Parent Company
I. Total operating income 274,202,840.48 18,798,716.14 234,601,314.71 22,683,649.92
Including: Operating income 274,202,840.48 18,798,716.14 234,601,314.71 22,683,649.92
Interest income
Insurance gained
Commission charge and
commission income
II. Total operating cost 345,036,984.40 93,719,698.42 299,249,788.87 89,943,090.21
Including: Operating cost 262,279,584.11 16,118,210.88 230,244,832.81 24,154,789.84
Interest expense
Commission charge and
commission expense
Cash surrender value
Net amount of expense of
compensationSHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
36
Net amount of withdrawal
of insurance contract reserve
Bonus expense of
guarantee slip
Reinsurance expense
Operating tax and extras 210,719.66 84.83 175,378.59 880.36
Sales expenses 5,408,121.48 771,808.21 5,542,241.79 1,393,554.08
Administration expenses 36,231,031.25 32,408,627.72 16,217,410.39 12,771,829.00
Financial expenses 32,083,564.27 35,722,902.67 35,273,002.48 39,825,114.12
Losses of devaluation of
asset
8,823,963.63 8,698,064.11 11,796,922.81 11,796,922.81
Add: Changing income of
fair value(Loss is listed with
“-”)
Investment income (Loss
is listed with “-”)
-874,997.07 -874,997.07 -1,336,613.99 -1,156,612.99
Including: Investment
income on affiliated company
and joint venture
Exchange income (Loss is
listed with “-”)
III. Operating profit (Loss
is listed with “-”)
-71,709,140.99 -75,795,979.35 -65,985,088.15 -68,416,053.28
Add: Non-operating income 27,591,925.55 27,548,141.04 140,806,500.96 140,792,096.39
Less: Non-operating
expense
372,564.56 151,462.93 1,935,616.35 1,935,616.35
Including: Disposal loss
of non-current asset
IV. Total Profit (Loss is
listed with “-”)
-44,489,780.00 -48,399,301.24 72,885,796.46 70,440,426.76
Less: Income tax 9,849,555.22 9,849,555.22
V. Net profit (Net loss is
listed with “-”)
-44,489,780.00 -48,399,301.24 63,036,241.24 60,590,871.54
Net profit attributable
to owner’s equity of parent
company
-44,893,006.40 -48,399,301.24 63,036,241.24 60,590,871.54
Minority shareholders’
gains and losses
403,226.40
VI. Earnings per share
i. Basic earnings per share -0.0936 0.1315
ii. Diluted earnings per share -0.0936 0.1315SHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF
ANNUAL REPORT 2008
37
Cash Flow Statement
Prepared by Shenzhen China Bicycle Company (Holdings) Limited January-December, 2008 Unit: RMB
Amount in this period Amount in last period
Items
Merger Parent Company Merger Parent Company
I. Cash flows arising from
operating activities:
Cash received from
selling commodities and
providing labor services
170,135,054.82 7,060,524.04 161,272,081.30 20,891,671.25
Net increase of customer
deposit and interbank deposit
Net increase of loan from
central bank
Net increase of capital
borrowed from other financial
institution
Cash received from
original insurance contract
fee
Net cash received from
reinsurance business
Insured savings and net
increase of investment
Net increase of disposal
of transaction financial
asset
Cash received from
interest, commission charge
and commission
Net increase of capital
borrowed
Net increase of returned
business capital
Write-back of tax
received
Other cash received
concerning operating
activities
8,033,821.67 11,778,462.99
Subtotal of cash inflow
arising from operating
activities
178,168,876.49 18,838,987.03 161,272,081.30 20,891,671.25
Cash paid for purchasing
commodities and receiving
labor service
147,502,490.17 1,438,426.75 131,243,202.76 7,196,032.27
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 ofSHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
38
guarantee slip
Cash paid to/for staff and
workers 23,596,434.77 2,323,782.46 18,456,590.20 3,688,775.28
Taxes paid 6,363,405.90 3,534,493.44 4,132,851.41 2,299,281.44
Other cash paid
concerning operating
activities
15,098,972.90 11,592,003.89 10,031,417.04 7,597,313.04
Subtotal of cash outflow
arising from operating
activities
192,561,303.74 18,888,706.54 163,864,061.41 20,781,402.03
Net cash flows arising
from operating activities -14,392,427.25 -49,719.51 -2,591,980.11 110,269.22
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
10,554,667.52 115,942.92 187,507.00 187,507.00
Net cash received from
disposal of subsidiaries and
other units
Other cash received
concerning investing
activities
Subtotal of cash inflow
from investing activities 10,554,667.52 115,942.92 187,507.00 187,507.00
Cash paid for purchasing
fixed, intangible and other
long-term assets
114,838.00 103,438.00 284,539.46 259,315.46
Cash paid for investment
Net increase of mortgaged
loans
Net cash received from
subsidiaries and other units 0.00 0.00 180,000.00
Other cash paid
concerning investing
activities
Subtotal of cash outflow
from investing activities 114,838.00 103,438.00 464,539.46 259,315.46
Net cash flows arising
from investing activities 10,439,829.52 12,504.92 -277,032.46 -71,808.46
III. Cash flows arising from
financing activities
Cash received from
absorbing investment
Including: Cash received
from absorbing minority
shareholders’ investment by
subsidiaries
Cash received from loans
Cash received from
issuing bonds
Other cash received
concerning financingSHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
39
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 due to
fluctuation in exchange rate -23,001.17 -23,001.17 -51,672.27 -65,236.99
V. Net increase of cash and
cash equivalents -3,975,598.90 -60,215.76 -2,920,684.84 -26,776.23
Add: Balance of cash and
cash equivalents at the period
-begin
14,062,198.43 477,660.27 16,982,883.27 504,436.50
VI. Balance of cash and cash
equivalents at the period -end 10,086,599.53 417,444.51 14,062,198.43 477,660.27SHENZHEN CHINA BICYCLE
COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
40
Statement on Changes of Owners' Equity
Prepared by Shenzhen China Bicycle Company (Holdings) Limited 2008 Unit: RMB
Amount in this report period Amount last year
Owners' equity attributable to the parent company
Owners' equity attributable to the parent
company
Items Paid-up
capital
(Share
capital)
Capital
reserves
Less:
Treasury
Stock
Surplu
s
reserv
es
Genera
l risk
provis
ion
Retain
ed
profit
Othe
rs
Minori
ty
intere
st
Total
owners’
equity
Paid-up
capital
(Share
capital)
Capital
reserves
Less:
Treasur
y Stock
Surplus
reserve
s
Genera
l risk
provis
ion
Retain
ed
profit
Ot
he
rs
Minori
ty
intere
st
Total
owners
’
equity
I. Balance at the end of the last
year
479,433,0
03.00
362,027,6
36.64
32,673,22
7.01
-2,681,166,
169.33
-1,807,032,3
02.68
479,433,0
03.00
362,027,6
36.64
32,673,227.
01
-2,721,509,
568.57
-1,847,375
,701.92
Add: Changes of accounting
policy
Error correction of the last
period
-22,692,84
2.00
-22,692,84
2.00
Others
II. Balance at the beginning of
this year
479,433,0
03.00
362,027,6
36.64
32,673,22
7.01
-2,681,166,
169.33
-1,807,032,3
02.68
479,433,0
03.00
362,027,6
36.64
32,673,227.
01
-2,744,202,
410.57
-1,870,068
,543.92
III. Increase/
Decrease in this year
(Decrease is listed
with'"-")
48,865,92
7.69
-44,893,00
6.40
403,226.4
0
4,376,147.69
63,036,241
.24
63,036,24
1.24
(I) Net profit
-44,893,00
6.40
403,226.4
0
-44,489,780.
00
63,036,241
.24
63,036,24
1.24
(II) Profits and losses
calculating into owners' equity
48,865,92
7.69
48,865,927.6
9
1. Net changing amountSHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
41
of fair value of
financial assets
available for sale
2. Effect of changes of other
owners' equity of invested
units under equity method
3. Effect of income tax
related to owners'
equity
4. Others
48,865,92
7.69
48,865,927.6
9
Total of (I)and (II)
48,865,92
7.69
-44,893,00
6.40
403,226.4
0
4,376,147.69
63,036,241
.24
63,036,24
1.24
(III) Owners' devoted and
decreased capital
1. Owners' devoted capital
2. Amount calculated into
owners' equity paid in shares
3. Others
(IV) Profit distribution
1. Withdrawal of surplus
reserves
2. Withdrawal of general risk
provisions
3. Distribution for owners
(shareholders)
4. Others
(V) Carrying forward internal
owners' equitySHENZHEN CHINA BICYCLE COMPANY（HOLDINGS）LIMITED SUMMARY OF ANNUAL REPORT 2008
42
1. Capital reserves conversed
to capital (share capital)
2. Surplus reserves conversed
to capital (share capital)
3. Remedying loss with profit
surplus
4. Others
IV. Balance at the end of the
report period
479,433,0
03.00
410,893,5
64.33
32,673,22
7.01
-2,726,059,
175.73
403,226.4
0
-1,802,656,1
54.99
479,433,0
03.00
362,027,6
36.64
32,673,227.
01
-2,681,166,
169.33
-1,807,032
,302.6844
Shenzhen China Bicycle Company （Holding） Limited
Notes to Financial Statement
For Year 2008
Otherwise stated, all amounts are stated in RMB Yuan.
Note 1. Company profile
Approved by Shenzhen People’s Government—ShenFuBanFu (1991) No 888, the Company was
restructured to be a stock company limited. On Dec. 28, 1991, approved by the People’s Bank of
China—Shenzhen Special Economic Zone Branch (ShenRenYinFu Zi (1991) No. 119), the
Company was listed with Shenzhen Stock Exchange. The corporate business license was QGYSZF
Zi No. 101165, with a registered capital of RMB 479,433,003.00.
The Company was engaged in machine manufacturing industry. The main operations include:
producing and assembling types of bicycles, the parts, fittings, mechanical products, sports
instrument, fining chemicals, carbon-fiber compound materials, household electronic appliances
and the fittings.
Prime products are: Emmelle bicycle, Chimo bicycle, Diamondback bicycle and electric bicycle.
Brief on production and management: The Company produces medium and top grade bicycles,
mainly for exporting. Influenced by antidumping lawsuits in recent years; the sales volume slided
down. The Company focuses on debts restructure as well as products research and development.
The Company has developed series of electric bicycle, and has been working to exploit domestic
market. Main businesses continue to make positive profit in the year.
Note 2. Compiling basis of financial statement
Compilation of financial statement of the company is based on continuous business according to
actual trade based on continuous operations and actual occurred transactions and matters, and in
according to the original Accounting Standards for Business Enterprises promulgated before Feb.
15, 2006 and original Accounting System for Business Enterprises (hereinafter refers to Original
Accounting Standards and Systems for Business Enterprises) promulgated on Dec. 29, 2000 by
Ministry of Finance. Since Jan.1, 2007, the Company implemented Accounting Standards for
Business Enterprises (hereinafter refers to Accounting Standards for Business Enterprises)
promulgated in Feb. 15, 2006 by Ministry of Finance. The financial statement was the first financial
statement compiled based on Accounting Standards for Business Enterprises.
The financial statement of the Company compiled based on the aforesaid compilation basis
conformed to the requirements of Accounting Standards for Business Enterprises; reflected the
financial status of the Company as of Dec. 31, 2008 truly and completely and the operation results
and cash flow of year 2008.
Note 3. Approving and delivering person of financial report and the approving and delivering
date of financial report.
The financial report of the Company was approved and delivered by the 10th meeting of 7th the
Board of Directors dated April 23, 2009.45
Note 4. Compilation method of main accounting policy, accounting estimate and consolidated
financial statement.
1. Accounting policy
Accounting policy and its application guidance of the company complies to Accounting Standards
for Business Enterprises 2006 and application guidance issued by Ministry of Finance People's
Republic of China as【2006】No. 3.
2. Fiscal year
It shall adopt calendar year, namely, one calendar year means period from January 1st to December,
31st.
3. Recording currency
RMB is used as the recording currency.
4. Foundation to charge to an account and price-calculating principle
Foundation to charge to financial accounting is accrual basis. Price-calculating principle of every
asset (except other price-calculating principles or required by "Enterprise Accounting Standard")
refers to historical cost when obtaining.
5. Foreign-currency business, translation and accounting methods of foreign currency statement.
Foreign currency payment shall be translated into recording currency amount by adopting spot
exchange rates issued by People's Bank of China during initial confirmation.
Treatments of foreign currency cash items and foreign currency non-cash items on balance sheet
date are as follows：
1）Foreign currency cash items shall be translated by spot exchange rates on balance sheet date.
Exchange differences caused by difference of spot exchange rates of balance sheet date and that
during initial confirmation or that of former balance sheet date is accounted for current gains or
losses.
2）Foreign currency non-cash items measured by historical cost can be translated by exchange rates
of transaction date without changing recording currency amount.
3）Foreign currency non-cash items measured by fair value are translated by exchange rates on fair
value confirmation date. Difference of translated recording currency amount and original carrying
amount is accounted for current gains or losses as variation treatment of fair value.
4）Exchange gains or losses caused by debts with regard to construction of fixed assets shall be
handled according to capitalization principle of borrowing expenses. Exchange gains or losses with
regard to development of real estate shall be capitalized before completion of real estate.
6. Defined standard of cash equivalent
The company uses investment with short holding period (generally refers to three months form
procurement date), strong liquidity, eligibility to convert into cash of known amount and very small
value variation risk as cash equivalent during preparation of cash flow statement.
7. Translation method of financial instruments
Financial instruments of the company include financial assets and financial debts.
1）Accounting for financial assets：
--- Confirmation standard of fair value of financial assets
Confirmation standard of fair value of financial assets of the company is as follows：
A. Price of balance sheet date is used as fair value if there are financial assets in active market.
B. Fair value is confirmed by present value calculated by appropriate discount rate (current bank
loan rate is generally used as discount rate) according to future cash flow if there are no financial
assets in active market.
Classification of financial assets
Financial assets of the company are classified as follows：
A. Financial assets measured by fair value and whose variation is accounted for current gains or46
losses（including tradable financial assets and financial assets measured by fair value and whose
variation is accounted for current gains or losses）；
B. Holding or due investment；
C. Receivable accounts；
D. Financial assets can be sold
Measurement of financial assets
A. Initially confirmed financial assets shall be measured by fair value. Relevant transaction
expenses of financial assets which are measured by fair value and whose variation is accounted for
current gains or losses shall be accounted for current gains or losses directly；Relevant transaction
expenses of other kinds of financial assets shall be accounted for initial confirmation amount.
B. The company will measure financial assets consequently according to fair value without
deducting possible transaction expenses during future financial assets treatment. However,
following conditions are not included：
① Holding or due investment and receivable accounts shall be measured according to amortized
cost by practical rate method；
② Equity instrument investment which has no active market or no quotation in active market and
whose fair value can not be measured and derivative financial assets which link to equity
instruments and shall be settled by delivery of equity instruments shall be measured by cost.
C. Difference of reclassified fair value of financial assets and cost of book value due to
classification change of financial assets caused by business holding purpose change shall be
accounted for capital reserves. It shall be accounted for current gains or losses when confirmation is
terminated or value is depreciated.
Depreciation of financial assets
Carry out depreciation test of book value of financial assets except those which shall be measured
by fair value and whose variation is accounted for current gains or losses on balance sheet date.
Objective evidences show that when financial assets depreciate, the difference of expected cash
flow present value of financial assets and book value shall be reserved and accounted for current
gains or losses.
Objective evidences of depreciation of financial assets shall include following contents：
A. Issue party or debtor has serious financial difficulties；
B. Debtor has breached contract clauses, such as breach or exceeding the time limit to pay for
interests or corpus；
C. The company concedes to debtor who has difficulty by considering economical or legal factors；
D. Debtor may have bankruptcy or other financial reorganizations because of uncertainty of
continuous business；
E. The company's financial assets can not continue to trade in active market because of serious
financial difficulty of issue party；
F. The company can not recover investment cost because of serious disadvantageous changes of
technical, market, economical and legal environment of debtor；
G. Fair value of equity instrument investment falls seriously or non-provisionally；
H. Although we can not determine whether cash flow of a certain asset of financial asset
combination decreases or not, the company discover that expected future cash flow since initial
confirmation of the group of financial assets has decreased and it can be measured after overall
evaluation according to open data.
I. Other objective evidences which can show depreciation of financial assets.
Measurement of depreciation loss of financial assets
A. Financial assets measured by fair value and whose variation is accounted for current gains or
losses need no depreciation testing；47
B. Measurement of depreciation loss of holding or due investment：The difference of expected
future cash flow present value and book value at the end of period shall be reserved and accounted
for current gains or losses；
C. Measurement of depreciation loss of receivable accounts：The company shall adopt allowance
method of bad debt loss for translation, carry out depreciation test of receivable accounts and
prepare for reserve in bad debt on balance sheet date.
① Carry out depreciation test of receivable accounts with large amount individually. If objective
evidences show that the value has depreciated, the company will confirm depreciation loss and
prepare for reserve in bad debt according to difference of future cash flow present value and book
value.
② Reserve 3‰ of sum of receivable accounts at the end of year and other receivable accounts as
for receivable accounts with not large amount and un-predicated receivable accounts after
individual test. Preparation of bad debt reservation is accounted for current management expenses.
③ Reserve 100% of bad debts after individual confirmation of bad debts.
Confirmation standard of bad debts of the company is as follows：① Property of debtor can not be
recovered after payment due to bankruptcy or death；② Debtor can not pay for due debts with
obvious evidence.
D. Depreciation judgment of financial assets that can be sold：The financial assets can be thought to
depreciate if fair value of the financial asset decreases continuously and non-provisionally.
Gains or losses caused by variation of fair value of financial assets shall be handled according to
following stipulations：
A. Gains or losses caused by variation of fair value of financial assets measured by fair value and
whose variation is accounted for current gains or losses shall be accounted for current gains or
losses.
B. Gains or losses caused by variation of fair value of saleable financial assets can be accounted for
owners equity directly except exchange rate difference caused by depreciation loss and foreign
currency cash financial assets. They shall be accounted for current gains or losses when financial
assets are transferred confirmation termination.
C. Exchange rate difference caused by saleable foreign currency cash financial assets shall be
accounted for current gains or losses. Interests of saleable financial assets calculated by actual rate
method shall be accounted for current gains or losses；Cash dividends of saleable equity instrument
investment shall be accounted for current gains or losses during announcement of dividends issuing
of invested unit.
2）Accounting of financial debts
Financial debts are divided to following two categories：
A. Financial debts measured by fair value and whose variation is accounted for current debts
include transaction financial debts and financial debts measured by fair value and whose variation is
accounted for current gains or losses.
B. Other financial debts.
Relevant transaction expenses of financial debts which are measured by fair value and whose
variation is accounted for current gains or losses shall be accounted for current gains or losses
directly；Relevant transaction expenses of other kinds of financial debts shall be accounted for
initial confirmation amount.
Consequent measurement of financial debts shall be handled according to following principle：
A. Financial debts measured by fair value and whose variation is accounted for current gains or
losses shall be measured by fair value.
B. Equity instrument which has no active market or no quotation in active market and whose fair
value can not be measured and derivative financial debts which link to equity instruments and shall
be settled by delivery of equity instruments shall be measured by cost.48
Financial debts measured by fair value and whose variation is accounted for current debts shall be
accounted for current gains or losses.
Difference of book value of confirmation termination and paid consideration during complete or
partial confirmation termination of financial debts shall be accounted for current gains or losses.
8, Accounting method of stock in trade
Stock in trade shall be divided into raw material, products in the process, commodity stocks,
low-value consumption goods, etc.
Procurement and warehousing of every kind of stocks in trade shall be valuated according to actual
cost. Cost of holding inventory includes procurement cost, processing cost and other expenses
which belong to cost of holding inventory and disbursement which meets capitalization conditions
of borrowing costs. Stock quantity shall be determined by perpetual inventory system. It shall be
valuated by weighed average method when the stock quantity is issuing.
Low-value consumption goods shall adopt one-off amortization method.
Prepare for inventory falling price reserves of goods at the end of period whose costs are
unexpected to recover for damaged stocks, completely or partially worn stocks or those whose sale
prices are less than costs on basis of wall-to-wall inventory of stock-in-trade. Define inventory
falling price reserves according to difference of cost of single stock item and net realizable value
and it shall be accounted for current gains or losses.
9, Translation method of long-term investment on stocks
Long-term dividend investment reflects that of subsidiary company, consortium and joint venture
held by the company. In the meanwhile, it includes equity investment of invested unit without
control, common control or important influence, quotation in active market and measurement of fair
value.
The company will calculate long-term dividend investment caused by enterprise combination and
that except for enterprise combination. Calculation is divided into four phases including initial cost
confirmation, consequent measurement, income and settlement.
Confirmation of initial investment cost：
(1) Initial investment cost of long-term dividend investment of the company caused by enterprise
combination form is determined according to following methods：
A. Long-term dividend investment caused by enterprise combination under the same control
① Unify accounting policy and accounting period of combined party first under premise to adhere
to significance principle.
② Obtained share of book value of owners’ equity of combined party on combination date shall be
thought as initial investment cost of long-term dividend investment when the company adopts
methods of payment in cash, conversion of non-cash capital or obligation incurred as combined
consideration. Adjust capital reserves--stock premium of the company according to difference of
initial investment cost and paid cash, transferred non-cash capital and book value of undertaken
debts；Adjust reinvested earnings when amount of stock premium is insufficient.
③ The company will use equity securities as combined consideration. Aggregate nominal amount
of shares shall be used as capital stock. Adjust capital reserves--stock premium according to
difference of initial investment cost of long-term dividend investment and aggregate nominal
amount of shares；Adjust reinvested earnings when amount of stock premium is insufficient.
④ Every direct relevant expense during combination, including auditing expense paid for enterprise
combination, evaluation expense, legal service expense and so on shall be accounted for current
gains or losses during occurrence.
⑤ Securities issued for enterprise combination or commission charges, brokerage expenses and so
on paid for other debts shall be accounted for issued securities and initial measurement amount of
other debts.
⑥ Commission charges, brokerage expenses and so on caused by issuing of equity securities during
enterprise combination shall offset gain on disposal of assets. Offset capital reserves, surplus49
reserves, and undistributed profit sequentially if gain on disposal of assets is insufficient.
B. Long-term dividend investment caused by enterprise combination under different control
① Combination cost of one-off enterprise combinations of capital, occurred or undertaken debts
paid for control rights of purchased party on procurement date of the company and fair value of
issued equity securities. Difference of fair value and book value shall be accounted for current gains
or losses.
② Combination cost of enterprise combinations by multiple transactions and step-by-step dividend
obtainment is sum of every transaction cost.
③ Every direct relevant expense of the company during enterprise combination shall be accounted
for enterprise combination cost.
④ If expected future items may occur on procurement date and the influence amount of
combination cost can be measured under promise of future items that may influence combination
cost in combination contract or agreement, it shall be accounted for combination cost.
⑤ The company will confirm difference of procurement cost and fair value of recognizable capital
of combined party obtained in combination as commercial goodwill；Commercial goodwill after
initial confirmation shall be measured by difference of cost and aggregate depreciation. Difference
of procurement cost and fair value of recognizable net capital of combined party obtained in
combination shall be accounted for current gains or losses.
Fair value of recognizable net capital of combined party refers to difference of fair value of
recognizable capital of combined party obtained in combination and debts or fair value with debts.
The company will confirm every item of recognizable capital, debt of combined party which meets
following conditions individually：
① The Company will confirm individually and measure according to fair value if economical
interests of other assets (not limited to original assets confirmed by combined party) besides
intangible assets of combined party during combination may flow into the company with reliable
measurement.
Intangible assets obtained in combination and whose fair value can be reliably measured can be
confirmed as intangible assets and measured according to fair value.
② Other debts whose implementation of relevant obligations may lead economical interests flow
out of the company with reliable measurement of fair value besides existing debts obtained by
combined party during combination shall be confirmed individually and measured according to fair
value.
If combined party may have debts obtained in combination with reliable measurement of fair value,
it shall be confirmed individually and measured according to fair value.
(2) Long-term dividend investment obtained out of enterprise combination shall enter in an account
during obtainment according to initial investment cost. Initial investment method shall be defined
according to following methods：
A. Long-term dividend investment purchased in cash shall be used as initial investment cost
according to total price of actual payment (including relevant expenses such as paid taxation,
commission charges).
B. Long-term dividend investment obtained by issuing equity securities shall be used as initial
investment cost according to fair value of issuing of equity securities.
C. Long-term dividend investment paid by investor shall be used as initial investment cost
according to value stipulated by investment contract or agreement except unfair value stipulated by
contract or agreement.
D. Long-term dividend investment obtained by debtor by way of payment of debts of non-cash
capital or that converted by receivable creditor's rights shall be used as initial investment cost
according to fair value and receivable relevant expenses of taxation.
E. If transaction of conversion from non-cash trade to long-term dividend investment has
commercial essence, converted long-term dividend investment shall be used as initial investment50
cost according to fair value and receivable relevant expenses of taxation；If the transaction has no
commercial essence, sum of book value caused by capital conversion by invested long-term
dividend investment and receivable relevant expenses of taxation shall be used as initial investment
cost.
Price of actual payment includes announced but not drawn cash dividend. Difference of price of
actual payment and announced but not drawn cash dividend shall be used as initial investment cost.
Consequent measurement of long-term dividend investment
Consequent measurement of long-term dividend investment of the company shall be calculated by
cost method and equity method.
The company's investment to subsidiary company and long-term dividend investment which has no
common control or significant influence to invested unit, quotation in active market and reliable
measurement of fair value shall be calculated by cost method. Adjust cost of long-term dividend
investment calculated by cost method during super addition or recovery of investment.
The company will calculate joint venture which has common control to invested unit and
consortium which has significant influence to invested unit by equity method.
Confirmation method of long-term dividend investment gains
Confirm gains of enterprises which are calculated by cost method when invested unit declares to
issue cash dividend but the investment income is limited to obtained quota of aggregate net profit of
invested unit after receiving investment. If obtained cash dividend declared by invested unit exceeds
above amount, the surplus shall be used as offset of initial investment cost to offset book valve of
investment.
As for enterprises which are calculated by equity method, net gains or losses after receiving stock
rights of invested unit shall be thought as the foundation. It is required to confirm investment gains
and adjust book value of long-term dividend investment at the end of every accounting period
according to net profit or share of net loss of invested unit that the company shall share or undertake.
The company shall decrease book value of long-term dividend investment correspondingly
according to calculated profit or cash dividend declared by invested unit.
Disposal of long-term dividend investment
Difference of book value of investment and actually obtained price during disposal of equity
investment shall be used as current investment gains.
10, Investment real estate
1) Definition of investment real estate
Investment real estate of the company refers to real estate whose purpose includes rental-earning,
capital appreciation or both.
2) Scope of investment real estate
Investment real estate of the company includes leased building.
3) Investment real estate of the company shall be measured by cost mode.
Measure, calculate and deduct depreciation charge or amortize investment real estate under cost
mode according to regulations of "Accounting Standard for Business Enterprises No. 4-Fixed
assets" and "Accounting Standard for Business Enterprises No. 6- Intangible assets"；Handle
depreciation according to regulations of "Accounting Standard for Business Enterprises No.
8-Impairment of assets".
11. Valuation and depreciation methods of fixed assets
Fixed assets refer to the tangible assets held for commodity production, labor service, lease,
operation or management and with a use term of over 1 fiscal year. The related economic interest
to the fixed assets is likely to flow into the company and the cost of it can be measured reliably.
1) Fixed assets of the company shall be initially measured according to the cost.
The fixed assets include purchasing price, related taxes, and other expenditures that could be
directly included in this assets and is used before making fixed assets in the usable condition, such
as transportation fees, loading and unloading fees, service charge of career men, estimated51
discarding expense and etc.
As to the fixed assets which are bought at a total price, according to the fair value proportion of
every fixed asset, we distribute the total cost and fix their cost.
The cost of the self-built fixed asset is composed of the expenses needed in constructing before the
expected applicable state.
The loan cost expenditure which accords with the capitalization requirements is recorded in fixed
asset cost.
As to the fixed asset of which deferred payment is made under the abnormal credit condition, the
fixed asset cost is measured on the basis of the present value of the purchasing price. The margin
between the actual price and the present value of purchasing price, except the part which is
capitalized according to China Accounting Standard No.17—loan cost, shall be recorded in current
profit and losses.
2) If the follow-up expenditures related to fixed assets are proved to make economic interests which
are going to flow to the enterprise and the cost can be measured reliably, then it should be
capitalized.
3) At least, the service life, the estimated residual value and the depreciation method of the fixed
asset should be checked at the end of the year, and discover: if the expected service life is discrepant
to the initial, adjust the service life of the fixed asset, if the estimated residual value is discrepant
to
the initial, adjust it, and if the expected achieving method of the economic interest related to the
fixed asset is changed greatly, the depreciation method of the fixed asset should be changed.
4) The changes to the service life, estimated residual value and the depreciation method of the fixed
asset should be dealt as accounting estimate change.
5) The depreciation of fixed assets adopts the straight-line method to set the average, and according
to the original value of various fixed assets and the expected service life of fixed assets minus
residual value ratio (10% of the original) to set the depreciation rate, the year assorted depreciation
rate as follows:
Sort of the asset Service life Year depreciation ratio
Houses and buildings 20 years 4.5%
Machinery and equipment 10 years 9%
Office equipment 5 years 18%
Electronic equipment 5 years 18%
Means of transportation 5 years 18%
Other equipment 5 years 18%
6) If the following occur, on the date of balance sheet, the fixed asset should be measured according
to the lesser one between the book value and the recoverable amount, and withdraw preparation of
fixed asset measurement to the margin when the recoverable amount is less than the book value:
A. It is proved that the asset is outdated or its entity is ruined,
B. The asset has been or will be left unused, ended to use, or planed to be dealt with in advance,
C. The enterprise interior report shows that the economic performance of the asset is or will be less
than expected,
D. Other evidence shows that the asset may have been under devaluating.
After the recognition to the loss of asset devaluation, adjust the depreciation expense with asset
devaluation to depreciate the asset after deducting the asset devaluation in the rest service life of the
asset.
7) It shouldn’t be conversed in the future accounting period after the recognition of the asset
devaluation loss.
12. Measurement method of construction in progress52
The construction in progress is recorded in book according to the actual expenditure of each
construction. When the built asset is in the expected applicable state, transfer to the fixed assets
according to the final accounts of the construction, construction budget, cost or the actual cost
measurement of the construction.
Before the fixed assets achieve the expected applicable state, the loan cost which accords with the
capitalization requirements and foreign currency conversion margin should be recorded in
construction cost, and after that they should be recorded in current financial expense.
On the date of balance sheet, for the construction in progress which is proved to have been
devaluated or stopped construction and estimated that it will not be reconstructed within three years,
the recoverable value should be estimated, and withdraw devaluation preparation according to the
margin when the recoverable amount is less than the book value.
13. Measurement method to loan cost
Loan costs refer to the interest, amortization of overate or discount price （including commission
charge and so on）and difference of currency exchange caused by borrowing.
1) Capitalization requirements, if the following three requirements are all achieved, the loan cost
before the fixed asset constructed achieving the expected applicable state should be capitalized.
(1) The capital expenditure has been materialized
(2) The loan cost has been materialized
(3)The needed purchasing and construction activities for making the asset achieve the expected
applicable state have already started
2) Recognition to the capitalization amount
(1) The special loan borrowed for constructing or producing asset which accords with the
capitalization requirements is recognized with the actually materialized interest expense of the
special loan minus the interest income of the unused loan deposited in bank or the investing profit
from application to the temporary investment.
(2) For the general loan used to construct or produce asset which accords with the capitalization
requirements, the company calculate the interest amount which should be capitalized of the general
loan by multiplying the weighted average of the asset expenditure which is the exceeded part of the
accumulated asset expenditure comparing with the special loan to the capital ratio of the general
loan used. The capital ratio is calculated according to the weighted interest rate of the general loan.
(3) If the discount or premium occurred to the loan, confirm the amortization value of every
accounting period and adjust the interest amount of every period according to the actual interest
rate.
(4) During the capitalization, the exchange margin of the principal and interest of the foreign
currency special loan should be capitalized and recorded in the asset cost which accords with the
capitalization requirement.
(5) As to The auxiliary expense of the loan, if it is materialized before the constructed asset,
accordant to the capitalization requirement, achieving the expected applicable state or salable sate,
it should be capitalized while materializing according to the materialized amount and recorded in
the asset cost accordant to the capitalization requirements. If it is materialized before the
constructed asset, accordant to the capitalization requirement, achieving the expected applicable
state or salable sate, it should be recognized as expense while materializing according to the
materialized amount and recorded in the current profit and losses.
(6) Capitalization of loan costs will be stopped when abnormal suspension occurs to assets
accordant to capitalization period while purchasing or construction goes on continuously for 3
months. The loan cost during suspension will be determined as expenses and recorded in current
profit and losses until the constructing activity of assets restarted.
14. Valuation and amortization method of intangible assets
1) For the intangible asset purchased or obtained through legal procedures, it should be recorded
according to the actual price. For the accepted intangible asset as investment, it should be recorded53
to the contract or recognized measurement. For the intangible asset developed by ourselves, all the
expenditures during researching should be recognized as expense and recorded in current profit and
losses, and the expenditures during researching shall be capitalized if it accords with the following
requirements:
(1) It is technically feasible to finish the intangible asset to make it able to be used or sold
(2) There is an intention to complete the intangible asset to use or sell
(3) The intangible asset can bring about economic benefit
(4) Having enough technical, financial and other resources to support to complete the development
of the intangible asset and capable of using or selling it
(5) The expenditure to the developing period of the intangible asset can be measured reliably
2) For the intangible asset of which the service life can be recognized, amortize with the
straight-line method within its validity period.
3) For the intangible asset of which the service life can not be recognized, it will not be amortized
within the holding period.
4) On the date of balance sheet, the intangible asset should be measured according to the lesser one
between the book value and the recoverable amount, and withdraw devaluation preparation to the
margin when the recoverable amount is less than the book value. Check the service life and
amortization method of the intangible asset of which the service life is limited to ensure whether the
service life and amortization method of the intangible asset should be changed or not. For the one
need to be re-estimated, change the amortization time limit and method.
After the recognition to the devaluation losses of the intangible asset, adjust the amortization
expense of the devaluated intangible asset in the future, and amortize according to the book value
after deducting the asset devaluation.
It should not be conversed in the future accounting period after the recognition to the intangible
asset devaluation.
15. The measurement method of long-term unamortized expenses
1) Organization costs: gather the organization costs in the long-term unamortized expenses when
they occur, and recorded in the current profit and losses completely in the first monthly when the
company begins to operate.
2) Long-term unamortized expenses: evaluate according to the actual materialized amount, if there
is definite beneficial period, amortize according to the beneficial period, and if there is no beneficial
period, amortize averagely in five years.
3) Fitment cost: amortize according to the beneficial period and the shorter fixed number of year of
two fitments, usually the amortization is less than 5years.
16. Recognition principle of anticipated liabilities
If the duty related to the contingent items accords with all the following requirements, it should be
recognized as liability:
1) The duty is the current duty of the company
2) The execution of the duty may cause outflow of economic interest from the company
3) The duty can be measured reliably
17. Revenue Recognition
1) The recognition principle and method of product selling income
(1) The product selling income of the company shall be recognized when it meets all the following
requirements:
A. the main risk and reward of the product property have been transferred to the purchasers
B. the company has not retained the continued management authority usually related to the property
or control effectively the products sold.
C. the income can be measured reliably
D. the related economic interest is likely to flow into the company
E. the related cost materialized or going to be materialized can be measured reliably54
(2) The company confirms the amount of product selling income according to the contract or
negotiated price received or going to be received from the purchasers except the unfair contract or
negotiated price received or going to be received.
(3) The deferred method is applied to the collection of the contract or negotiated price, and the
product selling amount is recognized according to the fair value of the receivable contract or
negotiated price. The margin between the contract or negotiated price and their fair value should be
amortized with the effective interest method during the period of contract or agreement and
recorded in the current profit and losses.
(4) If the contract or agreement signed by the company with others includes both products selling
and rendering of service which can be distinguished and measured separately, product selling
should be dealt with as product selling, and the rendering of service should be dealt with as
rendering of service.
(5) If the product selling and rendering of service cannot be distinguished or cannot be measured
separately though distinguished, both of them should be dealt with as product selling.
(6) If the product recognized as product selling income is returned back, counteract the current
product selling income while occurring.
2) Rental income
The rental date set in the contract or agreement signed by the company and the leaser is taken as the
beginning to confirm rental income, and the amount is amortized monthly to confirm the rental
income.
3) The usufruct income of the released assets will be recognized only when it meets all the
following requirements: the related economic interest is likely to flow into the company and the
income can be valuated reliably.
The usufruct income of the released assets is recognized according to the following operations:
interest income, recognized according to the time and effective interest rate of the capital used by
others, other charges income, recognized by the charging time and method of related contract and
agreement.
4) Rendering of service: the construction started and finished in the same year, when the service has
been provided, and the charge or the charge proof has been collected, the service income should be
recognized, if the beginning and ending of the service belongs to different accounting year, and the
result to the rendering of service can be valuated reliably, the related service income should be
recognized according to the percentage of completion on the date of balance sheet. The detailed
disposal is as follows:
(1) If the result to the rendering of service can be valuated reliably on the date of balance sheet, the
service income should be recognized according to the percentage of completion. The total income
of rendering of service should be recognized according to the received or to be received contract or
agreement price.
(2) On the date of balance sheet, the current service income should be recognized by multiplying
the total service income to the completion rate of progress and deducting the accumulated service
income recognized in the former accounting period. At the same time, carry forward the current
service cost by multiplying the estimated total service cost to the completion rate of progress and
deducting the accumulated service cost recognized in the former accounting period.
(3) If the result to the rendering of service cannot be valuated reliably on the date of balance sheet,
deal separately according to the following conditions: for the materialized service cost which is
estimated to be compensated, confirm the service cost according to the materialized service cost,
and carry forward the service cost with the same value, for the materialized service cost which is
estimated not to be compensated, record the materialized service cost in current profit and losses,
and do not confirm the service income.
5) Property management income, when the property management service is provided, the related
economic interest can flow into the company and the related cost can be measured reliably, the55
property management income should be recognized.
18. Measurement method to employees’ payment
1) Recognition and measurement to employee’s payment
All kinds of payments to the employees for the service they provided should be measured as
employees’ payment in the company.
For measurement to the accrued wages, if the withdraw basis and withdraw proportion have been
regulated by the nation, withdraw according to the national standard. If there is no definite
withdraw basis and proportion, estimate the current accrued wages rationally according to the
related payment system. If the current actual amount is more than the estimated amount,
compensate the accrued wages. If the current actual amount is less than the estimated amount,
withdraw the exceeded accrued wages.
As to the accrued wages of which the validity is over one year after the date of balance sheet with
the service provided by employees, record the discount value of the accrued wages in the related
asset cost or current profit and losses by taking the corresponding bank lending rate as discounting
rate.
For the non-currency welfare to which the beneficiary cannot be recognized, record it directly in the
current profit and losses and accrued wages.
2) The dismissed welfare is recorded in the current management cost, and the accrued wages is
recognized.
For the planed dismissing, follow the dismissing planed item, estimate and confirm rationally the
accrued wages result from dismissing welfare. The quantity of the employees planned to be
dismissed according to the planning item and each of their dismissing compensation is withdrawn
as accrued wages and recorded in accrued wages.
For the case which the material dismissing is finished within a year and the payment time is over a
year, record the discount value as the accrued wages by taking the corresponding bank lending rate
as discounting rate.
3) Recognition and measurement to the retiring welfare
If there is a retiring welfare system in the company, follow the standard of the system, record the
discount value as the accrued wages in the current profit and losses by taking the corresponding
bank lending rate as discounting rate.
19. Measurement method of liabilities restructuring
1) Measurement method of debt restructuring
If the liabilities conditions are changed, take the fair value after the liabilities conditions are
changed as the recorded value of the liabilities after restructuring. For the margin between the book
value and the recorded value of the restructured liabilities, if the anticipated liabilities is involved,
the margin between the recorded value of the liabilities after restructuring and the anticipated
liabilities value should be recorded in current profit and losses.
If the liabilities restructuring is carried out by combining the method of discharging with cash,
discharging with non-cash assets, forwarding the liabilities to assets, changing other liabilities
conditions, counteract the book value of the restructured liabilities and the margin between the book
value and recorded value of the restructured liabilities with the cash paid, the fair value of the
transferred non-cash asset and the fair value taking shares in turn. If the anticipated liabilities are
involved, the margin between the recorded value of the liabilities after restructuring and the
anticipated liabilities value should be recorded in current profit and losses.
In accordance with the regulations on Notice of Well Implementing Accounting Standards for
Business Enterprise on the Works of 2008 Annual Report by the Letter No. CK [2008]60 from
Ministry of Finance: “ if accepting the direct or indirect donations from the controlling shareholders
or the subsidiaries of the controlling shareholder, judge the capitalization input on enterprise
belonging to controlling shareholders from the economic substances which should be the Equity
Transaction, and relevant income should be recorded in owners’ equity(capital public reserve).”56
2) Measurement method of credit restructuring
If the credit of the company is discharged with cash, record the margin between the book balance of
the restructured credit and the cash received in the current profit and losses. If the credit has been
withdrawn devaluation preparation, first counteract the devaluation preparation with the margin, for
the part of the devaluation preparation which is deficient in counteracting; record it in the current
profit and losses.
For the discharging with non-cash assets, record the fair value of the received non-cash assets in
book, and record the margin between the book balance of the restructured credit and the fair value
of the received non-cash asset in current profit and losses after deducting the withdrawn devaluation
preparation.
For the credit forwarded to assets, confirm the fair value taking shares as the investment to debtors.
For the margin between the book balance of the restructured credit and the air value of the share, if
the devaluation preparation to the credit has been already withdrawn, first counteract the
devaluation preparation with the margin, for the part of the devaluation preparation which is
deficient in counteracting; record it in the current profit and losses.
If the credit is discharged by combining the method of discharging with cash, discharging with
non-cash assets, forwarding the liabilities to assets, changing other liabilities conditions, counteract
the book balance of the restructured credit and the margin between the book balance and the fair
value of the share with the cash paid, the fair value of the received non-cash asset and the fair value
taking shares in turn. If the devaluation preparation to the credit has been already withdrawn, first
counteract the devaluation preparation with the margin, for the part of the devaluation preparation
which is deficient in counteracting; record it in the current profit and losses.
20. Accounting method to income tax
The balance sheet liability method is applied to the accounting of the income tax expense
1) On the date of balance sheet, according to the discrepancy between tax law and accounting, it
should be divided to taxable temporary discrepancy and counteractable temporary discrepancy and
recognized as deferred income tax asset and deferred income tax liabilities separately, and measured
with anticipated taxable (or given back) income tax value according to the tax law.
If the effective tax rate is changed, reevaluate the recognized deferred income tax asset and deferred
income tax liabilities with the new tax rate, and record the influenced value in the income tax
expense corresponding to the tax rate changes. Record the income tax caused by enterprise
combination and the exchanges occurs directly in owner’s equity in current income.
On the date of balance sheet, check the book value of the deferred income tax asset. If it is proved
that in the future there may be no sufficient taxable income to counteract the deferred income tax
asset, deduct the book value of the deferred income tax asset according to the discrepancy between
them.
2) Recognition to the deferred income tax asset
(1) The company recognizes the deferred income tax asset result from the counteractable temporary
discrepancy in the limit of the taxable income which is likely to be obtained to counteract the
counteractable temporary discrepancy. However, the deferred income tax asset which own the
following features and result from the initial recognition to assets and liabilities in exchanging
should not be recognized.
A. the exchange is not enterprise combination
B. while exchanging, neither the accounting profit nor the taxable income is influenced (or the loss
can be counteracted)
(2) For the counteractable temporary discrepancy related to investment to subsidiary companies,
affiliated companies and joint ventures, if it meets all the following requirements, the company
recognizes the corresponding deferred income tax asset:
A. the temporary discrepancy is likely to be conversed in the foreseeable feature
B. the taxable income is likely to be obtained to counteract the temporary discrepancy in the future57
3) Recognition to deferred income tax liabilities
The company recognizes all the deferred income tax liabilities result from taxable temporary
discrepancy except the deferred income tax liabilities result from the following conditions:
(1) Initial recognition to goodwill
(2) The initial recognition of asset or liability caused by exchanges owning all the following
features:
A. the exchange is not enterprise combination
B. while exchanging, neither the accounting profit nor the taxable income is influenced (or the loss
can be counteracted)
(3) For the counteractable temporary discrepancy related to investment to subsidiary companies,
affiliated companies and joint ventures, if it meets all the following requirements, the company
recognizes the corresponding deferred income tax liabilities:
A. the investing company has the ability to control the conversing time of the temporary
discrepancy
B. it is likely that the temporary discrepancy in the foreseeable will not be conversed
4) Measurement to income tax expenses
The company records the current income tax and deferred income tax in the current profit and
losses as income tax expenses income, except the income tax result from the following cases:
(1) Enterprise combination
(2) The exchanges or items directly recognized in the owner’s equity
21. Preparation method for consolidated accounting statements
The principle to consolidate accounting statements: consolidate the accounting statements of the
invested companies of which more than 50% of its voting capital are belong to parent company or
the subsidiary companies to which parent company has the actual control power though no more
than 50% of its voting capital are belongs to parent company.
The method is to take the accounting statements of the parent company and the included subsidiary
companies as basis, prepare according to other related data after adjusting the long-term investment
on shares from the parent company to the subsidiary companies according to the equity law. While
consolidating, counteracting the interior exchanges between the parent company and the subsidiary
companies or among the subsidiary companies such as important investment, exchange, stock,
purchase and sell and unfulfilled profit, and calculate the minority shareholders’ equity.
The parent company is to prepare the consolidated accounting statement.
Note 5: Accounting policies, accounting estimation changes, accounting mistakes corrections
and the influence of changes to the range of the consolidated accounting statement
1. Changes on accounting policies and accounting estimation.
In the current year, there were no changes on accounting policies and accounting estimation of the
Company.
2. Corrections on accounting mistakes:
(1) Changes on accounting mistakes of the exemption of debts interests in year 2007
From Jan. to Dec. of 2007, the Company withdrew the debts interests of Guocheng Energy and
Sunrise Group in book. At the end of Dec. of year 2007, Guocheng Energy and Sunrise Group
respectively exempted the interests payable of the Company in year 2007 amounting to RMB
54,707,767.09 and RMB 14,850,832.43, the Company directly charged the confirmed financial
expense based on the exempted account but not recorded in non-operating income (income from
debts restructuring) in accordance with the regulation of Accounting Standards fro Enterprise. The
above accounting treatment of the Company was not appropriate which led to the mistakes on
calculation and disclosure of the non-recurring gains/losses.
Thus, the Company made retroactive adjustment on the mistakes adjusted the comparative financial58
statement of year 2007 which had no influences on the current profit in year 2007. The following
accounting items of profit statement in year 2007 were concerned to be adjusted: adjusted to
increase the Financial Expense-Bank Interest RMB 69,558,599.52, adjusted to increase
Non-operating income RMB 69,558,599.52.
(2) Corrections on accounting mistakes of confirmation of projected liabilities
The amount on the guarantee for the loan of Sunrise Group by the Company was RMB 36.1 million
and USD 1.74 million. The above loans were both involved in lawsuits before year 2002, and the
Company was judged to shoulder the joint responsibilities of compensation. The financial position
of the Sunrise Group has been deteriorated in year 2001. The Company has confirmed the projected
liabilities RMB 25,271,000 based on the 50% of the guarantee amount in year 2001, but not fully
confirmed the projected liabilities in accordance with the full amount of guarantee which was not in
accordance with the regulation of Accounting Standards fro Enterprise, and belonged to material
accounting mistakes in previous years.
Thus, the Company made retroactive adjustment on the mistakes adjusted the comparative financial
statement of year 2007 which had no influences on the current profit in year 2007. in light of the
changes on the exchange rate of the loan on the guaranteed USD, adjusted to increase the Projected
Liabilities RMB 22,692,842.00 and meanwhile, adjusted to decreased the Undistributed Profit in
Year-begin RMB 22,692,842.00.
3. Changes to the range of the consolidated accounting statement.
In the current year, the Company had no changes to the range of the consolidated accounting
statement
Note 6: Tax
The main taxes adopted by the Company include: VAT, business tax, city construction and
maintenance tax, extra charges for education and enterprise income tax, etc.
The respective tax rate of the turnover tax is: 17% for VAT, 5% for business tax, 1% for the city
construction and maintenance tax, 3% for the extra charges for education.
The tax rate of enterprise income tax is 18%.
Note 7: Controlled subsidiaries and associated enterprises
1. Controlled subsidiaries
Name of controlled
subsidiaries Registered
capital Business scope Investment
amount
Share-holdi
ng
proportion
Consolida
ted or not
China Bicycle (Hong
Kong) Co., Ltd.
HK$ 5
million
Distribution of
bicycle and parts 5,350,000.00 99% Yes
Shenzhen Anjule Property
Management Co., Ltd.
RMB 2
million
Self-owned property
management 2,000,000.00 100% Yes
Shenzhen Emmelle
Industry Co., Ltd.
RMB 2 milli
on
Distribution of
bicycle and parts 1,400,000.00 70% Yes
China Bicycle
(International) Co., Ltd.
HK$ 20,000
Trade and
manufacture
20,000.00 100% Yes59
2. Associated enterprises
Name of associated enterprises Registered
capital Business scope Investment
amount
Share
proportio
n
Hunan KYMCO Motorcycle
Co., Ltd.
USD 29.5 mill
ion
Manufacture of motorcycle
and fitting parts of engine,
etc.
5,679,300.00 5.5%
Shenzhen Golden Ring
Printing Co., Ltd.
USD 3.7
million
Produce Positive plate and
sensitive developer, etc.
14,883,560.00 38%
Chengdu Emmelle Technology
Co., Ltd.
RMB 600,000
Software and hardware;
machining, assembly,
distribution and technical
consultation of electric
bicycle and other legal
program
180,000.00 30%
Note 8: Notes to the main items presented in the financial statements (unless otherwise
specified, the data below is consolidation data)
1. Monetary fund
Dec. 31, 2008 Dec. 31, 2007
Item Currency
Original
currency
Converted to
RMB
Original
currency
Converted to
RMB
Cash RMB 76,329.51 76,329.51 131,454.91 131,454.91
HK
dollar 1,894.30 1,666.98 1,894.30 1773.76
US
dollar 1.20 8.20 1.2 9.13
Subtotal 78,004.69 133,237.80
Bank deposit RMB 9,651,336.60 9,651,336.60 13,555,013.78 13,555,013.95
HK
dollar 41,756.67 36,745.87 34,374.51 32,187.16
US
dollar 46,927.14 320,512.37 46,786.89 341,759.52
Subtotal 10,008,594.84 13,928,960.63
Other
monetary fund RMB - - - -
Total 10,086,599.53 14,062,198.43
2. Note receivable
Note type Dec. 31, 2008 Dec. 31, 2007
Bank acceptance 5,408,792.00 1,673,960.0060
Total 5,408,792.00 1,673,960.00
List as follows based on clients:
Name of client Face amount Reason for
formation Expiry date
Zhengzhou Daming Technology
and Trade Co., Ltd. 1,900,000.00 Sale May 27, 2009
Jinan Yuxintai Sales Co., Ltd. 3,208,792.00 Sale June 22, 2009
Zhengzhou Daming Technology
and Trade Co., Ltd. 200,000.00 Sale June 8, 2009
Zhengzhou Daming Technology
and Trade Co., Ltd. 100,000.00 Sale May 19, 2009
Total 5,408,792.00
3. Account receivable
Age of the Dec. 31, 2008
account Amount Proportion Bad debt reserve Net amount
Within one year 185,726.81 0.02% - 185,726.81
1-2 years 120,518.46 0.01% 95.85 120,422.61
2-3 years - 0.00% - -
Over 3 years 1,041,135,045.16 99.97% 1,041,056,161.17 78,883.99
Total 1,041,441,290.43 100.00% 1,041,056,257.02 385,033.41
Age of the Dec. 31, 2007
account Amount Proportion Bad debt reserve Net amount
Within one year 251,184.98 0.02% 95.85 251,089.13
1-2 years 24.00 0.00% --- 24.00
2-3 years 104,844.07 0.01% 17,560.08 87,283.99
Over 3 years 1,040,796,109.98 99.97% 1,040,652,456.59 143,653.39
Total 1,041,152,163.03 100.00% 1,040,670,112.52 482,050.51
(1) Risk analysis for the account receivable at the end of the period
Dec. 31, 2008
Age of the account Amount Proportion Bad debt reserve Net amount
Account receivable with
single big amount
904,866,318.70 86.89% 904,866,318.70 -61
Account receivable with
no single big amount but
with big risk after
combined according to the
characteristics of credit
risk
136,268,726.46 13.08% 136,189,842.47 78,883.99
Other accounts receivable
without single big amount 306,245.27 0.03% 95.85 306,149.42
Total 1,041,441,290.43 100.00% 1,041,056,257.02 385,033.41
The standard for account receivable with single big amount of the Company is set as RMB 5
million according to the business scale and business nature of the Company and settlement
performance of clients.
(2) The balance at the end of the period does not include the account receivable of shareholders
holding 5% (5% included) or above shares with voting rights of the Company.
(3) Total amount of the top five in the balance at the end of the period is RMB 492,884,806.45,
accounting for 47.33% of the total amount of account receivable.
(4) At the end of the report period, the Company withdrew bad debt reserve of RMB
1,040,652,456.59 in sum amount for account receivable, taking 99.96% of the total account
receivable.
4. Account paid in advance
Structure of age of the Dec. 31, 2008 Dec. 31, 2007
account Amount Proportion Amount Proportion
Within 1 year (1 year
included) 494,714.35 98.07% 1,187,093.48 91.02%
1 year to 2 years (2 years
included) 9,726.05 1.93% --- ---
2 years to 3 years (3 years
included) - - 117,100.00 8.98%
Over 3 years
- - --- ---
Total
504,440.40 100.00% 1,304,193.48 100.00%
(1) The balance at the end of the period does not include the account paid in advance to
shareholders holding 5% (5% included) or above shares with voting rights of the Company.
5. Other account receivable
Dec. 31, 2008
Age of the account
Amount Proportion Bad debt reserve Net amount
Within one year 34,114,247.64 5.86% 9,111,049.38 25,003,198.26
1-2 years 3,401,632.04 0.58% 10,118.71 3,391,513.33
2-3 years 95,212.35 0.02% 285.64 94,926.71
Over 3 years 544,940,183.33 93.54% 531,235,883.73 13,704,299.6062
Total 582,551,275.36 100.00% 540,357,337.46 42,193,937.90
Dec. 31, 2007
Age of the account
Amount Proportion Bad debt reserve Net amount
Within one year 9,436,385.37 1.71% 12,276.37 9,424,109.00
1-2 years 1,594,976.28 0.29% 4,705.53 1,590,270.75
2-3 years 9,225,788.74 1.67% 27,677.37 9,198,111.37
Over 3 years 531,647,245.61 96.33% 531,085,217.16 562,028.45
Total 551,904,396.00 100.00% 531,129,876.43 20,774,519.57
(1) Risk analysis for other account receivable at the end of the period:
Dec. 31, 2008
Age of the account Amount Proportion Bad debt reserve Net amount
Other account receivable with
single big amount 501,545,148.56 86.09% 471,086,344.75 30,458,803.81
Other account receivable without
single big amount but with big
risk after combined according to
the characteristics of credit risk
60,149,538.98 10.33% 60,149,538.98 -
Other accounts receivable
without single big amount 20,856,587.82 3.58% 9,121,453.73 11,735,134.09
Total 582,551,275.36 100.00% 540,357,337.46 42,193,937.90
The standard for other account receivable with single big amount of the Company is set as RMB 5
million according to the business scale and business nature of the Company and settlement
performance of clients.
(2) Total amount of the top five in the balance at the end of the period is RMB 357,711,532.44,
accounting for 61.40% of the total amount of account receivable.
(3) At the end of the report period, the Company withdrew bad debt reserve of RMB
531,221,136.55 in sum amount for other account receivable, taking 91.19% of the total other
account receivable.
(4)Other account receivable received an increase in period-end over period-begin, mainly due to
that equity of Jiangxi Lihua Industrial Co., Ltd. had been transferred by Hong Kong Dahuan Group
Co., Ltd., thus the Company transferred equity of Jiangxi Lihua into other account receivable.
6. Inventory and inventory devalue provision
(1) The changes to inventory are listed as follows:
Type Dec. 31, 2007
Increase of the
current period
Decrease of the
current period Dec. 31, 2008
Raw material 249,215,915.55 12,597,453.35 36,933,176.97 224,880,191.93
Low-value
consumables
1,470,068.73 -1,557.64 23,126.55 1,445,384.54
Self-manufactured
half-finished
5,622,775.11 10,120,544.95 12,709,222.34 3,034,097.7263
products
Goods in stock 39,069,218.53 254,313,491.47 258,408,113.80 34,974,596.20
Total of balance of
inventory
295,377,977.92 277,029,932.13 308,073,639.66 264,334,270.39
Less: provision for
devaluation
254,261,182.41 6,024,359.56 32,148,615.51 228,136,926.46
Total of net
inventory
41,116,795.51 36,197,343.93
(2) Changes to inventory devalue provision are listed as follows:
Decrease of the current
period
Type
Dec. 31, 2007
Increase of
the current
period
Switching
back Written-off
Dec. 31, 2008
Raw material 229,667,161.87 - - 29,233,214.64 200,433,947.23
Low-value
consumables 1,315,419.73 - - - 1,315,419.73
Self-manufactured
half-finished
products
2,611,095.99 - - - 2,611,095.99
Finished products 20,667,504.82 6,024,359.56 - 2,915,400.87 23,776,463.51
Total 254,261,182.41 6,024,359.56 - 32,148,615.51 228,136,926.46
The basis for confirmation of the inventory above being converted into realizable net value is: the
raw material is converted according to the average unit price of the latest purchase; the material
which is out of expiration period, outdated, or unsuitable for transformation and awaiting scrap is
converted according to the recoverable amount; finished products is converted according to the unit
price of the latest sale minus the direct expense and tax that may be necessary for conversion.
7. Long-term equity investment
(1) The long-term equity investment is listed as follows:
Item Dec. 31, 2007
Increase of
the current
period
Decrease of the
current period Dec. 31, 2008
Long-term equity
investment
46,286,150.08
25,723,290.08
20,562,860.00
Minus: devalue
provision
18,879,666.57
2,273,242.13
3,209,889.20
17,943,019.50
Net amount of
long-term equity
investment
27,406,483.51
2,619,840.50
Decrease occurred in this report period was mainly due to that: equity of Jiangxi Lihua Industrial
Co., Ltd. had been transferred by Hong Kong Dahuan Group Co., Ltd., thus the Company
transferred equity of Jiangxi Lihua into other account receivable; Balance as of period-end was the
liquidation balance of Shenzhen Golden Ring Printing Co., Ltd. which had been revoked with its
industrial and commercial registration information.
(2) Long-term equity investment
a. Other equity investment calculated through cost method64
Name of company
invested
Investme
nt time
limit
Proportion
in the
registered
capital of the
company
invested
Initial
investment
cost
Dec. 31, 2007
Increas
e of the
current
period
Decrease of the
current period Dec. 31, 2008
Hunan KN
Motorcycle Co., Ltd. 50 years 5.50% 5,679,300.00 5,679,300.00 - - 5,679,300.00
b. Other equity investment calculated through equity method
Name of
company
invested
Investment
time limit
Proportion
in the
registered
capital of
the
company
invested
Initial
investment
cost
Dec. 31, 2007
Equity
adjustment
during the
current
period
Other
increase/decrease
of the current
period
Accumulative
equity
adjustment
Dec. 31, 2008
Shenzhen
Golden Ring
Printing Co.,
Ltd.
20 years 38%
14,883,560.00 14,883,560.00 14,883,560.00
Chengdu
Emmelle
Technology
Co., Ltd.
30%
180,000.00 -180,000.00
Jiangxi Lihua
Industrial Co.,
Ltd.
30 years 38.60%
30,740,000.00 25,723,290.08 -874,997.07 24,848,293.01 -5,891,706.99 -
Total 45,803,560.00 40,606,850.08 -874,997.07 24,848,293.01 -6,071,706.99 14,883,560.00
It is showed that registered industrial and commercial information of Shenzhen Golden Ring
Printing CO., Ltd. has been already revoked, and its actual owner is the Company, for its
shareholder-Hong Kong Link Bicycle Co., Ltd. was only entrusted by the Company to hold shares
of Golden Ring on behalf of the Company.
(3) Changes to devalue provision
Name of the company invested Dec. 31, 2007 Increase of the
current period
Decrease of
the current
period
Dec. 31, 2008
Hunan KN Motorcycle Co., Ltd. 4,719,777.37 959,522.63 - 5,679,300.00
Jiangxi Lihua Industrial Co., Ltd. 3,209,889.20 - 3,209,889.20 -
Shenzhen Golden Ring Printing
Co., Ltd.
10,950,000.00 1,313,719.50 - 12,263,719.50
Total 18,879,666.57 2,273,242.13 3,209,889.20 17,943,019.50
8. Investment real estate
Item Dec. 31, 2007
Increase of
the current
period
Decrease of
the current
period
Dec. 31, 2008
1. Total original price 14,346,102.94 - - 14,346,102.94
1) Houses, buildings 14,346,102.94 - - 14,346,102.94
2) Land-use right - - -
2. Total accumulative
depreciation and
accumulative
3,389,266.86 645,574.68 - 4,034,841.5465
Item Dec. 31, 2007
Increase of
the current
period
Decrease of
the current
period
Dec. 31, 2008
amortization
1) Houses, buildings 3,389,266.86 645,574.68 - 4,034,841.54
2) Land-use right - - - -
3. Total devalue
provision amount - - - -
1) Houses, buildings
- - - -
2) Land-use right - - -
4. Total book value 10,956,836.08 - - 10,311,261.40
1) Houses, buildings 10,956,836.08 - - 10,311,261.40
2) Land-use right
The Company adopts cost method for the subsequent calculation of investment real estate.
9. Fixed assets and accumulated depreciation
Type Dec. 31, 2007
Increase of the
current period
Decrease of the
current period Dec. 31, 2008
Original value of fixed
assets
Houses and buildings 236,056,082.90 - 7,163,658.00 228,892,424.90
Machinery equipments 1,339,700.00 118,000.00 430,271.00 1,027,429.00
Transport equipments 1,778,027.00 - 1,018,258.00 759,769.00
Other equipments 1,680,583.30 673,478.00 - 2,354,061.30
Total 240,854,393.20 791,478.00 8,612,187.00 233,033,684.20
Accumulative
depreciation
Houses and buildings 166,947,213.90 9,787,299.06 4,613,552.94 172,120,960.02
Machinery equipments 731,492.39 294,884.52 372,485.36 653,891.55
Transport equipments 1,327,307.87 93,234.11 763,926.09 656,615.89
Other equipments 1,202,024.71 305,012.68 - 1,507,037.39
Total 170,208,038.87 10,480,430.37 5,749,964.39 174,938,504.85
Devaluation provision 2,084,874.23 2,084,874.2366
Net amount of fixed
assets
68,561,480.10 56,010,305.12
(1)Original value decreased RMB 7,747,888.00 in period-end over period-begin, mainly due to that
No. 91 property in West Fourth Street, Xicheng District, Beijing with original value of RMB
6,974,505.00 was sold in this report period.
(2)Among the houses and buildings of the Company, except house property certificate was
transacted for China Garden (original value of RMB 7,226,043.16), property right certificates
haven’t been transacted for others.
(3)Details for restriction upon property could be found in Note 12.
10. Intangible asset
Item Original value Obtaining
method
Accumulated
amortization
amount
Dec. 31, 2007
Increase
of the
current
period
Amortization
of the
current
period
Dec. 31, 2008
Periods left
for
amortization
Land-use
right
43,143,099.08 Purchase-in 15,962,947.74 28,043,013.38 - 862,862.04 27,180,151.34 31.50
The land-use right refers to the 127,333 ㎡ land in Yousong Village, Longhua Town, Bao’an
District, Shenzhen, and the term is from July 1st, 1990 to June 30th, 2040. Details for restriction
upon property could be found in Note 12.
11. Assets devalue provision
Item Dec. 31, 2007
Increase of the
current period
The amount
turned back in
the current
period
The amount
written off in
the current
period
Dec. 31, 2008
1. Bad debt reserve 1,571,799,988.95 9,613,605.53 - - 1,581,413,594.48
Inc: accounts receivable 1,040,670,112.52 386,144.50 - - 1,041,056,257.02
Other accounts receivable 531,129,876.43 9,227,461.03 - 540,357,337.46
2. Inventory devaluation
provision 254,261,182.41 6,024,359.56 - 32,148,615.51 228,136,926.46
Inc: raw material 229,667,161.87 - 29,233,214.64 200,433,947.23
Low-value consumables 1,315,419.73 - - - 1,315,419.73
Self-manufactured
half-finished products 2,611,095.99 - - - 2,611,095.99
Goods in stock 20,667,504.82 6,024,359.56 - 2,915,400.87 23,776,463.51
3. Devaluation provision for
long-term investment
19,059,666.57 2,273,242.13 - 3,209,889.20 18,123,019.50
4. Devaluation provision of
fixed assets 2,084,874.23 - - - 2,084,874.23
Total 1,847,205,712.16 17,911,207.22 - 35,358,504.71 1,829,758,414.67
12. Assets with restricted ownership
Asset kind Dec. 31, 2007
Increase of
the current
Decrease of
the current Dec. 31, 200867
period period
1. Assets served as
mortgages for loan * 230,684,010.96 --- --- 230,684,010.96
Inc: house and buildings 187,540,911.88 --- --- 187,540,911.88
Intangible assets 43,143,099.08 --- --- 43,143,099.08
2. Houses and buildings
** 4,768,111.78 --- --- 4,768,111.78
Total 461,368,021.92 --- --- 461,368,021.92
Values of the assets with restricted ownership listed above are all their book original values.
* The Company had guaranteed for US$7.5 million loan of the subsidiary China Bicycle (Hong
Kong) Co., Ltd. borrowed from China Merchants bank. Since China Bicycle (Hong Kong) Co., Ltd
could not pay off the loan after the expiration period, the Company was brought into Shenzhen
Intermediate People’s Court by China Merchants Bank. The Court had seized the 127,333 ㎡
land in Yousong Village, Longhua Town, Bao’an District, Shenzhen and buildings on the land.
**The Company was brought into Shenzhen Luohu Court for the arrearage of US$500,000 advance
for letter of credit and interest to Agricultural Bank of China, Shenzhen Luohu Branch. The court
intended to auction the Company’s house property in SEG Park, South Huaqiang Road, Shenzhen
to pay the arrearage.
13. Short-term loans
(1) Listed according to loan types
Loan type Dec. 31, 2008 Dec. 31, 2007
Currency Original
currency
Converted to
RMB
Original
currency Converted to
RMB
Credit RMB - 620,000.00 - 620,000.00
USD 21,089,522.66 144,041,439.77 21,089,522.66 154,050,527.22
Subtotal 144,661,439.77 154,670,527.22
Guarantee RMB - 123,057,930.00 - 123,057,930.00
HKD 8,000,000.00 7,040,000.00 8,000,000.00 7,491,040.00
USD 18,248,139.39 124,901,985.58 18,248,139.39 132,945,951.83
Subtotal 254,999,915.58 263,494,921.83
Total 399,661,355.35 418,165,449.05
(2) Listed according to financial institution
Loan institution Loan amount Loan
application Overdue reason
Prospective
date for loan
repayment
China Orient Asset
Management Corporation 95,828,026.48
Loan for
turnover of
production Fund shortage Unpredictable
China Cinda Asset
Management Corporation 58,360,649.40 Loan for
turnover of Fund shortage Unpredictable68
production
Huizhou Orient Union
Industrials Co., Ltd.
37,176,856.30
Loan for
turnover of
production Fund shortage Unpredictable
The Export-Import Bank
of China
114,557,930.00
Loan for
turnover of
production Fund shortage Unpredictable
China Merchants Bank,
Luohu Branch 18,427,945.90
Loan for
turnover of
production Fund shortage Unpredictable
China Everbright Bank 13,741,677.82
Loan for
turnover of
production Fund shortage Unpredictable
China Merchants Bank
Head Office
60,948,269.45
Loan for
turnover of
production Fund shortage Unpredictable
China Construction Bank,
Sichuan Mianyang
Branch
620,000.00
Loan for
turnover of
production Fund shortage Unpredictable
Total 399,661,355.35
(3)The aforesaid loans were all overdue for many years
14. Accounts payable
Item Dec. 31, 2008 Dec. 31, 2007
Accounts payable 130,714,884.86 135,329,891.70
The accounts payable does not include the arrearage to shareholders holding 5% (5% included) or
above shares with voting rights of the Company.
15. Account received in advance
Item Dec. 31, 2008 Dec. 31, 2007
Account received
in advance
21,333,035.66 18,086,124.15
The accounts received in advance do not include the account received in advance from
shareholders holding 5% (5% included) or above shares with voting rights of the Company.
16. Wages payable
Item Dec. 31, 2008 Dec. 31, 2007
1 Wage 606,482.30 537,498.91
2 Bonus
3 Allowance
4 Subsidy69
Item Dec. 31, 2008 Dec. 31, 2007
5 Employees’ welfare expenses
6 Social insurance expense
7 Housing fund
8 Trade union funds 901,777.77 854,553.30
9 Employee education fund
10 Non-monetary welfare
11 Dismission welfare 178,037.76
12
Share-based payment settled in
cash
Total 1,686,297.83 1,392,052.21
The Company reduced staff for sake of economic consideration according to Labor Contract Law in
2008, and paid retire compensation of RMB 11,452,225.33, and still has RMB 178,037.76 left to
pay.
17. Tax payable
Tax type Dec. 31, 2008 Dec. 31, 2007
Enterprise income tax 33,753,125.02 33,753,125.02
VAT 53,948,342.26 54,139,347.10
Business tax 399,505.63 447,794.29
Housing property tax 7,303,655.67 7,303,655.67
City construction and
maintenance tax
-10,992.63 -15,823.39
Withheld individual income tax -21,125.19 -186,992.91
Others 26,518.32 19,116.46
Total 95,399,029.08 95,460,222.24
For the Company has owed tax for a long time, it is possible for it to pay relevant fines and late fee.
18. Other accounts payable
Item Dec. 31, 2008 Dec. 31, 2007
Other accounts payable 168,604,764.50 167,601,705.14
The other accounts payable does not include the arrearage to shareholders holding 5% (5% included)
or above shares with voting rights of the Company.
19. Long-term liabilities due in 1 year70
Dec. 31, 2008 Dec. 31, 2007
Loan institution Curre
ncy
Original currency Converted to RMB Original currency Converted to RMB
China Everbright
Bank
USD
2,157,395.94 14,744,938.28
2,157,395.94 15,758,914.37
Shenzhen Guocheng
Energy Investment
Development Co.,
Ltd.
USD
84,797,624.57 579,557,844.87
84,797,624.57 619,412,728.42
Shenzhen Guocheng
Energy Investment
Development Co.,
Ltd.
RMB
- 19,300,058.59
--- 19,300,058.59
Guangdong Sunrise
Holdings Co., Ltd.
RMB - 232,801,657.06
--- 232,801,657.06
Guangdong Sunrise
Holdings Co., Ltd.
USD 204,847.86 1,599,595.48
204,847.86 1,599,595.48
China Orient Asset
Management
Corporation
RMB
- 3,000,000.00
--- 3,000,000.00
China Industrial and
Commercial Bank,
Suzhou Branch
RMB
- 2,000,000.00
2,000,000.00
Great Wall Asset
Management
Corporation
USD
2,500,000.00 17,086,500.00
2,500,000.00 18,261,500.00
Great Wall Asset
Management
Corporation
RMB
- 3,000,000.00
--- 3,000,000.00
Total
873,090,594.28
915,134,453.92
The aforesaid loans were all overdue for many years.
20. Other current liabilities
Item Dec. 31, 2008 Dec. 31, 2007
Reason for
balance71
Loan interest 118,881,087.74 86,097,636.52 Unpaid
Others 48,826.30 12,313.40
Total 118,929,914.04 86,109,949.92
21. Projected liabilities
Item Dec. 31, 2008 Dec. 31, 2007 Reason for withdraw
Loan guarantee for ZoriaPteLTd 78,087,000.00 78,087,000.00
The company guaranteed
has gone into serious
insolvency.
Loan guarantee for Jintian Industry
(Group) Co., Ltd.
50,000,000.00 50,000,000.00
The company guaranteed
has gone into serious
insolvency.
Loan guarantee for Guangdong
Sunrise Holdings Co., Ltd.
47,963,842.00 47,963,842.00
The company guaranteed
has gone into serious
insolvency.
Loan guarantee for Shenzhen Tianma
Cosmetics Co., Ltd.
8,000,000.00 8,000,000.00 The company guaranteed
has gone bankrupt.
Loan guarantee for Shandong
Huajiaming Trading Co., Ltd.
83,142.92 83,142.92
The company guaranteed
has gone into serious
insolvency.
Total 184,133,984.92 184,133,984.92
Details of reason for withdrawal could be found in Note 11.
22. Capital stock
2007.12.31 Increase/decrease of the current year(＋, －)
Item Quantity Proportion Bonus share Converted from public reserve Equity incentive other
1. Shares with limited sales condition 186,713,203 38.94% --- --- --- --
1) Shares held by state legal person
--- --- --- --- --- --
2) Other domestic capital shares
111,607,000 23.28% --- --- --- --
Inc: shares held by domestic legal person
--- --- --- --- --- --
Shares held by domestic non-state legal person
111,607,000 --- --- --- --- --
3) Others 75,106,203 15.67% --- --- --- --
Inc: shares held by foreign legal person 75,106,203 --- --- --- --- --
2. Shares with no limited sales condition 292,719,800 61.06% --- --- --- --72
2007.12.31 Increase/decrease of the current year(＋, －)
Item Quantity Proportion Bonus share Converted from public reserve Equity incentive other
Domestically listed RMB ordinary share 76,752,000 16.01% --- --- --- --
Domestically listed foreign capital shares 215,967,800 45.05% --- --- --- --
3. Total share amount 479,433,003 100.00% --- --- --- --
The capital stock of the Company has been verified with (96) YANZIZI No.076 Capital Verification
Report issued by Shenzhen Accountant Office.
23. Capital reserves
Item Dec. 31, 2007
Increase of the
current period
Decrease of the
current period Dec. 31, 2008
Other capital reserve 362,027,636.64 48,865,927.69 - 410,893,564.33
Inc: return from debt
restructuring 358,019,011.67 48,865,927.69 - 406,884,939.36
Account need not to be
paid 690,624.97 - - 690,624.97
Price difference of
related transactions 3,318,000.00 - - 3,318,000.00
Total 362,027,636.64 48,865,927.69 - 410,893,564.33
In accordance with the regulations on Notice of Well Implementing Accounting Standards for
Business Enterprise on the Works of 2008 Annual Report by the Letter No. CK [2008]60 from
Ministry of Finance, the controlling shareholder of the Company- Shenzhen Guocheng Energy
Investment Development Co., Ltd. exempted loan interest of RMB 48,865,927.69 for 2008, as
capital input which was then recorded into capital reserve.
24. Surplus reserves
Item Dec. 31, 2007
Increase of
the current
period
Decrease of
the current
period
Dec. 31, 2008
Statutory surplus reserve 32,673,227.01 --- --- 32,673,227.01
25. Undistributed profit
Item Dec. 31, 2008 Dec. 31, 2007
Undistributed profit at the beginning
of the period -2,681,166,169.33
-2,744,202,410.57
Net profit -44,893,006.40
63,036,241.24
Minus: withdraw statutory
surplus reserve - -
Withdraw statutory common
- -73
welfare reserve
Ordinary shares dividends payable
- -
Profit converted to capital stock
- -
Other conversion
- -
Undistributed profit at the end of the
period
-2,726,059,175.73 -2,681,166,169.33
26. Operating income and cost
2008 2007
Classification of business
items
Operating
income Operating cost Operating
income Operating cost
Main business:
Sales of bicycles and fitting
parts
262,378,494.39 252,383,154.36 224,545,279.20 219,349,717.13
Income from property
management
2,222,189.59 3,281,707.26 2,028,200.43 3,885,073.40
Subtotal
264,600,683.98 255,664,861.62 226,573,479.63 223,234,790.53
Other business:
Fixed assets rental income
6,538,573.51 3,409,074.89 5,968,464.76 3,363,048.66
Income from water and
power charge
1,346,604.80 1,318,031.12 1,422,770.31 2,243,548.75
Sales of materials
1,378,328.32 936,865.81 456,600.01 298,831.92
Others
338,649.87 950,750.67 180,000.00 1,104,612.95
Subtotal
9,602,156.50 6,614,722.49 8,027,835.08 7,010,042.28
Total
274,202,840.48 262,279,584.11 234,601,314.71 230,244,832.81
In the 2008 main business income, sales income from top five customers amounted to RMB
217,222,781.60, Taking 82.09% of the total main business income.
27. Business tax
Tax type 2008 2007 Calculation and payment74
standard
Business tax 110,013.98 167,786.77 Rental income*5%
City construction and
maintenance tax
25,916.58 2,558.22 Amount of turnover
tax*1%
Extra charges for
education
74,789.10 5,033.60 Amount of turnover
tax*3%
Total 210,719.66 175,378.59
28. Financial expenses
Type 2008 2007
Interest expense
98,306,389.58 103,827,044.90 98,306,389.58
Minus: interest income
161,041.42 140,629.79 161,041.42
Minus: exchange gains
66,086,960.64 68,440,197.61 66,086,960.64
Others
25,176.75 26,784.98 25,176.75
Total
32,083,564.27 35,273,002.48 32,083,564.27
29. Asset impairment loss
Type 2008 2007
Bad debt loss 526,361.94 3,945,197.10
Inventory devaluation
loss 6,024,359.56 7,851,725.71
Long-term equity
investment devaluation
loss
2,273,242.13 -
Total 8,823,963.63 11,796,922.81
30. Investment income
Item 2008 2007
Gains and loss
adjustment calculated
through equity method
-874,997.07 -1,336,613.99
Total -874,997.07 -1,336,613.99
31. Non-operating income
Item 2008 2007
Gains from disposal of
non-current assets 8,728,698.80 2,652,336.90 8,728,698.80
Profit from debt
restructuring 17,360,832.24 138,127,300.95 17,360,832.24
Others 1,502,394.51 26,863.11 1,502,394.51
Total 27,591,925.55 140,806,500.96 27,591,925.55
Gains from disposal of non-current assets mainly referred to the income RMB 7,925,541.94 by
selling the real estate of No. 91, West Four Avenue, West District, Beijing City.
The profit from debt restructuring is caused that Guangdong Sunrise Holding co., Ltd. exempted the
Company from the interest of loan payable for this year.
Other incomes were mainly the accounts payable RMB 1,009,277.90 which could not be paid by75
branch companies and RMB 440,670.00 received for brand infringing compensation account.
32. Non-operating expenditure
Item 2008 2007
Loss from disposal of
non-current assets 62,150.00 2,775.00
Commonweal donation 19,779.70 14,615.00
Loss on fixed assets
inventory shorts 1,892,109.37
Amercement expense 40,122.93
Others 250,511.93 26,116.98
Total 372,564.56 1,935,616.35
33. Income tax
Item 2008 2007
Income tax expense
of the current
period
--- ---
Deferred income
tax expense --- 9,849,555.22
Total --- 9,849,555.22
34. Other paid cash related with operation activities
All paid for period expenses in cash.
Note 9. Notes to main items of the financial statement of parent company
1. Accounts receivable
Age of Dec. 31, 2008
the
account Amount Proportion Provision for bad
debt Net amount
Within 1
year 496,746.90 0.04% - 496,746.90
1 year to
2 years 31,950.00 0.00% 95.85 31,854.15
2 years to
3 years - - - -
Over 3
years 1,172,776,011.87 99.96% 1,037,184,384.47 135,591,627.40
Total 1,173,304,708.77 100% 1,037,184,480.32 136,120,228.45
Age of the
account Dec. 31, 2007
Amount Proportion Provision for bad
debt Net amount
Within 1
year 31,950.00 0.00% 95.85 31,854.15
1 year to 2
years --- --- --- ---
2 years to
3 years 1,127,063.59 0.10% 17,560.08 1,109,503.51
Over 3
years 1,180,317,672.69 99.90% 1,036,780,679.89 143,536,992.80
Total 1,181,476,686.28 100.00% 1,036,798,335.82 144,678,350.46
(1) The balance at the end of the period does not include the account receivable of shareholders76
holding 5% (5% included) or above shares with voting rights of the Company.
(2) Total amount of the top five in the balance at the end of the period is RMB 492,884,806.45,
accounting for 42.01% of the total amount of account receivable.
2. Other accounts receivable
Age of the
account Dec. 31, 2008
Amount Proportion Provision for
bad debt Net amount
Within 1
year 40,722,758.73 6.64% 9,110,223.51 31,612,535.22
1 year to 2
years 1,175,870.02 0.19% 3,527.61 1,172,342.41
2 years to 3
years - - - -
Over 3 years 571,131,039.07 93.17% 516,256,193.21 54,874,845.86
Total 613,029,667.82 100% 525,369,944.33 87,659,723.49
Age of the
account Dec. 31, 2007
Amount Proportion Provision for
bad debt Net amount
Within 1
year 2,436,436.85 0.42% 7,309.31 2,429,127.54
1 year to 2
years --- --- --- ---
2 years to 3
years 9,129,289.40 1.57% 27,387.87 9,101,901.53
Over 3 years 571,247,506.43 98.02% 516,233,685.64 55,013,820.79
Total 582,813,232.68 100.01% 516,268,382.82 66,544,849.86
(1) The balance at the end of the period does not include the other account receivable of
shareholders holding 5% (5% included) or above shares with voting rights of the Company.
(2) Total amount of the top five in the balance at the end of the period is RMB 357,711,532.44,
accounting for 58.35% of the total amount of other accounts receivable.
3. Long-term investment
(1) The long-term equity investment is listed as follows:
Item Dec. 31, 2007
Increase of
the current
period
Decrease of the
current period Dec. 31, 2008
Long-term equity
investment
55,054,877.68 25,723,290.08 29,331,587.60
Minus: devalue
provision
27,648,394.17 2,273,242.13 3,209,889.20 26,711,747.10
Net amount of
long-term equity
investment
27,406,483.51 2,619,840.50
Decrease in the period was caused by that the equity of Jiangxi Lihua Industry Co., Ltd. was
transferred by Hong Kong Dahuan (Group) Co., Ltd., and the equity was transferred into other
account receivable; the balance at period-end was the liquidation balance of Shenzhen Golden Ring
Printing Co., Ltd. which was revoked with industrial and commercial registration.
(2) Long-term equity investment
a. Other equity investment calculated through cost method
Name of company Invest Proportion Initial Dec. 31, Increase Decrease Dec. 31,77
invested ment
time
limit
in the
registered
capital of
the
company
invested
investment
cost
2007 of the
current
period
of the
current
period
2008
Shenzhen Emmelle
Industry Co., Ltd. 70% 1,400,000.00 1,400,000.00 - - 1,400,000.0
0
Shenzhen Anjule
Property Management
Co., Ltd.
100% 2,000,000.00 2,000,000.00 - - 2,000,000.0
0
China Bicycle (Hong
Kong) Co., Ltd. 100% 5,350,000.00 5,350,000.00 - - 5,350,000.0
0
China Bicycle
(International) Co., Ltd. 100% 18,727.60 18,727.60 - - 18,727.60
Hunan KN Motorcycle
Co., Ltd.
50
years 5.50% 5,679,300.00 5,679,300.00 - - 5,679,300.0
0
Subtotal
14,448,027.6
0
14,448,027.6
0 - - 14,448,027.
60
b. Other equity investment calculated through equity method
Name of
company
invested
Inves
tment
time
limit
Proportio
n in the
registered
capital of
the
company
invested
Initial
investment
cost
Dec. 31, 2007
Equity
adjustment
during the
current
period
Other
increase/decre
ase of the
current period
Accumulative
equity
adjustment
Dec. 31, 2008
Shenzhen
Golden Ring
Printing Co.,
Ltd.
20
years 38%
14,883,560.00 14,883,560.00 14,883,560.00
Jiangxi Lihua
Industry Co.,
Ltd.
30
years 38.60%
30,740,000.00 25,723,290.08 -874,997.07 24,848,293.01 -5,891,706.99 -
Total 45,623,560.00 40,606,850.08 -874,997.07 24,848,293.01 -6,071,706.99 14,883,560.00
Shenzhen Golden Ring Printing Co., Ltd. was withdrawn enterprise industrial and commercial
registration; the original shareholder - Hong Kong (Link) Bicycles Limited was entrusted to hold its
shares by the Company, so the actual owner was the Company.
c. Changes of devaluation provision
Name of the company
invested Dec. 31, 2007
Increase of
the current
period
Decrease of the
current
period
Dec. 31, 2008
Shenzhen Emmelle Industry
Co., Ltd.
1,400,000.00 - - 1,400,000.00
Shenzhen Anjule Property
Management Co., Ltd.
2,000,000.00 - - 2,000,000.00
China Bicycle (Hong Kong)
Co., Ltd.
5,350,000.00 - - 5,350,000.00
China Bicycle (International)
Co., Ltd.
18,727.60 - - 18,727.60
Hunan KN Motorcycle Co.,
Ltd.
4,719,777.37 959,522.63 - 5,679,300.00
Shenzhen Golden Ring 10,950,000.00 1,313,719.50 - 12,263,719.5078
Name of the company
invested Dec. 31, 2007
Increase of
the current
period
Decrease of the
current
period
Dec. 31, 2008
Printing Co., Ltd.
Jiangxi Lihua Industry Co.,
Ltd.
3,209,889.20 - 3,209,889.20 -
Total 27,648,394.17 2,273,242.13 3,209,889.20 26,711,747.10
4. Main business income and cost
Item 2008 2007
Main business income 4,342,078.22 10,122,401.15
Main business cost 9,652,725.20 17,556,401.02
Gross profit from main
business -5,310,646.98 -7,433,999.87
5. Investment income
Item 2008 2007
Gains and loss adjustment calculated
through equity method -874,997.07 -1,156,612.99
Total -874,997.07 -1,156,612.99
Note 10: Affiliated party relationships and the transactions among them
1. Relationship between related parties
(1) Related companies with controlling relationship
Name of related
company Enterpri
se type
Legal
representat
ive
Registered
capital Business scope Shares or
equity held
Relationship
with the
Company
Shenzhen
Guocheng
Energy
Investment
Development
Co., Ltd.
Limited
liability
compan
y (legal
person
sole
propriet
orship)
Shang
Shijun ￥70000,000
Set up industry,
domestic business,
material supply
and marketing of
materials(excludin
g exclusive,
controlled and
monopoly
commodity)
13.58% Controlling
shareholder
(2) Related companies with no controlling relationship
Name of related company Relationship with the Company
Shenzhen Golden Ring Printing Co., Ltd. Affiliated company
According to the resolution of the 5th meeting of the 7th Board of Directors on April 25, 2008, the
Company cancelled investment to affiliated companies which was revoked with industrial and
commercial registration. The following companies would have no related relationship with the
Company any more.
Names of companies The original relationship
Shenzhen Danxia Bicycle Parts Co., Ltd. Affiliated company
Shenzhen Canghai Industry Co., Ltd. Affiliated company
Jiangsu Huaiyin Huayu Bicycle Parts
Manufacturer Co., Ltd.
Affiliated company79
Yangzhou Xinghua Bicycle Material Co., Ltd. Affiliated company
Shantou S.E.Z. Dapeng Industry Co., Ltd. Affiliated company
Director Shi Zhangxiong left the post of director of the Company in this year, so the following
companies would have no related relationship with the Company any more.
Names of companies The original relationship
Daming International Co., Ltd The director of the Company was
General Manager of this company
DiamondBack（Hong Kong）Co., Ltd. The director of the Company was
General Manager of this company
Zhigao International mechanical Co., Ltd. The director of the Company was
General Manager of this company
Zhigao Resource international Co., Ltd. The director of the Company was
General Manager of this company
China Composite Material (Shenzhen) Co.,
Ltd.
The director of the Company was
Chairman of the Board of this
company
Hong Kong Huajiaming Industrial Trading
Industry Co., Ltd
The director of the Company was
Chairman of the Board of this
company
2. Dealings of related companies
Item Name of related company Economic
content
Dec. 31, 2008 Dec. 31, 2007
Long-term
liability due
in 1 year
Shenzhen Guocheng Energy
Investment Development Co.,
Ltd.
Principal
sum of
loan
598,857,903.46 638,712,787.01
Subtotal 598,857,903.46 638,712,787.01
Other
current
liabilities
Shenzhen Guocheng Energy
Investment Development Co.,
Ltd.
Interest
of loan 1,373,681.70 787,577.51
1,373,681.70 787,577.51
Other
Account
payable
Shenzhen Golden Ring Printing
Co., Ltd.
2,769,840.50 600,000.00
Subtotal 2,769,840.50 600,000.00
3. Transaction of related parties
The shareholder and loaner of the Company - Shenzhen Guocheng Energy Investment Development
Co., Ltd. agreed to stop calculating interest of the loan in 2008, which was totally RMB
48,865,927.69.
Note 11: Contingency
Item Amount involved
Influence on the company’s
financial situation, operating
results and cash flow during
the current period and in the
future
Nature
Loan guarantee for Guangdong Sunrise
Holdings Co., Ltd.
RMB36,100,000.00
USD1,740,000.00 * Guarantee80
Loan guarantee for Jintian Industry
(Group) Co., Ltd.
RMB50,000,000.00 ** Guarantee
Loan guarantee for Shenzhen Tianma
Cosmetics Co., Ltd.
RMB8,000,000.00 *** Guarantee
ZoriaPteLtdc USD10,000,000.00 **** Guarantee
Shandong Huajiaming Trading Co.,
Ltd.
RMB83,142.92 ***** Guarantee
Total RMB94,183,142.92
USD11,740,000.00
* 100% of the guarantee amount for the company is predicted for loss, equal to RMB
47,963,842.00.
** The company is a listed limited company, and has gone into serious insolvency. Therefore, the
total guarantee amount is predicted for loss.
*** The company is closed down. Therefore, the total guarantee amount is predicted for loss.
**** The company has gone into serious insolvency, and is under liquidation now. Therefore, the
total guarantee amount is predicted for loss.
***** This company has gone into serious insolvency. Therefore, the total guarantee amount is
predicted for loss.
Note 12: Lawsuit
1. As of Dec. 31, 2008, the Company has been claimed by 16 financial organs for failure of
repaying the loan in due with principal and interest of RMB 408,555,000, USD 90,660,100 and
HKD 8,261,600. Most of the law suits have been judged and the Company has been defeated or
mediated. In 2008, China Bank, Agricultural Bank of China and Industrial and Commercial Bank of
China have transferred all or part creditor’s right to relevant asset management corporations and
thus the main body involved in the lawsuits changed correspondingly.
2. As of Dec. 31, 2008, the Company has been claimed by 29 suppliers with amount of RMB
30,580,800, HKD 17,650,800 and USD 1,668,500 involved. Most of the lawsuits have been judged
and the Company has been defeated.
3. In 2008, the Company was appealed by Shenzhen Caopu Dushu Village Industry Cooperation
Co., Ltd. to Shenzhen Luohu People’s Court due to lease contract dispute. The People’s Court
judged that the Company should pay rent RMB 1.4 million and relevant interests. The Company
had accrued for the rent in the past years.
Note 13: Interpretation for important issues
1. Restructuring of financial debts
In accordance with YJBT [2004] No.6 document issued on Jan. 7, 2004 by China Banking
Supervision and Administration Commission, that: 11 financial organs including BOC stopped
collecting interest of load of the Company for 3 years since Jan. 1, 2002 and exempted from all
interests (including default interest and Compound Interest) owed by the Company till Dec. 31,
2001. The Company has made all interest payable (including default interest and Compound
Interest) of RMB 357,993,665.24 into "capital reserve" and stopped to withdraw interest for the
period between Jan. 1, 2002 and Dec. 31, 2004. The exemption expired on Dec. 31, 2004.
In 2005, China Huarong Asset Management Corporation, Shenzhen office, China Orient Asset
Management Corporation, Shenzhen office, China Cinda Asset Management Corporation, Shenzhen
office, as well as China Great Wall Asset management Corporation, Shenzhen office continued to
stop calculating the annual interest of the Company for 2005. From 2006 to 2008, the Company has
deducted the interest according to the normal loan rate of bank.
For the ambiguity made by "stop to collect interest", and General Rules on Loan also has not81
interpreted it, thus, China Huarong Asset Management Corporation, Shenzhen office, China Orient
Asset Management Corporation, Shenzhen office, China Cinda Asset Management, Shenzhen office
and Great Wall Asset management corporation, Shenzhen office did not asked the Company to
return the interest which was stopped for withdrawal. Yet, Shenzhen Development Bank asked for
the interest and compound interest occurred in the period between Jan. 1, 2002 and Dec. 31, 2004.
The Company holds the idea that it needs not to pay the interest which was stopped for calculation.
And the Company started to withdraw interest for the interest occurred since the aforesaid
exemption expired, taking it as normal loan. So, the Company didn’t withdraw for the interest and
compound interest which was stopped for calculation from Jan. 1, 2002 to Dec. 31, 2004. Till
Dec.31, 2008, the interest confirmed by creditor banks is with RMB 265,875,786.92 more than the
book interest payable recorded by the Company, and part institutions has not replied to confirm loan
interests. The Company still could not determine whether the interest be withdrawn and returned or
not, so did not make accounting adjustment.
2. Capital reserve transferring to capital stock and Share Merger Reform
According to the Scheme of Capital Reserve Converting to Capital Stock and Scheme of Share
Merger Reform voted through in the Shareholders’ General Meeting on Feb. 1, 2007, the Company
made share capital conversion of 39,519,800 shares to circulating A-share shareholders and the
Non- circulating stock obtained the circulating right. The B-shares shareholder was added 1.5
shares to each 10 shares and 32,395,200 shares were totally converted. Among the converted shares
obtained by the circulating A-shares shareholders, deducting the 11,512,800 shares gained for the
share capital expansion of the Company, the rest 28,007,000 shares are arranged to circulating
A-share shareholders from the non circulating shareholders for consideration. After conversion, the
total share equity increases to 551,348,000 shares and the circulating A shares increased to
116,271,800 from 76,752,000, among which 28,007,000 shares are consideration shares. According
to Share Merger Reform memoranda No. 2—Information Disclosure (1) the consideration
arrangement rate is 28,007,000÷88, 264, 8 00= 0.3173 with converted A shares share capital
(88,264,800 shares) as base. Therefore, in the conversion, the circulating A shares shareholder
obtained 3.173 consideration shares for each 10 shares.
The Share Merger Reform of the Company has obtained the Reply of SZPi[2007] No. 1343 from
Ministry of Commerce and the Reply of SMGZFu[2007] No.2257on Increasing the Total Shares
Capital of Shenzhen China Bicycle Company (Holdings) Limited from Shenzhen Trade and
Industry Bureau, in which agreed the Share Merger Reform scheme of the Company examined and
approved in Shareholders’ General Meeting dated Feb.1, 2007. In accordance with Guidelines on
Practice and Operations of Share Merger Reform of Listed Companies, the relevant procedure on
Share Merger Reform of the Company was being transacted in Shenzhen Company of China
Securities Depository and Clearing Corporation Limited.
Note 14: Non adjustment items after the date of balance sheet
The Company signed Affiliated Agreement on investing Jiangxi Lihua Industrial Co., Ltd. with
Hong Kong Dahuan Group Co., Ltd.(hereinafter refers to be as Hong Kong Dahuan) on June 23,
1993. Considering that the aforementioned investment of the Company did not yield any profit until
now, and the nominal shareholder of the aforementioned investment was Hong Kong Dahuan, the
interests of the Company could not be guaranteed legally. Thus, with friendly negotiation with
Hong Kong Dahuan, the Company signed Agreement on Releasing Affiliated Agreement with Hong
Kong Dahuan on Jan. 20, 2009 in which Affiliated Agreement on investing Jiangxi Lihua Industrial
Co., Ltd. signed on June 23, 1993 was released.
Main contents of the transaction agreement were as follows:
1. Hong Kong Dahuan should repay the investment account to the Company amounting to RMB
30,740,000.82
2. RMB 4,000,000 was repaid before signing the agreement; the remaining RMB 26,740,000 would
be repaid in two years and six months after signing the agreement with amortization of 8 terms.
3. If Hong Kong Dahuan repaid the account with exceeding the time limitation, the penalty would
be paid to the Company daily based on the 0.03% of the overdue repayment.
4. Chairman of the Board of Hong Kong Dahuan Mr. Shi Zhanxiong shouldered joint responsibility
of guarantee for Agreement on Releasing Affiliated Agreement (the guarantee amount was RMB
20.74 million).
RMB 4 million was received from Hong Kong Dahuan on Feb. 5, 2009 and RMB 2 million was
received from Hong Kong Dahuan on March 18, 2009.
Note 15: Sustained operation interpretation
As of Dec. 31st, 2008 the total assets of the Company was RMB 190,897,705.53 and the total
liabilities was RMB 1,993,553,860.52 with net assets of RMB-1,802,656,154.99. The Company is
in insolvency and it may fail to liquidate assets to clear off debts during the normal operation.
Therefore, the Company and the original first creditor adopted the measures as follows:
Since March 2002, the original first creditor of the Company, China Huarong Asset Management
Corporation made breakthrough advance on the debt restructuring. “Shenzhen China restructuring
Scheme” has approved by the China Banking Regulatory Commission. The interests of the
monetary liabilities of the Company before December 31st, 2004 have been exempted and stopped
calculation and were under the age of implementing gradually.
China Huarong Asset Management Corporation and Shenzhen Julongsheng Industrial Development
Co., Ltd, Shenzhen Guocheng Energy Investment Development Co., Ltd. agreed and signed Letter
of Agreement on November 13th, 2006. The Guocheng Energy accepted the 65,098,412 A corporate
shares of the Company held by Huarong Corporation. The ownership right was transferred on April
30th, 2007. Shenzhen Guocheng Energy Investment Development Co., Ltd. became the largest
shareholder and biggest creditor of the Company and the debt restructuring issues were under the
progress.
The Company is making debt restructuring scheme and has made certain achievement. The
Company has signed Reconciliation Agreement with International Finance Corporation on March
29th, 2007. Both parties agreed to settle all right of credit and liability between the two parties by
paying the amount equivalent to RMB 2 million. The debt amount was about U.S. dollars 3.87
million and the accrual interest was about RMB 42.78 million. The two biggest debtors of the
Company, Shenzhen Guocheng Energy Investment Development Co. Ltd. and Guangdong Sunrise
Holdings Co. Ltd. has agreed to stop calculating the whole interests of debts in year 2007 and 2008.
The interests which were stopped calculation would not be collected in the future years.
While making liability restructuring, the main businesses of the Company increased great
continuously and make profit continuously. In this sense, the payment pressure for the Company in
the short term reduced great and the ability of sustained operation improved.
With restructuring of the debt and assets of the Company and the development of the achievements
of the Company, the business environment and operation status will improve further.
Note 16: Supplementary information
1. Supplementary information of cash flow statement
(1) Supplementary information of consolidated cash flow statement
Item 2008 2007
1. Reconciliation of net profit to cash flows from
operating activities
Net profit -44,489,780.00 63,036,241.2483
Item 2008 2007
Plus: assets devalue provision 8,823,963.63 11,796,922.81
Fixed assets depreciation 10,480,430.37 11,754,523.18
Amortization of intangible assets 862,862.04 -
Amortization of long-term expenses to be amortized - -
Loss on disposal of fixed assets, intangible
assets and other long-term assets
(income is listed with“-”)
-8,666,548.80 -2,649,561.90
Scrap loss of fixed assets (income is listed
with“-”) - 1,892,109.37
Loss on changes to fair value (income is listed
with“-”) - -
Financial expense (income is listed with“-”)
32,083,564.27 35,273,002.48
Investment loss (income is listed with“-”)
874,997.07 1,336,613.99
Decrease of deferred income tax assets
(increase is listed with“-”) - 9,849,555.22
Increase of deferred income tax liabilities
(decrease is listed with“-”) - -
Inventory decrease (increase is listed with“-”)
4,919,451.58 -3,533,289.17
Decrease in operating receivables (increase is
listed with“-”) -196,006.76 10,973,871.15
Increase in operating payables (decrease is
listed with“-”) -1,135,042.87 -4,194,667.53
Others
-17,950,317.78 -138,127,300.95
Net amount of cash flows from operating activities
-14,392,427.25 -2,591,980.11
2. Investing and financing activities that do not
involve cash receipts and payments -
Conversion of debt into capital
- -
Convertible bonds expired due within one year
- -
Fixed assets acquired under finance leases
- -
3. Net increase /(decrease) in cash and cash
equivalents -
Cash balance the end of the year
10,086,599.53 14,062,198.43
Minus: cash balance at the beginning of the year
14,062,198.43 16,982,883.27
Plus: balance of cash equivalents at the end of the
year - -
Minus: balance of cash equivalents at the beginning
of the year - -84
Item 2008 2007
Net amount of increase in cash and cash equivalents
-3,975,598.90 -2,920,684.84
(2) Supplementary information of the Company’ cash flow statement
Item 2008 2007
1. Reconciliation of net profit to cash flows from
operating activities
Net profit -48,399,301.24 60,590,871.54
Plus: assets devalue provision 8,698,064.11 11,796,922.81
Fixed assets depreciation 10,209,845.90 11,449,561.79
Amortization of intangible assets 862,862.04 -
Amortization of long-term expenses to be amortized - -
Loss on disposal of fixed assets, intangible
assets and other long-term assets
(income is listed with“-”)
-8,160,889.46 -2,646,561.90
Scrap loss of fixed assets (income is listed
with“-”) - 1,892,109.37
Loss on changes to fair value (income is listed
with“-”) - -
Financial expense (income is listed with“-”) 35,722,902.67 39,825,114.12
Investment loss (income is listed with“-”) 874,997.07 1,156,612.99
Decrease of deferred income tax assets
(increase is listed with“-”) - 9,849,555.22
Increase of deferred income tax liabilities
(decrease is listed with“-”) - -
Inventory decrease (increase is listed with“-”) 6,969,798.96 -1,383,545.41
Decrease in operating receivables (increase is
listed with“-”) 8,289,077.51 14,092,372.23
Increase in operating payables (decrease is
listed with“-”) 2,241,323.99 -8,385,442.59
Others -17,358,401.06 -138,127,300.95
Net amount of cash flows from operating activities -49,719.51 110,269.22
2. Investing and financing activities that do not
involve cash receipts and payments - -
Conversion of debt into capital - -
Convertible bonds expired due within one year - -
Fixed assets acquired under finance leases - -
3. Net increase /(decrease) in cash and cash
equivalents - -
Cash balance the end of the year 417,444.51 477,660.27
Minus: cash balance at the beginning of the year 477,660.27 504,436.50
Plus: balance of cash equivalents at the end of the - -85
Item 2008 2007
year
Minus: balance of cash equivalents at the beginning
of the year - -
Net amount of increase in cash and cash equivalents -60,215.76 -26,776.23
2. Detailed statement of non-recurring profit and loss items
Detailed item 2008 2007
1. Disposal of profit and loss on non-current assets 8,666,548.80 757,452.53
2. Tax refund and exemption approved by exceeding
authority or without formal document of approval - -
3. Government subsidy recorded into the current gains and
losses - -
4. Capital occupation received from non- financial
enterprises and recorded into the current gains and losses - -
5.
The investment cost of subsidiaries, affiliated enterprise
and combined enterprise obtained by the enterprise is
less than the obtained investment, then gains resulting
from recognizable fair value of net asset of investee units
should be enjoyed - -
6. Profit and loss on exchange of non-monetary assets - -
7. Profit and loss on entrusted investment - -
8. Assets devalue provisions withdrawn for force majeure,
such as natural disaster - -
9. Debt restructuring expense 17,360,832.24 138,127,300.95
10. Enterprise restructuring expense such as expense on
allocation of employee and integrated expense -11,452,225.33 -
11. Profit and loss exceeding fair value, resulting from unfair
transactions - -
12.
Net profit and loss of the current period from the
beginning of the subsidiary to combination date,
resulting from enterprise combination under the common
control - -
13. Profit and loss on predicted liabilities unrelated to main
business of the Company - -
14.
Held transaction financial asset, gains/losses of changes
of fair values from transaction financial liabilities, and
investment gains from disposal of transaction financial
asset, transaction financial liabilities and financial asset
available for sales, exclude the effective hedging
business relevant with normal operations of the
Company - -
15. Reversal of provisions for asset impairment of account
receivable which is made singly impairment test - -
16. Gains/losses obtained from external entrusted loan - -
17.
Losses/gains from the change of fair values of investing
property of subsequent measurement adopted by method
of fair value - -
18.
Influences on current losses/gains for one adjustment of
current losses/gains in accordance with the requirements
of laws and regulations such taxation and accountings. - -
19. Income of trustee fee from entrusted operation - -
20. Net amount of other non-operating income and expense
except the above items 1,191,979.95 -13,868.8786
21. Other losses/gains items conforming the definitions of
non-recurring gains/losses - -
Total 15,767,135.66 138,870,884.61
Minus: corresponding income tax of non-recurring profit
and loss - -
Minus: the part shared by minority shareholders - -
Net profit influenced by non-recurring profit and loss 15,767,135.66 138,870,884.61
Net profit on the statement -44,489,780.00 63,036,241.24
Minus: profit and loss of minority shareholders 403,226.40 -
Net profit attributable to shareholders of parent
company -44,893,006.40 63,036,241.24
Net profit attributable to shareholders of parent
company after deducting non-recurring profit and
loss -60,660,142.06 -75,834,643.37
3. Return on equity and earnings per share
Return on equity
Earnings per share (RMB
Period /share)
Financial index
Fully diluted
Weighted
average
Basic
earnings
per share
Diluted
earnings
per share
Net profit attributable to
common shareholders --- --- -0.0936 -0.0936
Year 2008
Net profit attributable to
common shareholders after
deducting non-recurring
profit and loss
--- ---
-0.1265 -0.1265
Net profit attributable to
common shareholders --- --- 0.1315 0.1315
Year 2007
Net profit attributable to
common shareholders after
deducting non-recurring
profit and loss
--- ---
-0.1582 -0.1582
Item Year 2008 Year 2007
Calculation of basic earnings per share and diluted
earnings per share
1. Numerator
Net profit after tax -44,489,780.00 63,036,241.24
Adjust: preference share dividend and influence of other
instruments
Profit and loss attributable to common shareholders of
parent company, in the calculation of basic earnings per
share -44,893,006.40 63,036,241.24
Adjust:
Dividend and interest related to diluted potential common
share - -
Changes to income or expense, caused by converting
diluted potential common share - -87
Profit and loss attributable to common shareholders of
parent company, in the calculation of diluted earnings per
share -44,893,006.40 63,036,241.24
2. Denominator
Weight average of common shares issued externally during
the current period, in the calculation of basic earnings per
share 479,433,003.00 479,433,003.00
Plus: the weighted average while all diluted potential
common shares are converted into common shares - -
Weight average of common shares issued externally during
the current period, in the calculation of diluted earnings per
share 479,433,003.00 479,433,003.00
3. Earnings per share
Basic earnings per share -0.0936 0.1315
Diluted earnings per share -0.0936 0.1315
The consolidated financial statement for year 2008 of the Company and notes are compiled
according to Accounting Standards for Business Enterprises No.1 to No.37 issued by the state.
Legal Representative of the Company: Shang Shijun Date: April 23, 2009
Person in Charge of Accounting Works: Jiang Houjin Date: April 23, 2009
Person in Charge of Accounting Institution: He Yili Date: April 23, 2009
XI. Documents Available For Reference
1. Accounting statements carrying the personal signatures and seals of legal representative, person
in charge of the accounting affairs and person in charge of the accounting department.
2. Original of Auditors’ Report carrying the seal of the Certified Public Accountants as well as
personal signatures and seals of certified public accountants.
3. Originals of all documents and public notices disclosed publicly on the newspapers as designated
by China Securities Regulatory Commission in the report period.
4. English version of the 2008 Annual Report.
The Board of Directors of
Shenzhen China Bicycle Company (Holdings) Limited
April 25, 2009
