HUBEI SANONDA CO., LTD. SUMMARY of ANNUAL REPORT 2005 (B-Share)

Hubei Sanonda Co., Limited

Stock Code: 000553, 200553 Short Form of the Stock: Sanonda A, Sanonda B No.: 2006-008 HUBEI SANONDA CO., LTD. SUMMARY OF ANNUAL REPORT 2005 (B-share)

§1. Important Notice

1.1 The Board of Directors, the Supervisory Committee, directors, supervisors and senior executives of Hubei Sanonda Co., Ltd. (hereinafter referred to as the Company) individually and collectively accept responsibility for the correctness, accuracy and completeness of the contents of this report and confirm that there are no material omissions or errors which would render any statement misleading. 1.2 All directors attended the Board meeting. 1.3 This report has been prepared in Chinese version and English version respectively. In the event of difference in interpretation between the two versions, the Chinese report shall prevail. 1.4 Hong Kong Ho and Ho & Company audited the financial report of the Company and produced the standard unqualified Auditors’ Report for the Company. 1.5 Chairman of the Board of the Company Mr. Li Zuorong, General Manager Mr. Zheng Xianhai and person in charge of Accounting and Principal in charge of Accounting Organ Mr. He Xuesong hereby confirm that the Financial Report enclosed in the Annual Report is true and complete. §2. Company Profile 2.1 Basic information Short form of the stock Sanonda A, Sanonda B Stock code 000553, 200553 Listed stock exchange Shenzhen Stock Exchange Registered address and Office address Registered address: No. 93, Beijing East Road, Jingzhou, Hubei Office address: No. 93, Beijing East Road, Jingzhou, Hubei Post code Post code of registered address: 434001 Post code of office address: 434001 Internet web site of the Company http://www.sanonda.com.cn E-mail of the Company [email protected]

2.2 Contact person and method Secretary of the Board Securities Affairs Representative Name Li Zhongxi Hu Haosong Hubei Sanonda Co., Limited

Contact address No. 93, Beijing East Road, No. 93, Beijing East Road, Jingzhou, Jingzhou, Hubei Hubei Telephone 86-716-8208632 86-716-8208232 Fax 86-716-8208899 86-716-8208899 E-mail [email protected] [email protected]

§3. Summary of Accounting Data and Financial Indexes 3.1 Major accounting data Unit: RMB’000 Increase/decrease 2005 2004 2003 over last year（％） Income from main operations 1,261,835 1,134,082.00 11.26% 858,705 Total profit 8,474.00 61,738.00 -86.27% 6,017 Net profit 181.00 63,131.00 -99.71% 8,482 Net cash flow arising from 80,383.00 55,648.00 44.45% 34,627 operating activities Increase/decrease At the end of At the end of At the end of over the end of last year 2005 year 2004 year 2003 year（％） Total assets 1,650,082.00 1,541,286.00 7.06% 1,516,367 Shareholder’s equity 857,395.00 856,856.00 0.06% 793,725 (excluding minority interests)

3.2 Major financial indexes Unit: RMB Increase/decrease 2005 2004 2003 over last year（％） Earnings per share 0.001 0.21 -99.52% 0.03 Return on equity 0.02% 7.37% -7.35% 1.07% Net cash flow per share arising 0.27 0.19 42.11% 0.12 from operating activities Increase/decrease At the end At the end At the end from the end of last of year 2005 of year 2004 of year 2003 year（％） Net assets per share 2.89 2.89 0 2.67 Note: Earnings per share was calculated based on new share capital if share capital was changed from the end of the report period to disclosure date of the report.

Items of non-recurring gains and losses Hubei Sanonda Co., Limited

□Applicable √Inapplicable

3.3 Difference of net profit as audited by PRC Accounting Rules and Regulations and IFRS √Applicable □Inapplicable Unit: RMB’000 CAS IAS 5,165 181 Net profit Net profit (deficit) under the PRC Accounting Rules and Regulations 5,165 Adjustments: Income from short equity investment - Provision for bad and doubtful debt of receivables - Explanation on Provision for depreciation for fixed assets not ready for use - difference Provision for impairment loss of fixed assets - Amortization of specific allocate funds 160 Adjustment for unrealized loss on investment (1,287) Others (3,857) Net profit under IFRS 181

§4. Changes in Share Capital and Particulars about Shareholders 4.1 Statement of change in shares Unit: share Before the Before the change After the change change

Number of Proportion Subtotal Number of Proportion shares (%) shares (%)

I. Nontradable shares 84,729,334 28.53% 84,729,334 28.53%

1. Sponsors’ shares

Including: Shares held by the State 84,729,334 28.53% 84,729,334 28.53%

Share held by domestic legal person

Share held by foreign legal person

Others

2. Raised legal person’s shares

3. Inner employees shares

4. Preference shares or others

II. Tradable shares 212,232,276 71.47% 212,232,276 71.47%

1. RMB ordinary shares 97,232,276 32.74% 97,232,276 32.74%

2. Domestically listed foreign shares 115,000,000 38.73% 115,000,000 38.73%

3. Overseas listed foreign shares Hubei Sanonda Co., Limited

4. Others

III. Total shares 296,961,610 100.00% 296,961,610 100.00%

4.2 Statement of shares held by the top ten shareholders and the top ten shareholders of tradable share Unit: share Total number of shareholders at the end of report period 39170 Particulars about shares held by the top ten shareholders Total Number of Share Type of Full name of Shareholder Proportion number of nontradable pledged or shareholders shares held shares held frozen

SANONDA GROUP State-owned 27.52% 81,726,625 81,726,625 42,110,000 CORPORATION shareholder

QICHUN COUNTY

STATE-OWNED ASSETS State-owned 1.01% 3,002,709 3,002,709 0 ADMINISTRATION shareholder BUREAU

Foreign ABN AMRO BANK NV 0.42% 1,250,000 0 0 shareholder

Foreign SHEN YING 0.34% 1,020,800 0 0 shareholder

TAIJI INVESTMENT CO., Foreign 0.33% 1,000,000 0 0 LTD. shareholder

GUANGQI INVESTMENT Foreign 0.33% 1,000,000 0 0 CO., LTD. shareholder

WANG ZHI CHANG Other 0.33% 977,585 0 0

FINANCING CO., LTD. Foreign 0.29% 864,550 0 0 shareholder

TAN DONG SHAN Foreign 0.25% 740,860 0 0 shareholder

HUANG JUN YUE Foreign 0.22% 664,570 0 0 shareholder Particulars about shares held by the top ten tradable shareholders Name of shareholders Numbers of tradable Type of shares shares held ABN AMRO BANK 1,250,000 Domestically listed foreign shares NV SHEN YING 1,020,800 Domestically listed foreign shares Hubei Sanonda Co., Limited

TAIJI INVESTMENT 1,000,000 Domestically listed foreign shares CO., LTD. GUANGQI INVESTMENT CO., 1,000,000 Domestically listed foreign shares LTD. WANG ZHI CHANG 977,585 RMB ordinary share FINANCING CO., 864,550 Domestically listed foreign shares LTD. TAN DONG SHAN 740,860 Domestically listed foreign shares HUANG JUN YUE 664,570 Domestically listed foreign shares XIE XI XIAN 664,500 Domestically listed foreign shares CHEN CHAO MING 649,700 Domestically listed foreign shares Explanation on The Company was unknown whether there is any associated associated relationship relationship among the top ten shareholders of tradable share, or among the above whether there is any action-in-concert among them as described by shareholders or the Administrative Rules on Information Disclosure about Changing acting-in-concert of Shareholding Status.

4.3 Particulars about holding shareholders and actual controller of the Company 4.3.1 Particulars about change in holding shareholders and actual controller of the Company √Applicable □Inapplicable Name of new controlling

shareholder Name of new actual controller ChemChina Agrochemical Corporation

Changing date Changing date of new actual controller: Oct. 20, 2005 Disclosure date and newspaper of the changing of controlling shareholder Disclosure date and newspaper of Sep. 10, 2005 the changing of actual controller China Securities Journal, Securities Times and Ta Kung Pao

4.3.2 Introduction of especial situation for holding shareholder and other actual controller 1. The controlling shareholder Name of the controlling shareholder: Sanonda Group Corporation Legal representative: Li Zuorong Registered capital: RMB 240.66 million Date of foundation: 1994 Hubei Sanonda Co., Limited

Scope of business: manufacturing and sales of chemical products and pharmaceutical products; import and export trade of pesticide, chemical products and chemical mechanical equipments and fittings; manufacturing and sales of chemical mechanical equipments; production and fixing of steel construction; fixing of chemical engineering and lease of housing. 2.Actual controller Name of the actual controller: ChemChina Agrochemical Corporation Registered capital: RMB 300 million ChemChina Agrochemical Corporation is a large-scale stated-owned sole company subordinate to ChemChina Group Corporation, as well as the wholly-owned subsidiary of ChemChina Group Corporation and one of the specialized companies under ChemChina Group Corporation, who is engaged in investment, development, production and operation of pesticides, chemical fertilizers, fine chemical products and minerals products. ChemChina Group Corporation subordinates to SASAC of State Council, which is state-owned large-scale corporation established after approval by the State Council in 2004.

4.3.3 Property right and controlling relationship between the actual controller of the Company and the Company are as follows:

SASAC of State Council

100%

ChemChina Group Corporation

100%

ChemChina Agrochemical Corporation

100%

Sanonda Group Corporation

27.52% Hubei Sanonda Co., Ltd.

Hubei Sanonda Co., Limited

§5. Particulars about Directors, Supervisors and Senior Executives 5.1 Change in shares held by directors, supervisors and senior executives

Drawing Total payment payment drawn from the Holding Holding from the Increase/ Reason Company in shares at shares at shareholding Name Title Sex Age Office term decrease for the report the the companies or of shares change period (after year-begin year-end other related tax parties or not RMB’0000) (Yes / No)

Jun. 30, 2003- Director Dec. 12, 2005

Chairman of the Li Zuorong Male 55 3000 3000 7.6 No Board Dec. 12, 2005 Secretary of Jun. 30, 2006 CPC

Vice Chairman Zheng Jun. 30, 2003- of the Board, Male 54 7.6 No Xianhai Jun. 30, 2006 General Manager

Jun. 30, 2003- Liu Xingping Director Male 43 2000 2000 6.4 No Jun. 30, 2006

Director, Deputy Jun. 30, 2003- He Fuchun Male 41 2000 2000 6.4 No General Manager Jun. 30, 2006

Director, Deputy Jun. 30, 2003- Deng Guobin Male 38 2000 2000 5.8 No General Manager Jun. 30, 2006

Jun. 30, 2003- Director Dec. 22, 2005 Zhang Chairman of the Male 53 2000 2000 6.0 No Jianguo Dec. 26, 2005- Supervisory Jun. 30, 2006 Committee

Chief Jun. 30, 2003- Accountant Dec. 22, 2005 He Xuesong Male 51 - 6.4 No Dec. 22, 2005- Director, CFO Jun. 30, 2006

Director, Dec. 22, 2005- Liu Anping Assistant to Male 38 - 3.0 No Jun. 30, 2006 General Manager Hubei Sanonda Co., Limited

Secretary of the Jun. 30, 2003- Li Zhongxi Male 35 - 3.6 No Board Jun. 30, 2006

Independent Jun. 30, 2003- Tan Liwen Male 58 - 3.0 No Director Jun. 30, 2006

Independent Jun. 30, 2003- Liao Hong Male 62 - 3.0 No Director Jun. 30, 2006

Yu Independent Jun. 30, 2003- Male 47 - 3.0 No Jingzhong Director Jun. 30, 2006

Chairman of the Wan Jun. 30, 2003- Supervisory Male 57 7,098 7,098 - 5.6 No Zheming Jun. 30, 2006 Committee

Chen Jun. 30, 2003- Supervisor Male 58 9,230 9,230 - 5.6 No Changshun Jun. 30, 2006

Sang Jun. 30, 2003- Supervisor Male 55 - 2 No Maorong Jun. 30, 2006

Jun. 30, 2003- Liu Jun Supervisor Female 45 - 2 No Jun. 30, 2006

Jun. 30, 2003- Xu Baojian Supervisor Male 50 - 2 No Jun. 30, 2006

§6. Report of the Board of Directors

6.1 Discussion and analysis on the whole operation in the report period Operation situation of the company within the report period The company's sales revenue within the report period was RMB 1,261,835,000 Yuan, which was a 11.26% increase over that of the same period of the previous year; the gross profit was RMB 213,800,000 Yuan, which was a 12.39% increase and the net profit was RMB 181,000 Yuan, which was a 99.71% decrease. The main reasons for the company's profit decrease were: 1) Influenced by the international crude oil price, the company's main raw materials and energy consumption and freight increased and thus the cost was raised. 2) Influenced by the state policy on the prohibition of highly toxic pesticides, the market of part of the company's highly toxic pesticides shrank and the prices were lowered down. 3) Although the company had enhanced the product structure adjustment, some of the substitutional products were not mass produced and the economic benefit was not obvious. 4) Some holding subsidiaries had suffered from huge loss and the collected depreciation reserve increased. Hubei Sanonda Co., Limited

Within the report period, facing such difficulties, the company enhanced its management, strengthened its purchasing by invitation to bid and based on materials comparative price, increased its technological innovation and project investment, improved its products' technological level and enlarged the production scale, increased product exportation by taking advantage of the technical superiority of some of the products and the company's self-import and export right. Within the report period, the company had produced chemical pesticides of 36,300 tons and sodium hydroxide of 82,400 tons, which are 14% and 7% increases over those of the same periods of the previous year. The foreign currency through exportation was 55 million US dollars, a 51% increase over that of the same period of the previous year.

6.2 Statement of main operations classified according to industries or products Unit: RMB’000 2005 2004 RMB’000Yuan RMB’000 Yuan

Sales of pesticides and chemical products 1,261,112 1,106,337 Real Estate sales 723 28,465

1,261,835 1,134,802

6.3 Particulars about main operations classified according to areas □Applicable √Inapplicable

6.4 Application of the raised proceeds □Applicable √Inapplicable

Particulars about the changed projects □Applicable √Inapplicable

6.5 Application of the non-raised proceeds through shares offering √Applicable □Inapplicable Unit: RMB’0000 Amount of Progress of Name of projects Earnings of projects projects projects Reaching prospective Glyphosate project 3,066.00 100% earnings Reaching prospective Acephate project 701.00 100% earnings Triple effect evaporation Reaching prospective 1,518.00 100% project earnings Electrolytic rectification Reaching prospective 972.00 100% system transformation earnings Nitrogen trifluoride project 432.00 100% Reaching prospective Hubei Sanonda Co., Limited

extension earnings Total 6,689.00 - -

6.6 Explanation of the Board of Directors on the “Qualified Opinion” made by the Certified Public Accountants □Applicable √Inapplicable

6.7 The preplan on the profit distribution and capitalization of capital public reserve of the Board of Directors √Applicable □Inapplicable Audited according to the domestic accounting standard, the company’s net profit in 2005 was RMB 5,165,234.82 Yuan and the profit which could be distributed by the shareholders after making up the loss was RMB -37,422,529.36 Yuan. According to international accounting standard, the net profit was RMB 181,000.00 Yuan and the profit which could be distributed by the shareholders after making up the loss was RMB -68,381,000.00 Yuan. According to the Lower of Cost or Market (LCM) principle, the profit which could be distributed by the shareholders after making up the loss was RMB -67, 876,000.00. According to the relevant stipulations of the Company Law and Articles of Association, the board of directors of the company decided not to distribute profit and not to convert and increase capital reserve in 2005. The preplan had to be submitted to the 2005 shareholder’s meeting for deliberation and approval.

The Company did not appropriate share distribution preplan though the Company achieved the profit in the report period √Applicable □Inapplicable

The reasons why the Company did not appropriate Usage and plan of undistributed share distribution preplan though the Company profit achieved the profit in the report period According to the Lower of Cost or Market (LCM) principle Making up the loss over the past years and audited as per the international accounting standard, within the report period, the profit which could be distributed by the shareholders after making up the loss in this year was RMB -67, 876,000.00 Yuan and the undistributed profit was a negative number. Therefore, the company had not proposed the cash profit distribution preplan. Hubei Sanonda Co., Limited

§7. Significant Events

7.1 Purchase of assets □Applicable √Inapplicable

7.2 Sales of assets □Applicable √Inapplicable

7.3 Significant guarantees √Applicable □Inapplicable Unit: RMB’0000 External guarantees of the Company (excluding guarantees for shareholding subsidiaries) Date of Name of For related occurrence Guarantee Guarantee Guarantee Accomplished companies parties or not (agreement amount type term or not guaranteed (yes or no) signing day) Total guarantee amount occurred in the report period 0.00 Total guarantee balance at the end of the report period 0.00 Guarantees for shareholding subsidiaries by the Company Total guarantee amount occurred in the report period for 20,407.00 shareholding subsidiaries Total guarantee balance at the end of the report period for 20,407.00 shareholding subsidiaries Total guarantee amount of the Company (including guarantees for shareholding subsidiaries) Total guarantee amount 20,407.00 Proportion of the Company’s net assets taken by the total 23.22% guarantee amount Including: Guarantee amount for shareholders, the actual controller or its 0.00 related parties Guarantee amount for the debts of the guaranteed companies 1,535.00 with an asset-liability ratio of over 70%, directly or indirectly The amount by which the total guarantee amount exceeded 0.00 50% of the net assets Total amount of the above three guarantees 1,535.00

7.4 Significant related transactions Hubei Sanonda Co., Limited

7.4.1 Related transaction concerning routine operation √Applicable □Inapplicable 2005 2004 RMB’000 RMB’000 Purchase of raw materials from Sanonda Group and its 8,291 8,913 same-graded affiliated companies Purchase of materials from minority shareholders - 3,339 Purchase of raw materials from affiliated companies and associated 10,725 7,095 companies not consolidated Sale of goods to Sanonda Group and its same-graded affiliated - 506 companies Housing lease to affiliated companies and associated companies not 1,000 360 consolidated Sale of goods to minority shareholders - 27

Including: In the report period, the amount occurred in related transaction that listed companies sold products or provided labor service to the controlling shareholder or its subsidiaries was RMB 8,291,000.

7.4.2 Related credits and liabilities current √Applicable □Inapplicable

2005 2004 RMB’000 RMB’000 Receivables and prepayments Sanonda Group and its same-graded affiliated companies 45,920 19,243 Affiliated companies and associated companies not consolidated 51,819 250 Minority shareholders - 1,248 Total 97,739 20,741 Including: In the report period, the amount of capital of the Listed Company provided for the controlling shareholder and its subsidiaries was RMB 33,579,800, and the balance was RMB 55,887,000.

Capital occupation and plan for clearing: √Applicable □Inapplicable Ended Apr. 20, 2006, the controlling shareholder and related parties had paid off the non-operating occupation capital. Clearing plan can surely solve the capital occupation problem before the end of 2006 or not: □Yes □No √Inapplicable

7.5 Financing entrustment □Applicable √Inapplicable Hubei Sanonda Co., Limited

7.6 Implementation of commitments 7.6.1 Commitments on the Share Merger Reform 1. Contents of the commitments In accordance with the requirements of CSRC and SSE, the Company would complete share merger reform before June 30, 2006.

2. Implementation of the commitments

3. Cases against the commitments □Applicable √Inapplicable

7.6.2 Other commitments □Applicable √Inapplicable

7.7 Significant lawsuits and arbitrations □Applicable √Inapplicable

§8.Report of the Supervisory Committee √Applicable □Inapplicable I. Meetings of the Supervisory Committee in 2005 The Company held the 6th meeting of the 4th Supervisory Committee at the Water meeting room of the Company on Apr. 13, 2005. The said meeting passed the following resolutions: (1) Work Report 2004 of the Supervisory Committee; (2) Financial Settlement Report 2004; (3) Profit Distribution Preplan 2004; (4) Annual Report 2004 and its Summary; (5) Proposal on Engaging Certified Public Accountants for the year 2005 for the Company; (6) Proposal on Amending the Articles of Association of the Company; (7) Notification on Holding the Annual Shareholders’ General Meeting 2004. The Company held the 7th meeting of the 4th Supervisory Committee at the Water meeting room of the Company on Aug. 8, 2005. The said meeting examined and passed Semi-annual Report 2005. II. Independent work report 1. Operating according to laws. The members in the Supervisory Committee of the Company attended all the meetings of the Board as nonvoting delegates and supervised on the Company’s decision-making and operation. The Supervisory Committee considered the procedures of the Company’s decision-making were legal and internal control system was improved. In the daily work, the Company’s directors, general manager and senior executives did not disobey laws and regulations Hubei Sanonda Co., Limited

and the Articles of Association of the Company, damage the interests of the Company or harm the interests of the shareholders and employees by abusing the authorities. 2. Inspecting the Company’s finance. In the report period, the Supervisory Committee inspected the Company’s business and finance and considered that the unqualified auditor’s report for 2005 presented by TIN WHA CPAs and Hong Kong Ho And Ho & Company for the Company reflected the Company’s financial position and operating results in an objective and true way. 3. Use of the latest raised proceeds. Ended the end of year 2002, the Company’s raised proceeds from B-shares offering had been used up. The change of projects invested with the proceeds raised from B-shares offering was considered and passed by Temporary Shareholders’ General Meeting on Jan. 8, 1999 with legal procedures. The input projects were the same as the changed projects. 4. Independent opinion of the Supervisory Committee on purchase and sales of assets: In the report period, the Company existed no significant purchase and sales of assets. 5. Related transactions. The related transactions were fair and just, not harming the interests of the Company.

§9. Financial Report

9.1 Auditor’s opinions Auditor’s opinions: Standard unqualified auditor’s opinions

9.2 Financial statement Consolidated income statement for the year ended 31st December 2005

Notes 2005 2004 RMB’000 RMB’000

Turnover 5 1,261,83 1,134,08 5 2 Cost of sales (1,048,035) (943,850)

Gross profit 213,800 190,232 Other operating income 10,934 16,111 Distribution expenses (76,614) (61,894) Administrative expenses (91,286) (87,046) Other operating expenses (5,022) (20,379) Finance costs, net 7 (29,372) (20,908) Investment income (13,966) 45,622

Profit before taxation 6 8,474 61,738 Hubei Sanonda Co., Limited

Income tax expenses 8 (7,335) (2,966)

Profit for the year 1,139 58,772

Attributable to: Equity holders of the parent 181 63,131 Minority interests 958 (4,359)

1,139 58,772

Earnings per share – Basic 10 RMB0.01 RMB0.21

Hubei Sanonda Co., Limited

Consolidated balance sheet as at 31st December 2005

Notes 2005 2004 RMB’000 RMB’000 Assets Non-current assets Property, plant and equipment 12 478,148 452,078 Land use rights 13 157,954 161,489 Construction in progress 14 15,735 28,353 Investments in associates 15 5,115 5,048 Available-for-sale investments 16 30,247 32,337 Intangible assets 17 4,245 4,571 Goodwill 18 1,975 1,975 Negative goodwill 19 - (358) Other assets 289 381

Total non-current assets 693,708 685,874

Current assets Inventories 20 336,199 255,618 Properties under development for sales 21 - 586 Investments held for trading 22 642 19,543 Trade and other receivables 343,235 276,247 Income tax recoverable 2,699 8,348 Prepaid expenses and other current assets 31,382 47,445 Cash and cash equivalents 23 242,217 247,625

Total current assets 956,374 855, 412

Total assets 1,650,082 1,541,286

Hubei Sanonda Co., Limited

Consolidated balance sheet as at 31st December 2005

Notes 2005 2004 RMB’000 RMB’000 Equity and liabilities Capital and reserves Share capital 24 296,962 296,962 Capital reserve 25 565,633 565,633 Surplus reserves 26 62,676 62,676 Accumulated losses (67,876) (68,415)

Equity attributable to equity holders of the parent 857,395 856,856

Minority interests 22,784 28,859

Non-current liabilities Deferred revenue 27 15,922 8,662 Long-term bank borrowings 28 90,000 90,000

Total non-current liabilities 105,922 98,662

Current liabilities Trade and other payables 344,043 249,846 Short-term bank borrowings 309,350 276,995 Current portion of long- term bank borrowings 28 10,588 30,068

Total current liabilities 663,981 556,909 Total liabilities 769,903 655,571

Total equity and liabilities 1,650,082 1,541,286

The financial statements on pages 2 to 38 were approved and authorised for issue by the Board of Directors on 21st April 2006 and are signed on its behalf by:

Hubei Sanonda Co., Limited

Consolidated statement of changes in equity for the year ended 31st December 2005

Attributable to equity holders of the parent Share Capital Surplus Accumulated Total Minority capital reserve reserves losses equity interests Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (note 24) (note 25) (note 26) At 1st January 2004 296,962 565,633 62,676 (131,546) 793,725 32,136 825,861 Effect of change in consolidation - - - - - 1,082 1,082 Profit / (loss) for the year - - - 63,131 63,131 (4,359) 58,772 At 31st December 2004 and 1st January 2005 296,962 565,633 62,676 (68,415) 856,856 28,859 885,715 Effect of change in consolidation - - - - - (7,033) (7,033) Effect of change in accounting policy (note 2) - - - 358 358 - 358 Profit for the year - - - 181 181 958 1,139

At 31st December 2005 296,962 565,633 62,676 (67,876) 857,395 22,784 880,179

Hubei Sanonda Co., Limited

Consolidated cash flow statement for the year ended 31st December 2005

2005 2004 RMB’000 RMB’000

Operating activities

Profit before taxation 8,474 61,738 Adjustments for: Depreciation of property, plant and equipment 54,938 62,629 Amortisation of land use rights 3,535 3,708 Amortisation of intangible assets 326 941 Amortisation of other assets 17,577 7,525 Negative goodwill released to income - (50) Deferred revenue released to income (160) (160) Gain on disposal of property, plant and equipment (381) (84,534) Interest expenses 30,228 25,235 Interest income (3,079) (4,614)

Operating cash flows before movements in working capital 111,458 72,418 Increase in inventories and properties under development for sales (79,995) (1,449) (Increase)/decrease in trade and other receivables (66,988) 2,664 Decrease in prepaid expenses and other current assets 21,711 - Increase/(decrease) in trade and other payables 94,197 (18,387)

Cash generated from operations 80,383 55,246 Income tax paid - 402

Net cash from operating activities 80,383 55,648

19 Hubei Sanonda Co., Limited

Consolidated cash flow statement for the year ended 31st December 2005

2005 2004 RMB’000 RMB’000

Net cash from operating activities 80,383 55,648

Investing activities

Government grants received 7,420 400 Net cash proceeds from disposal of property, plant and equipment 256 90 Net cash proceeds from disposal of investments 43,994 48,136 Purchase of property, plant and equipment (97,697) (97,137) Dividends received 456 66 Purchase of other long-term investments (34,798) (1,177)

Net cash used in investing activities (80,369) (49,622)

Financing activities

Interest paid (32,376) (29,485) Interest received 3,079 4,614 New bank borrowings raised 348,000 352,245 Repayments of bank borrowings (324,125) (306,385) Net cash (used in) / from financing activities (5,422) 20,989 Net (decrease) / increase in cash and cash equivalents (5,408) 27,015 Cash and cash equivalents at beginning of the year 247,625 220,610 Cash and cash equivalents at end of the year 242,217 247,625

20 Hubei Sanonda Co., Limited

9.3 Explanation on changes of accounting policy, accounting estimation and settlement compared with the latest annual report □Applicable √Inapplicable

9.4 Contents, correct amount, reason and its influence of significant accounting errors □Applicable √Inapplicable

9.5 Explanation on change of consolidated scope compared with the latest annual report □Applicable √Inapplicable

Chairman of the Board: Li Zuorong Hubei Sanonda Co., Ltd. Apr. 21, 2006