方大集团股份有限公司 CHINA FANGDA GROUP CO., LTD. Annual Report 2011
Table of Contents
I. Company Profile ...... 2
II. Financial Highlight ...... 3
III. Particulars About the Capital Share and Shareholders ...... 6
IV. Particulars about the Directors, Supervisors, Senior Management and Employees ...... 11
V. Administrative Structure ...... 16
VI. Particulars about the Shareholders’ Meeting ...... 21
VII. Report of the Board of Directors ...... 22
VIII. Report of the Supervisory Committee ...... 34
IX. Significant Events ...... 35
X. Financial Report ...... 42
XI. Documents For Reference ...... 43
Important Prompt The Board of Directors and the directors of the Company guarantee that there are no significant omissions, fictitious or misleading statements carried in the Report and we will accept individual and joint responsibilities for the truthfulness, accuracy and completeness of the Report. This report was examined and approved at the 9th meeting of the 6th term of Board. All of the directors other than director Xiong Jianwei presented the meeting. Mr. Xiong empowered director Wang Shengguo to vote on his behalf. This report is prepared both in English and Chinese. When there is any conflict in interpreting, the Chinese version shall prevail. Mr. Xiong Jianming, the Chairman, and Mr. Lin Kebing, the Financial Officer, and Mr. Chen Yonggang, the accounting manager, hereby declares that: The financial statements carried in this annual report are of authentic and complete. I. Company Profile
1. Legal Name of the Company in Chinese and English In Chinese: 方大集团股份有限公司 （abbreviation：方大集团） In English: CHINA FANGDA GROUP CO., LTD.（abbreviation：CFGC ）
2. Legal Representative: Mr. Xiong Jianming
3. Secretary of the Board: Mr. Zhou Zhigang Securities affair liaison: Ms. Guo Linchen Address: Fangda Town, Xili Longjing, Nanshan District, Shenzhen, PRC Post code: 518055 Tel: 86(755) 26788571 ext. 6622 Fax: 86(755) 26788353 Email: [email protected]
4. Registered Address of the Company: Fangda Building, Kejinan 12th Avenue, High-tech Zone, Shenzhen, PR China. Post code: 518057 Head office: Technology Building, Fangda Town, Xili Longjing, Nanshan District, Shenzhen, PRC Post code: 518055 Website: http://www.fangda.com Email: [email protected]
5. Official Medias of Information Disclosure China Securities Journal, Security Times, Shanghai Securities Daily, Hong Kong Commercial Daily Place where Annual Reports are available: Secretary Office of the Board of Directors. Website assigned by China Securities Regulatory Commission for the disclosing of Annual Report: http://www.cninfo.com.cn
6. Abbreviations and Codes of the Stock and the Stock Exchange Where Listed A Stock: Fangda Group000055 Shenzhen Stock Exchange B Stock: Fangda B200055Shenzhen Stock Exchange
7. Miscellaneous Information of the Company Initial registration date and place: December 13th, 1995, Shenzhen Bureau of Industry & Commerce Administration Business license number: 440301501124785 Tax registration number: No.440305192448589 Organization code: 19244858-9 Public accountants employed by the Company: Ascenda Certified Public Accountants Office address: A-12/F, Global Trade Center, 36 Beishanhuan Rd. East, Dongcheng District, Beijing
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II. Financial Highlight
1. Major Accounting Data of Year 2011 (in RMB Yuan)
Items Amount Operation profit 70,899,738.39 Total profit 79,160,090.12 Net profit attributable to the shareholders of the listed company 65,503,925.58 Net profit attributable to the owners of the PLC after deducting of non-recurring 51,005,479.89 gains/losses Cash flow generated by business operation, net -57,045,495.85 Note: The total of non-recurring incomes was of RMB14,498,445.69. The details are as followings:
In RMB Non-recurring gain and loss items Amount Gain/loss of non-current assets -690,807.78 Government subsidies accounted into current gain/loss account, other than those closely related to the Company’s common business, comply with the national policy and continues to enjoy at 1,988,650.00 certain fixed rate or amount. Gain/loss from debt reorganization 3,959.20 Gain/loss from change of fair value of transactional asset and liabilities, and investment gains from disposal of transactional financial assets and liabilities and sellable financial assets, other 99,342.47 than valid period value instruments related to the Company’s common businesses Gain/loss from change of fair value of investment property measured at fair value in follow-up 10,815,131.20 measurement Gain/loss from commissioned loans 0.00 Other non-business income and expenditures other than the above 6,080,071.96
Other gain/loss items satisfying the definition of non-recurring gain/loss account 878,478.35
Influenced amount of minority shareholders’ equity -60,101.30
Influenced amount of income tax -4,616,278.41
Total 14,498,445.69
3 2. Influences of adjustment on net profit and net asset
according to IAS
In RMB Net profit attributable to the shareholders of Owners’ equity to shareholders of the listed the listed company company Current term Amount of last term End of term Beginning of term On IAS 65,503,925.58 55,063,374.25 1,078,606,842.89 1,014,754,137.31 On domestic accounting 65,503,925.58 55,063,374.25 1,073,843,444.65 1,009,990,739.07 standard Individual and total of adjustment according to IAS Capitalizing of borrowing 0.00 0.00 4,763,398.24 4,763,398.24 expenses Total of differences between the IAS and 0.00 0.00 4,763,398.24 4,763,398.24 domestic accounting standard Statement on differences The different of owners’ equity attributable to the listed company on IAS was mainly the part between the IAS and of interest capitalized in years previous to application of the new accounting standard on Chinese Accounting January 1, 2007. Standard
3. Major financial data and accounting indices for latest 3 years
In RMB Increase/decrease 2011 2010 2009 (%) Turnover (yuan) 1,348,776,366.53 1,161,933,356.48 16.08% 912,979,118.31 Business profit (RMB) 70,899,738.39 49,637,958.64 42.83% 43,189,525.60 Gross profit (RMB) 79,160,090.12 67,655,340.40 17.00% 45,108,302.29 Net profit attributable to shareholders of the listed 65,503,925.58 55,063,374.25 18.96% 44,052,511.46 company (yuan) Net profit attributable to the shareholders of the listed company and after deducting 51,005,479.89 25,603,881.05 99.21% 21,304,916.08 of non-recurring gain/loss(RMB) Net Cash flow generated by -57,045,495.85 -31,187,262.97 46,698,915.92 business operation (RMB) Increase/decrease End of 2011 End of 2010 End of 2009 (%) Total asset (RMB) 2,163,325,598.14 1,991,161,158.84 8.65% 1,482,814,012.11 Total liability (RMB) 1,011,268,487.56 896,832,951.52 12.76% 768,403,722.42 Owners’ equity attributable to the shareholders of the listed 1,073,843,444.65 1,009,990,739.07 6.32% 623,295,593.57 company (yuan)
4 Total capital share (shares) 756,909,905.00 504,606,604.00 50.00% 426,786,359.00
4. According to the requirement of Regulations of Information Disclosure No.9 (Revised 2010) issued by China Securities Regulatory Commission, the Company net income on asset ratio and basic income
per share and diluted income per share on weighted average basis in year 2011 were:
Earnings per share (yuan/share) Weighted average net income/asset ratio (%) Basic earnings per Items share Diluted earnings per share Net profit attributable to common shareholders of 6.28% 0.09 0.09 the Company Net profit attributable to the common owners of the PLC after deducting 4.89% 0.07 0.07 of non-recurring gains/losses
5. Change of shareholders’ equity in 2011 (RMB Yuan)
Total of equity Surplus attributable to the Items Share capital Capital reserves Retained profit reserves owners of the parent co. Beginning 504,606,604 334,434,014.92 17,834,977.97 153,115,142.18 1,009,990,739.07 of term Increased 252,303,301 6,841,099.19 58,662,826.39 317,807,226.58 this term Decreased - 253,954,521.00 - 253,954,521.00 this term End of 756,909,905 80,479,493.92 24,676,077.16 211,777,968.57 1,073,843,444.65 term 1. Profit of the year 1. Transferred 2. Transferred from reserves providing of Cause of Transferred Profit of the from reserves 2. Drop of fair surplus change from reserves year 3. Drop of fair value of financial reserves value of financial asset for sale asset for sale
5 III. Particulars About the Capital Share
and Shareholders
1. Statement of Changes in Shares
In shares Before the change Changed (+,-) After the change Issuing Transferred Bonus Amount Proportion of new from Others Sub-total Amount Proportion shares shares reserves I. Shares with trade restriction 48,014,828 9.52% 24,007,414 -71,917,800 -47,910,386 104,442 0.01% conditions 1. State-owned shares 2. State-owned legal person shares 3. Other domestic 47,945,200 9.50% 23,972,600 -71,917,800 -47,945,200 shares Incl. Non-government 18,200,000 3.61% 9,100,000 -27,300,000 -18,200,000 domestic legal person shares Domestic natural 29,745,200 5.89% 14,872,600 -44,617,800 -29,745,200 person shares 4. Share held by foreign investors Incl. Shares held by foreign legal persons Foreign natural person shares 5. Management 69,628 0.01% 34,814 34,814 104,442 0.01% shares II. Shares without trading limited 456,591,776 90.48% 228,295,887 71,917,800 300,213,687 756,805,463 99.99% conditions 1. Common shares 232,624,317 46.10% 116,312,158 71,917,800 188,229,958 420,854,275 55.60% in RMB 2. Foreign shares in 223,967,459 44.38% 111,983,729 111,983,729 335,951,188 44.39% domestic market 3. Foreign shares in overseas market 4. Others III. Total of capital 504,606,604 100.00% 252,303,301 0 252,303,301 756,909,905 100.00% shares
6 Change of conditional shares in shares Conditional shares Name of the Increased this Conditional shares Reason of at beginning of Released this year Date of releasing shareholder year at end of year condition year Management Xiong Jianming 51,485 0 25,743 77,228 shares with restriction to sale Management Wang Shengguo 18,143 0 9,071 27,214 shares with restriction to sale Tieling Xinxin Issuing of new Copper Industry 11,200,000 16,800,000 5,600,000 0 Jul 15 2011 shares Co., Ltd. Issuing of new Chen Binblin 10,000,000 15,000,000 5,000,000 0 Jul 15 2011 shares Issuing of new Shi Baozhong 7,000,000 10,500,000 3,500,000 0 Jul 15 2011 shares Issuing of new Zhang Xu 7,000,000 10,500,000 3,500,000 0 Jul 15 2011 shares Zhongrong Issuing of new International Trust 7,000,000 10,500,000 3,500,000 0 Jul 15 2011 shares Co., Ltd. Issuing of new Shen Cangqiong 5,745,200 8,617,800 2,872,600 0 Jul 15 2011 shares Total 48,014,828 71,917,800 24,007,414 104,442 － －
2. Share placing and listing
(1) In 2010, the Company issued privately 47.9452 million A shares to six particular investors at price of RMB7.30 each. Totally RMB349.99996 million was raised. The shares were listed on July 15, 2010. The Company hadn’t issued shares in prior three years. (2) In the report term, common reserve capitalizing plan for year 2010 was implemented: basing on the total of 504,606,604 capital shares, 5 bonus share was given to each 10 shares of the entire shareholders, namely the capital shares have been increased by 252,303,301 shares. Among them, 140,319,572 were allotted to A shareholders at 5 to 10 basis; 111,983,729 shares were allotted to B shareholders at 5 to 10 basis as well. The capital shares of the Company was increased up to 756,909,905 shares after completion of this capitalization. (3) No employees’ shares issued in the Company 3. Shareholders and shareholding position
7 Top 10 shareholders (as of December 31, 2011)
In shares 79,593 （including 56,649 of 77,060 （including 54,290 of Total of shareholders at end of Total of shareholders at end of the A-share holders, and 22,944 of A-share holders, and 22,770 2011 month prior to issuing of this annual report B-share holders） of B-share holders） Top 10 Shareholders Properties of Share proportion Name of the shareholder Total shares Conditional shares Pledged or frozen shareholder (%) Shenzhen Banglin Domestic Technologies Development non-state-owned 9.09% 68,774,273 0 0 Co., Ltd. legal person Domestic Shenzhen Shilihe Investment non-state-owned 2.36% 17,860,992 0 0 Co., Ltd. legal person Domestic natural Wang Shaolin 2.22% 16,800,000 0 16,800,000 person Overseas legal Shengjiu Investment Ltd. 1.64% 12,447,120 0 0 person Domestic natural Chen Binblin 0.74% 5,598,300 0 0 person Domestic natural Cao Yifan 0.44% 3,320,865 0 0 person Domestic natural Shi Baozhong 0.36% 2,748,816 0 0 person Domestic natural Chen Lihong 0.30% 2,305,365 0 0 person Domestic natural Zhen Fan 0.26% 1,980,000 0 0 person Domestic Shenyang Shenfa Investment non-state-owned 0.24% 1,800,000 0 0 Co., Ltd. legal person Top 10 holders of unconditional shares Amount of shares without trade limited Name of the shareholder Category of shares conditions Shenzhen Banglin Technologies Development 68,774,273 RMB common shares Co., Ltd. Shenzhen Shilihe Investment Co., Ltd. 17,860,992 RMB common shares Wang Shaolin 16,800,000 RMB common shares Foreign shares placed in domestic Shengjiu Investment Ltd. 12,447,120 exchange Chen Binblin 5,598,300 RMB common shares Foreign shares placed in domestic Cao Yifan 3,320,865 exchange Shi Baozhong 2,748,816 RMB common shares Foreign shares placed in domestic Chen Lihong 2,305,365 exchange Foreign shares placed in domestic Zhen Fan 1,980,000 exchange Shenyang Shenfa Investment Co., Ltd. 1,800,000 RMB common shares Among the top 10 shareholders, Shenzhen Banglin Technology Development Co., Ltd. and Shengjiu Notes to relationship or Investment Co., Ltd. are parties action-in-concert. Shenzhen Banglin Technology Development Co., “action in concert” among Ltd. and Shenzhen Shilihe Investment Co., Ltd. are related parties. No other action-in-concert or the top ten shareholders. related parties among the other holders of current shares.
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4. Profile of the controlling shareholder:
Name of the Share Legal Date Registered Business scope shareholder proportion % representative incorporated capital Industrial investment, Shenzhen Banglin 3,000 developing of electronic Technologies 222 9.09% Chen Jinwu RMB 10 products, technical consulting, Development Co., June 7th thousand domestic commerce, material Ltd. trading
9 5. The investors of Shenzhen Banglin Technologies Development Co., Ltd.- the controlling shareholder of the Company are natural persons, in which Mr. Xiong Jianming, the Chairman of the Company is holding 85% of the shares, thus he’s the substantial controller of the Company. Mr. Xiong Jianming is a resident of Peoples’ Republic of China. He has been the Chairman and President of the Company for the past five years.
6. Neither the controlling shareholder nor the substantial controller of the Company has changed in the report term.
7. Chart of the controlling relationship between the practical controller and the Company
Xiong Jianming
85% 100%
Shenzhen Banglin Shengjiu Investment Ltd. Technologies Development Co., Ltd.9.09% 0.014% 1.64%
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China Fangda Group Co., Ltd. 8. Other legal person shareholders who are holding over 10% of the shares
In the report term, no legal person shareholders who are holding over 10% of the shares.
9. In the report term, except for those held by the directors, supervisors, and executives which are frozen according to the law, none of the shares of the
Company was under restriction of sale.
IV. Particulars about the Directors,
Supervisors, Senior Management and
Employees
1. Particulars about the Directors, Supervisors, and
Senior Management
(1) Profiles
11 Pays received from the Shares Shares Company held at held at Shares Cause of in the Name Position Sex Age Job term the the end increased change report beginning of term term of term (RMB0’ 000) before tax Capital Xiong Chairman, M 54 2011.3.25-2014.3.25 68,647 102,971 34,324 reserves 108.47 Jianming president capitalized Director, Capital Wang Vice M 54 2011.3.25-2014.3.25 24,191 36,286 12,095 reserves 56.66 Shengguo president capitalized Xiong Director M 43 2011.3.25-2014.3.25 56.89 Jianwei Director, Zhou Secretary of M 49 2011.3.25-2014.3.25 39.15 Zhigang the Board Guo Independent M 50 2011.3.25-2014.3.25 8.00 Jinlong Director Shao Independent F 73 2011.3.25-2014.3.25 8.00 Hanqing Director Huang Independent M 49 2011.3.25-2014.3.25 6.00 Yaying Director Host of the Zhen Hua Supervisory F 52 2011.3.25-2014.3.25 36.19 Committee
Yu Guoan Supervisor M 52 2011.3.25-2014.3.25 17.36
Cao Naisi Supervisor F 33 2011.3.25-2014.3.25 34.45
Yang Vice M 58 2011.3.25-2014.3.25 36.14 Xiaozhuan President Vice Lin Kebin president M 34 2011.3.25-2014.3.25 41.21 and CFO Wei Vice M 43 2011.7.29-2014.3.25 58.05 Yuexing President Former Dong independent M 69 2008.6.6-2011.6.6 2.00 Likun director Song Former M 50 2008.6.6-2011.6.6 0.75 Wenqing supervisor Total --- 92,838 139,257 46,419 509.32 Note: The Company hasn’t conducted any share option incentive program. None of the directors, supervisors and executives is holding share options or conditional shares. None of them is getting paid from the shareholding parties or other related parties. (2) Status of directors and supervisors taking positions in shareholding parties
Get remuneration Name Name of the shareholder Job taken Job term or not
Xiong Shengjiu Investment Ltd. Chairman Since Oct. 6 No
12 Jianming 2011
Since Oct. 19 Chairman No Wang Shenzhen Shilihe 2006 Shengguo Investment Co., Ltd. General Since Sept. No Manager 29 2003 Xiong Shenzhen Shilihe Since Jun 12 Director No Jianwei Investment Co., Ltd. 2001 Zhou Shenzhen Shilihe Since Oct. 19 Director No Zhigang Investment Co., Ltd. 2006 Shenzhen Shilihe Since Oct. 19 Zhen Hua Supervisor No Investment Co., Ltd. 2006
(3) Working experiences of current directors, supervisors and executives in recent five years Mr. Xiong Jianming: PHD Management; senior engineer; part-time professor of Beijing Institute of Civil Engineering and Architecture and Nanchang University. He was once employed by Jiangxi Provincial Machinery Design Academe, Administration Bureau of Shekou District of Shenzhen government, etc. He’s now assuming Chairman of the Board and President of our company, Deputy to the 10th People’s Congress of Guangdong Province, Deputy to the 3rd People’s Congress of Shenzhen City, member of Commission of Legislative Affairs, Deputy Director of China Construction Metal Structure Association, Deputy Director of Shenzhen League of Industry and Economy, Chief Director of Shenzhen Semiconductor Lighting Industry Commission, and Honorary Chairman of Shenzhen Nanshan Charity Society. Mr. Wang Shengguo: Master degree; Visiting Scholar from University of Essen; senior engineer. He once held such positions as Chief Engineer of Design Institute of the 2nd Heavy Machinery factory of Machinery Industrial Ministry. Mr. Wang is now assuming Director and Vice President of our company. Mr. Xiong Jianwei: MBA. He is now assuming director of our company. Mr. Zhou Zhigang, bachelor’s degree. Currently director, secretary of Board, and head of Securities Dept. Ms. Shao Hanqing, professor, doctorial course instructor. Once she was the Vice Director General of Shenzhen Bureau of Planning, assistant to the Mayor, Vice Chief Secretary of the City Government, standing commissioner of city council, PR director, and vice chief secretary of Shenzhen Political Consultative Conference. At present she’s the vice chief of China Production Association, chief of Shenzhen Production Association, commissioner of enterprise research centre of National Economics and Trade Committee, part-time professor of China People’s University, and independent director of Shenzhen Zhonghang Health Club Co., Ltd., Xingli (HK) Co., Ltd. and the Company. Mr. Guo Jinlong, member of China Democratic League, master of economics, certified accountant, certified tax consultant, deputy professor. He once was project manager and department leader of Pan-China Shenzhen CPA Ltd., chief of Profession Division, assistant to chief secretary, vice chief secretary of Shenzhen CPA Association. At present he’s independent director of Shenzhen Tuori New Energy Co., Ltd., Rainbow Shopping Mall Co., Ltd., Shenzhen Zhonghang Health Club Co., Ltd., partner of ShineWing Certified Public Account, off-campus instructor of Management School of Sun Yat-Sen University, Beijing National Academy of Accounting, Commissioner of Politic Congress, Comissioner of China CPA association, and independent director of the Company.
13 Huang Yaying, professor of law, certified lawyer. Senior visiting scholar of UNSW. Once he was professor of North-west University of Law, and postgraduate instructor. At present he’s the dean of Law School of Shenzhen University, standing commissioner of Shenzhen People’s Congress, certified arbitrator of Shenzhen Arbitration Committee, China International Trade Arbitration Committee; councilor of China Arbitration and Law Commission, and China International Private Law; certified arbitrator of Haikou Arbitration Committee, Xi’an Arbitration Committee, Huizhou Arbitration Committee, and lawyer of Guangdong Guoxin Law Firm, and independent director of the Company. Ms. Zhen Hua: Bachelor degree. She is now assuming supervisor, Chairwoman of Trade Union, and Director of President Office of our company. Mr. Yu Guoan, doctor degree. Once associate professor of North-east University, chief technical officer, head of IT department, and supervisor of the Company. Ms. Cao Naisi, bachelor degree, once head of auditing department, vice head of HR department, general manager of Shenzhen Fangda Decoration, at present she’s supervisor of the Company and vice general manager of Fangda Decoration. Mr. Yang Xiaozhuan: Bachelor degree; senior engineer. He once worked for Hubei Provincial machinery Industry Department and held such positions as managing director of the 2nd Machine Tool factory of Hubei, and Deputy Manager of Shenzhen Jinxin Investment Co., Ltd. Mr. Yang is now assuming Vice President of our company several other positions. Mr. Lin Kebin, bachelor’s degree. At present he’s the Vice President and CFO of the Company. Mr. Wei Xingyue, bachelor degree, engineer. Once he’s chief engineer of Jiangxi Auto Switch Factory. Currently he’s the vice president of the Company, and general manager of Fangda Decoration. (4) Particulars about the salaries of the current directors, supervisors and senior management (tax included) Through the approval of 2010 Shareholders’ General Meeting, the allowance was RMB80 thousand (before tax) per year for independent directors of the 6th term Board of Directors, RMB60 thousand (before tax) for directors, and RMB30 thousand (before tax) per year for the supervisors of the 6th term Supervisory Committee. The remuneration scheme was approved by the 1st meeting of the 6th term Board of Directors. All of the current directors, supervisors and executives of the Company took remunerations from the Company and took no remunerations from the shareholding or related parties. Remunerations of current directors, supervisors and executives are totaled to RMB5.0932 million. (5) In the report term, the 5th term of the Board and the Supervisory Committee has expired for their job terms. The members of the 6th term of Board and Supervisory Committee were elected at the Shareholders’ Annual Meeting 2010. Mr. Xiong Jianming, Mr. Wang Shengguo, Mr. Xiong Jianwei, and Mr. Zhou Zhigang were elected the directors of the Board. Ms. Shao Hanqing, Mr. Guo Jinlong, and Mr. Huang Yaying were elected the independent directors of the Board. Mr. Dong Likun has expired for his job term and no longer take the position of independent director. Ms. Zhen Hua, Mr. Yu Guoan, and Ms. Cao Naisi were elected supervisors of the Company. Mr. Song Wenqing has expired for his job term and no longer take the position of independent director. Mr. Xiong Jianming was elected Chairman of the 6th term of Board at the 1st meeting of the 6th term of Board. The new executive team was engaged too. Mr. Xiong Jianming is the president, Mr. Wang Shenguo and Mr. Yang Xiaozhuan are the vice president, Mr. Zhou Zhigang is the secretary of Board, and Mr. Lin Kebin is the chief financial officer of the Company. Mr. Wei Xingyue was elected the vice president at the 3rd meeting of the 6th term of Board.
14 2. Particulars about the employees
There are totally 2923 employees currently in the Company, among which, 1984 production employees, 118 sales employees, 489 technical and engineering employees, 48 accounting employees, 284 other administrative employees. 2545 employees with intermediate vocational school education, account for 87.06% of the total.
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V. Administrative Structure
1. Company Administration
The Company carried out its business operation strictly following with the Company Law, Securities Law and relative regulations of China Securities Regulatory Commission and Shenzhen Stock Exchange. And the administration structure has been further improved without conflict with the laws and regulations. Particulars about the administration of the Company in the report term: 1) According to the Company Law, Securities Law, Shenzhen Stock Exchange Share Listing Rules, Enterprise Accounting System and Enterprise Accounting Standard, the Company has produced the Shareholders’ Meeting Criteria, Working Regulations of the Board of Directors, Supervisory Committee Meeting Criteria, President Work Criteria, Independent Director Working Criteria, Internal Control Criteria, Information Disclosure Criteria, Proceed Administration Regulations, Accounting Criteria, Internal Auditing Criteria, Manpower Management Regulations, Legal Affair Administration Rules, Purchase Regulations, Rules of Bidding Invitation, Investor Reception and Promotion, New Subscription Internal Control, Hedge Operation Internal Control, CPA Selection and Employing, Accounting of Fair Value, Information Insider Registration, External Information User Administration, Finance and Accounting Responsibility Management, Rules of Related Transaction, External Investment Administration, and Internet Information Disclosure. These have composed a mature and effective internal control system covering all aspects of the business operation including investment decision-making, related transactions, financial management, R&D management, HRM, executive management, purchase management, production and sales management and information disclosure. All of them have been implemented smoothly and there isn’t any major defect or fraudulent practices in executing of the internal control system. The internal control system was designed under principles of scientific, rational, and standardization, and with reference to the Company’s practical business operations. In the report term, the Company has revised the Articles of Association, Rules of Internal Auditing, Working Rules of Board, Working Rules of Auditing Committee, Administration of Financial Proceeds, and Rules of Information Disclosure. Revising of these regulations may provide stronger support to standard operation of the Company. 2) The Company has adopted the Retrospective Rules of Material False Information in Annual Report. It will contribute to recognize and process material false in the procedures. The Company has been implementing the regulations diligently and no such material false or omission was found in the report period. 3) Establishing and operation of internal financial controlling system The Company has established independent accounting structure and deployed reasonable jobs and responsibilities. Professional accounting personnel were employed to ensure smooth operation of the system. The Company has established the ―Accounting Regulations‖, ―Accounting Seal Regulations‖, ―Cashier Regulations‖, ―Accounting Calculation Criteria‖, ―Online Banking Criteria‖, ―Payment Authorization Regulations‖, ―Financial Documentation Criteria‖, ―Accounting Authorization Regulations‖, ―Proceeds Administration Regulations‖, ―Related Transaction Regulations‖, and ―External Investment Regulations‖. These have been effectively controlling over the business operations.The Company has also established clear and effective accounting documentation,
16 booking and reporting procedures. All transactions can be recorded timely, accurately, and completely, to ensure preparing of financial statements is complying with the accounting standard. Verifications were taken on book value and substantial assets to make sure they are according to each other. Configuration of accounting positions has ensured frankly and objectively reflection of financial situations, business performance and cash flow. No major fault exist in the internal controlling of financial reporting system in the report term. 4) In the report term, the Company was fully executing the circulars issued by China Securities Regulatory Commission and National Government State-owned Asset Administrative Commission, namely ―Circular about capital transaction and providing of external guarantees by listed companies‖ [Zheng-Jian-Fa (2003)56], and ―Circular about collectively resolve the problems regard capital adoption and illegal guarantees of listed companies‖ [Zheng-Jian-Fa (2005)37. No capital of the Company was adopted by the holding shareholder or providing guarantees to external parties. The Company has been improving its business operation and preventing risks to guard the benefits of the Company and the shareholders. 5) In the report term, the Company has convened and held the Shareholders’ Meetings strictly according to the regulations and ensure the shareholders are able to execute their legal rights. 6) In the report term, the Board of Directors and the Supervisory Committee have been executing their duties strictly according to the law and regulations. Convening and holding of the board meetings and the Supervisory Committee meetings were carried out with the legal procedures. Both of the Board and the Committee have been executing their duties diligently, and defending the legal interests of the Company and the whole shareholders. The Company had never provided the main shareholder or the substantial controller of the Company any unreleased information in the year of 2009. 7) No trade competition or related transactions occurred due to company reconstruction in the report term. 2. Performance of the Independent Directors
Ms. Shao Hanqing, Mr. Guo Jinlong, and Mr. Huang Yaying were the independent directors of the Company. During the report term, the independent directors were performing their duties earnestly and independently, and exactly according with the terms of the ―Article of Association‖, ―Rules of the Board of Directors‖, and ―Rules for the Independent Directors‖. They issued independent opinions on significant issues of the Company, and performed consultancy functions as independent directors should have done. I. Presenting of meetings (I) Independent directors’ presenting of board meetings in the report period:
Number of Presented Not attend meetings the Name of Presented should personally Presented meetings Independen by telecom Absented Note have by proxy for t Director (times) attended successivel (times) (times) y 2 times Shao 8 5 2 1 - No Hanqing Guo 8 5 2 1 - No Jinlong Huang Took job on March 6 5 1 - - No Yaying 25, 2011
Dong Job expired on 2 1 1 - - No Likun March 25, 2011
17 (II) Independent directors’ presenting of shareholders’ meetings in the report period
Not attend the meetings Name Times to attend Times attended Absented for successively 2 times
Shao Hanqing 1 1 - No Guo Jinlong 1 1 - No Huang Yaying 1 1 - No
(III) Independent directors’ performing of duties with the special committees of the Board in the report period. Not attend the Name of Times of Presented meetings Independ Presented Position meetings to personall Absented for ent by proxy present y successiv Director ely 2 times Head of remuneration and 1 1 0 0 No. Shao assessment committee Hanqing Member of development 2 2 0 0 No. strategy committee Head of auditing Committee 6 5 1 0 No. Guo Member of remuneration Jinlong 1 1 0 0 No and assessment committee Huang Member of auditing 4 4 0 0 No Yaying committee II. Performance of the independent directors (I) Disagreement raised by independent directors During the report term, the independent directors were performing their duties earnestly and independently, and exactly according with the terms of the ―Article of Association‖, ―Company Law‖, and ―Rules for the Independent Directors‖. They observed all the materials available before every meeting and discussed on the proposals and procedures of the meetings, and provided valuable opinions and suggestions. The independent directors haven’t raised any disagreement against any of the proposals discussed on the meetings held in the report period. (II) Onsite investigation by independent directors To fully acquire about the business operation, the independent directors investigated the office space and production lines, and the subsidiaries in other cities as well. On March 25, 2011, the 1st meeting of the 6th term of Board was held in Shenzhen. Independent director Shao Hanqing, Guo Jinlong, and Huang Yaying visited the office and workshops of the Company at the headquarter, and interviewed the executives of the Company to better understand the business operation. On September 17, 2011, independent director Guo Jinlong and Huang Yaying took a trip to Shenyang Fangda Semiconductor Co., Ltd. – the controlled subsidiary of the Company to investigate the production site and construction in process, and talked to the executives about the business situation. (III) Suggestions on standard operation raised by independent directors
18 On March 2, 2011, independent director Shao Hanqing provide suggestions at the 28th meeting of the 5th term of Board: The Company is expecting a positive trend in development. With its sufficient reservation of orders, we can see a high speed development in coming years. Therefore the Company shall pay attention on reservation of manpower. The Board of Directors accepted her suggestion. On July 29, 2011, independent director Guo Jinlong provided suggestions at the 3rd meeting of the 6th term of Board: The Company has been listed as one of the 26 key enterprises in Shenzhen, internal control is the crucial aspect of development, hope the Company may enhance their sense of internal control, and promote all of the employees participating in the internal control. The Board has accepted the suggestions raised by Mr. Guo Jinlong. On July 29, 2011, independent director Huang Yaying provided suggestions at the 3rd meeting of the 6th term of Board: although the Company has achieved great performance, quality and risk management shall be reinforced. Internal management shall be improved to further upgrade quality control. III. Independent opinions provided in 2011 Date of issuing Type of Disclosed Names Issues involved in the opinions opinion opinion or not Shao Report of Introspective Assessment on Internal Control In favor Yes Hanqing, Providing of guarantee to subsidiaries In favor Yes Guo March 2, 2011 Profit distribution plan 2010 In favor Yes Jinlong, Dong Annual allowance for new term of directors and supervisors In favor Yes Likun Shao March 25, 2011 Using of idle financing proceeds to support working capital In favor Yes Hanqing, July 29 2011 Engaging of Mr. Wei Yuexing vice president of the Company In favor Yes Guo Jinlong, August 23, 2011 Continue to use idle financing proceeds to support working capital In favor Yes Huang Yaying As the convener or member of the professional committees of the Board, the independent directors has been using their professional knowledge and experiences in areas of economy, management, accounting, and law, to observe the material investment projects, annual assessment and remuneration, and annual auditing works, and contributed to fair, scientific, and reasonable decision making process. They have been doing their jobs diligently. 3. The Company is completely separated from the controlling shareholder in aspects of businesses, personnel, assets, organizations, and accounting. The Company has its own completed businesses and
capacity of independent business operation.
In the aspect of business: the company has its own purchasing, production, sales, and customer service system which performing independently. There is not any material related transactions occurred with the controlling shareholders. In personnel: The labor management, personnel and salary management are operated independently from the controlling shareholder. The senior managements take salaries from the Company and none of them takes senior management position in the controlling party.
19 In assets: The company owns its production, supplementary production system and accessory equipments independently, and possesses its own industrial properties, non-patent technologies, and trademark. In organization: The production and business operation, executive management, and department setting are completely independent from the controlling shareholder. No situation of combined office exists. The Company adjusts its organizing structure only for its own practical requirement of development and management. In accounting: The company has its own independent accounting and auditing division, established independent and completed accounting system and management rules, has its own bank account, and exercise its liability of taxation independently. 4. Assessment and motivation system of the senior management
The Company adopts a salary system for senior management formed by basic salary and floating salary based upon assessment of their achievement. In accordance with ―The detailed assessment rules of target management for the supervisory and service departments of year 2011‖ and ―The detailed assessment rules for subsidiaries of year 2011‖, the senior management are assessed on their capability of innovation, basic quality, performance, accomplishment of profit and account collecting goals. The results of assessment form the foundation of floating salary or penalty. 5. Estabishment and Improvement of Company Internal Control System
The company has been rated as one of the 26 key enterprise internal control experimental companies by Shenzhen Securities Regulatory Bureau in December, 2011. The company has immediately developed relative work of the company internal control system according to Enterprise Internal Control Basic Norms, Enterprise Internal Control Matching Guidance jointly issued by Ministry of Finance and other four departments and Notice about Optimizing Shenzhen Popedom Enterprise Internal Control Experimental Work issued by Shenzhen Securities Regulatory Bureau. The company has set up enterprise standard management group and the company chairman of the board has acted as the team leader. The team has take charge of the formulation of internal control system implementation plan and promoting study and research of the system. The company has invited experienced professional inquiry agency to associate the company to comb, construct and optimize the company internal control structure and distinguish the weak link and main risk according to the internal control system mentioned above. The company has formulated Internal Control Implementation Plan and the plan has been deliberated by the board of directors. The system implementation scope includes the company headquarter and its 4 subsidiaries which are Fangda Group Co. Ltd, Shenzhen Fangda Decoration Engineering Co., Ltd, Shenzhen Fangda Automatic System Co., Ltd, Fangda New Material (Jiangxi) Co., Ltd and Shenyang Fangda Semiconductor Lighting Co., Ltd long term assets. The revenue of the companies mentioned above occupied 100.98% proportion of the combined revenue report form. The company has promoted those things listed below: collecting internal information, researching risk; combing present system, process; formulating business flow chart and risk control matrix; check internal control imperfection; formulating and executing strictly rectification and reformation plan. Based on the work, the company has formulated Fangda Group Co., Ltd. Internal Control System and Fangda Group Co., Ltd. Internal Control Manuscript according to
20 Enterprise Internal Control Basic Norms, Enterprise Internal Control Matching Guidance jointly issued by Ministry of Finance and other four departments. The company standard management team has organized to implement the company internal control and timely rectified and reformatted the imperfection, meanwhile the company has invited Ascenda Certified Public Accountants to audit independently the efficiency of the company internal control. The company internal control system is sound without any significant imperfection and unusual affairs in company administration and operation management according to the system test run effects and audit results. The board statement: It is the duty of the board of directors that to establish and organize to implement the company internal control system; the board of supervisors inspect the establishment and implementation; the manager layer organize the system normal operation. The company internal control targets are reasonably guarantee legal operation management, assets safety, authentic and completed financial report and the relative information, operation efficiency and effect promotion, implementation of company development strategy. Because the company internal control system has its inherent limitations, there can be only reasonably guarantee for the realization of the targets. The board’s self evaluation and the external accounting firm audit about the company internal control are both issued in http://www.cninfo.com.cn VI. Particulars about the Shareholders’
Meeting
The Company held 1 shareholders’ meetings in the report term. The followings are the details: The Company announced the convening of the Shareholders’ Annual Meeting 2010 and the agendas on March 4, 2011 issues of Securities Times, China Securities Daily, Shanghai Securities Times and Hong Kong Commercial Daily. The meeting was held in the multi-function hall at the 1st floor of Fangda Building on March 25, 2011. The resolutions were published on March 26, 2011 issues of Securities Times, China Securities Daily, Shanghai Securities Times and Hong Kong Commercial Daily.
21 VII. Report of the Board of Directors
1. Business review of the report term
(1) General business situation
In year 2011, the economic environment is complicated both home and global. Continuing of debt crisis in Europe, inflation in the country, property market control, and tightening monetary policies have been influencing the economic growth of the whole country. The Company has overcome a number of difficulties, kept seizing the positive opportunities, focusing on innovative development, reinforcing the main businesses, and achieved merit performance. In the report period, the Company’s main businesses kept growing. It achieved turnover of RMB1.34878 billion, increased by 16.08% YOY, reached a new historic peak; net profit attributable to the owners of the Company of RMB65.50 million, a 18.96% of growth, net profit after deducting of non-recurring gain/loss increased by 99.21%, the profitability of main business was increasing. As of the end of report period, the Company has order reservation amounted to RMB1.32376 billion, account for 98% of the turnover of this year, which will lay a significant foundation for year 2012. (2) Main business operations
Our business include new-type building materials, composite materials, metal wares, metal frames, environmental equipment and apparatus, fire fighting equipment, optical-mechanical-electrical integrated products, polymer materials and their products, fine chemical products, mechanical equipment, optical materials and devices, electronic displayer, audio-visual device, transport facilities, metro platform screen doors, a variety of HAVC equipment, water supply and drainage equipment, central air-conditioner and their parts and components, semiconductors and their components. Integrated circuits, lighting products and equipment, solar-energy products and their R&D. design, production. construction, sales and after-sales service ,property management, property leasing and parking-lot service. Products taking over 10% of the turnover or gross profit are curtain wall, compound aluminum board, single layer aluminum board, and screen doors. In the report term, the Company has overcome the major influences brought by financial crisis and macro adjustment of the country, none of them has made major impact on the Company’s financial situation and business operation, so in the predictable future. The Company made no prediction or commitment on the profitability of future. During the report period, the distribution of major business turnover and profit in term of industries, product categories, and territories were as follows:
22
In RMB0’000 Segments on industries Gross profit Change of Change of On industry or Gross profit ration Turnover Operation cost income over cost over last product ratio (%) increased/decr last year % year % eased Metal production 118,479.82 97,780.53 17.47% 23.90% 22.91% 0.67% Railroad industry 9,823.06 7,336.12 25.32% -34.90% -43.32% 11.08% Segments on products Curtain wall and 118,479.82 97,780.53 17.47% 23.90% 22.91% 0.67% material Rail transportation 9,823.06 7,336.12 25.32% -34.90% -43.32% 11.08% equipment
Change of income over last Regions Turnover year % Domestic 121,707.55 14.70% Overseas 7,893.49 44.69% Total 129,601.04 16.17% We purchased from the top 5 suppliers at the amount of RMB149.9073 million, which is 16.01% of the yearly purchase total amount; we got the total sales of RMB378.9531 million to top 5 buyers, account for 28.10% in the main business income.
1). Sustained rapid growth of curtain wall business In the report period, facing the adverse economic environment, the company has continued to implement its enterprise bigger and stronger strategy, enhance product core competence, give full play to its technology and brand advantage, push forward energetically Pearl River Delta, Yangtze River Delta and Around Bohai large scale high-end building curtain wall market exploitation to obtain an abundant contract reserves. In the report period the company has successively signed a great number of large-scale energy-saving low-carbon high-end curtain wall projects such as Rwanda International Airport Terminal (Angola), Shenzhen Baoan International Airport New T3 Terminal, Shenzhen Zhongguang Nuclear Building, Changsha Kaifu Wanda Plaza, Beijing Peony Garden, Hefei Xindi Centre, Chengdu Huazhi Square, Wuhan Central Culture District Office Building, Jingdezhen Imperial Estate Square, Kunshan Shimao International Town, Tsingtao Haier Property Group Director Board Building, Erdos International Trade Mart and Hebei Langfang Financial Street Banking Centre. The company has achieved sales revenue 1, 184.7982 million yuan, up 17.4%. In 2011 the curtain production and material business were still the main revenue and profit sources. The company will continue to seize the opportunity of the vigorous domestic building curtain wall demand increasement and take its comprehensive advantage for promoting its curtain production and material business. The 26th World University Games was held in Shenzhen in 2011 and the company has contracted the curtain wall project of Shenzhen Bay Sports Centre which was the opening ceremony gym of the games. The company has constructed with its energy saving and environment protection curtain wall products according to the low-carbon construction idea and the construction was indeed as difficult as the Beijing Bird’s Nest in Beijing. The company has also contracted project of Universidad Stadium curtain wall and the company has constructed the building roof with its creation of new polycarbonate roof system which has been applied for 4 invention patents. The company has been award Universidad Stadium Construction Outstanding Contribution Prize by Universidad Engineering Construction and Logistic Guarantee Headquarters for the solution of polycarbonate temperature deformation and system water resistant problems.
23 2) Railway Transportation Equipments Promoting Shenzhen Access Metro Age The company PSD (platform screen door) product has possessed the first place in the aspects of market share, brand influence, intellectual property and industry engineering service and especially has distinguished itself in the Shenzhen local metro construction affairs. In June, 2011 the Shenzhen Metro 2nd-stage Construction was put into operation and it is an honor that the metro-line 1 (Baishizhou---Airpot East), the whole metro-line 2 and the metro-4 (Minle---Qinghu) have been equipped with the company PSD product. The company PSD product has possessed merits of advanced performance, stable quality, reliable operation and aesthetic features and the company comprehensive technology is in international advanced level. The company PSD products applied in the Shenzhen Metro 2nd-stage Construction have steadily and efficiently run with non-accident from the beginning of the whole line operation, which has indicated the advanced technology and perfect quality of the company product and obtained great affirmation and praise from Shenzhen Subway Company and Shenzhen residents. The company Shenzhen Metro Line 4 Project Department has been rated as Advanced Quality Control Unit. In the report period, the company has made efforts to greatly improved company internal control, cost control, team building and self-dependent innovation. The company has increased project margin rate and promoted the product performance to be more stable and reliable by optimizing product design and strengthening field management. After years of development, the company has possessed the core technology of PSD and obtained 197 relative patents including 45 invention patents, which is over half proportion of the total domestic patents in this industry. Meanwhile the company has possessed 4 software copyrights. The company has positively pushed forward intellectual property protection and won the social respect and support. 3) Sales Increasement of LED Production In the report period, the company has made efforts to recover LED (semiconductor lighting) production ability and market exploitation management. As a result the company has made an LED product sales increasement of 53.30% in 2011. 4) Promoting Production Base Arrangement and Construction The company always pays great attention to self-dependent innovation and which has resulted in the brand influence increasement, production competency and contract reserve. In order to solve the contradiction between production capacity and order form in the report period, the company has promoted to finish the construction of Dongguan Songshan Lake Production Base production expansion construction and set it in operation before the third quarter end of 2012. 5) Continuous Company Internal Control Improvement The company has been rated as one of 26 Major Listed Internal Control Construction Company according to CSRC (China Securities Regulatory Commission) Shenzhen Securities Regulatory Bureau. In the report period, the company has paid a great attention to the company internal control and invited external enquiry agency besides establishing company internal control construction institution. The company has formulated and performed its internal control system implementation plan. The company has comprehensively deliberated the company management system, business process, organizational structure and work post setting to determine the company business process flow diagram, process description and key control point together with the control approach, meanwhile the company has set up the very internal control group to examine and verify the internal control achievement documents. The company has formulated Company Internal Control System and Company Internal Control Manuscript according to the implementation plan. The company has optimized its internal control system through preliminary internal control audit. 6) In the report period, the company has had the honor to get the titles of 2010 Guangdong Province 500 Enterprise and Guangdong Province 100 Manufacturing Enterprise, 2011 Guangdong Province Model Harmonious Labor Relation Enterprise, etc. The company Fangda brand has been ranked as Shenzhen Famous Brand for 2 successive sessions. Contracted by the wholly-owned subsidiary Shenzhen Fangda Decoration Engineering Co. Ltd, the curtain wall project of Xiamen Five Margin Bay Operation Centre Office Building (Admiralty
24 Centre) has been awarded 2010~2011 China Construction Luban Prize (National High Quality Project) which is the highest prize in the construction trades. The wholly-owned subsidiary Shenzhen Fangda Automatic System Co. Ltd. has won, the only one enterprise of the metro PSD industry, the title of 2010 China Railway Transportation Innovation 50 Enterprise. The subsidiary PSD product has passed RAMS (reliability, applicability, maintainability and security) test and awarded RAMS Certificate issued by Bureau Veritas to come to the first domestic enterprise that has passed the authentication. The subsidiary has already passed through the ISO 90000 Quality Management System, ISO 14000 Environmental Management System and GB/T28001 Occupational Health and Safety Management authentication in the past. The wholly-owned subsidiary Fangda New Material Co. Ltd.(Jiangxi) has awarded Jiangxi Province Quality Management Advanced Enterprise, 2010 Nanchang City HiTech Zone Advanced Enterprise. The project Aluminum Profile Extrusion Die 4C Integration Technology and Appliance, which was cooperated with Nanchang University, has awarded Jiangxi Province Science and Technology Progress Second Prize. 7) Positively Assuming Social Responsibilities In the report period , the company has positively assumed social responsibilities by: paying taxes 74.74 million yuan, up 26.61%; achieving export revenue 12.53 million dollars, up 44.69%; donating 233 thousand yuan and investing 0.8119 million yuan to create nearly 5000 job opportunities; inputting 1.0886 million yuan in the field of employee knowledge and skill improvement. The company has promoted development of new draft, technology, product structure and patent according to clean, safety and efficient production to make contribution for environmental protection. (3) Capital structure in the report term
At the end of report term, the Company has total assets of RMB2.16333 billion, including RMB664.33 million of receivable account takes 30.71% of the total assets, increased by 10.79%; RMB254.42 million of inventory account for 11.76% of total assets, investment property of RMB277.71 million account for 12.84%, fixed asset of RMB316.78 million account for 14.64% of total asset, construction in process of RMB81.80 million account for 3.78% of total asset, and short-term borrowings of RMB397 million account for 17.89% of total asset. No long-term borrowings. In the report term, the Company uses fair value in accounting of investment properties, sellable financial assets, and hedging contracts. Recognition of investment property fair value was on the ―Property Evaluation Report‖ 深同诚评字（2011A）01YQC 第 002 号 issued by Shenzhen Tongzhicheng Property Real Estate Consulting Co., Ltd. Recognition of sellable financial assets was on closing quotation at the end of report term, and calculated according to the ―Formula of Fair Value of Shares with Definite Locking Period and Issued Privately‖. Hedging contracts are measured at settlement price at end of report term. None of the sales expense, management expense, financial expense, and income tax has changed significantly. (4) Composition of cash flow in the report term
Net increase of cash and cash equivalent of RMB-168.70 million. Including RMB-57.05 million occurred by business operation, which was mainly expanding of curtain wall production, and increase of project progress and slow retrieving of project payment. Net cash flow from investment of RMB-78.38 million, which was mainly the investment project of energy saving PV curtain wall, PSD production expanding; net cash flow from financing was RMB-33.3409 million, which was mainly repaying of bank loan and interest payment.
25 (5) The business status and performance analysis of the major subsidiaries of our company. & joint-stock companies.
By December 31,2011, we wholly own 8 subsidiary enterprises, they are Shenzhen Fangda Decoration Engineering Co., Ltd, Jiangxi Fangda New-type Aluminum Co., Ltd., Shenzhen Fangda Yide New Material Co., Ltd., Hong Kong Junjia Groups Co, Ltd., Dongguan Fangda New Materials Co., Ltd., Shenzhen Kexunda Software Co., Ltd. and a holding subsidiary, that is Shenyang Fangda semiconductor lighting Co,. Ltd. Shenzhen Fangda Decoration Engineering Co. Ltd is one of the largest manufacturers in curtain walls which is specialized in the design, manufacture and installation of curtain walls and indoor & outdoor windows and doors, also specialized in the design and manufacture of furniture. Shenzhen Fangda Automation Systems Co., Ltd is the 1st in the country and 3rd in the world manufacturer specialized in the development, manufacture and installation of platform screen doors. Fangda New Materials (Jiangxi) Co,. Ltd and Shenzhen Fangda Yidexin new material Co., Ltd are specialized in the manufacture and sales of aluminum sheet, clad aluminum and other new-type building materials, which is the largest in the country. Shenyang Fangda semiconductor lighting Co,. Ltd is specialized in the R&D, manufacture and sales of GAN-based integrated circuit and their parts and components which are the middle or finished products. Dongguan Fangda New Materials Co., Ltd. is mainly engaged in designing, manufacturing, and installation of multiple types of curtain walls, glass walls, doors and windows, fences, and interior roof; power supply and air-conditioning system designing and installation. At present the company is under construction. Shenzhen Kexunda Software Co., Ltd. is mainly involved in computer hardware and software developing, sales, system integration, and technical consulting. (6) Particulars about the special projects under the Company’s control
There is no such special projects. 2. Company Future Prospect and 2012 Annual Operation Plan
After years of sustained and high-speed development and continuous hardware capacity investment, the company has had curtain wall production and material high-speed development foundation, strong financial strength, brand influence, technical capacity and operation production management capacity. The company curtain wall product has come to be the first choice of the customer and the Fangda aluminum plate has come to be comprehensively technological advanced in the world. Facing the complicated economic situation in 2012, the company shall insist its Bigger and Stronger Strategy and ensure the company main business curtain wall to contribute more for the company revenue and profit. The company shall promote PSD production innovation and market especially the oversea market exploitation to keep the advanced place in domestic
26 industry in 2012. The company shall combine LED with the advantage of curtain wall to promote curtain wall LED display system in 2012. The company will accelerate Beijing, Chengdu and Shanghai production base construction in 2012 to finish the national arrangement of taking Shenzhen as the headquarter, Dongguan Songshan Lake as the base of southern China, Beijing as the base of North and Northeast of China, Chengdu as the base of South China, Shanghai as the base of East China. The company will promote talent-team building, technology innovation, high-level academic exchange, technological achievement share, intellectual property protection and China Famous Trademark declaration. The company will optimize employee salary system, work post plan, financial system, audit system and risk control system to decrease cost and expense. The company will optimize its operational cash flow, strengthen enterprise culture construction, enhance the company and company product popularity and influence. Plan of Fund Demand and Use The company put raised funds 180 million yuan in its energy saving curtain wall and PV curtain wall production expansion project and PSD production expansion project in 2012 and the company. The company will borrow from the bank and issue finance bills to afford the 0.4 billion yuan company normal operation expense. 3. Investment in the report term
(1) Application of fund raised Application of Proceeds from Share Placing In RMB10 thousand Total of proceeds 33,658.69 Total of proceeds Total of proceeds changed to other 13,328.35 invested this year use in the report term Accumulated proceeds changed to
other use Total of proceeds 15,899.52 % of accumulated proceeds changed invested
to other use If Date Total of Investment investment Accumulated when the Project proceeds Total progress at Profit project investment project Major promised to be to be investment Invested end of realized Gains as changed at end of become change in invested by the invested after this year report this expected? (including report term useable feasibility? proceeds as adjustment term(%)(3) year partially (2) as proposed ＝(2)/(1) change) proposed Project set by
the prospectus 1. Energy-saving curtain wall Sept. and PV curtain No 21,000.00 21,000.00 11,066.62 13,267.35 63.18 30, No wall 2012 production expanding project Sept. 2. Expanding No 12,658.69 12,658.69 2,261.72 2,632.16 20.79 30, No of PSD project 2012 Subtotal of investment - 33,658.69 33,658.69 13,328.34 15,899.51 47.24 - - - promised Investment project of premium
27 surplus Repaying of bank loans (if - - - - - any) Used as current - - - - - capital (if any) Subtotal of premium - - - - - proceeds Total - 33,658.69 33,658.69 13,328.34 15,899.51 47.24 - - - For the energy saving curtain wall and PV curtain wall projects were moved to Dongguan, it caused much preparation work, therefore it was delayed. PSD project is located in Nanchang, it was planned to use existing buildings and reduced the investment in Reason or office buildings and workshops, therefore the investment has decreased by RMB60 million. This caused greater situation that remaining in investment fund. Adjustment plan was adopted at the 1st provisional shareholders’ meeting held not on schedule on March 9, 2012. The RMB60 million originally planned for PSD project was transferred to curtain wall (on specific project. project) Progress was delayed for change of the plan. Both of the projects are expected to be put into operation on September 30, 2012.
Statement on major change None in feasibility Amount, usage and progress of Not applicable premium surplus Change of Applicable location of The proposal on changing the location of curtain wall project was adopted at the 24th meeting of the 5th term of project to Board held on November 22, 2010 to reduce management cost and increase efficiency. The project was moved invest to Dongguan, Guangdong. Adjustment on implementation Not applicable of project invested Pre-investment Applicable and On September 30, 2010, it was decided to use the raised capital to replace the investment made previously by replacement by Fangda Automatic RMB1,403,503.00 and Fangda Decoration RMB4,347,753.09. This has been verified by proceeds CPA with report 天健正信审（2010）专字第 020722 号. Applicable On March 28, 2011, payment of RMB20 million was made from idle proceeds to Fangda Decoration; and Idle proceed RMB10 million was made to Fangda Automatic.RMB30 million was returned to the proceed account on used as August 19, 2011. working capital On August 23, 2011, RMB20 million was paid from the proceed account to Fangda Decoration, and RMB10 million to Fangda Automatic, both are not exceeding six months. Surplus of investment and Not applicable causation Application plan of retained Retained proceeds will be used for curtain wall expanding and PSD expanding projects in all. fund from financing Problem or situation in using of None proceeds and disclosing (2) Non- raising -fund investment No investment financed by proceeds from share issuing in the report period.
28 4. Change in accounting policies, accounting estimations, or the correction of the previous important mistakes
None of change in accounting policies, accounting estimations, or the correction of the previous important mistakes occurred in the report term. 5. Disclosing of internal controlling system related to measuring of fair value, and relative information
On April 17, 2009, the Company produced ―Internal controlling system on measuring of fair value‖, which was aiming to regular the recognition basis and process in measuring of fair value of investment properties, shares of other PLCs, and so others.
29 Subjects related to measuring of fair value: In RMB Yuan Accumulative Impairment Gain/loss from change in fair value provisions Amount at end Items Initial amount change of fair accounted into provided in the of term value in the term equities current term Financial assets: Incld. 1. Financial assets accounted at fair value and changes accounted into current gain/loss account Incld: Derivate financial assets 2. Sellable financial 4,347,000.00 698,000 2,198,000.00 assets Subtotal of financial 4,347,000.00 698,000 2,198,000.00 assets Financial liabilities Investment real estates 271,226,332.73 11,550,311.20 277,705,949.35 Production physical assets Others Total 275,573,332.73 11,550,311.20 698,000 279,903,949.35
6. Foreign currency financial assets in possession
The Company has receivable accounts in foreign currency equals to RMB17,876,047.74 at end of the report period. 7. Influence on profitability by the changes in the financial instruments for measuring fair value and the changes in the fair value of investment property:
In the report period, the change of fair value of investment property has contributed RMB11.55 million to profit. No change made by change of fair value of financial asset for sale.
30 8 Ascenda Certified Public accountants audited the Financial Report of 2011 year and issued the standard audit report without qualified opinions.
9. Routine works of the Board
(1) Board meetings and resolutions 1）The 27th meeting of the 5th term of Board was held on January 7, 2011 by mean of telecommunication. The proposal of auditing fee for financial statements 2010 was approved. 2) The 28th meeting of the 5th term of Board of Directors was held in the afternoon of March 2, 2011 in the meeting room on the 5th floor of Fangda Technologies Building. The resolutions were published by March 4, 2011 issues of Securities Times, China Securities Journal, Shanghai Securities Daily and Hong Kong Commercial Daily. 3) The 1st meeting of the 6th term of Board of Directors was held in the morning of March 25, 2011 in the meeting room on the 5th floor of Fangda Technologies Building. The resolutions were published by February 26 2011 issues of Securities Times, China Securities Journal, Shanghai Securities Daily and Hong Kong Commercial Daily. 4) The 2nd meeting of the 6th term of Board of Directors was held in the afternoon of April 20th 2011 in the meeting room on the 5th floor of Fangda Technologies Building. The resolutions were published by April 22nd 2011 issues of Securities Times, China Securities Journal, Shanghai Securities Daily and Hong Kong Commercial Daily. 5) The 3rd meeting of the 6th term of Board of Directors was held in the afternoon of July 29, 2011 in the meeting room on the 5th floor of Fangda Technologies Building. The resolutions were published by August 2, 2011 issues of Securities Times, China Securities Journal, Shanghai Securities Daily and Hong Kong Commercial Daily. 6) The 4th meeting of the 6th term of Board of Directors was held in the afternoon of August 23 2011 in the meeting room on the 5th floor of Fangda Technologies Building. The resolutions were published by August 25, 2011 issues of Securities Times, China Securities Journal, Shanghai Securities Daily and Hong Kong Commercial Daily. 7) The 5th meeting of the 6th term of Board of Directors was held in the afternoon of October 27, 2011 in the meeting room on the 5th floor of Fangda Technologies Building. The resolutions were published by October 29, 2011 issues of Securities Times, China Securities Journal, Shanghai Securities Daily and Hong Kong Commercial Daily. 8) The 6th meeting of the 6th term of Board was held on December 19, 2011 by mean of telecommunication, the Internal Control System and the Internal Control Manual (Official Version) were approved at the meeting. The Auditing Committee of the Board was authorized to examine the working plan of internal control assessment. (2) Executing of the resolutions of Shareholders’ General Meeting by the Board of Directors As authorized by the Shareholders’ General Meeting, the following jobs have been done: 1) The capitalizing of capital reserves for year 2010 was accomplished; 2) Engaged the contract about applying for general credit limits and credit guarantee with the bank; (3) General report of the Development Strategy Committee
31 The Working Rules of Development Strategy Committee has provided suggestions to the setting of business target and operation plan for year 2011. The Committee inspected and monitored the implementation of the plan and deems that the target has basically been achieved and laid good foundation for long-term development. The Development and Strategy Committee is affirmative on the Business Plan and Target 2012 proposed by the executives. (4) Report of the Auditing Committee The Auditing Committee has held six meetings in the report period, and examined the auditing work plan, periodic financial report, profit distribution plan, employing of CPA, internal control practice, and providing of guarantees. Auditing Committee sent letters, since the date of annual report had been decided, to discus and decide the timetable with the CPA. The Committee examined the financial statements prepared by the Company before the CPA, and provided written opinions on the business operation reflected in the financial statement.In the auditing process, the Committee keeps communicate with the CPA, and sent another letter to make sure the Auditing Report will be provided on schedule. The Committee examined the Financial Statement again after the CPA provided primary opinions, listened to the report on major problems discovered in the auditing process, and basically accepted the opinions.Upon providing of final opinion by the CPA, the Auditing Committee submitted to the Board the voting result on the Financial Statement and the Report on Auditing Process by the CPA of the Year, accepted the Financial Statement 2011, and deems that the CPA has fulfilled the missions entrusted by the Company and auditing works on the Financial Statement 2011.
(5) Report of the Remuneration and Assessment Committee Basing on the ―Rules of Remuneration and Assessment Committee‖, the Remuneration and Assessment Committee subordinate to the Board had listened to the company’s main financial index and the performance of the operation objectiveness in 2011 and also find out director, senior executives performance. They think director and senior executive industrious, fulfill their duty well and in aid of the achievement of company’ operation objectiveness. The wage information disclosed in 2011 Annual Report are complying with the salary scheme.
10. Dividend distribution plan or capitalizing of
common reserves
The Company will not conduct profit distribution or capitalizing of reserves for year 2011. All profit will be used for business expanding in 2012. This profit distribution and reserve capitalizing plan is subject to approval of the Shareholders’ Annual Meeting 2011. Dividend distribution of the latest three years In RMB Yuan Percentage in net profit Net profit attributable to the Cash dividend attributable to owners of Distributable profit owners of the PLC in the (tax included) the PLC in the of the year consolidated statement consolidated statement 2010 0.00 55,063,374.25 0.00% 89,964,099.59 2009 0.00 44,052,511.46 0.00% 57,181,879.02 Year 2008 0.00 23,260,881.91 0.00% -20,153,902.80 Dividend accumulated in the 0.00%
32 latest three years over the average annual net profit (%) No cash dividend proposal was raised though the Company is making profit for the report term.
Reason for making profit but not have any Plan for the profit not distributed dividend plan Reserved all for expanding in 2012 Used for business expanding 2012
11. Executing of information insider administration
regulations
Since February 2012, according to the requirement of Shenzhen Stock Exchange and China Securities Regulatory Commission Shenzhen Office, the Company has already established ―Information insider registration criteria‖, and ―External information user regulations‖, and executed strictly. In the report term, the Company has not found any behavior conducted by information insiders such as illegal trading of the Company’s shares before releasing of major information which may influence the share prices. No investigation or instruction received from regulatory authorities on this issue. 12. The Company hasn’t changed the official information disclosure presses and the website in the
report term.
33
VIII. Report of the Supervisory Committee
1. Meetings held in the report term, and the resolutions
1) The 13th meeting of the 5th term of Supervisory Committee was held in the afternoon of March 2, 2011 in the meeting room on the 5th floor of Fangda Technologies Building. The resolutions were published by March 4, 2011 issues of Securities Times, China Securities Journal, Shanghai Securities Daily and Hong Kong Commercial Daily. 2) The 1st meeting of the 6th term of Supervisory Committee was held in the morning of March 25, 2011 in the meeting room on the 5th floor of Fangda Technologies Building. The resolutions were published by February 26 2011 issues of Securities Times, China Securities Journal, Shanghai Securities Daily and Hong Kong Commercial Daily. 3) The 2nd meeting of the 6th term of Supervisory Committee was held in the afternoon of April 20, 2011 in the meeting room on the 5th floor of Fanda Technologies Building. The 1st Quarterly Report 2011 was examined and passed at the meeting. 4) The 3rd meeting of the 6th term of Supervisory Committee was held in the afternoon of July 29th 2011 in the meeting room on the 5th floor of Fanda Technologies Building. The Interim Report 2011 and the summary were examined and passed at the meeting. 5) The 4th meeting of the 6th Supervisory Committee was held in the afternoon of October 27th 2011 in the meeting room at the 5th floor of Fangda Technologies Building. The 3rd Quarterly Report 2011 was examined on the meeting. 2. The Supervisory Committee issues the independent opinion on the following issues:
(1)In the report period, the supervisors have been participating all of the board meetings and shareholders’ meetings and monitored the calling and holding procedures. The Company has already established a mature internal control system and has been improving it constantly. The procedure of decision-making was in conformity with Company Law and Articles of Association of the Company. The directors and senior executives had no actions of breaking national laws and regulations and Articles of Association or damaging the interest of the Company when they performed their duties. (2) Ascenda Certified Public Accountants issued standard auditing report without qualified opinion for the financial report of 2011. The financial report is frankly reflecting the financial situation and business performance of the Company. (3) The investment projects were the same with those promised in ―Private share placing of A shares in 2009‖ at private issuing of A shares. (4) No related transactions happened in the report period, thus no interests of the investors are impaired.
34 3. Supervisory Committee’s comment on the Report of Introspective Assessment of Internal Control
According to the Basic Rules of Enterprise Internal Control, Basic Instruction on Enterprise Internal Control, and Instruction on Standard Operation of PLCs on the Main Board of Shenzhen Stock Exchange issued by the authorities and SSE, the members of the Supervisory Committee provide the following comments on the Report of Introspective Assessment of Internal Control: (1) According to the Company Law, Securities Law, and Basic Rules of Enterprise Internal Control, and Instruction on Standard Operation of PLCs on the Main Board of Shenzhen Stock Exchange, with consideration of the Company’s practice and the environmental factors and risk factors, the Company has established a relatively mature internal control system. In 2011, as one of the 26 modeling enterprises of Shenzhen, the Company has been carrying out improving of the control system constantly, and deepen to the subsidiaries. No behavior of the Company was found violating the laws and regulations and internal control rules. (2) The Company has its complete administration structure, internal control and risk control organization, internal auditing department, which were supporting effective executing and monitoring of the internal control system. Overall, the Committee deems that the introspective report is frankly and objectively reflecting every aspect of the operation of internal control system.
IX. Significant Events
1. No material lawsuit or arbitration in report period
2. No bankruptcy or restructuring issue happened in the report term
3. Holding of other PLCs’ equities and trading of other
PLCs’ shares
(1) Holding of other PLCs’ equities and participating in commercial banks, securities dealers, insurance companies, trust companies, and future.
35 In RMB Gain/loss Change of Book value Source Initial Share of the owners’ Accountin Stock Code Stock ID at the end of of investment portion report g subject term equity in the shares term report term Available-f ST Debt or-sale 600800 4,850,000.00 0.11% 2,198,000.00 0.00 -1,651,220.00 paid in Magnetic financial kind Card asset Total 4,850,000.00 - 2,198,000.00 0.00 -1,651,220.00 - -
4. Asset acquiring or selling nor takeover or merger events.
(1) In the report term, the Company conducted neither asset acquiring or selling nor takeover or merger events (2) No disposal of asset in the report term 5. No share option incentive program was implemented in the report term
6. No material related transaction in report period
7. Material contract and guarantee
(1) Material guarantee External Guarantee (Exclude controlled subsidiaries) Date and Ref. of Actual date of Related Guarantee the announcement Amount of the occurring Actual amount Type of Completed Term party or provided to about the guarantee (signing date of of guarantee guarantee or not not guarantee agreements Total of external guarantee Total of external guarantee approved in the 0.00 actually occurred in the 0.00 report term (A1) report term (A2) Total of external guarantee Total of external guarantee approved as of 0.00 actually occurred as of end 0.00 end of report term (A3) of report term (A4) Guarantee provided to controlled subsidiaries Actual date of Date and Ref. of the Amount of Actual Related Guarantee occurring Type of Completed announcement about the amount of Term party or provided to (signing date of guarantee or not the guarantee guarantee guarantee not agreements since Fangda CCB Shenzhen engage of 30,000.00 July 11 2011 22,418.92 joint liability No No Decoration Branch contract to 2 years upon
36 due of debt since engage of Fangda CITIC Bank Shenzhen 12,000.00 Feb 18 2011 8,362.00 joint liability contract to 2 No No Decoration Branch years upon due of debt since engage of Fangda CCB Shenzhen 25,000.00 July 11 2011 3,927.20 joint liability contract to 2 No No Automatic Branch years upon due of debt since engage of Fangda SZDB Shenzhen 2,000.00 2,000.00 Nov 03 2010 2,000.00 contract to 2 No No Automatic Tairan Branch Secured years upon due of debt since engage of Fangda New CCB Nanchang 3,259.04 5,800.00 May 26 2011 3,259.04 contract to 2 No No Materials Branch Secured years upon due of debt since China Import & engage of Fangda New 2,700.00 Export Bank Shanghai 3,500.00 October 30 2011 2,700.00 contract to 2 No No Materials Secured Branch years upon due of debt since Fangda engage of Decoration SPDB Shenzhen 1,651.87 1,651.87 Sept 29 2010 1,651.87 contract to 2 No No and Fangda Branch Secured years upon Automatic due of debt Total of guarantee to subsidiaries Total of guarantee to subsidiaries approved 79,951.87 actually occurred in the report term 56,802.12 in the report term (B1) (B2) Total of balance of guarantee actually Total of guarantee to subsidiaries approved 79,951.87 provided to the subsidiaries as of end of 44,319.02 as of the report term (B3) report term (B4) Total of guarantee provided by the Company (i.e. total of the above two items) Total of guarantee approved in the report Total of guarantee occurred in the 79,951.87 56,802.12 term (A1+B1) report term (A2+B2) Total of guarantee approved as of end of Total of guarantee occurred as of the 79,951.87 44,319.02 report term (A3+B3) end of report term Percentage of the total guarantee occurred (A4+B4) on net asset of the 41.27% Company In which: Guarantees provided to the shareholders, substantial controllers and the 0.00 related parties (C) Guarantee provided directly or indirectly to objects with over 70% of liability 0.00 on asset ratio (D) Amount of guarantee over 50% of the net asset (E) 0.00 Total of the above 3 * (C+D+E) 0.00 Statement on the possible joint liabilities on the guarantees not due yet None
(2) No asset entrusting, leasing, contracting to or from other parties. (3) Cash assets entrusted to others or entrusted loans in the report term: In the report period, the Company bought financial products with fixed gains from China Construction Bank and China Communication Bank, accumulated to RMB51 million. All of these have been retrieved in the report period with actual gain of RMB99.3 thousand, account for 0.15% of the net profit attributable to the owners of the parent company. Contract party Fund Amount Investment term Type of Predicted Gain/loss If
37 recourse product income involves Started Expired with on on lawsuit China June Own July 21 Financial Construction 2,000.00 22, 6.40 6.44 No capital 2011 products Bank 2011 China Own June 21 July 7, Financial Construction 1,100.00 1.90 1.96 No capital 2011 2011 products Bank China June Own June 29, Financial Communication 2,000.00 22, 1.50 1.53 No capital 2011 products Bank 2011 Total - 5,100.00 - - - 9.80 9.93 -
(4) Other major contracts: 1. Shenyang Xingmo’er Shopping Mall curtain wall project is proceeding as scheduled by the contract; 2. China ASEAN (Liuzhou) Industry Trading Center curtain wall project is proceeding as scheduled; 3. Zhongguanghe Building curtain wall project is proceeding as scheduled; 4. Shenzhen Airport Expanding T3 Tower curtain wall project is proceeding on schedule. 5. Xi’an Metro line No.1 PSD project is proceeding on schedule. 6. Wuhan Metro Line No.2 PSD project is proceeding on schedule. 7. Dalian Metro safe door system project was on schedule.
8. Engaging and dismissing of CPAs.
As approved by the 28th meeting of the 5th term of Board and the Shareholders’ Meeting 2010, Ascenda Certified Public Accountants was engaged as the auditing body of year 2011. This is the 3rd time Ascenda Certified Public Accountants provides auditing service to the Company. The reward is RMB1.3 million for auditing of the financial reports and internal control.
38 9. No capital adoption or repaying by the controlling shareholder or related parties occurred in the report term, Ascenda CPA has provided special statement on this issue.
10. No motivating share bonus scheme was implemented, promoted, or terminated in the report term.
11. In the report term, none of the directors, supervisors, executives, shareholders, substantial dominators, buyer of the Company was investigated by relative departments, executed by legal & discipline departments, delivered to legal departments, appeared for crime, investigated or punished by China Securities Regulatory Commission, restricted to security market, criticized publicly, regarded as improper person, punished by other executive departments, or publicly condemned by the Stock
Exchange.
39 12. No invalid trading of the Company’s shares by any of the directors, supervisors, executives or shareholders holding 5% or over of the Company’s shares.
13. Reception of investigation and visiting:
Main content involved and material Time/date Place Way Visitors provided Orient Securities Ltd., Business operation March 10, The Field Guangzhou Pearl River Asset and future 2011 Company research Management Ltd. development. Shenyin Wanguo Securities, Business operation March 18, The Field Hualin Securities, Guangdong and future 2011 Company research Andexin Development Ltd. development.
14. Material events judged by the Board of Directors or according to Article 67 of Securities Law, and Article
17 of “Information Disclosure Criteria of PLCs (Trial)”
Date Media Title of accouncement （1） March 24, China Securities Journal, Announcement on returning of financing proceeds 2011 Shanghai Securities Daily, Securities Times, and Hong Kong Commercial Daily （2） April 1, China Securities Journal, Winning of bidding for Shenzhen Airport T3 tower, 2011 Shanghai Securities Zhangjiakou Chengtou Commercial Center, entering of Daily, Securities Times, contract with Cixi Green City Property Development Ltd. and Hong Kong for Lvcheng.Cixi project Commercial Daily （3） April 14, China Securities Journal, Winning of bidding for Erduosi International Trade Center, 2011 Shanghai Securities and Shenzhen Zhongguanghe Building curtain wall project Daily, Securities Times, and Hong Kong Commercial Daily （4） April 20, China Securities Journal, Announcement on capitalizing of common reserves 2011 Shanghai Securities Daily, Securities Times, and Hong Kong Commercial Daily （5） June 21, China Securities Journal, Winning of bidding for Kunshan Shimao International 2011 Shanghai Securities Town, Qingdao Haier Property Executive Building, Daily, Securities Times, Changsha Kaifu Wanda Plaza, Beijing Mudanyuan Building, and Hong Kong and entering of contract for Beijing Mentougou, Hebei Commercial Daily Lanfang Financial Center curtain wall projects.
40 （6） July 12 China Securities Journal, Announcement on Releasing of Restricted A Stocks 2011 Shanghai Securities Privately Issued in Year 2009 Daily, Securities Times, and Hong Kong Commercial Daily （7） August 18, China Securities Journal, Winning of bidding for Angola International Airport, and 2011 Shanghai Securities Chengdu Huazhi Plaza curtain wall projects Daily, Securities Times, and Hong Kong Commercial Daily （8） September China Securities Journal, Winning in bidding competition for Hefei Xindi Center 14, 2011 Shanghai Securities project and entered the contract for the curtain wall project Daily, Securities Times, of Jingdezhen Diwang Plaza; winning in bidding and Hong Kong competition for Shenyang Summer Palace City Plaza LED Commercial Daily lighting project, and entered the contract for the outdoor full-color LED displayer of Shenyang Wanrun Xincheng. （9） November China Securities Journal, Winning of bidding for Wuhan Center Culture Office 21, 2011 Shanghai Securities Building, Nanchang Ligao Riverside Building #1, Shenzhen Daily, Securities Times, Digital Music Tower, Anhui National Asset Building; and Hong Kong entering of contracts for Shenzhen Satellite Building curtain Commercial Daily wall, and aluminum panel for Guangdong Shaifei Technology Garden （10） December China Securities Journal, Announcement on progress of lawsuit against Panasonic 23, 2011 Shanghai Securities Electronic Daily, Securities Times, and Hong Kong Commercial Daily
15. No investment on derivate products in the report period.
41
X. Financial Report
1. Auditors’ Report
Ascenda Certified Public Accountants issued standard Auditors’ Report without qualified opinion on the Company’s Financial Report 2011. (Attached hereafter) 2. Financial Statements (Attached)
3. Notes to Financial Statements (Attached)
42
XI. Documents For Reference
1. The Annual Report 2011 and the Summary with signature of the legal representative (Chinese and English); 2. Accounting Statements with signatures and seals of the legal representative and financial principal and chief of accounting department; 3. Original copy of the Auditors’ Report under the seal of the CPA and signed by and under the seal of certified accountants. 4. Originals of all documents and manuscripts of Public Notices of the Company disclosed in public in the newspapers as designated by China Securities Regulatory Commission.
Legal representative: Mr. Xiong Jianming
The Board of Directors of China Fangda Group Co., Ltd. April 20, 2012
43
China Fangda Group Co., Ltd.
Auditors’ Report on the Financial Statements of 2011
天健正信审（2012）GF 字第 020011 号
天 健 正 信 会 计 师 事 务 所
Ascenda Certified Public Accountants
44
Auditors’ Report
天健正信审（2012）GF 字第 020011 号 To the shareholders of China Fangda Group Co., Ltd.:
We have audited the Financial Statements of China Fangda Group Co., Ltd. (―Fangda Group‖) attached hereafter, including the Balance Sheet and Consolidated Balance Sheet ended December 31, 2011 and the Income Statement, Consolidated Income Statement, Cash Flow Statement, Consolidated Cash Flow Statement, Statement on Change of Shareholders’ Equity, Consolidated Statement on Change of Shareholders’ Equity of the year 2011, as well as the Notes to the Financial Statements. I. Executives’ responsibilities on the Financial Statements Preparing of the Financial Statements according to Enterprise Accounting Standard is the responsibility of the management of the Company. This responsibility is including: (1) to prepare the financial statements according to the accounting standard, and ensure its fair reflection of business position; (2) to design, implement and maintain the internal control system related to producing of the Financial Statements, to prevent the Financial Statements from major false presentation due to cheating or error II. Responsibilities of the CPA Our responsibilities are to issue auditing opinions on the Financial Statements basing on the auditing works we’ve done on them. We carried out the auditing works with compliance to Chinese CPA Auditing Standard, which requires us to plan and implement our works on the basis of professional ethic standards, and obtain reasonable guarantee that the Financial Statements are free of major false statements. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider the internal control relevant to the entity’s preparation of financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting polices used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. III. Auditors’ Opinions We believe that Fangda Group has been following with the Enterprise Accounting Standard in preparing of the Financial Statements. The Financial Statements is reflecting, in all important aspects, the financial situation of Fangda Group as of December 31, 2011, and the business performance and cash flow of year 2011.
CPA China
Ascenda Certified Public Accountants Zhou Junchao
Beijing, China CPA China
Chen Zhaoxin Date of report: April 18, 2012
45
Consolidated Balance Sheet Ended December 31, 2011 会合 01 表 Prepared by: China Fangda Group Co., Ltd. In RMB Yuan Balance at the end Balance at the Balance at the end of Balance at the Items Notes Items Notes of year beginning of year year beginning of year Current asset: Current liabilities Short-term Monetary capital V(I) 324,780,350.77 506,295,863.70 V(XVII) 387,000,000.00 397,000,000.00 loans Transactional Trade off
financial assets financial liabilities Notes receivable V(II) 6,303,353.88 16,491,007.92 Notes payable V(XVIII) 39,058,058.47 60,226,018.65 Account Account receivable V(III) 664,333,498.11 396,673,564.76 V(XIX) 324,340,008.15 296,531,749.82 payable Prepayment Prepayment V(V) 25,444,369.81 20,266,020.05 V(XX) 124,950,664.78 48,308,874.47 received Employees ’ Interest receivable 201,961.11 51,300.00 V(XXI) 20,432,966.02 14,047,721.00 wage payable Dividend Tax payable V(XXII) 41,002,265.87 21,520,643.71 receivable Other account V(IV) 53,412,523.94 39,235,264.87 Interest payable V(XXIII) 780,979.73 610,850.84 receivable Dividend Inventories V(VI) 254,419,907.08 280,285,486.41 payable Non-current asset Other account V(XXIV) 36,783,207.38 25,384,587.91 due in 1 year payable Non-current Other current asset liability due in 1 year Other current
liability Total of current Total of current asset 1,328,895,964.70 1,259,298,507.71 974,348,150.40 863,630,446.40 liability Non-current assets Non-current liabilities Available-for-sale Long-term V(VII) 2,198,000.00 4,347,000.00 financial asset borrowings Expired investment Bond payable in possess Long-term Long-term V(XXVI) 14,700.00 receivable payable Long-term share Special payable equity investment Investment real Anticipated V(VIII) 277,705,949.35 271,226,332.73 V(XXV) 288,000.00 347,657.52 estates liabilities Differed income Fixed assets V(IX) 316,775,398.58 240,554,714.52 V(XIV) 32,597,637.16 28,289,997.60 tax liability Other Construction in V(X) 81,799,896.43 56,762,380.64 non-recurring V(XXVII) 4,020,000.00 4,564,850.00 process liabilities Total of Engineering goods non-current 36,920,337.16 33,202,505.12 liabilities Fixed asset 586,285.67 Total of liability 1,011,268,487.56 896,832,951.52 disposal Production Shareholders’
physical assets equity Gas & petrol Share capital V(XXVIII) 756,909,905.00 504,606,604.00 Intangible assets V(XI) 110,599,955.27 114,530,578.15 Capital reserves V(XXIX) 80,479,493.92 334,434,014.92 Less: Shares in R&D expense V(XI) 914,683.63 1,182,970.28 stock Goodwill V(XII) 8,197,817.29 8,197,817.29 Special reserves Long-term Surplus V(XIII) 2,600,195.30 3,062,071.65 V(XXX) 24,676,077.16 17,834,977.97 amortizable expenses reserves Differed income Common risk V(XIV) 33,637,737.59 31,412,500.20 tax asset provision Other non-current Retained profit V(XXXI) 211,777,968.57 153,115,142.18 asset Different of foreign currency translation Total of owner’s equity belong to 1,073,843,444.65 1,009,990,739.07 the parent company Minor 78,213,665.93 84,337,468.25 shareholders ’
46
equity Total of owners ’ Total of non-current assets 834,429,633.44 731,862,651.13 1,152,057,110.58 1,094,328,207.32 equity Total of liabilities and Total of assets 2,163,325,598.14 1,991,161,158.84 2,163,325,598.14 1,991,161,158.84 owners’ equity Legal representative: Chief financial officer: Accounting Manager:
47
Consolidated Income Statement Year 2011 会合 02 表 Prepared by: China Fangda Group Co., Ltd .In RMB Yuan
Amount of current Amount of Last Items Notes year Year I. Turnover V(XXXII) 1,348,776,366.53 1,161,933,356.48 Less: Operation cost V(XXXII) 1,087,992,839.87 955,678,459.47 Business tax and surcharge V(33) 26,747,672.42 18,386,141.86 Sales expense V(34) 29,317,746.35 31,891,352.97 Administrative expense V(35) 105,614,972.87 94,339,378.92 Financial expenses V(36) 19,752,495.44 19,556,578.76 Asset impairment loss V(39) 19,365,374.86 9,499,099.13 Plus: Gains from fair value fluctuation (―-― for loss) V(37) 10,815,131.20 13,921,217.90 Investment gains (―-― for loss) V(38) 99,342.47 3,134,395.37 Incl. Investment gains from affiliates -42,121.60 II. Operational profit (“-“ for loss) 70,899,738.39 49,637,958.64 Plus: Non business income V(40) 11,383,948.30 20,201,611.90 Less: Non-business expenses V(41) 3,123,596.57 2,184,230.14 Incl. Loss from disposal of non-current assets V(41) 2,427,783.27 800,599.49 III. Gross profit (“-“ for gross loss) 79,160,090.12 67,655,340.40 Less: Income tax expenses V(42) 19,779,966.86 19,369,194.02 IV. Net profit (“-“ for net loss) 59,380,123.26 48,286,146.38 Including: Net profit realized by the entity taken over
before the takeover Net profit attributable to the owners of parent company 65,503,925.58 55,063,374.25 Minor shareholders’ equity -6,123,802.32 -6,777,227.87 V. Earnings per share (I) Basic earnings per share 0.09 0.08 (II) Diluted earnings per share 0.09 0.08 VI. Other misc gains V(44) -1,651,220.00 -4,955,100.48 VII. Total of integrated income 57,728,903.26 43,331,045.90 Total of misc. incomes attributable to the owners of the 63,852,705.58 50,108,273.77 parent company Total misc gains attributable to the minor shareholders -6,123,802.32 -6,777,227.87 Legal representative: Chief financial officer: Accounting Manager:
48
Consolidated Cash Flow Statement Year 2011 会合 03 表 Prepared by: China Fangda Group Co., Ltd. In RMB Yuan Amount of current Items Notes Amount of Last Year year I. Net cash flow from business operation Cash received from sales of products and providing of services 1,207,779,388.52 1,102,826,437.95 Tax returned 2,188,518.65 1,650,016.66 Other cash received from business operation V(45) 42,758,245.86 44,470,345.04 Sub-total of cash inflow from business activities 1,252,726,153.03 1,148,946,799.65 Cash paid for purchasing of merchandise and services 1,045,527,627.48 946,657,072.80 Cash paid to staffs or paid for staffs 115,606,746.78 80,446,172.23 Taxes paid 59,068,854.01 52,925,005.20 Other cash paid for business activities V(45) 89,568,420.61 100,105,812.39 Sub-total of cash outflow from business activities 1,309,771,648.88 1,180,134,062.62 Cash flow generated by business operation, net -57,045,495.85 -31,187,262.97 II. Cash flow generated by investing Cash received from investment retrieving 51,000,000.00 854,089.54 Cash received as investment gains 99,342.47 3,176,516.97 Net cash retrieved from disposal of fixed assets, intangible 5,948,411.61 30,073,385.67 assets, and other long-term assets Net cash received from disposal of subsidiaries or other
operational units Other investment-related cash received V(45) 29,969,683.50 Sub-total of cash inflow due to investment activities 87,017,437.58 34,103,992.18 Cash paid for construction of fixed assets, intangible assets and 95,845,766.81 88,201,467.27 other long-term assets Cash paid as investment 51,000,000.00 Net cash received from subsidiaries and other operational units Other cash paid for investment activities V(45) 18,550,000.00 Sub-total of cash outflow due to investment activities 165,395,766.81 88,201,467.27 Net cash flow generated by investment -78,378,329.23 -54,097,475.09 III. Cash flow generated by financing Cash received as investment 340,499,960.00 Incl. Cash received as investment from minor shareholders Cash received as loans 397,000,000.00 623,000,000.00 Cash received from bond placing Other financing-related cash received V(45) Subtotal of cash inflow from financing activities 397,000,000.00 963,499,960.00 Cash to repay debts 407,000,000.00 596,000,000.00 Cash paid as dividend, profit, or interests 23,046,670.20 19,817,895.61 Incl. Dividend and profit paid by subsidiaries to minor
shareholders Other cash paid for financing activities V(45) 293,344.43 4,251,102.20 Subtotal of cash outflow due to financing activities 430,340,014.63 620,068,997.81 Net cash flow generated by financing -33,340,014.63 343,430,962.19 IV. Influence of exchange rate alternation on cash and cash equivalents 62,133.34 -91,059.81 V. Net increase of cash and cash equivalents -168,701,706.37 258,055,164.32 Plus: Balance of cash and cash equivalents at the beginning of year V(46) 468,878,715.15 210,823,550.83 VI. Balance of cash and cash equivalents at the end of year 300,177,008.78 468,878,715.15 Legal representative: Chief financial officer: Accounting Manager:
49
Consolidated Statement of Change in Shareholders’ Equity Year 2011 会合 04 表 Prepared by: China Fangda Group Co., Ltd. In RMB Yuan Amount of current year Amount of Last Year Owners’ Equity Attributable to the Parent Company Owners’ Equity Attributable to the Parent Company Less: Less: Common Minor shareholders’ Total of owners’ Common Minor shareholders’ Total of owners’ Shares Special Shares Special Items Share capital Capital reserves Surplus reserves risk Retained profit Others equity equity Share capital Capital reserves Surplus reserves risk Retained profit Others equity equity in reserves in reserves provision provision stock stock I. Balance at the end of 504,606,604.00 334,434,014.92 17,834,977.97 153,115,142.18 84,337,468.25 1,094,328,207.32 426,786,359.00 80,622,488.67 13,360,180.84 102,526,565.06 91,114,696.12 714,410,289.69 last year Plus: Change of accounting policy Correcting of previous errors Oth
ers II. Balance at the beginning 504,606,604.00 334,434,014.92 17,834,977.97 153,115,142.18 84,337,468.25 1,094,328,207.32 426,786,359.00 80,622,488.67 13,360,180.84 102,526,565.06 91,114,696.12 714,410,289.69 of current year III. Changed in current 252,303,301.00 -253,954,521.00 6,841,099.19 58,662,826.39 -6,123,802.32 57,728,903.26 77,820,245.00 253,811,526.25 4,474,797.13 50,588,577.12 -6,777,227.87 379,917,917.63 year (“-“ for decrease) (I) Net profit 65,503,925.58 -6,123,802.32 59,380,123.26 55,063,374.25 -6,777,227.87 48,286,146.38 (II) Other -1,651,220.00 -1,651,220.00 -4,955,100.48 -4,955,100.48 misc. income Total of (I) and (II) -1,651,220.00 65,503,925.58 -6,123,802.32 57,728,903.26 -4,955,100.48 55,063,374.25 -6,777,227.87 43,331,045.90 (III) Inputting or withdrawing 47,945,200.00 288,641,671.73 336,586,871.73 of shareholders’ investment 1. Capital input by 47,945,200.00 288,641,671.73 336,586,871.73 owners 2. Amount of shares paid and accounted as owners ’ equity 3. Others
50
(IV) Profit 6,841,099.19 -6,841,099.19 4,474,797.13 -4,474,797.13 allotment 1. Providing of surplus 6,841,099.19 -6,841,099.19 4,474,797.13 -4,474,797.13 reserves 2. Common
risk provision 3. Dividend to
shareholders 4. Others (V) Internal transferring of 252,303,301.00 -252,303,301.00 29,875,045.00 -29,875,045.00 owners ’ equity 1. Capital reserves 252,303,301.00 -252,303,301.00 29,875,045.00 -29,875,045.00 transferred to share capital 2. Surplus reserves
transferred to share capital 3. Making up losses by
surplus reserves 4. Others (VI) Special
reserves 1. Provided
this year 2. Used this
year (VII) Others IV. Balance at end of this 756,909,905.00 80,479,493.92 24,676,077.16 211,777,968.57 78,213,665.93 1,152,057,110.58 504,606,604.00 334,434,014.92 17,834,977.97 153,115,142.18 84,337,468.25 1,094,328,207.32 year Legal Chief financial officer: Accounting Manager: representative:
51
Balance Sheet Ended December 31, 2011 会企 01 表 Prepared by: China Fangda Group Co., Ltd. In RMB Yuan Balance at the end Balance at the Balance at the end Balance at the Items Notes Items Notes of year beginning of year of year beginning of year Current asset: Current liabilities Monetary Short-term 24,587,261.80 30,547,718.91 210,000,000.00 200,000,000.00 capital loans Trade off Transactional financial financial assets liabilities Notes Notes
receivable payable Account Account XI(I) 5,603,561.80 7,917,726.90 1,851,490.36 1,901,490.41 receivable payable Prepayment Prepayment 122,369.00 366,736.00 693,045.60 715,925.50 received Interest Employees ’ 1,251,357.38 881,767.40 receivable wage payable Dividend 57,338,200.00 43,936,500.00 Tax payable 655,031.17 930,370.30 receivable Other account Interest XI(II) 265,169,612.63 200,454,969.75 441,980.00 308,275.00 receivable payable Dividend Inventories payable Non-current Other asset due in 1 account 66,697,963.87 70,841,835.18 year payable Non-current Other current liability due asset in 1 year Other current
liability Total of current Total of current asset 352,821,005.23 283,223,651.56 281,590,868.38 275,579,663.79 liability Non-current Non-current assets liabilities Available-for-s Long-term 2,198,000.00 4,347,000.00 ale financial asset borrowings Expired investment in Bond payable possess Long-term Long-term
receivable payable Long-term Special share equity XI(III) 659,733,745.58 658,733,745.58 payable investment Investment real Anticipated 271,841,967.35 262,602,432.73 estates liabilities Differed Fixed assets 57,299,884.44 56,934,198.94 income tax 32,186,364.40 27,852,316.45 liability Other Construction in 298,019.24 87,378.64 non-recurring process liabilities Total of Engineering non-current 32,186,364.40 27,852,316.45 goods liabilities Fixed asset Total of 313,777,232.78 303,431,980.24 disposal liability Production Owners’
physical assets equity Capital paid Gas & petrol in (or share 756,909,905.00 504,606,604.00 capital) Intangible Capital 9,910,673.85 10,323,163.72 41,078,838.54 295,033,359.54 assets reserves Less: Shares R&D expense in stock Special Goodwill reserves Long-term Surplus amortizable 24,676,077.16 17,834,977.97 reserves expenses 52
Differed Common risk 14,415,297.03 15,161,997.10 income tax asset provision Other Retained 232,076,539.24 170,506,646.52 non-current asset profit Total of non-current Total of owners’ 1,015,697,587.49 1,008,189,916.71 1,054,741,359.94 987,981,588.03 assets equity Total of liability and Total of assets 1,368,518,592.72 1,291,413,568.27 1,368,518,592.72 1,291,413,568.27 owners’ equity Legal representative: Chief financial officer: Accounting Manager:
53
Income Statement Year 2011 会企 02 表 Prepared by: China Fangda Group Co., Ltd. In RMB Yuan Amount of current Amount of Last Items Notes year Year I. Turnover XI(IV) 44,378,065.25 42,313,848.48 Less: Operation cost XI(IV) 11,314,912.66 12,498,134.64 Business tax and surcharge 3,494,969.54 3,152,407.77 Sales expense 609,975.58 1,262,950.47 Administrative expense 20,079,220.00 21,119,463.52 Financial expenses 4,461,333.17 5,705,104.69 Asset impairment loss 427,828.17 5,290,131.62 Plus: Gains from fair value fluctuation (―-― for loss) 11,008,729.20 13,793,517.90 Investment gains (―-― for loss) XI(V) 57,402,644.44 43,936,500.00 Incl. Investment gains from affiliates II. Operational profit (“-“ for loss) 72,401,199.77 51,015,673.67 Plus: Non business income 2,063,986.79 3,932,797.05 Less: Non-business expenses 475,666.63 564,184.44 Incl. Loss from disposal of non-current 233,537.63 133,324.44 assets III. Gross profit (“-“ for gross loss) 73,989,519.93 54,384,286.28 Less: Income tax expenses 5,578,528.02 9,636,315.03 IV. Net profit (“-“ for net loss) 68,410,991.91 44,747,971.25 V. Earnings per share (I) Basic earnings per share (II) Diluted earnings per share VI. Other misc gains -1,651,220.00 584,519.45 VII. Total of integrated income 66,759,771.91 45,332,490.70 Legal representative: Chief financial officer: Accounting Manager:
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Cash Flow Statement Year 2011 会企 03 表 Prepared by: China Fangda Group Co., Ltd. In RMB Yuan Amount of current Amount of Last Items Notes year Year I. Net cash flow from business operation Cash received from sales of products and providing of 40,782,560.14 34,489,847.83 services Tax returned Other cash received from business operation 460,822,732.71 535,770,873.96 Sub-total of cash inflow from business activities 501,605,292.85 570,260,721.79 Cash paid for purchasing of merchandise and services 12,416,456.66 12,235,675.54 Cash paid to staffs or paid for staffs 7,361,345.99 6,390,488.89 Taxes paid 4,030,680.64 4,037,378.92 Other cash paid for business activities 522,851,939.32 605,883,833.61 Sub-total of cash outflow from business activities 546,660,422.61 628,547,376.96 Cash flow generated by business operation, net -45,055,129.76 -58,286,655.17 II. Cash flow generated by investing Cash received from investment retrieving 20,000,000.00 Cash received as investment gains 44,000,944.44 68,300,000.00 Net cash retrieved from disposal of fixed assets, intangible 8,040.00 3,200.00 assets, and other long-term assets Net cash received from disposal of subsidiaries or other
operational units Other investment-related cash received Sub-total of cash inflow due to investment activities 64,008,984.44 68,303,200.00 Cash paid for construction of fixed assets, intangible assets 1,761,027.93 1,344,712.01 and other long-term assets Cash paid as investment 21,000,000.00 335,385,071.73 Net cash received from subsidiaries and other operational
units Other cash paid for investment activities Sub-total of cash outflow due to investment activities 22,761,027.93 336,729,783.74 Net cash flow generated by investment 41,247,956.51 -268,426,583.74 III. Cash flow generated by financing Cash received as investment 340,499,960.00 Cash received as loans 210,000,000.00 410,000,000.00 Cash received from bond placing Other financing-related cash received Subtotal of cash inflow from financing activities 210,000,000.00 750,499,960.00 Cash to repay debts 200,000,000.00 420,000,000.00 Cash paid as dividend, profit, or interests 11,858,872.50 11,260,773.75 Other cash paid for financing activities 293,344.43 4,251,102.20 Subtotal of cash outflow due to financing activities 212,152,216.93 435,511,875.95 Net cash flow generated by financing -2,152,216.93 314,988,084.05 IV. Influence of exchange rate alternation on cash and cash -1,066.93 -1,614.73 equivalents V. Net increase of cash and cash equivalents -5,960,457.11 -11,726,769.59 Plus: Balance of cash and cash equivalents at the beginning of year 30,297,718.91 42,024,488.50 VI. Balance of cash and cash equivalents at the end of year 24,337,261.80 30,297,718.91 Chief Accounting Legal representative: financial Manager: officer:
55
Change in Owners’ Equities Year 2011 会企 04 表 Prepared by: China Fangda Group Co., Ltd. In RMB Yuan
Amount of current year Amount of Last Year Less: Less: Common Common Shares Special Total of owners’ Shares Special Total of owners’ Items Share capital Capital reserves Surplus reserves risk Retained profit Others Share capital Capital reserves Surplus reserves risk Retained profit Others in reserves in reserves provision equity provision equity stock stock I. Balance at the end of 504,606,604.00 295,033,359.54 17,834,977.97 170,506,646.52 987,981,588.03 426,786,359.00 35,682,213.36 13,360,180.84 130,233,472.40 606,062,225.60 last year Plus: Change of accounting policy Correcting of previous errors Other
s II. Balance at the beginning 504,606,604.00 295,033,359.54 17,834,977.97 170,506,646.52 987,981,588.03 426,786,359.00 35,682,213.36 13,360,180.84 130,233,472.40 606,062,225.60 of current year III. Amount of change in current term 252,303,301.00 -253,954,521.00 6,841,099.19 61,569,892.72 66,759,771.91 77,820,245.00 259,351,146.18 4,474,797.13 40,273,174.12 381,919,362.43 (“-“ for decrease) (I) Net 68,410,991.91 68,410,991.91 44,747,971.25 44,747,971.25 profit (II) Other -1,651,220.00 -1,651,220.00 584,519.45 584,519.45 misc. income Total of (I) -1,651,220.00 68,410,991.91 66,759,771.91 584,519.45 44,747,971.25 45,332,490.70 and (II) (III) Investment or decreasing of 47,945,200.00 288,641,671.73 336,586,871.73 capital by owners 1. Capital 47,945,200.00 288,641,671.73 336,586,871.73
56
inputted by owners 2. Amount of shares paid and accounted as owners ’ equity 3. Others (IV) Profit 6,841,099.19 -6,841,099.19 4,474,797.13 -4,474,797.13 allotment 1. Providing of 6,841,099.19 -6,841,099.19 4,474,797.13 -4,474,797.13 surplus reserves 2. Common risk provision 3. Dividend to shareholders 4. Others (V) Internal transferring of 252,303,301.00 -252,303,301.00 29,875,045.00 -29,875,045.00 owners ’ equity 1. Capital reserves 252,303,301.00 -252,303,301.00 29,875,045.00 -29,875,045.00 transferred to share capital 2. Surplus reserves transferred to share capital 3. Making up losses by surplus reserves 4. Others (VI) Special reserves 1．本年提
取 2．本年使
用
57
(VII)
Others IV. Balance at end of this 756,909,905.00 41,078,838.54 24,676,077.16 232,076,539.24 1,054,741,359.94 504,606,604.00 295,033,359.54 17,834,977.97 170,506,646.52 987,981,588.03 year Legal Chief financial officer: Accounting Manager: representative:
58 China Fangda Group Co., Ltd. Notes to Financial Statements 2011
China Fangda Group Co., Ltd. Notes to Financial Statements Yea r 2 011
Prepared by: China Fangda Group Co., Ltd. In RMB Yuan
I. I. General Information
China Fangda Group Co., Ltd. (the ―Company‖, or the ―Group‖) was approved by the Government of Shenzhen with Document 深府办函（1995）194 号, and was founded, on the basis of Shenzhen Fangda Construction Material Co., Ltd., by way of share issuing in October 1995. The Company issued foreign currency shares (B shares) and local currency shares (A shares) and listed in November 1995 and April 1996 respectively in Shenzhen Stock Exchange. On June 12, 1997, as approved by Shenzhen Bureau of Commerce with Document 深招商复[1997]0192 号, the Company was re-registered to a sino-foreign joint venture. Registration routines were completed with Shenzhen Commerce and Industry Administration on November 12, 1997. In October 1999, the Company started to use the current name. On March 25, 2011, the ―profit distribution and capitalizing plan 2010‖ was adopted on the Shareholders’ Annual Meeting 2010. Which was: basing on the total capital shares of 504,606,604 shares, 5 bonus share was added to each 10 shares to all shareholders, totally 252,303,301 shares was capitalized with face value of RMB1. In May 2011,the Company’s registered capital was changed to RMB756,909,905. The Company holds the business registration number of 440301501124785, and registered address of Fangda Building, Kejinan Road 12, High-tech Zone, Shenzhen. Mr. Xiong Jianming is the legal representative. Our business include new-type building materials, composite materials, metal wares, metal frames, environmental equipment and apparatus, fire fighting equipment, optical-mechanical-electrical integrated products, polymer materials and their products, fine chemical products, mechanical equipment, optical materials and devices, electronic displayer, audio-visual device, transport facilities (exclude restricted items and produces under export certification, and their design, developing, installation, construction, technical consulting, and training. Managing and leasing of properties under possession (Fangda Building at Ke-Ji-Nan Road 12, and Fangda Town at Longzhu Road 4), parking services of Fangda Building. Mr. Xion Jianming is the substantial controller of the Company.
II. Main Accounting Policies, Estimations and Retrospection of Previous Accounting Errors
（I） Basis for the preparation of financial statements Preparing of the financial statements was on the assumption of the Company’s perpetual operation, 59
China Fangda Group Co., Ltd. Notes to Financial Statements 2011 according to the trades and events practically happened, complying with the Enterprise Accounting Standard issued by the Department of Finance and relative application guidance. Accounting estimations and assumptions are used in preparing the financial statements with compliance to the Enterprise Accounting Standard, which will make influences on the assets, liabilities or contingent liabilities at the financial statement date, as well as the income and expenses in the report term.
（II） Statement of compliance to the Enterprise Accounting Standard The financial report and statements are prepared with compliance to the requirement of the Enterprise Accounting Standard. They reflect the financial position as of December 31, 2011, and business performance and cash flow situation in Year 2011 of the Company frankly and completely.
（III） Fiscal period The fiscal year of the Group is the solar calendar year, that is from January 1 to December 31.
（IV） Standard currency for bookkeeping The Company takes RMB as the standard currency for bookkeeping.
（V） Accounting treatment of the entities under common control and different control as well
1. Consolidation of entities under common control Assets and liabilities obtained by the merging party are calculated at their book value with the merged parties at the merger day. The differences between the book value of net assets and the book value of consideration price (or the total of face value of share issued) are adjusted to the share capital premium under the capital reserves. If the share capital premium is not enough to neutralize the difference, it will be adjusted to the retained gains.
2. Consolidation of entities under different control For merger of entities under different control, the merger cost is the fair value of the asset paid, liability undertaken, and equity securities issued for exchanging of control power over the entities at the day of acquisition. When a merger of entity under different control is undertaken through multiple trades, accounting treatments will be carried out separately on individual and consolidated financial statements as the followings: (1) In the individual financial statements, the initial investment cost of the particular project will be the sum of book value of equity in the entity before the date of acquisition and the newly added investment cost; When the share equity before the date of acquisition involves with other integrated gains, such gains (such as the part of fair value of the sellable financial assets accounted into capital reserves, same for the followings) are transferred into current investment income account. (2) In the consolidated financial statements, the share equity in the acquired entity before the date of acquisition is recalculated upon the fair value of the equity at the date of acquisition. The balance between the fair value and book value shall be accounted into current investment income account; When the share equity before the date of acquisition involves with other integrated gains, such gains are 60
China Fangda Group Co., Ltd. Notes to Financial Statements 2011 transferred into investment income account of the period when it occurred. Agency expenses and other administrative expenses such as auditing, legal consulting, or appraisal services occurred relating to the merger of entities are accounted into current income account when occurred; the transaction fees of equity certificates or liability certificates issued by the purchaser for payment for the acquisition are accounted at the initial amount of the certificates. For merger of enterprises under common control, the merger cost is the fair value of capital paid, liability occurred or undertaken, or equity instrument issued thereof, on the day of purchasing to obtain power of control over the bought party, and those expenses directly related to the merger. For merger done through multiple trades, the overall cost is the sum of cost of each single trade. If the merger contract provided faith on future events that may influence the merger cost, and the event has great possibility to happen, and its influence may be reliably measured, then it will be accounted into merger cost.
（VI） Preparation of Consolidated Financial Statements The Company puts subsidiaries and special entities on which the Company has substantial controlling power in the consolidated financial statement. The Financial Statements of the Company are prepared according to ―Enterprise Accounting Standard No.33 – Consolidated Financial Statements‖ and relative rules. All major trades and interchanges within the consolidation range have been neutralized. The part of shareholders’ equities not attributable to the parent company are presented individually as minority shareholders’ equity in the consolidated financial statements. When the accounting policies and periods of the subsidiaries are not complying with those of the Company’s, they shall be adjusted according to the Company’s accounting policy and accounting period. Subsidiaries added as merger of enterprises under different control, the individual statement shall be adjusted basing on the recognizable net asset fair value at the day of purchasing; subsidiaries added as merger of enterprise under common control, it will be regarded as existing since the control power is acquired, the initial figures of the consolidated balance sheet will be adjusted as well as the related items. （VII） Recognition of cash and cash equivalents Cash equivalent in cash flow statement refers to the investments with short term, strong liquidity and small risk of value fluctuation that are held by the Company and easily converted into cash with known amount.
（VIII） Foreign currencies Trades of the Company made in foreign currencies are translated into RMB basing on the middle rate announced by China Foreign Currency Trading Center which is authorized by People’s Bank of China at the date when the trade is conducted. At the balance sheet date, foreign currency items are translated on the middle rate announced by China Foreign Currency Trading Center, the translation differences, except for those constructed or produced and can be capitalized directly into relative capital costs, are accounted into current gain/loss account. Non-monetary items accounted in foreign currency and on historical costs, are still use the middle rate announced by China Foreign Currency Trading
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Center, and the amount in standard currency will not be changed.
（IX） Financial instrument 1. Classification, recognition and measuring basis of financial instruments Financial assets are categorized as: financial assets measured at fair value with variations accounted into current income account, account receivable (see Note II (X) for details), and disposable financial assets. Categorizing of financial assets are decided by the intention and capability of holding of the financial assets by the Company or its subsidiaries. The Company has financial liabilities including: financial liabilities and other financial liabilities accounted into current gain/loss account at fair value. (1) Financial assets measured at fair value with variations accounted into current income account Including transactional financial assets and financial assets directly measured by fair value and with variations accounted into current gain/loss account, which are initially recognized at the fair value when obtained, the related transaction expenses are accounted into current income account when occurred. Cash dividend and bond interests included in the prices paid which are announced but not distributed are recognized as receivable items individually. Interests or cash dividends received during the period of holding the particular financial assets are recognized as investment gains when received. At the balance sheet day, the fair values of such financial assets are accounted into current income account. At disposal of such financial assets, the differences between the fair value and initial booked value are recognized as investment gains, and the fair value fluctuation gain/loss will be adjusted accordingly. (2) Sellable financial asset Sellable financial asset refers to those sellable non-derivate financial assets recognized initially, namely the Company does not elicit financial assets accounted by fair value with variations accounted into current income account, investment hold to expiration, loans, and receivables. Sellable financial assets are initialized at the sum of fair value and related transaction costs when obtained. Due bond interests or cash dividend included in the payment that are announced but not distributed are recognized as receivables individually. Interests or cash dividends received during the period of holding the sellable financial assets are recognized as investment gains when received. At the balance sheet date, sellable financial assets are measured on fair values, and the variations of fair values are accounted into ―Capital reserves – other capital reserves‖. At disposal of sellable financial assets, the difference between the amount received and the book value of the financial asset will be accounted into ―investment gains‖, meanwhile, the amount of accumulative change of fair value originally accounted into owners’ equity corresponding to the disposed part will be transferred over to ―investment gains‖.
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
(3) Financial liabilities measured at fair value with variations accounted into current income account Including transactional financial liabilities and financial liabilities directly measured by fair value and with variations accounted into current gain/loss account, including:1} Financial liabilities undertaken to be repurchased in short future;2) Those directly assigned as financial liabilities directly measured by fair value and with variations accounted into current gain/loss account in view of risk management or strategic investment needs;3) Derivate instruments not used as hedging instruments. Such financial liabilities are evaluated at fair value, and the transaction expenses could happen in future clearance are not deducted. If fair value is not suitable, evaluation will be on balance of cost after amortizing. (4) Other financial liabilities Other financial liabilities are those other than financial liabilities measured by fair value and changes recorded into current gain/loss account, which mainly include account payable and long-term payable accounts generated by purchasing of goods. Other financial liabilities are initially recognized by their fair value plus relative trade expenses. Subsequent measurement is on amortized costs. For other financial liabilities which are not at fair value through profit or loss, for example financial guaranteed contracts, they are initially recognized at fair value plus any directly attributable transaction costs. After the initial recognition, the other financial liabilities are measured at the higher of the followings: 1. The amount measured in accordance with ―Accounting Standards for Business Enterprises No.13 – Contingency‖ 2. The amortized balance measured in accordance with ―Accounting Standards for Business Enterprises No.14 – Revenue‖
2. Basis of recognition and accounting of financial asset transferring Transferring of financial assets by the Company is including the following two cases: (1) Transfer the rights of collecting the cash flow attached to the financial asset to another party; (2) Transfer the financial asset to another party, but reserve the rights to collect cash flow related to such financial asset, and is responsible to pass the cash flow over to the final beneficiary, and satisfying all of the following conditions: A. Only when equal cash flow was received upon the financial asset, the party is obligated to give it to the final beneficiary party. When an enterprise is making payment on other’s behalf for a short term, and will be retrieved in full along with interest at fair market rate, shall be deemed as satisfying this condition. B. As bounded by the contract, the financial asset is not able to be disposed or use as guarantee, however it can be used as guarantee for cash flow of final payment. C. The party is obligated to duly forward the cash flow to the final beneficiary party. However except for the cash or cash equivalent the enterprise is not entitled to reinvest, but received between the two payments as setout by the contract. When the party is reinvesting the cash according to the contract,
63
China Fangda Group Co., Ltd. Notes to Financial Statements 2011 the gains shall be passed to the final beneficiary party according to the contract. Recognition of the financial asset is terminated as soon as all of the risks and rewards attached to the financial asset has been transferred to the receiver. Whereas if all of the risks and rewards attached to the financial assets are reserved, recognition of the financial asset shall not be terminated. When non of the transferring or reserving of the all risks and rewards attached to the financial asset happened, it will be handled as: (1) When the controlling power over the financial asset is given up, it will be terminated. (2) When the controlling power is not given up, financial asset and related liability shall be recognized according to the extend the Company is involving in the financial asset.
3. Termination of recognition of financial liabilities As soon as partial or all of the current responsibilities attached to such financial liabilities, recognition of partial or all of the financial liabilities will be terminated. When recognition of financial liabilities are partially or wholly terminated, the balance between the book value and the price paid (including non-monetary asset transferred out or new financial liabilities undertaken) shall be accounted into current income account.
4. Recognition of financial instrument fair values Recognition of fair value is divided into three levels: firstly, when a quotation of the same asset or liability is acquirable from an active market at the date of recognition, the fair value will be used; secondly, when a quotation of similar asset or liability is acquirable from an active market at the date of recognition, or in an inactive market, the fair value will be used after made reasonable adjustment; thirdly, when no such market quotation is available for the same or similar asset or liability, the fair value will be recognized with reference to the date used by the participators to determine the similar asset or liability. Observable value is used rather than unobservable value.
5. Impairment testing on financial assets, providing of impairment provision At balance sheet date, the Company performs testing on the book value of financial assets other than those measured by fair value and changes accounted into current income account. As for sellable financial assets, if the fair value decreased significantly, and it was predicted not temporary, then impairment loss will be accounted at the difference between the balance of initial cost less retrieved principle less amortized amount and current fair value. The accumulative losses formed by decreasing of fair value originally accounted into the owner’s equity are transferred out along with providing of impairment losses, and accounted into ―asset impairment loss‖.
（X） Account receivable Accounts receivable (including account receivable and other account receivable) are initially accounted according to the contract amount or agreement amount. Accounts receivable that are unrecoverable due to bankruptcy of the debtor (still unrecoverable through insolvency procedures); death of the debtor, and no inheritance or heir of liabilities available; or failure of clearing overdue liabilities by the debtor, will be accounted as bad debt losses through legal verification procedures.
64
China Fangda Group Co., Ltd. Notes to Financial Statements 2011
When the Company is raising finance from financial institutions such as banks against receivable credits by means of transferring, pledging, or discounting, according to the related contracts, when the debtor failed to repay the debt, if the Company was responsible to repay the amount, then the particular receivable credit will be treated as pledged loan; if the Company was not responsible to repay the amount, then the receivable credit will be treated as transferred credit, and transferring gain/loss shall be recognized. When the Company retrieves the receivables, the differences between the amount retrieved and book value of the receivable shall be accounted into current gain/loss account.
1. Recognition and providing of bad debt provision on individual receivable account with large amount The Company divides receivable accounts into project receivables and product receivables. Project receivables are those recognized at percentage according to the construction contract, product receivables are those formed in other ways. For the current year, the Company recognizes project receivables over RMB8 million (included) as ―individual receivable with large amount‖ while recognizes product receivables over RMB2 million (included) as ―individual receivable with large amount‖ and other receivables over RMB1 million (included) as ―individual receivable with large amount‖. On balance sheet day, the Company performs impairment examination individually on each large amount receivables, and recognizes impairment and provides bad debt provision when the impairment is recognized; those not impaired are accounted along with the minor amount receivables and recognized in risk groups.
2. Account receivable with minor individual amount but provided of bad debt provisions The Company categorizes the engineering projects lower than RMB8 million as ―account receivable with minor individual amount‖; the product lower than RMB2 million as ―account receivable with minor individual amount‖; and other receivable account lower than RMB1 million as ―other account receivable with minor individual amount‖. Individual impairment tests are performed individually on receivable accounts aged over 5 years. Full impairment provision will be provided when there is no substantial evidence showing that it could be retrieved.
3. Recognition and providing of bad debt provisions on groups Receivable accounts are divided into two groups, which are receivable accounts not consolidated and receivable accounts consolidated. Receivable accounts consolidated are provided for bad debt provisions on basis of individual recognition; while receivable accounts not consolidated are provided fro bad debt provisions on basis of age analyzing as the following:
Age Providing rate (%) Within 1 yr, (included) 3.00 1-2 yrs 10.00
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Age Providing rate (%) 2-3 yrs 30.00 Over 3 yrs 50.00 （XI） Inventories 1. Categorizing of inventories Inventories are those under the Company’s possession for the purpose of selling, in the process of production, or materials and goods used in production process or providing of services, including materials purchased, raw materials, low-value consumables, OEM materials, products in process, semi-finished goods, finished goods, agency goods, and construction in process.
2. Pricing of delivering inventory Inventories are measured at cost when procured, including purchase cost, processing cost, and other costs. Actual costs are recognized at weight average when delivered. Transferring of construction materials are recognized individually.
3. Recognition of inventory realizable value and providing of impairment provision On the balance sheet date, inventories are accounted depending on which is lower between the cost and the net realizable value. At overall verification of inventories at the end of year, when the net realizable value is lower than the cost, provisions for impairment of inventories shall be drawn. Provisions for impairment of inventories shall be accounted according to the difference between the cost of individual inventory items and the net realizable value. Including: for inventories such as finished products or materials which will be directly sold, in the normal operation, the realizable net value will be the balance of estimated selling price less sales expenses and relative taxations; For those inventories need further processing, in the normal operation, the realizable net value will be the balance of estimated sales price less costs to make it finished, less estimated sales expenses, and less relative taxation. At the balance sheet day, inventories with contract prices will be determined for realizable value separately from those without contract prices.
4. Inventory system The Company uses perpetual inventory system. Inventories are checked periodicly and the gains and losses from inventory checking are accounted into current gain/loss account.
5. Amortizing of low-value consumables and packaging materials Low-value consumables are amortized on on-off amortization basis at using. Other materials are amortized at 50-50 basis.
（XII） Long-term share equity investment All of the long-term share equity investment of the Company are the investment in subsidiaries:
1. Recognition of initial investment costs
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Investment of the Company in subsidiaries are valued at investment costs. For long-term share equity investment formed by shareholding and merger please see Note II(V). Retrospective or retrieved investment are adjusted to the cost of long term equity investment.
2. Subsequent measurement and recognition of gain/loss The Company uses cost basis in subsequent measurement of investment in subsidiaries, and adjusted on equity basis when preparing the consolidated financial statement. Except for the announced cash dividend or profit included in the practical cost or price when the investment was made, the investment gains are recognized at the announced cash dividend or profit distribution.
3. Impairment examination and providing of impairment provision At the balance sheet day, if evidence showing that impairment occurred on the long-term equity investment, the recoverable amount shall be decided by the higher one of net amount of fair value less disposal fees and the current value of predicted future cash flow. When the recoverable amount of the long-term equity investment is lower than the book value, the book value will be reduced down to the recoverable amount, the reduced amount is recognized as asset impairment loss and counted into current gain/loss account, asset impairment provision shall be provided accordingly. Once the long-term equity investment impairment loss is recognized, it will not be written back in following fiscal terms.
（XIII） Investment real estates Investment real estates are buildings rented out. Investment real estate is measured according to the initial cost. Cost of real estate purchased from outside includes purchasing price, tax, and other expenses directly related to the real estate; cost of real estate constructed by the Company itself is constructed by the essential costs to make the real estate usable. Accounting of investment real estates of the Company is on fair value basis when the following conditions are satisfied: (1) There is an active real estate market where the investment real estate is located; (2) Market price and other related information of similar real estates may be acquired from the market and used to make reasonable estimation on the fair value of the investment real estate. At the balance sheet date, the Company uses fair value to measure the investment properties, no depreciation or amortizing is made on the investment properties, book value is adjusted on the base of fair value of the property at balance sheet date, and the differences between the fair value and the original book value are counted into current gain/loss account. At disposal of investment properties, or retrieve from the property permanently and no further financial benefit is expected to obtain from the property, recognition of the investment property will be terminated. Balance of income from disposal, transferring, discarding, or clearing of investment properties less the book value and related taxes is counted into current gain/loss account.
（XIV） Fixed assets 1. Conditions for fixed asset recognition Fixed assets is defined as the tangible assets which are held for the purpose of producing goods, 67
China Fangda Group Co., Ltd. Notes to Financial Statements 2011 providing services, lease or for operation & management, and have more than one year of service life.
2. Depreciation of fixed assets Other than fixed assets which have already been provided depreciations in full but still in use, the Company provides depreciations upon all of the fixed assets. Straight age average basis is adopted in depreciation. According to the property and usage of the fixed assets, the Company decides the service life and predicted net retained value. At end of each fiscal year, verification will be made on the useful life, predicted retained value, and depreciation basis, adjustment will be made if difference occurred to the original estimations. Categories, useful life, predicted net retained value, and annual depreciation rate of fixed assets are as the followings: Annual depreciation Categories Depreciation age (year) Residue rate (%) rate (%) Houses & buildings 35-45 10 2-2.57 Equipment & machinery 10 10 9 Transportation facilities 5 10 18 Electronics and other 5 10 18 devices 3. Impairment testing and impairment provisions At the balance sheet day, fixed assets are accounted at the lower one of book value and retrievable value. If the retrievable value is lower than the book value, the book value will be deducted to the retrievable value, and the deducted amount will be recorded as asset impairment loss into current income account, and impairment provision shall be provided accordingly. Once the impairment loss was recognized, it will not be written back in coming fiscal terms.
4. Other statements Fixed assets are initially measured at costs. Among them, cost of fixed assets purchased from outside include purchasing price, tariffs and other taxes, and other expenditures directly related to the asset before it reaches the useful status. Cost of self-build fixed assets is the necessary costs before it is made useful.Fixed assets invested by investors are booked at the value according to the investment contract, whereas when the contract value is not fairly acceptable, it will be booked at the fair value. When a payment for purchasing of fixed asset is overdue and practically forms financing activity, the fixed asset is recognized at the current value of purchasing price. When fixed asset is disposed, or made no financial benefit by using or disposing it, recognition is terminated. Income from disposal, transferring, discarding of fixed assets, less its book value and taxes, is accounted into current income account.
（XV） Construction in process Construction in process conducted by the Company itself, its actual cost consists of essential costs of carrying on the construction till it reaches usable status.Construction in process includes workshops
68
China Fangda Group Co., Ltd. Notes to Financial Statements 2011 and equipment installation projects. Cost of fixed asset which has already become usable but not settled yet, is recognized according to estimated value, and depreciations share be provided. Upon completion of settlement, the original estimated value shall be adjusted according to the actual cost, but the depreciations made previously shall not be adjusted. At the balance sheet day, construction in process are accounted at the lower one of book value and retrievable value. If the retrievable value is lower than the book value, the book value will be deducted to the retrievable value, and the deducted amount will be recorded as asset impairment loss into current income account, and impairment provision shall be provided accordingly. Once the impairment loss was recognized, it will not be written back in coming fiscal terms.
（XVI） Borrowing expenses Borrowing expenses occurred to the Company that can be accounted as purchasing or production of asset satisfying the conditions of capitalizing, are capitalized and accounted as cost of related asset. Other borrowing expenses are recognized as expenses according to the occurred amount, and accounted into gain/loss of current term. Assets satisfying the conditions of capitalization are referring to the fixed assets, investment properties, and inventories that need a long-term construction or production process to reach the usable or sellable status. Borrowing expenses start to be capitalized when all of the followings are satisfied:(1) Asset expense has already occurred. Asset expenses include cash payment, non-cash asset transferring, or undertaking of debt with interest done for purchasing or producing of assets. (2) The borrowing expense has already occurred. (3) Purchasing or production activity, which is necessary for the asset to reach the useful status, has already started. In the period of capitalization, the capitalized amount of each fiscal period, if it is a special borrowing for construction or production of asset satisfying the capitalizing conditions, is the interest expenses actually occurred less the interest income from the unused part of borrowings or from temporary investment. If it used a common borrowing for construction or production of asset satisfying the capitalizing conditions, the capitalized interest amount will be decided by the weighted average of accumulative asset expenses over the capital expenses of the special borrowing multiply the capitalizing ratio of common borrowing. Capitalizing amount of the interests shall not more than the actual amount of interest actually occurred to the current relative borrowing. If the construction or production of assets satisfying the capitalizing conditions is suspended abnormally for over 3 months, capitalizing of borrowing expenses shall be suspended. Borrowing expenses occurred in the suspension period are recognized as expenses and recorded to current income account, until the construction or production is resumed. If the suspension is an essential process to make the asset usable or sellable, capitalizing of borrowing expenses shall be carried forward. When the asset satisfying the capitalizing conditions has reached its usable or sellable status, capitalizing of borrowing expenses shall be terminated.
（XVII） Intangible assets and development expenses
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Intangible assets are those recognizable non-monetary assets without physical shape under the Company’s possess or control, including land using rights, patent, industry property, special technologies, and softwares. Intangible assets are initially measured by their costs. Intangible assets purchased are booked at the actual cost to purchase and relative expenses. Intangible assets inputted by investors are booked at the contract or agreement price, but if the contract or agreement price is not fairly acceptable, it will be booked at fair value. The Company analyses and determine the usable life when intangible assets are obtained, and are classified into intangible assets with limited useful life, and uncertain useful life. Intangible assets with limited useful life are amortized straightly to the useful life, the useful life and amortizing basis are reconsidered at the end of each year, when there is difference with the original estimation, adjustment shall be made. Intangible assets with limited useful life are amortized as followings:
Categories Useful life Basis of amortization Notes Land using right 50 yrs Average age Patent 10 yrs Average age Industrial property and special 10 yrs Average age Internal R&D tech Software 5,10 yrs Average age 10 yrs or beneficial Other intangible assets Average age age Intangible assets without certain useful life are not amortized. They will be reconsidered in each accounting period, if strong evidence showing that the useful life became limited, then it will be estimated, and amortized on straight basis. Intangible asset without certain useful life shall be tested each year whether or not there is evidence of impairment. On the balance sheet date, the Company measures intangible assets according to the lower of book value and retrievable value, intangible asset impairment provisions shall be provided at the difference of retrievable value lower than the book value, and the corresponding impairment loss shall be recorded to current income account. Once intangible asset impairment losses are recognized, they will not be written back in successive fiscal periods. Internal R&D expenses are divided into research expenses and development expenses and treated separately. The period of scientific or technological creation or research is categorized as research period. The period of using the researching fruits or other know-how into practical projects or designing of substantial products, equipment, or materials is recognized as development period. Research refers to creative and planned investigation on new science or technologies. Development means using the researching fruits or other know-how into practical projects or designing of substantial products, equipment, or materials is recognized as development period. Expenses of internal R&D projects in research stages are recorded into current income account when occurred; expenses of internal R&D projects in development stages, are recognized as intangible assets when all of the following conditions are satisfied, or otherwise recorded to current income account: 70
China Fangda Group Co., Ltd. Notes to Financial Statements 2011
(1) Developing of the intangible asset is about to be completed, and it is technically possible to be put into use or sold;(2) Has the intention to use or sell it; (3) The intangible asset is proved being able to make financial benefit, including there is a market for the products using the intangible asset or the intangible asset itself. If the intangible asset is used internally, its usage should be proved;(4) There are sufficient technologies, financial resources, or other resources that support the developing, using or selling of the intangible asset;(5) When the expenses attributable to the intangible asset can be reliably measured. The development expenses accounted in prior income accounts shall not be recognized as asset in succeeding period. Development expenses that have been capitalized shall be demonstrated as expenses in the balance sheet, and transferred into intangible asset as soon as it reaches usable status.
（XVIII） Long-term amortizable expenses Long-term amortizable expenses are those expenses paid and with beneficial period of over one year (not included), including improving of leased fixed asset, with the amortizing method as below:
Categories Basis of amortization Period of amortizing Expenses for improving of Straight average on period Beneficial period rental fixed assets （XIX） Goodwill Goodwill is the difference of merger costs of enterprises under same control over the share of recognizable net asset or fair value at the date of purchasing of the invested company. Goodwill related to subsidiaries are presented individually in consolidated financial statements. Goodwill presented individually in financial statements are tested for impairment at leased once at end of each year. At impairment test, the book value of goodwill shall be shared by the benefited asset group according to the collaboration effects between the merger businesses.
（XX） Anticipated liabilities When responsibilities occurred in connection to contingent issues, and all of the following conditions are satisfied, they are recognized as expectable liability in the balance sheet:(1) This responsibility is a current responsibility undertaken by the Company;(2) Execution of this responsibility may cause financial benefit outflow from the Company;(3) Amount of the liability can be reliably measured. Expected liabilities are initially measured at the best estimation on the expenses to exercise the current responsibility, and with considerations to the relative risks, uncertainty, and periodic value of currency. When the periodic value of currency is with major influence, then the best estimation will be determined at the discount of future cash outflow. The book value of expected liability is revised at balance sheet day, and adjustment will be made to reflect current best estimation.
（XXI） Revenue 1. Sales of goods When all of the following conditions are satisfied, the sales of goods are recognized as sales income according to the contract amount received or receivable from the buyer:(1) Main risks and rewards attached to the ownership of the goods have been transferred to the buyer;(2) No succeeding power of 71
China Fangda Group Co., Ltd. Notes to Financial Statements 2011 administration or effective control is reserved which are usually attached to ownership;(3) Amount received can be reliably measured;(4) Related financial benefit may inflow to the Company;(5) Relative costs, occurred or will occur, can be reliably measured. When collection of contract payment is by differed way, and practically with financing characters, sales income shall be recognized at the fair value of the receivable contract amount.
2. Providing of labor service Labor service started and completed in a same fiscal year is recognized as income at completion. If they are not in the same year, then use the estimation on percentage basis when it is possible. The completion percentage is the costs occurred on the total cost. When the partial of service is not able to be estimated, the labor service income is treated as the followings: A. When the labor cost occurred is expectable to be covered, the labor service income is recognized at the cost already occurred, and recorded to labor cost as well. B. When the labor cost occurred is not expectable to be covered, the cost will be recorded to current gain/loss account without recognizing as labor service income. When a contract engaged with other company is including sales of goods and providing of labor services, if the goods and services can be measured separately, they will be treated separately. When they are not able to be distinguished, or not able to be measured separately, all of them will be treated as sales of goods.
3. Demising of asset using rights Income is recognized when the financial benefit in connection with the demising of asset using right was received and the amount can be reliably measured. Interest income is recognized according to the applicable period of time and interest rate. Amount of application fee is recognized according to the period and calculation decided by the related contract. 4. Construction contracts Metro screen door projects of the Company and Shenzhen Fangda Automatic System Co., Ltd. (Fangda Automatic System), and glass curtain wall project of Shenzhen Fangda Decoration Engineering Co., Ltd. (Fangda Decoration) are individual construction contracts, they are accounted by the following means: Construction contracts completed within a fiscal year are recognized for their income and cost upon completion. Income and expenses of the construction contracts carried over-year are recognized on percentage basis at balance sheet day when all of the following conditions are satisfied: contract income can be reliably measured, relative financial benefit can inflow to the Company; progress of the project and costs to complete the contract can be reliably recognized; cost occurred to complete the contract can be clearly distinguished and reliably measured, which enables comparing of actual cost with predicted cost. Contract costs are direct and indirect expenses occurred since the date when the contract is engaged till the completion day. The completion percentage is the accumulated cost already occurred on the
72
China Fangda Group Co., Ltd. Notes to Financial Statements 2011 predicted total cost. Construction contracts completed in current term are recognized for income according to the actual total income of the contract less income recognized in previous terms; meanwhile, the total costs of the contract less costs recognized in previous terms are recognized as current contract costs. If the total contract cost is predicted to be greater than the predicted total income, the predicted loss shall be recognized as current cost instantly. Parts of the curtain wall project under Fangda Decoration are outsourced, and administrative fees are collected at agreed rate. For these construction contracts, income will be recognized when ongoing payment for the project is received and corresponding costs are transferred.
（XXII） Government subsidy Government subsidies are the monetary or non-monetary capital received from the government by free, but not include capital inputted by the government as investment of owners. When a government subsidy is monetary capital, it is measured at the received or receivable amount. None monetary capital are measured at fair value; If no reliable fair value available, recognized at RMB1. Government subsidies in connection with capital are recognized as differed income, and amortized straight to its useful life, and accounted into current income account. Government subsidies in connection with gains, which are used to cover future expenses or losses, are recognized as differed gains, and recorded to current income account to the period when the expenses are recognized. If a recognized government subsidy need to be returned, if there is relative differed gains, the balance of differed gains will be setoff, the exceeded part shall be recorded into current income account; if there is no relative differed gains, record to current income account directly. （XXIII） Differed income tax assets/ differed income tax liabilities Income taxes are accounted on liability basis in the balance sheet. When there is difference between the book value and taxable basis of asset or liability, differed income tax asset and differed income tax liability are recognized according to the regulations. At the balance sheet day, the current income tax liabilities (or assets) formed in current term or previous term, are measured by the amount of income tax to be paid (or refunded) according to the taxation law; differed income tax assets and liabilities are measured at the applicable tax rate in the period when the asset is predicted to be retrieved or the liability is predicted to be cleared. Recognition of differed income tax asset is limited to the provisional difference to be deducted, and deductible losses and taxable income amount. If the taxable income realized in the future period of transferring of provisional differences is not sufficient, which made the financial benefit related to the provisional difference unrealizable, no differed income tax asset is recognized.Differed income tax liabilities generated by the taxable provisional difference related to fluctuation of fair value of investment in subsidiaries and affiliates are recognized, but those satisfying the recovering time of the taxable provisional difference are not recognized; At the balance sheet day, the book values of differed income tax assets are revised. Those deductible provisional differences, which are neither enterprise merger, nor initial recognition of assets 73
China Fangda Group Co., Ltd. Notes to Financial Statements 2011 or liabilities are recognized as income tax expenses or income into current income account. （XXIV） Operational leasing and financial leasing If the leasing contract transfers all of the risks and rewards attached to the asset at substantially transferred to the lessee, then it is recognized as financial leasing, and the others are operational leasing.
1. The Company is the lender In financial leasing, the book value of financial rental is the sum of lowest amount of the rent and the initial expenses since the date when the lease is started.The difference between the sum of lowest rental, initial direct expense and unsecured balance and the current value is recognized as the unrealized financial income. Unrealized financial income is recognized as financial income at actual interest basis to the periods of the leasing period. Rentals from operational leasing are recognized as current gains on straight basis to the periods of leasing. Initial direct expenses are recorded to current income account.
2. The Company as lessee Rentals in operational leasing are recorded to relative capital cost or current income account on straight basis to the periods of leasing. Initial direct expenses are recorded to current income account.
（XXV） Accounting of hedging instruments Hedging instruments are the financial instruments adopted by the Company to avoid risks of fluctuating product prices, namely use the expected change of cash flow of the hedging instruments to wholly or partially deduct the change of cash flow of the target products. Hedging instrument used by the Company is Aluminum Future Contract targeting on purchasing of aluminum materials. The Company considers the hedging instrument highly effective only when the following conditions are satisfied: 1. The hedging instrument can effectively neutralize the risks of the target goods caused by change of cash flow since it started and in the following period. 2. The actual effectiveness is between 80% and 125%. The part of gains or loss from hedging instruments attributable to effective hedging, shall be straightly recognized as owners’ equity and demonstrated individually. The amount of the effective hedging shall be decided by the lower one of absolute values of gain or loss since starting of hedging and the accumulative variation of cash flow predicted from the beginning of hedging.When a predicted transaction makes the Company recognized a financial asset or liability, the gain or loss originally recognized as owners’ equity shall be written over to current income account in the same period with the gain or loss of the financial asset or its influence of the Company’s gain/loss. When the net loss originally recognized to owners’ equity is fully or partially unrecoverable in succeeding account period, the unrecoverable part shall be written over to current income account. The above hedging accounts are terminated as soon as expiration, sold, terminated, and disqualified.
（XXVI） Change of main accounting policies and estimations 1. Change of Accounting Policies No material change of accounting policies occurred in the year. 74
China Fangda Group Co., Ltd. Notes to Financial Statements 2011
2. Change of accounting estimations No material change of accounting estimations occurred in the year. （XXVII） Correction of previous accounting faults No correction of previous accounting faults occurred in the report term.
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
III. Taxation
Main categories and rates of taxes 1. Operation tax and surtaxes
Tax items Tax basis Rate income from curtain wall and metro screen door 3% Business tax installation projects Rental and service charge income 5% Sales income of curtain wall and aluminum materials 17% VAT Sales income of screen door materials 17% Sales income from LED products 17% City maintenance and turnover tax payable 7%、5%、1% construction tax Education surtax turnover tax payable 3% Local education turnover tax payable 2%、1% surcharges 2. Enterprise income tax
Name of companies Tax rate Note The headquarter 24% Note (1) Fangda Decoration 15% Note (2) Fangda Automatic 15% Note (3) Fangda Yide 24% Note (1) Shenzhen Guangke Optical & Electronics 24% Note (1) Co., Ltd. Shenzhen Woke 24% Note (1) Fangda New Materials (Jiangxi) Co., Ltd. 12.5% Note (4) Jiangxi Fangda New Type Aluminum Co., 25% Ltd. Shenyang Fangda Semi-conductor 25% Lighting Co., Ltd. Dongguan Fangda New Material Co., Ltd. 25% Shenzhen Kexunda Software Co., Ltd. 25% Note: (1) The People’s Congress passed ―The Income Tax Law of PRC‖ (the new Tax Law‖) on March 16, 2007. The new Tax Law took effect on January 1, 2008. Corporation income tax was reduced from 33% to 25%. High-tech enterprises recognized by the national government are subject to 15% of corporation income tax. According to document 国发[2007]39 号文 issued by the national government, the Company and the subsidiaries were subject to 15% of corporation tax, whereas since 2011, the tax rate is increased to 24%. (2) According to the Certification of High-tech Enterprise issued by Shenzhen Commission of Trade Industry and IT, Shenzhen Commission of Finance, Shenzhen National Tax Bureau, and Shenzhen Local Tax Bureau on October 29, 2009, Fangda Decoration was entitled to enjoy 15% of Corporation 76
China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Tax for three years (2009-2011) since the qualifications were awarded. (3) According to the Certification of High-tech Enterprise issued by Shenzhen Commission of Trade Industry and IT, Shenzhen Commission of Finance, Shenzhen National Tax Bureau, and Shenzhen Local Tax Bureau on October 29, 2009, Fangda Automatic was entitled to enjoy 15% of Corporation Tax for three years (2009-2011) since the qualifications were awarded. (4) As approved by Nanchang High-tech Zone Tax Bureau with document 洪高国税发（2008）74 号, Fangda New Material enjoys ―2 free 3 half‖ policy since 2008. The rate is 12.5% in 2011.
3. Property tax Property tax rate applicable to the Company and subsidiaries is 1.2% basing on 70% of the original value of property in Shenzhen. Same for the properties of subsidiaries outside Shenzhen for self use. Leasing property is subject to 12% of tax on rental income.
4. Personal income tax Individual income tax of the employees are paid by the Company on behalf.
IV. Merger of enterprises and consolidated financial statements
（I） Profiles of the subsidiaries
1. Subsidiaries founded acquired from investment
Name of Ownershi Registered Legal the Business p of the Reg. Add. capital represe Business scope subsidiari property subsidiary RMB0’000 ntative es Designing, manufacturing, Fangda Fully-own and installation of curtain Xiong Decoratio ed Shenzhen Ltd. liability 31,000.00 walls, glass shields, doors, Jianwei n subsidiary windows, fences, and ceilings. Designing, technical Fully-own developing, installation, and Fangda Lin ed Shenzhen Ltd. liability 10,500.00 sales of PSD system; import Automatic Kebin subsidiary & export; installation and processing of PSD. Fully-own Yang Developing, designing, Fangda Sino-foreign ed Shenzhen USD320.00 Xiaozh manufacturing of new type Yide Co. joint venture subsidiary uan composite materials Production and selling of new materials, compound Ltd. liability materials, curtain walls, (joint venture doors, windows, metal Fangda Fully-own between Yang structures, metal products, New ed Nanchang companies USD1,200.00 Xiaozh environment protection Material subsidiary from Taiwan, uan products, metallurgy Hong Kong or equipment, machinery, Macao) aluminum products, heat radiation materials, macromolecule materials. Desgining, manufacturing, Ltd. liability sales and installation of Fangda Fully-own (Joint venture Yang aluminum sections for curtain Aluminiu ed Nanchang with foreign 2,000.00 Xiaozh walls, doors, and windows; m subsidiary invested uan decoration design, water and company) power supply equipment, air
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
conditioner installation. House renting, equipment renting. Fully-own BODY HK Junjia ed HK HKD1.00 Investment CORPORATE subsidiary Manufacturing of semiconductor lighting material and chips; lighting source encapsulation; developing, manufacturing, technical consulting of semiconductor lighting Controlle products; developing, Wang Shenyang d designing, manufacturing, Shenyang Ltd. liability 20,000.00 Shengg Fangda subsidiari engineering, installation and uo es trading of semiconductor lighting system; materials and products related to semi-conductor lighting; trading of construction material; import and export agency service of products and technologies. Developing, designing and sales of new construction material; developing, designing, installation and trading of curtain walls, PSD systems, LED products, metal roof products, and solar-energy products; interior Fully-own decoration; water and power Dongguan Ltd. liability ed system installation; New (Sole Xiong subsidiary Dongguan 21,280.00 installation and trade of Material investment by Jianwei of air-conditioning system; Co., Ltd. legal person) subsidiary designing, installation, trade of lighting system; contracting of overseas curtain wall projects and domestic international bidding projects; manpower outsourcing; import and export of goods and technologies Ltd. liability Fully-own Developing of hardware and Kexunda (Sole Lin ed Shenzhen 100.00 software, system assembling, Co. investment by Kebin subsidiary technical consulting legal person) Name of Actual Balance of other items Share the Voting investment at actually formed net proportion Consolidated or not subsidiari rights (%) end of year investment in the (%) es (RMB0’000) subsidiaries Fangda Decoratio 100.00 100.00 31,000.00 Yes n Fangda 100.00 100.00 18,377.73 Yes Automatic Fangda 100.00 100.00 USD320.00 Yes Yide Co. Fangda New 100.00 100.00 USD1,200.00 Yes Material Fangda Aluminiu 100.00 100.00 2,000.00 Yes m
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
HK Junjia 100.00 100.00 HKD1.00 Yes Shenyang 64.58 64.58 10,885.21 Yes Fangda Dongguan New 100.00 100.00 21,280.00 Yes Material Co., Ltd. 科迅达公 100.00 100.00 100.00 Yes 司 Name of Minor Amount for deducting the Ownershi Organizati minor shareholder’s shareholders’ Note subsidiari p type on code equity in the minor equity es shareholder’s equity Fangda Corporati 19244418- Decoratio on 2 n Fangda Corporati 75425429-
Automatic on 3 Fangda Corporati 61929454-
Yide Co. on 0 Fangda Corporati 74852611- New on 7 Material Fangda Corporati 15830664- Aluminiu on 0 m 3007554-2 Corporati HK Junjia 000-04-10 on -4 Minority shareholders’ equity Shenyang Corporati 66254891- 78,213,665.93 -6,123,802.32 in Shenzhen Woke already Fangda on 3 included Dongguan New Corporati 56457096-
Material on 5 Co., Ltd. Kexunda Corporati 58409491-
Co. on 9
2. Subsidiaries procured from merger of companies under different control
Name of Registered Ownershi Legal the Business capital p of the Reg. Add. represen Business Scope subsidia property (RMB0’0 subsidiary tative ries 00) Subsidiar R&D, designing, production, after Wang Shenzhe y of Ltd. service of LED products; installation Shenzhen 1,000.00 Shenggu n Woke controlled liability of LED color displayer, city and road o subsidiary lighting system. Name of Actual the investmen Balance of other items Share subsidia Voting rights t at end of actually formed net proportion Consolidated? ries (%) year investment in the (%) (Full (RMB0’0 subsidiaries name) 00) Shenzhe 64.58 64.58 1,899.13 Yes n Woke Name of Minor Amount for deducting the Ownershi Organization sharehold minor shareholder’s Note subsidia p type code ers’ equity in the minor ries equity shareholder’s equity Shenzhe Corporati 72855858-4 See notes See notes See notes n Woke on Note: Shenzhen Woke was the subsidiary under direct control of Fangda Guoke; while Fangda 79
China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Guoke was taken over by Shenyang Fangda, the share equity is planned to under possession of Shenyang Fangda. The relative procedures are under process. However Shenzhen Woke is under the control of Shenyang Fangda before or after the takeover.The minority shareholders’ equity of Shenzhen Woke has already been included in the minority shareholders’ equity of Shenyang Fangda, thus it is not presented separately in this table.
（II） The change of consolidation scope The consolidation scope has changed in the report period for Kexunda Co. was added. Profiles of Kexunda is presented in Note IV (I)-1.
（III） The entity newly consolidated this period
Subsidiary newly consolidated
Net asset at end Net profit Name Reason of change of year realized this year Kexunda Co. Invest to found 967,524.47 -32,475.53
（IV） Takeover occurred this period
Main assets taken over Main liabilities taken over Type of takeover Items Amount Items Amount Monetary capital 2,197,053.92 Account payable 2,076,357.60 Other account Account receivable 2,993,815.76 15,878,714.59 payable Other Inventories 8,137,128.03 non-recurring 2,284,850.00 Takeover under common liabilities Long-term share control 10,419,311.00 equity investment Fixed assets 2,780,733.90 Construction in 37,412,882.18 process Intangible assets 7,918,765.04 Total of asset taken Total of liability 75,482,751.95 21,200,085.21 over merged
The Board of Shenyang Fangda – one of the subsidiaries of the Company, adopted resolution (沈方 （董）[2010]第 002 号) on December 7, 2010: Shenyang Fangda will takeover Fangda Guoke and all of its assets, including inventories, equipment, and intangible assets (patents) will be transferred to Shenyang Fangda at their book value. Upon completion of the takeover, Fangda Guoke will be deregistered. On May 18, 2011, the Decision to Takeover was approved by the shareholders’ meeting of Shenyang Fangda. The Takeover Contract was engaged on the same day. The takeover day was set on June 30, 2011. This was a takeover under same control for Fangda Guoke is under control of Shenyang Fangda before and after the takeover.
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
V. Notes to the consolidated financial statements
(I) Monetary capital
Book balance at end of year Book balance at beginning of year Excha Excha Items Original Translated to Original Translated to nge nge currency RMB currency RMB rate rate I. Cash RMB 25,877.99 1.00 25,877.99 9,841.07 1.00 9,841.07 USD 0.810 0.8509 HKD 1,911.16 1,549.38 4,767.80 4,057.07 7 3 Cash subtotal 27,427.37 13,898.14 II. Bank savings 310,189,42 310,189,424. 478,568,182. 478,568,182. RMB 1.00 1.00 4.04 04 50 50 6.300 USD 109,114.69 687,520.76 346,670.47 6.6227 2,295,894.52 9 0.8509 HKD 74.57 63.45 3 Bank saving 310,876,944. 480,864,140.
subtotal 80 47 III. Other monetary
capital 12,590,607. 12,590,607.4 25,417,161.5 25,417,161.5 RMB 1.00 1.00 47 7 0 0 6.300 USD 203,998.02 1,285,371.13 100.20 6.6227 663.59 9 HKD Subtotal of other 13,875,978.6 25,417,825.0
monetary capital 0 9 324,780,350. 506,295,863. Total 77 70 Note 1: RMB12 million among the balance of bank deposit at end of year was frozen by the Court for the lawsuit involved by Fangda Decoration and the sleeping account of RMB12,734.52. This is not regarded as cash equivalent at preparing of Cash Flow Statement. For details of the case please see Note VII(I)-1. Note 2: Balance of RMB13,875,978.60 under other monetary capital was mainly deposit for bank accepted notes and letter of guarantee, including deposit for accepted notes and guarantee letter which are not regarded as cash equivalent at preparing of cash flow statement. Note 3: Book balance of monetary fund at end of year has decreased by 35.85% from the previous year, which was caused by completion of private issuing of shares.
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
(II) Notes receivable (1) Category of notes receivable Book balance at beginning of Categories Book balance at end of year year Bank acceptance 6,303,353.88 2,262,000.00 Commercial acceptance 14,229,007.92 Total 6,303,353.88 16,491,007.92
(2) Top 5 notes transferred to account receivable for the issuer is not able to exercise
Issuer Date of issue Expired on Amount Note Shenzhen Wanghai Yikang Commercial Industry 2010-12-30 2011-3-31 14,229,007.92 draft denied Development Co., Ltd. Total 14,229,007.92
(3) Top 5 notes endorsed but not due yet are:
Issuer Date of issue Expired on Amount Shenyang Yuanda Aluminum Engineering Co., 2011-11-24 2012-5-18 2,000,000.00 Ltd. Xuanhua Shengtian Mining Co., Ltd. 2011-11-22 2012-5-22 1,000,000.00 Jiangyin Yinben Steel & Iron Trade Co., Ltd. 2011-9-26 2012-3-26 1,000,000.00 Zhejiang Sunda New Material Co., Ltd. 2011-10-20 2012-4-20 1,000,000.00 Xihua Xinglong Mining Co., Ltd. 2011-11-22 2012-5-12 1,000,000.00 Total 6,000,000.00 (III) Account receivable (1) Account receivable on categories
Book balance at end of year Book value Bad debt provision Categories Provid Ratio ing Net amount Amount Amount (%) rate (%) Receivables with major individual amount and bad
debt provision provided individually Receivables provided bad debt 121,679,764. 664,333,498. 786,013,262.74 97.43 15.48 provision in groups 63 11 Incl. Receivable accounts not 121,679,764. 664,333,498. 786,013,262.74 97.43 15.48 consolidated 63 11 121,679,764. 664,333,498. Sub-total of group 786,013,262.74 97.43 15.48 63 11 Account receivable with minor 20,731,784.6 individual amount but bad debt 20,731,784.64 2.57 100.00 4 provision is provided
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
100.0 142,411,549. 664,333,498. Total 806,745,047.38 17.65 0 27 11 Book balance at beginning of year Book value Bad debt provision Categories Provid Ratio ing Net amount Amount Amount (%) rate (%) Receivables with major individual amount and bad
debt provision provided individually Receivables provided bad debt 111,244,947.2 396,673,564. 507,918,512.04 96.95 21.90 provision in groups 8 76 Incl. Receivable accounts not 111,244,947.2 396,673,564. 507,918,512.04 96.95 21.90 consolidated 8 76 111,244,947.2 396,673,564. Sub-total of group 507,918,512.04 96.95 21.90 8 76 Account receivable with minor 100.0 individual amount but bad debt 15,988,232.58 3.05 15,988,232.58 0 provision is provided 100.0 127,233,179.8 396,673,564. Total 523,906,744.62 24.29 0 6 76 Note: the closing balance of receivable accounts has increased by 54.01% over the opening balance, which was caused by expanding of curtain wall business, increase of project progressive payment, and slow retrieving of project payment. Including: foreign currencies
Book balance at end of year Book balance at beginning of year Items Original Exchang Translated to Original Exchang Translated to currency e rate RMB currency e rate RMB 10,377,078.7 3,413,051.3 USD 1,646,920.08 6.3009 6.6227 22,603,614.98 3 2 9,256,528.9 HKD 9,256,528.95 0.8107 7,504,268.02 0.85093 7,876,658.18 5 Canadian $ 5,465.72 6.1777 33,765.58 Australian $ -40,000.00 6.4093 -256,372.00 17,658,740.3 Total 30,480,273.16 3 Note: The Australian Dollar -40,000.00AUD was the payment due from KiKuKaWa Industry International Ltd to Fangda New Material Co., Ltd. The prepayment was made in AUD, but the succeeding payment will be in HKD.
Account receivables on which bad debt provisions are provided on age basis in the group:
Book balance at end of year Age Proportio Bad debt Amount Net amount n provision within 1 year 476,396,053.72 59.05% 14,291,881.61 462,104,172.11 1-2 yrs 98,991,085.32 12.27% 9,899,108.54 89,091,976.78
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
2-3 yrs 39,121,436.82 4.85% 11,736,431.05 27,385,005.77 Over 3 yrs 171,504,686.88 21.26% 85,752,343.43 85,752,343.45 Total 786,013,262.74 97.43% 121,679,764.63 664,333,498.11 Book balance at beginning of year Age Proportio Bad debt Amount Net amount n provision within 1 year 236,060,382.71 45.06% 7,081,926.52 228,978,456.19 1-2 yrs 52,161,878.34 9.96% 5,216,187.84 46,945,690.50 2-3 yrs 54,506,462.84 10.40% 16,351,938.85 38,154,523.99 Over 3 yrs 165,189,788.15 31.53% 82,594,894.07 82,594,894.08 Total 507,918,512.04 96.95% 111,244,947.28 396,673,564.76
Account receivable with minor individual amount but bad debt provision is provided Description of the Book value at Bad debt receivable Rate Reason end of year provision accounts Aged over 5 years, not expectable Trade receivable 1,373,041.48 1,373,041.48 100.00% to be retrieved Curtain wall Aged over 5 years, not expectable 803,340.45 803,340.45 100.00% project receivable to be retrieved Curtain wall Aged over 5 years, not expectable 660,625.41 660,625.41 100.00% project receivable to be retrieved Aged over 5 years, not expectable Trade receivable 648,100.95 648,100.95 100.00% to be retrieved Aged over 5 years, not expectable Trade receivable 563,320.60 563,320.60 100.00% to be retrieved Curtain wall Aged over 5 years, not expectable 430,629.58 430,629.58 100.00% project receivable to be retrieved Aged over 5 years, not expectable Trade receivable 435,713.62 435,713.62 100.00% to be retrieved Aged over 5 years, not expectable Trade receivable 433,868.60 433,868.60 100.00% to be retrieved Curtain wall Aged over 5 years, not expectable 354,177.00 354,177.00 100.00% project receivable to be retrieved Curtain wall Aged over 5 years, not expectable 346,573.70 346,573.70 100.00% project receivable to be retrieved Aged over 5 years, not expectable Trade receivable 337,968.00 337,968.00 100.00% to be retrieved Curtain wall Aged over 5 years, not expectable 316,861.34 316,861.34 100.00% project receivable to be retrieved Curtain wall Aged over 5 years, not expectable 300,000.00 300,000.00 100.00% project receivable to be retrieved Total 7,004,220.73 7,004,220.73 Note: As of December 31, 2011, the account receivable, on which the Company has provided bad debt provisions, is amounted to RMB20,731,784.64. (2) There is no receivable account that have been fully provided of bad debt provision, or with great portion, and retrieved or written back in the same year, or such account with major amount. (3) No receivable account has been written off in current year. (4) No receivable account due from shareholders with over 5% (included) of the Company’s shares
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011 or related parties.
(5) The top 5 debtors at end of the year: Relation with the Balance at % in total Name of the companies Age Company end of year receivables Xin’Mo’er Property Curtain wall 39,542,698.6 within 1 Development (Shenyang) Co., 4.90 client 2 year Ltd. Shenzhen Metro Group Co., Screen door 37,553,364.2 within 1 4.65 Ltd. client 6 year within 1 2,765,943.63 Shenzhen Greenview Property Curtain wall year 3.85 Co., Ltd. client 28,283,148.6 1-2 yrs 2 China Construction Bureau III, Curtain wall 32,500,256.0 within 1 4.03 No.1 Construction Co., Ltd. client 2 year Liuzhou Dongcheng Curtain wall 31,026,472.1 within 1 Investment Development Co., 3.85 client 6 year Ltd. 171,671,883. Total 21.28 31 (IV) Other account receivable (1) Other account receivable is categories as the followings:
Book balance at end of year Book value Bad debt provision Categories Providin Ratio Net amount Amount Amount g rate (%) (%) Other receivables with major individual amount and bad 1,220,316.8 1.82 1,220,316.84 100.00 debt provision provided 4 individually Other receivables provided 63,039,807. 53,412,523. 93.91 9,627,283.90 15.27 bad debt provision in groups 84 94 Incl. Receivable accounts not 63,039,807. 53,412,523. 93.91 9,627,283.90 15.27 consolidated 84 94 63,039,807. 53,412,523. Sub-total of group 93.91 9,627,283.90 15.27 84 94 Other account receivable with 2,865,928.1 minor individual amount but 4.27 2,865,928.16 100.00 6 bad debt provision is provided 67,126,052. 13,713,528.9 53,412,523. Total 100.00 20.43 84 0 94 Book balance at beginning of year Book value Bad debt provision Categories Providin Ratio Net amount Amount Amount g rate (%) (%) Other receivables with major individual amount and bad 1,220,316.8 2.33 1,220,316.84 100.00 debt provision provided 4 individually
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Other receivables provided 48,373,161. 39,235,264. 92.25 9,137,896.60 18.89 bad debt provision in groups 47 87 Incl. Receivable accounts not 48,373,161. 39,235,264. 92.25 9,137,896.60 18.89 consolidated 47 87 48,373,161. 39,235,264. Sub-total of group 92.25 9,137,896.60 18.89 47 87 Other account receivable with 2,841,928.1 minor individual amount but 5.42 2,841,928.16 100.00 6 bad debt provision is provided 52,435,406. 13,200,141.6 39,235,264. Total 100.00 25.17 47 0 87 Including: foreign currencies
Book balance at end of year Book balance at beginning of year Items Original Exchang Translated to Original Exchang Translated to currency e rate RMB currency e rate RMB USD 34,488.31 6.3009 217,307.39 107,953.27 6.6227 714,942.12 Total 217,307.39 714,942.12
Other account receivables on which bad debt provisions are provided on age basis in the group:
Book balance at end of year Age Proportio Bad debt Amount Net amount n provision within 1 year 37,459,135.30 55.80% 1,123,917.85 36,335,217.45 1-2 yrs 9,156,077.06 13.64% 915,607.70 8,240,469.36 2-3 yrs 3,122,696.47 4.65% 936,808.94 2,185,887.53 Over 3 yrs 13,301,899.01 19.82% 6,650,949.41 6,650,949.60 Total 63,039,807.84 93.91% 9,627,283.90 53,412,523.94 Book balance at beginning of year Age Proportio Bad debt Amount Net amount n provision within 1 year 26,630,513.01 50.79% 798,915.40 25,831,597.61 1-2 yrs 3,702,868.95 7.06% 370,286.90 3,332,582.05 2-3 yrs 5,249,702.00 10.01% 1,573,293.62 3,676,408.38 Over 3 yrs 12,790,077.51 24.39% 6,395,400.68 6,394,676.83 Total 48,373,161.47 92.25% 9,137,896.60 39,235,264.87
Other account receivable with major amount and provided bad debt provision individually or minor amount but bad debt provision provided individually at end of year: Description of Book value at Bad debt Rate Reason other receivables end of year provision Deposite Aged over 5 years, not expectable 1,220,316.84 1,220,316.84 100.00% receivable to be retrieved Deposite Aged over 5 years, not expectable 300,000.00 300,000.00 100.00% receivable to be retrieved Deposite Aged over 5 years, not expectable 224,875.84 224,875.84 100.00% receivable to be retrieved Deposite Aged over 5 years, not expectable 159,800.00 159,800.00 100.00% receivable to be retrieved
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Deposite Aged over 5 years, not expectable 150,000.00 150,000.00 100.00% receivable to be retrieved Total 2,054,992.68 2,054,992.68 Note: (1) Account receivable of which fully provided bad debt provision is amounted to RMB4,086,245.00. (2) There is no receivable account that have been fully provided of bad debt provision, or with great portion, and retrieved or written back in the same year, or such account with major amount. (3) No other receivable account has been written off in current year. (4) No other receivable account due from shareholders with over 5% (included) of the Company’s shares or related parties. (5) Top 5 debtors of other receivables: Portion in total Name of the Relation with Balance at Specification Age other receivable companies the Company end of year accounts (%) payment for Property Ding Tao purchasing 4,300,000.00 within 1 year 6.41 buyer of house Administrati within 1 ye 2,320,483.21 on fee of Contractor of ar Wang Weihong 5.19 curtain wall the project 1,161,763.77 1-2 yrs project Zhangjiakou Urban Contract Development Client 3,120,543.15 within 1 year 4.65 security Investment Co., Ltd. Administrati 1,150.00 within 1 year on fee of Contractor of Xin Song 1,433,887.00 1-2 yrs 4.08 curtain wall the project project 1,305,290.61 2-3 yrs Cixi Fanshi Contract Property Co., Client 2,472,473.75 within 1 year 3.68 security Ltd. 16,115,591.4 Total 24.01 9 (V) Prepayment (1) Demonstrated by ages:
Book balance at end of year Age Bad debt Amount Ratio (%) Net amount provision within 1 year 23,321,608.14 88.29 23,321,608.14 1-2 yrs (included) 990,764.78 3.75 12,521.99 978,242.79 2-3 yrs (included) 377,369.89 1.43 113,210.97 264,158.92 Over 3 yrs 1,726,014.24 6.53 845,654.28 880,359.96 Total 26,415,757.05 100.00 971,387.24 25,444,369.81 Age Book balance at beginning of year
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Bad debt Amount Ratio (%) Net amount provision within 1 year 18,167,810.47 87.18 1,443.37 18,166,367.10 1-2 yrs (included) 918,561.95 4.41 10,329.88 908,232.07 2-3 yrs (included) 1,101,998.54 5.29 291,225.31 810,773.23 Over 3 yrs 649,879.99 3.12 269,232.34 380,647.65 Total 20,838,250.95 100.00 572,230.90 20,266,020.05
(2) Other top 5 debtors of prepayments: Relation Book Name of the % in total Reason of with the balance at Age companies prepayment unsettled Company end of year Dongguan Nanbo 3,265,406.9 within 1 Engineering Glass Co., Supplier 12.36 货未到 5 year Ltd. Guangdong Jianmei 1,865,228.4 within 1 Supplier 7.06 货未到 Aluminum Co., Ltd. 1 year Tianjing Nanbo 1,193,228.4 within 1 Engineering Glass Co., Supplier 4.52 货未到 2 year Ltd. Qinghuangdao 100,000.00 2-3 yrs Wanxiang Aluminum Supplier 4.05 not settled yet Co., Ltd. 970,751.02 Over 3 yrs Beijing Chengxin within 1 Zhong’ao Curtain Wall Supplier 831,000.00 3.15 货未到 year Engineering Co., Ltd. 8,225,614.8 Total 31.14 0 (3) Details of prepayment with large amount and aged over one year: Book balance at end Reason of Name of the companies Age of year overdue Qinghuangdao Wanxiang Aluminum 100,000.00 2-3 yrs not settled yet Co., Ltd. 970,751.02 Over 3 yrs China Construction No.8 Co., Ltd. 496,429.80 1-2 yrs not settled yet Dalian Division Huizhou Decai Import & Export Co. 470,738.96 Over 3 yrs not settled yet Beijing Shengdabotong 389,881.70 1-2 yrs not settled yet Construction Co., Ltd. Total 2,427,801.48
(4) No prepayment account involved with shareholders with over 5% (included) of the Company’s shares or related parties.
(VI) Inventories (1) Details of inventories
Book balance at end of year Book balance at beginning of year Items Impairment Impairment Amount Book value Amount Book value provision provision 37,888,262.6 56,115,354.6 55,889,811.1 Raw 361,902.41 37,526,360.23 225,543.53 materials 4 5 2 88
China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Book balance at end of year Book balance at beginning of year Items Impairment Impairment Amount Book value Amount Book value provision provision Product 16,207,626.7 43,221,748.5 43,221,748.5 in 16,207,626.78 process 8 7 7 Finished 14,367,024.0 3,609,182.2 14,201,337.8 2,224,683.5 11,976,654.3 goods in 10,757,841.82 stock 8 6 4 4 0 Asset formed 183,792,677. 183,792,677.3 164,193,924. 164,193,924. by constructi 32 2 07 07 on contract Low price consuma 263.29 263.29 659,849.04 659,849.04 ble OEM materials 624,811.54 624,811.54 3,042,245.47 3,042,245.47 On-road goods 5,430,367.04 5,430,367.04 1,301,253.84 1,301,253.84 Goods 79,959.06 79,959.06 delivered 258,390,991. 3,971,084.6 254,419,907.0 282,735,713. 2,450,227.0 280,285,486. Total 75 7 8 48 7 41 (2) Change of inventory impairment provision: Book Decreased this year Book balance at Provided in current Categories balance at beginning year Transferr Written back end of year of year ed 129,721.6 Raw materials 225,543.53 266,080.53 361,902.41 5 Products in 2,224,683.5 359,153.5 3,609,182.2 1,751,239.55 7,587.27 stock 4 6 6 2,450,227.0 488,875.2 3,971,084.6 Total 2,017,320.08 7,587.27 7 1 7 (3) Basis of providing impairment provision and situation of writing back Portion of Reasons of inventory Basis of providing written back in Categories impairment provision impairment provision balance at end written back of term Realizable net value lower Raw materials than realizable cost Realizable net value lower increase of realizable net Products in stock 0.003% than realizable cost value (VII) Available-for-sale financial asset Disposable financial assets are categorized as the following:
Items Fair value at end of year Fair value at beginning of year Available-for-sale bonds Available-for-sale equity 2,198,000.00 4,347,000.00 instruments Total 2,198,000.00 4,347,000.00 89
China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Less: impairment provision for
available-for-sale financial assets Net amount 2,198,000.00 4,347,000.00 Note 1: The financial asset for sale is the 700,000 current shares of Tianjing Global Magnetic Card Co., Ltd. with the initial cost of RMB4,850,000.00. Note 2: The closing balance of financial asset for sale decreased by 49.44%, which was caused by drop of fair value in the year.
(VIII) Investment real estates (1) Fluctuation of investment properties on fair value basis
Increased this year Decreased this year Fair value at For own use or Gain/loss Fair value at Items beginning of Transferred Purchased transferred from change Disposed end of year year for own use from of fair value inventory I. Total 188,914,883.84 2,566,320.00 1,440,258.46 184,908,305.38 costs 1. Houses & 188,914,883.84 2,566,320.00 1,440,258.46 184,908,305.38 buildings 2. Land using rights II. Total of fair value 82,311,448.89 11,550,311.20 735,180.00 328,936.12 92,797,643.97 fluctuation 1. Houses & 82,311,448.89 11,550,311.20 735,180.00 328,936.12 92,797,643.97 buildings 2. Land using rights III. Total of investment 271,226,332.73 11,550,311.20 3,301,500.00 1,769,194.58 277,705,949.35 property book value 1. Houses & 271,226,332.73 11,550,311.20 3,301,500.00 1,769,194.58 277,705,949.35 buildings 2. Land using rights Note 1: Recognition of investment property on fair value is based on the Property Appraisal Report (深同诚评字（2011A）01YQC 第 002 号) issued by Shenzhen Tongzhicheng Land and Property Appraisal Co., Ltd. Note 2: Investment property disposal was RMB2,566,320.00, which was the disposal of Wuhan Wanda Commercial Plaza by Fangda Decoration, the investment property decreased by RMB2,566,320.00 correspondingly, and the accumulated change of fair value transferred off amouted to RMB735,180.00. Note 3: Among the investment properties, Fangda Technology Building (with closing fair value RMB188,040,491.21) has been set on pledge for loans. See Note V (XVI).
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
(2) Property license not obtained yet: Among the investment property, the workshop No.2 and No.3 located on Beihuan Road in Nanshan Shenzhen have not been granted the certificate of property, their book value at end of year was RMB30,084,655.76. (3) Property converting and change of measurement basis Decreasing of investment property by RMB1,440,258.46 was the Room 802 of Fangda Technical Building transferred for self-use as approved at the 2nd meeting of the 6th term of Board.
(IX) Fixed assets (1) Change of fixed assets and accumulated depreciations:
Book balance at Decreased this Book balance at Items Increased this year beginning of year year end of year I. Total value of 384,511,171.89 149,206,765.83 11,107,420.92 522,610,516.80 original fixed assets 1. Houses & buildings 212,269,992.86 39,924,520.07 6,454,857.19 245,739,655.74 2. Machinery 132,090,633.96 99,311,077.06 3,578,279.94 227,823,431.08 3. Automobile 11,248,300.78 1,119,189.02 12,680.00 12,354,809.80 4. Electronics and 28,902,244.29 8,851,979.68 1,061,603.79 36,692,620.18 other devices Increased this Provided this — — — year year II. Total of accumulative 142,559,061.28 49,244,923.41 16,403,878.73 4,623,771.29 203,584,092.13 depreciation 1. Houses & buildings 28,895,411.02 5,660,434.99 1,157,262.29 33,398,583.72 2. Machinery 91,185,236.25 49,244,923.41 6,852,956.45 2,650,662.78 144,632,453.33 3. Automobile 6,883,467.49 748,983.85 11,412.00 7,621,039.34 4. Electronics and 15,594,946.52 3,141,503.44 804,434.22 17,932,015.74 other devices III. Total of fixed asset 241,952,110.61 — — 319,026,424.67 net value 1. Houses & buildings 183,374,581.84 — — 212,341,072.02 2. Machinery 40,905,397.71 — — 83,190,977.75 3. Automobile 4,364,833.29 — — 4,733,770.46 4. Electronics and 13,307,297.77 — — 18,760,604.44 other devices IV. Total of accumulative fixed 1,397,396.09 853,819.00 189.00 2,251,026.09 assets impairment provision 1. Houses & buildings 853,819.00 — 853,819.00 2. Machinery 1,397,396.09 — 189.00 1,397,207.09 3. Automobile — — 4. Electronics and — — other devices V. Total of fixed asset 240,554,714.52 — — 316,775,398.58 book value 1. Houses & buildings 183,374,581.84 — — 211,487,253.02 2. Machinery 39,508,001.62 — — 81,793,770.66
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Book balance at Decreased this Book balance at Items Increased this year beginning of year year end of year 3. Automobile 4,364,833.29 — — 4,733,770.46 4. Electronics and 13,307,297.77 — — 18,760,604.44 other devices Note 1: Depreciation provided this year was RMB16,403,878.73. Note 2: Fixed asset increased this year with original value of RMB149,206,765.83, including: RMB108,854,042.53 transferred from construction in process (including: RMB86,436,969.71 of fixed asset original value written back and RMB49,244,923.41 of depreciation at transferring of Fangda Guoke); and adjustment of other properties such as investment property into self-owned property, and adjustment of newly purchased fixed asset rearrangement. Note 3: Fixed asset decreased this year with original value of RMB11,107,420.92. Including RMB5,072,726.14 of asset disposed by Fangda Decoration. Others are assets disposed, discarded, or transferred out. (2) Property license not obtained yet: Description of Original book Accumulated Net book Categories Note property value depreciation: value Houses & Houses in Idle, under procedures 686,672.00 65,233.65 621,438.35 buildings Urumuqi of property certificate Houses & Multi-function Under procedures of 4,095,350.26 1,544,283.07 2,551,067.19 buildings building property certificate Houses & Under procedures of Office building 6,769,642.00 2,578,618.72 4,191,023.28 buildings property certificate Houses & 13,919,919.9 Under procedures of Workshop B-1 18,966,977.90 5,047,057.96 buildings 4 property certificate Houses & Under procedures of Workshop B-2 6,495,786.15 1,728,509.69 4,767,276.46 buildings property certificate Houses & Asset given for 20,953,587.7 21,226,500.00 272,912.22 Certificate not filed buildings debt in Dalian 8 Shenyang Houses & Fangda 18,871,771.3 Under procedures of 19,498,509.11 626,737.80 buildings extension 1 property certificate workshop Shenyang Houses & Fangda dorm Under procedures of 9,043,044.13 251,913.35 8,791,130.78 buildings and workshop property certificate 2# Dinning hall and power Houses & Under procedures of station of 4,266,633.86 118,856.27 4,147,777.59 buildings property certificate Shenyang Fangda 78,814,992.6 Total 91,049,115.41 12,234,122.73 8 (3) Fixed asset by financial leasing
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Accumulated Accumulated Book value of Original value of impairment Category of assets depreciation fixed asset fixed assets provision
Electronics and 24,500.00 628.20 23,871.80 other devices (X) Construction in process (1) Construction in process:
Book balance at end of year Book balance at beginning of year Items Impairment Net book Impairment Net book Amount Amount provision value provision value Nanchang Fangda Technology Garden 3,597,740.17 3,597,740.17 Automatic PSD Workshop Dongguan Songshan Lake Fangda 72,128,582.31 72,128,582.31 Southern Technology Garden Paining line 2,557,696.60 2,557,696.60 Bacterium of 2,324,786.32 2,324,786.32 spraying system Gas project 669,225.64 669,225.64 Semi-conductor material 5,135,906.09 5,135,906.09 sedimentation machine MOCVD Device 3,253,854.65 3,253,854.65 Semi-conductor material 3,154,032.47 3,154,032.47 sedimentation machine NE-550 Etcher 4,167,972.75 4,167,972.75 Factory moving and equipment to be 21,480,280.34 21,480,280.34 installed by Fangda Guoke Phase I pipes, roads, 9,573,061.61 9,573,061.61 and fence Automatic Gold Ball 3,720,574.65 3,720,574.65 Bonder LED 检测机 2,364,984.85 2,364,984.85 High-speed ribosomelike type 1,394,948.39 1,394,948.39 crystal solid Other equipment to 521,865.39 521,865.39 2,516,764.84 2,516,764.84 be installed Total 81,799,896.43 81,799,896.43 56,762,380.64 56,762,380.64
(2) Profiles of main construction in process and changes: Amount at the beginning of Increased this year Fund year Project Budget recourse Incl. Interest Incl. Interest Amount Amount capitalization capitalization Phase I pipes, RMB9 mil. Independent 9,573,061.61 2,997,784.43 roads, and 93
China Fangda Group Co., Ltd. Notes to Financial Statements 2011 fence Nanchang Fangda share Technology RMB14.3070 issuing and Garden 3,597,740.17 Automatic mil independent PSD financed Workshop Dongguan Songshan share Lake RMB210.5672 issuing and Fangda 72,128,582.31 Southern mil independent Technology financed Garden Factory moving and equipment to be 37,192,046.30 installed by Fangda Guoke Total 46,765,107.91 78,724,106.91 (Continue) Decreased this year Balance at end of year % of Incl. investme Project Transferred to Incl. Interest Progress Amount Amount nt on fixed assets this capitalization budget year Phase I 12,570,846. pipes, roads, 12,570,846.04 and fence 04 Nanchang Fangda Technology 3,597,740.1 Garden 25.15% 25.15 Automatic 7 PSD Workshop Dongguan Songshan Lake 72,128,582. Fangda 34.25% 34.25 Southern 31 Technology Garden Factory moving and equipment 37,192,046. to be 37,192,046.30 installed by 30 Fangda Guoke 49,762,892. 75,726,322. Total 49,762,892.34 34 48 (3) No impairment on construction in process till end of this year.
(XI) Intangible assets Intangible assets
94
China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Book balance at Increased this Decreased Book balance Items beginning of year year this year at end of year I. Total of intangible asset 138,877,554.2 137,634,777.72 1,242,776.55 initial value 7 Land using rights of Fangda Town (phase I) (Note 4) 8,543,250.00 8,543,250.00 Land using rights of Fangda Town (phase III) (Note 5) 4,783,050.00 4,783,050.00 Land using rights of Fangda Tech Garden on Gaoxin Road 11,064,548.41 11,064,548.41 Nanchang (Note 6) Land using rights of Shenyang Fangda (Note 7) 42,038,791.23 42,038,791.23 Dongguan land using rights (note 3) 40,006,806.75 34,659.00 40,041,465.75 Patent and classified tech 27,380,919.89 504,876.00 27,885,795.89 Computer software 3,817,411.44 703,241.55 4,520,652.99 II. Total of intangible asset 23,104,199.57 5,173,399.43 28,277,599.00 amortization Land using rights of Fangda Town (phase I) (Note 4) 3,901,567.76 145,431.36 4,046,999.12 Land using rights of Fangda Town (phase III) (Note 5) 1,331,282.25 95,661.00 1,426,943.25 Land using rights of Fangda Tech Garden on Gaoxin Road 1,198,529.24 235,092.98 1,433,622.22 Nanchang (Note 6) Land using rights of Shenyang Fangda (Note 7) 2,585,514.30 840,835.80 3,426,350.10 Dongguan land using rights (note 3) 66,678.01 800,887.13 867,565.14 Patent and classified tech 12,591,549.48 2,607,719.54 15,199,269.02 Computer software 1,429,078.53 447,771.62 1,876,850.15 III. Total of book net value 114,530,578.15 110,599,955.27 of intangible assets Land using rights of Fangda Town (phase I) (Note 4) 4,641,682.24 4,496,250.88 Land using rights of Fangda Town (phase III) (Note 5) 3,451,767.75 3,356,106.75 Land using rights of Fangda Tech Garden on Gaoxin Road 9,866,019.17 9,630,926.19 Nanchang (Note 6) Land using rights of Shenyang Fangda (Note 7) 39,453,276.93 38,612,441.13 Dongguan land using rights (note 3) 39,940,128.74 39,173,900.61 Patent and classified tech 14,789,370.41 12,686,526.87 Computer software 2,388,332.91 2,643,802.84 IV. Total of accumulated intangible asset impairment provisions Land using rights of Fangda Town (phase I) (Note 4) Land using rights of Fangda Town (phase III) (Note 5) Land using rights of Fangda Tech Garden on Gaoxin Road Nanchang (Note 6) Land using rights of Shenyang Fangda (Note 7)
95
China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Book balance at Increased this Decreased Book balance Items beginning of year year this year at end of year Dongguan land using rights (note 3) Patent and classified tech Computer software V. Total of intangible asset 114,530,578.15 110,599,955.27 book value Land using rights of Fangda Town (phase I) (Note 4) 4,641,682.24 4,496,250.88 Land using rights of Fangda Town (phase III) (Note 5) 3,451,767.75 3,356,106.75 Land using rights of Fangda Tech Garden on Gaoxin Road 9,866,019.17 9,630,926.19 Nanchang (Note 6) Land using rights of Shenyang Fangda (Note 7) 39,453,276.93 38,612,441.13 Dongguan land using rights (note 2) 39,940,128.74 39,173,900.61 Patent and classified tech 14,789,370.41 12,686,526.87 Computer software 2,388,332.91 2,643,802.84
Note 1: RMB5,173,399.43 amortized this year. Note 2: Increase of intangible asset was purchasing of software and obtaining of patent. Note 3: According to the ―Land Using Right Contract‖ entered by Guangdong Dongguan National Land Resource Bureau and Dongguan New Material Co., Ltd. – one of the subsidiaries of the Company, the Company purchased the land using right of 66666 square meters (编号 2010T107 号) with RMB40,006,806.75. Note 4: In 1995, Hengxiang Jingfa Co. inputted 3,797.40 square meters of land valued RMB8,543,250.00 to the Company when the Company was incorporated. The land was verified by Shenzhen Asset Appraisal Firm with the appraisal report 深资综评报字[1995]第 20 号 to value of RMB8,543,250.00. . Note 5: According to contract 深地合字(97)012 号 engaged between the Company and Shenzhen Bureau of Land Planning, the Company purchased the land using rights attached to land of 15,943.60 square meters with Ref. number T405-008 by RMB4,783,050.00. Note 6: In March 2003, according to the contract engaged between Jiangxi Nanchang High-tech Industry Zone Administration Committee and the Company, Fangda New Material Co., Ltd. had purchased the land of 177,047.14 square meters to the west of Aixi Lake and north of Gaoxin Road, with price of RMB10,622,828.28. Note 7: Shenyang Fangda land using right was inputted by Shenyang Hunnan New District National Asset Administration Co., Ltd. to Shenyang Fangda in term of investment. Note 1: Book value of intangible asset formed by R&D accounted for 10.62% of the total intangible assets at end of year.
(XII) Goodwill
Name of the companies Book Increased Decreased Book Impairment 96
China Fangda Group Co., Ltd. Notes to Financial Statements 2011
or goodwill item balance at this year this year balance at provision at beginning of end of year end of year year 8,197,817.2 Shenzhen Woke 8,197,817.29 9 Fangda Yide Co. 746,519.62 8,197,817.2 Total 8,197,817.29 746,519.62 9 Note 1: The Company acquired the 100% control power over Shenzhen Woke Co. by merger of enterprise under common control in May 2007. The difference between the initial investment cost and recognizable fair value of the investee has formed the goodwill of RMB8,197,817.29. No evidence of impairment shown with Shenzhen Woke Co. thus no impairment provision was provided. Note 2: The Company acquired the minority share equities of Fangda Yide Co. in August 2007. The difference between the initial investment cost and recognizable fair value of the investee has formed the goodwill of RMB746,519.62. For Fangda Yide was not in good business operation for successive years, impairment provision has been provided fully upon the goodwill.
(XIII) Long-term amortizable expenses
Book Other Amortized Book balance at Increased decreased Items in current balance at beginning of this year amount in year end of year year the year 1,396,350.0 Epoxy Floor 1,552,950.00 156,600.00 0 Upgrading of workshop rented by Fangda 650,031.44 65,549.39 584,482.05 Decoration Nanchang Branch Upgrading of workshop rented by Fangda 623,212.27 138,636.40 484,575.87 Decoration Upgrading of workshop rented by Fangda 235,877.94 101,090.56 134,787.38 Decoration Sanhe Branch 2,600,195.3 Total 3,062,071.65 461,876.35 0
(XIV) Differed income tax asset and differed income tax liabilities (1) Differed income tax asset and differed income tax liabilities already recognized A. Details of un-neutralized differed income tax asset and liabilities:
Book balance at end of year Book balance at beginning of year Deductible Deductible Items Differed income Differed income provisional provisional tax asset tax asset differences differences Asset impairment 181,447,229.52 29,413,806.15 153,793,200.88 26,448,912.08 provision Openning expenses 38,442.67 5,766.40 83,043.87 12,456.58 Neutralizable losses 11,549,071.51 2,887,267.88 20,406,633.15 4,898,982.91 97
China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Anticipated 420,995.96 63,149.39 347,657.52 52,148.63 liabilities Reserved expenses 5,007,105.42 978,405.58 Wage drawn in 2,314,737.55 289,342.19 advance Total 200,777,582.63 33,637,737.59 174,630,535.42 31,412,500.20 Book balance at end of year Book balance at beginning of year Taxable Taxable Items Differed income Differed income provisional provisional tax liability tax liability difference difference Adjustment of investment property 129,689,276.00 32,148,137.16 115,022,192.93 27,342,717.60 fair value Adjustment of sellable financial 1,798,000.00 449,500.00 3,947,000.00 947,280.00 asset fair value Total 131,487,276.00 32,597,637.16 118,969,192.93 28,289,997.60
(2) Particulars about Neutralizable provisional difference or losses by non-recognized differed income tax assets
Items End of Term Beginning of Term Asset impairment provision 28,784,639.04 27,185,509.66 Neutralizable losses 58,123,591.73 66,536,383.69 Total 86,908,230.77 93,721,893.35
(3) Neutralizable losses of non-recognized differed income tax assets will due in following years:
Year End of Term Beginning of Term Note 2012 10,378,557.33 11,917,349.15 Fangda Yide, Fangda Aluminum, Shenyang 2013 10,026,221.51 12,126,192.06 Fangda – the subsidiaries of the Company, are possibly not able to obtain sufficient taxable 2014 7,864,870.78 21,401,565.96 income to neutralize the gains from differed 2015 7,695,652.54 17,893,930.48 income tax assets in the future period of 2016 22,158,289.57 neutralizable temporary difference written back. Total 58,123,591.73 63,339,037.65
(XV) Asset impairment provision
Book balance Decreased this year Increased Book balance Items at beginning this year Written Transferr at end of year of year back ed 141,005,552. 16,923,420. 421,597.5 410,910.0 157,096,465. Bad debt provision 36 64 9 0 41 Inventory impairment 2,017,320.0 488,875.2 2,450,227.07 7,587.27 3,971,084.67 provision 8 1 Fixed asset impairment 1,397,396.09 853,819.00 189 2,251,026.09 provision Goodwill impairment 746,519.62 746,519.62 provision 145,599,695. 19,794,559. 429,184.8 899,974.2 164,065,095. Total 14 72 6 1 79 98
China Fangda Group Co., Ltd. Notes to Financial Statements 2011
(XVI) Assets with constrained ownership Assets with constrained ownership are:
Book balance Reason of Increased Decreased Book balance Category of assets at beginning restriction on this year this year at end of year of year property rights Asset under guarantee Fangda Tech 184,286,809.0 5,522,876.7 1,769,194.5 188,040,491.2 Building (The part Collateral loan 8 1 8 1 for rent) Fangda Tech 1,878,247.7 Building (The part 13,791,148.03 285,282.45 15,384,113.31 Collateral loan 3 for own use) Frozen asset Frozen as Bank deposit 12,000,000.00 12,000,000.00 claimed by the prosecutor 210,077,957.1 7,401,124.4 2,054,477.0 215,424,604.5 Total 1 4 3 2
(XVII) Short-term loans Short-term loans are: Book balance at beginning of Categories Book balance at end of year year Borrowings with security and 210,000,000.00 200,000,000.00 guarantee Guarantee loan 177,000,000.00 197,000,000.00 Total 387,000,000.00 397,000,000.00 Note 1: The short-term borrowing of RMB210 million was secured by Fangda Tech Building (limited to RMB112.43 million), and guaranteed by Fangda Decoration (limited to RMB50 million), Fangda Automatic (limited to RMB50 million), and Fangda New Material (limited to RMB50 million). Note 2: All of the guaranteed loans of RMB177 million was the short-term loans obtained by subsidiaries and secured by the Company; including RMB57 million was the short-term loans obtained by Fangda New Material; RMB100 million by Fangda Decoration, and RMB20 million by Fangda Automatic. For details please go to Note VI (II).
(XVIII) Notes payable
Book balance at beginning of Categories Book balance at end of year year Bank acceptance 31,684,990.21 59,241,926.92 Commercial acceptance 7,373,068.26 984,091.73 Total 39,058,058.47 60,226,018.65 Note 1: Amount due in next fiscal term will be RMB39,058,058.47. Note 2: The outstanding book value of notes payable has decreased by 35.15% over the report term, which was caused by payment for materials in term of bank notes issued by Fangda Decoration and Fangda Automatic has decreased.
99
China Fangda Group Co., Ltd. Notes to Financial Statements 2011
(XIX) Account payable (1) As of December 31, 2011, no such major prepaid accounts due over one year. (2) No payables due to shareholders with 5% or above shares of the Company, nor any related parties.
(XX) Prepayment received
（1）As of December 31, 2011, major prepaid accounts due over one year. Causation of not Client Amount Description settled Advances for project Xi’an Metro Co., Ltd. 12,236,055.00 Not started works (2) No prepayment received from shareholders with 5% or over shares of the Company, nor related parties. (3) Prepayment received increase by 158.90% over the year, which was caused by increase of prepayment received by Fangda Decoration and Fangda Automatic.
(XXI) Employees’ wage payable
Details of remunerations payable to the employees Book balance Increased this Decreased Book balance Items at beginning year this year at end of year of year Wage, bonus, allowance and 110,608,433. 103,135,454. 10,008,820.62 17,481,799.52 subsidies 20 30 Employee welfare 1,589,193.72 1,589,193.72 Social insurance 6,797,252.35 6,797,199.85 52.50 Incl. Medical insurance 1,730,287.30 1,730,274.70 12.60 Basic pension 4,566,343.44 4,566,306.69 36.75 Unemployment insurance 175,774.96 175,774.44 0.52 Labor injury insurance 231,722.53 231,720.95 1.58 Breeding insurance 93,124.12 93,123.07 1.05 Housing fund 1,921,169.50 1,921,169.50 Dismissing policy Trade union and education 4,038,900.38 276,252.58 1,396,781.64 2,918,371.32 allowance Non-monetary welfare Compensations for disengagement 32,742.68 32,742.68 other than dismissing policy Others 121,225,044. 114,839,799. Total 14,047,721.00 20,432,966.02 03 01 Note: Balance of wage payable increased by 45.45% over the last year, which was caused by drawing of salaries and bonus for the increased employees.
100
China Fangda Group Co., Ltd. Notes to Financial Statements 2011
(XXII) Tax payable
Items Book balance at end of year Book balance at beginning of year VAT 1,895,422.63 -9,822,981.98 Business tax 18,030,603.08 16,951,513.27 Enterprise income tax 15,046,043.63 10,240,451.93 Personal income tax 440,103.00 508,580.44 City maintenance and 2,677,051.21 1,795,117.16 construction tax Land using tax 989,909.39 221,094.98 Property tax 367,346.01 700,416.21 Education surtax 1,245,684.67 874,485.65 Local education 198,932.54 1,299.11 surcharges Other taxes 111,169.71 50,666.94 Total 41,002,265.87 21,520,643.71 Note 1: Tax payable increased by 90.53%, which was caused by increase of sales income. Note 2: Taxes are to be decided by the taxation department.
(XXIII) Interest payable
Items Book balance at end of year Book balance at beginning of year Short-term borrowing 780,979.73 610,850.84 interests payable Total 780,979.73 610,850.84
(XXIV) Other account payable (1) No other payables due to shareholders with 5% or above of shares of the Company, nor related parties. (2) Other payables with large amount in detail:
Items Book balance at end of year Description Guangzhou Nanjian Construction 8,289,683.50 Contract security Co., Ltd. Guangzhou Nanjian Construction 3,000,000.00 Contract security Co., Ltd. Dongguan Branch Ningbo Lailai Energy-saving Doors 2,060,000.00 Project deposit and Windows Co., Ltd. Jiangxi Changxing Logistics Co., 1,520,779.37 Freight Ltd. Jiangsu Tianyi Garment Co., Ltd. 1,500,000.00 Project deposit Total 16,370,462.87
(3) Large amount other payables aged over one year: Book balance at end Items Description Reason of overdue of year Ningbo Lailai Energy-saving Doors and 2,060,000.00 Project deposit construction in process Windows Co., Ltd. 101
China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Jiangsu Tianyi Garment 1,500,000.00 Project deposit construction in process Co., Ltd. Total 3,560,000.00 (4) Other payable account has increased by 44.90%, which was caused by receiving of contract deposit by Dongguan New Material for construction of Dongguan Sonshan Lake Fangda Southern Technology Garden.
(XXV) Anticipated liabilities
Book balance at Increased this Decreased this Book balance at Categories beginning of year year year end of year Maintenance expenses 347,657.52 59,657.52 288,000.00 Total 347,657.52 59,657.52 288,000.00 (XXVI) Long-term payable (1) Top 5 long-term payable accounts Book balance at end of Company Term Initial amount Condition year monthly basis, Shanghai Zhendan ownership Office Automatic 2 yrs 24,000.00 14,700.00 transferred at Management Co., deliver and Ltd. payment Total 24,000.00 14,700.00
(2) Financial leasing payable in long-term payable
Book balance at beginning of year Book balance at end of year Items Amount of Amount of foreign Amount RMB Amount RMB foreign currency currency Printer 14,700.00
(XXVII)Other non-recurring liabilities
Book balance at beginning of Items Book balance at end of year year Application and demonstration project of LED lighting tech (Note 334,850.00 1) Optical crystal project (Note 2) 1,200,000.00 1,200,000.00 Environmental protection and 500,000.00 500,000.00 energy saving project (Note 3) Graphic grounding production and 450,000.00 500,000.00 expanded chip production (Note 4) Purchasing of equipment for development of high-power chips 650,000.00 750,000.00 (Note 5) Fund for optical products (Note 6) 420,000.00 480,000.00 High-power-low-attenuation plug 800,000.00 800,000.00 in LED technologies Total 4,020,000.00 4,564,850.00 Note 1: According to document 粤科计字[2008]145 号 issued by Guangdong Department of 102
China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Science and Technologies, and Guangdong Department of Finance on November 24, 2008, Fangda Guoke was assigned to undertake the 揹 emonstrative project of LED production technologies with the government fund of RMB3.5 million.According to the agreement engaged between Fangda Guoke and Shenzhen Technologies and Information Committee on January 12, 2010, and the contract 深科工贸信 计财字〔2009〕82 号, Shenzhen Technologies and Information Committee provided RMB1 million in 2010 to support the project led by Fangda Guoke. RMB334,850.00 of government subsidy recognized in the year. Note 2: According to the contract engaged between Shenzhen Technologies and Information Bureau and Fangda Guoke Co. (深科信（2009）202 号) in July 2009, the Bureau provided RMB1.2 million to Fangda Guoke to support the development of ―photon crystal production technologies‖. As of end of this term, this project is under development. Note 3: According to the notice 沈新区委发（2009）52 号 issued by Shenyang Hunnan New Zone Administration Committee on August 26, 2009, the Committee provided RMB500 thousand to Shenyang Fangda to support the energy-saving projects. As of December 31, 2011, this project was not through acceptance inspection yet. Note 4: According to the notice 沈新区委发（2009）72 号 issued by Shenyang Hunnan New Zone Administration Committee on August 26, 2009, the Committee provided RMB500 thousand to Shenyang Fangda to support the production technologies of graphic background and extension and chips projects. The project has been completed and received. Intangible asset amortizing period is estimated according to the predicted usable life by Shenyang Fangda. RMB50,000.00 of non-operational income was recognized in the year. Note 5. According to document 深科信〔2005〕401 号, Shenzhen Bureau of Finance and Fangda Guoke entered the ―Contract on using of technical development fund‖. As of December 31, 2008, Fangda Guoke has received the fund for purchasing of equipment in two payment amounted to RMB1 million. Fangda Guoke recognized against the expected useful life of the equipment and amortizing of intangible assets. RMB100,000.00 recognized as non-operational income in the year. Note 6. According to document 沈信产发〔2008〕27 号 issued by Shenyang Information Industry Bureau and Shenyang Bureau of Finance on July 17, 2008, Shenyang Fangda received RMB480 thousand of subsidy to support the production technologies of graphic background and extension and chips projects. The project has been completed and received. Intangible asset amortizing period is estimated according to the predicted usable life by Shenyang Fangda. RMB180,000.00 of non-operational income was recognized in the year.
Note 7: According to the ―Scientific and technological project contract of Shenyang High-tech Zone‖ engaged between Shenyang High-tech Development Zone Administration Committee and Shenyang Fangda in November 2010, the Committee was about to provide finance of RMB800 thousand to Shenyang Fangda for purchasing of equipment. No related equipment has been purchased as of December 31, 2011.
(XXVIII)Share capital (1) Change of capital shares in the year 103
China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Book balance at Book balance at end of Changed in current term beginning of year year Class of Issuing Transferred shareholding Amount of Bonus Amount of Proportion of new from Others Sub-total Proportion shares shares shares shares reserves I. Shares with trade restriction conditions 1. State-owned shares 2. National legal person shares 3. Other 48,014,828 9.52% 24,007,414 -71,917,800 -47,910,386 104,442 0.01% domestic shares Incl. Non-government 18,200,000 3.61% 9,100,000 -27,300,000 -18,200,000 domestic legal person shares Domestic natural person 29,814,828 5.91% 14,907,414 -44,617,800 -29,710,386 104,442 0.01% shares 4. Overseas shareholding Incl. Shares held by foreign legal persons Foreign natural person shares Total of conditional 48,014,828 9.52% 24,007,414 -71,917,800 -47,910,386 104,442 0.01% shares II. Shares without trading limited conditions 1. Common 232,624,317 46.10% 116,312,158 71,917,800 188,229,958 420,854,275 55.60% shares in RMB 2. Foreign shares 223,967,459 44.38% 111,983,729 111,983,729 335,951,188 44.38% listed at home 3. Foreign shares placed abroad 4. Others Total of unconditional 456,591,776 90.48% 228,295,887 71,917,800 300,213,687 756,805,463 99.99% shares Total of capital 504,606,604 100.00% 252,303,301 252,303,301 756,909,905 100.00% shares Note 1. On March 25, 2011, the Shareholders’ Meeting 2010 adopted the dividend and capitalizing plan of 2010. In which the plan for capitalizing of common reserves was: Upon the total capital shares of 504,606,604 shares, 5 shares will be added to each 10 shares to all shareholders. Totally 252,303,301 shares were added at face value of RMB1.00. The registered capital was changed to RMB756,909,905 thereafter. This change has been verified by Asian-pacific (Group)
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
CPA and the Capital Verification Report 亚会深验字(2011)第 039 号 was issued. Note 2: On July 15, 2011, the 71,917,800 A-shares issued in 2009 privately were released for sale and listed. Note 3: As of December 31, 2011, there were 104,442 shares under restriction of sale, which are held by executives of the Company. (XXIX) Capital reserves Change of capital reserves this year: Book balance at Increased Decreased Book balance at Items beginning of year this year this year end of year 252,303,301. Share capital premium 290,541,523.48 38,238,222.48 00 Other capital reserves 43,892,491.44 1,651,220.00 42,241,271.44 253,954,521. Total 334,434,014.92 80,479,493.92 00 Note: 1. Capital premium has decreased by RMB252,303,301.00, which was caused by capitalizing of reserves as decided by the Shareholders’ Meeting 2010. 2. Other capital reserves has decreased by RMB1,651,220.00, which was caused by decrease of fair value of financial asset for sale. (XXX) Surplus reserves Change of surplus reserves this year: Book balance at Increased this Decreased this Book balance Items beginning of year year year at end of year Statutory surplus 17,834,977.97 6,841,099.19 24,676,077.16 reserves Total 17,834,977.97 6,841,099.19 24,676,077.16 Note: Increase of surplus reserve was caused by providing of surplus reserves at 10% of the net profit after tax according to the Articles of Association.
(XXXI) Retained profit Change of retained profit:
Items Current Year Previous Year Retained at end of last year 153,115,142.18 102,526,565.06 Plus: Adjusted amount of retained profit at
beginning of year (―-― for less) Retained at beginning of this year 153,115,142.18 102,526,565.06 Plus: Net profit attributable to the owners of 65,503,925.58 55,063,374.25 parent company Less: Statutory surplus reserves 6,841,099.19 4,474,797.13 Optional surplus reserves Common risk provisions Common share dividend payable Common share dividend transferred to capital
share Retained profit at end of year 211,777,968.57 153,115,142.18 105
China Fangda Group Co., Ltd. Notes to Financial Statements 2011
(XXXII)Operational turnover and costs (1) Details of business turnover and costs:
Items Occurred this term Occurred last year Turnover 1,348,776,366.53 1,161,933,356.48 Incl. Main business turnover 1,296,010,404.05 1,115,635,614.18 Other business income 52,765,962.48 46,297,742.30 Operation cost 1,087,992,839.87 955,678,459.47 Incl. Main business cost 1,064,398,832.90 938,020,389.11 Other business cost 23,594,006.97 17,658,070.36
(2) Main business turnover classified on industries:
Occurred this term Occurred last year Name of industry Operation Operation Turnover Turnover cost cost 1,184,798,163. Metal production 977,805,293.93 956,265,884.36 795,574,881.92 05 Railroad industry 98,230,586.47 73,361,235.01 150,901,720.94 129,419,580.67 Lighting product 12,981,654.53 13,232,303.96 8,468,008.88 13,025,926.52 industry 1,296,010,404. 1,064,398,832. Total 1,115,635,614.18 938,020,389.11 05 90 (3) Business segments on districts:
Occurred this term Occurred last year Name of districts Operation Operation Turnover Turnover cost cost 1,217,075,545. 1,008,524,582. Domestic 1,061,081,033.63 898,954,732.03 44 46 Overseas 78,934,858.61 55,874,250.44 54,554,580.55 39,065,657.08 1,296,010,404. 1,064,398,832. Total 1,115,635,614.18 938,020,389.11 05 90 (5) Turnover from top five clients
Name of clients Occurred this term Portion in total turnover No.1 99,076,985.77 7.35% No.2 74,837,147.70 5.55% No.3 73,474,073.08 5.45% No.4 68,083,216.13 5.05% No.5 63,481,640.08 4.71% Total 378,953,062.76 28.10%
(XXXIII)Business tax and surcharge
Type of taxes Occurred this term Occurred last year Rate Business tax 18,666,270.42 14,730,505.62 See Note III(I)-1
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
City maintenance 3,581,884.49 991,249.71 See Note III(I)-1 and construction tax Property tax 1,354,473.46 1,297,355.63 See Note III(I)-3 Land using tax 158,106.93 158,406.26 Education surtax 1,974,228.4 901,414.15 See Note III(I)-1 Others 1,012,708.72 307,210.49 Total 26,747,672.42 18,386,141.86 Note: Amount of the year increased by 45.48% over previous year, which was caused by significant increase of turnover and increase of turnover tax and surcharges. The local taxes have increased too.
(XXXIV)Sales expense
Items Occurred this term Occurred last year Manpower 10,825,555.42 7,986,270.78 Freight and misc. 6,146,199.77 6,112,904.64 After sales 633,197.88 5,097,364.23 Business trips 3,112,536.64 3,192,288.68 Business reception expenses 1,477,665.74 2,479,057.47 Material consumable 652,982.57 1,532,454.38 Office expenses 904,822.67 1,230,474.73 Advertisement and exhibition 976,749.69 1,190,779.70 Rental 719,897.99 860,288.91 Testing 1,165,719.66 371,999.35 Consulting 246,149.90 238,647.50 Export credit insurance 866,909.35 Misc. expenses 1,589,359.07 1,598,822.60 Total 29,317,746.35 31,891,352.97
(XXXV)Administrative expense
Items Occurred this term Occurred last year Manpower 49,208,779.84 46,788,029.85 Depreciation and amortization 16,156,234.59 10,593,727.87 Agencies 3,773,845.87 4,251,710.95 Tax 4,471,893.17 4,114,664.83 Maintenance fee 2,037,983.11 3,570,576.11 Water and electricity 2,101,335.16 2,696,533.49 Office expenses 2,544,556.04 2,654,017.23 Business trips 4,067,852.87 3,921,934.08 R&D 2,744,431.85 2,044,548.56 Business reception expenses 2,154,541.69 1,936,049.55 Rental 3,146,641.06 1,535,778.23 107
China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Moving 39,118.30 1,273,987.08 Lawsuit 5,218,326.92 1,261,030.00 Material consumable 563,765.22 836,693.27 Property management fee 1,609,835.89 729,924.00 Misc. expenses 5,775,831.29 6,130,173.82 Total 105,614,972.87 94,339,378.92
(XXXVI)Financial expenses
Items Occurred this term Occurred last year Interest expense 23,216,799.09 19,871,195.20 Less: Incoming interests 6,252,460.01 2,755,546.52 Exchange gains/losses 1,299,160.88 771,792.88 Commission charges and others 1,488,995.48 1,669,137.20 Total 19,752,495.44 19,556,578.76
(XXXVII)Income from change of fair value
Source of income from fluctuation of Occurred this term Occurred last year fair value Investment property measured at fair 10,815,131.20 13,921,217.90 value Total 10,815,131.20 13,921,217.90
(XXXVIII)Investment income Investment income categorized by resources:
Sources of investment gains Occurred this term Occurred last year Gains from long-term equity -17,436.48 investment Long-term equity investment gains on -24,685.12 equity basis Investment gains from disposal of 3,176,516.97 available-for-sale financial assets Gains from other investment 99,342.47 (financial products) Total 99,342.47 3,134,395.37
(XXXIX)Asset impairment loss
Items Occurred this term Occurred last year Bad debt losses 16,501,823.05 9,714,454.18 Inventory impairment losses 2,009,732.81 -215,355.05 Fixed assets impairment losses 853,819.00 Total 19,365,374.86 9,499,099.13
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Note: Asset impairment loss increased significantly, which was caused by significant increase of project payment receivable at end of year.
(XL) Non-operational income
Amount accounted Items Occurred this term Occurred last year into non-recurring account of the year Total of gains from disposal of 3,295.49 7,868,996.54 3,295.49 non-current assets Incl. Gains from disposal of 3,295.49 4,188,405.10 3,295.49 fixed assets Gains from disposal of 3,680,591.44 intangible assets Government subsidy 1,988,650.00 5,537,950.00 1,988,650.00 Penalty income 177,600.27 162,557.90 177,600.27 Payable account not able to be 47,898.40 137,566.66 47,898.40 paid Compensation income 2,355,157.57 Others 9,166,504.14 4,139,383.23 9,166,504.14 Total 11,383,948.30 20,201,611.90 11,383,948.30
Note 1: Non-operational income decreased by 43.65%, which was caused by greater compensation for the land retrieved by Nanchang High Tech Zone Administration Committee received in the previous year, while less government subsidy received in this year.
Note 2: Details of government subsidies Occurred this Occurred last Items 备 注 term year Technical development fund 2011 400,000.00 from Nanshan Bureau of Finance Application and demonstration 334,850.00 1,385,150.00 See Note V (XXVII)-1 project of LED lighting tech Graphic background production and See Note V(XXVII) 230,000.00 extension and chip making –4,6 Export development fund 2010 221,200.00 Technology insurance subsidy from 172,300.00 Nanchang government Main enterprise fund from Shenzhen 160,000.00 government Allowance for short-term export 127,700.00 credit 2011 Government subsidy for export and 100,100.00 credit Semiconductor high power chip 100,000.00 See Note V (XXVII)-5 technology National 863 program project 3,430,000.00 Resource exploration fund (inland 326,000.00 shipping subsidy for exporting) Others 142,500.00 396,800.00 Total 1,988,650.00 5,537,950.00
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Note 3: Other non-operational income were
(1) On June 1, 2011, Dalian Middle Court judged that Dalian Hongjin World Trade Center Co., Ltd. use its property located in Zhongshan Dalian amounted to RMB23,957,300.00 to make the debt to the Company. This made RMB4,762,634.40 of non-operational income.
(2) According to the judgment （2010）淮仲裁字第 098 号 issued by Huai’an Arbitration Committee on August 17, 2011, another non-operational income of RMB1,098,758.60 was confirmed.
(XLI) Non-operational expenditure
Occurred this Carried to current Items Occurred last year term contingent gain/loss Loss from disposal of fixed 2,427,783.27 800,599.49 2,427,783.27 assets Loss from debt reorganizing 3,959.20 434,040.66 3,959.20 (Note 1) Donations 233,000.00 602,762.20 233,000.00 Penalties paid 11,645.94 4,778.84 11,645.94 Other (Note 2) 447,208.16 342,048.95 447,208.16 Total 3,123,596.57 2,184,230.14 3,123,596.57
Note 1: On June 30, 2011, Fangda New Material has reached the debt reorganization agreement with Zhang Jian, by which partial of the credit due to Fangda New Material will be waived. The receivable account of RMB204,830.80 by Zhang Jian will be transferred to Fangda New Material. Meanwhile Zhang Jian will pay RMB750 thousand to Fangda New Material by one payment in seven days upon engaging of the agreement. The book value of receivable account from Zhang Jian is RMB1,369,700.00, RMB410,910.00 of bad debt provision has been provided, and RMB3,959.20 of credit lost has been recognized. Note 2: Other details are mainly losses of RMB327,116.87 from clearing of receivable accounts.
(XLII) Income tax expenses Composition of income tax expense (income)
Items Occurred this term Occurred last year Income tax calculated according to the law 17,199,784.69 9,762,250.04 and regulations of current term Adjustment of differed income tax 2,580,182.17 9,606,943.98 Total 19,779,966.86 19,369,194.02
(XLIII) Calculation formula of basic earnings per share and diluted earnings per share According to ―Information Disclosure Rules No.9 – Calculation and disclosure of net earnings on asset and earnings per share‖ (中国证券监督管理委员会公告 [2010]2 号) and ―Explanation Announcement of Information Disclosure No. 1 – Non-recurring gain/loss‖ (中国证券监督管理委员会 公告[2008]43 号), the earnings per share is calculated as the following:
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
1. Calculation outcome
Current Year Previous Year Diluted Basic Basic Diluted Profit of the report period earnings earnings per earnings per earnings per per share share share share Net profit attributable to common share 0.09 0.09 0.08 0.08 holders of the Company (I) Net profit attributable to common share holders of the Company after deducting of 0.07 0.07 0.04 0.04 non-recurring gain/loss (II)
2. Formula of earnings per share
Items No. Current Year Previous Year Net profit attributable to common 1 shareholders of the Company 65,503,925.58 55,063,374.25 Non-recurring gain/loss attributable to the net profit of common shareholders of the 2 14,498,445.69 29,459,493.20 parent company after deducting of income tax influences Net profit attributable to common share holders of the Company 3=1-2 after deducting of non-recurring 51,005,479.89 25,603,881.05 gain/loss Total of shares at beginning of 4 year 504,606,604 426,786,359 Amount of shares increased by capitalizing of common reserves 5 252,303,301 258,205,747 or share dividend 6 47,945,200 Amount of shares increased by issuing of new shares or 6 23,972,600 transforming of debt to shares 6
Number of months from the next 7 6 month of new share issuing or 7 converting of debt to shares to the 6 end of report term 7 Amount of shares decreased by repurchasing of shares in the 8 report term Number of months from the next month of share decreasing to the 9 end of report term Amount of shares reduced 10 Number of months in the report 11 term 12 12 Weighted average of common 12=4+5+6×7 shares issued outside (II) ÷11-8×9÷11-10 756,909,905 720,951,006 Weighted average of common shares issued outside adjusted for 13 756,909,905 720,951,006 merger under common control (I) Basic earning per share (I) 14=1÷13 0.09 0.08 Basic earning per share (II) 15=3÷12 0.07 0.04 Diluting potential common share 16 interests recognized as expenses
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Items No. Current Year Previous Year Income tax rate 17 24% 22% Transformation fees 18 Amount of shares increased by transforming or exercising of 19 company bond, subscription certificate, or share option 20=[1+(16-18)× Diluted earning per share (I) (100%-17)]÷(13+1 0.09 0.08 9) 21=[3+(16-18) Diluted earning per share (II) ×(100%-17)]÷(12+ 0.07 0.04 19) (1) Basic earnings per share
Basic earnings per share=P0÷S
S= S0＋S1＋Si×Mi÷M0– Sj×Mj÷M0-Sk
P0 = Net profit attributable to the common shareholders or net profit attributable to the common shareholder after deducting of non-recurring gain/loss.S = weighted average of common shares issued in the marketS0 = Total shares at the beginning of termS1 = increased shares due to capitalizing of common reserves or dividendSi = shares increased due to placing of new shares or transferred from debt in the report termSj = shares decreased due to actions such as repurchasing in the report termSK = the amount of shares reducedM0 = number of months of the report termMi = accumulative number of months from the next month of share increasing to the end of report term; Mj = accumulative number of months from the next month of share decreasing to the end of report term.
(2) Diluted earning per share
Diluted earning per share=P1/(S0＋S1＋Si×Mi÷M0–Sj×Mj÷M0–Sk+ weighted average of common shares increased by share option certificates, future option certificates, and convertible bonds)
P1 = net profit attributable to common shareholders of the Company, or net profit attributable to common shareholders after deducting of non-recurring gain/loss, with considering the influences of diluting potential common shares, and adjusted according to Enterprise Accounting Standard and related regulations.At calculating of diluted earnings per share, the Company has considered the influences of the entire dilute potential common shares, until the diluted earnings per share had reached the minimum value.
3. None of the amounts of common shares issued outside or potential common shares has greatly changed during the balance sheet date to this report is approved, no potential common shares with potential dilution.
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
(XLIV) Other misc incomes
Occurred this Items Occurred last year term 1. Gains (losses) from available-for-sale financial assets -2,149,000.00 850,589.04 Less: Income tax influence of available-for-sale financial -497,780.00 266,069.59 assets Net amount written into other gains and transferred 2,694,453.18 into gain/loss in previous terms Sub-total -1,651,220.00 -2,109,933.73 2. Shares in other gains of investees on equity basis Less: Income tax influence of shares in other gains of
investees on equity basis Net amount written into other gains and transferred into gain/loss in previous terms Sub-total 3. Amount of gains (or losses) from cash flow hedge instrument Less: Income tax influence of cash flow hedge instruments Net amount written into other gains and transferred into 2,845,166.75 gain/loss in previous terms Adjusted amount transferred to initial amount of the target project Subtotal -2,845,166.75 4. Difference from translating of foreign currency financial statements Less: Net amount of disposing overseas business and transferred to current gain/loss Sub-total 5. Others Less: Income tax influence by other accounted into other misc. incomes Net amount accounted into other misc. income and transferred into current gain/loss in previous terms Sub-total Total -1,651,220.00 -4,955,100.48 (XLV) Notes to the Cash Flow Statement 1. Other cash inflow related to operation
Items Amount of current year Amount of Last Year Interest income 6,101,798.90 3,264,310.41 Allowance income 1,443,800.00 5,852,800.00 Net amount of bank draft deposit retrieved 16,250,157.38 950,000.00 Retrieving of bidding deposits 4,672,960.50 6,158,167.57 Power and telecommunication expense 10,979,949.89 collected on behalf Lawsuit interest received 277,852.84 2,865,985.32 Operational trade received 10,522,014.77 8,242,443.30
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Others 3,489,661.47 6,156,688.55 Total 42,758,245.86 44,470,345.04 2. Other cash paid related to operation
Items Amount of current year Amount of Last Year Sales expense 17,515,503.13 10,920,411.71 Administrative expense 37,176,491.27 41,423,084.03 Bidding deposit paid 9,767,040.36 11,275,971.56 Net deposit for drafts 3,436,350.82 11,551,825.29 Other trades 21,673,035.03 24,934,519.80 Total 89,568,420.61 100,105,812.39 3. Other cash received related to investment
Items Amount of current year Amount of Last Year Bidding and contract deposit related to 29,969,683.50 construction projects Total 29,969,683.50 4. Other cash paid related to investment
Items Amount of current year Amount of Last Year Bidding deposit paid related to construction 18,550,000.00 projects Total 18,550,000.00 5. Other cash paid related to financing
Items Amount of current year Amount of Last Year Capital increase expense paid 293,344.43 Payment of share placing fee 4,001,102.20 Evaluation fee of short-term debentures 250,000.00 Total 293,344.43 4,251,102.20
(XLVI) Appendix of Cash Flow Statement (1) Net profit adjusted to cash flow of business operation on indirect basis Amount of current Amount of Last Supplementary Info. year Year 1.Net profit adjusted to cash flow of operation: Net profit 59,380,123.26 48,286,146.38 Plus: Asset impairment provision 19,365,374.86 9,499,099.13 Fixed asset depreciation, gas and petrol depreciation, 16,403,878.73 15,831,320.30 production goods depreciation Amortizing of intangible assets 5,173,399.43 4,145,584.44 Amortizing of long-term expenses 461,876.35 130,603.24 Loss from disposal of fixed assets, intangible assets, and -760,047.25 -7,678,770.63 other long-term assets (―-― for gains)
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Amount of current Amount of Last Supplementary Info. year Year Loss from fixed asset discard (―-― for gains) 1,450,855.03 610,373.58 Loss from fluctuation of fair value (―-― for gains) -10,815,131.20 -13,921,217.90 Financial expenses (―-― for gains) 23,698,010.18 20,018,951.57 Investment loss (―-― for gains) -99,342.47 -3,134,395.37 Decrease of deferred income tax asset (―-― for increase) -2,225,237.39 3,175,752.65 Increase deferred income tax asset (―-― for decrease) 4,805,419.56 6,346,420.64 Decrease of inventory (―-― for increase) 26,059,387.31 -80,422,206.72 Decrease of operational receivable items (―-― for increase) -290,074,127.42 -4,944,168.27 Increase of operational payable items (―-― for decrease) 81,643,448.27 -6,528,930.72 Others 8,486,616.90 -22,601,825.29 Cash flow generated by business operation, net -57,045,495.85 -31,187,262.97 2. Major investment and financing activities not involving in cash flow Liabilities converted to capital - Convertible bond expire in 1 year - Fixed assets leased through financing 3. Change of cash and cash equivalents Balance of cash at end of year 300,177,008.78 468,878,715.15 Less: Balance of cash at beginning of year 468,878,715.15 210,823,550.83 Plus: Balance of cash equivalents at end of term - Less: Balance of cash equivalents at beginning of term - Net increasing of cash and cash equivalents -168,701,706.37 258,055,164.32
(2) Cash and cash equivalents Amount of current Amount of Last Items year Year I. Cash 300,177,008.78 468,878,715.15 Incl: Cash in stock 27,427.37 13,898.14 Bank savings could be used at any time 298,864,210.28 468,864,140.47 Other monetary capital could be used at any time 1,285,371.13 676.54 Usable money in Central Bank Money saved in associated financial bodies Money from associated financial bodies II. Cash equivalents Incl. Bond investment due in 3 months III. Balance of cash and cash equivalents at end of year 300,177,008.78 468,878,715.15 IV. Cash and cash equivalents of subsidiaries within the 24,603,341.99 37,417,148.55 parent company or group under constrains
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
VI. Related parties and transactions
（I） Relationship
1． Major shareholders of the Company:
Voting Registered Percentage Name of the Ownership Reg. Legal Business power in capital Organization code of shareholders type Add. representative property the (RMB0’000) shareholding Company Shenzhen Banglin Industrial Technologies Ltd. liability Shenzhen Chen Jinwu 3,000.00 72984005-5 9.09% 9.09% investment Development Co., Ltd. Shenzhen Shilihe Wang Industrial Ltd. liability Shenzhen 1,978.0992 72984450-7 2.36% 2.36% Investment Shengguo investment Co., Ltd. Shengjiu Industrial Investment Ltd. liability HK Xiong Jianming HKD1.00 59046683-000-10-11-2 1.64% 1.64% investment Ltd. Note 1: Owners of Shenzhen Banglin Technology Development Co., Ltd. are natural persons. Mr. Xiong Jianming, Chairman of the Board of the Company, is holding 85% of the shares, and Mr. Xiong Xi, son of Mr. Xiong Jianming, is holding 15% of the shares. Mr. Xiong Jianming is the substantial holder of the Company. Note 2: Among the top 10 shareholders, Shenzhen Banglin Technology Development Co., Ltd. and Shengjiu Investment Co., Ltd. are parties action-in-concert. Shenzhen Banglin Technology Development Co., Ltd. and Shenzhen Shilihe Investment Co., Ltd. are related parties. No other action-in-concert or related parties among the other holders of current shares.
2． Particulars of the subsidiaries Please see Note IV.
（II） Related party transactions
Providing of guarantee among related parties:
Amount Completed or The provider The beneficiary Start date Due date guaranteed not Fangda Decoration 50,000,000.00 July 11 2011 July 10 2012 No
Fangda Automatic The Company 50,000,000.00 July 11 2011 July 10 2012 No Fangda New 50,000,000.00 July 11 2011 July 10 2012 No Material January 31, The Company Fangda Automatic 20,000,000.00 Feb. 1 2011 No 2012 30,000,000.00 Mar 1, 2011 Mar 1, 2012 No 30,000,000.00 Feb. 22 2011 Feb. 22 2012 No The Company Fangda Decoration 20,000,000.00 Aug 4, 2011 Feb 4 2012 No 20,000,000.00 Aug 3, 2011 Aug 2, 2012 No
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Amount Completed or The provider The beneficiary Start date Due date guaranteed not 15,000,000.00 Jul 7 2011 Jul 7 2012 No Fangda New The Company 15,000,000.00 Jul 7 2011 Jul 7 2012 No Material Sept. 30, 27,000,000.00 Sept 30, 2012 No 2011 Note: The above are related guarantees involving with bank loans.
VII. Contingency
（I） CONTINGENT LIABILITIES
1. Contingent liabilities formed by material lawsuit or arbitration, and their influences on the financial position
Case Target Plaintiff The defender The court Progress description amount The 1st RMB17.07 Fangda Project Middle Wang Weihong mil and Trial completed Decoration dispute Court of interests Chongqing Note: In 2010, Wang Weihong sue to Chongqing Middle Court against Fangda Decoration – one of the Company’s subsidiaries, claiming for RMB17.07 million project payment and interests. While Fangda Decoration claimed RMB18.1189 million of project payment and related loss. At present the trial process has been completed, but the debate was not started. And the bank deposit of RMB12 million of Fangda Decoration was frozen by the court.
2. Major lawsuits settled but not executed completely
(1) On November 24, 2004, Shanxi Taiyuan Middle Court issued the Civil Judgment （2004）并民 初字第 322 号 that Shanxi No.2 Construction Co., Ltd. and Shanxi Taiyuan Police Station should make the payment of RMB11,506,930.98 to Fangda Decoration in two disbursement. As of December 31, 2011, Fangda Decoration has retrieved RMB5,272,450.00, and the rest was not retrieved yet. (3) On January 2, 2003, Guangzhou Middle Court issued the Civil Settlement Letter （2002）穗中 法民三初字第 00596 号 requiring Guangzhou Yi’an Plaza Property Development Co., Ltd. to pay RMB5,621,329.63 to Fangda Decoration in 15 days. As of December 31, 2011, Fangda Decoration has received RMB1,950,000.00, and the rest of payment has not been received yet. 3. Other contingent liabilities As of December 31, 2011, the external guarantee was provided to subsidiaries of the Company. For details please see Note VI (II). No material contingent issues to be disclosed other than the above as of December 31, 2011.
VIII. Significant commitments
（I） Significant commitments 1. Details of guarantees provided between the Company and its subsidiaries for bank credits are:
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
(1) As of December 31, 2011, the guarantees provided by the Company to the subsidiaries for bank credits: Name of companies Amount Note Export sellers’ credit. Actual situation of 35,000,000.00 guarantee on loans see Note VI (II) Integrated credit of RMB58 million, including Fangda New Material current asset loan of RMB30 million, accepted 58,000,000.00 notes of RMB20 million, and guarantee letter of RMB8 million. Actual situation of guarantee on loans see Note VI (II) Fangda Automatic 250,000,000.00 Fangda Automatic 20,000,000.00 Actual situation of guarantee on loans see Note 300,000,000.00 Fangda Decoration VI (II) 120,000,000.00 Fangda Decoration Was the guarantee provide for guarantee letter by Fangda Decoration and Fangda Automatic. 16,518,674.25 Fangda Automatic This amount is the part used but not due in last year. Total 799,518,674.25
(2) As of December 31, 2011, the guarantees provided by the subsidiaries to the Company for bank credits:
Name of companies Amount Note 50,000,000.0 Fangda Decoration 0 50,000,000.0 Practical situations are Fangda Automatic 0 demonstrated in Note VI (II) 50,000,000.0 Fangda New Material 0 150,000,000. Total 00 2. Fangda Aluminum and Nanchang High-tech Zone Committee entered the ―Land Retrieving and Compensation Agreement‖ on January 18, 2010. Fangda Aluminum committed that: Since the date of the Agreement, all of the liabilities, credits and claims attached or raised in relation with the land will be undertaken by Fangda Aluminum.
（II） Fulfilling of commitments made in previous terms Commitments made by the Company in previous terms were exercised normally along with repaying of loans by the receiver of guarantees. No material contingent issues to be disclosed other than the above as of December 31, 2011.
IX. Post-balance-sheet issues
The 9th meeting of the 6th term of Board was held on April 18, 2012, on which the profit distribution and capitalizing of reserves plan 2011 was examined and approved. According to the resolution of the 9th meeting of the 6th term of Board. Neither profit distribution nor capitalizing of reserves will be performed. All of the profit will be save for future use in 2012. 118
China Fangda Group Co., Ltd. Notes to Financial Statements 2011
No major post-balance-sheet issues to be disclosed other than the above as of the date of this report.
X. Other Material Issues
（I） Issuing of short-term bonds
On December 10, 2010, the 1st provisional shareholders’ meeting 2010 was held. The proposal of filing to issue short-term bills was adopted at the meeting. The Company has submitted the filing application to China Inter-bank Transaction Association, and received the Acceptance Letter (中市协注 【2012】CP1 号) from the Association on January 4, 2012. As approved by the 66th registration meeting of 2011, the Company is approved to issue RMB400 million of short term bills. It is effective in two years and Industrial Bank Co., Ltd. will be main broker. Issuing can be implemented in installments but the first issuing shall be in two months upon registration. As of the end of report period, the Company has not issued by short term bills.
（II） Leases Details of property leasing as of December 31, 2011. Book balance at beginning of Category of property for rent Book balance at end of year year Investment real estates 277,705,949.35 271,226,332.73 Total 277,705,949.35 271,226,332.73 （III） Assets accounted at fair value
Accumulativ Impairment Fair value at Change of e change in provision Fair value at Items beginning of fair value in fair value provided this end of year year the year accounted year into equities I. Financial assets 4,347,000.00 698,000.00 2,198,000.00 1. Financial assets accounted at fair value and fluctuation
accounted into current income (Derivate financial assets not included) 2. Derivate
financial assets 3. Disposable 4,347,000.00 698,000.00 2,198,000.00 financial assets II. Investment 271,226,332. 11,550,311.2 277,705,949.
property 73 0 35 III. Production
biological assets IV. Others
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
275,573,332. 11,550,311.2 279,903,949. Total of assets 698,000.00 73 0 35 Total of liability
XI. Notes to the main items of the financial statements of the parent company
(I) Account receivable (1) Account receivable on categories
Book balance at end of year
Categories Book value Bad debt provision Ratio Providing Net amount Amount Amount (%) rate (%) Receivables with major individual amount and bad debt provision provided individually Receivables provided bad debt provision in 8,602,510.09 100.00 2,998,948.29 34.86 5,603,561.80 groups Incl. Receivable accounts not consolidated 8,602,510.09 100.00 2,998,948.29 34.86 5,603,561.80 Sub-total of group 8,602,510.09 100.00 2,998,948.29 34.86 5,603,561.80 Account receivable with minor individual amount but bad debt provision is provided Total 8,602,510.09 100.00 2,998,948.29 34.86 5,603,561.80 Book balance at beginning of year
Categories Book value Bad debt provision Ratio Providing Net amount Amount Amount (%) rate (%) Receivables with major individual amount and bad debt provision provided individually Receivables provided bad debt provision in 10,467,296.51 100.00 2,549,569.61 24.36 7,917,726.90 groups 100.0 Incl. Receivable accounts not consolidated 10,467,296.51 2,549,569.61 24.36 7,917,726.90 0 100.0 Sub-total of group 10,467,296.51 2,549,569.61 24.36 7,917,726.90 0 Account receivable with minor individual amount but bad debt provision is provided 100.0 Total 10,467,296.51 2,549,569.61 24.36 7,917,726.90 0 Account receivables on which bad debt provisions are provided on age basis in the group:
Book balance at end of year Age Amount Proportion Bad debt provision Net amount within 1 year 1,834,317.56 21.32% 55,029.53 1,779,288.03 1-2 yrs 1,100,443.75 12.79% 110,044.38 990,399.37 2-3 yrs Over 3 yrs 5,667,748.78 65.89% 2,833,874.38 2,833,874.40 Total 8,602,510.09 100.00% 2,998,948.29 5,603,561.80 Book balance at beginning of year Age Amount Proportion Bad debt provision Net amount
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
within 1 year 2,187,479.05 20.90% 65,624.37 2,121,854.68 1-2 yrs 2-3 yrs 8,279,817.46 79.10% 2,483,945.24 5,795,872.22 Over 3 yrs Total 10,467,296.51 100.00% 2,549,569.61 7,917,726.90
(2) There is no receivable account that have been fully provided of bad debt provision, or with great portion, and retrieved or written back in the same year, or such account with major amount.
(3) No receivable account has been written off in current year. (5) As of December 31, 2010, no receivables due from shareholders with 5% or above shares of the Company or related parties.
(5) The top 5 debtors at end of the year: Name of the Relation with the Balance at end % in total Age companies Company of year receivables 1,196,767.80 within 1 year Guangzhou Metro Client 1,100,443.75 1-2 yrs 92.59 Company 5,667,748.78 Over 3 yrs Shenzhen Taishan Online Tech Co. Lessee 203,736.16 within 1 year 2.37 Ltd. Shenzhen Yiliruiguang Technology Lessee 92,898.00 within 1 year 1.08 Development Co., Ltd. Shenzhen Fuchuangtong Lessee 74,708.72 within 1 year 0.87 Technology Co., Ltd. Fu Xiaoli Shenzhen Dianlitong Technologies Co., Lessee 61,703.96 within 1 year 0.72 Ltd. Total 8,398,007.17 97.62 3． Other account receivable (1) Other account receivable on categories
Book balance at end of year
Categories Book value Bad debt provision Ratio Providing Net amount Amount Amount (%) rate (%) Other receivables with major individual amount and bad debt provision provided individually Other receivables provided 265,710,536.44 99.97 540,923.81 0.20 265,169,612.63 bad debt provision in groups Incl. Receivable accounts not 1,996,058.81 0.75 540,923.81 27.10 1,455,135.00
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011 consolidated Receivable account within the 263,714,477.63 99.22 263,714,477.63 consolidation range Sub-total of group 265,710,536.44 99.97 540,923.81 0.20 265,169,612.63 Other account receivable with minor individual amount but 77,046.00 0.03 77,046.00 100.00 bad debt provision is provided Total 265,787,582.44 100.00 617,969.81 0.23 265,169,612.63 Book balance at beginning of year
Categories Book value Bad debt provision Ratio Providing Net amount Amount Amount (%) rate (%) Other receivables with major individual amount and bad debt provision provided individually Other receivables provided 586,474. 201,041,444.07 99.97 0.29 200,454,969.75 bad debt provision in groups 32 Incl. Receivable accounts not 3,253,600.46 1.61 586,474.32 18.03 2,667,126.14 consolidated Receivable account within the 197,787,843.61 98.36 197,787,843.61 consolidation range Sub-total of group 201,041,444.07 99.97 586,474.32 0.29 200,454,969.75 Other account receivable with minor individual amount but 53,046.00 0.03 53,046.00 100.00 bad debt provision is provided Total 201,094,490.07 100.00 639,520.32 0.32 200,454,969.75
Other account receivables on which bad debt provisions are provided on age basis in the group:
Book balance at end of year Age Proportio Bad debt Amount Net amount n provision within 1 year 928,255.27 0.35% 27,847.66 900,407.61 1-2 yrs 50,699.54 0.02% 5,069.95 45,629.59 2-3 yrs 2,729.00 0.00% 818.70 1,910.30 Over 3 yrs 1,014,375.00 0.38% 507,187.50 507,187.50 Total 1,996,058.81 0.75% 540,923.81 1,455,135.00 Book balance at beginning of year Age Proportio Bad debt Amount Net amount n provision within 1 year 2,203,367.46 1.09% 66,101.02 2,137,266.44 1-2 yrs 11,858.00 0.01% 1,185.80 10,672.20 2-3 yrs Over 3 yrs 1,038,375.00 0.51% 519,187.50 519,187.50 Total 3,253,600.46 1.61% 586,474.32 2,667,126.14
(2) There is no receivable account that have been fully provided of bad debt provision, or with great portion, and retrieved or written back in the same year, or such account with major amount. 122
China Fangda Group Co., Ltd. Notes to Financial Statements 2011
(3) No other receivable account has been written off in current year. (4) As of December 31, 2010, no other receivables due from shareholders with 5% or above shares of the Company.
(5) Top 5 debtors of other receivables: Portion in total Name of the Relation with Balance at end Specification Age other receivable companies the Company of year accounts (%) Fangda Controlled within Current account 162,996,918.47 61.33 Decoration subsidiaries 1 year Fangda New Controlled within Current account 63,944,978.75 24.06 Material subsidiaries 1 year within 5,053.50 1 year Controlled HK Junjia Current account 11.43 subsidiaries 49,352.88 1-2 yrs 30,325,845.43 2-3 yrs 2,488,413.62 1-2 yrs Shenyang Controlled Current account 2,858,162.60 2-3 yrs 2.60 Fangda subsidiaries Over 3 1,560,195.36 yrs Shenzhen Changshou Compensation Trading Over 3 984,375.00 0.37 Pharmacy Co., for building company yrs Ltd. Total 265,213,295.61 99.79
(6) Receivable account due from related parties Name of the Relation with the Balance at end of year % in total receivables companies Company Controlled Fangda Decoration 162,996,918.47 61.33 subsidiaries Fangda New Controlled 63,944,978.75 24.06 Material subsidiaries Controlled HK Junjia 30,380,251.81 11.43 subsidiaries Controlled Shenyang Fangda 6,906,771.58 2.60 subsidiaries Dongguan New Controlled 291,453.20 0.11 Material Co., Ltd. grand-subsidiary Controlled Fangda Woke 108,108.83 0.04 grand-subsidiary Controlled Kexunda Co. 40,400.00 0.02 subsidiaries Total 264,668,882.64 99.59
(II) Long-term share equity investment
Long-term equity investment:
Company Calculating Book balance at Changed this year Book balance at Investment cost invested in basis beginning of year (-― for less) end of year Fangda Cost basis 305,000,000.00 305,000,000.00 305,000,000.00 Decoration 123
China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Fangda Cost basis 19,800,000.00 Aluminium Fangda Yide Cost basis 19,907,760.00 Co. HK Junjia Cost basis 10,600.00 Fangda Cost basis 170,385,071.73 170,385,071.73 170,385,071.73 Automatic Fangda New Cost basis 74,496,600.00 74,496,600.00 74,496,600.00 Material Shenyang Cost basis 109,560,000.00 108,852,073.85 108,852,073.85 Fangda Kexunda Co. Cost basis 1,000,000.00 1,000,000.00 1,000,000.00 Total 700,160,031.73 658,733,745.58 1,000,000.00 659,733,745.58 Share Impairment Company Voting rights Impairment Cash dividend this proportion provision provided invested in (%) provision year (%) this year Fangda 98.39 98.39 49,195,000.00 Decoration Fangda 99.00 99.00 19,800,000.00 Aluminium Fangda Yide 75.00 75.00 19,907,760.00 Co. HK Junjia 100.00 100.00 10,600.00 Fangda 94.08 94.08 8,143,200.00 Automatic Fangda New 75.00 75.00 Material Shenyang 64.58 64.58 Fangda Kexunda Co. 100.00 100.00 (Note) Total 39,718,360.00 57,338,200.00 Note: According to the resolutions of the 2nd meeting of the 6th term of Board held on April 20, 2011, the Company has founded a professional software company with registered capital of RMB1 million. The company is involved in developing and sales of software. The capital of RMB1 million has been input on July 22, 2011, and was verified by Asia-Pacific (Group) CPA Ltd. with the verification report (亚会深验字[2011]032 号).
(III) Operational turnover and costs (1) Details of business turnover and costs:
Items Occurred this term Occurred last year Turnover 44,378,065.25 42,313,848.48 Incl. Main business turnover 1,022,878.46 1,125,165.60 Other business income 43,355,186.79 41,188,682.88 Operation cost 11,314,912.66 12,498,134.64 Incl. Main business cost 671,466.39 2,472,503.13 Other business cost 10,643,446.27 10,025,631.51
(2) Turnover on categories of products
Name of industry Occurred this term Occurred last year
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Operation Operation Turnover Turnover cost cost Rail transportation 1,022,878.46 671,466.39 1,125,165.60 2,472,503.13 equipment Rental 43,355,186.79 10,643,446.27 41,188,682.88 10,025,631.51 Total 44,378,065.25 11,314,912.66 42,313,848.48 12,498,134.64
(3) Turnover from top 5 clients
Name of clients Occurred this term Portion in total turnover No.1 7,142,793.96 16.10% No.2 5,470,523.53 12.33% No.3 2,444,833.96 5.51% No.4 1,616,908.96 3.64% No.5 1,221,604.44 2.75% Total 17,896,664.85 40.33%
(IV) Investment income (1) Investment income by resources:
Sources of investment gains Occurred this term Occurred last year Long-term equity investment gains on 57,338,200.00 43,936,500.00 cost basis Other investment income 64,444.44 Total 57,402,644.44 43,936,500.00
(2) Long-term equity investment gains on cost basis: Name of the Occurred this Occurred last year Causation of change Companies term Fangda Decoration 49,195,000.00 34,436,500.00 本年子公司利润分配增加 Fangda Automatic 8,143,200.00 9,500,000.00 Total 57,338,200.00 43,936,500.00
Note: According to the resolutions adopted by the board meeting of Fangda Automatic held on December 6, 2011, the profit of RMB9,000,000.00 realized in years up to November 2011 will be distributed. According to the capital shares the Company holds, the Company is entitled to RMB8,143,200.00 of dividend. According to the resolutions adopted by the board meeting of Fangda Decoration held on December 31, 2011, the profit of RMB50,000,000.00 realized in years up to 2011 will be distributed. According to the capital shares the Company holds, the Company is entitled to RMB49,195,000.00 of dividend. The two dividends were not received yet up to end of the report term.
(V) Appendix of Cash Flow Statement
Amount of Amount of Last Supplementary Info. current year Year 1.Net profit adjusted to cash flow of operation:
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Amount of Amount of Last Supplementary Info. current year Year Net profit 68,410,991.91 44,747,971.25 Plus: Asset impairment provision 427,828.17 5,290,131.62 Fixed asset depreciation, gas and petrol depreciation, production 2,210,970.53 2,223,723.20 goods depreciation Amortizing of intangible assets 637,358.82 569,199.39 Amortizing of long-term expenses Loss from disposal of fixed assets, intangible assets, and other 225,265.79 130,124.44 long-term assets (―-― for gains) Loss from fixed asset discard (―-― for gains) 8,149.14 Loss from fluctuation of fair value (―-― for gains) -11,008,729.20 -13,793,517.90 Financial expenses (―-― for gains) 12,536,988.86 11,246,974.73 Investment loss (―-― for gains) -57,402,644.44 -43,936,500.00 Decrease of deferred income tax asset (―-― for increase) 746,700.07 3,335,574.15 Increase deferred income tax asset (―-― for decrease) 4,831,827.95 6,300,740.88 Decrease of inventory (―-― for increase) Decrease of operational receivable items (―-― for increase) -62,382,349.30 54,443,592.44 Increase of operational payable items (―-― for decrease) -4,297,488.06 -128,844,669.37 Others Cash flow generated by business operation, net -45,055,129.76 -58,286,655.17 2. Major investment and financing activities not involving in cash
flow Liabilities converted to capital Convertible bond expire in 1 year Fixed assets leased through financing 3. Change of cash and cash equivalents Balance of cash at end of year 24,337,261.80 30,297,718.91 Less: Balance of cash at beginning of year 30,297,718.91 42,024,488.50 Plus: Balance of cash equivalents at end of term Less: Balance of cash equivalents at beginning of term Net increasing of cash and cash equivalents -5,960,457.11 -11,726,769.59
XII. Supplementary Info.
（I） Details of non-recurring gain/loss of current term
According to document 公告[2008]43 号 issued by China Securities Regulatory Commission, the non-recurring gain/loss are as the followings:
Items Occurred this term Note Gain/loss from disposal of non-working capital, including the neutralized part of the impairment -690,807.78 provision provided already
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Items Occurred this term Note Government subsidies accounted into current income account (except for those government subsidies See Note 1,988,650.00 closely related to the Company’s business, and V(XXXX)-1 received at national statutory standard and amount) Gain/loss from debt reorganization 3,959.20 Gain/loss from change of fair value of transactional asset and liabilities, and investment gains from disposal of transactional financial assets and liabilities and sellable financial assets, other than 99,342.47 valid period value instruments related to the Company’s common businesses Gain/loss from change of fair value of investment property measured at fair value in follow-up 10,815,131.20 measurement Other non-business income and expenditures other 6,080,071.96 than the above Gains from clearing of Fangda Guoke Other gain/loss items satisfying the definition of 878,478.35 which is taken non-recurring gain/loss account over by Shenyang Fangda Total of non-recurring gain/loss 19,174,825.40 Less: Influenced amount of income tax 4,616,278.41 Net non-recurring gain/loss (influence on net profit) 14,558,546.99 Less: Influenced amount of minor shareholders’ 60,101.30 equity Non-recurring gain/loss attributable to net profit of 14,498,445.69 common shareholders of the parent company Net profit attributable to common share holders of the 51,005,479.89 Company after deducting of non-recurring gain/loss （II） Net income on asset and earnings per share According to ―Information Disclosure Rules No.9 – Calculation and disclosure of net earnings on asset and earnings per share ( 中国证券监督管理委员会公告 [2010]2 号 ) and ―Explanation Announcement of Information Disclosure No. 1 – Non-recurring gain/loss (中国证券监督管理委员会 公告[2008]43 号), the earnings per share is calculated as the following:
Current Year Earnings per share Profit of the report period Net income on Basic Diluted asset, weighted earnings per earnings per share share Net profit attributable to common shareholders 6.28% 0.09 0.09 of the Company Net profit attributable to the common owners of the PLC after deducting of non-recurring 4.89% 0.07 0.07 gains/losses
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China Fangda Group Co., Ltd. Notes to Financial Statements 2011
Previous Year Earnings per share Profit of the report period Net income on Basic Diluted asset, weighted earnings per earnings per share share Net profit attributable to common shareholders 6.76% 0.08 0.08 of the Company Net profit attributable to the common owners of the PLC after deducting of non-recurring 3.14% 0.04 0.04 gains/losses
XIII. Approval of the financial statements
This financial statement is approved by the Board on April 18, 2012.
Legal representative: Accounting Manager: Manager of Accounting Dept.
China Fangda Group Co., Ltd. April 18, 2012
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