ST雷伊B：2010年年度报告（英文版）_财经

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ST雷伊B：2010年年度报告（英文版）

2011年03月31日 00:49
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GUANGDONG RIEYS GROUP COMPANY LTD.

Annual Report 2010

March 2011

Important Notice

The Board of Directors， the Supervisory Committee as well as all directors，

supervisors and senior executives of GUANGDONG RIEYS GROUP COMPANY

LTD. (hereinafter referred to as the Company) hereby confirms that there are no any

important omissions， fictitious statements or serious misleading information carried in

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

accuracy and completeness of the whole contents.

Asia (Group) Accounting Firm issued the Auditors’ Report with unqualified opinion

with explanatory notes for the Company. The Board of Directors， the Supervisory

Committee and independent directors have made the detailed explanations to relevant

matters and submitted to investors to read carefully.

Chairman of the Board Mr. Chen Hongcheng， Chief Financial Officer Ms. Chen

Peixia hereby confirm that the Financial Report enclosed in the Annual Report is true

and complete.

Contents

Section I. Company Profile1

Section II. Summary of Financial Highlights and Business Highlights3

Section III. Change in Share Capital and Particulars about Shareholders5

Section IV. Directors， Supervisors， Senior Executives and Employees8

Section V. Corporate Governance Structure11

Section VI. Shareholders’ General Meeting14

Section VII. Report of the Board of Directors14

Section VIII. Report of the Supervisory Committee23

Section IX. Significant Events25

Section X. Financial Report29

Section XI. Documents Available for Reference29

Section I. Company Profile

I.Legal Name of the Company

In Chinese: 广东雷伊（集团）股份有限公司

Abbr. in Chinese: 雷伊

In English: GUANGDONG RIEYS GROUP COMPANY LTD.

Abbr. in English: Rieys

II. Legal Representative: Mr. Chen Hongcheng

III. Contact method of Secretary of BOD and Securities Affairs Representative:

Secretary of BODSecurities Affairs Representative

NameMr. Xu WeiMr. Chen Yaoji

Address12/F of Orient Building， Dongmen Middle Road， Luohu District， Shenzhen

Telephone0755-82250045

Fax0755-82251182

E-mailxw@200168.comjacobchen63@yahoo.com

IV. Registered Address: Meixin Industrial Park of Jun Bu Town， Puning， Guangdong

Office Address: 12/F of Orient Building， Dongmen Middle Road， Luohu District，

Shenzhen

Post Code: 518001

Company’s Internet Website: http://www.rieys.com

E-mail of the Company: rieys@live.cn

V. Newspapers Chosen for Disclosing the Information of the Company:

Securities Times and Hong Kong Ta Kung Pao

Internet Website Designated by CSRC for Publishing the Annual Report:

http://www.cninfo.com.cn

The Place Where the Annual Report is Prepared and Placed: 12/F of Orient

Building， Dongmen Middle Road， Luohu District， Shenzhen

VI. Stock Exchange Listed with: Shenzhen Stock Exchange

Short Form of the Stock: RIEYS-B

Stock Code: 200168

VII. Initial registered date: Nov. 17， 1997

Initial registered place: Industrial and Commercial Administration Bureau of

Guangdong Province

Registration code of enterprise business license: 4400001000088

Registration code of tax: 445281231131833

Certified Public Accountants engaged by the Company:

Name: Asia (Group) Accounting Firm.

Address: Room 301， Building No. 1， Wudong Plaza， No. 9 Chegongzhuang Street，

West City District， Beijing

Section II. Summary of Financial Highlights and Business Highlights

I. Major financial data of the past three years (Unit: RMB Yuan)

20102009Year on year2008

Increase/decrease

(%)

Operating profit149，446，872.60152，002，048.85-1.68199，124，620.35

Total profit-37，488，328.723，678，544.90-1119.11-111，300，244.50

Netprofitattributableto-40，490，392.49

4，192，346.21-1065.82-114，592，168.43

shareholders of the Company

Netprofitattributableto-42，187，013.11

shareholders of the Company after

3，726，741.21-1205.18-105，566，994.24

deductingrecurringgainsand

losses

Net cash flow from operating

-42，204，052.02-48，631，563.48-13.22-104，532，788.27

activities

Operating profit93，654，939.87-6，147，375.33-1623.49-61，288，809.02

Year on year

As at 31 Dec.As at 31 Dec.As at 31 Dec.

Increase/decrease

201020092008

(%)

Total assets586，050，810.45640，024，704.10-8.43626，364，355.62

Shareholders’ equity attributable to

308，161，044.95349，348，058.06-11.79345，621，316.85

listed companies

II. There was no difference in net profit and net assets under different accounting

standards in the report period.

III. Items and amount of non-recurring gains and losses deducted

ItemsAmount

Gains and losses from disposal of non-current assets， including offset withdrawn as assets

-2，710，697.90

impairment reserves

Make examination beyond authority， or documents without official approval， or sporadic

refund on tax/ tax remittance1，826.93

Government grant included into the current period gains and losses， excluding those

closely related to the Company’s normal operating and persistently enjoyed at

fixed-amount or fixed-proportion according to the government policies and certain538，714.00

standards

Capital occupation charges on non-financial enterprises that recorded into current gains

and losses1，994.38

Recovery of provision for impairment on accounts receivable that make provision for

8，451，443.14

impairment text individually

Other non-operating income and expense deduct the above items-1，906，952.42

Subtotal4，376，328.13

Deductible income tax expense from the above non-recurring gains and losses2，840，792.20

Minority shareholders’ gains and losses in consolidation statement

518，497.02

Total1，017，038.91

IV. Main financial indexes over the past three years ended the report period

(Unit: RMB Yuan)

Year on year

20102009Increase/decrease2008

(%)

Basic EPS-0.130.01-1400.00%-0.33

Diluted EPS-0.130.01-1400.00%-0.33

Basic EPS after deducting

non-recurringgainand-0.13-0.15-13.33%-0.32

loss

Weighted average return

-12.53%1.15%-13.68%-31.00%

on net assets

Weighted average return

onnetassetsafter

-12.84%-14.96%2.12%-30.00%

deductingextraordinary

gain and loss

Net cash flow per share

arisingfromoperation0.29-0.021550.00%-0.19

activities

Increase/decrease

As at 31 Dec. 2010As at 31 Dec. 2009As at 31 Dec. 2008

YoY (%)

Netassetspershare

attributable to shareholders0.971.10-11.82%1.08

of listed company

Section III. Change in Share Capital and Particulars about Shareholders

I. Particulars about the changes in share capital

1. In the report period， the Company’s share capital remained unchanged.

2. Issuance and listing of shares

1) The Company has not issued any shares or the derived securities in recent three

years.

2) In the report period， there was no change in total number and structure of the shares

arising from bonus shares or share capital conversion.

3) There existed no inner employees’ shares in the Company.

II. Particulars about shareholders

1. Particulars about shares held by the main shareholders of the Company

(Unit: share)

Total number of

19，953

shareholders

CharacterNumber of

TotalPledged or

Name ofofShareholdingIncrease/decreanon-tradable

number offrozen

shareholdersshareholdproportionse in this yearshares

share heldshares

erholding

Puning

Shenghengchang

Corporate

Trade36.99%0117，855，000117，855，000Impawn

Development

Co.， Ltd

Shenzhen

RishengCorporate

10.68%034，020，00034，020，000Impawn

Investment Co.，share

Ltd.

Shantou Lianhua

Corporate

IndustrialCo.，3.81%012，150，00012，150，000Impawn

Ltd.

SU YOUHEB share1.89%+6，020，5676，020，5670Unknown

ZHENGSU

B share0.54%+1，719，5001，719，5000Unknown

XIAN

WANGYAN

B share0.45%+1，432，7551，432，7550Unknown

FENG

LUODONG

B share0.44%-42，8951，400，0000Unknown

HUI

XU HAIB share0.43%-43，6701，378，8000Unknown

NGAIKWOK

B share0.36%+1，145，8161，145，8160Unknown

PAN

Taifook

Securities

CompanyB share0.34%-983，5001，087，4590Unknown

Limited-Account

Client

Shares hold by the top ten tradable shareholders

Name of shareholdersNumber of tradable shares holdingType of shares

SU YOU HE6，020，567B share

ZHENG SU XIAN1，719，500B share

WANG YAN FENG1，432，755B share

LUO DONG HUI1，400，000B share

XU HAI1，378，800B share

NGAI KWOK PAN1，145，816B share

Taifook Securities Company

1，087，459B share

Limited-Account Client

CHEN ZHEN QI701，800B share

KE ZHONG FENG699，800B share

XU XIN FEN678，970B share

There existed related relationship among Puning Shenghengchang Trade

ExplanationonrelatedDevelopment Co.， Ltd.， Shenzhen Risheng Investment Co.， Ltd. and Shantou

relationshiporLianhua Industrial Co.， Ltd.， which belonged to action-in-concert promulgated

action-in-concertamongby Measures for the Administration of Disclosure of Information on the Change

above mentioned shareholdersof Shareholdings in Listed Companies. The Company was unknown whether

there existed related relationship among other shareholders.

Note: Guangzhou Shenghengchang Investment Co.， Ltd moved to Puning on 28 Jan.

2010， and changed its name as Puning Shenghengchang Trade Development Co.， Ltd.

Actual controller of the Company remained unchanged.

2. About the controlling shareholder of the Company

(1) The controlling shareholder of the Company is Puning Shenghengchang Trade

Development Co.， Ltd.， who held 117.855 million shares of the Company， taking up

36.99% of the total share capital. The registered capital of this company is RMB 98

million; hereinto Mr. Chen Hongcheng holds 70% equity of Puning Shenghengchang

Trade Development Co.， Ltd， while Mr. Chen Honghai holds 30% equity. Its

registered address located in No. 212， Building 46， Qiaoguang Village， Liushabei

Street， Puning and legal representative is Ms. Ma Chanying. The business scope of

Shenghengchang Trade Development Co.， Ltd: sales of hardware， electric， building

materials， electronic products and auto parts; import and export goods， technology

import and export (except for projects prohibited by laws and administrative

regulations; projects prohibited by laws and administrative regulations can be

operated with permission).

(2) Mr. Cheng Hongcheng is the actual controller of Puning Shenghengchang Trade

Development Co.， Ltd. Mr. Chen Hongcheng was engaged in operation and

management of the enterprise for over 20 years. At present he is Chairman of the

Board and legal representative of the Company， the standing commissar of political

consultative conference of Puning， Guangdong， the deputy of the National People’s

Congress of Jieyang City and Guangdong Province， Vice Chairman of Costume

Association of Guangdong Province and Vice Chairman of Costume Association of

Shenzhen City， Director of Puning Shenghengchang Trade Development Co.， Ltd.

(the controlling shareholder) over the long term. He has ever been the deputy of the

People’s Congress of Jieyang City and Guangdong Province.

Chen HongchengChen Honghai

70%30%

Puning Shenghengchang Trade Development

Co.， Ltd.

36.99%

The Company

3. Particulars about other shareholders of legal person’s share holding over 10% of

shares (including 10%):

Shenzhen Risheng Investment Co.， Ltd was founded on Sep. 8， 2000， whose

registered capital is RMB 25 million， among which Ms. Chen Xuewen holds 80.4%

equity and Mr. Ding Lihong holds 19.6% equity. The legal representative is Ms. Chen

Xuewen. The business scope of Shenzhen Risheng Investment Co.， Ltd.: to invest and

initiate industries (the detailed project till further declared); domestic commerce，

material supply and marketing industry (excluding monopoly commodities);

investment consultation and information consultation (excluding limited projects).

Section IV. Directors， Supervisors， Senior Executives and Employees

I. Particulars about directors， supervisors and senior executives

1. Basic information

Share held atShare held at

NameSexAgeTitleOffice term

the year-beginthe year-end

ChenChairman of the Board，

Male53Dec. 2009-Dec. 201200

HongchengPresident

DingVice Chairman of the

Male40Dec. 2009-Dec. 201200

LihongBoard， Vice President

Chen

Male57DirectorDec. 2009-Dec. 201200

Honghai

Chen

Female31DirectorDec. 2009-Dec. 201200

Xuewen

Liu YongMale33Independent DirectorDec. 2009-Dec. 201200

Su JianlongMale47Independent DirectorDec. 2009-Dec. 201200

Cai ShaoheMale50Independent DirectorDec. 2009-Dec. 201200

YanChairman of the

Male43Dec. 2009-Dec. 201200

MingfeiSupervisory Committee

Huang

Female44SupervisorDec. 2009-Dec. 201200

Yanfang

Yang XiaFemale39SupervisorDec. 2009-Dec. 201200

Chen PeixiaFemale40CFODec. 2009-Dec. 201200

Xu WeiMale33Secretary of the BoardDec. 2009-Dec. 201200

Note: The Company has no equity incentive mechanism.

2. Main work experience of present directors， supervisors and senior executives

Chairman of the Board and President Mr. Chen Hongcheng， was born in 1958;

bachelor degree. At present he is the standing commissar of political consultative

conference of Puning， Guangdong， the deputy of the National People’s Congress of

Jieyang City and Guangdong Province， Vice Chairman of Costume Association of

Guangdong Province and Vice Chairman of Costume Association of Shenzhen City，

Director of Puning Shenghengchang Trade Development Co.， Ltd. (the controlling

shareholder) over the long term. He has ever been the deputy of the National People’s

Congress of Jieyang City and Guangdong Province.

Vice Chairman and Vice President Mr. Ding Lihong was born in 1971 and graduated

from junior college. He ever took post of Vice President of the Company and

Chairman of the Board of Shenzhen Shenghengchang Industrial Co.， Ltd.

Director: Mr. Chen Honghai was born in 1954 and graduated from university， he acts

as Director of Puning Shenghengchang Trade Development Co.， Ltd. (the controlling

shareholder) over the long term.

Director Ms. Chen Xuewen， born in Jan. 1980， graduated from the department of law

of Guangdong Institute of Public Administration. Now she concurrently acts as

Chairman of Shenzhen Missk Fashion Co.， Ltd. She has served as Chairman and legal

representative of Shenzhen Shenghengchang Industrial Co.， Ltd.; as well as Chairman

and legal representative in Shenzhen Risheng Investment Co.， Ltd.

Independent Director Mr. Liu Yong， born in 1977， CPA， graduated from bachelor of

the accounting major of Hunan College of Finance & Economics. Now he is partner

of Shenzhen Pinghai Certified Public Accountants.

Independent Director Mr. Su Jianlong， born in 1964， post doctorate， acts as General

Manager in Bio-Treat Technology Limited (listed on Singapore Exchange Mainboard)

now. He successively held the posts of General Manager of Shenzhen Zhongxing

Environmental E&T Ltd， of General Manager of Anhui Guo Zhen Environmental

Protection Co.， Ltd.， Deputy General Manager of General Water of China Company

Limited， of General Manager of Yuanshui Technology (Beijing) Co.， Ltd.， of

Chairman of the Board of General Water of China (Shenzhen) Co.， Ltd.， of CMO and

Chief Senior Advisor of China National Environmental Protection Corporation.

Independent Cai Shaohe， born in 1961， diploma of postgraduate， is a CPA and

certified tax agent. He is Vice President of Shantou Institute of Certified Public

Accountants， independent director of Guangdong Orient Zirconic Ind Sci & Tech Co.，

Ltd and Guangdong Alpha Animation and Culture Co.， Ltd， we well as member of

National Committee of the Chinese People’s Political Consultative Conference of

Chenghai District， executive committee member of Chenghai Federation of Industry

and Commerce (Chamber of Commerce)， standing directors of Accounting Academy

of Chenghai District and Chenghai Association of Enterprises with foreign investment.

He once acted as chief accountant and chief of finance of Chenghai state-owned Wine

Factory， Vice Superintendent and Superintendent in Chenghai Auditor’ Firm and

Chief Accountant of Shantou Fengye Certified Public Accountants Co.， Ltd， as well as

independent director of the Company.

Chairman of the Supervisory Committee Mr. Yan Mingfei was born in 1968， bachelor

degree and engineer. Now he is in charge of general manager of Shantou Lianzhihua

Information and Technology Co.， Ltd. He took the post of assistant engineer of

Shantou Teye Power Development Co.， Ltd. and engineer of Shantou Special

Economic Region Talents Exchange Center.

Supervisor Ms. Huang Yanfang， born in 1966， bachelor degree， she has engaged in

enterprise financial work for many years. Now she serves in financial dep. of the

Company.

Supervisor Yang Xia， born in 1972， graduated from technical secondary school. She

has been engaging financial affairs o for many years. Now she serves in financial dep.

of the Company.

Chief Financial Officer Ms. Chen Peixia， born in 1971， is a CPA. She was engaged in

enterprise financing for several years. She ever took the post of Manager of Auditing

Dept. in the Company.

Secretary of the Board Mr. Xuwei， born in 1977， graduated from Zhongnan

University of Economics and Law， is a bachelor holder of economics and law. He

once acted as Securities Affairs Representative and Secretary of the Board of the

Company， General Manager of Securities Affairs and Secretary to the Chairman of the

Board of Directors in ABest Department Store Supermarket.

3. Particulars about the annual remuneration

In accordance with the proposal on setting down remuneration of senior executives

examined and passed at the 1st meeting of the 2nd Board of Director for the year 2002

and proposal on adjusting allowance of directors， independent director and

supervisors examined and passed at the annual Shareholders’ General Meeting 2007，

directors and independent directors of the Company drew their annual allowance of

RMB 50，000 (tax included) respectively from the Company; supervisors of the

Company received the annual allowance of RMB 15，000 (tax included) respectively.

The Company reimbursed the reasonable charges according to the actual situation

which independent directors attended the meeting of the Board， shareholders’ general

meeting or exercise their functions and powers in accordance with the relevant laws

and regulations and Articles of Association.

Up to 31 Dec. 2010， remuneration before tax of directors， supervisors and senior

executives in service drawn from the Company in the report period were as follows:

NameTitleTotal (RMB’0000 Yuan)

Chairman of the Board，22.5

Chen Hongcheng

President

Vice Chairman of the13.5

Ding Lihong

Board

Chen HonghaiDirector5

Chen XuewenDirector5

Cai ShaoheIndependent director5

Liu YongIndependent director5

Su JianlongIndependent director5

Chairmanofthe1.5

Yan Mingfei

Supervisory Committee

Huang YanfangSupervisor9.3

Yang XiaSupervisor5.7

Chen PeixiaChief Finance Officer11.2

Xu WeiSecretary of the Board9.6

Total98.3

Director Mr. Chen Honghai and Ms. Chen Xuwen， and independent director Mr. Liu

Yong， Mr. Cai Shaohe and Mr. Su Jianlong as well as Chairman of the Supervisory

Committee Mr. Yan Mingfei drew no payment from the Company except allowance.

Of them， Director Chen Honghai drew the annual remuneration from Puning

Shenghengchang Investment Co.， Ltd.

3. There were no changes of directors， supervisors and senior executives of the

Company in the reporting period

II. About employees

As at Dec. 31， 2010， the Company and its subsidiaries controlled by the Company had

about 682 in-service staffs in total. Among them， 309 production personnel， 120

salespersons， 38 technicians， 35 QC， 32 financial personnel and 50 administrative

personnel; 5 persons with senior professional titles， and 35 persons with middle

professional titles， and 58 persons with preliminary professional titles. The Company

did not bear expenses of retirees at present.

Section V. Corporate Governance Structure

I. Corporate governance

In accordance with relevant statutes such as Code of Corporate Governance for Listed

Companies， the Company established and perfected governance structure such as

Shareholders’ General Meeting， Board of Directors and Supervisory Committee， and

perfected relevant rules and systems.

In 2010， in accordance with relevant requirements of Notice on Starting Specific

Activities on Strengthening Corporate Governance of Listed Companies with

document No. CSRC-Company-Zi[2007]28 issued by CSRC， Notice on Putting

Forward the Development of Corporate Governance of Listed Companies with

document No. Guangdong-CSRC [2009]99 issued by CSRC Guangdong Bureau and

Circular on Common Problem in Corporate Governance of Listed Company in Area

Under Control with document No. Guangdong-CSRC[2010]155 (hereinafter referred

to as “Circular”)， the actual situation of the Company as well as common problems

stipulated in notice and circular on corporate governance of listed companies， the

Board of Directors of the Company conducted overall self-examination on corporate

governance of the Company， considered that the actual situation of corporate

governance of the Company is in line with requirements of regulatory documents such

as Code of Corporate Governance for Listed Companies. The Company would take

corporate governance as an important and basic work to promote the competence of

the Company， and further perfect the modern enterprise system of the Company.

II. Duty performance of independent directors

The Company formulated Work System for Independent Directors according to

relevant rules， which definitely regulated duties and work terms. In the report period，

independent directors of the Company actively took part in operation of the Board，

seriously and diligently performed their duties and carefully examined all proposals of

the Board and expressed independent opinion in the report period， and played an

important role in enhancing the independence of the Board， strengthening the function

of strategic management of the Board， balancing of rights of the Board and

concentrating on the legal rights and interests of the small and medium investors， and

played an active promotion role in scientific decision-making of the Board and

normative operation of the Company. During the report period， the Company’s

independent directors did not propose any objection on all proposals of the Board and

other proposals of the Company.

Times should be presentTimes of personalPresence onTimes of

NameNotes

at the Board meetingpresencecommissionabsence

Liu Yong8800——

Su Jianlong8820——

Cai Shaohe8810——

III. The Company separated from controlling shareholders in business， personnel，

assets， organization and finance:

The Company was completely separated with the controlling shareholder， Puning

Shenghengchang Trade Development Co.， Ltd. and associated enterprises in business，

personal， assets， organization and financing， which ensured the Company have

independent and complete business and self-operation capability.

IV. Particulars on the establishment and perfect of the internal control of the

Company

(I) General planning of the construction of internal control

The Company was strictly in compliance with the Guideline for the Internal Control

of Listed Companies as well as other laws， rules and stipulations， continuously

perfected its governance structure， completed its internal management and

standardized its operating activities. The Company’ general planning of the

construction of internal control were mainly reflected in the aspects， such as

standardizing the business process， perfecting management system and enforcing the

functional responsibilities， etc..

(II) Particulars about establishment and operation of internal control system

At present， the Company established and perfected corporate governance including

shareholders’ general meeting， the Board of Directors， the Supervisory Committee

and management， established and perfected a series of integrated， reasonable and

effective internal control system， such as Articles of Association and Rules of

Procedures for Shareholders’ General Meeting， the internal control system includes

management on production and operation， finance， internal audit and administration

as well as normative operation， and shaped rigorous internal control system. In

accordance with relevant regulations， the Company set up special internal audit

department， allocated specific auditors， who carried out routine internal audit and

responsible for internal management system and supervision and examination on

internal control. With supervision and guide of the Board of Directors and the Audit

Committee under the BOD， the audit department conducted internal audit legally and

independently according to audit procedures; adopted periodic and casual

examination to audit and verify finance， significant projects and operating activities of

the Company and its controlling subsidiaries， and reasonably estimated on

authentication and legitimacy of economic benefit; proposed advice on control and

management for problems in second time supervision and examination， supervised

and urged relevant department to rectify， ensured effective implementation on internal

control and normative operation of the Company. In the report period， the Company

paid attention to management on controlling subsidiaries and control on related

transaction， external guarantees， significant investment and information disclosure.

(III) Particulars on the defects of internal control and the rectification & reform for

them

The Company will be in compliance with the relevant laws and rules for the internal

control of listed companies stipulated by the supervision department， and integrate the

actual situation of the operating activities of the Company， as well as in accordance

with the relevant requirements of Code of Enterprise’s Internal Control and the

Supportive Guideline on Enterprise’s Internal Control， to establish and perfect the

internal control system， further improve the measures of internal control， enforce the

rectification & reform on the defects in the links of the Company’ s internal control，

and continuously enhance the Company’s ability of risk prevention and level of

normative operation.

(IV) Opinions from independent directors on the self-appraisal for the Company’s

internal control

In accordance with Code of Enterprise’s Internal Control and Guideline on the

Normative Operation of Listed Companies as well as other laws and rules， the

Company had established relative perfect internal control system， there was no

material defects on the reasonability and effectiveness of the internal control system，

the Company’s corporate governance， production & operation， information disclosure，

significant events and other activities were all strictly in compliance with stipulations

of the Company’s internal control system， which generally met the requirements from

CSRC and Shenzhen Stock Exchange， and ensured the normal and orderly function of

every operating activities in the Company as well as the safety and integration of the

Company’s assets. The Company’s Self-appraisal on the Internal Control for Y2010

truly and objectively reflected the actual situation of the Company’s governance and

internal control.

V. Establishment and implementation of appraisal and incentive mechanism for the

senior executives by the Company

The Company had set up preferable performance appraisal system gradually and

signed operation responsibility document with person in charge of subordinate

companies， clearly defined responsibility and power， set up reward and punishment，

urged convergence of private interest and the Company’s interest， effectively

promoted togetherness and sense of responsibility， as well as activity and gumption of

management staffs and technical backbones. However， the Company had not

formulated incentive and restraint mechanism for directors， supervisors or senior

executives， and performance appraisal need to be further perfected.

Section VI. Brief Introduction to Shareholders’ General Meetings Held

I. The First Special Shareholders’ General Meeting for 2010 was held on 19 Mar.

2010. And the announcement on the resolutions made at the meeting was published in

Securities Times and Hong Kong Ta Kung Pao on 20 Mar. 2010 with Announcement

No. 2010-004.

II. The 2009 Annual Shareholders’ General Meeting was held on 31 May 2010. And

the announcement on the resolutions made at the meeting was published in Securities

Times and Hong Kong Ta Kung Pao on 1 Jun. 2010 with Announcement No.

2010-017.

Section VII. Report of the Board of Directors

I. Operation of the Company during the reporting period

(I) Business review for the reporting period

1. Overall business performance during the reporting period

For the reporting period， the Company achieved an operating income of RMB

149，446，900， down 1.68% as compared to 2009; an operating profit of RMB

-37，488，300， down 1，119.12% on a year-on-year basis; and a net profit attributable to

the Company of RMB -41，187，000， down 1，205.19% as compared to 2009. The said

three items all presented a year-on-year decrease mainly because a. real estate projects

were still in the stage of development， which could not be sold for settlement; and b.

investment gains were obtained in the previous year from selling assets.

In 2010， in order to improve its capital and operating status as soon as possible， the

Company took effective measures to clear its accounts receivable. For instance， the

receivable about RMB 62 million from Puning Rieys Paper Co.， Ltd. was recovered at

all amount in the year. The said measures improved the asset quality of the Company.

Meanwhile， the cash flows generated from the garment business enabled the

Company to execute on time the “Agreement on Interest Reduction and Exemption”

signed between the Company and the Shenzhen branch of China Construction Bank，

repaying the loan principal of RMB 37.83 million to the bank. The Company also

repaid other loan principals of RMB 18.10 million. As such， the bank loan problem

was handled properly. Also， accumulative funds over RMB 80 million were

accumulatively input for real estate projects in the reporting period， which fully

ensured the smooth proceeding of its real estate projects.

2. Main businesses of the Company and operating status thereof

(1) Breakdown of incomes and profits from main businesses according to industries:

Amount in 2010 (RMB Yuan)Amount in 2009 (RMB Yuan)

Industry

Operating incomeOperating costOperating incomeOperating cost

Industry132，642，915.64111，680，965.23123，714，132.03109，925，426.65

Commerce35，656，845.1925，386，425.3661，854，994.2837，098，941.00

Total168，299，760.83137，067，390.59185，569，126.31147，024，367.65

Counteract-20，916，310.12-20，916，310.12-33，742，372.88-33，907，868.00

Total147，383，450.71116，151，080.47151，826，753.43113，116，499.65

(2) Breakdown of main business incomes and costs according to regions

Amount in 2010 (RMB Yuan)Amount in 2009 (RMB Yuan)

Region

Operating incomeOperating costOperating incomeOperating cost

Exportsalesof

138，077，428.46111，423，101.51145，233，771.49120，044，222.51

garments

Domesticsalesof

24，305，663.9619，312，324.7339，293，799.4218，291，471.25

garments

Garment processing5，916，668.966，331，964.351，041，555.408，688，673.89

Subtotal168，299，760.83137，067，390.59185，569，126.31147，024，367.65

Counteract-20，916，310.12-20，916，310.12-33，742，372.88-33，907，868.00

Total147，383，450.71116，151，080.47151，826，753.43113，116，499.65

(3) Main suppliers and customers

The total amount of purchases from the top five suppliers took up 12.78% of the total

purchases in the year.

The total sale amount to the top five customers took up 88.65% of the total sale in the

year.

3. Asset breakdown and other financial data for the reporting period， as well as

movements and reasons therefor

Items in theAs at 31 Dec. 2010As at 31 Dec. 2009Year-on-year

balance sheetProportion in totalProportion in totalchanges

Amount (RMB Yuan)Amount (RMB Yuan)

assets (%)assets (%)

Accounts

88，165，799.3915.04177，829，302.8227.78-12.74%

receivable

Inventory205，006，377.5034.98195，246，476.6730.514.47%

Investing

property

Long-term

equity

investment

Fixed assets110，872，936.6818.92113，529，392.3317.741.18%

Construction in

001，040，571.590.16-0.16%

process

Short-term

158，500，000.0027.05213，583，282.6633.37-6.32%

borrowings

Items in the

incomeAs of 2010As of 2009

statement

Selling expenses13，056，535.8915，246，870.57-14.37%

Administrative

30，002，677.2439，692，657.94-24.41%

expenses

Financial

25，054，903.4725，033，342.290.09%

expenses

Income tax2，883，005.98929，297.02210.24%

Reasons for changes:

1) Accounts receivable decreased because the Company recovered the receivable

from Rieys Paper in the reporting period.

2) Inventory increased due to real estate project development.

3) Fixed assets increased because construction in process was transferred in.

4) Construction in process decreased because some construction was finished and

transferred into fixed assets.

5) Selling expenses decreased due to the decrease of the operating income.

6) Administrative expenses decreased due to cost control.

7) Financial expenses decreased because loan principals decreased.

8) The closing income tax expenses increased by RMB 1，953，708.96 as compared to

the opening amount， representing a year-on-year increase of 210.24%， which was

mainly because the Company recovered some accounts receivable for which bad-debt

provisions had been made.

4. Breakdown of cash flows， changes and main influencing factors for changes

As of 2010 (RMBAs of 2009 (RMBYear-on-year

Yuan)Yuan)increase/decrease (%)

Net cash flows from operating activities93，654，939.87-6，147，375.33-1623.49%

Net cash flows from investing activities-9，060，612.647，898，411.77-214.71%

Net cash flows from financing activities-56，667，500.23-12，733，522.43345.03%

Effect of exchange rate changes on cash000

Reasons for changes:

1) Net cash flows from operating activities increased because other incoming funds

were received.

2) Net cash flows from investing activities decreased due to acquisitions of fixed

assets and intangible assets.

3) Net cash flows from financing activities decreased because some debts were

repaid.

5. Operation status and results of main subsidiaries

A. Particulars about subsidiaries in the reporting period

CapitalNet assets

Total assetsNet profit

Registered

Name of the subsidiarycontribution(RMB Ten(RMB Ten(RMB TenBusiness scope

capital

thousand)thousand)

ratio (%)thousand)

RMB 12 mill

Shenzhen Missk Fashion Co.， Ltd.861536-566-1732Brand garments

ion

Puning Tianhe Textile Manufactory Co.，Garment processing a

HKD 6，51010028277234451283

Ltd.nd export

RMB 50 mill

Shenzhen Rieys Industrial Co.， Ltd.9046334555180Import and export

ion

Tianrui (HK) Trading Co.， Ltd.USD 1.001003299-5820861International trade

Puning Hengda Real Estate DevelopmentRMB 26 millReal estate developme

1002410414278-382

Co.， Ltd.ionnt

B. Disposal of subsidiaries in the reporting period

In order to dispose the brand garment business step by step， Shenzhen Missk Fashion

Co.， Ltd. (a controlled subsidiary with the Company holding 86% of its equity

interests) and Shenzhen Rieys Industrial Co.， Ltd. (a controlled subsidiary with the

Company holding 90% of its equity interests) and Wang Zhichao signed an equity

transfer agreement on 16 Dec. 2010， transferring 100% equity interests of Shenzhen

Tianqi Garment Manufacturing Co.， Ltd. formerly held by the two controlled

subsidiaries to Wang Zhichao in exchange for a consideration of RMB 0.5 million.

The said transaction has been concluded.

C. The Company did not acquire any subsidiary during the reporting period.

(Ⅱ) Outlook of the Company’s future development

1. Development trends in the sector

In the reporting period， in order to control the fast growing house prices and prevent

speculative market demand so as to ensure an effective supply and redress the

imbalance between supply and demand， the government implemented the strictest

macro-control on the real estate sector. The “Eight Regulations for Real Estate Sector

by the State Council”， the “Restricted House Purchase Decree” and a prudent

monetary policy were promulgated， which caused phasic fluctuations in the real estate

sector， as well as many uncertainties in the future development of the sector. But the

economic and social development of China will be better and better in the long run，

and the factors promoting a long-term and positive development in the sector，

including domestic demand expansion and urbanization， remain unchanged. Therefore，

the healthy development of the real estate sector is inevitable， and the Company will

have a lot of excellent development opportunities ahead of it.

2. Work focuses in the future operation

The Company is currently engaged in both garments and real estate. In the long run，

the Company will step out of the garment sector at a proper time and focus on real

estate as its only main business at the end. Considering that the self-incurred

transformation of the Company’s main business is a gradual process， the Company

will focus on the following tasks in the future operation:

(1) The Company will try its best and concentrate its resources on the construction

and sale of the “Shangdi Central” project.

(2) It will continue to maintain the existing garment processing business and the

stability thereof.

The garment export business has been the Company’s traditional main business for

years， accounting for a major proportion in its main businesses. Considering that it

has just set foot in the real estate sector and cash flows may not be able to be

generated from such a business in the short run， the Company still needs to maintain

its existing garment processing business.

(3) The Company will further dispose non-performing assets and step out of the brand

garment business gradually.

(4) The Company will continue to improve its corporate governance and internal

management capability， further standardize and improve its internal control， attach

great importance to maintaining strict， sustained and effective internal control

supervision and management， and increase its management ability and ability to

prevent risks.

(5) It will enhance talent training and reserve. By way of optimizing the staff

allocation structure， the Company will beef up its efforts to build a talent team as

needed by the Company in its development， and reserve and develop professional

talents needed by the Company.

(6) It will continue to strengthen cost control. The Company’s efforts in cost control in

the recent years have produced some positive results and it will continue to carry out

measures for cost control.

(7) It will further strengthen the collection of receivables. In recent years， the

Company has beefed up its efforts in collecting receivables， which has produced

excellent results. And the Company will continue to carry out relevant measures.

(8) The Company will proactively promote financing from various channels and in

various forms. It will adopt effective measures and set the project development scale

and plan in a scientific and rational manner， so as to coordinate real estate

development and cash flows and ensure the development plans will be carried out

successfully.

(9) It will proactively increase land reserves for developing real estate projects. It will

explore every possible means to obtain projects and improve the research and

planning work before launching a new project， so as to lay a foundation for the

Company’s sustainable development.

(10) It will keep a close eye on economic movements at home and abroad， analyze the

government’s macro-control policy on real estate， and follow up market trends. At the

same time， it will increase the operating efficiency of projects， formulate the specific

development strategy for every project according to the business goals set for the year，

and effectively prevent policy risks.

Ⅱ. Investments of the Company

(Ⅰ) In the reporting period， the Company did not raise funds or use such funds.

(Ⅱ) The Company did not conduct external investments in the reporting period.

Ⅲ. Special explanation on matters mentioned in the non-standard audit report issued

by the accounting firm

ASIA (Group) Accounting Firm issued an unqualified audit report with pinpointed

matters for the 2010 Annual Financial Report of the Company. The said pinpointed

matters were stated as， “We remind users of the financial statements to note that， as

stated in the Note X. (X) to the financial statements， in the year 2010， the net profit

attributable to owners of the Company stood at RMB -41，187，000 and at RMB

-42，204，000 after deducting non-recurring gains and losses. In 2010， the main

business scope of the Company was transformed from garments to both garments and

real estate development. The real estate projects commenced construction but the

pre-sale was not yet started， so there still existed uncertainty whether the real estate

business would generate a profit or not. The Company had disclosed in detail

improvement measures to be taken in the notes to the financial statements， but there

still existed a significant uncertainty about the going-concern ability of the Company.

The statements above will not affect the unqualified audit opinion that has been

issued.”

The Board of Directors believed that the loss of the Company in 2010 was mainly

because: a. At the end of 2009， the Company realized its business transformation，

disposing non-performing assets in relation to paper making and increasing the real

estate development business. But due to the long cycle of a real estate project， the

business was in an input stage throughout the year 2010 and was unable to generate

profits for the Company; b. The traditional garment export business of the Company

was able to proceed normally， but it could not generate enough profits to cover all

expense of the Company due to limited input for the business; and c. Affected by the

fierce competition on the market， the brand garment business of the Company

registered a great deficit in 2010.

Despite a deficit in 2010， the Company managed to maintain its going-concern ability

by taking the following measures: a. In 2010， the Company adopted effective

measures to clear various receivables. Besides， the garment business generated some

cash flows in the year. As a result， the Company was able to input funds over RMB 80

million for its real estate projects， which ensured that those projects proceeded

smoothly. In view of the current development progress， the pre-sale could be started

around Jul. 2011. Although the government is currently implementing a strict control

over the real estate sector， house prices in Puning are actually on the rise due to the

fact that Puning (where the Company’s real estate projects are located) is a densely

populated third-grade city with a strong buying and improvement demand which is in

the start-up stage of urbanization; b. Upon the pre-sale of the real estate projects， the

funds of the Company will be greatly improved， which can address the bottleneck

problem in the development of the garment export business once and for all. As such，

the move will promote development in the garment business; and c. The Company

intends to further active the residual assets in 2011 and continues to adopt effective

measures in clearing receivables， selling out the brand garment business， maintaining

profitable subsidiaries and concentrating its funds and resources on the real estate

development projects. The Company will go all out to make a profit in its main

business in 2011.

After years of adjustment， the Company has been transformed from a single garment

maker to an enterprise engaged in both garments and real estate. Its asset quality has

been greatly improved， and the bank loan problem and the capital problem that have

been haunting the Company for a long time have been properly handled. As a result，

the going-concern ability of the Company has increased significantly.

IV. The Company has carried out its accounting activities in compliance with the new

Accounting Standards for Business Enterprises. No change occurred in the

Company’s accounting policies and estimates in the year. And the Company’s

financial status and operating results were not affected in this way.

V. Routine work of the Board of Directors

(I) Board sessions convened in the reporting period and resolutions made

Eight sessions were convened by the Board of Directors in the reporting period， with

details as follows:

1. The 1st Session of the 5th Board of Directors in 2010 was convened on 3 Mar. 2010.

And resolutions made at the session were disclosed on Securities Times and Ta Kung

Pao (HK) on 4 Mar. 2010 (public notice No.: 2010-002).

2. The 2nd Session of the 5th Board of Directors in 2010 was convened on 20 Apr.