Nanjing Sample Technology Company Limited - Proxy Solicitation & Information Statement 2014

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer, registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Nanjing Sample Technology Company Limited*（南京三寶科技股份有限公司）, you should at once hand this circular to the purchaser or transferee or to the bank or licensed securities dealer, registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

This circular is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities mentioned herein.

南京三寶科技股份有限公司 NANJING SAMPLE TECHNOLOGY COMPANY LIMITED*

(a joint stock limited company established in the People’s Republic of China with limited liability)

(Stock Code: 1708)

(1) CONNECTED TRANSACTION – PROPOSED SUBSCRIPTION OF NEW DOMESTIC SHARES BY NANJING SAMPLE TECHNOLOGY GROUP COMPANY LIMITED*; (2) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION; AND

(3) APPLICATION FOR WHITEWASH WAIVER

Financial adviser to the Company

Independent Financial Adviser to the Independent Board Committees and Independent Shareholders

A letter from the Board is set out on pages 6 to 22 of this circular. A letter from the Independent Board Committee for the Share Subscription is set out on pages 23 to 24 of this circular. A letter from the Independent Board Committee for the Whitewash Waiver is set out on pages 25 to 26 of this circular. A letter from the Independent Financial Adviser, containing its advice to the Independent Board Committee for the Share Subscription, the Independent Board Committee for the Whitewash Waiver and the Independent Shareholders, is set out on pages 27 to 46 of this circular.

A notice of the EGM to be held at 10:00 a.m. on Monday, 29 December 2014 at No. 10 Maqun Avenue, Qixia District, Nanjing City, the PRC is set out on pages 179 to 181 of this circular. A notice of the H Shareholders Class Meeting to be held at 10:30 a.m. (or immediately after the conclusion or adjournment of the EGM) on Monday, 29 December 2014 at No. 10 Maqun Avenue, Qixia District, Nanjing City, the PRC is set out on pages 182 to 184 of this circular. A notice of the Domestic Shareholders Class Meeting to be held at 11:00 a.m. (or immediately after the conclusion or adjournment of the H Shareholders Class Meeting) on Monday, 29 December 2014 at No. 10 Maqun Avenue, Qixia District, Nanjing City, the PRC is set out on pages 185 to 187 of this circular.

Proxy forms for use at the EGM and the Class Meetings are enclosed and are also published on the website of The Stock Exchange of Hong Kong Limited (http://www.hkexnews.hk). Whether or not you intend to attend the EGM and/or the Class Meetings, you are requested to complete the accompanying proxy form in accordance with the instructions printed thereon and return the same to the Company’s H Shares registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17/F., Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong (for the holders of the H Shares only) or the Company’s registered office at No. 10 Maqun Avenue, Qixia District, Nanjing City, Jiangsu Province, the PRC (for the holders of the Domestic Shares only), as soon as possible but in any event not less than 24 hours before the respective time fixed for holding the EGM and/or the Class Meetings. Completion and return of the proxy form will not preclude you from attending the EGM and/or the Class Meetings and voting in person if you so wish. Shareholders who intend to attend the meetings in person or by proxy should complete and return the reply slip in accordance with the instructions printed thereon on or before Friday, 19 December 2014.

This circular will remain on the website of The Stock Exchange of Hong Kong Limited at http://www.hkex.com.hk on the “Latest Company announcements” page for at least 7 days from the date of its posting.

For identification purpose only

2 December 2014

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
LETTER FROM THE INDEPENDENT BOARD COMMITTEE FOR
THE SHARE SUBSCRIPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
LETTER FROM THE INDEPENDENT BOARD COMMITTEE FOR
THE WHITEWASH WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER. . . . . . . . . . . . . . .	27
APPENDIX I – FINANCIAL INFORMATION OF THE GROUP. . . . . . . . . . . .	47
APPENDIX II – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . .	167
NOTICE OF EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	179
NOTICE OF THE H SHAREHOLDERS CLASS MEETING . . . . . . . . . . . . . . . . .	182
NOTICE OF THE DOMESTIC SHAREHOLDERS CLASS MEETING . . . . . . . . .	185

– i –

DEFINITIONS

In this circular, the following expressions have the meanings set out below unless the context requires otherwise:

“Active Gold” Active Gold Holding Limited, a company incorporated in the British Virgin Islands and is wholly owned by Ferdinard Holding Limited which is in turn wholly owned by Ms. Wan Ngok Wah（尹萼華） “Announcement” the announcement of the Company dated 21 October 2014 “Articles” the articles of association adopted by the Company “Board” the board of Directors of the Company “Class Meetings” the Domestic Shareholders Class Meeting and the H Shareholders Class Meeting “Company” Nanjing Sample Technology Company Limited* （南京三寶科技股份有限公司）, a joint stock limited company incorporated in the PRC, whose H Shares are listed on the Hong Kong Stock Exchange (Stock Code: 1708) “Connected Person(s)” has the meaning ascribed to it under the Listing Rules “CSRC” China Securities Regulatory Commission “Directors” the directors of the Company “Domestic Shareholder(s)” holder(s) of the Domestic Shares “Domestic Share(s)” ordinary domestic share(s) with par value of RMB1.00 each in the share capital of the Company

“Domestic Shareholders Class Meeting”

the class meeting of the Domestic Shareholders to be held to consider and, if thought fit, approve, among other things, the Domestic Shares Subscription, the Domestic Shares Subscription Agreement, the specific mandate, the proposed amendments to the Articles and the Whitewash Waiver

“Domestic Shares Subscription”

the proposed subscription of new Domestic Shares by Sample Group pursuant to the Domestic Shares Subscription Agreement

– 1 –

DEFINITIONS

“Domestic Shares Subscription the conditional share subscription agreement entered Agreement” into between Sample Group and the Company on 21 October 2014 (after trading hours), under which, Sample Group has conditionally agreed to subscribe for, and the Company has conditionally agreed to issue, 92,723,400 new Domestic Shares at the subscription price of RMB4.50 (equivalent to approximately HK$5.67) per new Domestic Share

“EGM” extraordinary general meeting of the Shareholders to be held to consider and, if thought fit, approve, among other things, the Domestic Shares Subscription, the Domestic Shares Subscription Agreement, the specific mandate, the proposed amendments to the Articles and the Whitewash Waiver
“Executive” the Executive Director of the Corporate Finance Division of the Securities and Futures Commission of Hong Kong or any of his/her delegates
“Group” the Company and its subsidiaries
“H Share(s)”
overseas listed foreign share(s) with a par value of RMB1.00 each in the share capital of the Company, listed on the Main Board of the Hong Kong Stock Exchange and traded in Hong Kong dollars
“H Shareholder(s)” holder(s) of the H Shares
“H Shareholders Class Meeting”
the class meeting of the H Shareholders to be held to consider and, if thought fit, approve among other things, the Domestic Shares Subscription, the Domestic Shares Subscription Agreement, the specific mandate, the proposed amendments to the Articles and the Whitewash Waiver
“Hong Kong” Hong Kong Special Administrative Region of the PRC
“Hong Kong Stock Exchange” The Stock Exchange of Hong Kong Limited
“HK$”
Hong Kong dollars, the lawful currency of Hong Kong
“Independent Board Committees” collectively, the Independent Board Committee for the Share Subscription and the Independent Board Committee for the Whitewash Waiver

– 2 –

DEFINITIONS

“Independent Board Committee an independent board committee, comprising all the for the Share Subscription” independent non-executive Directors, namely Mr. Xu Su Ming, Mr. Geng Nai Fan and Mr. Shum Shing Kei, established to provide recommendations to the Independent Shareholders on, inter alia, the terms of the Domestic Shares Subscription, the Domestic Shares Subscription Agreement, the specific mandate and the amendments to the Articles
“Independent Board Committee for the Whitewash Waiver”
an independent board committee, comprising the non-executive Director, namely Mr. Ma Jun, and all the independent non-executive Directors, namely Mr. Xu Su Ming, Mr. Geng Nai Fan and Mr. Shum Shing Kei, established to provide recommendations to the Independent Shareholders on, inter alia, the terms of the Domestic Shares Subscription, the Domestic Shares Subscription Agreement, the specific mandate, the amendments to the Articles and the Whitewash Waiver
“Independent Financial Adviser”
Messis Capital Limited, a corporation licensed to carry on type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO and the independent financial adviser appointed to advise the Independent Board Committees and the Independent Shareholders in respect of the Domestic Shares Subscription, Domestic Shares Subscription Agreement, the specific mandate, the proposed amendments to the Articles and the Whitewash Waiver
“Independent Shareholders”
Shareholders other than: (i) Sample Group; (ii) parties acting or presumed to be acting in concert with Sample Group (including Sample Commerce City, Mr. Sha Min and Active Gold); and (iii) all other parties (if any) who are interested or involved in the Domestic Shares Subscription, the Domestic Shares Subscription Agreement and/or the Whitewash Waiver
“Independent Third Party(ies)”
person(s) who, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, is a third party independent of the Company and its Connected Persons
“Latest Practicable Date”

28 November 2014, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information for inclusion in this circular

– 3 –

DEFINITIONS

“Listing Rules”
the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange
“Long Stop Date”
31 March 2015 or such other date as may be agreed by the parties to the Domestic Shares Subscription Agreement from time to time in writing
“NMIPC”
Nanjing Municipal Investment Promotion Commission
（南京市投資促進委員會）
“Price Determination Date”
20 October 2014, being the trading day immediately prior to the date of the Domestic Shares Subscription Agreement, and for this purpose, “trading day” means a day on which Hong Kong Stock Exchange is open for dealing or trading in securities
“Price Determination Period”
the period of 20 trading days immediately preceding the Price Determination Date, i.e., from 18 September 2014 to 17 October 2014, and for this purpose, “trading day” means a day on which Hong Kong Stock Exchange is open for dealing or trading in securities
“PRC”
the People’s Republic of China but excluding, for the purposes of this circular, Hong Kong, Macau Special Administrative Region of the PRC and Taiwan
“RMB”
Renminbi, the lawful currency of the PRC
“Sample Commerce City”
Nanjing Sample Commerce City Company Limited*
（南京三寶科技商城有限公司）, a limited liability company established in the PRC on 1 December 1996 and a wholly-owned subsidiary of Sample Group
“Sample Group”
Nanjing Sample Technology Group Company Limited*
（南京三寶科技集團有限公司）, a limited liability company established in the PRC on 12 June 1993, which is interested in 100% of the registered capital of Sample Commerce City and a substantial and the single largest Shareholder
“SFO”
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) as amended and modified from time to time
“Shareholder(s)” holder(s) of the Shares of the Company
“Share(s)”
Domestic Share(s) and/or H Share(s)

– 4 –

DEFINITIONS

“Takeovers Code” “Whitewash Waiver”

the Hong Kong Code on Takeovers and Mergers

a waiver from the Executive pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code, in respect of the obligations of Sample Group to make a mandatory general offer for all the securities of the Company not already owned or agreed to be acquired by Sample Group and parties acting or presumed to be acting in concert with it which would otherwise arise as a result of the allotment and issue of the new Domestic Shares under the Domestic Shares Subscription Agreement

“%” per cent.

The English translation of Chinese names or words in this circular, where indicated, are included for identification purpose only, and should not be regarded as the official English translation of such Chinese names or words

– 5 –

LETTER FROM THE BOARD

南京三寶科技股份有限公司 NANJING SAMPLE TECHNOLOGY COMPANY LIMITED*

(a joint stock limited company established in the People’s Republic of China with limited liability)

(Stock Code: 1708)

Directors: Executive Directors Mr. Sha Min (Chairman) Mr. Chang Yong Mr. Zhu Xiang

Registered address and principal place of business in the PRC: No. 10 Maqun Avenue Qixia District, Nanjing City The People’s Republic of China

Non-executive Director Mr. Ma Jun Independent non-executive Directors Mr. Xu Su Ming Mr. Geng Nai Fan Mr. Shum Shing Kei

Principal place of business in Hong Kong: 3112A, 31/F, Shun Tak Centre 168-200 Connaught Road Central Central, Hong Kong

2 December 2014

To the Shareholders

Dear Sir or Madam,

**(1) CONNECTED TRANSACTION – PROPOSED SUBSCRIPTION OF NEW DOMESTIC SHARES BY NANJING SAMPLE TECHNOLOGY GROUP COMPANY LIMITED*; (2) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION; AND**

(3) APPLICATION FOR WHITEWASH WAIVER

I. INTRODUCTION

Reference is made to the Announcement. On 21 October 2014 (after trading hours), the Company entered into the Domestic Shares Subscription Agreement with Sample Group. According to the terms of the Domestic Shares Subscription Agreement, the Company has conditionally agreed to issue and Sample Group has conditionally agreed to subscribe by cash for an aggregate of 92,723,400 new Domestic Shares at the subscription price of RMB4.50 (equivalent to approximately HK$5.67) per new Domestic Share, raising gross proceeds of approximately RMB417,255,300 (equivalent to approximately HK$525,741,678). Net proceeds from the issue of the new Domestic Shares are expected to be approximately

– 6 –

LETTER FROM THE BOARD

RMB413,652,363 (equivalent to approximately HK$521,201,977) of which approximately 72% is intended to be used for the expansion of the Group’s client base and major business segments, approximately 20% is intended to be used for the reduction of liabilities and approximately 8% is intended to be applied as additional working capital. Details of the use of proceeds are set out under the sub-section headed “5. Recent fund raising activities and use of proceeds” in the section headed “II. PROPOSED SUBSCRIPTION OF NEW DOMESTIC SHARES BY NANJING SAMPLE TECHNOLOGY GROUP COMPANY LIMITED*” in this letter. The 92,723,400 new Domestic Shares will be issued under a specific mandate to be sought at the EGM and the Class Meetings.

The purpose of this circular is (i) to provide you further information relating to the Domestic Shares Subscription, Domestic Shares Subscription Agreement, the specific mandate, the proposed amendments to the Articles and the Whitewash Waiver; (ii) a letter of recommendation from the Independent Board Committee for the Share Subscription to the Independent Shareholders on the Domestic Shares Subscription, the Domestic Shares Subscription Agreement, the specific mandate and the amendments to the Articles; (iii) a letter of recommendation from the Independent Board Committee for the Whitewash Waiver to the Independent Shareholders on the Domestic Shares Subscription, Domestic Shares Subscription Agreement, the specific mandate, the amendments to the Articles and the Whitewash Waiver; (iv) a letter of advice by Independent Financial Adviser to the Independent Board Committees and the Independent Shareholders on the Domestic Shares Subscription, the Domestic Shares Subscription Agreement, the specific mandate, the proposed amendments to the Articles and the Whitewash Waiver; and (v) to give notice of the EGM and the Class Meetings.

II. PROPOSED SUBSCRIPTION OF NEW DOMESTIC SHARES BY NANJING SAMPLE TECHNOLOGY GROUP COMPANY LIMITED*

1. Domestic Shares Subscription Agreement

Date: 21 October 2014 (after trading hours)

Parties

(1) The Company as the issuer; and
(2) Sample Group as the subscriber.

Number of new Domestic Shares subscribed for

– 7 –

LETTER FROM THE BOARD

Shares, representing approximately 48.45% of the then enlarged total issued share capital of the Company. Such 92,723,400 new Domestic Shares will be issued under a specific mandate to be sought at the EGM and the Class Meetings.

Subscription price

RMB4.50 (equivalent to approximately HK$5.67) per new Domestic Share.

The subscription price for the Domestic Shares Subscription is determined with reference to the average closing price of approximately HK$6.425 per H Share (equivalent to approximately RMB5.099) during the Price Determination Period. The average closing price of the H Shares during the Price Determination Period is calculated by dividing the total turnover of the trading of the H Shares by the total trading volume of the H Shares during the Price Determination Period and allow for a slight liquidity discount of approximately 11.75% since the Domestic Shares are not listed and therefore there is no publicly available transfer price. The resulting HK$ per Domestic Share is then converted to RMB at the exchange rate of RMB1 = HK$1.26 at the Price Determination Date for illustration purpose of this circular.

Conditions precedent to the Domestic Shares Subscription Agreement

The Domestic Shares Subscription is conditional upon:

(1) the Independent Shareholders approving the Domestic Shares Subscription Agreement, the Domestic Shares Subscription, the specific mandate and the proposed amendments to the Articles by way of special resolutions and by poll at the EGM and the Class Meetings;
(2) the Independent Shareholders approving the Whitewash Waiver by poll at the EGM and the Class Meetings;
(3) NMIPC approving the Domestic Shares Subscription;
(4) the Executive granting the Whitewash Waiver to Sample Group and parties acting in concert with it and the satisfaction of all conditions (if any) attached to the Whitewash Waiver;
(5) consent and approval of the Hong Kong Stock Exchange on the Domestic Shares Subscription pursuant to the Listing Rules (including but not limited to Chapter 14A) having been obtained; and
(6) the obtaining of all necessary consent and approval by the Company from relevant government and/or regulatory authorities.

None of the conditions can be waived under the Domestic Shares Subscription Agreement. Sample Group is obligated to remit the whole amount of the subscription money to one or more bank accounts of the Company within 10

– 8 –

LETTER FROM THE BOARD

business days after the satisfaction of the conditions precedent. The Company shall notify Sample Group in writing details of the bank account(s) on the day immediately following satisfaction of all conditions precedent.

As advised by the Company’s legal adviser as to the PRC laws, the Domestic Shares Subscription is not subject to the approval of the CSRC.

Termination of the Domestic Shares Subscription Agreement

If any of the conditions precedent under the Domestic Shares Subscription Agreement is not satisfied on or before the Long Stop Date or such other date as agreed by both parties in writing, the Domestic Shares Subscription Agreement shall automatically be terminated upon expiry of such time and date. Neither party shall claim or compensate the other save for any antecedent breaches accrued prior to the termination.

Specific Mandate

The 92,723,400 new Domestic Shares will be issued under a specific mandate to be sought at the EGM and the Class Meetings.

Domestic Shares are not listed

The Company has not applied and does not have any intention to apply for the listing of the Domestic Shares (i.e. A Share listing) on any stock exchanges in the PRC in the near future. The terms of the Domestic Shares Subscription are negotiated privately between a willing buyer and a willing seller.

Shareholders and potential investors should be aware that the proposed Domestic Shares Subscription is subject to the satisfaction of the conditions precedent set out in this circular, and accordingly, the proposed Domestic Shares Subscription may or may not proceed. Accordingly, they are advised to exercise caution when dealing in the Shares.

2. Ranking of new Domestic Shares to be issued

The new Domestic Shares to be issued pursuant to the Domestic Shares Subscription Agreement will rank, upon issue, pari passu in all respects with the Domestic Shares in issue at the time of allotment and issue of such new Domestic Shares.

– 9 –

LETTER FROM THE BOARD

3. Shareholding structure of the Company

The following table illustrates the shareholding structure of the Company as at the Latest Practicable Date and immediately after the completion of Domestic Shares Subscription (assuming no other changes to the issued share capital of the Company):

Parties acting or presumed to be acting in concert Share class Sample Group_(1) Domestic Sample Commerce City(1) Domestic Mr. Sha Min(1 & 2) Domestic Active Gold(3) Domestic Total for Sample Group and parties acting or presumed to be acting in concert with it Other Domestic Shareholders Jiangsu Ruihua Investment Holding Group Company Ltd.(4) Domestic Jiangsu Hongshi Technology Industry Company Ltd.(5) Domestic Total Domestic Shares for other Domestic Shareholders Total H Share(6)_ Total Domestic and H Shares	Number of Shares in issue as at the Latest Practicable Date 60,770,000 4,950,000 1,350,000 49,545,000 116,615,000 15,000,000 685,000 15,685,000 91,800,000 224,100,000	Percentage of the total number of issued Shares 27.12% 2.21% 0.60% 22.11% 52.04% 6.69% 0.31% 7% 40.96% 100.00%	Total number of Shares held immediately after the Domestic Shares Subscription 153,493,400 4,950,000 1,350,000 49,545,000 209,338,400 15,000,000 685,000 15,685,000 91,800,000 316,823,400	Percentage of shareholding immediately after the Domestic Shares Subscription(7) 48.45% 1.56% 0.42% 15.64%
				66.07%
				4.73% 0.22%
				4.95%
				28.98%
				100.00%

Notes:

Sample Commerce City is a company established in the PRC with limited liability and is a wholly owned subsidiary of Sample Group. Sample Commerce City owns 4,950,000 Domestic Shares and Sample Group currently owns 60,770,000 Domestic Shares. For the purpose of the SFO, Sample Group is also deemed to be interested in the 4,950,000 Domestic Shares held by Sample Commerce City, hence Sample Group is deemed to be interested in an aggregate of 65,720,000 Domestic Shares, representing approximately 29.33% of the total issued share capital of the Company.
Mr. Sha Min, the chairman of the Company and an executive Director, personally owns 1,350,000 Domestic Shares. In addition, he is also the single largest shareholder of Sample Group, holding approximately 47.91% equity interest in Sample Group. According to the SFO, in addition to the 1,350,000 Domestic Shares held personally, Mr. Sha Min is deemed to be

– 10 –

LETTER FROM THE BOARD

interested in all shares which Sample Group is deemed to the interested; i.e., 65,720,000 Domestic Shares. As such, Mr. Sha Min is deemed to be interested in approximately 29.93% of the total issued share capital of the Company.

Active Gold is a company incorporated in British Virgin Islands with limited liability and is wholly-owned by Ferdinard Holding Limited which is in turn wholly-owned by Ms. Wan Ngok Wah（尹萼華）. Ferdinard Holding Limited and Ms. Wan Ngok Wah（尹萼華）are Independent Third Parties. Active Gold is presumed to be acting in concert with Sample Group under the Takeovers Code.
Jiangsu Ruihua Investment Holding Group Company Ltd.（江蘇瑞華投資控股集團有限公司）is a limited liability company established under the laws of the PRC and is owned as to 98.46% by Mr. Zhang Jianbin （張建斌）, an Independent Third Party, and the remaining 1.54% by 15 individuals who are all Independent Third Parties.
Jiangsu Hongshi Technology Industry Company Ltd.（江蘇紅石科技實業有限公司）is a limited liability company established under the laws of the PRC and is owned as to 70% by Mr. Yuan Renniu（袁人牛）and 30% by Nanjing Hui Bao Feng Electronic Technology Co. Ltd.（南京匯保豐電子科技有限公司）. Nanjing Hui Bao Feng Electronic Technology Co. Ltd.（南京匯保豐電子科技有限公司）is a limited liability company established under the laws of the PRC and is owned as to 60% by Ms. Xu Yuanyuan（許媛媛）and 40% by Ms. Zhu Xiao Yin（朱曉銀）. Mr. Yuan Renniu（袁人牛）, Nanjing Hui Bao Feng Electronic Technology Co. Ltd.（南京匯保豐電子科技有公司）, Ms. Xu Yuanyuan（許媛媛）and Ms. Zhu Xiao Yin（朱曉銀）are all Independent Third Parties.
All H Shares in the Company are held by public Shareholders.
Figures shown above are calculated assuming that no other Shares will be issued or transferred after the Latest Practicable Date until the completion of Domestic Shares Subscription.

4. Reasons for the Domestic Shares Subscription

Before resorting to the Domestic Shares Subscription, the Board had considered other ways to raise the required funds, including debt financing, H Shares and Domestic Shares rights issue and H Shares new issue. The followings are an analysis of each alternative:

(i) Debt financing : The Group has been utilising bank borrowings to cover its cash requirements in investment activities and as at 31 December 2013, the Group had approximately RMB411.25 million in both short term and long term bank borrowings. The Group expects to repay short term borrowing of approximately RMB380.00 million within 12 months from 1 July 2014. Although the current ratio is approximately 1.7 times and cash made up of about 31.2% of all current assets, such high cash balance is required to meet repayment of both long and short term debts and the high cash requirement of the Group’s daily operation. The going average interest rate on the Group’s short term and long term bank borrowings in the financial year ended 31 December 2013 ranged from 6.0% to 6.7%. The Directors believe that it will be in the best interest of the Company and its Shareholders as a whole to utilise bank borrowing moderately but further bank borrowings in the magnitude of the Domestic Shares Subscription will not only significantly increase the financial obligation but also the related interest payment will also erode the operating result and the operating cash flow of the Company, hence the valuation of the Group will be adversely affected.

– 11 –

LETTER FROM THE BOARD

Furthermore, as the Group’s bank borrowing surges, banks will become more credit risk-averse when considering the Group’s new loan application, making it more difficult to raise funds through bank borrowings.

(ii) Rights issue of Domestic Shares and H Shares : The Directors had considered rights issue of both Domestic Shares and H Shares. The Directors had made preliminary enquiries to the relevant authorities regarding this option and came to the conclusion that there are uncertainties as to the timing in obtaining approval from relevant authorities on the rights issue of new Domestic Shares and H Shares.
(iii) Placement of new H Shares in Hong Kong : Like alternative (ii) above, such option requires the approval of the CSRC and the timing of its approval is uncertain. Even if it were approved, the size and turnover of the Company needs to be improved in order to allure quality investors.

Separately, to the best of knowledge of the Directors, Sample Group is also keen on subscribing the new Domestic Shares because it is fully aware of the difficulties involved in raising money by the Company through the above options and the potential opportunity that the Company might have if capital can be channeled in time to develop the existing intelligent city and intelligent transportation businesses.

Having considered the pros and cons of the above alternatives, the Directors believe that a subscription of new Domestic Shares by Sample Group is not only the most efficient and cost-effective way of raising the required funds but it also serves as a vote of confidence in the Company by the substantial Shareholder.

Overall, the net proceeds from the Domestic Shares Subscription will greatly improve the Group’s cash reserves, which is required to fulfill short term loan repayment, repay trade payables and satisfy cash requirement in its daily operation. In addition, the net proceeds will also improve the Company’s ability to raise further funds from banks.

As such, the Directors (including the non-executive Director and the independent non-executive Directors) believe that the Domestic Shares Subscription by Sample Group is the most efficient and cost-effective way of funding the Group’s capital requirement and is fair and reasonable and on normal commercial terms, and is in the interests of the Group and the Shareholders as a whole.

It is the intention of Sample Group that the Company will maintain its existing business. Sample Group has no intention to introduce any major changes to the existing operation of the Company. As at the Latest Practicable Date, Sample Group and the parties acting in concert or presumed to be acting in concert with it have no intention to re-deploy the fixed assets, or to discontinue the employment of the employees of the Group other than in the ordinary course of business of the Group. In addition, the Directors confirm that the Company does not have any plan or is not currently under any negotiation for the acquisition of new business as at the Latest Practicable Date.

– 12 –

LETTER FROM THE BOARD

5. Recent fund raising activities and use of proceeds

The Company has not conducted any fund raising activities through any issue of equity securities within 12 months immediately prior to the Latest Practicable Date. The Company expects to raise net proceeds of approximately RMB413.65 million (equivalent to approximately HK$521.20 million) from the proposed Domestic Shares Subscription. It is currently the intention of the Company to apply the net proceeds from the new Domestic Shares Subscription in the following manner:

approximately 60.68% or RMB251.00 million (equivalent to approximately HK$316.26 million) will be used for the expansion of the Group’s client base to increase the Group’s market shares in the areas of intelligent city and intelligent transportation and the execution of existing construction projects. Intelligent city and intelligent transportation involve the utilisation of radio frequency identification technologies and communication technologies to collect, analyze and integrate city-wide vital statistics. These two business segments encompass the provision of services to meet demand arises from daily civic life, environmental protection, public safety and public transportation in cities such as Xu Zhou and Huai An;
approximately 20.07% or RMB83.00 million (equivalent to approximately HK$104.58 million) will be used to repay part of Group’s short term bank borrowings;
approximately 11.17% or RMB46.20 million (equivalent to approximately HK$58.21 million) will be used for the expansion of the Group’s custom and logistic business, including the nation-wide promotion of the Group’s successfully researched safety intelligent lock project and the integration of the Group’s self-developed major intelligent systems, logistic information system, intelligent card system, safety intelligent lock system and GPS monitoring system, to strength the competitiveness of the Group’s custom clearance monitoring services; and
the remainder of approximately 8.09% or RMB33.45 million (equivalent to approximately HK$42.15 million) will be applied as additional working capital.

6. Proposed amendments to the Articles

The Board proposed to make the following amendments to the Articles, to take effect subject to and upon completion of the Domestic Shares Subscription, in order to reflect the latest registered capital and shareholding structure of the Company as a result of the issue of the new Domestic Shares:

(1) Current provisions in the Articles state that:−
(a) Article 17

– 13 –

LETTER FROM THE BOARD

(1) The number of ordinary overseas listed foreign shares issued for the first capital increase after incorporation of the Company was 20,400,000 shares (including 19,500,000 new shares and 900,000 exiting sale shares), accounting for 31.63% of the issuable ordinary shares of the Company.

The equity structure of the Company is: 64,500,000 ordinary shares, including 44,100,000 shares held by the promoters, accounting for 68.37% of the issuable ordinary shares of the Company, and 20,400,000 overseas listed foreign shares held by H shares holders, accounting for 31.63% of the issuable ordinary shares of the Company.

(2) With the approval of the examination and approval authority authorized by the State Council, 12,000,000 shares acquired by the promoter namely Nanjing Zhongbei (Group) Company Ltd. at the time of incorporation of the Company were all transferred to Jiangsu Century Gold Bull Technology and Trading Company Ltd.
(3) With the approval of the examination and approval authority authorized by the State Council, 12,000,000 shares acquired by the promoter namely Nanjing Huadong Electronics Information & Technology Company Ltd. at the time of incorporation of the Company were all transferred to Active Gold Holding Limited.
(4) With the approval of the examination and approval authority authorized by the State Council, 4,515,000 shares held by the Company’s shareholder namely Jiangsu Century Gold Bull Technology and Trading Company Ltd. were all transferred to foreign shareholder Active Gold Holding Limited.
(5) With the approval of the examination and approval authority authorized by the State Council, the Company issued 96,750,000 bonus shares (15 bonus shares for every 10 shares) and increased 32,250,000 shares by way of capitalization of capital reserve (5 capitalization shares for every 10 shares), thereafter the total equity of the Company changed to 193,500,000 shares, with 132,300,000 shares (68.37% of the total number of the ordinary shares issued by the Company) held by domestic shareholders, including:

54,000,000 shares held by Nanjing Sample Technology Group Company Ltd., accounting for approximately 27.91% of the total number of the ordinary shares issued by the Company.

22,455,000 shares held by Jiangsu Century Gold Bull Technology and Trading Company Ltd., accounting for approximately 11.60% of the total number of the ordinary shares issued by the Company.

– 14 –

LETTER FROM THE BOARD

49,545,000 shares held by Active Gold Holding Limited, accounting for approximately 25.60% of the total number of the ordinary shares issued by the Company.

4,950,000 shares held by Nanjing Sample Commerce City Company Ltd., accounting for approximately 2.56% of the total number of the ordinary shares issued by the Company.

1,350,000 shares held by Sha Min, accounting for 0.70% of the total number of the ordinary shares issued by the Company.

61,200,000 overseas listed foreign shares held by H shareholders, accounting for 31.63% of the total number of the ordinary shares issued by the Company.

(6) With the approval of the extraordinary general meeting of the Company held on 3 August 2009, the Company issued additional ordinary shares of 30,600,000 overseas listed foreign shares, thereafter the total equity of the Company changed to 224,100,000 shares, with 132,300,000 shares (59.04% of the total number of the ordinary shares issued by the Company) held by domestic shareholders, including:

54,000,000 shares held by Nanjing Sample Technology Group Company Ltd., accounting for approximately 24.10% of the total number of the ordinary shares issued by the Company.

22,455,000 shares held by Jiangsu Century Gold Bull Technology and Trading Company Ltd., accounting for approximately 10.02% of the total number of the ordinary shares issued by the Company.

49,545,000 shares held by Active Gold Holding Limited, accounting for approximately 22.11% of the total number of the ordinary shares issued by the Company.

4,950,000 shares held by Nanjing Sample Commerce City Company Ltd., accounting for approximately 2.21% of the total number of the ordinary shares issued by the Company. 1,350,000 shares were subscribed by Sha Min, accounting for 0.60% of the total number of the ordinary shares issued by the Company.

91,800,000 overseas listed foreign shares held by H shareholders, accounting for 40.96% of the total number of the ordinary shares issued by the Company.

– 15 –

LETTER FROM THE BOARD

(7) With the approval of the examination and approval authority authorized by the State Council, 6,770,000 shares held by the Company’s shareholder namely Jiangsu Century Gold Bull Technology and Trading Co. Ltd. were transferred to the Company’s shareholder Nanjing Sample Technology Group Company Ltd.
(8) With the approval of Jiangsu Administration for Industry and Commerce, the Company’s shareholder Jiangsu Century Gold Bull Technology and Trading Company Ltd. changed its name to Jiangsu Red Stone Technology Company Ltd.
(9) With the approval of the examination and approval authority authorized by the State Council, 15,000,000 shares held by the Company’s shareholder namely Jiangsu Red Stone Technology Company Ltd. were transferred to the Company’s shareholder Jiangsu Ruihua Investment Holding Group Company Ltd.
(b) Article 20

The Company’s registered capital is RMB224,100,000.

(2) Upon completion of the Domestic Shares Subscription, the Articles is proposed to be amended as follows:
(a) The following clause is proposed to be added to Article 17:−
- (10) With the approval of the extraordinary general meeting of the Company, the H shareholders class meeting and the domestic shareholders class meeting held on 29 December 2014 (or any adjournment thereof), the Company issued 92,723,400 new domestic shares, thereafter the total number of ordinary shares issued by the Company is changed to 316,823,400 shares, with 225,023,400 shares (accounting for approximately 71.02% of the total number of the ordinary shares issued by the Company) held by domestic shareholders, including:

153,493,400 shares held by Nanjing Sample Technology Group Company Ltd., accounting for approximately 48.45% of the total number of the ordinary shares issued by the Company.

15,000,000 shares held by Jiangsu Ruihua Investment Holding Group Company Ltd., accounting for approximately 4.73% of the total number of the ordinary shares issued by the Company.

685,000 shares held by Jiangsu Hongshi Technology Industry Company Ltd., accounting for approximately 0.22% of the total number of the ordinary shares issued by the Company.

– 16 –

LETTER FROM THE BOARD

49,545,000 shares held by Active Gold Holding Limited, accounting for approximately 15.64% of the total number of the ordinary shares issued by the Company.

4,950,000 shares held by Nanjing Sample Commerce City Company Ltd., accounting for approximately 1.56% of the total number of the ordinary shares issued by the Company. 1,350,000 shares held by Sha Min, accounting for approximately 0.42% of the total number of the ordinary shares issued by the Company.

91,800,000 overseas listed foreign shares held by H shareholders, accounting for 28.98% of the total number of the ordinary shares issued by the Company.

(b) Article 20 is prosposed to be amended as follows:−

The Company’s registered capital is RMB316,823,400.

The Board would like to state clearly that the proposed amendments to the Articles above are subject to (i) the approvals of the Independent Shareholders of the Company in EGM and the Class Meetings; (ii) completion of Domestic Shares Subscription; and (iii) approval of and registration or filing with the relevant PRC government authorities. As such, the above proposed amendments to the Articles may be subject to further modifications to the extent as necessary to reflect the actual registered capital structure of the Company as may be required by the relevant PRC regulatory authorities.

As advised by the Company’s legal adviser as to PRC laws, the proposed amendments to the Articles is in compliance with the relevant PRC laws, regulations and the normative documents. As advised by the Company’s legal adviser as to Hong Kong laws, the proposed amendments to the Articles is in compliance with the relevant provisions in the Listing Rules. The Directors, having considered the advice of the Company’s legal adviser as to the PRC laws and the Company’s legal adviser as to the Hong Kong laws, confirm that there is nothing unusual about the proposed amendments to the Articles for a company listed in Hong Kong.

The English version of the proposed amendments to the Articles above is an unofficial translation of its Chinese version prepared for reference only. In case of any discrepancy between the two versions, the Chinese version shall prevail.

– 17 –

LETTER FROM THE BOARD

7. Information on the parties

Information relating to the Group

The Group provides visual identification and Radio-frequency Identification (RFID) technologies based solutions to areas in intelligent transportation, custom and logistics services, health care and other sectors.

Information relating to Sample Group

Sample Group primarily engages in the investment and research in high-tech industries, high-tech consulting and assets management. Sample Group is beneficially owned as to approximately 47.91% by Mr. Sha Min, the chairman of the Company and an executive Director, as to approximately 4.67% by Mr. Chang Yong, an executive Director and as to approximately 47.42% by 16 individuals who are all Independent Third Parties.

8. Listing Rules implications

The Domestic Shares Subscription Agreement is governed by PRC laws. As the Company’s H Shares are listed on the Hong Kong Stock Exchange, the Domestic Shares Subscription must also comply with the Listing Rules.

As at the Latest Practicable Date, Sample Group directly holds 60,770,000 Domestic Shares in the Company, representing approximately 27.12% shareholding in the Company’s total issued share capital. According to the Listing Rules, Sample Group is a substantial shareholder of the Company. Pursuant to Rule 14A.07 of the Listing Rules, Sample Group is a connected person of the Company, the Domestic Shares Subscription therefore constitutes a connected transaction of the Company and is subject to reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules. The Domestic Shares Subscription to be proposed at the EGM and the Class Meetings are required to be approved by way of a special resolution by the Independent Shareholders. Sample Group, Sample Commerce City, Mr. Sha Min and Active Gold will abstain from voting on the resolutions to be proposed at the EGM and the Class Meetings for approving the Domestic Shares Subscription Agreement and the transactions contemplated thereunder, the specific mandate and the Whitewash Waiver.

Mr. Chang Yong, an executive Director, is a shareholder of Sample Group and is interested in approximately 4.67% equity interest in Sample Group. Mr. Chang Yong is therefore deemed to be interested in the Domestic Shares Subscription Agreement and the transactions contemplated thereunder. As such, each of Mr. Sha Min and Mr. Chang Yong shall abstain from voting at the meeting of the Board approving the Domestic Shares Subscription Agreement and the transactions contemplated thereunder. Each of Mr. Sha Min and Mr. Chang Yong has abstained from voting at the relevant Board meeting approving, inter alia, the Domestic Shares Subscription Agreement.

– 18 –

LETTER FROM THE BOARD

9. Takeovers code implications and application for Whitewash Waiver

As at the Latest Practicable Date, Sample Group and parties acting in concert with it (including Sample Commerce City and Mr. Sha Min, the chairman and an executive Director of the Company), own or have control or direction over 67,070,000 Domestic Shares, representing approximately 29.93% of the entire issued share capital of the Company. Under the Takeovers Code, Active Gold is presumed to be acting in concert with Sample Group as Active Gold holds more than 20% of the entire issued share capital of the Company. As such, Sample Group, Sample Commerce City, Mr. Sha Min and Active Gold are parties acting and presumed to be acting in concert under the Takeovers Code and the aggregate number of Domestic Shares held by them is 116,615,000, representing approximately 52.04% of the entire issued share capital of the Company.

Immediately after the completion of the Domestic Shares Subscription and assuming no other changes to the issued share capital of the Company, Sample Group and parties acting or presumed to be acting in concert with it (including Sample Commerce City, Mr. Sha Min and Active Gold) will hold approximately 66.07% of the Company’s then enlarged issued share capital. Despite the fact that Sample Group and parties acting or presumed to be acting in concert with it hold in aggregate more than 50% of the entire issued share capital of the Company, as the shareholding of Sample Group itself will increase from approximately 27.12% to approximately 48.45% as a result of the Domestic Shares Subscription, pursuant to Rule 26.1 of the Takeovers Code, Sample Group will be required to make a mandatory general offer for all the issued shares of the Company not already owned or agreed to be acquired by Sample Group and parties acting or presumed to be acting in concert with it unless the Whitewash Waiver is obtained from the Executive pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code.

Completion of the Domestic Shares Subscription is conditional upon, among other things, the Whitewash Waiver being granted by the Executive and approved by the Independent Shareholders taken by way of a poll at the EGM and the Class Meetings. If the Whitewash Waiver is not granted by the Executive or not approved by the Independent Shareholders, the Domestic Shares Subscription Agreement will not become unconditional and the Domestic Shares Subscription will not proceed.

On 18 November 2014, an application was made on behalf of Sample Group to the Executive for the granting of the Whitewash Waiver pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code in respect of the issue of the new Domestic Shares pursuant to the Domestic Shares Subscription. The Executive has indicated that it will grant the Whitewash Waiver, which if granted, will be subject to the approval of the Independent Shareholders taken by way of a poll at the EGM and the Class Meetings. Sample Group and parties acting or presumed to be acting in concert with it (including Sample Commerce City, Mr. Sha Min and Active Gold) will abstain from voting in respect of the resolutions to approve the Domestic Shares Subscription, the Domestic Shares Subscription Agreement, the proposed amendments to the Articles, the specific mandate and the Whitewash Waiver at the EGM and the Class Meetings. As far as the Directors are aware, currently, save for Sample Group,

– 19 –

LETTER FROM THE BOARD

Sample Commerce City, Mr. Sha Min and Active Gold, there are no other Shareholders who are interested or involved in the Domestic Shares Subscription and/or the Whitewash Waiver.

As at the Latest Practicable Date, other than the approximately 52.04% interest in the total existing issued share capital of the Company (or an aggregate of 116,615,000 Domestic Shares) owned by Sample Group and parties acting or presumed to be acting in concert with it (details of which are set out under the sub-section headed “3. Shareholding structure of the Company” under the section headed “II. PROPOSED SUBSCRIPTION OF NEW DOMESTIC SHARES BY NANJING SAMPLE TECHNOLOGY GROUP COMPANY LIMITED*” of this circular) and all the transactions contemplated under the proposed Domestic Shares Subscription and as disclosed in this circular, neither Sample Group nor any party acting or presumed to be acting in concert with it:

(i) holds, owns, controls or directs any shares, convertible securities, warrants, options or derivatives in respect of the securities in the Company nor has entered into any outstanding derivatives in respect of the securities in the Company;
(ii) has secured any irrevocable commitment from any Independent Shareholders to vote in favour of or against the resolutions approving the transactions contemplated under the Domestic Shares Subscription Agreement and/or the Whitewash Waiver;
(iii) has any arrangement as referred to in Note 8 to Rule 22 of the Takeovers Code (whether by way of option, indemnity or otherwise) or contracts with any other parties in relation to the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company or Sample Group which might be material to the Domestic Shares Subscription and/or the Whitewash Waiver;
(iv) has any agreement or arrangement to which Sample Group or any party acting or presumed to be acting in concert with it is a party which relates to the circumstances in which it may or may not invoke or seek to invoke a pre-condition or a condition to the Domestic Shares Subscription and/or the Whitewash Waiver; and
(v) has borrowed or lent any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company.

– 20 –

LETTER FROM THE BOARD

Save for the entering into of the Domestic Shares Subscription Agreement, neither Sample Group nor any party acting or presumed to be acting in concert with it has acquired or disposed of any voting rights of the Company or has dealt for value in any shares, convertible securities, warrants, options or derivatives in respect of the securities of the Company in the six-month period prior to the date of the Announcement and up to and including the Latest Practicable Date. Sample Group and parties acting or presumed to be acting in concert with it will not acquire or dispose of any voting rights of the Company after the date of the Domestic Shares Subscription Agreement until the completion of the Domestic Shares Subscription.

The Company has no outstanding warrants, options or securities convertible into shares of the Company prior to the Latest Practicable Date.

EGM AND CLASS MEETINGS

The EGM and the Class Meetings, will be held to consider and, if thought fit, pass resolutions to approve the (i) proposed Domestic Shares Subscription Agreement and the transactions contemplated thereunder; (ii) the grant of the specific mandate for the issue of the new Domestic Shares; (iii) the proposed amendments to the Articles and (iv) the Whitewash Waiver. The voting in relation to the Domestic Shares Subscription Agreement, the specific mandate, the proposed amendments to the Articles and the Whitewash Waiver at the EGM and the Class Meetings will be conducted by way of poll. Sample Group and parties acting or presumed to be acting in concert with it (including Sample Commerce City, Mr. Sha Min and Active Gold) will abstain from voting on the resolutions to be proposed at the EGM and the Class Meetings.

RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee for the Share Subscription set out on pages 23 to 24 of this circular and the letter from the Independent Board Committee for the Whitewash Waiver set out on pages 25 to 26 of this circular. The Independent Board Committees, having taken into account the advice of the Independent Financial Adviser, the text of which is set out on pages 27 to 46 of this circular, consider that the Domestic Shares Subscription, Domestic Shares Subscription Agreement, the specific mandate, the proposed amendments to the Articles and the Whitewash Waiver are fair and reasonable so far as the Company and the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Independent Board Committees recommend the Independent Shareholders to vote in favour of all resolutions to be proposed at the EGM and the Class Meetings to approve the Domestic Shares Subscription, Domestic Shares Subscription Agreement, the specific mandate, the proposed amendments to the Articles and the Whitewash Waiver.

– 21 –

LETTER FROM THE BOARD

FURTHER INFORMATION

Your attention is drawn to the additional information set out in the appendices to this circular.

By order of the Board Nanjing Sample Technology Company Limited* Sha Min

Chairman of the Board

– 22 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE FOR THE SHARE SUBSCRIPTION

南京三寶科技股份有限公司 NANJING SAMPLE TECHNOLOGY COMPANY LIMITED*

(a joint stock limited company established in the People’s Republic of China with limited liability) (Stock Code: 1708)

2 December 2014

To the Independent Shareholders

Dear Sir or Madam,

(1) CONNECTED TRANSACTION –

**PROPOSED SUBSCRIPTION OF NEW DOMESTIC SHARES BY NANJING SAMPLE TECHNOLOGY GROUP COMPANY LIMITED*; (2) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION; AND**

(3) APPLICATION FOR WHITEWASH WAIVER

We refer to the circular dated 2 December 2014 issued by the Company (the “Circular”), of which this letter forms part. Terms used in this letter shall have the same meanings as given to them in the Circular unless the context otherwise requires.

Under the Listing Rules, the entering into the Domestic Shares Subscription Agreement constitutes a connected transaction for the Company and is thus subject to the approval of the Independent Shareholders at the EGM and Class Meetings.

We have been appointed as members of the Independent Board Committee for the Share Subscription to consider the Domestic Shares Subscription, the Domestic Shares Subscription Agreement, the specific mandate and the amendments to the Articles (together the “Transaction”) and to advise the Independent Shareholders as to the fairness and reasonabless of the Transaction, and to recommend how the Independent Shareholders should vote at the EGM and the Class Meetings. Messis Capital Limited has been appointed to advise the Independent Board Committee for the Share Subscription and the Independent Shareholders in relation to the Transaction.

We wish to draw your attention to the letter from the Board, as set out on pages 6 to 22 of the Circular, and the letter from Messis Capital Limited to the Independent Board Committees and the Independent Shareholders which contains its advice to us in respect of the Transaction, as set out on pages 27 to 46 of the Circular.

* For identification purpose only

– 23 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE FOR THE SHARE SUBSCRIPTION

Having considered the principal factors and reasons considered by, and the advice of Messis Capital Limited, we consider that the Transaction is on normal commercial terms and fair and reasonable so far as the Company and the Independent Shareholders are concerned and that the Transaction is in the interests of the Company and the Shareholders as a whole.

Accordingly, we recommend the Independent Shareholders to vote in favour of all the resolutions to be proposed at the EGM and the Class Meetings to approve the Transaction and the transactions contemplated thereunder.

Mr. Shum Shing Kei

Yours faithfully Independent Board Committee for the Share Subscription Mr. Xu Su Ming Mr. Geng Nai Fan

– 24 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE FOR THE WHITEWASH WAIVER

南京三寶科技股份有限公司 NANJING SAMPLE TECHNOLOGY COMPANY LIMITED (a joint stock limited company established in the People’s Republic of China with limited liability) *(Stock Code: 1708)**

2 December 2014

To the Independent Shareholders

Dear Sir or Madam,

(1) CONNECTED TRANSACTION –

**PROPOSED SUBSCRIPTION OF NEW DOMESTIC SHARES BY NANJING SAMPLE TECHNOLOGY GROUP COMPANY LIMITED*; (2) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION; AND**

(3) APPLICATION FOR WHITEWASH WAIVER

We have been appointed as members of the Independent Board Committee for the Whitewash Waiver to consider the Domestic Shares Subscription, the Domestic Shares Subscription Agreement, the specific mandate and the amendments to the Articles and the Whitewash Waiver (together the “Transaction”) and to advise the Independent Shareholders as to the fairness and reasonabless of the Transaction, and to recommend how the Independent Shareholders should vote at the EGM and the Class Meetings. Messis Capital Limited has been appointed to advise the Independent Board Committee for the Whitewash Waiver and the Independent Shareholders in relation to the Transaction.

– 25 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE FOR THE WHITEWASH WAIVER

Yours faithfully Independent Board Committee for the Whitewash Waiver Mr. Ma Jun Mr. Shum Shing Kei Mr. Xu Su Ming Mr. Geng Nai Fan

– 26 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

2 December 2014

To: The Independent Board Committees and the Independent Shareholders of Nanjing Sample Technology Company Limited

Dear Sir/Madam,

CONNECTED TRANSACTION –

(1) PROPOSED SUBSCRIPTION OF NEW DOMESTIC SHARES BY NANJING SAMPLE TECHNOLOGY GROUP COMPANY LIMITED; (2) PROPOSED AMENDMENT TO ARTICLES OF ASSOCIATION; AND (3) APPLICATION FOR WHITEWASH WAIVER

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to the Independent Board Committee for the Share Subscription, the Independent Board Committee for the Whitewash Waiver and the Independent Shareholders in connection with the Domestic Shares Subscription, Domestic Shares Subscription Agreement, the specific mandate, the proposed amendments to the Articles and the Whitewash Waiver, details of which are set out in the letter from the Board (the “ Board Letter ”) contained in the circular of the Company to the Shareholders dated 2 December 2014 (the “ Circular ”), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as defined in the Circular unless the context otherwise requires.

On 21 October 2014 (after trading hours), the Company entered into the Domestic Shares Subscription Agreement with Sample Group. According to the terms of the Domestic Shares Subscription Agreement, the Company has conditionally agreed to issue and Sample Group has conditionally agreed to subscribe in cash for an aggregate of 92,723,400 new Domestic Shares at the subscription price of RMB4.50 (equivalent to approximately HK$5.67) per new Domestic Share (“ Subscription Price ”), raising gross proceeds of approximately RMB417,255,300 (equivalent to approximately HK$525,741,678). Net proceeds from the issue of the new Domestic Shares are expected to be approximately RMB413,652,363 (equivalent to approximately HK$521,201,977) of which approximately 72% is intended to be used for the expansion of the Group’s client base and major business segments and approximately 20% is intended to be used for the reduction of liabilities and approximately 8% is intended to be applied as additional working capital. The 92,723,400 new Domestic Shares will be issued under a specific mandate to be sought at the EGM and the Class Meetings.

– 27 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As at the Latest Practicable Date, Sample Group and parties acting in concert with it (including Sample Commerce City and Mr. Sha Min, the chairman and an executive Director of the Company), own or have control or direction over 67,070,000 Domestic Shares, representing approximately 29.93% of the entire issued share capital of the Company. Under the Takeovers Code, Active Gold is presumed to be a party acting in concert with Sample Group as Active Gold holds more than 20% of the entire issued share capital of the Company. As such, Sample Group, Sample Commerce City, Mr. Sha Min and Active Gold are parties acting or presumed to be acting in concert under the Takeovers Code and the aggregate number of Domestic Shares held by them is 116,615,000, representing approximately 52.04% of the entire issued share capital of the Company.

Immediately after the completion of the Domestic Shares Subscription and assuming no other changes to the issued share capital of the Company, Sample Group and parties acting or presumed to be acting in concert with it (including Sample Commerce City, Mr. Sha Min and Active Gold) will hold approximately 66.07% of the Company’s then enlarged issued share capital. Despite the fact that Sample Group and parties acting or presumed to be acting in concert with it hold in aggregate more than 50% of the entire issued share capital of the Company, as the shareholding of Sample Group itself will increase from approximately 27.12% to approximately 48.45% as a result of the Domestic Share Subscription, pursuant to Rule 26.1 of the Takeovers Code, Sample Group will be required to make a mandatory general offer for all the issued shares in the share capital of the Company not already owned or agreed to be acquired by Sample Group and parties acting or presumed to be acting in concert with it unless the Whitewash Waiver is obtained from the Executive.

– 28 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Pursuant to the Listing Rules, the Independent Board Committee for the Share Subscription (comprising all the independent non-executive Directors) has been formed to advise the Independent Shareholders on the Domestic Shares Subscription, the Domestic Shares Subscription Agreement, the specific mandate, and the proposed amendments to the Articles. Another Independent Board Committee, namely the Independent Board Committee for the Whitewash Waiver (comprising all the non-executive Directors including the independent non-executive Directors) has also been formed in accordance with Rule 2.8 of the Takeovers Code to advise the Independent Shareholders on the Domestic Shares Subscription, the Domestic Shares Subscription Agreement, the specific mandate, the proposed amendments to the Articles and the Whitewash Waiver.

The Board proposed to make certain amendments to the Articles, to take effect subject to and upon completion of the Domestic Shares Subscription, in order to reflect the latest registered capital and shareholding structure of the Company as a result of the issue of the new Domestic Shares. The proposed amendments to the Articles are subject to approval by the Independent Shareholders by way of special resolutions at the EGM and the Class Meetings and the approval of and registration or filing with the relevant PRC government authorities.

Our appointment as the Independent Financial Adviser to the Independent Board Committee for the Share Subscription, the Independent Board Committee for the Whitewash Waiver and the Independent Shareholders has been approved by the Independent Board Committees. We do not by this letter warrant the merits of the above transactions other than to form an opinion for the purpose of the Listing Rules and the Takeovers Code. Our role as the Independent Financial Adviser is to give our recommendation to the Independent Board Committee for the Share Subscription, the Independent Board Committee for the Whitewash Waiver and the Independent Shareholders as to whether or not the Domestic Shares Subscription, Domestic Shares Subscription Agreement, the specific mandate, the proposed amendments to the Articles and the Whitewash Waiver are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole; and how the Independent Shareholders should vote in respect of the relevant resolutions to approve the Domestic Shares Subscription, Domestic Shares Subscription Agreement, the specific mandate, the proposed amendments to the Articles and the Whitewash Waiver and the transactions contemplated therein at the EGM and the Class Meetings.

Other than this appointment as the Independent Financial Adviser to the Independent Board Committee for the Share Subscription, the Independent Board Committee for the Whitewash Waiver and the Independent Shareholders, we have no relationships or interests with the Company and any other parties that could reasonably be regarded as relevant to our independence. We are hence independent from the Company pursuant to Rule 13.84 of the Listing Rules.

– 29 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR OPINION AND RECOMMENDATION

In formulating our opinion to the Independent Board Committee for the Share Subscription, the Independent Board Committee for the Whitewash Waiver and the Independent Shareholders, we have relied on the statements, information, opinions and representations contained or referred to in the Circular and the representations made to us by the Directors and the management of the Company. We have assumed that all statements, information and representations provided by the Directors and the management of the Company, for which they are solely responsible, are true and accurate at the time when they were provided and continue to be so as at the Latest Practicable Date. Shareholders will be notified of material changes as soon as possible, if any, to the information and representations provided and made to us after the Latest Practicable Date and up to the date of the EGM and the Class Meetings. We have also assumed that all statements of belief, opinion, expectation and intention made by the Directors in the Circular were reasonably made after due enquiry and careful consideration. We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy and completeness of the information and facts contained in the Circular, or the reasonableness of the opinions expressed by the Company and/or the Directors, which have been provided to us. We consider that we have taken sufficient and necessary steps on which to form a reasonable basis and an informed view for our opinion in compliance with Rule 13.80 of the Listing Rules and Rule 2 of the Takeovers Code.

The Circular, for which the Directors jointly and severally accept full responsibility, includes particulars given in compliance with the Listing Rules and the Takeovers Code for the purpose of giving information with regard to the Group. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in the Circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or in the Circular misleading. The Circular includes particulars given in compliance with the Listing Rules and the Takeovers Code for the purpose of giving information with regard to the Group. We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, carried out any independent verification of the information provided, nor have we conducted any independent investigation into the business and affairs of the Group. We have not considered the taxation implication on the Group or the Shareholders as a result of the Domestic Shares Subscription, the Domestic Shares Subscription Agreement, the specific mandate, the proposed amendments to the Articles and the Whitewash Waiver and the transactions contemplated therein. Our opinion is necessarily based on the financial, economic, market and other conditions in effect and the information made available to us as at the Latest Practicable Date. Nothing contained in this letter should be construed as a recommendation to hold, sell or buy any Shares or any other securities of the Company. Where information in this letter has been extracted from published or otherwise publicly available sources, the sole responsibility of us is to ensure that such information has been correctly and fairly extracted, reproduced or presented from the relevant stated sources and not be used out of context.

– 30 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the Domestic Shares Subscription, the Domestic Shares Subscription Agreement, the specific mandate, the proposed amendments to the Articles and the Whitewash Waiver, we have taken into consideration the following principal factors and reasons:

(1) Background of the Domestic Shares Subscription

Business overview of the Group

The Group is principally engaged in the provision of visual identification and Radio-frequency Identification (RFID) technologies based solutions to areas in intelligent transportation, custom and logistics services, health care and other sectors.

The following table summarises the consolidated financial results of the Group from its operations for each of the two years ended 31 December 2013 and the six months ended 30 June 2013 and 30 June 2014, which are extracted from the Company’s annual report for the year ended 31 December 2013 (the “ Annual Report 2013 ”) and its interim report for the six months ended 30 June 2014 (the “ Interim Report 2014 ”) respectively:

	Year ended	Year ended	Six months	Six months
	31 December	31 December	ended	ended
	2012	2013	30 June 2013	30 June 2014
	RMB’000	RMB’000	RMB’000	RMB’000
	(audited)	(audited)	(unaudited)	(unaudited)
Total operating income	737,690	787,768	357,414	387,824
Operating profit	182,684	132,692	70,599	73,949
Profit/(loss) attributable
to owners of the
Company	167,928	126,406	65,532	64,689

We note that the total operating income of the Group increased from approximately RMB737.7 million in the year ended 31 December 2012 to approximately RMB787.8 million in the year ended 31 December 2013 which was mainly attributable to the rapid growth of intelligent terminal sales in 2013. The Group recorded profit attributable to owners of the Company of approximately RMB126.4 million in the year ended 31 December 2013, decreased from approximately RMB167.9 million in the year ended 31 December 2012 which was mainly attributable to the increase in research and development cost during 2013 and the absence of the one-off investment income from the disposal of long term equity investment in 2012.

– 31 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The total operating income of the Group increased approximately 8.5% from the six months ended 30 June 2013 of approximately RMB357.4 million to the six months ended 30 June 2014 of approximately RMB387.8 million which was attributable to the active development of the intelligent traffic business, the customs logistics business and the improvement of revenue from service business by the Group. The profit attributable to owners of the Company decreased from approximately RMB65.5 million for the six months ended 30 June 2013 to approximately RMB64.7 million for the six months ended 30 June 2014 which may be attributable to the rise in prices for sourcing of the raw materials and the increase in labour costs resulted in the further business development by the Group.

The following table summarises the consolidated financial position of the Group as at 31 December 2012 and 2013 and 30 June 2014, which is extracted from the Annual Report 2013 and the Interim Report 2014:

	As at	As at
	31 December	31 December	As at
	2012	2013	30 June 2014
	RMB’000	RMB’000	RMB’000
	(audited)	(audited)	(unaudited)
Non-current assets	414,993	503,410	545,593
Current assets	1,191,208	1,398,454	1,577,953
– Cash at bank and on
hand	449,610	579,053	491,580
Current liabilities	542,777	744,654	924,926
– Short-term borrowings	138,000	285,000	380,000
– Trade payables	269,752	316,606	375,347
Non-current liabilities	99,538	100,150	99,405
Total equity attributable to
owners of the Company	926,868	1,008,321	1,051,285
Non-controlling interests	37,018	48,740	47,930

Financing alternatives available to the Group

As referred to in the Board Letter, the Company had not conducted any equity fund raising activities in the past 12 months immediately prior to the Latest Practicable Date.

Upon our enquiry with the Directors in this respect, we understand that the Directors have considered both debt and equity financing as fund raising methods for the Group. In relation to debt financing, the Directors advised us that debt financing may significantly increase the financial obligation and the related interest payment will also erode the operating result and the operating cash flow of the Company, hence the valuation of the Group may be adversely affected.

– 32 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Directors advised us that they had considered rights issue of both Domestic Shares and H Shares. The Directors had made preliminary enquiries to the relevant authorities regarding this option and came to the conclusion that there are uncertainties as to the timing in obtaining approval from relevant authorities on the rights issue of new Domestic Shares and H Shares.

Furthermore, placement of new H Shares in Hong Kong requires the approval of the CSRC and the timing of its approval is uncertain. Even if it were approved, the size and turnover of the Company needs to be improved in order to allure quality investors.

Having considered the above, the Directors are of the opinion that a subscription of new Domestic Shares by Sample Group is not only the most efficient and cost effective way of raising the required funds but it also serves as a vote of confidence in the Company by the substantial Shareholder.

Reason for the subscription of Domestic Shares

With reference to the Board Letter, the Company expects to raise net proceeds of approximately RMB413.65 million (equivalent to approximately HK$521.20 million) from the proposed Domestic Shares Subscription. It is currently the intention of the Company to apply the net proceeds from the new Domestic Shares Subscription in the following manner:

(i) approximately 60.68% or RMB251.00 million (equivalent to approximately HK$316.26 million) will be used for the expansion of the Group’s client base to increase the Group’s market shares in the areas of intelligent city and intelligent transportation and the execution of existing construction projects. Intelligent city and intelligent transportation involve the utilization of radio frequency identification technologies and communication technologies to collect, analyze and integrate city-wide vital statistics. These two business segments encompass the provision of services to meet demand arises from daily civic life, environmental protection, public safety and public transportation in cities such as Xu Zhou and Huai An;
(ii) approximately 20.07% or RMB83.00 million (equivalent to approximately HK$104.58 million) will be used to repay part of the Group’s short term bank borrowings;
(iii) approximately 11.17% or RMB46.20 million (equivalent to approximately HK$58.21 million) will be used for the expansion of the Group’s custom and logistic business, including the nation-wide promotion of the Group’s successfully researched safety intelligent lock

– 33 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

project and the integration of the Group’s self-developed major intelligent systems, logistic information system, intelligent card system, safety intelligent lock system and GPS monitoring system, to strength the competitiveness of the Group’s custom clearance monitoring services; and

(iv) the remainder of approximately 8.09% or RMB33.45 million (equivalent to approximately HK$42.15 million) will be applied as additional working capital.

Our view

Based on the above and having considered in particular that:

(i) the Domestic Shares Subscription will greatly improve the Group’s cash reserves and the Company’s ability to raise further funds from banks; and
(ii) the subscription of new Domestic Shares by Sample Group is a more efficient and cost effective way of raising the required funds as compared to debt financing and other equity issuance alternatives given that debt financing may incur interest costs and other equity issuance alternatives of H Shares requires approval from relevant authorities including CSRC which timing of its approval is uncertain; and
(iii) the proceeds will be used to expand the Group’s existing business and to increase the Group’s market shares in the industry;

we consider that the proceeds from the subscription of new Domestic Shares will enhance the financial position and the liquidity of the Group which is fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole.

(2) Domestic Shares Subscription Agreement

Number of new Domestic Shares subscribed for

Sample Group will subscribe for an aggregate of 92,723,400 new Domestic Shares. Such new Domestic Shares represent approximately 41.38% of the existing issued share capital of the Company as at the Latest Practicable Date. Assuming there is no change to the issued share capital of the Company other than the issue of the new Domestic Shares pursuant to the Domestic Shares Subscription, immediately after completion of the new Domestic Shares Subscription, Sample Group will directly hold in aggregate 153,493,400 Domestic Shares, representing approximately 48.45% of the then enlarged total issued share capital of the Company. Such 92,723,400 new Domestic Shares will be issued under a specific mandate to be sought at the EGM and the Class Meetings.

– 34 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Subscription price

RMB4.50 (equivalent to approximately HK$5.67) per new Domestic Share.

The Subscription Price is determined with reference to the average closing price of HK$6.425 per H Share (equivalent to approximately RMB5.099) during the Price Determination Period. The average closing price of the H Shares during the Price Determination Period is calculated by dividing the total turnover of the trading of the H Shares by the total trading volume of the H Shares during the Price Determination Period and allow for a slight liquidity discount of approximately 11.75% after arm’s length negotiation between the Company and Sample Group after taking into account that the Domestic Shares are not listed and therefore there is no publicly available transfer price. The resulting HK$ per Domestic Share is then converted to RMB at the exchange rate of RMB1 = HK$1.26 at the Price Determination Date.

Domestic Shares are not listed

The Company has not applied and does not have any intention to apply for the listing of the Domestic Shares (i.e. A Share listing) on any stock exchanges in the PRC in the near future. The transaction of the Domestic Shares Subscription are negotiated privately between a willing buyer and a willing seller.

– 35 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Comparison of the Subscription Price with historical price of the H Shares

In order to assess the fairness and reasonableness of the Subscription Price, we have reviewed the daily closing price of the H Shares as quoted on the Hong Kong Stock Exchange within the one-year period prior to the Price Determination Date (the “ Review Period ”). We consider that such one-year period would be sufficient to smooth out the effects of any short-term fluctuations in the stock market for our analysis and therefore can serve as a benchmark for assessing the Subscription Price. The historical trading pattern of the Shares during the Review Period is illustrated as follows.

==> picture [368 x 215] intentionally omitted <==

----- Start of picture text -----

9.0
8.0
7.0
6.0
5.0
HK$
4.0
3.0
2.0
1.0
0.0
2013/10/202013/11/202013/12/202014/1/202014/2/202014/3/202014/4/202014/5/202014/6/202014/7/202014/8/202014/9/202014/10/20
----- End of picture text -----

During the Review Period, the closing prices of the H Shares ranged from HK$6.02 per H Share to HK$7.80 per H Share. We note that the Subscription Price of HK$5.67 does not fall within the above price range and the Subscription Price represents a discount of approximately 5.8% over the lowest closing price of the H Shares of HK$6.02 during the Review Period.

Comparison of the Subscription Price with the net asset value per Share

We note that the Subscription Price of HK$5.67 per new Domestic Share, represents a discount of approximately 8.26% to the unaudited consolidated net asset value of the Group of approximately HK$6.18 per Share based on the unaudited consolidated net asset value of approximately RMB1,099,215,085 (equivalent to approximately HK$1,385,011,007) as at 30 June 2014 as disclosed in the Interim Report 2014 and based on the total number of 224,100,000 Shares in issue as at the Price Determination Date. While the Group is principally engaged in the provision of visual identification and RFID technologies based solutions to areas in intelligent traffic, customs and logistics services, health care and other sectors, we consider that the current market price of the Shares can

– 36 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

directly reflect the value of the Shares that is generally perceived by the market having taken into account the principal business segments of the Group as well as the prevailing market conditions.

Comparable analysis

In order to assess the fairness and reasonableness of the terms of the Domestic Shares Subscription Agreement, to the best of our knowledge, we have searched for transactions that involved the subscription of new shares by connected persons of companies listed on the Main Board and Growth Enterprise Market of the Hong Kong Stock Exchange (the “ Comparables ”) within the Review Period. We consider that (i) the terms of the Comparables are determined under similar market conditions and sentiments as the Domestic Shares Subscription and they might be able to reflect the recent trend of open market transactions in the Hong Kong stock market; and (ii) there were 16 Comparables in the Review Period, representing a reasonable number of Comparables for the purpose of comparison. Accordingly, we are of the view that the Review Period forms an appropriate basis for our analysis and that the Comparables represent fair and representative samples. Shareholders should note that the size of shares subscription, businesses, operations and prospects of the Company are not the same as the Comparables and the Comparables are only used to provide a general reference for the recent general market practice on the subscription on new shares by connected persons. To the best of our knowledge and as far as we are aware of, we found in total 16 companies which met these criteria, which represent an exhaustive list for the purpose of this letter. The table below summarises our relevant findings:

						Premium/
						(Discount) of the
					Premium/	subscription
					(Discount) of the	price to the
					subscription	closing price of
					price to the	the shares for
					closing price of	the last 5
					the shares as at	consecutive
					the last trading	trading days
					day prior to the	prior to the
					release of the	release of the
					announcement	announcement
	Stock		Date of		(the “LTD	(the “5-Days
Company	code	Principal business	announcement	Subscription Price	Comparables)	Comparables)
				(HK$)
Chun Wo Development	711	Civil engineering,	20-Oct-14	0.46	-54.16%	-54.79%
Holdings Limited		electrical and
		mechanical
		engineering,
		foundation and
		building construction
		work, property
		development, property
		investment,
		professional services
		including provision of
		security and property
		management services.

– 37 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

						Premium/
						(Discount) of the
					Premium/	subscription
					(Discount) of the	price to the
					subscription	closing price of
					price to the	the shares for
					closing price of	the last 5
					the shares as at	consecutive
					the last trading	trading days
					day prior to the	prior to the
					release of the	release of the
					announcement	announcement
	Stock		Date of		(the “LTD	(the “5-Days
Company	code	Principal business	announcement	Subscription Price	Comparables)	Comparables)
				(HK$)
Changfeng Axle (China)	1039	Manufacturing and	10-Oct-14	0.33	-29.03%	-23.26%
Company Limited		selling of axle
		assemblies and axle
		components to heavy
		duty truck and middle
		duty truck and
		providing after-sales
		services,
		manufacturing and
		selling of train and
		railway components.
China Mobile Games and	8081	Design, research &	10-Oct-14	0.22	-5.58%	-6.86%
Cultural Investment Limited		develop mobileonline
		games & identifying
		& securing intellectual
		property rights;
		provide IT services;
		money lending
		business; provide
		medical diagnostic &
		health check services;
		securities & property
		investments.
Hopefluent Group Holdings	733	Provision of real estate	12-Sep-14	3.00	14.07%	15.83%
Limited		agency services,
		property management
		services, mortgage
		referral services,
		advertising and
		marketing services and
		investment holding.
Hainan Meilan International	357	Engaged in both	2-Jul-14	7.17	0.14%	0.70%
Airport Company Limited		aeronautical and
		non-aeronautical
		business at the Meilan
		Airport.
Reorient Group Limited	376	Provision of securities	26-Jun-14	2.35	-8.91%	-9.62%
		brokerage, securities
		underwriting and
		placements, and
		consultancy and
		advisory services.

– 38 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

						Premium/
						(Discount) of the
					Premium/	subscription
					(Discount) of the	price to the
					subscription	closing price of
					price to the	the shares for
					closing price of	the last 5
					the shares as at	consecutive
					the last trading	trading days
					day prior to the	prior to the
					release of the	release of the
					announcement	announcement
	Stock		Date of		(the “LTD	(the “5-Days
Company	code	Principal business	announcement	Subscription Price	Comparables)	Comparables)
				(HK$)
CT Environmental Group	1363	Supply of industrial	25-Jun-14	5.90	2.54%	4.83%
Limited		water, provision of
		wastewater treatment
		plants operation
		services, wastewater
		project construction
		and operation services,
		provision of heating
		services, provision of
		sludge and solid waste
		treatment services.
Shougang Concord Technology	521	Development and	18-Jun-14	0.30	3.33%	3.00%
Holdings Limited		provision of system
		integration solutions,
		system design and sale
		of system hardware;
		provision of
		management services,
		leasing of investment
		properties and sales of
		light emitted diode
		projects.
China Mobile Games and	8081	Design, research &	18-Jun-14	0.12	-6.35%	0.00%
Cultural Investment Limited		develop mobileonline
		games & identifying
		& securing intellectual
		property rights;
		provide IT services;
		money lending
		business; provide
		medical diagnostic &
		health check services;
		securities & property
		investments.
Chinlink International Holdings	997	Financing guarantee	28-Apr-14	0.55	3.77%	4.56%
Limited		services and
		consultancy services
		in the logistic industry
		in the PRC, trading of
		furniture and fixtures
		and interior decoration
		works in Hong Kong
		and Macau.
China City Railway	1522	Design, implementation	4-Apr-14	1.25	-26.04%	-25.77%
Transportation Technology		and maintenance of
Holdings Company Limited		application solutions
		for centralising
		various functions of
		public transport
		systems.

– 39 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

						Premium/
						(Discount) of the
					Premium/	subscription
					(Discount) of the	price to the
					subscription	closing price of
					price to the	the shares for
					closing price of	the last 5
					the shares as at	consecutive
					the last trading	trading days
					day prior to the	prior to the
					release of the	release of the
					announcement	announcement
	Stock		Date of		(the “LTD	(the “5-Days
Company	code	Principal business	announcement	Subscription Price	Comparables)	Comparables)
				(HK$)
ZMFY Automobile Glass	8135	Sales of automobile	28-Mar-14	0.55	-34.50%	-32.10%
Services Limited		glass with installation/
		repair services and the
		trading of automobile
		glass.
Yusei Holdings Limited	96	Design, development and	27-Jan-14	0.80	-5.88%	-4.76%
		fabrication of plastic
		injection moulds and
		the manufacture of
		plastic components in
		the PRC.
Credit China Holdings Limited	8207	Provision of pawn loan	21-Jan-14	0.80	-13.04%	-3.38%
		service, entrusted loan
		service, microfinance
		service and financing
		consultancy service.
Brockman Mining Limited	159	Exploration and	2-Jan-14	0.40	-13.98%	-16.49%
		development of iron
		ore mining projects in
		Western Australia;
		exploitation,
		processing and
		production of copper
		ore concentrates in the
		PRC.
Beautiful China Holdings	706	Provision of automatic	22-Oct-13	0.10	-22.48%	-22.72%
Company Limited		teller machines
		services.
Maximum					14.07%	15.83%
Minimum					-54.16%	-54.79%
Average					-12.26%	-10.68%
The Company				5.67	-5.81%	-6.19%

Source: the website of the Stock Exchange (http://www.hkex.com.hk)

As shown in the above table, the subscription prices of the Comparables (i) ranged from a discount of approximately 54.16% to a premium of approximately 14.07% to the respective closing prices of their shares as at the last trading day prior to the release of the relevant announcements (the “ LTD Market Range ”); and (ii) ranged from a discount of approximately 54.79% to a premium of approximately 15.83% to the respective closing prices of their shares for the last 5 consecutive trading days prior to the release of the relevant announcements (the “ 5-Days Market Range ”). As noted above, the Subscription Price of HK$5.67

– 40 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

represents (i) a discount of approximately 5.81% to the closing price of HK$6.02 per H Share as at the Price Determination Date is lower than the average discount represented by the LTD Market Range; and (ii) a discount of approximately 6.19% to the closing price of HK$6.04 per H Share for the last 5 consecutive trading days prior to the Price Determination Date is lower than the average discount represented by the 5-Days Market Range, given that (i) there is a liquidity discount where the Domestic Shares are not listed and therefore there is no publicly available transfer price; and (ii) the discount represented by the Subscription Price is lower than the average discount represented by the LTD Market Range and 5-Days Market Range, we consider the Subscription Price is in line with the respective subscription price for the Comparables.

Moreover, considering the Group and the Comparables may be operating in entirely different industries with significant difference in their price-to-book ratios, we are of the view that the analysis on the premium/discount of the subscription price to the market price can form a more reasonable basis in order for us to assess the fairness and reasonableness of the terms of the Domestic Shares Subscription Agreement.

Our view on the Domestic Shares Subscription

Based on all of the above and having considered in particular that:

(i) the Domestic Shares are not listed and therefore there is no publicly available transfer price;
(ii) the discount represented by the Subscription Price falls within the LTD Market Range and the 5-Days Market Range respectively;
(iii) the discount represented by the Subscription Price is lower than the average discount represented by the LTD Market Range and 5-Days Market Range respectively;
(iv) the Subscription Price was a commercial decision arrived at after arm’s length negotiation between the Company and the Sample Group;
(v) the net proceeds from the Domestic Shares Subscription will greatly improve the Group’s cash reserves and the Company’s ability to raise further funds from banks;
(vi) the proceeds from the Domestic Shares Subscription are used for the partial repayment of debts and for the Group’s general working capital; and
(vii) there is no better financing alternatives available to the Group as discussed above;

– 41 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

we are of the view that the terms of the Domestic Shares Subscription are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole. We also consider the grant of the specific mandate from the Shareholders to allot and issue the new Domestic Shares is fair and reasonable so far as the Company and the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole.

(3) Dilution effect on the shareholding interests of the existing public Shareholders

Changes in the shareholding structure of the Company as a result of the Domestic Shares Subscription

For illustrative purposes, set out below is the shareholding structures of the Company (i) as at the Latest Practicable Date; and (ii) immediately after completion of the Domestic Shares Subscription:

Assuming no other changes to the issued share capital of the Company:

Parties acting in concert Share class Sample Group(1) Domestic Sample Commerce City(1) Domestic Mr. Sha Min (1&2) Domestic Active Gold(3) Domestic Total for Sample Group and parties acting or presumed to be acting in concert with it Other Domestic Shareholders Jiangsu Ruihua Investment Holding Group Company Ltd.(4) Domestic Jiangsu Hongshi Technology Industry Company Ltd.(5) Domestic	(i) As at the Latest Practicable Date No. of Shares Approx. % 60,770,000 27.12% 4,950,000 2.21% 1,350,000 0.60% 49,545,000 22.11% 116,615,000 52.04% 15,000,000 6.69% 685,000 0.31%	(ii) Immediately after the completion of the Domestic Shares Subscription(7) No. of Shares Approx. % 153,493,400 48.45% 4,950,000 1.56% 1,350,000 0.42% 49,545,000 15.64% 209,338,400 66.07% 15,000,000 4.73% 685,000 0.22%	(ii) Immediately after the completion of the Domestic Shares Subscription(7) No. of Shares Approx. % 153,493,400 48.45% 4,950,000 1.56% 1,350,000 0.42% 49,545,000 15.64% 209,338,400 66.07% 15,000,000 4.73% 685,000 0.22%
			66.07%

			4.73% 0.22%

– 42 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Parties acting in concert Share class Total Domestic Shares for other Domestic Shareholders Total H Shares Total Domestic and H Shares	(i) As at the Latest Practicable Date No. of Shares Approx. % 15,685,000 7.00% 91,800,000 40.96% 224,100,000 100.00%	(ii) Immediately after the completion of the Domestic Shares Subscription(7) No. of Shares Approx. % 15,685,000 4.95% 91,800,000 28.98% 316,823,400 100.00%	(ii) Immediately after the completion of the Domestic Shares Subscription(7) No. of Shares Approx. % 15,685,000 4.95% 91,800,000 28.98% 316,823,400 100.00%
			100.00%

Notes:

(1) Sample Commerce City is a company established in the PRC with limited liability and is a wholly owned subsidiary of Sample Group. Sample Commerce City owns 4,950,000 Domestic Shares and Sample Group currently owns 60,770,000 Domestic Shares. For the purpose of the SFO, Sample Group is also deemed to be interested in the 4,950,000 Domestic Shares held by Sample Commerce City, hence Sample Group is deemed to be interested in an aggregate of 65,720,000 Domestic Shares, representing approximately 29.33% of the total issued share capital of the Company.
(2) Mr. Sha Min, the chairman of the Company and an executive Director, personally owns 1,350,000 Domestic Shares. In addition, he is also the single largest shareholder of Sample Group, holding approximately 47.91% equity interest in Sample Group. According to the SFO, in addition to the 1,350,000 Domestic Shares held personally, Mr. Sha Min is deemed to be interested in all shares which Sample Group is deemed to the interested; i.e., 65,720,000 Domestic Shares, As such Mr. Sha Min is deemed to be interested in approximately 29.93% of the total issued share capital of the Company.
(3) Active Gold is a company incorporated in British Virgin Islands with limited liability and is wholly-owned by Ferdinard Holding Limited which is in turn wholly-owned by Ms. Wan Ngok Wah,（尹萼華）. Ferdinard Holding Limited and Ms. Wan Ngok Wah（尹萼華）are Independent Third Parties. Active Gold is presumed to be acting in concert with Sample Group under the Takeovers Code.
(4) Jiangsu Ruihua Investment Holding Group Company Ltd. （江蘇瑞華投資控股集團有限公司）is a limited liability company established under the laws of the PRC and is owned as to 98.46% by Mr. Zhang Jianbin （張建斌）, an Independent Third Party and the remaining 1.54% by 15 individuals who are all Independent Third Parties.
(5) Jiangsu Hongshi Technology Industry Company Ltd. （江蘇紅石科技實業有限公司） is a limited liability company established under the laws of the PRC and is owned as to 70% by Mr. Yuan Renniu （袁人牛） and 30% by Nanjing Hui Bao Feng Electronic Technology Co. Ltd. （南京匯保豐電子科技有限公司）. Nanjing Bao Feng Electronic Technology Co. Ltd. （南京匯保豐電子科技有限公司） is a limited liability company established under the laws of the PRC and is owned as to 60% by Ms. Xu Yuanyuan*
（許媛媛）and 40% by Ms. Zhu Xiao Yin（朱曉銀）. Mr. Yuan Renniu（袁人牛）, Nanjing Hui Bao Feng Electronic Technology Co. Ltd. （南京匯保豐電子科技有公司）, Ms. Xu Yuanyuan（許媛媛）and Ms. Zhu Xiao Yin*（朱曉銀）are all Independent Third Parties.
(6) All H Shares in the Company are held by public Shareholders.

– 43 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(7) Figures shown above are calculated assuming that no other Shares will be issued or transferred after the Latest Practicable Date until the completion of the Domestic Shares Subscription.

As depicted by the table above, the shareholding interests of the existing public Shareholders in the Company would be diluted by approximately 14.03 percentage point immediately after completion of the Domestic Shares Subscription, from approximately 47.96% to approximately 33.93%. Taking into account (i) the reasons for and benefits of the Domestic Shares Subscription; and (ii) that the terms of the Domestic Shares Subscription being fair and reasonable so far as the Independent Shareholders are concerned, we are of the view that the aforementioned level of dilution to the shareholding interests of the existing public Shareholders is acceptable.

(4) Financial effects of the Domestic Shares Subscription

Effect on the net asset value and debt ratio

With reference to the Interim Report 2014, the unaudited consolidated net asset value and the debt ratio (the ratio of total liabilities to total assets) of the Group as at 30 June 2014 were approximately RMB1,099.2 million and 48.2% respectively. As confirmed by the Directors, the Domestic Shares Subscription would increase the total assets and net asset value of the Group.

It is currently the intention of the Company to apply approximately 20.07% or RMB83.00 million (equivalent to approximately HK$104.58 million) of the proceed to repay part of Group’s short term bank borrowings, the Directors expected that this would improve the Group’s debt ratio.

Effect on working capital

As confirmed by the Directors, it is currently the intention of the Company to apply approximately 8.09% or RMB33.45 million (equivalent to approximately HK$42.15 million) as additional working capital.

(5) Proposed amendments to the Articles

As referred to in the Board Letter, the Board proposed to make certain amendments to the Articles, to take effect subject to and upon completion of the Domestic Shares Subscription, in order to reflect the latest registered capital and shareholding structure of the Company as a result of the issue of the new Domestic Shares. Taking into account (i) the reasons for and benefits of the Domestic Shares Subscription; (ii) that the terms of the Domestic Shares Subscription being fair and reasonable so far as the Independent Shareholders are concerned; and (iii) the proposed amendments to the Articles can reflect the latest registered capital and shareholding structure of the Company as a result of the issue of the new Domestic Shares, we are of the view that the proposed amendments to the Articles is in the interests of the Company and the Shareholders as a whole.

– 44 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(6) The Whitewash Waiver

As at the Latest Practicable Date, Sample Group and parties acting in concert with it (including Sample Commerce City, Mr. Sha Min, the chairman and an executive Director of the Company), own or have control or direction over 67,070,000 Domestic Shares, representing approximately 29.93% of the entire issued share capital of the Company. Under the Takeovers Code, Active Gold is presumed to be a party acting in concert with Sample Group as Active Gold holds more than 20% of the entire issued share capital of the Company. As such, Sample Group, Sample Commerce City, Mr. Sha Min and Active Gold are parties acting or presumed to be acting in concert under the Takeovers Code and the aggregate number of Domestic Shares held by them is 116,615,000, representing approximately 52.04% of the entire issued share capital of the Company.

Immediately after the completion of the Domestic Shares Subscription and assuming no other changes to the issued share capital of the Company, Sample Group and parties acting or presumed to be acting in concert with it (including Sample Commerce City, Mr. Sha Min and Active Gold) will hold approximately 66.07% of the Company’s then enlarged issued share capital. Pursuant to Rule 26.1 of the Takeovers Code, despite the fact that Sample Group and parties acting or presumed to be acting in concert with it hold in aggregate more than 50% of the entire issued share capital of the Company, as the shareholding of Sample Group itself will increase from 27.12% to 48.45% as a result of the Domestic Share Subscription, Sample Group will be required to make a mandatory general offer for all the issued shares of the Company not already owned or agreed to be acquired by Sample Group and parties acting or presumed to be acting in concert with it unless the Whitewash Waiver is obtained from the Executive pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code.

It is one of the conditions under the Domestic Shares Subscription Agreement that the Whitewash Waiver be granted by the Executive and approved by the Independent Shareholders taken by way of a poll at the EGM and the Class Meetings. If the

– 45 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Whitewash Waiver is not granted by the Executive or not approved by the Independent Shareholders, the Domestic Shares Subscription Agreement will not become unconditional and the Domestic Shares Subscription will not proceed.

Based on (i) the reasons for the Domestic Shares Subscription and the proposed use of the net proceeds therefrom; (ii) the terms of the Domestic Shares Subscription Agreement being fair and reasonable so far as the Independent Shareholders are concerned; and (iii) the level of dilution to the shareholding interests of the existing public Shareholders being acceptable, we are of the opinion that the Whitewash Waiver is in the interests of the Company and the Shareholders as a whole and is fair and reasonable so far as the Independent Shareholders are concerned.

RECOMMENDATION

Having taken into consideration the factors and reasons stated above, we are of the opinion that (i) the Domestic Shares Subscription Agreement and the transaction contemplated therein are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned, and in the interests of the Company and the Shareholders as a whole; (ii) the grant of the specific mandate from the Shareholders to allot and issue the new Domestic Shares is fair and reasonable so far as the Company and the Independent Shareholders are concerned, and in the interests of the Company and the Shareholders as a whole; (iii) the proposed amendments to the Articles is fair and reasonable so far as the Independent Shareholders are concerned, in the interests of the Company and the Shareholders as a whole; and (iv) the Whitewash Waiver is fair and reasonable so far as the Independent Shareholders are concerned and is in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders, as well as the Independent Board Committees to advise the Independent Shareholders, to vote in favour of the relevant resolutions to be proposed at the EGM and Class Meetings to approve the Domestic Shares Subscription, Domestic Shares Subscription Agreement, the specific mandate, the proposed amendments to the Articles and the Whitewash Waiver and the transactions contemplated therein.

Yours faithfully, For and on behalf of Messis Capital Limited Robert Siu Managing Director

Mr. Robert Siu is a licensed person registered with the SFC and regarded as a responsible officer of Messis Capital Limited to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the SFO and has over 15 years of experience in corporate finance industry.

– 46 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

I. SUMMARY OF THE FINANCIAL INFORMATION

The following is a summary of the audited consolidated financial information of the Group for the years ended 31 December 2011, 2012 and 2013 and the unaudited consolidated financial information of the Group for the six months period ended 30 June 2014 as extracted from the published financial statements of the Group for the relevant years and/or period.

The auditor of the Company did not issue any qualified opinion on the financial statements of the Group for each of the years ended 31 December 2011, 2012 and 2013, and the Company had no items which are exceptional or extraordinary because of size, nature or incidence for the same financial periods and the six months ended 30 June 2014.

Consolidated Income Statement

(All amounts in Renminbi yuan unless otherwise stated)

ITEMS I. Total operating income II. Total operating cost Including: Operating cost Taxes and surcharges Selling and distribution expenses General and administrative expenses Financial expenses Asset impairment losses Share of profit of associates and jointly controlled entities Other investment income III. Operating profit Add: Non-operating income Less: Non-operating expenses IV. Total profit Less: Income tax expenses V. Net profit Net profit attributable to the shareholders of the Company Minority interests	ITEMS I. Total operating income II. Total operating cost Including: Operating cost Taxes and surcharges Selling and distribution expenses General and administrative expenses Financial expenses Asset impairment losses Share of profit of associates and jointly controlled entities Other investment income III. Operating profit Add: Non-operating income Less: Non-operating expenses IV. Total profit Less: Income tax expenses V. Net profit Net profit attributable to the shareholders of the Company Minority interests	Six months ended 30 June 2014 (Unaudited) 387,823,724.09 313,874,857.59	Year ended 31 December 2013 (Audited) 787,767,966.59 655,075,598.95	Year ended 31 December 2012 (Audited) 737,689,688.95 569,556,451.04	Year ended 31 December 2011 (Audited) 542,388,737.94 414,709,367.41 327,803,324.95 14,157,351.73 13,088,941.60 39,152,681.18 9,254,329.57 11,252,738.38 11,584,523.96 10,104,366.18 149,368,260.67 22,236,679.74 165,264.92 171,439,675.49 25,385,612.54 146,054,062.95 146,054,062.95 –
	Including: Operating cost Taxes and surcharges Selling and distribution expenses General and administrative expenses Financial expenses Asset impairment losses	259,469,666.18 3,683,990.26 11,077,888.77 31,622,366.47 9,097,112.22 (1,076,166.31)	523,328,683.75 11,207,510.01 24,316,401.22 75,788,482.51 8,904,116.66 11,530,404.80	453,605,654.15 18,738,322.80 19,700,037.85 56,672,710.29 11,369,009.23 9,470,716.72
	Share of profit of associates and jointly controlled entities Other investment income Operating profit Add: Non-operating income Less: Non-operating expenses Total profit Less: Income tax expenses Net profit Net profit attributable to the shareholders of the Company Minority interests	– – 73,948,866.50 3,350,020.10 61,276.65 77,237,609.95 11,957,613.51 65,279,996.44 64,689,329.19 590,667.25	– – 132,692,367.64 19,106,603.52 175,016.57 151,623,954.59 21,496,476.06 130,127,478.53 126,405,756.32 3,721,722.21	4,324,931.80 10,225,428.74 182,683,598.45 24,559,920.80 403,687.36 206,839,831.89 37,621,268.34 169,218,563.55 167,927,630.71 1,290,932.84

– 47 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

ITEMS VI. Other comprehensive income Items to be re-categorized into profit and loss when satisfied the stipulated conditions in the subsequent accounting period Converted difference in foreign currency statements Items not re-categorized into profit and loss in the subsequent accounting Period VII. Total comprehensive income Total comprehensive income attributable to the shareholders of the Company Total comprehensive income attributable to minority shareholders VIII. Earnings per share: (1) Basic earnings per share (2) Diluted earnings per share IX. Dividend X. Dividend per share	Six months ended 30 June 2014 (Unaudited) 684,803.86 684,803.86 684,803.86 – 65,964,800.30 65,374,133.05 590,667.25 0.289 0.289 – –	Year ended 31 December 2013 (Audited) (132,748.50) (132,748.50) (132,748.50) – 129,994,730.03 126,273,007.82 3,721,722.21 0.564 0.564 44,820,000.00 0.100	Year ended 31 December 2012 (Audited) (959.95) (959.95) (959.95) – 169,217,603.60 167,926,670.76 1,290,932.84 0.749 0.749 22,410,000.00 0.200	Year ended 31 December 2011 (Audited) (3,212,006.14) – – –
				142,842,056.81 142,842,056.81 –

				0.652 0.652
				22,410,000.00
				0.100

– 48 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Balance Sheet

(All amounts in Renminbi yuan unless otherwise stated)

ASSETS Current assets: Cash at bank and on hand Notes receivable Accounts receivable Prepayments Other receivables Inventories Total current assets Non-current assets: Long-term equity investments Fixed assets Construction in progress Construction materials Intangible assets Long-term deferred expenses Deferred income tax assets Total non-current assets TOTAL ASSETS LIABILITIES & SHAREHOLDERS’ EQUITY Current liabilities: Short-term borrowings Notes payable Accounts payable Advances from customers Staff remuneration payables Taxes payable Dividends payable Other payables Non-current liabilities due within 1 year Total current liabilities	As at 30 June 2014 (Unaudited) 491,579,921.31 450,000.00 316,516,967.85 137,498,253.88 119,489,797.73 512,418,128.77 1,577,953,069.54 119,506,244.94 189,379,258.72 196,915,650.23 3,397,054.00 20,380,493.73 4,827,659.04 11,186,605.00 545,592,965.66 2,123,546,035.20 380,000,000.00 14,469,197.00 375,347,349.62 34,357,559.52 415,828.76 29,523,996.37 22,410,000.00 42,152,452.66 26,250,000.00 924,926,383.93	As at 31 December 2013 (Audited) 579,052,891.83 3,300,000.00 343,612,285.44 96,418,562.53 92,493,603.10 283,576,874.55 1,398,454,217.45 101,386,244.94 197,473,466.90 166,580,798.69 1,906,895.00 21,828,164.51 2,886,273.36 11,348,029.95 503,409,873.35 1,901,864,090.80 285,000,000.00 6,115,952.00 316,606,125.09 25,481,574.39 392,855.74 35,754,695.27 – 25,303,089.24 50,000,000.00 744,654,291.73	As at 31 December 2012 (Audited) 449,609,726.85 160,000.00 278,576,202.98 48,417,202.13 147,128,312.82 267,316,724.10 1,191,208,168.88 101,386,244.94 172,765,938.02 105,149,762.35 3,978,173.60 24,364,756.07 755,341.29 6,592,988.15 414,993,204.42 1,606,201,373.30 138,000,000.00 29,246,066.85 269,751,512.77 25,300,107.19 221,508.60 52,212,021.92 – 28,046,279.25 – 542,777,496.58	As at 31 December 2011 (Audited) 457,625,077.68 856,348.50 321,076,498.92 3,193,664.28 88,932,996.33 277,749,254.36
				1,149,433,840.07

				194,007,290.40 51,830,494.11 4,680,462.89 19,289,440.00 24,859,714.28 4,248,176.20
				298,915,577.88

				1,448,349,417.95

				286,300,000.00 28,038,552.80 255,291,518.57 1,725,195.60 319,916.32 54,939,104.99 – 27,683,268.40 –
				654,297,556.68

– 49 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Non-current liabilities: Long-term borrowings Deferred income tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities Shareholders’ equity: Share capital Capital reserve Surplus reserve Undistributed profits Difference on translation of foreign currency financial statements Total equity attributable to the shareholders of the Company Minority interest Total shareholders’ equity TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY Net current assets Total asset less current assets	As at 30 June 2014 (Unaudited) 76,250,000.00 827,649.27 22,326,916.72 99,404,565.99 1,024,330,949.92 224,100,000.00 99,627,613.95 46,153,350.13 684,495,922.67 (3,092,046.85) 1,051,284,839.90 47,930,245.38 1,099,215,085.28 2,123,546,035.20 653,026,685.61 1,198,619,651.27	As at 31 December 2013 (Audited) 76,250,000.00 973,618.23 22,925,895.86 100,149,514.09 844,803,805.82 224,100,000.00 99,627,613.95 46,153,350.13 642,216,593.48 (3,776,850.71) 1,008,320,706.85 48,739,578.13 1,057,060,284.98 1,901,864,090.80 653,799,925.72 1,157,209,799.07	As at 31 December 2012 (Audited) 80,000,000.00 1,280,559.27 18,257,762.50 99,538,321.77 642,315,818.35 224,100,000.00 99,627,613.95 41,898,314.28 564,885,873.01 (3,644,102.21) 926,867,699.03 37,017,855.92 963,885,554.95 1,606,201,373.30 648,430,672.30 1,063,423,876.72	As at 31 December 2011 (Audited) – 1,602,503.42 –
				1,602,503.42

				655,900,060.10

				224,100,000.00 102,999,020.45 34,049,480.44 427,217,076.14 (3,643,142.26)
				784,722,434.77 7,726,923.08
				792,449,357.85

				1,448,349,417.95

				495,136,283.39

				794,051,861.27

– 50 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

II. AUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following is the full text of the audited consolidated financial statements of the Group for the year ended 31 December 2013:

Consolidated Balance Sheet

At 31 December 2013

(All amounts in Renminbi yuan unless otherwise stated)

ASSETS Note V Current assets: Cash at bank and on hand (I) Notes receivable (II) Accounts receivable (III) Prepayments (V) Other receivables (IV) Inventories (VI) Total current assets Non-current assets: Long-term equity investments (VII) Fixed assets (VIII) Construction in progress (IX) Construction materials (X) Intangible assets (XI) Long-term deferred expenses (XII) Deferred income tax assets (XIII) Total non-current assets TOTAL ASSETS LIABILITIES & SHAREHOLDERS’ EQUITY Current liabilities: Short-term borrowings (XV) Notes payable (XVI) Accounts payable (XVII) Advances from customers (XVIII) Staff remuneration payables (XIX) Taxes payable (XX) Other payables (XXI) Non-current liabilities due within 1 year (XXII) Total current liabilities	2013 579,052,891.83 3,300,000.00 343,612,285.44 96,418,562.53 92,493,603.10 283,576,874.55 1,398,454,217.45 101,386,244.94 197,473,466.90 166,580,798.69 1,906,895.00 21,828,164.51 2,886,273.36 11,348,029.95 503,409,873.35 1,901,864,090.80 285,000,000.00 6,115,952.00 316,606,125.09 25,481,574.39 392,855.74 35,754,695.27 25,303,089.24 50,000,000.00 744,654,291.73	2012 449,609,726.85 160,000.00 278,576,202.98 48,417,202.13 147,128,312.82 267,316,724.10
		1,191,208,168.88

		101,386,244.94 172,765,938.02 105,149,762.35 3,978,173.60 24,364,756.07 755,341.29 6,592,988.15
		414,993,204.42

		1,606,201,373.30

		138,000,000.00 29,246,066.85 269,751,512.77 25,300,107.19 221,508.60 52,212,021.92 28,046,279.25 –
		542,777,496.58

– 51 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Note V Non-current liabilities: Long-term borrowings (XXIII) Deferred income tax liabilities (XIII) Other non-current liabilities (XXIV) Total non-current liabilities Total liabilities Shareholders’ equity: Share capital (XXV) Capital reserve (XXVI) Surplus reserve (XXVII) Undistributed profits (XXVIII) Difference on translation of foreign currency financial statements Total equity attributable to the shareholders of the Company Minority interest Total shareholders’ equity TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY Net current assets Total asset less current assets	2013 76,250,000.00 973,618.23 22,925,895.86 100,149,514.09 844,803,805.82 224,100,000.00 99,627,613.95 46,153,350.13 642,216,593.48 (3,776,850.71) 1,008,320,706.85 48,739,578.13 1,057,060,284.98 1,901,864,090.80 653,799,925.72 1,157,209,799.07	2012 80,000,000.00 1,280,559.27 18,257,762.50 99,538,321.77 642,315,818.35 224,100,000.00 99,627,613.95 41,898,314.28 564,885,873.01 (3,644,102.21) 926,867,699.03 37,017,855.92 963,885,554.95 1,606,201,373.30 648,430,672.30 1,063,423,876.72

– 52 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Balance Sheet of the Company

At 31 December 2013

(All amounts in Renminbi yuan unless otherwise stated)

ASSETS Note XIII Current assets: Cash at bank and on hand Notes receivable Accounts receivable (I) Prepayments Other receivables (II) Inventories Total current assets Non-current assets: Long-term equity investments (III) Fixed assets Construction in progress Intangible assets Deferred income tax assets Total non-current assets TOTAL ASSETS LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Short-term borrowings Notes payable Accounts payable Advances from customers Staff remuneration payables Taxes payable Other payables Non-current liabilities due within 1 year Total current liabilities	2013 55,204,087.55 3,300,000.00 75,046,647.45 4,201,686.65 76,285,519.18 12,206,761.45 226,244,702.28 419,463,932.94 40,074,630.90 166,271,592.51 15,326,731.48 2,399,462.52 643,536,350.35 869,781,052.63 120,000,000.00 – 39,173,723.12 8,661,423.63 115,517.73 2,957,650.84 2,543,515.70 40,000,000.00 213,451,831.02	2012 98,224,649.04 160,000.00 79,441,459.36 6,489,125.55 135,865,532.27 5,203,767.52
		325,384,533.74

		337,463,932.94 44,349,731.63 98,701,702.73 15,712,132.24 3,533,564.81
		499,761,064.35

		825,145,598.09

		60,000,000.00 10,364,179.25 38,148,903.58 1,075,684.00 109,191.50 16,112,899.77 735,876.91 –
		126,546,735.01

– 53 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Note XIII Non-current liabilities: Long-term borrowings Other non-current liabilities Total non-current liabilities Total liabilities Shareholders’ equity: Share capital Capital reserve Surplus reserve Undistributed profits Total shareholders’ equity TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY Net current assets Total assets less current liabilities	2013 40,000,000.00 11,910,000.00 51,910,000.00 265,361,831.02 224,100,000.00 98,283,776.53 46,153,350.13 235,882,094.95 604,419,221.61 869,781,052.63 12,792,871.26 656,329,221.61	2012 80,000,000.00 11,910,000.00
		91,910,000.00

		218,456,735.01

		224,100,000.00 98,283,776.53 41,898,314.28 242,406,772.27
		606,688,863.08

		825,145,598.09

		198,837,798.73

		698,598,863.08

– 54 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Income Statement

For the year ended 31 December 2013 (All amounts in Renminbi yuan unless otherwise stated)

ITEMS Note V I. Total operating income (XXIX) II. Total operating cost Including: Operating cost (XXIX) Taxes and surcharges (XXXI) Selling and distribution expenses (XXXII) General and administrative expenses (XXXIII) Financial expenses (XXXIV) Asset impairment losses (XXXVI) Share of profit of associates and jointly controlled entities (XXXV) Other investment income (XXXV) III. Operating profit Add: Non-operating income (XXXVII) Less: Non-operating expenses (XXXVIII) IV. Total profit Less: Income tax expenses (XLI) V. Net profit Net profit attributable to the shareholders of the Company Minority interests	2013 787,767,966.59 655,075,598.95	2012 737,689,688.95 569,556,451.04
Including: Operating cost (XXIX)	523,328,683.75 11,207,510.01 24,316,401.22 75,788,482.51 8,904,116.66 11,530,404.80	453,605,654.15 18,738,322.80 19,700,037.85 56,672,710.29 11,369,009.23 9,470,716.72
Taxes and surcharges (XXXI)
Selling and distribution expenses (XXXII)
General and administrative expenses (XXXIII)
Financial expenses (XXXIV)
Asset impairment losses (XXXVI)
Share of profit of associates and jointly controlled entities (XXXV) Other investment income (XXXV) Operating profit Add: Non-operating income (XXXVII) Less: Non-operating expenses (XXXVIII) Total profit Less: Income tax expenses (XLI) Net profit Net profit attributable to the shareholders of the Company Minority interests	– – 132,692,367.64 19,106,603.52 175,016.57 151,623,954.59 21,496,476.06 130,127,478.53 126,405,756.32 3,721,722.21	4,324,931.80 10,225,428.74
		182,683,598.45 24,559,920.80 403,687.36
		206,839,831.89 37,621,268.34
		169,218,563.55 167,927,630.71 1,290,932.84

– 55 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

ITEMS Note V VI. Other comprehensive income (XLIV) Items to be re-categorized into profit and loss when satisfied the stipulated conditions in the subsequent accounting period Converted difference in foreign currency statements Items not re-categorized into profit and loss in the subsequent accounting Period VII. Total comprehensive income Total comprehensive income attributable to the shareholders of the Company Total comprehensive income attributable to minority shareholders VIII. Earnings per share: (1) Basic earnings per share (XLIII) (2) Diluted earnings per share (XLIII) IX. Dividend (XLII)	2013 (132,748.50) (132,748.50) (132,748.50) – 129,994,730.03 126,273,007.82 3,721,722.21 0.564 0.564 44,820,000.00	2012 (959.95) (959.95) (959.95) – 169,217,603.60 167,926,670.76 1,290,932.84 0.749 0.749 22,410,000.00

– 56 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Income Statement of the Company

For the year ended 31 December 2013 (All amounts in Renminbi yuan unless otherwise stated)

ITEMS Note XIII I. Operating income (IV) Less: Operating cost (IV) Taxes and surcharges Selling and distribution expenses General and administrative expenses Financial expenses Asset impairment losses Share of profit of associates and jointly controlled entities (V) Other investment income (V) II. Operating profit Add: Non-operating income Less: Non-operating expenses III. Total profit Less: Income tax expenses IV. Net profit V. Total comprehensive income	2013 203,777,235.43 117,980,532.78 976,434.24 10,823,012.35 36,787,909.53 3,791,298.27 (2,053,936.89) – – 35,471,985.15 15,019,643.95 128,446.57 50,363,182.53 7,812,824.00 42,550,358.53 42,550,358.53	2012 223,484,400.12 111,043,228.43 1,998,706.51 6,321,863.11 34,941,843.23 6,958,284.57 (1,810,426.81) 4,324,931.80 10,225,428.74 78,581,261.62 17,287,368.67 159,525.79 95,709,104.50 17,220,766.11 78,488,338.39 78,488,338.39

– 57 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Cash Flow Statement

For the year ended 31 December 2013 (All amounts in Renminbi yuan unless otherwise stated)

ITEMS Note V I. Cash flows from operating activities Cash received from sales of goods or rendering of services Refund of taxes and surcharges Cash received relating to other operating activities (XLV).1 Sub-total of cash inflows from operating activities Cash paid for goods and services Cash paid to and on behalf of employees Payments of taxes changes Cash paid relating to other operating activities (XLV).2 Sub-total of cash outflows from operating activities Net cash flows from operating activities II. Cash flows from investing activities Cash received from disposal of investments Cash received from returns on investments Net cash received from disposal of fixed assets, intangible assets and other long-term assets Net cash received from disposal of subsidiaries and other operating entities Cash received relating to other investing activities (XLV).3 Sub-total of cash inflows from investing activities Cash paid to acquire fixed assets, intangible assets and other long-term assets Cash paid to acquire investments Net increase of pledged loans Net cash paid to acquire subsidiaries and other operating entities Cash paid relating to other investing activities Sub-total of cash outflows from investing activities Net cash flows from investing activities	2013 826,914,131.31 9,546,287.67 196,312,804.91 1,032,773,223.89 661,015,700.91 41,544,671.79 70,288,459.26 207,973,906.15 980,822,738.11 51,950,485.78 64,600,000.00 – 58,177.78 – – 64,658,177.78 120,401,501.97 – – – – 120,401,501.97 (55,743,324.19)	2012 812,326,078.60 10,842,839.22 194,432,378.86 1,017,601,296.68 501,429,917.72 41,312,338.98 88,152,255.78 209,093,581.52 839,988,094.00 177,613,202.68 64,600,000.00 680,733.33 1,359,602.93 – 6,133,000.00 72,773,336.26 172,117,737.87 25,400,000.00 – – – 197,517,737.87 (124,744,401.61)

– 58 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

ITEMS Note V III. Cash flows from financing activities Cash received from capital contributions Including: Cash received from minority shareholders investment by subsidiary Cash received from borrowings Sub-total of cash inflows from financing activities Cash repayments of borrowings Cash payments for interest expenses and distribution of dividends or profits Sub-total of cash outflows from financing activities Net cash flows from financing activities IV. Effect of foreign exchange rate changes on cash and cash equivalents V. Net increase in cash and cash equivalents Add: Cash and cash equivalents at beginning of period VI. Cash and cash equivalent at end of period	2013 8,000,000.00 8,000,000.00 390,000,000.00 398,000,000.00 196,750,000.00 58,233,168.19 254,983,168.19 143,016,831.81 (134,756.84) 139,089,236.56 389,224,229.07 528,313,465.63	2012 28,000,000.00 28,000,000.00 288,000,000.00 316,000,000.00 356,300,000.00 38,399,839.81 394,699,839.81 (78,699,839.81) 5,327.27 (25,825,711.47) 415,049,940.54 389,224,229.07

– 59 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Cash Flow Statement of the Company

For the year ended 31 December 2013 (All amounts in Renminbi yuan unless otherwise stated)

ITEMS Note XIII I. Cash flows from operating activities Cash received from sales of goods or rendering of services Refund of taxes and surcharges Cash received relating to other operating activities Sub-total of cash inflows from operating activities Cash paid for goods and services Cash paid to and on behalf of employees Payments of taxes and surcharges Cash paid relating to other operating activities Sub-total of cash outflows from operating activities Net cash flows from operating activities II. Cash flows from investing activities Cash received from disposal of investments Cash received from returns on investments Net cash received from disposal of fixed assets, intangible assets and other long-term assets Sub-total of cash inflows from investing activities Cash paid to acquire fixed assets, intangible assets and other long-term assets Cash paid to acquire investments Sub-total of cash outflows from investing activities Net cash flows from investing activities	2013 242,873,335.62 8,670,064.76 16,345,281.70 267,888,682.08 164,470,271.30 17,540,133.62 32,189,563.26 17,121,940.66 231,321,908.84 36,566,773.24 64,600,000.00 – 8,500.00 64,608,500.00 67,977,239.52 82,000,000.00 149,977,239.52 (85,368,739.52)	2012 323,336,129.16 9,917,003.02 39,478,657.12 372,731,789.30 131,170,761.16 18,384,362.95 37,293,480.52 47,213,757.05 234,062,361.68 138,669,427.62 64,600,000.00 680,733.33 1,309,802.93 66,590,536.26 99,357,978.46 65,400,000.00 164,757,978.46 (98,167,442.20)

– 60 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

ITEMS Note XIII III. Cash flows from financing activities Cash received from borrowings Sub-total of cash inflows from financing activities Cash repayments of borrowings Cash payments for interest expenses and distribution of dividends or profits Sub-total of cash outflows from financing activities Net cash flows from financing activities IV. Effect of foreign exchange rate changes on cash and cash equivalents V. Net increase in cash and cash equivalents Add: Cash and cash equivalents at beginning of period VI. Cash and cash equivalent at end of period	2013 120,000,000.00 120,000,000.00 60,000,000.00 49,036,505.58 109,036,505.58 10,963,494.42 – (37,838,471.86) 93,042,559.41 55,204,087.55	2012 190,000,000.00 190,000,000.00 180,300,000.00 29,478,154.79 209,778,154.79 (19,778,154.79) – 20,723,830.63 72,318,728.78 93,042,559.41

– 61 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

==> picture [408 x 631] intentionally omitted <==

----- Start of picture text -----

Total shareholders’ equity 963,885,554.95 963,885,554.95 93,174,730.03 130,127,478.53 (132,748.50) 129,994,730.03 8,000,000.00 8,000,000.00 (44,820,000.00) – (44,820,000.00) – – – 1,057,060,284.98
Minority interest 37,017,855.92 37,017,855.92 11,721,722.21 3,721,722.21 – 3,721,722.21 8,000,000.00 8,000,000.00 – – – – – – 48,739,578.13
Others (3,644,102.21) (3,644,102.21) (132,748.50) – (132,748.50) (132,748.50) – – – – – – – – (3,776,850.71)
Undistributed profits 564,885,873.01 564,885,873.01 77,330,720.47 126,405,756.32 – 126,405,756.32 – – (49,075,035.85) (4,255,035.85) (44,820,000.00) – – – 642,216,593.48
Provision for general risk – – – – – – – – – – – – – – –
2013
Surplus reserve 41,898,314.28 41,898,314.28 4,255,035.85 – – – – – 4,255,035.85 4,255,035.85 – – – – 46,153,350.13
Special reserve – – – – – – – – – – – – – – –
Attributable to the shareholders of the Company
Less: Treasury stock – – – – – – – – – – – – – – –
Capital reserve 99,627,613.95 99,627,613.95 – – – – – – – – – – – – 99,627,613.95
Share capital 224,100,000.00 224,100,000.00 – – – – – – – – – – – – 224,100,000.00
Net profits capital reduction 1. Capital contribution by shareholders 1. Appropriation to surplus reserves 2. Appropriation to shareholders
Closing balance of prior year Opening balance of current year (I) (II) Other comprehensive income Subtotal (1) and (2) (III) Shareholders contribution and (IV) Profit appropriation (V) Internal transfer of shareholders’ equity (VI) Special reserve (VII) Others
Consolidated Statement of Changes in Equity For the year ended 31 December 2013 (All amounts in Renminbi yuan unless otherwise stated) ITEMS I. II. III. Changes during the period IV. Closing balance of current period
----- End of picture text -----

– 62 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

				shareholders’	equity	792,449,357.85	792,449,357.85	171,436,197.10	169,218,563.55	(959.95)	169,217,603.60		28,000,000.00	28,000,000.00	(22,410,000.00)	–	(22,410,000.00)	–	–	–	(3,371,406.50)	963,885,554.95
				Minority	interest	7,726,923.08	7,726,923.08	29,290,932.84	1,290,932.84	–	1,290,932.84		28,000,000.00	28,000,000.00	–	–	–	–	–	–	–	37,017,855.92
					Others	(3,643,142.26)	(3,643,142.26)	(959.95)	–	(959.95)	(959.95)		–	–	–	–	–	–	–	–	–	(3,644,102.21)
				Undistributed	profits	427,217,076.14	427,217,076.14	137,668,796.87	167,927,630.71	–	167,927,630.71		–	–	(30,258,833.84)	(7,848,833.84)	(22,410,000.00)	–	–	–	–	564,885,873.01
				Provision for	general risk	–	–	–	–	–	–		–	–	–	–	–	–	–	–	–	–
			2012 Attributable to the shareholders of the Company	Special Surplus	reserve reserve	– 34,049,480.44	– 34,049,480.44	– 7,848,833.84	– –	– –	– –		– –	– –	– 7,848,833.84	– 7,848,833.84	– –	– –	– –	– –	– –	– 41,898,314.28
Consolidated Statement of Changes in Equity	For the year ended 31 December 2012	(All amounts in Renminbi yuan unless otherwise stated)		Capital Less: Treasury	ITEMS Share capital reserve stock	I. Closing balance of prior year 224,100,000.00 102,999,020.45 –	II. Opening balance of current year 224,100,000.00 102,999,020.45 –	III. Changes during the period – (3,371,406.50) –	(I) Net profits – – –	(II) Other comprehensive income – – –	Subtotal (1) and (2) – – –	(III) Shareholders contribution and	capital reduction – – –	1. Capital contribution by shareholders – – –	(IV) Profit appropriation – – –	1. Appropriation to surplus reserves – – –	2. Appropriation to shareholders – – –	3. Others – – –	(V) Internal transfer of shareholders’ equity – – –	(V) Special reserve – – –	(VII) Others – (3,371,406.50) –	IV. Closing balance of current period 224,100,000.00 99,627,613.95 –

– 63 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Total Surplus Provision for Undistributed shareholders’ reserve general risk profits equity 41,898,314.28 – 242,406,772.27 606,688,863.08	Total Surplus Provision for Undistributed shareholders’ reserve general risk profits equity 41,898,314.28 – 242,406,772.27 606,688,863.08	41,898,314.28 – 242,406,772.27 606,688,863.08	4,255,035.85 – (6,524,677.32) (2,269,641.47)	– – 42,550,358.53 42,550,358.53	– – – –	– – 42,550,358.53 42,550,358.53	– – – –	4,255,035.85 – (49,075,035.85) (44,820,000.00)	4,255,035.85 – (4,255,035.85) –	– – (44,820,000.00) (44,820,000.00)	– – – –	– – – –	– – – –	– – – –	– 46,153,350.13 – 235,882,094.95 604,419,221.61
2013 Special reserve	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–
Capital Less: Share capital reserve Treasury stock 224,100,000.00 98,283,776.53 –		224,100,000.00 98,283,776.53 –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	– – –	224,100,000.00 98,283,776.53 –
ITEMS	I. Closing balance of prior year	II. Opening balance of current year	III. Changes during the period	(I) Net profits	(II) Other comprehensive income	Subtotal (1) and (2)	(III) Shareholders contribution and capital reduction	(IV) Profit appropriation	1. Appropriation to surplus reserves	2. Appropriation to shareholders	3. Others	(V) Internal transfer of shareholders’ equity	(VI) Special reserve	(VII) Others	IV. Closing balance of current period

– 64 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

	shareholders’	equity	553,981,931.19	553,981,931.19	52,706,931.89	78,488,338.39	–	78,488,338.39	–	(22,410,000.00)	–	(22,410,000.00)	–	–	–	(3,371,406.50)	606,688,863.08
	Undistributed	profits	194,177,267.22	194,177,267.22	48,229,504.55	78,488,338.39	–	78,488,338.39	–	(30,258,833.84)	(7,848,833.84)	(22,410,000.00)	–	–	–	–	242,406,772.27
	Provision for	general risk	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–
	Surplus	reserve	34,049,480.44	34,049,480.44	7,848,833.84	–	–	–	–	7,848,833.84	7,848,833.84	–	–	–	–	–	41,898,314.28
2012	Special	reserve	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–
	Less:	Treasury stock	–	–	–	–	–	–	–	–	–	–	–	–	–	–	–
	Capital	reserve	101,655,183.03	101,655,183.03	(3,371,406.50)	–	–	–	–	–	–	–	–	–	–	(3,371,406.50)	98,283,776.53
		Share capital	224,100,000.00	224,100,000.00	–	–	–	–	–	–	–	–	–	–	–	–	224,100,000.00
		ITEMS	I. Closing balance of prior year	II. Opening balance of current year	III. Changes during the period	(I) Net profits	(II) Other comprehensive income	Subtotal (1) and (2)	(III) Shareholders contribution and capital reduction	(IV) Profit appropriation	1. Appropriation to surplus reserves	2. Appropriation to shareholders	3. Others	(V) Internal transfer of shareholders’ equity	(VI) Special reserve	(VII) Others	IV. Closing balance of current period

– 65 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes to the Financial Statements

For the year ended 31 December 2013

I. CORPORATE INFORMATION

(I) General information

南京三寶科技股份有限公司 (Nanjing Sample Technology Company Limited*) (the “Company”, together with its subsidiaries, the “Group”) was established in the People’s Republic of China (the “PRC”) and was approved to be reorganised into a joint stock limited company on 28 December 2000.

The shares of the Company were listed on the Growth Enterprise Market (the “GEM”) of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) on 9 June 2004. On 22 November 2010, the Company’s H shares were successfully migrated from the GEM to the mainboard of the Stock Exchange (the “Main Board”).

The business registration number of the Company is 320100400023227 and the legal representative of the Company is Sha Min.

The addresses of the registered office and principal place of business of the Company are located at No. 10 Maqun Avenue, Qixia District, Nanjing City.

(II) The nature of the industry

The Group is engaged in the information technology application (IT application) service industry.

(III) Scope of business

Computer networks, industrial automation engineering design, installation; electronic products, computer development, manufacture, sale of self-production products, system integration; computer technology consulting and information services; research and development of ITS-based basic information collection technology and equipment.

(IV) Principal business

The Group is principally engaged in the provision of visual identification and RFID technologies-based full solutions to intelligent traffic, customs logistics and health safely and other application areas.

(V) Basic organizational structure of the Company

The Company has established Shareholders’ General Meeting, the Board of Directors and the Supervisory Committee. The Company has: Investment Department, Finance Department, Software Development Department, Hardware Development Department, Planning and Design Department, Engineering Technology Research Institute, Technology Management Department, Quality Management Department, Administration and Human Resources Department, Procurement Department, Legal Affairs Department, Traffic Monitoring and Control Department, Customs Logistics Monitoring Department, Office of the President and other functional departments.

– 66 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

As of 31 December 2013, the Group has ten wholly-owned and controlled subsidiaries, namely: 江蘇智運科技發展有限公司 (Jiangsu Intellitrans Company Limited), 江蘇瑞福智能科技有限公司 (Jiangsu Raifu Intelligent Tech. Co., Ltd.), 南京三寶物流科技有限公司 (Nanjing Sample Logistic Company Limited), 南京物聯網研究院發展有限公司 (Nanjing Wu Lian Wang Yan Jiu Yuan Development Co., Limited), Sample Technology (H.K.) Co., Limited, Federal International Enterprise Limited and 南京城市智能交通有限公司 (Nanjing City Intelligent Transportation Co., Ltd.), 江蘇三寶信息技術有限公司 (Jiangsu Sample Information Technology Co., Ltd.), 徐州三寶智能科技發展有限公司 (Xuzhou Sample Intelligent Technology Development Co., Ltd.), 江蘇跨境電子商務服務有限公司 (Jiangsu Cross-border e-Commerce Services Co., Ltd.).

II. SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND PRIOR PERIOD ERRORS

(I) Basis of preparation of financial statements

The Group’s financial statements have been prepared on a going concern basis and based on the actual transactions and matters incurred; in accordance with the China Accounting Standards for Business Enterprises, Information Disclosure Rule No. 15 of Public Offerings CompanyFinancial Reporting General Provisions (2010 Amendments) issued by CSRC and the applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange and by the Companies Ordinance (“Hong Kong Companies Ordinance”); and the accounting policies and estimates of Notes II (SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND PRIOR PERIOD ERRORS).

Accounting Standards and amendments issued by the Ministry of Finance in 2014 have been early adopted in this financial statements of the Group, relevant details can be referred to Note II (XXIII).1.

(II) Statement of compliance of accounting standards for business enterprises

The financial statements have been prepared in conformity with the China Accounting Standards for Business Enterprises, and present truly and completely the consolidated and the Company’s financial position as at 31 December 2013, and the consolidation and the Company’s operating results and cash flow and other related information during the year then ended.

(III) Accounting period

The accounting period of the Group is from 1 January to 31 December of each calendar year.

(IV) Reporting currency

The reporting currency of the Company is Renminbi (“RMB”). The reporting currency for the overseas businesses is the currency of the place in which they operate.

The currency used by the Group in the preparation of the financial statements is RMB.

– 67 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(V) Accounting treatments for business combinations involving entities under and not under common control

1. Business combinations involving entities under common control

The assets and liabilities acquired by the Group in business combination shall be measured at the carrying value of the acquiree on the date of combination. If there is an inconsistency between the accounting policies adopted by the acquirees and those of the Company, the adjustment will be made by the Group according to the Group’s accounting policies at the date of the combination, and the adjusted carrying value will be recognised on this basis.

The difference between the carrying amount of the net assets obtained and the carrying amount of the consideration paid for the combination (or total nominal value of the issued shares) is adjusted to capital premium in capital reserve. If the capital premium in capital reserve is not sufficient to absorb the difference, the remaining balance is adjusted against retained earnings.

The direct expenses incurred in business combination, including the audit fee, appraisal fee and legal service fee paid by the Group in connection with business combination shall be charged to the profit or loss when incurred.

The administrative charges and commission incurred upon issuance of equity securities in business combination shall be offset against the premium income from equity securities. If such amount cannot be offset by premium income, it shall be adjusted in retained earnings.

2. Business combinations involving entities not under common control

The assets paid and liabilities incurred or committed as a consideration of business combination by the Group were measured at fair value on the date of acquisition and the difference between the fair value and its carrying value shall be charged to the profit or loss for the period.

The Group shall allocate the cost of combination on the date of acquisition and recognize the fair value of the identifiable assets, liabilities and contingent liabilities acquired from the acquiree.

Where the cost of combination is higher than the fair value of the identifiable net assets acquired from the acquiree in business combination, the Group shall recognize such difference as goodwill; where the cost of combination is less than the fair value of the identifiable net assets acquired from the acquiree in business combination, such difference shall be charged to the profit or loss for the period after review.

– 68 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

As for the assets other than intangible assets acquired from the acquiree in a business combination (not limited to the assets which have been recognized by the acquiree), if the economic benefits brought by them are likely to flow into the Group and their fair values can be measured reliably, they shall be separately recognized and measured in light of their fair values; if the fair value of any intangible asset can be measured reliably, it shall be separately recognized as an intangible asset and shall be measured in light of its fair value; As for the liabilities other than contingent liabilities acquired from the acquiree, if the performance of the relevant obligations are likely to result in any out-flow of economic benefits from the Group, and their fair values can be measured reliably, they shall be separately recognized and measured in light of their fair values; As for the contingent liabilities of the acquiree obtained in a combination, if their fair values can be measured reliably, they shall separately recognized as liabilities and shall be measured in light of their fair values.

In a business combination, the acquiree’s deductible temporary differences obtained by the Group are not recognised if the deductible temporary differences do not satisfy the criteria for recognition of deferred tax assets on the date of acquisition. The Company recognises the relevant deferred tax assets and reduces goodwill accordingly if within 12 months of the acquisition date, new or updated information indicates that on the date of combination, the obtained deferred tax benefit is expected to be realised in future periods. If the goodwill is insufficient to be deducted, any remaining deferred tax benefits shall be recognised in profit or loss for the current period. Save as above, all other acquired deferred tax assets recognised under business combination shall be charged to profit or loss for the current period.

For business combinations involving entities not under common control, the agency fee paid by the acquirer such as audit, legal service and evaluation consultation and other management fees shall be recognised as the profit or loss in the period when the costs are incurred; the transaction costs for the equity securities or debt securities issued by the acquirer as the combination consideration shall be included in the amount of initial recognition of the equity securities or debt securities.

(VI) Preparation of consolidated financial statements

The scope of consolidation of the consolidated financial statements of the Group is based on controlling interests, and all the subsidiaries are included in the consolidated financial statements.

The subsidiaries that are within the scope of the consolidation shall have the same accounting policies and the accounting periods with those of the Company. In preparing the consolidated financial statements, where the accounting policies and the accounting periods are inconsistent between the Company and subsidiaries, the financial statements of subsidiaries are adjusted in accordance with the accounting policies and accounting period of the Company. For subsidiaries acquired from a business combination involving entities not under common control, the individual financial statements of the subsidiaries are adjusted based on the fair value of the identifiable net assets on the date of acquisition. Based on the financial statements of the Company and its subsidiaries, the consolidated financial statements are prepared by the Company according to other relevant information and after the long-term equity investments in the subsidiaries are adjusted in accordance with the equity method.

When consolidating the financial statements, the effects of intra-transactions between the Company and its subsidiaries, and among subsidiaries on the consolidated balance sheet, the consolidated income statement, the consolidated cash flow statement and the consolidated statement of changes in equity shall be offset.

– 69 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Profit or loss attributable to minority shareholders of a subsidiary is presented separately in the consolidated balance sheet within shareholders’ equity and in the consolidated income statement below the net profit line item. Where losses attributable to the minority shareholders of a subsidiary exceed the minority shareholders’ interest entitled in the shareholders’ equity of the subsidiary at the beginning of the period, the excess is allocated against the minority shareholders interest.

For acquisition of subsidiaries due to business combination involving entities under common control during the reporting period, the opening balance of the consolidated balance sheet shall be adjusted; the revenue, expense and profit of such subsidiaries from the beginning to the end of the reporting period when the merger occurs are included in the consolidated income statement; the cash flows of such subsidiaries from the beginning to the end of the reporting period when the merger occurs are included in the consolidated cash flow statement, and the comparative figures of the financial statements should be adjusted simultaneously as if the consolidated reporting entity had been in existence since prior periods.

For acquisition of subsidiaries due to business combination involving entities not under common control during the reporting period, the opening balance of consolidated balance sheet needs not be adjusted; the revenue, expense and profit of such subsidiaries from the date of acquisition to the end of the reporting period are included in the consolidated income statement; the cash flows of such subsidiaries from the date of acquisition to the end of the reporting period are included in the consolidated cash flow statement. In a business combination involving entities not under common control achieved in stages, the Company remeasures its previously held equity interest in the acquiree on the acquisition date in light of the fair value of such equity interest on the date of acquisition. The difference between the fair value and the carrying value is recognised as investment income for the period. If other comprehensive income was recognised regarding the equity interest previously held in the acquiree before the acquisition date, the relevant other comprehensive income is transferred to investment income in the period in which the acquisition occurs.

For disposal of subsidiaries during the reporting period, the revenue, expense and profit of such subsidiaries from the beginning of the period to the date of disposal are included in the consolidated income statement; the cash flows of such subsidiaries from the beginning of the period to the date of disposal are included in the consolidated cash flow statement. Where control of a subsidiary is lost due to partial disposal of the equity investment held in a subsidiary, or any other reasons, the remaining equity investment is remeasured to fair value at the date in which control is lost. The sum of consideration received from disposal of equity investment and the fair value of the remaining equity investment, net of the Company’s previous share of the subsidiary’s net assets recorded from the acquisition date, is recognised in investment income in the period in which control is lost. Other comprehensive income related to the previous equity investment in the subsidiary, is transferred to investment income when control is lost.

Where the Company acquired a minority interest, the difference between the newly acquired long-term equity investments and the newly acquired share of the subsidiary’s identifiable net assets is adjusted to the capital reserve within the capital premium in the consolidated balance sheet. Where the Company partially disposed an investment of a subsidiary that do not result in a loss of control, the difference between the proceeds and the corresponding share of the net assets of the subsidiary is adjusted to the capital reserve within the capital premium in the consolidated balance sheet. If the capital premium of the capital reserve is insufficient, any excess is adjusted to retained profits.

– 70 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(VII) Determination of cash and cash equivalents

In preparing the cash flow statement, the cash on hand and deposits that are available for payment at any time of the Group are recognised as cash. The short-term (due within 3 months of the date of purchase) and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of value change are recognised as cash equivalents.

(VIII) Foreign currency transactions

1. Foreign currency transactions

Foreign currency transactions shall be translated into RMB at the spot exchange rate on the day when the transactions occurred.

Foreign currency monetary items shall be translated using the spot exchange rate at the balance sheet date. The resulting exchange differences are recognised in profit or loss for the current period, except for those differences related to the principal and interest on a specific-purpose borrowing denominated in foreign currency for acquisitions, construction or production of the qualified assets, which should be capitalised as cost of the assets. Foreign currency non-monetary items measured in historic cost shall still be translated using the spot exchange rate when the transaction occurred, and do not change the original amount. Foreign currency non-momentary items measured in fair value shall be translated using the spot exchange rate at the date when the fair value was determined. Exchange differences arising from the differences of exchange rate are included in profit or loss or capital reserve for the current period.

2. Translation of foreign currency financial statements

All assets and liabilities items in balance sheet are translated based on spot exchange rate on the balance sheet date; shareholders’ equity items other than “undistributed profit” are translated at a spot exchange rate when accrued. Revenue and expense items in the income statement are translated at a spot exchange rate at the transaction occurrence date. The translation difference of foreign currency financial statements after the above translation, is stated as a separate item under the “shareholders’ equity” item in balance sheet.

For disposal of overseas operation, the translation difference as stated in the items under shareholders’ equity in balance sheet and in the foreign currency financial statements relating to overseas operation, is accounted for in the profit and loss account in the current period; for partial disposal of overseas operation, the translation difference for the foreign currency financial statements relating to the disposed overseas operation is proportionally calculated, and is accounted for in the profit and loss account in the current period.

– 71 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(IX) Financial instruments

Financial instruments include financial assets, financial liabilities and equity instruments.

1. Classification of the financial instruments

According to the purposes of acquisition and holding of financial assets and of the financial liabilities committed, the management classifies the financial instruments as: financial assets or financial liabilities carried at fair value through profit or loss for the current period, including financial assets or liabilities for trading (financial assets or financial liabilities directly designated as carried at fair value through profit or loss for the current period); held-to-maturity investments; accounts receivable; available-for-sale financial assets and other financial liabilities.

2. Recognition and measurement of financial instruments

(1) Financial assets or financial liabilities carried at fair value through profit or loss for the current period

When obtained, the financial assets or financial liabilities shall be initially measured at their fair value (except for cash dividends which are declared but not distributed or interests on bonds of which the maturity interest is not drawn), its transaction costs are included in the profit or loss for the period.

The interest or cash dividend which was gained in the period are recognized as investment income. At the balance sheet date, the variation in the fair value of the financial asset or financial liability shall be included in the profit or loss for the period.

When the said financial assets or financial liabilities are on disposal, the difference between the fair value and the amount of initial recognition shall be recognized as investment income; meanwhile, the profits and losses arising from the variation in fair value shall be adjusted.

(2) Held-to-maturity investments

Held-to-maturity investments are initially measured at fair value when obtained (except for interests on bonds of which the maturity interest is not drawn) plus relevant transaction costs.

Interest income is calculated according to the amortised cost and effective interest rate and recorded into investment income. The effective interest rate, ascertained when initially obtained, shall remain unchanged within the predicted term of existence or within a shorter applicable term.

When disposed, the difference between the consideration obtained and the carrying amount of the investment shall be recorded into investment income.

– 72 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(3) Accounts receivable

The receivables that are formed in sale of goods or rendering of services to external parties, and the receivables, except for the debt instruments quoted in an active market, due to the Group from other entities, including accounts receivable, other receivables, notes receivable, prepayments, etc., are initially recognised at the consideration of the contract or agreement to be received from the buyers. Accounts receivable that are of a financing nature are initially recognised at their present value.

Upon recovery or disposal of accounts receivable, the difference between the consideration obtained and the carrying amount is charged to profit or loss for the period.

(4) Available-for-sale financial assets

Available-for-sale financial assets are initially measured at fair value when obtained (except for cash dividends which are declared but not distributed or interests on bonds of which the maturity interest is not drawn) plus relevant transaction costs.

The interests or cash dividends to be obtained during the period the availablefor-sale financial assets are held shall be recorded into investment income. By the end of the reporting period, financial assets are measured at fair value, and the change in fair value shall be recorded into capital reserves (other capital reserves).

When disposed of, the difference between the consideration obtained and the carrying amount of the financial assets shall be recorded into investment income; meanwhile, the corresponding portion of accumulated change in fair value previously recorded into shareholders’ equity shall be transferred to profit or loss.

(5) Other financial liabilities

Other financial liabilities are initially measured at fair value plus relevant transaction costs, and subsequently measured at amortised cost.

3. Recognition and measurement of transfer of financial assets

A financial asset shall be derecognised while the Group has transferred nearly all the risks and rewards related to the ownership of the financial asset to the transferee, and it shall not be derecognised if the Group has retained nearly all the risks and rewards related to the ownerships of the financial asset.

The substance-over-form principle shall be adopted while making a judgment on whether the transfer of financial assets satisfies the above conditions for termination of recognition. The transfer of financial assets could be classified into entire transfer and partial transfer. If the transfer of an entire financial asset satisfies the conditions for termination of recognition, the difference between the two amounts below shall be recorded into profit or loss for the period:

(1) The carrying amount of the financial asset transferred;
(2) The consideration received as a result of the transfer, plus the accumulative amount of the change in fair value previously recorded into the shareholders’ equities (in cases where the transferred financial asset is available-for-sale financial asset).

– 73 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

If the partial transfer of financial assets satisfies the conditions for termination of recognition, the overall carrying amount of the transferred financial asset shall be apportioned according to their respective relative fair value between the portion of derecognised part and the remaining part, and the difference between the two amounts below shall be recorded into profit or loss for the current period:

(1) The carrying amount of the derecognised portion;
(2) The sum of consideration of the derecognised portion and the corresponding portion of accumulated change in fair value previously recorded into shareholders’ equity (in cases where the transferred financial assets are available-for-sale financial assets).

Financial assets will still be recognised if they fail to satisfy the conditions for termination of recognition, with the consideration received recognised as a financial liability.

4. Conditions for derecognition of financial liabilities

When the current obligation under a financial liability is completely or partially discharged, the whole or relevant portion of the liability is derecognized; an agreement is entered between the Group and a creditor to replace the original financial liabilities with new financial liabilities with substantially different terms, derecognize the original financial liabilities as well as recognize the new financial liabilities.

If all or part of the contract terms of the original financial liabilities are substantially amended, the original financial liabilities will be derecognized in full or in part, and the financial liabilities whose terms have been amended shall be recognised as a new financial liability.

When financial liabilities is derecognized in full or in part, the difference between the carrying amount of the financial liabilities derecognized and the consideration paid (including transferred non-cash assets or new financial liability) is recognized in profit or loss for the current period.

Where the Group repurchases part of its financial liabilities, the carrying amount of such financial liabilities will be allocated according to the relative fair value between the continued recognised part and derecognised part on the repurchase date. The difference between the carrying amount of the financial liabilities derecognized and the consideration paid (including transferred non-cash assets or new financial liability) is recognized in profit or loss for the current period.

5. Method of determining the fair values of financial assets and liabilities

All the financial assets and liabilities measured at fair value of the Group refer to the quotation in an active market at the end of the period.

– 74 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

6. Impairment provision of financial assets (excluding accounts receivable)

The Group shall assess the carrying amount of financial assets other than those at fair value through profit or loss at the balance sheet date. If there is objective evidence that the financial asset is impaired, the Company shall make provision of any impairment.

(1) Impairment provision for available-for-sale financial asset:

While the fair value of available-for-sale financial asset falls significantly, or judged by the Company that descending trend is not temporary after taking into account related data comprehensively at the end of the period, they will be recognised as impaired, the cumulative loss arising from decline in fair value that had been recognised directly in the shareholders’ equity shall be removed from the shareholders’ equity and recognised as impairment or loss.

If, after an impairment loss has been recognised on an available-for-sale debt instrument, the fair value of the debt instrument increases in a subsequent period and the increase can be objectively related to an event occurring after the impairment loss was recognised, the impairment loss shall be reversed, with the amount of the reversal recognised in the profit or loss for the current period.

Impairment losses recognised for an investment in an available-for-sale equity instrument shall not be reversed through profit or loss.

(2) Impairment provision for held-to-maturity investments:

The measurement of the impairment loss for held-to-maturity investments shall be treated with reference to that for the accounts receivable.

(X) Accounts receivable

1 Accounts receivable that are individually significant and subject to separate provision

Individually significant accounts receivable: the amount of accounts receivable are individually more than RMB10 million (including RMB10 million) and other receivables are individually more than RMB5 million (including RMB5 million).

Individually significant accounts receivable are subject to separate impairment test, and if there are objective evidence that they are impaired, the impairment loss and the provision for bad debts are determined based on the amount of the present value of the future cash flows expected to be derived from the receivables below the carrying amount. Accounts receivable which are not impaired according to the separate impairment test, shall be categorised into the corresponding groups for provision of bad debts.

– 75 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2 Accounts receivable that are subject to provision by groups

Basis for determination of groups is as follow:

Group 1 Accounts receivable due from governments Group 2 Accounts receivable due from non-governments Group 3 Accounts receivable within the scope of combination Group 4 Retention monies receivable Group 5 Other receivables

Methods for provision of bad debts by groups

Group 1 Discounting method Group 2 Aging analysis method Group 3 No provisions are made Group 4 No provisions are made Group 5 Aging analysis method

Where aging analysis method is used for provision of bad debts for groups:

	Provision ratios	Provision ratios
	for accounts	for other
Aging	receivable (%)	receivables (%)
Within 1 year (including 1 year)	3	5
1 to 2 years	8	10
2 to 3 years	30	50
Over 3 years	100	100

Accounting method is used for provision of bad debts for groups which are accounts receivable due from governments. The customer groups of governments refer to the customs, public security and traffic departments of the PRC government. For these customer groups , according to historical information, the average terms of credit is 3 to 5 years, and thus their liabilities are discounted at the interest rate of the PRC government bond in the same period to calculate the recoverable amount. Comparison will be made between the discounted value and the carrying amount. Provision will be made for bad debts if there is any impairment.

3 Accounts receivable which are individually insignificant but subject to separate provision

For individually insignificant accounts receivable, if there is objective evidence that the receivables are impaired at the end of the period, the impairment loss and the provision for bad debts are determined based on the amount of the present value of the future cash flows expected to be derived from the receivables below the carrying amount.

At the end of the period, notes receivable and prepayments which are not classified into groups with similar credit risks characteristics are subject to separate impairment test. If there is objective evidence that the receivables are impaired, the impairment loss and the provision for bad debts are determined based on the amount of the present value of the future cash flows expected to be derived from the receivables below the carrying amount. If there is no impairment identified according to the impairment test, no provision for bad debts shall be recognised.

– 76 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(XI) Inventories

1. Classification of inventories

Inventories include goods in transit, raw materials, circulating materials, commodity stocks and goods in processing contract and assets formed by construction contracts, etc.

2. Cost of inventories

Cost of inventories is determined using the weighted average method.

3. Basis for the determination of net realisable value and the method of provisions for impairment of inventories

At the end of the period, after a thorough inspection of the inventories, provision for decline in value of inventories will be made and adjusted at the lower of the cost and the net realizable value.

Net realisable value of held-for-sale commodity stocks, such as goods-in-stock, and held-for-sale raw materials, during the normal course of production and operation, shall be determined by their estimated sales less the related selling expenses and taxes; the net realizable value of material inventories, which need to be processed, during the normal course of production and operation, shall be determined by the amount after deducting the estimated cost of completion, estimated selling expenses and relevant taxes from the estimated selling price of finished goods; the net realizable value of inventories held for execution of sales contracts or labor contracts shall be calculated on the ground of the contracted price. If an enterprise holds more inventories than the quantity stipulated in the sales contract, the net realizable value of the exceeding part shall be calculated on the ground of general selling price.

Decline in value of inventories is made on an item-by-item basis at the end of the period. For large quantity and low value items of inventories, provision may be made based on categories of inventories; for items of inventories relating to a product line that is produced and marketed in the same geographical area and with the same or similar end uses or purposes, which cannot be practicable evaluated separately from other items in that product line, provision for decline in value of inventories may be determined on an aggregate basis.

Should the factors causing any write-down of the inventories do not exist anymore, the amount of write-down will be recovered and be reversed from the provision for diminution in value of inventories that has been made. The reversed amount will be included in the current profits and losses.

Unless there is evidence clearly shows that abnormality in market price exists as of the balance sheet date, the net realisable value of inventories is determined based on the market price as of the balance sheet date.

– 77 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. Inventory system

The perpetual inventory system is adopted.

5. Amortisation of low-value consumables and packaging materials

Low-value consumables and packaging materials are amortised using the immediate write-off method.

(XII) Long-term equity investments

1. Determination of cost of investment

(1) Long-term equity investments formed through business combination of entities

For business combinations involving entities under common control: where the Group pays cash, transfers non-cash assets, bear debts or issue equity securities as consideration of combinations, the initial investment cost of long-term equity investments are the share with reference to the book value of the shareholders’ equity of the acquiree on the date of combinations. Capital premium within the capital reserve is adjusted by differences between initial investment cost of long-term equity investments and the considerations paid; amounts that cannot be sufficiently released by the capital premium in the capital reserve serve the purpose of adjusting retained earnings. The direct expenses incurred in business combination, including the audit fee, appraisal fee and legal service fee paid in connection with business combination shall be charged to the profit or loss for the current period when incurred.

Business combinations involving entities not under common control: the cost of the combination ascertained on the date of acquisition shall be taken as the initial investment cost of the long-term equity investments. The cost of a business combination is the aggregate of the fair values, on the date of acquisition, of assets given, liabilities incurred or assumed, and equity securities issued by the acquirer to be paid by the acquirer, in exchange for control of the acquire. The agency fee such as audit, legal service and evaluation consultation and other management fees incurred by the acquirer for the business combination shall be charged to the profit or loss for the period when incurred. As equity or bond securities are issued by the acquirer as consideration, any attributable transaction cost is included in their initial costs. When the business combination is achieved in stages through a number of exchange transactions, the aggregate of the book value of the previously held equity interest in the acquiree before the acquisition date and the new investment cost on the date of acquisition, shall be taken as the initial investment cost of the long-term equity investments. Where the Group regards the contingent consideration agreed in the combination agreement as part of the consideration of the transfer in business combinations, such contingent consideration shall be included in the cost of business combinations at its fair value on the date of acquisition.

– 78 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(2) Long-term equity investments acquired by other means

The initial cost of investment of a long-term equity investment obtained by the Company by cash payment shall be the purchase cost which is actually paid.

The initial cost of investment of a long-term equity investment obtained by the Company by means of issuance of equity securities shall be the fair value of the equity securities issued.

The initial cost of investment of a long-term equity investment contributed by the investors shall be the value stipulated in the investment contract or agreement (except for cash dividends or profits which are declared but not distributed) except for cases where the value stipulated in the contract or agreement is not fair.

If the non-monetary assets transaction is commercial in nature and the fair value of the assets received or surrendered can be reliably measured, the initial cost of investment of a long-term equity investment received the non-monetary assets transaction, shall be determined on the basis of the fair value of the assets surrendered, unless there are concrete evidence that the fair value of the assets received is more reliable; For non-monetary assets transaction which does not meet the above conditions, the initial cost of investment of a long-term equity investment received shall be the book value of the assets surrendered and the relevant taxes and expenses payable.

The initial cost of investment of a long-term equity investment obtained by the Company through debt restructurings shall be ascertained based on their fair value.

2. Subsequent measurement and recognition of profit or loss

(1) Subsequent measurement

Long-term equity investment in subsidiaries of the Company is accounted for by cost method, subject to adjustment pursuant to equity method during preparation of the consolidated financial statement.

Cost method is used to account for a long-term equity investment where the investor does not have joint control or significant influence over the investee, and the investment is not quoted in an active market and its fair value cannot be reliably measured.

Long-term equity investments with joint control or significant influence on the investee are accounted for using equity method. Where the initial investment cost of a long-term equity investment exceeds the investor’s interest in the fair value of the investee’s identifiable net assets at the acquisition date, no adjustment shall be made to the initial investment cost; where the initial investment cost is less than the investor’s interest in the fair value of the investee’s identifiable net assets at the acquisition date, the difference shall be charged to profit or loss for the current period.

Treatment of the changes in shareholders’ equity other than the share of the investee’s net profit and loss: As for the changes in shareholders’ equity other than the share of the investee’s net profit and loss, the Company shall calculate its proportion, provided that the Company’s proportion of shareholding in the investee remains unchanged, adjust the book value of the long-term equity investment and increase or decrease the capital reserve (other capital reserve).

– 79 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(2) Recognition of profit or loss

Under the cost method, except for the actual consideration paid for the acquisition of investment or the declared but not yet distributed cash dividends or profits which are included in the consideration, investment gains is recognised as the Company’ shares of the cash dividends or profits declared by the investee.

Under the equity method, on the basis of the carrying amount of net profits of the investees, the following will be considered: Where the accounting policies and accounting periods of the investees are inconsistent with those adopted by the Company, the financial statements of the investees shall be adjusted according to the Company’s accounting policies and accounting periods; the effects of the amount of depletion or amortization or the relevant assets impairment provision provided based on the fair values of fixed assets or intangible assets of the investees when acquiring the investment; appropriate adjustments are made to the matters, such as offsetting the unrealized inter-transactions occurred between the Company and associates and jointly controlled entities, the Company’s share of net profits or losses in the investees shall be recognised.

In recognising the Company’s share of losses incurred by the investees, treatment shall be made in the following order: First, to reduce the carrying amount of the long-term equity investment. Second, where the carrying amount of the longterm equity investment is not sufficient to reduce, the investment loss shall continue to be recognised to the extent of the carrying amount of other long-term equities that in substance constitute the net investment in the investees, and reduce the carrying amount of long-term receivables and other items. Finally, after the above treatments, where the enterprise still bears additional obligations as stipulated in the investment contract or agreement, the expected liabilities shall be recognised based on the obligations expected to be undertaken, and charged to the investment loss for the current period. Where the investees realize profits in subsequent periods, after deducting its share of unrecognized losses, the Company shall treat in a reverse order with the above: write down the carrying amount of expected liabilities expected, restore the carrying amount of other long-term equities that in substance constitute the net investment in the investees and long-term equity investment, and recognize investment income simultaneously.

During the period the investments are held, where the investees was able to provide consolidated financial statements, accounting shall be made based on the net profits or changes in other equities in the consolidated financial statements.

3. Basis for determination of joint control and significant influence over the investees

Joint control is the contractually agreed sharing of control over an economic activity, and exists only when the significant financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control. Where the investor can jointly control over the investee with other parties, the investee is joint venture of the investor and the said parties.

Significant influence refers to the power to participate in making decisions on the financial and operating policies of an enterprise, but not the power to control, or jointly control, the formulation of such policies with other parties. Where the investor can exercise significant influence over the investee, the investee is an associate of the investor.

– 80 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. Impairment test method and impairment provision

Where a long-term equity investment is of below significant influence and is not quoted in an active market and its fair value cannot be reliably measured, its impairment loss shall be determined based on the difference between its carrying amount and the present value determined by discounting its future cash flows at a the prevailing market yield for similar financial assets.

For other long-term equity investments for which there are any indicators of impairment other than the goodwill arising from the business combinations, if the results of the measurement of the recoverable amount indicate the recoverable amount of such long-term equity investment is lower than its carrying amount, such difference shall be recognised as impairment loss.

Once the impairment loss for the long-term equity investment is recognised, it shall not be reversed.

(XIII) Fixed assets

1. Conditions for recognition of fixed assets

Fixed assets are tangible assets that are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and have a useful life of more than one accounting year. Fixed asset is recognised when it meets the following conditions:

(1) it is probable that the economic benefits associated with the fixed asset will flow to the enterprise;
(2) and its cost can be reliably measured.

2. Method for depreciation of different fixed assets

Fixed assets are depreciated by categories using the straight-line method, and the annual depreciation rates are determined by categories based upon their estimated useful lives and their estimated residual values. Where the parts of a fixed asset have different useful lives or cause economic benefits for the enterprise in different ways, different depreciation rates or depreciation methods shall apply, and each part is depreciated separately.

For fixed assets leased under finance lease, if it can be reasonably determined that the ownership of the leased asset can be acquired upon the expiry of the lease term, depreciation policies in line with the fixed assets will be adopted for depreciation during the remaining useful life of the leased asset. If it cannot be reasonably determined that the ownership of the leased asset can be acquired upon the expiry of the lease term, depreciation polices in line with the fixed assets will be adopted for depreciation during the shorter of the lease term and the remaining useful life of the leased asset.

– 81 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The useful life and annual depreciation rate of each category of fixed assets are as follows:

	Useful lives	Estimated	Annual
	of depreciation	residual	depreciation
Category	(years)	value (%)	rate (%)
Buildings and structures	30	5	3.17
Machinery and equipment	10	5	9.50
Transportation equipment	5	5	19.00
Electronic and office equipment	3-10	5	9.5-31.67

3. Impairment testing methods and provision for impairment methods on fixed assets

The Group will judge if there is any indication of impairment as at the end of each period in respect of fixed assets.

If there is any indicator that a fixed asset may be impaired, recoverable amount shall be estimated. The recoverable amount of a fixed asset is the higher of its fair value less costs of disposal and the present value of the future cash flows expected to be derived from the fixed asset.

If the recoverable amount of a fixed asset is less than its carrying amount, the carrying value of the fixed asset will be reduced to its recoverable amount. The writtendown amount will be included in profit and loss for the period and the corresponding impairment loss on fixed assets will be provided for.

After the impairment loss for the fixed asset is recognised, the corresponding adjustment will be made to the depreciation of the impaired fixed asset in subsequent periods, so as to amortise systematically the adjusted carrying amount (net of estimated net residual value) of the fixed asset over its remaining useful lives.

Once an impairment loss is made for a fixed asset, it shall not be reversed in subsequent accounting periods.

Where there is any indicator that a fixed asset may be impaired, the recoverable amount of a fixed asset will be assessed by the Group on an individual basis. If assessment of the recoverable amount for individual assets is difficult, the recoverable amount of an asset group will be determined based on the asset group to which the asset belongs.

4. Recognition basis and measurement method of fixed assets under finance lease

Where any one of the following conditions is provided in the lease agreement between the Group and the lessor, assets under finance lease will be recognised:

(1) upon the expiry of lease, the ownership of the leased asset is transferred to the Group;
(2) The Company has the option to purchase the leased asset, the purchase consideration entered into is expected to be far less than the fair value of the leased asset upon the exercise of the option;
(3) the lease term accounts for the majority of the useful life of the leased asset;
(4) the present value of the minimum lease payment upon the commencement of the lease is substantially the same as the fair value of the leased asset.

– 82 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

On the commencement of the lease, the leased asset shall be recorded at an amount equal to the lower of the fair value of the leased asset and the present value of the minimum lease payments, and the minimum lease payments shall be recorded as the carrying amount of long-term payables. The difference between the recorded amount of the leased asset and the minimum lease payments shall be accounted for as unrecognised finance charge.

5. Explanation on other matters

Fixed assets of the Group are initially measured at cost. The cost of a purchased fixed asset comprises the purchase price, import custom duties and other related taxes, and any directly attributable expenditures for bringing the asset to working condition for its intended use. The cost of a self-constructed fixed asset comprises those expenditures necessarily incurred for bringing the asset to working condition for its intended use. The cost of a fixed asset contributed by an investor will be determined in accordance with the value stipulated in the investment contract or agreement, whereas the value stipulated in the contract or agreement is not fair, the fair value shall be the cost. Where the payment for a fixed asset is delayed beyond the normal credit conditions, which is equivalent to financing in nature, the cost of fixed assets shall be recognized on the basis of the present value of the purchase price. Fixed assets will be derecognized on disposal or when no future economic benefits are expected from its use or disposal. When a fixed asset is sold, transferred, retired or damaged, the Company shall recognise the amount of any proceeds on disposal of the asset net of the carrying amount and related taxes in profit or loss for the current period.

(XIV) Construction in progress

1. Types of constructions in progress

Constructions in progress are accounted for by individual projects.

2. Criteria and time point for construction in progress being transferred to the fixed asset

Construction in progress is measured at all the expenditures incurred to bring the fixed assets ready for their intended use. If the construction in progress of fixed assets constructed are ready for their intended use but the final account of completed project has not been issued, it should be transferred to fixed assets at an estimated cost according to the construction budget, construction price or actual cost, and depreciation should be provided according to deprecation policy for fixed assets from the date when the assets are ready for their intended use. When the final account of completed project is issued, the estimated cost will be adjusted according to the actual cost, while the original depreciation charge will not be adjusted.

3. Impairment testing methods and provision for impairment methods on construction in progress

The Group will judge if there is any indication of impairment as at the end of each period in respect of construction in progress.

Where there is any indicator that construction in progress may be impaired, its recoverable amount will be assessed. Where there is any indicator that a construction in progress may be impaired, the recoverable amount of the construction in progress will be assessed by the Group on an individual basis. If assessment of the recoverable amount for individual constructions in progress is difficult, the recoverable amount of a construction in progress will be determined based on the asset group to which the construction in progress belongs.

– 83 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The recoverable amount of a construction in progress is the higher of its fair value less costs of disposal and the present value of the future cash flows expected to be derived from the construction in progress.

If the recoverable amount of a construction in progress is less than its carrying amount, the carrying value of the construction in progress will be reduced to its recoverable amount. The written-down amount will be included in profit and loss for the period and the corresponding impairment loss on the construction in progress will be provided for.

Once an impairment loss is made for a construction in progress, it shall not be reversed in subsequent accounting periods.

(XV) Borrowing costs

1. Criteria for recognition of capitalised borrowing costs

Borrowing costs refers to the borrowing interests, amortisation of discounts or premiums, ancillary costs and exchange differences arising from foreign currency borrowings, etc.

For borrowing costs incurred by the Group that are directly attributable to the acquisition, construction or production of assets qualified for capitalisation, the costs will be capitalised and included in the costs of the related assets. Other borrowing costs shall be recognised as expense in the period in which they are incurred and included in profit or loss for the current period.

Assets qualified for capitalisation are assets (fixed assets, investment property, inventories, etc.) that necessarily take a substantial period of time for acquisition, construction or production to get ready for their intended use or sale.

Capitalisation of borrowing costs begins when the following three conditions are fully satisfied:

(1) expenditures for the assets (including cash paid, transferred non-currency assets or expenditure for holding debt liability for the acquisition, construction or production of assets qualified for capitalisation) have been incurred;
(2) borrowing costs have been incurred;
(3) acquisition, construction or production that are necessary to enable the asset reach its intended usable or saleable condition have commenced.

2. Capitalisation period of borrowing costs

The capitalisation period shall refer to the period between the commencement and the cessation of capitalization of borrowing costs, excluding the period in which capitalisation of borrowing costs is temporarily suspended.

Capitalisation of borrowing costs shall be suspended during periods in which the qualifying asset under acquisition and construction or production ready for the intended use or sale.

– 84 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

If part of an asset being acquired, constructed or produced has been completed respectively and put into use individually, capitalization of such part of borrowing costs should be suspended.

If different parts of the assets acquired, constructed or produced are completed separately, but such asset will not be ready for the intended use or sale until all parts have been completed, then the borrowing costs will be capitalized until the completion of all parts of the said asset.

3. Suspension of capitalisation period

Capitalisation of borrowing costs shall be suspended during periods in which the acquisition, construction or production of a qualifying asset is interrupted abnormally, when the interruption is for a continuous period of more than 3 months; if the interruption is a necessary step for making the qualifying asset under acquisition and construction or production ready for the intended use or sale, the capitalisation of the borrowing costs shall continue. The borrowing costs incurred during such period shall be recognised as profits and losses of the current period. When the acquisition and construction or production of the asset resumes, the capitalisation of borrowing costs commences.

4. Calculation of capitalisation of borrowing costs

The interest costs of specifically borrowed loans (net of the interest income earned on the unused borrowing loans as a deposit in the bank or as a temporary investment) and their ancillary costs are capitalized before the qualifying asset under acquisition and construction or production is ready for the intended use or sale.

The to-be-capitalised amount of interests on the general borrowing shall be calculated and determined by multiplying the weighted average asset disbursement (based on the average for each month end) of the part of the accumulative asset disbursements minus the specifically borrowed loans by the capitalisation rate of the general borrowing used. The capitalisation rate shall be calculated and determined according to the weighted average interest rate of the general borrowing.

Where there is any discount or premium for the borrowings, the amount of discounts or premiums that shall be amortized during each accounting period shall be determined based on the effective interest method and an adjustment shall be made to the amount of interests in each period.

(XVI) Intangible assets

1. Valuation method of intangible assets

(1) Intangible assets are initially measured at cost upon acquisition;

The costs of an externally purchased intangible asset include the purchase price, relevant taxes and expenses paid, and other expenditures directly attributable to putting the asset into condition for its intended use. If the payment for an intangible asset is delayed beyond the normal credit conditions and it is of financing nature in effect, the cost of the intangible assets shall be ascertained based on the present value of the purchase price.

– 85 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The amount of intangible assets acquired from debt restructuring should be recorded at the fair value of such intangible assets, and the difference between the carrying amount of the restructured debt and the fair value of the intangible assets acquired from debt restructuring should be included in the profit or loss for the current period.

If the non-monetary assets transaction is commercial in nature and the fair value of the assets received or surrendered can be reliably measured, the intangible assets received in the non-monetary assets transaction, shall be measured on the basis of the fair value of the assets surrendered, unless there are concrete evidence that the fair value of the assets received is more reliable; For non-monetary assets transaction which does not meet the above conditions, the cost of intangible assets received shall be the book value of the assets surrendered and the relevant taxes and expenses payable, and the profit or loss will not be recognised.

The intangible assets acquired in the business combinations involving entities under common control by way of absorption shall be recorded at the carrying amount of the acquirer; and the intangible assets acquired in the business combinations involving entities not under common control by way of absorption shall be recorded at its fair value.

The cost of the internally developed intangible assets includes: the costs of the material consumed for developing the intangible assets, labor costs, registration fees, amortisation of other patents and licenses and capitalised interest expenses in the development phase, and other costs which are directly attributable to bringing the intangible assets ready for their intended use.

(2) Subsequent measurement

The Company shall analyse and judge the useful life of intangible assets upon acquisition.

As for intangible assets with a finite useful life, they are amortised using the straight-line method over the term in which economic benefits are brought to the Group; If the term in which economic benefits are brought to the Group by an intangible asset cannot be estimated, the intangible asset shall be taken as an intangible asset with indefinite useful life, and shall not be amortised.

2. Estimated useful lives for the intangible assets with finite useful life:

	Estimated useful
Items	lives (year(s))	Basis
Land use rights	50	Terms of the land lease
Software	8	expected useful lives
Know-how	8	expected useful lives

For an intangible asset with a finite useful life, review on its useful life and amortisation method is performed at each period-end.

Upon review, useful life and amortisation method for the intangible assets are no different from the previous estimate at the end of this period.

– 86 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. Judgement basis for the intangible assets with indefinite useful lives

As of the balance sheet date, there weren’t intangible assets with indefinite useful lives.

4. Impairment provision for intangible assets

For the intangible assets with finite useful life, if there is an obvious sign of impairment, an impairment test will be conducted at the period-end.

For the intangible assets with infinite useful life, an impairment test will be conducted at each period-end.

An impairment test is conducted for the intangible assets to estimate its recoverable amount. Where there is any indicator that an intangible asset may be impaired, the recoverable amount of an intangible asset will be assessed by the Group on an individual basis. If assessment of the recoverable amount for individual assets is difficult, the recoverable amount of an asset group will be determined based on the asset group to which the intangible asset belongs.

The recoverable amount of an intangible asset is the higher of its fair value less costs of disposal and the present value of the future cash flows expected to be derived from the intangible asset.

If the recoverable amount of an intangible asset is less than its carrying amount, the carrying value of the fixed asset will be reduced to its recoverable amount. The writtendown amount will be included in profit and loss for the period and the corresponding impairment loss on intangible asset will be provided for.

After the impairment loss for the intangible asset is recognised, the corresponding adjustment will be made to the depreciation or amortization costs of the impaired intangible asset in subsequent periods, so as to amortise systematically the adjusted carrying amount (net of estimated net residual value) of the intangible asset over its remaining useful lives.

Once the impairment loss is recognised for an intangible asset, it will not be reversed in the subsequent periods.

5. Specific criteria for the division of research phase and development phase for internal research and development projects of the Company

The expenses for internal research and development projects of the Group are divided into expenses in the research phase and expenses in the development phase.

Research phase: Scheduled innovative investigations and research activities to obtain and understand scientific or technological knowledge.

Development phase: Apply the research outcomes or other knowledge to a plan or design prior to a commercial production or use in order to produce new or essentiallyimproved materials, devices, products, etc.

– 87 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

6. Specific criteria for development phase qualified for capitalization

The expenses in the development phase for internal research and development projects are recognized as intangible assets if the following conditions are fulfilled:

(1) it is technically feasible to complete such intangible asset so that it will be available for use or for sale;
(2) there is intention to complete the intangible asset for use or sale;
(3) the intangible asset can produce economic benefits, including there is evidence that the products produced using the intangible asset has a market or the intangible asset itself has a market; if the intangible asset is for internal use, there is evidence that there exists usage for the intangible asset;
(4) there is sufficient support in terms of technology, financial resources and other resources in order to complete the development of the intangible asset, and there is capability to use or sell the intangible asset;
(5) the expenses attributable to the development stage of the intangible asset can be measured reliably.

Expenses incurred during the development stage which do not meet the above conditions, are accounted for in profit or loss for the current period when it is incurred. Expenses incurred during the research phase are accounted for in the profit or loss for the current period when it is incurred.

(XVII) Long-term prepaid expenses

Long-term prepaid expenses are expenditures and other expenses which have occurred but will benefit over 1 year and shall be amortized over the current period and subsequent periods. Long-term prepaid expenses are amortized evenly over the estimated benefit period.

	Amortization	Amortization
Type	method	period	Note
Renovation fee	Straight-line method	5 years	Benefit period
e-Card fee	Straight-line method	5 years	Benefit period

(XVIII) Estimated liabilities

When the Group is involved in litigations, guarantees provided to debts, loss-making contracts or restructuring which are likely to require to deliver assets or to provide labour in the future and whose amounts can be measured reliably, estimated liabilities will be recognised.

1. Recognition criteria for estimated liabilities

The Group shall recognise the obligations related to contingencies as estimated liabilities, when all of the following conditions are satisfied:

(1) the obligation is a present obligation of the Group;
(2) it is probable that an outflow of economic benefits will be required to settle the obligation;
(3) the amount of the obligation can be measured reliably.

– 88 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. Method of measuring the estimated liabilities

Estimated liabilities shall be initially measured at the best estimate of the expenditure required to settle the related present obligation.

Factors pertaining to a contingency such as risk, uncertainties, and time value of money shall be taken into account as a whole in reaching the best estimate. Where the effect of the time value of money is material, the best estimate shall be determined by discounting the related future cash outflow.

The best estimate will be dealt with separately in the following circumstances:

The expenses required have a successive range (or band), in which the possibilities of occurrence of each result are the same, and the best estimate should be determined as the middle value for the range, i.e. the average of the upper and lower limit.

The expenses required does not have a successive range (or band), or although there is a successive range (or band), the possibilities of occurrence of each result are not the same, if the contingency is related to individual item, the best estimate should be determined as the most likely amount; where the contingency is related to a number of items, the best estimate should be calculated and determined according to the possible results and the relevant possibilities.

Where some or all of the expenditure required to settle an estimated liability is expected to be reimbursed by a third party, the reimbursement is separately recognized as an asset when it is virtually certain that the reimbursement will be received. The amount recognized for the reimbursement is limited to the carrying amount of the liability recognized.

(XIX) Revenue

1. Recognition of the revenue from sales of goods and principles of measurement

(1) Recognition of the revenue from sales of goods and general principles of measurement

Revenue from the sale of goods is recognised when all the significant risks and rewards of ownership of the goods have been transferred to the buyer; the Group does not retain either continuing managerial involvement to the degree usually associated with ownership or effective control over the sold goods; the amount of revenue can be reliably measured; when it is probable that the economic benefits associated will flow to the enterprises and when the relevant amount of costs incurred or to be incurred can be measured reliably.

(2) Specific criteria for judging recognition of the revenue from sales of goods of the Company

Sales of goods (products) of the Company mainly consist of sales of software products and sales of special RFID equipment. For installation-free products, income is recognised after delivery and inspection by the purchaser. For products to be installed and adjusted, income is recognised after completion of the project and inspection of the client as stipulated in the relevant contracts or agreements.

– 89 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. Recognition of revenue from use by others of assets and principles of measurement

Revenue from use by others of assets shall be recognised when it is probable that the economic benefit associated with the transaction can flow into the Company, and the amount of revenue can be measured reliably:

(1) The amount of interest income will be calculated and determined by the time when others use the enterprise’s monetary capital and the effective interest rate.
(2) Income from the use of the assets is calculated and determined with reference to the agreed chargeable hours and calculation method stipulated in the relevant contracts or agreements.

3. Recognition of revenue from rendering of services and principles of measurement

Revenue from rendering of services of the Company mainly consists of technological development revenue and maintenance revenue, of which:

(1) Technological development revenue is recognized as realized after completion of technological developing projects undertaken and inspection of the client;
(2) Maintenance revenue is recognized as realized at the total revenue as stipulated in relevant contracts amortised over period of rendering of services thereunder.

4. Recognition of revenue from general system integration and principles of measurement

General system integration projects of the Company are integration projects for customs logistics. Revenue of such projects is recognized on a one-off basis, which is to be recognized as realized at receiving the payment or receipt after rendering the services and inspection of the party receiving the services.

5. Recognition of revenue from construction contract using percentage of completion method and principles of measurement

(1) Specific criteria for judging recognition of revenue of the Company from construction contract are determined based on governing construction contracts.

Revenue from intelligent transportation construction development projects of the Company in progress are recognized using percentage of completion method. Specific principles are as follows:

① When outcome of contracts of intelligent transportation construction development projects can be reliably measured, revenue and expenses related to such contracts are recognized on the balance sheet date using percentage of completion method. The percentage of completion is determined as the proportion of work under such contracts performed to total work estimated in such contracts.

– 90 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

② When outcome of contracts of intelligent transportation construction development projects cannot be reliably measured, it shall be treated as following respectively:
- If cost of the contracts is recoverable, sales revenue of the projects are recognized based on the actual recoverable contractual cost, which is recognized as current contractual expenses;
- If cost of the contracts is unrecoverable, it is recognized as current contractual cost at occurrence and is not recognized as sales revenue of the projects.
(2) Business characteristics relevant to revenue from construction contract using percentage of completion method and general principles of measurement

Intelligent transportation business of the Company is carried out by direct sales through tender, in which the Company directly provides customers with complete system integrating services, specifically: to design industrial solutions by itself, develop or direct procurement of software systems by itself, purchase in the market or produce by itself general equipment, engage factories certified to manufacture hardware equipment of correspondent systems to manufacture special hardware equipment and finally combine these three elements into a complete information system through overall coordination, management, installation and adjustment. Duration of intelligent transportation projects of the Company, being the period from commencement of work to the completion, is generally 12 months, where the shortest can be 6 months and the longest more than 24 months. As these projects involves higher contractual amount and spread over more than one balance sheet date and accounting period, their revenue is recognized according to their construction contracts.

(XX) Government grant

1. Types

Government grants are transfer of monetary assets or non-monetary assets from the government to the Group at no consideration, and are classified into government grant related to asset and government grant related to income.

2. Methods of accounting treatment

Government grants relating to the purchase of fixed assets, intangible assets and other long-term assets should be presented as deferred income and recognized as non-operating income evenly over the useful life of the assets constructed or procured;

A government grant related to income is used for compensation for related expenses or losses to be incurred by the Group in subsequent periods, the grant shall be recognized as deferred income, and recognized in non-operating income over the periods in which the related costs are recognized; if the grant is a compensation for related expenses or losses already incurred by the Group, the grant shall be recognized immediately in profit or loss for the current period.

– 91 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(XXI) Deferred tax assets and liabilities

Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which deductible temporary differences can be utilized.

Save as the exceptions, deferred tax liabilities shall be recognised for the taxable temporary difference.

The exceptions for not recognition of deferred tax assets and liabilities include: the initial recognition of the goodwill; other transactions or matters other than business combinations in which neither profit nor taxable income (or deductible loss) will be affected when transactions occur.

After granted the legal rights of net settlement and with the intention to use net settlement or obtain assets, repay debt, the Group, at the same time, records the net amount after offsetting its current income tax assets and current income tax liabilities.

The Group was granted the legal rights of net settlement of current income tax assets and current income tax liabilities. Deferred income tax assets and deferred income tax liabilities are related to income tax to be paid by the same entity liable to pay tax to the same tax collection and management authority or related to different entities liable to pay tax, but the relevant entity liable to pay tax is intended to apply net settlement of current income tax assets and liabilities or, at the same time, obtain assets, repay debt whenever every deferred income tax assets and liabilities with importance would be reversed in the future, the Group records the net amount after offsetting its current income tax assets and current income tax liabilities.

(XXII) Related party

A party under control or common control or significant influence exercised by or with control or common control or significant influence on the Company, or in concert with the Company under control or common control or significant influence exercised by another party is deemed as a related party. A related party can be a natural person or a corporate entity. An enterprise merely under common control of the State but without any other related party connections does not constitute a related party of the Company.

The related parties for the Company including but not limited to:

(1) the parent company of the Company;
(2) the subsidiaries of the Company;
(3) Other enterprises of a common parent;
(4) The investor with common control over the Company;
(5) The investor with significant influence over the Company;
(6) The jointly controlled entities of the Company, including their subsidiaries;
(7) The associates of the Company, including their subsidiaries;
(8) major individual investors of the Company and their close family members;

– 92 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(9) Key management personnel of the Company or its parent company and their close family members;
(10) Other enterprises under the control, common control or significant influence of the Company’s major individual investors, key management personnel or their close family members.

(XXIII) Change in major accounting policies and accounting estimates

1. Change in accounting policies

In these financial statements, the Group has early adopted “Accounting Standards for Business Enterprises No. 9 – Employee Benefits” (Revised) （《企業會計準則第 9 號－職工薪酬》（修訂））, “Accounting Standards for Business Enterprises No. 30 - Presentation of Financial Statements” (Revised) （《企業會計準則第 30 號－財務報表列報》（修訂）） “Accounting Standards for Business Enterprises No. 39 – Fair Value Measurement” （《企業會計準則第39號－公允價值計量》）, “Accounting Standards for Business Enterprises No. 40 – Joint Arrangements” （《企業會計準則第 40 號－合營安排》） and “Accounting Standards for Business Enterprises No. 33 – Consolidated Financial Statements” (Revised) （《企業會計準則第 33 號－合併財務報表》（修訂）） which were issued by Ministry of Finance in January and February 2014.

(1) “Accounting Standards for Business Enterprises No. 9 – Employee Benefits” (Revised)

Pursuant to “Accounting Standards for Business Enterprises No. 9 – Employee Benefits” (Revised), the enterprise shall divide the retirement benefit plan into defined contribution scheme and defined benefit scheme. Defined contribution scheme refers to the retirement benefit plan in which the Group would no longer undertake further payment responsibility after the payment of fixed charges to an independent fund; while the defined benefit scheme refers to the retirement benefit plan other than the defined contribution scheme. During the accounting period when the staff provides service, the enterprise shall calculate the amount payable according to the defined contribution scheme and confirmed the liabilities, and the liabilities would be calculated into current profits and loss or assets. In respect of the defined benefit scheme, the Group calculated the responsibilities generated from the defined contribution scheme using the projected unit credit method and appropriate actuarial assumptions, and attributed the generated welfare responsibilities to the service period of the staff pursuant to the formula determined on basis of the defined benefit scheme, and calculated it into the current profit and loss, while the changes generated from the re-calculation of the net liabilities or net assets of the defined contribution scheme would be included in the other comprehensive income. In addition, the standards also regulate the enterprise provided employees short-term remuneration and other longterm employee benefits.

(2) “Accounting Standards for Business Enterprises No. 30 – Presentation of Financial Statements” (Revised)

“Accounting Standards for Business Enterprises No. 30 – Presentation of Financial Statements” (Revised) further standardizes the presentation of its financial statements. In addition, the standard requires the presentation of other comprehensive income in the income statement should be divided into two categories: (1) items that are not to be re-categorized into profit and loss; (2) items to be re-categorized into profit and loss when stipulated conditions are satisfied in the subsequent accounting period.

– 93 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(3) “Accounting Standards for Business Enterprises No. 39 – Fair Value Measurement”

“Enterprise Accounting Standards No. 39 – Fair Value Measurement” establishes the measurement of fair value and the disclosure guidance of fair value measurement. The standards defines that the fair value is the price that will be received when selling an asset or the price to be paid to transfer a liability in an orderly transaction between market participants on the date of measurement. The disclosure requirements for fair value measurement under the standards are more extensive.

(4) “Accounting Standards for Business Enterprises No. 40 – Joint Arrangements”

“Accounting Standards for Business Enterprises No. 40 – Joint Arrangements”, standardizes the classification and accounting treatments for the joint arrangement that jointly controlled by two parties or above. According to the structure of the joint venture arrangements, legal form, the terms of the contract as agreed between the parties and other relevant facts and circumstances, joint arrangement classified as joint operations and joint ventures. Joint operation refers the joint arrangement which the joint venture parties entitled to the underlying assets of the relevant arrangement and assumed liabilities of the joint arrangements. Joint venture refers the joint arrangement which the joint venture party only entitled to the right of the net assets of the arrangements. The initial recognition and subsequent accounting treatment for joint ventures and joint operations are different. Investments in joint ventures are accounted for by the equity method. The interests in joint operations shall be recognized by the joint venture parties to its assets (including its attributable share of any jointly held assets), its liabilities (including its attributable share of any liabilities jointly incurred), its revenue (including its attributable share of income generated from any sale of joint operations) and its expenses (including its attributable share of any expenses jointly incurred). The joint venture parties shall recognize the assets and liabilities and revenues, costs and expenses for their interest in the joint operations in accordance with applicable standards.

(5) “Accounting Standards for Business Enterprises No. 33 – Consolidated Financial Statements” (Revised)

Pursuant to the provisions of “Accounting Standards for Business Enterprises No. 33 – Consolidated Financial Statements” (Revised), the scope of the Group’s consolidated financial statements as consolidated by the Group would still be based on control. The standard to determine control with three elements: (a) power over the investee; (b) undertake or enjoy their exposure to variable returns risks or return rights; and (c) the ability to affect the amount of returns by using its power over the investee. This amendment included a wide range of guidance for complex situations.

The management considered that the adoption of the above-mentioned standards will not have a material impact on the Group’s financial statements. These financial statements have been presented and disclosed in accordance with the above-mentioned standards.

On 17 January 2014, the Ministry of Finance issued “Accounting Standards for Business Enterprises Interpretation No. 6” （《企業會計準則解釋第 6 號》） (“the Interpretation”), which had taken effect since the publishing date. The directors of the Company considered that the effectiveness of this Interpretation had no material effect on the financial situations and operation performance of the Group.

– 94 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. Change in major accounting estimates

There were no changes in major accounting estimates during the reporting period.

(XXIV) Correction to previous errors

There was no correction to previous errors during the reporting period.

III. TAXATION

(I) Main types of taxes and corresponding rates

Tax Name	Tax basis	Standard
		tax rate
Value-added Tax (“VAT”)	Output VAT is calculated on product sales and	17%, 6%
	taxable services revenue, based on tax laws.
	The remaining balance of output VAT, after
	subtracting the deductible input VAT of the
	period, is VAT payable.
Business tax	Based on taxable revenue	3%
City maintenance and	Based on business tax paid and VAT payable	7%
construction tax
Enterprise income tax	Based on taxable profits	25%
Education surcharge	Based on business tax paid and VAT payable	3%
Local education surcharge	Based on business tax paid and VAT payable	2%
Enterprise income tax

Name of the company	Tax rate	Notes
The Company	15%	High and new technology enterprise
Jiangsu Intellitrans Company Limited	15%	High and new technology enterprise
Jiangsu Raifu Intelligent Tech. Co., Ltd.	15%	High and new technology enterprise
Sample Technology (H.K.) Co., Limited	16.5%	Overseas company
Federal International Enterprise Limited	16.5%	Overseas company
Nanjing City Intelligent Transportation	exempted	Software company
Co., Ltd.
Other subsidiaries	25%

– 95 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(II) Tax preferential and approval document

1. VAT

The VAT preferential policy relating to the sales revenue of software products are: (1) In accordance with the requirements of the document ( 財稅 [2000]25 號 ) of Ministry of Finance and State Administration of Taxation, from 24 June 2000 to the end of 2010, as for the sales of the self-developed and produced software products by the VAT general tax payers, after the VAT is levied at a statutory tax rate of 17%, the VAT refund policies will be applied for the excess of the actual VAT burden over 3%. The refunded tax will be used by the enterprise for the research and development of software products and the expansion of production, not as the taxable income for the enterprise income tax and will not levied the enterprise income tax. (2) On 28 January 2011, the State Council issued the Circular on the Certain Policies to Further Encourage the Development of the Software Industry and Integrated Circuit Industry ( 國發 [2011]4 號 ), pursuant to which, the preferential VAT policies for software industry shall continue.

On 16 July 2001, the Company obtained the Software Enterprise Verification Certificate ( 軟件企業認定證書 ) and was certified as software enterprise. On 24 June 2003, Nanjing Sample Logistic Company Limited obtained the Software Enterprise Verification Certificate ( 軟件企業認定證書 ) and was certified as software enterprise. On 11 September 2003, Jiangsu Intellitrans Company Limited obtained the Software Enterprise Verification Certificate ( 軟件企業認定證書 ) and was certified as software enterprise. On 19 August 2004, Jiangsu Raifu Intelligent Tech. Co., Ltd. obtained the Software Enterprise Verification Certificate ( 軟件企業認定證書 ) and was certified as software enterprise. On 17 September 2012, Nanjing City Intelligent Transporations Co., Ltd. obtained the Software Enterprise Verification Certificate ( 軟件企業認定證書 ) and was certified as software enterprise. The above companies selling self-developed-and-manufactured software products enjoy the said preferential VAT policies.

– 96 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. Enterprise income tax

On 31 October 2011, the Company obtained the High and New Technology Enterprise certificate jointly issued by the Jiangsu Science and Technology Bureau, Jiangsu State Tax Bureau and Jiangsu Local Tax Bureau ( 江蘇省科學技術廳、江蘇省財政廳、江蘇省國家稅務局、江蘇省地方稅務局 ), for an effective period of three years. Pursuant to article 28 of the Enterprise Income Tax Law of the People’s Republic of China, the income shall be taxed at the reduced rate of 15% for the New and High Technology Enterprise, therefore, the enterprise income tax rate for the Company is 15% in 2013.

On 21 October 2008, Jiangsu Intellitrans Company Limited, a subsidiary of the Company, obtained the High and New Technology Enterprise certificate jointly issued by the Jiangsu Science and Technology Bureau, Jiangsu Finance Bureau, Jiangsu State Tax Bureau and Jiangsu Local Tax Bureau ( 江蘇省科學技術廳、江蘇省財政廳、江蘇省國家稅務局、江蘇省地方稅務局 ), for an effective period of three years. This company continued to obtain the High and New Technology Enterprise certificate on 30 September 2011, with an effective period of three years. Pursuant to article 28 of the Enterprise Income Tax Law of the People’s Republic of China, the income shall be taxed at the reduced rate of 15% for the New and High Technology Enterprise, therefore, its effective tax rate is 15% during the reporting period.

On 22 December 2009, Jiangsu Raifu Intelligent Tech. Co., Ltd., a subsidiary of the Company, obtained the High and New Technology Enterprise certificate jointly issued by the Jiangsu Science and Technology Bureau, Jiangsu Finance Bureau, Jiangsu State Tax Bureau and Jiangsu Local Tax Bureau ( 江蘇省科學技術廳、江蘇省財政廳、江蘇省國家稅務局、江蘇省地方稅務局 ), for an effective period of three years. After the High and New Technology Enterprise review on 5 Novemebr 2012, the Company continued to be the High and New Technology Enterprise. Pursuant to article 28 of the Enterprise Income Tax Law of the People’s Republic of China, the income shall be taxed at the reduced rate of 15% for the New and High Technology Enterprise. Therefore, its effective tax rate is 15% during the reporting period.

On 17 September, 2012, Nanjing City Intelligent Transportation Co., Ltd. a subsidiary of the Company, obtained the Software Enterprise Verification Certificate issued by the Jiangsu Economic and Information Commission ( 江蘇省經濟和信息化委員會 ) and was identified as software enterprise. According to the relevant provisions of the notice on a number of preferential policies on enterprise income tax by the Ministry of Finance, State Administration of Taxation, the software enterprises can enjoy 2-Year Free and 3-Year Half of enterprise income tax incentives. According to the notice issued by the tax authorities incharge of the company, the company is exempted from enterprise income tax in 2012 and 2013.

The other domestic subsidiaries of the Company were taxed at 25% enterprise income tax rate.

The offshore subsidiaries of the Company were taxed at the local applicable income tax rate.

– 97 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

IV. Business combinations and combined financial statements

(All amounts are stated in RMB Yuan unless otherwise stated)

(I) Subsidiaries

1. Subsidiaries acquired from establishment or investment

Actual Equity Registered investment at interest % voting Minority Type of Registered and Nature of capital end of period held by the rights held Consolidated interests Name of subsidiary subsidiary operating place business (’0000) Scope of business (’0000) Company (%) (%) or not (’000) Sample Technology Wholly-owned HK Consultation and USD10 Consultation for and 77.7 100 100 Yes – (H.K.) Co., Limited subsidiary investment investment in electronic products and computer networks Nanjing Sample Logistic Wholly-owned PRC Computer software 6,000 Development, 6,000 100 100 Yes – Company Limited subsidiary manufacturing and sales of electronic products, computer and software and communications products Nanjing Wu Lian Wang Wholly-owned PRC Internet of Things 100,000 Research and development 100,000 100 100 Yes – Yan Jiu Yuan subsidiary technology as well as application of Development Co., the Internet of Things Limited technology Jiangsu Sample Information Wholly-owned PRC Internet of Things 50,000 Research and development 50,000 100 100 Yes – Technology Co., Ltd. subsidiary technology as well as application of the Internet of Things technology Xuzhou Sample Intelligent Wholly-owned PRC Intelligent 70,000 Intelligent transportation 70,000 100 100 Yes – subsidiary transportation systems engineering Technology Development Co., Ltd. Jiangsu Cross-border Controlled PRC e-Commerce 20,000 e-Commerce services 12,000 60 60 Yes 8,000 e-Commerce Services corporation Co., Ltd.

Note: All of the above companies are companies with limited liability.

2. Subsidiaries acquired in a business combination involving enterprises under common control

There were no subsidiaries acquired in a business combination involving enterprises under common control during the reporting period.

– 98 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. Subsidiaries acquired in a business combination involving enterprises not under common control

Actual Equity Registered Registered investment at interest % voting Minority Type of and operating Nature of capital end of period held by the rights held Consolidated interests Name of subsidiary subsidiary place business (’0000) Scope of business (’0000) Company (%) (%) or not (yuan) Jiangsu Intellitrans Wholly-owned PRC Intelligent 100,000 Design, construction and 130,000 100 100 Yes – Company Limited subsidiary transportation maintenance of intelligent system transportation system and computer networks engineering Federal International Wholly-owned HK Electronic HKD10 Development and HKD30,000 100 100 Yes – Enterprise Limited subsidiary products manufacturing of electronic products and computer software, etc. Jiangsu Raifu Intelligent Wholly-owned PRC Electronic 31,344.7 Development and 31,344.7 100 100 Yes – Tech. Co., Ltd. subsidiary products manufacturing of electronic products and communications equipment, etc. Nanjing City Intelligent Controlled PRC Information 100,000 Consultation on computer 66,350 65 65 Yes 37,017,855.92 Transportation Co., Ltd. corporation technology technologies and technical services, etc.

Note: All of the above companies are companies with limited liability.

(II) Notes to the changes in scope of consolidation

Name of subsidiaries

2013

Xuzhou Sample Intelligent Technology Newly established wholly-owned subsidiary Development Co., Ltd. in November 2013. Jiangsu Cross-border e-Commerce Newly established controlled corporation Services Co., Ltd. in December 2013.

(III) No Special-purpose-vehicle or any entity entrusted to operate or gaining controlling power by way of accepting a lease

– 99 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(IV) New member of consolidation or member be deconsolidated in the reporting period

1. New subsidiary be consolidated in the reporting period

Name	Net assets at the end of 2013 Net profit for 2013
Xuzhou Sample Intelligent Technology
Development Co., Ltd.	70,000,000.00 –
Jiangsu Cross-border e-Commerce
Services Co., Ltd.	20,000,000.00 –

2. No subsidiary be deconsolidated in the reporting period

(V) No business combination involving enterprises under common control happened during the period
(VI) No business combination involving enterprises not under common control happed during the reporting period
(VII) No reduction of subsidiary resulting from the disposal of interest which was loss of controlling power during the reporting period by sales
(VIII) No reverse acquisition happened during the reporting period
(IX) No combination by way of absorption happened during the reporting period

(X) The exchange rate for main items of consolidation sheet of foreign entity.

The foreign entities of the Group include Sample Technology (H.K.) Co., Limited and Federal International Enterprise Limited. The exchange rates used in the translation of items of the financial statements are as follows:

In the balance sheet, except for “long-term equity investments” and other long –term assets items, both assets and liabilities items are translated at the spot exchange rate on the balance sheet date. “Long-term equity investments “items are translated using the spot exchange rate when they are incurred. Items of owners’ equity except for “undistributed profit” are translated by spot rates when they are incurred. The revenue and expenses in the income statements use the spot exchange rate when the transaction occurred. The difference of currency translation computed as per above-mentioned has been listed under the shareholders’ equity in the balance sheet as an individual item.

– 100 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

V. NOTES TO THE MAIN ITEMS OF CONSOLIDATED FINANCIAL STATEMENTS:

(All amounts are stated in RMB Yuan unless otherwise stated)

(I) Cash at bank and on hand

2013	RMB 127,605.39 494,268,472.92 33,917,387.32 528,185,860.24 50,739,426.20 579,052,891.83 as below:	2012	2012

Foreign Currency Exchange rate		Foreign Currency Exchange rate RMB 307,543.34 269,779,091.83 43,338,708.31 0.8108 35,137,593.90 304,916,685.73 144,385,497.78 449,609,726.85 2013 2012 3,058,956.00 14,343,605.04 47,380,470.20 45,741,892.74 300,000.00 300,000.00 50,739,426.20 60,385,497.78		RMB 307,543.34 269,779,091.83 35,137,593.90 304,916,685.73 144,385,497.78





43,140,914.93 0.7862




				449,609,726.85



	as below:






			60,385,497.78

Note: The above deposits have been excluded from the closing balance of cash and cash equivalents, and included in the cash relating to other operating activities.

– 101 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(II) Notes receivable

1. Classification of notes receivable

Type		2013	2012
Bank accepted	bills of exchange	3,300,000.00	160,000.00

2. Particulars of the top five of bills endorsed by the Company but not yet due by the end of the year

Drawer
Issuing date Maturity date
Nanjing Xingang East
District Construction and
Development Co., Ltd.
2013-11-15
2014-5-15
Nanjing Xingang East
District Construction and
Development Co., Ltd.
2013-11-15
2014-5-15
Nanjing Xingang East
District Construction and
Development Co., Ltd.
2013-11-15
2014-5-15
Nanjing Xingang
Development Corporation
2013-11-25
2014-5-25
Nanjing Xingang East
District Construction and
Development Co., Ltd.
2013-11-15
2014-5-15
Total

Amount
Notes
1,000,000.00
Bank accepted
bills of exchange
1,000,000.00
Bank accepted
bills of exchange
500,000.00
Bank accepted
bills of exchange
500,000.00
Bank accepted
bills of exchange
200,000.00
Bank accepted
bills of exchange
3,200,000.00

3. There were no amount due from shareholders who holds 5% or more voting right of the Company included in balance of notes receivable.

– 102 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(III) Accounts receivable

1. The aging analysis of accounts receivable

Aging Within 1 year 1 to 2 years 2-3 years Over 3 years Total	2013 Closing balance Provision for bad debts Amount Percentage (%) Amount Percentage (%) 217,602,559.78 57.29 6,599,146.82 3.03 99,733,090.85 26.26 6,422,592.93 6.44 55,933,217.53 14.72 16,712,772.07 29.88 6,589,572.96 1.73 6,511,643.86 98.82 379,858,441.12 100.00 36,246,155.68 9.54	2013 Closing balance Provision for bad debts Amount Percentage (%) Amount Percentage (%) 217,602,559.78 57.29 6,599,146.82 3.03 99,733,090.85 26.26 6,422,592.93 6.44 55,933,217.53 14.72 16,712,772.07 29.88 6,589,572.96 1.73 6,511,643.86 98.82 379,858,441.12 100.00 36,246,155.68 9.54	2012 Closing balance Provision for bad debts Amount Percentage (%) Amount Percentage (%) 187,709,825.96 62.51 5,131,178.99 2.73 99,715,135.37 33.21 7,569,296.27 7.59 4,895,229.51 1.63 1,417,629.70 28.96 7,954,414.83 2.65 7,580,297.73 95.30 300,274,605.67 100.00 21,698,402.69 7.23
	Closing balance
	Amount Percentage (%)

	217,602,559.78	57.29
	99,733,090.85	26.26
	55,933,217.53	14.72
	6,589,572.96	1.73


	379,858,441.12	100.00

2. Disclosure of accounts receivable by categories

Categories Individually significant and subject to separate provision Subject to provision by groups Including: due from governments due from non- governments Sub-total for the group Individually insignificant but subject to separate provision Total	2013 Closing balance Provision for bad debts Amount Percentage (%) Amount Percentage (%) – – – – – – – – 33,483,226.96 8.81 754,024.68 2.25 346,375,214.16 91.19 35,492,131.00 10.25 379,858,441.12 100.00 36,246,155.68 9.54 – – – – 379,858,441.12 100.00 36,246,155.68	2013 Closing balance Provision for bad debts Amount Percentage (%) Amount Percentage (%) – – – – – – – – 33,483,226.96 8.81 754,024.68 2.25 346,375,214.16 91.19 35,492,131.00 10.25 379,858,441.12 100.00 36,246,155.68 9.54 – – – – 379,858,441.12 100.00 36,246,155.68	2012 Closing balance Provision for bad debts Amount Percentage (%) Amount Percentage (%) – – – – – – – – 29,541,171.16 9.84 297,701.89 1.01 270,733,434.51 90.16 21,400,700.80 7.90 300,274,605.67 100.00 21,698,402.69 7.23 – – – 300,274,605.67 100.00 21,698,402.69
	Closing balance
	Amount Percentage (%)

	–	–
	–	–
	33,483,226.96	8.81
	346,375,214.16	91.19


	379,858,441.12	100.00

	–	–


	379,858,441.12	100.00

– 103 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

In the groups, provision for bad debts for accounts receivable due from governments are made using discounting method:

	2013	2012
	Closing Provision for	Closing	Provision for
Category	balance bad debts	balance	bad debts
Due from governments	33,483,226.96 754,024.68	29,541,171.16	297,701.89

In the groups, provision for bad debts for accounts receivable due from nongovernments are made using aging analysis:

2013 Closing balance Provision for bad debts Amount Percentage (%) 205,586,617.16 59.35 6,266,150.33 78,643,006.63 22.70 6,028,635.66 55,640,350.53 16.06 16,692,105.17 6,505,239.84 1.89 6,505,239.84 346,375,214.16 100.00 35,492,131.00	2013 Closing balance Provision for bad debts Amount Percentage (%) 205,586,617.16 59.35 6,266,150.33 78,643,006.63 22.70 6,028,635.66 55,640,350.53 16.06 16,692,105.17 6,505,239.84 1.89 6,505,239.84 346,375,214.16 100.00 35,492,131.00	2012 Closing balance Provision for bad debts Amount Percentage (%) 165,267,096.26 61.04 4,958,012.88 93,184,327.03 34.42 7,454,746.16 4,705,813.51 1.74 1,411,744.05 7,576,197.71 2.80 7,576,197.71 270,733,434.51 100.00 21,400,700.80

205,586,617.16	59.35
78,643,006.63	22.70
55,640,350.53	16.06
6,505,239.84	1.89

		21,400,700.80
346,375,214.16	100.00

3. There were no actual write-off of accounts receivable in the reporting period

4. There were no amount due from shareholders who holds 5% or more voting right of the Company included in balance of accounts receivable at the end of the year.

– 104 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. Particulars of the top five of accounts receivable at the end of the year

Name of unit Relationship with the Company Headquarter for Construction of Zhejiang Zhuyong Expressway (浙江諸永高速公路建設指揮部) non-related customer Headquarter for Construction of Lishui City Longqing Yunjing Expressway (麗水市龍慶雲景高速公路建設指揮部) non-related customer Headquarter for the Modification of Zhejiang Linhai No. 83 Provincial Highway (浙江省臨海市83省道改建工程指揮部) non-related customer Foreign Capital Project Office of Shaanxi Provincial Communication Department (陝西省交通廳利用外資項目公室) non-related customer Headquarter for Construction of Main Roads and Bridges of Nanjing (南京重大路橋建設指揮部) non-related customer Total	Closing balance Age 47,676,008.72 2 to 3 years 37,047,950.09 Within 1 year 25,409,025.00 Within 1 year 19,478,065.57 1 to 2 years 14,764,650.31 1 to 2 years 144,375,699.69	Percentage of the total accounts receivable (%) 12.55 9.75 6.69 5.13 3.89
		38.01

6. There were no amount due from related parties of the Company included in balance of accounts receivable at the end of the year.

7. There were no accounts receivables derecognised due to transfer of financial assets in the reporting period.

8. There were no accounts receivables not completely derecognised but transferred in the reporting period.

9. There were no accounts receivable-backed securitisations in the reporting period.

10. Payment terms with customers are mainly on credit together with deposits. Invoices are normally payable within 180 days of issuance, except for certain well-established customers.

– 105 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(IV) Other receivables

1. The aging analysis of other receivables

Types Within 1 year (including one year ) 1 to 2 years 2 to 3 years Over 3 years Total	2013 Closing balance Provision for bad debts Amount Percentage (%) Amount Percentage (%) 46,497,321.30 50.06 85,937.91 0.18 28,884,522.43 31.10 271,268.01 0.94 9,689,295.62 10.43 39,942.33 0.41 7,819,612.00 8.41 – – 92,890,751.35 100.00 397,148.25 0.43	2013 Closing balance Provision for bad debts Amount Percentage (%) Amount Percentage (%) 46,497,321.30 50.06 85,937.91 0.18 28,884,522.43 31.10 271,268.01 0.94 9,689,295.62 10.43 39,942.33 0.41 7,819,612.00 8.41 – – 92,890,751.35 100.00 397,148.25 0.43	2012 Closing balance Provision for bad debts Amount Percentage (%) Amount Percentage (%) 117,660,234.79 78.14 3,449,433.05 2.93 14,250,361,35 9.46 9,504.37 0.07 1,990,000.00 1.32 – – 16,686,654.10 11.08 – – 150,587,250.24 100.00 3,458,937.42 2.30
	Closing balance
	Amount Percentage (%)

	46,497,321.30	50.06
	28,884,522.43	31.10
	9,689,295.62	10.43
	7,819,612.00	8.41


	92,890,751.35	100.00

2. Disclosure of other receivables by categories:

Types Individually significant and subject to separate provision Subject to provision by groups Including: Retention monies Others Sub-total for the group Individually insignificant but subject to separate provision Total	2013 Closing balance Provision for bad debts Amount Percentage (%) Amount Percentage (%) – – – – – – – – 88,141,701.79 94.89 – – 4,749,049.56 5.11 397,148.25 8.36 92,890,751.35 100.00 397,148.25 0.43 – – – – 92,890,751.35 – 397,148.25	2013 Closing balance Provision for bad debts Amount Percentage (%) Amount Percentage (%) – – – – – – – – 88,141,701.79 94.89 – – 4,749,049.56 5.11 397,148.25 8.36 92,890,751.35 100.00 397,148.25 0.43 – – – – 92,890,751.35 – 397,148.25	2012 Closing balance Provision for bad debts Amount Percentage (%) Amount Percentage (%) – – – – – – – – 81,455,884.86 54.09 – – 69,131,365.38 45.91 3,458,937.42 5.00 150,587,250.24 100.00 3,458,937.42 2.30 – – – – 150,587,250.24 – 3,458,937.42
	Closing balance
	Amount Percentage (%)

	–	–
	–	–
	88,141,701.79	94.89
	4,749,049.56	5.11


	92,890,751.35	100.00
	–	–


	92,890,751.35	–

– 106 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

In the groups, provision for bad debts for other receivables is made using aging analysis:

2013	2013	Provision for bad debts 3,449,433.05 9,504.37 – –
Closing balance Amount Percentage (%)
Amount

1,960,029.86	41.27
2,712,680.08	57.12
76,339.62	1.61
–	–

		3,458,937.42
4,749,049.56	100.00

3. There were no amount due from shareholders who holds 5% or more voting right of the Company included in balance of other receivables at the end of the year.

Particulars of the top five amounts of other receivables at the end of the year

Name of unit
Relationship with the
Company
Closing
balance
Aging
Nanping Ningwu Expressway Co., Ltd.
(南平甯武高速公路有限責任公司)
non-related customer
11,285,236.00
1 to 2 years
Sichuan Guangnan Expressway
Company Limited
(四川廣南高速公路有限責任公司)
non-related customer
5,505,535.00
1 to 2 years
Headquarter for Construction of
Yunnan Meng-Xin Expressway
(雲南蒙新高速公路建設指揮部)
non-related customer
5,050,000.00
Over 3 years
Beijing Gongke Feida Traffic
Engineering Development Co., Ltd.
(北京公科飛達交通工程發展有限公司)
non-related customer
4,000,000.00
Within 1 year
Xiamen City Shengxia Municipal
Engineering Co., Ltd.
(廈門市升夏市政工程有限公司)
non-related customer
4,000,000.00
Within 1 year
Total
29,840,771.00

Percentage
of the
total other
receivables
(%)
Nature
or content
12.15
Retention monies
5.93
Retention monies
5.44
Retention monies
4.31
Retention monies
4.31
Retention monies
32.14

5. There were no other receivables due from related parties of the Company at the end of the year.

6. There were no other receivables derecognised due to transfer of financial assets in the reporting period.

7. There were no other receivables not completely derecognised but transferred in the reporting period.

8. There were no other receivables-backed securitisations in the reporting period.

– 107 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(V) Prepayments

1. Prepayments by aging

Aging Within 1 year 1 to 2 years 2 to 3 years Over 3 years Total	2013 Closing balance Amount Percentage (%) 86,512,302.26 89.73 9,619,998.62 9.97 153,000.00 0.16 133,261.65 0.14 96,418,562.53 100.00	2012 Closing balance Amount Percentage (%) 48,130,940.48 99.40 153,000.00 0.32 2,298.26 0.01 130,963.39 0.27 48,417,202.13 100.00	2012 Closing balance Amount Percentage (%) 48,130,940.48 99.40 153,000.00 0.32 2,298.26 0.01 130,963.39 0.27 48,417,202.13 100.00
	Amount

	86,512,302.26
	9,619,998.62
	153,000.00
	133,261.65
			100.00
	96,418,562.53

2. Particulars of the top five amounts of prepayments at the end of the year

Name of unit
Relationship with the
Company
Nanjing Weimao Technology Co., Ltd. (南京
威茂科技有限公司)
non-related supplier
Nanjing Gongmei Technology Co., Ltd. (南
京共美科技有限公司)
non-related supplier
Xuzhou Shengpu Machinery Manufacturing
Engineering Co., Ltd. (徐州聖普工程機
械製造有限公司)
non-related supplier
Nanjing Xuxiang Optoelectronic Technology
Co., Ltd. (南京旭翔光電科技有限公司)
non-related supplier
Jiangsu Xingan Construction Group Co., Ltd.
(江蘇興安建設集團有限公司)
non-related supplier
Total

Closing
balance
Aging
Reason of unsettlement
18,500,000.00
Within 1 year
prepayments for material
procurement
11,000,000.00
Within 1 year
prepayments for
construction work
12,600,000.00
Within 1 year
prepayments for
construction work
8,567,560.73
Within 1 year
prepayments for material
procurement
6,400,000.00
Within 1 year
prepayments for material
procurement
57,067,560.73

3. There were no amount due from shareholders who hold 5% or more voting right of the Company included in the balance of prepayments at the end of the year.

4. There were no amount due from related parties of the Company included in balance of prepayments at the end of the year.

– 108 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(VI) Inventories

1. Classification of Inventories

2013 Ending balance Provision for declines in value of inventories Carrying amount 743,130.37 – 743,130.37 4,176,231.00 770,191.57 3,406,039.43 11,001,981.36 – 11,001,981.36 268,425,723.39 – 268,425,723.39 284,347,066.12 770,191.57 283,576,874.55	2013 Ending balance Provision for declines in value of inventories Carrying amount 743,130.37 – 743,130.37 4,176,231.00 770,191.57 3,406,039.43 11,001,981.36 – 11,001,981.36 268,425,723.39 – 268,425,723.39 284,347,066.12 770,191.57 283,576,874.55	2012 Ending balance Provision for declines in value of inventories Carrying amount 708,665.90 – 708,665.90 6,640,299.55 994,569.00 5,645,730.55 1,705,878.75 – 1,705,878.75 259,256,448.90 – 259,256,448.90 268,311,293.10 994,569.00 267,316,724.10

743,130.37	–
4,176,231.00	770,191.57
11,001,981.36	–
268,425,723.39	–
		267,316,724.10
284,347,066.12	770,191.57

2. Provisions for declines in the value of inventories

Type of inventory 2012 Current period provision Commodity stocks 994,569.00 44,440.98 Total 994,569.00 44,440.98 Assets of construction contract Items Accumulated costs incurred Add: Accumulated recognised gross profit Less: Accumulated progress billings The balance on the construction	Current period reductions Reversal Write-off 2013 – 268,818.41 770,191.57 – 268,818.41 770,191.57 2013 2012 411,931,964.23 516,166,423.41 170,502,596.62 198,459,583.92 314,008,837.46 455,369,558.43 268,425,723.39 259,256,448.90
		2013

		770,191.57

		770,191.57

3. Assets of construction contract

– 109 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. Major construction projects at the end of the year

		Contracted	Accumulated		Accumulated	Accumulated
	Year of	value of the	progress of	Accumulated	recognised	progress	Inventory at
Items	Commencement	project	completion	costs incurred	gross profit	billings	the year-end
Electromechanical Engineering for	2013	75,296,286.00	65.00	26,112,932.26	22,941,331.40	–	49,054,263.66
Handan to Daming (Ji Lu border)
Expressway (Handan City Bureau
of Transportation Highway Project
Office)
邯鄲至大名（冀魯界）高速公路機電
工程（邯鄲市交通局公路項目辦公
室）
Low power electronic, intelligent	2013	60,000,000.00	65.00	32,008,180.35	9,862,025.60	–	41,870,205.95
engineering (Shenyang NandaSoft
Software Development Co., Ltd.)
弱電、智慧化工程（瀋陽蘇富特軟件
發展有限公司）
Electromechanical Engineering for Fujian	2013	57,607,252.00	95.00	33,191,531.16	21,518,214.40	29,655,198.00	25,054,547.56
Xiacheng Expressway Zhangzhou
section and Chang Tai Mei Gong
to Chen Xian Highway Traffic
(Zhangzhou Xiacheng Expressway
Co., Ltd.)
福建省廈成高速公路漳州段及長泰
美宮至陳巷高速公路交通機電工程
（漳州廈成高速公路有限責任公司）
Electrical and Mechanical Engineering	2013	45,227,162.01	65.00	18,518,014.46	10,968,660.30	4,522,716.20	24,963,958.56
for G3015 highway construction
project from Karamay to Tacheng
(Xinjiang Transportation
Construction Authority)
G3015克拉瑪依至塔城高速公路建設
項目機電工程（新疆維吾爾自治區交
通建設管理局）
Electromechanical Engineering for Lot	2013	52,099,998.32	95.00	43,217,612.22	7,700,241.11	27,612,461.00	23,305,392.33
SHJD-1 highway construction Shiyan
to Baihe (Hubei and Shaanxi border)
(Headquarter for Construction of
Shiyan to Baihe Expressway of
Hubei Province
湖北省十堰至白河（鄂陝界）公路機
電工程施工SHJD-1標段（湖北省十
堰至白河高速公路建設指揮部
HEJD-1 Section Mechanical and	2013	26,666,235.00	80.00	11,527,509.56	9,825,100.00	2,666,623.00	18,685,986.56
electrical engineering for
construction of Huanggang to Ezhou
highway (Hubei Huange Expressway
Co., Ltd.,
黃岡至鄂州高速公路機電工程
HEJD-1合同段（湖北黃鄂高速公路
有限公司）

– 110 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

		Contracted	Accumulated		Accumulated	Accumulated
	Year of	value of the	progress of	Accumulated	recognised	progress	Inventory at
Items	Commencement	project	completion	costs incurred	gross profit	billings	the year-end
Electromechanical Engineering for Li	2012	36,255,796.00	96.00	27,339,329.16	13,834,224.63	25,252,273.00	15,921,280.79
Pan Expressway (Sichuan Li Pan
Expressway Co., Ltd.)
麗攀高速公路機電工程（四川麗攀高
速公路有限責任公司）
Mechanical and Electrical Engineering	2012	44,526,694.00	95.00	34,502,022.35	12,429,148.57	35,967,420.00	10,963,750.92
for Guanggan Expressway (Sichuan
Guanggan Expressway Co., Ltd.)
廣甘高速公路機電工程（四川廣甘高
速公路有限責任公司）
JD02 Section, Mechanical & Electrical	2012	70,810,319.00	95.00	49,961,130.61	19,848,441.20	59,027,789.45	10,781,782.36
Engineering Construction for Jishou
to Huaihua Expressway project of
Hunan Province (Hunan Province
Jihuai Expressway Construction and
Development Co., Ltd.)
湖南省吉首至懷化高速公路項目機
電工程第JD02標段（湖南省吉懷高速
公路建設開發有限公司）
Electromechanical Engineering	2013	13,280,709.43	80.00	6,076,379.34	4,560,647.54	1,048,232.00	9,588,794.88
and Reconstruction Project of
Xiakoumen. Suichang County of
Zhejiang Province to Hushan to
Jinzhu Highway (Headquarter for
reconstruction project of Xiakoumen,
Suichang County of Zhejiang
Province to Hushan to Jinzhu
Highway)
浙江省遂昌縣峽口門至湖山至金竹
公路改建工程隧道機電工程（遂昌縣
峽口門至湖山至金竹公路改建工程
指揮部）
Total		481,770,451.76		282,454,641.47	133,488,034.75	185,752,712.65	230,189,963.57

– 111 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(VII) Long-term equity investments

1. Classification of long-term equity investments

Items Other equity investments Sub-total Less: Impairment provision Total	2013 101,386,244.94 101,386,244.94 – 101,386,244.94	2012 101,386,244.94
		101,386,244.94 –
		101,386,244.94

2. Particulars of long-term equity investments

Investee Accounting method Jiangsu Information Industry Institute Union Joint Stock Company cost method Nanjing City Information Investment Holdings Co., Ltd. cost method Zhong Jian Zhi Kang Supply Chain Management Company Limited cost method Cost method sub-total Total	Investment cost 2,000,000.00 24,400,000.00 74,986,244.94 101,386,244.94 101,386,244.94	1 January 2013 2,000,000.00 24,400,000.00 74,986,244.94 101,386,244.94 101,386,244.94	Increase/ Decrease – – – – –	31 December 2013 Equity Interest held (%) Voting rights held (%) 2,000,000.00 4.00 4.00 24,400,000.00 13.83 13.83 74,986,244.94 19.00 19.00 101,386,244.94 101,386,244.94

– 112 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(VIII) Fixed assets

1. Particulars of fixed assets

Items (1) Total of original value: Including: Buildings Machinery and equipment Transportation equipment Electronic and office equipment (2) Total of accumulated depreciation: Including: Buildings Machinery and equipment Transportation equipment Electronic and office equipment (3) Total net book value of fixed assets: Including: Buildings Machinery and equipment Transportation equipment Electronic and office equipment (4) Total of impairment provision: Including: Buildings Machinery and equipment Transportation equipment Electronic and office equipment (5) Total of carrying amount of fixed assets: Including: Buildings Machinery and equipment Transportation equipment Electronic and office equipment	1 January 2013 Increase in the year Decrease in the year 222,658,293.34 44,081,871.44 – 33,119,755.96 882,631.68 10,079,483.80 388,256.84 57,314,042.13 – 128,560,334.74 – 4,927,343.45 373,180.00 31,856,573.02 15,076.84 New increase in the year Provision in the year 49,892,355.32 – 19,264,733.30 278,647.58 20,605,469.96 – 1,877,102.64 – 5,053,330.83 – 13,235,396.59 – 3,392,322.95 – 497,489.21 268,487.99 20,841,231.58 – 3,654,744.86 10,159.59 172,765,938.02 – – 36,708,572.17 – – 123,507,003.91 – – 1,535,020.50 – – 11,015,341.44 – – – – – – – – – – – – – – – – – 172,765,938.02 – – 36,708,572.17 – – 123,507,003.91 – – 1,535,020.50 – – 11,015,341.44 – –	31 December 2013

		266,351,907.94
		57,314,042.13
		161,680,090.70
		5,436,795.13
		41,920,979.98

		68,878,441.04
		22,482,572.60
		18,288,727.42
		3,621,324.17
		24,485,816.85

		197,473,466.90
		34,831,469.53
		143,391,363.28
		1,815,470.96
		17,435,163.13

		–
		–
		–
		–
		–

		197,473,466.90
		34,831,469.53
		143,391,363.28
		1,815,470.96
		17,435,163.13

Depreciation charges for the year amounted to RMB19,264,733.30.

2. There were no temporarily idle fixed assets at the end of the year.

3. There were no leased fixed assets under finance lease at the end of the year.

4. There were no fixed assets leased out under operating leases at the end of the year.

5. There were no fixed assets held for sale at the end of the year.

6. There were no fixed assets without certificates of ownership as at 31 December 2013.

7. There was no pledge of fixed assets at the end of the year.

– 113 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(IX) Construction in progress

1. Projects under construction

Items Ending balance Complex building 164,760,891.61 Base station construction projects – Sporadic projects 1,819,907.08 Total 166,580,798.69	Items Ending balance Complex building 164,760,891.61 Base station construction projects – Sporadic projects 1,819,907.08 Total 166,580,798.69	2013	Carrying amount 164,760,891.61 – 1,819,907.08 166,580,798.69	Ending balance 98,701,702.73 6,413,059.62 35,000.00 105,149,762.35	2012 Provision for impairment – – – –	Carrying amount 98,701,702.73 6,413,059.62 35,000.00 105,149,762.35
		Provision for impairment

	164,760,891.61	–
	–	–
	1,819,907.08	–

	166,580,798.69	–

2. Changes of major projects under construction

Name of projects 1 January 2013 Addition in the year Complex building 98,701,702.73 66,059,188.88 Base station construction projects 6,413,059.62 25,620,240.67 Total 105,114,762.35 91,679,429.55 (X) Construction materials Items Special equipment Total	Transfer to fixed assets Other decrease Aggregate amount of capitalization of interests Including: amount of capitalization of interests in the period – – 7,548,100.00 5,237,750.00 32,033,300.29 – 2,484,058.07 2,015,674.07 32,033,300.29 – 10,032,158.07 7,253,424.07 1 January 2013 Increase in the year 3,978,173.60 14,388,637.35 3,978,173.60 14,388,637.35	Transfer to fixed assets Other decrease Aggregate amount of capitalization of interests Including: amount of capitalization of interests in the period – – 7,548,100.00 5,237,750.00 32,033,300.29 – 2,484,058.07 2,015,674.07 32,033,300.29 – 10,032,158.07 7,253,424.07 1 January 2013 Increase in the year 3,978,173.60 14,388,637.35 3,978,173.60 14,388,637.35	Transfer to fixed assets Other decrease Aggregate amount of capitalization of interests Including: amount of capitalization of interests in the period – – 7,548,100.00 5,237,750.00 32,033,300.29 – 2,484,058.07 2,015,674.07 32,033,300.29 – 10,032,158.07 7,253,424.07 1 January 2013 Increase in the year 3,978,173.60 14,388,637.35 3,978,173.60 14,388,637.35	Progress of projects Source of fund 31 December 2013 80% Self financed, loan 164,760,891.61 100% Self financed, – loan – – 164,760,891.61 Decrease in the year 31 December 2013 16,459,915.95 1,906,895.00 16,459,915.95 1,906,895.00	Progress of projects Source of fund 31 December 2013 80% Self financed, loan 164,760,891.61 100% Self financed, – loan – – 164,760,891.61 Decrease in the year 31 December 2013 16,459,915.95 1,906,895.00 16,459,915.95 1,906,895.00	31 December 2013 164,760,891.61 – 164,760,891.61


					31 December 2013

					1,906,895.00
		3,978,173.60
					1,906,895.00

Note: The special equipment refers to the special smart card used in the intelligent transport public platform.

– 114 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(XI) Intangible assets

1. Particulars of intangible assets

Items (1) Total of original value Including: Land use rights Software Know-how (2) Total of accumulated amortization Including: Land use rights Software Know-how (3) Total of net carrying amount Including: Land use rights Software Know-how (4) Total of impairment provision Including: Land use rights Software Know-how (5) Total of book value Including: Land use rights Software Know-how	1 January 2013 36,969,440.45 17,390,032.80 3,009,387.17 16,570,020.48 12,604,684.38 1,677,900.56 195,520.25 10,731,263.57 24,364,756.07 15,712,132.24 2,813,866.92 5,838,756.91 – – – – 24,364,756.07 15,712,132.24 2,813,866.92 5,838,756.91	Increase in the year 350,000.00 – 350,000.00 – 2,886,591.56 385,400.76 554,938.10 1,946,252.70 – – – – – – – – – – – –	Decrease in the year – – – – – – – – – – – – – – – – – – – –	31 December 2013

				37,319,440.45
				17,390,032.80
				3,359,387.17
				16,570,020.48

				15,491,275.94
				2,063,301.32
				750,458.35
				12,677,516.27

				21,828,164.51
				15,326,731.48
				2,608,928.82
				3,892,504.21

				–
				–
				–
				–

				21,828,164.51
				15,326,731.48
				2,608,928.82
				3,892,504.21

The amortisation of intangible assets amounted to RMB2,886,591.56 for the year.

2. There were no pledge of intangible assets at the end of the year.

3. The land use right is mid-term lease (leased land in PRC).

(XII) Long-term deferred expenses

Items Renovation costs e-card fee Total	1 January 2013 755,341.29 – 755,341.29	Increase in the year – 2,384,854.68 2,384,854.68	Amortized in the year 167,853.60 86,069.01 253,922.61	Other decrease – – –	31 December 2013 587,487.69 2,298,785.67
					2,886,273.36

– 115 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(XIII) Deferred income tax

1. Recognised deferred income tax assets and deferred income tax liabilities

Items 2013 Deferred income tax assets Provision for impairment on assets 5,611,519.78 Accruals 5,736,510.17 Total 11,348,029.95 Deferred income tax liabilities: Asset gains from business combinations involving entities not under common control 973,618.23 Total 973,618.23 2. Breakdown of deductible difference and taxable difference Items 2013 Breakdown of deductible difference Provision for impairment on assets 37,413,495.50 Accruals 38,243,401.12 Total 75,656,896.62 Breakdown of taxable difference Asset gains from business combinations involving entities not under common control 8,116,258.10 Total 8,116,258.10	2012 4,031,716.72 2,561,271.43
	6,592,988.15

	1,280,559.27
	1,280,559.27

	2012 26,151,909.11 17,075,142.86
	43,227,051.97
	10,182,535.80
	10,182,535.80

(XIV) Provision for impairment on assets

Items Provision for bad debts Provision for decline in value of inventories Total	1 January 2013 25,157,340.11 994,569.00 26,151,909.11	Increase in the year 11,485,963.82 44,440.98 11,530,404.80	Decrease in Reversal – – –	the year transfer – 268,818.41 268,818.41	31 December 2013

					36,643,303.93
					770,191.57

					37,413,495.50

– 116 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(XV) Short-term borrowings

1. Classification of short-term borrowings

Items Guaranteed loan Fiduciary loan 2. Breakdown of guaranteed loan Lender Industrial and Commercial Bank of China Limited Xinjie Kou Branch China Construction Bank, Da Xing Gong Branch Bank of Jiangsu, Headquarters Branch Bank of Jiangsu, Headquarters Branch Bank of Nanjing, Zijin Branch Bank of Communications, Baixia Branch Bank of Communications, Baixia Branch Bank of Jiangsu, Headquarters Branch China Merchants Bank, Changjiang Lu Branch Bank of Ningbo Bank of Nanjing, Zijin Branch Total	2013 2012 275,000,000.00 138,000,000.00 10,000,000.00 – 285,000,000.00 138,000,000.00 Amount Borrowing date Due date Guarantee 10,000,000.00 2013-12-18 2014-12-17 Note 1 40,000,000.00 2013-3-6 2014-3-5 Note 1 20,000,000.00 2013-8-13 2014-8-12 Note 1 20,000,000.00 2013-10-28 2014-10-27 Note 1 20,000,000.00 2013-11-19 2014-11-18 Note 1 40,000,000.00 2013-8-23 2014-8-22 Note 2 30,000,000.00 2013-11-5 2014-11-4 Note 2 30,000,000.00 2013-8-13 2014-8-12 Note 2 25,000,000.00 2013-11-21 2014-11-20 Note 2 10,000,000.00 2013-7-30 2014-7-30 Note 2 30,000,000.00 2013-9-6 2014-9-5 Note 2 275,000,000.00	2012 138,000,000.00 –
		138,000,000.00

Note 1: Nanjing Sample Technology Group Company Limited provided guarantee to the borrowings of the Company.
Note 2: The Company provided guarantee to the borrowings of its subsidiary, Jiangsu Intellitrans Company Limited.

3. There were no due short-term borrowings outstanding at the end of the year.

4. All borrowings at the end of year are due within one year.

(XVI) Notes payable

Type Bank accepted bills of exchange	2013 6,115,952.00	2012 29,246,066.85

The amount of notes to be due in the next accounting period is RMB6,115,952.00.

– 117 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(XVII) Accounts payable

1. Balances of accounts payable

Items Accounts payable	2013 316,606,125.09	2012 269,751,512.77

2. There were no amount due from shareholders who holds 5% or more voting right of the Company included in balance of accounts payable at the end of the year.

3. There were no amount due from related parties of the Company included in balance of accounts payable at the end of the year.

4. Significant accounts payable aged over 1 year at the end of the year

Name of unit
Hunan Xiangzhu Transportation Technology Co., Ltd.
（湖南省湘築交通科技有限公司）
Guizhou Hongyi Technology Co., Ltd
（貴州宏屹科貿發展有限公司）
Ziguang Jie Tong Technology Co. Ltd
(紫光捷通科技股份有限公司)
Hezhou Guanglong Materials Trading Company Limited
(賀州廣龍物資貿易有限公司)
Zhejiang Zhancheng Construction Group Co., Ltd.
（浙江展誠建設集團股份有限公司）
Total

Closing
balance
Reason of
not transfer
4,619,095.00
Payment has not due
4,049,835.00
Payment has not due
3,300,000.00
Payment has not due
3,000,000.00
Payment has not due
2,528,169.06
Payment has not due
17,497,099.06

(XVIII) Advances from customers

1. Balances of advances from customers

Items Advances from customers	2013 25,481,574.39	2012 25,300,107.19

2. There were no amount from shareholders who holds 5% or more voting right of the Company included in balance of advances from customers at the end of the year.

3. There were no amount from related parties of the Company included in balance of advances from customers at the end of the year.

4. There were no significant advances from customers aged over 1 year included in the closing balance at the end of the year.

– 118 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(XIX) Staff remuneration payables

Items (1) Wages or salaries, bonuses, allowances and subsidies (2) Staff welfare (3) Social insurance Including: Medical insurance Basic pension contribution Unemployment insurance Work injury insurance Maternity insurance (4) Housing funds (5) Union running costs and staff education costs (6) Termination benefits (7) Other Total	1 January 2013 – – 89,683.57 24,797.24 55,758.92 5,396.84 1,426.67 2,303.90 8,220.60 123,604.43 – – 221,508.60	Increase in the year 29,312,538.59 1,009,705.55 7,906,769.08 2,202,672.06 4,933,925.46 443,307.62 125,670.79 201,193.15 2,450,914.78 335,285.64 530,785.00 – 41,545,998.64	Decrease in the year 29,167,432.01 1,009,705.55 7,908,432.55 2,202,672.06 4,935,588.93 443,307.62 125,670.79 201,193.15 2,450,914.78 332,866.61 505,300.00 – 41,374,651.50	31 December 2013

				145,106.58
				–
				88,020.10
				24,797.24
				54,095.45
				5,396.84
				1,426.67
				2,303.90
				8,220.60
				126,023.46
				25,485.00
				–


				392,855.74

(XX) Taxes payable

Tax items VAT Business tax Enterprise income tax Individual income tax City maintenance and construction tax Education surcharge Others Total (XXI) Other payables 1. Balances of other payables Items Other payables	2013 104,734.05 20,078,707.30 12,591,532.92 64,071.37 1,680,618.95 1,020,525.06 214,505.62 35,754,695.27 2013 25,303,089.24	2012 10,128,998.66 18,385,733.74 19,793,579.72 66,836.36 2,126,079.01 1,379,416.66 331,377.77
		52,212,021.92

		2012 28,046,279.25

2. There were no amount due to shareholders who holds 5% or more voting right of the Company included in balance of other payables at the end of the year:

3. There were no amount due to related parties of the Company included in balance of other payables at the end of the year.

– 119 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. Significant other payables aged over 1 year at the end of the year:

	Closing	Reason of
Name of unit	balance	not payment
Hunan Xiangzhu Transportation	4,616,206.38	Retention monies
Technology Co., Ltd.
（湖南省湘築交通科技有限公司）

5. Particulars of the top five amounts of other payables at the end of the year

Name of unit Hunan Xiangzhu Transportation Technology Co., Ltd （湖南省湘築交通科技有限公司） Fujian Xindalu Computer Co., Ltd. （福建新大陸電腦股份有限公司） Yiyang Communication Co., Ltd. （億陽通信股份有限公司） Zhejiang Supcon Information Technology Co., Ltd （浙江浙大中控信息技術有限公司） Jiangsu Shengze International Holdings Ltd. （江蘇生澤國際集團有限公司） Total Non-current liabilities due within 1 year 1. Particulars of non-current liabilities due within o Items Long-term borrowing due within 1 year 2. Long-term borrowing due within 1 year (1) Long-term borrowing due within 1 year Items Guaranteed loan	n	Closing balance 4,616,206.38 3,629,259.70 1,603,312.00 1,214,943.01 957,600.00 12,021,321.09 e year 2013 50,000,000.00 2013 50,000,000.00	Nature or content Retention monies Retention monies Retention monies Retention monies Retention monies 2012 –





			2012 –

(XXII) Non-current liabilities due within 1 year

– 120 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(2) Particulars of long-term borrowings due within 1 year

Lender China Everbright Bank, Nanjing Branch China Everbright Bank, Nanjing Branch Bank of Nanjing, Jiming Si Branch Bank of Nanjing, Jiming Si Branch Total	Amount Borrowing date Due date Annual interest rate Guarantee 20,000,000.00 2012-7-13 2014-1-20 6.4575% Note 20,000,000.00 2012-7-13 2014-7-20 6.4575% Note 3,750,000.00 2013-3-8 2014-3-5 7.3600% Note 6,250,000.00 2013-3-8 2014-3-5 7.3600% Note 50,000,000.00

Note: Nanjing Sample Technology Group Company Limited provided guarantee to the borrowings of the Company.

(XXIII) Long-term borrowing

1. Classification of long-term borrowing

Items Guaranteed loan Total	2013 76,250,000.00 76,250,000.00	2012 80,000,000.00
		80,000,000.00

2. Breakdown of guaranteed loan at the end of the year

Lender China Everbright Bank Nanjing Branch Bank of Nanjing Jiming Si Branch Total	Amount Borrowing date Due date Annual interest rate Guarantee 40,000,000.00 2012-7-13 2015-7-12 6.4575% Note 36,250,000.00 2013-3-18 2017-3-7 7.3600% Note 76,250,000.00

Note: Nanjing Sample Technology Group Company Limited provided guarantee to the borrowings of the Company.

– 121 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(XXIV) Other non-current liabilities

Items Deferred income-government subsidies for construction project of radio frequency identification (RFID) System Technology Research Center Deferred income-financial assistance for national scientific and technological support projects Total	2013 11,910,000.00 11,015,895.86 22,925,895.86	2012 11,910,000.00 6,347,762.50
		18,257,762.50

(XXV) Share capital

Movements of share capital of the Company in 2013 are as follows:

1 January	31 December 2013	31 December 2013
Amount	Amount	Percentage (%)

60,770,000.00	60,770,000.00	27.12
49,545,000.00	49,545,000.00	22.11
685,000.00	685,000.00	0.31
4,950,000.00	4,950,000.00	2.21
1,350,000.00	1,350,000.00	0.60
15,000,000.00	15,000,000.00	6.69
91,800,000.00	91,800,000.00	40.96

224,100,000.00	224,100,000.00	100.00

(XXVI) Capital reserve

1. Particulars of capital reserve

Items Share capital premium Other capital reserves Total	2013 96,217,430.61 3,410,183.34 99,627,613.95	2012 96,217,430.61 3,410,183.34
		99,627,613.95

– 122 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. Particulars of movements for the year

Items Share capital premium Other capital reserves Total	1 January 2013 96,217,430.61 3,410,183.34 99,627,613.95	Increase in the year – – –	Decrease in the year – – –	31 December 2013

				96,217,430.61
				3,410,183.34

				99,627,613.95

(XXVII) Surplus reserve

1. Particulars of Surplus reserve

Items Statutory surplus reserve Total Particulars of movement Item Statutory surplus reserve Total	s for the period 1 January 2013 41,898,314.28 41,898,314.28	2013 2012 46,153,350.13 41,898,314.28 46,153,350.13 41,898,314.28 Increase in the year Decrease in the year 31 December 2013 4,255,035.85 – 46,153,350.13 4,255,035.85 – 46,153,350.13	2013 2012 46,153,350.13 41,898,314.28 46,153,350.13 41,898,314.28 Increase in the year Decrease in the year 31 December 2013 4,255,035.85 – 46,153,350.13 4,255,035.85 – 46,153,350.13
			31 December 2013

			46,153,350.13

			46,153,350.13

2. Particulars of movements for the period

The increase in the amount for the year was statutory surplus reserve provided based on 10% of distributable profits of the Company.

(XXVIII) Undistributed profits

Items Undistributed profit at the beginning of the year Add: Current net profit attributable to shareholders of the Company Less: Provision of statutory surplus reserves Ordinary shares dividends payable Closing balance of undistributed profit	2013 564,885,873.01 126,405,756.32 4,255,035.85 44,820,000.00 642,216,593.48	2012 427,217,076.14 167,927,630.71 7,848,833.84 22,410,000.00
		564,885,873.01

– 123 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(XXIX) Operating income and operating cost

1. Operating income and operating cost

Items		2013		2012
Principal operating income		782,313,992.08	730,973,118.53
Other operating income		5,453,974.51		6,716,570.42
Total operating income		787,767,966.59	737,689,688.95
Principal operating cost		520,672,373.41	451,370,110.74
Other operating cost		2,656,310.34		2,235,543.41
Total operating cost		523,328,683.75	453,605,654.15
Principal operations (by	product)
	2013	2012
Name of Products	Operating income	Operating cost Operating income		Operating cost
System integration	577,906,131.29	407,172,888.03 594,895,931.67		401,935,672.34
Including: Expressway	509,768,572.80	368,495,536.74 485,488,602.52		339,938,920.74
Customs logistics	68,137,558.49	38,677,351.29 109,407,329.15		61,996,751.60
Intelligent terminal sales	138,472,466.30	93,322,367.23 79,578,171.57		39,578,044.30
Service	65,935,394.49	20,177,118.15 56,499,015.29		9,856,394.10
Total	782,313,992.08	520,672,373.41 730,973,118.53		451,370,110.74

2. Principal operations (by product)

3. Operating income from the top five customers of the Company for the year

Name of the customers Headquarter for Construction of Lishui City Longqing Yunjing Expressway （麗水市龍慶雲景高速公路建設指揮部） Zhangzhou Xiacheng Expressway Co., Ltd. （漳州廈成高速公路有限責任公司） Headquarter for Construction of Shiyan to Baihe Expressway of Hubei Province （湖北省十堰至白河高速公路建設指揮部） Highway Project Office of Department of Transportation of Handan City （邯鄲市交通局公路項目辦公室） Jiangsu Bozhi Software Technology Co., Ltd.（江蘇博智軟件科技有限公司） Total	2013	2013
	Total operating income	Percentage of the total operating income of the Group (%)

	61,821,967.50	7.85
	54,726,889.40	6.95
	49,494,998.40	6.28
	48,942,585.90	6.21
	41,170,559.27	5.23

	256,157,000.47	32.52

– 124 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. Operating income represents the Group’s principal operating income, including revenue received and receivable from security system business.

5. Information regarding the Company’s reportable operating segments as provided to the Company’s chief operating decision makers for the purposes of resources allocation and assessment of segment performance for the year is only derived from security system business. In addition, the Company’s operations are situated in the PRC in which its revenue was derived principally therefrom. Accordingly, no separate segments are presented.

(XXX) Income of project contracts

Contract item Fixed cost contract Mechanical and electrical construction for Longquan to Qingyuan Highway (Zhejiang-Fujian border) (Headquarter for Construction of Lishui City Longqing Yunjing Expressway) Fixed cost contract L10 Section, the Tunnel and Mechanical & Electrical Engineering Construction of Linhai to Duqiao Section for Zhejiang No. 83 Provincial Highway (Headquarter for the Modification of Zhejiang Linhai No. 83 Provincial Highway) Total	Total contractual amount 150,591,477.00 121,494,301.00 272,085,778.00	Accumulated cost incurred 89,049,666.57 66,101,568.35 155,151,234.92	Accumulated gross profit that has been recognised 48,408,186.50 44,634,357.67 93,042,544.17	The amount that has been settled 137,117,706.00 110,558,455.00
				247,676,161.00

(XXXI) Taxes and surcharges

Items Business tax City construction tax Education surcharge tax Total	2013 8,672,239.53 1,438,748.42 1,096,522.06 11,207,510.01	2012 Charge rate Standards 14,174,442.68 3%, 5% 2,652,196.94 7% 1,911,683.18 5% 18,738,322.80

– 125 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(XXXII) Selling and distribution expenses

Items Salary and surcharge Entertainment expenses Travelling expenses Composite fees for construction Bidding fees Water and electricity charges Motor vehicle expenses Office expenses Telephone charges Advertisement and promotion expenses Postage Depreciation charges Others Total General and administrative expenses Items Salary and surcharge Research and development materials fees Depreciation charges Technical service fees Intangible assets amortisation Entertainment expenses Agency fees Taxation charges Travelling expenses Consulting fees Rental expenses Water and electricity charges Motor vehicle expenses Promotion expenses Board’s fee Others Total	2013 12,510,433.36 4,133,757.60 2,603,033.83 1,653,293.69 187,128.00 222,449.39 525,640.70 271,404.62 210,030.79 43,557.65 114,296.78 386,710.79 1,454,664.02 24,316,401.22 2013 24,160,231.07 26,795,203.56 4,862,041.84 3,945,487.73 2,877,711.56 2,441,384.36 2,650,318.78 1,117,531.58 987,857.27 124,645.40 738,550.88 649,243.91 1,002,230.70 396,126.32 259,662.00 2,780,255.55 75,788,482.51	2012 8,880,822.09 3,707,748.58 2,778,561.30 469,596.88 390,316.97 233,409.13 699,722.74 281,074.59 250,067.53 107,799.00 147,617.13 293,094.39 1,460,207.52
		19,700,037.85

		2012 25,629,822.38 7,557,750.05 5,093,448.45 3,636,920.88 2,493,873.71 2,281,652.24 2,233,854.29 1,405,113.87 1,270,081.30 702,727.83 555,041.33 759,082.54 641,687.17 639,902.29 275,044.40 1,496,707.56
		56,672,710.29

(XXXIII) General and administrative expenses

– 126 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(XXXIV) Financial expenses

Items Interest expenses Less: interest income Exchange gain and loss Others Total	2013 13,413,168.19 5,628,309.80 717,844.80 401,413.47 8,904,116.66	2012 16,879,928.45 6,603,457.34 92,892.59 999,645.53
		11,369,009.23

Note: Interest expenses are interest on bank borrowings wholly repayable within five years.

(XXXV) Investment income

Items Income from long-term equity investments under equity method Income from disposal of long-term equity investments Total Asset impairment losses Items Loss from bad debts Loss from declines in values of inventories Total Non-operating income 1. Breakdown of non-operating income Items Total gain on disposal of non-current assets Including: gain on disposal of fixed assets Government grants VAT refund Others Total	2013 – – – 2013 11,485,963.82 44,440.98 11,530,404.80 2013 0.02 0.02 8,077,136.64 10,813,965.55 215,501.31 19,106,603.52	2012 4,324,931.80 10,225,428.74
		14,550,360.54

		2012 9,093,931.90 376,784.82
		9,470,716.72

		2012 1,329,197.93 1,329,197.93 12,334,637.50 10,843,209.22 52,876.15
		24,559,920.80

(XXXVI) Asset impairment losses

(XXXVII) Non-operating income

– 127 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. Particulars of government grants

Items Specific nature and content Form Receiving time Special fund for services business Subsidy Monetary funds January 2013 Subsidies for patent from the Qixia Technology Bureau Subsidy Monetary funds April 2013 Payment from Nanjing Bureau of Finance (subsidy for capital market financing agency fee) Subsidy Monetary funds August 2013 Pukou District Finance (municipal patent grant) income Subsidy Monetary funds September 2013 Year 2013 subsidy for special funds guide for upgrading and transformation of software industry of Iiangsu provincial industrial and information industry Subsidy Monetary funds November 2013 Software Sudidy from Qixia District Development and Reform Bureau Subsidy Monetary funds January 2013 Subsidy from Qixia District Development and Reform Bureau Subsidy Monetary funds January 2013 Innovation fund of Qixia District Technology Bureau Subsidy Monetary funds January 2013 Patent grant funds of Qixia District Technology Bureau Subsidy Monetary funds April 2013 2012 patent grant of Jiangning District of Nanjing City Finance Bureau Subsidy Monetary funds March 2013 Collaboration fee from Nanjing Institute of Agricultural Science and Technology Subsidy Monetary funds November 2013 2012 patent grant of Qixia District Technology Bureau Subsidy Monetary funds April 2013 Grants for software entities from Nanjing Software Industry Association Subsidy Monetary funds January 2013 Financial assistance for national scientific and technological support projects Subsidy Monetary funds December 2013 Financial assistance and subsidy income of provincial technological innovation and achievements Subsidy Monetary funds June 2013 Subsidy of science and technology projects from Finance Bureau of Yangzhou Subsidy Monetary funds April 2013 Year 2011 special development funds for provincial industrial transformation and upgrading software industry Subsidy Monetary funds April 2012 Fund from Nanjing Bureau of Finance (Year 2011 provincial Industry and Information transformation and upgrading IOT special funds) Subsidy Monetary funds April 2012 Grant given by the Finance Bureau of Administration Committee of the Nanjing High and New Technology Industry Development Zone Subsidy Monetary funds November 2012 Supporting fund for City Software from Qixia Bureau of Industry and Information Subsidy Monetary funds November 2012 SME Innovation Fund Subsidy Monetary funds April 2012 Subsidies from the Qixia Technology Bureau Subsidy Monetary funds December 2012 Financial assistance for national scientific and technological support projects Subsidy Monetary funds May 2012 Total	2013 250,000.00 7,920.00 850,000.00 2,540.00 5,000,000.00 25,000.00 4,000.00 20,000.00 5,070.00 1,170.00 130,000.00 4,470.00 12,500.00 1,184,466.64 550,000.00 30,000.00 – – – – – – – 8,077,136.64	2012 – – – – – – – – – – – – – – – – 4,500,000.00 4,000,000.00 2,000,000.00 500,000.00 135,000.00 40,000.00 1,159,637.50
		12,334,637.50

– 128 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(XXXVIII) Non-operating expenses

Items Total loss on disposal of non-current assets Including: Loss on disposal of fixed assets Penalty and overdue fines Others Total	2013 51,099.78 51,099.78 58,376.02 65,540.77 175,016.57	2012 71,272.71 71,272.71 58,075.17 274,339.48
		403,687.36

(XXXIX) Auditor’s remuneration

Auditor’s remuneration for the year was RMB750,000.00 (2012: RMB750,000.00).

(XL) Directors and supervisors’ emoluments

1. Directors and supervisors’ emoluments Items Directors and supervisors’ fees Executive directors Non-executive director and independent non-executive directors Supervisors Sub-total Executive directors ’other emoluments Basic salaries and allowance Contributions to retirement benefits/pensions schemes Sub-total Supervisors Basic salaries and allowance Contributions to retirement benefits/pensions schemes Sub-total Total	2013 75,000.00 100,000.00 30,000.00 205,000.00 776,904.00 158,021.79 934,925.79 162,890.00 40,569.66 203,459.66 1,343,385.45	2012 75,000.00 100,000.00 30,000.00
		205,000.00
		806,505.00 97,697.25
		904,202.25
		139,051.80 26,189.40
		165,241.20
		1,274,443.45

None of the directors or supervisors waived any emoluments during the year.

No emoluments were paid by the Group to the directors or supervisors of the Company as an inducement to join or upon joining the Group or as compensation for loss of office during the year.

– 129 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. Particulars of Directors and supervisors’ emoluments were as follows:

	2013	2013
	Other emoluments
Fees	Basic salaries and allowance Contributions to retirement benefits/ pensions schemes		Total


25,000.00	340,504.00	52,673.93	418,177.93
25,000.00	236,396.00	52,673.93	314,069.93
25,000.00	200,004.00	52,673.93	277,677.93

75,000.00	776,904.00	158,021.79	1,009,925.79


30,000.00	–	–	30,000.00

30,000.00	–	–	30,000.00


10,000.00	–	–	10,000.00
10,000.00	–	–	10,000.00
50,000.00	–	–	50,000.00
–	–	–	–

70,000.00	–	–	70,000.00


10,000.00	–	–	10,000.00
10,000.00	162,890.00	40,569.66	213,459.66



10,000.00	–	–	10,000.00

30,000.00	162,890.00	40,569.66	233,459.66

205,000.00	939,794.00	198,591.45	1,343,385.45

On 20 May 2013, Mr. Li Hai Feng resigned as independent non-executive director and Mr. Geng Nai Fan was appointed as independent non-executive director.

– 130 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Name Executive Directors Mr. Sha Min Mr. Chang Yong Mr. Guo Ya Jun Sub-total Non-executive Director Mr. Ma Jun Sub-total Independent Non-Executive Directors Mr. Xu Su Ming Mr. Li Hai Feng Mr. Shum Shing Kei Sub-total Supervisors Mr. Dai Jian Jun Mr. Li Gang Independent supervisor Mr. Qiu Xiang Yang Sub-total Total	Fees 25,000.00 25,000.00 25,000.00 75,000.00 30,000.00 30,000.00 10,000.00 10,000.00 50,000.00 70,000.00 10,000.00 10,000.00 10,000.00 30,000.00 205,000.00	2012 Other emoluments Basic salaries and allowance Contributions to retirement benefits/ pensions schemes 340,803.00 32,563.75 240,698.00 32,563.75 225,004.00 32,569.75 806,505.00 97,697.25 – – – – – – – – – – – – – – 139,051.80 26,189.40 – – 139,051.80 26,189.40 945,556.80 123,886.65	Total 398,366.75 298,261.75 282,573.75
			979,202.25
			30,000.00
			30,000.00
			10,000.00 10,000.00 50,000.00
			70,000.00
			10,000.00 175,241.20
			10,000.00
			195,241.20
			1,274,443.45

– 131 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. Five highest paid individuals

During the year, of the five individuals with the highest emoluments, three (2012: three) were directors. The emoluments of them were disclosed in the notes above. The emoluments of the remaining two (2012: two) individuals were as follows:

Items Basic salaries and allowance Contributions to retirement benefits schemes Total	2013 450,825.00 105,347.86 556,172.86	2012 460,997.00 32,563.75
		493,560.75

During the year, no emoluments were paid by the Company to the five highest paid individuals as an inducement to join or upon joining the Group or as compensation for loss of office.

Their emoluments were within the following bands:

Items Nil to HK$1,000,000 (nil to RMB820,000.00) (XLI) Income tax expenses Items Current income tax calculated based on tax law and related regulations Adjustment to deferred income tax Total (XLII) Dividend Items Final dividend proposed of RMB0.2 per share (2011: RMB0.1 per share) Final dividend proposed of RMB0.1 per share	2013 number 2 2013 26,558,458.90 (5,061,982.84) 21,496,476.06 2013 – 22,410,000.00	2012 number 2

		2012 40,288,024.44 (2,666,756.10)
		37,621,268.34

		2012 44,820,000.00 –

The directors recommend the payment of a final dividend of RMB0.1 per share (2012: RMB0.2 per share) for the year ended 2013 on 21 March 2014.

The final dividend proposed after the end of reporting period has not been recognised as a liability at the end of reporting period and is subject to approval by the shareholders at the annual general meeting.

– 132 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Items Final dividend in respect of the previous year, approved and paid during the year Total	2013 44,820,000.00 44,820,000.00	2012 22,410,000.00
		22,410,000.00

(XLIII) Calculation process of basic earnings per share and diluted earnings per share

1. Basic earnings per share

Basic earnings per share = P0 ÷ S

S = S0 + S1 + Si × Mi ÷ M0 – Sj × Mj ÷ M0 – Sk

Where:

P0 is the net profit attributable to ordinary shareholders of the Company or net profit attributable to ordinary shareholders with deduction of non-recurring gains and losses; S is the weighted average of outstanding ordinary shares; S0 is total of the shares at the beginning of year; S1 is the number of additional shares resulting from reserve capitalization or allocation of scrip dividends during the reporting period; Si is the number of additional shares resulting from new issue or debt conversion to equity during the reporting period; Sj is the number of reduced shares resulting from share repurchase during the reporting period; Sk is the number of reduced shares during the reporting period; M0 is the number of months during the reporting period; Mi is accumulated months from the following month of increasing shares to the ending of reporting period; Mj is accumulated months from the following month of decreasing shares to the ending of reporting period.

2. Diluted earnings per share

Diluted earnings per share = P1/(S0 + S1 + Si × Mi ÷ M0 – Sj × Mj ÷ M0 – Sk + Addition of weighted average ordinary shares of warrants, share options and convertible bonds)

Where P1 is the net profit attributable to ordinary shareholders of the Company or net profit attributable to ordinary shareholders with deduction of non-recurring gains and losses, including the effect of the dilution of potential ordinary shares and P1 shall be adjusted in accordance with Accounting Standards for Business Enterprises. The Company in the calculation of diluted earnings per share shall take into account the effect of all diluted potential ordinary shares on the net profit attributable to ordinary shareholders or the net profit attributable to ordinary shareholders with deduction of non-recurring gains and losses as well as the weighted average number of shares according to their degree of sequence were included in diluted earnings per share diluted, up to diluted earnings per share becomes minimum.

– 133 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(1) Basic earnings per share

Basic earnings per share is calculated by consolidated net profit for the current year attributable to ordinary shareholders of the Company divided by the weighted average number of ordinary shares outstanding:

Items Consolidated net profit attributable to ordinary shareholders of the Company Weighted average number of ordinary shares outstanding of the Company Basic earnings per share (RMB/share)	2013 126,405,756.32 224,100,000.00 0.564	2012 167,927,630.71 224,100,000.00 0.749

Weighted average number of ordinary shares is calculated as follows:

Items Number of ordinary shares in issue at the beginning of the year Add: Weighted average number of ordinary shares issued for the period Less: Weighted average number of ordinary shares repurchased for the period Weighted average number of ordinary shares outstanding at the end of the year	2013 224,100,000.00 – – 224,100,000.00	2012 224,100,000.00 – –
		224,100,000.00

(2) Diluted earnings per share

Diluted earnings per share is calculated by adjusted net profit for the current year attributable to ordinary shareholders of the Company divided by the adjusted weighted average number of ordinary shares outstanding.

Items Consolidated net profit attributable to ordinary shareholders of the Company (diluted) Weighted average number of ordinary shares outstanding of the Company (diluted) Diluted earnings per share (RMB/share)	2013 126,405,756.32 224,100,000.00 0.564	2012 167,927,630.71 224,100,000.00 0.749

– 134 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Weighted average number (diluted) of ordinary shares is calculated as follows:

Items Weighted average number of ordinary shares outstanding at the end of year when the basic earnings per share is calculated Effects of convertible bonds Effects of share options Weighted average number (diluted) of ordinary shares at the end of the year Other comprehensive income Item Difference on translation of foreign currency financial statements Total	2013 224,100,000.00 – – 224,100,000.00 2013 (132,748.50) (132,748.50)	2012 224,100,000.00 – –
		224,100,000.00

		2012 (959.95)
		(959.95)

(XLIV) Other comprehensive income

(XLV) Notes to cash flow statement

1. Cash received relating to other operating activities Items 2013 Interest income on bank deposits received 5,628,309.80 Amounts of transactions with units received 34,294,907.45 Non-operating income received 6,997,096.41 Retention monies received 142,262,491.25 Government grants received 7,130,000.00 Total 196,312,804.91 2. Cash paid relating to other operating activities Items 2013 Administrative expenses paid 17,163,804.86 Operating expenses paid 12,020,362.48 Non-operating expenses paid 123,916.79 Amounts of transactions with units paid 38,582,068.59 Handling charges paid to banks 399,888.28 Retention monies paid 139,683,865.15 Total 207,973,906.15 3. Cash received relating to other investing activities Items 2013 Receipt of loan of non-financial institution –	2012 6,603,457.34 15,288,108.14 12,356,645.85 141,926,405.03 18,257,762.50
	194,432,378.86

	2012 14,770,310.99 13,238,908.70 312,817.94 24,255,051.29 999,645.53 155,516,847.07
	209,093,581.52

	2012 6,133,000.00

– 135 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(XLVI) Supplementary information of cash flow statements

1. Supplementary information of cash flow statements

Items 1. Reconciliation of net profit to cash flow of operating activities Net profit Add: Provision for assets impairment Depreciation of fixed assets, depletion of oil and gas assets, depreciation of productive biological assets Amortisation of intangible assets Amortisation of long-term deferred expenses Loss on disposal of fixed assets, intangible assets and other long-term assets Loss on scrapped fixed assets Loss on change in fair value Financial expenses Investment loss Decrease in deferred tax assets Increase in deferred tax liabilities Decrease in inventories Decrease of operating receivables Increase of operating payables Others Net cash flows from operating activities 2. Significant investing and financing activities that do not involve cash receipts and payments Conversion of debt into capital Convertible company bonds due within one year Fixed assets held under finance leases 3. Net movement in cash and cash equivalents Cash at the end of the period Less: cash at the beginning of period Add: cash equivalents at end of the period Less: cash equivalents at beginning of the period Net increase in cash and cash equivalents	2013 130,127,478.53 11,530,404.80 19,264,733.30 2,886,591.56 253,922.61 51,099.76 – – 13,413,168.19 – (4,755,041.80) (306,941.04) (16,035,773.02) (108,922,221.95) 4,443,064.84 – 51,950,485.78 – – – 528,313,465.63 389,224,229.07 – – 139,089,236.56	2012 169,218,563.55 9,470,716.72 10,376,047.84 2,493,873.71 83,926.80 (1,257,925.22) – – 16,879,928.45 (14,550,360.54) (2,344,811.95) (321,944.16) 10,055,745.44 (69,472,898.15) 46,982,340.19 – 177,613,202.68
		– – –
		389,224,229.07 415,049,940.54 – –
		(25,825,711.47)

2. There were no relevant information of the disposal or acquisition of subsidiaries or other operating enterprises for the year

– 136 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. The composition of cash and cash equivalents:

Items I. Cash Including: Cash on hand Bank deposit available for paymen at any time Other monetary funds available for payment at any time II. Cash equivalents Including: Bond investment due in three months III. Cash and cash equivalents at the end of the period	2013 528,313,465.63 127,605.39 528,185,860.24 – – – 528,313,465.63	2012 389,224,229.07 307,543.34 304,916,685.73 84,000,000.00
		– –
		389,224,229.07

VI. RELATED PARTIES AND RELATED PARTY TRANSACTIONS

(All the following amounts in Renminbi yuan unless otherwise stated)

(I) General information of the controlling shareholder of the Company

								Equity	Voting
								interest	right
			Business	Registration	Legal		Registered	in the	in the	Ultimate	Organization
Name		Relationship	type	place	representative	Nature of business	capital	Company	Company	controller	code
							(’000)	(%)	(%)
Nanjing	Sample Technology	Controlling	limited liability	PRC	Guo Ming Ke	Domestic trading,	33,000	27.12	27.12	Sha Min	1348888–5
Group	Company Limited	shareholders	company			external investments
						and guarantee
						using its own
						assets

– 137 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(II) Information of subsidiaries of the Company:

							Equity
	Type of	Business	Registration	Legal	Nature of	Registered	interest	Voting	Organization
Full name of subsidiaries	subsidiaries	type	place	representative	business	capital	held	right	code
						(’000)	(%)	(%)
Jiangsu Intellitrans Company	Wholly-owned	Limited company	PRC	Chang Yong	Intelligent	100,000.00	100	100	72058184–3
Limited	subsidiary	(solely invested by			transport
		legal entity)
Jiangsu Raifu Intelligent Tech.	Wholly-owned	Limited liability company	PRC	Guo Ya Jun	Electronic	31,344.70	100	100	74870842–0
Co., Ltd.	subsidiary	(solely invested by			products
		Taiwan,
		Hong Kong and
		Macau legal entity)
Nanjing Sample Logistic	Wholly-owned	Limited company	PRC	Sha Min	Computer	6,000.00	100	100	73314243–6
Company Limited	subsidiary	(solely invested by			software
		legal entity)
Nanjing Wu Lian Wang Yan	Wholly-owned	Limited company	PRC	Sha Min	Internet of	100,000.00	100	100	56285853–5
Jiu Yuan Development	subsidiary				things
Co., Limited					technology
Sample Technology (H.K.)	Wholly-owned	Overseas enterprise	Hong Kong		Consultation	USD10	100	100
Co., Limited	subsidiary				and investment
Federal International Enterprise	Wholly-owned	Overseas enterprise	Hong Kong		Electronic	HKD10	100	100
Limited	subsidiary				products
Nanjing City Intelligent	Controlled	Limited company	PRC	Zhu Xiang	Information	100,000.00	65	65	56289005–X
Transportation Co., Ltd.	subsidiary				technology
Jiangsu Sample Information	Wholly-owned	Limited company	PRC	Zhu Xiang	IOT technology,	50,000.00	100	100	58997316-2
Technology Co., Ltd.	subsidiary				development
					& application
					of products
Xuzhou Sample Intelligent	Wholly-owned	Limited company	PRC	Liu Min	Intelligent	70,000.00	100	100	08502083-5
Technology Development	subsidiary				transportation
Co., Ltd.
Jiangsu Cross-border	Controlled	Limited company	PRC	Sha Min	e-Commerce	12,000.00	60	60	08596180-3
e-Commerce Services	subsidiary
Co., Ltd.

– 138 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(III) Particulars of other related parties of the Company

		Organization
Name	Relationship with the Company	code
Nanjing Sample Digital Science	Other subsidiary controlled by the	73887605-X
and Technology Company Limited	same controlling shareholder
(南京三寶數碼科技有限公司)

(IV) Related party transactions

1. For the subsidiaries which are controlled by the Company and consolidated into the consolidated financial statements, the transactions amongst them and that between the Company and these subsidiaries have been eliminated.

2. Related party providing guarantees

		Guarantee	Beginning date	Beginning date	Terminal date	Guarantee
Guarantor	Guarantee for	Amount	of guarantee		of guarantee	due or not
The Company	Jiangsu Intellitrans	40,000,000.00		2013-8-23	2014-12-31	No
	Company Limited
The Company	Jiangsu Intellitrans	30,000,000.00		2013-8-9	2014-12-31	No
	Company Limited
The Company	Jiangsu Intellitrans	30,000,000.00		2013-8-9	2014-7-29	No
	Company Limited
The Company	Jiangsu Intellitrans	50,000,000.00		2013-11-18	2014-11-17	No
	Company Limited
The Company	Jiangsu Intellitrans	20,000,000.00		2012-12-19	2014-12-19	No
	Company Limited
The Company	Jiangsu Intellitrans	50,000,000.00		2013-9-6	2014-9-5	No
	Company Limited
The Company	Jiangsu Intellitrans	130,000,000.00		2013-11-26	2015-6-30	No
	Company Limited
The Company	Jiangsu Intellitrans	70,000,000.00		2013-12-9	2014-12-9	No
	Company Limited
Sample Group	The Company	30,000,000.00		2013-12-18	2014-12-17	No
Sample Group	The Company	40,000,000.00		2013-3-6	2014-3-5	No
Sample Group	The Company	40,000,000.00		2013-8-12	2014-7-29	No
Sample Group	The Company	20,000,000.00		2013-11-19	2014-11-18	No
Sample Group	The Company	80,000,000.00		2012-7-13	2015-7-12	No
Sample Group	Nanjing City Intelligent	100,000,000.00		2013-3-8	2017-3-7	No
	Transportation
	Co., Ltd.

– 139 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(1) Explanations on the guarantee provided to the related parties (subsidiary) by the Company:
(A) As at 31 December 2013, the Company provided guarantee to bank to secure a loan for a total of RMB165,000,000 in favour of its subsidiary, Jiangsu Intellitrans Company Limited.
(B) As at 31 December 2013, the Company provided guarantee to Jiangsu Intellitrans Company Limited, a subsidiary of the Company for their issuance of a guarantee for a total of RMB59,241,908.69 to the bank.
(C) The Company provided guarantee for Jiangsu Intellitrans Company Limited, a subsidiary of the Company, to secure the bank accepted bills of exchange in the Hunan Lu Branch of China CITIC Bank. The guarantee amount does not exceed 50% of the face amount of the bills. As at 31 December 2013, the amount of the bank accepted bills of exchange issued by the Company through the Hunan Lu Branch of China CITIC Bank was RMB6,115,952 of which RMB3,058,956 was retention monies for bills of exchange and the remaining RMB3,056,996 was secured by the guarantee provided by the Company.
(2) Explanations on the guarantee provided to the Company and subsidiaries by the related parties:

Among the total guarantee provided to the Company by the related parties, Sample Group, as at 31 December 2013, the balances for the borrowings that the Company and the subsidiaries obtained was RMB236,250,000.

VII. CONTINGENT LIABILITIES

Guarantee provided to the debts of related parties (subsidiary):

For the particulars of the guarantees provided to the related parties, Jiangsu Intellitrans Company Limited (wholly-owned subsidiary) by the Company as at 31 December 2013, please see Note VI.(IV).2.(1).

Save as the above contingent matter, as at 31 December 2013, there is no other significant contingent matter which needs to be disclosed but has not been disclosed.

VIII. SIGNIFICANT COMMITMENTS

As at 31 December 2013, there is no significant commitment which needs to be disclosed but has not been disclosed.

– 140 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

IX. EVENTS AFTER BALANCE SHEET DATE

As of the financial reporting date, there is no other significant post balance sheet event which needs to be disclosed but has not been disclosed.

X. SEGMENTS INFORMATION

Information regarding the Company’s reportable operating segments as provided to the Company’s chief operating decision makers for the purposes of resources allocation and assessment of segment performance for the year is only derived from security system business. In addition, the Company’s operations are situated in the PRC in which its revenue was derived principally therefrom. Accordingly, no separate segments are presented.

The Group’s revenue from principal business is analysed as follows which was derived from the different sectors of the security systems business.

Name of Products System integration Including: Expressway Customs logistics Intelligent terminal sales Service Total	2013 Operating Operating income cost 577,906,131.29 407,172,888.03 509,768,572.80 368,495,536.74 68,137,558.49 38,677,351.29 138,472,466.30 93,322,367.23 65,935,394.49 20,177,118.15 782,313,992.08 520,672,373.41	2012 Operating Operating income cost 594,895,931.67 401,935,672.34 485,488,602.52 339,938,920.74 109,407,329.15 61,996,751.60 79,578,171.57 39,578,044.30 56,499,015.29 9,856,394.10 730,973,118.53 451,370,110.74	2012 Operating Operating income cost 594,895,931.67 401,935,672.34 485,488,602.52 339,938,920.74 109,407,329.15 61,996,751.60 79,578,171.57 39,578,044.30 56,499,015.29 9,856,394.10 730,973,118.53 451,370,110.74
			451,370,110.74

XI. SHARE OPTION SCHEME

On 18 October 2011, the Board passed the resolution to terminate the execution of the share option scheme of the Company which was approved by the shareholders of the Company by way of resolution on 24 April 2004. The resolution was passed at the general meeting on 30 December 2011.

The Company has not granted any option under the share option scheme since the adoption of the scheme.

XII. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Company’s major financial instruments include trade and accounts receivables, other payables, cash and cash equivalents and short-term bank loans. Details of these financial instruments are disclosed in the respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below.

The main risks arising from the Company’s financial instruments are credit risk, liquidity risk and market risk. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

– 141 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. Credit risk

The Group’s credit risk primarily relates to the Group’s trade and other receivables and prepayments. In order to minimise the risk, the management of the Group closely monitors overdue debts. Normally, the Group does not obtain collateral from customers. The recoverable amount of each individual debt is reviewed at the end of each reporting period and adequate impairment for doubtful debts has been made for irrecoverable amounts. In this regard, the directors of the Group consider that credit risk associated with the Group’s trade receivables is significantly reduced.

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The risk of the industry and country in which customers operate also has an influence on credit risk but to a lesser extent. At the end of reporting period, the Group has a certain concentration of credit risk as 12.55% (2012: 15.88%) and 38.01% (2012: 43.64%) of the total trade receivables was due from the Group’s largest customer and the five largest customers respectively. The maximum exposure to credit risk in the event that the counterparties fail to perform their obligations as at end of the reporting period in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the statement of financial position. Further quantitative disclosures in respect of the Group’s exposure to credit risk arising from trade receivables are set out in Note.

2. Liquidity risk

The Group is exposed to minimal liquidity risk as the Group closely monitors its cash flow position. The Group’s policy is to regularly monitor its liquidity requirements and its compliance with lending covenants, to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and longer term.

The following table details the remaining contractual maturities at the end of reporting period of the Group’s financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates, or if floating, based on rates current at the end of reporting period) and the earliest date the Group can be required to pay.

Company 2013 Carrying amount Notes payable 6,115,952.00 Accounts payable 316,606,125.009 Other payables 25,303,089.24 Staff remuneration payables 392,855.74 Short-term borrowings 285,000,000.00 Total 633,418,022.07	Total contractual discounted cash flow 6,115,952.00 316,606,125.09 25,303,089.24 392,855.74 285,000,000.00 633,418,022.07	Less than 3 months 2,000,000.00 231,449,869.01 17,619,119.41 392,855.74 40,000,000.00 291,461,844.16	More than 3 months but less than 6 months 4,115,952.00 63,321,225.08 6,053,731.83 – – 73,490,908.91	More than 6 months but less than 1 year – 21,835,031.00 1,630,238.00 – 245,000,000.00
				268,465,269.00

– 142 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Company 2012 Carrying amount Notes payable 29,246,066.85 Accounts payable 269,751,512.77 Other payables 28,046,279.25 Staff remuneration payables 221,508.60 Short-term borrowings 138,000,000.00 Total 465,265,367.47	Total contractual discounted cash flow 29,246,066.85 269,751,512.77 28,046,279.25 221,508.60 138,000,000.00 465,265,367.47	Less than 3 months 29,246,066.85 269,751,512.77 28,046,279.25 221,508.60 50,000,000.00 377,265,367.47	More than 3 months but less than 6 months – – – – – –	More than 6 months but less than 1 year – – – – 88,000,000.00
				88,000,000.00

3. Market risk

(1) Interest rate risk

Interest-bearing financial assets are mainly bank balances which are all short-term in nature. Interest-bearing financial liabilities are mainly short-term bank loans with fixed interest rates which expose the Group to fair value interest rate risk.

(2) Foreign currency risk

Foreign currency risk refers to the risk that movement in foreign currency exchange rate which will affect the Group’s financial results and its cash flows. The Group carries out a majority of its transactions in RMB and accordingly, the Group is not exposed to any significant foreign currency risk.

(3) Price risk

The Group is not exposed to any equity securities price risk or commodity price risk.

– 143 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

XIII. NOTES TO THE MAIN ITEMS OF THE FINANCIAL STATEMENTS OF THE COMPANY

(I) Accounts receivable

1. Disclosure of accounts receivable by categories

Categories Individually significant and subject to separate provision Subject to provision by groups Including: due from governments due from non-governments Sub-total for the group Individually insignificant but subject to separate provision Total	2013 Closing balance Provision for bad debts Amount Percentage Amount Percentage (%) (%) – – – – – – – – 33,483,226.96 42.24 754,024.68 2.25 45,776,706.38 57.76 3,459,261.21 7.56 79,259,933.34 100.00 4,213,285.89 5.32 – – – – 79,259,933.34 100.00 4,213,285.89	2012 Closing balance Provision for bad debts Amount Percentage Amount Percentage (%) (%) – – – – – – – – 29,541,171.16 35.78 297,701.89 1.01 53,014,085.91 64.22 2,816,095.82 5.31 82,555,257.07 100.00 3,113,797.71 3.77 – – – – 82,555,257.07 100.00 3,113,797.71

In the groups, provision for bad debts for accounts receivable due from governments are made using discounting method:

	2013		2012
		Provision for		Provision for
Category	Closing balance	bad debts	Closing balance	bad debts
Due from governments	33,483,226.96	754,024.68	29,541,171.16	297,701.89

In the groups, provision for bad debts for accounts receivable due from nongovernments are made using aging analysis:

Aging Within 1 year 1 to 2 years 2 to 3 years Over 3 years Total	2013 Closing balance Amount Percentage (%) 27,503,643.13 60.08 15,089,100.25 32.96 2,509,913.00 5.48 674,050.00 1.48 45,776,706.38 100.00	Provision for bad debts 825,109.29 1,207,128.02 752,973.90 674,050.00 3,459,261.21	2012 Closing balance Amount Percentage (%) 38,456,476.13 75.24 13,828,551.78 26.08 247,058.00 0.47 482,000.00 0.91 53,014,085.91 100.00	Provision for bad debts 1,153,694.28 1,106,284.14 74,117.40 482,000.00
				2,816,095.82

– 144 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. There were no amount due from shareholders who holds 5% or more voting right of the Company included in balance of accounts receivable at the end of the year.

3. Particulars of the top five amounts of accounts receivable at the end of the year

Name of unit
Relationship
with the
Company
Closing balance
Age
Nanjing High-Tech Construction
non-related
6,469,661.89
Within 1 year
Development Co., Ltd.
customer
(南京高科建設發展有限公司)
Zhejiang Electronic Port Co., Ltd.
non-related
6,361,456.00
Within 1 year
(浙江電子口岸有限公司)
customer
Changchun Xinglong Comprehensive
non-related
5,053,940.80
Within 1 year
Bonded Zone Investment and
customer
Construction Co., Ltd.
(長春興隆綜合保稅區投資建設公司)
Fuzhou Bonded Logistics Development
non-related
4,956,188.00
Within 1 year
Company Limited
customer
(福州保稅物流發展有限公司)
Nanjing Bureau of Commerce
non-related
4,824,185.00
Within 1 year
(南京市商務局)
customer
Total
27,665,431.69

Percentage
of the total
accounts
receivable (%)
8.16
8.03
6.38
6.25
6.09

34.91

4. There were no amount due from related parties of the Company included in balance of accounts receivables at the end of the year.

5. There were no accounts receivables derecognised during 2013.

6. There were no accounts receivable-backed securitisations during 2013.

– 145 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(II) Other receivables

1. Disclosure of other receivables by categories:

Categories Individually significant and subject to separate provision Subject to provision by groups Including: Accounts receivable within the scope of combination Retention monies Others Sub-total for the group Individually insignificant but subject to separate provision Total	2013 Closing balance Provision for bad debts Amount Percentage Amount Percentage (%) (%) – – – – – – – – 64,161,611.17 84.06 – – 11,662,891.63 15.28 – – 503,574.09 0.66 42,557.71 8.45 76,328,076.89 100.00 42,557.71 0.06 – – – – 76,328,076.89 100.00 42,557.71 –	2012 Closing balance Provision for bad debts Amount Percentage Amount Percentage (%) (%) – – – – – – – – 64,677,272.81 46.49 – – 9,654,002.41 6.94 – – 64,774,680.81 46.57 3,240,423.76 5.00 139,105,956.03 100.00 3,240,423.76 2.33 – – – – 139,105,956.03 100.00 3,240,423.76 –

In the groups, provision for bad debts for other receivables are made using aging analysis:

Aging Within 1 year 1 to 2 years 2 to 3 years Over 3 years Total	2013 Closing balance Amount Percentage (%) 426,349.64 84.66 43,430.00 8.62 33,794.45 6.72 – – 503,574.09 100.00	Provision for bad debts 21,317.48 4,343.00 16,897.23 – 42,557.71	2012 Closing balance Amount Percentage (%) 64,740,886.36 99.95 33,794.45 0.05 – – – – 64,774,680.81 100.00	Provision for bad debts 3,237,044.31 3,379.45 – –
				3,240,423.76

2. There were no amount due from shareholders who holds 5% or more voting right of the Company included in balance of other receivables at the end of the year.

– 146 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. Particulars of the top five amounts of other receivables at the end of the year

Relationship with the Name of unit Company Sample Technology (H.K.) Co., Ltd. wholly-owned subsidiary Fuzhou Bonded Logistics non-related party Development Company Limited Changchun Xinglong non-related party Comprehensive Bonded Zone Investment and Construction Co., Ltd. Huai’an City Public Security Bureau non-related party Dayao Bay Bonded Port non-related party Customs of Dalian Total	Closing balance Age 64,161,611.17 Over 3 years 1,617,653.00 2 to 3 years 901,485.20 1 to 2 years 412,969.00 Over 3 years 210,288.00 Over 3 years 67,304,006.37	Percentage of the total other Nature or receivables (%) content 84.06 amounts for transaction 2.12 Retention monies 1.18 Retention monies 0.54 Retention monies 0.28 Retention monies 88.18

4 Amount due from related parties of the Company included in balance of other receivables at the end of the year

			Percentage of
	Relationship with		the total other
Name of unit	the Company	Closing balance	receivables (%)
Sample Technology	wholly-owned subsidiary	64,161,611.17	84.06
(H.K.) Co., Limited

5. There were no other receivables derecognised during 2013.

6. There were no other receivables-backed securitisations during 2013.

– 147 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(III) Long-term equity investments

Accounting Investment Investee method cost Subsidiaries: Jiangsu Intellitrans Cost method 130,000,000.00 Company Limited Nanjing Sample Cost method 6,000,000.00 Logistic Company Limited Nanjing Wu Lian Wang Yan Cost method 85,000,000.00 Jiu Yuan Development Co., Limited Sample Technology (H.K.) Cost method 77,688.00 Co., Limited Jianqsu Sample Information Cost method 15,000,000.00 Technology Co., Ltd. Xuzhou Sample Intelligent Cost method 70,000,000.00 Technology Development Co., Ltd. Jiangsu Cross-border Cost method 12,000,000.00 e-Commerce Services Co., Ltd. Other investees: Zhong Jian Zhi Kang Supply Cost method 74,986,244.94 Chain Management Company Limited Jiangsu Information Industry Cost method 2,000,000.00 Institute Union Joint Stock Company Nanjing City Information Cost method 24,400,000.00 Investment Holding Co., Ltd. Total	2012 130,000,000.00 6,000,000.00 85,000,000.00 77,688.00 15,000,000.00 – – 74,986,244.94 2,000,000.00 24,400,000.00 337,463,932.94	Increase/ Decrease in the year – – – – – 70,000,000.00 12,000,000.00 – – – 82,000,000.00	Equity Voting Interest rights held held 2013 (%) (%) 130,000,000.00 100.00 100.00 6,000,000.00 100.00 100.00 85,000,000.00 85.00 85.00 77,688.00 100.00 100.00 15,000,000.00 30.00 30.00 70,000,000.00 100.00 100.00 12,000,000.00 60.00 60.00 74,986,244.94 19.00 19.00 2,000,000.00 4.00 4.00 24,400,000.00 13.83 13.83 419,463,932.94

– 148 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(IV) Operating income and operating cost

1. Operating income and operating cost

Items Principal operating income Other operating income Total operating income Principal operating cost Other operating cost Total operating cost	2013 198,534,286.16 5,242,949.27 203,777,235.43 115,325,461.76 2,655,071.02 117,980,532.78	2012 218,606,547.31 4,877,852.81
		223,484,400.12

		109,094,236.62 1,948,991.81
		111,043,228.43

2. Principal operations (by product)

Name of Products System integration Including: Expressway Customs logistics Intelligent terminal sales Service Total	2013 operating income operating cost 70,464,946.53 41,004,739.33 – – 70,464,946.53 41,004,739.33 106,439,339.63 74,320,722.43 21,630,000.00 – 198,534,286.16 115,325,461.76	2012 operating income operating cost 131,728,035.20 72,439,508.40 22,320,706.05 10,442,756.80 109,407,329.15 61,996,751.60 70,468,512.11 36,649,958.22 16,410,000.00 4,770.00 218,606,547.31 109,094,236.62	2012 operating income operating cost 131,728,035.20 72,439,508.40 22,320,706.05 10,442,756.80 109,407,329.15 61,996,751.60 70,468,512.11 36,649,958.22 16,410,000.00 4,770.00 218,606,547.31 109,094,236.62
			109,094,236.62

3. Operating income from the top five customers of the Company for the year

Name of the customers Nanjing Gori Technology (Holdings) Co., Ltd. (南京國瑞科技（集團）有限公司) Jiangsu Bozhi Software Technology Co., Ltd. ( 江蘇博智軟件科技有限公司) Sunflower Pharmaceutical Group Co., Ltd. (葵花藥業集團醫藥有限公司) Nanjing Taixin Project Construction Co., Ltd. (南京泰新工程建設有限公司) Jiangsu Yide Group Co., Ltd. (江蘇一德集團有限公司) Total	2013 Percentage of the total operating Total operating income of the income Company (%) 37,769,305.19 18.53 34,950,660.94 17.15 26,572,649.49 13.04 13,329,065.82 6.54 10,278,094.03 5.04 122,899,775.47 60.30	2013 Percentage of the total operating Total operating income of the income Company (%) 37,769,305.19 18.53 34,950,660.94 17.15 26,572,649.49 13.04 13,329,065.82 6.54 10,278,094.03 5.04 122,899,775.47 60.30
		60.30

– 149 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(V) Investment income

Items Investment income from long-term equity investments under equity method Investment income from disposal of long-term equity investments Total	2013 – – –	2012 4,324,931.80 10,225,428.74
		14,550,360.54

Note: Investment income from disposal of long-term equity investments: (1) the Company transferred its 31% equity held in Zhong Jian Zhi Kang to Shanghai Yang Yue Investment Partnership (limited partnership) the transfer price exceeding the carrying amount of the investment cost of RMB6,854,022.24 was included in investment income. (2) Capital reserve of RMB3,371,406.50 corresponding to the portion of changes of the owners’ equity in Zhong Jian Zhi Kang due to the equity transfer other than net profit or loss, which was accounted for by the equity method, was included in investment income.

(VI) Supplementary information of cash flow statements

Items 1. Reconciliation of net profit to cash flow of operating activities Net profit Add: Provision for assets impairment Depreciation of fixed assets, depletion of oil and gas assets, depreciation of productive biological assets Amortisation of intangible assets Amortisation of long-term deferred expenses Loss on disposal of fixed assets, intangible assets and other long-term assets Loss on scrapped fixed assets Loss on change in fair value Financial expenses Investment loss Decrease in deferred tax assets Increase in deferred tax liabilities Decrease in inventories Decrease of operating receivables Increase of operating payables Others Net cash flows from operating activities	2013 42,550,358.53 (2,053,936.89) 4,393,135.35 385,400.76 – 11,996.21 – – 4,216,505.58 – 1,134,102.29 – (6,778,616.50) 5,802,731.90 (13,094,903.99) – 36,566,773.24	2012 78,488,338.39 (1,810,426.81) 4,579,055.16 385,400.76 – (1,270,527.45) – – 7,958,243.43 (14,550,360.54) (1,000,886.02) – (1,758,568.07) 55,499,923.46 12,149,235.31 –
		138,669,427.62

Significant investing and financing activities that
do not involve cash receipts and payments
Conversion of debt into capital	–	–
Convertible company bonds due within one year	–	–
Fixed assets held under finance leases	–	–

– 150 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Items 3. Net movement in cash and cash equivalents Cash at the end of the period Less: cash at the beginning of year Add: cash equivalents at end of the period Less: cash equivalents at beginning of the year Net increase in cash and cash equivalents	2013 55,204,087.55 93,042,559.41 – – (37,838,471.86)	2012 93,042,559.41 72,318,728.78 – –
		20,723,830.63

XIV. SUPPLEMENTAL INFORMATION

(I) Summary of non-recurring profit or loss Items Profits or losses on disposal of non-current assets Government grants recognised in profits or losses (excluding those government grants that are closely relevant to the enterprise’s business and are received with fixed amounts or with fixed percentage based on unified standards promulgated by government) Other non-operating income and expenses other than the aforementioned items Other profit or loss items meeting the definition of non-recurring profit or loss Impact on income tax Impact on minority interests (after-tax) Total	2013 (51,099.78) 8,077,136.64 91,584.54 – (937,654.49) (616,961.56) 6,563,005.35	2012 1,257,925.22 12,334,637.50 (279,538.50) 10,225,428.74 (3,363,067.42) (412,952.95)
		19,762,432.59

(II) Return on net assets and earnings per share

		Earnings per share	Earnings per share
	Weighted	(RMB/share)
	average	Basic	Diluted
	return on	earnings	earnings
2013	net assets	per share	per share
Net profit attributable to ordinary
shareholders of the Company	13.11%	0.564	0.564
Net profit after deducting non-recurring
profit or loss attributable to ordinary
shareholders of the Company	12.43%	0.535	0.535

– 151 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

		Earnings per share	Earnings per share
	Weighted	(RMB/share)
	average	Basic	Diluted
	return on	earnings	earnings
2012	net assets	per share	per share
Net profit attributable to ordinary
shareholders of the Company	19.63%	0.749	0.749
Net profit after deducting non-recurring
profit or loss attributable to ordinary
shareholders of the Company	17.32%	0.661	0.661

(III) Exceptional items in financial statements of the Company and their reasons

1. Items in the balance sheet with significant changes during comparative periods and their reasons

			Percentage
Items	2013	2012	of change	Reasons of fluctuation
Notes receivable	3,300,000.00	160,000.00	1962.50	It was mainly due to the receipt of notes.
Prepayments	96,418,562.53	48,417,202.13	99.14	It was mainly due to the increase of the
				materials cost.
Other receivables	92,493,603.10	147,128,312.82	(37.13)	It was mainly due to the receipt of
				consideration of equity transfer.
Construction in progress	166,580,798.69	105,149,762.35	58.42	It was mainly due to the increase of
				projects under construction.
Construction materials	1,906,895.00	3,978,173.60	(52.07)	It was mainly due to the use of project
				materials.
Long-term deferred expenses	2,886,273.36	755,341.29	282.12	It was mainly due to the increase of e-card
				fee.
Deferred income tax assets	11,348,029.95	6,592,988.15	72.12	It was mainly due to the increase of
				provision.
Short-term borrowings	285,000,000.00	138,000,000.00	106.52	It was mainly due to decrease of
				borrowings.
Notes payable	6,115,952.00	29,246,066.85	(79.09)	It was mainly due to the decrease in bills.
Taxes payable	35,754,695.27	52,212,021.92	(31.52)	It was mainly due to the decrease in income
				tax payable.
			Percentage of
Items	2013	2012	change (%)	Reasons of fluctuation
Taxes and surcharges	11,207,510.01	18,738,322.80	(40.19)	It was mainly due to the decrease in
				turnover tax and the corresponding
				city surcharges construction tax and
				education surcharge tax decreased
				during the period.
General and administrative	75,788,482.51	56,672,710.29	33.73	It was mainly due to the increase of
expenses				research and development cost.
Income tax expenses	21,496,476.06	37,621,268.34	(42.86)	It was mainly due to the decrease of taxable
				profits and the corresponding tax
				payables decreased.

XV. APPROVAL OF FINANCIAL STATEMENTS

These financial statements were approved by the Board of Directors of the Company.

– 152 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

III. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following is the full text of the unaudited financial statements of the Group for the six months ended 30 June 2014:

Consolidated Balance Sheet

At 30 June 2014

ASSETS Note Current assets: Cash at bank and on hand Notes receivable 8 Accounts receivable 8 Prepayments 8 Other receivables 8 Inventories Total current assets Non-current assets: Available-for-sale financial assets Fixed assets Construction in progress Construction materials Intangible assets Long-term deferred expenses Deferred income tax assets Total non-current assets TOTAL ASSETS	At 30 June 2014 (Unaudited) 491,579,921.31 450,000.00 316,516,967.85 137,498,253.88 119,489,797.73 512,418,128.77 1,577,953,069.54 119,506,244.94 189,379,258.72 196,915,650.23 3,397,054.00 20,380,493.73 4,827,659.04 11,186,605.00 545,592,965.66 2,123,546,035.20	At 31 December 2013 (Audited) 579,052,891.83 3,300,000.00 343,612,285.44 96,418,562.53 92,493,603.10 283,576,874.55
		1,398,454,217.45

		101,386,244.94 197,473,466.90 166,580,798.69 1,906,895.00 21,828,164.51 2,886,273.36 11,348,029.95
		503,409,873.35

		1,901,864,090.80

– 153 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Note LIABILITIES & SHAREHOLDERS’ EQUITY Current liabilities: Short-term borrowings Notes payable Accounts payable 9 Advances from customers 9 Staff remuneration payables Taxes payable Dividends payable Other payables 9 Non-current liabilities due within 1 year Total current liabilities Non-current liabilities: Long-term borrowings Deferred income tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities	At 30 June 2014 (Unaudited) 380,000,000.00 14,469,197.00 375,347,349.62 34,357,559.52 415,828.76 29,523,996.37 22,410,000.00 42,152,452.66 26,250,000.00 924,926,383.93 76,250,000.00 827,649.27 22,326,916.72 99,404,565.99 1,024,330,949.92	At 31 December 2013 (Audited) 285,000,000.00 6,115,952.00 316,606,125.09 25,481,574.39 392,855.74 35,754,695.27 – 25,303,089.24 50,000,000.00
		744,654,291.73

		76,250,000.00 973,618.23 22,925,895.86
		100,149,514.09

		844,803,805.82

– 154 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Note Shareholders’ equity: Share capital Capital surplus Surplus reserve Undistributed profits Difference on translation of foreign currency financial statements Total equity attributable to the shareholders of the Company Minority interest Total shareholders’ equity TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY Net current assets Total assets less current liabilities	At 30 June 2014 (Unaudited) 224,100,000.00 99,627,613.95 46,153,350.13 684,495,922.67 (3,092,046.85) 1,051,284,839.90 47,930,245.38 1,099,215,085.28 2,123,546,035.20 653,026,685.61 1,198,619,651.27	At 31 December 2013 (Audited) 224,100,000.00 99,627,613.95 46,153,350.13 642,216,593.48 (3,776,850.71) 1,008,320,706.85 48,739,578.13 1,057,060,284.98 1,901,864,090.80 653,799,925.72 1,157,209,799.07

– 155 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated income statement (unaudited)

For the six months ended 30 June 2014

ITEMS Note I. Total operating income 2 II. Total operating cost Operating cost Taxes and surcharges Selling expenses Administrative expenses Finance costs 4 Impairment losses for assets Share of profit of associates and jointly controlled entities Other investment income III. Operating profit Add: Non-operating income Less: Non-operating expenses IV. Total profit Less: Income tax expenses 5 V. Net profit Net profit attributable to the shareholders of the Company VI. Other comprehensive income VII. Total comprehensive income Total comprehensive income attributable to the shareholders of the Company Total comprehensive income attributable to minority shareholders VIII. Earnings per share: 6 (1) Basic earnings per share (2) Diluted earnings per share IX. Dividends 7	ITEMS Note I. Total operating income 2 II. Total operating cost Operating cost Taxes and surcharges Selling expenses Administrative expenses Finance costs 4 Impairment losses for assets Share of profit of associates and jointly controlled entities Other investment income III. Operating profit Add: Non-operating income Less: Non-operating expenses IV. Total profit Less: Income tax expenses 5 V. Net profit Net profit attributable to the shareholders of the Company VI. Other comprehensive income VII. Total comprehensive income Total comprehensive income attributable to the shareholders of the Company Total comprehensive income attributable to minority shareholders VIII. Earnings per share: 6 (1) Basic earnings per share (2) Diluted earnings per share IX. Dividends 7	Six months ended 30 June 2014 2013 387,823,724.09 357,413,551.80 313,874,857.59 286,814,457.86	Six months ended 30 June 2014 2013 387,823,724.09 357,413,551.80 313,874,857.59 286,814,457.86
	Operating cost Taxes and surcharges Selling expenses Administrative expenses Finance costs 4 Impairment losses for assets	259,469,666.18 3,683,990.26 11,077,888.77 31,622,366.47 9,097,112.22 (1,076,166.31)	232,776,891.08 6,753,145.87 10,314,284.11 38,033,669.90 3,139,721.30 (4,203,254.40)
		– – 73,948,866.50 3,350,020.10 61,276.65 77,237,609.95 11,957,613.51 65,279,996.44 64,689,329.19 684,803.86 65,964,800.30 65,374,133.05 590,667.25 0.289 0.289 –	– – 70,599,093.94 9,458,592.35 149,200.91 79,908,485.38 12,782,381.82 67,126,103.56 65,531,817.06 (76,248.93) 67,049,854.63 65,455,568.13 1,594,286.50 0.292 0.292 –

– 156 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Condensed Consolidated Cash Flow Statement (unaudited)

For the six months ended 30 June 2014 (All amounts in Renminbi yuan unless otherwise stated)

ITEMS
I.
Cash flows from operating activities
Net cash flows from operating activities
II.
Cash flows from investing activities
Net cash flows from investing activities
III. Cash flows from financing activities
Net cash flows from financing activities
IV. Effect of foreign exchange rate changes on
cash and cash equivalents
V.
Net increase in cash and cash equivalents
Add: Cash and cash equivalents at
beginning of period
VI. Cash and cash equivalent at end of period

Six months ended 30 June
2014
2013
(35,707,518.64)
18,999,991.47
(59,102,885.18)
(20,390,478.27)
29,914,313.37
64,885,507.76
80,300.53
(77,931.38)
(64,815,789.92)
63,417,089.58
528,313,465.63
389,224,229.07
463,497,675.71
452,641,318.65

– 157 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Changes in Equity (unaudited)

For the six months ended 30 June 2014

(All amounts in Renminbi yuan unless otherwise stated)

Six months ended 30 June 2014 Attributable to the shareholders of the Company

ITEMS I. Closing balance of prior year II. Opening balance of current year III. Changes during the period (I) Net profits (II) Other comprehensive income (III) Shareholders contribution and capital reduction 1. Capital contribution by shareholders (IV) Profit appropriation 1. Appropriation to surplus reserves 2. Appropriation to shareholders (V) Others IV. Closing balance of current period	Share capital 224,100,000.00 224,100,000.00 – – – – – – – – – 224,100,000.00	Capital surplus 99,627,613.95 99,627,613.95 – – – – – – – – – 99,627,613.95	Surplus reserve 46,153,350.13 46,153,350.13 – – – – – – – – – 46,153,350.13	Undistributed profits 642,216,593.48 642,216,593.48 42,279,329.19 64,689 ,329.19 – – – (22,410,000.00) – (22,410,000.00) – 684,495,922.67	Others (3,776,850.71) (3,776,850.71) 684,803.86 – 684,803.86 – – – – – – (3,092,046.85)	Minority interest 48,739,578.13 48,739,578.13 (809,332.75) 590,667.25 – – – (1,400,000.00) – (1,400,000.00) – 47,930,245.38	Total shareholders’ equity 1,057,060,284.98
							1,057,060,284.98
							42,154,800.30 65,279,996.44 684,803.86 – – (23,810,000.00) – (23,810,000.00) –
							1,099,215,085.28

– 158 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Six months ended 30 June 2013 Attributable to the shareholders of the Company

ITEMS I. Closing balance of prior year II. Opening balance of current year III. Changes during the period (I) Net profits (II) Other comprehensive income (III) Shareholders contribution and capital reduction 1. Capital contribution by shareholders (IV) Profit appropriation 1. Appropriation to surplus reserves 2. Appropriation to shareholders (V) Others IV. Closing balance of current period	Share capital 224,100,000.00 224,100,000.00 – – – – – – – – – 224,100,000.00	Capital surplus 99,627,613.95 99,627,613.95 – – – – – – – – – 99,627,613.95	Surplus reserve 41,898,314.28 41,898,314.28 – – – – – – – – – 41,898,314.28	Undistributed profits 564,885,873.01 564,885,873.01 20,711,817.06 65,531,817.06 – – – (44,820,000.00) – (44,820,000.00) – 585,597,690.07	Others (3,644,102.21) (3,644,102.21) (76,248.93) – (76,248.93) – – – – – – (3,720,351.14)	Minority interest 37,017,855.92 37,017,855.92 1,594,286.50 1,594,286.50 – – – – – – – 38,612,142.42	Total shareholders’ equity 963,885,554.95
							963,885,554.95
							22,229,854.63 67,126,103.56 (76,248.93) – – (44,820,000.00) – (44,820,000.00) –
							986,115,409.58

– 159 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes to the Unaudited Interim Financial Statements

For the six months ended 30 June 2014

1. BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICiES

The unaudited interim financial statements have been prepared in accordance with the Accounting Standards for Business Enterprises and other related regulations (“PRC Accounting Standards”) issued by the Ministry of Finance of the People’s Republic of China (the “Ministry of Finance”) and the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

In January and February 2014, the Ministry of Finance issued “Accounting Standards for Business Enterprises No. 39-Fair Value Measurement”, “Accounting Standards for Business Enterprises No. 40-Joint Arrangements” and issued the revised “Accounting Standards for Business Enterprises No. 30-Presentation of Financial Statements”, “Accounting Standards for Business Enterprises No. 9-Employee Benefits” and “Accounting Standards for Business Enterprises No. 33-Consolidated Financial Statements”. The above five Accounting Standards for Business Enterprises will be effective from 1 July 2014 and entities listed overseas are encouraged to early adopt these Accounting Standards for Business Enterprises. As a Hong Kong listed company, the Company has adopted the above five Accounting Standards for Business Enterprises in the preparation of the financial statements for the year 2013 in accordance with the regulation in the transition period.

On 13 March 2014, the Ministry of Finance issued “Accounting Standards for Business Enterprises No. 2-Long-term equity investments”. The above Accounting Standards for Business Enterprises will be effective from 1 July 2014 and entities listed overseas are encouraged to early adopt this Accounting Standards for Business Enterprises. The Company has adopted the above Accounting Standards for Business Enterprises in the preparation of the financial statements for the six months ended 30 June 2014.

On 27 March 2014, the Ministry of Finance issued “Accounting Standards for Business Enterprises No. 41-Disclosure of Interests in Other Entities”. The above Accounting Standards for Business Enterprises will be effective from 1 July 2014 and entities listed overseas are encouraged to early adopt this Accounting Standards for Business Enterprises. The Company has adopted the above Accounting Standards for Business Enterprises in the preparation of the financial statements for the six months ended 30 June 2014.

Save the Adoption of the above-mentioned accounting standards, the accounting policies and methods of computation used in the preparation of the unaudited interim financial statements are consistent with those adopted in the annual financial statements of the Company for the year ended 31 December 2013. This interim result has not been audited by the auditor of the Company, and has been reviewed by the audit committee of the Company.

– 160 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. TOTAL OPERATING INCOME

Operating income represents the Group’s principal operating income, including revenue received and receivable from system integration, intelligent terminal sales and service businesses.

(1) Operating income and operating cost

Item Principal operating income Other operating income Total operating income Principal operating cost Other operating cost Total operating cost	Six months ended 30 June 2014 2013 (Unaudited) (Unaudited) 384,266,352.73 353,393,182.32 3,557,371.36 4,020,369.48 387,823,724.09 357,413,551.80 257,279,052.93 231,651,266.63 2,190,613.25 1,125,624.45 259,469,666.18 232,776,891.08	Six months ended 30 June 2014 2013 (Unaudited) (Unaudited) 384,266,352.73 353,393,182.32 3,557,371.36 4,020,369.48 387,823,724.09 357,413,551.80 257,279,052.93 231,651,266.63 2,190,613.25 1,125,624.45 259,469,666.18 232,776,891.08
		357,413,551.80

		231,651,266.63 1,125,624.45
		232,776,891.08

(2) Principal operations (by product)

	Six months ended 30 June	Six months ended 30 June	Six months ended 30 June	Six months ended 30 June
	2014		2013
	(Unaudited)		(Unaudited)
Name of Products	operating income	operating cost	operating income	operating cost
System integration	288,749,755.12	201,637,120.84	259,558,401.39	176,805,148.94
Including: Intelligent traffic	237,362,216.37	173,691,325.69	217,793,824.56	155,907,504.19
Customs logistics	51,387,538.75	27,945,795.15	41,764,576.83	20,897,644.75
Intelligent terminal sales	66,672,883.47	43,317,749.90	75,032,169.56	44,428,528.73
Service	28,843,714.14	12,324,182.19	18,802,611.37	10,417,588.96
Total	384,266,352.73	257,279,052.93	353,393,182.32	231,651,266.63

3. SEGMENTS INFORMATION

Information regarding the Company’s reportable operating segments as provided to the Company’s chief operating decision makers for the purposes of resources allocation and assessment of segment performance for the Period is only derived from intelligent system business. In addition, the Company’s operations are situated in the PRC in which its revenue was derived principally therefrom. Accordingly, no separate segments are presented.

– 161 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. FINANCE COSTS

Item Interest expenses Less: interest income Exchange (gains)/losses Others Total	Six months ended 30 June 2014 2013 (Unaudited) (Unaudited) 10,375,111.13 5,114,492.24 1,664,426.08 2,643,565.24 – 527,139.49 386,427.17 141,654.81 9,097,112.22 3,139,721.30

Notes: Interest expenses are interest on bank borrowings wholly repayable within five years.

5. INCOME TAX EXPENSES

Item Current income tax calculated based on tax law and related regulations Deferred income tax adjustment Total	Six months ended 30 June 2014 2013 (Unaudited) (Unaudited) 11,796,188.56 15,784,567.10 161,424.95 (3,002,185.28) 11,957,613.51 12,782,381.82

On 31 October 2011, the Company obtained the High and New Technology Enterprise certificate jointly issued by the Jiangsu Science and Technology Bureau, Jiangsu Finance Bureau, Jiangsu State Tax Bureau and Jiangsu Local Tax Bureau ( 江蘇省科學技術廳、江蘇省財政廳、江蘇省國家稅務局、江蘇省地方稅務局 ), for an effective period of three years. Pursuant to article 28 of the Enterprise Income Tax Law of the People’s Republic of China, the income shall be taxed at the reduced rate of 15% for the New and High Technology Enterprise, therefore, its tax rate was 15% during the reporting period.

– 162 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

On 22 December 2009, Jiangsu Raifu Intelligent Tech. Co., Ltd., a subsidiary of the Company, obtained the High and New Technology Enterprise certificate jointly issued by the Jiangsu Science and Technology Bureau, Jiangsu Finance Bureau, Jiangsu State Tax Bureau and Jiangsu Local Tax Bureau ( 江蘇省科學技術廳、江蘇省財政廳、江蘇省國家稅務局、江蘇省地方稅務局 ), for an effective period of three years. After the High and New Technology review on 5 November 2012, the Company continued to be the High and New Technology Enterprise. Pursuant to article 28 of the Enterprise Income Tax Law of the People’s Republic of China, the income shall be taxed at the reduced rate of 15% for the New and High Technology Enterprise. Therefore, its effective tax rate is 15% during the reporting period.

The other domestic subsidiaries of the Company were taxed at 25% enterprise income tax rate.

The offshore subsidiaries of the Company were taxed at the local applicable income tax rate.

6. EARNINGS PER SHARE

The calculation of the earnings per share is based on the net profit for the period attributable to the shareholders of the Company of RMB64,689,329.19 (2013: RMB65,531,817.06) and weighted average number of issued ordinary shares of approximately 224,100,000 (2013: 224,100,000) during the period.

The amount of basic earnings per share is the same as the diluted earnings per share as there was no dilution during the periods ended 30 June 2014 and 2013.

7. DIVIDENDS

The Board does not recommend the payment of an interim dividend for the six months ended 30 June 2014 (2013: Nil).

8. TRADE AND OTHER RECEIVABLES

Accounts receivable Less: Provision for doubtful and bad debts for accounts receivables Notes receivable Prepayments Other receivables Less: Provision for doubtful and bad debts for other receivables Total	At 30 June 2014 (Unaudited) 351,556,478.12 35,039,510.27 450,000.00 137,498,253.88 120,017,425.08 527,627.35 573,955,019.46	At 31 December 2013 (Audited) 379,858,441.12 36,246,155.68 3,300,000.00 96,418,562.53 92,890,751.35 397,148.25 535,824,451.07

– 163 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The aging analysis of accounts receivable

Types Within 1 year (including one year) 1 to 2 years 2 to 3 years Over 3 years Total	At 30 June 2014 (Unaudited) Provision for Closing balance bad debts 195,986,796.97 5,839,172.07 95,215,190.15 7,617,215.21 55,141,678.28 16,454,643.39 5,212,812.72 5,128,479.60 351,556,478.12 35,039,510.27	At 31 December 2013 (Audited) Provision for Closing balance bad debts 217,602,559.78 6,599,146.82 99,733,090.85 6,422,592.93 55,933,217.53 16,712,772.07 6,589,572.96 6,511,643.86 379,858,441.12 36,246,155.68	At 31 December 2013 (Audited) Provision for Closing balance bad debts 217,602,559.78 6,599,146.82 99,733,090.85 6,422,592.93 55,933,217.53 16,712,772.07 6,589,572.96 6,511,643.86 379,858,441.12 36,246,155.68
			36,246,155.68

Payment terms with customers are mainly on credit together with deposits. Invoices are normally payable within 180 days of issuance, except for certain well-established customers.

9. TRADE AND OTHER PAYABLES

Accounts payables Advances from customers Other payables Total Age analysis of accounts payables Within 1 year 1 to 2 years Over 2 years Total	At 30 June 2014 (Unaudited) 375,347,349.62 34,357,559.52 42,152,452.66 451,857,361.80 At 30 June 2014 (Unaudited) 325,894,513.85 14,603,767.96 34,849,067.81 375,347,349.62	At 31 December 2013 (Audited) 316,606,125.09 25,481,574.39 25,303,089.24
		367,390,788.72

		At 31 December 2013 (Audited) 249,779,374.06 30,136,648.91 36,690,102.12
		316,606,125.09

– 164 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

IV. WORKING CAPITAL

Having considered the Group’s financial resources (including bank borrowing and other internal resources) and the net proceeds from the Domestic Share Subscription, the Directors believe that the Group shall have adequate working capital for its operation for the twelve months period from the date of this Circular.

V. NO MATERIAL CHANGE

The Directors confirmed that there is no material change in the financial or trading position or outlook of the Group since 31 December 2013, the date to which the latest published audited accounts of the Group were made up, up to and including the Latest Practicable Date.

VI. INDEBTEDNESS STATEMENT

Borrowings

At the close of business on 31 October 2014, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group had short-term borrowings and long-term borrowings with aggregate principal amount of approxiamtely RMB370 million and approximately RMB150 million respectively.

Capital commitments

At the close of business on 31 October 2014, the Group did not had any capital commitments.

Pledged assets

The Group had pledged bank deposits of approximately RMB118 million as at 31 October 2014.

Disclaimer

Save as aforesaid in this section of the circular and apart from intra-group liabilities and normal trade payables in the ordinary course of business, at the close of business on 30 September 2014, the Group did not have any debt securities issued and outstanding, or authorised or otherwise created but unissued, loans or any term loans (secured, unsecured, guaranteed or otherwise), any other borrowings or indebtedness in the nature of borrowing including bank overdrafts and any liabilities under acceptances (other than normal trade bills) or other similar indebtedness, acceptance credits, debentures, mortgages, charges, finance lease or hire purchase commitments, guarantees or other material contingent liabilities.

– 165 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Directors confirmed that there has been no material adverse change in the indebtedness and contingent liabilities of the Group since 30 September 2014, being the date for determining the Group’s indebtedness up to and the date of this Circular.

– 166 –

GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information relating to the Group. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

This circular includes particulars given in compliance with the Takeovers Code for the purpose of giving information relating to the Group. The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this circular (other than information relating to Sample Group) and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed (other than those expressed by Sample Group) in this circular have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement in this circular misleading.

The information in relation to Sample Group contained in this circular has been supplied by the directors of Sample Group. The directors of Sample Group jointly and severally accept full responsibility for the accuracy of the information contained in this circular (other than information relating to the Group) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed (other than those expressed by the Group) in this circular have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statements in this circular misleading.

2. MARKET PRICE

The table below sets out the closing prices of the H Shares on the Hong Kong Stock Exchange on (i) the last trading day of each of the six months immediately preceding the date of the Announcement; (ii) the Price Determination Day; and (iii) the Latest Practicable Date.

	Closing price
Date	per H Share
	HK$
30 April 2014	6.91
30 May 2014	7.01
30 June 2014	7.00
31 July 2014	6.80
29 August 2014	7.17
30 September 2014	6.48
20 October 2014 (being the Price Determination Date)	6.02
31 October 2014	6.60
28 November 2014 (being the Latest Practicable Date)	6.58

– 167 –

GENERAL INFORMATION

APPENDIX II

The lowest and highest closing market prices of the H Shares recorded on the Hong Kong Stock Exchange during the period commencing on 21 April 2014 (being the six months immediately prior to the date of the Announcement) and ending on the Latest Practicable Date were HK$6.02 per H Share (recorded on 17 October 2014 and 20 October 2014) and HK$7.19 per H Share (recorded on 14 August 2014) respectively.

3. SHARE CAPITAL, SHARE OPTIONS AND CONVERTIBLE SECURITIES

(i) Share capital

The registered and issued share capital of the Company (i) as at the Latest Practicable Date; and (ii) immediately after the completion of Domestic Shares Subscription are set out below:

(a) As at the Latest Practicable Date

	RMB
Registered capital
132,300,000 Domestic Shares of RMB1.00 each	132,300,000
91,800,000 H Shares of RMB1.00 each	91,800,000
Total	224,100,000

Issued and fully paid or credited as fully paid
132,300,000 Domestic Shares of RMB1.00 each	132,300,000
91,800,000 H Shares of RMB1.00 each	91,800,000
Total	224,100,000

_Immediately after the completion of Domestic Shares _	Subscription
	RMB
Registered capital
225,023,400 Domestic Shares of RMB1.00 each	225,023,400
91,800,000 H Shares of RMB1.00 each	91,800,000
Total	316,823,400

Issued and fully paid or credited as fully paid
225,023,400 Domestic Shares of RMB1.00 each	225,023,400
91,800,000 H Shares of RMB1.00 each	91,800,000
Total	316,823,400

(b) Immediately after the completion of Domestic Shares Subscription

– 168 –

GENERAL INFORMATION

APPENDIX II

The H Shares and Domestic Shares in issue are ordinary shares in the share capital of the Company. Dividends, if any, paid to Domestic Shareholders shall be in Renminbi and those to H Shareholders shall be in Hong Kong dollar, and holders of Domestic Shares shall be investors located in the PRC and those of H Shares shall be investors located outside of PRC, including but not limited to Hong Kong, Macau, Taiwan and all other foreign countries. All existing Domestic Shares and H Shares rank pari passu in all respects with each other, including capital, dividends and voting rights. The H Shares are listed on the Hong Kong Stock Exchange and the Domestic Shares are privately held shares that are not listed on any stock exchanges.

Since 31 December 2013 (being the date to which the latest published audited accounts of the Group were prepared) and up to the Latest Practicable Date, no new Shares have been issued by the Company.

(ii) Share options and convertible securities

As at the Latest Practicable Date, the Company had no outstanding options, warrants, derivatives or securities convertible into Shares.

4. DISCLOSURE OF INTERESTS

(a) Interests of Directors, Supervisors and Chief Executive Officers

Save as disclosed below, as at the Latest Practicable Date, none of the Directors, supervisors and chief executive officers of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which should be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they have taken or which they are deemed to have under such provisions of the SFO), or which were required to be recorded in the register required to be kept pursuant to Section 352 of the SFO, or otherwise required to be notified to the Company pursuant to the required standard of dealings as set out in Appendix 10 of the Listing Rules.

– 169 –

GENERAL INFORMATION

APPENDIX II

Long Positions in Shares

				Approximate
				Percentage of
				the Registered
Name of	Number of			Capital of the
Director	Shares	Class of Shares	Nature of Interest	Company
				(%)
Sha Min	1,350,000	Domestic Shares	Beneficial owner	0.6%
	158,443,400	Domestic Shares	Interest of controlled	70.70%
			corporation

Note: Mr. Sha Min, an executive Director and chairman of the Board, directly holds 1,350,000 Domestic Shares and is interested in 47.91% of equity interest of Sample Group which in turn has interest in 158,443,400 Domestic Shares. Under the SFO, Mr. Sha Min is deemed to be interested in all 159,793,400 Domestic Shares.

b) Interests of Substantial Shareholders

So far as the Directors are aware of, as at the Latest Practicable Date, each of the following persons (other than the Directors, supervisors or chief executive officers of the Company) had an interest or short position in the Company’s shares or underlying shares which would fall to be disclosed to the Company and the Hong Kong Stock Exchange under provisions of Divisions 2 and 3 of Part XV of the SFO, or was otherwise interested in 5% or more of any class of the then issued share capital of the Company, or was a substantial shareholder of the Company as defined in the Listing Rules:

– 170 –

GENERAL INFORMATION

APPENDIX II

Long Positions in Shares

				Approximate
				Percentage
				of the
				Registered
				Capital of
Name of	Number of			the
Shareholders	Shares	Class of Shares	Nature of Interest	Company
				(%)
Sample Group (1)	158,443,400	Domestic Shares	Beneficial owner/	70.70%
			corporate
Du Yu(2)	159,793,400	Domestic Shares	Interest of spouse	70.76%
Jiangsu Ruihua	15,000,000	Domestic Shares	Beneficial owner/	6.69%
Investment			corporate
Holding Group
Company Ltd.*
Active Gold	49,545,000	Domestic Shares	Beneficial owner/	22.11%
			corporate
Atlantis Capital	21,104,000	H Shares	Interest of	9.42%
Holdings			controlled
Limited (3)			corporation
Riverwood Asset	11,104,000	H Shares	Investment Manager	4.95%
Management
(Cayman) Ltd.
(3)
Liu Yang (3)	21,104,000	H Shares	Interest of	9.42%
			controlled
			corporation
Golden Meditech	12,097,000	H Shares	Interest of	5.40%
Holdings			controlled
Limited (4)			corporation
Manygain Global	10,000,000	H Shares	Beneficial owner	4.46%
Limited
JP Margan Chase	7,000,000	H Shares	Interest of	3.12%
& Co.			controlled
			corporation/
			custodian
			corporation/
			approved lending
			agent
Norges Bank	7,000,000	H Shares	Beneficial owner	3.12%

Notes:

(1) Sample Group directly holds 60,770,000 Domestic Shares and has an interest in 92,723,400 Domestic Shares by entering into the Domestic Shares Subscription Agreement. Sample Group is also interested in 100% of the registered capital of Sample Commerce City, which holds 4,950,000 Domestic Shares and therefore by virtue of the SFO, Sample Group is deemed to be interested in the 4,950,000 Domestic Shares held by Sample Commerce City. As such, Sample

– 171 –

GENERAL INFORMATION

APPENDIX II

Group is the substantial and the single largest shareholders of the Company. Mr. Sha Min, the Chairman of the Company, held 47.91% of equity interest of Sample Group, together with parties acting in concert with him (including 3.58% held by Ms. Liao Qiong, 9.52% held by Mr. Sun Huai Dong, 4.67% held by Mr. Chang Yong, an executive director of the Company, and 2.27% held by Mr. Guo Ya Jun) held an aggregate of 67.95% of equity interest of Sample Group. Mr. Sha Min is a director of Sample Group.

(2) Ms. Du Yu（杜予）is the spouse of Mr. Sha Min. Under the SFO, Ms. Du Yu is deemed to be interested in 159,793,400 Domestic Shares in which Mr. Sha Min is interested.
(3) Atlantis Capital Holdings Limited and Riverwood Asset Management (Cayman) Ltd. are 100% owned by Ms. Liu Yang. Under SFO, Ms. Liu Yang owned the 21,104,000 Shares in a capacity of interest under controlled corporation.
(4) 12,097,000 H Shares were held by GM Investment Company Limited, which is a wholly-owned subsidiary of Golden Meditech Holdings Limited (formerly known as Golden Meditech Company Limited). By virtue of GM Investment Company Limited’s interests in the Company, Golden Meditech Company Holdings Limited is deemed to be interested in the same 12,097,000 H Shares under the SFO.

Save as disclosed above and so far as the Directors were aware of, as at the Latest Practicable Date, no other person (other than a Director, supervisor or chief executive officer of the Company) had an interest or short position in the Company’s shares or underlying shares (as the case may be) which would fall to be disclosed to the Company and the Hong Kong Stock Exchange under the provisions of Division 2 and 3 of Part XV of the SFO, or which was recorded in the register required to be kept by the Company under section 336 of the SFO, or was otherwise a substantial shareholder of the Company as defined in the Listing Rules.

6. SHAREHOLDINGS AND DEALINGS

As at the Latest Practicable Date:

(a) there was no agreement, arrangement or understanding (including compensation arrangement) between Sample Group or any parties acting or presumed to be acting in concert with it (including Sample Commerce City, Mr. Sha Min and Active Gold) and any other persons in relation to the transfer, charge or pledge of the Shares that may be issued and allotted to Sample Group under the Domestic Shares Subscription Agreement or as a result of any obligation under the Domestic Shares Subscription Agreement;
(b) Mr. Sha Min, being a director of Sample Group, directly holds 1,350,000 Domestic Shares and 47.91% equity interest of Sample Group; Mr. Guo Mingke, being a director of Sample Group and Sample Commerce City, directly holds 10.59% equity interest of Sample Group; and Mr. Liao Qiong, being a director of Sample Group, directly holds 3.58% equity interest of Sample Group. Sample Group in turn directly and indirectly holds 65,720,000 Domestic Shares;
(c) save as disclosed in the section sub-headed “3. Shareholding structure of the Company” under the section headed “II. PROPOSED SUBSCRIPTION OF NEW DOMESTIC SHARES BY NANJING SAMPLE TECHNOLOGY GROUP COMPANY LIMITED*” in the letter from the Board of this circular, none of

– 172 –

GENERAL INFORMATION

APPENDIX II

Sample Group and parties acting or presumed to be acting in concert with it (including the directors of Sample Group, Sample Commerce City, Mr. Sha Min and Active Gold) held, owned, controlled any other Shares, convertible securities, warrants, options or derivatives of the Company and none of them had dealt for value in any such securities of the Company during the period beginning six months prior to the date of the Announcement and ending on the Latest Practicable Date;

(d) no person had irrevocably committed themselves to vote for or against the resolutions to be proposed at the EGM and/or the Class Meetings approving the Domestic Shares Subscription, the Domestic Shares Subscription Agreement, the specific mandate and the Whitewash Waiver;
(e) save for the Domestic Shares Subscription Agreement and the transactions contemplated thereunder, Sample Group or any parties acting or presumed to be acting in concert with it (including Sample Commerce City, Mr. Sha Min and Active Gold) did not have any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with any other persons;
(f) none of Sample Group or any parties acting or presumed to be acting in concert with it (including Sample Commerce City, Mr. Sha Min and Active Gold) has borrowed or lent any Shares, convertible securities, warrants, options or derivatives in the Company or similar right which are convertible or exchangeable into Shares to any person;
(g) the Company did not hold, control or have any direction over any shares and any options, warrants, derivatives or convertible securities in respect of Sample Group, or Sample Commerce City or Active Gold, being parties acting or presumed to be acting in concert with Sample Group, and it had not dealt for value in any such securities of Sample Group, Sample Commerce City or Active Gold during the period beginning six months prior to the date of the Announcement and ending on the Latest Practicable Date;
(h) Mr. Sha Min, an executive Director and chairman of the Board, and Mr. Chang Yong, an executive Director, held 47.91% and 4.67% equity interest of Sample Group, respectively, and apart from this, none of the Directors held, controlled or had direction over any shares, options, warrants, derivatives or convertible securities in respect of the securities in Sample Group, or Sample Commerce City or Active Gold, being parties acting or presumed to be acting in concert with Sample Group, and none of them had dealt for value in any such securities of Sample Group, Sample Commerce City or Active Gold during the period beginning six months prior to the date of the Announcement and ending on the Latest Practicable Date;
(i) save as disclosed in the sub-paragraph headed “(a) Interests of Directors, Supervisors and Chief Executive Officers” under the paragraph headed “4. Disclosure of Interests” in this appendix, none of the Directors was interested in any Shares, convertible securities, warrants, options or derivatives of the

– 173 –

GENERAL INFORMATION

APPENDIX II

Company or similar rights which are convertible or exchangeable into any Shares. In addition, none of the Directors had dealt for value in any Shares, convertible securities, warrants, options or derivatives of the Company during the period beginning six months prior to the date of the Announcement and ending on the Latest Practicable Date;

(j) none of the subsidiaries of the Company and none of the pension funds of the Company and/or its subsidiaries, nor any fund managed on a discretionary basis by any fund manager connected with the Company, nor any adviser to the Company as specified in class (2) of the definition of “associate” under the Takeovers Code, owned or controlled any Shares, convertible securities, warrants, options or derivatives of the Company as at the Latest Practicable Date or had dealt for value in any Shares, convertible securities, warrants, options or derivatives of the Company during the period beginning six months prior to the date of the Announcement and ending on the Latest Practicable Date;
(k) no person had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Company or any person who is an associate of the Company by virtue of classes (1), (2), (3) and (4) of the definition of associate in the Takeovers Code;
(l) Mr. Sha Min and his associates will be required to abstain from voting on the resolutions approving the Domestic Shares Subscription, the Domestic Shares Subscription Agreement, the amendments to the Articles, the specific mandate and the Whitewash Waiver at the EGM and the Class Meetings in respect of his beneficial shareholdings in the Company. The other Directors (being Mr. Chang Yong, Mr. Zhu Xiang, Mr. Ma Jun, Mr. Xu Su Ming, Mr. Geng Nai Fan and Mr. Shum Shing Kei) did not hold any Shares as at the Latest Practicable Date;
(m) neither the Company nor any Directors had borrowed or lent any Shares, convertible securities, warrants, options or derivatives in the Company or similar rights which are convertible or exchangeable into Shares;
(n) there was no benefit to be given to any Directors as compensation for loss of office in any member of the Group or otherwise in connection with the Domestic Shares Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver;
(o) there was no agreement, arrangement or understanding (including compensation arrangement) (i) between Sample Group or any parties acting or presumed to be acting in concert with it (including Sample Commerce City, Mr. Sha Min and Active Gold) and any Directors, recent Directors, Shareholders or recent Shareholders having any connection with or dependence upon the Domestic Shares Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver; and (ii) between any Directors and any other persons which is conditional on or dependent upon the outcome of the Domestic Shares Subscription Agreement and the transactions contemplated thereunder and the Whitewash Waiver; and

– 174 –

GENERAL INFORMATION

APPENDIX II

(p) apart from the Domestic Shares Subscription Agreement in which Mr. Sha Min and Mr. Chang Yong are interested, there is no material contract entered into by Sample Group in which any Director has a material personal interest.

7. DIRECTORS’ INTEREST IN COMPETING BUSINESS, CONTRACTS AND ASSETS

a) Interests in competing business

As at the Latest Practicable Date, the Directors were not aware that any of the Directors and their respective associates had interest in any business which competes or is likely to compete, either directly or indirectly, with the businesses of the Group.

b) Interests in assets

As at the Latest Practicable Date, none of the Directors nor their respective associates had any direct or indirect interest in any assets which, since 31 December 2013 (being the date to which the latest published audited accounts of the Group were made up), have been acquired or disposed of by or leased to any member of the Group, or proposed to be acquired or disposed of by or leased to any member of the Group.

c) Interests in contract or arrangement

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement which was significant in relation to the business of the Group.

8. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered into any existing or proposed service contract with the Company, or any of its subsidiaries or associated companies which:

(a) was a continuous contract with a notice period of 12 months or more;
(b) was a fixed term contract with more than 12 months to run irrespective of the notice period; or
(c) was not expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation).

As at the Latest Practicable Date, save for the service contract disclosed below, none of the Directors had entered into any existing or proposed service contract with the Company, or any of its subsidiaries or associated companies which (including both continuous and fixed term contracts) had been entered into or amended within 6 months before the date of the Announcement:

– 175 –

GENERAL INFORMATION

APPENDIX II

Mr. Zhu Xiang, an executive Director, had entered into a service contract with the Company on 28 May 2014, the expiry date of which is 31 December 2015. The fixed remuneration payable under the contract is RMB25,000 per year.

9. MATERIAL CONTRACTS

During the two years immediately preceding the date of the Announcement, up to and including the Latest Practicable Date, the following contracts, not being contracts entered into in the ordinary course of business carried on or intended to be carried on by the Company or any of its subsidiaries, have been entered into by members of the Group and are or may be material:

(i) The Domestic Shares Subscription Agreement, the terms of which are set out in this circular; and
(ii) The share transfer agreement dated 29 November 2012 entered into between the Company and Shanghai Yang Yue Investment Partnership Corporation (limited partnership)（上海仰岳投資合夥企業（有限合夥））in relation to the disposal of 31% equity interest in Zhong Jian Zhi Kang Supply Chain Service Company Limited
（中健之康供應鏈服務有限責任公司） by the Company at the consideration of RMB129,200,000.

10. MATERIAL LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance was known to the Directors to be pending or threatened by or against any member of the Group.

11 . CONSENT AND QUALIFICATION OF EXPERT

The following are the qualifications of the expert who has given its opinion or advice contained in the circular:

Name Qualifications

Messis Capital Limited

A corporation licensed to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities as defined under the SFO

Messis Capital Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion of and references to its name and its letter in the form and context in which it appears.

As at the Latest Practicable Date, Messis Capital Limited had (i) no direct or indirect shareholding in any member of the Group or the right (whether legally enforceable of not) to subscribe for or to nominate persons to subscribe for shares in any member of the Group and (ii) no direct or indirect interest in any assets which had been, since the date to which

– 176 –

GENERAL INFORMATION

APPENDIX II

the latest published audited accounts of the Group were made up of, acquired or disposed of by, or leased to any member of the Group, or were proposed to be acquired or disposed of by, or leased to any member of the Group.

12. DOCUMENTS AVAILBLE FOR INSPECTION

Copies of the following documents are available for inspection at the principal office of the Company in Hong Kong at 3112A, 31/F, Shun Tak Centre, 168-200 Connaught Road Central, Central, Hong Kong during normal business hours on any business day from the date of this circular up to and including the date of EGM and Class Meetings. Copy of the following documents will also be available for inspection on the website of the SFC at www.sfc.hk and the website of the Company at www.sampletech.com.cn from the date of this circular up to and including the date of the EGM and Class Meetings.

(i) the Article;
(ii) the letter from the Board, the text of which is set out on pages 6 to 22 of this circular;
(iii) the audited consolidated accounts of the Company for each of the three financial years ended 31 December 2011, 31 December 2012 and 31 December 2013;
(iv) the annual reports of the Company for each of the three years ended 31 December 2011, 31 December 2012 and 31 December 2013;
(v) the letter from Independent Board Committee for the Share Subscription, the text of which is set out on pages 23 to 24 of this circular;
(vi) the letter from Independent Board Committee for the Whitewash Waiver, the text of which is set out on pages 25 to 26 of this circular;
(vii) the letter from Messis Capital Limited to the Independent Board Committees and the Independent Shareholders, the text of which is set out on pages 27 to 46 of this circular;
(viii) the service contract entered into between the Company and Mr. Zhu Xiang, the executive Director, dated 28 May 2014;
(ix) the material contracts referred to in the section headed “9. Material contracts” in this Appendix;
(x) the written consent referred to in the section headed “11. Consent and Qualification of Expert” in this Appendix; and
(xi) a copy of this circular.

– 177 –

GENERAL INFORMATION

APPENDIX II

13. MISCELLANEOUS

(i) The head office and principal place of business of the Company in the PRC is located at No. 10 Maqun Avenue, Qixia District, Nanjing City, the PRC.
(ii) The principal place of business of the Company in Hong Kong is located at 3112A, 31/F, Shun Tak Centre, 168-200 Connaught Road Central, Central, Hong Kong.
(iii) The company secretary of the Company is Ms. Wong Lai Yuk, who is an associate member of both The Institute of Chartered Secretaries and Administrators and The Hong Kong Institute of Chartered Secretaries.
(iv) The Company’s H share registrar and H share transfer office in Hong Kong is Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(v) The financial adviser of the Company is Changjiang Corporate Finance (HK) Limited and its registered office is situated at Suite 1908, 19/F., Cosco Tower, 183 Queen’s Road Central, Hong Kong.
(vi) Messis Capital Limited is the Independent Financial Adviser to the Independent Board Committees and the Independent Shareholders, the registered office of which is situated at Room 1606, 16/F, Tower 2 Admiralty Centre, 18 Harcourt Road, Hong Kong.
(vii) The registered address of Sample Group is No. 3 Maqun Avenue, Maqun Science Park, Qixia District, Nanjing City, the PRC.

The registered address of Sample Commerce City is Room 101, No. 88-1, Hou Zai Men Dong Cun, Xuanwu District, Nanjing, the PRC.

The address of Mr. Sha Min is 28/F, Block A, Bao An Square, 1002 Sun Gang East Road, Luohu, Shenzhen, the PRC.

The registered address of Active Gold is Sea Meadow House, Blackburne Highway, Road Town, Tortola, British Virgin Islands.

(viii) The directors of Sample Group are Sha Min, Guo Mingke （郭明科）and Liao Qiong（廖琼）and its ultimate controlling shareholder is Mr. Sha Min.

The director of Sample Commerce City is Guo Mingke*（郭明科）and its ultimate controlling shareholder is Sha Min.

The director of Active Gold is Ferdinand Holdings Limited and its ultimate controlling shareholder is Ms. Wan Ngok Wah（尹萼華）.

(ix) The English text of this circular and the accompanying form of proxy shall prevail over the Chinese text in case of any inconsistency.

– 178 –

NOTICE OF EGM

南京三寶科技股份有限公司 NANJING SAMPLE TECHNOLOGY COMPANY LIMITED*

(a joint stock limited company established in the People’s Republic of China with limited liability) (Stock Code: 1708)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an Extraordinary General Meeting (the “ EGM ”) of Nanjing Sample Technology Company Limited (the “ Company ”) shall be held at No. 10 Maqun Avenue, Qixia District, Nanjing City, Jiangsu Province, the PRC at 10:00 a.m. on Monday, 29 December 2014 for the purposes of considering, and if thought fit, passing the following resolutions. Unless otherwise indicated, capitalised terms used herein shall have the same meanings as those defined in the circular of the Company dated 2 December 2014 (the “ Circular ”).

SPECIAL RESOLUTIONS

“ THAT the Domestic Shares Subscription Agreement entered into between the Company and Sample Group in relation to the subscription of a total of 92,723,400 new Domestic Shares by Sample Group pursuant to which Sample Group has conditionally agreed to subscribe for and the Company has conditionally agreed to issue 92,723,400 Domestic Shares at RMB4.50 (equivalent to approximately HK$5.67) per new Domestic Share, be and is hereby approved, confirmed and ratified, and all the transactions contemplated under the Domestic Shares Subscription Agreement be and are hereby approved, confirmed and ratified and that the Board be and is hereby authorised to make changes or amendments to the Domestic Shares Subscription Agreement as it may in its absolute discretion think fit, a copy of which is produced to the meeting marked “A” and signed by the Chairman of the EGM for the purpose of identification.”
“ THAT the Board be and is hereby granted a specific mandate to issue the new Domestic Shares at the subscription price of RMB4.50 (equivalent to approximately HK$5.67) per new Domestic Share upon completion of the Domestic Shares Subscription Agreement to Sample Group pursuant to the Domestic Shares Subscription Agreement.”
“ THAT the proposed amendments to the Articles to be made in order to reflect the corresponding increase in the registered capital and change in shareholding structure of the Company following completion of the Subscription Agreement (details of which were set out in section headed “6. Proposed amendments to the Articles” in the Letter from the Board in the Circular) be and are hereby approved

– 179 –

NOTICE OF EGM

and any one Director be and is hereby authorised to make such other modifications to the proposed amendments to the Articles as may be required by the relevant regulatory authorities in the PRC.”

“ THAT any Director be and is hereby authorised to implement and take all steps and to do all acts and things which in his opinion may be necessary or desirable to give effect and/or to complete or in connection with the Domestic Shares Subscription Agreement and transactions contemplated thereunder, including, without limitation, to approve any changes and amendments thereto, to obtain all necessary approvals from, and make all relevant registrations and filings with, the relevant PRC and other authorities, and to sign and execute such further documents, or to do any other matters incidental thereto and/or as contemplated thereunder.”
“ THAT subject to the granting of the whitewash waiver by the Executive Director of the Corporate Finance Division of the Securities and Futures Commission of Hong Kong and any delegate of such Executive Director pursuant to Note 1 on dispensations from Rule 26 of the Hong Kong Code on Takeovers and Mergers in respect of the obligation on the part of the Sample Group and parties acting or presumed to be acting in concert with it to make a mandatory general offer to the Shareholders for all issued Shares not already owned by Sample Group or parties acting or presumed to be acting in concert with it under Rule 26 of the Hong Kong Code on Takeovers and Mergers as a result of the issue of the new Domestic Shares, such whitewash waiver be and is hereby approved.”

By order of the Board **Nanjing Sample Technology Company Limited* Sha Min** Chairman of the Board

Nanjing, the PRC 2 December 2014

for identification purpose only

Notes:

As disclosed in the Circular, Sample Group, Sample Commerce City, Mr. Sha Min and Active Gold will abstain from voting on the above resolutions at the EGM. Save as disclosed above, no other Shareholders will be required to abstain from voting on the above resolutions. The Domestic Shares Subscription Agreement and the transactions contemplated thereunder are also subject to the approval by the holders of H Shares at the separate class meeting of the H Shareholders to be held on 29 December 2014 at 10:30 a.m. (or immediately after the conclusion or adjournment of the EGM) and holders of Domestic Shares by way of special resolutions at the separate class meeting of the Domestic Shareholders to be held on 29 December 2014 at 11:00 a.m. and (or immediately after the conclusion or adjournment of the H Shareholders Class Meeting).
Any member of the Company (“Member”) entitled to attend and vote at the EGM is entitled to appoint one or more proxies to attend and vote on his behalf. A proxy need not be a Member. In the case of a joint holding, the form of proxy may be signed by any joint holder, but if more than one joint holder is present at the meeting, whether in person or by proxy, that one of the joint holders whose name stands first on the register of Members in respect of the relevant joint holding shall alone be entitled to vote in respect thereof.

– 180 –

NOTICE OF EGM

To be valid, a proxy form and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of such authority must be delivered to the Company’s H Share Registrar, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Center, 183 Queen’s Road East, Wanchai, Hong Kong (in case of holders of H Shares) or to the Company’s registered office at No. 10 Maqun Avenue, Qixia District, Nanjing City, the People’s Republic of China (in case of holders of Domestic Shares) not less than 24 hours before the time appointed for the holding of the EGM or 24 hours before the time appointed for taking the poll. Delivery of the form of proxy shall not preclude a shareholder of the Company from attending and voting in person at the meeting and, in such event, the instrument appointing a proxy shall be deemed to be revoked.
Holders of the H Shares or Domestic Shares who intend to attend the EGM are requested to complete the enclosed REPLY SLIP FOR ATTENDANCE AT THE EXTRAORDINARY GENERAL MEETING and return it to the Company’s Hong Kong H Share registrar and transfer office, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17/F., Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong (in case of holders of H Shares) or the Company’s registered office at No. 10 Maqun Avenue, Qixia District, Nanjing City, the People’s Republic of China (in case of holders of Domestic Shares) on or before Friday, 19 December 2014. The reply slip may be delivered by hand or by post.
The register of members of the Company will be closed from 16 December 2014 (Tuesday) to 29 December 2014 (Monday) (both days inclusive), during which period no transfer of Shares will be effected. Shareholders whose names appear on the register of members of the Company (apart from Members who are required to abstain from voting) at the close of trading on 15 Decemebr 2014 (Monday) will be entitled to attend and vote at the EGM convened by the above notice.
Members or their proxies shall present identity proof (and form of proxy in case of proxies) upon attending the EGM.

As at the date of this notice, the Board comprises:

The executive Directors are Mr. Sha Min (Chairman), Mr. Chang Yong and Mr. Zhu Xiang; the non-executive Director is Mr. Ma Jun and the independent non-executive Directors are Mr. Xu Su Ming, Mr. Geng Nai Fan and Mr. Shum Shing Kei.

– 181 –

NOTICE OF THE H SHAREHOLDERS CLASS MEETING

南京三寶科技股份有限公司 NANJING SAMPLE TECHNOLOGY COMPANY LIMITED*

(a joint stock limited company established in the People’s Republic of China with limited liability) (Stock Code: 1708)

NOTICE OF H SHAREHOLDERS CLASS MEETING

NOTICE IS HEREBY GIVEN that an H shareholders class meeting (the “ H Shareholders Class Meeting ”) of Nanjing Sample Technology Company Limited (the “ Company ”) shall be held at No. 10 Maqun Avenue, Qixia District, Nanjing City, Jiangsu Province, the PRC at 10:30 a.m. on Monday, 29 December 2014 (or immediately after the conclusion or adjournment of the extraordinary general meeting (“ EGM ”)) for the purposes of considering, and if thought fit, passing the following resolutions. Unless otherwise indicated, capitalised terms used herein shall have the same meanings as those defined in the circular of the Company dated 2 December 2014 (the “ Circular ”).

SPECIAL RESOLUTIONS

“ THAT the Domestic Shares Subscription Agreement entered into between the Company and Sample Group in relation to the subscription of a total of 92,723,400 new Domestic Shares by Sample Group pursuant to which Sample Group has conditionally agreed to subscribe for and the Company has conditionally agreed to issue 92,723,400 Domestic Shares at RMB4.50 (equivalent to approximately HK$5.67) per new Domestic Share, be and is hereby approved, confirmed and ratified, and all the transactions contemplated under the Domestic Shares Subscription Agreement be and are hereby approved, confirmed and ratified and that the Board be and is hereby authorised to make changes or amendments to the Domestic Shares Subscription Agreement as it may in its absolute discretion think fit, a copy of which is produced to the meeting marked “A” and signed by the Chairman of the H Shareholders Class Meeting for the purpose of identification.”
“ THAT the Board be and is hereby granted a specific mandate to issue the new Domestic Shares at the subscription price of RMB4.50 (equivalent to approximately HK$5.67) per new Domestic Share upon completion of the Domestic Shares Subscription Agreement to Sample Group pursuant to the Domestic Shares Subscription Agreement.”
“ THAT the proposed amendments to the Articles to be made in order to reflect the corresponding increase in the registered capital and change in shareholding structure of the Company following completion of the Subscription Agreement (details of which were set out in section headed “6. Proposed amendments to the

– 182 –

NOTICE OF THE H SHAREHOLDERS CLASS MEETING

Articles” in the Letter from the Board in the Circular) be and are hereby approved and any one Director be and is hereby authorised to make such other modifications to the proposed amendments to the Articles as may be required by the relevant regulatory authorities in the PRC.”

“ THAT any Director be and is hereby authorised to implement and take all steps and to do all acts and things which in his opinion may be necessary or desirable to give effect and/or to complete or in connection with the Domestic Shares Subscription Agreement and transactions contemplated thereunder, including, without limitation, to approve any changes and amendments thereto, to obtain all necessary approvals from, and make all relevant registrations and filings with, the relevant PRC and other authorities, and to sign and execute such further documents, or to do any other matters incidental thereto and/or as contemplated thereunder.”
“ THAT subject to the granting of the whitewash waiver by the Executive Director of the Corporate Finance Division of the Securities and Futures Commission of Hong Kong and any delegate of such Executive Director pursuant to Note 1 on dispensations from Rule 26 of the Hong Kong Code on Takeovers and Mergers in respect of the obligation on the part of the Sample Group and parties acting or presumed to be acting in concert with it to make a mandatory general offer to the Shareholders of the Company for all issued Shares not already owned by Sample Group or parties acting or presumed to be acting in concert with it under Rule 26 of the Hong Kong Code on Takeovers and Mergers as a result of the issue of the new Domestic Shares, such whitewash waiver be and is hereby approved.”

By order of the Board **Nanjing Sample Technology Company Limited* Sha Min** Chairman of the Board

Nanjing, the PRC 2 December 2014

for identification purpose only

Notes:

No H Shareholder is required to abstain from voting on the above resolutions at the H Shareholders Class Meeting. The Domestic Shares Subscription Agreement and the transactions contemplated thereunder are also subject to the approval by the Independent Shareholders by way of special resolutions at the EGM to be held on 29 December 2014 at 10:00 a.m. and holders of Domestic Shares at the separate class meeting of the Domestic Shareholders to be held on 29 December 2014 at 11:00 a.m. (or immediately after the conclusion or adjournment of the H Shareholders Class Meeting).

– 183 –

NOTICE OF THE H SHAREHOLDERS CLASS MEETING

Any member of the Company (“Member”) entitled to attend and vote at the H Shareholders Class Meeting is entitled to appoint one or more proxies to attend and vote on his behalf. A proxy need not be a Member. In the case of a joint holding, the form of proxy may be signed by any joint holder, but if more than one joint holder is present at the meeting, whether in person or by proxy, that one of the joint holders whose name stands first on the register of Members in respect of the relevant joint holding shall alone be entitled to vote in respect thereof.
To be valid, a proxy form and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of such authority must be delivered to the Company’s H share registrar office, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 24 hours before the time appointed for the holding of the H Shareholders Class Meeting or 24 hours before the time appointed for taking the poll. Delivery of the form of proxy shall not preclude a shareholder of the Company from attending and voting in person at the meeting and, in such event, the instrument appointing a proxy shall be deemed to be revoked.
Holders of the H Shares who intend to attend the H Shareholders Class Meeting are requested to complete the enclosed REPLY SLIP FOR ATTENDANCE AT THE H SHAREHOLDERS CLASS MEETING and return it to the Company’s H share registrar office, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong on or before Friday, 19 December 2014. The reply slip may be delivered by hand or by post.
The register of members of the Company will be closed from 16 December 2014 (Tuesday) to 29 December 2014 (Monday) (both days inclusive), during which period no transfer of Shares will be effected. Shareholders whose names appear on the register of members of the Company apart from Members who are required to abstain from voting at the close of trading on 15 December 2014 (Monday) will be entitled to attend and vote at the H Shareholders Class Meeting convened by the above notice.
Members or their proxies shall present identity proof (and form of proxy in case of proxies) upon attending the H Shareholders Class Meeting.

As at the date of this notice, the Board comprises:

– 184 –

NOTICE OF THE DOMESTIC SHAREHOLDERS CLASS MEETING

南京三寶科技股份有限公司 NANJING SAMPLE TECHNOLOGY COMPANY LIMITED*

(a joint stock limited company established in the People’s Republic of China with limited liability)

(Stock Code: 1708)

NOTICE OF THE DOMESTIC SHAREHOLDERS CLASS MEETING

NOTICE IS HEREBY GIVEN that a domestic shareholders class meeting (the “ Domestic Shareholders Class Meeting ”) of Nanjing Sample Technology Company Limited (the “ Company ”) shall be held at No. 10 Maqun Avenue, Qixia District, Nanjing City, Jiangsu Province, the PRC at 11:00 a.m. on Monday, 29 December 2014 (or immediately after the conclusion or adjournment of the H shareholders class meeting (“ H Shareholders Class Meeting ”)) for the purposes of considering, and if thought fit, passing the following resolutions. Unless otherwise indicated, capitalised terms used herein shall have the same meanings as those defined in the circular of the Company dated 2 December 2014 (the “ Circular ”).

SPECIAL RESOLUTIONS

“ THAT the Domestic Shares Subscription Agreement entered into between the Company and Sample Group in relation to the subscription of a total of 92,723,400 new Domestic Shares by Sample Group pursuant to which Sample Group has conditionally agreed to subscribe for and the Company has conditionally agreed to issue 92,723,400 Domestic Shares at RMB4.50 (equivalent to approximately HK$5.67) per new Domestic Share, be and is hereby approved, confirmed and ratified, and all the transactions contemplated under the Domestic Shares Subscription Agreement be and are hereby approved, confirmed and ratified and that the Board be and is hereby authorised to make changes or amendments to the Domestic Shares Subscription Agreement as it may in its absolute discretion think fit, a copy of which is produced to the meeting marked “A” and signed by the Chairman of the Domestic Shareholders Class Meeting for the purpose of identification.”
“ THAT the Board be and is hereby granted a specific mandate to issue the new Domestic Shares at the subscription price of RMB4.50 (equivalent to approximately HK$5.67) per new Domestic Share upon completion of the Domestic Shares Subscription Agreement to Sample Group pursuant to the Domestic Shares Subscription Agreement.”
“ THAT the proposed amendments to the Articles to be made in order to reflect the corresponding increase in the registered capital and change in shareholding structure of the Company following completion of the Subscription Agreement

– 185 –

NOTICE OF THE DOMESTIC SHAREHOLDERS CLASS MEETING

(details of which were set out in section headed “6. Proposed amendments to the Articles” in the Letter from the Board in the Circular) be and are hereby approved and any one Director be and is hereby authorised to make such other modifications to the proposed amendments to the Articles as may be required by the relevant regulatory authorities in the PRC.”

“ THAT any Director be and is hereby authorised to implement and take all steps and to do all acts and things which in his opinion may be necessary or desirable to give effect and/or to complete or in connection with the Domestic Shares Subscription Agreement and transactions contemplated thereunder, including, without limitation, to approve any changes and amendments thereto, to obtain all necessary approvals from, and make all relevant registrations and filings with, the relevant PRC and other authorities, and to sign and execute such further documents, or to do any other matters incidental thereto and/or as contemplated thereunder.”
“ THAT subject to the granting of the whitewash waiver by the Executive Director of the Corporate Finance Division of the Securities and Futures Commission of Hong Kong and any delegate of such Executive Director pursuant to Note 1 on dispensations from Rule 26 of the Hong Kong Code on Takeovers and Mergers in respect of the obligation on the part of the Sample Group and parties acting or presumed to be acting in concert with it to make a mandatory general offer to the Shareholders of the Company for all issued Shares not already owned by Sample Group or parties acting or presumed to be acting in concert with it under Rule 26 of the Hong Kong Code on Takeovers and Mergers as a result of the issue of the new Domestic Shares, such whitewash waiver be and is hereby approved.”

By order of the Board **Nanjing Sample Technology Company Limited* Sha Min**

Chairman of the Board

Nanjing, the PRC 2 December 2014

for identification purpose only

Notes:

As disclosed in the Circular, Sample Group, Sample Commerce City, Mr. Sha Min and Active Gold will abstain from voting on the above resolutions at the Domestic Shareholders Class Meeting. Save as disclosed above, no other Shareholder will be required to abstain from voting on the above resolutions. The Domestic Shares Subscription Agreement and the transactions contemplated thereunder are also subject to the approval by the Independent Shareholders by way of special resolutions at the EGM to be held on 29 December 2014 at 10:00 a.m. and holders of H Shares by way of special resolutions at the separate class meeting of the H Shareholders to be held on 29 December 2014 at 10:30 a.m. (or immediately after the conclusion or adjournment of the EGM).

– 186 –

NOTICE OF THE DOMESTIC SHAREHOLDERS CLASS MEETING

Any member of the Company (“Member”) entitled to attend and vote at the Domestic Shareholders Class Meeting is entitled to appoint one or more proxies to attend and vote on his behalf. A proxy need not be a Member. In the case of a joint holding, the form of proxy may be signed by any joint holder, but if more than one joint holder is present at the meeting, whether in person or by proxy, that one of the joint holders whose name stands first on the register of Members in respect of the relevant joint holding shall alone be entitled to vote in respect thereof.
To be valid, a proxy form and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of such authority must be delivered to the Company’s registered office at No. 10 Maqun Avenue, Qixia District, Nanjing City, the People’s Republic of China not less than 24 hours before the time appointed for the holding of the Domestic Shareholders Class Meeting or 24 hours before the time appointed for taking the poll. Delivery of the form of proxy shall not preclude a shareholder of the Company from attending and voting in person at the meeting and, in such event, the instrument appointing a proxy shall be deemed to be revoked.
Holders of the Domestic Shares who intend to attend the Domestic Shareholders Class Meeting are requested to complete the enclosed REPLY SLIP FOR ATTENDANCE AT THE DOMESTIC SHAREHOLDERS CLASS MEETING and return it to the Company’s registered office at No. 10 Maqun Avenue, Qixia District, Nanjing City, the People’s Republic of China on or before Friday, 19 December 2014. The reply slip may be delivered by hand or by post.
The register of members of the Company will be closed from 16 December 2014 (Tuesday) to 29 December 2014 (Monday) (both days inclusive), during which period no transfer of Shares will be effected. Shareholders whose names appear on the register of members of the Company apart from Members who are required to abstain from voting at the close of trading on 15 December 2014 (Monday) will be entitled to attend and vote at the Domestic Shareholders Class Meeting convened by the above notice.
Members or their proxies shall present identity proof (and form of proxy in case of proxies) upon attending the Domestic Shareholders Class Meeting.

As at the date of this notice, the Board comprises:

– 187 –

AI assistant

Nanjing Sample Technology Company Limited — Proxy Solicitation & Information Statement 2014

50106_rns_2014-12-01_bebfc6c9-cdbc-4179-a880-c118ffc72478.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

南京三寶科技股份有限公司 NANJING SAMPLE TECHNOLOGY COMPANY LIMITED*

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

南京三寶科技股份有限公司 NANJING SAMPLE TECHNOLOGY COMPANY LIMITED*

(1) CONNECTED TRANSACTION – PROPOSED SUBSCRIPTION OF NEW DOMESTIC SHARES BY NANJING SAMPLE TECHNOLOGY GROUP COMPANY LIMITED*; (2) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION; AND

(3) APPLICATION FOR WHITEWASH WAIVER

I. INTRODUCTION

LETTER FROM THE BOARD

II. PROPOSED SUBSCRIPTION OF NEW DOMESTIC SHARES BY NANJING SAMPLE TECHNOLOGY GROUP COMPANY LIMITED*

1. Domestic Shares Subscription Agreement

Parties

Number of new Domestic Shares subscribed for

LETTER FROM THE BOARD

Subscription price

Conditions precedent to the Domestic Shares Subscription Agreement

Specific Mandate

2. Ranking of new Domestic Shares to be issued

3. Shareholding structure of the Company

4. Reasons for the Domestic Shares Subscription

5. Recent fund raising activities and use of proceeds

6. Proposed amendments to the Articles

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

7. Information on the parties

8. Listing Rules implications

9. Takeovers code implications and application for Whitewash Waiver

LETTER FROM THE BOARD

LETTER FROM THE BOARD

EGM AND CLASS MEETINGS

RECOMMENDATION

FURTHER INFORMATION

南京三寶科技股份有限公司 NANJING SAMPLE TECHNOLOGY COMPANY LIMITED*

(1) CONNECTED TRANSACTION –

PROPOSED SUBSCRIPTION OF NEW DOMESTIC SHARES BY NANJING SAMPLE TECHNOLOGY GROUP COMPANY LIMITED*; (2) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION; AND

(3) APPLICATION FOR WHITEWASH WAIVER

南京三寶科技股份有限公司 NANJING SAMPLE TECHNOLOGY COMPANY LIMITED (a joint stock limited company established in the People’s Republic of China with limited liability) (Stock Code: 1708)*

(1) CONNECTED TRANSACTION –

PROPOSED SUBSCRIPTION OF NEW DOMESTIC SHARES BY NANJING SAMPLE TECHNOLOGY GROUP COMPANY LIMITED*; (2) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION; AND

(3) APPLICATION FOR WHITEWASH WAIVER

CONNECTED TRANSACTION –

(1) PROPOSED SUBSCRIPTION OF NEW DOMESTIC SHARES BY NANJING SAMPLE TECHNOLOGY GROUP COMPANY LIMITED; (2) PROPOSED AMENDMENT TO ARTICLES OF ASSOCIATION; AND (3) APPLICATION FOR WHITEWASH WAIVER

INTRODUCTION

BASIS OF OUR OPINION AND RECOMMENDATION

PRINCIPAL FACTORS AND REASONS CONSIDERED

(1) Background of the Domestic Shares Subscription

Business overview of the Group

Financing alternatives available to the Group

Reason for the subscription of Domestic Shares

Our view

(2) Domestic Shares Subscription Agreement

Number of new Domestic Shares subscribed for

Subscription price

Domestic Shares are not listed

Comparison of the Subscription Price with historical price of the H Shares

Comparison of the Subscription Price with the net asset value per Share

Comparable analysis

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Our view on the Domestic Shares Subscription

(3) Dilution effect on the shareholding interests of the existing public Shareholders

Changes in the shareholding structure of the Company as a result of the Domestic Shares Subscription

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(4) Financial effects of the Domestic Shares Subscription

Effect on the net asset value and debt ratio

Effect on working capital

(5) Proposed amendments to the Articles

(6) The Whitewash Waiver

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

RECOMMENDATION

I. SUMMARY OF THE FINANCIAL INFORMATION

Nanjing Sample Technology Company Limited Proxy Solicitation & Information Statement 2014

**(1) CONNECTED TRANSACTION – PROPOSED SUBSCRIPTION OF NEW DOMESTIC SHARES BY NANJING SAMPLE TECHNOLOGY GROUP COMPANY LIMITED*; (2) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION; AND**

**PROPOSED SUBSCRIPTION OF NEW DOMESTIC SHARES BY NANJING SAMPLE TECHNOLOGY GROUP COMPANY LIMITED*; (2) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION; AND**

南京三寶科技股份有限公司 NANJING SAMPLE TECHNOLOGY COMPANY LIMITED (a joint stock limited company established in the People’s Republic of China with limited liability) *(Stock Code: 1708)**

**PROPOSED SUBSCRIPTION OF NEW DOMESTIC SHARES BY NANJING SAMPLE TECHNOLOGY GROUP COMPANY LIMITED*; (2) PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION; AND**