Foreign Corporate Inspection Report

Transcription

1 2008 Annual Inspection Foreign Corporate Inspection Report Company name: ChinaCast Technology (Shanghai) Co., Ltd. Business license No.: Registration authority: Shanghai Administration of Industry and Commerce Bureau in Pudong New Area Date of report: Made by Shanghai Administration of Industry and Commerce Bureau 55

2 Enterprise Relevant Information State tax registration authority Shanghai Municipal State Administration of Taxation Tax registration No Local tax registration authority Shanghai Municipal Local Administration of Taxation Tax registration No Opening bank (basic account) Shanghai Jinqiao Branch of CCB Opening bank account Organization Code Corporate Payment Situation Investment total amount Invested capital China subscribed 39.8 million dollars Million dollars Paid-in capital Paid in 2008 Actual payment in 2008 Foreign subscribed China subscribed Foreign subscribed China Foreign China Foreign 34.8 million dollars Million dollars Million dollars Million dollars Million dollars Million dollars Million dollars The amounts of capital China paid by state-owned assets Million RMB 56

3 2008 Production Business Situation (Unit: RMB yuan) Business situation (select one to ) Preparation Investment and opening Closed Liquidation Sales revenue Among which: service business revenue Domestic sales amount Among which: service business amount Profit total amount Net profit Losses amount Tax total Assets total amount Among which: Long-term investment Liabilities total Among which: Long-term liabilities Proof of company annual inspection designated representative or agent Name of designated representative or agent: Cheng Yin Contact phone: Entrusted matter: conduct the 2008 annual company inspection procedures include exclude Branch authority annual inspection Name: Cheng Yin Gender: F Nationality: Han Birthday: Residence: Room 505, No. 205, Dongyuan Village, Pudong New Area, Shanghai Issued in ? The valid period is 20 years. No.? I confirm and promise that the contents of annual inspection report are free of false information. The submitted financial sheets and other materials are real and valid. I am willing to take the legal and relevant responsibilities for providing false information. Signed and stamped by legal representative: Chen Ziang Company stamp:

4 Preparation unit: China Cast Technology (Shanghai) Co., Ltd. Assets 2008 Financial Statements of Foreign Invested Enterprises Council Enterprise Form 1 Line No December 31, 2008 Closing balance Opening balance Balance Sheet Liabilities and Equity Line No Currency Unit: RMB Current Assets: 1 Current liabilities: 47 Cash 2 351,010, ,116, Short term borrowing ,000, Δ Transaction financial assets 3 Δ Transaction financial liabilities 49 # Short term investment 4 # Warrants payable 50 Notes receivable 5 Notes payable 51 Accounts receivable 6 120, , Account payable 52 Payment advance 7 685, Advance from customers 53 Dividends receivable 8 Employees' salary and benefits payable 54 Interest receivable 9 Employees' salary payable 55 Other receivable 10 12,943, ,323, Employees' benefits payable 56 Inventory 11 Employee bonus and welfare fund 57 Original materials 12 Tax fees payable , , Stock merchandise 13 Taxes payable , , Non current assets within one year 14 Taxes payable 60 Other current assets 15 Dividends payable 61 Current Assets Total ,073, ,882, Other payable 62 76,782, ,064, Non current assets: 17 Non current liabilities within one year 63 Δ Financial assets hold to sales 18 Other current liabilities 64 76,915, ,344, Δ Investment hold to mature 19 Current liabilities total 65 # Long term debt investment 20 Non current liabilities: 66 Δ Long term receivable 21 Long term borrowing 67 Long term debt investment 22 14,700, ,700, Bonds payable 68 # The right of tradable shares in circulation 23 Long term payable 69 Δ Investment property 24 Special payables 70 Original price of fixed assets 25 3,701, ,694, Provision 71 Less: Accumulated depreciation 26 3,024, ,930, Δ Deferred income tax liabilities 72 Net fixed assets value , , # Deferred taxation credit 73 Less: Impairment of fixed assets 28 Other non current liabilities 74 Net fixed assets , , Specially approved reserving funds 75 Construction in progress 30 Non current liabilities Total 76 Physical assets for construction 31 Liabilities Total 77 76,915, ,344, Disposal of fixed assets 32 Equity: 78 Δ Production of biological assets 33 Paid in capital ,873, ,873, Δ Oil and gas assets 34 Stated capital 80 Intangible assets 35 Collective capital 81 Land use rights 36 Corporate capital 82 Δ Development expenditure 37 State owned capital 83 Δ Goodwill 38 Collective corporate capital 84 # Cost book value differentials 39 Personal capital 85 Long term deferred assets 40 Foreign capital 86 Δ Deferred Tax Assets 41 Investment paid 87 # Deferred Tax loan 42 Net paid up capital 88 Other non current assets 43 Capital surplus 89 Authorized reserve materials 44 Less: Storing stocks 90 Total non current assets 45 15,377, ,464, Surplus reserves 91 1,566, ,512, Statutory Fund 92 1,566, ,512, Other surplus reserve 93 Reserve fund 94 Enterprise Development Fund 95 Return investment 96 * # Unrecognized investment losses 97 Note: The * items are specially used in the Consolidated Financial Statements; the item is specifically used for executing the new accounting regulation, while other companies cannot meet them; the # items are used for the companies which are executing the corporate accounting systems specifcally, while the companies which execute the new accouting regulations cannot meet. Closing balance Opening balance Undistributed profits 98 14,095, ,616, Cash Dividend 99 * Currency translation differences 100 Total equity attributable to parent company 101 * Minority interests 102 Equity Total ,535, ,003, # Less: Assets losses 104 Equity Total (after excluding the total asset losses) 105 Assets Total ,450, ,347, Liabilities and Equity Total ,450, ,347, Translation of page 57 of 89

5 Preparation unit: China Cast Technology (Shanghai) Co., Ltd Financial Statements of Foreign Invested Enterprises Council Enterprise Form 2 Income Statement Items Line No 2008 Currency Unit: RMB Current Period Prior Period Items Line No Current Period Prior Period I. Operating total revenue 1 14,067, ,188, Add: Losses on the asset impairment 20 Operating revenue 2 14,067, ,188, Investment income 21 Main operating revenue 3 14,067, ,188, Associates and JV investment income 22 Other operating revenue 4 III. Operating profits , , II. Operating total cost 5 13,243, ,255, Add: Non operating income 24 Operating cost 6 7,340, ,572, Revenue on disposal of long term assets 25 Main operating cost 7 7,340, ,572, Non monetary asset exchange gains (Income non monetary transactions) 26 Other operating cost 8 Government grants (subsidy income) 27 Operating tax and additions 9 335, , Selling expenses 10 1, Debt restructuring gains 29 10, Administration expenses 11 8,639, ,688, Less: Non operating expenses 30 Business service expenses 12 Loss on disposal of long term assets 31 Analysis and development expenses 13 Debt restructuring losses 32 Financial expenses 14 3,072, ,467, IV. Profit before tax , , Interest cost 15 Less: Income tax , Interest revenue 16 Add: * # Unrecognized investment losses 35 Net foreign exchange loss 17 V. Net profit , , Δ Losses on the asset impairment 18 Less: * Minority interests 37 Others 19 VI. Net profit attributable to equity holders 38 Note: The * items are specially used in the Consolidated Financial Statements; the item is specifically used for executing the new accounting regulation, while other companies cannot meet them; the # items are used for the companies which are executing the corporate accounting systems specifcally, while the companies which execute the new accouting regulations cannot meet. Translation of page 58 of 89

6 Preparation unit: China Cast Technology (Shanghai) Co., Ltd. Items Line No 2008 Financial Statements of Foreign Invested Enterprises Council Enterprise Form 3 Cash Flow Statement 2008 Currency Unit: RMB Amount of this year Amount of last year I. Cash flows from operating activities Cash received from sale of goods or rendering of services 2 15,389, ,074, Items Cash received from disposal of subsidiaries or other associations Other cash payments relating to investing activities Line No Amount of this year Amount of last year Refund of tax and levies 3 Sub-total of cash outflows 23 7, , Other cash received relating to operating activities 4 146,362, ,565, Net cash flows from investing activities 24-7, , Sub-total of cash inflows 5 161,751, ,640, III. Cash flows from financing activities 25 Cash paid for goods and services 6 7,340, ,092, Cash received from capital contribution 26 Cash paid to and on behalf of employees 7 2,798, ,507, Received from minority shareholders of subsidiary cash 27 Payments of all types of taxes 8 923, ,253, Cash received from borrowings ,000, Other cash paid relating to operating activities 9 106,797, ,659, Other cash received relating to financing activities 29 Sub-total of cash outflows ,860, ,512, Sub-total of cash inflows ,000, Net cash flows from operating activities 11 43,891, ,127, Cash repayments of amounts borrowed ,000, ,366, 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 & other longterm assets Cash received from disposal of subsidiaries or other associations Other cash received relating to investing activities Sub-total of cash inflows 18 Cash paid to acquire fixed assets, intangible assets & other long-term assets Cash paid to acquire investments Cash payments for interest expenses and distribution of dividends or profit Subsidiary and profit paid to minority shareholders Other cash payments relating to financing activities 32 9,051, ,301, Sub-total of cash outflows ,051, ,667, Net cash flows from financing activities ,051, ,332, , , IV. Effect of foreign exchange rate changes on cash and cash equivalents V. Net increase/(decrease) in cash and cash equivalents Add: Opening balance of cash and cash equivalents VI. Closing balance of cash and cash equivalents ,060, ,261, ,106, ,714, ,116, ,402, ,010, ,116, Translation of page 60 of 89

7 2008 Financial Statements of Foreign Invested Enterprises Council Enterprise Form 1 Main Index Supplement Information Preparation unit: China Cast Technology (Shanghai) Co., Ltd. Items Line No 2008 Amount of this year Amount of last year Items Line No Amount of this year Amount of last year 1. Basic indicators of enterprises 1 Others 38 33, Compilation of business households 2 Paid housing funds 39 85, Export enterprises of households 3 Paid land use right fee 40 Advanced tech enterprise households 4 Paid maritime space use right fee 41 High tech enterprises of households 5 Paid transfer land fee 42 Households paid income tax 6 Total actual salaries 43 2,714, ,507, Total planned investment 7 Actual foreign employees` salaries 44 Foreign planned investment 8 Annual average staff number Total actual investment 9 286,873, ,873, Foreign employees number 46 Foreign actual investment ,873, ,873, Annual average staff salary 47 50, , Registered capital ,873, ,873, Chinese employees annual average salary 48 50, , Foreign investment ,873, ,873, Foreign employees annual average salary 49 Total imports and exports Profit distribution target 50 Total imports 14 Net profit , , Total exports 15 Add: Beginning retained earnings 52 13,616, ,351, Paid customs duty 16 Other adjustment factors , ,565, Paid value-added tax , , Profits available for distribution 54 14,162, ,709, Value added tax on import goods 18 Less: Statutory reserve 55 67, , Paid consumption tax 19 Extract employee bonus and welfare fund 56 Consumption tax on import goods 20 Reserve funds 57 Paid business tax , , Extraction Enterprise Development Fund 58 Paid income tax , , Profit return investment 59 Paid individual income tax , , Others 60 Paid other taxes 24 8, , The profits available for distribution to investors 61 14,095, ,616, Land appreciation tax 25 Less: Preferred dividends payable 62 Resource tax 26 Chinese payable 63 Stamp tax 27 8, , Foreign payable 64 Deed tax 28 Discretionary surplus reserve 65 Urban land use tax 29 Common stock dividends (profit) payable 66 Others 30 4, Chinese payable 67 Total taxes paid , ,277, Foreign payable 68 Paid Chinese social insurance , , Common stock dividend converted into capital 69 Pension , , Chinese payable 70 Medical insurance 34 78, , Foreign payable 71 Unemployment insurance 35 13, , Others 72 Injury insurance 36 3, , Undistributed profit 73 Maternity insurance 37 3, , ,095, ,616, Translation of page 62 of 89

8 Statement of Changes in Owner s Equity Council Enterprise Form 4 Currency Unit:RMB Preparation Unit: China Cast Technology (Shanghai) Co., Ltd. Year of 2008 Items Line No Capital (Stock) Capital Surplus Less: Treasury Stock Amount of this year Equity attributable to parent company Surplus Reserves Undistributed profit Others Total Minority Less:Losses interests of assets Total Owner's Equity Capital (Stock) Capital Surplus Less: TreasurySt ock Surplus Reserves Amount of last year Equity attributable to parent company Undistributed profit Others Total Minority interests Less: Losses of assets Total Owner's Equity Column No I. Closing Balance of Last Year 1 286,873, ,512, ,616, ,003, ,873, ,705, ,351, ,930, Add: Change of Accounting Policies 2 Corretions of Prior Period Errors 3 II. Opening Balance of This Year 4 286,873, ,512, ,616, ,003, ,873, ,705, ,351, ,930, III. Increases/Decreases of This Year (minus decreases) 5 53, , , , ,734, ,927, i. Net Profits 6 67, , , , , , ii. Gains and Losses Directly Recorded into The Owner's Equities 7 13, , , , ,565, ,850, Net Change in Fair Value of Financial Assets Available for Sale 8 Effect of Changes of Other Owner's Equities of Invested Company According to Equity Method 9 Effect on The Income Taxes Related to Items Recorded into The Owner's Equities 10 Others 11 13, , , , ,565, ,850, Net Profits and Gains and Losses Directly Recorded into The Owner's Equities Total 12 53, , , , ,734, ,927, iii. Capital Invested and Reduced by The Owners 13 Capital Invested by The Owners 14 The Amount of Share based Payments Recorded into The Owner's Equities 15 Others 16 IV. Profits Distribution 17 53, , , , Make The Surplus Reserves 18 67, , , , Distribute to The Owners (or Shareholders) 19 Others 20 13, , , , V. Balance Down of the Owner's Equities 21 Capital Surplus Converted to Capital (Stock) 22 Surplus Reserves Converted to Capital (or Stock) 23 Surplus Reserves Make Up Losses 24 Others 25 VI. Closing Balance of This Year ,873, ,566, ,095, ,535, ,873, ,512, ,616, ,003, Translation of page 63 of 89

9 SHANGHAI HONGZHENG CERTIFIED PUBLIC ACCOUNTANTS CO., LTD. Audit Report All shareholders of ChinaCast Technology (Shanghai) Limited: No. (2009) 0343 We have audited the attached financial statements of ChinaCast Technology (Shanghai) Limited (called company as follows), including the balance sheets of , the income statement of 2008, Statement of Changes in Owner's Equity, the cash flow statement and the notes of financial sheets. 1. Management responsibility for the financial statements In accordance with Accounting Standards and the "enterprise accounting system" the preparation of financial statements is the responsibility of the Company's management. The responsibility includes: (1) Designing, implementing and maintaining internal control procedures relevant to the preparation of financial statements and controls, so that the financial statements are free of fraud or material misstatement due to error; (2) Selecting and applying appropriate accounting policies; (3) Making reasonable estimates for accounting. 2. Responsibility of Certified Public Accountant: Our responsibility is to audit the financial statements on the basis of an audit opinion. We follow the Chinese CPA Standards for the audit work. China Certified Public Accountants audit standards require that we should comply with ethical requirements, plan and perform the audit so as to make sure the financial statements are free from important mistakes and that suitable guarantees are obtained. An audit involves performing audit procedures to obtain the amounts and disclosures in the financial statements for evidence of the audit. The audit procedures selected depend on the auditor's judgment, including errors due to fraud or material misstatement of the financial statements of risk assessment. In making those risk assessments, we consider the preparation of financial statements related to internal controls in order to design appropriate audit procedures, but not for the purpose of providing an opinion on the effectiveness of internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting valuation, as well as evaluating the financial statement presentation. We believe that the audit evidence we have obtained is sufficient and appropriate, to provide a basis for our audit opinion. 3. Audit Advices We think that the financial sheets of your company are made according to the corporate accounting standards and the Corporate Accounting Systems. In all important aspects, they fairly show the financial situations in , the business results in 2008 and the cash flow. Attachments of the report: 1. Balance Sheet at Income Statement Statement of Changes in Owner's Equity Cash Flow Statement 58

10 Accounting Sheets Notes Business taxable income adjustment table Shanghai Hongzheng Certified Public Accountants Co., Ltd. Shanghai, China Address: Room 1906, Building 2, No. 335, Guoding road Phone: China Certified Public Accountants: Chen Li China Certified Public Accountants: Li Shuzhen Date of report:

11 2008 Financial Statements of Foreign Invested Enterprises Council Enterprise Form 1 Balance Sheet Preparation unit: China Cast Technology (Shanghai) Co., Ltd. December 31, 2008 Currency Unit: RMB Assets Line No Closing balance Opening balance Liabilities and Equity Line No Closing balance Opening balance Current Assets: 1 Current liabilities: 47 Cash 2 351,010, ,116, Short term borrowing 48 Δ Transaction financial assets 3 ΔTransaction financial liabilities 49 # Short term investment 4 # Warrants payable 50 Notes receivable 5 Notes payable 51 Account receivable 6 120, , Accounts payable 52 Payment advance 7 685, Advance from customers 53 Dividends receivable 8 Employees' salary and benefits payable 54 Interest receivable 9 Employees' salary payable 55 Other receivable 10 12,943, ,323, Employees' benefits payable 56 Employee bonus and welfare fund 57 Inventory 11 Tax fees payable , , Original materials 12 Taxes payable , , Stock merchandise 13 Taxes payable 60 Non current assets within one year 14 Dividends payable 61 Other current assets 15 Other payable 62 76,782, ,064, Current Assets Total ,073, ,882, Non current liabilities within one year 63 Non current assets: 17 Other current liabilities 64 76,915, ,344, Δ Financial assets hold to sales 18 Current liabilities total 65 Δ Investment hold to mature 19 Non current liabilities: 66 # Long term debt investment 20 Long term borrowing 67 Δ Long term receivable 21 Bonds payable 68 Long term debt investment 22 14,700, ,700, Long term payable 69 # The right of tradable shares in circulation 23 Special payables 70 Δ Investment property 24 Provision 71 Original price of Fixed assets 25 3,701, ,694, Δ Deferred income tax liabilities 72 Less: Accumulated depreciation 26 3,024, ,930, # deferred taxation credit 73 Net fixed assets Value , , Other non current liabilities 74 Less: Impairment of fixed assets 28 Specially approved reserving funds 75 Net fixed assets , , Non current liabilities Total 76 Construction in progress 30 Liabilities Total 77 76,915, ,344, Physical assets for construction 31 Equity: 78 Disposal of fixed assets 32 Paid in capital ,873, ,873, Δ Production of biological assets 33 Stated capital 80 Δ Oil and gas assets 34 Collective capital 81 Intangible assets 35 Corporate capital 82 Land use rights 36 State owned capital 83 Δ Development expenditure 37 Collective corporate capital 84 Δ Goodwill 38 Personal capital 85 # Cost book value differentials 39 Foreign capital 86 Long term deferred assets 40 Less: investment paid 87 Δ Deferred Tax Assets 41 Net paid up capital 88 # Deferred Tax loan 42 Capital surplus 89 Other non current assets 43 Less: Storing stocks 90 Authorized reserve materials 44 Surplus reserves 91 1,566, ,512, Non current assets Total 45 15,377, ,464, Statutory Fund 92 1,566, ,512, Other surplus reserve 93 Reserve fund 94 Enterprise Development Fund 95 Return investment 96 General risk reserve 97 * #Unrecognized investment losses 98 Undistributed profits 99 14,095, ,616, Cash Dividend 100 * Currency translation differences 101 Total equity attributable to parent company 102 * Minority interests 103 Total equity ,535, ,003, # Less: Assets losses 105 Total Equity (after excluding the total asset 106 losses) Assets Total ,450, ,347, Liabilities and Equity Total ,450, ,347, Translation of page 67 of 89

12 Income Statement 2008 Financial Statements of Foreign Invested Enterprises Council Enterprise Form 2 Preparation unit: China Cast Technology (Shanghai) Co., Ltd Currency Unit: RMB Items Line No Current Period Prior Period Items Line No Current Period Prior Period I. Total operating revenue 1 14,067, ,188, Others 19 Operating revenue 2 14,067, ,188, Losses on asset impairment 20 Main operating revenue 3 14,067, ,188, Investment income 21 Other operating revenue 4 Associates and JV investment income 22 II. Total operating cost 5 13,243, ,255, III. Operating profits , , Operating cost 6 7,340, ,572, Add: Non operating income 24 Main operating cost 7 7,340, ,572, Revenue on disposal of long term assets 25 Other operating cost 8 Non monetary asset exchange gains (Income non monetary transactions) Operating tax and additions 9 335, , Government grants (subsidy income) 27 Selling expenses 10 1, Administration expenses 11 8,639, ,688, Debt restructuring gains 29 10, Business service expenses 12 Less: Non operating expenses 30 Analysis and development expenses 13 Loss on disposal of long term assets 31 Financial expenses 14 3,072, ,467, Debt restructuring losses 32 Interest cost 15 IV. Profit before tax , , Interest revenue 16 Less: Income tax , Net foreign exchange loss 17 Add: * # Unrecognized investment losses 35 Δ Losses on the asset impairment 18 V. Net profit , , Note: The * items are specially used in the Consolidated Financial Statements; the item is specifically used for executing the new accounting regulation, while other companies cannot meet them; the # items are used for the companies which are executing the corporate accounting systems specifcally, while the companies which execute the new accouting regulations cannot meet. Translation of page 68 of 89

13 Cash Flow Statement Preparation unit: China Cast Technology (Shanghai) Co., Ltd Financial Statements of Foreign Invested Enterprises Council Enterprise Form Currency Unit: RMB Items Line No Amount of this year Amount of last year Items Line No Amount of this year Amount of last year I. Cash flows from operating activities 1 Cash received from disposal of subsidiaries or other associations 21 Cash received from sale of goods or rendering of services 2 15,389, ,074, Other cash payments relating to investing activities 22 Refund of tax and levies 3 Sub total of cash outflows 23 7, , Other cash received relating to operating activities 4 146,362, ,565, Net cash flows from investing activities 24 7, , Sub total of cash inflows 5 161,751, ,640, III. Cash flows from financing activities 25 Cash paid for goods and services 6 7,340, ,092, Cash received from capital contribution 26 Cash paid to and on behalf of employees 7 2,798, ,507, Received from minority shareholders of subsidiary cash Payments of all types of taxes 8 923, ,253, Cash received from borrowings ,000, Other cash paid relating to operating activities 9 106,797, ,659, Other cash received relating to financing activities 29 Sub total of cash outflows ,860, ,512, Sub total of cash inflows ,000, Net cash flows from operating activities 11 43,891, ,127, Cash repayments of amounts borrowed ,000, ,366, II. Cash flows from investing activities 12 Cash received from disposal of investments 13 Cash payments for interest expenses and distribution of dividends or profit Subsidiary and profit paid to minority shareholders ,051, ,301, Cash received from returns on investments 14 Other cash payments relating to financing activities 34 Net cash received from disposal of fixed assets, intangible assets & other longterm assets 15 Sub total of cash outflows ,051, ,667, Cash received from disposal of subsidiaries or other associations 16 Net cash flows from financing activities ,051, ,332, Other cash received relating to investing activities 17 IV. Effect of foreign exchange rate changes on cash and cash equivalents 37 2,060, ,261, Sub total of cash inflows 18 V. Net increase/(decrease) in cash and cash equivalents ,106, ,714, Cash paid to acquire fixed assets, intangible assets & other long term assets 19 7, , Add: Opening balance of cash and cash equivalents ,116, ,402, Cash paid to acquire investments 20 VI. Closing balance of cash and cash equivalents ,010, ,116, Translation of page 69 of 89

14 2008 Financial Statements of Foreign Invested Enterprises Council Enterprise Form 4 Statement of Change in Owners' Equity Preparation unit: China Cast Technology (Shanghai) Co., Ltd. Items Line No Capital (Stock) Capital Surplus Less: Treasury Stock Amount This Year (2008) Equity attributable to parent company Surplus Reserves General risk preparation Undistributed profit Column times I. Closing Balance of Last Year 1 286,873, ,512, ,616, ,003, Add: Change of Accounting Policies 2 Corretions of Prior Period Errors 3 II. Opening Balance of This Year 4 286,873, ,512, ,616, ,003, III. Increases and Decreases(minus: decreases) 5 53, , , i. Net Profits 6 67, , , ii. Gains and Losses of Shareholder Equity 7 13, , , Net Change in Fair Value of Financial Assets 8 Effect of Changes of Other Owner's Equities of Invested Company According to Equity Method 9 Effect on The Income Taxes Related to Items Recorded into The Owner's Equities 10 Others 11 13, , , Net Profits and Gains and Losses Directly Recorded into The Owner's Equities Total 12 53, , , iii. Capital Invested and Reduced by The Owners 13 Capital Invested by The Owners 14 The Amount of Share based Payments Recorded into The Owner's Equities 15 Others 16 IV. Profits Distribution 17 53, , Make The Surplus Reserves 18 67, , Distribute to Shareholders 19 Profits paid by SOEs 20 Common stock dividend 21 Share dividends transferred to share capital Others 23 13, , V. Balance Down of the Owner's Equities 24 Capital Surplus Converted to Capital (Stock) 25 Surplus Reserves Converted to Capital (or Stock) 26 Surplus Reserves Make Up Losses 27 Others 28 VI. Closing Balance of This Year ,873, ,566, ,095, ,535, Translation of page 70 of 89 Others Minority interests Total Owner's Equity

15 Notes for the Financial Statements of ChinaCast Technology (Shanghai) Limited I. Company introduction Year 2008 Currency unit: RMB yuan ChinaCast Technology (Shanghai) Limited (called Company in the following) is approved by the Shanghai People s Government, and its corporate business license, whose registration number is , was issued in by Branch of Shanghai Administration for Industry and Commerce in the Pudong New Area. The legal representative is Chen Ziang. The enterprise nature is foreign owned enterprise. The invested capital is 34.8 million dollars, and the business period is from 2000 to The business scope is design, development and broadband technologies related to software, network integration software and other computer software, providing technical advice, sale of products; providing satellite access to satellite transmission and other technology-related technical and practical advice (involving renewal of the satellite license for business). II. Main accounting policy and accounting valuation Our company obeys the PRC s Corporate Accounting Standards and the Corporate Accounting Systems. And the following accounting policy and accounting valuation are according to the above systems. 1) Fiscal Year Fiscal Year is made according to calendar year, from January 1 to December 31 of each year. 2) Accounting recording base currency and currency conversion The company uses RMB Yuan as base currency. Any non-base currency economic transactions incurred during the fiscal year, will be recorded based on the mid-price of currency rate for market rates published by the People s Bank of China. On the closing date, any non-base currency surplus from currency related projects, will be adjusted based on the market rate mid-price published by the People s Bank of China towards the end of the year. The difference from such rate adjustment for base currency conversion will be counted towards the annual profits and losses. 3) Basic accounting principles and valuation The use of debits and credits, the accrual basis of accounting and the historical cost principle. 4) Accounting method for bad debts 1) Recognition of bad debts: 1 Debtor's bankruptcy or death, with its liquidation of the estate or inheritance, still cannot recover the receivables; 2 Unit due to debt bankruptcy, insolvency, serious cash flow shortage severe natural disasters resulting in inability to pay the debt in a short time; 3 The debtor fails to meet their debt obligations and does not recover more than two years of accounts receivable. 60

16 2) Bad debt losses accounting methods: the use allowance method. 5) Inventory accounting method Get to the actual cost of inventory valuation, inventory costs incurred by the weighted average calculation. Ending inventory is accounted at the lower of cost and net realizable value pricing. Consumables used in the production are accounted for with an amortization method. 6) Short-term investment accounting method 1) Method of valuation of short-term investments: Short-term investments to the actual total price paid (including taxes, fees and related expenses), net of declared but not paid cash dividends (or due and unpaid interest on the bonds) are recorded. 2) Investment revenue recognition methods: short-term investments that experience cash dividends or interest payments result in a writedown of the carrying value of short-term investments. When examining short-term investments, the discount of income received and the change in the difference between the market and book value of shortterm investments are recognized as profit or loss. 7) Long-term investment accounting method The investee company's long-term equity investments use the following accounting treatment: according to the price actually paid when the investment was made to determine the value of the account. Investee companies have control, joint control or significant influence using the cost method. Equity ratio of more than 20% of the capital in the investee company has control, joint control or significant influence using the equity method. 8) Loans assets accounting method Loan from financial institutions are calculated according to the actual loan amount due payable by the end of the contract in addition to interest receivable. If interest payments cannot be recovered, then the loan is in default and the relevant interest accruals are made. 9) Fixed assets and depreciation accounting method 1) Standards for fixed assets: capital assets used for more than a year, inclusive of houses and buildings, machinery, equipment, vehicles and other capital related to its business applications. The fixed assets should be primary to the business operations, with a value of 2000 Yuan or more, and the items should be used for more than a year. 2) Valuation of fixed assets: Fixed assets carried at actual cost 3) Fixed assets depreciation method: depreciation of fixed assets using straight-line basis, according to the original fixed-asset class, estimated useful lives and estimated residual value (10% of the original price) to determine the depreciation rates are as follows: 61

17 Type of assets Estimated use period Annual depreciation rate % Buildings Machines and equipments 5 18 Transportation machines 10 9 Electronic and other equipments ) Accounting methods for construction Capitalized construction valued based on the actual expenditures included in the project cost, interest on loans for projects and costs of project delivery, when used according to the actual costs into fixed assets; incomplete accounts for the project that are in progress will be valued based on progress to-date. After completion of the accounts, accounts have been adjusted for the original valuation and depreciation. 11) Method of accounting for intangible assets Intangible assets valued at acquisition or the actual cost. Amortization of intangible assets amortized straight-line basis. 12) Method of accounting for long-term prepaid expenses and other assets Long-term prepaid expenses and other long-term assets are marked at actual cost and amortized according to the direct method. 13) Accounting treatment of borrowing costs 1. For the construction of long-term fixed assets, borrowing costs incurred are capitalized and included in the cost of fixed assets construction; if borrowing costs on fixed assets are incurred after the intended use has begun, they are expensed through profit or loss. 2. For short-term borrowing or borrowing not specifically for long-term fixed assets, borrowing costs are recorded on a monthly basis, accruing to profit or loss. 14) Eight provisioning methods 1. Bad debts: bad debts on accounts receivable are calculated by aging analysis provisions, and included in profit or loss. Inclusion ratio: If it is delayed for 2-3 years, it should be accounted according to 0.5% of the remaining amount. If it is delayed for more than 3 years, it should be accounted according to 1% of the remaining amount. 2. Short-term investments of provision: short-term investments are valued at cost and market value is calculated and the difference is determined to be a 62

18 provision for decline in profit or loss. Total short-term investments of 10% or more use the single accrual method. 3. Inventory impairment provision method: if the net realizable value of inventory is below carrying cost, estimated inventory losses are included in current profit or loss. (1) Generally, accounted by 1%-5% of inventory value. (2) For the following situation, apply the whole amount to account. 1 Severe deterioration of the inventory; 2 Inventory expired with no resale value; 3 Production has ended and there is no value or transfer value of the inventory; 4 There is no longer sufficient proof of the value or transfer value of inventory. 4. Provision for the impairment of long-term investments: at year end, check each long-term investment, if deterioration in operating conditions causes prices to fall and the recoverable amount is less than its book value, according to the individual assets, a provision for impairment should be made. 5. Provision for impairment of fixed assets method: for fixed assets, if the recoverable amount is less than the end of period book value, the difference may result in 1% -10% impairment of fixed assets, and associated profit or loss. One of the following conditions must exist for the full impairment of fixed assets: (1) Expected to be idle in the foreseeable future, and there is no transfer value or long term value of fixed assets; (2) The fixed assets cannot be used because of technology advances or other reasons; (3) The fixed assets can still be useful, but produce a large number of unsuitable products; (4) The fixed assets are damaged and no longer retaining practical value or transfer value; (5) Other reasons that destroy the economic benefit of fixed assets. 6. Impairment of intangible assets and the reporting method: if the ability of the intangible asset to bring future economic benefits to the enterprise is impaired and the estimated recoverable amount is lower than book value, a provision for expected impairment should be made. 7. Impairment of construction and the reporting method: at the end of the period, a review of construction in progress should be conducted, if there is evidence that the construction work has been impaired, make a provision for impairment. 63

19 8. Loan impairment and the reporting method: if the principal balance is unlikely to be recovered, make a loan impairment provision. (15) Revenue confirmation principles When the following four conditions are recognized, sales revenue is booked: 1. Ownership of the product and associated risks and rewards are transferred to the buyer; 2. The company no longer is in possession of the product. 3. Economic benefits associated with the transaction flow to the company; 4. And the revenue and product-related costs can be measured reliably. (16) Taxes (1)The company's applicable taxes and tax rates Tax Tax basis Tax rate Business tax Business revenue 5% VAT Sales revenue 17% Corporate income tax Taxable income 18% Personal income tax is paid by the company. method." The corporate income tax accounting treatment is "tax payable (17) Profit distribution method The profit is distributed by the meeting of directors (or meeting of shareholders), according to PRC Company Law, and the Corporate Charter (after covering the previous years accumulated losses) 3. Financial Statement note ( ) 1. Cash Closing amount: 351,010, yuan Among which: Cash: 39, yuan Bank deposit: 1,971, yuan Other currency cash 349,000, yuan 2. Account received: Closing amount 120, yuan Analysis: Period closing amount percentage% Bad debts Within 2 years 120, Total 120,

20 Principal debtor: Name Amount Percentage % Remark Chongqing Shuangwei Distance Education Services Ltd. 120, The company has not had any issues with collecting accounts receivable, so it didn t make the bad debts preparation. 3. Other account receivable: closing amount 12,943, Yuan Analysis: Period Closing balance Percentage % Bad debts Within 1 year 12,943, Total 12,943, Principal debtor: Name Amount Percentage % Remark ChinaCast Co., Ltd. 7,450, ChinaCast Li Xiang Co., Ltd. 1,165, Fixed assets and Depreciation Item Opening balance Increase in this year Decrease in this year Closing balance 1. Original price Among which: Electronic equipment and other equipments Machine equipments 373, , , ,777, ,777, Transportation 543, ,

21 equipments Total 3,694, , ,701, Accumulated depreciation Among which: Electronic equipment and other equipments Machine equipments Transportation equipments 224, , , ,499, ,499, , , , Total 2,930, , ,024, Net value of fixed assets Among which: Electronic equipment and other equipments Machine equipments Transportation equipments 148, , , , , , Total 764, , The Company did not find the fixed assets' recoverable amount to be less than its book value, so no provision for impairment of fixed assets was made. 5. Long-term equity investment: Closing balance 14,700, yuan The detailed list is as follows: Invested unit Investment amount Invested percentage Invested period Remark Beijing Tongfang Chuangxin Technology Co., Ltd. 14,700, % Total 14,700, % 6. Taxes payable: Closing balance 133, yuan Among which: 66

22 VAT -367, yuan Business tax 335, yuan Corporate income tax 151, yuan River management fees 3, yuan 7. Other payable: Closing balance 76,782, yuan Analysis: Period Closing balance Percentage % Bad debts Within 1 year 76,782, Total 76,782, Principal debtor: Name Amount Percentage % Remark CCTHK 76,782, Actual investment: Closing balance 286,873, yuan Investor Investment amount Percentage % Remark ChinaCast Technology (BVI) Limited Total 34.8 million dollars( 186,873, yuan RMB) 34.8 million dollars( 186,873, yuan RMB) The above actual investment was examined by the verification report No. (2006)182 of Shanghai Xinhu Accounting Firm Co., Ltd. 9. Surplus reserves: Closing balance 1,566, yuan Opening balance Add: Increase in this year Adjust the initial amount Closing balance 1,512, yuan 67, yuan -13, yuan 1,566, yuan 10. Undistributed profits: Closing Balance 14,095, yuan Closing balance Add: Net profit of this period 13,616, yuan 672, yuan 67

23 Adjusting opening retained earnings Less: Statutory surplus reserve Closing balance -139, yuan 53, yuan 14,095, yuan 11. Operating revenue: Amount of this period 14,067, yuan (1) Sales revenue: 7,367, yuan (2) Service revenue: 6,700, yuan 12. Operating cost: Amount of this period 7,340, yuan (1) Sales cost: 7,340, yuan 13. Statutory surplus reserve: Amount of this period 335, yuan 14. Management expenses: Amount of this period 8,639, yuan Main: Lease expense 1,142, yuan Service expense 3,441, yuan Salary,970, yuan Overall costs 362, yuan Zip cost 145, yuan Communication expense 145, yuan Audit fees 135, yuan Depreciation 94, yuan Travel 68, yuan Car fees 72, yuan Office fees 44, yuan Social fees 48, yuan 15. Finance costs: Amount of this period -3,072, yuan Main: Interest revenue -14,227, yuan Interest cost 9,051, yuan Exchange gains and losses 2,060, yuan Financial institutions charge 42, yuan 16. Notes of relevant projects in the Cash Flow Statement 68

24 The net increase amount of 2008 corporate cash and cash equivalents is - 134,106, yuan. Among which: Cash flows from operating activities 43,891, yuan Cash flows from investing activities -7, yuan Cash flows from financing activities -180,051, yuan Effect of foreign exchange rate changes on cash and cash equivalents 2,060, yuan 4. If it involves tax, it should be subjected to the approval number of tax authority. ChinaCast Technology (Shanghai) Co., Ltd

25 Taxable Income Adjustment Table 2008 Unit name: ChinaCast Technology (Shanghai) Co., Ltd. Currency Unit: RMB yuan Item Amount 1. Total corporate profits booked 823, Adjust for income tax increase 19, Adjust the amount of income tax reduction Among which: investment income recognized by equity method 4. Adjusted taxable income 843, Data in this table is only the audit opinion of certified public accountant, the final settlement of accounts are controlled by the tax department. 70