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特力A(000025)公告正文

特 力B:2010年年度报告(英文版)

公告日期:2011-04-15

    Shenzhen Tellus Holding Co., Ltd.                Annual Report 2010
    深圳市特力(集团)股份有限公司
    SHENZHEN TELLUS HOLDING CO.,LTD
    Annual Report 2010
    April 15, 2011
    1
    Shenzhen Tellus Holding Co., Ltd.                                           Annual Report 2010
    Section I. Important Notes and Contents
    Important Notes:
    Board of Directors, Supervisory Committee, all directors, supervisors and senior
    executives of Shenzhen Tellus Holding Co., Ltd. (hereinafter referred to as the Company)
    hereby confirm that there are no any fictitious statements, misleading statements, or
    important omissions carried in this report, and shall take all responsibilities, individual
    and/or joint, for the reality, accuracy and completion of the whole contents. This report
    has been prepared in Chinese version and English version respectively. In the event of
    difference in interpretation between the two versions, the Chinese report shall prevail.
    Chairman of the Board of the Company Zhang Ruili, Chief Financial Officer Fu Bin,
    General Manager of Accounting and Financing Department Ke Wensheng hereby confirm
    that the Financial Report enclosed in the Annual Report is true and complete
    Section I. Important Notes and Contents---------------------------------------------------2
    Section II. Company Profile-------------------------------------------------------------------3
    Section III. Summary of Financial Highlight and Business Highlight----------------4
    Section IV. Changes in Share Capital and Particular about Shareholders----------6
    Section V. Particulars about Directors, Supervisors, Senior Executives and
    Employees----------------------------------------------------------------------------------------10
    Section VI. Administrative Structure-------------------------------------------------------16
    Section VII. Brief of the Shareholders’ General Meeting-------------------------------21
    Section VIII. Report of Board of Directors -----------------------------------------------22
    Section IX. Report of Supervisory Committee -------------------------------------------36
    Section X. Significant Events-----------------------------------------------------------------37
    Section XI. Financial Report -----------------------------------------------------------------42
    Section XII. Documents Available for Reference-----------------------------------------43
    2
    Shenzhen Tellus Holding Co., Ltd.                                Annual Report 2010
    Section II. Company Profile
    I. Legal Name of the Company in Chinese: 深圳市特力(集團)股份有限公司
    Legal Name of the Company in English: ShenZhen Tellus Holding Co., Ltd.
    II. Legal Representative: Zhang Ruili
    III. Secretary of the Board of Directors: Guo Dongri
    Contact Tel: (86) 755-83989338
    Fax: (86) 755-83989399
    E-mail: ryj@tellus.cn
    Securities Affairs Representative: Ju Jiang
    Contact Tel: (86)755-883989337
    Fax: (86)755-83989399
    E-mail: shuedeng@tellus.cn
    IV. Registered Address: the 3/F, Tellus Building, Shui Bei Er Road, Luohu District,
    Shenzhen
    Office Address: the 15/F, Zhonghe Building, Shennan Middle Road, Futian District,
    Shenzhen
    Post Code: 518031
    Web site of the Company: www.tellus.cn
    E-mail: sztljtgf@public.szptt.net.cn
    V. Newspapers Chosen by the Company for Disclosing the Information: Securities Times
    (Shenzhen) and Hong Kong Commercial Daily
    Internet Website for Publishing the Annual Report: http://www.cninfo.com.cn
    The Place Where the Annual Report is Prepared and Placed: Secretariat of the Board of
    Directors of Shenzhen Tellus Holding Co., Ltd.
    VI. Stock Exchange Listed with: Shenzhen Stock Exchange
    Short Form of the Stock and Stock Code: Tellus-A (000025) Tellus-B (200025)
    VII. Initial registration date: Nov. 10, 1986
    Registration institution: Shenzhen Administration of Industry and Commerce
    Registration number of enterprise legal person’s business license: 440301103017750
    Registered number of taxation: SDS Zi 440303192192210
    Code of organization: 19219221-0
    Certified Public Accountants engaged by the Company: China Audit International
    Certified Public Accountants LTD.
    Office address of CPA: Room G1202, Yuhui Building, No. 73, Fushi Road, Haidian
    District, Beijing
    3
    Shenzhen Tellus Holding Co., Ltd.                              Annual Report 2010
    Section III. Summary of Financial Highlight and Business Highlight
    I. Accounting data and financial indexes as of the year 2010      (Unit: RMB)
    Business profit                                                       2,791,429.03
    Total profit                                                          3,276,342.15
    Net profit attributable to shareholder of listed company              3,584,445.78
    Net profit attributable to shareholder of listed company
    3,281,963.57
    after deducting non-recurring gains/losses
    Net cash flow arising from operating activities                       7,143,993.37
    Net increased of cash and cash equivalent                               -76,962.03
    II. Items of non-recurring gains and losses deducted and the relevant amount
    (Unit: RMB)
    Items of non-recurring gains/losses                  Amount
    Gains/losses from the disposal of non-current asset                      233,137.69
    Other non-operational income and expenditure
    251,775.43
    except the abovementioned items
    Impact on income tax                                                    -106,680.89
    Impact on minority equity                                                -75,750.02
    Total                                           302,482.21
    4
    Shenzhen Tellus Holding Co., Ltd.                                          Annual Report 2010
    III. Major accounting data and financial indexes over the past three years
    (Unit: RMB)
    2009                      Increase/decrease
    in this year
    Item                         2010              Before                After                                      2008
    compared with that
    adjustment           adjustment          in last year (%)
    Business income                      386,348,379.27     432,676,350.20      432,676,350.20                  -10.71%     637,896,590.03
    Total profit                           3,276,342.15       8,643,117.76          8,643,117.76               -62.09%        2,188,916.80
    Net profit attributable to
    shareholder of listed                   3,584,445.78       6,300,464.72          6,305,956.65               -43.16%        4,584,308.06
    company
    Net profit attributable to
    shareholder of listed
    3,281,963.57       -5,590,806.21        -5,585,314.28               158.76%       -4,369,676.82
    company after deducting
    non-recurring gains/losses
    Net cash flow arising from
    7,143,993.37      26,475,163.85         26,475,163.85               -73.02%       35,478,077.98
    operating activities
    Net cash flow arising from
    operating activities per                          0.03                0.12               0.12               -75.00%                  0.16
    share(RMB/Share)
    Basic earnings per
    0.0163                0.0286             0.0286                -43.01%             0.0208
    share(RMB/Share)
    Diluted earnings per
    0.0163                0.0286             0.0286                -43.01%             0.0208
    share(RMB/Share)
    Basic earnings per share
    after deducting non-recurring                0.0149                -0.0254            -0.0254               158.66%             -0.0198
    gains/losses
    Down         1.64
    ROE fully diluted(%)                         2.05%                 3.69%              3.69%                                         0.03
    percentage point
    Weighted average return on                                                                       Down         1.71
    2.07%                 3.78%              3.78%                                     2.82%
    equity (%)                                                                                        percentage point
    ROE fully diluted after
    Up           5.15
    deducting non-recurring                       1.87%                -3.28%             -3.28%                                    -2.67%
    percentage point
    gains/losses(%)
    Weighted average return on
    equity after deducting                                                                            Up           5.25
    1.90%                -3.35%             -3.35%                                    -2.69%
    non-recurring gains and                                                                           percentage point
    losses (%)
    At the end of 2009                Increase/decrease in
    At the end of                                               end of this year       At the end of
    Item                                                     Before adjustm      After adjustme
    2010                                                   compared with end           2008
    ent                 nt             of last year (%)
    Total assets                         599,555,953.28     611,487,117.65      611,487,117.65                     -1.95%   614,544,088.77
    Owners’ equity(or
    175,274,602.44     170,686,600.81      170,894,015.12                   2.56%      163,709,500.27
    shareholders’equity)
    Net asset per share attributable to
    shareholders of listed                        0.796                 0.775              0.776                  2.58%              0.743
    company(RMB/Share)
    III. There were no substantial differences between the financial statements
    respectively calculated based on China Accounting Standards and International
    Financial Reporting Standards.
    5
    Shenzhen Tellus Holding Co., Ltd.                               Annual Report 2010
    Section IV. Changes in Share Capital and Particulars about
    Shareholders
    I. Changes in share capital
    (I) Ended as Dec. 31, 2010; the stock structure of the Company was as follows:
    Unit: Share
    Before the Changes Increase/Decrease in the Change (+, -)    After the Changes
    Issuan          Capitali
    Propor ce of Bonus zation of           Subto               Proporti
    Amount                                     Other           Amount
    tion new shares public                  tal                 on
    shares           reserve
    I. Restricted
    14,587,056 6.62%                                           14,587,056    6.62%
    shares
    1. State-owned
    shares
    2.State-owned
    legal person’s 14,587,056 6.62%                                               14,587,056    6.62%
    shares
    3.          Other
    domestic shares
    Including:
    Domestic
    non-state-owne
    d legal person’s
    shares
    Domestic
    natural person’s
    shares
    4. Foreign
    shares
    Including:
    Foreign legal
    person’s shares
    Foreign natural
    person’s shares
    5. Senior
    executives’
    shares
    II. Unrestricted
    205,694,544 93.38%                                         205,694,544 93.38%
    shares
    1.          RMB
    179,294,544 81.39%                                         179,294,544 81.39%
    Ordinary shares
    2. Domestically
    listed    foreign 26,400,000 11.98%                                            26,400,000 11.98%
    shares
    3. Overseas
    listed foreign
    6
    Shenzhen Tellus Holding Co., Ltd.                                    Annual Report 2010
    shares
    4. Others
    100.00
    III.Total shares   220,281,600
    %
    220,281,600 100.00%
    Ended the report period, the changes of restricted shares of the Company were as
    follows:
    Restricted    Restricted                                    Date for
    Restricted                                    Restricted    Reason for
    Name of                         shares         shares                                      releasing
    shares in                                     shares in     restricted
    shareholders                        released increased this                                  restricted
    year-begin                                     year-end        trade
    this year        year                                         trade
    Relevant
    special
    Shenzhen
    commitments Undetermine
    SDG Co.,            14,587,056                0             0     14,587,056
    during Share d
    Ltd.
    Merger
    Reform
    Total          14,587,056                0             0     14,587,056       -              -
    (II) Share issuance and listing
    1. Particulars about issuance of share and its derivative securities in the recent three
    years: the Company had issued neither additional shares nor derivative securities in
    recent three years.
    2. In the report period, the Company had never been involved in any events which may
    cause change of the total shares and the equity structure such as bonus shares, share
    capital converted, rationed share, additional issuance, private offering, warrant exercise,
    stock incentive implementation, enterprise consolidation, transferring convertible
    company bonds into shares, capital deduction, listing of inner employees’ shares or
    company’s employees’ shares, etc.
    3. The company had no present inner employees’ share.
    II. Particular about shareholders
    (I) Ended Dec. 31, 2010; Statement of Shareholders was as follows:
    Number of Shareholders and Particulars about Shares Held
    Unit: Share
    Total number of       18,940 shareholders (including 14,736 shareholders of A-share and 4,204
    shareholders        shareholders of B-share)
    Particulars about shares held by the top ten shareholders
    Total       Amount of the
    Full name of            Type of                                                   Amount of shares
    Proportion number of restricted shares
    Shareholder         shareholders                                                  pledged or frozen
    shares held        held
    SHENZHEN            SDG State-owned
    66.22% 145,870,560           14,587,056                   0
    CO., LTD.                  legal person
    Foreign
    FISRT SHANGHAI
    legal              0.21%       464,678                    0                 0
    SECURITIES LTD.
    person
    Domestic
    ZENGG JIN BIAO             nature               0.20%       447,484                    0                 0
    person
    Domestic
    YE YING                    nature               0.20%       440,000                    0                 0
    person
    LI LV YE                   Domestic             0.20%       437,918                    0                 0
    7
    Shenzhen Tellus Holding Co., Ltd.                                  Annual Report 2010
    nature
    person
    Domestic
    ZHANG ZI BIN              nature                0.18%      388,900                   0                 0
    person
    Domestic
    KONG SHU MEI              nature                0.17%      369,800                   0                 0
    person
    Domestic
    KAN HUI                   nature                0.16%      358,926                   0                 0
    person
    Domestic
    HE XING                   nature                0.14%      318,000                   0                 0
    person
    Domestic
    ZHAO YAN                  nature                0.12%      275,200                   0                 0
    person
    Particulars about shares held by the top ten shareholders of unrestricted share
    Numbers of unrestricted shares
    Name of shareholders                                                      Type of share
    held
    SHENZHEN SDG CO., LTD.                                      131,283,504      RMB ordinary shares
    FISRT SHANGHAI SECURITIES                                                  Domestically listed foreign
    464,678
    LTD.                                                                                  shares
    ZENGG JIN BIAO                                                  447,484      RMB ordinary shares
    YE YING                                                         440,000      RMB ordinary shares
    LI LV YE                                                        437,918      RMB ordinary shares
    ZHANG ZI BIN                                                    388,900      RMB ordinary shares
    KONG SHU MEI                                                    369,800      RMB ordinary shares
    KAN HUI                                                         358,926      RMB ordinary shares
    Domestically listed foreign
    HE XING                                                         318,000
    shares
    ZHAO YAN                                                        275,200      RMB ordinary shares
    Among the top ten shareholders, there exists no associated relationship
    Explanation           on between the state-owned legal person’s shareholders Shenzhen SDG Co., Ltd
    associated relationship and other shareholders, and they do not belong to the consistent actionist
    among the top ten regulated by the Management Measure of Information Disclosure on Change
    shareholders           or of Shareholding for Listed Companies. For the other shareholders of
    consistent action         circulation share, the Company is unknown whether they belong to the
    consistent actionist.
    (II) Particular about controlling shareholder and actual controller
    1. Name of the controlling shareholder of the Company: Shenzhen SDG Co., Ltd.
    (State-owned shareholder)
    Legal representative: Liu Aiqun
    Date of establishment: June of 1982
    Registered capital: RMB 1,582,820,000
    Company type: Limited Company
    Business scope: development and operation of real estates, domestic trading, supply
    and marketing of materials (excluding monopoly products), consultant of economic
    information (excluding limit items), operating import and export business, industry
    8
    Shenzhen Tellus Holding Co., Ltd.                                  Annual Report 2010
    traffic and transportation, tourism, finance and trust, issuance of securities and so on.
    No changes on controlling shareholders of the Company in 2010. SASAC of Shenzhen
    Municipal Government was the first largest shareholder of SDG with 43.30 percent
    equity held in the report period.
    2. Actual controller of the Company: State-owned Assets Supervision and
    Administration Commission of Shenzhen Municipal Government
    The block diagram of equity controlling relationship between the Company and actual
    controller is as follows:
    State-owned Assets Supervision and Administration
    Commission of Shenzhen Municipal Government
    43.30%
    Shenzhen SDG Co., Ltd.
    66.22%
    Shenzhen Tellus Holding Co., Ltd.
    Actual controller of the Company-- State-owned Assets Supervision and
    Administration Commission of Shenzhen Municipal Government was officially
    established in August 2004, and exercise of investor rights to SDG on behalf of
    Shenzhen Municipal Government. It’s office located in Investment Building, Shennan
    Avenue, Futian District, Shenzhen; post code: 518026; person in charge: ZHANG
    XIAO LI.
    (III) Ended Dec. 31, 2010, the Company exist no shareholder of legal person’
    share holding 10% equity (including 10%).
    9
    Shenzhen Tellus Holding Co., Ltd.                                 Annual Report 2010
    Section V. Particulars about directors, supervisors, senior executives
    and employees
    I. Basis information of directors, supervisors and senior executives
    Amount of      Reaso
    shares held     n for
    Ag                                                       (Share)     change
    Sex                    Titles           Office duration
    Names              e                                                   Perio Peri
    d-beg od-e
    in      nd
    Zhang                                             2009.6.18-2012.6.17      0        0     -
    Male    47     Director, Chairman
    Ruili
    Lv Hang    Male    49      General Manager        2011.2.18-2012.6.17     0       0       -
    Fu Bin     Male    48       Director, CFO         2009.6.18-2012.6.17     0       0       -
    Shi                                               2009.6.18-2012.6.17     0       0       -
    Changy     Male    53             Director
    ue
    Zhang                                             2010.6.29-2012.6.17     0       0       -
    Male    52             Director
    Jianmin
    Zhang                                             2009.6.18-2012.6.17     0       0       -
    Male    45             Director
    Junlin
    Ji Dejun   Male    66    Independent Director     2009.6.18-2012.6.17     0       0       -
    Jiang                                             2009.6.18-2012.6.17     0       0       -
    Male    49    Independent Director
    Hongjun
    Liu                                               2009.6.18-2012.6.17     0       0       -
    Fem
    Honglin            56    Independent Director
    ale
    g
    Supervisor, Chairman      2009.6.18-2012.6.17     0       0       -
    Guan
    Male    56    of the Supervisory
    Zhicai
    Committee
    Zhang                                             2009.6.18-2012.6.17     0       0       -
    Male    40         Supervisor
    Xinliang
    Fu                                                2009.6.18-2012.6.17     0       0       -
    Chunlon    Male    37         Supervisor
    g
    Wang                                              2009.6.18-2012.6.17     0       0       -
    Guangy     Male    52   Employee Supervisor
    e
    Ke                                                2010.4.28-2012.6.17     0       0
    Fem
    Wenshe             42   Employee Supervisor
    ale
    ng
    Ren                                               2009.6.18-2012.6.17     0       0       -
    Deputy General
    Yongjia    Male    47
    Manager
    n
    Luo                        Deputy General         2009.6.18-2012.6.17     0       0       -
    Male    48
    Bojun                         Manager
    Deputy General         2009.6.18-2012.6.17     0       0       -
    Guo
    Male    45     Manager, Secretary
    Dongri
    of the Board
    10
    Shenzhen Tellus Holding Co., Ltd.                                Annual Report 2010
    Deputy General     2009.6.18-2012.6.17      0      0           -
    Feng Yu    Male    43
    Manager
    II. Main work experience of directors, supervisors and senior executives in the
    recently five years and particulars about holding the post or taking part-time job
    in other units barring the Shareholding Company
    Name             Main work experience and holding the post or taking part-time job
    He ever took the posts of Divisional Manager of Financial Company of Shenzhen
    Special Economic Zone Development (Group) Company and Manager of Assets
    Department of Shenzhen Special Economic Zone Development (Group) Company;
    now, he takes the post of Chairman of the Board of the Group. At the same time, he
    concurrently Chairman of the Board in Shenzhen Auto Industry and Trade
    Zhang
    Corporation (the controlling subsidiaries of the Company), Chairman of the Board in
    Ruili
    Shenzhen Huari Automobile Co. Ltd. (the controlling subsidiaries of the Company),
    Vice Chairman of the Board in Shenzhen Renfu Tellus Automobile Service Co., Ltd.
    (the affiliated company of the Company), Chairman of Shenzhen Tellus Gem
    Investment Co., Ltd.( the joint venture company of the Company) and Chairman of
    Shenzhen Xinglong Mold Co., Ltd. (the affiliated company of the Company).
    He ever took the post of lecturer and principal secretary of University of Shenzhen,
    and GM and Deputy Director of Party-masses Dept. of Shenzhen SDG Co., Ltd.,
    the Chairman, GM and Deputy Secretary of General Branch of Shenzhen SDG
    Xiaomeisha Tourism Center. Now he acts as the GM of the Company, and director
    Lv Hang      of the Shenzhen Motor Industry Trade General Company(controlling subsidiary of
    the Company) and Shenzhen SDG Huari Auto Enterprise Co., Ltd. (controlling
    subsidiary of the Company) respectively; serve as the Chairman of Shenzhen
    Telihang Investment(joint-venture of the Company) and deputy Chairman of
    Shenzhen Dongfeng Auto Co., Ltd. (joint-venture of the Company)
    He ever took the post of lecturer in Hunan College of Finance and Economics,
    Business Manager of Assets Operation Department in Shenzhen SDG Co., Ltd., CFO
    of Shenzhen SDG Xiaomeisha Tourism Center. He now acts as Director and CFO of
    Fu Bin    the Group. At the same time, he concurrently took the post of Director of Shenzhen
    Auto Industry and Trade Corporation (the controlling subsidiaries of the Company).
    And serve as the director of China Perfect Machinery Industry Cor., Ltd. (the
    affiliated company of the Company).
    He ever took the post of Department Manager of head company of China National
    Aero-Technology Import & Export Corporation Shenzhen Company, Deputy GM
    of Shum Yip Holdings (Shenzhen) Property Management Co., Ltd., GM of Shum
    Shi       Yip Zengjie Corporation, and General Assistant of Shum Yip, Deputy GM and
    Changyue    Commissary of Party Committee of Shenzhen Special Economic Zone
    Development (Group) Co., Ltd. Now he acts as General Manager and
    Vice-secretary of Party Committee of Shenzhen SDG Co., Ltd., the Director of the
    Company and concurrently the Director of Shenzhen SDG Information Co., Ltd.
    He ever took the post of secretary of committee for discipline inspection of Shenzhen
    SDG Co., Ltd. Now he acts as the deputy GM of Shenzhen SDG Co., Ltd., director
    Zhang
    of the Company and at the same time, serve as the director of Hon Kwok Sanhe Co.,
    Jianmin
    Ltd., director of Shenzhen International Enterprise Co., Ltd. and director of
    Shenzhen SDG Information Co., Ltd. respectively.
    11
    Shenzhen Tellus Holding Co., Ltd.                               Annual Report 2010
    He ever took the post of Accountant of Audit Bureau of Shenzhen, General Auditor
    of Shenzhen Fountain Corporation, Manager of Planning and Financial Department
    Zhang
    of Shenzhen SDG Co., Ltd.; serve as GM and Chairman of Shenzhen SDG
    Junlin
    Information Co., Ltd., Now he acts as deputy GM of Shenzhen SDG Co., Ltd. and
    Director of the Company.
    He ever took the post of GM of Shenzhen Industry Co., Ltd.; Chief Economist of
    Shenzhen Special Economic Zone Development (Group) Company; Chairman of
    Shenzhen SDG Information Co., Ltd and Shenzhen SDG Information Alcatel Fiber
    Ji Dejun
    Co., Ltd. Now, he acts the Independent Director of the group, and concurrently
    Independent Director of Shenzhen Century Plaza Hotel Co., Ltd and Guilin Tourism
    Corporation Limited.
    He ever took the post of Assistant of English Department of Teachers College of
    Jiangsu University, Translator of Jiangsu Engineering Translation Institute, Senior
    Jiang      Investment Manager of L.A.Enterprises(USA), Inc., Executive Director of GITIC
    Hongjun     International Pte. Ltd., PM of Shentou Transportation Group Co., Ltd. and General
    Economist of Shenzhen Shipping Group Co., Ltd. Now he acts as Independent
    Director of the Company.
    She ever took the post of Assistant Accountant of Financial Department of Tianjin
    Components Industries Corporation, Senior Staff of Tianjin Electronic Instruments
    Management Bureau, Deputy Head of Tianjin Zhonghuan Certified Public
    Liu
    Accountants, CFO of Shenzhen Yongxing Industrial and Commercial Corporation,
    Hongling
    Head of Shenzhen Weiming Appraisal Institute, and Chairman of Shenzhen
    Sinocoms Appraisal Co., Ltd. Now she acts as Vice-chairman of Shenzhen Sinocoms
    Appraisal Co., Ltd. and Independent Director of the Company.
    He ever took the post of Workers, Head of Workshop Section, and Secretary Of
    Youth League Committee in state-owned 5501 plant, and worked in Shenyang
    Agricultural Machinery Automotive Industry Bureau and Shenyang Automotives
    Industry General Corporation. He also took the posts of Deputy Officer, Deputy
    Head and Head of Enterprise Management Department, Director of Reform Office,
    Director of the Board, Vice Secretary General of the Board of Shenyang Jinbei
    Guang
    Automotive Company Limited; Secretary of Party Committee and Deputy GM of
    Zhicai
    Shenzhen Radio Industry and Trade Corporation, Deputy GM of Shenzhen Liming
    Industry Corporation; Deputy GM of Shenzhen SDG Liming Group Co., Ltd., Vice
    Chairman and GM and Secretary of Party Committee of Shenzhen SDG Liming
    Group Co., Ltd., Chairman and Secretary of Party Committee of Shenzhen SDG
    Liming Group Co., Ltd. Now he acts as Chairman of Supervisory Committee of the
    Company.
    He ever took the post of Manager of Financial Dept in Machinery And Equipment
    Import And Export Company, Deputy Manager of Shenzhen SDG Co., Ltd. Now, he
    Zhang
    acts the supervisor of the group, Head of Audit and Supervision Dept. and
    Xinliang
    concurrently the Secretary of the supervisor committee of Shenzhen SDG Co., Ltd,
    and Supervisor of the Company.
    He ever took the Business Deputy General Manage of HR Department of Shenzhen
    Fu        SDG Co., Ltd., Deputy Team Leader in Work Team of Shenzhen Tefa Huatong
    Chunlong     Packaging Co., Ltd. Now, he is the Deputy Minister of HR Department of Shenzhen
    SDG Co., Ltd. and Supervisor of the Company.
    He ever took the post of Deputy General Manger of Financial Department and
    Wang       Deputy General Manager of Auditing Department in Shenzhen Tellus Holding Co.,
    Guangye     Ltd. Now, he acts as the Manager of Auditing Department in Shenzhen Tellus Holing
    Co., Ltd and Employee Supervisor of the group.
    12
    Shenzhen Tellus Holding Co., Ltd.                                Annual Report 2010
    He ever acts as the teacher in School of Guangdong Foreign Trade, major accountant
    of Shenzhen SDG Co., Ltd. and deputy GM and GM of the Accounting and Financial
    Dept. of the Company. Now, he acts as the GM of Accounting and Financial Dept.
    and staff supervisor of the Company, director of the Shenzhen Zhongtian Industrial
    Co., Ltd.(controlling subsidiary of the Company), and Shenzhen Teyao Investment
    Ke      Development Co., Ltd. (the controlling subsidiary of the Company); serve as the
    Wensheng supervisor of Shenzhen Xinyongtong Motor Vehicle Inspection Equipment Co.,
    Ltd(the controlling subsidiary of the Company), Shenzhen Tellus Real Estates
    Trading Co., Ltd. (the controlling subsidiaries of the Company), Shenzhen SDG
    Tellus Property Management Co., Ltd. (the controlling subsidiaries of the Company),
    Shenzhen Telihang Investment Co., Ltd.(joint-venture of the Company) and of
    Shenzhen Dongfeng Motor Co., Ltd. respectively.
    He ever took the posts of Manager of China Marketing Department of Shanghai
    Guo
    Pepsi Food Co., Ltd. and Assistant General Manager of the Company. He now acts
    Dongri
    as Deputy General Manager and secretary of the Board of the Company.
    He ever took the posts of Deputy Manager of Planning & Financial Dept. and
    Ren          Manager of Auditing Dept. in Shenzhen Special Economic Zone Development
    Yongjian     (Group) Company; Director and CFO of the Company. He now acts as Deputy
    General Manager of the Company and concurrently holds the post of Director of
    Shenzhen Auto Industry and Trade Corporation (the controlling subsidiary of the
    Company), Shenzhen SDG Huari Auto Enterprise Co., Ltd.(controlling shareholder
    of the Company), Shenzhen Telihang Investment Co., Ltd. (the joint-venture
    company of the Company), Shenzhen Zeng Fu Tellus Auto Service Co.,
    Ltd.(affiliated company of the Company) and of Shenzhen Dongfeng Motor Co.,
    Ltd.(affiliated company of the Company).
    He ever took the post of Deputy Manager of HR Dept. and Director of Human
    Resource Communication Training Center in Tellus Group, and Deputy General
    Manger of Shenzhen Auto Industry and Trade Corporation. Now he takes the post of
    Deputy General Manager of the Group, at the same time, he concurrently took the
    posts of Director of Shenzhen Auto Industry and Trade Corporation (the controlling
    subsidiary of the Company), Director of Shenzhen Huari Automobile Co. Ltd. (the
    Luo Bojun
    controlling subsidiaries of the Company), Chairman of the Board of Shenzhen SDG
    Tellus Real Estates Co., Ltd. (the controlling subsidiaries of the Company),
    Chairman of the Board of Shenzhen Teyao Investment Development Co., Ltd. (the
    controlling subsidiary of the Company) and director of Shenzhen Tellus Gem
    Investment Co., Ltd( the joint-venture company of the Company) and Shenzhen
    Xinglong Mold Co., Ltd. (the affiliated company of the Company).
    He ever took the Deputy General Manger of Shenzhen Xianke Real-estate Co., Ltd.,
    Manager of Investment Department of China Sports Group Industry Co., Ltd.;
    Feng Yu
    Director to the Office of General Manger of Shenzhen SDG Co., Ltd; and Supervisor
    of the Company. Now, he acts as Deputy General Manager of the Company.
    III. Particulars about the annual remunerations of directors, supervisors and
    senior executives in office at present
    (I) In the report period, the remuneration and welfare of directors, supervisors and
    senior executives taking the position in the Company were determined in accordance
    with the present distribution system, welfare system of the Nation and the Company
    and work position in the Company. As decided by the Extraordinary Shareholders’
    General Meeting 2002 of the Company, the allowance of three independent directors of
    the Company was respectively RMB 35,100 per year.
    (II) In the report period, the Company has 17 directors, supervisors and senior
    13
    Shenzhen Tellus Holding Co., Ltd.                                Annual Report 2010
    executives in office at present, among them, 12 persons drew the remuneration from
    the Company. The total annual remuneration received from the Company was RMB
    2,591,900.
    Remuneration
    Name                 Position             before              Remarks
    tax(RMB’0000)
    Zhang Ruili           Chairman                    39.70
    Chairman          of
    Guan Zhicai           supervisory                 29.33
    committee
    Luo Bojun             Deputy GM                   28.97
    Fu Bin                CFO                         28.97
    Ren Yongjian          Deputy GM                   28.97
    Guo Dongri            Deputy GM                   28.41
    Feng Yu               Deputy GM                   28.97
    Wang Guangye          Supervisor                  19.37
    Ke Wensheng           Supervisor                  15.97
    Independent
    Liu Hongling                                       3.51
    director
    Independent
    Jiang Hongjun                                      3.51
    director
    Independent
    Ji Dejun                                           3.51
    director
    GM           (office        37.45           2010.1-2010.12
    Cheng Peng
    leaving)
    Supervisor(office            3.31            2010.1-2010.4
    Deng Shu’e
    leaving)
    Total                      299.95
    (III) Directors and supervisors taking the position in the Company received their
    remuneration according to their position in the Company, Shi Changyue, Zhang
    Jianmin, Zhang Junlin, Zhang Xinliang and Fu Chunlong took the positions in the
    shareholding companies of the Company and drew their remuneration from these
    companies, while received no payment from the Company.
    IV. During the report period, name of directors, supervisors and senior executives
    elected or leaving the office and the reasons
    1. In April 2010, Mr. Ren Yongjian resigned the post of secretary of the Board held in
    the Company for position changes.
    2. The 3rd Meeting of 6th Session of the Board held on April 15, 2010 with agreement
    of unanimously for Mr. Guo Dongri as the Secretary of the Board. Relevant
    announcement published in Securities Times and Hong Kong Commercial Daily dated
    April 19, 2010.
    3. In April 2010, Ms. Deng Shu’e resigned the post of supervisor held in the Company
    for position changes.
    4. On April 16, 2010, by election expansion with the Labor Union Committee of the
    Group, Ms. Ke Wensheng was elected as the staff supervisor of 6th Session of
    Supervisory Committee of the Company with unanimously agreement. Relevant
    announcement published in Securities Times and Hong Kong Commercial Daily dated
    14
    Shenzhen Tellus Holding Co., Ltd.                                  Annual Report 2010
    April 28, 2010.
    5. In June 2010, Mr. Liu Chong resigned the post of director held in the Company for
    position changes.
    6. The 8th Interim Meeting of 6th Session of the Board held on June 8, 2010 with
    proposal of election for Mr. Zhang Jianmin as the director candidate of the 6th Session
    of the Board approved. Relevant announcement published in Securities Times and
    Hong Kong Commercial Daily dated June 9, 2010.
    7. The Shareholders’ General Meeting 2009 of the Company held on June 29, 2010
    with proposal of election for Mr. Zhang Jianmin as the director of the 6th Session of the
    Board approved. Relevant announcement published in Securities Times and Hong
    Kong Commercial Daily dated June 30, 2010.
    8. In February 2011, Mr. Cheng Peng resigned the post of director of 6th Session of the
    Board and GM held in the Company for position changes.
    9. The 11th Interim Meeting of 6th Session of the Board held on February 18, 2011 with
    proposal of election for Mr. Lv Hang as the director candidate of the 6th Session of the
    Board and GM of the Company approved. Relevant announcement published in
    Securities Times and Hong Kong Commercial Daily dated February 19, 2011.
    V. Particular about employees
    Till end of Dec. 31, 2010, the Group had totally 653 on-the-job employees, including
    150 production personnel, 26 salespersons, 53 technical personnel, 53 financial
    personnel, 134 administration personnel and other employee with 237 person; the
    Company has 16 persons with master degree, 67 persons with bachelor degree, 136
    persons graduated from 3-years regular college and 434 other graduated from senior
    higher or lower. The Company needs bear the expenses for 573 retirees.
    15
    Shenzhen Tellus Holding Co., Ltd.                                  Annual Report 2010
    Section VI. Administrative Structure
    I. Administration of the Company
    In the report period, according to requirement of the Company Law, Securities Law
    and relevant laws and regulations from CSRC, the Company continuously completed
    legal-person administration structure of the Company, and higher the standard for
    regulated operational. In accordance with serials regulations and rules of the Article of
    Association, Rules of Procedure for Shareholders’ General Meeting, Rules of
    Procedure for the Board, Rules of Procedure for Supervisory Committee, Working
    System for Independent Director and Details Work on General Manager, the Company
    exercise works with duty responsibility in normal for Shareholders’ General Meeting,
    Board and Supervisory Committee guarantee. Effectively protect the interest of the
    Company and shareholders, established an administrative structure for corporation
    legal person in complied with modern management preliminary. Governance status of
    the Company meets the requirements of relevant administrative regulations issued by
    CSRC for governance for listed company.
    In the report period, the Responsibility System of Significant Errors on Annual Report
    Disclosure, Management Measurement on Significant Fund Current, Management
    System on External Information Insider and Management System for Relevant Persons
    who in Charge of Financial Accounting were prepared by the Company according to
    the Regulation of Stock Listing in Shenzhen Stock Exchange and relevant regulations
    of Requirement of the Establishment on Responsibility System of Significant Errors on
    Annual Report Disclosure in List Company by Shenzhen CSRC. According to the
    status and actual requirement of the Company, the Company determined and regulated
    the error responsibility system; inside information used by external insider and
    significant fund current that arising in the process of annual report disclosure.
    Management and operation of the Company meets the requirement of governance
    regulation for listed company basically.
    In the report period, accordance with the requirement of Notice of Specific Activities
    on Standardized the Financial Accounting Basis Fully for Listed Company in Shenzhen
    Area issued by Shenzhen CSRC and Notice of Self-examination Work on
    Establishment and Implementation on Long-term System for Capital Occupation
    Avoidance, the Company exercise self-examination and self-correction work for
    enhance the system. The Self-examination Report of Specific Activities on Financial
    Accounting Basis Standardized, Reform Report of Specific Activities on Financial
    Accounting Basis Standardized, and Self-examination Report for the Establishment
    and Implementation on Long-term System for Capital Occupation Avoidance were
    submitted by the Company for better execution and perfection on long-term system for
    capital occupation avoidance and financial accounting system of the Company. After
    self-examination, existing no capital of listed company occupation for non-operational
    by largest shareholders and other related parties in the Company, neither the horizontal
    competition nor related transaction that arising from partial reformation.
    II. Performance of Independent Directors
    In the report period, independent directors of the Company performed their duties in
    line with the relevant laws and regulations of Working System for Independent
    Director, actively knew the Company’s business and operation situations and issued
    independent opinion to the significant events of the Company, and gave full play to
    active function in order to ensure the benefits of the Company and medium and small
    shareholders.
    (I) Particulars about independent directors’ presence in the Board meeting:
    16
    Shenzhen Tellus Holding Co., Ltd.                                  Annual Report 2010
    Times that
    Name of           should            Times of    Times of       Times
    independent       attend the         in-person    entrusted        of        Remark
    directors         Board             presence    presence      absence
    meeting
    Ji Dejun             8                8             0             0
    Jiang
    8                8             0             0
    Hongjun
    Liu Hongling           8                8             0             0
    (II) In the report period, the Company’s independent directors did not propose any
    objection on the relevant matters.
    (III) During the annual report auditing period, independent directors participated in the
    audit and carried out field examination on the Company in accordance with relevant
    regulations and requirements. Before the entry of certified public accountants,
    independent directors checked annual work plan, financial statements and other
    documents of the Company, listened to the report of financial position and operational
    results of the Company in this year from chief financial officer. After annual audit
    accountants issued preliminary auditing opinions, independent directors communicated
    and discussed with them to ensure that the auditing result was timely, authentic and
    accurate.
    III. The Company is separated from the controlling shareholder in terms of
    Business, Personnel, Assets, Organization and Finance; the Company possessed
    the whole business and independent operating capability
    (I) Separation in Business: The Company was an independent corporate body. The
    Company was absolutely independent from its controlling shareholder in business, and
    had an independent and complete business system and independent management
    capability. The Company has independent production, sales and service system and
    own leading industry. There exists no competition in the same line among the
    Company, controlling shareholders and related parties.
    (II) Separation in Personnel: The Company was absolutely independent in management
    of labor, human affairs, and salaries, enacted an independent administration systems.
    All the senior executives of the Company receive emoluments from the Company and
    have taken no post concurrently in the Shareholder Company.
    (III) Separation in Assets: The Company was strictly separated from its controlling
    shareholder, and they conducted completely independent management. The Company
    has complete and independent purchase system, production system, marketing system
    and the relevant service systems. The Company exclusively owns such intangible
    assets as industrial property rights, trademarks and non-patent technologies.
    (IV) Separation in Finance: The Company set up an independent financial accounting
    department, and established a complete set of accounting systems and financial
    administration systems. The controlling shareholder has never disturbed the Company
    in fund operation; The Company has opened independent bank account and has never
    been involved in such activities as depositing funds in the accounts of the financial
    company or the clearing center controlled by any of the principal shareholders or other
    related parties. The Company independently pays taxes according to the law.
    17
    Shenzhen Tellus Holding Co., Ltd.                                    Annual Report 2010
    (V) Separation in Organization: The Board of Directors and the Supervisory
    Committee and the other inner organization operate independently. The Organizations
    of the Company were set up according to the standardized requirements of listed
    company and actual business features, and had independent office site.
    IV. Establishment and perfection of internal control system of the Company
    According to relevant laws, regulations and standardized documents from CSRC and
    Shenzhen Stock Exchange, the Company established corporate governance structure
    including the Shareholders’ General Meeting, Board, Supervisory Committee as well
    as Senior Executives and prepared relevant regulations and systems.
    (I) Control over holding subsidiaries
    The Company exerted management upon its holding subsidiaries in strict accordance
    with relevant laws and rules and regulatory documents of listed companies, and
    conducted guidance and standarization on the operation of holding subsidiaries in
    conformity with related requirements of listed companies.
    Directors, supervisors and legal person representatives of the holding subsidiaries were
    recommended and appointed by Board of the Company, and senior exceutives
    relocated by the Company accorded with Articles of Association and other relevant
    regulations.The Company had also established corresponding performance appraisal
    system to implement periodical or irregular appraisal on relevant staff.
    The Company had established a whole set of operation and management system in line
    with relative documents and demanded holding subsidiaries to put it into practice in
    line with the relevant regulations of the Company, concurrently, it stipulated that
    coorelative management system of holding subsidiaries must be in compliance with
    management system frame of the Company.
    Functional departments of the Company also exercised supervision on holding
    subsidiaries in the aspects of personnel, operation, finance, sigificant contract and legal
    affairs, etc. through functional systems of their own.
    (II) Control over related transactions
    The Company adhered to principle of fairness, justice and honesty in term of related
    transaction, and went through approval in strict accordance with relevant regulations
    and procedures, fully safegurding interest of all-party investors. According to the
    relevant regulations of Stock Listing Rules of Shenzhen Stock Exchange, Articles of
    Association and Management Methods of Classifed Authorization, the Company
    explicitly delimited approval authority of shareholder’ general meeting and Board
    meeting on related transaction, that is, significicant ones should be submitted to the
    Board only after it was approved by independent directors, and all related transaction
    of the Company demanded independent opionions of independent directors.
    (III) Control over external guarantees
    Strictly complying with Notice of Further Standarizing Gurantee Behaviour, Stock
    Listing Rules of Shenzhen Stock Exchange and other provisions of CSRC, The
    Company revised part guarantee events-related terms of Management Methods of
    Classifed Authorization and stipulated that all external guarantee had to fullfill relevant
    approval procedure, enhancing the management and control upon external guarantee
    business.
    (IV) Control over the usage of raised proceeds
    The Company has not raised proceeds for the recent years, and it woulld work out
    18
    Shenzhen Tellus Holding Co., Ltd.                                 Annual Report 2010
    management system as regards proceed-raising on the foundation of actual needs.
    (V) Control over significant investments
    The Company always sticks to the principle of prudence, safety and effectiveness in
    term of significant external investment, strictly controls investing risks and attaches
    great importance on the maximization of investment effect. On the basis of adequate
    market survey conducted by related departments, external investment had to form a
    feasible report for the operation meeting to dissucss and study fully, and finally be
    submitted to the Board for examination and approval. According to relevant
    regulations of Stock Listing Rules of Shenzhen Stock Exchange, Articles of
    Association and Management Methods of Classifed Authorization, the Company
    difinitely delimited approval privileges on external investment events, and in actual
    practice, it aslo conducted real-time supervision on the whole implementation process
    of investment in strict line with regulations of approval privileges to avoid investment
    risks to the largest extent.
    (VI) Control over information disclosure
    The Company followed laws and rules, Stock Listing Rules of Shenzhen Stock
    Exchange, Management Methods for Information Disclosure of Listed Companies and
    other regulatory documents, and revised Work System on Information Disclosure and
    Responsibility System on Significant Errors of Annual Information Disclosre,
    stipulating principles, content, requirements, approving procedures, obligations and
    confidentiality regualtaions of information disclosure in detail and defining
    responsibilities and related investigation system for information disclosure.
    Information disclosure of the Company was all published in relevant media designated
    by CSRC to guarantee timeness and accuracy.
    V. The Board’s appraisal on internal control system of the Company could be
    found in Self-appraisal Report on Internal Control 2010 of Shenzhen Tellus
    Holding Co., Ltd. which was disclosed along with the annual report
    VI. At the end of the report period, Board of Directors performed assessment on
    senior exceutives of the Company in compliance with coorelative system of the
    Company
    VII. Particular about non-normative of governance exist in the Company for 2010
    (1) Type of non-normative item of governance of the Company including financial
    budget and financial statement that submitted to SDG-controlling shareholder of the
    Company, before information disclosure.
    Statement of private information offered to largest shareholder in 2010
    Information                                    Submitted time     Basis of         Approval
    Information type
    receiver                                       or period       submitted         procedure
    Monthly main financial
    Monthly      (4th
    index express which was in                   Document        of
    SDG                                         day of every
    common use of enterprise                     SDG                  To submit via
    month)
    located in Shenzhen                                               internet
    Quarterly (10th Document          of
    SDG              Three charges
    day of season) SDG
    19
    Shenzhen Tellus Holding Co., Ltd.                                Annual Report 2010
    Accounting statement and      Monthly (13th                   Prepared by
    Document       of
    SDG              Explanation of Financial      day of every                    Accounting &
    SDG
    Status                        month)                          Financial
    Annual Financial Budget                     Document       of Dept.     seal
    SDG                                            Yearly                          with       the
    Statement for Enterprise                    SDG
    Company and
    Annual Financial Budget                    Document        of submit     via
    SDG                                       Yearly
    Statement for Enterprise                   SDG                interne
    Other statement required                                     Required by
    Document      of
    SDG               for submitted by largest Un-schedule                          the
    SDG
    shareholder temporary                                         documents
    (2) Reasons for the abovementioned items exist
    Pursuit to the management department of Ministry of Financial and State-owned Assets
    Supervision & Administration Commission of State Council, the controlling
    shareholder required the Company submitted pre-disclosure financial statement
    regularly.
    (3) Solution plan
    The financial statement offered to controlling shareholder regularly was the necessary
    information needed for consolidation statement of the controlling shareholder.
    According to the regulations of Notice of Strength Supervise on Behavior of
    Un-disclosure Information Provided to Largest Shareholder and Actual Controller by
    Listed Company( SZJGSZ[2007] No.11) and Supplementary Notice of Strength
    Supervise on Non-normative Behavior of Governance of Un-disclosure Information
    Provided to Largest Shareholder and Actual Controller by Listed
    Company(SZJGSZ[2007] No. 39) issued from Securities Regulatory Bureau of
    Shenzhen Municipal, the Company asks for implementation to SDG. SDG have issued
    the Promise Letter of Strength on Management for Un-disclosure Information and
    Name Lists of the Un-disclosure Information of Listed Company Contact by SDG to
    the Company for strength management on un-disclosure information.
    In the report period, in accordance with the Notice of Further Standardized the Filed
    Information of Un-disclosure Information Provided to Largest Shareholder and Actual
    Controller by Listed Company (SZJGSZ [2008] No. 60) from Securities Regulatory
    Bureau of Shenzhen Municipal, the Company have submitted information to Securities
    Regulatory Bureau of Shenzhen Municipal for field regularly on the un-disclosure
    information provided to largest shareholder and actual controller.
    VIII. Statement on responsibility of internal control from the Board
    Board of the Company responsible for the establishment and perfection on internal
    control for its long-term implementation; performed the guidance and supervise duty
    on the implementation and establishment for internal control; guarantee the
    confidential and completion on assets and truth of the financial report.
    20
    Shenzhen Tellus Holding Co., Ltd.                                Annual Report 2010
    Section VII. Brief of the Shareholders’ General Meeting
    During the report period, the Company held 2009 Shareholders’ General Meeting.
    I. Shareholders’ General Meeting 2009
    The Board of the Company issued Notice of Holding 2009 Shareholders’ General
    Meeting on the designated medias—Securities Times and Hong Kong Commercial
    Daily on June 9, 2010. On June 29, 2010, the Company held 2009 Shareholders’
    General Meeting of Shenzhen Tellus Holding Co., Ltd. at the Company’s Conference
    Room on 15th floor of Zhonghe Building.
    Notice of Resolutions of 2009 Shareholders’ General Meeting was published on
    Securities Times and Hong Kong Commercial Daily dated June 30, 2010.
    21
    Shenzhen Tellus Holding Co., Ltd.                                 Annual Report 2010
    Section VIII. Report of the Board of Directors
    I. Operating review of the Company in the report period
    (I)The overall operation of the Company in the report period
    1. The main work of the Company 2010 is to fully diminish historic left problems,
    totally clear up obstacles preventing healthy growth of the Company, and try to achieve
    stage results, to make scientific development plan, to centralize resources on promoting
    process of primary transformation projects, thus lay a foundation for the stage which
    the Company will develop into.
    Over the past year, under the leadership of Board of Directors, the leaders of the
    Company led all the staffs, continuously took over working principle of stable
    operation, closely revolved around working targets, centralized on two major items of
    development of accented terms and corporate daily operation, effectively overcame
    enormous impact on corporate development arising from unquiet economy and various
    objective factors. Accented terms obtained breakthrough growth, and the operation and
    production kept stable and developing tendency. We accomplished the whole-year
    operational targets and tasks.
    In reporting period, the Company realized operating income RMB 386.35 million,
    down 10.71% over the same period of last year; total profit RMB 3.28 million down
    62.09% over the same period of last year; net profit attributable to owners of parent
    company RMB 3.58 million, down 43.16% over the same period of last year. Business
    income decreased due to that the change of sales policy of import vehicles in
    automobile sales business caused decrease of operating income; net profit decreased
    mainly due to profiting RMB 9.6678 million from debts restructure of the same period
    of last year.
    2. Main problems and difficulties existed in the Company
    Though the Company got promotion and improvement in operation over past recent
    years and assets quality constantly ascended, there still existed many difficulties and
    deficiencies which were mainly manifested in:
    (1) The present biggest impact for development of Tellus is from petrifaction guarantee
    case. Though we temporarily avoided term payment for enormous case-involving
    principles, interests and default interest owing to our constant hard effort, the
    reconciliation became harder because the case-involving amount was huge and Tellus
    is a listed company.
    (2) Lower marketing share and profitability. Marketing share of main business was a
    little low and the scale was not big enough. And the weak profitability of current
    business was not changed while the new profit growth point was still not formed.
    Though accented item of the group Shuibei Jewelry Industrial Park got policy support
    from the municipal government and obtained breakthrough growth owing to hard effort
    of the Company, the appraisal progress did not reach the target due to various objective
    factors. At the same time, the group was deficient in management experience of capital
    construction. The aspects such as item planning, implementation and supervision etc.
    need to be improved.
    (3) Present mechanism of the Company was still far away from being totally
    market-oriented. Talents appraisal mechanism along with payments distribution and
    incentive mechanism were still correspondingly lagging behind.
    (4) Enormous capital investment was needed in developing new items as well as
    dealing with historic left problems thus financing pressure was a little hard.
    22
    Shenzhen Tellus Holding Co., Ltd.                                   Annual Report 2010
    (II) Scope of main operations and particulars about business in the report period
    1. Scope of main operations and particulars about business
    The Company was mainly engaged in automobile sales, automobile inspection and
    maintenance as well as accessories sales, industry property lease and service etc.
    (I) In reporting period, the Company realized operating income RMB 386.35 million
    including main operating income RMB 381.49 million, down 10.86% over the same
    period of last year. Main operating income decreased mainly due to that the change of
    sales policy of import vehicles in automobile sales business caused decrease of
    operating income.
    The income from main operations was classified as follows according to industries:
    Unit: RMB
    Income from          Cost of main         Profit ratio of main
    Industries
    main operations          operations           operations (%)
    Automobile trade         237,081,553.05        227,491,635.40                     4.04%
    Automobile inspection
    24.04%
    and maintenance                57,505,214.01          43,683,322.84
    Lease service                  86,907,819.42          47,757,961.57                  45.05%
    Total             381,494,586.48        318,932,919.81                   16.40%
    (2) The operating activities of the Company’s business or main products taking over
    10% in total amount of income from main operations or profit from main operations:
    Unit: RMB
    Increase     Increase
    Increase or
    Profit      or           or
    decrease of
    ratio   decrease decrease
    main
    Income from                         of     of main     of main
    Cost of main                                        operating
    Products           main                          main    operating operatin
    operations                                        profit ratio
    operations                      operati   income       g cost
    over that of
    ons    over that over that
    last year
    (%)      of last     of last
    (%)
    year (%) year (%)
    Automob 237,081,553.0 227,491,635.4
    4.04%      -16.03% -15.12%               -1.04%
    ile trade                      5                0
    Automobile
    inspection                                            24.04
    57,505,214.01 43,683,322.84                  -19.73% -19.32%               -0.39%
    and                                                       %
    maintenance
    Automob                                         45.05
    86,907,819.42 47,757,961.57                   17.46% 24.08%                -2.93%
    ile trade                                                 %
    2. Main suppliers and customers of the Company
    In the report period, the Company’s total purchase amount from the top five suppliers
    was RMB 295.2 million, accounting for 82% in total purchase amount in the whole
    year. The Company’s main sales customers were terminal consumers and the sales
    income from the top five customers was RMB 36.4 million, which occupied 9.4% in
    the income from main operations.
    3. In the report period, there was no great change in the Company’s main operations
    and their structure and capability of main operations compared to those of last period.
    23
    Shenzhen Tellus Holding Co., Ltd.                                 Annual Report 2010
    (III) Statement on comparatively large change of increase and decrease of assets
    and liability at the end of reporting period
    Unit: RMB
    2010-12-31         2009-12-31
    Proportion       Proportion
    Proportio          Proportio  increased or     increased or
    Items      Am n in total Am n in total          decreased of     decreased of
    ount     assets    ount     assets  amount     (%) proportion (%)
    (%)                (%)
    10,2               17,8
    Accounts
    12,3               78,3
    paid in                  1.70%             2.92%         -42.88%            -1.22%
    71.6               92.4
    advance
    8                  6
    13,7               22,2
    Other
    43,1               74,1
    accounts                 2.29%             3.64%         -38.30%            -1.35%
    65.2               03.7
    receivable
    4                  5
    25,0               18,3
    45,9               73,9
    Inventory                4.18%             3.00%          36.31%             1.18%
    54.5               99.2
    2                  3
    Remunera 14,7
    9,12
    tion          84,4
    2.47% 8,11        1.49%          61.97%             0.98%
    payable       18.6
    0.35
    for staffs       1
    (1) Accounts paid in advance decreased RMB 7.666 million and down 42.88% over the
    period-begin mainly due to the decrease prepaid automobile accounts of subsidiary
    Huari Toyota.
    (2) Other accounts receivable decreased RMB 8.5309 million and down 38.3% over
    the same period of last year. The original amount of the receivable account decreased
    RMB 5.8862 million and bad debt increased RMB 2.6447 million, mainly due to that
    the Company regained RMB 4.9063 million of equity transfer from Shenzhen Sufa
    Union Industry Co., Ltd and accrued special bad debts provision for partial
    uncollectible accounts receivable.
    (3) Inventory increased RMB 6.672 million and up 36.31% over the same period of
    last year. The original value of inventory increased RMB 6.672 million, mainly due to
    the increase of inventorial automobiles of subsidiary Huari Toyota.
    (4) Remuneration payable for staffs increased RMB 5.6563 million and up 61.97%
    over the same period of last year, mainly due to accrual of housing reserve capital and
    un-payment of bonus.
    (IV) Huge on year-on-year basis change and main influence factors of the profit
    constitution in reporting period
    Unit: RMB
    Amount of
    Increase/dec
    Items                 2010               2009         increase and
    rease (%)
    decrease
    Income from
    18,222,881.72     14,875,383.09      3,347,498.63         22.50%
    investments
    24
    Shenzhen Tellus Holding Co., Ltd.                                 Annual Report 2010
    Non-operating
    666,300.24     10,917,525.82 -10,251,225.58           -93.90%
    income
    Non-operating
    181,387.12        272,077.02         -90,689.90       -33.33%
    expense
    Income tax expense             -645,965.13        519,607.38      -1,165,572.51      -224.32%
    Other comprehensive
    -432,000.46        677,006.50      -1,109,006.96      -163.81%
    earnings
    (1) Investment income increased RMB 3.3475 million and up 22.5% over the same
    period of last year mainly due to increased profit of investors.
    (2) Non-operating income decreased RMB 10.2512 million and down 93.9% over the
    same period of last year, mainly due to that last year we profited RMB 9.6678 million
    from debts restructure while this year this account did not occur.
    (3) Non-operating expense decreased RMB 90,700 and down 33.33% over the same
    period of last year, mainly due to fines forfeits and penalty expenditure as well as loss
    from debts restructure occurred at the same period of last year.
    4) Income tax expenditure decreased RMB 1.1656 million and down 224.32% over the
    same period of last year, mainly due to that deferred income tax on provision for
    housing reserve capital as well as loss form accrued assets depreciation.
    (5) Other comprehensive income decreased RMB 1.109 million and down 163.81%
    over the same period of last year, mainly due to the change of market value of stock in
    financial assets available for sale.
    (V) Particulars about structure of cash flow arising from operating activities,
    investing activities and financing activities of the Company, change situation and
    reasons:
    Unit: RMB
    Increase/decrease
    Items          2010             2009        Increase/decrease
    (%)
    Net cash
    flows
    arising
    7,143,993.37 26,475,163.85          -19,331,170.48              -73.02%
    from
    operating
    activities
    Net cash
    flows
    arising
    -679,006.28     9,157,675.90        -9,836,682.18             -107.41%
    from
    investing
    activities
    Net cash
    flows
    arising
    -14,707,112.61 -2,931,096.54          -11,776,016.07             -401.76%
    from
    financing
    activities
    (1) Net amount of cash flow arising from operating activities decreased on
    year-on-year basis mainly due to decrease of operating income.
    (2) Net amount of cash flow arising from investing activities decreased on year-on-year
    25
    Shenzhen Tellus Holding Co., Ltd.                                   Annual Report 2010
    basis mainly due to the occurred equity transfer of the same period of last year.
    (3) Net amount of cash flow arising from financing activities decreased on
    year-on-year basis mainly due to payment for loan in this period.
    (VI) Operations and achievements of main holding companies
    1. In the report period, the main holding companies of the Company were: Shenzhen
    Auto Industry and Trade Corporation (hereinafter referred to as Auto Industrial
    Trading), Shenzhen Tellus New Yongtong Automobile Development Co., Ltd.
    (hereinafter referred to as New Yongtong), Shenzhen Tefa Huari Automobile Co., Ltd.
    (hereinafter referred to as Huari Automobile), Shenzhen Huari Toyota Auto Sales Co.,
    Ltd. (hereinafter referred to as Huari Auto Trading), Shenzhen New Yongtong Motor
    Vehicle Inspecting Equipments Company (hereinafter referred to as Inspecting
    Equipments), Shenzhen Tefa Tellus Property Management Co., Ltd. (hereinafter
    referred to as Property Company), Shenzhen Zhongtian Industrial Co., Ltd. (hereinafter
    referred to as Zhongtian Company), Shenzhen Tefa Tellus Real Estate Co., Ltd.
    (hereinafter referred to as Real Estate Company) and Shenzhen Tellus Real Estate
    Trade Co., Ltd. (hereinafter referred to as Trade Company).
    The main operations and business of the aforesaid holding enterprises was as follows:
    Unit: RMB’0000
    Hu
    ari   Inspect      Propert            Real
    Auto                                                     Zhon              Trade
    New     Huari
    Industr                      Au         ing       y       gtian   Estate
    Yongto   Autom
    y and                                                    Comp              Com
    ng      obile
    Trade                       to    Equip        Compa      any    Compa
    pany
    Tra   ments          ny                ny
    de
    Produc
    Sale of              Mainte                                         Develo
    tion
    auto                 nance                        Lease             pment    Agen
    Main                                 Sal and
    and its              of auto,                     and               of land, cy
    produ            Mainte               e sale of                  Proper
    fittings,            product                      manage            operatin   of
    cts or           nance               of inspect                  ty
    develo               ion and                      ment of           g         real
    servic           of auto             aut ing                     lease
    pment                sale of                      propert           commer estate
    e                                     o equip
    of real              auto                         ies               cial        s
    ments
    estates              fittings                                       housing
    of auto
    Regist
    ered                        USD50     20
    5,896     3,290                        1,000      705      725     3,115    200
    capita                          0      0
    l
    Total                                 4,6
    26,638     8,755     8,142              1,909    2,818    2,157     3,038    314
    assets                                 77
    Net                                    68
    18,454     4,891     4,696               656     1,041    1,767     1,372    266
    assets                                  5
    26
    Shenzhen Tellus Holding Co., Ltd.                                   Annual Report 2010
    Net
    166        -28        -16 29          59        -34      9         14    -10
    profit
    2. Particulars of the influence received by the net profit of the Company over 10%
    originating from the net profit from single subsidiary or investment income from single
    share-join company
    Unit: RMB’0000
    Proportion of
    Operating Operating
    Name                     shares held                                   Net profit
    income         profit
    (%)
    Shenzhen Auto Industry and Trade
    100         1,444           236                166
    Corporation
    Shenzhen Dongfeng Automobile
    25       25,700            676                624
    Co.,Ltd
    Shenzhen Renfu Tellus Auto
    35      178,478          6,060             4,885
    Service Co., Ltd.
    (VII)Items measured by fair value
    Unit: RMB
    Depreciati
    Gains and
    Accumulative fair     on
    losses from
    Amount at                      value change withdraw Amount at
    Item                          change of fair
    period-begin                    recorded into     in the   period-end
    value in the
    equity        report
    report period
    period
    Financial assets:
    Including: 1. financial
    assets measured by fair
    value and whose change
    should be recorded into
    current gains and losses
    Including: derivative
    financial assets
    2.     Financial      assets
    1,849,330.80                       -432,000.46               1,483,077.75
    available for sale
    Subtotal of financial
    1,849,330.80                       -432,000.46               1,483,077.75
    assets
    Financial liabilities
    Real estate investment
    Productive       biological
    assets
    Others
    Total                        1,849,330.802                       -432,000.46               1,483,077.75
    As for estimation for fair value of financial assets available for sale at period-end, fair
    value should be confirmed according to the closing price at securities market on the
    estimation day.
    II. Future development of the Company
    The guiding ideology of 2011 is: deeply implement and carry out scientific thought of
    27
    Shenzhen Tellus Holding Co., Ltd.                                    Annual Report 2010
    development, correctively grasp the change of market situation, stand around the
    transformation of developing method of corporate economy, take the whole situation
    into account by spirit of reform and innovation. On one hand grasp the stable growth
    and the other hand seize the construction of accented terms, thus further improve assets
    quality and profitability of corporation. Practically enhance the compatibility, durative
    and inner motivation of corporate development, gradually establish competitiveness,
    strive to achieve new leaping and sustainable development of the group. Mainly get
    starting from the following several aspects:
    (I) Developing plans of the Company
    Seize opportunities, achieve historic breakthrough of primary project
    Continuously invest more in restructuring primary project of old industrial area,
    gradually raise ratio of development and construction of industry park along with
    logistic administration and management in group operation income along with profit,
    promote transformation in developing method of group economy and structure
    adjustment of industry, foster leading industry, boost assets quality and market
    competitiveness.
    1. Start officially on Shuibei Jewelrly Project: Under the premise of no major
    fluctuation of property income in the period of project construction and whole
    operation in an order stable status, control the liabilities and miner the financial risks,
    the industry zone performed in three phases with rolling development. The initial
    project will start with the construction of light-industry plant.
    2. As soon as possible start industry park project of Buxin Autos Comprehensive
    Services: with issue and implementation of Shenzhen Urban Renewal Means, industry
    park project of Buxin autos comprehensive services, Yannanlu project and sequential
    other logistic restructuring and upgrading projects in old industrial areas will meet new
    development opportunity, we must seize opportunities on time, speed up smooth
    conduct of every project, improve value of logistic assets.
    Buxin industry area has been included in the second pilot scope of upgrading and
    restructuring in old industrial areas. In 2011, we must grasp this historic opportunity
    and coordinate with government plan to strive to jointly plan restructuring of NO.8
    plant of Buxin and restructuring of NO.5, 6, 7, strive to build Tellus industry park of
    Buxin autos comprehensive services. With openness of Dongxiao Railway, we should
    strive the promotion of property value of palnts in Buxin Industry Region, and do a
    better job in market positioning and plot.
    (II) Demand and resource of capital for future development strategy of the
    Company
    Capital demand for future development strategy of the Company comes from the
    investment in Jewelry Industry Zone of Shuibei Project. Approximately total RMB
    0.27 billion is require for Shuibei Reform Project in future five years. Capital mainly
    comes from the self-owned funds and new partner introducing, rests of the capital will
    solved by bank loans.
    (III) Risks and measurements
    1. Risks:
    In coming year, along with the transfer of macroeconomics policy, the government
    focuses their attention on control of inflation and real estate. There has a major
    influence on real estate industry due to the strictly control on credit; sales of auto has a
    slowly increased due to the policy control on auto consumption market, building &
    stock, and other disadvantage impact of inflation; the inventory has a dramatically
    soaring and capital pressure increased with down on gross profit. Competitions
    between the industries will get fiercer.
    28
    Shenzhen Tellus Holding Co., Ltd.                                  Annual Report 2010
    2. Counter-measures:
    (1) Consolidate current business, actively explore and progress, build leading industry,
    ensure stable operation
    Continuously insist working principle of stable operation, exert advantage of group
    scale operation and systemic management, vigorously explore market, improve
    marketing share, increase sales income; further enhance management, save cost, reduce
    expense and ask management for efficiency.
    Fully make use of property resource, make marketing plot by heart, strive to keep
    famous jewelry corporations, ensure that the property operation of the group shows no
    huge fluctuation during the 1st stage of project construction of Shuibei Jewelry Industry
    Park, and ensure stabilization and growth of leasing price and leasing rate of property.
    Make use well of capital, create operating efficiency of capital; continuously support
    and transform marketing operation of corporation, realize constant profit; timely
    implement the Going-Out strategy, build new profiting point, enhance the Making
    Blood function of corporation.
    (2) Strengthen system construction, control risk and ensure smooth completion of
    accented terms by plans
    In order to card system and working procedure, especially establish and perfect risk
    control and supervision mechanism of large-scale capital construction and investment
    in strange lands with direction, set up scientific and reasonable early warning system
    for risk, thus form independent and valid internal control system; strive to innovate and
    breakthrough in aspects such as const control; ensure high efficiency, high quality,
    safety and probity of accented terms and various workings.
    III. Investments of the Company in the report period
    1. In the report period, the Company had neither raised capital nor applied capital
    which was raised in previous periods in this report period;
    2. In the report period, no particulars of the significant projects invested with
    non-raised proceeds.
    IV. Standard Unqualified Auditor’s Reports for the Company from China Audit
    International Certified Public Accountants has issued
    1. Changes of accounting policy
    According to the Clause VI. Regulated in Accounting Rules for Business Enterprises
    Explanation No.4 (CK[2010] No. 15) issued from MOF on July 14, 2010, ―in the
    consolidation statement, if the current deficit beared by minority shareholders
    exceeded the quota shared by the minority shareholder in owners’ equity at
    period-begin in subsidiary, the balance should off-setting minority equity ―. Meanwhile,
    regulated by the document, before issued the abovementioned documents, if the
    minority equity calculated no in accordance with the regulated method, should
    exercising retroactive adjustment. Being consent with the Board, relevant accounting
    policies were changed regulated by the document on January 1, 2010 by the Company.
    And retroactive adjustment on the consolidation shareholders’ equity dated January 1,
    2009 and December 31, 2009 as well as the consolidation net profit of 2009 at the
    same time.
    Before the accounting policy changed, concerning the same business, the Company
    adopted the accounting basis on Clause XXI of Accounting Rules for Business
    Enterprise No. 33—Consolidation Financial Statement, detail regulation as: in the
    consolidation statement, if the current deficit beared by minority shareholders
    exceeded the quota shared by the minority shareholder in owners’ equity at
    29
    Shenzhen Tellus Holding Co., Ltd.                                     Annual Report 2010
    period-begin in subsidiary, the balance should followed the treatment as: A. if the
    Articles of Association or Agreement of the Company has decided that the minor
    shareholders has the responsibility to undertake the losses and have the power to make
    up them, the balance should off-setting minority shareholders’ equity; B. if the Articles
    of Association or Agreement of the Company has decided that the minor shareholders
    have the responsibility to undertake the losses, the balance should off-setting owners’
    equity of parent company. Profits produced by the subsidiary in subsequent periods are
    attributable to the owners’ equity of the parent company before making up of the losses
    attributed to the minor shareholders but undertaken by the parent company of the
    Company.
    Shenzhen Tellus Xinyongtong Auto Development Co., Ltd., wholly subsidiary of the
    Company, in accordance with Clause XXI of Accounting Rules for Business Enterprise
    No. 33—Consolidation Financial Statement. While preparing the consolidation
    financial statement of 2009, the balance of current deficit share by minority
    shareholder of the Shenzhen Dongchang Yongtong Motor Vehicle Inspection Co., Ltd.
    and Shenzhen Xinyongtong Dongxiao Auto Inspection Co., Ltd. (―Dongchang
    Inspection ‖ and ―Dongxiao Inspection ‖ for short; 95% equity of the companies was
    held by Xinyongtong Company) and quota shared by minority of owners’ equity at
    period-begin in Dongchang Inspection and Dongxiao Inspection, should off-setting the
    shareholders’ equity attributable to parent company. Exceed deficit of minority of
    Dongchang Inspection and Dongxiao Inspection were off-setting the equity attributable
    to parent company dated January 1, 2009 and December 31, 2009 respectively with
    RMB 201,922.38 and RMB 207,414.31 by Xinyongtong. In accordance with the
    Clause VI of Accounting Rules for Business Enterprise No.4 (CK [2010] No. 15),
    Xinyongtong changes the accounting policy and exercised retroactive adjustment on
    the financial statement of comparative period. Due to the 100% equity of Xinyongtong
    held by the Company, the Company correspondingly retroactive adjustment for the
    period-begin amount in consolidation balance sheet and amount of comparative period
    in consolidation profit statement. The influence on consolidation shareholders’ equity
    and consolidation net profit 2009 dated January 1, 2009 and December 31, 2009
    respectively of the Company as:
    Item             January 1, 2009             2009            December 31, 2009
    Retained profit                  201,922.38                                 207,414.31
    Equity          of
    minority
    shareholders                     -201,922.38                               -207,414.31
    Net          profit
    attributable    to
    owners’ equity of
    parent company                                        5,491.93
    Minority interest                                    -5,491.93
    2. Changes on accounting estimation
    No changes on accounting estimation in the report period.
    3. Errors correction on previously accounting
    No errors correction for previously accounting in the report period.
    V. Routine work of the Board of Directors
    (I) Meetings held by the Board of Directors and contents of the resolutions
    30
    Shenzhen Tellus Holding Co., Ltd.                                  Annual Report 2010
    In the year 2010, the Board of Directors of the Company held 8 meetings in total:
    1. The 3rd Meeting of the 6th Session of Board was held on April 15, 2010 in the
    meeting room of 15/F in Zhonghe Building. The meeting discussed and approved
    proposal on 2009 Annual Report. Relevant notices were published on Securities Times
    and Hong Kong Commercial Daily dated April 19, 2010.
    2. The 6th Extraordinary Meeting of the 6th Session of Board was held on April 26,
    2010. The meeting discussed and approved proposal on First Quarterly Report 2010.
    Relevant notices were published on Securities Times and Hong Kong Commercial
    Daily dated April 28, 2010.
    3. The 7th Extraordinary Meeting of the 6th Session of Board was held on May 28, 2010.
    The meeting discussed and approved proposal on Self-examination Report of Specific
    Activities on Standardized the Basic Work of Financial Accounting of Shenzhen Tellus
    Holding Co., Ltd.
    4. The 8th Extraordinary Meeting of the 6th Session of Board was held on June 8, 2010.
    The meeting discussed and approved proposal on Guarantee for Loan to Auto Industry
    Import-Export Company by Auto Industry and Commercial, the proposal on Holding
    the Annual Shareholders’ General Meeting of 2009 and proposal on Changes for
    Director. Relevant notices were published on Securities Times and Hong Kong
    Commercial Daily dated June 9, 2010.
    5. The 4th Meeting of the 6th Session of Board was held on August 2, 2010 by
    communication. The meeting discussed and approved proposal on Semi-Annual Report
    of 2010. Relevant notices were published on Securities Times and Hong Kong
    Commercial Daily dated August 4, 2010.
    6. The 5th Meeting of the 6th Session of Board was held on October 20, 2010 by
    communication. The meeting discussed and approved proposal on Third Quarterly
    Report of 2010. Relevant notices were published on Securities Times and Hong Kong
    Commercial Daily dated October 21, 2010.
    7. The 9th Extraordinary Meeting of the 6th Session of Board was held on October 31,
    2010. The meeting discussed and approved proposal on Self-examination Report of
    Establishment and Implementation on Long-term System of Fund Occupation
    Avoidance and proposal on Reform Report of Specific Activities on Basis Work for
    Standardized Accounting of Shenzhen Tellus Holding Co., Ltd. Relevant notices were
    published on Securities Times and Hong Kong Commercial Daily dated November 3,
    2010.
    8. The 10th Extraordinary Meeting of the 6th Session of Board was held on December
    30, 2010 in Nanning. The meeting discussed and approved proposal on Management
    System of Persons in Charger of Financial Accounting of Shenzhen Tellus Holding Co.,
    Ltd.. Relevant notices were published on Securities Times and Hong Kong
    Commercial Daily dated January 4, 2011.
    (II) Implementation of the resolutions made at the Shareholders’ General Meeting
    by the Board of Directors
    According to the resolutions approved by Annual Shareholders’ General Meeting 2009,
    the Board of the Company did not distribute any profit or convert capital reserve into
    share capital in 2010.
    (III) Summary of the duty performance of the Audit Committee of the board of
    directors
    In the report period, the Audit Committee actively carried out its work in auditing the
    annual report according to the relevant regulations of the Article of Association and the
    31
    Shenzhen Tellus Holding Co., Ltd.                                 Annual Report 2010
    Discussing Principles of the Audit Committee.
    Before the official entrance of the certified public accountants for annual audit, on
    December 23, 2010 the Audit Committee and the certified public accountants
    negotiated and confirmed the work arrangement for the 2010 Annual Report audit. The
    independent directors of the Company were handed with the work arrangement for the
    2010 Annual Report audit. On Feb. 15, 2011, the Audit Committee held meeting, in
    which they examined the financial accounting statements made by the Company and
    believed that the preparation for these statements was in line with the regulations of
    accounting standard; the statements really reflected the financial condition of the
    Company at the end of 2010 and operating achievement in 2010. It was agreed to take
    this financial accounting statement and relevant files to hand in to China Audit
    International Certified Public Accountants for audit.
    After the official entrance of the certified public accountants for annual audit, the
    members of the Audit Committee respectively made call inquire for the audit progress
    and supervised and urged the Certified Public Accountants Co., Ltd to finish the audit
    work in the regulated time according to the audit work arrangement, to make sure the
    annual report of the Company could be disclosed in time. At the same time, the Audit
    Committee made negotiation and communication with the certified public accountants
    on the problems existed in this audit.
    After the certified public accountants issued the initial audit opinion, the Audit
    Committee held meeting on April 7, 2011, in which they reexamined the financial
    accounting statement and formed written opinion and resolution on the annual financial
    accounting statement, summary report of the audit work and renewal of the
    engagement for the Certified Public Accountants Co., Ltd which were finally handed
    in to the Board of the Company for examination.
    1. The initial examination opinion on the 2010 financial accounting statement of the
    Company issued by the Audit Committee of the board of directors:
    According to the requirement of the Discussing Principles of the Audit Committee, as
    the commissioner of the Audit Committee of Shenzhen Tellus Holding Co., Ltd
    (hereinafter referred to as the Company), we made examination on the 2010 financial
    accounting statement of the Company before the official entrance of the certified
    public accountants for annual audit and presented the following opinion:
    With attitude of earnest and responsible, we made careful examination on the financial
    accounting statement prepared by the Company, including the balance sheet as of Dec.
    31, 2010, the 2010 annual profit statement, the 2010 cash flow statement and statement
    of change in owners’ equity. We hold that: the preparation of the above financial
    statements is in line with the regulation of Accounting Standard for Enterprise and
    Accounting System for Enterprise; the statements really reflect the operating
    achievement of the Company in 2010 and financial condition of the Company at the
    end of 2010. It is agreed to carry out the financial audit work of 2010 taking the
    financial statements as the basis.
    2. The second examination opinion on the 2010 financial accounting statement of the
    Company issued by the Audit Committee of the board of directors:
    Being the commissioners of the Audit Committee of Shenzhen Tellus Holding Co., Ltd,
    after the certified public accountants issued the initial audit opinion, we examined the
    financial accounting statements again and presented the following opinion:
    We consider that: the 2010 financial accounting statement of the Company fairly
    reflect the operating achievement of the Company in 2010 and financial condition of
    the Company at the end of 2010 in all significant aspects. The statements are real,
    32
    Shenzhen Tellus Holding Co., Ltd.                                 Annual Report 2010
    accurate and complete and in line with the relevant regulations of CSRS, Shenzhen
    Stock Exchange and Accounting Standard for Enterprise. The Audit Committee has no
    objection over the audit opinion planned to issue by the accountants who are in charge
    of the annual audit.
    At the same time, we request the audit organization- China Audit International
    Certified Public Accountants LTD. to finish all the audit work as quickly as possible
    according to the general work arrangement and issue the audit report within the
    conventional time, to make sure that the Company could disclose its 2009 Annual
    Report in time.
    3. Summary of the audit work conducted by China Audit International Certified Public
    Accountants LTD. to the Company issued by the Audit Committee of the board of
    directors:
    It makes the following summary on the 2010 annual audit work conducted by the audit
    organization of the Company- China Audit International Certified Public Accountants
    LTD. (hereinafter called as China Audit International):
    China Audit International carried out the necessary audit procedure during the audit
    work for the Company and kept effective negotiation and contact with the Audit
    Committee.
    China Audit International carried out necessary negotiation with the Board, the
    Supervisory Committee and senior executives of the Company; carried out
    independent audit work in strict accordance to the regulations of independent audit
    standard for certified public accountant of China. Sufficient time for audit was
    arranged. The audit personnel were collocated rationally and the audit report that it
    issued could fully reflect the financial condition and operating achievement of the
    Company, and the conclusion of the audit report complied with the actual condition of
    the Company.
    During this audit work, the Certified Public Accountants Co., Ltd and accountants in
    charge of the audit all strictly observed the request presented by the professional
    morality for maintaining independence. The members of this audit team were all
    qualified with the necessary professional knowledge and characteristics and qualified
    for this audit. According to the audit standard for Chinese certified public accountant,
    the audit team acquired sufficient and adequate audit evidence for issuing audit
    opinion.
    According to the audit plan arrangement, China Audit International accomplished the
    audit work for the Company in time and issued standard and unqualified audit report.
    4. Resolutions reached in the meeting of the Audit Committee of the board of directors:
    The Audit Committee of the board of directors held meeting on April 7, 2011, and the
    following proposals were examined and approved in this meeting:
    (1) The 2010 Audit Report and Financial Accounting Statements;
    (2) Summary of the 2010 Audit Work Conducted by China Audit International
    Certified Public Accountants LTD. for the Company;
    (3) Engagement of China Audit International Certified Public Accountants LTD. as the
    Audit Institution of the Company for 2011.
    33
    Shenzhen Tellus Holding Co., Ltd.                                Annual Report 2010
    (IV) Summary of the duty performance of the Remuneration and Examination
    Committee of the board of directors
    During the report period, the Remuneration and Examination Committee of the board
    of directors made examination on the remuneration of the directors, supervisors and
    senior executives of the Company. With examination, all the members of the
    Remuneration and Examination Committee hold that the remuneration paid during the
    report period is in line with the performance-related evaluation system. The
    remuneration received by the directors, supervisors and senior executives of the
    Company is confirmed according to the relevant system of the Company.
    VI. Profit distribution preplan
    In the consolidation statement of 2010, the Company realized a net profit attributable
    to shareholders of parent company with RMB 3,584,445.78. And it is planned that no
    profit made by the Company in 2010 would be distributed or converted into share
    capital. The undistributed profit would be used to compensate the losses of previous
    years. This profit distribution preplan is still needed to be examined and approved by
    the Annual Shareholders’ General Meeting 2010.
    The independent directors of the Company-- Ji Dejun, Jiang Hongjun and Liu
    Hongling issued the following independent opinion on the reason that why ho cash
    profit distribution preplan is made this year: it is agreed of the decision of the 2010
    profit distribution made by the Board of the Company and the Company is planned that
    no profit made by the Company in 2010 would be distributed or converted into share
    capital. The undistributed profit would be used to compensate the losses of previous
    years.
    Particulars about the cash bonus of the Company in previous three years
    Unit: RMB
    Net profit attributable        Ratio of net profit
    Amount of cash bonus to owners of parent           attributable to owners of
    Year of
    (tax included)            company in              parent company in
    consolidated statement consolidated statement
    2009                             0.00             6,305,956.65                        0.00%
    2008                             0.00             4,584,308.06                        0.00%
    2007                             0.00            12,311,789.81                        0.00%
    VII. Execution of Management System on Insider of Internal Information
    According to relevant regulation and actual status combination of the Company, the
    Company standardized its management on internal information, strength the
    confidential on internal information for the principle of fair-ness on information
    disclosure. The 5th Interim Meeting of 5th Board and the 2nd Meeting of 6th Session of
    Board was held on July 20, 2007 and Oct. 27, 2009 respectively for the approval of
    Work System on Information Disclosure and Registration System on Insider of Internal
    Information. Clarified the responsibility institution for information disclosure; the
    system of internal report; range of insider and internal information; management rules
    of internal information; registration method and confidential duty as well as the
    responsibility investigation. The Company strictly performed relevant regulations. For
    those significant sensitive information, took effective measures before disclosure.
    Controlling the insider limited. Exercise confidential duty promotion and guidance for
    insiders. Keep the information reveal and insider transaction from happening. No
    34
    Shenzhen Tellus Holding Co., Ltd.                             Annual Report 2010
    behavior of stock trading in sensitive period of the Company by insider through
    verification.
    VIII. Other events
    In report period, overseas designated newspapers of the Company changed from Hong
    Kong Wen Wei Po to Hong Kong Commercial Daily; Securities Times and Juchao
    Website still was the domestic newspaper and website for information disclosure
    respectively for the Company.
    35
    Shenzhen Tellus Holding Co., Ltd.                                Annual Report 2010
    Section IX. Report of Supervisory Committee
    Supervisory Committee of this term held 4 meetings in total during the report period,
    main topics include that: 1. Supervisory Committee examined significant events of the
    Company, successively examined and approved Proposal on the Self-appraisal
    Report on 2009 Internal Control of the Company and the Self-check on Construction
    and Implementation of the Long-term Mechanism for Preventing Capital Occupation
    and other proposals. 2. Supervisory Committee earnestly examined work report of the
    Board, performance report of the operational team, quarterly financial statements,
    annual report and profit distribution preplan, etc. 3. Supervisory Committee approved
    2009 Work Report of Supervisory Committee and formed resolutions.
    During the past one year, members of the Supervisory Committee had attended each
    meetings held by the Board as delegates, and, with the rights authorized by relevant
    laws, regulations and the Articles of Association, conducted surveys and supervision
    over the Company’s operation according to laws, the work and behaviors of members
    of the Board and other senior executives, etc. through the attendance as a nonvoting
    delegate at meetings of the Board, office meetings of General Manager and other
    various means. They had strictly and dutifully performed their supervisory
    responsibilities.
    Independent opinions of the Supervisory Committee on relevant events of the
    Company in 2010 were as follow:
    1. the Company’s operation according to law
    In accordance with the rules of relevant laws and regulations such as the Company
    Law, the Administration Rules for Listed Companies and the Articles of Association,
    etc, the Supervisory Committee of the Company had conducted supervision over the
    convening procedures and resolutions of the General Shareholders’ Meeting and the
    Board meetings, the Board’s implementation of the resolutions made by the General
    Shareholders’ Meeting, the work performance of the Company’s senior executives, and
    the management system of the Company, etc. The Committee believed that, for the
    current year, the operation of the Board and the administration team as well as the
    procedures of each resolution had all been in conformity with the Company Law, the
    Administration Rules of Listed Companies and the Articles of Association, and that
    resolutions of the General Shareholders’ Meeting could be implemented. No wrong
    doings against laws or regulations was detected that directors or senior executives had
    committed while performing their duties.
    2. Opinions after the inspection on the Company’s financial status
    The Supervisory Committee had conducted careful and prudent inspection over the
    financial system and financial status of the Company and believed that the Company’s
    inner controlling system is sound, and management is perfect. The Financial Report of
    this year can truly reflect the Company’s financial status and operation achievements.
    China Audit International Certified Public Accountants LTD. had issued standard
    unqualified Auditors’ Reports.
    3. Supervisory Committee viewed the Self-evaluation Report for Internal Control
    carefully, with the opions that: the Report truthly reflect the real situation of the
    internal controal of the Company complete-ness and accuracy.
    4. No fund was raised in the report period.
    5. During this accounting year, the Company had no significant purchases and selling
    of assets or acquisition & merger items.
    6. During this accounting year, the Company had no related transaction
    36
    Shenzhen Tellus Holding Co., Ltd.                                Annual Report 2010
    Section X. Significant Events
    I. Significant lawsuits and arbitrations
    In the report period, the Company had no new significant lawsuits and arbitrations.
    The explanations on original significant lawsuits and arbitrations of the Company are
    as follows:
    (I) As to the case on Shenzhen Shangbu Branch of Agricultural Bank of China suing
    Shenzhen Petrochemical Industry (Group) Co., Ltd for the overdue loan of RMB 57.6
    million with guarantee provided by the Company, Guangdong Supreme Court judged
    by the YGFMEZZ (2006) No.172 Civil Judgment, rejected the appeal, maintained
    SZFMECZ (2004) No. 437 issued by Shenzhen Intermediate Court. The Company had
    to take over joint liability of payment for Petrochemical Company, and had to pay back
    the principle and interests of Agricultural Bank loan RMB 57.6 million within 10 days
    since the judgment was taken into force. We had to pay multiple debts interests
    occurred within the delaying days if we exceed the deadline. The Company did not
    accept the above judgments, and applied civil retrial and required them to retreat
    YGFMEZZ (2006) No.172 and SZFMECZ (2004) No. 437 Civil Judgment.
    Guangdong Supreme Court accepted the retrial application.
    On Jan. of 2010, the Company received the YGFSJMZZ No. 23 Civil Judgment from
    Higher People’s Court of Guangdong Province which maintained the original verdict
    YGFMEZZ (2006) No.172 Civil Judgment and signified the final trial of this case.
    Relevant notice had been published on Securities Times and Hong Kong Commercial
    Daily dated Jan 15th, 2010.
    On July of 2010, the Company received freezing notices ((2010) SZFHZZ No. 534-1)
    from Shenzhen Intermediate People’s Court. According to application of Shenzhen
    Agricultural Bank of application operator, Shenzhen Intermediate People’s Court froze
    95% equity of Shenzhen Tefa Tellus Real Estate Co., Ltd 50% equity of Shenzhen
    Tellus Jimeng Investment Co., Ltd, 60% equity of Shenzhen Tefa Huari Automobile
    Corporation Co., Ltd, 60% equity of Shenzhen Huari Toyota Automobile Sales Service
    Co., Ltd and 35% equity of Shenzhen Renfu Tellus Automobile Service Co., Ltd held
    by the Company on Jun. 2 of 2010. Related notices were published on the Securities
    Times and the Hong Kong Commercial Daily on July 9 of 2010.
    Till reporting day, both parties were in procedure of negotiation and reconciliation.
    (II) 64 owners of Tellus Shopping City, such as owner Fu Yuansi and Wu Shenbao,
    presented a lawsuit against Shenzhen Tellus Real Estate Yue Yang Co., Ltd.(hereinafter
    refers to Yueyang Company) for they thought Tellus Shopping City was involved in
    quality problem. The People’s Courts in Yueyang County made the verdict dated Dec.
    26th of 2007 with (2007) YMCZ No. 10 civil judgment, which judged to cancel
    contract of housing sales between 64 defendants such as Fu Yuansi and the Company;
    the 64 owners gave back the houses they purchased to Yueyang Company within 3
    months since the judgment became legal; Yue Yang Company, Shenzhen Tellus Real
    Estate Co., Ltd., the Company and Shenzhen SDG Group Co., Ltd sent back RMB
    6,572,025 to the 64 owners. Due to that the Company and other three
    defendants were unsatisfied with the verdict of the People’s Courts in Yueyang
    County, they appealed to Yueyang Intermediate People’s Court.
    On Jul. of 2009, the Company received Written Civil Ruling (2008) YZMYZZ No. 344,
    345, 346, 347 and 348 from Yueyang Intermediate People’s Court of Hunan which
    rejected the appeals of defendants Shenzhen Tellus Real Estate Yueyang Company,
    Shenzhen SDG Tellus Real Estate Co., Ltd, Shenzhen Tellus (Group) Co., Ltd and
    Shenzhen SDG Group Co., Ltd while maintained the original verdict.
    On Mar. 4 of 2011, the Company received civil judgment from Hunan Province
    37
    Shenzhen Tellus Holding Co., Ltd.                                   Annual Report 2010
    Yueyang County People’s Court whose content was: Fu Yuansi, Wu Shenbao etc 64
    applicants applied to the court for conducting quality dispute of housing sales with
    Tellus Group in accordance with civil judgment (2008) YMCZ No. 506-1, 506-2,
    506-3, 506-4 and 506-5. in conducting process, Tellus Group had fulfilled all the duties
    by the term about implementation and reconciliation thus this case had been executed
    completely. Relevant notices were published on the Securities Times and Hong Kong
    Commercial Daily on Mar. 9 of 2011.
    In 2009, 316 proprietors such as Li Xingwang lodged a complaint to Yueyang
    Company, the Company and subsidiaries of the Company Tellus Real Estate as well as
    majority stockholder SDG Group. In Mar. of 2011, the Company received 8 advice
    notes about completion of execution from Yueyang Court (2009) YFZZ No. 185-191 as
    well as civil judgment from (2007) YMCZ No. 646, 766, 794, 805 and 817. Owing to
    that the majority shareholder Shenzhen SDG Group Co., Ltd reached an overall
    reconciliation term with suitor, 316 proprietors such as Li Xingwang recalled the
    lawsuits in Aug. of 2010.
    The ruling result removed all the possible follow-up responsibility probably to the
    Company arising from partial lawsuit. Yueyang County People’s Court dealt with total
    RMB 1.1798 million of assets in 5 times from Oct. of 2006 to Jun. of 2007. This
    account has been calculated in 2007 non-operating expense. Besides this account, other
    expense and cost relevant to this part of lawsuit had been taken over by the majority
    shareholder Shenzhen SDG Group Co., Ltd.
    As far as other lawsuits about the Company were concerned, there was no new
    progress during the report period.
    II. Particulars about equity of other listed companies held by the Company
    Unit: RMB
    Gai     Change
    Proport
    ns in     s on
    Short     Initial     ion in      Par                           Account
    Stoc                                                 the    owners’                Share
    form     investm      equity    value at                           ing
    k                                                 repo     equity                 resour
    of the     ent        of the    period-e                        calculati
    code                                                  rt     in the                   ces
    stock    amount      Compa         nd                           on items
    peri     report
    ny
    od      period
    China                                                           Financia
    6000   Mercha        178,               1,483,07          -432,000 l assets Sponso
    0.00%                 0.00
    36      nts       454.20                   7.75                .46 available r share
    Bank                                                           for sales
    178,454.                                 -432,000
    Total                                              0.00
    20                                       .46
    The Company originally held 102,456 shares of China Merchants Bank Co. Ltd. (short
    form of the stock: China Merchants Bank, Stock code: 600036, hereinafter referred to
    as Merchants Bank) —the company listed in Shanghai Stock Exchange. Merchants
    Bank exercise shares allotment in 2010 with proportion of 10 to 1.3 which will
    implementing within the period. Till end of the report period, totaling 115,775 shares
    of Merchants Bank were held by the Company.
    III. The significant assets purchases, sales or merger in the report period
    38
    Shenzhen Tellus Holding Co., Ltd.                                 Annual Report 2010
    In reporting period, the Company had no significant purchase and selling assets as well
    as acquisition and consolidation.
    IV. Significant related transactions in the report period
    (I) In the report period, the Company had no related transaction of purchase and sale of
    merchandise and supply of labor service with the related parties.
    (II) In reporting period, the Company had no related transaction of transfer of assets
    and equity with the related parties.
    (III) In the report period, the Company had no related transactions invested by the
    related parties and the Company.
    (IV) On credit and liability exchange and guarantee between the Company and the
    related parties, please refer to Note VI of accounting statement for details.
    (V) In the report period, there was no other significant related transaction.
    V. Significant contracts and implementation
    (I) In the report period, the Company had no significant trusteeship, contract and lease
    of other companies’ assets and vice visa;
    (II) Significant guarantee:
    Unit: RMB’0000
    Particulars about the external guarantee of the Company (Barring the guarantee for the
    controlling subsidiaries)
    Name of Name of                 Name
    the      the     Name of of the Name of
    Name of the
    Name of the                        Compan Compan         the      Compa        the
    Company
    Company guaranteed                           y        y     Company       ny    Company
    guaranteed
    guarante guarante guaranteed guarant guaranteed
    ed       ed                  eed
    Shenzhen          Auto                                    2009-06-25
    Industry Import & 2009-06-25                476 Credit to              Yes   Yes
    Export Co., Ltd.                                          2010-06-24
    Shenzhen          Auto                                    2009-11-30
    Industry Import & 2009-11-30                884 Credit to              Yes   Yes
    Export Co., Ltd.                                          2010-06-24
    Total amount of guarantee in the
    1,360
    report period
    Total balance of guarantee at the end
    0
    of the report period
    Guarantee of the Company for the controlling subsidiaries
    Total amount of guarantee for
    controlling subsidiaries during the                                                  0.00
    report period
    Total balance of guarantee for
    controlling subsidiaries at the end of                                               0.00
    the report period
    Total amount of guarantee of the Company (including guarantee for controlling
    subsidiaries)
    Total amount of guarantees                                                              0
    Ratio of total guarantee to net assets
    0%
    of the Company
    39
    Shenzhen Tellus Holding Co., Ltd.                                   Annual Report 2010
    Including:
    Amount of guarantee for shareholders,
    0.00
    actual controller and its related parties
    The debts guarantee amount provided
    for the guarantee of which the
    0
    assets-liability ratio exceeded 70%
    directly or indirectly
    Proportion of total amount of
    guarantee in net assets of the                                                       0.00
    Company exceeded 50%
    Total amount of the aforesaid three
    0
    guarantees
    During the report period, the Company agreed its holding subsidiary—Shenzhen Auto
    Industry and Trade Corporation to apply loan of RMB 20 million and provide
    guarantee of credit line of US$ 2 million with a guarantee term lasting from 2009 to
    2010 for Shenzhen Auto Import and Export Co., Ltd. which was the stock-joint
    enterprise of Shenzhen Auto Industry and Trade Corporation. The matter was examined
    and approved in the 2009 Shareholders’ General Meeting held on Jun. 29, 2010.
    Till the end of the report period, the loan US$ 2 million of Shenzhen Auto Import and
    Export Co., Ltd. had been accomplished repayment.
    (III) During the report period, the Company had no entrusted financing event.
    (IV) During the report period, the Company had no entrusted loan borrowing.
    (V) In the report period, the Company had no other significant contracts.
    VI. Commitments
    (I) SDG, the shareholder of non-circulating shares, made the following commitments
    during the work of Share Merger Reform of the Company:
    1. Commitments on Lock-up period
    (1) In accordance with the Measures for the Administration of the Share Merger
    Reform of Listed Companies, SDG would abide by the various laws, regulations and
    rules, and perform its statutory commitment duty.
    (2) Apart from the above-mentioned statutory commitment, SDG also made the
    following special commitment: with 36 months since the day the reform plan starts to
    take effect, SDG would not list at Shenzhen Stock Exchange and sell the shares of
    Tellus it held (except for the shares used to promote the administration level of Tellus).
    (3) The administration level would abide by the laws, regulations and rules, and
    perform its statutory commitment duty.
    (4) SDG made the commitment: ―The Promiser hereby promises that, if the Promiser
    failed to fulfill its commitment or not fully fulfill its commitment, it would compensate
    other shareholders for their losses suffered thereafter‖.
    (5) SDG declared: ―The Promiser would dutifully fulfill its commitments and shoulder
    corresponding legal responsibilities. The Promiser would transfer the shares held by it
    only if the assignee agree and have the ability to shoulder the commitment
    responsibility.‖
    2. Special commitment concerning the incentive mechanism
    To effectively boost the core management level and business backbones for long, SDG
    would take out its shares, not exceeding 10% in total number after the Share Merger
    Reform, and apply them to the boost of the administration level. The shares would be
    sold to the Company’s administrative level over 3 years, with the selling price being
    the net asset value per share audited during the period nearest to the implementation.
    40
    Shenzhen Tellus Holding Co., Ltd.                                 Annual Report 2010
    Before the implementation of the promoting plan by share selling each year, the
    administration level must prepay the Company a risk responsibility fund, i.e. 20% of
    the planned selling price; Should the work of the performance examination set by the
    Board failed to be finished, the paid risk responsibility fund would not be refunded and
    shall be owned by the Company. Detailed rules concerning the limitations on the
    administration level, such as the subscription conditions and risk responsibility fund,
    and boost plans would be set by the Board and submitted to relevant departments for
    approval. The implementation of the shares for promoting would be conducted strictly
    according to relevant laws and regulations, and the circulation conditions of these
    shares would be in conformity with relevant regulations set by the Shenzhen Stock
    Exchange.
    3. Relevant expenses of this Share Merger Reform of Tellus would be paid by SDG.
    (II) The aforesaid commitments are in process of implementation by SDG. The
    restricted period for the shares held by SDG were expired on Jan. 20, 2009, in which
    131,283,504 shares were listed for trading, and others were still in limited period due
    to special commitment of equity mechanism.
    VII. Particulars about reception of investigation and interview
    In the report period, the Company followed the regulations of Guidance to Listed
    Company Fair Information Disclosure. The Company and relevant person in charge of
    information disclosure strictly obey the principle of fair information disclosure.
    Besides the aforesaid situation of reporting unopened information to controlling
    shareholders, there were no situations of distinctively treatment, selectively and
    privately disclosure, impartment or omission of unopened information to specific
    persons in advance. In report period, the Company had no situation of reception of
    investigation and interview.
    VIII. Engagement of CPAs
    In reporting period, the Company paid RMB 0.55 million for 2010 annual audit to
    Zhongshen International Certified Public Accounts the Company engaged. This year
    was the first year that the CPA offered service to the Company.
    IX. In the report period, neither the Company, nor its Board or directors had
    been inspected by the CSRC, received any administrative punishments or
    circulating criticism from the CSRC, or publicly criticized by the Stock Exchange.
    41
    Shenzhen Tellus Holding Co., Ltd.                                         Annual Report 2010
    Section XI. Financial Report
    SHENZHEN TELLUS HOLDING COMPANY LIMITED
    FINANCIAL STATEMENTS AND
    REPORT OF THE AUDITORS
    FOR THE YEAR ENDED 31 DECEMBER 2010
    [English Translation for Reference Only. Should there be any inconsistency
    between the Chinese and English versions, the Chinese version shall prevail.]
    CONTENTS                                             PAGE
    一、Report of the auditors                                                           1-2
    二、Audited Financial Statements
    1、Consolidated balance sheet                                                    3-4
    2、Consolidated income statement                                                  5
    3、Consolidated cash flow statement                                               6
    4、Consolidated statement of changes in investors’ equity                        7
    5、Balance sheet                                                                 8-9
    6、Income statement                                                              10
    7、Cash flow statement                                                           11
    8、Statement of changes in investors’ equity                                    12
    9、Notes to the consolidated financial statements                               13-95
    三、Appendix
    1、Copies of Audit Institution’s Business License and Practice License
    2、Copies of Audit Institution’s Securities Related Business License &
    Futures Related Business License
    42
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010     Expressed in RMB Yuan
    * Confidential *
    Report of the Auditors
    CAICPA Shen Zi [2011]01020065
    To the shareholders of Shenzhen Tellus Holding Company Limited:
    We have audited the accompanying financial statements of Shenzhen Tellus Holding Company
    Limited (―the company‖), which comprise the consolidated balance sheet as at 31 December 2010,
    and the consolidated income statement, the consolidated cash flow statement, the consolidated
    statement of changes in investors’ equity for the year then ended, and the notes to the financial
    statements.
    Management’s Responsibility for the Financial Statements
    The Company’s management is responsible for the preparation of these financial statements in
    accordance with the Accounting Standards for Business Enterprises. This responsibility includes:
    designing, implementing and maintaining internal control relevant to the preparation of financial
    statements that are free from material misstatement, whether due to fraud or error; selecting and
    applying appropriate accounting policies; and making accoungting estimates that are reasonable in
    the circumstances.
    Auditor’s Responsibility
    Our responsibility is to express an opinion on these financial statements based on our audit.
    We conducted our audit in accordance with China’s Auditing Standards for the Certified Public
    Accountants. Those standards require that we comply with ethical requirements and plan and
    perform the audit to obtain reasonable assurance whether the financial statements are free from
    material misstatement.
    An audit involves performing procedures to obtain audit evidence about the amounts and
    disclosures in the financial statements. The procedures selected depend on the auditor’s judgement,
    including the assessment of the risks of material misstatement of the financial statements, whether
    due to fraud or error. In making those risk assessments, the auditor considers internal control
    relevant to the entity’s preparation of the financial statements in order to design audit procedures
    that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
    effectiveness of the Company’s internal control. An audit also includes evaluating the
    appropriateness of accounting policies used and the reasonableness of accounting estimates made
    by management, as well as evaluating the overall presentation of the financial statements.
    1
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                Expressed in RMB
    Yuan
    We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
    basis for our audit opinion.
    Opinion
    In our opinion, the Group’s consolidated financial statements comply with the Accounting
    Standards for Business Enterprises and present fairly, in all material respects, the financial position
    of the Company as at 31 December 2010, and the consolidated results of operations and cash flows
    of the Company for the year then ended.
    China Audit International Certified Public      Certified Public Accountants
    Accountants Co., Ltd.
    Certified Public Accountants
    Beijing, China                                  April 13, 2011
    2
    Consolidated Balance Sheet
    As at 31 December 2010
    Prepared by:Shenzhen Tellus Holding company limited                                 Expressed in RMB Yuan
    Assets                       Note5                  31 Dec.2010              31 Dec.2009
    Current assets
    Cash at bank and on hand                       1                 69,122,979.84            77,376,177.95
    Trading financial assets                                                   -                        -
    Bills receivable                                                           -                        -
    Accounts receivable                            2                  8,831,986.63             8,813,731.55
    Advances to suppliers                          3                 10,212,371.68            17,878,392.46
    Interest receivable                                                       -                        -
    Dividend receivable                                                       -                        -
    Other receivabes                               4                 13,743,165.24            22,274,103.75
    Inventories                                    5                 25,045,954.52            18,373,999.23
    Non-current assets due within one year                                       -                        -
    Other current assets                                                       -                        -
    Total current assets                                            126,956,457.91           144,716,404.94
    Non-current assets
    Available-for-sale financial assets            6                  1,483,077.75             1,849,330.80
    Held-to-maturity investments                   7                   121,300.00               121,300.00
    Long-term receivables                                                      -                        -
    Long-term equity investments                   8                150,474,640.20           132,105,433.54
    Investment properties                          9                113,660,483.41           118,899,698.41
    Fixed assets                                  10                173,400,772.86           182,074,577.00
    Construction in Progress                                                   -                        -
    Construction materials                                                     -                        -
    Fixed assets pending disposal                                              -                        -
    Intangible assets                             11                   221,588.46               219,921.75
    R&D expenditure                                                            -                        -
    Goodwill                                                                   -                        -
    Long-term deferred expenses                   12                  1,258,536.21             1,688,268.91
    Deferred income tax assets                    13                 31,972,434.56            29,812,182.30
    Other non-current assets                                                   -                        -
    Total non-current assets                                        472,592,833.45           466,770,712.71
    Total assets                                                    599,549,291.36           611,487,117.65
    3
    Consolidated Balance Sheet(Continued)
    As at 31 December 2010
    Prepared by:Shenzhen Tellus Holding company limited                                             Expressed in RMB Yuan
    Liabilities and investors' equity                                         Note5   31 Dec.2010            31 Dec.2009
    Current liabilities
    Short-term loans                                                       15      42,363,705.42          52,418,922.86
    Trading financial liabilities                                                            -                      -
    Bills payable                                                                            -                      -
    Accounts payable                                                       16      30,767,809.82          32,734,686.58
    Advances from customers                                                17       1,838,938.58           1,561,591.32
    Employee benefits payable                                              18      14,784,418.61           9,128,110.35
    Tax payable                                                            19       7,464,874.69           9,656,230.96
    Interest payable                                                                         -                      -
    Dividends payable                                                                       -                          -
    Other payables                                                         20     107,704,456.87         113,143,361.92
    Current portion of non-current liabilities                             21       8,640,000.00           8,160,000.00
    Other current liabilities                                                               -
    Total current liabilities                                                        213,564,203.99         226,802,903.99
    Non-current liabilities
    Long-term borrowings                                                   22      92,700,000.00          95,700,000.00
    Debentures payable                                                                       -                      -
    Long-term payables                                                     23       3,920,160.36           3,920,160.36
    Special payables                                                                         -                      -
    Accrued liabilities                                                    24      87,568,728.57          87,568,728.57
    Deferred income tax liabilities                                        13       2,005,026.70           2,415,939.89
    Other non-current liabilities                                                            -                      -
    Total non-current liabilities                                                    186,193,915.63         189,604,828.82
    Total liabilities                                                                399,758,119.62         416,407,732.81
    Investors' equity
    Share capital                                                          25     220,281,600.00         220,281,600.00
    Capital surplus                                                        26       8,635,829.85           7,839,688.31
    Less: treasury stocks                                                                   -                      -
    Special Reserve                                                                                         -
    Surplus reserve                                                        27       2,952,586.32           2,952,586.32
    Retained earnings                                                      28     -56,595,413.73         -60,179,859.51
    Currency translation difference                                                          -                      -
    Total equity attributable to shareholders of the parent company               175,274,602.44         170,894,015.12
    Minority stockholder's interests                                               24,523,231.22          24,185,369.72
    Total investors' equity                                                          199,797,833.66         195,079,384.84
    Total liabilities and investors' equity                                           599,555,953.28         611,487,117.65
    4
    Consolidated Income Statement
    For the year ended 31 December 2010
    Prepared by:Shenzhen Tellus Holding company limited                                                                 Expressed in RMB Yuan
    Item                                         Note5             2010                       2009
    Operating revenues                                                                  29            386,348,379.27             432,676,350.20
    include:Operating cost                                                         29            320,837,643.33             362,883,942.51
    Operating tax and surcharges                                        Operational tax and surcharges               3,854,632.14
    Operating expenses                                                   31             20,131,244.26              19,970,615.74
    Administrative expenses                                               32             46,215,747.64              50,517,983.60
    Financial expenses                                                    33              8,407,104.95               9,604,691.19
    Impairment losses                                                     34              2,187,125.35               2,722,199.15
    Add: Changes of fair value assets ("-" means loss)                                                        -                          -
    Investment income ("-" means loss)                                      35             18,222,881.72              14,875,383.09
    include:income from associates                                         35             17,760,821.49              10,203,767.61
    Profit from operation ( "-" means loss)                                                             2,791,429.03              -2,002,331.04
    Add:Non-operating income                                                       36                666,300.24              10,917,525.82
    Less:Non-operating expenditures                                                37                181,387.12                272,077.02
    include:disposal loss on non-current liability                             37                131,672.71                  71,677.49
    Profit before tax ( "-" means loss)                                                                 3,276,342.15               8,643,117.76
    Less:income tax                                                                38               -645,965.13                519,607.38
    Net profit ( "-" means loss)                                                                        3,922,307.28               8,123,510.38
    Net profit attributable to shareholders of the parent company                                   3,577,783.86               6,305,956.65
    Minority interests                                                                               337,861.50               1,817,553.73
    Earnings per share
    Basic earnings per share                                                        39                      0.0163                     0.0286
    Diluted earnings per share                                                      39                      0.0163                     0.0286
    Other Comprehensive earnings                                                        40               -432,000.46                677,006.50
    Gross Comprehensive earnings                                                                        3,490,306.82               8,800,516.88
    Gross Comprehensive earnings attributable to stockholders of the parent company                     3,152,445.32               6,982,963.15
    Gross Comprehensive earnings attributable to minority stockholders                                    337,861.50               1,817,553.73
    5
    Consolidated Cash Flow Statement
    For the year ended 31 December 2010
    Prepared by:Shenzhen Tellus Holding company limited                                                                   Expressed in RMB Yuan
    Item                                               Note5       2010                   2009
    Cash flow from operating activities
    Cash received from sales of goods or rendering services                                                 450,816,837.44         498,768,749.17
    Refunds of taxes                                                                                                   -                77,049.44
    Cash received relating to other operating activities                                             41      21,244,509.61          60,140,677.82
    Sub-total of cash inflows                                                                               472,061,347.05         558,986,476.43
    Cash paid for goods or receiving services                                                               353,727,007.40         365,994,397.08
    Cash paid to and on behalf of employees                                                                  48,347,067.04          52,398,347.99
    Tax payments                                                                                             18,730,749.76          22,477,576.97
    Cash paid relating to other operating activities                                                 41      44,112,529.48          91,640,990.54
    Sub-total of cash outflows                                                                              464,917,353.68         532,511,312.58
    Net Cash Flow from Operating Activities                                                          41       7,143,993.37          26,475,163.85
    Cash Flow from Investing Activities
    Cash received from disposal of investments                                                                         -            10,726,800.00
    Cash received from investments income                                                                      498,973.14            4,502,251.70
    Net cash received from disposal of fixed assets, intangible assets and other long-term assets               50,649.00               57,500.00
    Cash received from disposal of subsidiary or other operating business units                                       -                       -
    Cash received relating to other investing activities                                                               -
    Sub-total of cash inflows                                                                                  549,622.14           15,286,551.70
    Cash paid to acquire fixed assets, intangible assets and other long-term assets                            681,755.37              830,875.80
    Cash paid to acquire investments                                                                           546,873.05            5,298,000.00
    Cash paid to acquire subsidiary or other operating business units                                                  -                      -
    Cash payments relating to other investing activities                                                                                      -
    Sub-total of cash outflows                                                                                1,228,628.42           6,128,875.80
    Net Cash Flow from Investing Activities                                                                    -679,006.28           9,157,675.90
    Cash Flow from Financing Activities
    Cash received by investors                                                                                         -
    include:Cash absorbed by subsidiaries from investment of minority shareholders                                    -
    Cash received from loans                                                                                 20,500,000.00         137,700,000.00
    Cash received relating to other financing activities                                             41                -            85,500,000.00
    Sub-total of cash inflows                                                                                20,500,000.00         223,200,000.00
    Repayments of borrowings                                                                                 25,220,000.00         129,480,000.00
    Dividends paid, profit distributed or interest paid                                                       8,287,112.61          10,509,096.54
    include:dividend and profit paid to minority shareholders by subsidiaries                                         -                      -
    Cash payments relating to other financing activities                                             41       1,700,000.00          86,142,000.00
    Sub-total of cash outflows                                                                               35,207,112.61         226,131,096.54
    Net Cash Flow from Financing Activities                                                                 -14,707,112.61          -2,931,096.54
    Effect of Foreign Currency Translation                                                                      -11,072.59                -235.97
    Net Increase (Decrease) in Cash and Cash Equivalents                                                     -8,253,198.11          32,701,507.24
    Add:beginning balance of cash and cash equivalents                                              42      72,376,177.95          39,674,670.71
    Closing balance of cash and cash equivalents                                                     42      64,122,979.84          72,376,177.95
    6
    Consolidated Statement of Changes in Investors' equity
    For the year ended 31 December 2010
    Prepared by:Shenzhen Tellus Holding company limited
    2010
    Investors' equity attributable to the parent company                                                                                    Investor
    Item
    Paid-in                        Less:                                                                                                       Paid-in
    Special         Surplus        Undistributed                Minority        Total of Investors'
    capital(share    Capital Surplus Treasur                                                    Other                                          capital(share
    Reserve         reserves          profit                    interests             equity
    capital)                       y stock                                                                                                     capital)
    1. Closing balance of last year                                 220,281,600.00     7,839,688.31                         2,952,586.32       -60,179,859.51     -     24,185,369.72       195,079,384.84     220,281,600.00
    Add:Change of accounting policy                                           -               -         -                              -                -        -                  -                  -                 -
    Correction for error in previous period                                    -               -         -                              -                -        -                  -                  -                 -
    Other                                                                                                                                                -                                                                -
    2. Beginning balance of this year                               220,281,600.00     7,839,688.31      -           -      2,952,586.32       -60,179,859.51     -     24,185,369.72       195,079,384.84     220,281,600.00
    3. Change of current year(‘-’means decrease)                           -        796,141.54       -           -                  -       3,584,445.78      -       337,861.50          4,718,448.82                -
    1)Net profit                                                              -               -         -           -                  -       3,584,445.78      -       337,861.50          3,922,307.28                -
    2)Other Comprehensive earnings                                            -        -432,000.46      -           -                  -                -        -                  -         -432,000.46                -
    Subtotal of 1) and 2)                                                      -        -432,000.46      -           -                  -       3,584,445.78      -       337,861.50          3,490,306.82                -
    3) Capital invested and decreased by owner                                 -                         -                              -                -        -                                     -                 -
    (1)Capital invested by the owner                                           -                         -                              -                -        -                                     -                 -
    (2)Fund paid for shareholders recorded into the Investors'
    -               -         -                              -                -        -                  -                  -                 -
    equity
    (3)Other                                                                   -               -         -                              -                -        -                                     -                 -
    4) Profit distribution                                                     -               -         -                              -                -        -                  -                  -                 -
    (1)Appropriated surplus reserves                                           -               -         -                              -                -        -                  -                  -                 -
    (2)Distribution to owners (or shareholders)                                -               -         -                              -                -        -                  -                  -                 -
    (3)Other                                                                   -               -         -                              -                -        -                  -                  -                 -
    5)Internal transfer of Investors' equity                                  -       1,228,142.00      -                              -                -        -                  -        1,228,142.00                -
    (1)Capital reserves transferred to capital (or share capital)              -               -         -                              -                -        -                  -                  -                 -
    (2)Surplus reserves transferred to capital (or share capital)              -               -         -                              -                -        -                  -                  -                 -
    (3)Loss covered by surplus reserves                                        -               -         -                              -                -        -                  -                  -                 -
    (4)Other                                                                   -       1,228,142.00      -           -                  -                -        -                  -        1,228,142.00                -
    6)Special reserve
    (1).increased at the period
    (2).decreased at the period
    4. Closing balance of current year                              220,281,600.00     8,635,829.85      -                  2,952,586.32       -56,595,413.73     -     24,523,231.22       199,797,833.66     220,281,600.00
    7
    Balance Sheet
    As at 31 December 2010
    Prepared by:Shenzhen Tellus Holding company limited                                    Expressed in RMB Yuan
    Assets                          Note11          31 Dec. 2010           31 Dec. 2009
    Current assets
    Cash at bank and on hand                                               324,541.62             401,503.65
    Trading financial assets                                                      -                      -
    Bills receivable                                                              -                      -
    Accounts receivable                                  1                        -                      -
    Advances to suppliers                                                         -                      -
    Interest receivable                                                           -                      -
    Dividend receivable                                                          -                      -
    Other receivables                                   2              21,830,874.99          31,532,451.36
    Inventories
    Non-current assets due within one year                                       -                      -
    Other current assets                                                          -                      -
    Total current assets                                                22,155,416.61          31,933,955.01
    Non-current assets
    Available-for-sale financial assets                                  1,483,077.75           1,849,330.80
    Held-to-maturity investment                                                   -                      -
    Long-term receivables                                                         -                      -
    Long-term investment on stocks                       3             376,413,291.95         359,628,239.83
    Investment real estates                                             64,814,748.48          67,779,964.32
    Fixed assets                                                        20,466,877.39          21,029,852.07
    Construction in Progress                                                      -                      -
    Construction materials                                                        -                      -
    Fixed assets pending disposal                                                 -                      -
    Intangible assets                                                     172,421.79             219,921.75
    R&D expenditure                                                               -                      -
    Goodwill                                                                      -                      -
    Long-term deferred expenses                                            174,688.06             150,979.02
    Deferred income tax assets                                          14,865,962.87          13,072,248.59
    Other non-current assets                                                      -                      -
    Total non-current assets                                           478,391,068.29         463,730,536.38
    Total assets                                                       500,546,484.90         495,664,491.39
    8
    Balance Sheet(Continued)
    As at 31 December 2010
    Prepared by:Shenzhen Tellus Holding company limited                                          Expressed in RMB Yuan
    Liabilities and investors' equity                           Note               31 Dec. 2010            31 Dec. 2009
    Current liabilities
    Short-term loans                                                         16,828,120.42           22,907,571.86
    Trading financial liabilities                                                       -                      -
    Bills payable                                                                       -                      -
    Accounts payable                                                               1,554.00               1,554.00
    Advances from customers                                                             -                      -
    Employee benefits payable                                                  3,547,611.71           2,658,235.89
    Tax payable                                                                 281,199.97              278,658.81
    Interests payable                                                                   -                      -
    Dividend payable                                                                    -                      -
    Other payables                                                          215,911,977.86          209,034,610.53
    Current portion of non-current liabilities                                 4,480,000.00                    -
    Other current liabilities                                                          -                      -
    Total current liabilities                                                  241,050,463.96          234,880,631.09
    Non-current liabilities
    Long-term borrowings                                                     46,160,000.00           49,000,000.00
    Debentures payable                                                                  -                      -
    Long-term payables                                                                  -                      -
    Special payables                                                                    -                      -
    Accrued liabilities                                                      87,568,728.57           87,568,728.57
    Deferred income tax liabilities                                             341,399.21              393,524.95
    Other non-current liabilities                                                       -                      -
    Total non-current liabilities                                              134,070,127.78          136,962,253.52
    Total liabilities                                                          375,120,591.74          371,842,884.61
    Investors' equity
    Share capital                                                           220,281,600.00          220,281,600.00
    Capital surplus                                                            5,442,406.57           5,874,407.03
    Less: treasury stocks                                                              -                      -
    Special reserve                                                                    -                      -
    Surplus reserve                                                            2,952,586.32           2,952,586.32
    Retained earnings                                                       -103,250,699.73        -105,286,986.57
    Total investors' equity                                                    125,425,893.16          123,821,606.78
    Total liabilities and investors' equity                                     500,546,484.90          495,664,491.39
    9
    Income Statement
    For the year ended 31 December 2010
    Prepared by:Shenzhen Tellus Holding company limited                                              Expressed in RMB Yuan
    Item                                 Note11                   2010                   2009
    Operating revenues                                                     4            13,077,003.33          12,618,974.56
    include:Operating cost                                            4             4,074,278.80           4,252,450.00
    Operating tax and surcharges                                            683,778.14             656,186.69
    Operating expenses                                                             -                      -
    Administrative expenses                                               18,119,279.60          16,250,731.31
    Financial expenses                                                     4,113,508.83           4,805,078.36
    Impairment losses                                                      2,833,737.75           1,401,339.96
    Add: Changes of fair value assets ("-" means loss)                                       -                      -
    Investment income ("-" means loss)                         5            17,000,152.35          10,968,661.92
    include:income from associates                            5            16,538,092.12          11,167,583.53
    Profit from operation ( "-" means loss)                                               252,572.56           -3,778,149.84
    Add:Non-operating income                                                                 -             8,422,279.79
    Less:Non-operating expense                                                        10,000.00             166,400.72
    include:disposal loss on non-current liability                                       -               13,180.25
    Profit before tax ( "-" means loss)                                                   242,572.56            4,477,729.23
    Less:income tax                                                                -1,793,714.28          -1,047,746.69
    Net profit ( "-" means loss)                                                         2,036,286.84           5,525,475.92
    Other Comprehensive earnings                                                          -432,000.46            677,006.50
    Gross Comprehensive earnings                                                         1,604,286.38           6,202,482.42
    10
    Cash Flow Statement
    For the year ended 31 December 2010
    Prepared by:Shenzhen Tellus Holding company limited                                                                 Expressed in RMB Yuan
    Itme                                               Note            2010                   2009
    Cash flow from operating activities
    Cash received from sales of goods or rendering services                                                 1,327,277.78          12,618,974.56
    Refunds of taxes                                                                                                 -                      -
    Cash received relating to other operating activities                                                   14,228,014.76          65,869,892.31
    Sub-total of cash inflows                                                                              15,555,292.54          78,488,866.87
    Cash paid for goods or receiving services                                                                        -                      -
    Cash paid to and on behalf of employees                                                                8,495,444.25           7,630,158.30
    Tax payments                                                                                            2,629,192.14           4,382,034.30
    Cash paid relating to other operating activities                                                        3,570,083.17          62,074,659.52
    Sub-total of cash outflows                                                                             14,694,719.56          74,086,852.12
    Net Cash Flow from Operating Activities                                                          6       860,572.98            4,402,014.75
    Cash Flow from Investing Activities
    Cash received from disposal of investments                                                                       -             4,906,300.00
    Cash received from investments income                                                                    462,060.23            4,502,251.70
    Net cash received from disposal of fixed assets, intangible assets and other long-term assets                   -                  1,600.00
    Cash received from disposal of subsidiary or other operating business units                                     -                       -
    Cash received relating to other investing activities                                                             -                      -
    Sub-total of cash inflows                                                                                462,060.23            9,410,151.70
    Cash paid to acquire fixed assets, intangible assets and other long-term assets                           45,205.00              142,034.00
    Cash paid to acquire investments                                                                         117,873.05                     -
    Cash paid to acquire subsidiary or other operating business units                                                -                      -
    Cash payments relating to other investing activities                                                             -                      -
    Sub-total of cash outflows                                                                               163,078.05             142,034.00
    Net Cash Flow from Investing Activities                                                                  298,982.18            9,268,117.70
    Cash Flow from Financing Activities
    Cash received by investors                                                                                       -                      -
    Cash received from loans                                                                                6,000,000.00          50,000,000.00
    Cash received relating to other financing activities                                                             -            85,500,000.00
    Sub-total of cash inflows                                                                               6,000,000.00         135,500,000.00
    Repayments of borrowings                                                                                4,360,000.00          57,800,000.00
    Dividends paid, profit distributed or interest paid                                                     2,869,442.84           6,053,781.43
    Cash payments relating to other financing activities                                                             -            85,500,000.00
    Sub-total of cash outflows                                                                              7,229,442.84         149,353,781.43
    Net Cash Flow from Financing Activities                                                                -1,229,442.84         -13,853,781.43
    Effect of Foreign Currency Translation                                                                     -7,074.35                -250.79
    Net Increase (Decrease) in Cash and Cash Equivalents                                                      -76,962.03            -183,899.77
    Add:beginning balance of cash and cash equivalents                                              6       401,503.65             585,403.42
    Closing balance of cash and cash equivalents                                                     6       324,541.62             401,503.65
    11
    Statement of Changes in Investors' equity
    For the year ended 31 December 2010
    Prepared by:Shenzhen Tellus Holding company limited
    2010
    Less:
    Item                                 Paid-in                                                                                                           Paid-in
    Treasu Special                                             Total of Investors'
    capital(share    Capital surplus                Surplus reserves Undistributed profit Other                       capital(share    Capital surplus
    ry  reserve                                                   equity
    capital)                                                                                                          capital)
    stock
    1. Closing balance of last year                                 220,281,600.00     5,874,407.03     -       -       2,952,586.32     -105,286,986.57    -       123,821,606.78    220,281,600.00     5,197,400.53
    Add:Change of accounting policy                                            -               -       -       -                -                   -      -                  -                  -               -
    Correction for error in previous period                                     -               -       -       -                -                   -      -                  -                  -               -
    Other                                                                       -               -       -       -                -                   -      -                  -                                  -
    2. Beginning balance of this year                               220,281,600.00     5,874,407.03     -       -       2,952,586.32     -105,286,986.57    -       123,821,606.78    220,281,600.00     5,197,400.53
    3. Change of current year(‘-’means decrease)                            -       -432,000.46     -       -                -          2,036,286.84    -         1,604,286.38                -        677,006.50
    1)Net profit                                                               -               -       -       -                -          2,036,286.84    -         2,036,286.84                -               -
    2)Other Comprehensive earnings                                             -       -432,000.46     -       -                -                   -      -          -432,000.46                         677,006.50
    Subtotal of 1) and 2)                                                       -       -432,000.46     -       -                -          2,036,286.84    -         1,604,286.38                -        677,006.50
    3) Capital invested and decreased by owner                                  -               -       -                        -                   -      -                  -                  -               -
    (1)Capital invested by the owner                                            -               -       -                        -                   -      -                  -                  -               -
    (2)Fund paid for shareholders recorded into the Investors'
    -               -       -                        -                   -      -                  -                  -               -
    equity
    (3)Other                                                                    -               -       -                        -                   -      -                  -                  -               -
    4) Profit distribution                                                      -               -       -                        -                   -      -                  -                  -               -
    (1)Appropriated surplus reserves                                            -               -       -                        -                   -      -                  -                  -               -
    (2)Distribution to owners (or shareholders)                                 -               -       -                        -                   -      -                  -                  -               -
    (3)Other                                                                    -               -       -                        -                   -      -                  -                  -               -
    5)Internal transfer of Investors' equity                                   -               -       -                        -                   -      -                  -                  -
    (1)Capital reserves transferred to capital (or share capital)               -               -       -                        -                   -      -                  -                  -
    (2)Surplus reserves transferred to capital (or share capital)               -               -       -                        -                   -      -                  -                  -
    (3)Loss covered by surplus reserves                                         -               -       -                        -                   -      -                  -                  -
    (4)Other                                                                    -               -       -                        -                   -      -                  -                  -
    6)Special reserve
    (1).increased at the period
    (2).decreased at the period
    4. Closing balance of current year                              220,281,600.00     5,442,406.57     -               2,952,586.32     -103,250,699.73    -       125,425,893.16    220,281,600.00     5,874,407.03
    12
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010         Expressed in RMB Yuan
    Note1. Profile of Company
    1. About Company
    Shenzhen Tellus Machinery Co.,Ltd. is a state-owned enterprise, established in Shenzhen in the
    People’s Republic of China (the PRC) On 11 December 1992, the Shenzhen Municipal People’s
    Government approved the reorganization of Shenzhen Tellus Machinery Co.,Ltd. to become a public
    limited company.    Shenzhen Tellus Machinery Co.,Ltd. was renamed Shenzhen Tellus Holding
    Company Limited (hereinafter referred to as ―the Company‖) on 30 June 1994, with approval by the
    Shenzhen Administration for Industry and commerce. The company respectively obtained the
    approval certificates ―Shen Zhen Ban Fu (1993) No. 34‖ and ―Shen Zhen Shi Zi (1993) No. 22‖from
    the Shenzhen Stock Management Office and Shenzhen Stock Exchange in June 1993.
    On 31 March 1997, with the approval of Shenzhen Municipal People’s Government ―Shen Fu
    Han (1997) No.19‖ and China Security Regulatory Commission ―Zhen Jian Han (1997) No.5‖,
    Shenzhen Investment Administrative Company transferred its 159,588,000 shares to Shenzhen Te Fa
    (Group) Company Company Limited (hereinafter referred to as ―the Te Fa Group‖). The shares
    transferred represent 72.45% of the total issued shares of the Company. In order to circulate all the
    non-negotiable shares in the A share market, the Te Fa Group, as the one and only shareholder of
    non-negotiable shares in the Company, gave 13,717,440 shares to the holders of tradable shares of the
    company in the A share market(Per 10 tradable shares for 4 shares). The transferring was finished on
    4th January 2006. After the split-share reform was completed, The Te Fa Group holds 66.22% of the
    shares capital of the Company.
    The Company holds the Business License (Shen Qi Fa Zi No. 440301103017750).
    2. Industry type, Business Scope, main products or service
    The company and its subsidiaries provided automobile overall services, including automobile
    retailing, inspection and maintenance, production of inspection equipment, property lease and
    property management service, etc.
    With the approval by Shenzhen Administration for Industry and Commerce, the Company’s
    business scope includes induatrial projects, operating real estate under gaining land-ues right,
    13
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010             Expressed in RMB Yuan
    mainland commerce, goods and materials business , (Government monopolistic goods and materials
    are not included.),leasing and managing own property, import and export business of internal
    production materials and accessories.Import and export business complys with the approval certificate
    (Shen Mao Guan Zheng Zi No.098).
    During the period reported, there was no change in the main operating business.
    3. Authorized person and issued date of the financial statements
    The financial statements of the Company are authorized to be issued to the public on April 13,
    2011 by the Board of Directors.
    Note2. Accounting Policies, Accounting Estimates and Prior period accounting errors
    1. Basis Preparation of the Financial Statements
    The Company continues to operate as a going concern. These financial statements have been
    prepared on an accrual basis, according to the actual transations and events.
    2. Statement of Compliance with the Accounting Standards for Business Enterprises
    The financial statements of the Company for the year ended 31 December 2010 are in conformity
    with the requirements of the Accounting Standard for Business Enterprises issued by the Ministry of
    Finance of the PRC on 15 February 2006, and present fairly, in all material respects, the financial
    position, the results of operations, the cash flows and other relevant informations of the Company.
    The financial statements of the Company are also in conformity with the Information Disclosure
    Standards for Listed Companies No.15—the regular rule of financial statements(2010)and the
    Information Disclosure Standards for Listed Companies No.9—the calculation and disclosure of
    ROEand earnings per share(2010).
    3. Accounting year
    The Company’s accounting year starts on 1 January and ends on 31 December.
    4. Recording currency
    14
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010            Expressed in RMB Yuan
    The recording currency is the Renminbi(RMB).
    5. Business Combinations
    The term "business combinations" refers to a transaction or event that makes two or more
    separate enterprises from a reporting entity. Business combinations are classified into the business
    combination under the common control and the business combination not under the common control.
    1)     Business combination under the common control
    If the enterprises involved in a combination are subject to control of the same party or the same
    parties both before and after the combination, and that control is not temporary in nature, it is business
    combination under common control. The cost of combination and net asset obtained by the combining
    party shall be measured at their book value and the difference shall adjust the capital surplus – capital
    premium. If the balance of capital premium is not sufficient to be offset, the retained earning shall be
    adjusted.
    The direct cost for the business combination of the combining party shall, including the expenses
    for audit, assessment and legal services, be recorded into the profits and losses at the current period.
    The bonds issued for a business combination or the handling fees, commissions and other expenses
    for assuming other liabilities shall be recordedinto the amount of initial measurement of the bonds or
    other debts. The handling fees, commissions and other expenses for the issuance of equity securities
    for the business combination shall be credited against the surplus of equity securities; if the surplus is
    not sufficient, the retained earnings shall be offset. The "combining date" refers to the date on which
    the combining partyactually obtains control on the combined party.
    2) Business combination does not under common control
    If the enterprises involved in a combination are not subject to control of the same party or the
    same parties both before and after combination, it is business combination not under the common
    control. The cost of combination and net asset obtained by the combining party shall be measured at
    fair value on acquisition day.
    15
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010             Expressed in RMB Yuan
    Differences are determined to goodwill, surplus of which combination cost is more than fair
    value of identifiable net asset acquired from acquiree in combination on acquisition date. If
    combination cost is less than fair value of identifiable net asset acquired from acquiree in combination
    on acquisition date, it shall first make review about fair value of acquired acquiree’s identifiable assets,
    liabilities and contingent liabilities and measurement of combination cost, and if combination cost is
    still less than fair value of identifiable net asset acquired from acquiree in combination after review,
    the balances are included in current profit or loss.
    As for business combination not under the common control, combination costs contain paid
    properties, incurred or assumed liabilities, and fair value of issued equity securities so that acquirer
    can take control over acquiree on acquisition date; auditing, legal service, evaluation consulting costs
    and other intermediary fees incurred in business combination, and other administrative expenses
    accounted into current profit or loss at the time of incurring. Transaction costs incurred during the
    period when acquirer issue equity securities or debt securities as combination consideration are
    recorded into initially recognized amount of equity securities or debt securities.
    The "acquisition date" refers to the date on which the acquirer actually obtains the control on the
    acquiree. The acquirer distributes the combination costs on acquisition date, and confirms the
    measurement of the fair values of the identifiable assets, liabilities and contingent liabilities.
    Operation combination deals with the same method.
    6. Preparation method of consolidated financial statements
    The combined financial statements include the Company and its subsidiaries. Control means that
    the Company is able to make decision on financial and operational policies of the invested company,
    and possesses the rights of obtaining benefits from operating activities of invested company.
    Subsidiaries increased through business combination under the common control, its operating
    results and cash flows from the beginning of combination to combination date have been properly
    included in consolidated profit statement and consolidated cash flow statement, and it shall also adjust
    comparable number in consolidated financial statement.
    16
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010             Expressed in RMB Yuan
    Subsidiaries increased through business combination not under the common control, its operating
    results and cash flows after acquisition date have been properly included in consolidated profit
    statement and consolidated cash flow statement, and it shall not adjust beginning balance and
    comparable number in consolidated financial statement.
    The portion of a subsidiary’s equity and the portion of a subsidiary’s net profits and losses for the
    period not held by the Company are recognized as minority interests and presented separately in the
    consolidated balance sheet within equity and net profits respectively.
    Portion of which subsidiary’s losses assumed by minority shareholders exceed owner’s equity of
    minority shareholders entitled in the beginning of this subsidiary shall reduce minority shareholder’s
    equity.
    As preparing consolidated financial statement, if accounting policy or accounting period adopted
    by subsidiaries and Company is not conformity, it shall make necessary adjustment to subsidiaries’
    financial statement pursuant to Company’s accounting policy and accounting period. All significant
    balances, transactions and unrealizable profit within the Group shall offset when preparing
    consolidated financial statement.
    7. Cash and Cash equivalents
    For the purpose of the cash flow statement, cash and cash equivalents comprise cash in
    hand,deposits held at call with bank and short-term and highly liquid investments that are readily
    convertible to known amounts of cash and which are subject to an insignificant risk of changes in
    value.
    8. Foreign currency transactions and translation of foreign currency
    1) Transactions and balances
    Foreign currency transactions are translated into RMB using the exchange rates prevailing at the
    date of the transactions.
    At the balance sheet date, monetary items denominated in foreign currency are translated into
    17
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010              Expressed in RMB Yuan
    RMB using the spot exchange rate at the balance sheet date. Exchange differences arising from these
    translations are recognised in profit or loss for the current period, except for those attributable to
    foreign currency borrowings that have been taken out specifically for the acquisition or construction
    of qualifying assets, which are capitalised as part of the cost of those assets. Nonmonetary items
    denominated in foreign currency that are measured in terms of historical cost are translated at the
    balance sheet date using the spot exchange rate at the date of the transaction.
    2) Translation of foreign currency financial statements
    The asset and liability items in the balance sheets for overseas businesses are translated at the
    spot exchange rate on the balance sheet date. Among the owner’s equity items, the items other than
    ―undistributed profits‖ are translated at the spot exchange rate of the transaction date. The income and
    expense items in the income statements of overseas businesses are translated at the spot exchange rate
    of the transaction date. The differences arising from the above translation are presented separately in
    the owner’s equities. The cash flows of overseas businesses are translated at the spot exchange rate on
    the date of the cash flows. The effect of exchange rate changes on cash is presented separately in the
    cash flow statement.
    9. Financial instruments
    1).Classify of the Financial Assets and Financial Liabilities
    The initial Recognition of the Financila Assets and Financial Liabilities are divided into trading
    financial assets and Financial Liabilities whose are measured at their fair values and whose variations
    are included into the current profit and loss; held-to-maturity investments; loans and the receivables;
    available-for-sale financial assets and other Financial Liabilities.
    2).Recognition of the Financial Assets and Financial Liabilities
    Recognition of the Financial Assets and Financial Liabilities in accord with defined and
    recognition conditions of the Financial Assets and Financial Liabilities is the process of booking the
    Balance sheet.
    18
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010              Expressed in RMB Yuan
    3).Measurement of the Financial Assets and Financial Liabilities
    Financial assets and financial liabilities are initially recognised at their fair value. In the case of
    financial assets at fair value through profit or loss, the related transaction costs occurred at the time of
    acquisition is recognised in profit or loss for the current period. For other financial assets, transaction
    costs that are attributable to the acquisition of the financial assets are included in their initial
    recognition amounts.
    Financial assets at fair value through profit or loss and available-for-sale financial assets are
    subsequently measured at fair value. Investments in equity instruments are measured at cost when
    they do not have a quoted market price in an active market and whose fair value cannot be reliably
    measured. Receivables and held-to-maturity investments are measured at amortised cost using the
    effective interest method.
    A gain or loss arising from a change in the fair value of financial assets at fair value through
    profit or loss is recognised in profit or loss. A gain or loss arising from a change in fair value of an
    available-for-sale financial asset is recognised directly in equity, except for impairment losses and
    foreign exchange gains and losses arising from the translation of monetary financial assets. When
    such financial asset is derecognised, the cumulative gain or loss previously recognised in equity is
    recognised in profit or loss for the current period.
    Interests on available-for-sale investments in debt instruments are calculated using the effective
    interest method during the period in which such investments are held and cash dividends declared by
    the investee on available-for-sale investments in equity instruments are recognised as investment
    income in profit or loss.
    Financial Assets and financial Liabilities are measured using effective interest method and using
    amortized cost as subsequent measurement. The gain or loss incurred as at the time of derecognition,
    impairment or amortization are recorded in current profit or loss.
    4).Termination of the Financial Assets and Financial Liabilities
    Financial assets are derecognised when: i) the contractual rights to receive the cash flows from
    19
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010            Expressed in RMB Yuan
    the financial assets have expired; or ii) all substantial risks and rewards of ownership of the financial
    assets have been transferred; or iii) the control over the financial asset has been waived even if the
    company does not transfer or retain nearly all of the risks and rewards relating to the ownership of a
    financial asset.
    A financial liability (or a part of financial liability) is derecognised when and only when the
    obligation specified in the contract is discharged or cancelled. The difference between the carrying
    amount of a financial liability (or a part of financial liability) extinguished and the consideration paid
    is recognised in the income statement.
    5). Measurement of Fair values of financial assets and financial liabilities
    (1) The fair value of a financial instrument that is traded in an active market is determined at the
    quoted price in the active market.
    (2) The fair value of a financial instrument for which the market is not active is determined by
    using a valuation technique.
    (3) The fair value of initial or originated financial assets and financial liabilities is measured on
    the basis of transaction prices.
    (4) The discount rate used to measure the fair values by the Discounted Future Cash Flow
    Method shall apply the rate of return of financial instruments in the market, which are the same in the
    contractual articles and characters.
    6). Impairment of financial assets
    The company assesses the carrying amount of a financial asset other than that at fair value
    through profit or loss at each balance sheet date. If there is objective evidence that the financial asset
    is impaired, the Group shall determine the amount of any impairment loss.
    (1) Held-to-maturity investment
    At the balance sheet date, if an impairment loss on a financial asset carried at amortised cost has
    been incurred, the amount of loss is measured as the difference between the asset’s carrying amount
    20
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010          Expressed in RMB Yuan
    and the present value of estimated future cash flows.
    (2) Available-for-sale financial assets
    At the balance sheet date, if the fair values of financial assets available for sale have decreased
    by a great amount, and the decrease is over 50% of initial cost, it is expected that the decrease is not
    temporary and the last time is over 12 months after considering all relevant factors. Impairment losses
    are recognized at the balance of current value of future cash flow lower than the book value, and bad
    debt provisions will be provided thereof.
    If the impairment losses of financial assets available for sale have actually incurred, the
    accumulating losses owing to the decrease of fair values in owner’s equity must be transferred.
    Impairment losses are recognized and bad debt provisions will be provided thereof.
    10. Receivables
    1) The receivables that are individually significant and the provision is individually provided
    for
    Receivables that are individually significant are above 1,000,000.00 yuan at the end of year,
    account receivable that are individually significant are above 500,000.00 yuan at the end of year.
    The method for providing bad debt provision of the receivables that are individually significant
    are subject to separate impairment assessment. If there is objective evidence that the Group will not be
    able to collect the full amount under the original terms, a provision for impairment of that receivable
    is established. The provision is individually provided for is at the difference between the carrying
    amount of that receivable and the present value of its estimated future cash flows.
    2) The receivables that are grouped for providing bad debt provision
    Aging analysis method for the bad debt provision for the groups of receivables
    Provision for                  Provision for other
    receivables (%)                  receivables (%)
    Within 1 year                                             --                                           --
    1 to 2 years                                              5                                            5
    21
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010          Expressed in RMB Yuan
    1 to 2 years                                          20                                             20
    Over 3 years                                          50                                             50
    3) The receivables that are not individually significant but the provision is individually provided
    for
    The receivables that are not individually significant are below 1,000,000.00 yuan at the end of
    year, the other receivables that are not individually significant are below 500,000.00 yuan at the end
    of year.
    The method for providing the bad debt provision is based on the difference between the carrying
    amount of that receivable and the present value of its estimated future cash flows, and count and draw
    bad debt provision.
    11. Inventories
    1) Classify of Inventories
    Inventories include raw materials, finished goods, consumable biological assets and low-value
    consumbles.etc.
    2) Measurement upon issuance
    The inventories should be initially measured in light of their cost. The cost of inventory is
    determined on the weighted average method. Low-value consumbles and packing are carried out as
    graded amortization.
    3) Determination of net realisable value and the method of provisions for impairment of
    inventories
    The measurement of net realizable value of the inventory: the net realizable value of finished
    products, goods, materials for sale and other goods directly for sale means inventory estimating value
    minus estimated selling expense and amount after taxing. The net realizable value of material needed
    to be processed means inventory estimating value minus estimated cost of completion, estimated
    selling expense, and amount after taxing.
    22
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010             Expressed in RMB Yuan
    At the date of balance sheet, inventory is calculated at the lower of the costs and net realizable
    value. When net realizable value is lower than the cost, inventory impairment provision was made.
    Inventory impairment provision is drew according to the balance which is the value of cost of every
    single inventory item minus its net realizable value. When confirm inventory’s net realized value, you
    should be on the basis of conclusive evidence,at meantime, consider the purpose of inventory holding,
    and effects of balance sheet in future.
    4) The company adopts the perpetual inventory system.
    12. Long-term equity investments
    1) Category of long-term equity investment
    Long-term equity investments comprise the Company’s equity investments in its subsidiaries, tin
    its associates as well as the long-term equity investments where the company does not have control,
    joint control or significant influence over the investees, and which are not quoted in an active market
    and whose fair value cannot be reliably measured.
    2) Determining initial investment cost
    (1) Long-term equity investment formed by business combination
    For long term equity investment formed by business combination, if it is the long term equity
    investment of business combination under the common control, at the date of combination, the
    acquiree’s owner equity accounting value was turned to be the preliminary investment capital; by the
    long term equity investment of business combination not under the common control; business
    combination costs consist of purchaser’s asset, operating and bearing liabilities, issued equity
    securities’ fair value sum. Purchaser’s auditing, law service, assessment consulting agent fees, etc. and
    other corresponding management fees for business combination, which should be calculated in the
    profit or lost of that period when operation; transaction fee of equity securities or debt securities
    issued by purchaser’s business combination, which should be calculated in initializing confirming
    amount of equity securities or debt securities.
    23
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010          Expressed in RMB Yuan
    (2) Long-term equity investment formed by other means.
    The initial cost of a long-term equity investment obtained by making payment in cash shall be
    recognized at the purchasing cost. The initial cost consists of the expenses directly relevant to the
    obtainment of the long-term equity investment, taxes and other necessary expenses. But the cash
    dividends in purchase payment, which is declared but not yet received, shall be included in a separate
    account receivable.
    The initial cost of a long-term equity investment obtained by issuing equity securities shall be
    recongnized at the fair valuse of the issued equity securities.
    The initial cost of a long-term equity investment of an investor shall be recognized at the
    contractual value, except the contractual value is unfair.
    If a long-term investment is obtained by the exchange of non-monetary assets, the transaction
    possesses commercial nature and the fair values of assets received or surrendered can be measured
    reliably, the initial cost of the long-term equity investment shall be recognized at the fair values of
    assets surrendered and the relevant expenses. The balance of fair values and the book values of assets
    received is included in the current profits and losses.
    If a long-term equity investment is obtained by liabilities restructuring, the initial cost of the
    long-term equity investment shall be recognized by the fair values of equity. The balance of the initial
    cost of long-term equity investment and book value of claim is included in the current profits and
    losses.
    3) Subsequent measurement of long-term equity investment
    The company’s long-term equity investment and other equity investment in subsidiaries are
    measured using the cost method in the Company’s financial statements, and adjusted using the equity
    method when preparing the consolidated financial statements. Investments in joint venture and
    associates are accounted for using the equity method.
    4) The recognizion of profit or loss of long-term equity investment
    24
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010            Expressed in RMB Yuan
    When accounted by cost method, long term equity investment is valued by initial investing cost,
    except the actual amount of acquiring investment , or the acclaimed but not found cash dividend in the
    value or interest, the term investment profit confirmed by the cash dividend and interest acclaimed by
    investee.
    When accounted by the equity method, the company recognised the investment income based on
    its share of net profit or loss of the investee. The carrying amount of the investment is reduced by the
    company’s share of the profit or cash dividends declared by an investee. As to the total income of
    investees, adjust long term equity investment accounting value, which confirmed as the other total
    income and calculated in capital reserve.
    The disposal of long-term equity investment, the difference of its accounting value and actual
    acquired price, calculated in the lost or profit of that period; long term equity investment calculated
    with equity method, in disposing we should turn the other total income which calculated in equity
    before to the lost or profit of that period according to a certain rate.
    5) Determining joint control, significant influence over investees
    (1) Basis of joint control over investees
    Joint control means that the investor has contractual obligation to control a certain economic
    activity, while such control only exists when the significant financial and operating policies relating to
    that activity are agreed upon by all investors sharing that control.
    (2) Basis of significant influence over investees
    Significant influence means that the investor has the right to participate in the determination of
    the investee’s financial and operating policies, but cannot control or joint control with other parties on
    the determination of these policies. Generally, the company directly or indirectly through subsidiaries
    hold more than 20% but less than 50% of the voting shares that have a significant influence to the
    invested unit.
    6) Impairment test method and impairment preparation accrual method
    25
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010            Expressed in RMB Yuan
    At the date of financial liabilities sheet, our company checks whether value reducing exists in the
    long term equity investment. If value reducing does exist in the asset, then the recoverable amount
    will be evaluated. If the recoverable amount is less than the accounting value, then calculating the
    preparation for asset impairment according to the difference, and putting into the lost or profit of that
    period. The impairment losses can not be reversed back in the later accounting period once it is
    recognized.
    13. Investment properties
    1) Classify of investment properties
    The investment properties include land use rights that have already been leased out, land use
    rights that held for increasing in value and buildings that for leasing.
    2) Measurement of investment properties
    The investment properties shall be initially measured in light of their cost when getting it and
    make a follow-up measurement to the investment real estate through the cost pattern on the date of the
    balance sheet. The test method of depreciation or impairment of the buildings is the same as fixed
    assets, the test method of depreciation or impairment of the land use rights is the same as intangibled
    assets.
    14 .Fixed assets
    1) Recognition of fixed assets
    (1) The economic benefits with the fixed assets may flow to the company.
    (2) The cost of the fixed assets can be measured reliably.
    2) Classify of fixed assets
    The company’s fixed assets comparise house and buildings, machinery equipments,
    transportation vehicles, electronic equipments and other equipments.
    3) Fixed assets depreciation
    26
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010              Expressed in RMB Yuan
    Fixed assets are depreciated using the straight-line method to allocate the cost of the assets to
    their estimated residual values over their estimated useful lives. The estimated useful lives, the
    estimated residual values expressed as a percentage of cost and the annual depreciation rates are as
    follows:
    Asset type             Estimated useful        Estimated residual         Annual depreciation
    life (year)               rate (%)                    rate(%)
    Housing and building                     35                       3                         2.77
    Machinery equipments                     12                       3                         8.08
    Transportation vehicles                  7                        3                        13.86
    Electronic equipments                    7                        3                        13.86
    Other equipments                         7                        3                        13.86
    4) Impairment of fixed assets
    At the balance date, if the result of the impairment test indicates that the recoverable amount of
    the asset is less than its carrying amount, a provision for impairment and an impairment loss are
    recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The
    recoverable amount is the higher of an asset’s fair value less costs to sell and the present value of the
    future cash flows expected to be derived from the asset. Once the asset impairment loss mentioned
    above is recognised, it is not allowed to be reversed even if the value is recovered in the subsequent
    periods.
    5) Fixed assets on financial lease
    When one or more of the following criteria are met, a lease shall be classified as a financial
    lease:
    a. the lease transfers ownership of the leased asset to the lessee by the end of the lease term;
    b. the lessee has the option to purchase the leased asset at a price that is expected to be
    sufficiently lower than the fair value at the date the option becomes exercisable such that, at the
    inception of the lease, it is reasonably certain that the option will be exercised by the lessee;
    c. the lease term is for the major part of the useful life of the leased asset even if title is not
    27
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010             Expressed in RMB Yuan
    transferred;
    d. in the case of the lessee, at the inception of the lease the present value of the minimum lease
    payments amounts to substantially all of the fair value of the leased asset; in the case of lesser, at the
    inception of the lease the present value of the minimum lease receipts amounts to substantially all of
    the fair value of the leased asset;
    e. the leased assets are of a specialized nature such that only the lessee can use them without
    majormodifications being made.
    Fixed assets on financial lease shall be recorded at the lower one of the fair value of the leased
    asset and the present value of the minimum lease payments.
    6) Subsequent expenditures of fixed assets
    The subsequent expenditures related to fixed asset, if the economic profit of fixed asset can
    probably be flew into, and the costs can be calculated reliably, then counting into the costs of fixed
    asset, and ceasing the accounting value which confirmed as the substitute part. Except this, the other
    subsequent expenditures t is calculated into the lost or profit of that period when existing.
    15. Construction in process
    Construction in progress is measured at actual cost. Actual cost comprises construction
    costs, ,installation cost, borrowing costs that are eligible for capitalization and other costs necessary to
    bring the fixed assets ready for their intended use. Construction in progress is transferred to fixed
    assets when the assets are ready for their intended use, and depreciation begins from the following
    month.
    At the balance sheet date, as to construction in process which is long-term suspended and will
    not be re-started in three years, The carrying amount of construction in progress is reduced to the
    recoverable amount when the recoverable amount is less than the carrying amount. Once the asset
    impairment loss mentioned above is recognised, it is not allowed to be reversed even if the value is
    recovered in the subsequent periods.
    16. Borrowing Costs
    28
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010           Expressed in RMB Yuan
    The borrowing costs shall include interests on borrowings, amortization of discounts or
    premiums on borrowings, ancillary expenses, and exchange balance on foreign currency borrowings.
    Where the borrowing costs incurred to an enterprise can be directly attributable to the acquisition and
    construction or production of assets eligible for capitalization, it shall be capitalized and recorded into
    the costs of relevant assets. Other borrowing costs shall be recognized as expenses on the basis of the
    actual amount incurred, and shall be recorded into the current profits and losses.
    1) Conditions of capitalization
    The borrowing costs shall not be capitalized unless they simultaneously meet the following
    requirements:
    (1) The asset disbursements have already incurred, which shall include the cash, transferred
    non-cash assets or interest bearing debts paid for the acquisition and construction or production
    activities for preparing assets eligible for capitalization;
    (2) The borrowing costs have already incurred;
    (3) The acquisition and construction or production activities which are necessary to prepare the
    asset for its intended use or sale have already started.
    2) Recognition of capitalized amounts
    For a borrowing specific for the acquisition, construction or production activities for preparing
    an asset eligible for capitalisation, the to-be-capitalised borrowing costs shall be determined according
    to the actual borrowing costs incurred less any income earned on the unused borrowing fund as a
    deposit in the bank or as a temporary investment.
    For the other borrowings related to acquisition, construction and production of a qualifying asset,
    the amount of to-be-capitalised borrowing costs shall be the lower of the actual borrowing costs
    incurred and the amount of qualifying asset not financed by specific borrowings multiplying
    capitalisation rate. The capitalisation rate is the weighted average interest rate of these borrowings.
    3) Capitalize cost suspension
    29
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010           Expressed in RMB Yuan
    Capitalisation of borrowing costs is suspended during periods in which the acquisition or
    construction of a fixed asset is interrupted abnormally and the interruption lasts for more than 3
    months, until the acquisition or construction is resumed.
    4) Cease to capitalize cost
    The capitalisation of borrowing costs ceases when the asset under acquisition or construction
    becomes ready for its intended use, the borrowing costs incurred thereafter are recognised in profit or
    loss for the current period.
    17. Intangible assets
    Intangible assets include those with limited using life and those with uncertain using life.
    1) Measurement of intangible assets
    The intangible assets shall be initially measured according to its actual cost.
    The cost of self-developed intangible assets shall include the total expenditures incurred during
    the period from the time when it meets the provisions of certain standards to the time when the
    expected purposes of use are realized.
    2) Amortization of intangible assets
    (1) The using life span limited intangible asset from the date of using, the original value minus
    predicted net remaining value, and calculated impairment preparation accumulated amount is
    amortized evenly with linear method in the predicted using life span.
    (2) The intangible asset with uncertain using life span could not be amortized.
    3) The impairment of intangible assets
    For uncertain using life the impairment tests should be indicated at the balance sheet date.
    For intangible assets with limited life, at the balance sheet date, where any evidence shows that
    there is possible assets impairment, the recoverable amount of the assets shall be estimated. If the
    recoverable amount is lower than its carrying value, the carrying value of the asset shall be recorded
    down to the recoverable amount, and the reduced amount shall be recognized as the losses of
    30
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010           Expressed in RMB Yuan
    intangible asset impairment and be recorded as thecurrent profits and losses. Simultaneously, a
    provision for the asset impairment shall be made accordingly.
    Once the asset impairment loss mentioned above is recognised, it is not allowed to be reversed
    even if the value is recovered in the subsequent periods.
    18. Long-term prepaid expenses
    Determine a reasonable benefit period for Long-term prepaid expenses, and amortize it according
    to its average benefit period. If do not determine a reasonable benefit period, and amortize it
    according to below 10years.
    19. Employee benefits
    The term "employee benefits" refers to all kinds of payments and other relevant expenditures
    given by enterprises in exchange of the services offered by the employees. The employee benefits
    include:
    (1) Wages, bonuses, allowances and subsidies;
    (2) Welfare expenses;
    (3) Medical insurance, endowment insurance, unemployment insurance, work injury insurance,
    maternity insurance and other social insurances;
    (4) Housing funds;
    (5) Labor union expenditure and employee education expenses;
    (6) Non-monetary welfare;
    (7) Compensations for the cancellation of the labor relationship with the employees;
    (8) Other relevant expenditures of services offered by the employees.
    During the accounting period of an employee' providing services to the company, the company
    shall recognize the employee benefits as liabilities. Except for the compensations for the cancellation
    of the labor relationship with the employee, the company shall, in accordance with beneficiaries of the
    31
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010              Expressed in RMB Yuan
    services offered by the employee, treat this liabilities as the product costs and service costs;
    construction costs of fixed asset; costs of intangible assets and the current profits or losses.
    20. Recognition of predicted debts
    The obligation pertinent to contingencies shall be recognized as anestimated debts when the
    following conditions are satisfied simultaneously:
    (1) That obligation is a current obligation of the enterprise;
    (2) It is likely to cause any economic benefit to flow out of the enterprise as a result of
    performance of the obligation; and
    (3) The amount of the obligation can be measured in a reliable way.
    Where an executory contract turns to be a loss contract, the obligation generated from the loss
    contract and restructuring obligations undertaken by an enterprise which meets the provisions above
    shall be recognized as an estimated debts.
    The estimated debts shall be initially measured in accordance with the best estimate of the
    necessary expenses for the performance of the current obligation.
    21. Income
    (1) No revenue from selling goods may be recognized unless the following conditions are met
    simultaneously:
    a. The significant risks and rewards of ownership of the goods have been transferred to the buyer
    by the enterprise;
    b. The enterprise retains neither continuous management right that usually keeps relation with the
    ownership nor effective control over the sold goods;
    c. The relevant amount of revenue can be measured in a reliable way;
    d. The relevant economic benefits may flow into the enterprise; and
    e. The relevant costs incurred or to be incurred can be measured in a reliable way.
    32
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010        Expressed in RMB Yuan
    (2) Rendering of services
    In the condition of service income proving result could be estimated reliably, at the date of asset
    debt sheet, confirming service providing income with percentage of completion method. The rate of
    completion progress of service transaction of provided cost takes up the total cost to be provided
    which to be confirmed.
    If the service rendered could not be estimated reliably, then the providing service income
    confirmed by the existed and predicted compensated service cost amount; and make the existed
    service cost as the expense of that period. The existed service cost could not be compensated as
    predict, then the income could not be confirmed.
    (3) Transfer of asset use rights
    Interest income is recognised on a time-proportion basis using the effective interest method.
    Business renting income amount, according to the renting contract, agreed tenant date, and tenant
    amount, confirming realization of the income after the related rent has acquired, or the evidence of
    money acquiring; the business rent received in advance for more than one year, calculating into
    deferred income, and confirmed it with linear method in the prescriptive period in the contract.
    22. Government Subsidies
    A government subsidy means the monetary or non-monetary assets obtained free by an enterprise
    from the government, but excluding the capital invested by the government as the owner of the
    enterprise. Government subsidies consist of the government subsidies pertinent to assets and
    government subsidies pertinent to income.
    The government subsidies pertinent to assets will be recognized as other non-current
    debtdeferred income, equally amortized within the useful lives of the relevant assets and recognized
    as profit and loss at the same time. The government subsidies measured at their nominal amounts will
    be directly recognized as profit and loss in the current period.
    The government subsidies pertinent to incomes, those subsidies used for compensating related
    33
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010             Expressed in RMB Yuan
    future expenses or losses will be recognized as deferred income and recognized as profit and loss
    during the period when the relevant expenses are recognized; those subsidies used for compensating
    related expenses or losses already existed will be directly recognized as income or cost in the current
    period.
    23. Deferred income tax assets and deferred income tax liabilities
    The balance between book value and tax basis of some assets and liabilities, and the transient
    difference of the book value and tax basis of items which is not confirmed as assets and liabilities
    while can confirm the tax basis shall adopt the Balance Sheet Liability Method to ensure the deferred
    income tax assets and deferred income tax liabilities. As for balance sheet date,the deferred income
    tax assets and deferred income tax liabilities shall calculate with the applicable tax rate in the period
    of repossessing asset in expectation or paying off liabilities according to the tax law.
    Deferred tax liabilities are recognised for temporary differences arising from investments in joint
    ventures, subsidiaries and associates, except where the Group is able to control the timing of the
    reversal of the temporary difference, and it is probable that the temporary difference will not reverse
    in the foreseeable future. When it is probable that the temporary differences arising from investments
    in subsidiaries, joint ventures and associates will be reversed in the foreseeable future and that the
    taxable profit will be available in the future against which the temporary differences can be utilized,
    the corresponding deferred tax assets are recognized.
    Deferred tax assets are only recognised for deductible temporary differences, deductible losses
    and tax credits to the extent that it is probable that taxable profit will be available in the future against
    which the deductible temporary differences, deductible losses and tax credits can be utilised.
    Deferred tax asset is recognized for the deductible losses that can be carried forward to
    subsequent years for deduction of the taxable profit in accordance with the taxlaw.
    24. Changes on important accounting policies and accounting estimates
    1、Changes on important accounting policies
    34
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010            Expressed in RMB Yuan
    According the related regulation, as preparing consolidated financial statement, portion of which
    subsidiary’s losses assumed by minority shareholders exceed owner’s equity of minority shareholders
    entitled in the beginning of this subsidiary shall reduce minority shareholder’s equity. Simultaneously
    the file means that if the company has not dealt with the regulation at previous year,the accounting
    method should be traced back to adjust.Through the agreement of the board of directors,the company
    changed on the important accounting policies on 1 Jan.2010,the consolidated investors' equity and net
    profit were traced back to adjust.
    Before changing on important accounting policies, the company adopted the previous
    regulation ,which means that as preparing consolidated financial statement, portion of which
    subsidiary’s losses assumed by minority shareholders exceed owner’s equity of minority shareholders
    entitled in the beginning of this subsidiary dealt as follows:A The articles of incorporation stipulates
    minority shareholders are obligated to bear and minority shareholder are capable of compensation,the
    amounts reduce minority shareholder’s equity.B There was no stipulations, the amounts reduce
    investors' equity of patent company.
    The subsidiary of the company, Shenzhen Tellus Xinyongtong Automobile Development Co.,Ltd,
    as preparing consolidated financial statement of 2009, losses of Shenzhen Dongchang Yongtong
    Automobile Inspection Equipment Co.,Ltd. and Shenzhen Xinyongtong Dongxiao Automobile
    Inspection Equipment Co.,Ltd.assumed by minority shareholders exceed owner’s equity of minority
    shareholders entitled in the beginning of this subsidiary reduced investors' equity of patent
    company,the amounts were respectively 201,922.38yuan and 207,414.31yuan .According to the new
    regulation,the Xinyongtong changed the accounting policies,and was traced back to adjust.As the
    company hold 100% equity of Xinyongtong,the accounting method was correspondly traced back to
    adjust. The financial statements of the subsidiaries are adjusted based on the important changes of
    accounting policies, the influence of adjustment to stockholder's interests in 2009 is as follows:
    Items                               1Jan.2009        2009    31Dec.2009
    Retained earnings                                                       201,922.38                207,414.31
    Minority stockholder's interests                                        -201,922.38               -207,414.31
    35
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                 Expressed in RMB Yuan
    Equity attributable to shareholders of the parent company                                  5,491.93
    Minority stockholder's profit and loss                                                     -5,491.93
    2、Changes on important accounting estimates
    The company has no changes on important accounting estimates during this reporting period.
    25. Changes in the prior periods’accounting errors
    The company has no changes in the prior periods’accounting errors during this reporting period.
    Note3. Taxations
    The types and rates of taxes applicable to the company are set out below:
    Type                                           Taxable basis              Rate (%)
    Added value of sold goods                 17
    VAT
    Value of services                         17
    Business tax                                                  Business turnover                          5
    City maintaining and construction tax*1                       VAT and Business tax paid                 1、7
    Enterprise income tax*2                                       Taxable income                            22
    *1 According to the Shen Di Shui Gao[2010] No.8,from 1 Dec.2010, City maintaining and
    construction tax of Shenzhen is levied on 7%.The company and the subsidiaries implement on the
    regulation.
    *2 According to the ―Notification of the State Council on Carrying out the Transitional
    Preferential Policies concerning Enterprise Income Tax‖(Guo Fa〔2007〕No.39), the income tax for
    resident enterprises shall gradually shift from the lower rate to the 25% in a 5-year transitional period.
    The company enjoyed a lower enterprise income tax rate of 15%, which shall gradually be subject to
    income tax rate of 18% in 2008, 20% in 2009, 22% in 2010, 24% in 2011 and 25% in 2012. Except
    that the subsidiaries of Shenzhen Dongchang Yongtong Automobile Inspection Equipment Co.,Ltd.
    and Shenzhen xinyongtong Automobile Inspection Equipment Co.,Ltd. are levied on assessment basis.
    The enterprise income tax of others in 2010 is 22%.
    36
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                                                Expressed in RMB Yuan
    Note4.Enterprise consolidation and consolidated financial statements
    1. Particulars of the subsidiaries
    (1) Subsidiaries acquired under common control(Expressed in 10,000 Yuan)
    included in the
    Type of           Registered     Nature of   Registered                             Real          Holding      Voting          consolidated
    Name of subsidiaries                                                                             Business scope
    subsidiaries          place         business    capital                             investment     proportion% proportion%        finiancial
    statements(yes or no)
    Shenzhen Automobile Industry and
    Automobile and
    Trading    Co.,Ltd.(The    Automobile fully-owned subsidiary    Shenzhen       Bussiness          5896                            12,625.00       100         100                YES
    accessories selling
    Industry and Trading)
    Automobile
    Shenzhen Tefa Huari Automobile                                                                             maintenance &
    holding subsidiary     Shenzhen        Service         USD500                             1,922.00        60          60                YES
    Enterprise Co.,Ltd(The Hua Ri )                                                                          production and sales
    of accessories
    Shenzhen Zhongtianye Industrial Co.,
    fully-owned subsidiary   Shenzhen        Service            725         Leasing             1,070.00       100         100                YES
    Ltd(The Zhongtian)
    Shenzhen Huari Toyota Automobile
    holding subsidiary     Shenzhen       Bussiness           200   Automobile selling          181.00        60          60                YES
    Co., Ltd(The Huari Toyota)
    Shenzhen Huari Anxing Automobile
    holding subsidiary     Shenzhen        Service            150 Automobil Inspection              150       0           60                YES
    Inspection Equipment Co.,Ltd.
    Shenzhen Automobile Industry supply                                                                        Automobile and
    fully-owned subsidiary   Shenzhen        Service           1111                                   648       0          100                YES
    and marketing Co.,Ltd.                                                                                   accessories selling
    37
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                                                 Expressed in RMB Yuan
    (2) Particulars of subsidiaries consolidated by other means (Expressed in 10,000 RMB Yuan)
    included in the
    Type of                                Nature of   Registered                             Real          Holding      Voting
    Name of subsidiaries                                   Registered place                                Business scope                                                consolidated finiancial
    subsidiaries                             business     capital                            investment     proportion% proportion%
    statements(yes or no)
    Shenzhen Tellus Xinyongtong
    Automobile
    Automobile Development Co. ,Ltd fully-owned subsidiary          Shenzhen          Service       3,290.00                              5,767.00      100         100                 YES
    inspection & repair
    (The Xinyongtong)
    Shenzhen Tefa Tellus Property
    Property
    Management Co.,Ltd(The Tellus fully-owned subsidiary            Shenzhen          Service         705.00                               502.00       100         100                 YES
    management
    Property)
    Shenzhen Tefa Tellus Real Estate                                                                                Real estate
    fully-owned subsidiary         Shenzhen        Manufacture     3,115.00                              3,115.00      100         100                 YES
    Co., Ltd(The Real Estate)                                                                                      development
    Shenzhen Tellus Real Estate
    Service         200.00     Real estate agent         200.00
    Exchange Co., Ltd(The Exchange) fully-owned subsidiary          Shenzhen                                                                            100         100                 YES
    Shenzhenxinyongtong Automobile                                                                                 Production of
    Inspection Equipment Co.,Ltd(The      holding subsidiary        Shenzhen          Service       1,961.00        automobile            1,000.00       51          51                 YES
    Inspection)                                                                                                inspection equipment
    Shenzhen Dongchang Yongtong
    Automobile Inspection Equipment       holding subsidiary        Shenzhen          Service         150.00       Automobile                 143        0           95                 YES
    Co.,Ltd.                                                                                                       inspection
    Shenzhen Xinyongtong Dongxiao
    Automobile Inspection Equipment       holding subsidiary        Shenzhen          Service         150.00       Automobile                 143        0           95                 YES
    Co.,Ltd.                                                                                                       inspection
    Shenzhen    Shiquan    Industrial
    fully-owned subsidiary      Shenzhen          Business        200.00 Induatrial&supply                150        0          100                 YES
    Co.,Ltd.                                                                                                   and marketing
    Shenzhen Tefa Tellus Real Estate                                                                                Real estate
    fully-owned subsidiary         Huizhou         Manufacture       400.00                                  309        0          100                 YES
    Co., Ltd Huizhou Branch                                                                                        development
    38
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                                             Expressed in RMB Yuan
    2. Minority interests
    Reversal of minority profit /loss interest from
    Name of subsidiary                              Holding proportion%   Minority equity interest
    minority equity interest
    Shenzhen Tefa Huari Automobile Enterprise Co.,Ltd.                                       40%                      18,783,348.80                                                 --
    Shenzhen Huari Toyota Automobile Co.,Ltd.                                                40%                       2,738,962.75                                                 --
    Shenzhen xinyongtong Automobile Inspection Equipment Co.,Ltd.                            49%                       3,212,867.14                                                 --
    Shenzhen Dongchang Yongtong Automobile Inspection Equipment Co.,Ltd.                     5%                         -160,126.09
    Shenzhen Xinyongtong Dongxiao Automobile Inspection Equipment Co.,Ltd.                   5%                           -51,821.38
    Total                                                                       24,523,231.22                                                 --
    3. Change of mergering scope during the reporting period
    There is no change of mergering scope during the reporting period.
    39
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                             Expressed in RMB Yuan
    Note 5.Notes to the consolidated financial statements
    1、 Cash at bank and on hand
    31 December 2010                                        31 December 2009
    Items                Original         Exchange              RMB              Original          Exchange           RMB
    currency              rate         equivalent          currency               rate          equivalent
    Cash
    RMB                                         --                --        159,780.96                    --              --     127,403.37
    HKD                               42,092.83            0.8509            35,816.79         44,752.45           0.8805          39,404.53
    USD                                 1,433.00           6.6227             9,490.33           1,433.00          6.8282           9,784.81
    YEN                              311,685.00            0.0813            25,327.52        198,656.00           0.0738          14,660.81
    Sub-total                                                               230,415.60                                           191,253.52
    Cash at bank
    RMB                            68,519,934.16                  -- 68,519,934.16                        --              -- 76,791,528.04
    HKD                              176,934.16            0.8509           150,553.28        191,369.84           0.8805        168,524.92
    USD                               29,833.79            6.6227           197,580.24         32,932.76           6.8282        224,871.47
    Sub-total                                                          68,868,067.68                                           77,184,924.43
    Other cash balances
    RMB                                         --                --         24,496.56                    --              --                  --
    Sub-total                                   --                --         24,496.56                    --              --                  --
    Total                                       --                -- 69,122,979.84                        --              -- 77,376,177.95
    Fixed deposits not as cash and cash equivalents on December 31, 2010 are as follows:
    Bank of deposits                 Currency               Amount            Term deposits        Interest rate        Remark
    Fuhua Branch,Shenzhen,SPD Bank                  RMB               5,000,000.00         3 months                  1.19%       No pledge
    2、 Accounts receivable
    (1) Accounts receivable are analysed by categories as follows:
    31 December 2010                                                          31 December 2009
    Items                     Book amount                   Provision for bad debts                 Book amount                    Provision for bad debts
    Amount          Ratio %            Amount             Ratio %        Amount             Ratio %          Amount          Ratio %
    Receivables that are
    individually significant      20,131,654.12      39.55        20,131,654.12            47.86      20,131,654.12          39.20        20,131,654.12       47.32
    and impaired
    42
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                     Expressed in RMB Yuan
    31 December 2010                                               31 December 2009
    Items                      Book amount                 Provision for bad debts              Book amount                Provision for bad debts
    Amount           Ratio %        Amount         Ratio %            Amount        Ratio %         Amount            Ratio %
    The aging analysis of the receivables that are grouped and impaired
    Group                            13,561,376.87      26.65       4,729,390.24      11.24       13,803,561.11        26.88         4,989,829.56        11.73
    Receivables that are
    individually insignificant       17,202,325.47      33.80      17,202,325.47      40.90       17,423,503.64        33.92        17,423,503.64        40.95
    and impaired
    Total                  50,895,356.46      100.00     42,063,369.83     100.00       51,358,718.87       100.00        42,544,987.32       100.00
    The aging analysis of the receivables that are grouped and impaired is as follows:
    31 December 2010                                   31 December 2009
    Duration                      Book amount            Provision for bad              Book amount               Provision for
    Amount       Ratio %          debts                 Amount          Ratio%        bad debts
    Within 1 year                               2,759,019.87 20.34                          --     1,327,479.02      9.62                        --
    1 to 2 years                                 877,963.40 6.47                    43,898.17      2,298,550.20     16.65            114,927.51
    2 to 3 years                                 922,349.10 6.80                   184,469.82         712,879.65     5.16            142,575.93
    Over 3 years                                9,002,044.50 66.39            4,501,022.25         9,464,652.24     68.57          4,732,326.12
    Total                      13,561,376.87 100.00           4,729,390.24         13,803,561.11 100.00            4,989,829.56
    As at 31 December 2010, Receivables that are individually insignificant and impaired are
    analysed as follows:
    Provision for
    Name of companies                     Bussiness          Book amount                             Ratio %              Reason
    bad debts
    Aging long,not     expected
    Dadong                                  rent                          801,380.16        801,380.16        100.00
    to withdraw
    Aging long,not     expected
    Qinglin                                 payment for goods             695,848.00        695,848.00        100.00
    to withdraw
    Shanghai Automobile industry                                                                                        Aging long,not     expected
    payment for goods             641,341.90        641,341.90        100.00
    supply and sales Co.,Ltd.                                                                                           to withdraw
    Aging long,not     expected
    Zhongqi Trading                         payment for goods             558,000.00        558,000.00        100.00
    to withdraw
    Guangdong Province commodity                                                                                        Aging long,not     expected
    payment for goods             395,400.00        395,400.00        100.00
    group Automobile trade branch                                                                                       to withdraw
    Aging long,not expected
    Yunnan Lanjian                          payment for goods             389,640.00        389,640.00        100.00
    to withdraw
    Guangdong Province commodity                                                                                        Aging long,not expected
    payment for goods             387,000.00        387,000.00        100.00
    trade center                                                                                                        to withdraw
    Aging long,not expected
    Others                                                            13,333,715.41       13,333,715.41       100.00
    to withdraw
    Total                                              17,202,325.47       17,202,325.47       100.00
    43
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                      Expressed in RMB Yuan
    (2) During the reporting period, no receivables were cancelled after verification.
    (3) As at 31 December 2010, no balances included in above accounts receivable are due from
    the shareholders of the Company who hold over 5% shares with voting rights.
    (4) As at 31 December 2010, the company’s five largest accounts receivable balances are
    analysed as follows:
    Relationship with                                              % of total accounts
    Name of companies                                               Amount           Duration
    the company                                                 receivable balance
    Shenzhen Jinlu trade Co.,Ltd.                      Non-related party            9,846,607.00      Over 5 years                   19.35
    Guangdong Zhanjiang Sanxingautomobile Co.,Ltd.     Non-related party            4,060,329.44      Over 5 years                       7.98
    Guangdong Province commodity group                 Non-related party            1,862,000.00      Over 5 years                       3.66
    Jianglin                                           Non-related party            1,191,059.98      Over 5 years                       2.34
    Yangjiang Automobile trade Co.,Ltd.                Non-related party            1,150,000.00      Over 5 years                       2.26
    Total                                               18,109,996.42                                      35.59
    (5) Accounts receivable due from related parties see Note XI.7 for details.
    3、 Advance to suppliers
    (1) The aging of advance to suppliers is analysed below:
    31 December 2010                                   31 December 2009
    Duration                                         % of total                                      % of total
    Amount                                               Amount
    balance                                         balance
    Within 1 year                         10,003,519.14                97.96                  17,632,252.48            98.62
    1 to 2 year                               173,671.75                1.70                     112,130.79              0.63
    2 to 3 years                               35,180.79                0.34                     134,009.19              0.75
    Over     3 years                                  --                      --                          --                 --
    Total                   10,212,371.68                100.00                 17,878,392.46            100.00
    (2) As at 31 December 2010, the company’s several larger advance to suppliers balances are
    44
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                     Expressed in RMB Yuan
    analysed as follows
    % of total     Relationship
    Time of
    Name of companies          Amount          advance to            with the                            Unsettled reason
    prepayment
    suppliers         company
    Relevant goods or services
    FTMS                         7,500,515.67            73.45           supplier      December,2010
    were not provided
    Toyota              Motor
    Relevant goods or services
    (China)Investment Co.,       2,201,607.61            21.56           supplier      December,2010
    were not provided
    Ltd.
    Dongguan       guangtong                                                                            Relevant goods or services
    115,550.00            1.13            supplier        Sep,2010
    trade Co.,Ltd.                                                                                      were not provided
    Shenzhen            fanhai                                                                          Relevant goods or services
    104,377.00            1.02                            Sep,2010
    sanjiang Co.,Ltd.                                                                                   were not provided
    Total             9,922,050.28               97.16
    (3) As at 31 December 2010, no balances included in above advance to suppliers are due
    from the shareholders of the Company who hold over 5% shares with voting rights.
    (4) As at 31 December 2010, no balances of advance to suppliers were with related parties.
    4、 Other receivables
    (1) Accounts receivable are analysed by categories as follows:
    31 December 2010                                                 31 December 2009
    Items                     Book amount                   Provision for bad debts           Book amount             Provision for bad debts
    Amount         Ratio %             Amount         Ratio %       Amount        Ratio %       Amount         Ratio %
    Other receivables that
    are             individually    35,629,566.55        55.29        35,629,566.55        70.27    32,958,725.54      46.86    32,958,725.54       68.58
    significant and impaired
    The aging analysis of the other receivables that are grouped and impaired
    Group                           23,073,514.58        35.80         9,330,349.34        18.40    32,187,670.96      45.77     9,913,567.21       20.63
    Other receivables that
    are             individually
    5,740,656.56           8.91       5,740,656.56        11.33     5,183,536.86       7.37     5,183,536.86       10.79
    insignificant           and
    impaired
    Total                64,443,737.69       100.00        50,700,572.45       100.00    70,329,933.36     100.00    48,055,829.61      100.00
    The aging analysis of the other receivables that are grouped and impaired is as follows:
    45
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                    Expressed in RMB Yuan
    31 December 2010                                      31 December 2009
    Duration             Book amount                                          Book amount
    Provision for bad debts
    Amount      Ratio %                                   Amount     Ratio% Provision for bad debts
    Within 1 year      2,859,411.37 12.39                                   -- 9,423,432.04 29.28                431,955.11
    1 to 2 years       1,119,321.40 4.85                         55,966.07 1,255,793.95 3.90                      62,789.70
    2 to 3 years          910,025.45 3.94                      182,005.09 4,451,333.61 13.83                     890,266.72
    Over 3 years      18,184,756.36 78.82                     9,092,378.18 17,057,111.36 52.99                  8,528,555.68
    Total        23,073,514.58 100.00                    9,330,349.34 32,187,670.96 100.00                 9,913,567.21
    As at 31 December 2010, other receivables that are individually insignificant and impaired
    are analysed as follows:
    Book         Provision for
    Name of companies                   Bussiness                                           Ratio %           Reason
    amount         bad debts
    Aging    long , not
    Huangshengchang                       payment for goods           463,912.46      463,912.46     100.00
    expected to withdraw
    Aging    long , not
    ABC north of renming branch           rent                        247,219.98      247,219.98     100.00
    expected to withdraw
    purchasing for real                                                  Aging    long , not
    Staffs’purchasing for real estate                                217,892.57      217,892.57     100.00
    estate                                                               expected to withdraw
    Aging    long , not
    Liang Derong                          rent                        182,133.26      182,133.26     100.00
    expected to withdraw
    Aging    long , not
    Shensha Trade                                                     134,835.20      134,835.20     100.00
    expected to withdraw
    Chengdu Aircraft Design and                                                                                Aging    long , not
    130,000.00      130,000.00     100.00
    Research Institute                                                                                         expected to withdraw
    Aging    long , not
    Others                                                           4,364,663.09    4,364,663.09    100.00
    expected to withdraw
    Total                                             5,740,656.56    5,740,656.56    100.00
    (2) During the reporting period, no other receivables were cancelled after verification.
    (3) As at 31 December 2010, no balances included in above other receivable are due from the
    shareholders of the Company who hold over 5% shares with voting rights.
    (4) As at 31 December 2010, the company’s five largest other receivable balances are analysed
    46
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                     Expressed in RMB Yuan
    as follows:
    % of total other
    Name of companies                      Business                  Amount           Duration
    receivable balance
    Shenzhen     Tellus   Automobile
    Services Development Co.,Ltd.                    Borrowing            7,126,559.60           2 to 3 years                        11.06
    ShenZhen ZhongHao (Group)
    Co.,Ltd.                                         Borrowing            5,000,000.00          Over 3 years                          7.75
    Zhongqi Huanan Automobile sales
    Co.,Ltd.                                        Accounting            9,832,956.37          Over 3 years                         15.26
    Shenzhen kaifeng Automobile                      Borrowing                                  Over 3 years
    Co., Ltd.                                                             4,413,728.50                                                6.85
    Shenzhen Nanfang industry and                   Accounting                                  Over 3 years
    trade Co.,Ltd.                                                        7,359,060.75                                               11.42
    Total                                               33,732,305.22                                                52.34
    (5) Other receivable due from related parties see Note XI.7 for details.
    5、 Inventories
    (1) Categories of inventory
    31 December 2010                                            31 December 2009
    Items                                    Provision for                                              Provision for
    Amount                             Net book value           Amount                            Net book value
    impairment                                              impairment
    Raw materials            7,803,134.67      5,161,245.85       2,641,888.82           7,718,479.33      5,161,245.85          2,557,233.48
    Consumables                25,189.68                    --       25,189.68             27,569.98                  --           27,569.98
    Stock products          32,357,337.82     13,040,368.05      19,316,969.77          25,400,136.21     13,040,368.05      12,359,768.16
    Product in process       7,093,168.70      4,031,262.45       3,061,906.25           7,460,690.06      4,031,262.45          3,429,427.61
    Total             47,278,830.87     22,232,876.35      25,045,954.52          40,606,875.58     22,232,876.35      18,373,999.23
    (2) Provision for impairment
    31 December            Current year          Current year decreases           31 December
    Items
    2009             provisions          Reversals      Written-off               2010
    Raw materials                       5,161,245.85                      --               --               --       5,161,245.85
    Stock products                     13,040,368.05                      --               --               --      13,040,368.05
    Product in process                  4,031,262.45                      --               --               --       4,031,262.45
    Total                 22,232,876.35                      --               --               --      22,232,876.35
    6、 Available-for-sale financial assets
    47
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010           Expressed in RMB Yuan
    Items                                31 December 2010          31 December 2009
    Available-for-sale equity investments                                   1,483,077.75             1,849,330.80
    include:Shares of China Merchants Bank                                 1,483,077.75             1,849,330.80
    Total                                         1,483,077.75             1,849,330.80
    7、 Held-to-maturity investments
    Item                           31 December 2010                      31 December 20089
    Corporate bond                                              121,300.00                             121,300.00
    Total                                          121,300.00                             121,300.00
    48
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                                                Expressed in RMB Yuan
    8、 Long-term equity investments
    (1) Details of Long-term equity investments
    Provision
    for
    Current year                           Holding     Voting     Provision        impairme      Cash
    Accounting       Initial         31 December                         31 December
    Name of the Companies                                                                   increases /                           proporti   proporti       for               nt      dividend
    method        investment            2009                                2010
    decreases                             on(%)      on(%)     impairment         made in    obtained
    current
    year
    Shenzhen Tellus Jimen Investment Co.,Ltd.       Equity method   28,352,480.00     27,011,026.75        -720,253.23    26,290,773.52        50         50                    --          --          --
    Shenzhen Tellus Xing Investment Co.,Ltd.        Equity method   13,600,000.00      8,029,868.45         378,704.20     8,408,572.65        50         50                    --          --          --
    Shenzhen Xing Long Mechanical Models
    Equity method    2,400,000.00      6,410,470.52          32,561.80     6,443,032.32        30         30                    --          --          --
    Co.,Ltd.
    Shenzhen     Tellus   Automobile    Services
    Equity method     800,000.00                 --                  --                 --     40         40                    --          --          --
    Development Co.,Ltd.
    Shenzhen Zung Fu Tellus Automobiles
    Equity method   10,500,000.00     44,160,713.30    17,094,039.35      61,254,752.65        35         35                    --          --          --
    Services Co.,Ltd.
    Shenzhen Automobile Industrial Import
    Equity method    4,737,500.00      7,846,695.97         346,154.73     8,192,850.70       35.75      35.75                  --          --          --
    and Export Co.,Ltd.
    Shenzhen Dongfeng Automobile Co., Ltd.          Equity method   14,527,044.85     14,801,059.38        1,460,521.27   16,261,580.65        25         25                    --          --          --
    Shenzhen       Xinyongtong         Inspection
    Equity method     496,000.00        553,455.75            -3,070.07      550,385.68        31         31                    --          --   36,912.91
    Tenology Co.,Ltd.
    Shenzhen      Xinyongtong     Pump       and
    Equity method     155,000.00        147,478.47              649.52       148,127.99        31         31                    --          --          --
    Environmental Protection Co.,Ltd
    Shenzhen      Xinyongtong      Automobile
    Equity method     300,000.00        300,758.50           -83,687.66      217,070.84        30         30                    --          --          --
    Service Co.,Ltd*2
    49
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                                                Expressed in RMB Yuan
    Provision
    for
    Current year                           Holding     Voting     Provision        impairme      Cash
    Accounting       Initial         31 December                         31 December
    Name of the Companies                                                                  increases /                           proporti   proporti       for               nt      dividend
    method        investment            2009                                2010
    decreases                             on(%)      on(%)     impairment         made in    obtained
    current
    year
    Shenzhen       Xinyongtong       Dongxiao
    Equity method     175,000.00        175,237.26             50.55         175,287.81        35         35                    --          --           --
    Automobile Parts Sales Co.,Ltd*2
    Shenzhen      Xinyongtong    Xinda     Test
    Equity method     400,000.00        332,842.10         -31,202.13        301,639.97        40         40                    --          --           --
    Eqiupment Co.,Ltd
    Shenzhen Xinyongtong consulting Co.,Ltd        Equity method      48,000.00         47,841.32            400.25          48,241.57        30         30                    --          --           --
    Shenzhen Tellus Xinyongtong Automobiles
    Equity method     504,000.00         75,000.00         -75,000.00                   --     18         24                    --          --           --
    Services Co.,Ltd*1
    China Perfect Machinery Industry Co.,Ltd.      Cost method     10,176,617.20     10,176,617.20                  --   10,176,617.20       5.30       5.30                   --          --   437,747.48
    Hunan Changyang Industrial Co.,Ltd.*2          Cost method      6,900,000.00      1,810,540.70                  --    1,810,540.70       36.55      36.55     1,810,540.70             --           --
    Shenzhen Hanli ceramics Co.,Ltd.*2             Cost method      3,466,000.00      1,956,000.00                  --    1,956,000.00        80         80       1,956,000.00             --           --
    Shenzhen Jiecheng Electronic Co.,Ltd.*2        Cost method      3,150,000.00      3,225,000.00                  --    3,225,000.00        45         45       3,225,000.00             --           --
    Shenzhen Jingwei Industrial Co.,Ltd            Cost method      4,000,000.00      4,000,000.00                  --    4,000,000.00       12.50      12.50     4,000,000.00             --           --
    Shenzhen Mosike Co.,Ltd.                       Cost method       825,000.00        825,000.00                   --      825,000.00       7.00       7.00        825,000.00             --           --
    Wuhan Weite Hotel                              Cost method       640,000.00        640,000.00                   --      640,000.00                              640,000.00             --           --
    Shenzhen Xiandao      chemical     materials
    Cost method      7,256,401.38      4,751,621.62                  --    4,751,621.62        40         40       4,751,621.62             --           --
    Co.,Ltd.*2
    Shenzhen Petroleum & Chemical Co.,Ltd.         Cost method       700,000.00        700,000.00                   --      700,000.00      10 万股    10 万股      700,000.00             --           --
    Nanfang Automobile Repairing center *2         Cost method      6,700,000.00      6,700,000.00                  --    6,700,000.00        100        100      6,700,000.00             --           --
    China   Automobile    industry     shenzhen    Cost method       400,000.00        400,000.00                   --      400,000.00        40         40         400,000.00             --           --
    50
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                                              Expressed in RMB Yuan
    Provision
    for
    Current year                         Holding     Voting     Provision        impairme      Cash
    Accounting       Initial         31 December                         31 December
    Name of the Companies                                                                 increases /                         proporti   proporti       for               nt      dividend
    method        investment            2009                                2010
    decreases                           on(%)      on(%)     impairment         made in    obtained
    current
    year
    trading Co.,Ltd. *2
    Shenzhen     General     Standard   software
    Cost method      500,000.00        500,000.00                   --      500,000.00      25         25         500,000.00             --           --
    Co.,Ltd.*2
    Shenzhen torch spark plug Industrial
    Cost method        17,849.20         17,849.20                  --        17,849.20     49         49          17,849.20             --           --
    Co.,Ltd.*2
    Zhongqi South China automobile sales *2        Cost method     2,250,000.00      2,250,000.00                  --     2,250,000.00     49         49        2,250,000.00            --           --
    Electrombile                                   Cost method      600,000.00        600,000.00                   --      600,000.00     11.10      11.10       600,000.00             --           --
    Shenzhen South automobile investment
    Cost method    11,710,000.00     11,710,000.00                  --    11,710,000.00    14.73      14.73                  --          --           --
    Co.,Ltd.
    Shenzhen Jinhe standard molds Co.,Ltd.         Cost method      453,440.00        453,440.00                   --      453,440.00     15.00      15.00       453,440.00             --           --
    Zhongqi Training center                        Cost method      600,000.00        600,000.00                   --      600,000.00     6.25       6.25        600,000.00             --           --
    Shenzhen Bailiyuan Power Co.,Ltd.*2            Cost method     1,320,000.00      1,320,000.00                  --     1,320,000.00    25.00      25.00      1,320,000.00            --           --
    Mililong(Zeng Wengang)                       Cost method      162,000.00        162,000.00                   --      162,000.00     6.25       6.25        162,000.00             --           --
    Shenzhen Yiming Automobile Trading
    Cost method      200,001.10        200,001.10                   --      200,001.10                            200,001.10             --           --
    Co.,Ltd.
    Shenzhen Bisike Machine Co.,Ltd.               Cost method      302,368.57        302,368.57                   --      302,368.57      7.5       22.7                   --          --           --
    Hongkong Rishen National Co.,Ltd.              Cost method      145,800.00        145,800.00                   --      145,800.00      7.5        7.5        145,800.00      24,000.00           --
    Total                                  139,470,502.30    163,338,686.16    18,399,868.58      181,738,554.74                         31,257,252.62     24,000.00   474,660.39
    51
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                                                    Expressed in RMB Yuan
    *1 The subsidiaries of the company respectively increased capital 420,000.00yuan and 9,000.00yuan to Shenzhen Tellus Xinyongtong Automobiles Services
    Co.,Ltd.during this period,then the company hold 18% share totally and maintains significant effect on it, accounting method transfer cost method into equity
    method..
    *2 These companies have stopped their business for years, and the company does not have signficant influence on them.
    (2) As at 31 December 2010, the long-term equity investments of the Company were not subject to restriction on disposal or remittance of return on investments.
    (3) Details of Joint ventures and Associates
    Holding        Voting
    Name of the Companies                                                    Total assets        Total liabilities    Net assets      Operating revenue    Net profit / (loss)
    proportion(%) proportion(%)
    一、Joint ventures
    Shenzhen Tellus Jimen Investment Co.,Ltd.                        50            50          52,815,667.64            234,120.61     52,581,547.03       1,761,403.60            -1,437,728.02
    Shenzhen Tellus Xing Investment Co.,Ltd.                         50            50          27,546,503.28            111,385.33     27,435,117.95         525,398.00               134,363.16
    二、Associates
    Shenzhen Xing Long Mechanical Models Co.,Ltd.                    30            30          27,708,884.02          6,232,109.62     21,476,774.40                   --             108,539.34
    Shenzhen   Tellus    Automobile   Services   Development
    40            40              1,848,959.07       9,202,799.63     -7,353,840.56       2,631,219.75              -617,425.70
    Co.,Ltd.
    Shenzhen Zung Fu Tellus Automobiles Services Co.,Ltd.            35            35         452,705,349.00       292,691,770.00     160,013,579.00 1,784,783,088.00             48,847,684.00
    Shenzhen Automobile Industrial Import and Export Co.,Ltd.       35.75         35.75        79,244,580.47        55,190,208.09      22,917,064.89      96,864,113.33               803,245.77
    52
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                                                   Expressed in RMB Yuan
    Holding        Voting
    Name of the Companies                                                  Total assets        Total liabilities   Net assets      Operating revenue   Net profit / (loss)
    proportion(%) proportion(%)
    Shenzhen Dongfeng Automobile Co., Ltd.                            25            25         259,504,697.64       194,458,375.04     65,046,322.60     256,979,532.24            6,244,297.48
    Shenzhen Xinyongtong Inspection Tenology Co.,Ltd.                 31            31              2,752,977.69         977,540.00     1,775,437.69       3,263,657.00              109,170.46
    Shenzhen Xinyongtong Pump and Environmental Protection
    31            31               422,655.80            86,243.66      336,412.14         253,611.63                 2,095.21
    Co.,Ltd.
    Shenzhen Xinyongtong Automobile Service Co.,Ltd.                  30            30              2,012,453.50       1,288,884.05       723,569.45       5,215,327.28             -278,958.88
    Shenzhen   Tellus     Xinyongtong   Automobiles   Services
    18            24              2,613,078.81       2,842,766.49      -229,687.68       2,675,702.96           -1,083,160.13
    Co.,Ltd.
    Shenzhen Xinyongtong Dongxiao Automobile Parts Sales
    35            35               867,258.32          366,436.02       500,822.30       1,738,103.46                   144.42
    Co.,Ltd.
    Shenzhen Xinyongtong Xinda Test Eqiupment Co.,Ltd.                40            40              4,732,138.17       3,978,038.24       754,099.93       3,253,552.10              -78,005.32
    Shenzhen Xinyongtong consulting Co.,Ltd.                          30            30               409,449.92          266,564.70       142,885.22         160,920.00                 1,334.15
    53
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                 Expressed in RMB Yuan
    9、 Investment properties
    (1) Investment properties on cost basis
    Current year        Current year
    Items
    31 December 2009         increases            decreases         31 December 2010
    Cost totals                                 181,002,443.71                     --                  --      181,002,443.71
    Buildings                                   181,002,443.71                     --                  --      181,002,443.71
    Accumulated depreciation totals              62,102,745.30        5,239,215.00                     --       67,341,960.30
    Buildings                                    62,102,745.30        5,239,215.00                     --       67,341,960.30
    Net book value totals                       118,899,698.41                     --                  --      113,660,483.41
    Buildings                                   118,899,698.41                     --                  --      113,660,483.41
    Impairment privision totals                             --                     --                  --                    --
    Buildings                                               --                     --                  --                    --
    Book value totals                           118,899,698.41                     --                  --      113,660,483.41
    Buildings                                   118,899,698.41                     --                  --      113,660,483.41
    In 2010, investment properties depreciation was RMB 5,239,215.00.
    (2) Mortgaged investment properties at the end of the reporting period
    Items                                      Cost                            Net value
    Floor 1 to 4,27 to 29,Tellus building                                 23,961,792.74                         17,242,436.05
    421factory building,Bagualin                                          33,917,679.95                         24,908,942.87
    Dongfeng building                                                      9,640,803.22                          7,106,264.74
    Jijia workshop                                                         9,458,559.68                          4,018,853.32
    Maohan workshop                                                        4,455,052.22                          1,248,701.11
    5、6、7building,Buxin                                                  7,379,753.13                          3,792,672.98
    Floor 6 to 7,10Building,Buxin                                          3,231,493.46                          1,710,537.70
    The 3rd factory building,Buxin                                        67,503,936.40                         44,467,738.42
    North underground and floor 2,the 21st building                        1,815,996.00                             594,197.86
    The 5th to 7th factory building,Buxin                                  6,377,742.29                          2,544,809.38
    Total                                       167,742,809.09                       107,635,154.43
    10、         Fixed assets and accumulative depreciation
    54
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                  Expressed in RMB Yuan
    (1) Fixed assets
    Current year        Current year
    Items              31 December 2009                                           31 December 2010
    increases           decreases
    Original cost totals                    321,846,528.00    2,208,433.14       3,148,930.55          320,906,030.59
    Houses and buildings                    273,760,865.17      105,865.11                    --       273,866,730.28
    Machinery equipments                     19,672,732.91                  --     257,820.91           19,414,912.00
    Transportation vehicles                   8,580,461.70    1,168,347.62       2,045,195.92            7,703,613.40
    Electronic equipments                     8,094,048.15      767,216.41         229,336.72            8,631,927.84
    Other equipments                          8,730,267.21      167,004.00         616,577.00            8,280,694.21
    Building fitting fee                      3,008,152.86                  --                --         3,008,152.86
    Accumulated epreciation totals          135,544,388.99   10,410,538.28       2,677,231.55          143,277,695.72
    Houses and buildings                     98,933,385.10    8,057,353.70                    --       106,990,738.80
    Machinery equipments                     15,413,510.18      486,461.57         237,958.87           15,662,012.88
    Transportation vehicles                   6,457,762.58      659,247.87       1,658,954.46            5,458,055.99
    Electronic equipments                     5,976,316.34      557,849.58         206,248.05            6,373,784.47
    Other equipments                          7,152,055.12      358,747.38         574,070.17            6,890,865.73
    Building fitting fee                      1,611,359.67      290,878.18                    --         1,902,237.85
    Net book value totals                   186,302,139.01                  --                --       177,628,334.87
    Houses and buildings                    174,827,480.07                  --                --       166,875,991.48
    Machinery equipments                      4,259,222.73                  --                --         3,752,899.12
    Transportation vehicles                   2,122,699.12                  --                --         2,245,557.41
    Electronic equipments                     2,117,731.81                  --                --         2,258,143.37
    Other equipments                          1,578,212.09                  --                --         1,389,828.48
    Building fitting fee                      1,396,793.19                  --                --         1,105,915.01
    Impairment privision totals               4,227,562.01                  --                --         4,227,562.01
    Houses and buildings                      3,555,385.70                  --                --         3,555,385.70
    Machinery equipments                       650,147.31                   --                --          650,147.31
    Transportation vehicles                             --                  --                --                   --
    Electronic equipments                               --                  --                --                   --
    Other equipments                             22,029.00                  --                --            22,029.00
    Building fitting fee                                --                  --                --                   --
    Book value totals                       182,074,577.00                  --                --       173,400,772.86
    Houses and buildings                    171,272,094.37                  --                --       163,320,605.78
    Machinery equipments                      3,609,075.42                  --                --         3,102,751.81
    55
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                  Expressed in RMB Yuan
    Current year        Current year
    Items                  31 December 2009                                            31 December 2010
    increases         decreases
    Transportation vehicles                          2,122,699.12                   --                --            2,245,557.41
    Electronic equipments                            2,117,731.81                   --                --            2,258,143.37
    Other equipments                                 1,556,183.09                   --                --            1,367,799.48
    Building fitting fee                             1,396,793.19                   --                --            1,105,915.01
    In 2010, fixed assets depreciation was RMB 10,410,538.28.
    (2) Mortgaged fixed assets at the end of the reporting period
    Item                            Original cost                                   Net value
    Huari Garden                                                    25,904,442.95                               17,925,965.89
    Total                                       25,904,442.95                               17,925,965.89
    (3) Fixed assets without ownership certificates to be obtained
    Items                             Original cost                            Net book value
    Tellus building                                                     29,918,843.50                           16,783,672.60
    Yongtong building                                                 103,389,580.16                            59,683,564.27
    Shuibei Zhongtian building                                           2,722,490.41                               1,279,696.69
    Automobile building                                                 33,707,119.96                           24,897,784.09
    Floor 1 of business housing,Banan                                    1,867,500.00                               1,190,501.25
    Five business housings,Banan                                           590,040.00                                376,141.92
    Zhonghe building                                                     8,312,377.03                               6,949,254.93
    5B,4 Building,Weipeng garden                                           357,905.78                                318,213.62
    Floor 3 to 5, the 3rd factory building                               2,860,500.00                               1,265,347.71
    West of the 16th apartment house                                     2,210,725.54                               1,291,828.01
    The first factory building                                           2,902,634.00                               2,185,338.10
    The second factory building                                          3,491,960.00                               2,631,340.35
    th
    Half of the 16 building,Tanhuayuan                                   2,210,725.54                               1,308,407.83
    Total                                      194,542,401.92                           120,161,091.37
    The houses and buildings are actively settling the historical problem with relevant department
    and it is just not possible to predict exact time of obtaining relevant legal certificates.
    56
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                   Expressed in RMB Yuan
    (4) Ended at Dec.31, 2010, the Company had no significant situation of idle fixed assets.
    (5) Ended at Dec.31, 2010, the Company had no significant fixed assets for sale.
    (6) Ended at Dec.31, 2010, the Company had no significant fixed assets for financial lease.
    11、       Intangible assets
    Current
    31 December         Current year                            31 December
    Items                                                                year
    2009               increases                                2010
    decreases
    Original cost totals                      275,000.00              50,000.00                 --        325,000.00
    Trademarks                                 75,000.00                      --                --         75,000.00
    Software                                  200,000.00              50,000.00                 --        250,000.00
    Accumulated amortization totals            55,078.25              48,333.29                 --        103,411.54
    Trademarks                                 11,744.96               7,500.00                 --         19,244.96
    Software                                   43,333.29              40,833.29                 --         84,166.58
    Net book value totals                     219,921.75                      --                --        221,588.46
    Trademarks                                 63,255.04                      --                --         55,755.04
    Software                                  156,666.71                      --                --        165,833.42
    Impairment privisions totals                         --                   --                --                   --
    Trademarks                                           --                   --                --                   --
    Software                                             --                   --                --                   --
    Book value totals                         219,921.75                      --                --        221,588.46
    Trademarks                                 63,255.04                      --                --         55,755.04
    Software                                  156,666.71                      --                --        165,833.42
    In 2010, the amortization of intangible assets amounted to RMB 48,333.29.
    Ended at Dec.31, 2010, all intangible assets of the company have certain useful life.
    12、       Long-term deferred expenses
    31 December       Current    Current year          Other     31 December
    Items
    2009             year      amortization     decreases          2010
    57
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                     Expressed in RMB Yuan
    increases
    Repairing fee                                   182,513.54            --      43,105.92             --       139,407.62
    Web construction fee                              4,509.28            --       4,509.28             --               --
    Hotel equipments                                557,879.02            -- 185,959.68                 --       371,919.34
    Subsequent restructure fee                      590,536.64            -- 166,444.60                 --       424,092.04
    Insurance fee for pledge and commitment
    fee for loan of SPD Bank                        273,028.30 230,282.83 196,221.57                    --       307,089.56
    Others                                           79,802.13            --      63,774.48             --        16,027.65
    Total                   1,688,268.91 230,282.83 660,015.53                    --     1,258,536.21
    13、           Deffered income tax assets and deferred income tax liabilities
    (1) Recognized deffered income tax assets and deferred income tax liabilities
    31                  31
    Items
    December2010            December2009
    Deffered income tax assets
    Provision for impairment of assets                                                 26,491,542.53          24,983,825.42
    Amortization of stock investment difference                                         3,562,593.44           3,250,741.67
    Unpaid employee benefits                                                              431,253.12                     --
    Deductible losses                                                                     212,888.75             341,099.94
    Unrealized profit to associates                                                     1,274,156.72           1,236,515.27
    Sub-total                                                                          31,972,434.56          29,812,182.30
    Deferred income tax liabilities
    Temporary difference of depreciation and amortization                               2,057,152.44           2,022,414.94
    Change in fair value of available for sale equity financial assets recorded           -52,125.74             393,524.95
    in capital surplus
    Sub-total                                                                           2,005,026.70           2,415,939.89
    (2) Unrecognized deffered income tax assets
    31 December                                 31 December
    Items
    2010                                        2009
    Deductible temporary differences                               9,624,049.45                                8,822,045.33
    Deductible losses                                             12,373,828.15                               14,855,827.39
    58
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                    Expressed in RMB Yuan
    Total                                               21,997,877.60                          23,677,872.72
    These items have not recognized deffered income tax assets because of the uncertainly of
    gaining taxable income in the future.
    (3) The above deductible losses that no deferred tax assets have been provided for will expire
    in the following years:
    31 December                  31 December
    Year                                                                                     Remark
    2010                         2009
    2011                                                 6,105,818.70              6,852,329.42
    2012                                                13,412,642.67             14,762,964.52
    2013                                                13,494,659.13             14,279,897.10
    2014                                                15,662,426.27             15,662,426.27
    2015                                                18,850,941.36                         --
    Total                                67,526,488.13             51,557,617.31
    (4) Details for taxable temporary difference and deductible temporary differences as follows:
    Items                                                         Amount
    Deductible temporary differences
    Bad debt provisions                                                                                        62,891,139.63
    Provision for declines in the value of inventories                                                         13,181,955.05
    Provision for impairment of long-term equity investments                                                   30,156,978.45
    Provision for impairment of fixed assets                                                                    4,151,354.08
    Amortization of stock investment difference                                                                14,844,139.31
    Unpaid employee benefits                                                                                    1,796,888.00
    Deductible losses                                                                                            887,036.44
    Unrealized profit to associates                                                                             5,308,986.33
    Total                                                                   133,218,477.29
    Taxable temporary difference
    Temporary difference of depreciation and amortization                                                       9,809,858.26
    Change in fair value of available for sale equity financial assets                                           341,399.21
    recorded in capital surplus
    Total                                                                    10,151,257.47
    14、         Provision for impairment of assets
    31 December          Current year        Current year reduction         31 December
    Items
    2009               addition         Reverse        Utilized            2010
    Bad debt provisions                 90,600,816.93         2,163,125.35               --              --     92,763,942.28
    59
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010              Expressed in RMB Yuan
    Provision for declines in the
    value of inventories               22,232,876.35              --             --         --    22,232,876.35
    Provision for impairment of
    long-term equity investments       31,233,252.62      24,000.00              --         --    31,257,252.62
    Provision for impairment of
    fixed assets                        4,227,562.01              --             --         --     4,227,562.01
    Total              148,294,507.91    2,187,125.35             --         --   150,481,633.26
    15、             Short-term loans
    31 December                       31 December
    Items
    2010                              2009
    Mortgaged loan                                                11,283,960.42                   17,563,411.86
    Guaranteed loan                                                           --                             --
    loan on credit                                                31,079,745.00                   34,855,511.00
    Total                                  42,363,705.42                   52,418,922.86
    During the reporting period, there were no overdued short-term loans.
    16、             Accounts payable
    31 December                       31 December
    Item
    2010                              2009
    Accounts payable                                             30,767,809.82                    32,734,686.58
    (1) As at 31 December 2010, the company did not have any accounts payable balances which
    were due to parties having 5% or above shareholdings.
    (2) Accounts payable due to related parties see Note XI.7 for details.
    17、             Advances from customers
    31 December                     31 December
    Item
    2010                            2009
    Advances from customers                                            1,838,938.58                1,561,591.32
    (1) As at 31 December 2010, the company did not have any advance from customers balances
    which were due to parties having 5% or above shareholdings.
    (2) As at 31 December 2010, no balances of advance from customers were from related
    parties.
    60
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                       Expressed in RMB Yuan
    18、       Employee benefits payable
    Estimated
    31 December       Current year            Current year     31 December
    Items                                                                                              time to
    2009            increases              decreases           2010
    issue
    the    first
    Wages, bonuses, allowances
    quarter of
    and subsidies
    7,153,661.23      40,957,481.58          39,801,973.31      8,309,169.50    2011
    Staff welfare                       33,885.00       1,673,722.25           1,615,917.25        91,690.00
    Social security contributions    1,643,412.23       6,015,984.79           6,297,829.86      1,361,567.16
    Housing funds                              --       4,429,311.75              69,541.75      4,359,770.00
    Labor union and employee
    education funds                    264,301.89       1,460,718.72           1,330,038.66       394,981.95
    Dismiss welfare                            --        385,589.54              385,589.54                --
    Others                              32,850.00       1,294,124.00           1,059,734.00       267,240.00
    Total                9,128,110.35      56,216,932.63          50,560,624.37     14,784,418.61
    As at 31 December 2010, employee benefits payable balance did not include default items.
    19、       Taxes payable
    Items                         31 December 2010                            31 December 2009
    VAT                                                      -530,012.71                                        1,126,167.45
    Business tax                                              640,226.44                                         733,837.92
    City construction tax                                        84,091.75                                        23,355.07
    Enterprise income tax                                     735,617.03                                        1,373,740.07
    Property tax                                              995,859.11                                         983,618.96
    Land VAT                                                5,362,442.05                                        5,362,442.05
    Personal income tax                                          73,467.65                                        -65,325.56
    Education surtax                                             65,569.26                                        76,638.80
    Embankment fee                                                   829.97                                        1,682.71
    Other                                                        36,784.14                                        40,073.49
    Total                                   7,464,874.69                                        9,656,230.96
    20、       Other payables
    31 December                             31 December
    Item
    2010                               2009
    Other payables                                                     107,704,456.87                      113,143,361.92
    61
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                 Expressed in RMB Yuan
    (1) As at 31 December 2010, the Company have any other payables which were due to parties
    having 5% or above shareholdings see Note XI.7 for details.
    (2) Other payables due to related parties see Note XI.7 for details.
    21、 Current portion of non-current liabilities
    31 December                             31 December
    Item
    2010                                     2009
    Current portion of long-term borrowings                           8,640,000.00                              8,160,000.00
    Total                                          8,640,000.00                              8,160,000.00
    Current portion of long-term borrowings
    31 December                                 31 December
    Item
    2010                                      2009
    Mortgaged loan                                                    8,640,000.00                              8,160,000.00
    Total                                           8,640,000.00                              8,160,000.00
    a. Details of current portion of long-term borrowings as follows:
    31 December                31 December
    Borrowing    Borrowing                  Interest              2010                       2009
    Loan units                                        Currency
    beginning     ending                  rate(%) Original         RMB         Original       RMB
    currency     equivalent    currency    equivalent
    Fuhua branch,SPD Bank 10 Aug.2009          10 Nov.2011     RMB          5.40           -- 4,960,000.00            -- 4,960,000.00
    Fuhua branch,SPD Bank 31 July 2009         20 Oct.2011     RMB          5.40           -- 2,800,000.00            -- 2,800,000.00
    Fuhua branch,SPD Bank         5 Feb.2010   5 Nov.2011      RMB          5.67           --     480,000.00          --                 --
    Fuhua branch,SPD Bank 31 May 2009          30 Nov.2011     RMB          5.40           --     400,000.00          --     400,000.00
    Total                                                                        -- 8,640,000.00            -- 8,160,000.00
    22、 Long-term borrowings
    Item                          31 December 2010                            31 December 2009
    Mortgaged loan                                                   92,700,000.00                             95,700,000.00
    Total                                          92,700,000.00                             95,700,000.00
    Details of           Long-term borrowings as follows:
    62
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                     Expressed in RMB Yuan
    31 December                31 December
    Borrowing    Borrowing                   Interest               2010                       2009
    Loan units                                        Currency
    beginning        ending                 rate(%) Original          RMB        Original        RMB
    currency    equivalent    currency      equivalent
    Fuhua branch,SPD Bank 10 Aug.2009        10 Aug.2012           RMB     5.40             -- 50,840,000.00           -- 55,800,000.00
    Fuhua branch,SPD Bank 31July 2009        31 July 2012          RMB     5.40             -- 28,700,000.00           -- 31,500,000.00
    Fuhua branch,SPD Bank 31 May 2009 31 May 2012                  RMB     5.40             -- 8,000,000.00            -- 8,400,000.00
    Fuhua branch,SPD Bank 5 Feb.2010         5 Feb.2013            RMB     5.67             -- 5,160,000.00            --                  --
    Total                                                                          -- 92,700,000.00           -- 95,700,000.00
    23、 Long-term Payables
    Companies                  31 December 2010             31 December 2009               Condition of loan
    Employee housing deposit                          2,588,848.40                  2,588,848.40           Interest-free
    Shenzhen working committee                        1,320,000.00                  1,320,000.00           Interest-free
    Technical innovation                                   11,311.96                    11,311.96          Interest-free
    Total                             3,920,160.36                  3,920,160.36
    24、 Accrued liabilities
    Current year               Current year
    Item               31 December 2009                                                           31 December 2010
    additions                 decreases
    External guarantee               87,568,728.57                         --                         --         87,568,728.57
    Total                    87,568,728.57                         --                         --         87,568,728.57
    External guarantee see Note XII 1(3) for details.
    63
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                                               Expressed in RMB Yuan
    25、 Share Capital
    Current year additions / decreases
    Shares converted
    Items                      31 December 2009    Issuance of        Presented                                                              31 December 2010
    from accumulation         Others        Sub-total
    new shares          shares
    fund
    1、State shares                                                --                 --               --                          --            --          --                  --
    2、PRC legal person shares                          14,587,056.00                 --               --                          --            --          --       14,587,056.00
    3、Domestic shares of legal person                             --                 --               --                          --            --          --                  --
    4、Domestic natural person shares                              --                 --               --                          --            --          --                  --
    Shares with restriction on disposal total           14,587,056.00                 --               --                          --            --          --       14,587,056.00
    1、Common shares in RMB                            179,294,544.00                 --               --                          --            --          --      179,294,544.00
    2、Domestically listed foreign shares               26,400,000.00                 --               --                          --            --          --       26,400,000.00
    Shares without restriction on disposal total      205,694,544.00                 --               --                          --            --          --      205,694,544.00
    Total                         220,281,600.00                 --               --                          --            --          --      220,281,600.00
    64
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                  Expressed in RMB Yuan
    26、 Capital surplus
    31 December          Current year       Current year       31 December
    Items
    2009             increases          decreases            2010
    Share premium                                           3,024,773.35                     --               --      3,024,773.35
    Other capital surplus                                   4,814,914.96        1,228,142.00        432,000.46        5,611,056.50
    include:Change in fair value of available-for-sale
    1,395,224.80                     --     432,000.46         963,224.34
    financial assets
    Total                        7,839,688.31        1,228,142.00        432,000.46        8,635,829.85
    Current year additions of other capital surplus was that debt interests of the
    subsidiary,Xingyongtong was exempted by Shenzhen Investment Holding Co.,Ltd.
    27、 Surplus reserve
    31 December         Current year           Current year               31 December
    Item
    2009               increases            decreases                     2010
    Statutory surplus reserves                  2,952,586.32                       --                    --            2,952,586.32
    28、 Retained earnings
    The year of         The year of
    Items
    2010               2009
    Retained earnings at the end of last year before adjustments                            -60,179,859.51 -66,687,367.86
    Adjustment to retained earnings at the beginning of year (increase +, decrease -)                            --      201,922.38
    Retained earnings at the beginning of this year after adjustment                              -60,179,859.51 -66,485,445.48
    Add: Current year net profit attributable to the quity owners of the parent company            3,584,445.78        6,305,956.65
    Less: Appropriation of statutory surplus reserves                                                            --                  --
    Appropriation of discretionary surplus reserves                                                              --                  --
    Common share dividends payable                                                                               --                  --
    Common share dividends change to share Capital                                                               --                  --
    Appropriation of staff welfare                                                                               --           370.68
    Closing retained earnings                                                                     -56,595,413.73 -60,179,859.51
    65
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010              Expressed in RMB Yuan
    29、 Operating Revenues and Operating Costs
    (1) Operating revenues and Operating costs
    Items                                      2010                           2009
    Revenue from main operations                                             381,494,586.48                 427,982,537.42
    Revenue from other operations                                              4,853,792.79                    4,693,812.78
    Total                                        386,348,379.27                 432,676,350.20
    Cost of main operations                                                  318,932,919.81                 360,631,572.98
    Cost of other operations                                                   1,904,723.52                    2,252,369.53
    Total                                        320,837,643.33                 362,883,942.51
    (2) Revenue and cost from main operations
    Analysis by business is as follows:
    2010                                  2009
    Items                    Revenue from      Cost from main     Revenue from          Cost from main
    main operations       operations     main operations         operations
    Automobile sales                             237,081,553.05    227,491,635.40      282,352,760.16       268,001,110.00
    Automobile imspection, repairing and parts
    57,505,214.01       43,683,322.84     71,640,092.54        54,141,298.45
    sales
    Leasing and service                           86,907,819.42       47,757,961.57     73,989,684.72        38,489,164.53
    Total                     381,494,586.48    318,932,919.81      427,982,537.42       360,631,572.98
    (3) Particulars of revenue from the top five customers of the company:
    % of total revenue
    Clients                          Operating revenues
    of the Company
    Customer    A                                                    14,302,647.00                  3.70
    Customer    B                                                    11,178,650.57                  2.89
    Customer    C                                                     5,036,300.00                  1.30
    Customer    D                                                     3,505,446.08                  0.91
    Customer    E                                                     2,377,285.47                  0.62
    Total                                          36,400,329.12                  9.42
    66
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010   Expressed in RMB Yuan
    30、 Operating tax and surcharges
    Items                            2010                           2009
    Business tax                                             3,705,613.90                   3,515,308.45
    City maintenance and construction tax                     112,394.41                      113,527.98
    Educational surcharge                                     136,435.97                      225,570.19
    Land VAT                                                           --                         225.52
    Consumption tax                                            46,522.15                               --
    Total                                    4,000,966.43                   3,854,632.14
    31、 Operating expenses
    Items                          2010                           2009
    Staff cost                                               10,585,561.16                   9,139,440.03
    Insurance                                                   151,563.38                    227,436.40
    Advertising expense                                       1,258,355.41                    989,887.63
    Utilities                                                   410,919.52                    424,697.06
    Depreciation and amortisation                               979,889.36                   1,568,268.74
    Tax                                                       1,130,412.76                   1,137,832.17
    Leasing management fee                                      257,134.00                    257,473.00
    Others                                                    5,357,408.67                   6,225,580.71
    Total                                 20,131,244.26                  19,970,615.74
    32、 Administration expenses
    Items                          2010                           2009
    Staff cost                                               23,878,347.11                  27,401,028.51
    Director fee                                                321,132.50                    174,431.00
    Insurance                                                   172,019.81                    212,420.06
    Utilities                                                   473,718.09                    697,201.00
    Consultation fee                                            889,740.00                   1,101,144.00
    Tax                                                       3,086,464.96                   3,471,415.08
    Depreciation and amortisation                             2,034,039.70                   2,154,133.14
    Advertising expense                                         826,544.80                    376,680.00
    Leasing management fee                                      575,730.72                    560,068.22
    Others                                                   13,958,009.95                  14,369,462.59
    Total                                 46,215,747.64                  50,517,983.60
    67
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010            Expressed in RMB Yuan
    33、 Financial expenses
    Items                                  2010                                  2009
    Interest expenses                                                    9,449,875.69                              9,240,667.10
    Less: interests income                                             1,361,353.29                               685,749.69
    Exchange loss                                                           7,660.42                                  4,087.94
    Less: Exchange gain                                                 181,712.71                                  9,886.39
    Others                                                                492,634.84                               1,055,572.23
    Total                                         8,407,104.95                              9,604,691.19
    34、 Impairment losses
    Items                              2010                                        2009
    Impairment losses for bad debts                               2,187,125.35                                     2,722,199.15
    Others                                                                     --                                                --
    Total                                      2,187,125.35                                     2,722,199.15
    35、 Investment income
    (1) Details of Investment income
    Items                                          2010                          2009
    Investment income from investments under cost method accounting                    462,060.23                   467,696.04
    Investment income from investments under equity method accounting                17,760,821.49            10,203,767.61
    Loss from disposal of long-term investment                                                   --               4,203,919.44
    Total                                          18,222,881.72            14,875,383.09
    (2) Investment income from long-term equity investments under equity method accounting
    Companies                                   2010              2009                 Reason of fluctuation
    Shenzhen Zung Fu Tellus Automobiles Services Co.,Ltd.                17,094,039.35      13,748,649.60           Profits increase
    Shenzhen Tellus Jimen Investment Co.,Ltd.                              -720,253.23        -962,070.60           Losses decrease
    Shenzhen Dongfeng Automobile Co., Ltd.                                1,528,243.52       -1,440,390.30          Investee start to profit
    Shenzhen Tellus Automobile Services Development Co.,Ltd.               -246,960.00                800.00        *1
    Shenzhen Hua Tong Automobile Co., Ltd.                                             --    -1,728,000.00          Transfer last period
    Shenzhen Xing Long Mechanical Models Co.,Ltd.                            32,561.80          57,812.13           Profits decrease
    Shenzhen Tellus Xing Investment Co.,Ltd.                                378,704.20          50,392.40           *2
    Shenzhen Automobile Industrial Import and Export Co.,Ltd.               278,432.48         282,935.30
    Shenzhen Tellus Xinyongtong Automobile Development Co., Ltd            -504,000.00                       --     *3
    Others                                                                   -79,946.63        193,639.08
    Total                                17,760,821.49      10,203,767.61
    68
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010              Expressed in RMB Yuan
    *1 The company appeared excess losses at previous year,then Long-term equity investments to
    it were reduced by zero,since existing creditor's rights of net investment,during the reporting period
    the investment losses 246,960.00yuan were recognized as net losses of the company.
    *2The amount of the year include the recognized profits 311,537.62yuan on the basis of
    properties depreciation,the fair value of which exceeded the book value at previous year.
    *3The accounting method transferred cost method into equity method in the reporting
    period,because of the excess losses of the company,investment losses 504,000.00yuan were
    recognized until the book value of Long-term equity investments was reduced to zero.
    36、 Non-operating income
    Amount recognized in
    Items                              2010                2009            non-recurring profit or loss of
    current period
    Gain from disposal of non-current assets                   364,810.40            872,126.35                            364,810.40
    Includ: gain from disposal of fixed assets                364,810.40            872,126.35                            364,810.40
    gain from disposal of intangible assets                  --                    --                                     --
    Gain from debt rescheduling                                          --         9,667,820.26                                      --
    Government grant                                             5,813.87               5,353.44                              5,813.87
    Others                                                     295,675.97            372,225.77                            295,675.97
    Total                             666,300.24          10,917,525.82                           666,300.24
    37、 Non-operating expenditures
    Amount recognized in
    Items                               2010                 2009              non-recurring profit or loss of
    current period
    Loss from disposal of non-current assets                      131,672.71               71,677.49                          131,672.71
    Including: loss from disposal of fixed assets                131,672.71               71,677.49                          131,672.71
    loss from disposal of intangible asset                          --                    --                                     --
    Penalty                                                            3,862.29          111,480.74                             3,862.29
    Donation                                                         10,000.00              1,000.00                           10,000.00
    Loss from debt rescheduling                                               --           30,000.00                                       --
    Others                                                           35,852.12             57,918.79                           35,852.12
    Total                               181,387.12            272,077.02                            181,387.12
    69
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                Expressed in RMB Yuan
    38、 Income tax
    Items                                        2010                                  2009
    Current income tax                                                       1,873,074.58                          1,948,379.55
    Deferred income tax                                                      -2,519,039.71                         -1,428,772.17
    Total                                                -645,965.13                            519,607.38
    39、 Earnings per share
    The calculation of earnings per share is as follows:
    Items                                                 2010                 2009
    Consolidated profit attributable to shareholders of the Company                           3,584,445.78         6,305,956.65
    Weighted average number of ordinary shares in issue                                     220,281,600.00       220,281,600.00
    Earnings per share - basic                                                                        0.0163               0.0286
    Earnings per share - diluted                                                                      0.0163               0.0286
    40、 Other Comprehensive earnings
    Items                                                  2010                 2009
    Gain/(loss) arising from available-for-sale financial assets                                -484,126.20          890,976.88
    Less: Income tax relating to available-for-sale financial assets                              52,125.74          213,970.38
    Total                                                  -432,000.46          677,006.50
    41、 Cash flow Statement
    (1) Cash received relating to other operatin activities
    Items                                        2010                                   2009
    Current accounts from associates                                          409,113.00                           50,735,645.17
    Internal short-term borrowings                                            224,678.81                              330,615.00
    Amount pledged and guaranteed                                           2,363,751.11                            2,212,468.96
    Interest income                                                           450,476.08                              411,384.18
    Penalty and compensation                                                          --                                5,353.44
    Rental income                                                           1,705,934.59                            6,445,211.07
    Other income                                                            2,616,576.67                                        --
    Accounting                                                             13,473,979.35                                        --
    Total                                               21,244,509.61                           60,140,677.82
    70
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010             Expressed in RMB Yuan
    (2) Cash paid relating to other operating activities
    Items                                     2010                      2009
    Current accounts from associates                                         15,330,669.47                41,080,385.35
    Internal short-term borrowings                                              180,893.98                  215,784.90
    Operating expense                                                        11,022,642.37                27,859,244.55
    Administrating expense                                                   17,322,606.06                21,175,161.91
    Pledge,deposit                                                              152,951.60                 1,310,413.83
    Others                                                                      102,766.00                           --
    Total                                       44,112,529.48                91,640,990.54
    (3) Cash received relating to other financing activities
    Item                                   2010                                  2009
    Borrowings from associates                                                 --                        85,500,000.00
    Total                                                     --                        85,500,000.00
    (4) Cash paid relating to other financing activities
    Items                                  2010                                  2009
    Pay borrowings to associates                                     1,700,000.00                        85,500,000.00
    Pay cash to financing activies                                             --                           642,000.00
    Total                                           1,700,000.00                        86,142,000.00
    42、 Supplementary information of the Cash Flow Statement.
    (1) Supplementary information of the Cash Flow Statement.
    Supplementary Information                              2010                  2009
    1、Net profit adjusted to cash flow of operation:
    Net profit                                                                       3,922,307.28         8,123,510.38
    Plus: Provisions for assets impairment                                           2,187,125.35         2,722,199.15
    Depreciation of fixed assets                                              15,649,753.28        16,179,151.21
    Amortisation of intangible assets                                             48,333.29           45,901.59
    Amortisation of long-term prepaid expenses                                  660,015.53           749,215.82
    Gains on disposal of fixed assets intangible assets and others              -233,137.69          -800,448.86
    Loss of disposing fixed assets                                                                            --
    Loss from change of fair value                                                                            --
    Financial expenses                                                         9,321,192.88        10,290,440.88
    71
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010       Expressed in RMB Yuan
    Supplementary Information                               2010               2009
    Investment income                                                      -18,222,881.72    -14,875,383.09
    Decrease of differed income tax asset                                   -2,147,198.37     -1,587,377.48
    Increase of differed income tax liability                                 -773,439.59      -167,474.96
    Decrease of inventory                                                   -6,671,955.29    32,888,966.19
    Decrease of operating accounts receivable                              -14,436,617.38     7,301,942.97
    Increase of operating accounts payable                                  17,840,495.80    -34,395,479.95
    others                                                                                               --
    Net value                                                                7,143,993.37    26,475,163.85
    2、Material investment and financing not involved in cash flow                            --               --
    3、Net change of cash and cash equivalents
    Cash at end of year                                                     64,122,979.84    72,376,177.95
    Less: cash at beginning of year                                         72,376,177.95    39,674,670.71
    Plus: Balance of cash equivalents at the period end                                 --               --
    Less: Initial balance of cash equivalents                                           --               --
    Net increase of cash and cash equivalents                               -8,253,198.11    32,701,507.24
    (2) Cash and cash equivalents
    Items                                     2010                     2009
    Cash                                                                    64,122,979.84           72,376,177.95
    Including:Cash on hand                                                   230,415.60               191,253.52
    Cash at bank without restriction                                 63,868,067.68           72,184,924.43
    Other cash balance without restriction                                 24,496.56                     --
    Cash equivalents                                                                      --                   --
    Cash and cash equivalents at end of year                                64,122,979.84           72,376,177.95
    Note 6. Related parties and related party transactions
    1. Standards of related parties
    The related parties refer to those that one party can control, jointly control or have significant
    influence on the other party; and those that two parties or more are under control, jointly control, or
    significant influence by the other party.
    2. General information of the parent company
    72
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010               Expressed in RMB Yuan
    Share
    Name of the parent Registered                                   Registered                    Voting
    Entity type Bisiness scope                       holding                  Institute Code
    company                place                                      capital                    proportion
    proportion%
    Shenzhen      SDG                            Real estate &
    Limited
    Information         Shenzhen                  Mainland         1,582,820,000      66.22       66.22        192194195
    liability
    Co.,Ltd                                        business
    3. Subsidiaries
    The general background and other related information of the subsidiaries is set out in Note IV.
    73
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                                                          Expressed in RMB Yuan
    4. Joint venture and Associates
    Entity      Registered      Legal                   Nature of                 Registration capital   Holding      Voting
    Name of companies                                                                                                                                                  Institute Code
    type        address     epresentative              business                    (10,000yuan)       proportion% proportion%
    一、Joint venture
    Limited                                   Investment,      leasing        of
    Shenzhen Tellus Jimen Investment Co .Ltd.                               Shenzhen     Zhang Ruili                                                   5670.496     50.00         50.00
    liability                                 property, administration
    Limited
    Shenzhen Tellus Xing Investment Co.,Ltd.                                Shenzhen     Cheng Peng      Invest in industrial projects                     2720     50.00         50.00
    liability
    二、Associates
    Limited                                    Manufacture and sell steel
    Shenzhen Xing Long Mechanical Models Co.,Ltd.                           Shenzhen     Zhang Ruili                                                    2763.33     30.00         30.00    192172420
    liability                                  moulds for plastic product
    Limited                                    Provide automobile repairs and
    Shenzhen Tellus Automobile Services Development Co.,Ltd.                Shenzhen      Li Jinlong                                                        200     40.00         40.00    767583926
    liability                                  inspection services
    Limited                                    Benz Automobile repairs and
    Shenzhen Zung Fu Tellus Automobiles Services Co.,Ltd.                   Shenzhen     Wu Jianfan                                                        3000     35.00         35.00    774131792
    liability                                  sales
    Limited
    Shenzhen Automobile Industrial Import and Export Co.,Ltd.               Shenzhen Huang Qiangwei                                                        1325     35.75         35.75    192190506
    liability                                  Automobile import and export
    Limited
    Shenzhen Dongfeng Automobile Co.,Ltd.                                   Shenzhen     Li Jiangang                                                       4500     25.00         25.00
    liability                                  Automobile selling
    Limited                                    Automobile inspection &
    Shenzhen Xinyongtong Inspection Tenology Co.,Ltd.                       Shenzhen      Li Jinlong                                                        160     31.00         31.00
    liability                                  repair
    Shenzhen Xinyongtong Pump and Environmental Protection Limited                                       Pump repair & environmental
    Shenzhen      Li Jinlong                                                        100     31.00         31.00
    Co.,Ltd.                                                  liability                                  protection consulting
    Limited
    Shenzhen Xinyongtong Automobile Service Co.,Ltd.                        Shenzhen       Qi Peng                                                          100     31.00         31.00
    liability                                  Automobile parts marketing
    Shenzhen Xinyongtong Dongxiao Automobile Parts Sales Limited
    Shenzhen       Qi Peng                                                           50     31.00         31.00
    Co.,Ltd.                                                  liability                              Automobile parts marketing
    Limited                                Test Equipment Development
    Shenzhen Xinyongtong Xinda Test Eqiupment Co.,Ltd.                      Shenzhen     Huang Peibo                                                        100     40.00         40.00
    liability                              and sales
    Limited                                Automobile       management
    Shenzhen Xinyongtong consulting Co.,Ltd.                                Shenzhen      Li Jinlong                                                         16     30.00         30.00
    liability                              consulting
    74
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010      Expressed in RMB Yuan
    5. Other related parties
    Name                                     Relationship         Institute
    Code
    Shenzhen Tefa Swan Industrial Co.,Ltd.                                     Subsidiary          192473856
    Shenzhen Mechanical Equipment Import and Export Co.,Ltd.                     Subsidiary        19034097X
    Shenzhen Tefa Real Estate Co.,Ltd.                                           Subsidiary        279365997
    Hong Kong Jia Yu Investment Co.,Ltd                                          Subsidiary
    Shenzhen Tellus Real Estate(Yue Yang) Co.,Ltd.                               Subsidiary
    Shenzhen Development Center Construction Management Co.,Ltd.               Subsidiary          192260957
    Shenzhen Yang Chun Real Estate Co.,Ltd.                                      Subsidiary
    Shenzhen Tellus Real Estate(Long Gang) Co.,Ltd.                              Subsidiary
    Shenzhen Long GangGrand Industrial Investment Development Co.,Ltd.   Under the same untimate
    controller
    75
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                                              Expressed in RMB Yuan
    6. Related party transactions
    (1) Lease
    Lease income
    Date of      Date of                      Lease
    Lessor                                              Lessee                              Leased assets                              recognition
    Starting     ending                      income
    basis
    Shenzhen Tellus Holding Co., Ltd.                    Shenzhen Ren Fu Te Li Automobile Service Co.,Ltd.      Houses and buildings   1 Jan.2005   1 Jan.2025 Contract price 5,150,000.00
    Shenzhen Tellus Xinyongtong Automobile Development
    Shenzhen Xinyongtong Inspection Tenology   Co., Ltd.   Machinery equipments   1 Jul.2008 30Jun.2016 Contract price
    Co., Ltd.                                                                                                                                                                  141,700.00
    Shenzhen Tellus Xinyongtong Automobile Development
    Shenzhen Xinyongtong Automobile Service Co., Ltd.      Houses and buildings   1 Apr.2009 31Mar.2012 Contract price
    Co., Ltd.                                                                                                                                                                  309,204.00
    Shenzhen Tellus Xinyongtong Automobile Development
    Shenzhen Xinyongtong Automobile Service Co., Ltd.      Machinery equipments   1 Apr.2009 31 Mar.2012 Contract price
    Co., Ltd.                                                                                                                                                                   60,969.00
    Shenzhen Tellus Xinyongtong Automobile Development Shenzhen Xinyongtong Dongxiao Automobile Parts Sales
    Houses and buildings   1 Apr.2009 31 Mar.2012 Contract price
    Co., Ltd.                                            Co., Ltd.                                                                                                             226,800.00
    Shenzhen Tellus Xinyongtong Automobile Development Shenzhen Xinyongtong Dongxiao Automobile Parts Sales
    Machinery equipments   1 Apr.2009 31 Mar.2012 Contract price
    Co., Ltd.                                            Co., Ltd.                                                                                                              31,800.00
    76
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010              Expressed in RMB Yuan
    (2) During reporting period,there is no related party guarantees.
    (3) Borrowed and payed fund from related parties
    Date of            Date of
    Related parties                         Amount                                         Remark
    Starting           ending
    In
    Shenzhen    Development         Center   Construction                                                     fund
    5,000,000.00   1 Nov.2010       31 Oct.2011
    Management Co.,Ltd                                                                                      turnover
    Out
    Shenzhen      Tellus      Automobile         Services                                                     fund
    200,000.00       Dec.2010
    Development Co.,Ltd.                                                                                    turnover
    Shenzhen     Tellus     Xinyongtong       Automobile                                                      fund
    200,000.00
    Development Co., Ltd.                                                                                   turnover
    (4) Remuneration to key managements
    Items                                 2010(10,000yuan )            2009(10,000yuan )
    Total amount of key managements                                                    296.64                    257.94
    Total amount of the top three                                                      106.47                    101.26
    77
    SHENZHEN TELLUS HOLDING CO., LTD
    Notes to Financial Statements
    For the Year Ended Dec 31, 2010                                         Expressed in RMB Yuan
    7. Receivables from and payables to related parties
    Receivables from related parties:
    31 December 2010                    31 December 2009
    Items                                       Name&nb