Sunpower Group Ltd.sunpower.listedcompany.com/misc/ar2011.pdf · one of the largest EPC companies in Taiwan to supply core equipment to Arabian Industrial Fiber Company which is a

Sunpower Group Ltd.Annual Report 2011

CONTENTS

01 Corporate Profile02 Sunpower’s Innovation04 Chairman’s Statement08 Financial and Operations Review10 Financial Highlights12 Board of Directors15 Key Management16 Corporate Information17 Corporate Governance Report29 Financial Statements84 Statistics of Shareholdings86 Notice of Annual General Meeting

01Annual Report 2011

COrpOraTE prOfilE

a Specialist in Energy-Saving, Energy-Efficiency and Environmental protection Business

Sunpower Group started in April 1997, listed on SGX-SESDAQ in March 2005 and was subsequently upgraded to the Mainboard in August 2007. The Group specialises in the design, R&D and manufacture of customised energy-saving, energy-efficiency and environmental protection products and solutions, using proprietary heat-transfer technologies tailored for the petrochemical, chemical, polysilicon, coal chemical, pharmaceutical, tobacco, metallurgical, and transportation industries.

From the initial business of making pipe supports, Sunpower went on to develop other related products such as heat exchangers and pressure vessels in 1998, heat pipes and heat-pipe exchangers in 1999 for the recovery of waste heat in petrochemical, steel and chemical projects. In 2003, Sunpower successfully developed its proprietary environmentally friendly energy-saving and environmental protection systems. These systems are used to recover petrochemical by-products contained in the flare gas generated during the production process in a petrochemical refinery. In 2010, the Group was awarded with the “Technology Innovation High Achievement Award” in the development and application of energy efficient heat exchanger given out by China Association for Quality 2010. In 2011, the Group spearheaded to set the national standards for Heat Pipes and also participated in drafting the national standards for core heat pipes and coreless heat pipes which were eventually approved and promulgated.

Through providing many years of outstanding services, the company has established a reputable brand in the markets. Among Sunpower’s key customers are international companies such as BP, BASF, SABIC, Dow, Technip, Celanese, Shell, CTCI, Samsung, Hyundai, TOYO and their joint ventures in China; domestic major industrial groups such as CNPC, SINOPEC, CNOOC, ChemChina, CREC, Shenhua Group, GCL-Poly etc. Sunpower has been designated as a supply network member of SINOPEC Group Materials and Equipment as well as the first-tier supplier of CNPC Group. In 2011, Sunpower was able to export its products to the Middle East for the first time by winning SABIC’s PTA project to supply core equipment.

To satisfy the complexities of client’s requests, Sunpower continuously engaged in R&D, introducing proprietary technology, coming up with innovative solutions and has achieved many excellent results. So far, the Group has registered 76 technological patents and 4 products were used to set the benchmarks for national standards. Sunpower was approved by the PRC Ministry of Human Resources and Social Security to establish a “Post-doctoral Programme”, and has been designated by the PRC Standardisation Administration as “Working Group on Thermal Pile of National Technical Committee on Traffic Engineering Facility (Highway) Standardisation Administration of China”. Sunpower also established the “Nanjing Permafrost Engineering Center of the Chinese Academy of Sciences”, and set up “Jiangsu Engineering Research Center for Energy-Saving” under the approval of Jiangsu Department of Science Technology. Meanwhile, the “Research Institute for Industrial Energy-Saving” was also established.

After many years of hard work and dedication, the Group’s market diversification strategy has successfully garnered marked achievements. The Group now exports to overseas countries and regions such as the United States, Europe, Australia, Southeast Asia, South Asia, Central Asia, South America and the Middle East.

In recent years, under the government’s strong support for development of energy-saving and environmental protection industry, Sunpower continues to expand its scope of business, going into the field of sulphur recovery and other related industries. In addition, Sunpower is making greater efforts on R&D in the energy-saving and environment protection industry accompanied by the integration of industry, university and research institute. Moreover, the localisation of the key equipment manufacturing promoted by the Chinese government would bring more opportunities to us in the future.

02 Sunpower Group Ltd.

Heat Exchangers and pressure Vessels

Heat Exchanger and Pressure Vessel perform the functions of completing the reaction, heat transfer, separation and storage during the process of industrial production. It can also withstand the pressure load from airtight containers. The Group focuses its research and efforts on developing corrosion-resistant heat exchangers, high-efficiency heat exchanger and higher-value pressure vessels and heat exchangers made from non-ferrous metals.

While heat exchangers are commonly made of bare steel pipes, Sunpower’s high-efficiency heat exchangers use specially designed pipes such as corrugated pipes and threaded pipes. The increased surface area will thereby increase heat exchange efficiency. Due to the increased efficiency of the heat exchangers, the size of the heat exchangers can be reduced, leading to cost savings, as less space is required to be set aside for the heat exchanger. Sunpower’s high-efficiency heat exchangers are highly efficient, stable, flexible, durable and increase

SUNpOWEr’S iNNOVaTiON

energy conversation for the users by 30% to 50%, achieving the contemporary concept of environmental protection through improved efficiency. In 2008, Sunpower drafted the national standards for effective heat transfer of special-shaped heat exchangers that was eventually approved and promulgated.

Sunpower owns a number of top-rate non-ferrous metals processing and heat exchanger processing plants. The plants provide development, design and manufacturing of pressure vessels and heat exchangers made of carbon steel, stainless steel, titanium, copper, nickel, zirconium, tantalum, hastelloy and composite materials. Widely used in chemical, petrochemical, metallurgy and pharmaceutical industries etc, we have many successful experiences in the areas of Purified Terephthalic Acid (PTA), acetic acid, polysilicon, polyformaldehyde and so on. Our heat exchangers and pressure vessels have successfully penetrated into the overseas markets, such as America, Europe, Australia, Southeast Asia, and the Middle East.


Heat pipes and Heat-pipe Exchangers

The Heat Pipe is a thermal transfer device that transfers heat quickly from one point to another. Heat Pipes, with their excellent heat transfer capacities and rates, are used in areas where heat is required to be transmitted immediately and effectively with no heat loss. Our Heat Pipes can transfer heat 3,000 times faster than the heat-transfer rate of a copper pipe. A Heat-Pipe Exchanger consists of many Heat Pipes bundled together. Sunpower led the development of national standards for heat pipes and participated in drafting the national standards for core & coreless heat pipes that were eventually approved and promulgated in 2011.

Our Heat Pipes and Heat-Pipe Exchangers facilitate the recovery of residual heat in petrochemical, steel and chemical projects. They are also used to protect the permafrost foundation in the construction of roads, railways and oil pipelines. Examples in which our heat pipes have been used in significant projects include: Qinghai-Tibet railway and the Sino-Russia oil pipeline. Leveraging on the techniques of producing heat pipes, the Group subsequently developed its proprietary Waste-Heat Recovering Systems based on its core heat-transfer technology which has successfully secured domestic and international orders. These products have also been successfully applied in a number of projects.

pipe Supports

The main products of this segment are pipe supports and temperature insulated materials.

Our patented products provide support to the pipelines by isolating effects of ambient temperature and minimising energy loss during transmission. To cater to the various project requirements of our customers, we developed several types of Pipe Supports with varying characteristics, for example, the BL series of ultra low temperature cold insulating Pipe Supports, the BR series of high efficiency heat insulating Pipe Supports, the JZ series of shock absorbing Pipe Supports, as well as PIR series of cold preservation pipe supports. Based on market demand, we have also successfully enlarged our production lines by providing our foam glass products to supply complete

cold prevention and shock absorption systems. Our Pipe Supports products have penetrated into the international markets and have been used to connect a variety of pipes such as liquefied natural gas (LNG) pipes, ethylene storage, steam pipes, pressure pipes etc.

Energy-Saving and Environmental protection Systems

Our Energy-Saving and Environmental Protection Systems are used mainly for the waste treatment in petrochemical, chemical and coal chemical industries (The wastes include industrial waste water, waste gas & residue). Some examples of our products would include flare-gas recovery system and sulfur recovery system.

The Flare-Gas Recovering System is used to recover useful petrochemical by-products contained in flare gas, or waste gas, commonly generated in a petrochemical refinery during the production process. Flare gas contains flammable and poisonous waste gas and is characterized by its high temperature, flammability and volatility. Sunpower’s system provides a cost-saving and environment-friendly solution, as it helps our petrochemical clients reduce the discharge of pollutants into the atmosphere, thereby reducing the penalties imposed on them. Sunpower’s flare-gas recovery systems have successfully penetrated into markets such as Central Asia and Southeast Asia.

Sulfur recovery is carried out through Sunpower’s core design team, where we utilise advanced technology and EPC experience to provide one-stop services for our customers in the oil refining, natural gas and coal chemical industries.


CHairMaN’S STaTEMENT

Guo Hong XinExecutive Chairman

Dear Shareholders,

2011 was a year of rapid growth for Sunpower. The Group set a record-breaking revenue of RMB1.25 billion, an increase of 32.8% over FY2010. FY2011 gross profit also recorded an increase of 12.3% year-on-year (yoy) to RMB273.4 million while net profit attributable to shareholders improved 5.1% yoy to RMB91.0 million.


The main drivers for our growth are attributed to the two business segments: Heat Exchangers and Pressure Vessels as well as Pipe Supports. The performance of the Heat Exchangers and Pressure Vessels segment was excellent, with revenue increased by 45.7% yoy reaching RMB862.7 million; revenue from the Pipe Supports segment increased by 50.8% yoy to hit RMB85.2 million. Our growth was also attributed to our effective management, an increase in EPC (Engineering, Procurement and Construction) capacity and the reputation of our corporate brand. In FY2011, we made efficient use of our overall resources to secure larger contracts in order to sustain our growth rate in the competitive market.

Within our Heat Exchangers and Pressure Vessels segment, in FY2011, we secured a contract with CTCI Corporation, one of the largest EPC companies in Taiwan to supply core equipment to Arabian Industrial Fiber Company which is a subsidiary of Saudi Basic Industry Corporation. We also penetrated the Middle East markets, again cooperating with Alcoa Inc. (US aluminum giant) by supplying 72 heat exchangers to Ma’dden Bauxite and Alumina Company, a

joint venture of Saudi Arabian Mining Company, Ma’aden and Alcoa Inc. At the end of 2011, the Group completed a contract to supply energy efficient core equipment for the Heng Li Petrochemical‘s Purified Terephthalic Acid (PTA) project, which included a pressure vessel with a diameter of 8.8m. This pressure vessel is the largest in diameter that the Group has ever built to date. In 2011, we achieved significant breakthroughs in our research and development efforts. For instance, the Group has set the national standards for heat pipes and also participated in drafting the national standards for core and coreless heat pipes where it was eventually approved and promulgated. So far, the Company has achieved a total of 76 patents. Such outstanding achievements have strengthened the Company’s technological leadership and enhanced the Company’s core competitiveness.

Currently, the Chinese government is implementing the 12th Five-Year energy-saving and environmental protection development plan where the investment in this industry is expected to reach RMB3.1 trillion from 2011 to 2015.


CHairMaN’S STaTEMENT

In 2012, the investments are expected to increase faster and there will be more favourable policies issued by the Chinese government in the areas of financing and taxes. In addition, a global low carbon economy trend and a structural adjustment in the Chinese economy will drive the long-term sustainable development of energy-saving and environmental protection industry.

Moving forward into 2012, the Group expects to encounter some challenges. Nonetheless, barring unforeseen circumstances, we believe the Group will continue to be profitable.

In line with the record performance, our Board of Directors has proposed a dividend of 0.3 Singapore cents per ordinary share. This dividend was declared as we believe that the Group has reached a point of sustainable growth and would like to share the benefits with our loyal shareholders.

On behalf of the Board, I would like to take this opportunity to express my heartful gratitude towards our esteemed customers, suppliers, shareholders and business partners for your continued support and confidence in us. I would also like to thank the management and employees for their efforts and contributions. Finally, I would like to thank my fellow Directors for their relentless support and guidance.

Guo Hong XinExecutive Chairman


a New MilestoneSunpower has secured a contract at valued US$6.8

million with CTCI Corporation to supply high-end core equipment to Arabian Industrial Fiber Company

in the Middle East. This contract will further propel Sunpower Group onto the internationalplatform.


Revenue Breakdown (RMB’ million)

Heat Exchangers & Pressure

Vessels

Heat Pipes &Heat-Pipe

Exchangers

Energy-Saving& Enviromental

Protection Systems

PipeSupports

FY2011 FY2010

income Statement review

The Group’s revenue for FY2011 increased by 32.8% from RMB940.8 million in FY2010 to RMB1.25 billion. The Group recorded a net profit attributable to shareholders of approximately RMB91.0 million in FY2011, an increase of 5.1% from RMB86.6 million in FY2010.

The Group’s largest business segment, Heat Exchangers and Pressure Vessels, contributed approximately 69.1% of the Group’s total revenue in FY2011 as compared to 62.9% in FY2010. This segment recorded an increase in revenue of approximately 45.7%, from RMB592.1 million in FY2010 to RMB862.7 million in FY2011, attributed by the increased number of contracts fulfilled during the financial year.

Revenue derived from other business segments such as Heat Pipes and Heat-Pipe Exchangers segment increased by 2.5% to RMB229.3 million; Pipe Supports segment increased by 50.8% to RMB85.2 million and Energy-Saving and Environmental Protection Systems segment increased by 4.7% to RMB71.7 million in FY2011.

Gross profit increased by 12.3% from RMB243.5 million in FY2010 to RMB273.4 million in FY2011. However, gross profit margin fell from 25.9% in FY2010 to 21.9% in

fiNaNCial & OpEraTiONS rEViEW

FY2011, mainly due to the lower margins derived from Heat Pipes and Heat-Pipe Exchangers segment. Net profit attributable to shareholders increased by 5.1% to RMB91.0 million in FY2011. As such, earnings per share correspondingly improved from RMB26.3 cents in FY2010 to RMB27.7 cents in FY2011.

review of financial position

Current assets increased by 17.0% from RMB1.15 billion as at 31 December 2010 to RMB1.35 billion as at 31 December 2011, contributed mainly by the following factors:

Trade receivables increased by RMB197.8 million to RMB807.5 million as at 31 December 2011, driven by the higher sales volumes and delivery of contracts during the last quarter of 2011;

Inventories increased by RMB130.8 million to RMB289.9 million as at 31 December 2011 as the Group stocked up on raw materials, which leads to higher work-in-progress in preparation to fulfill the outstanding orders for FY2012; and

•

•

862.7

592.1

229.3 223.7

71.7 68.5 85.2 56.5


Energy-Savingand EnvironmentalProtection Systems

Heat Pipes and Heat-Pipe ExchangersPipe Supports

Heat Exchangers and Pressure Vessels

Revenue by activities (%)

FY2010FY2011

Cash and bank balances, which were used to finance daily operating activities, decreased by RMB128.4 million from RMB236.0 million as at 31 December 2010 to RMB107.6 million as at 31 December 2011.

Current liabilities increased by 23.1% to RMB1.08 billion as at 31 December 2011. The increase in current liabilities was mainly attributed by the increase in short-term borrowings of approximately RMB197.4 million. The short-term borrowings were required for working capital to support the increasedorders on hand.

Cash flow and liquidity

Net cash used in operating activities amounted to RMB268.0 million in FY2011, a decrease from net cash generated from operating activities of RMB98.4 million in FY2010 attributed to the following main factors:

the cash outflows arising from the increase in trade and other receivables amounting to RMB201.6 million, the trade and other payables amounting to RMB28.9 million and inventories amounting to RMB132.8 million; and

the payment made for income tax amounting to RMB26.3 million and net interest expenses of RMB23.9 million.

Net cash used in investing activities amounted to a total of RMB91.1 million due to the purchase of property, plant and equipment amounting to RMB74.9 million and land use rights amounting to RMB16.2 million.

Net cash from financing activities of approximately RMB230.7 million arose mainly from proceeds of new short term loans of approximately RMB521.1 million and advances from a related party of RMB38.2 million. These were partially offset by repayment of the bank loans and dividends amounting to RMB343.9 million in aggregate.

•

•

•

62.9%

6.0%

23.8%

7.3%

69.1%

6.8%

18.4%

5.7%


fY2007

fY2007

fY2007

fY2007

fY2008

fY2008

fY2008

fY2008

fY2009

fY2009

fY2009

fY2009

fY2010

fY2010

fY2010

fY2010

fY2011

fY2011

fY2011

fY2011

940.8

1,249.0

236.0

107.6

753.6

195.7

766.7

75.5560.1

32.7

0.86

0.68

0.94

40.1

0.7064.2

0.8286.691.0

revenue (rMB’million)

Net profit attributable to Shareholders (rMB’million)

Debt-To-Equity ratio

Cash & Bank Balances (rMB’million)

90.5

fiNaNCial HiGHliGHTS


In line with the 12th Five-Year Plan in China, Sunpower would move up the value chain to

differentiate its products and offer high-end equipment to various major industries such as

petrochemical, oil and gas, chemical, coal chemical and even in the growing solar industries.

Exciting prospects ahead


From Left to Right: Mr. Guo Hong Xin and Mr. Li Lai Suo

BOarD Of DirECTOrS

Mr. Guo Hong XinExecutive ChairmanMr. Guo Hong Xin was appointed as an Executive Director and Chairman of the Board in May 2004 and was last re-elected on 27 April 2011. Mr. Guo is responsible for the overall management and strategic plan for the development of the Group. Mr. Guo graduated from Nanjing Chemical Engineering Senior College (majoring in thermal engineering) in July 1983; in 2010 he obtained his Ph.D in Geotechnical Engineering from Cold and Arid Regions Environmental and Engineering Research Institute of Chinese Academy of Sciences. He began his career as a Lab Director in Heat Pipe Research Centre of Nanjing Chemical Institute. In 1985, Mr. Guo left to join Nanjing Heat Pipe Technology Development Centre as a Business Development Manager. From 1993 to 1997, he worked in Shengnuo Group as a Director and Deputy General Manager and was responsible for sales and marketing. Between 1995 and 1997, he worked as a Vice Dean of Heat Pipe Technology development Institute of Nanjing University of Technology and a Deputy Director of National Science and Technology Ministry Heat Pipe Technology Promotion Centre. In 1998, he joined Jiangsu Sunpower Petrochemical Engineering Co., Ltd. He has also been a part-time professor of Changzhou University (Originally named Jiangsu Polytechnic University) since 2003. In 2008, he was appointed as the Team Leader of the National Standardization Technical Committee for heat pipes. In 2009, Mr. Guo was awarded second prize in technological progress by National Federation of Industry & Commerce and Jiangsu Province. In 2010, he was awarded second prize in technological progress by China Petroleum

and Chemical Industry Federation, and was engaged as a part-time instructor in the MBA Education Center at Nanjing University. In 2011, Mr. Guo was awarded as Jiangsu Top 10 Outstanding Entrepreneurs and Jiangsu Province Innovative and Entrepreneurial talents. Mr. Guo is also engaged as the first batch of industry professor in Jiangsu province.

Mr. li lai SuoExecutive DirectorMr. Li Lai Suo was appointed as an Executive Director of the Group in May 2004 and was re-elected on April 2009. From 2004 to October 2011, Mr. Li was appointed as Chairman and General Manager of Nanjing Shengnuo Heat Pipe Co. Ltd, a subsidiary of Sunpower Group, and is responsible for the management of the company’s business operations. Mr. Li graduated from Nanjing Chemical Engineering Senior College (majoring in thermal engineering) in 1981. From 1981 to 1997, he worked in Nanjing Engineering Senior College and held various positions such as engineer, Director of Thermal Engineering Lab and Director of Energy Test Centre. From 1983 to 1988, he studied in the Mechanical Engineering Department of Tongji University and graduated with a Bachelor of Engineering degree (majoring in thermal supply and ventilation) in 1998. From 2003 to 2005, he studied in the China Europe International Business and graduated with an Executive MBA qualification in 2005. In 1997, he co-founded Sunpower Petrochemical and was appointed the General Manager between 1997 and March 2004.


From Left to Right: Mr. Ma Ming and Mr. Jiang Ning

Mr. Ma MingExecutive DirectorMr. Ma Ming was appointed as an Executive Director in May 2004 and was last re-elected on 27 April 2010. Mr. Ma is responsible for the management of the financial affairs and external investment of the Group. Mr. Ma graduated from Nanjing Chemical Engineering Senior College (majoring in chemical engineering instruments) in July 1983. He graduated with a Master of Engineering Management degree from University of Shanghai for Science and Technology in March 2007. From 1983 to 1992, he worked as an engineer in Nanjing Chemical Industrial Company. In 1992, he left to join Hainan Lida Industrial Co., Ltd. as a Manager responsible for sales and marketing. In 1997, Mr. Ma joined Sunpower Petrochemical as a Deputy General Manager until he joined the Group in 2004. During the year 2008 to 2010, Mr. Ma was entrusted by the Chairman of the Board to perform, on his behalf, all the responsibilities as General Manager of Jiangsu Sunpower Technology Co., Ltd. and Jiangsu Sunpower Machinery Manufacture Co., Ltd. In 2010, Mr. Ma Ming was formally appointed as General Manager of the two companies. Mr. Ma Ming is also a Director of Nanjing Shengnuo Heat Pipe Co., Ltd.

Mr. Jiang Ningindependent DirectorMr. Jiang Ning was appointed as an Independent Non-Executive Director in February 2005 and was last re-elected on 27 April 2009.

Mr. Jiang graduated with a Bachelor of Science degree in 1982 from Anhui Normal University. From September 1982 to September 1989, he was a lecturer in both Anhui Bengbu Education Institution and Anhui Bengbu Foodstuff College. From September 1989 to September 1992, he studied in Nanjing University and received his Master of Economics in 1992. Since September 1992, Mr. Jiang held various positions with Nanjing University such as lecturer, associate professor and professor; Vice Dean of Yangtze Delta Economic Social Development Research Centre of Nanjing University and Dean of Investment and Finance Research Centre of Nanjing University.

His teaching curriculum includes: money and banking, investment and financial research, corporate mergers and acquisitions.

Mr. Jiang also serves as an independent director in the following companies: Datcent Technology (Nanjing) Co., Ltd, Jiangsu Broadcasting Cable Information Network Co., Ltd. and Nanjing University Asset Management Co., Ltd.


BOarD Of DirECTOrS

Mr. lau ping Sum pearceindependent DirectorMr. Lau Ping Sum Pearce was appointed as an Independent Non-Executive Director in February 2005 and was last re-elected on 27 April 2010. Mr. Lau graduated from the Australian National University with a Degree in Economics and also holds a Diploma in Business Administration from the National University of Singapore. Mr. Lau was a Member of Parliament for Yio Chu Kang Constituency from 1980 to 1991 and a Member of Parliament for Ang Mo Kio Group Representation Constituency from 1991 to 1996. He served as a Director of Ang Mo Kio Community Hospital between 1993 to 1999 and Chairman of the Medifund Committee of the hospital from 2001 to 2005. He was Head of Computer Services in a statutory board and two local banks from 1973 to 1996. Between 1997 and 2000, he was the General Manager of NTUC Link Pte Ltd. Since January 2001, Mr. Lau has been an Executive Director of the People’s Action Party/PAP Community Foundation. He is currently an Independent Director of several listed companies in Singapore and a member of the Singapore Institute of Directors.

Mr. Chin Sek pengindependent DirectorMr. Chin Sek Peng was appointed as an Independent Non-Executive Director in February 2005 and was last re-elected on 27 April 2011. Mr. Chin is the co-founding Director of PKFCAP Advisory Partners Pte Ltd, a company engaged in the provision of consultancy and business advisory services. He is also the Deputy Managing Partner responsible for running, managing and developing the assurance business of PKF-CAP LLP, a certified public accounting firm based in Singapore. Mr. Chin started his accountancy and audit training in Casson Beckman, a medium sized firm of chartered accountants in London. After qualifying as a chartered accountant, he joined legacy Price Waterhouse and worked in UK, Europe and Singapore from 1983 to 1994. In 1994, he joined the Institute of Certified Public Accountants of Singapore as the first Practice Review Director, heading, running and regulating the compliance of work standards for all audit practices in Singapore. In 1999, Mr. Chin joined legacy Arthur Andersen as a partner in its Assurance and Business Advisory Division and in 2002 he left the firm to set up his own audit and consultancy practices together with another partner. He holds a Bachelor of Arts (Honours) degree in Accounting and Finance from Lancaster University in the United Kingdom and is a Fellow Member of the Institute of Chartered Accountants in England and Wales, as well as a Fellow (practising) Certified Public Accountant of Singapore. Mr. Chin also serves as Independent Director mainly in the capacity as Audit Committee Chairman to several public companies listed on the Singapore Exchange and is a member of the Institute of Internal Auditors, Singapore.

From Left to Right: Mr. Lau Ping Sum Pearce and Mr. Chin Sek Peng


Ms. Zhang Mei SunChief Engineer, r&DMs. Zhang Mei Sun, a senior and registered engineer, graduated in 1967 from Nanjing Power Senior College with a Diploma in Thermal Engineering. For 34 years from 1967 to 2001, she worked in Sinopec Ningbo Engineering Co., Ltd. (SNEC) and Sinopec Yangtze Design Institute, overseeing the design work for various petrochemical projects in China. She joined the Group’s Energy-Saving and Environmental Protection Systems Department as Chief Engineer in 2001. She is primarily responsible for research and development, promotion of technological development as well as execution of the department’s projects.

Ms. Ge Cui pingfinancial Controller Ms. Ge Cui Ping joined the Group in January 2004 as Financial Controller, responsible for the Group’s financial reporting and management. She graduated in 1998 from Nanjing Economic Institute (majoring in Accounting). She became a PRC Certified Public Accountant (CPA) in 1999 and PRC Certified Public Valuer in 2002. From October 2000 to January 2004, she was an Audit Manager in Jiangsu Tianheng CPA firm and was involved in auditing the accounts of various PRC listed companies. In September 2005, she was admitted as a member to the Institute of Financial Accountants. Between July 2007 and November 2007, she participated in the CFO programme conducted by China Europe International Business School. From March 2011, she served as a Director for Jiangsu Sunpower Technology Co., Ltd. and Jiangsu Sunpower Machinery Manufacturing Co., Ltd. From October 2011, she served as a Director for Nanjing Shengnuo Heat Pipe Co., Ltd.

KEY MaNaGEMENT


BOarD Of DirECTOrSGuo Hong Xin (Executive Chairman)

Li Lai Suo (Executive Director)Ma Ming (Executive Director)

Jiang Ning (Independent Director)Lau Ping Sum Pearce (Independent Director)

Chin Sek Peng (Independent Director)

aUDiT COMMiTTEEChin Sek Peng (Chairman)

Jiang NingLau Ping Sum Pearce

NOMiNaTiNG COMMiTTEEJiang Ning (Chairman)Lau Ping Sum Pearce

Guo Hong Xin

rEMUNEraTiON COMMiTTEELau Ping Sum Pearce (Chairman)

Jiang NingChin Sek Peng

COMpaNY SECrETarYHo Wui Mee Marian

DEpUTY SECrETarYChew Bee Leng

BErMUDa rESiDENT rEprESENTaTiVE aND aSSiSTaNT SECrETarY

Appleby Services (Bermuda) Ltd.Canon’s Court

22 Victoria StreetHamilton HM 12

Bermuda

priNCipal plaCE Of BUSiNESSNo. 2111 Chengxin Road

Nanjing Jiangning Science ParkNanjing, 211112

P. R. Chinawww.sunpower.com.cn

rEGiSTErED OffiCECanon’s Court22 Victoria StreetHamilton HM 12Bermuda

SiNGapOrE SHarE TraNSfEr aGENTBoardroom Corporate & Advisory Sevices Pte. Ltd.50 Raffles Place#32-01 Singapore Land TowerSingapore 048623

BErMUDa SHarE rEGiSTrar aND TraNSfEr aGENTAppleby Management (Bermuda) Ltd.Canon’s Court22 Victoria StreetHamilton HM 12Bermuda

aUDiTOrSDeloitte & Touche LLPCertified Public Accountants6 Shenton Way #32-00DBS Building Tower TwoSingapore 068809Audit Partner: Lim Kuan MengAppointed on June 1, 2007

priNCipal BaNKErSBank of CommunicationJiangning BranchNo. 1 Zhongxin Road NorthJiangning Development ZoneNanjing, Jiangsu, PRC

Nanjing City Commercial BankGuanghua BranchNo. 11 Daguang RoadNanjing, Jiangsu, PRC

COrpOraTE iNfOrMaTiON

Corporate Governance Report


The Board of Directors (the “Board”) and management of Sunpower Group Ltd. (“the Company” and together

with its subsidiaries “the Group”) are committed to upholding a high standard of corporate governance in

order to safeguard the interests of all stakeholders and to promote investors’ confi dence. The Board has put

in place various self-regulating and monitoring mechanisms, as set out in the Code of Corporate Governance

2005 (the “Code”) issued by the Ministry of Finance. This report describes the Company’s corporate governance

processes and activities with specifi c references to the Code.

1. BOARD MATTERS

Board’s Conduct of Affairs Principle 1: Effective Board to lead and control the Company

(i) Apart from its statutory duties and responsibilities, the Board oversees the management and affairs

of the Group. It focuses on strategies and policies, with particular attention paid to growth and

fi nancial performance. The Group has put in place fi nancial authorisation and approval limits for

operating expenditure and procurement of goods and services. It delegates the formulation of

business policies and day-to-day management to the Executive Directors.

The principal functions of the Board are:

(a) Review and approve the Group’s key business strategies and fi nancial objectives, including

major investments/divestments and fi nancing of projects;

(b) Oversee the processes for evaluating the adequacy of internal controls, risk management,

fi nancial reporting and compliance with regulatory authorities and the Group’s internal control

policies and procedures;

(c) Review management performance; and

(d) Set the Company’s values and standards, and ensure that obligations to shareholders and

others are understood and met.

(ii) The Board discharges its responsibilities either directly or indirectly through various Board

committees. These committees (“Board Committees”) include the Nominating Committee (“NC”),

Remuneration Committee (“RC”) and Audit Committee (“AC”). Each of the Board Committees

functions within its terms of reference. The NC is tasked with the responsibility of carrying out

annual reviews of the effectiveness of the Board and each individual Director. If authority to make

decisions on certain board matters is delegated by the Board to any Board Committee, such

delegation would be disclosed.

(iii) The Board meets once a year to review and deliberate on the key activities and business strategies

of the Group. The Board meets at least four times a year to approve the release of the fi rst and

third quarters, half-year and full-year results and performance. Additional meetings of the Board

will be held when circumstances require. The Company’s Bye-Laws allows a Board meeting to be

conducted by way of teleconference and video-conference.



(iv) During the fi nancial year, the attendance of each Director at every Board and Board Committee

meeting is as follows:

Board AC NC RCNumber Attended Number Attended Number Attended Number Attended

Guo Hong Xin 4 4 N/A N/A 2 2 N/A N/A

Li Lai Suo 4 4 N/A N/A N/A N/A N/A N/A

Ma Ming 4 4 N/A N/A N/A N/A N/A N/A

Jiang Ning 4 4 4 4 2 2 2 2

Lau Ping Sum Pearce 4 3 4 3 2 1 2 1

Chin Sek Peng 4 4 4 4 N/A N/A 2 2

(v) Executive Director receives appropriate training to develop individual skills in order to discharge

his duties. The Group also provides extensive information about its history, mission and values to

the Directors. Where necessary, the Directors will be updated regarding new legislation and/or

regulations which are relevant to the Group.

Board Composition and Guidance Principle 2: Strong and independent element on the Board

(i) The Board comprises of the following members:

Name of DirectorPosition held on the Board

Date of fi rst appointment to the Board

Date of lastre-election as

Director Nature of appointment

Guo Hong Xin Chairman 12 April 2004 27 April 2011 Executive/Non-Independent

Li Lai Suo Deputy Chairman 12 April 2004 27 April 2009 Executive/Non-Independent

Ma Ming Director 12 April 2004 27 April 2010 Executive/Non-Independent

Jiang Ning Director 02 February 2005 27 April 2009 Non-executive/Independent

Lau Ping Sum Pearce Director 02 February 2005 27 April 2010 Non-executive/Independent

Chin Sek Peng Director 02 February 2005 27 April 2011 Non-executive/Independent

(ii) The independence of each Director is reviewed by the NC. The NC adopts the guidelines of the

Code in its review of who can be considered as an Independent Director. The NC is of the view that

the non-executive Directors are independent.

(iii) The Board has examined its size and is of the view that it is an appropriate size for effective

decision-making, taking into account the scope and nature of the operations of the Company. The

NC is of the view that no individual or small group of individuals dominate the Board’s decision-

making process.

(iv) The NC is of the view that the current Board consists of the appropriate mix of expertise and

experience to meet the Company’s targets. Qualifi cations and experiences of the Board members

are set out on pages 12 to 14 of the Annual Report. Particulars of interests of Directors who held

offi ce at the end of the fi nancial year in shares in the Company and in related corporations (other

than wholly-owned subsidiary companies) are set out in the Report of the Directors.



Role of Executive Chairman and Chief Executive Offi cer Principle 3: Clear division of responsibilities at the top of the Company

(i) The Company keeps the posts of Executive Chairman, Executive Deputy Chairman and Executive

Director separate and these positions are held by Mr Guo Hong Xin, Mr Li Lai Suo and Mr Ma

Ming respectively. The Executive Chairman, Guo Hong Xin, is primarily responsible for overseeing

the overall management and strategic development of the Group. The Executive Chairman is also

responsible for the effective working of the Board. The responsibilities of the Executive Chairman

include:

Scheduling of meetings to enable the Board to perform its duties responsibly while not

interfering with the fl ow of the Group’s operations;

Preparing meeting agenda in consultation with other Directors;

Assisting in ensuring the Group’s compliance with the Code;

Ensuring that Board meetings are held when necessary; and

Reviewing key proposals by management before they are presented to the Board.

The Company Secretary may be called to assist the Executive Chairman in any of the above.

Board Membership Principle 4: Formal and transparent process for the appointment of new directors to the Board

(i) The NC comprises Mr Jiang Ning, Mr Lau Ping Sum Pearce and Mr Guo Hong Xin, a majority of

whom are Independent Directors. The Chairman of the NC is Mr Jiang Ning who is not associated

with a substantial shareholder. The NC meets at least once a year and at other times as required.

(ii) The NC performs the following functions in accordance with its terms of reference:

(a) reviewing and making recommendations to the Board on all candidates nominated for

appointment to the Board, having regard to their background, potential contribution to the

Group based on their experience and expertise, and ability to exercise independent business

judgement;

(b) reviewing all candidates nominated for appointment as senior management staff;

(c) reviewing and recommending to the Board, the Board structure, size and composition,

taking into account the balance between executive and non-executive, independent and

non-independent Directors and having regard at all times to the principles of corporate

governance and the Code;

(d) identifying and making recommendations to the Board as to the Directors who are to retire

by rotation and to be put forward for re-election at each annual general meeting (the “AGM”)

of the Company, having regard to the Directors’ contribution and performance, including

Independent Directors;

(e) assessing the independence of the Directors (taking into account the circumstances set out

in the Code and other salient factors); and

(f) proposing a set of objective performance criteria to the Board for approval and

implementation, and to evaluate the effectiveness of the Board as a whole and the

contribution of each Director to the effectiveness of the Board.



(iii) Pursuant to the Company’s Bye-Laws, all Directors are required to submit themselves for re-

nomination and re-election at least once every three years.

Board Performance Principle 5: Formal assessment of the effectiveness of the Board and contributions of each Director

(i) The Board has established a formal assessment process which will be carried out annually for

evaluation of the performance of the Board and the individual Directors on the basis of the following

performance criteria:

Attendance at Board meetings;

Level of participation at Board meetings and overall commitment;

• Ability to strategise and propose sound business direction; and

Contribution of specialised knowledge.

(ii) The appraisal process requires the Directors to complete appraisal forms which will be collated

by an independent coordinator who will compile the results of the appraisal for review by the NC.

The NC will thereafter report to the Board. Such an appraisal process was carried out in respect of

fi nancial year 2011.

Access to information Principle 6: Board members to have complete, adequate and timely information

(i) The Board is provided with management reports, and papers containing relevant background or

explanatory information required to support the decision making process.

(ii) Board papers are circulated to the Directors before the scheduled meetings so as to allow for a

better understanding of the issues and to achieve a more effective discussion time for questions

that the Directors may have.

(iii) The Directors have separate and independent access to senior management and the Company

Secretaries. The Company Secretaries administer, attend and prepare minutes of meetings of the

Board and of the Board Committees which are circulated. The Company Secretaries ensures that

the Company complies with the corporate secretarial aspects of the Bye-Laws and the rules of the

Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX-ST”).

(iv) In carrying out their duties, the Directors, whether individually or as a group, have direct access to

the independent professional advisors to obtain advice.

2. REMUNERATION MATTERS

Remuneration Committee Principle 7: Formal and transparent procedure for fi xing remuneration packages of Directors and key

management executives

(i) The RC comprises Mr Lau Ping Sum Pearce, Mr Jiang Ning and Mr Chin Sek Peng all of whom

are Independent Directors. The Chairman of the RC is Mr Lau Ping Sum Pearce. The RC meets at

least once a year and at other times as required.



(ii) The RC performs the following functions in accordance with its terms of reference:

(a) recommending to the Board a framework of remuneration for the Board and the key

executives of the Group covering all aspects of remuneration such as Director’s fees,

salaries, allowances, bonuses, options and benefi ts-in-kind;

(b) proposing to the Board, appropriate and meaningful measures for assessing the Directors’

and key executives’ performance;

(c) determining the specifi c remuneration package for each Executive Director;

(d) considering the eligibility of directors, executives and employees for benefi ts under long-term

incentive schemes; and

(e) considering and recommending to the Board the disclosure of details of the Company’s

remuneration policy.

(iii) Each member of the RC shall abstain from voting on any resolution concerning his own

remuneration.

Principle 8: Remuneration of Directors should be adequate, not excessive and linked to performance

(i) All Independent Directors have no service agreements with the Company. They are each paid a

Director’s fee which is determined by the Board based on the effort and time spent as well

as responsibilities as member of the AC, NC and RC. The fees are subject to approval by the

shareholders at each AGM. Except as disclosed, the Independent Directors do not receive any

remuneration from the Company.

(ii) According to the respective service agreements of the Executive Directors:

each service agreement is valid for an initial period of 3 years which commenced from 1

January 2008 and shall be automatically renewed annually thereafter;

the remuneration of the Executive Directors include a fi xed salary and a variable performance

related bonus which is designed to align their interests with those of the shareholders;

the service agreement may be terminated by either the Company or the Executive Director

giving not less than six months’ notice in writing.

Principle 9: Clear disclosure of remuneration policy, level and mix of remuneration, and procedure for

setting remuneration

(i) A breakdown, showing the level and mix of each individual Director’s and Key Executive’s

remuneration in FY2011 is refl ected in the Remuneration Report.

(ii) The Company does not have any employees who are immediate family members of a Director and

whose remuneration exceeded S$150,000 during the fi nancial year ended 31 December 2011.

(iii) The Company has an employee share option scheme (“Share Option Scheme”). No options have

been granted under the Share Option Scheme. Details of the Share Option Scheme can be found

in the Report of the Directors.



3. ACCOUNTABILITY AND AUDIT

Audit Committee Principle 11: Establishment of Audit Committee with written terms of reference

(i) The AC of the Company comprises Mr Chin Sek Peng, Mr Lau Ping Sum Pearce and Mr Jiang

Ning, all of whom are Independent Directors. The Chairman of the AC is Mr Chin Sek Peng. The

Board considers that the members of the AC have suffi cient fi nancial management expertise and

experience to discharge the function of the AC.

(ii) The AC performs, inter alia, the following key functions:

(a) reviewing with auditors the audit plan, their evaluation of the system of internal accounting

controls and their audit reports;

(b) reviewing the overall internal control system;

(c) reviewing the Group’s fi nancial results and the announcements before submission to the

Board for approval;

(d) reviewing signifi cant fi ndings of internal investigations, if any;

(e) recommending to the Board the annual appointment/re-appointment of the external auditors;

(f) reviewing interested person transactions; and

(g) other functions as required by law or the Code.

(iii) The AC is authorised to investigate any matters in its terms of reference, and has full access to and

co-operation of management. The AC has full discretion to invite any Director or executive offi cer to

attend its meetings, as well as reasonable resources to enable it to discharge its function properly.

(iv) The AC has met with the external auditors without the presence of management. The AC also met

with the external auditors to discuss matters relating to internal accounting controls as well as the

results of their audit of the Group.

(v) The AC annually reviews, inter alia, the independence and objectivity of the external auditors, taking

into consideration the nature and extent of any non-audit services provided to the Company by

the external auditors. The AC, having reviewed all non-audit services provided by the external

auditors to the Group, is satisfi ed that the nature and extent of such services would not affect the

independence of the external auditors.

(vi) The Group has complied with Rule 712 and Rule 716 of the Listing Manual of the SGX-ST in

relation to its auditors.

Whistle-blowing Policy

The Board undertakes to investigate complaints of suspected fraud in an objective manner and has put in

place a whistle-blowing policy and procedures which provide employees with well-defi ned and accessible

channels within the Group, including a direct channel to the AC, for reporting suspected fraud, corruption,

dishonest practices or other similar matters.

The policy aims to encourage the reporting of such matters in good faith, with the confi dence that

employees making such reports will be treated fairly and, to the extent possible, be protected from

reprisal.



Internal Controls Principle 12: Sound system of internal controls

(i) The Group has put in place a system of internal controls to respond to fi nancial, operational and

compliance risks that are signifi cant to the achievement of the Group’s business objectives.

(ii) The Board reviews the effectiveness of the Group’s internal controls, including operational controls

and is responsible for the overall internal control framework. The Board acknowledges that no cost

effective internal control system will preclude all errors and irregularities. A system is designed to

manage rather than eliminate the risk of failure to achieve business objectives, and can provide only

reasonable and not absolute assurance against material misstatement or loss.

(iii) Based on the review of the fi ndings from the auditors on the Group’s internal controls and the

management’s responses to the auditors’ recommendations for improvements to the Group’s

internal controls and discussions with the auditors and management, the Board with the

concurrence of the AC is satisfi ed that there are adequate internal controls to respond to the

fi nancial, operational and compliance risks of the Group.

Internal Audit Principle 13: Setting up independent internal audit function

(i) The Company has outsourced the internal audit function to an external professional service fi rm to

perform the review and test of controls of the Group’s processes including the review of interested

person transactions.

(ii) The internal auditors have unrestricted access to the AC.

(iii) The AC reviewed the scope of internal audit work and the key audit procedures, including any

fi ndings during the year and the management’s responses thereto; and ensured the adequacy of

the internal audit function.

(iv) The AC has also met with the internal auditors without the presence of management.

4. COMMUNICATION WITH SHAREHOLDERS

Accountability Principle 10: Board’s accountability to shareholders; Management’s accountability to the Board

(i) The Board provides the shareholders with a detailed and balanced explanation and analysis of the

Company’s performance, position and prospects on a quarterly basis.

(ii) The management provides the Board with appropriately detailed management accounts of the

Group’s performance, position and prospects on a quarterly basis.



Communication with Shareholders Principle 14: Regular, effective and fair communication with shareholders

Principle 15: Shareholders’ participation at AGM

(i) The Board is mindful of the obligation to keep shareholders informed of all major developments that

affect the Group in accordance with the rules of the Listing Manual of the SGX-ST.

(ii) Information is communicated to shareholders on a timely basis through:

annual reports that are prepared and issued to all shareholders within the mandatory period;

public announcements via SGXNet system, the press and analysts;

notices of annual general meetings;

the Company’s website at http://www.sunpower.com.cn at which shareholders can access

information on the Group; and

the investor relations channel on fi nancial portal at http://www.sunpower.com.cn

(iii) At AGMs, shareholders are given the opportunity to air their views and ask Directors or

management questions regarding the Company. Shareholders are encouraged to attend the

AGMs to ensure a high level of accountability and to stay informed of the Group’s strategies and

goals. The AGM is the principal forum for dialogue with shareholders. The Board supports the

Code’s principle to encourage shareholder participation. The Bye-Laws allow a shareholder of the

Company to appoint one or two proxies to attend the AGM and vote in place of the shareholder.

Voting in absentia and by electronic mail may only be possible following careful study to ensure that

integrity of the information and authentication of the identity of shareholders via the internet is not

compromised.

(iv) The members of the AC, NC and RC will be present at the AGM to address queries relating to the

work of these committees.

5. DEALINGS IN SECURITIES (Listing Manual Rule 1207 (19))

Directors and offi cers of the Group are advised not to deal in the Company’s shares on short-term

considerations or when they are in possession of unpublished price-sensitive information. They

are not allowed to deal in the Company’s shares during the period commencing one month before

the announcement of the Company’s quarterly or year end results and ending on the date of the

announcement of the relevant results.

The Company has complied with the SGX-ST’s rules on best practices on dealings in the Company’s

securities in FY2011.



6. INTERESTED PERSON TRANSACTIONS (Listing Manual Rule 907)

The Group has established procedures to ensure that all transactions with interested persons are reported

on a timely manner to the AC and that the transactions are carried out on normal commercial terms and

will not be prejudicial to the interests of the Company and its minority shareholders.

The aggregate value of interested person transactions entered into during the fi nancial year under review

is as follows:

Name of interested person

Aggregate value of all interested person

transactions for the year ended 31 December 2011 (excluding transactions

less than $100,000 and transactions conducted under

shareholders’ mandate pursuant to Rule 920)

RMB’000


transactionsconducted under

shareholders’ mandatepursuant to Rule 920

(excluding transactions less than $100,000)

RMB’000

Jiangsu Sunpower Petrochemical Engineering Co., Ltd

Rental of factory and offi ce premises by

Sunpower Technology 860 (1) –

Acquisition of buildings by Sunpower Technology 23,535 (2) –

Acquisition of land use rights by Sunpower

Technology 14,645 (2) –

Interest expenses on advances from Sunpower

Technology 1,664 (3) –

Nanjing University of Technology

Rental of premises by Nanjing Shengnuo 260 –

Staff costs and benefi ts 794 –

Technology development fee by Nanjing

Shengnuo 890 –

Design fees incurred by Sunpower Technology 421 –

Research Technology Center of Nanjing University of Technology

Support fee incurred and paid on behalf by

Nanjing Shengnuo 684 –

Purchase of technology system by Nanjing

Shengnuo 923 –

Note:

(1) The leasing of factory building and offi ce premises commenced in April 2005 and was renewed for another three years

commencing in April 2008.

(2) The factory building and land use rights were acquired during FY2010 which was approved by the shareholders at a Special

General Meeting held on 6 August 2010.

(3) The second tranche consideration of RMB38,180,000 which was payable to Sunpower Technology was converted to an

advance. The advance is repayable on demand and bears a fl oating interest rate quoted by the People’s Bank of China.



Name of interested person


transactions for the year ended 31 December 2011 (excluding transactions

less than $100,000 and transactions conducted under

shareholders’ mandate pursuant to Rule 920)

RMB’000


transactionsconducted under

shareholders’ mandatepursuant to Rule 920

(excluding transactions less than $100,000)

RMB’000

Wuhan Sunpower Energy Environmental Engineering Co., Ltd

Sales of raw materials by Sunpower Technology 232 –

Wuxi Chengguang Refractory Materials Co., Ltd

Purchase of raw materials by Sunpower

Technology 515 –

Purchase of raw materials by Nanjing Shengnuo 48 –

Purchase of building materials by Sunpower

Energy-Savings 272 –

Rental expenses by Sunpower Energy-Savings 230 –

Sinocalci Technology Corporation

Sales of heat exchangers by Nanjing Shengnuo 632 –

7. MATERIAL CONTRACTS (Listing Manual Rule 1207(8))

Save for the service agreements between the Executive Directors and the Company, there are no material contracts of the Company or its subsidiaries involving the interest of any Director or controlling shareholders subsisting at the end of the fi nancial year ended 31 December 2011.

8. RISK MANAGEMENT (Listing Manual Rule 1207(4)(b))

(i) To strengthen its risk management processes and framework, the Risk Management Committee (“RMC”) was formed during the fi nancial year. The RMC consists of 5 members including an Independent Director. The RMC shall meet no less than two times a year and at other times as required.

(ii) The RMC shall performs the following key functions in accordance with its terms of reference:

(a) evaluate and provide advice on the business risks (strategic, fi nancial, and compliance with laws and regulations);

(b) study and identify internal controls and risk management strategies to manage the identifi ed risks;

(c) design and implement new controls and strategies to address identifi ed business risks;

(d) study and analysed material investments, fi nancing and other operational management activities, and advise the Board; and

(e) other functions as authorised by the Board.



REMUNERATION REPORT

The Remuneration Committee (“RC”) comprises Mr Lau Ping Sum Pearce, Mr Jiang Ning and Mr Chin

Sek Peng, all of whom are Independent Directors. The Chairman of the RC is Mr Lau Ping Sum Pearce.

The function of the RC is to consider and determine, within its terms of reference, all matters concerning

the remuneration package for directors and senior management.

Remuneration Policy

The Company has a staff remuneration policy which comprises a fi xed component and a variable

component. The fi xed and variable components are in the form of a base salary and variable bonus that is

linked to the performance of the Company and individual.

Remuneration Framework

Our remuneration framework is made up of three key components:

Base/fi xed salary

Variable or performance related income/bonuses

Other benefi ts

Base/fi xed salary

Fixed pay comprises a base salary.

Variable or performance related income/bonuses

Variable bonus payouts are based on actual achievement against corporate, business unit and

individual performance objectives.

Other benefi ts

Social insurance fund comprising housing fund, old-age retirement pension, unemployment

compensation, medical fund and car allowance.

Directors’ Fees

The proposed fees for non-executive Directors to compensate their time and effort comprise a basic

retainer fee and additional fees for appointment to Board Committees and involvement in ad hoc projects.

No Director decides his own fees. Directors’ fees are recommended by the RC and are submitted for

endorsement by the Board. Directors’ fees are subject to the approval of shareholders at the AGM.

Currently, Directors’ fees for each fi nancial year are paid in arrears, in the following fi nancial year, after

obtaining shareholders’ approval at the AGM.



Disclosure on Directors’ and Key Executives’ Remuneration

The level and mix of each Director’s and Key Executive’s remuneration in FY2011 is as follows:

Remuneration Band &Name of Director

Base/fi xed salary/

bonuses

Variable or performance

related incomeDirector’s

feesOther

benefi ts*

Executive Directors

Above $500,000 to $750,000Mr Guo Hong Xin 99.0% – – 1.0%

Mr Li Lai Suo 98.3% – – 1.7%

Mr Ma Ming 98.9% – – 1.1%

Independent Directors

Below $250,000Mr Jiang Ning – – 100% –

Mr Lau Ping Sum Pearce – – 100% –

Mr Chin Sek Peng – – 100% –

Key Executives

Above $250,000 to $500,000– – – – –

Below $250,000Ms Ge Cui Ping 92.2% – – 7.8%

Ms Zhang Mei Sun 100.0% – – –

* Other benefi ts include social insurance fund and car allowance.

The Company does not have any employee who is an immediate family member of any Director and

whose remuneration exceeded S$150,000 during the fi nancial year under review.

30 Report of the Directors33 Statement of Directors34 Independent Auditors’ Report35 Statements of Financial Position36 Consolidated Statement of Comprehensive Income37 Statements of Changes in Equity38 Consolidated Statement of Cash Flows39 Notes to Financial Statements

FINANCIAL STATEMENTS

Report of the Directors


The directors present their report together with the audited consolidated fi nancial statements of the Group and

the audited statement of fi nancial position and statement of changes in equity of the Company for the fi nancial

year ended December 31, 2011.

1 DIRECTORS

The directors of the Company in offi ce at the date of this report are:

Guo Hong Xin

Li Lai Suo

Ma Ming

Jiang Ning

Lau Ping Sum Pearce

Chin Sek Peng

2 ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE SHARES OR DEBENTURES

Neither at the end of the fi nancial year nor at any time during the fi nancial year did there subsist any

arrangement whose object is to enable the directors of the Company to acquire benefi ts by means of the

acquisition of shares or debentures in the Company or any other body corporate.

3 DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES

The directors of the Company holding offi ce at the end of the fi nancial year had no interests in the share

capital and debentures of the Company and related corporations except as follows:

Name of directors and companiesin which interests are held

AtJanuary 1,

2011

AtDecember 31,

2011

AtJanuary 21,

2012

Interest in Sunpower Group Ltd.

Ordinary shares of US$0.01 each

Guo Hong Xin 73,440,661 – –

Guo Hong Xin (deemed interest) 2,847,322 76,287,983 76,287,983

Li Lai Suo 66,154,120 66,154,120 66,154,120

Li Lai Suo (deemed interest) 2,943,198 2,943,198 2,943,198

Ma Ming 53,977,927 – –

Ma Ming (deemed interest) 3,135,239 57,113,166 57,113,166

4 DIRECTORS’ RECEIPT AND ENTITLEMENT TO CONTRACTUAL BENEFITS

Since the beginning of the fi nancial year, no director has received or become entitled to receive a benefi t

by reason of a contract made by the Company or a related corporation with the director or with a fi rm

of which he is a member, or with a company in which he has a substantial fi nancial interest, except as

disclosed in the fi nancial statements.



5 SHARE OPTIONS

(a) The Sunpower Employee Share Option Scheme (“the Share Option Scheme”) is administered by

the Remuneration Committee which comprises:

Lau Ping Sum Pearce (Chairman)

Jiang Ning

Chin Sek Peng

Under the Share Option Scheme, an option entitles the option holder to subscribe for a specifi c

number of new ordinary shares of US$0.01 each in the Company. The option has an exercise

price per share determined with reference to the market price of the shares at the time of grant of

the option. The Remuneration Committee may at its discretion, fi x that exercise price at a discount

up to 20% off market price but not lower than the par value of the shares. The consideration for

the grant of an option is RMB1.00. Options granted with the exercise price set at the market

price shall only be exercised after the fi rst anniversary but before the fi fth anniversary of the date

of grant of that option. Options granted with the exercise price set at a discount to the market

price shall only be exercised after the second anniversary but before the fi fth anniversary of the

date of grant of that option. The shares under option may be exercised in whole or in part on the

payment of the relevant exercise price (provided that an option may be exercised in part only in

respect of 1,000 shares or any multiple thereof). Options granted will lapse when the option holder

ceases to be a full-time employee of the Company or any company of the Group subject to certain

exceptions at the discretion of the Remuneration Committee.

There were no unissued shares of the Company under options granted pursuant to the Share

Option Scheme.

(b) During the fi nancial year, no options to take up unissued shares of any corporation were granted

and there were no shares of any subsidiary issued by virtue of the exercise of an option to take up

unissued shares.

(c) At the end of the fi nancial year, there were no unissued shares of any corporation under option.

6 AUDIT COMMITTEE

The Board has adopted the principles of corporate governance as described in the Code of Corporate

Governance 2005 (the “Code”) with regards to the Audit Committee.

Members of the Audit Committee are:

Chin Sek Peng (Chairman)

Jiang Ning

Lau Ping Sum Pearce

The Audit Committee meets periodically to perform, inter alia, the following functions:

a. reviewing the audit plans of the (external and internal) auditors and their audit reports;

b. reviewing with the auditors their evaluation of the internal accounting controls arising from their

audit or review together with management’s responses;

c. reviewing the Group’s fi nancial results and the announcements before submission to the Board for

approval;



d. reviewing signifi cant fi ndings of internal investigations, if any;

e. recommending to the Board the annual appointment/re-appointment of the external auditors;

f. reviewing interested person transactions; and

g. other functions as required by the law or the Code.

The Audit Committee has full access to and co-operation of the management and has been given

the resources required for it to discharge its functions properly. It also has full discretion to invite any

director and executive offi cer to attend its meetings. The auditors have unrestricted access to the Audit

Committee.

The Audit Committee has recommended to the directors the nomination of Deloitte & Touche LLP for re-

appointment as external auditors of the Company at the forthcoming annual general meeting.

7 AUDITORS

The auditors, Deloitte & Touche LLP, have expressed their willingness to accept re-appointment.

ON BEHALF OF THE BOARD

Guo Hong Xin

Ma Ming

March 27, 2012

Statement of Directors


In the opinion of the directors, the consolidated fi nancial statements of the Group and the statement of fi nancial

position and statement of changes in equity of the Company as set out on pages 35 to 83 are drawn up so as

to give a true and fair view of the state of affairs of the Group and of the Company as at December 31, 2011

and of the results, changes in equity and cash fl ows of the Group and changes in equity of the Company for

the fi nancial year then ended and at the date of this statement, there are reasonable grounds to believe that the

Company will be able to pay its debts when they fall due.

ON BEHALF OF THE BOARD

Guo Hong Xin

Ma Ming

March 27, 2012

Independent Auditors’ ReportTo the Members of Sunpower Group Ltd.


Report on the Financial Statements

We have audited the fi nancial statements of Sunpower Group Ltd. (the “Company”) and its subsidiaries

(the “Group”) which comprise the statements of fi nancial position of the Group and the Company as at

December 31, 2011, the statement of comprehensive income, statement of changes in equity and statement

of cash fl ows of the Group and the statement of changes in equity of the Company for the fi nancial year then

ended, and a summary of signifi cant accounting policies and other explanatory notes, as set out on pages 35 to

83.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation of fi nancial statements that give a true and fair view in

accordance with the Singapore Financial Reporting Standards and for devising and maintaining a system of

internal accounting controls suffi cient to provide reasonable assurance that assets are safeguarded against loss

from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as

necessary to permit the preparation of true and fair profi t and loss accounts and balance sheets and to maintain

accountability of assets.

Auditors’ Responsibility

Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted

our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with

ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial

statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the

fi nancial statements. The procedures selected depend on the auditor’s judgement, including the assessment

of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those

risk assessments, the auditor considers internal control relevant to the entity’s preparation of fi nancial statements

that give a true and fair view 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 entity’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 fi nancial statements. We

believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit

opinion.

Opinion

In our opinion, the consolidated fi nancial statements of the Group and the statement of fi nancial position and

statement of changes in equity of the Company are properly drawn up in accordance with the Singapore

Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and the

Company as at December 31, 2011 and of the results, changes in equity and cash fl ows of the Group and

changes in equity of the Company for the year ended on that date.

Deloitte & Touche LLP

Public Accountants and

Certifi ed Public Accountants

Singapore

Lim Kuan Meng

Partner

Appointed on June 1, 2007

Singapore

March 27, 2012

Statements of Financial Position


As at December 31, 2011

GROUP COMPANYNote 2011 2010 2011 2010

RMB’000 RMB’000 RMB’000 RMB’000

ASSETSCurrent assetsCash and bank balances 6 107,551 235,985 653 1,719

Pledged bank deposits 7 37,962 47,157 – –

Trade receivables 8 807,453 609,651 – –

Other receivables and prepayments 9 101,458 97,199 153 122

Inventories 10 289,888 159,107 – –

Land use rights 12 1,356 997 – –

Total current assets 1,345,668 1,150,096 806 1,841

Non-current assetsLand use rights 12 50,169 35,543 – –

Property, plant and equipment 13 197,726 136,430 – –

Investment in subsidiaries 14 – – 160,971 160,932

Trademark 15 731 1,023 – –

Deferred tax assets 16 7,972 4,858 – –

Total non-current assets 256,598 177,854 160,971 160,932

Total assets 1,602,266 1,327,950 161,777 162,773

LIABILITIES AND EQUITYCurrent liabilitiesTrade payables 17 546,742 561,211 – –

Other payables 18 112,474 87,102 44,971 38,829

Borrowings 19 412,400 215,000 – –

Income tax payable 7,685 13,154 – –

Total current liabilities 1,079,301 876,467 44,971 38,829

Non-current liabilitiesDeferred tax liabilities 16 1,752 1,167 – –

Borrowings 19 29,537 44,185 – –

Total non-current liabilities 31,289 45,352 – –

Capital and reservesShare capital 20 27,230 27,230 27,230 27,230

Share premium 35,275 35,275 35,275 35,275

General reserves 21 37,881 35,305 – –

Accumulated profi ts 367,435 284,172 54,301 61,439

Equity attributable to equity holders of

the Company 467,821 381,982 116,806 123,944

Non-controlling interest 23,855 24,149 – –

Total equity 491,676 406,131 116,806 123,944

Total liabilities and equity 1,602,266 1,327,950 161,777 162,773

See accompanying notes to fi nancial statements.

Consolidated Statement of Comprehensive IncomeFor year ended December 31, 2011


GROUPNote 2011 2010

RMB’000 RMB’000

Revenue 22 1,248,982 940,792

Cost of sales (975,534) (697,257)

Gross profi t 273,448 243,535

Other operating income 23 9,298 8,540

Selling and distribution expenses (32,574) (27,873)

Administrative expenses (119,281) (98,873)

Other operating expenses (655) (28)

Finance costs 24 (27,299) (12,138)

Profi t before income tax 25 102,937 113,163

Income tax expense 26 (18,267) (20,231)

Profi t for the year representing total comprehensive income for the year 84,670 92,932

Total comprehensive income for the year attributable to:

Equity holders of the Company 90,964 86,557

Non- controlling interest (6,294) 6,375

Profi t for the year 84,670 92,932

Earnings per share (RMB cents)- Basic 27 27.65 26.31

- Diluted 27 27.65 26.31


Statements of Changes in Equity


For year ended December 31, 2011

Sharecapital

Sharepremium

Generalreserves

Accumulatedprofi ts

Equityattributable

to equityholders of the

Company

Non-controlling

interest TotalRMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

GROUP

Balance at January 1, 2010 27,230 35,275 29,289 203,631 295,425 20,259 315,684

Total comprehensive income

for the year – – – 86,557 86,557 6,375 92,932

Payment to non-controlling

interest – – – – – (2,485) (2,485)

Transfer to general reserves

(Note 21) – – 6,016 (6,016) – – –

Balance at December 31, 2010 27,230 35,275 35,305 284,172 381,982 24,149 406,131


for the year – – – 90,964 90,964 (6,294) 84,670

Dividend paid (Note 28) – – – (5,125) (5,125) – (5,125)

Contribution by non-

controlling interest – – – – – 6,000 6,000

Transfer to general reserves

(Note 21) – – 2,576 (2,576) – – –

Balance at December 31, 2011 27,230 35,275 37,881 367,435 467,821 23,855 491,676

COMPANYBalance at January 1, 2010 27,230 35,275 – 75,883 138,388 – 138,388


for the year – – – (14,444) (14,444) – (14,444)

Balance at December 31, 2010 27,230 35,275 – 61,439 123,944 – 123,944


for the year – – – (2,013) (2,013) – (2,013)

Dividend paid (Note 28) – – – (5,125) (5,125) – (5,125)

Balance at December 31, 2011 27,230 35,275 – 54,301 116,806 – 116,806


Consolidated Statement of Cash FlowsFor year ended December 31, 2011


GROUP2011 2010

RMB’000 RMB’000

Operating activitiesProfi t before income tax 102,937 113,163

Adjustments for:

Depreciation expense 13,531 10,840

Interest expense 27,299 12,138

Amortisation of land use rights 1,240 696

Exchange differences arising on foreign currency translation 65 55

Amortisation of trademark 292 293

Loss (Gain) on disposal of property, plant and equipment 8 (1,792)

Impairment allowance on inventories 1,974 32

Interest income (1,376) (1,446)

(Reversal of) Impairment of allowance on trade receivables (432) 2,305

Operating cash fl ows before movements in working capital 145,538 136,284

Trade receivables (197,370) (207,836)

Other receivables and prepayments (4,259) (52,968)

Inventories (132,755) 50,940

Trade payables (14,469) 173,469

Other payables (14,472) 22,310

Cash (used in) generated from operations (217,787) 122,199

Income tax paid (26,265) (11,643)

Interest received 1,376 1,446

Interest paid (25,283) (13,623)

Net cash (used in) from operating activities (267,959) 98,379

Investing activitiesPurchase of property, plant and equipment (74,870) (53,056)

Purchase of land use rights (16,225) (19,337)

Proceeds from disposal of property, plant and equipment 35 2,854

Net cash used in investing activities (91,060) (69,539)

Financing activitiesProceeds from new borrowings 521,139 247,103

Advance from a related party 38,180 –

Pledged bank deposits 9,195 (2,055)

Contributions from non-controlling interest holders 6,000 –

Issuance of term note, net of issue cost – 29,185

Payment of dividends to non-controlling interest shareholders – (2,485)

Payment of dividend (5,125) –

Repayment of borrowings (338,739) (260,245)

Net cash from fi nancing activities 230,650 11,503

Net (decrease) increase in cash and cash equivalents (128,369) 40,343

Cash and bank balances at beginning of year 235,985 195,697

Effects of foreign exchange rate changes (65) (55)

Cash and bank balances at end of year (Note 6) 107,551 235,985


Notes to Financial Statements



1 GENERAL

The Company is incorporated in Bermuda, under the Companies Act 1981 of Bermuda, with its registered

offi ce at Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda and principal place of business

at No. 2111 Chengxin Road, Nanjing Jiangning Science Park, Nanjing, China 211112. The Company is

listed on the Singapore Exchange Securities Trading Limited. The fi nancial statements are expressed in

Chinese Renminbi (“RMB”).

The principal activity of the Company is that of investment holding. The principal activities of the

subsidiaries are detailed in Note 14 to the fi nancial statements.

The consolidated fi nancial statements of the Group and statement of fi nancial position and statement of

changes in equity of the Company for the fi nancial year ended December 31, 2011 were authorised for

issue by the Board of Directors on March 27, 2012.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF ACCOUNTING - The fi nancial statements have been prepared in accordance with the historical

cost basis, except as disclosed below, and are drawn up in accordance with the provisions of the

Singapore Financial Reporting Standards (“FRS”).

ADOPTION OF NEW AND REVISED FINANCIAL REPORTING STANDARDS - In the current

fi nancial year, the Group has adopted all the new and revised FRSs and Interpretations of FRS

(“INT FRS”) that are relevant to its operations and effective for annual periods beginning on or after

January 1, 2011. The adoption of these new/revised FRSs and INT FRSs does not result in changes to

the Group’s and Company’s accounting policies and has no material effect on the amounts reported for

the current or prior years.

At the date of authorisation of these fi nancial statements, the management anticipates that the adoption

of the FRS, INT FRS and amendment to FRS that were issued but not effective until future periods will

have no material impact on the fi nancial statements of the Group and the Company in the year of their

initial adoption.

BASIS OF CONSOLIDATION - The consolidated fi nancial statements incorporate the fi nancial statements

of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the

Company has the power to govern the fi nancial and operating policies of an entity so as to obtain benefi ts

from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated

statement of comprehensive income from the effective date of acquisition or up to the effective date of

disposal, as appropriate.

Where necessary, adjustments are made to the fi nancial statements of subsidiaries to bring their

accounting policies into line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Non-controlling interests in subsidiaries are identified separately from the Group’s entity therein.

The interest of non-controlling shareholders may be initially measured (at date of original business

combination) either at fair value or at the non-controlling interests’ proportionate share of the fair value

of the acquiree’s identifi able net assets. The choice of measurement basis is made on an acquisition-

by-acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the

amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent

changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results

in the non-controlling interest having a defi cit balance.

Notes to Financial StatementsFor year ended December 31, 2011


2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for

as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests

are adjusted to refl ect the changes in their relative interests in the subsidiary. Any difference between the

amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or

received is recognised directly in equity and attributed to owners of the Company.

When the Group loses control of a subsidiary, the profi t or loss on disposal is calculated as the difference

between (i) the aggregate of the fair value of the consideration received and the fair value of any retained

interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the

subsidiary and any non-controlling interests. Amounts previously recognised in other comprehensive

income in relation to the subsidiary are accounted for (i.e. reclassifi ed to profi t or loss or transferred

directly to retained earnings) in the same manner as would be required if the relevant assets or liabilities

were disposed of. The fair value of any investment retained in the former subsidiary at the date when

control is lost is regarded as the fair value on initial recognition for subsequent accounting under FRS 39

Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of

an investment in an associate or jointly controlled entity.

In the Company’s fi nancial statements, investment in subsidiary is carried at cost less any impairment in

net recoverable value that has been recognised in the profi t or loss.

BUSINESS COMBINATIONS - Acquisitions of subsidiaries and businesses are accounted for using the

acquisition method. The consideration for each acquisition is measured at the aggregate of the acquisition

date fair values of assets given, liabilities incurred by the Group to the former owners of the acquiree, and

equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are

recognised in profi t or loss as incurred.

Where applicable, the consideration for the acquisition includes any asset or liability resulting from a

contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes

in such fair values are adjusted against the cost of acquisition where they qualify as measurement period

adjustments (see below). The subsequent accounting for changes in the fair value of the contingent

consideration that do not qualify as measurement period adjustments depends on how the contingent

consideration is classifi ed. Contingent consideration that is classifi ed as equity is not remeasured at

subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent

consideration that is classifi ed as an asset or a liability is remeasured at subsequent reporting dates in

accordance with FRS 39 Financial Instruments: Recognition and Measurement, or FRS 37 Provisions,

Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being

recognised in profi t or loss.

Where a business combination is achieved in stages, the Group’s previously held interests in the acquired

entity are remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the

resulting gain or loss, if any, is recognised in profi t or loss. Amounts arising from interests in the acquiree

prior to the acquisition date that have previously been recognised in other comprehensive income are

reclassifi ed to profi t or loss, where such treatment would be appropriate if that interest were disposed of.





The acquiree’s identifi able assets, liabilities and contingent liabilities that meet the conditions for

recognition under the FRS are recognised at their fair value at the acquisition date, except that:

deferred tax assets or liabilities and liabilities or assets related to employee benefi t arrangements

are recognised and measured in accordance with FRS 12 Income Taxes and FRS 19 Employee

Benefi ts respectively;

liabilities or equity instruments related to the replacement by the Group of an acquiree’s share-

based payment awards are measured in accordance with FRS 102 Share-based Payment; and

assets (or disposal groups) that are classifi ed as held for sale in accordance with FRS 105 Non-

current Assets Held for Sale and Discontinued Operations are measured in accordance with that

Standard.

If the initial accounting for a business combination is incomplete by the end of the reporting period in

which the combination occurs, the Group reports provisional amounts for the items for which the

accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see

below), or additional assets or liabilities are recognised, to refl ect new information obtained about facts

and circumstances that existed as of the acquisition date that, if known, would have affected the amounts

recognised as of that date.

The measurement period is the period from the date of acquisition to the date the Group obtains

complete information about facts and circumstances that existed as of the acquisition date – and is

subject to a maximum of one year from acquisition date.

The accounting policy for initial measurement of non-controlling interests is described above.

FINANCIAL INSTRUMENTS - Financial assets and fi nancial liabilities are recognised on the Group’s

statement of fi nancial position when the Group becomes a party to the contractual provisions of the

instrument.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a fi nancial instrument and of

allocating interest income or expense over the relevant period. The effective interest rate is the rate that

exactly discounts estimated future cash receipts or payments through the expected life of the fi nancial

instrument, or where appropriate, a shorter period. Income and expense is recognised on an effective

interest basis for debt instruments.

Financial assets

Trade and other receivables

Trade and other receivables that have fi xed or determinable payments that are not quoted in an active

market are classifi ed as “trade” and “other receivables” respectively. These are measured at amortised

cost using the effective interest method less impairment. Interest is recognised by applying the effective

interest method, except for short-term receivables when the recognition of interest would be immaterial.

Cash and cash equivalents

Cash and bank balances comprise cash on hand and demand deposits and other short-term highly liquid

investments that are readily convertible to a known amount of cash and are subject to an insignifi cant risk

of changes in value.



2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d) Impairment of fi nancial assets

Financial assets are assessed for indicators of impairment at the end of each reporting period.

Financial assets are impaired where there is objective evidence that, as a result of one or more events

that occurred after the initial recognition of the fi nancial asset, the estimated future cash fl ows of the

investment have been impacted. For fi nancial assets carried at amortised cost, the amount of the

impairment is the difference between the asset’s carrying amount and the present value of estimated

future cash fl ows, discounted at the original effective interest rate.

The carrying amount of the fi nancial asset is reduced by the impairment loss directly for all fi nancial

assets with the exception of trade receivables where the carrying amount is reduced through the use

of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance

account. Subsequent recoveries of amounts previously written off are credited against allowance

account. Changes in the carrying amount of the allowance account are recognised in profi t or loss.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related

objectively to an event occurring after the impairment loss was recognised, the previously recognised

impairment loss is reversed through profi t or loss to the extent the carrying amount of the investment at

the date the impairment is reversed does not exceed what the amortised cost would have been had the

impairment not been recognised.

Derecognition of fi nancial assets

The Group derecognises a fi nancial asset only when the contractual rights to the cash fl ows from the

asset expire, or it transfers the fi nancial asset and substantially all the risks and rewards of ownership of

the asset to another entity. If the Group neither transfers nor retains substantially all the risk and rewards

of ownership and continues to control the transferred asset, the Group recognises its retained interest in

the assets and an associated liability for amounts it may have to pay. If the Group retains substantially all

the risks and rewards of ownership of a transferred fi nancial asset, the Group continues to recognise the

fi nancial asset and also recognises a collateralised borrowing for the proceeds received.

Financial liabilities and equity instruments

Classifi cation as debt or equity

Financial liabilities and equity instruments issued by the Group are classifi ed according to the substance

of the contractual arrangements entered into and the defi nitions of a fi nancial liability and an equity

instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Group after

deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue

costs.





Financial liabilities

Trade and other payables are initially measured at fair value, net of transaction costs, and are

subsequently measured at amortised cost, using the effective interest method, with interest expense

recognised on an effective yield basis.

Interest-bearing bank loans are initially measured at fair value, and are subsequently measured at

amortised cost, using the effective interest method. Any difference between the proceeds (net of

transaction costs) and the settlement or redemption of borrowings is recognised over the term of the

borrowings in accordance with the Group’s accounting policy for borrowing costs (see below).

Financial guarantee contract liabilities are measured initially at their fair values and subsequently at the

higher of the amount recognised as a provision and the amount initially recognised less cumulative

amortisation in accordance with the revenue recognition policies described below.

Financial guarantee contracts

A fi nancial guarantee contract is a contract that requires the issuer to make specifi ed payments to

reimburse the holder for a loss it incurs because a specifi ed debtor fails to make payment when due

in accordance with the original or modifi ed terms of a debt instrument. A fi nancial guarantee contract

issued by the company and not designated as at fair value through profi t or loss is recognised initially

at its fair value less transaction costs that are directly attributable to the issue of the fi nancial guarantee

contract. Subsequent to initial recognition, the company measures the fi nancial guarantee contract at

the higher of: (i) the amount determined in accordance with FRS 37, Provisions, Contingent Liabilities and

Contingent Assets; and (ii) the amount initially recognised less, when appropriate, cumulative amortisation

recognition with FRS 18 Revenue.

Derecognition of fi nancial liabilities

The Group derecognises fi nancial liabilities when, and only when, the Group’s obligations are discharged,

cancelled or expired.

LEASES - Leases are classifi ed as fi nance leases whenever the terms of the lease transfer substantially all

the risks and rewards of ownership to the lessee. All other leases are classifi ed as operating leases.

Rentals payable under operating leases are charged to statement of comprehensive income on a straight-

line basis over the term of the relevant lease unless another systematic basis is more representative of the

time pattern in which economic benefi ts from the leased asset are consumed. Contingent rentals arising

under operating leases are recognised as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are

recognised as a liability. The aggregate benefi t of incentives is recognised as a reduction of rental

expense on a straight-line basis, except where another systematic basis is more representative of the time

pattern in which economic benefi ts from the leased asset are consumed.

INVENTORIES - Inventories are measured at the lower of cost and net realisable value. Costs comprise

direct material and where applicable, direct labour and those overheads that have been incurred in

bringing the inventories to their present location and condition. Cost is calculated using the weighted

average method. Net realisable value represents the estimated selling price less all estimated costs to

completion and costs to be incurred in marketing, selling and distribution.




PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are carried at cost, less

accumulated depreciation and any impairment loss where the recoverable amount of the asset is

estimated to be lower than its carrying amount.

Properties in the course of construction for production, rental or administration purpose, or for purposes

not yet determined, are carried at cost, less any recognised impairment loss. Cost includes professional

fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting

policy. Depreciation of these assets, on the same basis as other property assets, commences when the

assets are ready for their intended use.

Depreciation is charged so as to write off the cost of the assets over their estimated useful lives, using the

straight-line method, as follows:

Buildings - 5%

Leasehold improvements - 20%

Plant and machinery - 10%

Furniture, fi xtures and equipment - 20%

Motor vehicles - 20%

No depreciation is provided on construction-in-progress.

Fully depreciated assets are retained in the fi nancial statements until they are no longer in use.

The estimated useful lives, residual values and depreciation method are reviewed at each year end, with

the effect of any changes in estimate accounted for on a prospective basis.

The gain or loss arising on disposal or retirement of an item of property, plant and equipment is

determined as the difference between the sales proceeds and the carrying amounts of the asset and is

recognised in the statement of comprehensive income.

INTANGIBLE ASSETS

Intangible assets acquired separately

Intangible assets acquired separately are reported at cost less accumulated amortisation and

accumulated impairment losses. Intangible assets with fi nite useful lives are amortised on a straight-line

basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed

at the end of each annual reporting period, with the effect of any changes in estimate being accounted

for on a prospective basis. Intangible assets with indefi nite useful lives are not amortised. Each period,

the useful lives of such assets are reviewed to determine whether events and circumstances continue

to support an indefi nite useful life assessment for the asset. Such assets are tested for impairment in

accordance with the policy below.





Internally-generated intangible assets - research and development expenditure

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from development (or from the development phase of an

internal project) is recognised if, and only if, all of the following have been demonstrated:

the technical feasibility of completing the intangible asset so that it will be available for use or sales;

the intention to complete the intangible asset and use or sell it;

the ability to use or sell the intangible asset;

how the intangible asset will generate probable future economic benefi ts;

the availability of adequate technical, fi nancial and other resources to complete the development

and to use or sell the intangible asset; and

the ability to measure reliably the expenditure attributable to the intangible asset during its

development.

The amount initially recognised for internally-generated intangible assets is the sum of the expenditure

incurred from the date when the intangible asset fi rst meets the recognition criteria listed above. Where

no internally-generated intangible asset can be recognised, development expenditure is charged to

statement of comprehensive income in the period in which it is incurred.

Subsequent to initial recognition, internally-generated intangible assets are reported at cost less

accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets

acquired separately.

TRADEMARK - The trademark is measured initially at purchase cost and is amortised on a straight-line

basis over its estimated useful life of 10 years.

LAND USE RIGHTS - Leasehold land premiums are up-front payments to acquire long term interest in

lessee-occupied properties. The premiums are stated at cost and are amortised over the period of the

lease of between 30 to 50 years on a straight-line basis to profi t or loss.

IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS - At the end of each reporting period, the

Group reviews the carrying amounts of its tangible and intangible assets to determine whether there

is any indication that those assets have suffered an impairment loss. If any such indication exists, the

recoverable amount of the asset is estimated in order to determine the extent of the impairment loss

(if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group

estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Intangible assets with indefi nite useful lives and intangible assets not yet available for use are tested for

impairment annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in

use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate

that refl ects current market assessments of the time value of money and the risks specifi c to the asset.




If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying

amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An

impairment loss is recognised immediately in the profi t or loss, unless the relevant asset is carried at a

revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating

unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying

amount does not exceed the carrying amount that would have been determined had no impairment loss

been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is

recognised immediately in the profi t or loss, unless the relevant asset is carried at a revalued amount, in

which case the reversal of the impairment loss is treated as a revaluation increase.

PROVISIONS - Provisions are recognised when the Group has a present obligation (legal or constructive)

as a result of a past event, it is probable that the Group will be required to settle the obligation, and a

reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the

present obligation at the end of the reporting period, taking into account the risks and uncertainties

surrounding the obligation. Where a provision is measured using the cash fl ows estimated to settle the

present obligation, its carrying amount is the present value of those cash fl ows.

When some or all of the economic benefi ts required to settle a provision are expected to be recovered

from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will

be received and the amount of the receivable can be measured reliably.

SHARE-BASED PAYMENTS - The Group has an employee share option scheme under which it can issue

equity-settled share-based payments to certain employees. Equity-settled share-based payments are

measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on

a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually

vest and adjusted for the effect of non market-based vesting conditions.

Fair value is measured using the Black-Scholes pricing model. The expected life used in the model has

been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise

restrictions and behavioural considerations.

GOVERNMENT GRANTS - Government grants are not recognised when there is reasonable assurance

that the Group will comply with the conditions attaching to them and the grants will be received.

Government grants whose primary condition is that the Group should purchase, construct or otherwise

acquire non-current assets are recognised as deferred income in the statement of fi nancial position and

transferred to profi t or loss on a systematic and rational basis over the useful lives of the related assets.

Other government grants are recognised as income over the periods necessary to match them with

the costs for which they are intended to compensate, on a systematic basis. Government grants that

are receivable as compensation for expenses or losses already incurred or for the purpose of giving

immediate fi nancial support to the Group with no future related costs are recognised in the profi t or loss in

the period in which they become receivable.

REVENUE RECOGNITION - Revenue is measured at the fair value of the consideration received or

receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.





Sale of goods

Revenue from the sale of goods is recognised when all the following conditions are satisfi ed:

the Group has transferred to the buyer the signifi cant risks and rewards of ownership of the goods;

the Group retains neither continuing managerial involvement to the degree usually associated with

ownership nor effective control over the goods sold;

the amount of revenue can be measured reliably;

it is probable that the economic benefi ts associated with the transaction will fl ow to the entity; and

the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Specifi cally, revenue from the sale of goods is recognised when the goods are delivered and legal title is

passed.

Rendering of services

Revenue from a contract to provide services is recognised by reference to the stage of completion of the

contract. The stage of completion of the contract is determined as follows:

servicing fees included in the price of products sold are recognised by reference to the proportion

of the total cost of providing the servicing for the product sold, taking into account historical trends

in the number of services actually provided on past goods sold;

revenue from time and material contracts is recognised at the contractual rates as labour hours are

delivered and direct expenses are incurred; and

income from providing fi nancial guarantee is recognised in profi t or loss over the guarantee period

on a straight-line basis.

Construction contracts

Where the outcome of a construction contract can be estimated reliably, revenue and costs are

recognised by reference to the stage of completion of the contract activity at the end of the reporting

period, measured as the proportion that contract costs incurred for work performed to date bear to the

estimated total contract costs, except where this would not be representative of the stage of completion.

Variations in contract work, claims and incentive payments are included to the extent that they have been

agreed with the customer.

Where the outcome of a construction contract cannot be estimated reliably, contract revenue is

recognised to the extent of contract costs incurred that it is probable will be recoverable. Contract costs

are recognised as expenses in the period in which they are incurred.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is

recognised as an expense immediately.




Interest income

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective

interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the

expected life of the fi nancial asset to that assets’ net carrying amount.

Dividend income

Dividend income from investments is recognised when the shareholders’ rights to receive payment have

been established.

BORROWING COSTS - Borrowing costs directly attributable to the acquisition, construction or production

of qualifying assets, which are assets that necessarily take a substantial period of time to get ready

for their intended use or sale, are added to the cost of those assets, until such time as the assets are

substantially ready for their intended use or sale. Investment income earned on the temporary investment

of specifi c borrowings pending their expenditure on qualifying assets is deducted from the borrowing

costs eligible for capitalisation.

All other borrowing costs are recognised in profi t or loss in the period in which they are incurred.

RETIREMENT BENEFIT COSTS - Payments to defi ned contribution retirement benefi t plans are charged

as an expense as they fall due. Payments made to state-managed retirement benefi t schemes are

dealt with as payments to defi ned contribution plans where the Group’s obligations under the plans are

equivalent to those arising in a defi ned contribution retirement benefi t plan.

EMPLOYEE LEAVE ENTITLEMENT - Employee entitlements to annual leave are recognised when they

accrue to employees. A provision is made for the estimated liability for annual leave as a result of services

rendered by employees up to the end of the reporting period.

INCOME TAX - Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profi t for the year. Taxable profi t differs from profi t as

reported in the statement of comprehensive income because it excludes items of income or expense

that are taxable or deductible in other years and it further excludes items that are not taxable or tax

deductible. The Group’s liability for current tax is calculated using tax rates (and tax laws) that have been

enacted or substantively enacted in countries where the subsidiaries operate by the end of the reporting

period.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the

fi nancial statements and the corresponding tax bases used in the computation of taxable profi t, and are

accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for

all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable

that taxable profi ts will be available against which deductible temporary differences can be utilised. Such

assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial

recognition (other than in a business combination) of other assets and liabilities in a transaction that

affects neither the taxable profi t nor the accounting profi t.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is

settled or the asset realised based on the tax rates (and tax laws) that have been enacted or substantively

enacted by the end of the reporting period. Deferred tax is charged or credited to statement of

comprehensive income, except when it relates to items charged or credited directly to equity, in which

case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is

a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to

income taxes levied by the same taxation authority and the Group intends to settle its current tax assets

and liabilities on a net basis.





Current and deferred tax are recognised as an expense or income in the statement of comprehensive

income, except when they relate to items credited or debited directly to equity, in which case the

tax is also recognised directly in equity, or where they arise from the initial accounting for a business

combination. In the case of a business combination, the tax effect is taken into account in calculating

goodwill or determining the excess of the acquirer’s interest in the net fair value of the acquiree’s

identifi able assets, liabilities and contingent liabilities over cost.

FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION - The individual fi nancial statements of

each group entity are measured and presented in the currency of the primary economic environment in

which the entity operates (its functional currency). The consolidated fi nancial statements of the Group

and the statement of fi nancial position and statement of changes in equity of the Company are presented

in Chinese Renminbi (“RMB”), which is the functional currency of the Company and the Group, and the

presentation currency for the consolidated fi nancial statements.

The consolidated fi nancial statements of the Group and the statement of fi nancial position and statement

of changes in equity of the Company are presented in Renminbi, which is the functional currency of

the principal entities in the People’s Republic of China (“PRC”), and the presentation currency for the

consolidated fi nancial statements. The choice of presentation currency is to better refl ect the currency

that mainly determines economic effects of transactions, events and conditions of the Group.

In preparing the fi nancial statements of the individual entities, transactions in currencies other than the

entity’s functional currency are recorded at the rates of exchange prevailing on the date of the transaction.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at

the rates prevailing on the end of the reporting period. Non-monetary items carried at fair value that are

denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value

was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency

are not retranslated.

Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items

are included in profi t or loss for the period. Exchange differences arising on the retranslation of non-

monetary items carried at fair value are included in statement of comprehensive income for the period

except for differences arising on the retranslation of non-monetary items in respect of which gains and

losses are recognised directly in other comprehensive income. For such non-monetary items, any

exchange component of that gain or loss is also recognised directly in other comprehensive income.

For the purpose of presenting consolidated fi nancial statements of the Group and the statement of

fi nancial position and the statement of changes in equity of the Company, the assets and liabilities of

the Group’s non-PRC foreign operations (including comparatives) are expressed in RMB using exchange

rates prevailing on the end of the reporting period. Income and expense items (including comparatives)

are translated at the average exchange rates for the period, unless exchange rates fl uctuated signifi cantly

during that period, in which case the exchange rates at the dates of the transactions are used. Exchange

differences arising, if any, are recognised in other comprehensive income and accumulated in a separate

component of equity. Such translation differences are recognised in statement of comprehensive income

in the period in which the foreign operation is disposed.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets

and liabilities of the foreign operation and translated at the closing rate.




RESERVES - Pursuant to relevant laws and regulations in the PRC applicable to foreign investment

enterprises and the Articles of Association of the PRC subsidiaries, the subsidiaries are required to

maintain three statutory reserves, being a statutory surplus reserve fund, an enterprise fund and a staff

welfare and bonus fund which are non-distributable. Appropriations to such reserves are made out of

profi t after taxation of the statutory fi nancial statements of the subsidiaries. The subsidiaries are required

to transfer 10% of their profi t after taxation as reported in its PRC statutory fi nancial statements to the

statutory surplus reserve fund until the balance reaches 50% of its registered capital. The statutory

surplus reserve fund can be used to make up prior year losses incurred and, with approval from relevant

government authority, to increase capital.

The subsidiaries are also required to make appropriation from profi t after taxation as reported in the

PRC statutory fi nancial statements to the enterprise expansion fund at rates determined by the Board of

Directors. The enterprise expansion fund, subject to approval by relevant government authority, may also

be used to increase capital.

3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are described in Note 2 to the fi nancial

statements, management is required to make judgements, estimates and assumptions about the carrying

amounts of assets and liabilities that are not readily apparent from other sources. The estimates and

associated assumptions are based on historical experience and other factors that are considered to be

relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting

estimates are recognised in the period in which the estimate is revised if the revision affects only that

period, or in the period of the revision and future periods if the revision affects both current and future

periods.

i) Critical judgements in applying the Group’s accounting policies

In the application of the Group’s accounting policies, which are described in Note 2 to the fi nancial

statements, management is of the opinion that any instances of application of judgements are not

expected to have a signifi cant effect on the amounts recognised in fi nancial statements.

ii) Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at

the end of the reporting period, that have a signifi cant risk of causing a material adjustment to the

carrying amounts of assets and liabilities within the next fi nancial year, are discussed below.




3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (cont’d)

ii) Key sources of estimation uncertainty (cont’d)

Assessment of recoverability of trade and other receivables

As stated in Note 2 to the fi nancial statements, trade and other receivables are carried at amortised

cost using the effective interest method, less any impairment losses. Appropriate allowances for

estimated irrecoverable amounts are recognised in profi t or loss when there is objective evidence

that the asset is impaired.

In making the judgement, management considered the detailed procedures that have been in place

to monitor this risk as a signifi cant proportion of the Group’s working capital is devoted to trade

and other receivables. In determining whether an allowance for bad and doubtful debts is required,

the Group takes into consideration the aging status and the likelihood of collection. Following

the identifi cation of doubtful debts, the responsible sales personnel discuss with the relevant

customers and report on the recoverability; specifi c allowance is only made for trade receivables

that are unlikely to be collected. In this regard, management is satisfi ed that this risk is minimal and

adequate allowance for doubtful debts has been made in the fi nancial statements in the light of the

historical records of the Group.

The carrying amount of the trade and other receivables is disclosed in Notes 8 and 9 to the

fi nancial statements.

Allowances for inventories

As stated in Note 2 to the fi nancial statements, inventories are stated at the lower of cost and

net realisable value. Net realisable value is the estimated selling price in the ordinary course of

business, less the estimated costs of selling expenses.

Operational procedures have been in place to monitor this risk as a signifi cant portion of the

working capital is devoted to inventories. Management reviews the inventory ageing list on a

periodic basis for those aged inventories. This involves comparison of carrying value of the aged

inventory items with the respective net realisable value. The purpose is to ascertain whether

allowance is required to be made in the fi nancial statements for any obsolete and slow-moving

items. In addition, physical count on all inventories is carried out on a periodic basis in order to

determine whether allowance is needed to be made in respect of any obsolete and defective

inventories identifi ed. In this regard, management is satisfi ed that this risk is minimal and adequate

provision for obsolete and slow-moving inventories has been made in the fi nancial statements.

The carrying amount of the inventories is disclosed in Note 10 to the fi nancial statements.

Useful lives of property, plant and equipment

As stated in Note 2 to the fi nancial statements, depreciation is provided to write off the cost of

property, plant and equipment over their estimated useful lives, using the straight-line method.

The management exercises judgement in estimating the useful lives of the depreciable assets.

The carrying amount of the property, plant and equipment is disclosed in Note 13 to the fi nancial

statements.



3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (cont’d)

ii) Key sources of estimation uncertainty (cont’d)

Revenue and costs of construction for long term contracts

As described in Note 2 to the fi nancial statements, revenue and costs associated with a project

are recognised as revenue and expenses respectively by reference to the stage of completion

of a project activity at the end of the reporting period, measured as the proportion that contract

costs incurred for work performed to date bear to the estimated total contract costs, except where

this would not be representative of the stage of completion. Variations in contract work, claims

and incentive payments are included to the extent that they have been agreed with the customer.

When it is probable that the total project costs will exceed the total project revenue, the expected

loss is recognised as an expense immediately. These computations are based on the presumption

that the outcome of a project can be estimated reliably.

Management has performed the cost studies, taking into account the costs to date and costs to

complete each project. Management has also reviewed the status and the physical proportion of

the contract work completed of such projects and is satisfi ed that the estimates to complete are

realistic, and the estimates of total project costs and sales proceeds indicate full project recovery.

4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT

(a) Capital risk management policies and objectives

The Group manages its capital to ensure that entities in the Group will be able to continue as a

going concern while maximising the return to stakeholders through the optimisation of the debt and

equity balance, and to ensure that all externally imposed capital requirements are compiled with.

The capital structure of the Group consists of debt, which includes the bank borrowings, cash and

cash equivalents and equity attributable to equity holders of the Company, comprising paid up

capital, accumulated profi ts and other reserves.

The Group’s management reviews the capital structure on an on-going basis. As a part of this

review, the management considers the cost of capital and the risks associated with each class of

capital. Based on recommendations of the management, the Group will balance its overall capital

structure through the payment of dividends, new share issues as well as the issue of new debt or

the redemption of existing debt.

The Group’s overall strategy remains unchanged from prior year. As at the end of the reporting

period, the Group is in compliance with all capital requirements on its external borrowings.




4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (cont’d)

(b) Categories of fi nancial instruments

The following table sets out the fi nancial instruments as at the end of the reporting period:

GROUP COMPANY2011 2010 2011 2010

RMB’000 RMB’000 RMB’000 RMB’000

Financial assets

Loans and receivables 1,043,458 982,216 806 1,841

(including cash and bank balances

and pledged bank deposits)

Financial guarantee contracts – – 1,850 1,850

Financial liabilities

Trade and other payables 659,216 648,313 44,971 38,829

Bank loans 441,937 259,185 – –

(c) Financial risk management policies and objectives

The management of the Group monitors and manages the fi nancial risks relating to the operations

of the Group to minimise adverse potential effects of fi nancial performance. These risks include

market risk (including currency risk and interest rate risk), credit risk, liquidity risk and interest rate

risk.

(i) Market risk

The Group’s activities expose it primarily to the fi nancial risks of changes in foreign currency

exchange rates and interest rates. The management monitors risks associated with changes

in foreign currency exchange rates and interest rates, and will consider appropriate measures

should the need arise.

There has been no change to the Group’s exposure to market risk or the manner in which it

manages and measures the risk.

(ii) Foreign exchange risk management

The principal entities in the Group transact businesses signifi cantly in Renminbi (“RMB”)

which is also the functional currency of the principal entities in the Group and therefore

exposure to foreign currency risk, such as United States Dollars (“US$”), Euro Dollars (“Euro”)

and Singapore Dollars (“S$”), is minimal.




(c) Financial risk management policies and objectives (cont’d)

(ii) Foreign exchange risk management (cont’d)

The carrying amounts of foreign currency denominated monetary assets and monetary liabilities denominated in currencies other than the respective group entities’ functional currencies at the reporting date are as follows:

2011 2012US$ S$ Others* US$ S$ Others*

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

GROUP

Cash and bank balances 8,050 4,927 423 1,099 332 6

Trade receivables 9,989 – 410 111 – 864

Trade payables (190) – (41) (82) – (44)

COMPANY

Cash and bank balances 3 649 1 3 331 3

* made up of Euro Dollars, British Pounds and Hong Kong Dollars.

The Company has a number of investments in foreign subsidiaries, whose net assets are exposed to currency translation risk. The Group does not currently designate its foreign currency denominated debt as a hedging instrument for the purpose of hedging the translation of its foreign operations.

Foreign currency sensitivity

The following table details the sensitivity to a 5% increase in the Renminbi (“RMB”) against the relevant foreign currencies. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 5% change in foreign currency rates. A positive number below indicates an increase in profi t or loss, where relevant currency strengthens 5% against RMB.

US$ impact S$ impact Others impact2011 2010 2011 2010 2011 2010


GROUP

Profi t or loss 892 56 246 17 40 41

COMPANY

Profi t or loss – – 32 17 – –

For a 5% weakening of the relevant currency against RMB, there would be an equal and opposite impact on the profi t.






(iii) Interest rate risk management

The Group is exposed to interest rate risk as the Group borrows funds at both fi xed and

fl oating interest rates. The risk is managed by the Group by maintaining an appropriate mix

between fi xed and fl oating rate borrowings. The Group currently does not have an interest

rate hedging policy. However, the management monitors interest rate exposure and will

consider restructuring the Group’s credit facilities should the need arise.

The Group’s exposures to interest rate risk arising from its fi nancial liabilities are detailed in

the liquidity risk management section set out below.

Interest rate sensitivity

The sensitivity analyses below have been determined based on the exposure to interest

rates for non-derivative instruments at the end of the reporting period. For variable-rate bank

borrowings, the analysis is prepared assuming the amount of liability outstanding at the end

of the reporting period was outstanding for the whole year. A 100 basis points increase or

decrease is used when reporting interest rate risk internally to key management personnel

and represents management’s assessment of the possible change in interest rates.

If interest rate had been 100 basis points higher/lower and all other variables were held

constant, the Group’s profit for the financial year ended December 31, 2011 would

decrease/increase by RMB1,357,000 (2010 : decrease/increase by RMB1,717,000).

This is mainly attributable to the Group’s exposure to interest rates on its variable rate

borrowings.

The Group’s sensitivity to interest rates has increased during the current fi nancial year mainly

due to the increase in variable rate bank loans.

(iv) Credit risk management

Credit risk refers to the risk that the counterparty will default on its contractual obligations

resulting in fi nancial loss to the Group. The Group has adopted a policy of only dealing

with creditworthy counterparties and obtaining suffi cient collateral where appropriate,

as a means of mitigating the risk of fi nancial loss from defaults. This information is

supplied by independent rating agencies where available and, if not available, the Group

uses other publicly available fi nancial information and its own trading records to rate

its major customers. The Group’s exposure and the credit ratings of its counterparties

are continuously monitored and the aggregate value of transactions concluded is spread

amongst approved counterparties. Credit exposure is controlled by the counterparty limits

that are reviewed and approved by the management.

The Group’s credit risk primarily relates to the Group’s trade and other receivables, trade

prepayments and pledged bank deposits. The management of the Group generally grants

credit only to customers with good credit ratings and also closely monitors overdue trade

debts. The recoverable amount of each individual trade debt is reviewed at the end of each

reporting period and adequate allowance for doubtful debts has been made for irrecoverable

amounts. In this regard, the management of the Group considers that the credit risk

associated with the Group’s trade receivable and trade prepayments is signifi cantly reduced.





(iv) Credit risk management (cont’d)

The top fi ve raw material suppliers did not account for any of the carrying amount of trade

prepayments as at December 31, 2011. In order to minimise the risk, trade prepayments

are generally made to suppliers with good credit ratings and with good trading history with

the Group.

The credit risk in relation to the Group’s pledged bank deposits is not signifi cant as the

corresponding banks are reputable banking institutions in the PRC.

The maximum exposure to credit risk in the event that the counterparties fail to perform their

obligations as at end of the fi nancial period in relation to each class of recognised fi nancial

assets is the carrying amounts of those assets as stated in the statement of fi nancial

position.

Further details of credit risks on trade and other receivables are disclosed in Notes 8

and 9 to the fi nancial statements respectively.

(v) Liquidity risk management

In the management of the liquidity risk, the Group monitors and maintains a level of cash and

cash equivalents deemed adequate by the management to fi nance the Group’s operations

and mitigate the effects of fl uctuations in cash fl ows. The managements monitor the

utilisation of bank borrowings and ensure compliance with loan covenants.

In the management of the liquidity risk, the Company monitors and maintains a level of cash

and cash equivalents deemed adequate by the management to fi nance the Company’s

operations and mitigate the effects of fl uctuations in cash fl ows. The managements will

request payment from subsidiaries as and when the needs arise.

Undrawn facilities are disclosed in Note 19 to the fi nancial statements.






(v) Liquidity risk management (cont’d)

Liquidity and interest risk analyses

Non-derivative fi nancial assets

The following table details the expected maturity for non-derivative fi nancial assets. The

tables below have been drawn up based on the undiscounted contractual maturities of

the fi nancial assets including interest that will be earned on those assets except where the

Group and the Company anticipates that the cash fl ow will occur in a different period. The

adjustment column represents the possible future cash fl ows attributable to the instrument

included in the maturity analysis which are not included in the carrying amount of the

fi nancial asset on the statement of fi nancial position.

Weighted averageeffective

interest rate%

On demand

or less than 1 year

RMB’000

More than 1 to5 years

RMB’000Adjustment

RMB’000Total

RMB’000

GROUP

2011

Non-interest bearing 897,945 – – 897,945

Variable interest rate 0.35 107,927 – (376) 107,551

Fixed interest rate 2.60 38,949 – (987) 37,962

Total 1,044,821 – (1,363) 1,043,458

2010

Non-interest bearing – 699,074 – – 699,074

Variable interest rate 0.86 238,014 – (2,029) 235,985

Fixed interest rate 0.36 47,327 – (170) 47,157

Total 984,415 – (2,199) 982,216

COMPANY

2011

Non-interest bearing – 153 – – 153

Variable interest rate 0.35 656 – (3) 653

Total 809 – (3) 806

2010

Non-interest bearing – 122 – – 122

Variable interest rate 0.36 1,725 – (6) 1,719

Total 1,847 – (6) 1,841





(v) Liquidity risk management (cont’d)

Non-derivative fi nancial liabilities

The following table details the remaining contractual maturity for non-derivative fi nancial

liabilities. The table has been drawn up based on the undiscounted cash fl ows of fi nancial

liabilities based on the earliest date on which the Group and Company is required to

pay. The table includes both interest and principal cash fl ows. The adjustment column

represents the possible future cash fl ows attributable to the instrument included in the

maturity analysis which are not included in the carrying amount of the fi nancial liability on the

statement of fi nancial position.

Weighted averageeffective

interest rate%

Ondemand

or less than 1 year

RMB’000

More than 1 to5 years

RMB’000Adjustment

RMB’000Total

RMB’000

GROUP

2011


Variable interest rate 6.83 440,567 31,554 (30,184) 441,937

Total 1,099,783 31,554 (30,184) 1,101,153

2010


Variable interest rate 5.76 227,384 46,730 (14,929) 259,185

Total 875,697 46,730 (14,929) 907,498

COMPANY

2011


2010


(vi) Fair value of fi nancial assets and fi nancial liabilities

The carrying amounts of cash and cash equivalents, trade and other current receivables and

payables, provisions and other liabilities approximate their respective fair values due to the

relatively short-term maturity of these fi nancial instruments. The fair value of other classes of

fi nancial assets and liabilities are disclosed in the respective notes to the fi nancial statements.

The managements consider that the carrying amounts of fi nancial assets and fi nancial

liabilities recorded at amortised cost in the fi nancial statements approximate their fair values.




5 RELATED PARTY TRANSACTIONS

a) Some of the Group’s transactions and arrangements are with related parties and the effect of

these, on the basis determined between the parties, is refl ected in these fi nancial statements. The

balances are unsecured, receivable/repayable on demand and interest free unless stated otherwise.

Name of related party Relationship

Jiangsu Sunpower Petrochemical A company in which three of the Company’s

Engineering Co., Ltd directors have control.

Jiangsu Shengnuo Heat Pipe Co., Ltd A company in which three of the Company’s

directors have control.

Nanjing Sunpower Equipment Co., Ltd A company in which three of the Company’s

directors have control.

Nanjing University of Technology A minority shareholder of Nanjing Shengnuo

Heat Pipe Co., Ltd.

Wuhan Sunpower Energy Environmental A company in which three of the Company’s

Engineering Co., Ltd directors have control.

Wuxi Chengguang Refactory A minority shareholder of Jiangsu Sunpower

Materials Co., Ltd Energy-Saving Technology Co., Ltd.

b) Signifi cant related party transactions:

GROUP2011 2010

RMB’000 RMB’000

With Jiangsu Sunpower Petrochemical Engineering Co., Ltd:

Acquisition of building 23,535 8,483

Acquisition of land use rights 14,645 19,337

Interest expense on advances 1,664 –

Rental expenses 860 3,833

With Nanjing University of Technology:

Technology development fee expense 890 944

Research Technology Centre support fee 684 684

Staff costs and benefi ts 794 852

Purchase of raw materials 923 690

Purchase of plant and equipment 1 300

Rental expense 260 260

Service fee 421 –



5 RELATED PARTY TRANSACTIONS (cont’d)

b) Signifi cant related party transactions: (cont’d)

GROUP2011 2010

RMB’000 RMB’000

With Nanjing Sunpower Equipment Co., Ltd:

Sales of goods (632) –

With Wuhan Sunpower Energy

Environmental Engineering Co., Ltd:

Sales of goods (232) –

With Wuxi Chengguang Refactory Materials Co., Ltd:

Purchase of raw materials 563 –

Purchase of building materials 272 –

Administrative expenses incurred 230 –

The sales and purchases made are conducted on terms mutually agreed among the parties

involved. The expenses charged are paid in accordance with the terms of the agreement entered

into among the parties involved.

c) Related party balances:

GROUP2011 2010

RMB’000 RMB’000

Trade receivables (Note 8)

Nanjing Sunpower Equipment Co., Ltd 494 93

Other receivables (Note 9)

Nanjing University of Technology 614 614

Trade payables (Note 17)

Jiangsu Sunpower Petrochemical Engineering Co., Ltd – –

Nanjing University of Technology 773 –

Wuxi Chengguang Refactory Materials Co., Ltd 187 –

Total 960 –




5 RELATED PARTY TRANSACTIONS (cont’d)

c) Related party balances: (cont’d)

GROUP2011 2010

RMB’000 RMB’000

Other payables (Note 18)

Jiangsu Shengnuo Heat Pipe Co., Ltd 351 2,187

Jiangsu Sunpower Petrochemical Engineering Co., Ltd 39,844 –

Nanjing University of Technology 5,118 944

Wuxi Chengguang Refactory Materials Co., Ltd 230 –

Total 45,543 3,131

Included in the amount due to Jiangsu Sunpower Petrochemical Engineering Co., Ltd is an

advance amounting to RMB 38,180,000 which bears interest at effective interest rate ranging from

6.31% to 6.56% per annum and repayable on demand.

6 CASH AND BANK BALANCES

GROUP COMPANY2011 2010 2011 2010

RMB’000 RMB’000 RMB’000 RMB’000

Cash and bank balances 107,551 235,985 653 1,719

Cash and bank balances comprise cash held by the Group and the Company and short-term bank

deposits with maturity of three months or less (2010 : three months or less) and an effective interest rate

at 0.35% (2010 : 0.36% to 1.35%) per annum.

The above balances that are not denominated in the functional currencies of the respective entities are as

follows:

GROUP COMPANY2011 2010 2011 2010

RMB’000 RMB’000 RMB’000 RMB’000

United States dollars 8,050 1,099 3 3

Singapore dollars 4,927 332 649 331

Euro dollars 398 3 – –

Others 25 3 1 3



7 PLEDGED BANK DEPOSITS

GROUP2011 2010

RMB’000 RMB’000

Pledged bank deposits 37,962 47,157

The above deposits were pledged to certain banks to secure the Group’s notes payable, letter of credit

facilities and letter of guarantee at the end of the reporting period. The deposits carry fi xed interest rate

ranging from 0.36% to 3.50% (2010 : 0.36%) per annum. The pledged bank deposits will be released

upon the settlement of notes payable, letter of credit facilities and letter of guarantee.

8 TRADE RECEIVABLES

GROUP2011 2010

RMB’000 RMB’000

Outside parties 773,313 629,186

Less: Impairment allowances (18,837) (19,681)

Net 754,476 609,505

Due from customers for contract works (Note 11) 52,483 53

Related party (Note 5) 494 93

Total 807,453 609,651

Movement in the allowances for doubtful trade receivables:

Balance at beginning of year 19,681 18,787

(Reversal) Charge to profi t and loss (432) 2,305

Utilised (412) (1,411)

Balance at end of year 18,837 19,681

Included in the above are notes receivables:

(i) amounting to RMB84,068,000 (2010 : RMB101,600,000) which are endorsed with recourse in

settlement with trade creditors; and

(ii) amounting to RMB12,000,000 (2010 : RMB9,764,000) have been pledged as securities for the

issuance of bank acceptance. The carrying amount of the associated liability is RMB12,000,000

(2010 : RMB9,769,000).

The average credit period on the trade receivables is 180 days (2010 : 180 days). No interest is charged

on the overdue trade receivables.

Trade receivables that are past due are provided for based on estimated irrecoverable amounts from the

sale of goods, determined by reference to past default experience.




8 TRADE RECEIVABLES (cont’d)

The table below is an analysis of trade receivables as at December 31:

GROUP2011 2010

RMB’000 RMB’000

Not past due and not impaired 719,399 530,793

Past due but not impaired (i) 88,054 78,858

807,453 609,651

Impaired receivables - collectively assessed (ii) 18,837 19,681

Less: Allowance for impairment (18,837) (19,681)

– –

Total trade receivables, net 807,453 609,651

(i) Ageing of receivables that are past due but not impaired:

180 days to 360 days 33,719 33,273

1 to 2 years 39,178 24,610

2 to 3 years 11,843 18,670

Over 3 years 3,314 2,305

Total 88,054 78,858

(ii) These amounts are stated before any deduction for impairment losses. These receivables are not

secured by any collateral or credit enhancements.

In determining the recoverability of a trade receivable the Group considers any change in the credit

quality of the trade receivable from the date credit was initially granted up to the reporting date. The

concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly,

the management believes that there is no further allowance required for credit risk in excess of the

allowance for doubtful debts.


follows:

GROUP2011 2010

RMB’000 RMB’000

United States dollars 9,989 111

Euro dollars 410 864



9 OTHER RECEIVABLES AND PREPAYMENTS

GROUP COMPANY2011 2010 2011 2010

RMB’000 RMB’000 RMB’000 RMB’000

Advance payments for purchases 55,866 83,796 – –

Deposits and prepayments 10,966 7,776 – –

Staff advances 8,427 3,087 – –

Advance to non-controlling interest

shareholders 614 614 – –

Value added tax 23,581 – – –

Others 2,004 1,926 153 122

Total 101,458 97,199 153 122

The staff advances and advance to non-controlling interest shareholders are non-trade in nature,

unsecured, interest-free and repayable on demand.

In determining the recoverability of other receivable the Group considers any change in the credit quality

of the other receivable from the date credit was initially granted up to the reporting date. Accordingly, the

management believe that there is no allowance required.

10 INVENTORIES

GROUP2011 2010

RMB’000 RMB’000

At cost:

Raw materials and consumables 70,862 73,093

Work-in-progress 217,095 83,197

Finished goods 1,931 2,817

At net realisable value:

Raw materials and consumables – –

Total 289,888 159,107

Movement in allowances for inventories obsolescence:

At beginning of year 2,134 2,102

Charge (Credit) to profi t or loss 1,974 32

At end of year 4,108 2,134

During the fi nancial year, the cost of inventories recognised as an expense included an amount of

RMB1,974,000 (2010 : RMB584,000) in respect of the write down of inventories to their net realisable

value and has been reduced by RMB Nil (2010 : RMB552,000) in respect of the reversal of write-downs

as a result of sales of the inventories at higher value.




11 CONTRACT WORK IN PROGRESS

The contract work in progress at the end of the reporting period is made up of the following:

GROUP2011 2010

RMB’000 RMB’000

Contract costs incurred plus recognised profi ts less recognised

losses to date 52,483 113,793

Less: Progress billings – (116,781)

Net - shown as “Due (to) from customers for contract work” 52,483 (2,988)

Presentation on statement of fi nancial position:

Trade receivables - Due from customers for contract works (Note 8) 52,483 53

Trade payables - Due to customers for contract works (Note 17) – (3,041)

Net 52,483 (2,988)

At December 31, 2011, retention held by customers for contract work amounted to RMB Nil (2010 :

RMB6,476,000). Advances received for customers for contact work amounted to RMB73,723,000 (2010

: RMB1,180,000).

12 LAND USE RIGHTS

GROUP2011 2010

RMB’000 RMB’000

Cost:

At January 1 39,287 19,950

Addition 16,225 19,337

At December 31 55,512 39,287

Accumulated amortisation:

At January 1 2,747 2,051

Charge 1,240 696

At December 31 3,987 2,747

Carrying amount 51,525 36,540

Presentation in statement of fi nancial position:

Current assets 1,356 997

Non-current assets 50,169 35,543

Total 51,525 36,540



12 LAND USE RIGHTS (cont’d)

The land use rights are amortised over 30 years for Nanjing Shengnuo Heat Pipe Co., Ltd and over

50 years for Jiangsu Sunpower Technology Co., Ltd and Jiangsu Sunpower Machinery Manufacture Co.,

Ltd. The amortisation periods are in line with the business licence of each of the subsidiaries.

At the end of the reporting period, the land use rights with carrying amount of RMB27,918,000 (2010 :

RMB7,834,000) are pledged to secure banking facilities granted to the subsidiaries.

In 2010, a subsidiary was in the process of obtaining land use right certifi cate with a carrying amount of

RMB19,186,000.

13 PROPERTY, PLANT AND EQUIPMENT

BuildingsLeasehold

improvementsPlant andmachinery

Furniture,fi xtures and equipment

Motorvehicles

Construction- in-progress Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

GROUP

Cost:

At January 1, 2010 48,938 6,913 50,182 9,942 13,299 3,707 132,981

Adjustment to cost – (112) – – – – (112)

Additions 9,428 – 3,200 1,457 1,512 39,056 54,653

Disposal (1,392) – (49) (338) (1,733) – (3,512)

Reclassifi cation 30,952 – 2,461 – – (33,413) –

At December 31, 2010 87,926 6,801 55,794 11,061 13,078 9,350 184,010

Adjustment to cost – – (359) – – – (359)

Additions 25,068 758 9,636 3,878 3,523 32,366 75,229

Disposal – (350) – (54) (345) – (749)

Reclassifi cation 16,340 2,011 2,687 – – (21,038) –

At December 31, 2011 129,334 9,220 67,758 14,885 16,256 20,678 258,131

Accumulated depreciation:

At January 1, 2010 6,331 4,413 13,979 5,979 8,488 – 39,190

Depreciation 2,196 936 4,636 1,402 1,670 – 10,840

Disposal (733) – (26) (66) (1,625) – (2,450)

At December 31, 2010 7,794 5,349 18,589 7,315 8,533 – 47,580

Depreciation 5,142 582 5,205 1,327 1,275 – 13,531

Disposal – (350) – (45) (311) – (706)

At December 31, 2011 12,936 5,581 23,794 8,597 9,497 – 60,405

Carrying amount:

At December 31, 2010 80,132 1,452 37,205 3,746 4,545 9,350 136,430

At December 31, 2011 116,398 3,639 43,964 6,288 6,759 20,678 197,726




13 PROPERTY, PLANT AND EQUIPMENT (cont’d)

At the end of the reporting period:

(i) buildings with carrying amount of RMB55,997,000 (2010 : RMB3,012,000) are pledged to secure

banking facilities and loans granted to the Group; and

(ii) the property certifi cate of three (2010: one) of the subsidiaries’ building with a carrying amount of

RMB45,308,000 (2010 : RMB30,671,000) have not been obtained.

In 2010, included in the addition of the construction-in-progress was interest on bank loan capitalised

amounting to RMB1,485,000.

14 INVESTMENT IN SUBSIDIARIES

COMPANY2011 2010

RMB’000 RMB’000

Unquoted equity shares, at cost * *

Financial guarantee contracts 1,850 1,850

Amount due from subsidiaries 159,121 159,082

Total 160,971 160,932

* Amount less than RMB1,000

The balances with subsidiaries are unsecured, interest-free and not expected to be repayable within

one year. As the amount due from subsidiary has no defi nite repayment period, it is not possible for

management to calculate what the fair value of these balances as is at the end of the reporting period.

Transactions between the Company and its subsidiaries have been eliminated on consolidation and are

not disclosed in these fi nancial statements.

Details of the subsidiaries are as follows:

SubsidiariesCost of

investments

Effective equity interest and voting power

held

Place of incorporation/

operation Principal activities2011 2010 2011 2010

RMB’000 RMB’000 % %

Held by Company:

Perimeter Pacifi c Pte. Ltd. * * 100.0 100.0 Singapore Investment holding

Sun Superior Holdings

Pte. Ltd.

* * 100.0 100.0 Singapore Investment holding



14 INVESTMENT IN SUBSIDIARIES (cont’d)

SubsidiariesCost of

investments

Effective equity interest and voting power

held

Place of incorporation/

operation Principal activities2011 2010 2011 2010

RMB’000 RMB’000 % %

Held by subsidiaries:

Jiangsu Sunpower Machinery

Manufacture Co., Ltd (Shares

held by Perimeter Pacifi c

Pte Ltd)

– – 100.0 100.0 People’s

Republic

of China

Manufacture and

sale of pressure

vessels products

Jiangsu Sunpower

Technology Co., Ltd (Shares

held by Perimeter Pacifi c

Pte Ltd)

– – 100.0 100.0 People’s

Republic

of China

Manufacturing and

sale of pressure

vessels, designing,

manufacturing and

sale of pipe racks

and hangers,

provision of

installation and

commissioning of

relevant projects and

provision of technical

and consultation

Nanjing Shengnuo Heat

Pipe Co., Ltd (Shares held

by Sun Superior Holdings

Pte Ltd)

– – 64.5 64.5 People’s

Republic

of China

Manufacturing and

trading of heat

pipes and heat pipe

exchangers,

provision of

installation and

commissioning of

relevant projects and

provision of technical

services and

consultation

Jiangsu Sunpower

Energy-Saving Technology

Co., Ltd (Shares held by

Jiangsu Sunpower

Technology Co., Ltd)

– – 70.0 – People’s

Republic

of China

Production and sale

of foam glass

products

* Cost of investment amounted to S$1.00 (equivalent to RMB5.07). The fi nancial statements are audited by Deloitte & Touche

LLP, Singapore.

Note on PRC subsidiaries:

The subsidiaries are audited by Deloitte Touche Tohmatsu CPA Ltd, Nanjing Branch for consolidation

purposes.




15 TRADEMARK

GROUP2011 2010

RMB’000 RMB’000

Cost:

At January 1 and December 31 2,924 2,924

Accumulated amortisation:

At January 1 1,901 1,608

Charge 292 293

At December 31 2,193 1,901

Carrying amount 731 1,023

The trademark “SHENGNUO” has been registered and is effective till April 6, 2015.

16 DEFERRED TAX ASSETS (LIABILITIES)

GROUP2011 2010

RMB’000 RMB’000

(a) Deferred tax assets

At beginning of year 4,858 4,658

Credit to profi t or loss 3,114 200

At end of year 7,972 4,858

The following are the major deferred assets recognised by the Group. The movements thereon

during the year are as follows:

Allowance for doubtful

debtsWrite downof inventory

Estimated loss of

constructioncontracts

Governmentgrant related

assets Tax losses Total


At January 1, 2010 2,746 298 459 1,155 – 4,658

Credit (Charge) to profi t

or loss 98 (6) (459) 567 – 200

At December 31, 2010 2,844 292 – 1,722 – 4,858

Credit (Charge) to profi t

or loss 102 445 – 1,054 1,513 3,114

At December 31, 2011 2,946 737 – 2,776 1,513 7,972



16 DEFERRED TAX ASSETS (LIABILITIES)

GROUP2011 2010

RMB’000 RMB’000

(b) Deferred tax liabilities

At beginning of year (1,167) (653)

Charge to profi t or loss (585) (514)

At end of year (1,752) (1,167)

This relates to unremitted income from overseas subsidiaries.

17 TRADE PAYABLES

GROUP2011 2010

RMB’000 RMB’000

Outside parties 276,027 248,441

Customer advances 254,438 291,474

Notes payables 15,317 18,256

Due to customers for contract works (Note 11) – 3,041

Related party (Note 5) 960 –

Total 546,742 561,211

The average credit period on purchases of goods is 180 days (2010 : 180 days).


follows:

GROUP2011 2010

RMB’000 RMB’000

United States dollars 190 82

Euro dollars 41 44




18 OTHER PAYABLES

GROUP COMPANY2011 2010 2011 2010

RMB’000 RMB’000 RMB’000 RMB’000

Related parties (Note 5) 45,543 3,131 – –

Accruals 27,242 30,001 1,054 891

Accruals for payroll 19,145 16,740 – –

Due to directors 14,344 14,433 12,800 14,433

Value-added taxes and other tax liabilities 4,181 22,797 – –

Interest payable on related party’s advance 1,664 – – –

Interest payable on term note 355 – – –

Subsidiaries – – 31,117 23,505

Total 112,474 87,102 44,971 38,829

The amount due to subsidiaries, related parties and directors are non-trade in nature, unsecured, interest-

free and repayable on demand.

Included in the accruals is a government grant of RMB14,000,000 (2010 : RMB6,000,000) received but

not recognised which will be used for future projects.

19 BORROWINGS

GROUP2011 2010

RMB’000 RMB’000

Bank loans of:

Subsidiary A - Jiangsu Sunpower Technology Co., Ltd 275,000 152,000

Subsidiary B - Nanjing Shengnuo Heat Pipe Co., Ltd 82,400 78,000

Subsidiary C - Jiangsu Sunpower Machinery Manufacture Co., Ltd 55,000 –

Total bank loans 412,400 230,000

Term note, at amortised cost, of

Subsidiary A – Jiangsu Sunpower Technology Co., Ltd 29,537 29,185

Total borrowings 441,937 259,185

Presentation in statement of fi nancial position:

Current liabilities 412,400 215,000

Non-current liabilities 29,537 44,185

Total 441,937 259,185



19 BORROWINGS (cont’d)

GROUP

2011 2010RMB’000 RMB’000

The loans and notes are repayable as follows:

Within one year 412,400 215,000

In the second year 29,537 15,000

In the third year – 29,185

Total 441,937 259,185

(a) The bank loans of Subsidiary A, which are repayable within 12 months, are:

Secured by building and land use rights of the subsidiary

(2010: a related party) and guaranteed by the Company 30,000 30,000

Guaranteed by another subsidiary 185,000 82,000

Guaranteed by the Company 60,000 20,000

Guaranteed by the Company and a director – 20,000

Total 275,000 152,000

The bank loans bear weighted average effective interest rate at 6.80% (2010 : 5.72%) per annum.

(b) The bank loans of Subsidiary B are:

2011 2010RMB’000 RMB’000

Secured by land use rights, building and guaranteed by

another subsidiary 15,000 45,000

Guaranteed by another subsidiary 67,400 33,000

Total 82,400 78,000

The loans are repayable as follows:

Within one year 82,400 63,000

In the second year – 15,000

Total 82,400 78,000

The bank loans bear weighted average effective interest rate at 7.20% (2010 : 5.90%) per annum.




19 BORROWINGS (cont’d)

(c) The bank loans of Subsidiary C, which are repayable within 12 months, are:

2011 2010RMB’000 RMB’000

Secured by land use rights, building and guaranteed by

another subsidiary 30,000 –

Guaranteed by another subsidiary 25,000 –

Total 55,000 –

The bank loans bear weighted average effective interest rate at 7.100% (2010 : Nil%) per annum.

(d) In 2010, a subsidiary issued an unsecured long-term note of RMB 30,000,000 (the “Term Note”)

entitled as 江苏省高新技术中小企业2010年度集合票据 (Jiangsu Province 2010 New and High

Technology Small and Medium Enterprise’s Collective Note) with a maturity period of three years

and with interest at fl oating rate with reference to the one-year rate quoted by the People’s Bank

of China. Pursuant to the underlying agreement, the Term Note is denominated in RMB with the

principal amount wholly repayable in September 2013 and interest accrued payable yearly.

At December 31, 2011, the amount represents the Term Note at its amortised cost with an

effective interest rate 5.55% (2010 : 5.55%) per annum.

The fair value of the above borrowings is estimated by discounting their future cash fl ows at the prevailing

market borrowing rates at the end of the reporting period. The carrying amount of the bank loans

approximates to their fair value.

At December 31, 2011, the Group had available RMB661,204,000 (2010 : RMB66,054,000) of undrawn

committed borrowing facilities.

20 SHARE CAPITAL

GROUP AND COMPANY2011 2010 2011 2010

Number of ordinaryshares of US$0.01 each

’000 ’000 RMB’000 RMB’000

Authorised share capital:

At beginning and end of year 800,000 800,000 66,355 66,355

Issued and fully paid up:

At beginning and end of year 329,000 329,000 27,230 27,230

These are fully paid ordinary shares that carry one vote per share and a right to dividends as and when

declared by the company.



21 GENERAL RESERVES

GROUP2011 2010

RMB’000 RMB’000

Statutory surplus reserve fund 33,877 31,301

Enterprise expansion fund 4,004 4,004

Total 37,881 35,305

22 REVENUE

GROUP2011 2010

RMB’000 RMB’000

Sales of goods 1,157,775 754,980

Construction revenue contracts 61,813 169,065

Others 29,394 16,927

Total 1,248,982 940,972

23 OTHER OPERATING INCOME

GROUP2011 2010

RMB’000 RMB’000

Government grant 6,446 3,445

Interest income 1,376 1,446

Foreign exchange gain 475 98

Gain on disposal of property, plant and equipment – 1,792

Others 1,001 1,759

Total 9,298 8,540




24 FINANCE COSTS

GROUP2011 2010

RMB’000 RMB’000

Interest expenses:

- On bank loans 24,015 13,623

- On related party advance 1,664 –

- On term note 1,620 –

Total 27,299 13,623

Less : Interest capitalised (Note 13) – (1,485)

Net 27,299 12,138

Borrowing costs included in the cost of qualifying assets during the year arose on bank borrowings

obtained for the property, plant and equipment included in “construction-in-progress”.

25 PROFIT BEFORE INCOME TAX

(a) This has been arrived at after charging (crediting):

GROUP2011 2010

RMB’000 RMB’000

Amortisation of land use rights * 1,240 696

Amortisation of trademark * 292 293

Audit fees:

- to auditors of the Company 600 550

- to other auditors 880 850

Cost of inventories sold included in cost of sales 973,560 514,843

Defi ned contribution plans 9,365 7,014

Depreciation of property, plant and equipment 13,531 10,840

Directors’ fees - Directors of the Company 945 908

Directors’ remuneration - Directors of the Company 10,572 13,401

Loss (Gain) on disposal of property, plant and equipment 8 (1,792)

Non-audit fees:

- to auditors of the Company 25 25

- to other auditors – –

Impairment allowance on inventories 1,974 32

(Reversal of) Impairment allowance on trade receivables * (432) 2,305

Salaries and wages 125,167 87,211

* included in administrative expenses



25 PROFIT BEFORE INCOME TAX (cont’d)

(b) Compensation of key management personnel

The remuneration of directors and other members of key management during the fi nancial year

were as follows:

GROUP2011 2010

RMB’000 RMB’000

Short-term benefi ts 11,094 13,871

Other staff benefi ts 157 131

Total 11,251 14,002

The remuneration of directors and key executives is determined by the Remuneration Committee

having regard to the performance of individuals and market trends.

26 INCOME TAX EXPENSE

GROUP2011 2010

RMB’000 RMB’000

Current 20,426 20,502

Under (Over) provision in prior years 678 (585)

Deferred (Note 16) (2,529) 314

Income tax expense 18,267 20,231

The income tax expense varied from the amount of income tax expense determined by applying the PRC

income tax rate of 25% to profi t before income tax as a result of the following differences:

GROUP2011 2010

RMB’000 RMB’000

Profi t before income tax 102,937 113,163

Income tax expense at PRC income tax rate of 25% 25,734 28,291

Tax effect of non-deductible expenses 6,504 6,708

Effect of tax exemption and tax incentives (14,649) (14,256)

Under (Over) provision in prior years 678 (585)

Others – 73

Net 18,267 20,231




26 INCOME TAX EXPENSE (cont’d)

a) Jiangsu Sunpower Technology Co., Ltd and Nanjing Shengnuo Heat Pipe Co., Ltd

The above entities are foreign investment enterprises located in Jiangning Science Park, Nanjing,

Jiangsu Province, PRC, and with a statutory tax rate of 25.0%. In 2009, the subsidiaries

successfully applied and received offi cial approval for preferential tax rate of 15%, for three years

beginning 2009, under the “New and High Tech Enterprises” scheme. During the fi nancial year, the

subsidiaries renew the scheme to enjoy a further three fi nancial years starting from December 31,

2011.

The effective income tax rate for the two entities for the fi nancial year is 15.0% (2010 : 15.0%).

b) Jiangsu Sunpower Machinery Manufacture Co., Ltd

Jiangsu Sunpower Machinery Manufacture Co., Ltd is a foreign investment enterprise located in

Nanjing Chemical Industry Park, Jiangsu Province, PRC and with a statutory tax rate of 25.0%.

In accordance with the tax legislations applicable to foreign investment enterprises, it is entitled to

exemption from PRC income tax for the two years commencing from its fi rst profi t-making year of

operations, after offsetting all unexpired tax losses carried forward from the previous years, and

thereafter, entitled to a 50% relief from PRC income tax for the next three years. The entity has

opted 2007 as its fi rst tax exemption year.

The effective income tax rate of Jiangsu Sunpower Machinery Manufacture Co., Ltd for the fi nancial

year is 12.5% (2010 : 12.5%).

c) Jiangsu Sunpower Energy-Saving Technology Co., Ltd

Under the Law of the PRC on Enterprise Income Tax (the “EIT Law”) and Implementation

Regulation of the EIT Law, the tax rate of 25% from January 1, 2008 onwards. No provision for

income tax has been made as the entity has no assessable profi t during the fi nancial year.

d) Certain subsidiaries are incorporated in countries where profi ts are not subject to income tax or that

the profi ts for the fi nancial year are exempted from taxation.

27 EARNINGS PER SHARE

GROUP2011 2010

RMB’000 RMB’000

Earnings:

Profi t attributable to equity holders of the Company (RMB’000) 90,964 86,557

Number of shares:

Weighted average number of ordinary shares (’000) 329,000 329,000

Earnings per share (RMB cents) 27.65 26.31

There is no dilution as no share options were granted during the fi nancial year or outstanding as at the

end of the fi nancial year.



28 DIVIDENDS

Subsequent to the end of the reporting period, the directors of the Company recommended that

a fi rst and fi nal tax exempt dividend of S$0.003 per ordinary share totalling S$987,000 (equivalent to

RMB 4,856,000) for the fi nancial year just ended be paid. In accordance with FRS 10 – Events after the

Reporting Period, the amount is not taken up as a liability.

During the fi nancial year, a fi rst and fi nal tax exempt dividend of S$0.003 per ordinary share totalling

S$987,000 (equivalent to RMB 5,125,000) was paid to shareholders in respect on the fi nancial year

ended December 31, 2010.

29 OPERATING LEASE COMMITMENTS

GROUP2011 2010

RMB’000 RMB’000

Minimum lease payments paid under operating leases recognised

as an expense in the year 1,591 5,976

At the end of the reporting period, the Group has outstanding commitments under non-cancellable

operating leases, which fall due as follows:

GROUP2011 2010

RMB’000 RMB’000

Within one year 391 955

In the second to fi fth years inclusive 460 721

After fi fth year 800 850

Total 1,651 2,526

Operating lease payments represent rentals payable by the Group for premises, which are fi xed for 1 to 3

years (2010 : 1 to 3 years). Leases are negotiated for terms from 1 to 20 (2010 : 1 to 20) years.

As at December 31, 2010, a PRC subsidiary has outstanding lease commitments amounting to

RMB645,000 with a related party of the Group.

As at December 31, 2011, the Company does not have any outstanding commitments under non-

cancellable operating leases.

30 CONTINGENT LIABILITIES

GROUP2011 2010

RMB’000 RMB’000

Guarantees (unsecured) given to banks for facilities granted to

subsidiaries 70,000 70,000




31 CAPITAL COMMITMENTS

GROUP

2011 2010RMB’000 RMB’000

Capital expenditure contracted for but not provided for in respect of

acquisition of property, plant and equipment 6,535 38,180

In 2010, the RMB 38,180,000 relates to the commitment to purchase the second batch of the target

properties as set out in the Sale and Purchase Agreement dated May 31, 2010 between the Group and

a related party, Jiangsu Sunpower Petrochemical Engineering Co., Ltd. This purchase was completed

during the year ended December 31, 2011 [Note 5(b)].

32 SEGMENT INFORMATION

The Group determines its operating segments based on internal reports about components of the Group

that are regularly reviewed by the chief operating decision maker in order to allocate resources to the

segments and to assess their performance.

The Group is organised into business units based on their products and services, based on which

information is prepared and reported to the Group’s chief operating decision maker for the purposes of

resource allocation and assessment of performance.

The Group’s operations are organised into the following operating divisions namely:

(1) Heat pipes and heat pipe exchangers;

(2) Pipes supports;

(3) Heat exchangers and pressure vessels; and

(4) Energy saving and environmental protection systems.

The accounting policies of the operating segments are the same as the Group’s accounting policies

describe in Note 2 to the fi nancial statements. Segment results represent the profi ts earned by each

segment without allocation of central administration costs, director’s remuneration, interest income,

foreign exchange gains and losses, income tax and fi nance costs at corporate level.

Inter-segment transfers: Segment revenue and expenses include transfers between business segments.

Inter-segment sales are charged at prevailing market prices. These transfers are eliminated on

consolidation.



32 SEGMENT INFORMATION (cont’d)

Segment information about the Group’s operating segment is presented below:

Heat pipesand heat

pipeexchangers

Pipes supports

Heat exchangers

and pressurevessels

Energy saving and

environmentalprotection systems Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

2011REVENUE 229,341 85,194 862,720 71,727 1,248,982

RESULTSegment result (6,282) 22,181 119,173 5,470 140,542

Unallocated corporate expenses (11,682)

Interest income 460 77 775 64 1,376

Finance cost (2,461) (2,075) (21,015) (1,748) (27,299)

Profi t before income tax 102,937

Income tax expense (18,267)

Profi t after income tax 84,670

2010REVENUE 223,715 56,490 592,102 68,485 940,792

RESULTSegment result 36,756 16,578 67,004 18,078 138,416

Unallocated corporate expenses (14,561)

Interest income 331 193 729 193 1,446

Finance cost (3,533) (648) (7,343) (614) (12,138)

Profi t before income tax 113,163

Income tax expense (20,231)

Profi t after income tax 92,932

Segment assets represent property, plant and equipment, land use rights, intangible assets, deferred tax

assets, inventories, trade receivables, other receivables and prepayments, pledged bank deposits and

bank balances and cash, which are attributable to each operating segments. Segment liabilities represent

trade and other payables, tax payables, bank borrowings, amount due to customers for contract work

and deferred tax liabilities, which are attributable to each operating segments.





Heat pipesand heat

pipeexchangers

Pipes supports

Heat exchangers

and pressurevessels

Energy saving and



Statement of Net Assets2011Assets:Segment assets 348,731 158,503 1,009,352 84,874 1,601,460

Unallocated assets 806

Total assets 1,602,266

Liabilities:Segment liabilities 286,622 42,698 711,538 68,678 1,109,536

Unallocated liabilities 1,054

Total liabilities 1,110,590

Statement of Net Assets2010Assets:

Segment assets 375,973 127,546 730,679 91,911 1,326,109

Unallocated assets 1,841

Total assets 1,327,950

Liabilities:Segment liabilities 283,656 33,476 549,500 54,296 920,928

Unallocated liabilities 891

Total liabilities 921,819

Unallocated corporate assets mainly represent bank balances and cash, other receivable and

prepayments at corporate level.

Unallocated corporate liabilities represent other payable at corporate level.




Heat pipesand heat

pipeexchangers

Pipes supports

Heat exchangers

and pressurevessels

Energy saving and



OTHER INFORMATION2011Capital expenditure

- Property, plant and equipment 3,165 4,225 52,736 15,103 75,229

- Land use rights – 1,264 12,802 2,159 16,225

Depreciation expense 2,849 495 9,641 546 13,531

Impairment (Reversal of)

allowance on:

- trade receivables 1,759 78 (2,337) 68 (432)

- inventories 1,638 22 295 19 1,974

Amortisation of trademark 292 – – – 292

Amortisation of land use rights 333 62 794 51 1,240

OTHER INFORMATION2010Capital expenditure

- Property, plant and equipment 34,277 3,465 16,644 267 54,653

- Land use rights 193 5,028 13,729 387 19,337

Depreciation expense 1,261 1,423 8,047 109 10,840

Impairment (Reversal of)

allowance on:

- trade receivables 989 (16) 1,348 (16) 2,305

- inventories 102 (52) 32 (50) 32

Amortisation of trademark 293 – – – 293

Amortisation of land use rights 335 51 306 4 696





Geographical information

The geographical locations of the customers of the Group principally comprise the People’s Republic of

China (“PRC”), United States of America (“USA”), Europe, Middle East, Asia (except PRC) and South East

Asia.

The Group’s revenue from external customers and information about its segment assets by geographical

location are detailed below:

Revenue fromexternal customer Non-current assets2011 2010 2011 2010

RMB’000 RMB’000 RMB’000 RMB’000

PRC 1,235,781 886,902 256,598 177,854

America 4,622 27,830 – –

Asia (except PRC) 3,918 – – –

South East Asia 3,700 24,890 – –

Middle East 961 – – –

Europe – 1,170 – –

Total 1,248,982 940,792 256,598 177,854

Information about major customers

As at the end of the reporting period, revenue from the Group’s largest customer per segment is as

follows:

GROUP2011 2010

RMB’000 RMB’000

Heat pipes and heat pipes exchangers 18,247 16,709

Pipes supports 7,563 10,196

Heat exchangers and pressure vessels 489,609 139,578

Energy saving and environmental protection systems 11,368 19,637

Statistics of ShareholdingsAs at March 9, 2012


DISTRIBUTION OF SHAREHOLDINGS

SIZE OF SHAREHOLDINGSNO. OF

SHAREHOLDERS % NO. OF SHARES %

1 - 999 6 0.48 1,533 0.00

1,000 - 10,000 510 40.90 3,535,000 1.07

10,001 - 1,000,000 717 57.50 43,255,500 13.15

1,000,001 AND ABOVE 14 1.12 282,207,967 85.78

TOTAL 1,247 100.00 329,000,000 100.00

TWENTY LARGEST SHAREHOLDERS

NO. NAME NO. OF SHARES %

1 UOB KAY HIAN PTE LTD 137,410,347 41.77

2 CITIBANK NOMINEES SINGAPORE PTE LTD 67,182,120 20.42

3 DBS VICKERS SECURITIES (S) PTE LTD 37,194,000 11.31

4 WATERWORTH PTE LTD 12,000,000 3.65

5 ASDEW ACQUISITIONS PTE LTD 11,758,000 3.57

6 PHILLIP SECURITIES PTE LTD 3,195,500 0.97

7 CIMB SECURITIES (SINGAPORE) PTE LTD 2,369,000 0.72

8 HSBC (SINGAPORE) NOMINEES PTE LTD 2,230,000 0.68

9 LU WEI 1,975,000 0.60

10 MAYBANK KIM ENG SECURITIES PTE LTD 1,935,000 0.59

11 TEO CHIANG CHAI 1,400,000 0.43

12 SINGAPORE NOMINEES PTE LTD 1,259,000 0.38

13 TEO CHIANG SONG 1,200,000 0.36

14 LIM MUI SWAN 1,100,000 0.33

15 XIE YU 960,000 0.29

16 HONG LEONG FINANCE NOMINEES PTE LTD 940,000 0.29

17 TEO CHIANG WEE 900,000 0.27

18 RAFFLES NOMINEES (PTE) LTD 817,000 0.25

19 SOFTSOURCE SOLUTIONS PRIVATE LIMITED 750,000 0.23

20 OCBC SECURITIES PRIVATE LTD 743,000 0.23

TOTAL 287,317,967 87.34

Statistics of Shareholdings


As at March 9, 2012

SHARE CAPITAL

Authorised share capital : US$8,000,000

Issued and fully paid-up : US$3,290,000

Class of Shares : Ordinary shares of US$0.01 each

Number of Treasury Shares held : NIL

Voting rights : One vote per share

Shareholdings Held in Hands of Public

Based on information available to the Company as at 9 March 2012, 28.09% of the issued ordinary shares of

the Company is held by the public and therefore Rule 723 of the Listing Manual is complied with.

SUBSTANTIAL SHAREHOLDERS as at March 9, 2012

Name of Substantial Shareholder Direct Interest % Deemed Interest %

1. Guo Hong Xin (1) – – 76,287,983 23.19

2. Li Lai Suo (2) 66,154,120 20.11 2,943,198 0.89

3. Ma Ming (3) – – 57,113,166 17.36

4. Artur Jurczakowski 34,097,000 10.36 – –

5. Allgreat Pacifi c Limited 76,287,983 23.19 – –

6. Claremont Consultancy Limited 57,113,166 17.36 – –

Notes:

(1) Mr Guo Hong Xin is deemed to be interested in the 76,287,983 shares held by Allgreat Pacifi c Limited which is an investment holding

company wholly owned by Mr Guo Hong Xin.

(2) Mr Li Lai Suo’s deemed interest comprises of 2,943,198 shares held by Armour Asia Limited which is an investment holding company

wholly owned by Mr Li Lai Suo.

(3) Mr Ma Ming is deemed to be interested in the 57,113,166 shares held by Claremont Consultancy Limited which is an investment

holding company wholly owned by Mr Ma Ming.

Notice of Annual General Meeting


NOTICE IS HEREBY GIVEN that the 2012 Annual General Meeting of the Company will be held at Carlton Hotel,

76 Bras Basah Road Singapore 189558 in Empress Ballroom 2, Level 2 on Thursday, 26 April 2012 at 8.00

a.m., for the purpose of transacting the following business:

ORDINARY BUSINESS

1. To receive, consider and adopt the Audited Financial Statements for the fi nancial year

ended 31 December 2011 and the Directors’ Report and the Auditors’ Report thereon.

Resolution 1

2. To declare a fi rst and fi nal dividend of S$0.003 per share in respect of the fi nancial year

ended 31 December 2011.

Resolution 2

3. To approve Directors’ fees of S$192,000 for the fi nancial year ended 31 December

2011. (2010: S$177,000)

Resolution 3

4. To re-elect the following Directors retiring pursuant to Bye-Law 104 of the Bye-Laws of

the Company:-

(i) Li Lai Suo (See Explanatory Note)

(ii) Jiang Ning (See Explanatory Note)

Pursuant to Bye-law 105 of the Bye-Laws of the Company, in the event that any of

the above Directors is not re-elected, not to fi ll up such vacated offi ce(s).

Resolution 4(i)

Resolution 4(ii)

5. To re-appoint Messrs Deloitte & Touche LLP as Auditors and to authorise the Directors

to fi x their remuneration.

Resolution 5

SPECIAL BUSINESS

To consider and, if thought fi t, to pass, with or without modifi cations, the following Ordinary Resolutions:-

6. That pursuant to Bye-Law 12(B) of the Bye-Laws of the Company and listing rules of

Singapore Exchange Securities Trading Limited (“SGX-ST”), the Directors be and are

hereby authorised to:

(a) (i) issue shares in the capital of the Company (“shares”) whether by way of

rights, bonus or otherwise; and/or

(ii) make or grant offers, agreements or options (collectively, “Instruments”)

that might or would require shares to be issued, including but not

limited to the creation and issue of (as well as adjustments to) warrants,

debentures or other instruments convertible into shares,

at any time and upon such terms and conditions and for such purposes and to

such persons as the Directors may, in their absolute discretion deem fi t; and

(b) (notwithstanding the authority conferred by this Resolution may have ceased to

be in force) issue shares in pursuance of any Instrument made or granted by the

Directors while this Resolution was in force,

Resolution 6



PROVIDED THAT:

(1) the aggregate number of shares to be issued pursuant to this Resolution

(including shares to be issued in pursuance of Instruments made or granted

pursuant to this Resolution) shall not exceed fi fty per cent. (50%) of the total

number of issued shares (excluding treasury shares (if any)) in the capital of the

Company (as calculated in accordance with sub-paragraph (2) below), of which

the aggregate number of shares to be issued other than on a pro rata basis to

existing shareholders of the Company (including shares to be issued in pursuant

of Instruments made or granted pursuant to this Resolution) shall not exceed

twenty per cent. (20%) of the total number of issued shares (excluding treasury

shares (if any)) in the capital of the Company (as calculated in accordance with

sub-paragraph (2) below);

(2) (subject to such manner of calculation as may be prescribed by the SGX-ST) for

the purpose of determining the aggregate number of shares that may be issued

under paragraphs (1) above, the percentage of issued shares shall be based

on the total number of issued shares in the capital of the Company excluding

treasury shares if any at the time this Resolution is passed, after adjusting for:

(i) new shares arising from the conversion or exercise of any convertible

securities or share options or vesting of share awards which are

outstanding or subsisting at the time this Resolution is passed; and

(ii) any subsequent bonus issue or consolidation or subdivision of shares;

(3) in exercising the authority conferred by this Resolution, the Company shall

comply with the provisions of the Listing Manual of the SGX-ST for the time

being in force (unless such compliance has been waived by the SGX-ST) and the

Bye-Laws for the time being of the Company; and

(4) (unless revoked or varied by the Company in General Meeting) the

authorityconferred by this Resolution shall continue in force until the conclusion

of the next Annual General Meeting of the Company or the date by which the

next Annual General Meetin g of the Company is required by the Bye-Laws to be

held, whichever is the earlier. (See Explanatory Note)

7. That approval be and is hereby given to the Remuneration Committee of the Board of

Directors of the Company to:

(a) offer and grant options to subscribe for shares in the Company in accordance

with the provisions of the Sunpower Employee Share Option Scheme (“ESOS”);

and

(b) to allot and issue from time to time such number of shares as may be required to

be issued pursuant to the exercise of the options under the ESOS,

PROVIDED THAT the aggregate nominal amount of shares over which the

Remuneration Committee may grant options on any date, when added to the nominal

amount of shares issued and issuable in respect of all options granted under the ESOS

shall not exceed 15 percent of the issued share capital of the Company on the day

immediately preceding the date of the relevant grant. (See Explanatory Note)

Resolution 7



OTHER BUSINESS

8 To transact any other business that may be properly transacted at the Annual General Meeting of the

Company.

BY ORDER OF THE BOARD

HO WUI MEE MARIANCompany Secretary

3 April 2012

Explanatory Notes:

Resolution 4(i)

Mr Li Lai Suo is an Executive Director of the Company.

Resolution 4(ii)

Mr Jiang Ning, Chairman of Nominating Committee, a member of Remuneration Committee and a member of Audit Committee, will continue

to serve in these capacities if re-elected as a Director of the Company. Mr Jiang is an Independent Director.

Resolution 6

Ordinary Resolution no. 6, if passed, will empower the Directors of the Company to issue shares in the capital of the Company and to make

or grant instruments (such as warrants or debentures) convertible into shares, and to issue shares in pursuance of such instruments, up to a

number not exceeding in total fi fty per cent (50%) of the total number of issued shares (excluding treasury shares (if any)) in the capital of the

Company, with a sub-limit of twenty per cent (20%) for issued other than on a pro rata basis to shareholders. For the purpose of determining

the aggregate number of shares that may be issued, the percentage of issued shares (excluding treasury shares (if any)) shall be based on

the total number of issued shares (excluding treasury shares (if any)) in the capital of the Company at the time this resolution is passed, after

adjusting for (a) new shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards

which are outstanding or subsisting at the time this resolutions passed, and (b) any subsequent bonus issue or consolidation or subdivision

of shares.

Resolution 7

The Ordinary Resolution no. 7, if passed, will empower the Remuneration Committee of the Board of Directors of the Company to offer and

grant options to the directors and employees of the Group, and to allot and issue shares in the issued capital of the Company pursuant to

the exercise of the options under the Sunpower Employee Share Option Scheme provided that the aggregate nominal amount of shares

over which the options are granted does not exceed 15 percent of the issued share capital of the Company from time to time.

Notes:

(1) With the exception of The Central Depository (Pte) Limited (“CDP”) who may appoint more than two proxies, any member of the

Company entitled to attend and vote at the above-mentioned meeting is entitled to appoint a proxy to attend and vote in his stead. A

proxy need not be a member of the Company.

(2) The instrument appointing the proxy must be deposited at the Share Transfer Offi ce of the Company at 50 Raffl es Place, #32-01

Singapore Land Tower, Singapore 048623, not less than 48 hours before the time set for holding the meeting.

Sunpower Group Ltd.No. 2111 Chengxin Road

Nanjing Jiangning Science ParkNanjing, 211112

People’s Republic of ChinaRegistered Address:

Canon’s Court22 Victoria StreetHamilton HM 12

Bermuda

Documents

Sunpower Group Ltd.sunpower.listedcompany.com/misc/ar2011.pdf · one of the largest EPC companies in Taiwan to supply core equipment to Arabian Industrial Fiber Company which is a