VIP REPORT SAMPLE

Subject Company 天极光电股份有限公司 Tianji Optical & Electronic Co., Ltd.

Our Ref. 00000001

Service Duration Express

Type of Report VIP

Date of Order 2010-07-23

Date of Delivery 2010-07-30

Credit Rating CR3

The report is used solely for your use and no part of the report shall be disclosed to any third party. It is not liable for the incompleteness or inaccuracy of the information contained in the report, nor liable for your loss or damage caused by the errors in the process of our collecting, passing and furnishing information in the report.

* All figures are in RMB unless otherwise stated;

* “---” in this report indicates “unavailable” due to

insufficiency of information or “no comments”;

EXECUTIVE SUMMARY

Credit Rating CR3

Name 天极光电股份有限公司

Tianji Optical and Electronic Co Ltd.

Business Address 河南省南阳市工业南路 5 号

No.5 South Industrial Road, Nanyang, Henan Province

Zip Code 473300

Telephone 0377-63156818

Fax 0377-63166819

Date of Foundation 1995-04-05

Legal Form Chinese-foreign joint stock limited company (listed)

ICNEA Manufacture of optical instruments

Registered Capital RMB 199.24000 million

Sales Income RMB 367.75360 million (As at 2009)

Total Assets RMB 671.93214 million (As at 2009-12-31)

Shareholder’s Equity RMB 450.45150 million (As at 2009-12-31)

Number of Employees About 2,100

Main Business Manufacture and sales of optical components.

Reputation Good

Trends Steady

General Comments The Subject is a main manufacturer of optical parts and

components in China. These products are mainly applied to

digital projectors, large screen projection digital TV, digital

cameras, DVDs, optical systems for aviation and space

detection. About 70% of the total output is exported to Japan,

USA, Germany Korea, Hong Kong and Taiwan with the Clients

including Epson, Canon, Samsung, Zeiss, Sony, Fuji, Sharp and

Sanyo, etc. The Subject has listed in Shenzhen Stock Exchange

on December 3, 2007 (Stock Code: 002189)

BASIC INFORMATION

CONTACT INFORMATION

Name 天极光电股份有限公司

Tianji Optical & Electronic Co., Ltd.

Business Address 河南省南阳市工业南路 5 号

No.5 South Industrial Road, Nanyang, Henan Province

Zip Code 473300

Telephone 0377-63156818

Fax 0377-63166819

Website www.tianji-oe.com

E-mail tianji@tianji-oe.com.cn

Note According to the Subject’s website, its English name is listed as Tianji

Optical and Electronic Co., Ltd. It is confirmed with the Subject’s

representative that the name should be Tianji Optical & Electronic Co.,

Ltd.

REGISTRATION INFORMATION

Name 天极光电股份有限公司

Tianji Optical & Electronic Co., Ltd.

Registration Number 410000400013231

Registered Address No.5 South Industrial Road, Nanyang, Henan Province

Date of Registration 1995-4-5

Legal Form Chinese-foreign joint stock limited company (listed)

Registered Capital RMB 199.240 million

Legal Representative 李明 Li Ming

Business Scope Research and Development, production, sales with after sales

services of optical parts, optical coating products, photoresistors,

lens, light engine, optical auxiliary materials, and optical

instruments.

Operation Period Long-term

QUALIFICATION & AUTHENTICATION

Certificate/ License Date of Approval License issuing agency

Import-export License 1995 Henan Provincial Commerce Department

【Advisors】

Name 北京市天安律师事务所

(translated as Beijing Tianan Law Offices)

Address 北京市西城区月坛北街 2 号月坛大厦 3 层

3/F, Yuetan Mansion, 2 Yuetan North Road, Xicheng District, Beijing

BRANCHES and SUBSIDIARIES

【Branch】

Name Address Telephone Principal

Shenzhen Office of Tianji Optical and Electronic Co Ltd.

20/F., Yunsong Building, Chegongmiao, Futian District, Shenzhen, Guangdong Province

0755-33898898 Xu Dong

Wang

Suzhou Office of Tianji Optical and Electronic Co Ltd.

Chang Xu Road, Suzhou, Jiangsu Province

0512-35037788 Changchun

Li

【Subsidiaries】

Note The Subject has no subsidiaries.

【Share-holding Enterprises】

Note The Subject has no share-holding enterprises.

SHAREHOLDERS

Shareholding Structure （Unit：RMB’000）

Name Subscription Shares (%)

Paid-in Ratio(%)

Mode of Investment

中国南方工业集团公司 (translated as China Southern Industrial Group Co.)

81,455.192 40.88 100.00 In Cash

南方工业资产管理有限责任公司 (translated as Southern Industrial Asset Management Co., Ltd.)

26,713.960 13.41 100.00 In Cash

日本清水（香港）有限公司 (translated as Japan Shimizu (HK) Company Limited)

17,177.524 8.62 100.00 In Cash

富士能佐野株式会社 15,466.340 7.76 100.00 In Cash

明汇国际有限公司 (translated as Ming Hui International Co., Ltd.)

4,686.136 2.35 100.00 In Cash

南阳市金坤光电仪器有限责任公司 (translated as Nanyang Jin Kun Optoelectronic Instruments Co., Ltd.)

3,760.848 1.89 100.00 In Cash

陈盛豪 Chen Shenghao 207.800 0.10 100.00 In Cash

何肖军 He Xiaojun 182.250 0.09 100.00 In Cash

杭州承创投资有限公司 (translated as Hangzhou Cheng Chuang Investment Co., Ltd.)

182.100 0.09 100.00 In Cash

吴金仙 Wu Jin Xian 148.000 0.07 100.00 In Cash

Other shareholders 49,259.850 24.74 100.00 In Cash

Total 199,240.000 100.00 100.00

Note 1. The Subject is a listed company, which experiences frequent

changes of shareholding structure. The following is the

shareholding structure as at June 30, 2010;

2. The share of “Other shareholders” has been adjusted from 24.72%

to 24.74% to maintain the total investment among all shareholders

as 100.00%.

Background of Shareholders

Name 中国南方工业集团公司 (translated as China Southern Industrial Group Co.)

Business Address 北京市海淀区紫竹院路 69 号中国兵器大厦 5 层 5/F., China Bingqi Building, 69 Zizhuyuan Road, Haidian District, Beijing

Zip Code 100089

Telephone 010-68963822

Fax 010-68963688

Legal Form Enteprises Owned by the Whole People

Registered Capital RMB 12,645.210 million

Business Scope Sales, Import & Export of motorcycles, automobiles, optical and electronic products.

Reputation Good

Trends Steady

General Comments This company is one of the most important enterprises being managed by the central government. It consists of 46 industrial enterprises, 5 research laboratories, 3 state-level R&D centre. The main business includes special equipment; automobiles; motorcycles; parts for motorcycles and automobiles and optical and new business. Over 30 production plant and sales organization have been set up all over the world. It has also built up business relationships with Ford, Suzuki, Yamaha, and Fuji, etc. The sales of automobiles ranked 3rd – 4th in the nation with the capacity of 1.2 million vehicles being manufactured at 11 production plants. About 6 million motorcycles could be produced with the famous brand

names of 嘉陵, 建设, 大阳 and 轻骑, etc. The sales of motorcycles ranked no. 1 in the nation. It owned the largest manufacturer and exporter for transformers and LCoS light engines.

Name 南方工业资产管理有限责任公司 (translated as Southern Industrial Asset Management Co., Ltd.)

Business Address 北京市海淀区紫竹院路 69 号中国兵器大厦 20 层 20F., China Bingqi Building, 69 Zizhuyuan Road, Haidain District, Beijing

Zip Code 100089

Telephone 010-68963956

Business scope Industrial investment, reconstruction of assets, operations and consultations regarding investments.

Reputation Normal

Trends Steady

General Comments This company is subordinated to China Southern Industrial Group Co., which acts as an platform for industrial investment, capital operation, capital reconstruction and investment consultation. It has 10 subsidiaries and 7 shareholding enterprises with the business include autoparts, information, electronics, newly developed materials, electrical appliances and finance, etc.

Alteration in Capital (Unit：RMB’000)

Date of Alteration Registered Capital Currency Audited by

1995-04-05 51,430.00 RMB ---

2004-08-03 121,116.70 RMB ---

2005-11-08 141,116.70 RMB ---

2006-06-24 149,240.00 RMB RSM China CPAs Co., Ltd.

2007-12-03 199,240.00 RMB RSM China CPAs Co., Ltd.

Note 中瑞华恒信会计师事务所有限公司 has changed its name to 中瑞岳

华会计师事务所有限公司 (translated as RSM China CPAs Co., Ltd.)

DIRECTORS & MANAGERS Directors & Managers

Name Position Gender Age Education

Li Ming Legal Representative and Chairman

M 57 Postgraduate, Senior Engineer

Chen Daoming Director and General Manager

M 60 Postgraduate, Senior Engineer

Wang Jiong Director M 50 undergraduate, Senior Economist

Zuo Dan Director F 64 Postgraduate Senior Engineer

Name Li Ming

Position Legal representative and Chairman

Graduated from Beijing University

Responsibility Tactic management

Working Experiences

Li Ming is a senior engineer. He was once the technician, deputy officer, chief officer, assistant factory manager, deputy factory manager and general deputy factory

manager of 河南中南光电仪器厂 (translated as Henen Zhongnan Optoelectronic Instruments Factory) ; general deputy manager of 河南中光学集团有限公司 (translated as Henan Zhong Optical Group Co., Ltd.) At present, he is the Subject’s legal representative and chairman, director

and manager of Henan Zhong Optical Group Co., Ltd., chairman of 南阳南方智能光电有限公司 (translated as Nanyang Southern Intelligent Optoelectronics Co., Ltd.), executive director of 河南南方辉煌图像技术 有 限 公 司 (translated as Henan Southern Huihuang Graphic Technology Co., Ltd.) and chairman of 南阳中光学机电装备有限公司(translated as Henan Costar Group Co., Ltd.)

Part-time Position

Director and general manager of Henan Zhong Optical Group Co., Ltd., chairman of Nanyang Southern Intelligent Optoelectronics Co., Ltd., executive director of Henan Southern Huihuang Graphic Technology Co., Ltd. and chairman of Henan Costar Group Co., Ltd.

Interest ---

Industry Experiences

Over 10 years

Management Experiences

Over 10 years

Strength Operations and Management

Means of Promotion

Assigned by shareholder

Detrimental Record

None

Comprehensive evaluation

Strong sense of responsibility, have power, high management ability, decision-making ability

STAFF

Number of Employees About 2,100

Including: Managerial Staff About 120

Technicians About 220

Sales Officers About 20

Temporary Employee None

Personnel Quality Good

Work Efficiency Normal

Employment plan None

Note Other person mainly for production staff. The responsibility of the

Subject’s Retiree fund has been transferred to the local Department of Labor and Social Security. The Subject is not responsible for Retiree fund.

FACILITIES

Offices

Address No.5 South Industrial Road, Nanyang, Henan Province

Number 4

Build time Around year 1990

Coverage 3,335 sq. meter

Floorage 10,000 sq. meter

Ownership self-owned and Rent

Structure Framework、Building

Floors 4-5

Appearance Normal

Interior decoration Normal

Location Normal

Mortgage None

Insurance Yes

Geographical Environment

The Subject’s office was situated at an independent building of an industrial park.

Working State Normal

Factories

Address No.5 South Industrial Road, Nanyang, Henan Province

Number 4

Build time Around year 1990

Coverage 60,555.50 sq. meter

Floorage 40,000,000 sq. meter

Ownership Self-owned and Rent

Structure Framework、Building

Floors 4

Appearance Normal

Interior Decoration Normal

Location Normal

Mortgage None

Insurance Yes

Geographical Environment

The Subject’s office was situated at an independent building of an industrial park.

Working State Normal

The geographical environment description

Note 1. The main address is located in lujia town, lujia town abouts Nanyang economic and technology development zone, south of Henan, west zone along the Japanese industrial park, Nanyang export processing zone in the east , the geographical superiority.

2. The subject and subsidiary operation with the same addresses. 3. The main body of the land lease zhengda Co., LTD, which belongs to own workshop.

Facilities and Equipments

Equipment name Number Origin

Lathe --- Japan、China

grinding, iron cots --- Japan、China

comprehensive processing machinery

--- Japan、China

Production ability 4,500/year

The equipment

utilization Rate 85%

mortgage Unknown

insurance Unknown

Equipment and

facilities

The equipment imported from Japan, most complete equipment with

high automation standards.

SUPPLIERS AND CUSTOMERS Domestic Suppliers

Products Glass in strips, etc.

Regions Chengdu, Wuhan, etc.

Suppliers 成都光明光电股份有限公司 (translated as CDGM Glass Co., Ltd.)

湖北新华光信息材料股份有限公司 (translated as Hubei New

HuaGuang Information Materials Co., Ltd.)

Payment

Payment Method Telegraphic-transfer

Payment Terms 100%

Overseas Suppliers

Products Materials for optical processing

Regions Japan

Suppliers 日本清水产业株式会社(translated as Japan shimizu industrial Co.,

etc)

Payment

Payment Method Telegraphic-transfer

Payment Terms 100%

Payment Record

Name Payment in due

course (%)

Delay (in one

year) (%)

Delay (above one

year) (%)

Glass in strips, Materials for optical

processing

90 10 0

Note The price of the materials would be adjusted once per three months,

based on the results of the discussion between the Subject and the

domestic suppliers. Regarding overseas suppliers, the payment will be

settled in 60 days through telegraphic transfer

Domestic Customers

Products Lens, prisms, coatings, optical auxiliary materials, etc.

Regions around the country

Customers 佳能珠海有限公司 (translated Canon Zhuhai Co., Ltd.), 苏州智能泰

克有限公司 (translated as Suzhou Zhineng Taike Co., Ltd.), 河南中

光学集团有限公司 (translated as Henan Zhong Optical Group Co.,

Ltd.) and 南阳市金坤光电仪器有限责任公司(translated as Nanyang

Jin Kun Optolectronic Instruments Co., Ltd.), etc.

Collection

Collection Method Telegraphic-transfer

Collection Terms 1-60 days

Overseas Customers

Products Lens, prisms, coatings, optical auxiliary materials, etc.

Regions Japan, USA, Germany, Korea, Hong Kong and Taiwan, etc.

Customers Epson, Canon, Samsung, Zeiss, Sony, Fuji, Sharp, Sanyo, etc.

Collection

Collection Method T/T、L/C

Collection Terms 1-60 days

Collection Record

Name Collection in

due course (%)

Delay (in one

year) (%)

Delay (above one

year) (%)

Glass in strips, Materials for optical

processing

90 10 0

Note The Collection are settled within 60 days, as soon as the goods are

delivered.

COMMENTS of SUPPLIERS

Name 成都光明光电股份有限公司

(translated as CDGM Glass Co., Ltd.)

Type of Supplier Production

Materials Glass in strips, etc.

Cooperation since 2006

Credit None

More than None

Payment Method Telegraphic-transfer,

Payment Terms 30-60 days

Comments The cooperation is steady as the Subject has not owed any payments.

Name 湖北新华光信息材料股份有限公司

(translated as Hubei New HuaGuang Information Materials Co., Ltd.)

Type of Supplier Production

Materials Glass in strips, etc.

Cooperation since 1996

Credit None

More than None

Payment Method Telegraphic-transfer

Payment Terms 30-60 days

Comments The cooperation is steady as the Subject has not owed any payments.

Note It’s not obtain overseas supplier evaluation during the investigation.

Sales status in 2009

(Unit: RMB’000)

Item Domestic

Market

Proportion

( %)

Sale Abroad Proportion

( %)

Total Proportion

( %)

Optical

components

176,448.30 47.98 191,305.30 52.02 363,753.60 100.00

Total 176,448.30 47.98 191,305.30 52.02 363,753.60 100.00

FINANCE

Balance Sheet (Unit: RMB’000)

Assets 2009-12-31 2008-12-31 2007-12-31

Cash at bank & in hand 321,073.40 73,182.65 57,841.84

Bills receivable --- --- 200.00

Trade debtors 81,124.43 73,349.93 84,718.43

Other debtors 5,075.51 976.13 11,056.08

Provision for bad debt --- --- ---

Trade and other debtors, net 86,199.94 74,326.06 95,774.51

Advance payments 3,985.12 3,376.86 3,471.52

Inventories 24,399.58 30,128.98 22,438.50

Provision for diminution in

inventories --- --- ---

Inventories, net 24,399.58 30,128.98 22,438.50

Other current assets --- --- ---

Total current assets 435,658.04 181,014.55 179,726.37

Long term investment --- --- ---

Fixed assets at cost 221,129.18 226,654.44 208,887.41

Accumulated depreciation --- --- ---

Fixed assets net book value 221,129.18 226,654.44 208,887.41

Construction materials --- --- ---

Construction in progress 4.69 4,055.02 ---

Other fixed assets --- --- ---

Total fixed assets 221,133.87 230,709.46 208,887.41

Intangible assets, net 12,415.20 --- ---

Deferred tax assets 2,725.03 4,161.76 4,114.26

Total intangible assets and

Deferred tax assets 15,140.23 4,161.76 4,114.26

Other assets --- --- ---

Total Assets 671,932.14 415,885.77 392,728.04

Liabilities 2009-12-31 2008-12-31 2007-12-31 Short-term loans 97,800.00 82,000.00 87,800.00

Trade creditors 77,686.99 66,698.76 38,001.66

Bills payable --- 22,600.00 5,000.00

Receipts in advance 484.22 636.34 678.19

Dividend payable --- --- 12,186.68

Taxes payable 4,310.94 1,162.69 2,688.45

Other payables 11,555.41 20,836.63 72,579.73 Current portion of

long-term loans --- --- ---

Other current liabilities 8,343.08 13,479.51 9,742.66

Total current liabilities 200,180.64 207,413.93 228,677.37

Long-term loans --- --- 11,000.00

Housing Revolving fund --- --- ---Other long-term

liabilities 21,300.00 24,800.00 2,100.00

Total long-term liabilities 21,300.00 24,800.00 13,100.00

Deferred taxes (credit) --- --- ---

Total liabilities 221,480.64 232,213.93 241,777.37

Minority interests --- --- ---

Paid-up capital 199,240.00 149,240.00 121,116.70

Capital reserves 185,145.22 23.06 9.25

Surplus reserves 7,678.51 4,512.76 9,329.15

Retained profits 58,387.77 29,896.02 22,495.57

Others --- --- ---

Total shareholders’ equity 450,451.50 183,671.84 150,950.67 Total liabilities and shareholders’ equity 671,932.14 415,885.77 392,728.04

Income Statement (Unit: RMB’000)

Item 2009 2008 2007

Income from principal operations 367,753.60 383,798.32 314,835.33

Cost of sales 270,393.81 277,077.10 232,899.94

Business taxes and surcharges --- --- ---

Other costs --- --- ---

Profit from principal operations 97,359.79 106,721.22 81,935.39

Profit from other operations --- --- ---Provision for diminution in

inventories --- --- ---

Selling expenses 13,913.56 19,138.98 12,841.87

Administrative expenses 37,965.64 37,539.15 30,050.94

Financial expenses 6,772.97 11,253.40 11,446.95

Other expenses 1,684.88 2,486.60 -505.85

Income from operation 37,022.74 36,303.09 28,101.48

Investment (losses) income --- --- ---

Subsidy income --- --- ---

Non-operating income 124.42 176.38 113.61

Non-operating expenses 28.92 191.10 45.00

Other profits --- --- ---

Total profit 37,118.24 36,288.37 28,170.09

Taxation 5,460.75 2,167.23 2,465.14

Profit after taxation 31,657.49 34,121.14 25,704.95

Minority interests --- --- ---

Other profits and losses --- --- ---

Net profit 31,657.49 34,121.14 25,704.95

Financial Ratio

Year 2009 2008 2007

Current Ratio 2.18 0.87 0.79

Quick Ratio 2.05 0.73 0.69

Assets Liability Ratio(%) 32.96 55.84 61.56

Inventory Turnover Times 11.08 9.20 10.38

A/R Turnover Times 4.53 5.23 3.72

A/R Turnover Days 79.41 68.80 96.87

Current Assets Turnover Times

0.84 2.12 1.75

Total Assets Turnover Times 0.55 0.92 0.80

Return on Assets(%) 4.71 8.20 6.55

Return on Equity(%) 7.03 18.58 17.03

Profit Ratio(%) 10.09 9.46 8.95

Expense Profit Ratio(%) 63.29 53.42 51.84

Gross sales Ratio (%) 100 100 100

Financial Notes Analysis of financial data for the year of 2010:

1. Financial security: strong credit capacity, more current assets, low

current liabilities and small financial risk

2. Business ability: More account receivable, high cost and ordinary

business ability;

3. Profitability: The ability to raise profit is good.

Sources The Subject’s Annual report

BANK

Name Nanyang Branch of Bank of China

Address 129 Qiyi Road, Nanyang, Henan Province

Tel 0377-63198052

Opening time 1996-03

Bank’s Opinion Normal

Average Deposit Number Nine digits low（As at 2009-12-31）

Loan The subject has a short-term loan balance of RMB 97.8 mln at

the end of 2009

【Loan mortgage guarantee】

Note The Subject’s bank loan is guaranteed by other company.

LITIGATION RECORDS

Time Event

--- No litigation records have been found during the investigation.

OVERVIEW

Background

Having a good prospect in the industry of optical instruments, to expand the scale of production, and in nanyang area preferential investment conditions, April 5, 1995, henan zhongnan photoelectric instrument combined the British virgin islands optical Co., LTD established in nanyang lida photoelectric Co., LTD, registered capital is 51,430 thousand RMB, including henan zhongnan photoelectric instrument invested 33,430 thousand RMB, the British virgin islands second optical Co., LTD invested 18,000 thousand RMB.

History April 4, 1996: The Subject was formally put into production; November 11, 1995: The Subject’s legal representative was changed to 王树山 Wang Shushan; May 15, 1997: The Subject’s legal representative was changed to 李宗樵 Li Zongqiao April 4, 2003: The Subject applied for a change of registration information at AIC:

1. Legal Representative: 李生新 Li Shengxin 2. Shareholders 河南中光学集团有限公司 (translated as Henan Zhong Optical Group Co., Ltd.)

invested RMB 38,572.50 thousand (75.00%) BVI Second Optics Co., Ltd. invested RMB 12,857.50 thousand (25.00%)

August 3, 2004: The Subject applied for a change of registration information below:

1. Registered address: 河南省南阳市工业南路 5 号 No.5 Industry South Road, Nanyang, He’nan 2. Registered capital: RMB 121,116.70 thousand 3. Shareholders Henan Zhong Optical Group Co., Ltd. invested RMB 77,017.60 thousand (63.59%) BVI Second Optics Co., Ltd. invested RMB 12,860.00 thousand (10.62%) 南方工业资产管理有限责任公司 (translated as Southern Industrial Asset

Management Co., Ltd.) invested RMB 12,000.00 thousand (9.91%) 日本清水产业株式会社 invested RMB 11,013.10 thousand (9.09%) 香港明汇国际有限公司 (translated as Hong Kong Minghui International Co., Ltd.)

invested RMB 5,969.50 thousand (4.93%) 香港友滔有限公司 (Hong Kong You Tao Co., Ltd.) invested RMB 1,200.00

thousand (0.99%) 南 阳 市 金 坤 光 电 仪 器 有 限 责 任 公 司 (translated as Nanyang Jin Kun

Optoelectronic Instruments Co., Ltd.) invested RMB1,056.50 thousand (0.87%) 4. Business Scope: Research and Development, production, sales with after sales services of optical parts, optical coating products, photoresistors, lens, light engine, optical auxiliary materials, and optical instruments.

September 14, 2005: The Subject applied for a change of registration information below 1. Legal Representative: 李明 Li Ming 2. Registered capital: RMB 141,116.70 thousand 3. Shareholders:

中国南方工业集团公司 (translated as China Southern Industrial Group Co.) invested RMB 77,017.60 thousand (54.38%)

Southern Industrial Asset Management Co., Ltd. invested RMB 25,260.00 thousand (17.90%)

日本清水（香港）有限公司 (translated as Japan Shimizu (HK) Company Limited) invested RMB 16,247.60 thousand (11.51%)

富士能佐野株式会社 invested RMB 14,600.00 thousand (10.35%) Hong Kong Minghui International Co., Ltd. invested RMB 4,435.00 thousand

(3.14%) Nanyang Jin Kun Optoelectronic Instruments Co., Ltd. invested RMB 3,556.50

thousand (2.52%) June 24, 2006: The Subject applied for a change of registration information below:

1. Name: 天极光电股份有限公司 (current company name) 2. Registered capital: RMB 149,240.00 thousand 3. Shareholders: China Southern Industrial Group Co. invested RMB 81,455.20 thousand (54.58%) Southern Industrial Asset Management Co., Ltd. invested RMB 26,714.00 thousand

(17.90%) Japan Shimizu (HK) Company Limited invested RMB 17,177.50 thousand (11.51%) 富士能佐野株式会社 invested RMB 15,446.40 thousand (10.35%) Hong Kong Minghui International Co., Ltd. invested RMB 4,686.10 thousand

(3.14%) Nanyang Jin Kun Optoelectronic Instruments Co., Ltd. invested RMB 3,760.80

thousand (2.52%) 4. Legal Form: 中外合资股份有限公司（未上市）

December 3, 2007: The Subject applied for a change of registration information below:

1. Registered capital: RMB 199,240.00 thousand 2. Shareholders: China Southern Industrial Group Co. invested RMB 81,455.192 thousand (40.88%) Southern Industrial Asset Management Co., Ltd. invested RMB 26,713.96 thousand

(13.41%) Japan Shimizu (HK) Company Limited invested RMB 17,177.524 thousand (8.62%) 富士能佐野株式会社 invested RMB 15,446.340 thousand (7.75%) 明汇国际有限公司 (translated as Ming Hui International Co., Ltd.) invested RMB

4,686.136 thousand (2.35%) Nanyang Jin Kun Optoelectronic Instruments Co., Ltd. invested RMB 3,760.848

thousand (1.89%) 中信证券股份有限公司 (translated as Zhongxin Securities Holdings Co., Ltd.)

invested RMB 913.210 thousand (0.46%) 中国银河证券股份有限公司 (translated as China Galaxy Securities Holdings Co.,

Ltd.) invested RMB 216.710 thousand (0.11%) 国信证券有限责任公司 (translated as Guoxin Securities Co., Ltd.) invested RMB

191.210 thousand (0.10%) 长江证券有限责任公司 (Changjiang Securities Co., Ltd.) invested RMB 170.710

thousand (0.09%) Other shareholders invested RMB 48,508.160 thousand (24.34%) Note: The share of “Other shareholders” has been adjusted from 24.35% to 24.34% to maintain the total investment among all shareholders as 100.00%.

3. Legal Form: 4. Operation Period: Long-term

June 30, 2010: The Subject Shareholder structure change for the current situation

Organization structure The Subject is a listed company, which consists of 股东大会, Board of Directors, and Board of Supervisors. Its internal structure mainly divided into six control centers and three business affairs departments.

The Subject’s Board of Directors includes 张守启 Zhang Shouqi, 王天洲 Wang Tianzhou, 王志亮 Wang Zhiliang, 左月夕 Zuo Yuexi, 蒋晓勇 Jiang Xiaoyong, 肖连丰 Xiao Lianfeng, 桑名卓夫 (translated as Sang Ming Zhuo Fu) with 张敬党 Zhang Jingdang as Secretary. Independent directors include 高其富 Gao Qifu, 周春生 Zhou Chunsheng, 宣明 Xuan Ming and 郭耀黎 Guo Yaoli.

The Subject’s Broad of Supervisors include 陈鲁平 Chen Luping, 魏克伦 Wei kelun,

韩培恩 Han Peien and 许文民 Xu Wenmin.

Present Situation

The Subject was a major manufacturer in China responsible for the production of optical parts and components. These products are mainly applied to digital projectors, large screen projection digital TV, digital cameras, DVDs, optical systems for aviation and space detection.

About 70% of the total output (such as lens and prisms) is exported to Japan, USA,

Germany Korea, Hong Kong and Taiwan with the Clients including Epson, Canon, Samsung, Zeiss, Sony, Fuji, Sharp and Sanyo, etc. The Subject supplies its products to the Clients (such as Sony, Fuji, Sharp and Sanyo) with the supports / assistance of two foreign dealers 日本清水产业株式会社 and 明汇国际有限公司 respectively.

The Subject experiences a rapid growth in recent years with an increase of market share

regarding optical components (for projectors). For examples, the Subject’s output regarding prism series have occupied over 20% of global market share. Other lens have also shared a very important role.

The Subject was listed in Shenzhen Stock Exchange on December 3, 2009 with the

stock code of 002189. Analysis of business competitiveness Superiority: 1. The production of optical components is one of the high tech industry, which supported

by the Government. These supports create a good environment for the industrial growth; 2. The Subject has a strong history and background from military based enterprises, which

formed an important component of the Subject’s enterprise culture. 3. The Subject consists of various overseas clients, which provides feedbacks and supports

for the improvement of management and technology. 4. As China becomes dominant for the industry of optical components, the Subject takes

this opportunity to change the tradition and lead the industry with high technology. As a result, its products become very competitive.

5. The Subject plays a leading role in the production of optical coating products and has a high production capacity of optical components and related accessories. It became an important supplier for well-known enterprises such as SONY, EPSON, CANON, SAMSUNG and ZEISS. Its base of clients is international leading enterprises.

6. Based on the structure of global optical components industry, 36% belongs to lens (for

digital cameras), 22% for DVD players, and only 16% for projectors. This creates a room for the Subject’s development and growth for projectors related components. Inferiority: The Subject specialized in the production of optical components for projectors and digital TV. Its performance will be largely affected by the quantity demanded by related manufacturers.

Note: Military based enterprises refer to various institutions. Its main shareholder: China Southern Industrial Group Co., also has a strong military background.

Industry Analysis Optical devices are widely used for various observations, measurements, analysis and

recording, information processing, graphic evaluation, energy transmission and changes. They are important components for optical instruments, graphical display products and optical storage equipments.

The processing of optical devices is a labor, capital and technology intensive industry.

Its main feature is the necessity to design and produce the products, which can meet the requirements and characteristics of client’s products. To produce a high performance, low cost and large bulk of optical devices, the capacity of product design, high tech equipment and well trained labor is a must for the manufacturer. The main obstacles to break into this industry include the required technology protection, goodwill and trust, quality of labor force and system management skills.

The world optical device business centralized in Germany, Japan, Korea and Taiwan.

Having a traditional history of research and development of various glasses and lens in Germany, leading enterprises such as Leica and Carl Zeiss emerged and provide series of highly ranked products. Japan’s industry for optical devices has developed rapidly since World War II. Although the quality is still worse than those manufactured in Germany, the price and the unique functions become significant advantages in global markets. The main manufacturers include Canon, Nikon, Fuji, Olympus and Chinontec.

The traditional processing of optical device in China developed since the establishment

of People’s Republic of China. This process was mainly carried out by various institutions and research laboratories in the aspects of military, aviation and aerospace. The scale was relatively small and the production equipment was old. The quality of the output was very poor when compared to those manufactured by advanced countries. The performance, cost, production skills, applications and market promotion were weak. Most enterprises focused on the traditional processes, such as grinding through particles and polishing, etc. The level of

automation for these processes was low with the quality depends on the workers’ experience and skills. The output was applied to telescopes, microscopes and spectacle lenses.

There has been a technological development of the skills regarding optical coating,

information and display since 60s of 20th century. The emergence of digital and graphical information products made the optical components to express its characteristics of high precision and function. They could be applied to a wide range of products, including projectors, digital TV, digital cameras, lens (for mobile phones), CD-ROM, DVD ROM, DVD players, as well as MD players.

The rapid growth of global industry of optical components triggers the injections of state

and private capital in domestic industry by establishing related enterprises. The competitions become more and more intense. Many global well known enterprises in Japan, Korea, Taiwan, USA and Germany set up production plants in China, which centralized in the area of Zhujiang Delta, Yangtze River Delta and Huanbohai Area. The advantage for the domestic manufacturers having the labor force in low cost weakens and China becomes the world’s major production base.

At present, the industry of optical components is market oriented, with the

macro-regulation and control by related governmental departments. An agency, namely 中国光学光电子行业协会 China Optics & Optoelectronics Manufactures Association (COEMA) plays as an advisor and assistant role for government administrating optics and optoelectronics industries. It was voluntarily sponsored by enterprises, institutions engaging in optics and optoelectronic science researching, manufacturing, teaching and studying. Recently, the government issued various policies encouraging the industrial development. Examples are

《当前国家鼓励发展的产业、产品和技术目录（2000 年修订）》 translated as the List of Industries, Products and Technologies Encouraged and Emphasized on by the State for Development (revised in 2000) 《当前优先发展的高技术产业化重点领域指南（2004 年度）》 translated as the Directory of Priority Development of High Tech Industries (2004) 《國家中長期科學和技術發展規劃綱要》2006 translated as National Guideline on Medium and Long Term Program for Science and Technology Development

《高技術產業發展“十一五”規劃》 translated as Plan 11-5 for High Tech Industrial Development The domestic enterprises for the production of optical component can survive and

growth in such a competitive market only when they put more effort on product innovation and skill improvement. Trends and Prospects The Subject commences the production of precision optical components and part upon the receipt of purchase orders from both dealers and manufacturers. The X cubes, TIR prisms and lens are mainly exported to the manufacturers in Japan, Korea, USA and Europe. The quantity demanded is affected by the sales performance of the consumer products including digital TV, digital projectors, digital cameras. The Subject’s main competitors include 日本日東光器, 亞洲光學股份有限公司 (translated as Asia Optical Co., Inc.), 今國光學工業股份有限公司 (translated as Kinko Optical Co., Ltd.) 鳳凰光學股份有限公司、舜宇光學科技（集團）有限公司 Sunny Optical Technology (Group) Company Limited.日本日東光器 is a Japan based manufacturer, which specialized in the production of various prisms, polarizers/ polarizing prisms, mirrors, coating products, gratings, collimating lens, components made of calcium fluoride, cylindrical lenses, etc. Its skills and techniques applied on PSC components is in the leading role. The Subject is one of the high-tech enterprises in Henan Province and one of the leaders in the industry. It received the supports from the government.

The Subject attempted to develop the optical components into the aspect of laser and phase space, in order to strengthen the application of the products. The potential new products include key optical modules for “mini” projection devices, modern smooth surface components and mini camera modules, etc.

The Subject’s strategy in the coming 3-5 years is: “the optical component is base, the

optical thin film is core, actively extends to the downriver of the industry chain, became the top optoelectronics enterprise in the world”.

Relationship and Appraisal The Subject is honored as “Key High-Tech Enterprise under National Torch Plan” by Torch High Technology Industry Development Center, The Ministry of Science and Technology. It is one of the High-Tech enterprises in Henan Province, which was honored 双优外商投资企业 and A-class enterprise management method by China Customs. Besides, it was honored as Top 100 Potential Small-Medium Sized Innovative Enterprises by “Forbes” Chinese Edition in 2005 and 2006.

The good relationship with local government body, in the process of the development of industry and commerce, taxation, obtained the customs and other relevant government departments must support.

The main body of the main supplier of the overall evaluation, mutual cooperation

relations.

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Notes to Credit Rating

Credit rating

CR1 CR2 CR3 CR4 CR5 CR6 CR7 CR8 CR9

Credit score

95～100 90～94 85～89 75～84 65～74 55～64 45～54 35～44 Below 35

Credit risk level

No risk Slight risk Controllable risk High risk Unacceptable

Meaning

of credit

rating

Very trustworthy

in operation,

credit and tax

payment, etc, very

good social

reputation,

outstanding

business

performance,

good financial

situation, leading

position in the

industry. Low

credit risk.

Quite trustworthy

in operation,

credit and tax

payment, etc,

quite good social

reputation, quite

good business

performance,

quite good

financial

situation,

advanced

position in the

industry. Quite

low credit risk.

Trustworthy in

operation, credit

and tax payment,

etc, good social

reputation, good

business

performance,

good financial

situation,

common position

in the industry.

Normal credit

risk.

Normal in

operation, and

tax payment, etc,

normal social

reputation,

normal business

performance,

inferior financial

situation. Quite

high credit risk.

Adverse record of

operation, credit

and tax payment,

etc, bad social

reputation, poor

business

performance, poor

financial situation,

high credit risk.