Fengfan Co., Ltd. Business Report FY2007

Business Highlights

Performance for FY2007 (million yuan)

(in million yuan) FY2007 FY2006 Rate of change(%) Factors
Sales 2,627.33 1,872.82 40.3 Sales increased as a result of the following factors:
- The Company started commercial production at its new production facility that was recently completed. 
- The Company developed new products.
- The Company developed and supplied new products based on an OEM agreement. 
Operating profit 142.12 77.68 83.0
Net profits 116.21 66.85 73.8

New contracts
- In May 2007, the Company signed an agreement with GM Global Procurement Group, under which the Company will develop and manufacture 250,000 batteries for the GM Group.
-The Company has also concluded an exclusive supply agreement with SAIC Motor to provide batteries for the Roewe.
- In August, 2007, the Company's new 58043 (C6) eco batteries passed VW's new TL82506 lead acid standard. These batteries are likely to be used in high-end VW models.

New subsidiary
- In February, 2007, the Company established Baoding Fengfan New Energy Co., Ltd., a wholly owned subsidiary to manufacture lithium batteries. The new entity is capitalized at 50 million yuan.

New joint venture
- In July 2007, the Company and Johnson Controls Inc. signed a memorandum of understanding, under which they will establish a  joint-venture company to engineer, manufacture, sell, and provide after-sales services on maintenance-free lead-acid automotive batteries in Sichuan Province, Chongqing City, Guizhou Province, Yunnan Province, and the Tibet Autonomous Region. The two companies are likely to hold equal shares in the joint-venture corporation.


Development activities based on OEM contracts
- In October 2007, the Company developed maintenance-free storage batteries for use in the MG-7 built by Nanjing MG Motor. 
- In October 2007, the Company developed maintenance-free storage batteries for use in the Chrysler 300C assembled at Beijing Benz-DaimlerChyrsler.

Investment Activities

Capital investment projects using raised funds (as of Dec. 2007) (in million yuan)
Capital investment projects Planned investment amount Actual investment amount Status report as of Dec. 200
Construction project for new-type maintenance free battery production line 197.39 177.19 Completed
Expansion project for production facilities of high performance battery plates 80.00 80.05 Completed
Construction project for lithium-ion battery production facilities 200.00 139.08 The Company completed the first phase and already launched production. 
(Percentage of completion: 70 percent)
Construction project for production facilities to make sealed maintenance-free lead- acid batteries 270.00 0.70 This facility is now under construction. 
(Percentage of completion: 0.3 percent)

Capital investment projects using own resources (as of Dec. 2007)
- The Company completed building a new production facility at its Qingyuan Branch to make 1 million maintenance-free batteries per year. The Group is now capable of producing 4.5 billion batteries annually. 
- The Company started commercial production at its new facility in Tangshan, which has the capacity to make 2 million storage batteries.

New projects
- In October 2007, Fengfan Co., Ltd. raised 440 million yuan by issuing additional shares. Out of this amount, 270 million yuan will be used to build a new facility to manufacture 3 million sealed, maintenance-free, lead-acid batteries per year. Full-scale production is scheduled to begin in December 2012.

- In November 2007, the board members of Fengfan Co., Ltd. agreed to carry out development projects on maintenance-free, lead-acid batteries. The company plans to invest a total of 17.8 million yuan in this project. Construction is slated to begin in October 2007 and end in October 2009. When the lines are fully operational in 2011, they are expected to add 22.6 million yuan to the Company's annual sales.