In fiscal 2007, our Group's revenue increased by RMB3.2 million or 1.7%, from RMB189.3 million in FY2006 to RMB192.5 million. The growth in revenue was underpinned by an increase in fabric sales of approximately RMB 17 million as a result of our efforts to command a larger market share. This increase, however, has been offset by reduced sales of yarn by RMB23 million. This was mainly due to an increase in yarn consumption in house and less orders from third party customers.

Our Group's gross profit decreased by 26.6% (equivalent to RMB5 million) to RMB 13.6 million in FY2007 from RMB18.6 million in the corresponding period last year.

Gross profit margin was 7.1% in FY2007, from 9.8% in FY2006. The decrease in gross profit margin was attributed to a confluence of factors. For one, the continuing appreciation of Renminbi to US dollar reduced the gross profit margin of our export business. Secondly, our labor cost and other facility expenses also increased during the year. Thirdly, there was an allowance for inventory obsolescence of RMB1.5 million incurred in FY2007. Also, one of our Group's initiatives in FY2007 was the termination of the capitalization of expenses incurred in respect of the mulberry plant. All expenses including land lease expense, labor and other materials were charged to the cost of sales.

At the same time, the company began to amortise RMB0.2 million biological assets in the cost of sales annually from FY2007.

Other income decreased by RMB0.9 million or 34.3% due mainly to the decrease in demand of customers for electricity offseting by increase of government grants of RMB0.27 million.

Our distribution expenses increased by RMB1.1 million due mainly to the increased selling expenses arose from additional marketing activities to increase sales of company's products. Administrative expenses, on the other hand, dipped by 12.2% or RMB1.1 million during the year under review due mainly to the better management of our Singapore office expenses and more prudent cost control measures.

Other operating expenses increased by RMB1.9 million or 66.1% from RMB2.7 million in FY2006 to RMB4.6 million in FY2007. This was due mainly to the extraordinary expenses of RMB 2.6 million for writing off the biological assets as we returned parts of the land to the lessor. Our finance costs for FY2007 increased slightly at RMB3.4 million as compared to RMB3.2 million in FY2006 due mainly to the higher interest rate of approximately 1% additionally.

Balance Sheet

The non-current assets as at FY2007 were RMB56.6 million compared to RMB62.9 million in FY2006. The decline was due to the depreciation charge of RMB6.0 million and amortisation of biological assets of RMB0.2 million, write off biological assets of RMB2.6 million due to return part of the leased land and disposal of property, plant and machinery of net book value of RMB1.9 million after offseting by additions in the property, plant and equipment of RMB4.4 million.

Due to an increase in pledged deposit partly offset by a decrease in inventory and cash and bank balances, our current assets as at FY2007 stood at RMB160.2 million, compared to RMB156.6 million in FY2006.

Our current liabilities, on the other hand, amounted to RMB94.0 million from RMB92.0 million in FY2006. The increase was underpinned by the increase in trade payables of RMB18.7 million with part offset by decrease of bank loan of RMB11.8 miilion and decrease of other payable of RMB3.8 million.

Non-current liabilities as at FY2007 were RMB24.2 million from RMB 23.7 million in FY2007. The change is due to the deferred income from the government grants in Guizhou and the effect of adoption of FRS39.

Shareholders' equity of our Group was RMB98.3 million as at 31 December 2007 from RMB103.1 million in FY2006. The decrease of RMB4.8 million or 4.6% was due to the net loss attributable to shareholders for the FY2007 of RMB4.7 million.

Cash Flow

In FY2007, the Group experienced a net cash inflow of approximately RMB30.3 million from operations, caused mainly by a decrease in working capital of approximately RMB21.0 million which was due to the increase in trade payables and decrease in inventory.

Net cash used in investing activities stood at RMB2.6 million in FY2007 due to the purchase of a new plant and equipment of RMB4.4 million, partly set off by the receipts of government grants of RMB1.7 million.

Net cash used in financing activities stood at RMB35.1 million in FY2007 due mainly to net repayment of bank loan of RMB11.8 million and increased pledged deposit of RMB18.9 million.