Guosen Securities Co., Ltd. is a nationwide and comprehensive security firm formed and developed on the basis of former 4 outlets and 1 distribution department and 1 computer department of our company in 1994. A sluggish security market over a number of years greatly affected Guosen s operation. In 2005 this company still operated in harsh trading environment. Chinese security markets had remained stagnant for the last consecutive 5 years. Major domestic stock indexes hit an all time low and turnover was at a historical low level. New issue of shares and refinance were stopped for the reform of the shareholder structure of listed companies.

Against this background, Guosen s self-operated business, brokerage business and investment banking business were hard hit. Facing such a savage situation, the Board of Directors introduced a new working philosophy “change the operating ideal, adjust strategies, strengthen ourselves, expand the influence of the brand name, meet challenges and become a first class security company”Guosen gradually implemented two radical changes. Firstly, Guosen changed its management model. It switched from relying upon high risk businesses to creating and selling products with a lower and more controllable risk. Guosen has allowed itself to maintain a long-term steady development. Secondly, Guosen changed its developing model from totally relying on its own system to combining its own strengths with outside organizations through merger and acquisition. Guosen took advantage of exploiting the chance for industry consolidation. Thus it expanded with little cost and made a significant more forward in terms of development. With these changes, Guosen consolidated and elevated its position within the security industry and geared up for future development through the difficult times. In 2005 Guosen made significant progress on a wide range of fronts within its business. These included Guosen adhered to its persistent management ideal, maintained a high level of professionalism, and improved staff quality. It adjusted its operating structure, disposed of underperforming assets, improved assets quality, and maintained a good momentum of growth. In 2005 Guosen realized a net income of RMB 51.78 million.