中集Ｂ(200039)2007年年度报告（英文版）（补充后）

China International Marine Containers (Group) Co., Ltd. 2007 Annual Report April 2, 2008 1 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Section 1 Important Statement and Contents Important Statement The Board of Directors, Supervisory Council, supervisors and senior management of China International Marine Containers (Group) Co., Ltd. (hereinafter referred to as “the Company” ) hereby undertake that the information and data contained in this report are free from false records, misleading statements or significant omission, and we shall assume individual and joint liabilities for the authentication, accuracy and integrity of the contents in this report. No directors, supervisors or high-level management have any objection to the authenticity, accuracy or integrity of the contents of this annual report. This report has been audited by KPMG which has issued audit report without reservations. Mr. Fu Yuning, the Chairman of the Board, Mr. Mai Boliang the President of the Company and Mr. Jin Jianlong, the General Manager of Financial Management Dept., hereby undertake that the financial report in this annual report is true and complete. This report consists of Chinese and English versions and in case of discrepancy between these two versions, the Chinese version shall prevail. Contents 1. Important Statement and Contents 2 2. Basic Information 3 3. Accounting Data and Business Data Summary 5 4. Shareholders and Changing of Share Capital 7 5. Directors, Supervisors, Senior Management and Employees 13 6. Corporate Governance Structure 22 7. The Shareholders’ General Meeting 27 8. Report of the Board of Directors 28 9. Report of Supervisory Council 53 10. Significant Issues 55 11. Financial Report 71 12. Documents for Reference 248 2 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Section 2 Basic Information 1. Statutory Chinese and English names and abbreviations: Chinese name: 中国国际海运集装箱（集团）股份有限公司 Chinese abbreviation: 中集集团 English name: CHINA INTERNATIONAL MARINE CONTAINERS (GROUP) CO., LTD English abbreviation: CIMC 2. Legal representative: Fu Yuning 3. Board secretary: Yu Yuqun Representative for securities affairs: Wang Xinjiu Address: CIMC R&D Center, 2 Gangwan Avenue, Shekou, Nanshan District, Shenzhen Zip code: 518067 Tel: (86) 755-2669 1130 Fax: (86) 755-2682 6579 E-mail: shareholder@cimc.com 4. Registered address: CIMC R&D Center, 2 Gangwan Avenue, Shekou, Nanshan District, Shenzhen Office address: CIMC R&D Center, 2 Gangwan Avenue, Shekou, Nanshan District, Shenzhen Zip code: 518067 Website: http://www.cimc.com 5. News media designated by CIMC for information release: “China Securities Journal”, ”Securities Times”, “Shanghai Securities News” and ”Ta Kung Pao”. Website designated by CSRC for information release: http://www.cninfo.com.cn Places where annual report is made available: Board secretary’s office and Financial Management Dept 6. Stock exchange on which the Company are listed: Shenzhen Stock Exchange Stock short form and code: CIMC (中集集团) 000039 CIMC B (中集B) 200039 7. Other relevant information: 1. Date of initial registry: September 30, 1992 2. Place of initial registry: Shenzhen Administration for Industry and Commerce 3. Latest change in registry: May 19, 2006 4. Plate of registry after change: Shenzhen Administration for Industry and Commerce 5. Corporate business license: QGYSZZ 101157 Tax registry number: State Tax 440301618869509 ; Local Tax 440305618869509 6. Organization code: 61886950-9 7. Name and office address of certified public accountants: KPMG 3 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Office address: Yuehai Tianhe Town Plaza, 208 Tianhe Road, Guangzhou Zip code: 510620 Primary Banks Connected: China Development Bank The Export-Import Bank of China Bank of Communications China Merchants Bank China Construction Bank Bank of China Citibank, N.A. The Hongkong and Shanghai Banking Corporation Limited Standard Chartered Bank ING Bank Nanyang Commercial Bank 4 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Section 3 Accounting Data and Business Data Summary 1. Key accounting data of current year Unit: RMB ‘000 No. Item Amount 1 Total profit 3,500,304 2 Operating profit 3,457,387 3 Net profit attributable to shareholders of listed company 3,165,373 4 Net profit excluding non-recurring gain/loss (Note) 2,840,860 5 Net cash flow from operating activities -1,085,549 Note: Net profit excluding non-recurring gain/loss Unit: RMB ‘000 Non-recurring gain and loss 2007 2006 Gain and loss from non-current asset disposal 334,886 -1643 Governmental subsidy 16,587 7573 Gains generated when consolidated cost of consolidating 24,490 enterprise is less than the fair value of the identifiable net assets of consolidated enterprise available at the time of consolidation — Non-operating revenue 15,370 23535 Non-operating expenditure -11,387 -10982 Subtotal 379,946 18,483 Less: Impact on tax from above items -48,429 -1,175 Total 331,517 17,308 Including: Non-recurring gain and loss affecting net profit 324,513 of parent company shareholders 17,308 Non-recurring gain and loss affecting net profit of minority 7,004 shareholders — 2. Impact on net profit and net assets from adjustment in compliance with international accounting standards (unaudited) Unit: RMB ‘000 Net profit attributable Net asset attributable to to shareholders of shareholders of listed listed company company Jan – Dec 2007 December 31, 2007 Amount under Chinese accounting standards 3,165,373 15,913,757 Items to be adjusted based on international accounting standards Others -18,455 -14,077 Amount under international accounting 3,146,918 15,899,680 standards 3. Key accounting data and financial indicators in the recent 3 years 5 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Unit: RMB ‘000 2007 2006 Rate of 2005 After Before Increase/De After Before adjustment adjustment crease adjustment adjustment 48,760,826 33,573,664 33,167,801 45.24% Operating revenue 31,320,122 30,959,311 3,500,304 3,186,788 3,150,248 9.84% Total profit 3,169,283 3,061,227 3,165,373 2,820,752 2,771,723 12.22% 2,812,647 2,669,141 Net profit attributable to parent company shareholders 2,840,860 2,803,444 2,211,990 1.33% Net profit excluding non-recurring gain/loss 2,733,580 2,602,478 -1,085,549 1,296,823 1,296,823 -183.71% Net cash flow from operating activities 5,317,580 5,317,580 1.19 1.06 1.04 12.22% Basic EPS (RMB yuan) 1.06 1.00 1.19 1.06 1.04 12.22% Diluted EPS (RMB yuan) 1.06 1.00 1.07 1.05 0.83 1.33% Basic EPS after deducting non-recurring gain and loss (RMB yuan) 1.03 0.98 19.04% 22.50% 24.29% -3.46% Fully diluted ROE 28.77% 28.23% 24.46% 24.73% 26.71% -0.27% Weighted mean ROE 32.50% 31.50% Diluted ROE after deducting non-recurring 17.09% 22.36% 19.39% -5.27% gain and loss 27.96% 27.52% Weighted mean ROE after deducting 21.95% 24.58% 21.31% -2.63% non-recurring gain and loss 31.58% 30.71% -0.41 0.49 0.49 -183.71% Net cash flow from operating activities per share (RMB yuan) 2.00 2.00 2007 Dec.31, 2006 Rate of Dec.31, 2005 Increase/De After After crease After After adjustment adjustment adjustment adjustment 40,391,920 24,191,571 22,923,368 66.97% Total assets 17,289,851 17,173,071 15,913,757 12,220,114 11,117,446 30.23% Shareholders’ equity attributable to parent company shareholders 9,572,691 9,455,913 5.98 4.59 4.18 30.23% Net assets per share attributable to parent company shareholders 3.60 3.55 6 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Section 4 Shareholders and Changing of Share Capital I. Changing of Share Capital 1. Changing of Share Capital as of December 31, 2007 (1) Changing of Share Capital Unit: Share Before current change Increase/decrease after current change (+/-) After current change Number of Ratio Reserve fund Others Subtotal Number of Ratio shares (%) transferred to shares (%) capital stock (Note) I. Total number of shares 360,832,289 16.26 72,166,457 -133,326,528 -61,160,071 299,672,218 11.26 conditional in sales 1. Shares held by state 0 0 0 0 0 0 0 2. Shares held by state-owned 0 0 0 0 0 0 0 enterprises 3. Shares held by other 689,086 0.03 137,817 -206,726 -68,909 620,177 0.02 domestic investors Including: Shares held by domestic non-state-owned 0 0 0 0 0 0 0 enterprises Shares held by domestic natural 689,086 0.03 137,817 -206,726 -68,909 620,177 0.02 person (Senior management) 4. Shares held by overseas 360,143,203 16.23 72,028,640 -133,119,802 -61,091,162 299,052,041 11.23 investors Including: Shares held by 360,143,203 16.23 72,028,640 -133,119,802 -61,091,162 299,052,041 11.23 overseas corporations Shares held by overseas natural 0 0 0 0 0 0 0 person (Senior management) II. Total number of shares 1,857,831,087 83.74 371,566,217 133,326,528 504,892,745 2,362,723,832 88.74 unconditional in sales 1． RMB ordinary shares 665,765,996 30.01 133,153,199 133,325,928 266,479,127 932,245,123 35.02 (A-share) 2． Foreign shares listed in 1,192,065,091 53.73 238,413,018 600 238,413,618 1,430,478,709 53.73 domestic market (B-share) 3． Foreign shares listed in 0 0 0 0 0 0 0 7 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 overseas market 4． Others 0 0 0 0 0 0 0 III. Total number of shares 2,218,663,376 100 443,732,674 0 443,732,674 2,662,396,051 100.00 Note: On June 1, 2007, CIMC implemented 2006 dividend payout and capital conversion proposal. Based on 2,218,663,376 capital shares at the end of 2006 as baseline, CIMC increases 2 shares per 10 shares. (2) Statement of Change in Restricted Shares Unit: Share Name of Number of Number of Number of Number of Reason for Date of releasing shareholder Restricted Restricted Restricted Restricted restriction in sale restriction Shares at year Shares released Shares e Shares at year sale beginning in current year increased in end current year COSCO Container Promise not to 360,143,203 133,119,802 72,028,640 299,052,041 Sep. 5, 2007 Industries Ltd. sell Mai Boliang Held by Senior Release sale 412,251 123,676 82,450 371,025 restriction under management relative regulations Li Ruiting Held by Senior Release sale 274,835 82,450 54,967 247,352 restriction under management relative regulations Liu Xuebin Held by Senior Release sale 2,000 600 400 1,800 management restriction under relative regulations Total 360,832,289 133,326,528 72,169,457 299,672,218 2. Share issuing and listing (1) Shares issued in the past 3 years before reporting period. CIMC did not issue any shares or derivative securities. (2) On June 1, 2007, CIMC implemented 2006 dividend payout and capital conversion proposal to increase 2 shares per 10 shares. After share bonus, total number of shares and shareholding structure are as follows: Unit: Share Before current Change in After current Shareholding change current capital change ratio (%) conversion (+) I. Total circulating A-shares with 328,027,536 32,802,753 360,830,289 16.23 conditions in sale 1. Shares held by overseas 327,402,912 32,740,291 360,143,203 16.23 organizations 8 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 2. Shares held by senior 624,624 62,462 687,086 0.03 management II. Total circulating shares without 1,689,563,794 168,956,379 1,858520,173 83.77 conditions in sale A-shares 605,866,438 60,586,644 666,453,082 30.04 B-shares 1,083,697,356 108,369,735 1,192,067,091 53.73 III. Total number of shares 2,218,663,376 201,696,670 2,662,396,051 100.00 II. Shareholders 1. Total number of shareholders at the end of the reporting period Number of shareholders at Increase / decrease (+, -) Number of shareholders at period beginning in the reporting period period end A-share 67,191 227,237 294,428 B-share 14,672 37,087 51,759 Total 81,863 264,324 346,187 2. Major shareholders (as of December 31, 2007) Number of Number of Shareholding Shareholding shares with Name of shareholder Nature pledged or ratio (%) at period end conditions in frozen shares sale Foreign 16.54% 299,052,041 0 1.COSCO Container Industries Limited 440,513,853 investor 2. China Merchants (CIMC) Investment Foreign 16.23% 0 0 432,171,844 Limited investor 3.China Merchants (CIMC) Holdings Foreign 6.52% 0 0 173,643,136 Limited investor 4.CMBLSA RE FTIF TEMPLETON Foreign 2.19% 0 Unknown 58,257,587 ASIAN GRW FD GTI 5496 investor Foreign 1.43% 0 Unknown 5.HTHK-TARGET ASIA FUND LIMITED 38,014,125 investor 6.LONG HONOUR INVESTMENTS Foreign 0.95% 0 0 25,322,106 LIMITED investor 7.HTHK/CMG FSGUFP-CMG FIRST Foreign 0.89% 0 Unknown 23,812,520 STATE CHINA GROWTH FD investor Foreign 0.72% 0 Unknown 8.FTIF TEMPLETON BRIC FUND 19,274,810 investor Foreign 0.68% 0 Unknown 9.BB/BARING HONG KONG FUND 17,999,986 investor Domestic 0.63% 0 Unknown 10.GAO-LING FUND,L.P. 16,660,327 investor Note 1: COSCO Container Industries Limited holds 440,513,853 shares, including 432,171,844 A-shares and 8,342,010 B-shares. Note 2: Among the top 10 shareholders: Affiliation and group-as-a-person relation exists between the first and sixth shareholders, where COSCO Container Industries Limited is subordinate whole-owned 9 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 subsidiary of COSCO Pacific Limited under COSCO Group; Long Honour Investments Limited is subordinate whole-owned subsidiary of COSCO Hong Kong under COSCO Group; These two and other shareholders are not group as a person as specified in “Regulatory Provisions on Disclosure of Information on Shareholding Change of Shareholders for Listed Companies”. Affiliation and group-as-a-person relation exists between the second and third shareholders, where China Merchants (CIMC) Investment Limited and China Merchants (CIMC) Holdings Limited are both subordinate whole-owned subsidiaries of China Merchants Holdings (International) Limited, a controlling subsidiary under China Merchants Group Limited. These two and other shareholders are not group as a person as specified in “Regulatory Provisions on Disclosure of Information on Shareholding Change of Shareholders for Listed Companies”. It is unknown whether affiliation exists between other shareholders and it is also unknown whether they are group as a person as specified in “Regulatory Provisions on Disclosure of Information on Shareholding Change of Shareholders for Listed Companies”. 3. Corporate shareholders with shareholding ratio exceeding 10% (1) Shareholders with shareholding ratio exceeding 30% (controlling shareholders) Shareholder name Sharehol Director Date of Regist Equity structure Business ding incorpor ered scope ratio ation capital COSCO Container 16.54% Chen Keng, 2004.4.2 USD 1 Whole-owned by Investment Industries Limited Wang Zhi and 6 COSCO Pacific and Ying Haifeng holdings China Merchants 16.23% Du Yongcheng, 1995.1.1 HK$ Whole-owned by Investment (CIMC) Investment Liu Enhuai and 7 10,000 China Merchants and Limited Lin Woliu Holdings holdings (International) Limited ①As a liability limited company incorporated in British Virgin Islands, COSCO Container Industries Limited is a whole-owned subsidiary under COSCO Pacific Limited. COSCO Pacific Investment Holdings Limited holds 51.34% equity of COSCO Pacific Limited. COSCO Pacific Investment Holdings Limited is a whole-owned subsidiary under China COSCO Holdings Limited and COSCO Group holds 63.83% equity of China COSCO Holdings Limited. As of December 31, 2007, COSCO Container Industries Limited held 16.54% equity of CIMC. Long Honour Investments Limited is whole-owned subsidiary under COSCO Hong Kong and holds 0.95% equity of CIMC. Therefore, COSCO Pacific Limited actually holds 17.49% equity of CIMC. ②China Merchants (CIMC) Investment Limited is a whole-owned subsidiary under China Merchants Holdings (International) Limited. China Merchants Group Limited holds 57.51% equity of China Merchants Holdings (International) Limited. China Merchants (CIMC) Investment Limited holds 16.23% equity of CIMC and China Merchants (CIMC) Holdings Limited, a whole-owned subsidiary under China Merchants Holdings (International) Limited, holds 6.52% equity of CIMC. Another whole-owned subsidiaries under China Merchants Holdings (International) Limited---Bestrain Investment Limited holds 0.314% equity of CIMC. Therefore, China Merchants Holdings (International) Limited actually holds 23.06% equity of CIMC. 10 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Property and controlling relation between actual controller and CIMC SASAC 100% 100% COSCO China Merchants Group (HongKong) Co., Ltd. 53.57% 57.44% China COSCO Holdings Company Limited China Merchants Holdings (International) Company Limited 100% 100% 100% COSCO Pacific Investment Holdings Limited CHINA MERCHANTS（CIMC）INVESTMENT LIMITED 50.97% 100% COSCO (Hong Kong) Group Ltd COSCO Pacific Limited 100% Bestrain Investment Limited 100% Long Honour Investment Ltd. 16.23% 0.31% COSCO Container Industries Limited 0.95 CHINA MERCHANTS(CIMC)HOLDINGS LIMITED 16.54% CIMC 6.52% (2) In the reporting period, no change occurred to China Merchants (CIMC) Investment Limited and COSCO Container Industries Limited. From December 10, 2007 to March 6, 2008, COSCO Container Industries Limited acquired 113,067,401 CIMC B-shares listed in Shenzhen Stock Exchange (approximately 4.25% of issued share capital). In addition to 432,171,843 CIMC A-shares by COSCO Pacific Limited and its subordinate companies (approximately 16.23% of issued share capital), the shareholding ratio of COSCO Pacific Limited and its subordinate companies in CIMC increased to 20.48%. (3) Top 10 shareholders of shares without conditions in sale ①Top 10 A-share holders No. Shareholder name Number of shares without conditions in sale 1 COSCO Container Industries Limited 133,119,802 2 Agricultural Bank of China－ China Post Core Growth Stock 16,000,000 Securities Investment Fund 3 Industrial & Commercial Bank of China－Hua An Mid-Cap & 11,600,000 Small-Cap Growth Stock Fund 4 Industrial & Commercial Bank of China－Rongtong Shenzhen Stock 7,037,262 Exchange 100 Index Securities Investment Fund 5 Industrial & Commercial Bank of China－E-Fund Value Growth 5,715,315 Combined Securities Investment Fund 6 Tiance Investment Management Consultants (Shanghai) Ltd. 5,616,382 7 Bank of China－Harvest Shanghai-Shenzhen 300 Index Securities 5,350,225 Investment Fund 8 China Construction Bank－Xinda Aoyin Leading growth Stock 5,000,000 11 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Securities Investment Fund 9 China Life Insurance Company Limited－Dividend－Personal 4,531,829 Dividend -005L-FH002 Shenzhen 10 Guangzhou Steel & Iron Enterprises Group 4,516,982 ②Top 10 B-share shareholders No. Shareholder name Number of shares without conditions in sale 1 China Merchants (CIMC) Investment Limited 432,171,844 2 China Merchants (CIMC) Holdings Limited 173,643,136 3 CMBLSA RE FTIF TEMPLETON ASIAN GRW FD GTI 5496 58,257,587 4 HTHK-TARGET ASIA FUND LIMITED 38,014,125 5 LONG HONOUR INVESTMENTS LIMITED 25,322,106 6 HTHK/CMG FSGUFP-CMG FIRST STATE CHINA GROWTH 23,812,520 FD 7 FTIF TEMPLETON BRIC FUND 19,274,810 8 BB/BARING HONG KONG FUND 17,999,986 9 GAO-LING FUND,L.P. 16,660,327 10 TOYO SECURITIES ASIA LIMITED-A/C CLIENT. 13,011,858 Note: Affiliation and group-as-a-person relation exists between the first and second shareholders, where China Merchants (CIMC) Investment Limited and China Merchants (CIMC) Holdings Limited are both whole-owned subsidiaries under China Merchants Holdings (International) Limited. They and other shareholders are not group as a person as specified in “Regulatory Provisions on Disclosure of Information on Shareholding Change of Shareholders for Listed Companies”. It is unknown whether affiliation exists between other shareholders and it is also unknown whether they are group as a person as specified in “Regulatory Provisions on Disclosure of Information on Shareholding Change of Shareholders for Listed Companies”. (4) Restricted shares originally held by non-circulating shareholders Unit: Share Shareholder name Number of shares Date to be traded Number of Restricted Condition shares for sale COSCO Container Industries 5% of the total shares May 24, 2007 133,119,802 Note 1 Limited 10% of the total shares May 24, 2008 266,239,604 Note 2 432,171,843 May 24, 2009 432,171,843 Note 1: In accordance with relevant provisions, COSCO Container Industries Limited promises not to sell or transfer originally non-circulating shares at Shenzhen Stock Exchange within 12 months commencing on the first day after implementation of Split Share Structure Reform Scheme. After expiry of the above commitment period, COSCO Container Industries Limited may sell originally non-circulating shares at Shenzhen Stock Exchange. However, the percentage of sale shall not exceed 5% of total shares of the Company within 12 months and not exceed 10% within 24 months. Note 2: On September 5, 2007, 133,119,802 A-shares with conditions in sale held COSCO Container Industries Limited were listed for trading, accounting for 5% of total shares of the Company. 12 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Section 5 Directors, Supervisors, Senior Management and Employees 1. Directors, supervisors and senior management (1) Basic information 1. Directors Name Title Gender Age Office term Fu Yuning Chairman Male 51 2007.4—2010.4 Li Jianhong Vice chairman Male 52 2007.4—2010.4 Mai Boliang Director and president Male 49 2007.4—2010.4 Wang Hong Director Male 45 2007.4—2010.4 Xu Minjie Director Male 49 2007.4—2010.4 Qin Rongsheng Independent director Male 45 2007.4—2010.4 Jin Qingjun Independent director Male 50 2007.4—2010.4 Xu Jing’an Independent director Male 66 2007.4—2010.4 2. Supervisors Name Title Gender Age Office term Chen Keng Chief supervisor Male 51 2007.4—2010.4 Du Yongcheng Supervisor Male 58 2007.4—2010.4 Feng Wanguang Staff supervisor Male 61 2007.4—2010.4 3. Senior management Name Title Gender Age Office term Mai Boliang President Male 49 2007.3—2010.3 Zhao Qingsheng Vice president Male 55 2007.3—2010.3 Li Ruiting Vice president Male 60 2007.3—2010.3 Wu Fapei Vice president Male 49 2007.3—2010.3 Li Yinhui Vice president Male 40 2007.3—2010.3 Liu Xuebin Vice president Male 49 2007.3—2010.3 Jin Jianlong General manager of Male 2007.3—2010.3 54 Financial Management Yu Yuqun Board secretary Male 42 2007.3—2010.3 4. Shares of the company held by directors, supervisors and senior management Name Year-beginning Year-end Reason for change in shareholding shareholding shareholding Mai Boliang 412,251 494,701 Reserve fund transferred to capital stock Li Ruiting 274,835 329,802 Reserve fund transferred to capital stock Liu Xuebin 2,000 2,400 Reserve fund transferred to capital stock (2) Key work experience of current directors, supervisors and senior management 1. Board members Currently, holds such positions as director and president of China Merchants Group, chairman and managing director of China Merchants International Limited, chairman of China Merchants China Direct Investments Limited, chairman of China Merchants Steam Navigation Limited and director of China Merchants Bank (CMB). Graduated from Dalian University of Technology in 1982 with 13 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 bachelor’s degree in port engineering; graduated from UK Brunel University in 1986 with doctor’s degree in marine engineering mechanics; and worked in the university as post-doctoral research fellow for many years. Mr. Fu once served as directing manager of Shenzhen Chiwan Petroleum Supply Base as well as executive director and vice president of China Merchants Group. He began to serve as CIMC director in April 2007. Mr. Li Jianhong, vice president. Currently, holds such positions as vice president of COSCO Group, chairman of COSCO Shipyard Group Limited, COSCO Ship Trading Limited and Chinese-Tanzanian Joint Shipping Company, and director of China COSCO Holdings Limited, COSCO Pacific Limited, COSCO International Holdings Limited and COSCO Corporation (Singapore) Limited. Also, Mr. Li is vice director of China Society of Naval Architecture and Marine Engineering and vice president of China Association of National Shipbuilding Industry. In 1989, Mr. Li joined COSCO Group and held such positions as factory director of COSCO Nantong Shipyard, general manager of COSCO Shipbuilding Industry Company, COSCO Real Estate Development (COSRED) and assistant president/chief economist of COSCO Group. Mr. Li holds such degrees as MBA from University of East London and master of economic administration from Jilin University and holds the technical title of senior economist with extensive experience in enterprise management and capital operation. In March 1995, Mr. Li joined CIMC. Mai Boliang, director and president. He graduated from mechanical engineering of South China University of Technology. Since 1982, Mr. Mai has been working in CIMC, first as technician and then as manager of Product Technical Dept and general manager. He began to serve as CIMC president in 1992 and director in March 1994. Mr. Wang Hong, director. Currently, holds such positions as director and executive vice general manager of China Merchants Holdings (International) Limited, director of China Merchants Group (Hong Kong) Limited, chairman of China Merchants Holdings (Pacific) Limited and vice president of Shanghai International Port (Group) Co., Ltd. Mr. Wang graduated from turbine management in Dalian Maritime University in 1982 and then graduated from University of Science and Technology Beijing Graduate School and CASS (Chinese Academy of Social Sciences) Graduate School with MBA degree and PhD in management. He once served as turbine engineer of COSCO Guangzhou Ocean Shipping Company, general manager of CIESCO (China Communications Import & Export Corporation) Ocean Shipping Dept, general manager of CIESCO Financial Dept and CIESCO general manager, managing director of China Merchants (Hong Kong) Haitong Limited, general manager of CMG (China Merchants Group) Performance Measurement Dept and HR Dept. In April 2007, Mr. Wang began to serve as CIMC director. Mr. Xu Minjie, director. Currently, holds such positions as executive director, vice chairman and managing director of COSCO Pacific Limited as well as chairman of Investment & Strategic Planning Council and member of Executive Board, Nominating Council and Remuneration Council. Mr. Xu graduated from ship navigation in Qingdao Ocean Shipping Mariners College and obtained MBA degree from Shanghai Maritime University and master’s degree in management from Maastricht School of Management in Netherlands. Mr. Xu joined COSCO Group in 1980. In November 1998, he began to serve as general manager of COSFRESH (COSCO). From December 1998 to September 2003, he served as vice chairman of Shanghai International Freight Forwarders Association. In September 2003, he began to serve as general manager of COSCO Group Freight Dept. Also, he once served as ocean shipping shipmaster and department manager of COSCO Shanghai Container Freight 14 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Dept, Operation Dept and Ocean Shipping Export Dept as well as deputy manager of Shanghai Ocean Shipping Company. From June 2005 to January 2007, he served as director of China Communications and Transportation Association. Mr. Xu has 30 years’ ocean shipping experience and extensive experience in enterprise operation and management, and outstanding insight and management capability, and has won extensive commendation from insiders. In January 2007, Mr. Xu began to serve as vice chairman and managing director of COSCO Pacific Limited responsible for development strategy, corporate governance and financial management. In April 2004, he began to serve as director of the company. Mr. Qin Rongsheng, independent director. PhD in management, certified accountant in China, CPC secretary, professor and doctor tutor of National Accounting Instidute in Beijing as well as vice president of China Audit Society, vice president of China Association of Chief Financial Officers, member of China Certified Accountants Test Commission under the Ministry of Finance, member of China Auditing Standards Commission and visiting professor of Tsinghua University and Renmin University of China. In April 2007, he began to serve as independent director. Mr. Jin Qingjun, independent director, master and securities lawyer. Currently, holds such positions as partner of King & Wood Law Firm as well as visiting professor of China University of Politic Science and Law, arbitrator of Shenzhen Arbitration Committee, arbitrator of China lnternational Economic and Trade Arbitratlon Commission, vice director of All China Lawyers Association Overseas Affairs Committee, member of All China Lawyers Association WTO Committee, legal advisor of Washington Court of Appeals in China, legal advisor for many financial institutions, securities companies and listed companies, legal advisor of World Bank, international financial corporations and many listed companies in USA and Hong Kong, member of China Law Society, China International Law Society, China Maritime Law Society and Inter-Pacific Bar Association. Mr. Jin once worked as lawyer in Johnson Stokes & Master and British Law Firm, full-time lawyer of Zhongxin Law Firm, executive partner of Shu Jin Law Firm, chief legal advisor of Shenzhen Stock Exchange and director of Listing Regulatory Commission. As one of the first lawyers in China to obtain accreditation as lawyer, Mr. Jin is mainly engaged in legal affairs in such sectors as finance, securities, investment, intellectual property, real estate, corporation, bankruptcy and litigation and has made outstanding contribution in securities, funds, banking, merger and acquisition. In April 2007, he began to serve as independent director. Mr. Xu Jing’an, independent director. Graduated from Fudan University News Department in 1964 and then worked in Central Marxist-Leninist Research Institute, Central Policy Research Institute, State Planning Commission, Office of Economic Policy Reform under State Council and State System Reform Commission. Mr. Xu served as vice director of China Economic System Reform Research Commission in 1985 and director of Shenzhen Economic Reform Commission and vice director of Shenzhen Stock Exchange in 1987. Currently, he serves as chairman of Xu Jing An Investment Consultants and chairman of research fellow of Shenzhen New Century Civilization Research Institute. In April 2007, he began to serve as independent director. 2. Members of Supervisory Council Mr. Chen Keng, Chief supervisor. Currently, holds such positions as COSCO Pacific Limited deputy general manager and member of Investment and Strategic Planning Council. From 1998 to 2006, Mr. Chen was general manager of Enterprise Development Dept (now Strategic Development 15 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Dept) in COSCO Pacific Limited. Mr. Chen graduated from Xiamen University with bachelor’s degree in economics and then graduated from Dalhousie University in Canada with MBA degree in 1985. Then, he served as senior economic research fellow in Bank of China (Hong Kong) and chief economist in Nikko Securities (Asia) Ltd. He has over 20 years’ experience in financial, securities and enterprise planning. Currently, he is responsible for port management and port-related project development under COSCO Pacific Limited. In April 2007, he began to serve as independent director. Mr. Du Yongcheng, Supervisor. Mr. Du obtained mechanical engineering certificate in Hong Kong in 1977. Later, obtained UK MOT certificate as UK recognized maritime engineer. Mr. Du joined China Merchants Group in 1971 and currently serves as vice managing director of China Merchants Holdings (International) Limited. He used to hold such positions as general supervisor of China Merchants Brokerage Dept, vice manager, vice general manager, general manager and vice chairman of Ming Wah Shipping Limited, general manager of China Merchants Group Transportation Dept and vice chairman of China Merchants Port Service (Shenzhen) Limited. Currently, he holds such positions as director of Asia Airfreight Terminal Limited, Modern Terminals and Hong Kong West Harbor Tunnel and vice chairman of Zhangzhou China Merchants Port Limited. In May 2002, he began to serve as CIMC supervisor. Mr. Feng Wanguang, staff supervisor. Mr. Feng graduated from foundry major in Mechanical Engineering Department of South China University of Technology. Mr. Feng began to work in Shekou Huamei Steelworks in January 1982. Mr. Feng worked in Shekou Industrial District Organization Dept from January 1983 to September 1986. Mr. Feng worked in Hongda Glasses Co., Ltd. as general manager from September 1986 to January 1987. Mr. Feng worked in China Merchants (Hong Kong) HR Dept and Board Office as vice general manager from January 1987 to September 1996. Mr. Feng worked in China Merchants Zhangzhou Development Zone as vice general manager and vice CPC secretary from September 1996 to April 1999. Vice CPC secretary in CIMC from April 1999 to present. Mr. Feng began to serve as supervisor in May 2002. 3. Senior management Mr. Mai Boliang, director and president (See aforesaid description). Mr. Li Ruiting, vice president and senior engineer. Mr. Li graduated from mechanical manufacturing in South China University of Technology. Mr. Li joined CIMC in 1987, first as manager of Technical Dept and QC Dept and then as vice general manager and general manager of Shenzhen South CIMC Limited and general manager of Shanghai CIMC Reefer Containers Limited. Mr. Li began to serve as CIMC vice general manager in 1995. Mr. Zhao Qingsheng, vice president. Mr. Zhao graduated from Wuhan University of Water Transportion Engineering in marine engineer major. Vice president in CIMC at present. Mr. Zhao joined China Merchants Group in 1983, served as general manager of China Merchants Group Enterprise Dept from 1991 to 1995, vice general manager of China Merchants Holdings (International) Limited from 1995 to 1999 and CIMC vice chairman from 1997 to 1999 and began to serve as vice president in 1999. Mr. Wu Fapei, vice president. Mr. Wu graduated from South China University of Technology in mechanical manufacturing with degrees of bachelor and master in engineering. Mr. Wu used to be teacher and associate professor in SCUT (South China University of Technology) School of Business Administration and vice general manager of Nanhua Bicycle Ronghui Limited in Zhaoqing Guangdong. Joined CIMC in 1996 and began to serve as manager of Information Management Dept 16 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 in December 1996; assistant to CIMC president in December 1998 and CIMC board secretary in December 1999. He began to serve as vice president in March 2004. Mr. Liu Xuebin, vice president. Mr. Liu graduated from Shenzhen University in business administration. Joined CIMC in 1982 and used to hold such positions as vice general manager of CIMC Purchase Dept, vice general manager of Nantong Shunda Containers Limited, vice general manager of CIMC Group Container Branch and general manager of CIMC Xinhui Limited. Mr. Liu began to serve as general manager of Shenzhen Southern CIMC Limited in 1997 and assistant to CIMC president and chairman of CIMC Xinhui Limited in December 1998. Began to serve as CIMC vice president in March 2004. Mr. Li Yinhui, vice president. Mr. Li obtained bachelor’s degree in history from Jilin University, MBA degree from School of Business Nanjing University, and PhD in economics from Jilin University. Worked in Central Committee of Chinese Communist Youth League in 1991; worked in State Commission of Foreign Trade and Economic Cooperation from May 1993 to March 2003; and in Ministry of Commerce in March 2003. Served as CIMC vice president (part-time) from October 2002 to October 2003 and began to serve as CIMC vice president in March 2004. Mr. Jin Jianlong, general manager of Financial Department and certified accountant. Mr. Jin graduated from Maanshan Institute of Iron and Steel Technology in accounting major in July 1985. From August 1975 to April 1989, Mr. Jin worked in Hangzhou Steelworks as director of Financial Section. Joined CIMC in 1989, first as manager of CIMC Financial Manaagement Dept and then as manager of Shenzhen South CIMC Limited Financial Dept. Began to serve as general manager of CIMC Financial Management Dept in October 2001. Mr. Yu Yuqun, board secretary. Mr. Yu obtained bachelor and master’s degrees in economics from Beijing University. Once worked in State Price Control Bureau. Mr. Yu joined CIMC in 1992, first as vice manager and manager of Financial Affairs Dept responsible for securities affairs and fund management. In March 2004, began to serve as board secretary. (3) Concurrent positions held by directors, supervisors and high-level management in organizations other than shareholder unit Name and position Organizations for concurrent positions Relations with Title CIMC (controlling) Affiliated/ Non-affiliated Fu Yuning/Chairman Affiliated Director and China Merchants Group Limited president China Merchants Holdings Affiliated Chairman and (International) Limited managing director China Merchants China Direct Non-affiliated Investments Limited Chairman China Merchants Steam Navigation Non-affiliated Limited Chairman China Merchants Bank Affiliated Director Li Jianhong/Vice Affiliated chairman China Ocean Shipping Corporation Vice president 17 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 (COSCO) Chinese-Tanzanian Joint Shipping Non-affiliated Chairman Company COSCO Shipyard Group Limited Non-affiliated Chairman COSCO Ship Trading Limited Non-affiliated Chairman China COSCO Holdings Limited Affiliated Director COSCO International Holdings Limited Non-affiliated Director COSCO Pacific Limited Affiliated Director COSCO Corporation (Singapore) Non-affiliated Director Limited Controlling CIMC Vehicle (Group) Co., Ltd. subsidiary Chairman Mai Boliang/ director/ Concurrent positions in 20 controlling Controlling Chairman / president subsidiaries such as CIMC Vehicle subsidiary Director Group and Shenzhen South CIMC Limited Wang Hong/director China Merchants Group (Hong Kong) Affiliated Director Limited China Merchants Holdings Affiliated Director/ vice (International) Limited general manager China Merchants Holdings (Pacific) Non-affiliated Chairman Limited Shanghai International Port (Group) Non-affiliated Vice chairman Co., Ltd. Xu Minjie/ director Antwerp Gateway NV Non-affiliated Director COSCO Logistics Limited Non-affiliated Vice chairman COSCO-Hit Terminals HK Ltd Non-affiliated Director Qingdao Qianwan Container Terminal Non-affiliated Director Co., Ltd. Antwerp Gateway NV Non-affiliated Director Qin Beijing National Accounting Institute Non-affiliated CPC secretary Rongsheng/Independent and vice president director Baoli Real Estate (Group) Co., Ltd. Non-affiliated Independent director UFID Software Co., Ltd. Non-affiliated Independent director Aerospace Information Co., Ltd. Non-affiliated Independent director China Audit Society Non-affiliated Vice president China Association of Chief Financial Non-affiliated Vice president Officers Changjiang Securities Co., Ltd. Non-affiliated Independent director Jin King & Wood Law Firm Non-affiliated Senior partner Qingjun/Independent director Invesco Great Wall Fund Management Non-affiliated Independent Company Limited director Shenzhen Syscan Technology Co., Ltd. Non-affiliated Independent director China United Travel Co., Ltd. Non-affiliated Independent director China University of Politic Science and Non-affiliated Part-time 18 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Law professor Shenzhen Arbitration Committee Non-affiliated Arbitrator China lnternational Economic and Non-affiliated Arbitrator Trade Arbitratlon Commission All China Lawyers Association Non-affiliated Member WTO Committee Xu Jing’an Shenzhen Nanshan Power Station Co., Non-affiliated Independent /Independent director Ltd. director Chen Keng/Chief COSCO Pacific Limited Affiliated Vice general supervisor manager Du Yongcheng/ China Merchants Holdings Affiliated Vice managing supervisor (International) Limited director Asia Airfreight Terminal Limited Non-affiliated Director Zhangzhou China Merchants Port Non-affiliated Vice chairman Limited Feng Wanguang/ CIMC Holdinigs (B.V.I.) Limited Controlling Director Supervisor subsidiary Zhao Qingsheng /Vice Concurrent positions in 36 companies Controlling Chairman/director president such as Shenzhen South CIMC Limited subsidiary and Enric Energy Equipment Holdings Limited China United International Rail Participating Director Container Co., Ltd. company Wu Fapei/Vice Concurrent positions in 25 controlling Controlling Director/ president subsidiaries such as Shenzhen South subsidiary chairman CIMC Limited and Enric Energy Equipment Holdings Limited Li Ruiting /Vice Concurrent positions in 5 controlling Controlling Chairman /Vice president subsidiaries such as Shanghai CIMC subsidiary chairman Reefer Containers Co., Ltd. Liu Xuebin /Vice Concurrent positions in 8 controlling Controlling Chairman/director president subsidiaries such as Shenzhen South subsidiary CIMC Limited and CIMC Logistic Equipment (Chongqing) Co., Ltd. Li Yinhui/Vice Concurrent positions in 18 controlling Controlling Chairman/director president subsidiaries such as CIMC Shenzhen subsidiary Special Vehicle Co., Ltd. and Dalian CIMC Railway Equipment Co., Ltd. Jin Jianlong / General Concurrent positions in 50 controlling Controlling Chairman/director manager of Financial subsidiaries such as Shenzhen South subsidiary Management CIMC Limited and Enric Energy Equipment Holdings Limited Yu Yuqun /Board Shenzhen CIMC-Tianda Airport Controlling Director secretary Support Co., Ltd. and Enric Energy subsidiary Equipment Holdings Limited (4) Remuneration for directors, supervisors and high-level management Procedures and basis to determine remuneration for directors, supervisors and high-level management: As stipulated in the Articles of Association, the remuneration for directors and supervisors is determined by shareholders meetings and that for high-level management is determined by the Board of Directors. In the reporting period, CIMC high-level management get paid in CIMC or subsidiaries. CIMC has established a complete remuneration system and incentive mechanism. First, we 19 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 implement annual-salary system for directors, supervisors and high-level management who work for and get paid from CIMC. Secondly, CIMC board of directors formulates “CIMC Leading Group Measurement and Management Regulations” at the beginning of each year to implement performance measurement for relevant personnel and determine performance-based incentive amount at the end of each year. Shareholders’ meeting authorizes the board of directors to determine the remuneration of chairman and President Mai Boliang in compliance with “CIMC Leading Group Measurement and Management Regulations” and president formulates proposals for performance-based bonus for other high-level management subject to approval by Remuneration Council under the board of directors. 2. Of the 8 directors, Mr. Mai Boliang holds the position as president and gets paid in CIMC and CIMC paid no remuneration to any other directors in the reporting period. Based on approval by the shareholders meeting and board of directors, independent directors Qin Rongsheng, Jin Qingjun and Xu Jing’an received RMB 120,000 as subsidy for independent directors in reporting period. Except for this, no other remuneration was paid to independent directors in the reporting period. As staff supervisor, Mr. Feng Wanguang gets paid in CIMC and no remuneration was paid to other supervisors in the reporting period. Remuneration (before tax) of current directors, supervisors and senior management Name Position Total annual salary (RMB 0’000) Mai Boliang President 710.53 Wanguang Staff supervisor 100.30 Zhao Qingsheng Vice president 203.60 Li Ruiting Vice president 92.04 Wu Fapei Vice president 131.84 Li Yinhui Vice president 108.20 Liu Xuebin Vice president 107.35 Jin Jianlong Financial general manager 98.20 Yu Yuqun Board secretary 67.84 Total 1,619.90 Subsidy for independent directors Name Position Total subsidy Remarks (RMB 0’000) Xiao Zhuoji Independent director 5.33 January-April subsidy paid based on RMB 80,000/year Zhang Limin Independent director 5.33 Same as above Han Xiaojing Independent director 5.33 Same as above Qin Rongsheng Independent director 6.00 RMB 120,000/year beginning in April 2007 Jin Qingjun Independent director 6.00 Same as above Xu Jing’an Independent director 6.00 Same as above Total 34.00 Directors and supervisors without payment from CIMC Name Name of shareholder Position Whether to get remuneration and subsidy from shareholder unit Fu Yuning China Merchants Holdings Chairman and Get paid from shareholder (International) Limited managing director affiliated unit Li Jianhong COSCO Group Vice president Get paid from shareholder 20 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 affiliated unit Wang Hong China Merchants Holdings Director Get paid from shareholder (International) Limited affiliated unit Xu Minjie COSCO Pacific Limited Vic chairman and Get paid from shareholder managing director affiliated unit Du China Merchants Holdings Director and vice Get paid from shareholder Yongcheng (International) Limited general manager affiliated unit Chen Keng COSCO Pacific Limited Vice general Get paid from shareholder manager affiliated unit (5) Change of directors, supervisors and high-level management CIMC convened 2006 annual shareholders meeting on April 23, 2007 to elect Board of Directors and Supervisory Council for another session: Directors Zhao Huxiang, Wang Zhixian and Sun Jiakang resigned upom expiry of office term while Fu Yuming, Wang Hong and Xu Minjie were elected as new directors. Supervisor Ying Haifeng resigned upon expiry of office term while Chen Keng was elected as new supervisor. Independent directors Xiao Zhuoji, Han Xiaojing and Zhang Limin resigned upon expiry of office term while Qin Rongsheng, Jin Qingjun and Xu Jing’an were elected as new independent directors. 2. Employees (1) Number of employees By the end of 2007, the number of employees of the Group was 53,578. (2) Composition Post composition Professional composition Management Technology Production Engineering Professional workers technology Headcount 7,898 2,129 43,551 1,733 1,001 Ratio（%） 14.74 3.97 81.29 3.23 1.87 CIMC does not need to bear expenses for retired employees. 21 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Section 6 Corporate Governance Structure As required by relevant laws and regulations such as “Company Law”, “Code of Corporate Governance for Listed Companies in China”, “Guideline for Establishing Independent Director System in Listed Companies” and “Shenzhen Stock Exchange Share Listing Rules”, CIMC has constantly intensified corporate governance and standard operation in the reporting period. Based on a series of rules and regulations such as rules of procedures for Shareholders Meeting, Board of Directors and Supervisory Council and working rules for president, CIMC leverages on special committees under the board of directors to intensify corporate governance. Based on this, CIMC ensures Shareholders Meeting, Board of Directors and Supervisory Council fully implement their roles and responsibilities and effectively safeguard the interests of shareholders and the company. CIMC has initially established a corporate governance structure compliant with the management requirements of modern enterprises. These is no discrepancy between actual corporate governance structure and the requirements specified in above documents. 1. Status of corporate governance In accordance with the requirements of CSRC and SSRB (Shenzhen Securities Regulatory Bureau), CIMC initiated corporate governance activity in the reporting period and completed three-stage work: self audit, public comments and rectification. On July 24, 2007, CIMC released Self-audit Report on Corporate Governance. On September 14, 2007, CIMC convened online exchange meeting on corporate governance. On September 25, 2007, CSRC Shenzhen Securities Regulatory Bureau (SSRB) performed site inspection on the implementation of corporate governance special activity in CIMC and issued “Regulatory Comments on Corporate Governance of China International Marine Containers (Group) Co., Ltd.” on October 9, in which, SSRB affirmed the achievements accomplished by CIMC in corporate governance special activity and pointed out some aspects for improvement. CIMC paid close attention to Regulatory Comments and formulated specific measures for those problems. On October 31, 2007, CIMC convened the 12th meeting in 2007 of the fifth session of the board, reviewed and adopted “Report on Corporate Governance and Rectification of China International Marine Containers (Group) Co., Ltd.” CIMC revised and improved relevant documents and systems on corporate governance; revised “Information Disclosure Management System” and “Working Rules for President”; and formulated “Investor Relations Management System”, “Raised Fund Management System”, “CIMC Internal Audit System”, “CIMC Affiliated Transaction Management System (Draft)” and “Procedures on Reporting of Shares Held by Directors, Supervisors and Senior Management of Listed Companies and Change of Shareholding”. CIMC identified plans to improve and refine internal control system, performed overall process optimization on internal control, supplemented, modified and improved relevant systems, regulations and procedures. CIMC established “Internal Control System Construction” Project Office, and determined to invite external auditors to evaluate internal control system. In June 2007, CIMC officially initiated “CIMC Internal Control System Construction”. At board meeting on December 30, 2007, CIMC decided to establish “Audit & Supervisory Dept” as an internal audit organization to report to Audit Council under the board. Through improvement of the above systems and initiation of system construction, CIMC 22 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 further improved the working process of internal control and intensified corporate governance. 2. Status of noncompliance in corporate governance In 2007, no noncompliance in corporate governance exists in CIMC such as providing undisclosed information to majority shareholder and actual controller. 3. Performance of independent directors (1) Overview of independent directors attending board meetings: Name of Times of Personal Attendance by Absence (times) independent attendance in attendance attorney (times) directors current year (times) Xiao Zhuoji 2 0 0 2 Zhang Limin 2 2 0 0 Han Xiaojing 2 2 0 0 Qin Rongsheng 16 16 0 0 Jin Qingjun 16 15 1 0 Xu Jing’an 16 16 0 0 (2) In the reporting period, independent directors dutifully reviewed significant affairs and issued comments of independent directors as required. (3) In the reporting period, independent directors put forward no objection to proposals and other affairs reviewed at previous board meetings. 4. Split operation between CIMC and majority shareholder in business, human resources, assets, organization and financial affairs Majority shareholders for CIMC include COSCO Container Industries Limited and China Merchants (CIMC) Investment Limited, representing 16.23% shareholding respectively. CIMC implements split operation in business, human resources, assets, organization and financial affairs as well as independent accounting and independent bearing of liabilities and risks. Majority shareholders have never transcended Shareholders Meeting to directly or indirectly interfere with CIMC decision or production and operation activities, and no competition in similar products or operations exists between CIMC and majority shareholders. 5. Establishment and improvement of internal control system (1) Status of internal control CIMC has established a series of procedures and systems for shareholders meeting, board of directors and supervisory council to exercise their decision power, executing power and supervisory power. In addition, the Board of Directors has established three special committees: audit, remuneration & measurement and strategy. These special committees perform their roles to discuss and decide on significant affairs of the company in compliance with relevant working rules. The Board of Directors supervises the establishment, improvement and implementation of internal control systems via Audit Committee. The Audit Committee assists in formulating and reviewing internal control systems and reviews and supervises significant affiliated transactions. The Supervisory Council reviews internal control status and provides audit proposals. At the end of the year, CIMC Audit & Supervisory Dept submits annual working report to the Audit 23 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Committee. CIMC has established a complete set of rules, regulations and procedures covering production, operation, purchase, marketing, investment, financial management and information release, which constitute CIMC internal control system. (2) Key control activities 1. Controlling subsidiary CIMC performs centralized management on general managers and financial managers of controlling and contracting subsidiaries in marketing, sales, batch raw material purchase, fund, guarantee and financial affairs. (1) In compliance with “CIMC Outposted Director Management Regulations”, outposted directors nominate candidates and boards of subsidiaries appoint general managers and financial managers. CIMC performs direct management and annual measurement on them. (2) CIMC leverages budget and “Target measurement program” to perform measurement and implement rewards and punishment on controlling and contracting subsidiaries. Generally, CIMC Operation Analysis Group formulates and releases “Monthly operation report” and “Performance scoreboard” to maintain monitoring and tracking management on the operating activities of subsidiaries. (3) Annual credit line and guarantee. CIMC signs annual credit agreement with financial institutions and banks in compliance with the annual budget approved by the board of directors. Subsidiaries are required to perform various types of funding activities within the scope of the annual credit agreement. CIMC provides credit guarantee within the scope of total budget when necessary subject to the approval by the board of directors. CIMC provides guarantee for marketing customers within the scope approved by the board of directors. The vehicle group under CIMC cooperates with financial institutions to provide loans and guarantee for customers that have passed credit rating by CIMC and banks. Customers use such loans to buy our vehicles, get them registered with local traffic control authorities and mortgage them to vehicle group. Based on this, we believe the risk for guarantee is controllable. Guarantee information disclosure: Financial Management Dept provides summary information on quarterly and annual guarantee and summary statements of significant guarantee activities for disclosure. (4) CIMC reviews annul budget of capital expenditure submitted by subsidiaries to keep monitoring on their investment activities. Expansion, restructuring and equity investment exceeding annual budget are subject to level-by-level approval by CIMC Strategic Development Detp, Financial Management Dept, vice president, president, Investment Review Council and the Board of Directors. (5) CIMC implements “CIMC internal audit procedures” and leverages Audit & Supervisory Dept to audit and supervise the economic activities of internal organization in economic effect, financial income and expenditure and project investment as well as the performance of economic responsibilities by relevant responsible persons. CIMC has established “Significant Event Reporting System for Enterprises under CIMC” to maintain effective control on significant events of enterprises under CIMC. 2. Affiliated transactions (1) CIMC regularly formulates “List of Affiliated Parties” and notifies subordinate 24 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 CIMC 100% CIMC（HK） 100% 100% 100% Speedic 100% Charm Wise Limited BVI Enterprise 42.18% 85% 15% Chuang jia Enric Energy Equipment Holdings Ltd. I E C H n q I o v u M l e i C d s p i t m T n m e a g e n n s n t k t 100.00% 57.47% 42.53% 25.16% 35.37% 61.06% 32.83% 68.23% 21.07% 82.70% 17.30% 50.00% 50.00% 40.00% 60.00% 30.00% 47.50% 6.11% 100% 100% 40% 60% 50% 50% 50% 50% 50% 50% 75% 25% 25% 75% 71% 71% 62% 38% 25% 75% 25% 75% 50% 20% 20% 52% 25% 75% 99% 1% E L Y S E L T E L D C D E L N I B S C C Z C S N M E T S N E C N M C Q M C R Q S M C Z S S M E L Z S C X C N T C R S M E T S X T W q o a h q o i q o a q o i n a h o m a a q r p a a o i a o e i S MAXSHINE ENTERPRISES p a o h o h a q o h o o o i o e h a q r p i u g n a u g a u g l T o a u g n d o a o I h n o n n u a e n q I a n n n n n e n Q C h n n o u e n u g o u o i n r a n e a n u a e n e a C a e i E i i g n i i n i i i n l i i g u w n n M a t o t u i n c t u M n u t g u t f g c o T C a u t n t n u i i n t n n t t n t f n u i n c h c n C L Y o i n F q R p s s g p s j p s a t i p s b s e g t C n a t o f p s i o i C t f a d f a e d i o n f a g h z f p s g h t h a h j a e g f p s i u h s o o a n c B g n i a u u m t h h m t i m t n m t o t l h i h n a m p a n a i a a i r a C n g a i j e h a m t j e i i i r h a m p a i LIMITED . g n t a a a a g p o a d r a u n h t a , i p i n y g e i a n c n a i e i n c n e i n c C a n i n e i n c C r i l a i i z n e S g c e o t n r l g m T n V c n o t e c n t e o l a a I n t a h a c n i t e r n e n c e i n c i r n i i n O n e c n e a i c e o t n r l C o e L t m s t a z h t s t s C t s I i g n n t I e n h r a C u t t C e a g B u r C u r C R o i M j i E a i u r u t E n r e C r u t t I l n e n C n d n i g o C I I M M C e C e C M C s C I e o i I l M r e a t I M n n A r e I M r e I M e C n i e s C r s e r e a s e C a I n M s C I r e a t M C o g r I e I . t c u M C r I M r u C i C t k C C e n r t I t r I C M i g s M f M C M C - o e C r M M C o y C C n C C n r 34.21% 80% 45% CIMC-BURG B.V. N L S a 70.00% 100％% 30.00% T a C i n 60% 100.00% 100.00% 100.00% a r I 51.00% 55.00% 40.00% 30.00% 80.00% 59.00% 40.00% 60.00% 50.00% 25.00% 75.00% 25.00% 51.00% 63.14% 55.00% 45.00% z t n g M 88.00% 86.65% 13.35% 70.00% 30.00% 75.00% 25.00% e o k e C d n - g C T Y P B N W S F C X W H I C J E L V T A C V S T E Q V S o o a D N M T S T S r a i o h l o i o o n q o e i N I e p i c i e h n n n E a i a o Y h r Q h o m n o e o n n o l n I i u g h a M h e a o n h e ) I n n a a i 55% t g g q R l n C G E C e C L C C e d b g d n o t h d o e M a i i i n C i c n - g i n m g T g Y n n H n a l z u o u q S o n S o D o Q S o S o n u o g z r a u n r C x p s c j V c i j E d c z u a i E p b o l a t s e Y g c o u m t l i i e h f n a u e n z e n o g i e n e n z h i i i b m e S l a i q a l h i i a x o o n e n i p n u d t o 12% i e i e n n e o a t n i r t h r t n i n r t r t h e n n u o h H e l n u o e e p r g e g a o g l a W n e u p l n c a g p v a e v a g s g v a v a e a n g e C i n n c i A s i n o t Z y z n r f o o r R t i z m i i n i i h t d i i i i n n C r I r g o g t s C c C C p C S m w r h a R h t e n e u n h e c n c n u i a c n c n d I C M o s I l I m I a C e a C t a o n e o P a n g C o e r e o n e e C e e a c o e e e e C M I C C l M e M e M l I ( n n g e u o t g I d f n y I i r u t r I r s r r I W C M I i C X C n C e M d g f r i M e n M M o C M a I t s C t M z e t o C r g C C o C ’ C e r n d 98.53% 1.47% 75% 20% 90% W X 10% W M o u o a CIMC (Shanghai) Shanghai Meiyang Properties o z o n Development d h o 80% 25% d z h 65.71% 14.29% u 90% 80% 20% o u C l I i M S C C h S I a h N M C n C a C i C Y o g S o n S o n a n h e n g e n g 40% 60% n t a r t h r t b g a i v a a v a o s i i i i i i h n D c n c n C a e u e e C e e I n r n r I r M h Shanghai Yulan Real Estate M C u Development C a 100% 100% 100% 100% 100% 100% 100% 100% 100% 60% 40% 25% 75% 75% 75% 75% E T R Q S V N E T N V D L E L V X A R W A L L E L V G E L F E L V C E L V H E L V S E L V C q r e i e e i q r a e o i q o e i u u u u i u q o e u q o u q o e h q o e u q o e h q o e I u a f n r h n u a n a h n a u g h a t i h t n o u g h a u g y u g h e u g h b u g h a u g h M i n r g v i g i n t n i g n i i i m o J u o g y i i i n i i a i i i n i i i e i i i n i i i C p s i d i c b p s o d c y g p s c e m i m y a p s c g p s n p s c g p s c i p s c x p s c m p g a c l o m p n l u s m t l n o a C o u n m t l z m t g m t l d m t l m t l i m t l F e o e o e e e o g L e e h e i e b n I b g e i e h e i e i e u e i e C e i e e i e i n r r C n r e a n c C i g M i n c o n c C n c n c I n c C n c n t t a S I t t C a C n t s I l C l C t s u t s I t s C t s M t s I t s a t a M a I s I s M e e I s s M s I s C s M s n i l C t M i M C M C C M C c o e i C n C C I C i n s o g M n n C g 25 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 companies and relevant departments of the same. CIMC implements credit management on recurrent affiliated transactions, and regularly accounts transaction value of affiliated parties. When CIMC board of directors and shareholders meeting audit affiliated transactions, affiliated directors and shareholders are not allowed to participate in voting. Auditor issues “Special Note on Status of Fund Occupancy by Controlling Shareholders and Other Affiliated Parties”. 3. Use of raised funds CIMC has established “Raised Fund Management System” to allocate raised funds for use by subordinate subsidiaries in compliance with the purpose specified in “prospectus”. Financial Management Department regularly monitors the use status of raised funds and discloses relevant information. CIMC has never encountered any situation requiring change of purpose for raised funds or change in the mode of investment projects. 4. Internal control on information disclosure (1) In June 2007, CIMC upgraded “Information Disclosure Management System” which specifies the scope, contents and procedures to release key information. (2) CIMC board secretary has full power and responsibility for items of information disclosure. CIMC operating group issues guarantee letter for regular financial report and makes commitments about the accuracy and legitimacy of financial report. Securities Affairs Department under Financial Management Department performs specific work for information release. Board secretary and Financial Management Department review released information, maintain contact and communication with regulatory body via e-mail, Internet, fax or SMS to keep informed of changed in regulations on timely basis. (3) Problems and corrective plans 1. Further intensification and improvement of internal control system. In the year, CIMC has fully implemented Regulatory Comments issued by SSRB after site inspection on CIMC corporate governance status and special governance activities. (4) Auditing and supervision on implementation of internal control system Audit Committee under the board of directors audits and supervises CIMC internal control system and its implementation. Supervisory Council reviews internal control status and issues audit comments. At board meeting on December 30, 2007, CIMC decided to set a special internal audit organization – Audit & Supervisory Department (formerly Audit Group). Audit & Supervisory Department is responsible to the board of directors in monitoring corporate governance and internal control and directly reports to the board of directors. (5) Overall evaluation on CIMC internal control status. At CIMC, existing internal control system can meet the requirements of risk control in all significant aspects. This internal control system is effective. However, with corporate development and expansion in operating scale, existing internal control system is insufficient in consistency, integrity and standardization and there is much room for improvement. In 2007, based on corporate status and regulatory requirements, CIMC intensified the construction of internal control system and appointed external professional organizations to fully improve CIMC internal control system and process, supplement, modify and improve relevant procedures and fill up gaps in internal control in an attempt to meet the needs of future development, ensure healthy operation and safeguard the legitimate rights and benefits of CIMC shareholders. 26 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 （6）Appraisal opinion on internal control from the Board of Supervisors Through adequate review and verification to the internal control of the Company, we believed that the present internal control system is in compliance with the requirements of relevant laws, rules and provisions such as Guidelines for the Internal Control of Listed Companies, and can satisfy the requirements of the effective control of risk in all material respects. The Self-Appraisal Report of the Company gives an objective and true view of internal control system in terms of establishment, operation, inspection and supervision. （7）Appraisal opinion on internal control from independent directors Through adequate review and verification to the internal control of the Company, we believed that the present internal control system is in compliance with the requirements of relevant laws, rules and provisions such as Guidelines for the Internal Control of Listed Companies, and can satisfy the requirements of the effective control of risk in all material respects. The Self-Appraisal Report of the Company gives an objective and true view of internal control system in terms of establishment, operation, inspection and supervision. 6. Senior management performance evaluation, motivating and restraining mechanism CIMC has established a set of performance measurement, motivating and restraining mechamism under which the remuneration for high-level management is connected with corporate performance and personal performance. To ensure standard, healthy and sustainable development for CIMC, attract talented people, maintain the stability of the high-level management team and safeguard the interests of all shareholders, CIMC formulated “CIMC Leading Group Measurement and Management Regulations” based on medium and long-term strategic targets. Based on this, CIMC formulates measurement targets at year beginning and determines total remuneration at year end based on the accomplishment of various targets. The shareholders’ meeting authorizes the board of directors to determine the remuneration for director and President Mr. Mai Boliang in compliance with “CIMC Leading Group Measurement and Management Regulations”. For remuneration of other high-level management personnel, president formulates proposals and submits them to Remuneration Council under the board of directors for approval. 27 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Section 7 The Shareholders’ General Meetings 1. Annual shareholders meeting CIMC convened 2006 annual shareholders meeting in Shenzhen on April 23, 2007. On April 24, 2007, CIMC published “Notice on Resolution of Shareholders Meeting” via “Securities Times”, “Shanghai Securities News” “China Securities Journal” and “Ta Kung Pao”. 2. Interim shareholders meeting On October 17, 2007, CIMC convened the first interim shareholders meeting in 2007 in Shenzhen. On October 18, 2007, CIMC published “Notice on Resolution of Shareholders Meeting” via “Securities Times”, “Shanghai Securities News” “China Securities Journal” and “Ta kung Pao”. 28 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Section 8 Report of the Board of Directors Ⅰ Management discussion and analysis (Ⅰ) Industrial overview In 2007, global economy exhibits sound growth in basic aspects and global trade maintains a trend of steady growth. In 2007 as a whole, world economy maintained 4.7% growth rate, higher than 3.8% in the previous year. China economy exhibited 11.4% growth rate and total import/export value in foreign trade exhibited 23.5% growth rate compared with previous year. U.S. subprime mortgage crisis that occurred in summer has gradually spread to major developed countries, adding uncertainty to worldwide economic growth. Due to Chinese factors and domestic demand in various countries, emerging markets exhibit a trend of high-speed growth while USA is gradually weakening its role as an engine to propel global economic growth. Economic downturn in USA in 2007 has insignificant impact on export from China. In 2007, according to Clarkson data, global shipping industry experienced unprecedented high freight and trade volume: Global container trade volume in 2007 hit 131 million TEU, representing 11% growth rate; global container throughput is expected to hit 465 million TEU, representing 10% growth rate; global new container vessel delivery in 2007 reached 1.41 million TEU, slightly higher than previous year. In 2007, container throughput in Chinese ports reached 112.7 million TEU, up 20.4% over previous year. Operating environment of container industry. In 2007, due to hiking price for batch commodities and oil around the world, oil production, countries, mineral production countries and countries on Mediterranean bank in South Europe experienced steady economic growth and constant growth in infrastructure construction and consumer demand, thus creating booming demand for container transportation. On the other hand, global industrial relocation takes a growing trend and emerging markets such as China, India and Vietnam are becoming key recipients for global industrial relocation, thus creating substantial growth in export volume. In 2007, global container demand exhibited a substantial growth and output exceeded 3.90 million TEU (Source: World Cargo News), exceeding 25% in growth rate over previous year and creating another new high. On the other hand, dry cargo container industry features 5.50 million TEU in production capacity and is faced with substantial structural production capacity surplus. Thus, this industry is faced with the risk of imbalance in supply and demand relations. Container industry is faced with hiking production cost and pressure in raising selling price, thus causing significant shrinkage in gross profit. Operating environment of road transportation vehicles industry. On October 31, 2007, nine ministries and commissions such as the Ministry of Communications jointly enacted “Circular on Distribution of Detailed Rules on Implementing Long-term Control of Oversize and Overload Vehicles in China” to further standardize vehicle loading and transportation behavior. This has fundamentally eliminated “Low tonnage indication” vehicles and unlawful retrofitting phenomenon and helped establish proper vehicle production and use status as well as proper road traffic status. 29 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Relevant departments have enacted policies to promote structural readjustment for transportation vehicles, inhibit structural production capacity surplus, promote product restructuring and propel technical advancement and innovation for vehicle products. With constant expansion of the scope in implementing weight-charge policy around the country, high-tonnage, high-power and high-efficiency heavy-duty trucks have won extensive favor from market and become mainstream vehicles for transportation vehicles. Meanwhile, China has implemented the preferential policy to discount tolls by 20% and 30% for 10T and 15-55T heavy-duty freight vehicles respectively. Recommended vehicles approved by the Ministry of Communications may enjoy ≤15% discount for highway maintenance tax. This policy helps high-tonnage freight vehicles to reduce transportation cost, and encourages the use of standard, large-size transportation vehicles. China has experienced substantial improvement in external environment for special vehicles and special transportation vehicles in particular. Operating environment of energy and chemical equipment and services. With high-speed growth in Chinese economy and constant improvement in China’s competitive power around the world in energy, chemical and food equipment and services, CIMC is expected to have greater space for business development. Triggered by vigorous support from Chinese government in natural gas application and booming growth in national economy and energy demand, China’s gas equipment industry remains optimistic in the past year and experienced booming growth in market demand for CNG (compressed natural gas) trailers, high-pressure cylinder-type vessels and CNG stations. Chinese policy in energy utilization aims to increase the share of clean energy such as natural gas in total energy consumption, from 2.7% at present to 5.3% by 2010 and 10% by 2020. This promises great development potential and sustainable growth in natural gas market. With hiking oil price and sufficient coal resources in China, coal-bed gas in China as clean energy has an energy reserve of 36,800 billion cubic meters, which exceeds conventional land natural gas reserve and is equivalent to 45 billion tons of coal equivalent. Coal-bed gas is one of the new clean energy sources in China. In addition to traditional natural gas market, coal-bed gas storage and transportation equipment in China will create new development opportunities for CIMC in energey equipment sector. Demand for storage and transportation of chemical and hazardous goods also experienced rapid growth. With constant growth in national income and consumption, liquid food such as beer and juice also maintained fast growth and quality control in production, storage, transporation and preservation has become a fundamental guarantee to improve competitive power for products. These sectors exhibit a growing demand for relevant atmospheric-temperature, atmospheric-pressure and high-pressure, low-temperature equipment and mobile containers. China has imposed higher requirements in transportation safety, food safety guarantee and regulatory requirements. Accordingly, enterprises have higher standards and higher quality requirements in operating service chain. Currently, relevant logistic service providers in China lack robust strengths and feature outdated equipment. Suppliers feature small scale and low concentration. As a result, it is difficult for them to fully meet market needs and they have to further improve equipment research, design, manufacturing and technology. This creates opportunities for CIMC to gain growth in segmented markets. Market environment of airport equipment. With approaching of Beijing Olympics and Shanghai World Expo as well as higher demand for aviation arising from increase in income in combination with rapid growth in domestic airlines and international airfreight logistics, airport construction and airport equipment in China (including passenger boarding bridge and cargo handling systems) will experience new opportunities and market demand will enter a peak period. 30 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Airport equipment manufacturers in China have gradually established competitive advantages in international market. (Ⅱ) Review of operating performance 1. Overall operating performance In 2007, CIMC leveraged the strategic positioning to “provide equipment and services for modern transportation” targeted to “meet global customers’ needs and create value for them” and “leverage advantages in China to improve global operating system” to intensify core competitive power and thus accomplished continuous growth in operating performance. In 2007, CIMC accomplished RMB 48.761 billion in operating revenue and RMB 3.107 billion in net profit attributable to parent company shareholders, up 45.24% and 10.17% over previous year. Change in key financial indicators Unit: RMB ‘000 Item Amount in current Amount in the same Increase /decrease period period of previous year Operating revenue 48,760,826 33,573,664 45.24% 3,457,387 3,168,790 9.11% Operating profit Net profit attributable to parent 12.22% 3,165,373 2,820,752 company shareholders -183.71% Net cash flow from operating -1,085,549 1,296,823 activities Notes: ① Growth in operating revenue over previous year, mainly including that for containers and vehicle operations due to substantial growth in production and sales, up 37.44% and 42.61% respectively. ② Growth in operating profit over previous year, mainly including substantial growth in investment income. ③ Growth in net profit attributable to parent company shareholders, mainly including substantial growth in investment income. ④ Substantial decline in net cash flow from operating activities mainly because account receivable is large in relation to account payable, and due to such factors as hiking price and increase in raw material purchase scale and expenditure. Composition of operating revenue Item 2007 2006 Increase / decrease Container manufacture and service 34,048,901 24,773,670 37.44% Road transportation vehicle manufacture and service 9,724,054 6,818,555 42.61% Energy and chemical equipment and service 4,536,303 1,846,881 145.62% 31 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Airport equipment 473,230 176,796 167.67% Others 618,487 471,148 31.27% Combined setoff -640,151 -513,388 24.69% Total 48,760,826 33,573,664 45.24% 2007 Revenue Breakdown Containers Vehicles Energy and chemical equipment Airport equipment Others 2006 Revenue Breakdown 2. Operating base and production capacity CIMC and subordinate subsidiaries (“CIMC Group” or “CIMC”) is mainly engaged in manufacturing and services of modern transportation equipment, energy, food and chemical equipment, including design, manufacture and services of international standard dry cargo 32 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 containers, reefer containers, regional special containers, tank containers, container flooring, road tanker vehicles, gas equipment, stationary storage tanks, road transportation vehicles and airport equipment. In addition, CIMC also provides services such as equipment financing and rental, railway equipment production and real estate development. Container business: Since 1996, CIMC has maintained No.1 ranking in the world in production and sales. Currently, CIMC can manufacture a full series of container products with proprietary intellectual property, including dry cargo containers, reefer containers, special-purpose containers and regional special containers, container flooring. “CIMC” brand containers won the title of “World Famous Brand in China” and “CIMC” trademark has been officially designated as famous brand in China. CIMC has the annual production capacity exceeding 2.5 million TEU and 400 products, and has 15 dry cargo container bases in main seaports and Chongqing; 2 reefer container manufacturing bases in Shanghai and Qingdao; 4 special container bases in Dalian, Tianjin, Xinhui and Qingdao. For container flooring, CIMC has 4 production bases in Yakeshi in Inner Mongolia, Jiashan in Zhejiang, Xuzhou in Jiangsu and Xinhui in Guangdong. As a strategic extension of containers in the service sector, CIMC storage yard service has completed network layout consisting of 9 storage yards in key ports around the country. Road transportation vehicle business: Currenly, CIMC has 22 production bases and 19 4S stores in Shenzhen, Shanghai, Tianjin, Yangzhou, Zhangjiagang, Zhumadian, Luoyang, Jinan, Qingdao, Liangshan, Wuhu, Xinhui, Yingkou, Baiyin, Xi’an and somes countries such as USA, Belgium, Australia and Thailand. Ranking first in the world in terms of production capacity and scale, CIMC turns out about 200,000 vehicles per year. Energy, chemical and food & beverage equipment and service include Burg Industries B.V., Enric Energy Equipment Holdings Limited, Zhangjiagang CIMC Sanctum Cryogenic Equipment Co., Ltd. and Nantong CIMC Tank Container Co., Ltd. Established in 1937, Burg is headquartered in Poland and mainly engaged in production, manufacturing and marketing of road transportation vehicles, tank vehicles and stationary storage tanks and has business bases distributed in Netherlands, Germany, Denmark and Poland. Business bases of Enric Energy Equipment Holdings Limited are distributed in Langfang, Shijiazhuang and Bengbu. Nantong CIMC Tank Container Co., Ltd. has become the largest standard tank container manufacturer in the world. Airport equipment manufacturing base is located in Shenzhen. Shenzhen CIMC – Tianda Airport Support Ltd. is the largest passenger boarding bridge supplier in the world and first-class airfreight equipment supplier in China. In terms of other business, CIMC railway freight wagon manufacturing base is located in Dalian and has the annual production capacity of 1000 railway cargo wagons. CIMC real estate development facilities are located in Shanghai, Yangzhou and Jiangmen. 3. Main operations Over 10% of CIMC income and gross profit from main operations come from container and 33 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 highway transportation vehicle products. Composition and change of operating revenue and profit: Unit: RMB ‘000 Service categories Operating Operating cost, tax and Gross profit revenue surtax Containers 34,048,901 30,878,895 9.31% Road transportation 11.08% vehicles 9,724,054 8,646,614 Energy and chemical 15.12% equipment 4,536,303 3,850,583 Airport equipment 473,230 316,707 33.08% Others 618,487 152,081 75.41% Combined setoff -640,151 — — Total 48,760,826 43,859,202 10.05% Regions Operating revenue Ratio in revenue Rate of increase/ decrease of revenue Asia 20,324,127 41.68% 72.75% America 10,161,469 20.84% 23.88% Europe 17,895,465 36.70% 58.39% Others 379,765 0.78% -38.12% Total 48,760,826 100.00% 52.95% —— Container manufactures and services In container business, CIMC has further intensified product line presence in mainstream markets around the world. CIMC has accomplished substantial upgrading in new product development, innovation in technical equipment, information application, lean production and product quality and further cemented leading position in the industry. In 2007, CIMC accomplished RMB 34.049 billion in sales income in container services, up 37.44% over previous year. Faced with fierce market competition in dry cargo container market, CIMC turned out 2.10 million TEU containers (excluding pallet containers), setting a new high in the industry. Of these, output of standard dry cargo containers in the year hit 1.866 TEU, up 37% over previous year. Output of standard reefer containers in the year hit 73,600 sets, up 39% over previous year. Special containers include standard special containers, regional special containers, foldable containers, special reefer containers and pallet containers (including tank pallet containers). Output of special containers and pallet containers hit 58,700 sets and 790,000 sets, up 1.7% and 22.5% over previous year. Output of container flooring in the year hit 305,000 cubic meters, up 30% over previous year. In storage yard service, CIMC completed 5 million TEU in container throughput and 290,000 TEU container repair, up 20.5% and 12.0% over previous year. In 2007, though faced with greater supply than demand market situation in dry cargo container market, CIMC accomplished close coordination with marketing, purchase and production aspects, made full use of the advantages in group operation and production base layout and maintained a leading position in the world. Through capacity expansion and restructuring, CIMC further expanded market share in 34 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 reefer container operation. CIMC launched low-cost new products at proper time and intensified efforts to open up market for special reefer containers. As a result, CIMC cemented leading position in technology and substantially improved profitability. Special container met with increasingly fiercer competition in market. While enhancing market position in existing special container market, CIMC leveraged “container orientation” conception and intensified efforts to open up new applications for containers, including house-type container, equipment container, oilfield container, military container and special reefer container, thus substantially improving technical contents for products and constantly expanding market scale. CIMC has become the world’s largest container flooring supplier and intensified research in bamboo flooring and bamboo/wood composite flooring. Currently, CIMC has launched a full range of bamboo/wood composite flooring products with proprietary intellectual property, including more than 10 patents. CIMC consists of multiple container service enterprises, including over 1,500,000m2 storage yards, 5,000,000 TEU storage capacity and 300,000 container repair capacity. Container service includes a full range of equipment services ranging from storage and repair to retrofitting, restructuring, rental, purchase and sale as well as extended logistic services such as forwarding, warehousing and container splitting and consolidation. Based on this, CIMC has the capacity to provide one-stop services for key shipping companies and container rental companies in the world. Through construction in the past 3 years, CIMC has become one of the leading container service providers in China. —— Road transportation vehicle manufacturing and service In this sector, CIMC accomplished RMB 9.724 billion in sales income and 112,136 sets in sales volume, up 42.61% (RMB 6.819 billion in previous year) and 26.89% over previous year. In vehicle services, CIMC champion product strategy achieved new progress. In the year, CIMC intensified efforts to open up market for semi-trailers and mixer vehicles, and substantially increased market share in domestic market for semi-trailers and retrofitted vehicles. CIMC ranked first in the world in sales volume of container semi-trailers and box semi-trailers, and became the largest supplier of cement mixer vehicles in China. Through technical innovation, CIMC has diversified product lines and completed preliminary work for high additional value products such as scavenger vehicles, fire vehicles and cement mixer vehicles, ready to launch them to market soon. Through expansion of product lines to open up overseas market, CIMC cemented advantageous positioning in North American container semi-trailer market and intensified the influence of CIMC brand in overseas market. Through acquisition of Burg, CIMC vehicle products intensified presence in European mainstream markets. Also, CIMC further intensified market presence in Japan, Australia and Thailand. In addition to efforts to export products to overseas market, CIMC gradually increased the ratio of key component supply to domestic market from CIMC North American production base and intensified efforts to promote “Sino-American 35 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 interaction”, thus improving the competitive power of products from CIMC North American production base. Production base layout was further improved. Through acquisition and new construction, CIMC has 5 new vehicle production bases in China. For example, CIMC established Luoyang CIMC in cooperation with Luoyang Yutong Automobile Co., Ltd.; established CIMC Wuhu Ruijiang Automobile Co., Ltd. in cooperation with Wuhu Ruixin Automobile Marketing Service Co., Ltd.; established Qingdao CIMC Eco-equipment Co., Ltd. in cooperation with Fuji Heavy Industries, Sumitomo Corporation and Sumitomo Corporation Shanghai. In April, CIMC Shanxi Heavy Truck (Xi’an) Vehicle Co., Ltd. began its operation. Meanwhile, CIMC is constructing or planning to construct new production bases in Thailand, Australia and USA. New progress in international production bases and further expansion in global operating platform lay a solid foundation for CIMC to accomplish future strategic target of vehicle production. To promote the construction of vehicle marketing service network, CIMC is committed to constructing a one-stop life-cycle vehicle service system. In 2007, CIMC initiated full construction of 4S store marketing system and set up 11 new 4S stores. CIMC Financing and Leasing Co., Ltd. was established which provides financial services for CIMC vehicle customers. CIMC vehicle 4S store network provides complete marketing services to meet customers’ needs for customized products and services. Meanwhile, CIMC implemented diversified cooperation with major manufacturers, large distributors and domestic suppliers to integrate competitive advantages in the value chain of the vehicle industry. Implementation of completely new operating mode intensifies the competitive power for CIMC to gain high-speed growth in future vehicle services. —— Energy and chemical equipment and services Accomplished RMB 4.536 billion in revenue, up 145.62% over the previous year (RMB 1.847billion). Burg and Enric were included in CIMC consolidated statements in July and October respectively. Enric Industries Limited accomplished RMB 13.49 billion in sales income and Enric Energy Equipment Holdings Limited accomplished RMB 3.37 billion in sales income. In June 2007, CIMC completed acquisition of Burg Industries B.V. in Netherlands, a leading road transportation vehicle and special stationary storage tank supplier in Europe, and thus owns 22 production bases of Burg Industries in 5 European counties and 80% equity of Burg marketing network. In July 2007, CIMC acquired 42.18% equity of Enric Energy Equipment Holdings Limited, a company listed in Hong Kong. Enric is a leading special energy equipment manufacturer and integrated solution provider in China, and their key products include natural gas transmission, storage and distribution equipment. Enric is specialized in design, manufacture and marketing of gas equipment, including high-pressure cylinder-type vessels, CNG trailers, CNG stations, LNG tanks, LNG trailers and natural gas compressors. Their new products include LNG containers and LCNG (liquefied compressed natural gas) stations. In addition, Enric also provides integrated solutions, ranging from design, manufacture and site installation of gas equipment systems to 36 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 employee training and after-sale services, thus shaping a complete gas storage and transportation equipment production chain. These product lines from CIMC mainly target such market segments as energy, chemical and food. Based on existing tank equipment operations of Nantong CIMC Tank Container Co., Ltd. and Zhangjiagang Sanctum Cryogenic Equipment Co., Ltd., CIMC has shaped a global operating platform integrated with energy and chemical equipment and services, and further intensified global competitive power. —— Airport equipment services Airport equipment services from CIMC include manufacture, marketing and services of passenger boarding bridges, airfreight stations, ship boarding bridges and urban mechanical parking systems. In 2007, CIMC ranked first in domestic and international markets in terms of orders obtained and completed. Leveraging the opportunities of prime time in airport construction brought about by high-speed economic growth in China, CIMC further expanded airport equipment services. Specifically, CIMC achieved outstanding performance in passenger boarding bridges and airport freight stations and substantially intensified positioning in international market. In 2007, Shenzhen CIMC – Tianda Airport Support Ltd. accomplished RMB 473 million in sales income of airport equipment, up 167.67% over previous year. —— Other business Dalian CIMC Railway Equipment Co., Ltd. has been fundamentally completed. In real estate sector, CIMC accomplished RMB 166 million in sales income, up 16.90% over previous year. 4. Research and development The Group possesses the corporate technical center of state level and under the center, there are 9 R&D centers, one manufacturing technical center and one CAE computer center; meanwhile, it has also established several key labs and testing platforms constituting the special R&D production system of “centralized management, distributed R&D and manufacturing”. Through the technical development system of “centralized management, distributed R&D and manufacturing”, the technical innovation mechanism oriented by “driving added value by innovation” has been set up. In 2007, through the construction of in-depth technical innovation mechanism, the Group consummated technical innovation appraisal system, advanced the cultivation of technical talents and enhanced the advancement of technical achievements. This Group will continue to improve the technical innovation capability, enhance the construction of intellectual property and standardization systems. In 2007, the Group developed 560 new products, achieved 94 innovation results; applied for 365 patents and among which, 199 were invention patents. In terms of standardization, the Group actively participated in the setting of industrial standards, taking charge of or participated in the compilation of 25 standards of international, state or industry levels. In 2007, the Group further enhanced the key problem tackling works, incessantly optimized the product structure and manufacturing system taking 37 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 safety, energy saving, environment and intelligentization as the target. While adhering to self-reliant innovation for intelligentized containers, the Group actively collaborates with domestic and overseas companies to advance the product R&D and industrialization. The intelligentized tank container equipment and system have become the standard deployment for transporting LNG from Zhuhai to Shanghai by China Offshore Oil Co., Ltd. In 2007, the Group continued to enhance the investment in R&D, with a total amount of some RMB 1 billion. 5. Social responsibilities In terms of environment protection, energy saving and reducing discharge, the Group has guided the various subsidiaries to establish environment management organizations and the environment management level thereof has been significantly improved. In 2007, the Group invested more than RMB 50 million to harness the organic waste gas and the pollutant discharge has met the relevant state standards of environment protection and passed the inspection by the state environment department. Significant achievement has been made in terms of comprehensive electricity saving for dry containers and, most subsidiaries of the Group have completed electricity saving remolding and realized the target of reducing 10% of electricity for a single container. In regard to occupational safety and labor protection, the safety and occupational health management organization has bee established, the safety and health education on employees enhanced; the system of holding permit required for special type of workers strictly followed; the equipment safety operation regulations have been established and consummated; the proper personal labour protection provided and regular health check for employees organized; safety meetings are also held on regular basis. During the fiscal year, this Group made donations for various commonweal causes to support the development of such causes and education. Based on incomplete statistics, the Group donated RMB 1.18848 million to the society and set up fellowship and awards at Qinghua University, Peking University, Shanghai Jiaotong University, South China University of Science and Technology, Jilin University and Changan University etc. The Company, through participating in the projects of China Poor Supporting Fund, supported extremely poor university students and the Group Chairman, Mr. Mai Boliang was appointed the committee member of New Great Wall – Caring Action for Extremely Poor University Students and the Company was issued the title of the title of “commonweal organization”. 6. Suppliers and clients During the reporting period, the Group made purchases from top 5 suppliers for goods with a total value of RMB 14,132,926,328, accounting for 27% of the total sales revenue of the Group. 7. Analysis of the financial status of the Company (1) Analysis of assets variation Unit: RMB 1,000 Item Amount ( as of Amount ( as of Variation (%) Major influencing factor 31 Dec 07) 31 Dec 06) 38 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 66.97 Total assets Increased production scale through acquisition 40,391,920 24,191,571 and incorporating new companies 51.44 Monetary assets Increase of recovered amount at year end; 3,054,432 2,016,876 increased number of subsidiaries 311.44 Transactional financial Increase of ramified financial assets such as assets 924,340 224,664 foreign exchange transaction in long term taking fair value for measurement 71.78 Accounts receivable 8,899,769 5,180,868 Increased production and business scale 131.11 Other receivable After sales of the equity of subsidiary, the same 1,147,246 496,397 became jointly-operated one thus the account receivable from associated companies increased 63.20 Inventory Increased raw material purchase, especially the 7,715,381 4,727,570 purchase for storage at year end 172.49 Financial assets Fair price went up 4,153,636 1,524,355 available for sale 41.28 Long term equity Increased investment in jointly-operated investment 912,822 646,115 companies and equity method-based adjustment in the year 36.55 Fixed assets Increased production scale and new merger 6,341,530 4,644,196 company 186.52 Short term loan 2,696,559 941,150 Increased production and business scale — — Transactional financial Increased part of the ramified financial 338,379 liabilities instruments with value less than zero 81.14 Accounts payable 6,979,610 3,853,251 Increased scale of raw material purchase 103.53 Pre-received accounts 530,379 260,593 Increased sales of vehicles and airport equipment 1,368,100 6554.83 Non-floating liability Significant increase of long term loan due in one 20,558 due in one year year 514.81 Long term loan 4,462,309 725,800 Increased production scale 645.10 Deferred income tax Income tax influence of ramified financial liabilities 1,233,410 165,536 instruments measured with fair value of financial assets available for sale 105.43 Total liabilities More company merger, increased production 22,849,619 11,123,259 scale 56.57% 45.98% 10.59 Total assets liabilities Quick increase of liabilities ratio - Measurement attributes of the major assets of the Company: In producing the financial statements, in general, the Company uses the historical cost for measurement except for the following assets and liabilities, in which, fair value is used for 39 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 measurement: ① The financial assets and financial liabilities (including the transactional ones) measured with fair value and the variation there of is recorded in the current profits and losses (refer to Note 3 (12)); ② Financial assets available for sale (refer to Note 3 (12)). - Analysis of assets variation and influence as measured with fair value: Amount Net assets Fair value Balance Balance influencing amount Item Content obtaining as of 31 as of 31 the profit Remark directly method Dec 07 Dec 06 and loss of affected the year Transactional equity Stock investment in Market price 378,220 215,678 70,715 instrument secondary market Transactional investment financial assets Ramification Ramified Quotation products relating to financial from financial 546,120 8,986 exchange rates and instrument institution interest rates 203,969 Ramification Ramified Ramified Quotation products relating to financial financial from financial 338,379 - exchange rates and liabilities instrument institution interest rates Other Quotation Exchange future Cash flow floating from financial 71,713 - 71,713 value maintaining futures assets institution products Equity stocks of “China Merchant Salable Strategic equity Valuated Bank” and “Bank of financial 4,153,636 1,524,355 2,744,945 investment value Communications” assets strategically held by the Company For further details, please refer to Note 60 to the financial statements for risk analysis, sensitivity analysis and determination of fair value of financial instruments. (2) Assets constitution variation analysis: Unit: RMB’000 Item Amount (as of 31 Dec 07) Amount (as of 31 Dec 06) Change of Major influencing factors ratio to total assets Ratio to Amount Ratio to (%) total assets total assets Amount (%) (%) 40 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Total assets 40,391,920 24,191,571 100.00 100.00 1.36 Transactional Increase of ramified financial assets financial assets such as foreign exchange 924,340 224,664 transaction in long term taking fair value for measurement 2.29 0.93 19.20 -3.35 Fixed assets 6,341,530 4,644,196 15.85 3.89 2.85 Short term loan Increased production and 2,696,559 941,150 business scale 6.74 3.00 8.15 Long term loan Increased production and business scale, more 4,462,309 725,800 newly acquired companies 11.15 (3) Expenses and income tax variation: Unit: RMB’000 Item Amount (as of Amount (as of Change (%) Major influencing factors 31 Dec 2007) 31 Dec 2006) 14.41% Sales expenses 1,152,846 1,007,623 Increase of major product sales scale 45.74% Overhead More mergers and increased product 1,598,083 1,096,549 sales 495.63% Financial expenses 371,704 62,405 Increased borrowings and interest -13.75% Income tax 174,698 202,529 Increased deferred income tax assets (4) Cash flow variation Unit: RMB ’000 Item Amount (as of 31 Amount (as of 31 Change (%) Major influencing factors Dec 2007) Dec 2006) -183.71% Net amount of cash Compared with last period, the flow from business accounts receivable increased and -1,085,549 1,296,823 activities purchase scale of raw material increased -60.42% Net amount of cash More newly incorporated flow from investment companies and mergers, increased -2,998,262 -1,869,061 activities capital expenditure and long term assets 2,273.91% Net amount of cash Increased investment and flow from 5,447,742 -250,597 production scale led to increased fundraising activities borrowings 41 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 8. Business status and achievements of major holding and joint stock companies In addition to containers, transportation vehicles, energy and chemical equipment and airport equipment etc., this Company also operates small amount of real estates. Unit: USD’000 Major products or Registered Business Business Company name Total assets Net assets Net profit services capital revenue profit 75,000 1,077,700 244,042 1,200,017 36,027 32,376 CICM Vehicle Development, (Group) Co., Ltd. production and sale of special automobiles, semi-trailer and components 626 140,199 85,027 124,276 33,609 15,700 Enric Energy Provide integration Equipment services to energy holdings limited equipment industry, design, production and sale of key gas equipment 81,246 333,309 89,880 181,215 1,617 2,324 Burg Industries Production, B.V. manufacturing and sale of transportation vehicles, tanks and static storing tanks Status of disposed subsidiaries (1) Burg Industries B.V. On acquisition date, 26 Jun 2007, the Company through the JV subsidiary, CIMC Burg B.V., acquired 100% interest of Burg Industries B.V. in cash of USD108,308,708 (RMB 825,139,062). The fair value of 100% interest of Burg Industries B.V. on the purchase date was USD 111,543,045 (RMB 849,628,815), the difference of USD 3,234,337 (RMB 24,489,753) was recorded in the revenue outside business. Burg Industries B.V., headquartered in the Netherlands, is a company incorporated in the Netherlands in 1937 mainly engaged in the production and sales of road-based transportation vehicles, tanks and static storing tanks. The parent company of Burg Industries B.V. is CIMC Burg B.V. and its ultimate holding company is this Company. The financial information of Burg Industries B.V. is as follow: From 26 Jun 2 7 To 31 Dec 2007 Amount USD Equivalent RMB (Unit: 1000) 42 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Revenue 177,895 1,348,950 Net profit 2,113 15,998 Net cash flow in 23 175 (2) Enric Energy Equipment Holdings Limited (“Enric”) On 30 Jul 2007, the purchase date, the Company, through its wholly owned subsidiary, Charm Wise Limited, acquired 190,703,000 shares of Enric, accounting for 42.18% of its total shares at a cost of HKD 1,128,961,760(USD 144,412,833, RMB 1,094,076,842). Following that, the management of Enric exercised 6,900,000 shares of option and the interest of this Company was diluted to 41.55%. The merger cost on the date of purchase was USD 144,291,628 (RMB 1,094,076,842). On 15 Oct, the Company appointed more than half of the directors and obtained the material control over the company. The fair value of the identifiable net assets of 41.55% interest of Enric on the purchase date was USD 52,299,000 (RMB 393,042,674); the difference with the cost of USD 92,113,833 (RMB 701,034,168) was determined to be good will. Enric was incorporated in Cayman Islands in Sept 2004 and headquartered in Hong Kong; it is mainly engaged in the integration services for energy equipment industry as well as the design, production and sale of key gas equipment; it is listed in Hong Kong Stock Exchange Limited (code: 3899). The parent company of Enric is Charm Wise Limited and is ultimately held by this Company. The financial information of Enric is as follow: From 26 Jun 2007 To 31 Dec 2007 Amount USD Equivalent RMB (Unit: 1000) Revenue 40,533 306,907 Net profit 4,984 37,738 Net cash flow in 19,673 148,963 (3) 60% of the shares of the wholly owned subsidiary by way of indirect holding – Shanghai Fengyang Property Development Co., Ltd. (“Fengyang”) were transferred at Shanghai United Property Right Exchange and Shenzhen China Merchant Property Co., Ltd. (“Shenzhen China Merchant Property”) acquired such shares. For the increase of merger, please refer to Note 6, Corporate merger and consolidated financial statement (1) (a) and (1) (b). (Ⅲ) Prospect of the future development of the Company 1. Economic environment and policy The influence of the “subprime loan crisis” of the US may continue and the consumption increase in the developed countries may slow down thus the import may decrease. Meanwhile, there will be more uncertainties in terms of world macro economy on the international politics stage. Therefore, the world economy in 2008 faces many uncertainties. Although weak dollar is positive to the US economy yet slack dollar may directly incite the price rise of the commodities in the glob and increase the possibility of sluggish economy. The Chinese economy has become an 43 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 indispensable part of the world economy and will continue to be influenced by the trade globalization in terms of exchange rate change, trade friction and intellectual property rights etc. The change of Chinese economy also significantly influences the world economy as well as the Chinese economy itself. The reform and opening up of China will be continued. “Development in a scientific approach” requires the overall coordinated and sustained economic and social development. The implementation or adjustment of the policies such as macro-control, energy saving and reducing discharge, new tax law and Labour Contract Law etc. will significantly influence the future development of Chinese enterprises. On the other hand, in the process of globalization, the transfer of manufacturing industry in the world to China will be further enhanced; benefited the deepening globalization which drives the rising of the global consumption level, and the new economies represented by China, India, countries along the Mediterranean and Russia will continue to enjoy relatively high growth rate, which can significantly reduce the negative impact on the global economic growth brought about by subprime loan crisis of the US. 2. Industry development trend and market prospect (1)Adjustment of overall demand for containers appears. As a result of contribution made by the strong economic growth of the above new economies, the west bound cargoes from Asia and Europe will continue to surpass that of Pan-Pacific. After the global economic adjustment, between 2008 and 2009, the world containerized trade volume increase will be around 11% (based on Drewry forecast). Meanwhile, following the further deepening of the global industry division and cooperation as well as the construction and consummation of inland transportation infrastructures, the containerization rate will be further increased and inland container transportation will enjoy a large increase space. The container updating and washing out quantity will also rise while stable. However, considering the structural adjustment of export policies of China, the periodical factor, the huge uncertainties of the US economy growth and implementation of the unified income tax between domestic and foreign invested enterprises, the uncertainties of the export growth of China in 2008 significantly increase and there is pressure for adjustment in terms of export growth. On the other hand, in the dry container market of 2007, over buying to certain extent existed and the growth of overall demand in 2008 is hard, and there is the possibility of decrease. As influenced by the surplus production capacity in the dry containers, the manufacturers will face increased competition pressure; the reefers and special container market will still grow healthily. (2)Road-based transportation market continues to grow. In 2008, the Chinese economy will still grow fast and driving by domestic demand will be more evident. China has opened the logistics field and the large foreign logistics service providers are coming to Chinese market, resulting in the increased demand fro high standard new vehicles complying with international standard. Following the increased investment in infrastructure, more engineering vehicles will be required. On the other hand, following the weight-based charging system by the state, the vehicles of new materials, high performance and light weight are recognized by the clients. It is forecasted that in 2008, the overall demand situation for special vehicles will be stable. (3)Opportunities in energy and chemical equipment market 44 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 As a result of high oil price and driving by “energy saving and reducing discharge” policy, in terms of energy utilization, the Chinese government will be committed to reduce the consumption of oil and coal, and uplifting the ratio of LNG in the overall energy; as a kind of clean energy, the prospect of LNG is bright. By 2015, the supply of LNG in the international market will still be short of 30 – 50 million tones. Since 1995, the annual growth rate of LNG market has been maintained at 7.5%, which is mainly in the Asia Pacific region where the import accounts for 2/3 of the total import in the world. China, India and US etc. have entered the stage of quick development. The fast economic growth of China brings about more demand for storage and transportation of chemicals and dangerous goods. Following the incessant increase of the national income level and upgraded consumption, the liquid foodstuff industry such as beer and juice etc. also grows fast. Meanwhile, the government requires more stringent supervision on transportation security and food security and the market demands higher standard and quality for operation service chain, the demand for top grade and medium range storage, transportation and production equipment is more and more imminent. The relevant businesses of the Group will have the opportunity in this segmented market. (4)The market development space of airport equipment is large. In 2008, the construction of domestic airports will still be fast. The China made equipment is relatively advantageous and the producers have possessed sufficient design and development capabilities; there is also space for exploring the international market. 3. Overall business targets and measures In the next 5 years ahead, the Group will fully explore the advantages of China and develop toward the targets: more consolidated leading position in container industry; the leading position of the mainstream vehicle products in the international mainstream market substantially established; significantly increased ratio of income from services to the operation income; the new industry becomes important development pillar; create more added value by use brand name and resources advantages; globalized corporate group with due scale under the global operation framework. It will become the most respected industry leader with more responsibilities, more environmental friendliness and more harmonious labor relations. Facing the globalization and industry structure upgrading of China, the Group will further bring into play of the international business capability and the advantage of made in China; it will be more actively participating the international industry division and structural adjustment, accelerating the construction of “globalized operation system relying on the advantages of China”; secondly, it will catch the opportunity and seek new opportunity, expand the new business field to create space for future development. The container industry will, in line with the decided strategic requirements, continues to consolidate and uplift the position of industrial leader; the vehicle industry will further consummate business layout and continue to accelerate the business development speed; in terms of the energy and chemical equipment business, the resources integration will be accelerated taking the interaction of the businesses of Burg and Enric with this Group. The development of service business of containers and vehicles will be spurred. 45 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 The Group will incessantly improve its capability in terms of strategic cooperation, supply chain management, human resources, corporate culture, information system construction, best practice advancement, fine management, operation mode change, mechanism innovation, integration after acquisition and business risk control etc. and actively explore the operation mode and method of the brand names to spur their value adding. 4. Capital expenditure and fundraising plan Based on the business development and investment planning, it is expected that in 2008, the capital expenditure will be around RMB 5.7 billion. The major projects (including newly built, acquisition, capital increase and technical remolding) include: RMB 1.25 billion for container manufacturing and container yard; RMB 1.33 billion for road-based transportation vehicles, RMB 2.38 billion for marine works, RMB 100 million for railway equipment and RMB 650 million for energy, chemical equipment and others. The corresponding fundraising arrangements are mainly self-owned capital, fundraising in capital market and loan from banks. 5. Risk factor in the future development In 2008, as a result of subprime loan market crisis in the US, the uncertain of the global economy increases. The main business of the Group is closely related to the global economy and trade, shipping, the Chinese manufacturing industry and export; therefore, it will be directly subject to the influence by the fluctuation of the economy. The prices of primary products in China including energy, chemical, industrial raw material and agricultural products etc. may continue to go up and the pressure of inflation is large; the enterprises’ cost will go up which directly affect their competitiveness. Meanwhile, the devaluation of the US dollar and appreciation of RMB bring about due market risk as a result of exchange rate change. The adjustment of foreign capital policy and structural adjustment of export will bring about sustained influence on the manufacturing sector of China, which will adjust unavoidably. In 2008, as a result of implementation of new labor law and new corporate income tax law, the income taxes for foreign and domestic enterprises will the unified and the favorable taxation policy granted to export-oriented products will also be adjusted. The main business of the Group is closely related to the global economy and trading, shipping, the Chinese manufacturing sector and export; the above macro economy factors may lead to increased investment, business and foreign exchange risks as well as more production cost and labor cost thus influencing the profitability and operation efficiency of the Group. II. Investment in the reporting period (I) Use of fund raised during the reporting period On 20 Nov 2003, the Company completed the re-issuing of 120 million A shares with a total fund raised of RMB 1.755 billion (after deduction of issuing expenses). The use of fund raised in this year complied with the planned progress and expected proceeds. 46 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Unit: RMB’0000 Total amount of raised proceeds used as of the report 10,958.00 Total amount of raised 176,565.00 year proceeds Total amount of raised 176,565.00 proceeds used accumulatively Committed Projects Changed Planned Actual Compliance Estimated Accrued amount projects or investment investment with planned earnings of earnings not amount amount progress or not Reconstruction of dry No cargo 32,906.00 32,906.00 Yes 0.00 33,213 container factory Production expansion of No regional & special 41,350.00 35,256.00 Yes 0.00 29,146 purpose containers Reefer Container No production expansion 22,106.00 21,163.00 Yes 0.00 31,979 project Tank container No 14,539.00 14,539.00 Yes 0.00 25,413 Van semi-trailer No 23,156.00 23,156.00 Yes 0.00 0 Container chassis No 19,021.00 19,021.00 Yes 0.00 12,510 Overseas OEM van No 24,012.00 22,066.00 Yes 0.00 -1,513 semi-trailer Total - 177,090.00 168,107.00 - 0.00 130,748 Explanation on failing Due to production scale and market reason, the box type semi-trailer project with imported to catch up with the materials project failed to materialize the expected proceeds. planned progress or get the expected gains (with details down to each project) Explanation on the project changes and procedure of changes (with details down to each project) Usage of the raised proceeds not used yet As of the end of reporting period, RMB 74.58 million of fund raised was for the time being used to supplement the circulating fund. Total amount of raised fund had been used up. 47 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 (II) Investment with non-raised fund during reporting period Unit: RMB 1 million Share ratio held Accumulated directly or Progress in Project investment indirectly by the 2007 at year end Company (%) 1. Acquisition of 47.37% shares of Shanghai CIMC Baowell 94.74% Completed 101.70 Industrial Co., Ltd. 2. Acquisition of 47.5% shares of Shanghai CIMC Far East 100.00% Completed 114.79 Container Co., Ltd 3. Dalian CIMC Railway Equipment Co., Ltd. 100.00% Completed 73.04 3. Luoyang CIMC Lingyu Automobile Co., Ltd. 60% Completed 45 4. Wuhu CIMC Ruijiang Automobile Co., Ltd. 60% Completed 52.5 5. Yangzhou CIMC Tonghua Machinery Co., Ltd. 80% Completed 13.5 6. Guangzhou Tongyang Container Manufacturing Co., Ltd. 100% Completed 45.69 7. Guangzhou CIMC Vehicle Logistics Equipment Co., Ltd. 80% Completed 15 8. Fuyang CIMC Logistics Equipment Co., Ltd. 80% Completed 8 9. CIMC Shenfa Construction Industrial Co., Ltd. 100% Completed 54.12 10. China Railway United International Container Co., Ltd. 10% Completed 137.9 11. Qingdao Eco- Equipment Co., Ltd. 40.80% Completed 73.04 12. Hubei CIMC Vehicle Logistics Equipment Co., Ltd. 80% Completed 5 13. Shanxi CIMC Vehicle Logistics Equipment Co., Ltd. 80% Completed 5 14. Xinjiang CIMC Vehicle Logistics Equipment Co., Ltd. 80% Completed 5 15. Ningguo CIMC Bamboo and Wood Product Co., Ltd 60% Completed 9.88 16. Manzhouli CIMC Wood Co., Ltd. 100.00% Completed 10 17. Inner Mongolia CIMC Vehicle Logistics Equipment Co., 80% Completed 5 Ltd. 18. Shijiazhuang CIMC Vehicle Sales Service Co., Ltd. 80% Completed 5 19. Xiamen CIMC Vehicle Logistics Equipment Co., Ltd. 80% Completed 3 20. Liangshan Dongyue CIMC Vehicle Co., Ltd. 60% Completed 6.75 21. Burg Industries B.V. 80% Completed 825.14 48 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 22. CIMC Vehicle (Xinjiang) Co., Ltd. 80% Completed 24 23. Nantong CIMC Tank Equipment Manufacturing Co., Ltd. 100.00% Completed 73.04 24. CIMC Financing and Leasing Co., Ltd. 80% Completed 74.59 25. Nantong CIMC Transportation and Storage Equipment 80% Completed 31.40 Manufacturing Co., Ltd. 26. CIMC Vehicle (Sichuan) Co., Ltd. 80% Completed 5 27. Yunnan CIMC Vehicle Logistics Equipment Co., Ltd. 80% Completed 5 28. Chongqing CIMC Vehicle Logistics Equipment Co., Ltd. 80% Completed 5 29. Hunan CIMC Vehicle Sales Service Co., Ltd. 80% Completed 5 30. Liaoning CIMC Vehicle Logistics Equipment Co., Ltd. 80% Completed 7 31. Chongqing CIMC Logistics Equipment Co., Ltd. 80% Completed 35.06 32. Tianjin Port CIMC Zhenhua Logistics Co., Ltd. 29.78% Completed 9.5 33. Guangxi CIMC Vehicle Logistics Equipment Co., Ltd. 80% Completed 10 34. Xuzhou CIMC Wood Co., Ltd. 100.00% Completed 10 35. Dalian CIMC Vehicle Logistics Equipment Co., Ltd. 100.00% Completed 34.54 36. Zhangzhou CIMC Container Co., Ltd. 100.00% Completed 43.46 37. CIMC USA Inc. 100.00% Completed 0.19 38. Nantong CIMC Large-Sized Tank Co., Ltd. 100.00% Completed 96.42 39. Qingdao CIMC Refrigeration Transport Equipment Co., Ltd. 80% Completed 74.02 40. Shenzhen CIMC Special Vehicle Co., Ltd. 80% Completed 140 41. Yangzhou CIMC Tonghua Tank Equipment Co., Ltd. 80% Completed 58.50 42. Enric Energy Equipment Holdings Limited 41.55% Completed 1094.08 During the reporting period, the Group paid RMB 2.2736 billion for acquiring part of the stock equity of the companies. The Group totally paid RMB 1.06266 billion for incorporating new companies or increasing the capital. III. Routine works of the board of directors (I) Meetings and resolutions of the board Time of Session Resolution Disclosure convening 49 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 9 Feb 2007 First meeting in 2007 of The resolution of railway lorry the fourth session board manufacturing project 15 Mar 2007 The second meeting in Annual report and digest of 2006; 17 March 2007 Securities Times, 2007 of the fourth session dividing of profit of 2006; nominating the Shanghai Securities Times and TA board candidates for directors and independent KUNG PAO of Hong Kong directors for the fifth session of board 23 Apr 2007 First meeting in 2007 of Elect chairman and vice chairman; decide 24 Apr 2007 Securities Times, the fifth session board the members of special committees Shanghai Securities Times and TA KUNG PAO of Hong Kong 24 Apr 2007 The second meeting in Resolution of the first quarter report of 2007 of the fifth session 2007 board 24 May 2007 The third meeting in 2007 Resolution to establish CIMC Financial of the fifth session board Co., Ltd. 16 Jul 2007 The fourth meeting in Resolution of self-checking report and 24 Jul 2007 Securities Times, 2007 of the fifth session remedial measures for the governance of Shanghai Securities Times and TA board listed companies KUNG PAO of Hong Kong 24 Jul 2007 The fifth meeting in 2007 Resolution to acquire Enric Energy 3 Aug 2007 Securities Times, of the fifth session board Equipment Holdings Ltd. Shanghai Securities Times and TA KUNG PAO of Hong Kong 15 Aug 2007 The seventh meeting in Resolution of the half year report of 2007 2007 of the fifth session board 17 Aug 2007 The eighth meeting in Resolution to set up Dalian CIMC 2007 of the fifth session (Changxing Island) Heavy Equipment board Park Co., Ltd. 30 Aug 2007 The ninth meeting in 2007 Resolution on stock trust plan (draft) of 29 Sept 2007 Securities Times, of the fifth session board CIMC Vehicle (Group) Co., Ltd. Shanghai Securities Times and TA KUNG PAO of Hong Kong 11 Oct 2007 The tenth meeting in 2007 Resolution to provide guarantee to 12 Oct 2007 Securities Times, of the fifth session board Shenzhen CIMC Tianyu Real Estate Shanghai Securities Times and TA Development Co., Ltd. KUNG PAO of Hong Kong 25 Oct 2007 The 11th meeting in 2007 Resolution for the third quarter report of of the fifth session board 2007 31 Oct 2007 The 12th meeting in 2007 Resolution of remedial report of the 3 Nov 2007 Securities Times, of the fifth session board governance of listed companies Shanghai Securities Times and TA KUNG PAO of Hong Kong 6 Nov 2007 The 13th meeting in 2007 Resolution to increase capital to Dalian of the fifth session board CIMC Logistics Equipment Co., Ltd. 3 Dec 2007 The 14th meeting in 2007 Resolution to set up CIMC Intelligent of the fifth session board Science and Technology Co., Ltd. (provisional name) 50 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 20 Dec 2007 The 15th meeting in 2007 Resolution of approving the transfer of 27 Dec 2007 Securities Times, of the fifth session board stocks of Shanghai Fengyang Real Estate Shanghai Securities Times and TA Development Co., Ltd. KUNG PAO of Hong Kong 31 Dec 2007 The 16th meeting in 2007 Resolution to change the organizational of the fifth session board structure of the headquarter of the Group Resolution to authorize investment review and approval (II) Execution of the resolutions of general meetings of shareholders by the board The board strictly executed the resolutions of the general meetings of the shareholders during the year: 1. During the general meeting of shareholders of 2006 and the first temporary general meeting of the shareholders in 2007, the board was authorized to modify the Articles of Association, which was completed during the reporting period. 2. Implementation of the profit division of 2006 and transfer the accumulation fund to stocks by the board In the general meeting of shareholders of 2006 held on 23 Apr 2007, the Profit Division and Transfer of Accumulation Fund to Stock Schemes were passed. The dividend issuing scheme was: taking total shares of 2,218,663,376 as the basis, RMB 4.3 was issued to each 10 shares (including tax, for B shares, no tax deduction; after tax deduction, the actual dividend for A share was RMB 3.87 for every 10 shares). The dividend for B share was paid on the first working day after the general meeting of the shareholders (24 April) in HKD at the base exchange rate of the People’s Bank of China (1 HKD = RMB 0.9889). The accumulation fund transferring to stock scheme of 2006 was, taking the total shares of 2,218,663,376 as the basis, for every 10 shares, 2 shares were transferred. On 24 May 2007, the Company publicized Bulletin for Dividend and Transferring Accumulation Fund to Stocks of 2006 on Securities Times, Shanghai Securities Times and TA KUNG PAO of Hong Kong; it was decided that the stock registration date was 31 May 2007 and the paying date was 1 June 2007. As of the end of reporting period, the Company had completed all the dividend payment works. (III) The duty performance of three special committees of the board The Audit Committee, Compensation and Appraisal Committee and Strategy Committee of the board, in line with Governance Principles for Listed Companies, Articles of Association, Rules of Procedure of Board of Directors as well as the implementation details of the special committees, carefully performed their duties. Duty performance of Audit Committee 1. During the reporting period, the Audit Committee convened 4 meetings discussing the financial reports of the Company on regular basis; it also communicated with the auditor and issued the review comments on the financial report. Since the commencement of the annual report audit works of 2007, the Audit Committee convened 4 meetings and it actively decided the audit arrangement with the auditor. It reviewed the financial statement twice and issued the comments and urged the auditor to carry out the auditing works strictly in line with the audit work arrangement to ensure that the same was completed 51 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 2. The audit works of KPMG Accounting Firm are summarized by the Audit Committee as follows: In line with the provisions of Notification for the Annual Report and Relevant Works of 2007 of China Securities Regulatory Commission etc., the audit works carried out by KPMG are summarized as follows: First, preparation works before auditing Deciding the audit plan: From the pre-auditing started in the beginning of Nov 2007 to the completion of preliminary audit, 5 months has passed and the detailed arrangements are as follows: Between Nov and Dec 2007, auditing preparation works On 1 Jan 2008, KPMG started to stay at this Company for the auditing works; on 27 March, this Company completed the final financial report and KPMG issued the preliminary audit report for review by the Audit Committee; on 31 March, the audit works completed. Review on the financial statements not audited: Before the coming of auditor, the Audit Committee carefully reviewed the financial statements compiled by the Company and issued the written comments. Second, the auditing process Commencing on 1 Jan 2008, KPMG dispatched teams to carry out overall audit on the headquarters and the subsidiaries of the Company. During the audit process, the Audit Committee, based on the audit progress, urged KPMG to strictly carry out the works as per the schedule to ensure the smooth completion within the specified time. On 27 March 2008, KPMC presented the preliminary audit report for 2007 to the Audit Committee and on 31 March, it issued the audit report. 3. Audit results KPMG issued the Audit Report for 2007 to the Company without reservation. The Audit Committee is of the view that the audit works of the financial statements of the Company of 2007 have been completed well, yet the audit progress should have been better arranged. 4. Proposal to nominate KPMG as outside audit institution for 2008 The Audit Committee made the resolution to appoint KPMG for the financial statements auditing works for the year of 2008. Duty performance of Compensation and Appraisal Committee During the reporting period, the Compensation and Appraisal Committee convened two meetings. During the meetings, the performance appraisal of the management was discussed; based on the review it is recommended that the method of 2006 should be used, which has been passed by the board. Duty Performance of Strategy Committee During the reporting period, the Strategy Committee convened 5 meetings and during the meeting, the development strategies of the Company were comprehensively studied. In the important investment project, acquisition of Burge Industrial B.V. and Enric Energy Equipment Holdings Ltd., the Committee conducted full demonstration, which served strong basis for making the decision by the board. IV. Draft proposal for profit division or transfer capital to stocks of 2007 52 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 As per the Articles of Association of the Company and the current accounting standard, the net profit of parent company was RMB1,236,829,191.69 in 2007. As at the end of 2007, the profit available for distribution to shareholders was RMB 1,493,044,377.81. The profit distribution and dividend declaration preplan is hereby proposed as: the accumulative amount of statutory surplus reserves as at 31 Dec. 2007 has not reach 50% of registered capital, thus the Company would appropriate RMB 80,542,962.12 as statutory surplus reserves for 2007. Based on the total share capital of 2,662,396,051 shares as at December 31 Dec. 2007, a cash dividend of RMB 5.0 (tax included) will be distributed for every ten shares, representing a total dividend of RMB 1,331,198,025.50. Upon that, the balance of retained profit of the Company was RMB 81,303,390.19. The above preplans are to be submitted to the Annual Shareholders’ General Meeting for examination and approval before implementation. V. No other issues that need to be disclose 53 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Section 9 Report of Supervisory Council I. Meetings and contents of the board of supervisors 1. The fourth session of the board of supervisors convened one meeting: On 15 March 2007, the first meeting of board of supervisors of 2007 was convened. During the meeting, the Work Report of Board of Directors of 2006 was heard; the Work Report of Board of Supervisors of 2006 was reviewed and approved; the Annual Report of 2006 and the Digest of Annual Report of 2006 were reviewed and approved; the Motion to Nominate the Supervisors for the Fifth Board of Supervisors was passed. 2. The fifth session of the board of supervisors convened 6 meetings: On 23 Apr 2007, the first meeting in 2007 was held. Mr. Chen Qiang was elected the executive supervisor of the board of supervisors. On 24 Apr 2007, the second meeting was held and during the meeting, Review Comments on the First Quarterly Report was reviewed and passed. On 16 Jul 2007, the third meeting was held and the Comments on Self-inspection Report and Remedial Plan for Governance of Listed Companies was reviewed and approved. On 15 Aug 2007, the fourth meeting was held and the Review on the First Half Year Report was reviewed and passed. On 25 Oct 2007, the fifth meeting was held; the Review on the Third Quarterly Report was reviewed and passed. On 31 Oct 2007, the sixth meeting was held; the Audit Comments on the Remedial Report of Governance of Listed Companies was reviewed and approved. II. Independent comments on issues of board of directors by board of supervisors The board of supervisors’ independent comments on the following issues are as follows: 1. The legitimate operation of the Company. (1) The board of supervisors of the Company, on the basis of Company Law and Articles of Association, carefully performed its duties. The supervisors attended the meetings of board of directors as non-voting delegates and supervised the convening procedures, decision making procedures of the general meetings of shareholders and board of directors as well as the execution of the resolutions made in the general meetings of shareholders and the decision making of the Company; the board of supervisors is of the view that during the reporting period, the decision making procedures were consistent with the law, the internal control procedures were consummated; there was no behavior of the directors, chairman and senior management staff which violated the Articles of Association or damaged the Company’s interest; there was no behavior of power abusing or damaged the interest of the shareholders or employees. 54 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 (2) In the governance of the listed companies organized by China Securities Regulatory Commission, the Company Governance Remedial Report was reviewed with the following comments: the report truly reflected the self-checking, accepting the comments from public and implementing the remedial measures; truly reflected the remedial status as per the requirements by Shenzhen Securities Regulatory Bureau, and complied with the relevant requirements and provisions of the securities regulatory departments. 2. Inspection on the financial status of the Company. In this year, the business and financial status of the Company was inspected and the annual financial report, intermediate financial report and other documents presented by the board of directors were inspected. The board of supervisors is of the view that the financial reports genuinely and fairly reflected the financial status and business achievements of the Company. During the reporting period, KPMG issued audit report on the financial report of the Company for 2007 without any reservation. The board of supervisors is of the view that the audit report issued by KPMG is objective. 3． The use of latest fund raised. In 2003, the Company re-issued 120 million of A shares; the board of supervisors is of the view that during the reporting period, the fund raised was used in line with the commitment made in Intention for Re-issuing A Shares and the invested projects completed on time and no change occurred to the invested projects; the use of fund raised was consistent with relevant laws and would bring about good proceeds to the shareholders. 4．In June 2007, the Company completed the acquisition of 80% shares of Burg Industry B.V. of the Netherlands. In July, it completed the acquisition of 42.18% shares of Enric Energy Equipment Holdings Limited. The prices for the above acquisition were rational and the transaction was insistent with legal procedures; no inside transaction or the case of damaging the interest of some of the shareholders or the flowing out of Company’s assets was found. 55 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Section 10 Significant Issues I. Significant lawsuits and arbitrations In Feb 2007, Ruihua Investment Holdings Co. (“Ruihua”) lodged a legal suit to Senior Court of Jiangsu Province, involving Yangzhou Runyang Logistics Equipment Co., Ltd., Shenzhen Southern CIMC Container Service Co., Ltd. and 100% shares of CIMC Holdings (BVI) Limited, the subsidiaries of the Company. In the indictment Ruihua claimed that the above defendants had right infringe activities and caused loss to it during the course of impawned loan, rental business, stock equity transfer and bankruptcy of Yangzhou Tongyun Container Co., Ltd. (“Tongyun”) and Yangzhou Tonglee Reefer Co., Ltd. (“Tonglee”); it further demanded a compensation of RMB 310 million. For details, please refer to Publication of Significant Issues of CIMC, which was publicized on China Securities Daily, Shanghai Securities Times, Securities Times and TA KUNG PAO of Hong Kong on 8 Feb 2007 (publication number 2007-001). As of 31 Dec 2007, no hearing had been conducted. On 25 Feb 2008, the Senior Court of Jiangsu Province started the hearing and both parties debated on whether the plaintiff has the right for lodge such a suit. II. Holding and trading the stocks of other listed companies and participating in financial sector (I) Short term investments Unit: RMB 1,000 SN Code Name for short Initial Ratio to Book value Profit and Change of Source of stock investme equity of at year end loss in owners’ nt invested reporting equity Company (%) period 1 60003 China Merchant 94,383 0.03 178,335 83,952 - Purchased in 6 Bank secondary market 2 03968 China Merchant 61,713 0.02 74,589 12,876 - Purchased in Bank (H shares) secondary market 3 00598 Sino-trans( H 9,149 0.05 6,445 -2,704 - Purchased in shares) secondary market 4 00728 China Telecom 12,158 - 11,616 -542 - Purchased in (H shares) secondary market 5 03808 China Heavy 6,094 - 5,677 -417 - Purchased in Truck (H shares) secondary market 6 00368 Sino-trans 23,193 0.07 18,386 -4,807 - Shipping (H Purchased in shares) secondary market 56 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 7 20000 Vanke B shares 91,415 0.06 83,174 -8,241 - Purchased in 2 secondary market Other stock investment at term - - - - end Profit and loss from selling stock - - 509,059 - investment Total 298,105 378,222 589,176 - (II) Stocks of other listed companies held by the Group Unit: RMB 1,000 SN Code Name for short Initial Ratio to Book value Profit and Change of Source of stock investment equity of at year end loss in owners’ invested reporting equity Company (%) period 1 600036 China Merchant 239,973 0.93 3,826,736 - 2,595,490 Originally Bank purchased corporate shares and after equity reforming 2 601328 Bank of 276,500 0.07 326,900 - 50,400 Purchased out of Communications the network Total 516,473 4,153,636 2,645,890 (III) Stocks of not listed financial institutions and companies planning to be listed held by the Group Unit: RMB 1,000 SN Name of the company Initial Ratio to Book value Profit and Change of Source of stock investment equity stock at year end loss in owners’ of invested reporting equity company (%) period China Merchant Securities Purchased 1 Ltd. 53,354 1.00 53,354 - - corporate shares Beihai Yinjian Investment Purchased 2 Co., Ltd. 1,968 1.01 - - - corporate shares Guangdong Sanxing Enterprises Group Co., Purchased 3 Ltd. 1,574 0.09 - - - corporate shares Total 56,896 - 53,354 - - III. Significant acquisition and sale of assets 57 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 1. Acquiring 80% shares of Burg Industries B.V. of the Netherlands On 26 June 2007, the Company completed the indirect acquisition of 80% shares of Burg Industries B.V. (“Burg”); for details, please refer to the Publication of Completion the Acquisition of 80% Shares of Burg Industries B.V. by CIMC, which was disclosed on China Securities Daily, Shanghai Securities Times, Securities Times and TA KUNG PAO of Hong Kong on 28 Jun 2007 (publication number 2007-015). 2. Acquiring 42.18% shares of Enric Energy Equipment Holdings Limited On 30 Jul 2007, the Company indirectly acquired 42.18 shares of Enric Energy Equipment Holdings Limited from Xinao Group International Investment Limited. For details, please refer to the Publication for Acquisition of 42.18% Shares of Enric Energy Equipment Holdings Limited by CIMC, which was published on China Securities Daily, Shanghai Securities Times, Securities Times and TA KUNG PAO of Hong Kong on 3 Aug 2007 (publication number 2007-017). 3. 60 shares of the indirect wholly owned subsidiary of the Company - Shanghai Fengyang Real Estate Development Co. (“Fengyang”) was transferred at Shanghai United Property Right Exchange, and Shenzhen China Merchant Real Estate Co., Ltd. (“China Merchant Real Estate”) acquired the same. The above issue was disclosed on China Securities Daily, Shanghai Securities Times, Securities Times and TA KUNG PAO of Hong Kong on 27 Dec 2007 (publication number 2007-048). IV Important related transactions (I) Transactions between the Group and other related parties (relating to daily business operation) (a) Other related parties without control relation with this Group Name of related party Relations with this Company Yangzhou Maisitong Compound Material Co., Ltd. Jointly operated entity KYH Steel Holding Ltd Jointly operated entity Hemple-HaiHong Coatings Ltd Subsidiary of important shareholder Florens Container Services Ltd Subsidiary of important shareholder COSCO North America, Inc. Subsidiary of important shareholder Florens Maritime Limited Subsidiary of important shareholder COSCO Pacific Management Company Ltd. Subsidiary of important shareholder Florens Container Corporation S.A. Subsidiary of important shareholder Hempel-HaiHong (Kunshan) Co., Ltd Subsidiary of important shareholder COSCO Container Lines Americas, Inc Subsidiary of important shareholder COSCO South-China International Freight Co., Ltd. Subsidiary of important shareholder Sinyang Wood (HK) Limited Jointly operated entity 58 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Name of related party Relations with this Company Shenzhen CIMC Tianyu Property Co., Ltd. Joint venture Shanghai Fengyang Real Estate Development Co., Ltd. Jointly operated entity Tianjin Zhenhua Logistics Group Co., Ltd. Jointly operated entity Tianjin Port CIMC Zhenhua Logistics Co., Ltd. Jointly operated entity Shenzhen China Merchant Real Estate Co., Ltd. Subsidiary of important shareholder Directors and other senior management staff Key management staff (b) The transaction amounts with the other related parties are as follows: This Group 2007 2006 Ratio to the same Ratio to the same Amount transactions Amount transactions USD 1,000 USD 1,000 Goods sold 223,574 3.39% 177,212 4.06% Goods purchased 100,994 1.67% 50,945 1.23% This Group 2007 2006 Ratio to the same Ratio to the same Amount transactions Amount transactions RMB 1,000 RMB 1,000 Goods sold 1,633,031 3.39% 1,383,157 4.06% Goods purchased 737,681 1.67% 397,631 1.23% Accepted labour services During the year, the subsidiary of this Group – Shenzhen CIMC Special Vehicle Co., Ltd. accepted labour services of USD 1,167,864.33 (RMB 8,530,314.62) from South-China International Freight Co., Ltd.; Taicang CIMC Container Manufacturing Co., Ltd. accepted labour services of USD 391,150.00 (RMB 2,857,037.83). The total of above is USD 1,559,014.33 (RMB 11,387,352.45). The above transactions with the related parties were conducted according to ordinary commercial terms or relevant agreements. (II) Related transactions for Assets and equity transfer In this year, the subsidiary of the important share holder – Shenzhen China Merchant Real Estate Co., Ltd. signed Equity Transfer Contract with the subsidiary of this Group – CIMC Shenfa Construction Industrial Co., Ltd. to transfer 60% of shares of Shanghai Fengyang Real Estate Development Co., Ltd. held by it to China Merchant Real Estate Co., Ltd. The price for such transfer is USD 48,362,585.91 (RMB 353,250,000.00). USD24, 999,315.46 (RMB182,600,000.00) has been paid for the transfer. 59 (I) Assets and liabilities transactions between the Company and related parties, guarantee issues Providing capital (loan or equity investment During the reporting period, the parent company loaned USD 626,760.00 to the jointly-operated company – Sinyan total amount of USD 24,271,243.89; the subsidiary of this Group, CIMC Shenfa Construction Industrial Co., Ltd. p jointly operated company – Shanghai Fengyang Real Estate Development Co., and a loan of USD 3,101,885. Development Co., a jointly operated company of this Company. The total amount of the above is USD 54,380,176 was USD 3,531,451.00 (RMB 27,563,328.20). 60 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Summary of capital occupation of non-business natur Capital Name of related party Relation between Account of Balance of Accumulated Interest on Repayment Ba transaction related party and the listed capital amount in capital accumulation c with other listed company company transaction 2007 (excl. transaction in in 2007 tran related in beginning interest) 2007 th parties of 2007 Jiangmen CIMC Tianyu Wholly owned Other 2,267.14 - - 2,267.14 Real Estate Co., Ltd. subsidiary of the receivable (“Jiangmen Tianyu”) jointly –operated company of this Company Shenzhen CIMC Tianyu Jointly operated Other 2,490.00 2,267.14 - - Real Estate company of this receivable Development Co., Ltd. Company (“Shenzhen Tianyu”) Subsidiary of Shenzhen Tianyu Jointly operated Other 173.17 - - - listed company of this receivable company and Company its affiliated Shenzhen Tianyu Jointly operated Other 1,436.55 - - 1,436.55 entities company of this receivable Company Qingdao CIMC Traffic Subsidiary of this Other 311.32 - - 311.32 Equipment Co., Ltd. Company receivable Sinyang Wood (HK) Jointly operated Other 489.19 - - - Limited company of this receivable Company Shanghai Fengyang Jointly operated Other 6,580.81 18,000.00 327.76 5,016.29 Real Estate company of this receivable Development Co., Ltd. Company (“Shanghai Fengyang”) Other related Shenzhen China Subsidiary of the Other - 35,325.00 - 18,260.00 parties and Merchant Real Estate important receivable affiliated Co., Ltd. shareholder of this entities Company Total 13,748.18 55,592.14 327.76 26,979.98 61 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Note 1: In 2007, Jiangmen Tianyu was consolidated with Shenzhen Tianyu and the interest free short term loan it provided Co., Ltd. (“CIMC Shenfa”) at the beginning of 2007 was transferred to Shenzhen Tianyu. Note 2: In 2006, CIMC Shenfa transferred 45% shares of Jiangmen Tianyu it held to Shenzhen Tianyu; in 2007, Shenzhen transfer amount of RMB 14.3655 million. Note 3: Since Qingdao CIMC Traffic Equipment Co., Ltd. entered into the liquidation stage in 2004, it was not included in 2007, the same company was liquidated and the receivable from it was treated as bad debt. Note 4: Shanghai Fengyang was the subsidiary of this Company in the previous year; on 25 Dec 2007, 60% shares of Shenzhen China Merchant Real Estate Co., Ltd. Consequently, at the end of 2007, Shanghai Fengyang was the joi and the capital it occupied was the long term loan to it in 2007; the repaid capital was the transactional amount in 20 Note 5: During the reporting period, the Company transferred 60% shares of Shanghai Fengyang to Shenzhen China Mercha 353.25 million and the balance not yet received at present is RMB 170.65 million. 62 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 V. Significant contracts and performance thereof 1. Important issues of assets of other companies trusted to, contracted or rented by this Company 2. Significant contracts On 25 May 2007, the Company signed a loan contract of USD 200 million with 11 financial institutes, which was disclosed on Securities Times, China Securities Daily, Shanghai Securities Times and TA KUNG PAO of Hong Kong with the publication number of (CIMC) 2007-13. 3. Significant guarantee contracts (1) As approved by the 10th meeting of 2007 of the fifth session of the board of directors, the Company provided guarantee with related liabilities for the jointly operated company – Shenzhen Yutian Real Estate Development Co., Ltd (in which the Company has 50% shares) for it to apply for a credit of USD 10 million or equivalent RMB from Nanyang Commercial Bank Dalian Branch. The guarantee period is between 15 Oct 2007 and 14 Oct 2010. The above issue was disclosed on Securities Times, China Securities Daily, Shanghai Securities Times and TA KUNG PAO of Hong Kong with the publication number of (CIMC) 2007-32. (2) The Company provides guarantees for the business capital of the subsidiaries. The Company is an entirely listed one and provides guarantee for the business capital within budget for the need of business operation and development. The Company, on the basis of the approved budget by the board of directors, enters into agreement of credit with the financial institutions. The various fundraising activities of the subsidiaries must be within the total annual credit. The Company, as approved by the board of directors, provides credit guarantee for the subsidiaries within the total annual credit, if so needs. As of 31 Dec 2007, the balance of the guaranteed amount for the subsidiaries of this Company was RMB 1,042.52 million. (3) The subsidiary of the Company – CIMC Vehicle (Group) Co., Ltd. has entered into agreements with China Construction Bank, Communication Bank of China, China Merchant Bank and other Banks to sell the products of CIMC Vehicle (Group) Co., Ltd. and its controlled subsidiaries on credit. The clients purchase the vehicles of the Company on credit; alter obtaining the number plates, the same will be impawned to banks of CIMC Vehicle Group. As of 31 Dec 2007, as agreed by the board of directors, CIMC (Group) Co., Ltd. and its subsidiaries have provided a total credit of USD 27,617,982 (RMB 201,727,266) to its dealers and clients. (4) The board of directors of the Company, at the beginning of each year and based on the budget, makes resolution as to the guarantee for the subsidiaries. There is no case of guarantee without permission of the board. (5) As of 31 Dec 2007, the balance of total guarantee was RMB 1,244.25 million, accounting for 7.82 % of the net assets which was RMB 15,913.75 million. The amount of total guarantee surpassing 50% of the net assets is zero. 4 During the reporting period, there was no case of entrusting the others to manage the cash assets. 63 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 VI The commitment of the Company or shareholders holding more than 5% of shares and the performance thereof (I) For the commitment of the Company, please refer to Note 61 to financial statement. (II) Limited sales conditions and circulating of the circulating shares in the market in the reforming scheme of the shares of COSCO Container Industries Limited and the performance thereof (1) COSCO Container Industries Limited committed that, in 12 months after the first transaction day after implementation of the share reforming, the same would not be sold at Shenzhen Stock Exchange or transfer the non-circulating shares. (2) COSCO Container Industries Limited further committed that, after expiration of the above commitment, in line with relevant provisions, within 12 months, it would not sell more than 5% of the originally non-circulating shares and within 24 months, the percentage would not exceed 10%. The board of directors and CITIC Securities are of the view that up to date, COSCO Container Industries Limited has strictly followed its various commitments. VII Accounting firms appointed and dismissed accounting firms During the reporting period, the general meeting of shareholders of 2007 was convened on 23 Apr 2007and Deloitte Touche Tohmatsu CPA Ltd. was again appointed to audit the financial statements and provide other relevant consultation services; KPMG was again appointed to provide audit on financial statements produced in line with international accounting principles and provide other related consultation services. Since Dec 2005, Deloitte Touche Tohmatsu CPA Ltd. has provided one year auditing service for A shares; since 1994, KPMG has provided auditing services for B shares of this Company for 13 years. Based on the Notification for Certain Issues Regarding Audit of Foreign Domestically Listed Foreign Capital Shares (Zhengjianhui Ji Zi (2007) No.30) issued by China Securities Regulatory Commission, considering that after the implementation of new accounting principles, the difference between the domestic and international accounting principles is becoming more and more insignificant, since 2007, the Company did not carry out audit in line with international accounting principles, KPMG is appointed to provide the audit on financial statements and other related consultation services for the year of 2007. During the reporting period, the compensations paid to the accounting firms were as follows: RMB 3.2 million was paid to Deloitte Touche Tohmatsu CPA Ltd., including the audit expenses and traveling expenses for the year of 2006; HKD 2.7 million was paid to KPMG, including the audit expenses and traveling expenses for the year of 2006. VIII During the reporting period, there was no punishment imposed on the Company, the board of directors and directors by the regulatory departments. IX Issues after the date of balance sheet 64 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 On 12 Mar 2008, this Group entered into an agreement with Leung Kee Holdings Limited and Bright Touch Investment Limited (“the seller”), the Group, through its wholly owned subsidiary, Sharp Vision Holdings Limited, acquired 81,776,500 shares of Yantai Raffles Shipyard Limited (“Yantai Raffles”) of the seller, accounting for 29.90% of its issued shares at a price of 38 Norway krone per share and the total price is NOK 3,107,507,000 equivalent to USD 565,535,961. The amount will be paid in three installments. The head office of Yantai Raffles is in Singapore and the production base is in Yantai, Shandong Province of China. In May 2006, the stocks of Yantai Raffles started to be traded at OTC of Oslo Securities Exchange of Norway. The number of issued ordinary shares is 273,500,000. Yantai Raffles is an internationally leading ship and marine works contractor and at present, it is the largest in China and the third largest in the world contractor for semi-submergible marine equipment. This company is mainly engaged in the construction of self-lifting drilling platform, semi-submergible drilling platform, FPSO, FSO, platform supply ship, pipeline laying ship, deluxe yacht and other engineering facilities. The company is engaged in the building of movable drilling platform and the supplementary ships, including semi-submergible, self-lifting drilling platform, FPSO, FSO, platform supply ship, pipeline laying ship, deluxe yacht and other ships. The audited total assets of Yantai Raffles as of 31 Dec 2006 were USD 589,051,000; its business turnover in 2006 was USD 195,508,000and the net profit was USD 13,978,000. The above transaction is yet to be approved by the relevant government agencies of the People’s Republic of China and Singapore. The above issue has been disclosed on Securities Times, Shanghai Securities Times and TA KUNG PAO of Hong Kong on 13 Mar 2008. For details, please refer to the following bulletin: Public Notice of CIMC for Acquiring Yantai Raffles Shipyard Limited with the number of (CIMC) 2008-004. X Visits, surveys and interviews received by the Company During the reporting period, the Company worked out Information Disclosure Management System and Investors Relationship Management System to further regulate the management over investors. There was no case of disclosing to the institution or individual investors the significant which had not been publicized. The Company maintained good communications with the investors, securities analyzers and media through the modes and ways such as telephone consultation, survey, road show on the internet, on site promotion and company website etc. The Company incessantly enhances and consummates the service to the investors and the investor relation management has been widely recognized by the market and investors. During the reporting period, the Company received 80 batches of visitors for visiting, surveying and visiting plants by funds, investment companies, securities companies and individual investors etc. and they communicated with the management and department in charge of investor relation of the Company. Time of Reception location Reception mode Name of investor Major content reception and information provided Conference room of the Industry and 5 Jan 2007 Physical survey and study Morgan Stanley Asia Limited market trend; Company management, 65 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 investment, strategy; annual report, brief introduction to the Company etc. Conference room of the Shenyin Wanguo Securities 9 Jan 2007 Physical survey and study Ditto Company/Plant in Shenzhen Research Institute Conference room of the 10 Jan 2007 Physical survey and study Emerging Markets Management Ditto Company Conference room of the 13 Feb 2007 Physical survey and study Morgan Stanley Asia Limited Ditto Company Shanghai Representative Office of Conference room of the 15 Nov 2007 Physical survey and study Merrill Lynch, Everbright Ditto Company Securities Research Institute Conference room of the 19 Jan 2007 Physical survey and study Asia Pacific Co. Ditto Company Conference room of the 21 Jan 2007 Physical survey and study Desheng Assets Management Ditto Company Conference room of the PRAETORIAN RESOURCES 24 Jan 2007 Physical survey and study Ditto Company INCORPORATED Conference room of the Piangan Securities Research 12 Feb 2007 Physical survey and study Ditto Company Institute Conference room of the 2 Mar 2007 Physical survey and study Dafu Assets Management Co. Ditto Company Conference room of the 5 Mar 2007 Physical survey and study Impala Asset Management Ditto Company Conference room of the 8 Mar 2007 Physical survey and study Hindsight Asset Management Ditto Company Conference room of the 9 Mar 2007 Physical survey and study Hengmao Investment Group Ditto Company Conference room of the 12 Mar 2007 Physical survey and study Huabao Xingye Fund Ditto Company Conference room of the 13 Mar 2007 Physical survey and study CLSA client Ditto Company Conference room of the 14 Mar 2007 Physical survey and study Orient Securities Ditto Company Conference room of the 16 Mar 2007 Physical survey and study ELLESTON ASSETS Ditto Company 20 Mar 2007 Conference room of the Physical survey and study Dingtian Assets Management, Ditto 66 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Company/Plant in Shenzhen Yinhua Fund Co., Fuda Fund Haifutong Fund, Fuguo Fund Conference room of the 20 Mar 2007 Physical survey and study manager, Jiaoyuin Schroeder Ditto Company Fund United Securities, China-Europe Conference room of the 21 Mar 2007 Physical survey and study Fund, Jianxin Fund, Jingshun Ditto Company/Plant in Shenzhen Great Wall Fund, Huaxia Fund 23 Mar 2007 Zhuhai CLSA Investment Forum Ditto Conference room of the 27 Mar 2007 Physical survey and study Fuguo Fund Ditto Company Conference room of the 4 Apr 2007 Physical survey and study Columbia Management Group Ditto Company Conference room of the Shanghai Representative Office of 5 Apr 2007 Physical survey and study Ditto Company Merrill Lynch Hillhouse Capital Conference room of the 5 Apr 2007 Physical survey and study Management ,Yale Fund China Ditto Company Investment Institution United Securities Research Conference room of the 13 Apr 2007 Physical survey and study Institute, Jiashi Fund, Teda Heyin Ditto Company Fund Co. Conference room of the Shanghai Representative Office of 13 Apr 2007 Physical survey and study Ditto Company J. P. Morgan Securities Inc. Conference room of the 17 Apr 2007 Physical survey and study Boyer Allan Investment Ditto Company Conference room of the 19 Apr 2007 Physical survey and study Orient Securities Ditto Company/Plant in Shenzhen Conference room of the 26 Apr 2007 Physical survey and study Huaan Securities Ditto Company Conference room of the 8 May 2007 Physical survey and study UBS clients Ditto Company Conference room of the Hong Kong Shanghai Assets 11 May 2007 Physical survey and study Ditto Company Management UBS Global Asset Management, INVESCO Great Wall Fund, JF CLSA 2007 China Asset Management, Blackrock 15 May 2007 Shanghai Ditto Investment Forum Investment Management(UK),CLSA, Allianz Global Investors, Value Partners Conference room of the 30 May 2007 Physical survey and study Nomura Asset Management Ditto Company 67 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Conference room of the 1 Jun 2007 Physical survey and study Shanghai Ruixin Co. Ditto Company Conference room of the NAITO SECURITIES CO.,LTD 7 Jun 2007 Physical survey and study Ditto Company and its Japanese clients Conference room of the 8 Jun 2007 Physical survey and study Morgan Stanley clients Ditto Company Rongtong Fund, Rixing Assets 11 Jun 2007 Plant in Shenzhen Physical survey and study Ditto Management overseas clients Sino Life Insurance Assets Conference room of the 12 Jun 2007 Physical survey and study Management, Zhongtou Ditto Company Securities Conference room of the 15 Jun 2007 Physical survey and study Morgan Stanley’s clients Ditto Company Conference room of the Guotai Junan Securities Research 20 Jun 2007 Physical survey and study Ditto Company/Plant in Shenzhen Institute Shanghai Tianxiang Investment Conference room of the Consultation Co., Orient Fund 29 Jun 2007 Physical survey and study Ditto Company Management, Huaxia Fund Management 3 Jul 2007 Company Tele-conference Clients of Heyin Securities Ditto Conference room of the Beijing Gaohua Securities, 5 Jul 2007 Physical survey and study Ditto Company Hillhouse Capital Management Conference room of the 12 Jul 2007 Physical survey and study Baring Asset Ditto Company Hillhouse Capital Management, Conference room of the 13 Jul 2007 Physical survey and study Yale University Fund, Princeton Ditto Company University Fund Conference room of the 16 Jul 2007 Tele-conference Citibank Global Asia Ditto Company First State Investment, Xinda 17 Jul 2007 Plant in Shenzhen Physical survey and study Ditto Aoyin Fund Conference room of the Goldman Sachs, Value Partners, 18 Jul 2007 Physical survey and study Ditto Company Dacheng Fund Conference room of the 20 Jul 2007 Physical survey and study Capital Research Global Investors Ditto Company Conference room of the 24 Jul 2007 Physical survey and study Guangfa Securities Ditto Company Conference room of the 30 Jul 2007 Physical survey and study Baling Assets Management Co. Ditto Company 68 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 2 Aug 2007 Company Tele-conference BOC international Ditto Conference room of the 9 Aug 2007 Physical survey and study Telligent Capital Ditto Company Conference room of the 10 Aug 2007 Physical survey and study Taixin Fund Management Co. Ditto Company Conference room of the Fortress Investment Management 20 Aug 2007 Physical survey and study Ditto Company Co. Conference room of the 22 Aug 2007 Physical survey and study Beijing Gaohua Securities Ditto Company China International Capital Conference room of the 27 Aug 2007 Tele-conference Corporation Limited and its Ditto Company clients Conference room of the 28 Aug 2007 Physical survey and study Threadneedle Assets Management Ditto Company Conference room of the 13 Sept 2007 Physical survey and study Clients of Martin Currie Ditto Company Government Investment Co. of Conference room of the Singapore 13 Sept 2007 Physical survey and study Ditto Company Alliance Bernstein Conference room of the 17 Sept 2007 Physical survey and study Absolute Asia、Morgan Stanley Ditto Company Conference room of the 18 Sept 2007 Physical survey and study Zhongyou Fund Ditto Company Conference room of the 19 Sept 2007 Physical survey and study Templeton Emerging Markets Ditto Company Conference room of the Fuda Fund, AMP Capital 21 Sept 2007 Physical survey and study Ditto Company Investors Conference room of the 24 Sept 2007 Physical survey and study Fair Investment Ditto Company Conference room of the 17 Oct 2007 Physical survey and study Huaan Fund Ditto Company Investment forum of BNP 18 Oct 2007 Xiamen PRIME PEREGRINE Ditto LTD. Conference room of the 22 Oct 2007 Physical survey and study Rixing Securities Ditto Company Conference room of the Boshi Fund, China Merchant 2 Nov 2007 Physical survey and study Ditto Company Securities 69 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Conference room of the 5 Nov 2007 Physical survey and study CITIC Jianshe Securities Ditto Company Courage Capital, Alliance Bernstein LP, Citigroup Global “2007 China Investment Markets Inc., Avenue Capital Forum” of Goldman Sachs 11 Nov 2007 Beijing Group, Daiwa Assets Mgmt, Ditto Group and Beijing Hillhouse Capital Mgmt Ltd., Gaohua Securities Eton Park, Modal Capital Partners Ltd. Conference room of the 19 Nov 2007 Physical survey and study Sypress House, Hong Kong Ditto Company Conference room of the ICBC Credit Suisse Asset 20 Nov 2007 Physical survey and study Ditto Company Management Co. Ltd. 2008 Annual Meeting of 6 Dec 2007 Shenzhen Shenyin Wanguo Ditto Securities Institute Conference room of the Avenue Capital and Zhongtian 10 Dec 2007 Physical survey and study Ditto Company Securities 12 Dec 2007 Company Tele-conference Value Partners, Hong Kong Ditto Conference room of the 14 Dec 2007 Physical survey and study Morgan Stanley Ditto Company 2008 Annual Investment 21 Dec 2007 Xiamen Meeting of Guoxin Ditto Securities Conference room of the 26 Dec 2007 Physical survey and study UBS Securities Ditto Company XI Other important issues (I) As approved by the general meeting of shareholders held on 17 Oct 2007, the wholly owned subsidiary of the Company, CIMC Vehicle (Group) Co., Ltd. implemented a stock credit plan. Based on the plan, the senior management staff of the Company relating to vehicle business and the core staff of CIMC Vehicle (Group) Co., Ltd. (“Vehicle Group”) (“Participating staff”), hold 20% shares of CIMC Vehicle (Group) Co., Ltd. by increasing the capital amounting to RMB 220.70 million through Shenzhen International Trust and Credit Co., Ltd. The above issue has been disclosed on Securities Times, Shanghai Securities Times and TA KUNG PAO of Hong Kong with the bulletins as follows: On 29 Sept 2007, Publication of Resolution of the Ninth Meeting of the Board of Directors of CIMC in 2007 (number (CIMC) 2007-025) and Notification for Holding the First Temporary General Meeting of Shareholders in 2007 (publication number (CIMC 2007-026) On 18 Oct 2007, Publication of Resolution of the First Temporary General Meeting of Shareholders in 2007 (publication number (CIMC 2007-029) 70 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 (II) The share holding plan by the backbone employees of Vehicle Group has been implemented through the establishment of Vehicle Group stock credit plan and the relevant details are as follows: 1. Based on the resolution passed in the 9th meeting of the board of directors and the first general meeting of shareholders in 2007, the stock credit plan of Vehicle Group has been completed; the total capital amount of credit plan is RMB 220,700,000, which is divided into 220,700,000 credit benefit units. 2. Based on the credit plan, Shenzhen International Trust and Credit Co., Ltd. holds 20% shares of CIMC Vehicle (Group) Co., Ltd. by increasing the capital of RMB 220,700,000. The share payment was completed on 29 Dec 2007 and the expense for paying such shares was RMB 21.90 million. Based on the fair value of Vehicle Group on 29 Dec 2007, the total amount of the services of the employees was determined and the fair value of rights and interests was estimated on the basis of income method. 3. The first batch of staff participating the plan are the head office staff of the Vehicle Group and the staff above department manager level of the head office of this Group who are closely related to vehicle businesses as well as the staff of three large scaled subsidiaries (Tonghua, Huajun and Shenzhen Special Vehicle). The Vehicle Group obtained 24 million benefit shares, the head office got 3 million; the shares for Tonghua, Huajun and Shenzhen Special Vehicles are all 6 million. In terms of senior management staff of the Company, only Mai Boliang (chairman of this Company, director and general manager of Vehicle Group, 10 million shares), Zhao Qingsheng (vice chairman of the Company, director of Vehicle Group, 3 million) and Li Yinhui (vice chairman, deputy general manager, 3 million) participated the first phase plan for they have duties in Vehicle Group; the total of above is 45 million shares, accounting for 20.39 of the total benefit rights. 4. The benefit rights of the credit plan will be distributed in three instalments; the second and third will be distributed after the performance appraisal in 2007 and 2008. 71 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 China International Marine Containers (Group) Co., Ltd. ENGLISH VERSION OF FINANCIAL STATEMENTS FOR THE YEAR 1 JANURAY 2007 TO 31 DECEMBER 2007 IF THERE IS ANY CONFLICT OF MEANING BETWEEN THE CHINESE AND ENGLISH VERSIONS, THE CHINESE VERSION WILL PREVAIL 72 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 AUDITORS’ REPORT KPMG-C (2008) AR No.0127 All Shareholders of China International Marine Containers (Group) Co., Ltd.: We have audited the accompanying financial statements of China International Marine Containers (Group) Co., Ltd. (the Company), which comprise the consolidated balance sheet and balance sheet as at 31 December 2007, the consolidated income statement and income statement, the consolidated statement of changes in equity and statement of changes in equity, the consolidated cash flow statement and cash flow statement for the year then ended, and notes to the financial statements. Management's Responsibility for the Financial Statements The Company’s management is responsible for the preparation of these financial statements in accordance with China Accounting Standards for Business Enterprises (2006) issued by the Ministry of Finance of the People’s Republic of China. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with China Standards on Auditing for Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of the financial statements 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 Company’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 financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 73 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 Opinion In our opinion, the financial statements comply with the requirements of China Accounting Standards for Business Enterprises (2006) issued by the Ministry of Finance of the People’s Republic of China and present fairly, in all material respects, the consolidated financial position and financial position of the Company as at 31 December 2007, and the consolidated results of operations and results of operations and the consolidated cash flows and cash flows of the Company for the year then ended. KPMG Huazhen Certified Public Accountants Registered in the People’s Republic of China Beijing, the People’s Republic of China Lei Iun Mei Chu Anyi 31 March 2008 The accompanying financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than the People’s Republic of China. The standards, procedures and practices to audit such financial statements are those generally accepted and applied in the People’s Republic of China. 74 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 China International Marine Containers (Group) Co., Ltd. Consolidated balance sheet as at 31 December 2007 (Expressed in thousands) Note 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Assets Current assets Cash at bank and on hand 7 418,175 3,054,432 258,405 2,016,876 Financial assets held for trading 8 126,550 924,340 28,784 224,664 Bills receivable 9 103,741 757,747 26,301 205,284 Accounts receivable 10 1,218,445 8,899,769 663,780 5,180,868 Prepayments 11 231,912 1,693,935 289,727 2,261,348 Interest receivable 12 684 4,997 - - Dividends receivable 13 291 2,125 577 4,501 Other receivables 14 157,067 1,147,246 63,599 496,397 Inventories 15 1,056,294 7,715,381 605,703 4,727,570 Other current assets 16 9,818 71,713 - - Non-current assets due within one year 17 13,021 95,109 939 7,328 Total current assets 3,335,998 24,366,794 1,937,815 15,124,836 ---------------- ---------------- ---------------- ---------------- Non-current assets Available-for-sale financial assets 18 568,664 4,153,636 195,302 1,524,355 Long-term receivables 19 27,196 198,643 7,512 58,635 Long-term equity investments 20 124,972 912,822 82,781 646,115 Investment property 21 6,713 49,031 6,415 50,066 Fixed assets 22 868,203 6,341,530 595,021 4,644,196 Construction in progress 23 94,946 693,507 43,551 339,922 Intangible assets 24 323,152 2,360,367 174,233 1,359,909 Goodwill 25 133,889 977,949 37,627 293,682 Long-term deferred expenses 26 4,913 35,890 4,494 35,075 Deferred tax assets 27 41,312 301,751 14,706 114,780 Total non-current assets 2,193,960 16,025,126 1,161,642 9,066,735 ---------------- ---------------- ---------------- ---------------- Total assets 5,529,958 40,391,920 3,099,457 24,191,571 The notes on pages 26 to 172 form part of these financial statements. 75 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 China International Marine Containers (Group) Co., Ltd. Consolidated balance sheet as at 31 December 2007 (continued) (Expressed in thousands) Note 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Liabilities and shareholders’ equity Current liabilities Short-term loans 30 369,179 2,696,559 120,581 941,150 Financial liabilities held for trading 31 46,327 338,379 - - Bills payable 32 345,679 2,524,909 361,168 2,818,949 Accounts payable 33 955,561 6,979,610 493,684 3,853,251 Advances from customers 34 72,613 530,379 33,388 260,593 Employee benefits payable 35 128,241 936,688 130,329 1,017,233 Taxes payable 5(3) (49,936) (364,743) (39,240) (306,275) Interest payable 12,711 92,842 4,447 34,720 Dividends payable 36 1,408 10,285 750 5,851 Other payables 37 191,073 1,395,651 119,329 931,374 Provisions 38 85,749 626,327 73,787 575,915 Non-current liabilities due within one year 39 187,303 1,368,100 2,634 20,558 Total current liabilities 2,345,908 17,134,986 1,300,857 10,153,319 ---------------- ---------------- ---------------- ---------------- Non-current liabilities Long-term loans 40 610,924 4,462,309 92,990 725,800 Deferred income 41 1,586 11,587 792 6,183 Special payables 42 1,003 7,327 9,279 72,421 Deferred tax liabilities 27 168,863 1,233,410 21,209 165,536 Total non-current liabilities 782,376 5,714,633 124,270 969,940 ---------------- ---------------- ---------------- ---------------- Total liabilities 3,128,284 22,849,619 1,425,127 11,123,259 ---------------- ---------------- ---------------- ---------------- The notes on pages 26 to 172 form part of these financial statements. 76 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 China International Marine Containers (Group) Co., Ltd. Consolidated balance sheet as at 31 December 2007 (continued) (Expressed in thousands) Note 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Liabilities and shareholders’ equity (continued) Shareholders’ equity Share capital 43 328,872 2,662,396 270,843 2,218,663 Capital reserve 44 455,603 3,553,473 198,831 1,616,788 Surplus reserve 45 422,695 3,497,045 422,695 3,497,045 Retained earnings 46 965,799 7,674,757 671,341 5,463,409 Foreign currency translation differences 22,677 (1,473,914) 8,363 (575,791) Total equity attributable to equity holders of the Company 2,195,646 15,913,757 1,572,073 12,220,114 Minority interests 6(4) 206,028 1,628,544 102,257 848,198 Total equity 2,401,674 17,542,301 1,674,330 13,068,312 ---------------- ---------------- ---------------- ---------------- Total liabilities and shareholders’ equity 5,529,958 40,391,920 3,099,457 24,191,571 These financial statements have been approved by the Board of Directors of the Company on 31 March 2008. Mai Boliang Mai Boliang Jin Jianlong (Company stamp) Authorized Chief Financial Officer Chief Accountant representative of Legal Representative (Signature or stamp) (Signature or stamp) (Signature or stamp) The notes on pages 26 to 172 form part of these financial statements. 77 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 China International Marine Containers (Group) Co., Ltd. Balance sheet as at 31 December 2007 (Expressed in thousands) Note 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Assets Current assets Cash at bank and on hand 7 126,931 927,131 59,255 462,493 Financial assets held for trading 8 24,415 178,335 15,452 120,603 Dividends receivable 13 646,265 4,720,452 579,819 4,525,547 Other receivables 14 446,112 3,258,492 328,088 2,560,756 Total current assets 1,243,723 9,084,410 982,614 7,669,399 ---------------- ---------------- ---------------- ---------------- Non-current assets Available-for-sale financial asset 18 568,664 4,153,636 195,302 1,524,355 Long-term equity investments 20 317,867 2,321,766 272,710 2,128,525 Fixed assets 22 17,732 129,515 17,170 134,012 Construction in progress 23 2,094 15,294 508 3,963 Intangible assets 24 4,944 36,108 4,663 36,395 Long-term deferred expenses 26 1,016 7,421 1,314 10,263 Deferred tax assets 27 7,991 58,371 - - Total non-current assets 920,308 6,722,111 491,667 3,837,513 ---------------- ---------------- ---------------- ---------------- Total assets 2,164,031 15,806,521 1,474,281 11,506,912 78 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 The notes on pages 26 to 172 form part of these financial statements. 79 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 China International Marine Containers (Group) Co., Ltd. Balance sheet as at 31 December 2007 (continued) (Expressed in thousands) Note 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Liabilities and shareholders’ equity Current liabilities Financial liabilities held for trading 31 3,217 23,499 - - Advances from customers 34 395 2,887 370 2,887 Employee benefits payable 35 44,825 327,412 71,927 561,398 Taxes payable 5(3) 14,215 103,829 353 2,751 Interest payable 2,346 17,136 - - Dividends payable 36 - - 5 39 Other payables 37 11,063 80,806 257,936 2,013,224 Non-current liabilities due within one year 39 173,339 1,266,100 - - Total current liabilities 249,400 1,821,669 330,591 2,580,299 ---------------- ---------------- ---------------- ---------------- Non-current liabilities Long-term loans 40 435,042 3,177,637 67,879 529,800 Deferred income 41 725 5,295 715 5,583 Deferred tax liabilities 27 102,272 747,018 21,209 165,536 Total non-current liabilities 538,039 3,929,950 89,803 700,919 ---------------- ---------------- ---------------- ---------------- Total liabilities 787,439 5,751,619 420,394 3,281,218 ---------------- ---------------- ---------------- ---------------- The notes on pages 26 to 172 form part of these financial statements. 80 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 China International Marine Containers (Group) Co., Ltd. Balance sheet as at 31 December 2007 (continued) (Expressed in thousands) Note 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Liabilities and shareholders’ equity (continued) Shareholders’ equity Share capital 43 328,872 2,662,396 270,843 2,218,663 Capital reserve 44 431,133 3,376,580 206,214 1,677,886 Surplus reserve 45 422,695 3,497,045 422,695 3,497,045 Retained earnings 46 193,892 1,493,044 154,135 1,210,240 Foreign currency translation differences - (974,163) - (378,140) Total equity 1,376,592 10,054,902 1,053,887 8,225,694 ---------------- ---------------- ---------------- ---------------- Total equity attributable to equity holders of the company 2,164,031 15,806,521 1,474,281 11,506,912 These financial statements have been approved by the Board of Directors of the Company on 31 March 2008. Mai Boliang Mai Boliang Jin Jianlong (Company stamp) Authorized Chief Financial Officer Chief Accountant representative of Legal Representative (Signature or stamp) (Signature or stamp) (Signature or stamp) The notes on pages 26 to 172 form part of these financial statements. 81 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 China International Marine Containers (Group) Co., Ltd. Consolidated income statement for the year ended 31 December 2007 (Expressed in thousands) Note 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Operating income 47 6,439,793 48,760,826 4,210,286 33,573,664 Less: Operating costs 48 5,785,095 43,803,581 3,613,794 28,817,113 Business taxes and surcharges 49 7,346 55,621 3,866 30,831 Selling and distribution expenses 152,255 1,152,846 126,360 1,007,623 General and administrative expenses 211,056 1,598,083 137,512 1,096,549 Financial expenses 50 49,091 371,704 7,826 62,405 Impairment loss (reversal) 51 8,262 62,556 (27,699) (220,881) Add: Gain from changes in fair value 52 36,278 274,684 26 207 Investment income 53 193,649 1,466,268 48,727 388,559 (Including: Income from investment in associates and jointly controlled enterprises) 16,638 126,978 3,975 31,697 Operating profit 456,615 3,457,387 397,380 3,168,790 Add: Non-operating income 54 7,896 59,786 4,507 35,940 Less: Non-operating expenses 55 2,228 16,869 2,250 17,942 (Including: Loss from non-current assets disposal) 283 2,143 267 2,128 Profit before income tax 462,283 3,500,304 399,637 3,186,788 Less: Income tax expenses 56 23,073 174,698 25,398 202,529 Net profit for the year 439,210 3,325,606 374,239 2,984,259 The notes on pages 26 to 172 form part of these financial statements. 82 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 China International Marine Containers (Group) Co., Ltd. Consolidated income statement for the year ended 31 December 2007 (Expressed in thousands) Note 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Net profit for the year 439,210 3,325,606 374,239 2,984,259 Attributable to: Equity shareholders of the Company 418,048 3,165,373 353,735 2,820,752 Minority shareholders 21,162 160,233 20,504 163,507 Earnings per share 67 Basic earnings per share 0.16 1.19 0.13 1.06 Diluted earnings per share 0.16 1.19 0.13 1.06 These financial statements have been approved by the Board of Directors of the Company on 31 March 2008. Mai Boliang Mai Boliang Jin Jianlong (Company stamp) Authorized Chief Financial Officer Chief Accountant representative of Legal Representative (Signature or stamp) (Signature or stamp) (Signature or stamp) The notes on pages 26 to 172 form part of these financial statements. 83 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 China International Marine Containers (Group) Co., Ltd. Income statement for the year ended 31 December 2007 (Expressed in thousands) Note 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Operating income 14 109 17 142 Less: Operating costs 1 6 1 9 general and administrative expenses 49,473 374,597 27,553 219,722 Financial expenses (Net financial income) 50 120 908 (9,173) (73,149) Impairment loss (reversal) 51 - - (2,954) (23,552) Add: Gain from changes in fair value 52 10,192 77,168 136 1,088 Investment income 53 201,520 1,525,866 203,941 1,626,272 Operating profit 162,132 1,227,632 188,667 1,504,472 Add: Non-operating income 54 787 5,958 175 1,392 Less: Non-operating expenses 55 109 822 27 216 (Including: gain from non-current assets disposal) 15 114 132 1,053 Profit before income tax 162,810 1,232,768 188,815 1,505,648 Less: Income tax expenses 56 (537) (4,061) - - Net profit for the year 163,347 1,236,829 188,815 1,505,648 These financial statements have been approved by the Board of Directors of the Company on 31 March 2008. Mai Boliang Mai Boliang Jin Jianlong (Company stamp) Authorized Chief Financial Officer Chief Accountant representative of Legal Representative (Signature or stamp) (Signature or stamp) (Signature or stamp) The notes on pages 26 to 172 form part of these financial statements. 84 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 China International Marine Containers (Group) Co., Ltd. Consolidated cash flow statement for the year ended 31 December 2007 (Expressed in thousands) Note 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Cash flows from operating activities: Cash received from sale of goods and rendering of services 5,610,980 42,485,218 4,110,509 32,778,024 Refund of taxes 304,253 2,303,743 164,440 1,311,278 Other cash received relating to operating activities 70,701 535,320 39,719 316,725 Sub-total of cash inflows 5,985,934 45,324,281 4,314,668 34,406,027 ---------------- ---------------- ---------------- ---------------- Cash paid for goods and services 5,492,044 41,584,656 3,713,877 29,615,198 Cash paid to and for employees 326,077 2,468,990 220,665 1,759,626 Cash paid for all types of taxes 64,624 489,320 64,952 517,940 Other cash paid relating to operating activities 246,555 1,866,864 152,547 1,216,440 Sub-total of cash outflows 6,129,300 46,409,830 4,152,041 33,109,204 ---------------- ---------------- ---------------- ---------------- Net cash (outflow) / inflow from operating activities 57(1) (143,366) (1,085,549) 162,627 1,296,823 ---------------- ---------------- ---------------- ---------------- The notes on pages 26 to 172 form part of these financial statements. 85 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 China International Marine Containers (Group) Co., Ltd. Consolidated cash flow statement (continued) for the year ended 31 December 2007 (Expressed in thousands) Note 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Cash flows from investing activities: Cash received from disposal of investments 158,701 1,201,652 1,912 15,248 Cash received from return on investments 5,307 40,184 45,087 359,530 Net cash received from disposal of fixed assets, intangible assets and other long-term assets 21,414 162,143 5,293 42,204 Cash received from disposal of subsidiaries 57(4) 23,697 179,429 12,198 97,272 Other cash received relating to investing activities 5,999 45,423 9,279 73,991 Sub-total of cash inflows 215,118 1,628,831 73,769 588,245 --------------- --------------- --------------- --------------- Cash paid for acquisition of fixed assets, intangible assets and other long-term assets 266,193 2,008,993 185,637 1,480,304 Cash paid for acquisition of investments 86,319 653,590 122,266 974,967 Cash paid for acquisition of subsidiaries 57(4) 235,477 1,789,548 255 2,035 Other cash paid relating to investing activities 23,107 174,962 - - Sub-total of cash outflows 611,096 4,627,093 308,158 2,457,306 --------------- --------------- --------------- --------------- Net cash outflow from investing activities (395,978) (2,998,262) (234,389) (1,869,061) --------------- --------------- --------------- --------------- The notes on pages 26 to 172 form part of these financial statements. 86 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 China International Marine Containers (Group) Co., Ltd. Consolidated cash flow statement (continued) for the year ended 31 December 2007 (Expressed in thousands) Note 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Cash flows from financing activities: Cash received from investors 53,751 406,992 11,289 90,021 (Including: Cash received from minority shareholders of subsidiaries) 35,648 269,916 11,289 90,021 Cash received from borrowings 3,097,622 23,454,574 1,259,992 10,047,427 Sub-total of cash inflows 3,151,373 23,861,566 1,271,281 10,137,448 --------------- --------------- --------------- --------------- Cash repayments of borrowings 2,266,460 17,161,182 1,186,660 9,462,661 Cash paid for dividends, profits distribution or interest 165,435 1,252,642 115,781 923,262 (Including: Dividends and profits paid to minority shareholders by subsidiaries) 3,972 30,075 8,804 70,204 Other cash paid relating to financing activities - - 266 2,122 Sub-total of cash outflows 2,431,895 18,413,824 1,302,707 10,388,045 --------------- --------------- --------------- --------------- Net cash inflow / (outflow) from financing activities 719,478 5,447,742 (31,426) (250,597) --------------- --------------- --------------- --------------- Effect of foreign exchange rate changes on cash and cash equivalents (17,050) (297,832) 4,464 (40,091) --------------- --------------- --------------- --------------- Net increase / (decrease) in cash and cash equivalents 163,084 1,066,099 (98,724) (862,926) Add: cash and cash equivalents at the beginning of the year 249,740 1,949,249 348,464 2,812,175 Cash and cash equivalents at the end of the year 57(3) 412,824 3,015,348 249,740 1,949,249 These financial statements have been approved by the Board of Directors of the Company on 31 March 2008. Mai Boliang Mai Boliang Jin Jianlong (Company stamp) Authorized Chief Financial Officer Chief Accountant representative of Legal Representative (Signature or stamp) (Signature or stamp) (Signature or stamp) The notes on pages 26 to 172 form part of these financial statements. 87 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 China International Marine Containers (Group) Co., Ltd. Cash flow statement for the year ended 31 December 2007 (Expressed in thousands) Note 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Cash flows from operating activities: Other cash received relating to operating activities 6,186,030 46,839,375 3,196,912 25,492,813 Sub-total of cash inflows 6,186,030 46,839,375 3,196,912 25,492,813 --------------- --------------- --------------- --------------- Cash paid to and for employees 44,850 339,595 6,537 52,126 Cash paid for all types of taxes 154 1,166 127 1,019 Other cash paid relating to operating activities 6,573,453 49,772,871 3,076,863 24,535,517 Sub-total of cash outflows 6,618,457 50,113,632 3,083,527 24,588,662 --------------- --------------- --------------- --------------- Net cash (outflow) / inflow from operating activities 57(1) (432,427) (3,274,257) 113,385 904,151 --------------- --------------- --------------- --------------- The notes on pages 26 to 172 form part of these financial statements. 88 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 China International Marine Containers (Group) Co., Ltd. Cash flow statement (continued) for the year ended 31 December 2007 (Expressed in thousands) Note 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Cash flows from investing activities: Cash received from disposal of investments 297,001 2,248,832 - - Cash received from return on investments 14,306 108,322 56,332 449,204 Net cash received from disposal of fixed assets, intangible assets and other long-term assets 266 2,014 481 3,835 Other cash received relating to investing activities 13,809 104,559 - - Sub-total of cash inflows 325,382 2,463,727 56,813 453,039 --------------- --------------- --------------- --------------- Cash paid for acquisition of fixed assets, intangible assets and other long-term assets 5,354 40,539 1,436 11,455 Cash paid for acquisition of investments 227,784 1,724,735 58,496 466,458 Other cash paid relating to investing activities - - - - Sub-total of cash outflows 233,138 1,765,274 59,932 477,913 --------------- --------------- --------------- --------------- Net cash inflow / (outflow) from investing activities 92,244 698,453 (3,119) (24,874) --------------- --------------- --------------- --------------- The notes on pages 26 to 172 form part of these financial statements. 89 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 China International Marine Containers (Group) Co., Ltd. Cash flow statement (continued) for the year ended 31 December 2007 (Expressed in thousands) Note 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Cash flows from financing activities: Cash received from borrowings 677,286 5,128,274 152,697 1,217,636 Sub-total of cash inflows 677,286 5,128,274 152,697 1,217,636 --------------- --------------- --------------- --------------- Cash repayments of borrowings 136,784 1,035,701 158,971 1,267,668 Cash paid for dividends, profits distribution or interest 132,643 1,004,346 97,550 777,880 Other cash paid relating to financing activities - - 266 2,122 Sub-total of cash outflows 269,427 2,040,047 256,787 2,047,670 --------------- --------------- --------------- --------------- Net cash inflow / (outflow) from financing activities 407,859 3,088,227 (104,090) (830,034) --------------- --------------- --------------- --------------- Effect of foreign exchange rate changes on cash and cash equivalents - (47,785) 1,355 (4,173) --------------- --------------- --------------- --------------- Net increase in cash and cash equivalents 67,676 464,638 7,531 45,070 Add: cash and cash equivalents at the beginning of the year 59,255 462,493 51,724 417,423 Cash and cash equivalents at the end of the year 57(3) 126,931 927,131 59,255 462,493 These financial statements have been approved by the Board of Directors of the Company on 31 March 2008. Mai Boliang Mai Boliang Jin Jianlong (Company stamp) Authorized Chief Financial Officer Chief Accountant representative of Legal Representative (Signature or stamp) (Signature or stamp) (Signature or stamp) The notes on pages 26 to 172 form part of these financial statements. 90 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 China International Marine Containers (Group) Co., Ltd. Consolidated statement of changes in shareholder’s equity for the year ended 31 December 2007 (Expressed in thousands of USD) Attributable to equity shareholders of the Company Foreign Note Share Capital Surplus Retained currency Minority capital reserve Reserve earnings exch. diff Subtotal interests Total Balance at 31 December 2006 270,843 90,674 454,677 606,241 8,363 1,430,798 102,257 1,533,055 Changes in accounting policies - 108,157 (31,982) 65,100 - 141,275 - 141,275 Balance at 1 January 2007 270,843 198,831 422,695 671,341 8,363 1,572,073 102,257 1,674,330 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Changes in equity for the year 1. Net profit for the year - - - 418,048 - 418,048 21,162 439,210 2. Gain and loss recognised directly in equity - Net changes in fair value of available-for-sale financial assets - 362,522 - - - 362,522 - 362,522 - Effective portion of changes in fair value of cash flow hedges - 9,818 - - - 9,818 - 9,818 - Deferred tax effect - (81,097) - - - (81,097) - (81,097) - Others - 9,167 - - 14,314 23,481 - 23,481 Sub-total of 1&2 - 300,410 - 418,048 14,314 732,772 21,162 753,934 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- 3. Shareholders’ contributions and decrease of capital -Contributions by shareholders - 11,992 - - - 11,992 85,848 97,840 - Equity settled share-based payment - 2,399 - - - 2,399 600 2,999 4. Appropriation of profits 46 - Distributions to shareholders - - (123,590) - (123,590) (3,839) (127,429) 5. Transfers within equity 43 - Share capital increased by capital reserve transfer 58,029 (58,029) - - - - - - Balance at 31 December 2007 328,872 455,603 422,695 965,799 22,677 2,195,646 206,028 2,401,674 These financial statements have been approved by the Board of Directors of the Company on 31 March 2008 Mai Boliang Mai Boliang Jin Jianlong (Company stamp) Authorized Chief Financial Officer Chief Accountant representative of Legal Representative (Signature or stamp) (Signature or stamp) (Signature or stamp) The notes on pages 26 to 172 form part of these financial statements. 91 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 China International Marine Containers (Group) Co., Ltd. Consolidated statement of changes in shareholder’s equity (continued) for the year ended 31 December 2006 (Expressed in thousands of USD) Attributable to equity shareholders of the Company Foreign Note Share Capital Surplus Retained currency Minority capital reserve Reserve earnings exch. diff Subtotal interests Total Balance at 31 December 2005 245,606 113,736 541,708 270,028 3,407 1,174,485 107,949 1,282,434 Changes in accounting policies - (9,997) (23,111) 47,578 - 14,470 - 14,470 Balance at 1 January 2006 245,606 103,739 518,597 317,606 3,407 1,188,955 107,949 1,296,904 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Changes in equity for the year 1. Net profit for the year - - - 353,735 - 353,735 20,504 374,239 2. Gain and loss recognised directly in equity - Net changes in fair value of available-for-sale financial assets - 141,391 - - - 141,391 - 141,391 - Effect of changes in equity excluding retained earnings of investees under equity method - 147 - - - 147 - 147 - Deferred tax effect - (21,209) - - - (21,209) - (21,209) - Others - - - - 4,956 4,956 - 4,956 Sub-total of 1&2 - 120,329 - 353,735 4,956 479,020 20,504 499,524 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- 3 Appropriation of profits 46 - Distributions to shareholders - - (95,902) - - (95,902) (26,196) (122,098) 4. Transfers within equity 43 - Share capital increased by capital reserve transfer 25,237 (25,237) - - - - - - Balance at 31 December 2006 270,843 198,831 422,695 671,341 8,363 1,572,073 102,257 1,674,330 These financial statements have been approved by the Board of Directors of the Company on 31 March 2008 Mai Boliang Mai Boliang Jin Jianlong (Company stamp) Authorized Chief Financial Officer Chief Accountant representative of Legal Representative (Signature or stamp) (Signature or stamp) (Signature or stamp) The notes on pages 26 to 172 form part of these financial statements. 92 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 China International Marine Containers (Group) Co., Ltd. Consolidated statement of changes in shareholder’s equity (continued) for the year ended 31 December 2007 (Expressed in thousands of RMB) Attributable to equity shareholders of the Company Foreign Note Share Capital Surplus Retained currency Minority capital reserve Reserve earnings exch. reserve Subtotal interests Total Balance at 31 December 2006 2,218,663 749,822 3,758,569 4,901,350 (510,958) 11,117,446 848,198 11,965,644 Changes in accounting policies - 866,966 (261,524) 562,059 (64,833) 1,102,668 - 1,102,668 Balance at 1 January 2007 2,218,663 1,616,788 3,497,045 5,463,409 (575,791) 12,220,114 848,198 13,068,312 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Changes in equity for the year 1. Net profit for the year - - - 3,165,373 - 3,165,373 160,233 3,325,606 2. Gain and loss recognised directly in equity - Net changes in fair value of available-for-sale financial assets - 2,744,945 - - - 2,744,945 - 2,744,945 - Effective portion of changes in fair value of cash flow hedges - 71,713 - - - 71,713 - 71,713 - Deferred tax effect - (611,425) - - - (611,425) - (611,425) - Others - 69,414 - - (898,123) (828,709) - (828,709) Sub-total of 1&2 - 2,274,647 - 3,165,373 (898,123) 4,541,897 160,233 4,702,130 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- 3. Shareholders’ contributions and decrease of capital - 88,251 - - - 88,251 644,803 733,054 - Equity settled share-based payment - 17,520 - - - 17,520 4,380 21,900 4. Appropriation of profits 46 - Distributions to shareholders - - - (954,025) - (954,025) (29,070) (983,095) 5. Transfers within equity 43 - Share capital increased by capital reserve transfer 443,733 (443,733) - - - - - - Balance at 31 December 2007 2,662,396 3,553,473 3,497,045 7,674,757 (1,473,914) 15,913,757 1,628,544 17,542,301 These financial statements have been approved by the Board of Directors of the Company on 31 March 2008 Mai Boliang Mai Boliang Jin Jianlong (Company stamp) Authorized Chief Financial Officer Chief Accountant representative of Legal Representative (Signature or stamp) (Signature or stamp) (Signature or stamp) The notes on pages 26 to 172 form part of these financial statements. 93 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 China International Marine Containers (Group) Co., Ltd. Consolidated statement of changes in shareholder’s equity (continued) for the year ended 31 December 2006 (Expressed in thousands of RMB) Attributable to equity shareholders of the Company Foreign Note Share Capital Surplus Retained currency Minority capital reserve Reserve earnings exch. reserve Subtotal interests Total Balance at 31 December 2005 2,016,967 941,446 4,481,992 2,220,316 (204,808) 9,455,913 893,584 10,349,497 Changes in accounting policies - (82,490) (218,500) 422,341 (4,573) 116,778 - 116,778 Balance at 1 January 2006 2,016,967 858,956 4,263,492 2,642,657 (209,381) 9,572,691 893,584 10,466,275 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Changes in equity for the year 1. Net profit for the year - - - 2,820,752 - 2,820,752 163,507 2,984,259 2. Gain and loss recognised directly in equity - Net changes in fair value of available-for-sale financial assets - 1,127,331 - - - 1,127,331 - 1,127,331 - Effect of changes in equity excluding retained earnings of investees under equity method - 1,319 - - - 1,319 - 1,319 - Deferred tax effect - (169,122) - - - (169,122) - (169,122) - Others - - - - (366,410) (366,410) - (366,410) Sub-total of 1&2 - 959,528 - 2,820,752 (366,410) 3,413,870 163,507 3,577,377 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- 3 Appropriation of profits 46 - Distributions to shareholders - - (766,447) - - (766,447) (208,893) (975,340) 4. Transfers within equity 43 - Share capital increased by capital reserve transfer 201,696 (201,696) - - - - - - Balance at 31 December 2006 2,218,663 1,616,788 3,497,045 5,463,409 (575,791) 12,220,114 848,198 13,068,312 These financial statements have been approved by the Board of Directors of the Company on 31 March 2008 Mai Boliang Mai Boliang Jin Jianlong (Company stamp) Authorized Chief Financial Officer Chief Accountant representative of Legal Representative (Signature or stamp) (Signature or stamp) (Signature or stamp) The notes on pages 26 to 172 form part of these financial statements. 94 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 China International Marine Containers (Group) Co., Ltd. Statement of changes in shareholder’s equity for the year ended 31 December 2007 (Expressed in thousands of USD) Foreign Note Share Capital Surplus Retained currency capital reserve Reserve earnings exch. diff Total Balance at 31 December 2006 270,843 152,061 423,032 596,341 12,420 1,454,697 Changes in accounting policies - 54,153 (337) (442,206) (12,420) (400,810) Balance at 1 January 2007 270,843 206,214 422,695 154,135 - 1,053,887 --------------- --------------- --------------- --------------- --------------- --------------- Changes in equity for the year 1. Net profit for the year - - - 163,347 - 163,347 2. Gain and loss recognised directly in equity - Net changes in fair value of available-for-sale financial assets - 362,522 - - - 362,522 - Deferred tax effect - (79,574) - - - (79,574) Sub-total of 1&2 - 282,948 - 163,347 - 446,295 --------------- --------------- --------------- --------------- --------------- --------------- 3 Appropriation of profits 46 - Distributions to shareholders - - - (123,590) - (123,590) 4. Transfers within equity - Share capital increased by capital reserve transfer 43 58,029 (58,029) - - - - Balance at 31 December 2007 328,872 431,133 422,695 193,892 - 1,376,592 These financial statements have been approved by the Board of Directors of the Company on 31 March 2008 Mai Boliang Mai Boliang Jin Jianlong (Company stamp) Authorized Chief Financial Officer Chief Accountant representative of Legal Representative (Signature or stamp) (Signature or stamp) (Signature or stamp) The notes on pages 26 to 172 form part of these financial statements. 95 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 China International Marine Containers (Group) Co., Ltd. Statement of changes in shareholder’s equity (continued) for the year ended 31 December 2006 (Expressed in thousands of USD) Foreign Note Share Capital Surplus Retained currency capital reserve Reserve earnings exch. diff. Total Balance at 31 December 2005 245,606 121,181 518,934 279,959 3,407 1,169,087 Changes in accounting policies - (9,912) (337) (314,639) (3,407) (328,295) Balance at 1 January 2006 245,606 111,269 518,597 (34,680) - 840,792 --------------- --------------- --------------- --------------- --------------- --------------- Changes in equity for the year 1. Net profit for the year - - - 188,815 - 188,815 2. Gain and loss recognised directly in equity - Net changes in fair value of available-for-sale financial assets - 141,391 - - - 141,391 - Deferred tax effect - (21,209) - - - (21,209) Sub-total of 1&2 - 120,182 - 188,815 - 308,997 --------------- --------------- --------------- --------------- --------------- --------------- 3 Appropriation of profits 46 - Distributions to shareholders - - (95,902) - - (95,902) 4. Transfers within equity - Share capital increased by capital reserve transfer 43 25,237 (25,237) - - - - Balance at 31 December 2006 270,843 206,214 422,695 154,135 - 1,053,887 These financial statements have been approved by the Board of Directors of the Company on 31 March 2008 Mai Boliang Mai Boliang Jin Jianlong (Company stamp) Authorized Chief Financial Officer Chief Accountant representative of Legal Representative (Signature or stamp) (Signature or stamp) (Signature or stamp) The notes on pages 26 to 172 form part of these financial statements. 96 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 China International Marine Containers (Group) Co., Ltd. Statement of changes in shareholder’s equity (continued) for the year ended 31 December 2007 (Expressed in thousands of RMB) Foreign Note Share Capital Surplus Retained currency capital reserve Reserve earnings exch. reserve Total Balance at 31 December 2006 2,218,663 1,241,489 3,499,835 4,824,688 (430,618) 11,354,057 Changes in accounting policies - 436,397 (2,790) (3,614,448) 52,478 (3,128,363) Balance at 1 January 2007 2,218,663 1,677,886 3,497,045 1,210,240 (378,140) 8,225,694 --------------- --------------- --------------- --------------- --------------- --------------- Changes in equity for the year 1. Net profit for the year - - - 1,236,829 - 1,236,829 2. Gain and loss recognised directly in equity - Net changes in fair value of available-for-sale financial assets - 2,744,945 - - - 2,744,945 - Deferred tax effect - (602,518) - - - (602,518) - Others - - - - (596,023) (596,023) Sub-total of 1&2 - 2,142,427 - 1,236,829 (596,023) 2,783,233 --------------- --------------- --------------- --------------- --------------- --------------- 3 Appropriation of profits 46 - Distributions to shareholders - - - (954,025) - (954,025) 4. Transfers within equity 43 - Share capital increased by capital reserve transfer 443,733 (443,733) - - - - Balance at 31 December 2007 2,662,396 3,376,580 3,497,045 1,493,044 (974,163) 10,054,902 These financial statements have been approved by the Board of Directors of the Company on 31 March 2008 Mai Boliang Mai Boliang Jin Jianlong (Company stamp) Authorized Chief Financial Officer Chief Accountant representative of Legal Representative (Signature or stamp) (Signature or stamp) (Signature or stamp) The notes on pages 26 to 172 form part of these financial statements. 97 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 China International Marine Containers (Group) Co., Ltd. Statement of changes in shareholder’s equity (continued) for the year ended 31 December 2006 (Expressed in thousands of RMB) Foreign Note Share Capital Surplus Retained currency capital reserve Reserve earnings exch. reserve Total Balance at 31 December 2005 2,016,967 1,002,968 4,293,902 2,301,793 (180,865) 9,434,765 Changes in accounting policies - (81,742) (30,410) (2,597,201) 59,945 (2,649,408) Balance at 1 January 2006 2,016,967 921,226 4,263,492 (295,408) (120,920) 6,785,357 --------------- --------------- --------------- --------------- --------------- --------------- Changes in equity for the year 1. Net profit for the year - - - 1,505,648 - 1,505,648 2. Gain and loss recognised directly in equity - Net changes in fair value of available-for-sale financial assets - 1,127,480 - - - 1,127,480 - Deferred tax effect - (169,124) - - - (169,124) - Others - - - - (257,220) (257,220) Sub-total of 1&2 - 958,356 - 1,505,648 (257,220) 2,206,784 --------------- --------------- --------------- --------------- --------------- --------------- 3 Appropriation of profits 46 - Distributions to shareholders - - (766,447) - - (766,447) 4. Transfers within equity 43 - Share capital increased by capital reserve transfer 201,696 (201,696) - - - - Balance at 31 December 2006 2,218,663 1,677,886 3,497,045 1,210,240 (378,140) 8,225,694 These financial statements have been approved by the Board of Directors of the Company on 31 March 2008 Mai Boliang Mai Boliang Jin Jianlong (Company stamp) Authorized Chief Financial Officer Chief Accountant representative of Legal Representative (Signature or stamp) (Signature or stamp) (Signature or stamp) The notes on pages 26 to 172 form part of these financial statements. 98 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 China International Marine Containers (Group) Co., Ltd. Notes to the financial statements (Expressed in thousands) 1 COMPANY STATUS China International Marine Containers (Group) Co., Ltd (the “Company”), formerly “China International Marine Containers Co., Ltd.”, was a sino-foreign joint venture set up by China Merchants Group, the East Asiatic Company (Denmark) and Ocean Containers Inc. (USA). In December 1992, as approved in “Shen Fu Ban Fu [1992] 1736” of the General Office of the People’s Government of Shenzhen and “Shen Ren Yin Fu Zi (1992) 261” of People’s Bank of China Shenzhen Special Economic Zone Branch, the original shareholders of the Company acted as promoters and reorganized the Company into a company limited by shares. As approved in “Shen Fu Ban Fu [1993] 925” of the General Office of the People’s Government of Shenzhen and “Shen Zhen Ban Fu [1994] 22” of Shenzhen Securities Administration Office, the Company became a listed company with RMB share issued to both domestic (A shares) and foreign (B shares) investors and commenced trading on Shenzhen Stock Exchange on 31 December 2003 and 17 January 2004 respectively. On 1 December 1995, as approved by State Administration for Industry and Commerce, the Company changed its name to “China International Marine Containers (Group) Co., Ltd”. As at 31 December 2007, the capital shares of the Company amounted to 2,662,396,051 shares. Please refer to Note 43 for details of the capital shares. The Company and its subsidiaries (together referred to as the “Group”) are principally engaged in the manufacturing and repairing of containers and other relevant business, utilizing the Group’s equipments to process and manufacture various parts, structure components and relevant machines, providing cutting, punching, moulding, riveting surface treatment (including sand/paint spraying, welding and assembly) and other processing services; developing, manufacturing and selling various high-tech and high-performance special vehicles and semi-trailers, and leasing of containers. 2 BASIS OF PREPARATION These financial statements have been translated into English from the Company’s financial statements issued in Chinese. (1) Statement of compliance The financial statements have been prepared in accordance with the requirements of the China Accounting Standards for Business Enterprises (CAS (2006)) issued by the Ministry of Finance (MOF). These financial statements present truly and completely the consolidated financial position and financial position, the consolidated results of operations and results of operations and the consolidated cash flows and cash flows of the Group. 99 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 2 BASIS OF PREPARATION (CONTINUED) (1) Statement of compliance (continued) These financial statements also comply with the disclosure requirements of “Regulation on the Preparation of Information Disclosures of Companies Issuing Public Shares, No. 15: General Requirements for Financial Reports” revised by the China Securities Regulatory Commission (CSRC) in 2007. (2) Accounting year The accounting year of the Group is from 1 January to 31 December. (3) Measurement basis The measurement basis used in the preparation of the financial statements is historical cost basis except that the assets and liabilities set out below: - Financial assets and financial liabilities at fair value through profit or loss(including financial assets or financial liabilities held for trading) (See Note 3(12)) - Available-for-sale financial assets(See Note 3(12)) (4) Functional currency and presentation currency The Company’s functional currency is U.S dollars, while certain domestic subsidiaries’ use RMB (“RMB”) and Hong Kong and oversea subsidiaries’ use local currencies as their functional currency. Foreign currencies are defined as currencies other than functional currencies. The Group determines its functional currencies based on its major currencies in business transactions. The financial statements are prepared using U.S dollars and presented both in U.S dollars and RMB. The assets and liabilities of foreign operation are translated to RMB at the spot exchange rates on the balance sheet date. The equity items, excluding “Retained earning”, are translated to RMB at the spot exchange rates on the transaction dates. The income and expenses of foreign operation are translated to RMB at the rates that approximate the spot exchange rates on the transaction dates. The resulting exchange differences are recognised in a separate component of equity. 100 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (1) Business combination and consolidated financial statements (a) Business combination involving entities under common control A business combination involving enterprises under common control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or parties both before and after the business combination, and that control is not transitory. The assets and liabilities obtained are measured at the carrying amounts as recorded by the enterprise being absorbed at the combination date. The difference between the carrying amount of the net assets obtained and the carrying amount of consideration paid for the combination (or the total face value of shares issued) is adjusted to share premium in the capital reserve. If the balance of share premium is insufficient, any excess is adjusted to retained earnings. The combination date is the date on which the Group effectively obtains control of the enterprise being absorbed. (b) Business combinations involving entities not under common control A business combination involving entities not under common control is a business combination in which all of the combining entities are not ultimately controlled by the same party or parties both before and after the business combination. The cost of a business combination paid by the Group is the aggregate of the fair value at the acquisition date of assets given, liabilities incurred or assumed, and equity securities issued by the Group, in exchange for control of the acquiree plus any cost directly attributable to the business combination. The difference between the fair value and the carrying amount of the assets given is recognised in profit or loss. The acquisition date is the date on which the Group effectively obtains control of the acquiree. The Group, at the acquisition date, allocates the cost of the business combination by recognising the acquiree’s identifiable asset, liabilities and contingent liabilities at their fair value at that date. Any excess of the cost of a business combination over the Group’s interest in the fair value of the acquiree’s identifiable net assets is recognised as goodwill (See Note 3(10)). Any excess of the Group’s interest in the fair value of the acquiree’s identifiable net assets over the cost of a business combination is recognised in profit or loss. (c) Consolidated financial statements The consolidated financial statements comprise the Company and its subsidiaries. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. 101 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (1) Business combination and consolidated financial statements (continued) (c) Consolidated financial statements (continued) Where the Company combines a subsidiary during the reporting period through a business combination involving entities under common control, the financial statements of the subsidiary are included in the consolidated financial statements as if the combination had occurred at the beginning of the earliest comparative period presented or, if later, at the date that common control was established. Therefore the opening balances and the comparative figures of the consolidated financial statements are restated. In the preparation of the consolidated financial statements, the subsidiary’s assets, liabilities and results of operations are included in the consolidated balance sheet and the consolidated income statement, respectively, based on their carrying amounts in the subsidiary’s financial statements, from the date that common control was established. Where the Company acquires a subsidiary during the reporting period through a business combination involving entities not under common control, the identifiable assets, liabilities and results of operations of the subsidiaries are consolidated into consolidated financial statements from the date that control commences, base on the fair value of those identifiable assets and liabilities at the acquisition date. Minority interest is presented separately in the consolidated balance sheet within equity. Net profit or loss attributable to minority shareholders is presented separately in the consolidated income statement below the net profit line item. Where the amount of losses attributable to the minority shareholders of a subsidiary exceeds the minority shareholders’ portion of the equity of the subsidiary, the excess, and any further losses attributable to the minority shareholders, are allocated against the equity attributable to the Company except to the extent that the minority shareholders have a binding obligation under the articles of association or an agreement and are able to make additional investment to cover the losses. If the subsidiary subsequently reports profits, such profits are allocated to the equity attributable to the Company until the minority shareholders' share of losses previously absorbed by the Company has been recovered. When the accounting period or accounting policies of a subsidiary are different from those of the Company, the Company makes necessary adjustments to the financial statements of the subsidiary based on the Company’s own accounting period or accounting policies. Intra-group balances and transactions, and any unrealised profit or loss arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealized gains but only to the extent that there is no evidence of impairment. 102 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (2) Translation of foreign currencies When the Group receives capital in foreign currencies from investors, the capital is translated to RMB at the spot exchange rate on the date of the receipt. Other foreign currency transactions are, on initial recognition, translated to RMB at the spot exchange rates on the dates of the transactions. A spot exchange rate is an exchange rate quoted by the People’s Bank of China. A rate that approximates the spot exchange rate is the average exchange rate at the end of the previous month. Monetary items denominated in foreign currencies are translated to RMB at the spot exchange at the balance sheet date. The resulting exchange differences are recognised in profit or loss, except those arising from the principals and interests on foreign currency borrowings specifically for the purpose of acquisition, construction or production of qualifying assets (see Note 3(18)). Non-monetary items denominated in foreign currencies that are measured at historical cost are translated to RMB using the foreign exchange rate at the transaction date. Non-monetary items denominated in foreign currencies that are measured at fair value are translated using the foreign exchange rate at the date the fair value is determined; the exchange differences are recognised in profit or loss, except for the differences arising from the translation of available-for-sale financial assets, which is recognised in capital reserve. The assets and liabilities of foreign operation are translated to RMB at the spot exchange rates on the balance sheet date. The equity items, excluding “Retained earning”, are translated to RMB at the spot exchange rates on the transaction dates. The income and expenses of foreign operation are translated to RMB at the spot exchange rates on the transaction dates. The resulting exchange differences are recognised in a separate component of equity. Upon disposal of a foreign operation, the cumulative amount of the exchange differences recognised in equity which relate to that foreign operation is transferred to profit or loss in the period in which the disposal occurs. (3) Cash and Cash equivalents Cash and cash equivalents comprise cash on hand, demand deposits, and short-term, highly liquid investments, which are readily convertible into known amounts of cash and are subject to an insignificant risk of change in value. (4) Inventories Inventories are carried at the lower of cost and net realisable value. Cost of inventories comprises all costs of purchase, costs of conversion and other costs. Inventories are initially measured at their actual cost. Borrowing costs directly related to the production of qualifying inventories are also included in the cost of inventories (see Note 3(18)). Cost of inventories is calculated using the weighted average method. In addition to the purchasing cost of raw materials, work in progress and finished goods include direct labour costs and an appropriate allocation of production overheads. 103 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (4) Inventories Any excess of the cost over the net realisable value of each class of inventories is recognised as a provision for diminution in the value of inventories. Net realisable value is the estimated selling price in the normal course of business less the estimated costs to completion and the estimated expenses and related taxes necessary to make the sale. Reusable materials, such as low-value consumables, packaging materials and other materials, are amortised in full when received for use. The amounts of the amortisation are included in the cost of the related assets or profit or loss. The Group maintains a perpetual inventory system. (5) Long-term equity investments (a) Investments in subsidiaries In the Group’s consolidated financial statements, investment in subsidiaries are accounted for in accordance with the principles described in Note 3(1)(c). In the Company’s financial statements, investments in subsidiaries are accounted for using the cost method. The investments are stated at cost less impairment losses (see Note 3(11)) in the balance sheet. At initial recognition, such investments are measured as follows: - The initial investment cost of a long-term equity investment obtained through a business combination involving entities under common control is the absorbing enterprise’s share of the subsidiary’s equity at the combination date. The difference between the initial investment cost and the carrying amounts of the consideration given is adjusted to share premium in capital reserve. If the balance of the share premium is insufficient, any excess is adjusted to retained earnings. - The initial investment cost of a long-term equity investment obtained through a business combination involving entities not under common control is the cost of acquisition determined at the acquisition date. - An investment in a subsidiary acquired otherwise than through a business combination is initially recognised at actual payment cost if the Group acquires the investment by cash, or at the fair value of the equity securities issued if an investment is acquired by issuing equity securities, or at the value stipulated in the investment contract or agreement if an investment is contributed by investors. 104 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (5) Long-term equity investments (continued) (b) Investment in jointly controlled enterprises and associates A jointly controlled enterprise is an enterprise which operates under joint control in accordance with a contractual agreement between the Group and other parties. Joint control is the contractual agreed sharing of control over an economic activity, and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing the control. An associate is an enterprise over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of an investee but is not control or joint control over those policies. An investment in a jointly controlled enterprise or an associate is accounted for using the equity method, unless the investment is classified as held for sale. The investment is classified as held for sale when the Group has made a decision and signed a non-cancellable agreement on the transfer of the investment with the transferee, and the transfer is expected to be completed within one year. The investment held for sale is measured at the lower of its carrying amount and fair value less costs to sell. Any excess of its carrying amount over fair value less costs to sell is recognised as a provision for impairment loss of the investment. At year-end, the Group makes provision for impairment loss of investments in jointly controlled enterprises and associates (see Note 3(11)). An investment in a jointly controlled enterprise or an associate is initially recognised at actual payment cost if the Group acquires the investment by cash, at the fair value of the equity securities issued if an investment is acquired by issuing equity securities, or at the value stipulated in the investment contract or agreement if an investment is contributed by an investor. The Group makes the following accounting treatments when using the equity method: - Where the initial investment cost of a long-term equity investment exceeds the Group’s interest in the fair value of the investee’s identifiable net assets at the time of acquisition, the investment is initially recognised at the initial investment cost. Where the initial investment cost is less than the Group’s interest in the fair value of the investee’s identifiable net assets at the time of acquisition, the investment is initially recognised at the investor’s share of the fair value of the investee’s identifiable net assets, and the difference is charged to profit or loss. 105 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (5) Long-term equity investments (continued) (b) Investment in jointly controlled enterprises and associates (continued) - After the acquisition of the investment, the Group recognises its share of the investee’s net profits or losses after deducting the amortisation of the debit balance of equity investment difference, which was recognised by the Group before the first-time adoption of CAS (2006), as investment income or losses, and adjusts the carrying amount of the investment accordingly. The debit balance of the equity investment difference is amortised using the straight-line method over 10 years which is determined in accordance with previous accounting standards. Once the investee declares any cash dividends or profits distributions, the carrying amount of the investment is reduced by that attributable to the Group. The Group recognises its share of the investee’s net profits or losses after making appropriate adjustments to align the accounting policies or accounting periods with those of the Group based on the fair values of the investee’s individual separately identifiable assets at the time of acquisition. Unrealised profits and losses resulting from transactions between the Group and its associates or jointly controlled enterprises are eliminated for the part attributable to the Group calculated based on its share of the associates or jointly controlled enterprises. Unrealised losses resulting from transactions between the Group and its associates or jointly controlled enterprises are eliminated in the same way as unrealized gains but only to the extent that there is no evidence of impairment. The Group discontinues recognising its share of net losses of the investee after the carrying amount of the long-term equity investment and any long-term interest that in substance forms part of the Group’s net investment in the associate or the jointly controlled enterprise is reduced to zero, except to the extent that the Group has an obligation to assume additional losses. Where net profits are subsequently made by the associate or jointly controlled enterprise, the Group resumes recognising its share of those profits only after its share of the profits exceeds the share of losses not recognised. (c) Other long-term equity investments Other long-term equity investments refer to investments for which the Group does not have the right to control, have joint control or exercise significant influence over the investees, and for which the investments are not quoted in an active market and their fair value cannot be reliably measured. Such investments are initially recognised at the cost determined in accordance with the same principles as those for jointly controlled enterprises and associates, and then accounted for using the cost method. At year-end the Group makes provision for impairment losses on such investments (see Note 3(12)). 106 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (6) Investment property Investment property is a property held either to earn rental income or for capital appreciation or for both. Investment property is accounted for using the cost model and stated in the balance sheet at cost less accumulated depreciation and impairment loss (see Note 3(11)). Investment property is depreciated or amortised using the straight line method over its estimated useful life. Estimated useful life Land Use Rights 50 years (7) Fixed assets and construction in progress Fixed assets represent the tangible assets held by the Group for use in the production of goods or supply of services for rental to others or for operation and administrative purposes with useful lives over one year. Fixed assets are stated in the balance sheet at cost less accumulated depreciation and impairment losses (see Note 3(11)). Construction in progress is stated in the balance sheet at cost less impairment losses (see Note 3(11)). The cost of a purchased fixed asset comprises the purchase price, related taxes, and any directly attributable expenditure for bringing the asset to working condition for its intended use. The cost of self-constructed assets includes the cost of materials, direct labour, capitalised borrowing costs (see Note 3(18)), and any other costs directly attributable to bringing the asset to working condition for its intended use. Construction in progress is transferred to fixed assets when it is ready for its intended use. No depreciation is provided against construction in progress. Where the individual component parts of an item of fixed asset have different useful lives or provide benefits to the Group in different patterns thus necessitating use of different depreciation rates or methods, they are recognised as a separate fixed asset. The subsequent costs including the cost of replacing part of an item of fixed assets are recognised in the carrying amount of the item if the recognition criteria are satisfied, and the carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of fixed assets are recognised in profit or loss as incurred. Gains or losses arising from the retirement or disposal of an item of fixed asset are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in profit or loss on the date of retirement or disposal. 107 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (7) Fixed assets and construction in progress (continued) Fixed assets are depreciated using the straight-line method over their estimated useful lives. The estimated useful lives, residual values and depreciation rates of each class of fixed assets are as follows: Estimated Estimated Depreciation useful life residual value rate Plants and buildings 20-30 years 10% 3-4.5% Machinery and equipment 10-12 years 10% 7.5-9% Office and other equipment 5 years 10% 18% Motor vehicles 5 years 10% 18% Useful lives, residual values and depreciation methods are reviewed at least each year-end. (8) Leases A lease is classified as either a finance lease or an operating lease. A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of a leased asset to the lessee, irrespective of whether the legal title to the asset is eventually transferred or not. An operating lease is a lease other than a finance lease. (a) Assets leased out under finance leases The Group recognises the aggregate of the minimum lease receipts determined at the inception of a lease and the initial direct costs as finance lease receivable. The difference between the aggregate of the minimum lease receipts, the initial direct costs, and the aggregate of their present values is recognised as unearned finance income. Unearned finance income is allocated to each accounting period during the lease term using the effective interest method. At the balance sheet date, finance lease receivables, net of unearned finance income, are presented as long-term receivables or non-current assets due within one year, respectively in the balance sheet. The Group makes provision for impairment losses of finance lease receivables (see Note 3(11).) The unguaranteed residual values are reviewed at at least each year-end. Any excess of the carrying amount of the unguaranteed residual values over their estimated recoverable amounts is recognised as impairment loss. If there is an indication that there has been a change in the factors used to determine the provision for impairment and as a result the estimated recoverable amount of the unguaranteed residual values is greater than its carrying amount, the impairment loss recognised in prior years is reversed. Reversals of impairment losses are recognised in the income statement. 108 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (8) Leases (continued) (b) Operating lease charges Rental payments under operating leases are recognised as costs or expenses on a straight-line basis over the lease term. (c) Assets leased out under operating leases Fixed assets leased out under operating leases are depreciated in accordance with the Group’s depreciation policies described in Note 3(7). Impairment losses are provided for in accordance with the accounting policy described in Note 3(11). Other leased out assets under operating leases are amortised using the straight-line method. Income derived from operating leases is recognised in the income statement using the straight-line method over the lease term. If initial direct costs incurred in respect of the assets leased out are material, the costs are initially capitalised and subsequently amortised in profit or loss over the lease term on the same basis as the lease income. Otherwise, the costs are charged to profit or loss immediately. (9) Intangible assets Intangible assets are stated in the balance sheet at cost less accumulated amortisation (where the estimated useful life is finite) and impairment losses (see Note 3(11)). For an intangible asset with finite useful life, its cost less residual value and impairment loss is amortised on the straight-line method or other more appropriate methods over its estimated useful life. The respective amortisation periods for such intangible assets are as follows: Estimated useful lives Land use rights 30-50 years Technological know-how and trademarks 5-10 years Timber concession rights 20 years Customer base 8 years Customer contracts 4 years An intangible asset is regarded as having an indefinite useful life and is not amortised when there is no foreseeable limit to the period over which the asset is expected to generate economic benefits for the Group. At the balance sheet date, the Group doesn’t have any intangible assets with indefinite useful lives. 109 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (9) Intangible assets (continued) Expenditures on an internal research and development project are classified into expenditures on the research phase and expenditures on the development phase. Research is original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding. Development is the application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products or processes before the start of commercial production or use. Expenditures on research phase are recognised in profit or loss when incurred. Expenditures on development phase are capitalised if development costs can be measured reliably, the product or process is technically and commercially feasible, and the Group intends to and has sufficient resources to complete development. Capitalised development costs are stated at cost less impairment losses (see Note 3(11)). Other development expenditures are recognised as expenses in the period in which they are incurred. (10) Goodwill Goodwill represents the excess of cost of acquisition over the Group’s interest in the fair value of the identifiable net assets of the acquiree under the business combination involving entities not under common control. Goodwill arising on the acquisition of a minority interest in a subsidiary represents the excess of the cost of the additional investment over the carrying amount of the net asset acquired at the date of exchange. Goodwill is not amortised and is stated at cost less accumulated impairment losses (see Note 3(11)). On disposal of an asset group or a set of asset groups, any attributable amount of purchased goodwill is included in the calculation of the profit or loss on disposal. (11) Impairment of non-financial long-term assets The carrying amounts of the following assets are reviewed at each balance sheet date based on the internal and external sources of information to determine whether there is any indication of impairment: - fixed assets - construction in progress - intangible assets - investment property measured using a cost model - investments in subsidiaries, associates and jointly controlled entities 110 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (11) Impairment of non-financial long-term assets (continued) If any indication exists that an asset may be impaired, recoverable amount of the asset is estimated. In addition, for goodwill and intangible assets with indefinite useful lives, the Group estimates the recoverable amount of intangible assets with indefinite useful lives at least each year and the recoverable amounts of goodwill at at least each year-end, irrespective of whether there is any indication of impairment or not. Goodwill is tested for impairment together with its related asset groups or sets of asset groups. An asset group is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or asset groups. An asset group is composed of assets directly relating to cash-generation. Identification of an asset group is based on whether major cash inflows generated by the asset group are largely independent of the cash inflows from other assets or asset groups. In identifying an asset group, the Group also considers how management monitors the Group’s operations and how management makes decisions about continuing or disposing of the Group’s assets. The recoverable amount of an asset, asset group or set of asset groups is the higher of its fair value less costs to sell and its present value of expected future cash flows. An asset’s fair value less costs to sell is the amount determined by the price of a sale agreement in an arm’s length transaction, less the costs that are directly attributable to the disposal of the asset. The present value of expected future cash flows of an asset is determined by discounting the future cash flows, estimated to be derived from continuing use of the asset and from its ultimate disposal, to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in profit or loss. A provision for impairment loss of the asset is recognised accordingly. Impairment losses related to an asset group or a set of asset groups first reduce the carrying amount of any goodwill allocated to the asset group or set of asset groups, and then reduce the carrying amount of the other assets in the asset group or set of asset groups on a pro rata basis. However, that the carrying amount of an impaired asset will not be reduced below the highest of its individual fair value less costs to sell (if determinable), the present value of expected future cash flows (if determinable) and zero. An impairment loss is not reversed in subsequent periods. 111 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (12) Financial instruments Financial instruments comprise cash at bank and on hand, investments in debt and equity securities other than long-term equity investments, receivables, payables, loans and borrowings and share capital, etc. (a) Recognition and measurement of financial assets and financial liabilities A financial asset or financial liability is recognised in the balance sheet when the Group becomes a party to the contractual provisions of a financial instrument. The Group classifies financial assets and liabilities into different categories at initial recognition based on the purpose of acquiring assets or assuming liabilities: financial assets and financial liabilities at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets and other financial liabilities. Financial assets and financial liabilities are measured initially at fair value. For financial assets and financial liabilities at fair value through profit or loss, any directly attributable transaction costs are charged to profit or loss; for other categories of financial assets and financial liabilities, any attributable transaction costs are included in their initial costs. Subsequent to initial recognition financial assets and liabilities are measured as follows: - Financial assets and financial liabilities at fair value through profit or loss (including financial assets or financial liabilities held for trading) A financial asset or financial liability is classified as at fair value through profit or loss if it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term or if it is a derivative, unless it is a designated and effective hedging instrument, or a financial guarantee contract, or a derivative that is linked to and must be settled by delivery of an unquoted equity instrument (without a quoted price from an active market) whose fair value cannot be reliably measured. Subsequent to initial recognition, financial assets and financial liabilities at fair value through profit or loss are measured at fair value, and changes therein are recognised in profit or loss. - Receivables Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, receivables are subsequently stated at amortised cost using the effective interest method. 112 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (12) Financial instruments (a) Recognition and measurement of financial assets and financial liabilities (continued) - Available-for-sale financial assets Available-for-sale financial assets include non-derivative financial assets that are designated upon initial recognition as available for sales and other financial assets which do not fall into any of the above categories. An investment in equity instrument which does not have a quoted market price in an active market and whose fair value cannot be reliably measured is measured at cost subsequent to initial recognition. Besides investments in equity instruments whose fair value cannot be measured reliably as described above, subsequent to initial recognition, other available-for-sale financial assets are measured at fair value and changes therein, except for impairment losses and foreign exchange gains and losses from monetary financial assets, which are recognised directly in equity. When an investment is derecognised, the cumulative gain or loss in equity is removed from equity and recognised in profit or loss. - Other financial liabilities Financial liabilities other than the financial liabilities at fair value through profit or loss are classified as other financial liabilities. Among other financial liabilities, financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified payments to reimburse the beneficiary of the guarantee (the holder) for a loss the holder incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Where the Group issues a financial guarantee, subsequent to initial recognition, the guarantee is measured at the higher of the amount initially recognised less accumulated amortisation and the amount of a provision determined in accordance with the principles of contingent liabilities (see Note 3(15)). Except for the other financial liabilities described above, subsequent to initial recognition, other financial liabilities are measured at amortised cost using the effective interest method. 113 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (12) Financial instruments (continued) (b) Impairment of financial assets The carrying amounts of financial assets (other than those at fair value through profit or loss) are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. If any such evidence exists, impairment loss is provided. - Receivables Receivables are assessed for impairment both on an individual basis and on a collective group basis. Where impairment is assessed on an individual basis, an impairment loss in respect of a receivable is calculated as the excess of its carrying amount over the present value of the estimated future cash flows (exclusive of future credit losses that have not been incurred) discounted at the original effective interest rate. All impairment losses are recognised in profit or loss. The assessment is made collectively where receivables share similar credit risk characteristics (including those having not been individually assessed as impaired), based on their historical loss experiences, and adjusted by the observative figures reflecting present economic conditions. If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, the impairment loss is reversed through profit or loss. A reversal of an impairment loss will not result in the asset’s carrying amount exceeding that which would have been determined had no impairment loss been recognised in prior years. - Available-for-sale financial assets and other long-term equity investments Available-for-sale financial assets and other long-term equity investments are assessed for impairment on an individual basis. When an available-for-sale financial asset is impaired, the cumulative loss arising from decline in fair value that has been recognised directly in equity is removed from equity and recognised in profit or loss even though the financial asset has not been derecognised. If, after an impairment loss has been recognised on an available-for-sale debt instrument, the fair value of the debt instrument increases in a subsequent period and the increase can be objectively related to an event occurring after the impairment loss was recognised, the impairment loss is reversed through profit or loss. An impairment loss recognised for an investment in an equity instrument classified as available-for-sale is not reversed through profit or loss. 114 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (12) Financial instruments (continued) (b) Impairment of financial assets (continued) For other long-term equity investments (see Note 3(5)(c)), the amount of the impairment loss is measured as the difference between the carrying amount of the investment and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss is not reversed. (c) Determination of fair values If there is an active market for a financial asset or financial liability, the quoted price in the active market without adjusting for transaction costs that may be incurred upon future disposal or settlement is used to establish the fair value of the financial asset or financial liability. For a financial asset held or a financial liability to be assumed, the quoted price is the current bid price and, for a financial asset to be acquired or a financial liability assumed, it is the current asking price. If no active market exists for a financial instrument, a valuation technique is used to establish the fair value. Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing parties; reference to the current fair value of another instrument that is substantially the same. The Group calibrates the valuation technique and tests it for validity periodically. (d) Hedge accounting Hedge accounting is a method which recognises the offsetting effects on profit or loss of changes in the fair values of the hedging instrument and the hedged item in the same accounting period(s). Hedged items are the items that expose the Group to risks of changes in fair value or future cash flows and that are designated as being hedged. The Group’s hedged item is foreign currency risk associated with a forecast transaction that is settled with a fixed amount of foreign currency. A hedging instrument is a designated derivative whose changes in fair value or cash flows are expected to offset changes in the fair value or cash flows of the hedged item. For a hedge of foreign currency risk, a non-derivative financial asset or non-derivative financial liability may also be used as a hedging instrument. 115 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (12) Financial instruments (continued) (d) Hedge accounting (continued) The hedge is assessed by the Group for effectiveness on an ongoing basis and determined to have been highly effective throughout the accounting periods for which the hedging relationship was designated. The Group uses a ratio analysis to assess the subsequent effectiveness of a cash flow hedge. - Cash flow hedges A cash flow hedge is a hedge of the exposure to variability in cash flows. The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly in shareholders’ equity as a separate component. That effective portion is adjusted to the lesser of the following (in absolute amounts): - the cumulative gain or loss on the hedging instrument from inception of the hedge - the cumulative change in present value of the expected future cash flows on the hedged item from inception of the hedge. The portion of the gain or loss on the hedging instrument that is determined to be an ineffective hedge is recognised in profit or loss. If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability, the associated gain or loss is removed from shareholders’ equity and recognised in profit or loss in the same period during which the financial asset or financial liability affects profit or loss. However, if the Group expects that all or a portion of a net loss recognised directly in shareholders’ equity will not be recovered in future accounting periods, it reclassifies into profit or loss the amount that is not expected to be recovered. If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, the associated gain or loss is removed from equity and recognised in profit or loss in the same period during which the financial asset or financial liability affects profit or loss. However, if the Group expects that all or a portion of a net loss recognised directly in shareholders’ equity will not be recovered in future accounting periods, it reclassifies into profit or loss the amount that is not expected to be recovered. For cash flow hedges, other than those covered by the preceding two policy statements, the associated gain or loss is removed from shareholders’ equity and recognised in profit or loss in the same period or periods during which the hedged forecast transaction affects profit or loss. 116 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (12) Financial instruments (continued) (d) Hedge accounting (continued) When a hedging instrument expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for hedge accounting, the Group will discontinue the hedge accounting treatments prospectively. Until the forecast transaction occurs, the Group classifies the gain or loss on the hedging instrument that recognised directly in shareholders’ equity from the period when the hedge was effective into profit or loss. If the forecast transaction is no longer expected to occur, the gain or loss on the hedging instrument that remains recognised directly in shareholders’ equity from the period when the hedge was effective shall be reclassified into profit or loss immediately. (e) Derecognition of financial assets and financial liabilities A financial asset is derecognised if the Group’s contractual rights to the cash flows from the financial asset expire or if the Group transfers substantially all the risks and rewards of ownership of the financial asset to another party. Where a transfer of a financial asset in its entirely meets the criteria of the derecognition, the difference between the two amounts below is recognised in profit or loss: - Carrying amount of the financial asset transferred. - The sum of the consideration received from the transfer and any cumulative gain or loss that has been recognised directly in shareholders’ equity. The Group derecognises a financial liability (or part of it) only when the underlying present obligation (or part of it) is discharged. (f) Equity instrument An equity instrument is a contract that proves the ownership interest of the assets after deducting all liabilities in the Company. The consideration received from the issuance of equity instruments net of transaction costs is recognised in share capital and capital reserve. Consideration and transaction costs paid by the Company for repurchasing its own equity instrument are deducted from shareholders’ equity. (13) Employee benefits Employee benefits are all forms of considerations given and other related expenditures incurred in exchange for services rendered by employees. Except for termination benefits, employee benefits are recognised as a liability in the period in which the associated services are rendered by employees, with a corresponding increase in cost of relevant assets or expenses in the current period. 117 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (13) Employee benefits (continued) (a) Retirement benefits Pursuant to the relevant laws and regulations of the PRC, the Group has joined a defined contribution basic retirement scheme for the employees arranged by local Labour and Social Security Bureaus. The Group makes contributions to the retirement scheme at the applicable rates based on the amounts stipulated by the government organisation. The contributions are charged to profit or loss on an accrual basis. When employees retire, the local Labour and Social Security Bureaus are responsible for the payment of the basic retirement benefits to the retired employees. The Group does not have any other obligations in this respect. (b) Housing fund and other social insurances Besides the retirement benefits, pursuant to the relevant laws and regulations of the PRC, the Group has joined defined social security contributions for employees, such as a housing fund, basic medical insurance, unemployment insurance, injury insurance and maternity insurance. The Group makes contributions to the housing fund and other social insurances mentioned above at the applicable rate(s) based on the employees’ salaries. The contributions are recognised as cost of assets or charged to profit or loss on an accrual basis. (c) Share-based payments Share-based payments transactions in the Group are equity-settled share-based payments. - Equity-settled share-based payments Where the Group uses shares or other equity instruments as consideration for services received from the employees, the payment is measured at the fair value of the equity instruments granted to the employees. If the equity instruments granted to employees vest immediately, the fair value of the equity instruments granted is, on grant date, recognised as relevant cost or expenses with a corresponding increase in capital reserve. If the equity instruments granted to employees do not vest until the completion of services for a vesting period, or until the achievement of a specified performance condition, the Group, at each balance sheet date during the vesting period, makes the best estimation according to the latest information of the number of employees who are granted to vest and revises the number of equity instruments expected to vest. Based on the best estimation, the Group recognises the services received for the current period as related costs or expenses, with a corresponding increase in capital reserve, at an amount equal to the fair value of the equity instruments at the grant date. 118 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (13) Employee benefits (continued) (d) Termination benefits When the Group terminates the employment relationship with employees before the employment contracts have expired, or provides compensation as an offer to encourage employees to accept voluntary redundancy, a provision for the termination benefits provided, is recognised in profit or loss when both of the following conditions have been satisfied: - The Group has a formal plan for the termination of employment or has made an offer to employees for voluntary redundancy, which will be implemented shortly - The Group is not allowed to withdraw from termination plan or redundancy offer unilaterally. (14) Income tax Current tax and deferred tax are recognised in profit or loss except to the extent that they relate to items recognised directly in equity, in which case they are recognised in equity. Current tax is the expected tax payable calculated at the applicable tax rate on taxable income for the year, and any adjustment to tax payable in respect of previous years. Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases, which include the deductible losses and tax credits carryforward to subsequent periods. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax is not recognised for the temporary differences arising from the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting profit nor taxable profit (or tax loss). Deferred tax is not recognised for taxable temporary differences arising from the initial recognition of goodwill. At the balance sheet date, the amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates that are expected to be applied in the period when the asset is realised or the liability is settled in accordance with tax laws. 119 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (15) Provisions and contingent liabilities (continued) A provision is recognised if, as a result of a past event, the Group has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Where the effect of time value of money is material, provisions are determined by discounting the expected future cash flows. In terms of a possible obligation resulting from a past transaction or event, whose existence will only be confirmed by the occurrence or non-occurrence of uncertain future events or a present obligation resulting from a past transaction or event, where it is not probable that the settlement of the above obligation will cause an outflow of economic benefits, or the amount of the outflow can not be estimated reliably, the possible or present obligation is disclosed as a contingent liability. (16) Revenue recognition Revenue is the gross inflow of economic benefit in the periods arising in the course of the Group’s ordinary activities when the inflows result in increase in shareholder’s equity, other than increase relating to contributions from shareholders. Revenue is recognised in profit or loss when it is probable that the economic benefits will flow to the Group, the revenue and costs can be measured reliably and the following respective conditions are met: (a) Sale of goods Revenue from sale of goods is recognised when all of the general conditions stated above and following conditions are satisfied: - The significant risks and rewards of ownership of goods have been transferred to the buyer - The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold. Revenue from the sale of goods is measured at the fair value of the considerations received or receivable under the sales contract or agreement. (b) Rendering of services When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue from the rendering of services is recognised in the income statement by reference to the stage of completion of the transaction based on the progress of work performed. 120 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (16) Revenue recognition (continued) (b) Rendering of services (continued) Where the outcome of rendering of services cannot be estimated reliably, if the costs incurred are expected to be recoverable, revenues are recognised to the extent that the costs incurred that are expected to be recoverable, and an equivalent amount is charged to profit or loss as service cost; if the costs incurred are not expected to be recoverable, the costs incurred are recognised in profit or loss and no service revenue is recognised. (c) Interest income Interest income is recognised on a time proportion basis with reference to the principal outstanding and the applicable effective interest rate. (17) Government grants Government grants are transfers of monetary assets or non-monetary assets from the government to the Group at no consideration except for the capital contribution from the government as a shareholder of the Group. Special funds such as investment grants allocated by the government, if clearly defined in official documents as part of “capital reserve” are dealt with as capital contributions, and not regarded as government grants. A government grant is recognised when there is reasonable assurance that the grant will be received and that the Group will comply with the conditions associated with the grant. If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount that is received or receivable. If a government grant is in the form of a transfer of a non-monetary asset, it is measured at its fair value. A government grant related to an asset is recognised initially as deferred income and amortised to profit or loss on a straight-line basis over the useful life of the asset. A grant that compensates the Group for expenses to be incurred in the subsequent periods is recognised initially as deferred income and recognised in profit or loss in the same periods in which the expenses are recognised. A grant that compensates the Group for expenses incurred is recognised in profit or loss immediately. (18) Borrowing costs Borrowing costs incurred directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of the asset. Except for the above, other borrowing costs are recognised as financial expenses in the income statement when incurred. 121 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (18) Borrowing costs (continued) In the capitalisation period, the amount of interest (including amortisation of any discount or premium on borrowing) to be capitalised in each accounting period is determined as follows: - Where funds are borrowed specifically for the acquisition, construction or production of a qualifying asset, the amount of interest to be capitalised is the interest expense calculated using effective interest rates during the period less any interest income earned from depositing the borrowed funds or any investment income on the temporary investment of those funds before being used on the asset. - Where funds are borrowed generally and used for the acquisition, construction or production of a qualifying asset, the amount of interest to be capitalised on such borrowings is determined by applying a capitalisation rate to the weighted average of the excess amounts of cumulative expenditures on the asset over the above amounts of specific borrowings. The capitalisation rate is the weighted average of the interest rates applicable to the general-purpose borrowings. The effective interest rate is determined as the rate that exactly discounts estimated future cash flow through the expected life of the borrowing or, when appropriate, a shorter period to the carrying amount of the borrowings. The capitalisation period is the period from the date of commencement of capitalisation of borrowing costs to the date of cessation of capitalisation, excluding any period over which capitalisation is suspended. Capitalisation of borrowing costs commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities of acquisition, construction or production that are necessary to prepare the asset for its intended use or sale are in progress, and ceases when the assets become ready for their intended use or sale. Capitalisation of borrowing costs is suspended when the acquisition, construction or production activities are interrupted abnormally and the interruption lasts over three months. (19) Dividends appropriated to investors Dividends or distributions of profits proposed in the profit appropriation plan which will be authorised and declared after the balance sheet date, are not recognised as a liability at the balance sheet date but disclosed in the notes separately. 122 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (20) Related parties If the Group has the power to control, jointly control or exercise significant influence over another party, or vice versa, or where the Group and one or more parties are subject to common control, jointly control, or significant influence from another party, they are considered to be related parties. Related parties may be individuals or enterprises. Enterprises with which the Company is under common control only from the State and that have no other related party relationships are not regarded as related parties of the Group. The Company’s and its subsidiaries’ related parties include, but are not limited to: (a) the Company’s parent; (b) the Company’s subsidiaries; (c) enterprises that are controlled by the Company’s parent; (d) investors that have joint control over the Group; (e) investors that exercise significant influence over the Group; (f) joint ventures of the Group; (g) associates of the Group; (h) principal individual investors and close family members of such individuals; (i) key management personnel of the Group and close family members of such individuals; (j) key management personnel of the Company’s parent; (k) close family members of key management personnel of the Company’s parent; and (l) other enterprises that are controlled, jointly controlled or significantly influenced by principal individual investors, key management personnel of the Group, and close family members of such individuals. Besides the related parties stated above determined in accordance with the requirements of CAS (2006), the following enterprises and individuals are considered as (but not restricted to) related parties based on the disclosure requirements of Administrative Procedures on the Information Disclosures of Listed Companies issued by the CSRC: (m) enterprises that hold 5% or more of the Company’s shares or persons that act in concert; (n) individuals who directly or indirectly hold 5% or more of the Company’s shares and close family members of such individuals; (o) enterprises that satisfy any of the aforesaid conditions in (a), (c) and (m) during the past 12 months or will satisfy them within the next 12 months pursuant to a relevant agreement; 123 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (20) Related parties (continued) (p) individuals who satisfy any of the aforesaid conditions in (i), (j) and (n) during the past 12 months or will satisfy them within the next 12 months pursuant to a relevant agreement; and (q) enterprises, other than the Company and subsidiaries controlled by the Company, which are controlled directly or indirectly by an individual defined in (i), (j), (n) or (p), or in which such individual assumes the position of a director or senior executive. (21) Segment reporting Segment information is presented in respect of the Group’s business and geographical segments. A business segment is a distinguishable component of the Group that is engaged in providing an individual product or service or a group of related products or services and that is subject to risks and returns that are different from those of other component. A geographical segment is a distinguishable component of the Group that is engaged in providing products or services within a particular economic environment, which is subject to risks and rewards that are different from those of other segments. In accordance with the Group’s internal financial reporting system, the Group has chosen business segment information as the primary reporting format and geographical segment information as the secondary reporting format for the purposes of these financial statements. Segment revenue, expenses, results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis to that segment. Segment revenue, expenses, assets and liabilities are determined before intra-group balances and intra-group transactions are eliminated as part of the consolidation process, except to the extent that such intra-group balances and transactions are between group entities within a single segment. Inter-segment pricing is based on similar terms as those available to other external parties. Segment capital expenditure is the total cost incurred during the period to acquire or construct segment fixed assets and intangible assets. Unallocated items mainly comprise interest income and expenses, dividend income, investment income or loss arising from long-term equity investment, non-operating income and expenses, and income tax expenses. 124 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (22) Significant accounting estimates and judgments The preparation of financial statements requires management to make estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. 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 and in any future periods affected. Notes 25, 58 and 60 contain information about the assumptions and their risk factors relating to impairment of goodwill, share-based payments and fair value of financial instruments. Other key sources of estimation uncertainty are as follows: (a) Impairment of receivables As described in Note 3(12)(b), receivables that are measured at amortisation cost are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. If any such evidence exists, impairment loss is provided. Objective evidence of impairment includes observable data that comes to the attention of the Group about loss events such as a significant decline in the estimated future cash flow of an individual debtor or the portfolio of debtors, and significant changes in the financial condition that have an adverse effect on the debtor. If there is an indication that there has been a change in the factors used to determine the provision for impairment, the impairment loss recognised in prior years is reversed. (b) Impairment of non-financial long-term assets As described in Note 3(11), non-financial long-term assets are reviewed at each balance sheet date to determine whether the carrying amount exceeds the recoverable amount of the assets. If any such indication exists, impairment loss is provided. The recoverable amount of an asset (asset group) is the greater of its net selling price and its present value of expected future cash flows. Since a market price of the asset (the asset group) cannot be obtained reliably, the fair value of the asset cannot be estimated reliably. In assessing value in use, significant judgements are exercised over the asset’s production, selling price, related operating expenses and discounting rate to calculate the present value. All relevant materials which can be obtained are used for estimation of the recoverable amount, including the estimation of the production, selling price and related operating expenses based on reasonable and supportable assumption. 125 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (22) Significant accounting estimates and judgments (continued) (c) Depreciation and amortisation As described in Note 3(6) and (7), investment property, fixed assets and intangible assets are depreciated and amortised using the straight-line method over their estimated useful lives after taking into account residual value. The estimated useful lives are regularly reviewed to determine the depreciation and amortisation costs charged in each reporting period. The estimated useful lives are determined based on historical experiences of similar assets and the estimated technical changes. If there is an indication that there has been a change in the factors used to determine the depreciation or amortisation, the amount of depreciation or amortisation is revised. (d) Warranty provisions As described in Note 38, the Group makes provisions under the warranties it gives on sale of its products taking into account the group’s recent claim experience. Any increase or decrease in the provision will affect profit or loss in future years. (e) Functional currency As described in the Note 2(4), the Group determines its functional currencies based on the major currencies in business transactions. Since most revenue of subsidiaries within the container segment is denominated in US dollars, these subsidiaries choose US dollar as their functional currencies. For the same reason, the subsidiaries in the road transportation segment choose RMB. If there is an indication that there has been a change in the factors used to determine the functional currency, the functional currency is changed. (f) Income taxes Determining income tax provisions involves judgement on the future tax treatment of certain transactions. The Group carefully evaluates tax implications of transactions and tax provisions are set up accordingly. The tax treatment of such transactions is reconsidered periodically to take into account all changes in tax legislations. Deferred tax assets are recognised for tax losses not yet used and temporary deductible differences. As those deferred tax assets can only be recognised to the extent that it is probable that future taxable profit will be available against which the unused tax credits can be utilised, management’s judgement is required to assess the probability of future taxable profits. Management’s assessment is constantly reviewed and additional deferred tax assets are recognised if it becomes probable that future taxable profits will allow the deferred tax asset to be recovered. 126 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 4 CHANGES IN ACCOUNTING POLICIES (1) Changes in accounting policies and their effects The Group adopted CAS (2006) on 1 January 2007. The significant accounting policies applicable to the Group under CAS (2006) are summarised in Note 3. The Group has issued B shares, and the financial statements in prior years were reported by using the applicable PRC accounting regulations and the International Financial Reporting Standards (IFRS). Pursuant to the requirements of the Q&A No.1 in China Accounting Standards Bulletin No.1 (CAS Bulletin 1) issued by the MOF in November 2007, the Group, at the date of first-time adoption, made retrospective adjustments based on the following principles. Where the principles stipulated in CAS (2006) differ from those of the applicable PRC accounting regulations, and these principles in CAS (2006) are same as those adopted by the Group in preparing the financial statements in accordance with IFRS in prior years, the Group made retrospective adjustments to those items affected by the changes in accounting policies due to the first-time adoption of CAS (2006), based on the information used in preparing the financial statements in accordance with IFRS. In addition, the Group made retrospective adjustments to other items in accordance with the requirements of “CAS 38 – First-time Adoption of CAS” (CAS 38) and CAS Bulletin 1. Except for the retrospective adjustments described in item (a), (b), (c), (f), (g), (h), (i) and (j) which were made in accordance with the requirements of CAS 38 and CAS Bulletin 1, no other retrospective adjustments resulted from the changes in accounting policies. Upon the adoption of CAS (2006), the Group’s significant accounting policies changed as follows: (a) Business combinations and goodwill The previous accounting policy for business combination required that the excess of the cost of acquisition over the Group’s interest in the shareholder’s equity of the acquiree be recognised as equity investment differences or goodwill, which was amortised to profit and loss on a straight line basis, while the shortfall of the cost of acquisition over the Group’s interest in the shareholder’s equity of the acquiree was recognised in capital reserve or as negative goodwill. Under CAS (2006), the accounting principles for business combinations involving entities under common control differ from those for business combinations involving enterprises not under common control (see Note 3(1)). Goodwill recognised in a business combination involving enterprises not under common control is no longer amortised. For business combinations completed before 1 January 2007, the Group retrospectively adjusted it in accordance with the same principles as those for investments in subsidiaries (see Note 4(1)(b)). Except that, the Group made the following adjustments on 1 January 2007: 127 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 4 CHANGES IN ACCOUNTING POLICIES (CONTINUED) (1) Changes in accounting policies and their effects (continued) (a) Business combinations and goodwill (continued) - For goodwill resulting from a business combination involving enterprises not under common control completed before 1 January 2007, the balance were adjusted retrospectively based on the information used in preparing the financial statements in accordance with IFRS. - The difference between the fair value and book value of identifiable assets and liabilities of acquiree in the acquiring day, was apportioned to the identifiable assets and liabilities of acquiree in reasonable method, depreciation was provided or amortization was made against the identifiable assets of acquiree in the remaining durable years, and the depreciation or aromatization is charged to the items of earning on investment in consolidated profit statement. The difference of business combination cost over the fair value of the identifiable net assets of acquiree in the acquiring day was listed as goodwill in the consolidated balance sheet. - The Group performed an impairment test on the goodwill on 1 January 2007. Any provision for impairment is provided against the carrying amount of the goodwill. The 2006 comparative items were accordingly retrospectively adjusted. (b) Investments in subsidiaries In the Company’s separate financial statements, investments in subsidiaries were accounted for using the equity method before 1 January 2007. Such investments are now accounted for using the cost method. On 1 January 2007, investments in subsidiaries before 1 January 2007 were changed retrospectively in accordance with the accounting policy in Note 3(5)(a) based on the information used in preparing the financial statements in accordance with IFRS. (c) Financial instruments Before 1 January 2007, financial assets, financial liabilities and equity instruments were measured at historical costs. As of 1 January 2007, they are now measured at fair value, amortisation cost or cost according to the classification based on the principle in Note 3(12). The following adjustments were made because of the change in accounting policies of financial instruments on 1 January 2007: - On 1 January 2007, the accounting policies of financial assets (except for derivatives that are effective hedging instruments) were changed retrospectively based on the information used in preparing the financial statements in accordance with IFRS. 128 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 4 CHANGES IN ACCOUNTING POLICIES (CONTINUED) (1) Changes in accounting policies and their effects (continued) (d) Intangible assets Before 1 January 2007, expenditures on the development phase of an internal research and development projects were previously recognised in profit or loss when incurred. As of 1 January 2007, such expenditures are now capitalised if certain criteria are met. Before 1 January 2007, intangible assets with indefinite useful lives were amortised on the straight-line method over the period of not more than 10 years. As of 1 January 2007 such intangible assets are no longer amortised. The unamortised balances of such intangible assets at 31 December 2006 were treated as the deemed costs of the intangible assets as at 1 January 2007. No retrospective adjustment has been made by the Group for the above change of accounting policy on intangible assets. (e) Reversal of impairment loss of non-financial long-term assets Before 1 January 2007, for an asset, such as a long-term equity investment, fixed asset, intangible asset, if there is an indication that there has been a change in the factors used to determine the provision for impairment and as a result the estimated recoverable amount is greater than its carrying amount, the impairment loss recognised in prior years was to be reversed. The impairment loss is reversed only to the extent of the asset’s carrying amount that would have been determined had no impairment loss been recognised in prior years. As of 1 January 2007, such impairment loss is no longer permitted to be reversed. No retrospective adjustment has been made by the Group for the above change of accounting policy on asset impairment. (f) Income tax Before 1 January 2007, income tax was previously accounted for using tax payable method. As of 1 January 2007, it is accounted for using the liability method. On 1 January 2007, deferred taxes arising from temporary differences between the carrying amounts and the tax bases of assets and liabilities were retrospectively adjusted. The relevant 2006 comparative items have been adjusted accordingly. (g) Government grants Before 1 January 2007, a government grant related to an asset (excluding capital contribution from the government) was recognised in capital reserve once it complied with the conditions associated. As of 1 January 2007, such government grant is recognised initially as deferred income and recognised in profit or loss on a straight-line basis over the useful life of the asset. 129 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 4 CHANGES IN ACCOUNTING POLICIES (CONTINUED) (1) Changes in accounting policies and their effects (continued) (g) Government grants (continued) Retrospective adjustment has been made by the Group for the above change of accounting policy on government grants based on the information used in preparing the financial statements in accordance with IFRS. (h) Borrowing costs Before 1 January 2007, borrowing costs on funds borrowed for general purposes and used for the acquisition or construction of fixed assets, and borrowing costs on parts of the funds borrowed specifically for the acquisition or construction of fixed assets which have not been put into use (less any interest income earned from depositing the borrowed funds or any investment income on the temporary investment of those funds before being used on the asset), and borrowing costs on the funds borrowed and used for the acquisition or construction of intangible assets or production of qualifying inventory, were recognised in profit or loss when incurred. As of 1 January 2007, such borrowing costs are now capitalised as part of the cost of assets, when certain conditions are satisfied. Retrospective adjustment has been made by the Group for the above change of accounting policy on borrowing costs based on the information used in preparing the financial statements in accordance with IFRS. (i) Pre-operating expenses Before 1 January 2007, except for expenditures on acquisition or construction of fixed assets, all expenses incurred during the start-up period were recognised as long-term deferred expenses and then fully charged to profit or loss in the month operation commenced. Such pre-operating expenses are now charged to profit or loss when incurred. Retrospective adjustment has been made by the Group for the above change of accounting policy on pre-operating expenses based on the information used in preparing the financial statements in accordance with IFRS. (j) Surplus Reserve Before 1 January 2007, the Group provided surplus reserve for minority interests when preparing its consolidated financial statements. Such surplus reserve was no longer provided. On 1 January 2007, surplus reserve was retrospectively adjusted. The relevant 2006 comparative items have been adjusted accordingly. 130 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 4 Changes in accounting policies (continued) (2) Effects of the above changes in accounting policies Group’s net profits and shareholders’ equity in thousands of U.S dollars are summarised as follows: The Group 2006 Closing Opening balance of balance of shareholders’ shareholders’ Notes Net profit equity equity Net Net profit and shareholders’ equity before adjustments 368,091 1,533,055 1,282,434 31 ---------------- ---------------- ---------------- --------- Credit balance of other long-term equity investment differences measured using the equity method 4(1)a 3,953 (669) (4,622) Investment in subsidiaries 4(1)b - - - (12 Financial assets at fair value through profit or loss, and available-for-sale financial assets 4(1)c (3,623) 145,821 4,974 Derivative financial instruments 4(1)c 570 1,151 581 Income tax 4(1)f 4,069 (6,503) 10,637 Government grant 4(1)g 1,925 (679) - Borrowing cost 4(1)h 56 3,056 3,000 Pre-operating expenses 4(1)i (802) (902) (100) Total 6,148 141,275 14,470 (12 ---------------- ---------------- ---------------- --------- Net profit and shareholders’ equity after adjustments 374,239 1,674,330 1,296,904 18 131 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 4 Changes in accounting policies (continued) (2) Effects of the above changes in accounting policies Group’s net profits and shareholders’ equity in thousands of RMB are summarised as follows: (continued) The Group 2006 Closing Opening balance of balance of shareholders’ shareholders’ Notes Net profit equity equity Net Net profit and shareholders’ equity before adjustments 2,935,230 11,965,644 10,349,497 2,52 ---------------- ---------------- ---------------- --------- Credit balance of other long-term equity investment differences measured using the equity method 4(1)a 30,856 (5,220) (36,076) Investment in subsidiaries 4(1)b - - - (1,00 Financial assets at fair value through profit or loss, and available- for-sale financial assets 4(1)c (28,799) 1,138,151 38,824 Derivative financial instruments 4(1)c 4,447 8,986 4,539 ( Income tax 4(1)f 31,757 (50,756) 86,859 Government grant 4(1)g 16,584 (5,308) - ( Borrowing cost 4(1)h 438 23,852 23,414 Pre-operating expenses 4(1)i (6,254) (7,037) (782) Total 49,029 1,102,668 116,778 (1,01 ---------------- ---------------- ---------------- --------- Net profit and shareholders’ equity after adjustments 2,984,259 13,068,312 10,466,275 1,50 132 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 4 Changes in accounting policies (continued) (2) Effects of the above changes in accounting policies Group’s net profits and shareholders’ equity in thousands of U.S dollar are summarised as follows: (continued) Affected assets and liabilities items in the balance sheet as at 31 December 2006 The Group Before After B Notes adjustment Adjustment adjustment adjus Short-term investments * 23,202 (23,202) - 1 Financial assets held for trading * - 28,784 28,784 Available-for-sale financial assets * - 195,302 195,302 Accounts receivable 664,191 (411) 663,780 Subsidy receivables 29,193 (29,193) - Dividends receivable 577 - 577 16 Other receivable 31,664 31,935 63,599 73 Deferred expenses * 2,332 (2,332) - Inventories 605,697 6 605,703 Long-term equity investments 175,669 (92,888) 82,781 84 Fixed assets * 628,882 (33,861) 595,021 1 Construction in progress * 85,427 (41,876) 43,551 Intangible assets * 101,861 72,372 174,233 Investment property * - 6,415 6,415 Goodwill - 37,627 37,627 Long-term deferred expenses 5,395 (901) 4,494 Long-term receivables * - 7,512 7,512 Finance lease receivables * 7,512 (7,512) - Deferred tax assets - 14,706 14,706 133 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 4 Changes in accounting policies (continued) (2) Effects of the above changes in accounting policies Group’s net profits and shareholders’ equity in thousands of U.S dollars are summarised as follows: (continued) Affected assets and liabilities items in the balance sheet as at 31 December 2006 The Group Before After B Notes adjustment Adjustment adjustment adjus Non-current assets due within one year * - 939 939 Finance lease receivable due within one year * 939 (939) - Interest payable * - (4,447) (4,447) Accrued payroll * (125,805) 125,805 - (7 Staff welfare payable * (4,511) 4,511 - Employee benefits payable * - (130,329) (130,329) Other payables (94,953) (24,376) (119,329) (25 Taxes payable * 39,923 (39,923) - Taxes payable * - 39,240 39,240 Provisions (72,182) (1,605) (73,787) Accrued expenses * (31,125) 31,125 - Deferred income * - (792) (792) Special payables * (10,071) 792 (9,279) Deferred tax liabilities - (21,209) (21,209) Total 2,063,817 141,275 2,205,092 1,46 * Apart from the retrospective adjustments made on relevant items in the balance sheet as at 31 4(1), certain items in the comparative figures of 2006 have been reclassified to conform to the re 134 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 4 Changes in accounting policies (continued) (2) Effects of the above changes in accounting policies Group’s net profits and shareholders’ equity in thousands of U.S dollars are summarised as follows: (continued) Affected income and expenses items in the income statement for the year ended 31 December 2006 The Group Before After B Notes adjustment Adjustment adjustment adjus Sales from principal activities * (4,159,389) 4,159,389 - Operating income * - (4,210,286) (4,210,286) Costs from principal activities * 3,597,676 (3,597,676) - Operating cost * - 3,613,794 3,613,794 Other operating profit * (34,780) 34,780 - General and administrative expenses 112,073 25,439 137,512 2 Financial expenses 8,055 (229) 7,826 ( Gain on changes in fair value * - (26) (26) Impairment loss reversal * - (27,699) (27,699) Investment income (48,030) (697) (48,727) (33 Subsidy income * (950) 950 - Non-operating expenses 2,086 164 2,250 Non-operating income (2,023) (2,484) (4,507) Income tax expenses 29,467 (4,069) 25,398 Unrecognised investment loss (2,502) 2,502 - Total (498,317) (6,148) (504,465) (31 * Apart from the retrospective adjustments made on relevant items in the balance sheet as at 31 4(1), certain items in the comparative figures of 2006 have been reclassified to conform to the re 135 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 4 Changes in accounting policies (continued) (2) Effects of the above changes in accounting policies Group’s net profits and shareholders’ equity in thousands of RMB are summarised as follows: (continued) Affected assets and liabilities items in the balance sheet as at 31 December 2006 The Group Before After B Notes adjustment Adjustment adjustment adjus Short-term investments * 181,097 (181,097) - 11 Financial assets held for trading * - 224,664 224,664 Available-for-sale financial assets * - 1,524,355 1,524,355 Accounts receivable 5,184,079 (3,211) 5,180,868 Subsidy receivables * 227,853 (227,853) - Dividends receivable 4,501 - 4,501 1,31 Other receivable 247,132 249,265 496,397 5,76 Deferred expenses * 18,201 (18,201) - Inventories 4,727,524 46 4,727,570 Long-term equity investments 1,371,111 (724,996) 646,115 6,63 Fixed assets * 4,908,486 (264,290) 4,644,196 15 Construction in progress * 666,762 (326,840) 339,922 Intangible assets * 795,038 564,871 1,359,909 1 Investment property * - 50,066 50,066 Goodwill - 293,682 293,682 Long-term deferred expenses 42,112 (7,037) 35,075 1 Long-term receivables * - 58,635 58,635 Finance lease receivables * 58,635 (58,635) - Deferred tax assets - 114,780 114,780 136 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 4 Changes in accounting policies (continued) (2) Effects of the above changes in accounting policies Group’s net profits and shareholders’ equity in thousands of RMB are summarised as follows: (continued) Affected assets and liabilities items in the balance sheet as at 31 December 2006 The Group Before After B Notes adjustment Adjustment adjustment adjus Non-current assets due within one year * - 7,328 7,328 Finance lease receivables due within one year * 7,328 (7,328) - Interest payable * - (34,720) (34,720) Accrued payroll * (981,921) 981,921 - (56 Staff welfare payable * (35,205) 35,205 - Employee benefits payable * - (1,017,233) (1,017,233) Other payables (741,120) (190,254) (931,374) (2,01 Taxes payable * 311,605 (311,605) - ( Taxes payable * - 306,275 306,275 Accrued expenses * (242,935) 242,935 - Provisions (563,391) (12,524) (575,915) Deferred income * - (6,183) (6,183) Special payables * (78,604) 6,183 (72,421) ( Deferred tax liabilities - (165,536) (165,536) Total 16,108,288 1,102,668 17,210,956 11,42 * Apart from the retrospective adjustments made on relevant items in the balance sheet as at 31 4(1), certain items in the comparative figures of 2006 have been reclassified to conform to the re 137 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 4 Changes in accounting policies (continued) (2) Effects of the above changes in accounting policies Group’s net profits and shareholders’ equity in thousands of RMB are summarised as follows: (continued) Affected income and expenses items in the income statement for the year ended 31 December 2006 The Group Before After B Notes adjustment Adjustment adjustment adjus Sales from principal activities * (33,167,801) 33,167,801 - Operating income * - (33,573,664) (33,573,664) Costs from principal activities * 28,688,590 (28,688,590) - Operating cost * - 28,817,113 28,817,113 Other operating profit * (277,340) 277,340 - General and administrative expenses 893,686 202,863 1,096,549 21 Financial expenses 64,233 (1,828) 62,405 (7 Gain from changes in fair value * - (207) (207) Impairment loss reversal * - (220,881) (220,881) Investment income (382,998) (5,561) (388,559) (2,66 Subsidy income * (7,574) 7,574 - Non-operating expenses 16,632 1,310 17,942 Non-operating income (16,129) (19,811) (35,940) ( Income tax expenses 234,970 (32,441) 202,529 Unrecognised investment loss * (19,953) 19,953 - Total (3,973,684) (49,029) (4,022,713) (2,52 * Apart from the retrospective adjustments made on relevant items in the balance sheet as at 31 4(1), certain items in the comparative figures of 2006 have been reclassified to conform to the re 138 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 5 TAXATION (1) The types of taxes applicable to the Group’s sale of goods and rendering of services include business tax, value added tax (VAT) and education surcharge. Their tax rates are as follows: Business tax rate: 3% - 5% VAT rate: 17% Education surcharge rate: 3% (2) Income tax The income tax rates applicable to the Group for the year are as follows: 2007 2006 The Company 15% 15% Domestic subsidiaries 0-33% 0-33% Subsidiaries registered in Hong Kong 17.5% 17.5% Subsidiaries registered in British Virgin Islands - - Subsidiary registered in Suriname 38% 38% Subsidiary registered in Cambodia 30% 30% Subsidiary registered in US 40% 40% Subsidiary registered in Britain 30% 30% Subsidiary registered in Australia 30% 30% Subsidiary registered in Holland 30% 30% Subsidiary registered in Belgium 34% 34% Subsidiary registered in Denmark 30% 30% Subsidiary registered in Finland 28% 28% Subsidiary registered in Poland 28% 28% Subsidiary registered in Thailand 30% 30% The Group’s subsidiaries that are entitled to preferential tax treatments are as follows: Local Statutory Preferential Name of enterprises tax rate rate Reasons 1 Nantong CIMC Shunda Containers 24% 12% Export revenue over 70% Co., Ltd. of total revenue, 50% reduction in statutory income tax rate 2 Shanghai CIMC Reefer Containers 15% 10% Technology-intensive and Co., Ltd. knowledge-intensive enterprise located in the economic and technical development zone; export revenue over 70% of total revenue, 50% reduction in statutory income tax rate 139 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 5 TAXATION (CONTINUED) (2) Income tax (continued) Local Statutory Preferential Name of enterprises tax rate rate Reasons 3 Xinhui CIMC Container Co., Ltd. 24% 12% Export revenue over 70% of total revenue, 50% reduction in statutory income tax rate 4 Qingdao CIMC Reefer Containers 24%1 2% Export revenue over 70% of Co., Ltd. total revenue, 50% reduction in statutory income tax rate 5 Shanghai CIMC Baowell Industries Co., Ltd. 24% 12% Export revenue over 70% of total revenue, 50% reduction in statutory income tax rate 6 Qingdao CIMC Containers Co., Ltd. 15% 10% Export revenue over 70% of total revenue, 50% reduction in statutory income tax rate but not less than 10% 7 Nantong CIMC Special 24% 12% Export revenue over 70% of Transportation Equipments total revenue, 50% reduction Co., Ltd. in statutory income tax rate 8 Yangzhou CIMC Tong Hua 27% 15% Approved by local tax authority rate since 2002 (2002) Yang Guo Shui Wai Fen Zi No. 2008 9 Shenzhen Southern CIMC 15% 7.5% Entitled to tax holiday of “one- Containers Service Co., Ltd. year exemption and two-year reduction”, and 2007 is the third profit making year 10 Qingdao CIMC Special Reefer 24% 12% Entitled to tax holiday of “two- Co., Ltd year exemption and three-year reduction”, and 2007 is the third profit making year 11 Guangdong Xinhui CIMC Special 24% 12% Entitled to tax holiday of “two-year Transportation Equipments CO., LTD exemption and three-year reduction”, and 2007 is the third profit making year 12 Nantong CIMC Tank Equipments 24% 12% Entitled to tax holiday of “two-year Co., Ltd. exemption and three-year reduction”, and 2007 is the fourth profit making year 13 Dalian CIMC Containers Co., Ltd. 15% 7.5% Entitled to tax holiday of “two-year exemption and three-year reduction”, and 2007 is the fourth profit making year 14 Shenzhen CIMC Special Vehicle 15% 7.5% Entitled to tax holiday of Co., Ltd. “two-year exemption and three-year reduction”, and2007 is the third profit making year 140 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 5 TAXATION (CONTINUED) (2) Income tax (continued) Local Statutory Preferential Name of enterprises tax rate rate Reasons 15 Ningbo CIMC Logistic Equipments 16.5% 8.25% Entitled to tax holiday of Co., Ltd. “two-year exemption and three-year reduction”, and 2007 is the fourth profit making year 16 Zhangzhou CIMC Containers 24% 12% Entitled to tax holiday of Co., Ltd. “two-year exemption and three-year reduction”, and 2007 is the fourth profit making year 17 Shenzhen Southern CIMC Eastern 15% 7.5% Entitled to tax holiday of Logistics Equipments Co., Ltd. “two-year exemption and three-year reduction”, and 2007 is the fourth profit making year 18 Dalian CIMC Logistics Equipments 15% 7.5% Entitled to tax holiday of Co., Ltd. “two-year exemption and three-year reduction”, and 2007 is the third profit making year 19 Yangzhou Runyang Logistics 24% 12% Entitled to tax holiday of Co., Ltd. “two-year exemption and three-year reduction”, and 2007 is the third profit making year 20 Jiaxing CIMC Wood Co., Ltd. 24% - Entitled to tax holiday of “two-year exemption and three-year reduction”, and 2007 is the second profit making year 21 Tianjin CIMC Logistics Equipments 15% - Entitled to tax holiday of Co., Ltd. “two-year exemption and three-year reduction”, and 2007 is the second profit making year 22 Taicang CIMC Containers Co., Ltd 24% - Entitled to tax holiday of Co., Ltd. “two-year exemption and three-year reduction”, and 2007 is the second profit making year 23 Zhangjiagang CIMC Sanctum 24% - Entitled to tax holiday of Cryogenic Equipment Co., Ltd. “two-year exemption and three-year reduction”, and 2007 is the second profit making year 24 Xinhui CIMC Container Flooring 24% 12% Entitled to tax holiday of Co., Ltd. “two-year exemption and three-year reduction”, and 2007 is the fourth profit making year 25 Zhumadian CIMC Huajun Vehicle Entitled to tax holiday of Co., Ltd. “two-year exemption and three-year reduction”, and 2007 is the third profit making year 141 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 5 TAXATION (CONTINUED) (2) Income tax (continued) Effective from 1 January 2008, the statutory income tax rate for the Company and its domestic subsidiaries will be 25%. According to the Notice for Transitional Preferential Tax Policies of Enterprise Income Tax (Guo Fa [2007] No. 39) issued by the State Council, the tax rate for the companies which were previously entitled to preferential tax rates will gradually transition to the statutory tax rate of 25% within 5 years. The tax rate for the enterprises which are entitled to preferential tax rate of 15% will be 18% in 2008, 20% in 2009, 22% in 2010, 24% in 2011 and 25% in 2012; the tax rate for the enterprises whose applicable tax rates were 24% and above or equal to 25% will be 25% starting from 2008. Effective from 1 January 2008, the companies which are previously entitled to tax holidays of “two-year exemption and three-year reduction” and “one-year exemption and two-year reduction” will continue to enjoy the tax holidays until their expirations. The reduced tax rates will be based on the applicable tax rate in the transitional period. The applicable tax rate will be the statutory tax rate after the expirations of tax holidays. (3) Taxes payable The Group 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Business tax payable 200 1,458 66 514 VAT deductible (93,301) (681,490) (56,815) (443,448) Income tax payable 30,912 225,789 12,915 100,806 Withholding tax 9,772 71,377 1,934 15,091 Other 2,481 18,123 2,660 20,762 Total (49,936) (364,743) (39,240) (306,275) The Company 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Withholding tax 7,914 57,804 353 2,751 Income tax payable 6,301 46,025 - - Total 14,215 103,829 353 2,751 142 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) At 31 December 2007, the consolidated financial statements include the following subsidiaries: (a) Subsidiaries set up by the Company: Subsidiaries set up by the Company are as follows. The Company is the ultimate controller of these (i) Domestic subsidiaries: Registered capital Amount of Organisation Registration Business original Name code place nature Currency currency Business scope 1 Shenzhen Southern CIMC 618908520 Guangdong Sino-foreign USD 16,600,000.00 Manufacture, repair and sale of contain Containers , China joint venture manufacture of various mechanical pa Manufacture Co., equipments; container stockpiling business Ltd.(SCIMC) 2 Shenzhen Southern CIMC 769168750 Guangdong Sino-foreign USD 16,600,000.00 Manufacture and repair of container, process Eastern Logistics , China joint venture of various mechanical parts, structures and Equipment Manufacturing and manufacture of new-style special road Co., Ltd. (SCIMCEL) equipment; container stockpiling business 3 Xinhui CIMC Container 61773847-8 Guangdong Sino-foreign USD 24,000,000.00 Manufacture, repair and sale of contain Co., Ltd.(XHCIMC) , China joint venture manufacture of various mechanical pa equipments 4 Nantong CIMC Shunda 60830980-7 Jiangsu, Sino-foreign USD 7,700,000.00 Manufacture, repair and sale of contain Containers Co., Ltd. China joint venture manufacture of various mechanical pa (NTCIMC) equipments 5 Shanghai CIMC Far East 60726170-6 Shanghai, Sino-foreign USD 9,480,000.00 Manufacture, repair and sale of contain Container Co., Ltd China joint venture manufacture of various mechanical pa (SHFE) equipments 6 Tianjin CIMC North Ocean 60055332-X Tianjin, Sino-foreign USD 16,682,000.00 Manufacture and sale of container as we Container Co., Ltd. China joint venture equipment and steel structure specially (TJCIMC) warehousing and after service for container 7 Tianjin CIMC Containers 77361818-7 Tianjin, Sino-foreign USD 23,000,000.00 Manufacture and sale of container as well Co., Ltd.(TJCIMC) China joint venture advisory; processing and manufacture of parts, structures and equipments; container sto 8 Qingdao CIMC Container 71371940-2 Shandong, Sino-foreign USD 27,840,000.00 Manufacture and repair of container, process Manufacture Co., China joint venture of various mechanical parts, structures and eq Ltd.(QDCC) 143 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) At 31 December 2007, the consolidated financial statements include the following subsidiaries: (co (a) Subsidiaries set up by the Company: (continued) (i) Domestic subsidiaries: (continued) Registered capital Amount of Organisation Registration Business original Name code place nature Currency currency Business scope 9 Dalian CIMC Container 751584887 Dalian, Sino-foreign USD 17,400,000.00 Manufacture and sale of container as well Co., Ltd.(DLCIMC) China joint venture advisory; processing and manufacture of parts, structures and equipments; container sto 10 Ningbo CIMC Logistics 753276730 Ningbo, Sino-foreign USD 15,000,000.00 Manufacture and sale of container as well Equipment Co., Ltd. China joint venture advisory; processing and manufacture of (NBCIMC) parts, structures and equipments; container sto 11 Shanghai CIMC Baowell 60727026-9 Shanghai, Sino-foreign USD 28,500,000.00 Manufacture and sale of container as well Industries Co., China joint venture advisory; processing and manufacture of Ltd.(SBWI) parts, structures and equipments; container sto 12 Taicang CIMC Containers 76150720-1 Jiangsu, Sino-foreign USD 40,000,000.00 Manufacture and repair of container, process Co., Ltd.(TCCIMC) China joint venture of various mechanical parts, structures and eq 13 Zhangzhou CIMC Container 74166213-2 Fujian, Sino-foreign USD 23,000,000.00 Manufacture and sale of container as well Co., Ltd.(ZZCIMC) China joint venture advisory; processing and manufacture of parts, structures and equipments 14 Yangzhou Runyang 77320198-X Jiangsu, Foreign-fun USD 5,000,000.00 Manufacture, repair and sale of contain Logistics Equipments China ded manufacture of various mechanical pa Co., Ltd.(YZRYL) enterprise equipments 15 Shanghai CIMC Yangshan 77978043-3 Shanghai, Sino-foreign USD 20,000,000.00 Manufacture and sale of container as well Logistics Equipments China joint venture advisory; processing and manufacture of Co., Ltd.(SHYSLE) parts, structures and equipments; container sto 16 Shanghai CIMC Reefer 60731217-4 Shanghai, Sino-foreign USD 31,000,000.00 Manufacture and sale of refrigeration and hea Containers Co., Ltd. China joint venture of reefer container, refrigerator car and he (SCRC) providing relevant technical advisory and ma 17 Qingdao CIMC Reefer 71371939-X Shandong, Sino-foreign USD 39,060,000.00 Manufacture and sale of refrigeration and hea Container Manufacture China joint venture of reefer container, refrigerator car and he Co., Ltd.(QDCRC) providing relevant technical advisory and ma 18 Yangzhou Tonglee Reefer 608708058 Jiangsu, Sino-foreign USD 8,000,000.00 Manufacture and sale of reefer container an Container Co., China joint venture providing relevant technical advisory and ma Ltd.(TLC) 144 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) At 31 December 2007, the consolidated financial statements include the following subsidiaries: (co (a) Subsidiaries set up by the Company: (continued) (i) Domestic subsidiaries: (continued) Registered capital Amount of Organisation Registration Business original Name code place nature Currency currency Business scope 19 Yangzhou Tonglee Reefer 785881878 Jiangsu, Sole-funded USD 1,000,000.00 Manufacture and sale of reefer container an Equipment Co., China by foreign providing relevant technical advisory and ma Ltd.(TLRC) businessmen 20 Nantong CIMC Special 703728006 Jiangsu, Sino-foreign USD 10,000,000.00 Manufacture, sale and repair of various tro Transportation China joint venture various special storing and transporting equip Equipment Manufacture Co., Ltd. (NTCIMCS) 21 Xinhui CIMC Special 74629484-2 Guangdong Sino-foreign USD 9,000,000.00 Manufacture and sale of various cont Transportation Equipment , China joint venture container product and relevant components Co., Ltd.(XHCIMCS) leasing, maintenance and relevant technical a 22 Nantong CIMC Tank 752015352 Jiangsu, Sino-foreign USD 25,000,000.00 Manufacture and sale of various cont Equipment Co., Ltd. China joint venture container product and relevant components (NTCIMCT) maintenance service for relevant equipments 23 Qingdao CIMC Special 76027144-4 Shandong, Sino-foreign USD 11,500,000.00 Manufacture and sale of various cont Reefer Co., China joint venture container product and relevant components Ltd.(QDCSR) leasing, maintenance and relevant technical a 24 Tianjin CIMC Logistics 77730246-2 Tianjin, Sino-foreign USD 5,000,000.00 Design, manufacture, sale, maintenance an Equipments Co., Ltd. China joint venture advisory for logistics equipments and relev (TJCIMCLE) parts 25 Dalian CIMC Logistics 76443524-X Dalian, Sino-foreign USD 17,700,000.00 Design, manufacture, sale, maintenance an Equipment Co., Ltd. China joint venture advisory for international trade, entrep (DLL) equipment and pressure vessel 26 Dalian CIMC Railway 77727911-9 Liaoning, Sino-foreign USD 20,000,000.00 Design, manufacture and sale of vario Equipment Co., Ltd. China joint venture equipment products such as railway cont (DLCIMCS) wagon and hopper wagon 27 Nantong CIMC Large-Sized 70104175 Jiangsu, Sole-funded USD 33,000,000.00 Design, production and sale of tank a Tank Co., Ltd. China by foreign undertaking tank-related general contracting (NTCIMCLST) businessmen relevant after service 145 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) At 31 December 2007, the consolidated financial statements include the following subsidiaries: (co (a) Subsidiaries set up by the Company: (continued) (i) Domestic subsidiaries: (continued) Registered capital Amount of Organisation Registration Business original Name code place nature Currency currency Business scope 28 Shenzhen CIMC Vehicle 76345702-5 Guangdong, Sino-foreign RMB 3,000,000.00 Sales of various special vehicles and refitti Sales Co., China joint venture trailer, box car produced by CIMC and its su Ltd.(SZCVS) sales of chassis, tractor and relevant com providing after service 29 Shenzhen CIMC Special 75860190X Guangdong, Sino-foreign RMB 200,000,000.00 Development, production and sales of Vehicle Co., China joint venture vehicles, refitting vehicles, special vehicles, Ltd.(CIMCSV) as relevant components and parts; providing service 30 Yangzhou CIMC Tong Hua 60870648-2 Jiangsu, Sino-foreign RMB 143,656,000.00 Development, production and sales of Special Vehicles Co., China joint venture vehicles, refitting vehicles, special vehicles, Ltd. as relevant components and parts; providing (YZTH) service 31 Yangzhou Xinghua 60870728-2 Jiangsu, Sino-foreign RMB 9,910,000.00 Machining and production of special steel str Machinery Co., China joint venture sales of products produced by the company Ltd.(YZXH) 32 CIMC Vehicle (Shandong) 61320142-X Shandong, Sino-foreign USD 18,930,100.00 Development and manufacture of refrigerator Co., Ltd.(KGR) China joint venture box car, special vehicles and various series technical service 33 Zhumadian CIMC 17591422-6 Henan, Sino-foreign RMB 105,340,000.00 Refitting of special vehicles, sales of trailer Huajun Vehicle Co., China joint venture vehicle-related materials Ltd.(HJCIMC) 34 Qingdao CIMC Special 76671523-7 Shandong, Sino-foreign RMB 35,000,000.00 Development, production and sales of Vehicles Co., China joint venture vehicles, trailer series as well as components Ltd.(QDSV) advisory and after service 35 Zhangjiagang CIMC 71854007-3 Jiangsu, Sino-foreign RMB 144,862,042.01 Development, manufacture and installation o Shendayin Machinery China joint venture petrochemical mechanical equipment, tank Co., Ltd. (SDY) vessel; providing relevant after service 146 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) At 31 December 2007, the consolidated financial statements include the following subsidiaries: (co (a) Subsidiaries set up by the Company: (continued) (i) Domestic subsidiaries: (continued) Registered capital Amount of Organisation Registration Business original Name code place nature Currency currency Business scope 36 Yangzhou CIMC Tonghua 76914300-0 Jiangsu, Sino-foreign USD 17,500,000.00 Development and production of various tr Tank Equipment Co., Ltd. China joint venture vehicles and tank equipment as well as comp (YZTHT) providing relevant technical service 37 Shanghai CIMC Vehicle 770922079 Shanghai, Sino-foreign RMB 90,204,082.00 Development, construction, operation, lea Logistics Equipments Co., China joint venture warehousing and auxiliary facilities; property Ltd. (SHL) relevant service 38 Yangzhou Xincheng 738252378 Jiangsu, Sino-foreign RMB 500,000.00 Purchasing and selling agent for automobile fittin Tonghua Automobile Parts Sales China joint venture routine electric appliances Co., Ltd.(XCTH) 39 Shanghai CIMC Transport 781865153 Shanghai, Sino-foreign RMB 500,000.00 Transport and advisory for routine goods; wareho Service Co., China joint venture Ltd.(SHXMK) 40 Beijing CIMC Vehicle 78095118-0 Beijing, Sino-foreign RMB 20,000,000.00 Construction and operation of auxiliary warehou Logistics Equipments Co., China joint venture Ltd. (BJVL) 41 Shanghai CIMC Automobile 133421941 Shanghai, Sino-foreign RMB 1,130,000.00 Automobile examination and repair; purchasing Examination and Repair Co., China joint venture for automobile fittings, decoration material Ltd (SHVT) hardware, electrical appliances, rubber products, 42 Shanghai CIMC Automobile 750332725 Shanghai, Sino-foreign RMB 5,000,000.00 Wholesale and retail of automobile fittings; sa Sales Service Co., Ltd.(SHVS) China joint venture (excluding sedan); processing, assembly and m body 43 Beijing CIMC Automobile 78617496-8 Beijing, Sino-foreign RMB 5,000,000.00 Sales of automobile, automobile fittings, metal Sales Service Co., Ltd. China joint venture and export of goods; repair of mechanical equip (BJVS) insurance agency 44 CIMC Vehicle (Liaoning) 78162475-5 Liaoning, Sino-foreign RMB 40,000,000.00 Development and production of various tr Co., Ltd. (LNVS) China joint venture vehicles as well as components and parts; p technical service 45 Shanghai CIMC Old Motor 789512643 Shanghai, Sino-foreign RMB 1,000,000.00 Brokerage for old motor vehicle Vehicle Brokerage Co., Ltd (SHOV) China joint venture 147 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) At 31 December 2007, the consolidated financial statements include the following subsidiaries: (co (a) Subsidiaries set up by the Company: (continued) (i) Domestic subsidiaries: (continued) Registered capital Amount of Organisation Registration Business original Name code place nature Currency currency Business scope 46 Tianjin CIMC Vehicle 79250966-4 Tianjin, Sino-foreign RMB 10,000,000.00 Wholesale and retail of automobile, autom Logistics Equipments China joint venture material, hardware, electrical appliances; tr Co., Ltd. (TJVL) export; maintenance of mechanical equipmen 47 Tianjin CIMC Special 79251125-4 Tianjin, Sino-foreign RMB 30,000,000.00 Production and sales of box car, mechan Vehicles Co., Ltd (TJXV) China joint venture structure member; relevant advisory and after 48 CIMC -SHAC (Xi’An) 79165912-6 Xi’an, China Sino-foreign RMB 50,000,000.00 Development and production of various traile Special Vehicle Co., joint venture the components and parts; providing relevant Ltd. (XASV) 49 Gansu CIMC Huajun 78404613-7 Gansu, Sino-foreign RMB 25,000,000.00 Refitting of special vehicles, manufacture of Vehicle Co., Ltd. China joint venture well as automobile fittings; sales of m (GSHJ) automobile, motorcycle, hardware and chemi 50 Ningbo CIMC Vehicle Sales 79600392-7 Zhejiang, Sino-foreign RMB 5,000,000.00 Wholesale and retail of non-passenger car, Services Co., Ltd. China joint venture metal material, mechanical equipments; (NBVS) maintenance; insurance agency for motor veh 51 Guangzhou CIMC Vehicle 79737362-0 Guangdong, Sino-foreign RMB 15,000,000.00 Wholesale and retail of automobile, autom Logistics Equipments China joint venture material, hardware, electrical appliance Co., Ltd (GZV) equipments; maintenance for mechanical equ 52 Shanghai CIMC Baojian 797010379 Shanghai, Sino-foreign RMB 3,300,000.00 Comprehensive performance examination Vehicle Comprehensive China joint venture vehicle consignation Detection Co., Ltd (SHBJ) 53 Fuyang CIMC Logistics 79811738-9 Anhui, China Domestically- RMB 8,000,000.00 Wholesale and retail of non-passenger car, Equipments Co., Ltd. funded metal material, mechanical equipments; (FYV) maintenance 54 Luoyang CIMC Lingyu 79916391-8 Henan, Domestically- RMB 60,000,000.00 Production and sales of passenger car, ta Automobile CO., LTD. China funded e operation of import and export business (LYV) 148 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) At 31 December 2007, the consolidated financial statements include the following subsidiaries: (co (a) Subsidiaries set up by the Company: (continued) (i) Domestic subsidiaries: (continued) Registered capital Amount of Organisation Registration Business original Name code place nature Currency currency Business scope 55 Wuhu CIMC RuiJiang 79982593-4 Anhui, China Other RMB 70,000,000.00 Development, production and sales of vario Automobile CO., LTD Sino-foreign ordinary mechanical products and metal (WHVS) joint venture providing relevant advisory and after service 56 Yangzhou Tonghua 79909439-3 Jiangsu, Domestically- RMB 15,000,000.00 Manufacture, processing and sales of electro Machinery Co., Ltd China funded special vehicles, components and parts, nu (YZTHM) machine tool, and components and parts of m 57 Xinhui CIMC Composite 76933495-8 Guangdong, Sino-foreign USD 16,000,000.00 Production, development, processing and Material Manufacture China joint venture composite plate products such as plastics, pla CO., LTD (XHCM) 58 Qingdao CIMC Eco- 66128116-1 Shandong, Sino-foreign RMB 137,930,000.00 Development, manufacture, sales and s Equipment Co., Ltd. China joint venture treatment truck and the components and parts (QDHB) 59 Hubei CIMC Vehicle 66676694-2 Hubei, Sino-foreign RMB 5,000,000.00 Sales of automobile, automobile fitting Logistics Equipments China joint venture hardware, electrical appliances and electrome Co., Ltd (HBVS) warehousing service; maintenance of mechan leasing, etc. 60 Shanxi CIMC Vehicle 66661403-3 Shanxi, Sino-foreign RMB 5,000,000.00 Sales of automobile, automobile fitting Logistics Equipments China joint venture hardware, electrical appliances and electrome Co., Ltd warehousing service; maintenance of mechan (SXVS) leasing, etc. 61 Xinjiang CIMC Vehicle 66394910-X Xinjiang, Sino-foreign RMB 5,000,000.00 Sales of hardware, electrical appliances Logistics Equipments China joint venture equipment and chemical products; mainten Co., Ltd (XJVS) equipment; warehousing of logistics equipme renovation 62 Inner Mongolia CIMC 667304248-8 Inner Sino-foreign RMB 5,000,000.00 Sales of automobile, automobile fitting Vehicle Logistics Mongolia, joint venture hardware, electrical appliances and electrome Equipments Co., Ltd China warehousing service; maintenance of me (NMGVS) vehicle warehousing 149 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) At 31 December 2007, the consolidated financial statements include the following subsidiaries: (co (a) Subsidiaries set up by the Company: (continued) (i) Domestic subsidiaries: (continued) Registered capital Amount of Organisation Registration Business original Name code place nature Currency currency Business scope 63 Shijiazhuang CIMC Vehicle 667739364 Hebei, Invested by RMB 5,000,000.00 Sales of automobile fittings, metal material, Sales Services Co., Ltd. China foreign appliances and electromechanical equipmen (SJZVS) businessmen warehousing of logistics equipments; tyre lea 64 Xiamen CIMC Vehicle 66472628-5 Fujian, Sino-foreign RMB 5,000,000.00 Sales of automobile, automobile fitting Logistics Equipments China joint venture hardware, electrical appliances and electrome Co., Ltd. (XMVS) maintenance of mechanical equipment 65 Liangshan Dongyue CIMC 66806999-9 Shandong, Sino-foreign RMB 90,000,000.00 Production and sales of mixing truck, Vehicle Co., Ltd. China joint venture components and parts (LSDYV) 66 Shanghai CIMC Special 666094445 Shanghai, Sino-foreign RMB 30,000,000.00 Development and production of box trailer, Vehicle Co., Ltd. China joint venture relevant mechanical products and metal (SHCIMCV) providing relevant advisory and after service 67 CIMC Financing and 71788051-9 Guangdong, Sino-foreign USD 10,000,000.00 Financing and leasing business; disposal a Leasing Co., Ltd. China joint venture residual value of leased property; advisory (CIMCVL) leasing transaction 68 CIMC Vehicle (Guangxi) 66971491-0 Guangxi, Sole-funded RMB 10,000,000.00 Sales of special vehicle and trailer; purchasi Co., Ltd. (GXV) china by legal for automobile fittings, metal material, person appliances and electromechanical equipme mechanical equipment 69 Hunan CIMC Vehicle Sales 66858563-5 Hunan, Sino-foreign RMB 5,000,000.00 Sales of automobile, automobile fitting Services Co., Ltd. China joint venture hardware, electrical appliances and electrome (HNVS) import and export business of goods and tech 70 Liaoning CIMC Vehicle 66717529-8 Hunan, Sino-foreign RMB 5,000,000.00 Sales of automobile, automobile fittings, m Logistics Equipments China joint venture and export of goods; leasing logistics equip Co., Ltd. (SYVS) service 71 Yunnan CIMC Vehicle 66828683-8 Yunnan, Sino-foreign RMB 5,000,000.00 Sales of special vehicle and trailer; sales of Logistics Equipments China joint venture import and export of goods and technologies; Co., Ltd. (YNVS) 150 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) At 31 December 2007, the consolidated financial statements include the following subsidiaries: (co (a) Subsidiaries set up by the Company: (continued) (i) Domestic subsidiaries: (continued) Registered capital Amount of Organisation Registration Business original Name code place nature Currency currency Business scope 72 Chongqing CIMC Vehicle 66893549-8 Chongqing, Sino-foreign RMB 5,000,000.00 Sales of automobile, automobile fitting Logistics Equipments China joint venture hardware, electrical appliances and electrome Co., Ltd. (CQVS) maintenance and warehousing service for me import and export of goods 73 Qingdao Refrigeration 66787432-0 Shandong, Sino-foreign USD 25,000,000.00 Manufacture and sales of various refrigeratio Transport Equipment Co., China joint venture and other transport equipments and spare part Ltd. (QDRV) technical and maintenance service 74 Nantong CIMC Tank 798612590 Jiangsu, Sino-foreign USD 10,000,000.00 Production of special vehicles, manufac Equipment Co., Ltd. China joint venture large-sized tank, production of various pre special pressurization trough, tank and parts 75 Shanghai Yulan Real Estate 70306257-4 Shanghai, Sino-foreign RMB 5,000,000.00 Real estate development, property manageme Development Co., Ltd China joint venture 76 Shanghai Meiyang 76942311-7 Shanghai, Sino-foreign RMB 9,000,000.00 Real estate development, property managem Properties Co., Ltd China joint venture information advisory 77 Shenzhen CIMC – Tianda 61880852-X Guangdong, Sino-foreign USD 13,500,000.00 Production and operation of vario Airport Support Ltd. China joint venture electromechanical equipment products, p (TAS) structure members 78 Xinhui CIMC Container 71471803-0 Guangdong, Sino-foreign USD 15,500,000.00 Production of container-purpose wood floor a Flooring Co., Ltd. China joint venture of various specifications; providing relevan (XHCIMCF) and after service 79 Shenzhen CIMC Wood 72717262-0 Guangdong, Sino-foreign RMB 5,000,000.00 Investment in wood industry; import an Co., Ltd. China joint venture technical development related to wood in timber, equipment and products 80 Innermongolia Holonbuir 76447440-9 Inner Sino-foreign USD 12,000,000.00 Production and sales of various container wo CIMC Wood Co., Ltd. Mongolia, joint venture products for transport equipments China 81 Jiaxing CIMC Wood 78442573-5 Zhejiang, Sino-foreign USD 5,000,000.00 Production and sales of container wood floor Co., Ltd. China joint venture transport equipments and other wood product 151 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) At 31 December 2007, the consolidated financial statements include the following subsidiaries: (co (a) Subsidiaries set up by the Company: (continued) (i) Domestic subsidiaries: (continued) Registered capital Amount of Organisation Registration Business original Name code place nature Currency currency Business scope 82 Ningguo CIMC Bamboo 66424260-0 Anhui, China Sino-foreign USD 1,300,000.00 Production and sales of self-produced plywo and Wood Product joint venture board and relevant wood and bamboo p Co., Ltd bamboo and wood for production purpose 83 Manzhouli CIMC Wood 66408391-0 Inner Domestically- RMB 10,000,000.00 Import and export trade Co., Ltd Mongolia, funded China 84 Xuzhou CIMC Wood 67013281-1 Jiangsu, Sino-foreign RMB 50,000,000.00 Production and sales of container wood fl Co., Ltd China joint venture sales of timber 85 Shenzhen Southern CIMC 76916693-1 Guangdong, Sino-foreign USD 5,000,000.00 Engaged in container transshipment, sto Containers Service China joint venture vanning, maintenance; providing relevant tech Co., Ltd. 86 Shenzhen CIMC Yantian 77412123-6 Guangdong, Sino-foreign RMB 12,000,000.00 Engaged in container transshipment, stoc Port Container Service China joint venture vanning, maintenance; providing relevant tech Co., Ltd. 87 Donghwa Container 607217900 Shanghai, Sino-foreign USD 4,500,000.00 Container cargo devanning, vanning; canvass Transportation Service China joint venture and customs declaration; container maintena Co., Ltd. (DHCTs) supply of components and parts 88 Qingdao CIMC-Dragon 766745954 Shandong, Sino-foreign RMB 48,780,000.00 Container transshipment, stockpiling, deva Container Services China joint venture and unload, sorting, allotment, refitting ma Co., Ltd. relevant technical service 89 Qingdao Kooll Logistics 718076960 Shandong, Sino-foreign RMB 20,000,000.00 Container warehousing, stockpiling, devannin Co., Ltd. China joint venture unload, cleaning, maintenance; goods proc supporting service 90 Ningbo CIMC Container 778206173 Ningbo, Sino-foreign RMB 30,000,000.00 Goods traffic; goods package, sorting, exam Service Co., Ltd. China joint venture advisory service; container stockpiling, c repair, storing 91 Ningbo Zhongze Import 790053173 Zhejiang, Sole-funded RMB 5,000,000.00 Self-operation and agency for import and and Export Co., Ltd China by foreign various goods and technologies businessmen 152 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) At 31 December 2007, the consolidated financial statements include the following subsidiaries: (co (a) Subsidiaries set up by the Company: (continued) (i) Domestic subsidiaries: (continued) Registered capital Amount of Organisation Registration Business original Name code place nature Currency currency Business scope 92 Shanghai CIMC Yangshan 77977341X Shanghai, Sino-foreign USD 7,000,000.00 Container transshipment, stockpiling, deva Container Service Co., China joint venture warehousing; container maintenance, try-off a Ltd. 93 Shanghai Dunhua Container 630605549 Shanghai, Domestic RMB 6,000,000.00 Providing container and refrigerator Co., Ltd China joint venture maintenance, devanning, vanning,; sales of co international shipping agent 94 CIMC Shenfa Development 63167299-7 Shanghai, Sino-foreign RMB 204,122,966.00 Investment, construction and operation for Co., Ltd.(CIMCSD) China joint venture estate development and operation; ind manufacture and sales of container a equipments 95 CIMC Vehicle (Xinjiang) 66667529-0 Xinjiang, Sino-foreign RMB 80,000,000.00 Production and sales of mechanical equ Co., Ltd. (SJ4S) China joint venture relevant technical development 96 Chengdu CIMC Vehicle 66957422-5 Sichuan, Sino-foreign RMB 5,000,000.00 Sales of automobile; wholesale and retai Logistics Equipments China joint venture and warehousing Co., Ltd. 97 CIMC Vehicle (Group) 61891987-9 Guangdong, Sino-foreign USD 75,000,000.00 Development, production and sales of va Co., Ltd. (HI) China joint venture high-performance special vehicle and traile 98 Guangdong Tongyang 79102617-7 Guangdong, Sino-foreign USD 40,000,000.00 Design, manufacture of container and re Container Manufacturing China joint venture and parts; relevant after service Co., Ltd. (GZTY) 153 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 6 Business combinations and the consolidated financial statements (continued) (1) At 31 December 2007, the consolidated financial statements include the following subsidiaries: (co (a) Subsidiaries set up by the Company: (continued) (ii) Overseas Subsidiaries Registered capital Amount of Name Registration place Currency original currency Business scope 99 CIMC Holdings (B.V.I.) Limited British Virgin Islands USD 34,001.00 Investment 100 CIMC Tank Equipment Investment Hong Kong HKD 4,680,000.00 Holdings Co., Ltd. Investment 101 Speedic Enterprise Corp. British Virgin Islands USD 50,000.00 Investment 102 CIMC-SMM Vehicle (Thailand) CO., LTD. Thailand Baht 260,000,000.00 Production and operation of various special vehicles 103 CIMC Vehicle (HK) Ltd Hong Kong HKD 10,000.00 Sale of various vehicles 104 Domino Flatracks Limited Britain GBP 100.00 Production and processing of hinge 105 CIMC Australia Pty Ltd Australia AUD 50,000.00 Sale of vehicle 106 CIMC Transportation Equipment Inc. US USD 10.00 Trade and investment 107 CIMC USA,INC US USD 10.00 Investment 108 Vanguard National Trailer Corporatio US USD 10.00 Production and sale of various special vehicles 109 Goldbird Holding Inc British Virgin Islands USD 1.00 Investment 110 CIMC Vehicle Investment Holding Co., Ltd. Hong Kong USD 50,000.00 Investment 111 CIMC EURpe BVBA Belgium EUR 18,550.00 Investment 112 Chuangjia Co., Ltd. Hong Kong HKD 2.00 Investment 113 Wansheng Technology Co., Ltd. Hong Kong HKD 10,000.00 Investment 114 China International Marine Containers Hong Kong HKD 2,000,000.00 Investment (Hong Kong) Limited 115 CIMC Burg B.V. Belgium EUR 60,000,000.00 Investment 116 Maxshine Enterprises Ltd Hong Kong HKD 1.00 Investment 117 Tacoba Consultant N.V. Suriname Guilder 3,000,000.00 Purchase and sale of wood 118 Charm Wise Ltd. Hong Kong USD 1.00 Investment 119 Gold Terrain Assets Limited. (GTA) British Virgin Islands USD 1.00 Investment 120 Silveroad Wood Products Limited Cambodia USD 8,000.00 Production, development and sale of various wood products 154 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) At 31 December 2007, the consolidated financial statements include the following subsidiaries: (co (b) Subsidiaries acquired through combinations under non-common control: (i) Domestic Subsidiaries Registered capital Registration Business Amount of Name place nature Currency original currency Business scope 1 Enric (BengBu) Compressor Co., Ltd. Anhui, China Sino-foreign HKD 21,320,000.00 Production and sale of joint venture compressor and relevant products 2 Shijiazhuang Enric Gas Equipment Limited Hebei, China Sino-foreign USD 7,000,000.00 Production and sale of joint venture compressed gas equipment 3 Langfang Enric Energy Equipment Hebei, China Sino-foreign HKD 50,000,000.00 Development of energy Integration Co., Ltd joint venture equipment 4 Beijing Enric Energy Technology Co., Ltd Beijing, China Sino-foreign HKD 40,000,000.00 Development of energy joint venture equipment (ii) Overseas Subsidiaries Registered capital Amount of Name Registration place Currency original currency Business scope 5 Enric Energy Equipment Holdings Limited Cayman Islands HKD 100,000.00 Investment holding 6 Enric Investment Holdings Limited British Virgin Islands USD 50,000.00 Investment holding 7 Anhui Enric Investment Limited British Virgin Islands USD 50,000.00 Investment holding 8 Shijiazhuang Enric Investment Limited British Virgin Islands USD 50,000.00 Investment holding 9 Langfang Enric Investment Limited British Virgin Islands USD 50,000.00 Investment holding 10 Hong Kong Enric Gas Equipment Limited Hong Kong, China HKD 10,000.00 Investment holding 11 Hong Kong Enric Compressor Limited Hong Kong, China HKD 10,000.00 Investment holding 155 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) At 31 December 2007, the consolidated financial statements include the following subsidiaries: (co (b) Subsidiaries acquired through combinations under non-common control: (continued) (ii) Overseas Subsidiaries (continued) Registered capital Amount of Name Registration place Currency original currency Business scope 12 Enric Integration (HK) Company Limited Hong Kong, China HKD 10,000.00 Investment holding 13 Burg Industries B.V. Holland EUR 3,403,351.62 Investment 14 Holvrieka Holding B.V. Holland EUR 12,000,000.00 Investment 15 Holvrieka Ido B.V. Holland EUR 136,200.00 Sales of tank equipment 16 Holvrieka Nirota B.V. Holland EUR 680,670.32 Production, assembly and sale of tank equipment 17 Noordkoel B.V. Holland EUR 500,000.00 Sales of tank equipment 18 Beheermaatschappij "Burg" B.V. Holland EUR 453,780.22 Investment 19 Burg Fabriek van Wegtransportmiddelen Holland EUR 453,780.22 Production, repair and sale of road transp B.V. vehicle and components and parts 20 Burg Carrosserie B.V. Holland EUR 90,756.04 Production of road transport vehicle 21 Exploitatiemaatschappij Intraprogres B.V. Holland EUR 79,411.54 Trade, financing and leasing of road transport vehicle 22 Burgers Carosserie B.V. Holland EUR 90,756.04 Production and repair of vehicle and components and parts 23 Hobur Twente B.V. Holland EUR 226,890.11 Production and sale of oil and natural gas tank equipment 24 Burg Service B.V. Holland EUR 250,000.00 Assembly and repair of road transport vehicle and tank equipment 25 B.V. Trailer Leasing Company Holland EUR 907,560.43 Trade, financing and leasing of road transport vehicle 26 LAG Trailers NV Belgium BEF 30,000,000.00 Manufacturing trailer 27 Holvrieka NV Belgium BEF 40,000,000.00 Manufacturing tank equipment 28 Immoburg NV Belgium BEF 10,000,000.00 Manufacturing road transport vehicle 29 Holvrieka Danmark A/S Denmark DKr 1,000,000.00 Manufacturing tank equipment 156 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (1) Business combinations involving entities not under common control during the year : Burg Industries B.V. (“Burg”) At the acquisition date of 26 June 2007, the Company acquired 100% interests of Burg by paying USD 108,308,708 (RMB 825,139,062) in cash as combination cost through its joint venture CIMC Burg B.V. The fair value of 100% of Burg’s equity acquired by the Company was USD 111,543,045 (RMB 849,628,815) at the acquisition date. USD 3,234,337 (RMB 24,489,753) in the excess of the fair value over combination cost is recognised as non-operating income. Burg is a company registered in the Netherlands in 1937, with its headquarter located in the Netherlands. It is engaged in manufacturing and selling of road transportation vehicles, tank vehicles and static tanks. Burg’s parent company is CIMC Burg B.V and its ultimate holding company is the Company. Burg’s financial information is as follows: From 26 June 2007 to 31 December 2007 USD’000 RMB’000 Revenue 177,895 1,348,950 Net profit 2,113 15,998 Net cash inflow 23 175 (2) Business combinations involving entities not under common control during the year The identifiable assets and liabilities: 26 June 2007 31 Dec 2007 Book value Fair value Book Value USD’000 USD’000 USD’000 Cash at bank and on hand 618 618 4,361 Accounts and other receivable 52,882 52,882 58,552 Inventories 101,185 103,415 74,216 Fixed assets 28,294 131,624 28,016 Intangible assets - 19,499 - Long-term receivables 8,673 8,673 - Short-term loans (58,646) (58,646) - Accounts and other payable (50,186) (50,760) (47,921) Taxes payable (5,796) (5,796) - 157 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (2) Business combinations involving entities not under common control during the year (continued) The identifiable assets and liabilities: (continued) 26 June 2007 31 Dec 2007 Book value Fair value Book Value USD’000 USD’000 USD’000 Long-term loans (41,029) (41,029) - Long-term payables (7,463) (7,463) (13,296) Deferred tax liabilities (5,219) (41,474) - Identifiable net assets 23,313 111,543 103,928 26 June 2007 31 Dec 2007 Book value Fair value Book Value RMB’000 R’000 USD’000 Cash at bank and on hand 4,710 4,710 31,854 Accounts and other receivable 402,808 402,808 427,676 Inventories 770,729 787,716 542,089 Fixed assets 215,521 1,002,591 204,634 Intangible assets - 148,525 - Long-term receivables 66,060 66,060 - Short-term loans (446,713) (446,713) - Accounts and other payable (382,272) (386,645) (350,025) Taxes payable (44,149) (44,149) - Long-term loans (312,522) (312,522) - Long-term payables (56,843) (56,843) (97,116) Deferred tax liabilities (39,755) (315,909) - Identifiable net assets 177,574 849,629 759,112 Enric Energy Equipment Holding Co., Ltd (“Enric”) At the acquisition date of 30 July 2007, the Company obtained 190,703,000 shares of Enric, or 42.18% of outstanding shares of Enric for HKD 1,128,961,760 (USD 144,412,833, RMB 1,094,076,842) through Charm Wise Limited, its fully owned subsidiary. The Company’s interest in Enric was then diluted to 41.55% after the execution of stock options of 6,900,000 shares by Enric’s management. On 15 October 2007, the Company appointed over 50% of Enric’s directors and took control of Enric since then. The fair value of 41.55% of Enric’s equity acquired by the Company was USD 52,299,000 (RMB 393,042,674) at the acquisition date. USD 92,113,833 (RMB 701,034,168) in the shortfall of the fair value below acquisition cost is recognised as goodwill. 158 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (2) Business combinations involving entities not under common control during the year (continued) Enric is a company registered in Cayman Islands in September 2004, with its headquarter located in Hong Kong, and is engaged in manufacture, sale and design of energy related equipments. Enric is a listed company on Hong Kong Stock Exchange. Enric’s parent company is Charm Wise Limited, and its ultimate holding company is the Company. Enric’s financial information is as follows: From 30 July 2007 to 31 December 2007 USD’000 RMB’000 Revenue 40,533 306,907 Net profit 4,984 37,738 Net cash inflow 19,673 148,963 The identifiable assets and liabilities: 26 June 2007 31 Dec 2006 Book value Fair value Book Value USD’000 USD’000 USD’000 Cash at bank and on hand 16,627 16,627 40,835 Accounts and other receivable 23,231 23,231 14,596 Inventories 47,705 47,705 27,519 Fixed assets 29,032 29,032 21,581 Construction in progress 7,691 7,691 5,717 Intangible assets 937 60,931 5,614 Deferred tax assets 251 251 241 Other non-current assets 813 813 - Short-term loans (23,854) (23,854) (21,490) Account and other payables (24,052) (24,052) (29,572) Employee benefits payable (450) (450) - Taxes payable 999 999 (272) Other current liablilities (347) (347) - Deferred tax liabilities - (12,707) - Identifiable net assets 78,583 125,870 64,769 Less: Minority interests 73,571 Attributable to: Equity shareholders of the Company 52,299 Less: Acquisition price 144,413 Goodwill 92,114 159 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (2) Business combinations involving entities not under common control during the year (continued) 26 June 2007 31 Dec 2006 Book value Fair value Book Value RMB’000 RMB’000 RMB’000 Cash at bank and on hand 124,958 124,958 318,721 Accounts and other receivables 174,590 174,590 113,920 Inventories 358,518 358,518 214,786 Fixed assets 218,182 218,182 170,452 Construction in progress 57,802 57,802 42,613 Intangible assets 7,040 457,915 43,816 Deferred tax assets 1,884 1,884 1,884 Other non-current assets 6,112 6,112 - Short-term loads (179,269) (179,269) (167,733) Accounts and other payable (180,761) (180,761) (230,812) Employee benefits payable (3,384) (3,384) - Taxes payable 7,509 7,509 - Other current liabilities （2,605） （2,605） - Deferred tax liabilities - (95,500) - Identifiable net assets 590,576 945,951 507,647 Less: Minority Interest 552,908 Attributable to: Equity shareholders of the Company 393,043 Less: Acquisition price 1,094,077 Goodwill 701,034 For the above identifiable assets which have an active market, the quoted prices in the active market are used to establish their fair value; if there is no active market, their fair value is estimated based on the market price of the same or similar types of assets which have an active market; if there is no active market for even the same asset or similar types of assets, valuation techniques will be used to determine the fair value. On 25 December 2007, Meiyang Real Estate Company, a wholly owned subsidiary of the Company sold 60% interest of Shanghai Fengyang to Shenzhen China Merchants Real Estate Co., Ltd. for a price of RMB 353,250,000. Shanghai Fengyang was no longer a subsidiary of the Company from then on. 160 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (2) Business combinations involving entities not under common control during the year (continued) For the above identifiable liability, the payable amount or the present value of the payable amount is its fair value. Shanghai Fengyang Property Development Co., Ltd (“Shanghai Fengyang”), is no longer consolidated by the Company as at 31 December 2007. It is mainly engaged in the development of real estates. The Company originally owned its 100% interest indirectly. (3) Former subsidiaries that ceased to be consolidated during the year Shanghai Fengyang’s financial information is as follows: From 1 January 2007 to the day of disposal USD’000 RMB’000 Revenue 22,013 166,685 Expenses 17,002 128,143 Operating Profit 5,011 38,542 Net profit 3,189 24,148 Balance sheet information: 25 December 2007 31 December 2006 USD’000 RMB’000 USD’000 RMB’000 Assets 73,101 533,942 23,682 184,840 Liabilities 62,660 457,679 4,334 33,827 Shareholders’ equity 10,441 76,263 19,348 151,013 161 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (4) Minority interests in each of major subsidiary 2007 2006 USD’000 RMB’000 USD’000 RMB’000 XHCIMC 8,169 65,145 7,699 63,861 NTCIMC 4,095 32,656 3,760 31,188 SCRC 20,084 160,164 16,311 135,296 NTCIMCS 2,855 22,768 2,391 19,833 TJCIMC 19,548 155,889 16,112 133,645 TAS 1,379 10,997 697 5,781 QCSC 4,559 36,357 4,559 37,816 SBWI 1,513 12,066 15,934 132,169 YZTH 2,439 19,450 2,618 21,716 KGR 2,015 16,069 1,981 16,432 HICIMC 11,919 95,050 9,191 76,237 DHCTs 3,094 24,674 3,040 25,216 SHFE - - 14,435 119,735 WHVS 3,619 28,498 - - LYV 1,931 15,205 - - Burg 17,222 135,614 - - Enric 74,570 587,201 - - QDHB 8,583 68,447 - - SHYSL 1,400 11,165 - - HI 7,912 59,298 - - Others 9,122 71,831 3,529 29,273 TOTAL 206,028 1,628,544 102,257 848,198 The loss attributable to minority shareholders of YZTL exceeded the minority interest as at 1 January 2007 by USD 790,737 (RMB 5,987,300). Such loss reduced the interest attributable to equity shareholders of the Company since the articles of association of YZTL did not specify that the minority shareholders have a binding obligation to cover the loss. 162 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 7 Cash at bank and on hand The Group 2007 Original currency Exchange USD RMB Original currency ’000 rate ’000 ’000 ’000 Cash on hand RMB 2,324 7.3042 318 2,324 RMB 1,304 USD 32 - 32 231 USD 33 HKD 6 7.7974 1 6 HKD 11 JPY 322 111.39 3 21 JPY 198 EUR 77 0.6849 112 818 EUR - Others - - Others 466 3,400 -------------- -------------- Deposits with banks RMB 1,310,790 7.3042 179,457 1,310,790 RMB 763,274 USD 143,796 - 143,796 1,050,315 USD 92,241 HKD 12,518 7.7974 1,605 11,726 HKD 2,468 JPY 64,992 111.39 583 4,262 JPY 320,780 AUD 2,690 1.1405 2,358 17,226 AUD 9,007 EUR 2,358 0.6849 3,443 25,147 EUR 44 Others 2,902 21,191 Others 334,144 2,440,657 -------------- -------------- Other monetary funds RMB 608,392 7.3042 83,294 608,392 RMB 281,520 USD 252 - 252 1,842 USD 491 HKD 150 7.7974 19 141 HKD 147,319 83,565 610,375 -------------- -------------- 418,175 3,054,432 163 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 7 CASH AT BANK AND ON HAND (CONTINUED) The Company 2007 Original currency Exchange USD RMB Original currency ’000 rate ’000 ’000 ’000 Deposits with banks RMB 265,712 7.3042 36,378 265,713 RMB 328,864 USD 56,055 - 56,055 409,437 USD 10,404 HKD 16 7.7974 2 15 HKD 14 JPY 52,687 111.39 473 3,455 JPY 320,656 EUR 526 0.6849 768 5,610 EUR - 93,676 684,230 -------------- -------------- Other monetary funds RMB 242,901 7.3042 33,255 242,901 RMB 31,379 -------------- -------------- 126,931 927,131 At 31 December 2007, restricted cash at bank and on hand of the Group amounted to USD 5,350,97 29 for details. 164 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 8 FINANCIAL ASSETS HELD FOR TRADING The Group 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Equity securities investments held for trading 51,782 378,220 27,633 215,678 Derivative financial assets 74,768 546,120 1,151 8,986 Total 126,550 924,340 28,784 224,664 The Company 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Equity securities investments held for trading 24,415 178,335 15,188 118,540 Derivative financial assets - - 264 2,063 Total 24,415 178,335 15,452 120,603 There are no material restrictions on the realisation of the investment in financial assets held for trading. 9 BILLS RECEIVABLE The Group 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Bank acceptance bills 103,741 757,747 26,301 205,284 All of the above bills held by the Group are due within one year. At 31 December 2007, the Group’s outstanding endorsed or discounted bills (with recourse) amounted to USD 67,849,777 (RMB 495,588,346), all of which are due by 31 December 2008. Refer to Note 29 for details. No amount due from shareholders who hold 5% or more of the voting rights of the Company is included in the above balance of bills receivable. 165 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 10 ACCOUNTS RECEIVABLE (1) The Group’s Accounts receivable by customer type: 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Amounts due from related parties 31,085 227,049 33,726 263,233 Amounts due from other customers 1,217,433 8,892,380 643,782 5,024,781 Subtotal 1,248,518 9,119,429 677,508 5,288,014 Less: provision for bad and doubtful debts 30,073 219,660 13,728 107,146 Total 1,218,445 8,899,769 663,780 5,180,868 No amount due from shareholders who hold 5% or more of the voting rights of the Company is included in the above balance of accounts receivable. At 31 December 2007, the total amounts of accounts receivable due from the Group’s biggest five debtors are as follows: 2007 2006 Amounts (USD’000) 286,910 195,742 Amounts (RMB’000) 2,095,649 1,527,785 Years past due Within 1 year Within 1 year Percentage of accounts receivable 23.0% 28.9% In 2007, the Group factored its accounts receivable with recourse with China Development Bank, and obtained the USD 1,178,108,603 (RMB: 8,920,402,720) from the financing agreement with the bank. At 31 December 2007, such factored accounts receivable balances was nil. At 31 December 2007, the accounts receivable of the Group with restriction amounted to USD 78,045,933 (RMB 570,063,104). Refer to Note 29 for details. 166 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 10 ACCOUNTS RECEIVABLE (CONTINUED) (2) The analysis of the Group’s accounts receivable by original currency is as follows: 2007 2006 Original Exchange Original Exchange currency rate USD currency rate USD ’000 ’000 ’000 ’000 RMB 1,470,385 7.3042 201,306 624,633 7.8051 80,029 USD 977,375 - 977,375 593,262 - 593,262 HKD 5,890 7.7974 755 6,642 7.7781 854 JPY 627,888 111.39 5,637 96,382 118.99 810 AUD 5,638 1.1405 4,944 - - - EUR 40,062 0.6848 58,501 1,934 0.7576 2,553 1,248,518 677,508 (3) The ageing analysis of the Group’s accounts receivable is as follows: 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Within 1 year (inclusive) 1,236,731 9,033,334 669,527 5,225,721 1 and 2 years (inclusive) 9,403 68,684 6,636 51,797 2 and 3 years (inclusive) 1,679 12,266 751 5,858 Over 3 years 705 5,145 594 4,638 Subtotal 1,248,518 9,119,429 677,508 5,288,014 Less: provision for bad and doubtful debts 30,073 219,660 13,728 107,146 Total 1,218,445 8,899,769 663,780 5,180,868 The ageing is counted starting from the date accounts receivable is recognised. 167 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 10 ACCOUNTS RECEIVABLE (CONTINUED) (4) An analysis of provision for bad and doubtful debts is as follows: The Group 2007 2006 Percentage Percentage of total of total accounts Bad debts Rate of accounts Bad debts Rate of Amount receivable provision provision Amount receivable provision provision USD’000 USD’000 USD’000 USD’000 Accounts receivable - Individually significant 635,312 51% 9,530 1.50% 457,549 68% 6,863 1.50% - Individually insignificant but with a material portfolio credit risk 178,460 14% 6,668 3.74% 99,911 15% 3,697 3.70% - Other immaterial items 434,746 35% 13,875 3.19% 120,048 18% 3,168 2.64% Total 1,248,518 100% 30,073 2.41％ 677,508 100% 13,728 2.03％ The Group 2007 2006 Percentage Percentage of total of total accounts Bad debts Rate of accounts Bad debts Rate of Amount receivable provision provision Amount receivable provision provision RMB’000 RMB’000 RMB’000 RMB’000 Accounts receivable - Individually significant 4,640,442 51% 69,607 1.50% 3,571,217 - 53,568 1.50% - Individually insignificant but with a material portfolio credit risk 1,303,510 14% 48,707 3.74% 779,813 - 28,852 3.70% - Other immaterial items 3,175,477 35% 101,347 3.19% 936,984 100% 24,726 2.64% Total 9,119,429 100% 219,660 2.41％ 5,288,014 100% 107,146 2.03％ 168 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 11 PREPAYMENTS The ageing analysis of the Group’s prepayments is as follows: 2007 2006 Percen- Percen- Amount Amount tage Amount Amount tage USD’000 RMB’000 % USD’000 RMB’000 % Within 1 year (inclusive) 231,379 1,690,040 99.72 286,701 2,237,732 98.96 1 and 2 years (inclusive) 524 3,830 0.23 2,918 22,773 1.00 2 and 3 years (inclusive) 58 421 0.03 35 270 0.01 Over 3 years 47 342 0.02 73 573 0.03 Subtotal 232,008 1,694,633 100.00 289,727 2,261,348 100.00 Less: provision for bad and doubtful debts 96 698 0.04 - - - Total 231,912 1,693,935 99.96 289,727 2,261,348 100.00 The ageing is counted starting from the date prepayments is recognised. No amount due from shareholders who hold 5% or more of the voting rights of the Company is included in the above balance of prepayments. At 31 December 2007, no individual prepayments that are 30% or more of the total amount. 12 INTERESTS RECEIVABLE The Group 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Trusted loan interest 684 4,997 - - No amount due from shareholders who hold 5% or more of the voting rights of the Company is included in the above balance of interest receivable. 169 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 13 DIVIDENDS RECEIVABLE The Group 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Dalian Jinong Logistic Co., Ltd 291 2,125 291 2,271 Others - - 286 2,230 Total 291 2,125 577 4,501 The Company 2007 2006 USD’000 RMB’000 USD’000 RMB’000 SCIMC 76,071 555,642 57,883 415,786 SCIMCEL 47,187 344,663 23,871 186,316 XHCIMC 942 6,880 608 4,743 QDCC 5,923 43,268 666 5,202 DLCIMCn 8,400 61,363 6,389 49,870 NBCIMC 11,226 81,997 6,877 53,674 SCRC 3,835 28,015 2,316 18,078 QDCRC 3,067 22,401 2,181 17,021 XHCIMCS 17,273 126,165 13,817 107,843 QDCSR 286 2,087 127 989 DLL 4,709 34,401 2,245 17,525 CIMC(HK) 461,821 3,373,220 462,839 3,648,500 TCCIMC 2,032 14,840 - - ZZCIMC 420 3,066 - - TJCIMCLE 3,073 22,444 - - Total 646,265 4,720,452 579,819 4,525,547 No amount due from shareholders who hold 5% or more of the voting rights of the Company is included in the above balance of dividends receivable. 170 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 14 OTHER RECEIVABLES (1) Other receivables by customer type The Group 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Amounts due from related parties 57,120 417,213 9,183 71,674 Amounts due from other customers 101,312 740,006 56,968 444,642 Subtotal 158,432 1,157,219 66,151 516,316 Less: provision for bad and doubtful debts 1,365 9,973 2,552 19,919 Total 157,067 1,147,246 63,599 496,397 The Company 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Amounts due from related parties 25,348 185,147 627 4,894 Amounts due from other customers 421,455 3,078,393 328,152 2,561,255 Subtotal 446,803 3,263,540 328,779 2,566,149 Less: provision for bad and doubtful debts 691 5,048 691 5,393 Total 446,112 3,258,492 328,088 2,560,756 The Group’s other receivables due from related parties amounted to USD 57,119,543 (2006: USD 9,183,696), or 36.05% (2006: 13.88%) of the total of other receivables. No amount due from shareholders who hold 5% or more of the voting rights of the Company is included in the above balance of other receivables. 171 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 14 OTHER RECEIVABLES (CONTINUED) (1) Other receivables by customer type (continued) At 31 December 2007, the total amount of other receivables due from the Group and the Company’s biggest five debtors were as follows: The Group The Company 2007 2006 2007 2006 Amounts (USD’000) 58,873 12,031 393,436 12,030 Amounts (RMB’000) 430,023 93,900 2,873,739 93,895 Years past due Within 1 year Within 1 year Within 1 year Within 1 year Percentage of other receivables 37.2% 18.2% 88.1% 3.7% (2) The ageing analysis of other receivables is as follows: The Group 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Within 1 year (inclusive) 146,827 1,072,460 58,925 459,919 1 and 2 years (inclusive) 7,318 53,449 4,962 38,729 2 and 3 years (inclusive) 3,088 22,553 981 7,657 Over 3 years 1,199 8,757 1,283 10,011 Subtotal 158,432 1,157,219 66,151 516,316 Less: provision for bad and doubtful debts 1,365 9,973 2,552 19,919 Total 157,067 1,147,246 63,599 496,397 The Company 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Within 1 year (inclusive) 440,135 3,214,837 328,779 2,566,149 1 and 2 years (inclusive) 6,668 48,703 - - Subtotal 446,803 3,263,540 328,779 2,566,149 Less: provision for bad and doubtful debts 691 5,048 691 5,393 Total 446,112 3,258,492 328,088 2,560,756 The ageing is counted starting from the date of recognition of other receivables. 172 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 14 OTHER RECEIVABLES (CONTINUED) (3) An analysis of provision for bad or doubtful debts for the Group’s other receivables is as follows: The Group 2007 2006 Percentage Percentage of total of total accounts Bad debts Rate of accounts Bad debts Rate of Amount receivable provision provision Amount receivable provision provision USD’000 USD’000 USD’000 USD’000 Other receivables - Individually significant 80,472 50.79% - - - - - - - Other immaterial items 77,960 49.21% 1,365 1.75% 66,151 100.00% 2,552 3.86% Total 158,432 100.00% 1,365 0.86% 66,151 100.00% 2,552 3.86% The Group 2007 2006 Percentage Percentage of total of total accounts Bad debts Rate of accounts Bad debts Rate of Amount receivable provision provision Amount receivable provision provision RMB’000 RMB’000 RMB’000 RMB’000 Other receivables - Individually significant 587,784 50.79% - - - - - - - Other immaterial Items 569,435 49.21% 9,973 1.75% 516,316 100.00% 19,919 3.86% Total 1,157,219 100.00% 9,973 0.86% 516,316 100.00% 19,919 3.86% The Company 2007 2006 Percentage Percentage of total of total accounts Bad debts Rate of accounts Bad debts Rate of Amount receivable provision provision Amount receivable provision provision USD’000 USD’000 USD’000 USD’000 Other receivables - Individually significant 393,436 88.06% - - 246,929 75.10％ - - - Other immaterial items 53,367 11.94% 691 1.30% 81,850 24.90% 691 0.84% Total 446,803 100.00% 691 0.15% 328,779 100.00% 691 0.21% The Company 2007 2006 Percentage Percentage of total of total accounts Bad debts Rate of accounts Bad debts Rate of Amount receivable provision provision Amount receivable provision provision RMB’000 RMB’000 RMB’000 RMB’000 Other receivables - Individually significant 2,873,739 88.06% - - 1,927,305 75.10% - - - Other immaterial items 389,801 11.94% 5,048 1.30% 628,844 24.90% 5,393 0.84% Total 3,263,540 100.00% 5,048 0.15% 2,566,149 100.00% 5,393 0.21% 173 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 15 INVENTORIES (1) An analysis of the movements of the Group’s inventories for the year is as follows: Opening Effect of Closing balance at the Addition Reduction foreign balance beginning during during exchange at the end of the year the year the year rate changes of the year USD’000 USD’000 USD’000 USD’000 USD’000 Raw materials 306,898 6,993,493 (6,698,227) 8,908 611,072 Finished goods 131,811 3,489,192 (3,474,018) 2,770 149,755 Work in progress 76,864 4,824,419 (4,732,349) 2,552 171,486 Consignment stocks 31,030 739,531 (732,813) 256 38,004 Completed property held for sale 9,139 - (9,139) - - Spare parts 11,249 308,987 (313,282) 64 7,018 Consumables 510 19,691 (17,154) 44 3,091 Materials in transit 1,358 29,307 (28,715) 1 1,951 Stocks 4,712 1,670,608 (1,595,887) 1,478 80,911 Property under development for sale 36,848 - (36,848) - - Subtotal 610,419 18,075,228 (17,638,432) 16,073 1,063,288 Less: Provision for diminution in value of inventories 4,716 4,040 (1,895) 133 6,994 Total 605,703 18,071,188 (17,636,537) 15,940 1,056,294 Opening Effect of Closing balance at the Addition Reduction foreign balance beginning during during exchange at the end of the year the year the year rate changes of the year RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Raw materials 2,395,366 52,953,338 (50,717,633) (167,676) 4,463,395 Finished goods 1,028,801 26,419,465 (26,304,573) (49,854) 1,093,839 Work in progress 599,929 36,529,535 (35,832,399) (44,500) 1,252,565 Consignment stocks 242,193 5,599,581 (5,548,712) (15,471) 277,591 Completed property held for sale 71,331 - (69,200) (2,131) - Spare parts 87,801 2,339,590 (2,372,110) (4,018) 51,263 Consumables 3,983 149,092 (129,889) (611) 22,575 Materials in transit 10,600 221,902 (217,420) (828) 14,254 Stocks 36,778 12,649,508 (12,083,739) (11,564) 590,983 Property under development for sale 287,599 - (279,003) (8,596) - Subtotal 4,764,381 136,862,011 (133,554,678) (305,249) 7,766,465 Less: Provision for diminution in value of inventories 36,811 30,588 (14,346) (1,969) 51,084 Total 4,727,570 136,831,423 (133,540,332) (303,280) 7,715,381 174 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 15 INVENTORIES (CONTINUED) (1) An analysis of the movements of the Group’s inventories for the year is as follows: (continued) The Group’s closing balance of inventories included no capitalised borrowing cost. At the year end, the Group’s inventories with restriction amounted to USD 115,312,237 (RMB 842,263,638). Refer to Note 29 for details. (2) An analysis of provision for diminution in value of the Group’s inventories is as follows: Opening Effect of Closing balance at the Addition Increase by Reduction foreign balance beginning for acquisition during the year exchange at the end of the year the year of subsidiary Reversal Write-off rate changes of the year USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 Raw materials 2,658 14 1,757 (1,463) (16) 88 3,038 Finished goods 1,048 318 183 (82) (235) 44 1,276 Work in progress 501 - 1,738 (99) - 1 2,141 Spare parts 509 30 - - - - 539 4,716 362 3,678 (1,644) (251) 133 6,994 Opening Effect of Closing balance at the Addition Increase by Reduction foreign balance beginning for acquisition during the year exchange at the end of the year the year of subsidiary Reversal Write-off rate changes of the year RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Raw materials 20,747 102 13,300 (11,074) (124) (768) 22,183 Finished goods 8,183 2,412 1,387 (619) (1,778) (254) 9,331 Work in progress 3,907 - 13,162 (751) - (684) 15,634 Spare parts 3,974 225 - - - (263) 3,936 36,811 2,739 27,849 (12,444) (1,902) (1,969) 51,084 Any excess of the cost over the net realisable value of each class of inventories is recognised as a provision for diminution in the value of inventories. The reversals during the year were due to the use or the sales of the above mentioned inventories. 16 OTHER CURRENT ASSETS The Group 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Cash flow hedges 9,818 71,713 - - 175 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 17 NON-CURRENT ASSETS DUE WITHIN ONE YEAR The Group 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Finance leases 1,553 11,342 939 7,328 Trusted loans 11,222 81,968 - - Others 246 1,799 - - 13,021 95,109 939 7,328 18 AVAILABLE-FOR-SALE FINANCIAL ASSETS The Group and the Company 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Equity instruments 568,664 4,153,636 195,302 1,524,355 19 LONG-TERM RECEIVABLES The Group 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Finance leases 13,677 99,900 7,512 58,635 Sale of goods by installments 42 309 - - Car/housing loans to staff 3,995 29,180 - - Trusted loans 6,194 45,242 - - Others 3,302 24,114 - - Subtotal 27,210 198,745 7,512 58,635 Less: Provision for impairment 14 102 - - Total 27,196 198,643 7,512 58,635 176 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 19 LONG-TERM RECEIVABLES (CONTINUED) The total future minimum lease receipts under finance leases after the balance sheet date are receivable as follows: 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Within 1 year (inclusive) 2,224 16,241 1,343 10,482 1 and 2 years (inclusive) 4,323 31,576 1,343 10,482 2 and 3 years (inclusive) 4,250 31,043 1,343 10,482 Over 3 years 6,346 46,355 6,156 48,049 Subtotal 17,143 125,215 10,185 79,495 Less: unrecognised finance income 1,913 13,973 1,734 13,532 Total 15,230 111,242 8,451 65,963 In above: Due within 1 year 1,553 11,342 939 7,328 Over 1 year 13,677 99,900 7,512 58,635 20 LONG-TERM EQUITY INVESTMENTS The Group 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Investments in associates 85,131 621,821 63,832 498,207 Investments in joint ventures 13,252 96,793 10,487 81,852 Other long-term equity investments 27,054 197,605 8,927 69,685 Subtotal 125,437 916,219 83,246 649,744 Less: Provision for impairment 465 3,397 465 3,629 Total 124,972 912,822 82,781 646,115 177 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 20 LONG-TERM EQUITY INVESTMENTS (CONTINUED) The Company 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Investments in subsidiaries 291,515 2,129,182 264,469 2,064,204 Other long-term equity investments 26,817 195,981 8,706 67,950 Subtotal 318,332 2,325,163 273,175 2,132,154 Less: Provision for impairment 465 3,397 465 3,629 Total 317,867 2,321,766 272,710 2,128,525 (1) At 31 December 2007, the Company’s investments in major subsidiaries are as follows: Initial Balance at the Addition Balance at investment beginning of during the end of Investee cost the year year the year USD’000 USD’000 USD’000 USD’000 SCIMC 12,450 12,450 - 12,450 SCIMCEL 12,450 12,450 - 12,450 XHCIMC 5,539 5,539 - 5,539 SHFE 17,338 13,321 4,017 17,338 TICIMC 12,342 12,342 - 12,342 TJCIMCn 11,500 11,500 - 11,500 QDCC 9,139 9,139 - 9,139 DLCIMC 7,400 7,400 - 7,400 NBCIMC 3,750 3,750 - 3,750 SBWI 10,100 10,100 - 10,100 TCCIMC 12,003 12,003 - 12,003 ZZCIMC 15,266 9,316 5,950 15,266 SHYSLE 11,982 11,982 - 11,982 CQVS 5,994 1,199 4,795 5,994 SCRC 16,120 16,120 - 16,120 QDCRC 8,229 8,229 - 8,229 XHCIMCS 6,748 6,748 - 6,748 TJCIMCLE 2,498 2,498 - 2,498 DLL 8,950 5,422 3,528 8,950 XHCIMCF 4,258 4,258 - 4,258 CIMC (HK) 256 256 - 256 CIMC USA 25,986 25,960 26 25,986 TAS 1,923 1,923 - 1,923 CIMCSD 24,688 17,754 6,934 24,688 HI 41,906 41,906 - 41,906 SZCVS 4 4 - 4 CIMC TEI 900 900 - 900 GZTY 1,796 - 1,796 1,796 291,515 264,469 27,046 291,515 178 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 20 LONG-TERM EQUITY INVESTMENTS (CONTINUED) (1) At 31 December 2007, the Company’s investments in major subsidiaries are as follows: (continued) Effect of InitialBalance at the Addition foreign Balance at investment beginning of during exchange the end of Investee cost the year year rate changes the year RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 SCIMC 90,937 97,173 - (6,236) 90,937 SCIMCEL 90,937 97,173 - (6,236) 90,937 XHCIMC 40,458 43,232 - (2,774) 40,458 SHEF 126,640 103,972 30,416 (7,748) 126,640 TJCIMC 90,148 96,331 - (6,183) 90,148 TJCIMCn 83,998 89,759 - (5,761) 83,998 QDCC 66,753 71,331 - (4,578) 66,753 DLCIMC 54,051 57,758 - (3,707) 54,051 NBCIMC 27,391 29,269 - (1,878) 27,391 SBWI 73,772 78,832 - (5,060) 73,772 TCCIMC 87,672 93,685 - (6,013) 87,672 ZZCIMC 111,506 72,712 45,052 (6,258) 111,506 SHYSLE 87,519 93,521 - (6,002) 87,519 QCVS 43,781 9,358 36,307 (1,884) 43,781 SCRC 117,744 125,818 - (8,074) 117,744 QDCRC 60,106 64,228 - (4,122) 60,106 XHCIMCS 49,289 52,669 - (3,380) 49,289 TJCIMCLE 18,246 19,497 - (1,251) 18,246 DLL 65,373 42,319 26,713 (3,659) 65,373 XHCIMCF 31,101 33,234 - (2,133) 31,101 CIMC (HK) 1,870 1,998 - (128) 1,870 CIMC USA 189,807 202,620 197 (13,010) 189,807 TAS 14,046 15,009 - (963) 14,046 CIMCSD 180,326 138,572 52,503 (10,749) 180,326 HI 302,697 327,078 - (21,088) 305,990 SZCVS 29 31 - (2) 29 CIMC TEI 6,574 7,025 - (451) 6,574 GZTY 13,118 - 13,599 (481) 13,118 2,125,889 2,064,204 204,787 (139,809) 2,129,182 Refer to Note 6 for detailed information of the subsidiaries. At 31 December 2007, there was no provision for impairment of investments in subsidiaries. At 31 December 2007, there was no contingent liabilities related to the investment in subsidiaries. 179 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 20 LONG-TERM EQUITY INVESTMENTS (CONTINUED) (2) At 31 December 2007, the Group and the Company’s investments in major joint ventures were as follows: (a) The major joint ventures of the Company’s subsidiaries Balance Effect of Initial at the Addition foreign Balance at investment beginning during exchange the end of Investee cost of the year year rate changes the year USD’000 USD’000 USD’000 USD’000 USD’000 Shenzhen CIMC Skyspace Real Estate Development Co., Ltd (“CIMC Tianyu”) 9,937 10,487 3,056 (291) 13,252 Balance Effect of Initial at the Addition foreign Balance at investment beginning during exchange the end of Investee cost of the year year rate changes the year RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 CIMC Tianyu 79,872 81,852 23,139 (8,198) 96,793 Details of the major joint ventures of the Company’s subsidiaries are as follows: The Company’s Shareholding At year end Current year Name of Organisation Business Registered percentage / Total Total Total Net investee code place nature capital voting rights assets liabilities revenue profit RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 CIMC Tianyu 70846450-5 China Domestic 154,634 50% 552,562 358,976 212,521 34,816 Guangdong The voting rights held by the Company are the same as its shareholding percentage of the joint ventures. 180 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 20 LONG-TERM EQUITY INVESTMENTS (CONTINUED) (3) At 31 December 2007, the Group and Company’s investments in major associates are as follows: (a) The major associates of the Company’s subsidiaries Balance Addition Adjustme Initial at the Addition through Transfer und investment beginning during acquisitions from equ Investee cost of the year the year of subsidiaries subsidiaries meth USD’000 USD’000 USD’000 USD’000 USD’000 USD’0 KYH Steel Holding Ltd 3,336 8,751 - - - 4,2 Tianjin Port CIMC Zhenhua Logistic Co., Ltd (“TJCIMCZL”) 2,200 2,200 1,300 - - 3 Yangzhou Maxi-CUBE Tong Composite Co., Ltd (“MST”) 1,151 1,620 - - - 1 Dalian Jinong Logistic Co., Ltd (“DLJLL”) 1,828 2,070 - - - 8 Xiamen CIMC Haitou Container Service Co., Ltd (“XCIMCHC”) 835 1,064 - - - 4 Zhenhua Logistic Group Co., Ltd (“TJZL”) 47,453 47,453 - - - 6,9 Ningbo Beilun Donghua Container Service Co., Ltd (“NBBL”) 432 478 - - - 1 New Atlantic Timber (HK) Limited (“XYW”) 196 196 Shanghai Fengyang - - - - 4,176 TRS Transportkoeling - - - 676 - 2 EURTANK OY - - - 1,526 - 1 57,431 63,832 1,300 2,202 4,176 13,5 181 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 20 LONG-TERM EQUITY INVESTMENTS (CONTINUED) (3) At 31 December 2007, the Group and Company’s investments in major associates are as follows: (c (a) The major associates of the Company’s subsidiaries: (continued) Balance Addition Adjustme Initial at the Addition through Transfer und investment beginning during acquisitions from equ Investee cost of the year the year of subsidiaries subsidiaries meth RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’0 KYH Steel Holding Ltd 27,625 68,294 - - - 31,9 TJCIMCZL 18,216 17,171 9,843 - - 2,5 MST 9,530 12,644 - - - 1,3 DLJLL 8,619 16,157 - - - 6,7 XCIMCHC 6,913 8,305 - - - 3,4 TJZL 302,144 370,375 - - - 52,9 NBBL 3,579 3,731 - - - 9 XYW 1,530 1,530 TRS Transportkoeling - - - 4,864 - 2,0 TRS Transportkoeling - - - 4,864 - 2,0 EURTANK OY - - - 11,114 - 9 378,156 498,207 9,843 15,978 31,623 102,8 As at 31 December 2007, based on the result of the impairment tests by comparing the recov term equity investment in jointly ventures and associates, no provision for impairment was con 182 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 20 LONG-TERM EQUITY INVESTMENTS (CONTINUED) (3) At 31 December 2007, the Group and Company’s investments in major associates are as follows: (c (a) The major associates of the Company’s subsidiaries: (continued) Details of the associates of the Company’s subsidiaries are as follows: The Company’s Subsidiaries’ Organisation Registered Business Registered Shareholding Voting Name of investee code place nature capital percentage rights RMB’000 RM The British KYH Steel Holding Ltd 106755 Virgin Islands LTD 730,420 31.83% 31.83% 6 TJCIMCZL 78939485 Tianjin JV 200,000 29.78% 29.78% MST 60872487-5 Yangzhou JV 15,193 37.77% 37.77% DLJLL 2102716968340 Dalian JV 25,000 30.00% 30.00% XCIMCHC 776024499 Xianmen JV 15,000 45.00% 45.00% TJZL 600575801 Tianjin JV 322,315 45.00% 45.00% 1,5 NBBL 14432073-2 Ningbo JV 4,000 21.00% 21.00% XYW 871052 HongKong LTD 12,500 20.00% 20.00% Shanghai Fengyang 74269573-7 Shanghai JV 30,000 40.00% 40.00% 5 183 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 20 LONG-TERM EQUITY INVESTMENTS (CONTINUED) (4) At 31 December 2007, other long-term equity investments of the Group and Company are as follow The Group’s major other equity investments: Shanghai Haifu BOCM China Jinan Puren International Schroder Railway polyurethane Container Stolt Fund Donghwa United Guangdong Co., Ltd Transport Management Container Logistics Samsung USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 Investment costs Balance at the beginning of the year 84 103 1,233 35 - 207 Addition during the year - - - - 18,111 - Effect of foreign exchange rate changes - - - - 16 - Balance at the end of the year 84 103 1,233 35 18,127 207 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Less: Provision for impairment Balance at the beginning and the end of the year - - - - - 207 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Carrying amount At the year end 84 103 1,233 35 18,127 - At the beginning of the year 84 103 1,233 35 - - 184 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 20 LONG-TERM EQUITY INVESTMENTS (CONTINUED) (4) At 31 December 2007, other long-term equity investments of the Group and Company are as follow The Group’s major other equity investments: (continued) Shanghai Haifu BOCM China Jinan Puren International Schroder Railway polyurethane Container Stolt Fund Donghwa United Guangdong Co., Ltd Transport Management Container Logistics Samsung RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Investment costs Balance at the beginning of the year 656 805 9,623 274 - 1,616 Addition during the year - - - - 137,133 - Effect of foreign exchange rate changes (42) (52) (619) (17) (4,734) (104) Balance at the end of the year 614 753 9,004 257 132,399 1,512 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Less: Provision for impairment Balance at the beginning of the year - - - - - 1,616 Effect of foreign exchange rate changes - - - - - (104) Balance at the end of the year - - - - - 1,512 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Carrying amount At the year end 614 753 9,004 257 132,399 - At the beginning of the year 656 804 9,624 274 - - 185 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 20 LONG-TERM EQUITY INVESTMENTS (CONTINUED) (4) At 31 December 2007, other long-term equity investments of the Group and Company are as follows: The Group’s major other equity investments: (continued) BOCM China Schroder China Railway Guangdong Beihai Stolt Fund Merchants United Samsung Yinjian Management Securities Logistics Total USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 Investment costs Beginning of the year 207 258 1,233 7,008 - 8,706 Addition during the year - - - - 18,111 18,111 End of the year 207 258 1,233 7,008 18,111 26,817 ------------- ------------- ------------- ------------- ------------- ------------- Less: Provision for impairment Beginning and the end of the year 207 258 - - - 465 ------------- ------------- ------------- ------------- ------------- ------------- Carrying amount At the year end - - 1,233 7,008 18,111 26,352 At the beginning of the year - - 1,233 7,008 - 8,241 BOCM China Schroder China Railway Guangdong Beihai Stolt Fund Merchants United Samsung Yinjian Management Securities Logistics Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Investment costs Beginning of the year 1,616 2,013 9,623 54,698 - 67,950 Addition during the year - - - - 137,133 137,133 Effect of foreign exchange rate changes (104) (128) (619) (3,517) (4,734) (9,102) End of the year 1,512 1,885 9,004 51,181 132,399 195,981 ------------- ------------- ------------- ------------- ------------- ------------- Less: Provision for impairment Beginning of the year 1,616 2,013 - - - 3,629 Effect of foreign exchange rate changes (104) (128) - - - (232) End of the year 1,512 1,885 - - - 3,397 ------------- ------------- ------------- ------------- ------------- ------------- 186 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 20 LONG-TERM EQUITY INVESTMENTS (CONTINUED) (4) At 31 December 2007, other long-term equity investments of the Group and Company are as follows: The Group’s major other equity investments: (continued) BOCM China Schroder China Railway Guangdong Beihai Stolt Fund Merchants United Samsung Yinjian Management Securities Logistics Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Carrying amount At the year end - - 9,004 51,181 132,399 192,584 At the beginning of the year - - 9,623 54,698 - 64,321 21 INVESTMENT PROPERTY The Group Land use rights USD’000 RMB’000 Cost: Balance at the beginning of the year 6,674 52,092 Addition during the year - - Effect of the foreign exchange rate changes 458 - Balance at the end of the year 7,132 52,092 ------------------ ------------------ Accumulated depreciation or amortisation: Balance at the beginning of the year 259 2,026 Charge for the year 137 1,035 Effect of the foreign exchange rate changes 23 - Balance at the end of the year 419 3,061 ------------------ ------------------ Carrying amount: At the end of the year 6,713 49,031 At the beginning of the year 6,415 50,066 187 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 22 FIXED ASSETS The Group Office & Plant & Machinery & Motor other buildings equipment vehicles equipment Total USD’000 USD’000 USD’000 USD’000 USD’000 Cost: As at the beginning of the year 380,004 364,991 28,999 33,257 807,251 Additions through acquisitions of subsidiaries 80,858 118,258 18,381 22,472 239,969 Decrease due to disposal of subsidiaries (55) - - (443) (498) Purchase 25,403 12,752 9,960 13,990 62,105 Transfer from construction in progress 48,696 48,028 2,148 2,357 101,229 Disposals (10,133) (5,721) (4,364) (2,106) (22,324) Effect of the foreign exchange rate changes 13,286 13,735 1,933 2,164 31,118 As at the end of the year 538,059 552,043 57,057 71,691 1,218,850 --------------- --------------- --------------- --------------- --------------- Accumulated depreciation: As at the beginning of the year 52,416 116,419 15,695 18,059 202,589 Additions through acquisitions of subsidiaries 23,876 41,124 6,349 7,964 79,313 Decrease due to disposal of subsidiaries (52) - - (328) (380) Charge for the year 13,299 31,662 6,978 9,797 61,736 Written back on disposals (2,004) (5,269) (1,584) (1,768) (10,625) Effect of the foreign exchange rate changes 2,429 4,382 821 742 8,374 As at the end of the year 89,964 188,318 28,259 34,466 341,007 --------------- --------------- --------------- --------------- --------------- Less: Provision for impairment As at the beginning of the year 3,746 5,563 2 330 9,641 Effect of the foreign exchange rate changes (1) - - - (1) As at the end of the year 3,745 5,563 2 330 9,640 --------------- --------------- --------------- --------------- --------------- Net book value As at the end of the year 444,350 358,162 28,796 36,895 868,203 As at the beginning of the year 323,842 243,009 13,302 14,868 595,021 188 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 22 FIXED ASSETS (CONTINUED) The Group (continued) Office & Plant & Machinery & Motor other buildings equipment vehicles equipment Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Cost: As at the beginning of the year 2,965,969 2,848,791 226,340 259,574 6,300,674 Additions through acquisitions of subsidiaries 616,560 895,427 139,181 170,151 1,821,319 Decrease due to disposal of subsidiaries (418) - - (3,351) (3,769) Purchase 188,027 96,552 75,415 105,931 465,925 Transfer from construction in progress 368,717 363,657 16,266 17,847 766,487 Disposals (76,722) (43,317) (33,045) (15,944) (169,028) Effect of the foreign exchange rate changes (132,050) (128,880) (7,398) (10,564) (278,892) As at the end of the year 3,930,083 4,032,230 416,759 523,644 8,902,716 --------------- --------------- --------------- --------------- --------------- Accumulated depreciation: As at the beginning of the year 409,112 908,662 122,501 140,952 1,581,227 Additions through acquisitions of subsidiaries 180,783 311,384 48,077 60,302 600,546 Decrease due to disposal of subsidiaries (397) - - (2,481) (2,878) Charge for the year 100,698 239,735 52,836 74,183 467,452 Written back on disposals (15,176) (39,899) (11,994) (13,386) (80,455) Effect of the foreign exchange rate changes (17,916) (44,371) (5,010) (7,820) (75,117) As at the end of the year 657,104 1,375,511 206,410 251,750 2,490,775 --------------- --------------- --------------- --------------- --------------- Less: Provision for impairment As at the beginning of the year 29,238 43,420 18 2,575 75,251 Effect of the foreign exchange rate changes (1,881) (2,791) (1) (167) (4,840) As at the end of the year 27,357 40,629 17 2,408 70,411 --------------- --------------- --------------- --------------- --------------- Net book value As at the end of the year 3,245,622 2,616,090 210,332 269,486 6,341,530 As at the beginning of the year 2,527,619 1,896,709 103,821 116,047 4,644,196 189 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 22 FIXED ASSETS (CONTINUED) The Company Office & Plant & Motor other buildings vehicles equipment Total USD’000 USD’000 USD’000 USD’000 Cost: As at the beginning of the year 15,331 1,732 10,359 27,422 Purchase 1,401 950 435 2,786 Transfer from construction in progress - - 237 237 Disposals - (301) - (301) As at the end of the year 16,732 2,381 11,031 30,144 ------------- ------------- ------------- ------------- Accumulated depreciation: As at the beginning of the year 2,114 909 7,229 10,252 Charge for the year 508 283 1,638 2,429 Written back on disposals - (269) - (269) As at the end of the year 2,622 923 8,867 12,412 ------------- ------------- ------------- ------------- Net book value As at the end of the year 14,110 1,458 2,164 17,732 As at the beginning of the year 13,217 823 3,130 17,170 190 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 22 FIXED ASSETS (CONTINUED) The Company (continued) Office & Plant & Motor other buildings vehicles equipment Total RMB’000 RMB’000 RMB’000 RMB’000 Cost: As at the beginning of the year 119,659 13,518 80,853 214,030 Purchase 10,606 7,193 3,294 21,093 Transfer from construction in progress - - 1,795 1,795 Disposals - (2,279) - (2,279) Effect of the foreign exchange rate changes (8,054) (1,041) (5,369) (14,464) As at the end of the year 122,211 17,391 80,573 220,175 ------------- ------------- ------------- ------------- Accumulated depreciation: As at the beginning of the year 16,500 7,095 56,423 80,018 Charge for the year 3,846 2,143 12,403 18,392 Written back on disposals (2,037) (2,037) Effect of the foreign exchange rate changes (1,195) (459) (4,059) (5,713) As at the end of the year 19,151 6,742 64,767 90,660 ------------- ------------- ------------- ------------- Net book value As at the end of the year 103,060 10,649 15,806 129,515 As at the beginning of the year 103,159 6,423 24,430 134,012 At 31 December 2007, there was no fixed assets pending disposal. At 31 December 2007, the cost of the Group’s fixed assets whose certificates of ownership are pending amounted to USD 37,662,000. At 31 December 2007, the carrying amount of the Group’s fixed assets leased out under operating leases is: Office & Plant & Machinery & Motor other buildings equipment vehicles equipment Total USD’000 USD’000 USD’000 USD’000 USD’000 Balance at the end of the year 630 379 183 872 2,064 Balance at the beginning of the year 717 457 205 1,027 2,406 191 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 22 FIXED ASSETS (CONTINUED) Office & Plant & Machinery & Motor other buildings equipment vehicles equipment Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Balance at the end of the year 4,600 2,770 1,339 6,366 15,075 Balance at the beginning of the year 5,594 3,567 1,599 8,212 18,972 At 31 December 2007, the fixed assets the Group that have been restricted amounted to USD 25,843,982 (RMB 188,769,611). Refer to Note 29 for details. 23 CONSTRUCTION IN PROGRESS The Group 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Cost Balance at the beginning of the year 43,551 339,922 31,945 252,806 Additions through acquisitions of subsidiaries 7,691 57,802 - - Additions during the year 152,345 1,153,960 104,623 834,287 Transferred to fixed assets (101,229) (766,487) (89,498) (709,375) Decrease due to other reasons (9,534) (72,193) (4,107) (32,056) Effect of the foreign exchange rate changes 2,122 (19,497) 588 (5,740) Balance at the end of the year 94,946 693,507 43,551 339,922 ---------------- ---------------- ---------------- ---------------- Carrying amounts At the end of the year 94,946 693,507 43,551 339,922 At the beginning of the year 43,551 339,922 31,945 252,806 The Company 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Cost Balance at the beginning of the year 508 3,963 427 3,446 Additions during the year 2,042 14,758 746 5,949 Transferred to fixed assets (237) (1,795) (665) (5,432) Decrease due to other reasons (219) (1,632) - - Balance at the end of the year 2,094 15,294 508 3,963 ---------------- ---------------- ---------------- ---------------- Carrying amounts At the end of the year 2,094 15,294 508 3,963 At the beginning of the year 508 3,963 427 3,446 192 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 23 Construction in progress (continued) The carrying amounts at the end of the year included capitalised borrowing cost of USD 940,946 (2 rate per annum at which the borrowing costs were capitalised for the current year by the Group was 5. At 31 December 2007, the Group’s major construction in progress is set out as follows: Effect of the foreign Beginning Transfer to Other exchange Project Budget balance Additions fixed assets decreases rate changes USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 HJCIMC Industrial Park 135,538 4,592 15,069 (1,252) (5,955) 603 LYY Plants 15,951 - 6,918 - - 253 DLCIMCS Plants 6,277 - 5,966 - - 218 SZSV Plants 4,970 - 3,858 - - 141 Dormitory 1,931 - 1,795 - - 65 QDHB Plants 7,102 - 5,220 - - 191 SBWI Plants 1,564 - 1,090 - - - NTCIMCT Office building 1,493 - 1,079 - (16) - 193 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 23 Construction in progress (continued) At 31 December 2007, the Group’s major construction in progress is set out as follows: (continued) Effect of the foreign Beginning Transfer to Other exchange Project Budget balance Additions fixed assets decreases rate changes RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 R HJCIMC Industrial Park 990,000 35,841 114,100 (9,482) (45,090) - LYY Plants 116,509 - 52,381 - - - DLCIMCS Plants 45,850 - 45,167 - - - SZSV Plants 36,300 - 29,211 - - - Dormitory 14,104 - 13,588 - - - QDHB Plants 51,875 - 39,526 - - - SBWI Plants 11,424 - 8,253 - - (291) NTCIMCT Office building 10,905 - 8,170 - (113) financing 194 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 24 INTANGIBLE ASSETS The Group Technical Timber know-how concession Customer Land use rights & trademarks rights Relationships Backlog Total USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 Cost Balance at the beginning of the year 173,358 6,249 36,276 - - 215,883 Additions through acquisitions of subsidiaries 6,549 69,492 - 3,317 1,605 80,963 Other additions 72,964 124 - - - 73,088 Decrease during the year (578) (13) - - - (591) Effect of foreign exchange rate changes 3,109 3,427 (422) - - 6,114 Balance at the end of the year 255,402 79,279 35,854 3,317 1,605 375,457 --------------- --------------- --------------- --------------- --------------- --------------- Less: Accumulated amortisation Balance at the beginning of the year 12,073 2,298 11,340 - - 25,711 Additions through acquisitions of subsidiaries 532 - - - - 532 Charge for the year 4,225 3,623 1,150 416 642 10,056 Written back on disposal (127) - - - - (127) Effect of foreign exchange rate changes 303 154 (135) - - 322 Balance at the end of the year 17,006 6,075 12,355 416 642 36,494 --------------- --------------- --------------- --------------- --------------- --------------- Less: Provision for impairment Balance at the beginning of the year - - 15,939 - - 15,939 Effect of foreign exchange rate changes - - (128) - - (128) Balance at the end of the year - - 15,811 - - 15,811 --------------- --------------- --------------- --------------- --------------- --------------- Carrying amounts At the end of the year 238,396 73,204 7,688 2,901 963 323,152 At the beginning of the year 161,285 3,951 8,997 - - 174,233 195 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 24 INTANGIBLE ASSETS (CONTINUED) The Group (continued) Technical Timber know-how concession Customer Land use rights & trademarks rights Relationships Backlog Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Cost Balance at the beginning of the year 1,353,084 48,771 283,136 - - 1,684,991 Additions through acquisitions of subsidiaries49,589 523,616 - 25,118 12,149 610,472 Other additions 552,467 942 - - - 553,409 Decrease during the year (4,378) (100) - - - (4,478) Effect of foreign exchange rate changes (85,261) 5,853 (21,261) (888) (429) (101,986) Balance at the end of the year 1,865,501 579,082 261,875 24,230 11,720 2,742,408 --------------- --------------- --------------- --------------- --------------- --------------- Less: Accumulated amortisation Balance at the beginning of the year 94,226 17,936 88,512 - - 200,674 Additions through acquisitions of subsidiaries 4,032 - - - - 4,032 Charge for the year 31,992 27,432 8,709 3,150 4,860 76,143 Written back on disposal (961) - - - - (961) Effect of foreign exchange rate changes (5,075) (998) (6,978) (111) (172) (13,334) Balance at the end of the year 124,214 44,370 90,243 3,039 4,688 266,554 --------------- --------------- --------------- --------------- --------------- --------------- Less: Provision for impairment Balance at the beginning of the year - - 124,408 - - 124,408 Effect of foreign exchange rate changes - - (8,921) - - (8,921) Balance at the end of the year - - 115,487 - - 115,487 --------------- --------------- --------------- --------------- --------------- --------------- Carrying amounts At the end of the year 1,741,287 534,712 56,145 21,191 7,032 2,360,367 At the beginning of the year 1,258,858 30,835 70,216 - - 1,359,909 196 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 24 INTANGIBLE ASSETS (CONTINUED) The Company Technical know-how Land use rights & trademarks Total USD’000 USD’000 USD’000 Cost Balance at the beginning of the year 4,736 - 4,736 Addition during the year - 350 350 Balance at the end of the year 4,736 350 5,086 --------------- --------------- --------------- Less: Accumulated amortisation Balance at the beginning of the year 73 - 73 Charge for the year 5 64 69 Balance at the end of the year 78 64 142 --------------- --------------- --------------- Carrying amounts At the end of the year 4,658 286 4,944 At the beginning of the year 4,663 - 4,663 Technical know-how Land use rights & trademarks Total RMB’000 RMB’000 RMB’000 Cost Balance at the beginning of the year 36,965 - 36,965 Addition during the year - 2,650 2,650 Effect of foreign exchange rate changes (2,372) (94) (2,466) Balance at the end of the year 34,593 2,556 37,149 --------------- --------------- --------------- Less: Accumulated amortisation Balance at the beginning of the year 570 - 570 Charge for the year 37 485 522 Effect of foreign exchange rate changes (33) (18) (51) Balance at the end of the year 574 467 1,041 --------------- --------------- --------------- Carrying amounts At the end of the year 34,019 2,089 36,108 At the beginning of the year 36,395 - 36,395 197 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 24 INTANGIBLE ASSETS (CONTINUED) In 2007, the Group acquired Enric and Burg, and the valuation amounts of the two companies’ intangible assets are recorded as the original values. At 31 December 2007, Enric and Burg’s intangible assets whose values were in excess of RMB 1 million were as follows: Original value valuation method USD’000 RMB’000 Enric -Land use rights 6,016 45,213 Replacement cost -Technical know-how 39,410 296,184 Excess Earning -Trademarks 10,583 79,528 Relief from royalty -Clients’ relationships 3,317 24,928 Excess Earning -Backlog 1,605 12,062 Excess Earning Burg - Technical know-how 9,208 70,137 Excess Earning - Trademarks 10,291 78,388 Relief from royalty 80,430 606,440 Enric’s intangible assets were valued by Pan-China Schinda Certified Public Accounts, and Burg’s were valued by Duff & Phelps Corporation. The timber concession right amounted to USD 18,472,014 in respect of the 450,000 acres in Suriname was purchased by Topco Forestry N.V., a wholly owned subsidiary of the Gold Terrain Assets Limited, a subsidiary of the Company. Since around 75,000 acres of the forest was located in a nature reserve, the Suriname government decided to take back the timber concession right in 2003. The Company has negotiated with the Suriname government to substitute the 75,000 acres with other locations. Since there are no clear results of the negotiation, an impairment of USD 2,104,035 was made to the timber concession right. In 1998, Silveroad Wood Products Limited, a fully owned subsidiary of Gold Terrain Assets Limited purchased 315,460 acres of timber concession rights in Cambodia amounting to USD 17,381,995. The government of Cambodia has suspended logging activities of all concessionaires, including those of the Group since 2001. In view of this, full impairment loss amounted to USD 13,707,349 was made on the carrying value of the related concession rights. At 31 December 2007, there were no intangible assets with indefinite useful lives. 198 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 25 GOODWILL The Group 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Balance at the beginning of the year 39,384 307,694 14,776 119,249 Addition for the year 96,262 703,115 24,608 196,226 Effect of foreign exchange rate changes - (19,670) - (7,781) Balance at the end of the year 135,646 991,139 39,384 307,694 Less: Provision for impairment 1,757 13,190 1,757 14,012 Carrying amounts at the end of the year 133,889 977,949 37,627 293,682 The Group paid USD 144,291,628 (RMB1,094,076,842) as combination cost for the 41.55% equity interest in Enric in 2007. The excess of combination cost over the Group’s interest in the fair value of Enric’s identifiable assets and liabilities, amounting to USD 92,113,833 (RMB 701,034,168), was recognised as goodwill attributable to Enric. Since the Group only purchased Enric’s interests in late 2007 and there has been no adverse trend in Enric’s business, no impairment was considered necessary for the goodwill. 26 LONG-TERM DEFERRED EXPENSES The Group 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Water and electricity capacity expenses 382 2,787 138 1,078 Rent 1,728 12,624 982 7,665 Others 2,803 20,479 3,374 26,332 4,913 35,890 4,494 35,075 The Company 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Golf club membership fees and others 1,016 7,421 1,314 10,263 199 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 27 DEFERRED TAX ASSETS AND LIABILITIES The Group 2007 2006 Deductible Deferred Deductible Deferred temporary tax temporary tax difference assets RMB difference assets RMB USD’000 USD’000 ’000 USD’000 USD’000 ’000 Deferred tax assets Provision for bad and doubtful debts 31,534 7,307 53,372 16,280 1,013 7,905 Provision for diminution in value of inventories 6,994 1,145 8,363 3,982 328 2,560 Provision for impairment against fixed assets and construction in progress 9,640 1,664 12,154 9,641 987 7,704 Provisions 85,749 12,603 92,055 54,086 5,726 44,692 Employee benefits payable 80,496 14,470 105,692 23,215 2,544 19,856 Others 21,208 4,123 30,115 12,703 4,108 32,063 Total 235,621 41,312 301,751 119,907 14,706 114,780 The Group 2007 2006 Taxable Deferred Taxable Deferred temporary tax temporary tax difference liabilities RMB difference liabilities RMB USD’000 USD’000 ’000 USD’000 USD’000 ’000 Deferred tax liabilities Changes in fair value - Available-for-sale financial assets 503,913 100,783 736,139 141,391 21,209 165,536 - Financial assets held for trading 102,483 10,766 78,637 - - - - Hedging assets 9,818 1,523 11,124 - - - - Valuation gain through acquisition 230,146 55,031 401,962 - - - Others 3,460 760 5,548 - - - Total 849,820 168,863 1,233,410 141,391 21,209 165,536 The Company 2007 2006 Deductible Deductible temporary Deferred temporary Deferred difference tax assets RMB v difference tax assets RMB USD’000 USD’000 ’000 USD’000 USD’000 ’000 Deferred tax assets Employee benefits payable 44,397 7,991 58,371 - - - 200 China International Marine Containers (Group) Co., Ltd. Annual Report 2007 27 DEFERRED TAX ASSETS AND LIABILITIES (CONTINUED) The Company 2007 2006 Taxable Deferred Taxable Deferred temporary tax temporary tax difference liabilities RMB difference liabilities RMB USD’000 USD’000 ’000 USD’000 USD’000 ’000 Deferred tax liabilities Changes in fair value - Available-for-sale financial assets 503,913 100,783 736,139 141,391 21,209 165,536 - Financial assets held for trading 8,276 1,489 10,879 - - - Total 512,189 102,272 747,018 141,391 21,209 165,536 In accordance with the accounting policy set out in Note 3(14), because it is not probable that future taxable profits against which the losses can be utilised will be available in some subsidiaries, the Group has not recognised deferred tax assets as follows: 2007 2006 USD’000 RMB’000 USD’000 RMB’000 Tax loss carry-forwards 18,752 136,968 12,748 99,501 Deductible temporary difference - Impairment losses of timber concession rights 8,463 61,815 8,463 66,056 - Employee benefits payable 516 3,769 7,837 61,170 - Impairment losses of 201