中集Ｂ(200039)2008年年度报告（英文版）

China International Marine Containers (Group) Co., Ltd. 2008 Annual Report 31 March 2009 1 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 Section 1 Important Statement and Contents Important Statement The Board of Directors, the Board of Supervisor, as well as directors, 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 senior 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 auditor’s report with unqualified opinion. 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. General Information 3 3. Summary of Accounting Data and Business Data 5 4. Shareholders and Changing of Share Capital 7 5. Directors, Supervisors, Senior Management and Employees 13 6. Corporate Governance Structure 21 7. The Shareholders’ General Meeting 25 8. Report of the Board of Directors 26 9. Report of Supervisory Council 48 10. Significant Issues 50 11. Financial Report 57 12. Documents for Reference 247 2 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 Section 2 General 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. Newspapers designated by the Company for information disclosure: “China Securities Journal”, ”Securities Times”, “Shanghai Securities News” and ”Ta Kung Pao”. Website designated by CSRC for information disclosure: 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 registration: September 30, 1992 2. Place of initial registration: Shenzhen Administration for Industry and Commerce 3. Latest change in registration: Nov. 19, 2008 4. Place of registration after change: Shenzhen Administration for Industry and Commerce 5. Corporate business license: 440301501119369 Tax registration number: State Tax 440301618869509 ; Local Tax 440305618869509 6. Organization code: 61886950-9 7. Name and office address of certified public accountants engaged by the Company: KPMG 3 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 Office address: 38/F, Yuehai Tianhe Town Plaza, 208 Tianhe Road, Guangzhou Zip code: 510620 Primary Banks Connected: China Development Bank The Export-Import Bank of China China Construction Bank Bank of Communications China Merchants 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 2008 Section 3 Summary of Accounting Data and Business Data 1. Key accounting data as of year 2008 Unit: RMB’000 No. Item Amount 1 Total profit 1,927,029 2 Operating profit 1,766,979 3 Net profit attributable to shareholders of listed company 1,406,908 4 Net profit excluding Extraordinary Gain and Loss (Note) 990,797 5 Net cash flow from operating activities 3,366,538 Note: Extraordinary Gain and Loss Unit: RMB’000 Extraordinary Gain and Loss Amount Disposal of non-current assets -29,379 Government grants 138,612 Changes in fair value of financial assets and liabilities held for trading, and available- 250,639 financial assets, excluding those held for effective hedges of normal operations Entrusted loans 3,528 Debt restructuring 37,703 Other non-operation income and expense 2,762 Effect on taxation 15,339 Effect on Minority interests -3,093 Total 416,111 2. Impact on net profit and net assets from adjustment in compliance with IAS Unit: RMB’000 Net profit Net assets 2008 2007 31 Dec. 2007 31 Dec. 2008 As per IAS 1,409,413 3,146,918 15,899,680 13,417,329 As per PRC GAAP 1,406,908 3,165,373 15,913,757 13,428,901 Items to be adjusted based on IAS Other 2,505 -18,455 -14,077 -11,572 As per IAS 1,409,413 3,146,918 15,899,680 13,417,329 Reason: in accordance with PRC GAAP and relevant provisions, special Explanation for payable, fixed assets and intangible assets are amortized, as a result, net profit difference has increased by RMB 2,505,000 and net asset has decreased by RMB 11,572,000 under IAS. 3. Key accounting data and financial indicators in the recent 3 years Unit: RMB’000 2008 2007 +/- (%) 2006 After Before adjustment adjustment 5 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 Operating revenue 47,327,281 48,760,826 -2.94% 33,573,664 33,167,801 Total profit 1,927,029 3,500,304 -44.95% 3,186,788 3,150,248 Net profit attributable to shareholders of 2,771,723 1,406,908 3,165,373 -55.55% 2,820,752 parent company Net profit excluding non-recurring gain/loss 2,211,990 attributable to shareholders of parent 990,797 1,842,802 -46.23% 2,750,885 company Net cash flow from operating activities 3,366,538 -1,085,549 410.12% 1,296,823 1,296,823 Basic EPS (RMB yuan) 0.53 1.19 -55.46% 1.06 1.04 Diluted EPS (RMB yuan) 0.53 1.19 -55.46% 1.06 1.04 Basic EPS after deducting non-recurring 0.83 0.37 0.69 -46.38% 1.05 gain and loss (RMB yuan) Fully diluted ROE 10.48% 19.89% -9.41% 23.08% 24.29% Weighted mean ROE 10.00% 24.00% -14.00% 24.73% 26.71% Diluted ROE after deducting non-recurring 19.39% 7.38% 11.58% -4.20% 22.51% gain and loss Weighted average ROE after deducting 21.31% 7.00% 14.00% -7.00% 24.58% non-recurring gain and loss Net cash flow from operating activities per 0.49 1.26 -0.41 410.12% 0.58 share (RMB yuan) 31 Dec. 2008 31 Dec. 2007 +/- (%) 31 Dec. 2006 After Before adjustment adjustment Total assets 34,557,863 41,048,674 -15.81% 24,191,571 22,923,368 Shareholders’ equity attributable to 11,117,446 13,428,901 15,913,757 -15.61% 12,220,114 shareholders of parent company Net assets per share attributable to 5.51 5.01 5.04 5.98 -15.72% shareholders of parent company 6 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 Section 4 Shareholders and Changing of Share Capital I. Changing of Share Capital 1. Changing of Share Capital as at 31 Dec. 2008 (1) Changing of Share Capital Unit: Share Before current change Increase/decrease after current change (+/-) After current change Number of Ratio Issuance Bonus Others Subtotal Number of Ratio shares (%) of new shares shares (%) share I. Shares subject to trading 299,672,218 11.26 0 0 -133,119,802 -133,119,802 166,552,416 6.26 moratorium 1. Shares held by state 0 0 0 0 0 0 0 0 2. Shares held by state-owned 0 0 0 0 0 0 0 0 corporations 3. Shares held by other 0 0 0 0 0 0 0 0 domestic investors Including: Shares held by 0 0 0 0 0 0 0 0 domestic non-state-owned corporations Shares held by domestic natural 0 0 0 0 0 0 0 0 person 4. Shares held by overseas 299,052,041 11.23 0 0 -133,119,802 -133,119,802 165,932,239 6.23 investors Including: Shares held by 299,052,041 11.23 0 0 -133,119,802 -133,119,802 165,932,239 6.23 overseas corporations Shares held by overseas natural 0 0 0 0 0 0 0 0 person 5. Shares held by senior 620,177 0.02 0 0 0 0 620,177 0.02 management II. Shares not subject to trading 2,362,723,833 88.74 0 0 133,119,802 133,119,802 2,495,843,635 93.74 moratorium 1. RMB ordinary shares 932,245,124 35.02 0 0 133,119,802 133,119,802 1,065,364,926 40.02 (A-share) 2. Domestically listed foreign 1,430,478,709 53.73 0 0 0 0 1,430,478,709 53.73 shares (B-share) 7 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3. Overseas listed foreign 0 0 0 0 0 0 0 0 shares 4. Others 0 0 0 0 0 0 0 0 III. Total number of shares 2,662,396,051 100.00 0 0 0 0 2,662,396,051 100.00 Note: The total share capital of the Company is 2,662,396,051 shares, including 1,231,915,542 A Renminbi common shares (A shares) and 1,430,480,509 domestically listed foreign shares (B shares). (2) Statement of change in shares subject to trading moratorium Unit: Share Name of Number of Number of Number of Number of Reason Date of releasing shareholder shares subject shares released shares subject to shares subject trading moratorium to trading from trading trading to trading moratorium at moratorium in moratorium moratorium at year-begin current year increased in year-end current year COSCO Container Promise not to 299,052,041 133,119,802 0 165,932,239 2 Jul. 2008 Industries Ltd. sell in SMR Mai Boliang Shares held by 494,702 123,676 0 371,026 Senior management Li Ruiting Shares held by Release sale 329,802 82,451 0 247,351 Senior restriction under relative regulations management Liu Xuebin Shares held by 2,400 600 0 1,800 Senior management Total 299,878,945 133,326,529 0 166,552,416 2. Share issuing and listing (1) Shares issued in the past 3 years by the end of the reporting period. CIMC did not issue any shares or derivative securities. (2) During the reporting period, total number of shares of the Company and its structure remained unchanged. (3) Up till the end of reporting period, the Company has no inner staff shares. II. Shareholders and actual controller 1. Shares held by major shareholders (as at 31 Dec. 2008) Unit: share 8 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 322,461 shareholders, including 273,044 ones of A-share and 49,417 ones of Total number of shareholders B-share Shares held by the top ten shareholders Number of Number of Shareholding Shareholding shares with Name of shareholder Nature pledged or ratio (%) at period end conditions in frozen shares sale Foreign 0 COSCO Container Industries Limited 21.80 580,491,880 165,932,239 investor China Merchants (CIMC) Investment Foreign 0 16.23 432,176,844 0 Limited investor Foreign 0 China Merchants (CIMC) Holdings Limited 6.52 173,643,136 0 investor CMBLSA RE FTIF TEMPLETON ASIAN Foreign Unknown 2.19 58,257,531 0 GRW FD GTI 5496 investor China Merchants Securities (HK) Co., Other Unknown 2.14 56,894,773 0 Limited LONG HONOUR INVESTMENTS Foreign 0 0.95 25,322,106 0 LIMITED investor HTHK/CMG FSGUFP-CMG FIRST Foreign Unknown 0.91 24,250,634 0 STATE CHINA GROWTH FD investor China Construction Bank － LION Stock Other Unknown 0.76 20,188,996 0 Securities Investment Funds TOYO SECURITIES ASIA LIMITED-A/C Foreign Unknown 0.47 12,461,625 0 CLIENT. investor Foreign Unknown TEMPLETON DRAGON FUND,INC. 0.44 11,778,895 0 investor Shares held by the top ten shareholders holding shares not subject to trading moratorium Number of shares not subject to Name of shareholders Type of shares trading moratorium COSCO Container Industries Limited 266,239,604 RMB common share COSCO Container Industries Limited 148,320,037 Domestically listed foreign share China Merchants (CIMC) Investment Limited 432,176,844 Domestically listed foreign share China Merchants (CIMC) Holdings Limited 173,643,136 Domestically listed foreign share CMBLSA RE FTIF TEMPLETON ASIAN GRW FD GTI 5496 58,257,531 Domestically listed foreign share China Merchants Securities (HK) Co., Limited 56,894,773 Domestically listed foreign share LONG HONOUR INVESTMENTS LIMITED 25,322,106 Domestically listed foreign share HTHK/CMG FSGUFP-CMG FIRST STATE CHINA GROWTH FD 24,250,634 Domestically listed foreign share China Construction Bank － LION Stock Securities Investment Funds 20,188,996 RMB common share TOYO SECURITIES ASIA LIMITED-A/C CLIENT. 12,461,625 Domestically listed foreign share TEMPLETON DRAGON FUND, INC. 11,778,895 Domestically listed foreign share Among the top 10 shareholders: Association relationship and acting-in-concert person relation exist between COSCO Container Industries Limited and Long Honour Investments Limited, where COSCO Container Industries Limited is subordinate wholly-owned Explanation on associated subsidiary of COSCO Pacific Limited under COSCO Group; Long relationship among the top ten shareholders or acting-in-concert Honour Investments Limited is subordinate wholly-owned subsidiary of COSCO Hong Kong under COSCO Group; These two and other shareholders are not acting-in-concert person specified in “Regulatory Provisions on Disclosure of Information on Shareholding Change of Shareholders for Listed Companies”. 9 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 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 acting-in-concert person as specified in “Regulatory Provisions on Disclosure of Information on Shareholding Change of Shareholders for Listed Companies”. The Company is not aware of whether association relationship exists between other shareholders and whether they are acting-in-concert person as specified in “Regulatory Provisions on Disclosure of Information on Shareholding Change of Shareholders for Listed Companies”. Note 1: Note 1: China Merchants (CIMC) Investment Limited holds 13,522,331 shares of the Company through agent account of China Merchants Securities (Hong Kong) Co., Ltd., therefore, the said company holds 445,694,175 shares of the Company in total. Note 2: China Merchants (CIMC) Holdings Limited holds 6,507,922 shares of the Company through agent account of China Merchants Securities (Hong Kong) Co., Ltd., therefore, the said company holds 180,151,058 shares of the Company in total. Note 3: BESTRAIN INVESTMENT LIMITED, subordinate subsidiary of China Merchants Holdings (International) Limited, holds 34,881,117 shares of the Company through agent account of China Merchants Securities (Hong Kong) Co., Ltd. 2. Corporate shareholders with shareholding ratio exceeding 10% (1) None of shareholders with shareholding ratio exceeding 30% (controlling shareholders) Name of shareholder Shareholding Director Date of Regist Equity structure Business ratio incorporation ered scope capital COSCO Container 21.80% Chen Keng, 2004.4.26 USD 1 Wholly-owned by Investment Industries Limited Wang Zhi and COSCO Pacific and Ying Haifeng holdings China Merchants 16.74% Du 1995.1.17 HK$ Wholly-owned by Investment (CIMC) Investment Yongcheng, 10,000 China Merchants and Limited Liu Enhuai Holdings holdings and Lin Wuliu (International) Limited ①As a liability limited company incorporated in British Virgin Islands, COSCO Container Industries Limited is a wholly-owned subsidiary under COSCO Pacific Limited. COSCO Pacific Investment Holdings Limited holds 50.96% equity of COSCO Pacific Limited. COSCO Pacific Investment Holdings Limited is a subordinate wholly-owned subsidiary under China COSCO Holdings Limited and COSCO Group holds 54.55% equity of China COSCO Holdings Limited. As of December 31, 2008, COSCO Container Industries Limited held 21.80% equity of CIMC. Long Honour Investments Limited is subordinate wholly-owned subsidiary under COSCO Hong Kong and holds 0.95% equity of CIMC. ②China Merchants (CIMC) Investment Limited and China Merchants (CIMC) Holdings Limited are both the subordinate wholly-owned subsidiaries under China Merchants Holdings (International) Limited. China Merchants Group Limited holds 55.82% equity of China Merchants 10 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 Holdings (International) Limited. China Merchants (CIMC) Investment Limited holds 16.74% equity of CIMC and China Merchants (CIMC) Holdings Limited holds 6.77% equity of CIMC. Another wholly-owned subsidiaries under China Merchants Holdings (International) Limited---Bestrain Investment Limited holds 1.31% equity of CIMC. Therefore, China Merchants Holdings (International) Limited actually holds 24.82% equity of CIMC. Property and controlling relation between actual controller and CIMC SASAC 100% 100% COSCO China Merchants Group Limited 100% 54.55% 55.82% China COSCO Holdings Co., Ltd. COSCO (Hong Kong) Group Ltd. China Merchants Holdings (International) Limited 100% 100% 100% COSCO Pacific Investment Holdings Limited China Merchants (CIMC) Investment Limited 100% 50.96% 16.74% Long Honour Investment Limited 100% COSCO Pacific Limited Bestrain Investment Limited 100% 1.31% 0.95% COSCO Container Industries Limited China Merchants (CIMC) Holdings Limited CIMC 6.77% 21.80% (2) In the reporting period, no change occurred to China Merchants (CIMC) Investment Limited and COSCO Container Industries Limited. 3. Restricted shares originally held by non-circulating shareholders Unit: Share Name of shareholder Number of shares Date to be traded Number of Restricted Condition shares for sale COSCO Container Industries 5% of the total shares 24 May 2007 133,119,802 Note 1 Limited 10% of the total shares 24 May 2008 266,239,604 Note 2 432,171,843 24 May 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 Share Merger 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 11 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 shall not exceed 5% of total shares of the Company within 12 months and not exceed 10% within 24 months. Note 2: On 5 September 2007, the Company’s 133,119,802 circulating A shares with conditions in sale held COSCO Container Industries Limited were listed for trading, accounting for 5% of total shares of the Company. On 2 July 2008, the Company’s 133,119,802 circulating 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 2008 Section 5. Directors, Supervisors, Senior Managements and Employees I. Directors, supervisors and Managements 1. Basic information Name Title Gender Age Office term Total remuneration/ Whether receive allowance received remuneration from from the the shareholders or Company(RMB other organizations 0000’) Fu Yuning Chairman Male Apr. 2007- Yes 52 Apr. 2010 Li Vice chairman Male Apr. 2007- Yes 53 Jianhong Apr. 2010 Mai Director and Male Apr. 2007- 684.64 No 50 Boliang president Apr. 2010 Wang Director Male Apr. 2007- Yes 46 Hong Apr. 2010 Xu Minjie Director Male Apr. 2007- Yes 50 Apr. 2010 Qin Independent Male Apr. 2007- 12 No 46 Rongsheng director Apr. 2010 Jin Independent Male Apr. 2007- 12 No 51 Qingjun director Apr. 2010 Xu Jing’an Independent Male Apr. 2007- 12 No 67 director Apr. 2010 Chen Keng Chief Male Apr. 2007- Yes 52 supervisor Apr. 2010 Du Supervisor Male Apr. 2007- Yes 59 Yongcheng Apr. 2010 Feng Staff Male Apr. 2007- 98.21 No 62 Wanguang supervisor Apr. 2010 Zhao Vice president Male Mar. 2007- 217.89 No 56 Qingsheng Mar. 2010 Li Ruiting Vice president Male Mar. 2007- 95.48 No 61 Mar. 2010 Wu Fapei Vice president Male Mar. 2007- 130.92 No 50 Mar. 2010 Li Yinhui Vice president Male Mar. 2007- 123.46 No 41 Mar. 2010 Liu Xuebin Vice president Male Mar. 2007- 120.50 No 50 Mar. 2010 Jin General Male Mar. 2007- 97.44 No Jianlong manager of Mar. 2010 55 Financial Management Yu Yuqun Secretary to Male Mar. 2007- 96.30 No the Board of 43 Mar. 2010 Directors Total — — — — 1700.84 — Shares of the company held by directors, supervisors and senior managements 13 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 Name Shareholding at the Shareholding at the Reason for change in shareholding beginning of the year end of the year Mai Boliang 494,702 494,702 — Li Ruiting 329,802 329,802 — Liu Xuebin 2,400 2,400 — Total 826,904 826,904 — 2. Main work experience of current directors, supervisors and senior managements (1). Members of Board of Directors Mr. Fu Yuning, Chairman of the Board of Directors. He is currently Director and president of China Merchant Group, President of China Merchants Holdings (International) Co., Ltd., Chairman of Board of China Merchants Steam Navigation Limited and Director of China Merchant Bank. Mr. Fu was graduated from Dalian University of Technology in 1982 with bachelor degree in port engineering. He got the doctor’s degree in marine engineering mechanics from UK Brunel University in 1986 and worked in the university as post-doctoral researcher for many years. Mr. Fu ever took the post of Directing Manager of Chiwan Base and China Nanshan Development (Group) Incorporation, and of Vice President of China Merchants Group. He began to serve as Director of CIMC since April 2007. Mr. Li Jianhong is currently Vice President of COSCO Group, Chairman of COSCO Corporation (Singapore) Limited, Sino-Ocean Land Holdings Limited, COSCO Shipyard Group Co., Ltd., COSCO Ship Trading Limited. Chinese-Tanzanian Joint Shipping Company, and Director of COSCO Holding Limited, COSCO International Holdings Limited and COSCO Pacific Limited. Mr. Li Jianhong is also vice director of China Society of Naval Architecture and Marine Engineering and Vice President of China Association of National Shipbuilding Industry. He ever took the post of Factory Director of COSCO Nantong Shipyard, of General Manager of COSCO Industry Company, and of Assistant President and 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 title of senior technical title of senior economist with extensive experience in enterprise management and capital operation. He has been Director of the Company since March 1995. Mr. Mai Boliang, Director and President. He graduated from mechanical engineering of South China University of Technology and served as technician and Manager and Deputy Manager of Product Technical Dept. since 1982. He began to serve as president of the Company in 1992 and act as Director of the Company since March 1992. Mr. Wang Hong, Director. He is currently Director and Standing Deputy General Manager of China Merchants Holdings (International) Co., Ltd., Director of China Merchants Group (Hong Kong) 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 continued his study in the Graduate School of University of Science and Technology Beijing and Graduate School of Chinese Academy of Social Sciences and achieved MBA degree and PHD of management respectively. He ever served as Marine 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 China Merchants Group Performance Appraisal Dept. and HR Dept. He began to act as the Company’s Director since April 2007. Mr. Xu Minjie, Director. He is currently Executive Director, Vice Chairman and Managing Director of COSCO Pacific Limited as well 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 14 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 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 COSCO Shanghai International Ocean Freight & Forwarding Company. 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 Freight Dept. in COSCO Group. He was also once shipmaster of ocean shipping, Department Manager of Container Freight Dept, Operation Dept and Ocean Shipping Export Dept in COSCO Shanghai as well as deputy manager of Shanghai International Ocean Freight Company. From June 2005 to January 2007, he served as Director of China Communications and Transportation Association. Mr. Xu owns an ocean shipping experience of over 30 years and extensive experience in enterprise operation and management. In January 2007, Mr. Xu began to serve as Vice Chairman and Managing Director of COSCO Pacific Limited and was in charge of the development strategy, corporation governance and financial management affaires. He has been the Company’s Director since April 2007. Mr. Qin Rongsheng, Independent Director with PHD in management, an certified accountant in China. He is currently CCP Secretary, professor and doctor tutor of Beijing National Accounting Institute, and 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 part-time professor of Tsinghua University and Renmin University of China. He has been the Company’s Independent Director since April 2007. Mr. Jin Qingjun, Independent Director, master and securities lawyer. He 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 International Economic and Trade Arbitratlon Commission, member of Appeals Review Committee of Shenzhen Stock Exchange, legal advisor of Washington Court of Appeals in China, legal advisor for many financial institutions, securities companies and listed companies at home and abroad, legal advisor of 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 chief legal advisor of Shenzhen Stock Exchange and director of Listing Regulatory Commission, lawyer in Johnson Stokes & Master and British Law Firm, full-time lawyer of Zhongxin Law Firm, executive partner of Shu Jin Law Firm. 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. He 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 Committee Mr. Chen Keng, Chief Supervisor. He currently holds such posts as COSCO Pacific Limited Deputy General Manager and member of Investment and Strategic Planning Council. From1998 to 2006, Mr. Chen was General Manager of Enterprise Development Dept (now Strategic Development 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 15 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 (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 till now. Mr. Feng began to serve as supervisor in May 2002. (3) Senior Managements Mr. Mai Boliang, Director and President. See introduction of Directors above. Mr. Zhao Qingsheng, Vice President. Mr. Zhao Graduated from Wuhan University of Water Transportation Engineering (Wuhan University of Technology), majoring in marine engineer. He is currently Vice President of the Company. Mr. Zhao joined China Merchant Group in 1983 and served as General Manager of the Enterprise Dept. in China Merchant Group from 1991 to 1995, Deputy General Manager of China Merchants Holdings (International) Co., Ltd. from 1995 to 1999, and Vice Chairman of the Company from 1997 to 1999. He has been Vice President of the Company since 1999. Mr. Li Ruiting, Vice President. Mr. Li graduated from South China University of Technology with bachelor degree in mechanical manufacturing. He is a senior engineer and is currently the Company’s Vice President. Mr. Li began to serve the Company in 1987, and ever took the post of Manager of the Company’s Technology Dept. and QC Dept., of Deputy General Manager and General Manager of Shenzhen Southern CIMC Containers Manufacture Co., Ltd. and of General Manager of Shanghai CIMC Reefer Containers Co., Ltd.. Mr. Li has been the Company’s Vice President since 1995. Mr. Wu Fapei, Vice President. Mr. Wu graduated from South China University of Technology with bachelor degree in mechanical manufacturing and master degree in engineering. He used to be teacher and associate professor of School of Business Administration in South China University of Technology and Deputy General Manager of Nanhua Bicycle Ronghui Co., Ltd. in Zhaoqing Guangdong. He joined the Company in 1996 and began to serve as Manager of Information Management Dept in December 1996, Assistant President of CIMC in December 1998 and Secretary to the Board of CIMC in December 1999. He began to serve as Vice President of CIMC 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 in Nanjing University, and PHD in economics from Jilin University. He worked in Central Committee of Chinese Communist Youth League in 1991; 16 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 worked in State Commission of Foreign Trade and Economic Cooperation from May 1993 to March 2003; and in Ministry of Commerce in March 2003. He served as Vice President of CIMC (part-time) from October 2002 to October 2003 and began to his work as Vice President of CIMC in March 2004. Mr. Liu Xuebin, Vice President. Mr. Liu graduated from Shenzhen University with a bachelor’s degree in management. He joined the Company in 1982, and ever worked as Deputy Manager of the Company’s Purchasing Dept., Deputy General Manager of Nantong CIMC-SMOOTH SAIL Container Co., Ltd., Deputy General Manager of Container Branch of CIMC Group, and General Manager of Xinhui CIMC Container Co., Ltd.. In 1997, he began to serve as General Manager of Shenzhen Southern CIMC Containers Manufacture Co., Ltd., and in December 1998, he also took post of the Assistant President of the CIMC and Chairman of Xinhui CIMC Container Co., Ltd. at the same time. In March 2004, he began to serve as Vice President of CIMC. Mr. Jin Jianlong, General Manager of Financial Dept., a certified accountant. He graduated from Maanshan Institute of Iron and Steel Technology in July 1985, majoring in accounting. From August 1975 to April 1989, he worked in Hangzhou Iron & Steel Works as Section Chief of the Financial Dept. He joined the Company in 1989, and first worked as Manager of the Financial Management Dept. of CIMC, and then of the Financial Management Dept. of Shenzhen Southern CIMC Containers Manufacture Co., Ltd.. He has been the Company’s General Manager of Financial Management since October 2001. Mr. Yu Yuqun, Secretary to the Board. Mr. Yu obtained bachelor and master’s degrees in economics from Beijing University. He once worked in the State Price Control Bureau. He joined the Company in 1992 and first worked as Deputy Manager and then Manager of Financial Affaires Dept., responsible for securities affaires and fund management. He has been Secretary to the Board of the Company since March 2004. 3. Concurrent positions held by Directors, Supervisors and Senior Managements in organizations other than shareholder’s company Name and title Organizations for concurrent positions Relations with Title the Company (controlling) related/non- related Fu Yuning/Chairman China Merchants Group Limited Related Director and president China Merchants Holdings (International) Related Chairman and Limited Managing Director China Merchants Steam Navigation Non- related Limited Chairman China Merchants Bank Non- related Director Li Jianhong/Vice China Ocean Shipping Corporation Related Chairman (COSCO) Vice president COSCO Corporation (Singapore) Limited non- related Chairman Sino-Ocean Land Holdings Limited non- related Chairman COSCO Shipyard Group Limited non- related Chairman Chinese-Tanzanian Joint Shipping non- related Company Chairman COSCO Ship Trading Limited non- related Chairman China COSCO Holdings Limited related Director COSCO International Holdings Limited non- related Director COSCO Pacific Limited related Director Controlling CIMC Vehicle (Group) Co., Ltd. subsidiary Chairman Mai Boliang/ Director/ Concurrent positions in 32 controlling Controlling Chairman / Director President subsidiaries such as CIMC Vehicle Group subsidiary 17 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 and Shenzhen South CIMC Limited Yantai Raffles Shipyards Ltd joint stock Chairman company Wang Hong/director China Merchants Group (Hong Kong) related Director Limited China Merchants Holdings (International) related Vice Managing Limited Director Shanghai International Port (Group) Co., non- related Vice Chairman Ltd. Xu Minjie/ Director COSCO Pacific Limited related Vice Chairman and Managing Director COSCO Logistics Co., Ltd. non- related Vice Chairman COSCO-Hit Terminals HK Ltd non- related Director Qingdao Qianwan Container Terminal Co., non- related Director Ltd. Non-affiliated Director Antwerp COSCO Pacific Holding Limited non- related Director COSCO(Hong Kong) Investment Co., Ltd. non- related Director Taicang International Containers Co., Ltd. non- related Chairman Concurrent positions in 31 companies non- related Director /Chairman subsidiary to COSCO Pacific Limited Concurrent positions in 6 joint controlling non- related Director/Vice and joint operation companies of COSCO Chairman/Chairman Pacific Limited Qin Rongsheng/ Beijing National Accounting Institute non- related CCP Secretary Independent Director Baoli Real Estate (Group) Co., Ltd. non- related Independent Director UFID Software Co., Ltd. non- related Independent Director Aerospace Information Co., Ltd. non- related Independent Director China Audit Society non- related Vice President China Association of Chief Financial non- related Vice President Officers Changjiang Securities Co., Ltd. non- related Independent Director Jin King & Wood Law Firm non- related Senior partner Qingjun/Independent Director Invesco Great Wall Fund Management non- related Independent Director Company Limited Shenzhen Syscan Technology Co., Ltd. non- related Independent Director China United Travel Co., Ltd. non- related Independent Director China University of Politic Science and non- related Part-time Law professor Shenzhen Arbitration Committee non- related Arbitrator China lnternational Economic and Trade non- related Arbitrator Arbitratlon Commission Appeals Review Committee of Shenzhen non- related Member Stock Exchange Xu Jing’an Shenzhen Nanshan Power Station Co., Ltd. non- related Independent Director /Independent Director Chen Keng/Chief COSCO Pacific Limited related Deputy General Supervisor Manager Du Yongcheng/ China Merchants Holdings (International) related Vice Managing Supervisor Limited Director Asia Airfreight Terminal Limited non- related Director Zhangzhou China Merchants Port Limited non- related Vice Chairman Feng Wanguang/ CIMC Holdinigs (B.V.I.) Limited Controlling Director Supervisor subsidiary Zhao Qingsheng /Vice Concurrent positions in 51 companies such Controlling Chairman/Director President as Shenzhen South CIMC Limited and subsidiary Enric Energy Equipment Holdings Limited China United International Rail Containers joint stock Director Co., Ltd. company Wu Fapei/ Concurrent positions in 36 controlling Controlling Director /Chairman Vice President subsidiaries such as Shenzhen South CIMC subsidiary 18 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 Limited and Enric Energy Equipment Holdings Limited Li Ruiting / Concurrent positions in 6 controlling Controlling Chairman/Vice Vice President subsidiaries such as Shanghai CIMC Reefer subsidiary Chairman Containers Co., Ltd. Liu Xuebin / Concurrent positions in 9 controlling Controlling Chairman/ Director Vice President subsidiaries such as Shenzhen South CIMC subsidiary Limited and CIMC Logistic Equipment (Chongqing) Co., Ltd. Li Yinhui/ Concurrent positions in 15 controlling Controlling Chairman/Director Vice President subsidiaries such as CIMC Shenzhen subsidiary Special Vehicle Co., Ltd. and Dalian CIMC Railway Equipment Co., Ltd. Jin Jianlong / General Concurrent positions in 70 controlling Controlling Chairman/ Director Manager of Financial subsidiaries such as Shenzhen South CIMC subsidiary Management Limited and Enric Energy Equipment Holdings Limited Yu Yuqun /Secretary to Concurrent positions in 14 controlling Controlling Director the Board subsidiaries such as Shenzhen subsidiary CIMC-Tianda Airport Support Co., Ltd. and Enric Energy Equipment Holdings Limited 4. Remuneration for directors, supervisors and senior management Procedures and basis to determine remuneration for directors, supervisors and senior management: As stipulated in the Articles of Association, the remuneration for directors and supervisors is determined by shareholders meetings and that for senior management is determined by the Board of Directors. In the reporting period, CIMC senior management get paid in CIMC or subsidiaries. CIMC has established a complete remuneration system and incentive mechanism. First, we implement annual-salary system for directors, supervisors and senior 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 senior management subject to approval by Remuneration Council under the board of directors. 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. Details on remuneration (before tax) of current directors, supervisors and senior management please see basic information above about the directors, supervisors and senior management. 5. Changes Directors, Supervisors and Senior Management There is no change in the reporting period. 19 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 II. About the employees of the Company 1. Number of employees By December 31, 2008, the number of employees of the Company is 47,050. 2. Composition Post composition Education status Management Technology Production Doctor Master Bachelor Junior Others workers college Number 7,824 2,238 36,988 18 312 3,126 3,110 40,484 Proportion (%) 16.63 4.76 78.61 0.04 0.66 6.65 6.61 86.04 The Company does not need to bear expense for retired employees. 20 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 Section 6. Corporate Governance Structure I. Corporate governance 1. Difference between corporate governance and the normative documents and status of corporation governance In the reporting period, the Company constantly perfected corporate governance and standardized the operation of the Company strictly in accordance with the provisions in such laws and regulations as the Company Law, Code of Corporate Governance for Listed Companies in China, Guideline for Establishing Independent Director System in Listed Companies, Rules for the General Meeting of Shareholders of Listed Companies and Guidelines for the Articles of Association of Listed Companies. Corporate governance was based on the regulators in the rules of procedure of shareholders’ general meeting, the Board’s meeting and Supervisors’ meeting, as well as work rules for president, and through the roles of special committee of the Board, thus assuring the duties performance and responsibility fulfillment of the meetings held by the shareholders, directors and supervisors. Interests of the shareholders and the Company were protected and corporate governance which complied with the requirements of modern enterprise management was initially established. Corporate governance is fairly perfect and operated in a standard way and stands no difference with the normative documents on corporate governance of listed companies. 2. Summary of the Company’s work on the special campaign 2007 In the reporting period, in the line of requirements from CSRC and SSRB (Shenzhen Securities Regulatory Bureau), the Company initiated corporate governance activity in the reporting period and completed three-stage work: self inspection, public consultation and rectification. On October 31, 2007, the 12th meeting of the 5th Board 2007 was held, at which the Regulatory Opinions on Corporate Governance of China International Marine Containers (Group) Co., Ltd issued by Shenzhen Regulatory Bureau of CSRC, was examined and approved. Management systems as Management System on Information Disclosure, Management System on Related Transaction, etc. were formulated and revised. In 2007, the Group started construction projects on internal control system, which effectively reduced the various risks existed in the operation of the enterprise and further perfected the Company’s internal system. 3. About the Company’s work on the special campaign 2008 According to the Document No.20 2008 issued by CSRC on June 12, 2008 and the requirement that “listed companies should deepen the special campaign of corporate governance basing on the achievement of 2007” in the Notice on Carrying out a Special Campaign to Deepen Corporate Governance (SZJGSZ [2008] No.62) from SSRB, the Company’s Board and Supervisory Committee, in the principal of seeking truth, made self-examination into the implementation of the Rectification Report and rectification results. The main concern of this self-examination is to optimize the information disclosure system and make detail rectification plan for the problems existing and those need persistent improvement. The rectification mainly included: perfect and revise the rules and regulations for corporate governance, further standardize operation of the shareholders’ general meeting and the Board’s meeting, improve the Company’s internal auditing system; establish and optimize the equity motivation mechanism, and come up with plans on loan and repayment and clearing up advanced operating fund for solving the problems of possession of the Company’s non-operation capital and other related fund transfer. The rectification has been undertaken in 2008. The Company disclosed the situation about the self-examination and rectification on July 23, 2008, the detail of which can be found in the Report on “Situation about Affaires Listed in the Rectification of Corporate Governance” by the Board of CIMC published in Shanghai Securities News, Securities Times, China Securities Journal as well as www.cninfo.com.cn, numbered: [CIMC]2008-018． 21 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 In 2008, the Company had an outstanding performance in promoting the standard operation of listed companies and the implementation of the regulatory requirements, for which the Company earned praise from SSRB of CSRC. In the future, he Company will further implement the rectification on internal control gap, establish supervisory system on internal control, and optimize internal control system according to the Basic Standard for Enterprise Internal Control; and strengthen internal risk control and content optimization, standardize decision-making procedures of significant investment, related transaction and other internal work, improve standard operation of the Company in light of requirements of the corporate governance laws and regulations; reinforce training of Directors, Supervisors and senior executives and standardize their related actions; strictly carry out the management system on information disclosure and the management system on investor relations to maintain corporate transparency. II. Performance of Independent Directors 1. Overview of independent directors attending board meetings: Personal Attendance by Attendance Name of Independent Times should attend attendance by attorney (times) Directors meetings (times) attorney (times) Qin Rongsheng 17 16 1 0 Jin Qingjun 17 17 0 0 Xu Jing’an 17 17 0 0 2. Duty performance In compliance with requirements of regulatory documents as Guideline for Establishing Independent Director System in Listed Companies, the Articles of Association and Work Details for Independent Directors, the Independent Director, being reasonably cautious, diligently performed their duty to protect the overall interests of the Company, especially legal interests of the minority shareholders. They attended the Board’s meetings on time, reviewed carefully documents of the meetings and actively carried out investigation and inspected subsidiaries of the Company to gather information needed for the decision-making and gave clear opinions on the affairs discussed. They also paid special attention to the auditor’s report and reports of the Company by public media, kept themselves informed of the Company’s operation and management status, and significant events happened or contingent and their influence. They reported to the Board the problems existing in the operation of the Company and submitted annual duty report to the Shareholders’ General Meeting of the Company. In the reporting period, the Independent Directors carefully deliberated the significant events which required their independent opinions and submitted opinion letters in writing. The significant events included: a. Special Statement on fund possession of the Company’s related party and external guarantee; b. Stock option motivation plan (draft) of CIMC; c. The Company’s purchase of shares of Shanghai CIMC Reefer Containers Co., Ltd. and FENTALIC LIMITED owned by COSCO. Independent Director Qin Rongsheng gave abstention opinion on the resolution of transfer shares of FENTALIC LIMITED at the 17th meeting of the 5 Board 2008. 3. Independent role of Independent Directors in the Annual Report Strictly in accordance with the requirement of Public Notice from China Securities Regulatory Commission([2008] No.48), the Independent Directors diligently perform their duties as independent directors when preparing the Annual Report 2008. 22 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 (1). Independent Directors heard the report on the operational condition 2008 by the management staff in ways such as meeting of the Board. Independent Directors inspected subsidiaries Shenzhen Southern CIMC Eastern Logistics Equipment Manufacturing Co., Ltd. and Yangzhou CIMC Tong Hua Special Vehicles Co., Ltd., and listened to report on annual operational condition 2008 by the General Manager respectively. (2). Independent Directors communicated thoroughly with Klynveld Peat Marwick Goerdeler Co., Ltd. (hereinafter refer to as “KPMG”) on personnel of auditing team, the auditing plan, risk evaluation, test of fraud and its evaluation method as well as the important point of the auditing work 2008, and the two parties reached agreement on these items. Independent Directors examined and approved the Arrangement of the Company’s Auditing Work 2008. (3). Independent Directors heard the report on the concluding stage in the period-end by KPMG; (4). Independent Directors communicated with KPMG on the preliminary examination opinions on the Auditor’s Report, and agreed on the preliminary examination opinions that KPMG had issued audit report without reservations. (5). Independent Directors carefully deliberated the holding procedure and the documents required for the 2nd meeting of the 5th Board of Directs held on March 30, 2009 for deliberating the annual report. They believed that the notice on the convening and procedures of the Board’s meeting for deliberating the annual report were in compliance with requirements of relevant rules and regulations; and that the annual report, auditor’s report, financial statement and other documents on the resolutions to be discussed were complete and in compliance with the requirements of relevant rules and regulations. III. The Company was separated from the controlling shareholder in business, personnel, assets, organization and financing. Majority shareholders for CIMC include COSCO Container Industries Limited and China Merchants (CIMC) Investment Limited. CIMC was separated from the controlling shareholder in business, personnel, assets, organization and financing as well as independent accounting and independent bearing of liabilities and risks. 1. In aspect of personnel: The Company was independent and complete in labor, personnel and salary management and absolutely independent from the majority shareholders. All senior managements received remuneration in the listed Company and none of them holds a double position in the controlling shareholders entities. 2. In aspect of assets: The Company’s assets were complete, and there was the clear property right relationship between the Company and the controlling shareholder. The Company owns an independent management of the assets and there exist no such things as the majority shareholders possessed or controlled the assets or intervened in the operation management of the asset of the listed company. 3. In aspect of financing: The Company owned independent financial department, established independent accounting system and financial management system, opened independent bank account, paid tax in line with laws. 4. In aspect of organization: The Company’s Board of Directors, Supervisory Committee and other internal organizations are complete and operate independently. Shareholders exercised their rights according to the law and bear relevant liabilities and did not intervene in the operation activities of the Company directly or indirectly beyond the shareholders’ general meeting. 5. In aspect of business: The Company’s systems of production, purchase, auxiliary production and sales are completely independent. Intangible assets as industrial property right, trademarks and other non-patent technology were independently owned by the Company. There existed no such thing as the Company and the subsidiaries produced and sell the same product and there was no direct or indirect competition in business between the two. IV. Establishment and improvement of internal control system CIMC has established a series of procedures and systems for shareholders meeting, board of 23 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 directors and Supervisory Committee 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 Committee reviews internal control status and provides audit proposals. In aspect of the corporation and internal control, the auditing inspection department assists the Board of Directors to recognize and evaluate material risks and assists the group the to improve its risk management and internal control system; assists the effective internal control system through evaluating the efficiency and effect of internal control and promoting its constant improvement; Implement duties of examination and evaluation, consultation and service and report the auditing work of internal control periodically to the Board’s audit committee, supervisory committee and operation staff of the group. 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. In 2008, in strict compliance with requirements of Company Law, Code of Corporation Governance for Listed Companies in China, Rules for Shareholders’ General Meeting of Listed Companies and Guidelines for the Articles of Association of Listed Companies, the Company constantly established and improved corporate governance structure, gradually established and completed internal management and control system, further standardize the operation of the Company and optimized the corporate governance. The year 2008 saw a continuous effort of the Group to develop and improve its internal control system, which resulted in some primary fruits, i.e. the streamlining, adjusting and reviewing of the internal control system of quite a few subsidiaries. After adjusting the original internal control system, the “Internal Control System for CIMC (a Draft for Comment)” was drafted in 2008. Upon the feedback regarding the internal control system, the “Management System for Making Regulations and Rules of CIMC” was formulated to provide guidance for institutional management and improvement. Meanwhile, several risk financing and management process were implemented in 2008, including: foreign exchange risk management, long-tern interest rate risk management and commodity prices risk management. V. Senior management performance evaluation, motivating and restraining mechanism CIMC has established a set of performance measurement, motivating and restraining mechanism under which the remuneration for senior 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 senior 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 according to 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 senior management personnel, president formulates proposals and submits them to Remuneration Council under the board of directors for approval. 24 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 Section 7. The Shareholders’ General Meeting 1. Annual shareholders’ general meeting The Company convened the 2007 Annual Shareholders’ General Meeting in Shenzhen on 28 Apr. 2008. The public notice on the resolutions made at the meeting was published on Securities Times, Shanghai Securities News, China Securities Journal and Ta Kung Pao (HK) dated 29 Apr. 2008. 2. Interim shareholders’ general meeting The 1st Interim Shareholders’ General Meeting in 2008 was convened in Shenzhen on 26 Sept. 2008. The public notice on the resolutions made at the meeting was published on Securities Times, Shanghai Securities News, China Securities Journal and Ta Kung Pao (HK) dated 27 Sept. 2008. 25 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 Section 8. Report of Board of Directors Ⅰ Discussion and analysis by management team （Ⅰ） Industrial overview The year 2008 saw the significant recession of the global economy due to the international financial crisis. According to the statistics from International Monetary Fund (IMF), the global economy grew by 2.2% in the year 2008, much lower than the 3.8% growth rate of 2007. China and other Asian emerging nations, as well as other developing economies also experienced a recession in the manufacturing and export sector, which resulted in a shrinking international trade and a falling demand in the shipping industry. As a result, the global container trade volume, together with the ocean freight, showed a sharp decrease in the year. According to the statistics from Clarkson Research Services, the global container trade volume increased by only 5.1% in 2008, much lower than the increase of 10.4% in the previous year. Meanwhile, China’s economy continued to slow down with a considerable decrease of export. Statistics showed that the above-the-designated-scale ports in China handled 128.35 million TEU of containers in the year 2008, a year-on-year increase of 12.2%, much lower than the 20.4% of 2007. About the container industry: During the period between the first quarter to the third quarter of 2008, the demand for containers grew steadily, together with a steady price rise of steel and other raw materials. As a result, a considerable monthly output of containers was maintained with the constantly rising price for dry cargo containers. However, the global container trade began to fall because of the damaging impact of the global economic recession on the shipping industry and China’s export. In the fourth quarter of 2008, a large amount of empty containers began to return to the ports in China. And since the fourth quarter, there were suddenly almost no orders for dry cargo containers. Consequently, the factories had to stop their production or cut their production by half capacity, which was never seen before in the industry. The global demand for containers also saw a significant decrease in 2008, with a global container output of 3.00 million TEU in the year, a decrease of 29% from the previous year. And the output of dry cargo containers in the year was 2.51 million TEU, decreasing by 31% compared with last year. About the road transportation vehicles industry: In 2008, the global economic slowdown, together with the contracting domestic liquidity, caused financial strains in the enterprises. After the application of National Phase Ⅲ Emission Standards in China, the chassis was in short supply. Meanwhile, more and more heavy truck enterprises began to enter the special car industry with more new investments and an expanded production capacity, which led to an increasingly fierce market competition. Affected by the above adverse conditions, the production and sales volume of special cars was approximately 580,000 in the year 2008, an increase of 10% over last year. And the production and sales of such vehicle varieties as ordinary semi-trailers, van trailers and Tipper was affected significantly, compared with a slight influence on the vehicles for special operation with high added value. At the same time, the market demand fluctuated sharply with a strong demand in the first half of the year and a significantly reduced demand in the second half. About the energy, chemical equipments and service industry: In 2008, with the Chinese government’s policy of supporting the development of clean energy such as natural gas and coalbed methane, more investments were put into the infrastructure development in the natural gas industry, which led to an increasing coverage of the natural gas. Meanwhile, the demand for the storage and transportation of chemical and hazardous goods was on the rise along with the rapid economic growth. And the energy industry, chemical industry and food machinery industry began to make a faster transfer to China, with a rising global competitiveness of the Chinese enterprises. About the airport equipment industry: Because of the 2008 Beijing Olympic Games and the 2010 Shanghai World Expo, the domestic hub airports were successively expanded. At the same time, the demand for airport equipments (passenger boarding bridges, cargo handling systems, etc.) was rapidly growing due to the increasing air passenger transportation demand arising from the individual shopping and business travels, the growing domestic branch lines market, and the 26 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 growing international air transport demand arising from the transfer of relevant industries to China. And the new A380 airliners were constantly put into service, which would boost a demand growth of the overseas market. About the brief analysis of the financial impact caused by changes of macro-policies and the industries: During the period between the first quarter and the third quarter in 2008, the Company maintained a normal production and sales volume. Consequently, the Company purchased a certain amount of raw materials such as steel. However, the external economic environment became more and more adverse due to the international financial crisis in the fourth quarter, which led to a sharp decrease of orders for dry cargo containers of the Company, as well as a certain amount of inventory at the end of 2008. In view of the price decrease of steel, as well as a weak export market, it was expected that the Company’s container products would experience a further price drop from that of 2008. According to the wariness principle, the Company withdrew a provision for the decline in the value of inventory, which amounted to RMB 699 million. The first three quarters of 2008 saw liquidity squeeze both internationally and domestically. In regard to the international environment, the subprime mortgage crisis had a greater and greater impact, with a gradually contracting liquidity for overseas banks. Domestically, the macro-economic policies adopted since the second half of 2007 were maintained, with China’s central bank increasing for six times the deposit reserve ratio in the first three quarters. And the domestic money market was tight with rising borrowing costs. Since the first three quarters was a period of brisk sales for the Company, it expanded the cooperation with and gained support from the major banks, so as to reduce the impact of an adverse financial environment. Since Sept. 2008, with the deepening of the global financial crisis, China’s economy, especially its export trade, was adversely affected. As a result, a “moderately easy” monetary policy was adopted in China instead of a “tight” one, with the loan interest rate gradually decreasing. As a quality customer of the banks, the Company also gained strong support from the banking sector in China. As early as the second half of 2007, the Company foresaw the tightening of the financial market in 2008. Therefore, the Company adjusted its loan structure in advance by properly increasing its long-term loans and decreasing its short-term loans. And the adjustments were proved successful for it improved the stability of the Company’s capital structure, as well as the Company’s ability to deal with the crisis. During the year of 2008, the global financial crisis led by the subprime crisis in U.S.A. resulted in a considerable turmoil in the global financial market including Commodity , Forex & Credit. Due to the new policy of "Target FED fund rate bewteen Zero to 0.25% " and the "quantitative easing" introduced by the U.S. Federal Reserve, as well as the “deleveraging” caused unlasting unwind of the "Carry trade" especially in Japanese Yen currency , the fair value of the outstanding hedge position held by the Company in the year end, decreased sharply comparing with 2007. Whereas, in evaluation of the scope “actual settlement (including unwind)P/L ＋ changes of fair value at the period end” for the financial derivatives the company entered into, the Company still gained a net profit in financial risk hedging. (Ⅱ) Review of operating performance 1. Overall operating performance In 2008, the Company achieved an operation revenue of RMB 47,327 million ( RMB 48,761 million in 2007), a decrease of 2.94% over last year; and a net profit attributable to the parent company’s shareholders reaching RMB 1,407 million (RMB 3,165 million in 2007), decreasing by 55.55% compared to last year. Changes in key financial indicators Unit: (RMB) Thousand 27 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 Items In the current period At the same period Rate of of last year increase/decrease (%) Operation income 47,327,281 48,760,826 -2.94% Operation profit 1,766,979 3,457,387 -48.89% Net profit attributable to the parent 1,406,908 3,165,373 -55.55% company’s shareholders Notes: The operation income decreased -2.94%compared to last year, mainly because the Company stopped its production of dry cargo container in the fourth quarter of 2008. Both of the operation profit and the net profit attributable to the parent company’s shareholders experienced a considerable decrease, mainly because the Company stopped its production of dry cargo container in the fourth quarter of 2008, and withdrew a provision for the decline in the value of inventory, which amounted to RMB 699 million. 2. Operating base, products, services and production capacity The Company and its subsidiaries (hereinafter referred to as “the Group”) is mainly engaged in the manufacturing and services of modern transportation equipments, as well as energy, food and chemical equipments, including the design, manufacturing and services for international standard dry cargo containers, reefer containers, regional special containers, tank containers, container flooring, road tank vehicles, gas equipments, stationary storage tanks, road transportation vehicles and airport equipments. In addition, the Group is also engaged in the manufacturing and services of logistics equipments, offshore engineering, manufacturing of railway trucks, real estate development, etc.. About the container business: Up until now, the Group has maintained its No.1 position worldwide in terms of container production and sales. Currently, the Group can manufacture a full series of container products with proprietary intellectual property rights, including ISO dry cargo containers, ISO reefer containers, special-purpose reefer containers, other special-purpose containers, pallet containers, container flooring and other container service. The Group currently has an annual production capacity exceeding 2.5 million TEU; more than 10 dry cargo container bases in China’s main seaports and Chongqing City; reefer container bases in Shanghai, Taicang, Yangzhou and Qingdao; and special containers in Dalian, Tianjin, Xinhui and Qingdao. As for the container flooring business, the Group has quite a few production bases in Shenzhen, Jiangmen, Xuzhou, Jiashan and other places. As for the container storage yard business, the Group also has quite a few companies providing container service and 9 storage yards covering the main seaports of the country. To be specific, the storage yards cover an area more than 1.50 million square meters, with a storage capacity of 5 million TEU and a repairing capacity of 300 thousand TEU. About the road transportation vehicle business: 8 series of special-purpose vehicles with more than 500 vehicle varieties are available, including container carriers, flat trucks, sided trucks, tank trucks, self-dumping trucks, refrigerated and insulated trucks, ordinary van trucks, curtain side trucks, agitating trucks, car carriers, fire trucks and garbage trucks. The Group has an annual production capacity of such products about 200 thousand units, ranking the first both domestically and internationally. In addition, the Group currently has more than 20 production bases, 24 4S stores and over 200 service stations in Shenzhen, Shanghai, Tianjin, Yangzhou, Zhangjiagang, Zhumadian, Luoyang, Jinan, Qingdao, Liangshan, Wuhu, Xinhui, Yingkou, Baiyin, Xi’an, Wulumuqi and some countries such as USA, Belgium, Australia and Thailand. 28 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 About the energy, chemical and food equipment business: The main products and service in this business sector include: stationary storage tanks, tank transportation equipments, process equipments, project contracting and technology service. And these products are specified as follows: (1) Stationary storage tanks: low-temperature standing storage tanks for LNG and industrial gases, storage tanks for food and beverage, storage tanks for chemical products, etc. (2) Tank transportation equipments: international standard / special-purpose tank containers for liquid products, tank containers for gas, highway tank trucks for hazardous and chemical products (LPG, etc.), low-temperature tank trucks for LNG and industrial gases, CNG tube trailers, bottle-group pressure vessels for high-pressure industrial gases, natural gas compressors and special-purpose compressors. (3) Process equipments: fermentation tanks for food and beverage, bright beer tanks, etc.; chemical reaction pots, columns, heat exchangers, carburetors, etc. (4) Project contracting and technology service: packaged projects of food and beverage (beer, etc.) factory, and projects of urban LNG peak-shaving station, LNG gasification station, LNG fueling station for vehicles, bottle-group LNG gas station, and LNG vehicle system modification, LNG application projects and industrial gas application projects; CNG filling station system, LCNG filling station system; EP+CS (engineering, purchase, construction plus supervision) services in terms of the storage, receiving station and handling station of LNG, LPG and other petrochemical gases. The Group’s main holding enterprises include: Enric Energy Equipment Holdings Limited, Holvrieka Limited, TGE GAS ENGINEERING GmbH, Zhangjiagang CIMC Sanctum Cryogenic Equipment Co., Ltd., Nantong CIMC Tank Equipment Co., Ltd., CIMC HOLVRIEKA CO. LTD., Dalian CIMC Heavy Chemical Equipment Co., Ltd.. Among them, TGE GAS ENGINEERING GmbH is an independent head-contractor in Germany with an over-25-year experience of head contracting regarding storage station for low-temperature liquefied gases. With its headquarter situated in Holland, Holvrieka Limited is mainly engaged in the production and sales of stationary storage tanks. And its operation bases are mainly located in Holland, Belgium and Denmark. Enric Energy Equipment Holdings Limited has its operation bases situated in Langfang, Shijiazhuang, Bengbu and Beijing in China. As for Nantong CIMC Tank Equipment Co., Ltd., it is the world’s largest tank container producer with the richest varieties of such products. About the air support equipment business: The Group’s business of air support equipments covers the product design, manufacturing, installation and maintenance service for airport surface equipments, logistic storage system, boarding equipments, parking equipments, etc.. Shenzhen CIMC Tianda Airport Support Ltd., the Group’s production base for air support equipments, is the world’s largest passenger bridge producer, as well as one of the top producers in China for air freight warehouses. About other business: Yantai Raffles Shipyard Ltd., with the Company holding 17.86% of its equity, is mainly engaged in building special-purpose vessels and producing offshore engineering products. And its main products include semi-submersible tug boats, drilling platforms, seabed oil exploration vessels, pipe-laying vessels, FPSOs, FSOs, seagoing tenders, offshore steel structures, full-revolving tug boats, luxury yachts, etc.. And its production base is located in Yantai, Shangdong Province. Meanwhile, the Group has its production base for railway trucks located in Dalian, and its bases for real estate development located in Shanghai, Yangzhou and Jiangmen. 3. Status of main operations Products which take up over 10% of the Group’s main operation income or profit are containers, 29 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 road transportation vehicles, and energy and chemical equipments. Composition and changes of the operating revenue and profit: Unit: (RMB) Thousand Business classified Increase/decrease Increase/decrease according to Operating of operating of operating cost Increase/decrease industries or Operating Operating profit revenue over last over last year of profit rate products revenue cost rate (%) year (%) (%) over last year 10.82% -14.54% -15.97% 1.51% Containers 29,098,576.7 25,948,717.0 Road transportation 10.99% 3.36% 3.46% -0.09% vehicles 10,050,450.7 8,945,412.8 Energy and chemical 15.70% 71.30% 70.13% 0.58% equipment 7,770,870.4 6,550,910.7 Airport 32.04% 3.13% 4.72% -1.04% equipment 488,044.5 331,662.7 49.37% 27.87% 163.29% -26.04% others 790,882.6 400,420.0 Combined setoff -871,547.0 -303,330.0 11.52% -2.94% -4.53% 1.47% Total 47,327,278.0 41,873,790.0 Regions Operating revenue Proportion in total revenue Increase/decrease over last (%) year (%) Asia 9.00% 20,273,455.00 42.84% America -6.57% 8,688,511.00 18.36% Europe 7.51% 17,607,101.00 37.20% Others 118.17% 758,211.00 1.60% Total -2.94% 47,327,278.30 100.00% About the container manufacturing and services: In 2008, the Group achieved sales revenue of RMB 29,098 million in its container business, a decrease of 14.54% from last year. Throughout the year, a total number of 1,561,700 TEU of containers (excluding pallet containers) was sold, decreasing by 25.87% compared to last year. Affected by the global economic recession, as well as a falling demand for sea transportation, the Group had shut down or half-shut down its factories producing dry cargo containers since Oct., 2008. Consequently, the total number of standard dry cargo containers sold in the year was only 1,312,900 TEU, a drop of 29.64% from the previous year. However, the business of reefer containers and special-purpose containers maintained a normal and continuous receiving of orders due to little influence from the international economic slowdown. Also in 2008, through its cooperation with other enterprises such as Baosteel Group Corp., Valspar Corp. and V.ABC Group Ltd., the Company developed a new variety of container—“SGIL”, i.e. “Secure, Green, Intelligence and Light”. SGIL containers set the trend for the next-generation containers, and the development and application of SGIL containers would further consolidate the Group’s leading position in the container industry. Made of high-tensile steel (HTS), a light dry 30 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 cargo container was about 300 kg. lighter than a standard container. According to the global yearly output of 3 million TEU of containers, 900,000 tons of steel could be saved per year if HTS containers were widely used. The new product was improved in terms of its tamper-proof function, and the improvements included strengthening the locks, bettering the door hinges, adopting the security lock devices, adjusting the position of customs seal position, etc.. All these adjustments would help reduce the possibility of the container’s being illicitly opened. Furthermore, combining the RFID tag with the built-in Smart Guard made it possible to automatically recognize the container ID, as well as to realize the remote monitoring of the container. In this way, the safety of the container was further improved. Meanwhile, the use of water-borne coatings and water-based sealant in the new product could reduce 90% of the emission of VOC (Volatile Organic Compounds), which could protect the container and the goods inside it from external smells. And the use of bamboo flooring instead of the traditional tropical hardwood flooring could help reduce the damage to the tropical rainforest. The business of reefer containers increased its market shares through production capacity expansion and restructuring. The Group properly introduced new products with low costs into the market and vigorously developed the market for the special-purpose reefer containers, which effectively consolidated the Croup’s leading position in the industry from the aspect of technology and considerably improved the products’ profitability. Throughout the year, 133,100 TEU of standard reefer containers were sold, a decrease of 5.27% compared to last year. The business of special-purpose containers covered standard special-purpose containers, special containers for regions, foldable containers, special reefer containers, pallet containers (including tank pallets), house-type containers, etc. In 2008, the Group achieved a sales of 102,700 TEU of special-purpose containers, an increase of 12.24% from the previous year; and a sales of 691,900 units of pallet containers, decreasing by 10.26% compared to last year. In recent years, following the containerization concept, the Group provides solutions for the industrialization of building construction, including house-type containers and container hotels. And the idea of building containerization has added new vitality to the container industry. As a donation from the Group, the containerized building compound of Yanmen Central School in Wenchuan County, Sichuan Province was formally accomplished and handed over in Aug. 2008. Adopting the advanced concepts of integration, modularization and standardization, as well as the industrial production model, this building compound was China’s first containerized school building compound, as well as a brand new construction model characteristic of high efficiency, environmental protection, energy conservation, safety and reusability. Up until now, the Group’s containerized construction model has been widely used in many fields, for example, the container hotel invested by Travelodge Hotels Inc. in Britain, the container hotel built by Premier Travel Inn—Britain’s largest chain hotels, the 1,000 sets of students’ departments of Amsterdam University, the senior staff apartments by JanSnel Group in Holland, etc.. The Group has become the world’s largest container flooring supplier and intensified its research in bamboo flooring and bamboo/wood composite flooring. In 2008, the Group produced 225,000 cubic meters of container wood flooring, a decrease of 26.2% from the previous year. The Group’s container service covers a full range of equipment services ranging from storage and repair to renovation, restructuring, rental, purchase and sales, as well as extended logistic services such as forwarding, warehousing and container splitting and consolidating. Based on this, the Croup is capable of providing one-stop service for key shipping companies and container rental companies worldwide. As for the container storage yard business in 2008, the Group handled 5,357,000 TEU of containers and repaired 332,000 TEU of containers, respectively increasing by 5.0% and 14% over last year. About the road transportation vehicle manufacturing and services: As for this business sector, the Group achieved a sales income of RMB 10,050 million in 2008, an 31 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 increase of 3.36% over last year; and a sales amount of 108,100 units of vehicles, decreasing by 3.60% from the previous year. In 2008, the construction of production bases progressed smoothly. Tianjin Special-purpose Vehicle Base, the factory of Qingdao Refrigeration Transport Equipment Co., Ltd., Xinjiang Wulumuqi Production Base and the factory in Thailand all began construction. Meanwhile, Qingdao Zhongji Environmental Protection Equipment Co.,Ltd. accomplished its factory construction and began production in the year. With the advanced technologies and technical processing introduced from Japan, the company mainly produced compressed garbage trucks. The new heavy truck production line with an expected annual output of 5,000 units built by Zhumadian CIMC Huajun Vehicle Co., Ltd. was put into a trial production. At the same time, Luoyang CIMC Lingyu Automobile Co., Ltd. accomplished its first phase of the industrial park project, which mainly included two production lines with a respective yearly output of 4,000 tank trucks and 2,000 passenger vehicles. The main products of this business sector such as semi-trailers, mixer trucks and self-dumping trucks enjoyed a market share expansion in the year. The sales of container semi-trailers and bed semi-trailers both ranked as the No. 1 in China, with the Group’s position as the second largest supplier for concrete mixer trucks in the domestic market. At the same time, environmental sanitation vehicles, fire trucks, concrete pump trucks and other high-end special-purpose vehicles have been put into market. Aiming at becoming the leading enterprise in the environmental sanitation vehicle industry, as well as providing a full range of products and quality service to customers, Qingdao Zhongji Environmental Protection Equipment Co., Ltd. has begun to enter the domestic market by selling 13 environmental sanitation vehicles in 2008. Meanwhile, the sales amounts of concrete mixer trucks and concrete pump trucks reached 3,086 units and 11 units respectively in 2008. CIMC Vehicles Group Co., Ltd. was to continue its product standardization and to step up its efforts to realize the operation objectives of lowering the cost, increasing the efficiency and optimizing the product structure. Product standardization has been adopted in the production of mixer trucks, bedded trucks, and frame trucks, self-dumping trucks, van trucks and tank trucks. Meanwhile, 44-yard frame trucks with three axles, 44-yard frame trucks with two three axles, cement mixer trucks, etc. were introduced to the market as part of the basic products. Efforts would continue to be made to improve the service system for vehicle marketing, develop more marketing channels and establish a unified marketing organization, so as to promote the integration of vehicle R&D, production and sales, as well as to constantly strengthen the marketing system. In 2008, CIMC Vehicles Group Co., Ltd. set up a marketing service company to take full charge of building and managing the domestic marketing network for special-purpose vehicles, building and operating the after-sales service and value-added service system for vehicles, brand building, marketing promotion, public notices management, etc.. The establishment of the marketing service company marked the Group’s adoption of a brand new operating strategy of separating marketing from production. Meanwhile, the Group has 4S stores and service stations all over the country. To sum up, the upgrade of both the marketing management and the marketing network provided a cast-iron guarantee for the Group’s provision of efficient service to customers. Since the establishment and operation of CIMC Financing and Leasing Co., Ltd., it has been providing financial leasing service for customers, which has effectively promoted the sales of the products and increased the Group’s comprehensive competitiveness. At the same time, the company continued to strengthen its cooperation with the engine manufacturers, distributors and suppliers. About the energy, chemical and food equipment manufacturing and services: In terms of this business sector, the Group achieved an operating income of RMB 7,771 million in 2008, with a year-on-year increase of 71.30%. 32 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 In recent years, on the basis of the original business of standard tank containers, the Group acquired Zhangjiagang CIMC Sanctum Cryogenic Equipment Co., Ltd., Burg Industries B.V. in Holland, Enric Energy Equipment Holdings Limited and TGE GAS ENGINEERING GmbH, and thus formed a global operating platform of equipment manufacturing and services for natural gas, petro-chemical products and food & beverage. Covering the main products of the main markets in the global industry, the Group possessed the world-advanced technologies and business philosophies, as well as the world-class production design characteristic of lightness, security and environmental protection. In Apr., 2008, the Group accomplished its test on the commercial application of multimodal transportation of intelligent tank containers. The success of the test marked the realization of the local and remote monitoring and alarming system regarding the transportation of hazardous and chemical products, which ensured a safe, reliable, efficient and environment-protecting transportation for hazardous and chemical products. Up until now, the system has been adopted in the mainland by some tank trucks for transporting hazardous and chemical products. Burg Industries B.V. in Holland, with the Group holding 80% of its equity, was a leading supplier in Europe for road transportation vehicles and special-purpose stationary storage tanks. In 2008, the company achieved an operating income of RMB 2,890 million, an increase of 130.12% over last year. Enric Energy Equipment Holdings Limited, with the Group holding 41.55% of its equity, was a leading enterprise for manufacturing gas equipments and providing integrated operation solutions. And its products were mainly for the transportation, storage and distribution of natural gas. In 2008, Enric Company achieved a main operation income of RMB 1,237 million, of which RMB 770 million was generated from pressure vessel products, RMB 175 million from compressor products and RMB 292 million from integrated operation products. Despite an adverse international economic situation in 2008, natural gas continued to partially replace petroleum. Consequently, the sales of the pressure vessel products also continued to rise by RMB 234 million (an increase of 44%) over last year, which took up 62% of the company’s main operation income. On Aug., 2008, the Group’s Enric Energy Equipment Holdings Limited signed a contract to purchase 80% equity of Jingmen Hongtu Special Aircraft Manufacturing Co., Ltd. Hongtu Company had the license for designing, manufacturing and installing Pressure Vessel Type Ⅰ,Ⅱ& Ⅲ, LPG fueling stations for vehicles, and municipal works. The Company’s “Hutong Brand” series of LPG transportation vehicles took up approximately 40% of the domestic market, with the largest production and sales volume in China for the past 14 years. Nantong CIMC Tank Equipment Co., Ltd., on the basis of the existing tank products and pressure vessel products, continued to effectively develop the high-tech products with high added value such as special-purpose tanks, gas tanks and small and medium pressure vessels, so as to further perfect its product mix. In the year 2008, the company sold a total of 13,100 TEU of tank containers, increasing by 21.30% from the previous year. Zhangjiagang CIMC Sanctum Cryogenic Equipment Co., Ltd. achieved operation revenue of RMB 809 million in the year 2008, an increase of 60.47% over last year. In 2008, the Group purchased 60% equity of TGE GAS INVESTMENT SA. TGE GAS ENGINEERING GMBH (hereinafter referred to as “TGE GAS”), with TGE GAS INVESTMENT SA holding 100% of its equity, was a gas engineering company in Bonn, Germany, as well as an independent project head-contractor with 25-year experience. Its business covered the storage and handling of LNG, LPG and other petro-chemical gases, as well as engineering services such as EPC and EP+CS services. And it provided services mainly for the storage tank areas of large LNG receiving stations for export and import, medium LNG distribution stations and LNG distribution satellite stations; the storage tank areas of large import and export receiving stations for LPG, ethylene, propylene, liquid ammonia and other petro-chemical gases; gas processing factories, etc.. 33 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 After the acquisition, the Group was to make TGE GAS a world-leading and independent head-contractor for large onshore projects regarding natural gas, petro-chemical gas and other gases, so that TGE GAS could provide one-stop integrated solutions for customers in terms of the exploration and application of natural gas. About the airport equipment business: The Group’s business of air support equipments covers the product design, manufacturing, installation and maintenance service for airport surface equipments, logistic storage system, boarding equipments, parking equipments, etc.. Shenzhen CIMC Tianda Airport Support Ltd., with the Group holding 70% of its equity, achieved a sales amount of RMB 488 million in the year 2008, an increase of 12.69% over last year; and a net profit of RMB 56,978,290, decreasing by 27.25% from the previous year. Throughout the year, the company sold 136 units of passenger boarding bridges, as well as air cargo system with a combined yearly handling capacity of 1.80 million tons. In August, 2008, the passenger boarding bridges produced by the company were put into operation in the International Passenger Transport Center of Shanghai Port. And this was another successful case of such kind following the Yantai Port Boarding Bridges Project, Dalian Port Boarding Bridges Project and the Boarding Bridges Project for Xiamen International Cruise Center. About other business: About the offshore engineering business: On November, 2008, the Group acquired 10% equity of Yantai Raffles Shipyard Ltd.. By 31 Dec. 2008, the equity of the company held by the Group reached 17.86%. The equity acquisition of Raffles Company marked the Group’s first step into the offshore engineering industry, which was considered a strategic merger of two strong enterprises where they could make use of each other’s strengths. And the merger would promote an industrial upgrade and a leapfrog development for the Group, as well as strategically strengthen the Group in the domestic and global competition. On 22 Nov. 2008, the Raffles Company held a ceremony for the first lifting of the bridge crane with a lifting capacity of 20,000 tons, as well as for the assemblage of 14,000-ton deck modules for a semi-submersible oil platform. This was the first formal lifting of the 20,000-ton-capacity bridge crane, which is the bridge crane with the world’s largest lifting capacity. And the success of the bridge crane’s lifting marked a globally revolutionary innovation in the construction pattern of vessel and offshore engineering products, which would become a major milestone in the development of offshore engineering industry. About the railway trucks manufacturing business: Dalian CIMC Railway Equipment Co., Ltd. had accomplished its construction and begun production, with its main products covering railway container flat wagons, tank wagons and hopper wagons. In 2008, the company achieved sales revenue of RMB 4,679,910. About the real estate business: In 2008, the Group achieved sales revenue of RMB 138 million (RMB 166 million in 2007) generated in this business sector, a decrease of 16.87% compared to last year. 4. Research and Development The Group possesses a corporate technical center of state level and under the center, there are 9 R&D centers, one manufacturing technical center and one CAE computation center; meanwhile, it has also established several key institutes such as key labs and testing platforms etc., constituting the special R&D production system of “centralized management, distributed R&D and manufacturing”. Through establishing the technical development system of “centralized management, distributed R&D and manufacturing”, a technical innovation mechanism with “Increasing value by innovation” as orientation has been set up. In 2008, the Group developed 503 new products, achieved technology innovation in 81 items. 34 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 Among them, 6 items were awarded the scientific and technological progress prize at provincial and municipal level or above, and the Company took charge of or participated in formulating 36 international, national or industrial standards, as well as 20 technical standards for group enterprises; The Company applied 231patents, including 108 patents for invention. In 2008, the Group invested RMB 560,000,000 in R&D (expenses on researches and experiments) in total. 5. Suppliers and Customers During the reporting period, the Group purchased from top 5 suppliers, with total procurement value of RMB9,514,000,000, accounting for47.30% of the total purchase expanse of the Group. In this year, the total sales revenue of the top 5 customers reached RMB11,898,000,000, accounting for26.00% of the total sales revenue of the Group. 6. Analysis of the Financial Status of the Company (1) Analysis of Assets Variation Unit: (RMB) Thousand Item Amount ( as Amount ( as of Variation (%) Major influencing factor of 31 Dec 08) 31 Dec 07) Total assets -15.81% Shrinking of production scale in the fourth 34,557,863 41,048,674 quarter, resulting in a decrease in assets appropriation Transactional financial -58.18% Increase of ramified financial assets such as long- assets 386,553 924,340 term foreign exchange transaction with fair value as measurement Accounts receivable -52.88% Shrinking of business and production scale in the 4,193,731 8,899,769 fourth quarter in the fourth quarter Other receivable 884,116 1,147,246 -22.94% Collecting part of money of equity transfer Financial assets -69.55% Decline of fair price and sales of part of financial available for sale 1,264,613 4,153,636 assets available for sale Long term equity 75.57% Increase of investment in affiliated companies and investment 1,602,598 912,822 adjustment of equity method in the year Short term loan -32.61% Shrinking of business and production scale in the 1,817,093 2,696,559 fourth quarter Transactional financial 21.00% The ramified financial instruments with fair liabilities 409,443 338,379 value less than zero Accounts payable 4,391,266 6,979,610 -37.08% Decrease of the scale of raw materials purchase Pre-received accounts 687,964 530,379 29.71% Increase of sales of items sold by pre-paying Non-floating liability 270,358 1,368,100 -80.24% Significant decrease of long-term loan due in one due in one year year Long term loan 55.48% Change of financing policies, and the increase of 6,937,810 4,462,309 long term loan proportion Total liabilities 19,623,415 23,506,373 -16.52% Shrinking of production scale in the fourth quarter Total assets liabilities 56.78% 57.26% -0.48% Shrinking of production scale in the fourth quarter 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, which are measured by fair value: ① The financial assets and financial liabilities (including the transactional ones) measured by fair value, whose variations are recorded in the current profits and losses; Unit: (RMB) Thousand 35 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 The profit and The accumulative The decrease losses on the changes in fair Items Initial amount of withdrawal Closing amount changes in fair value included in in the period value equity Financial Assets: Including: 1. The financial assets measured by fair value, whose variations are recorded in the current profits and losses 924,340 -154,521 386,553 Including: Ramified financial assets 546,120 -188,483 324,616 2. Financial assets available for sale 4,153,636 1,003,697 1,264,613 Sub-total of Financial Assets 5,077,976 -258,349 1,003,697 1,651,166 Financial Liabilities 338,379 -94,725 409,443 Fixed assets for investment - Capitalized biological assets - Others 71,713 - 55,044 55,044 ② Financial assets available for sale (refer to Note 3 (12)). -- Analysis of assets variation and influence, measured by fair value: Unit: (RMB) Thousand Amount of Net assets Fair value Balance as Balance as influenced amount Item Content obtaining of 31 Dec. of 31 Dec. profit and Remark directly method 2008 2007 loss of the affected year Transactional equity Stock investment in instrument Market price 61,937 378,220 secondary market Transactional -154,521 investment financial Ramification assets Ramified Quotation products relating to financial from financial 324,616 546,120 -188,483 exchange rates and instrument institution interest rates Ramification Ramified Ramified Quotation products relating to financial financial from financial 409,443 338,379 -94,725 exchange rates and liabilities instrument institution interest rates Other Quotation Cash flow Exchange hedge floating hedging from financial 55,044 71,713 55,044 products assets institution Equity of “China Financial Merchants Bank” assets Strategic equity available for investment Market price 1,264,613 4,153,636 1,003,697 strategically held by the Company and sale etc. For more information please refer to Note 59, the risk analysis, sensitivity analysis, as well as the method of determining fair value of financial instrument (2) Analysis of expense and income tax variation: Unit: (RMB) Thousand Items Amount （2008） Amount （2007） Increase or Major influencing factors decrease （%） Management 3.97% Increased newly merged corporate 1,661,486 1,598,083 expense Financial expense -47.34% Increase of exchange gain from 195,734 371,704 selling out derivative financial instruments Income tax 38.42% Increased deferred income tax 241,824 174,698 assets 36 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 (3) Analysis of cash flow composition variation: Unit: (RMB) Thousand Items Amount Amount Increase or Major influencing factors （2008） （2007） decrease （%） Net amount of cash 410.12% Payment collection is more than flow from business 3,366,538 -1,085,549 Purchases of raw materials activities Net amount of cash -117.60% The shrinkage of production scale flow from fundraising in the 4th quarter led to the activities -958,649 5,447,742 decrease in the growth rate of loans 7. Operation and Business Performance of Major Holding Companies and Joint-Stock Companies (1) Major shareholding companies Unit: USD Equity directly or Major products or Registered indirectly Business Company name Total assets Net assets Net profit services capital held by the revenue Company (%) CICM Vehicle Development, 75,000,000 80 169,693,037 151,637,425 3,051,961 31,358,550 (Group) Co., Ltd. production and sale of special automobiles, semi-trailer and their components Enric Energy Providing integration 4,590,000 41.55 204,506,098 110,699,459 180,743,168 19,396,858 Equipment services to energy HKD holdings Ltd equipment industry, design, production and sale of key gas equipment Burg Industries Producing, 60,000,000€ 80 298,830,473 86,186,506 417,003,674 2,425,679 B.V. manufacturing and sale of transportation vehicles, tanks and static storing tanks Tianda Airport Designing, 13,500,000 70 61,155,010 28,679,303 70,431,548 8,222,806 Support Ltd developing, manufacturing, installing and maintenance of airport ground equipments, logistic storage systems, port facilities, as well as parking systems etc. (2) Major Joint-Stock Companies The Group holds 17.86% equity of Yantai Raffles Shipyards Ltd. Its registered capital is RMB 5.8 billion, mainly engaging in the business of special ships and marine engineering equipment construction. In 2008, the investment income got by the Company is RMB 8.31 million. The Group holds 10% equity of China United International Rail Containers Co., Ltd.. Its registered capital is RMB 4.2 billion, mainly engaging in the business of railway container center construction as well as relevant business. In 2008, the investment income got by the Company is zero. The Group holds 5% equity of Bank of Communications Schroder Fund Management Co., Ltd. Its registered capital is RMB 200 million, and in 2008, the investment income got by the Company is RMB 8.28 million. 37 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 In this year, with regard to acquisition and disposal of subsidiaries, the Company purchased 60% equity of TGE GAS ENGINEERING GMBH. For more information please refer to (2) “Important corporate merging under different controls in this year” of note 6 “Corporate merger and consolidated financial statement”. 8. The Special purpose company (SPC) under the Controlling of the Company No SPC under the controlling of the Company exists. (Ⅲ) Outlook of the Company’s Future Development 1. Economic Environment and Policy In 2009, the influence of the international financial crisis may still exist, and the authoritative organizations predict that, in 2009, the global economic growth will slow down to -0.6%, and China’s economic growth, 6.7%. The economy of China is now confronted with a decrease of foreign demand and the revival of trade protectionism; meanwhile, it is also under the pressure of internal economy restructuring and increasing resources restriction. In the long term, with the slowdown of China’s economy growth and the promotion of industrial upgrade, the growth of foreign export and cargo throughput is likely to slow down and becomes steady in the future. Though the domestic demand of China has great market potential, the stimulation of domestic demand is a time-consuming process. The traditional competitive edges of Chinese enterprises are weakened, and their management risks increase. In 2009, the Group is generally confronted with very serious and complicated situations, with many uncertainties. Yet there are still opportunities in the crisis. In order to handle the financial crisis, the governments of countries all over the world have taken concerted actions, and the Chinese government has also specified the target of economic policies to expand and stimulate domestic demands, speed up shifting the mode of economic growth, as well as economic restructuring, so as to ensure economic growth. Besides, the government has unveiled a series of policies and measures, including a relatively loose monetary policy, a positive fiscal policy, and the plan for revitalization of top 10 industries etc., which imply opportunities for the enterprise’s development. On the other hand, China still possesses a good foundation for economy development, therefore, if the policies and measures taken to stimulate domestic demands can be effective, China’s economy can continue to maintain its momentum of growth in the future. This serves as an important foundation for China’s manufacturing industry and the Group to develop major business as well as maintain competitive edges. With regard to the tendency, the globalized structure of economy and trade will create growth cycle of economy, and the tendency of shifting labor division in manufacturing industry will support the long-term demand of international trade. The Company believes that the tendency of economy integration in the world will not be reversed. 2. Industry Development Trend and Market Prospect (1) Influenced by the decline of global trade and China’s export, as well as the backflow of numerous empty containers, the general demand for containers dropped significantly. Clarkson predicts that, in 2009, the growth of containers trade volume will slow down to 3.1%, while the containers freight capacity will rise up to 13.1%. DREWRY predicted that, in 2009, the growth rate of containers freight volume will decrease to 2.8%. Moreover, the business of dry cargo containers suffers the most severe impact in 2009, and it is predicted that the global demand may be less than 1,000,000 TEU and the annual demand will not surpass 2,000,000 TEU in the coming two or three years. It is also predicted that the orders for reefer containers and special containers will remain in good circumstance in the first half year, but the demand is also likely to decline in the second half year. 38 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 (2) The international demand for road transport vehicles remains low, yet there are still opportunities in the decreasing domestic market demand. In 2009, under the influence of global financial economic recession, the logistics semi-trailers, as the major vehicle for export to the foreign market, will experience difficulty in market demand growth, in major international markets such as America, Europe etc.. On the other hand, this segment has become relatively saturated after the rapid growth in the previous two years. Moreover, with the slowdown of China’s economic growth, the demand for domestic logistics, energy chemistry, capital construction, as well as real estate market will be repressed in 2009. Currently, most of relevant domestic logistics service providers and logistics equipment providers are small in size, backward in equipment and with low concentration. Therefore, the industry is now badly in need of integration and the products needs upgrading. The production of special purpose vehicle takes up 40% of the total production of trucks in our country, yet there is still a great gap, when it is compared with the more than 70% market shares of the special purpose vehicle in developed countries. The Group has possessed many competitive edges, and will have ability to seize more opportunities in this segment. More and more domestic relevant policies about road transport vehicles come into being, which is in favor of the healthy development of special purpose vehicle industry in our country. It is predicted that after the implementation of new tax and fee policy on processed oil, with the influence of factors such as fuel economy, reducing transport costs, etc., the market demand will soon shift to heavy vehicles, multi-spindle semi-trailers, and van vehicles. The enterprises will pay more attention to energy saving and emission-reduction, promoting the spread of vehicle fuel-saving techniques, and the development of new energy vehicles, light weight vehicles as well as energy-saving and environmental-friendly special purpose vehicles. The canceling of highway maintenance fee and the further promotion of toll based on load system will effectively discourage the behavior of overloading in road transportation. Ministry of Industry and Information has released the draft for comment of Rules for Management over the Special Purpose Vehicles and Trailers Producing Enterprises and their Market Access, which has raised the threshold for market access in aspects like investment, R&D ability, and after-sales services. It is predicted that the implementation of the Management Rule will further promote the mechanism for selecting the superior and eliminating the worst in the industry as well as improve the concentration of the industry. With the expansion of basic facilities construction, and post-disaster reconstruction in the state, as well as the implementation of other policies to stimulate domestic demand, the demand for special purpose vehicles for construction, such as self-discharging cars, pump trucks, powder tank trucks, bulk-cement tanker, and truck-mounted mixer etc. will be supported. Due to the release of industrial standard, and improvement of industrial regulations, as well as the increase demands for food and other logistics, the demand for refrigerator trucks is predicted to increase, and the domestic market demand for special purpose vehicles is predicted to decline about 15% in 2009. (3) The impact on the business of energy, chemistry, food and equipments is relatively slight, but the situation is not optimistic. In 2009, the lowering of oil prices has produced a certain impact on the natural gas market, but given the growing global shortage of traditional energy, the long-term price trends towards high level, and the Chinese government’s implementation of "energy-saving and emission-reducing" energy utilization policy, Liquid natural gas (LNG) as a kind of clean energy will account for a larger proportion in the overall energy consumption. Thus the prospects for natural gas market remain favorable. China is also actively speeding up the construction of the national oil reserve base, large-scale petrochemical projects, and the No.2 gas-line project of West-to East Gas Transmission; besides, the large and medium-sized coastal LNG receiving stations are entering the peak period of investment. On the other hand, viewed from the long-term trends, thanks to the economic development, and the upgrading of industry and consumption, the demand for equipments of chemicals and dangerous goods storage and transportation, as well as beer, fruit 39 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 juice and other liquid food storage, transportation and production will grow. In the next 5 years, the global market is expected to grow at the annual rate of 5%, and the Asian market at 8-10%, which will become the main driving force for global market growth. The Group's main products of the above-mentioned business have covered the most segments of tank storage and transportation equipment industry, including single-bottle, mobile tanks (tank-vehicles, tank-containers), and fixed storage tanks. The Group will gain opportunities from the growth of the above market segments. It has possessed related capabilities of designing and building technologies of energy, chemistry, food and equipments as well as rich experience in product manufacturing, and accumulated long-term customers and social resources. Thus it will strive to seize the opportunities brought by the development of energy, chemistry and food industry, actively compete for key projects with national long-term support and investment, and make breakthroughs to develop some special and licensed areas of manufacturing. In 2009, the Group's business in energy, chemistry, food and equipment is expected to be flat with or slightly lower than that of the previous year. The demand for tank-containers, tank-type food equipments will probably decline, while business related to LNG, CNG, LPG and other energy will maintain growth. (4) Market demand for airport equipments will grow steadily. In 2009, with the implementation of the national policy of expanding fiscal spending to stimulate domestic demands, and the launch of the four trillion infrastructure investment programs, the construction of and investments in domestic civil airports enjoy an excellent environment, and the domestic airport boarding bridges, cargo base will maintain stable growth; besides, there is still potential for further growth in the international market. The sales revenue of air equipment business in 2009 is expected to grow at more than 10%. (5) There are also a lot of potential opportunities for business development in other business such as marine engineering, as well as services. The Revitalization Plans of China Ship Industry launched in 2009 points out that China is to "develop high-tech and high value-added ships and marine engineering equipments, and foster new economic growth points." It is also pointed out that China will support shipbuilding enterprises in research and development of marine engineering equipments such as new jack-up drilling platforms, and encourage the development of marine engineering and power transmission and other critical systems and supporting facilities. At present, although oil prices decline temporarily in the global economic recession, but viewed from the long-term trends, the tide of global offshore oil and gas development is not going out, which will lead to a steady rise in future market demands for global marine engineering equipments. Relevant data indicate that the utilization rate of the global marine engineering equipments, represented by the drilling platforms, reached over 90%; in the next few years they will enter the peak of updating. In 2007, the global market of marine engineering equipments, including oil and gas drilling and gathering platforms, storage facilities, engineering ships, had surpassed USD 300 billion, with offshore platform equipments accounting for more than RMB 500 billion. The market is expected to maintain more than 10% growth in the next two years. The global market of cargo trains approaches RMB 100 billion, of which the oversea market demand takes up a larger share, while China has also set up its long-term railway network construction plans, thus its demand for railway equipments enjoys great potential of growth. 3. Overall Business Targets and Measures 40 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 2009 is a tough year, and thus the challenge for the Group will be unprecedentedly serious. Facing the complicated Macro-economic situation, the industrial environment and the operating pressures, the Group will persist in optimizing connotations of the Group, carry out reform in management and innovation in technology, apply new business rules and models, adopt new management concepts and guidelines, employ new technologies, processes and equipments, and improve quality and efficiency of existing production factors, so as to realize business growth, as well as adjustment and upgrading of industrial structure. The Group will promote optimization of organization, explore new business models actively and improve the ability in organization earnestly; we should be firm in determination to turn challenges into opportunities and thus create a brilliant future. The Group will continue to pay close attention to the financial market trends, policies, changing regulations and tendencies, as well as follow the changes and trends of the industry, upstream and downstream markets; it will actively work out various contingency plans to cope with the deteriorating economic situation, and adjust its strategies and management tactics timely in line with the changing conditions; the Group is to strengthen the management control of operating and financial risks, and to establish a highly-responsive mechanism to deal with important events within the Group; meanwhile, it will closely monitor its receivable accounts, reduce inventory, reinforce the management of operating capital, cut down expenses, maintain the stability of financing channels, and guarantee the safety of financing chain. Taking conservatism and prudence as its main principles, the Group will take initiative to implement dynamic risk management, endeavor to reduce and address the negative effects and losses brought about by the volatile financial market. Besides, the Group will enhance its communication with the government, to work over and make good use of the policy resources put forward by the nation during the financial crisis. 4. Capital Expenditure and Financing Plan Based on the change of economic situation and business environment, as well as the requirement of the Group to handle the financial crisis and develop business, it is expected that in 2009, the capital expenditure will drop significantly to around RMB 2.5 billion, including RMB 220 million for containers, RMB 560 million for vehicles, RMB 380 million for energy and chemistry equipments, RMB 140 million for logistics and services, and 1.2 billion for others. The corresponding financing arrangements are mainly self-owned capital and loans from banks. 5. Risk Factors in Future Development In 2009, as a result of the global economic recession and the slowdown of China’s economy growth, the Group’s main business, the containers business, is closely related to the global shipping industry, trade and export; therefore, it will be continuously subject to the negative influence, and the demand for relevant business will probably decline or face much uncertainty. Under the impact of the financial crisis, the fluctuation and uncertainty of exchange rate at the foreign exchange market increases, as a result, it becomes more difficult to manage the foreign exchange and ramified financial instruments. Because most business of the Group has been internationalized, the Group is now facing greater risks. China is now implementing the policies to stimulate domestic demands and undergoing the industrial restructuring, which will exert far-reaching influence on the development of China’s manufacturing industry; in 2009, the plan for revitalization of top 10 industries has been unveiled consecutively and will be implemented; the unification of enterprises income taxes between domestic-funded enterprises and foreign-invested enterprises will be continued; meanwhile, the state has adjusted the preferential tax policies for export products and improved export rebate rate. Yet, whether the implementation of these policies will achieve obvious effects remains to be seen. The main business of the Group is closely related to the global economy and trade, shipping industry, China’s manufacturing industry as well as export; the above macro economy factors may 41 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 lead to increase of uncertainties in market sales, investment, and business thus influencing the business revenue, growth of profits and operation efficiency of the Group. In 2009, it is predicted that the global financial and credit market will continue to fluctuate, and the process of de-leveraging financial derivatives market is still under-going, posing a sever challenge to the Group’s risks management of foreign exchange and product price. In 2009, it is predicted that the external financial environment of the Group will possess ample liquidity under a relatively loose domestic monetary policy, and the loan rate will remain low, which is good for the reduction the Group’s financial expenses. II. Investment in the Reporting Period (I) Use of Fund Raised in the Reporting Period The Company had not raised any fund in the reporting period, nor was there any fund raised in previous periods and still used in the reporting period. (II) Important Investment Projects with Non-Raised Fund in the Reporting Period During the reporting period, the Group paid RMB 1,335,420,000 in total to purchase equity of some companies; in this period, the Group paid RMB 1,045,620,000 to establish subsidiaries or increase the capital of subsidiaries; and the scale of the Group’s fixed assets (including construction in progress) has a net increase of RMB 1,062,300,000. Unit: (RMB) Million Share ratio held directly Accumulated Project or indirectly Progress in 2008 investment at by the year end Company (%) 1. Acquisition of 11.35% shares of Yangzhou CIMC 100.00% Completed 35.62 Special Vehicles Co., Ltd 2. Acquisition of 11.35% shares of Yangzhou Xinghua 100.00% Completed 0.33 Machinery Co., Ltd 3. Acquisition of 25% shares of Zhumadian CIMC Huajun 100.00% Completed 122.33 Vehicle Co., Ltd 4. Acquisition of 22.5% shares of Tianjin CIMC North 100.00% Completed 95.54 Ocean Container Co., Ltd 5. Acquisition of 2% shares of Shanghai CIMC Vehicles 100.00% Completed 2.31 Logistics Equipments Co., Ltd 6. Acquisition of 20% shares of Shanghai CIMC Reefer 92.00% Completed 111.92 Containers Co., Ltd 7. Acquisition of 2.95% shares of Zhangjiagang CIMC 100.00% Completed 5.31 Sanctum Cryogenic Equipment Co., Ltd 8. Acquisition of 60%shares of TGE SA 60.00% Completed 243.1 9. Acquisition of 17.86% shares of Yantai Raffles Shipyard 17.86% Completed 636.64 Ltd 10. Acquisition of shares of TSC Offshore Group Ltd 9.11% Completed 82.32 11. CIMC Smart Secure Container Co., Ltd 100.00% Completed 6 12. Yangzhou Tuoli Refrigeration Equipments Co., Ltd 100.00% Completed 20.5 13. Taichang CIMC Refrigeration Logistics Equipments 100.00% Completed 88.46 Co., Ltd 14. Hunan Bamboo & Wood Products Co., Ltd 100.00% Completed 28 15. Shanghai CIMC Special Vehicles Co., Ltd 100.00% Completed 30 16. Shangdong CIMC Vehicle Logistics Equipments Co., 100.00% Completed 5 Ltd 17. Zhengzhou Motor Sales and Service Co., Ltd 100.00% Completed 5 18. Shanxi Motor Sales and Service Co., Ltd 100.00% Completed 5 19. Jiangsu Motor Sales and Service Co., Ltd 100.00% Completed 5 20. Ningbo New High Area Ximake Transport Service Co., 100.00% Completed 5 42 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 Ltd 21. Jiangxi CIMC Vehicle Logistics Equipments Co., Ltd 100.00% Completed 10 22. CIMC Jidong (Qinhuangdao) Vehicle Manufacturing 100.00% Completed 70 Co., Ltd 23. Tianji Ximake Trasport Co., Ltd 100.00% Completed 5 24. Suining CIMC Forestry Co., Ltd 100.00% Completed 8 25. CIMC Motor Sales and Service Co., Ltd 100.00% Completed 15 26. Ningbo Ximake Metal Co., Ltd 100.00% Completed 5 27. Ningbo Runxin Container Co., Ltd 60.00% Completed 5 28. CIMC Investment Co., Ltd 100.00% Completed 5 29. Direct Classic LLC 100.00% Completed 43.68 30. Sound Winner Holdings Limited 100.00% Completed 0.07 31. Taicang CIMC Container Manufacturing Co., Ltd 100.00% Completed 109.17 32. Dalian CIMC Vehicle Logistics Equipment Co., Ltd 100.00% Completed 15.74 33. CIMC USA,INC 100.00% Completed 0.02 34. CIMC（Chongqing）Logistics Equipment Manufacturing 100.00% Completed 10.92 Co., Ltd 35. Nantong CIMC Tank Storage Equipment Co., Ltd 100.00% Completed 135.12 36. Yangzhou CIMC Tonghua Special Vehicles Co., Ltd 100.00% Completed 73.40 37. Xiamen CIMC Vehicle Logistics Equipment Co., Ltd. 100.00% Completed 2 38. Xinjiang CIMC Vehicle Logistics Equipment Co., Ltd. 100.00% Completed 56 39. Qingdao CIMC Refrigeration Transport Equipment Co., 100.00% Completed 104.15 Ltd 40. Tianjin Port CIMC Zhenhua Logistics Co., Ltd 36.00% Completed 3.19 41. Yangzhou Maisitong Composite Materials Co., Ltd 50.00% Completed 12.87 42. Dalian Jilong Logistics Co., Ltd 30.00% Completed 8.23 43. Xiamen CIMC Haitou Container Service Co., Ltd 45.00% Completed 4.57 44. Xinyang Wood Products Hong Kong Co., Ltd 20.00% Completed 1.39 45. Fuzhou CIMC Haitou Logistics Co., Ltd 49.00% Completed 5.18 46. Xiamen CIMC Haitou Logistics Co., Ltd 49.00% Completed 6.15 47. China United International Containers Co., Ltd 10.00% Completed 132.81 Total —— —— 2381.04 III. Routine Work of the Board of Directors (I) Meetings and Resolutions in the reporting period Time of Session Resolution Disclosure convenin g 2008.2.19 1st meeting of the Resolution of purchasing office occupancy in fifth Board in Beijing 2008 2008.3.10 2nd meeting of the Resolution of acquisition of Yantai Raffles Shipyard Mar. 13,2008 fifth Board in Ltd 2008 2008.3.31 3rd meeting of the Minutes of the Meeting Apr. 2, 2008 fifth Board in 1. resolution of the 3rd board meeting in 2008 2008 2. resolution of financing arrangement in 2008 3. resolution of providing guarantee for bank credit 43 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 of subsidiaries and wholly-owned subsidiaries in 2008； 4. resolution of the CIMC Vehicles Group Co., Ltd and its holding subsidiaries to provide credit guarantee for its distributors and customers 5. resolution of its holding subsidiaries to provide bank credit for the subsidiaries in the Group 2008.4.25 4th meeting of the Resolution of the first quarterly report 2008 fifth Board in 2008 2008.4.28 5th meeting of the Resolution of the 5th board meeting May 9, 2008 fifth Board in Resolution on the quantity of stock option by senior 2008 management personnel Announcement on the authenticity of materials used to apply for stock right incentive Others：independent directors’ opinion on the stock option stimulating plan (draft) 2008.6.2 6th meeting of the 1. resolution of acquisition of 60% shares of TGE Jun. 24, 2008 fifth Board in GAS INVESTMENT SA 2008 2. resolution of change of internal organization and institution in the headquarters of the Group 2008.6.13 7th meeting of the Resolution of developing CIMC heavy equipment fifth Board in projects 2008 2008.6.17 8th meeting of the Resolution of affiliated party transaction, and fifth Board in non-business capital expropriation in 2007 2008 2008.7.16 9th meeting of the Resolution of report on progress of the issues listed Jul. 23, 2008 fifth Board in in the special campaign report 2008 2008.8.19 10th meeting of Resolution of report on business operation in the Aug. 22, 2008 the fifth Board in first half year of 2008 2008 Resolution of the semi-annual report Resolution of setting up legal affairs department Resolution of summery of self-check activity to prevent big shareholders and its affiliated parties expropriating capital 2008.8.29 11th meeting of Resolution of adjusting acquisition price of Yantai Aug. 30, 2008 the fifth Board in Raffles Shipyard Ltd 2008 2008.9.11 12th meeting of Resolution of selling assets to Enric Energy Sep. 11, 2008 the fifth Board in Equipment Holdings Ltd and subscribing for its 2008 shares 2008.9.27 13th meeting of Resolution of establishing the stock option the fifth Board in stimulating plan of CIMC Management Training 2008 (Shenzhen) Co., Ltd 2008.10.1 14th meeting of Resolution of termination of the stock option Oct. 30, 2008 7 the fifth Board in stimulating plan (draft) of CIMC (Group) Co. Ltd 2008 2008.10.2 15th meeting of Resolution of the third quarterly report 2008 4 the fifth Board in 2008 2008.11.4 16th meeting of Resolution of adjusting the stock acquisition of Nov. 5, 2008 the fifth Board in Yantai Raffles Shipyard Ltd 2008 2008.12.2 17th meeting of 1. resolution of acquiring Shanghai CIMC Reefer Dec. 25, 2008 2 the fifth Board in Containers Co., Ltd； 44 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 2008 2. resolution of acquiring stocks of FENTALIC LIMITED 3. resolution of authorizing to sell part of financial assets available to sales 4. resolution of establishing CIMC Group Financing Co., Ltd 5. announcement of operation according to laws and regulations 6. resolution of adjusting the equity of wood product companies (II) Execution of the resolutions of shareholders’ general meetings by the BOD The BOD strictly executed the resolutions of the shareholders’ general meetings during the reporting year: 1. During the first temporary shareholders’ general meeting of 2007, the BOD was authorized to modify the Articles of Association, which was completed during the reporting period. 2. Implementation of the profit distribution plan of 2007 by the BOD At the shareholders’ general meeting 2007 held on 28 Apr. 2008, the Profit Distribution Scheme 2007 was passed, namely, based on the existing total share capital of 2,662,396,051 shares as at 31 Dec. 2007, a cash dividend of RMB 5.0 (tax included, for B shares, no tax deduction; after tax deduction, the actual dividend for individual shareholders and investment fund of A-share is RMB 4.50 for every 10 shares) is distributed for every 10 shares. On 26 Jun. 2008, the Company had completed all the dividends payable works. (III) The duty performance of three special committees of the board The Audit Committee, Compensation and Appraisal Committee and Strategy Committee of the BOD, in line with Administration Rules for Listed Companies, Articles of Association, Rules of Procedure for Board of Directors as well as the office power and obligations in the implementation rules of the special committees, carefully performed their duties. Duty performance of Audit Committee 1. During the reporting period, the Audit Committee convened special meetings discussing the regular financial reports of the Company; 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 2008, the Audit Committee convened 3 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 2. The audit works 2008 of KPMG are summarized by the Audit Committee as follows: In line with the provisions of Notification on Doing Well for the Annual Report 2008 and Relevant Works from China Securities Regulatory Commission etc., the audit works carried out by KPMG are summarized as follows: (1)preparation works before auditing Deciding the audit plan: From the pre-auditing started in the beginning of Nov. 2008 to the completion of preliminary audit, 5 months has passed and the detailed arrangements are as follows: Between Nov. and Dec. 2008, auditing preparation works to major subsidiaries On 21 Dec. 2008, making the communication to pre-auditing with the management team and the 45 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 audit committee On 1 Jan. 2009, KPMG started to stay at this Company and each subsidiaries of the Group for the auditing works; on 29 Mar. 2009, KPMG completed the final financial report and issued the preliminary audit report for review by the Audit Committee; on 30 Mar. 2009, the audit report was approved by the Board of Directors. 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. (2)the auditing process Since Nov. 2008, KPMG started auditing preparation works to major subsidiaries of the Company; Commencing on 1 Jan 2009, KPMG dispatched teams to carry out overall audit on the headquarters and the subsidiaries of the Company. On 13 Mar.2009, KPMG made the communication and reported the final auditing to the Audit Committee. On 29 Mar. 2009, KPMC presented the preliminary audit report for 2008 to the Audit Committee and on 30 Mar., it issued the audit report. (3)Audit results KPMG issued the Audit Report 2008 for the Company with unqualified opinion. The Audit Committee is of the view that the audit works of the financial statements of the Company of 2008 have been completed well. 3. Proposal to nominate KPMG as outside audit institution for 2009 The Audit Committee made the proposal to reengage KPMG for the auditing works of financial statements for the year of 2009. Duty performance of Compensation and Appraisal Committee During the reporting period, the Compensation and Appraisal Committee convened three special meetings. During the meetings, the matters is discussed and reviewed as below: 1. Appraisal Method to Management Team for year 2008. Considering the capital market paradigm of the Company, the Compensation and Appraisal Committee proposed to put performance assessment indicator “Assets Liabilities Ratio” up to 65% from 60%, which has been passed by the BOD. 2. With regard to Stock Option Incentive Plan (Draft) of CIMC, the Compensation and Appraisal Committee asked questions that are to be involved and gave some suggestions. 3. In accordance with the significant change occurred in economic situation both at home and abroad and securities market, the Compensation and Appraisal Committee suggested terminating Stock Option Incentive Plan (Draft) of CIMC, till conditions are ripe and then implement such plan, which has been passed by the BOD. Duty Performance of Strategy Committee During the reporting period, the Strategy Committee convened six special meetings with examination of investment. During the meetings, the development strategies of the Company were comprehensively studied. In the important investment projects, such as equity acquisition of Yantai Raffles Shipyard Limited and TGE Ltd., the Committee conducted full demonstration, which served strong basis for making the decision by the BOD. IV. Draft proposal for profit distribution or capitalization of capital reserve of 2008 As audited by KPMG, the Company’s net profit after tax and minority interests recorded in the consolidated statement for year 2008 was RMB 1,406,907,640.28 in 2008, as well as earnings per 46 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 share of RMB 0.53 calculated based on the share capital of 2,662,396,051 shares as at 31 Dec. 2008. As per the Articles of Association of the Company and the current accounting standard, the net profit of parent company was RMB 983,309,760.73 in 2008. As at 31 Dec. 2008, the profit available for distribution to shareholders is RMB 1,064,613,150.92 in the statement of parent company. The profit distribution and dividend declaration preplan is hereby proposed as: Based on the total share capital of 2,662,396,051 shares as at 31 Dec. 2008, a cash dividend of RMB 1.5 (tax included) will be distributed for every 10 shares, representing a total dividend of RMB 399,359,407.65 Upon that, the balance of retained profit of the Company was RMB 665,253,743.27. The above preplans are to be submitted to the Annual Shareholders’ General Meeting 2008 for examination and approval before implementation. Cash bonus of the Company over the past three years Unit: RMB Yuan Net profit attributable to Amount in cash Ratio in net profit attributable to owners of parent company bonus owners of parent company under under the consolidated (tax included) the consolidated statement statement 2007 1,331,198,025.50 3,165,373,000.00 42.06% 2006 954,025,251.68 2,820,752,000.00 33.82% 2005 766,447,348.28 2,669,141,000.00 28.72% V. No other issues that need to be disclose 47 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 Section 9. Report of the Board of Supervisors I. Meetings of the Board of Supervisors and resolutions Date Term of the meeting Content of resolutions The 1st Meeting of the 5th Board of 1. Auditing opinion on Annual Report 2007; 31 May 2008 Supervisors 2008 2. Opinion on Self-appraisal on internal control The 2nd Meeting of the 5th Board of 25 Apr. 2008 Resolutions on the 1st Quarterly Report of 2008 Supervisors 2008 The 3rd Meeting of the 5th Board of 1. Checking opinion on list of incentive object of stock option 28Apr. 2008 Supervisors 2008 2. Statement on authenticity of application information regarding equity incentives. The 4th Meeting of the 5th Board of 1. Auditing opinion on Summary of Self-inspection and Supervisors 2008 Rectification of Capital Occupation of Principal Shareholders and 19 Aug. 2008 Related Parties 2. Resolutions on Semi-annual Report 2008. The 5th Meeting of the 5th Board of 24 Oct. 2008 Resolutions on the 3rd Quarterly Report of 2008 Supervisors 2008 II. Independent opinion on events of the Company in 2008 by the Board of Supervisors The Board of Supervisors of the Company issued independent opinion on the following events: 1. 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 Board Meetings 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. (2) The Company proposed Stock Option Incentive Plan (Draft) of CIMC in May 2008. The Board of Supervisors checked list of object authorized equity for incentive according to relevant laws and statutes, and issued the following opinion: Directors (excluding external directors, independent directors), senior executives and other core technical or sales staff, which was confirmed by Stock Option Incentive Plan (Draft) of CIMC, qualified post stipulated in laws and statutes such as the Company Law, Articles of Association and so on, and standard documents, and complied with condition of incentive object stipulated in Measures for Administration of Equity Incentives of Listed Companies (Trial Implementation). As main body of stock option incentive of the Company, they are legitimate and valid. (3) According to Notice on Carrying out a Special Campaign to Promoting Corporate Governance of Listed Companies, the Board of Supervisors checked and examined Summary of Self-inspection and Self-rectification Report on Capital Occupation by the Principal Shareholders and related parties, and expressed auditing opinion as follows: Checked and verified Summary of Self-inspection and Self-rectification Report on Capital Occupation by the Principal Shareholders and related parties, we considered that the summary report authentically and objectively reflected actual situation of the Company 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. In Sep. 2008, the Company acquired 60% equity of TGE GAS INVESTMENT SA held by GASFIN 48 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 INVESTMENT SA. TGE GAS ENGINEERING GmbH was wholly-owned subsidiary company of TGE GAS INVESTMENT SA. In Nov. 2008, the Company acquired 100% equity of Yantai Raffles Shipyard Limited. The Company acquired equity of Shanghai CIMC Reefer Containers Co., Ltd and FENTALIC LIMITED, which was related transaction. Price of the aforesaid acquisition was reasonable, and the transaction complied with lawful procedure. There were neither insider trading, nor events damaged interest of part equity or caused loss of assets. 49 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 Section 10. Significant Events I. Significant lawsuits and arbitrations In Feb. 2007, Ruihua Investment Holdings Co. (hereinafter refer to as “Ruihua”) appealed to Senior Court of Jiangsu Province, involving 100% equity of Yangzhou Runyang Logistics Equipment Co., Ltd, Shenzhen Southern CIMC Container Service Co., Ltd and 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 (hereinafter refer to as “Tongyun”) and Yangzhou Tonglee Reefer Co., Ltd (hereinafter refer to as “Tonglee”); it further demanded a compensation of RMB 310 million. In Oct. 2008, the Company received Civil Judgment from Senior Court of Jiangsu Province with main content as follows: Senior Court of Jiangsu Province accepted and heard case on dissension of property damage and compensation between Rui Hua Investment Holding Limited (hereinafter refer to as “Ruihua Company”) and defendants Yangzhou Runyang Logistics Equipment Co., Ltd, Shenzhen Southern CIMC Container Service Co., Ltd and CIMC Holdings (BVI) Limited (Note: defendants are subsidiaries of the Company) on 23 Jan. 2007. Ruihua Company withdrew the lawsuit to Senior Court of Jiangsu Province on 13 Oct. 2008. On 16 Oct. 2008, Senior Court of Jiangsu Province judged to approve withdrawal appeal of Ruihua Company according to provisions in Article 131 of The Civil Procedure Law of the People s Republic of China, which was final adjudication. The Company disclosed the above lawsuit on 8 Feb. 2007. Details please referred to Public Notice on Significant Issues of CIMC in China Securities Journal, Shanghai Securities News, Securities Times, Hong Kong Ta Kung Pao as well as website(http//:www. cninfo.com.cn) with announcement No. [CIMC] 2007-01, Public Notice on Progress of Lawsuit of CIMC published in China Securities Journal, Shanghai Securities News, Securities Times, Hong Kong Ta Kung Pao as well as website (http//:www. cninfo.com.cn) with announcement No. [CIMC] 2008-029. II. Holding and trading the stocks of other listed companies and participating in financial enterprise (I) Short-term investment Unit: RMB Yuan Proportion of Profits and Initial investment Book value at stock No. Stock variety Stock code Name for short Shares held gains in report amount period-end investment at period period-end (%) 1 H-share 00368 Sino-trans Shipping 21,802,547 2,996,500 5,198,285 8.39% -12,209,990 2 S-share G05.SI GoodPack 109,431,721 13,500,000 53,739,424 86.76% -55,692,298 Other stock investment at term end 4,455,955 2,999,550 4.84% -1,456,405 Profit and loss from selling stock investment - - -172,488,035 Total 135,690,224 - 61,937,259 100% -246,241,000 (II) Shares of other listed companies held Unit: RMB Yuan Equity Profit and Change in the Book value at Subject for Short form of Initial investment proportion in loss in the owners’ equity Stock code the accounting Source of shares stock amount that of this report in the report period-end calculation company period period Originally Financial purchased China 600036 178,496,394 0.69% 1,240,320,000 0.00 -1,606,500,000 assets corporate shares Merchant Bank available for and after equity sale reforming Financial assets Purchase from 8149 TSC OFFSHORE 82,317,190 9.11% 24,656,851 0.00 -57,660,339 available for the second sale market 50 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 Total 260,813,584 - 1,264,976,851 0.00 -1,664,160,339 - - (III) Equity of financial enterprise held by the Company Unit: RMB Yuan Equity Profit and Change in Initial Book value Subject for Number of proportion in loss in the the owners’ Name investment at the accounting Source of shares shares held that of this report equity in the amount period-end calculation company period report period China Merchant Long-term equity Purchase of 53,354,420 32,291,151 1.00% 47,819,000 0.00 -3,362,000 Securities Ltd investment corporate shares Total 53,354,420 32,291,151 1.00% 47,819,000 0.00 -3,362,000 - - III. Significant acquisition and sales of assets 1. Acquisition of 17.86% equity of Yantai Raffles Shipyard Limited On 12 Mar. 2008, Sharp Vision Holdings Limited (hereinafter referred to as “the Buyer”), wholly-owned subsidiary company of the Company, signed and concluded agreement with Leung Kee Holdings Limited and Bright Touch Investment Limited (hereinafter referred to as “the Seller”): Sharp Vision Holdings Limited will acquire 81,776,500 shares of Yantai Raffles Shipyard Limited (hereinafter referred to as “Yantai Raffles”) held by the Seller, which took up 29.90% of issued shares. Relevant details please referred to Public Notice on Resolutions of the 2nd Meeting of the 5th Board of Directors of CIMI 2008, Public Notice on Acquisition of Equity of Yantai Raffles Shipyard Limited with respective announcement No. [CIMC] 2008-003 and [CIMC] 2008-004 in China Securities Journal, Shanghai Securities News, Securities Times and Hong Kong Ta Kung Pao dated 13 Mar. 2008. Both parties signed and concluded supplementary agreement on 27 Aug. 2008 that the price of acquired shares adjusted to USD 4.00 per share from NOK 38 per share (approximately equal to be USD 6.92), maximum of total price was USD 327.1 million, which will be paid off with cash in lump sum. Details please referred to Public Notice on Resolutions of the 11th Meeting of the 5th Board of Directors of CIMI 2008, Public Notice on Progress of Acquisition of Equity of Yantai Raffles Shipyard Limited with announcement No. [CIMC] 2008-022 and [CIMC] 2008-023 respectively in China Securities Journal, Shanghai Securities News, Securities Times and Hong Kong Ta Kung Pao dated 30 Aug. 2008. After negotiation, both parties agreed to revise relevant clauses in aforesaid agreement in Nov. 2008: (1) Shares of Yantai Raffles acquired by the buyer from the seller was adjusted to 27,356,500 shares from 81,776,500 shares, accounting for 10.00% of shares issued by Yantai Raffles. (2) the purchase price was adjusted from USD 4.00 per share to NOK 16.25 per share. On 3 Nov. 2008, acquisition of 10% equity of Yantai Raffles by the Company has completed already. Relevant details please referred to Public Notice on Completion of Acquisition of Equity of Yantai Raffles Shipyard Limited, which published in China Securities Journal, Shanghai Securities News, Securities Times and Hong Kong Ta Kung Pao on 5 Nov. 2008 with respective announcement No. [CIMC] 2008-022 and [CIMC] 2008-023. Besides, the Company acquired about 7.86% equity of shares in public offered by Yantai Raffles through CIMC (Hong Kong) Co., Ltd, wholly-owned subsidiary of the Company, in cash at the purchase cost of NOK 186,831,510 (equal to be USD 26,726,789) on respectively on 28 Nov. 2008, 19 Dec. 2008 and 30 Dec. 2008. As of Dec. 2008, the Company held 17.86% equity of Yantai Raffles. 2. Acquisition of 60% equity of TGE GAS ENGINEERING GmbH On 22 Jun. 2008, Acquisition Agreement was signed in Bonn, Germany by China International Marine Containers (Group) Co., Ltd (hereinafter referred to as “the Company”, “CIMC”) and Luxembourg GASFIN INVESTMENT SA, in which CIMC would acquire 60% equity of TGE GAS INVESTMENT SA held by GASFIN INVESTMENT SA. TGE GAS ENGINEERING GmbH (hereinafter referred to as “TGE GAS”), which is a gas engineering company set up in Bonn, Germany, is wholly-owned subsidiary company of TGE GAS INVESTMENT SA. Details please referred to Announcement concerning the Acquisition of TGE with announcement No. [CIMC] 2008-016,which published respectively in China Securities Journal, Shanghai Securities News, Securities Times and Hong Kong Ta Kung Pao dated 24 June. 2008. 3. Sales of assets to Enric Energy Equipment Holdings Limited and subscription of its shares The Company planned to sell 80.04% and 19.96% shares of Sound Winner Holding Limited held by wholly-owned subsidiaries of the Company to Enric Energy Equipment Holdings Limited (hereinafter 51 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 referred to as “Enric”) to subscribe its 202,787,960 ordinary shares and 1,195,749,690 convertible preference shares respectively; sell 80% shares of Full Medal Limited and 20% shares of Full Medal held by the independent third party PGM Holding BV to Enric to subscribe its 195,664,241 ordinary shares and 423,526,395 convertible preference shares respectively. The plan on Injection of subscribing Enric’ shares by sales of assets to subsidiaries of the Company accorded with regulations of state laws and CSRC. Injection relevant assets and business of Nantong CIMC Tank Equipment Co., Ltd, Zhangjiagang CIMC Sanctum Cryogenic Equipment Co., Ltd and Holvrieka Holdings B.V. to Enric helped to set up unified operation and administration for tank equipment (which is mainly applied in energy and chemical industrial products and liquid food field), actualized co-benefits in marketing & sales, purchasing, research & development of technology, management, etc., avoid horizontal competition in development of tank equipment field and actualize resource sharing and positive interaction. Meanwhile, the plan laid good foundation for development new business and extending new profit model of tank equipment, and was in favor of enhancing financing ability for future capital market and continuous profit ability. Relevant details please referred to Public Notice on Sales of Assets to Enric Energy Equipment Holdings Limited and Subscription of its Shares published in China Securities Journal, Shanghai Securities News, Securities Times and Hong Kong Ta Kung Pao on 11 Sep. 2008 with announcement No. [CIMC] 2008-025. In view of durative worsening of global economy and capital market fluctuation, and several preconditions was unable to fulfill before the original predicated deadline (2 Mar. 2009) to finish the aforesaid sales of assets and subscription for Enric’s shares. After consideration, both parties agreed that the deadline to finish sales of aforesaid assets and subscription of shares of Enric Energy Equipment Holdings Limited delayed to 2 Sep. 2009 from 2 Mar. 2009. The date that Enric Energy Equipment Holdings Limited issued announcement on shareholder general meeting was delayed to “before 30 Jun. 2009 “from “before 31 Dec. 2008”. Relevant details please refer to Public Notice on Postponing Sale of Assets to Enric Energy Equipment Holdings Limited and Subscription for Its Shares published in China Securities Journal, Shanghai Securities News, Securities Times and Hong Kong Ta Kung Pao on 13 Dec. 2008 with announcement No. [CIMC] 2008-034. IV. Influence of termination of stock incentive plan on operation results and financial status According to spirit of Memo No. 3 on Relevant Events of Stock Incentive issued by CSRC and in order to protect long-term interests f most shareholders and listed companies, the Company held the 24th Meeting of the 5th Board of Directors for the Year of 2008 on 17 Oct. 2008, the Board of Directors approved to terminate Stock Option Incentive Plan of CIMC (Daft) unless the condition is ripe. Termination of stock option incentive plan was accorded with actuality of the Company, and there was no adverse influence on operation and financial status. V. Significant related transactions (I) Related transactions for assets and equity transfer 1. Acquisition of equity In Dec. 2008, COSCO Pacific Limited (hereinafter referred to as “COSCO Pacific”) transferred 22.5% shares of Tianjin CIMC North Ocean Container Co., Ltd.(hereinafter referred to as “TNOC”), which was held by its subsidiary FENTALIC LIMITED, to CIMC Holdings (B.V.I.) Limited, wholly-owned subsidiary of the Company, at the price of USD 14 million. COSCO Pacific transferred 20% shares of Shanghai CIMC Reefer Containers Co., Ltd, which was held by COSCO Pacific (China) Investment Holdings Limited, to the Company at the price of USD 16.4 million. According to Rules for Listing Shares, this transaction between the Company and COSCO Pacific was related transaction because COSCO Pacific held 21.80% shares of the Company. The aforesaid related transaction was published with Public Notice on Related Transaction of China International Marine Containers (Group) Co., Ltd in China Securities Journal, Shanghai Securities News, Securities Times and Hong Kong Ta Kung Pao with announcement No. [CIMC] 2008-035 on 25 Dec. 2008. 2. Transfer equity of subsidiary company In 2007, China Merchants Property Development Co., Ltd signed Equity Transfer Contract with CIMC Shenfa Construction Industrial Co., Ltd, subsidiary of the Company, to transfer 60% equity of Shanghai Fengyang Real Estate Development Co., Ltd held to China Merchant Real Estate Co., Ltd at consideration totaling RMB 353,250,000. Balance of the transfer being RMB 70,650,000 has not been paid yet as of 31 Dec. 2008. 52 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 (II) Financial Lease On 30 Sep. 2008, CIMC Vehicle Financial Leasing Co., Ltd, subsidiary of the Company, and Yantai Raffles Ocean Engineering Co., Ltd (hereinafter referred to as “Raffles”), subsidiary of the affiliated enterprise of the Company, signed Ship Financial Lease Contract, which was guaranteed by Yantai Raffles Shipyard Limited, subsidiary of affiliated enterprise of the Company. The contract prescribed that CIMC Vehicle Financial Leasing Co., Ltd purchased a barge from Raffles with price of RMB 38 million and then leased to Raffles at price of RMB 45,987,179 with method of financial leasing from 10 Dec. 2008 to 10 Dec. 2013. The contract appointed interest rate was fluctuated and adjusted according to benchmark interest rate of the People’s Bank of China per year. Annual interest rate was 7.56% from date of contract to 31 Dec. 2008. As of 31 Dec. 2008, fund of financial leasing being RMB 38 million has not received yet, amounting to USD 5,568,255. (III) Related transaction relating to routine operation For details etails please referred to 3 (c) of “Relationship between related parties and Transaction”, Note 63 in financial statement. (IV) The above transaction with other related parties was made according to general and normal commerce clause or relevant agreement. VI. Significant contract and performance thereof 1. There were no significant events of entrusting, contracting and renting assets in the Company 2. Significant guarantee contracts (1) The Company provided guarantees on business capital for subsidiary companies. The Company is a holistic listing company and provides guarantee on business capital for subsidiary companies within budget, which was mainly because the demand of business operation and development. The Company signed General Agreement on Credit by Head Office of the Bank with financial institutions according to budget approved by the Board of Directors. The various fundraising activities of the subsidiaries must be within annual credit in general agreement. The Company, as approved by the board of directors, provides credit guarantee for the subsidiaries within the total annual credit As of 31 Dec 2008, the balance of the guaranteed amount for the subsidiaries of the Company was RMB 898.4 million. (2) CIMC Vehicle (Group) Co., Ltd, subsidiary of the Company, has entered into agreements with China Construction Bank, Communication Bank of China, China Merchant Bank and other Banks and sell the products of CIMC Vehicle (Group) Co., Ltd, in which stipulated that CIMC Vehicle (Group) Co., Ltd offered credit guarantee for loan financing of dealer and clients of CIMC Vehicle (Group) Co., Ltd and its subsidiary companies from bank. The clients purchased the vehicles of the Company on credit and applied license plate in local vehicle management station, then pledged to banks or CIMC Vehicle Group. As of 31 Dec 2008, as agreed by the board of directors, CIMC (Group) Co., Ltd and its subsidiaries have provided a total credit of RMB 4,611.16 million to its dealers and clients. (3) The Company didn’t guarantee for shareholders, actual controller or related parties of the Company. (4) As of 31 Dec. 2008, balance of guarantee totaled RMB 1,359.56 million, accounting for 10.12% of net assets being RMB 13,428.9 million at the end of 2008, direct or indirect guarantee amount for liabilities of subsidiaries whose assets liability ratio was over 70% was RMB 259.41 million. There were neither overdue guarantees, nor guarantees for shareholders, actual controller or related parties in the Company and shareholding subsidiaries. 3. During the reporting period, there was no case of entrusting the others to manage the cash assets. VII. Commitment by the Company or shareholders holding more than 5% of shares and the performance thereof (I) For the relevant commitment of the Company, please refer to Note 60 of financial statement. (II) Relevant commitment on listing of non-tradable shares in share merger reform of COSCO Container Industries Limited and the performance thereof (1) COSCO Container Industries Limited committed that, the non-tradable shares held would not be sold at Shenzhen Stock Exchange or transfer within 12 months since the first transaction day after implementation of share merger reform according to relevant regulations. (2) COSCO Container Industries Limited further committed that, after expiration of the above commitment, the non-tradable shares listed and sold at Shenzhen Stock Exchange in line with relevant provisions would not exceed 5% of original ones within 12 months and not exceed 10% within 24 months. The Board of Directors and CITIC Securities considered that up to date, COSCO Container Industries Limited has strictly performed relevant commitments in share merger reform. 53 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 VIII. Engagement and dismission of accounting firms During the reporting period, the General Meeting of Shareholders 2007 was held on 28 Apr. 2008, at which engaged KPMG again to provide audit on financial statements in line with domestic accounting principles for the year 2008 and other related consultation services, and also Deloitte Touche Tohmatsu CPA Ltd again to provide audit the financial statements for the year of 2008 and other relevant consultation services;. Since 1994, KPMG has provided services in line with international accounting principles to the Company for 14 years. During the report period, the remuneration paid to accounting firms were as flows: RMB 3.9 million was paid to KPMG, including the audit expenses and traveling expenses for the year of 2007. IX. During the reporting period, there was no punishment imposed on the Company, the Board of Directors or directors by the regulatory departments. X. Events after the balance sheet date On 9 Jan. 2009, CIMC Vehicle (Group) Co., Ltd being the affiliated subsidiary of the CIMC, Wuhu Tederic Investment Co., Ltd (hereinafter referred to as “Tederic Investment”) and as Shenzhen Just Investment Co., Ltd (hereinafter referred to as “Just Investment”) reached agreement on planning to establish a joint venture C & C Truck Co., Ltd (hereinafter referred to as “C&C Truck”) with registered capital RMB 400 million, of which, CIMC Vehicle accounts for its 45%, Tederic Investment accounts for its 45%, Just Investment accounts for its 10%. The investment events was examined and approved by the 1st Meeting of the 5th Board of Director for the year 2009. The investment didn’t need approval from General Meeting of Shareholders but approval from relevant ministry. XI. Reception of visits, investigation and interviews of the Company During the reporting period, the Company received 52 batches of visitors for visiting, investigating and visiting plants by funds, investment companies, securities companies and individual investors etc. There was no disclosure, betraying unpublicized significant information to investment companies or individual investors. Reception Discussed content and materials Reception location Reception way Reception object time provided by the Company Including business development, developing trend of industry, marketing sales, production management, financial management, 4 Jan. 2008 The Company Tele-conference Pacific Eagle Assets Management Co., Ltd. research & development of products, project investment, developing strategy, prospect and corporate governance of the Company, etc. Meeting room of 10 Jan. 2008 Field research Industrial Securities Co., Ltd Ditto the Company Meeting room of 14 Jan. 2008 Field research Clients of Merrill Lynch Securities Ditto the Company Meeting room of CREDIT SUISSE Assets Management 17 Jan. 2008 Field research Ditto the Company (Singapore) Ltd 23 Feb. 2008 The Company Tele-conference FCM Advisor Ditto 25 Feb. 2008 The Company Tele-conference BOCI Ditto Meeting room of 25 Feb. 2008 Field research Goldman Sach (China) Co., Ltd and clients Ditto the Company Rongtong Fund Management Co., Ltd. Meeting room of 27 Feb. 2008 Field research Shanghai Boyi Investment Management Ditto the Company Co., Ltd Meeting room of 28 Feb. 2008 Field research CEPHEI INVESTMENTS Ditto the Company 54 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 Meeting room of 3 Mar. 2008 Field research Guosen Securities Co., Ltd Ditto the Company Meeting room of 6 Mar. 2008 Field research TY Advisers Ditto the Company Meeting room of 7 Mar. 2008 Field research Fidelity Fund Ditto the Company Meeting room of 12 Mar. 2008 Field research Dongguan Securities Ditto the Company Meeting room of 12 Mar. 2008 Field research Morgan Stanley Ditto the Company Meeting room of 18 Mar. 2008 Field research First-Trust Fund Management Co., Ltd Ditto the Company Meeting room of 28 Mar. 2008 Field research Pacific Sun Investment Co., Ltd Ditto the Company Meeting room of Ping An Securities Limited Ping An Asset 3 Apr. 2008 Field research Ditto the Company Management Co., Ltd Meeting room of 15 Apr. 2008 Field research MARTIX Alternative Asset Management Ditto the Company Meeting room of 16 Apr. 2008 Field research VALUE PARTNER Ditto the Company Investor’s 19 Apr. 2008 Dongguan communication United Securities Ditto meeting Meeting room of 14 May 2008 Field research Galaxy Securities Ditto the Company China Investment Forum held by CLSA in Shanghai, including RCM Asia Pacific Ltd., Investor’s Old Peak Ltd., Front Point Partners, USA 16 May 2008 Shanghai communication Ditto GE Asset Management, HIGHBRIDGE, meeting JANUS CAPITAL GROUP, Hua An Fund and Shanghai Securities 21 May 2008 The Company Tele-conference Citi Investment Research Ditto Meeting room of 2 May 2008 Field research Southern Fund Management Co., Ltd Ditto the Company Meeting room of 23 May 2008 Field research ALLIANCE BERNSTEIN Ditto the Company 27 May 2008 The Company Tele-conference Client of Goldman Sach Hong Kong, Nezu Ditto Meeting room of Visiting plants and SINOLINK Securities Research, Boshi fund 28 May 2008 Ditto the Company field research Management Co., Ltd Meeting room of 12 Jun. 2008 Field research Maverick (Shanghai) Ltd Ditto the Company Meeting room of 12 Jun. 2008 Field research Emerging Markets Management Ditto the Company Meeting room of 16 Jun. 2008 Field research Standard Pacific Capital Ditto the Company Meeting room of 17 Jun. 2008 Field research Credit Suisse Ditto the Company Meeting room of 27 Jun. 2008 Field research Shanghai Chongyang Investment Co., Ltd Ditto the Company 55 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 Meeting room of 2 Jul. 2008 Field research Merrill Lynch Securities Ditto the Company Meeting room of 17 Jul. 2008 Field research Citic Securities Co., Ltd Ditto the Company Meeting room of 25 Jul. 2008 Field research Tidemann Global Emerging Markets Ditto the Company Meeting room of 2 Sep. 2008 Field research Absolute Asia Ditto the Company Meeting room of 3 Sep. 2008 Field research HQ Bank . HQ Fonder Ditto the Company Meeting room of 5 Sep. 2008 Field research CVI Ditto the Company Meeting room of 9 Sep. 2008 Field research Platinum Asset Management Ditto the Company Meeting room of 19 Sep. 2008 Field research Gartmore Investment Management Ditto the Company Meeting room of 19 Sep. 2008 Field research Macquaire Capital Securities Ditto the Company Meeting room of 8 Oct. 2008 Field research Matterhorn Investment Management Ditto the Company Meeting room of 9 Oct. 2008 Field research Goldman Sach； Ditto the Company Meeting room of Hong Kong Pacific Investment Management 29 Oct. 2008 Field research Ditto the Company Company Investor’s Attendance of CLSA Conference for Hong 30 Oct. 2008 Hong Kong communication Ditto Kong small investors meeting Meeting room of GaoLing Oriental Investment Consulting 6 Nov. 2008 Field research Ditto the Company Co., Ltd Meeting room of 13 Nov. 2008 Field research CLSA Ditto the Company Meeting room of ICBC Credit Suisse Asset Management Co., 18 Nov. 2008 Field research Ditto the Company Ltd Clients of Beijing Goldman Sachs Gao Hua 19 Nov. 2008 The Company Tele-conference Ditto Securities Company Meeting room of 9 Dec. 2008 Field research Cazenove Asia Limited Ditto the Company Meeting room of GTJA Allianz Fund management Limited 24 Dec. 2008 Field research Ditto the Company Company XII. Other significant events (I) Proposal and termination of stock option incentive plan of CIMC The 5th Meeting of the 5th Board of Directors for the year 2008 was held on 28 Apr. 2008, at which examined and approved Stock Option Incentive Plan (Draft) of China International Marine Containers (Group) Co., Ltd. For details please referred to Public Notice on Resolutions of the 5th Meeting of the 5th Board of Directors of CIMC for the year 2008, which was published in Securities Times, China Securities Journal, Shanghai Securities News, Hong Kong Ta Kung Pao with announcement No. [CIMC] 2008-012 on 9 May. 2008. In view that the economic situation and securities market in domestic and the board changed significantly, the former plan was with non-practicality under this condition, it will not play an incentive effects if the 56 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 Company continued to carry out former plan. The Company held the 14th Meeting of the 5th Board of Directors for the year 2008 on 17 Oct. 2008, and the Board approved to terminate stock option incentive plan unless the condition is ripe. (II) Implementation on stock credit plan 1. As examined and approved by the General Meeting of Shareholders held on 17 Oct. 2007, CIMC Vehicle (Group) Co., Ltd, the wholly-owned subsidiary of the Company, implemented a stock credit plan. Based on the plan, senior executives of the Company relating to vehicle business and the core staff of CIMC Vehicle (Group) Co., Ltd. (hereinafter referred to as “Participating staff”), held 20% equity of CIMC Vehicle (Group) Co., Ltd by increasing capital amounting to RMB 220.70 million through Shenzhen International Trust and Credit Co., Ltd. The share holding plan by the backbone employees of Vehicle Group had been already implemented in 2007 through the establishment of Vehicle Group stock credit plan. The first installment benefit rights amounted to 45 million shares, taking up 20.39% of the total benefit rights. For details please referred to XI Other significant event of Significant event in Annual Report 2007. As of 31 Dec. 2008, the second and the third installment benefit rights of vehicle credit plan had not been distributed yet. 57 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 Section 11. Financial Report AUDITORS’ REPORT KPMG-C (2009) AR No.0075 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 2008, 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. Auditors’ 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 as to 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 auditors’ 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 auditors consider 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. 58 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 AUDITORS’ REPORT (CONTINUED) KPMG-C (2009) AR No.0075 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 2008, 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 Liang Jiebing 30 March 2009 59 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 China International Marine Containers (Group) Co., Ltd. Consolidated balance sheet as at 31 December 2008 Note 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Assets Current assets Cash at bank and on hand 7 454,451 3,101,353 418,175 3,054,432 Financial assets held for trading 8 56,643 386,553 126,550 924,340 Bills receivable 9 125,052 853,406 103,741 757,747 Accounts receivable 10 614,520 4,193,731 1,218,445 8,899,769 Prepayments 11 148,642 1,014,391 231,912 1,693,935 Interest receivable 12 353 2,412 684 4,997 Dividends receivable 13 1,581 10,792 291 2,125 Other receivables 14 129,552 884,116 157,067 1,147,246 Inventories 15 1,147,849 7,833,378 1,056,294 7,715,381 Non-current assets due within one year 16 18,766 128,064 13,021 95,109 Other current assets 17 60,105 410,183 117,030 854,808 Total current assets 2,757,514 18,818,379 3,443,210 25,149,889 ---------------- ---------------- ---------------- ---------------- Non-current assets Available-for-sale financial assets 18 185,308 1,264,613 568,664 4,153,636 Long-term receivables 19 73,545 501,903 27,196 198,643 Long-term equity investments 20 234,834 1,602,598 124,972 912,822 Investment property 21 11,612 79,244 6,713 49,031 Fixed assets 22 1,048,265 7,153,777 868,203 6,341,530 Construction in progress 23 138,263 943,560 94,946 693,507 Intangible assets 24 387,647 2,645,457 323,152 2,360,367 Goodwill 25 168,550 1,150,251 133,889 977,949 Long-term deferred expenses 26 5,746 39,210 4,913 35,890 Deferred tax assets 27 52,586 358,871 24,015 175,410 Total non-current assets 2,306,356 15,739,484 2,176,663 15,898,785 ---------------- ---------------- ---------------- ---------------- Total assets 5,063,870 34,557,863 5,619,873 41,048,674 The notes on pages 83 to 246 form part of these financial statements. 60 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 China International Marine Containers (Group) Co., Ltd. Consolidated balance sheet as at 31 December 2008 (continued) Note 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Liabilities and shareholders’ equity Current liabilities Short-term loans 30 323,352 2,206,688 369,179 2,696,559 Financial liabilities held for trading 31 59,997 409,443 46,327 338,379 Bills payable 32 148,504 1,013,448 345,679 2,524,909 Accounts payable 33 643,466 4,391,266 955,561 6,979,610 Advances from customers 34 100,810 687,964 72,613 530,379 Employee benefits payable 35 110,970 757,307 128,241 936,688 Taxes payable 5(3) 61,810 421,815 57,276 418,352 Interest payable 7,598 51,852 12,711 92,842 Dividends payable 36 4,756 32,456 1,408 10,285 Other payables 37 232,034 1,583,477 191,073 1,395,651 Provisions 38 83,970 573,046 85,749 626,327 Non-current liabilities due within one year 39 39,616 270,358 187,303 1,368,100 Total current liabilities 1,816,883 12,399,120 2,453,120 17,918,081 ---------------- ---------------- ---------------- ---------------- Non-current liabilities Long-term loans 40 959,530 6,548,215 610,924 4,462,309 Deferred income 41 3,031 20,685 1,586 11,587 Special payables 42 1,265 8,633 1,003 7,327 Provisions 38 6,064 41,383 - - Deferred tax liabilities 27 88,708 605,379 151,566 1,107,069 Total non-current liabilities 1,058,598 7,224,295 765,079 5,588,292 ---------------- ---------------- ---------------- ---------------- Total liabilities 2,875,481 19,623,415 3,218,199 23,506,373 ---------------- ---------------- ---------------- ---------------- The notes on pages 83 to 246 form part of these financial statements. 61 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 China International Marine Containers (Group) Co., Ltd. Consolidated balance sheet as at 31 December 2008 (continued) Note 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Liabilities and shareholders’ equity (continued) Shareholders’ equity Share capital 43 328,872 2,662,396 328,872 2,662,396 Capital reserve 44 186,386 1,352,772 455,603 3,553,473 Surplus reserve 45 434,170 3,577,588 422,695 3,497,045 Retained earnings 46 965,638 7,669,924 965,799 7,674,757 Translation differences of financial statements denominated in foreign currency 52,711 (1,833,779) 22,677 (1,473,914) Total equity attributable to shareholders of the Company 1,967,777 13,428,901 2,195,646 15,913,757 Minority interests 6(3) 220,612 1,505,547 206,028 1,628,544 Total equity 2,188,389 14,934,448 2,401,674 17,542,301 ---------------- ---------------- ---------------- ---------------- Total liabilities and shareholders’ equity 5,063,870 34,557,863 5,619,873 41,048,674 These financial statements have been approved by the Board of Directors of the Company on 30 March 2009. 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 83 to 246 form part of these financial statements. 62 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 China International Marine Containers (Group) Co., Ltd. Balance sheet as at 31 December 2008 Note 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Assets Current assets Cash at bank and on hand 7 63,031 430,150 126,931 927,131 Financial assets held for trading 8 - - 24,415 178,335 Dividends receivable 13 727,166 4,962,468 646,265 4,720,452 Other receivables 14 723,136 4,934,969 446,112 3,258,492 Total current assets 1,513,333 10,327,587 1,243,723 9,084,410 ---------------- ---------------- ---------------- ---------------- Non-current assets Available-for-sale financial asset 18 181,694 1,239,956 568,664 4,153,636 Long-term equity investments 20 372,446 2,541,719 317,867 2,321,766 Fixed assets 22 19,190 130,957 17,732 129,515 Construction in progress 23 976 6,662 2,094 15,294 Intangible assets 24 4,834 32,990 4,944 36,108 Long-term deferred expenses 26 1,492 10,184 1,016 7,421 Total non-current assets 580,632 3,962,468 912,317 6,663,740 ---------------- ---------------- ---------------- ---------------- Total assets 2,093,965 14,290,055 2,156,040 15,748,150 The notes on pages 83 to 246 form part of these financial statements. 63 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 China International Marine Containers (Group) Co., Ltd. Balance sheet as at 31 December 2008 (continued) Note 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Liabilities and shareholders’ equity Current liabilities Short-term loans 30 14,653 100,000 - - Financial liabilities held for trading 31 30,055 205,109 3,217 23,499 Advances from customers 34 - - 395 2,887 Employee benefits payable 35 35,360 241,309 44,825 327,412 Taxes payable 5(3) 20,787 141,860 14,215 103,829 Interest payable 1,082 7,385 2,346 17,136 Other payables 37 20,669 141,048 11,063 80,806 Non-current liabilities due within one year 39 25,578 174,557 173,339 1,266,100 Total current liabilities 148,184 1,011,268 249,400 1,821,669 ---------------- ---------------- ---------------- ---------------- Non-current liabilities Long-term loans 40 879,629 6,002,938 435,042 3,177,637 Deferred income 41 - - 725 5,295 Deferred tax liabilities 27 18,035 123,081 94,281 688,647 Total non-current liabilities 897,664 6,126,019 530,048 3,871,579 ---------------- ---------------- ---------------- ---------------- Total liabilities 1,045,848 7,137,287 779,448 5,693,248 ---------------- ---------------- ---------------- ---------------- The notes on pages 83 to 246 form part of these financial statements. 64 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 China International Marine Containers (Group) Co., Ltd. Balance sheet as at 31 December 2008 (continued) Note 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Liabilities and shareholders’ equity (continued) Shareholders’ equity Share capital 43 328,872 2,662,396 328,872 2,662,396 Capital reserve 44 152,476 1,118,064 431,133 3,376,580 Surplus reserve 45 434,170 3,577,588 422,695 3,497,045 Retained earnings 46 132,599 1,064,613 193,892 1,493,044 Translation differences of financial statements denominated in foreign currency - (1,269,893) - (974,163) Total equity 1,048,117 7,152,768 1,376,592 10,054,902 ---------------- ---------------- ---------------- ---------------- Total liabilities and shareholders equity 2,093,965 14,290,055 2,156,040 15,748,150 These financial statements have been approved by the Board of Directors of the Company on 30 March 2009. 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 83 to 246 form part of these financial statements. 65 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 China International Marine Containers (Group) Co., Ltd. Consolidated income statement for the year ended 31 December 2008 Note 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Operating income 47 6,830,023 47,327,281 6,439,793 48,760,826 Less: Operating costs 6,043,005 41,873,791 5,785,095 43,803,581 Business taxes and surcharges 48 4,039 27,989 7,346 55,621 Selling and distribution expenses 155,813 1,079,678 152,255 1,152,846 General and administrative expenses 239,777 1,661,486 211,056 1,598,083 Financial expenses 49 28,247 195,734 49,091 371,704 Impairment loss 50 101,331 702,151 8,262 62,556 Losses / (Gains) from changes in fair value 51 63,171 437,729 (36,278) (274,684) Add: Investment income 52 60,361 418,256 193,649 1,466,268 (Including: Income from investment in associates and jointly controlled enterprises) 9,063 62,799 16,638 126,978 Operating profit 255,001 1,766,979 456,615 3,457,387 Add: Non-operating income 53 29,617 205,224 7,896 59,786 Less: Non-operating expenses 54 6,519 45,174 2,228 16,869 (Including: Losses from disposal of non-current assets) 2,746 19,027 283 2,143 Profit before income tax 278,099 1,927,029 462,283 3,500,304 Less: Income tax expenses 55 34,899 241,824 23,073 174,698 Net profit for the year 243,200 1,685,205 439,210 3,325,606 The notes on pages 83 to 246 form part of these financial statements. 66 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 China International Marine Containers (Group) Co., Ltd. Consolidated income statement for the year ended 31 December 2008 Note 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Net profit for the year 243,200 1,685,205 439,210 3,325,606 Attributable to: Shareholders of the Company 203,038 1,406,908 418,048 3,165,373 Minority shareholders 40,162 278,297 21,162 160,233 Earnings per share 66 Basic earnings per share (RMB) 0.08 0.53 0.16 1.19 Diluted earnings per share (RMB) 0.08 0.53 0.16 1.19 These financial statements have been approved by the Board of Directors of the Company on 30 March 2009. 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 83 to 246 form part of these financial statements. 67 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 China International Marine Containers (Group) Co., Ltd. Income statement for the year ended 31 December 2008 Note 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Operating income 19 129 14 109 Less: Operating costs 2 16 1 6 General and administrative expenses 12,706 88,037 49,473 374,597 (Net financial income) / Financial expenses 49 (41,825) (289,818) 120 908 Add: (Losses) / Gains from changes in fair value 51 (38,332) (265,612) 10,192 77,168 Investment income 52 143,996 997,790 201,520 1,525,866 Operating profit 134,800 934,072 162,132 1,227,632 Add: Non-operating income 53 15,674 108,610 787 5,958 Less: Non-operating expenses 54 1,829 12,677 109 822 (Including: (Losses) / Gain from disposal of non-current assets) (7) (46) 15 114 Profit before income tax 148,645 1,030,005 162,810 1,232,768 Less: Income tax expenses 55 6,739 46,695 (537) (4,061) Net profit for the year 141,906 983,310 163,347 1,236,829 These financial statements have been approved by the Board of Directors of the Company on 30 March 2009. 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 83 to 246 form part of these financial statements. 68 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 China International Marine Containers (Group) Co., Ltd. Consolidated cash flow statement for the year ended 31 December 2008 Note 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Cash flows from operating activities: Cash received from sale of goods and rendering of services 8,691,639 60,226,974 5,610,980 42,485,218 Refund of taxes 276,815 1,918,134 304,253 2,303,743 Other cash received relating to operating activities 64,387 446,157 70,701 535,320 Sub-total of cash inflows 9,032,841 62,591,265 5,985,934 45,324,281 ---------------- ---------------- ---------------- ---------------- Cash paid for goods and services 7,768,947 52,833,364 5,492,044 41,584,656 Cash paid to and for employees 438,069 3,035,883 326,077 2,468,990 Cash paid for all types of taxes 86,276 597,832 64,624 489,320 Other cash paid relating to operating activities 253,654 1,757,648 246,555 1,866,864 Sub-total of cash outflows 8,546,946 59,224,727 6,129,300 46,409,830 ---------------- ---------------- ---------------- ---------------- Net cash inflow / (outflow) from operating activities 56(1) 485,895 3,366,538 (143,366) (1,085,549) ---------------- ---------------- ---------------- ---------------- The notes on pages 83 to 246 form part of these financial statements. 69 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 China International Marine Containers (Group) Co., Ltd. Consolidated cash flow statement for the year ended 31 December 2008 (continued) Note 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Cash flows from investing activities: Cash received from disposal of investments 154,347 1,069,517 158,701 1,201,652 Cash received from return on investments 13,248 91,799 5,307 40,184 Net cash received from disposal of fixed assets, intangible assets and other long-term assets 18,281 126,675 21,414 162,143 Cash received from disposal of subsidiaries 14,431 100,000 23,697 179,429 Other cash received relating to investing activities 19,551 135,475 5,999 45,423 Sub-total of cash inflows 219,858 1,523,466 215,118 1,628,831 --------------- --------------- --------------- --------------- Cash paid for acquisition of fixed assets, intangible assets and other long-term assets 343,839 2,382,564 266,193 2,008,993 Cash paid for acquisition of investments 221,194 1,532,720 86,319 653,590 Cash paid for acquisition of subsidiaries 56(4) 19,815 135,309 235,477 1,789,548 Other cash paid relating to investing activities - - 23,107 174,962 Sub-total of cash outflows 584,848 4,050,593 611,096 4,627,093 --------------- --------------- --------------- --------------- Net cash outflow from investing activities (364,990) (2,527,127) (395,978) (2,998,262) --------------- --------------- --------------- --------------- The notes on pages 83 to 246 form part of these financial statements. 70 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 China International Marine Containers (Group) Co., Ltd. Consolidated cash flow statement for the year ended 31 December 2008 (continued) Note 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Cash flows from financing activities: Cash received from investors 2,525 17,496 53,751 406,992 (Including: Cash received from minority shareholders of subsidiaries) 2,525 17,496 35,648 269,916 Cash received from borrowings 2,422,348 16,785,176 3,097,622 23,454,574 Sub-total of cash inflows 2,424,873 16,802,672 3,151,373 23,861,566 --------------- --------------- --------------- --------------- Cash repayments of borrowings 2,270,106 15,730,246 2,266,460 17,161,182 Cash paid for dividends, profits distribution or interest 293,114 2,031,075 165,435 1,252,642 (Including: Dividends and profits paid to minority shareholders of subsidiaries) 6,525 45,214 3,972 30,075 Sub-total of cash outflows 2,563,220 17,761,321 2,431,895 18,413,824 --------------- --------------- --------------- --------------- Net cash (outflow) / inflow from financing activities (138,347) (958,649) 719,478 5,447,742 --------------- --------------- --------------- --------------- Effect of foreign exchange rate changes on cash and cash equivalents 18,160 (73,935) (17,050) (297,832) --------------- --------------- --------------- --------------- Net increase / (decrease) in cash and cash equivalents 718 (193,173) 163,084 1,066,099 Add: Cash and cash equivalents at the beginning of the year 412,824 3,015,348 249,740 1,949,249 Cash and cash equivalents at the end of the year 56(3) 413,542 2,822,175 412,824 3,015,348 These financial statements have been approved by the Board of Directors of the Company on 30 March 2009. 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 83 to 246 form part of these financial statements. 71 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 China International Marine Containers (Group) Co., Ltd. Cash flow statement for the year ended 31 December 2008 Note 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Cash flows from operating activities: Other cash received relating to operating activities 7,197,743 49,875,314 6,186,030 46,839,375 Sub-total of cash inflows 7,197,743 49,875,314 6,186,030 46,839,375 --------------- --------------- --------------- --------------- Cash paid to and for employees 11,724 80,948 44,850 339,595 Cash paid for all types of taxes 7,624 52,829 154 1,166 Other cash paid relating to operating activities 7,461,972 51,706,248 6,573,453 49,772,871 Sub-total of cash outflows 7,481,320 51,840,025 6,618,457 50,113,632 --------------- --------------- --------------- --------------- Net cash outflow from operating activities 56(1) (283,577) (1,964,711) (432,427) (3,274,257) --------------- --------------- --------------- --------------- The notes on pages 83 to 246 form part of these financial statements. 72 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 China International Marine Containers (Group) Co., Ltd. Cash flow statement for the year ended 31 December 2008 (continued) Note 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Cash flows from investing activities: Cash received from disposal of investments 145,422 1,007,673 297,001 2,248,832 Cash received from return on investments 23,008 159,429 14,306 108,322 Net cash received from disposal of fixed assets, intangible assets and other long-term assets 7 51 266 2,014 Other cash received relating to investing activities 60,909 422,060 13,809 104,559 Sub-total of cash inflows 229,346 1,589,213 325,382 2,463,727 --------------- --------------- --------------- --------------- Cash paid for acquisition of fixed assets, intangible assets and other long-term assets 8,086 56,030 5,354 40,539 Cash paid for acquisition of investments 81,113 562,056 227,784 1,724,735 Sub-total of cash outflows 89,199 618,086 233,138 1,765,274 --------------- --------------- --------------- --------------- Net cash inflow from investing activities 140,147 971,127 92,244 698,453 --------------- --------------- --------------- --------------- The notes on pages 83 to 246 form part of these financial statements. 73 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 China International Marine Containers (Group) Co., Ltd. Cash flow statement for the year ended 31 December 2008 (continued) Note 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Cash flows from financing activities: Cash received from borrowings 573,472 3,973,760 677,286 5,128,274 Sub-total of cash inflows 573,472 3,973,760 677,286 5,128,274 --------------- --------------- --------------- --------------- Cash repayments of borrowings 261,993 1,815,428 136,784 1,035,701 Cash paid for dividends, profits distribution or interest 231,949 1,607,244 132,643 1,004,346 Sub-total of cash outflows 493,942 3,422,672 269,427 2,040,047 --------------- --------------- --------------- --------------- Net cash inflow from financing activities 79,530 551,088 407,859 3,088,227 --------------- --------------- --------------- --------------- Effect of foreign exchange rate changes on cash and cash equivalents - (54,485) - (47,785) --------------- --------------- --------------- --------------- Net (decrease) / increase in cash and cash equivalents (63,900) (496,981) 67,676 464,638 Add: cash and cash equivalents at the beginning of the year 126,931 927,131 59,255 462,493 Cash and cash equivalents at the end of the year 56(3) 63,031 430,150 126,931 927,131 These financial statements have been approved by the Board of Directors of the Company on 30 March 2009. 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 83 to 246 form part of these financial statements. 74 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 China International Marine Containers (Group) Co., Ltd. Consolidated statement of changes in shareholder’s equity for the year ended 31 December 2008 Attributable to shareholders of the Company Foreign Note Share Capital Surplus Retained currency Minority capital reserve reserve earnings exch. diff Subtotal interests Total USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 Balance at 1 January 2008 328,872 455,603 422,695 965,799 22,677 2,195,646 206,028 2,401,674 Changes in equity for the year 1. Net profit for the year - - - 203,038 - 203,038 40,162 243,200 2. Gains and losses recognised directly in equity 44 - Net changes in fair value of available-for- sale financial assets - (356,838) - - - (356,838) - (356,838) - Effective portion of changes in fair value of cash flow hedges - (1,752) - - - (1,752) - (1,752) - Deferred tax effect - 77,790 - - - 77,790 - 77,790 - Others - 3,134 - - 30,034 33,168 10,166 43,334 Sub-total of 1&2 - (277,666) - 203,038 30,034 (44,594) 50,328 (5,734) ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- 3. Shareholders’ contributions and decrease of capital - Contributions by minority shareholders - - - - - - 2,525 2,525 - Acquisition of minority interest - 8,449 - - - 8,449 (56,867) (48,418) - Increase in minority interest resulted from acquisition of subsidiary - - - - - - 14,994 14,994 - Increase in minority interest resulted from the transfer of associate to subsidiary - - - - - - 13,477 13,477 4. Appropriation of profits 46 - Appropriation for - - 11,475 (11,475) - - - - surplus reserve - Distributions to shareholders - - - (191,724) - (191,724) (9,873) (201,597) Balance at 31 December 2008 328,872 186,386 434,170 965,638 52,711 1,967,777 220,612 2,188,389 These financial statements have been approved by the Board of Directors of the Company on 30 March 2009. 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 83 to 246 form part of these financial statements. 75 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 China International Marine Containers (Group) Co., Ltd. Consolidated statement of changes in shareholder’s equity for the year ended 31 December 2007 Attributable to equity shareholders of the Company Foreign Note Share Capital Surplus Retained currency Minority capital reserve Reserve earnings exch. diff Subtotal interests Total USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 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. Gains and losses 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 30 March 2009. 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 83 to 246 form part of these financial statements. 76 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 China International Marine Containers (Group) Co., Ltd. Consolidated statement of changes in shareholder’s equity for the year ended 31 December 2008 (continued) Attributable to equity shareholders of the Company Foreign Note Share Capital Surplus Retained currency Minority capital reserve reserve earnings exch. reserve Subtotal interests Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Balance at 1 January 2008 2,662,396 3,553,473 3,497,045 7,674,757 (1,473,914) 15,913,757 1,628,544 17,542,301 Changes in equity for the year 1. Net profit for the year - - - 1,406,908 - 1,406,908 278,297 1,685,205 2. Gains and losses recognised directly in equity 44 - Net changes in fair value of available-for-sale financial assets - (2,868,727) - - - (2,868,727) - (2,868,727) - Effective portion of changes in fair value of cash flow hedges (16,669) - - (16,669) - (16,669) - Deferred tax effect - 605,371 - - - 605,371 - 605,371 - Others - 21,668 - - (359,865) (338,197) (153,608) (491,805) Sub-total of 1&2 - (2,258,357) - 1,406,908 (359,865) (1,211,314) 124,689 (1,086,625) ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- 3. Shareholders’ contributions and decrease of capital - Contributions by minority shareholders - - - - - - 17,496 17,496 - Acquisition of minority interest - 57,656 - - - 57,656 (394,046) (336,390) - Increase in minority interest resulted from acquisition of subsidiary - - - - - - 103,890 103,890 - Increase in minority Interest resulted from the transfer associate to subsidiary - - - - - - 93,387 93,387 4. Appropriation of profits 46 - Appropriation for surplus reserve - - 80,543 (80,543) - - - - - Distributions to shareholders - - - (1,331,198) - (1,331,198) (68,413) (1,399,611) Balance at 31 December 2008 2,662,396 1,352,772 3,577,588 7,669,924 (1,833,779) 13,428,901 1,505,547 14,934,448 These financial statements have been approved by the Board of Directors of the Company on 30 March 2009. 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 83 to 246 form part of these financial statements. 77 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 China International Marine Containers (Group) Co., Ltd. Consolidated statement of changes in shareholder’s equity for the year ended 31 December 2007 (continued) Attributable to equity shareholders of the Company Foreign Note Share Capital Surplus Retained currency Minority capital reserve reserve earnings exch. reserve Subtotal interests Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 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. Gains and losses 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 30 March 2009. 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 83 to 246 form part of these financial statements. 78 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 China International Marine Containers (Group) Co., Ltd. Statement of changes in shareholder’s equity for the year ended 31 December 2008 Note Share Capital Surplus Retained capital reserve reserve earnings Total USD’000 USD’000 USD’000 USD’000 USD’000 Balance at 1 January 2008 328,872 431,133 422,695 193,892 1,376,592 Changes in equity for the year 1. Net profit for the year - - - 141,906 141,906 2. Gains and losses recognised directly in equity 44 - Net changes in fair value of available-for-sale financial assets - (348,321) - - (348,321) - Deferred tax effect - 69,664 - - 69,664 Sub-total of 1&2 - (278,657) - 141,906 (136,751) ---------------- ---------------- ---------------- ---------------- ---------------- 3 Appropriation of profits 46 - Appropriation for for surplus reserve - - 11,475 (11,475) - - Distributions to shareholders - - - (191,724) (191,724) Balance at 31 December 2008 328,872 152,476 434,170 132,599 1,048,117 These financial statements have been approved by the Board of Directors of the Company on 30 March 2009. 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 83 to 246 form part of these financial statements. 79 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 China International Marine Containers (Group) Co., Ltd. Statement of changes in shareholder’s equity for the year ended 31 December 2007 Foreign Note Share Capital Surplus Retained currency capital reserve reserve earnings exch. diff Total USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 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. Gains and losses 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 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 30 March 2009. 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 83 to 246 form part of these financial statements. 80 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 China International Marine Containers (Group) Co., Ltd. Statement of changes in shareholder’s equity for the year ended 31 December 2008 (continued) Foreign Note Share Capital Surplus Retained currency capital reserve reserve earnings exch. reserve Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Balance at 1 January 2008 2,662,396 3,376,580 3,497,045 1,493,044 (974,163) 10,054,902 Changes in equity for the year 1. Net profit for the year - - - 983,310 - 983,310 2. Gains and losses recognised directly in equity 44 - Net changes in fair value of available-for-sale financial assets - (2,814,200) - - - (2,814,200) - Deferred tax effect - 555,684 - - - 555,684 - Others - - - - (295,730) (295,730) Sub-total of 1&2 - (2,258,516) - 983,310 (295,730) (1,570,936) --------------- --------------- --------------- --------------- --------------- --------------- 3. Appropriation of profits 46 - Appropriation for surplus reserve - - 80,543 (80,543) - - - Distributions to shareholders - - - (1,331,198) - (1,331,198) Balance at 31 December 2008 2,662,396 1,118,064 3,577,588 1,064,613 (1,269,893) 7,152,768 These financial statements have been approved by the Board of Directors of the Company on 30 March 2009. 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 83 to 246 form part of these financial statements. 81 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 China International Marine Containers (Group) Co., Ltd. Statement of changes in shareholder’s equity for the year ended 31 December 2008 (continued) Foreign Note Share Capital Surplus Retained currency capital reserve reserve earnings exch. reserve Tota RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000l 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. Gains and losses 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 - 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 30 March 2009. 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 83 to 246 form part of these financial statements. 82 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 China International Marine Containers (Group) Co., Ltd. Notes to the financial statements (Expressed in thousands of USD or RMB) 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 by “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 Company was organized and restructured as a stock company set up by directional subscription and was renamed as “China International Marine Containers Co., Ltd” by the original legal representative of the shareholders for the Company. The Company issued ordinary shares denominated in Renminbi for domestic (A Shares) and for foreign investors (B Shares) and commenced trading on Shenzhen Stock Exchange on 31 December 1993 and 17 January 1994 respectively pursuant to “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. 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 2008, 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 principal activities of the Company and its subsidiaries (together referred to as the “Group”) are the manufacturing and repairing of containers and other relevant business; utilizing the Group’s equipment 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; leasing of containers; developing, production and sales of high-end fuel gas equipments such as pressure container and compressor; providing integrated services for natural gas distribution; production of static container and pot-type wharf equipments and offering the client EP+CS (engineering procurement and construction supervision) technical service for the storage and processing of LNG, LPG and other petrochemical gases. 83 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 2 BASIS OF PREPARATION (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 Company. 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” as 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 Renminbi (“RMB”) and Hong Kong and certain oversea subsidiaries use local currencies as their functional currencies. Foreign currencies are defined as currency other than functional currency. 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 in both U.S dollars and RMB. For subsidiaries using currencies other than U.S dollars as their functional currencies, the Company translates the financial statements of these subsidiaries into U.S dollars (see Note 3(2)). 84 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 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 combined 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 one combining enterprise effectively obtains control of the other combining enterprises. (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 acquirer is the aggregate of the fair value at the acquisition date of assets given, liabilities incurred or assumed, and equity securities issued by the acquirer, 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 acquirer effectively obtains control of the acquiree. The acquirer, 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 acquirer’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 acquirer’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 operating 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. 85 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (1) Business combination and consolidated financial statements (continued) (c) Consolidated financial statements (continued) Where a subsidiary was acquired 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 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 amount from the date that common control was established. Where a subsidiary was acquired 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. Where the Company acquired a minority interest from a subsidiary’s minority shareholders, the difference between the investment cost for acquiring the minority interest and the corresponding reduction of minority interest in the consolidated financial statements, is adjusted to the capital reserve in the consolidated balance sheet. If the credit balance of capital reserve is insufficient, any excess is adjusted to retained earnings. Where the Company acquired a minority interest from a subsidiary’s minority shareholders before 7 August 2008, any excess of the investment cost for acquiring the minority interest over the Group’s interest in the fair value of the identifiable net assets of the minority interest acquired is recognised as goodwill. Where the Company acquired a minority interest from a subsidiary’s minority shareholders, the difference between the investment cost for acquiring the minority interest and the corresponding reduction of minority interest in the consolidated financial statements, is adjusted to the capital reserve in the consolidated balance sheet except for the portion that has been recognised as goodwill. If the credit balance of capital reserve is insufficient, any excess is adjusted to retained earnings. Minority interest is presented separately in the consolidated balance sheet within shareholders’ equity. Net profit or loss attributable to minority shareholders is presented separately in the consolidated income statement below the net profit line item. 86 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (1) Business combination and consolidated financial statements (continued) (c) Consolidated financial statements (continued) Where losses attributable to the minority shareholders of a subsidiary exceeds the minority shareholders’ interest in 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 unrealised gains but only to the extent that there is no evidence of impairment. (2) Translation of foreign currencies When the Group receives capital in foreign currencies from investors, the capital is translated to functional currency at the spot exchange rate at the date of the receipt. Other foreign currency transactions are, on initial recognition, translated to functional currency at the spot exchange rates at 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 functional currency at the spot exchange rate 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(19)). Non-monetary items denominated in foreign currencies that are measured at historical cost are translated to functional currency 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. 87 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (2) Translation of foreign currencies (continued) The assets and liabilities of foreign operation are translated to functional currency at the spot exchange rates at the balance sheet date. The equity items, excluding “Retained earning”, are translated to functional currency at the spot exchange rates at the transaction dates. The income and expenses of foreign operation are translated to functional currency at the spot exchange rates at 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 relates 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(19)). 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. 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 include low-value consumables, packaging materials and other materials, which can be used repeatedly but do not meet the definition of fixed assets. Reusable 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. 88 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (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(13)(c)) 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 Company’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 shareholders. (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 (see Note 3(11). At year-end, the Group makes provision for impairment loss of investments in jointly controlled enterprises and associates (see Note 3(13)(c)). 89 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (5) Long-term equity investments (continued) (b) Investment in jointly controlled enterprises and associates (continued) 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 date 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 date 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. - 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 the period 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 identifiable net assets at the date of acquisition. Unrealised profits and losses resulting from transactions between the Group and its associates or jointly controlled enterprises are eliminated to the extent of the Group’s interest in 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 unrealised gains but only to the extent that there is no evidence of impairment. 90 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (5) Long-term equity investments (continued) (b) Investment in jointly controlled enterprises and associates (continued) - 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 equals the share of losses not recognised. (c) Other long-term equity investments Other long-term equity investments refer to investments where the Group does not have control, joint control or significant influence over the investees, and 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(13)(b)). (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, amortisation and impairment loss (see Note 3(13)(c)). Investment property is depreciated or amortised using the straight line method over its estimated useful life, unless the investment property is classified as held for sale (see Note 3(11)). Depreciation Estimated Estimated / Amortisation useful life residual value rate Land use rights 29 - 50 years - 2% - 3.4% Plant and buildings 20 - 30 years 10% 3 - 4.5% (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. 91 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (7) Fixed assets and construction in progress (continued) Fixed assets are stated in the balance sheet at cost less accumulated depreciation and impairment losses (see Note 3(13(c))). Construction in progress is stated in the balance sheet at cost less impairment losses (see Note 3(13)(c)). 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(19)), 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 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, each part is 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 unless the fixed asset is classified as held for (see Note 3(11)). 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. Fixed assets are depreciated using the straight-line method over their estimated useful lives, unless the fixed asset is classified as held for sale (see Note 3(11)). 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% Motor vehicles 5 years 10% 18% Electronic and other equipment 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. 92 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (8) Leases (continued) (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(13)(a)) The unguaranteed residual values are reviewed 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. (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, except for investment property (see Note 3(6)) 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(13)(c). 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. 93 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (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(13)(c)). 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 that can reflect the pattern in which the asset’s economic benefits are expected to be realized over its estimated useful life, unless the intangible asset is classified as held for sale (see Note 3(11)). The respective amortisation periods for such intangible assets are as follows: Estimated useful lives Land use rights 29 - 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. 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(13)(c)). 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 acquirer’s interest in the fair value of the identifiable net assets of the acquiree under the business combination involving entities not under common control. 94 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (10) Goodwill (continued) Where the Company acquired a minority interest from a subsidiary’s minority shareholders before 7 August 2008, goodwill is recognised with reference to the excess of the investment cost for acquiring the minority interest over the Group’s interest in the fair value of the identifiable net asset of the minority interest acquired. Goodwill is not amortised and is stated at cost less accumulated impairment losses (see Note 3(13)(c)). On disposal of an asset group or a set of asset groups, any attributable amount of purchased goodwill is written off and included in the calculation of the profit or loss on disposal. (11) Non-current assets held for sale A non-current asset is classified as held for sale when the Group has made a decision and signed a non-cancellable agreement on the transfer of the asset with the transferee, and the transfer is expected to be completed within one year. Such non-current assets may be fixed assets, intangible assets, investment property subsequently measured using the cost model, long-term equity investment etc. but not include deferred tax assets. Non-current assets held for sale are stated at the lower of carrying amount and net realisable value. Any excess of the carrying amount over the net realisable value is recognized as impairment loss. At balance sheet date, non-current assets held for sale are still presented under corresponding asset classification as they were. (12) Financial instruments Financial instruments comprise cash at bank and on hand, investments in debt and equity securities other than long-term equity investments (see Note 3(5)), 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. 95 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (12) Financial instruments (continued) (a) Recognition and measurement of financial assets and financial liabilities (continued) 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 the derivative is a designated and effective hedging instrument, or a financial guarantee contract. 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. - 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. 96 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (12) Financial instruments (continued) (a) Recognition and measurement of financial assets and financial liabilities (continued) - Available-for-sale financial assets (continued) Other than 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 profit or loss, 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. Dividend income from these equity instruments is recognised in profit or loss when the investee declares the dividends. - Other financial liabilities Financial liabilities other than the financial liabilities at fair value through profit or loss are classified as other financial liabilities. Other financial liabilities include the liabilities arising from financial guarantee contracts. 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(16)). Except for the liabilities arising from financial guarantee contracts described above, subsequent to initial recognition, other financial liabilities are measured at amortised cost using the effective interest method. (b) 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. 97 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (12) Financial instruments (continued) (b) Determination of fair values (continued) 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. (c) 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 include a forecast transaction that is settled with a fixed amount of foreign currency and expose the Group to foreign currency risk. 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. 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. 98 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (12) Financial instruments (continued) (c) Hedge accounting (continued) - Cash flow hedges (continued) 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. 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. In this case, the gain or loss on the hedging instrument that remains recognised directly in shareholders’ equity from the period when the hedge was effective shall not be reclassified into profit or loss and is recognised in accordance with the above policy when the forecast transaction occurs. 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. (d) 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. 99 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (12) Financial instruments (continued) (d) Derecognition of financial assets and financial liabilities (continued) Where a transfer of a financial asset in its entirety 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 equity. The Group derecognises a financial liability (or part of it) only when the underlying present obligation (or part of it) is discharged. (e) 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 self-issued equity instruments are deducted from shareholders’ equity. (13) Impairment of financial assets and non-financial long-term assets (a) 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. 100 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (13) Impairment of financial assets and non-financial long-term assets (continued) (a) Impairment of financial assets (continued) - Receivables (continued) 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 observable figures reflecting present economic conditions. If, after an impairment loss has been recognised on receivables, there is objective evidence of a recovery in value of the financial asset which can be related objectively to an event occurring after the impairment was recognised, the previously recognised 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 Available-for-sale financial assets 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. (b) Impairment of other long-term equity investments Other long-term equity investments (see Note 3(5)(c)) are assessed for impairment on an individual basis. For other long-term equity investments, 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. 101 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (13) Impairment of financial assets and non-financial long-term assets (continued) (c) Impairment of other 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 - long-term equity investments in subsidiaries, associates and jointly controlled entities If any indication exists that an asset may be impaired, the recoverable amount of the asset is estimated. In addition, the Group estimates the recoverable amounts of goodwill at no later than 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 set 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. 102 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (13) Impairment of financial assets and non-financial long-term assets (continued) (c) Impairment of other non-financial long-term assets (continued) If the result of the recoverable amount calculating indicates the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is recognised as an impairment loss and charged to profit or loss for the current period. A provision for impairment loss of the asset is recognised accordingly. For 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. Once an impairment loss is recognised, it is not reversed in a subsequent period. (14) Employee benefits Employee benefits are all forms of considerations given and other relevant 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. (a) Pension benefits Pursuant to the relevant laws and regulations of the PRC, the Group has joined a basic pension insurance for the employees arranged by local Labour and Social Security Bureaus. The Group makes contributions to the pension insurance 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 pension 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 pension 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. 103 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (4) Employee benefits (continued) (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. (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. (15) 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. 104 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (15) Income tax (continued) At the balance sheet date, current tax assets and liabilities are offset if the taxable entity has a legally enforceable right to set off them and the entity intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. 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 carry forward 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 recovery 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 recovered or the liability is settled in accordance with tax laws. At the balance sheet date, deferred tax assets and liabilities are offset if all the following conditions are met: - the taxable entity has a legally enforceable right to set off current tax assets against current tax liabilities, and - they relate to income taxes levied by the same tax authority on either: - the same taxable entity; or - different taxable entities which either to intend to settle the current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered. (16) Provision and contingent liabilities A provision is recognised for an obligation related to a contingency if, 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. 105 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (16) Provision and contingent liabilities (continued) 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. (17) 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 At the balance sheet date, where 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 At the balance sheet date, where 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. 106 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (17) Revenue recognition (continued) (c) Revenue from construction contracts At the balance sheet date, where the outcome of a construction contract can be estimated reliably, contract revenue and contract expenses associated with the construction contract are recognised at the balance sheet date using the percentage of completion method. The stage of completion of a contract is determined based on the proportion of the physical construction work completed to the total estimated construction work. When the outcome of a construction contract cannot be estimated reliably: - If the contract costs can be recovered, revenue is recognised to the extent of contract costs incurred that can be recovered, and the contract costs are recognised as contract expenses when incurred; - If the contract costs can not be recovered, the contract costs are recognised as contract expenses immediately when incurred, and no contract revenue is recognised. (d) Interest income Interest income is recognised on a time proportion basis with reference to the principal outstanding and the applicable effective interest rate. (18) 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 an investor in 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 attaching to 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. 107 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (19) 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. During 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 initially recognised 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. 108 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (20) 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. (21) Related parties If a party has the power to control, jointly control or exercise significant influence over another party, or vice versa, or where two 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. Related parties of the Group and the Company 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 or exercise significant influence over the Group; (e) enterprises or individuals if a party has control, joint control or significant influence over both the enterprises or individuals and 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 or persons that act in concert that hold 5% or more of the Company’s shares; (n) individuals and close family members of such individuals who directly or indirectly hold 5% or more of the Company’s shares; 109 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (21) Related parties (continued) (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; (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 an individual assumes the position of a director or senior executive. (22) 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. 110 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (23) 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, 57 and 59 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(13)(a), 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(13)(c), 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. 111 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (23) Significant accounting estimates and judgments (continued) (c) Depreciation and amortisation As described in Note 3(6) and (7), (9) investment property, fixed assets and intangible assets are depreciated and amortised using the straight-line method over their useful lives after taking into account residual value. The useful lives are regularly reviewed to determine the depreciation and amortisation costs charged in each reporting period. The 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) Impairment of inventories As described in Note 3(4), inventories are carried at the lower of cost and net realisable value. 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. For inventories with committed sales orders or active market, the Group estimates the new realisable value with reference to the selling prices set out in the committed sales orders or in the active market. For inventories without committed sales orders or active market, the Group carefully estimates the new realisable value based on available information and reasonable and supportive assumptions on expected selling prices, manufacturing costs, selling expenses, sales tax and etc. 112 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 3 SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES (CONTINUED) (22) Significant accounting estimates and judgments (continued) (f) 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. (g) Construction contract As described in Note 3(17)(c), contract revenue and contract income are recognised based on the stage of completion of a contract which is determined with reference to the proportion of the physical construction work completed to the total estimated construction work. Where a contract is completed substantially and its contract revenue and contract expenses to completion can be reliably measured, the Group estimates contract revenue and contract expenses with reference to it recent construction experience and the nature of the construction contracts. For a contract that is not completed substantially, contract revenue that should be recognised based on its stage of completion, is not recognised and disclosed in the financial statements. Therefore, at the balance sheet date, actual total contract revenue and total contract cost may be higher or lower than the estimated total contract revenue and total contract cost and any change of estimated total contract revenue and total contract cost may have financial impact on future profit or loss. (h) 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. 113 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 4 CHANGES IN ACCOUNTING POLICIES (1) Changes in accounting policies and their effects (a) Description of and reasons for changes in accounting policies In accordance with CAS Bulletin No.2 and the Notice on preparing 2008 annual reports of enterprises adopting China Accounting Standards (Caikuaihan [2008]No.60) , which were newly issued by the Ministry of Finance in 2008, and the Interpretation Guidance of CAS published in December 2008, the Group changed the following significant accounting policies in the current accounting year: - The acquisition of minority interests When preparing the consolidated financial statements, if the Company acquired a minority interest from a subsidiary’s minority shareholders before 7 August 2008, a goodwill is recognised on the consolidated financial statement, whose amount is the excess of the additional long-term equity investment cost on the minority interest acquisition over the fair value on the transaction date of the subsidiary’s identifiable net assets of the newly acquired portion. The difference between (i) and (ii) below, less the aforementioned goodwill is adjusted to the capital surplus in the consolidated balance sheet: (i) the additional long-term equity investment cost on the minority interest acquisition; (ii) the newly acquired interest in the subsidiary's identifiable net assets recorded from the subsidiary acquisition date (or combination date). If such an acquisition occurred on or after 7 August 2008, no goodwill is recognised. The total difference between the above (i) and (ii) is adjusted to the capital reserve in the consolidated balance sheet. In both cases if the credit balance of capital reserve is insufficient, any excess is adjusted to retained earnings. According to CAS Bulletin No.2, no retrospective adjustment has been made by the Group for the above change of accounting policy on acquisition of minority interest. The effect of this change of accounting policy on the current year has been disclosed in Note 4(1)(b). - Deferred tax assets are offset against deferred tax liabilities Deferred tax assets and liabilities were presented separately from each other and were not offset. Now they are presented on a net basis on the balance sheet if specific conditions are met (see Note 3(15)). The relevant comparative items have been adjusted accordingly for the above change on the presentation of deferred tax assets and liabilities. The effects of this change of accounting policy on the prior years have been disclosed in Note 4(2) , while this is no effect on the current year. 114 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 4 CHANGES IN ACCOUNTING POLICIES (CONTINUED) (1) Changes in accounting policies and their effects (continued) (a) Description of and reasons for changes in accounting policies (continued) - Change on the presentation of tax withheld/deductible Tax withheld/deductible were presented in the debit side of Taxes Payable. In the current accounting year, in accordance with the Interpretation Guidance of CAS published in December 2008, they are presented in Other Current Assets if specific conditions are met and the relevant comparative items have been adjusted accordingly. The effects of this change of accounting policy on the prior years have been disclosed in Note 4(2), while this is no effect on the current year. (b) Effect of changes in accounting policies on the current year The following tables provide estimates of the extent to which each of the line items in the consolidated income statement and income statement, and the consolidated balance sheet and balance sheet for the year ended 31 December 2008 is higher or lower than it would have been had the previous policies still been applied in the year. (i) The changes of accounting policies have no effect on the 2008 consolidated income statement and income statement. (ii) The effects on each of the line items in the consolidated balance sheet and balance sheet for the year ended 31 December 2008 are analysed as follows: The Group Effect of new policy Note (increase/decrease) in net assets) USD’000 RMB’000 Good will and Net assets 996 6,434 Attributable to: - Surplus reserve 996 6,434 115 China International Marine Containers (Group) Co., Ltd. Annual Report 20 4 CHANGES IN ACCOUNTING POLICIES (CONTINUED) (2) Above changes in accounting policies have no effects on the Group’s and the Company’s net p 2007. Affected assets and liabilities items in the balance sheet as at 31 December 2007 The Group Before After B adjustment Adjustment adjustment adjus USD’000 USD’000 USD’000 USD Other current assets 9,818 107,212 117,030 Deferred tax assets 41,312 (17,297) 24,015 Taxes payable 49,936 (107,212) (57,276) (1 Deferred tax liabilities (168,863) 17,297 (151,566) (10 Total (67,797) - (67,797) (10 The Group Before After B adjustment Adjustment adjustment adjus RMB’000 RMB’000 RMB’000 RMB Other current assets 71,713 783,095 854,808 Deferred tax assets 301,751 (126,341) 175,410 5 Taxes payable 364,743 (783,095) (418,352) (10 Deferred tax liabilities (1,233,410) 126,341 (1,107,069) (74 Total (495,203) - (495,203) (79 116 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 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% The Netherlands / Australia service tax rate 10% - 19% (2) Income tax The income tax rates applicable to the Group for the year are as follows: 2008 2007 The Company 18% 15% Domestic subsidiaries 0 - 25% 0-33% Subsidiaries registered in Hong Kong 16.5% 17.5% Subsidiaries registered in British Virgin Islands - - Subsidiary registered in Suriname 36% 38% Subsidiary registered in Cambodia 20% 30% Subsidiary registered in US 15 - 35% 40% Subsidiary registered in Germany 31.6% 31.6% Subsidiary registered in Britain 28% 30% Subsidiary registered in Australia 30% 30% Subsidiary registered in the Netherlands 20% - 25.5% 20% - 25.5% Subsidiary registered in Belgium 34% 34% Subsidiary registered in Denmark 28% 30% Subsidiary registered in Finland 26% 28% Subsidiary registered in Poland 19% 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 Shenzhen CIMC - Tianda 18% 15% Recognized as high-tech Airport Support Co., Ltd enterprises, Entitled to 15% preferential rate 2 Qingdao CIMC Special Reefer 25% 12.5% Entitled to tax holiday of “two- Co., Ltd year exemption and three-year reduction”, and 2008 is the fourth profit making year 3 Guangdong Xinhui CIMC Special 25% 12.5% Entitled to tax holiday of “two-year Transportation Equipments Co., Ltd exemption and three-year reduction”, and 2008 is the fifth profit making year 117 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 5 TAXATION (CONTINUED) (2) Income tax (continued) Local Statutory Preferential Name of enterprises tax rate rate Reasons 4 Nantong CIMC Tank Equipments 25% 12.5% Entitled to tax holiday of “two-year Co., Ltd. exemption and three-year reduction”, and 2008 is the fifth profit making year 5 Dalian CIMC Container Co., Ltd. 18% 9% Entitled to tax holiday of “two-year exemption and three-year reduction”, and 2008 is the fifth profit making year 6 Shenzhen CIMC Special Vehicle 18% 9% Entitled to tax holiday of Co., Ltd. “two-year exemption and three-year reduction”, and 2008 is the fouth profit making year 7 Ningbo CIMC Logistics Equipments 18% 9% Entitled to tax holiday of Co., Ltd. “two-year exemption and three-year reduction”, and 2008 is the fifth profit making year 8 Shanghai CIMC Yangshan 25% - Entitled to tax holiday of Logistics Equipment Co., Ltd “two-year exemption and three-year reduction”, and 2008 is the first profit making year 9 Shenzhen Southern CIMC Eastern 18% 9% Entitled to tax holiday of Logistics Equipments Co., Ltd. “two-year exemption and three-year reduction”, and 2008 is the fifth profit making year 10 Dalian CIMC Logistics Equipments 18% 9% Entitled to tax holiday of Co., Ltd. “two-year exemption and three-year reduction”, and 2008 is the fourth profit making year 11 Tianjin CIMC Special Vehicle Co., Ltd 18% - Entitled to tax holiday of “two-year exemption and three-year reduction”, and 2008 is the first profit making year 12 CIMC SHAC (Xi’An) Special Vehicle Co., Ltd. 25% - Entitled to tax holiday of “two-year exemption and three-year reduction”, and 2008 is the first profit making year 13 Gansu CIMC Huajun Vehicle Co., Ltd. 25% - Entitled to tax holiday of “two-year exemption and three-year reduction”, and 2008 is the second profit making year 14 Yangzhou Runyang Logistics Equipments 25% 12.5% Entitled to tax holiday of Co., Ltd. “two-year exemption and three-year reduction”, and 2008 is the fourth profit making year 118 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 5 TAXATION (CONTINUED) (2) Income tax (continued) Local Statutory Preferential Name of enterprises tax rate rate Reasons 15 Jiaxing CIMC Wood Co., Ltd. 25% 12.5% Entitled to tax holiday of “two-year exemption and three-year reduction”, and 2008 is the third profit making year 16 Ianermongolia Holonbuir CIMC Wood Co., Ltd 25% - Entitled to tax holiday of “two-year exemption and three-year reduction”, and 2008 is the first profit making year 17 Tianjin CIMC Logistics Equipments 18% 9% Entitled to tax holiday of Co., Ltd. “two-year exemption and three-year reduction”, and 2008 is the third profit making year 18 Tianjin CIMC Containers Co., Ltd 18% - Entitled to tax holiday of “two-year exemption and three-year reduction”, and 2008 is the first profit making year 19 Taicang CIMC Containers Co., Ltd 25% 12.5% Entitled to tax holiday of “two-year exemption and three-year reduction”, and 2008 is the third profit making year 20 Shanghai CIMC Yangshan Container Service 25% - Entitled to tax holiday of Co.,Ltd “two-year exemption and three-year reduction”, and 2008 is the first profit making year 21 Zhangjiagang CIMC Sanctum 25% 12.5% Entitled to tax holiday of Cryogenic Equipment Co., Ltd. “two-year exemption and three-year reduction”, and 2008 is third profit making year 22 Xinhui CIMC Container Flooring 25% 12.5% Entitled to tax holiday of Co., Ltd. “two-year exemption and three-year reduction”, and 2008 is the fifth profit making year 23 Zhumadian CIMC Huajun Vehicle 25% 12.5% Entitled to tax holiday of Co., Ltd. “two-year exemption and three-year reduction”, and 2008 is the fourth profit making year 24 Yangzhou Tonglee Reefer Equipment Co., Ltd 25% - Entitled to tax holidays of “two-year reduction and three-year reduction”, and 2008 is the second profit making year 25 Yangzhou Tonglee Reefer Container Co., Ltd 25% - Entitled to tax holidays of reduction and three-year reduction”, “two-year and 2008 is the first profit making year 119 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 5 TAXATION (CONTINUED) (2) Income tax (continued) Local Statutory Preferential Name of enterprises tax rate rate Reasons 26 Yangzhou CIMC Tonghua 25% - Entitled to tax holidays of Tank Equipment Co., Ltd “two-year reduction and three-year reduction”, and 2008 is the first profit making year 27 Enric (Bengbu) Compressor Co., Ltd 25% 15% Recognized as high-tech enterprises entitled to 15% preferential rate 28 Shijiazhuang Enric Gas Equipment Co., Ltd. 25% 12.5% Entitled to tax holidays of “two-year reduction and three-year reduction”, and 2008 is the fifth profit making year On 16 March 2007, the Fifth Plenary Session of Tenth National People’s Congress, for the People's Republic of China promulgated the corporate income tax law of the PRC (“New Tax Law”) which become effective on 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 2008 2007 USD’000 RMB’000 USD’000 RMB’000 VAT payable 16,873 115,145 10,325 75,414 Business tax payable 333 2,275 203 1,485 Income tax payable 32,498 221,779 34,332 250,769 Withholding tax 9,553 65,194 9,775 71,401 Others 2,553 17,422 2,641 19,283 Total 61,810 421,815 57,276 418,352 120 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 5 TAXATION (CONTINUED) (3) Taxes payable (continued) The Company 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Income tax payable 12,276 83,780 6,301 46,025 Withholding tax 8,511 58,080 7,914 57,804 Total 20,787 141,860 14,215 103,829 Pursuant to the Business Accounting Criterion Explains 2008 issued by Ministry of Finance in December 2008, the debit balance of tax payable which fulfils certain criteria is classified as other current assets in current year’s financial statements. Certain comparative figures have been classified to conform with presentation adopted in the current year’s financial statements. 121 China International Marine Containers (Group) Co., Ltd. Annual Report 20 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) As at 31 December 2008, the consolidated financial statements included the following subsidiaries: (a) Subsidiaries acquired through business combinations under common control: (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 and manufacture of new-style special road Manufacturing equipment; container stockpiling business Co., Ltd. (SCIMCEL) 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 Tianjin CIMC Containers 77361818-7 Tianjin, Sino-foreign USD 23,000,000.00 Manufacture and sale of container as well Co., Ltd.(TJCIMCn) China joint venture advisory; processing and manufacture of parts, structures and equipments; container sto 122 China International Marine Containers (Group) Co., Ltd. Annual Report 20 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) As at 31 December 2008, the consolidated financial statements included the following subsidiaries: (a) Subsidiaries acquired through business combinations under common control: (continued) (i) Domestic subsidiaries: (continued) Registered capital Amount of Organisation Registration Business original Name code place nature Currency currency Business scope 6 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 7 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 8 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 9 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 10 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 11 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 123 China International Marine Containers (Group) Co., Ltd. Annual Report 20 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) As at 31 December 2008, the consolidated financial statements included the following subsidiaries: (a) Subsidiaries acquired through business combinations under common control: (continued) (i) Domestic subsidiaries: (continued) Registered capital Amount of Organisation Registration Business original Name code place nature Currency currency Business scope 12 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 13 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) 14 Xinhui CIMC Special 74629484-2 Guangdong Sino-foreign USD 9,000,000.00 Manufacture and sale of various cont Transportation , China joint venture container product and relevant components Equipment Co., leasing, maintenance and relevant technical a Ltd.(XHCIMCS) 15 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 16 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 17 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 businessmen relevant after service 124 China International Marine Containers (Group) Co., Ltd. Annual Report 20 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) As at 31 December 2008, the consolidated financial statements included the following subsidiaries: (a) Subsidiaries acquired through business combinations under common control: (continued) (i) Domestic subsidiaries: (continued) Registered capital Amount of Organisation Registration Business original Name code place nature Currency currency Business scope 18 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 19 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 20 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 125 China International Marine Containers (Group) Co., Ltd. Annual Report 20 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) As at 31 December 2008, the consolidated financial statements included the following subsidiaries: (a) Subsidiaries acquired through business combinations under common control: (continued) (i) Domestic subsidiaries: (continued) Registered capital Amount of Organisation Registration Business original Name code place nature Currency currency Business scope 21 Yangzhou CIMC Tonghua 76914300-0 Jiangsu, Sino-foreign USD 17,500,000.00 Development and production of various Tank Equipment Co., China joint venture vehicles and tank equipment as well as co Ltd. (YZTHT) providing relevant technical service 22 Shanghai CIMC Vehicle 770922079 Shanghai, Sino-foreign RMB 90,204,082.00 Development, construction, operation, Logistics Equipments China joint venture warehousing and auxiliary facilities; proper Co., Ltd. (SHL) relevant service 23 Shanghai CIMC Transport 781865153 Shanghai, Sino-foreign RMB 500,000.00 Transport and advisory for routine goods; wa Service Co., China joint venture Ltd.(SHXMK) 24 Beijing CIMC Vehicle 78095118-0 Beijing, Sino-foreign RMB 20,000,000.00 Construction and operation of auxiliary wareh Logistics Equipments China joint venture Co., Ltd. (BJVL) 25 Beijing CIMC Automobile 78617496-8 Beijing, Sino-foreign RMB 5,000,000.00 Sales of automobile, automobile fittings, m Sales Service Co., Ltd. China joint venture and export of goods; repair of mechanical eq (BJVS) insurance agency 26 CIMC Vehicle (Liaoning) 78162475-5 Liaoning, Sino-foreign RMB 40,000,000.00 Development and production of various Co., Ltd. (LNVS) China joint venture vehicles as well as components and parts technical service 27 Shanghai CIMC Old Motor 789512643 Shanghai, Sino-foreign RMB 1,000,000.00 Relevant advisory about brokerage for old mo Vehicle Brokerage Co., China joint venture services Ltd (SHOV) 126 China International Marine Containers (Group) Co., Ltd. Annual Report 20 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) As at 31 December 2008, the consolidated financial statements included the following subsidiaries: (a) Subsidiaries acquired through business combinations under common control: (continued) (i) Domestic subsidiaries: (continued) Registered capital Amount of Organisation Registration Business original Name code place nature Currency currency Business scope 28 Tianjin CIMC Special 79251125-4 Tianjin, Sino-foreign RMB 30,000,000.00 Production and sales of box car, mechan Vehicles Co., China joint venture structure member; relevant advisory and after Ltd.(TJXV) 29 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) 30 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 chemic 31 Ningbo CIMC Vehicle 79600392-7 Zhejiang, Sino-foreign RMB 5,000,000.00 Wholesale and retail of non-passenger car, Sales Services Co., China joint venture metal material, mechanical equipments; Ltd. maintenance; insurance agency for motor veh (NBVS) 32 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 equi 33 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) 34 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 127 China International Marine Containers (Group) Co., Ltd. Annual Report 20 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) As at 31 December 2008, the consolidated financial statements included the following subsidiaries: (a) Subsidiaries acquired through business combinations under common control: (continued) (i) Domestic subsidiaries: (continued) Registered capital Amount of Organisation Registration Business original Name code place nature Currency currency Business scope 35 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) 36 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) 37 Hubei CIMC Vehicle 66676694-2 Hubei, Sino-foreign RMB 5,000,000.00 Sales and relevant services of automobile, s Logistics Equipments China joint venture fittings, metal material, hardware, electri Co., Ltd (HBVS) electromechanical equipment,mechanical equ products warehousing service. 38 Shanxi CIMC Vehicle 66661403-3 Shanxi, Sino-foreign RMB 5,000,000.00 Sales of automobile, automobile fittings, meta Logistics China joint venture electrical appliances and electromechanical eq Equipments Co., Ltd warehousing service; mechancical products, m (SXVS) mechanical equipment; tyre leasing, etc. 39 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 40 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; chemical produ (NMGVS) mechanical equipment; tyre leasing 128 China International Marine Containers (Group) Co., Ltd. Annual Report 20 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) As at 31 December 2008, the consolidated financial statements included the following subsidiaries: (a) Subsidiaries acquired through business combinations under common control: (continued) (i) Domestic subsidiaries: (continued) Registered capital Amount of Organisation Registration Business original Name code place nature Currency currency Business scope 41 Shijiazhuang CIMC 667739364 Hebei, Invested by RMB 5,000,000.00 Sales of automobile fittings, metal material, Vehicle Sales Services China foreign appliances and electromechanical equipment Co., Ltd. (SJZVS) businessmen logistics equipments; tyre leasing 42 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 43 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 44 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 45 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 46 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 47 Liaoning CIMC Vehicle 66717529-8 Liaoning, Sino-foreign RMB 7,000,000.00 Sales of automobile, automobile Logistics Equipments China joint venture material,mechanical equipment;; leasing lo Co., Ltd. (SYVS) warehousing service 48 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) 129 China International Marine Containers (Group) Co., Ltd. Annual Report 20 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) As at 31 December 2008, the consolidated financial statements included the following subsidiaries: (a) Subsidiaries acquired through business combinations under common control: (continued) (i) Domestic subsidiaries: (continued) Registered capital Amount of Organisation Registration Business original Name code place nature Currency currency Business scope 49 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 50 Qingdao Refrigeration 66787432-0 Shandong, Sino-foreign USD 25,000,000.00 Manufacture and sales of various refrigeratio Transport Equipment China joint venture and other transport equipments and spare part Co., Ltd. (QDRV) technical and maintenance service 51 Nantong CIMC Tank 798612590 Jiangsu, Sino-foreign USD 10,000,000.00 Production of special vehicles, manufac Equipment Co., China joint venture large-sized tank, production of various pre Ltd. (NTCY) special pressurization trough, tank and parts 52 Shanghai Yulan Real Estate 70306257-4 Shanghai, Sino-foreign RMB 5,000,000.00 Real estate development, property manageme Development Co., China joint venture Ltd. (SYPL) 53 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 Ltd. (SMYPL) 54 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 55 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 56 Shenzhen CIMC Wood 72717262-0 Guangdong, Sino-foreign RMB 5,000,000.00 Investment in wood industry; import an Co., Ltd. (CIMCW) China joint venture technical development related to wood in timber, equipment and products 57 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 (NMGW) China 58 Jiaxing CIMC Wood 78442573-5 Zhejiang, Sino-foreign USD 5,000,000.00 Production and sales of container wood floor Co., Ltd. (JXW) China joint venture transport equipments and other wood product 130 China International Marine Containers (Group) Co., Ltd. Annual Report 20 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) As at 31 December 2008, the consolidated financial statements included the following subsidiaries: (a) Subsidiaries acquired through business combinations under common control: (continued) (i) Domestic subsidiaries: (continued) Registered capital Amount of Organisation Registration Business original Name code place nature Currency currency Business scope 59 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. (NGW) bamboo and wood for production purpose 60 Manzhouli CIMC Wood 66408391-0 Inner Domestically- RMB 10,000,000.00 Import and export trade Co., Ltd (MZLW) Mongolia, funded China 61 Xuzhou CIMC Wood 67013281-1 Jiangsu, Sino-foreign RMB 50,000,000.00 Production and sales of container wood fl Co., Ltd (XZW) China joint venture sales of timber 62 Shenzhen Southern CIMC 76916693-1 Guangdong, Sino-foreign USD 5,000,000.00 Engaged in container transshipment, stoc Containers Service China joint venture vanning, maintenance; providing relevant tech Co., Ltd. (SCIMCL) 63 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. (SZYTL) 64 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. (QDYLL) relevant technical service 65 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 (NBCIMCL) repair, storing 131 China International Marine Containers (Group) Co., Ltd. Annual Report 20 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) As at 31 December 2008, the consolidated financial statements include the following subsidiaries: ( (a) Subsidiaries acquired through business combinations under common control: (continued) (i) Domestic subsidiaries: (continued) Registered capital Amount of Organisation Registration Business original Name code place nature Currency currency Business scope 66 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. (SHYLE) 67 CIMC Shenfa 63167299-7 Shanghai, Sino-foreign RMB 204,122,966.00 Investment, construction and operation for Development Co., China joint venture estate development and operation; ind Ltd.(CIMCSD) manufacture and sales of container a equipments 68 CIMC Vehicle (Xinjiang) 66667529-0 Xinjiang, Sino-foreign RMB 80,000,000.00 Production and sales of mechanical equi Co., Ltd. (SJ4S) China joint venture relevant technical development 69 Sichuan 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. (SCV) 70 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 71 Guangzhou Tongyang 79102617-7 Guangdong, Sino-foreign USD 40,000,000.00 Design, manufacture of container and re Container China joint venture and parts; relevant after service Manufacturing Co., Ltd. (GZTY) 72 Qingdao CIMC Special Shandong, Sino-foreign USD 11,500,000.00 Manufacture and sale of various conta Reefer Co., China joint venture container product and relevant components Ltd.(QDCSR) leasing, maintenance and relevant technical ad 73 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 74 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 75 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 132 China International Marine Containers (Group) Co., Ltd. Annual Report 20 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) As at 31 December 2008, the consolidated financial statements include the following subsidiaries: ( (a) Subsidiaries acquired through business combinations under common control: (continued) (i) Domestic subsidiaries: (continued) Registered capital Amount of Organisation Registration Business original Name code place nature Currency currency Business scope 76 Chongqing CIMC 7842749- X Chongqing, Sino-foreign USD 8,000,000.00 Design, manufacture, hire, maintenance o Logistics Equipments China joint venture container, other logistic equipment and relev Co., Ltd. (CQLE) parts; provide leasing and relevant technical a 77 Dalian CIMC Heavy Logistics 67996511-5 Dalian, Sino-foreign USD 3,700,000.00 international trade, entrepot trade, design, m Equipments China joint venture relevant technical advisory of pressure vess Co., Ltd.(DLZH) installation, other service of relevant comp pressure vessel 78 Shenzhen CIMC 67187468-1 Guangdong Sino-foreign RMB 20,000,000.00 Design, development, sale, surrogate of Intelligent Technology Co., , China joint venture software and system Ltd.(CIMC Tech) 79 Yangzhou Actaris 67393527-3 Jiangsu, Sino-foreign USD 15,000,000.00 Production, sale of mobile home, compo Refrigeration Equipment Co., China joint venture equipment, provide after sales service and pro Ltd.(YTLRC) 80 CIMC Taicang 32007615072 Jiangsu, Sino-foreign RMB 450,000,000.00 Research and development, production a refrigeration equipment logistics 01 China joint venture container and special container Co., Ltd.(TCCRC) 81 Hunan CIMC Bamboo 67559916-2 Hunan, Sino-foreign RMB 50,000,000.00 Cure, manage and sale of bamboo and wood p Industry Development Co., China joint venture Ltd.(HNW) 82 Shanghai CIMC Special 666094445 Shanghai, Sino-foreign RMB 30,000,000.00 Development, manufacture van semi-trailer an Vehicle Co., Ltd.(SHCIMCV) China joint venture 83 Shandong CIMC Vehicles l 67226549-0 Shandong, Sole-funded RMB 5,000,000.00 Sale of car, components and parts of c ogistics equipment Ltd.(Shangdong China by legal hardware, mechanical equipment; trade for 4S) person maintenance of mechanical equipment 84 Zhengzhou CIMC 67411383-7 Henan, Sino-foreign RMB 5,000,000.00 Business car, components and parts of c Vehicles Sales Service Co, China joint venture hardware, electromechanical equipment and Ltd.(HNVS) import and export business of goods and techn 133 China International Marine Containers (Group) Co., Ltd. Annual Report 20 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) As at 31 December 2008, the consolidated financial statements include the following subsidiaries: ( (a) Subsidiaries acquired through business combinations under common control: (continued) (i) Domestic subsidiaries: (continued) Registered capital Amount of Organisation Registration Business original Name code place nature Currency currency Business scope 85 Shangxi vehicle sales and 67154730-6 Shanxi, Sino-foreign Sale of car and car components and parts service Co., Ltd (SXVS) China joint venture RMB 5,000,000.00 86 Jiangsu vehicle sales and 67244439-2 Jiangsu, Invested by Sale of car and car components and parts, met service Co., Ltd.(JSVS) China foreign hardware, electromechanical equipment and w businessmen RMB 5,000,000.00 of chemical products; maintenance of mechan 87 Ningbo Hi-tech Zone Ximake 67472170-1 Zhejiang, Sino-foreign Transport Services Co., China joint venture Goods traffic and warehousing service Ltd..(NBXMK) RMB 5,000,000.00 88 Jiangxi Vehicle Logistics 67244439 Jiangxi, Sino-foreign Equipment Co., China joint venture Sale of car and car components and parts Ltd.(JXVL) RMB 10,000,000.00 89 CIMC Jidong 67320277-4 Hebei, Sino-foreign (Qinhuangdao) Vehicles China joint venture Sale of car and car components and parts Manufacture Co., Ltd(QHDV) RMB 70,000,000.00 90 Tianjing Ximake 67596675-6 Tianjin, Sino-foreign transportation service Co., China joint venture Sale of car and car components and parts Ltd(TJXMK) RMB 5,000,000.00 91 Suining Bamboo Industry 67802545-5 Hunan, Sino-foreign Development Co., Ltd. China joint venture Cure and sale of Forest product (SNW) RMB 8,000,000.00 92 Shenzhen CIMC Vehicle 68037053-0 Hunan, Sino-foreign Sale of special vehicle, construction machiner Marketing Services Ltd.(4sHO) China joint venture RMB 15,000,000.00 chassis parts 93 Ningbo CIMC Metal 07769304-8 Ningbo, Sino-foreign Shearing and curing metal material, processin Processing Co,. China joint venture components of container and hardware, impor Ltd.(NBJS) RMB 5,000,000.00 goods 134 China International Marine Containers (Group) Co., Ltd. Annual Report 20 6 Business combinations and the consolidated financial statements (continued) (1) As at 31 December 2008, the consolidated financial statements include the following subsidiaries: ( (a) Subsidiaries acquired through business combinations under common control: (continued) (ii) Overseas Subsidiaries Registered capital Amount of Name Registration place Currency original currency Business scope 94 CIMC Holdings (B.V.I.) Limited British Virgin Islands USD 34,001.00 (CIMC BVI) Investment 95 CIMC Tank Equipment Investment Hong Kong HKD 4,680,000.00 Holdings Co., Ltd. (NK) Investment 96 Speedic Enterprise Corp. (SEC) British Virgin Islands USD 50,000.00 Investment 97 CIMC-SMM Vehicle (Thailand) CO., LTD. Thailand Baht 260,000,000.00 Production and operation of various (Thailand V) special vehicles 98 Domino Flatracks Limited (CSC) Britain GBP 100.00 Production and processing of hinge 99 CIMC Transportation Equipment Inc. US USD 10.00 Trade and investment (CTEI) 100 CIMC USA,INC (CIMC USA) US USD 10.00 Investment 101 Vanguard National Trailer Corporation US USD 10.00 Production and sale of various special (Vanguard) vehicles 102 Goldbird Holding Inc (GH) British Virgin Islands USD 1.00 Investment 103 CIMC Vehicle Investment Holding Co., Hong Kong USD 50,000.00 Investment Ltd.(CIMC Vehicle) 104 CIMC EURpe BVBA (BVBA) Belgium EUR 18,550.00 Investment 105 Creation Charter Limited. (CCL) Hong Kong HKD 2.00 Investment 106 China International Marine Containers Hong Kong HKD 2,000,000.00 Investment (Hong Kong) Limited (CIMC HK) 107 CIMC Burg B.V. (Burg) Belgium EUR 60,000,000.00 Investment 108 Tacoba Consultant N.V. Suriname SF 3,000,000.00 Sale of wood (Tacoba) 109 Charm Wise Ltd. (Charm Wise) Hong Kong USD 1.00 Investment 110 Gold Terrain Assets Limited. (GTA) British Virgin Islands USD 1.00 Investment 111 Silveroad Wood Products Limited (SR) Cambodia USD 8,000.00 Production, development and sale of various wood products 112 Polyearn Development Corp. (POLYEAR) British Virgin Islands USD 1.00 Investment 113 Full Medal Holdings Ltd. (Full Medal) British Virgin Islands USD 1.00 Investment 135 China International Marine Containers (Group) Co., Ltd. Annual Report 20 6 Business combinations and the consolidated financial statements (continued) (1) As at 31 December 2008, the consolidated financial statements include the following subsidiaries: ( (a) Subsidiaries acquired through business combinations under common control: (continued) (ii) Overseas Subsidiaries (continued) Registered capital Amount of Name Registration place Currency original currency Business scope 114 Speedic Enterprise Service Corp. (SESC) British Virgin Islands USD 1.00 Investment 115 Hing Wah Machinery Ltd.(HWM) Hong Kong HKD 10,000.00 Production and operation of various special vehicles 116 Charm Ray Holdings Limited. (Charm Ray) Hong Kong HKD 10,000.00 Investment 117 Charm Beat Enterprises Limited. British Virgin Islands USD 1.00 Investment (Charm Beat) 118 Perfect Vision International Limited British Virgin Islands USD 1.00 Investment (Perfect Vision) 119 Sharp Vision Holdings Limited. Hong Kong HKD 1.00 Investment (Sharp Vision) 120 Sound Winner Holdings Limited. British Virgin Islands USD 1.00 Investment (Sound Winner) 121 Grow Rapid Limited. (Grow Rapid) Hong Kong USD 1.00 Investment 122 Win Score Investments Limited. Hong Kong HKD 10,000.00 Investment (Win Score) 123 Manner Kind International Limited. British Virgin Islands USD 1.00 Investment (Manner Kind) 136 China International Marine Containers (Group) Co., Ltd. Annual Report 20 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) As at 31 December 2008, the consolidated financial statements include the following subsidiaries: ( (b) Subsidiaries acquired through combinations under non-common control: (i) Domestic Subsidiaries Registered capital Amount of Name Registration place Currency original currency Business scope 1 Luoyang CIMC Lingyu Henan, China RMB 60,000,000.00 Production and sales of passenger car, tank Automobile CO., LTD. car; machining; operation of import and (LYV) export business 2 Wuhu CIMC RuiJiang Automobile CO LTD Anhui, China RMB 70,000,000.00 Development, production and sales of (WHVS) various special vehicles, ordinary mechanical products and metal structure members; providing relevant advisory and after service 3 Yangzhou Tonghua Machinery Co., Ltd Jiangsu, China RMB 15,000,000.00 Manufacture, processing and sales of (YZTHM) electromechanical products, special vehicles, components and parts, numerically controlled machine tool, and components and parts of machine tool 4 Liangshan Dongyue CIMC Shandong, China RMB 90,000,000.00 Production and sales of mixing truck, Vehicle Co., Ltd. special vehicle and components and parts (LSDYV) 5 Qingdao CIMC Container Manufacture Co., Shandong, China USD 27,840,000.00 Manufacture and repair of container, Ltd.(QDCC) processing and manufacture of various mechanical parts, structures and equipments 6 Qingdao CIMC Reefer Shandong, China USD 39,060,000.00 Manufacture and sale of refrigeration and Container Manufacture heat preservation device of reefer container, Co., Ltd.(QDCRC) refrigerator car and heat preservation car; providing relevant technical advisory and maintenance service 7 Shanghai CIMC Far East Container Co., Shanghai, China USD 9,480,000.00 Manufacture, repair and sales of container, Ltd.( SHEF ) processing and manufacture of various mechanical parts, structures and equipments 137 China International Marine Containers (Group) Co., Ltd. Annual Report 20 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) As at 31 December 2008, the consolidated financial statements include the following subsidiaries: ( (b) Subsidiaries acquired through combinations under non-common control: (continued) (i) Domestic Subsidiaries (continued) Registered capital Amount of Name Registration place Currency original currency Business scope 8 Tianjin CIMC North Ocean Container Tianjin, China USD 16,682,000.00 Manufacture and sale of container as well Co., Ltd.(TJCIMC) as vehicle, ship, equipment and steel structure specially used for container; warehousing and after service for container 9 Shanghai CIMC Baowell Industries Co. Ltd Shanghai, China USD 28,500,000.00 Manufacture and sale of container as well (SBWI) as relevant technical advisory; processing and manufacture of various mechanical parts, structures and equipments; container stockpiling business 10 CIMC Vehicle (Shandong) Co. Ltd.(KGR) Shandong, China USD 18,930,100.00 Development and manufacture of refrigerator car, tank car, trailer, box car, special vehicles and various series products; providing technical service 11 Ningbo Zhongze Import and Export Co., Zhejiang, China RMB 5,000,000.00 Self-operation and agency for import and Ltd export business of various goods and technologies 12 Zhangzhou CIMC Container Co., Ltd. Fujian, China USD 23,000,000.00 Manufacture and sale of container as well (ZZCIMC) as relevant technical advisory; processing and manufacture of various mechanical parts, structures and equipments 13 Yangzhou CIMC Tong Hua Jiangsu, China RMB 815,704,000.00 Development, production and sales of Special Vehicles Co., Ltd. various special-use vehicles, refitting (YZTH) vehicles, special vehicles, trailer series as well as relevant components and parts; providing technical and after service 14 Yangzhou Xinghua Machinery Co., Jiangsu, China RMB 9,910,000.00 Machining and production of special steel Ltd.(YZXH) structure products, and sales of products produced by the company 138 China International Marine Containers (Group) Co., Ltd. Annual Report 20 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) As at 31 December 2008, the consolidated financial statements include the following subsidiaries: ( (b) Subsidiaries acquired through combinations under non-common control: (continued) (i) Domestic Subsidiaries (continued) Registered capital Amount of Name Registration place Currency original currency Business scope 15 Zhumadian CIMC Huajun Vehicle Co. Ltd., Henan, China RMB 105,340,000.00 Refitting of special vehicles, sales of trailer (HJCIMC) and fittings; sales of vehicle-related materials 16 Zhangjiagang CIMC Sanctum Jiangsu, China RMB 144,862,042.01 Development, manufacture and installation Cryogenic Equipment Machinery of deep freezing unit, petrochemical Co., Ltd. (SDY) mechanical equipment, tank container, pressure vessel; providing relevant after service 17 Shanghai Dunhua Container Co., Ltd Shanghai, China RMB 6,000,000.00 Providing container and refrigerator (SHDHCS) stockpiling, repair, maintenance, devanning, vanning,; sales of components and parts; international shipping agent 18 Donghwa Container Transportation Shanghai, China USD 4,500,000.00 Container cargo devanning, vanning; service Co., Ltd. (DHCTS) canvass for cargo; allotment and customs declaration; container maintenance and stockpiling; supply of components and parts 19 Shanghai CIMC Automobile Shanghai, China RMB 1,130,000.00 Automobile examination and repair; Examination and Repair purchasing and selling agent for automobile Co., Ltd (SHVT) fittings, decoration materials, ship fittings, hardware, electrical appliances, rubber products, wires and cables 20 Shanghai CIMC Automobile Shanghai, China RMB 5,000,000.00 Wholesale and retail of automobile fittings; Sales Service Co., sales of automobile (excluding sedan); Ltd.(SHVS) processing, assembly and maintenance of car body 139 China International Marine Containers (Group) Co., Ltd. Annual Report 20 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) As at 31 December 2008, the consolidated financial statements include the following subsidiaries: ( (b) Subsidiaries acquired through combinations under non-common control: (continued) (i) Domestic Subsidiaries (continued) Registered capital Amount of Name Registration place Currency original currency Business scope 21 Yangzhou Tonglee Reefer Container Jiangsu, China USD 8,000,000.00 Manufacture and sale of reefer container Co., Ltd. (TLC) and special container; providing relevant technical advisory and maintenance service 22 Qingdao Kooll Logistics Co., Shangdong, China RMB 20,000,000.00 Container warehousing, stockpiling, Ltd.(QDHFL) devanning, vanning, load and unload, cleaning, maintenance; goods processing and relevant supporting service 23 Yangzhou Xincheng Jiangsu, China RMB 500,000.00 Purchasing and selling agent for automobile Tonghua Automobile Parts Ltd. fittings, hardware and routine electric (XCTH) appliances 24 Enric (Bengbu) Compressor Co.,Ltd. Anhui, China HKD 21,320,000.00 Manufacturing base of NG compressor (Enric Bengbu) (Note 6(1)(c)) and related products 25 Shijiazhuang Enric Gas Equipment Hebei, China USD 7,000,000.00 Manufacturing pressure vessel Co., Ltd. (“Shijiazhuang Enric”) (Note 6(1)(c)) 26 Enric ( Lang fang )Energy Equipment Hebei, China HKD 50,000,000.00 Manufacturing and exploiting Energy integration Co.,Ltd. Equipment integration (Langfang Enric) (Note 6(1)(c)) 27 Enric ( Beijing )Energy Beijing, China HKD 40,000,000.00 Manufacturing and exploiting Energy TechnologyCo.,Ltd (Beijing Equipment integration Enric) (Note 6(1)(c)) 28 Ningbo runxin container Co.,Ltd Ningbo, China RMB 5,000,000.00 Container cleaning, repair, storage, (“Ningbo runxin”) packing, devanning Service 29 Shenzhen CIMC Skyspace Real Estate Guangdong, RMB 154,634,066.00 Lawfully obtained in the framework of Development Co., Ltd (CIMC Shenzhen land use right to engage in real estate Tianyu) (Note 6(1)(c)) development 140 China International Marine Containers (Group) Co., Ltd. Annual Report 20 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) As at 31 December 2008, the consolidated financial statements include the following subsidiaries: ( (b) Subsidiaries acquired through combinations under non-common control: (continued) (i) Domestic Subsidiaries (continued) Registered capital Amount of Name Registration place Currency original currency Business scope 30 Yangzhou CIMC grand space Real Estate Jiangsu, China RMB 25,000,000.00 Real Estate Development, sales and leasing Development Co., Ltd (CIMC Haoyu) (Note 6(1)(c)) 31 Yangzhou CIMC Skyspace Property Jiangsu, China RMB 500,000.00 Property management, interior cleaning, Management Co., Ltd (Yangzhou water and electricity conservation wuye) ( Note 6(1)(c)) decorating consultative 32 Yangzhou CIMC Skyspace Real Estate Jiangsu, China RMB 8,000,000.00 Real estate development, real estate sales, Co.,Ltd. (Yangzhou Zhiye) (Note leasing, property management, engineering 6(1)(c)) consulting business, building decoration decoration 33 Jiangmen CIMC skyspace Real Estate Guangdong, China RMB 30,000,000.00 Real estate development, engaging in the Co.,Ltd. (“Jiangmen Dichan”) (Note sale of decoration and building materials 6(1)(c)) 34 Jiangmen CIMC skyspace property Guangdong, China RMB 1,000,000.00 Engage in community property management Co., Ltd. management, real estate agents and home (Jiangme Wuye) (Note 6(1)(c)) economics service. 35 TGE Gas Engineering GmbH (“TGE Shanghai, China USD 200,000.00 Provide international trade agent service, Shanghai”) entrepot trade between the bonded area enterprise trade and regional trade agent service, area commercial simple processing and trade advisory services 36 TGE Engineering Consulting (Shanghai) Shanghai, China USD 200,000.00 Gas engineering equipment design Co., Ltd (“Joebot Shanghai”) consulting, project design consulting and corporate management consulting, business consulting 141 China International Marine Containers (Group) Co., Ltd. Annual Report 20 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) As at 31 December 2008, the consolidated financial statements include the following subsidiaries: ( (b) Subsidiaries acquired through combinations under non-common control: (continued) (ii) Overseas Subsidiaries Registered capital Amount of Name Registration place Currency original currency Business scope 37 Mason Technology Limited (MTL) Hong Kong, China HKD 10,000.00 Investment holding 38 CIMC Australia Pty Limited (CIMC Aus) Australia AUD 50,000.00 Sales of vehiches 39 Enric Energy Equipment Holdings Limited Cayman Islands HKD 4,590,000.00 Investment holding (Enric) (Note 6(1)(c)) 40 Enric Investment Holdings Limited British Virgin Islands USD 50,000.00 Investment holding (Note 6(1)(c)) 41 Anhui Enric Investment Limited British Virgin Islands USD 50,000.00 Investment holding (Note 6(1)(c)) 42 Shijiazhuang Enric Investment Limited British Virgin Islands USD 50,000.00 Investment holding (Note 6(1)(c)) 43 Langfang Enric Investment Limited British Virgin Islands USD 50,000.00 Investment holding (Note 6(1)(c)) 44 Hong Kong Enric Gas Equipment Limited Hong Kong, China HKD 10,000.00 Investment holding (Note 6(1)(c)) 45 Hong Kong Enric Compressor Limited Hong Kong, China HKD 10,000.00 Investment holding (Note 6(1)(c)) 142 China International Marine Containers (Group) Co., Ltd. Annual Report 20 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) As at 31 December 2008, the consolidated financial statements include the following subsidiaries: ( (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 46 Enric Integration (HK) Company Limited Hong Kong, China HKD 10,000.00 Investment holding (Note 6(1)(c)) 47 Burg Industries B.V. Holland EUR 3,403,351.62 Investment 48 Holvrieka Holding B.V. Holland EUR 12,000,000.00 Investment 49 Holvrieka Ido B.V. Holland EUR 136,200.00 Sales of tank equipment 50 Holvrieka Nirota B.V. Holland EUR 680,670.32 Production, assembly and sale of tank equipment 51 Noordkoel B.V. Holland EUR 500,000.00 Sales of tank equipment 52 Beheermaatschappij "Burg" B.V. Holland EUR 453,780.22 Investment 53 Burg Fabriek van Wegtransportmiddelen Holland EUR 453,780.22 Production, repair and sale of road B.V. transport vehicle and components and parts 54 Burg Carrosserie B.V. Holland EUR 90,756.04 Production of road transport vehicle 55 Exploitatiemaatschappij Intraprogres B.V. Holland EUR 79,411.54 Trade, financing and leasing of road transport vehicle 56 Burgers Carosserie B.V. Holland EUR 90,756.04 Production and repair of vehicle and components and parts 57 Hobur Twente B.V. Holland EUR 226,890.11 Production and sale of oil and natural gas tank equipment 58 Burg Service B.V. Holland EUR 250,000.00 Assembly and repair of road transport vehicle and tank equipment 59 B.V. Trailer Leasing Company Holland EUR 907,560.43 Trade, financing and leasing of road transport vehicle 60 LAG Trailers NV Belgium BEF 30,000,000.00 Manufacturing trailer 61 Holvrieka NV Belgium BEF 40,000,000.00 Manufacturing tank equipment 143 China International Marine Containers (Group) Co., Ltd. Annual Report 20 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMEN (1) As at 31 December 2008, the consolidated financial statements include the following subsidiaries: ( (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 62 Immoburg NV Belgium BEF 10,000,000.00 Manufacturing road transport vehicle 63 Holvrieka Danmark A/S Denmark DKr 1,000,000.00 Manufacturing tank equipment 64 Direct Chassis LLC (DCEC) Manufacturing and sales of special USA USD 1,000,000.00 vehicles 65 Maxshine Enterprises Ltd (MAXSHINE) Hong Kong, China USD 1.00 Investment holding 66 TGE GAS INVESTMENT SA (TGE SA) Luxemburg EUR 50,000.00 Investment holding t Provide EP+CS(Design, Purchase and Construction Supervision ) or other 67 TGE Gas Engineering GmbH Germany EUR 1,000,000.00 technical project services in LNG,LPG and storage and disposal of other procurement gas 68 Fentalic Limited (Fentalic) British Virgin Islands USD 1,.00 Investment holding 144 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (1) As at 31 December 2008, the consolidated financial statements include the following subsidiaries: (continued) (c) Subsidiaries obtained through other means: Qingdao CIMC Eco-Equipment Co., Ltd. (QDHB) The Company holds 40.80% equity of QDHB. As the Company has more than 50% voting rights of QDHB and the rights to determine the strategy on the finance and operation of QDHB, QDHB was included into consolidated financial statement of the Company. Shenzhen CIMC Skyspace Real Estate Development Co., Ltd. and its subsidiary (CIMC Tianyu) The Company’s wholly owed subsidiary company, CIMCSD, holds 50% equity of CIMC Tianyu and its subsidiary company. According to CIMC Tianyu’s articles of association which was revised on 25 August 2008, CIMCSD is authorised to appoint and dismiss more than half of board of directors of CIMC Tianyu and therefore has more than 50% voting rights of CIMC Tianyu and the rights to determine the strategy on the finance and operation of CIMC Tianyu. Since 25 August 2008, CIMC Tianyu is considered as subsidiary of the Company and is included in the Company’s consolidated financial statement of 2008. Enric Energy Equipment Holdings Limited (Enric) The company's wholly owed subsidiary company, Charm Wise, holds 41.55% equity of Enric and its subsidiary company. Enric’s board of directors was re-elected with more than half of the directors delegated by Charm Wise and thus on 15 October 2007 has more than 50% voting rights Enric, and the rights to determine the strategy on the finance and operation of Enric. Since 15 October 2007, Enric is considered as subsidiary of the Company and is included in the company's consolidated financial statement of 2008. 145 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (2) Business combinations involving entities not under common control during the year: TGE GAS INVESTMENTS SA. (TGE SA) At the acquisition date of 19 September 2008, the Company acquired 60% equity of TGE SA by paying EUR 20 millions in cash through its wholly-owned subsidiary company, Grow Rapid. According to the Agreements, the subsidiary is required to pay additional EUR 5 millions to its former shareholders in 2010 and 2011 respectively, if the operation results of TGE SA in 2009 or 2010 can achieve the agreed targets. It is forecasted that the profit of TGE SA in 2009 is unlikely to achieve the agreed target, which is probable to be met in 2010, so it recognises the EUR 5 millions additional payment which is to be paid in 2011 as the acquisition cost according to its present value at the acquisition date. After the adjustment, the total amount of acquisition cost at the acquisition date is about USD35,605,021 (RMB243,096,841). The fair value of 60% of TGE SA’s equity acquired by the Company was USD22,416,127 (RMB153,048,348) at the acquisition date. USD13,188,894 (RMB90,048,493) in the shortfall of the fair value below acquisition cost is recognised as goodwill. TGE SA is a company registered in Luxemburg in 2008, with it’s headquarter located in Bonn, Germany, and is engaged in building liquefied natural gas terminals, offers EP+CS (engineering, procurement and construction supervision) services for storage and processing of LNG, LPG and other petrochemical gases. Its main service areas are large LNG import and export receiving station, medium-size distribution and subordinate stations as storage area; petrochemical gas import and export receiving station and import and export receiving station and storage area, such as large LPG, ethylene, propylene and liquid ammonia; gas handling factories; etc. The parent company of TGE SA was Gasfin Investment S.A. (“Gasfin”) before consolidation. TGE SA’s financial information is as follows: From 19 September 2008 to 31 December 2008 USD’000 RMB’000 Revenue 28,163 195,152 Net profit 1,949 13,508 Net cash flow 1,903 12,936 146 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (2) Business combinations involving entities not under common control during the year: (continued) TGE GAS INVESTMENTS SA. (“TGE SA”) (continued) The identifiable assets and liabilities: 19 September 2008 Carrying amount Fair value USD’000 RMB’000 Cash at bank and on hand 15,241 15,241 Accounts and other receivable 12,228 12,228 Inventories 186 186 Fixed assets 1,354 1,354 Intangible assets 895 32,816 Good will 15,197 15,197 Long-term receivables 73 73 Short-term loans (2,850) (2,850) Financial liabilities held for trading (587) (587) Accounts and other payable (23,528) (23,528) Long-term payables (165) (165) Deferred tax liabilities (2,518) (12,605) Identifiable net assets 15,526 37,360 Less: Minority interests 14,944 Attributable to: Equity shareholders of the Company 22,416 Less: Acquisition price 35,605 Goodwill 13,189 147 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (2) Business combinations involving entities not under common control during the year: (continued) TGE GAS INVESTMENTS SA. (“TGE SA”) (continued) The identifiable assets and liabilities: (continued) 19 September 2008 Carrying amount Fair value USD’000 RMB’000 Cash at bank and on hand 104,059 104,059 Accounts and other receivable 83,488 83,488 Inventories 1,270 1,270 Fixed assets 9,245 9,245 Intangible assets 6,111 224,055 Good will 103,759 103,759 Long-term receivables 498 498 Short-term loans (19,459) (19,459) Financial liabilities held for trading (4,008) (4,008) Accounts and other payable (160,630) (160,630) Long-term payables (1,134) (1,134) Deferred tax liabilities (17,192) (86,062) Identifiable net assets 106,007 255,081 Less: Minority interests 102,032 Attributable to: Equity shareholders of the Company 153,049 Less: Acquisition price 243,097 Goodwill 90,048 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. For the above identifiable liability, the payable amount or the present value of the payable amount is its fair value. 148 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 6 BUSINESS COMBINATIONS AND THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (3) Minority interests in each major subsidiary 2008 2007 USD’000 RMB’000 USD’000 RMB’000 XHCIMC 7,438 50,761 8,169 65,145 NTCIMC 4,131 28,191 4,095 32,656 SCRC 6,641 45,324 20,084 160,164 NTCIMCS 2,794 19,069 2,855 22,768 TJCIMC - - 19,548 155,889 TAS 8,604 58,716 1,379 10,997 QDCRC 4,493 30,661 4,559 36,357 SBWI 926 6,320 1,513 12,066 YZTH - - 2,439 19,450 KGR 2,052 14,007 2,015 16,069 HJCIMC - - 11,919 95,050 DHCTS 3,786 25,839 3,094 24,674 WHVS 2,681 18,299 3,619 28,498 LYV 1,714 11,695 1,931 15,205 Burg 17,800 116,648 17,222 135,614 Enric 93,525 638,249 74,570 587,201 QDHB 7,876 53,746 8,583 68,447 SHYEL 1,340 9,147 1,400 11,165 HI 14,184 96,797 7,912 59,298 QHDVS 2,369 16,168 - - TGE SA 15,652 106,816 - - CIMC Tianyu 13,686 93,401 - - Others 8,920 65,693 9,122 71,831 TOTAL 220,612 1,505,547 206,028 1,628,544 In current year, there is no case where a loss attributable to the minority shareholders of a subsidiary exceeds the minority shareholders’ interest in of the equity of the subsidiary. In 2007, the loss attributable to minority shareholders of TLC 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 TLC did not specify that the minority shareholders have a binding obligation to cover the loss. 149 China International Marine Containers (Group) Co., Ltd. Annual Report 20 7 CASH AT BANK AND ON HAND The Group 2008 Original currency Exchange USD RMB Original currency ’000 rate ’000 ’000 ’000 Cash on hand RMB 3,004 6.8244 441 3,004 RMB 2,324 USD 281 1.0000 281 1,921 USD 32 HKD 12 7.7497 1 10 HKD 6 JPY 1,312 90.90 14 98 JPY 322 AUD 4 1.4102 2 17 AUD - EUR 26 0.7171 36 245 EUR 77 Others - - 1 2 Others - 776 5,297 -------------- -------------- Deposits with banks RMB 1,350,514 6.8244 197,896 1,350,514 RMB 1,310,790 USD 149,638 1.0000 149,638 1,021,189 USD 143,796 HKD 127,339 7.7497 16,431 112,135 HKD 12,518 JPY 199,556 90.90 2,195 14,982 JPY 64,992 AUD 1,695 1.4102 1,202 8,200 AUD 2,690 EUR 12,670 0.7171 17,670 120,589 EUR 2,358 Others - - 957 6,531 Others 385,989 2,634,140 -------------- -------------- Other monetary funds RMB 440,030 6.8244 64,479 440,030 RMB 608,392 USD 3,030 1.0000 3,030 20,680 USD 252 HKD 150 7.7497 19 132 HKD 150 EUR 113 0.7171 157 1,073 EUR - Others - - 1 1 Others - 67,686 461,916 -------------- -------------- Total 454,451 3,101,353 150 China International Marine Containers (Group) Co., Ltd. Annual Report 20 7 CASH AT BANK AND ON HAND (CONTINUED) The Company 2008 Original currency Exchange USD RMB Original currency ’000 rate ’000 ’000 ’000 Deposits with banks RMB 270,071 6.8244 39,574 270,071 RMB 265,713 USD 20,491 1.0000 20,491 139,839 USD 56,055 HKD 79 7.7497 10 70 HKD 16 JPY 199,041 90.90 2,190 14,943 JPY 52,687 EUR 12 0.7171 16 111 EUR 526 62,281 425,034 -------------- -------------- Other monetary funds RMB 5,116 6.8244 750 5,116 RMB 242,901 63,031 430,150 As at 31 December 2008, restricted cash at bank and on hand of the Group amounted to USD40,90 note 29 for details. 151 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 8 FINANCIAL ASSETS HELD FOR TRADING The Group Note 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Equity securities investments held for trading 9,076 61,937 51,782 378,220 Derivative financial assets - forward contract (1) 47,567 324,616 74,768 546,120 Total 56,643 386,553 126,550 924,340 The Company 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Equity securities investments held for trading - - 24,415 178,335 There are no material restrictions on the realisation of the investment in financial assets held for trading. (1) As at 31 December 2008, the Group and the Company had certain open forward contracts denominated in U.S. dollars. The nominal value of these contracts amounted to USD404,240,000. Pursuant to these forward contracts, the Group and the Company are required to buy U.S. dollar/sell RMB of contracted nominal value at agreed rates at the contract settlement dates. These forwards contracts will be settled on a net basis by comparing the market rates at the settlement dates and the agreed rates. The settlement dates of the aforesaid forwards contracts range from 26 January 2009 to 23 July 2009. As at 31 December 2008, the Group recognised the aforesaid forwards contracts in their fair values of USD47,566,969 (RMB324,616,023) as financial assets held for trading and USD27,606,259 (RMB188,396,154) as financial liabilities held for trading, of which, the financial liabilities held for trading of USD703,765 (RMB4,802,776) related to the Company. Transaction costs on realisation have not been considered when calculating the fair values. 152 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 9 BILLS RECEIVABLE The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Bank acceptance bills 125,052 853,406 103,741 757,747 All of the above bills held by the Group are due within one year. As at 31 December 2008, the Group’s outstanding endorsed or discounted bills (with recourse) amounted to USD119,518,404 and RMB815,641,396 (2007: USD67,849,777 and RMB495,588,346), all of which are due before 30 June 2009 (2007: due before 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. 10 ACCOUNTS RECEIVABLE (1) The Group’s accounts receivable by customer type: 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Amounts due from related parties 5,871 40,679 31,085 227,049 Amounts due from other customers 633,410 4,322,032 1,217,433 8,892,380 Subtotal 639,281 4,362,711 1,248,518 9,119,429 Less: provision for bad and doubtful debts 24,761 168,980 30,073 219,660 Total 614,520 4,193,731 1,218,445 8,899,769 The Group’s accounts receivable due from related parties is 0.92% (2007: 2.49%) of the total accounts receivable. 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. 153 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 10 ACCOUNTS RECEIVABLE (CONTINUED) (1) The Group’s accounts receivable by customer type: (continued) As at 31 December 2008, accounts receivable due from the five biggest debtors of the Group is as follows: The Group Percentage of total Years accounts Amount Amount past due receivable USD’000 RMB’000 Goodpack Ltd. 52,521 358,426 Within 1year (inclusive) 8.22% CMA CGM S.A. 49,686 339,077 Within 1year (inclusive) 7.77% Capital Intermodal Ltd. 34,056 232,408 Within 1year (inclusive) 5.33% A.P Moller Maersk 24,932 170,148 Within 1year (inclusive) 3.90% CRONOS Containers Ltd. 20,254 138,222 Within 1year (inclusive) 3.17% During 2008, the Group has entered into Account Receivables Factoring Agreements (with recourse) with Bank of Communication Limited and China Development Bank. During 2008, the Group obtained a total amount of USD1,088,487,184 (RMB7,542,454,244) under these agreements. As at 31 December 2008, accounts receivables under such factoring arrangement were nil. As at 31 December 2008, the accounts receivable of the Group with restriction amounted to USD5,632,709 (RMB38,439,859). Refer to Note 29 for details. (2) The analysis of the Group’s accounts receivable by original currency is as follows: 2008 2007 Original Exchange Original Exchange currency rate USD currency rate USD ’000 ’000 ’000 ’000 RMB 1,353,861 6.8244 198,385 1,470,385 7.3042 201,306 USD 364,203 1.0000 364,203 977,375 1.0000 977,375 HKD 4,196 7.7497 541 5,890 7.7974 755 JPY 394,609 90.90 4,341 627,888 111.39 5,637 AUD 4,515 1,4102 3,202 5,638 1.1405 4,944 EUR 45,046 0.7171 62,821 40,062 0.6848 58,501 Others - - 5,788 - - - 639,281 1,248,518 154 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 10 ACCOUNTS RECEIVABLE (CONTINUED) (3) The ageing analysis of the Group’s accounts receivable is as follows: 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Within 1 year (inclusive) 613,567 4,187,224 1,236,731 9,033,334 1 and 2 years (inclusive) 17,180 117,241 9,403 68,684 2 and 3 years (inclusive) 6,897 47,069 1,679 12,266 Over 3 years 1,637 11,177 705 5,145 Subtotal 639,281 4,362,711 1,248,518 9,119,429 Less: provision for bad and doubtful debts 24,761 168,980 30,073 219,660 Total 614,520 4,193,731 1,218,445 8,899,769 The ageing is counted starting from the date accounts receivable is recognised. (4) An analysis of provision for bad and doubtful debts is as follows: The Group 2008 2007 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 Individually significant 312,249 49% 4,684 1.50% 635,312 51% 9,530 1.50% Individually insignificant but with a material portfolio credit risk 198,204 31% 15,084 7.61% 178,460 14% 6,668 3.74% Other immaterial items 128,828 20% 4,993 3.88% 434,746 35% 13,875 3.19% Total 639,281 100% 24,761 3.87% 1,248,518 100% 30,073 2.41％ The Group 2008 2007 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 Individually significant 2,130,914 49% 31,964 1.50% 4,640,442 51% 69,607 1.50% Individually insignificant but with a material portfolio credit risk 1,352,625 31% 102,939 7.61% 1,303,510 14% 48,707 3.74% Other immaterial items 879,172 20% 34,077 3.88% 3,175,477 35% 101,346 3.19% Total 4,362,711 100% 168,980 3.87% 9,119,429 100% 219,660 2.41％ 155 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 11 PREPAYMENTS (1) The prepayments by category: 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Raw materials 139,870 954,527 214,226 1,564,752 Work in progress 13,910 94,928 8,586 62,714 Others 2,260 15,422 9,196 67,167 Subtotal 156,040 1,064,877 232,008 1,694,633 Less: Provision for bad and doubtful debts 7,398 50,486 96 698 Total 148,642 1,014,391 231,912 1,693,935 (2) The ageing analysis of the Group’s prepayments is as follows: 2008 2007 Percen- Percen- Amount Amount -tage Amount Amount -tage USD’000 RMB’000 % USD’000 RMB’000 % Within 1 year (inclusive) 154,963 1,057,533 99.31% 231,379 1,690,040 99.72% 1 and 2 years (inclusive) 647 4,418 0.41% 524 3,830 0.23% 2 and 3 years (inclusive) 354 2,409 0.23% 58 421 0.03% Over 3 years 76 517 0.05% 47 342 0.02% Subtotal 156,040 1,064,877 100.00% 232,008 1,694,633 100.00% Less: provision for bad and doubtful debts 7,398 50,486 4.74% 96 698 0.04% Total 148,642 1,014,391 95.26% 231,912 1,693,935 99.96% 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. As at 31 December 2008, no individual prepayments that are 30% or more of the total amount. 156 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 12 INTERESTS RECEIVABLE The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Trusted loan interest 277 1,895 684 4,997 Term deposit interest 76 517 - - Total 353 2,412 684 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. 13 DIVIDENDS RECEIVABLE The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Dalian Jinong Logistic Co., Ltd 291 1,985 291 2,125 KYH Steel Holding Ltd 1,290 8,807 - - Total 1,581 10,792 291 2,125 The Company 2008 2007 USD’000 RMB’000 USD’000 RMB’000 SCIMC 85,039 580,336 76,071 555,642 SCIMCEL 55,157 376,412 47,187 344,663 XHCIMC 1,579 10,776 942 6,880 QDCC 5,213 35,579 5,923 43,268 DLCIMCn 8,401 57,332 8,400 61,363 NBCIMC 11,733 80,071 11,226 81,997 SCRC 5,289 36,093 3,835 28,015 QDCRC - - 3,067 22,401 XHCIMCS 27,406 187,029 17,273 126,165 QDCSR 581 3,967 286 2,087 DLL 7,018 47,895 4,709 34,401 CIMC(HK) 464,346 3,168,880 461,821 3,373,220 TCCIMC 3,616 24,679 2,032 14,840 ZZCIMC 3,541 24,164 420 3,066 TJCIMCLE 6,710 45,794 3,073 22,444 SBWI 615 4,196 - - TJCIMC 31,437 214,538 - - CIMCSD 9,485 64,727 - - Total 727,166 4,962,468 646,265 4,720,452 157 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 13 DIVIDENDS RECEIVABLE (CONTINUED) 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. 14 OTHER RECEIVABLES (1) Other receivables by customer type The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Amounts due from related parties 33,029 225,405 57,120 417,213 Amounts due from other customers 100,427 685,354 101,312 740,006 Subtotal 133,456 910,759 158,432 1,157,219 Less: provision for bad and doubtful debts 3,904 26,643 1,365 9,973 Total 129,552 884,116 157,067 1,147,246 The Company 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Amounts due from subsidiaries 700,784 4,782,429 421,455 3,078,393 Amounts due from related parties 21,558 147,119 25,348 185,147 Amounts due from other customers 1,485 10,138 - - Subtotal 723,827 4,939,686 446,803 3,263,540 Less: provision for bad and doubtful debts 691 4,717 691 5,048 Total 723,136 4,934,969 446,112 3,258,492 The Group’s and the Company’s other receivables due from related parties amounted to USD33,029,262 and USD722,341,646 (2007: USD57,119,543 and USD446,802,882), 24.75% and 99.79% (2007: 36.05% and 100%) 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. 158 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 14 OTHER RECEIVABLES (CONTINUED) (1) Other receivables by customer type (continued) As at 31 December 2008, other receivables due from the five biggest debtors of the Group and the Company are as follows: The Group Percentage of total Years accounts Amount Amount past due receivable USD’000 RMB’000 Shanghai Fengyang Real Estate Development Co., Ltd (Shanghai Fengyang) 21,554 147,096 Within 1year (inclusive) 16.15% China Merchants Property Development Co., Ltd 10,353 70,570 Within 1year (inclusive) 7.76% SHYSLE tax draw back 1,811 12,360 Within 1year (inclusive) 1.36% Rizhao Steel And Iron Co., Ltd 1,465 10,000 Within 1year (inclusive) 1.10% Dalian Stone Surface Treatment Co., Ltd 1,366 9,321 Within 1year (inclusive) 1.02% The Company Percentage of total Years accounts Amount Amount past due receivable USD’000 RMB’000 HI 362,653 2,474,890 Within 1year (inclusive) 50.10% DLCIMC 75,573 515,742 Within 1year (inclusive) 10.44% CIMCSV 32,037 218,631 Within 1year (inclusive) 4.43% XHCIMCF 28,595 195,141 Within 1year (inclusive) 3.95% Shanghai Fengyang 21,554 147,096 1 and 2 years (inclusive) 2.98% (2) The ageing analysis of other receivables is as follows: The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Within 1 year (inclusive) 97,187 663,241 146,827 1,072,460 1 and 2 years (inclusive) 34,013 232,121 7,318 53,449 2 and 3 years (inclusive) 1,487 10,146 3,088 22,553 Over 3 years 769 5,251 1,199 8,757 Subtotal 133,456 910,759 158,432 1,157,219 Less: provision for bad and doubtful debts 3,904 26,643 1,365 9,973 Total 129,552 884,116 157,067 1,147,246 159 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 14 OTHER RECEIVABLES (CONTINUED) (2) The ageing analysis of other receivables is as follows: (continued) The Company 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Within 1 year (inclusive) 702,271 4,792,580 440,135 3,214,837 1 and 2 years (inclusive) 21,556 147,106 6,668 48,703 Subtotal 723,827 4,939,686 446,803 3,263,540 Less: provision for bad and doubtful debts 691 4,717 691 5,048 Total 723,136 4,934,969 446,112 3,258,492 The ageing is counted starting from the date of recognition of other receivables. (3) An analysis of provision for bad or doubtful debts for the Group’s other receivables is as follows: The Group 2008 2007 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 Individually significant 40,157 30.09% - - 80,472 50.79% - - Other immaterial items 93,299 69.91% 3,904 4.18% 77,960 49.21% 1,365 1.75% Total 133,456 100.00% 3,904 2.93% 158,432 100.00% 1,365 0.86% The Group 2008 2007 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 Individually significant 274,044 30.09% - - 587,784 50.79% - - Other immaterial items 636,715 69.91 26,643 4.18% 569,435 49.21% 9,973 1.75% Total 910,759 100.00% 26,643 2.93% 1,157,219 100.00% 9,973 0.86% The Company 2008 2007 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 Individually significant 701,433 96.91% - - 393,436 88.06% - - Other immaterial items 22,394 3.09% 691 3.09% 53,367 11.94% 691 1.30% Total 723,827 100.00% 691 0.10% 446,803 100.00% 691 0.15% 160 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 14 OTHER RECEIVABLES (CONTINUED) (3) An analysis of provision for bad or doubtful debts for the Group’s other receivables is as follows: (continued) The Company 2008 2007 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 Individually significant 4,786,862 96.91% - - 2,873,739 88.06% - - Other immaterial items 152,824 3.09% 4,717 3.09% 389,801 11.94% 5,048 1.30% Total 4,939,686 100.00% 4,717 0.10% 3,263,540 100.00% 5,048 0.15% 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 611,072 6,474,017 (6,407,528) 12,952 690,513 Finished goods 149,755 3,055,338 (3,096,537) 3,664 112,220 Work in progress 171,486 5,257,868 (5,261,986) 4,367 171,735 Consignment stocks 38,004 532,333 (512,857) 1,153 58,633 Spare parts 7,018 32,241 (32,333) 127 7,053 Consumables 3,091 19,828 (20,639) 71 2,351 Materials in transit 1,951 11,577 (2,421) 144 11,251 Stocks 80,911 2,691,891 (2,615,218) 5,341 162,925 Completed property held for sale - 24,282 (13,309) 169 11,142 Property under development for sale - 47,642 (24,282) 359 23,719 Subtotal 1,063,288 18,147,017 (17,987,110) 28,347 1,251,542 Less: Provision for diminution in value of inventories 6,994 100,859 (4,587) 427 103,693 Total 1,056,294 18,046,158 (17,982,523) 27,920 1,147,849 161 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 15 INVENTORIES (CONTINUED) (1) An analysis of the movements of the Group’s inventories for the year is as follows: (continued) 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 4,463,395 44,860,412 (44,399,680) (211,775) 4,712,352 Finished goods 1,093,839 21,171,355 (21,456,837) (42,526) 765,831 Work in progress 1,252,565 36,433,346 (36,461,881) (52,047) 1,171,983 Consignment stocks 277,591 3,688,695 (3,553,741) (12,408) 400,137 Spare parts 51,263 223,403 (224,045) (2,490) 48,131 Consumables 22,575 137,396 (143,012) (915) 16,044 Materials in transit 14,254 80,218 (16,782) (907) 76,783 Stocks 590,983 18,652,917 (18,121,627) (10,416) 1,111,857 Completed property held for sale - 168,255 (92,224) - 76,031 Property under development for sale - 330,125 (168,255) - 161,870 Subtotal 7,766,465 125,746,122 (124,638,084) (333,484) 8,541,019 Less: Provision for diminution in value of inventories 51,084 698,881 (31,782) (10,542) 707,641 Total 7,715,381 125,047,241 (124,606,302) (322,942) 7,833,378 The Company’s closing balance of inventories included a capitalized borrowing cost of USD 145,449, equivalent to RMB 1,007,860 (2007: nil). The interest rate per annum at which the borrowing costs were capitalized for the current year by the Company was 9.07% (2007: nil). At the year end, the Group’s inventories pledged as security amounted to USD25,503,177 (RMB174,043,884). 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 Provision Written back foreign balance beginning made for during the year exchange at the end of the year the year Reversal Write-off rate changes of the year USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 Raw materials 3,038 87,561 (573) (1,206) 213 89,033 Finished goods 1,276 3,850 (22) (58) 85 5,131 Work in progress 2,141 2,327 (165) (2,024) 19 2,298 Consignment stocks - 240 - - 4 244 Spare parts 539 - (441) (98) - - Stocks - 6,881 - - 106 6,987 6,994 100,859 (1,201) (3,386) 427 103,693 162 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 15 INVENTORIES (CONTINUED) (2) An analysis of provision for diminution in value of the Group’s inventories is as follows: (continued) Opening Effect of Closing balance at the Provision Written back foreign balance beginning made for during the year exchange at the end of the year the year Reversal Write-off rate changes of the year RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Raw materials 22,183 606,734 (3,968) (8,357) (8,996) 607,596 Finished goods 9,331 26,679 (151) (406) (435) 35,018 Work in progress 15,634 16,124 (1,144) (14,022) (909) 15,683 Consignment - 1,664 - - - 1,664 Spare parts 3,936 - (3,057) (677) (202) - Stock - 47,680 - - - 47,680 51,084 698,881 (8,320) (23,462) (10,542) 707,641 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 sales of the above mentioned inventories. 16 NON-CURRENT ASSETS DUE WITHIN ONE YEAR The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Finance leases 8,066 55,046 1,553 11,342 Consignment loan 6,718 45,846 11,222 81,968 Sale of goods by installments 3,963 27,045 - - Others 138 939 246 1,799 Subtotal 18,885 128,876 13,021 95,109 Less: Provision for impairment 119 812 - - Total 18,766 128,064 13,021 95,109 163 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 17 NON-CURRENT ASSETS DUE WITHIN ONE YEAR The Group Note 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Cash flow hedges 8,066 55,044 9,818 71,713 Tax deductible / withheld 52,008 354,926 107,212 783,095 Others 31 213 - - Total 60,105 410,183 117,030 854,808 18 AVAILABLE-FOR-SALE FINANCIAL ASSETS The Group 2008 2007 Amount Amount Amount Amount USD’000 RMB’000 USD’000 RMB’000 Equity instruments 185,308 1,264,613 568,664 4,153,636 The Company 2008 2007 Amount Amount Amount Amount USD’000 RMB’000 USD’000 RMB’000 Equity instruments 181,694 1,239,956 568,664 4,153,636 19 LONG-TERM RECEIVABLES The Company 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Finance leases 69,095 471,532 13,677 99,900 Sale of goods by installments 1,469 10,025 42 309 Car / housing loans to staff 4,224 28,829 3,995 29,180 Trusted loans 22 150 6,194 45,242 Others - - 3,302 24,114 Subtotal 74,810 510,536 27,210 198,745 Less: Provision for impairment 1,265 8,633 14 102 Total 73,545 501,903 27,196 198,643 164 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 19 LONG-TERM RECEIVABLES (CONTINUED) An analysis of the above finance leases receivable is as follows: 2008 2007 Amount Amount Amount Amount USD’000 RMB’000 USD’000 RMB’000 Amount due from lessees 80,151 546,982 16,636 121,513 Less: Unearned finance income 11,056 75,450 2,959 21,613 Finance leases 69,095 471,532 13,677 99,900 The total future minimum lease receipts under finance leases after the balance sheet date which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on rates current at the balance sheet date), are receivable as follows: 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Within 1 year (inclusive) 10,200 69,610 2,224 16,241 1 and 2 years (inclusive) 36,568 249,555 4,323 31,576 2 and 3 years (inclusive) 24,247 165,471 4,250 31,043 Over 3 years 19,519 133,205 6,346 46,355 Subtotal 90,534 617,841 17,143 125,215 Less: unrecognised finance income 13,373 91,263 1,913 13,973 Total 77,161 526,578 15,230 111,242 In above: Due within 1 year 8,066 55,046 1,553 11,342 Over 1 year 69,095 471,532 13,677 99,900 165 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 20 LONG-TERM EQUITY INVESTMENTS The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Investments in associates 1,929 13,164 13,252 96,793 Investments in joint ventures 187,229 1,277,724 85,131 621,821 Other long-term equity investments 46,141 314,884 27,054 197,605 Subtotal 235,299 1,605,772 125,437 916,219 Less: Provision for impairment 465 3,174 465 3,397 Total 234,834 1,602,598 124,972 912,822 The Company 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Investments in subsidiaries 326,927 2,231,081 291,515 2,129,182 Other long-term equity investments 45,984 313,812 26,817 195,981 Subtotal 372,911 2,544,893 318,332 2,325,163 Less: Provision for impairment 465 3,174 465 3,397 Total 372,446 2,541,719 317,867 2,321,766 (1) As at 31 December 2008, the Company’s investments in subsidiaries were as follows: Initial Balance at the Addition/ Balance at investment beginning of (disposal) the end of Investee cost the year during 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 17,338 - 17,338 TJCIMC 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 - 10,100 166 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 20 LONG-TERM EQUITY INVESTMENTS (CONTINUED) (1) As at 31 December 2008, the Company’s investments in major subsidiaries are as follows: (continued) Initial Balance at the Addition/ Balance at investment beginning of (disposal) the end of Investee cost the year during year the year USD’000 USD’000 USD’000 USD’000 TCCIMC 19,979 12,003 7,976 19,979 ZZCIMC 15,266 15,266 - 15,266 SHYSLE 11,982 11,982 - 11,982 CQVS 5,994 4,795 1,199 5,994 SCRC 32,520 16,120 16,400 32,520 QDCRC 8,229 8,229 - 8,229 XHCIMCS 6,748 6,748 - 6,748 QDCSR 1,931 1,931 - 1,931 TJCIMCLE 2,498 2,498 - 2,498 DLL 8,874 8,218 656 8,874 XHCIMCF 4,258 4,258 - 4,258 CIMC (HK) 256 256 - 256 CIMC USA 25,988 25,986 2 25,988 TAS - 1,923 (1,923) - CIMCSD 24,688 24,688 - 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 CIMC SSC 384 - 384 384 TCCRC 9,073 - 9,073 9,073 YTLRC 1,645 - 1,645 1,645 326,927 291,515 35,412 326,927 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 SCIMC 84,964 90,937 - (5,973) 84,964 SCIMCEL 84,964 90,937 - (5,973) 84,964 XHCIMC 37,800 40,458 - (2,658) 37,800 SHFE 118,319 126,640 - (8,321) 118,319 TJCIMC 84,229 90,148 - (5,919) 84,229 TJCIMCn 78,479 83,998 - (5,519) 78,479 QDCC 62,370 66,753 - (4,383) 62,370 167 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 20 LONG-TERM EQUITY INVESTMENTS (CONTINUED) (1) As at 31 December 2008, the Company’s investments in major subsidiaries are as follows: (continued) 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 DLCIMC 50,501 54,051 - (3,550) 50,501 NBCIMC 25,592 27,391 - (1,799) 25,592 SBWI 68,929 73,772 - (4,843) 68,929 TCCIMC 136,343 87,672 55,268 (6,597) 136,343 ZZCIMC 104,180 111,506 - (7,326) 104,180 SHYSLE 81,767 87,519 - (5,752) 81,767 CQVS 40,905 35,024 8,308 (2,427) 40,905 SCRC 221,929 117,744 113,640 (9,455) 221,929 QDCRC 56,157 60,106 - (3,949) 56,157 XHCIMCS 46,049 49,289 - (3,240) 46,049 QDCSR 13,193 14,101 - (908) 13,193 TJCIMCLE 17,045 18,246 - (1,201) 17,045 DLL 60,558 60,029 4,541 (4,012) 60,558 XHCIMCF 29,056 31,101 - (2,045) 29,056 CIMC (HK) 1,750 1,870 - (120) 1,750 CIMC USA 177,356 189,807 18 (12,469) 177,356 TAS - 14,046 (13,325) (721) - CIMCSD 168,480 180,326 - (11,846) 168,480 HI 285,984 305,990 - (20,006) 285,984 SZCVS 25 29 - (4) 25 CIMC TEI 6,142 6,574 - (432) 6,142 GZTY 12,254 13,118 - (864) 12,254 CIMC SSC 2,616 - 2,661 (45) 2,616 TCCRC 61,921 - 62,873 (952) 61,921 YTLRC 11,224 - 11,396 (172) 11,224 2,231,081 2,129,182 245,380 (143,481) 2,231,081 For detailed information of the subsidiaries, please refer to Note 6. As at 31 December 2008, there was no provision for impairment of investments in subsidiaries. At 31 December 2008, the Company provides guarantee with an amount of USD27,739,165 (RMB189,303,158) for bank loan of subsidiary. 168 China International Marine Containers (Group) Co., Ltd. Annual Report 20 20 LONG-TERM EQUITY INVESTMENTS (CONTINUED) (2) As at 31 December 2008, the Group’s and the Company’s investments in major joint ventures were The joint ventures of the Company’s subsidiaries Initial Balance at Adjustments investment the beginning under equity Investee Note cost of the year Increase Decrease method USD’000 USD’000 USD’000 USD’000 USD’000 Shenzhen CIMC Skyspace Real Estate Development Co., Ltd (CIMC Tianyu) 6(1) 9,937 13,252 - (12,106) (1,146) Yangzhou Maxi-CUBE Tong Composite Co., Ltd (MTC) 1,151 - 1,857 - 357 11,088 13,252 1,857 (12,106) (789) Initial Balance at Adjustments investment the beginning under equity Investee cost of the year Increase Decrease method RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Shenzhen CIMC Skyspace Real Estate Development Co., Ltd (CIMC Tianyu) 6(1) 79,872 96,793 - (88,851) (7,942) Yangzhou Maxi-CUBE Tong Composite Co., Ltd (MST) 9,530 - 12,868 - 2,474 89,402 96,793 12,868 (88,851) (5,468) 169 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 20 LONG-TERM EQUITY INVESTMENTS (CONTINUED) (2) As at 31 December 2008, the Group’s and the Company’s investments in major joint ventures were as follows: (a) The joint ventures of the Company’s subsidiaries Details of the joint ventures of the Company’s subsidiaries are as follows: The Company’s Shareholding At year end Current year Name of Organisation Regisation 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 MST 60872487-5 Yangzhou Sino 154,634 50% 33,913 7,579 62,875 4,951 foreign joint venture The voting rights held by the Company are the same as its shareholding percentage of the joint ventures. 170 China International Marine Containers (Group) Co., Ltd. Annual Report 20 20 LONG-TERM EQUITY INVESTMENTS (CONTINUED) (3) As at 31 December 2008, the Group’s and Company’s investments in major associates are as follow (a) The associates of the Company’s subsidiaries Balance Addition Adjustme Initial at the Addition through und investment beginning during acquisitions equ Investee cost of the year the year of subsidiaries meth USD’000 USD’000 USD’000 USD’000 USD’0 KYH Steel Holding Ltd 3,336 13,430 - - 4,2 Tianjin Port CIMC Zhenhua Logistic Co., Ltd (TJCIMCZL) 2,660 3,806 460 - 1,4 Yangzhou Maxi-CUBE Tong Composite Co., Ltd (MST) 1,151 1,403 454 (1,857) Dalian Jinong Logistic Co., Ltd (DLJLL) 3,015 3,075 1,187 - 6 Xiamen CIMC Haitou Container Service Co., Ltd (Xiamen Haitou) 1,494 1,549 659 - 5 Zhenhua Logistic Group Co., Ltd (TJZL) 47,453 54,441 - - 1,9 Ningbo Beilun Donghua Container Service Co., Ltd (NBBL) 432 457 - - New Atlantic Timber (HK) Limited (XYW) 396 196 200 - Shanghai Fengyang 1,643 4,176 - - (5 TRS Transportkoeling 1,647 1,647 - - 3 EURTANK OY 951 951 - - 1 Fuzhou Haitou Logistics Co., Ltd (Fuzhou Haitou) 709 - 709 - (2 Xiamen Haitou Logistics Co., Ltd (XMHLC) 888 - 888 - Yantai Raffles Shipyard Limited (Raffles) 93,288 - 93,288 - 1,1 159,063 85,131 97,845 (1,857) 9,8 171 China International Marine Containers (Group) Co., Ltd. Annual Report 20 20 LONG-TERM EQUITY INVESTMENTS (CONTINUED) (3) At 31 December 2008, 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 und investment beginning during acquisitions equ Investee cost of the year the year of subsidiaries meth RMB’000 RMB’000 RMB’000 RMB’000 RMB’0 KYH Steel Holding Ltd 27,625 95,068 - - 29,2 TJCIMCZL 21,403 27,800 3,187 - 9,8 MST 9,530 10,247 2,621 (12,868) DLJLL 16,844 22,464 8,225 - 4,2 Xiamen Haitou 11,479 11,311 4,566 - 4,0 TJZL 302,144 400,680 - - 13,3 NBBL 3,579 3,339 - - 6 XYW 2,916 1,431 1,386 - Shanghai Fengyang 12,000 30,505 - - (3,5 TRS Transportkoeling 12,030 12,030 - - 2,6 Eurotank Oy 6,946 6,946 - - 1,0 Fuzhou Haitou 5,179 - 5,179 - (1,6 XMHLC 6,153 - 6,153 - Raffles 636,635 - 636,635 - 8,3 1,074,463 621,821 667,952 (12,868) 68,2 As at 31 December 2008, based on the result of the impairment tests comparing the recoverab term equity investment in jointly ventures and associates, no provision for impairment was con 172 China International Marine Containers (Group) Co., Ltd. Annual Report 20 20 LONG-TERM EQUITY INVESTMENTS (CONTINUED) (3) At 31 December 2008, the Group and Company’s investments in associates are as follows: (continu (a) The associates of the Company’s subsidiaries: (continued) Details of the associates of the Company’s subsidiaries are as follows: The Company’s Registered Subsidiaries’ Organisation Registered Business /paid-in Shareholding Voting Name of investee code place nature capital percentage rights Currency ’000 RM The British KYH Steel Holding Ltd 106755 Virgin Islands LTD HKD 72,289 31.83% 31.83% 6 TJCIMCZL 78939485 Tianjin JV RMB 200,000 36.00% 36.00% DLJLL 2102716968340 Dalian JV RMB 25,000 30.00% 30.00% Xiamen Haitou 776024499 Xianmen JV RMB 15,000 45.00% 45.00% TJZL 600575801 Tianjin JV RMB 322,315 34.00% 34.00% 1,5 NBBL 14432073-2 Ningbo JV RMB 4,000 21.00% 21.00% XYW 871052 HongKong LTD RMB 12,500 20.00% 20.00% Shanghai Fengyang 74269573-7 Shanghai JV RMB 30,000 40.00% 40.00% 5 Fuzhou Haitou 78690210-1 Fuqing JV RMB 11,180 49.0% 49.00% XMHLC 77602449-9 Xiamen JV RMB 83,151 49.00% 49.00% Raffles * (1) 199401560D Singapore LTD SGD 591,428 17.86% 17.86% 7,5 * Raffles is a listed company. As at the reporting date, Raffles' financial statement for the The financial information stated above was sourced from the unaudited interim finan ended 30 June 2008, which is the latest announced financial result. 173 China International Marine Containers (Group) Co., Ltd. Annual Report 20 20 LONG-TERM EQUITY INVESTMENTS (CONTINUED) (3) As at 31 December 2008, the Group and Company’s investments in associates are as follows: (conti (a) The associates of the Company’s subsidiaries: (continued) As at 13 November 2008, the Company acquired 10.00% equity of Yantai Raffles Shipyard its wholly-owned subsidiary, Sharp Vision Holdings Limited at a cash consideration o (equivalent to USD66,561,326). Moreover, as at 28 November 2008, 19 December 2008 an obtained totally 7.86% equity of Raffles at a total cash consideration of Norwegian K USD26,726,789) by acquiring the publicly available shares of Raffles in Norwegian Oslo Sto 2008, the Group held 17.86% equity of Raffles and the fair value of the Group’s identifiabl respective acquisition dates amounted to USD54,106,000 (RMB369,316,736). The exces aforesaid amount of USD39,182,115 (RMB267,945,268) was recognised as goodwill and equity investment in Raffles. Since the Group only had investments in Raffles in late 2008 change in Raffles’ business since acquisitions dates, the Group considered that no impairment Although the Group only has 17.86% equity of Raffles, the Group has significant influences o operational decisions as the Group's President, Mr. Mai Boliang has been appointed as Chairm Raffles in 3 November 2008. Raffles becomes an associate company of the Group since 3 N Raffles is incorporated in Singapore with it’s headquarter and manufacturing plants in Singapo China respectively. Raffles has its shares listed in the Over-The-Counter Market (OTC) in since May 2006. The issued ordinary shares of Raffles amounted to 273,500,000. Raffle fabrication specialist and is the biggest and the third manufacturer in China and in th semi-submersible oceanographic engineering equipment construction business. Raffles ma various marine and offshore projects that include jack-up drilling rigs, semi-submersible dri platform supply vessels, other prototype vessels and luxury yachts. 174 China International Marine Containers (Group) Co., Ltd. Annual Report 20 20 LONG-TERM EQUITY INVESTMENTS (CONTINUED) (4) As at 31 December 2008, other long-term equity investments of the Group and Company are as foll The Group’s 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 18,127 207 Add: addition - - - - 19,167 - Less: disposal 89 - - - - - Effect of foreign exchange rate changes 5 15 - 4 (16) - Balance at the end of the year - 118 1,233 39 37,278 207 -------------- -------------- -------------- -------------- -------------- -------------- Less: Provision for impairment Balance at the beginning and the end of the year - - - - - 207 -------------- -------------- -------------- -------------- -------------- -------------- Carrying amount At the year end - 118 1,233 39 37,278 - At the beginning of the year 84 103 1,233 35 18,127 - 175 China International Marine Containers (Group) Co., Ltd. Annual Report 20 20 LONG-TERM EQUITY INVESTMENTS (CONTINUED) (4) As at 31 December 2008, other long-term equity investments of the Group and Company are as foll The Group’s 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 614 753 9,004 257 132,399 1,512 Add: addition - - - - 132,814 - Less: disposal 614 - - - - - Effect of foreign exchange rate changes - 51 (585) 11 (10,813) (101) Balance at the end of the year - 804 8,419 268 254,400 1,411 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Less: Provision for impairment Balance at the beginning of the year - - - - - 1,512 Effect of foreign exchange rate changes - - - - - (101) Balance at the end of the year - - - - - 1,411 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Carrying amount At the end year of the year - 804 8,419 268 254,400 - At the beginning of the year 614 753 9,004 257 132,399 - 176 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 20 LONG-TERM EQUITY INVESTMENTS (CONTINUED) (4) As at 31 December 2008, other long-term equity investments of the Group and Company are as follows: The Company’s 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 18,111 26,817 Addition during the year - - - - 19,167 19,167 End of the year 207 258 1,233 7,008 37,278 45,984 ------------- ------------- ------------- ------------- ------------- ------------- Less: Provision for impairment Beginning and the end of the year 207 258 - - - 465 ------------- ------------- ------------- ------------- ------------- ------------- Carrying amount At the year end - - 1,233 7,008 37,278 45,519 At the beginning of the year - - 1,233 7,008 18,111 26,352 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 1,512 1,885 9,004 51,181 132,399 195,981 Addition during the year - - - - 132,814 132,814 Effect of foreign exchange rate changes (101) (122) (585) (3,362) (10,813) (14,983) End of the year 1,411 1,763 8,419 47,819 254,400 313,812 ------------- ------------- ------------- ------------- ------------- ------------- Less: Provision for impairment Beginning of the year 1,512 1,885 - - - 3,397 Effect of foreign exchange rate changes (101) (122) - - (223) End of the year 1,411 1,763 - - - 3,174 ------------- ------------- ------------- ------------- ------------- ------------- 177 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 20 LONG-TERM EQUITY INVESTMENTS (CONTINUED) (4) As at 31 December 2008, other long-term equity investments of the Group and Company are as follows: The Company’s 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 - - 8,419 47,819 254,400 310,638 At the beginning of the year - - 9,004 51,181 132,399 192,584 21 INVESTMENT PROPERTY The Group Land use rights Buildings Total USD’000 USD’000 USD’000 Cost: Balance at the beginning of the year 7,132 - 7,132 Transfer from intangible assets 2,004 - 2,004 Transfer from fixed assets - 4,639 4,639 Effect of the foreign exchange rate changes 532 21 553 Balance at the end of the year 9,668 4,660 14,328 ---------------- -------------- -------------- Less: Accumulated depreciation or amortisation Balance at the beginning of the year 419 - 419 Transfer from intangible assets 131 - 131 Transfer from fixed assets - 1,975 1,975 Additions during the year 156 - 156 Effect of the foreign exchange rate changes 34 1 35 Balance at the end of the year 740 1,976 2,716 ---------------- -------------- -------------- Carrying amounts: At the year end 8,928 2,684 11,612 At the beginning of the year 6,713 - 6,713 178 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 21 INVESTMENT PROPERTY (CONTINUED) The Group Land use rights Buildings Total RMB’000 RMB’000 RMB’000 Cost: Balance at the beginning of the year 52,092 - 52,092 Transfer from intangible assets 13,887 - 13,887 Transfer from fixed assets - 32,142 32,142 Effect of the foreign exchange rate changes - (340) (340) Balance at the end of the year 65,979 31,802 97,781 ---------------- -------------- -------------- Less: Accumulated depreciation or amortisation Balance at the beginning of the year 3,061 - 3,061 Transfer from intangible assets 911 - 911 Transfer from fixed assets - 13,688 13,688 Additions during the year 1080 - 1,080 Effect of the foreign exchange rate changes - (203) (203) Balance at the end of the year 5,052 13,485 18,537 ---------------- -------------- -------------- Carrying amounts: At the year end 60,927 18,317 79,244 At the beginning of the year 49,031 - 49,031 179 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 22 FIXED ASSETS The Group Electronic & Plant & Machinery & Motor other buildings equipment vehicles equipment Total USD’000 USD’000 USD’000 USD’000 USD’000 Cost: Balance at the beginning of the year 538,059 552,043 57,057 71,691 1,218,850 Additions through acquisitions of subsidiaries 964 - 178 4,016 5,158 Additions through associate becoming subsidiaries 1,706 - - 195 1,901 Purchase 29,673 25,237 4,411 5,433 64,754 Transfer from construction in progress 103,791 80,560 6,006 6,483 196,840 Transfer from investment property (4,639) - - - (4,639) Disposals (7,781) (17,567) (5,239) (2,105) (32,692) Effect of the foreign exchange rate changes 1,831 10,033 1,191 935 13,990 Balance at the end of the year 663,604 650,306 63,604 86,648 1,464,162 --------------- --------------- --------------- --------------- --------------- Less: Accumulated depreciation: Balance at the beginning of the year 89,964 188,318 28,259 34,466 341,007 Additions through acquisitions of subsidiaries 91 - 134 2,935 3,160 Additions through associate becoming subsidiaries 559 - - 154 713 Charge for the year 28,127 35,284 5,442 6,390 75,243 Transfer from investment property (1,975) - - - (1,975) Written off on disposals (1,363) (7,139) (1,312) (1,658) (11,472) Effect of the foreign exchange rate changes (3,274) 2,653 559 176 114 Balance at the end of the year 112,129 219,116 33,082 42,463 406,790 --------------- --------------- --------------- --------------- --------------- Less: Provision for impairment As at the beginning of the year 3,745 5,563 2 330 9,640 Written off on disposal (327) - - (215) (542) Effect of the foreign exchange rate changes - - - 9 9 Balance at the end of the year 3,418 5,563 2 124 9,107 --------------- --------------- --------------- --------------- --------------- Carrying amount: Balance at the end of the year 548,057 425,627 30,520 44,061 1,048,265 Balance at the beginning of the year 444,350 358,162 28,796 36,895 868,203 180 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 22 FIXED ASSETS (CONTINUED) The Group (continued) Electronic & Plant & Machinery & Motor other buildings equipment vehicles equipment Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Cost: Balance at the beginning of the year 3,930,083 4,032,230 416,759 523,644 8,902,716 Additions through acquisitions of subsidiaries 6,678 - 1,235 27,828 35,741 Additions through associate becoming subsidiaries 11,822 - - 1,353 13,175 Purchase 205,615 174,872 30,568 37,644 448,699 Transfer from construction in progress 719,197 558,225 41,614 44,923 1,363,959 Transfer from investment property (32,142) - - - (32,142) Disposals during the year (53,920) (121,726) (36,305) (14,589) (226,540) Effect of the foreign exchange rate changes (258,634) (205,648) (19,811) (29,497) (513,590) Balance at the end of the year 4,528,699 4,437,953 434,060 591,306 9,992,018 --------------- --------------- --------------- --------------- --------------- Less: Accumulated depreciation: Balance at the beginning of the year 657,104 1,375,511 206,410 251,750 2,490,775 Additions through acquisitions of subsidiaries 630 - 928 20,336 21,894 Additions through associate becoming subsidiaries 3,871 - - 1,066 4,937 Charge for the year 194,903 244,493 37,711 44,281 521,388 Transfer from investment property (13,688) - - - (13,688) Written off on disposals (9,445) (49,471) (9,094) (11,486) (79,496) Effect of the foreign exchange rate changes (68,163) (75,196) (10,189) (16,172) (169,720) Balance at the end of the year 765,212 1,495,337 225,766 289,775 2,776,090 --------------- --------------- --------------- --------------- --------------- Less: Provision for impairment Balance at the beginning of the year 27,357 40,629 17 2,408 70,411 Written off on disposal (2,268) - - (1,491) (3,759) Effect of the foreign exchange rate changes (1,758) (2,666) (2) (75) (4,501) Balance at the end of the year 23,331 37,963 15 842 62,151 --------------- --------------- --------------- --------------- --------------- Carrying amount: Balance at the end of the year 3,740,156 2,904,653 208,279 300,689 7,153,777 Balance at the beginning of the year 3,245,622 2,616,090 210,332 269,486 6,341,530 181 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 22 FIXED ASSETS (CONTINUED) The Company Electronic & Plant & Motor other buildings vehicles equipment Total USD’000 USD’000 USD’000 USD’000 Cost: Balance at the beginning of the year 16,732 2,381 11,031 30,144 Purchase - 180 446 626 Transfer from construction in progress 1,115 - 1,196 2,311 Disposals during the year - - (17) (17) Balance at the end of the year 17,847 2,561 12,656 33,064 ------------- ------------- ------------- ------------- Less: Accumulated depreciation: Balance at the beginning of the year 2,622 923 8,867 12,412 Charge for the year 517 374 574 1,465 Written off on disposals - - (3) (3) Balance at the end of the year 3,139 1,297 9,438 13,874 ------------- ------------- ------------- ------------- Carrying amount Balance at the end of the year 14,708 1,264 3,218 19,190 Balance at the beginning of the year 14,110 1,458 2,164 17,732 182 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 22 FIXED ASSETS (CONTINUED) The Company (continued) Electronic & Plant & Motor other buildings vehicles equipment Total RMB’000 RMB’000 RMB’000 RMB’000 Cost: Balance at the beginning of the year 122,211 17,391 80,573 220,175 Purchase - 1,247 3,090 4,337 Transfer from construction in progress 7,726 - 8,288 16,014 Disposals during the year - - (118) (118) Effect of the foreign exchange rate changes (8,142) (1,161) (5,463) (14,766) Balance at the end of the year 121,795 17,477 86,370 225,642 ------------- ------------- ------------- ------------- Less: Accumulated depreciation: Balance at the beginning of the year 19,151 6,742 64,767 90,660 Charge for the year 3,582 2,592 3,977 10,151 Written off on disposals - - (21) (21) Effect of the foreign exchange rate changes (1,309) (482) (4,314) (6,105) Balance at the end of the year 21,424 8,852 64,409 94,685 ------------- ------------- ------------- ------------- Carrying amount Balance at the end of the year 100,371 8,625 21,961 130,957 Balance at the beginning of the year 103,060 10,649 15,806 129,515 As at 31 December 2008, there was no fixed asset pending for disposal. As at 31 December 2008, the cost of the Group’s fixed assets whose certificates of ownership are pending amounted to USD120,388,837. The group owns the legitimate use rights and disposal rights of the plant and buildings above. As at 31 December 2008, the carrying amounts of the Group’s and the Company’s fixed assets leased out under operating leases were: Electronic & 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 - - - - - Balance at the beginning of the year 630 379 183 872 2,064 183 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 22 FIXED ASSETS (CONTINUED) As at 31 December 2008, the carrying amounts of the Group’s and the Company’s fixed assets leased out under operating leases were: (continued) Electronic & 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 - - - - - Balance at the beginning of the year 4,600 2,770 1,339 6,366 15,075 As at 31 December 2008, the fixed assets of the Group have been restricted for USD134,373,911 (RMB917,021,318). Please refer to Note 29 for details. 23 CONSTRUCTION IN PROGRESS The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Cost: Balance at the beginning of the year 94,946 693,507 43,551 339,922 Additions through acquisitions of subsidiaries - - 7,691 57,802 Additions during the year 248,093 1,719,109 152,345 1,153,960 Transferred to fixed assets (196,840) (1,363,959) (101,229) (766,487) Decrease due to other reasons (8,900) (61,680) (9,534) (72,193) Effect of the foreign exchange rate changes 964 (43,417) 2,122 (19,497) Balance at the end of the year 138,263 943,560 94,946 693,507 ---------------- ---------------- ---------------- ---------------- Carrying amounts: At the end of the year 138,263 943,560 94,946 693,507 At the beginning of the year 94,946 693,507 43,551 339,922 The Company 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Cost: Balance at the beginning of the year 2,094 15,294 508 3,963 Additions during the year 6,440 44,625 2,042 14,758 Transferred to fixed assets (2,311) (16,014) (237) (1,795) Decrease due to other reasons (5,247) (37,243) (219) (1,632) Balance at the end of the year 976 6,662 2,094 15,294 ---------------- ---------------- ---------------- ---------------- Carrying amounts: At the end of the year 976 6,662 2,094 15,294 At the beginning of the year 2,094 15,294 508 3,963 184 China International Marine Containers (Group) Co., Ltd. Annual Report 20 23 Construction in progress (continued) The carrying amounts at the end of the year included capitalised borrowing cost of USD1,400,535 e USD 940,946, equivalent to RMB 7,124,655). The interest rate per annum at which the borrowing c year by the Group was 5.78% (2007: 5.50%). As at 31 December 2008, the group’s construction in progress with restrictions placed on (RMB3,586,645), please refer to Note 29. As at 31 December 2008, the Group’s major construction projects in progress were set out as follows: Effect of the foreign Beginning Transfer to exchange Project Budget balance Additions fixed assets rate changes USD’000 USD’000 USD’000 USD’000 USD’000 HJCIMC Industrial Park 37,439 406 22,091 (6,485) 268 TCCIMC CIP 24,885 1,122 15,078 (544) 303 DLZH pressure container project 54,217 - 10,699 (15) - NTCIMC Large-Sized Tank Co., Ltd 14,952 - 6,389 - - LNVS 2nd project 5,568 3,292 1,930 - 261 NTCIMCT Cylinders project 6,062 882 4,930 (2,574) - Pressure machine 2,134 581 1,093 - - NTCIMCS plants 4,558 - 3,140 - 48 QDRV Plants 4,208 - 2,703 - 42 Plants 3,972 - 2,934 - 45 XASV CIP 5,613 - 1,691 - 26 CQVS Plants 18,466 1,179 14,289 (14,200) - NTCIMC Plants 3,000 95 2,291 (1,185) - 185 China International Marine Containers (Group) Co., Ltd. Annual Report 20 23 Construction in progress (continued) At 31 December 2008, the Group’s major construction in progress were set out as follows: (continued Effect of the foreign Beginning Transfer to exchange Project Budget balance Additions fixed assets rate changes RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 HJCIMC Industrial Park 255,500 2,966 153,075 (44,940) - TCCIMC CIP 169,827 8,196 104,483 (3,767) - DLZH Pressure Container Project 370,000 - 74,133 (103) (1,120) NTCIMC Large-Sized Tank Co., Ltd 102,039 - 44,270 - (670) LNVS 2nd project 38,000 24,044 13,376 - - NTCIMCT Cylinders project 41,372 6,445 34,161 (17,834) (670) Pressure machine 14,564 4,242 7,571 - (393) NT CIMCS plants 31,109 - 21,761 - - QDRV Plants 28,720 - 18,732 - - Plants 27,103 - 20,327 - - XASV CIP 38,306 - 11,720 - - CQVS Plants 126,018 8,615 99,012 (98,393) (575) NTCIMC Plants 20,473 697 15,877 (8,210) (162) 186 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 24 INTANGIBLE ASSETS The Group Technical Timber Land know-how & concession Customer Customer Note use rights trademarks rights relationships contracts Total USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 Cost: Balance at the beginning of the year 255,402 79,279 35,854 3,317 1,605 375,457 Additions through acquisitions of subsidiaries (1) - 10,807 - 13,686 9,568 34,061 Addition for the year 47,697 4,936 - - - 52,633 Transfer to investment property (2,004) - - - - (2,004) Decrease during the year - (396) - - - (396) Effect of foreign exchange rate changes 5,222 (844) 221 - - 4,599 Balance at the end of the year 306,317 93,782 36,075 17,003 11,173 464,350 --------------- --------------- --------------- --------------- --------------- --------------- Less: Accumulated amortisation Balance at the beginning of the year 17,006 6,075 12,355 416 642 36,494 Additions through acquisitions of subsidiaries - 1,245 - - - 1,245 Charge for the year 5,899 11,871 712 2,174 2,103 22,759 Transfer to investment property (131) - - - - (131) Written off on disposal - (47) - - - (47) Effect of foreign exchange rate changes 626 (231) 79 - - 474 Balance at the end of the year 23,400 18,913 13,146 2,590 2,745 60,794 --------------- --------------- --------------- --------------- --------------- --------------- Less: Provision for impairment Balance at the beginning of the year (2) - - 15,811 - - 15,811 Effect of foreign exchange rate changes - - 98 - - 98 Balance at the end of the year - - 15,909 - - 15,909 --------------- --------------- --------------- --------------- --------------- --------------- Carrying amounts: At the end of the year 282,917 74,869 7,020 14,413 8,428 387,647 At the beginning of the year 238,396 73,204 7,688 2,901 963 323,152 187 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 24 INTANGIBLE ASSETS (CONTINUED) The Group (continued) Technical Timber Land use know-how concession Customer Customers Note rights & trademarks rights Relationships contracts Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Cost: Balance at the beginning of the year 1,865,501 579,082 261,875 24,230 11,720 2,742,408 Additions through acquisitions of subsidiaries (1) - 74,883 - 93,441 65,326 233,650 Addition of the year 330,508 34,204 - - - 364,712 Transfer to investment property (13,887) - - - - (13,887) Decrease during the year - (2,745) - - - (2,745) Effect of foreign exchange rate changes (91,695) (45,414) (15,682) (1,636) (801) (155,228) Balance at the end of the year 2,090,427 640,010 246,193 116,035 76,245 3,168,910 --------------- --------------- --------------- --------------- --------------- --------------- Less: Accumulated amortisation Balance at the beginning of the year 124,214 44,370 90,243 3,039 4,688 266,554 Additions through acquisitions of subsidiaries - 9,595 - - - 9,595 Charge for the year 40,873 82,260 4,932 15,067 14,575 157,707 Transfer to investment property (911) - - - - (911) Written off on disposal - (324) - - - (324) Effect of foreign exchange rate changes (4,489) (6,828) (5,461) (428) (529) (17,735) Balance at the end of the year 159,687 129,073 89,714 17,678 18,734 414,886 --------------- --------------- --------------- --------------- --------------- --------------- Less: Provision for impairment Balance at the beginning of the year (2) - - 115,487 - - 115,487 Effect of foreign exchange rate changes - - (6,920) - - (6,920) Balance at the end of the year - - 108,567 - - 108,567s --------------- --------------- --------------- --------------- --------------- --------------- Carrying amounts: At the end of the year 1,930,740 510,937 47,912 98,357 57,511 2,645,457 At the beginning of the year 1,741,287 534,712 56,145 21,191 7,032 2,360,367 188 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 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 4,736 350 5,086 --------------- --------------- --------------- Less: Accumulated amortisation Balance at the beginning of the year 78 64 142 Charge for the year 99 11 110 Balance at the end of the year 177 75 252 --------------- --------------- --------------- Carrying amounts: At the end of the year 4,559 275 4,834 At the beginning of the year 4,658 286 4,944 Technical know-how & Land use rights trademarks Total RMB’000 RMB’000 RMB’000 Cost: Balance at the beginning of the year 34,593 2,556 37,149 Effect of foreign exchange rate changes (2,279) (167) (2,446) Balance at the end of the year 32,314 2,389 34,703 --------------- --------------- --------------- Less: Accumulated amortisation Balance at the beginning of the year 574 467 1,041 Effect of foreign exchange rate changes (52) (31) (83) Balance at the end of the year 1,201 512 1,713 --------------- --------------- --------------- Carrying amounts: At the end of the year 31,113 1,877 32,990 At the beginning of the year 34,019 2,089 36,108 189 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 24 INTANGIBLE ASSETS (CONTINUED) (1) In 2008, the Group acquired TGE SA (see Note 6(2)) whose intangible assets are measured at assessed value in consolidation financial statement, the following are the intangible assets with value in excess of USD 1 million: Original value valuation method USD’000 RMB’000 Technical know-how 8,667 59,177 discounted cash flow Customer relationship 13,686 93,441 discounted cash flow Customer contracts 9,568 65,326 discounted cash flow 31,921 217,944 TGE SA’s intangible assets were valued by Rentrop & Partner KG. (2) The timber concession right amounted to USD18,585,711, in respect of the 450,000 acres in Suriname was acquired 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 government of Suriname had taken back the timber concession right in 2003. The Company had negotiated with government to substitute the 75,000 acres with other locations. Since there are clear results of the negotiation, the provision of impairment for USD2,116,985 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 tights in Cambodia amounting to USD17,488,983. 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 USD13,791,719 was made on the carrying value of the related concession rights. (3) As at 31 December 2008, there were no intangible assets with indefinite useful lives. 190 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 25 GOODWILL The Group 2008 2007 Amount Amount Amount Amount USD’000 RMB’000 USD’000 RMB’00 Cost: Balance at the beginning of the year 135,646 991,139 39,384 307,694 Addition for the year 35,757 247,769 96,262 703,115 Effect of foreign exchange exchange rate changes (1,096) (76,666) - (19,670) Balance at the end of the year 170,307 1,162,242 135,646 991,139 ------------- ------------- ------------- ------------- Less: Provision for impairment Balance at the beginning of the year 1,757 13,190 1,757 14,012 Effect of foreign exchange - (1,199) - (822) Balance at the end of the year 1,757 11,991 1,757 13,190 ------------- ------------- ------------- ------------- Carrying amounts: At the end of the year 168,550 1,150,251 133,889 977,949 At the beginning of the year 133,889 977,949 37,627 293,682 The Group paid USD144,291,628 (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, amounted to USD92,113,833 (RMB701,034,168), was recognised as goodwill attributable to Enric. (a) The recoverable amount of Enric is determined based on the present value of expected future cash flow. The present value of expected future cash flow was projected based on the most recent ten-year financial budgets approved by management of the Group and a pre tax discount rate of 5.94%. The cash flow beyond the ten-year budget period was assumed to keep stable. As key assumptions on which management has made the future cash projections are subject to change, management believes that any adverse change in the key assumptions would cause the carrying amount to exceed its recoverable amount. The calculation of present value of expected future cash flows of Enric was based on 23% of gross profit ratio and 20% of operating sales incensement as the assumption, which determined by management on the basis of past performance before the budget period. 191 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 25 GOODWILL (CONTINUED) (b) Goodwill of TGE SA The Group paid USD35,605,021 (RMB243,096,841) as combination cost for the 60% equity interests in TGE SA in 2008. The excess of combination cost over the Group’s interest in the fair value of TGE SA’s identifiable assets and liabilities, amounted to USD13,188,894 (RMB90,048,493), was recognized as good will attributable to TGE SA. The good will together with which comes from TGE SA regroup, amounted to USD15,197,477 (RMB103,759,294) are USD28,386,371 (RMB193,807,787). Since the Group only purchased TGE SA’s interests in late 2008 and there has been no adverse trend in TGE SA’s business, no impairment was considered necessary for the goodwill. 26 LONG-TERM DEFERRED EXPENSES The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Water and electricity capacity expenses 317 2,163 382 2,787 Rent 2,646 18,058 1,728 12,624 Others 2,783 18,989 2,803 20,479 5,746 39,210 4,913 35,890 The Company 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Golf club membership fees and others 1,492 10,184 1,016 7,421 192 China International Marine Containers (Group) Co., Ltd. Annual Report 20 27 DEFERRED TAX ASSETS AND LIABILITIES The Group Deferred tax assets / (liabilities Increased Increase/ Increase/ Increase/ due to decrease decrease decrease Opening consolidation charge to charge recongnized balance of subsidiary profit or loss to equity in goodwill USD’000 USD’000 USD’000 USD’000 USD’000 Provision for bad and doubtful debts 7,307 - (714) - - Provision for diminution in value of inventories 1,145 - 12,800 - - Provision for impairment against fixed assets and construction in progress 1,664 - 155 - - Provisions 12,603 - (337) - - Employee benefits payable 14,470 - (47) - - Tax loss carry-forward 548 - 1,747 - - Movement for fair value of available for sale financial assets (100,782) - - 69,664 - Movement for fair value of financial assets held for trade (10,766) - 21,533 - - Revaluation gain through combination (55,031) - 2,211 - (10,087) Movement for fair value of hedge instruments (1,523) - - 716 - Estimated dividend income earned by non-resident foreign enterprise - - (8,149) - - Others 2,814 (2,518) 1,350 - - Total (127,551) (2,518) 30,549 70,380 (10,087) 193 China International Marine Containers (Group) Co., Ltd. Annual Report 20 27 DEFERRED TAX ASSETS AND LIABILITIES (CONTINUED) The Group (continued) Deferred tax assets / (liabilities Increased Increase/ Increase/ Increase/ due to decrease decrease decrease Opening consolidation charge to charge recongnized balance of subsidiary profit or loss to equity in goodwill RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Provision for bad and doubtful debts 53,372 - (4,950) - - Provision for diminution in value of inventories 8,365 - 88,692 - - Provision for impairment against fixed assets and construction in progress 12,152 - 1,075 - - Provisions 92,055 - (2,336) - - Employee benefits payable 105,692 - (323) - - Tax loss carry-forward 4,005 12,104 - - Movement for fair value of available for sale financial assets (736,139) - - 482,724 - Movement for fair value of financial Assets held for trade (78,637) - 149,208 - - Revaluation gain through combination (401,962) 15,323 - (68,870) Movement for fair value of hedge instruments (11,124) - - 4,964 - Estimated dividend income earned by Non-resident foreign enterprise - - (56,468) - - others 20,562 (17,192) 9,355 - - Total (931,659) (17,192) 211,680 487,688 (68,870) 194 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 27 DEFERRED TAX ASSETS AND LIABILITIES (CONTINUED) The Company Deferred tax assets (liabilities) Current year increase/ Current year decrease increase/ Ending charged to decrease balances of Opening profit or loss recognized Ending temporary balance in equity directly balance difference USD’000 USD’000 USD’000 USD’000 USD’000 Employee benefits payable 7,991 (919) - 7,072 35,360 Financial assets held for trade (2,068) 2,068 - - - Financial liabilities held for trade 579 5,432 - 6,011 30,055 Available for sale financial assets (100,783) - 69,665 (31,118) (155,592) Total (94,281) 6,581 69,665 (18,035) (90,177) Deferred tax assets (liabilities) Current year increase/ Current year decrease increase/ Effect of Ending charged to decrease foreign balances of Opening profit or loss recognized Ending exchange temporary balance in equity directly balance rate changes difference RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Employee benefits payable 58,371 (6,372) - (3,737) 48,262 241,309 Financial assets held for trade (15,109) 14,336 - 773 - - Financial liabilities held for trade 4,230 37,640 - (848) 41,022 205,109 Available for sale financial assets (736,139) - 523,774 - (212,365) (1,061,825) Total (688,647) 45,604 523,774 (3,812) (123,081) (615,407) At the balance sheet date, the deferred tax assets and liabilities on the balance sheet, after offsetting each other, were as follows: The Group 2008 2007 Amount Amount Amount Amount USD’000 RMB’000 USD’000 RMB’000 Deferred tax assets, net 52,586 358,871 24,015 175,410 Deferred tax liabilities, net (88,708) (605,379) (151,566) (1,107,069) Total (36,122) (246,508) (127,551) (931,659) 195 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 27 DEFERRED TAX ASSETS AND LIABILITIES (CONTINUED) The Company 2008 2007 Amount Amount Amount Amount USD’000 RMB’000 USD’000 RMB’000 Deferred tax liabilities, net 18,035 123,081 94,281 688,647 In accordance with the accounting policy set out in Note 3(15), 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: 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Tax loss carry-forwards 27,707 189,083 18,752 136,968 Deductible temporary difference - Impairment losses of timber concession rights 8,463 57,755 8,463 61,815 - Other 4,081 27,853 516 3,769 Total 40,251 274,691 27,731 202,552 The tax loss carry-forwards will expire before 2013 under current tax law. At 31 December 2008, the Group had no unrecognized deferred tax liabilities. 28 PROVISIONS FOR IMPAIRMENT As at 31 December 2008, the provisions for impairment of the Group are set out as follows: Addition Effect of Balance at though acq- foreign Balance the beginning Charge for Decrease -uisitions of exchange at the end Notes of the year the year during the year subsidiaries rate changes of the year Item Reversal Write off USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 Receivables 10,11,14 31,534 9,197 (8,895) (157) - 4,384 36,063 Current assets due within one year 16 - 119 - - - - 119 Long-term receivables 19 14 1,252 - - - (1) 1,265 Inventories 15 6,994 100,859 (1,201) (3,386) - 427 103,693 Long-term equity investments 20 465 - - - - - 465 Fixed assets 22 9,640 - - (542) - 9 9,107 Intangible assets 24 15,811 - - - - 98 15,909 Good will 25 1,757 - - - - - 1,757 Total 66,215 111,427 (10,096) (4,085) - 4,917 168,378 196 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 28 PROVISIONS FOR IMPAIRMENT (CONTINUED) Addition Effect of Balance at though acq- foreign Balance the beginning Charge for Decrease -uisitions of exchange at the end Notes of the year the year during the year subsidiaries rate changes of the year Item Reversal Write off RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Receivables 10,11,14 230,331 63,729 (61,633) (1,096) - 14,778 246,109 Current assets due within one year 16 - 825 - - - (13) 812 Long-term receivables 19 102 8,669 - - - (138) 8,633 Inventories 15 51,084 698,881 (8,320) (23,462) - (10,542) 707,641 Long-term equity investments 20 3,397 - - - - (223) 3,174 Fixed assets 22 70,411 - - (3,759) - (4,501) 62,151 Intangible assets 24 115,487 - - - - (6,920) 108,567 Good will 25 13,190 - - - - (1,199) 11,991 Total 484,002 772,104 (69,953) (28,317) - (8,758) 1,149,078 As at 31 December 2008, the provisions for impairment losses of the Company are set out below: Balance at Balance the beginning Charge for Decrease at the end Item Notes of the year the year during the year of the year Reversal Write off USD’000 USD’000 USD’000 USD’000 USD’000 Receivables 14 691 - - - 691 Long-term equity investments 20 465 - - - 465 Total 1,156 - - - 1,156 Effect of Balance at foreign Balance the beginning Charge for Decrease exchange at the end Notes of the year the year during the year rate changes of the year Item Reversal Write off RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Receivables 14 5,048 - - - (331) 4,717 Long-term equity investments 20 3,397 - - - (223) 3,174 Total 8,445 - - - (554) 7,891 Please refer to the respective notes of the assets for reasons of provisioning. 197 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 29 RESTRICTED ASSETS As at 31 December 2008, the Group’s assets with restrictions placed on their ownership are as follows: Effect of Balance at Decrease foreign Balance the beginning Charge during exchange at the end Notes of the year for the year the year rate changes of the year USD’000 USD’000 USD’000 USD’000 USD’000 Assets guaranteed - Cash at bank and on hand 7 5,351 71,057 (30,467) (5,032) 40,909 - Bills receivable 9 67,850 114,908 (64,936) 1,696 119,518 - Accounts receivable 10 78,046 482,478 (554,891) - 5,633 - Inventories 15 115,312 25,430 (115,312) 73 25,503 - Fixed assets 22 25,844 108,530 - - 134,374 - Construction In progress 23 - 526 - - 526 Total 292,403 802,929 (765,606) (3,263) 326,463 Effect of Balance at Decrease foreign Balance the beginning Charge during exchange at the end Notes of the year for the year the year rate changes of the year RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Assets guaranteed - Cash at bank and on hand 7 39,084 492,374 (211,112) (41,168) 279,178 - Bills receivable 9 495,588 796,232 (449,960) (26,219) 815,641 - Accounts receivable 10 570,063 3,343,237 (3,845,010) (29,850) 38,440 - Inventories 15 842,264 176,215 (799,033) (45,402) 174,044 - Fixed assets 22 188,770 752,037 - (23,786) 917,021 - Construction In progress 23 - 3,645 - (58) 3,587 Total 2,135,769 5,563,740 (5,305,115) (166,483) 2,227,911 The above inventories, fixed assets and construction in progress were secured for bank facilities. Refer to Note 30 and Note 40 for short-term and long term secured loans analysis. 198 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 30 SHORT-TERM LOANS The Group 2008 2007 Annual Exchange Exchange interest rate Principal rate USD RMB Principal rate USD RMB ’000 ’000 ’000 ’000 ’000 ’000 Bank loans RMB 3.51% ~ 7.47% 845,094 6.8244 123,834 845,094 654,857 7.3042 89,655 654,857 3.94% ~ 8.45% LIBOR+0 ~ USD 120BPs 54,789 1.0000 54,789 373,902 219,747 1.0000 219,747 1,605,076 3.43% ~ JPY 4.00% 1,219,390 90.90 13,415 91,547 160,643 111.39 1,442 10,534 5.65% EUR 7.6% 76,781 0.7171 107,078 730,749 39,954 0.6849 58,335 426,092 EURIBOR+ 90~145BPs HIBOR+60 ~ HKD 150BPs 186,173 7.7497 24,023 163,944 - 7.7974 - - AUD 7.56% 300 1.4102 213 1,452 - 1.1405 - - 323,352 2,206,688 369,179 2,696,559 The Company 2008 2007 Annual Exchange Exchange interest rate Principal rate USD RMB Principal rate USD RMB ’000 ’000 ’000 ’000 ’000 ’000 Bank loans RMB 3.51% 100,000 6.8244 14,653 100,000 - 7.3042 - - No amount due to shareholders who hold 5% or more of the voting rights of the Company is included in the above balance of short-term loans. The Group Note 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Guarantee loans (1) - RMB 52,781 360,200 51,808 378,418 - USD 7,451 50,849 27,490 200,791 - JPY 4,713 32,162 - - - EUR 6,873 46,901 - - Secured loans (2) - USD 16,200 110,555 18,165 132,683 - EUR 99,754 680,765 54,070 394,941 Pledge loans - RMB 16 110 25,867 188,939 - USD 3,363 22,952 25,185 183,956 199 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 30 SHORT-TERM LOANS (CONTINUED) The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’00 Credit loans - RMB 47,641 325,123 11,979 87,500 - USD 27,775 189,546 148,907 1,087,647 - JPY 8,702 59,385 1,443 10,533 - EUR 451 3,083 4,265 31,151 - HKD 24,023 163,944 - - - AUD 213 1,452 - - Other loans (3) - RMB 23,396 159,661 - - 323,352 2,206,688 369,179 2,696,559 The Company 2008 2007 Amount Amount Amount Amount USD’000 RMB’000 USD’000 RMB’00 Credit loans - RMB 14,653 100,000 - - (1) As at 31 December 2008, guarantee loans of the Group include bank loan amounted to USD27,739,165 guaranteed by the Company for its subsidiary. USD38,078,426 of bank loan guaranteed by HI for its subsidiary and USD6,000,000 guaranteed by CIMC (HK) for CIMC USA. (2) As at 31 December 2008, in secured loans of the Group, except for the guarantee from CIMC (HK), Vanguard also obtained loans amounted to USD16,200,000 from Bank of Communications, New York Branch and secured by its real estate; Burg obtained loans amounted to UER71,529,089 (USD99,754,468) secured by its fixed assets and construction in progress. (3) As at 31 December 2008, the Group’s other short-term loans was secured by the bills receivable of subsidiaries under HI. 200 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 31 FINANCIAL LIABILITIES HELD FOR TRADING The Group Note 2008 2007 Amount Amount Amount Amount USD’000 RMB’000 USD’000 RMB’000 Derivative financial liabilities - foreign future contracts 8(1) 27,606 188,396 43,110 314,880 - metal - nickel exchange option (1) 1,559 10,640 713 5,211 - swap contract for interest rate (2) 15,027 102,548 - - - foreign exchange option (3) 15,805 107,859 2,504 18,288 Total 59,997 409,443 46,327 338,379 The Company Note 2008 2007 Amount Amount Amount Amount USD’000 RMB’000 USD’000 RMB’000 Derivative financial liabilities - foreign future contracts 8(1) 703 4,802 - - - metal - nickel exchange option (1) - - 713 5,211 - swap contract for interest rate (2) 13,547 92,448 - - - foreign exchange option (3) 15,805 107,859 2,504 18,288 Total 30,055 205,109 3,217 23,499 (1) Nickel-containing stainless steel is the Group’s major raw material in its productions and the price of nickel-containing stainless steel fluctuates with reference to the nickel market price. The Group aims to improve its control and management on procurement costs by developing a price-risk management approach for nickel, in which the Group would buy nickel forward contracts through one of its wholly owned subsidiary, CIMC (HK). As at 31 December 2008, the Group had 2 open forwards contract of nickel. According to the terms of these contracts, the Group is entitled to purchase 20 tons and 25 tons of nickel respectively at the agreed prices on the settlement dates. If the average market price of nickel in London Metal Exchange (“the average market price”) at the settlement date is lower than the agreed price, the Group is required to purchase 20 tons and 25 tons of nickel respectively at the agreed prices. These forwards contracts will be settled on a net basis by comparing the average market price at the settlement dates and the agreed prices. The settlement dates of the aforesaid forwards contracts are 30 January 2009 and 31 March 2009 respectively and, subject to mutual agreements of the Group and the counter parties, these forward contracts can be settled in periods earlier than the settlement dates. As at 31 December 2008, the Group recognised the aforesaid forwards contracts in their fair values of USD1,559,054 as expenses and financial liabilities held for trading. Transaction costs on realisation have not been considered when calculating the fair values. 201 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 31 FINANCIAL LIABILITIES HELD FOR TRADING (CONTINUED) (2) As at 31 December 2008, the Group had 9 open interest rate swap contracts (including eight contracts held by the Company) denominated in U.S. dollars. The nominal value of these contracts amounted to USD 390,000,000. The settlement dates of these interest rate swap contracts range from 23 May 2012 to 23 December 2013. As at 31 December 2008, the Group recognised the aforesaid contracts in their fair values of USD15,026,773 (including USD13,546,708 related to the Company) as expenses and financial liabilities held for trading. Transaction costs on realisation have not been considered when calculating the fair values. (3) As at 31 December 2008, the Company had 14 open forward contracts denominated in Japanese Yen. The nominal value of these contracts amounted to Japanese Yen 4,300,000,000. Pursuant to these forward contracts, the Company is entitled to buy U.S. dollar at an amount equivalent to contracted nominal value at agreed rates at the contract settlement dates where the market spot rates at the settlement dates are higher than the agreed rates. These forwards contracts are not executed where the market spot rates at the settlement dates are equal to or lower than the agreed rates. The settlement dates of the aforesaid forwards contracts range from 23 September 2009 to 23 October 2010. Moreover, the Company had 1 open forward contract denominated in Japanese Yen. The nominal value of this contract amounted to Japanese Yen 300,000,000. Pursuant to this forward contract, the Company is entitled to buy U.S. dollar at an amount equivalent to contracted nominal value at agreed rate at the contract settlement date where the market spot rate at the settlement date is higher than the agreed rate. The Company is required to buy U.S. dollar at an amount equivalent to Japanese Yen 600,000,000 at agreed rate at the contract settlement date where the market spot rate at the settlement date is lower than the agreed rate. The settlement date of the aforesaid forward contract is 29 October 2009. As at 31 December 2008, the Group recognised the aforesaid 15 forwards contracts in their fair values of USD15,804,840 as expenses and financial liabilities held for trading. Transaction costs on realisation haven not been considered when calculating the fair values. 32 BILLS PAYABLE The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Bank acceptance bills 137,541 938,635 338,273 2,470,814 Commercial acceptance bills 10,963 74,813 7,406 54,095 148,504 1,013,448 345,679 2,524,909 The above bills are due within one year. No amount due to the shareholders who hold 5% or more of the voting rights of the Company is included in the above balance of bills payable. 202 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 33 ACCOUNTS PAYABLE The currency analysis of the Group’s accounts payable is as follows: 2008 2007 Original Exchange Original Exchange Currency currency rate USD RMB currency rate USD RMB ’000 ’000 ’000 ’000 ’000 ’000 RMB 2,882,473 6,8244 422,377 2,882,473 4,681,119 7.3042 640,881 4,681,119 USD 212,224 1.0000 212,224 1,448,301 271,225 1.0000 271,225 1,981,086 HKD 15,407 7.7497 1,988 13,568 664 7.7974 85 622 JPY 25,797 90.90 284 1,937 280 111.39 2 15 EUR 3,665 0.7171 5,112 34,885 29,702 0.6849 43,368 316,768 AUD 1,637 1.4102 1,162 7,922 - - - - Others - - 319 2,180 - - - - 643,466 4,391,266 955,561 6,979,610 No amount due to shareholders who hold 5% or more of the voting rights of the Company is included in the balance of accounts payable 34 ADVANCES FROM CUSTOMERS No amount due to shareholders who hold 5% or more of the voting rights of the Company is included in the balance of advances from customers. At 31 December 2008, there was no significant advances more than one year past due. 35 EMPLOYEE BENEFITS PAYABLE The Group Effect of Balance at Accrued Paid foreign Balance at the beginning during during exchange the end of of the year the year the year rate changes the year USD’000 USD’000 USD’000 USD’000 USD’000 Salaries, bonuses, and allowances 87,769 351,217 (380,809) 2,745 60,922 Senior management bonus 26,601 - (1,984) - 24,617 Social insurances and others 13,871 66,506 (55,276) 330 25,431 Total 128,241 417,723 (438,069) 3,075 110,970 The Group Effect of Balance at Accrued Paid foreign Balance at the beginning during during exchange the end of of the year the year the year rate changes the year RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Salaries, bonuses, and allowances 641,082 2,511,771 (2,639,111) (85,221) 428,521 Senior management bonus 194,298 - (13,748) (12,554) 167,996 Social insurances and others 101,308 460,840 (383,024) (18,334) 160,790 Total 936,688 2,972,611 (3,035,883) (116,109) 757,307 203 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 35 EMPLOYEE BENEFITS PAYABLE (CONTINUED) The Company Balance at Accrued Paid Balance at the beginning during during the end of of the year the year the year the year USD’000 USD’000 USD’000 USD’000 Salaries, bonuses, and allowances 18,165 1,089 (8,509) 10,745 Senior management bonus 26,601 - (1,984) 24,617 Social insurances and others 59 1,170 (1,231) (2) 44,825 2,259 (11,724) 35,360 The Company Effect of Balance at Accrued Paid foreign Balance at the beginning during during exchange the end of of the year the year the year rate changes the year RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Salaries, bonuses, and allowances 132,683 7,546 (58,961) (7,941) 73,327 Senior management bonus 194,298 - (13,748) (12,554) 167,996 Social insurances and others 431 8,107 (8,239) (313) (14) 327,412 15,653 (80,948) (20,808) 241,309 36 DIVIDENDS PAYABLE The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Minority shareholders of subsidiaries 4,756 32,456 1,408 10,285 204 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 37 OTHER PAYABLES (1) The nature analysis of the Group’s other payables is as follows: The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’00 Quality guarantees 18,918 129,105 9,090 66,398 Deposits 22,531 153,761 5,125 37,437 Advance received 28,610 195,246 6,774 49,480 Transportation 25,833 176,296 30,395 222,013 Equipment or land use rights 32,522 221,941 20,709 151,264 Accruals 35,665 243,391 38,922 284,293 Housing maintenance fees 2,056 14,029 1,806 13,194 Current account with subsidiary’s minority shareholder and consideration for equity investment payable 35,378 241,436 4,473 32,669 Professional and training fees 1,888 12,885 10,546 77,029 Others 28,633 195,387 63,233 461,874 Total 232,034 1,583,477 191,073 1,395,651 The Company 2008 2007 USD’000 RMB’000 USD’000 RMB’00 Consideration for equity investment payable 16,400 111,920 - - Others 4,269 29,128 11,063 80,806 20,669 141,048 11,063 80,806 No amount due to the shareholders who hold 5% or more of the voting rights of the Company is included in the above balance of other payables (2) The currency analysis of the Group’s other payables is as follows: The Group 2008 2007 Original Exchange Original Exchange currency rate USD RMB currency rate USD RMB ’000 ’000 ’000 ’000 ’000 ’000 RMB 667,824 6.8244 97,860 667,824 1,028,688 7.3042 140,834 1,028,688 USD 51,237 1.0000 92,477 631,100 28,392 1.0000 28,392 207,394 HKD 19,097 7.7497 2,464 16,817 28,630 7.7974 3,672 26,819 JPY 460 90.90 5 34 280 111.39 3 18 EUR 25,583 0.7171 35,679 243,486 12,446 0.6849 18,172 132,732 AUD 4,967 1.4102 3,522 24,038 - - - - Others 27 178 - - - - 232,034 1,583,477 191,073 1,395,651 205 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 37 OTHER PAYABLES (CONTINUED) (2) The currency analysis of the Group’s other payables is as follows: The Company 2008 2007 Original Exchange Original Exchange currency rate USD RMB currency rate USD RMB ’000 ’000 ’000 ’000 ’000 ’000 RMB 23,851 6.8244 3,496 23,851 75,160 7.3042 10,290 75,160 USD 17,154 1.0000 17,154 117,065 758 1.0000 758 5,537 HKD 144 7.7497 19 132 117 7.7974 15 109 20,669 141,048 11,063 80,806 38 PROVISIONS The Group Effect of Balance at the Payments Reversal foreign Balance at beginning of Charges during during exchange the end of Notes the year for the year the year the year rate changes the year USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 Current Warranties for product quality(1) 84,265 34,311 (5,150) (32,579) 543 81,390 Guarantees for - third parties (2) 1,484 - - - - 1,484 Others - 2,888 (1,711) - (81) 1,096 Subtotal 85,749 37,199 (6,861) (32,579) 462 83,970 --------------- --------------- --------------- --------------- --------------- --------------- Non-current (3) - 6,034 - (32,579) 30 6,064 --------------- --------------- --------------- --------------- --------------- --------------- Total 85,749 43,233 (6,861) (32,579) 492 90,034 Effect of Balance at the Payments Reversal foreign Balance at beginning of Charges during during exchange the end of Notes the year for the year the year the year rate changes the year RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Current Warranties for product quality(1) 615,491 237,750 (35,686) (255,749) (36,365) 555,441 Guarantees for third parties (2) 10,836 - - - (709) 10,127 Others - 20,012 (11,856) - (678) 7,478 Subtotal 626,327 257,762 (47,542) (225,749) (37,752) 573,046 --------------- --------------- --------------- --------------- --------------- --------------- Non-current (3) - 41,811 - - (428) 41,383 --------------- --------------- --------------- --------------- --------------- --------------- Total 626,327 299,573 (47,542) (225,749) (38,180) 614,429 206 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 38 PROVISIONS (CONTINUED) (1) The Group provides after-sales repair warranty to the customers, ranging from two to seven years for containers, one year for trailers, one to seven years for tank equipments and one to two years for airport ground facilities. The Group will provide repair and maintenance services in accordance with sales contracts during the warranty period in the event of any non-accidental breakdown or quality problems. The balance of “Provisions - Warranties for product quality” represents the Group’s estimated obligation for such warranty. (2) The amount represents the possible loss for a bank guarantee letter issued by the Company’s subsidiary - Shenzhen CIMC Tianda Airport Equipment Co., Ltd. (3) Sharp Vision Holdings Limited, the wholly owned subsidiary of the Company, makes a provision for contingent consideration in respect of its acquisition of TGE SA (see Note 6(2)). 39 NON-CURRENT LIABILITIES DUE WITHIN ONE YEAR The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Long-term loans - Credit loans 28,186 192,358 184,839 1,350,100 - Guarantee loans 11,430 78,000 2,464 18,000 Total 39,616 270,358 187,303 1,368,100 The Company 2008 2007 USD’000 RMB’000 USD’000 RMB’00 Long-term loans - Credit loans 25,578 174,557 173,339 1,266,100 The analysis of loans due within one year is set out as follows: The Group 2008 2007 Annual Original Exchange Original Exchange interest rate currency rate USD currency rate USD ’000 ’000 ’000 ’000 Bank loans - RMB 6.24% ~ 6.72% 78,000 6.8244 11,430 1,350,100 7.3042 184,839 - USD LIBOR+30 ~ 90BPs 20,028 1.0000 20,028 2,464 1.0000 2,464 - EUR EURIBOR+65BPs 4,000 0.7171 5,578 - - - - HKD HIBOR+33BPs 20,000 7.7497 2,580 - - - 39,616 187,303 207 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 39 NON-CURRENT LIABILITIES DUE WITHIN ONE YEAR The Company 2008 2007 Annual Original Exchange Original Exchange interest rate currency rate USD currency rate USD ’000 ’000 ’000 ’000 Bank loans - RMB - - - 1,266,100 7.3042 173,339 - USD LIBOR+90BPs 20,000 1.0000 20,000 - - - - EUR EURIBOR+65BPs 4,000 0.7171 5,578 - - - 25,578 173,339 40 LONG-TERM LOANS The Group Note 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Bank loans - Credit loans 956,599 6,528,215 530,773 3,876,871 - Guarantee loans - - 12,869 94,000 - Secured loans (1) 2,931 20,000 67,282 491,438 Total 959,530 6,548,215 610,924 4,462,309 The Company 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Bank loans - Credit loans 879,629 6,002,938 435,042 3,177,637 (1) As at 31 December 2008, CIMC Tianyu obtained bank loan amounted to RMB20, 000,000 (USD2, 930,661) from ICBC Jiangmen branch, which was secured by its own land use rights, the mature date is 2 September 2011. The Group 2008 2007 Annual Original Exchange Original Exchange interest rate currency rate USD currency rate USD ’000 ’000 ’000 ’000 Bank loans - RMB 3.51%~9.07% 1,192,000 6.8244 174,668 94,491 7.3042 12,937 - USD LIBOR+30~170BPs 686,000 1.0000 686,000 400,000 1.0000 400,000 - HKD HIBOR~33BPs 550,000 7.7497 70,970 745,924 7.7974 95,663 - EUR EURIBOR+65BPs 20,000 0.7171 27,892 70,082 0.6849 102,324 959,530 610,924 208 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 40 LONG-TERM LOANS (CONTINUED) The Company 2008 2007 Annual Original Exchange Original Exchange interest rate currency rate USD currency rate USD ’000 ’000 ’000 ’000 Bank loans - RMB 3.51%~ 4.23% 1,172,000 6.8244 171,737 - - - - USD LIBOR+30~90BPs 680,000 1.0000 680,000 400,000 1.0000 400,000 - EUR EURIBOR+65BPs 20,000 0.7171 27,892 24,000 0.6849 35,042 879,629 435,042 The maturity analysis of the Group’s and the Company’s long-term loans, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating based on rates current at the balance sheet date), is set out below: The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Due after 1 year but within 2 years (inclusive) 163,319 1,114,555 131,245 958,642 Due after 2 years but within 3 years (inclusive) 461,356 3,148,478 183,367 1,339,352 Due after 3 years 606,341 4,137,912 372,013 2,717,258 Contractual undiscounted cash flows 1,231,016 8,400,945 686,625 5,015,252 Carrying amounts 959,530 6,548,215 610,924 4,462,309 The Company 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Due after 1 year but within 2 years (inclusive) 148,020 1,010,146 27,191 198,612 Due after 2 years but within 3 years (inclusive) 360,939 2,463,194 145,298 1,061,284 Due after 3 years 418,394 2,855,285 320,947 2,344,260 Contractual undiscounted cash flow 927,353 6,328,625 493,436 3,604,156 Carrying amount 879,629 6,002,938 435,042 3,177,637 No amount due to the shareholders who hold 5% or more of the voting rights of the Company is included in the above balance of long-term loans. 209 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 41 DEFERRED INCOME The Group Effect of Balance at Additions Settlements foreign Balance at the beginning during during exchange the end of the year the year the year rate changes of the year USD’000 USD’000 USD’000 USD’000 USD’000 Government grants 1,586 4,257 (2,875) 63 3,031 Effect of Balance at Additions Settlements foreign Balance at the beginning during during exchange the end of the year the year the year rate changes of the year RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Government grants 11,587 29,497 (20,196) (203) 20,685 The Company Effect of Balance at Additions Settlements foreign Balance at the beginning during during exchange the end of the year the year the year rate changes of the year USD’000 USD’000 USD’000 USD’000 USD’000 Government grants 725 - (725) - - Effect of Balance at Additions Settlements foreign Balance at the beginning during during exchange the end of the year the year the year rate changes of the year RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Government grants 5,295 - (5,473) 178 - 42 SPECIAL PAYABLES The Group Effect of Balance at Additions Settlements foreign Balance at the beginning during during exchange the end of the year the year the year rate changes of the year USD’000 USD’000 USD’000 USD’000 USD’000 Project funds 1,003 262 - - 1,265 Effect of Balance at Additions Settlements foreign Balance at the beginning during during exchange the end of the year the year the year rate changes of the year RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Project funds 7,327 1,815 - (509) 8,633 210 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 43 SHARE CAPITAL The Company’s share capital status at 31 December is as follows: Changes of Balance at the Additions shares subject to Balance at the beginning of the year during the year selling restrictions end of the year Original Original Original Original currency USD currency USD currency USD currency USD RMB’000 ’000 RMB’000 ’000 RMB’000 ’000 RMB’000 ’000 Shares subject to selling restrictions - Shares held by overseas legal persons 299,052 37,133 - - (133,120) (16,251) 165,932 20,882 - Shares held by domestic natural persons 620 77 - - - - 620 77 Shares not subject to selling restrictions - RMB-denominated ordinary shares 932,245 114,962 - - 133,120 16,251 1,065,365 131,213 - Domestically listed foreign shares 1,430,479 176,700 - - - - 1,430,479 176,700 2,662,396 328,872 - - - - 2,662,396 328,872 44 CAPITAL RESERVE The Group Balance at Additions Settlements Balance at the beginning during during the end of of the year the year the year the year USD’000 USD’000 USD’000 USD’000 Share premiums 21,245 - - 21,245 Other capital reserves - Property revaluation reserve 6,640 - - 6,640 - Exchange reserve on foreign currency capital 105 - - 105 - Donated non-cash assets reserve 39 - - 39 - Net changes in fair value of available-for-sale financial assets 503,913 - (356,838) 147,075 - Effective portion of changes in fair value of cash flow hedges 9,818 - (1,752) 8,066 - Deferred tax effect (109,715) 77,790 - (31,925) - Equity settled share-based payment 2,399 - - 2,399 - Capital reserves due to minority shareholders’ contribution 11,992 - - 11,992 - Capital reserves due to acquirement of minority shareholders’ equity - 8,449 - 8,449 - Government grants 9,167 3,134 - 12,301 455,603 89,373 (358,590) 186,386 211 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 44 CAPITAL RESERVE (CONTINUED) The Group Balance at Additions Settlements Balance at the beginning during during the end of of the year the year the year the year RMB’000 RMB’000 RMB’000 RMB’000 Share premiums 201,222 - - 201,222 Other capital reserves - Property revaluation reserve 54,979 - - 54,979 - Exchange reserve on foreign currency capital 866 - - 866 - Donated non-cash assets reserve 324 - - 324 - Net changes in fair value of available-for-sale financial assets 3,872,424 - (2,868,727) 1,003,697 - Effective portion of changes in fair value of cash flow hedges 71,713 - (16,669) 55,044 - Deferred tax effect (823,240) 605,371 - (217,869) - Equity settled share-based payment 17,520 - - 17,520 - Capital reserves due to minority Shareholders’ contribution 88,251 - - 88,251 - Capital reserves due to acquirement of minority shareholders’ equity - 57,656 - 57,656 - Government grants 69,414 21,668 - 91,082 3,553,473 684,695 (2,885,396) 1,352,772 The Company Balance at Additions Settlements Balance at the beginning during during the end of of the year the year the year the year USD’000 USD’000 USD’000 USD’000 Share premiums 21,245 - - 21,245 Other capital reserves - Property revaluation reserve 6,640 - - 6,640 - Exchange reserve on foreign currency capital 104 - - 104 - Donated non-cash assets reserve 13 - - 13 - Net changes in fair value of available-for-sale financial assets 503,913 - (348,321) 155,592 - Deferred tax effect (100,782) 69,664 - (31,118) 431,133 69,664 (348,321) 152,476 212 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 44 CAPITAL RESERVE (CONTINUED) The Company Balance at Additions Settlements Balance at the beginning during during the end of of the year the year the year the year RMB’000 RMB’000 RMB’000 RMB’000 Share premiums 212,656 - - 212,656 Other capital reserves - Property revaluation reserve 54,979 - - 54,979 - Exchange reserve on foreign currency capital 861 - - 861 - Donated non-cash assets reserve 108 - - 108 - Net changes in fair value of available-for-sale financial assets 3,876,025 - (2,814,200) 1,061,825 - Deferred tax effect (768,049) 555,684 - (212,365) 3,376,580 555,684 (2,814,200) 1,118,064 45 Surplus reserve Statutory Discretionary surplus reserve surplus reserve Total USD’000 USD’000 USD’000 Balance at the beginning of the year 151,045 271,650 422,695 Profit appropriation 46(1) 11,475 - 11,475 Balance at the end of the year 162,520 271,650 434,170 Statutory Discretionary surplus reserve surplus reserve Total RMB’000 RMB’000 RMB’000 Balance at the beginning of the year 1,250,655 2,246,390 3,497,045 Profit appropriation 46(1) 80,543 - 80,543 Balance at the end of the year 1,331,198 2,246,390 3,577,588 213 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 46 APPROPRIATION OF PROFITS AND RETAINED EARNINGS AT THE END OF YEAR (1) Appropriation to surplus reserve In accordance with the Shareholders’ Meeting resolution on 28 April 2008, the Company made appropriations USD11,474,991.04 (RMB80,542,962.12) from the retained earnings to the statutory surplus reserve. (2) Dividends of ordinary shares (a) Dividends of ordinary shares declared during the year Pursuant to the shareholders’ approval at the shareholders’ Meeting on 28 April 2008, a cash dividend of RMB0.50 per share (2007: RMB0.43 per share) totalling RMB1,331,198,025.50 for USD191,724,111.81 (2007: RMB954,025,251.68 for USD123,590,139.03) was declared and paid to the Company’s ordinary shareholders on 28 April 2008. (b) Dividends of ordinary shares proposed after the balance sheet date The Board of Directors proposed on 30 March 2009 the appropriation of a cash dividend of RMB0.15 per share (2007: RMB0.50 per share) to the Company’s ordinary shareholders, totalling RMB399,359,407.65 (2007: RMB1,331,198,025.50). The proposal is subject to the approval by the Shareholders’ Meeting. Such cash dividend has not been recognised as a liability at the balance sheet date (3) Retained earnings at the end of the year As at 31 December 2008, the consolidated retained earnings attributable to the Company included an appropriation of USD74,147,383 to surplus reserve made by the subsidiaries (2007: USD66,674,131). 214 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 47 OPERATING INCOME The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Operating income from - Sales of goods 6,629,615 45,938,596 6,244,532 47,282,349 - Rendering of services 40,197 278,532 31,838 241,066 - construction contract 24,757 171,547 - - - Others 4,128 28,607 21,300 161,507 Subtotal 6,698,697 46,417,282 6,297,700 47,684,922 --------------- --------------- --------------- --------------- Other operating income: - Sales of materials and spare parts 77,652 538,074 104,066 787,970 - Materials processing 32,091 222,368 18,352 138,955 - Others 21,583 149,557 19,675 148,979 Subtotal 131,326 909,999 142,093 1,075,904 --------------- --------------- --------------- --------------- 6,830,023 47,327,281 6,439,793 48,760,826 The information of revenue, expenses and profit about major business have been provided in Note 58. The Group’s and the Company’s sales to the top five customers for the year amount to USD1,717,120,893 (RMB11,898,445,802), or 26% of the total sales. 47 OPERATING INCOME The construction contracts are as follows: Accumulated recognized Contracts Total amount Accumulated gross profit / Billed of contract revenue incurred cost (loss) amount USD’000 USD’000 USD’000 USD’000 Fixed price contracts 64,985 23,013 1,744 24,757 Accumulated recognized Contracts Total amount Accumulated gross profit / Billed of contract revenue incurred cost (loss) amount RMB’000 RMB’000 RMB’000 RMB’000 Fixed price contracts 450,300 159,464 12,083 171,547 215 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 48 BUSINESS TAXES AND SURCHARGES The Group Taxation basis and rates 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Business tax 3% ~ 5% of operating income 2,305 15,972 2,203 16,682 City maintenance and 7% of VAT construction tax and business tax paid 742 5,138 500 3,784 3% of VAT and Education surcharge business tax paid 349 2,421 175 1,325 Land appreciation tax Appreciation amount in transferring property and applicable tax rate 596 4,128 4,334 32,818 Others 47 330 134 1,012 4,039 27,989 7,346 55,621 49 FINANCIAL EXPENSES / (NET FINANCIAL INCOME) The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Interest expenses from loans and payables 89,752 621,925 50,767 384,396 Less: Borrowing costs capitalised 1,401 9,708 941 7,125 Net interest expenses 88,351 612,217 49,826 377,271 Interest income from deposits and receivables (12,654) (87,684) (6,683) (50,602) Net exchange (gains) / losses (51,270) (355,268) 3,852 29,170 Other financial expenses 3,820 26,469 2,096 15,865 Total 28,247 195,734 49,091 371,704 49 FINANCIAL EXPENSES / (NET FINANCIAL INCOME) (CONTINUED) The Company 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Interest expenses from loans and payables & net interest expenses 38,961 269,981 11,399 86,312 Interest income from deposits and receivables (60,909) (422,060) (13,809) (104,562) Net exchange (gains) / losses (20,161) (139,705) 1,460 11,062 Other financial expenses 284 1,966 1,070 8,096 Total (41,825) (289,818) 120 908 216 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 50 IMPAIRMENT LOSSES / (REVERSAL) The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Receivables 421 2,921 9,530 72,157 Long-term receivables 1,252 8,669 14 104 Inventories 99,658 690,561 (1,282) (9,705) Total 101,331 702,151 8,262 62,556 51 GAINS / LOSSES FROM CHANGES IN FAIR VALUE The Group 2008 2007 Amount Amount Amount Amount USD’000 RMB’000 USD’000 RMB’000 Financial assets held for trading: Changes in fair value during the year - equity securities investments held for trading investment(37,284) (258,349) 10,672 80,810 - derivative financial instrument (27,201) (188,483) 73,266 542,348 (64,485) (446,832) 83,938 623,158 ------------- ------------- ------------- ------------- 217 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 51 GAINS / LOSSES FROM CHANGES IN FAIR VALUE (CONTINUED) The Group 2008 2007 Amount Amount Amount Amount USD’000 RMB’000 USD’000 RMB’000 Financial assets held for trading (continued) Transfer to investment - losses / (income) for derecognized financial assets held for trading 14,984 103,828 (1,333) (10,095) Financial liabilities held for trading Changes in fair value during the year (13,670) (94,725) (46,327) (338,379) Total (63,171) (437,729) 36,278 274,684 The Group 2008 2007 Amount Amount Amount Amount USD’000 RMB’000 USD’000 RMB’000 Financial assets held for trading - changes in fair value during the year (26,478) (183,470) 15,006 113,625 - transfer to investment losses / (income) for derecognized financial assets held for trading 14,984 103,828 (1,333) (10,095) Financial liabilities held for trading - changes in fair value during the year (26,838) (185,970) (3,481) (26,362) Total (38,332) (265,612) 10,192 77,168 218 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 52 INVESTMENT INCOME The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Long-term equity investments 12,074 83,667 21,974 166,382 Available-for-sale financial assets - Dividends received 10,229 70,881 - - - Gains on sale of financial assets 51,226 354,958 58,715 444,578 Sale of equity instrument held for trading (13,236) (91,720) 68,473 518,461 (Loss) / Gains on disposal of subsidiaries (1,494) (10,352) 44,487 336,847 Others 1,562 10,822 - - Total 60,361 418,256 193,649 1,466,268 The Company 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Long-term equity investments 93,680 649,137 80,752 611,436 Available-for-sale financial assets - Dividends received 10,229 70,881 - - - Gains on sale of financial assets 51,226 354,958 58,715 444,578 Sale of equity instrument held for trading (10,202) (70,694) 62,053 469,852 Loss on disposal of subsidiaries (937) (6,492) - - Total 143,996 997,790 201,520 1,525,866 219 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 52 INVESTMENT INCOME (CONTINUED) The analysis of the Group’s long-term equity investment income from major investees is as follows: The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Jointly controlled entities - CIMC Tianyu (1,146) (7,942) 3,056 23,139 - MST 357 2,474 179 1,355 Subtotal (789) (5,468) 3,235 24,494 ------------- ------------- ------------- ------------- Associates - KYH Steel Holding Ltd 4,225 29,275 4,226 31,998 - TJCIMCZL 1,427 9,885 333 2,521 - DLJLL 620 4,293 888 6,724 - XCIMCHC 582 4,035 450 3,407 - TJZL 1,922 13,315 6,988 53,912 - NBBL 95 657 122 924 - Shanghai Fengyang (515) (3,566) - - - TRS Transportkoeling 379 2,628 275 2,082 - EURTANK OY 156 1,084 121 916 - Fuzhou Haitou (238) (1,651) - - - Raffles 1,199 8,312 - - Subtotal 9,852 68,267 13,403 102,484 ------------- ------------- ------------- ------------- Gain on investment of jointly controlled entities and associates 9,063 62,799 16,638 126,978 Other enterprises 3,011 20,868 5,336 39,404 Total 12,074 83,667 21,974 166,382 220 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 52 INVESTMENT INCOME (CONTINUED) Except to the CIMC Tianyu’s investment income's reduction was due to the CIMC Tianyu become merged subsidiary company in consolidation of corporation financial statement, the movement of the Group’s other long-term investment income were due to the changes of invested company’s profit and loss. There was no restriction on the investee’s ability to transfer investment income to the investor. The analysis of the Company’s long-term equity investment income from major investees is as follows: The Company 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Subsidiaries SCIMC 8,967 62,134 18,189 137,721 TJCIMC 31,437 217,836 - - SBWI 1,170 8,109 - - SCIMCEL 7,970 55,230 23,315 176,537 XHCIMC 637 4,414 334 2,529 QDCC 3,240 22,453 5,257 39,805 DLCIMCn - - 2,012 15,234 NBCIMC 507 3,513 4,349 32,930 TCCIMC 1,585 10,980 2,032 15,386 ZZCIMC 3,121 21,626 6,370 48,232 SCRC 5,289 36,648 3,835 29,038 QDCRC 886 6,140 886 6,709 XHCIMCS 10,133 70,214 3,456 26,168 QDCSR 296 2,048 159 1,204 TJCIMCLE 3,638 25,206 3,073 23,268 DLL 2,308 15,996 2,464 18,657 CIMCSD 9,485 65,722 - - Other enterprises 3,011 20,868 5,021 38,018 Total 93,680 649,137 80,752 611,436 The movements of the Group’s investment income were due to the changes of invested companies’ profit and loss. There was no restriction on the investee’s ability to transfer investment income to the investor. 221 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 53 NON-OPERATING INCOME The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Gains on disposal of fixed assets 738 5,114 441 3,339 Compensation income 84 578 65 493 Penalty income 589 4,081 285 2,157 Gains on fixed assets inventory surplus 5 35 - 3 Government grants (1) 20,003 138,612 2,191 16,587 Amounts no longer payable 469 3,243 312 2,359 Gains on recognition of negative goodwill - - 3,234 24,490 Gain on debt restructuring (2) 5,441 37,703 - - Others 2,288 15,858 1,368 10,358 29,617 205,224 7,896 59,786 The Company 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Gains on disposal of fixed assets - - 15 114 Penalty income 1 7 - - Government grants (1) 15,643 108,395 700 5,311 Others 30 208 72 533 15,674 108,610 787 5,958 (1) Government grants The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Financial grants 19,817 137,325 2,098 15,882 Tax refund 186 1,287 93 705 20,003 138,612 2,191 16,587 The Company 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Financial grants 15,643 108,395 700 5,311 222 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 53 NON-OPERATING INCOME (CONTINUED) (2) Ruihua Investment Holding Limited (Ruihua) was a creditor of TLC (the Group’s subsidiary) with amount of RMB 99,702,322 (USD 14,388,706). As at 3 February 2007, the Group’s three investment holding subsidiaries YZRYL, SCIMC, CIMC (BVI) were prosecuted by Ruihua. The indictment declared that the above defendants had infringed Ruihua’s rights in the process of mortgage loan, leasing management, the stockholder's rights transfer and bankruptcy related with YZTY which led to the loss of Ruihua. After negotiation, all parties have reached an agreement in 2008 and Ruihua withdrew the indictment. According to the agreement, the Group acquires all the creditor’s right held by Ruihua in respect of TLC at a consideration of RMB 62,000,000 (USD 8,947,513) through YZRYL, and this transaction has been completed as at 31 December 2008. The Group completed the debt restructure payable to Ruihua through purchasing the creditor’s right mentioned above. The difference between TLC amount payable to Ruihua and the transaction consideration was recognised as gain on debt restructure amounted to RMB 37,703,322 (USD 5,441,243 ). 54 NON-OPERATING EXPENSES The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Losses on disposal of fixed assets 3,484 24,141 724 5,482 Donation expenses 2,082 14,430 219 1,656 Penalty expenses 302 2,093 125 950 Compensation expenses 92 637 36 271 Others 559 3,873 1,124 8,510 6,519 45,174 2,228 16,869 The Company 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Donation expenses 1,822 12,631 104 784 Losses on disposal of fixed assets 7 46 - - Others - - 5 38 1,829 12,677 109 822 223 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 55 INCOME TAX (1) Income tax expenses for the year represents The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Current tax expenses for the year 65,448 453,504 37,141 281,224 Deferred taxation (30,549) (211,680) (14,068) (106,526) Total 34,899 241,824 23,073 174,698 The Company 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Current tax expenses for the year 13,320 92,299 5,965 43,431 Deferred taxation (6,581) (45,604) (6,502) (47,492) Total 6,739 46,695 (537) (4,061) (2) Reconciliation between income tax expenses and accounting profits is as follows: The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Profits before taxation 278,099 1,927,029 462,283 3,500,304 Expected income tax expenses at applicable tax rates of subsidiaries 60,717 420,729 75,678 573,022 Effect of tax incentive (18,450) (127,845) (29,707) (224,937) Tax effect of non- deductible expenses 6,935 48,055 2,921 22,117 Tax effect of non- taxable income (33,904) (234,923) (19,182) (145,243) Tax effect of utilization of tax losses not recognized in prior years (1,245) (8,625) (12,344) (93,467) Tax effect of unused tax losses not recognized 13,280 92,019 7,432 56,273 Temporary differences of deductible unrecognized deferred tax assets 6,742 46,714 - - Effect of tax rate change on deferred tax 4,505 31,214 - - Tax refund (759) (5,261) (1,100) (8,325) Domestic equipment tax refund (2,922) (20,253) (625) (4,742) Income tax expenses 34,899 241,824 23,073 174,698 224 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 55 INCOME TAX (CONTINUED) (2) Reconciliation between income tax expenses and accounting profits is as follows: (continued) The Company 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Profits before taxation 148,645 1,030,005 162,810 1,232,768 Expected income tax expenses at applicable tax rate 26,756 185,401 24,422 184,915 Tax effect of non-deductible expense 386 2,674 - - Tax effect of unused tax losses not recognized in prior years - - (11,217) (84,924) Effect of tax rate change on deferred tax (1,308) (9,066) - - Tax effect of other non-taxable income (19,095) (132,314) (13,742) (104,052) Income tax expenses 6,739 46,695 (537) (4,061) 56 SUPPLEMENT TO CASH FLOW STATEMENT (1) Reconciliation of net profit to cash flows from operating activities The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Net profit 243,200 1,685,205 439,210 3,325,606 Add: Impairment for assets 101,331 702,151 8,262 62,556 Depreciation of fixed assets 75,243 521,388 61,736 467,452 Amortisation of intangible assets 22,759 157,707 10,056 76,143 Amortisation of investment property and long-term deferred expenses 2,550 17,670 4,382 33,176 Losses on disposal of fixed assets, intangible assets, and other long-term assets 2,746 19,027 283 2,143 Losses / (Gains) on changes in fair value 63,171 437,729 (36,278) (274,684) Financial expense 77,098 534,241 44,084 333,794 Gains arising from investments (60,361) (418,256) (193,649) (1,466,268) Increase in deferred tax assets (14,954) (103,621) (26,606) (186,971) (Decrease) / Increase in deferred tax liabilities (15,595) (108,062) 11,526 84,185 Increase in gross inventories (160,607) (1,112,894) (369,783) (2,799,923) Decrease / (Increase) in operating receivables 546,780 3,788,789 (598,561) (4,532,184) (Decrease) / Increase in operating payables (397,466) (2,754,161) 501,972 3,800,832 Effect of foreign exchange rate changes - (375) - (11,406) Net cash inflow / (outflow) from operating activities 485,895 3,366,538 (143,366) (1,085,549) 225 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 56 SUPPLEMENT TO CASH FLOW STATEMENT (CONTINUED) (1) Reconciliation of net profit to cash flows from operating activities (continued) The Company 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Net profit 141,906 983,310 163,347 1,236,829 Add: Depreciation of fixed assets 1,465 10,151 2,429 18,392 Amortisation of intangible assets 110 755 69 522 Amortisation of long-term deferred expenses 544 3,770 474 3,589 Losses / (gains) on disposal of fixed assets 7 46 (15) (114) Gains on changes in fair value 38,332 265,612 (10,192) (77,168) Financial income (21,948) (152,079) (2,410) (18,250) Gains arising from investments (143,996) (997,790) (201,520) (1,525,866) Increase in deferred tax assets (4,513) (26,683) (7,991) (58,371) (Decrease) / Increase in deferred tax liabilities (2,068) (15,109) 1,489 10,879 Increase in operating receivables (282,609) (1,958,276) (118,024) (893,655) Decrease in operating payables (10,807) (74,890) (260,083) (1,969,296) Effect of foreign exchange rate changes - (3,528) - (1,748) Net cash outflow from operating activities (283,577) (1,964,711) (432,427) (3,274,257) (2) In 2008 the Group’s all major investing and financing activities required the use of cash or cash equivalents. (3) Cash and cash equivalents held by the Group and company are as follows: The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 (a) Cash at bank and on hand - Cash on hand 776 5,297 466 3,400 - Bank deposits available on demand 385,989 2,634,140 334,144 2,440,657 - Other monetary fund available on demand 26,777 182,738 78,214 571,291 - Cash with restricted usage 40,909 279,178 5,351 39,084 (b) Closing balance of cash and cash equivalents 454,451 3,101,353 418,175 3,054,432 Less: cash with restricted usage 40,909 279,178 5,351 39,084 (c) Closing balance of cash and cash equivalents available on demand 413,542 2,822,175 412,824 3,015,348 226 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 56 SUPPLEMENT TO CASH FLOW STATEMENT (CONTINUED) (3) Cash and cash equivalents held by the Group and company are as follows: (continued) The Company 2008 2007 USD’000 RMB’000 USD’000 RMB’000 (a) Cash at bank and on hand - Bank deposits available on demand 62,281 425,034 93,676 684,230 - Other monetary fund available on demand 750 5,116 33,255 242,901 (b) Closing balance of cash and cash equivalents available on demand 63,031 430,150 126,931 927,131 Cash held by the Group and the Company are cash on hand or bank deposits available on demand. Refer to Note 7 for details. (4) Information on acquisition or disposal of subsidiaries and other business units during the current year: (a) Information on acquisition of subsidiaries and other business units: The Group USD’000 RMB’000 Consideration of acquisition 42,042 287,046 Cash and cash equivalents paid for acquiring subsidiaries and other business units 35,978 245,663 Less: cash and cash equivalents held by subsidiaries and other business units 16,163 110,354 Net cash paid for the acquisition 19,815 135,309 The Group USD’000 RMB’000 Non-cash assets and liabilities held by the acquired subsidiaries and other business units Current assets 14,965 102,176 Non-current assets 68,439 467,274 Current liabilities (29,811) (203,538) Non-current liabilities (27,714) (189,220) 227 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 57 SHARE-BASED PAYMENTS Expenses recognised for the year arising from share-based payments are as follows: The Group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Equity-settled share- based payments - - 2,998,275 21,900,000 (i) CIMC Vehicle (Group) Co., Ltd., (HI) a subsidiary of the Company, carried out a share trust plan (the “Plan”) in 2007, which was approved by the shareholders’ meeting on 17 October 2007. According to the Plan, the senior executives of the Company and HI, and key personnel related to the trailer business, purchased 20% equity interest of HI by injecting RMB 220,700,000.00 with distributed senior management bonuses into HI via Shenzhen International Trust and Investment Co., Ltd. The Group determined the amount of employee services received based on the fair value of the equity interest of HI on 29 December 2007 using the income approach. A valuation report was issued by Pan-China Schinda Certified Public Accounts (XDZPBZ 2008(004) Assets Assessment Report of CIMC Vehicle (Group) Co., Ltd) in this respect. (ii) The Fifth session of 2008 of the Fifth board of directors was held by the Company on 28 April 2008, and had approved the stock option incentive plan (draft) of China International Marire Containers (Group) Co., Ltd. In view of the tremendous change of economic and stock market within and outside China, this plan is no longer feasible and cannot meet the incentive purpose if the plan was implemented base on the approved draft. Therefore, as approved by the fourteenth session of 2008 of the Fifth board of directors on 17 October 2008, the Board agreed to terminate the above plan and will introduce stock option incentive plan when the condition is appropriate. 228 China International Marine Containers (Group) Co., Ltd. Annual Report 20 58 SEGMENT REPORTING In accordance with the Group’s internal financial reporting process, business segment information i and geographical segment information as the secondary reporting format. The Group comprises fo trailers, tank equipments and airport ground facilities. Reportable information on each of the Group’s business segment is set out as follows: Primary segment reporting (business segments) Airport Item Containers Trailers Tank equipments ground facilities Others 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 U Operating income 4,199,353 4,496,804 1,450,428 1,284,246 1,121,451 599,105 70,432 62,499 114,136 81,683 Including: External transaction 4,183,685 4,482,349 1,435,700 1,276,352 1,119,188 596,483 70,432 62,499 21,018 22,110 Inter-segment transaction 15,668 14,455 14,728 7,894 2,263 2,622 - - 93,118 59,573 Operating expenses / (gains) 4,181,367 4,215,209 1,468,754 1,231,111 1,047,171 542,931 61,575 50,089 53,954 29,636 Operating profit / (loss) 17,986 281,595 (18,326) 53,135 74,280 56,174 8,857 12,410 60,182 52,047 Total assets 1,885,789 2,504,239 1,181,791 1,003,585 1,047,265 924,116 60,769 45,623 1,152,292 371,019 Total liabilities 950,904 1,029,733 750,832 394,785 281,252 169,412 30,193 28,595 160,345 125,105 Supplementary information: 1. Depreciation and amortisation expenses 41,682 43,306 17,398 11,377 35,571 12,915 331 353 804 674 2. Non-cash expenses / (gains) other than depreciation and amortisation 180,633 (60,220) 10,057 (6,884) 11,720 59 291 (114) (573) - Including: impairment loss / (reversal) for the year 83,077 5,099 9,684 1,674 8,407 1,387 41 102 122 - 3、Capital expenditure 117,524 137,531 159,108 104,785 78,666 29,387 531 434 9,651 15,458 Secondary segment reporting (geographical segments Item America Europe Asia 2008 2007 2008 2007 2008 2007 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 U Revenue from external customers 1,253,880 1,342,015 2,540,964 2,363,436 2,925,758 2,684,187 Total assets 79,435 33,750 346,138 347,527 4,629,182 5,232,381 229 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 59 RISK ANALYSIS, SENSITIVITY ANALYSIS, AND DETERMINATION OF FAIR VALUES FOR FINANCIAL INSTRUMENTS The Group has exposure to the following risks from its use of financial instruments • Credit risk • Liquidity risk • Interest rate risk • Foreign currency risk This note presents information about the Group’s exposure to each of the above risks and their sources, the Group’s objectives, policies and processes for measuring and managing risks, etc. The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The internal audit of the Group undertakes both regular and ad hoc reviews of risk management controls and procedures. (1) Credit risk The Group’s credit risk is primarily attributable to receivables, debt investments and derivative financial instruments entered into for hedging purposes. Exposure to these credit risks are monitored by management on an ongoing basis. In respect of receivables, the risk management committee of the Group has established a credit policy under which individual credit evaluations are performed on all customers requiring credit over a certain amount. These evaluations focus on the external ratings of the customers and their bank credit records where available and previous payment records (if available). Receivables are due within from 30 to 90 days from the date of billing. Normally, the Group does not obtain collateral from customers, but earnest or prepayment money is requested sometimes due to the customer’s situation. Most of the Group’s and the Company’s customers have been transacting with the Group or the Company for a long time, and losses have occurred infrequently. In monitoring customer credit risk, customers are grouped according to some factors, such as ageing and maturity date. This group has calculated the provision for the significant overdue receivables at 31 December 2008. Guideline from the Group basis to the assets of associates and jointly controlled, profit forecast of development project provide fund to associates and jointly controlled entity and continue to monitor the project progress and its operating to insure the return ability of the fund. 230 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 59 RISK ANALYSIS, SENSITIVITY ANALYSIS, AND DETERMINATION OF FAIR VALUES FOR FINANCIAL INSTRUMENTS (CONTINUED) (1) Credit risk (continued) The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer rather than the industry, country or area in which the customers operate and therefore significant concentrations of credit risk arise primarily when the Group has significant exposure to individual customers. At the balance sheet date, the Group and the Company had a certain concentration of credit risk, as 23% (2007: 20%) of the total accounts receivable and other receivables were due from the five largest customers of the Group. Investments are normally only in liquid securities quoted on a recognised stock exchange, except where entered into for long-term strategic purposes. Transactions involving derivative financial instruments are made with counterparties of sound credit standing and with whom the Group has a signed netting ISDA agreement (International Swap Derivative Association). Given their high credit standing, management does not expect any investment counterparty to fail to meet its obligations. The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial instruments, in the balance sheet. Except for the financial guarantees given by the Group and Company as set out in Note 61, the Group and the Company do not provide any other guarantees which would expose the Group or the Company to credit risk. The maximum exposure to credit risk in respect of these financial guarantees at the balance sheet date is disclosed in Note 61. (2) Liquidity risk The Company is responsible for the cash management, including short term investment of cash surpluses and the raising of loans to cover expected cash demands, for individual subsidiaries subject to approval by the Company’s board when the borrowings exceed certain predetermined levels of authority. The Group’s policy is to regularly monitor its liquidity requirements and its compliance with lending covenants, to ensure that it maintains sufficient reserves of cash, readily realisable marketable securities and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term. The maturity analysis of the held-to-maturity investments, long-term receivables and long term debts are disclosed in Note 19 and 40. 231 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 59 RISK ANALYSIS, SENSITIVITY ANALYSIS, AND DETERMINATION OF FAIR VALUES FOR FINANCIAL INSTRUMENTS (CONTINUED) (3) Interest rate risk Interest-bearing financial instruments at variable rates and at fixed rates expose the Group to cash flow interest rate risk and fair value interest risk, respectively. The Group adopts an interest rate policy of ensuring that interest rate risk is reasonable. The Group has entered into interest rate swaps denominated in the currency of the loan, to achieve an appropriate mix of fixed and floating rate exposure consistent with the Group’s policy. The interest rates of short term loan and long term loan are respectively disclosed in Note 30 and 40. (a) As at 31 December, the Group held the following interest-bearing financial instruments: The Group The Company 2008 2007 2008 2007 USD’000 USD’000 USD’000 USD’000 Fixed rate instruments Financial assets - Cash at bank and on hand - 263,069 - 69,633 - Long-term receivables due within one year 18,766 13,021 - - - Long-term receivables 73,545 27,196 - - Financial liabilities - Short-term loans (14,653) (89,655) (14,653) - - Long-term loans due within one year (187,303) - (173,339) - Long-term loans - (12,937) - - 77,658 13,391 (14,653) (103,706) Variable rate instruments Financial assets - Cash at bank and on hand 454,451 155,106 63,031 57,298 Financial liabilities - Short-term loans (308,699) (279,524) - - - Long-term loans within one year (39,616) - (25,578) - - Long-term loans (959,530) (597,987) (879,629) (435,042) (853,394) (722,405) (842,176) (377,744) (b) Sensitivity analysis As at 31 December 2008, it is estimated that a general increase / decrease of 54 basis points in interest rates, with all other variables held constant, would increase/decrease the Group’s net profit by USD3,456,000 (2007: USD2,425,000), and equity by USD3,729,000 (2007: USD1,156,000). 232 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 59 RISK ANALYSIS, SENSITIVITY ANALYSIS, AND DETERMINATION OF FAIR VALUES FOR FINANCIAL INSTRUMENTS (CONTINUED) (3) Interest rate risk (continued) (b) Sensitivity analysis (continued) The sensitivity analysis above indicates the instantaneous change in the net profit and equity that would arise assuming that the change in interest rate had occurred at the balance sheet date and had been applied to re-measure those financial instruments held by the Group or the Company which expose the Group or the Company to fair value interest rate risk at the balance sheet date. In respect of the exposure to cash flow interest rate risk arising from floating rate non-derivative instruments held by the Group or the Company at the balance sheet date, the impact on the net profit and equity is estimated as an annualised impact on interest expense or income of such a change in interest rates. The analysis is performed on the same basis for 2007. (4) Foreign currency risk The major currency received by the Group is USD and the main currency paid out is RMB. In order to avoid the risks resulting from the fluctuation of the exchange rate of RMB, in respect of accounts receivables and payables denominated in foreign currencies other than RMB, the Group ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances. (a) Besides the exposure to currency risk arising from financial assets and financial liabilities disclosed in Note 8 and 31, the Group’s and the Company’s exposure as at 31 December to currency risk arising from recognised assets or liabilities denominated in foreign currencies is follows. For presentation purposes, the amounts of the exposure are shown in RMB, translated using the spot rate at the balance sheet date. Differences resulting from the translation of the financial statements denominated in foreign currency are excluded. Expressed in RMB’000 The group 2008 USD EUR HKD JPY Cash at bank and on hand 1,043,790 121,907 112,277 15,080 Accounts receivable 2,485,467 428,716 3,692 29,625 Short-term loans (373,902) (730,749) (163,944) (91,547) Long-term loans (4,681,538) (190,349) (484,328) - Accounts payable (2,079,401) (278,371) (30,385) (1,971) Contingent liabilities (572,315) (41,062) - - Non-current liabilities Due within one year (136,679) (38,067) (17,607) - Gross balance sheet exposure (4,314,578) (727,975) (580,295) (48,813) 233 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 59 RISK ANALYSIS, SENSITIVITY ANALYSIS, AND DETERMINATION OF FAIR VALUES FOR FINANCIAL INSTRUMENTS (CONTINUED) (4) Foreign currency risk 2007 USD EUR HKD JPY Cash at bank and on hand 1,052,388 25,965 11,873 4,283 Accounts receivable 7,138,942 427,303 5,515 41,174 Short-term loans (1,605,076) (426,092) - (10,534) Long-term loans (2,921,680) (747,395) (698,742) - Accounts payable (2,188,480) (449,500) (27,441) (33) Contingent liabilities (545,463) (37,624) - - Non-current liabilities Due within one year (17,998) - - - Gross balance sheet exposure 912,633 (1,207,343) (708,795) 34,890 The company 2008 USD EUR HKD JPY Cash at bank and on hand 139,839 111 70 14,943 Long-term loans due within one year (136,488) (38,067) - - Long-term loans (4,640,592) (190,346) - - Gross balance sheet exposure (4,637,241) (228,302) 70 14,943 2007 USD’000 EUR’000 HKD’000 JPY’000 Cash at bank and on hand 409,437 5,610 15 3,455 Long-term loans (2,921,680) (255,954) - - Gross balance sheet exposure (2,512,243) (250,344) 15 3,455 (b) The following are the significant exchange rates applied by the Group: Reporting date Average rate mid-spot rate 2008 2007 2008 2007 USD 6.9293 7.5718 6.8244 7.3042 EUR 10.3780 10.4667 9.5167 10.6669 HKD 0.8897 0.9697 0.8806 0.9346 JPY 6.5511 6.4847 7.5076 6.4064 234 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 59 RISK ANALYSIS, SENSITIVITY ANALYSIS, AND DETERMINATION OF FAIR VALUES FOR FINANCIAL INSTRUMENTS (CONTINUED) (4) Foreign currency risk (continued) (c) Sensitivity analysis Assuming all other risk variables remained constant, 1%, 12%, 2% and 5% strengthening of the RMB against the USD, EUR, HK dollar, and Japanese Yen respectively at 31 December 2008 (6%, 4%, 6% and 2% strengthening of the RMB against the USD, EUR, HK dollar, and Japanese Yen respectively at 31 December 2007) would have increased (decreased) equity and net profit or loss by the amount shown below; whose effect is in RMB and translated using the spot rate at the balance sheet date: Equity Profit or loss The Group The Company The Group The Company RMB’000 RMB’000 RMB’000 RMB’000 At 31 December 2008 USD 32,359 38,025 32,359 38,025 EUR 65,518 22,465 65,518 22,465 HKD 8,704 (1) 8,704 (1) JPY 1,830 (613) 1,830 (613) 108,411 59,876 108,411 59,876 Equity Profit or loss The Group The Company The Group The Company RMB’000 RMB’000 RMB’000 RMB’000 At 31 December 2007 USD (163,298) 120,872 (163,298) 120,872 EUR 71,143 8,186 71,143 8,186 HKD 36,158 (1) 36,158 (1) JPY (798) (56) (798) (56) (56,795) 129,001 (56,795) 129,001 1%, 12%, 2% and 5% weakening of the RMB against USD, EUR, HK dollar and Japanese Yen respectively at 31 December 2008 (6%, 4%, 6% and 2% weakening of the RMB against the USD, EUR, HK dollar, and Japanese Yen respectively at 31 December 2007) would have had the equal but opposite effect on them to the amounts shown above, on the basis that all other variables remain constant. The sensitivity analysis above assumes that the change in foreign exchange rates had been applied to re-measure those financial instruments held by the Group or the Company which expose the Group or the Company to foreign currency risk at the balance sheet date, the analysis excludes differences that would result from the translation of the financial statements denominated in foreign currency. The analysis is performed on the same basis for 2007. 235 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 59 RISK ANALYSIS, SENSITIVITY ANALYSIS, AND DETERMINATION OF FAIR VALUES FOR FINANCIAL INSTRUMENTS (CONTINUED) (4) Foreign currency risk (continued) (c) Sensitivity analysis (continued) The above sensitive analysis does not include exposure to currency risk arising from foreign future contracts, Japanese Yen exchange option, swap contact for interest rate and metal-nickel exchange option disclosed in Note 8 and 31 about financial assets and financial liabilities, but the change in exchange rate may have effect on shareholder’s equity and net profit. (5) Fair values All financial instruments are carried at amounts not materially different from their fair values as at 31 December 2008 and 2007. (6) Estimation of fair values The following summarises the major methods and assumptions used in estimating the fair values of financial assets and liabilities held for trading, available-for-sale financial assets, and items set out in Note 59(5) above that measured at fair value on the balance sheet date. (a) Equity investments Fair value is based on quoted market prices at the balance sheet date for financial assets and liabilities held for trading (excluding derivatives), available-for-sale financial assets, and held-to-maturity investments if there is an active market, if an active market does not exist for the financial asset, the fair value is determined using valuation techniques. (b) Receivables The fair value is estimated as the present value of the future cash flows, discounted at the market interest rates at the balance sheet date. (c) Loans and long-term payables The fair value is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date. (d) Derivatives The fair value of forward exchange contracts is either based on their listed market prices or by discounting the contractual forward price and deducting the current spot rate. The fair value of interest rate swaps is based on broker quotes. The quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar interest rate instrument at the measurement date. 236 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 59 RISK ANALYSIS, SENSITIVITY ANALYSIS, AND DETERMINATION OF FAIR VALUES FOR FINANCIAL INSTRUMENTS (CONTINUED) (6) Estimation of fair values (continued) (e) Financial guarantees The fair value of financial guarantees issued is determined by reference to fees charged in an arm’s length transaction for similar services, when such information is obtainable, or is otherwise estimated by reference to interest rate differentials, by comparing the actual rates charged by lenders when the guarantee is made available with the estimated rates that the lenders would have charged, had the guarantees not been available, where reliable estimates of such information can be made. (f) Interest rates used for determining fair value The interest rates used to discount estimated cash flows are based on same term loans’ rates announced by People Bank of China at the balance sheet date plus an adequate credit spread and are as follows: 2008 2007 Long term loans 3.51% - 7.56% 3.78% - 5.80 % Receivables 4.85% - 6.56% 6.57% - 7.56 % 60 COMMITMENTS (1) Capital commitments As at 31 December, the capital commitments of the Group and the Company are summarised as follows: 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Contracts entered into but not recognised - Assets acquisition contracts 98,504 672,230 97,698 713,600 - Investment contracts 5,628 38,405 234 1,718 104,132 710,635 97,932 715,318 60 COMMITMENTS (continued) 237 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 (2) Operating lease commitments As at 31 December, the total future minimum lease payments under non-cancellable operating leases of properties, fixed assets and so on were payable as follows: 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Within 1 year (inclusive) 15,256 104,113 9,405 68,696 After 1 year but within 2 years (inclusive) 10,466 71,426 7,876 57,530 After 2 years but within 3 years (inclusive) 6,555 44,734 6,837 49,938 After 3 years (inclusive) 25,279 172,513 16,631 121,477 Total 57,556 392,786 40,749 297,641 61 CONTINGENCIES (1) Contingent liabilities As at 31 December 2008, the contingent liabilities of the Group are summarised as follows: (a) Guarantees provided for other entities During the year, CIMC Vehicle provided guarantees in respect of banking facilities granted to customers who drew down loans under banking facilities to settle outstanding payables arising from purchase of trailers from the Group. As at 31 December 2008, the Group has the above outstanding guarantees totalling RMB461,161,591 equivalent to USD67,575,405 (2007: RMB 210,727,266 equivalent to USD 27,617,982). (b) Bills payable This kind of bills payable represents contingent liability of the Group. The obligation to settle the bills will arise only when the goods are delivered. A bill is recognised as a liability upon the delivery of the goods by the suppliers or the maturity of the bill, whichever is earlier. At 31 December 2008, the Group had bills issued to suppliers but not recorded on the books totalling USD58,477,932 (RMB399,076,799). At 31 December 2007, the balance was USD142,599,850 (RMB1,041,578,116). 238 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 62 Non-adjusting post balance sheet events The Group’s subsidiary- CIMC Vehicle (Group) Co., Ltd. (HI), Wuhu Terry investment Co., Ltd. (Terry investment) and Shenzhen Jiusi investment Co., Ltd. (Jiusi investment) is planning to establish Jirui Joint Truck Company Limited (Joint truck) on 9 January 2009. The registered capital is RMB 4 hundred millions and the proportion of CIMC vehicles is 45%, Terry investment is 45%, Jiusi investment is 10%. This investment have already approved by the first conference of the fifth board of directors by the Group of 2009, and this investment doesn’t have to submit to the Group’s general meeting of shareholders but have to approve by the Chinese government Department. 63 RELATED PARTY RELATIONSHIPS AND TRANSACTIONS (1) For the information on the subsidiaries of the Company, refer to Note 6. (2) Transactions with its key management personnel The group 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Remuneration of key management personnel 2,517 17,178 2,288 16,709 The company 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Remuneration of key management personnel 2,517 17,178 2,288 16,709 (3) Transactions other than its key management personnel (a) Transaction amounts with related parties: (i) sales / purchase goods The group 2008 2007 Percentage Percentage on similar on similar Amount deals Amount deals USD’000 USD’000 Sales 51,292 0.75% 223,574 3.39% Purchase 29,859 0.49% 100,994 1.67% 239 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 63 RELATED PARTY RELATIONSHIPS AND TRANSACTIONS (CONTINUED) (3) Transactions other than its key management personnel (continued) (a) Transaction amounts with related parties (continued): (i) sales / purchase goods The group 2008 2007 Percentage Percentage on similar on similar Amount deals Amount deals RMB’000 RMB’000 Sales 355,416 0.75% 1,633,031 3.39% Purchase 206,902 0.49% 737,681 1.67% (ii) Funding Lendings The Group Effect of Additions Settlement foreign Opening during during exchange Closing balance the year the year rate changes balance USD’000 USD’000 USD’000 USD’000 USD’000 Shanghai Fengyang 51,265 6,338 (39,148) 3,099 21,554 XYW 626 - - 3 629 Total 51,891 6,338 (39,148) 3,102 22,183 The Group Effect of Additions Settlement foreign Opening during during exchange Closing balance the year the year rate changes balance RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Shanghai Fengyang 385,702 55,309 (293,915) - 147,096 XYW 4,565 - - (272) 4,293 Total 390,267 55,309 (293,915) (272) 151,389 240 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 63 RELATED PARTY RELATIONSHIPS AND TRANSACTIONS (CONTINUED) (3) Transactions other than its key management personnel (continued) (a) Transactions amounts with related parties: (continued) (ii) Funding (continued) Borrowings The Group Effect of Additions Settlement foreign Opening during during exchange Closing balance the year the year rate changes balance USD’000 USD’000 USD’000 USD’000 USD’000 Shenzhen Dongfang Tianyu Investment Development Co., Ltd. (“Dongfang Tianyu”) 6,571 - - 462 7,033 Gasfin - 11,218 - (772) 10,446 Total 6,571 11,218 - (310) 17,479 The Group Effect of Additions Settlement foreign Opening during during exchange Closing balance the year the year rate changes balance RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Dongfang Tianyu 47,996 - - - 47,996 Gasfin - 77,733 - (6,505) 71,228 Total 47,996 77,733 - (6,505) 119,224 (iii) Sale of a subsidiary In 2007, CIMC Shenfa Development Co., Ltd. (“CIMCSD”), a subsidiary of the Group and Shenzhen China Merchants Real Estate Co., Ltd. and, entered into a share transfer agreement, in which CIMCSD will transfer 60% of the equity of Shanghai Fengyang to Shenzhen China Merchants Real Estate Co., Ltd for a price of USD48,362,586 (RMB353,250,000) in total. As at 31 December 2008, USD10,352,559 (RMB70,650,000) of the total price had not been paid. 241 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 63 RELATED PARTY RELATIONSHIPS AND TRANSACTIONS (CONTINUED) (3) Transactions other than its key management personnel (continued) (a) Transactions amounts with related parties: (continued) (iv) Acquisition of equity investments In 2008, the Company entered into a share transfer agreement with COSCO Pacific Management Co., Ltd. (“COSCO Pacific Management”), in which the Company acquired 20% equity of SCRC from COSCO at a consideration of USD 16,400,000 (RMB 111,920,160). The amount was not yet settled as at 31 December 2008. In 2008, a subsidiary of the Company- CIMC Holdings (B.V.I.) Limited and Topview Investment Limited (Subsidiary of COSCO Pacific Management Co., Ltd) entered a share transfer agreement in which it acquired all the equity and liabilities of its subsidiary Fentalic. Fentalic holds 22.5% equity of Tianjin CIMC North Ocean Container Co., Ltd. (TJCIMC), at a consideration of USD 14,000,000 (RMB 95,541,600). As at 31 December 2008, it had already been paid off (v) Finance lease As at 30 September 2008, the Group’s subsidiary- CIMC Financing and Leasing Co., Ltd. (CIMCVL) and subsidiary of the Group’s joint venture-Yangtai Raffles Ocean Construction Co., Ltd. entered into a finance lease contract and it is guaranteed by the Group’s joint venture’s subsidiary- Raffles Shipping Co., Ltd. According to the contract, CIMCVL acquires a barge from Raffles Ocean at a consideration of RMB 38,000,000, and leases back to Raffles Ocean at RMB 45,987,179 under finance lease. The leasing period is from 10 December 2008 to 10 December 2013 with a floating rate and it will be adjusted by benchmark lending rate of People’s bank of China yearly, the rate on contract award date and at 31 December 2008 is 7.56%. As at 31 December 2008, receivable under finance lease is RMB 38,000,000 (USD 5,568,255). The above transactions with related parties were conducted under normal commercial terms or relevant agreements. 242 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 63 RELATED PARTY RELATIONSHIPS AND TRANSACTIONS (CONTINUED) (3) Transactions other than its key management personnel (continued) (b) The balances of transactions with related parties as at 31 December are set out as follows: The Group 2008 2008 2007 2007 USD’000 RMB’000 USD’000 RMB’000 Accounts receivable 5,871 40,679 31,085 227,049 Other Receivables 33,029 225,405 57,120 417,213 Long-term receivables 5,568 38,000 - - Accounts payable 27,909 193,386 53,348 389,667 Other payable 40,929 279,316 - - Refer to Note 20 for information about the Group’s associates and joint ventures. (c) Relationships with related parties under the transactions stated in 3(a)(b) Organisation name Relationship with the Group MST Associate KYH Steel Holding Ltd Joint venture Dalian Jinong Joint venture XYW Joint venture Shanghai Fengyang Joint venture Yangtai Raffles Subsidiary of joint venture Xiamen Haitou Logistics Co., Ltd Joint venture Hemple-HaiHong Coatings Limited Subsidiary of shareholder Hempel-HaiHong (Kunshan) Co., Ltd Subsidiary of shareholder Florens Container Services Limited Subsidiary of shareholder Florens Maritime Limited Subsidiary of shareholder Florens Container Corporation S.A. Subsidiary of shareholder COSCO North America, Inc. Subsidiary of shareholder COSCO Pacific Management Company Ltd. Subsidiary of shareholder Topview Investmetn Limited Subsidiary of shareholder Shenzhen China Merchants Real Estated Co., Ltd Subsidiary of shareholder CIMC Tianyu Minority shareholder of subsidiary Gasfin Minority shareholder of subsidiary Liangshan Dongyue Trailer Manufacturing Co., Ltd Minority shareholder of subsidiary Wuhu Ruijiang Automobile Co., Ltd Ultimate controlling party of minority shareholder of subsidiary 243 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 64 COMPARATIVE FIGURES The accounting policy of defer tax assets and liabilities, tax deduction / withheld disclosure have been changed. Relevant adjustments of comparative figures have been made and are disclosed in Note 4. 65 EXTRAORDINARY GAIN AND LOSS In accordance Interpretive Pronouncement on the Preparation of Information Disclosures of Companies Issuing Public Shares No. 1 - Extraordinary Gain and Loss (2008), the extraordinary gain and loss of the Group is listed as follows: 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Extraordinary gain and loss for the year Disposal of non-current assets (4,240) (29,379) 44,204 334,704 Government grants 20,003 138,612 2,191 16,587 Excess of interest in the fair value of investee’s identifiable net assets investment cost of subsidiaries associates and jointly controlled enterprises acquired - - 3,234 24,490 Changes in fair value of financial assets and liabilities held for trading, and available-for-sale financial assets, excluding those held for effective hedges of normal operations 36,171 250,639 162,753 1,232,324 Entrusted loans 509 3,528 - - Debt restructuring 5,441 37,703 - - Other non-operation income and expense 400 2,762 526 3,983 Subtotal 58,284 403,865 212,908 1,612,088 Less: effect on taxation (2,214) (15,339) 35,613 269,652 Total 60,498 419,204 177,295 1,342,436 2008 2007 USD’000 RMB’000 USD’000 RMB’000 Attributable to: Equity shareholders of the Company 60,052 416,111 174,671 1,322,571 Minority interests 446 3,093 2,624 19,865 Note: the above figures for 2007 have been adjusted. These retrospective adjustments were made as a result of “regulation on the preparation of information disclosures of companies issuing public shares NO.1-extraordinary gain and loss”. 244 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 66 EARNINGS PER SHARE AND RETURN ON NET ASSETS The Group’s earnings per share Basic and diluted earnings per share 2008 2007 USD’000 RMB’000 USD’000 RMB’000 (a) Earnings per share inclusive of extraordinary gain and loss 0.08 0.53 0.16 1.19 - Profit attributable to the Company’s ordinary equity shareholders (’000) 203,038 1,406,908 418,048 3,165,373 - Weighted average number of the Company’s ordinary shares (’000) 2,662,396 2,662,396 2,662,396 2,662,396 (b) Earnings per share net of extraordinary gain and loss 0.05 0.37 0.09 0.69 - Profit deducted extraordinary gains and loss attributable to the Company’s ordinary equity shareholders (’000) 142,986 990,797 243,377 1,842,802 - Weighted average number of the Company’s ordinary shares (’000) 2,662,396 2,662,396 2,662,396 2,662,396 On net assets of the Group: 2008 2007 Fully Weighted Fully Weighted diluted average diluted average (a) Return on net assets inclusive of extraordinary gain and loss 10% 10% 19% 24% - Net profit attributable to the Company’s ordinary equity shareholders(USD’000) 203,038 203,038 418,048 418,048 - Year-end equity attributable to the Company’s ordinary equity shareholders(USD’000) 1,967,777 - 2,195,646 - - Weighted average of equity attributable to the Company’s ordinary equity shareholders (USD’000) - 2,049,051 - 1,709,183 (b) Return on net assets net of extraordinary gain and loss 7% 7% 11% 14% - Net profit deducted extraordinary gain and loss attributable to the Company’s ordinary equity shareholders(USD’000) 142,986 142,986 243,377 243,377 - Year-end equity attributable to the Company’s ordinary equity shareholders(USD’000) 1,967,777 - 2,195,646 - - Weighted average of equity attributable to the Company’s ordinary equity shareholders (USD’000) - 2,049,051 - 1,709,183 245 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 China International Marine Containers (Group) Co., Ltd. Supplementary information to the financial statements 1 Reconciliation statements of differences in financial statements prepared under different GAAPs (1) The effect of the difference between PRC GAAP and IFRS on profit attributable to shareholders of the Company is analysed as follows: 2008 2007 USD’000 USD’000 Amounts under PRC GAAP 203,038 418,048 Adjustments: Others 361 (2,438) Amounts under IFRS 203,399 415,610 2008 2007 RMB’000 RMB’000 Amounts under PRC GAAP 1,406,908 3,165,373 Adjustments: Others 2,505 (18,455) Amounts under IFRS 1,409,413 3,146,918 (2) The effect of the difference between PRC GAAP and IFRS on equity attributable to shareholders of the Company is analysed as follows: 2008 2007 USD’000 USD’000 Amounts under PRC GAAP 1,967,777 2,195,646 Adjustments: Others (1,566) (1,927) Amounts under IFRS 1,966,211 2,193,719 Amounts under PRC GAAP 13,428,901 15,913,757 Adjustments: Others (11,572) (14,077) Amounts under IFRS 13,417,329 15,899,680 246 China International Marine Containers (Group) Co., Ltd. Annual Report 2008 Section 12. Content of Documents Available for Reference I. The text of annual report with signature of Chairman of the Board. II. Accounting statements carrying signatures and seal of Legal Representative, Chief Officer in charge of accounting and person in charge of accounting firms (Chief Accountant). III. Original of the Audit Report carrying official seal of accounting firm, signatures and seals of certified public accountants. IV. Originals of documents and public notice disclosed on the newspaper designated by China Securities Regulatory Commission during the reporting period. V. Full text of Articles of Association; 247