China International Marine Containers (Group) Co., Ltd.
2010
Annual Report
23 March 2011
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Section I 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. Li Jianhong, 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.
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Contents
Section I. Important Statement and Contents 1
Section II. General Information 3
Section III. Financial and Business Highlights 5
Section IV. Shareholders and Changing of Share Capital 7
Section V. Directors, Supervisors, Senior Management and Employees 13
Section VI. Corporate Governance Structure 24
Section VII. The Shareholders’ General Meeting 32
Section VIII. Report of the Board of Directors 33
Section IX. Report of Supervisory Council 66
Section X. Significant Issues 69
Section XI. Financial Report 80
Section XII. Documents for Reference 254
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Section Ⅱ General Information
I. 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
II. Legal representative: Li Jianhong
III. Board secretary: Yu Yuqun
Tel: (86) 755-2669 1130
Fax: (86) 755-2682 6579
Representative for securities affairs: Wang Xinjiu
Tel: (86) 755-2680 2706
Fax: (86) 755-2681 3950
Address: CIMC R&D Center, 2 Gangwan Avenue, Shekou, Nanshan District,
Shenzhen
Zip code: 518067
E-mail: shareholder@cimc.com
IV. Registered address: 8/F, CIMC R&D Center, 2 Gangwan Avenue, Shekou, Nanshan
District, Shenzhen, Guangdong
Office address: CIMC R&D Center, 2 Gangwan Avenue, Shekou, Nanshan District,
Shenzhen, Guangdong
Zip code: 518067
Website: http://www.cimc.com
V. 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.
VI. Stock exchange on which the Company are listed: Shenzhen Stock Exchange
Stock short form and code: CIMC (000039), CIMC B (200039)
VII. Other relevant information:
1. Date of initial registration: Jan., 1980
2. Place of initial registration: Shenzhen Administration for Industry and Commerce
3. Latest change in registration: 19 Nov. 2008
4. Place of registration after change: Shenzhen Administration for Industry and
Commerce
5. Corporate business license: 440301501119369
Tax registration No.: 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
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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
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Section III Financial and Business Highlights
I. Key accounting data as of year 2010
Unit: RMB’000 Yuan
No. Item Amount
1 Total profit 3,674,607
2 Operating profit 3,438,168
3 Net profit attributable to shareholders of listed company 3,001,851
4 Net profit excluding non-recurring gain/loss (Note) 2,791,507
5 Net cash flow from operating activities 1,482,901
Note: Items of non-recurring gains/losses
Unit: RMB’000 Yuan
Items of non-recurring gains and losses Amount
Gains and losses from non-current asset disposal (164,757)
Governmental subsidy 93,685
Capital occupation fee from non-financial corporate that written into current gains and losses 7,919
Gains and losses from changes in fair value of transaction financial assets and transaction
financial liabilities and investment income from disposal of transaction financial assets,
transaction financial liabilities and financial assets available for sale besides valid hedging
business relating to normal operating business 209,457
Gains and losses from external entrusted loans 84,166
Other non-operating income and expenditure 79,139
Impact on income tax (62,571)
Impact on equity of minority shareholders (36,694)
Total 210,344
II. Impact on net profit and net assets from adjustment in compliance with IAS
Unit: RMB’000 Yuan
Net profit Net assets
Amount of this Amount at the Amount at the
Amount of last period
period period-end period-begin
As per IAS 3,007,463 964,649 16,219,107 14,193,198
As per PRC GAAP 3,001,851 958,967 16,223,057 14,198,208
Items to be adjusted based on IAS
Other 5,612 5,682 (3,950) (5,010)
As per IAS
Mainly of the amortization of the estimated increase of former fixed assets,
Explanation for difference
intangible assets.
III. Key accounting data and financial indicators in the recent 3 years
Unit: RMB’000 Yuan
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Increase/decrease
Items 2010 2009 2008
(%)
Operating revenue 51,768,316 20,475,507 152.83% 47,327,281
Total profit 3,674,607 1,465,385 150.76% 1,927,029
Net profit attributable to
shareholders of parent 3,001,851 958,967 213.03% 1,406,908
company
Net profit excluding
non-recurring gain/loss
2,791,507 -281,787 1090.64% 990,797
attributable to shareholders of
parent company
Net cash flow from operating
1,482,901 969,685 52.93% 3,366,538
activities
Basic EPS (RMB Yuan) 1.13 0.36 213.89% 0.53
Diluted EPS (RMB Yuan) 1.13 0.36 213.89% 0.53
Basic EPS after deducting
non-recurring gain and loss 1.05 -0.11 1054.55% 0.37
(RMB Yuan)
Weighted average return on
20% 7% 13% 10%
equity
Weighted average return on
equity after deducting 18% -2% 20% 7%
non-recurring gain and loss
Net cash flow from operating
activities per share (RMB 0.56 0.36 55.56% 1.26
Yuan)
Increase/decrease
Items 31 Dec. 2010 31 Dec. 2009 31 Dec. 2008
year-on-year (%)
Total assets 54,130,649 37,358,383 44.90% 34,557,863
Shareholders’ equity
attributable to shareholders of 16,223,057 14,198,208 14.26% 13,428,901
parent company
Net assets per share
attributable to shareholders of 6.09 5.33 14.26% 5.04
parent company (RMB Yuan)
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Section IV Shareholders and Changing of Share Capital
I. Changes in share capital
(I) Changes in share capital as at 31 Dec. 2010
1 Statement on changes in share capital
Unit: Share
Before this change Increase/decrease (+/-) After this change
Number of Ratio Issuance of Bonus Number of Ratio
Others Subtotal
shares (%) new share shares shares (%)
I. Shares subject to
620,177 0.02 0 0 0 0 620,177 0.02
trading moratorium
1. Shares held by state 0 0 0 0 0 0 0 0
2. Shares held by
0 0 0 0 0 0 0 0
state-owned corporations
3. Shares held by other
0 0 0 0 0 0 0 0
domestic investors
Including: Shares held by
domestic
0 0 0 0 0 0 0 0
non-state-owned
corporations
Shares held by domestic
0 0 0 0 0 0 0 0
natural person
4. Shares held by
0 0 0 0 0 0 0 0
overseas investors
Including: Shares held by
0 0 0 0 0 0 0 0
overseas corporations
Shares held by overseas
0 0 0 0 0 0 0 0
natural person
5. Shares held by senior
620,177 0.02 0 0 0 0 620,177 0.02
management
II. Shares not subject to
2,661,775,874 99.98 0 0 0 0 2,661,775,874 99.98
trading moratorium
1. RMB ordinary
1,231,297,165 46.25 0 0 0 0 1,231,297,165 46.25
shares (A-share)
2. Domestically listed
1,430,478,709 53.73 0 0 0 0 1,430,478,709 53.73
foreign shares (B-share)
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
2,662,396,051 100.00 0 0 0 0 2,662,396,051 100.00
shares
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
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listed foreign shares (B shares).
2 Statement on changes in shares subject to trading moratorium
Unit: Share
Number of Number of Number of
Number of
shares shares subject to shares Date of
shares subject
Name of released from trading subject to releasing
to trading Reason
shareholder trading moratorium trading trading
moratorium at
moratorium in increased in moratorium moratorium
year-begin
current year current year at year-end
Mai Boliang 371,026 123,676 123,676 371,026 Shares held by Senior
Li Ruiting 247,351 82,451 82,451 247,351 management was frozen by
China Securities Depository
Naught
and Clearing Limited
Liu Xuebin 1,800 600 600 1,800
Shenzhen Branch according
to relevant regulations
Total 620,177 206,727 206,727 620,177
(II) Share issuing and listing
1 The Company didn’t issue any shares or derivative securities in the past 3 years by
the end of the reporting period.
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
(I). Shares held by major shareholders (as at 31 Dec. 2010)
Unit: share
Total number of shareholders 160,312 shareholders, including 132375 ones of A-share, 27937ones of B-share
Shares held by the top ten shareholders
Shares subject to Number of
Shareholding Shareholding at
Name of shareholder Nature trading pledged or
ratio (%) period end
moratorium held frozen shares
Foreign
China Merchants (CIMC) Investment Limited 25.00% 665,599,037 0 0
investor
Foreign
COSCO Container Industries Limited 16.23% 432,171,843 0 0
investor
Foreign
COSCO Container Industries Limited 5.57% 148,320,037 0 0
investor
CMBLSA RE FTIF TEMPLETON ASIAN GRW FD Foreign
3.23% 85,998,058 0 0
GTI 5496 investor
Foreign
LONG HONOUR INVESTMENTS LIMITED 0.95% 25,322,106 0 0
investor
New China Life Insurance Co., Ltd–Dividend Other 0.83% 22,184,495 0 0
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Distribution–Individual Dividend-018L-FH002 Shen
HTHK/CMG FSGUFP-CMG FIRST STATE CHINA Foreign
0.69% 18,373,582 0 0
GROWTH FD investor
INDUSTRIAL & COMMERCIAL BANK OF
CHINA—E FUND VALUE GROWTH MIXED Other 0.68% 18,000,000 0 0
SECURITIES INVESTMENT FUND
GUOTAI JUNAN SECURITIES(HONGKONG) Foreign
0.66% 17,683,993 0 0
LIMITED investor
National Social Security Fund 102 Portfolio Other 0.53% 14,043,592 0 0
China Merchants Bank Co., Ltd-Everbright Pramerica
Other 0.50% 13,312,936 0 0
Advantage Allocation Stock Fund
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
China Merchants (CIMC) Investment Limited 665,599,037 Domestically listed foreign share
COSCO CONTAINER INDUSTRIES LIMITED 432,171,843 RMB common share
COSCO Container Industries Limited 148,320,037 Domestically listed foreign share
CMBLSA RE FTIF TEMPLETON ASIAN GRW FD GTI 5496 85,998,058 Domestically listed foreign share
LONG HONOUR INVESTMENTS LIMITED 25,322,106 Domestically listed foreign share
New China Life Insurance Co., Ltd–Dividend
22,184,495 RMB common share
Distribution–Individual Dividend-018L-FH002 Shen
HTHK/CMG FSGUFP-CMG FIRST STATE CHINA GROWTH
18,373,582 Domestically listed foreign share
FD
INDUSTRIAL & COMMERCIAL BANK OF CHINA—E
FUND VALUE GROWTH MIXED SECURITIES 18,000,000 RMB common share
INVESTMENT FUND
GUOTAI JUNAN SECURITIES(HONGKONG) LIMITED 17,683,993 Domestically listed foreign share
National Social Security Fund 102 Portfolio 14,043,592 RMB common share
China Merchants Bank Co., Ltd-Everbright Pramerica Advantage
13,312,936 RMB common share
Allocation Stock Fund
1. 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 subsidiary of COSCO Pacific Limited under COSCO Group;
Explanation on associated Long Honour Investments Limited is subordinate wholly-owned subsidiary of COSCO Hong Kong
relationship among the top ten (hereinafter refer to as “COSCO Hong Kong”)under COSCO Group; These two and other
shareholders or shareholders are not acting-in-concert person specified in “Regulatory Provisions on Disclosure of
acting-in-concert Information on Shareholding Change of Shareholders for Listed Companies”.
2. 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”.
(II) Corporate shareholders with shareholding ratio exceeding 10%
1 None of shareholders with shareholding ratio exceeding 30% (controlling
shareholders)
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Date of
Name of Shareholdin Registere Business
Director incorporati Equity structure
shareholder g ratio d capital scope
on
Wholly-owned by
China Merchants China Merchants
Huang Qianru, Zhang HKD Investment
(CIMC) Investment 25.00% 1995.1.17 Holdings
Rizhong and LinWuliu 10,000 and holdings
Limited (International)
Limited
COSCO Container Chen Keng, Zhang Jie Wholly-owned by Investment
21.80% 2004.4.26 USD 1
Industries Limited and Xu Jian COSCO Pacific and holdings
(1) China Merchants (CIMC) Investment Limited is the wholly-owned subsidiary of
China Merchants Holdings (International) Limited. China Merchants Group Limited
holds 55.50% equity of China Merchants Holdings (International) Limited. China
Merchants (CIMC) Investment Limited holds 25.00% equity of CIMC. Therefore
China Merchants (CIMC) Holdings Limited actually holds 25.00% equity of CIMC.
(2) As 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 42.72% 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. COSCO Container Industries
Limited held 21.80% equity of CIMC through COSCO Containers Industries Limited;
Long Honour Investments Limited is a subordinate wholly-owned subsidiary under
COSCO Hong Kong and holds 0.95% equity of CIMC.
Property and controlling relation between actual controller and CIMC
SASAC
100% 100%
COSCO China Merchants Group Limited
100%
54.55% 55.50%
China COSCO Holdings Co., Ltd. COSCO (Hong Kong) Group Ltd. China Merchants Holdings (International) Limited
100%
100%
COSCO Pacific Investment Holdings Limited
100%
42.72%
Long Honour Investment Limited
COSCO Pacific Limited
100% China Merchants (CIMC) Investment Limited
0.95%
COSCO Container Industries Limited
25%
21.80% CIMC
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2 The Company has no controlling shareholder. In the reporting period, no change
occurred to China Merchants (CIMC) Investment Limited and COSCO Container
Industries Limited
(III) Time for listing and trading of shares subject to trading moratorium
Shares subject to trading Balance of shares not
Balance of shares subject
Time moratorium listed for trade subject to trading
to trading moratorium
due to expiration moratorium
5 Sep. 2007 133,119,802 299,052,041 133,119,802
2 Jul. 2008 133,119,802 165,932,239 266,239,604
15 Jun. 2009 165,932,239 0 432,171,843
Note: On 30 Jun. 2009, 432,171,843 shares subject to trading moratorium of the
Company held by COSCO Container Industries Limited were listed for trading.
Shares subject to trading moratorium held by the top ten shareholders and trading
moratorium
Unit: Share
Quantity of shares Additional shares
Name of Date of list
subject to trading to be listed for Trading moratorium
shareholders for trade
moratorium trade
Mai Boliang 494,702 Shares held by Senior management
Li Ruiting 329,802 — — was frozen by China Securities
Depository and Clearing Limited
Liu Xuebin 2,400 Shenzhen Branch according to
relevant regulations
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Section V Directors, Supervisors, Senior Managements and Employees
I. Directors, supervisors and Managements
Total remuneration/ Whether receive
allowance received remuneration from the
Name Title Gender Age Office term
from the Company shareholders or other
(RMB’0000) organizations
Fu Yuning Chairman Male 54 Apr. 2007-Apr. 2010 - Yes
Li Jianhong chairman Male 55 Apr. 2010-Apr. 2013 - Yes
Director and
Mai Boliang Male 51 Apr. 2010-Apr. 2013 596.22 No
president
Wang Hong Director Male 48 Apr. 2010-Apr. 2013 - Yes
Xu Minjie Director Male 52 Apr. 2010-Apr. 2013 - Yes
Ding Independent Male
48 Apr. 2010-Apr. 2013 8.00 No
Huiping director
Independent
Jin Qingjun Male 53 Apr. 2010-Apr. 2013 12.00 No
director
Independent
Xu Jing’an Male 69 Apr. 2010-Apr. 2013 12.00 No
director
Qin Independent
Male 48 Apr. 2007-Apr. 2010 4.00 No
Rongsheng director
Lv Shijie Chief supervisor Male 46 Apr. 2010-Apr. 2013 - Yes
Huang
Supervisor Female 58 Apr. 2010-Apr. 2013 - Yes
Qianru
Feng
Staff supervisor Male 64 Apr. 2010-Apr. 2013 110.86 No
Wanguang
Zhao
Vice president Male 58 Apr. 2010-Apr. 2013 189.92 No
Qingsheng
Li Ruiting Vice president Male 63 Apr. 2010-Apr. 2013 104.27 No
Wu Fapei Vice president Male 52 Apr. 2010-Apr. 2013 138.38 No
Li Yinhui Vice president Male 43 Apr. 2010-Apr. 2013 134.52 No
Liu Xuebin Vice president Male 52 Apr. 2010-Apr. 2013 208.40 No
Yu Ya Vice president Male 54 Apr. 2010-Apr. 2013 137.24 No
General manager
Jin Jianlong of Financial Male 57 Apr. 2010-Apr. 2013 137.12 No
Management
Zeng Beihua General manager
of Capital Female 56 Apr. 2010-Apr. 2013 128.39 No
Management
Secretary to the
Yu Yuqun Board of Male 45 Apr. 2010-Apr. 2013 137.02 No
Directors
Total — — — — 2058.34 —
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(I) Basic information
Shares of the company held by directors, supervisors and senior managements
Shareholding at the Shareholding at the end of
Name Reason for change in shareholding
beginning of the year 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 —
(II) 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 and director as well as General Manager of
China Merchants Holdings (International) Co., Ltd., Chairman of the Board of Directors
of China Merchants Energy Shipping Co., Ltd, non-executive directors of China
Merchants Bank Co., Ltd, independent non-executive director of IDS Group Limited,
non-executive director of Sino Land Company Limited and independent non-executive
director of Capitaland Limited. Mr. Fu was graduated from Dalian University of
Technology in 1982 with bachelor degree in port engineering. He got the doctor’s degree
in offshore 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 acted as Director of
the Company since Apr. 2007, due to work reason, Mr. Fu resigned the job as Director of
the Company, Chairman of the Board on 25 Oct. 2010.
Mr. Li Jianhong, Chairman of the Company, is currently President 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. He ever work for COSCO Group and took the post of Factory
Director of COSCO Nantong Shipyard, of General Manager of COSCO Industry
Company, and of Assistant President, Chief Economist and Vice President of COSCO
Group, of Chairman of COSCO Corporation (Singapore) Limited, of Chairman of the
Board of Sino-Ocean Land Holdings Limited, of Chairman of COSCO Shipyard Group
Co., Ltd., as well as of President for China business of Nantong COSCO KHI Ship
Engineering Co., Ltd.. Meanwhile, Mr. Li Mr. also has been director of COSCO Holding
Limited, COSCO Pacific Limited and COSCO International Holdings Limited (all of
which are listed in Hongkong Exchanges and Clearing Limited) Li is also vice director of
China Society of Naval Architecture and Offshore engineering and Vice President of
China Association of National Shipbuilding Industry etc. He has been awarded the 3rd
Session of National Outstanding Young Entrepreneur and Model Worker of National
Transportation System in 1995. He has been Director of the Company since March 1995
and acts as Director of the Company again since 25 October 2010.
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Mr. Mai Boliang, is the director and President of the Company. 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 1994.
Mr. Wang Hong, Director. He is currently General Manager of Strategy Research
Department of China Merchants Group Limited, concurrently Director of China
Merchants Group (Hong Kong) Limited, Director of China Merchants Holdings
(International) Co., Ltd., as well as Director of China Merchants Energy Shipping 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
Performance Appraisal Dept. and HR Dept. in China Merchants Group, and standing
Vice General Manager of China Merchants Holdings (International) Co., Ltd as well as
Vice Chairman in Shanghai International Port (Group) Co., Ltd. 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 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. His predominant foresight and administrative
capacity are received good reputation in the industry. In January 2007, Mr. Xu began to
serve as Vice Chairman and Managing Director of COSCO Pacific Limited and was in
charge of general management, the development strategy, corporation governance and
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financial management affaires. He has been the Company’s Director since April 2007.
Mr. Qin Rongsheng, Independent Director with PHD in management, is a 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 didn’t act as Company’s Independent Director since April 2010.
Mr. Ding Huiping, Independent Director with PHD in management, professor and
doctor tutor of School of Economics and Management in Beijing Jiaotong University, is
Director of Chinese EnterpriseCompetitive Power Research Center in Beijing Jiaotong
University. He concurrently acts as independent director of CRBC International Co., Ltd.
He graduated from Northeastern University with bachelor of engineering degree in Feb.
1982. He went to Sweden for study in 1987, got licentiate of engineering in 1991, got
economics doctor degree in 1992 and then has been postdoctoral researcher. He returned
to China in 1994, and then has been working in School of Economics and Management of
Northern Jiaotong University (now named Beijing Jiaotong University) till now. Mr.
Ding once concurrently acted as independent director of China Merchants Bank, Huadian
Power International Corporation Limited and Shandong Luneng Taishan Cable Co., Ltd.
His research direction: finance, decision-making of investment & financing and
enterprise evaluation and administration on enterprise economy and innovation. Mr. Ding
has been acted as Independent Director of the Company since April 2010.
Mr. Jin Qingjun, Independent Director, is a 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 Arbitration
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.
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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, Chairman and 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. Lu Shijie, Chief Supervisor. He took the post of Chief Financial Officer in COSCO
Pacific Limited in Jan. 2008. Mr. Lu Shijie is a member of Hong Kong Institute of
Certified Public Accountants, American Institute of Certified Public Accountants, the
Chartered Institute of Management Accountants and Certified Management Accountants
of Canada. Mr. Lu Shijie is MBA of University of Ottawa and holds bachelor degree in
administration in University of York. He once acted as CFO and General Manager in
listed company in Hong Kong and American multinational Company, for example, in
New World TMT, Wang On Group Limited and Hong Kong Plastics Department of
General Electric Company. He has been acting as supervisor of the Company since Jun.
2009.
Ms. Huang Qianru, supervisor. She now serves as Vice General Manager of China
Merchants Holdings (International) Co., Ltd., taking charge of the company’s financial
affairs. She also serves as Independent Non-executive Director in China Gas Holdings
Ltd. In 2004, she joined China Merchants Holdings (International) Co., Ltd. Mr. Huang
has had an over-15-year experience of working as a top executive in many globally
famous investment banks such as Societe Generale, Deutsche Morgan Grenfell, Samuel
Montague and Bear Stearns Asia, providing financial consulting and financing services
for not less than 50 companies in the Greater China Region and Asia. And Ms. Huang has
an MBA degree granted by University of Asia Oriental, Macau. She has been supervisor
of the Company since Jun. 2009.
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.
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3. Senior managements
Mr. Mai Boliang, director and President, please referred to the above introduction on
directors.
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; 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
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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. Yu Ya, Vice President of the Company ,Vice Secretary of the Party and General
Manager of Public affairs Dept. Mr. Yu graduated from Mechanical Engineering
Department of Tianjin Light Industry Vocational Technical College, MBA of Nanjing
University. He used to serve as Secretary of Minister、Vice-Director of office department
in the Light Industry Dept (later it was China Light Industry Association). Then he served
as Deputy General Manager and General Manager of China National Food Industry
(Group) Corp., Vice-president of Sinolight Corporation, and Executive Director 、
Vice-Executive President. Mr. Yu joined the company in August.2007, and served as the
Vice secretary of the Party and General Manager of Public affairs Dept. He began to
serve as Vice President of CIMC since March 2010.
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.
Ms. Zeng Beihua, General Manager of Cash management Dept. Ms. Zhen graduated
from Wuhan University, majoring in accounting. Ms. Zhen joined the company in 1989,
and ever took the post of the General Manager of Financial Dept.、Deputy General
Manager of CIMC Vehicle (Group) Corp., while General Manager of CIMC Vehicle
finance lease Corp.、General Manager of CIMC Finance Corp. She served as the General
Manager of Cash Dept. of the company since December 2009.
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.
(III) Concurrent positions held by Directors, Supervisors and Senior Managements
in organizations other than shareholder’s company
Relations with the
Name and title Organizations for concurrent positions Company (controlling Title
related/non- related)
Li Jianhong/Chairman China Merchants Group Limited Non-related Director and president
Chairman of China Merchants Energy
Naught Chairman
Shipping Co., Ltd.
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Managing Director
China Merchants Holdings (International) Co.,
Related and Vice Chairman of
Ltd
the Board
Concurrent positions in 33 controlling
Mai
subsidiaries such as CIMC Vehicle Group and Controlling subsidiary Chairman/Director
Boliang/Director/President
Shenzhen South CIMC Limited
General Manager of
Wang Hong/Director China Merchants Group Limited Non-related Strategy Research
Department
China Merchants Group (Hong Kong) Limited Non-related Director
China Merchants Holdings (International)
Related Director
Limited
China Merchants Energy Shipping Co., Ltd. Non-related Director
Vice Chairman of the
Xu Minjie/Director COSCO Pacific Holding Limited Related Board and General
Manager to the Board
COSCO(Hong Kong) Investment Co., Ltd. Non-related Director
Taicang International Containers Co., Ltd. Non- related Director
Concurrent positions in 34 companies
Non-related Chairman
subsidiary to COSCO Pacific Limited
Concurrent positions in 9 joint controlling and
joint operation companies of COSCO Pacific Non-related Director/Chairman
Limited
Director/Vice
COSCO Pacific Holding Limited Non-related
Chairman /Chairman
Professor and doctor
tutor of School of
Economics and
Director of Chinese
Ding Huiping/Independent Enterprise
Beijing Jiaotong University Non-related
Director Competitive Power
Research Center in
Beijing Jiaotong
University. He
concurrently acts as
CRBC International Co., Ltd Non-related Independent Director
Jin Qingjun/Independent
King & Wood Law Firm Non-related Senior partner
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 Law Non-related Part-time professor
School of Law of Tsinghua University Non-related Part-time professor
Shenzhen Arbitration Committee Non-related Arbitrator
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China International Economic and Trade
Non-related Arbitrator
Arbitration Commission
Xu Jing’an/Independent
Xu Jing An Investment Consultants and Non-related Chairman
Director
Shenzhen New Century Civilization Research Chairman, research
Non-related
Institute fellow
Shenzhen Nanshan Power Station Co., Ltd. Non-related Independent Director
Lv Shijie/Chief Supervisor COSCO Pacific Limited Related CFO
Concurrent positions in 8 subsidiary
Non-related Director/Chairman
companies of COSCO Pacific Limited
Concurrent positions in two joint control
entities and affiliated companies under Non-related Director
COSCO Pacific Limited
China Merchants Holdings (International) Co., Director, Deputy
Huang Qianru/Supervisor Related
Ltd General Manager
Feng
CIMC Holdinigs (B.V.I.) Limited Controlling subsidiary Director
Wanguang/Supervisor
Concurrent positions in 48 companies such as
Zhao Qingsheng/Vice
Shenzhen South CIMC Limited and Enric Controlling subsidiary Chairman/Director
President
Energy Equipment Holdings Limited
Concurrent positions in 6 controlling
Li Ruiting/Vice President subsidiaries such as Shanghai CIMC Reefer Controlling subsidiary Chairman/Director
Containers Co., Ltd.
Concurrent positions in 40 controlling
subsidiaries such as Shenzhen South CIMC
Wu Fapei/Vice President Controlling subsidiary Chairman/Director
Limited and CIMC Logistic Equipment
(Chongqing) Co., Ltd.
Concurrent positions in 6 controlling
subsidiaries such as Shenzhen South CIMC
Liu Xuebin/Vice President Controlling subsidiary Chairman/Director
Limited and CIMC Logistic Equipment
(Chongqing) Co., Ltd.
Concurrent positions in 10 controlling
subsidiaries such as CIMC Shenzhen Special
Li Yinhui/Vice President Controlling subsidiary Chairman/Director
Vehicle Co., Ltd. and Dalian CIMC Railway
Equipment Co., Ltd.
Concurrent positions in 9 controlling
Yu Ya/ Vice President subsidiaries such as CIMC Raffles Ocean Controlling subsidiary Chairman/Director
Engineering (Singapore)Co., Ltd.
Concurrent positions in 70 controlling
Jin Jianlong/General
subsidiaries such as Shenzhen South CIMC
Manager of Financial Controlling subsidiary Director
Limited and Enric Energy Equipment
Management
Holdings Limited
Zeng Beihua/ Manager of Concurrent positions in 29 controlling
Controlling subsidiary Director
Capital Management subsidiaries such as Yangzhou CIMC Tonghua
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Department Special Vehicle Co., Ltd.
Concurrent positions in 17 controlling
subsidaries such as CIMC Raffles Ocean
Yu Yuqun /Secretary to the Engineering (Singapore)Co., Ltd., CIMC
Controlling subsidiary Director
Board Enric Energy Equipment Holdings Limiteand
Shenzhen CIMC-Tianda Airport Support Co.,
Ltd.
(IV) 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 Jin
Qingjun and Xu Jing’an received RMB 120,000 as subsidy for independent directors in
reporting period, Qin Rongsheng and Ding Huiping received RMB 40,000 and RMB
80,000 respectively. Except for this, no other remuneration was paid to 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.
(V) Changes Directors, Supervisors and Senior Management
Of Independent Directors of the 5th Board of Directors, Qin Rongsheng, Jin Qingjun and
Xu Jing’an came to expire on April 2010 that the Board nominated Mr. Ding Huiping,
Mr. Jin Qingjun and Mr. Xu Jinag’an as candidates of independent directors for the 6th
Board of Directors. As the Shareholders’ General Meeting 2009 was convened on 26 Apr.
2010, of which proposal on electing Mr. Ding Huiping, Mr. Jin Qingjun and Mr. Xu
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Jinag’an as independent directors of the 6th Board of Directors was approved.
II. About the employees of the Company
(I) Number of employees
By December 31, 2010, the number of employees of the Company is 63,354.
(II) Composition
Post composition Education status
Manageme Production Junior
Technology Doctor Master Bachelor Others
nt workers college
Number 7083 4844 51427 23 497 5064 6281 51489
Proportion
(%) 11.2 7.6 81.2 0.0 0.8 8.0 9.9 81.3
The Company does not need to bear expense for retired employees.
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Section VI Corporate Governance Structure
I. Corporate 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.
In accordance with regulations and requirements on corporate governance of listed
companies stipulated by CSRC, CSRC Shenzhen Bureau and Shenzhen Stock Exchange,
the Company positively and timely completed issues as rectifying and improving of
corporate governance, specific check, implement of system required by supervision
department. Meanwhile, the Company implemented and revised basic working rules for
financial accounting such as Rules on Accounting Management of CIMC, Rules on
Management of Internal Incomings and Outgoings of CIMC, Management System for
Financing etc..
The Company actively participated in trainings for directors and supervisors of listed
companies organized by regulatory ministry. The Company organized all directors,
supervisors and senior managements as well as shareholder holding over 5% shares of the
Company, strictly obey relevant laws, statutes, regulations and cases to purchase and sell
shares of the Company without violating, improved self-discipline and restraint
consciousness on relevant action of the above personnel.
As for implement of administrative system on inner information and insider,the Board of
the Company and secretary to the Board are in charge of administrative work of inner
information, and secretary office of the Board is in charge of daily procedure of
registration and record of inner information. The Company strictly in line with
regulations and requirements stipulated in system, so as to conduct efficient supervision
for inner carry-over and disclosure of inner information. Upon self-examination, there
were no particulars about insider took advantages of inner information to purchase and
sell shares of the Company before the disclosure of major sensitive information that shall
have an impact on the share price of the Company.
In 2010, the Company actively cooperated with the CSRC Shenzhen Bureau to complete
the routine inspection work to the Company which maintained a smooth and good
communication with supervision department and secretary to the Board has received
praise from CSRC Shenzhen Bureau for the Company has done a good job in actively
promoting regular development of listed companies. In accordance with the assemble
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disposition and requirement of CSRC Shenzhen Bureau, the Company accomplished
summary and report of documents on investigation of basic work of financial accounting
standard in accordance with general allocation and requirement of CSRC Shenzhen
Bureau and submission of inspection documents on basic financial accounting work of
listed companies which further improvement and standardization of basic financial
accounting work.
II. Performance of the Independent Directors
(I) Particulars about the independent directors attending the Board meetings:
Name of Independent Presence in person Entrusted presence Absence
Due presence (times)
Directors (times) (times) (times)
Qin Rongsheng 5 5 0 None
Ding Huiping 8 8 0 None
Jin Qingjun 13 13 0 None
Xu Jing’an 13 11 2 None
(II) 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:
1 Specific statement and independent opinion on external guarantee in 2009;
2 Special opinion on particulars of derivatives investment and risk control in 2009;
3 Independent opinion on re-electing of Board of Directors and engagement of senior
management;
4 Independent opinion on remuneration of directors and senior management of the
Company;
5 Independent opinion on Self-appraisal Report on Internal Control of CIMC 2009;
6 Independent opinion on engagement of senior management;
7 Specific statement and independent opinion from independent directors on relevant
events of the first half of 2010;
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8 Independent opinion on Stock Option Incentive Plan (Draft) of CIMC (Revised);
9 Independent opinion on relevant events concerning granting stock option in stock
option incentive plan.
(III) Independent role of Independent Directors in the Annual Report
Strictly in accordance with the requirements stipulated in Public Notice on Preparation of
Annual Report 2010 and Relevant Work by CSRC, the Independent Directors diligently
perform their duties as independent directors when preparing the Annual Report 2010.
1 Independent Directors heard the report on the operational condition 2010 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 CIMC Shenzhen Special Vehicle Co., Ltd., and listened to report on annual
operational condition 2010 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 2010, and the two parties reached agreement on
these items. Independent Directors examined and approved the Arrangement of the
Company’s Auditing Work 2010.
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 3rd Session of the 6th Board of Directs held on March 21, 2010 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 China Merchants (CIMC) Investment Limited
and COSCO Container Industries 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.
(I) 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.
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(II) 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.
(III) 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 independently.
(IV) 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.
(V) 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 the internal control system
(I) General situation
CIMC has established a series of procedures and systems for the Shareholders’ General
Meeting, the Board of Directors and the Supervisory Committee to exercise their
decision-making power, executing power and supervisory power. In addition, the Board
of Directors has established three special committees for audit, remuneration &
measurement and strategy respectively. 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 the internal control system via the Audit Committee. The Audit Committee assists in
formulating and reviewing the internal control system and reviews and supervises
significant affiliated transactions. The Supervisory Committee reviews internal control
status and provides audit proposals.
In terms of corporate governance and internal control, the Audit & Supervision
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
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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.
In strict compliance with the Company Law, the Code of Corporate Governance for
Listed Companies, the Guiding Opinion on Establishing Independent Director System in
Listed Companies, the Stock Listing Rules of Shenzhen Stock Exchange, the Guidelines
for Fair Information Disclosure of Listed Companies, the Guidelines of Shenzhen Stock
Exchange for Internal Control of Listed Companies, the Several Provisions on
Strengthening Protection of Rights and Interests of Public Shareholders, the Decisions on
Amending Some Provisions on Cash Dividends by Listed Companies, the Regulations on
Takeover of Listed Companies, the Guidelines of Shenzhen Stock Exchange for
Management over Listed Company’s Shares Held by Its Directors, Supervisors and
Senior Executives and Changes thereof, and other relevant laws and regulations by the
central government, CSRC and other authorities, the Company continued to improve its
corporate governance and standardized its operation. The Company has established and
exercised effective internal control in all material respects. Meanwhile, through
continuous improvement, the Company has formed a sound and effective internal control
system, covering rules and methods for production and operation, purchase, selling and
distribution, investment, financial affairs and information disclosure. These rules and
methods have composed the Company’s internal control system.
After two years of efforts, the Company has set up internal control systems for its 65
wholly-owned or controlling subsidiaries, of which 28 have received an internal control
re-examination from the Company. By carrying forward the comprehensive budget
management and the accountability and authorization mechanism, as well as formulating
preventive methods in the Group’s level concerning significant purchases and takeovers
and other processes and mechanisms, the overall governance environment of the Group
has been greatly improved. In addition, the various rules have become more systematic
and more new rules have been formulated. All relevant departments including the audit
and information departments, the purchase department and the HR department have been
working closely together to strengthen control of various risks and follow up problems
found in the internal examination of internal control until they are addressed.
In 2010, the Company put further efforts in integrating its rules into a consistent system
and relevant management. It held special meetings and appointed specialized functional
organs to prescribe the establishing, improving and issuing processes for rules, as well as
to examine, revise and terminate the Company’s internal operation rules and basic
management rules. By continuously improving various management rules, the Company
tried to standardize its internal business processes and management so as to control risks
arising from the course of its operation. Upon its efforts in integrating its rules into a
consistent system, the Company also proactively upgraded its internal control to meet
requirements of the Implementation Guidelines for Enterprise Internal Control issued by
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the Ministry of Finance and other four government authorities in Apr. 2010. As a result,
the Company has not been recognized by CSRC as one of the first 26 key pilot
enterprises on the main board of the Shenzhen Stock Exchange for the implementation of
the Implementation Guidelines for Enterprise Internal Control.
(II) Pending issues concerning corporate governance and rectification plan
From Oct. to Dec. 2010, the Shenzhen CSRC Bureau carried out an on-site examination
in the Company and stated their concerns, which mainly related to some operation details
of the Shareholders’ General Meeting, the Board of Directors, the Supervisory Committee,
the formulation and execution of some internal control rules, some details of information
disclosure, and the operation and execution of financial management and accounting.
The Company has given its explanations to the Shenzhen CSRC Bureau concerning the
aforesaid issues. At the same time, it has formulated some preliminary rectification
measures. It will further disclose and adopt rectification measures when the Bureau issues
its formal conclusion opinion.
(III) Establishment and execution of the Company’s internal control rules for financial
reports
The financial management system of the Company is sound and effectively executed. The
system is divided into four grades, i.e. rules, provisions, methods and specific rules
(signed and issued by the President) and guidelines (signed and issued by department
chiefs), covering management over accounting, funds, budgets, payments, internal
transactions and events, etc..
The Company has established unified accounting policies for the Group. As for
subsidiaries abroad which adopt IFRS for accounting, they are brought under the Group’s
unified accounting policies in the consolidation. In this way, it can be ensured that all
entities consolidated are accounted for under the same accounting policies. If a change of
key accounting policies is required or needed, approval from the Board of Directors must
be obtained. And change of ordinary accounting policies must be approved by the top
management.
Any change of the accounting estimates must be approved by the management. Despite
the fact that there are no specific rules for fair value, the recognition methods for fair
value must be approved by the Board of Directors.
Correction of material accounting errors shall be approved by the management. And there
have been no such events in the past three years.
As for asset impairment tests, the Company has explicit stipulations for the process and
approval of asset impairment recognition, which the Company has been strictly abided by.
Besides, checks and re-checks are carried out on a frequent basis.
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In Mar. 2010, pursuant to the requirements of the Shenzhen CSRC Bureau, the Company
established the Accountability Mechanism of CIMC for Material Errors in Annual Report
Preparation and Disclosure and the Financial Principal Mechanism of CIMC, which were
reviewed and approved at the Eighth Session of the Sixth Board of Directors for 2010
held on 1 Dec. 2010.
No material defects had been found concerning the Company’s internal control on
financial reports by the end of 2010.
(IV) Self-examination and rectification for the special campaign for basic accounting
activities
In Apr. 2010, the Shenzhen CSRC Bureau issued the Notice on Special Campaign for
thoroughly Regulating Basic Accounting Activities in Shenzhen. In accordance with the
Notice, the Company carried out a special campaign for standardizing basic accounting
activities within the Group, on which the Audit Committee gave its instructions and
carried out necessary examinations. A special task team for the special campaign was set
up, with President Mr. Mai Boliang as the team leader and Financial GM Mr. Jin Jianlong
as the executive deputy leader, including financial principals and other financial
personnel from all subsidiaries. The special campaign was divided into two phases—the
self-examination phase and the rectification phase, stretching over six months and
covering the over 100 subsidiaries registered in China Mainland.
The special campaign was carried out at three steps, i.e. self-examination, rectification
and re-check. The Financial Management Department of the Group appointed specialized
personnel to collect self-examination reports from subsidiaries and followed up their
examination progress as a way to ensure that the self-examination was complete and
timely. In addition, specialized personnel were also appointed to summarize the
self-examination activities and produce a general report on the self-examination results of
the Group. All subsidiaries were required to produce a rectification report on problems
found in the course of the special campaign, addressed the problems in a timely manner.
As for pending rectification matters, they were assigned to specific personnel. And the
subsidiaries were required to formulate relevant rectification measures and finish the
required rectifications in a given period. On 30 Jun. 2010, the Rectification Report on
Special Campaign for Standardizing Basic Accounting Activities was reviewed and
approved at the Second Session of the Sixth Board of Directors of the Company for 2010.
(V) Horizontal competition and related-party transactions
Horizontal competition arises between the Company and the subsidiary of China
Merchants Group (the controlling shareholder of the Company’s first majority
shareholder). One of the Group’s four core businesses—the offshore engineering
business—is partially the same with or similar to the business of the said subsidiary of
China Merchants Group, and horizontal competition to some degree has thus formed. The
said subsidiary of China Merchants Group commenced and developed its offshore
engineering equipment business earlier than the Company. Later, the Company also
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gained the opportunity to acquire an offshore engineering enterprise—Yantai Raffles. As
a result, the horizontal competition was unavoidable due to objective circumstances.
Despite the fact that China Merchants Group does not hold shares of the Company
directly, the Company will still communicate with its first majority shareholder in terms
of the emphasis points and target markets of the Company’s offshore engineering
business, so as to avoid direct competition.
Product selling and purchasing activities in the container business arise between the
Company and a subsidiary of China Ocean Shipping (Group) Company—the Company’s
majority shareholder. For more details, see the part of related-party transactions in the
notes to the financial statements for the year.
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.
In Sept. 2010, the Stock Incentive Drafted Plan of China International Marine Containers
(Group) Co., Ltd. (Revised) was reviewed and approved at the First Special
Shareholders’ General Meeting for 2010. Implementation of stock incentive plan will be
good for: establishment share and restraining system on interest among shareholders,
management team and backbone; management team will balance short-term goal and
long-term goal better; attract and keep excellent administrative talent and backbone of
business; durative creation of incentive value will assure long-term stable healthy
development and strengthen competitive power of the Company.
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Section VII The Shareholders’ General Meeting
Ⅰ. Annual shareholders’ general meeting
The Company convened the 2009 Annual Shareholders’ General Meeting in Shenzhen on
26 Apr. 2010.
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 Apr. 2010.
Ⅱ. Special shareholders’ general meetings
The First Special Shareholders’ General Meeting for 2010 was convened in Shenzhen on
17 Sept. 2010.
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
18 Sept. 2010.
The Second Special Shareholders’ General Meeting for 2010 was convened in Shenzhen
on 15 Nov. 2010.
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
16 Nov. 2010.
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Section VIII Report of the Board of Directors
I. Management discussion and analysis
(I)Environment change of industry and influence thereof
After a heavy slump, the global economy recovered gradually in 2010. Consumer
confidence for all major markets resumed to some degree. As a result, the global
economy and trade picked up rapidly and main economies around the world were ready
to grow again. Emerging economies served as the main driving force for the global
economic growth and main developed economies were also in the recovery.
In 2010, China’s export volume increased significantly by 31.30% on a year-on-year
basis, with the container throughput in ports reaching 145 million TEUs, an increase of
18.85% as compared to 2009. Also, market demand for inland logistic service and energy
and chemicals rebounded greatly. According to statistics from the US Energy Information
Administration, in 2010, the global oil demand per day grew 1.3%. The rising oil demand
from developing countries pushed up the global oil demand in 2010. In the year, due to
combined effects from growing demand, better economic data, the depreciation of US
dollars and other factors, oil prices were on the rise with fluctuations.
The container sector: In 2010, the V-shape rebound of the global economy boosted the
rapid recovery of the container trade and shipping. As a result, demand for containers was
strong. Shipping companies’ continuous increases of their capacity to meet the strong
demand, together with the container renewal demand accumulated over the past more
than one year, resulted in a considerable increase in container purchases. Meanwhile, in
order to cushion the cost pressure caused by the financial crisis, most shipping companies
lowered speeds of their ships, which reduced the turnover efficiency of containers. In the
first six months of the year, container makers could not give full play to their production
capacity in a timely way due to the labor force shortage. In addition, shipping companies
and container leasing companies encountered an inadequate stock of containers. All those
factors exacerbated the container shortage and beefed up demand for containers at the
same time. In the first half of 2010, all major container makers gradually put into use
their idle capacity, but the capacity resumption speed for the sector as a whole was still
slow for such reasons as shortage in labor force, a limited supply of raw materials and the
scheduling problem. In the second half of the year, supply and demand in the container
market basically achieved a balance. It was estimated that, in 2010, over 2.8 million
TEUs of containers were produced, of which the dry-cargo containers were over 2.5
million TEUs, representing a sharp increase of 250% year on year; the reefer containers
were about 0.184 million TEUs, up 93.68% as compared to 2009; and the special
containers (including those for particular regions) were 0.116 million TEUs, also
representing a significant year-on-year growth.
The strong and rapid rebound of demand pushed up prices for dry-cargo containers and
the profitability in the sector. For the first half, the price for a TEU was between USD
1,800 to 2,300 and rose to a range between USD 2,400 to 2,700 in the second half.
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Spurred by the active container trading, the storage, repair, lease and forwarding services
for containers also maintained strong growth. Meanwhile, as a new business model, the
modulized building and container house business was more and more welcomed in
markets.
The road transportation vehicle sector: In 2010, China’s special vehicle markets grew
enormously. Combined demand for seven types of special vehicles reached 0.7 million
units, up significantly by 56%. In the year, the government continued to carry out a
positive fiscal policy and increase its input for infrastructure. As such, real estate
investments were greatly encouraged, which resulted in a strong demand for vehicles for
infrastructure. In 2010, China’s new commercial houses increased 41% in construction
area as compared to 2009. A wild surge appeared in domestic demand for concrete
vehicles, with the relevant sales up 123% on a year-on-year basis. At the same time,
China’s automobile policies also contributed to the demand growth of special vehicles.
The fuel tax and the reform to transform administrative fees into taxes reduced the idle
cost of vehicles. The policy “to charge by weight” accelerated vehicle renewal. And with
laxer lending standards for special vehicle purchases, individual consumers with limited
funds were more interested in buying vehicles.
2010 witnessed a strong growth of 35% in China’s import and export, which directly
boosted recovery of demand for container transportation in ports. As a result, domestic
demand for semi-trailers for container transportation in 2010 rose significantly by 82% as
compared to 2009.
Thanks to China’s launch of many large infrastructure projects, economy revitalizing
plans by many local governments, and favorable policies such as “new cars for old”,
heavy truck markets also showed an explosive surge in 2010. In the year, a total of 1.017
million units of heavy trucks were sold in Chinese markets, representing a considerable
increase of 59.9% over 2009. In 2010, the government continued to raise emission
standards for commercial vehicles. As compulsorily required by the government, the
National Emission Standard Ⅳ will commence the pilot and then the full implementation
phase after 2010. Since 1 Jan. 2010, the pattern check for heavy trucks made under the
National Emission Standard Ⅲ has been stopped. And sale and registration of those
trucks have also been stopped since 1 Jan. 2011. Meanwhile, in 2010, the Ministry of
Transport promulgated the Fuel Consumption Limits and Measuring Methods for
Operating Vehicles for Passengers and Cargoes; the Ministry of Industry and Information
Technology promulgated an exposure draft for the Measuring Methods for Fuel
Consumption of Medium and Heavy Commercial Vehicles; and opinions are now being
solicited from relevant ministries and departments of the central government on the Plan
for Developing Energy-Saving and New Energy Vehicles (2011 to 2020). These new
policies and the National Emission Standard Ⅳ, through competition and reshuffle in the
sector, will wash out vehicles with high oil consumption and poor economic efficiency
and guide the sector towards low carbon and environmental protection.
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The equipments and services for energy, chemicals and food: Natural gas markets are
expected to enjoy a bright future. According to estimates from BP, natural gas will
become the fossil fuel with the fastest growth in consumption by 2030. And China will
take up half of the consumption growth in the Asia-Pacific region, with its growth rate
estimated at 7.6% per year.
China plans to increase the weight of natural gas in its energy utilization mix from the
present 4% to 9% by 2015 and 15% by 2020. According to the government’s
development plan for the new energy sector, natural gas consumption is set to triple to
260 billion cubic meters by 2015, equal to a compound annual growth rate of 18.8%. And
natural gas investments for the period from 2011 to 2020 are expected to reach 1 trillion
in RMB, most of which will go to the natural gas infrastructure including tubes, LNG
receiving stations and LNG plants. Along with the implementation of the West-East
Natural Gas Transmission Project, the Sea-Land Natural Gas Transmission Project, the
Sichuan-East China Natural Gas Transmission Project, the Russia-China Natural Gas
Transmission Project and other projects in the coming years, the growth in consumption
of natural gas will be faster than that of coal and oil. Quite a few LNG receiving stations
and plants are currently in the stage of planning or construction. Thanks to the increasing
supply of natural gas, as well as the huge investments in natural gas infrastructure, huge
demand for natural gas storage and transport equipments is created. Various storage and
transport equipments are needed along the supply chain of natural gas, for example, LNG
satellite storage stations, LNG steaming stations, LNG trailers, tank trucks, tanks and
CNG high-pressure cylinders. In the coming years, application of natural gas in the
downstream will also speed up, i.e. to develop transport vehicles using natural gas,
particularly taxies and buses. For the period from 2003 to 2009, vehicles using natural
gas in China quintupled to nearly 450,000 units and were expected to rise to 1,500,000
units by 2015 and 3,000,000 units by 2020. By the end of 2010, China had nearly 1,000
gas stations, which showed the rapid increase of vehicles using natural gas in China and
the urgent needs for gas station equipments.
In 2010, the global economy walked out of the slump, with the global chemical
production index rising by 23.5% at the end of the year as compared to that in Mar. 2009
when the global economy started to bottom out. Chemical and relevant companies around
the world proactively expanded their bases and business in emerging markets,
particularly China. The average annual growth for 2011 and 2012 is expected to reach
about 8% in the chemical sectors of emerging countries. In addition, in view of the plan
promulgated in 2009 by the Chinese government for stimulating domestic consumption
and revitalizing various sectors, huge investments will go to chemical infrastructure in
the next few years. Therefore, the chemical sector of China is expected to maintain a high
growth rate.
Hit by the global financial crisis and market saturation, growth of the liquefied food
sectors in developed countries has slowed down in recent years. However, the liquefied
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food sectors in such developing counties as China and India is growing rapidly due to
their strong economic growth, rising consumption and accelerated urbanization. It is
expected that in the coming five years, the total output of liquefied food in China will
grow by 12% to 15% per year. And development of the liquefied food sector will surely
boost development of the sector of transport, storage and processing equipments for
liquefied food.
The offshore engineering equipment sector: Along with recovery of the global
economy, crude oil prices rose significantly and global offshore engineering markets
were also picking up. New inquiries and orders appeared in the fourth quarter of 2010.
The rise of oil prices significantly boosted offshore engineering investments. Meanwhile,
in the long run, the International Energy Agency has increased its estimate of the global
energy demand to rise at an average annual rate of 1.5% for the period from 2009 to 2030.
It is expected that by 2030, oil will still be the dominant energy for consumption. Oil
fields onshore and in the shallow sea which are easy to be exploited are drying and it
becomes more and more difficult to exploit oil fields onshore, which means that the
actual exploitable oil is decreasing. As such, the gap in the future oil demand can only be
filled by oil and gas resources offshore, particularly those in deep sea. In view of energy
safety and building up more energy reserves, it has become an important energy strategy
for sovereign countries around the world to enhance exploitation of offshore and deep-sea
oil and gas fields. Recovery of the global energy demand, together with stable and high
oil prices, contribute to investment growth in the global sector of offshore engineering
equipments. Due to the fact that it usually takes a comparatively long time to produce a
drilling platform, the delivery peak of drilling platforms often appear one or two years
after an oil price peak.
The annual investments about USD 30 million in offshore oil and gas exploitation from
global markets, as well as the investments above RMB 30 million in that from China
during the period of the Twelfth Five-Year Plan for National Economic and Social
Development, create huge growth space for the global offshore engineering markets. To
develop the offshore engineering sector is a move with rising importance, which can
ensure a country’s energy safety and boost its economy significantly. The offshore
engineering industry has been labeled as a strategic emerging industry in China’s Twelfth
Five-Year Plan for National Economic and Social Development. And the Chinese
government will promulgate a series of relevant policies to support the rapid and healthy
development of its offshore engineering industry.
A brief analysis to the influence of changes in macro-policies and the sector on the
Company’s finance is set out below:
In 2010, the global economy gradually recovered. All businesses of the Group,
particularly the container business, showed significant growth. The Company adjusted its
operation strategies in a timely manner and adopted proactive and effective measures so
as to maintain a healthy status on its financial position, investments and acquisitions,
capital management and other activities. Capital turnover and the cash collection ability
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of the Company both improved as compared to 2009. Thanks to production recovery, sale
acceleration and operating scale expansion, as at 31 Dec. 2010, the total assets of the
Company stood at RMB 54.131 billion, up 44.90% as compared to 2009; total liabilities
at RMB 34.924 billion, up 62.20% on a year-on-year basis; and net cash flows from
operating activities at RMB 1.483 billion, representing a significant increase over 2009.
Raw materials such as steel purchased in 2008 as reserves was fully utilized in 2010 and
the corresponding inventory falling price reserves withdrawn was written back in the first
quarter of 2010.
With good liquidity at home and abroad in 2010, the Company maintained a rational
liability structure and strengthened its efforts in preventing financial risks. Among the
liability structure, short and long-term borrowings from external parties took up a smaller
proportion in the total liabilities. Short-term liabilities were increased moderately, which
led to an increase of the percentage of short-term loans on interest. Maintaining
communication and cooperation with major banks, the Group contained to gain support
from those banks. In Feb. 2010, CIMC Finance Co., Ltd. officially commenced business,
which would help the Group plan and manage its capital and increase the operating
capital efficiency and risk control.
In 2010, the global financial market encountered a liquidity glut, as well as uncertainties
from inflation and the foreign exchange market. China’s monetary policy was shifted
from being moderately loose to being prudent. In view of the circumstances above, the
Company carried out a prudent strategy on risk control, which effectively controlled risks
and safeguarded capital safety. At the same time, based on its business development, the
Company also used the leasing business, financial products and foreign exchange
instruments in a rational and flexibly way.
(Ⅱ) Business Review
1. General Performance
For 2010, the Company achieved revenue of RMB 51.768 billion (RMB 20.476 billion
for 2009), representing a sharp increase of 152.82% over 2009; net profits attributable to
the Company’s shareholders reaching RMB 3.002 billion (RMB 959 million for 2009), a
surge of 213.03% on a year-on-year basis. Both of the revenue and profits represented the
best records in the history of the Group.
Movements in Financial Highlights
Unit: RMB’000
Items 2010 2009 Change(%)
Revenue 51,768,316 20,475,507 152.82%
Total profits 3,674,607 1,465,385 150.76%
Net profits attributable to the
3,001,851 958,967 213.03%
Company’s shareholders
Notes:
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In 2009, affected by the global financial crisis, the dry cargo container business of the
Company was basically in a halt, which led to a great loss. Starting from the fourth
quarter of 2009, the demand for dry cargo containers grew again and the production
resumed in plants due to recovery of the global economy and the shipping sector. In 2010,
sales of dry cargo containers jumped significantly with sufficient orders and rising prices
and profitability from the second quarter of the year.
As a result, revenue, total profits and net profits attributable to the Company’s
shareholders all experienced a huge surge.
2. Business bases, products, services and capacities
The Company, together with its subsidiaries (jointly referred to as the Group hereinafter)
was mainly engaged in manufacture and services in relation of modern traffic
transportation equipments, energy, food, chemical and offshore engineering equipments.
In particular, these equipments were mainly involved in design, manufacture and service
for dry cargo containers meeting international standards, refrigeration containers, regional
special containers, tank containers, container wood floor, modulized housing containers,
road tank transportation autos, gas equipments and static storage tank, road transportation
vehicles as well as offshore engineering equipments. Other than the above, the Group was
also engaged in manufacture and service of logistic equipments, manufacture of airport
equipments and oceanic engineering and freight train, and properties development. The
Group has been trying to make each of its businesses to cover the whole life cycles of
products and provide best-quality and safe products and services for its clients.
Container business: The Group remained No.1 in the world by its quantity of production
and sales, and was able to produce the entire series of container products with self-owned
intellectual property. Included in its products and services were ISO dry cargo containers,
special refrigeration containers, other various special containers, pallet containers and
modulized housing containers, as well as container wood floor and container service. It
has already equipped with annual production capacity of over 2.0 million TEU; 18
industrial parks for container manufacturing in South China, East China, North China,
Chongqing and other regions of China, including over 10 dry-cargo container bases
located in the coastal region and Chongqing in China; refrigeration container
manufacture bases located in Shanghai, Yangzhou and Qingdao; special container
manufacture bases located in Nantong, Yangzhou, Xinhui and Qingdao. As for container
wood floor business, certain domestic production bases were respectively located in
Shenzhen, Jiangmen, Xuzhou and Jiashan; as for container demurrage business, the
Group has already owned many container service enterprises, forming a service network
covering the main line ports of the coast of China.
The Group works deeply on the container business, which covers the whole life cycle of
container products.
Road transportation vehicles business: capable to provide a product range covering 11
series and more than 1,000 varieties, including container skeleton semi trailer, platform
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car, rack wagon, tank truck, self-discharging wagon, refrigeration van, normal cabin
vehicle, curtain-side vehicle, mixer, pump vehicle, car carrier, fire fighting truck and
rubbish disposal vehicle, etc. The annual capacity exceeded 200,000 units, ranking the
No. 1 position both in the world and China. The Group now has 22 production bases and
24 companies for selling and distribution services, covering North America, Thailand,
Central China, East China, South China, North China, Northwest China, Northeast China
and other regions, as well as more than 400 service stations. As such, a business layout
featuring interactions between China and the US and between China and the Europe,
rationality and mutual support has taken shape, with the Group’s products sold to
mainstream markets such as the US and Japan.
Energy, chemical, food equipment and service business: major products and services
included: static storage tank, tank transportation equipment, craftwork procedure
equipment, engineering undertaking technology service.
Specific products include:
(1) Static storage tank: low-temperature fixed storage tank for LNG and industrial gas,
stainless storage tank for liquid food and chemical storage tank, etc;
(2) Tank transportation equipment: international standard/special liquid tank container
and gas tank container; LPG tank transportation vehicle, low temperature tank
transportation vehicle for LNG and industrial gas; CNG wrecker, and CNG pressure
container in high-pressured bottle;
(3) Craftwork procedure equipment: ferment tank for food and beverage, bright beer tank;
chemical reactor, tower facility, heat exchanger, and air vaporizer, etc;
(4)Engineering contract technology service: overall contract engineering regarding to
processing and allocation of liquid foods (bear and juices), LNG city peak-regulation
satellite station, LNG gasification station, LNG filling station, bottles of LNG supply
station, and LNG car system reform and various LNG and industrial gas application
projects; CNG and LNG filling systems, natural gas compressor and special compressors;
provision of EP+CS (design, purchase, construct and supervision) technology
engineering services in fields of storage and disposal regarding to LNG receivers, LPG
and other petroleum chemical gas.
At present, in terms of the energy, chemical and food equipment business, the Group
owns 15 manufacturing bases and R&D centers in China, Europe and other regions,
giving rise to a business layout featuring interactions between China and Europe,
rationality and mutual support.
Major enterprises of which CIMC was the controlling shareholder consisted of CIMC
Enric Holdings Limited and TGE GAS ENGINEERING GmbH. TGE GAS
ENGINEERING GmbH was a German independent contractor which had 25 years
engineering contract experiences regarding to low-temperature liquefied gas reserve station.
Business bases of Enric were mainly distributed in Langfang, Shijiazhuang, Bangbu, Jingmen, Beijing,
Nantong, and Zhangjiagang in China, and Holland, Belgium and Denmark in Europe. Nantong
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CIMC Tank Equipment Co., Ltd. has already become the tank container manufacturer of
the world with the largest scale and the most diversified products.
Offshore engineering equipment business: Manufacturing bases of the Group for
offshore engineering equipments are located in Yantai, Haiyang and Longkou, Shandong
province. In January 2010, the Company realized shareholding in CIMC Raffles Offshore
(Singapore) Limited which was incorporated in Singapore in 1994 with principal
business of constructing various ships for offshore petroleum and natural gas market,
which equipped the company with accumulated professional knowledge and construction
experiences in respect of diversified oceanic and offshore projects. Its main products
included jack-up drilling platform, semi-submersible drilling platform, crane ship,
pipe-laying vessel, floating production storage and offloading (FPSO), floating storage
and offloading (FSO), offshore supply vessel, offshore steel structure, shuttle propelled
tugboat and luxury pleasure-boat, etc.. In 2010, the Group established Shanghai CIMC
Offshore Engineering Research Center, Yantai Offshore Engineering Research Institute
and the National R&D Center for Offshore Oil Drilling Platforms, which improved the
Group’s research and design capacity in terms of high-end manufacturing and made the
Group a key member in the offshore engineering sector.
The manufacture base of airport equipments was located in Shenzhen, with main
businesses in respect of development, design, manufacture, installment and repair
services for passenger boarding bridge, boarding bridge for liner, guiding system for
aircraft parking, flight special vehicles, flight goods disposal system, automatic storage
and logistic system, as well as automatic parking system. Shenzhen CIMC-TianDa
Airport Support Co., Ltd. (hereinafter referred to as “CIMC Tianda”), a subsidiary of the
Group, was one of the major airport ground equipments suppliers of the world.
Other business: the manufacture bases of logistics equipments were located in Dalian
and Tianjin; the manufacture base of railway equipments was located in Dalian; the
financial leasing business was mainly in Shenzhen; and business of property development
was mainly in Shanghai, Yangzhou and Jiangmen, Guangdong province.
3. Operation of principal businesses of the Company
Products whose contribution to principal business income or principal business profit of
the Group exceeded 10% mainly referred to containers and road transportation vehicles.
Breakdown and Movements of Revenue and Operating Profits
Unit: RMB 0’000
Increase or
Increase or Increase or
Classified decrease of
Operating decrease of decrease of
according to operating
Revenue Operating cost profit revenue operating
industries or profit
margin (%) over last cost over last
products margin over
year(%) year(%)
last year
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(%)
Containers 2,543,997 2,048,549 19.48 356.44 330.15 4.93
Road
transportation 1,663,155 1,425,306 14.30 51.02 49.50 0.87
vehicles
Energy, chemicals
and liquefied food 535,080 441,050 17.57 48.62 48.16 0.25
equipments
Offshore
244,403 324,641 -32.83 - -
engineering
Airport
34,261 24,295 29.09 -35.51 -29.74 -5.82
equipments
Others 205,827 118,790 42.06 428.68 296.47 19.25
Offset due to
-49,892 -22,849
consolidation
Total 5,176,831 4,359,782 15.78 152.83 150.54 0.77
Proportion taken in YoY movements in
Classified according to regions Operating income
total incomes (%) income (%)
China 1,923,466 37.16 60.86
Asia 421,706 8.15 160.63
America 1,580,208 30.52 573.68
Europe 1,161,646 22.44 245.98
Others 89,805 1.73 -5.01
Total 5,176,831 100.00 155.98
Income breakdown according to businesses
1%
4%
Container
5% Road transportation vehicles
10%
Energy, chemicals and
food equipment
48%
Offshore engineering
32% Airport equipment business
Others
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——Business of container manufacturing and service
Being the matured principal business of the Group, container business witnessed strong
recovery in the market in 2010 after gonging through the global financial crisis and
historic industrial downturn. By timely adjusting operating strategies, quickly responding
to and overcoming numerous difficulties, such as labor shortage and higher labor mobility,
the Company successfully seized market opportunities in the industry and created
record-breaking business performance. In 2010, a sales income of RMB 25.440 billion
from container business was realized, with 356.40% up on a year-on-year comparison,
among which, sale income of RMB 19.552 billion was realized by dry cargo container,
with a sharp increase on a year-on-year comparison; sale income of RMB 3.658 billion
was realized by refrigeration container company, with 137.38% up on a year-on-year
comparison; and sale income of RMB 3.514 billion was realized by special purpose
container, with 52.19% up on a year-on-year comparison. The sales quantity contributed
by standard dry cargo container business reached at 1,296,000 TEU in 2010, with a big
increase compared to that of last year. 85,800 and 61,900 sets of refrigeration containers
and special purpose containers were respectively sold out, respectively increasing by
182.23% and 43.29%.
Based on accumulated capability for years, container business constantly kept its
horizontal and vertical development through service extension, technology upgrade, and
commercial model innovation, providing positive exploration for new space of business
growth.
While proposing ideas about developing a new generation of containers, namely, SGIL
(S-Secure, G-Green, I-Intelligent, L-Light), transforming itself from a product
manufacturer to a solution provider, and balancing production between orders of slack
season and peak season by applying thorough standardization, the Group constantly put
efforts on container industry in directions of standardization and individuation. In respect
of production and manufacturing, having experienced financial crisis, the Group
rediscovered directions and restraining factors of industry development. In an
environment where resource restrictions existed and environmentally friendly economy
of low-carbon was promoted, the Group continually explored its production way, sought
for a development path leading to refine manufacturing, and so far has set up the upgrade
in manufacturing patterns in compliance with new plans and design perception. In respect
of transportation and storage, the Group provided various solutions to transportation and
storage for clients by taking advantage of its national network of container yards in major
ports. In respect of recycling operation, the Group provided container businesses such as
new-for-old service, re-design for old containers, maintenance, and rent of second-hand
containers. The creative technology and business of using second-hand containers as
modular constructions especially extended service lives and applied fields of container to
a large degree.
By now, the Group is the only container manufacturing and service enterprise to provide
whole series of containers, including dry cargo containers, refrigeration containers, tank
containers, as well as other kinds of special purpose containers, and own complete
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independent intellectual property. Meanwhile, the 18 container manufacturing industrial
parks of the Group established and expanded in coastal areas and areas along rivers could
not only quickly provide containers for each container quay and yard in China, but also,
in fast speed, globally provide containers for major ports and clients by its integrated
advantages in cost and quality. Besides, CIMC Group had established container service
sites in major costal port cities and inland container logistic centers in China, which
formed perfect container service system and provided container service and application
system covering the whole product cycle for clients.
——Road transport vehicle manufacturing and service business
CIMC Vehicle Group has been accessed to the road transport vehicle industry since 2002
and became the largest manufacturer of road transport vehicles in China in 2004 with
annual capacity exceeding 200,000 units.
In 2010, beyond the expectation, the Vehicle Group achieved great business performance,
together with soaring profitability and capability by adjusting operating strategies and
seizing market opportunities in line with strategic targets. As for vehicle business, during
the year, sales revenue recorded to RMB 16.632 billion, and net profit amounted to RMB
587 million, respectively up 51.02% and 102.41% compared with last year. Gross margin
rate reached 14.30%, with a year-on-year increase of 0.87%. Sales volume of 155,300
units registered a year-on-year increase of 59.45%. The domestic leading products of the
vehicle business, such as tank vehicles, cement mixers and dump trucks, saw their
markets further expand and their market shares significantly rise in the Chinese market.
CIMC’s business of road transport vehicle had set its strategic vision as providing
top-ranking logistics equipment and service in land routes for global customers by
replying on China’s advantage. CIMC Vehicle Group focused on a complete value chain
process of product design and development, product manufacturing and delivery, sales
and service, as well as customer follow-up and feedback. CIMC Vehicle Group
constantly insisted on creating sustainable value for customers, keeping improving
customer satisfaction, and leading sustainable and healthy development in the industry.
Having been specializing in extensive expansion for years, in 2010, vehicle business of
the Group started its strategic transformation. The Vehicle Group established its value
orientation with the core of profitability improvement, took marketing system as the
starting point, implementing internal optimization in organization and process, adopted
operating and management measures, such as management improvement of investment
and capital, resources integration, improvement of management mode and incentive
mechanism of marketing system, refining division of end-sales channels, along with
reinforcement of strategic plans, strengthened internal management, and improved
operating efficiency. The Vehicle Group seized external market opportunities, worked
hard to meet customers’ requirements, and stably expanded its market shares in refined
industry in domestic and overseas markets.
On the other hand, the Vehicle Group extended its business structure through vigorous
innovation in business mode. It appropriately invested on industry on front-end parts,
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enlarged product sales scope by using current channel resources, and helped to promote
heavy truck business.
Heavy truck business hit the record in 2010. As a blowout growth emerged in domestic
market of heavy trucks, domestic heavy trucks became the mainstream products. Under
such circumstance, with 3 years of serous preparation, the first batch of heavy truck
products produced by C&C Trucks in thorough processes was launched to the market in
Dec. 2010, marking an initially acquired basis for heavy truck development involved by
the Group.
C&C Trucks Co., Ltd, of which 45% equity was held by CIMC Vehicle Group, took
domestic middle and high-end heavy truck market as the starting point, regarded its
product development strategy as “leading the domestic technology while following the
overseas advanced technology”, and implemented its strategies of “holding appropriately
advanced technology advantages and obtaining more markets shares in domestic
high-end heavy truck market”. C&C Trucks Co., Ltd. orientated itself in overseas middle
and high-end heavy truck market, as well as domestic high-end heavy truck market. Road
vehicles, for example, tractors, were targeted for markets of city-to-city logistics
transportation and port-to-port container transportation; construction vehicles, such as
dump trucks and mixers, were targeted for markets of city construction and infrastructure
construction. Leading products, including tractors, dump trucks, uploading and special
vehicles, as well as mixers, were targeted for creating a platform for C&C UE technology.
As at Feb. 2011, the Ministry of Industry and Information Technology promulgated
No.224 Public Notice on Vehicle Production Enterprises and Products, and the company
had declared 79 public notices for 442 vehicle types, totally sufficient for future market
demand.
Engines of Yuchai 6K series adopted by Y&C Engine were brand-new developed vehicle
types of Y&C Engine with strong competitiveness in fuel consumption. Y&C Engine had
been based on Euro Emission Standard IV and holding the upgrade potential of Euro
Emission Standard IV since it started to design. China Emission Standard IV public
notices has been included in declared public notices of C&C Trucks by now. As a result,
implementation of emission standards of China Emission Standard IV of the country
would bring positive effect on both design and sales of C&C Trucks products. C&C
Trucks is also actively developing CNG/LNG heavy trucks using natural gas, which are
expected to be launched in 2010, fully in compliance with state policies of energy-saving,
emission-reducing, and new energy development.
——Energy, chemicals, food equipment and service business
The Group’s energy, chemicals, liquid food equipment business was spurred by the
economic recovery and the rising market demand, thus its operating income and net profit
soared up over the last year. In 2010, the operating income was RMB 5.351 billion, up
48.64% over the same period of last year. The net profit amounted to RMB 190 million,
up 80.95% over the same period of last year.
2010 was the first year to witness the Group’s operation after business restructure in
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energy, chemicals and equipment, along with the Group’s effective integration. The
Group clearly defined business development directions, enhanced internal control and
system establishment, and strengthened internal coordination by making strategic
development plans and conducting all kinds of special research. The Group achieved
striking progress in overseas business expansion, stably advanced business performance,
initially established its role as the main supplier of equipment and service in energy
(mainly is natural gas) industrial chain, actively progressed in modular products and
skid-mounted products, and stably propelled business of engineering contracts and
solutions.
Energy (LNG, CNG and LPG) equipments: In 2010, the Company recorded aggregate
sales income of RMB 3.335 billion from energy equipments, up 59.47% over the same
period of last year.
By means of sustainable R&D and innovation, the Group active promoted continual
and stable development for products such as CNG and low-temperature equipment and
provided high-pressure and low-temperature equipment for secure transportation and
storage of energy. Enric Gas Equipment Co., Ltd. independently researched and
developed high-volume steel seamless gas cylinders, filling the correspondent in
domestic market and achieving international advanced level. In low-temperature field,
Zhangjiagang Sanctum Co., Ltd. led the industrial development of low-temperature
products by constant development of new products. Products and businesses of CIMC
in the field of natural gas effectively solved the “last kilometer” problem beyond
natural gas lines, significantly propelled promotion and usage of natural gas, the clean
energy, in China, and fully reflected its brand development philosophy of promoting
environmental protection and realizing sustainable development.
At present, the Group provides the most various natural gas products (CNG/LNG) and
liquid petroleum gas products (LPG) for customers. After the acquisition of TGE GAS
TGE Gas Engineering GmbH (or TGE GAS for short), a world leading engineering
turnkey contracting company, the Group sharply enhanced its capability in system
integration and engineering in the whole industrial chain of natural gas, realized
coordinate development between current LNG downstream applications, namely the
supply of equipment and service, and LNG upstream developing projects by TGE GAS,
obtained the ability to provide one-stop system solutions for customers in the field of
natural gas development and application, and formed the coordinative value chain
between technology service and equipment manufacturing.
In 2010, TGE GAS, of which 60% equity was held by the Group, realized its operating
income of RMB 904 million, up 69.03% compared with last year. At the same year,
turnkey contract projects undertaken by TGE GAS, including EPC contract project of
storage tanks for CNOOC liquid natural gas item in Zhejiang and the 2nd phase contract
project of storage tanks for LNG receiving station item in Portugal, all progressed
smoothly.
Chemical equipments: In 2010, the chemical equipment business recorded operating
income of RMB 1.279 billion, up 61.96% over the same period of last year. The major
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production bases of chemical equipments include Nantong CIMC Tank Equipment Co.,
Ltd. and Dalian CIMC Heavy Chemical Equipment Co., Ltd.
A tank container is a stainless steel pressure vessel with an external framework of the
international standard of 20-foot container. It can be used for shipping toxic and harmful,
inflammable and explosive, corrosive, and non-hazardous liquid, gaseous and solid bulk
granular powder. Tank containers are featured by advantages of being safe,
environmentally friendly, economical, flexible and efficient with multiple united transport
and “door to door” delivery etc.
Nantong CIMC Tank Equipment Co., Ltd. (Nantong Tank) is mainly engaged in the
business of manufacturing international standard tank containers. Due to the effect of the
economic recession, the demand and orders of the chemical logistics equipment market
closely associated with chemical raw materials and refined chemicals increased sharply..
The 1st phase project of Dalian CIMC Heavy Chemical Equipment Co., Ltd. (Dalian
Heavy Chemical) was completed and formed annual production capacity of 9,000 tons.
Its main products include gasifier in the coal gasification equipment, ethylene cracking
furnace in the ethylene equipment, large-scale synthetic ammonia, high-pressure
equipment in the chemical fertilizer equipment, oil refining hydrogenation,
hydrocracking, key equipments in the methanol device and evaporator in the sea water
desalination device etc.
Liquid Food Equipments: In 2010, the liquid food equipment business recorded
operating income of RMB 0.561 billion, down 21.94% over the same period of last year.
Netherlands-based Holvrieka Holding B.V. is one of the leading suppliers of exclusive
stainless steel static storage tanks and tank terminal equipments in Europe, under which,
there are four production bases, namely Netherlands-based Emmen, Netherlands-Sneek,
Denmark-based Danmark and Belgium-based NV. It offers a wide range of services to the
liquid, gas and powder bulk tank transport sector in Europe including petrochemicals,
beer, juice, milk and other food and beverage industries, such as all tank equipments and
bulk water tank ships involved by orange juice from the juice, road transport to orange
juice docks. HOLVRIEKA accounted for 100% of the market share in Europe.
Holvrieka (China) Co., Ltd. is the production base of Holvrieka of the Group in China,
mainly engaged in manufacturing of stainless steel static storage tanks and crafts tanks
used to store beer, fruit juice and other food and chemical products. In 2010, it formed a
capacity of producing 1,000 units of large storage tanks annually.
——Offshore engineering business
CIMC Raffles Offshore (Singapore) Co., Ltd. (SCRO), the subsidiary of the Group, and
its subsidiary, Yantai CIMC Raffles Offshore Co., Ltd. (YCRO) rank top offshore
engineering equipment manufacturers in the world, and have been involved in global
competitions in international market of offshore engineering. Its main products include
jack up, semi-submersible and auxiliaries to offshore engineering. As a new core business
of the Group, offshore engineering business will become important future profit growth
point of the Group.
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In Jan. 2010, CIMC Raffles Offshore (Singapore) Co., Ltd. (SCRO) has been included
into consolidated statements of the Company since the completion of the unconditional
voluntary cash tender offer conducted by the Group over SCRO. As at the year-end,
proportion of equity held by the Company over SCRO reached 50.98%. In 2010, offshore
engineering business of the Group recorded a sales income of RMB 2.444 billion, with a
deficit of RMB 1.109 billion.
In 2010, project delivery in offshore engineering business made a breakthrough. YCRO
delivered a jebsen and three semi-submersibles, namely COSL Pioneer 1#, SS Pantanal,
Scarabeo 9. The successful delivery of a dump jebsen of 30,000 tons in Jan. 2010 and
successive deliveries of three deep-water semi- submersibles in the 4th quarter of 2010
marked that China had broken the monopoly of Singaporean and South Korean
enterprises in high-end offshore engineering products, and the Group was the first one to
possess large-scale and industrial capability of manufacturing high-end offshore
engineering products. In Oct. 2010, the first deep-water semi- submersible in China,
COSL Pioneer 1#, established for COSL was successfully delivered; in Nov. 2010, the
SchahinII established for Petrobras, the terminal user, was successfully delivered. In Oct.
2010, with 90% work had been done, project D90 was uncompleted and thus delivered by
negotiation In Feb. 2011, the globally largest pipelay vessel (PLV) established for
SAIPEM in Italy was uncompleted and thus delivered, and it is still under construction at
present.
COSL pioneer was the first deep-water semi-submersible in China. Compared with
similar products, COSL pioneer was featured by high automation degree, simple
manipulation, comfortable work environment, and high security. The platform of COSL
Pioneer 1# was 104.5 meters long, 65 meters wide in body type, and 36.85 meters deep in
body type. It could go down within 750 meters during operation, and depth of the drilling
reached 7,500 meters. Cosl pioneer was one of the most advanced semi-submersibles
established so far in China. SS Pantanal was the first one between the two
semi-submersibles established for Schahin in Brazil by CIMC Raffles, which
independently finished the detailed design, production design, construction and
debugging.
Main reasons for losses on offshore engineering business: because of the outsourcing
strategy adopted since 2007, and also because all in-hand orders for deep-water drill
platforms were the first manufactured ship, which meant lack of experience in technology,
construction and project management, almost all projects went through delayed delivery
for one to two years. As such, contract prices were reduced because customers took
products in advance, and the Company had to compensate for losses on delay with higher
extra cost expenses. What’s worse, losses on such projects also diminished the
Company’s reputation.
The semi-submersible, D90, established for SAIPEM in Italy wasn’t delivered by 100%
completion. As a result, project gross margins recognized in precious fiscal years had to
be reversed, cost expenses of COSL series were large and in the red, and other deliveries
of delayed projects all directly effected on profits of the current period.
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Up to 31 Dec. 2010, except that the COSL 2# project under construction had completed
by 82%, the COSL 3# project had completed by 63%, and the super M2 H195 project had
completed by 48%, other projects had all completed by over 90% and are under focused
debugging at present.
Offshore engineering business of the Group basically defined its development directions
in three main product lines, namely semi-submersibles, jack ups, and special offshore
engineering vessels. The strategic layout of “one center and three bases” made up by
Yantai, Haiyang, Longkou and Offshore engineering Research Center was completed and
being developed.
In terms of construction of production bases, Yantai Base was mainly applied for
concentrated supply, approximation, and debugging. Haiyang Base and Longkou Base
respectively acted as semi-submersible construction base and jack up construction base.
Yantai Base was equipped with bridge-type portal crane of 20,000 tons and large
shipyards for approximation of semi-submersibles. An 18 meters deep port had been
completed for installment and debugging of equipment. After the completion of the 1st
phase and the 2nd phase of deep-water port project, 9 drill platforms could call at the port
at the same time. Series of innovative construction techniques of semi-submersibles, such
as thorough land construction, launching of large barges, inner-shipyard approximation of
cranes of 20,000 tons, and underwater installment of a propeller at 18 meters beneath the
port, were created.
Haiyang Raffles was registered in 2008 with registered capital of RMB 200 million. The
total investment amounts to RMB 700 million at present. Its annual capacity of steelwork
totaled to 40,000 tons per year, and it was targeted for annual production of 2
semi-submersibles. Its main capacity plan had been realized.
In Apr. 2010, the acquisition of Longkou Sanlian Co., Ltd. was completed. After the
completion of infrastructure construction of Longkou Raffles Project, the capacity of
annual production of 4 jack ups will be formulated in 2011.
In terms of in-hand orders and enlargement of new orders, in-hand orders of CIMC
Yantai Raffles in 2010 included 6 semi-submersibles, 4 jack ups, 1 life supporting
platform, and 4 special offshore engineering ships. Order contracts on projects under
construction of Raffles amounted to USD 1.588 billion. In 2011, Raffles has obtained a
5-year charter party totally amounting to USD 172 million. 3 jack ups and 1 life
supporting platform under construction are due for realization in sales and delivery in
2011.
In the field of R&D and design, CIMC raffles had established a R&D and design team of
800 people by structuring Yantai CIMC Offshore engineering Research Institute and
Shanghai CIMC Marine and Engineering Research Center, constructed a R&D and
design platform integrated with R&D and design, which operated through the whole
process of basic design, detailed design and production design, and independently
completed analysis and design for several DP2 and DP3 products, which won high
evaluation from ship owners and classification societies. In Jul. 2010, National Bureau of
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Energy named and branded for the second batch of national energy R&D (experiment)
centers. National Energy Marine Petroleum Drill Platform R&D (Experiment) Center
settled down in the Group, which meant that the Group gained its national industrial
status in several respects of scientific research offshore engineering, and thus acquired
the qualification to undertake R&D, experiments, and manufacturing in important
national offshore engineering equipment. As such, the leading advantage of the Group in
domestic offshore engineering was strengthened, which enlarged the space for in-depth
anticipation of the Group in future national energy development.
The Company will continually strengthen construction of CIMC Offshore engineering
Research Institute, further attract high-end talent, and build an international advanced
design and R&D platform for offshore engineering equipment. YCRO has succeeded in
applying for the research topic of “Offshore engineering Equipment Assembly
Construction Technology Research” set up by the Ministry of Industry and Information
Technology and the Ministry of Finance.
——Other businesses
Airport equipment business: In 2010, CIMC Tianda Airport Equipment Co., Ltd.,
where the Company held 70% equity interests, recorded sales of RMB 343 million, down
35.40% than the last year (RMB 531 million) and achieved net profit of RMB 27 million,
down 55% over the last year (RMB 60 million). There were 118 units of boarding bridges
and 7 sets of dimensional parking garages sold in the year.
Compared with other industries, influence of the global financial crisis on airport industry
was lagged behind. The income level was decreased than last year because of delayed
deliveries of many projects due to customers. There were few substantial threats from
entrants and substitutes due to specialty of the industry. However, competition in the
industry is fierce because of the relatively small market space. The network of CIMC
boarding bridge business was globally expanding step bay step, with a domestic market
share rate over 90%, and a global market share rate of 20%. Connected by boarding
bridges, the extension forwarding to airport service value chain entered into a substantive
stage. After acquiring the contract of all 30 boarding bridges, including 7 A380 airplane
seats, of project S4 of Charles De Gaulle Airport in France, the Group signed long-term
framework agreements of passenger boarding bridges for 5+5 years with Paris Airports
Management Co., Ltd. in France and Schiphol Airports Group in Netherlands. The
bid-winning enterprise that acquired such project would, in the coming 5 to 10 years, be
the only supplier of current passenger boarding bridges and new bridges for Charles de
Gaulle International Airport in France, Orly Airport in Paris, and Amsterdam Airport in
Netherlands. The number of such bridges was estimated as 100 units.
Logistics equipment and service business: CIMC is committed to providing special
logistic equipment and comprehensive logistic solutions for customer from different
trades. Our logistic equipment products mainly include pallet containers for automobiles,
logistic, foods, chemical, and agriculture, stainless steel IBC ( Intermediate Bulk
Container) applicable in chemical and foods fields, and various special logistic equipment,
such as wind power product logistic, and commercial car assembly logistic equipment.
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In 2010, CIMC has achieved an operating income of RMB1.144 billion, an increase of
110.68% over the same period last year, with the net profit of RMB 92 million.
The Group has been involved in manufacturing of steel tray containers since 1999, and
has started to produce IBC (Intermediate Bulk Container) since 2002. By now, the Group
can produce tray containers for industries of vehicles, synthetic rubbers, glass, home
appliances, chemical, logistics, storage, fruits and vegetables, petroleum chemical, and
military logistic equipment, including steel IBC and pressure vessels, all categories of
which totaled to more than 500. Being the largest supplier of steel tray containers and
IBC in China and one of the leading tray container suppliers in the world, the Group
currently owns 2 manufacturing bases, Tianjin and Dalian, with an annual capacity of
1,300,000 units.
The rapid development of refined logistics industries, such as industries of auto parts,
chemical, and liquid food, pushed the demand for unit-packaged products. At present,
wood tray containers are still mostly widely used in China. However, disadvantages of
wood materials, such as requirements for health and quarantine / fumigation, forest
resources consumption and short service life, as well as restriction of uprising cost,
resulted in more and more demand for metal tray containers, for example, steel tray
containers. Based on the usage condition in developed countries, steel tray containers
were increasingly broadly used due to their reusable features, and gradually became a
new development direction for containerization-unit equipment.
Financing service business: The Group owns CIMC Financial Leasing Co., Ltd., which
provides sales and other service supports to businesses of the Group, and has achieved
rapidly expanding business scale and net profits while strongly supporting business
development and developing customers for recent 3 years. On 18 Jun. 2009, CIMC
Finance Co., Ltd. was established through the approval of China Banking Regulatory
Commission, and officially started its business in Feb. 2010, which marked the initial
formulation of CIMC financing business. Operation of CIMC Finance Co., Ltd. enlarged
space for structural optimization of the Group’s assets, business operating efficiency, and
benefit improvement, reflecting strategy upgrade of the Group in business combination.
Dalian CIMC Railway Equipment Co., Ltd. under the Group concentrates on business
enlargement of railway equipment. In 2010, it realized an operating income of RMB 20
million with a striking year-on-year increase. As for its real estates business, except for
holding 40% equity of Zhendi Project of Shanghai Merchants Property Development Co.,
Ltd., the Group progressed smoothly in two lands in Yangzhou City. In 2010, sales
income of the Company totaled to RMB 350 million, and the total after-tax profits
amounted to RMB 76 million.
4. R&D
The CIMC technology center became a state-level enterprise technology center in 2001.
In 2010, National Energy Marine Petroleum Drill Platform R&D Center settled down in
CIMC Group. At present, under the CIMC technology center, there are 5 research
institutes, 15 technology branch centers, 5 state post-doctoral research stations, 1
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post-doctoral innovation base, and more than 20 laboratories including engineering
laboratories and material laboratories. Therein, 7 technology branch centers are
provincial and municipal technology centers, and 2 laboratories are CNAL certified
laboratories.
In 2010, a total of 856 categories of new products were developed in all industries under
the Group. Sales volume of new products and significantly improved products accounted
for more than 20%. The Group presided and anticipated in the preparation of more than
20 provisions of international, domestic and industrial technology standards, and declared
more than 280 patents, of which 90 patents were for inventions.
5. Suppliers and customers
In the reporting period, the total amount of purchase by the Group from top five suppliers
was RMB 7 billion, accounting for 33% of the total annual purchase. The total amount of
sales income achieved by the Group from top five customers was RMB 12.872 billion in
the year, accounting for 24.86% of the total sales income of the Group.
6. Analysis on Financial Status of the Company
(1) Analysis on Changes of Assets and Liabilities
Unit: (RMB) Thousand
Amount as at Amount as at 31 Variation
Item Main influential factors
31 Dec. 2010 Dec. 2009 (%)
Balance of transactional equity
Transactional financial
525,661 113,337 363.80% instrument investment and
assets
derivative financial assets
Recognition of bank acceptance
bills, which was of little risk and had
Notes receivable 508,585 1,690,845 -69.92%
been endorsed and discounted, was
terminated in the current year.
Accounts receivable 8,129,836 3,862,604 110.48% Expansion of sales scale.
Expansion of purchase of raw
Prepayments 2,433,447 1,073,559 126.67%
materials.
Increase of receivables of related
parties and borrowings from
Other receivables 2,236,272 1,123,489 99.05%
shareholders of associated
companies.
1. Increase of production scale
resulted in the increase of raw
Inventories 13,423,747 6,753,566 98.77% materials in stock and goods in
process. 2. Raffles was firstly
included into consolidation.
Non-current assets due Big increase of receivable financing
1,185,502 394,036 200.86%
within 1 year leases and sales paid by instalments.
Other current assets 688,030 254,677 170.16% Big increase of taxes to be deducted
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or taxes prepaid.
Raffles was firstly included into
Construction in progress 1,697,664 573,269 196.14%
consolidation.
Scale expansion of current capital
Short-term in borrowing 8,309,309 4,157,477 99.86%
borrowings.
Notes payable 2,538,623 1,226,091 107.05% Expansion of purchase scale.
Accounts payable 9,117,500 4,462,255 104.32% Expansion of purchase scale.
Accounts received in Raffles was included into
1,935,731 1,270,602 52.35%
advance consolidation.
Expansion of production scale and
Employee compensation
1,365,532 813,425 67.87% improvement of treatment of
payable
workers.
Expansion of business scale and
correspondent increase of freights,
Other payables 2,388,367 1,476,903 61.71%
pledges, and quality guarantee
deposits.
Non-current liabilities due Big increase of long-term
2,844,521 455,472 524.52%
within 1 year borrowings due within 1 year.
—Accounting measure for major assets of the Company:
When preparing financial statements, the Company usually adopts historical cost
accounting except for the following assets and liabilities which are measured by fair
value:
① Financial assets and liabilities (including transactional ones) measured by fair value,
whose variations are recorded in profits and losses of the current period
Unit: (RMB) Thousand
Gain/loss Accumulative
from fair fair value Impairment
Opening Closing
Item value changes changes provision for
amount amount
in report recorded into report period
period equity
Financial assets:
Including:
1. Financial assets measured by
fair value, whose changes are 91,772 252,109 - - 512,560
recorded into profits and losses
of current period
Of which: Derivative financial
5,050 94,032 - - 119,069
assets
2. Financial assets available for
1,175,785 - 727,466 - 768,467
sale
3.Hedging instrument 21,565 - 14,070 - 13,101
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Subtotal of financial assets 1,289,122 252,109 741,536 - 1,294,128
Financial liabilities -17,191 -
Investing real estate - - - - -
Production biological assets - - - - -
Others - - - - -
Total 1,134,086 234,918 741,536 - 1,136,026
② For financial assets available for sale, please refer to Note 5 (10) to the financial
statements
—Analysis on changes and influence of main assets measured by fair value:
Unit: (RMB) Thousand
Effect on Direct
Balance as Balance as
Item in Recognition gain/loss effect
Contents at 31 Dec. at 31 Dec. Notes
statements of fair value for current on net
2010 2009
year assets
Transactional
Stock investment
equity Market
393,491 86,722 173,897 in secondary
instrument price
market
Transactional investment
financial Financial
Quotation
assets Derivative derivative
from
financial 119,069 5,050 94,032 products relating
financial
instrument to exchange rate
institution
and interest rate
Financial
Quotation
Derivative Derivative derivative
from
financial financial 13,101 21,565 14,070 products relating
financial
liabilities instrument to exchange rate
institution
and interest rate
Quotation
Other current Cash flow from Exchange rate
158,102 155,036 -17,191
assets hedging financial hedging product
institution
Equities of China
Financial Market
Merchants Bank,
assets Strategic equity price and
768,467 1,175,785 727,466 etc. held by the
available for investment assessed
Company for
sale value
strategic purposes
For more details, please refer to “3. Risk Analysis, Sensitivity Analysis and Fair Value
Recognition Methods for Financial Instruments” under “Note 11 Other Significant
Events” to the financial statements.
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(2) Analysis on changes in expense and income tax:
Unit: (RMB) Thousand
Increase/decreas
Item 2010 2009 Main influential factors
e (%)
Production scale expanded; labor
Administrative cost for administration increased;
2,734,364 1,976,074 138.37%
expenses Raffles was firstly included into
consolidation.
Financial
669,783 131,037 511.14% Interest expenses increased.
expenses
Profits increased, and income tax
Income tax 823,748 384,674 214.14% expenses of the current period
correspondently increased.
(3) Analysis on changes of cash flows
Unit: (RMB) Thousand
Increase/de
Item 2010 2009 Main influential factors
crease (%)
Cash flows from operating activities 1,482,901 969,685 52.93% Sales scale expands.
Cash flows from financing activities 477,409 520,840 -8.34% Cash to pay off debts increased.
7. Business Performance of Major Holding Subsidiaries and Joint Ventures
(1) Major holding subsidiaries
Major holding subsidiaries of CIMC include about 40 controlling subsidiaries for
container business, over 80 controlling subsidiaries for road transportation vehicle
business, 25 subsidiaries for energy, chemical and food equipments, 1 subsidiary for
airport equipment, 1 subsidiary for railway freight transportation equipments, 10
subsidiaries for logistics equipments and service, 3 subsidiaries for offshore engineering,
13 subsidiaries for real estates, and 5 subsidiaries for other industries. For business
performance of the said subsidiaries, please refer to “3. Status of Main Operations” of the
previous section of this report.
(2) Major joint ventures
As at 31 Dec. 2010, CIMC holds 10% equity of China Railway International United
Container Co., Ltd. With a registered capital of RMB 4.2 billion, China Railway
International United Container specializes in building and operating railway container
centers, as well as relevant services.
CIMC holds 5% equity of Communications Schroder Fund Management Co., Ltd., with
its registered capital standing at RMB 200 million. For the year 2010, the Company
achieved an investment income of RMB 7.46 million from this joint venture.
8. Entities controlled by the Company for special purposes
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The Company does not control any entity for special purposes.
(III) Outlook of the Company’s Future Development
1. Economic Environment and Policies
Having suffered the rough downturn, global economy returned to growth in 2010.
However, the unbalanced recovery structure of main economies is evident and will
further differentiate in 2011. As for growth prospects in developed economies, American
economy will still face challenges from unemployment, real estates market and
government deficits; polarization in European economy will be sharpened – while core
countries such as Germany and France are expected to drive economic growth in Europe,
other non-core countries, with debt crisis remain existing, will still struggle and pull
down the whole economic performance in Europe; Japanese economy will keep slow
growth.
Headed by China, emerging economies and developing economies will grow rapidly with
dual supports from recoveries in domestic and overseas market, but they also face
tremendous inflation pressure in the global environment of excess mobility. As compared
with 2010, China will suffer a much more complicated environment, in which, there will
internally exist long-term challenges such as inflation pressure, adjustment and upgrade
of industrial structure, energy saving and emission reduction, as well as improvement of
revenue distribution pattern, and there will externally exist various challenges such as
downward overseas demand, RMB depreciation, as well as more complicated
international and regional political games. The economic growth speed will fluctuate,
currency policy will turn from appropriately loose to stable, and at the same time
financial policies will keep loose.
As for CIMC Group, being placed in global economic environment and businesses, as
well as global market structure, the year 2011, on one hand, means that there will be
continual stable growth of market demand in its businesses, but there will also be obvious
differences between market demands in different regions, on the other hand, means that
the Group should adopt more flexible operating strategies in its businesses to adapt to the
increasing market demand in total and differentiating market demands in different regions.
Chinese manufacturing is undergoing profound changes while facing brand-new
challenges currently. Firstly, it has to upgrade to high-end manufacturing, develop toward
high technical complexity technology incentive type, and keep up with high-end
technology represented by Japanese technology and German technology. Secondly,
traditional industries have to develop toward refined production, make breakthroughs in
environment and resources, so as to improve its competitiveness by higher efficiency,
better quality and more effective cost control. As an enterprise group with the core of
manufacturing, the Group has to try hard on innovation on core technologies and
transform in manufacturing technologies and management styles, etc.
2. Development trends in the industry and market
In 2011, we believe that recovery of global economic and trade will be continued,
International Monetary Fund (abbreviation as IMF) predicted that the actual increase of
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global economic would reach 3.3% in 2011, while Organization of Economic
Cooperation & Development (abbreviation as OECD) predicted that global trade would
increase by 8.3%. As for the growth prospect of emerging and developing economic
bodies, the economic bodies headed by China will gain fast increase under the double
support from the recovery of demands home and abroad. Energy Information
Administration (abbreviation as EIA) believed that the demands for oil from developed
countries would assume a large increase with the global economic recovery, and it was
predicted that the global demands for oil per day would increase by 1.7% in 2011, higher
than that in 2010 as 1.3%.
In 2011, in light of the comprehensive factors such as growth trend of global economy,
the change in demands from core economic bodies, the production increase of domestic
industries and investment & consumption trends, foreign exchange fluctuation and price
change home and abroad, base effect in the same period, etc., it’s primarily predicted that
the export will increase by about 16%, import will increase by about 20%, and the
foreign trade surplus will reach USD 170 billion with a little year-on-year decrease.
The continued strengthen of economic recovery, risk of economic fluctuation and
adjustment of Chinese economic structure, will provide more opportunities for the
development of the Group, which will also set more requirements and challenge for the
group in the respects such as industrial upgrade, self-optimization, capacity hoisting and
the development goal of becoming the world-class enterprise.
(1) As for the container business, against the overall background of continued and stable
recovery of global economy & trade, it is predicted that the demands for containers will
continue to increase with a possible increase of 20~30% in 2011. In accordance with the
prediction from Clarkson, a British dynamic analysis institution for shipbuilding and
shipping, the global business of containers will increase by 9.7 % to reach 153 million
TEU in 2011. According to the prediction from relevant professional institution, the total
freight capacity of global containers will increase by 8.4% per year over the future three
years (excluding the factors of vessels dismantling).
At present, the number of global containers on hand is about 30 million TEU, and it is
predicted that the renewal and elimination of old containers will amount to more than 1.2
million TEU per year, which will also continue to increase.
In accordance with the prediction from the authoritative institution, due to the total global
new ships with freight capacity as 1.3 million TEU being delivered to use in 2011, and
the growth rate of containers business being lower than that of freight capacity,
meanwhile high price of oil, the operating cost of the shipping company will increase
compared with last year. In consideration of absorbing surplus freight capacity, saving
fuel cost, reducing carbon emissions, etc, the shipping company will continue to adopt
low-speed strategy, which will also bring the increased demands for containers.
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(2) As for road transport vehicle manufacturing and service business, with the economic
recovery and development, the structural demands from domestic markets of different
regions and the increase of Chinese export & import business will drive the increased
demands for port logistic service and road transport vehicle service business. With
synchronous accelerative development of industrialization and urbanization, the demands
for engineering transport vehicles and special vehicles for engineering operation, such as
environmental sanitation trucks, pumping appliance, and fire-fighting vehicles, will
remain at high-level; the demands for common transport vehicles (high-way transport
vehicles, in-city and inter-city logistic vehicles, etc.) such as container transport vehicles,
common dry cargo transport vehicles, reefer vehicles, liquid tank special vehicles, etc.
will continue to go up. However, due to the high base of demands in 2010, the demands
for Chinese special vehicles will be less than the supplies obviously in 2011, so the price
may suffer the pressure of falling. Meanwhile, the company will also face the pressure of
increased cost of raw materials.
In 2011, it is predicted that the overseas demands will be possible to continue to recover,
but is not possible to gain substantial increase due to the discontinued recovery of
American and European economies.
(3) As for business of energy, chemical, food equipments and service, with the overall
recovery of global economy, it is predicted that the demands for liquid tank containers
will have a substantial recovery. In China, with the acceleration of industrialization and
urbanization, the demands for energy especially natural gas will increase significantly, so
as to drive the substantial increased demands for natural gas storage equipments,
liquefied natural gas receiving stations and engineering service business. In the aspect of
demands for chemical equipments, the demands are mainly from the domestic market,
because during the period of the twelfth-five-year plan, it will reform a lot of large scale
oil refineries and fertilizer plants as well as build up many petrochemical production
bases. In additional, the start of the new technologies, such as joint circulatory power
generation with coal combined oil and coal gasification and etc., will bring the new
increased demands for chemical equipment industry.
(4) As for offshore engineering equipment business, under the drive of the factors such as
the global recovery demands for raw oil and the increase of its price, the increasing
strength in the exploration for and exploitation of ocean oil in the world, oil leaking event
in gulf of Mexico, update and etc., the global investment in the industry of offshore
engineering equipments will enter into a new prosperity cycle. And it is predicted that the
global demands for offshore engineering platform will continue to go up. During the
period of the eleventh-five-year plan, the input in development of the ocean oil and gas
resources reached RMB 120 billion; while in accordance with the primarily finished
Development Plan of Offshore Engineering Equipment during the Period of
Twelfth-five-year Plan, it is predicted that the input in offshore engineering will be RMB
250 billion to 300 billion, which will drive the upsurge of Chinese offshore engineering
equipments investment. In the future ten years, Chinese oil production will increase by
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20%, which will bring the unprecedented development opportunities for Chinese offshore
engineering equipments manufacturing industry. In international market, Raffles has
established solid business relationship with many famous companies in this trade in
offshore regional markets like North Europe, Middle East, Russia, Brazil, and West
Africa, to improve its industrial influence. In the future, Raffles will mainly explore the
said segmented regional markets. However, in domestic market, it will continue to
consolidate the relations with the three major gas companies, paying attention to
investment demands and business opportunities to achieve a substantial breakthrough.
At present, the global market, especially high-end offshore products, has still been
dominated by South Korea, and Singapore, the traditional offshore business powers.
However, because of its lower price and improvement of design and construction
capacity, offshore business now experiences a trend of moving to China, providing both
opportunities and challenges for CIMC’s offshore business.
3. Overall business objectives and measures taken to achieve them
With the gradual recovery of global economy in 2011, CIMC will face a new
environment both internally and externally, which brings new opportunities for
development. As a global enterprise, CIMC will take the economic crisis as an
opportunity to accelerate business structure adjustment and strategic upgrading, and to
conduct systematic transformation in terms of development strategies, business mode,
enterprise culture, organizational structure, operation flow, human resources, etc., with
the purpose of turning the crisis to an opportunity and lay a foundation for the excellent
development of CIMC for the next ten years. At the same time, it will grasp opportunities
brought by emerging markets in American and European countries, Japan and the rest of
the world, pay equal attention to market at home and abroad, and effectively promote
steady growth of all its businesses.
In 2010, CIMC has made the general upgrading objective for the future three years which
is to build a capacity platform for sustained and healthy business growth of CIMC. It
aims to generally upgrading the organization ability at all levels of CIMC through the
upgrading activity in the future three years, so as to support the operation and
development of CIMC at the plan scale of RMB 100 billion or more.
4. Capital expenditure and financing plan
Considering changes of the economic situation and operation environment, as well as the
Group’s need for strategic upgrading and business development, a capital expenditure
about RMB 10.4 billion is expected for the year 2011, and the funds will mainly come
from self-owned capital and bank borrowings.
5. Risk factors in future development
Although the global economy has resumed increase, the recovery road is not so smooth
duo to the obvious imbalanced pattern of recovery in the major economic bodies. The
recovery of developed economic bodies still have the risks of downturn, and the slow
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increase still not enough to reduce the high unemployment rate. The pressure of currency
inflation also exists in the emerging market and developing economic bodies, which face
the problems of avoiding overheated economy and capital inflow control. As for Chinese
economy, at home, it faces the continuous increasing pressure of currency inflation and
the long-term challenges in the aspects such as industrial structural adjustment and
upgrade, energy saving & emission reduction, income distribution restructuring and etc.;
at abroad, it faces the challenges such as the decline of external demands, inflation of
RMB, more complex strike between international politics and geopolitics, and the
economic growth also has the risk of downturn.
Keeping abreast with the strategic adjustment of Chinese economic structure, the
manufacturing industry which the Group belongs to faces a series issues such as how to
improve production efficiency, improve working conditions, save resources, protect
environment and so on. Besides, the fluctuation and increase in the price of energy and
materials will be possible to erode the profits of the Company.
In the containers business, the uncertainty of global economic recovery and the
rebalancing process of global trade structure will be likely to have influence on the global
trade so as to cause the decreasing demands for containers. The risks that shipping
industry mainly faces are as follows: 1) the centralized delivery of new ships and the
cargo volume being less than the freight capacity will affect the freight fees; 2) the up
trend of the oil price under the conditions of inflation and fluctuation in geopolitics; 3)
the risk of fluctuated demands for containers, such as the increase of the rent of
containers ship, containers and port fees.
In the business of energy, chemical and food equipments and service, the development of
chemical equipments is closely related to the macro economic cycle, so the instability of
relevant national industrial policies has substantial influence on its business development.
With the increasing competitors, the competitiveness is more than that of before so that
the market shares face the risk to be squeezed out. Moreover, the production for export
faces the risk of foreign exchange fluctuation.
In the business of road transport vehicles, due to the recovery of mainstream developed
economic bodies in 2011 still being the primary step, it’s impossible to gain substantial
increase in overseas demands. Basing on the high growth rate in domestic market in last
year, the growth rate may decline due to the gradual withdrawal of national economic
stimulus policies. Besides, the factors such as resources, environment, traffic have a more
and more restraint on the developments of vehicles industry, the railway construction has
a negative impact on the trunk line road cargo freight and also brings the risks of
decreasing demands for road transport vehicles.
In the business of offshore engineering equipments, the offshore engineering equipments
are the products with high input and high risk, and have a high requirement for
construction facilities and experience, capitals and research power. Compared with
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Singapore and South Korea with more mature construction technology as well as
America and Europe with stronger R&D ability, the construction level of Chinese
offshore engineering equipments still have a long way to catch up. With the offshore
engineering industry being included into the Strategic Emerging Industries and gaining
the support of policies, there will be more traditional ship building enterprises in the
downturn cycle to transform to offshore engineering equipments manufacturing
enterprises, so as to increase the industrial competitiveness.
II. Investments in the reporting period
(I) The Company did not raise funds in the report period. Nor there existed application of
previously raised funds.
(II) Investments with Non-raised Funds in Report Period
1. Acquiring equities: In the reporting period, the Company paid a total of RMB 1,082.38
million for acquiring equities of some enterprises.
2. Establishing new subsidiaries or increasing investment in subsidiaries: In the reporting
period, the Company paid a total of RMB 1.541 billion for establishing new subsidiaries
or increasing investment in subsidiaries.
3. Investment in fixed assets: The year 2010 saw a net increase of RMB 3.436 billion in
the Company’s fixed assets (including construction in progress).
4. As at 31 Dec. 2010, balance of the Company’s short-term securities investment stood
at RMB 393.49 million.
Unit: RMB Million
Project Accumulative
Shareholding ratio of
Project progress in investment at
the Company (%)
2010 year-end
Acquisition of 31.74% minority equity of Yantai CIMC
50.98% Completed 1,189
Raffles Shipyards Ltd. and investment increase
Acquisition of 33.55% of minority equity of Shenzhen
CIMC Tianyu Real Estate Development Co., Ltd. and 90% Completed 656
investment increase
Increased investment on CIMC Vehicle Financing Lease
80% Completed 41
Co., Ltd.
Newly establishment of CIMC Vehicles (Chengdu) Co.,
100% Completed 30
Ltd.
Newly establishment of CIMC Industrial Property Service
80% Completed 1
Management (Chengdu) Co., Ltd.
Newly establishment of CIMC (Group) Finance Co., Ltd. 100% Completed 500
Newly establishment of Qingdao CIMC Special Vehicles
88.86% Completed 27.88
Co., Ltd.
Newly establishment of Shenzhen CIMC Investment
100.00% Completed 75
Holding Co., Ltd.
Newly establishment of Wuhu CIMC Ruijiang Automobile
60.00% Completed 22.5
Co., Ltd.
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Newly establishment of CIMC Financial Leasing (HK) Co
100% Completed 3.4
Ltd.
Increased investment on Yangzhou CIMC Tonghua Special
80.00% Completed 77.21
Vehicles Co., Ltd.
Total 2,623
III. Routine Work of the Board of Directors
(I) Board Meetings and Resolutions Made
Time Session Resolutions made Disclosure
st
1 Feb. 2010 The 1 Session of Resolution on acquisition of equities of F&G Public notice on
th
the 5 Board of 2 Feb. 2010
Directors for Year 2010
10 Feb. 2010 The 2nd Session of Resolution on establishing Containers Service Business
th
the 5 Board of Investment Holding Company
Directors for Year 2010
19 Mar. 2010 The 3rd Session of 1. Resolutions of the 3rd Session of Public notice on
th th
the 5 Board of the 5 Board of Directors for Year 2010; 23 Mar. 2010
Directors for Year 2010 2. Resolution on financing plan for 2010;
3. Resolution on providing guarantees for credits
granted by banks to subsidiaries in 2010
4. Resolution on provision of credit guarantees by
CIMC Vehicle (Group) Co., Ltd. and its controlling
subsidiaries for dealers and customers;
5. Resolution on controlling subsidiary’s providing
guarantee for credits granted by banks to subsidiaries
of the Group.
th
2 Apr. 2010 The 4 Session of Resolution on nomination of director candidates of the Public notice on
th th
the 5 Board of 6 Board of Directors; 3 Apr. 2010
Directors for Year 2010 Resolution on nomination of independent director
candidates of the 6th Board of Directors;
Resolution on holding the annual shareholder’s general
meeting for 2009
th
23 Apr. 2010 The 4 Session of Resolution on 1st Quarterly Report 2010
the 5th Board of
Directors for Year 2010
26 Apr. 2010 The 1st Session of Resolution on the 1st Session of the 6th Board of Public notice on
th
the 6 Board of Directors for Year 2010 5 May 2010
Directors for Year 2010
30 Jun. 2010 The 2nd Session of Resolution on restructuring of Shenzhen CIMC Tianyu
th
the 6 Board of Real Estate Development Co., Ltd.
Directors for Year 2010 Resolution on Self-inspection Report on the Basic
Works of Financial & Accounting of CIMC Group
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5 Jul. 2010 The 3rd Session of Resolution on transferring the using right of land to
th
the 6 Board of Qingdao CIMC Eco-equipment Co., Ltd.
Directors for Year 2010
20 Aug. 2010 The 4th Session of Resolution on Semi-annual Report 2010
th
the 6 Board of
Directors for Year 2010
1 Sep. 2010 The 5th Session of 1. Resolutions made at 5th Session of the 6th Board of Public notice on
th
the 6 Board of Directors for year 2010; 2 Sep. 2010
st
Directors for Year 2010 2. Resolution on proposal of convening 1 Provisional
Shareholders’ General Meeting in 2010
th
27 Sep. 2010 The 6 Session of Resolution on the 6th Session of the 6th Board of 28 Sep. 2010
th
the 6 Board of Directors for Year 2010
Directors for Year 2010
25 Oct. 2010 The 7th Session of 1. Resolution on the 7th Session of the 6th Board of Public notice on
th
the 6 Board of Directors for Year 2010; 28 Oct. 2010
Directors for Year 2010 2. Resolution on changing the book keeping currency;
3. Resolution on equity exchange of CIMC Vehicle
Financing Lease Co., Ltd.
th
1 Dec. 2010 The 8 Session of 1. Resolution on the 8th Session of the 6th Board of
the 6th Board of Directors for Year 2010
Directors for Year 2010
(II) Execution on resolutions of shareholders’ general meetings by the Board of
Directors
1. The Board of Directors faithfully executed the resolutions of the shareholders’ general
meetings during the report year:
The Proposal on The Stock Option Incentive Scheme of China International Marine
Containers (Group) Co., Ltd. (Draft) (Revised) was reviewed and approved at the 1st
Provisional Shareholders’ General Meeting in 2010, which had fixed the exercise price,
grant date and etc., and finished the stock right register in Jan. 2011. The Proposal on
Register and issuance of Semi-period Notes was reviewed and approved at the 2nd
Provisional Shareholders’ General Meeting, which was still under the review and
approval of dealer; the proposal on Providing the Guarantees for Borrowings from Banks
to Taicang CIMC Containers Co., Ltd. and Proposal on Providing Guarantees for Credits
Granted by Banks to Yantai Raffles Shipyard Limited were still under the execution.
2. Implementation of the profit distribution scheme for 2009 by the Board of Directors
The Profit Distribution Scheme for 2009 was reviewed and approved at the 2009 Annual
Shareholders’ General Meeting held on 26 Apr. 2010. According to the Scheme, based on
the total 2,662,396,051 shares of the Company, a cash dividend of RMB 1.2 (tax included;
after tax, actual cash dividend for every 10 shares for individual shareholders, investment
funds and QFIIs stands at RMB 1.08.) is distributed for every 10 shares. On 29 Jun. 2010,
all parts of the profit distribution had been done.
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(III) Duty performance of three special committees under the Board
The Audit Committee, the Compensation and Appraisal Committee and the Strategy
Committee under the Board of Directors conscientiously performed their duties according
to the Administration Rules for Listed Companies, the Articles of Association of the
Company, Rules of Procedure for Board of Directors as well as the office power and
obligations stipulated in the implementation rules for the special committees.
Duty performance of Audit Committee
1. During the report period, the Audit Committee convened special meetings for
discussing periodical financial reports of the Company; it also communicated with the
auditors and issued the review comments on the financial report.
Since the commencement of the annual report audit for 2010, the Audit Committee
convened 2 meetings and it actively made the audit arrangement with the auditors. It
reviewed the financial statements twice and issued relevant comments. It kept contact
with auditors and paid much attention to the audit progress so as to make sure that the
audit would be accomplished on time.
2. Summary report by Audit Committee on 2010 audit conducted by KPMG
Pursuant to the Notification on Doing Well for the formulation, disclosure and audit
works of Annual Report 2010 from China Securities Regulatory Commission, the audit
carried out by KPMG is hereby summarized as follows:
Firstly, about preparation before the audit:
Formulating audit plan:
The 2010 audit lasted five months from the preliminary audit in early Nov. 2010 to the
completion of the preliminary audit, which was scheduled as follows:
From Nov. 2010 to Dec. 2010, preliminary audit was conducted on main subsidiaries.
On 28 Dec. 2010, KPMG communicated with the management and the Audit Committee
on the preliminary audit.
On 1 Jan. 2011, KPMG entered CIMC and its subsidiaries for audit. At the afternoon of
20 Mar. 2011, KPMG completed audit and issued a preliminary auditor’s report, which
was submitted to the Audit Committee for review and was approved by the Board of
Directors latter on 21 Mar. 2011.
Reviewing unaudited financial statements:
Before the entry of auditors, the Audit Committee carefully reviewed the financial
statements prepared by the Company.
Secondly, about the audit process:
Beginning from Nov. 2010, KPMG conducted preliminary audit on main subsidiaries.
From 1 Jan. 2011, KPMG conducted full audit on CIMC Headquarters and its
subsidiaries.
On 15 Mar. 2011, KPMG reported to the Audit Committee about the completion stage of
the audit.
On 20 Mar. 2011, KPMG submitted the preliminary Auditor’s Report 2010 to the Audit
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Committee.
On 21 Mar. 2011, KPMG officially issued the Auditor’s Report.
Thirdly, about the audit results
KPMG issued the Auditor’s Report 2010 for the Company with an unqualified opinion.
The Audit Committee was of the view that KPMG had done a good job in auditing the
Company’s 2010 annual financial statements.
3. Proposal on continuing employment of KPMG as external audit agency for 2011
The Audit Committee proposed to renew the employment of KPMG for auditing financial
statements of 2011.
Duty performance of Compensation and Appraisal Committee
During the report period, the Compensation and Appraisal Committee convened two
special meetings, at which the following matters were reviewed and discussed:
1. Issuing the audit opinion on the Appraisal Results for Management Team for 2009 and
Appraisal Measures for Management Team for 2010.
2. Issuing the audit opinion on the Disclosure for the Compensation of Directors,
Supervisors and Senior Management Staffs for 2009.
3. Reviewing and approving The Stock Option Incentive Scheme of China International
Marine Containers (Group) Co., Ltd. (Draft) (Revised) and The Appraisal Measures for
Implementing Stock Option Incentive Scheme of China International Marine Containers
(Group) Co., Ltd., which was submitted to the Board of Directors for review and
approval.
Duty Performance of Strategy Committee
During the report period, the Investment Examination Committee under the Strategy
Committee convened five special meetings on investment projects, thoroughly examining
significant investments and acquisition projects of the Company, which provided strong
basis for decision-making of the Board of Directors.
(IV) Statement of the Board of Directors on the responsibility of internal control
The Board of Directors is responsible for the establishment, improvement and effective
implementation of internal control. Generally speaking, the existing internal control rules
and system of the Group are complete, rational, effective and sound, with no material
internal control defects. All units within the Group that have established the internal
control system are able to control risks effectively. And the internal control system can
guarantee the healthy operation and the all the Company’s businesses and help the
Company control operating risks, which meets the relevant requirements of the Guideline
of Shenzhen Stock Exchange for Internal Control of Listed Companies. The
self-evaluation report of the Company on its internal control factually and objectively
presents the actual current situation of its internal control establishment, execution and
supervision. For more details, see the “Self-evaluation Report on Internal Control for
2010” disclosed by the Company.
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IV. Preplan for profit distribution or capitalization of capital reserve for 2010
As audited by KPMG, for the year 2010, the Company achieved a consolidated net profit
of RMB 3,001,850,708.56 after tax and minority interests. Based on the share capital of
2,662,396,051 shares as at 31 Dec. 2010, the earnings per share stood at RMB 1.13.
As per the Articles of Association of the Company and the current accounting standard,
the net profit of parent company was RMB -33,497,245.50 for the year 2010. And the
parent company’s profit available for distribution to shareholders as at 31 Dec. 2010
stood at RMB 1,579,889,470.04 as recorded in the statements. 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. 2010, a cash dividend of RMB 3.50 (tax included)
will be distributed for every 10 shares, representing a total dividend of RMB
931,838,617.85. After the said profit distribution, retained profit of the Company will
stand at RMB 648,050,852.19.
The above preplans are to be submitted to the Annual Shareholders’ General Meeting
2010 for examination and approval before implementation.
Cash bonus of the Company over the past three years
Unit: RMB Yuan
Ratio to net profit
Net profit attributable to Profit available for
Cash bonus (tax attributable to owners of
Year owners of listed company distribution for the
included) listed company under
under consolidated statements year
consolidated statements
2009 319,487,526.12 958,967,000 33.32% 1,932,874,000
2008 399,359,407.65 1,406,908,000 28.39% 1,064,613,000
2007 1,331,198,025.50 3,165,373,000 42.06% 1,493,044,000
Ratio of accumulative cash bonus to average annual net profit in past
111.19%
three years (%)
V. Other matters that need to be disclosed
(I) Foreign-currency financial assets and liabilities held by the Company
Unit: RMB Thousand
Accumulative
Gain/loss from fair fair value Impairment
Opening
Item value changes in changes provision for Ending amount
amount
report period recorded into report period
equity
Financial assets:
Of which: 1. Financial assets
measured at fair value with
88,9388 204,4299 349,3000
changes recorded into gain/loss
for current period
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Including: derivative financial
5,050 94,0322 119,0699
assets
2. Loans and receivables 2,202,816 -10,0566 5,815,4500
3. Financial assets available for
123,715 3,9355 9,0666
sale
4. Held-to-maturity
investments
5. Hedging 21,5655 14,0700 13,1011
Subtotal of financial assets 2,437,034 204,429 18,005 -10,056 6,186,917
Financial liabilities -9,312,911 -17,191 -12,293,6522
(II) Media designated for information disclosure
The Company has designated China Securities Journal, Shanghai Securities News,
Securities Times and Ta Kung Pao (HK) as media for its information disclosure.
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Section IX Report of the Board of Supervisors
I. Meetings of the Board of Supervisors and resolutions made
Date Session of meeting Resolutions made
st th
19 Mar. 2010 The 1 Session of the 5 Board st
Resolution on the 1 Session of the 5th Board of Supervisors
of Supervisors for Year 2010 for Year 2010
Review opinion on Self-evaluation Report on Internal
Control of CIMC for 2009
nd th
23 Apr. 2010 The 2 Session of the 5 Board Supervision opinion on 1st Quarterly Report 2010 of CIMC
of Supervisors for 2010
26 Apr. 2010 The 1st Session of the 6th Board Resolution on the 1st Session of the 6th Board of Supervisors
of Supervisors for Year 2010 for Year 2010
nd th
20 Aug. 2010 The 2 Session of the 6 Board Supervision opinion on Semi-annual Report 2010 of CIMC
of Supervisors for Year 2010
1 Sep. 2010 The 3rd Session of the 6th Board Resolution on the 3rd Session of the 6th Board of Supervisors
of Supervisors for Year 2010 for Year 2010
27 Sep. 2010 The 4th Session of the 6th Board Resolution on the 4th Session of the 6th Board of Supervisors
of Supervisors for Year 2010 for Year 2010
th th
25 Oct. 2010 The 5 Session of the 6 Board Supervision opinion on 3rd Quarterly Report 2010 of CIMC
of Supervisors for Year 2010
1 Dec. 2010 The 6th Session of the 6th Board Supervision opinion on the Self-inspection Report of the
of Supervisors for Year 2010 Establishment and Implementation of Long-term
Mechanism for Preventing the Fund Occupies
II. Independent opinion on events of the Company in 2010 by the Board of
Supervisors
The Board of Supervisors of the Company issued independent opinion on the following
events:
(I). 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 sat in on 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
report 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. In accordance with the Guideline of Internal Control in Listed Company Stipulated by
Shenzhen Stock Exchange, the Board of Supervisors fully inspected on the internal
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control of the Company and issued the following supervision opinions: the current
internal control system is in line with the requirements of relevant laws, rules and
stipulations at present, as well as meet the requirement of effective risk control in all the
material aspects; the Self-assessment Report of Internal Control of CIMC for Y2010
reflects the particulars on the establishment, operation, inspection and supervision of the
Company’s internal control objectively and truly.
3. The Stock Option Incentive Plan of the Company was successively approved and filed
by State Assets Supervision and Administration Committee (SASAC) and China Security
Regulatory Committee (CSRC), and the Board of Supervisors respectively issued the
supervision opinion on the following events in accordance with relevant rules and laws:
(1) The Board of Supervisors believes that the content of Stock Option Incentive Plan of
China International Marine Containers (Group) Co., Ltd. (Drafted) (Revised) is in line
with the stipulations of Company Law, Securities Law, Administration of Stock Option
Incentive of Listed Company, Memorandum of Relevant Events on Stock Option
Incentive No. 1, No. 2 and No. 3 as well as other relevant rules, laws and stipulations; the
Company has fulfilled the duties on legal procedure and information disclosure at current
period; it was legal, compliant and existed no harm to the interest of the Company and
the shareholders in the implementation of tock Option Incentive Plan of China
International Marine Containers (Group) Co., Ltd. (Drafted) (Revised), so it can be put
into practice in accordance with relevant laws, rules and stipulations once being approved
by the Shareholders’ General Meeting of the Company.
(2) The Board of Supervisors believes that the Appraisal Measures for Implementing
Stock Option Incentive Scheme of China International Marine Containers (Group) Co.,
Ltd. takes the correct appraise of the Company’s directors (excluding independent
directors and external directors), senior management staffs, other core technical personnel
on their professional ethics, attitude, ability and performance, etc., then positively uses
the stock incentive mechanism so as to improve the management performance and
maximize the interest of the Company and the shareholders.
(3) The Board of Supervisors supervised the List of Grantees for the Stock Option
incentive fixed by Stock Option Incentive Plan of China International Marine Containers
(Group) Co., Ltd. (Drafted) (Revised) and issued the following opinions: the Company’s
directors (excluding independent directors and external directors), senior management
staffs, other core technical personnel fixed by Stock Option Incentive Plan of China
International Marine Containers (Group) Co., Ltd. (Drafted) (Revised) all meet the
qualification stipulated in Company Law, Articles of Association as well as other laws
and rules, who also meet the conditions of incented objects stipulated by Administration
of Stock Option Incentive of Listed Company (Trial), so whose qualifications as the
incented objects for this stock option incentive of the Company are legal and effective.
4. After the review and approval of Shareholders’ General Meeting on the Stock Option
Incentive Plan of the Company, the Board of Supervisors issued the opinion on the
following events:
(1) In line with the authorization from the Shareholders’ General Meeting, the Board of
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Directors fixed the grant date for the stock option incentive plan of the Company as 28
Sep. 2010, and the Board of Supervisors issued the following opinion after supervision:
the determination of grant date is in line with Administration of Stock Option Incentive
of Listed Company (Trial)(hereinafter refers as Administration), Memorandum of
Relevant Events on Stock Option Incentive No. 1, No. 2 and No. 3 (hereinafter refers as
Memorandum) and Stock Option Incentive Plan of China International Marine
Containers (Group) Co., Ltd. (hereinafter refers as Stock Option Incentive Plan), which is
legal and effective.
(2) In view that the Company has carried out the Distribution Plan 2009 as distributing
RMB 1.2 for every ten shares in Jun. 2010, the Board of Directors adjusted the original
exercise price under the authorization of the Shareholders’ General Meeting and in line
with the stipulations of Administration, Memorandum and Stock Option Incentive Plan of
the Company, the details as follows:
Equity distribution for Y2009
Before adjustment After adjustment
Exercise price 12.51 12.39
After supervision, the Board of Supervisors believes that the above adjustment of the
original exercise price is in line with the relevant stipulations on the adjustment of
exercise price in Administration, Memorandum and Stock Option Incentive Plan, which
is legal and effective.
5. In accordance with the spirit of the Circular on Carrying out Self-inspection on the
Establishment and Implementation of Long-term Mechanism for Funds Occupies
Prevention, the Company carried out the self-inspection and form the Self-inspection
Report on the Establishment and Implementation of Long-term Mechanism for Funds
Occupies Prevention, the Board of Supervisors supervised the Self-inspection Report and
believes that the content of the report is objective and true; there existed no funds
occupies from the main shareholders and related parties of the Company.
(II) The Board of Supervisors examined the Company’s business and finance in 2010, as
well as the annual financial report, the semi-annual report and other documents submitted
by the Board of Directors. And it is of the opinion that the financial report has presented
the Company’s financial status and operating results in a factual and fair manner. In the
report period, KPMG issued a standard unqualified auditor’s report for the Company’s
Financial Report 2010. And it believes that the audit opinion issued by KPMG is
objective.
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Section X Significant Events
I. Significant lawsuits and arbitrations
Naught
II. Significant acquisition and sales of assets
On 16 Nov. 2009, by Bright Day Limited (hereinafter referred to as “the Offeror”), a
wholly-owned subsidiary of CIMC (Hong Kong) Limited, which is in turn a wholly-owned
subsidiary of the Company, and the person acting-in concert made a voluntary
unconditional cash tender offer for all the shareholders of Yantai Raffles Shipyard Limited
and other relevant parties. This offer was completed on 18 Jan. 2010, the subsidiary of the
Company held 136,810,425 shares of Yantai Raffles Shipyard Limited, amounting for
about 50.01% shares of Yantai Raffles Shipyard Limited, thus becoming the control
shareholder of Yantai Raffles Shipyard Limited. The the Company joined the shares
allotment and then made the proportion of shares of Yantai Raffles Shipyard Limited held
increase to 50.98% after this shares allotment. For details, please refer to Public Notices on
the Progress of Voluntary Unconditional Cash Tender Offer towards Yantai Raffles
Shipyard Limited from the Subsidiary of China International Marine Containers (Group)
Co., Ltd. and Pubic Notice on Joining in the New Share Allotment of the Subsidiary by
China International Marine Containers (Group) Co., Ltd. (Public notices in China
Securities Journal, Shanghai Securities, Securities Times and Ta Kung Pao on 20 Jan. 2010
and 6 Jul. 2010, Announcement No. : [CIMC] 2010-001 and [CIMC]2010-019).
III. Significant related transactions
During the reporting period, no significant related transaction occurred in 2010. For details
of relevant information, please refer to “Note VI Related Party Relationships and
Transactions” in the Notes to the Financial Statements.
IV. Significant contracts and execution
1. During the reporting period, the Company did not hold in trust, contract or lease any
significant assets from other companies, nor did it put in trust, contract or lease its
significant assets to other companies.
2. On 15 Nov. 2009, Bright Day Limited (hereinafter referred to as “the Offeror”), a
wholly-owned subsidiary of CIMC (Hong Kong) Limited, which is in turn a wholly-owned
subsidiary of the Company, signed the Shareholders’ Agreement with CIMC (Hong Kong)
Limited, Sharp Vision Holdings Limited, Leung Kee Holdings Limited and Bright Touch
Investment Limited. The Offeror made a voluntary unconditional cash tender offer for all
the shareholders of YRSL other than offeror and relevant parties on offer date (16 Nov.
2009). This offer was completed on 18 Jan. 2010, the subsidiary of the Company held
136,810,425 shares of Yantai Raffles Shipyard Limited, amounting for about 50.01% shares
of Yantai Raffles Shipyard Limited, thus becoming the control shareholder of Yantai
Raffles Shipyard Limited. In Jul. 2010, Yantai Raffles Shipyard Limited announced to, on
the basis of one additional share for every two existing shares, issue 136,782,500 shares of
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renounceable non-underwritten additional shares, and the Company joined in this share
allotment. The proportion of shares of Yantai Raffles Shipyard Limited held by the
Company increased to 50.98% after this shares allotment. For details, please referred to the
Announcement was disclosed in China Securities Journal, Shanghai Securities News,
Securities Times and Ta Kung Pao on 20 Jan. 2010 and 6 Jul. 2010(Announcement No. :
[CIMC] 2010-001 and [CIMC]2010-019).
3. The Company signed a strategic cooperation agreement with China Merchants Bank Co.,
Ltd. (hereinafter referred to as “China Merchants Bank”). According to the said agreement,
China Merchants Bank intends to provide a credit line of RMB 17.7 billion to the Company
and will cooperate with the Company in various business. For details, please referred to the
Announcement was disclosed in China Securities Journal, Shanghai Securities News,
Securities Times and Ta Kung Pao on 23 Dec. 2010 (Announcement No. : [CIMC]
2010-040).
4. Significant guarantee contracts
(1) The Company provided guarantees on operational capital for its subsidiaries. The
Company is a overall listed company, who provided guarantees on operational capital
within budgets for its subsidiaries for the purpose of demands of business and development.
The Company signed a General Agreement on Annual Credit of Head Office with the Bank
according to the annual budget approved by the Board of Directors. The various financing
activities of the subsidiaries must be within the annual credit in the General Agreement.
The Company, as approved by the Board of Directors, provided credit guarantee for the
subsidiaries with the total annual credit. As 31 Dec. 2010, the balance of the guarantee
provided by the Company for its subsidiaries was RMB 2,116.09 million. No overdue
external guarantee existed in the Company and holding subsidiaries.
(2) The Company did not provide any external guarantees to its shareholders, actual
controller and other related parties.
(3) As at 31 Dec. 2010, the balance of guarantee provided by the Company amounted to
RMB 3,154.02 million, accounting for 19.44% of the net assets at the end of 2010, direct or
indirect guarantee amount for liabilities of subsidiaries whose assets liability ratio was over
70% was RMB 720.01 million.
5. During the reporting period, the Company did not entrust any person to conduct cash
assets management.
V. Special explanation and independent opinion made by Independent Directors on
relevant events
(I) Special explanation and independent opinion made by Independent Directors in respect
of appropriations of funds of the Company by its related parties and external guarantee
We believed that the Company has strictly followed the requirements of relevant rules and
regulations to standardize the behaviors of external guarantee with perfect decision-making,
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and reached the effective financial risk control. There was no behavior of external
guarantee provided by the Company for its shareholders, actual controller and other related
parties in the Company. Both guarantees the Company provided for its subsidiaries and
guarantees CIMC Vehicle and its holding subsidiaries provided for their dealers and clients
are for the sake of promoting business development of the Group and demands of products
sales. The above-mentioned guarantees did not harm benefits of the Company and
shareholders.
(II) Special explanation and independent opinion made by Independent Directors on the
Company’s derivatives investment and risk control
In our opinion, the Company strictly complied with the requirements of relevant rules and
regulations issued by supervision department, as well as the principle of prudence, to
standardize derivatives investment. The internal approval system and operating process on
business was perfect. And risk control was valid.
VI. Performance on the stock option incentive scheme
(I) Implementation of the stock option incentive scheme of CIMC
On 28 Dec. 2009, the 16th Session of the 5th Board of Directors for year 2009 of CIMC and
the 7th Session of the 5th Board of Supervisors for year 2009 of CIMC were held, at which
the Stock Option Incentive Scheme of China International Marine Containers (Group) Co.,
Ltd. (Draft), the Appraisal Measures for Implementing Stock Option Incentive Scheme of
China International Marine Containers (Group) Co., Ltd. and the Proposal on Submitting
the Shareholders’ General Meeting to Authorize the Board of Directors to Transact Matters
Related with Stock Option Incentive Scheme of CIMC were reviewed and approved. And
the independent directors issued The Independent Opinion on the Stock Option Incentive
Scheme of China International Marine Containers (Group) Co., Ltd. (Draft) by the
Independent Directors.
On 1 Sep. 2010, the Company convened the 5th Session of the 6th Board of Directors for
Year 2010 and the 3rd Session of the 6th Board of Supervisors for Year 2010, which
reviewed and approved Proposal on Revising the Stock Option Incentive Scheme of China
International Marine Containers (Group) Co., Ltd (Draft), and amended the original
incentive scheme. With unanimous review by CSRC, on 17 Sep. 2010, the 1st Special
Shareholders’ Meeting for Year 2010 of the Company reviewed and passed the Stock
Option Incentive Scheme of China International Marine Containers (Group) Co., Ltd.
(hereafter referred to as Incentive Scheme of Stock Option).
The Company completed this stock option registration on 26 Jan. 2011.
The number of stock option granted to grantees in this scheme was 60 million, accounting
for 2.25% of the total share capital of the Company, of which 54 million was initially
granted. And the grantees were core technical (business) staff and middle management staff,
amounted to 181. And the initial exercise price was RMB 12.39 per share with the grant
date as 28 Sep. 2010, and the valid period of this stock option incentive scheme was ten
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years since the initial grant date of the stock option, which was divided into two periods to
exercise, and the first exercise period was from the initial trade date after two years since
the grant date to the last trade date within four years since the grant date, and it was
allowed to exercise no more than 25% of the total granted stock options; the second
exercise period was from the initial trade date after four years since the grant date to the
last trade date of this plan, and it was allowed to exercise no more than 75% of the total
stock options. The large-scale stock option incentive and the strict exercise conditions
would integrate the interest of the Company and that of the staffs themselves, so as to
stimulate the staffs’ enthusiasm significantly, and thus input endless energy to the
development of the Company.
For details, please referred to the Revised Stock Option Incentive Scheme of CIMC(Draft),
(Revised) disclosed in http://www.cninfo.com.cn on 3 Sep. 2010.
(II) Performance on Equity Trust Scheme of CIMC Vehicle (Group) Co., Ltd.
1. The Shareholders’ General Meeting of the Company held on 17 Oct. 2007 reviewed and
approved the Proposal on Shares Trust Plan of CIMC Vehicles (Group) Co., Ltd., the
Company’s wholly owned subsidiary. In accordance with the plan, the Company’s senior
management staffs involving in the vehicles business and the core staffs of the Company’s
subsidiary CIMC Vehicles (Group) Co., Ltd. held 20% of this subsidiary with increasing
capital as RMB 220.7 million through China Resources SZITIC Trust Co., Ltd..
2. The Shareholding Plan of Core Staffs in CIMC Vehicles (Group) Co., Ltd. was
implemented in 2007 through the establishment of Shares Trust Plan, of which the first
phase of distributed shares totaling 43 million shares, accounting for 19.48% in the total
beneficiary shares of the Shares Trust Plan. The second phase of beneficiary shares of
Shares Trust Plan of CIMC Vehicles (Group) Co., Ltd. was distributed with the total shares
as 72.87 million shares, representing 33.02% in the total beneficiary shares of the Shares
Trust Plan, with the number of beneficiary as 150.
As to 31 Dec. 2010, the distributed shares of Shares Trust Plan of CIMC Vehicles (Group)
Co., Ltd. were 115.32 million shares, accounting for 52.25% in the total beneficiary shares
of the Shares Trust Plan.
VII. Commitment made by the Company or shareholders holding more than 5% of
shares and performance thereof
(I) For the relevant commitment made by the Company, please refer to the Notes to the
Financial Statements.
(II) Commitment made by COSCO Container Industrial Limited in the Share Merger
Reform on listing of shares subject to trading moratorium and the performance thereof
(1) COSCO Container Industries Limited committed that the original non-tradable shares
held by it would not be sold at Shenzhen Stock Exchange or transferred according to
relevant regulations within 12 months since the first transaction day after implementation
of the share merger reform.
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(2) COSCO Container Industries Limited further committed that, after expiration of the
above commitment, the non-tradable shares sold through listing at Shenzhen Stock
Exchange in accordance with the relevant provisions would not exceed 5% of total shares
of CIMC 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 the Share Merger
Reform.
VIII. Other investment events
(I) Securities investment
Unit: RMB Yuan
Number of Proportion to
Initial shareholding total securities Profits and
Stock Stock Short form of Closing book
No. investment at the investment at losses in the
variety code Stock value
(RMB Yuan) period-end the period-end reporting period
(share) (%)
1 A 000581 Weifu Hi-tech 24976714.19 1419710 52742226.5 13.40 27765512.32
2 A 000858 Wuliangye 98235671.43 3163623 109556264.5 27.84 11320593.06
3 B 200581 Su Weifu B 39108015.97 3367933 80513216.89 20.46 48018830.77
inotrans
4 H 00368 Shipping 20988542.68 2996500 7468205.16 0.19 -1717091.22
Limited H
5 S G05.SI GoodPack 105346054.5 13500000 142242646.9 36.15 72373195.09
Other securities investment at the
2,834,425.00 - 968,440.03 0.25 315,959.98
period-end
Profit and loss from selling securities
15,820,000.00
investment
Total 291,489,423.77 393,491,000.00 100.00% 173,897,000.00
(II) Equity of other listed companies held by the Company
Unit: RMB Yuan
Ratio to Profits and Change of owners’
equity of losses in the equity
Stock Short form Closing book
Initial investment invested reporting period
code of Stock value
company
(%)
China
600036 Merchants 25,461,492.90 0.53% 147,129,000.00 13,524,312.95 -35,182,305.08
Bank
China
600999 Merchants 57,517,510.73 0.90% 612,272,000.00 16,053,488.28 -183,838,694.92
Securities
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Otto
OEL 13,480,167.09 1.19% 9,066,000.00 - -14,027,000.00
Energy
Total 96,459,170.72 - 768,467,000 29,577,801.23 -233,048,000
(III) Equity of Pre-IPO and unlisted financial enterprises held by the Company
Naught
(VI) Derivatives investment
As at 31 Dec. 2010, main financial instrument held by the Company
included foreign exchange forwards or option contract and interest
rate swap contract. Risk of interest rate swap contract was nearly
related to fluctuation of interest rate. Risk of foreign exchange
Analysis on risks and control measures of derivatives forwards or option contract related to of risk from exchange rate
positions held in the report period (including but not market and certainty of future cash flow from foreign currency
limited to market risk, liquidity risk, credit risk, income. Control measures of derivative instrument showed in the
operation risk, law risk, etc.) following: carefully select and determine the type and amount of
new derivative instrument; aimed at derivative transaction, the
Company formulated strict and regular internal system of
examination and approval and operation process, and defined
procedure of examination and approval to control relevant risks.
Changes of market prices or fair values of the
The Group’s profit and loss from change in fair value of derivative
invested derivatives in the reporting period And the
financial instrument was RMB 76,841,000 from Jan to Dec. 2010.
analysis on the fair value of the derivatives should
Fire value of derivative financial instrument was recognized
disclose the specific use methods and the relevant
according to market quote from the external financial institution.
assumptions and parameters.
Whether significant changes occurred to the
Company’s accounting policy and specific accounting
No
principles of derivatives in the reporting period than
that of the previous reporting period
In our opinion, the Company strictly complied with the requirements
Specific opinion from independent directors, sponsors of relevant rules and regulations issued by supervision department,
or financial consultants on the Company’s derivatives as well as the principle of prudence, to standardize derivatives
investment and risk control investment. The internal approval system and operating process on
business was perfect. And risk control was valid.
Positions of derivatives investment as at the end of reporting period
Unit RMB Yuan
Profit and loss Proportion of closing
Opening contract Closing contract in the reporting contract amount to net assets
Type of contract
amount amount period of the Company at the end of
(RMB’0000) reporting period(%)
1. Forward foreign
1,469,500,244.47 4,673,302,392.70 77,190,000.00 28.81%
exchange contract
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2. Interest rate swaps 2,172,069,289.01 2,370,373,304.01 -6,974,000.00 14.61%
3. Option
346,401,816.57 370,908,516.65 6,625,000.00 2.29%
contracts-JPY
Total 3,987,971,350.05 7,414,584,213.36 76,841,000.00 45.70%
IX. Engagement and disengagement of CPA Firm
During the reporting period, as approved by the Annual Shareholders’ General Meeting
2009 held on 26 Apr. 2010, the Company reengaged KPMG, which has been providing
auditing services for the Company for 16 consecutive years since 1994, as the Company’s
accountants for providing auditing to the accounting statements for 2010.
2010 2009
Remuneration Continuous Name of Remuneration paid
Audited items Name of CPA
paid (audit fee service life CPA (audit fee and
Firm
and travel charge) Firm travel charge)
Preparing the consolidated
financial statements of the
Group in accordance with KPMG 4.5 million 17 KPMG 4.38 million
China Accounting Standard for
Business Enterprise
X. During the reporting period, none of the Company, its Board of Directors and its
directors was subject to administrative punishment by CSRC.
XI. Events after the balance sheet date
The change in book keeping currency
The book keeping currency of the Company and parts of its domestic subsidiaries in 2010
and previous years was US Dollar. Because the economical environment in which the
Company and parts of its domestic subsidiaries was substantially affected by the change in
value of Renminbi, their book keeping currency was changed into Renminbi from 1 Jan.
2011.
XII. Interviews and visits in the reporting period
During the reporting period, the Company received in aggregate 90 batches of visitors for
visiting, investigation and visiting plants by various institutional investors, such as fund
companies, investment companies and securities companies, and individual investors etc.
The Company did not disclose, reveal or divulge to any institutional investors and
individual investors any material information not generally available to the public.
Topics discussed and information
Time Location Means Investors
provided
The business structure of the
4 Jan. 2010 The Company Field research UBS Securities
Company, the recent status in the
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industry, the main business status,
investment progress, outlook for the
industry in 2010
Orient Securities Co., Ltd.,
7 Jan. 2010 The Company By telephone Bank of China Investment Ditto
Management
Guangzhou Securities,
7 Jan. 2010 The Company Field research Ditto
Morgan Stanley Huaxin Funds
Value Partners, Customers of
8 Jan. 2010 The Company Field research Ditto
Shenyin & Wanguo Securities
Changsheng Fund
12 Jan. 2010 The Company Field research Management, China Minzu Ditto
Securities
TX Investment Consulting,
ICBC Credit Suisse Asset
14 Jan. 2010 The Company Field research Ditto
Management, Pacific
Securities, Lord Abbett China
14 Jan. 2010 The Company By telephone Guosen Securities Ditto
China Universal Asset
15 Jan. 2010 The Company Field research Ditto
Management, Dacheng Fund
18 Jan. 2010 The Company Field research Nomura Securities Ditto
20 Jan. 2010 The Company Field research Harvest Fund Ditto
26 Jan. 2010 The Company By telephone First Shanghai Securities Ditto
27 Jan. 2010 The Company By telephone Customers of ABN AMRO Ditto
E Fund, KGI, China Galaxy
28 Jan. 2010 The Company Field research Securities, BNP Paribas Ditto
Peregrine
28 Jan. 2010 The Company By telephone Customers of CICC Ditto
29 Jan. 2010 The Company By telephone Capital Securities Ditto
Manulife Teda Fund
24 Feb. 2010 The Company Field research Management, PingAn Ditto
Securities
25 Feb. 2010 The Company Field research Standard Chartered Ditto
25 Feb. 2010 The Company Field research GF Securities Ditto
26 Feb. 2010 The Company By telephone Nomura Securities Ditto
China Post Fund, First-Trust
26 Feb. 2010 The Company Field research Fund Management, UBS Ditto
SDIC
28 Feb. 2010 The Company Field research CLSA Asia-Pacific Markets Ditto
Customers of BOC
5 Mar. 2010 The Company Field research Ditto
International (China) Limited
8 Mar. 2010 The Company By telephone Taikang Asset Management Ditto
11 Mar. 2010 The Company Field research Nikko Asset Management Ditto
76
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Customers of CICC,
2009 Annual Report and relevant
23 Mar. 2010 The Company Tele-conference customers of Shenyin &
business progress
Wanguo
The business structure of the
Company, the recent status in the
Morgan Stanley and its
24 Mar. 2010 The Company Field research industry, the main business status,
customer
investment progress, outlook for the
industry in 2010
25 Mar. 2010 The Company By telephone Dacheng Fund, Harvest Fund Ditto
9 Apr. 2010 The Company Field research Manulife Ditto
17 Apr. 2010 Yantai Field research Customers of Citibank Ditto
19 Apr. 2010 The Company Field research China Galaxy Securities Ditto
Shanghai Jianyong Investment
20 Apr. 2010 The Company Field research Ditto
Co., Ltd.
22 Apr. 2010 The Company Field research Customers of HSBC Bank Ditto
Shenyin & Wanguo Securities
28 Apr. 2010 The Company Field research Ditto
(HK)
Donghai Securities, CITIC
7 May 2010 The Company Field research Ditto
Securities
Martine Currie Investment
11 May 2010 The Company Field research Ditto
Management
28 May 2010 The Company Field research Chang Xin Asset Management Ditto
3 Jun. 2010 Shenzhen Field research Capital Securities Ditto
Asian Century Quest, Galaxy
21 Jun. 2010 The Company Field research Ditto
Asset Management
22 Jun. 2010 The Company Field research Customers of BNP Paribas Ditto
2010 Interim Strategy
One-to-many
23 Jun. 2010 Shenzhen Conference of China Ditto
conference
Merchants Securities
25 Jun. 2010 The Company Field research Gartmore Ditto
Morgan Stanley, Fidelity
28 Jun. 2010 The Company Field research Ditto
Investments Management
Business structure, recent industry,
Morgan Stanley, Fidelity Cash
28 Jun. 2010 The Company Field research main business status, investment
Fund
progress, industry outlook for 2010
Aijian Securities
6 Jul. 2010 The Company Field research Ditto
First Capital Securities
7 Jul. 2010 The Company By telephone Taiwan Yuanta Securities Ditto
Tufton Ocean Fund, Huatai
8 Jul. 2010 The Company Field research Ditto
Securities
12 Jul. 2010 The Company Field research Shanghai Zexi Investment Ditto
13 Jul. 2010 The Company Field research INVESCO Ditto
14 Jul. 2010 The Company Field research Standard Chartered Bank Ditto
77
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Customers of Goldman Sachs,
15 Jul. 2010 The Company By telephone Ditto
TPG Axon Capital
16 Jul. 2010 The Company Field research TX Investment Ditto
27 Jul. 2010 The Company Field research CITIC Securities Ditto
29 Jul. 2010 The Company Field research JP Morgan Ditto
29 Jul. 2010 The Company Field research GTJA Securities Ditto
30 Jul. 2010 The Company Field research Guosen Securities Ditto
5 Aug. 2010 The Company By telephone Customers of BNP Ditto
Everbright Pramerica Fund
12 Aug. 2010 The Company By telephone Ditto
(Taiwan)
The Company, Hai Tong Securities, Bank
31 Aug. 2010 Field research Ditto
eastern factory Fund
3 Sep. 2010 The Company Field research First State Cinda Fund Ditto
6 Sep. 2010 The Company Field research Yimin Securities Ditto
7 Sep. 2010 The Company Field research KGI Capital Asia Limited Ditto
10 Sep. 2010 The Company Field research Macquarie Securities Ditto
13 Sep. 2010 The Company Field research Shenyin & Wanguo Securities Ditto
13 Sep. 2010 The Company Field research Changjiang Securities Ditto
Fuh Hwa Securities
15 Sep. 2010 The Company Field research Ditto
Investment Trust, CPIC
Shenyin & Wanguo, Guosen
Securities, Ping An Securities,
Essence Securities, Sinolink
Securities, China Merchants
Securities, Hai Tong
Securities, E-Fund, GF
Securities, Hua An Fund,
Fortune SGAM Fund, Yinhua
Fund, Great Wall Fund, ICBC Business structure of the Company’s
Credit Suisse, Fullgoal Fund, marine industry, recent industry,
27 Sep. 2010 Yantai Raffles Field research China Post Fund, Lombarda progress situation of major orders,
China Fund, Tianhong Fund, investment progress, industry outlook
Changxin Fund, Taikang for the second of 2010 and 2011
Asset, Pacific Assets, Rising
Investment, Yongjin Asset,
Morgan Stanley, Macquarie
Capital Securities, China
AMC, Runhui Investment,
Changsheng Fund, CCIG,
Harvest Fund, Galaxy Fund,
Penghua Fund
Business structure, recent industry,
29 Sep. 2010 The Company Field research New silk road main business status, investment
progress, industry outlook for the
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second of 2010 and 2011
Business structure, recent industry,
main business status, investment
12 Oct. 2010 The Company Field research Guosen Securities
progress, industry outlook for the
second of 2010 and 2011
13 Oct. 2010 The Company Field research E Fund, UBS Ditto
Aisawa Securities, China Ditto
22 Oct. 2010 The Company Field research
Merchants Securities
28 Oct. 2010 The Company By telephone Customers of Citibank Ditto
Yantai CIMC Ditto
Taihe Investment ,E Fund,
28 Oct. 2010 Raffles Shipyard Field research
Individual Investors
Limited
2 Nov. 2010 The Company Field research China Merchants Fund Ditto
Invesco HK、Customers of Ditto
4 Nov. 2010 The Company Field research
Guosen Securities
5 Nov. 2010 The Company Field research Mitsui Life Insurance Ditto
9 Nov. 2010 The Company Field research Changjiang Pension Insurance Ditto
10 Nov. 2010 The Company Field research China Southern Fund Ditto
One-to-many Ditto
24 Nov. 2010 The Company Customers of Morgan Stanley
conference
One-to-many Customers of Shenyin & Ditto
25 Nov. 2010 Sanya
conference Wanguo
26 Nov. 2010 The Company Field research Jefferies Ditto
30 Nov. 2010 The Company Field research China Merchants Securities Ditto
The Company, Ditto
3 Dec. 2010 Field research GF Securities
eastern factory
6 Dec. 2010 The Company By telephone Harvest Fund Ditto
7 Dec. 2010 The Company Field research Everbright Securities Ditto
8 Dec. 2010 The Company Field research CICC Ditto
14 Dec. 2010 The Company Field research GF Securities Ditto
17 Dec. 2010 The Company Field research Harvest Fund Ditto
17 Dec. 2010 The Company Field research CICC Securities Ditto
20 Dec. 2010 The Company Field research KB Asset Management Ditto
23 Dec. 2010 The Company Field research Industrial Securities Ditto
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China International Marine Containers
(Group) Co., Ltd.
ENGLISH VERSION OF FINANCIAL STATEMENTS
FOR THE YEAR 1 JANUARY 2010 TO 31 DECEMBER 2010
IF THERE IS ANY CONFLICT OF MEANING BETWEEN THE CHINESE
AND ENGLISH VERSIONS, THE CHINESE VERSION WILL PREVAIL
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Auditors’ Report
KPMG-C (2011) AR No.0039
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 2010, the consolidated income statement and
income statement, the consolidated statement of changes in shareholders’ equity and
statement of changes in shareholders’ 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 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 auditor’s
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the 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 entity’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.
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Auditors’ Report (continued)
KPMG-C (2011) AR No.0039
Opinion
In our opinion, the financial statements comply with the requirements of China Accounting
Standards for Business Enterprises 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 2010, 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
21 March 2011
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China International Marine Containers (Group) Co., Ltd.
Consolidated balance sheet as at 31 December 2010
’000
Item Note 2010 2009
RMB RMB
USD equivalent USD equivalent
Current assets:
Cash at bank and on hand
V.1 706,511 4,655,696 771,685 5,269,217
Financial assets held
for trading V.2 79,770 525,661 16,604 113,337
Bills receivable V.3 77,179 508,585 247,627 1,690,845
Accounts receivable V.4 1,233,719 8,129,836 565,684 3,862,604
Prepayments V.6 369,280 2,433,447 157,224 1,073,559
Interest receivable 718 4,732 - -
Other receivables V.5 339,359 2,236,272 164,537 1,123,489
Inventories V.7 2,037,080 13,423,747 989,070 6,753,566
Non-current assets
due within one year V.8 179,902 1,185,502 57,707 394,036
Other current assets V.9 104,410 688,030 37,292 254,677
Total current assets 5,127,928 33,791,508 3,007,430 20,535,330
Non-current assets:
Available-for-sale
financial assets V.10 116,616 768,467 172,196 1,175,785
Long-term receivables V.11 202,780 1,336,257 145,271 991,942
Long-term equity
Investments V.12 234,962 1,548,332 282,770 1,930,811
Investment property V.13 11,739 77,356 11,073 75,606
Fixed assets V.14 1,518,501 10,006,466 1,126,949 7,695,033
Construction in progress V.15 257,624 1,697,664 83,956 573,269
Intangible assets V.16 488,424 3,218,571 406,788 2,777,626
Goodwill V.17 177,336 1,168,594 176,697 1,206,522
Long-term deferred
expenses V.18 4,246 27,978 4,469 30,513
Deferred tax assets V.19 74,275 489,456 53,593 365,946
Total non-current assets 3,086,503 20,339,141 2,463,762 16,823,053
Total assets 8,214,431 54,130,649 5,471,192 37,358,383
The notes on pages 20 to 250 form part of these financial statements.
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China International Marine Containers (Group) Co., Ltd.
Consolidated balance sheet as at 31 December 2010
(continued)
’000
Item Note 2010 2009
RMB RMB
USD equivalent USD equivalent
Current liabilities:
Short-term loans V.22 1,260,954 8,309,309 608,869 4,157,477
Financial liabilities
held for trading V.23 578 3,810 58 395
Bills payable V.24 385,241 2,538,623 179,563 1,226,091
Accounts payable V.25 1,383,599 9,117,500 653,504 4,462,255
Advances from customers V.26 293,751 1,935,731 186,082 1,270,602
Employee benefits payable V.27 207,222 1,365,532 119,127 813,425
Taxes payable V.28 119,756 789,155 91,241 623,011
Interest payable V.29 1,998 13,168 1,295 8,844
Dividends payable V.30 2,435 16,046 4,604 31,434
Other payables V.31 362,438 2,388,367 216,294 1,476,903
Provisions V.32 98,574 649,573 75,687 516,801
Non-current liabilities
due within one year V.33 431,662 2,844,521 66,705 455,472
Other current liabilities - -
Total current liabilities 4,548,208 29,971,335 2,203,029 15,042,710
Non-current liabilities
Financial liabilities
held for trading V.23 23,414 154,292 22,647 154,641
Long-term loans V.34 593,676 3,912,148 821,382 5,608,560
Special payables V.35 2,495 16,442 1,997 13,639
Provisions V.32 - - 6,060 41,381
Deferred tax liabilities V.19 86,933 572,866 79,190 540,722
Long-term payables V.36 18,037 118,858 - -
Other non-current
liabilities V.37 27,013 178,008 19,053 130,099
Total non-current liabilities 751,568 4,952,614 950,329 6,489,042
Total liabilities 5,299,776 34,923,949 3,153,358 21,531,752
The notes on pages 20 to 250 form part of these financial statements.
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China International Marine Containers (Group) Co., Ltd.
Consolidated balance sheet as at 31 December 2010
(continued)
’000
Item Note 2010 2009
RMB RMB
USD equivalent USD equivalent
Shareholders’ equity
Share capital V.38 328,872 2,662,396 328,872 2,662,396
Capital reserve V.39 185,516 1,349,420 216,389 1,557,703
Surplus reserve V.40 434,170 3,577,588 434,170 3,577,588
Retained earnings V.41 1,412,800 10,689,335 1,047,547 8,229,532
Translation differences
of financial statements
denominated in
foreign currency 100,532 (2,055,682) 52,371 (1,829,011)
Total equity attributable to
shareholders of the
Company 2,461,890 16,223,057 2,079,349 14,198,208
Minority interests 452,765 2,983,643 238,485 1,628,423
Total equity 2,914,655 19,206,700 2,317,834 15,826,631
Total liabilities and
Shareholders’ equity 8,214,431 54,130,649 5,471,192 37,358,383
These financial statements have been approved by the Board of Directors of the Company on
21 March 2011.
Legal representative’s [The person in charge of The head of the Company stamp
authorised person accounting affairs accounting department
The notes on pages 20 to 250 form part of these financial statements.
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China International Marine Containers (Group) Co., Ltd.
Balance sheet as at 31 December 2010
’000
Item Note 2010 2009
RMB RMB
USD equivalent USD equivalent
Current assets
Cash at bank and on hand XII.1 63,727 419,945 93,398 637,738
Financial assets held
for trading XII.2 24,629 162,298 - -
Dividends receivable XII.3 643,950 4,243,437 693,576 4,735,874
Other receivables XII.4 633,590 4,175,168 771,156 5,265,606
Bills receivable 4,704 31,000 - -
Total current assets 1,370,600 9,031,848 1,558,130 10,639,218
Non-current assets
Available-for-sale
financial assets XII.5 115,241 759,401 154,077 1,052,070
Long-term equity
Investments XII.6 555,788 3,662,478 436,147 2,978,100
Fixed assets 21,957 144,692 19,469 132,936
Construction in progress 3,828 25,224 3,208 21,906
Intangible assets 3,507 23,109 4,576 31,249
Long-term deferred
expenses 759 4,999 1,138 7,770
Total non-current assets 701,080 4,619,903 618,615 4,224,031
Total assets 2,071,680 13,651,751 2,176,745 14,863,249
The notes on pages 20 to 250 form part of these financial statements.
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China International Marine Containers (Group) Co., Ltd.
Balance sheet as at 31 December 2010 (continued)
’000
Item Note 2010 2009
RMB RMB
USD equivalent USD equivalent
Current liabilities
Short-term loans XII.7 72,977 480,897 94,690 646,564
Financial liabilities held
for trading XII.8 84 556 - -
Billss payable XII.9 30,350 200,000 - -
Employee benefits
Payable XII.10 55,886 368,275 34,019 232,286
Taxes payable XII.11 8,966 59,080 36,439 248,814
Interest payable 838 5,522 538 3,673
Other payables 1,428 9,407 3,843 26,234
Non-current liabilities
due within one year XII.12 414,185 2,729,353 57,678 393,839
Total current liabilities 584,714 3,853,090 227,207 1,551,410
Non-current liabilities
Financial liabilities held
for trading XII.8 20,767 136,846 21,268 145,224
Long-term loans XII.13 375,340 2,473,381 743,787 5,078,728
Deferred tax liabilities XII.14 7,632 50,291 19,936 136,128
Total non-current
Liabilities 403,739 2,660,518 784,991 5,360,080
Total liabilities 988,453 6,513,608 1,012,198 6,911,490
The notes on pages 20 to 250 form part of these financial statements.
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China International Marine Containers (Group) Co., Ltd.
Balance sheet as at 31 December 2010 (continued)
’000
Item Note 2010 2009
RMB RMB
USD equivalent USD equivalent
Shareholders’ equity
Share capital V.38 328,872 2,662,396 328,872 2,662,396
Capital reserve XII.15 112,162 852,264 141,809 1,045,202
Surplus reserve V.40 434,170 3,577,588 434,170 3,577,588
Retained earnings 208,023 1,579,889 259,696 1,932,874
Translation differences
of financial statements
denominated in
foreign currency - (1,533,994) - (1,266,301)
Total equity 1,083,227 7,138,143 1,164,547 7,951,759
Total liabilities and
Shareholders’ equity 2,071,680 13,651,751 2,176,745 14,863,249
These financial statements have been approved by the Board of Directors of the Company on
21 March 2011.
Legal representative’s [The person in charge of The head of the Company stamp
authorised person accounting affairs accounting department
The notes on pages 20 to 250 form part of these financial statements.
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China International Marine Containers (Group) Co., Ltd.
Consolidated income statement
for the year ended 31 December 2010
’000
Item Note 2010 2009
RMB RMB
USD equivalent USD equivalent
I.Operating income V.42 7,673,359 51,768,316 2,997,659 20,475,507
II.Operating costs V.42 6,462,286 43,597,815 2,547,655 17,401,760
Business taxes and Surcharges V.43 11,397 76,892 7,563 51,658
Selling and distribution expenses V.44 185,317 1,250,243 106,536 727,693
General and administrative
expenses V.45 405,301 2,734,364 289,303 1,976,074
Financial expenses V.46 99,279 669,783 19,184 131,037
Impairment loss V.49 40,704 274,610 57,987 396,081
Add: Gains / (losses) from
changes in fair value V.47 34,821 234,918 (5,664) (38,689)
Add: Investment income V.48 5,728 38,641 229,552 1,567,955
Including: Income
from investment in
associates and jointly
controlled enterprises 15,258 102,938 15,217 103,938
III.Operating profit 509,624 3,438,168 193,319 1,320,470
Add: Non-operating
Income V.50 43,284 292,019 25,263 172,561
Less: Non-operating
Expenses V.51 8,238 55,580 4,047 27,646
Including: Losses from
disposal of non-current
assets 3,046 20,551 643 4,392
IV.Profit before income tax 544,670 3,674,607 214,535 1,465,385
Less: Income tax expenses V.52 122,100 823,748 56,317 384,674
V.Net profit for the year 422,570 2,850,859 158,218 1,080,711
Attributable to:
Shareholders of the Company 444,949 3,001,851 140,394 958,967
Minority shareholders (22,379) (150,992) 17,824 121,744
The notes on pages 20 to 250 form part of these financial statements.
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China International Marine Containers (Group) Co., Ltd.
Consolidated income statement
for the year ended 31 December 2010 (continued)
’000
Item Note 2010 2009
RMB RMB
USD equivalent USD equivalent
VI.Earnings per share:
Basic earnings per share
(USD / RMB) V.53 0.17 1.13 0.05 0.36
Diluted earnings per share
(USD / RMB) V.53 0.17 1.13 0.05 0.36
VII.Other comprehensive income
for the year V.54 15,659 (536,354) 14,226 105,051
VIII.Total comprehensive income
for the year 438,229 2,314,505 172,444 1,185,762
Attributable to:
Shareholders of the Company 453,219 2,506,058 140,412 966,171
Minority interests (14,990) (191,553) 32,032 219,591
These financial statements have been approved by the Board of Directors of the Company on
21 March 2011.
Legal representative’s [The person in charge of The head of the Company stamp
authorised person accounting affairs accounting department
The notes on pages 20 to 250 form part of these financial statements.
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China International Marine Containers (Group) Co., Ltd.
Income statement for the year ended 31 December 2010
’000
Item Note 2010 2009
RMB RMB
USD equivalent USD equivalent
I.Operating income 223 1,503 188 1,284
Less: Operating costs 12 81 40 272
General and administrative
Expenses 46,833 315,962 18,622 127,203
Financial expenses 1,169 7,884 1,157 7,902
Add: Gains from changes in fair
value XII.16 7,214 48,668 8,787 60,020
Investment income XII.17 26,443 178,396 248,305 1,696,049
II.Operating (loss) / profit (14,134) (95,360) 237,461 1,621,976
Add: Non-operating
Income 3,850 25,973 1,961 13,397
Less: Non-operating
Expenses 71 469 15,392 105,137
Including:Losses from
disposal of non-current assets 1 9 73 500
III.(Loss) / profit before income
tax (10,355) (69,856) 224,030 1,530,236
Less: Income tax expenses XII.18 (5,389) (36,359) 38,448 262,616
IV.Net (loss) / profit for the Year (4,966) (33,497) 185,582 1,267,620
VI.Other comprehensive
income for the year XII.19 (33,513) (486,714) (10,667) (69,270)
VII.Total comprehensive
income for the year (38,479) (520,211) 174,915 1,198,350
These financial statements have been approved by the Board of Directors of the Company on
21 March 2011.
Legal representative’s [The person in charge of The head of the Company stamp
authorised person accounting affairs accounting department
The notes on pages 20 to 250 form part of these financial statements.
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China International Marine Containers (Group) Co., Ltd.
Consolidated cash flow statement
for the year ended 31 December 2010
’000
Item Note 2010 2009
RMB RMB
USD equivalent USD equivalent
I.Cash flows from operating
activities:
Cash received from sale of
goods and rendering
of services 7,986,953 53,883,978 3,373,596 23,043,347
Refund of taxes 237,172 1,600,081 85,391 583,263
Cash received relating
to other operating activities V.55(1) 29,605 199,730 44,256 302,291
Sub-total of cash inflows 8,253,730 55,683,789 3,503,243 23,928,901
Cash paid for goods and services 6,972,828 47,042,184 2,547,097 17,397,946
Cash paid to and for employees 522,568 3,525,509 285,634 1,951,023
Cash paid for all types of taxes 161,778 1,091,435 149,994 1,024,534
Cash paid relating to
other operating activities V.55(2) 376,753 2,541,760 378,554 2,585,713
Sub-total of cash outflows 8,033,927 54,200,888 3,361,279 22,959,216
Net cash inflow / (outflow)
from operating activities V.56(1) 219,803 1,482,901 141,964 969,685
II.Cash flows from investing
activities:
Cash received from disposal
of investments 15,632 105,461 238,675 1,630,270
Cash received from return
on investments 7,061 47,637 3,885 26,536
Net cash received from disposal of
fixed assets, intangible assets
and other long-term assets 9,958 67,182 8,246 56,324
Cash received from disposal of
Subsidiaries 3,124 21,076 - -
Cash received relating
to other investing activities V.55(3) 9,522 64,240 13,167 89,937
Sub-total of cash inflows 45,297 305,596 263,973 1,803,067
Cash paid for acquisition of
fixed assets, intangible assets
and other long-term assets 312,749 2,116,817 200,640 1,370,472
Cash paid for acquisition
of investments 86,304 582,250 57,466 392,522
Cash paid for acquisition
of subsidiaries V.56(2) 50,943 336,831 5,456 37,278
Sub-total of cash outflows 449,996 3,035,898 263,562 1,800,272
Net cash (outflow) / inflow from
investing activities (404,699) (2,730,302) 411 2,795
The notes on pages 20 to 250 form part of these financial statements.
10
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China International Marine Containers (Group) Co., Ltd.
Consolidated cash flow statement
for the year ended 31 December 2010 (continued)
’000
Item Note 2010 2009
RMB RMB
USD equivalent USD equivalent
III.Cash flows from financing
activities
Cash received from investors 14,459 97,548 1,659 11,332
Including: Cash received from
minority
shareholders
of subsidiaries 14,459 97,548 1,659 11,332
Cash received from borrowings 2,982,427 20,120,944 1,325,424 9,053,309
Cash received relating to other
financing activities V.55(4) 32,118 216,684 - -
Sub-total of cash inflows 3,029,004 20,435,176 1,327,083 9,064,641
Cash repayments of borrowings 2,833,919 19,119,035 1,153,893 7,881,666
Cash paid for dividends, profits
distribution or interest 124,321 838,732 96,938 662,135
Including: Dividends and profits
paid to minority
shareholders
of subsidiaries 8,309 56,057 4,288 29,279
Sub-total of cash outflows 2,958,240 19,957,767 1,250,831 8,543,801
Net cash inflow
from financing activities 70,764 477,409 76,252 520,840
IV.Effect of foreign exchange rate
changes on cash and cash
equivalents 46,519 170,882 11,709 81,030
V.Net (decrease) / increase in cash
and cash equivalents V.56(1) (67,613) (599,110) 230,336 1,574,350
Add: Cash and cash equivalents
at the beginning of the
year 643,878 4,396,525 413,542 2,822,175
VI.Cash and cash equivalents at
the end of the year 576,265 3,797,415 643,878 4,396,525
These financial statements have been approved by the Board of Directors of the Company on
21 March 2011.
Legal representative’s [The person in charge of The head of the Company stamp
authorised person accounting affairs accounting department
The notes on pages 20 to 250 form part of these financial statements.
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China International Marine Containers (Group) Co., Ltd.
Cash flow statement for the year ended 31 December 2010
’000
Item Note 2010 2009
RMB RMB
USD equivalent USD equivalent
I.Cash flows from operating
activities:
Cash received relating to
other operating activities 1,265,075 8,533,690 1,040,621 7,107,962
Cash paid to and for employees 11,570 78,051 9,444 64,504
Cash paid for all types of taxes 32,394 218,517 24,962 170,503
Other cash paid relating to
operating activities 1,144,568 7,720,814 1,114,255 7,610,919
Sub-total of cash outflows 1,188,532 8,017,382 1,148,661 7,845,926
Net cash inflow / (outflow) from
operating activities XII.20 76,543 516,308 (108,040) (737,964)
II.Cash flows from investing
activities:
Cash received from disposal
of investments 12,492 84,266 236,773 1,617,278
Cash received from
return on investments 70,102 472,880 72,750 496,919
Net cash received from disposal of
fixed assets 15 101 11 75
Net cash received from dsposal of
subsidiary 2,296 15,488 - -
Cash received relating
to other investing activities 35,609 240,217 30,413 207,737
Sub-total of cash inflows 120,514 812,952 339,947 2,322,009
Cash paid for acquisition of
fixed assets and other long-term
assets 5,314 35,846 4,345 29,679
Cash paid for acquisition
of investments 31,400 211,812 168,431 1,150,468
Cash paid for subsidiay
establishment 10,987 74,118 - -
Sub-total of cash outflows 47,701 321,776 172,776 1,180,147
Net cash inflow from
investing activities 72,813 491,176 167,171 1,141,862
The notes on pages 20 to 250 form part of these financial statements.
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China International Marine Containers (Group) Co., Ltd.
Cash flow statement for the year ended 31 December 2010
(continued)
’000
Item Note 2010 2009
RMB RMB
USD equivalent USD equivalent
III.Cash flows from financing
activities:
Cash received from borrowings and
subtotal of cash inflows 258,468 1,743,522 360,272 2,460,838
Cash repayments of borrowings 292,121 1,970,531 383,977 2,622,755
Cash paid for dividends, profits
distribution or interest 72,517 489,171 78,293 534,654
Sub-total of cash outflows 364,638 2,459,702 462,270 3,157,409
Net cash outflow from financing
activities (106,170) (716,180) (101,998) (696,571)
IV.Effect of foreign exchange
rate changes on cash and
cash equivalents - (11,523) - 203
V.Net increase / (decrease) in
cash and cash equivalents XII.20 43,186 279,781 (42,867) (292,470)
Add: cash and cash equivalents at
the beginning of the year 20,164 137,680 63,031 430,150
VI.Cash and cash equivalents at
the end of the year XII.20 63,350 417,461 20,164 137,680
These financial statements have been approved by the Board of Directors of the Company on
21 March 2011.
Legal representative’s [The person in charge of The head of the Company stamp
authorised person accounting affairs accounting department
The notes on pages 20 to 250 form part of these financial statements.
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China International Marine Containers (Group) Co., Ltd.
Consolidated statement of changes in shareholders’ equity
for the year ended 31 December 2010
USD’000
2010 2009
Attributable to shareholders of the Company Attributable to shareholders of the Company
Translation Translation
differences differences
Item of financial of financial
statements statements
denominated denominate
Share Capital Surplus Retained in foreign Minority Total Share Capital Surplus Retained d in foreign Minority Total
Note capital reserve reserve earnings currency interests equity capital reserve reserve earnings currency interests equity
I.Balance at 1 January 328,872 216,389 434,170 1,047,547 52,371 238,485 2,317,834 328,872 186,386 434,170 965,638 52,711 220,612 2,188,389
II.Changes in equity for the year
(I)Net profit for the year - - - 444,949 - (22,379) 422,570 - - - 140,394 - 17,824 158,218
(II)Other comprehensive income
for the year V.54 - (39,891) - - 48,161 7,389 15,659 - 358 - - (340) 14,208 14,226
Sub-total of (I)&(II) - (39,891) - 444,949 48,161 (14,990) 438,229 - 358 - 140,394 (340) 32,032 172,444
(III)Shareholders’ contributions
and decrease of capital
1.Contributions by minority
Shareholders - - - - - 14,459 14,459 - - - - - 16,009 16,009
2.Acquisition of
minority interests of
subsidiary - 189 - - - (189) - - 28,862 - - - (27,283) 1,579
3. Increase in minority
interests resulted from
acquisition of subsidiary - - - - - 226,591 226,591 - - - - - 1,034 1,034
4.Decrease in minority
interests resulted from
disposal of subsidiary - - - - - (2,069) (2,069) - - - - - - -
5.Decrease in retained earnings
resulted from acquisition of
minority interests - - - (32,989) - (5,011) (38,000) - - - - - - -
6.Increase in shareholders’ equity
resulted from share-based
payments - 8,829 - - - 1,629 10,458 - 783 - - - 217 1,000
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The notes on pages 20 to 250 form part of these financial statements.
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China International Marine Containers (Group) Co., Ltd.
Consolidated statement of changes in shareholders’ equity
for the year ended 31 December 2010 (continued)
USD’000
2010 2009
Attributable to shareholders of the Company Attributable to shareholders of the Company
Translation Translation
differences differences
of financial of financial
statements statements
denominated denominate
Share Capital Surplus Retained in foreign Minority Share Capital Surplus Retained d in foreign Minority Total
Item Note capital reserve reserve earnings currency interests Total equity capital reserve reserve earnings currency interests equity
(IV)Appropriation of profits
1.Distributions to V.41
shareholders (1) - - - (46,707) - (6,140) (52,847) - - - (58,485) - (4,136) (62,621)
III.Balance at 31 December 328,872 185,516 434,170 1,412,800 100,532 452,765 2,914,655 328,872 216,389 434,170 1,047,547 52,371 238,485 2,317,834
These financial statements have been approved by the Board of Directors of the Company on 21 March 2011.
Legal representative’s [The person in charge of The head of the Company stamp
authorised person accounting affairs accounting department
The notes on pages 20 to 250 form part of these financial statements.
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China International Marine Containers (Group) Co., Ltd.
Consolidated statement of changes in shareholders’ equity
for the year ended 31 December 2010 (continued)
RMB’000
2010 2009
Attributable to shareholders of the Company Attributable to shareholders of the Company
Translation Translation
differences of differences of
Item financial financial
statements statements
denominated denominated
Capital Surplus Retained in foreign Minority Share Capital Surplus Retained in foreign Minority
Note Share capital reserve reserve earnings currency interests Total equity capital reserve reserve earnings currency interests Total equity
I.Balance at 1 January 2,662,396 1,557,703 3,577,588 8,229,532 (1,829,011) 1,628,423 15,826,631 2,662,396 1,352,772 3,577,588 7,669,924 (1,833,779) 1,505,547 14,934,448
II.Changes in equity for the
Year
(I) Net profit for the year - - - 3,001,851 - (150,992) 2,850,859 - - - 958,967 - 121,744 1,080,711
(II)Other comprehensive
income for the year V.54 - (269,122) - - (226,671) (40,561) (536,354) - 2,436 - 4,768 97,847 105,051
Sub-total of (I)&(II) - (269,122) - 3,001,851 (226,671) (191,553) 2,314,505 - 2,436 - 958,967 4,768 219,591 1,185,762
(III) Shareholders’
contributions
and decrease of capital
1. Contributions by
minority Shareholders - - - - - 97,548 97,548 - - - - - 109,353 109,353
2. Acquisition of
minority interests of
subsidiary - 1,274 - - - (1,274) - - 197,148 - - - (189,367) 10,781
3. Increase in minority
interests resulted from
acquisition of
subsidiary - - - - - 1,528,694 1,528,694 - - - - - 7,063 7,063
4. Decrease in minority
interests resulted from
disposal of subsidiary - - - - - (13,956) (13,956) - - - - - - -
5.Decrease in retained earings
resulted from acquisition of V.41(2
minority interest ) - - - (222,560) - (33,803) (256,363) - - - - - - -
6. Increase in shareholders’
equity resulted from
share-based payments
VII.2 - 59,565 - - - 10,991 70,556 - 5,347 - - - 1,485 6,832
The notes on pages 20 to 250 form part of these financial statements.
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China International Marine Containers (Group) Co., Ltd.
Consolidated statement of changes in shareholders’ equity
for the year ended 31 December 2010 (continued)
RMB’000
2010 2009
Attributable to shareholders of the Company Attributable to shareholders of the Company
Translation Translation
differences of differences of
Item financial financial
statements statements
denominated denominated
Capital Surplus Retained in foreign Minority Share Capital Surplus Retained in foreign Minority
Note Share capital reserve reserve earnings currency interests Total equity capital reserve reserve earnings currency interests Total equity
(IV)Appropriation of profits
1. Distributions to V.41(1
shareholders ) - - - (319,488) - (41,427) (360,915) - - - (399,359) - (28,249) (427,608)
III.Balance at 31 December 2,662,396 1,349,420 3,577,588 10,689,335 (2,055,682) 2,983,643 19,206,700 2,662,396 1,557,703 3,577,588 8,229,532 (1,829,011) 1,628,423 15,826,631
These financial statements have been approved by the Board of Directors of the Company on 21 March 2011.
Legal representative’s [The person in charge of The head of the Company stamp
authorised person accounting affairs accounting department
The notes on pages 20 to 250 form part of these financial statements.
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China International Marine Containers (Group) Co., Ltd.
Statement of changes in shareholders’ equity
for the year ended 31 December 2010
USD’000
2010 2009
Item Note Retained
Share capital Capital reserve Surplus reserve earnings Total Share capital Capital reserve Surplus reserve Retained earnings Total
I.Balance at 1 January 328,872 141,809 434,170 259,696 1,164,547 328,872 152,476 434,170 132,599 1,048,117
II.Changes in equity for the year - - - - -
(I) Net (losses)/ profit for the year - - - (4,966) (4,966) - - - 185,582 185,582
(II)Other comprehensive income
for the year XII.19 - (33,513) - - (33,513) - (10,667) - - (10,667)
Sub-total of (I)&(II) - (33,513) - (4,966) (38,479) - (10,667) - 185,582 174,915
(III)Shareholders’ contributions
and decrease of capital - - - - -
1.Increase in shareholders’
equity resulted from VII
share-based payment - 3,866 - - 3,866 - - - - -
(IX) Appropriation of profits - - - - -
1.Distribution to shareholders V.41(1) - - - (46,707) (46,707) - - - (58,485) (58,485)
III.Balance at 31 December 328,872 112,162 434,170 208,023 1,083,227 328,872 141,809 434,170 259,696 1,164,547
These financial statements have been approved by the Board of Directors of the Company on 21 March 2011.
Legal representative’s [The person in charge of The head of the Company stamp
authorised person accounting affairs accounting department
The notes on pages 20 to 250 form part of these financial statements.
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China International Marine Containers (Group) Co., Ltd.
Statement of changes in shareholders’ equity
for the year ended 31 December 2010 (continued)
RMB’000
2010 2009
Translation Translation
differences differences of
of financial financial
Item
statements statements
denominated denominated
Capital Surplus Retained in foreign Capital Surplus Retained in foreign
Note Share capital reserve reserve earnings currency Total Share capital reserve reserve earnings currency Total
I.Balance at 1 January 2,662,396 1,045,202 3,577,588 1,932,874 (1,266,301) 7,951,759 2,662,396 1,118,064 3,577,588 1,064,613 (1,269,893) 7,152,768
II.Changes in equity for the year
(I) Net (losses)/ profit for the year - - - (33,497) - (33,497) - - - 1,267,620 - 1,267,620
(II) Other comprehensive income
for the year XII.19 - (219,021) - - (267,693) (486,714) - (72,862) - - 3,592 (69,270)
Sub-total of (I)&(II) - (219,021) - (33,497) (267,693) (520,211) - (72,862) - 1,267,620 3,592 1,198,350
(III)Shareholders’ contributions
and decrease of capital
1.Increase in shareholders’
equity resulted from
share-based payment VII.2 - 26,083 - - - 26,083 - - - - - -
(IX)Appropriation of profits
1.Appropriation for surplus
reserve - - - - - - - - - - - -
V.41
2.Distribution to shareholders
(1) - - - (319,488) - (319,488) - - - (399,359) - (399,359)
III.Balance at 31 December 2,662,396 852,264 3,577,588 1,579,889 (1,533,994) 7,138,143 2,662,396 1,045,202 3,577,588 1,932,874 (1,266,301) 7,951,759
These financial statements have been approved by the Board of Directors of the Company on 21 March 2010.
Legal representative’s [The person in charge of The head of the Company stamp
authorised person accounting affairs accounting department
The notes on pages 20 to 250 form part of these financial statements.
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China International Marine Containers (Group) Co., Ltd.
Notes to the financial statements
(Expressed in thousands of USD or RMB)
I 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” issued by the General Office of the People’s Government of Shenzhen and
“Shen Ren Yin Fu Zi (1992) 261” issued by Shenzhen Special Economic Zone
Branch of People’s Bank of China, the Company was restructured as an incorporated
company set up by directional subscription and was renamed as “China International
Marine Containers Co., Ltd.” by the original corporate shareholders of the
Company. On 31 December 1993 and 17 January 1994 respectively, the Company
issued ordinary shares denominated in Renminbi for domestic investors (A Shares)
and for foreign shares issued domestically (B Shares), and commenced trading on
Shenzhen Stock Exchange. Pursuant to “Shen Fu Ban Fu [1993] 925” issued by the
General Office of the People’s Government of Shenzhen and “Shen Zheng Ban Fu
[1994] 22” issued by Shenzhen Securities Administration Office.
On 1 December 1995, as approved by the State Administration of Industry and
Commerce, the Company changed its name to “China International Marine
Containers (Group) Co., Ltd”. Up to 31 December 2010, the share capital of the
Company amounted to 2,662,396,051 shares. Please refer to Note V.38 for details
of the share capital.
The principal activities of the Company and its subsidiaries (together referred to as
the “Group”) are the manufacturing of modern transportation facilities, facilities for
energy, food, chemistry and rendering of relative services. Detailed activities 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 of 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 providing EP+CS (engineering
procurement and construction supervision) technical service for the storage and
processing of LNG, LPG and other petrochemical gases. Apart from the above, the
Group is also engaged in manufacturing of logistic equipment and related services,
marine projects, railway trucks production and property development, etc.
CIMC Enric Holdings Limited, the subsidiary of the Group, is listed in the Main
Board of the Stock Exchange of Hong Kong Limited. The principal activities of the
Group are the design, development, manufacturing, engineering and sales of, and the
provision of technical maintenance service for, a wide spectrum of transportation,
storage and processing equipment that is widely used in energy, chemical and liquid
food industries.
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II. BASIS OF PREPARATION
1. BASIS OF FINANCIAL REPORTING
The financial statements have been prepared on the basis that the Company will
continue to operate throughout the next accounting period until 31 December 2011 as
a going concern.
2. STATEMENT OF COMPLIANCE
The financial statements have been prepared in accordance with the requirements of
“Accounting Standards for Business Enterprises—Basic Standard” and 38 Specific
Standards issued by the Ministry of Finance (MOF) of the People’s Republic of
China (PRC) on 15 February 2006, and application guidance, bulletins and other
relevant accounting regulations issued subsequently (collectively referred to as
“Accounting Standards for Business Enterprises” or “CAS”). 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 2010.
3. ACCOUNTING PERIOD
The accounting year of the Group is from 1 January to 31 December.
4. FUNCTIONAL CURRENCY
The Company’s functional currency is U.S dollar, while certain domestic subsidiaries
use Renminbi (“RMB”) and Hong Kong and certain overseas subsidiaries use local
currencies as their functional currencies. Foreign currencies are defined as currency
other than functional currency. The Group determines its functional currency based
on its major currency in business transactions. The financial statements are prepared
using U.S dollars and presented in both U.S dollar and RMB. For subsidiaries using
currencies other than U.S dollar as their functional currencies, the Company translates
the financial statements of these subsidiaries into U.S dollars (see Note II.8).
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II. BASIS OF PREPARATION (CONTINUED)
5. ACCOUNTING TREATMENTS FOR BUSINESS COMBINATIONS INVOLVING
ENTERPRISES UNDER AND THOSE NOT UNDER COMMON CONTROL
(1) Business combinations involving enterprises 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.
(2) Business combinations involving enterprises not under common control
A business combination involving enterprises not under common control is a business
combination in which all of the combining enterprises are not ultimately controlled by
the same party or parties both before and after the business combination.
Where 1) the aggregate of the fair value at the acquisition date of assets transferred
(including the acquirer’s previously held equity interest in the acquiree), liabilities
incurred or assumed, and equity securities issued by the acquirer, in exchange for
control of the acquiree, exceeds 2) the acquirer’s interest in the fair value of the
acquiree’s identifiable net assets, the difference is recognised as goodwill (see Note
II.18). Where 1) is less than 2), the difference is recognised in profit or loss for the
current period. The costs of the issuance of equity or debt securities as a part of the
consideration paid for the acquisition are included as a part of initial recognition
amount of the equity or debt securities. Other acquisition-related costs arising from
the business combination are recognised as expenses in the periods in which the costs
are incurred. The difference between the fair value and the carrying amount of the
assets transferred 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.
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II. BASIS OF PREPARATION (CONTINUED)
5. ACCOUNTING TREATMENTS FOR BUSINESS COMBINATIONS INVOLVING
ENTERPRISES UNDER AND THOSE NOT UNDER COMMON CONTROL (CONTINUED)
(2) Business combinations involving enterprises not under common control (continued)
In a business combination, the acquiree’s deductible temporary differences obtained
by the Group are not recognised if the deductible temporary differences do not satisfy
the criteria for recognition of deferred tax assets at the acquisition date. The Group
recognises the relevant deferred tax assets and reduces goodwill accordingly if within
12 months of the acquisition date, new or updated information indicates that at the
acquisition date, the obtained deferred tax benefit is expected to be realised in future
periods. If the goodwill is insufficient to be deducted, any remaining deferred tax
benefits shall be recognised in profit or loss for the current period. All other acquired
deferred tax benefit shall be included in profit or loss for the current period.
6. PREPARATION OF 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. In assessing control, potential voting
rights, such as warrants and convertible bonds, that are currently exercisable or
convertible, are taken into account. The financial statements of subsidiaries are
included in the consolidated financial statements from the date that control
commences until the date that control ceases.
Where a subsidiary was acquired during the reporting period, through a business
combination involving enterprises 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 the ultimate controlling party first obtained
control. 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 enterprises 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.
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II. BASIS OF PREPARATION (CONTINUED)
6. PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For a business combination not involving enterprises under common control and
achieved in stages, the Group remeasures its previously-held equity interest in the
acquiree to its fair value at the acquisition date. The difference between the fair value
and the carrying amount is recognised as investment income for the current period;
the amount recognised in other comprehensive income relating to the previously-held
equity interest in the acquiree is reclassified as investment income for the current
period.
Where the Company acquires a minority interest from a subsidiary’s minority
shareholders or disposes of a portion of an interest in a subsidiary without a change in
control, the difference between the amount by which the minority interests are
adjusted and the amount of the consideration paid or received 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.
When the Group loses control of a subsidiary due to the disposal of a portion of an
equity investment, the remaining equity investment is remeasured at its fair value at
the date when control is lost. The difference between 1) the total amount of
consideration received from the transaction that resulted in the loss of control and the
fair value of the remaining equity investment and 2) the carrying amounts of the
interest in the former subsidiary’s net assets immediately before the loss of the
control is recognised as investment income for the current period when control is lost.
The amount recognised in other comprehensive income in relation to the former
subsidiary’s equity investment is reclassified as investment income for the current
period when control is lost.
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.
When the amount of loss for the current period attributable to the minority
shareholders of a subsidiary exceeds the minority shareholders’ portion of the
opening balance of shareholders’ equity of the subsidiary, the excess is allocated
against the minority interests.
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II. BASIS OF PREPARATION (CONTINUED)
6. PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
7. 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.
8. FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION OF FINANCIAL
STATEMENTS DENOMINATED IN FOREIGN CURRENCY
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 rates that approximate 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 a rate determined under a systematic
and rational method, normally the average exchange rate of the current period or the
weighted average exchange rate.
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 principal and
interest on foreign currency borrowings specifically for the purpose of acquisition,
construction or production of qualifying assets (see Note II.16). 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.
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II. BASIS OF PREPARATION (CONTINUED)
8. FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION OF FINANCIAL
STATEMENTS DENOMINATED IN FOREIGN CURRENCY (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 earnings”, 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 rates that approximate 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.
9. FINANCIAL INSTRUMENTS
Financial instruments include cash at bank and on hand, derivatives, investments in
debt and equity securities other than long-term equity investments (see Note II.12),
receivables, payables, loans and borrowings and share capital.
(1) Financial assets and financial liabilities
A financial asset or financial liability is recognised in the balance sheet when the
Group becomes a party to the contractual provisions of a financial instrument.
The Group classifies financial assets and liabilities into different categories at initial
recognition based on the purpose of acquiring assets or assuming liabilities: financial
assets and financial liabilities at fair value through profit or loss, loans and
receivables, held-to-maturity investments, available-for-sale financial assets and other
financial liabilities.
Financial assets and financial liabilities are measured initially at fair value. For
financial assets and financial liabilities at fair value through profit or loss, any directly
attributable transaction costs are charged to profit or loss; for other categories of
financial assets and financial liabilities, any attributable transaction costs are included
in their initial costs. Subsequent to initial recognition financial assets and liabilities
are measured as follows:
- Financial assets and financial liabilities at fair value through profit or loss
(including financial assets or financial liabilities held for trading)
A financial asset or financial liability is classified as at fair value through
profit or loss if it is acquired or incurred principally for the purpose of selling
or repurchasing it in the near term or if it is a derivative, unless the derivative
is a designated and effective hedging instrument, or a financial guarantee
contract or a derivative that is linked to and must be settled by delivery of an
unquoted equity instrument (without a quoted price from an active market)
whose fair value cannot be reliably measured.
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II. BASIS OF PREPARATION (CONTINUED)
9. FINANCIAL INSTRUMENTS
(1) Financial assets and financial liabilities (continued)
- Financial assets and financial liabilities at fair value through profit or loss
(including financial assets or financial liabilities held for trading) (continued)
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 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.
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.
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II. BASIS OF PREPARATION (CONTINUED)
9. FINANCIAL INSTRUMENTS
(1) Financial assets and financial liabilities (continued)
- Other financial liabilities (continued)
Other financial liabilities include the liabilities arising from financial
guarantee contracts. Financial guarantees are contracts that require the
Group (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 II.21).
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.
Financial assets and financial liabilities are presented separately in the balance sheet
and are not offset. However, a financial asset and a financial liability are offset and
the net amount presented in the balance sheet when both of the following conditions
are satisfied:
- the Group has a legal right to set off the recognised amounts and the legal
right is currently enforceable;
- the Group intends either to settle on a net basis, or to realise the financial asset
and settle the financial liability simultaneously.
(2) Determination of fair values
If there is an active market for a financial asset or financial liability, the quoted price
in the active market without adjusting for transaction costs that may be incurred upon
future disposal or settlement is used to establish the fair value of the financial asset or
financial liability. For a financial asset held or a financial liability to be assumed, the
quoted price is the current bid price and, for a financial asset to be acquired or a
financial liability assumed, it is the current asking price.
If no active market exists for a financial instrument, a valuation technique is used to
establish the fair value. Valuation techniques include using recent arm’s length
market transactions between knowledgeable, willing parties; reference to the current
fair value of another instrument that is substantially the same. The Group calibrates
the valuation technique and tests it for validity periodically.
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II. BASIS OF PREPARATION (CONTINUED)
9. FINANCIAL INSTRUMENTS (CONTINUED)
(3) Derecognition of financial assets and financial liabilities
A financial asset is derecognised if the Group’s contractual rights to the cash flows from the
financial asset expire or if the Group transfers substantially all the risks and rewards of ownership
of the financial asset to another party.
Where a transfer of a financial asset in its entirety meets the criteria for 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.
(4) 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.
Objective evidences that a financial asset is impaired includes but is not limited to evidence
arising from the following events:
(a) significant financial difficulty of the issuer or obligor;
(b) a breach of contract by the borrower, such as a default or delinquency in interest or
principal payments;
(c) it becoming probable that the borrower will enter bankruptcy or other financial
reorganisations;
(d) the disappearance of an active market for that financial asset because of financial
difficulties of the issuer;
(e) significant changes with an adverse effect that have taken place in the technological,
market, economic or legal environment in which the issuer operates, indicating that the
cost of the investment in the equity instrument may not be recovered by the investor;
(f) a significant or prolonged decline in the fair value of an investment in an equity
instrument below its cost.
For the calculation method of impairment of receivables, refer to Note II.10, The
impairment of other financial assets are measured as follows:
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II. BASIS OF PREPARATION (CONTINUED)
9. FINANCIAL INSTRUMENTS (CONTINUED)
(4) Impairment of financial assets (continued)
- 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.
(5) Equity investments
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.
10. IMPAIRMENT OF RECEIVABLES
Receivables are assessed for impairment both on an individual basis and on a
collective group basis.
Where impairment is assessed on an individual basis, an impairment loss in respect of
a receivable is calculated as the excess of its carrying amount over the present value
of the estimated future cash flows (exclusive of future credit losses that have not been
incurred) discounted at the original effective interest rate. All impairment losses are
recognised in profit or loss.
The assessment is made collectively where receivables share similar credit risk
characteristics (including those having not been individually assessed as impaired),
based on their historical loss experiences, and adjusted by the observable figures
reflecting present economic conditions.
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II. BASIS OF PREPARATION (CONTINUED)
10. IMPAIRMENT OF RECEIVABLES (CONTINUED)
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.
(a) Receivables that are individually significant and are assessed for impairment
on an individual basis:
Criteria of provision for Individually significant receivables are the
receivable that are receivables with the individual amount over
individually significant RMB10 million (inclusive) or accounting to 5% or
and are assessed for more of the total receivables.
impairment on an
individual basis.
Method of provision for An impairment loss is calculated as the excess of
receivable that are its carrying amount over the present value of the
individually significant estimated future cash flows (exclusive of future
and are assessed for credit losses that have not been incurred)
impairment on an discounted at the original effective interest rate.
individual basis.
(b) Receivable that are individually insignificant but are assessed for impairment
on an individual basis:
Criteria of provision for Within the receivables whose amounts are
receivables that are individually insignificant, impairment is assessed
individually insignificant on an individual basis for the overdue receivables
but are assessed for unpaid after collection efforts or with unique
impairment on an characteristics.
individual basis.
Method of provision for An impairment loss is calculated as the excess of
receivable that are its carrying amount over the present value of the
individually insignificant estimated future cash flows (exclusive of future
but are assessed for credit losses that have not been incurred)
impairment on an discounted at the original effective interest rate.
individual basis.
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II. BASIS OF PREPARATION (CONTINUED)
10. IMPAIRMENT OF RECEIVABLES (CONTINUED)
(c) Receivables that are assessed for impairment on a collective group basis:
The assessment is made collectively where receivables share similar credit
risk characteristics, including those having not been individually assessed as
impaired.
Determination method of Accounts receivable are divided into six groups of
the group based on credit containers, vehicles, energy and chemistry
risk characteristics equipment, offshore engineering, other business, and
due from related parties, land lease prepayments and
operating deposits according to the industry and
business nature of customers and the characteristics
of the receivables. As to offshore engineering
groups, the relevant receivables within credit period
have lower credit risk after the grouping based on
credit risk characteristics according to individual
credit risk assessment and historical data. No
provision is provided accordingly. As to other groups
like due from related parties, land lease prepayments
operating deposits, and etc, if the credit risk is
assessed low after grouping based on the assessment
on credit risk and their historical loss experience, no
impairment loss is recognised for those groups.
Group 1 Containers
Group 2 Trailers
Group 3 Tank equipments
Group 4 Other business
Methods of provision for receivables assessed on a collective group basis
(based on an ageing analysis, a parentage of the total balance and others).
Containers Provision is determined based on an ageing analysis.
Trailers Provision is determined based on an ageing analysis.
Tank equipments Provision is determined based on an ageing analysis.
Other business Provision is determined based on an ageing analysis.
For the above groups, provision is made based on their respective ageing
analysis follows:
Percentage of total accounts receivable
Ageing (%)
Group 1 Group 2 Group 3 Group 4
Within 1 year
(inclusive) 5% 1.5
1 to 2 years
(inclusive) 30% 1.5
2 to 3 years
(inclusive) 100% 1.5 100% 100%
Over 3 years 100% 100% 100% 100%
Note: Aforesaid ageing group, the provision of Group 2 is determined based
on natural age, while others are determined based on the overdue age.
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II. BASIS OF PREPARATION (CONTINUED)
11. INVENTORIES
(1) Classification
Inventories include raw materials, work in progress, semi-finished goods, finished
goods and reusable materials. 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.
(2) Cost of inventories
Cost of inventories is calculated using the weighted average method.
(3) The underlying factors in the determination of net realisable value of inventories and
the basis of provision for decline in value of 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 II.16). 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.
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. The net realisable value of materials held for use in the
production of inventories is measured based on the net realisable value of the finished
goods in which they will be incorporated. The net realisable value of the quantity of
inventory held to satisfy sales or service contracts is based on the contract price. If the
quantities of inventories specified in sales contracts are less than the quantities held
by the Group, the net realisable value of the excess portion of inventories shall be
based on general selling prices.
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.
(4) Inventory system
The Group maintains a perpetual inventory system.
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II. BASIS OF PREPARATION (CONTINUED)
11. INVENTORIES (CONTINUED)
(5) Amortisation of reusable material including low-value consumables and packaging
materials
Reusable materials including low-value consumables and packaging 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.
12. LONG-TERM EQUITY INVESTMENTS
(1) Investment cost
(a) Long-term equity investments acquired through a business combination
- 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.
- For a long-term equity investment obtained through a business
combination not involving enterprises under common control and
achieved in stages, the initial cost comprises the carrying value of
previously-held equity investment in the acquiree immediately before
the acquisition date, and the additional investment cost at the
acquisition date. Any amounts recognised in other comprehensive
income relating to the previously-held equity interest in the acquiree,
are reclassified to profit or loss as investment income when the equity
investment is disposed of.
- For other long-term equity investments obtained through a business
combination involving enterprises not under common control, the
initial investment cost represents the aggregate of the fair values of
assets transferred, liabilities assumed, and equity securities issued by
the Company, in exchange for control of the acquiree.
(b) Long-term equity investments acquired otherwise than through a business
combination
- 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.
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II. BASIS OF PREPARATION (CONTINUED)
12. LONG-TERM EQUITY INVESTMENTS (CONTINUED)
(2) Subsequent measurement
(a) Investments in subsidiaries
In the Company’s separate financial statements, long-term equity investments
in subsidiaries are accounted for using the cost method. Except for cash
dividends or profits distribution declared but not yet distributed that have been
included in the price or consideration paid in obtaining the investments, the
Company recognises its share of the cash dividends or profit distributions
declared by the investee as investment income irrespective of whether these
represent the net profit realised by the investee before or after the investment.
The investments in subsidiaries are stated in the balance sheet at cost less
impairment losses.
In the Group’s consolidated financial statements, investments in subsidiaries
are accounted for in accordance with the principles described in Note II. 6.
(b) Investment in jointly controlled enterprises and associates
A jointly controlled enterprise is an enterprise which operates under joint
control (see NoteII.12(3)) in accordance with a contractual agreement between
the Group and other parties.
An associate is an enterprise over which the Group has significant influence
(see NoteII.12(3)).
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 II.28).
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.
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II. BASIS OF PREPARATION (CONTINUED)
12. LONG-TERM EQUITY INVESTMENTS (CONTINUED)
(2) Subsequent measurement (continued)
(b) Investment in jointly controlled enterprises and associates (continued)
- After the acquisition of the investment, the Group recognises its share
of the investee’s profit or loss 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, 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 of 10 years 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 amount 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.
- 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.
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II. BASIS OF PREPARATION (CONTINUED)
12. LONG-TERM EQUITY INVESTMENTS (CONTINUED)
(2) Subsequent measurement (continued)
(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. Cash dividends or
profit distributions declared by subsidiaries and attributed to the Company
shall be recognised as investment income, except those that have been
declared but unpaid at the time of acquisition and therefore included in the
price paid or the consideration.
(3) Basis for determining the existence of joint control or significant influence over an
investee
Joint control is the contractual agreed sharing of control over an investee’s 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. The
following evidences shall be considered when determining whether the Group can
exercise joint control over an investee:
no single venturer is in a position to control the operating activities unilaterally;
operating decisions relating to the investee’s economic activity require the unanimous consent of
the parties sharing the control;
if the parties sharing the control appoint one venturer as the operator or manager of the joint
venture through the contractual arrangement, the operator must act within the financial
and operating policies that have been agreed by the venturers in accordance with the
contractual arrangement.
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II. BASIS OF PREPARATION (CONTINUED)
12. LONG-TERM EQUITY INVESTMENTS (CONTINUED)
(3) Basis for determining the existence of joint control or significant influence over an
investee (continued)
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. The
following one or more evidences shall be considered when determining whether the
Group can exercise significant influence over an investee:
representation on the board of directors or equivalent governing body of the investee;
participation in policy-making processes;
material transactions between the investor and the investee;
interchange of managerial personnel; or
provision of essential technical information.
(4) Method of impairment testing and measuring
For the method of impairment testing and measuring for subsidiaries, jointly
controlled enterprises and associates, refer to Note II.20.
For other long-term equity investments, the carrying amount is required to be tested
for impairment at the balance sheet date. If there is objective evidence that the
investments may be impaired, the impairment shall be assessed on an individual
basis. The impairment loss is measured as the amount by which the carrying amount
of the investment exceeds 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. The other long-term equity investments are stated at cost less
impairment losses in the balance sheet.
13. 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. 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 II.28). For the method of impairment testing and measuring,
refer to Note II.20.
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II. BASIS OF PREPARATION (CONTINUED)
13. INVESTMENT PROPERTY (CONTINUED)
The useful lives and estimated residual values of each class of investment property
are as follows:
Depreciation
residual / Amortisation
useful life value rate rate
Land use rights 29 - 50 years - 2% - 3.4%
Plant and buildings 20 - 30 years 10% 3 - 4.5%
14. FIXED ASSETS
(1) Recognition
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.
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 is measured in accordance with the
policy set out in Note II.15.
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.
Fixed assets are stated in the balance sheet at cost less accumulated depreciation and
impairment losses.
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II. BASIS OF PREPARATION (CONTINUED)
14. FIXED ASSETS (CONTINUED)
(2) Depreciation
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 II.28). The
depreciation period and estimated residual value of each class of fixed assets are as
follows:
Residual Depreciation
period value Depreciation
Classes (years) rate rate
Plants and buildings 20-30 years 10% 3-4.5%
Machinery and equipment 10-12 years 10% 7.5-9%
Office and other equipment 3-5 years 10% 18%
Motor vehicles 5 years 10% 18%
Dock, wharf 50 years 10% 1.8%
Offshore engineering equipment 15-30 years 10% 3%-6%
Useful lives, residual values and depreciation methods are reviewed at least each
year-end.
(3) For the method of impairment testing and measuring, refer to Note II.20.
(4) Criteria of recognition and method of measuring for fixed assets under a finance lease
For criteria of recognition and method of measuring for fixed assets under a finance
lease, refer to Note II 27(3).
(5) Disposal
The carrying amount of a fixed asset shall be derecognised:
on disposal; or
when no future economic benefits are expected to be generated from its use or disposal.
Gains or losses arising from the retirement or disposal of an item of fixed asset are
determined as the difference between the net disposal proceeds and the carrying
amount of the item and are recognised in profit or loss on the date of retirement or
disposal.
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II. BASIS OF PREPARATION (CONTINUED)
15. CONSTRUCTION IN PROGRESS
The cost of self-constructed assets includes the cost of materials, direct labour,
capitalised borrowing costs (see Note II.16), and any other costs directly attributable
to bringing the asset to working condition for its intended use.
A self-constructed asset is included in construction in progress before it is transferred
to fixed asset when it is ready for its intended use. No depreciation is provided against
construction in progress. Construction in progress is stated in the balance sheet at cost
less impairment losses (see Note II.20).
16. 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.
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II. BASIS OF PREPARATION (CONTINUED)
16. BORROWING COSTS (CONTINUED)
- 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.
During the capitalisation period, exchange differences related to the principal
and interest on a specific-purpose borrowing denominated in foreign currency
are capitalised as part of the cost of the qualifying asset. The exchange
differences related to the principal and interest on foreign currency
borrowings other than a specific-purpose borrowing are recognised as a
financial expense in the period in which they are incurred.
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.
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II. BASIS OF PREPARATION (CONTINUED)
17. 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 II.20). 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
realised over its estimated useful life, unless the intangible asset is classified as held
for sale (see Note II.28).
The respective amortisation periods for such intangible assets are as follows:
Amortisation periods (years)
Land use rights 20 - 50
Maritime space use rights 40 - 50
Technological know-how and trademarks 5 - 10
Timber concession rights 20
Customer base 8
Customer contracts 3-4
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 does
not 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
II.20). Other development expenditures are recognised as expenses in the period in
which they are incurred.
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II. BASIS OF PREPARATION (CONTINUED)
18. 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.
Goodwill is not amortised and is stated at cost less accumulated impairment losses
(see Note II.20). 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.
19. LONG-TERM DEFERRED EXPENSE
Long-term deferred expenses are amortised on a straight-line method within the
beneficial period:
Item Amortisation period
Water and electricity
capacity enlargement expenses 5-10 years
Rental 2-10 years
Others 5-10 years
20. IMPAIRMENT OF ASSETS OTHER THAN INVENTORIES, FINANCIAL ASSETS AND
OTHER LONG-TERM INVESTMENTS
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
- goodwill
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 allocated to each asset group or set of asset groups,
which is expected to benefit from the synergies of the combination for the purpose of
impairment testing.
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II. BASIS OF PREPARATION (CONTINUED)
20. IMPAIRMENT OF ASSETS OTHER THAN INVENTORIES, FINANCIAL ASSETS AND
OTHER LONG-TERM INVESTMENTS (CONTINUED)
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 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.
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.
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.
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II. BASIS OF PREPARATION (CONTINUED)
21. PROVISIONS 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.
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 cannot be estimated reliably, the possible or present obligation is disclosed as a contingent liability.
22. SHARE-BASED PAYMENTS
(1) Classification
Share-based payments transactions in the Group are equity-settled share-based
payments.
(2) Method to determine the fair value of equity instruments
Fair value of stock option is estimated based on binomial lattice model. Contract term
of the stock option is used as the input variable of this model. And the binomial lattice
model includes estimation of early execution of the option. The following factors are
taken into account when using the binomial lattice model: (1) exercise price of the
option; (2) vesting period; (3) current price of basic stocks; (4) expected fluctuation
of stocks; (5) expected dividends of stocks; (6) risk-free rate within the option term.
(3) Basis of the best estimate of the number of equity instruments expected to vest
At each balance sheet date during the vesting period, the Group 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. On
vesting date, the estimate shall be equal to the number of equity instruments that
ultimately vested.
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II. BASIS OF PREPARATION (CONTINUED)
22. SHARE-BASED PAYMENTS (CONTINUED)
(4) Accounting treatment for share-based payment
- 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 at the grant date. 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.
For share-based payment transactions among entities within the group of
companies (comprising the ultimate parent of the Group and all of its
subsidiaries), the Group receiving services recognises the transaction as an
equity-settled share-based payment transaction when the Group has no
obligation to settle the transaction.
23. 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 shareholders’
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:
(1) 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.
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II. BASIS OF PREPARATION (CONTINUED)
23. REVENUE RECOGNITION (CONTINUED)
(2) Rendering of services
Revenue from rendering of services is measured at the fair value of the considerations
received or receivable under the contract or agreement.
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
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.
(3) Revenue from construction contracts
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 cannot be recovered, the contract costs are recognised as
contract expenses immediately when incurred, and no contract revenue is
recognised.
Construction contract revenue includes initial revenue stipulated by contract and
increased amount generated by contract alteration.
Increased amount cannot be recognized as contract revenue unless the following
contract alteration terms are all satisfied:
- Client accepts and confirms the increased amount generated by contract
alteration;
- Increased amount can be reliably measured.
Contract anticipated loss is recognised when estimated total construction contract cost
exceeds contract revenue. Provision should be made for contract anticipated loss and
charged into profit and losses for the current period.
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II. BASIS OF PREPARATION (CONTINUED)
23. REVENUE RECOGNITION (CONTINUED)
(4) Interest income
Interest income is recognised on a time proportion basis with reference to the
principal outstanding and the applicable effective interest rate.
24. 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.
(1) 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 capitalised as part of the cost of assets or 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.
(2) 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.
(3) 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
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II. BASIS OF PREPARATION (CONTINUED)
24. EMPLOYEE BENEFITS (CONTINUED)
(3) Termination benefits (continued)
- The Group is not allowed to withdraw from termination plan or redundancy
offer unilaterally.
25. 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.
26. DEFERRED TAXED ASSETS AND LIABILITIES
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.
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II. BASIS OF PREPARATION (CONTINUED)
26. DEFERRED TAXED ASSETS AND LIABILITIES (CONTINUED)
The carrying amount of a deferred tax asset is reviewed at each balance sheet date.
The carrying amount of a deferred tax asset is reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow the benefit of the
deferred tax asset to be utilised. Any such reduction is reversed to the extent that it
becomes probable that sufficient taxable profits will be available.
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.
27. OPERATING AND FINANCE 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.
(1) Operating lease charges
Rental payments under operating leases are recognised as costs or expenses on a
straight-line basis over the lease term.
(2) Assets leased out under operating leases
Fixed assets leased out under operating leases, except for investment property (see
Note II.13) are depreciated in accordance with the Group’s depreciation policies
described in Note II.14(2). Impairment losses are provided for in accordance with
the accounting policy described in Note II.20. 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.
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II. BASIS OF PREPARATION (CONTINUED)
(3) Assets acquired under finance leases
When the Group acquires an asset under a finance lease, the asset is measured at an
amount equal to the lower of its fair values and the present value of the minimum
lease payments, each determined at the inception of the lease. The minimum lease
payments are recorded as long-term payables. The difference between the value of the
leased assets and the minimum lease payments is recognised as unrecognised finance
charges. Initial direct costs that are attributable to a finance lease incurred by the
Group are added to the amounts recognised for the leased asset. Depreciation and
impairment losses are accounted for in accordance with the accounting policies
described in Notes II.14(2) and II.20, respectively.
If there is a reasonable certainty that the Group will obtain ownership of a leased
asset at the end of the lease term, the leased asset is depreciated over its estimated
useful life. Otherwise, the leased asset is depreciated over the shorter of the lease term
and its estimated useful life.
Unrecognised finance charge under finance lease is amortised using an effective
interest method over the lease term. The amortisation is accounted for in accordance
with policies of borrowing costs (see Note II.16).
At the balance sheet date, long-term payables arising from finance leases, net of the
unrecognised finance charges, are presented into long-term payables and non-current
liabilities due within one year, respectively in the balance sheet.
(4) 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 II.10).
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.
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II. BASIS OF PREPARATION (CONTINUED)
28. ASSETS HELD FOR SALE
A held-for-sale 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, and 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 recognised as impairment loss. At balance sheet date,
non-current assets held for sale are still presented under corresponding asset
classification as they were.
29. 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 judged
whether it has been highly effective throughout the accounting periods for which the
hedging relationship was designated. A hedge is regarded as highly effective if both
of the following conditions are satisfied:
- at the inception and in subsequent periods, the hedge is expected to be highly
effective in achieving offsetting changes in fair value or cash flows
attributable to the hedged risk during the period for which the hedge is
designated;
- the actual results of offsetting are within a range of 80% to 125%.
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II. BASIS OF PREPARATION (CONTINUED)
29. HEDGE ACCOUNTING (CONTINUED)
- Cash flow hedges
A cash flow hedge is a hedge of the exposure to variability in cash flows. The
portion of the gain or loss on the hedging instrument that is determined to be
an effective hedge is recognised directly in shareholders’ equity as a separate
component. That effective portion is adjusted to the lesser of the following
in absolute amounts:
- the cumulative gain or loss on the hedging instrument from inception
of the hedge
- the cumulative change in present value of the expected future cash
flows on the hedged item from inception of the hedge
The portion of the gain or loss on the hedging instrument that is determined to
be an ineffective hedge is recognised in profit or loss.
If a hedge of a forecast transaction subsequently results in the recognition of a
non-financial asset or non-financial liability, the associated gain or loss is
removed from shareholders’ equity and recognised in profit or loss in the same
period during which the financial asset or financial liability affects profit or
loss. However, if the Group expects that all or a portion of a net loss
recognised directly in shareholders’ equity will not be recovered in future
accounting periods, it reclassifies into profit or loss the amount that is not
expected to be recovered.
If a hedge of a forecast transaction subsequently results in the recognition of a
financial asset or a financial liability, the associated gain or loss is removed
from equity and recognised in profit or loss in the same period during which
the financial asset or financial liability affects profit or loss. However, if the
Group expects that all or a portion of a net loss recognised directly in
shareholders’ equity will not be recovered in future accounting periods, it
reclassifies into profit or loss the amount that is not expected to be recovered.
For cash flow hedges, other than those covered by the preceding two policy
statements, the associated gain or loss is removed from shareholders’ equity
and recognised in profit or loss in the same period or periods during which the
hedged forecast transaction affects profit or loss.
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.
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II.BASIS OF PREPARATION (CONTINUED)
30. 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.
31. 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 or joint control 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 over both the
enterprises or individuals and the Group;
(f) joint ventures of the Group, including subsidiaries of joint ventures ;
(g) associates of the Group, including subsidiaries of associates;
(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 or jointly controlled by principal
individual investors, key management personnel of the Group, and close
family members of such individuals.
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II. BASIS OF PREPARATION (CONTINUED)
31. RELATED PARTIES (CONTINUED)
Besides the related parties stated above determined in accordance with the
requirements of CAS, 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, supervisors for listed
companies and their close family members;
(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.
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II. BASIS OF PREPARATION (CONTINUED)
32 SEGMENT REPORTING
Reportable segments are identified based on operating segments which are
determined based on the structure of the Group’s internal organisation, management
requirements and internal reporting system. An operating segment is a component of
the Group that meets the following conditions:
- It engages in business activities from which it may earn revenues and incur
expenses
- Its operating results are regularly reviewed by the Group’s management to
make decisions about resource to be allocated to the segment and assess its
performance
- The Group is able to obtain its financial information regarding financial
position, results of operations and cash flows, etc.
Two or more operating segments may be aggregated into a single operating segment
if the segments have same or similar economic characteristics, and are similar in
respect of the following aspects:
- the nature of each product and service;
- the nature of production processes;
- the type or class of customers for the products and services;
- the methods used to distribute the products or provide the services;
- the legal and regulatory impact on manufacturing of products and rendering of
services.
Inter-segment revenues are measured on the basis of actual transaction price for such
transactions for segment reporting, and segment accounting policies are consistent
with those for the consolidated financial statements.
33 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.
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II. BASIS OF PREPARATION (CONTINUED)
33 SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS CONTINUED)
Notes V.17, VII and XI.3 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:
(1) Impairment of receivables
As described in Note II.10, receivables that are measured at amortised 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.
(2) Impairment of other assets excluding inventories, financial assets and other long-term
equity investments
As described in Note II.20, other assets excluding inventories, financial assets and
other long-term equity investments 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.
(3) Depreciation and amortisation
As described in Note II.13, 14 and 17, 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.
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II. BASIS OF PREPARATION (CONTINUED)
33 SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS (CONTINUED)
(4) Warranty provisions
As described in V.32, 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.
(5) Impairment of inventories
As described in Note II.11, 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&n
2319.12 (1.00%)
19664.10 -1.06%