2010 SEMI-ANNUAL REPORT SHENZHEN CHIWAN WHARF HOLDINGS LIMITED Important Note The Board of Directors, the Supervisory Committee as well as the directors, supervisors and senior management staff of Shenzhen Chiwan Wharf Holdings Limited (hereinafter referred to as “the Company”) hereby confirm that there exists no omission, misstatement, or misleading information in this report, and accept, individually and collectively, the responsibility for the factuality, accuracy and completeness of the contents of this report. This Semi-Annual Report has been reviewed and approved at the Sixth Session of the Sixth Board of Directors of the Company. Chairman of the Board Ms. Wang Fen, as well as Chief Financial Officer of the Company Mr. Zhang Jianguo and Deputy Financial Manager Mr. Gao Limin hereby confirm that the financial report contained herein is true and complete. The financial report contained herein has not been audited. The Semi-Annual Report is written in both English and Chinese. In case of any discrepancy between the two versions, Chinese version prevails.Table of Contents PART Ⅰ COMPANY PROFILE..........................................................................................1 PART II CHANGES IN SHARE CAPITAL AND SHAREHOLDERS...........................3 PART Ⅲ DIRECTORS, SUPERVISORS & SENIOR MANAGEMENT STAFF...........5 PART Ⅳ REPORT OF THE BOARD OF DIRECTORS...................................................5 PART Ⅴ SIGNIFICANT EVENTS......................................................................................9 PART Ⅵ FINANCIAL REPORT (SEE ATTACHED, UN-AUDITED).........................16 PART Ⅶ DOCUMENTS AVAILABLE FOR REFERENCE..........................................16Semi-Annual Report 2010-Chiwan Wharf 1 PART Ⅰ COMPANY PROFILE I. Corporate Information A. Company's Name in Chinese 深圳赤湾港航股份有限公司(深赤湾) Company's Name in English Shenzhen Chiwan Wharf Holdings Limited (Chiwan Wharf) B. Legal Representative Ms. Wang Fen, Chairman C. Company Secretary Ms. Pei Jiangyuan Address 13/F., Chiwan Petroleum Building, Shenzhen, PRC Tel +86 755 26694222 Fax +86 755 26684117 E-mail cwh@cndi.com D. Place of Registration Chiwan, Shenzhen, PRC Office address 13/F., Chiwan Petroleum Building, Chiwan, Shenzhen, PRC Postal Code 518067 E-mail address cwh@cndi.com Internet Website http://www.szcwh.com E. Newspaper for Information "Securities Times" and "Ta Kung Pao” Disclosure Website for Annual Report http://www.cninfo.com.cn Annual Report Preparation Secretariat of the Board of Directors F. Stock Exchange Shenzhen Stock Exchange Stock Short Name Chiwan Wharf A/Chiwan Wharf B Stock Code 000022/200022 G. Other information Date of Original Registration 19 July 1990 Place of Registration Chiwan, Shenzhen Business Registration Number 440301501124494 Tax Registration Number Shen-Guo-Shui-Deng-Zi No. 440300618832968 Shen-Di-Shui-Deng-Zi No. 440301618832968 Organization Code 61883296-8 Accounting Firm PricewaterhouseCoopers Zhong Tian Certified Public Accountants Room 3706, Di Wang Commercial Centre 5002 Shennan Road East Shenzhen, 518068, PRCSemi-Annual Report 2010-Chiwan Wharf 2 II. Major Financial Highlights Unit: RMB As at 30 Jun. 2010 As at 31 Dec. 2009 +/- (%) Total assets 5,932,786,944.00 5,527,873,569.00 7.32% Total equity attributable to equity holders of the Company 2,951,579,308.00 2,852,982,756.00 3.46% Share capital 644,763,730.00 644,763,730.00 - Net assets per share attributable to equity holders of the Company 4.578 4.425 3.46% Jan.-Jun. 2010 Jan.-Jun. 2009 +/- (%) Revenue 833,761,885.00 714,358,140.00 16.71% Operating profit 491,087,919.00 320,028,779.00 53.45% Total profit 493,451,736.00 327,514,639.00 50.67% Net profit attributable to equity holders of the Company 308,963,482.00 200,144,439.00 54.37% Net profit attributable to equity holders of the Company after extraordinary gains and losses 307,126,626.00 194,446,830.00 57.95% Earnings per share-Basic 0.479 0.310 54.52% Earnings per share -Diluted 0.479 0.310 54.52% Return on equity 10.47% 7.60% 2.87% Net cash flows arising from operating activities 377,587,237 294,064,935.00 28.40% Net cash flows per share arising from operating activities 0.586 0.456 28.51% ● Extraordinary gains and losses Items Amount Net gains/(losses) on disposal of non-current assets 1,950,715 Non-operating income (expense) - net 68,412 Government grants 344,690 Tax effects on extraordinary gains and losses (518,077) Minority interests on extraordinary gains and losses (8,884) Total 1,836,856 III. Returns on equity and earnings per share calculated in accordance with the requirements of the Rules for the Compilation of Information Disclosure by the Companies Publicly Issuing Securities (No. 9) promulgated by CSRC Return on equity Earnings per share Profit for the reporting period Fully diluted Weighted average Basic Diluted Net profit attributable to equity holders of the Company 10.47% 10.27% 0.479 0.479 Net profit attributable to equity holders of the Company after extraordinary gains and losses 10.41% 10.21% 0.476 0.476Semi-Annual Report 2010-Chiwan Wharf 3 PART II CHANGES IN SHARE CAPITAL AND SHAREHOLDERS . Changes in Share Capital Ⅰ Unit: share Before the change Increase(+)/decrease(-) After the change Number Percentage Issue of additional shares Bonus issue Reserves to stocks Other Sub-total Number Percentage 1. Shares subject to trading moratorium a. State-owned shares b. State-owned legal person shares c. Other domestic shares Including: Shares held by domestic on-state-owned legal persons Shares held by domestic individuals d. Shares held by overseas shareholders Including: Shares held by overseas legal persons Shares held by overseas individuals e. Shares held by senior management staff 2. Shares not subject to trading moratorium a. Ordinary shares denominated in RMB b. Domestically listed foreign shares c. Overseas listed foreign shares d. Others 326,457 13,602 13,602※ 312,855 644,437,273 464,789,805 179,647,468 0.051% 0.002% 0.002% 0.049% 99.949% 72.087% 27.862% +267,693 -13,602 -13,602 +281,295 -267,693 0 -267,693 +267,693 -13,602 -13,602 +281,295 -267,693 0 -267,693 594,150 0 0 594,150 644,169,580 464,789,805 179,379,775 0.092% 0.000% 0.000% 0.092% 99.908% 72.087% 27.821% 3. Total shares 644,763,730 100% 644,763,730 100% ※ Changes on shares held by domestic individuals are caused by ex-supervisor Mr. Fang Jie’s leaving the position since August, 2009. According to the regulations of “Rules on Stock Listing” issued by Shenzhen Stock Exchange, shares held by Fang Jie can be traded half a year after his demission. . Number of shareholders and particulars about shares Ⅱheld by them (as at 30 Jun. 2010) Unit: share Total number of shareholders 35,850, among which 27,691 being shareholders of A shares and 8,159 being shareholders of B shares Shareholdings of top ten shareholders (all being shareholders holding shares not subject to trading moratorium) Name of shareholders Nature of shareholders Percentage of shareholding (%) Total shares held Shares subject to trading moratorium Shares pledged or frozen Type of shares (A, B, H or other shares) CHINA NANSHAN DEVELOPMENT (GROUP) INC. 57.51 370,802,900 0 0 A shares KEEN FIELD ENTERPRISES LIMITED Holder of B shares 7.98 51,475,773 0 N/A B sharesSemi-Annual Report 2010-Chiwan Wharf 4 CMBLSA RE FTIF TEMPLETON ASIAN GRW FD GTI 5496 Holder of B shares 5.64 36,352,658 0 N/A B shares BANK OF NEW YORK-MATTHEWS PACIFIC TIGER FUND Holder of B shares 1.85 11,949,117 0 N/A B shares NATIONAL SOCIAL SECURITY FUND 102 PORTFOLIO 1.32 8,503,724 0 N/A A shares GOVERNMENT OF SINGAPORE INV. CORP.- A/C "C" Holder of B shares 1.12 7,245,406 0 N/A B shares PLATINUM ASIA FUND Holder of B shares 0.83 5,360,421 0 N/A B shares MIRAE ASSET ASIA PACIFIC INFRA SECTOR EQTY INVSTMT TRS 1 Holder of B shares 0.55 3,576,544 0 N/A B shares EMPLOYEES PROVIDENT FUND Holder of B shares 0.48 3,098,150 0 N/A B shares GSIC A/C MONETARY AUTHORITY OF SINGAPORE Holder of B shares 0.47 3,017,837 0 N/A B shares Explanation on associated relationship among the top ten shareholders: China Nanshan Development (Group) Inc. (hereinafter referred to as “CND”) does not have any relations with the shareholders holding shares not subject to trading moratorium. The Company does not know if there are any inter-relations among other shareholders holding shares not subject to trading moratorium. III. Within the reporting period, the controlling shareholder of the Company remained unchanged, so did the shares held by CND. IV. China Merchants Securities (HK) Co., Ltd. (hereinafter referred to as “Merchants Securities HK”), Keen Field Enterprises Limited (hereinafter referred to as “Keen Field Enterprises”) and the China Merchants (CIMC) Holdings Ltd (hereinafter referred to as “China Merchants CIMC Holdings”) signed the Simplified Statement of Change in Equities on January 6, 2010. Merchants Securities HK transferred to Keen Field Enterprises its 49,764,893 Chiwan Wharf B shares (about 7.718% of the total), which it had held for Keen Field Enterprises, as well as 1,710,880 Chiwan Wharf B shares (about 0.265% of the total), which it had held for the China Merchants CIMC Holdings. The related notice was published on Securities Times and Ta Kung Pao on January 8, 2010. During the reporting period, the shares held by Keen Field Enterprises increased from 49,764,893 (about 7.718% of the total) to 51,475,773 (about 7.984% of the total). V. The Templeton Asset Management Ltd. signed the Simplified Statement of Change in Equities on February 26, 2010. The related notice was published on Securities Times and Ta Kung Pao on March 2, 2010. During the reporting period, the shares held by FTIF Asia Fund, which is managed by the Templeton Asset Management Ltd., increased from 23,552,225 (about 3.650% of the total) to 36,352,658 (about 5.638% of the total).Semi-Annual Report 2010-Chiwan Wharf 5 PART DIRECTORS, SUPERVISORS & SENIOR MANAGEMENT STAFFⅢ .The shareholding of the Company’s directors, supervisors aⅠnd senior management staff remained unchanged, which was specified as follows: Name Title Number of shares held at year-begin (share) Number of shares increased in reporting period (share) Number of shares decreased in reporting period (share) Number of shares held at period-end (share) Shares subject to trading moratorium (share) Number of stock options held at period-end (share) Reason for changes Wang Fen Chairwoman of the Board 82,632 0 0 82,632 61,974 0 N/A Zheng Shaoping Vice Chairman, General Manager 115,142 75,892 0 191,034 164,400 0 Purchase on market Fan Zhaoping Director 53,877 0 0 53,877 40,407 0 N/A Yuan Yuhui Director 14,040 0 0 14,040 10,530 0 N/A Han Guimao Director 13,988 0 0 13,988 10,491 0 N/A Zhang Ning Director, Deputy General Manager 51,885 76,400 0 128,285 115,314 0 Purchase on market Zhao Chaoxiong Supervisor 27,558 26,656 0 54,214 48,018 0 Purchase on market Ni Keqin Supervisor 17,699 17,226 0 34,925 30,956 0 Purchase on market Zhang Jianguo CFO 41,459 42,808 0 84,267 75,032 0 Purchase on market Pei Jiangyuan Secretary to the Board 18,149 23,027 0 41,176 37,028 0 Purchase on market . During the reportⅡing period, the Company did not appoint or dismiss any director, supervisor and senior management staff. PART Ⅳ REPORT OF THE BOARD OF DIRECTORS . Business PerformanceⅠ A. Core business scope and business performance The Company is principally engaged in handling, warehousing and transportation of containers and bulk cargoes, as well as the provision of related services. During the reporting period, China’s import and export volume has risen significantly, compared with the same period of last year. Container throughput of the coastal ports has grown by 22.1% over the same period of last year. Among them, Shenzhen Port’s containers throughput has grown by 29.4%, compared with the same period of last year. With shipping companies launching new transport capacity, the Company has attracted more lines calling and its container throughput has grown by 37.1%, compared with the same period of last year. The Company maintained general stability in its bulk cargo handing business. Since Machong Port was put into operation, the overall throughput of bulk cargo has increased by 29.7%, compared with the sameSemi-Annual Report 2010-Chiwan Wharf 6 period of last year. The supporting services such as tow truck and harbor tugboat services have got corresponding increases with the growth of throughput. Specific business indexes were as follows: Business Data Jan.-Jun. 2010 Jan.-Jun. 2009 +/- YoY Total throughput of cargo (’000 tons) 3,150.5 2,383.3 32.2% Including: container (’000 TEU) 295.1 215.2 37.1% Chiwan Port 198.6 153.1 29.7% Mawan Port 94.9 62.1 52.7% Machong Port 1.6 - - Bulk cargoes (’000 tons) 504.1 388.6 29.7% Chiwan Port 420.3 388.6 8.2% Machong Port 83.9 - - Hours charged for tow truck service (’000 hours) 61.4 56.9 7.9% Hours charged for tugboat service (hour) 16,489 14,516 13.6% B. Year-on-year changes in revenue, operating profit and net profit attributable to equity holders of the Company Unit: RMB Item Jan.-Jun. 2010 Jan.-Jun. 2009 +/- YoY Revenue 833,761,885 714,358,140 16.71% Operating profit 491,087,919 320,028,779 53.45% Net profit attributable to equity holders of the Company 308,963,482 200,144,439 54.37% Reason for changes: The Company’s business volume increased 37.1% year-on-year, thus the revenue, operating profit and net profit attributable to equity holders of the Company increased accordingly compared to the same period of last year. C. Core business accounting for 10% or above of the revenue for the reporting period: Unit: RMB Business Revenue Operating cost Operating profit margin (%) +/- of revenueYoY (%) +/- of operating cost YoY (%) +/- of operatingprofit margin YoY (%) Cargo handling 780,859,901 318,862,164 59.17% 22.94% 8.97% 5.24% D. Profit breakdown, core business structure and profitability of the Company did not have significant changes during the reporting period. E. The Company conducted no other business, which exerted significant influence on the Company’s profit during the reporting period.Semi-Annual Report 2010-Chiwan Wharf 7 F. Media Port Investments Limited (hereinafter referred to as “MPIL”) is jointly incorporated at the British Virgin Islands by Chiwan Wharf Holdings (HK) Ltd. (hereinafter referred to as “CWHK”), a wholly-owned subsidiary company of the Company, and China Merchants Holdings (International) Company Limited as an investment controlling company. The said two companies hold its 50% equity separately. MPIL holds 60% equity of Shenzhen Mawan Wharf Co., Ltd., Shenzhen Mawan Port Service Co., Ltd. and Shenzhen Mawan Terminals Co., Ltd. in total. During the reporting period, MPIL gained net profit of RMB 112,800,212 through the above-mentioned three companies. For the reporting period, the Company earned investment income amounting to RMB56,400,106 from MPIL, accounting for 18.25% of net profit attributable to equity holders of the Company for the reporting period. . Financial ⅡStatus A. Composition of assets and reasons for significant changes year-on-year: Unit: RMB Item As at 30 Jun. 2010 As at 31 Dec.2009 +/- (%) Cash at bank and on hand 1,108,008,730 741,096,267 49.51% Dividend payable 381,438,026 171,889,814 121.91% Reasons for significant changes: The cash at bank and on hand increased due to funds raised for investment projects. The dividend payable increased mainly because it was declared at the Shareholders’ General meeting in June that cash dividend was to be distributed for ordinary shares in August. B. Composition of profits and reasons for significant changes year-on-year Unit: RMB Item Jan.-Jun. 2010 Jan.-Jun. 2009 +/- (%) Investment income 84,416,791 31,207,492 170.50% Income tax expenses (65,939,121) (36,243,693) 81.93% Reasons for significant changes: Investment income increased significantly due to the following reasons. 1. Business volume of associate companies increased, so as their profits. 2. Partial equities of associate companies was sold, while there was no such case in the same period of last year. Income tax expenses increased mainly because income tax rate of this year increased and favorite policy for income tax of some berths have expired.Semi-Annual Report 2010-Chiwan Wharf 8 C. Composition of cash flows Unit: RMB Item Jan.-Jun. 2010 Jan.-Jun. 2009 +/- (%) Net cash flows from operating activities 377,587,237 294,064,935 28.40% Net cash flows from investing activities (59,614,883) (120,923,392) -50.70% Net cash flows from financing activities 48,940,109 (220,411,998) -122.20% Net (decrease)/increase in cash and cash equivalents 366,912,463 (47,270,455) -876.20% Reasons for significant changes: Net cash inflows from operating activities increased mainly due to the increased operating profit during the reporting period; Net cash outflows from investing activities decreased mainly because construction funds for the project of “converting diesel-powered RTG engines into electric ones” and Machong Project in Dongguan decreased compared with the same period of last year. Net cash outflows from financing activities decreased mainly because borrowings increased compared to the same period of previous year. . Investments in reportⅢing period A. The Company did not raise any funds in the reporting period, and the latest funds raised by the Company had been used up by the end of 1996. B. 2. Significant investment projects with non-raised funds In the reporting period, the Company made a total investment of RMB 70.61 million of which RMB 14.48 million was invested in fixed assets at Chiwan Port, mainly referring to the project of “converting diesel-powered RTG engines into electric ones”; and RMB 56.13 million was invested in the Machong Project in Dongguan. . Outlook for future development of the Company Ⅳ A. Development trend of the industry in which the Company is engaged China’s import and export trading recovered and increased rapidly over the first half year. Although the risk of liabilities crisis still exist in Euro zone, so far there is no such a trend that it will further spread. The PMI Index of developed economies such as Europe and the US shows a stable trend after a sharp increase. Global consumption demand is expected to show modest growth in the general recovery environment, and the container ports in China will start a stable period of increase. As the traditional container busy season comes, we can expect the Company’s container handing business to increase in the second half year. The overall bulk cargo handing business in Shenzhen’s three western ports show stabilization, and this trend is expected to continue in the second half of this year. As all the related works being put forward at Machong Port, bulk cargo handing throughput will increase steadily in the second half year.Semi-Annual Report 2010-Chiwan Wharf 9 B. Main problems and risks encountered by the Company With rapid growth of business volume, the Company will be confronted with certain challenges in resources allocation and regional competition. C. Business plan for the second half, as well as countermeasures against risks The Company will continue to carry out its annual business plan and allocate existing resources optimally, efficiently and reasonably, meanwhile try to make the best of external resources to enhance the ability of resource integration. The Company will continuously improve the service, and timely adjust business strategy and structure in accordance with market trends, while at the same time strengthen internal management and cost controls so as to create satisfying economic results. PART Ⅴ SIGNIFICANT EVENTS . Corporate governance Ⅰ Ever since its establishment, the Company has been in strict compliance with the company law and securities law, as well as relevant laws and regulations issued by CSRC. And it has timely formulated and amended its relevant management rules according to the Code of Corporate Governance for Listed Companies, which are conscientiously and carefully executed. An effective system of internal control has thus taken shape in the Company. Along with the development of the Company, it will, as always, keep perfecting its corporate governance and protecting the interests of all shareholders and stakeholders. Non-compliance of corporate governance standards by the Company during the reporting period: according to the Accounting Standards for Business Enterprises No.33—Consolidated Financial Statements, the Financial Department of the Company should submit the Company’s monthly financial statements around the 10th day of each month to CND, the main shareholder holding 57.51% of the Company’s shares, for the need of the latter’s preparing its consolidated statements. At the Fifth Session of the Fifth Board of Directors of the Company held on 17 April 2007, the Report Concerning the Submission of Monthly Financial Statements to the Substantial Shareholder was reviewed and approved, and it was agreed that Financial Department shall provide the company’s monthly financial statements to CND. On 25 August 2007, the Company disclosed the details of submitting the financial statements to substantial shareholders in the Self-inspection Report and Rectification Plan for Corporate Governance in 2007 of Shenzhen Chiwan Wharf Holding Co., Ltd. In compliance with the requirements of the Shenzhen Securities Regulatory Bureau, the Company delivered “Undisclosed Information Provided by the Company to its Substantial Shareholders and Actual Controllers” to the Shenzhen Securities Regulatory Bureau before the tenth day every month since September 2007, including the name list of relevant parties and relevant information. The above-mentioned matters did not affect the Company’s independence. In the future, the Company will disclose the relevant information in due course at the request of the regulatory authorities. . Profit and divⅡidend distribution plan for 2009 and its implementation As audited by PricewaterhouseCoopers Zhongtian Certified Public Accountants Co., Ltd., the net profit of the Company for 2009 was RMB 284,356,677, and the accumulative attributable profit was RMB 431,538,411.Semi-Annual Report 2010-Chiwan Wharf 10 1. In accordance with the Company Law and the Articles of Association of the Company, RMB 28,435,668, i.e. 10% of the Company’s net profit as audited for the year 2009 was to be withdrawn as statutory surplus reserve; 2. It was planned that a cash dividend of RMB 3.25 per ten shares (pre-tax) totaling RMB 209,548,212 would be paid based on the total share capital of 644,763,730 shares as at the end of 2009. After the aforesaid distribution, the retained profit of the Company was RMB 193,554,531. The said profit distribution plan was completed on 10 August 2010, with the registration day for A shares and the last trading day for B shares being 5 August 2010, and the ex-dividend day being 6 August 2010. . For Ⅲ2010, no interim profit distribution will be conducted and no reserves will be transferred into shares. . During the reportⅣing period, the Company was not involved in any significant lawsuits and arbitrations. . During the reportⅤing period, the Company did not conduct any significant asset acquisition, sale or reorganization. . ⅥDuring the reporting period, no shareholders holding over 30% shares of the Company put forward and implemented plans of increasing its equity interest in the company. . ⅦDuring the reporting period, there existed no new securities investments. The Company did not acquire equity of financial enterprises such as commercial banks, securities companies, insurance companies, trust companies and futures companies, or equity of the companies to be listed. Set out below was the equity of other listed companies held by the Company, which was acquired by the Company in the previous periods and carried down to the current period. Unit: RMB Stock code Short name of the stock Initial investment amount Shareholding percentage in the listed company Book value at period-end Gains/ (losses) in reporting period Changes in owners’ equity during reporting period Accounting Title Source of Shares 600377 JiangSu Expressway 1,120,000 0.02% 6,090,000 - (819,000) Financial Assets available for sale Legal shares that gained transfer rights through Equity Separation Reform 400032 Shenzhen Petrochemical Industry (Group) Co., Ltd. 3,500,000 0.26% 382,200 - - Long-term Equity investment Legal Shares 400009 Guangdong Guang Jian Group Limited Company 27,500 0.02% 17,000 - - Long-term Equity investment Legal Shares Total 4,647,500 - 6,489,200 - (819,000) - -Semi-Annual Report 2010-Chiwan Wharf 11 . Special explanation and independent opinion Ⅷby independent directors In accordance with the Circular on Relevant Issues Concerning Regulating Capital Flows between Listed Companies and Related Parties and Provision of External Guaranty By Listed Companies (ZJF [2003] No.56) and the Circular on Regulating Provision of Guarantees for Outside Parties by Listed Companies (ZJF (2005) No.120) (hereinafter referred to as “the Circulars”), as well as the Circular on 2010 Semi-Annual Reports of Listed Companies, independent directors of the Company Mr. Li Wuzhou, Mr. Hao Zhujiang and Mr. Zhang Jianjun, with a sense of responsibility to the Company, all its shareholders and investors and the principle of seeking truth from facts, have carefully and responsibly examined the Company’s provision of guarantees for other parties and the capital occupation by its controlling shareholder and other related parties. Upon the examination, they made the relevant explanation as follows: 1. The Company strictly abided by the requirements of the Circulars. No funds occupation by its controlling shareholder had been found by 30 June 2010, nor that incurred in the previous periods and carried down till 30 June 2010. The funds flows between the Company and its related parties during the reporting period were considered normal operational funds flows. 2. As at 30 June 2010, the balance of guarantee provided to outside parties by the Company was zero. 3. As at 30 June 2010, the accumulative guarantee amount provided by the Company for its wholly-owned and holding subsidiaries reached RMB 256,690,000, taking up 8.70% of the Company’s net assets as at 30 June 2010, The aforesaid guarantees were in line of relevant laws and regulations concerning the provision of guarantees for other parties by listed companies, which were detailed as follows: Unit: RMB Guaranteed party Shareholding percentage of the Company Amount Chiwan Wharf Holdings (Hong Kong) Limited 100% 149,600,000 Dongguan Chiwan Wharf Company Limited 100% 7,650,000 Shenzhen Chiwan Harbor Container Company Limited 100% 99,440,000 To sum up, the independent directors were of the opinion that the Company effectively controlled its financial risks during the reporting period, without doing any harm to the interests of investors. . Significant related transactionsⅨ A. Related transactions arising from routine operation Payment of Land use fees Jan.-Jun. 2010 Jan.-Jun. 2009 CND RMB 20,997,382 RMB 22,930,453 Due to the need of routine operation, the Harbor Division of the Company and Chiwan Container Terminal Co., Ltd. (CCT), in which the Company held a total of 55% equity directly and indirectly, rented lands from CND for bulk cargo and container stacking. Recognized as frequent transactions of the Company, the said transactions occurred in the previous years and will continue to occur in the future.Semi-Annual Report 2010-Chiwan Wharf 12 Almost as same as the land rents in the western Shenzhen ports in 2010, the transaction price was a fair market price decided through negotiation between transaction parties at RMB3.5—12.5/m2. According to the contract signed, the rent was paid by month and a penalty would be charged at a ratio of 0.5% of the monthly rental fee for each day overdue. During the reporting period, the aforesaid rents accounted for 73.76% of the Company’s total rental expenses for stacking yards and offices, which caused a cost and expense of RMB 21 million. B. Creditor’s rights and liabilities with related parties Accounts receivable As at 30 Jun. 2010 (RMB) As at 31 Dec. 2009 (RMB) Mawan Companies 1,564,600 1,141,315 Shenzhen Southseas Grains Industries Limited 1,245,557 1,281,446 Shenzhen Nantian Oil Mills Co., Ltd. 830,063 685,274 Total 3,640,220 3,108,035 The accounts receivable as set out in the table above were resulted from the operational contacts of the Company’s providing road transportation service and terminal handling service for its related parties mentioned above. As at 30 Jun. 2010, the accounts receivable from related parties took up 1.48% of the Company’s total accounts receivable (1.49% in the year of 2009). Other receivables As at 30 Jun. 2010 (RMB) As at 31 Dec. 2009 (RMB) China Merchants Maritime & Logistics (Shenzhen) Ltd. 1,911,230 1,408,328 Mawan Companies※ 972,146 237,072 Total 2,883,376 1,645,400 ※ The Company and Mawan Companies cooperated in marketing, and they shared the common expenses thus incurred according to the numbers of berths each had. Concerning the entrusted collection and disbursement of relevant fees incurred in the course of settlement, the Company confirmed the accounts payable to Mawan Companies after checking the relevant accounts with customers. As at 30 Jun. 2010, the other receivables from related parties took up 2.70% of the Company’s total other receivables (7.56% in the year of 2009). Long-term receivables As at 30 Jun. 2010 As at 31 Dec. 2009 Media Port Investments Ltd. RMB 108,037,599 RMB 108,037,599 The long-term receivable as set out in the table above was resulted from the interest-free shareholder’s contribution to an associated company of the Company within the total investment amount prescribed in the relevant joint venture agreement. As at 30 Jun. 2010, the long-term receivables from related parties accounted for 100% of the Company’s total long-term receivables (also 100% in the year of 2009).Semi-Annual Report 2010-Chiwan Wharf 13 Accounts payable As at 30 Jun. 2010 (RMB) As at 31 Dec. 2009 (RMB) Shenzhen Haiqin Engineering Supervision Co., Ltd. 9,972,227 10,040,807 CND 6,836,983 4,238,999 Shenzhen Xuqin Industrial Development Co., Ltd. 3,623,885 2,514,454 Total 20,433,095 16,794,260 The accounts payable as set out in the table above were resulted from the debts caused by the Company’s renting lands and receiving engineering construction and supervision services from its related parties mentioned above. As at 30 Jun. 2010, the accounts payable to related parties amounted to 9.34% of the Company’s total accounts payable (7.39% in the year of 2009). Other payables As at 30 Jun. 2010 (RMB) As at 31 Dec. 2009 (RMB) Mawan Companies 15,863,339 2,376,938 CND 1,278,457 7,752 Total 17,141,796 2,384,690 As at 30 Jun. 2010, other payables to related parties took up 14.15% of the Company’s total other payables (1.95% in the year 2009). . Significant contracts Ⅹ A. During the reporting period, the Company did not hold in trust, contract or lease any significant assets of other companies, or vice versa. B. During the reporting period, the Company did not provide any guarantee for external parties. By the end of the reporting period, the Company provided guarantees only for the bank loans granted to wholly-owned subsidiaries of the Company, i.e. Chiwan Wharf (Hong Kong) Limited, Dongguan Chiwan Wharf Company Limited and Shenzhen Chiwan Harbor Container Co. Ltd., details of which are as follows: Guarantee Amount of guarantee Term of guarantee Subsisting guarantee liability or not Type of guarantee Procedures for guarantee Chiwan Wharf Holdings (Hong Kong) Limited HKD17,000 2008.12.5-2010.12.2 Yes Guarantee with joint liability Reviewed and approved at the Fifth Special Session of the Sixth Board of Directors for 2008 Dongguan Chiwan Wharf Company Limited RMB765 2010.2.25-2010.8.25 Yes Guarantee with joint liability Reviewed and approved at the Sixth Special Session of the Sixth Board of Directors for 2009 and the first special shareholders' meeting in 2009 Shenzhen Chiwan Harbor Container Co. Ltd. HKD11,300 2010.4.27-2010.10.26 Yes Guarantee with joint liability Applying for the capacity of comprehensive credit line was approved by the Board.Semi-Annual Report 2010-Chiwan Wharf 14 By the end of the reporting period, the Company had provided guarantees for external parties totaling RMB 256.69 million, accounting for 8.70% of the Company’s net assets. C. During the reporting period, the Company did not entrust others to manage its cash assets. Ⅺ. Researches and visits received during the reporting period During the reporting period, the Company handled warm-heartedly investors’ phone calls and held one-on-one meetings with investors. The Company disclosed relevant information to investors in accordance with the Company Law, the Securities Law, the Rules on the Management of Investors Relations and other laws and regulations. During the reporting period, the Company received in aggregate 19 visits. The Company gave visitors an introduction to the profile of the Company and the development of its business, and made reasonable disclosures regarding the operations, investments and financial status of the Company that the investors were interested in. The Company did not disclose, reveal or divulge to any specific visitors any material information not generally available to the public. Details of such interviews and visits are as follows: Type Time Location Means Investor Topics discussed and information provided January 2010 Shanghai UBS Conference Clients of UBS May 2010 Qingdao BOCI Investors Conference Clients of BOCI Conference launched by security firms May 2010 Huhhot UBS Conference Clients of UBS January 2010 Matthews international capital management. llc., Xiangcai securities Co., ltd., Merrill Lynch(Asia Pacific) Ltd., First Shanghai Group., Orient Securities Co., Ltd., Essence Securities Co., Ltd., Penghua Fund Management Co., Ltd. One-on-one meeting Guotai Junan Securities, Guodu Securities Co., Ltd., Great wall fund management Co., ltd., CLSA research limited, Value Partners Ltd., February 2010 Tel conference Keywise Capital Management (HK) Limited April 2010 One-on-one meeting Bohai securities Co., Ltd., Zhongtian securities Co., Ltd., Macquarie Capital Securities Limited Tel conference UBS, Harvest Fund, Fortune SGAM Fund, Bosera Fund, Acru Asset Management Limited, CCIG, E-Fund, Penghua Fund Management Co., Ltd., Martin Currie Receiving visits from investors May 2010 Conference room of the Company One-on-one meeting Baillie Gifford, Guodu Securities Co., Ltd., Donghai Securities Co., Ltd., Eton Park Asia Limited, Ping An Securities, Bosera Asset Management Co., ltd., SWS research Co., Ltd., EFG Bank AG, Hanwha Investment Trust Management, Fuh Hwa Securities Investment Trust Co., Ltd., OWL CREEK Asset Basic information of operations and investments of the Company and the financial status of the Company Information provided: Brochure of the CompanySemi-Annual Report 2010-Chiwan Wharf 15 Management LP, DFZH Capital Management Pte. Ltd., Emerald Orient Capital, Gansu trust Co., Ltd., Huatai Securities, United Innovation Capital Ltd, Marco Polo Pure Asset Management, BOCI-Prudential asset management limited, Cathay Fortune Corp., Harvest International Capital Management, Tiger Investment Consulting(Shanghai) Co.,Ltd., Dacheng Fund, UG Investment Advisers Limted, Matthews international capital management. llc June 2010 Harvest Fund Management Co., ltd., Shenzhen Wudang Management Co., Ltd. Ⅻ. Other significant events Event Date of disclosure Public Notice No. Newspaper for disclosure and page number Website for disclosure The Fourth Special Session of the Sixth Board of Directors for 2010 was held on May 11, 2010. The meeting examined and unanimously adopted the Report on the Investment in Laizhou Port Project. On the same day, the Company signed a Subscription Agreement (hereinafter referred to as “Subscription Agreement”) with the China Overseas Port Investment Co., Ltd. (hereinafter referred to as “China Overseas Port Investment”), Shenzhen China Overseas Port Logistics Co., Ltd. (hereinafter referred to as “China Overseas Port Logistics”) and China Overseas Harbor Affairs (Laizhou) Co., Ltd. (hereinafter referred to as “China Overseas Harbor Affairs”) in Hong Kong, China. Meanwhile, the Company signed the China Overseas Harbor Affairs Joint Venture Contract (hereinafter referred to as “Joint Venture Contract”) with China Overseas Port Investment and China Overseas Port Logistics as well. According to the Subscription Agreement and the Joint Venture Contract, the Company will subscribe capital contribution to China Overseas Harbor Affairs at the cost of RMB 749,655,300 and hold 40% shares of China Overseas Harbor Affairs. This external investment will not constitute an associated transaction. 12 May. 2010 2010-014 Securities Times B11; Ta Kung Pao A9 http://www.cninfo. com.cnSemi-Annual Report 2010-Chiwan Wharf 16 PART FINANCIAL REPORT (ⅥSEE ATTACHED, UN-AUDITED) PART DOCUMENTS AVAILABLE FOR REFERENCEⅦ I. Full-text of the Company’s 2010 Semi-Annual Report carrying the signature of Chairwoman of the Board; II. 2010 Semi-Annual Financial Report carrying the signatures of the Company’s Legal Representative, Chief Financial Officer and Financial Manager; III. Original copies of all documents and public notices thereof disclosed during the reporting period on Securities Times and Ta Kung Pao; and IV. Other relevant materials. For and on behalf of the Board Wang Fen Chairwoman Shenzhen Chiwan Wharf Holdings Limited Dated 18th August, 2010SHENZHEN CHIWAN WHARF HOLDINGS LIMITED FINANCIAL STATEMENTS AND REPORT FOR THE MONTH ENDED 30 JUNE 2010 [English Translation for Reference Only. Should there be any inconsistency between the Chinese and English versions, the Chinese version shall prevail.]SHENZHEN CHIWAN WHARF HOLDINGS LIMITED [English translation for reference only] Contents Page Financial Statements and Report of the Auditors for the month ended 30 June 2010 Consolidated and Company’s balance sheets 1-2 Consolidated and Company’s income statements 3 Consolidated and Company’s cash flow statements 4 Consolidated statement of changes in owners’ equity 5 Company’s statement of changes in owners’ equity 6 Notes to financial statements 7 - 97 Supplementary information to financial statements 98 - 100SHENZHEN CHIWAN WHARF HOLDINGS LIMITED CONSOLIDATED AND COMPANY BALANCE SHEETS AS AT 30 JUNE 2010 (All amounts in RMB Yuan unless otherwise stated) [English translation for reference only] ASSETS Note(s) 30 June 2010 Consolidated 31 December 2009Consolidated 30 June 2010 Company 31 December 2009Company Current assets Cash at bank and on hand 5(1) 1,108,008,730 741,096,267 647,142,458 453,407,958 Notes receivable 5(2) 6,500,000 - 6,500,000 - Accounts receivable 5(4), 13(1) 246,378,085 209,177,364 16,768,080 9,860,135 Advances to suppliers 5(6) 2,886,662 2,575,752 417,000 667,000 Interest receivable 5(3) 142,500 384,750 193,157 389,807 Dividends receivable - - 209,973,184 268,588,679 Other receivables 5(5), 13(2) 106,676,818 21,760,241 499,763,606 360,320,056 Inventories 5(7) 24,862,005 25,616,306 1,121,197 1,094,881 Total current assets 1,495,454,800 1,000,610,680 1,381,878,682 1,094,328,516 Non-current assets Available-for-sale financial assets 5(8) 6,090,000 7,140,000 6,090,000 7,140,000 Long-term receivables 5(9), 7(6) 108,037,599 108,037,599 11,004,304 11,004,304 Long-term equity investments 5(10), 13(3) 336,168,729 346,061,938 824,766,732 861,060,047 Investment properties 5(12) 28,400,958 28,854,510 19,884,356 20,209,734 Fixed assets 5(13) 2,170,413,312 2,209,046,448 165,590,531 169,912,242 Construction in progress 5(14) 566,022,580 575,630,562 821,290 827,356 Disposal of fixed assets 86,672 - 46,002 - Intangible assets 5(15) 1,053,052,744 1,071,933,095 69,199,425 70,715,345 Goodwill 5(16) 10,858,898 10,858,898 - - Long-term prepaid expenses 5(17) 65,608,688 66,638,726 5,412,234 5,547,558 Deferred tax assets 5(19) 33,819,131 44,288,280 11,530,789 20,457,200 Other non-current assets 5(18) 58,772,833 58,772,833 - - Total non-current assets 4,437,332,144 4,527,262,889 1,114,345,663 1,166,873,786 TOTAL ASSETS 5,932,786,944 5,527,873,569 2,496,224,345 2,261,202,302 1SHENZHEN CHIWAN WHARF HOLDINGS LIMITED CONSOLIDATED AND COMPANY BALANCE SHEETS AS AT 30 JUNE 2010 (CONTINUED) (All amounts in RMB Yuan unless otherwise stated) [English translation for reference only] LIABILITIES AND OWNERS’ EQUITY Note(s) 30 June 2010 Consolidated 31 December 2009Consolidated 30 June 2010 Company 31 December 2009Company Current liabilities Short-term borrowings 5(21) 850,080,000 777,040,000 143,440,000 143,440,000 Notes payable 5(22) 8,866,000 20,466,600 - - Accounts payable 5(23) 218,857,990 227,293,714 11,889,101 12,113,749 Advances from customers 5(24) 4,438,391 5,057,162 2,068,219 3,281,709 Employee benefits payable 5(25) 18,200,080 43,145,231 11,320,344 26,443,239 Taxes payable 5(26) 50,926,250 79,069,847 (6,249,931) 775,935 Interests payable 5(27) 723,334 492,546 930,545 592,370 Dividends payable 5(28) 381,438,026 171,889,814 209,548,212 - Other payables 5(29) 121,164,989 122,165,581 500,476,950 267,187,595 Current portion of non-current liabilities 5(30,32) 286,551,750 172,151,750 132,000,000 - Total current liabilities 1,941,246,810 1,618,772,245 1,005,423,440 453,834,597 Non-current liabilities Long-term borrowings 5(31) 290,400,000 422,400,000 88,000,000 220,000,000 Deferred tax liabilities 5(19) 1,093,400 1,324,400 1,093,400 1,324,400 Other non-current liabilities 5(32) 62,309,519 64,785,394 - - Total non-current liabilities 353,802,919 488,509,794 89,093,400 221,324,400 Total liabilities 2,295,049,729 2,107,282,039 1,094,516,840 675,158,997 Owners' equity Share capital 5(33) 644,763,730 644,763,730 644,763,730 644,763,730 Capital surplus 5(34) 144,591,155 145,410,155 153,787,428 154,606,428 Surplus reserve 5(35) 383,570,404 355,134,736 383,570,404 355,134,736 Undistributed profits 5(36) 1,792,007,798 1,721,028,196 219,585,943 431,538,411 Foreign exchange translation differences (13,353,779) (13,354,061) - - Total equity attributable to equity holders of the Company 2,951,579,308 2,852,982,756 1,401,707,505 1,586,043,305 Minority interests 5(37) 686,157,907 567,608,774 - - Total owners' equity 3,637,737,215 3,420,591,530 1,401,707,505 1,586,043,305 TOTAL LIABILITIES AND OWNERS’ EQUITY 5,932,786,944 5,527,873,569 2,496,224,345 2,261,202,302 The accompanying notes form an integral part of these financial statements. 2SHENZHEN CHIWAN WHARF HOLDINGS LIMITED CONSOLIDATED AND COMPANY INCOME STATEMENTS FOR THE MONTH ENDED 30 JUNE 2010 (All amounts in RMB Yuan unless otherwise stated) [English translation for reference only] Items Note(s) Jan.-Jun.2010 Consolidated Jan.-Jun.2009 Consolidated Jan.-Jun.2010 Company Jan.-Jun.2009Company Revenue 5(38),13(4) 833,761,885 714,358,140 83,968,138 59,398,927 Less: Cost 5(38),13(4) (336,890,090) (341,704,183) (62,927,819) (59,758,174) Tax and levies on operations 5(39) (29,897,320) (24,866,617) (3,155,974) (2,146,458) General and administrative expenses (55,387,647) (49,078,801) (19,877,921) (17,337,513) Financial (expenses) /income - net 5(40) (4,915,700) (10,538,788) (2,920,881) (1,522,266) Asset impairment losses 5(42) - 651,536 - 651,536 Add: Investment income 5(41), 13(5) 84,416,791 31,207,492 32,906,831 9,526,319 Including: share of results of associates 5(41) 84,106,791 25,678,050 27,706,685 (3,148,222) Operating profit 491,087,919 320,028,779 27,992,374 (11,187,629) Add: Non-operating income 5(43) 2,469,174 7,836,283 352,045 59,841 Less: Non-operating expenses 5(44) (105,357) (350,423) (17,939) (237,621) Including: Loss on disposals of non-current assets (57,458) (97,859) (12,939) (29,907) Total profit 493,451,736 327,514,639 28,326,480 (11,365,409) Less: Income tax (expenses)/ income 5(45) (65,939,121) (36,243,693) (2,295,068) 4,175,979 Net profit 427,512,615 291,270,946 26,031,412 (7,189,430) Attributable to equity holders of the Company 308,963,482 200,144,439 Minority interest 118,549,133 91,126,507 Earnings per share (attributable to equity holders of the Company) Basic earnings per share 5(46) 0.479 0.310 Diluted earnings per share 5(46) 0.479 0.310 Other comprehensive income 5(47) (818,718) 728,000 (819,000) 728,000 Total comprehensive income 426,693,897 291,998,946 25,212,412 (6,461,430) Attributable to equity holders of the Company 308,144,764 200,872,439 Minority interest 118,549,133 91,126,507 The accompanying notes form an integral part of these financial statements. 34 SHENZHEN CHIWAN WHARF HOLDINGS LIMITED CONSOLIDATED AND COMPANY CASH FLOW STATEMENTS FOR THE MONTH ENDED 30 JUNE 2010 (All amounts in RMB Yuan unless otherwise stated) [English translation for reference only] Items Note(s) Jan.-Jun.2010 Consolidated Jan.-Jun.2009 Consolidated Jan.-Jun.2010Company Jan.-Jun.2009Company 1. Cash flows from operating activities Cash received from rendering of services 794,087,904 658,345,387 68,736,435 59,405,302 Cash received from taxes 71,864 - Cash received relating to other operating activities 8,177,173 17,788,634 236,820,327 126,523,165 Sub-total of cash inflows 802,265,077 676,205,885 305,556,762 185,928,467 Cash paid for goods and services (161,385,911) (178,223,532) (45,053,251) (45,220,194) Cash paid to and on behalf of employees (105,080,062) (91,411,953) (29,882,464) (22,994,571) Payments of taxes and levies (117,713,056) (92,549,662) (5,059,624) (4,791,565) Cash paid relating to other operating activities 5(48) (40,498,811) (19,955,803) (67,976,214) (270,444) Sub-total of cash outflows (424,677,840) (382,140,950) (147,971,553) (73,276,774) Net cash flows from operating activities 5(49) 377,587,237 294,064,935 157,585,209 112,651,693 2. Cash flows from investing activities Cash received from disposals of investments - 10,000,000 70,408,776 Cash received from returns on investments 310,000 11,020,550 63,611,777 65,156,097 Net cash received from disposals of fixed assets and intangible assets 10,681,289 792,685 - 61,350 Net cash received from disposal of subsidiaries and other business units 4(2) - 1,961,995 - 2,458,847 Sub-total of cash inflows 10,991,289 13,775,230 73,611,777 138,085,070 Cash paid to purchase fixed assets, intangible assets and other long-term assets (70,606,172) (134,698,622) (3,341,851) (3,558,085) Cash paid relating to the investing activities - (30,000,000) (92,408,776) Sub-total of cash outflows (70,606,172) (134,698,622) (33,341,851) (95,966,861) Net cash flows from investing activities (59,614,883) (120,923,392) 40,269,926 42,118,209 3. Cash flows from financing activities Cash received from borrowings 374,880,000 143,440,000 143,440,000 143,440,000 Cash repayments of borrowings (319,440,000) (345,840,000) (143,440,000) (178,640,000) Cash payments for interest expenses and distribution of dividends or profits (5,902,112) (17,835,998) (3,822,428) (6,955,848) Including: Cash payments for dividends or profit to minority shareholders of subsidiaries - - - - Cash payments relating to other financing activities (597,779) (176,000) - Sub-total of cash outflows (325,939,891) (363,851,998) (147,560,635) (185,595,848) Net cash flows from financing activities 48,940,109 (220,411,998) (4,120,635) (42,155,848) 4. Effect of foreign exchange rate changes on cash and cash equivalents - - - - 5. Net (decrease)/increase in cash and cash equivalents 366,912,463 (47,270,455) 193,734,500 112,614,054 Add: Cash and cash equivalents at beginning of year 5(49) 741,096,267 641,475,910 453,407,958 298,644,660 6. Cash and cash equivalent at 30 June 2010 5(49) 1,108,008,730 594,205,455 647,142,458 411,258,714 The accompanying notes form an integral part of these financial statements.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED CONSOLIDATED STATEMENT OF CHANGES IN OWNERS’ EQUITY FOR THE MONTH ENDED 30 JUNE 2010 (All amounts in RMB Yuan unless otherwise stated) [English translation for reference only] Attributable to equity holders of the Company Items Note Paid-in capital Capital surplus Surplus reserves Undistributed profits Translation difference Minority interest Total owners' equity Balance at 1 January 2009 644,763,730 144,170,555 355,134,736 1,624,545,217 (13,349,891) 572,393,030 3,327,657,377 Movement for the year ended 31 December 2009 Net profit - - - 418,864,844 - 185,270,457 604,135,301 Other comprehensive income 5(34) - 1,239,600 - - (4,170) - 1,235,430 Profit appropriation - appropriation to surplus reserves 5(35) - - - - - - - - profit distribution to equity owners 5(36) - - - (322,381,865) - (190,054,713) (512,436,578) Balance at 31 December 2009 644,763,730 145,410,155 355,134,736 1,721,028,196 (13,354,061) 567,608,774 3,420,591,530 Balance at 1 January 2010 644,763,730 145,410,155 355,134,736 1,721,028,196 (13,354,061) 567,608,774 3,420,591,530 Movement for the year ended 30 June2010 Net profit - - - 308,963,482 - 118,549,133 427,512,615 Other comprehensive income 5(34) - (819,000) - - 282 - (818,718) Profit appropriation - appropriation to surplus reserves 5(35) - - 28,435,668 (28,435,668) - - - - profit distribution to equity owners 5(36) - - - (209,548,212) - - (209,548,212) Balance at 30 June 2010 644,763,730 144,591,155 383,570,404 1,792,007,798 (13,353,779) 686,157,907 3,637,737,215 The accompanying notes form an integral part of these financial statements. 56 SHENZHEN CHIWAN WHARF HOLDINGS LIMITED COMPANY STATEMENT OF CHANGES IN OWNERS’ EQUITY FOR THE MONTH ENDED 30 JUNE 2010 (All amounts in RMB Yuan unless otherwise stated) [English translation for reference only] Items Note Paid-in capital Capital surplus Surplus reserves Undistributed profits Total owners' equity Balance at 1 January 2009 644,763,730 153,366,828 355,134,736 469,563,599 1,622,828,893 Movement for the year ended 31 December 2009 Net profit - - - 284,356,677 284,356,677 Other comprehensive income 5(34) - 1,239,600 - - 1,239,600 Profit appropriation - appropriation to surplus reserves - profit distribution to equity owners 5(36) - - - (322,381,865) (322,381,865) Balance at 31 December 2009 644,763,730 154,606,428 355,134,736 431,538,411 1,586,043,305 Balance at 1 January 2010 644,763,730 154,606,428 355,134,736 431,538,411 1,586,043,305 Movement for the year ended 30 June2010 Net profit - - - 26,031,412 26,031,412 Other comprehensive income 5(34) - (819,000) - - (819,000) Profit appropriation - appropriation to surplus reserves 5(35) - - 28,435,668 (28,435,668) - - profit distribution to equity owners 5(36) - - - (209,548,212) (209,548,212) Balance at 30 June 2010 644,763,730 153,787,428 383,570,404 219,585,943 1,401,707,505 The accompanying notes form an integral part of these financial statements.7 1. General information Shenzhen Chiwan Wharf Holdings Limited (the “Company”) was incorporated in September 1982 in Shenzhen, the People’s Republic of China (the “PRC”), by China Nanshan Development (Group) Ltd (the “Nanshan Group”), and was registered a sino-foreign joint venture enterprise in July 1990. In January 1993, as approved by the Shenzhen municipal government with document SFBF (1993)357, the Company was reorganized into a joint stock limited company. In February 1993, the Company issued, by public offering, the domestic shares (“A shares”) of 46,000,000 shares and domestically listed foreign shares (“B shares”) of 40,000,000 shares. Both shares were listed in Shenzhen Stock Exchange in May 1993. In June 1994, 31,047,000 bonus shares were issued in a proportion of “one bonus share for every ten shares”. In June, the bonus A shares and bonus B shares held by Nanshan Group were listed in Shenzhen Stock Exchange. In December 1995, the Company issued additional 40,000,000 B shares, consequently, the total volume of the Company’s shares rose to 381,517,000. In June 2004, the directors of the Company resolved to increase the share capital by means of capitalization of the share premium and capital reserves of the Company to the extent that 3 additional ordinary shares were issued to each shareholder holding 10 shares of the Company. As the result, the total volume of shares was increased from 381,517,000 to 495,972,100. In July 2005, again the directors of the Company resolved to increase the share capital by means of capitalization of the share premium and capital reserves of the Company to the extent that 3 additional ordinary shares were issued to each shareholder holding 10 shares of the Company Consequently, the total volume of shares was increased from 495,972,100 to 644,763,730. Pursuant to the relevant rules and regulations issued by the PRC authorities and approval from State-owned Asset Supervision and Administration Commission with document No. (2006)405, share segregation reform of the Company was performed in May 2006. Nanshan Group, the non public shares shareholder of the Company, offered RMB11.5 in cash, 1 share and 8 put options, to the holders of every 10 listed A shares. In return the listed A shares shareholders agree to allow the non public shares held by Nanshan Group be converted into listed A shares. From 30 May 2006, the non public A shares held by Nanshan Group (original volume less those offered to tradable A shares shareholders) become listed with restriction on disposal for certain lock up period. As to the put options offered by Nanshan Group, during the required exercise period from 23 May 2007 to 29 May 2007, none was actually exercised by listed A shares shareholders. The lock up period for three batches of A shares with 23,243,415 shares, 23,243,415 shares and 324,316,070 shares held by the Nanshan Group with restriction on disposal expired on 3 July 2007, 6 June 2008, and 19 June 2009 respectively. The Company and its subsidiaries (collectively the “Group”) are principally engaged in the provision of cargo packing, cargo handling, container terminal, warehousing, land and sea transportation services. These consolidated financial statements have been approved for issue by the Board of Directors on 16 August 2010.8 2. Significant accounting policies and accounting estimates The consolidated and the Company’s financial statements for the year ended 31 December 2009 truly and completely present the financial position as of 31 December 2009 and the operating results, cash flows and other information for the year then ended of the Group and Company in compliance with the Accounting Standards for Business Enterprises. a. Basis of preparation The Group prepared financial statements in accordance with the Basic Standard and 38 specific standards of Accounting Standards for Business Enterprises issued by Ministry of Finance of the PRC on 15 February 2006, Application Guidance of Accounting Standard for Business Enterprises, Interpretation of Accounting Standards for Business Enterprises and other regulations issued thereafter (hereafter referred to as “the Accounting Standard for Business Enterprises”, “China Accounting Standards” or “CAS”), Rules for Preparation Convention of Disclosure of Public Offering Companies No.15 – General Regulations for Financial Reporting (revised in 2010) by China Securities Regulatory Commission. b. Statement of compliance with the Accounting Standards for Business Enterprises The consolidated and the Company’s financial statements for the month ended 30 June 2010 truly and completely present the financial position as of 30 June 2010 and the operating results, cash flows and other information for the year then ended of the Group and Company in compliance with the Accounting Standards for Business Enterprises. c. Accounting year The Company’s accounting year starts on 1 January and ends on 30 June. d. Recording currency The recording currency is Renminbi (RMB) e. Preparation of consolidated financial statements The consolidated financial statements comprise the financial statements of the Company and its subsidiaries. Subsidiaries are fully consolidated from the date on which the Group obtains control and are de-consolidated from the date that such control ceases. For a subsidiary acquired in a business combination involving enterprises under common control, it is included in the consolidated financial statements from the date when it, together with the Company, came under common control of the ultimate controlling party. The portion of the net profits realized before the combination date is presented separately in the consolidated income statement. The financial statements of subsidiaries are adjusted in accordance with the accounting policies and accounting period of the Company during the preparation of the consolidated financial statements, where the accounting policies and the accounting periods are inconsistent between the Company and subsidiaries. For subsidiaries acquired from a business combination involving enterprises not under common control, the individual financial statements of the subsidiaries are adjusted based on the fair value of the identifiable net assets at the acquisition date. All significant inter-group balances, transactions and unrealised profits are eliminated in the consolidated financial statements. The portion of a subsidiary’s equity and the portion of a subsidiary’s net profits and losses for the period not held by the Company are recognized as minority interests and presented separately in the consolidated balance sheet within equity and net profits respectively.9 2 Significant accounting policies and accounting estimates (continued) f. Cash and cash equivalents For the purpose of the cash flow statement, cash and cash equivalents comprise cash in hand, deposits held at call with bank and short-term and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. g. Foreign currency translation (a) Transactions and balances Foreign currency transactions are translated into RMB using the exchange rates prevailing at the dates of the transactions. At the balance sheet date, monetary items denominated in foreign currency are translated into RMB using the spot exchange rate at the balance sheet date. Exchange differences arising from these translations are recognised in profit or loss for the current period, except for those attributable to foreign currency borrowings that have been taken out specifically for the acquisition or construction of qualifying assets, which are capitalised as part of the cost of those assets. Non-monetary items denominated in foreign currency that are measured in terms of historical cost are translated at the balance sheet date using the spot exchange rate at the date of the transaction. The effect of exchange rate changes on cash is presented separately in the cash flow statement. (b) Translation of foreign currency financial statements The asset and liability items in the balance sheets for oversea businesses are translated at the spot exchange rate on the balance sheet date. Among the owner’s equity items, the items other than “undistributed profits” are translated at the spot exchange rate of the transaction date. The income and expense items in the income statements of oversea businesses are translated at the spot exchange rate of the transaction date. The differences arising from the above translation are presented separately in the owner’s equities. The cash flows of oversea businesses are translated at the spot exchange rate on the date of the cash flows. The effect of exchange rate changes on cash is presented separately in the cash flow statement. h. Financial instruments i. Financial assets (i) Classification of financial assets Financial assets are classified into the following categories at initial recognition: financial assets at fair value through profit or loss, loans and receivables, available-for-sale financial assets and held-to-maturity investments. The classification of financial assets depends on the Group’s intention and ability to hold the financial assets. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for the purpose of selling in the short term, which are presented as financial assets held for trading on the balance sheet. Receivables Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.10 2 Significant accounting policies and accounting estimates (continued) (8) Financial instruments (continued) (a) Financial assets (continued) (i) Classification of financial assets (continued) Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are either designated in this category or not classified in any of the other categories at initial recognition. Available-for-sale financial assets are included in other current assets in the balance sheet if management intends to dispose of them within 12 months of the balance sheet date. Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed maturity and fixed or determinable payments that management has the positive intention and ability to hold to maturity. Held-to-maturity investments with maturities over 12 months when the investments were made but are due within 12 months at the balance sheet date are included in current portion of non-current assets; held-to maturity investments with maturities no more than 12 months when the investments were made are included in other current assets. (ii) Recognition and measurement Financial assets are recognised at fair value on the balance sheet when the Group becomes a party to the contractual provisions of the financial instrument. In the case of financial assets at fair value through profit or loss, the related transaction costs occurred at the time of acquisition are recognised in profit or loss for the current period. For other financial assets, transaction costs that are attributable to the acquisition of the financial assets are included in their initial recognition amounts. Financial assets are derecognised when the contractual rights to receive the cash flows from the financial assets have expired, or all substantial risks and rewards of ownership of the financial assets have been transferred. Financial assets at fair value through profit or loss and available-for-sale financial assets are subsequently measured at fair value. Investments in equity instruments are measured at cost when they do not have a quoted market price in an active market and whose fair value cannot be reliably measured. Receivables and held-to-maturity investments are measured at amortised cost using the effective interest method. A gain or loss arising from a change in the fair value of financial assets at fair value through profit or loss is recognised in profit or loss. Interests and cash dividends received during the period in which such financial assets are held, as well as the gains or losses arising from the disposal of the assets are recognised in profit or loss for the current period. A gain or loss arising from a change in fair value of an available-for-sale financial asset is recognised directly in equity, except for impairment losses and foreign exchange gains and losses arising from the translation of monetary financial assets. When such financial asset is derecognised, the cumulative gain or loss previously recognised in equity is recognised in profit or loss for the current period. Interests on available-for-sale investments in debt instruments are calculated using the effective interest method during the period in which such investments are held and cash dividends declared by the investee on available-for-sale investments in equity instruments are recognised as investment income in profit or loss.11 2 Significant accounting policies and accounting estimates (continued) (8) Financial instruments (continued) (a) Financial assets (continued) (iii) Impairment of financial assets The Group assesses the carrying amount of a financial asset other than that at fair value through profit or loss at each balance sheet date. If there is objective evidence that the financial asset is impaired, the Group shall determine the amount of any impairment loss. If an impairment loss on a financial asset carried at amortized cost has been incurred, the amount of loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred). If there is objective evidence that the value of the financial asset recovered and the recovery is related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed and the amount of reversal is recognized in profit or loss. In the case of a significant or prolonged decline in the fair value of an available-for-sale financial asset, the cumulative loss arising from the decline in fair value that had been recognized directly in equity is removed from equity and recognized in impairment loss. For an investment in debt instrument classified as available-for-sale on which impairment losses have been recognized, if, in a subsequent period, its fair value increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the previously recognized impairment loss is reversed and recognized in profit or loss for the current period. For an investment in an equity instrument classified as available-for-sale on which impairment losses have been recognized, if, in a subsequent period, its fair value increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the previously recognized impairment loss is reversed and directly recognized in equity. (iv) Derecognition of financial assets Financial assets are derecognized when: i) the contractual rights to receive the cash flows from the financial assets have expired; or ii) all substantial risks and rewards of ownership of the financial assets have been transferred; or iii) the control over the financial asset has been waived even if the Group does not transfer or retain nearly all of the risks and rewards relating to the ownership of a financial asset. On derecognition of a financial asset, the difference between the carrying amount and the aggregate of consideration received and the accumulative amount of the changes of fair value originally recorded in the owner’s equity, is recognised in the income statement.12 2 Significant accounting policies and accounting estimates (continued) (8) Financial instruments (continued) ii. Financial liabilities Financial liabilities are classified into the following categories at initial recognition: the financial liabilities at fair value through profit or loss and other financial liabilities. The financial liabilities in the Group mainly comprise of other financial liabilities, including payables and borrowings. Payables comprise accounts payable and other payables, which are recognised initially at fair value and measured subsequently at amortised cost using the effective interest method. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently carried at amortised costs using the effective interest method. Borrowings are classified as the short-term borrowings if they mature within one year (one year included); others are classified as long-term borrowings; long-term borrowings due for repayment within one year since the balance sheet day are classified as current portion of non-current liabilities. A financial liability (or a part of financial liability) is derecognised when and only when the obligation specified in the contract is discharged or cancelled. The difference between the carrying amount of a financial liability (or a part of financial liability) extinguished and the consideration paid is recognised in the income statement. iii. Determination of fair value of financial instruments The fair value of a financial instrument that is traded in an active market is determined at the quoted price in the active market. The fair value of a financial instrument for which the market is not active is determined by using a valuation technique. Valuation techniques include using recent market transactions between knowledgeable, willing parties, reference to the current fair value of another instrument that is substantially the same with this instrument, and discounted cash flow analysis. When a valuation technique is used to establish the fair value of a financial instrument, use market data as much as possible and avoid use of data that is particularly related to the Group.13 2 Significant accounting policies and accounting estimates (continued) i. Receivables Receivables comprise accounts receivable and other receivables. Accounts receivables arising from rendering of services are initially recognized at fair value of the contractual payments from the customer. (a) The recognition criteria and method of provision for impairment of receivables that are individually significant - The recognition criteria of receivables that are individually significant Receivables that are individually significant are subject to separate impairment assessment. A provision for impairment of the receivable is recognized if there is objective evidence that the Group will not be able to collect the full amounts according to the original terms. - The method of provision for impairment of receivables that are individually significant The provision for impairment of the receivable is established at the difference between the carrying amount of the receivable and the present value of estimated future cash flows. (b) The criteria and method of provision for impairment of receivables that are not individually significant, but grouped as high credit risk on the basis of similar credit risk Receivables that are not individually significant are grouped on the basis of similar credit risk. The impairment losses are determined by considering the current conditions and the experience of bad debt for the groups of receivables with the similar credit risk. The basis of similar credit risk group: the ageing of receivables Provisioning by credit risk portfolio - Ageing analysis provisioning method Provision for receivables (%) Provision for other receivables (%) Within 1 year 0 0 1 to 2 years 10 10 2 to 3 years 30 30 3 to 4 years 60 60 4 to 5 years 60 60 Over 5 years 100 100 When the Group transfers the accounts receivable to financial institutions without recourse, the difference between proceeds derived from the transaction, net of the carrying amounts of the accounts receivable and relevant taxes is recognized in profit or loss for the current period.14 2 Significant accounting policies and accounting estimates (continued) j. Inventories (a) Categories Inventories include spare parts, fuel and low cost consumables, and are presented at the lower of cost and net realisable value. (b) Measurement upon issuance Cost of spare parts and fuel is determined on the weighted average method. (c) Determination of net realizable value and the method of provisions for impairment of inventories Provisions for declines in the value of inventories are determined at the carrying value of the inventories net of their net realizable value. Net realizable value is determined based on the estimated selling price in the ordinary course of business, less the estimated costs to completion and estimated costs necessary to make the sale and relevant taxes. (d) The Group adopts the perpetual inventory system. (e) Amortization of low cost consumables Low cost consumables are expensed upon issuance. k. Long-term equity investments Long-term equity investments comprise the Company’s equity investments in its subsidiaries, the Group’s long-term equity investments in its associates as well as the long-term equity investments where the Group does not have control, joint control or significant influence over the investees, and which are not quoted in an active market and whose fair value cannot be reliably measured. Subsidiaries are all investees over which the Company is able to control. Associates are all investees that the Group has significant influence on their financial and operating policies. Investments in subsidiaries are measured using the cost method in the Company’s financial statements, and adjusted using the equity method when preparing the consolidated financial statements. Investments in associates are accounted for using the equity method. Other long-term equity investments where the Group does not have control, joint control or significant influence over the investee, and which are not quoted in an active market and whose fair value cannot be reliably measured are accounted for using the cost method. (a) Determining initial investment cost Long-term equity investments accounted for using the cost method are measured at the initial investment cost. Long-term equity investments accounted for using the equity method, where the initial investment cost exceeds the Group’s share of the fair value of the investee’s identifiable net assets at the time of acquisition, the investment is initially measured at cost. Where the initial investment cost is less than the Group’s share of the fair value of the investee’s identifiable net assets at the time of acquisition, the difference is included in profit or loss for the current period and the cost of the long-term equity investment is adjusted accordingly.15 2 Significant accounting policies and accounting estimates (continued) (11) Long-term equity investments (continued) (b) Subsequent accounting and recognition of profit or loss For long-term equity investments accounted for using the cost method, investment income is recognised in profit or loss for the cash dividends or profit declared by the investee. When using the equity method of accounting, the Group recognised the investment income based on its share of net profit or loss of the investee. The Group discontinues recognising its share of net losses of an investee after the carrying amount of the long-term equity investment together with any long-term interests that, in substance, form part of the investor’s net investment in the investee are reduced to zero. However, if the Group has obligations for additional losses and the conditions on recognition of provision are satisfied in accordance with the accounting standards on contingencies, the Group continues to recognise the investment losses and the provision. For changes in owner’s equity of the investee other than those arising from its net profit or loss, the Group record directly in capital surplus its proportion, provided that the Group’s proportion of shareholding in the investee remains unchanged. The carrying amount of the investment is reduced by the Group’s share of the profit or cash dividends declared by an investee. The unrealised profits or losses arising from the intra-group transactions between the Group and its investees are eliminated to the extent of the Group’s interest in the investees, on the basis of which the investment gain or losses are recognised. The loss on the intra-group transaction between the Group and its investees, of which the nature is asset impairment, is recognised in full amount, and the relevant unrealised gain or loss is not allowed to be eliminated. (c) Determining control, joint control, significant influence over investees Control means that the investor has the power to govern the financial and operating policies so as to obtain benefits from their operating activities. The existence and effect of potential voting rights (including that derived from the convertible bonds and warrants that are currently convertible or exercisable) are considered to determine whether the Group has control over the investee. Joint control means that the investor has contractual obligation to control some economic activity, while such control only exists when the significant financial and operating policies relating to that activity are agreed upon by all investors sharing that control. Significant influence means that the investor has the right to participate in the determination of the investee’s financial and operating policies, but cannot control or joint control with other parties on the determination of these policies. (d) Impairment of long-term equity investments The carrying amount of long-term equity investments in subsidiaries and associates is reduced to the recoverable amount when the recoverable amount is less than the carrying amount (Note 2(18)). Once the impairment loss is recognised, it is not allowed to be reversed for the value recovered in the subsequent periods.16 2 Significant accounting policies and accounting estimates (continued) l. Investment property Investment property, including land use rights that have already been leased out and buildings that held for the purpose of lease, is measured initially at its actual cost. Subsequent expenditures incurred for an investment property is included in the cost of the investment property when it is probable that economic benefits associated with the investment property will flow to the Group and its cost can be reliably measured, otherwise the expenditure is recognized in profit or loss in the period in which they are incurred. The Group adopts the cost model for subsequent measurement of the investment property. Buildings and land use rights are depreciated or amortized to allocate the costs of these assets to their estimated net residual values over their estimated useful lives. The estimated useful lives, the estimated net residual values expressed as a percentage of cost and the annual depreciation (amortization) rates of the investment properties are as follows: Estimated useful lives Estimated residual value Annual depreciation (amortization) rate Buildings 25 - 33 years 10% 2.7% to 3.6% Land use rights 8 - 38 years - 2.6% to 12.5% When an investment property is changed to an owner-occupied property, it is transferred to fixed assets or intangible assets at the date of the change. When an owner-occupied property is changed to be held to earn rental or for capital appreciation, the fixed asset or intangible asset is transferred to investment property at the date of the change at the relevant carrying amount of the property. The estimated useful life, net residual value of an investment property and the depreciation (amortization) method applied are reviewed, and adjusted as appropriate at each financial year-end. An investment property is derecognized on disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal. The amount of proceeds on sale, transfer, retirement or damage of an investment property less its carrying amount and related taxes and expenses is recognized in profit or loss for the current period. The carrying amount of investment property is reduced to the recoverable amount when the recoverable amount is less than the carrying amount (Note 2 (18)).17 2 Significant accounting policies and accounting estimates (continued) m. Fixed assets (a) Fixed assets recognition and initial measurement Fixed assets comprise harbor facilities, warehouses, container yards and buildings, machinery and equipment, motor vehicles, cargo ships and tugboats, and other equipments. Fixed assets purchased or constructed by the Group are initially measured at cost at the time of acquisition. Fixed assets contributed by the State-owned shareholders at the incorporation of a limited company are initially recorded at the valuation amount recognized by the State-owned assets supervision and administration department. Subsequent expenditures incurred for a fixed asset are included in the cost of the fixed asset when it is probable that economic benefits associated with the fixed asset will flow to the Group and its cost can be reliably measured. The carrying amount of those parts that are replaced is derecognized and all other subsequent expenditures are recognized in profit or loss in the period in which it is incurred. (b) Fixed assets depreciation Fixed assets are depreciated using the straight-line method to allocate the cost of the assets to their estimated residual values over their estimated useful lives. For the fixed assets being provided for impairment loss, the related depreciation charge is prospectively determined based upon the adjusted carrying amounts over their remaining useful lives. The estimated useful lives, the estimated residual values expressed as a percentage of cost and the annual depreciation rates are as follows: Estimated useful lives Estimated residual value Annual depreciation rate Harbor facilities 5 - 50 years 10% 1.8%-18% warehouses, container yards and buildings 5 - 40 years 10% 2.25%-18% machinery and equipments 5 - 15 years 10% 6%-18% motor vehicles, cargo ships and tugboats 5 - 20 years 10% 4.5%-18% other equipments 5 years 10% 18% The estimated useful life, the estimated net residual value of a fixed asset and the depreciation method applied to the asset are reviewed, and adjusted as appropriate at least at each financial year-end. (c) The carrying amount of fix assets is reduced to the recoverable amount when the recoverable amount is less than the carrying amount (Note 2(18). (d) Fixed assets disposal A fixed asset is derecognized on disposal or when no future economic benefits are expected from its use or disposal. The amount of proceeds on sale, transfer, retirement or damage of a fixed asset net of its carrying amount and related taxes and expenses is recognized in profit or loss for the current period.18 2 Significant accounting policies and accounting estimates (continued) n. Construction in progress Construction in progress is measured at actual cost. Actual cost comprises construction costs, ,installation cost, borrowing costs that are eligible for capitalization and other costs necessary to bring the fixed assets ready for their intended use. Construction in progress is transferred to fixed assets when the assets are ready for their intended use, and depreciation begins from the following month. The carrying amount of construction in progress is reduced to the recoverable amount when the recoverable amount is less than the carrying amount (Note 2(18)). o. Borrowing costs The borrowing costs that are directly attributable to the acquisition and construction of a fixed asset that needs a substantially long period of time of acquisition and construction for its intended use commence to be capitalized and recorded as part of the cost of the asset when expenditures for the asset and borrowing costs have been incurred, and the activities relating to the acquisition and construction that are necessary to prepare the asset for its intended use have commenced. The capitalization of borrowing costs ceases when the asset under acquisition or construction becomes ready for its intended use, the borrowing costs incurred thereafter are recognized in profit or loss for the current period. Capitalization of borrowing costs is suspended during periods in which the acquisition or construction of a fixed asset is interrupted abnormally and the interruption lasts for more than 3 months, until the acquisition or construction is resumed. For a borrowing specific for the acquisition, construction or production activities for preparing an asset eligible for capitalization, the to-be-capitalized borrowing costs shall be determined according to the actual borrowing costs incurred less any income earned on the unused borrowing fund as a deposit in the bank or as a temporary investment. For the other borrowings related to acquisition, construction and production of a qualifying asset, the amount of to-be-capitalized borrowing costs shall be the lower of the actual borrowing costs incurred and the amount of qualifying asset not financed by specific borrowings multifying capitalization rate. The capitalization rate is the weighted average interest rate of these borrowings. p. Intangible assets Intangible assets including land use rights, coastal line use rights and computer software are measured at actual cost. Fixed assets contributed by the state-owned shareholders at the incorporation of a limited company are initially recorded at the valuation amount recognized by the state-owned assets supervision and administration department. (a) Land use rights Land use rights are amortized on the straight-line basis over their estimated useful lives of 20 - 50 years. If the purchase costs of land use rights and attached buildings cannot be reliably allocated between the land use rights and buildings, for the purchase costs are recognized as fixed assets. (b) Coastal line use rights Coastal line use rights are amortized on the straight-line basis over periods of 20 - 50 years.19 2 Significant accounting policies and accounting estimates (continued) (17) Intangible assets (continued) (c) Computer software Computer software is amortized on a straight-line basis over periods of 3 - 5 years. (d) Periodical review of useful life and amortization method For an intangible asset with a finite useful life, review and adjustment on useful life and amortization method are performed at each year-end. (e) A provision for impairment and an impairment loss are recognized when the recoverable amount of an intangible assets is less than its carrying amount (Note 2(18)). q. Long-term prepaid expenses Long-term prepaid expenses include the expenditure for improvements to fixed assets under operating lease and other prepayments incurred but should be borne by the current and subsequent periods and amortized over more than one year. Long-term prepaid expenses are amortized on the straight-line basis over the expected beneficial period and are presented at cost net of accumulated amortization. r. Impairment of long-term assets Fixed assets, construction in progress, intangible assets with finite useful lives, investment properties measured using the cost model and long-term equity investments in subsidiaries, joint ventures and associates are tested for impairment if there is any indication that an asset may be impaired at the balance date. If the result of the impairment test indicates that the recoverable amount of the asset is less than its carrying amount, a provision for impairment and an impairment loss are recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and the present value of the future cash flows expected to be derived from the asset. A provision for asset Impairment is determined and recognized on an individual asset basis. If it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount of the group of assets to which the asset belongs is determined. A group of assets is the smallest group of assets that is able to generate independent cash inflows. Separately recognized goodwill is tested at least annually for impairment, irrespective of whether there is any indication that the asset may be impaired. During the test, the carrying value of goodwill is allocated to the related asset group or groups of asset group which is expected to benefit from the synergies of the business combination. If the result of the test indicates that the recoverable amount of an asset group or groups of asset group including the goodwill allocated is lower than its carrying amount, the corresponding impairment loss is recognized. The impairment loss is first deducted from the carrying amount of goodwill allocated to the asset group or groups of asset group, and then deducted from the carrying amount of the remaining assets of the asset group or groups of asset group pro rata with goodwill. Once the asset impairment loss mentioned above is recognized, it is not allowed to be reversed for the value recovered in the subsequent periods.20 2 Significant accounting policies and accounting estimates (continued) s. Employee benefits Employee benefits mainly include wages or salaries, bonuses, allowances and subsidies, staff welfare, social security contributions, housing funds, labor union funds, employee education funds and other expenditures incurred in exchange for service rendered by employees. The Group has established a pension scheme for employee which is a defined contribution plan. The Group pays contributions at 5.5% to 6% of employees’ salary into the plan. The Group has no further obligations once the contributions have been paid. The contributions are recognized as employee benefit expense when they are due. The pension assets are hold by a trustee and are managed separately from the Group’s assets. t. Profit distribution Proposed profit distribution is recognized as a liability in the period in which it is approved by the shareholders’ meeting. u. Revenue recognition The amount of revenue is determined in accordance with the fair value of the consideration received or receivable for services in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax, rebates, discounts and returns. Revenue is recognized when the economic benefits associated with the transaction will flow to the Group, the relevant revenue can be reliably measured and specific revenue recognition criteria have been met for each of the Group’s activities as described below: (a) Rendering of services The Group provides loading/unloading, transportation, logistic agency and other related harbor services to external customers. Revenue arising from provision of services is recognized when services are completed and the amount of revenue and cost can be reliably measured (b) Transfer of asset use rights Interest income is recognized on a time-proportion basis using the effective interest method. Lease income from an operating lease is recognized on a straight-line basis over the period of the lease.21 2 Significant accounting policies and accounting estimates (continued) v. Government subsidies Government subsidy means the monetary or non-monetary assets obtained freely by an enterprise from the government, including tax returns, financial subsidies. Government subsidy is recognized unless the additional condition can be met and the subsidy can be received by the corporation. If the government subsidy is a monetary asset, it will be measured in the light of the received or receivable amount, if the government subsidy is a non-monetary asset, it shall be measured at its fair value. If its fair value cannot be obtained in a reliable way, it will be measured at its nominal amount. The government subsidies pertinent to assets will be recognized as other non-current debt-deferred income, equally amortized within the useful lives of the relevant assets and recognized as profit and loss at the same time. The government subsidies measured at their nominal amounts will be directly recognized as profit and loss in the current period. The government subsidies pertinent to incomes, those subsidies used for compensating related future expenses or losses will be recognized as deferred income and recognized as profit and loss during the period when the relevant expenses are recognized; those subsidies used for compensating related expenses or losses already existed will be directly recognized as income or cost in the current period. w. Deferred revenue Deferred revenue is the advance from customers which should be amortized on a straight-line basis over the expected beneficial period of 20 years and presented at cost net of accumulated amortization. x. Deferred tax assets and deferred tax liabilities Deferred tax assets and deferred tax liabilities are calculated and recognized based on the differences arising between the tax base of assets and liabilities and their carrying amount (temporary differences). Deferred tax asset is recognized for the deductible losses that can be carried forward to subsequent years for deduction of the taxable profit in in accordance with the tax law. No deferred tax liability is recognized for a temporary difference arising from the initial recognition of goodwill. No deferred tax asset or deferred tax liability is recognized for the temporary differences resulting from the initial recognition of assets or liabilities due to a transaction other than a business combination, which affects neither accounting profit nor taxable profit (or deductible loss) At the balance sheet date, deferred tax assets and deferred tax liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax assets are only recognized for deductible temporary differences, deductible losses and tax credits to the extent that it is probable that taxable profit will be available in the future against which the deductible temporary differences, deductible losses and tax credits can be utilized. Deferred tax liabilities are recognized for temporary differences arising from investments in subsidiaries and associates, except where the Group is able to control the timing of the reversal of the temporary difference, and it is probable that the temporary difference will not reverse in the foreseeable future. When it is probable that the temporary differences arising from investments in subsidiaries and associates will be reversed in the foreseeable future and that the taxable profit will be available in the future against which the temporary differences can be utilized, the corresponding deferred tax assets are recognized.22 2 Significant accounting policies and accounting estimates (continued) (25) Deferred tax assets and deferred tax liabilities (continued) Deferred tax assets and liabilities are offset when: ?The deferred taxes are relate to the same taxable entity and same taxation authority, and; ?That taxable entity has a legally enforceable right to offset current tax assets against current tax liabilities. y. Leases A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an asset. An operating lease is a lease other than a finance lease. Lease payments under an operating lease are recognized on a straight-line basis over the period of the lease, and are either capitalized as part of the cost of related assets, or charged as an expense for the current period. z. Held for sale and discontinuing operations Non-current asset or components of the corporation which meet all three conditions below can be classified as hold for sale: (1) the agreement of disposal is made. (2) The contract which can not withdraw is signed by both corporation and the transferee. (3) The transfer will be completed with in a year. A non-current asset classified as an asset held for sale is presented as other current asset at the lower of the carrying amount and the fair value less costs to sell. Any excess of the carrying amount over the fair value less the costs to sell is recognized as asset impairment loss. Discontinuing operations are disposed or classified as hold for sale components which can be respectively identified from both operating and preparing the financial statements of the corporation. aa. Segment information The Group identifies operating segments based on the internal organization structure, management requirement and internal reporting, than discloses segment information of reportable segments which is based on operating segments. An operating segment is the component of the Group that all of the following conditions are satisfied: (1) that component can earn revenues and incur expenses from ordinary activities; (2) whose operating results are regularly reviewed by the Group’s management in order to make decisions about resources being allocated to the segment and assess its performance, and (3) for which the information of financial position, operating results and cash flows are available to the Group. If two or more operating segments have similar economic characteristics, and certain conditions are satisfied, they may be aggregated into one operating segment. bb. Significant accounting estimates and judgements. The Group continually evaluates the critical accounting estimates and key judgements applied based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. There is no critical accounting estimate or key judgments of the Group in current year that will cause significant adjustments to the book value of assets and liabilities of next year.23 3. Taxation The types and rates of taxes applicable to the Group are set out below. Type Taxable basis Tax rate Enterprise income tax Taxable income 16.5%, 22% and 25% Value added tax (“VAT”) Taxable income from vehicle maintenance and utilities supplies on ships in shore (tax payable represents output VAT calculated using the taxable sales amount multiplied by the effective tax rate less deductible input VAT) 17% Taxable income from sales of scraps 3% Taxable income from transferof fixed asset (tax inclusive) 4% (levied by half) Business tax Taxable loading/unloading and transportation income 3% Taxable warehousing, logistic agency and rental income 5% Urban maintenance and construction tax VAT and Business tax paid 1% Education surplus VAT and Business tax paid 3% The applicable enterprise income tax rate for the Company and the subsidiaries located in Shenzhen Special Economic Zone had been 15%. Under the new CIT Law, the CIT income tax rate applicable to the Company and these subsidiaries will increase gradually to 25% within 5 years from 2008 to 2012. The applicable income tax rate for 2010 is 22%. The applicable enterprise income tax rate for the subsidiaries located in Dongguan city is 25%. Chiwan Wharf Holdings (H.K.) Limited (the “WHK”) and Chiwan Shipping (H.K.) Company Limited are subject to Hong Kong CIT income tax rate at 16.5% (2009: 16.5%). For the year ended 30 June 2010, several subsidiaries of the Company are still in the tax holiday of “5 year exemption and 5 year half reduction”. The details are set out below. (a) The profit derived from berth #11 of Chiwan Container Terminal Company Limited (“CCT”) is entitled to full exemption from income tax for five years commencing from its first profit making year and a 50% exemption for the following five years. 2010 is the tenth profit-making year of berth #11, CIT has been provided at a rate of 11% (2009: 10%). (b) The profit derived from berth #12 of CCT is entitled to full exemption from income tax for five years commencing from its first profit making year and a 50% exemption for the following five years. 2010 is the seventh profit-making year of berth #12, CIT has been provided at a rate of 11% (2009: Nil). (c) The profit derived from berth #13 of CCT is entitled to full exemption from income tax for five years commencing from its first profit making year and a 50% exemption for the following five years when certain requirement met. 2010 is the sixth profit-making year of berth #13, but is the fourth year for it to meet the requirement of related tax circular, CIT has been provided at a rate of 11% (2009: Nil).SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 4 Business combination and consolidation of financial statements (1) Particulars of the subsidiaries (a) Subsidiaries acquired through establishment or investment Full name of investees Type of subsidiaries Place of registration Nature of business Registered capital (in ten thousand Yuan unless otherwise stated) Principal activities Type of enterprise Legal representatives Organization code Shenzhen Chiwan International Freight Agency Company Limited Direct Shenzhen, PRC Logistics 550 Shipping agency service Domestically-funded enterprise Fan Zhaoping 61885111-4 Shenzhen Chiwan Terminal Company Limited Direct and indirect Shenzhen, PRC Logistics 5,000 Port services Domestically-funded enterprise Fan Zhaoping 19231989-1 Shenzhen Chiwan Trains-Grains Terminal Company Limited Direct Shenzhen, PRC Logistics 4,500 Warehousing of grains Chinese-Foreign equity joint venture Zhang Jianguo 61893398-8 Chiwan Wharf Holdings (H.K.) Limited Direct and indirect Hong Kong SAR, PRC Investments HKD1,000,000 Shipping agency service Foreign company NA NA Dongguan Chiwan Wharf Company Limited Direct and indirect Dongguan, PRC Logistics 26,130 Port services, warehousing and other logistic services Chinese-Foreign equity joint venture Wang Fen 79123972-X Dongguan Chiwan Terminal Company Limited Direct and indirect Dongguan, PRC Logistics 30,000 Port services, warehousing and other logistic services Chinese-Foreign equity joint venture Wang Fen 67307267-4 Grossalan Investments Limited Direct British Virgin Islands Investments USD 1 Investment holding Foreign company NA NA 24SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 4 Business combination and consolidation of financial statements (continued) (1) Particulars of the subsidiaries (continued) (a) Subsidiaries acquired through establishment or investment (continued) Name of subsidiaries Year end actual investment Substantial net investment on the subsidiaries recorded in other items Interest held (%) Voting right held (%) Consolidated Minority equity interest Reversal of minority profit / loss interest from minority equity interest Reversal of the portion of current year loss attributable to minority shareholders of subsidiaries exceeding their shares in that subsidiary’s opening equity, from the parent company’s owner’s equity Shenzhen Chiwan International Freight Agency Company Limited 5,500,000 - 100% 100% Yes - - - Shenzhen Chiwan Terminal Company Limited 50,000,000 - 100% 100% Yes - - - Shenzhen Chiwan Trains-Grains Terminal Company Limited 45,000,000 - 100% 100% Yes - - - Chiwan Wharf Holdings (H.K.) Limited 1,070,000 11,004,285 100% 100% Yes - - - Dongguan Chiwan Wharf Company Limited 261,300,000 - 100% 100% Yes - - - Dongguan Chiwan Terminal Company Limited 300,000,000 - 100% 100% Yes - - - Grossalan Investments Limited 8 - 100% 100% Yes - - - 662,870,008 11,004,285 - - - 25SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 4 Business combination and consolidation of financial statements (continued) (1) Particulars of the subsidiaries (continued) (b) Subsidiaries acquired under common control Full name of investees Type of subsidiaries Place of registration Nature of business Registered capital (in ten thousand Yuan unless otherwise stated) Principal activities Type of enterprise Legal representatives Organization code Shenzhen Chiwan Harbour Container Company Limited Direct and indirect Shenzhen, PRC Logistics 10,820 Container handling and other port services Chinese-Foreign Equity joint venture Wang Fen 61881729-0 Shenzhen Chiwan Transportation Company Limited Direct and indirect Shenzhen, PRC Logistics 1,500 container transportation, vehicle and port machinery maintenance Chinese-Foreign Equity joint venture Zheng Shaoping 61883349-3 Chiwan Container Terminal Company Limited Direct and indirect Shenzhen, PRC Logistics USD95,300,000 Container handling and other port services Chinese-Foreign Equity joint venture Wang Fen 61881700-4 Shenzhen Chiwan Shipping and Transportation Company Limited Direct and indirect Shenzhen, PRC Logistics 600 Cargo shipping Chinese-Foreign Equity joint venture Zheng Shaoping 61881638-6 Chiwan Shipping (H.K.) Company Limited Indirect Hong Kong, PRC Logistics HKD800,000 Shipping agency service Foreign company NA NA 26SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 27 4 Business combination and consolidation of financial statements (continued) (1) Particulars of the subsidiaries (continued) (b) Subsidiaries acquired under common control (continued) Name of subsidiaries Year end actual investment Substantial net investment on the subsidiaries recorded in other items Interest held (%) Voting right held (%) Consolidated Minority equity interest Reversal of minority profit / loss interest from minority equity interest Reversal of the portion of current year loss attributable to minority shareholders of subsidiaries exceeding their shares in that subsidiary’s opening equity, from the parent company’s owner’s equity Shenzhen Chiwan Harbour Container Company Limited 70,920,000 - 100% 100% Yes - - - Shenzhen Chiwan Transportation Company Limited 7,000,000 19 100% 100% Yes - - - Chiwan Container Terminal Company Limited 485,990,004 - 55% 55% Yes 686,157,907 - - Shenzhen Chiwan Shipping and Transportation Company Limited 6,000,000 - 100% 100% Yes - - - Chiwan Shipping (H.K.) Company Limited 856,000 - 100% 100% Yes - - - 570,766,004 19 686,157,907 - - All above subsidiaries and the Company had been under common control by Nanshan Group before and after the acquisition.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 28 4 Business combination and consolidation of financial statements (continued) (2) Exchange rates adopted on the translation of major financial statement items of the foreign operating entities Balance Sheet Item 30 June 2010 31 December 2009 Revenue, expense and cash flow item Chiwan Shipping (H.K.) Company Limited 1HKD = 0.8805RMB 1HKD = 0.8805RMB Current exchange rate of the transaction Grossalan Investments Limited 1HKD = 0.8805RMB 1HKD = 0.8805RMB Current exchange rate of the transaction 5 Notes to the consolidated financial statements (1) Cash at bank and at hand 30 June 2010 31 December 2009 Original currency Exchange rate RMB equivalent Original currency Exchange rate RMB equivalent Cash on hand- RMB 15,125 1.00 15,125 16,461 1.00 16,461 HKD 4,731 0.88 4,164 2,172 0.88 1,911 19,289 18,372 Cash at bank- RMB 804,936,447 1.00 804,936,447 528,155,273 1.00 528,155,273 USD 4,284,205 6.83 29,261,121 2,764,851 6.83 18,883,932 HKD 309,698,203 0.88 272,534,419 219,158,563 0.88 192,859,535 1,106,731,987 739,898,740 Other cash balances- RMB 1,132,319 1.00 1,132,319 1,054,020 1.00 1,054,020 USD 3,202 6.83 21,870 3,202 6.83 21,870 HKD 117,347 0.88 103,265 117,347 0.88 103,265 1,257,454 1,179,155 1,108,008,730 741,096,267 (2) Notes receivable 30 June 2010 31 December 2009 Bank acceptance notes 6,500,000 -SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 29 5 Notes to the consolidated financial statements (continued) (3) Interest receivable 31 December 2009 Current year additions Current year decreases 30 June 2010 Interest receivables 384,750 852,150 (1,094,400) 142,500 There was no interest overdue as at 30 June 2010 and 31 December 2009. (4) Accounts receivable 30 June 2010 31 December 2009 Accounts receivable 246,452,419 209,251,698 Less: provision for bad debts (74,334) (74,334) 246,378,085 209,177,364 (a) The ageing of accounts receivable is analysed below: 30 June 2010 31 December 2009 Within 1 year 246,137,767 208,430,782 1 to 2 years 136,960 687,145 2 to 3 years 153,257 91,953 3 to 4 years 24,435 - Over 5 year - 41,818 246,452,419 209,251,698 (b) Accounts receivable are analysed by categories as follows: 30 June 2010 31 December 2009 Book amount Provision for bad debts Book amount Provision for bad debts Amount % of total balance Provision for bad debts % of balance Amount % of total balance Provision for bad debts % of balance Receivables that are individually significant 184,599,052 74.9% (13,696) 0.0% 159,838,730 76.4% (13,696) 0.0% Receivables that are individually insignificant but are comparatively risky when grouped on the basis of similar credit risk characteristics - - - - - - - - Other insignificant receivables 61,853,367 25.1% (60,638) 0.1% 49,412,968 23.6% (60,638) 0.1% 246,452,419 100% (74,334) 0.0% 209,251,698 100% (74,334) 0.0%SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 30 5 Notes to the consolidated financial statements (continued) (4) Accounts receivable (continued) The management classified the five largest accounts receivable as “receivables that are individually significant”. (c) As at 30 June 2010, the bad debt provision for accounts receivable that are individually significant or individually insignificant but comparatively risky when grouped on the basis of similar credit risk characteristics is made as follows: Book amount Provision for bad debts % of balance Reason Customer A 81,325,057 (13,696) Not applicable Being long aged and disputedamount (d) As at 30 June 2010, no balances included in above accounts receivable are due from the shareholders of the Company who hold over 5% shares with voting rights (31 December 2009: Nil). (e) As at 30 June 2010, the Group’s five largest accounts receivable balances are analysed as follows: Relationship with the Group Amount Duration % of total accounts receivable balance Customer A Third party 81,325,057 Within 1 year and 1 to 2 years 33.0% Customer B Third party 49,014,757 Within 1 year 19.9% Customer C Third party 21,986,475 Within 1 year 8.9% Customer D Third party 16,496,190 Within 1 year 6.7% Customer E Third party 15,776,573 Within 1 year 6.4% 184,599,052 74.9%SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 31 5 Notes to the consolidated financial statements (continued) (4) Accounts receivable (continued) (f) Accounts receivable due from related parties are analyzed as follows: 30 June 2010 31 December 2009 Relationship with the Group Amount % of total accounts receivables Provision for bad debt Amount % of total accounts receivables Provision for bad debt Shenzhen Southsea Grains Industries Limited Controlled by the same parent company 1,245,557 0.5% - 1,281,446 0.6% - Mawan companies Associate of the Group 1,564,600 0.7% - 826,212 0.4% - Shenzhen Nantian Oilmills Company Limited “Nantian Oilmills”) Controlled by the same parent company 830,063 0.3% - 685,274 0.3% - 3,640,220 1.5% - 3,108,035 1.5% - (g) The following accounts receivable are denominated in foreign currencies: 30 June 2010 31 December 2009 Original currency Exchange rate RMB equivalent Original currency Exchange rate RMB equivalent USD 7,167,551 6.83 48,954,370 - - - HKD - - - 3,486,003 0.88 3,067,683 48,954,370 3,067,683SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 32 5 Notes to the consolidated financial statements (continued) (5) Other receivables 30 June 2010 31 December 2009 Current accounts with counterparties 104,373,535 20,503,435 Bond and deposits 2,427,929 2,314,581 Reserves 1,925,087 885,662 Others 51,829 158,125 108,778,380 23,861,803 Less: Provision for bad debts (2,101,562) (2,101,562) 106,676,818 21,760,241 (a) The ageing of other receivables is analysed below: 30 June 2010 31 December 2009 Within 1 year 104,797,885 21,079,970 1 to 2 years 1,084,847 231,709 2 to 3 years 488,699 158,648 3 to 4 years 724,698 843,228 4 to 5 years - 81,300 Over 5 years 1,682,251 1,466,948 108,778,380 23,861,803 (b) Other receivables are analysed by categories as follows: 30 June 2010 31 December 2009 Book amount Provision for bad debts Book amount Provision for bad debts Amount % of total balance Provision for bad debts % of balance Amount % of total balance Provision for bad debts % of balance Receivables that are individually significant 98,435,156 90.5% (1,551,780) 1.6% 16,370,732 68.6% (1,743,780) 10.7% Receivables that are individually insignificant but are comparatively risky when grouped on the basis of similar credit risk characteristics - - - - - - - - Other insignificant receivables 10,343,224 9.5% (549,782) 5.3% 7,491,071 31.4% (357,782) 4.8% 108,778,380 100% (2,101,562) 1.9% 23,861,803 100% (2,101,562) 8.8%SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 33 5 Notes to the consolidated financial statements (continued) (5) Other receivables (continued) (c) As at 30 June 2010, the bad debt provision for other receivables that are individually significant or individually insignificant as follows: Book amount Provision for bad debts % of balance Reason Zhennan Packing Holdings Limited 1,031,780 (1,031,780) 100% (i) Beijing Tonggang Co., Ltd. 520,000 (520,000) 100% (i) Shenzhen Xuqin Industrial Development Co., Ltd.(“Xuqin”) 320,000 (192,000) 60% 18,71,780 (1,743,780) (i) As at 30 June 2010, the above items all aged above 3 years, and the former two debtors were already bankrupted. The Group is in the view that these receivables are partially or fully irrecoverable, thus partial or full provision has been made on them. (d) None of other receivables were written off during the year. (e) As at 30 June 2010, no balances included in above other receivables are due from the shareholders of the Company who hold over 5% shares with voting rights (31 December 2009: Nil). (f) As at 30 June 2010, the Group’s five largest other receivables balances are analyzed as follows: Relationship with the Group Amount Duration % of total accounts receivable balance *Hinwin Development Ltd Third party 94,000,000 Within 1 year 86.4% China Merchants Maritime & Logistics (Shenzhen) Ltd. (“CMML”) Associate of the Company 1,911,230 Within 1 year 1.8% Zhennan Packing Holdings Limited Third party 1,031,780 Over 3 years 0.9% Mawan Co, Ltd. Associate of the Group 972,146 Within 1 year 0.9% Beijing Tonggang Co., Ltd. Third party 520,000 Over 3 years 0.5% 98,435,156 90.5% *The company signed stock rights transfer contracts with Hinwin Development Ltd on 29th,Jan,2010。The company had closed out its 20% share of the CMML at a cost of RMB 94,000,000. Hinwin Development Ltd had paid it at the end of June, but until to the 30th, Jun, because the related government was still making entry approved procedure, the company didn’t received this payment. Such payment had received on 12th, Jul, 2010.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 34 5 Notes to the consolidated financial statements (continued) (5) Other receivables (continued) (g) Other receivables due from related parties are analyzed as follows: 30 June 2010 31 December 2009 Relationship with the Group Amount % of total accounts receivables Provision for bad debt Amount % of total accounts receivables Provision for bad debt COCL Controlled by the same parent company - - - 13,090,624 54.9% - CMML Associate of the Company 1,911,230 1.8% - 1,408,328 5.9% - Mawan Associate of the Company 972,146 0.9% - 237,072 1.0% Xuqin Controlled by the same parent company 320,000 0.3% (192,000) 320,000 1.3% (192,000) China Petroleum Supply Base Co., Ltd. (“CPSB”) Controlled by the same parent company 135,622 0.1% - 135,622 0.6% - 3,338,998 3.1% (192,000) 15,191,646 63.7% (192,000) (h) The following other receivables are denominated in foreign currencies: 30 June 2010 31 December 2009 Foreign currency Original currency Exchange rate RMB equivalent Original currency Exchange rate RMB equivalent USD 115,849 6.83 791,249 18,191 6.83 124,245 HKD 280,556 0.88 246,889 84,438 0.88 74,305 1,038,138 198,550SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 35 5 Notes to the consolidated financial statements (continued) (6) Advance to suppliers (a) The ageing of advance to suppliers is analyzed below 30 June 2010 31 December 2009 Amount % of total balance Amount % of total balance Within 1 year 1,515,964 53% 2,575,562 100% 1 to 2 years 1,370,698 47% 190 0% 2,886,662 100% 2,575,752 100% (b) As at 30June 2010, the Group’s five largest advance to suppliers balances are analysed as follows: Relationship with the Group Amount % of total advance to suppliers Time of prepayment Unsettled reason The People’s Insurance Company (Group) of China Limited Third party 944,532 32.7% Year 2009 Relevant goods or services were not provided Hoi Tung (shanghai) company limited Third party 581,305 20.1% Year 2010 Relevant goods or services were not provided Shenzhen Yue Chengda information technology Limited Third party 511,111 17.7% Year 2010 Relevant goods or services were not provided Yantai Eastern China Electronic Software Technology Co., Ltd. Third party 417,000 14.4% Year 2009 Relevant goods or services were not provided China life property and cansualty insurance company limited Third party 307,450 10.7% Year 2010 Relevant goods or services were not provided 2,761,398 95.6% (c) As at 30 June 2010, the Group did not have any balances which were due to parties having 5% or above shareholdings in the Company (31 December 2009: Nil). (d) As at 30 June 2010, no balances of advance to suppliers were against related parties (31 December 2009: Nil). (e) As at 30 June 2010, no balances of advance to suppliers were denominated in foreign currencies (31 December 2009: Nil).SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 36 5 Notes to the consolidated financial statements (continued) (7) Inventories (a) Inventories by categories are analyzed as follows: 30 June 2010 31 December 2009 Book amount Provision for declines in the value of inventories Book value Book amount Provision for declines in the value of inventories Book value Spare parts 27,024,035 (3,396,128) 23,627,907 27,217,440 (3,396,128) 23,821,312 Fuel 1,185,672 - 1,185,672 1,736,947 - 1,736,947 Low cost consumables 48,426 - 48,426 58,047 - 58,047 28,258,133 (3,396,128) 24,862,005 29,012,434 (3,396,128) 25,616,306 (b) Provision for declines in the value of inventories is analyzed as follows: 31 December 2009 Current year provisions Current year decreases 30 June 2010 Reversals Write offs Spare parts (3,396,128) - - - (3,396,128) (3,396,128) - - - (3,396,128) (c) Details about provision for declines in the value of inventories is as follows: Basis of provision Reason of current year reversals % of current year reversals to stock year end balance Spare parts Net realizable value lower than the book value of spare parts Not applicable Not applicable (8) Available-for-sale financial assets 30 June 2010 31 December 2009 Available-for-sale equity instruments 6,090,000 7,140,000 Available-for-sale financial asset represented 1,000,000 PRC legal person shares of Jiangsu Expressway (the “Jiangsu Expressway”) held by the Company. As at 30 June 2010, the market value of the stocks in Shanghai Stock Exchange per the closing market price of the last trading day of year 2010 was RMB 6,090,000. Fair value change has lead to increase of capital surplus by RMB 819,000.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 37 5 Notes to the consolidated financial statements (continued) (9) Long term receivables 31 December 2009 Current year decrease 30 June 2010 Media Port Investments Limited 108,037,599 - 108,037,599 On 30 September 2002, China Merchants Holdings (International) Company Limited (the “CMHI”, a listed company in Hong Kong) and Shenzhen South Oil (Group) Company Limited (the “SSOG”) entered into an agreement called the “Agreement on Cooperation and Development of Mawan Port” (the “Development Agreement”) to incorporate three joint ventures, namely SMW, SMP and Shenzhen Mawan Terminals Co., Ltd. (“SMT”) (together referred to as “Mawan Companies”), to construct and operate the berth 0#, 5#, 6#, 7# and 8# in Mawan Port. According to the Development Agreement, CMHI and the Group will incorporate an associated company (Note 5 (10)) Media Port Investments Limited (the “MPIL”) first with equal percentage of equity held respectively. MPIL then incorporates the abovementioned three joint ventures together with SSOG, at 60% and 40% equity interest therein respectively. The total investment by the shareholders in these three Mawan joint ventures amounts to RMB 1,200,000,000. In 2003, according to the arrangement under the Development Agreement, WHK, a subsidiary of the Company, provided an interest free shareholder’s loan of HKD 169,815,000 to MPIL, and MPIL then injected the amount to the three Mawan companies as their paid-in capital. In 2006, the interest free shareholder’s loan was increased by HKD 39,320,388 and the increment was paid to the three companies by MPIL as paid-in capital. As at 31 December 2008, the RMB equivalent of the shareholder’s loan amounted to RMB 184,039,141. During year 2009, pursuant to meeting of board of directors of MPIL, such shareholders’ loans were decided to be partially repaid by portion according to the operation and funding situation of the Mawan companies. Therefore, the balance reduced to RMB 108,037,599 as at 31 December 2009. The above long-term receivable is part of the substantial investment to associates and the exchange differences arising in current year was recorded in “Equity – Translation differences of foreign currency financial statements”. The total investments by exceeding these three companies over their paid-in capital have been financed by bank loans. As at 30 June 2010, the total paid-in capital of these three Mawan companies was RMB 735,000,000. The shareholder’s loans to MPIL are unsecured, interest-free and have no fixed term of repayment. The Group has confirmed that it will not call for repayment of the loans if the associates are in need of them.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 38 5 Notes to the consolidated and the Company’s financial statements (continued) (10) Long-term equity investments 30 June 2010 31 December 2009 Associates (a) 322,259,529 332,152,738 Other long-term equity investments (b) 17,037,500 17,037,500 339,297,029 349,190,238 Less: Provision for impairment of long-term equity investments (c) (3,128,300) (3,128,300) 336,168,729 346,061,938 As at 30 June 2010, the long-term equity investments of the Group were not subject to restriction on disposal or remittance of return on investments.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 5 Notes to the consolidated and the Company’s financial statements (continued) (10) Long-term equity investments (continued) (a) Associates Current year additions / decreases Accounting method Initial investment cost 31 December 2009 Additional investment Share of net profit or loss of associates Cash dividends announced by associates Other equity changes 30 June 2010 Interest % Voting right % Reason of inconsistent interest % and voting right Provision for impairment balance Provision for impairment made in current year Shenzhen Cyber-harbour Network Co., Ltd.(“Cyber Network”) Equity method 1,875,000 12,489,764 - 939,805 - - 13,429,569 37.5% 37.5% Not applicable - - CMML Equity method 160,000,000 131,572,884 (64,232,743) (3,000,377) - - 64,339,764 20% 20% Not applicable - - MPIL* Equity method 139,932 188,090,090 - 56,400,106 - - 244,490,196 50% 50% Not applicable - - 332,152,738 (64,232,743) 54,339,534 - - 322,259,529 - - * The Company held 50% equity in MPIL, but has no control over it. Thus MPIL was treated as an associate of the Company. As stated in Note 5(9), the Company held 30% equity of the three Mawan Companies through MPIL. 39SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 5 Notes to the consolidated financial statements (continued) (10) Long-term equity investments (continued) (b) Other long-term equity investment Accounting method Initial investment cost 31 December 2009 Current year additions / decreases 30 June 2010 Interest % Voting right % Reason of inconsistent interest % and voting right Provision for impairment balance Provision for impairment made in current year Current year declared cash dividend China Ocean Shipping Agency (Shenzhen) Company Limited Cost method 13,510,000 13,510,000 - 13,510,000 15% 15% Not applicable - - - Shenzhen Petro-chemical Industry (Group) Company Limited. Cost method 3,500,000 3,500,000 - 3,500,000 0.26% 0.26% Not applicable (3,117,800) - - Guangdong Guang Jian Group Company Limited Cost method 27,500 27,500 - 27,500 0.02% 0.02% Not applicable (10,500) - - 17,037,500 - 17,037,500 (3,128,300) - - 40SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 41 5 Notes to the consolidated financial statements (continued) (10) Long-term equity investments (continued) (c) Provision for impairment of long-term equity investments 31 December 2009 Current year additions Current year decreases 30 June 2010 Other long-term equity investment -Shenzhen Petro-chemical Industry (Group) Company Limited (3,117,800) - - (3,117,800) -Guangdong Guang Jian Group Company Limited (10,500) - - (10,500) (3,128,300) - - (3,128,300) (11) Investment in associates The particular of the associates are set out as below. 30 June 2010 2010 Entity type Place of incorporation Legal representative Organisation code Nature of business Registered capital Interest held Voting right held Total assets Total liabilities Net assets Operating revenue Net profit / (loss) Associates – Cyber Network Sino-foreign invested enterprise Shenzhen, China Luo Huilai 73207614-X Network service 5 million 37.5% 37.5% 44,093,594 9,274,725 34,818,869 23,028,762 2,506,146 CMML Sino-foreign iivested enterprise Shenzhen, China Hu Jianhua 75045115-0 Warehousing service 400 million 20% 20% 1,297,700,100 976,001,280 321,698,820 54,211,971 (7,233,389) MPIL Foreign enterprise British Virgin Islands Not applicable Not applicable Investment USD 10 50% 50% HKD 481,080,513 HKD 245,582,804 HKD 235,497,709 - HKD (2,076) All above summary financial information of associates are extracted from their statutory financial statements or management accounts. The Group has applied the accounting policy of the Group to the results of the associates in equity accounting of the share of results of the associates.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 42 5 Notes to the consolidated financial statements (continued) (12) Investment property 31 December 2009 Current year additions Current year decreases 30June 2010 Cost totals 45,014,939 - - 45,014,939 Buildings / properties 13,505,974 - - 13,505,974 Land use right 31,508,965 - - 31,508,965 Accumulated depreciation / amortization totals 16,160,429 453,552 - 16,613,981 Buildings / properties 3,729,153 146,669 - 3,875,822 Land use right 12,431,276 306,883 - 12,738,159 Book value totals 28,854,510 (453,552) - 28,400,958 Buildings / properties 9,776,821 (146,669) - 9,630,152 Land use right 19,077,689 (306,883) - 18,770,806 In the first half of 2010, investment property depreciation / amortization of RMB 453,552 (Jan.-Jun.2009: RMB 443,774) has been charged. Part of the previously self used properties was leased out in current year, thus reclassified as investment property at such change. All the above investment property is held for lease. As at 30 June 2010 and at 31 December 2009, none of the investment property has obtained Building and Land Ownership Certificate. Please refer to Note 5(15) for the reason and response from management.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 43 5 Notes to the consolidated financial statements (continued) (13) Fixed assets 31 December 2009 Current year additions Current year decreases 30 June 2010 Cost totals 3,642,788,499 54,630,282 (9,067,708) 3,688,351,073 Harbor facilities 953,316,348 - - 953,316,348 Warehouses, container yards and buildings 548,348,131 241,400 - 548,589,531 Machinery and equipments 1,793,509,327 50,063,014 (419,318) 1,843,153,023 Motor vehicles, cargo ships and tugboats 260,879,490 1,296,755 (7,946,836) 254,229,409 Other equipments 86,735,203 3,029,113 (701,554) 89,062,762 Accumulated depreciation totals 1,373,017,850 89,525,942 (5,326,032) 1,457,217,760 Harbor facilities 204,281,404 9,851,791 - 214,133,195 Warehouses, container yards and buildings 178,480,382 15,030,346 - 193,510,728 Machinery and equipments 818,321,237 52,206,400 (376,379) 870,151,258 Motor vehicles, cargo ships and tugboats 110,872,450 7,810,851 (4,641,850) 114,041,451 Other equipments 61,062,377 4,626,554 (307,803) 65,381,128 Net book amount totals 2,269,770,649 (34,895,660) (3,741,676) 2,231,133,313 Harbor facilities 749,034,944 (9,851,791) - 739,183,153 Warehouses, container yards and buildings 369,867,749 (14,788,946) - 355,078,803 Machinery and equipments 975,188,090 (2,143,386) (42,939) 973,001,765 Motor vehicles, cargo ships and tugboats 150,007,040 (6,514,096) (3,304,986) 140,187,958 Other equipments 25,672,826 (1,597,441) (393,751) 23,681,634 Provision for impairment loss totals 60,724,201 - (4,200) 60,720,001 Harbor facilities - - - - Warehouses, container yards and buildings* 60,695,381 - - 60,695,381 Machinery and equipments - - - - Motor vehicles, cargo ships and tugboats 28,820 - (4,200) 24,620 Other equipments - - - - Net book value totals 2,209,046,448 (34,895,660) (3,737,476) 2,170,413,312 Harbor facilities 749,034,944 (9,851,791) - 739,183,153 Warehouses, container yards and buildings 309,172,368 (14,788,946) - 294,383,422 Machinery and equipments 975,188,090 (2,143,386) (42,939) 973,001,765 Motor vehicles, cargo ships and tugboats 149,978,220 (6,514,096) (3,300,786) 140,163,338 Other equipments 25,672,826 (1,597,441) (393,751) 23,681,634 (*) In 2007, the Group planned to relocate part of the general cargo business and facilities to Dongguan Machong Port, and made certain impairment provision of certain demolition for related warehouses, container yards and buildings accordingly. As at 30 June 2010, the management of the Group considered that impairment provision against the fixed assets were sufficient. Depreciation charge In the first half of 2010 amounted to RMB 89,525,942 (Jan.-Jun.2009: RMB 86,834,860). Fixed assets amounted to RMB 46,085,622 (Jan.-Jun.2009: 2,798,354) were transferred from construction in progress in current year. In the first half of 2010, depreciation expenses of RMB 86,107,646 (Jan.-Jun.2009: RMB 81,960,395) and RMB 3,418,296 (Jan.-Jun.2009: RMB 4,874,465) were charged to cost of revenue and general and administrative expenses, respectively.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 44 5 Notes to the consolidated financial statements (continued) (13) Fixed assets (continued) (a) Temporary idle fixed assets As at 30 June 2010, buildings, machinery and equipment with a net book amount of approximately RMB 4,364,375 (cost: RMB 30,927,998) were temporary idle (31 December 2009: net book amount: RMB 4,517,799, cost: 30,927,998), due to that management has not designated their usage. Details are as follows: Cost Accumulated depreciation Impairment Net book amount Warehouses, container yards and buildings 30,927,998 (26,563,623) - 4,364,375 (b) Fixed assets with ownership certificates to be obtained As at 30 June 2010, ownership certificates of buildings (“Buildings and Land Ownership Certificates”) for certain buildings of the Group with carrying amount of approximately RMB 130,161,391 (cost: RMB 222,362,485) had not yet been obtained (31 December 2009: carrying amount: RMB 83,326,227, cost: RMB 111,437,724). Please refer to Note 5(15) for the reason and response from management. (14) Construction in progress 30 June 2010 31 December 2009 Book value Provisionfor impairment Net book value Book value Provision for impairment Net book value Land formation and dredging projects for berth 2#-3# at Machong Port 236,458,187 - 236,458,187 236,230,716 - 236,230,716 Berth 2#-3#, Machong Port 269,208,976 - 269,208,976 260,324,130 - 260,324,130 MQ2535/4025 RTGs 20,981,217 - 20,981,217 40,988,241 - 40,988,241 Berth 4#-5#, Machong Port 3,893,592 - 3,893,592 3,793,592 - 3,793,592 Others 35,480,608 - 35,480,608 34,293,883 - 34,293,883 566,022,580 - 566,022,580 575,630,562 - 575,630,562SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 45 5 Notes to the consolidated financial statements (continued) (14) Construction in progress (continued) (a) Movement of significant construction in progress Name of projects Budget 31 December 2009 Current year additions Transfer to fixed assets during the current year Other reduction 30 June 2010 % of actual cost to budget Percentage of completion Accumulated capitalised borrowing cost Borrowing cost capitalised In Jan.-Jue.2010 Weighted average interest rate Sources of fund Land formation and dredging projects for berth 2# -3# at Machong Port 321,778,940 236,230,716 227,471 - - 236,458,187 73% 73% 6,534,010 227,471 2.5-4.779% Self Funding and loan Berth 2# and 3#, Machong Port 304,522,494 260,324,130 8,884,846 - - 269,208,976 88% 88% 3,173,406 457,844 2.5-4.779% Self Funding and loan MQ2535/4025 RTGs 71,680,000 40,988,241 18,029,062 (38,036,086) - 20,981,217 82% 82% 643,304 29,063 2.5-4.779% Self Funding and loan Berth 4# - 5#, Machong Port 9,006,200 3,793,592 100,000 - - 3,893,592 43% 43% - - 2.5-4.779% Self Funding Others 59,708,105 34,293,883 10,527,305 (8,049,536) (1,291,044) 35,480,608 - - 122,172 - Self Funding and loan 575,630,562 37,768,684 (46,085,622) (1,291,044) 566,022,580 10,472,892 714,378SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 46 5 Notes to the consolidated financial statements (continued) (14) Construction in progress (continued) (b) As at 30 June 2010, the progresses for significant constructions are analysed as below: Progress Notes Land formation and dredging projects for berth 2# - 3# at Machong Port Buildings partially completed, port nearly completed. Project not checked and accepted Progress is estimated basing on injection vs budget Berth 2# and 3#, Machong Port Buildings partially completed, port nearly completed. Project not checked and accepted Progress is estimated basing on injection vs budget MQ2535/4025 RTGs Machinery partially arrived and under installment, partially in transit Progress is estimated basing on injection vs budget Berth 4# - 5#, Machong Port In prophase survey and flattening Progress is estimated basing on injection vs budget (15) Intangible assets 31 December 2009 Current year additions Current year reductions 30 June 2010 Original cost totals 1,491,145,095 - - 1,491,145,095 Land use rights – prepaid under lease (a) 1,419,159,549 - - 1,419,159,549 Land use rights– purchased 19,343,189 - - 19,343,189 Computer software 18,940,657 - - 18,940,657 Coastal line use rights 33,701,700 - - 33,701,700 Accumulated amortization totals (419,212,000) (18,880,351) - (438,092,351) Land use rights – prepaid under lease (a) (400,519,896) (15,233,677) - (415,753,573) Land use rights– purchased (1,069,211) (2,872,222) - (3,941,433) Computer software (17,005,426) (362,807) - (17,368,233) Coastal line use rights (617,467) (411,645) - (1,029,112) Net book value totals 1,071,933,095 (18,880,351) - 1,053,052,744 Land use rights – prepaid under lease (a) 1,018,639,653 (15,233,677) - 1,003,405,976 Land use rights– purchased 18,273,978 (2,872,222) - 15,401,756 Computer software 1,935,231 (362,807) - 1,572,424 Coastal line use rights 33,084,233 (411,645) - 32,672,588 In the first half of 2010, the amortization of intangible assets amounted to RMB18,880,351 (Jan.-Jun.2009: RMB 18,698,420).SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 47 5 Notes to the consolidated financial statements (continued) (15) Intangible assets (continued) (a) Group has leased from Nanshan Group several plots of land with a total area of 752,699 sq. meters within Chiwan port for a lease term of 20 - 50 years with up-front payments of RMB 684,453,783 made. The lands were injected by Shenzhen Investment Holding Corporation in 1982 as part of the consideration in acquiring the equity interests of Nanshan Group. As the PRC laws prevailing at that time did not provide for a mechanism for the issuance of official certificates of the land use rights, Nanshan Group has not obtained the land use right certificates of the leased land so far. In June 2003 and September 2004, CCT entered into a land use agreement with Nanshan Group and leased two plots of land, one with an area of 117,827.2 square meters for 40.5 years and the other with an area of 171,089.478 square meters for 39 years, at the consideration of RMB 271,002,558 and RMB 444,832,643 respectively. Also no official certificates for such lands were obtained by Nanshan Group. Correspondingly, the buildings located on such lands have not obtained relevant real estate certificates. Nanshan Group issued irrevocable and unconditional letters of indemnity to the Group in March 2001, June 2003 and September 2004, undertaking to indemnify the Group against any losses arising from or in connection with the leased land use rights. The directors of the Company therefore considered there was no significant impairment risk nor any significant contingent liabilities related to the above assets. The Company realises that Nanshan Group is actively discussing such historical problem with relevant governmental organizations, however, it is not in a position to reliably estimate the time of obtaining relevant certificates. (16) Goodwill 31 December 2009 Current year additions Current year decreases 30 June 2010 CCT 10,858,898 - - 10,858,898 The goodwill arose from the acquisition of the minority interests in CCT, being the difference of the additional cost of investment and the Group’s share of the fair value of the identifiable net assets in CCT.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 48 5 Notes to the consolidated financial statements (continued) (16) Goodwill (continued) (a) Impairment Goodwill allocated to the asset groups or compositions of asset groups of the Group at impairment tests are summarized by operating segments as follows: 30 June 2010 31 December 2009 Loading and unloading business - Mainland China 10,858,898 10,858,898 The recoverable amount of the asset groups and compositions of asset groups was determined according to the 5-year budget approved by the management, and calculated per cash flow forecasts. Estimated growth rate in cash flow above this 5-year was calculated as follows. Major assumptions applied in the future cash flow forecast method: Loading and unloading business – Mainland China Growth rate 0% Gross margin 53% Discount rate 13.2% The weighted average growth rate that management adopted is consistent with forecasts in relevant industry analysis reports, and did not exceed the long-term average growth rate of various services. Management developed a budgeted gross profit margin according to experience and forecast in market development, as well as the pre-tax interest rate that can reflect the specific risk of relevant asset group or combination of asset group, as discount rate. Such assumptions are applied to analyze the asset group or combination of asset group within relevant operating segment.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 49 5 Notes to the consolidated financial statements (continued) (17) Long-term prepaid expenses 31 December 2009 Current year additions Current year amortizations Other decreases 30 June 2010 Construction expenditure of Tonggu sea-route (a) 60,870,857 - (922,286) - 59,948,571 Foresea packing ground 4,832,736 - (604,092) - 4,228,644 Cement fender - 979,000 (16,317) - 962,683 Improvement to fixed assets under operating leases 129,988 - (129,988) - - Golf membership 495,915 - (80,286) - 415,629 Building decoration 22,083 - (22,083) - - Others 287,147 - (233,986) - 53,161 66,638,726 979,000 (2,009,038) - 65,608,688 (a) In 2007, the Shenzhen municipal government commenced the construction work of the public sea route connecting Tonggu sea route, Shekou port area, Chiwan port area, Mawan port area, Qianhaiwan port area and Dachanwan port area (“Tonggu Sea Route”). As required by a decision by the government, 60% of construction expenditure would be allocated to the port operators while the remaing 40% born by the government. The port operators in Western Shenzhen port areas were allocated 35% of the total expenditure, and subsequently agreed the portion to each operator, taking into accounts of the factors including the function, waterfront length, berthing ship of each porter etc. The total expenditure of RMB 64,560,000 were allocated to the Group and accounted for as Long term prepaid expenses, being amortized on a straight line basis over 35 years which is the expected useful live of Tonggu Sea Route starting from 2008 when the Tonggu Sea Route was ready for use. (18) Other non-current assets In March 2006, the Company entered into the agreement of “Frame contract for cooperation on usage of quay and land for berth 2# & 5# at Machong Port in Dongguan” with Dongguan Humen Port Administration Commission to purchase a land with an area of 800,000 square meters and area of water with depth of 700 meters from the front of terminal, together with the use right of 1,200 meters coast line, for berth 2# to berth 5# in Dongguan Machong Port at a consideration of RMB 260,000,000. Up to 30 June 2010, the Company has paid the first、second and third installments of the consideration. As parts of land and water area have not been made available for use by the Company, the relevant payments were therefore recognized as other non-current assets.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 50 5 Notes to the consolidated financial statements (continued) (19) Deferred tax assets and deferred tax liabilities (a) Deferred tax assets before offsetting 30 June 2010 31 December 2009 Deferred tax assets Deductible temporary difference and losses Deferred tax assets Deductible temporary difference and losses Provision for asset impairment 14,339,429 66,522,429 14,289,664 66,296,225 Depreciation of fixed assets and amortization of intangible assets 11,772,483 48,315,832 11,770,601 48,307,278 Deductible losses 3,731,207 13,370,108 9,477,396 39,489,150 Accrued expenses 1,659,888 11,116,079 5,461,258 28,395,034 Pre-operational expenses 1,137,504 10,111,148 1,137,504 10,111,148 Compensation for Pingnan railway 955,277 4,342,170 1,910,555 8,684,341 Others 223,343 1,015,196 241,302 1,096,827 33,819,131 154,792,962 44,288,280 202,380,003 (b) Deferred tax liabilities before offsetting 30 June 2010 31 December 2009 Deferred tax liabilities Taxable temporary difference Deferred tax liabilities Taxable temporary difference Change in fair value of available for sale equity financial assets recorded in capital surplus 1,093,400 4,970,000 1,324,400 6,020,000SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 51 5 Notes to the consolidated financial statements (continued) (19) Deferred tax assets and deferred tax liabilities (continued) (c) As at 30 June 2010, there were no offsets between deferred tax assets and liabilities (31 December 2009: Nil). (20) Provision for impairment of assets Current year reduction 31 December 2009 Current year addition Reverse Utilized 30 June 2010 Bad debt provisions 2,175,896 - - - 2,175,896 Provision for declines in the value of inventories(Note 5(7)) 3,396,128 - - - 3,396,128 Provision for impairment of long-term equity investments (Note 5(10)) 3,128,300 - - - 3,128,300 Provision for impairment of fixed assets (Note 5(13)) 60,724,201 - - (4,200) 60,720,001 69,424,525 - - (4,200) 69,420,325SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 52 5 Notes to the consolidated financial statements (continued) (21) Short-term borrowings (a) Category of short-term borrowings 30 June 2010 31 December 2009 Bank loans - unsecured 850,080,000 777,040,000 All the above bank loans were denominated in HKD. As at 30 June 2010, the balance represented HKD 966,000,000. As at 30 June 2010, the weighted average interest rate of the short-term borrowings was 0.87% per annum (31 December 2009: 1.59%). (b) As at 30 June 2010 and 31 December 2009, there were no due but unpaid short-term borrowings. (22) Notes payable 30 June 2010 31 December 2009 Bank acceptance notes 8,866,000 20,466,600 As at 30 June 2010, RMB 8,866,000 had an expected maturity within 1 year (31 December 2009: RMB 20,466,600)。 (23) Accounts payable 30 June 2010 31 December 2009 Construction amounts payable 173,303,178 193,173,197 Material purchase amounts payable 25,371,478 12,677,330 Service amounts payable 15,398,305 17,975,209 Rental payables 3,932,695 3,051,569 Machinery procurement amounts payable 852,334 416,409 218,857,990 227,293,714 (a) As at 30 June 2010, the Group did not have any accounts payable balances which were due to parties having 5% or above shareholdings in the Company (31 December 2009: nil).SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 53 5 Notes to the consolidated financial statements (continued) (23) Accounts payable (continued) (b) Accounts payable due to related parties: 31 June 2010 31 December 2009 Shenzhen Haiqin Engineering Supervision Co. Ltd. (“Haiqin Engineering”) 9,972,227 10,040,807 Nanshan Group 6,836,983 4,238,999 Xuqin 3,623,885 2,514,454 Cyber Network - 1,147,398 20,433,095 17,941,658 (c) As at 30 June 2010, accounts payable with aging over 1 year amounting to RMB 11,607,960 (31 December 2009: RMB 5,224,028) were mainly payable for construction and project management services. As the related construction projects have not been completed yet, the accounts have not been settled. Up to the approval date of these financial statements, there is no significant repayment. (d) The following accounts payable balances are denominated in foreign currency: 30 June 2010 31 December 2009 Original currency Exchange rate RMB equivalent Original currency Exchangerate RMB equivalent USD 7,432 6.83 50,761 107,539 6.83 734,491 HKD 1,849,564 0.88 1,627,616 2,988,369 0.88 2,629,765 1,678,377 3,364,256SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 54 5 Notes to the consolidated financial statements (continued) (24) Advances from customers 31 June2010 31 December 2009 Service fee receipt in advance 4,438,391 5,057,162 (a) As at 30 June 2010, the Group did not have any advance from customers balances which were due to parties having 5% or above shareholdings in the Company (31 December 2009: Nil). (b) As at 30 June 2010, no balances of advance from customers were from related parties (31 December 2009: Nil). (c) As at 30 June 2010, no balances of advance from customers were aged above 1 year (31 December 2009: Nil). (d) As at 30 June 2010, no balances of advance from customers were denominated in foreign currencies (31 December 2009: Nil). (25) Employee benefits payable 31 December 2009 Current year additions Current year reductions 30 June 2010 Wages and salaries, bonuses, allowances and subsidies 35,421,059 61,595,930 (87,758,014) 9,258,975 Staff welfare - 2,882,426 (2,882,426) - Social security contributions 6,261 7,591,718 (7,588,597) 9,382 Including: Medical insurance - 1,582,080 (1,582,080) - Basic pension - 5,515,818 (5,515,818) - Unemployment insurance - 131,246 (131,246) - Employment injury insurance 6,261 177,699 (174,578) 9,382 Generational insurance - 184,875 (184,875) - Defined contribution plan * 125,952 3,052,359 (3,052,359) 125,952 Housing funds - 5,331,150 (5,331,150) - Labor union and employee education funds 7,591,957 3,299,004 (2,085,192) 8,805,769 Others 2 - - 2 43,145,231 83,752,587 (108,697,738) 18,200,080 * On 3 June 2008, the Group participated in a group defined contribution plan of Nanshan Group approved by Shenzhen government. The above pension contributions were paid into the plan through Nanshan Group. As at 30 June 2010, employee benefits payable balance did not include default items (31 December 2009: Nil).SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 55 5 Notes to the consolidated financial statements (continued) (25) Employee benefits payable (continued) Pursuant to the resolution of 9th meeting of the 4th session board of directors on 29 March 2009, it s resolved that the management team will be granted a performance reward scheme basing on the current year net profit and yearly net asset return ratio. The Company has provided RMB 2,932,054 of management reward in the first half of 2010 (Jan.-Jun.2009: nil), which was debited to general and administrative expenses. (26) Taxes payable 30 June 2010 31 December 2009 Enterprise income tax payable 24,494,757 54,579,863 Withholding tax payable 18,971,988 18,971,988 Value-added-tax payable 780,474 464,777 Business tax payable 4,852,241 4,320,008 Others 1,826,790 733,211 50,926,250 79,069,847 (27) Interest payable 31 June 2010 31 December 2009 Interest payable for long-term borrowings that interests are payable by installment and principal at maturity 723,334 492,546 Interest payable for short-term borrowings - - 723,334 492,546 (28) Dividends payable 30 June 2010 31 December 2009 Payable to International Enterprise Co., Ltd. 97,781,630 97,781,630 Payable to Hidoney Developments Co., Ltd. 74,108,184 74,108,184 Public A Shares 30,571,255 - Public B Shares 58,466,015 - Nanshan Group 120,510,942 - 381,438,026 171,889,814SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 56 5 Notes to the consolidated financial statements (continued) (29) Other payables 30 June 2010 31 December 2009 Refunds of Harbor Construction Fee (*) 62,418,606 65,350,430 Temporary receipts 24,978,422 15,273,141 Security expense payable 14,504,464 12,901,204 Relocation compensation for subway (**) 3,999,234 3,999,234 Rental payable 3,325,000 2,660,000 Deposits received 1,678,014 1,815,175 Insurance indemnity 1,305,459 1,148,358 Due to Nanshan Group 1,278,457 7,752 Service fees 1,272,431 1,438,019 Due to employees 1,103,007 1,194,515 Others 5,301,895 16,377,753 121,164,989 122,165,581 (*) The amount was refunds of Port Construction Fee received by the Company and CCT from Shenzhen Communication Bureau. According to the related circular “Port construction fee supervising method“ issued by the Ministry of Finance, the use of the refunds should be controlled strictly and separately for port facility construction. (**) The amount was unutilized compensation awarded by Shenzhen Nanshan District government through Nanshan Group pursuant to document SNDTCZ[2008]008# for stacking yards relocation due to municipal railway construction. The balances will be used to offset the expenses occurred in the future stacking yards relocation. (a) As at 30 June 2010, except for the amount due to Nanshan Group, the Group did not have any other payables which were due to parties having 5% or above shareholdings in the Company. (b) Other payables due to related parties: 30 June 2010 31 December 2009 Due to Mawan companies 15,863,339 2,376,938 Due to Nanshan Group 1,278,457 7,752 Due to COCL 138,650 10,642,043 17,280,446 13,026,733SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 57 5 Notes to the consolidated financial statements (continued) (29) Other payables (continued) (c) As at 30 June 2010, other payables with aging over 1 year amounting to RMB 14,283,059 (2009: RMB 2,761,619) are mainly deposits. As the relevant business keeps running, the amounts have not been settled. Up to the approval date of these financial statements, there was no significant repayment. (d) The following other payable balances are dominated in foreign currency: 30 June 2010 31 December 2009 Original currency Exchange rate RMB equivalent Original currency Exchange rate RMB equivalent USD 751,998 6.83 5,136,146 326,184 6.83 2,227,837 HKD 505,368 0.88 444,724 523,548 0.88 460,722 5,580,870 2,688,559 (30) Current portion of non-current liabilities 30 June 2010 31 December 2009 Current portion of long-term borrowings (a) 281,600,000 167,200,000 Current portion of deferred revenue(Note 5(32)) 4,951,750 4,951,750 286,551,750 172,157,750 (a) Current portion of long-term borrowings 30 June 2010 31 December 2009 Bank borrowings - unsecured 281,600,000 167,200,000 As at 30 June 2010, the balance of current portion of long-term borrowings represented the borrowing of HKD 150,000,000 by the company and the borrowing of HKD 170,000,000 by the subsidiary of the Company, Chiwan Wharf Holding (H.K.) Limited. The borrowing was secured by a standby letter of credit of HKD 170,000,000 issuer by China Minsheng Bank Corp. Ltd. The borrowing does not include overdue but extended balance.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 58 5 Notes to the consolidated financial statements (continued) (30) Current portion of non-current liabilities Top five current portion of long-term borrowings: 30 June 2010 31 December 2009 Borrowing beginning Borrowing ending Currency Interest rate (%) Original currency RMB equivalent Original currency RMB equivalent 2008.06.25 2011.06.25 HKD 1.45% 11,000,000 9,680,000 - - 2008.07.22 2011.06.25 HKD 1.45% 139,000,000 122,320,000 - - 2008.12.05 2010.12.02 HKD 1.33% 170,000,000 149,600,000 190,000,000 167,200,000 281,600,000 167,200,000 (31) Long-term borrowings 30 June 2010 31 December 2008 Bank borrowings - unsecured(a) 290,400,000 422,400,000 (a) Top five long-term borrowing 30 June 2010 31 December 2009 Borrowing beginning Borrowing ending Currency Interest rate (%) Original currency RMB equivalent Original currency RMB equivalent Nanyang Commercial Bank 19 October 2009 19 October 2011 HKD 0.71% 150,000,000 132,000,000 150,000,000 132,000,000 Nanyang Commercial Bank 22 July 2008 25 June 2011 HKD 0.67-5.59% 139,000,000 122,320,000 Nanyang Commercial Bank 17 September 2009 17 September 2011 HKD 1.13% 100,000,000 88,000,000 100,000,000 88,000,000 Nanyang Commercial Bank 31 July 2008 25 July 2011* HKD 1.44-5.30% 80,000,000 70,400,000 80,000,000 70,400,000 Nanyang Commercial Bank 25 June 2008 25 June 2011 HKD 0.66-5.72% 11,000,000 9,680,000 290,400,000 422,400,000 * This loan had an original maturity of 25 July 2010 as well as 55%, namely HKD44,000,000, guarantee by the Company. It was subsequently extended by one year, at the same time the guarantee had been cancelled.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 59 5 Notes to the consolidated financial statements (continued) (b) Long-term borrowings are repayable as follows: 30 June 2010 31 December 2009 1 to 2 years 290,400,000 422,400,000 The weighted average interest rate of the long-term borrowings in the first half of 2010 was 0.90% per annum (Jan.-Jun.2009: 2.03%) (c) Undrawn committed borrowing facilities The Group has the following undrawn committed borrowing facilities as at 30 June 2010: Expiring within 1 year 1,262,400,000 Expiring in 1 to 2 years 400,000,000 Expiring in 2 to 3 years 1,891,134,000 Expiring more than 3 years 102,450,000 3,655,984,000 The undrawn committed borrowing facilities mentioned above would be used for the commitment capital expenditure (Note 8). As most of the bank borrowings were short-term, as at 30 June 2010, the Group had net current liabilities of RMB 445,792,010. The directors of the Company are confident that the Group can roll over the current borrowings and has sufficient bank borrowing facilities and other financial resources to repay bank borrowings when they fall due. Therefore, the financial statements of the Group for the month ended on 30 June 2010 are prepared on going concern basis.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 60 5 Notes to the consolidated financial statements (continued) (32) Other non-current liabilities 30 June 2010 31 December 2009 Deferred revenue 62,309,519 64,785,394 Deferred revenue 31 December 2009 - the portion of current liabilities 4,951,750 - the portion of non-current liabilities 64,785,394 69,737,144 Current year reduction (2,475,875) Less: the portion of current liabilities 4,951,750 30 June 2010 62,309,519 Residual useful years 13-14年 Deferred revenue is amortised on a straight-line basis over the expected beneficial period of 20 years and is presented at cost net of accumulated amortisation.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 5 Notes to the consolidated financial statements (continued) (33) Share capital 31 December 2009 Current year additions / decreases 31 June 2010 Issuance of new shares Presented shares Shares converted from accumulation fund Others Sub-total Shares with restriction on disposal - State shares - - - - - - - PRC legal person shares - - - - - - - Other domestic shares 361,942 - - - 232,208 232,208 594,150 Including: Domestic shares of legal person other than the State - - - - - - - Natural person shares 361,942 - - - 232,208 232,208 594,150 Foreign shares - - - - - - - Including: Foreign legal person shares股 Natural person shares - - - - - - - 361,942 - - - 232,208 232,208 594,150 Shares without restriction on disposal - Common shares in RMB 464,789,805 - - - - - 464,789,805 Domestically listed foreign shares 179,611,983 - - - (232,208) (232,208) 179,379,775 Others - - - - - - - 644,401,788 - - - (232,208) (232,208) 644,169,580 644,763,730 - - - - - 644,763,730 Since the share reformation scheme came into effect on 30 May 2006, the non tradable shares became tradable in 1 to 3 years. Up to 30 June 2010, all the shares held by Nanshan Group become tradable (Note 1). 61SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 62 5 Notes to the consolidated financial statements (continued) (33) Share capital (continued) 31 December 2008 Current year additions / decreases 31 December 2009 Issuance of new shares Presented shares Shares converted from accumulation fund Others Sub-total Shares with restriction on disposal - State shares PRC legal person shares Other domestic shares 324,608,912 - - - (324,246,970) (324,246,970) 361,942 Including: Domestic shares of legal person other than the State 324,316,070 - - - (324,316,070) (324,316,070) - Natural person shares 292,842 - - - 69,100 69,100 361,942 Foreign shares - - - - - - - Including: Foreign legal person shares股 Natural person shares - - - - - - - 324,608,912 - - - (324,246,970) (324,246,970) 361,942 Shares without restriction on disposal - Common shares in RMB 140,473,735 - - - 324,316,070 324,316,070 464,789,805 Domestically listed foreign shares 179,681,083 - - - (69,100) (69,100) 179,611,983 Others - - - - - - - 320,154,818 - - - 324,246,970 324,246,970 644,401,788 644,763,730 - - - - - 644,763,730SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 63 5 Notes to the consolidated financial statements (continued) (34) Capital surplus 31 December 2009 Current year additions Current year reductions 30 June 2010 Share premium 142,786,083 - - 142,786,083 Other capital surplus— Change in fair value of available-for-sale financial assets - Total (Note 5(8)) 6,020,000 - (1,050,000) 4,970,000 - Deferred tax liabilities (Note 5(19)) (1,324,400) - 231,000 (1,093,400) Transfer from the balance of capital surplus recognized under previous accounting system (2,781,133) - - (2,781,133) Others 709,605 - - 709,605 145,410,155 - (819,000) 144,591,155 31 December 2008 Current year additions Current year reductions 31 December 2009 Share premium 142,786,083 - - 142,786,083 Other capital surplus— Change in fair value of available-for-sale financial assets - Total(Note 5(8)) 4,320,000 1,700,000 - 6,020,000 - Deferred tax liabilities (Note 5(19)) (864,000) (460,400) - (1,324,400) Transfer from the balance of capital surplus recognized under previous accounting system (2,781,133) - - (2,781,133) Others 709,605 - - 709,605 144,170,555 1,239,600 - 145,410,155 (35) Surplus reserve 31 December 2009 Current year additions Current year reductions 30 June 2010 Statutory surplus reserve 355,134,736 28,435,668 383,570,404 Discretionary surplus reserve - - - 355,134,736 28,435,668 383,570,404 31 December 2008 Current year additions Current year reductions 31 December 2009 Statutory surplus reserve 355,134,736 - - 355,134,736 Discretionary surplus reserve - - - - 355,134,736 - - 355,134,736SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 64 5 Notes to the consolidated financial statements (continued) In accordance with the Company Law and the Company’s Articles of Association, the Company should appropriate 10% of net profit for the year to the statutory surplus reserve, the Company can cease appropriation when the statutory surplus reserve accumulated to more than 50% of the paid in capital. The statutory surplus reserve can be used to make up for the loss or increase the paid in capital after approval. The Company appropriates discretionary surplus reserve after shareholders’ meeting approves the Board of Director’s proposal. The discretionary surplus reserve can be used to make up for the loss or increase the paid in capital after approval. Pursuant to the board resolution on 8 April 2010, the Company appropriates 10% of net profit to statutory surplus reserve, namely RMB 28,435,668 (2008: 10% of net profit of 2008 and 2007, RMB 142,010,813 in total), no appropriation to discretionary reserve is provided. This proposal was approved by the annual general meeting of the shareholders on 11th, June, 2010, and has been recorded in this set of financial statements. (36) Retained earnings Jan.-Jun.2010 Jan.-Jun.2009 Amount Appropriate or distribution % Amount Appropriate or distribution % Opening retained earnings 1,721,028,196 - 1,624,545,217 - Add: Current year net profit attributable to the equity owners of the parent company 308,963,482 - 200,144,439 - Less: Appropriation of statutory reserves (28,435,668) - - - Common share dividends payable (209,548,212) 50% (322,381,865) 50% Reserve offsetting losses - - - - Closing retained earnings 1,792,007,798 1,502,307,791 As at 30 June 2010, included in the undistributed profits, the amount of RMB 462,317,849 is subsidiaries’ surplus reserve attributable to the Company (30 June 2009: RMB 460,621,058), among which nothing is appropriated for the first half year (Jan.-Jun.2009: nil). In accordance with the resolution at the Shareholder’s meeting dated on 9 April 2009, the Company paid the dividends of RMB 5 for each 10 shares of the issued shares as at 31 December 2008 which was 644,763,730 in total, with an aggregated amount of RMB 322,381,865 to the shareholders. In accordance with a resolution at the Board of Directors meeting dated 8 April 2010, the Board of Directors proposed dividend of RMB 3.25 for each 10 shares of the issued shares as at 31 December 2009 which was 644,763,730 in total, with an aggregated amount of RMB 209,548,212. The proposed dividend was approved by the annual general meeting of the shareholders on 11th, June, 2010, and has been recorded as liability as at 30 June 2010.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 65 5 Notes to the consolidated financial statements (continued) (37) Minority interests 30 June 2010 31 December 2009 CCT 686,157,907 567,608,774 (38) Revenue and cost of sales Jan.-Jun.2010 Jan.-Jun.2009 Revenue from main operations 809,922,098 690,973,171 Revenue from other operations 23,839,787 23,384,969 833,761,885 714,358,140 Jan.-Jun.2010 Jan.-Jun.2009 Cost of main operations 333,013,099 336,432,750 Cost of other operations 3,876,991 5,271,433 336,890,090 341,704,183 (a) Revenue and cost from main operations Analysis by business is as follows: Jan.-Jun.2010 Jan.-Jun.2009 Revenue from main operations Cost from main operations Revenue from main operations Cost from main operations Loading and unloading services 757,020,116 314,985,173 612,395,512 288,238,773 Transportation service 70,188,863 38,870,144 96,006,908 68,224,145 Agency and others services 3,555,337 - 2,600,919 - Elimination (20,842,218) (20,842,218) (20,030,168) (20,030,168) 809,922,098 333,013,099 690,973,171 336,432,750SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 66 5 Notes to the consolidated financial statements (continued) (38) Revenue and cost of sales (continued) (a) Revenue and cost from main operations (continued) Analysis by geographic area is as follows: Jan.-Jun.2010 Jan.-Jun.2009 Revenue from main operations Cost from main operations Revenue from main operations Cost from main operations Mainland China 808,068,595 333,013,099 689,565,053 336,432,750 Hong Kong 1,853,503 - 1,408,118 - 809,922,098 333,013,099 690,973,171 336,432,750 (b) Other revenue and cost Jan.-Jun.2010 Jan.-Jun.2009 Revenue from other operations Cost from other operations Revenue from other operations Cost from other operations Lease income 7,769,043 1,265,627 7,256,445 1,554,909 Security fee 5,592,274 - 4,760,147 - Other logistic services in port 3,782,631 223,312 3,493,280 808,553 Agency fee 2,236,507 1,183,204 2,168,896 936,041 Sales of material 690,565 - 430,636 - Containers management fee - - 985,300 - Parking lot income - - 377,499 708,521 Documentation fee 300,535 - 258,789 - Others 3,468,232 1,204,848 3,653,977 1,263,409 23,839,787 3,876,991 23,384,969 5,271,433 (c) Particulars of revenue from the top five customers of the Group Revenue from the top 5 customers with aggregate amount of 521,509,348 (Jan.-Jun.2010: RMB 447,313,484) accounted for 62.5% (Jan.-Jun.2009: 62.6%) of the Group’s total revenue. Details are as follows: Revenue % of total revenue of the Group Customer A 235,154,032 28.2% Customer B 176,746,117 21.1% Customer C 39,802,571 4.8% Customer F 38,278,166 4.6% Customer G 31,528,462 3.8% 521,509,348 62.5%SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 67 5 Notes to the consolidated financial statements (continued) (39) Tax and surcharges Jan.-Jun. 2010 Jan.-Jun. 2009 Accrual basis Business tax 28,739,075 24,394,461 See Note 3 City maintenance and construction tax 994,959 263,312 See Note 3 Educational surcharge 46,444 38,552 See Note 3 Others 116,842 170,292 29,897,320 24,866,617 (40) Financial (income)/expenses - net Jan.-Jun. 2010 Jan.-Jun. 2009 Interest expenses -Interests on borrowings 6,132,898 12,700,809 Less: interest income (2,825,461) (3,319,655) Exchange gains 668,086 680,905 - Exchange gains from operating activities 668,086 680,905 Others 940,177 476,729 4,915,700 10,538,788 * Relevant forward contract was completed in 2008. There was no similar transaction in 2009. (41) Investment income Jan.-Jun.2010 Jan.-Jun.2009 Investment income from investments under cost method of accounting - 7,270,550 Investment income from investments under equity method of accounting (Note 5 (10)(a)) 54,339,534 25,678,050 Loss from disposal of long-term investment 29,767,257 - Income from available-for-sale financial assets 310,000 - Sold the subsidiary - (1,741,108) 84,416,791 31,207,492 There is no significant restriction in receipt in remittance for investment income.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 68 5 Notes to the consolidated financial statements (continued) (41) Investment income (continued) (a) Investment income from long-term equity investments under cost method of accounting Investment income from top five investees or individually accounted to over 5% of total profit are analysed as below: Jan.-Jun.2010 Jan.-Jun.2009 Reason of fluctuation China Ocean Shipping Agency (Shenzhen) Company Limited - 7,270,550 The investee did not appropriate profit to shareholders this year (b) Investment income from long-term equity investments under equity method of accounting Investment income from top five investees or individually accounted to over 5% of total profit are analyzed as below: Jan.-Jun.2010 Jan.-Jun.2009 Reason of fluctuation MPIL 56,400,106 28,826,272 Increase in performance Cyber Network 939,805 1,485,854 Decrease in performance CMML (3,000,377) (4,634,076) Increase in performance 54,339,534 25,678,050 (42) Impairment (reversals) / losses Jan.-Jun.2010 Jan.-Jun.2009 Impairment losses for bad debts - (651,536) Impairment losses on fixed asset - - Impairment losses on long-term investment - - - (651,536)SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 69 5 Notes to the consolidated financial statements (continued) (43) Non-operating income Jan.-Jun.2010 Jan.-Jun.2009 Gain on disposal of non-current assets 2,008,173 6,702,553 Including:disposal of fixed assets 2,008,173 6,702,553 Government grant (a) 344,690 1,000,000 Others 116,311 133,730 2,469,174 7,836,283 (a) Details of government grants Jan.-Jun.2010 Jan.-Jun.2009 Subsidy in environmental conservancy project - 1,000,000 Special award of water saving 344,690 - 344,690 1,000,000 (44) Non-operating expenses Jan.-Jun.2010 Jan.-Jun.2009 Losses on disposal of non-current assets 57,458 97,859 Including: disposal of fixed assets 57,458 97,859 Donation 6,000 61,000 Penalty expenditure - 28,850 Others 41,899 162,714 105,357 350,423SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 70 5 Notes to the consolidated financial statements (continued) (45) Income tax expenses Jan.-Jun. 2010 Jan.-Jun. 2009 Current income tax 55,289,972 33,061,710 Deferred income tax 10,649,149 3,181,983 65,939,121 36,243,693 The reconciliation from income tax calculated based on applicable tax rate and total profit presented in the consolidated financial statements to the income tax expenses is as follows: Jan.-Jun. 2010 Jan.-Jun. 2009 Profit before income tax 493,451,736 327,514,639 Income tax calculated at the applicable tax rate of 22% (2009: 20%) 108,559,382 65,502,928 Effect of tax holidays (27,093,995) (24,423,891) Income not subject to tax (15,491,694) (6,241,498) Effect of different tax rate in other tax jurisdictions (34,572) (9,524) Tax losses of subsidiaries for which no deferred income tax asset as recognised - 209,608 Withholding tax (a) - 1,206,070 Costs and expenses not deductible for tax purposes - - Income tax expenses 65,939,121 36,243,693 (a) Withholding income tax was accrued at the rate of 5% or 10% for dividend payable to WHK for the year ended 31 December 2009, declared by those Group’s PRC subsidiaries of which WHK is a shareholderSHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 71 5 Notes to the consolidated financial statements (continued) (46) Earning per share (a) Earnings per share - basic Basic earning’s per share is calculated by dividing the profit attributable to shareholders of the Company by the weighted average number of ordinary shares in issue during the year. Jan.-Jun. 2010 Jan.-Jun. 2009 Consolidated profit attributable to shareholders of the Company 308,963,482 200,144,439 Weighted average number of ordinary shares in issue 644,763,730 644,763,730 Basic earnings per share 0.479 0.310 Includes: - Basic earnings per share from continuing operations: 0.479 0.310 (b) Earnings per share - diluted The Company had not potential dilutive outstanding equity instruments issued as at Jan.-Jun. 2010 and 2009, accordingly the diluted earnings per share are the same as the basic ones.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 72 5 Notes to the consolidated financial statements (continued) (47) Other comprehensive income Jan.-Jun. 2010 Jan.-Jun. 2009 Gain/(loss) arising from available-for-sale financial assets (1,050,000) 910,000 Less: Income tax relating to available-for-sale financial assets 231,000 (182,000) Subtotal (819,000) 728,000 Exchange differences arising from translating foreign operations 282 - Subtotal 282 - Loss from effective hedging portion of cash flow hedging instruments - - Less: Income tax relating to cash flow hedging instruments - - Subtotal - - Others - - Subtotal - - (818,718) 728,000SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 73 5 Notes to the consolidated financial statements (continued) (48) Notes to consolidated cash flow statements (a) Cash received relating to other operating activities Jan.-Jun. 2010 Jan.-Jun. 2009 Refunds of Harbor Construction Fee received by CCT (981,521) 11,780,460 Interest income 3,059,031 3,571,212 Government grant 344,690 - Others 5,754,973 2,436,962 8,177,173 17,788,634 (b) Cash paid relating to other operating activities Jan.-Jun. 2010 Jan.-Jun. 2009 Collection and payment on others behalf 8,645,922 (6,090,752) Lease expenses 172,853 140,995 Office expenses & utilities 7,450,339 6,633,041 Port expenses 3,143,587 4,599,695 Car expenses 1,991,373 1,682,908 Entertainment expenses 2,430,689 2,207,503 Asset insurance fee 1,954,592 2,060,000 Consulting & auditing fee 2,076,638 1,723,684 Travel & accommodation 1,559,967 1,390,894 Advertisements & exhibition expense 319,691 443,968 Others 10,753,160 5,163,867 40,498,811 19,955,803SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 74 5 Notes to the consolidated financial statements (continued) (49) Notes to consolidated cash flow statements (a) Notes to consolidated cash flow statements Reconciliation from the net profit to the cash flows from operating activities Jan.-Jun. 2010 Jan.-Jun. 2009 Net profit 427,512,615 291,270,946 Add: (Provisions for)/reversal of assets impairment - (651,536) Depreciation of fixed assets 89,525,942 86,834,860 Depreciation/amortization of investment property 453,552 443,774 Amortization of intangible assets 18,880,351 18,698,420 Amortization of long-term prepaid expenses 2,009,038 1,977,279 Gains on disposal of fixed assets and intangible assets (1,950,715) (6,604,694) Losses on scrapping of fixed assets - - Finance expenses/(income) 5,703,729 11,625,664 Investment (income)/lose (84,416,791) (31,207,491) Increase in deferred tax assets 10,469,149 3,181,982 Decrease/(increase) in inventories 754,301 253,052 (Increase)/decrease in operating receivables (34,928,208) (59,488,948) Increase/(decrease) in operating payables (56,425,726) (22,268,373) Net cash flows from operating activities 377,587,237 294,064,935 Net increase/(decrease) in cash and cash equivalents Jan.-Jun. 2010 Jan.-Jun. 2009 Cash at end of year 1,108,008,730 594,205,455 Less: cash at beginning of year 741,096,267 641,475,910 Net increase/(decrease) in cash 366,912,463 (47,270,455)SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 75 5 Notes to the consolidated financial statements (continued) (49) Notes to consolidated cash flow statements (continued) (b) Cash and cash equivalents 30 June 2010 31 December 2009 Cash Including: Cash on hand 19,290 18,372 Cash at bank without restriction 1,106,731,987 739,898,740 Other cash balance without restriction 1,257,453 1,179,155 Cash and cash equivalents at end of year 1,108,008,730 741,096,267SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 76 6 Segment information The management of the Company assesses the operating performance of load and unload operation, transportation, agency services and others respectively. The management of the Company identifies reviews the group internal reports regularly in order to assess their performance and make decisions of resources being allocated to the segment, which is the foundation of the Group identifying operation segments. The management of The Group evaluates the group operating performance on types of businesses and geography respectively. For types of businesses, the management evaluates the operating performances of loaded and unloaded operation, transportation and agency service and other services. Besides, the management evaluates the operation performance of agency service and other services in Mainland China and Hong Kong. Inter-segment transfers are measured by making reference to the sales to third parties. Expenses indirectly attributable to each segment are allocated among the segments based on the proportion of segment revenue.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 77 6 Segment information (continued) (a) Segment information as at and for the period ended 30 June 2010 is as follows: Load and unload operation Transportation Agency service and others Unallocated Elimination Total Revenue 780,859,901 70,188,864 3,555,338 - (20,842,218) 833,761,885 Including: revenue from external customers 780,859,901 49,346,646 3,555,338 - - 833,761,885 Inter-segment revenue - 20,842,218 - - (20,842,218) - Operating expenses 385,506,207 43,972,814 2,509,668 15,944,286 (20,842,218) 427,090,757 Operating profit 451,753,800 26,216,050 28,752,355 (15,634,286) - 491,087,919 Assets 5,326,921,672 198,893,451 94,401,502 339,668,995 (27,098,676) 5,932,786,944 Liabilities 474,978,262 16,110,941 166,948,988 1,664,110,214 (27,098,676) 2,295,049,729 Depreciation and amortization 102,805,827 8,000,228 62,828 - - 110,868,883 (Reversals)/loss on asset impairment - - - - - - Capital expenditures 46,575,956 346,141 7,898 - - 46,929,995SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 78 6 Segment information (continued) (b) Segment information as at and for the period ended 30 June 2010 is as follows: Load and unload operation Transportation Agency service and others Unallocated Elimination Total Revenue 635,163,208 96,370,824 3,015,456 - (20,191,348) 714,358,140 Including: revenue from external customers 635,163,208 76,179,476 3,015,456 - - 714,358,140 Inter-segment revenue - 20,191,348 - - (20,191,348) - Operating expenses 347,593,293 75,123,827 2,787,080 20,224,001 (20,191,348) 425,536,853 Operating profit/(loss) 316,396,187 21,246,997 2,609,596 (20,224,001) - 320,028,779 Assets 4,548,380,262 225,314,065 162,312,566 282,742,381 (34,723,702) 5,184,025,572 Liabilities 252,817,033 19,200,608 26,380,187 1,627,861,244 (34,723,702) 1,891,535,370 Depreciation and amortization 95,982,414 11,690,723 231,300 - - 107,904,437 Loss/(reversals) on asset impairment (651,536) - - - - (651,536) Capital expenditures 122,360,603 11,070,666 1,267,353 - - 134,698,622SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 79 6 Segment information (continued) The Group’s revenue from external customers of Mainland China and other countries or geographical areas for Jan.-Jun. 2010, and the total non-current assets other than financial assets and deferred tax assets located in the Mainland China and other countries or geographical areas as at 30 Jun 2010 are as follows: Revenue from external customers Jan.-Jun.2010 Jan.-Jun.2009 Mainland PRC 831,908,382 712,912,982 Hong Kong 1,853,503 1,445,158 833,761,885 714,358,140 Total non-current assets other than financial assets and deferred tax assets 30 June 2010 31 December 2009 Mainland PRC 4,403,492,537 4,482,949,170 Hong Kong 20,476 25,439 4,403,513,013 4,482,974,609 The revenues of RMB 521,509,348 of load and unload operation segment are derived from top 5 customers, represent 62.5% of the Group’s total revenue. 7 Related parties and related party transactions (1) The parent company (a) General information of the parent company Entity type Place of registration Legal representative Nature of business Organization code Nanshan Group Sino-foreign invested enterprise Shenzhen Fu Yuning Land development, port service and transportation, industry and commerce, tour, real estate and others 61883297-6 Nanshan Group is the ultimate controlling party of the Group. (b) Registered capital and changes in registered capital of the parent company 31 December 2009 Current year additions Current year decreases 30 June 2010 Nanshan Group 500,000,000 - - 500,000,000SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 80 7 Related parties and related party transactions (continued) (1) The parent company (continued) (c) The proportion of interests and voting rights in the Company held by the parent company 30 June 2010 31 December 2009 % interest held % voting rights % interest held % voting rights Nanshan Group 57.51% 57.51% 57.51% 57.51% (2) Subsidiaries The general background and other related information of the subsidiaries is set out in Note 4. (3) Associates The general background and other related information of the associates is set out in Note 5(11). (4) Other related parties Relationship with the Group Organization code CPSB A fellow subsidiary of the Company 61883389-9 Shenzhen Chixiao Engineering Construction Co. Ltd. (“Chixiao Engineering”) A fellow subsidiary of the Company 61883136-7 Haiqin Engineering a subsidiary of the shareholder of the parent company 61888000-1 Mawan companies (SMW, SMP, SMT) Indirect associates of the Company, and common key management personnel with the Company 74322579-6 74322582-5 74322581-7 Cyber Network Associate of the Company 73207614-X MPIL Indirect associate of the Company Not applicable Xuqin Controlled by the same parent company 70845749-5 Nantian Oilmills Common key management personnel with the Company 61881614-0 CMML Associate of the Company 75045115-0 Shenzhen Southsea Grains Industries Limited (“Southsea Grains”) Common key management personnel with the Company 61883769-7 COCL A fellow subsidiary of the Company 72616516-2SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 81 7 Related parties and related party transactions (continued) (5) Related party transactions Saved for disclosed in above, other major related party transactions are as follows: (a) Services provided or received Jan.-Jun. 2010 Jan.-Jun. 2009 Related party Type of transaction Nature of transaction Policies and determination procedures Amount % of total transaction Amount % of total transaction Nantian Oilmills Service received Loadand unload service Negotiation 1,453,185 0.58% 1,732,222 0.77% Cyber Network Service received Network service Negotiation 1,921,430 100% 2,150,750 100% Xuqin Service received Construction Negotiation 360,000 4.64% 76,695 0.66% Nantian Oilmills Loadand unload service 5,375,660 0.75% 6,814,345 1.18% Mawan companies Service provided Transportation service Negotiation 8,015,081 16.24% 6,530,811 14.65% Southsea grains Service provided Loadand unload service Negotiation 1,067,316 0.15% 917,761 0.15% CPSB Service provided Loadand unload service Negotiation 96,217 0.01% 345,150 0.06%SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 82 7 Related parties and related party transactions (continued) (5) Related party transactions (continued) (b) Lease The related parties’ pricing policies on lease of container yards and office land and buildings from Nanshan Group, Nantian Oilmills and CPSB are based on negotiation. Lessor Lessee Jan.-Jun. 2010 Jan.-Jun. 2009 Leased assets Start end Ending date Nanshan Group Entities of the Group 20,997,382 22,930,453 Land, buildings and packing yards various Respective expiry of operation of the group companies Nantian Oilmills CGCL 1,453,185 - Packing yards Mar 2010 March 2010 CPSB The Company 852,400 843,347 Land and buildings Jan 2010 Decrmber 2009 23,302,967 23,773,800 In Jan.-Jun. 2010, the operating lease payment to related parties accounted for 81.86% of total operating lease payment (Jan.-Jun. 2009: 74.34%). The Group lease buildings or others to related parties at negotiated price. Lessor Lessee Leased assets Leased asset value Start date Ending date Lease income Lease income recognition basis Lease income impact to the Group CCT Southsea Grains Office land 17,757,591 2010.01.01 2011.12.31 2,132,690 Agreed beneficiary period Less than 1% of the netprofit of the group CCT CMML Crane 1,716,610 2006.05 Not applicable 400,000 Agreed beneficiary period Less than 1% of the netprofit of the group The Company Haiqin Engineering Building 1,906,000 2010.01.01 2010.12.31 132,000 Agreed beneficiary period Less than 1% of the netprofit of the group 2,664,690SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 83 7 Related parties and related party transactions (continued) (6) Receivables from and payables to related parties 30 June 2010 31 December 2009 Accounts receivable Southsea Grains 1,245,557 1,281,446 Mawan companies 1,564,600 1,141,315 Nantian Oilmill 830,063 685,274 3,640,220 3,108,035 Other receivables COCL(a) - 13,090,624 CMML 1,911,230 1,408,328 Xuqin 320,000 320,000 Mawan companies 972,146 237,072 CPSB 135,622 135,622 3,338,998 15,191,646 Long-term receivables MPIL(Note 5(9)) 108,037,599 108,037,599 Accounts payables Haiqin Engineering 9,972,227 10,040,807 Nanshan Group 6,836,983 4,238,999 Xuqin 3,623,885 2,514,454 Cyber Network - 1,147,398 20,433,095 17,941,658 Other payables Mawan companies(b) 15,863,339 2,376,938 Nanshan Group 1,278,457 7,752 COCL(a) 138,650 10,642,043 17,280,446 13,026,733 (a) COCL was a subsidiary of the Company and sold to Nanshan Group in 2009, after which it became a related party of the Company. The current account balances represented those unsettled amount relating to relevant business at the disposal of COCL. (b) The Company cooperates with Mawan companies in marketing promotion activities. Some common expenses incurred in the cooperation are allocated to both parties based on certain reasonable criteria. For those payments and receipts made on behalf, the Company and Mawan companies recorded the amounts in other receivables or other payables.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 84 8 Commitments (1) Capital commitments Capital expenditures contracted for by the Group at the balance sheet date but not yet necessary to be recognised on the balance sheet are as follows: 30 June 2010 31 December 2009 Land and coastal line use rights 181,991,051 181,991,051 Harbour facilities 76,721,491 5,645,000 Buildings 15,559,061 19,022,361 Machinery and equipments 7,464,331 46,526,056 Others 13,216,907 993,942 294,952,841 254,178,410 (2) Operating lease commitments The future aggregate minimum lease payments due under the signed irrevocable operating leases contracts are summarized as follows: 30 June 2010 31 December 2009 Within one year 13,735,206 5,575,703 Between 1 and 2 years 3,756,800 2,037,141 Between 2 and 3 years 1,000,000 1,158,741 More than 3 years - 2,523,069 18,492,006 11,294,654 (3) Implementation of prior period commitments The Group has fulfilled the capital and operating lease commitments as of 31 December 2009 based on the relevant contracts.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 85 9 Discontinued operation None. 10 Events after the balance sheet date Significant events after balance sheet date Item Contents Impact to financial position and operation results Reason of inability to estimate Purchase of long-term equity investments Purchase of 40% of the COHA’s equity interest Asset and owner’s equity Increase by RMB749,655,300 Not applicable The Company has signed Agreement for Acquiring Increased Registered Capital (referred to as agreement for increased registered capital) with China Overseas port investment Co., LTD (referred to as China Overseas port investment in the following) and Shenzhen China Port Logistics Co., LTD (referred to as China port logistics) and China Harbor (Laizhou) Co., LTD (referred to as China Harbor) , while signed China harbour joint venture management contract (referred to as joint venture contract) with China Overseas port investment and China port logistics.In Accordance with agreement for increased registered capital and joint venture contract, the company will contribute seven hundred forty nine million six hundred fifty five thousand three hundred Yuan (RMB RMB 749,655,300 )to China Harbor occupying 40% shares. The investment fund will be paid on August 2010. 11 Assets and liabilities measured at fair value 31 December 2009 Current year fair value changes in profit or loss Current year fair value changes in equity Impairment provision made during the year 30 June 2010 Financial assets - Available-for-sale financial assets 7,140,000 (1,050,000) - - 6,090,000 12 Financial assets and liabilities denominated in foreign currency 31 December 2009 Impairment provision made during the year 30 June 2010 Financial assets - Loans and receivables 215,136,746 - 351,917,350 Financial liabilities 1,373,185,361 - 1,430,062,581SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 86 13 Notes to the Company’s financial statements (1) Accounts receivable 30 June 2010 31 December 2009 Accounts receivable 16,768,080 9,860,135 Less: provision for bad debts - - 16,768,080 9,860,135 (a) The ageing of accounts receivable is analysed below: 30 June 2010 31 December 2009 Within 1 year 16,768,080 9,860,135 1 to 2 years - - 16,768,080 9,860,135 (b) Accounts receivable are analysed by categories as follows: 30 June 2010 31 December 2009 Book amount Provision for bad debts Book amount Provision for bad debts Amount % of total balance Provision for bad debts % of balance Amount % of total balance Provision for bad debts % of balance Receivables that are individually significant 11,599,855 69.2% - - 7,938,914 80.5% - - Receivables that are individually insignificant but are comparatively risky when grouped on the basis of similar credit risk characteristics - - - - - - - - Other insignificant receivables 5,168,225 30.8% - - 1,921,221 19.5% - - 16,768,080 100% - - 9,860,135 100% - - The management classified the five largest accounts receivable as “receivables that are individually significant”. They are all aged within one year and the management considered no provision for bad debts is needed.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 87 13 Notes to the Company’s financial statements (continued) (1) Accounts receivable (continued) (c) As at 30 June 2010,, no bad debt provision has been made for accounts receivable that are individually significant or individually insignificant but comparatively risky when grouped on the basis of similar credit risk characteristics. (d) No accounts receivable have been written off during the year. (e) As at 30 June 2010, no balances included in above accounts receivable are due from the shareholders of the Company who hold over 5% shares with voting rights (31 December 2009: Nil). (f) As at 30 June 2010, the Group’s five largest accounts receivable balances are analysed as follows: Relationship with the Group Amount Duration % of total accounts receivable balance Customer H Third party 3,746,445 Within 1 year 22.3% Customer I Third party 3,137,264 Within 1 year 18.7% Customer J Third party 2,059,891 Within 1 year 12.3% Customer K Third party 2,000,610 Within 1 year 11.9% Customer L Third party 655,645 Within 1 year 4.0% 11,599,855 69.2% (g) As at 30 June 2010, there were no balances due from related parties (31 December 2009: Nil).SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 88 13 Notes to the Company’s financial statements (continued) (2) Other receivables 30 June 2010 31 December 2009 Loans to subsidiaries 399,968,776 349,668,776 Others 101,425,259 12,281,709 501,394,035 361,950,485 Less: Provision for bad debts (1,630,429) (1,630,429) 499,763,606 360,320,056 (a) The ageing of other receivables is analysed below: 30 June 2010 31 December 2009 Within 1 year 496,088,525 350,364,077 1 to 2 years 1,629,773 9,822,757 2 to 3 years 1,965,308 76,063 3 to 4 years 80,000 439,351 Over 5 years - 1,248,237 499,763,606 361,950,485 (b) Other receivables are analysed by categories as follows: 30 June 2010 31 December 2009 Book amount Provision for bad debts Book amount Provision for bad debts Amount % of total balance Provision for bad debts % of balance Amount % of total balance Provision for bad debts % of balance Receivables that are individually significant 497,066,019 99.1% - - 360,929,665 99.7% (1,031,780) 0.3% Receivables that are individually insignificant but are comparatively risky when grouped on the basis of similar credit risk characteristics 1,551,780 0.3% (1,551,780) 100% 520,000 0.2% (520,000) 100% Other insignificant receivables 2,776,236 0.6% (78,649) 2.8% 500,820 0.1% (78,649) 15.7% 501,394,035 100% (1,630,429) 0.3% 361,950,485 100% (1,630,429) 0.5% The management classified the five largest accounts receivable as “receivables that are individually significant”. They are all aged within one year.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 89 13 Notes to the Company’s financial statements (continued) (2) Other receivables (continued) (c) As at 30 June 2010, the bad debt provision for other receivables that are individually significant or individually insignificant but comparatively risky when grouped on the basis of similar credit risk characteristics is made as follows: Book Amount Provision for bad debt % of balance Reason ZhennanPacking Holdings Limited 1,031,780 (1,031,780) 100% (i) BeijingTonggang Co., Ltd. 520,000 (520,000) 100% (i) 1,551,780 (1,551,780) (i) As at 30 June 2010, the above items were all aged above 3 years and bankrupted, thus full provision has been made against them. (d) Other receivables that are individually insignificant but comparatively risky when grouped on the basis of similar credit risk characteristics are analysed as follows: 30 June 2010 31 December 2009 Book amount Provision for bad debts Book amount Provision for bad debts Amount % of total balance Provision for bad debts % of balance Amount % of total balance Provision for bad debts % of balance Over 5 years 1,551,780 0.3% (1,551,780) 100% 520,000 0.1% (520,000) 100% (e) None of other receivables were written off during the year. (f) As At 30 June 2010, no balances included in above other receivables are due from the shareholders of the Company who hold over 5% shares with voting rights (31 December 2009: Nil). (g) The company’s five largest other receivable balances are analysed as follows: Relationship with the Group Amount Duration % of total other receivables balance DGW Subsidiary of the Company 361,500,000 Within 1 year 72.1% HINWIN DEVELOPMENT LTD Third party 94,000,000 Within 1 year 18.7% CSTC Subsidiary of the Company 37,408,776 Within 1 year 7.5% WHK Subsidiary of the Company 3,097,243 Over 1 year 0.6% CIFA Subsidiary of the Company 1,060,000 Within 1 year 0.2% 497,066,019 99.1%SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 90 13 Notes to the Company’s financial statements (continued) (2) Other receivables (continued) (h) Other receivables due from related parties are analysed as follows: 30 June 2010 31 December 2009 Relationship With the Group Amount % of total accounts receivables Provision for bad debt Amount % of total accounts receivables Provision for bad debt DGW Subsidiary of the Group 361,500,000 72.1% - 301,200,000 83.2% - CSTC Subsidiary of the Company 37,408,776 7.5% - 47,408,776 13.1% - WHK Subsidiary of the Company 3,097,243 0.6% - 10,229,109 2.8% - CIFA Subsidiary of the Company 1,060,000 0.2% - 1,060,000 0.3% - CPSB Controlled by the same parent 135,622 0.0% - 135,622 0.1% - 403,201,641 80.4% - 360,033,507 99.5% - (3) Long-term equity investments 30 June 2010 31 December 2009 Subsidiaries (a) 733,088,199 703,088,199 Associates (b) 77,769,333 144,062,648 Other long-term equity investments (c) 17,037,500 17,037,500 827,895,032 864,188,347 Less: provision for impairment loss (d) (3,128,300) (3,128,300) 824,766,732 861,060,047 The long-term equity investments of the Company are not subject to restriction on conversion into cash.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 91 13 Notes to the Company’s financial statements (continued) (3) Long-term equity investments (continued) (a) Subsidiaries Accounting method Investment cost 31 December 2009 Current year changes 30 June 2010 Interest % Voting right % Reason of inconsistent interest % and voting right Provision For impairment balance Provision for impairment made in current year Current year declared cash dividend Shenzhen Chiwan Terminal Company Limited Cost method 47,500,000 47,500,000 - 47,500,000 95% 95% Not applicable - - - Shenzhen Chiwan International Freight Agency Company Limited Cost method 5,500,000 5,500,000 - 5,500,000 100% 100% Not applicable - - - Shenzhen Chiwan Harbor Container Company Limited Cost method 70,920,000 70,920,000 - 70,920,000 60% 60% Not applicable - - - Shenzhen Chiwan Transportation Company Limited Cost method 7,000,000 7,000,000 - 7,000,000 75% 75% Not applicable - - - Chiwan Wharf Holdings (H.K.) Limited Cost method 1,070,000 1,070,000 - 1,070,000 100% 100% Not applicable - - - Shenzhen Chiwan Shipping and Transportation Company Limited Cost method 6,000,000 6,000,000 - 6,000,000 60% 60% Not applicable - - - Shenzhen Chiwan Trains-Grains Terminal Company Limited Cost method 33,750,000 33,750,000 - 33,750,000 75% 75% Not applicable - - - Chiwan Container Terminal Company Limited Cost method 421,023,199 421,023,199 - 421,023,199 51% 51% Not applicable - - - Dongguan Chiwan Wharf Company Limited Cost method 65,325,000 65,325,000 - 65,325,000 25% 25% Not applicable - - - Dongguan Chiwan Terminal Company Limited Cost method 45,000,000 45,000,000 30,000,000 75,000,000 25% 25% Not applicable - - - 703,088,199 30,000,000 733,088,199 - - -SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 92 13 Notes to the Company’s financial statements (continued) (3) Long-term equity investments (continued) (b) Associates Current year additions / decreases Accounting method Nitial Investment cost 31 December 2009 Additional investment Share of net profit or loss of associates Cash dividends announced by associates Other equity changes 30 June 2010 Interest % Voting right % Reason of inconsistent interest % and voting right Provision for impairment balance Provision for impairment made in current year Cyber Network Equity method 1,875,000 12,489,764 - 939,805 - - 13,429,569 37.5% 37.5% Not applicable CMML Equity method 160,000,000 131,572,884 (64,232,743) (3,000,377) - - 64,339,764 20% 20% Not applicable 144,062,648 (64,232,743) (2,060,572) - - 77,769,333 - -SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 93 - - 13 Notes to the Company’s financial statements (continued) (3) Long-term equity investments (continued) (c) Other long-term equity investment Accounting method Initial Investment cost 31 December 2009 Current year additions / decreases 30 June 2010 Interest % Voting right % Reason of inconsistent interest % and voting right Provision for impairment balance Provision for impairment made in current year Current year declared cash dividend China Ocean Shipping Agency (Shenzhen) Company Limited Cost method 13,510,000 13,510,000 - 13,510,000 15% 15% Not applicable - Shenzhen Petro-chemical Industry (Group) Company Limited. Cost method 3,500,000 3,500,000 - 3,500,000 0.26% 0.26% Not applicable (3,117,800) - - Guangdong Guang Jian Group Company Limited Cost method 27,500 27,500 - 27,500 0.02% 0.02% Not applicable (10,500) - - 17,037,500 - 17,037,500 (3,128,300) - - (d) Provision for impairment of long-term equity investments 31 December 2009 Current year additions Current year decreases 30 June 2010 Other long-term equity investment -Shenzhen Petro-chemical Industry (Group) Company Limited (3,117,800) - - (3,117,800) -Guangdong Guang Jian Group Company Limited (10,500) - - (10,500) (3,128,300) - - (3,128,300)SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 94 13 Notes to the Company’s financial statements (continued) (4) Operating income and operating cost Jan.-Jun.2010 Jan.-Jun.2009 Revenue from main operations 79,131,875 55,333,268 Revenue from other operations 4,836,263 4,065,659 83,968,138 59,398,927 Jan.-Jun.2010 Jan.-Jun.2009 Cost from main operations 62,573,536 59,376,451 Cost from other operations 354,283 381,723 62,927,819 59,758,174 (a) Revenue and cost from main operations Jan.-Jun.2010 Jan.-Jun.2009 Revenue frommain operations Cost from main operations Revenue from main operations Cost from main operations Load and unload operation 79,131,875 62,573,536 55,333,268 59,376,451 (b) Other revenue and cost Jan.-Jun.2010 Jan.-Jun.2009 Revenue from other operations Cost from other operations Revenue from other operations Cost from other operations Lease income 1,999,985 354,283 1,993,822 381,723 Labor management income 1,862,704 - - - Documentation fee 300,229 - 258,789 - Sales of materials 290,374 - 223,097 - Other logistic services in port 82,540 - 141,435 - Others 300,431 - 1,448,516 - 4,836,263 354,283 4,065,659 381,723SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 95 13 Notes to the Company’s financial statements (continued) (4) Operating income and operating cost (continued) (c) Particulars of the top five customers in revenue Revenue from top five customers of the Company totaled RMB 26,310,353 (Jan.-Jun.2009: RMB33,470,288), which accounted for 31.3% (Jan.-Jun.2009: 56.3%) of the total revenue from main operations. Details are showed as below: Revenue % of total revenue from main operations of the Company Customer H 6,638,824 7.9% Customer K 6,613,580 7.9% Customer M 6,274,488 7.5% Customer N 3,598,348 4.3% Customer I 3,185,113 3.8% 26,310,353 31.3% (5) Investment income Jan.-Jun.2010 Jan.-Jun.2009 Investment income from investments under cost method of accounting (a) - 12,692,707 Investment income from investments under equity method of accounting (b) (2,060,572) (3,148,222) Loss from disposal of long-term investment 29,767,257 (2,541,153) Income from available-for-sale financial assets 310,000 - Interest income for short-term loans to subsidiaries 4,890,146 2,522,987 32,906,831 9,526,319 There is no significant restriction in receipt in remittance for investment income.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 96 13 Notes to the Company’s financial statements (continued) (5) Investment income (continued) (a) Investment income from long-term investment under cost method of accounting Investment income from top five investees or individually accounted to over 5% of total profit are analysed as below: Jan.-Jun.2010 Jan.-Jun.2009 Reason of fluctuation CCT - 5,422,157 The investee did not appropriate profit to shareholders this period China Ocean Shipping Agency (Shenzhen) Company Limited - 7,270,550 The investee did not appropriate profit to shareholders this period - 12,692,707 (b) Investment income from long-term investment under equity method of accounting Investment income from top five investees or individually accounted to over 5% of total profit are analysed as below: Jan.-Jun. 2010 Jan.-Jun. 2009 Reason of fluctuation Cyber Network 939,805 1,485,854 Increase in performance CMML (3,000,377) (4,634,076) Increase in performance (2,060,572) (3,148,222)SHENZHEN CHIWAN WHARF HOLDINGS LIMITED NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 97 13 Notes to the Company’s financial statements (continued) (6) Supplementary information to cash flow statements (a) Reconciliation from the net profit to the cash flows from operating activities Jan.-Jun.2010 Jan.-Jun.2009 Net profit 26,031,412 (7,189,430) Add: Provisions for assets impairment - (651,536) Depreciation of fixed assets 7,887,155 9,078,137 Depreciation/amortization of investment property 325,378 325,378 Amortization of intangible assets 1,465,775 1,468,795 Amortization of long-term prepaid expenses 135,324 135,324 Gains on disposal of fixed assets and intangible assets 15,735 (10,534) Finance (income)/expenses 6,819,649 8,604,995 Investment income (32,906,831) (9,526,319) (Increase)/decrease in deferred tax assets 8,926,411 1,697,844 (Increase)/decrease in inventories (26,316) (330,019) (Increase)/decrease in operating receivables (58,601,495) (4,363,546) Increase/(decrease) in operating payables 197,513,012 113,412,604 Net cash flows from operating activities 157,585,209 112,651,693 (b) Net changes in cash and cash equivalents Jan.-Jun.2010 Jan.-Jun.2009 Cash at end of year 647,142,458 411,258,714 Less: cash at beginning of year 453,407,958 298,644,660 Net increase/(decrease) in cash 193,734,500 112,614,054SHENZHEN CHIWAN WHARF HOLDINGS LIMITED SUPPLEMENTARY INFORMATION TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 98 1 Breakdown of extraordinary gains and losses Jan.-Jun.2010 Jan.-Jun.2009 Net loss on disposal of non-current assets 1,950,715 6,604,694 Government grants in current year profit 344,690 - Receivables impairment reversal by individual assessment - - Other non-operating (income)/expenses, net 68,412 881,166 2,363,817 7,485,860 Tax effects (518,077) (1,390,265) Minority interests effects (after tax) (8,884) (397,986) 1,836,856 5,697,609 The basis of preparation of net profit before extraordinary gains and losses reconciliation According to the Interpretation Bulletin on Information Disclosure by Public Companies No [2008] 1 – Extraordinary gains and losses, extraordinary gain and losses are the gain and losses resulted from the transactions/events which are not incurred by the operation of the entity, or, though incurred by the operation, the nature, amounts or the frequency of such transactions/events will lead to a misleading presentation of the normal performance and profitability of the operation of the entity. 2 Return on equity and earnings per share Earnings per share Weighted average return on equity (%) Basic earnings per share Diluted earnings per share Jan.-Jun.2010 Jan.-Jun.2009 Jan.-Jun.2010 Jan.-Jun.2009 Jan.-Jun.2010 Jan.-Jun.2009 Consolidated net profit attributable to shareholders of the Company 10.27% 7.14% 0.479 0.310 0.479 0.310 Consolidated net profit excluding non-routine items attributable to shareholders of the Company 10.21% 6.94% 0.476 0.302 0.476 0.302SHENZHEN CHIWAN WHARF HOLDINGS LIMITED SUPPLEMENTARY INFORMATION TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 99 3 Notes for significant fluctuation of major accounts in financial statements (continued) The following represents analysis to financial statements line items with a fluctuation above 30% (inclusive), or take up 5% of total assets as at balance sheet date (inclusive) or 10% of net profit for the reported period (inclusive): 30 June 2010 31 December 2009 Increase / (decrease)(%) Cash at bank and on hand 1 1,108,008,730 741,096,267 49.51% Accounts receivable 2 246,378,085 209,177,364 17.78% Other receivables 3 106,676,818 21,760,241 390.24% Fix assets 4 2,170,413,312 2,209,046,448 (1.75%) Construction in progress 5 566,022,580 575,630,562 (1.67%) Intangible assets 6 1,053,052,744 1,071,933,095 (1.76%) Deferred tax assets 7 33,819,131 44,288,280 (23.64%) Short-term borrowings 8 850,080,000 777,040,000 9.40% Accounts payable 9 218,857,990 227,293,714 (3.71%) Taxes payable 10 50,926,250 79,069,847 35.59% Dividends payable 11 381,438,026 171,889,814 121.91% Current portion of non-current liabilities 12 286,551,750 172,151,750 66.45% Long-term borrowings 13 290,400,000 422,400,000 (31.25%) Other non-current liabilities 14 62,309,519 64,785,394 (3.82%) Jan.-Jun.2010 Jan.-Jun.2009 Revenue 15 833,761,885 714,358,140 16.71% Cost 16 (336,890,090) (341,704,183) (1.41%) Investment income 17 84,416,791 31,207,492 170.50% Income tax 18 (65,939,121) (36,243,693) 81.93% (1) The company raised fund for the “Lai zhou” project which led to increase of Cash at bank and on hand. (2) The volume of business rose and the revenue increased which led to the increase of accounts receivable balance.SHENZHEN CHIWAN WHARF HOLDINGS LIMITED SUPPLEMENTARY INFORMATION TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2010 (All amounts in RMB unless otherwise stated) [English translation for reference only] 100 3 Notes for significant fluctuation of major accounts in financial statements (continued) (3) Due to the document was not approved and issued from the government department, the fund of disposal of 20% of the CMML’s equity interest was not received. The fund was received on 12 July 2010. (4) The reason is due to some subsidiaries sold part of the assets. (5) The fluctuation is due to the completion of some projects of DGW and DGT. (6) The decrease is due to amortization of intangible assets. (7) The distribution of bonus led to the decrease of deferred tax assets. (8) The increase of the short-term borrowings is due to raising fund for Lai zhou project. (9) DGW paid for some construction payment which led to the decease of Accounts payable. (10) The decrease is due to paying the income tax of 2009 (11) The increase is due to the pronouncement of whacking up dividend on August from the shareholders’ meeting held on June. (12) The significant increase is due to that the loan which should be repayed before 30 Jun 2011 is increased. (13) The reason of fluctuation is the same as (12). (14) The decrease is due to amortization of deferred revenue. (15) The throughputs’ recover is the mainly reason of the revenue’s growth. (16) Decrease in cost is mainly due to that some subsidiaries sold part of the assets and the fixed cost such as depreciation and amortization was decreased. (17) The volume business’ increase of the associated company and selling part of the equity interest is the mainly reason of the investment income’s growth. (18) Increase in income tax is due to that the income tax rate was raised and part of the berths’ income tax preferential policy was over.