Semi-Annual Report 2010 Announcement No.:【CMPD】2010-026 Chapter 1. Important Notice, Definitions & Content (I) Important Notice Board of Directors, Supervisory Committee of China Merchants Property Development Co., Ltd. (hereinafter referred to as the Company) and its directors, supervisors and senior executives hereby confirm that there are no any important omissions, fictitious statements or serious misleading information carried in this report, and shall take all responsibilities, individual and/or joint, for the reality, accuracy and completion of the whole contents. Sun Chengming - Legal Representative, Huang Peikun –Chief Financial Officer, and Xu Yixia –Manager of Accounting Department hereby confirm that the Financial Report enclosed in the Semiannual Report is true and complete. This report has been prepared in Chinese and English version respectively. In the event of difference in interpretation between the two versions, the Chinese report shall prevail. The Semi-annual Financial Report of the Company was not audited. (II) Definitions Unless carried in the report, the following abbreviations possess the meanings as follows: 1. CSRC: China Securities Regulatory Commission 2. The Company: China Merchants Property Development Co., Ltd. 3. China Merchants Group: China Merchants Group Ltd. 4. Top Chief: Top Chief Co., Ltd. 5. Shekou Industrial Zone: China Merchants Shekou Industrial Zone Co., Ltd. 6. Shenzhen CMRE: Shenzhen China Merchants Real Estate Co., Ltd. 7. CMPS: Shenzhen China Merchants Power Supply Co., Ltd. 9. CMWS: Shenzhen China Merchants Water Supply Co., Ltd. 9. Hong Kong Ruijia: Ruijia Investment Industrial Co., Ltd. 10. CMC: Shenzhen China Merchants Construction Co., Ltd. (III) Content Chapter 1. Important Notice, Definitions & Content Chapter 2. Company Profile Chapter 3. Changes in Share Capital and Particulars about Shareholders Chapter 4. Particulars about Directors, Supervisors and Senior Executives Chapter 5. Report of the Board of Directors Chapter 6. Significant Events Chapter 7. Financial Report Chapter 8. Documents Available for Reference2 Chapter 2. Company Profile (I) Profile I. Legal Name of the Company: In Chinese: 招商局地产控股股份有限公司 Abbr: 招商地产 In English: CHINA MERCHANTS PROPERTY DEVELOPMENT CO., LTD. Abbr: CMPD II. Legal Representative: Sun Chengming III. Secretary of the Board: Liu Ning Securities Affair Representative: Zeng Fanyue Address: No.3 Building, Nanhai E Cool Park, No.6 Xinghua Road, Shekou Industrial Zone, Nanshan District, Shenzhen Post Code: 518067 Email: investor@cmpd.cn Tel: (0755)26819600 Fax: (0755)26818666 26819680 IV. Registered Address: No.3 Building, Nanhai E Cool Park, No.6 Xinghua Road, Shekou Industrial Zone, Nanshan District, Shenzhen Office Address: No.3 Building, Nanhai E Cool Park, No.6 Xinghua Road, Shekou Industrial Zone, Nanshan District, Shenzhen Post Code: 518067 Email: investor@cmpd.cn V. Newspapers Chosen for Disclosing the Information of the Company: China Securities Journal, Securities Times, Shanghai Securities News and Hong Kong Commercial Daily Internet Website for Publishing Annual Report Designated by CSRC: http://www.cninfo.com.cn Place Where the Semi-Annual Report is Prepared and Placed: Secretariat of the Board of Directors VI. Stock listed in: Shenzhen Stock Exchange The Secondary Stock Exchange listed with: Singapore Stock Exchange Short Form of the Stock: CMPD, CMPD-B Stock Code: 000024, 200024 VII. Other Relevant Information of the Company 1. Initial registration date: September 19, 1990 2. Initial registration place: Shenzhen 3. Registration code for business license of corporation: 4403015032878413 4. Number of taxation registration: National Tax – Shen Zi 440300618845136 Local Tax – Deng Zi 440300618845136 5. Organization Code Certificate: 61884513-6 6. Name and office address of the certified public accountants engaged by the Company: Deloitte Touche Tohmatsu (Shanghai) CPA Ltd. 30/F, Bund Center, Yan An Road East, Shanghai (II) Main financial data and index Unit: RMB) Ended the report period End of last year Increase/decrease (%) Total assets 51,785,644,895 47,897,160,497 8.12% Shareholders’ equity attributable to shareholders of the listed company 17,179,481,845 16,278,736,754 5.53% Capital stock 1,717,300,503 1,717,300,503 - Net assets per share attributable to shareholders of the listed company 10.00 9.48 5.49% This report period The same period of last year Increase/decrease in this report period year-on-year (%) Total operating revenue 6,981,153,925 2,875,777,226 142.76% Operating profit 1,829,861,942 607,570,645 201.18% Total profit 1,833,668,498 624,090,354 193.81% Net profit attributable to shareholders of the listed company 1,050,179,281 486,847,748 115.71% Net profit attributable to shareholders of the listed company after deducting non- recurring gains and losses 1,051,236,135 478,362,040 119.76% Basic earnings per share 0.61 0.28 117.86% Diluted earnings per share 0.61 0.28 117.86% Return on equity (weighted) 6.25% 3.24% Increased by 3.01% Net cash flow arising from operating activities -1,998,549,301 3,146,422,732 -163.52% Net cash flow per share arising from operating activities -1.16 1.83 -163.39% Non-recurring gain and loss items: Non-recurring gain and loss items Amount Gains/losses from the disposal of non-current assets -210,473 Withdrawal of impairment provisions 2,861 Government subsidies 2,226,430 Other non-operating income/expenditure, net -3,071,464 Impact on income tax 180,5184 Influences on minority shareholders’ -184,726 Total -1,056,854 Indexes calculated in accordance with Regulations on the Information Disclosure of Companies Publicly Issuing Shares (No. 9) are as follows Earnings per share (RMB) Profit index Weighted average return on equity (%) Basic Fully diluted Net profit attributable to the shareholders of the company 6.25% 0.61 0.61 Net profit attributable to the shareholders of the company after deducting non-recurring gains and losses 6.25% 0.61 0.61 Influences of adjustment made under IAS on net profit and net asset (RMB’000) Net profit attributable to the shareholders of the listed company Net asset attributable to the shareholders of the listed company This report The same Ended the End of last Upon International Accounting 1,050,179,281 486,847,748 18,519,311,074 17,618,565,983 Upon China Accounting 1,050,179,281 486,847,748 17,179,481,845 16,278,736,754 Difference between domestic and - - 1,339,829,229 1,339,829,229 Of which:Adjustment of - - 1,339,829,229 1,339,829,229 Notes to the There’s no difference between the net profit attributable to the listed5 Chapter 3. Changes in Share Capital and Particulars about Shareholders (I) Chart of share change Before the change Increase / decrease this time (+, -) After the change Amount Proportion Issuance of new shares Amount Proportion Issuance of new shares Amount Proportion Issuance of new shares I. Shares with conditional subscription 929,439,484 54.12% 929,439,484 54.12% 1. State-owned shares 2. State-owned legal person’s shares 731,298,105 42.58% 731,298,105 42.58% 3. Other domestic shares Including: Domestic nonstate- owned legal person’s shares Domestic natural person’s shares 4. Foreign shares 197,709,440 11.51% 197,709,440 11.51% Including: Foreign legal person’s shares 197,709,440 11.51% 197,709,440 11.51% Foreign natural person’s shares 5. Senior executives’ shares 431,939 0.03% 431,939 0.03% II. Shares with unconditional subscription 787,861,019 45.88% 787,861,019 45.88% 1. RMB common shares 646,434,394 37.64% -13,950 -13950 646,420,444 37.64% 2. Domestically listed foreign shares 141,426,625 8. 24% 13,950 13,950 141,440,575 8. 24% 3. Overseas listed foreign shares 4. Others III. Total shares 1,717,300,503 100.00% 1,717,300,503 100.00% Notes: (1) Foreign shares in shares with conditional subscription were held by underling subsidiary of Shekou Industrial Zone; (2) Shares with conditional subscription include: Shekou Industrial Zone directly holds A shares of 693,419,317 and indirectly holds B shares of 197,709,440, China Merchants Zhangzhou Development Zone Co., Ltd. directly holds A shares of 37,878,788, senior executives hold A shares of 238,664 and B shares of 193,275. (3) Other changes are reclassification of the Company senior management share with sales limit relieved.6 (II) Particulars about shares held by the top ten shareholders (Unit: Share) Total number of shareholders 107,726 shareholders (97,092 are A share shareholders, 10,634 are B share shareholders) Shareholding situation of top 10 shareholders Nature of the shareholder Proporti on of shareholding Amount of share held Amount of unconditional shares held Shares pledged or frozen China Merchants Shekou Industrial Zone Co., Ltd. State-owned legal person 40.38% 693,419,317 693,419,317 Naught Full Space Investment Ltd. Foreign legal person 5.48% 94,144,050 94,144,050 Naught China Merchants Securities Hong Kong Ltd. Foreign legal person 2.91% 49,893,378 49,242,245 Naught China Merchants Zhangzhou Development Zone Co., Ltd State-owned legal person 2.21% 37,878,788 37,878,788 Naught FOXTROT INTERNATIONAL LIMITED Foreign legal person 1.61% 27,720,000 27,720,000 Naught Full Goal Selected Mixed Open-ended Security Investment Fund Domestic non- stateowned legal person 1.60% 27,522,577 Unknown ORIENTURE INVESTMENT LTD Foreign legal person 1.55% 26,603,145 26,603,145 Naught China International Advantaged Security Investment Fund Domestic nonstate- owned legal person 1.24% 21,269,899 Unknown Efunds SZSE 100 Open-ended Index Security Investment Fund Domestic nonstate- owned legal person 0.74% 12,729,595 Unknown Penghua Value Advantage Stock-linked Security Investment Fund Domestic nonstate- owned legal person 0.58% 10,000,000 Unknown Top 10 holders of unconditional shares Full name of shareholder Amount of unconditional shares held Type of shares Full Goal Selected Mixed Open-ended Security Investment Fund 27,522,577 A-shares China International Advantaged Security Investment Fund 21,269,899 A-shares Efunds SZSE 100 Open-ended Index Security Investment Fund 12,729,595 A-shares Penghua Value Advantage Stock-linked Security Investment Fund 10,000,000 A-shares CNCA A/C COMPAGNIE FINANCIERE EDMOND DE ROTHSCHILD 8,999,770 B-shares DREYFUS PREMIER INVESTMENT FDS INC.-DREYFUS GREATER CHINA FD 8,678,901 B-shares Rongtong SZSE 100 Index Security Investment Fund 8,253,780 A-shares Invesco Great Wall Resource Monopoly Stock Equity Investment Fund(LO F) 8,000,000 A-shares GUOTAI JUNAN SECURITIES(HONGKONG) LIMITED 7,463,783 B-shares China Life Insurance Company Co., Ltd.-traditional-ordinary insurance products-005LFH002 7,263,983 A-shares Explanation on associated relationship or accordant action among the aforesaid shareholders (1) Among the shares held by China Merchants Securities Hong Kong Ltd., 49,242,245 shares were purchased-in entrusted by Top Chief Co., Ltd.; Top Chief Co., Ltd., Full Space Investment Ltd., FOXTROT INTERNATIONAL LIMITED and ORIENTURE INVESTMENT LTD are the whollyowned subsidiaries of China Merchants Shekou Industrial Zone Co., Ltd..7 (III) Conditional shares and their conditions Name of the shareholder Amount of conditional shares (Share) Nature of shares Date when the shares are allowed to be traded in market Committed condition China Merchants Shekou Industrial Zone Co., Ltd. 693,419,317 A share Sep. 24, 2010 1. Commitment in share relocation: The price of A- shares of the Company sold in the stock market before February 9, 2011 shall not be lower than 120% of the arithmetical average in 30 days prior to the publishing of share merger reform prospectus, i.e. RMB11.51 (after profit distribution of year 2005: RMB0.2 for each 10 shares; year 2006: RMB2.1 for each 10 shares; year 2007: RMB1, 3 bonus shares and 2 capitalized shares for each 10 shares; year 2008: RMB1 for each 10 shares and the price has been adjusted to RMB7.33). 2、In year 2007, because Shekou Industrial Zone increasingly held the privately offering shares of the Company, Shekou Industrial Zone promised to not sell the holding shares of the Company before September 24, 2010 including the shares held directly indirectly. Full Space Investment Ltd. 94,144,050 B share Sep. 24, 2010 China Merchants Securities Hong Kong Ltd. 49,242,245 B share Sep. 24, 2010 China Merchants Zhangzhou Development Zone Co., Ltd 37,878,788 A share Sep. 24, 2010 FOXTROT INTERNATIONAL LIMITED 27,720,000 B share Sep. 24, 2010 ORIENTURE INVESTMENT LTD 26,603,145 B share Sep. 24, 2010 Promised not to sell the Company’s shares until September 24, 2010 for the associated relationship with Shekou Industrial Zone Chapter 4. Particulars about Directors, Supervisors and Senior Executives (I) Change in the Company’s shares held by its directors, supervisors and senior executives during the report period Unit: share Shares held at period-begin Shares held at period-end Name A share B share A share B share Reason for change Lin Shaobin 41,670 100,500 41,670 100,500 Yang Baiqian 89,900 - 89,900 - He Jianya 97,170 - 97,170 - Yang Zhiguang 44,295 33,000 44,295 33,0008 Huang Peikun - 130,700 - 130,700 Wang Li 30,187 - 30,187 - Liu Ning - 13,500 - 13,500 Liu Ye 15,000 15,000 Total 318,222 277,700 318,222 277,700 (II)New engagement or dismissal of directors, supervisors and senior executives in the report period On April 15, 2010, the 6th board of Company held the 2nd temporary conference in 2010 and employed Wang Zhengde as the chief economist. Chapter 5 Report of the Board of Directors I. Discussion and analysis of the management Since the second half of 2009, the rapid rise in price of houses again attracted the significant attention from the central government and the society. The State Council and relevant departments issued a package of policies of regulation and control aiming to curb speculative ventures and property inflation in real estate. In the wake of the improvement and implementation of various measures of regulation and control over the past six months, change in real estate market expectation was on its way, and such measures began to show effect. Currently, the market is under observation period of regulation effect. According to the data of nationwide real estate sales and development, over the first half the 2009, the sales area of commercial house totaled to 394 million square meters, up 15.4% year-on-year and downward 7.1% in growth rate from January to July; the sales amount of commercial house hit RMB 1.98 trillion, up 25.4% year-on-year and downward 13.0% in growth rate from January to May; investment in real estate development reached RMB 19.747 billion, up 38.1% year-on-year; area of new started houses hit 805 million square meters, up 67.9% year-on-year. Under the influence of gradual fall in price and sharp drop in sales amount, the real estate market develops under the governmental regulation and control. In the first half year, by properly adjusting the sales strategies and development pace and adopting the market-oriented price policy, the company optimized the inventory structure, seized the opportunity and successfully launched 21 elaborate projects including Shanghai Magnificent Phase II and Suzhou Stone City Phase III in 11 cities. The sales area hit 287.5 thousand square meters, and the contract sales amount reached RMB 42.30 billion. In the first half year, the company newly started nine projects with a building area of 670 thousand square meters and increased 460 thousand square meters of land reserve, which kept the total land reserve over 10 million square meters and provided adequate resources for the sustainable development of the company in future. The company continued implementing the concept of “continuous improvement” and satisfying the working requirements on reinforcing delicacy management and improving information construction and forged a more standard, optimal and efficient process and system and laid a firm management foundation for the realization of goals of “forging another merchant property” and “building excellent company”. Meanwhile, the company also devoted great efforts to push forward the construction of performance evaluation system9 and the accumulation and cultivation of human resources and further intensify the ability of sustainable development the competitive strength. The company fully understood the goal of this package of policies of real estate regulation and control. In the second half year, on the premise of responding to the requirements of the government and in connection with its own development, the company would focused on the following work: continue to carry out the balanced and careful policies of land acquisition, pay attention to area selection, wait for appropriate opportunity to rationally expand land reserves, set up the precise marketing concept of thorough market research and refined project quality, make great efforts to improve marketing capability, carry out measures to promote sales and optimize inventory structure in short term; continue to carry out the robust financial management methods and do a good job on the prospective financing arrangement; rationally arrange the cash flow to ensure financial safety and stable operation according to the financial conditions of the company; actively promote the study and practice on urban complex mode, seize the huge opportunity in commercial real estate, give full play to the stable cash flow of commercial real estate to make it become the effective means of enhancing performance and curbing fluctuation; continue to follow the operation philosophy of “environmental-friendly company”, adhere to the development strategy of “environmental-friendly real estate”, develop the products suitable for market need and industrial prospect; improve manpower and rationally use price lever, sustainably improve the core competitive strength and market position as well as performance to bring abundant benefits to shareholders. II. Main operation in the report period 1. Operation achievement Unit: RMB’000 Item Jan. to June, 2010 Jan. to June, 2009 Increase or decrease Operation income 698,115 287,578 142.76% Operation profit 182,986 60,757 201.18% Net profit attributable to shareholders of listed company 105,018 48,685 115.71% Operation income: The operation income realized by the Company in this period obviously grew over the same period of last year, main benefiting from the great growth in carry-over volume of real estate development business. Operation profit: In the period, the operation profit increased substantially. Except for the growth in income from the carry-over of real estate development business, the profit and loss from change in fair value of NDF business increased greatly over the same period of last year. ③ Net profit belonging to the shareholders of the listed companies In the report period, growth rate of net profit of shareholders of the listed companies is lower than the growth rate of the business profit, and the main reason is that in the report period, profit and loss growth of a few shareholders grew greatly. 2. Main business Unit: RMB’00010 Classified according to industries Operation income Operation cost Gross profit rate Increase or decrease yearon- year in operation income(%) Increase or decrease yearon- year in operation cost(%) Increase or decrease yearon- year in gross profit rate(%) Development & sales for real estate 610,030 349,197 42.76% 188.77% 217.53% -5.19% Rental property operation 25,154 13,342 46.96% 5.68% 3.42% 1.16% Property agency service 5,037 3,713 26.29% -3.29% -15.06% 10.20% Power & water supply for parks and communities 32,127 23,671 26.32% 6.13% 9.92% -2.54% Property management 19,905 16,547 16.87% 20.15% 24.14% -2.67% Engineering construction income 5,335 5,275 1.22% - - - (1) Business of development & sales for real estate: In the report period, income realized from this business increased over the same period of last year, mainly due to that the carry-over area of real estate increased over the same period of last year; however, growth scope of sales cost exceeded the increase scope of sales income, which made the gross profit ratio for this business declined over the same period of last year. (2) Business of rental property operation: In the report period, the newly started rental properties - Garden City Center South Area and Garden City Digital Building - made the rentable area increased on a year-on-year basis. The occupancy rate of Nanhai E-cool building 5# has been improved, with income from rental operation also increased on a year-on-year basis. (3) Business of property agency service: In the report period, due to the macro-control policies of the government, the decline in turnover at the secondhand housing market in Shenzhen caused the synchronous slowdown in both income and cost of the business. (4) Business of garden power & water supply In the report period, the electricity sales amount of the Company grew in Chiwan and Qianhai areas, so the income from electricity sales greatly increased. (5) Property management In the report period, because the Company added new property management project, income scope of property management increased accordingly. However, because the lowest wage standard was enhanced, increase rate of man power cost is larger than the growth rate of income on year-on-year basis, the gross interest rate decreased on year-on-year basis. 2. Main business classified according to area Unit: RMB’000 Area Operation income Increase or decrease year-on-year Area around Pearl River Delta 398,984 97.14% Area around Yangtze River Delta 190,762 271.46% Area around Bohai Sea 63,291 107.21% Other areas 45,078 1268.50% Total 698,115 142.76%11 In the report period, the settlement area and operation income in all areas greatly increased, benefiting from the sound tendency of real estate sales in the second half of 2009. Reason for the year-on-year increase in other areas mainly benefited from the first revenue of Chongqing Jiangwan City Phase I. Therefore, the growth ratio was high. 3. Settlement for main real estate projects Project Area for settlement (square meter’0000) Amount for settlement (RMB’000) Shenzhen Buena Vista Phase III 3.86 205,122 Shanghai Nan Qiao Ya Yuan 8.61 95,959 Shanghai Magnificent Phase I 4.56 54,135 Foshan Evian Town 6.68 48,563 Beijing Lakeward Scenery 1.97 42,604 Chongqing Jiangwan City Phase I 7.00 41,087 Shenzhen Mount Orchid Riverlet Phase II 0.97 37,751 Nanjing Yi Yun Xi Gu Phase III 3.97 34,857 Shenzhen Yi Shan Jun 2.17 15,222 Shenzhen Estate at waterside 1.30 13,006 4. Financial condition Unit: RMB’000 Items June 30, 2010 Dec. 31, 2009 Change scope Reason Transactional financial assets 2,565 644 298% Increased due to decrease of fluctuation of NDF market price Others receivable 105,030 192,651 -45% Bond for land bid in early 2010 was confirmed as the down payment of land accrued and transferred into deposit Other current assets 85,189 62,480 36% Due to the holding assets of subsidiaries to be sold in the report period Fixed assets 18,682 29,962 -38% Decreased due to part of fixed assets transferred into the holding assets of subsidiaries to be sold in the report period Deferred income tax assets 43,816 29,049 51% Increased due to the deductible temporary differences caused by accrued land value-added taxes Accounts payable 179,620 270,552 -34% Pay for part of land cost in the report period Payroll payable 9,633 16,283 -41% Pay for payroll payable in the report period Tax payable 38,012 58,986 -36% Decreased due to payment of tax payable in the report period Interest payable 3,976 2,187 82% Increased due to accrued interest payable Dividends payable 21,793 10,775 102% Increased due to declaration of dividends distribution in 2009 Long-term loan 951,528 572,030 66% Due to business scale expansion and adjustment on short and long-term loan structure Converted difference in foreign currency statements 9,575 7,281 32% Due to adjustment on rate in foreign money currency in the report period12 Minority shareholder's interest 286,397 202,330 42% Due to the increase in registered capital of cooperation project and realized profit III. Investment (I)Progress and income of the project invested with raised proceeds In the report period, the raised proceeds used by the Company included the proceeds raised through the 2007 non-public share offer and the 2008 public share offer, of which, the use progress of the proceeds raised with non-public share offer is 97.34% and the use progress of the proceeds raised with public share offer is 91.66%. 1. Progress of the project invested with proceeds raised through the 2007 non-public share offer, and application of the proceeds: Unit: RMB’0000 Total raised proceeds used in this period 1,948 Total proceeds raised 229,217 Total raised proceeds accumulatively used 223,114 Commitment Amount planned to input Whether change projects Amount actually input Total profit accumulatively realized Whether comply to planned progress Whether comply to planned income Purchase 5% equities Shenzhen China Merchants Construction Co., Ltd. 40,000 No 40,000 14,952 Yes Yes Purchase office building of New Times Square 88,000 No 88,000 6,404 Yes Note 1 Purchase land use right of Meilun Apartment and develop for construction 25,000 No 18,897 - Note 2 Note 2 Haiyue Huating 33,000 No 33,000 15,137 Yes Yes Nanjing Xianlin (Evian Valley) 43,217 No 43,217 21,350 Yes Yes Total 229,217 223,114 57,843 Explanation on reason why not reaching the planned progress and projected income Note 1: Income of RMB 11.02 million was realized by office building of New Times Square in this period. Due to that the Company conducted a more stable depreciation policy and the tax rate used in the aforementioned listing public notice for benefit measure was 15%, while the rate actually used by the Company in 2010 was increased to 22%. If computed according to the depreciation and tax rate caliber of the original listing public notice, then New Times Square realized income of RMB 15.34 million. Note 2: Due to that it was later for position of raised capital than prediction, the use of raised capital for Meilun Apartment and Haiyue Huating progressed slower than prediction. Till Jun.30th of 2010, these two properties were still being developed and no income from these projects had been yielded yet. Explanation on reason and procedure of change Unchanged13 Usage and use plan of the raised proceeds which hadn’t been Use according to plan 2. Progress of the project invested with proceeds raised through the 2008 public share offer, and application of the proceeds: Total raised proceeds used in this period 41,826 Total proceeds raised 577,722 Total raised proceeds accumulatively used 529,539 Commitment Whether change projects Amount planned to input Amount actually input Total profit accumulativel y realized Whether comply to planned progress Whether comply to planned income Garden City Syber Port No 22,722 22,596 (336) Yes Note 2 Garden City Phase V No 22,000 22,000 - Yes Note 1 Technology Building Phase II No 16,000 16,000 (264) Yes Note 3 Pilot Tower No 44,000 44,000 - Yes Note 1 Pilot Park No 34,000 33,452 - Yes Note 1 Kings Ville No 130,000 95,558 - Note 10 Note 1 CM Guanyuan No 40,000 34,718 - Yes Note 1 CM Lanyuan No 70,000 67,153 1,466 Yes Note 4 Weijin South Road No 60,000 59,921 8,164 Yes Note 5 CM Jiangwan City No 40,000 40,000 5,915 Yes Note 6 Evian Town phase III No 26,000 21,141 7,610 Yes Note 7 Nanqiao No 35,000 35,000 15,806 Yes Note 8 Zhuanqiao No 38,000 38,000 2,583 Yes Note 9 Total 577,722 529,539 40,944 Explanation on predicted income Note 1: The project didn’t realize profit. Note 2: The project was on rental in November 2009. For the low rental rate e in early days, the predicated benefit was not realized in the first half of 2010. Note 3: The project changed into investment property when it was completed in March 2010. The rental contract was not signed by the end of the report perod. Therefore, the predicated benefit was not realized in the first half of 2010. Note 4: CM Lanyuan accumulatively carried over 7% by the end of the report period, and made a net profit of RMB14.66 million yuan. It’s predicated that the predicated profit can be realize when 100% carry-over is realized. Note 5: Weijin South Road accumulatively carried over12% by the end of the report period, and made a net profit of RMB81.64 million yuan. It’s predicated that the predicated profit can be realize when 100% carry-over is realized. Note 6: CM Jiangwan City accumulatively carried over 17% by the end of the report period, and made a net profit of RMB59.15 million yuan. It’s predicated that the predicated profit can be realize when 100% carry-over is realized. Note 7: Evian Town phase III realized 100% carry-over by the end of 2009 and accumulatively realized a net profit of 76.10 million. The project opened in August 2008 when the economic situation worsed abruptly. Therefore, its actual benefit is less than the predicated level. Note 8: Nanqiao accumulatively carried over 87% by the end of the report period, and made a net profit of RMB158.06 million yuan. It’s predicated that the predicated profit can be realize when 100% carry-over is realized. Note 9: Zhuanqiao accumulatively carried over 34% by the end of the report period, and made a net profit of RMB25.83 million yuan. It’s predicated that the predicated profit can be realize when 100% carry-over is realized.14 Note 10: For relevant government department used this project site, which made the relocation lagged behind schedule. Explanation on reason and procedure of change Unchanged Usage and use plan of the raised proceeds which hadn’t been used yet Use according to plan (II)Actual progress and benefit of the significant projects invested with non-raised proceeds Unit: RMB’000 Project Investment amount in this period Progress Benefit received in this period Chongqing Tanzishi 200,318 Pre-phase plan Shanghai Jingyuan 172,258 Pre-phase plan Foshan Shishan 69,442 Pre-phase plan Guangzhou Jinshangu 21,278 1# section of Phase II and Phase III already completed, the main body of Phase IV is in construction and the pre-phase plan for Phase V and Phase VI is made Dongcheng International Business Square 20,941 Pre-phase plan Beijing Park·1872 20,345 Building 3# of Phase II already in partnership, the main body of Building 2# and Building 5# is in construction and pre-phase plan for Phase III is made Realized gross profit of RMB 135.18 million Shenzhen Xicheng PhaseIIIPhase IV 20,301 Phase III already in partnership and structural roofsealing was for Phase IV already finished Realized gross profit of RMB 817.42 million Foshan Evian Town 14,533 Phase I already in partnership, the main body of Phase II is in construction and foundation for Phase III and Phase IV already finished Realized gross profit of RMB 118.28 Suzhou Stone City 9,223 External wall construction for Phase II and Phase III, foundation construction for Phase IV Beijing Xicheng Jiayuan 8,869 The price-limited house is already completed and the pre-phase plan for commodity house is made Realized gross profit of RMB 9.61 Zhuhai CM Garden Phase II and Phase III 5,820 Main body construction Zhuhai CM Garden Phase I 5,233 External wall construction Beijing Conrad Hotel 5,062 Main body construction Foshan Evian Up City 4,320 Phase I main body construction and Phase II foundation construction15 Zhangzhou CM Garden 3,835 Phase I main body construction 2# plot, Shenzhen Lanxigu Phase II 3,429 Special acceptance stage Shanghai CM Bay Park 3,316 Phase I completion acceptance, Phase II is finalizing and the preparation for Phase III foundation is made Shanghai Haide Park Phase II-Phase IV 3,257 Roof-ceiling for main body of the south part of Phase III made and design for Phase IV construction finished Realized gross profit of RMB 12.04 Chongqing CM Garden 3,131 Pre-phase plan Shenzhen CM Green Park 2,588 Pre-phase plan Note: the gross profit in this table excludes business tax and surcharges and land valueadded tax. (III)Company newly invested 1. In January 2010, the Company invested RMB 10 million to establish Chengdu CM Real Estate Co., Ltd. The share proportion and voting right proportion of the Company are all 100%. The Company includes Chengdu company in the consolidation scope of consolidated financial statement. 2. In March 2010, Hong Kong Ruijia, a subsidiary of the Company, established Foshan CM Huide Real Estate Co., Ltd. and Boshi Holding Co., Ltd. The registered capital of the Company is US$99.9 million, of which Hong Kong Jiari contributed US$49.95 million, taking a share of 50%. As Hong Kong Ruijia has majority voting right in the board of the Foshan company, it actually controls the finance and operational decision. The Company includes Foshan company in the consolidation scope of consolidated financial statement. 3. In April 2010, Shanghai CM Landing Co., Ltd., a subsidiary of the Company, established Shanghai Jingyuan Real Estate Development Co., Ltd. with Langda Industry Co., Ltd., a company under China Vanke Co., Ltd. The registered capital of the Company is RMB30 million, of which Shanghai CM Landing Co., Ltd. contributed RMB16.5 million, taking a share of 55%. As Shanghai CM Landing Co., Ltd. has majority voting right in the board of the Foshan company, it actually controls the finance and operational decision. The Company includes Shanghai company in the consolidation scope of consolidated financial statement. IV. Modification plan for the operation plan for the later half year N/A16 Chapter 6 Significant Events Ⅰ. Company governance There is no difference between the Company’s perfect administration structure and the requirements of documents concerning corporate governance issued by CSRC. The Company insists to continuously perfect the Company legal person governance structure, standardize Company operation and optimize internal control system according to the requirements of Company Law, Securities Law and Code of Corporate Governance for Listed Companies etc., so as to continuously enhance the Company governance level and strengthen scientificalness of decision making. In the report period, the Company’s shareholders and the shareholders’ general meeting, directors and the board of directors and supervisors and the supervisory committee all regulated the operation according to law, which guaranteed the legal rights of the Company and the shareholders, especially the medium and small shareholders. The controlling shareholders and the actual controller of the Company exercise the right of the investor. The Company and the controlling shareholders and the actual controller kept independences in staff, asset, finance, organization and business. The affiliated transaction between the Company and the shareholders of associated party conformed to the transaction principle of openness and fairness. In April 2010, according to the requirements of Notice About Requiring to Make Listed Company Annual Report Information Disclosure Significient Error Responsibility Investigation System issued by Shenzhen Securities Regulatory Bureau, the 13th meeting of the 6th board of directors approved Annual Report Information Disclosure Significient Error Responsibility Investigation System, and the Company strictly implemented the system. In May 2010, according to the requirements of the Notice About Comprehensively and Deeply Developing the Special Event of Standardizing Financial Accounting Fundamental Work in the Listed Companies of Shenzhen issued by Shenzhen Securities Regulatory Bureau, the Company established standardizing financial accounting fundamental work special work group, made work scheme of developing special event, conducted self examination and self correction to the setting of financial personnel and institution, accounting fundamental work, capital management work, tax management work, construction and implementation condition of financial management system, and setting and using condition of financial information system, and completed self examination condition report within prescribed time. Ⅱ. Execution of profit distribution plan for year 2009 The proposal of profit distribution in 2009 was approved at the Annual General Meeting 2009 held on June 7, 2010. According to 10% of the net profit of the parent company RMB 1,155,665,059, statutory surplus reserve RMB 115,566,506 was withdrew; Taking the total capital shares 1,717,300,503 shares as of year-end as the radix, cash RMB 1 (tax included) would be sent for each 10 shares, that was to say, RMB 171,730,050 cash dividend would be sent. The residual undistributed profit RMB 3,367,380,227 was retained to the next report year. The Company did not conduct converting capital reserve into share17 capital this year. The Company issued the Announcement on Dividend Distribution and Implementation of Converting Capital Reserve into Share Capital of 2009 on China Securities Journal, Securities Times, Shanghai Securities News, Hong Kong Wen Wei Po and http://www.cninfo.com.cn on July 6, 2010. The share equity registration day would be July 12, 2010, and the ex-dividend day would be July 13, 2010. Up till the disclosure date of this report, implementation of the above-mentioned dividend and interest distribution scheme has been completed. Ⅲ. Profit distribution plan of semi-annual 2010 Neither profit distribution nor converting capital reserve into share capital will be implemented for semi-annual 2010. Ⅳ. Material Lawsuits and Arbitration The Company has not involved in any material lawsuit or arbitration in the report period. Ⅴ. Status of shareholding in other listed companies (Unit: RMB) Stock code Short form of stock Initial investment Share proportion Book balance at the end of the term Gain/Loss in the report period Change of owners’ equity in the report period 000004 ST Guonong 1,572,275 0.58% 4,129,216 - (650,978) Total 1,572,275 0.58% 4,129,216 - (650,978) “ST Guonong” stock right held by the Company can be accounted as “financial assets for sale”. Ⅵ. Material purchase, sale or asset restructuring In the report period, the Company did not have material purchase, sale or asset restructuring. Ⅶ. Major related transactions 1. Related transactions concerning daily operation (1)Shenzhen China Merchants Water Supply Co., Ltd. supplies water to its largest shareholder Shekou Industrial Zone and its subsidiaries. Shenzhen China Merchants Power Supply Co., Ltd. supplies power to its largest shareholder Shekou Industrial Zone and its subsidiaries. Calculated and charged utilities according to the regulations of Bureau of Commodity Price, the water and electrical quantities of related transaction couldn’t be counted because partial utilities were calculated and charged by other property companies. (2) Related transactions concerning land use The facilities, equipments, and office locations of supplying electricity and water business of the Company were located in Shekou. Most of the leasing properties in real estate business were built in Shekou. Therefore, the Company and the subsidiaries engaging in aformentioned business have rented land of Shekou Industrial Zone since they were founded.18 In the report period, land using expenses of the Company and controlling subsidiaries paid to Shekou Industrial Zone totaled to RMB 13.80 million. (3)Guarantee and assurance A. The wholly owned subsidiary company of Shekou Industrial Zone – Top Chief Co., Ltd. provided liquidation guarantee for long-term foreign exchange business engaged in ING Bank N.V., Hong Kong Branch of the Company’s subsidiary-Hong Kong Ruijia. B. Shekou Industrial Zone and China Merchants Group provided guarantee for the loan of the Company, and the concrete guarantee condition is as follows: End of the term Beginning of the term RMB Yuan RMB Yuan Shekou Industrial Zone (Note 1) 1,357,991,058 1,723,354,595 China Merchants Group (Note 2) 3,492,078,282 1,459,670,359 Note 1: Shekou Industrial Zone provided guarantee for the loan of the Company with the amount of RMB 1,007,909,000, for the loan of Shenzhen China Merchants Power Supply Co., Ltd. with the amount of USD 5,569,000 (RMB 37,818,522), for the payment guarantee of Shenzhen China Merchants Real Estate Co., Ltd. with the amount of RMB 82,012,508, and for the bank acceptance of Shenzhen China Merchants Real Estate Co., Ltd. with the amount of RMB 230,251,028. Note 2: China Merchants Group provided guarantee for the RMB 2,000,000,000 obtained by the Company from Huatai Asset Management Co., Ltd. and for the loan of Hong Kong Ruijia with the amount of USD 203,000,000 (RMB 1,378,666,282) and HKD 130,000,000 (RMB 113,412,000). (4)Rental income Accumulated in this term Accumulated in the Same period of last year RMB Yuan RMB Yuan China Merchants Shekou Industrial Zone Co., Ltd. 5,946,918 5,758,446 China Merchants International (China) Investment Co., Ltd. 2,266,634 1,336,124 Shenzhen China Merchants Landmark Co., Ltd. 1,076,120 1,069,400 China Merchants Logistics Holding Co., Ltd. 763,896 738,854 Shenzhe n Beike Venture Co., Ltd. 3_3_5_,_0_0_0_ ___ 3_3_5_,_0_0_0_ ___ Total 1__0__,__3__8__8__,5__6__8__ __ 9__,__2__3__7__,8__2__4__ ____ Proportion accounting for in the rental income of the report period 4.13% 3.88% Note: the above mentioned rental income is the building rental fee that subsidiary company of the Company, Shenzhen China Merchants Property collected from the related parties such as Shekou Industrial Zone etc., and the transaction is conducted according to the agreement price. 2. In the report period, the following purchase and sale related transactions were conducted between the Company and Shekou Industrial Zone: ⑴ Transfer the stock right of China Merchants Water Supply On June 28, 2010, the Company and the subsidiary company Shenzhen China Merchants Property signed agreement with Shekou Industrial Zone, transferring China Merchants19 Water Supply 95% and 5% stock right respectively to the big shareholder Shekou Industrial Zone, and the stock right transfer price is RMB 162,833,200. Industrial and commercial change registration after China Merchants Water Supply stock right transfer was completed on July 5, 2010. The Company transferred China Merchants Water Supply 100% stock right held, in that way, Company asset overall benefit can be enhanced, Company business structure can be optimized, and main business can be highlighted. ⑵ Purchase land use right On July 29, 2010, the Company subsidiary company Shenzhen China Merchants Business Development Co., Ltd. (hereinafter referred to as “China Merchants Business) signed Land Use Right Confirmation Contrat with Shekou Industrial Zone, purchasing the land use right of the land block with the land number of SKC102-01. The land area was 11,904.23 square meters, and the price was RMB 111,751,800. Purchasing the land block can enrich the land resource of the Company, and it is also the need for developing sea world block. 3. Other related transactions On June 30, 2010, the Company subsidiary company China Merchants Construction signed building construction contract with the subsidiary company Shenzhen China Merchants Front Bay Property Co., Ltd. (hereinafter referred to as “China Front Bay Property”) indirectly controlled by Shekou Industrial Zone, and China Merchants Construction planned to contract Front Bay Garden 3rd and 4th phase project general contracting engineering invested by China Merchants Front Bay Property. The construction general contracting contract price was estimated to be RMB 135,180,000. 1% general contracting management expense of the contracting general price that China Merchants Construction can gain was estimated to be RMB1,351,800. China Merchants construction accepting front bay garden engineering of China Merchants Front Bay Property can accumulate building construction achievement, create condition for the Company to promote qualification as soon as possible, thus better meeting the development need of the Company, and it complies with the Company overall interest. 4. Credit, debts between the Company and associated parties at the report period-end Item name Associated party Amount at the end of the term Amount at the beginning of the term Other account receivable Shenzhen TCL Optical- Electronics Technologies Ltd. 257,339,044 187,851,513 Other account receivable Huizhou Taitong Property Investment Co., Ltd. 127,236,214 121,257,000 Account payable China Merchants Shekou Industrial Zone Co., Ltd. 9,919,240 5,338,724 Other account payable Dafeng International Inc. - 887,700,513 Other account payable China Merchants Zhangzhou Development Zone Co., Ltd. 475,334,117 420,821,115 Other account payable Tianjin Xinhai real Estate Development Co., Ltd. 133,081,399 148,831,399 Other account payable Shenzhen Shekou Dazhong Investment Co., Ltd. 138,235,302 138,235,302 Other account payable CM Financing 33,510,000 16,338,000 Other account payable China Merchants Guangming Technologies Garden Ltd. 1,069,390 1,067,447 Other account payable China Merchants Hanghua 528,151 1,051,70720 Technologies and Trade Center Co., Ltd. Interest payable Dafeng International Inc. - 1,288,737 Dividend payable China Merchants Shekou Industrial Zone Co., Ltd. 89,112,876 - Dividend payable China Merchants Zhangzhou Development Zone Co., Ltd. 3,787,878 - Dividend payable Dafeng International Inc. 4,900,000 - Long-term account payable Shenzhen CM Landmark Co., Ltd. 1,200,000 1,200,000 ____________ __________ The aformentioned issues had no major influences on the Company. Ⅷ. Significant contracts and implementation 1. In the report period, there was no other significant trust, contract or lease event. 2. Implementation of significant contracts in the report period: (1) The Company received the notification form for line of credit from China Industrial and Commercial Bank Shenzhen Branch, the checked line of credit was totally up to RMB 4.9 billion for the Company and underling subsidiaries with term from January 1, 2010 to December 31, 2010. (2) The Company received the confirmation letter for credit of RMB 7.5 billion from China Construction Bank Shenzhen Branch, including RMB 7 billion for the Company, RMB 0.5 billion for the underling subsidiary company – Shenzhen Merchants Real Estate Co., Ltd. (3) The Company signed agreement with Industrial Bank Shenzhen Branch for the credit of RMB 1 billion with term from January 13, 2010 to January 13, 2011. (4)The Company signed Huatai China Merchants Power Supply Project Credit Investment Plan Investment Contract with investment principal of RMB 2 billion with Huatai Asset Management Co., Ltd., with term from April 20, 2010 to April 19, 2017. (5)The Company signed Issuing Guarantee Agreement with China Construction Bank Shenzhen Branch. China Construction Bank Shenzhen Branch provided guarantee and issued guarantee for the Company subsidiary company Hong Kong Ruijia borrowing money from China Construction Bank Hong Kong Branch. The guarantee amount as USD 0.2 billion and the term shall not exceed three years. (6)The Company subsidiary company Hong Kong Ruijia signed agreement with ING BANK N.V., HONGKONG BRANCH for the credit of USD 0.1 billion with term from April 27, 2010 to April 27, 2013. Ended the report period, the aforementioned contract was under the implementation. 3. Capital occupation of associated parties and guarantee issues (1) Capital occupation of associated parties According to the requirements of Notice on Standardizing Capital Current between the Listed Companies and Associated parties and Notice on Standardizing External Guarantee of Listed Companies promulgated by CSRC, the Company made self-inspection onthe current fund with the associated parties and external guarantee and report to Shenzhen Securities Regulatory Bureau. Relevant details were as follows:21 Name of the parties Relationship with the Company Accounting items calculated by listed company Amount at period begin Amount in this period Amount in period end Reason Nature Huizhou Taitong Property Investment Co., Ltd. Joint venture Other accont receivable 121,257,000 5,979,214 127,236,214 Current fund Nonoperational occupancy Shenzhen TCL Optical- Electronics Technologies Ltd. Associated company Other account receivable 187,851,513 69,487,531 257,339,044 Current fund Nonoperational occupancy (2) Guarantee issues Up till June 30, 2010, external guarantee sum of the Company and its holding subsidiary companies was RMB 1,607,970,000, accounting for 9.88% of the parent company shareholder net asset after the latest term of auditing. There were no overdue guarantee amount, guarantee amount involving lawsuit and loss amount that should be shouldered for the guarantee being judged as losing lawsuit. Besides the above-mentioned guarantees, the Company provided mortgage loan guarantee for purchaser of commercial house according to relevant regulations of people’s bank of China. At present, the Company provided phase joint guarantee for purchaser of commercial house with term from the date the bank offering loan to the date the bank completing handling Property Ownership Certificate. If the purchaser did not implement the responsibility of debtor in the aforesaid period, the Company had the right to take back the sold house, so the guarantee would not cause actual loss of the Company. At the end of the period, the Company totally provided guarantee of RMB 134,820,000. 4. Special statement and independent opinions of the independent directors regarding capital occupation by the associated parties and providing of external guarantees. Independent Directors of the Company – Meng Yan, Chen Yanping, Gong Xinglong and Chai Qing checked the conditions of capital occupation by controlling shareholders and associated parties and providing of external guarantees, and thought that: The Company providing development fund for joint venture as shares holding proportion and providing loan guarantee for subsidiary company as shares holding proportion were demands of normal operation and rational use of fund. Decision-making procedure accorded with laws and regulations without hurting interests of the Company and shareholders. Providing guarantee for purchaser of commercial house was the routine in real estate industry and the demand of normal operation. At the same time the Company provided guarantee for purchaser of commercial house, the purchaser of commercial house took the house as mortgage. The risk of the aforementioned behavior could be controlled, and decision-making procedure accorded with laws and regulations without hurting interests of the Company and shareholders. 5. In the report period, the Company did not entrust others to manage cash assets. Ⅸ. Accepting investigation, and communication and interview in the report period were as follows: Reception date Reception place Reception way Object received Content discussed and information provided January 12, 2010 Shekou, Shenzhen Field investigation China Securities Co., Ltd. January 19, 2010 Shekou, Field Changjiang Securities ①. Introducing operation of the Company22 Shenzhen investigation January 25, 2010 Shekou, Shenzhen Field investigation GTJA Allianz Funds January 26, 2010 Shekou, Shenzhen Field investigation Goldman Sachs January 27, 2010 Shekou, Shenzhen Field investigation Bohai Securities Co., Ltd. February 5, 2010 Shekou, Shenzhen Field investigation Client of China Securities Co., Ltd. February 10, 2010 Shekou, Shenzhen Written inquiry Investor February 22, 2010 Shekou, Shenzhen Written inquiry Investor February 23, 2010 Shekou, Shenzhen Written inquiry Investor March 1, 2010 Shekou, Shenzhen Field investigation Guangzhou Securities Co., Ltd. March 2, 2010 Shekou, Shenzhen Field investigation Daiwa Securities Group Inc. March 3, 2010 Shekou, Shenzhen Field investigation Essence Securities March 12, 2010 Shekou, Shenzhen Written inquiry Investor March 15, 2010 Shekou, Shenzhen Written inquiry Investor March 15, 2010 Shekou, Shenzhen Written inquiry Investor March 18, 2010 Shekou, Shenzhen Field investigation Zhongshan Securities Co., Ltd. March 22, 2010 Shekou, Shenzhen Written inquiry Investor March 25, 2010 Shekou, Shenzhen Field investigation Taishin Securities Co. March 26, 2010 Shekou, Shenzhen Field investigation Client of J.P. MORGEN March 29, 2010 Shekou, Shenzhen Field investigation Client of UBS March 29, 2010 Shekou, Shenzhen Written inquiry Investor March 31, 2010 Shekou, Shenzhen Written inquiry Investor April 2, 2010 Shekou, Shenzhen Field investigation Client of Gaohua Securities Co., Ltd. April 4, 2010 Shekou, Shenzhen Written inquiry Investor April 6, 2010 Shekou, Shenzhen Written inquiry Investor April 6, 2010 Shekou, Shenzhen Written inquiry Investor April 12, 2010 Shekou, Shenzhen Written inquiry Investor April 12, 2010 Shekou, Shenzhen Written inquiry Investor April 19, 2010 Shekou, Shenzhen Written inquiry Investor April 20, 2010 Shekou, Shenzhen Written inquiry Investor ②. Discussing the industry development; ③. Providing the information announced and brochure for projects of the Company. ④Visiting the Company on-sale buildings, and providing building sales brochure23 April 21, 2010 Shekou, Shenzhen Written inquiry Investor April 23, 2010 Shekou, Shenzhen Field investigation Client of UBS April 23, 2010 Shekou, Shenzhen Written inquiry Investor May 6, 2010 Shekou, Shenzhen Field investigation Shenyin Wanguo organizes group investigation May 13, 2010 Qingdao Field investigation Strategy meeting of BOC International (China) Limited May 18, 2010 Shanghai Field investigation CLSA China Forum May 31, 2010 Hohhot Field investigation Strategy meeting of UBS June 9, 2010 Beijing Field investigation Strategy meeting of J.P.Morgan June 11, 2010 Shenzhen Field investigation Guosen Securities June 11, 2010 Shenzhen Field investigation Everbright Securities Co., Ltd. June 10, 201 Beijing Field investigation Huatai United Securities June 9, 2010 Beijing Field investigation Essence Securities June 10, 2010 Lijiang Field investigation Sinolink Securities June 23, 2010 Shenzhen Field investigation China Merchants Securities Ⅹ. Implementation of commitment made by shareholders with holding 5% or over shares (1) Shekou Industrial Zone promised not to directly or indirectly engage in or develop any business or project which are the same as or similar with the operation scope of the Company; not to conduct direct or indirect competition with the Company for Shekou Industrial Zone and it associated parties, or establish, develop, participate, and assist with any enterprise on the behalf of any third party; not to engage, directly or indirectly participate in competitive activities with the Company by the information obtained from the Company, and conduct any other competitive behaviors of hurting or possibly hurting the interests of the Company. In the report period, Shekou Industrial Zone strictly implemented the commitment. (2) In the report period, Shekou Industrial Zone fulfilled its commitments made about sales: not put any of the Company’s shares on sale. Ⅺ. In the report period, there was no criticism or condemnation received by the Company, the Board of Directors, or the directors. Ⅻ. Engagement or dismissal of CPAs On June 7, 2010, the Company held Shareholders’ General Meeting of 2009, which approved relevant proposal on Continuing Engaging Deloitte Touche Tohmatsu Certified Public Accountants Ltd. as External Audit Institution.24 ⅩⅢ. Other significant events After the approval of the 5th meeting of the 6th board of directors of the Company and the 1st temporary shareholders meeting in 2009, the Company planned to issue stocks not exceeding 0.2 billion non-publicly to specific objects. In the following months, influenced by the change of economic environment and policies, adjustment of the real estate plate of the capital market was obvious and stock price of the Company was lowered greatly. The 13th meeting of the 6th board of directors of the Company planned to adjust the extra issurance price this time as RMB 20.60, but later the Company stock price decreased continuously and greatly. After comprehensively considering all factors and analyzing and arguing carefully, the Company decided to actively withdraw the application of non-public issurance this time. The 14th meeting of the 6th board of directors of the Company and 2009 annual shareholders meeting approved to withdraw the scheme of non-publicly issuing stocks this time. The report of the Company withdrawing non-public issurance got the approval of China Securities Regulatory Commission Administratively Permitting Application Termination Examination Notice [2010] No. 78 Document. Chapter 7. Financial Report (unaudited) For the details, please refer to Appendix (Interim Financial Report 2010) Chapter 8. Documents Available for Reference Ⅰ. Financial statements carrying the personal signatures and seals of Legal Representative, Person in Charge of Accounting Works and Person in Charge of Accounting Department; Ⅱ. Originals of all documents and notices publicly disclosed on newspapers designated by CSRC in the first half of 2010;25 China Merchants Property Development Co., Ltd. Financial Statements The period from January 1, 2010 to June 30, 201026 - - Financial Statements The period from January 1, 2010 to June 30, 2010 Contents Page Consolidated Balance Sheet 2 Balance Sheet of the Company 3 Consolidated Income Statement 4 Income Statement of the Company 5 Consolidated Cash Flow Statement 6 Cash Flow Statement of the Company 7 Consolidated Statement of Change in Shareholders’ Equity 8 Statement of Change of Shareholders’ Equity of the Company 9 Notes to Financial Statements 10 - 90China Merchants Property Development Co., Ltd. 27 - - The period from January 1, 2010 to June 30, 2010 Consolidated Balance Sheet In RMB Items Note Balance at the end of term Balance at the beginning of year Items Note Balance at the end of term Balance at the beginning of year Current asset: Current liabilities Monetary capital (V)1 10,390,560,833 9,489,490,935 Short-term loans (V)18 1,629,644,446 1,372,929,609 Settlement provision - - Loan from Central Bank - - Outgoing call loan - - Deposit received and hold for others - - Transactional financial assets (V)2 25,651,617 6,437,479 Call loan received - - Notes receivable - - Trade off financial liabilities (V)2 2,254,310 12,829,413 Account receivable (V)3 109,526,262 118,962,896 Notes payable (V)19 268,100,694 257,896,108 Prepayment (V)5 5,648,907 8,747,313 Account payable (V)20 1,796,195,435 2,705,521,285 Insurance receivable - - Prepayment received (V)21 8,296,324,582 9,498,461,291 Reinsurance receivable - - Selling of repurchased financial assets - - Provisions of Reinsurance contracts receivable - - Fees and commissions receivable - - Interest receivable - - Employees’ wage payable (V)22 96,330,938 162,832,982 Dividend receivable - - Tax payable (V)23 380,116,649 589,859,453 Other account receivable (V)4 1,050,297,111 1,926,509,243I nterest payable (V)24 39,755,152 21,872,418 Repurchasing of financial assets Dividend payable (V)25 217,926,308 107,751,887 Inventories (V)6 33,856,297,075 30,461,181,900 Other account payable (V)26 5,638,304,437 5,835,329,987 Non-current asset due in 1 year 1,735,693 26,754 Reinsurance fee payable - - Other current asset (V)7 851,886,216 624,800,651 Insurance contract provision - - Total of current asset 46,291,603,714 42,636,157,171 Entrusted trading of securities - - Non-current assets Entrusted selling of securities - - Loans and payment on other’s behalf disbursed - Non-current liability due in 1 year (V)28 1,457,610,597 1,303,501,721 Sellable financial asset (V)8 4,129,216 4,898,240 Other current liability (V)29 2,239,959,131 1,843,563,001 Expired investment in possess - - Total of current liability 22,062,522,679 23,712,349,155 Long-term receivable (V)9 1,095,238,586 1,062,146,037 Non-current liabilities Long-term share equity investment (V)10,11 615,920,380 616,512,618 Long-term borrowings (V)30 9,515,280,804 5,720,303,012China Merchants Property Development Co., Ltd. 28 - - Items Note Balance at the end of term Balance at the beginning of year Items Note Balance at the end of term Balance at the beginning of year Investment properties (V)12 2,967,575,138 2,787,842,250 Bond payable - - Fixed assets (V)13 186,817,919 299,615,954 Long-term payable (V)31 51,233,638 46,469,703 Construction in process (V)14 14,960,414 19,254,007 Special payable - - Engineering goods - - Expected liabilities (V)27 108,057,942 108,052,194 Fixed asset disposal - - Differed income tax liability (V)16 613,666 731,713 Production physical assets - - Other non-recurring liabilities (V)32 4,483,360 7,218,243 Gas & petrol - - Total of non-current liabilities 9,679,669,410 5,882,774,865 Intangible assets - 54,121 Total of liability 31,742,192,089 29,595,124,020 R&D expense - - Shareholders’ equity Goodwill - - Share capital (V)33 1,717,300,503 1,717,300,503 Long-term amortizable expenses (V)15 171,237,171 180,194,127 Capital reserves (V)34 8,487,275,926 8,487,926,904 Differed income tax asset (V)16 438,162,357 290,485,972 Less: Shares in stock - - Other non-current asset - - Special reserves - - Total of non-current assets 5,494,041,181 5,261,003,326 Surplus reserves (V)35 785,793,010 785,793,010 Common risk provision - - Retained profit (V)36 6,093,358,841 5,214,909,610 Different of foreign currency translation 95,753,565 72,806,727 Total of shareholders’ equity attributable to the parent company 17,179,481,845 16,278,736,754 Minor shareholders’ equity 2,863,970,961 2,023,299,723 Total of shareholders’ equity 20,043,452,806 18,302,036,477 Total of assets 51,785,644,895 47,897,160,497 Total of owners’ equity and liabilities 51,785,644,895 47,897,160,497 The Notes to the Financial Statements are essential parts of the Financial StatementsChina Merchants Property Development Co., Ltd. 29 - - The period from January 1, 2010 to June 30, 2010 Balance Sheet (Parent Company) In RMB Items Note Balance at the end of term Balance at the beginning of year Items Note Balance at the end of term Balance at the beginning of year Current asset: Current liabilities Monetary capital 5,087,842,852 6,268,540,842 Short-term loans (XII)3 1,127,226,500 630,397,000 Transactional financial assets - - Trade off financial liabilities - - Notes receivable - - Notes payable - - Account receivable - - Account payable - - Prepayment - - Prepayment received - - Interest receivable - - Employees’ wage payable 1,338,460 6,052,306 Dividend receivable 1,090,720,147 1,090,720,147 Tax payable 8,437,959 4,514,867 Other account receivable (XII)1 17,224,211,664 12,504,314,805 Interest payable 22,128,955 9,898,520 Inventories - - Dividend payable 171,730,050 - Non-current asset due in 1 year - - Other account payable 4,788,934,835 3,928,393,230 Other current asset - - Non-current liability due in 1 year (XII)4 750,000,000 650,000,000 Total of current asset 23,402,774,663 19,863,575,794 Other current liability 77,559 77,559 Non-current assets Total of current liability 6,869,874,318 5,229,333,482 Sellable financial asset 4,129,216 4,898,240 Non-current liabilities Expired investment in possess - - Long-term borrowings (XII)5 6,211,636,000 4,123,128,000 Long-term receivable 953,817,502 924,366,671 Bond payable - - Long-term share equity investment (XII)2 3,489,252,049 3,481,655,301 Long-term payable - - Investment properties - - Special payable - - Fixed assets 361,111 318,634 Expected liabilities - - Construction in process - - Differed income tax liability 613,666 731,713 Engineering goods - - Other non-recurring liabilities - - Fixed asset disposal - - Total of non-current liabilities 6,212,249,666 4,123,859,713China Merchants Property Development Co., Ltd. 30 - - Items Note Balance at the end of term Balance at the beginning of year Items Note Balance at the end of term Balance at the beginning of year Production physical assets - - Total of liability 13,082,123,984 9,353,193,195 Gas & petrol - - Shareholders’ equity Intangible assets - - Share capital 1,717,300,503 1,717,300,503 R&D expense - - Capital reserves 8,929,876,698 8,930,527,676 Goodwill - - Less: Shares in stock - - Long-term amortizable expenses 63,076 158,628 Special reserves - - Differed income tax asset - - Surplus reserves 734,841,617 734,841,617 Other non-current asset - - Common risk provision - - Total of non-current assets 4,447,622,954 4,411,397,474 Retained profit 3,386,254,815 3,539,110,277 Total of shareholders’ equity 14,768,273,633 14,921,780,073 Total of assets 27,850,397,617 24,274,973,268 Total of owners’ equity and liabilities 27,850,397,617 24,274,973,268China Merchants Property Development Co., Ltd. 31 - - The period from January 1, 2010 to June 30, 2010 Consolidated Income Statement In RMB Items Note Amount of the Current Term Amount of the same period of last year I. Total revenue (V)37 6,981,153,925 2,875,777,226 Incl. Business income 6,981,153,925 2,875,777,226 Interest income - - Insurance fee earned - - Fee and commission received - - II. Total business cost 5,206,663,811 2,371,956,755 Incl. Business cost (V)37 4,127,363,733 1,628,278,262 Interest expense - - Fee and commission paid - - Insurance discharge payment - - Net claim amount paid - - Net insurance policy reserves provided - - Insurance policy dividend paid - - Reinsurance expenses - - Business tax and surcharge (V)38 862,925,247 480,483,907 Sales expense 112,145,064 114,595,993 Administrative expense 101,179,394 90,818,800 Financial expenses (V)39 3,053,234 57,887,757 Asset impairment loss (V)40 (2,861) (107,964) Plus: Income from change of fair value (V)41 29,917,874 (108,371,152) Investment income (V)42 25,453,954 212,121,326 Incl. Investment gains from affiliates (592,236) 109,884,894 Exchange gains - - III. Business profit 1,829,861,942 607,570,645 Plus: Non business income (V)44 8,910,241 17,875,375 Less: Non-business expenses (V)45 5,103,685 1,355,666China Merchants Property Development Co., Ltd. 32 - - Items Note Amount of the Current Term Amount of the same period of last year Incl. Loss from disposal of non-current assets 276,647 318,807 IV. Gross profit 1,833,668,498 624,090,354 Less: Income tax expenses (V)46 434,742,205 142,053,203 V. Net profit 1,398,926,293 482,037,151 Net profit attributable to the owners of parent co. 1,050,179,281 486,847,748 Minor shareholders’ equity 348,747,012 (4,810,597) VI. Earning per share (I) Basic earnings per share (V)47 0.6115 0.2834 (II) Diluted earnings per share (V)47 0.6115 0.2834 VII. Other misc. incomes (V)48 38,546,181 (224,877) VIII. Total of misc. incomes 1,437,472,474 481,812,274 Total misc gains attributable to the parent company 1,072,475,141 486,622,871 Total misc gains attributable to the minor shareholders 364,997,333 (4,810,597)China Merchants Property Development Co., Ltd. 33 - - The period from January 1, 2010 to June 30, 2010 Income Statement (Parent Company) In RMB Items Note Amount of the Current Term Amount of the same period of last year I. Turnover - - Less: Operation cost - - Business tax and surcharge - - Sales expense - - Administrative expense 9,215,964 8,998,837 Financial expenses (14,086,134) 21,752,719 Asset impairment loss - - Plus: Income from change of fair value - - Investment income (XII)6 20,005,859 21,545,461 Incl. Investment gains from affiliates (2,403,251) (1,825,269) II. Operation profit 24,876,029 (9,206,095) Plus: Non business income - - Less: Non-business expenses - - Incl. Loss from disposal of non-current assets - - III. Total of profit 24,876,029 (9,206,095) Less: Income tax expenses 6,001,441 - IV. Net profit 18,874,588 (9,206,095) V. Earnings per share - - (I) Basic earnings per share Not applicable Not applicable (II) Diluted earnings per share Not applicable Not applicable VI. Other misc gains (650,978) 1,775,123 VII. Total of integrated income 18,223,610 (7,430,972)China Merchants Property Development Co., Ltd. 34 - - The period from January 1, 2010 to June 30, 2010 Consolidated Cash Flow Statement In RMB Items Note Amount of the Current Term Amount of the same period of last year I. Net cash flow from business operation Cash received from sales of products and providing of services 5,779,743,718 6,727,241,1661 Net increase of customer deposits and capital kept for brother company - - Net increase of loans from central bank - - Net increase of inter-bank loans from other financial bodies - - Cash received against original insurance contract - - Net cash received from reinsurance business - - Net increase of client deposit and investment - - Net increase of trade financial asset disposal - - Cash received as interest, processing fee, and commission - - Net increase of inter-bank fund received - - Net increase of repurchasing business - - Tax returned 15,311,948 9,407 Other cash received from business operation (V)49(1) 1,457,432,262 824,720,066 Sub-total of cash inflow from business activities 7,252,487,928 7,551,970,639 Cash paid for purchasing of merchandise and services 6,182,133,125 2,645,911,081 Net increase of client trade and advance - - Net increase of savings in central bank and brother company - - Cash paid for original contract claim - - Cash paid for interest, processing fee and commission - - Cash paid for policy dividend - - Cash paid to staffs or paid for staffs 367,569,007 286,740,876 Taxes paid 1,621,816,124 689,645,723 Other cash paid for business activities (V)49(2) 1,076,378,973 783,250,227 Sub-total of cash outflow from business activities 9,247,897,229 4,405,547,907 Cash flow generated by business operation, net (1,995,409,301) 3,146,422,732 II. Cash flow generated by investingChina Merchants Property Development Co., Ltd. 35 - - Items Note Amount of the Current Term Amount of the same period of last year Cash received from investment retrieving - - Cash received as investment gains - 413,971 Net cash retrieved from disposal of fixed assets, intangible assets, and other long-term assets 33,971 26,214 Net cash received from disposal of subsidiaries or other operational units - - Other investment-related cash received (V)49(3) 12,887 77,277,985 Sub-total of cash inflow due to investment activities 46,858 77,718,170 Cash paid for construction of fixed assets, intangible assets and other long-term assets 6,321,512 23,382,118 Cash paid as investment 28,125,469 5,327,200 Net increase of loan against pledge - - Net cash received from subsidiaries and other operational units - - Other cash paid for investment activities - - Sub-total of cash outflow due to investment activities 34,446,981 28,709,318 Net cash flow generated by investment (34,400,123) 49,008,852 III. Cash flow generated by financing Cash received as investment 475,673,905 75,000,000 Incl. Cash received as investment from minor shareholders 475,673,905 75,000,000 Cash received as loans 5,730,487,074 2,167,067,165 Cash received from bond placing - - Other financing-related cash received - - Subtotal of cash inflow from financing activities 6,206,160,979 2,242,067,165 Cash to repay debts 1,507,153,645 3,744,278,142 Cash paid as dividend, profit, or interests 239,851,792 489,256,718 Incl. Dividend and profit paid by subsidiaries to minor shareholders 61,556,629 - Other cash paid for financing activities 882,889,738 - Subtotal of cash outflow due to financing activities 2,629,895,175 4,233,534,860 Net cash flow generated by financing 3,576,265,804 (1,991,467,695) IV. Influence of exchange rate alternation on cash and cash equivalents (3,610,150) (325,164) V. Net increase of cash and cash equivalents 1,542,846,230 1,203,638,725 Plus: Balance of cash and cash equivalents at the beginning of term (V)50(1) 8,775,661,067 7,358,057,106 VI. Balance of cash and cash equivalents at the end of term (V)50(1) 10,318,507,297 8,561,695,831China Merchants Property Development Co., Ltd. 36 - - The period from January 1, 2010 to June 30, 2010 Cash Flow Statement (Parent Company) In RMB Items Note Amount of the Current Term Amount of the same period of last year I. Net cash flow from business operation Cash received from sales of products and providing of services - - Tax returned - - Other cash received from business operation 552,707,036 3,745,135,936 Sub-total of cash inflow from business activities 552,707,036 3,745,135,936 Cash paid for purchasing of merchandise and services Cash paid to staffs or paid for staffs 5,860,756 6,505,053 Taxes paid 5,024,297 72,411 Other cash paid for business activities 2,277,673,432 1,974,950,670 Sub-total of cash outflow from business activities 2,288,558,485 1,981,528,134 Cash flow generated by business operation, net (1,735,851,449) 1,763,607,802 II. Cash flow generated by investing Cash received from investment retrieving - - Cash received as investment gains - - Net cash retrieved from disposal of fixed assets, intangible assets, and other long-term assets - - Net cash received from disposal of subsidiaries or other operational units - - Other investment-related cash received - - Sub-total of cash inflow due to investment activities - - Cash paid for construction of fixed assets, intangible assets and other long-term assets 40,900 - Cash paid as investment 10,000,000 - Net cash received from subsidiaries and other operational units - - Other cash paid for investment activities - - Sub-total of cash outflow due to investment activities - - Net cash flow generated by investment 10,040,900 - III. Cash flow generated by financing Cash received as investment -China Merchants Property Development Co., Ltd. 37 - - Items Note Amount of the Current Term Amount of the same period of last year Cash received as loans 1,318,282,000 1,698,346,000 Other financing-related cash received Subtotal of cash inflow from financing activities 1,318,282,000 1,698,346,000 Cash to repay debts 627,909,000 2,830,102,100 Cash paid as dividend, profit, or interests 124,762,027 379,265,176 Other cash paid for financing activities Subtotal of cash outflow due to financing activities 752,671,027 3,209,367,276 Net cash flow generated by financing 565,610,973 (1,511,021,276) IV. Influence of exchange rate alternation on cash and cash equivalents (416,613) (30,607) V. Net increase of cash and cash equivalents (1,180,697,989) 252,555,919 Plus: Balance of cash and cash equivalents at the beginning of term 6,268,540,841 4,728,619,945 VI. Balance of cash and cash equivalents at the end of term 5,087,842,852 4,981,175,864China Merchants Property Development Co., Ltd. 38 - - The period from January 1, 2010 to June 30, 2010 Consolidated Statement of Change in Shareholders’ Equity In RMB Amount of the Current Term Amount of Last Year Shareholders’ equity attributable to the parent company Shareholders’ equity attributable to the parent company Items Share capital Capital reserves Surplus reserves Retained profit Others Minor shareholders’ equity Total of shareholders’ equity Share capital Capital reserves Surplus reserves Retained profit Others Minor shareholders’ equity Total of shareholders’ equity I. Balance at the end of last year 1,717,300,503 8,487,926,90 4 785,793,010 5,214,909,610 72,806,727 2,023,299,723 18,302,036,477 1,717,300,503 8,548,544,784 670,226,504 3,858,062,28 6 68,612,288 1,416,760,639 16,279,507,004 Plus: Change of accounting policy - - - - - - - - - - - - - - Correcting of previous errors - - - - - - - - - - - - - - Others - - - - - - - - - - - - - - II. Balance at the beginning of current year 1,717,300,503 8,487,926,90 4 785,793,010 5,214,909,610 72,806,727 2,023,299,723 18,302,036,477 1,717,300,503 8,548,544,784 670,226,504 3,858,062,28 6 68,612,288 1,416,760,639 16,279,507,004 III. Changed in current term - (650,978) - 878,449,231 22,946,838 840,671,238 1,741,416,329 - (60,617,880) 115,566,506 1,356,847,32 4 4,194,439 606,539,084 2,022,529,473 (I) Net profit - - - 1,050,179,281 - 348,747,012 1,398,926,293 - - - 1,644,143,88 0 - 110,321,971 1,754,465,851 (II) Other integrated income - (650,978) - - 22,946,838 16,250,321 38,546,181 - 2,457,054 - - 4,194,439 1,192,914 7,844,407 Total of (I) and (II) - (650,978) - 1,050,179,281 22,946,838 364,997,333 1,437,472,474 - 2,457,054 - 1,644,143,88 0 4,194,439 111,514,885 1,762,310,258 (III) Shareholder input and withdraw of share capital - - - - - 475,673,905 475,673,905 - -63,074,934 - - - 795,570,007 732,495,073 1. Capital input by shareholders - - - - - 475,673,905 475,673,905 - - - - - 338,613,691 338,613,691 2. Share payment accounted into shareholders’ equity - - - - - - - - - - - - - - 3. Others - - - - - - - - (63,074,934) - - - 456,956,316 393,881,382 (IV) Profit distribution - - - (171,730,050) - - (171,730,050) - - 115,566,506 (287,296,556 ) - (300,545,808) (472,275,858) 1. Providing of surplus reserves - - - - - - - - - 115,566,506 (115,566,506 ) - - - 2. Common risk provision - - - - - - - - - - - - - - 3. Dividend to shareholders - - - (171,730,050) - - (171,730,050) - - - (171,730,050) - (300,545,808) (472,275,858) 4. Others - - - - - - - - - - - - - - (V) Internal settlement of shareholders’ equity - - - - - - - - - - - - - - 1. Capital reserves transferred to share capital - - - - - - - - - - - - - - 2. Surplus reserves transferred to share capital - - - - - - - - - - - - - - 3. Making up losses by surplus reserves - - - - - - - - - - - - - - 4. Others - - - - - - - - - - - - - -China Merchants Property Development Co., Ltd. 39 - - IV. Balance at the end of this term 1,717,300,503 8,487,275,92 6 785,793,010 6,093,358,841 95,753,565 2,863,970,961 20,043,452,806 1,717,300,503 8,487,926,904 785,793,010 5,214,909,61 0 72,806,727 2,023,299,723 18,302,036,477China Merchants Property Development Co., Ltd. 40 - - The period from January 1, 2010 to June 30, 2010 Statement of Change in Shareholders’ Equity (Parent Company) In RMB Amount of the Current Term Amount of Last Year Items Share capital Capital reserves Surplus reserves Retained profit Total of shareholders’ equity Share capital Capital reserves Surplus reserves Retained profit Total of shareholders’ equity I. Balance at the end of last year 1,717,300,503 8,930,527,676 734,841,617 3,539,110,277 14,921,780,073 1,717,300,503 8,928,070,622 619,275,111 2,670,741,774 13,935,388,010 Plus: Change of accounting policy - - - - - - - - - - Correcting of previous errors - - - - - - - - - - Others - - - - - - - - - - II. Balance at the beginning of current year 1,717,300,503 8,930,527,676 734,841,617 3,539,110,277 14,921,780,073 1,717,300,503 8,928,070,622 619,275,111 2,670,741,774 13,935,388,010 III. Changed in current term - (650,978) - (152,855,462) (153,506,440) - 2,457,054 115,566,506 868,368,503 986,392,063 (I) Net profit - - - 18,874,588 18,874,588 - - - 1,155,665,059 1,155,665,059 (II) Other integrated income - (650,978) - - (650,978) - 2,457,054 - - 2,457,054 Total of (I) and (II) - (650,978) - 18,874,588 18,223,610 - 2,457,054 - 1,155,665,059 1,158,122,113 (III) Shareholder input and withdraw of share capital - - - - - - - - - - 1. Capital input by shareholders - - - - - - - - - - 2. Share payment accounted into shareholders’ equity - - - - - - - - - - 3. Others - - - - - - - - - - (IV) Profit distribution - - - (171,730,050) (171,730,050) - - 115,566,506 (287,296,556) (171,730,050) 1. Providing of surplus reserves - - - - - - - 115,566,506 (115,566,506) - 2. Providing of common risk provisions - - - - - - - - - - 3. Dividend to shareholders - - - (171,730,050) (171,730,050) - - - (171,730,050) (171,730,050) 4. Others - - - - - - - - - - (V) Internal settlement of shareholders’ equity - - - - - - - - - - 1. Capital reserves transferred to share capital - - - - - - - - - - 2. Surplus reserves transferred to share capital - - - - - - - - - - 3. Making up losses by surplus reserves - - - - - - - - - - 4. Others - - - - - - - - - - IV. Balance at the end of this term 1,717,300,503 8,929,876,698 734,841,617 3,386,254,815 14,768,273,633 1,717,300,503 8,930,527,676 734,841,617 3,539,110,277 14,921,780,073China Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 41 - - A. (I) Company Profiles China Merchants Property Development Co., Ltd. (the Company), originally China Merchants Shekou Shareholding Co., Ltd., is a sino-foreign joint venture established on the base of Shenkou China Merchants Port Service Co., Ltd. by China Merchants Sekou Industrial Zone Co., Ltd. (Shekou Industrial Zone). The Company was incorporated in Shenzhen China in September 1990. On February 23 1993, the Company raised finance by issuing 27,000,000 A shares to the local investors, and 50,000,000 B shares to foreign investors. Upon issuing of these shares, the Company’s capital shares had increased up to 210,000,000 shares. The A shares and B shares were listed at Shenzhen Stock Exchange in June 1993. In July 1995, part of B shares were listed in Singapore Stock Exchange by mean of SDR (Singapore Depository Receipts, “新加坡托管收据” in Chinese). In June 2004, the Company changed its name to “China Merchants Property Development Co., Ltd.” After dividend distributions and rights issues implemented during 1994-2004, the Company’s total number of shares had increased to 618,822,672 shares up to December 31, 2004. On January 18, 2006, as approved by the shareholders’ meeting, the A share relocation plan was implemented. Namely holders of current A shares received 2 A shares and RMB3.14 upon each 10 current A shares from the holders of non-current A shares. The total number of capital shares remains unchanged after completion of the relocation plan. As approved by Document [2006]67 issued by China Securities Regulatory Commission, the Company has made full right issue of 15,100,000 convertible corporation bonds to original A shareholders on August 30, 2006, the part of right issue waived by the original A shareholders would be placed offline to institution investors. The bonds are with face value of RMB100 each. The convertible part became negotiable in Shenzhen Stock Exchange since September 11, 2006 with ID of “CM Convertible Bond” and the convertible date was March 1, 2007. On May 25, 2007, CM Convertible Bond was terminated from trading and converting. All of the bonds not converted yet were repurchased by the Company. Till then, there were totally 15,093,841 bonds (with total face value of RMB1,509,384,100) converted into 115,307,691 shares. The remained 6,159 convertible bonds (with face value of RMB615,900) were repurchased by the Company. Thus the capital shares of the Company had increased up to 734,130,363 shares.China Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 42 - - As approved by document Zheng-Jian-Fa-Xing-Zi [2007]299 issued by China Securities Regulatory Commission, the company has placed 110,736,639 shares privately to China Merchants Shekou Industrial Zone Co., Ltd. on September 19, 2007. The Company’s capital shares has increased up to 844,867,002 shares since then. On March 17, 2008, the plan for profit distribution and capitalizing of common reserves for year 2007 was passed by the Shareholders’ General Meeting 2007, which was, basing on the total capital share of 844,867,002 at December 31, 2007, 3 bonus shares were to distributed to each 10 shares, meanwhile 2 new shares were to converted to each 10 shares from the common reserves basing on the same. Since then, the total capital shares of the Company would be increased to 1,267,300,503 shares. Under “Approval for issuing of new shares by China Merchants Property Development Co., Ltd.” (Zheng-Jian-Xu-Ke[2008]989) issued by China Securities Regulatory Commission, the Company issued 450,000,000 shares to existing A-share holders on November 26, 2008, among which 279,349,288 shares were subscribed by China Merchants Shekou Industrial Zone Co., Ltd. – one of the shareholders of the Company. The total capital shares of the Company has increased up to 1,717,300,503 shares since then. The Company has its headquarter located in Shenzhen Guangdong. The Company and its subsidiaries (referred to as “The Group” are mainly engaged in property development, public utilities (water and power supply), and property management. China Merchants Shekou Industrial Zone Co., Ltd. is the parent company of the Company, and China Merchants Group Ltd. is the ultimate holding shareholder. B. (II) Main Accounting Policies, Estimations and Retrospecting of Previous Accounting Errors 1、 Basis of the Financial Statements Basis of Presentation and Principle of Pricing The accounting basis of the Group is the accrual system. Except that some financial tools are accounted according to fair value, the financial statements take the historical cost as the accounting basis. If assets impair, account the corresponding provisions for impairment in accordance with the relevant provisions. 2. Statement of compliance to the Enterprise Accounting Standard The financial statements prepared by the Company comply with the requirement of New Accounting Standards, and are truly and completely reflecting the financial situations as of June 30, 2010 of both the company and consolidated, as well as the operation results andChina Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 43 - - cash flow in the period from January 1, 2010 to June 30, 2010 of the Company and consolidated as well. 3. Accounting period The fiscal year of the Group is the solar calendar year, that is from January 1 to December 31. 4. Standard currency for bookkeeping RMB is the primary currency in main economic environments, thus the Company and its domestic subsidiaries adopt RMB as the standard currency for bookkeeping. The business of the subsidiaries of the Group in Hong Kong, Singapore shall be accounted in Hong Kong Dollar. Standard currency used in this financial statement is RMB. 5. Accounting treatment of the merging entities under common control and different control Merger of companies refers to those trade or event that merges over two individual companies into one report subject. Merger of companies is divided into merger of enterprises under common control and merger of enterprises under different control. Assets and liabilities acquired from merger of enterprises are recognized at consolidation day or purchasing day. Consolidation day or purchasing day is the date when the controlling power over the target enterprise are practically obtained, namely the date when the net asset or controlling power of business operation decision-making is transferred to the Company. 5.1 Merger of entities under common control Both before and after the merger, the enterprises are under common control of sole party or several parties, and the controlling power is by no means temporary, it is regarded as merger of enterprises under common control. The party which obtained the controlling power over other parties participated in the merger at the merger day is referred to as the merging party, where the other parties are referred to as the merged party. Assets and liabilities obtained by the merging party are calculated at their book value with the merged parties at the merger day. The differences between the book value of net assets and the book value of consideration price (or the total of face value of share issued) are adjusted to the share capital premium under the capital reserves. If the share capital premium is not enough to neutralize the difference, it will be adjusted to the retained gains. Direct expenses occurred to the merging party for the merger are accounted into current gain/loss account when occurred. 5.2 Merger of entities under different control and goodwillChina Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 44 - - When the enterprises participated in the merger are not under controlling of the same party or group of parties, either before or after the merger, the merger is regarded as merger of enterprises under different control. At merging of enterprises under different control, the party which obtains power of control over other participants is regarded as the buying party, and the other parties are regarded as the bought parties. For merger of enterprises under common control, the merger cost is the fair value of capital paid, liability occurred or undertaken, or equity instrument issued thereof, on the day of purchasing to obtain power of control over the bought party, and those expenses directly related to the merger. For merger done through multiple trades, the overall cost is the sum of cost of each single trade. If the merger contract provided faith on future events that may influence the merger cost, and the event has great possibility to happen, and its influence may be reliably measured, then it will be accounted into merger cost. Recognizable assets, liabilities, and contingent liabilities obtained in merger of enterprises under different control, are measured at their fair value on the purchase day. When the merger cost is greater than the share of fair value of recognizable net asset of the bought enterprise, the balance is recognized as goodwill. When the merger cost is lower than the share of fair value of recognizable net asset of the bought enterprise, revising will firstly be done on the merger cost and fair value of each recognizable assets, liabilities, and contingent liabilities of the bought party, and if the merger cost is still lower than the share of fair value of recognizable net asset of the bought enterprise, the balance will be accounted into current gain/loss account. Goodwill and intangible assets formed by merger of enterprises, shall be verified annually for impairment. Verifying of goodwill is performed along with the asset group or combination of asset groups to which the goodwill is related. I.e. the book value of goodwill shall be reasonably amortized to the related asset group since the day acquired. Those can hardly be amortized to the related asset group shall be amortized to the combination of asset groups. Impairment loss is recognized when the retrievable value of the asset group or combination of asset groups including the goodwill is lower than its book value. Impairment losses shall be firstly amortized to the book value of goodwill of the asset group or combination of asset groups, then amortized to other assets in the group or combination of groups at their relative portions. Retrievable value is the higher one of the net amount of fair value less disposal expenses and the current value of expected future cash flow the asset may cause. Fair value is determined according to a fair trade contract; for those without trade contract but has an active market, the fair value is determined at the price offered by the buyer; for those without trade contract and active market, the fair value can be determined according to the best informationChina Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 45 - - obtained. Disposal expenses include those legal expenses, taxes, truckage, and other direct expenses occurred in purpose of make the asset usable. Goodwill impairment will not be written back in subsequent fiscal periods as soon as it was recognized. 6. Preparing method of consolidated financial statements Consolidation range is determined on the basis of control power for the consolidated financial statements. Control power means the Company has the ability to decide the financial and operation issues of another firm and can obtain profit from the firm’s business operation. The Company adopts the date of gaining or losing power of control over the subsidiaries as the date of purchasing or disposal. For subsidiaries being disposed, their business result and cash flow before the disposal day have been appropriately demonstrated in the consolidated income statement and cash flow statement. For subsidiaries disposed in the current term, the initial amount of the consolidated balance sheet will not be adjusted. Subsidiaries added as merger of enterprises under different control, their operation results and cash flow after the purchase day have been appropriately demonstrated in the consolidated income statement and cash flow statement. The initial amount and comparison amount of the consolidated financial statement will not be adjusted. Subsidiaries added as merger of enterprises under common control, their operation results and cash flow from the beginning of current term to the merger day have been appropriately demonstrated in the consolidated income statement and consolidated cash flow statement. And the comparison amount in the consolidated financial statement shall be adjusted accordingly. The accounting policies and accounting periods of the subsidiaries are decided accord with the Company’s accounting policies and accounting periods. Trades and major accounts between the Company and subsidiary or any two subsidiaries shall be neutralized when consolidated. Those share of owners’ equity in the subsidiaries not attributable to the parent company are treated as minor shareholders’ equity, and demonstrated as 搈inor shareholders’ equity?under the shareholders’ equity items in the consolidated balance sheet. The shares of minor shareholders’ equity in net income of current term are demonstrated under ‘Minor shareholders’ gain/loss’ under the net profit items in the consolidated income statement. When the share of losses attributable to the minor shareholders has exceeded their shares in the shareholders’ equity at the beginning of term, if the Articles of Association of the Company has decided beforehand that the minor shareholders has the responsibility to undertake the losses and have the power to make up them, the shareholders’ equity shall beChina Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 46 - - deducted thereof. If not so, it will be deducted from the shareholders’ equity attributable to the parent company of the Company. Profits produced by the subsidiary in subsequent periods are attributable to the shareholders’ equity of the parent company of the Company before making up of the losses attributed to the minor shareholders but undertaken by the parent company of the Company. 7. Recognition basis of cash and cash equivalents Cash refers to in-stock cash and bank savings which are available for payment whenever needed. Cash equivalent refers to the investment held by the Company with short term, strong liquidity and low risk of value fluctuation that is easy to be converted into cash of known amount. 8. Translation of businesses and accounts in foreign currency 8.1 Foreign currency businesses Foreign currency transactions at initial confirmation shall be translated with the approximate exchange rate on the exchange date, the exchange rates which are approximate to the exchange rate on the exchange date shall be determined according to the spot exchange rate of the current month of the transaction. At the balance sheet day, foreign currencies are translated to Renminbi at the instant exchange rate of that day, the exchange difference caused by difference of the instant rate at that day and the rate adopted in initial recognition, or the exchange rate adopted in previous balance sheet, are accounted into current gain/loss account, except for: (1) The exchange difference of special foreign currency borrowing satisfying the conditions of capitalization, which is capitalized and accounted into cost of related asset; (2) Exchange difference of hedge instruments for purpose of avoiding exchange risks is treated by the way of accounting on hedge instruments;(3) Exchange differences caused by sellable non-monetary items (shares for instance), and exchange differences caused by fluctuation of other book balance other than retained cost of sellable monetary items, are accounted into current income account. Non-monetary items in foreign currency and measured with historical costs are still measured at standard currency with exchange rate of the day when the transaction is happened. Non-monetary foreign currency items in fair value are translated at the rate when the fair value is determined. Differences between the standard currency and original currency is handled as fair value fluctuation and accounted under current gain/loss account or other integrated income and recorded into capital reserves. 8.2 Translation of foreign currency accounts When preparing of consolidated financial statements is involving in overseas business operation, if it is a foreign currency item practically formed net investment in overseasChina Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 47 - - business, the difference caused by exchange rate fluctuation will be accounted under “difference of foreign currency translation” of shareholders’ equity. When the overseas business is disposed of, it will be accounted into current gain/loss. Foreign currency financial statements prepared for the Company’s overseas businesses are translated by the following methods: All asset and liability items in the balance sheet are translated at the exchange rate of the balance sheet date; shareholders’ equity items except for 搖ndistributed profit?are translated at the exchange rate of the day when they happened; all items in the income statement and items reflecting the amount of profit distribution are translated at the similar exchange rate of the date when the trades happened; undistributed profit at the beginning of year is the undistributed profit translated at the end of previous year; undistributed profit at the end of year are demonstrated according to the calculation of profit distribution items after translated; the differences between the translated asset items and liability items and total amount of shareholders’ equity items are demonstrated separately as difference of foreign currency statement translation under shareholders’ equity items in the balance sheet. When disposing of overseas businesses, those foreign currency statement translation differences displayed under shareholders’ equity in balance sheet and related to the overseas businesses are fully or at the portion of the business transferred over to current gain/loss account regarding disposal. Foreign currency cash flow and overseas subsidiaries’ cash flow are translated on the similar exchange rate of the day when the cash flow was happened. Influences of exchange rate movement on cash and cash equivalents are regarded as adjustment items and demonstrated under 揑nfluence of exchange rates on cash and cash equivalents?in the cash flow statement. The initial amount at the beginning of year and the practical amount of last year are presented according to the translated amount of the financial statements of last year. 9. Financial instruments 9.1 Deciding of fair value of financial assets and financial liabilities Fair value is the amount in a fair trade decided mutually by the both parties doing the trade or debt clearance voluntarily and who are familiar with the situation. When there is an active market for the financial instrument, the value quoted at the active market is adopted by the Company as the fair value. Value quoted at the active market refers to the amount can be easily obtained from the exchange, brokers, industrial associations, or pricing institutions, and is representing the price practically used in market transactions. When there isn’t any active market, fair value will be recognized by evaluation techniques. Evaluation techniques include referencing to the prices adopted in latest voluntary transaction between parties with full understanding of the situation, referencing to the current fair value of other substantiallyChina Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 48 - - similar financial instruments, discounted cash flow analysis, and future option pricing model. 9.2 Categorizing, recognition and measuring of financial assets Transactions of financial assets in common ways are recognized and terminated according to the accounting of the trading day. At initial recognition, financial assets are divided into financial assets measured at fair value that accounted into current gain/loss account by its variations, investment in possession till expiration, loans and receivables, and disposable financial assets. Fair values are adopted in initial recognitions of financial assets. For those financial assets measured by fair value and with variations accounted into current gain/loss account, the relative transaction expenses are accounted into current gain/loss account directly, while the transaction expenses of other categories are accounted into initial recognition amounts. 9.2.1 Financial assets measured by fair value and fluctuation accounted into current income account Including transactional financial assets and financial assets measured by fair value and with variations accounted into current gain/loss account Transactional financial assets are those satisfying one of the followings:(1) The purpose of acquiring the assets is to sell or repurchase them in a recent time;(2) It is part of the distinguishable financial instrument portfolio under collective management, and there is practical evidence showing that the Company is managing this portfolio by way of short term gain;(3) Belongs to derivative financial instrument, however except for those be recognized as effective hedging instruments, derivative instruments belongs to financial guarantee contract, connected to option instruments without quotation in active market and cannot be reliably measured for their fair value and can only be settled by delivery of this option instrument. Financial assets satisfying one of the following conditions can be recognized as financial assets measured by fair value and with variations accounted into current gain/loss account:(1) This recognition may eliminate or obviously reduce the divorce of gain or loss caused by adopting of different measuring basis of the particular financial asset;(2) It has been stipulated by the official document regarding risk management or investment strategies, that the portfolio of financial assets or portfolio of financial assets and liabilities should be managed, evaluated and reported to key managements on basis of fair value. Fair value basis is adopted in successive measurement of financial assets measured by fair value and with variations accounted into current gain/loss account. Gains or losses caused by variation of fair value and the dividend or interest related to the financial assets is accounted into current gain/loss account as well.China Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 49 - - 9.2.2 Investment held till due date Refers to those non-derivate financial assets which has fixed expiration date, retrievable amount, and the Company has definite intention and ability to hold under its possession. Accounting of investment hold till expiration is on actual interest rate basis, and successive measurement will upon retained cost after amortization, where the gains and losses occurred at termination recognition, impairment, or amortization, are accounted into current gain/loss account. Actual interest rate basis refers to the method of calculating the amortized costs and every due interests at actual interest rate of financial assets or liabilities (including a group of financial assets or liabilities). Actual interest rate refers to the interest rates used in discounting of future cash flow of particular financial asset or liability during its existing period or applicable shorter time to the current book value. At calculating of the actual interest rate, the Company predicts future cash flow with considering the financial assets or liabilities on the basis of all contract clauses (without considering future credit loss), as well as the costs, expenses, discounts or premiums paid between the parties of above contracts regarding the financial assets or liabilities of which can be regarded as part of the actual interest rates. 9.2.3 Loans and receivable accounts They are referring to those non-derivate financial assets without quotation in the active market, but with fixed retrievable amount. Financial assets categorized under loans and receivables include notes receivable, account receivable, interest receivable, dividend receivable and other receivable. Accounting of loan and receivable is on actual interest rate basis, and successive measurement will upon retained cost after amortization, where the gains and losses occurred at termination recognition, impairment, or amortization, are accounted into current gain/loss account. 9.2.4 Disposable financial assets Includes those non-derivate financial assets recognized as disposable at initial recognition, and financial assets other than those accounted at fair value and variations accounted into current gain/loss, loans and receivable, and investment in possession till due. Successive measurement of disposable financial assets is on fair value basis, gains or losses from variation of fair values, except for impairment loss and exchange difference of foreign currency financial assets related to retained costs, are accounted directly into shareholders’ equity, and transferred over to current gain/loss at termination of such financial assets.China Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 50 - - Interests obtained during the period of holding the disposable financial assets and cash dividend announced by the debtor are accounted into investment gains. 9.3 Impairment of financial assets Except for financial assets accounted at fair value and variation accounted into current gain/loss account, the Company undertake inspection on the book value of other financial assets at each balance sheet day, whenever practical evidence showing that impairment occurred with them, impairment provisions are provided. Practical evidences on impairment of financial assets are the followings: (1) The issuer or the debtor is in serious financial difficulty; (2) The debtor has broken the conditions of contract, for instance default or overdue of payment for interest or principal; (3) With consideration of economic or legal factors, the Company decided to give way to the debtor who is in financial difficulty; (4) There is great possibility that the debtor will bankrupt or use other debt reorganizing process; (5) Financial asset is not able to be traded in the active market because the issuer is in significant financial difficulty; (6) It is hard to tell whether the cash flow of a particular asset in a portfolio has been declining, whereas upon overall evaluation, the Company discovered that the predicted cash flow of the portfolio has practically decreased since the initial recognition, and the decrease is quantifiable, including: - The debtor of the portfolio is becoming worse in ability of making payments; - Particular situation happened with the country or area where the debtor is located, which may cause obstructions for payment of the financial asset; (7) Major negative change occurred with the technical, market, economical, or legal environment of the debtors business territory, which may cause obstructions for the investor to retrieve the investment; (8) The fair value of right investment instrument is significantly decreasing or noncontemporarily decreasing; (9) Other practical evidence showing that impairment has happened with the financial asset. The Company performs impairment test separately on individual financial assets with major amounts; for financial assets without major amounts, the Company performs impairment test separately or inclusively in a group of financial assets with similar characteristics of risks. Those financial assets (individual financial assets with or without major amounts) tested separately with no impairment found shall be tested again along with the group of financial assets with similar risk characteristics. Financial assets confirmed for impairment individually shall not be tested along with the group of financial assets with similar riskChina Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 51 - - characteristics. - Impairment of investment in possession till expiration, loans, an receivables Financial assets measured at cost or retained cost after amortization are written down to the current value of prediced future cash flow, the reduced amount is recognized as impairment loss and accounted into current gain/loss account. Upon recognized for impairment losses, if practical evidence showing that a particular financial asset has recovered in value, and practically related to the issues occurred after recognition of the loss, the recognized impairment loss is restored, the book value of the particular financial asset after the restoring of impairment loss shall not greater than the amortized cost at the day of restoring as if no impairment loss has ever been provided. - Impairment of sellable financial assets When impairment occurred with a sellable financial asset, the accumulated losses caused by decreasing of fair value which have originally been written into capital reserves shall be carried over to current gain/loss account, the accumulated loss carried over is the balance of initial cost after deducting of retrieved principal, amortized amount, current fair value, and impairment originally accounted into gain/loss account. If practical evidence showing that the value of a particular financial asset has recovered in value after a impairment loss has been recognized and practically related to the issues occurred after recognition of the loss, the impairment loss recognized shall be restored. Impairment loss of disposable equity investment instrument will be restored to other miscellaneous income, and the same of disposable liability instrument will be restored to current gain/loss account. Impairment losses of right investment instrument without quotation in an active market and can’t be reliably measured for its fair value, or derivative financial assets which must be settled by delivering of such right investment instrument shall not be restored. 9.4 Basis of recognition and accounting of financial asset transferring Recognition will be terminated when a financial asset satisfies one of the following conditions:(1) The rights setout by the contract by which the the cash flow of the financial asset is collected have been terminated;(2) The financial asset has been transferred to other parties along with almost all of the risks and rewards attached to the financial asset;(3) The financial asset has been transferred to other parties, although neither transferred nor reserved the most risks and rewards attached to the financial asset, the Company gave away its controlling power over it.China Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 52 - - If the firm neither transferred nor reserved almost all of the risks and rewards attached to the financial asset, and did not give away the control over the financial asset, then the relative financial asset is recognized to the extent of continuous involving in the financial asset, and relative liabilities as well. Continuous involving refers to the risk level of value fluctuation risk the financial asset may confront the firm. When the overall transferring of particular financial asset has satisfied the conditions of termination, the difference between “the book value and offer in transferring” and “accumulation of fair value fluctuation which has been accounted into miscellaneous income” shall be accounted into current income account. When partial transferring of particular financial asset has satisfied conditions of termination, the book value of transferred financial asset shall be amortized between the terminated part and un-terminated part according their corresponding fair value, and the difference between “the total of the offer received in transferring and the accumulative of fair value fluctuation originally accounted into other misc. income amortizable to termination part” and “amortizable aforesaid book value” shall be accounted into current income account. 9.5 Categorizing and measuring of financial liabilities At initial recognition, financial liabilities are classified into financial liabilities measured by fair value with changes counted into current income account and other financial liabilities. Initial recognition of financial liabilities is on fair value basis. For financial liabilities measured by fair value with changes accounted into current income account, the related transaction expenses are accounted into current income account directly, as for other financial liabilities, the related transaction expenses are accounted into initially recognized amount. 9.5.1 Financial liabilities accounted at fair value and fluctuation accounted into current gain/loss account Recognition conditions of transactional financial liabilities and those being assigned to financial liabilities measured by fair value with changes counted into current income account are similar with those conditions of transactional financial assets and those being assigned to financial assets measured by fair value with changes counted into current income account. Successive measurements of financial liabilities measured by fair value with changes counted into current income account are on fair value basis. Gains or losses due to change of fair value and dividend or interest payment related to the financial asset are counted into current income account. 9.5.2 Other financial liabilities Derivative financial liabilities bonded to those equity instruments without quotation in an active market and cannot be reliably measured for fair value, and can only be settled byChina Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 53 - - giving of the equity instrument, are measured on cost basis in successive measurement. Accounting of other financial liabilities is on practical interest basis; successive measurements are on amortized balance of cost; gains or losses due to termination recognition or amortizing are accounted into current income account. 9.5.3 Financial guarantee contracts Financial guarantee contracts that cannot be classified to financial liabilities assigned to be calculated by fair value with changes accounted into current income account, are initially recognized at fair value. Successive measurement will be on the greater one between the amount recognized according to 揈nterprise Accounting Standard No.13 – Contingent Issues?and the balance of initially recognized amount less accumulative amortization decided according to 揈nterprise Accounting Standard No. 14 – Income? 9.6 Termination of financial liabilities When the current liabilities of particular financial liability have been wholly or partially relieved, recognition of the financial asset or part of it can only be terminated. When the Group (the debtor) has entered an agreement with the creditor, by which the current financial liability is replaced by accepting of new financial liabilities, and the contract conditions are substantially different between the new and old contract, recognition of the financial liability is terminated, and the new financial liability is recognized at the meantime. When a financial liability is wholly or partially terminated, the difference between the book value of the terminated part and offered value (including non-monetary asset transferred out or new financial liabilities accepted) shall be accounted into current income account. 9.7 Derivative financial instruments and embedded derivative instruments Derivative instruments are initially measured on fair value basis at the day when the contracts are signed, and successive measurements are on fair value as well. Change of fair value of derivative instruments are accounted into current income account. For combined instruments with embedded derivative instruments, in case they are not assigned as financial assets or liabilities on fair value basis and changes accounted into current income account, there is no close relationship between the embedded derivative instruments and the main contract regarding financial and risk characteristics, and with same conditions, and the individual instrument is satisfying the definition of derivative instrument, the embedded derivative instrument shall be separated from the combined instrument and treated as if it is an individual derivative instrument. In case individual measurement is not able to be carried out on the embedded instrument at acquisition day or successive period, then the combined instrument is assigned to financial asset or liability accounted on fair value basis with changes accounted into current income account.China Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 54 - - 9.7.1 Convertible bonds Convertible bonds containing liabilities and converting options issued by the Company are split and recognized separately at initial recognition. Where converting options settled by fixed amount of cash or exchanging of other financial assets for fixed amount of self equity instrument, are accounted as equity. At initial recognition, the fair value of the liability part is determined with reference to the current market price of similar bonds without converting option. Balance of the whole issuing price of the convertible bonds less the fair value of the liability part is recognized as the price of converting option by which the holders may convert the bonds into equity instruments, and shall be accounted under “Capital reserves – other capital reserves (share converting option)” 9.8 Neutralizing of financial assets and financial liabilities The Company is legally empowered to neutralize the recognized financial assets and financial liabilities. The power is currently executable. At the meantime, if the Company is about to liquidate by net amount or cash in the financial assets and discharge the financial liabilities simultaneously, the neutralized amounts of financial assets and liabilities are demonstrated in the Balance Sheet. Except for the above, financial assets and liabilities are demonstrated separately and shall not be neutralized by each other. 9.9 Equity instruments Equity instruments are those contracts which can prove the retained equities in the asset the Group holds after deduction of all liabilities. The balance of equity instrument offer received at issuing less subscription expense is added to shareholders’ equity. Interest allocations (exclude share dividend) to the equity instruments are deducted from shareholders’ equity. The Group don’t recognize fair value fluctuation amount of equity instruments. 10. Account receivable 10.1 Recognition and provision of bad debt provision on receivable accounts with large amount Recognition criteria of bad debt provision on receivable accounts with large amount The Group recognizes receivable accounts over RMB10 million as receivable accounts with large amount Provision of bad debt provision on receivable accounts with large amount The Company performs impairment test separately on individual financial assets with large amounts; those financial assets tested separately with no impairment found shall be tested again along with the group of financial assets with similar risk characteristics. Financial assets confirmed for impairment shall not be tested along with the group of financial assets with similar riskChina Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 55 - - characteristics. 10.2 Recognition and providing of bad debt provisions on receivable accounts with minor amount but with greater risk after combined in the group with similar characteristics Recognition basis of credit risk groups Receivable accounts with minor amount individually and those with large amount but tested no impairment, are grouped according to their credit risks. These credit risks are usually reflecting the ability of repaying according to the contract of the debtor, and related to testing of future cash flow of the receivable account. Receivable accounts overdue for over 3 years are classified as minor amount but with greater risks after combining with risk group. Providing method decided on the group of similar risks When impairment testing by way of risk grouping, amount of bad debt provision is decided according to historical experiences and current economical situation and evaluated loss already exists with the groups. 10.3 Rate of bad debt provisions provided on account age basis Age analysis method Age Rate for receivables (%) Rate for other receivables (%) within 3 months (include) 1% 1% 3-6 months 2% 2% 6-9 months 3% 3% 9-12 months 5% 5% 1-2 years 10% 10% 2-3 years 30% 30% 3-4 years 50% 50% 4-5 years 80% 80% over 5 yrs 100% 100% 11. Inventories 11.1 Categorizing and pricing of inventory delivered The inventories shall measured according to the initial cost. Inventories are divided into real estate development products, raw materials, finished products and stocks, low-value and consumable products and others. The real estate development products are the real estate development products under construction, development products which have been completed, the lands to be developed, etc. The actual costs of real estate development products include the land transfer amount,China Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 56 - - infrastructure expenses, and expenditures on construction and installation works, the borrowing costs before the completion of the development projects and other related costs. When the inventories are sent out, determine the actual cost by the individual valuation method. The actual costs of inventories include the purchase price, transportation cost, and insurance premium, taxes and other related costs for the expenses of making inventories reach the current site and state. When send out the inventories, determine its actual costs according to the method of weighted average. Construction contracts are measured at actual costs, including related direct and indirect expenses occurred from signing to completion of the contract. Accumulated actual costs and accumulated recognized gross profit (loss) and settled prices are demonstrated at net value in the balance sheet after neutralization. The balance of “total of accumulated actual cost and accumulated recognized gross profit (loss)” over the “settled price” is demonstrated as inventory. The balance of “settled price” over “total of accumulated actual cost and accumulated recognized gross profit (loss)” is demonstrated as account received in advance. Expenses such as travelling expenses and bidding expenses related to construction contract are accounted into contract cost when they can be distinguished and measured reliably, and the contract is possibly been engaged. Otherwise are accounted into current income account. 11.2 Recognition basis of realizable net value of inventory and providing basis of inventory impairment provision On the balance sheet date, inventories are accounted depending on which is lower between the cost and the net realisable value. When its net realisable value is lower than the cost, provisions for impairment of inventories shall be drawn. Provisions for impairment of inventories shall be accounted according to the difference between the cost of individual inventory items and the net realisable value. After providing of inventory impairment provision, if the impacting factors that caused impairment of inventory were eliminated, and the realizable value of the inventory becomes higher than the book value, the inventory impairment provision formerly provided shall be restored into current income account. Realizable net value is, in daily transaction, the amount of predicted sales price less predicted cost at completion of construction, less predicted sales expense and tax. Recognition of realizable net value of inventory shall base on confirmed evidence obtained, with reference to the purpose to hold the inventory, and influence of post balance sheet issues.China Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 57 - - 11.3 Inventory system Inventory system is the perpetual inventory system. 11.4 Amortizing basis of low-value consumable materials Low-value consumables are amortized on one-off basis. 12. Long-term equity investment 12.1 Recognition of initial investment cost For the long-term equity investment formed by corporate merger, if it is the long-term equity investment obtained from the corporate merger under the same control, the share of book value of owner's equity on the merger date shall be taken as the initial investment cost. The long-term equity investment obtained through the corporate merger under different control shall be taken as the initial investment cost of long-term equity investment. The other longterm investment besides the long-term equity investment formed by corporate merger shall conduct initial measurement according to its cost. 12.2 Successive measurement and recognition of gain/loss For the long-term equity investments that have no joint control or significant influence and have no price in active market and the fair value can not be reliably measured, shall adopt the the cost accounting method; for the long-term equity investments that have joint control or significant influence, shall adopt the method of equity to account. For those without controlling, joint control or significant influence, and can be measured reliably for their fair values, they are accounted as sellable financial assets. Meanwhile, the Company apply cost basis in accounting of long-term equity investment with substaintial control. 12.2.1 Long-term equity investment on cost basis When cost basis is adopted, long-term equity investments are measured at initial cost. Investment gains are recognized as the cash dividend or profit announced and distributed, except for those cash dividend or profit which have already included in the actual payment of offer when the investment was made. 12.2.2 Long-term equity investment on equity basis When equity basis is adopted, if the initial cost of the long-term equity investment is greater than the share of fair value of the receiver’s recognizable net asset, the initial investment cost of the long-term equity investment will not be adjusted; if the initial cost of the longterm equity investment is less than the share of fair value of the receiver’s recognizable net asset, the balance shall be counted into current income account, and the cost of long-term equity investment shall be adjusted.China Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 58 - - When equity basis is adopted, investment gain/loss of the current term is the share of net gains or losses of the investment receiver of the current year. Recognition of the share of net gains or losses of the investment receiver shall be on the basis of fair value of recognizable asset of the receiver when the investment was made, and recognized after adjustment on the net profit of the receiver in accordance with the Company’s accounting policies and accounting period. For the gain/loss due to unrealised internal trade between the Company and co-operations, the share of the Company in this gain/loss shall be neutralized, and investment gains shall be recognized upon them. But the losses from unrealised trade between the Company and investment receivers which are regarded as losses from asset transferring according to “Enterprise Accounting Standard No.8 – Asset impairment” shall not be neutralized. Change of equities of the investment receiver other than net gains or losses shall be counted into shareholders’ equity, and the book value of long-term equity investment shall be adjusted correspondingly and recognized as other miscellaneous income and recorded in capital reserves. Recognition of the share of net loss by the investment receiver shall be limited to when the book value of long-term equity investment and other long-term equity forms substantial net investment has been reduced to zero. Beside, if the Company is responsible for other losses of the investment receiver, predicted liability shall be recognized upon the prediction of responsibilities and recorded into current investment loss account. If the receiver realized net profit in the period thereafter, the share of gains is recovered after making up of share of losses which has not been recognized. 12.2.3 Purchasing of minority share equity At preparing of consolidated financial statements, the differece between the newly added long-term equity investment due to purchasing of minority share equity and share of net asset calculated upon the new share portion from the date of acquisition (or date of consolidation) in continuous way, shall be adjusted in capital reserves, and when the capital reserves is not enough to be offsetted, the balance will be adjusted from the retained gains. 12.2.4 Disposal of long-term equity investment In the consolidated financial statement, when the parent company partially disposes the longterm equity investment in the subsidiary without losing controlling power over it, the difference between the disposing price and the share of net asset corresponding to the disposed long-term equity investment is accounted into shareholders’ equity. Disposal of long-term equity investment in other conditions, the difference between the book value and actual price received shall be accounted into current income account. For long-term equity investment accounted on equity basis, the part originally accounted into shareholders’ equity is carried over to current income account at corresponding rate when disposed. 12.3 Basis of deciding the common control and major influence on the invested firmChina Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 59 - - Controlling power means the power over the firm’s financial and operational decisionmaking, and can obtain profit from the operation of such firm. Mutual control means the controlling power on particular activity hold together with others against particular contract, and shall only take effect when all of the investment parties has collective affirmative opinions on the major financial or operational issues. Major influence means the power to participate in decision-making but cannot control or collectively control the same. At considering of substantial control or major influence of a firm, the potential voting right factors such as current convertible bonds or executable subscription options have been considered. 12.4 Impairment testing and basis of impairment provision Impairment testing is performed on the long-term equity investment at each balance sheet date. In case of there is evidence showing impairment has occurred, the recoverable amount shall be assessed. If the recoverable amount is lower than the book value, the impairment provision shall be provided at the difference and accounted into current income account. Once the impairment loss of a long-term equity investment is recognized, it shall not be written back in subsequent fiscal periods. 13. Investment property Investment real estate is defined as the real estate with the purpose to earn rent or capital appreciation or both, including the rented land use rights and the land use rights which are held and prepared for transfer after appreciation, the rented buildings. Furthermore, as for the idle estates hold by the Company and ready for rent, if the Board has made written resolutions to use them for rent and shall remain unchanged, they will be reported under investment real estate. Investment real estate is measured according to the initial cost. The follow-up expenses that are related to investment real estate, if the economic interests related to the assets are is likely to inflow cost and its costs can be reliably measured, shall be included in the cost of investment real estate. The other follow-up expense shall be included in the current loss. The Group adopts the cost model to have follow-up measurements of the investment real estate, and to conduct depreciation or amortization according to the policies that are in consistent with the land use rights. Impairment testing is performed on investment property at each balance sheet day. When evidence showing that impairment has occurred, the recoverable value shall be assessed. Assessment of recoverable value is based on individual asset. If the recoverable value was hard to evaluate separately, it shall be decided along with the group of assets it belongs to. If the recoverable value of an asset is lower than its book value, the balance shall be providedChina Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 60 - - for impairment provision and accounted into current income account. Once impairment of investment property was recognized, it will not be written back in the subsequent fiscal periods. Real estates for self use or inventories converted into investment real estate or investment real estate converted into real estate for self use, the book value before the conversion shall be taken as the recorded value after the conversion. The difference of the income from the sale, transfer, dispose of the investment real estate deducting the book value and relevant taxes shall be included in the gains and losses in the current period. 14. Fixed assets 14.1 Recognition of fixed assets Fixed assets is defined as the tangible assets which are held for the purpose of producing goods, providing services, lease or for operation & management, and have more than one year of service life. 14.2 Depreciation of various fixed assets Initial measurement shall be conducted on fixed assets according to the actual cost when obtain them and also considering the expected costs for disposal. From the next month since reaching the intended use state, depreciations on fixed assets shall be accounted by using the method of average life length. The service life of fixed assets, expected net residual value and the year depreciation rate are as follows: Categories Depreciation age (yrs) Salvage value rate % Annual depreciation ratio (%) Houses & buildings 10-50 yrs 5%-10% 1.8%-9.5% Equipment & machinery 10–20 yrs 5%-10% 4.5%-9.5% Electronics, furniture, appliances 5-10 yrs 5% 9.5%-19% Transportation equipment 5-10 yrs 5% 9.5%-19% Estimated salvage value refers to the amount of value retrieved after deducting of predicted disposal expense when the expected using life of a fixed asset has expired and in the expected state of termination. 14.3 Impairment test on fixed asset and providing of impairment provision Impairment testing is performed on fixed asset at each balance sheet day. When evidence showing that impairment has occurred, the recoverable value shall be assessed. AssessmentChina Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 61 - - of recoverable value is based on individual asset. If the recoverable value was hard to evaluate separately, it shall be decided along with the group of assets it belongs to. If the recoverable value of an asset is lower than its book value, the balance shall be provided for impairment provision and accounted into current income account. Once fixed asset impairment is recognized, it shall not be written back in subsequent fiscal periods. 14.4 Other remarks Subsequent expenses related to particular fixed asses, if the financial benefit attached to the fixed asset is possibly inflowing and the cost can be measured reliably, are accounted into fixed asset cost, and the book value of the replaced part is recognized termination. Subsequent expense other than these are accounted into current income account when occurred. The Company revises, at least once at the end of year, the useful life, estimated salvage value, and depreciation policies of the fixed assets. If any change happened, it will be treated as changing of accounting estimations. Income from treatment of fixed asset disposing, transferring, discarding or damage, the balance after deducting of book value and relative taxes is recorded into current income account. 15. Construction-in-progress Cost of construction in process is determined at practical construction expenditures, including all expenses during the construction, capitalized loan expenses before the construction reaches useful status, and other relative expenses. It is transferred to fixed asset as soon as the construction reaches the useful status. Impairment testing is performed on construction in process at each balance sheet day. When evidence showing that impairment has occurred, the recoverable value shall be assessed. Assessment of recoverable value is based on individual asset. If the recoverable value was hard to evaluate separately, it shall be decided along with the group of assets it belongs to. If the recoverable value of an asset is lower than its book value, the balance shall be provided for impairment provision and accounted into current income account. Once impairment of construction impairment is recognized, it shall not be written back in subsequent fiscal periods. 16. Borrowing expenses Borrowing expenses include borrowing interests, amortizing of discount or premium,China Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 62 - - auxiliary expenses, and exchange balances due to borrowings in foreign currencies. Borrowing expenses that can be attributed for purchasing or construction of assets that are complying with capitalizing conditions start to be capitalized when the payment of asset and borrowing expenses have already occurred, and the purchasing or production activities in purpose of make the asset usable have started; Capitalizing will be terminated as soon as the asset that complying with capitalizing conditions has reached its usable or saleable status. The other borrowing expenses are recognized as expenses when occurred. Interest expenses practically occurred at the current term of a special borrowing are capitalized after deducting of the bank saving interest of unused borrowed fund or provisional investment gains; Capitalization amounts of common borrowings are decided by the weighted average of exceeding part of accumulated asset expenses over the special borrowing assets multiply the capitalizing rate of common borrowings adopted. Capitalization rates are decided by the weighted average of common borrowings. In the capitalization period, all of the exchange differences of special borrowings in foreign currencies are capitalized; exchange differences of common borrowings in foreign currencies are accounted into current income account. Assets satisfying the conditions of capitalization are those fixed assets, investment assets or inventories which need a long period of time to purchase, construct, or manufacturing before becoming usable. If purchasing, construction, or manufacturing process of an asset satisfying the conditions of capitalization is suspended abnormally for over 3 months, capitalizing of borrowing expenses shall be suspended until the purchasing, construction, or manufacturing process is resumed. 17. Intangible assets Intangible assets are those recognizable non-monetary assets without physical shape under the Company’s possess or control. Intangible assets are measured by their costs. Those costs related to intangible assets, if the financial benefits are likely to inflow to the Company and can be reliably measured, then counted into intangible asset costs. Other expenditures related to intangible items are counted into current income account when occurred. Land using rights purchased or by way of land using right payment for the Company’s own use are accounted as intangible assets; land using rights purchased or by way of land using right payment for developing of merchandise properties are accounted into property developing costs. For those houses or buildings purchased from outside, the relatedChina Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 63 - - payments are allocated between land using rights and buildings. Those which can hardly be allocated are treated as fixed assets collectively. Those intangible assets with limited useful life are evenly amortized on straight basis from the date when they become useable to the end of expected useful life. At end of report term, revising will be performed on the useful life of intangible assets with limited useful life and the methods of amortizing. If any change happened, it will be treated as changing of accounting estimations. Impairment testing is performed on intangible assets at each balance sheet day. When evidence showing that impairment has occurred, the recoverable value shall be assessed. Assessment of recoverable value is based on individual asset. If the recoverable value was hard to evaluate separately, it shall be decided along with the group of assets it belongs to. If the recoverable value of an asset is lower than its book value, the balance shall be provided for impairment provision and accounted into current income account. Once intangible asset impairment loss was recognized, shall not be written back in subsequent fiscal periods. 18. Long-term expenses to be amortized Long-term amortizable expenses are those already occurred and amortizable to the current term and successive terms for over one year. Long-term amortizable expenses are evenly amortized to the benefit period. 19. Predicted liabilities Responsibilities connected to contingent issues and satisfied all of the following conditions are recognized as predictive liabilities: (1) The responsibility is a current responsibility undertaken by the Company; (2) Fulfilling of the responsibility may lead to financial benefit outflow; (3) The responsibility can be measured reliably for its value. At balance sheet day, with reference to the risks, uncertainty and periodic value of currency that connected to the contingent issues, the predicted liabilities are measured according to the best estimation on the payment to fulfil the current responsibility. If the expenses for clearing of predictive liability is fully or partially compensated by a third party, and the compensated amount can be definitely received, it is recognized separated as asset. Though the compensated amount shall not greater than the book value of the predictive liability. 20. TurnoverChina Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 64 - - 20.1 Income from sales of goods When main risks and rewards attached to the ownership of goods have been transferred to the buyer, reserved neither continuous management power nor effective control over the goods, incoming payment can be measured reliably, relative financial benefit possibly inflow to the company, cost occurred or will occur can be reliably measured, sales income of goods is recognized. If the buyer of the property can stipulate the main structural factors of the design prior to starting of construction, or can decide main structural alternation during the construction, and the construction agreement satisfies the definition of construction contract, the relative income and expenses are recognized according to “Enterprise Accounting Standard No.15 – construction contracts”; If the buyer of the property has limited ability to alter the design of property (for instance can only make minor alternation on the design), property sales income is recognized upon completion and acceptance of the property and the handover procedures were completed. The sales income from power supply and water supply shall be recognized when the electricity and water have been provided and have received the right to collect the money. 20.2 Income from construction contracts When the results of construct contracts can be reliably estimated, income and costs are recognized at the percentage of completion at the balance sheet day. Percentage of completion of the construction contracts are decided by estimation of completed work and other whole work. Reliable estimation of construction results means satisfying of all of these conditions: (1) Overall income of the contract can be measured reliably; (2) Financial benefit attached to the contract is possibly inflow to the company; (3) Actual costs of the contract are distinguishable and can be reliably measured; (4) Progress of the work and expected costs can be reliably recognized. If the results of construction contract are not able to reliably estimated, but the costs can be recovered, income shall be recognized at the cost actually recovered, contract costs are recognized as contract expenses at current term; if the costs are not recoverable, they are recognized instantly as contract cost rather than contract income. When the uncertain factors, which caused the results cannot be reliably estimated, were eliminated, income and expenses of the construction contract are recognized on completion percentage basis. When the contract cost is predicted greater than the income, the predicted loss is recognized as current expenses. 20.3 Rental incomeChina Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 65 - - Rental income from operational rental properties are recognized as rental income toward periods within the contracted rental period on straight basis. 20.4 Income from property management fee When the property management services have been provided and the income from property management will flow into the company and the relevant income and cost can be reliably measured, the property management income shall be recognized. 20.5 Interest income Shall be determined and calculated according to the time of monetary capital and the actual rate. 21. Government allowance Government subsidies are those monetary and/or non-monetary assets obtained from the government by free, but not include those capital input by the government by way of ownership. Government subsidies are classified to asset-related government subsidies and income-related government subsidies. Monetary government subsidies are measured at the amount received or receivable. Nonmonetary government subsidies are measured at fair value. If no fair value is available, nominal amount will be adopted. Government subsidies measured at nominal amount are accounted into current income account directly. Asset-related government subsidies are recognized as differed income and accounted into current income evenly upon their useful life. Those income-related government subsidies used to neutralize relative expenses and losses of successive periods are recognized as differed income and accounted into current income at the period when the expenses are recognized; those used to neutralize relative expenses and losses which have already occurred are accounted into current income directly. When a recognized government subsidy needs to be returned, if there is balance of relative deferred income, the booked balance of relative deferred income shall be neutralized, the exceeding part shall be accounted into current income account; if there is no relative deferred income, it will be accounted into current income account. 22. Differed income tax assets/ differed income tax liabilities 22.1 Income tax of current term At the balance sheet date, the income tax liabilities (or assets) formed at current term or previous terms are measured by the predicted income tax payable according to the tax law. The taxable amount of income used in calculating of income tax expenses of current term is the result of adjusted accounting profit before tax of the current year according to theChina Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 66 - - relative tax laws. 22.2 Deferred income tax asset and deferred income tax liabilities The differences between the book values and taxable basis of certain assets and liability items, and provisional differences occurred between the book value and taxable basis which are not recognized as assets and liabilities, but may be recognized for taxable basis according to the law, are recognized as deferred income tax asset and deferred income tax liabilities on liability basis of the balance sheet. Those taxable provisional differences, which are related to initial recognition of goodwill, and neither enterprise merger, nor initial recognition of assets or liabilities generated by trades make no influence on the accounting profit and taxable income (or deductible losses), are not recognized as relative differed income tax liabilities. Meanwhile, those taxable provisional differences related to investments in subsidiaries, joint businesses, and cooperative businesses, if the Company is able to control the writing back time of the provisional differences, and these provisional differences may neither be written back in an expectable future, are not recognized as relative differed income tax liabilities. Beside the above exemptions, all of the other taxable provisional differences are recognized as differed income tax liabilities. Those deductible provisional differences, which are neither enterprise merger, nor initial recognition of assets or liabilities generated by trades make no influence on the accounting profit and taxable income (or deductible losses), are not recognized as relative differed income tax assets. Meanwhile, those deductible provisional differences related to investments in subsidiaries, joint businesses, and cooperative businesses, if these provisional differences may neither be written back in an expectable future, or may not possibly obtain taxable income used to deduct the provisional difference, are not recognized as relative differed income tax assets. Beside the above exemptions, to the extend of the amount of taxable income used to deduct the provisional difference which can possibly be obtained, all of the other taxable provisional differences are recognized as differed income tax assets. Those tax deductions which can be used to deduct losses and can be carried on to future years, to the extend of the amount of taxable income used to deduct the deductible losses and deductible tax which can possibly be obtained, are recognized as corresponding differed income tax assets. At the balance sheet day, those differed income tax assets and income tax liabilities, according to the tax law, calculation will be on tax rate applicable to retrieving period of assets or clearing of liabilities. At the balance sheet day, verification will be performed on the book value of differedChina Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 67 - - income tax assets. If it is not possible to obtain enough taxable income to neutralize the benefit of differed income tax assets, then the book value of the differed income tax assets shall be reduced. Whenever obtaining of taxable income became possible, the reduced amount shall be restored. 22.3 Income tax expenese Income tax expenditures include current income tax and differed income tax. Except for those current income taxes and differed income taxes related to trades which are directly accounted into shareholders’ equity are accounted into shareholders’ equity, and differed income tax generated by merger of businesses are adjusted in the book value of goodwill, all other current income taxes and differed income taxes expenditures or incomes are accounted into current gain/loss account. 22.4 Neutralizing of income tax When accounting with net amount is a stipulated rights, and tending to account with net amount or acquire of asset and clearing of debts are performed simultaneously, the income tax asset and liabilities of the current term are accounted at net amount after neutralization. When accounting of income tax asset and liabilities of current term with net amount is the stipulated rights, and the income tax asset and liabilities are related to the same subject recognized by the same taxation authority, or to the different subjects but within each period of writing back the differed income tax asset and liabilities with great importance, and tending to account with net amount or acquire of asset and clearing of debts are performed simultaneously, the income tax asset and liabilities of the current term are accounted at net amount after neutralization. 23. Operational leasing and financial leasing Financial leases are those which all of the risks and rewards attached to the assets have been substantially transferred, regardless its ultimate ownership will be transferred or not. Leases other than this are regarded as operational lease. 23.1 Recording of operational lease businesses in which the Company is the undertaker Rentals paid for operational lease are amortized to relative asset cost or current gain/loss account on straight basis to each term covered by the rental period. Initial direct expenses accounted into current gain/loss account. Contingent rentals are accounted into current gain/loss account as soon as happened. 23.2 Recording of operational lease businesses in which the Company is a lender Rental income from operational rental property are recognized as current gain/loss at straight basis to periods in the rental period. Initial direct expenses with large amount are capitalized as occurred, and accounted into current income account at the same base periods same asChina Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 68 - - recognition of rental income to the whole rental period. Initial direct expense with minor amount are accounted into current income account at occurring. Contingent rental is accounted into current income account as occurring. 24. Employee wages In the accounting period when the employees served the Company, the remunerations payable to the employees are recognized as liabilities. According to the regulations, the Company has participated in the social security system setup by the government, including endowment insurance, medical insurance, housing reserves, and other social security policies. Corresponding expenses are accounted into relative asset cost or current income account. When a employee is dismissed before expiring of the employment contract, or proposed compensation for voluntary disengaging, if the Group has produced an official disengagement scheme or voluntary disengaging proposal and will implement them, and these scheme or proposal are irrevocable, predicted liability shall be recognized and accounted into current income account. (III) Taxation 1、 Main categories and rates of taxes Class of tax Tax basis Tax rate Enterprise income tax Amount of income taxable (Note 1) Business tax Income from sales or leasing of property 5% VAT Income from sales of goods (Note 2) 17% Income from power supply (Note 2) 17% Income from water supply 6% Land VAT Income from property sales – amount of deducted items on ultra-progressive tax rate of 30%-60% Contract tax Amount received for land using rights and estates 3% Property tax 70% of the original value of estates (Note 3) 1.2% City maintenance and construction tax Operational tax (or VAT paid) 1%-3% Education surtax Operational tax (or VAT paid) 3% Note 1: Except for businesses in the following areas, the income tax rate for other subsidiaries of the Company is 25%. Tax rate Note Shenzhen and Zhuhai 22% (1) Hong Kong 16.5% (2)China Merchants Property Development Co., Ltd. Notes to the Financial Statements The period from January 1 to June 30, 2010 69 - - (1) Shenzhen and Zhuhai are special economical zones. According to document Guo-Fa (2007)39 issued by National Government, since January 1, 2008, enterprises originally enjoy preferential tax rates will shift to statutory rates gradually in five years upon implementing of the new Tax Law. In which enterprises enjoys 15% of corporation tax will be subject to 22% of corporation tax in 2010. Therefore the subsidiaries of the Company located in Shenzhen and Zhuhai are subject to 22% of corporation tax. (2) According to Taxation Act of Hong Kong, enterprises located in Hong Kong are subject to 16.5% of corporation tax. Note 2: VAT is the balance of output tax less deductible input tax. Output tax is calculated according to the sales income and taxable rate set forth by the relative taxation laws. Note 3: The fixed assets of buildings and rental properties are subject to the payment of property tax upon 70% of their original book value and stipulated tax rate. In which the newly constructed buildings are exempted from property taxes in 3 years since documented by the tax bureau. 2. Preferential tax and approving documents As approved by the Ministry of Finance and National Tax Bureau General with document 财 关税[2010]22号, in the period from January 1, 2010 to December 31, 2010, the electric power imported by Shenzhen China Merchants Power Supply Co., Ltd. from Hong Kong is on the basic amount of 560 million Kwh. The VAT on the amount lower than the basic amount will be refunded at 20%, where the amount beyond the basic amount is subject to the import VAT according to the regulations.China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1 to June 30, 2010 70 - - (IV) Merger of enterprises and consolidated financial statements 1. Particulars of the subsidiaries Subsidiaries acquired through incorporation or investment Full name of the subsidiary Ownership of the subsidiary Reg. Add. Business property Registered capital (x 1000) Business Scope Actual capital input as of end of term (RMB’000) Balance of other items actually formed net investment in the subsidiaries Share proportion % Voting power % Consolid ated? Minor shareholder s’ equity (RMB) Amount of minor shareholders’ equity used to offset the gain/loss of minor shareholders Balance of owners’ equity of the parent company after deducting of the share of loss of current term by minor shareholder over the share of owners’ equity in the subsidiary at beginning of term Ruijia Investment Industrial Ltd. Ltd. liability HK Investmen t HKD20,000 Investment 19,919 - 100% 100% Yes Not applicable Not applicable Not applicable Shenzhen Taige Apartment Management Co., Ltd. Ltd. liability Shenzhen Hotel service RMB1,000 Indoor golf court, Property rental, restaurant, shopping mall, sales of water supply facilities 1,000 - 100% 100% Yes Not applicable Not applicable Not applicable Shenzhen Maitesi Civil Engineering Co., Ltd. Ltd. liability Shenzhen Engineeri ng RMB9,000 Water supply pipe engineering 8,100 - 90% 90% Yes 537,291 537,291 - Shekou Xinghua Industrial Holdings Co., Ltd. Ltd. liability Shenzhen Property developm ent HKD47,420 Real-estate and other properties 38,065 - 65.07% 65.07% Yes 38,136,596 - - Shekou Zhaofa Property Co., Ltd. Ltd. liability Shenzhen Property RMB36,000 Building of commercial houses and auxiliary facilities 36,000 - 100% 100% Yes Not applicable Not applicable Not applicable Guangzhou Wende Property Management Co., Ltd. Ltd. liability Guangzhou Property RMB600 Property management 600 - 100% 100% Yes Not applicable Not applicable Not applicable Shenzhen CM Property Consultancy Ltd. Ltd. liability Shenzhen Property agency RMB2,000 Real-estate operation, information & 2,000 - 100% 100% Yes Not applicable Not applicable Not applicableChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1 to June 30, 2010 71 - - Full name of the subsidiary Ownership of the subsidiary Reg. Add. Business property Registered capital (x 1000) Business Scope Actual capital input as of end of term (RMB’000) Balance of other items actually formed net investment in the subsidiaries Share proportion % Voting power % Consolid ated? Minor shareholder s’ equity (RMB) Amount of minor shareholders’ equity used to offset the gain/loss of minor shareholders Balance of owners’ equity of the parent company after deducting of the share of loss of current term by minor shareholder over the share of owners’ equity in the subsidiary at beginning of term consulting Shanghai China Merchants Properties Co., Ltd. Ltd. liability Shanghai Property developm ent RMB30,000 Property development and sales of construction materials 30,000 - 100% 100% Yes Not applicable Not applicable Not applicable Guangzhou China Merchants Realestate Co., Ltd. Ltd. liability Guangzhou Property developm ent RMB50,000 Specialized property development, leasing and sales 50,000 - 100% 100% Yes Not applicable Not applicable Not applicable CM Property (Beijing) Ltd. Ltd. liability Beijing Property developm ent RMB20,000 Property development and sales 20,000 - 100% 100% Yes Not applicable Not applicable Not applicable China Merchants (Suzhou) Co., Ltd. Ltd. liability Suzhou Property developm ent RMB30,000 Property development, operation and sales 30,000 - 100% 100% Yes Not applicable Not applicable Not applicable CM (Chongqing) Ltd. Ltd. liability Chongqing Property developm ent RMB30,000 Property development, leasing of selfowned properties 30,000 - 100% 100% Yes Not applicable Not applicable Not applicableChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1 to June 30, 2010 72 - - Full name of the subsidiary Ownership of the subsidiary Reg. Add. Business property Registered capital (x 1000) Business Scope Actual capital input as of end of term (RMB’000) Balance of other items actually formed net investment in the subsidiaries Share proport ion % Voting power % Consolid ated? Minor shareholder s’ equity (RMB) Amount of minor shareholders ’ equity used to offset the gain/loss of minor shareholders Balance of owners’ equity of the parent company after deducting of the share of loss of current term by minor shareholder over the share of owners’ equity in the subsidiary at beginning of term Shenzhen City Main Plaza Investment Co., Ltd. Ltd. liability Shenzhen Investment RMB10,00 0 Industry and domestic commerce 10,000 - 100% 100% Yes Not applicable Not applicable Not applicable Shanghai China Merchants Real-estates Co., Ltd. Ltd. liability Shanghai Property developme nt RMB30,00 0 Property development, sales, and services 30,000 - 100% 100% Yes Not applicable Not applicable Not applicable CM (Nanjing) Ltd. Ltd. liability Nanjin Property developme nt RMB30,00 0 Property development, sales, and services 30,000 - 100% 100% Yes Not applicable Not applicable Not applicable Tianjin China Merchants Properties Co., Ltd. Ltd. liability Tianjin Property developme nt RMB40,00 0 Property development, sales, and services 30,000 - 75% 75% Yes 20,674,503 - - Shenzhen China Merchants Xin’an Properties Co., Ltd. Ltd. liability Shenzhen Property developme nt RMB25,00 0 Leasing of self-owned properties 36,803 - 100% 100% Yes Not applicable Not applicable Not applicable Beijing CM Property Management Co., Ltd. Ltd. liability Beijing Property RMB5,000 Property management, decoration, consultancy, property facility sales, maintenance, property leasing and agency 4,000 - 80% 80% Yes 5,830,881 - - Nanjing CM Property Ltd. liability Nanjin Property RMB5,000 Property management, decoration, consultancy, 5,000 - 100% 100% Yes Not applicable Not applicable Not applicableChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1 to June 30, 2010 73 - - Full name of the subsidiary Ownership of the subsidiary Reg. Add. Business property Registered capital (x 1000) Business Scope Actual capital input as of end of term (RMB’000) Balance of other items actually formed net investment in the subsidiaries Share proport ion % Voting power % Consolid ated? Minor shareholder s’ equity (RMB) Amount of minor shareholders ’ equity used to offset the gain/loss of minor shareholders Balance of owners’ equity of the parent company after deducting of the share of loss of current term by minor shareholder over the share of owners’ equity in the subsidiary at beginning of term Management Co., Ltd. property facility sales, maintenance, property leasing and agency Shanghai CM Property Management Co., Ltd. Ltd. liability Shanghai Property USD 620 Property management, decoration, consultancy, property facility sales, maintenance, property leasing and agency 5,130 - 100% 100% Yes Not applicable Not applicable Not applicable Wuhan CM Property Management Co., Ltd. Ltd. liability Wuhan Property RMB5,000 Property management, decoration, consultancy, property facility sales, maintenance, property leasing and agency 5,000 - 100% 100% Yes Not applicable Not applicable Not applicable CM Property Management (HK) Ltd. Ltd. liability HK Property HKD 10 Property management, decoration, consultancy, property facility sales, maintenance, property leasing and agency 11 - 100% 100% Yes Not applicable Not applicable Not applicable Shenzhen China Merchants Property Management Co., Ltd. Ltd. liability Shenzhen Property RMB11,20 0 Property management, decoration, consultancy, property facility sales, maintenance, property leasing and agency 11,200 - 100% 100% Yes Not applicable Not applicable Not applicableChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1 to June 30, 2010 74 - - Full name of the subsidiary Ownership of the subsidiary Reg. Add. Business property Registered capital (x 1000) Business Scope Actual capital input as of end of term (RMB’00 0) Balance of other items actually formed net investment in the subsidiaries Share proport ion % Voting power % Consolid ated? Minor shareholder s’ equity (RMB) Amount of minor shareholders ’ equity used to offset the gain/loss of minor shareholders Balance of owners’ equity of the parent company after deducting of the share of loss of current term by minor shareholder over the share of owners’ equity in the subsidiary at beginning of term Zhangzhou CM Property Management Ltd. Ltd. liability Zhangzhou Property RMB500 Property management, decoration, consultancy, property facility sales, maintenance, property leasing and agency 500 - 100% 100% Yes Not applicable Not applicable Not applicable Shenzhen CM Qile Property Management Ltd. Ltd. liability Shenzhen Property RMB2,000 Property management, decoration, consultancy, property facility sales, maintenance, property leasing and agency 1,200 - 60% 60% Yes (1,063,542) 800,000 - Zhangzhou CM Honglong Property Ltd. Ltd. liability Zhangzhou Property development RMB40,000 Property development and sales 38,448 - 100% 100% Yes Not applicable Not applicable Not applicable Foshan Xincheng Property Co., Ltd. (Note 1) Ltd. liability Foshan Property development USD127,000 Property development, sales, and services 478,690 - 50% 60% Yes 529,361,629 - - Huipeng Property Development Co., Ltd. (Note 1) Ltd. liability HK Property development HKD 10 Property development, sales, and services 5 - 50% 60% Yes (53,384,536) 4,682 - Suzhou Shuanghu Property Co., Ltd. (Note 1) Ltd. liability Suzhou Property development USD244,000 Property development, sales, and services 826,135 - 50% 60% Yes 808,370,430 58,929,445 - Tianjing Zhaosheng Property Co., Ltd. Ltd. liability Tianjin Property development RMB30,000 Property development, sales, 30,000 - 100% 100% Yes Not applicable Not applicable Not applicableChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1 to June 30, 2010 75 - - Full name of the subsidiary Ownership of the subsidiary Reg. Add. Business property Registered capital (x 1000) Business Scope Actual capital input as of end of term (RMB’00 0) Balance of other items actually formed net investment in the subsidiaries Share proport ion % Voting power % Consolid ated? Minor shareholder s’ equity (RMB) Amount of minor shareholders ’ equity used to offset the gain/loss of minor shareholders Balance of owners’ equity of the parent company after deducting of the share of loss of current term by minor shareholder over the share of owners’ equity in the subsidiary at beginning of term and services Suzhou CM Nanshan Property Co., Ltd. Ltd. liability Suzhou Property development RMB100,000 Property development, sales, and services 60,000 - 60% 60% Yes 82,645,197 - - Shenzhen CM Anye Investment Development Co., Ltd. Ltd. liability Shenzhen Investment RMB10,000 Industrial investment, domestic commerce 5,100 - 51% 51% Yes 4,076,274 823,726 - Shanghai CM Minsheng Property Ltd. Ltd. liability Shanghai Property development RMB30,000 Property development, interior decoration, construction material sales 30,000 - 100% 100% Yes Not applicable Not applicable Not applicable Shanghai CM Fengsheng Property Ltd. Ltd. liability Shanghai Property development RMB30,000 Property development, interior decoration, construction material sales 30,000 - 100% 100% Yes Not applicable Not applicable Not applicableChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1 to June 30, 2010 76 - - Full name of the subsidiary Ownership of the subsidiary Reg. Add. Business property Registered capital (x 1000) Business Scope Actual capital input as of end of term (RMB’000) Balance of other items actually formed net investment in the subsidiaries Share proportio n % Voting power % Consoli dated? Minor shareholders ’ equity (RMB) Amount of minor shareholders ’ equity used to offset the gain/loss of minor shareholders Balance of owners’ equity of the parent company after deducting of the share of loss of current term by minor shareholder over the share of owners’ equity in the subsidiary at beginning of term Shenzhen CM Construction Co., Ltd. Ltd. liability Shenzhen Property develop ment RMB50,000 Construction engineering, decoration, elevator, air conditioner maintaining, sales of construction materials 50,000- 100% 100% Yes Not applicable Not applicable Not applicable Guangzhou Qidi Tech & Science Investment Co., Ltd. Ltd. liability Guangzhou Property develop ment RMB30,000 Ventual Investment 21,777- 72.59% 72.59% Yes 6,965,279 1,257,721 - Foshan Xinjie Property Co., Ltd. (Note 1) Ltd. liability Foshan Property develop ment USD219,80 0 Property development, sales, and services 1,511,578- 100% 100% Yes Not applicable Not applicable Not applicable Heighten Holdings Limited BVI (British Virgin Island) British Virgin Island Investme nt USD0.002 Investment 11- 100% 100% Yes Not applicable Not applicable Not applicable Converage Holdings Limited BVI British Virgin Island Investme nt USD0.002 Investment 11- 100% 100% Yes Not applicable Not applicable Not applicable China Merchants Properties (Chongqing) Co., Ltd. Ltd. liability Chongqing Property develop ment RMB30,000 Property development, interior decoration, sales of construction material 30,000- 100% 100% Yes Not applicable Not applicable Not applicable China Merchants Jiaming (Beijing) Property Development Co., Ltd. Ltd. liability Beijing Property develop ment RMB350,00 0 Property development, interior decoration, sales of construction material 175,000- 50% 60% Yes 178,159,299 - - Shenzhen CM Commercial Ltd. liability Shenzhen Property develop RMB51,000 Developing of commercial 51,000- 100% 100% Yes Not applicable Not applicable Not applicableChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1 to June 30, 2010 77 - - Full name of the subsidiary Ownership of the subsidiary Reg. Add. Business property Registered capital (x 1000) Business Scope Actual capital input as of end of term (RMB’000) Balance of other items actually formed net investment in the subsidiaries Share proportio n % Voting power % Consoli dated? Minor shareholders ’ equity (RMB) Amount of minor shareholders ’ equity used to offset the gain/loss of minor shareholders Balance of owners’ equity of the parent company after deducting of the share of loss of current term by minor shareholder over the share of owners’ equity in the subsidiary at beginning of term Development Co., Ltd. ment property, operation, management, leasing, investment in industry Beijing Kanglade Property Development Co., Ltd. Ltd. liability Beijing Property develop ment RMB30,000 Property development, sales of its products, hotel development, import & export of goods and technologies 18,000- 60% 60% Yes 11,011,049 988,951 - Chongqing China Merchants Property Development Co., Ltd. (Note 3) Ltd. liability Chongqing Property develop ment USD99,990 Developing, leasing, sales and management of property 682,781- 100% 100% Yes Not applicable Not applicable Not applicable Chengdu China Merchants Beihu Property Co., Ltd. Ltd. liability Chengdu Property develop ment RMB50,000 Property development, project investment, property agency, and management service 50,000- 100% 100% Yes Not applicable Not applicable Not applicableChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1 to June 30, 2010 78 - - Full name of the subsidiary Ownership of the subsidiary Reg. Add. Business property Registered capital (x 1000) Business Scope Actual capital input as of end of term (RMB’000) Balance of other items actually formed net investment in the subsidiaries Share proportion % Voting power % Consolida ted? Minor shareholders ’ equity (RMB) Amount of minor shareholders ’ equity used to offset the gain/loss of minor shareholders Balance of owners’ equity of the parent company after deducting of the share of loss of current term by minor shareholder over the share of owners’ equity in the subsidiary at beginning of term Tianjin Gangwei Property Development Co., Ltd. Ltd. liability Tianjin Property developme nt RMB15,0 00 Property development, sales, leasing, management and information service 15,000 - 100% 100% Yes Not applicable Not applicable Not applicable Shenzhen China Merchants OCT Investment Co., Ltd. (Note 4) Ltd. liability Shenzhen Property developme nt RMB100, 000 Property development, management, agency, and decoration 50,000 - 50% 57% Yes 595,016,399- - Shenzhen China Merchants Electric Power Measurement Co., Ltd. Ltd. liability Shenzhen Power supply RMB 1,500 Special measurement technologies authorized by Shenzhen Quality and Technical Supervisory Bureau 1,500 - 100% 100% Yes Not applicable Not applicable Not applicable Pride Oasis Limited (Note 3) BVI British Virgin Island Investment USD0.002 Investment USD 0.05 - 50% 60% Yes 2,462,265 - - Cosmo City Limited(Note 3) Ltd. liability HK Investment USD0.002 Investment USD 0.05 - 100% 100% Yes Not applicable Not applicable Not applicable Chengdu CM Property Co., Ltd. (Note 5) Ltd. liability Chengdu Property developme nt RMB 10,000 Property development, property management; project investment, property agency 10,000 - 100% 100% Yes Not applicable Not applicable Not applicableChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1 to June 30, 2010 79 - - Full name of the subsidiary Ownership of the subsidiary Reg. Add. Business property Registered capital (x 1000) Business Scope Actual capital input as of end of term (RMB’000) Balance of other items actually formed net investment in the subsidiaries Share proportion % Voting power % Consolida ted? Minor shareholders ’ equity (RMB) Amount of minor shareholders ’ equity used to offset the gain/loss of minor shareholders Balance of owners’ equity of the parent company after deducting of the share of loss of current term by minor shareholder over the share of owners’ equity in the subsidiary at beginning of term Foshan CM Huidefeng Property Co., Ltd. (Note 6) Ltd. liability Foshan Property developme nt USD 99,900 Property development, property management; project investment, property agency 340,978 - 50% 60% Yes 340,528,018 450,662 - Shanghai Jingyuan Property Development Co., Ltd. (Note 7) Ltd. liability Shanghai Property developme nt RMB 30,000 Property development and trading, lease of own property, property management, interior decoration service 16,500 - 55% 60% Yes 13,498,058 1,942 -China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1 to June 30, 2010 80 - - (2) Subsidiaries acquired from merger under common control Full name of the subsidiary Ownership of the subsidiary Reg. Add. Business property Registered capital (x 1000) Business Scope Actual capital input as of end of term (RMB’000) Balance of other items actually formed net investment in the subsidiaries Share proportion % Voting power % Consolidated ? Minor shareholders ’ equity (RMB) Amount of minor shareholders ’ equity used to offset the gain/loss of minor shareholders Balance of owners’ equity of the parent company after deducting of the share of loss of current term by minor shareholder over the share of owners’ equity in the subsidiary at beginning of term Shenzhen China Merchants Property Co., Ltd. Ltd. liability Shenzhen Property development RMB500,00 0 Property development and sales 3,492,312 - 100% 100% Yes Not applicable Not applicable Not applicable Shenzhen CM Power Supply Co., Ltd. Ltd. liability Shenzhen Power supply RMB57,000 Power supply and sales 592,978 - 100% 100% Yes Not applicable Not applicable Not applicable Shenzhen CM Water Supply Co., Ltd. (Note 8) Ltd. liability Shenzhen Water supply RMB43,000 Water supply and installations 70,766 - 100% 100% Yes Not applicable Not applicable Not applicable Zhangzhou China Merchants Properties Co., Ltd. Ltd. liability Zhangzhou Property development RMB50,000 Property development and sales 25,500 - 51% 51% Yes 46,908,396- - China Merchants Property Management Co., Ltd. Ltd. liability Shenzhen Property RMB25,000 Property management, decoration, consultancy, property facility sales, maintenance, property leasing and agency 169,200 - 100% 100% Yes Not applicable Not applicable Not applicableChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1 to June 30, 2010 81 - - (3) Subsidiaries acquired from merger under different control Full name of the subsidiary Ownership of the subsidiary Reg. Add. Business property Registered capital (x 1000) Business Scope Actual capital input as of end of term (RMB’000) Balance of other items actually formed net investment in the subsidiaries Share proportion % Voting power % Consolidated ? Minor shareholders ’ equity (RMB) Amount of minor shareholders ’ equity used to offset the gain/loss of minor shareholders Balance of owners’ equity of the parent company after deducting of the share of loss of current term by minor shareholder over the share of owners’ equity in the subsidiary at beginning of term Shanghai CM Fengrui Property Ltd. Ltd. liability Shanghai Property development RMB10,00 0 Property development, interior decoration, sales of construction material 10,000 - 100% 100% Yes Not applicable Not applicable Not applicable Zhuhai China Merchants Property Co., Ltd. Ltd. liability Zhuhai Property development RMB8,000 Property development and sales 8,000 - 100% 100% Yes Not applicable Not applicable Not applicable Zhuhai Yuanfeng Property Co., Ltd. Ltd. liability Zhuhai Property development RMB8,000 Property development and sales 4,080 - 51% 51% Yes (2,407,635) 3,920,000 - Shanghai Fengyang Property Development Co., Ltd. Ltd. liability Shanghai Property development RMB30,00 0 Property development and sales 353,250 - 60% 60% Yes 240,517,676 - - Shenzhen Meiyue Properties Consultants Co., Ltd. Ltd. liability Shenzhen Property development RMB1,000 Property consultancy, planning and brokerage 82,666 - 100% 100% Yes Not applicable Not applicable Not applicableChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 82 - - Note 1: Through its subsidiary Ruijia Investment & Industry Co., Ltd., the Company is holding the major of the voting capital of Foshan Xincheng Real Estate Co., Ltd., Huipeng Real Estate Co., Ltd., and Suzhou Shuanghu Real Estate Co., Ltd. respectively. Because these subsidiaries are holding the major amount of voting capital in these companies, they are substantially controlling over the financial and business operations of these companies. Thus the Company includes them in the consolidate range of the consolidated financial statements. In which, Huipeng Real Estate Co., Ltd. is holding 100% of the equity capital of Foshan Xinjie Real Estate Co., Ltd., thus Foshan Xinjie Real Estate Co., Ltd. is included in the consolidation range. Note 2: China Merchants Jianming (Beijing) Property Co., Ltd. was founded jointly by Shenzhen CM Property Co., Ltd. and Jianming Investment Co., Ltd. In which Shenzhen CM Real-Estate invested RMB100 million and take 50% of capital shares. For the Company is holding major voting rights in the board of the company through Shenzhen CM Property, thus take control over the financial and business decisions. Therefore it was included in the consolidation range. Note 3: In December 2009, Converage Holdings Limited – one of the subsidiaries of the Company, subscribed 50 shares of Pride Oasis Limited (face value USD1.00) with USD50. After the subscription, the Company holds 50% of the voting rights of Pride Oasis Limited. For the Company is holding the majority voting rights in Pride Oasis Limited and holds control over the financial and operational decisions, Pride Oasis Limited is included in the consolidated financial statements. And for Pride Oasis Limited is holding 100% of the equity of Cosmo City Limited, it was included in the consolidated financial statements too. Upon completion of the above acquisition, Cosmo City Limited invested to establish Chongqing China Merchants Property Development Co., Ltd. in December 2009 and holds 100% of the share and voting rights. Thus Chongqing China Merchants Property Development Co., Ltd. was included in the consolidated financial statements. Note 4: The Company invested through Shenzhen CM Real-Estate to take 50% of capital shares of Shenzhen CM OCT Investment Co., Ltd. For the Company is holding major voting rights in the board of the company through Shenzhen CM Property, thus take control over the financial and business decisions. Therefore it was included in the consolidation range. Note 5: In January 2010, the Company invested RMB10 million to setup Chengdu CM Property Co., Ltd. It was consolidated for the Company is holding 100% of the capital shares. Note 6: In March 2010, Ruijia Investment & Industry Co., Ltd. – one of the subsidiaries of the Company, and Boshi Shareholding Co., Ltd. invested to setup Foshan CM HuidefengChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 83 - - Property Co., Ltd. with registered capital of USD99.9 million. In which Ruijia invested USD49.95 million and took 50% of the share equity. For Ruijia is holding the majority votes in the board of Foshan CM Huidefeng Property Co., Ltd., thus it has practical control over the financial and business affairs of the company. Therefore the Company includes it in the consolidated financial statements. Note 7: In April 2010, Shanghai CM Property Co., Ltd. – one of the subsidiaries of the Company, and Langda Industry Co., Ltd. invested to setup Shanghai Jingyuan Property Development Co., Ltd. with registered capital of RMB30 million. In which Shanghai CM Property invested RMB16.5 million and took 55% of the share equity. For Shanghai CM Property is holding the majority votes in the board of Shanghai Jingyuan Property Development Co., Ltd., thus it has practical control over the financial and business affairs of the company. Therefore the Company includes it in the consolidated financial statements. Note 8: On June 28, 2010, Shenzhen CM Property Co., Ltd. – one of the subsidiaries of the Company, the Company, and CMSIZ entered the ‘Agreement of Transferring the 100% share equities of Shenzhen China Merchants Water Supply Co., Ltd.’ By this agreement, the Company and Shenzhen CM Property Co., Ltd. will transfer the 95% and 5% share equities of Shenzhen CM Water Supply Co., Ltd. over to CMSIZ respectively. The deal was decided with reference to the net capital value appraised on June 30, 2010, namely RMB162.8332 million. As of June 30, 2010, the Company has not received any of the payment and the share transferring procedures were not completed. Thus Shenzhen CM Water Supply Co., Ltd. is still in the consolidation range. Voting rights of the Group on above companies are decided by the voting rights in each board of directors of the companies. 2. Entities newly consolidated in current term In RMB Name Net asset at end of term Net profit of the current term (loss) Chengdu CM Property Co., Ltd. (Note 1) 9,242,920 (757,080) Foshan CM Huidefeng Property Co., Ltd. (Note 2) 681,056,035 (901,324) Shanghai Jingyuan Property Development Co., Ltd. (Note 3) 29,995,683 (4,317) Note 1: See Note (IV) 1 – Note 5. Note 2: See Note (IV) 1 – Note 6. Note 3: See Note (IV) 1 – Note 7. 3. Exchange rate of main accounts of overseas businesses Currency Balance Sheet Income StatementChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 84 - - HKD 0.8724 0.8779 (V) Notes to the consolidated financial statements 1. Monetary fund In RMB Items End of term Beginning of term Original currency Exchange rate Amount RMB Original currency Exchange rate Amount RMB Cash: RMB 63,079 1.00 63,079 37,271 1.00 37,271 HKD 3,967 0.87 3,461 6,519 0.88 5,740 Bank account: RMB 9,843,612,054 1.00 9,843,612,054 8,524,304,914 1.00 8,524,304,914 USD 68,997,911 6.79 468,573,192 36,388,061 6.83 248,474,062 HKD 3,571,007 0.87 3,115,511 3,224,701 0.88 2,839,080 Other monetary fund (Note) USD 10,535,273 6.79 71,549,869 102,892,290 6.83 702,599,868 RMB 3,643,667 1.00 3,643,667 11,230,000 1.00 11,230,000 Total 10,390,560,833 9,489,490,935 Note: Balance of other monetary capital was mainly deposits of foreign currency future contracts and guarantee letters of project payment. 2. Transactional financial assets / liabilities (1) Details: In RMB Items Fair value at end of term Fair value at beginning of term Transactional financial assets: 1. Transactional bond investment - - 2. Transactional equity instruments - - 3. Financial assets defined to measured at fair value and fluctuation accounted into current gain/loss account - - 4. Derivate financial assets 25,651,617(Note) 6,437,479 5. Others - Total 25,651,617 6,437,479 Transactional financial liabilities: 1. Transactional bond investment -China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 85 - - Items Fair value at end of term Fair value at beginning of term 2. Transactional equity instruments - 3. Financial liabilities defined to measured at fair value and fluctuation accounted into current gain/loss account - 4. Derivate financial liabilities 2,254,310(Note) 12,829,413 5. Others - Total 2,254,310 12,829,413 Note: This was the fair value at end of the contract year by which Ruijia Investment Industrial Co., Ltd. and ING Bank N.V., Hong Kong Branch engaged for future foreign currency trading without transferring of principal. As of June 30, 2010, the nominal principal has amounted to USD396,639,000. Such contracts will due amongst August 27, 2010 to April 26, 2011. 3. Account receivable (1) Account receivable categorized by property In RMB End of term Beginning of term Categories Book balance Bad debt provision Book balance Bad debt provision Amount Proportio n % Amount Proportio n % Amount Proportio n % Amount Proportio n % Single receivable account with mass amount - - - - - - - - No major amount individually but with great risk after combined with others with similar credit risk 7,168,514 6% 3,012,499 57% 4,869,129 4% 2,998,082 56% Other non-material receivables 107,666,855 94% 2,296,608 43% 119,402,874 96% 2,311,025 44% Total 114,835,369 100% 5,309,107 100% 124,272,003 100% 5,309,107 100% Note: Single receivable account with mass amount is defined to account over RMB10 milion. Ages of receivable accounts: In RMB End of term Beginning of term Age Amount Proportion % Bad debt provision Book value Amount Proportion % Bad debt provision Book value within 1 yr 100,522,862 88% 2,130,739 98,392,123 114,517,835 92% 2,176,502 112,341,333 1-2 years 6,556,906 6% 45,763 6,511,143 4,360,465 4% 120,106 4,240,359 2-3 years 2,668,682 2% 120,106 2,548,576 524,574 - 14,417 510,157 Over 3 yrs 5,086,919 4% 3,012,499 2,074,420 4,869,129 4% 2,998,082 1,871,047 Total 114,835,369 100% 5,309,107 109,526,26 2 124,272,003 100% 5,309,107 118,962,896China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 86 - - (2) No balance in the account receivable due from shareholders holding 5% or over of the Company’s shares. (3) Top 5 receivable accounts In RMB Name of the companies Relation with the Company Amount Ages Portion in total receivables Juxin Technologies Co., Ltd. Client 5,482,143 within 1 yr 5% Shenzhen Zijincheng Investment Co., Ltd. Client 3,704,738 within 1 yr 3% Huawei Technologies Co., Ltd. Client 2,772,743 within 1 yr 2% Shenzhen Rainbow Shopping Mall Co., Ltd. Client 2,313,031 within 1 yr 2% Shenzhen Shengdi Investment Development Co., Ltd. Client 1,777,586 within 1 yr 2% Total 16,050,241 14% (4) No account receivable due from related parties. 4. Other account receivable. (1) Other account receivable categorized by property In RMB End of term Beginning of term Book balance Bad debt provision Book balance Bad debt provision Categories Amount Proportion % Amount Proportion % Amount Proportion % Amount Proportion % Other receivable with major individual amount 946,250,151 90% - - 1,852,727,261 96% - - No major amount individually but with great risk after combined with others with similar credit risk 10,131,924 1% 1,758,972 98% 3,839,254 - 1,745,947 75% Other minor other receivables 96,252,011 9% 578,003 2% 72,276,842 4% 588,167 25% Total 1,052,634,08 6 100% 2,336,975 100% 1,928,843,357 100% 2,334,114 100% Note: Note: Single other receivable account with mass amount is defined to account over RMB10 million. Age of other receivable accounts: In RMB End of term Beginning of term Age Amount Proportio n % Bad debt provision Book value Amount Proportio n % Bad debt provision Book valueChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 87 - - within 1 yr 1,021,801,081 97% 43,057 1,021,758,024 1,849,097,605 96% 40,196 1,849,057,409 1-2 years 10,548,506 1% 534,946 10,013,560 73,203,703 4% 534,946 72,668,757 2-3 years 10,152,575 1% - 10,152,575 2,702,795 - 13,025 2,689,770 Over 3 yrs 10,131,924 1% 1,758,972 8,372,952 3,839,254 - 1,745,947 2,093,307 Total 1,052,634,086 100% 2,336,975 1,050,297,111 1,928,843,357 100% 2,334,114 1,926,509,243 (2) No other receivable account due from shareholders with 5% or over of shares of the Company in the balance. (3) Top other receivable accounts In RMB Name of the companies Relation with the Company Amount Ages Portion in total other receivables (%) Shenzhen TCL Optical-Electronics Technologies Ltd. Affiliate of the Company 257,339,044 1-2 years 24% Chengdu Beijiao Scenery Area Administrative Committee Non-related 200,000,000 within 1 yr 19% Jiasen International Co., Ltd. Shareholder of subsidiary 179,574,894 within 1 yr 17% Huizhou Taitong Property Investment Co., Ltd. Joint venture of the Company 127,236,214 within 1 yr 12% Guangzhou Property Trading and Registration Center Non-related 113,100,000 within 1 yr 11% Total 877,250,152 83% (4) Receivables from related parties In RMB Name of the companies Relation with the Company Amount Portion in total other receivables (%) Shenzhen TCL Optical-Electronics Technologies Ltd. Affiliate of the Company 257,339,044 24% Huizhou Taitong Property Investment Co., Ltd. Joint venture of the Company 127,236,214 12% Total 384,575,258 36% 5. Prepayment (1) Prepayments presented by ages In RMB Age End of term Beginning of term Amount Proportion % Amount Proportion % within 1 yr 1,957,105 35% 3,222,296 37% 1-2 years 3,357,402 59% 5,190,617 59% 2-3 years 334,400 6% 334,400 4% Over 3 yrs - - - - Total 5,648,907 100% 8,747,313 100% (2) No prepayment due from shareholders with 5% or over of shares of the Company.China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 88 - - (3) Prepayments presented by clients In RMB Categories End of term Beginning of term Single prepayment with large amount (Note) - - Single prepayment with minor amount but with great risk after combined into group with similar credit risk - - Other minor prepayments 5,648,907 8,747,313 Total 5,648,907 8,747,313 Note: Single prepayment account with mass amount is defined to account over RMB10 million. 6. Inventories (1) Categories of inventory In RMB End of term Beginning of term Items Book balance Impairment provision Book value Book balance Impairment provision Book value Real property development costs 31,485,807,744 296,210,000 31,189,597,744 29,767,117,792 296,210,000 29,470,907,792 Property products 2,584,005,432 2,584,005,432 931,435,216 - 931,435,216 Raw materials 6,053,585 6,053,585 4,276,489 - 4,276,489 Low-value consumables and others 2,003,296 162,982 1,840,314 1,925,385 162,982 1,762,403 Sub-total 34,077,870,057 296,372,982 33,781,497,075 30,704,754,882 296,372,982 30,408,381,900 Inventory formed by construction contract Completed but not settled (Note) 74,800,000 - 74,800,000 52,800,000 - 52,800,000 Sub-total 74,800,000 - 74,800,000 52,800,000 - 52,800,000 Total 34,152,670,057 296,372,982 33,856,297,075 30,757,554,882 296,372,982 30,461,181,900 Note: This is the “Contract for Construction of Low Rental Apartments” entered by China Merchants Jiaming (Beijing) Property Development Co., Ltd. and Beijing Construction Committee. Property development costs: In RMB Projects Start date Planned finish date Expected total investment Balance at the end of term Balance at the beginning of termChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 89 - - RMB0’000 RMB Yuan RMB Yuan Development costs of real estate under construction: Xicheng Jiayuan Beijing (Note 1) 2008.10 2013.05 434,899 2,192,725,242 2,104,036,652 Foshan Yiyun Shangcheng 2008.08 2012.04 282,598 1,744,807,917 1,701,606,478 Beijing Park 1872 2006.10 2012.12 378,198 1,679,023,805 1,706,269,205 Shenzhen Xicheng Phase IV, V 2010.02 2012.10 347,173 1,656,276,626 - Suzhou Xiaoshicheng 2008.04 2016.12 431,063 1,398,002,215 1,312,808,406 Foshan Yiyunshui’an 2008.04 2011.05 324,049 1,263,384,608 1,453,565,179 Shenzhen CM Guanyuan 2008.08 2010.10 195,073 1,211,589,616 993,833,761 Tianjin Star City 2007.10 2012.08 394,315 1,058,382,610 1,363,422,177 Shenzhen Yongjinwan 2009.07 2011.12 203,935 1,008,565,732 948,094,905 Shanghai Haide Garden Phase II-IV 2006.05 2013.08 150,842 879,511,445 846,939,463 Jinshan Valley, Guangzhou 2008.02 2015.07 482,973 1,194,494,058 981,712,186 Shanghai CM Haiwan Garden 2008.10 2013.12 163,139 740,439,112 707,281,733 Chongqing China Merchants Jiangwan City 2007.10 2012.09 179,892 679,399,979 955,503,667 Tianjin Jingjiang Road Project 2010.03 2012.12 133,981 671,646,033 - Zhangzhou CM Garden City Phase I 2008.04 2010.11 72,484 485,707,976 433,381,447 Zhuhai CM Garden City Phase II and III 2009.12 2012.12 135,332 485,361,923 427,163,839 Beijing Kanglade Hotel 2009.12 2011.12 120,419 468,077,664 417,452,769 Shanghai CM Yonghua Garden 2008.07 2011.05 132,539 466,950,839 929,129,714 Phase V. Garden City 2008.03 2010.08 38,833 261,276,872 237,499,898 Zhangzhou CM Garden City 2008.07 2011.01 63,701 258,571,914 220,224,406 Shenzhen Meilun Apartment 2008.03 2010.07 29,467 214,318,212 185,309,528 Shenzhen Lanxigu Phase II, land II 2008.08 2010.08 30,890 167,072,861 132,780,136 Nanjing Yiyunxigu Phase IV 2006.12 2010.10 100,524 116,674,305 65,861,754 Shenzhen Xicheng Phase III 2008.09 2010.03 99,922 - 387,164,158 36 Xikang Road Tianjin 2007.02 2010.05 55,672 82,081,812 75,295,066 Shenzhen CM Lanyuan 2008.03 2010.06 155,498 - 1,267,193,998 Shenzhen Technical Building Phase II 2009.03 2010.02 29,360 - 233,518,941 Shanghai CM Nanqiao Yayuan 2008.03 2010.01 84,502 - 735,111,814 Others - - - 87,691,403 84,282,252 Sub-total 20,472,034,779 20,906,443,532 Land to be developed: In RMB Projects Start date Planned finish date Planned total investment Balance at the end of term Balance at the beginning of termChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 90 - - RMB0’000 RMB Yuan RMB Yuan Land to be developed: Chongqing Danzishi TBD TBD TBD 2,003,183,000 - Shanghai Jingyuan TBD TBD TBD 1,722,581,019 - Nanjing G67 project 2010.08 TBD TBD 1,450,150,204 1,431,811,856 Chongqing CM Garden City 2010.07 2013.05 361,338 1,354,903,683 1,323,592,687 Suzhou Weiting 2010.08 2014.12 170,818 1,030,198,951 1,026,362,838 Foshan Shishan Project TBD TBD TBD 694,421,000 - Zhangzhou Jiari 365 2010.07 2015.05 41,112 94,510,442 92,212,266 Shenzhen Jiangangshan Phase VI 2010.12 2012.03 80,961 546,990,599 546,539,397 Shenzhen CM Plaza 2010.10 2012.11 150,226 478,868,169 473,230,882 Shenzhen CM Guoling Garden 2010.10 2012.08 118,303 440,219,835 414,341,737 Shenzhen Wuzi Apartment 2010.12 2012.08 83,691 338,236,027 323,568,922 Chengdu CM Dongcheng International Business Plaza 2010.08 2012.11 58,802 209,410,101 - Zhangzhou Kadalansi (former Zhangzhou Nanpaotai Project) 2010.07 2020.07 311,049 650,099,935 632,686,541 Shenzhen Xicheng phase IV, V 2010.02 2012.10 347,173 - 1,934,265,191 Tianjin Jingjiang Road Project 2010.03 2012.05 129,031 - 662,061,943 Sub-total 11,013,772,965 8,860,674,260 Total 31,485,807,744 29,767,117,792 Property development products: In RMB Projects Date of finish Balance at the beginning of term Increased this term Decreased this term Balance at the end of term CM Lanyuan 2010.06 - 1,467,395,208 102,745,823 1,364,649,384 Tianjin Xincheng phase I 2010.03 - 396,300,000 21,865,250 374,434,750 Shanghai Haide Garden Phase I, II, and III north 2009.06 197,093,654 - 11,804,816 185,288,838 Shenzhen Lanxigu Phase II. 2007.06 199,478,035 - 73,173,278 126,304,757 Shanghai CM Yonghua Garden 2010.06 - 579,510,916 471,994,119 107,516,797 Shanghai CM Nanqiao Yayuan 2010.01 - 792,403,879 695,980,806 96,423,073 Chongqing CM. Jiangwancheng Phase I 2010.01 - 387,379,017 300,675,894 86,703,124 Xicheng Phase III 2010.03 - 868,165,204 790,990,397 77,174,807 Tianjin 36 Xikang Road 2008.11 85,897,387 156,743 29,638,256 56,415,874 Shenzhen Haiyue Huating 2009.06 40,555,752 - - 40,555,752 Zhangzhou Sun Garden Phase I 2006.06 11,479,422 - - 11,479,422 Zhangzhou CM Jianzhu 2007.12 11,090,109 - - 11,090,109 Shenzhen Yishanjun Phase II 2008.08 12,997,680 - 3,209,151 9,788,529 Zhangzhou CM Garden City Phase I west 2009.12 8,482,178 - - 8,482,178China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 91 - - Zhangzhou Yinshanhai Phase II 2007.12 5,239,996 - - 5,239,996 Nanjing Yiyunxigu phase I - III 2009.12 247,167,734 2,045,538 244,020,303 5,192,969 Suzhou Xiaoshicheng Phase I 2009.12 - 7,036,509 3,786,205 3,250,304 Beijing Park 1872 (block 3) 2010.03 - 230,696,992 228,633,510 2,063,482 Shenzhen Yishanjun Phase III 2009.09 91,646,738 42,729,230 132,718,917 1,657,051 Zhangzhou Jinshanjiao Apartment 2004.12 1,439,657 - - 1,439,657 Shenzhen Technical Building Phase II 2010.06 - 247,607,469 247,607,469 - Foshan Yiyunshui’an phase I 2010.01 - 335,510,570 335,510,570 - Tianjin 36 Xikang Road apartment and shops 2009.12 3,593,879 4,806,668 8,400,547 - Beijing Park 1872 Phase I (block 9) 2008.12 6,285,941 - 6,285,941 - Others 8,987,054 129,955 262,429 8,854,579 Total 931,435,216 5,361,873,898 3,709,303,681 2,584,005,432 Note 1: As of June 30, 2010, China Merchants Jiaming (Beijing) Property Development Co., Ltd. – one of the subsidiaries of the Company, entered the Pledge Contract with China Merchants Bank Beijing Sanhuan Branch, by which the 106,700 square meters of land of Beijing Xicheng Jiayuan (Land CY09 in Changping) was pledged to the bank for the loan of RMB275,000,000. Except for this, there is no inventory under pledge, guarantee, suspension, or abandoned. Note 2: As of June 30, 2010, the land using contracts for land 2009G67 Nanjing, Land No.2 Haide Garden Shanghai, Chongqing Garden City, Shenzhen Bao’an Xicheng B, and Tianjin Jinjiang Road project totaled to 937,478 square meters has been engaged, and the land using certificate is under process. Loan expenses capitalized in the term was RMB164,702,213 (RMB256,568,371 for the first half of 2009). (2) Inventory impairment provision In RMB Decreased this term Categories Balance of book value at beginning Provided this term Written Transferred Balance of book value at end of term Real property development costs 296,210,000 - - - 296,210,000 Low-value consumables and others 162,982 - - - 162,982 Total 296,372,982 - - - 296,372,982 Note: Inventory impairment provision was provided at the balance of realizable value lower than the book value of the inventory, namely RMB296,372,982.China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 92 - - 7. Other current assets In RMB Items End of term Beginning of term Subsidiaries to be disposed (Note 1) 112,764,727 - Incl. Monetary capital 4,419,861 - Account receivable 317,751 - Other account receivable 1,770,794 - Advance account 131,576 - Inventories 777,669 - Fixed assets 103,496,225 - Construction in process 1,813,492 - Long-term amortizable expenses 37,359 - Operation tax and surcharges prepaid 426,217,303 334,952,908 Prepaid income tax 171,185,998 263,792,293 112,458,907 Land VAT prepaid (Note 2) 134,059,677 160,046,409 Prepaid rent 2,242,028 8,968,112 Others 5,416,483 8,374,315 Total 851,886,216 851,886,216 624,800,651 Note 1: On June 28, 2010, Shenzhen CM Property Co., Ltd. – one of the subsidiaries of the Company, the Company, and CMSIZ entered the ‘Agreement of Transferring the 100% share equities of Shenzhen China Merchants Water Supply Co., Ltd.’ By this agreement, the Company and Shenzhen CM Property Co., Ltd. will transfer the 95% and 5% share equities of Shenzhen CM Water Supply Co., Ltd. over to CMSIZ respectively. For details please see Note (IV)1 – Note 8. This deal was approved at the 15th meeting of the 6th term of Board, therefore the whole asset and liabilities of this company were treated as asset to be disposed and liabilities respectively. Note 2: For the property sales income collected prior to finishing of construction, the Company pays Land VAT at legal portion and account them into other current asset. Upon finishing of the construction, the actual Land VAT is calculated upon the income from sales of property less the legal deductive items, and is accounted into other current liabilities after deducting of prepaid amount. 8. Disposable financial asset In RMB Items Fair value at end of term Fair value at beginning of term Sellable equity instruments 4,129,216 4,898,240 Incl. Guonong Tech shares 4,129,216 4,898,240 Others - - Total 4,129,216 4,898,240China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 93 - - 9. Long-term receivables In RMB Items End of term Beginning of term Entrusted loan (Note 1) 953,817,502 924,366,673 Balance of share equity transfer (Note 2) 141,421,084 137,779,364 Total 1,095,238,586 1,062,146,037 Note 1: IThe Company entered the Entrusted Loan Contract with China Agriculture Bank Nanshan Branch for the loan quota of RMB900,000,000. The loan was provided to Nanjing Fucheng Property Development Co., (Nanjing Fucheng), and Nanjing Fucheng put the property of 100,189 square meters located at floor 1-6 and 8-51 into pledge. As of June 30, 2010, the principal of entrusted loan was RMB881,623,583, interest receivable upon the entrusted loans was RMB72,193,919. Note 2: Heighten Holdings Limited – one of the Company’s subsidiaries transferred its shares in Elite Trade Investment Limited, the balance receivable was RMB152,906,973. According to the Share Trading Agreement entered with ADF Phoenix IV Limited, the receiver, the balance would be retrieved in one to two years. The Company calculated, but not confirmed, financing expenses of RMB11,485,889 with reference to the bank loan rates at the similar period. It was deducted from the long-term receivables.China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 94 - - (V) Notes to the consolidated financial statements – cont. 10. Investment in affiliates and joint ventures List of joint ventures and affiliates and their major financial information Name of the Companies Ownership type Reg. Add. Legal representative Business property Registered capital RMB000 Shares held by the Company % Voting power of the Company in the entity % Total asset at end of term (RMB) Total debt at end of term (RMB) Net asset at end of term (RMB) Turnover of current term (RMB) Net profit of current term (RMB) I. Joint ventures Guangzhou Panyu Innovation Technology Garden Co., Ltd. Ltd. liability GuangzhouHu Jianxin Property leasing and management 150,000 70% 50% 639,725,937 33,174,320 606,551,617 - - Shenzhen China Merchants OCT Investment Co., Ltd. Ltd. liability Shenzhen Lin Shaobin Property management 5,000 50% 50% 8,454,036 2,090,418 6,363,618 5,496,367 507,432 Huizhou Taitong Property Investment Co., Ltd. Ltd. liability Huizhou Wang Quanlin Property development 8,000 50% 50% 262,320,602 254,529,474 7,791,129 - (208,756) II. Affiliates Beijing Tianping Property Management Co., Ltd. Ltd. liability Beijing Wang Guanghui Property management 1,000 49% 49% 3,740,599 391,616 3,348,983 3,926,599 279,522 China Merchants Guangming Technologies Garden Ltd. Ltd. liability Shenzhen Yang Tianping Property development and management 200,000 49% 49% 314,014,976 141,060,216 172,954,761 720,000 (4,904,594) Shenzhen Haitao Hotel Co., Ltd. Ltd. liability Shenzhen He Jianya Hotel management 6,000 45% 45% 14,678,495 1,915,755 12,762,741 4,960,562 600,000 Tianjin Xinhai real Estate Development Co., Ltd. Ltd. liability Tianjin He Jianya Property development 15,000 45% 45% 309,866,908 30,234,058 279,632,850 8,750,813 4,654,908 Shenzhen TCL Optical- Electronics Technologies Ltd. Ltd. liability Shenzhen Bo Lianming Leasing and management of self-owned property 200,000 40% 40% 773,487,732 686,395,711 87,092,021 -- (2,100,000)China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 95 - - 11. Long-term equity investment (1) Details of long-term equity investment In RMB Company invested in Calculating basis Initial costs Balance at the beginning of term Changed by Balance at the end of term Percentage of share in the firm % Voting power in the firm % Statement on differences between the shareholding and voting rights Impairmen t provision Impairmen t provision provided this term Cash dividend of the current term Guangzhou Panyu Innovative Technologies Garden Co., Ltd.(Note 1) Equity basis 350,000,000 345,409,546 345,409,546 70% 50% (Note 1) - - - Tianjin Xinhai real Estate Development Co., Ltd. Equity basis 6,750,000 116,738,432 2,094,709 118,833,141 45% 45% - - - - China Merchants Guangming Technologies Garden Ltd. Equity basis 98,000,000 86,010,889 (2,403,252) 83,607,637 49% 49% - - - - Shenzhen TCL Optical-Electronics Technologies Ltd. Equity basis 42,010,652 40,073,574 (840,000) 39,233,574 40% 40% - - - - Shenzhen Haitao Hotel Co., Ltd. Equity basis 4,996,675 5,729,366 270,000 5,999,366 45% 45% - - - - Huizhou Taitong Property Investment Co., Ltd. Equity basis 4,900,000 4,881,510 (104,377) 4,777,133 50% 50% - - - - Shenzhen China Merchants OCT Investment Co., Ltd. Equity basis 2,500,000 3,037,151 253,716 3,290,867 50% 50% - - - - Beijing Tianping Property Management Co., Ltd. Equity basis 490,000 1,534,255 136,966 1,671,221 49% 49% - - - - Beijing Hengshihuarong Real-estate Development Co., Ltd. Cost basis 14,532,541 12,997,895 12,997,895 12% 12% - - - - Shenzhen China Merchants Engineering Co., Ltd. Cost basis 100,000 100,000 100,000 5% 5% - - - - Shenzhen Fishermans’ Wharf Restaurant Co., Ltd. (Note 2). Cost basis 100,000 100,000 100,000 - - - 100,000 - - Total 524,379,868 616,612,618 (592,238) 616,020,380 100,000 Less: Impairment provision 100,000 100,000 Long-term equity investment (net) 616,512,618 615,920,380 Note1: Guangzhou Qidi Technologies Garden Investment Co., Ltd. – one of the Company’s subsidiaries, is holding 70% shares of GuangzhouChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 96 - - Panyu Innovative Technologies Garden Co., Ltd. As stipulated in the Articles of Association of Guangzhou Panyu Innovative Technologies Garden Co., Ltd., all of the financial and operational decision making have to be decided by presenting of the whole shareholders, thus Guangzhou Qidi Technologies Garden Investment Co., Ltd. has no controlling power over Guangzhou Panyu Innovative Technologies Garden Co., Ltd.. Thus it was not included in the consolidation range. Note 2: Shenzhen Fisherman Port Restaurant Co., Ltd. was established by Shenzhen Taige Apartment Management Co., Ltd in 2001. Due to poor management, now it is closed. Shenzhen Taige Apartment Management Co., Ltd fully accounted provision for impairment on its long-term investment. (2) The Company’s long-term equity investment receivers as of June 30, 2010 were not limited in ability to transfer capital to the Company.China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 97 - - 12. Investment property In RMB Items Balance of book value at beginning of term Increased this term Decreased this term Balance of book value at end of term I. Total of original book value 3,569,997,734 249,371,078 1,473,101 3,817,895,711 1. House and buildings 2,388,786,421 107,636,078 1,473,101 2,494,949,398 2. Land using rights 1,181,211,313 141,735,000 - 1,322,946,313 II. Total of accumulated depreciation and amortizing 782,155,484 68,873,766 708,677 850,320,573 1. House and buildings 683,673,427 53,356,007 708,677 736,320,757 2. Land using rights 98,482,057 15,517,759 - 113,999,816 III. Total of net book value of investment property 2,787,842,250 2,967,575,138 1. House and buildings 1,705,112,994 1,758,628,641 2. Land using rights 1,082,729,256 1,208,946,497 IV. Total of impairment provision - - - - 1. House and buildings - - - - 2. Land using rights - - - - V. Total of book value of investment property 2,787,842,250 2,967,575,138 1. House and buildings 1,705,112,994 1,758,628,641 2. Land using rights 1,082,729,256 1,208,946,497 Note 1: The depreciation of the term was RMB68,873,766 Note 2: As of June 30, 2010, none of the Company’s investment properties is on pledge. Note 2: As of June 30, 2010, there were investment properties amounted to RMB752,061,934. (net value) which have not been granted the certificate of property. 13. Fixed assets (1) Details of fixed assets In RMB Items Balance of book value at beginning of term Increased this term Decreased this term Balance of book value at end of term I. Total of original book value 708,008,818 7,855,851 271,545,171 444,319,498 Incl. House & Buildings 228,061,377 10,300 73,845,146 154,226,531 Equipment & machinery 365,451,743 3,083,830 182,356,364 186,179,210 Transportation equipment 54,165,265 1,415,033 2,480,614 53,099,683 Electronics, furniture, appliances 60,330,433 3,346,687 12,863,047 50,814,073 II. Total of accumulative depreciation 408,392,864 16,924,895 167,816,180 257,501,579 Incl. House & Buildings 95,182,530 4,510,534 45,848,701 53,844,363 Equipment & machinery 236,317,849 5,106,236 108,407,924 133,016,161 Transportation equipment 34,527,282 2,592,294 1,951,325 35,168,250 Electronics, furniture, 42,365,203 4,715,832 11,608,231 35,472,804China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 98 - - appliances III. Total of net book value of fixed assets 299,615,954 186,817,919 Incl. House & Buildings 132,878,847 100,382,168 Equipment & machinery 129,133,894 53,163,049 Transportation equipment 19,637,983 17,931,433 Electronics, furniture, appliances 17,965,230 15,341,269 IV. Total of impairment provisions - - - - Incl. House & Buildings - - - - Equipment & machinery - - - - Transportation equipment - - - - Electronics, furniture, appliances - - - - V. Total of fixed asset book value 299,615,954 186,817,919 Incl. House & Buildings 132,878,847 100,382,168 Equipment & machinery 129,133,894 53,163,049 Transportation equipment 19,637,983 17,931,433 Electronics, furniture, appliances 17,965,230 15,341,269 Note 1: The depreciation was RMB16,924,895 for the current term. Note 2: The original value of fixed assets increased in the current term by transferring of construction in process was RMB3,137,020. Note 3: Decrease in the current term was caused by the fixed assets of Shenzhen CM Water Supply Co., Ltd. which transferred into other current assets – subsidiaries to be disposed, with net value of RMB103,496,225, see details with Note (V) 7. Note 4: As of June 30, 2010, the Company still has houses and buildings of RMB60,346,646 which are not granted property certifications. For these properties were constructed a long time ago, and the original materials are not enough to file for certification, thus are not in filing process at present. 14. Construction-in-progress Details of construction in process: In RMB End of term Beginning of term Items Book balance Impairment provision Net book value Book balance Impairment provision Net book value Construction project 2,936,043 - 2,936,043 2,936,043 - 2,936,043 Transformer Station 12,024,371 - 12,024,371 13,719,271 - 13,719,271 Water supply project - - - 2,598,693 - 2,598,693China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 99 - - Total 14,960,414 14,960,414 19,254,007 - 19,254,007 15. Long-term expenses to be amortized In RMB Items At beginning of term Increased this term Amortized this term Other decrease At end of term Reason of other decreasing Renewing of fixed assets for rent 174,912,809 - 6,394,846 - 168,517,96 3 Outdoor advertisement facilities 2,735,176 - 1,307,370 - 1,427,806 Golf club membership 158,628 - 95,552 - 63,076 Others 2,387,514 654,628 1,813,816 - 1,228,326 Total 180,194,127 654,628 9,611,584 - 171,237,17 1 16. Differed income tax assets/ differed income tax liabilities (1) Differed income tax assets and differed income tax liabilities recognized In RMB Items End of term Beginning of term Differed income tax assets: Land VAT drawn in advance 429,964,422 282,716,985 Expected liabilities 6,145,623 6,118,200 Amortizing of other long-term assets 817,109 817,109 Bad debt provision on receivables 563,569 558,091 Bad debt provision on other receivables 566,215 220,991 Inventory impairment provision 35,856 32,596 Long-term equity investment impairment provision 22,000 22,000 Depreciation of fixed assets 47,563 - Sub-total 438,162,357 290,485,972 Differed income tax liabilities: Fluctuation of fair value of disposable financial assets accounted into capital reserves 613,666 731,713 Sub-total 613,666 731,713China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 100 - - (2) Details of income tax assets not recognized In RMB Items End of term Beginning of term Deductible provisional differences 618,030,977 867,140,392 Neutralizable losses 60,655,242 325,619,889 Total 678,686,219 1,192,760,281 Deductible losses from not recognized differed income tax assets shall due not later than 2015. (3) Provisional differences caused by recognized differed income tax assets/ differed income tax liabilities In RMB Items Amount of temporary differences End of term: Deductible provisional difference and deductible losses: Land VAT drawn in advance 1,969,526,457 Expected liabilities 27,934,648 Depreciation of investment property 3,268,434 Bad debt provision on receivables 2,561,678 Bad debt provision on other receivables 2,534,872 Inventory impairment provision 162,982 Long-term equity investment impairment provision 100,000 Depreciation of fixed assets 216195 Sub-total 2,006,305,266 Taxable provisional difference: Fluctuation of fair value of disposable financial assets accounted into capital reserves 2,556,942 Sub-total 2,556,942 Beginning of term: Deductible provisional difference and deductible losses: Land VAT drawn in advance 1,259,319,813 Expected liabilities 27,810,000 Depreciation of investment property 3,268,434 Bad debt provision on other receivables 2,561,678 Bad debt provision on receivables 1,101,342 Inventory impairment provision 162,982China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 101 - - Long-term equity investment impairment provision 100,000 Sub-total 1,294,324,249 Taxable provisional difference: Fluctuation of fair value of disposable financial assets accounted into capital reserves 3,325,965 Sub-total 3,325,965 17. Detail of asset impairment provision In RMB Decreased this term Items Balance of book value at beginning of term Increased this term Written back Transferred Exchange rate adjustment Balance of book value at end of term I. Bad debt provision 7,643,221 2,861 7,640,360 II. Inventory impairment provision 296,372,982 296,372,982 III. Disposable financial asset impairment provision - - - - - - IV. Investment equity hold till expiring impairment provision - - - - - - V. Long-term equity investment impairment provision 100,000 - - - - 100,000 VI. Property investment impairment provision - - - - - - VII. Fixed asset impairment provision - - - - - - VIII. Project material impairment provision - - - - - - IX. Construction in process impairment provision - - - - - - X. Production biological material asset impairment provision - - - - - - Incl. Mature production biological material asset impairment provision - - - - - - XI. Gas & oil asset impairment provision - - - - - - XII. Intangible asset impairment provision - - - - - - XIII. Goodwill impairment provision - - - - - - XIV. Other - - - - - - Total 304,116,203 2,861 304,113,342 18. Short-term loans In RMB Items End of term Beginning of termChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 102 - - Loan by pledge - - Pledged loan - - Guarantee loan 105,727,522(Note) 398,125,029 Credit loan 1,523,916,924 974,804,580 Total 1,629,644,446 1,372,929,609 Note: The Company borrowed USD10,000,000 (RMB67,909,000) from China Merchants Bank Shenzhen Shekou Branch. Shenzhen CM Power Supply Co., Ltd. – one of the subsidiaries of the Company borrowed USD5,569,000 (RMB37,818,522) from the same bank. Both of these loans were secured by CMSIZ. 19. Notes payable In RMB Categories End of term Beginning of term Commercial acceptance - - Bank accepted drafts (Note) 268,100,694 257,896,108 Total 268,100,694 257,896,108 Note: As of June 30, 2010, Shenzhen CM Property Co., Ltd. – one of the subsidiaries of the Company has the balance of RMB37,849,666 of accepted drafts in China Construction Bank Shekou Branch; and the balance of RMB230,251,028 in China Merchants Bank Shenzhen New Age Branch. Both of above were secured by CMSIZ and will expire in 2010. 20. Account payable (1) Details of payable accounts: In RMB Items End of term Beginning of term Project payment 1,420,437,792 1,454,062,917 Land price 163,001,348 1,096,001,348 Payment for purchasing of share equity 70,650,000 70,650,000 Warrant pay 34,051,200 21,499,544 Others 108,055,095 63,307,476 Total 1,796,195,435 2,705,521,285 (2) Payable accounts due to shareholders with 5% or over of the Company’s shares or related parties: In RMB Name of the companies End of term Beginning of term China Merchants Shekou Industrial Zone Co., Ltd. 9,919,240 5,338,724 Total 9,919,240 5,338,724China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 103 - - (3) Payable accounts with large amount and due over 1 year In RMB Name of the companies End of term Age Reason of overdue Amount to repay after the report term Shanghai Meiyang Property Co., Ltd. 70,650,000 1-2 years Payment for purchasing of share equity - Baoshan Yanghang Town Government 72,192,000 1-2 years Land price - Shenzhen OCT Construction and Installation Co., Ltd. 45,210,211 1-3 years Project quality warranty at 5%, payable upon expiring of warranty period and no claiming. - Chaoyang Property Development Co., Ltd. 40,000,000 4-5 years Moving assisting fee payable to Chaoyang Property Development Co., Ltd., payable upon completion letter granted by National Land Property Bureau. - 21. Account received in advance (1) Age analyse of prepayment received In RMB Age End of term Beginning of term Amount % Amount % within 1 yr 6,993,513,080 84% 9,454,578,537 100% 1-2 years 1,301,401,770 16% 33,778,332 - 2-3 years 1,363,000 - 8,026,332 - Over 3 yrs 46,732 - 2,078,090 - Total 8,296,324,582 100% 9,498,461,291 100% Including: presale of properties: In RMB Projects End of term Beginning of term Planned finish date Presale portion Tianjin Xincheng phase I 580,458,390 539,347,212 2010 91% Beijing Park 1872 2,108,712,290 1,609,282,424 2012 98% Foshan Yiyun Shui’an phase I,II 1,084,494,119 1,090,757,116 2011 90% Shenzhen CM Lanyuan North 907,787,593 691,948,950 2010 98% Tianjin Xincheng Phase II (Low density) 244,866,051 - 2010 41% Beijing Xicheng Jiayuan 813,390,292 563,964,405 2012 61% Chongqing CM Jiangwancheng phase I, II 523,927,434 475,822,198 2010 73% Phase V. Garden City 377,187,198 - 2010 57%China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 104 - - Guangzhou Jinshangu phase II 323,082,199 318,212,200 2010 96% Zhangzhou CM Garden City Phase I 220,237,208 - 2010 75% Foshan Yiyun Shangcheng phase I 203,347,599 24,100,950 2010 60% Shanghai CM Yonghuayuan Phase I,II 192,619,698 658,889,318 completed 67% Shenzhen Xicheng Phase III 151,093,498 2,014,274,540 completed 95% Zhangzhou CM Garden City Phase I 138,546,829 1,701,305 2011 92% Shenzhen Haiyue Huating 89,874,826 2,762,368 completed 98% Guangzhou Jinshangu Phase III - 1 77,400,193 - 2010 9% Shenzhen Lanxigu Phase II. 27,734,125 41,896,025 completed 86% Tianjin 36 Xikang Road 16,800,000 11,107,049 completed 72% Shanghai CM Nanqiao Yayuan 15,660,132 751,329,017 2010 89% Nanjing Yiyunxigu Phase IV 9,980,601 347,394,769 completed 4% Shanghai Haiwan Garden Phase II 8,121,731 - 2010 7% Zhangzhou CM Jianzhu 6,728,737 2,458,519 completed 100% Zhangzhou Yinshanhai Phase II 1,385,532 759,573 completed 100% Shenzhen Haijing Plaza 1,328,637 1,328,637 completed 100% Shenzhen Yishanjun phase II, III 771,660 149,215,837 completed 100% Others 10,869,765 20,307,368 Total 8,136,406,337 9,316,859,780 (2) No prepayment account received from shareholders holding 5% or over of shares of the Company. 22. Wage payable In RMB Items Balance of book value at beginning of term Increased this term Decreased this term Balance of book value at end of term I. Wage, bonus, allowances 138,779,990 245,997,003 311,549,754 73,227,239 II. Employees’ welfare 703,632 13,372,360 12,591,369 1,484,623 III. Social security 5,116,720 21,112,666 24,641,632 1,587,754 IV. Housing fund 90,207 3,082,450 3,033,157 139,500 V. Dismissing welfare 1,280,000 629,680 629,680 1,280,000 VI. Others 16,862,433 8,690,074 6,940,685 18,611,822 Incl. Trade union fee and training fee 15,488,395 6,902,061 4,093,163 18,297,293 Total 162,832,982 292,884,233 359,386,277 96,330,938 Note: Balance of union fund and employee training fund is RMB18,297,293. Balance of dismissing compensation is RMB1,280,000.China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 105 - - 23. Tax payable In RMB Items End of term Beginning of term Enterprise income tax 235,353,960 345,044,458 Land VAT (Note) 72,986,793 82,326,199 Business tax 58,126,774 100,574,873 VAT 5,372,245 15,659,902 Personal income tax 3,897,506 4,462,646 City maintenance and construction tax 1,775,099 1,225,228 Land using tax 856,874 765,383 Consumption tax - - Others 1,747,398 39,800,764 Total 380,116,649 589,859,453 Note: See Note (V)7. 24. Tax disbursable In RMB Items End of term Beginning of term Long-term loan interest with instalments 38,362,168 19,532,853 Interest of company bond - - Short-term borrowing interests payable 1,392,984 2,339,565 Total 39,755,152 21,872,418 25. Dividend payable In RMB Name of the companies End of term Beginning of term Reason of overdue for over 1 year CMSIZ. (Note 1) 89,112,876 - CM Zhangzhou Development Co., Ltd. (Note 1) 3,787,878 - Dafeng International Holdings Co., Ltd. (Note 1) 4,900,000 - Other investors of the PLC (Note 1) 73,929,296 - Shenzhen Nanshan Property Development Co., Ltd. (Note 2) 23,806,776 23,806,776 Tianjin Shenmiao Investment Group Co., Ltd. (Note 3) 22,103,882 22,103,882 Shekou Huayuan Seafood Restaurant 285,600 285,600 This company has been closed up. Shenzhen OCT Property Co., Ltd. - 61,555,629 Total 217,926,308 107,751,887 Note 1: This was the dividend payable according to the distribution plan of 2009 approved atChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 106 - - the Shareholders’ Annual Meeting 2009 held on June 7, 2010. Note 2: According to the profit distribution plan as of December 31, 2009 adopted by the board meeting of Suzhou CM Nanshan Property Co., Ltd. held on December 28, 2009, this was the profit payable to Shenzhen Nanshan Property Co., Ltd. Note 3: According to the profit distribution plan as of December 31, 2009 adopted by the board meeting of Tianjin CM Property Co., Ltd. held on December 28, 2009, this was the profit payable to Tianjin Shenmiao Investment Group Co., Ltd. 26. Other account payable. (1) Details of other payable accounts In RMB Items End of term Beginning of term Interchange with co-operative companies 4,553,769,559 3,673,592,439 Loans to related companies - 887,698,968 Deposit 657,194,279 642,352,024 Temporary payment 236,290,542 368,284,408 Others 191,050,057 263,402,148 Total 5,638,304,437 5,835,329,987 (2) Details of other payable accounts to shareholders with 5% or over of shares of the Company: In RMB Name of the companies End of term Beginning of term Dafeng International Holdings - 887,700,513 CM Zhangzhou Development Zone Ltd. 475,334,117 420,821,115 Tianjin Xinhai real Estate Development Co., Ltd. 133,081,399 148,831,399 Shenzhen Shekou Dazhong Investment Co., Ltd. 138,235,302 138,235,302 Shenzhen China Merchants Financing Service Co., Ltd. 33,510,000 16,338,000 China Merchants Guangming Technologies Garden Ltd. 1,069,390 1,067,447 China Merchants Hanghua Technologies and Trade Center Co., Ltd. 528,151 1,051,707 Total 781,758,359 1,614,045,483 (3) Statement on other payable accounts with large amount and aged over 1 yearChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 107 - - In RMB Name of the companies End of term Age Reason of overdue Huidefeng Property (China) Co., Ltd. 750,524,622 2-3 years Investment payable by Huipeng Property Development Co., Ltd. to Huidefeng Property (China) Co., Ltd. who paid the investment payment to Foshan Xinjie Property Co., td. on its behalf Shenzhen Nanshan Development Industrial Co., Ltd. 327,220,681 2-3 years Suzhou CM Nanshang Property Co., Ltd. payable to Shenzhen Nanshan Development Industry Co., Ltd. of payment made on behalf Beijing Jiaming Property Development Co., Ltd. 246,155,074 1-2 years CM Jianming (Beijing) Property Development Co., Ltd. payable to Beijing Jiaming Property Co., Ltd. of payment made on behalf CHINA INTERNATIONAL MARINE CONTAINERS (GROUP) CO., LTD 147,095,730 1-2 years Shanghai Fengyang Property Development Co., Ltd. payable to China International Marine Container (Group) Co., Ltd. for the payment paid on behalf. Shenzhen Shekou Dazhong Investment Co., Ltd. 138,235,302 1-2 years Beijing Kanglade Property Development Co., Ltd. payable to Shenzhen Shekou Dazong Investment Co., Ltd. for the payment paid on behalf. Shenzhen China Merchants Financing Service Co., Ltd. 33,510,000 1-2 years Beijing Kanglade Property Development Co., Ltd. payable to Shenzhen CM Financial Services Co., Ltd. for the payment paid on behalf. 27. Predicted liabilities In RMB Items Beginning of term Increased this term Decreased this term End of term Providing of external guarantees - - - - Unsettled lawsuit - lawsuit of Yishanjun (Note 1) 27,810,000 - - 27,810,000 Dismissing policy - - - - Loss contract to be executed - - - - Predicted expenses (Note 2) 80,242,194 5,748 - 80,247,942 Total 108,052,194 5,748 - 108,057,942 Note 1. Some of the owners of Shenzhen Yishanjun, which was developed by Shenzhen CM Property Co., Ltd., sued to the court claiming for compensation of delayed propertyChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 108 - - certification. The compensation of RMB27,810,000 could be paid by Shenzhen CM Property Co., Ltd. Note 2: According to the agreement engaged with Nanjing Fucheng Property Development Co., Ltd., the Company is expected to pay for the land using rights, land VAT, house maintaining fund, and other taxes for the transferring of International Finance Center held by Nanjing Fucheng Property Development Co., Ltd. 28. Non-current liabilities due in one year (1) Details of non-current liabilities due in one year In RMB Items End of term Beginning of term Long-term loans due in 1 year 1,457,610,597 1,303,402,319 Bond payable due in one year - - Long-term payable due in 1 year - - Other non-current liabilities due in 1 year 99,402 Total 1,457,610,597 1,303,501,721 (2) Long-term loans due in 1 year (a) Long-term loans due in one year In RMB Items End of term Beginning of term Loan by pledge - - Pledged loan (Note 1) 275,000,000 218,000,000 Guaranteed loan (Note 2) 432,610,597 835,402,319 Credit loan 750,000,000 250,000,000 Total 1,457,610,597 1,303,402,319 Note 1: China Merchants Jiaming (Beijing) Property Development Co., Ltd. – one of the subsidiaries of the Company, entered the Pledge Contract with China Merchants Bank Beijing Sanhuan Branch, by which the 106,700 square meters of land of Beijing Xicheng Jiayuan (Land CY-09 in Changping) was pledged to the bank for the loan of RMB275,000,000. Note 2: Ruijia Investment Industrial Co., Ltd. Raised loans of USD47,000,000 (RMB319,198,597) and HKD130,000,000 (RMB113,412,000) from China Industrial & Commercial Bank (Asia), which were both secured by China Merchants Group (HK) Co., Ltd. (b) Long-term loans due in 1 year top 5 in amountChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 109 - - In RMB End of term Beginning of term Loan provided by Commence date Terminate date Currency Interest rates % Amount of foreign currency Amount of original currency Amount of foreign currency Amount of original currency China Construction Bank Shekou Branch 2008.11.24 2011.02.23 RMB 4.86% - 500,000,000 - - China Industrial and Commercial Bank (Asia) 2008.12.14 2010.12.17 USD 浮动利 率 47,000,000 319,198,597 47,000,000 320,937,319 China Merchants Bank Beijing Beisanhuan Branch 2009.06.29 2011.05.20 RMB Float rates - 275,000,000 - 218,000,000 China Minsheng Bank Shenzhen Shekou branch 2008.11.28 2010.11.28 RMB 4.86% - 200,000,000 - 200,000,000 China Industrial and Commercial Bank (Asia) 2008.12.24 2010.12.24 HKD Float rates 130,000,00 0 113,412,000 130,000,00 0 114,465,000 Total 1,407,610,59 7 853,402,319 29. Other current liability In RMB Items Balance of book value at end of term Balance of book value at beginning of term Subsidiaries to be disposed (Note 1) Incl. Account payable 156,218 - Account received in advance 773,618 - Employees’ wage payable 4,154,122 - Tax payable 369,170 - Other payables 40,393,353 - Other long-term liabilities 2,784,584 - Land VAT drawn in advance (Note 2) 2,159,065,278 1,819,878,069 Outsourced cleaning and security guard services 11,660,143 7,857,914 Improving of intelligent system 1,729,173 2,763,676 Original water and power supply 2,893,238 2,364,392 Uniforms 2,501,671 466,201 Visiting tours 2,122,500 - Agencies - 3,012,000 Others 11,356,063 7,220,749 Total 2,239,959,131 2,237,152,128 223 1,843,563,001China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 110 - - Note 1: See Note (V)7, note 1. Note 2: Land VATs are calculated and provided in accordance with 国税发[2006]187号 with the heading of circular about Settlement of Land VAT of Property Development Enterprises issued by National Tax Bureau General, and accounted into current income account. Meanwhile, when calculating of the income tax of current year, corresponding adjustments were done by the subsidies of the Company on the taxable income account according to the relative income tax rules of local governments. 30. Long-term loans (1) Categories of long-term loans In RMB Items End of term Beginning of term Loan by pledge - - Pledged loan - - Guaranteed loan (Note 1) 5,690,737,832 2,244,268,040 Credit loan 3,671,636,000 3,323,128,000 Entrusted loan (Note 2) 152,906,972 152,906,972 Total 9,515,280,804 5,720,303,012 Note 1: The Company raised loan of RMB470,000,000 from China Merchants Bank Shekou Branch, and RMB470,000,000 from China Merchants Bank New Age Branch, both of them were secured by China Merchants Shekou Industrial Zone Co., Ltd. The Company obtained RMB2,000,000,000 of input capital from Huatai Asset Management Co., Ltd., Ruijia Investment & Industry Co., Ltd. raised USD36,000,000 (RMB244,492,543) from China Merchants Bank Offshore Business Dept., and USD50,000,000 (RMB339,572,976) and USD70,000,000 (RMB475,402,166) from ING Bank N.V., Hong Kong Branch. All of them were secured by China Merchants Group (HK) Co., Ltd. Shenzhen CM Power Supply Co., Ltd. – one of the subsidiaries of the Company raised the loan of USD30,000,000 (RMB203,727,000) from ING Bank N.V., Shanghai Branch, which was secured by the Company. Ruijia Investment & Industry Co., Ltd. – one of the subsidiaries of the Company, raised USD194,000,000 (RMB1,317,543,147) of loan from China Construction Bank Hong Kong Branch. According to the ‘Agreement of Guarantee Letter’ engaged between the Company and China Construction Bank Shenzhen Branch, it forms a substantial guarantee liability to the Company over Ruijia Investment & Industry Co., Ltd.China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 111 - - Zhuhai Yuanfeng Property Co., Ltd. raised RMB170,000,000 of loan from Guangdong Development Bank Zhuhai Branch, which was secured by the Company at 51% of the outstanding balance. Note 2: According to the “Contract for Entrusted Loans in RMB” entered by Shenzhen China Merchants Construction Co., Ltd., Nanjing Fucheng Property Development Co., Ltd. and Bank of China Shekou Branch, Nanjing Fucheng Property Development Co., Ltd. entrusted Bank of China Shekou Branch to provide Shenzhen China Merchants Construction Co., Ltd. the loan with term of 3 years. (2) Long-term loans top 5 in amount End of term Beginning of term Loan provided by Commence date Terminate date Currency Interest rates % Amount of foreign currency Amount of original currency Amount of foreign currency Amount of original currency Huatai Asset Management Co., Ltd. 2010.04.20 2017.04.19 RMB Float rates - 2,000,000,000 - - Xinhua Trust & Investment Co., Ltd. 2009.07.21 2012.07.20 RMB Float rates - 1,000,000,000 - 1,000,000,000 China Construction Bank Hong Kong Branch 2010.01.05 2012.12.23 USD Float rates 130,000,000 882,889,738 - China Merchants Bank Newage Branch 2009.07.27 2012.07.27 RMB 4.86% - 470,000,000 - 600,000,000 China Construction Bank Hong Kong Branch 2010.01.14 2012.12.23 USD Float rates 64,000,000 436,453,409 - - Total 4,789,343,147 1,600,000,000 31. Long term payables In RMB Units Term Initial amount Interest rates % Interest payable Balance at the end of term Condition Main body maintaining fund - 50,033,638 - - 50,033,638 - Shenzhen China Merchants Landmark Co., Ltd. - 1,200,000 - - 1,200,000 - Total 51,233,638 - 51,233,638 32. Other non-current liabilities In RMB Items Balance of book Balance of book Differed rental income 4,483,360 2,983,360 Infrastructure construction fund granted by Bureau of Water - 2,737,985 Special grant for culture development - - 1,500,000 Other water supply grants - - 96,300 Total 4,483,360 7,317,645China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 112 - - Less: Other non-current liabilities due in 1 year - 99,402 Incl. Infrastructure construction fund granted by Bureau of Water - 99,402 Non-current liabilities due beyond 1 year 4,483,360 7,218,243 33. Capital Share In RMB Changed this term Items Beginning of term Issuing of new shares Bonus shares Transferred from reserves Others Subtotal End of term June 30, 2010 I. Shares with conditional subscription 1. State-owned shares - - - - - - - 2. National legal person shares 731,298,105 - - - - - 731,298,105 3. Other domestic shares - - - - - - - 4. Foreign shares 197,709,440 - - - 197,709,440 5. Management shares 431,939 431,939 Total of conditional shares 929,439,484 - - - 929,439,484 II. Shares with unconditional subscription 1. RMB common shares 646,434,394 - - - 646,434,394 2. Foreign shares placed in domestic exchange 141,426,625 - - - 141,426,625 3. Foreign shares listed overseas - - - - - 4. Others - - - - - Total of unconditional shares 787,861,019 - - - 787,861,019 III. Total of capital shares 1,717,300,503 - - - - - 1,717,300,50 3 December 31, 2009 I. Shares with conditional subscription 1. State-owned shares - - - - - - - 2. National legal person shares 731,298,105 - - - - - 731,298,105 3. Other domestic shares - - - - - - - 4. Foreign shares 197,709,640 - - - (200) (200) 197,709,440China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 113 - - 5. Management shares 473,789 (41,850 ) (41,850) 431,939 Total of conditional shares 929,481,534 - - - (42,050 ) (42,050) 929,439,484 II. Shares with unconditional subscription 1. RMB common shares 646,407,544 - - - 26,850 26,850 646,434,394 2. Foreign shares placed in domestic exchange 141,411,425 - - - 15,200 15,200 141,426,625 3. Foreign shares listed overseas - - - - - 4. Others - - - - - Total of unconditional shares 787,818,969 - - - 42,050 42,050 787,861,019 III. Total of capital shares 1,717,300,503 - - - - - 1,717,300,50 3 The above shares are with par value of RMB1 yuan. 34. Capital reserves In RMB Items Beginning of term Increased this term Decreased this term End of term June 30, 2010 Share capital premium 8,369,949,610 - 8,369,949,610 Incl. Capital input by investors 8,884,412,549 - - 8,884,412,549 Using of converting rights of convertible bonds 1,394,072,217 - - 1,394,072,217 Liabilities converted to capital - - - - Difference formed by merger of firms under common control (1,354,694,800) - - (1,354,694,800) Acquiring share equities from minor shareholders of subsidiaries (384,866,956) - (384,866,956) Capital reserves capitalized (168,973,400) - - (168,973,400) Other misc incomes 13,565,536 650,978 12,914,558 Other capital reserves 104,411,758 - - 104,411,758 Incl. Equity part distilled from convertible bond - - - - Fair value of equity instrument accounted at equity basis - - - - Balance of moving compensation granted by government for public interests - - - -China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 114 - - Transferred from capital reserves under original system 104,411,758 - - 104,411,758 Total 8,487,926,904 - 650,978 84,87,275,926 December 31, 2009 Share capital premium 8,433,024,544 - 63,074,934 8,369,949,610 Incl. Capital input by investors 8,884,412,549 - - 8,884,412,549 Using of converting rights of convertible bonds 1,394,072,217 - - 1,394,072,217 Liabilities converted to capital - - - - Difference formed by merger of firms under common control (1,354,694,800) - - (1,354,694,800) Acquiring share equities from minor shareholders of subsidiaries (321,792,022) - 63,074,934 (384,866,956) Capital reserves capitalized (168,973,400) - - (168,973,400) Other misc incomes 11,108,482 2,457,054 - 13,565,536 Other capital reserves 104,411,758 - - 104,411,758 Incl. Equity part distilled from convertible bond - - - - Fair value of equity instrument accounted at equity basis - - - - Balance of moving compensation granted by government for public interests - - - - Transferred from capital reserves under original system 104,411,758 - - 104,411,758 Total 8,548,544,784 2,457,054 63,074,934 8,487,926,904 35. Surplus reserves In RMB Items Beginning of term Increased this term Decreased this term End of term June 30, 2010 Statutory surplus reserves 645,672,972 - - 645,672,972 Optional surplus reserves 140,120,038 - - 140,120,038 Preserved fund - - - - Enterprise development fund - - - - Others - - - - Total 785,793,010 - - 785,793,010 December 31, 2009 Statutory surplus reserves 530,106,466 115,566,506 - 645,672,972 Optional surplus reserves 140,120,038 - - 140,120,038China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 115 - - Preserved fund - - - - Enterprise development fund - - - - Others - - - - Total 670,226,504 115,566,506 - 785,793,010 Legal common reserves could be used to makeup losses, expand business operation or capitalized to capital shares. 36、 Retained profit In RMB Items Amount Percentage of drawing or allocation The period from January 1, 2010 to June 30, 2010 Before adjustment: Retained profit at end of last year 5,214,909,610 Adjustment: Total of retained profit at beginning of year (+ for increase, - for decrease) - Adjusted: Retained profit at beginning of year 5,214,909,610 Plus: Net profit attributable to owners of the parent company 1,050,179,281 Less: Statutory surplus reserves - Optional surplus reserves - Common risk provisions - Common share dividend payable 171,730,050 Note 1 Common share dividend transferred to capital share - Retained profit at the end of term 6,093,358,841 Year 2009 Before adjustment: Retained profit at end of last year 3,858,062,286 Adjustment: Total of retained profit at beginning of year (+ for increase, - for decrease) - Adjusted: Retained profit at beginning of year 3,858,062,286 Plus: Net profit attributable to owners of the parent company 1,644,143,880 Less: Statutory surplus reserves 115,566,506 Optional surplus reserves - Common risk provisions - Common share dividend payable 171,730,050 Common share dividend transferred to capital share - Retained profit at the end of term 5,214,909,610 Note 1: Cash dividend approved by the Shareholders’ Annual MeetingChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 116 - - According to the resolutions adopted at the Shareholders’ Meeting 2009 held in June 2010, on the basis of 1,717,300,503 shares at December 31, 2009, the Company distributed RMB1.00 to each 10 shares, and totally RMB171,730,050 was distributed. Note 2: Surplus reserves drawn by subsidiaries As of June 30, 2010, there was RMB505,929,305 of surplus reserves provided by the subsidiaries which has been included in the retained profit of the Company. (December 31, 2009: RMB505,929,305). 37. Operational turnover and cost (1) Turnover In RMB Items Occurred current term Amount occurred same period last year Major business turnover 6,980,394,887 2,874,721,644 Other business income 759,038 1,055,582 Major business cost 4,127,221,400 1,628,092,292 Other business cost 142,333 185,970 (2) Main businesses (on industries) In RMB Occurred current term Amount occurred same period last year Name of industry Turnover Operation cost Turnover Operation cost Property development 6,460,083,143 3,725,031,407 2,407,393,782 1,279,625,305 Public Utilities 321,265,272 236,716,661 301,655,272 215172676 Property management 199,046,472 165,473,332 165,672,590 133,294,311 Total 6,980,394,887 4,127,221,400 2,874,721,644 1,628,092,292 (3) Income from top 5 clients In RMB Name of clients Turnover Percentage in total turnover of the Company % Shenzhen Nanshan Property Development Co., Ltd. 52,437,650 0.75% Owner of block 152, phase III of Xicheng 49,305,296 0.71% Owner of block 163, phase III of Xicheng 46,627,472 0.67% Owner of block 143, phase III of Xicheng 43,415,227 0.62% Owner of block 165, phase III of Xicheng 33,903,042 0.49%China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 117 - - Total 225,688,687 3.24% (4) Turnover from construction contracts: In RMB Project Contract amount Accumulated costs occurred Accumulation of gross profit recognized Settled amount Constructio n contract with fixed price Low rental project of Beijing Xicheng Jiayuan 88,000,000 67,460,834 7,339,166 - 38. Business tax and surcharge In RMB Items Occurred current term Amount occurred same period last year Rate Land VAT 509,082,873 344,756,208 Note Business tax 335,311,052 129,410,111 Note City maintenance and construction tax 10,008,345 2,335,284 Note Education surtax 7,158,099 2,919,672 Note Resource tax - - Consumption tax - - Others 1,364,878 1,062,632 Total 862,925,247 480,483,907 Note: See Note (III). 39. Financial expenses In RMB Items Occurred current term Amount occurred same period last year Interest expense 195,007,097 328,428,319 Less: Interest expenses capitalized 173,094,565 262,854,000 Less: Interest income 48,785,129 9,608,370 Exchange differences 26,152,464 349,430 Less: Exchange difference capitalized 8,392,352 - Others 12,165,719 1,572,378 Total 3,053,234 57,887,757 40. Borrowing expenses In RMB Items Amount of borrowing expenses capitalized in current term Capitalization rateChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 118 - - Inventories 164,702,213 5.31% Production physical assets - - Biological assets with public interests - - Construction in process - - Intangible assets - - Subtotal of borrowing expenses capitalized in current term 164,702,213 5.31% Borrowing expenses accounted into current income account 21,912,532 - Total of borrowing expenses of current term 186,614,745 5.31% 41. Income from fair value fluctuation In RMB Source of income from fluctuation of fair value Occurred current term Amount occurred same period last year Transactional financial assets 19,394,866 (108,371,152) Incl. Gains from fluctuation of fair value of derivate financial instruments 19,394,866 (108,371,152) Trade off financial liabilities 10,523,008 - Investment property measured at fair value - - Others - - Total 29,917,874 (108,371,152) Note: See Note (V)2. 42. Investment income (1) Detailed investment gains In RMB Items Occurred current term Amount occurred same period last year Long-term equity investment gains on cost basis - - Long-term equity investment gains on equity basis (592,236) 109,884,894 Investment gains from disposal of long-term equity investment - - Investment gains in the period of holding transactional financial assets - - Investment gains in the period from receiving to expiration - - Investment gains in period of holding disposable financial assets - - Investment gains from disposal of transactional financial assets 3,637,080 81,835,093 Investment gains from disposal of investment hold to - -China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 119 - - expiration Investment gains from disposal of disposable financial assets - - Others 22,409,110(Note 1) 20,401,339 Total 25,453,954 212,121,326 Note 1: Interest income from entrusted loans was RMB22,409,110 after deducting of taxes. For details please see Note (V)9. (2) Details of gains from long-term equity investment on equity basis In RMB Company invested in Occurred current term Amount occurred same period last year Causation of change China Merchants Guangming Technologies Garden Ltd. (2,403,252) (1,825,269) Increase of loss by invested business Tianjin Xinhai real Estate Development Co., Ltd. 2,094,709 1,963,199 Profit of the firm increased Shenzhen China Merchants OCT Investment Co., Ltd. - 110,525,808 Included in the consolidation range since October 2009 Total (308,543) 110,663,738 43. Asset impairment loss In RMB Items Occurred current term Amount occurred same period last year I. Bad debt loss (2,861) (107,964) II. Inventory impairment loss - - III. Disposable financial asset impairment - - IV. Impairment loss from investment held till expiration - - V. Impairment loss from long-term stock investment - - VI. Property investment impairment loss - - VII. Fixed asset impairment loss - - VIII. Engineering goods impairment loss - - IX. Construction-in-process impairment loss - - X. Production goods impairment loss - - XI. Gas and fuel asset impairment loss - - XII. Intangible asset impairment loss - - XIII. Goodwill impairment loss - - XIV. Other - -China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 120 - - Total (2,861) (107,964) 44. Non-business income (1) Details of non-operational income In RMB Items Occurred current term Amount occurred same period last year Total of gains from disposal of non-current assets 66,174 20,524 Incl. Gains from disposal of fixed assets 66,174 20,524 Gains from disposal of intangible assets - - Gains from debt reorganization - - Gains from exchange of non-monetary assets - - Donation received - - Government subsidy 7,088,493 8,484,431 Write back of predicted debts - 7,450,000 Income from penalties 599,948 1,847,513 Others 1,155,626 72,907 Total 8,910,241 17,875,375 Details of government subsidy In RMB Items Occurred current term Amount occurred Remarks VAT refund for electric power import 4,862,063 7,755,000 Note 1 Industrial development special fund 600,000 - Note 2 Tax refund 556,129 634,730 Note 3 Government financing for pipe 49,702 49,702 Note 4 Subsidy for solar energy application 1,020,600 45,000 Note 5 Total 7,088,493 8,484,432 Note 1: As approved by the Ministry of Finance and National Tax Bureau General with document 财关税[2010]22号, in the period from January 1, 2010 to December 31, 2012, the electric power imported by Shenzhen China Merchants Power Supply Co., Ltd. from Hong Kong is on the basic amount of 560 million Kwh. The VAT on the amount lower than the basic amount will be refunded at 20%, where the amount beyond the basic amount is subject to the import VAT according to the regulations. Note 2: This was the special fund for industrial development received by Shenzhen CM Real-estate Co., Ltd. – one of the subsidiaries of the Company. Note 3: Tax refund received by Shanghai China Merchants Property Management Co., Ltd. – the subsidiary of the Company, according to the tax refunding agreement engaged withChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 121 - - Shanghai Hongkou Government. Note 4. It was the differed income formed by government grant received by Shenzhen China Merchants Water Supply Co., Ltd. for reconstruction of Shahexi DN1200 pipe lines and expanding engineering of Xili (Beihuan-Langshan) water pipe. Note 5. This was government financing granted by Shenzhen Nanshan District Bureau of Finance and the first disburse of solar energy application subsidy granted by Shenzhen Bao’an District Bureau of Finance for Shenzhen China Merchants Lanyuan Project. 45. Non-business expenditures In RMB Items Occurred current term Amount occurred same period last year Total of loss from disposal of non-current assets 276,647 318,807 Incl. Loss from disposal of fixed assets 276,647 318,807 Loss from disposal of intangible assets - - Losses from debt restructuring - - Loss from exchange of non-monetary assets - - Expected liability expense - - Donations 2,232,000 190,461 Others 2,595,038 846,398 Total 5,103,685 1,355,666 46. Income tax expenses In RMB Items Occurred current term Amount occurred same period last year Income tax calculated according to the law and regulations of current term 582,418,590 198,172,477 Adjustment of differed income tax (147,676,385) (56,119,274) Total 434,742,205 142,053,203 Adjustments on income tax expenditure and accounting profit: In RMB Occurred current term Amount occurred same period last year Accounting profit 1,833,668,498 624,090,354 Income tax at 22% (20% last year) 403,407,070 124,831,715 Influence of taxes may not be neutralized by expenses 16,484,665 37,319,173China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 122 - - Influence of tax-free income (2,229,334) (23,673,865) Influence of taxes not confirmed to neutralize loss and neutralizable provisional differences (45,150,629) (13,088,910) Tax influence by using of unrecognized previous loss and deductible provisional differences 43,672,028 - Influence of inconsistency in tax rates of subsidiaries in other region 18,558,405 16,665,090 Income tax expenses 434,742,205 142,053,203 47. Calculation of basic earning per share and diluted earning per share At calculating of basic earning per share, the net profit of current term attributable to common shareholders is: In RMB Occurred current term Amount occurred same period last year Net profit of current term attributable to common shareholders 1,050,179,281 486,847,748 Incl. Net profit attributable to continuous operation 1,050,179,281 486,847,748 Net profit attributable to terminating operation - - At calculating of diluted earning per share, the net profit of current term attributable to common shareholders is: In RMB Occurred current term Occurred in previous term Net profit of current term attributable to common shareholders 1,050,179,281 486,847,748 Diluting potential common share interests recognized as expenses at current term The part attributable to common shareholders after deducting of income tax - - The part of income or expenses generated by converting of diluted potential common shares attributable to common shareholders after deducting of income tax - - Incl. Net profit attributable to continuous operation 1,050,179,281 486,847,748 Net profit attributable to terminating operation - - At calculating of basic earning per share, the denominator is the weighted average of common shares issued outside, the calculation formula is as: In RMBChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 123 - - Occurred current term Amount occurred same period last year Common shares out in the market at beginning of year 1,717,300,503 1,717,300,503 Plus: Weighted amount of common shares issued this term - - Less: weighted amount of common shares repurchased in current term - - Weighted amount of common shares issued outside at end of year 1,717,300,503 1,717,300,503 At calculating of diluted earning per share, the formula for weighted average amount of common shares issued outside is as: RMB Yuan Occurred current term Occurred in previous term Weighted average of common shares used in calculating of basic earnings per share 1,717,300,503 1,717,300,503 Plus: Weighted average amount of common shares increased with assumption of the diluted potential common shares have been converted to current common shares - - Incl. Weighted amount of common shares increased by converting of convertible bonds - - Weighted amount of common shares increased by exercising of subscription certificate / share option - - Weighted amount of common shares increased by executing of repurchasing commitment - - Weight average amount of common shares used in calculating of diluted earning per share 1,717,300,503 1,717,300,503 Earnings per share In RMB Occurred current term Amount occurred same period last year Calculated according to net profit attributable to the shareholders of the parent company Basic earnings per share 0.6115 0.2834 Diluted earnings per share 0.6115 0.2834 Calculated according to continuous operation net profit attributable to the shareholders of parent companyChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 124 - - Basic earnings per share 0.6115 0.2834 Diluted earnings per share 0.6115 0.2834 Calculated according to termination net profit attributable to the shareholders of parent company Basic earnings per share - - Diluted earnings per share - - 48. Other miscellaneous income In RMB Items Occurred current term Amount occurred same period last year 1. Gain(loss) generated by sellable financial assets (769,024) 2,218,903 Less: Income tax influence of sellable financial assets (118,046) 443,780 Net amount written into other gains and transferred into gain/loss in previous terms - - Sub-total (650,978) 1,775,123 2. Share in other misc. income of the invested company on equity basis - - Less: Income tax influence of shares in other gains of investees on equity basis - - Net amount written into other gains and transferred into gain/loss in previous terms - - Sub-total - - 3. Gain(loss) generated by cash flow of hedging instrument - - Less: Income tax influence of cash flow hedge instruments - - Net amount written into other gains and transferred into gain/loss in previous terms - - Adjustment converted to initially recognized amount of hedging subject - - Sub-total - - 4. Difference in translating of foreign currency accounts 39,197,159 - Less: Net amount of disposing overseas business and transferred to current gain/loss - - Sub-total 39,197,159 - 5. Others - (2,000,000) Less: Income tax influence by other accounted into other misc. incomes - - Net amount accounted into other misc. income and transferred into current gain/loss in previous terms - - Sub-total - (2,000,000)China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 125 - - Total 38,546,181 (224,877) 49. Notes to cash flow statements (1) Other cash received relating to business operation In RMB Items Occurred current term Amount occurred same period last year Operational trade money received 965,050,266 500,146,184 Project deposit received 337,179,945 125,550,342 Interest received 50,537,793 24,367,967 Operational provisional money received 104,664,258 174,655,573 Total 1,457,432,262 824,720,066 (2) Other cash paid relating to business operation In RMB Items Occurred current term Amount occurred same period last year Operational trade money paid 475,466,354 618,392,498 Project deposit refunded 477,206,606 65,130,245 Cash paid for sales expenses 71,933,008 67,049,266 Cash paid for administrative expenses 51,773,005 32,678,218 Total 1,076,378,973 783,250,227 (3) Other cash received relating to investment operation In RMB Items Occurred current term Amount occurred same period last year Cash received from trade of foreign currency future contract 12,887 77,277,985 Total 12,887 77,277,985 50. Supplementary data of cash flow statement (1) Supplementary cash flow statement In RMB Supplementary Info. Amount of the Current Term Amount of the same period of previous term 1. Net profit adjusted to cash flow of business operation Net profit 1,398,926,293 482,037,151 Plus: Asset impairment provision (2,861) (107,964) Fixed asset depreciation, gas and petrol depreciation, 16,924,895 17,499,053China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 126 - - production goods depreciation Amortizing of intangible assets and investment properties 68,873,765 62,839,470 Amortizing of long-term expenses 9,611,584 11,167,990 Loss from disposal of fixed assets, intangible assets and other long-term assets 210,473 298,283 Loss of disposing fixed assets - - Loss (gain) from fair value fluctuation (29,917,874) 108,371,152 Financial expenses 3,053,234 57,887,757 Investment loss (gains) (25,453,955) (212,121,326) Decrease of differed income tax assets (increase) (147,676,385) (56,119,274) Increase of differed income tax liabilities (118,047) 443,780 Decreasing (increase) of inventory (3,339,843,203) (2,042,467,115) Decrease (increase) of operational receivables 888,747,172 484,523,627 Increase of operational payables (838,744,392) 4,232,170,148 Others Cash flow generated by business operation, net (1,995,409,301) 3,146,422,732 2. Major investment and financing operation not involving with cash Liabilities converted to capital - - Convertible bond expire in 1 year - - Fixed assets leased through financing - - 3. Net change of cash and cash equivalents Balance of cash at period end 10,315,367,297 8,561,695,831 Less: Initial balance of cash 8,775,661,067 7,358,057,106 Plus: Balance of cash equivalents at the period end - - Less: Initial balance of cash equivalents - - Net increasing of cash and cash equivalents 1,539,706,230 1,203,638,725 (2) Composition of cash and cash equivalents In RMB Items End of term Beginning of term I. Cash 10,315,367,297 8,775,661,067 Incl: Cash in stock 66,540 43,011 Bank savings could be used at any time 10,315,300,757 8,775,618,056 Other monetary capital could be used at any time - - Usable money in Central Bank - - Money saved in associated financial bodies - - Money from associated financial bodies - - II. Cash equivalents - -China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 127 - - Incl. Bond investment due in 3 months - - III. Balance of cash and cash equivalents at end of term 10,315,367,297 8,775,661,067China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 128 - - (VI) Related parties and related transactions 1. Particulars about the parent company of the Company In RMB Name of the parent co. Relationshi p Ownership type Reg. Add. Legal representative Business property Registered capital Shareholding of the parent co. Voting power of the parent company % Ultimate holder of the Company Organization code China Merchants Shekou Industrial Zone Co., Ltd. Controlling shareholder Ltd. liability Shenzhen Fu Yuning Establishment and management of various types of enterprises. 2,236,000,000 51.89% 51.89% China Merchants Group Co., Ltd. 10001146 - 0 The ultimate controlling party of the Group is China Merchants Group Co., Ltd. The parent company and the ultimate controlling party of the Group do not provide financial statements to outsiders. 2. Particulars of the subsidiaries See Note (IV) 3. Joint-ventures and affiliates See Note (V) 10China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 129 - - 4. Other related parties Name of the related parties Relationship with the Company Organization code Shenzhen China Merchants Landmark Co., Ltd. Under same controlling shareholder 70844202 - 3 Shenzhen Beike Venture Co., Ltd. Under same controlling shareholder 72304387 - 2 Dafeng International Holdings Under same controlling shareholder Not applicable Shenzhen China Merchants Financing Service Co., Ltd. Under same controlling shareholder 19244397 - 2 China Merchants Logistics Holdings Co., Ltd. Under same controlling shareholder 72472882 - 2 Shenzhen Shekou Dazhong Investment Co., Ltd. Under same controlling shareholder 61880956 - 5 China Merchants Hanghua Technologies and Trade Center Co., Ltd. Under same controlling shareholder 60002262 - 5 China Merchants Group (HK) Ltd. Under common substantial controlling shareholder Not applicable China Merchants Securities Co., Ltd. Under common substantial controlling shareholder 19218149 - 0 China Merchants International (China) Investment Co., Ltd. Under common substantial controlling shareholder 71786931-X CM Zhangzhou Development Zone Ltd. Under common substantial controlling shareholder 61145106 - 2 Shenzhen CM Qianhaiwan Property Co., Ltd. Under common substantial controlling shareholder 79386851 - 1 Shenzhen TCL Optical-Electronics Technologies Ltd. Affiliate of the Company 26639365 - 3 China Merchants Guangming Technologies Garden Ltd. Affiliate of the Company 76755303 - 0 Tianjin Xinhai real Estate Development Co., Ltd. Affiliate of the Company 7581445 – 4 Huizhou Taitong Property Investment Co., Ltd. Joint venture of the Company 67314099 – 0 Director, general manager and vice general manager Key management 5. Related transactions (1) Related transactions of goods and services In RMBChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 130 - - Occurred current term Amount occurred same period last year Related parties Type of trade Subjects of the related transactions Pricing and decision making process Amount Percentage in similar trades % Amount Percentage in similar trades % Shenzhen CM Qianhaiwan Property Co., Ltd. income of constructio n contract Note 1 approved by the board 53,350,00 0 100% - - Note 1: Shenzhen CM Construction Co., Ltd. contracted for the general project of phase I and II of Qianhaiwan Garden from Shenzhen CM Qianhaiwan Property Co., Ltd. The company actually gained RMB603,347 after subcontracted the project. (2) Related rents In RMB Name of the owner Name of the tenant Description of the property Leases Start date Stop date Rental income China Merchants Shekou Industrial Zone Co., Ltd. Shenzhen China Merchants Property Co., Ltd. Land using right 2010.1.1 2010.12.31 4,580,516 China Merchants Shekou Industrial Zone Co., Ltd. Shenzhen China Merchants Property Co., Ltd. Nanhai E-cool 2008.9.1 2023.8.31 6,726,084 China Merchants Shekou Industrial Zone Co., Ltd. Shenzhen CM Water Supply Co., Ltd. Land using right 1982.01.01 2025.06.30 1,366,986 China Merchants Shekou Industrial Zone Co., Ltd. Shenzhen CM Power Supply Co., Ltd. Land using right 2007.01.01 2010.12.31 1,120,500 Shenzhen China Merchants Property Co., Ltd. China Merchants Shekou Industrial Zone Co., Ltd. Office building of New Time Plaza 2010.01.01 2010.12.31 5,946,918 Shenzhen China Merchants Property Co., Ltd. China Merchants International (China) Investment Co., Ltd. Office building of New Time Plaza, industrial building 2010.02.01 2011.01.31 2,266,63 4 Shenzhen China Merchants Property Co., Ltd. Shenzhen China Merchants Landmark Co., Ltd. Office building of New Time Plaza 2009.10.01 2010.09.30 1,076,120 Shenzhen China Merchants Property Co., Ltd. China Merchants Logistics Holdings Co., Ltd. China Merchants Building, Haibin Commercial Center 2010.01.01 2010.12.31 763,896 Shenzhen China Merchants Property Co., Ltd. Shenzhen Beike Venture Co., Ltd. Beike Chuangye Building 2000.07.01 2015.06.03 335,000 The above transactions are implemented according to agreement price. (3) Related guarantees In RMB The guarantor The beneficiary Amount guaranteed Start date Due date Completed or not CMSIZ. (Note 1) The Company 1,007,909,000 2009.05.26 2012.07.27 No CMSIZ. (Note 1) Shenzhen China Merchants Property Co., Ltd. 230,251,028 2 0 1 0.01.06 2010.12.28 No CMSIZ. (Note 1) Shenzhen CM Power Supply Co., Ltd. 37,818,522 2 0 0 9.08.26 2010.08.26 No CMSIZ. (Note 1) Shenzhen China Merchants Property Co., Ltd. 82,012,508 2 0 0 9.11.15 2012.03.20 No China Merchants Group (HK) Co., Ltd. (Note 2) The Company 2,000,000,000 2010.04.20 2017.04.19 No China Merchants Group (HK) Ruijia Investment 244,492,543 2 0 0 9.12.01 2011.11.28 NoChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 131 - - Co., Ltd. (Note 2) Industrial Ltd. China Merchants Group (HK) Co., Ltd. (Note 2) Ruijia Investment Industrial Ltd. 339,572,976 2 0 0 7.11.20 2012.11.19 No China Merchants Group (HK) Co., Ltd. (Note 2) Ruijia Investment Industrial Ltd. 475,402,166 2 0 1 0.04.27 2013.04.27 No China Merchants Group (HK) Co., Ltd. (Note 2) Ruijia Investment Industrial Ltd. 319,198,597 2 0 0 8.12.24 2010.12.24 No China Merchants Group (HK) Co., Ltd. (Note 2) Ruijia Investment Industrial Ltd. 113,412,000 2 0 0 8.12.24 2010.12.24 No Dafeng International Holding Co., Ltd. – fully-owned subsidiary of CMSIZ, provided credit guarantee for Ruijia Investment & Industry Co., Ltd. – subsidiary of the Company, for the future foreign currency contract in ING Bank N.V., Hong Kong Branch. Note 1: China Merchants Shekou Industrial Zone Co., Ltd. provided RMB1,007,909,000 of loan guarantee for the company; USD5,569,000 (RMB37,818,522) of loan guarantee for Shenzhen CM Power Supply Co., Ltd.; RMB82,012,508 of credit guarantee for Shenzhen China Merchants Property Co., Ltd.; and RMB230,251,028 of guarantee for accepted draft to Shenzhen China Merchants Property Co., Ltd. Note 2: The Company obtained RMB2,000,000,000 of input capital from Huatai Asset Management Co., Ltd., Ruijia Investment & Industry Co., Ltd. raised USD36,000,000 (RMB244,492,543) from China Merchants Bank Offshore Business Dept., and USD50,000,000 (RMB339,572,976) and USD70,000,000 (RMB475,402,166) from ING Bank N.V., Hong Kong Branch, and USD47,000,000 (RMB319,198,597) and HKD130,000,000 (RMB113,412,000) from China Industrial & Commercial Bank (Asia) All of them were secured by China Merchants Group (HK) Co., Ltd. (4) Asset acquisition On June 29, 2010, Shenzhen CM Commerce Development Co., Ltd. – one of the subsidiaries of the Company entered the ‘Land Using Right Confirmation Contract’ with CMSIZ, to purchase the land using right of land SKC102-01. The land is of 11,904.23 square meters with 40 years of using rights. It is stipulated for commercial use. The consideration was RMB111.7518 million. (5) Asset transferring On June 28, 2010, Shenzhen CM Properties and the Company entered the agreement with CMSIZ to transfer the 100% share equities of Shenzhen CM Water Supply Co., Ltd. held directly or indirectly over to CMSIZ with the consideration of RMB162.8332 million. 6. Receivable and payables due with related parties In RMB Projects Related parties Amount at end of term Initial amount Other account receivable Shenzhen TCL Optical-Electronics Technologies Ltd. 257,339,044 187,851,513China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 132 - - Other account receivable Huizhou Taitong Property Investment Co., Ltd. 127,236,214 121,257,000 Account payable China Merchants Shekou Industrial Zone Co., Ltd. 9,919,240 5,338,724 Other account payable Dafeng International Holdings Co., LTd. - 887,700,513 Other account payable CM Zhangzhou Development Zone Ltd. 475,334,117 420,821,115 Other account payable Tianjin Xinhai real Estate Development Co., Ltd. 133,081,399 148,831,399 Other account payable Shenzhen Shekou Dazhong Investment Co., Ltd. 138,235,302 138,235,302 Other account payable Shenzhen China Merchants Financing Service Co., Ltd. 33,510,000 16,338,000 Other account payable China Merchants Guangming Technologies Garden Ltd. 1,069,390 1,067,447 Other account payable China Merchants Hanghua Technologies and Trade Center Co., Ltd. 528,151 1,051,707 Interest payable Dafeng International Holdings Co., LTd. - 1,288,737 Dividend payable China Merchants Shekou Industrial Zone Co., Ltd. 89,112,876 - Dividend payable CM Zhangzhou Development Zone Ltd. 3,787,878 - Dividend payable Dafeng International Holdings 4,900,000 - Long-term payable Shenzhen China Merchants Landmark Co., Ltd. 1,200,000 1,200,000 (VII) Contingent issues As of June 30 2010, the Company has provided guarantees for property mortgages to the banks totalled to RMB134,818,721 (December 31, 2009: RMB251,212,905). This issue makes no material influence on the financial situations of the report term and the period after the report term. (VIII) Commitments (1) Capital commitment In RMB Items End of term Beginning of term Signed but not yet recognized in the financial statements - - commitment of long-term asset purchasing - 3,494,368 - Outsourcing contract with large amount - - -Real estate development projects 5,188,660,756 2,277,962,492 -Investment commitment to the outside - Total 5,188,660,756 2,281,456,860 (2) Operational leasing commitment By the balance sheet date, information on irrevocable operation lease contract signed with outside, as follows: In RMB Items End of term Beginning of termChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 133 - - Minimum lease payments of irrevocable operation lease: The first year since the balance sheet date. 29,936,742 29,845,542 The Second years since the balance sheet date. 25,946,332 29,460,842 The Third years since the balance sheet date. 24,917,024 25,381,484 The following years. 215,009,652 227,468,164 Total 295,809,750 312,156,032 (IX) Post-balance-sheet issues No post-balance-sheet issue with the Company up to the date of this report. (X) Segment report The Group decides and disclose the segment report according to “Interpreting of Enterprise Accounting Standard” for year 2009, and no longer execute “Enterprise Accounting Standard No.35 – Segment Report”. According to the internal structure, administrative requirement and reporting criteria of the Group, the Group divides its businesses into four reporting segments. These reporting segments are decided according to the characteristics of businesses. The executives evaluate the business performance of these segments and decide the allocation of resources. These segments are: property development, public sector business, property management and others. Segment report adopts same accounting policies and measurement basis with those adopted in preparing of this financial statement.China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 134 - - (1) Segment report data In RMB Property development Public sector Property management Others Unclassified projects Neutralized between segments Total Current year Same period last year Current year Same period last year Current year Same period last year Current year Same period last year Current year Same period last year Current year Same period last year Current year Same period last year Turnover Income from external trade 6,460,083,143 2,407,393,782 321,265,272 301,655,272 199,046,472 165,672,590 759,038 1,055,582 - - - - 6,981,153,925 2,875,777,226 Income among the segments - - - - - - - - - - - - - - Total turnover of the segments 6,460,083,143 2,407,393,782 321,265,272 301,655,272 199,046,472 165,672,590 759,038 1,055,582 - - - - 6,981,153,925 2,875,777,226 Adjusted items: Total of turnover in the financial statement 6,981,153,925 2,875,777,226 Operation cost 3,725,031,407 1,279,625,305 236,716,661 215,172,676 165,473,332 133,294,311 142,333 185,970 - - - - 4,127,363,733 1,628,278,262 Segment operation profit (loss) 2,735,051,736 1,127,768,477 84,548,611 86,482,596 33,573,140 32,378,279 616,705 869,612 - - - - 2,853,790,192 1,247,498,964 Adjusted items: Business tax and surcharge 851,678,388 471,218,073 815,766 913,586 10,431,093 8,352,248 - - - - - - 862,925,247 480,483,907 Sales expense 112,145,064 114,595,993 - - - - - - - - - - 112,145,064 114,595,993 Administrative expense 71,161,608 56,844,994 6,674,145 5,038,804 13,060,686 13,672,120 10,282,955 15,262,882 - - - - 101,179,394 90,818,800 Financial expenses (15,283,182) (6,244,587) (272,842) 21,806,324 (1,519,832) (3,120,883) 20,129,090 45,446,902 - - - - 3,053,234 57,887,757 Asset impairment loss (2,861) (107,964) - - - - - - - - - - (2,861) (107,964) Income from change of fair value - - - - - - 29,917,874 (108,371,152) - - - - 29,917,874 (108,371,152) Investment income 2,927,006 108,857,278 - - 390,684 (116,505) 1,057,234,603 604,089,760 (1,035,098,339 ) (500,709,206) - - 25,453,954 212,121,326 Operation profit 1,718,279,725 600,319,246 77,331,542 58,723,882 11,991,877 13,358,289 1,057,357,137 435,878,436 (1,035,098,339 ) (500,709,206) - - 1,829,861,942 607,570,645 Non-operational income 3,396,091 9,403,326 4,912,894 7,804,701 601,256 667,348 - - - - - - 8,910,241 17,875,375 Non-operational expenditure 2,655,341 567,110 2,278,486 621,595 169,858 166,962 - - - - - - 5,103,685 1,355,666 Total profit 1,719,020,475 609,155,462 79,965,950 65,906,988 12,423,275 13,858,675 1,057,357,137 435,878,436 (1,035,098,339 ) (500,709,206) - - 1,833,668,498 624,090,354 Income tax 405,867,659 122,459,100 18,360,567 14,665,235 4,512,537 4,804,169 6,001,442 124,699 - - - - 434,742,205 142,053,203 Net profit 1,313,152,816 486,696,362 61,605,383 51,241,753 7,910,739 9,054,506 1,051,355,697 435,753,737 (1,035,098,339 (500,709,206) - - 1,398,926,293 482,037,151China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 135 - - )China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 136 - - In RMB Property development Public sector Property management Others Unclassified projects Neutralized between segments Total Current year Same period last year Current year Same period last year Current year Same period last year Current year Same period last year Current year Same period last year Current year Same period last year Current year Same period last year Total asset of the segments 48,700,383,337 41,330,383,216 3,770,461,248 1,814,453,728 472,737,757 335,013,896 33,051,010,397 31,188,797,460 (9,738,481,949) (7,850,392,575) (24,470,465,895) (18,921,095,228 ) 51,785,644,895 47,897,160,497 Total asset in the financial statements 48,700,383,337 41,330,383,216 3,770,461,248 1,814,453,728 472,737,757 335,013,896 33,051,010,397 31,188,797,460 (9,738,481,949) (7,850,392,575) (24,470,465,895) (18,921,095,228 ) 51,785,644,895 47,897,160,497 Total liability of the segments 35,548,838,318 33,063,133,537 2,785,938,164 885,425,597 36,330,819 245,968,027 17,841,550,683 14,321,692,087 - - (24,470,465,895) (18,921,095,228 ) 31,742,192,089 29,595,124,020 Total liability in the financial statements 35,548,838,318 33,063,133,537 2,785,938,164 885,425,597 36,330,819 245,968,027 17,841,550,683 14,321,692,087 - - (24,470,465,895) (18,921,095,228 ) 31,742,192,089 29,595,124,020 Supplementary info. Depreciation and amortized expenses 85,291,608 79,923,496 8,904,500 8,613,477 1,118,584 494,964 95,552 2,474,577 - - - - 95,410,244 91,506,513 Impairment recognized in current term (2,861) (107,964) - - - - - - - - - - (2,861) (107,964) Capital expenditure Incl. Expenditure of constructionin- process - 59,501 656,918 5,290,763 - - - - - - - - 656,918 5,350,264 Expenditure for purchasing of fixed assets 3,225,824 1,449,679 150,015 1,523,893 1,286,592 979,890 56,400 - - - - - 4,718,831 3,953,462 Expenditure for purchasing of intangible assets - - - - - - - - - - - - 0 0 Expenditure for purchasing of investment property 249,371,078 5,262,207 - - - - - - - - - - 249,371,078 5,262,207 Non-cash expenses other than depreciation and amortizing - - - - - - - - - - - - - -China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 137 - - (2) Income from external trade upon location of source and segment asset upon locations In RMB Items Occurred current term Occurred in previous term External trade income from mainland China 6,981,153,925 2,875,777,226 External trade income from Hong Kong and abroad - - Total 6,981,153,925 2,875,777,226 In RMB Items End of term Beginning of term Non-current asset located in mainland China 5,351,988,515 5,122,449,922 Non-current asset located in Hong Kong and abroad 142,052,666 138,553,404 Total 5,494,041,181 5,261,003,326China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 138 - - (XI) Financial Instruments and Risk Management Financial instruments adopted by the Company are available-for-sale financial assets, longterm equity investments, loans, account receivable, account payable, transactional financial liabilities, and convertible bonds. Details of these financial instruments are available in respective notes herein. Risks attached to these financial instruments and the risk management policies adopted by the Company are illustrated hereafter. The executive team of the Company have been monitoring and controlling over the risk exposures to constrain them in a certain extent. 1. Objective and policies of risk management The objective of the Company’s risk management is to achieve a balance between the risk and gains. Constrain the negative influence on business operation to the lowest limit, and maximum the interests of shareholders and other equity holders. With regard to this target, the basic policies of the Company are; locate and analyse the risks, set appropriate bottom line for risks, and manage and monitor on each risk and constrain them in a certain extent. 1.1 Market risk 1.1.1 Foreign currency risk Foreign currency risks are those generated by vibration of exchange rates. Foreign currency risks of the Company are mainly involved with Hong Kong Dollar, and US Dollar. Except for the overseas subsidiaries of the Company incorporated in Hong Kong Special Executive Zone and other countries, which are doing their businesses by local currencies, all other main business operations of the Company are in Renminbi. As of December 31, 2009, except for the following assets which are demonstrated in Hong Kong Dollar, and US Dollar, all of the other assets and liabilities of the Company are demonstrated in RMB. Foreign currency risks brought by these assets and liabilities in foreign currencies may influence the Company’s business performance. In RMB Items End of term Beginning of term Monetary capital 543,242,033 953,918,750 Other account receivable 179,574,894 1,365,754,365 Other account payable 1,818,503,461 2,662,527,318 Short-term loans 1,079,644 ,446 1,322,929,609 Long-term loans due in 1 year 432,610,597 435,402,319 Long-term borrowings 2,852,373,832 1,297,396,040 Note: As of June 30, 2010, except for the above assets and liabilities accounted in HKD or USD, the Company has the book principal of USD396,639,000 (RMB2,693,757,713) purchased in term of foreign currency future contract without transferring of principal.China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 139 - - The Company pays close attention on the influences of exchange rate vibration. 1.1.2 Interest risks The Company’s loans are mainly in Renminbi, and foreign currency loans are just auxiliary measures. Foreign currency loans are mainly floating rate loans in USD and HKD without being influenced by adjustment of basic interest rate done by People’s Bank of China. As for loans in RMB, the Company eliminated the influence of increasing interest rate to a certain extent by obtaining fix rate loans in advance and raise the portion of fix rate loans in the whole loans, in both arrangements of short-term and long-term loans. 1.1.3 Other price risks The financial assets available to sale (see Note (V)8) held by the Company are measured at their fair value at the balance sheet day. Thus the Company is exposed to the risks of securities market fluctuation. So far the Company adopted no countermeasures to minimize financial asset price fluctuation risks. 1.2 Credit risks As at December 31, 2009, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counter parties or debtors is arising from: · Book value of financial asset recognized in consolidated balance sheet; as for financial instruments measured at fair value, the book value is reflecting the exposure to risks but not actually the greatest exposure. The greatest exposure to risks fluctuates along with the future fair value. · Amount of financial guarantee contracts disclosed in Note (VII) – Contingent issues. In order to minimize the credit risk, the management of the Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at each balance sheet date to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced. The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies. The Company adopted necessary policies to make sure that all clients and customers are attributed with merit credit records.China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 140 - - 1.3 Liquidity risk In the management of the liquidity risk, the Company monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Company’s operations and mitigate the effects of fluctuations in cash flows. The management monitors the utilization of bank borrowings and ensure the loan contracts are properly exercised. The Company uses bank loans as main capital resources. On June 30, 2010, the bank loan credit not used was RMB25,465,440,000 (December 31, 2009: RMB24,873,030,000) The due dates of financial liabilities held by the Company on retained contract liabilities without discounted to cash is as the followings: In RMB Book value Gross value within 1 yr 1-5 yrs over 5 yrs Monetary capital 10,390,560,833 10,390,560,833 10,390,560,833 - - Account receivable 109,526,262 109,526,262 109,526,262 - - Other account receivable 1,050,297,111 1,050,297,111 1,050,297,111 - - Long-term receivable 1,095,238,586 1,150,002,968 - 1,150,002,968 - Short-term loans 1,629,644,446 1,657,206,336 1,657,206,336 - - Interest payable 39,755,152 39,755,152 39,755,152 - - Dividend payable 217,926,308 217,926,308 217,926,308 - - Other current liability 2,239,959,131 2,239,959,131 2,239,959,131 - - Long-term loans due in 1 year 1,457,610,597 1,488,485,117 1,488,485,117 - - Notes payable 268,100,694 268,100,694 268,100,694 - - Account payable 1,796,195,435 1,796,195,435 1,796,195,435 - - Other account payable 5,638,304,437 5,638,304,437 5,638,304,437 - - Long-term borrowings 9,515,280,804 11,032,902,976 405,469,219 8,412,617,319 2,214,816,43 8 2. Fair value Fair value of financial assets and financial liabilities are decided by the ways as provided hereafter: Fair values of financial assets and financial liabilities complying with standard conditions and with active market are decided respectively with reference to the current prices of the active market and current offers; Fair value of other financial assets and financial liabilities (derivate instruments not included) are recognized by general pricing matrix on future discounted cash flow basis, or recognized by observable current market prices;China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 141 - - Fair values of derivate instruments are determined by the public offer in the active market. The management of the Company deems that, the book values of financial assets and financial liabilities measured by amortized costs are close to the fair values of these assets and liabilities. 3. Sensitivity analyse 3.1 Foreign currency risk Foreign currency risks come mostly from the influence of exchange rate fluctuation on the foreign currency loans raised by the Company and monetary assets and liabilities accounted in foreign currencies. Foreign currency loans are mainly USD loans with float interest rates. To avoid the exchange rate risks, the Group locks the future exchange rates by using future exchange contracts without transferring of principal. On the other hand, for those monetary asset and liabilities accounted in foreign currencies, the Group capitalizes most of the exchange gain/loss and accounted into inventory cost. 3.2 Interest risks Interest risks are mostly the influences of interest fluctuation on the borrowing expenses. Most of the borrowing expenses have been capitalized and accounted into inventory cost, therefore fluctuation of interest rate is not making major influence on the gain/loss of current term or shareholders’ equity at end of report term. (XII) Notes to the main items of the financial statements of the parent company 1. Other account receivable. (1) Other account receivable categorized by property In RMB End of term Beginning of term Categories Book balance Bad debt provision Book balance Bad debt provision Amount Proportio n % Amount Proportio n % Amount Proportio n % Amount Proportion % Other receivable with major individual amount 17,220,768,759 100% - - 12,501,248,369 100% - - No major amount individually but with great risk after combined with others with similar credit risk - - - - - - - Other minor other receivables 3,442,905 - - - 3,066,436 - - - Total 17,224,211,664 100% - - 12,504,314,805 100% - - Ages of other receivable accounts End of term Beginning of term Age Amount Prop ortio n % Bad debt provisio n Book value Amount Prop ortio n % Bad debt provision Book value within 1 yr 17,220,805,9 10 100% - 17,220,805,9 10 12,503,630,17 6 100 % - 12,503,630,17 6China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 142 - - End of term Beginning of term Age Amount Prop ortio n % Bad debt provisio n Book value Amount Prop ortio n % Bad debt provision Book value 1-2 years 3,405,754 - - 3,405,754 684,629 - - 684,629 2-3 years - - - - - - - - Over 3 yrs - - - - - - - - Total 17,224,211,6 64 100% - 17,224,211,6 64 12,504,314,80 5 100 % - 12,504,314,80 5 (2) No other receivable account due from shareholders with 5% or over of shares of the Company in the balance. (3) Top other receivable accounts In RMB Name of the companies Relation with the Company Amount Ages Portion in total other receivables (%) Shenzhen China Merchants Property Co., Ltd. Subsidiary of the Company 5,001,722,535 within 1 yr 29% CM Power Supply Co., Ltd. Subsidiary of the Company 2,000,000,000 within 1 yr 12% CM Property (Chongqing) Garden City Co., Ltd. Subsidiary of the Company 1,321,273,876 within 1 yr 8% Guangzhou China Merchants Realestate Co., Ltd. Subsidiary of the Company 1,267,724,709 within 1 yr 7% China Merchants Property (Nanjing) Co., Ltd. Subsidiary of the Company 1,173,000,000 within 1 yr 7% Total 10,763,721,120 63% (4) Receivables from related parties Note: See Note (XII)7(2)China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 143 - - 2. Long-term equity investment (1) Details of long-term equity investment In RMB Company invested in Calculating basis Initial costs Balance at the beginning of term Changed by Balance at the end of term Percentage of share in the firm % Voting power in the firm % Statement on differences between the shareholding and voting rights Impairmen t provision Provided current term Impairment provision Cash dividend of the term China Merchants Guangming Technologies Garden Ltd. Equity basis 98,000,000 86,010,889 -2,403,252 83,607,637 49% 49% Not applicable - - - Shanghai China Merchants Properties Co., Ltd. Cost basis 3,000,000 3,000,000 - 3,000,000 10% 10% Not applicable - - - Shenzhen CM Property Consultancy Ltd. Cost basis 400,000 400,000 400,000 20% 20% Not applicable Shenzhen City Main Plaza Investment Co., Ltd. Cost basis - - - - 10% 10% Not applicable - - - Shanghai China Merchants Real-estates Co., Ltd. Cost basis 3,000,000 3,000,000 - 3,000,000 100% 100% Not applicable - - - Shenzhen China Merchants Property Co., Ltd. Cost basis 500,000,000 2,734,841,461 - 2,734,841,461 100% 100% Not applicable - - - Shenzhen CM Power Supply Co., Ltd. Cost basis 57,000,000 119,791,233 - 119,791,233 95% 95% Not applicable - - - Shenzhen CM Water Supply Co., Ltd. Cost basis 43,000,000 127,209,610 - 127,209,610 95% 95% Not applicable - - - Shenzhen China Merchants Xin’an Properties Co., Ltd. Cost basis 25,000,000 20,822,211 - 20,822,211 60% 60% Not applicable - - - Ruijia Investment Industrial Ltd. Cost basis 19,919,300 19,919,300 - 19,919,300 100% 100% Not applicable - - - CM Property (Beijing) Ltd. Cost basis 18,000,000 18,000,000 - 18,000,000 90% 90% Not applicable - - - China Merchants (Suzhou) Co., Ltd. Cost basis 27,000,000 27,000,000 - 27,000,000 90% 90% Not applicable - - - CM (Chongqing) Ltd. Cost basis 27,000,000 27,000,000 - 27,000,000 90% 90% Not applicable - - - China Merchants Property Management Co., Ltd. Cost basis 22,500,000 36,460,597 - 36,460,597 90% 90% Not applicable - - - CM (Nanjing) Ltd. Cost basis 14,700,000 14,700,000 - 14,700,000 49% 49% Not applicable - - - Zhangzhou China Merchants Properties Co., Ltd. Cost basis 25,500,000 25,500,000 - 25,500,000 51% 51% Not applicable - - - Tianjing Zhaosheng Property Co., Ltd. Cost basis 18,000,000 18,000,000 - 18,000,000 60% 60% Not applicable - - - Suzhou CM Nanshan Property Co., Ltd. Cost basis 120,000,000 120,000,000 - 120,000,000 60% 60% Not applicable - - -China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 144 - - Company invested in Calculating basis Initial costs Balance at the beginning of term Changed by Balance at the end of term Percentage of share in the firm % Voting power in the firm % Statement on differences between the shareholding and voting rights Impairmen t provision Provided current term Impairment provision Cash dividend of the term China Merchants Properties (Chongqing) Co., Ltd. Cost basis 30,000,000 30,000,000 - 30,000,000 100% 100% Not applicable Chengdu China Merchants Beihu Property Co., Ltd. Cost basis 50,000,000 50,000,000 - 50,000,000 100% 100% Not applicable - - - Chengdu CM Property Co., Ltd. Cost basis 10,000,000 - 10,000,000 10,000,000 100% 100% Not applicable - - - Total 3,481,655,301 7,596,748 3,489,252,049 - - (2) Investment in affiliates and joint-ventures In RMB Name of the Companies Ownership type Reg. Add. Legal representative Business property Registered capital Shares held by the Company % Voting power of the Company in the entity % Total asset at end of term Total liability at end of term Total net asset at end of term Total of turnover at current term Net profit of the current term I. Affiliates China Merchants Guangming Technologies Garden Ltd. Ltd. liability Shenzhen Yang Tianping Property development and management 200,000,000 49% 49% 314,014,976 141,060,216 172,954,76 1 720,000 (4,904,594) (3) The Company’s long-term equity investment receivers as of June 30, 2010 were not limited in ability to transfer capital to the Company.China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 - 145 - 3. Short-term loans In RMB Items End of term Beginning of term Loan by pledge - - Pledged loan - - Guarantee loan 67,909,000 - Credit loan 1,059,317,500 630,397,000 Total 1,127,226,500 630,397,000 4. Non-current liabilities due in one year (1) Details of non-current liabilities due in one year In RMB Items End of term Beginning of term Long-term loans due in 1 year 750,000,000 650,000,000 Bond payable due in one year - - Long-term payable due in 1 year - - Other non-current liabilities due in 1 year - - Total 750,000,000 650,000,000 (2) Long-term loans due in 1 year (a) Long-term loans due in one year In RMB Items End of term Beginning of term Loan by pledge - - Pledged loan - - Guaranteed loan (Note) 400,000,000 Credit loan 750,000,000 250,000,000 Total 750,000,000 650,000,000 Note: See Note (V)28(2) (b) Long-term loans due in 1 year top 5 in amount In RMB End of term Beginning of term Loan provided by Commence date Terminate date Currency Interest rates % Amount of foreign currency Amount of original currency Amount of foreign currency Amount of original currency China Construction Bank Shekou Branch 2008.11.24 2011.02.23 RMB 4.86% - 500,000,000 - - China Minsheng Bank Shenzhen Shekou branch 2008.11.28 2010.11.28 RMB 4.86% - 200,000,000 - 200,000,000China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 - 146 - China Agriculture Bank Shenzhen Nanshan Branch 2008.07.31 2010.07.30 RMB 4.86% - 50,000,000 - 50,000,000 Total 750,000,000 250,000,000 5. Long-term loans (1) Categories of long-term loans In RMB Items End of term Beginning of term Loan by pledge - - Pledged loan - - Guaranteed loan (Note) 2,940,000,000 1,100,000,000 Credit loan 3,271,636,000 3,023,128,000 Entrusted loan - Total 6,211,636,000 4,123,128,000 Note: See Note (V)30(1) (2) Long-term loans top 5 in amount End of term Beginning of term Loan provided by Commence date Terminate date Currency Interest rates % Amount of foreign currency Amount of original currency Amount of foreign currency Amount of original currency Huatai Asset Management Co., Ltd. 2010.04.2 0 2017.04.20 RMB Float rates - 2,000,000,000 - - Xinhua Trust & Investment Co., Ltd. 2009.07.2 1 2012.07.20 RMB Float rates - 1,000,000,000 - 1,000,000,00 0 China Merchants Bank Shenzhen New Times Branch 2009.07.2 7 2012.07.27 RMB 4.86% - 470,000,000 - 600,000,000 Bank of China Shenzhen Shekou Branch 2009.07.2 4 2012.07.24 RMB 4.86% - 400,000,000 - 400,000,000 China Agriculture Bank Nanchan Branch 2009.07.1 7 2014.07.16 RMB 5.472% 330,000,000 330,000,000 Total 4,200,000,000 2,330,000,00 0 6. Investment income (1) Detailed investment gains In RMB Items Occurred current term Amount occurred same period last year Long-term equity investment gains on cost basis - - Long-term equity investment gains on equity basis (2,403,251) (1,825,269) Investment gains from disposal of long-term equity investment - - Investment gains in the period of holding transactional - -China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 - 147 - financial assets Investment gains in the period from receiving to expiration - - Investment gains in period of holding disposable financial assets - - Investment gains from disposal of transactional financial assets - - Investment gains from disposal of investment hold to expiration - - Investment gains from disposal of disposable financial assets - - Others 22,409,110 23,370,730 Total 20,005,859 21,545,461 (2) Details of gains from long-term equity investment on equity basis In RMB Company invested in Occurred current term Amount occurred same period last year Causation of change China Merchants Guangming Technologies Garden Ltd. (2,403,252) (1,825,269) Profit decrease of the invested business Total (2,403,252) (1,825,269) 7. Related Transactions (1) Guarantees of related parties In RMB The guarantor The beneficiary Amount guaranteed Start date Due date Completed or not CMSIZ. (Note 1) The Company 67,909,000 2010.05.17 2011.05.17 No China Merchants Group (HK) Co., Ltd. (Note 2) The Company 2,000,000,000 2010.04.20 2017.04.19 No CMSIZ. (Note 2) The Company 100,000,000 2009.06.24 2012.06.24 No CMSIZ. (Note 2) The Company 300,000,000 2009.05.26 2012.05.26 No CMSIZ. (Note 2) The Company 540,000,000 2009.07.27 2012.07.27 No The Company (Note 2) Shenzhen CM Power Supply Co., Ltd. 203,727,000 2010.06.18 2013.06.18 No The Company (Note 2) Zhuhai Yuanfeng Property Co., Ltd. 86,700,000 2009.11.27 2012.06.11 No The Company (Note 2) Ruijia Investment Industrial Ltd. 1,317,543,147 2010.01.05 2012.12.23 No Note 1: See Note (V)18 Note 2: See Note (V)30(1) (2) Receivable and payable due with the related parties In RMBChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 - 148 - Projects Related parties Amount at end of term Initial ammount Dividend receivable Shenzhen China Merchants Property Co., Ltd. 859,075,614 859,075,614 Dividend receivable China Merchants (Suzhou) Co., Ltd. 182,635,544 182,635,544 Dividend receivable Suzhou CM Nanshan Property Co., Ltd. 35,710,165 35,710,165 Dividend receivable Shanghai China Merchants Properties Co., Ltd. 13,298,824 13,298,824 Total 1,090,720,147 1,090,720,147 Other account receivable Shenzhen China Merchants Property Co., Ltd. 5,001,722,535 4,442,695,824 Other account receivable CM Power Supply Co., Ltd. 2,000,000,000 - Other account receivable China Merchants Properties (Chongqing) Co., Ltd. 1,321,273,876 1,277,696,120 Other account receivable Guangzhou China Merchants Real-estate Co., Ltd. 1,267,724,709 1,204,289,451 Other account receivable CM (Nanjing) Ltd. 1,173,000,000 200,000,000 Other account receivable Shanghai Jingyuan Property Co., Ltd. 947,232,399 - Other account receivable Shanghai CM Fengrui Property Ltd. 703,212,194 660,363,253 Other account receivable Suzhou CM Nanchan Property Co., Ltd. 606,125,737 553,165,572 Other account receivable Tianjing Zhaosheng Property Co., Ltd. 599,248,516 683,736,391 Other account receivable Zhangzhou China Merchants Properties Co., Ltd. 491,866,900 508,057,437 Other account receivable Zhuhai China Merchants Property Co., Ltd. 426,389,859 417,905,262 Other account receivable CM (Chongqing) Ltd. 400,108,953 400,108,953 Other account receivable Shanghai CM Minsheng Property Ltd. 380,000,000 299,732,000 Other account receivable Shanghai CM Fengsheng Property Ltd. 350,000,000 307,398,200 Other account receivable Beijing Kanglade Property Development Co., Ltd. 255,853,158 229,581,158 Other account receivable China Merchants Jiaming (Beijing) Property Development Co., Ltd. 251,947,896 315,407,245 Other account receivable Shanghai Fengyang Property Development Co., Ltd. 220,643,596 220,643,596 Other account receivable China Merchants (Suzhou) Co., Ltd. 211,587,211 204,233,511 Other account receivable Chengdu CM Property Co., Ltd. 200,773,965 - Other account receivable Chengdu CM Beihu Property Co., Ltd. 150,999,461 - Other account receivable Suzhou Shuanghu Property Co., Ltd. 103,543,309 101,421,070 Other account receivable Ruijia Investment Industrial Ltd. 81,536,271 81,647,973 Other account receivable Foshan Xinjie Property Ltd. 35,769,380 27,890,037 Other account receivable Shenzhen China Merchants Xin’an Properties Co., Ltd. 29,896,380 34,396,380 Other account receivable Foshang CM Huifeng Property Co., Ltd. 6,456,075 - Other account receivable Zhuhai Yuanfeng Property Co., Ltd. 104,349 - Other account receivable Shenzhen Meiyue Property Investment Co., Ltd. 50,110 - Other account receivable CM Property (Beijing) Ltd. - 266,385,000 Total 17,217,066,839 12,436,754,433 In RMB Projects Related parties Amount at end of term Initial ammountChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 - 149 - Other account payable Shenzhen CM Power Supply Co., Ltd. 1,568,543,551 1,414,231,992 Other account payable Shenzhen CM Water Supply Co., Ltd. 96,251,370 95,072,758 Other account payable Shenzhen CM Property Consultancy Ltd. 42,494,152 20,012,738 Other account payable Shanghai China Merchants Properties Co., Ltd. 184,777,154 173,006,186 Other account payable China Merchants Guangming Technologies Garden Ltd. 1,069,390 1,067,447 Other account payable CM Property (Beijing) Ltd. 559,172,160 164,730,677 Other account payable China Merchants (Suzhou) Co., Ltd. 476,942,526 491,582,002 Other account payable CM (Chongqing) Ltd. 207,334,473 35,900,947 Other account payable Shekou Xinghua Industrial Holdings Co., Ltd. 94,633,646 91,948,499 Other account payable Zhangzhou China Merchants Properties Co., Ltd. 50,627,993 - Other account payable Shenzhen City Main Plaza Investment Co., Ltd. 30,388,279 30,388,279 Other account payable Shanghai China Merchants Real-estates Co., Ltd. 30,500,688 30,500,688 Other account payable CM (Nanjing) Ltd. 12,041,488 134,423,946 Other account payable Shanghai CM Property Management Co., Ltd. 39,020,041 36,014,281 Other account payable Beijing CM Property Management Co., Ltd. 90,192,421 100,366,424 Other account payable China Merchants Property Management Co., Ltd. 19,564,306 23,562,444 Other account payable Shenzhen China Merchants Property Management Co., Ltd. 125,078,258 125,755,466 Other account payable Tianjin China Merchants Properties Co., Ltd. 129,047,042 81,360,183 Other account payable Shenzhen Taige Apartment Management Co., Ltd. 135,536,011 118,490,378 Other account payable Nanjing CM Property Management Co., Ltd. 2,034,158 6,078,108 Other account payable Wuhan CM Property Management Co., Ltd. 14,095,296 15,087,597 Other account payable Zhangzhou CM Honglong Property Ltd. 11,865,965 11,573,817 Other account payable Tianjing Zhaosheng Property Co., Ltd. 76,454,407 7,496,320 Other account payable Shanghai CM Minsheng Property Ltd. 79,133,968 67,392,495 Other account payable Shenzhen CM Construction Co., Ltd. 50,534,075 50,534,075 Other account payable Shanghai CM Fengsheng Property Ltd. 535,879,500 360,600,486 Other account payable Shanghai Fengyang Property Development Co., Ltd. 51,763,810 62,892,770 Other account payable Shenzhen CM Commercial Development Co., Ltd. 49,969,324 49,969,324 Other account payable Beijing Kanglade Property Co., Ltd. 21,675 - Other account payable Ruijia Investment Industrial Ltd. 3,416,349 3,443,990 Other account payable Shenzhen CM Qile Property Management Ltd. 12,281,329 12,715,005 Other account payable Guangzhou China Merchants Real-estate Co., Ltd. - 76,572,970 Other account payable Shenzhen China Merchants Property - 27,340,441China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 - 150 - Co., Ltd. Other account payable Shenzhen China Merchants Xin’an Properties Co., Ltd. - 2,072,989 Total 4,780,664,805 3,922,185,722 Dividend payable China Merchants Shekou Industrial Zone Co., Ltd. 89,112,876 - Dividend payable CM Zhangzhou Development Zone Ltd. 3,787,878 - Dividend payable Dafeng International Holdings 4,900,000 - Dividend payable Other investors of the PLC 73,929,296 - Total 171,730,050 - (3) Capital coordinating by capital settlement center The Company has established an internal capital clearance center to collectively manage and coordinate the capital inside the Company. All of the subsidiaries save their money in the center, and apply for fund when needed for project development. The Company charge the fund applied at practical financial cost. (XIII) Approval of the financial statements The financial statements of the Company and the consolidated are approved by the Board of Directors of the Company on July 23, 2010. (XIV) Supplementary Info. 1. Details of non-recurring gain/loss In RMB Items Amount Remarks Gain/loss of non-current assets (210,473) - Tax refunding or exemption without official certification or exceeded authority - Government subsidy recorded into current income account (other than those closely related to the Company’s business operation, granted at fixed amount according to the national regulations) 2,226,430 - Capital adoption fee collected from non-financial organizations and accounted into current gain/loss - Gain/loss from differences between the cost of enterprise merger and the fair value of recognizable net asset of the invested entities - - Gain/loss from non-monetary assets - - Gain/loss from commissioned investment or assets - - Asset impairment provisions provided for force-majeur - - Gain/loss from debt reorganization - - Enterprise reorganizing expenses, such as employee placement fee and integration fee - - Gain/loss from trade departing from fair value - - Current net gain/loss of subsidiaries under same control from beginning of term till date of consolidation - - Gain/loss generated by contingent liabilities without connection with main businesses - - Gain/loss from change of fair value of transactional asset and liabilities, and investment gains from disposal of transactional financial assets and liabilities and sellable financial assets, other than valid period value instruments related to the Company’s common businesses - -China Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 - 151 - Restoring of receivable account impairment provision tested individually 2,861 - Gain/loss from commissioned loans - - Gain/loss from change of fair value of investment property measured at fair value in follow-up measurement - - Influence of one-time adjustment made on current gain/loss account according to the laws and regulations regarding tax and accounting - - Consigning fee received for cosigned operation - - Other non-business income and expenditures other than the above (3,071,464) - Other gain/loss items satisfying the definition of non-recurring gain/loss account - - Influenced amount of income tax 180,518 - Influence on minority shareholders’ equity (after tax) (184,726) - Total (1,056,854) - 2. Net income on asset ratio and earning per share This calculation formula of net income on asset ratio and earning per share was prepared by CMPD according to “Information Disclosure Rules of PLC No.09 – calculating and disclosing of net income on asset and earnings per share” (Revised 2007) issued by China Securities Regulatory Commission. Earnings per share Profit of the report period Weighted average net income on asset % Basic earnings per share Diluted earnings per share Net profit attributable to common shareholders of the Company 6.25% 0.6115 0.6115 Net profit attributable to the common owners of the PLC after deducting of non-recurring gains/losses 6.25% 0.6121 0.6121 3. Analysis on irregular situation of items in the financial statements RMB Yuan Items Current term Comparing amount Scale of change Causation of differences 1 Transactional financial assets 25,651,617 6,437,479 298%Increased dueto price fluctuation of NDF 2 Other account receivable 1,050,297,111 1,926,509,243 -45% Land bidding deposit at beginning of year was recognized as initial pay for the land and transferred into inventory 3 Other current asset 851,886,216 624,800,651 36%Subsidiary asset disposable increased 4 Fixed assets 186,817,919 299,615,954 -38% Decreased because part of the fixed assets transferred into subsidiary asset disposable. 5 Differed income tax asset 438,162,357 290,485,972 51% Increase of differed income tax assets recognized by provisional difference caused by drawn of land VAT in advance 6 Account payable 1,796,195,435 2,705,521,285 -34%Decrease of land payment payable 7 Employees’ wage payable 96,330,938 162,832,982 -41%Decreased because of greater amount of wage paid to employees this term 8 Tax payable 380,116,649 589,859,453 -36%Decreased because of greater amount of taxesChina Merchants Property Development Co., Ltd. Notes to Financial Statements The period from January 1, 2010 to June 30, 2010 - 152 - 9 Interest payable 39,755,152 21,872,418 82%Increase of outstanding interest payable 10 Dividend payable 217,926,308 107,751,887 102% Increased because announcing of dividend distributing for 2009 11 Long-term borrowings 9,515,280,804 5,720,303,012 66%Loan increased by expanding of business scale 12 Different of foreign currency translation 95,753,565 72,806,727 32% Caused by adjustment of foreign currency rate 13 Minor shareholders’ equity 2,863,970,961 2,023,299,723 42% Caused by increase of registered capital of co-operated projects and profit realized 14 Turnover 6,981,153,925 2,875,777,226 143%Increase of property sales income 15 Operation cost 4,127,363,733 1,628,278,262 153%Increase of property sales costs 16 Business tax and surcharge 862,925,247 480,483,907 80% Increase of tax caused by increase of property sales 17 Financial expenses 3,053,234 57,887,757 -95% Mainly caused by increase of interest income 18 Gain/loss from change of fair value 29,917,874 -108,371,152 128% Caused by increase of fair value of NDF contract 19 Income tax expenses 434,742,205 142,053,203 206%Caused by increase of total profit 20 Minor shareholders’ equity 348,747,012 -4,810,597 7350% Caused by increase of profit realized by the co-operated projects Note: NDF means future foreign currency trade contract without handover of principal.