Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Annual Report for Year 2011

SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. ANNUAL REPORT FOR YEAR 2011

Important Notice

The directors, supervisors and senior management guarantee that there are no omissions, misstatement, or misleading information in this annual report. The directors, supervisors and senior management are responsible, individually and jointly, for the authenticity, accuracy and integrity of the information herein.

RSM China Certified Public Accountants presented audit report with standard and non-reserved opinion for the Company.

Mr. Fan Zhaoping, Chairman of the Board, Mdm. Yu Zhongxia, Financial Controller and Mdm. Sun Yuhui, Financial Manager, guarantee the authenticity and integrity of the financial report in this annual report.

The Annual Report is written in both English and Chinese. In case of conflict between the two versions, Chinese version shall prevail.

Contents

PART I. Company Profile 3

PART II. Highlights for Accounting and Business Data 4

PART III. Changes in Capital Stock and Shareholders 6

PART IV. Profiles of Directors, Supervisors, Senior Management 11

PART V. Corporate Governance 20

PART VI. Internal Control 22

PART VII. Review of Shareholders’ General Meetings 24

PART VIII. The Report of Board of Directors for Year 2011 25

PART IX. The Report of Board of Supervisors for Year 2011 35

PART X. Significant Events 37

PART XI. Financial Statements 46

PART XII. Documents Available for Verification 46

PART I. Company Profile

1. Company’s Name in English Shenzhen Chiwan Petroleum Supply Base Co., Ltd. (“Chiwan Base”) Company’s Name in Chinese 深圳赤湾石油基地股份有限公司（深基地） 2. Legal Representative Mr. Fan Zhaoping 3. Secretary of the Board Mr. Fu Jialin Securities Representative Mr. Song Tao Tel 0755-26694211 Fax 0755-26694227 E-mail Address [email protected] 4. Office Address 14/F, Chiwan Petroleum Building, Chiwan, Nanshan District, Shenzhen, PRC Post Code 518068 E-mail Address [email protected] Website of the Company http://www.chiwanbase.com 5. Designated Newspapers for “Securities Times”, ”Hong Kong Commercial Information Disclosure Daily” Website for Publishing the http://www.cninfo.com.cn Annual Report Place where the Annual Report Secretary Department of Chiwan Base is available

6. Stock Exchange Shenzhen Stock Exchange Stock Short Name Chiwan Base -B Stock Code 200053 7. Date of Initial Registration 10 th February, 1984 Initial Registration Address Chiwan, Shekou, Shenzhen City, PRC Registration Number of 440301501124066 Business License

Number of Taxation Registration 440300618833899

RSM China Certified Public Accountants Certified Public Accountants 8-9 /F, Block A, Corporation Bldg., No.35, Finance Street, Xicheng District, Beijing, PRC

PART II. Highlights for the Accounting and Business Data

I. Main Accounting Data

Unit: RMB

Year 2011 Year 2010 Change （％） Year 2009

Total operating 461,923,472.76 400,102,381.18 15.45 332,322,203.41 revenue

Operating profit 144,059,676.56 151,880,814.56 -5.15 122,952,419.22

Total profit 148,094,031.19 154,329,519.61 -4.04 123,897,230.27

Net profit attributed to the parent 129,274,351.74 142,229,324.77 -9.11 118,178,931.42 company

Net profit after deducting 125,777,485.70 143,326,111.55 -12.24 117,156,946.07 non-recurring gains& losses

Net cash flows from 267,653,960.54 255,124,925.08 4.91 179,187,901.48 operating activities

End of 2011 End of 2010 Change （％） End of 2009

Total assets 3,647,993,280.18 2,804,631,422.11 30.07 2,668,704,397.53

Total liabilities 2,239,248,700.35 1,663,337,149.38 34.62 1,546,398,472.82

Shareholders’ equity attributed to the 1,160,341,793.12 1,046,166,354.23 10.91 994,963,390.28 parent Company

Share capital 230,600,000.00 230,600,000.00 0.00 230,600,000.00

Items of the non-recurring gains & losses

Unit: RMB

Items of the non-recurring gains & losses Year 2011 Explanation Year 2010 Year 2009

Profit and loss from non-current assets disposal 546,451.05 608,610.28 -1,482,415.41

Government grants recognized in current year’s Please find the profit or loss (except for the fixed or quantitative 3,341,765.88 details in the 1,965,300.00 2,380,804.00 government grants closely related to the financial notes.

enterprise businesses according to the national unified standard)

Net profit or loss from beginning of the year to acquisition date from subsidiaries acquired under -5,002,934.04 ca tegory of business combinations under common control

Other non-business revenue and expenditure 185,416.76 -53,245.23 46,422.46 excluding items mentioned above

Effect of income tax -504,632.58 -630,586.74 -193,025.05

Effect of minority interests (after tax) -72,135.07 2,016,068.95 270,199.35

Total 3,496,866.04 -1,096,786.78 1,021,985.35 Ⅱ. Main Financial Indicators Unit: RMB Year 2011 Year 2010 Change （％） Year 2009 Basic EPS (Yuan/Share) 0.56 0.62 -9.68 0.51 Diluted EPS (Yuan/Share) 0.56 0.62 -9.68 0.51 EPS after deducting non-recurring 0.55 0.62 -11.29 0.51 gains& losses (Yuan/Share) Weighted average ROE (%) 11.77 13.79 -2.02 12.73 Weighted average ROE deducting of 11.45 13.90 -2.45 12.62 non-recurring gains & losses (%) Net cash flows per share from 1.16 1.11 4.50 0.78 operating activities(Yuan/Share) End of 2011 End of 2010 Change （％） End of 2009 Net asset per share attributed to the 5.03 4.54 10.79 4.31 parent company (Yuan/Share) Asset Liability Ratio 61.38 59.31 2.07 57.95

Ⅲ. Differences between IFRS and New Accounting Standards

The Company has implemented the New Accounting Standards since Jan 1, 2007. There are no differences of net profits and net assets compared with IFRS.

Ⅳ. Changes in Equity

Unit: RMB Statutory Discretional Minority Capital Retained Shareholders’ Item Capital Stock Surplus Surplus Shareholders’ Reserves Earnings Equity Reserve Reserves Equity

Year-begin 230,600,000.00 219,723,332.58 155,956,669.93 61,314,828.91 378,571,522.81 95,127,918.50 1,141,294,272.73

Increase 14,417,853.51 18,329,718.81 7,389,338.60 129,274,351.74 180,124,000.00 349,535,262.66 Decrease 55,235,823.77 26,849,131.79 82,084,955.56

Year-end 230,600,000.00 234,141,186.09 174,286,388.74 68,704,167.51 452,610,050.78 248,402,786.71 1,408,744,579.83 Reasons of change: The increment of Statutory Surplus Reserve was drawn in accordance with the company’s Article of Association. Statutory Surplus Reserves is 10% of the net profit. Discretional Surplus Reserves is calculated as 5% of the net profit of last year.

PART III. Changes in Capital Stock and Shareholders

Ⅰ. Changes in Capital Stock

1. Form of Changes in Capital Stock

Unit: Share

Before Changes Changes in Shares （＋，－） After Changes Conversion New Bonus of Shares Ratio Shares Others Subtotal Shares Ratio Shares Reserves Issued to Shares 1.Non-tradable 119,420,000 51.79% 119,420,000 51.79% Shares a. Promoters’ 119,420,000 51.79% 119,420,000 51.79% shares including State-owned

Shares Ownership by Domestic Legal 119,420,000 51.79% 119,420,000 51.79% Entities Ownership by Foreign Legal Entities

Others b. Shares Raised from Legal Entities c. Employee’s

Shares d. Preferred Shares and Others 2.Tradable 111,180,000 48.21% 111,180,000 48.21% shares a. A shares b. B shares 111,180,000 48.21% 111,180,000 48.21% c. Shares Traded in

Overseas Market

d. Others 3.Total 230,600,000 100% 230,600,000 100%

2. Shares Issue The Company issued, at the par value of RMB 1.00 per share, a total number of 230.6 million shares of common B shares in June 1995, according to the approval of Shenzhen Securities and Exchange Commission. The total shares include 119.42 million non-tradable A shares, 51.18 million non-tradable B-shares for foreign promoters, and 60 million public tradable B-shares for ordinary investors. The public tradable B shares were issued on June 23 rd , 1995 at a price of HK$2.82 per share and the fully diluted P/E of 10.5. The B shares became public listed on July 28 th , 1995. The Company hasn’t issued any employees’ shares ever since.

Ⅱ. Introduction of Shareholders

1. Number of Shareholders and Shares

Unit: Share Total number of shareholders at the Total number of shareholders at the 8,738 8,612 end of Year 2011 end of February 2012 Shareholding of top ten shareholders Total shares Non-tradable Impawned or Name Nature Ratio（％） held shares frozen shares CHINA NANSHAN State owned legal DEVELOPMENT (GROUP) 51.79 119,420,000 119,420,000 0 person INCORPORATION CHINA LOGISTICS HOLDING(12) Foreign legal 19.90 45,890,000 0 0 PTE. LTD. person CHINA MECHANTS SECURITIES State owned legal 1.13 2,607,734 0 Unknown (HONGKONG) LTD person GUOTAI JUNAN SECURIES Foreign legal 0.37 849,650 0 Unknown HONG KONG LIMITED person Domestic natural SUN LI FENG 0.30 700,000 0 Unknown person CORE PACIFIC-YAMA ICHI Foreign legal INTERNATIONAL (H.K.) 0.28 637,802 0 Unknown person LIMITED Domestic natural LI MINGYA 0.22 511,500 0 Unknown person Domestic natural PAN BO 0.17 392,100 0 Unknown person Domestic natural LI SHUCHUN 0.16 374,616 0 Unknown person

Foreign natural WU CHI LI 0.16 368,300 0 Unknown person Shareholdings of top ten tradable shareholders Name Shares held Type （A、B、H or other ） CHINA LOGISTICS HOLDING(12) PTE. LTD. 45,890,000 B CHINA MECHANTS SECURITIES (HONGKONG) 2,607,734 B LTD GUOTAI JUNAN SECURIES HONG KONG 849,650 B LIMITED SUN LI FENG 700,000 B CORE PACIFIC-YAMAICHI INTERNATIONAL 637,802 B (H.K.) LIMITED LI MINGYA 511,500 B PAN BO 392,100 B LI SHUCHUN 374,616 B WU CHI LI 368,300 B CAI GANG 359,000 B Among the top ten shareholders, the domestic legal entity shareholder, China Nanshan Development (Group) Incorporation has no affiliated relations with other shareholders and does not fall into the scope of Explanation for th e Affiliated Relations or United united action person stipulated by “Regulation of Action of the Top Ten Shareholders Information Disclosure of the Change of Shareholding of listed company”. It is unknown that whether other tradable-share shareholders fall into the scope of united action person. 2. Profile of Controlling Shareholders

(1) Controlling Shareholder: China Nanshan Development (Group) Incorporation (“Nanshan Group”) Legal representative: Fu Yuning Date of registration: Sept 28, 1982 Business scope: Land development, port service and transportation, as well as related industry, commerce, real estate and tourism and bondedwarehouses Registered Capital: RMB 900 million

(2)Shareholding structure of the Company

State-Owned Assets Supervision and Administration Commission of the State Council 100 ％

China Merchants Group State-Owned State-Owned China National Offshore Oil Assets Assets Corporation 55.14 ％ Supervision and Supervision 100 ％ Administration and Commission of Administration China Merchants Holdings Shenzhen Commission of (International) Company Municipal Guangdong Limited Government Province 100 ％ 100 ％ 100 ％

China Silverflow Shenzhen Guangdong China China HK Clifford Merchants Co ., Ltd. Investment Petro-Trade National Ocean Wong (Nanshan) Holdings Develop ment Offshore Oilfields Investment Holdings Co., Ltd. Corporation Oil Services Co.,Ltd Ltd Investment (Hong Co.,Ltd Kong) Limited (COOS)

36.52% 0.50% 26.10% 23.49% 7.83% 1.64% 3.92%

China Nanshan Development (Group) Incorporation

51.79%

Tradable 48.21% Shenzhen Chiwan Shenzhen Chiwan Petroleum Supply Base Shareholders Co. Ltd. (B Shares )

3. Shareholders with More Than 5% Shares of Nanshan Group Shareholder I China Merchants Holdings (International) Co Ltd Chairman: Fu Yuning Date of registration: May 28, 1991 Business scope: Investment and holdings, a company listed in HK Stock Exchange Registered Capital: HKD 500 million

Shareholder II Shenzhen Investment Holding Co Ltd Legal representative: Fan Mingchun Date of registration: Oct 13, 2004 Business scope: 1. provision of guarantees to state-owned enterprises in

Shenzhen; 2. management of equity interests in state-owned enterprises other than those directly supervised and managed by the State-owned Assets Supervision and Administration Commission of Shenzhen; 3. asset restructuring, transformation and capital operation of the relevant enterprises; 4. investment; 5. other activities authorized by the State-owned Assets Supervision and Administration Commission of Shenzhen Registered Capital: RMB 5.6 billion

Shareholder III Guangdong Guangye Assets Management Co., Ltd. Legal representative: Zeng Ruijun Date of registration: Feb 17, 2009 Business scope: Project investment, investment and consultation; business information consultation Registered Capital: RMB 80.057848 million

Shareholder IV China National Offshore Oil Corporation Legal representative: Wang Yilin Date of registration: Sep 7, 1993 Business scope: Cooperation with foreign partners for oil and gas exploitation in China's offshore areas Registered Capital: RMB 94.9 billion

4. Other Shareholders with More Than 10% Shares of the Company

Company Name: CHINA LOGISTICS HOLDING (12) PTE. LTD Date of registration: Nov 11, 2010 Place of registration: Singapore Registered Capital: 100 US Dollars Business scope: Industrial investment and equity investment

PART IV. Profiles of Directors, Supervisors and Senior Management I. General information Name Position Gender Age Office Term

Fan Zhaoping Chairman Male 57 2011.1—2013.5

Ming Zhi Mei Vice Chairman Male 39 2011.4-2013.5

Tian Junyan Director Male 50 2010.5—2013.5

Han Guimao Director Male 61 2010.5—2013.5

Kent Yang Director Male 43 2011.4-2013.5 Director/Deputy General Ren Yongping Male 59 2010.5—2013.5 Manager Lin Shaodong Independent Director Male 66 2010.5—2013.5

Zhang Limin Independent Director Male 56 2010.5—2013.5

Zhou Chengxin Independent Director Male 56 2010.5—2013.5

Cui Zhongfu Independent Director Male 50 2010.5—2013.5

Liu Fu Supervisor (Convenor) Male 66 2010.5—2013.5

Guo Songhua Supervisor Female 53 2010.5—2013.5

Chen Lei Supervisor Male 35 2011.4-2013.5

Li Hongwei Supervisor Male 44 2011.4-2013.5

Kong Peng Employee Supervisor Male 39 2010.5—2013.5

Sun Wujiang Employee Supervisor Male 44 2010.5—2013.5

Liu Wei Executive Deputy GM Male 46 2011.11—present

Wang Jianjiang Deputy GM&Chief Engineer Male 54 2011.2—present Deputy GM &Financial Yu Zhongxia Female 48 2011.11—present Controller Deputy GM &Board Fu Jialin Male 50 2011.11—present Secretary

Brief information (continued)

Whether receiving Shares Shares Total remuneration from Name held at the held at the Reason of Changes remuneration shareholder or year-begin year-end (RMB ,000) other relative companies Fan Zhaoping 11,600 11,600 - yes Ming Zhi Mei 0 0 - yes Tian Junyan 0 0 - yes Han Guimao 10,000 10,000 - yes Kent Yang 0 0 - yes Brought on no Ren Yongping 57,500 118,000 1,038 secondary market. Lin Shaodong 0 0 80 no Zhang Limin 0 0 80 no Zhou Chengxin 0 0 80 no Cui Zhongfu 0 0 80 no Liu Fu 0 0 - yes Guo Songhua 0 0 - yes Chen Lei 0 0 - yes Li Hongwei 0 0 - yes Kong Peng 0 0 331.9 no Sun Wujiang 0 0 301.4 no Brought on no Liu Wei 34,800 55,900 640.2 secondary market. Wang Jianjiang 0 0 373.2 no Brought on no Yu Zhongxia 25,482 65,182 703.9 secondary market. Brought on no Fu Jialin 34,100 71,100 693.4 secondary market. Total 173,482 331,782 - 4,402.0 -

Ⅱ. Changes of Directors, Supervisors and Senior Management

1. On 5 th January 2011, the First Extraordinary Shareholders’ Meeting in 2011 reviewed and approved to elect Mdm Sylvia Neo as supervisor of the Sixth Board of Supervisors.

Mdm Wang Fen resigned her position as supervisor of the Company for personal reason.

The details were published on Securities Times, Hong Kong Commercial Daily and

www.cninfo.com.cn on 6 th January 2011.

2. In January 2011, Mr. Han Guimao resigned his position as Chairman of the Company for age reason. The Fourth Tele-communication Meeting of the Sixth Board of Directors reviewed and approved the Proposal on Election of Chairman of the Sixth Board of Directors and elected Mr. Fan Zhaoping as Chairman of the Board. The Fourth Tele-communication Meeting of the Sixth Board of Directors reviewed and approved the Proposal on Appointment of Mr. Liu Wei as Deputy General Manager of the Company.

The details were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn on 7 th January 2011.

3. On 21 st February 2011, the Fifth Tele-communication Meeting of the Sixth Board of Directors reviewed and approved the Proposal on Appointment of Mr. Wang Jianjiang as Deputy GM and Chief Engineer of the Company.

The details were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn on 23 rd February 2011.

4. In March 2011, Mr. Fong Yue Kwong resigned his position as the Vice Chairman and director of the Company. Mr. Stephen Stanley resigned his position as director of the Company. Ms. Sylvia Neo resigned her position as supervisor of the Company.

On 25 th March 2011, the Third Session of the Sixth Board of Directors’ Meeting reviewed the Proposal on Nomination of Candidate of the Sixth Board of Directors and approved to nominate Mr. Ming Zhi Mei and Mr. Kent Yang as the candidates of the Sixth Board of Directors. 2010 Annual General Meeting reviewed and approved to elect Mr. Ming Zhi Mei and Mr. Kent Yang as directors of the Sixth Board of Directors.

On 25 th March 2011, the Third Session of the Sixth Board of Supervisors; Meeting reviewed the Proposal on Nomination of Candidate of the Sixth Board of Supervisors and approved to nominate Mr. Li Hongwei and Mr. Chen Lei as the candidates of the Sixth Board of Supervisors. 2010 Annual General Meeting reviewed and approved to elect Mr. Li Hongwei and Mr. Chen Lei as Supervisors of the Sixth Board of Supervisors.

The details were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn on 29 th March 2011 and 21 st April 2011.

5. On 22 nd April 2011, the Sixth Tele-communication Meeting of the Sixth Board of Directors approved to elect Mr. Ming Zhi Mei as Vice Chairman of the Sixth Board of Directors and member of Strategy and Development Committee of the Sixth Board of Directors, elect Mr. Cui Wei as member of Audit Committee of Sixth Board of

Directors and Mr. Fan Zhaoping did not hold this post. The meeting also approved to elect Mr. Fan Zhaoping as member of Nomination and Remuneration Committee of the Sixth Board of Directors and Mr. Han Guimao did not hold this post.

The details were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn on 26 th April 2011.

6. In November 2011, Mr. Cui Wei resigned his position as Director and General Manager of the Company and other positions in subsidiaries of the Company.

The details were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn on 17 th November 2011.

7. On 21 st November 2011, the Eighth Tele-communication of the Sixth Board of Directors reviewed and approved the Proposal on Appointment of Mr. Liu Wei as Executive General Manager of the Company, the Proposal on Appointment of Mdm. Yu Zhongxia as Deputy GM and Financial Controller of the Company and the Proposal on Appointment of Mr. Fu Jialin as Deputy GM and Board Secretary of the Company.

The details were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn on 23 rd November 2011.

8. Mr. Huang Donger retired his position as Deputy General Manager for age reason.

The details were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn on 7 th January 2012.

III. Profiles of Current Directors, Supervisors and Senior Management

Directors

Mr. Fan Zhaoping, bachelor degree in economics of China Finance College and master degree in economics in the Research Institute of the Ministry of Finance of China. Mr. Fan has successively held the posts as the financial manager and supervisor of the Company and he worked as the financial and investment manager and of China Nanshan Development (Group) Incorporation in 1991. At present, he is Senior Vice President of Nanshan Group and the Chairman of the Sixth Board of Directors of the Company.

Mr. Ming Zhi Mei, American, has bachelor degree in finance of Indiana University and MBA of Northwestern University and The Hong Kong University of Science and Technology. Since 1996, he occupied important positions in the departments of finance, manufacture, sales, market, strategic planning and integrated management of Owens Corning. He joined ProLogis in 2003 and was the President of China and Asia Emerging Market of ProLogis. At present he is the jointed founder and CEO of

Global Logistic Properties and the vice chairman of the Sixth Board of Directors of the Company.

Mr. Tian Junyan, master degree in management of Huazhong University of Science and Technology. He was once the associate professor of School of Management of Huazhong University of Science and Technology. Since 1996, he had successively served the posts of manager of research &development department and the Executive Senior Vice President of Nanshan Group. Now he is the President of Nanshan Group and director of the Sixth Board of Directors of the Company.

Mr.Han Guimao, graduated from Tsinghua University majored in Architecture. Mr. Han worked in the First Design Institute of China Railway Ministry in 1976. He was the Deputy GM of Shenzhen Branch of the Second Construction Bureau of China Railway Ministry in 1983 and Executive Deputy GM of Shenzhen Nanshan CBD Development Company in 1992. Since 1994, he was Assistant GM and Senior Vice President of China Nanshan Development (Group) Incorporation. At present, he is the deputy director of Nanshan Group and the director of the Sixth Board of Directors of the Company.

Mr. Kent Yang, American, has bachelor degree in architecture of University of California, Los Angeles and master degree in real estate development of Columbia University. He was the directing designer in Mark Lintott Design in 1993; professional consultant in Colliers Jardine in 1996; special assistant to Chairman and General Manager-China in Taiwan Fu Ji Manufacture Co., Ltd. since 1997; General Manager in Wuxi Huayang High Tech Investment Co.,. He was the General Manager of GLP Park Lingang in 2005 and First Vice President of Global Logistic Properties in 2007. At present, he is Director and GM of Global Logistic Properties and director of the Sixth Board of Directors of the Company.

Mr. Ren Yongping, graduated from China Finance College. Since 1982, he worked in Tax Bureau of Hebei Province and successively held the posts of Financial Manager in Chiwan Warf, GM of Chiwan Foodstuff Port and GM of Chiwan Warehouse Co. He was the director of the Fifth Board. At present, he is Deputy GM and director of the Sixth Board of Directors of the Company.

Mr. Lin Shaodong, an expert on offshore petroleum field. He had successively served as GM and Party Chief of Bohai Oil Field Company, Chief Economist of CNOOC, Chairman of CNOOC Investment & Holdings Ltd, China Offshore Oilfields Services Ltd. and AEGON-CNOOC Life Insurance Co., Ltd. He held the posts of Vice Chairman of Nanshan Group from Jul 2001 to Jul 2003 and Director of the third Board of Directors of the Company from Nov 2001 to September 2003. He retired in Dec 2005. At present, he is the independent director of the Company since May 2007. Meanwhile he is the special advisor of China Offshore Oilfields Services Ltd and

independent director of Huatai Insurance Group.

Mr. Zhang Limin, doctor degree of accounting. He is doctorial tutor and professor of Economic Management Institute of Beijing Jiaotong University and part-time professor of Management Institute of Sun Yat-Sen University. He is Vice President of China Auditing Society. At present, he is the independent director of the Company since May 2007. Meanwhile he is the independent director of Shenzhen Airport Co., Ltd., Shenzhen Expressway Co., Ltd and Tianjin Benefo Electric Co., Ltd.

Mr. Zhou Chengxin, doctor degree of law. He is the director of Shenzhen Legal Research Institute, member of the legal committee of the Forth Shenzhen Municipal People’s Congress and of the Consultation Committee for Shenzhen Municipal Committee of the Communist Party and government, arbitrator of China International Economic and Trade Arbitration Commission, and the local arbitration commissions of Shenzhen, Zhuhai, Shanghai and other branches, and part-time practicing lawyer at Guangdong Zhongan Law Firm. And he is the independent director of the Company since May 2007. Meanwhile he is the independent director of Eternal Asia Supply Chain Management Ltd. and China Aviation Sanxin Co., Ltd.

Mr Cui Zhongfu, currently is the Vice Chairman and Secretary General of China Federation of Logistics and Purchasing, adjunct professor of Nankai University and Zhongnan University of Economics and Law. He got a bachelor degree at Zhongnan University of Economics in 1983 and a master degree at Renmin University of China in 1986. He was a lecturer of the Management Cadre College of the Ministry of Mechanical Industry of China from 1983 to 1990. After 1990, He worked in several governmental departments as section chief, such as the Port Administration Office of the State Council, Bureau of Economic Operation of the State Economic and Trade Commission and the National Development and Reform Commission. And, he is the independent director of the Company since 2007.Meanwhile he is the independent director of Sinotrans Air Transportation Development Co Ltd.

Supervisors

Mr. Liu Fu, senior engineer and offshore petroleum expert, graduated from Beijing Petroleum Institute in 1970. He is the Chairman of CNOOC Investment & Holdings Ltd, and Vice Chairman of China Nanshan Development (Group) Incorporation. He is specialized in petroleum technology and safety management, successively held the posts of drilling platform manger, safety controller and GM in CNOOC Bohai Company and CNOOC. He was director of the fourth Board of Directors and is the Convener of Fifth Board of Supervisors. At present, he is the Convener of Sixth Board of Supervisors.

Mdm. Guo Songhua, senior economist and Registered Financial Planner and master

degree of University of Manchester. She jointed China Nanshan Development (Group) Incorporation in 1994 and currently is Financial Controller and GM of the Finance Department of Nanshan Group. She has taken the post of supervisor of the Company since May 2007.

Mr. Chen Lei, has bachelor degree in international finance of Shanghai Jiao Tong University and MBA of University of Southern California. He is CPA and CTA of China. He was the auditor of Ernst & Young in 1998 and finance manager of Shanghai New International Expo Center in 2001. At present, he is Senior Vice President of Global Logistic Properties and the supervisor of the Sixth Board of Supervisors of the Company.

Mr. Li Hongwei, born in March 1968, has doctor degree in system engineering of South China University of Technology. He successively held the posts of manager, board secretary, director and deputy GM of Chengdu Galaxy Power Co., Ltd. since 1989. He was the board secretary and deputy GM of Shenzhen Seg Dasheng Co., Ltd. since 2001. He was deputy GM of Business Management Department of China Nanshan Development (Group) Incorporation in 2006. Now he is GM of Business Management Department of China Nanshan Development (Group) Incorporation.

Mr. Kong Peng, MBA of Huazhong University of Science and Technology and CPA. Mr.Kong has served the posts as Assistant to Financial Manager of the Company, Financial Manager of Shenzhen Chiwan Logistics Ltd and Shanghai Baowan Logistics Ltd and Deputy GM and Executive Deputy GM of Offshore Oil Logistics Service Division of the Company. At present, he is manager of business management department and employee supervisor of the Sixth Board of Supervisors.

Mr. Sun Wujiang, Master of Tianjin University majored in port and engineering. Mr. Sun was Supervisory Engineer of Nanshan Engineering Ltd, Properties Manager Assistant and Deputy Manager. Since 2006, he is Deputy Director of General Engineering Office. At present, he is the employee supervisor of the Sixth Board of Supervisors.

Senior Management

Mr. Liu Wei, Executive Deputy GM, has Master degree of logistics and supply chain management of Chinese University of Hong Kong. Mr. Liu has served the posts as manager of the Business Development Department of the Company, the deputy GM of Shanghai Baowan, manager of Logistics Business and Department General Manager of Offshore Oil Logistics Service Division of the Company. He also was the supervisor of the Fifth Board of Supervisors. At present, he is the Executive Deputy GM of the Company since November 2011.

Mr. Wang Jianjiang, Deputy GM & Chief Engineer, has doctor degree of Hydraulic

Structure Engineering of Wuhan Water Resources and Electric University. He worked in Xinjiang Shihezi University (the original Shihezi Agricultural College) from Mar 1985 to Aug 1992. He studied in Wuhan Water Resources and Electric University from Sept 1992 to June 1995 and got doctor degree of Hydraulic Structure Engineering. Since 1996, he worked in planning department, office of general engineer and department of planning and construction management of China Nanshan Development (Group) Incorporation as engineer, assistant manager and department manager successively. He is Deputy GM & Chief Engineer of the Company since February 2011.

Mdm. Yu Zhongxia, Deputy GM & CFO, has bachelor of Shan’xi Finance and Economics College with the qualification of Acountant and senior international financial manager. Mdm. Yu has taught at Xi’an Road Management College. She joined the Company in 1992 and held the posts of Financial Manager Assistant, Financial Manager of CSE, System/Audit Manager Assistant, Deputy Financial Manager, Financial Manager, Assistant GM, Deputy CFO and CFO. She is Deputy GM & CFO of the Company since November 2011.

Mr. Fu Jialin, Deputy GM & Board Secretary, has graduated at Beijing University of Aeronautics and Astronautics in 1982 and has had master degree of University of Alberta in Canada in 1993. He had been the Assistant GM of development and research department of Nanshan Group, deputy manager of Chixiao Component Houses Co Ltd, and GM of Dongguan Nanshan Construction Material Co Ltd. He is Deputy GM & Board Secretary of the Company since November 2011.

IV. Directors and Supervisors held posts in Nanshan Group as follows: Name Post in the Company Post in Nanshan Group Term of the Post in Nanshan Group

Fan Zhaoping Chairman Senior Vice President Dec1998 till now

Tian Junyan Director President Jan 2011 till now

Han Guimao Director Vice Director Jan 2011 till now

Liu Fu Supervisory Convener Vice Chairman May 2003 till now

Guo Songhua Supervisor Financial Controller Sept 2007 till now

Li Hongwei Supervisor GM of Business Mar 2009 till now Management Department

Other Posts Name Company Position Fan Zhaoping Chiwan Wharf Holdings Co., Ltd. Director

Chiwan Container Terminal Co., Ltd. Director Shenzhen Southseas Grains Industries Limited Director CEO & Jointed Global Logistic Properties Founder Ming Zhi Mei Founder & Eastern Bell Venture Capital Chairman Nanshan Real Estate Developing Co., Ltd. Chairman & GM YAHGEE Modular House Co., Ltd Chairman Tian Junyan Chixiao Enterprise Co., Ltd. Chairman Shenzhen Chiwan Oriental Logistics Ltd Chairman Chiwan Wharf Holdings Co., Ltd. Director Shenzhen Chiwan Sembawang Engineering Co., Ltd. Vice Chairman Shanghai Matsuo Steel Structure Co., Ltd. Chairman Han Guimao Penglai Jutal Offshore Engineering Heavy Industries Director Co., Ltd. Kent Yang Global Logistic Properties Director & GM Shenzhen Chiwan Offshore Petroleum Equipment Director Liu Wei Repair & Manufacture Co., Ltd. Shenzhen Chiwan Sembawang Engineering Co., Ltd. Director Shenzhen Chiwan Sembawang Engineering Co., Ltd. Vice Chairman Liu Fu Penglai Jutal Offshore Engineering Heavy Industries Director Co., Ltd. Shenzhen Southsea Food Industries Limited Vice Chairman Shenzhen Southseas Grains Industries Limited Vice Chairman Chixiao Enterprise Co.,Ltd Director Shenzhen Haiqin Engineering. Management Co., Ltd. Director Guo Songhua Changsha Nanshan Real Estate Development Co., Ltd Director Chiwan Development (Hong Kong) Co., Ltd. Director Nanshan Development (Hong Kong) Co., Ltd. Director Chiwan Development (Singapore) Co., Ltd. Director Chiwan Wharf Holdings Co., Ltd. Supervisor Senior Vice Chen Lei Global Logistic Properties President

V. Annual Remuneration

Salary standard of the Company was decided and approved by the Board of Directors. Independent directors’ allowance is approved by General Shareholders’ Meeting.

Four Independent Directors, Director& Deputy GM(Ren Yongping), two employee Supervisors and Senior Management draw their salaries, bonuses and other welfares from the Company, while all the others draw the payment from their respective

shareholder party instead of the Company.

Ⅵ. Staffing

As at Dec 31, 2011, the Company had 461 employees in total, which includes 35 management personnel and 426 employees, in which there are 26 employees with master degree or above, 99 employees with bachelor degree, and 336 employees with lower degree. The Company need to pay remuneration and fees for 2 retirees.

PART V. Corporate Governance

Ⅰ.Corporate Governance

1. General information of Corporate Governance

(1) According to the Notice of Specifying Funds Flowing between Listed Company and Its Affiliated Party and the Notice of Conducting Self-examination on Establishment and Implementation of Long-term Mechanism of Preventing Funds Occupation, the Third Session of the Sixth Board of Directors reviewed and approved the Measures for Preventing Controlling Shareholders and Its Affiliated Parties from Funds Occupation on March 25, 2011.

(2) According to the requirements of CSRC Shenzhen Bureau, the Sixth Tele-communication Meeting of the Sixth Board of Directors has reviewed and approved the Implementation Scheme of Internal Control on April 22, 2011.

(3) To standard the activity of external guarantee, protect shareholders’ interests and avoid external guarantee risk, the Fifth Session of the Sixth Board of Directors reviewed and approved the Management System of External Guarantee on October 27, 2011.

2. The Results of Corporate Governance

The above-mentioned activities has improved and enhanced the Company’s corporate governance structure and management with better corporate governance system and further awareness of standardized operation.

Ⅱ. Non-normative Corporate Governance

According to the requirements of Ministry of Finance and Accounting Standards for Enterprises, the Company provided financial reports monthly to its controlling shareholders, Nanshan Group, for compiling consolidated financial statements. In line with requirements of the Supplementary Notice on Strengthened Supervision of Non-Standard Behaviors in Corporate Governance Including Providing Undisclosed

Information to Controlling Shareholders and Effective Controller, the Board of Directors reviewed and approved the Resolution on Regular Submission of Financial Statements to the Controlling Shareholders on the Second Tele-communication meeting of the Fifth Board of Directors. Nanshan Group and the Company signed the commitment letter respectively, and the Company provided the insiders’ list to CSRC Shenzhen Bureau for record as well.

The Company has submitted its monthly financial reports to Nanshan Group for 12 times in 2011, which is also submitted the Information Form for Undisclosed Information in terms of timeliness, accuracy and integrity to CSRC Shenzhen Bureau for record.

Ⅲ. Performance of Independent Directors

1. According to the requirements of CSRC and its Shenzhen Bureau, the Company appointed four specialists as independent directors, specialized in offshore oil, law, accounting and logistics. The Company established three special committees of the Board of Directors. The Independent Directors presided over the three special committees.

During the report period, in accordance with the requirements of Guidance Opinion for Listed Company to Establish Independent Directors System ， Articles of Association and Work System of Independent Directors and Independent Directors’ Work System for Compiling Annual Report, the Company’s independent directors exercised their duties, took part in the decision-making of the Company’s importance affairs, heard of the business and operating report from the management, reviewed the operating and investments on the spot, presented independent director’s opinion and fully executed independent directors’ duties.

2. Attendance of Board Meetings Non-attendance Meetings Attendance Attendance Attendance Absence in person for Name required to by in person by proxy rate two consecutive be present facsimile times Lin Shaodong 8 3 5 0 0 N/A Zhang Limin 8 3 5 0 0 N/A Zhou Chengxin 8 3 5 0 0 N/A Cui Zhongfu 8 3 5 0 0 N/A 3. In the report period, there are no objections issued by independent directors. The details of independent directors’ performance are published on www.cninfo.com.cn on 28th March 2012.

Ⅳ. The Company is absolutely independent in its business, personnel, assets, organization, finance, etc from its controlling shareholder.

1. The business of the Company is entirely independent from its controlling shareholder. The controlling shareholder and its subordinate units do not engage in the business that are the same or similar to the business of the Company.

2. The Company has basically separated its staff from its controlling shareholder. No senior management, department managers, financial manager and the secretary to Board of Directors takes any position in the controlling shareholder.

3. The assets invested by the controlling shareholder are independent and integrated with clear ownership. At the report period, there is no assets possession, allocation and management interference of the Company.

4. The Company’s Board of Directors, Board of Supervisors and other internal organizations operate independently. There is no affiliated relation between the controlling shareholder and its functional departments as well as the Company and the Company’s functional departments. The controlling shareholder and its subordinate organization don’t give any business plan or directions to intervene in the independence of the Company and its subordinate’s operation and management.

5. The Company establishes finance system and accounting system according to relative laws and regulations. The controlling shareholder does not intervene in the Company’s finance and accounting activities.

Ⅴ. Examination and Incentive Mechanism for Senior Management.

In the report period, the salaries of senior management were decided by their work performance, job description, personal ability, the Company’s profit, etc.

In the report period, there are no equity incentives for senior management.

PART VI. Internal Control

I. Summary of Internal Control Construction

According to the requirements of Ministry of Finance and CSRC Shenzhen Bureau, the Sixth Tele-communication Meeting of the Sixth Board of Directors has reviewed and approved the Implementation Scheme of Internal Control on April 22, 2011. The Company finished the work of construction of internal control, self-assessment and audit work of internal control, which further perfected and improved its internal control system.

The Company appointed Deloitte to provide consultation service for its internal control system. Deloitte mainly focused on the risk identification, evaluation, internal control test, etc and offered suggestions for improvement. The Company conducted rectification in accordance with these suggestions, which further improved its internal control system.

According to relative requirements, the Company compiled self-assessment report of internal control for year 2011.

The Company appointed Ernst & Young to audit its internal control system.

II. The Board’s Declaration of Internal Control

Establishing and effectively implementing internal control is the responsibility for Board of Directors. The Board of Supervisors would supervise the activity of Board of Directors. The senior management is in charge of the daily operation of internal control. The Company’s goals for internal control are guaranteeing the Company’s legitimate business, asset safety, integrity and authenticity of financial report, improving its operation effectiveness and promoting its strategic development. Due to the limitations of internal control, this could only provide reasonable guarantee for above-mentioned goals.

III. The Defects of Internal Control and Their Identification

According to related rules and regulations, the Board of Directors compiled Standards of Internal Control Defects, which identified major defects, important defects and ordinary defects.

There are no major defects of internal control in the report period.

By the end of year 2011, the Company has established sound internal control system, which could satisfy the demands of management control.

Please find the details in self-assessment report of internal control for year 2011 on www.cninfo.com.cn on March 28, 2012.

IV. The Establishment and Implementation of the Obligation System of Major Errors in Annual Report Disclosure

The Ninth Session of the Fifth Board of Directors reviewed and approved the Obligation System of Major Errors in Annual Report Disclosure on April 20, 2010. The system stipulated the identification and obligation for major errors in annual report disclosure. The Company strictly implemented the system afterwards.

There are no major accounting errors or omitted information in the report period.

PART VII. Review of Shareholders’ General Meetings

I. On 5th January 2011, the Company had convened the First Extraordinary Shareholders Meeting in 2011 on the 16 th floor of Chiwan Petroleum Building in Shenzhen. The meeting reviewed and approved the following proposals:

1. The Proposal on Nomination of Candidate of the Sixth Board of Supervisors

2. The Proposal on Authorizing the Management to Arrange Financing Activities within the Quota of RMB 2 Billion or Equivalent Foreign Currencies

3. The Proposal on Issuance of Medium Term Notes

4. The Proposal on Connected Transaction of Nanshan Group Receiving Interest of Debt Investment from Joint Invested Baowan Logistics Companies

5. The Proposal on Connected Transaction of Nanshan Group and the Company Jointly Making Additional Investment as Registration Capital in Joint Invested Baowan Logistics Companies

The details were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn on 6 th January 2011.

II. On 20 th April 2011, the Company convened 2010 Annual General Meeting on the 16 th floor of Chiwan Petroleum Building, Shenzhen. The meeting reviewed and approved the following proposals:

1. Report of Board of Directors for Year 2010

2. Report of Board of Supervisors for Year 2010

3. The Proposal on Nomination of Candidate of the Sixth Board of Directors

4. The Proposal on Nomination of Candidate of the Sixth Board of Supervisors

5. Financial Report for Year 2010

6. Dividend Distribution Scheme for Year 2010

7. The Proposal on Appointment of Accounting Firm for Year 2011

8. The Proposal on Adjustment for Independent Directors’ Allowance

9. The Proposal on Connected Transactions of Wall Panels for Mingjiang (Shanghai) Baowan

The details were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn on 21 st April 2011.

III. On 11st July 2011, the Company had convened the Second Extraordinary Shareholders Meeting in 2011 on the 16 th floor of Chiwan Petroleum Building in Shenzhen. The meeting reviewed and approved the following proposals:

1. The Proposal on Equity Integration for Baowan Logistics

2. The Proposal on Tianjin Lingang Baowan Logistics Park

The details were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn on 12nd July 2011.

IV. On 15 th November 2011, the Company had convened the Third Extraordinary Shareholders Meeting in 2011 on the 16 th floor of Chiwan Petroleum Building in Shenzhen. The meeting reviewed and approved the following proposals:

1. The Proposal on Nantong Baowan Logistics Park

2. The Proposal on Chengdu Ziyang Baowan Logistics Park

3. The Proposal on Authorizing the Management to Arrange Financing Activities within the Quota of RMB 2.5 Billion or Equivalent Foreign Currencies

4. The Proposal on Connected Transaction of Acquiring Loans from China Nanshan Development (Group) Incorporation

5. The Proposal on Appointment of Accounting Firm for Internal Control for Year 2011

The details were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn on 16 th November 2011.

PART VIII. The Report of Board of Directors

I. Business Review

1. Overall Business Performance

In 2011, the Company achieved RMB 461 million of revenue, a year-on-year increase of 15.45%; the net profit was RMB 125 million with a year-on-year decrease of 6%.

The decrease of net profit was caused by CSE’s project delay and increase of loans and interest rate, which led to the decrease of investment income and increase of finance expenses.

2. Review of Business Segments

Offshore Oil Logistic Services

Under the circumstance of significant increase of rent and labor cost, it achieved operating revenue of RMB 264 million and net profit of RMB 117 million in 2011.

Logistics Services

1) Shanghai Baowan: In 2011, it achieved revenue of RMB 71.45 million and net profit of RMB 37.38 million. The occupancy rate is 100% by the end of 2011.

2) Kunshan Baowan: It achieved revenue of RMB 39.08 million and net profit of RMB 14.49 million. The occupancy rate is 100% by the end of 2011.

3) Tianjin Baowan: It achieved revenue of RMB 44.19 million and net profit of RMB 10.64 million. The occupancy rate is 89% by the end of 2011.

4) Shenzhen Baowan: It achieved revenue of RMB 17.53 million and net profit of RMB 1.37 million. The occupancy rate is 73% by the end of 2011.

5) Guangzhou Baowan: In 2011, the operated Plot B achieved revenue of RMB 7.04 million and net profit of RMB 1.21 million. The occupancy rate is 100% by the end of 2011.

6) Xindu Baowan: In 2011, it achieved revenue of RMB 13.13 million and net profit of RMB 1.58 million. The occupancy rate is 92.6% by the end of 2011.

7) Longquan Baowan: There are 4 warehouses, 1 office building and 1 dormitory building (total area: 57,000 ㎡) putting into operation in June 2011. In 2011, it achieved revenue of RMB 5.56 million and net profit of RMB -1.6 million. The occupancy rate is 99.2% by the end of 2011.

Note: Please find the details of above-mentioned subsidiaries (registered capital, business scope, etc.) in the notes to the financial statements. The net profit of above-mentioned subsidiaries is exclusive of interest expense.

Investment Companies

CSE: The Company holds 32% equity of CSE. In 2011, CSE achieved profit of RMB 61.18 million. CSE holds 70% equity of Penglai Jutal. Penglai Jutal’s operation revenue and net profit were RMB 0.58 billion and RMB 19.66 million. Due to Penglai Jutal’s project delay, the investment income for the Company decreased by RMB 11.24 million compared with the same period of last year.

CPEC: The Company holds 20% equity of CPEC. It achieved revenue of RMB 30.14 million and net profit of RMB -3.71 million in 2011. The Company’s investment income was RMB -0.74 million.

3. Project Construction Development

1） The construction of 18# warehouse of Shanghai Baowan (area: 5,000 ㎡) was finished and put it into operation in May 2011.

2) 4 warehouses, 1 office building and 1 dormitory building (total area: 57,000 ㎡) of Longquan Baowan were put into operation in June 2011. There will be 3 warehouses (area: 32,000 ㎡) putting into operation in March 2012. The rest of warehouses (area: 47,000 ㎡) plans to be finished in December 2013.

3) Langfang Baowan (area: 87,000 ㎡) began to construct in October 2010 and passed fire control acceptance check till now. It planned to finish construction and put into operation in May 2012.

4) Six warehouses (area:62,000 ㎡) of Mingjing Shanghai project planned to be finished construction in April 2012. The other six warehouses (area:51,000 ㎡) planned to be finished in September 2012.

5) The design scheme of Guangzhou Plot A (area:133,000 ㎡) had been finished in December 2011. The other related work was also in progress.

6) 12# warehouse of Kunshan Baowan (area: 8,000 ㎡) had finished construction and was put into operation in February 2012.

7) Chiwan Q1 warehouse (area: 3,000 ㎡) had finished construction in April 2011.

8） Nanjing Baowan will started project application and construction work after getting land quota.

4. Review of Core Business

1) Classification of Operating Revenue of Core Business Unit: RMB million Sectors of Core Business Increase or Increase or Increase or Decrease of Decrease of Decrease of Sectors or Operating Operating Gross Profit Operating Op erating Cost Gross Profit Products Revenue Cost Rate Revenue over the over the Same Rate over the Same Period of Period of Last Same Period of Last Year Year Last Year Warehouse and 295.52 108.96 63.13% 18.31% 17.21% 0.35%

Storage Loading and Unloading, Harbor 136.95 44.52 67.49% 7.75% 33.51% -6.28% Management Office Leasing 23.63 6.47 72.60% 11.01% 15.10% -0.97% 2) Classification of Operating Revenue of Region Unit: RMB million Increase of Core Business Revenue over Region Revenue of Core Business the Same Period of Last Year （％） South China 282.70 7.69 East China 110.52 15.41 North China 44.19 59.26 Southwest China 18.69 53.94

5. The Analysis of Financial Situation

(1) Analysis of Financial Situation

Unit: RMB million Items Dec 31, 2011 Dec 31, 2010 Change(%) Reasons Cash and cash Receiving loans from Nanshan 402.12 186.59 115.51 equivalents Group. Brought financing products of RMB Other current 369.62 - - 369.62 million with short-term spare assets capital. The projects of Langfang, Shanghai Construction in Mingjiang, Chengdu Longquan, 12# 341.48 128.24 166.27 progress of Kunshan Baowan and wharf in Chiwan Base began to construct. The coverable deficit of subsidiaries Deferred which are in construction and initial income tax 16.75 11.63 44.06 operation included to deferred assets income tax assets. Other The other non-current assets which non-current 76.22 124.39 -38.73 got land certificate transferred to assets intangible assets. Increase of long-term loans and Interest payable 8.69 1.68 416.53 interest rate. Long-term loans due in 1 year is Long-term 359.90 910 -60.45 reclassified as non-current liability loans due in 1 year. Long-term Paying back loans from Nanshan 140.13 209.39 -33.08 accounts Group.

payable Other Receiving RMB 700 million loans non-current 723.11 24.46 2855.87 from Nanshan Group. liabilities Making additional investment for Minority 248.40 95.13 161.13 Tianjin Baowan, etc and establishing interests Blogis Holding. (2) Analysis of Assets and Liabilities

Unit: RMB million December 31, 2011 December 31, 2010 Changes of Assets Items Assets Ratio Assets Amount Amount Ratio (%) (%) Ratio (%) Cash and cash 402.12 11 186.59 7 4 equivalents Other current assets 369.62 10 0.00 0 10 Long-term equity 325.14 9 350.68 13 -4 investment Investment property 707.48 19 656.72 23 -4 Fixed assets 437.85 12 406.99 15 -3 Construction in 341.48 9 128.24 5 4 progress Intangible assets 921.54 25 886.01 32 -7 Short-term loans 210.00 6 258.53 9 -3 Other payable 184.46 5 202.67 7 -2 Non-current liability 549.82 15 0.00 0 15 due in 1 year Long-term loans 359.90 10 910.00 32 -22 Long-term accounts 140.13 4 209.39 7 -3 payable Other non-current 723.11 20 24.46 1 19 liabilities (3) Analysis of Changes in Income Statement

Unit: RMB million December 31, December 31, Change Items Reasons 2011 2010 (%) New warehouses put into operation, which led to the Operating revenue 461.92 400.10 15.45 increase of rent area. The occupancy rate increased. The depreciation and Operating costs 164.16 133.45 23.01 amortization of new warehouses

led to the increase of operating costs. The rate of city planning tax in Business tax and 41.98 33.15 26.62 Shenzhen increased from 1% to surcharges 7%. Financial Increase of loans and interest 71.88 54.53 31.82 expenses rate. Investment Penglai Jutal project delay 22.46 34.65 -35.18 income caused the decrease of profit. (4) The Analysis of Changes in Cash Flow Statmemt

Unit: RMB million December December Change Items Change Reason 31, 2011 31, 2010 (%) Net cash flow from 267.65 255.12 12.53 4.91 Revenue increase. operating activities Net cash flow from Increase of -643.10 -264.11 -378.99 -143.50 investment activities investment. Net cash flow from 590.32 -29.92 620.23 -2,073.26 Increase of loans. financing activities II. Future Development of the Company

1. Development Trend and Competition in Logistics Industry

In 2012, the development of industrialization and urbanization will bring great opportunity for the development of logistics parks. The economic development of second and third tier cities will increase the demand for modern logistics facilities. The logistics demand in e-commerce, retails and express delivery will promote the development of extended services in logistics. Under the circumstance of increase of land price, materials price and labor cost, financial strength will become the core competitiveness.

The operation of CNOOC’s Huizhou Base will have an impact on our offshore oil logistics services. The Company shall face the challenges and continuously improve its core competitiveness.

2. Business Plan in 2012

The work plan for Baowan Logistics is as follows: developing new projects in Yangtze River Delta, Pearl River Delta, Bohai Rim and other hotspots; strengthening multi-project investment management; strengthening the strategic cooperation with key clients, creating new logisitics business modes and actively trying out these new business modes; reasearching business strategies and improving the profitability of logistics parks, etc.

The work plan for offshore oil logistics services is as follows: fully taking the advantages of the deep water resources and achieving the strategic transformation of a sole shallow-water functional base to an integrated deep-water base.

The Company shall continue to focus on the operation management of CSE and support its development.

3. The Fund Demand and Use Plan in 2012 To achieve its future development and strategy, the Company had issued a five-year medium term notes with the total amount of RMB 400 million. Besides this, the Company shall explore other financing methods to meet the fund demand of future development.

III. Investment in the report period

1. Funds Raised

There are no funds raised in the report period. The Company raised USD 20.50 million at its IPO in 1995. The funds had been used for the projects approved by AGM. The constructions had been finished at the end of 1996 and disclosed according to relative regulations.

2. The Use of Non Raised Funds

Unit: RMB million Project Development at the end Project Name Project Benefits Amount of 2011 Plot B had finished In 2011, the operated Plot B construction and put into Guangzhou Baowan achieved revenue of RMB 7.04 217 operation. Other related Logistics Park million and net profit of RMB work of Plot A are in 1.21 million. progress. Four warehouses had finished construction and In 2011, it achieved operating Chengdu Longquan 300 put into operation. Other revenue of RMB 5.56 million and Baowan Logistics Park warehouses were under net profit of RMB -1.6 million. construction. Langfang Baobao 248 Under construction. N/A Logistics Park Mingjiang Logistics 353 Under construction. N/A Park Total 1,118 - - IV. Board of Directors’ Explanations on the Reasons and Their Impacts for the Changes of Accounting Policies and Estimation or Corrections of Accounting Errors.

There is no change of accounting policies and estimation or correction of accounting errors occurred at the report period.

V. Routine Work of Board of Directors 1. Board Meetings and Resolutions

The Board had held 8 meetings in the report period.

1) The Fourth Tele-communication Meeting of the Sixth Board of Directors was held on 6th January 2011 by facsimile. The announcement was published on Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn on 7th January 2011.

2) The Fifth Tele-communication Meeting of the Sixth Board of Directors was held on 21 st February 2011 by facsimile. The announcement was published on Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn on 23 rd February 2011.

3) The Third Session of the Sixth Board of Directors’ Meeting was held on site on 25 th March 2011. The announcement was published on Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn on 29 th March 2011.

4) The Sixth Tele-communication Meeting of the Sixth Board of Directors was held on 22 nd April 2011 by facsimile. The announcement was published on Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn on 26 th April 2011.

5) The Fourth Session of the Sixth Board of Directors’ Meeting was held on site on 13 rd June 2011. The announcement was published on Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn on 23 rd June 2011.

6) The Seventh Tele-communication Meeting of the Sixth Board of Directors was held on 18 th August 2011 by facsimile. The announcement was published on Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn on 22 nd August 2011.

7) The Fifth Session of the Sixth Board of Directors’ Meeting was held on site on 27 th October 2011. The announcement was published on Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn on 31st October 2011.

8) The Eighth Tele-communication Meeting of the Sixth Board of Directors was held on 21st November 2011 by facsimile. The announcement was published on Securities Times, Hong Kong Commercial Daily and http://www.cninfo.com.cn on 23 rd November 2011.

2. Implementation of the Resolutions of General Shareholders’ Meeting In the report period, the Board of Directors implemented all the resolutions approved by general shareholders’ meeting, and actively engaged in operation and investments

of the Company.

2010 Annual General Meeting has reviewed and approved the proposal on dividend distribution scheme for year 2010, RMB 1.28 in cash for every 10 shares (tax included). The Company published the Dividends Distribution Scheme for Year 2010 on 3 rd June 2011 and finished the work of dividends distribution.

3. Audit Committee

1) Reviewing the financial report and presenting written opinion.

According to relevant regulations, the Audit Committee reviewed the financial report and presented written opinion: the Company strictly implemented Articles of Association and other regulations and ensured the objectivity and authenticity of financial report.

After the auditor submitted the draft of audit report, the committee reviewed the finance report and presented written opinion. The compiling basis, principles and method of financial report followed the relative regulations and fairly reflected the financial status and operation results of the Company in Year 2011.

2) Maintaining regular communication with auditors and following progress of auditing closely.

In the audit period, the committee maintained regular communication with financial department, followed the progress of auditing closely and held a meeting discussed with the auditors about auditing plan, scope, focus points and the incurred problems and resolutions.

3) Summarizing the auditor’s work

The committee summarized the work of auditor and thought that they completed the annual audit work in plan.

4. Nomination and Remuneration Committee

1）On 17 th February 2011, the Committee convened a meeting and nominated Mr. Wang Jianjiang as Deputy GM and Chief Engineer of the Company.

2）On 24 th March 2011, the Committee convened a meeting and nominated Mr. Ming Zhi Mei and Mr. Kent Yang as candidate of the Sixth Board of Directors to attend the election on General Shareholder’s Meeting.

3）On 24 th March 2011, the Committee convened a meeting and approved to adjust independent directors’ allowance to RMB 80,000 per year.

4）On 24 th March 2011, the Committee convened a meeting and approved senior management salaries.

5）On 15 th November 2011, the Committee convened a meeting and nominated Mr. Liu Wei as Executive Deputy GM, Mdm. Yu Zhongxia as Deputy GM and Financial Controller and Mr. Fu Jialin as Deputy GM and Board Secretary of the Company.

VI. Dividend Distribution Scheme for Year 2011

In accordance with the independent audit by RSM China Certified Public Accountants, the consolidated net profit is RMB 125,229,801.47, and the Parent company’s net profit is RMB 183,297,188.06 in 2011. Adhere to the Articles of Corporation as well as relevant rules and regulations of PRC, and based on the parent company’s net profit, the dividends distribution would be proposed by the Board of Directors as follows: 1. Profit Distribution Unit: RMB The parent company Ratio of parent Ratio of company's net consolidated net profit (%) profit (%) Retained Earnings B/F 286,288,175.82 Net profit for the year 2011 183,297,188.06 Less: Statutory surplus public 18,329,718.81 10 14.64 reserve Discretionary public reserve 9,164,859.40 5 7.32 Dividends (tax included) 36,659,437.61 20 29.27 The balance 119,143,172.24 65 95.14 Retained earnings 405,431,348.06

2. The cash dividend The Company proposes to distribute dividend of RMB1.58 (tax included) in cash for every10 shares with the total amount of RMB 36,434,800 for 2011. The conversion will be based on the closing rate between HK$ and RMB announced by the People’s Bank of China on the first working day after the proposal is approved by AGM.

The above-mentioned dividend scheme shall be implemented after the approval of 2011 Annual General Meeting.

3. Cash dividend distributions for the last three years

Unit: RMB Ratio of the Net Profit Cash Dividends Tax Net Profit Attributed Year Attributed to Distributed Profit Included to Shareholders Shareholders 2010 29,516,800.00 142,229,324.77 20.75% 378,571,522.81 2009 59,725,400.00 118,178,931.42 50.54% 316,836,309.31

2008 39,663,200.00 68,739,276.90 57.70% 254,284,395.94 The ratio of cash dividends in the latest three years 117.49 to the average net profit （%） VII. Establishment and Implementation of Registration System of Undisclosed Information Insiders

The Company established registration system of undisclosed information insiders in accordance with relative regulations.

In the report period, the Company strictly implemented the registration system, registered the insiders timely. There are no illegal behaviors of buying and selling shares for insiders.

There are no illegal behaviors of buying and selling shares by directors, supervisors and senior management of the Company.

Part IX. The Report of Board of Supervisors for Year 2011

I. Convening meetings of Board of Supervisors

The Supervisors Committee has convened four meetings in the report period.

1) The Third Session of the Sixth Board of Supervisors’ Meeting was held on site on 25 th March 2011, which had reviewed and approved the Report of Board of Supervisors for Year 2010, the Proposal on Nomination of Candidate of the Sixth Board of Supervisors, 2010 Annual Report and Its Abstract, Financial Report for Year 2010, the Self-assessment Report of Internal Control for Year 2010.

The details were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn on 29 th March 2011.

2) The Second Tele-communication Meeting of the Sixth Board of Supervisors was held by facsimile on 22 nd April 2011, which had reviewed and approved First Quarterly Report for Year 2011.

The details were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn on 26 th April 2011.

3) The Third Tele-communication Meeting of the Sixth Board of Supervisors was held by facsimile on 18 th August 2011, which had reviewed and approved Interim Report for Year 2011.

The details were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn on 22 nd August 2011.

4) The Fourth Session of the Sixth Board of Supervisors’ Meeting was held on site on 27 th October 2011, which had reviewed and approved Third Quarterly Report for Year 2011.

The details were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn on 31 st October 2011.

II. In the report period, the Board of Supervisors has formed opinions for business operation as follows:

1) The Board of Supervisors had supervised the Company’s management and business operation and ensured that these activities were legitimate. The Company established internal control system. The meeting also confirmed that neither the directors nor senior management had acted in contravention of laws, regulations, Articles of Association or harmed the interests of the Company.

2) The Board of Supervisors carefully reviewed the financial report and confirmed that the company was in good financial situation. The meeting further confirmed that the audit report prepared by RSM China Certified Public Accountants gave a true and fair presentation of the Company’s financial performance by offering clear opinion in the audit report for year 2011.

3) In the report period, the Company did not raise capital.

4) The Board of Supervisors had supervised the Company’s acquisition, sale of assets, and ensured that these activities were legitimate. There is no infringement on interests of the Company and investors.

5) All the affiliated transactions in 2011 were conducted in market principle.There is no infringement on interests of the Company and investors.

6) The Board of Supervisors has published its opinions on self-assessment report as follows: The internal control system of the Company has been proved to be feasible and effective in business operation. The Company’s self-assessment fit its realities. Internal control is a long-term systematic project. As supervisors, we will strictly follow the requirements of the Basic Internal Control Norms for Enterprises and the Guidance on Internal Control of Listed Companies and keep improving its internal control system so that it can play a positive role in supervising and promoting the Company’s healthy development to ensure the interests of shareholders.

7) In the report period, the Board of Supervisors had reviewed the establishment and implementation of registration system of undisclosed information insiders and believed: The Company had established the registration system of undisclosed information insiders and strictly implemented it, which protected the investors’ interests.

Part X. Significant Events

I. There is no significant lawsuit or arbitration in the report period.

II. There is no occupation of non-operation funds by controlling shareholders and its related parties in the report period.

III. There is no bankruptcy, reconstruction or relevant issues in the report period.

IV. The Company did not hold any share of listed companies at the report period.

V. Assets Acquisition, Sale and Merger

1. In the report period, there is no merger. Please find the details of assets acquisition and sales in Part X. VII.4

2. Acquired Assets by Connected Transaction in Recent Three Years. The Eighth Session of the Fifth Board of Directors’ Meeting and the First Extraordinary Shareholders’ Meeting had reviewed and approved the Proposal on 60% Equity Acquisition of Mingjiang(Shanghai ）International Logistics Co., Ltd. from China Nanshan Development (Group) Incorporation. The details were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn on 26 th January 2010. At the end of report period, Mingjiang(Shanghai) Baowan Logistics Park was in construction.

VI. There is no plan of stock rights incentive in the report period.

VII. Significant Connected Transactions

1. Connected Transactions Involving Daily Operation for 2011

Unit: RMB million Providing Services Receiving Services Related party amount Ratio amount Ratio China Nanshan Development (Group) 4.29 18.16% 9.76 47.30% Incorporation Shenzhen Chiwan Wharf 1.71 7.24% 10.87 52.70% Holdings Ltd Total 6.00 25.40% 20.63 100% To the needs of daily operation, Nanshan Group (controlling shareholder) and its subsidiaries and Chiwan Wharf had rented the Company’s owned building as their

offices. Meanwhile, the Company and its subsidiaries had rented lands and warehouses from Nanshan Group and Chiwan Wharf. Both office and land renting will continuously happen in the future.

2. Credits and Debts with Related Parties

Unit: RMB million Providing Funds to Receiving Funds from Related Related Party Related Party Party Amount Balance Amount Balance Nanshan Group (construction funds 7.32 140.80 and interests for logistics parks) Nanshan Group (Long-term loans and 706.76 706.76 interests) Total 714.08 847.56 3. In the report period, there is no occupation of non-operation funds by controlling shareholders and its related parties. RSM China Certified Public Accountants has presented special explanation on occupying funds by controlling shareholders and its related parties. (The details are on the website of http://www.cninfo.com.cn )

4. Other Significant Connected Transactions

1) Connected Transactions of Wall Panels for Mingjiang(Shanghai ) International Logistics Co., Ltd.

For carrying through the business development strategy and ensuring the construction of Mingjiang(Shanghai) Logistics Park, the Third Session of the Sixth Board of Directors’ Meeting and 2010 Annual General Meeting had reviewed and approved to purchase wall panels from Shenzhen Chixiao Building Technology Co., Ltd with the amount of RMB 19.33 million.

The details were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn on 29 th March 2011 and 21 st April 2011.

2) Connected Transaction of Equity Integration of Baowan Logistics

The Fourth Session of the Sixth Board of Directors’ Meeting and the Second Extraordinary General Shareholders’ Meeting had reviewed and approved the Proposal on Equity Integration of Baowan Logistics.

Nanshan Group and the Company planned to jointly establish Blogis Logistics Holding Co., Ltd. (hereinafter referred to as “Blogis Holding”) The registered capital of Blogis Logistics is RMB 500 million, in which the Company contributes RMB 386.8 million, 77.36% of registered capital, and Nanshan Group contributes RMB

113.2 million, 22.64% of registered capital. Cash investment is 30% of registered capital and equity investment is 70% of registered capital. Nanshan Group and the Company will transfer their owned or jointly-owned equity of Shanghai Baowan , Kunshan Baowan, Guangzhou Baowan, Nanjing Baowan, Tianjin Baowan, Langfang Baowan, Chengdu Xindu Baowan, Chengdu Longquan Baowan and Mingjiang(Shanghai) Logistics (hereinafter referred to as “the subsidiaries” ) to Blogis Holding.

This equity integration will be evaluated on the bases of audit results on 31 st March 2011. According to the evaluation results, the equity value of above-mentioned subsidiaries owned by the Company is RMB 877,125,868.65 and the equity value of above-mentioned subsidiaries owned by Nanshan Group is RMB 256,693,623.55. Therefore the equity ratio of Blogis Holding owned by Nanshan Group and the Company are 22.64% and 77.36% respectively.

Under the circumstance of difficult financing, this transaction will be propitious to acquire ample capital, promote the development of Baowan logistics parks and enhance the Company’s profitability. The Company will use its own funds and bank loans to pay for this transaction. There is no payment risk for Nanshan Group because of its good financial condition.

At the end of report period, Blogis Holding’s industrial and commercial registration procedure has finished.

The details were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn on 23 rd June, 12nd July, 4 th August and 30 th December, 2011.

3) Connected Transaction of Acquiring Loans from China Nanshan Development (Group) Incorporation

For the requirements of development funds, the Fifth Session of the Sixth Board of Directors and the Third Extraordinary Shareholders’ Meeting had reviewed and approved to acquire loans from Nanshan Group with the total amount of RMB 700 million. The interests rate is 6.815% and total interest expense is RMB 238.5 million.

The details were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn on 31 st October 2011 and 16 th November 2011.

VIII. Important Contracts and Their Implementation 1. The Company did not entrust, contract or lease other company’s assets or was entrusted, contracted or leased with its own assets at the report period.

2. There was no illegal guarantee event happened in the report period.

By the end of the report period, there was no other guarantee event happened except

loan guarantee for Kunshan Baowan International Logistics Co., Ltd.

Unit: RMB million Warrantee Amount Term Any Method warranty Kunshan 70 2010.7.07-2011.3.09 Yes Joint and several Baowan liability By the end of the report period, Kunshan Baowan has repaid the loans on schedule.

3. In the report period, the Company’s trust financing is as follows:

The Company used its short-term idle fund to purchase breakeven financial products, in which there are RMB 300 million financial product with the expected interest rate of 6.3% within 3 months from Bank of China and RMB 69.20 million financial product with the expected interest rate of 6.5% within 90 days from China Merchants Bank.

4. Other Important Contracts

1) To meet the logistics demand in Bo-hai Rim and perfect the network of Blogis logistics, the Fourth Session of the Sixth Board of Directors’ Meeting and the Second Extraordinary Shareholders’ Meeting had reviewed and approved to construct Tianjin Lingang Baowan Logistics Park with the area of 360 Mu and initial investment of RMB 430 million. Blogis Holding planned to register Tianjin Lingang Baowan International Logistics Co., Ltd with the registered capital of RMB 150 million to operate Tianjin Lingang Baowan Logistics Park.

The details were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn on 23 rd June 2011 and 12nd July 2011.

2) To meet the logistics demand in Yangtze River Delta Area, perfect the network of Blogis logistics and strengthen the advantage of Blogis logistics, the Fifth Session of the Sixth Board of Directors’ Meeting and the Third Extraordinary Shareholders’ Meeting had reviewed and approved to construct Nantong Baowan Logistics Park with the area of 366 Mu and investment of RMB 408 million. Blogis Holding planned to register Nantong Baowan International Logistics Co., Ltd with the registered capital of RMB 100 million to operate Nantong Baowan Logistics Park.

The details were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn on 31 st October 2011 and 16 th November 2011.

3) To meet the logistics demand in Chengdu area, perfect the network of Blogis logistics and strengthen the advantage of Blogis logistics, the Fifth Session of the Sixth Board of Directors’ Meeting and the Third Extraordinary Shareholders’ Meeting

had reviewed and approved to construct Chengdu Ziyang Baowan Logistics Park with the area of 175 Mu and investment of RMB 199 million. Blogis Holding planned to register Chengdu Ziyang Baowan International Logistics Co., Ltd with the registered capital of RMB 50 million to operate Chengdu Ziyang Baowan Logistics Park.

The details were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn on 31 st October 2011 and 16 th November 2011.

IX. There was no commitment by controlling shareholders in the report period.

X. The Appointment of Certified Public Accountant

With the approval of 2010 Annual General Meeting, the Company continuously appointed RSM China Certified Public Accountants as auditor of the Company for 2011 with the remuneration of RMB 775,000.This auditor has consecutively served the Company for 4 years.

With the approval of the Third Extraordinary Shareholders’ Meeting, the Company appointed Ernest & Young as internal control auditor of the Company for 2011 with the remuneration of RMB 480,000.

XI. Punishment and Rectification

In the report period, there are no directors, supervisor and senior management receiving any kind of punishment from supervisory organizations.

XII. Other Issues

1. Index for Published Announcements Date Disclosure Items Disclosed Media Resolutions of the First Extraordinary Securities Times, Hong Kong 6th January, 2011 Commercial Daily and Shareholders’ Meeting in 2011 http://www.cninfo.com.cn Announcement of Supervisor’s Securities Times, Hong Kong 6th January, 2011 Commercial Daily and Resignation http://www.cninfo.com.cn Resolutions of the Fourth Securities Times, Hong Kong 7th January, 2011 Tele-communication Meeting of the Commercial Daily and Sixth Board of Directors http://www.cninfo.com.cn Resolutions of the Fifth 23 rd February, Securities Times, Hong Kong Tele-communication Meeting of the Commercial Daily and 2011 Sixth Board of Directors http://www.cninfo.com.cn Resolutions of the Third Session of Securities Times, Hong Kong 29 th March, 2011 Commercial Daily and the Sixth Board of Directors http://www.cninfo.com.cn Resolutions of the Third Session of Securities Times, Hong Kong 29 th March, 2011 Commercial Daily and the Sixth Board of Supervisors http://www.cninfo.com.cn 29 th March, 2011 2010 Annual Report and Its Abstract Securities Times, Hong Kong

Commercial Daily and http://www.cninfo.com.cn Announcement of Connected Transactions of Wall Panels for Securities Times, Hong Kong 29 th March, 2011 Commercial Daily and Mingjiang(Shanghai) International http://www.cninfo.com.cn Logistics Co., Ltd. Announcement of Connected Securities Times, Hong Kong 29 th March, 2011 Transaction Involving Daily Commercial Daily and Operation for Year 2011 http://www.cninfo.com.cn Notice of Convening 2010 Annual Securities Times, Hong Kong 29 th March, 2011 Commercial Daily and General Meeting http://www.cninfo.com.cn Announcement of Director and Securities Times, Hong Kong 29 th March, 2011 Commercial Daily and Supervisor’s Resignation http://www.cninfo.com.cn Indicative Announcement of Securities Times, Hong Kong 15 th April, 2011 Convening 2010 Annual General Commercial Daily and Meeting http://www.cninfo.com.cn Resolutions of 2010 Annual General Securities Times, Hong Kong 21 st April, 2011 Commercial Daily and Meeting http://www.cninfo.com.cn Resolutions of the Sixth Securities Times, Hong Kong 26 th April, 2011 Tele-communication Meeting of the Commercial Daily and Sixth Board of Directors http://www.cninfo.com.cn Securities Times, Hong Kong 26 th April, 2011 First Quarterly Report for Year 2011 Commercial Daily and http://www.cninfo.com.cn Implementation of Dividends Securities Times, Hong Kong 3rd June, 2011 Commercial Daily and Distribution Scheme for Year 2010 http://www.cninfo.com.cn Securities Times, Hong Kong 14 th June, 2011 Announcement of Trade Suspension Commercial Daily and http://www.cninfo.com.cn Resolutions of the Fourth Session of Securities Times, Hong Kong 23 rd June, 2011 Commercial Daily and the Sixth Board of Supervisors http://www.cninfo.com.cn Announcement of Connected Securities Times, Hong Kong 23 rd June, 2011 Transaction on Equity Integration of Commercial Daily and Baowan Logistics http://www.cninfo.com.cn Securities Times, Hong Kong 23 rd June, 2011 Announcement of Investment Commercial Daily and http://www.cninfo.com.cn Notice of Convening the Second Securities Times, Hong Kong 23 rd June, 2011 Extraordinary Shareholders’ Meeting Commercial Daily and in 2011 http://www.cninfo.com.cn Indicative Announcement of Securities Times, Hong Kong 5th July, 2011 Convening the Second Extraordinary Commercial Daily and Shareholders’ Meeting in 2011 http://www.cninfo.com.cn Resolutions of the Second Securities Times, Hong Kong 12 th July, 2011 Extraordinary Shareholders’ Meeting Commercial Daily and

in 2011 http://www.cninfo.com.cn Announcement of Development of Securities Times, Hong Kong 4th August, 2011 Equity Integration of Baowan Commercial Daily and Logistics http://www.cninfo.com.cn 22 nd August, Interim Report and Its Abstract for Securities Times, Hong Kong Commercial Daily and 2011 Year 2011 http://www.cninfo.com.cn 24 th September, Announcement of Registration of Securities Times, Hong Kong Commercial Daily and 2011 Medium Term Notes http://www.cninfo.com.cn 25 th October, Announcement of Development of Securities Times, Hong Kong Commercial Daily and 2011 Issuing Medium Term Notes http://www.cninfo.com.cn 31 st October, Resolutions of the Fifth Session of Securities Times, Hong Kong Commercial Daily and 2011 the Sixth Board of Supervisors http://www.cninfo.com.cn 31 st October, Securities Times, Hong Kong Third Quarterly Report for Year 2011 Commercial Daily and 2011 http://www.cninfo.com.cn 31 st October, Securities Times, Hong Kong Announcement of Investment 1 Commercial Daily and 2011 http://www.cninfo.com.cn 31 st October, Securities Times, Hong Kong Announcement of Investment 2 Commercial Daily and 2011 http://www.cninfo.com.cn Announcement of Connected 31 st October, Transaction on Acquiring Loans from Securities Times, Hong Kong Commercial Daily and 2011 China Nanshan Development http://www.cninfo.com.cn (Group) Incorporation Notice of Convening the Third 31 st October, Securities Times, Hong Kong Extraordinary Shareholders’ Meeting Commercial Daily and 2011 in 2011 http://www.cninfo.com.cn Announcement of Development of 31 st October, Securities Times, Hong Kong Shareholder Changes of the Commercial Daily and 2011 Company http://www.cninfo.com.cn Indicative Announcement of 9th November, Securities Times, Hong Kong Convening the Third Extraordinary Commercial Daily and 2011 Shareholders’ Meeting in 2011 http://www.cninfo.com.cn 16 th November, Resolutions f the Third Extraordinary Securities Times, Hong Kong Commercial Daily and 2011 Shareholders’ Meeting in 2011 http://www.cninfo.com.cn 17 th November, Announcement of Director/GM’s Securities Times, Hong Kong Commercial Daily and 2011 Resignation http://www.cninfo.com.cn Resolutions of the Eighth 23 rd November, Securities Times, Hong Kong Tele-communication Meeting of the Commercial Daily and 2011 Sixth Board of Directors http://www.cninfo.com.cn 30 th December, Announcement of Development of Securities Times, Hong Kong Commercial Daily and 2011 Bolgis Holding http://www.cninfo.com.cn

2. Reception, investigation and interview in the report period

According to pertinent regulations of listed company information disclosures direct of Shenzhen bourse and Working system in management of investor relation of company, the Company carried out the principle of equity, justice and publicity when receiving, investing, interviewing and developing activities to fair play total investors, and guarantee all investors enjoying right to learn the truth and other lawful rights and interests, to introduce and reflect practical situation of the company and insider dealing. The details are as follows: Topics Document Time Location Method Visitor Discussed Provided Guosen Securities (Economic Business Research Institute)/Industrial operation and February Shenzhen Field Securities Co Ltd / Haitong Company development 17,2011 Research Securities Co Ltd(Institute of brochures of logistics Research)/First State Cinda parks Fund Management Co Ltd, etc Business Shenzhen PingRock operation and February Field Shenzhen Investment Co Ltd/Huatai development None 22, 2011 Research United Securities of logistics parks SWS Research Co., Ltd/ Business Shenyin Wanguo (Hong Kong) operation and May 20, Field Company Shenzhen Limited/ Shenzhen Huaqiang development 2011 Research brochures Dingxin Investment Co., Ltd., of logistics etc parks Business operation and June 29, Field Company Shenzhen Orient Securities Co., Ltd. development 2011 Research brochures of logistics parks

3. Other significant events

(1) Issuing of Medium Term Notes

In order to release the capital pressure caused by possible rise of loan interest rate and obtain sufficient financing support for fixed assets investment, the First Extraordinary Shareholder’s Meeting in 2011 has approved the Company to issue five-year medium term notes of RMB 400 million with the expected five-year complex issuance rate.

On 16 th September 2011, the Company received the registration approval of issuing medium term notes from National Association of Financial Market Institutional

Investors. Based on the consideration of fund cost, the Company decided to issue the medium term notes at a proper time.

On 7 th March 2012, the Company issued this five-year medium term notes of RMB 400 million with complex issuance rate of 6.436%.

The details were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn on 18 th December 2010, 24 th September 2011, 25 th October 2011 and 1 st March 2012.

(2) By the end of report period, the balance of interest bearing loan is RMB 1.82 billion.

(3) At the end of the report period, the scope of consolidated financial statements include Shenzhen Baowan, Blogis Holding and its wholly-owned subsidiaries—Shanghai Baowan, Kunshan Baowan, Guangzhou Baowan, Chengdu Xindu Baowan, Chengdu Longquan Baowan, Tianjin Baowan, Langfang Baowan, Shanghai Mingjiang, Nanjing Baowan and Tianjin Bingang Baowan.

PART X. Financial Statement （Attached ）

PART XI. Documents Available for Verification:

1. Original copy of Annual Report carrying the signature of the Chairman. 2. Financial Report carrying the signature of relative persons in charge. 3. Original copy of Auditor’s Statements sealed by CPA and signed by registered accountants. 4. Original copies of all the documents disclosed in the newspapers specified by the China Securities Regulatory Commission.

Board of Directors Shenzhen Chiwan Petroleum Supply Base Co., Ltd.

Date: 28th March, 2012

中瑞岳华会计师事务所（特殊普通合伙） RSM China Certified Public Accountants 电话：+86(10)88095588 Add:8-9 /F Block A Corporation Bldg.No.35 Finance Street Xicheng 地址：北京市西城区金融大街 35 号国际企 Tel ： +86(10)88095588 District 业大厦 A 座 8-9 层传真： Beijing PRC +86(10)88091190 邮政编码：100033 Post Code:100033 Fax ： +86(10)88091190

AUDITORS’ REPORT

Zhong Rui Yue Hua Shen Zi (2012) No. 3136

To the shareholders of Shenzhen Chiwan Petroleum Supply Base Co., Ltd.: We have audited the accompanying financial statements of Shenzhen Chiwan Petroleum Supply Base Co., Ltd. (the “Company”) and its subsidiaries, which comprise the consolidated and the Company’s balance sheet as at 31 December 2011, the consolidated and the Company’s income statement, the consolidated and the Company’s cash flow statement for the year then ended and the consolidated and the Company’s statement of changes in shareholders’ equity, and notes to the financial statements.

Management’s Responsibility for the Financial Statements The Company’s management is responsible for the preparation and fair presentation of these financial statements. This responsibility includes: (1) preparing and fairly presenting financial statements in accordance with Accounting Standards for Business Enterprises; (2) designing, implementing and maintaining necessary internal control in order that financial statements are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with China Standards on Auditing. Those standards require that we comply with Chinese Certified Public Accountants’ ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial

statements 。

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the financial statements give a true and fair view of the consolidated financial position of Shenzhen Chiwan Petroleum Supply Base Co., Ltd. and its subsidiaries as at 31 December 2011, and of their consolidated financial performance and their consolidated cash flows for the year then ended and, of the financial position of Shenzhen Chiwan Petroleum Supply Base Co., Ltd. as at 31 December 2011, and of its financial performance and its cash flows for the year then ended in all material aspects in accordance with Accounting Standards for Business Enterprises.

RSM China Certified Public Accountants Chinese Certified Public Accountant: Wang Yu Qiao

Beijing, China Chinese Certified Public Accountant: Li Rong

26 March 2012

Financial Statements

Balance Sheet

（（（Dec 31 2011 ））） Currency: RMB Ending Balance Beginning Balance Items Parent Parent Consolidated Consolidated Company Company Current Assets: Cash and Cash Equivalents 402,122,936.70 324,237,017.87 186,593,590.15 171,818,576.09 Deposit Reservation for Balance Lendings to Banks and Other Financial

Institutions Held for Trading Financial Assets Notes receivable Accounts Receivable 38,761,849.27 32,246,795.90 40,202,568.15 31,402,129.86 Accounts Prepayment 1,414,854.45 363,576.52 2,956,666.33 269,643.65 Insurance Premium Receivable Reinsurance Accounts Receivable Reinsurance Reserve Receivable Accrued Interest Receivable 743,516.68 743,516.68 Dividend Receivable 69,228,865.68 35,878,170.16 Other Receivables 7,743,467.02 690,801,414.95 9,282,760.01 528,755,821.24 Redemptory Monetary Capital for Sale Inventories 1,129,514.30 801,510.26 918,995.81 685,670.08 Current Portion of Non-current Assets Other Current Assets 369,620,000.00 369,620,000.00 Sub-total Current Assts 821,536,138.42 1,488,042,697.86 239,954,580.45 768,810,011.08 Non-current Assets Disbursement of Entrust Loans and

Advance Financial Assets Available for Sale Held-to-maturity Investment Long-term Accounts Receivable Long-term Investment on Stocks 325,138,453.01 1,196,944,212.72 350,681,587.87 866,217,347.58 Investment Real Estate 707,482,188.70 116,380,151.11 656,722,808.71 110,751,343.68 Fixed Assets 437,846,577.37 68,311,365.75 406,994,591.00 61,111,913.91 Construction-in-progress 341,476,044.19 16,652,681.00 128,244,251.69 2,546,036.86 Engineer Material Liquidation of Fixed Assets 884.40 884.40 Capitalized Biological Assets Oil and Gas Assets Intangible Assets 921,544,551.30 359,318,178.34 886,009,970.99 375,964,413.38

Development Expenditure Goodwill Long-term Deferred Expenses Deferred Income Tax Assets 16,752,609.82 85,701.63 11,628,802.96 79,520.94 Other Non-current Assets 76,216,717.37 124,393,944.04 Sub-total Non-current Assets 2,826,457,141.76 1,757,692,290.55 2,564,676,841.66 1,416,671,460.75 Total Assets 3,647,993,280.18 3,245,734,988.41 2,804,631,422.11 2,185,481,471.83 Current Liabilities Short-term Loans 210,000,000.00 210,000,000.00 258,530,000.00 188,530,000.00 Borrowing from the Central Bank Accept Money Deposits and Call Loans from Banks Other Financial Institutions Transactional Monetary Liabilities) Notes Payable Accounts Payable 10,108,928.11 10,036,686.11 7,540,627.11 7,400,729.91 Down payment Received 2,093,276.87 334,452.28 Financial Assets Sold for Repurchase Commission Payable Payroll Payable 16,729,891.85 13,198,897.59 21,562,803.34 18,191,220.73 Tax Payable 25,815,966.83 17,086,958.44 27,156,465.43 20,273,544.31 Accrued Interest Payable 8,692,594.04 8,692,594.04 1,682,882.21 1,580,664.71 Dividend Payable 8,382,728.01 Other Payables 184,460,828.33 224,504,487.28 202,671,498.15 39,441,017.76 Dividend Payable for Reinsurance Reserves for Insurance Contract Acting Trading Securities Acting Underwriting Securities Current Portion of Non-current Liabilities 549,820,000.00 549,820,000.00 Other Non-current Liabilities Sub-total Current Liabilities 1,016,104,214.04 1,033,339,623.46 519,478,728.52 275,417,177.42 Non-current Liabilities Long-term Loans 359,900,000.00 359,900,000.00 910,000,000.00 910,000,000.00 Bonds Payable Long-term Accounts Payable 140,130,172.17 209,394,755.56 Special Accounts Payable Accrued liabilities Deferred Income Tax Liabilities Other Non-current Liabilities 723,114,314.14 723,114,314.14 24,463,665.30 24,463,665.30 Sub-total Non-current Liabilities 1,223,144,486.31 1,083,014,314.14 1,143,858,420.86 934,463,665.30 Total Liabilities 2,239,248,700.35 2,116,353,937.60 1,663,337,149.38 1,209,880,842.72 Owner's Equity( Shareholders’ Equity) Paid-in Capital (Capital Stock) 230,600,000.00 230,600,000.00 230,600,000.00 230,600,000.00

Capital Reserves 234,141,186.09 204,534,849.49 219,723,332.58 204,534,849.49 Less : Treasury Stock Special Reserves Surplus Reserves 242,990,556.25 242,990,556.25 217,271,498.84 217,271,498.84 General Risk Reserve Retained Earnings 452,610,050.78 451,255,645.07 378,571,522.81 323,194,280.78 Translation Reserve Total Chiwan Base Shareholders’ Equity 1,160,341,793.12 1,129,381,050.81 1,046,166,354.23 975,600,629.11 Non-controlling interests 248,402,786.71 95,127,918.50 Total Shareholders’ Equity 1,408,744,579.83 1,129,381,050.81 1,141,294,272.73 975,600,629.11 Total Liabilities and Equities 3,647,993,280.18 3,245,734,988.41 2,804,631,422.11 2,185,481,471.83

Legal Representative: Fan Zhaoping Chief financial officer: Yu Zhongxia Financial manager: Sun Yuhui

Income Statements (From Jan 01 2011 to Dec 31 2011) Currency ：：：RMB Current Period Same Period Last Year Items Parent Parent Consolidated Consolidated company company 1. G ross Revenue 461,923,472.76 263,955,016.82 400,102,381.18 241,132,014.47 Incl. Operation Revenue 461,923,472.76 263,955,016.82 400,102,381.18 241,132,014.47 Interest Revenue Earned Premium Commission Revenue 2. Total operating cost 340,320,661.34 172,932,368.29 282,867,516.94 140,195,029.67 Incl. Operating cost 164,161,243.51 87,073,551.05 133,454,179.87 68,353,082.83 Interest Expenses Commission Expenses Surrender Value Net Payments for Insurance Claims Net Provision for Insurance Contracts Expenditures Dividend Policy Amortized Reinsurance Expenditures Business Tax and Surcharge 41,977,231.20 16,470,292.01 33,152,983.57 14,361,466.58 Selling Expenses 1,278,007.00 1,816,652.85 83,199.98 Administrative Expenses 61,030,772.57 29,040,413.91 59,975,166.05 30,698,669.42 Financial Expenses 71,884,408.68 40,339,579.34 54,533,750.43 26,764,951.23 Assets Impairment Loss -11,001.62 8,531.98 -65,215.83 -66,340.37 Plus: Fair Value change Income(“-” for net loss) Investment income(“-” for net loss) 22,456,865.14 112,734,166.42 34,645,950.32 69,092,568.62

Incl: Investment income from Associate and 22,456,865.14 22,456,865.14 34,645,950.32 34,645,950.32

Joint venture

Exchange Earnings(“-” for net loss) 3. Operating Profits(“-” for net loss) 144,059,676.56 203,756,814.95 151,880,814.56 170,029,553.42 Plus: Non-operating income 4,653,207.13 1,624,781.30 3,659,848.65 996,568.73 Less: non-operating expenses 618,852.50 131,231.72 1,211,143.60 1,008,886.89 Incl: Loss of Liquidation of non-current Assets 170,796.82 45,116.45 298,382.62 209,866.09 4. Total profit(“-” for net loss) 148,094,031.19 205,250,364.53 154,329,519.61 170,017,235.26 Less: Income taxes expenses 22,864,229.72 21,953,176.47 21,269,178.67 22,230,463.13 5. Net profit(“-” for net loss) 125,229,801.47 183,297,188.06 133,060,340.94 147,786,772.13 Net Profit attributable to controlling interests 129,274,351.74 183,297,188.06 142,229,324.77 147,786,772.13 Net Profit attributable to non-controlling interests -4,044,550.27 -9,168,983.83 6. Earnings per share 1) basic earnings per share 0.56 0.62 2)diluted earnings per share 0.56 0.62 7. Other comprehensive income 8. Total comprehensive income 125,229,801.47 183,297,188.06 133,060,340.94 147,786,772.13 Total comprehensive income attributable to the 129,274,351.74 183,297,188.06 142,229,324.77 147,786,772.13 owners of parent company Total comprehensive income attributable to -4,044,550.27 -9,168,983.83 non-controlling interests

Legal Representative: Fan Zhaoping Chief financial officer: Yu Zhongxia Financial manager: Sun Yuhui

Cash Flow (CF)Statements (From Jan 01 2011 to Dec 31 2011) Currency ：：：RMB Current Period Same Period Last Year Items Parent Parent Consolidated Consolidated company company

1. Cash Flows from Operating Activities

Cash from Sales of Goods & Services 464,107,002.65 262,386,863.97 408,913,681.18 248,306,644.06

Net Increase in Customer Bank Deposits and due to Banks and Other Financial Institutions

Net Increase in Borrowings from Central Bank

Net Increase in Placements from Other Financial

Institutions Cash from Insurance Premium of Original

Insurance Contracts

Net cash received from reinsurance business

Net increase in deposits from policyholders

Net increase from disposal of tradable financial assets Cash from Interest 、 Handling Charges and commission Income Net Increase in Placements from Banks and Other

Financial Institutions

Net Increase in Repurchase Business Capital

Tax Refunds

Cash from Other Operating-related Activities 21,676,209.39 6,141,456.79 10,069,372.98 179,586,642.98

Sub-total of Cash Inflows from Operating 485,783,212.04 268,528,320.76 418,983,054.16 427,893,287.04 Activities

Cash Paid for Purchasing of Goods &Services 59,291,648.87 44,159,842.02 43,672,147.30 30,525,580.64

Net Increase in Loans and Advances to Customers

Net Increase in Deposits with Central Bank and

Other Financial Institutions Cash paid for Claims of Original Insurance

Contracts Cash Paid for Interest 、 Handling Charges and commission Income

Cash paid for policy dividends

Cash paid for staffs 55,575,260.71 34,989,585.99 44,648,276.34 28,242,633.08

Taxes and dues 79,764,723.55 43,452,487.58 49,849,764.03 26,226,867.93

Cash Paid for Other Operating-related Activities 23,497,618.37 12,621,432.08 25,687,941.41 279,845,316.67

Sub-total of Cash Outflows from Operating 218,129,251.50 135,223,347.67 163,858,129.08 364,840,398.32 Activities

Net Cash Flows from Operating Activities 267,653,960.54 133,304,973.09 255,124,925.08 63,052,888.72

2. Cash Flows from Investing Activities

Cash from Disinvestment

Cash from Investment Income 48,000,000.00 105,087,242.21 37,040,332.44

Net Cash from Disposal of Fixed Assets, 517,402.56 517,292.61 967,200.00 895,700.00 Intangible Assets and Other Long-term Assets Net Cash Received from Disposal of

Subsidiaries and Other Business Units Cash Received from Other Investing-related 76,895,416.61 1,117,451,497.48 101,847,893.52 56,973,393.52 Activities Sub-total of Cash Inflows from Investing 125,412,819.17 1,223,056,032.30 102,815,093.52 94,909,425.96 Activities Cash Paid for Construction of Fixed Assets, 380,218,545.79 35,887,341.11 320,823,782.86 11,911,624.74 Intangible Assets and Other Long-term Assets

Cash Paid for Investment 335,270,000.00

Net Increase in Pledge Loans

Net Cash Paid for Acquisition of Subsidiaries and 31,301,000.00 31,301,000.00 Other Business Units

Cash Paid for Other Investing-related Activities 388,295,759.97 1,663,889,491.92 14,797,750.93 42,052,634.08

Sub-total of Cash Outflows from Investing 768,514,305.76 2,035,046,833.03 366,922,533.79 85,265,258.82 Activities

Net Cash Flows from Investing Activities -643,101,486.59 -811,990,800.73 -264,107,440.27 9,644,167.14

3.Cash Flows from Financing Activities

Cash Received from Absorbing Investment 180,120,000.00 incl : Cash from absorbing minority investment 180,120,000.00

Cash received from Borrowings 565,000,000.00 565,000,000.00 278,368,000.00 208,368,000.00

Cash Received from Bonds Issuance

Cash from Other Financing-related Activities 700,000,000.00 936,255,764.80

Sub-total of Cash Inflows from Financing 1,445,120,000.0 1,501,255,764.80 278,368,000.00 208,368,000.00 Activities 0

Debt Redemption 613,810,000.00 543,810,000.00 143,368,000.00 143,368,000.00

Cash Paid for Dividends or Interests 96,791,910.08 96,067,095.08 112,890,948.71 111,339,101.21

incl : Dividends and profits paid by subsidiaries to minorities

Cash Paid for Other Financing-related Activities 144,200,094.20 30,933,939.51 52,024,875.18 52,024,875.18

Sub-total of Cash Outflows from Financing 854,802,004.28 670,811,034.59 308,283,823.89 306,731,976.39 Activities Net Cash Flows from Financing Activities 590,317,995.72 830,444,730.21 -29,915,823.89 -98,363,976.39 4. Influence from Fluctuations in Exchange for 667,760.88 668,423.21 80,049.55 78,486.33 Cash and Cash Equivalents

5. Net Increase in Cash and Cash Equivalents 215,538,230.55 152,427,325.78 -38,818,289.53 -25,588,434.20

Plus: Beginning Balance of Cash and Cash 186,568,590.15 171,793,576.09 225,386,879.68 197,382,010.29 Equivalents

6. Ending Balance of Cash and Cash Equivalents 402,106,820.70 324,220,901.87 186,568,590.15 171,793,576.09

Legal Representative: Fan Zhaoping Chief financial officer: Yu Zhongxia Financial manager: Sun Yuhui

Consolidated Statement of Changes in Equity End of Dec 31 2011 Currency: RMB Current Period Stockholders' equity in parent company Items Loss ： General Minority Total owner's Paid-in Capital Special Retained Capital Reserves Treasury Surplus reserves risk Others interests equity (Capital Stock) reserves Earnings stock reserve

1. Ending Balance of Last Year 230,600,000.00 219,723,332.58 217,271,498.84 378,571,522.81 95,127,918.50 1,141,294,272.73 plus ：Changes in Accounting

Policies Corrections of Prior Period

Errors Others 2.Beginning Balance of Current 230,600,000.00 219,723,332.58 217,271,498.84 378,571,522.81 95,127,918.50 1,141,294,272.73 Period 3. Changes for Current Period 14,417,853.51 25,719,057.41 74,038,527.97 153,274,868.21 267,450,307.10 ("-" stands for decrease) (1) Net Profit 129,274,351.74 -4,044,550.27 125,229,801.47 (2)Other Comprehensive

Income Sub-total for (1) and (2) above 129,274,351.74 -4,044,550.27 125,229,801.47 Investment by Owners and 14,417,853.51 165,702,146.49 180,120,000.00 Decreased in Capital 1) Contributed Capital by 180,120,000.00 180,120,000.00 Owners 2)Share-based Payment in

Shareholders' Equity 3)Others 14,417,853.51 -14,417,853.51

(4)Profit Distribution 25,719,057.41 -55,235,823.77 -8,382,728.01 -37,899,494.37 1) Appropriation of 25,719,057.41 -25,719,057.41 Surplus Reserves

2)Appropriation of

General Risk Reserve 3) Distribution for Owners( or -29,516,766.36 -8,382,728.01 -37,899,494.37 Stockholders ) 4) Others (5)Inside Carry-over within

Shareholders' Equity 1)Capital Surplus Convert to

Capital or Stock 2)Surplus Reserves Convert to

Capital or Stock 3) Surplus Reserves Cover the

Deficit 4)Others

(6) Special Reserves

1) Current Extraction

2) Current Usage

(7) Others 4.Ending Balance of Current 230,600,000.00 234,141,186.09 242,990,556.25 452,610,050.78 248,402,786.71 1,408,744,579.83 Period

Prior Period Stockholders' equity in parent company Loss ： Items General Minority Total owner's Paid-in Capital Capital Special Surplus Retained Treasu risk Others interests equity (Capital Stock) Reserves reserves reserves Earnings ry reserve stock

1. Ending Balance of Last Year 230,600,000.00 251,024,332.58 196,502,748.39 316,836,309.31 127,342,534.43 1,122,305,924.71 plus ：Changes in Accounting

Policies

Corrections of Prior Period Errors

Others

2.Beginning Balance of Current 230,600,000.00 251,024,332.58 196,502,748.39 316,836,309.31 127,342,534.43 1,122,305,924.71 Period 3. Changes for Current Period ("-" -31,301,000.00 20,768,750.45 61,735,213.50 -32,214,615.93 18,988,348.02 stands for decrease)

(1) Net Profit 142,229,324.77 -9,168,983.83 133,060,340.94

(2)Other Comprehensive Income

Sub-total for (1) and (2) above 142,229,324.77 -9,168,983.83 133,060,340.94 Investment by Owners and -23,045,632.10 -23,045,632.10 Decreased in Capital

1) Contributed Capital by Owners -24,000,000.00 -24,000,000.00

2)Share-based Payment in

Shareholders' Equity 3)Others 954,367.90 954,367.90

(4)Profit Distribution 20,768,750.45 -80,494,111.27 -59,725,360.82 1) Appropriation of Surplus 20,768,750.45 -20,768,750.45 Reserves

2)Appropriation of General

Risk Reserve 3) Distribution for Owners( or -59,725,360.82 -59,725,360.82 Stockholders )

4) Others

(5)Inside Carry-over within

Shareholders' Equity 1)Capital Surplus Convert to

Capital or Stock 2)Surplus Reserves Convert to

Capital or Stock 3) Surplus Reserves Cover the

Deficit 4)Others

(6) Special Reserves

1) Current Extraction

2) Current Usage

(7) Others -31,301,000.00 -31,301,000.00

4.Ending Balance of Current 230,600,000.00 219,723,332.58 217,271,498.84 378,571,522.81 95,127,918.50 1,141,294,272.73 Period Legal Representative: Fan Zhaoping Chief financial officer: Yu Zhongxia Financial manager: Sun Yuhui

Statement of Changes in Equity End of Dec 31 2011 Currency: RMB

Current Period

Loss ： Items Paid-in Capital Special General Risk Total Owner's Capital Reserves Treasury Surplus Reserves Retained Earnings (Capital Stock) Reserves Reserve Equity Stock

1. Ending Balance of Last 230,600,000.00 204,534,849.49 217,271,498.84 323,194,280.78 975,600,629.11 Year plus ：Changes in Accounting

Policies Corrections of Prior Period

Errors Others 2.Beginning Balance of 230,600,000.00 204,534,849.49 217,271,498.84 323,194,280.78 975,600,629.11 Current Period 3. Changes for Current Period 25,719,057.41 128,061,364.29 153,780,421.70 ("-" stands for decrease) (1) Net Profit 183,297,188.06 183,297,188.06 (2)Other Comprehensive

Income Sub-total for (1) and (2) above 183,297,188.06 183,297,188.06 Investment by Owners and

Decreased in Capital 1) Contributed Capital by

Owners 2)Share-based Payment in

Shareholders' Equity 3)Others

(4)Profit Distribution 25,719,057.41 -55,235,823.77 -29,516,766.36

1) Appropriation of 25,719,057.41 -25,719,057.41 Surplus Reserves 2)Appropriation of

General Risk Reserve 3) Distribution for Owners( or -29,516,766.36 -29,516,766.36 Stockholders ) 4) Others (5)Inside Carry-over within

Shareholders' Equity 1)Capital Surplus Convert to

Capital or Stock 2)Surplus Reserves Convert to

Capital or Stock 3) Surplus Reserves Cover the

Deficit 4)Others

(6) Special Reserves

1) Current Extraction

2) Current Usage

(7) Others 4.Ending Balance of Current 230,600,000.00 204,534,849.49 242,990,556.25 451,255,645.07 1,129,381,050.81 Period

Prior Period

Items Paid-in Capital Loss ：Treasury Special General Risk Total Owner's Capital Reserves Surplus Reserves Retained Earnings (Capital Stock) Stock Reserves Reserve Equity

1. Ending Balance of Last Year 230,600,000.00 208,453,861.91 196,502,748.39 255,901,619.92 891,458,230.22

plus ：Changes in Accounting

Policies Corrections of Prior Period

Errors

Others

2.Beginning Balance of Current 230,600,000.00 208,453,861.91 196,502,748.39 255,901,619.92 891,458,230.22 Period 3. Changes for Current Period -3,919,012.42 20,768,750.45 67,292,660.86 84,142,398.89 ("-" stands for decrease)

(1) Net Profit 147,786,772.13 147,786,772.13

(2)Other Comprehensive Income

Sub-total for (1) and (2) above 147,786,772.13 147,786,772.13

Investment by Owners and

Decreased in Capital 1) Contributed Capital by

Owners 2)Share-based Payment in

Shareholders' Equity

3)Others

(4)Profit Distribution 20,768,750.45 -80,494,111.27 -59,725,360.82

1) Appropriation of Surplus 20,768,750.45 -20,768,750.45 Reserves 2)Appropriation of General

Risk Reserve 3) Distribution for Owners( or -59,725,360.82 -59,725,360.82 Stockholders )

4) Others

(5)Inside Carry-over within

Shareholders' Equity 1)Capital Surplus Convert to

Capital or Stock 2)Surplus Reserves Convert to

Capital or Stock 3) Surplus Reserves Cover the

Deficit

4)Others

(6) Special Reserves

1) Current Extraction

2) Current Usage

(7) Others -3,919,012.42 -3,919,012.42

4.Ending Balance of Current 230,600,000.00 204,534,849.49 217,271,498.84 323,194,280.78 975,600,629.11 Period Legal Representative: Fan Zhaoping Chief financial officer: Yu Zhongxia Financial manager: Sun Yuhui

63 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD.

Notes to the Financial Statements for the Year Ended 31 December 2011

(Expressed in Renminbi Yuan unless otherwise indicated)

I. COMPANY STATUS

Shenzhen Chiwan Petroleum Supply Base Co., Ltd. (the “Company”), approved by Shen Fu Ban Han (1995) No. 112 issued by the General Office of Shenzhen Municipal People's Government, was established through the restructuring of Shenzhen Chiwan Base Company. The Company publicly issued domestic listed foreign shares (B Share) pursuant to the approval of Shen Fu Ban Han (1995) No. 112 issued by the General Office of Shenzhen Municipal People's Government and Shen Zheng Ban Fu (1995) No.33 issued by the Shenzhen Securities Administration Office on 11 May 1995 and 16 June 1995 respectively. The total share capital of the Company is RMB230,600,000.00 with 230,600,000 ordinary shares in issue at par value of RMB1.00 after the public offering. Pursuant to Listing Notice Shen Zheng Shi Zi (1995) No.14, issued by Shenzhen Stock Exchange, the Company’s share was list and traded on Shenzhen Stock Exchange on 28 July 1995. The Company’s registration place is Shenzhen City, Guangdong Province, People’s Republic of China. The controlling shareholder, China Nanshan Development (Group) Incorporation (“Nanshan Group”), holds 51.79% of the Company’s equity shares.

Main business scopes of the Company and its subsidiaries (collectively referred to as the “Group”) include: terminal and port operation services; lease of stack area, storage and office building; providing labor service, cargo handling and transportation, equipment lease, supply of water, power and oil, and agency services for offshore crude oil logistics; operating bonded warehouse and stack area, and commercial car park operation. The financial statements are approved by the Board of Directors of the Company and authorized for issue on 26 March 2012.

II. BASIS OF PREPARATION

The financial statements of the Group have been prepared based on going concern assumption and based on actual transactions and events occurred. It is prepared in accordance with the requirements of “Accounting Standards for Business Enterprises - Basic Standard” and 38

64 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Specific Standards issued by the Ministry of Finance on 15 February 2006, and application guidance, illustrations to the standards and related pronouncements (collectively known as “Accounting Standards for Business Enterprises” or “CAS”). These financial statements also comply with the disclosure requirements of “Regulation on the Preparation of Information Disclosures of Companies Issuing Public Shares, No. 15: General Requirements for Financial Reports” (revised in 2010) issued by China Securities Regulatory Commission (CSRC) in 2010.

According to Accounting Standards for Business Enterprises, the accrual basis is adopted for the Group’s accounting activity. Except for some financial instruments, the financial statements are measured using historical cost. In case of impairment occurred on assets, provisions for impairment are provided for in accordance with related rules.

III. STATEMENT OF COMPLIANCE

The financial statements have been prepared in accordance with the requirements of Accounting Standards for Business Enterprises. These financial statements present truly and completely the financial position as at 31 December 2011, the results of operations and the cash flows for the year then ended of the Company and the Group. In addition, the financial statements of the Company and the Group comply with, in all material respects, the disclosure requirements for financial statements and notes to the financial statements under “Regulation on the Preparation of Information Disclosures of Companies Issuing Public Shares, No. 15: General Requirements for Financial Reports” as revised by CSRC in 2010.

IV. ACCOUNTING POLICIES AND ESTIMATES

1. Accounting period

The accounting period of the Group includes accounting year and interim accounting period. An interim period refers to a reporting period which is shorter than a full accounting year. The accounting year of the Group is the calendar year, i.e. from 1 January to 31 December of each year.

2. Recording currency

Renminbi (RMB) is the functional currency of the main economic environment in which the Group operates. The Group adopts Renminbi as the recording currency. The currency used in preparing the Group’s financial statements for year 2011 is Renminbi.

3. Accounting treatment for business combinations

Business combination refers to transactions or events that combine two or more separate

65 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements enterprises and form one reporting entity. Business combinations are classified into business combinations involving enterprises under common control and business combinations involving enterprises not under common control.

(1) Business combination involving entities under common control

If the enterprises involved in a combination are subject to control of the same party or parties both before and after the combination, and that control is not temporary in nature, it is business combination under common control. The party who obtains control over other participating enterprises on the combination date is the combining party, and the other participating enterprises are combined parties in a business combination under common control. Combination date means the date on which the combining party actually obtains control over the combined parties.

Assets and liabilities that the combining party obtained are measured using book value of the combined party’s accounts on combination date. Difference between book value of net assets the combining party obtained and book value of combination consideration paid (or the aggregate nominal amount of shares issued) is recognized in capital reserve (share premium). If the capital reserve (share premium) is insufficient to offset, retained earnings will be adjusted accordingly.

All direct expenses incurred by the acquirer in relation to the combination are included in the current profit or loss at the time such expenses incurred.

(2) Business combinations involving entities not under common control

If the enterprises involved in a combination are not subject to control of the same party or parties both before and after the combination, it is the business combination involving entities not under common control. The party who obtains control over the other participating enterprises on acquisition date is the acquirer, and the other participating enterprises are the acquiree in a business combination not under common control. The acquisition date is the date on which the acquirer actually obtains the control over the acquirees.

As for business combinations involving enterprises not under common control, combination cost includes assets paid, liabilities incurred or assumed, and the fair value of equity securities issued by the acquirer to obtain control over the acquiree on the acquisition date. Fees for auditing, legal service, evaluation and consultation, and other administrative expenses incurred for the combination are recognized in profit or loss in the period in which such expenses incurred. Transaction costs incurred by the acquirer for issuing equity securities or debt

66 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements securities as combination consideration are recognized in initial recognition amount of equity securities or debt securities. Contingent consideration, if any, is included in acquisition cost at its fair value on the acquisition date. If, within 12 months, new or further evidence revealed regarding conditions that already existed on acquisition date, the contingent consideration required to be adjusted, adjusting the goodwill arising from the acquisition accordingly. For acquisition that realized step by step through multiple transfer transactions, the equity of the acquiree held by the acquirer before the acquisition date are re-measured using fair value on the acquisition date. Any difference between the fair value and its carrying amount is recognized as investment gain and transfer other comprehensive income related to this part of equity to investment gain in the period where the acquisition date falls. The acquisition cost is the aggregate of fair value of acquiree’s equity held by the acquirer before the acquisition date and fair value of additional equity acquired on the acquisition date.

Acquisition cost incurred by the acquirer and identifiable net assets acquired in the acquisition are measured at fair value on the acquisition date. If the acquisition cost is greater than the fair value of the part of identifiable net assets acquired on the acquisition date, the difference is recognized as goodwill. If the acquisition cost is lesser than the fair value of the part of identifiable net assets acquired on the acquisition date, review the fair value of each identifiable asset, liability and contingent liability that acquired and the calculation of acquisition cost. If, after the review, the acquisition cost is still lesser than the fair value of the part of identifiable net assets acquired, the difference is recognized in profit or loss in corresponding period.

Deductible temporary differences that the acquirer obtained from the acquiree, which are not recognized on acquisition date due to the conditions of recognition as deferred tax assets are not fulfilled, are recognized as deferred tax assets and correspondingly deduct goodwill if new or further evidence shows, within 12 months after the acquisition date, that relevant conditions exist on the acquisition date and it is probable that the economic benefit arising from the deductible temporary differences on acquisition date can be realized. If the goodwill is insufficient to the deduction, the excess part is recognized in profit or loss in corresponding period. Deferred tax assets recognized in relation to acquisition that other than the circumstances mentioned above are recognized in profit or loss in corresponding period.

4. Method of preparing consolidated financial statements

(1) Principles in determining the scope of the consolidation

The scope of consolidation is determined on the basis of control. Control refers to the right that the Company is able to make decision on financial and operational policies of the invested

67 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements company, and receiving benefits from the business activities conducted by the invested company. The scope of the consolidation includes the Company and all its subsidiaries. Subsidiary means enterprise or entity that is controlled by the Company.

(2) Method of preparing consolidated financial statements

The Group begins to include a subsidiary in the scope of consolidation from the date that the Company acquires the net assets and effective control over the operation and business decisions of the subsidiary. A subsidiary is excluded out of the scope of the Group’s consolidation from the date the Company losses effective control over it. For subsidiary that is disposed, the operating performance and cash flows before the disposal date are properly included in the consolidated income statement and consolidated cash flow statement. The opening balance of the consolidated balance sheet is not adjusted if the disposal occurs in the same period. The business performance and cash flows of the addition of subsidiary through combination involving entities not under common control after the acquisition date have been properly included in the consolidated income statement and consolidated cash flow statement, and no adjustments are made to the opening balance and comparative figures of the consolidated financial statements. For addition of subsidiary through combination involving entities under common control, the business performance and cash flows from the beginning of the period to the combination date are properly included in the consolidated income statement and consolidated cash flow statement, and the comparative figures of the consolidated financial statements are adjusted at the same time.

If the accounting policies or accounting period adopted by the subsidiary are not in line with the Company, necessary adjustments are made to the financial statements of the subsidiary according to the Company’s accounting policies and period when preparing consolidated financial statements. If the subsidiary is acquired through combinations involving entities not under common control, the adjustments are made based on the fair value of its identifiable net assets on the acquisition date.

All material intra-group current account balances, transactions and unrealized profits are offset when preparing the consolidated financial statements.

The part of subsidiary shareholders’ equity and current period net profit or loss that do not attribute to the Company are presented separately under shareholders’ equity and net profit in consolidated financial statements as minority shareholders’ equity and minority shareholders’ profit or loss respectively. Portion of subsidiaries’ current net profit or loss attributable to minority shareholder’s equity are presented under the title of “minority shareholders’ profit or loss” under

68 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements net profit in consolidated income statement. If subsidiary’s losses that attributable to minority shareholders exceed the opening owners’ equity attributable to minority shareholders, minority shareholders’ equity is deducted.

If the Company losses control over a subsidiary due to partial disposal of equity investment or other reasons, the remaining equity is measured at fair value on the date when the control lost. The difference between the sum of consideration received for disposal of equity interest and the fair value of remaining equity interest less the net assets attributable to the Company calculated continuously since the purchase date based on shareholding percentage before disposal are recognized in investment gain in the period when the control lost. Other comprehensive income related to equity investment in the subsidiary is transferred to investment gain at the time control lost.

5. Determination of cash and cash equivalents

The Group's cash and cash equivalents include cash on hand, deposit that can be used for immediate payment, and Group’s investments that are with characteristics of short term (generally matures in three months from the date of purchase), highly liquid, readily convertible to known amount of cash, and with insignificant risks of changes in value.

6. Foreign currency transactions and financial statements translation

(1) Translation of foreign currency transactions

Initial recognition of foreign currency transactions incurred by the Group are translated to recording currency using the spot exchange rate at the transaction date (usually refers to middle rate of foreign exchange rate on that day published by the People's Bank of China). For foreign currency exchange transactions and transactions related to foreign currency exchange, they are translated into recording currency using actual exchange rate.

(2) Translation of monetary items and non-monetary items denominated in foreign currencies

At the balance sheet date, monetary items denominated in foreign currencies are translated using the spot rate at the balance sheet date. Translation differences arising from the translation are recognized in current profit or loss, except that exchange differences resulting from foreign currency specific borrowings in connection with constructing of assets that can be capitalized, which are treated under the principle of borrowing costs capitalization.

Non-monetary items denominated in foreign currencies that are measured using historical costs are still measured using functional currency translated at the spot rate at transaction date.

69 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Non-monetary items denominated in foreign currency which are measured using fair value are translated at spot rate of the day the fair value is determined. The differences between amount of functional currency after the translation and the original amount of functional currency are treated as changes in fair value (including exchange rate change) and are recognized in current profit or loss or recognized in capital reserves as other comprehensive income.

7. Financial instruments

(1) Determination of fair values for financial assets and financial liabilities

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. If there is an active market for a financial instrument, the quoted price in the active market shall be used to establish the fair value of the financial instruments. Quoted prices from an active market are prices that are readily and regularly available from an exchange, broker, industry association or pricing service agency etc… and represent prices used in actual market transactions on an arm’s length basis. If no active market exists for a financial instrument, the Group establishes fair values by using valuation techniques. Valuation techniques include using the prices quoted in latest market transactions between knowledgeable, willing parties for reference, referencing to the current fair value of another instrument that is substantially the same in nature, discounted cash flow method and option pricing model, etc...

(2) Classification, recognition and measurement of financial assets

Financial assets which are traded in conventional manner are recognized or derecognized on the transaction date. On initial recognition, financial assets are classified into fair value through profit or loss financial assets, held-to-maturity financial assets, loans and receivables, and available-for-sale financial assets. The financial assets are initially measured at fair value. For fair value through profit or loss financial assets, the transaction costs are directly recognized into current profit or loss. For financial assets under other categories, relevant transaction costs are included in their initial recognition amounts.

Financial assets of the Group are receivables which refer to non-derivative financial assets with no quoted price in active markets and with fixed or determinable recoverable amounts. Financial assets that are classified as receivables by the Group include accounts receivable, prepayments, interest receivable, other receivables and other current assets, etc...

Receivables are measured subsequently at the amortized cost by using the effective interest rate method. Gain or losses incurred at the time of derecognition, impairment or amortization

70 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements are recorded in current profit or loss.

(3) Impairment of Finance Assets

The Group examines the book value of other financial assets at each balance sheet date, and if there are any objective evidences indicating impairment of financial assets, impairment provision is provided.

The carrying amounts of financial assets that are measured at cost or amortized cost are to be reduced to present value of estimated future cash flows. The amount reduced is recognized as impairment loss in profit or loss in current period. If there are objective evidences indicating that the value of the financial assets have been recovered after recognizing the impairment losses and the recoveries are connected, objectively, with events after the recognition of the impairment losses, the impairment losses recognized before can be reversed. The carrying amount of the financial assets after the reversal should not exceed the amortized cost on the reversal date as if there were no impairment losses recognized.

Please refer to Note IV. 8 for impairment provision recognition for accounts receivable and other receivables.

(4) Recognition and measurement of transfer of financial assets

Financial asset is derecognized if one of the following conditions is satisfied: (a) the contractual rights of receiving cash flows from the financial asset is terminated; (b) financial asset has been transferred, and substantially all risks and reward associated with the ownership of the financial asset have been transferred to transferee; (c) the financial asset has been transferred. The enterprise neither transfers nor retains substantially all the risks and rewards associated with the ownership of the financial asset, but it has not retained control over the financial asset.

If the enterprise neither transfers nor retains substantially all the risks and rewards associated with the ownership of a financial asset, and it retains control over the financial asset, it recognizes the financial asset to the extent of its continuing involvement in the transferred financial asset and recognizing associated liability. The extent of continuing involvement in the transferred asset is the extent to which the enterprise is exposed to risks of changes in the value of the transferred asset.

For a entire transfer of a financial asset that satisfies the derecognition criteria, the difference between the carrying amount of the financial asset transferred and the sum of the consideration received from the transfer and any cumulative gain or loss that had been recognized in other

71 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements comprehensive income is recognized in current profit or loss.

If a part of the transferred financial asset qualifies for derecognition, the carrying amount of the transferred financial asset in its entirety shall be allocated between the part that is derecognized and the remaining portion apportionately based on the relative fair value of each part. The difference between the carrying amount allocated to the part derecognized and the sum of the consideration received for the part derecognized and any cumulative gain or loss attributable to it that had been recognized in other comprehensive income is recognized in current profit or loss.

(5) Classification and measurement of financial liabilities

On initial recognition, financial liabilities are classified in financial liabilities at fair value through profit or loss and other financial liabilities. A financial liability is initially recognized at fair value. Transaction costs for financial liability at fair value through profit or loss are charged to current profit or loss. Transaction costs for other financial liabilities are included in their initial recognition amounts. The Group’s financial liabilities are mainly other financial liabilities and financial guarantee contracts.

(a) Other financial liabilities

Other financial liabilities are subsequently measured at amortized cost using effective interest method. Gain or losses arising from derecognition or amortization is charged to current profit or loss.

(b) Financial guarantee contracts These contracts are not classified as financial liabilities at fair value through profit or loss. It is initially measured at fair value and subsequently measured at the higher of the amount determined according to “CAS No. 13 – Contingent Events” and the initial amount less accumulated amortization recognized according to “CAS No. 14 – Revenue”.

(6) Derecognition of financial liabilities

A financial liability (or part of it) can only be derecognized only when the present obligations are fully (or partly) discharged. If an agreement between the Group (the debtor) and creditor indicates that the present financial liability are to be replaced with a new financial liability which has substantially different terms compare with the present financial liability, the present financial liability is derecognized and the new financial liability is recognized.

When a financial liability is entirely or partly derecognized, the difference between the carrying

72 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements amount of the derecognized financial liability and the consideration paid (including any non-cash assets transferred or new financial liabilities undertook) is charged to current profit or loss.

(7) Offsetting of financial assets and financial liabilities

Financial assets and financial liabilities can be presented in the balance sheet using net figure after offsetting only when the Group has the legal rights to offset the financial assets and liabilities that are already recognized and plans to execute such rights, and the Group intends to settle corresponding financial assets and liabilities on net basis or to realize the financial asset and settle the financial liability simultaneously. Other than situations mentioned above, financial assets and liabilities are presented separately in balance sheet and cannot be offset.

(8) Equity Instrument

An equity instrument is a contract that evidences any residual interest in the assets of the Group after deducting all of its liabilities. The equity instrument will increase the owners’ equity by deducting transaction costs from consideration received for the issuance of the equity instrument.

All kinds of distributions to the owners of equity instrument (excluding stock dividends) decrease the owners’ equity. The Group does not recognize fair value changes for equity instrument.

8. Receivables

(1) Recognition principle for bad debts provision

The Group examines, at the balance sheet date, the carrying amounts of receivables and impairment provision is recognized if following objective evidences that indicating impairment to receivables occurs: (a) severe financial difficulties of the debtor; (b) a breach of contract by the debtor (such as a default or breach of contract in interest or principle repayments); (c) it is probable that the debtor will be bankrupted or conduct other financial reorganization; (d) other objective evidences indicating there is an impairment of the receivables.

(2) Method of recognizing bad debt provision

(a) Determination and providing bad debt provision for receivables which are individually significant in amount and provided for bad debt individually

The Group identifies single receivable item that above RMB1,000,000.00 as receivable that individually significant in amount.

The Group conducts impairment test on individually significant receivables separately. Financial

73 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements assets that are not impaired after standalone impairment tests will be tested again by including it in a portfolio of financial assets with similar credit risk characteristics. Receivables that have been impaired in standalone test will not be tested again by including it in a portfolio of financial assets with similar credit risk characteristics.

(b) Determination of receivables that recognize bad debt provision under credit risk portfolio and bad debt provision recognition

i. Basis of determining portfolio with similar credit risk characteristics

Receivables that are not individually significant in amount and receivables that are individually significant in amount but not impaired after individual impairment test are grouped into different asset portfolios based on similarity and correlation of the credit risk characteristics. These credit risk characteristics reflect the ability of the debtor to repay all amounts due according to terms of contracts related to the assets under test and are in connection with estimation of future cash flows expected to be generated by these assets.

Basis of portfolio determination

Item Basis of portfolio determination Portfolio of receivables that are recognized for bad debt For receivables that are not impaired after impairment test

based on percentage of on individual receivable item account balances Receivables from government, petty cash advanced to Portfolio of specific accounts employees, security deposit, and receivables from related parties of the Company and its subsidiaries

ii. Recognizing bad debt provision based on credit risk portfolio

If the impairment test is carried out for a portfolio of assets, the amount of bad debt provision is recognized based on the structure of the portfolio and similar credit risk characteristics by assessing historical experience on asset impairment with similar credit risk characteristics, current economic condition, and losses that are already exist in the portfolio.

Method of recognizing bad debt provision for different portfolios

Item Method

Accounts receivable that are provided for based on Based on percentage of accounts balances percentage of balances No bad debt provision is recognized as the risk of impairment Portfolio of specific accounts does not exist according to its credit risk characteristics

74 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Bad debt provision is recognized at 1% of year-end balance for accounts receivables, of which the bad debt provision is recognized based on percentage of closing balances.

Based on historical experience, the possibility of incurring bad debt losses is remote for receivables in form of government receivables, petty cash advanced to employees, security deposit or guarantee and receivables from related parties of the Company and its subsidiaries. As a result, the Group does not recognize bad debt provision for such receivables.

The Group treated receivables that insignificant in amount individually but with over 3 years aging as receivables that insignificant in amount individually but recognize bad debt provision individually. Standalone impairment test is carried out for this kind of receivables. If any objective evidence indicate that the receivables impaired, impairment losses are recognized based on the difference between the carrying amount and the present value of estimated future cash flows. Bad debt provision is recognized accordingly. If impairment loss is recognized for a receivable, it will not be included in the portfolio of receivables that are with similar credit risk characteristics for impairment test purpose.

(3) Reversal of bad debt provision

If, subsequent to the recognition of an impairment loss on a receivable, there are objective evidences of a recovery in value of the receivable and the recovery is related objectively to events occurred after the impairment was recognized, the impairment loss recognized previously is reversed and recognized in profit or loss. The carrying amount after the reversal shall not exceed the amortized cost of the receivable on the reversal date as if there is no impairment previously.

9. Inventory

(1) Classification of inventory

Inventory mainly includes raw material, maintenance accessories and low-value consumables.

(2) Costing method of acquiring and delivering of inventory

The inventory is valued using actual cost when it is acquired. The cost of inventory includes cost of purchase, manufacturing cost and other costs. Weighted average costing is used when the inventory is used or delivered.

75 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

(3) Determination of net realizable value of the inventory and method of recognizing impairment provision

Net realizable value equals estimated selling price less estimated costs of completion, estimated selling costs and related taxes in the ordinary course of business. The determination of net realizable value of the inventory is based on reliable evidence and taking into consideration of the intents of holding the inventory and impacts of events after the balances sheet date.

On balance sheet date, inventory is measured at lower of cost and net realizable value. If the net realizable value is lower than cost, impairment provision is recognized. The impairment provision for inventory is recognized to the extent the cost exceeds its NRV on the basis of single inventory class.

If, after the impairment provision is recognized, the influence conditions are no longer exist and as a result, the NRV of the inventory is higher than its carrying amount, the impairment provision recognized previously can be reversed. The amount reversed is to be recognized in current profit or loss.

(4) The inventory system is perpetual inventory system

(5) Amortization of low-value consumables and packaging material

The low-value consumables are amortized using one-off method at the time it is used.

10. Long-term equity investment

(1) Determination of investment cost

If the long-term equity investment was originated from business combination involving entities under common control, the initial investment cost is the acquired portion of the carrying amount of the combined party’s owner equity on the combination date. If the long-term equity investment was originated from business combination involving entities not under common control, the acquisition cost is the aggregate of assets paid, liabilities incurred or undertook and fair value of equity securities issued by the acquirer. Agent fees incurred by the acquirer for the acquisition such as audit, legal service, and valuation and consultation fees, and other related administration expenses are charged to current profit or loss at the time such expenses incurred. Transaction cost incurred for issuing equity securities or debt securities, which are used as considerations for the combination, are included in the initial recognition amount of the equity securities or debt securities.

76 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Equity investments that other than the kind originated from business combinations are measured at cost initially. The investment cost differs based on ways of acquiring the long-term equity investment. It can be determined based on cash consideration actually paid by the Group or value stimulated in investment contract or agreement reached. Expenses that directly related to the acquisition of the long-term equity investment, taxes and other necessary expenditure are included in the investment cost.

(2) Subsequent measurement and recognition of gain or losses

Cost method is used for measurement of long-term equity investment if there is no common control with or significant influence to the invested entity, and there is no quotation in an active market and the fair value cannot be measured reliable. Equity method is used for measurement of long-term equity investment if there is common control with or significant influence to the invested entity.

Besides, the Company adopts cost method to measure long-term equity investment if it can implement control over the invested entity in its financial statements.

(a) Long-term equity investments that are measured using cost method

Under cost method, long-term equity investment is measured at initial investment cost. Current period investment gain or losses are recognized according to the cash dividend or profit distribution that is announced by the invested entity, except for cash dividend or profit distribution that is already announced but not distributed which is included in the consideration that actually paid.

(b) Long-term equity investments that are measured using equity method

If the initial investment cost of a long-term equity investment, which is measured using equity method, is greater than the portion of fair value of the identifiable net assets of the invested entity attributable to the Company, the initial investment cost of the long-term equity investment is not adjusted. Otherwise, the difference is charged to current profit or loss, and the cost of long-term equity investment is adjusted accordingly.

Under equity method measurement, current period investment gain or losses are the net profit or losses, which are realized by the invested entity in the same year, that attributable to the Company. The portion of net profit or loss that attributable to the Company is determined based on the fair value of the identifiable assets of the invested entity and after adjusting invested entity’s net profit according to the accounting policies and accounting period of the Group. For

77 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements unrealized gain or losses from internal transactions between the Group and its associated enterprises and joint invested enterprises, the part attributable to the Group, calculated based on percentage of shareholding, is offset and, on this basis, the investment gain or losses are calculated. However, for unrealized internal transaction losses between the Group and invested entities, the impairment loss attributable to assets transfer is not offset according to “CAS No. 8 – Asset Impairment”. For other comprehensive income of invested entity, the Company will adjust carrying amount of long-term equity investment and recognizing other comprehensive income in capital reserves accordingly.

The invested entity’s net loss attributable to the Group reduces the carrying amount of long-term equity investment and other long-term equities that in nature of net investment to the invested entity to the extent of zero. If the Group undertakes obligations of the invested entity’s extra losses, provision is to be recognized according to liabilities estimated, and charge to investment loss in current period. Net profit of the invested entity that is realized in subsequent period, the Group offset the unrealized losses using the profit attributable to the Group. After all losses are offset, resume recognizing gains attributable to the Group.

When preparing consolidated financial statements, the difference, resulted from addition of long-term equity investment and shares of net assets calculated continuously since acquisition date (or combination date) according to new shareholding, is adjusted to capital reserve. If the capital reserve is insufficient to offset, adjusting retained earnings.

(d) Disposal of long-term equity investment

In consolidated financial statements, the parent company can dispose part of the long-term equity investment to a subsidiary given that the parent does not lose control over the subsidiary. The difference between consideration received for the disposal and the part of net assets disposed attributable to the parent is recognized in owners’ equity. If the parent company losses control over a subsidiary because of long-term equity investment disposal, the accounting treatment shall refer to accounting policies stated in Note IV. 4. (2) – “Preparing consolidated financial statements”.

For long-term equity investment disposal other than situations mentioned above, the difference of carrying amount of disposed equity and the consideration actually received is charged to current profit or loss. If the long-term equity investment is measured using equity method, the comprehensive income that originally recognized in owners’ equity shall be charged to current

78 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements profit or loss apportionately at the disposal. Residual equity is recognized as long-term equity investment or other related financial assets at its carrying amount, and subsequent measurement follows accounting policies of long-term equity investment or financial assets stated in the notes. If the measurement of residual equity changes from cost method to equity method, retrospective adjustment is needed according to related rules.

(3) Basis of determining joint control over or significant influence to the invested entity

Control means a company has the ability to establish an enterprise’s financial and business policies, and can obtain benefit from the operation of the enterprise. Joint control means jointly control of a certain business activity according to the agreement of contract. It exists only when the agreement on important accounting and business policies that needs to be reached between investors who share the control rights. Significant influence means participation in decision making to a company’s finance and business policies, but could not control or jointly control with other parties to the policy making. In determining whether the Company can control or implement significant influence on invested entity, potential voting factors, such as convertible debt and options and warrants that can be converted or executed in current period held by investors and other parties, have been taking into consideration.

(4) Impairment test and recognizing impairment provision

The Group checks whether there is any indicators of impairment to the long-term equity investment on each balance sheet date. If it indicates impairment to the assets, recoverable amount will be estimated. If the recoverable amount of the assets is lower than its carrying amount, impairment provision is recognized based on the difference and charged to current profit or loss.

Impairment loss of long-term equity investment is not allowed to reverse in subsequent accounting period.

11. Investment property

Investment property is property held to earn rentals or for capital appreciation or both. It includes property and buildings that are already leased out.

An investment property is measured initially at cost. If it is probable that the benefit related to subsequent expenditures incurred for an investment property will flow into the Company and that the cost can be measured reliably, the expenditure is included in the cost of investment property. Other subsequent expenditures are charged to profit or loss in the period in which they

79 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements are incurred.

The Group adopts cost method for subsequent measurement to investment property. Straight line depreciation method is used for investment property. Its estimated useful life, ratio of residual value and annual depreciation rate are as follows: Estimated useful Estimated net residual Annual depreciation Category life (year) value ratios (%) rates (%) Property and building 10 - 45 5, 10 2 - 9.5

Please refer to Note IV. 16 “Impairment of non-current non-financial assets” for details of impairment test and impairment provision recognition for investment property.

Changing the purpose of property or inventory from self-use to investment property, recognize using carrying amount before the change, and vice versa.

When the usage of the property changed from investment property to self-use property, the property is transferred from investment property to fixed asset or intangible asset on the changing date. If the usages of the property change from self-use to earn rental or capital appreciation, the property is switched to investment property from fixed asset or intangible asset. If it switched to investment property that measured using cost method, it is recognized using the carrying amount before the switch.

The investment property is derecognized when it is disposed or ceased usage permanently and it is estimated that no benefit can be obtained from the disposal. Disposal income arising from selling, transfer, disposing and damaging the investment property, less its carrying amount and taxes related to the disposal, is recognized in profit or loss.

12. Fixed asset

(1) Recognition principles

Fixed assets refer to tangible assets that are held for the purpose of goods production, providing services, lease, or for administrative purposes with useful life of more than one accounting year.

(2) Depreciation method

Fixed asset is recognized initially at cost taking into consideration of estimated disposal expenses. The fixed asset is depreciated on straight-line basis over its estimated useful life from the next month after it reached estimated useful condition. The useful lives, estimated residual ratios and annual depreciation rates for each category of fixed assets are as follows:

80 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Estimated net Estimated useful Annual depreciation Categories residual value lives (year) rates (%) ratios (%) Plants and buildings 5-50 5, 10 1.8-19 Port facilities 50 5 1.9 Machinery equipments 3-20 5, 10 4.5-31.7 Transportation vehicles 3-14 5, 10 6.4-31.7 Fixed asset decoration 2-5 - 20-50 Office and other 3-5 5, 10 18-31.7 equipments Estimated net residual value of a fixed asset is the estimated amount that the Group would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset’s useful life is passed and in the condition expected at the end of its useful life.

(3) Impairment test and impairment provision recognition for fixed asset

For impairment test and impairment provision recognition for fixed asset, please refer to Note IV. 16 “Impairment of non-current non-financial asset”.

(4) Others

Subsequent expenditure in relation to fixed asset is recognized in the cost of the fixed asset and derecognizing the carrying amount of the part replaced if it is probable that the economic benefit related to the fixed asset will flow in the entity and the cost can be measured reliably. Subsequent expenditures other than this are charged to current profit or loss.

When a fixed asset is sold, transferred, retired or damaged, the disposal proceed net of the carrying amount and related taxes is charged in profit or loss for the current period.

The Group conduct reviews to the useful life, estimated net residual rate and depreciation method at least at each end of the accounting year. Any changes will be treated as changes in accounting estimates.

13. Construction in progress

Construction in progress is measured at actual project expenditure which includes construction expenditures, borrowing cost capitalized before the asset reaches its estimated useful condition, and other related expenses. Construction in progress is transferred to fixed asset or investment property when the asset reaches its estimated useful condition.

For impairment test and impairment provision recognition for construction-in-progress, please

81 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements refer to Note IV. 16 “Impairment of non-current non-financial asset”.

14. Borrowing cost

Borrowing cost includes loan interest, associated expenses incurred in connection with the arrangement of borrowings. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset can be capitalized starting from the time the necessary acquisition or production for bringing the asset to its estimated useful or sellable condition started, and given that the capital expenditure and borrowing cost have been incurred. The capitalization stops when the asset reaches its estimated useful or sellable conditions. Other borrowing costs are charged to profit or loss at the time they are incurred.

Interest expenses for specific borrowings actually incurred in current period less interest income from deposit of unused borrowings or investment income from temporary investment, the remaining amount can be capitalized. For general borrowings, the amount to be capitalized is determined using the weighted average of the excess part of capital expenditure that over the specific borrowings multiply the capitalization ratio of the general borrowings occupied. The capitalization ratio is determined according to the weighted average interest rate of the general borrowings.

Assets that satisfy capitalization conditions refer to fixed assets, investment assets and inventories that require long term in its construction or production to bringing it to its estimated useful or sellable condition.

If abnormal interruption occurred to the assets satisfy capitalization condition in the course of construction or production and the interrupted period over three consecutive months, capitalization of borrowing cost is freeze until the construction or production resume.

15. Intangible assets

(1) Intangible assets

An Intangible asset is the identifiable non-monetary asset without physical substances that is owned or controlled by the Group.

An intangible asset is initially measured at its cost. Expenditures related to the intangible asset are included in its cost if it is probable that the related economic benefit will flow into the Group and the cost can be measured reliably. Other expenditures apart from this will be charged to profit or loss in corresponding period at the time it incurred.

Land use right obtained is generally accounted for as intangible asset. When the plants or

82 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements buildings are constructed by the Group, expenditures on the land use right and on the buildings shall be recognized as the intangible asset and the fixed asset respectively. When the plants or buildings are purchased, the consideration paid shall be allocated between the land use right and the buildings. If it can be allocated reasonably, recognize entirely as fixed assets.

An intangible asset with a finite useful life shall be amortized by using the straight-line method over its estimated useful life when it is available for use. The depreciable amount of an intangible asset is its cost less estimated residual value and impairment provision. An intangible asset with an indefinite useful life is not amortized.

For an intangible asset with a finite useful life, its useful life and amortize method are reviewed at the end of each accounting period. Any changes will be treated under changes in accounting estimates. Besides, the useful life of the intangible assets with indefinite useful life will be reviewed at the end of each accounting period. If there is evidence indicating that it is foreseeable that the period during which the economic benefit associated with the asset would flow into the entity, its useful life will be estimated and the asset will be amortized in accordance to the amortization policies applicable for an intangible asset with finite useful life.

(2) Impairment test and impairment provision recognition for intangible assets

For impairment test and impairment provision recognition for intangible assets, please refer to Note IV. 16 “Impairment of non-current non-financial asset”.

16. Impairment of non-current non-financial assets

The Group assesses, on balance sheet date, whether there are indicators for impairment to fixed assets, construction in process, intangible assets with finite useful life, investment property measured at cost, and long-term equity investment to subsidiaries, joint ventured companies and associated companies. If there are any indictors of impairment, recoverable amount is estimated and impairment test is conducted. Impairment tests are conducted each year to goodwill, intangible assets that with indefinite useful life and intangible assets that have not reached its useful condition despite whether there is indicators of impairment.

If the recoverable amount of an asset is less than its carrying amount in the impairment test, provision for impairment shall be made for the difference and recognized as an impairment loss. The recoverable amount of an asset is the higher of its fair value less costs to sell and the present value of the future cash flows expected to be derived from the asset. The fair value of an asset is determined according to the price in a sale agreement in an arm’s length transaction. If there is no sale agreement but an active market for the asset, the fair value shall be determined

83 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements according to the current bid price. If there is no sale agreement or active market for the asset, the fair value shall be based on the best information available. Costs of disposal include legal costs related to the disposal of the asset, related taxes, cost of removing the asset and direct cost to bring the asset into its condition of sale. The present value of expected future cash flows of an asset shall be determined by estimating the future cash flows to be derived from continuing use of the asset and from its ultimate disposal and applying the appropriate discount rate to those future cash flows. Provision for impairment shall be made and recognized on an individual basis. If it is not possible to estimate the recoverable amount of the individual asset, the Company shall determine the recoverable amount of the asset group to which the asset belongs. An asset group is the minimum group of assets which can generate cash flows independently.

Once an impairment loss is recognized, it shall not be reversed in a subsequent period.

17. Revenue

(1) Revenue from rendering of service

When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction are recognized using the percentage of completion method on balance sheet date. The percentage of completion is calculated based on the proportion of services performed to date to the total volume of services to be performed.

The outcome of a transaction involving the rendering of services can be estimated reliably when all of the following conditions are satisfied: (a) the amount of revenue can be measured reliably; (b) it is probable that the associated economic benefits will flow to the entity; (c) the percentage of completion can be measured reliably; and (d) the costs incurred and to be incurred for the transaction can be measured reliably.

When the outcome of a transaction involving the rendering of services cannot be estimated reliably, revenue shall be recognized to the extent of costs incurred and expected to be recovered. Costs of service provided are charged to the current profit or loss as service costs. If the costs incurred are not expected to be recoverable, no revenue is recognized.

(2) Revenue from rendering of asset usage right

The revenue is recognized on accrual basis according to related contracts or agreements reached.

The amount of revenue from property leasing are recognized when the rentals are collected or

84 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements evidence of receipt of payments are obtained in accordance with the tenure (consider rental-free period, if any) and rental stated in the leasing contract or agreement.

(3) Interest income

The interest income shall be calculated based on the tenure of the Group’s monetary funds used by others and the actual interest rates used.

18. Government grant

Government grants are monetary assets or non-monetary assets obtained by the Group from the government free of charge. It does not include capital contributions from the government as an owner. Government grants are classified into government grants related to assets and government grants related to income.

If a government grant is in form of monetary asset, it is measured at the amount received or receivable. If a government grant is in the form of non-monetary asset, is measured at fair value. If the fair value cannot be measured reliably, it is measured at a nominal amount and recognize directly in the current profit or loss.

A government grant related to asset is recognized as deferred income, and evenly amortized and charged to profit or loss over its useful life. If a government grant related to income is used to compensate related expenses and losses in subsequent periods, it is recognized as deferred income. If it is used to compensate related expenses and losses that are already incurred, it is charged to current profit or loss directly.

If a government grant already recognized needs to be repaid, the carrying amount of related deferred income, if any, is to be reduced. Any excess are charged to current profit or loss. If there is no deferred income, the repayment is charged to current profit or loss directly.

19. Deferred income tax asset / deferred income tax liability

(1) Current corporate income tax

On the balance sheet date, current income tax liabilities (or assets) for the current period and prior periods shall be measured at the amount expected to be paid (refunded) according to requirements of taxation laws. The taxable income used to calculate current period income tax expenses is calculated by making corresponding adjustments to current period profit before tax in accordance with relevant taxation regulations.

(2) Deferred tax asset and deferred tax liability

85 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Temporary differences can be recognized as deferred tax asset or deferred tax liability using balance sheet liability method. Temporary differences arise from: the difference between the carrying amount and tax base of certain assets and liabilities; the difference between the carrying amount and the tax base of an item which are not recognized as assets or liabilities but its tax base can be determined according to relevant taxation laws.

A deferred tax liability shall not be recognized for the taxable temporary differences arising from the following events: (a) the initial recognition of goodwill; (b) the initial recognition of an asset or liability in a transaction which contains both of the following characteristics: (i) the transaction is not a business combination; (ii) at the time of the transaction, it affects neither accounting profit nor taxable profit (or deductible loss). For taxable temporary differences associated with investment in subsidiaries, associates and interests in jointly controlled enterprises, a deferred tax liability shall not be recognized if both of the following conditions are satisfied: (a) the Group is able to control the timing of the reversal of the temporary differences; and (b) it is probable that the temporary difference will not reverse in the foreseeable future. Except for exceptions mentioned above, the Group recognizes all other taxable temporary difference as deferred tax liability.

A deferred tax asset shall not be recognized for the deductible temporary differences associated with the initial recognition of an asset or liability in a transaction which contains both of the following characteristics: (a) the transaction is not a business combination; (b) at the time of the transaction, it affects neither accounting profit nor taxable profit (or deductible loss). For deductible temporary differences associated with investment in subsidiaries, associates and interests in jointly controlled enterprises, a deferred tax asset shall not be recognized if one of the following conditions is satisfied: (a) it is probable that the temporary difference will not reverse in the foreseeable future; and (b) taxable profits will not be available in the future, against which the temporary difference can be utilized. Except for exceptions mentioned above, the Group recognizes deductible temporary difference as deferred tax asset to the extent of the future taxable profit which is probably achieved by the Group.

A deferred tax asset shall be recognized for the carry forward of unused deductible losses and tax credits to the extent that it is probable that future taxable profit will be available against which the deductible losses and tax credits can be utilized.

At the balance sheet date, deferred tax assets and deferred tax liabilities shall be measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, according to the requirement of tax laws.

86 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

At the balance sheet date, the carrying amount of a deferred tax asset shall be reviewed. The Company shall reduce the carrying amount of a deferred tax asset to the extent that it is no longer probable that sufficient taxable profit will be available in future periods to allow the benefit of the deferred tax asset to be utilized. Any such reduction in amount shall be reversed to the extent that it becomes probable that sufficient taxable profit will be available.

(3) Corporate income tax

The corporate income tax includes current income tax and deferred income tax.

The current income tax and deferred income tax shall be recognized in the current profit or loss except for: (a) the income tax arising from events or transactions which are recognized in the comprehensive income or owners’ equity are recognized in the comprehensive income or owners’ equity accordingly; and (b) the income tax arising from business combinations which are adjusted to the carrying amount of goodwill.

20. Lease

A finance lease is a lease that transfers substantially all the risks and rewards associated with the ownership of an asset. Title of the asset may or may not eventually be transferred. An operating lease is a lease other than a finance lease. The Group’s lease is operating lease.

(1) Accounting treatment for the Group as lessee under operating leases

Lease payments under an operating lease are recognized as cost of relevant assets or charged to profit or loss for the current period on straight-line basis over the lease term. Initial direct costs incurred are charged to profit or loss for the current period directly. Contingent rentals are charged to profit or loss in the period in which they are actually incurred.

(2) Accounting treatment for the Group as lessor under operating leases

Lease receipts under an operating lease are recognized by the in the current profit or loss on a straight-line basis over the lease term. Significant initial direct costs are capitalized when they are incurred, and are recognized in profit or loss over the lease term on the basis on which the lease income is recognized. Insignificant initial direct costs shall be charged to the current profit or loss directly. Contingent rentals are charged to profit or loss in the period in which they are actually incurred.

21. Employee remuneration

In the accounting period in which an employee has rendered service to the Group, the Group

87 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements recognizes the employee benefits payable as a liability.

Expenditures paid by the Group for the social security system set up the government, such as basic pension insurance, medical insurance, housing funds and others, are recognized in the costs of related assets or the current profit or loss.

When the Group terminates the employment relationship with employees before the end of the employment contracts or provides compensation as an offer to encourage employees to accept voluntary redundancy, a provision shall be recognized for the compensation arising from termination of employment relationship with employees, with a corresponding charge to the profit or loss for the current accounting period, when both of the following conditions are satisfied: (a) the Group has a formal plan for termination of employment relationship or has made an offer for voluntary redundancy, which will be implemented immediately; (b) the Group cannot unilaterally withdraw from the termination plan or the redundancy offer.

The earlier retirement plan shall be accounted for in accordance with the accounting principles for compensation for termination of employment. The salaries or wages and the social contributions to be paid for the employees who retire before schedule from the date on which the employees stop rendering services to the Company to the scheduled retirement date, shall be recognized (as compensation for termination of employment) in the current profit or loss if the recognition principles for provisions are satisfied.

22. Significant accounting judgments and estimates

When adopting the accounting policies, the Group needs to make judgments, estimates and assumptions for the carrying amount of items which are presented in financial statements and cannot be measured accurately due to internal uncertainties of business. The judgments, estimates and assumptions that are made according to historical experience of the management and with consideration of other relevant factors will have effects on the reported amounts of revenue, expenses, assets as well as liabilities and the disclosure of contingent liabilities at the balance sheet date. The uncertainties of these estimates will probably result in significant adjustments on the carrying amounts of assets or liabilities which will be affected by those judgments, estimates and assumptions in future accounting periods.

The judgments, estimates and assumptions are reviewed by the Group periodically on going concern basis. If the changes in accounting estimates affect current period only, the amounts affected are recognized in current period. If the change affects both current and future periods, the amounts affected are recognized in the current accounting period as well as subsequent

88 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements accounting periods.

At the balance sheet date, significant areas that require the Group to make judgments, estimates and assumptions to the amounts of financial statements items are as follows:

(1) Bad debt provision recognition

The allowance method is adopted by the Group to account for losses on bad debts in accordance with the accounting policies for receivables. Impairment of accounts receivable is made based on estimation of its recoverability, which requires the management to make judgments and estimates. The difference between the actual outcome and the estimates will have effects on the carrying amounts of accounts receivable and on provision or reversal of the provision for bad debts of the accounting period in which the estimates will be changed.

(2) Impairment provision for non-current non-financial assets

At the balance sheet date, the Group judges whether there are indicators of impairment for non-current assets other than financial assets. For an intangible asset with an indefinite useful life, except for annually impairment test, if there are any indicators of impairment occur, an impairment test will be conducted. For non-current assets other than financial assets, an impairment test shall be made if there are evidences indicating the carrying amounts cannot be recovered in full amount.

An asset or asset group is impaired when its carrying amount is higher than its recoverable amount, i.e. the higher of its fair value less the disposal expenses and the present value of the estimated future cash flows.

The net amount of fair value less the disposal expenses is determined with reference to the quoted price of similar assets in a sales agreement in an arm’s length transaction or an observable market price less incremental costs directly attributable to disposal of the asset.

When estimating the present value of future cash flows, significant judgments are involved for the production output, selling price, relevant business costs of the asset (or asset group) and the discount rate adopted in calculating the present value. In estimating the recoverable amount, the Group will adopt all information available, such as forecasts for the production output, the selling price and relevant business costs, which are made according to reasonable and supportive assumptions.

(3) Depreciation and amortization

Taking the residual value into consideration, an investment property, fixed asset and intangible

89 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements asset are depreciated or amortized on a straight-line basis over its useful life. The Group reviews the useful life periodically to determine the amount of depreciation or amortization which shall be recognized in each accounting period. The useful life is determined according to historical experience of similar assets and technological renovation estimated. The amount of depreciation or amortization shall be adjusted in future accounting periods if there are material changes in estimates made before.

(4) Deferred income tax asset

A deferred tax asset shall be recognized for the unused deductible losses to the extent that it is probable that future taxable profit will be available against which the deductible losses can be utilized. Taking the taxation planning into consideration, the management of the Group is required to make significant amount of judgments to estimate the time and the amount of future taxable profit in order to determine the amount of deferred income tax assets to be recognized.

(5) Corporate income tax

For some transactions in the Group’s ordinary course of business, uncertainties exist in their tax treatment and calculation. An approval from the tax authority is needed to determine whether an item is deductible before tax. If the final confirmation from the tax authority differs with the original estimation, the difference will have effects on the current income tax and deferred income tax of the period in which the final confirmation is made by the tax authority.

(6) Estimated value of fixed asset

For the logistic warehouse, both the construction period and the final completion settlement period are in long-term. A logistic warehouse that has reached its estimated useful condition but before final completion settlement is recognized according to the actual cost incurred and starts depreciation from the next month it reached the useful condition. After final completion settlement is done, the book value previously recognized in book will be adjusted to its actual cost. The Group’s management believes that recognizing fixed asset according to actual cost incurred before the final completion settlement and depreciate it on this basis is appropriate.

V. TAXES 1. Value-added tax

The Company and its domestic subsidiaries are taxpayers of value-added tax (VAT). The taxable amount for VAT is the remaining of the current output tax offset by deductible input tax. The output tax rate of VAT is 17% on taxable income. 6% VAT tax rate is applicable for revenue

90 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements from water supply. 3% VAT tax rate is applicable for small scale taxpayers of VAT.

2. Business tax

It is levied at 3% or 5% to the Company and its subsidiaries on the taxable revenue.

3. Urban maintenance and construction tax, educational surcharge and local educational surcharge

The Company and Shenzhen Baowan International Logistic Co., Ltd (Shenzhen Baowan) and Baowan Logistic Holdings Co., Ltd (Baowan Holding), two subsidiaries of the Company located in Shenzhen pay urban maintenance and construction tax at 1% on the turnover tax actually paid before 1 December 2010, and 7% thereafter. Subsidiaries that are outside Shenzhen pay urban maintenance and construction tax at 5% or 7% on the turnover tax actually paid.

The Company and its subsidiaries accrue and pay educational surcharge at 3% on turnover tax actually paid.

The Company and its subsidiaries located in Shenzhen pay local educational surcharges at 2% on turnover tax actually paid starting from 1 January 2011 pursuant to Shen Fu Ban (2011) No.60 “Notice of Publishing the Interim Administrative Measures on Imposing Shenzhen Municipal Local Educational Surcharge” issued by the General Office of Shenzhen Municipal Government.

4. Corporate income tax

Tax rate applicable for Tax rate applicable Name of the Company and its subsidiaries 2011 (%) for 2010 (%)

The Company (note (1)) 24 22

Shenzhen Baowan (note (2)) 24 22

Baowan Holding 25 - Shanghai Baowan International Logistic Co., Ltd. (Shanghai Baowan) 25 25 (note (2)) Guangzhou Baowan International Logistic Co., Ltd. (Guangzhou 25 25 Baowan) Kunshan Baowan International Logistic Co., Ltd. (Kunshan Baowan) 25 25

Tianjin Baowan International Logistic Co., Ltd. (Tianjin Baowan) 25 25

91 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Tax rate applicable for Tax rate applicable Name of the Company and its subsidiaries 2011 (%) for 2010 (%)

Langfang Baowan International Logistic Co., Ltd. (Langfang Baowan) 25 13 Chengdu Xindu Baowan International Logistic Co., Ltd. (Chengdu 25 25 Xindu Baowan) Ch engdu Longquan Baowan International Logistic Co., Ltd. 25 25 (Chengdu Longquan Baowan) Nanjing Baowan International Logistic Co., Ltd. (Nanjing Baowan) 25 25 Mingjiang (Shanghai) International Logistic Co., Ltd. (Shanghai 25 25 Mingjiang) Tianjin Bingang Baowan International Logistic Co., Ltd. (Tianjin 25 - Bingang Baowan) Note (1): According to “State Council Notice on Implementing Transitional Preferential Policies to Corporate Income Tax” (Guo Fa [2007] No. 39 issued by State Administration of Taxation, the preferential tax rates enjoyed by enterprises will be phased to legal tax rate in 5 years step by step since 1 January 2008. As a result, the Company and Shenzhen Baowan enjoyed 24% of tax rate in 2011.

Note (2): The corporate income tax for Shanghai Baowan is levied on assessment basis. Its taxable income is determined at 10% of operating revenue 5. Property tax

In accordance with Article 5 of “Notice to Publish “Reply to Issues Related to Property Tax and Vehicle and Vessel Usage Tax””, Shen Di Shui Fa (1999) No.374 issued by Shenzhen Local Taxation Bureau, property leased out by manufacturing or business entity is taxed at 1.2% on the bases of 70% of the original cost of the property.

Properties of the Group that situated in Shenzhen are taxed according to this notice. Properties situated in other cities are taxed according to local regulations.

VI. BUSINESS COMBINATION AND CONSOLIDATED FINANCIAL STATEMENTS

1. Details of subsidiaries

(1) Subsidiaries that are obtained by setup or investment

Monetary unit: in ten thousands Yuan (RMB ’0000)

Type of Registered Business Registered Name of the subsidiary Business scope subsidiary place nature capital

Baowan Holding (note a) holding Shenzhen Investment 50,000.00 Investment

92 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Monetary unit: in ten thousands Yuan (RMB ’0000)

Type of Registered Business Registered Name of the subsidiary Business scope subsidiary place nature capital

Shanghai Baowan (note b) holding Shanghai Service 16,000.00 Storage, stack

Guangzhou Baowan (note holding Guangzhou Service 5,000.00 Storage, stack b)

Kunshan Baowan (note b) holding Kunshan Service 12,000.00 Storage, stack

Tianjin Baowan (note c) holding Tianjin Service 15,000.00 Storage, stack

Langfang Baowan (note c, holding Langfang Service 9,000.00 Storage, stack d) Chengdu Xindu Baowan holding Chengdu Service 6,000.00 Storage, stack (note c) Chengdu Longquan holding Chengdu Service 10,000.00 Storage, stack Baowan (note c)

Nanjing Baowan (note c, d) holding Nanjing Service 13,000.00 Storage, stack

Tianjin Bingang Baowan holding Tianjin Service 5,000.00 Storage, stack (note d, e)

(Continued) Monetary unit: in ten thousands Yuan (RMB ’0000)

Balance of other Amount of items that Name of the Types of business Legal Organization investment at substantially forms subsidiary formation representative code the year end net investment to subsidiary Baowan Holding Limited liability Fan Zhaoping 58007384-6 83,053 — (note a) Shanghai Baowan Limited liability Ren Yongping 76057836-6 21,100 — (note b) Guangzhou Limited liability Ren Yongping 76954322-3 4,851 — Baowan (note b) Kunshan Baowan Limited liability Ren Yongping 79231068-X 12,946 — (note b) Tianjin Baowan Limited liability Ren Yongping 78334845-9 12,569 — (note c) Langfang Baowan Limited liability Ren Yongping 79546095-8 8,465 — (note c, d) Chengdu Xindu Limited liability Ren Yongping 66533423-2 5,258 — Baowan (note c) Chengdu Longquan Limited liability Ren Yongping 66530615-1 9,189 — Baowan (note c) Nanjing Baowan Limited liability Ren Yongping 67133602-3 12,883 —

93 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

(note c, d) Tianjin Bingang Limited liability Ren Yongping 58327930-5 5,000 — Baowan (note d, e)

(Continued) Monetary unit: RMB Yuan Owners' equity of parent Amount in minority company after deducting the shareholder Percentage of Percentage of In the scope of Minority excess of Minority's interest used to Name of Subsidiary Shareholding voting power consolidation shareholders’ attributable share of losses in offset minority (%) (%) (Yes/No) interest current period over its share of shareholder loss opening balance of

subsidiary's owners' equity Baowan Holding (note a) 77.36 77.36 Yes 248,402,786.71 — — Shanghai Baowan (note b) 100.00 100.00 Yes — — — Guangzhou Baowan (note 100.00 100.00 Yes — — — b) Kunshan Baowan (note b) 100.00 100.00 Yes — — —

Tianjin Baowan (note c) 100.00 100.00 Yes — — — Langfang Baowan (note c, 100.00 100.00 Yes — — — d) Chengdu Xindu Baowan 100.00 100.00 Yes — — — (note c) Chengdu Longquan 100.00 100.00 Yes — — — Baowan (note c)

Nanjing Baowan (note c, d) 100.00 100.00 Yes — — — Tianjin Bingang Baowan 100.00 100.00 Yes — — — (note d, e)

Note a: Baowan Holding was established by the Company and Nanshan Group, the controlling shareholder of the Company, on 28 July 2011 with registered capital of RMB500,000,000.00.

According to the resolution of “Proposal of Equity Integration of Baowan Logistic” passed on the 4th meeting of the 6th Board of Directors in 2011 and the “Agreement on Contribution to Incorporate Baowan Logistic Holdings Co., Ltd” signed between the Company and Nanshan Group, the Company contributed in Baowan Holding with phase 1 cash contribution of RMB116,040,000.00, and phase 2 equity contribution of 60% shareholdings each in Nanjing Baowan, Tianjin Baowan, Langfang Baowan, Mingjiang (Shanghai) International Logistic Co., Ltd (Shanghai Mingjiang), Chengdu Xindu Baowan and Chengdu Longquan Baowan respectively, and 100% shareholdings each in Shanghai Baowan, Guangzhou Baowan and Kunshan Baowan respectively. The Company holds 77.36% of shareholdings in Baowan Holding. Nanshan Group contributed in Baowan Holding with phase 1 cash contribution of RMB33,960,000.00 and phase 2 equity contribution of 40% shareholdings in Nanjing Baowan,

94 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Tianjin Baowan, Langfang Baowan, Mingjiang (Shanghai) International Logistic Co., Ltd (Shanghai Mingjiang), Chengdu Xindu Baowan and Chengdu Longquan Baowan respectively. Nanshan Group holds 22.64% of shareholdings in Baowan Holding.

On 20 October 2011, the Company signed “Supplementary Agreement Regarding Equity Contribution to Baowan Logistic Holding Co., Ltd” with Baowan Holding and Nanshan Group. According to the agreement, the delivery date of equity contribution is determined to be the date on which the procedures of alteration of industrial and commerce records of the last subsidiary finished.

As at 28 October 2011, all alteration of business registration information of Nanjing Baowan, Tianjin Baowan, Langfang Baowan, Shanghai Mingjiang, Chengdu Xindu Baowan, and Chengdu Longquan Baowan held by the Company and Nanshan Group respectively and Shanghai Baowan, Guangzhou Baowan and Kunshan Baowan held by the Company have been finished. On 31 October 2011, the Company signed “Equity Asset Delivery Note” with Baowan Holding and Nanshan Group. After that, Baowan Holding holds 100% of the shareholdings in the subsidiaries which are invested as contributions.

The business scope of Baowan Holding includes: investing in logistic industry, trading industry and related investment consultation, warehousing agent, machinery and equipment leasing; domestic logistic service, goods loading, unloading and handling, logistic and commerce information consultation, domestic trading (all above excludes items prohibited by law, administrative regulations and the State Council; approvals are needed for restricted items).

Note b: The Company originally held 100% equity in these subsidiaries. As described in note VI. 1 (1) note a, the shareholdings in these subsidiaries held by the Company are invested in Baowan Holding as contributions. After the investment, the Company held, indirectly through Baowan Holding, 100% equity in these subsidiaries.

Note c: The Company originally held 60% equity in these subsidiaries. As described in note VI. 1 (1) note a, the shareholdings in these subsidiaries held by the Company are invested in Baowan Holding as contributions. After the investment, the Company held, indirectly through Baowan Holding, 100% equity in these subsidiaries.

Note d: As at 31 December 2011, these subsidiaries are still under construction period.

Note e: this company is incorporated on 19 October 2011 by Baowan Holding. Its registered capital is RMB50,000,000.00 and its business tenure is 50 years.

95 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

(2) Subsidiaries acquired through business combinations involving entities under common control Monetary unit: in ten thousands Yuan (RMB ’0000)

Type of Registered Business Registered Name of subsidiary Business scope subsidiary place nature capital Wholly Shenzhen Baowan Shenzhen Service 3,441 Storage, stack owned

Shanghai Mingjiang holding Shanghai Service 12,000 Storage, stack

(Continued) Monetary unit: in ten thousands Yuan

(RMB ’0000)

Balance of other Types of Amount of items that Legal Organization Name of subsidiary business investment at the substantially forms Representative code formation year end net investment to subsidiary Shenzhen Baowan Limited liability Liu Wei 61885906-0 4,127 - Shanghai Mingjiang Limited liability Ren Yongping 79149154-6 10,667 -

(Continued) Monetary unit: RMB Yuan

Owners' equity of parent Amount in company after deducting Percentage minority Percentage of In the scope of Minority the excess of Minority's Name of of voting shareholder Shareholding consolidation shareholders’ attributable share of losses Subsidiary power interest used to (%) (Yes/No) interest in current period over its (%) offset minority share of opening balance of shareholder loss subsidiary's owners' equity Shenzhen Baowan 100 100 Yes - - - Shanghai Mingjiang 100 100 Yes - - - (note)

Note: the Company originally held 60% of its equity. As described in note VI. 1 (1) note a, the Company invested the equity holding as contribution to Baowan Holding. As a result, the Company held, directly through Baowan Holding, 100% equity of Shanghai Mingjiang. As at 31 December 2011, the subsidiary is still under construction.

2. Explanation to changes in scope of consolidation

As described in Note VI. 1 Baowan Holding and Tianjin Bingang Baowan are new subsidiaries

96 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

incorporated by the Group in 2011 and the scope of consolidation for 2011 is expanded accordingly.

3. Entities that are newly included in the scope of consolidation in the reporting period

Name of entity Net asset at year end Net profit for current year Baowan Holding 1,097,185,453.68 15,828,778.50 Tianjin Bingang Baowan 49,969,651.36 (30,348.64)

VII. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Unless otherwise specified, for the following noted items (including notes to main items of the Company’s financial statements), the beginning of the year refers to 1 January 2011 while the year end refers to 31 December 2011; the prior year refers to the year 2010 and current year refers to the year 2011.

1. Cash and bank balances Closing balance Opening balance Amount in Amount in Item Exchange Exchan Foreign Amount in RMB Foreign Amount in RMB Rate ge Rate Currency Currency Cash on hand: -RMB - - 14,654.66 - - 12,375.57 -HKD 45.13 0.81 36.56 2,907.13 0.85 2,471.06 -EUR 600.24 8.16 4,897.96 600.24 8.81 5,288.11 Subtotal 19,589.18 20,134.74 Bank deposit: -RMB - - 401,635,858.59 - - 186,019,632.35 -USD 64,644.37 6.30 407,259.53 67,220.49 6.62 444,999.85 -HKD 54,460.99 0.81 44,113.40 98,586.47 0.85 83,823.21 subtotal 402,087,231.52 186,548,455.41 Other monetary fund: -RMB - - 16,116.00 - - 25,000.00 Subtotal 16,116.00 25,000.00 Total 402,122,936.70 186,593,590.15

Note: The balance of other monetary fund is the credit card’s security deposit.

2. Receivables

(1) Receivables presented by types Type Closing balance

97 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Book value Bad debt provision Percentage Percentage Amount Amount （%）（%） Accounts receivables that are significant in amount individually and provided for bad debt individually Accounts receivables that are provided for

bad debt by combination Accounts receivables that are provided for bad debt based on percentage of year-end 39,147,876.18 100.00 386,026.91 1.00 balances Subtotal of combination 39,147,876.18 100.00 386,026.91 1.00 Accounts receivables that are insignificant in amount individually but provided for bad debt - - - - individually Total 39,147,876.18 100.00 386,026.91 1.00

(Continued) Opening balance Book value Bad debt provision Type Percentage Percentage Amount Amount （%）（%） Accounts receivables that are significant in amount individually and provided for bad - - - - debt individually Accounts receivables that are provided for bad debt by combination Accounts receivables that are provided for bad debt based on percentage of year-end 40,608,795.61 100.00 406,227.46 1.00 balances Subtotal of combination 40,608,795.61 100.00 406,227.46 1.00 Accounts receivables that are insignificant in amount individually but provided for bad - - - - debt individually Total 40,608,795.61 100.00 406,227.46 1.00

(2) Accounts receivables presented by aging Closing balance Item Amount Percentage （%） Bad debt provision Book value Within 1 year 38,094,244.53 97.30 375,490.59 37,718,753.94 1~ 2 year 409,848.45 1.05 4,098.48 405,749.97 2~3years 606,146.60 1.55 6,061.47 600,085.13 Over 3 years 37,636.60 0.10 376.37 37,260.23 Total 39,147,876.18 100.00 386,026.91 38,761,849.27

(Continued) Opening balance Item Amount Percentage （%） Bad debt provision Book value Within 1 year 39,096,583.50 96.28 390,457.50 3 8,706,126.00

98 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

1~ 2 year 729,623.27 1.80 7,944.07 721,679.20 2~3years 405,419.92 1.00 4,054.20 401,365.72 Over 3 years 377,168.92 0.92 3,771.69 373,397.23 Total 40,608,795.61 100.00 406,227.46 40,202,568.15

(3) Accounts receivables provided for bad debt by combination Provision for bad Combination Book value Percentage (%) debt Accounts receivables that are provided for bad debt 39,147,876.18 1.00 386,026.91 based on percentage of year-end balances

(4) During the reporting period, there are no receivables due from any shareholders held over 5% (inclusive) voting shares of the Company.

(5) Top five accounts receivables Percentage of Relationship with Name of entity Amount Aging total accounts the Group receivable (%) Shenzhen Weisheng Offshore Oil Non-related party Within 1 year 27.40 Technology Co. , Ltd . 10,727,569.46 Husky Oil China Ltd . Non-related party 3,923,703.35 Within 1 year 10.02

Shenzhen ST-Anda Logistics Co. Ltd. Non-related party 2,284,434.65 Within 1 year 5.84

China Oilfield Services Limited Non-related party 2,217,636.83 Within 1 year 5.66 Shenzhen Jutal Machinery Equipment Non-related party 1,833,676.70 Within 1 year 4.68 Co., Ltd. Total 20,987,020.99 53.60

(6) Receivables from related parties

For details, see Note VIII.6 “Receivables from and payables to related parties”.

3. Prepayments

(1) Prepayment presented by aging

Closing balance Opening balance Account aging Percentage Amount Percentage (%) Amount (%) Within 1 year 1,232,487.02 87.11 2,706,157.02 91.53 1~ 2 year - - - - 2~3 years - - - - Over 3 years 182,367.43 12.89 250,509.31 8.47 Total 1,414,854.45 100.00 2,956,666.33 100.00

99 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

(2) There are no prepayment balances at the year end to any shareholders held over 5% (inclusive) voting shares of the Company and to other related parties.

4. Interest Receivable Item Opening balance Increase Decrease Closing balance Interest receivable - 743,516.68 - 743,516.68 from fixed deposit

5. Other Receivables

(1) Other receivables presented by types Closing balance

Type Book value Bad debt provision Percentage Percentage Amount Amount (%) (%) Accounts receivables that are significant in amount individually and - - - - provided for bad debt individually Accounts receivables that are provided for bad debt by combination: Accounts receivables that are provided for bad debt based on 919,893.00 11.87 9,198.93 1.00 percentage of year-end balances Combination for receiva bles that are 6,832,772.95 88.13 - - not recognize bad debt Subtotal of combination 7,752,665.95 100.00 9,198.93 0.12 Accounts receivables that are insignificant in amount individually but - - - - provided for bad debt individually Total 7,752,665.95 100.00 9,198.93 0.12

(Continued) Opening balance

provided for bad debt by combination: Accounts receivables that are provided for bad debt based on - - - - percentage of year-end balances

100 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Combination for receivables that are 9,282,760.01 100.00 - - not recognize bad debt Subtotal of combination 9,282,760.01 100.00 - - Accounts receivables that are insignificant in amount individually but - - - - provided for bad debt individually Total 9,282,760.01 100.00 - -

(2) Other receivables presented by account aging Closing balance Item Amount Percentage (%) Bad debt provision Book value Within 1 year 5,692,235.45 73.42 6,100.12 5,686,135.33 1~ 2 years 1,311,935.30 16.92 2,098.81 1,309,836.49 2~3 years 277,516.9 5 3.58 1,000.00 276,516.95 Over 3 years 470,978.25 6.08 - 470,978.25 Total 7,752,665.95 100.00 9,198.93 7,743,467.02

(Continued) Opening balance Item Amount Percentage (%) Bad debt provision Book value Within 1 year 7,215,429 .59 77.73 - 7,215,429.59 1~ 2 year 553,544.20 5.96 - 553,544.20 2~3 years 444,754.97 4.79 - 444,754.97 Over 3 years 1,069,031.25 11.52 - 1,069,031.25 Total 9,282,760.01 100.00 - 9,282,760.01

(3) Other receivables provided for bad debt by combination Provision for bad Combination Book value Percentage (%) debt Other receivables that are provided for bad debt 919,893.00 1.00 9,198.93 based on percentage of year-end balances

(4) There are no other receivables in the year end balances due from any shareholders held over 5% (inclusive) voting shares of the Company.

(5) Top five other receivable accounts Percentage of Relationship with The Name of entity Amount Aging Total Receivables Group (%) Tianjin Tanggu District Construction and Non-related party 1,000,000.00 1 to 2 years 12.90 Management Committee Jiangsu International Business Center Planning Non-related party 499,000.00 Within 1 year 6.44 and Construction Bureau North China Grid Co., Ltd. Langfang Electricity Non-related party 345,600.00 Within 1 year 4.46 Supply Company

101 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Percentage of Relationship with The Name of entity Amount Aging Total Receivables Group (%) Langfang Yuantong Construction and Industrial Non-related party 180,000.00 Within 1 year 2.32 Group Co., Ltd. Jiangsu Provincial Power Co., Ltd Kunshan Non-related party 130,000.00 Within 1 year 1.68 Power Supply Company Total 2,154,600.00 27.79

(6) Receivables from related parties

For details, see Note VIII.6 Receivables from and payables to related parties.

6. Inventory

(1) Classification of the inventory Closing Balance Item Carrying amount Impairment Provision Book Value Material and maintenance 1,129,514.30 - 1,129,514.30 accessories (Continued) Opening Balance Item Carrying amount Impairment Provision Book Value Material and maintenance 918,995.81 - 918,995.81 accessories

(2) Inventory presented by aging Item Within 1 year 1~ 2 year 2~3years Total Material and maintenance accessories 420,925.33 660,235.30 48,353.67 1,129,514.30

7. Other current assets Item Closing balance Opening balance Wealth management product 369,620,000.00 -

Note: amount up to RMB300,000,000.00 are bank wealth management product purchased by the Group in November 2011. According to agreement signed with commercial bank, the expected annualized rate of return is 6.3%, and the term of the product is in the range from 90 days to 115 days.

Amount up to RMB69,620,000.00 are trust product purchased by the Group in December 2011 through commercial bank. According to “Guangdong Financial Trust Prudent Notes Investment Open Investment of Gathered Capital Entrusted Plan”, the annualized rate of return is 6.5% and

102 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements its term is 75 days.

8. Long-term equity investment

(1) Classification of the long-term equity investment

Item Opening Balance Increase Decrease Closing Balance

Investment in associated enterprises 350,681,587.87 22,456,865.14 48,000,000.00 325,138,453.01 Less: impairment provision for long-term - - - - equity investment Total 350,681,587.87 22,456,865.14 48,000,000.00 325,138,453.01

(2) Details of the long-term equity investment Accounting Increase or Investee treatment Investment Cost Opening Balance Closing Balance decrease Method Shenzhen Chiwan Sembawang Equity Engineering Co., Ltd. 79,488,000.00 345,758,574.50 (24,801,629.12) 320,956,945.38 method (Sembawang Company) Shenzhen Chiwan Offshore Petroleum Equity Equipment Repair & 3,312,000.00 4,923,013.37 (741,505.74) 4,181,507.63 method Manufacture Co., Ltd. (CPEC) Total 82,800,000.00 350,681,587.87 (25,543,134.86) 325,138,453.01

(Continued) Explanation on inconsistency between Percentage of Percentage of Provision Provision the shareholding Cash dividend this Investee Shareholding in voting power in for Accrued percentage and voting year Investee (%) investee (%) Impairment this year power percentage in investee Sembawang 32.00 32.00 - - - 48,000,000.00 Company CPEC 20.00 20.00 - - - - Total - - 48,000,000.00

(3) Investment in associated companies Voting Shareholding percentage enterprise Registered Business Investee Legal rep. Registered capital held by the held by the nature place nature Group (%) Group in investee (%)

103 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Sembawang Limited Shenzhen Deng Jianhui Service USD30 million 32.00 32.00 Company liability Limited CPEC Shenzhen Sun Jianjun Service USD2 million 20.00 20.00 liability

(Continued) Total sales Total assets at the Total liability at Total net asset at Total net profit for Investee revenue for year end the year end the year end 2011 2011 Sembawang Company 1,355,465,453.93 365,166,159.08 990,299,294.85 1,051,369,599.63 72,494,909.00 CPEC 26,292,637.63 5,837,636.80 20,455,000.83 30,136,260.90 (3,707,528.68)

(4) There is no restrictions to the ability of transferring funds to the Group from the investee entities which are held by the Group as long-term equity investment as at 31 December 2011.

9. Investment property

(1) Details of the investment property Item Opening Balance Increase Decrease Closing Balance Investment properties which are subsequently 656,722,808.71 77,180,397.19 26,421,017.20 707,482,188.70 measured using cost model Less: impairment provision for the - - - - - investment property Total 656,722,808.71 77,180,397.19 26,421,017.20 707,482,188.70

Note: among the current year’s increase figure of investment property, amount up to RMB59,144,349.25 is transferred from construction-in-progress as the project is finished. Amount up to RMB5,993,583.00 in original cost and RMB5,832,447.05 of book value are reclassified from self-use property and buildings to investment property account according to the intent of holding of the management of Chengdu Xindu Baowan.

(2) Investment properties which are subsequently measured using cost model

Item Opening Balance Increase Decrease Closing Balance A. Original Cost 832,535,130.78 77,180,397.19 - 909,715,527.97 Property and buildings 832,535,130.78 77,180,397.19 - 909,715,527.97 Land use right - - - - B. Accumulated depreciation Addition in Accrued in

and amortization 2011 2011 Total accumulated 175,812,322.07 161,135.95 26,259,881.25 - 202,233,339.27 depreciation and amortization Property and buildings 175,812,322.07 161,135.95 26,259,881.25 - 202,233,339.27 Land use right - - - - -

104 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Item Opening Balance Increase Decrease Closing Balance C. Total impairment - - - - provision Property and buildings - - - - Land use right - - - - D. Total carrying amount 656,722,808.71 707,482,188.70 Property and buildings 656,722,808.71 707,482,188.70 Land use right - -

Note (1): Depreciation and amortization of current year are RMB26,259,881.25.

Note (2): As at 31 December 2011, the certificates of property right for the Group’s investment property with cost of RMB317,183,104.95 and net book value of RMB298,844,984.29 are still not obtained due to the final completion settlement not performed. The certificates of property right for property and buildings with cost of RMB266,599,064.28 and net book value of RMB133,770,928.16 are still not obtained due to the land on which the properties were constructed are leased from Nanshan Group. Please refer to note VII. 12 for details.

10. Fixed assets

(1) Details of the fixed assets Item Opening balance Increase Decrease Closing balance A. Total original cost 575,815,022.23 68,047,187.95 10,991,269.33 632,870,940.85 Including: property & buildings 328,672,712.56 46,780,338.53 6,264,441.57 369,188,609.52 Port facility 45,460,529.33 1,990.00 - 45,462,519.33 Machinery & equipment 100,347,585.78 17,082,515.02 2,949,882.65 114,480,218.15 Transportation devices 15,348,763.90 2,161,335.09 1,316,392.99 16,193,706.00 fixed assets renovation 13,432,175.19 335,489.00 - 13,767,664.19 Office and other equipment 72,553,255.47 1,685,520.31 460,552.12 73,778,223.66 B. Accumulated depreciation Total accumulated depreciation 168,820,431.23 30,487,611.10 4,283,678.85 195,024,363.48 Including: property & buildings 40,328,710.98 14,589,071.22 167,089.91 54,750,692.29 Port facility 30,497,395.08 864,539.94 - 31,361,935.02 Machinery & equipment 41,187,373.04 8,727,849.18 2,488,802.42 47,426,419.80 Transportation devices 9,637,220.83 1,582,894.22 1,230,810.79 9,989,304.26 fixed assets renovation 13,190,759.25 128,095.42 - 13,318,854.67 Office and other equipment 33,978,972.05 4,595,161.12 396,975.73 38,177,157.44 C. Total net book value 406,994,591.00 437,846,577.37 Including: property & buildings 288,344,001.58 314,437,917.23 Port facility 14,963,134.25 14,100,584.31

105 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Item Opening balance Increase Decrease Closing balance Machinery & equipment 59,160,212.74 67,053,798.35 Transportation devices 5,711,543.07 6,204,401.74 Fixed asset renovation 241,415.94 448,809.52 Office and other equipment 38,574,283.42 35,601,066.22 D. Total impairment provision - - - - Including: property & buildings - - - - - Port facility - - - - - Machinery & equipment - - - - - Transportation devices - - - - - fixed assets renovation - - - - - Office and other equipment - - - - - E. Total carrying amount 406,994,591.00 437,846,577.37 Including: property & buildings 288,344,001.58 314,437,917.23 Port facility 14,963,134.25 14,100,584.31 Machinery & equipment 59,160,212.74 67,053,798.35 Transportation devices 5,711,543.07 6,204,401.74 fixed assets renovation 241,415.94 448,809.52 Office and other equipment 38,574,283.42 35,601,066.22

Note (1): The current year’s increase figure consists of addition transferred from construction-in-progress amount to RMB50,999,523.67 as the related projects accomplished. In particular, amount up to RMB45,663,150.53 was transferred to property and buildings, amount up to RMB5,106,839.04 was transferred to machinery equipment, and amount up to RMB229,534.10 was transferred to office and other equipment.

Note (2): Current year’s decrease figure consists of decrease in property with original cost of RMB5,993,583.00 and book value of RMB5,832,447.05 due to reclassification from fixed asset to investment property according to Chengdu Xindu Baowan management’s intent of holding such properties.

Note (3): In 2011, fixed assets with original cost of RMB4,997,686.33 and net book value of RMB875,143.43 were disposed or retired. Disposal gain was RMB546,451.05.

Note (4): Depreciation accrued this year is RMB30,487,611.10. It is allocated to operating cost and administrative expenses for RMB24,564,793.50 and RMB5,922,817.60 respectively.

(2) Fixed assets without certificate of property right

As at 31 December 2011, the certificates of property right for the Group’s fixed asset with original cost of RMB221,281,975.41 and net book value of RMB205,456,661.57 are still not

106 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

obtained due to the final completion settlement not performed. The certificates of property right for property and buildings with cost of RMB15,286,308.97 and net book value of RMB8,721,244.26 are still not obtained due to the land on which the properties were constructed are leased from Nanshan Group. Please refer to note VII. 12 for details.

(3) Details of the fixed assets that are currently being used and have been fully depreciated

Type Original cost at year Book value at year

end end

Property & buildings 418,669.20 20,933.45

Port facility 261,218.36 13,060.92

Machinery & equipment 25,991,389.80 2,011,453.53

Transportation devices 2,704,289.90 135,889.54

Fixed assets renovation 13,263,006.47 241,415.94

Office and other equipment 24,270,267.63 1,230,385.62

Total 66,908,841.36 3,653,139.00

11. Construction in progress

(1) Details of construction in progress Closing balance Opening balance Impairme Item Carrying Impairment Carrying Book value nt Book value amount provision amount provision Langfang Baowan logistic park 130,731,172.84 - 130,731,172.84 8,380,214.31 - 8,380,214.31 project Mingjiang logistic park project 128,065,936.64 - 128,065,936.64 14,854,832.61 - 14,854,832.61 phase 1 Longquan Baowan logistic 38,304,667.67 - 38,304,667.67 84,820,969.09 - 84,820,969.09 park project Chiwan petroleum supply base 16,6 00,000.00 - 16,600,000.00 - - - working ship wharf project Kunshan Baowan #12 warehouse 15,128,809.04 - 15,128,809.04 - - - project Nanjing Baowan 10,124,793.94 - 10,124,793.94 9,652,381.66 - 9,652,381.66 logistic park

107 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Closing balance Opening balance Impairme Item Carrying Impairment Carrying Book value nt Book value amount provision amount provision project Guangzhou Baowan logistic 2,139,783.06 - 2,139,783.06 270,580.43 - 270,580.43 park project Tianjin Bingang Baowan logistic 206,400.00 - 206,400.00 - - - park project Eastern highland - - - 106,292.00 - 106,292.00 warehouse H Shanghai Baowan #18 warehouse - - - 6,678,970.73 - 6,678,970.73 project Misc project 174,481.00 - 174,481.00 3,480,010.86 - 3,480,010.86 Total 341,476,044.19 - 341,476,044.19 128,244,251.69 - 128,244,251.69

108 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

(2) Changes to major construction-in-progress project Transferred to Transferred to Opening Increase in investment Project name Budget (note) fixed assets in Closing balance Balance 2011 property in 2011 2011 Langfang Baowan logistic park project 248,000,000.00 8,380,214.31 122,350,958.53 - - 130,731,172.84 Shanghai Mingjiang logistic park project 353,000,000.00 14,854,832.61 113,256,704.03 45,600.00 - 128,065,936.64 phase 1 Chengdu Longquan Baowan logistic park 300,000,000.00 84,820,969.09 52,874,171.40 49,065,040.57 50,325,432.25 38,304,667.67 project Chiwan petroleum supply base working ship - - 16,600,000.00 - - 16,600,000.00 wharf project Kunshan Baowan #12 warehouse project 14,000,000.00 - 15,128,809.04 - - 15,128,809.04 Nanjing Baowan logistic park project 373,000,000.00 9,652,381.66 472,412.28 - - 10,124,793.94 Guangzhou Baowan logistic park project 217,000,000.00 270,580.43 1,869,202.63 - - 2,139,783.06 Shanghai Baowan #18 warehouse project 11,310,000.00 6,678,970.73 2,139,946.27 - 8,818,917.00 - Total 124,657,948.83 324,692,204.18 49,110,640.57 59,144,349.25 341,095,163.19

Note: Project budget figure includes budget for purchasing land. (Continued) including: Interest Investment in Percentage Amount of interest capitalization project to of Name of project interest Sources of capital capitalized in rate (%) in budget ratio completion capitalized 2011 2011 (note) (%) (%) Langfang Baowan logistic park project 1,947,847.49 1,916,628.21 5.4571 100.00 100.00 Self-raised and loan Mingjiang logistic park project phase 1 2,021,143.37 1,975,592.75 5.5271 75.00 75.00 Self-raised and loan Longquan Baowan logistic park project 4,470,092.64 2,237,617.05 5.5101 70.00 70.00 Self-raised and loan

109 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Chiwan petroleum supply base working - - - - 100.00 Self-raised and loan ship wharf project Kunshan Baowan #12 warehouse project - - - 108.07 100.00 Self-raised Nanjing Baowan logistic park project 26,701.15 - - 2.71 - Self-raised and loan Preparation Guangzhou Baowan logistic park project - - - 1.61 Self-raised and loan phase Shanghai Baowan #18 warehouse project - - - - - Self-raised Total 8,465,784.65 6,129,838.01

Note: the fund to finance the construction of all logistic parks of the subsidiaries is arranged centrally, as well as the calculation of capitalized interest. Before December 2011, the capitalization rate was calculated according to capital actually occupied by each logistic project. In December 2011, as the medium term notes issued by Nanshan Group specifically for construction of the Group’s logistic park projects, the capitalization rate were fixed at 6.815%.

12. Intangible assets Opening increase Amortized Accumulated Obtaining Project Original cost Closing balance balance In 2011 In 2011 amortization method Land-use right for phase 2 (note (1)) 535,079,510.36 356,038,761.50 — 15,123,770.40 194,164,519.26 340,914,991.10 Lease Dock-use right phase 2 (note (1)) 25,379,972.81 2,881,500.00 — 122,400.00 22,620,872.81 2,759,100.00 Lease Prepayment of land rental (note (2)) 36,110,385.42 16,731,146.16 — 1,444,415.52 20,823,654.78 15,286,730.64 Lease Land-use right of Guangzhou Baowan 77,486,963.29 13,339,325.45 62,665,200.00 1,564,527.89 3,046,965.73 74,439,997.56 Transfer Land-use right of Shanghai Baowan 115,112,393.81 102,097,370.29 — 2,303,571.48 15,318,595.00 99,793,798.81 Transfer Land-use right of Kunshan Baowan 60,341,348.50 55,514,040.80 — 1,206,826.92 6,034,134.62 54,307,213.88 Transfer Land-use right of Tianjin Baowan 139,964,130.77 131,524,082.69 — 2,813,349.36 11,253,397.44 128,710,733.33 Transfer (note (3)) Land-use right of Chengdu Longquan 42,121,443.92 38,682,606.98 1,402,910.21 831,751.06 2,867,677.79 39,253,766.13 Transfer 110 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Baowan (note (3))

Land-use right of Langfang Baowan 51,480,000.00 50,278,800.00 — 1,029,600.00 2,230,800.00 49,249,200.00 Transfer Land-use right of Chengdu Xindu 32,066,483.47 30,524,372.72 380,283.47 638,696.06 1,800,523.34 30,265,960.13 Transfer Baowan (note (3)) Land-use right of Shanghai Mingjiang 90,794,630.98 87,559,125.55 — 1,819,255.44 5,054,760.87 85,739,870.11 Transfer Trademark 230,500.00 136,208.50 — 23,049.96 117,341.46 113,158.54 Purchase Software 1,480,780.80 702,630.35 199,760.00 192,359.28 770,749.73 710,031.07 Purchase Total 1,207,648,544.13 886,009,970.99 64,648,153.68 29,113,573.37 286,103,992.83 921,544,551.30

Note (1): The phase 2 land-use right and dock use right are assets leased from Nanshan Group, the Company’s parent company. The phase 1 land-use right and dock use right that were contributed by Nanshan Group has expired in July of 2009. On 18 July 2006, the Company and Nanshan Group signed agreement “Venue Usage Agreement”, which allows the Company to continue the usage of port and dock of Nanshan Group for further 25 years by means of leasing starting from July 2009. The period is from 15 July 2009 to 14 July 2034.

Note (2): The land rental prepayment is for the long-term rent with term of 25 years that leased from the parent company – Nanshan Group in 1997. Because Nanshan Group did not obtained the certificate for the land-use right for these land, on 18 January 1995 and 18 July 1997, Nanshan Group and the Company signed agreements, which agreed to compensate the loss, expenditures and other related liabilities caused by using the land and dock mentioned above.

Note (3): As described in Note VII. 9 and 10, the certificate of property right for property and buildings with original cost up to RMB317,183,104.95 and RMB221,281,975.41 and net book value of RMB298,844,984.29 and RMB205,456,661.57 respectively are still under application.

Note (4): Amortization amount in 2011 is RMB29,113,573.37.

111 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

13. Deferred tax assets

(1) Details of recognized deferred income tax assets Closing balance Opening balance Deductible Deductible Item Deferred income temporary Deferred income temporary

tax assets difference & tax assets difference & deductible losses deductible losses Asset impairment 90,476.27 372,048.10 87,152.10 362,235.61 provision Organization cost - - 9,907.01 39,628.04 Intangible assets 11,706.53 46,826.10 2,747.03 11,445.95 Deductible losses 16,650,427.02 66,601,708.08 11,528,996.82 46,115,987.26 Total 16,752,609.82 67,020,582.28 11,628,802.96 46,529,296.86

(2) Details of unrecognized deferred income tax assets Item Closing balance Opening balance Provision for asset impairment 23,177.74 43,991.85 Deductible losses 13,321,084.43 13,321,084.43 Total 13,344,262.17 13,365,076.28

Note: the reason that the Group did not recognize above deductible temporary differences and deductible losses is that there is uncertainty to whether the Group could obtain sufficient taxable income in future.

(3) The deductible losses that are not recognized as deferred income tax assets will be expired in the following years: Year Closing balance Opening balance Note Year 2014 8,033,050.98 8,033,050.98 Year 2015 5,288,033.45 5,288,033.45 Total 13,321,084.43 13,321,084.43

14. Other non-current assets Item Closing Balance Opening Balance Prepayment for land-use right （Note ） 74,559,280.00 123,018,080.00 Others 1,657,437.37 1,375,864.04 Total 76,216,717.37 124,393,944.04

Note: It is the prepayment of the land transfer fee paid by Nanjing Baowan, Tianjin Bingang Baowan and Chengdu Longquan Baowan, three subsidiaries of the Company. As at 31 December 2011, the land-use right hasn’t been acquired.

112 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

15. Details of assets impairment provision Opening Decreased in 2011 Closing Item Accrued in balance 2011 Reversed Written-off balance Bad debt provision 406,227.46 (11,001.62) - - 395,225.84 From: Accounts receivable 406,227.46 (20,200.55) - - 386,026.91 Other receivables - 9,198.93 - - 9,198.93

16. Short-term Loans Short-term loan category Closing balance Opening balance Credit loan 210,000,000.00 88,530,000.00

Guaranteed loan - 70,000,000.00

Entrusted loan - 100,000,000.00

Total 210,000,000.00 258,530,000.00

17. Accounts payable

(1) Details of accounts payable Item Closing balance Opening balance Rental payable 7,390,088.76 4,610,860.56 Project expenditure payable 2,327,822.85 2,384,161.51 Labor service payable 242,332.14 217,781.64 Others 148,684.36 327,823.40 Total 10,108,928.11 7,540,627.11

(2) Accounts payable presented by aging Closing balance Opening balance Aging Percentage Percentage Amount Amount (%) (%) Within 1 year 9,672,417.40 95.68 6,978,163.25 92.54 1~ 2 years 192,826.80 1.91 237,854.82 3.15 2~3years 137,923.22 1.36 60,152.40 0.80 Over 3 years 105,760.69 1.05 264,456.64 3.51 Total 10,108,928.11 100.00 7,540,627.11 100.00

(3) Within the closing balance, there are no payables due to shareholders with over 5% (inclusive) voting shares of the Company.

(4) Details of accounts payable to related parties

Please refer to note VIII. 6 “Receivables from and payables to related parties” for detail.

18. Advances from customers

113 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

(1) Details of advances from customers Item Closing balance Opening balance Rental collected in advance 2,093,276.87 334,452.28

(2) Advances from customers presented by aging Closing balance Opening balance Aging Percentage Percentage Amount Amount (%) (%) Within 1 year 2,093,276.87 100.00 334,452.28 100.00

(3) Within the closing balance, there are no advances received from shareholders with over 5% (inclusive) voting shares of the Company and other related parties.

19. Employee remuneration payable Opening Closing Item Increase Decrease balance balance I. Wages, bonus, 21,484,638.99 38,899,884.27 43,899,030.17 16,485,493.09 allowance and reimbursement II. Employee Welfare - 2,718,435.33 2,718,435.33 - III. Social insurance 18,231.66 5,837,436.09 5,810,114.43 45,553.32 Incl.: 1.medical insurance 5,017.72 1,239,098.20 1,230,978.02 13,137.90 2. basic endowment insurance 11,588.11 2,989,463.75 2,972,755.31 28,296.55 3.annuity fee - 1,243,548.65 1,243,708.61 (159.96) 4.unemployment insurance 643.75 152,421.91 150,566.81 2,498.85 5.work-related injury 322.15 101,849.31 101,195.17 976.29 insurance 6.birth insurance 659.93 111,054.27 110,910.51 803.69 IV. Housing fund 1,168.20 1,773,300.39 1,772,513.49 1,955.10 V. Expenditure for trade 58,764.49 1,397,880.32 1,259,754.47 196,890.34 union and employee training VI. Others - 115,412.82 115,412.82 - Total 21,562,803.34 50,742,349.22 55,575,260.71 16,729,891.85

20. Taxes payable Item Closing balance Opening balance Value Added Tax (38,071.76) 1,095.34 Business Tax 1,855,488.58 1,840,635.05 Corporate Income Tax 15,024,966.90 20,445,033.83 Individual income tax 271,550.82 233,006.33 Urban Maintenance & 120,838.49 114,442.56 construction tax Land-use Tax 4,813,624.80 3,419,619.38 Property Tax 1,914,192.09 849,848.10 Educational Surcharges 93,548.91 57,299.92 Others 1,759,828.00 195,484.92 Total 25,815,966.83 27,156,465.43

114 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

21. Interest payable Item Closing balance Opening balance Nanshan Group 6,758,208.34 - Bank interest 1,934,385.70 1,580,664.71 Huarong International Trust Co., Ltd. - 102,217.50 Total 8,692,594.04 1,682,882.21

22. Dividend payable Name of entity Closing balance Opening balance Nanshan Group 8,382,728.01 -

Note: The closing balance of the dividend payable is the cash dividend of Baowan Holding, a subsidiary of the Company, payable to Nanshan Group based on Baowan Holding’s 2011 profit distribution plan.

23. Other payables

(1) Details of other payables Item Closing balance Opening balance Project expenditure payable 120,725,579.52 142,100,584.65 Security deposit payable 25,496,373.93 22,139,051.96 Equipment expenditure payable 6,420,000.00 5,218,500.00 Land fees payable 4,546,323.85 11,611,188.92 Temporary loan payable 1,566,876.96 1,485,694.82 Others 25,705,674.07 20,116,477.80 Total 184,460,828.33 202,671,498.15

(2) Other payables presented by aging. Closing balance Opening balance Aging Percentage Percentage Amount Amount (%) (%) Within 1 year 106,192,224.36 57.56 146,443,730.97 72.25 1~ 2 years 55,775,542.65 30.24 34,851,432.09 17.20 2~3years 7,184,813.22 3.90 14,127,344.17 6.97 Over 3 years 15,308,248.10 8.30 7,248,990.92 3.58 Total 184,460,828.33 100.00 202,671,498.15 100.00

(3) In the closing balance, there is no other payable due to any shareholders with 5% (inclusive) of voting shares of the Company and other related parties.

For details, please see Note VIII. 6 – Receivable from and payables to related parties.

(4) Other payables in significant amount and with account age over 1 year:

115 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Reasons for not Paid after the Creditor Amount settled balance sheet date? IDS Logistics (Shanghai) Co., Ltd. 4,778,172.36 Security deposit No Shanghai Baowan logistic park phase Payment condition 4,478,420.55 No 2 project remaining fund is not reached Shanghai Oriental CJ Co., Ltd. 1,427,650.00 Security deposit No Shanghai Baowan logistic park phase Payment condition 1,175,028.54 No 1 remaining fund is not reached Total 11,859,271.45

Note: Other payables with significant amount the aging excess one year are the remaining funds (security deposit) which haven’t meet the condition of payment, and the rental deposit of the property and buildings paid by continuous tenants.

(5) Details of other payables that are with material amount Creditor Closing balance Nature Equipment expenditure Shanghai Xinda Machinery Co., Ltd. 6,120,000.00 payable Guarantee and deposit IDS Logistics (Shanghai) Co., Ltd. 4,778,172.36 payable Total 10,898,172.36

24. Long-term liability that is due in one year

(1) Details of long-term liability that will due in one year Item Closing balance Opening balance Long-term loan that will due in one year 549,820,000.00 —

(2) Long-term loan that will due in one year

Interest Closing balance Opening balance

Lender Loan date Mature date rate Currency Foreign Foreign (%) RMB RMB currency currency Industrial and Commercial Bank of China 2009-8-25 2012-8-24 5.6525 RMB - 300,000,000.00 - - Limited Shekou Branch China Merchants Bank Co., 2009-8-26 2012-8-26 4.8600 RMB - 199,900,000.00 - - Ltd. Shenzhen Chiwan

116 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Branch Ningbo Bank Co., Ltd. 2009-7-10 2012-5-14 5.9850 RMB - 49,920,000.00 - - Shenzhen Branch Total 549,820,000.00 -

25. Long-term loan

(1) Classification of the long-term loan Item Closing balance Opening balance Credit loan 909,720,000.00 910,000,000.00 Less ：long-term loan that will due in one 549,820,000.00 - year （note VII. 24 ） Total 359,900,000.00 910,000,000.00

(2) Details of long-term loans

Lender Interest Closing balance Opening balance

Loan date Mature date rate Currency Foreign Foreign (%) RMB RMB currency currency China Merchants Bank Co., Ltd. 2009-8-21 2014-8-21 5.1840 RMB - 199,900,000.00 - 200,000,000.00 Shenzhen Chiwan Branch Bank of China Co., Ltd. 2009-11-10 2014-11-10 5.1840 RMB - 160,000,000.00 - 160,000,000.00 Shenzhen Branch Industrial and Commercial Bank of China 2009-8-25 2012-8-24 4.9725 RMB - - - 300,000,000.00 Limited Shekou Branch China Merchants Bank

Co., Ltd. 2009-8-26 2012-8-26 4.8600 RMB - - - 200,000,000.00 Shenzhen Chiwan Branch Ningbo Bank Co., Ltd. 2009-7-10 2012-5-14 5.2650 RMB - - - 50,000,000.00 Shenzhen Branch Total 359,900,000.00 910,000,000.00

117 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Note: the weighted average annual interest rate of the Group’s long-term loan for 2011 is 5.465%.

(3) Analysis of mature dates of the long-term loans ： Item Closing balance Opening balance 1 to 2 years - 550,000,000.00 2 to 5 years 359,900,000.00 360,000,000.00 Total 359,900,000.00 910,000,000.00

26. Long-term payables

Entity Opening balance Increased Decreased Closing balance

Nanshan Group 209,394,755.56 - 69,264,583.39 140,130,172.17

Note: The decreased amount is the repayment of construction capital of the logistic park project in Tianjin Baowan, Chengdu Xindu Baowan, Chengdu Longquan Baowan and Shanghai Mingjiang undertook by Nanshan Group according to “Agreement of Transfer of Equity and Liability” signed by Nanshan Group and the Company.

27. Other non-current liabilities Item Details Closing balance Opening balance Advanced rental Long-term advances received 23,114,314.14 24,463,665.30 receipt Medium and Nanshan Group (note) 700,000,000.00 - long-term loan Total 723,114,314.14 24,463,665.30

Note: it is the fund borrowed from Nanshan Group in 2011. Amount up to RMB650,000,000.00 are used for logistic part construction project and working ship wharf project. The remaining fund of RMB50,000,000.00 is used in the Company’s operation and development. The loan term is from 11 November 2011 to 11 November 2016 and the annual interest rate is 6.815%.

28. Share capital Opening balance Increase/decrease (+, -) Closing balance New Capitalize Percen Item Percent Bonus Amount shares d capital Others Subtotal Amount tage age (%) Share issued reserves (%) I. Shares with sales restrictions Shares held by other 119,420,000.00 51.79 - - - - - 119,420,000.00 51.79 domestic parties Including: shares held by domestic Legal 119,420,000.00 51.79 - - - - - 119,420,000.00 51.79 person Total shares with sales 119,420,000.00 51.79 - - - - - 119,420,000.00 51.79

118 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements restrictions

II. Shares without sales restrictions Domestically listed 111,180,000.00 48.21 - - - - - 111,180,000.00 48.21 foreign shares Total shares without 111,180,000.00 48.21 - - - - - 111,180,000.00 48.21 sales restrictions III. Total shares 230,600,000.00 100.00 - - - - - 230,600,000.00 100.00

Note: the above share capital had been verified by Shekou Zhonghua Certified Public Accountants with share capital verification report – She Zhong Yan Bao Zi (1995) No. 27.

29. Capital reserves

(1) Changes to capital reserves in 2011: Opening Item Increase Decrease Closing balance balance Capital premium 110,450,372.16 14,417,853.51 - 124,868,225.67 Other capital reserves 109,272,960.42 - - 109,272,960.42 Total 219,723,332.58 14,417,853.51 - 234,141,186.09

Note: As described in note VI. 1, the Company invested the 60% of equity each of Nanjing Baowan, Tianjin Baowan, Langfang Baowan, Shanghai Mingjiang, Chengdu Xindu Baowan and Chengdu Longquan Baowan and 100% equity each of Shanghai Baowan, Guangzhou Baowan and Kunshan Baowan held by the Company in Baowan Holding as contribution paid up by the Company and obtained 77.36% of Baowan Holding. The increase of capital premium in 2011 is resulted from the difference between the net assets attributable to the Company at the time Baowan Holding incorporated and the net asset attributable to the Company based on shareholdings in these subsidiaries before the contribution.

(2) Changes to capital reserves in 2010: Opening Item Increased Decreased Closing balance balance Capital premium 141,751,372.16 - 31,301,000.00 110,450,372.16 Other capital reserves 109,272,960.42 - - 109,272,960.42 Total 251,024,332.58 - 31,301,000.00 219,723,332.58

Note: the decrease of capital reserve in 2010 is resulted from the acquisition of 60% equity of Shanghai Mingjiang on 30 November 2010. The net asset of Shanghai Mingjiang as at 31 December 2009 calculated according to percentage of shareholding does not exist in the consolidated financial statements of year 2010.

119 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

30. Surplus reserve

(1) Changes of surplus reserve in 2011: Closing Item Opening balance Increase Decrease balance Statutory surplus reserve 155,956,669.93 18,329,718.81 - 174,286,388.74 Discretionary surplus reserve 61,314,828.91 7,389,338.60 - 68,704,167.51 Total 217,271,498.84 25,719,057.41 - 242,990,556.25

Note: According to the Company Law of PR China, the Company drew the statutory surplus reserve at 10% of net profit of 2010. With approval of resolution at the 2010 Shareholders Annual General Meeting, the Company drew the discretionary surplus reserve at 5% of net profit of 2010.

(2) Changes of surplus reserve in 2010: Closing Item Opening balance Increased Decreased balance Statutory Surplus reserve 141,177,992.72 14,778,677.21 - 155,956,669.93 Discretionary Surplus reserve 55,324,755.67 5,990,073.24 - 61,314,828.91 Total 196,502,748.39 20,768,750.45 - 217,271,498.84

31. Undistributed profits

(1) Changes of undistributed profit Percentage for drawing Item 2011 2010 or distribution (%) Undistributed profit at the end of prior year before 378,571,522.81 316,836,309.31 adjustments Total adjustment to undistributed profit at the - - beginning of the year Undistributed profit at the beginning of the year after 378,571,522.81 316,836,309.31 adjustments Plus: Net profit attributable to the owners of the 129,274,351.74 142,229,324.77 parent company during the year Less: statutory surplus reserve drawn 18,329,718.81 14,778,677.22 10 Discretionary surplus reserve drawn 7,389,338.60 5,990,073.23 5 Dividends payable to ordinary shares 29,516,766.36 59,725,360.82 Undistributed profit at the end of the year 452,610,050.78 378,571,522.81

(2) Profit distribution

On 20 April 2011, according to the resolution of “2010 Annual Profit Distribution Plan” approved at the 2010 Shareholders Annual General Meeting, the Company distributed, to all shareholders, cash dividends of RMB1.28 (tax inclusive) for every 10 shares. Based on 230,600,000 shares that have been issued, the Company needs to distribute cash dividend of RMB29,516,800.00. Actual

120 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements distribution amounted to RMB29,516,766.36.

(3) Surplus reserves drawn by subsidiaries in the reporting period Amount attributable to the Subsidiaries 2011 parent company Shenzhen Baowan 736,518.59 736,518.59 Baowan Holding 4,114,020.42 4,114,020.42 Shanghai Baowan 3,632,918.32 3,632,918.32 Kunshan Baowan 1,018,433.54 1,018,433.54 Total 9,501,890.87 9,501,890.87

32. Minority shareholders’ interest Item Closing balance Opening balance Baowan Holding 248,402,786.71 - Tianjin Baowan - 10,437,242.49 Chengdu Xindu Baowan - 9,940,113.04 Langfang Baowan - 18,648,132.27 Chengdu Longquan Baowan - 18,201,569.72 Nanjing Baowan - 19,792,486.93 Shanghai Mingjiang - 18,108,374.05 Total 248,402,786.71 95,127,918.50

Note: as described in Note VII. 1, the Company invested the 60% of equity each of Nanjing Baowan, Tianjin Baowan, Langfang Baowan, Shanghai Mingjiang, Chengdu Xindu Baowan and Chengdu Longquan Baowan and 100% equity each of Shanghai Baowan, Guangzhou Baowan and Kunshan Baowan held by the Company in Baowan Holding as contribution paid up by the Company. Baowan Holding then holds 100% equity of these companies. As at 31 December 2011, the minority shareholders’ interest represents the 22.64% equity of Baowan Holding held by Nanshan Group.

33. Operating revenue and operating costs

(1) Operating revenue and operating costs Item 2011 2010 Revenue from main businesses 456,103,502.76 398,163,609.58 Revenue from other businesses 5,819,970.00 1,938,771.60 Total Revenue 461,923,472.76 400,102,381.18 Cost for main businesses 159,949,884.95 131,928,023.42 Cost for other businesses 4,211,358.56 1,526,156.45 Total operating cost 164,161,243.51 133,454,179.87

(2) Main business presented by industry sectors Industry sectors 2011 2010

121 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Revenue Cost Revenue Cost Stack (Storage) 295,521,049.43 108,958,328.72 249,780,580.82 92,959,306.63 Load and unload 75,213,890.88 28,836,745.33 69,820,363.19 22,821,773.34 Port management 61,738,791.65 15,680,370.43 57,276,615.55 10,521,753.84 Office lease 23,629,770.80 6,474,440.47 21,286,050.02 5,625,189.61 Subtotal 456,103,502.76 159,949,884.95 398,163,609.58 131,928,023.42 Less: amount

offset internally Total 456,103,502.76 159,949,884.95 398,163,609.58 131,928,023.42

(3) Main business presented by regions 2011 2010 Region Revenue Cost Revenue Cost Southern China 282,704,547.73 95,892,056.23 262,511,033.90 78,830,694.67 Eastern China 110,521,301.52 35,557,517.43 95,766,079.29 31,683,413.57 Northern China 44,191,483.04 19,065,437.54 27,747,731.89 16,662,009.69 Southwest China 18,686,170.47 9,434,873.75 12,138,764.50 4,751,905.49 Subtotal 456,103,502.76 159,949,884.95 398,163,609.58 131,928,023.42 Less: amount - - - - offset internally Total 456,103,502.76 159,949,884.95 398,163,609.58 131,928,023.42

(4) Other businesses 2011 2010 Item Income from Cost for other Income from Cost for other

other business business other business business Agency service 5,816,980.00 4,211,358.56 1,932,141.60 1,526,156.45 Others 2,990.00 - 6,630.00 - Total 5,819,970.00 4,211,358.56 1,938,771.60 1,526,156.45

(5) Sales revenue from top five customers Percentage of total Period Total revenue from top five customers revenue in corresponding period (%) 2011 171,498,589.65 37.13 2010 152,344,203.31 38.08

34. Business tax and surcharges Item 2011 2010 Business tax 20,362,574.66 17,613,680.29 Property tax 10,930,216.05 7,224,989.58 Land use tax 8,160,627.09 7,339,344.61 Urban maintenance and 1,327,233.23 574,496.74 construction tax Educational surcharges 1,020,467.73 312,120.22

122 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Item 2011 2010 Others 176,112.44 88,352.13 Total 41,977,231.20 33,152,983.57

Note: for the tax rates of business tax and surcharges, please refer to Note V. Taxes.

35. Administrative expenses Item 2011 2010 Salary and bonus 19,604,558.59 24,688,657.38 Asset depreciation 5,922,817.60 5,745,533.85 Asset amortization 5,678,313.26 4,165,737.18 Social insurance 5,346,503.75 4,677,817.48 Taxes 4,188,012.15 3,310,412.09 Labor cost 2,206,841.25 1,860,948.00 Business entertainment 2,170,817.36 1,662,045.55 Vehicle expense 1,610,359.12 1,687,832.08 Travelling expense 1,403,810.90 1,157,485.04 Board of directors fee 1,048,769.20 1,250,000.00 Others 11,849,969.39 9,768,697.40 Total 61,030,772.57 59,975,166.05

36. Financial Expenses Item 2011 2010 Interest expense 81,392,202.22 58,546,647.31 Less: interest income 2,676,187.76 2,022,124.15 Less: interest capitalized 6,129,838.01 1,956,968.56 Exchange losses 165,313.54 16,754.48 Less: exchange gains 1,052,497.70 229,251.47 Others 185,416.39 178,692.82 Total 71,884,408.68 54,533,750.43

37. Asset impairment losses Item 2011 2010 Bad debt loss (11,001.62) (65,215.83)

38. Investment gain

(1) Details of investment gain Item 2011 2010 Investment gain from long-term equity investment measured 22,456,865.14 34,645,950.32 using equity method

(2) Investment income from long-term equity investment measured using equity method

123 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Reasons for Investee 2011 2010 increase/decrease Sembawang 23,198,370.88 34,443,311.87 Performance changes Company CPEC (741,505.74) 202,638.45 Performance changes Total 22,456,865.14 34,645,950.32

39. Non-operating income Amount recognized in

Item 2011 2010 non-recurring

profit or loss in 2011 Total gains from disposal of the 717,247.87 906,992.90 717,247.87 non-current assets Including: gains from disposal 717,247.87 906,992.90 717,247.87 of the fixed assets Government grant (see details of government grant in following 3,341,765.88 1,965,300.00 3,341,765.88 table) Others 594,193.38 787,555.75 594,193.38 Total 4,653,207.13 3,659,848.65 4,653,207.13

Details of government grant: Item 2011 2010 Note 2010 investment in transport and logistics base construction subsidy 2,000,000.00 - Note (1) funds Land formation fee 500,000.00 - Note (2) Financial incentives 306,000.00 580,000.00 Note (3) Shenzhen’s key logistics 300,000.00 - Note (4) enterprises incentives in 2010 Special project fund for economic 200,000.00 - Note (5) development Fee refund for booth fee in 2009 16,848.00 - Shenzhen Logistic Fair Subsidy for economic 10,000.00 - development zone Maternity grants 7,917.88 - Job searching subsidy to the 1,000.00 5,000.00 families follows the soldier Service industry special guiding - 900,000.00 fund Subsidy for developing modern - 398,300.00 logistic industry Reward for water saving - 72,000.00

124 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Item 2011 2010 Note Reward for industrial injury - 10,000.00 prevention Total 3,341,765.88 1,965,300.00

Note (1): It is the financial fund for transportation and logistics base construction plan of 2010 received by Kunshan Baowan, a subsidiary of the Company, according to Jiangsu Province Transportation department Sujiaoji (2010) No.245 about “Notice of 2010 Investment Plan for Transportation and Logistic Base Construction”.

Note (2): It is the compensation fund received by Chengdu Xindu Baowan, a subsidiary of the Company, from Chengdu Xindu Logistic Center Administration Committee according to “Supplementary Agreement” signed by both parties.

Note (3): It is the specific fund for service industry development received by Kunshan Baowan, a subsidiary of the Group according to “Management Method of Usage of Special Fund for Modern Service Industry Development in Huaqiao Economic Development District”.

Note (4): It is the reward for 2010 Shenzhen Major Logistic Enterprises received by the Company.

Note (5): It is the economic development special fund received by the Company according to the “Notice of 2011 Economic Development Specific Fund” issued by Economic Promotion Bureau of Nanshan District.

40. Non-operating expenses Amount recognized in non-recurring Item 2011 2010 profit or loss of current period Total losses in disposal of 170,796.82 298,382.62 170,796.82 non-current assets Including: losses from fixed assets 170,796.82 298,382.62 170,796.82 disposal Donation for public welfare 70,000.00 - 70,000.00 Extraordinary losses 24,111.43 - 24,111.43 Inventory taking loss 90,000.00 - 90,000.00 Flood prevention security fee 39,279.06 30,280.40 - Others 224,665.19 882,480.58 224,665.19 Total 618,852.50 1,211,143.60 579,573.44

41. Income Tax Expenses Item 2011 2010 Current period income tax expenses 27,988,036.58 26,227,997.76

125 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Item 2011 2010 Deferred income tax expenses (5,123,806.86) (4,958,819.09) Total 22,864,229.72 21,269,178.67

Adjusting accounting profit to income tax expense: Item 2011 2010 Accounting profit 148,094,031.19 154,329,519.61 Income tax expense calculated based on applicable tax rate 35,542,567.49 33,952,494.31 of 24% (22% in 2010) Tax effect of non-deductible expenses 107,353.98 111,941.00 Tax effect of the tax exemption income (note 1) (5,389,647.63) (7,622,109.07) Tax effect of unrealized deductible loss and deductible - 1,163,367.36 temporary difference Effect of different tax rate applied to subsidiaries in other (86,446.07) (337,119.38) areas Effect of tax exemption and reduction of the subsidiaries (480,000.00) (396,000.00) Payment (refund) of prior years’ tax (331,137.98) 1,144.81 Others (note 2) (6,498,460.07) (5,604,540.36) Income tax expenses 22,864,229.72 21,269,178.67

Note 1: It is the tax effect of investment gain from the equity of associated companies held by the Company;

Note 2: It is the tax effect of the Company’s subsidiaries Shanghai Baowan and Langfang Baowan, of which the corporate income tax are levied on assessment basis.

42. Basic EPS and diluted EPS

(1) Presentation of various periods’ basic EPSs and diluted EPSs:

Profit during the reporting 2011 2010 period Basic EPS Diluted EPS Basic EPS Diluted EPS Net profit attributable to the Company's ordinary 0.56 0.56 0.62 0.62 shareholders Net profit attributable to the Company's ordinary 0.55 0.55 0.62 0.62 shareholders after deducting non-recurring profits or losses

(2) Calculation of basic EPS and diluted EPS

The Company does not have dilutive potential ordinary shares during the reporting period. As a result, diluted EPS equals to basic EPS.

(a) Current period net profit attributable to ordinary shareholders used to calculate basic

126 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

EPS: Item 2011 2010 Current period net profit attributable to ordinary 129,274,351.74 142,229,324.77 shareholders including ：amount attributable to continuous operation 129,274,351.74 142,229,324.77 Net profit attributable to the Company’s ordinary shareholders after deducting non-recurring profit or 125,777,485.70 143,326,111.55 loss including: amount attributable to continuous operation 125,777,485.70 143,326,111.55

(b) When calculating basic EPS, the denominator is the weighted average of outstanding ordinary shares. The process of calculation is as follows: Item 2011 2010 Outstanding ordinary shares at the beginning of the year 230,600,000.00 230,600,000.00 Add: weighted average of ordinary shares issued in current - - year Less: weighted average ordinary shares re-purchased in - - current year Outstanding ordinary shares at the end of the year 230,600,000.00 230,600,000.00

43. Notes to cash flow statement

(1) Cash received from other operating activities Item 2011 2010 Guarantee and deposit 6,916,617.10 1,908,588.19 Utility expense paid on behalf of others 5,335,069.07 3,921,053.57 Government subsidy 3,341,765.88 1,965,300.00 Interest income 1,932,671.08 2,022,124.15 Others 4,150,086.26 252,307.07 Total 21,676,209.39 10,069,372.98

(2) Cash paid for other operating activities Item 2011 2010 Office expense paid in cash 13,115,317.61 12,662,970.09 Others 10,382,300.76 13,024,971.32 Total 23,497,618.37 25,687,941.41

(3) Cash received from other investing activity Item 2011 2010 Project expenditure invested by Nanshan Group 76,895,416.61 78,194,634.08 Land use fee - 14,920,759.44

127 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Item 2011 2010 Project guarantee - 8,732,500.00 Total 76,895,416.61 101,847,893.52

(4) Cash paid for other investing activity Item 2011 2010 Financial product purchasing 369,620,000.00 - Land guarantee 10,000,000.00 14,380,000.00 Others 8,675,759.97 417,750.93 Total 388,295,759.97 14,797,750.93

(5) Cash received from other financing activity Item 2011 2010 5-year long-term loan from Nanshan Group 700,000,000.00 -

(6) Cash paid for other financing activity Item 2011 2010 Repayment of logistic park construction investment 127,630,000.00 23,045,632.10 from Nanshan Group Debt interest of Nanshan Group 16,570,094.20 - Transfer fee of liability of Nanshan Group - 28,979,243.08 Total 144,200,094.20 52,024,875.18

44. Supplementary information to the cash flow statement

(1) Reconciliation from net profit to cash flows from operating activities Item 2011 2010 1. Reconciliation from net profit to cash

flows from operating activities Net profit 125,229,801.47 133,060,340.94 Add: Provision for asset impairment (11,001.62) (65,215.83) fixed asset depreciation 56,747,492.35 51,712,566.84 Intangible assets amortization 29,113,573.37 27,907,926.82 Loss (gain) arising from disposal of the fixed assets, intangible assets and other (546,451.05) (608,610.28) long-term assets Financial expense 75,930,125.09 56,669,728.30 Investment loss (gain) (22,456,865.14) (34,645,950.32) Decrease (increase) of Deferred tax asset (5,123,806.86) (4,958,819.09) Inventory decrease (increase) (210,518.49) 294,201.08 Decrease of operating receivables 4,532,825.61 9,575,138.96 Increase of operating payables 4,448,785.81 16,183,617.66 Net cash flows from operating activities 267,653,960.54 255,124,925.08 2. Significant investment and financing

activities that are not involving cash

128 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Item 2011 2010 receipt and payment: 3. Net changes in cash and cash

equivalent: Cash balance at the end of the year 402,106,820.70 186,568,590.15 Less: cash balance at the beginning of the year 186,568,590.15 225,386,879.68 Plus: cash equivalent at the end of the year - - Less: cash equivalent at the beginning of the - - year Net increase in cash and cash equivalent 215,538,230.55 (38,818,289.53)

(2) Composition of cash and cash equivalent Item 2011 2010 1. Cash 402,106,820.70 186,568,590.15 including ：Cash on hand 19,589.18 20,134.74 Bank deposit available for immediate payment 402,087,231.52 186,548,455.41 2. Cash equivalent - - 3. Closing balance of cash and cash equivalent 402,106,820.70 186,568,590.15 4. Restricted monetary fund 16,116.00 25,000.00 including: other monetary fund 16,116.00 25,000.00 5. Total cash and bank balances 402,122,936.70 186,593,590.15

VIII. RELATED PARTIES AND RELATED TRANSACTIONS

1. Basic information of the Company’s parent company

(1) Basic information of the parent company Relationship with The Type of Place of Parent company Legal person Group enterprise registration Controlling Sino-foreign Shenzhen, Nanshan Group Fu Yuning shareholder joint venture China

(Continued)

Parent company Business nature Ultimate control party Organization code

Port and shipping, offshore oil China Merchants Nanshan Group service, real estate development 618832976 Group Ltd. and new material

Note: On 18 June 2010, Guangdong Guangye Investment Holding Co., Ltd (Guangye Investment Holding) has entrusted the management rights and the power to direct the voting right over 23.493% of Nanshan Group (Entrusted Nanshan Shares), the controlling shareholder of the Company, to China Merchants Holdings (Hong Kong) Co., Ltd (CMHK). According to the entrustment agreement, Guangye Investment Holding will retain certain rights over the Entrusted

129 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Nanshan Shares, including, in particular, the right to receive income and dividend over the Entrusted Nanshan Shares and the right to receive residual assets and properties upon the winding up of Nanshan Group. Guangye Investment Holding is not entitled to terminate the entrustment of the Entrusted Nanshan Shares to CMHK. The entrustment agreement is for an indefinite term. CMHK grant to China Merchants Holdings (International) Co., Ltd (China Merchants International) the management rights and the power to direct the voting right over 23.493% of Nanshan Group for a one-off nominal consideration of RMB1.00.

China Merchants International originally held 37.014% of Nanshan Group. After the entrustment arrangement, it held totally 60.507% of Nanshan Group.

China Merchants Group Ltd. is the ultimate controller of China Merchants International. As a result, the ultimate controller of the Company is China Merchants Group Ltd., which is a State-owned large enterprise directly supervised by State-owned Assets Supervision and Administration Commission. Its registration place is in Beijing, China. Its registered capital is RMB6,300,000,000.00 and the legal representative is Fu Yuning.

(2) Changes of the parent company’s registered capital Name of parent company Opening balance Increased Decreased Closing balance Nanshan Group 500,000,000.00 400,000,000.00 - 900,000,000.00

(3) The percentage of shareholding and voting power that the parent company holds. 2011 2010 Name of parent company Shareholding Voting power Shareholding Voting power

percentage (%) percentage (%) percentage (%) percentage (%) Nanshan Group 51.79 51.79 51.79 51.79

2. Subsidiaries of the Company

Please refer to Note VI. 1 – Status of subsidiaries for details of subsidiaries.

3. Status of joint ventured and associated companies of the Group

Please refer to Note VII. 8 - Long-term equity investment (3) for details.

4. Information of other related parties of the Group

Other related parties Relationship with the Company Organization code Shenzhen Chiwan Wharf Holdings Ltd. Controlled by a same party 61883296-8 (Chiwan Wharf) Shenzhen Nanshan Real Estate Controlled by a same party 61883297-6 Development Ltd. (Nanshan Real Estate) Shenzhen Chixiao Engineering Project Co., Controlled by a same party 61883136-7 Ltd. (Chixiao Project)

130 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Shenzhen Chixiao Construction Technology Controlled by a same party 61881595-7 Co., Ltd. (Chixiao Construction) China Merchants Logistic Guangzhou Logistic Co., Ltd. (Merchants Logistic Controlled by a same party 75198798-5 Guangzhou Company) China Merchants Bank Co. , Ltd. (China note 10001686-X Merchants Bank)

Note: China Merchants Bank is an associated company of China Merchants Group Ltd.

5. Related party transactions

(1) Purchase and sales of goods, rendering and accepting of services

(a) Purchase of goods and receiving of services 2011 2010 Related Percentage of transaction pricing Percentage of Details of related the same Related parties principle and the same transaction Amount category Amount decision-making category transactions procedure transactions (%) (%) Loading and Wharf Holding Negotiated price - 276,695.58 1.21 unloading 3,258.00 Maintenance of Chixiao Construction panel, project Negotiated price 32,755,319.17 10.08 9,549,273.00 8.67 management General Chixiao Engineering contractor, steel Negotiated price 12,740,40 3.92 17,542,455.48 15.93 structure 6.94 Power supply Nanshan Group Negotiated price 2,151,984.40 100.00 2,018,629.44 100.00 service Total 47,650,968.51 29,387,053.50

(b) Rendering of service Related 2011 2010 transaction Percentage of Details of pricing Percentage of the the same Related parties related principle and Amount same category Amount category transaction decision-mak transactions (%) transactions ing (%) procedure Loading and Negotiated CPEC 158,621.00 0.27 354,898.16 0.51 unloading price Loading and Negotiated Sembawang Company 5,039,841.61 7.02 2,422,834.96 3.47 unloading price Total 5,198,462.61 7.29 2,777,733.12 3.98

(2) Related party leasing

131 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

(a) The Group as the lessor Basis for Recognized rental Lessor Lessee Asset types Starting date Ending date determination of income in 2011 lease income The Company Nanshan Group Property 2006-1-1 2014-12-31 Negotiated price 3,548,081.23 Nanshan Real The Company Property 2005-9-1 2011-12-31 Negotiated price 731,245.61 Estate The Company Wharf Holding Property 2009-11-1 2014-12-31 Negotiated price 1,709,935.15 The Company CPEC Property 2009-11-1 2011-3-31 Negotiated price 2,316,945.00 Sembawang The Company Property 2002-10-16 2011-12-31 Negotiated price 5,237,673.61 Company Merchants Logistic Guangzhou Guangzhou Warehouse 2011-1-1 2013-12-31 Negotiated price 5,188,158.99 Baowan Company Total 18,732,039.59

(b) The Group as the lessee Basis for Starting Recognized rental Lessor Lessee Asset types Ending date determining date expenses in 2011 rental Nanshan Shenzhen Negotiated Land 1988-11-12 2018-11-15 683,716.69 Real Estate Baowan price Nanshan Shenzhen Negotiated Land 1988-11-26 2018-11-25 488,369.06 Group Baowan price Nanshan Shenzhen Negotiated Land 1996-1-1 2018-12-11 466,016.51 Real Estate Baowan price Nanshan Shenzhen Negotiated Land 1996-1-1 2018-12-11 332,868.94 Group Baowan price Nanshan Negotiated The Company Land 2006-9-1 2026-8-31 7,179,178.79 Real Estate price Nanshan Negotiated The Company Land 2006-9-1 2026-8-31 6,445,435.94 Group price Wharf Negotiated The Company Berth, land 2010-8-1 2011-12-31 10,126,039.96 Holding price Total 25,721,625.89

(3) Related party guarantees If the Amount Guarantor Guarantee Starting date Ending date guarantee guaranteed finished? The Company Kunshan Baowan 70,000,000.00 2011-3-10 2013-3-9 Yes

Note: The Company provided guarantee for the loan of RMB70,000,000.00 made by Kunshan Baowan. On 9 March 2011, Kunshan Baowan repaid the loan. According to agreed terms between the Company and Huarong International Trust Co., Ltd., the Company did not undertake liabilities of

132 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements guarantee with effect from 10 March 2011.

(4) Capital borrowing and lendings between related parties Amount of Related parties borrowing and Starting date Ending date Notes lendings Borrowing: Nanshan Group 650,000,000.00 2011-11-11 2016-11-11 Note (a) Nanshan Group 50,000,000.00 2011-11-11 2016-11-11 Note (b) China Merchants Bank 50,000,000.00 2010-1-29 2011-11-29 repaid on schedule China Merchants Bank 50,000,000.00 2010-12-3 2011-12-3 repaid on schedule China Merchants Bank 45,000,000.00 2011-3-28 2011-9-17 repaid on schedule China Merchants Bank 200,000,000.00 2009-8-21 2014-8-21 Repaid RMB100,000.00 in 2011 China Merchants Bank 200,000,000.00 2009-8-26 2012-8-26 Repaid RMB100,000.00 in 2011 Total 1,245,000,000.00

Note (a): It is the medium and long-term loan the Company borrowed from Nanshan Group. The borrowings are used for logistic park projects of Tianjin Baowan, Langfang Baowan, Chengdu Longquan Baowan, Chengdu Xindu Baowan, Shanghai Mingjiang and Chiwan Petroleum Supply Base working ship wharf project.

Note (b): It is medium and long term loan the Company borrowed from Nanshan Group. The borrowing is specifically used in operating activity of the Company.

(5) Interest income from related parties

(a) Interest income from capital deposited by the Group Related 2011 2010 transaction Percentage of Details of pricing principle Percentage of the the same Related parties related and Amount same category Amount category transaction decision-making transactions (%) transactions procedure (%) Interest rate set Interest China Merchants Bank by the People’s 1,151,042.19 43.01 1,497,918.19 74.08 income Bank of China

(b) Interest expenses caused by capital borrowed in by the Group Related 2011 2010 transaction Details of Percentage of pricing Percentage of the Related parties related the same principle and Amount same category Amount transaction category decision-mak transactions (%) transactions (%) ing

133 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

procedure

Interest Negotiated China Merchants Bank 26,816,549.60 32.95 20,797,900.00 35.52 expense price Interest Negotiated Nanshan Group 14,083,038.97 17.30 9,918,882.41 16.94 expense price Total 40,899,588.57 50.25 30,716,782.41 52.46

(6) Key management’s remuneration Remuneration levels 2011 2010

Total amount of Remuneration (in RMB) 5,759,301.50 3,475,760.44 incl: (number of persons fall in corresponding remuneration level)

Over RMB200,000 7 6

RMB150,000 – 200,000

RMB100,000 – 150,000

Below RMB100,000

(7) Other related transactions

Nanshan Group paid RMB76,895,416.61 to the Group as the fund of construction of Baowan logistic parks. The Group paid Nanshan Group interest of the capital invested on logistic parks construction up to RMB16,570,094.20 in 2011.

6. Receivables from and payables to related parties

(1) Receivables from and prepayments to related parties Closing balance Opening balance Item Book value Bad debt Book value Bad debt provision provision Bank deposit: China Merchants Bank 173,682,508.15 - 76,694,976.46 - Interest receivable: China Merchants Bank 194,527.78 - - - Accounts receivable: Sembawang Company 1,013,885.21 10,138.85 2,262.80 22.63 CPEC 715,981.10 7,159.81 674,327.70 6,743.27 Total 1,729,866.31 17,298.66 676,590.50 6,765.90 Other receivables: Nanshan Group 649,018.40 - - - Nanshan Real Estate - - 2,144,189.64 - Total 649,018.40 - 2,144,189.64 -

134 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

(2) Payables to and advances received from related parties Item Closing balance Opening balance Short-term loan: China Merchants Bank - 100,000,000.00 Accounts payable: Chixiao Construction 9,740.00 40,592.00 Chixiao Engineering - 90,000.00 Sembawang Company 30,957.50 - Nanshan Real Estate 7,390,088.76 4,610,860.56 Total 7,430,786.26 4,741,452.56 Interest payable: Nanshan Group 6,758,208.34 - China Merchants Bank 613,493.10 766,700.00 Total 7,371,701.44 766,700.00 Dividend payable: Nanshan Group 8,382,728.01 - Other payables: Nanshan Group 920,873.92 253,617.61 Nanshan Real Estate 57,668.48 58,788.40 CPEC 192,441.64 124,667.56 Wharf Holding 209,954.63 213,224.28 Sembawang Company 619,040.08 113,625.00 Merchants Logistic Guangzhou Company 489,408.00 489,408.00 Total 2,489,386.75 1,253,330.85 Non-current liability due in one year: China Merchants Bank 199,900,000.00 - Long-term loan: China Merchants Bank 199,900,000.00 400,000,000.00 Long-term payable: Nanshan Group 140,130,172.17 209,394,755.56 Other non-current liabilities: Nanshan Group 700,000,000.00 -

IX. CONTINGENT EVENTS

As at 31 December 2011, the Group does not have material contingent events that require to be disclosed.

X. COMMITMENT

1. Significant commitments

(1) Capital commitment RMB Yuan Item Closing balance Opening balance Contracts that are signed but not recognized in balance sheet

135 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

- long-term capital construction or purchase 328,079,258.00 230,329,386.09 commitment

(2) Operating lease commitment

Valid irrevocable leasing contracts signed by the Group as at the balance sheet date are as follows: RMB Yuan Item Closing balance Opening balance Minimum future lease payment for irrevocable operating leases: First year after balance sheet date 42,888,769.15 23,476,911.92 Second year after balance sheet date 36,038,029.25 14,462,018.85 Third year after balance sheet date 36,038,029.25 15,217,382.55 Forth year onwards 618,871,275.41 219,865,018.96 Total 733,836,103.06 273,021,332.28

Note: the operating lease contracts are all signed between the Group and related parties.

2. Fulfillment of prior year commitments

The Group has fulfilled its commitment of capital expenditure promised on 31 December 2010.

XI. EVENTS AFTER THE BALANCE SHEET DATE

1. On 1 March 2012, the Company’s Board of Directors announced that the Company is going to issue 5-year medium term note with nominal value of RMB400,000,000.00 on 7 March 2012. On 7 March 2012, the note was issued and the comprehensive interest rate is 6.436%.

2. On 26 March 2012, the proposal of 2011 profit distribution plan has been passed on the sixth meeting of the sixth Board of Directors of the Company and will be submitted to the Annual General Meeting. The proposal is to distribute cash dividend of RMB1.58 (tax inclusive) for every 10 shares held to all shareholders based on total outstanding 230,600,000 shares as at 31 December 2011. Total cash dividend needs to be distributed amount to RMB36,434,800.00. The above profit distribution proposal is waiting for approval by Annual Shareholders’ General Meeting.

3. On 26 March 2012, a resolution passed on the sixth meeting of the sixth Board of Directors of the Company for the proposal of re-design the Land A project of Guangzhou Baowan with estimated total investment of RMB480,000,000.00. The above proposal is waiting for approval by Annual Shareholders’ General Meeting.

4. On 26 March 2012, a resolution passed on the sixth meeting of the sixth Board of Directors of the Company for the proposal of a 22-year lease of the land use right from Nanshan Group for total area of 68,700 square meters (including wharf) of the land located at east coast line of south extension of Shekou Chiwan No.1 Road. The period of lease is from 1 January 2012 to 14 July

136 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

2034. The rental terms are: (1) before the completion of sea filling to east coast line (phase 1 land), the annual rental standard is RMB15,000,000.00; (2) after the completion of sea filling to east coast line (including phase 1 and phase 2 lands), total land usage rental standard is RMB20,000,000.00; (3) the rental remain unchanged for 2 years since the completion of sea filling and ready for use, and from the third year onwards, increase 4% annually. The rental for the sixth year (2017) is to be re-determined according to comprehensive factors at that time such as market price for land etc… The contract of related transactions of 2017 east coast line lease will be re-submitted to the Board of Directors for examination and approval procedures. The above mentioned proposal of related transaction of leasing east coast line from Nanshan Group is waiting for approval by Annual Shareholders’ General Meeting.

XII. NOTES TO OTHER MATERIAL EVENTS

1. Issue of medium-term notes

The proposal of issue a 5-year medium-term notes with principal of RMB400,000,000.00 was approved by the first Emergency Shareholders’ Meeting on 5 January 2011.

On 16 September 2011, the Company received the “Notice of Acceptance of Registration” from National Association of Financial Market Institutional Investors (Zhong Shi Xie Zhu [2011] No. MTN164). By considering of the cost of capital, the Company decided to issue the notes at an appropriate time.

2. Financial instruments and risk management

The target of the Group’s risk management is to obtain balance between risk and benefit and to minimize the negative effect of the risk to the Group’s operating performance so as to maximize the benefit of the shareholders and other equity investors. Based on this risk management target, the basic strategy of the Group’s risk management is to ensure and analyze various risks the Group faces and to establish appropriate risk undertaking baseline and, at the same time, managing the risks and monitoring all kinds of risks reliably and in a timely manner so as to control the risk within a determined scope.

Financial risks the Group faces in its daily operations include market risk (foreign exchange risk and interest rate risk), credit risk and liquidity risk. The Group set out policies and procedures to identify and analyze these risks and implemented appropriate risk limit and internal control procedures. The above mentioned risks are monitored through reliable management and information system continuously.

137 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

(1) Market risk

(a) Foreign exchange risk

The business operation of the Group is mainly conducted in China. Except for monetary assets list in the table below, all other monetary assets and liabilities of the Group are denominated in Renminbi. Main foreign exchange risks the Group faces is related to bank deposit in Hong Kong dollar, US dollar and Euro. The Group closely monitoring the effect of foreign exchange risks arising from changing of foreign exchange rate. As the balances of the Group’s foreign currency deposit is not much, the foreign exchange risk the Group faces can be maintained at a minimum level.

The RMB equivalents of financial assets and financial liabilities denominated in foreign currencies are presented as follows ： Closing balance Item Item Item Item denominated denominated denominated Total in USD in HKD in EUR Financial assets denominated in

foreign currency: Monetary fund 407,259.53 44,149.96 4,897.96 456,307.45 (Continued) Opening balance Item Item Item Item denominated denominated denominated Total in USD in HKD in EUR Financial assets denominated in

foreign currency: Monetary fund 444,999.85 86,294.27 5,288.11 536,582.23

As a result, the Group believes that the foreign exchange risk is not significant to the Group.

(b) Interest rate risk

The interest risk the Group faced is mainly long-term interest bear debt such as long-term bank loans. The financial liabilities carrying floating interest rate brings cash flow interest rate risk to the Group. Financial liabilities carrying fixed interest rate brings fair value interest rate risk. The Group determines the relative percentage of the fixed interest rate contracts versus floating interest rate contracts according to the market environment at a particular period. As at 31 December 2011, the long-term interest bearing liabilities are all denominated in RMB and floating interest contracts amounts to 350,000,000.00.

The Group monitors the Group’s interest level continuously. Increase in interest rate will increase

138 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements the cost of addition of interest bearing liabilities and unclear interest bearing liability with floating interest rate of the Group, and will have significant negative effect on the Group’s financial performance. The management will make adjustments timely according to the latest market condition. For short term and long term loan arrangement, the Group borrows fixed interest rate loan in advance and increase the percentage of fixed interest rate loan in total loans to avoid negative effect to cost due to increase in interest rate.

In 2011, if the interest rate increase or decrease 10% for loans with floating interest rate and other conditions remain the same, the net profit of the Group will increase or decrease about RMB1,951,395.16 (the figure was1,655,204.17 in 2010).

(2) Credit risk

The Group manages the credit risk based on portfolios. Credit risk emerges from bank deposit, accounts receivable and other receivables.

The bank deposit of the Group is mainly deposited in financial institutions with good credit rating. The Group believes that there is no material credit risk and will not result in any material losses arising from breaching of agreements by the counterparty.

For accounts receivable and other receivables, the Group set related policies to control the credit risk exposure. The Group evaluates the credit capability of the customer and set corresponding credit terms based on factors such as the financial status, the possibility of obtaining third party guarantee, credit records of the customer and other factors such as current market conditions. The Group will monitor the credit record of the customer and will chase the customer in writing, shorten or cancel the credit term to customers with worse credit record so as to ensure the overall credit risk of the Group is under control.

(3) Liquidity risk

The Company is responsible for predicting the Group’s cash flows and responsible to acquire fund from financial institutions to provide sufficient capital to meet short and long term capital needs. At the same time, the Company continuously monitoring the capital needs in short and long term to ensure sufficient cash reserves and comply with loan agreements.

Maturity analysis of undiscounted cash flows for financial assets and financial liabilities held by the Group are as follows:

Closing balance Item Within 1 year 1-3 years Over 3 years Total

139 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Financial

asset: Monetary fund 402,122,936.70 - - 402,122,936.70 Accounts 37,718,753.94 1,005,835.10 37,260.23 38,761,849.27 receivable prepayments 1,232,487.02 - 182,367.43 1,414,854.45 Interest 743,516.68 - - 743,516.68 receivable Other 5,686,135.33 1,586,353.44 470,978.25 7,743,467.02 receivables Other current 369,620,000.00 - - 369,620,000.00 assets Total 817,123,829.67 2,592,188.54 690,605.91 820,406,624.12 Financial

liability: Short term loan 210,000,000.00 - - 210,000,000.00 Accounts 9,672,417.40 330,750.02 105,760.69 10,108,928.11 payable Advances received from 2,093,276.87 - - 2,093,276.87 customer Interest 8,692,594.04 - - 8,692,594.04 payable Dividend 8,382,728.01 - - 8,382,728.01 payable Other payables 106,192,224.36 62,960,355.87 15,308,248.10 184,460,828.33 Long term loan due in one 549,820,000.00 - - 549,820,000.00 year Long term loan - 359,900,000.00 - 359,900,000.00 Long term - 140,130,172.17 - 140,130,172.17 receivables Other non-current 700,000,000.00 - 23,114,314.14 723,114,314.14 liabilities Total 1,594,853,240.68 563,321,278.06 38,528,322.93 2,196,702,841.67

(Continued) Closing balance Item Within 1 year 1-3 years Over 3 years Total Financial

asset: Monetary fund 186,593,590.15 - - 186,593,590.15 Accounts 38,706,126.00 1,123,044.92 373,397.23 40,202,568.15 receivable Prepayments 2,706,157.02 - 250,509.31 2,956,666.33 Interest - - - - receivable

140 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Closing balance Item Within 1 year 1-3 years Over 3 years Total Other 7,215,429.59 998,299.17 1,069,031.25 9,282,760.01 receivable Total 235,221,302.76 2,121,344.09 1,692,937.79 239,035,584.64 Financial

liabilities: Short term loan 258,530,000.00 - - 258,530,000.00 Accounts 6,978,163.25 298,007.22 264,456.64 7,540,327.11 payable Advances received from 334,452.28 - - 334,452.28 customers Interest 1,682,882.21 - - 1,682,882.21 payable Dividends - - - - payable Other payables 146,443,730.97 48,978,776.26 7,248,990.92 202,671,498.15 Long term loan due in one - - - - year long term loan - 910,000,000.00 - 910,000,000.00 Long term 61,453,046.84 147,941,708.72 209,394,755.56 payables Other non-current - - 24,463,665.30 24,463,665.30 liabilities Total 475,422,275.55 1,107,218,492.20 31,977,112.86 1,614,617,580.61

3. Operating events

As at 31 December 2011, the Group’s current liabilities exceed current assets up to RMB194,568,075.62. As at 31 December 2010, the Group’s current liabilities exceed current assets up to RMB279,524,148.07. It is due to some logistic parks projects in different areas invested by the Company are still in construction phase, which requires large capital expenditure. The Company’s management believes that it will not affect the Group’s continuous operations significantly.

4. Notes to other matters

On 27 October 2011, according to resolution passed on Board of Directors, Baowan Holding is going to incorporate Nantong Baowan International Logistic Co., Ltd in Jiangsu Provincial Nantong Gangzha Economic Development Zone with registered capital of RMB100,000,000.00. It also plans to incorporate Chengdu Ziyang Baowan International Logistic Co., Ltd. in Chengdu Ziyang Modern Industry Development Zone in Chengdu, Sichuan Province with registered capital of

141 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

RMB50,000,000.00. As at 31 December 2011, related incorporation works is still in progress.

XIII. NOTES TO THE COMPANY’S FINANCIAL STATEMENTS

1. Bank and cash balances Closing balance Opening balance Item Foreign Exchange Foreign Exchange Amount in RMB Amount in RMB currency rate (%) currency rate (%) Cash in hand: -RMB - - 100.00 - - 418.60 -HKD 45.13 0.81 36.56 2,907.13 0.85 2,471.06 -EUR 600.24 8.16 4,897.96 600.24 8.81 5,288.11 Subtotal 5,034.52 8,177.77 Bank deposit: -RMB - - 323,786,758.28 - - 171,279,933.89 -HKD 26,974.74 0.81 21,849.54 71,134.80 0.85 60,464.58 -USD 64,644.37 6.30 407,259.53 67,220.49 6.62 444,999.85 Subtotal 324,215,867.35 171,785,398.32 Other

monetary fund -RMB - - 16,116.00 - - 25,000.00 Subtotal 16,116.00 25,000.00 Total 324,237,017.87 171,818,576.09

2. Accounts receivable

(1) Receivables presented by types Closing balance

Type Book value Bad debt provision Percentage Percentage Amount Amount （%）（%） Accounts receivable that are significant in amount individually and - - - - provided for bad debt individually Accounts receivables that are provided for bad debt by portfolio Accounts receivables that are provide d for bad debt based on 32,572,521.11 100.00 325,725.21 1.00 percentage of year-end balances Subtotal of portfolio 32,572,521.11 100.00 325,725.21 1.00 Accounts receivables that are insignificant in amount individually but - - - - provided for bad debt individually Total 32,572,521.11 100.00 325,725.21 1.00

142 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

(continued) Opening balance

Type Book value Bad debt provision Percentage Percentage Amount Amount （%）（%） Accounts receivable that are significant in amount individually and - - - - provided for bad debt individually Accounts receivables that are provided for bad debt by portfolio Accounts receivables that are provide d for bad debt based on 31,719,323.09 100.00 317,193.23 1.00 percentage of year-end balances Subtotal of portfolio 31,719,323.09 100.00 317,193.23 1.00 Accounts receivables that are insignificant in amount individually but - - - - provided for bad debt individually Total 31,719,323.09 100.00 317,193.23 1.00

(2) Receivables presented by account aging Closing balance Item Amount Percentage (%) Bad debt provision Book value within 1 year 31,524,629.43 96.78 315,246.29 31,209,383.14 1~2 year 406,642.45 1.25 4,066.42 402,576.03 2~3 year 603,612.63 1.85 6,036.13 597,576.50 Over 3 year 37,636.60 0.12 376.37 37,260.23 Total 32,572,521.11 100.00 325,725.21 32,246,795.90

(Continued) Opening balance Item Amount Percentage (%) Bad debt provision Book value within 1 year 30,207,110.98 95.23 302,071.11 29,905,039.87 1~2 year 729,623.27 2.30 7,296.23 722,327.04 2~3 year 405,419.92 1.28 4,054.20 401,365.72 Over 3 year 377,168.92 1.19 3,771.69 373,397.23 Total 31,719,323.09 100.00 317,193.23 31,402,129.86

(3) Receivables that are provided for bad debt by portfolio Percentage of Portfolio Book balance Bad debt provision provision (%) Accounts receivables that are provided for bad debt based on percentage of 32,572,521.11 1.00 325,725.21 year-end balances

(4) At the end of the reporting period, there is no receivable owed by any shareholders with over 5% (inclusive) voting shares of the Company.

143 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

(5) Top five receivable accounts Relationship with the Percentage of total Entity name Amount Aging Company receivables (%) Shenzhen Weisheng Offshore Oil Technology Non-related party 10,727,569.46 Within 1 year 32.93 Co., Ltd . Husky Oil China Ltd . Non-related party 3,923,703.35 Within 1 year 12.05 China Oilfield Services Non-related party 2,217,636.83 Within 1 year 6.81 Limited Shenzhen Jutal Mechanical Equipment Non-related party 1,833,676.70 Within 1 year 5.63 Ltd. CACT Operators Group Non-related party 1,389,518.56 Within 1 year 4.27 Total 20,092,104.90 61.69

(6) Receivables from related parties

For details, please see Note XIII. 14 – Receivables from and payables to related parties.

3. Other receivables

(1) Other receivables presented by types Closing balance

Type Book value Bad debt provision Percentage Amount Percentage （%） Amount （%） Other receivables that are significant in amount individually and provided - - - - for bad debt individually Accounts receivables that are - - - - provided for bad debt by portfolio Accounts receivables that are provided for bad debt based on - - - - percentage of year-end balances Portfolio of specific accounts 690,801,414.95 100.00 - - Subtotal of portfolio 690,801,414.95 100.00 Other receivables t hat are insignificant in amount individually but - - - - provided for bad debt individually Total 690,801,414.95 100.00

(Continued) Opening balance

Type Book value Bad debt provision Percentage Percentage Amount Amount （%）（%）

144 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Other receivables that are significant in amount individually and provided - - - - for bad debt individually Accounts receivables that are provided for bad debt by portfolio Accounts receivables that are provided for bad debt based on - - - - percentage of year-end balances Portfolio of specific accounts 528,755,821.24 100.00 - - Subtotal of portfolio - - - - Other receivables that are insignificant in amount individually but - - - - provided for bad debt individually Total 528,755,821.24 100.00 - -

(2) Other receivables presented by account aging Closing balance Item Amount Percentage (%) Bad debt provision Book value Within 1 year 416,527,736.88 60.30 - 416,527,736.88 1~2 year 100,653,678.28 14.57 - 100,653,678.28 2~3 year 134,948,271.63 19.53 - 134,948,271.63 Over 3 years 38,671,728.16 5.60 - 38,671,728.16 Total 690,801,414.95 100.00 - 690,801,414.95

(Continued) Opening balance Item Amount Percentage (%) Bad debt provision Book value within 1 year 236,478,802.79 44.72 - 236,478,802.79 1~2 year 151,468,777.89 28.65 - 151,468,777.89 2~3 year 100,447,884.64 19.00 - 100,447,884.64 Over 3 years 40,360,355.92 7.63 - 40,360,355.92 Total 528,755,821.24 100.00 - 528,755,821.24

(3) Other receivables that are provided for bad debt by portfolio Percentage of provision Combination Book value Bad debt provision (%) Portfolio of specific 690,801,414.95 - - accounts

(4) At the year end, there are no other receivables balances that due from any shareholders held over 5% (inclusive) voting shares of the Company.

(5) Top five other receivables accounts Percentage of Relation with Entity name Amount Aging total other the Company receivables (%)

145 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Tianjin Baowan Related party 164,613,831.11 Note a 23.83 Within 1 Kunshan Baowan Related party 109,760,338.88 15.89 year Within 1 Shanghai Mingjiang Related party 87,792,908.97 12.71 year Within 1 Langfang Baowan Related party 81,359,091.94 11.78 year Longquan Baowan Related party 66,973,668.71 Note b 9.69 Total 510,499,839.61 73.90

Note a: Among the year end balances, the age of amount up to RMB29,918,070.18 is within 1 year; the age of amount up to RMB42,322,843.11 is between 1 to 2 years; the age of amount up to RMB63,522,675.55 is between 2 to 3 years; and the age of amount up to RMB28,850,242.27 is over 3 years.

Note b: Among the year end balances, the age of amount up to RMB65,347,877.91 is within 1 year; the age of amount up to RMB1,625,790.80 is between 2 to 3 years.

(6) Receivables from related parties

For details, please refer to Note XIII. 14 – Receivables from and payables to related parties.

4. Long-term equity investment

(1) Classification of long-term equity investment Item Opening Balance Increase in 2011 Decrease in 2011 Closing Balance Investment in subsidiary 515,535,759.71 1,070,761,987.58 714,491,987.58 871,805,759.71 Investment in associated 350,681,587.87 22,456,865.14 48,000,000.00 325,138,453.01 companies Subtotal 866,217,347.58 1,093,218,852.72 762,491,987.58 1,196,944,212.72 Less: impairment provision for long-term equity -- - - investment Total 866,217,347.58 1,093,218,852.72 762,491,987.58 1,196,944,212.72

(2) Details of long-term equity investment Accounting Initial Investment Opening Increase Or Investee Closing Balance Method Cost Balance Decrease Shenzhen Baowan Cost method 41,834,700.07 41,273,772.13 - 41,273,772.13 Baowan Holding Cost method 830,531,987.58 830,531,987.58 830,531,987.58 Shanghai Baowan Cost method 144,000,000.00 144,000,000.00 (144,000,000.00) - Guangzhou Baowan Cost method 45,000,000.00 45,000,000.00 (45,000,000.00) - Kunshan Baowan Cost method 120,000,000.00 120,000,000.00 (120,000,000.00) - Tianjin Baowan Cost method 29,880,000.00 29,880,000.00 (29,880,000.00) -

146 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Langfang Baowan Cost method 30,000,000.00 30,000,000.00 (30,000,000.00) - Chengdu Xindu Cost method 18,000,000.00 18,000,000.00 (18,000,000.00) - Baowan Chengdu Longquan Cost method 30,000,000.00 30,000,000.00 (30,000,000.00) - Baowan Nanjing Baowan Cost method 30,000,000.00 30,000,000.00 (30,000,000.00) - Shanghai Mingjiang Cost method 27,381,987.58 27,381,987.58 (27,381,987.58) - CPEC Equity method 3,312,000.00 4,923,013.37 (741,505.74) 4,181,507.63 Sembawang Company Equity method 79,488,000.00 345,758,574.50 (24,801,629.12) 320,956,945.38 Total 866,217,347.58 330,726,865.14 1,196,944,212.72

(Continued) explanation on inconsistency Percentage of between the Percentage of Provision shareholding shareholding Impairment Cash dividend Investee voting power in accrued in in investee percentage and the provision paid in 2011 investee (%) 2011 (%) voting power percentage in investee Shenzhen 100.00 100.00 - - - 6,628,667.26 Baowan Baowan 77.36 77.36 - - - 28,643,455.78 Shareholding Shanghai 100.00 100.00 - - - 53,938,261.95 Baowan Guangzhou 100.00 100.00 - - - 1,066,916.29 Baowan Kunshan 100.00 100.00 - - - - Baowan Tianjin 100.00 100.00 - - - - Baowan Langfang 100.00 100.00 - - - - Baowan Chengdu 100.00 100.00 - - - - Xindu Baowan Chengdu Longquan 100.00 100.00 - - - - Baowan Nanjing 100.00 100.00 - - - - Baowan Shanghai 100.00 100.00 - - - - Mingjiang CPEC 20.00 20.00 - - - - Sembawang 32.00 32.00 - - - 48,000,000.00 Company

147 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Total - - 138,277,301.28

5. Non-current liability that will due in one year

(1) Details of non-current liability that is due in one year Item Closing balance Opening balance Long-term loan that is due in one year 549,820,000.00 —

(2) Details of long-term loan that is due in one year Interest Closing balance Opening balance Starting Ending Curren Lender rate Foreign Foreign date date cy RMB RMB （%） currency currency Industrial and Commercial Bank of China 2009-8-25 2012-8-24 5.6525 RMB - 300,000,000.00 - - Limited Shekou Branch China Merchants Bank Co., Ltd. 2009-8-26 2012-8-26 4.8600 RMB - 199,900,000.00 - - Shenzhen Chiwan Branch Ningbo Bank Co., Ltd. 2009-7-10 2012-5-14 5.9850 RMB - 49,920,000.00 - - Shenzhen Branch Total 549,820,000.00 -

6. Long-term loans

(1) long-term loan classification Item Closing balance Opening balance Credit loan 909,720,000.00 910,000,000.00 Less: long-term loan that is due in one year 549,820,000.00 - (note XIII. 5) Total 359,900,000.00 910,000,000.00

(2) Details of long-term loans Lender Interest Closing balance Opening balance Curren Starting date Ending date rate Foreign Foreign cy RMB RMB (%) currency currency China Merchants 2009-8-21 2014-8-21 5.1840 RMB - 199,900,000.00 - 200,000,000.00 Bank Co., Ltd.

148 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Shenzhen Chiwan Branch Bank of China Ltd. 2009-11-10 2014-11-10 5.1840 RMB - 160,000,000.00 - 160,000,000.00 Shenzhen Branch Industrial and Commercial Bank 2009-8-25 2012-8-24 4.9725 RMB - - - 300,000,000.00 of China Limited Shekou Branch China Merchants Bank Co., Ltd. 2009-8-26 2012-8-26 4.8600 RMB - - - Shenzhen Chiwan 200,000,000.00 Branch Ningbo Bank Co., Ltd. Shenzhen 2009-7-10 2012-5-14 5.2650 RMB - - - 50,000,000.00 Branch

Total 359,900,000.00 910,000,000.00

Note: In 2011, the weighted average annual interest rate of the Company’s long-term loan is 5.465%.

(3) Maturity analysis of long-term loans: Item Closing balance Opening balance 1 to 2 years - 550,000,000.00 2 to 5 years 359,900,000.00 360,000,000.00 Total 359,900,000.00 910,000,000.00

7. Capital reserves

(1) Changes in capital reserves in 2011 Opening Item Increase Decrease Closing balance balance Capital premium 107,448,611.74 - - 107,448,611.74 Other capital reserves 97,086,237.75 - - 97,086,237.75 Total 204,534,849.49 - - 204,534,849.49

(2) Changes in capital reserves in 2010 Opening Item Increase Decrease Closing balance balance Capital premium 111,367,624.16 - 3,919,012.42 107,448,611.74 Other capital reserves 97,086,237.75 - - 97,086,237.75 Total 208,453,861.91 - 3,919,012.42 204,534,849.49

Note: the decrease in capital reserve in 2010 is the difference of net assets attributable to the Company and original investment cost due to the Company acquired 60% of Shanghai Mingjiang in 2010.

149 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

8. Surplus reserves

(1) Changes in surplus reserves in 2011 Item Opening balance Increase Decrease Closing balance Statutory reserve 155,956,669.93 18,329,718.81 - 174,286,388.74 Discretionary reserve 61,314,828.91 7,389,338.60 - 68,704,167.51 Total 217,271,498.84 25,719,057.41 - 242,990,556.25

(2) Changes in surplus reserve in 2010 item Opening balance Increase Decrease Closing balance Statutory reserve 141,177,992.72 14,778,677.21 - 155,956,669.93 Discretionary reserve 55,324,755.67 5,990,073.24 - 61,314,828.91 Total 196,502,748.39 20,768,750.45 - 217,271,498.84

9. Undistributed profit Percentage of drawing Item 2011 2010 or distributing (%) Undistributed profit at the end of prior year before 323,194,280.78 255,901,619.92 adjustments Total adjustment to undistributed profit at the beginning of the year Undistributed profit at the beginning of the year after 323,194,280.78 255,901,619.92 adjustments Plus: Net profit attributable to the owners of the parent 183,297,188.06 147,786,772.13 company during the year Less: statutory surplus reserve drawn 18,329,718.81 14,778,677.21 10 Discretionary surplus reserve drawn 7,389,338.60 5,990,073.24 5 Dividends payable to ordinary shares 29,516,766.36 59,725,360.82 Undistributed profit at the end of the year 451,255,645.07 323,194,280.78

10. Operating revenue and operating cost

(1) Operating revenue and operating cost Item 2011 2010 Revenue from Main 258,138,036.82 239,199,872.87 Businesses Revenue from Other 5,816,980.00 1,932,141.60 Businesses Total operating revenue 263,955,016.82 241,132,014.47 Cost for Main Businesses 82,862,192.49 66,826,926.38 Cost for Other Businesses 4,211,358.56 1,526,156.45 Total operating cost 87,073,551.05 68,353,082.83

(2) Main Businesses presented by sectors

150 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

2011 2010 Industry sector Revenue Cost Revenue Cost Stack (storage) 119,242,409.21 47,072,926.88 109,618,001.66 38,890,592.70 Port management 55,620,296.20 11,270,174.04 52,818,616.81 7,746,858.83 Loading and 64,901,419.18 20,225,721.67 60,477,793.97 15,875,890.95 unloading Office Leasing 18,373,912.23 4,293,369.90 16,285,460.43 4,313,583.90 Total 258,138,036.82 82,862,192.49 239,199,872.87 66,826,926.38

The Company’s main businesses are conducted in Guangdong Province, no disclosure according to regions is needed.

(3) Sales revenue from top five clients Total Revenue from Top Percentage to total revenue in Period Five Clients corresponding period (%) 2011 151,325,810.46 58.62 2010 136,039,956.00 56.42

11. Financial expense Item 2011 2010 Interest expense 81,392,202.22 58,546,647.31 Less: Interest income 40,286,023.73 31,717,426.14 Exchange loss 164,948.81 15,681.95 Less: exchange gain 1,053,303.73 226,344.85 Others 121,755.77 146,392.96 Total 40,339,579.34 26,764,951.23

12. Investment gain

(1) Details of investment gain Name of investee 2011 2010 Income from long-term equity investment measured by cost 90,277,301.28 35,878,170.16 method Income from long-term equity investment measured by equity 22,456,865.14 34,645,950.32 method Gain arising from disposal of long-term equity investment - (1,431,551.86) Total 112,734,166.42 69,092,568.62

Note: There are no significant restrictions for remitting back investment gain.

(2) Investment gain from long-term equity investment measured by cost method

Investee 2011 2010

Shanghai Baowan 53,938,261.95 27,146,004.30

151 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Investee 2011 2010

Baowan Holding 28,643,455.78 - Shenzhen Baowan 6,628,667.26 4,909,917.18 Guangzhou Baowan 1,066,916.29 378,811.79 Kunshan Baowan - 3,443,436.89 Total 90,277,301.28 35,878,170.16

(3) Investment gain from long-term equity investment measured by equity method Reason For Increase / Investee 2011 2010 Decrease Sembawang Company 23,198,370.88 34,443,311.87 Performance changes CPEC (741,505.74) 202,638.45 Performance changes Total 22,456,865.14 34,645,950.32

13. Supplementary information to the cash flow statement Item 2011 2010 1. Reconciliation from net profit to cash flows from

operating activities Net profit 183,297,188.06 147,786,772.13 Plus: asset impairment provision 8,531.98 (66,340.37) Fixed asset and investment property depreciation 12,316,935.82 11,253,588.59 intangible assets amortization 16,845,995.04 16,839,588.33 Loss (gain) arising from disposal of fixed assets, (640,741.42) (651,860.64) intangible assets and other long-term assets Financial expense 44,057,410.46 26,907,707.50 Investment loss (gain) (112,734,166.42) (69,092,568.62) Decrease (increase) of deferred income tax assets (6,180.69) 13,491.60 Decrease (increase) of inventory (115,840.18) 330,454.86 Decrease (increase) of operating receivables (1,574,483.09) (84,253,397.70) Increase (decrease) of operating payables (8,149,676.47) 13,985,453.07 Net cash flows from operating activities 133,304,973.09 63,052,888.72 2. Significant investment and financing activities not

involving cash receipt and payment 3.Net change in cash and cash equivalent: Cash at the end of the year (note) 324,220,901.87 171,793,576.09 Less: cash at the beginning of the year 171,793,576.09 197,382,010.29 Plus: cash equivalent at the end of the year - - Less: cash equivalent at the beginning of the year - - Net increased of cash and cash equivalents 152,427,325.78 (25,588,434.20)

Note: it does not include security deposit for credit card. As at 31 December 2011, the security deposit for the Company’s credit card is RMB16,116.00 (the figure was RMB25,000.00 on 31 December 2010).

152 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

14. Related party transactions

(1) Rendering and receiving of services

(a) Receiving of services Pricing 2011 2010 principal and Percentage of Percentage decision Details of same of same Related parties making transaction Amount category of Amount category of procedures for transactions transactions related （%）（%） transactions Loading and Negotiated Wharf Holding 3,258.00 - 276,695.58 1.74 uploading price Project Negotiated Chixiao Project contractor, 5,876,947.07 100.00 2,263,130.00 100.00 price steel structure Power supply Negotiated Nanshan Group 1,899,171.73 100.00 1,753,929.62 100.00 service price Total 7,779,376.80 4,293,755.20

(b) Providing of service Pricing 2011 2010 principal and Percentage of Percentage decision Details of same of same Related parties making transaction Amount category of Amount category of procedures for transactions transactions related （%）（%） transactions Loading and Negotiated CPEC uploading 158,621.00 0.31 354,898.16 0.59 price service Loading and Sembawang Negotiated uploading 5,039,841.61 8.14 2,422,834.96 4.01 Company price service Total 5,198,462.61 8.45 2,777,733.12 4.60

(2) Related party leasing (a) The Company as the lessor Types of Basis of Recognized gain Starting Lessor Lessee property Ending date recognizing lease from leasing in date leased income 2011 The Nanshan Property 2006-1-1 2014-12-31 Negotiated price 3,548,081.23 Company Group The Nanshan Real Property 2005-9-1 2011-12-31 Negotiated price 731,245.61 Company Estate

153 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

The Wharf Property 2009-11-1 2014-12-31 Negotiated price 1,709,935.15 Company Company The CPEC Property 2009-11-1 2011-3-31 Negotiated price 2,316,945.00 Company The Sembawang Property 2002-10-16 2012-12-31 Negotiated price 5,237,673.61 Company Company Total 13,543,880.60

(b) The Company as the lessee Basis of Types of Starting Recognized rental Lessor Lessee Ending date recognizing lease property leased date expense in 2011 income Nanshan The Company Land 2006-9-1 2026-8-31 Negotiated price 7,179,178.79 Real Estate Nanshan The Company Land 2006-9-1 2026-8-31 Negotiated price 6,445,435.94 Group Wharf The Company Berth, land 2010-8-1 2011-12-31 Negotiated price 10,126,039.96 Holding Total 23,750,654.69

(3) Related party guarantee Whether the Amount guarantee Guarantor Guarantee Starting date Ending date guaranteed has been discharged The Company Kunshan Baowan 70,000,000.00 2011-3-10 2013-3-9 Yes

(4) borrowing and leading between related parties Amount of Related parties Starting date Ending date Note transaction Borrowed: Nanshan Group 650,000,000.00 2011-11-11 2016-11-11 - Nanshan Group 50,000,000.00 2011-11-11 2016-11-11 - China Merchants Bank 50,000,000.00 2010-1-29 2011-11-29 repaid on schedule China Merchants Bank 50,000,000.00 2010-12-3 2011-12-3 repaid on schedule China Merchants Bank 45,000,000.00 2011-3-28 2011-9-17 repaid on schedule Already repaid China Merchants Bank 200,000,000.00 2009-8-21 2014-8-21 RMB100,000.00 in 2011 Already repaid China Merchants Bank 200,000,000.00 2009-8-26 2012-8-26 RMB100,000.00 in 2011 Total 1,245,000,000.00

(5) Interest income from related parties

(a) Interest income from the Company’s bank deposit Related parties Details of Pricing 2011 2010

154 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

transaction principal and Percentage decision Percentage of of same making same category Amount Amount category of procedures of transactions transactions for related （%）（%） transactions Interest rate set by China Merchants Interest People’s 1,029,100.01 45.08 1,459,259.59 74.84 Bank income Bank of China

(b) Interest expense caused by capital borrowed by the Company Pricing 2011 2010 principal and Percentage decision Details of Percentage in in same Related parties making transaction Amount same kind of Amount kind of procedures transaction（%） transaction for related （%） transactions China Merchants Interest Negotiated 26,816,549.60 32.95 20,797,900.00 35.52 Bank expense price Interest Negotiated Nanshan Group 6,758,208.34 8.30 - - expense price Total 33,574,757.94 41.25 20,797,900.00 35.52

(6) Other related party transactions

Nanshan Group paid RMB76,895,416.61 to the Company as the fund of construction of Baowan logistic parks. The Company paid, on behalf of its subsidiaries, to Nanshan Group interest of the capital invested on logistic parks construction up to RMB16,570,094.20 in 2011.

(7) Receivables from and payables to related parties (a) Accounts receivable and prepayments to related parties Closing balance Opening balance Item Book value Bad debt Book value Bad debt provision provision Bank deposit: China Merchants Bank 114,317,943.20 - 69,687,431.25 - Interest receivable: China Merchants Bank 743,516.68 - - - Accounts receivable: Sembawang Company 1,013,885.21 10,138.85 2,262.80 22.63 CPEC 715,981.10 7,159.81 674,327.70 6,743.27

155 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Total 1,729,866.31 17,298.66 676,590.50 6,765.90 Other receivables: Tianjin Baowan 164,613,831.11 - 215,374,440.53 - Kunshan Baowan 109,760,338.88 - 43,420,921.96 - Shanghai Mingjiang 87,792,908.97 - 33,504,469.00 - Langfang Baowan 81,359,091.94 - 14,400,287.14 - Longquan Baowan 66,973,668.71 - 50,659,587.94 - Xindu Baowan 61,325,514.37 - 61,373,933.99 - Guangzhou Baowan 55,275,945.26 - 51,347,621.88 - Shanghai Baowan 49,035,029.33 - 41,473,0 85.38 - Tianjin Bingang 10,206,400.00 - - - Shenzhen Baowan 1,167,086.35 - 867,811.68 - Nanjing Baowan - - 12,205,138.12 - Nanshan Real Estate - - 2,144,189.64 - Nanshan Group 649,018.40 - - - Total 688,158,833.32 - 526,771,487.26 - (b) Payables to and advances received from related parties Item Closing balance Opening balance Short-term loan: China Merchants Bank - 100,000,000.00 Account payable: Chixiao Construction 9,740.00 40,592.00 Chixiao Project - 90,000.00 Sembawang Company 30,957.50 - Nanshan Real Estate 7,390,088.76 4,610,860.56 Total 7,430,786.26 4,741,452.56 Interest payable: Nanshan Group 6,758,208.34 - China Merchants Bank 613,493.10 766,700.00 Total 7,371,701.44 766,700.00 Other payables: Baowan Holding 99,457,056.00 - Nanjing Baowan 54,611,657.58 - Shenzhen Baowan 43,402,942.03 16,328,582.81 Nanshan Group 247,255.08 253,617.61 Wharf Holding 209,954.63 213,224.28 CPEC 192,441.64 124,667.56 Sembawang Company 113,625.00 113,625.00 Nanshan Real Estate 57,668.48 58,788.40 Total 198,292,600.44 17,092,505.66 Non-current liability due in one year China Merchants Bank 199,900,000.00 - Long-term loan: China Merchants Bank 199,900,000.00 400,000,000.00 Other non-current liability: Nanshan Group 700,000,000.00 -

156 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

SUPPLEMENTARY INFORMATION TO THE NOTES TO THE FINANCIAL STATEMENTS

1. Details of non-recurring profit or loss Item 2011 2010 546,451.05 profit and loss arising from non-current assets disposal 608,610.28

Government grants recognized in current year’s profit or loss (except for the 3,341,765.88 fixed or quantitative government grants closely related to the enterprise 1,965,300.00

businesses according to the national unified standard) Net profit or loss from beginning of the year to the combination date from subsidiaries obtained through business combinations involving entities under - (5,002,934.04) common control 185,416.76 Other non-operating income and expenses excluding items mentioned above (53,245.23)

4,073,633.69 Subtotal (2,482,268.99)

504,632.58 Effect of income tax 630,586.74

Effect of minority interests (after tax) 72,135.07 (2,016,068.95) Total 3,496,866.04 (1,096,786.78)

The Group recognizes non-recurring profit or loss items in accordance with “Explanatory Public Notice on Information Disclosure of Companies Having Publicly Issued Securities No.1 – Non-recurring Profit or Loss” (Zheng Jian Hui Gong Gao (2008) No. 43).

2. Return on Equity (ROE) and EPS Weighted EPS (RMB/share) Profits of the reporting period average ROE Basic EPS Diluted EPS Net profit attributable to ordinary 11.77% 0.56 0.56 shareholders of the Company Net profit attributable to ordinary shareholders after deducting 11.45% 0.55 0.55 non-recurring profit or loss

Note (1): the weighted average ROE = “net profit attributable to the Company's ordinary shareholders” ÷ [“opening net assets attributable to the Company's ordinary shareholders” + “net profit attributable to the Company's ordinary shareholders” ÷ 2 – (“net asset decreased by cash dividends during reporting period, attributable to the Company's ordinary shareholders” * “cumulative number of months from the next month of net asset attributable to the Company’s ordinary shareholders decrease to the end of the reporting period” ÷ “number of months in the

157 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements reporting period”) + (“net assets changes arising from Baowan Holding’s equity contribution” * “cumulative number of months from the next month of net asset changes due to other matters to the end of the reporting period” ÷ “number of months in the reporting period”)] = 129,274,351.74÷[1,046,166,354.23+(129,274,351.74÷2)-(29,516,766.36*6÷12)+(14,413,853.51*2÷ 12)]=11.77%.

The weighted average ROE after deducting non-recurring profit or loss = “net profit attributable to the Company's ordinary shareholders after deducting non-recurring profits and losses” ÷ [“opening net assets attributable to the Company's ordinary shareholders” + “net profit attributable to the Company's ordinary shareholders” ÷ 2 – (“net asset decreased by cash dividends during reporting period, attributable to the Company's ordinary shareholders” * “cumulative number of months from the next month of net asset attributable to the Company’s ordinary shareholders decrease to the end of the reporting period” ÷ “number of months in the reporting period”) + (“net assets changes arising from Baowan Holding’s equity contribution” * “cumulative number of months from the next month of net asset changes due to other matters to the end of the reporting period” ÷ “number of months in the reporting period”) = 125,777,485.70÷ [1,046,166,354.23+(129,274,351.74÷2)-(29,516,766.36*6÷12)+(14,413,853.51*2÷12)]=11.45%.

Note (2): For the calculation of basic EPS and diluted EPS, please refer to Note VII. 42.

3. Abnormal Items in the Group’s consolidated financial statements and reasons

(1) Balance sheet item

Balance sheet items that with changes over RMB5,000,000.00 or over 30% by comparing the closing balance and the opening balance are analyzed as follows:

A. The closing balance of cash and balances is RMB402,122,936.70, increased 115.51% than

the opening balance. Main reasons for the increase include:

a. In 2011, Nanshan Group, the Company’s parent company issued medium-term notes

for the Group’s logistic park projects. Capital of RMB700,000,000.00 from the notes

issue were transferred to the Company;

b. In 2011, the Company utilized its idle capital to purchase finance products from banks

up to RMB369,620,000.00.

B. The closing balance of other current assets is RMB369,620,000.00, which is newly added in

2011. It is the finance products the Company purchased from banks;

C. The closing balance of long-term equity investment is RMB325,138,453.01, decreased 7.28

compared to the opening balance. The main reasons for the decrease include:

158 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

a. In 2011, the Company received cash dividend from Sembawang Company, an

associated company, as a result, the long-term equity investment decreased

RMB48,000,000.00;

b. In 2011, the Company adjust the investment gain from Sembawang Company

according to equity method, therefore, long-term equity investment increased

RMB23,190,000.00;

D. The closing balance of investment property is RMB707,482,188.70, increased 7.73%

compared to the opening balance. Main reasons for the increase include:

a. At the time Chengdu Longquan Baowan and Shanghai Baowan reached its useful

condition, construction-in-progress amounts to RMB59,140,000.00 were transferred to

investment property according to respective management’s intent of holding such

properties. In particular, Chengdu Longquan Baowan transferred RMB50,320,000.00 to

investment property, and Shanghai Baowan transferred RMB8,820,000.00;

b. The renovation project to the Company’s warehouse numbered A1 increased amount

up to RMB3,890,000.00 and the project for warehouse numbered Q1 has been finished,

resulted in an increase of RMB7,180,000.00. The two projects totally increased the

investment property of RMB11,070,000.00;

c. Chengdu Xindu Baowan, a subsidiary of the Company, transferred the self-use

property and buildings to investment property with original cost of RMB5,990,000.00

according to its management’s intent of holding such properties;

d. Depreciation accrued this year is RMB26,260,000.00;

E. The closing balance of fixed asset is RMB437,846,577.37, increased 7.58% compared to its

opening balance. Main reasons for the increase include:

a. The phase 1 project cost of warehouse base facility and associated machinery and

equipment for Chengdu Longquan Baowan logistic park increased RMB49,060,000.00;

b. The Company purchased fixed assets with cost of RMB13,630,000.00, which consists

of machinery and equipment of RMB10,760,000.00, transportation equipment of

RMb1,690,000.00, office and other equipment or RMB840,000.00, and fixed asset

decoration of RMB340,000.00;

c. Shanghai Baowan, Kunshan Baowan and Chengdu Xindu Baowan purchased fixed

assets up to RMB2,890,000.00 in 2011;

159 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

d. Chengdu Xindu Baowan transferred self-use property and buildings to investment

property with original cost of RMB5,990,000.00 according to its management’s intent of

holding in 2011;

e. Depreciation accrued in 2011 is RMB30,490,000.00;

F. The closing balance of construction-in-progress is RMB341,476,044.19, increased 166.27%

compared with its opening balance. Main reasons for the increase include:

a. Langfang Baowan logistic park project increased RMB122,350,000.00; Shanghai

Mingjiang logistic park project increased RMB113,260,000.00; Chengdu Longquan

Baowan phase II logistic park project increased RMB52,870,000.00; Kunshan Baowan

#12 warehouse project started and increased RMB15,130,000.00. Total increase in

construction-in-progress of RMB303,610,000.00;

b. The Company’s Chiwan Base working ship wharf project is started and increased

RMB16,600,000.00 accordingly;

c. At the time Chengdu Longquan Baowan reached its useful condition, it transferred to

investment property of RMB50,320,000.00 and transferred to fixed asset of

RMB49,060,000.00 according to its management’s intent of holding.

d. Warehouse #18 of Shanghai Baowan logistic park transferred to investment property at

RMB8,820,000.00 at the time it reached its useful condition;

G. The closing balance of intangible asset is RMB921,544,551.30, increased 4.01% compared

to its opening balance. Main reasons for the increase include:

a. The land identified as Land A held by Guangzhou Baowan increased

RMb62,670,000.00 due to the related certificate to property right is obtained;

b. Chengdu Longquan Baowan paid land use tax of RMB1,400,000.00 for the land it held;

c. Amortization of intangible asset in 2011 is RMB29,110,000.00;

H. The closing balance of deferred tax asset is RMB16,752,609.82, increased 44.06%

compared to its opening balance. Main reasons for the increase is that the deductible losses

from subsidiaries which are still under construction or at the initial stage of operation

increased, and the deferred tax asset increased accordingly;

I. The closing balance of other non-current asset is RMB76,216,717.37, decreased 38.73%

compared to its opening balance. Main reasons for the decrease include:

a. The property right certificate for Land A held by Guangzhou Baowan has been obtained

and amount up to RMB62,670,000.00 is transferred to intangible asset accordingly;

160 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

b. In 2011, Tianjin Bingang Baowan prepaid land transfer fee of RMB10,000,000.00; and

Nanjing Baowan paid land transfer fee of RMB4,210,000.00;

J. The closing balance of short-term loan is RMB210,000,000.00, decreased 18.77%

compared with its opening balance due to the Company adjusted the structure of its debt;

K. The closing balance of interest payable is RMB8,692,594.04, increased 416.53% compared

to its opening balance. The increase is due to increase in total amount of long-term loan and

increase in loan interest rate. As a result, interest payable at the end of year increased;

L. The closing balance of dividend payable is RMB8,382,728.01, which is new addition in 2011.

The increase is the dividend payable to Nanshan Group by Baowan Holding according to its

2011 profit distribution plan. The dividend is not distributed as at the end of 2011;

M. The closing balance of other payables is RMB184,460,828.33, decreased 8.99% compared

to its opening balance. The decrease is because the Group’s logistic park projects are ready

for operation successively and project expenditure due to other parties decreased;

N. The closing balance of non-current liability due in one year increased RMB549,820,000.00.

It is new addition in 2011 due to the Company’s long-term loan will be matured in one year;

O. The closing balance of long-term loan is RMB359,900,000.00, decreased 60.45% compared

to its opening balance because the Company reclassified long-term loan that will be matured

in one year to long-term liability due in one year account;

P. The closing balance of long-term payables is RMB140,130,172.17, decreased 33.08%

compared to its opening balance. The decrease is because Tianjin Baowan, Chengdu Xindu

Baowan and Chengdu Longquan Baowan are all put into operation and repaid Nanshan

Group for construction fund. According to the “Equity and Liability Transfer Agreement”

signed between the Company and Nanshan Group, Tianjin Baowan, Chengdu Xindu Baowan,

Chengdu Longquan Baowan will repay the construction fund received from Nanshan Group,

which undertook the construction expenditure according to its shareholdings in these

subsidiaries, step by step after put into operation;

Q. The closing balance of other non-current liability is RMB723,114,314.14, increased

2,855.87% compared to its opening figure. The increase is mainly due to Nanshan Group

issued, in 2011, medium-term notes for the Group’s logistic park projects and transferred

RMB700,000,000.00 to the Group.

R. The closing balance of capital reserve is RMB234,141,186.09, increased 6.56% compared

to its opening balance. The Company invested the 60% of equity each of Nanjing Baowan,

161 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

Tianjin Baowan, Langfang Baowan, Shanghai Mingjiang, Chengdu Xindu Baowan and

Chengdu Longquan Baowan and 100% equity each of Shanghai Baowan, Guangzhou

Baowan and Kunshan Baowan held by the Company in Baowan Holding as contribution paid

up by the Company to acquire 77.36% of Baowan Holding. The increase of capital premium

in 2011 is resulted from the difference between the net assets attributable to the Company at

the time Baowan Holding incorporated and the net asset attributable to the Company based

on shareholdings in these subsidiaries before the contribution.

S. The closing balance of surplus reserve is RMB242,990,556.25, increased 11.84%

compared to its opening figure. Reasons for the increase include:

a. The Company drew 10% statutory surplus reserve of RMB 18,330,000.00 based on net

profit of 2011 according to the Article of Association of the Company;

b. Pursuant to the approval of resolution on 2010 Annual Shareholders’ General Meeting,

the Company drew 5% discretionary surplus reserve of RMB7,390,000.00 based on net

profit of 2010;

T. The closing balance of undistributed profit is RMB452,610,050.78, increased 19.56%

compared to opening balance. Reasons for the increase include:

a. Net profit attributable to the parent company is RMB129,270,000.00;

b. Statutory and discretionary surplus reserves drew in 2011 up to RMB25,720,000.00;

c. In 2011, cash dividend distributed up to RMB29,520,000.00;

U. The closing balance of minority shareholders’ interest is RMB248,402,786.71, increased

161.13% compare to opening balance. Main reasons for the increase include:

a. In 2011, investment in subsidiaries of Tianjin Baowan etc.. increased as well as

incorporated Baowan Holding, which resulted in the increase of minority shareholders’

interest up to RMB180,120,000.00;

b. The Company invested the 60% of equity each of Nanjing Baowan, Tianjin Baowan,

Langfang Baowan, Shanghai Mingjiang, Chengdu Xindu Baowan and Chengdu

Longquan Baowan and 100% equity each of Shanghai Baowan, Guangzhou Baowan

and Kunshan Baowan held by the Company in Baowan Holding as contribution paid up

by the Company. The minority shareholders’ interest calculated using the new

shareholding percentage decreased RMB14,420,000.00;

c. Baowan Holding distributed its profit in 2011 and minority shareholders’ interest

decreased RMB8,380,000.00 accordingly;

162 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

d. The minority shareholders’ equity decreased RMB4,040,000.00 due to profit or loss

recognized for minority shareholders in 2011.

(2) Income statement item

Analysis of main items in 2011 that are with changes over 30% or RMB5,000,000.00 in amount compared with 2010 figure are as follows: A. Operating revenue realized in 2011 is RMB461,923,472.76, increased 15.45% compared to

prior year’s figure. Reasons for the increase include:

a. The stacking area of petroleum logistic headquarters that available for lease increased;

#18 warehouse of Shanghai Baowan and Chengdu Longquan Baowan logistic park are

all put into operation; rate of warehouse and office occupation of Kunshan Baowan,

Tianjin Baowan and Chengdu Xindu Baowan increased and the rental increased as well.

All of these contributed to the increase in stacking (warehousing) revenue up to

RMB45,740,000.00;

b. In 2011, the business volume of petroleum logistic headquarters increased, together

with the kick off of new businesses of Tianjin Baowan, revenue from loading and

unloading, and port management increased up to RMB9,850,000.00 ；

B. The operating cost incurred in 2011 is RMB164,161,243.51, increased 23.01% compare

with prior year. The main reason is because the increase in revenue which caused increase

in operating cost. The reason for increase in cost is not match with increase in revenue is

because the Group’s business is mainly stacking and warehousing, for which the operating

cost consists mainly depreciation and leasing cost, which are relatively fixed and do not have

proportionate relationship with the increase of revenue. This resulted the increase in cost is

not proportionately with the increase in revenue.

C. Business tax and surcharges for 2011 is RMB41,977,231.20, increased 26.62% compared

to prior year. The increase is mainly due to turnover taxes increase given that operating

revenue increased. The reason for the increase in business tax and surcharges did not

maintain proportionate increase relationship with revenue is because the urban maintenance

and construction tax rate increased from 1% to 7% for Shenzhen and newly addition of local

educational surcharges at a rate of 2% in 2011;

D. Finance expenses incurred in 2011 is RMB71,884,408.68, increased 31.82% compare with

prior year. The main reason is due to the total amount of loan increased, increase in interest

163 Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Notes to the Financial Statements

rate, as well as official operation of some subsidiaries logistic park projects. In 2011, the

Company’s average loan interest rate increased and the interest expenses increased

accordingly;

E. Investment gain in 2011 is RMB22,456,865.14, decreased 35.18% compared to prior year.

This is because the profit from Penglai Jutal Ocean Engineering Heavy Industry Co., Ltd, an

associate company of Sembawang Company, which is an associate company of the

Company, decreased significantly due to project progress was lacking behind and the volume

of work decreased.

F. Minority shareholders profit or loss incurred in 2011 is -4,044,550.27, decreased 55.89%

compared to prior year. Reasons for the decrease include:

a. Tianjin Baowan and Longquan Baowan, two controlling subsidiaries of the Company,

were put in operation in recent years and losses decreased, as a result, minority

shareholders’ profit or losses decreased;

b. In 2011, the Company invested 100% equity of Shanghai Baowan and Kunshan

Baowan in Baowan Holding as contribution. As Nanshan Group holds 22.64% of equity

of Baowan Holding, the minority shareholders’ profit or loss attributable to Nanshan

Group increased.

164