CMA Logistics Co., Ltd.* A1a1 (A Joint Stock Limited Company Incorporated in the People’S Republic of China with Limited Liability)

IMPORTANT

If you are in any doubt about this prospectus, you should consult your stockbroker, bank manager, solicitor, professional accountant or other professional adviser.

CMA Logistics Co., Ltd.* A1a1 (A joint stock limited company incorporated in the People’s Republic of China with limited liability)

Listing on A1a.15(1) The Growth Enterprise Market of The Stock Exchange of Hong Kong Limited Placing Number of Placing Shares : 55,000,000 Shares (comprising 50,000,000 Placing New Shares A1a.15(3)a to be offered by CMAL and 5,000,000 Sale H Shares to be offered by the Vendors) Placing Price : not more than HK$2.70 per H share and A1a15(3)c expected to be not less than HK$2.30 per H share Nominal value : Rmb1.00 each Stock code : 8217

Sponsor and Arranger ANGLO CHINESE CORPORATE FINANCE, LIMITED Sole Bookrunner and Sole Lead Manager

China Everbright Securities (HK) Limited

The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this prospectus, make R14.04 no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this prospectus. A copy of this prospectus, together with the documents specified in the paragraph headed “Documents delivered to the Registrar of Companies in Hong Kong and available for inspection” in appendix VIII to this prospectus, has been registered by the Registrar of Companies in Hong Kong as required by Section 342C of the Companies Ordinance. The Securities and Futures Commission of Hong Kong and the Registrar of Companies in Hong Kong take no responsibility as to the contents of this prospectus or any of the other documents referred to above. CMA Logistics Co., Ltd. is incorporated and its business are primarily located in the PRC. Potential investors in CMA Logistics Co., Ltd. should be aware of the A1a66 differences in the legal, economic and financial systems between the PRC and Hong Kong and there are different risk factors relating to investments in the PRC-incorporated companies. Potential investors should also be aware that the regulatory framework in the PRC is different from the regulatory framework in Hong Kong and should take into consideration the different market nature of our H Shares. Such differences and risk factors are set out in section headed “Risk Factors” in this prospectus. The Placing Price is expected to be fixed by an agreement between CMA Logistics Co., Ltd. (for itself and on behalf of the Vendor) and China Everbright (for itself and on behalf of the other Underwriters) on or before the Price Determination Date, which is expected to be on or before 17 February, 2006 or such other date or time as may be agreed between CMA Logistics Co., Ltd. (for itself and on behalf of the Vendor) and China Everbright (for itself and on behalf of the other Underwriters) but in any event, not later than 12:00 noon on 20 February, 2006. The Placing Price will not be more than HK$2.70 per Placing Share and is currently expected to be not less than HK$2.30 per Placing Share. Applicants for the Placing Shares are required to pay brokerage of 1%, Stock Exchange trading fee of 0.005%, SFC transaction levy of 0.005%. China Everbright (for itself and on behalf of the other Underwriters), with the consent of CMA Logistics Co., Ltd. (for itself and on behalf of the Vendor), may reduce the indicative Placing Price range below that stated in this prospectus (which is HK$2.30 to HK$2.70 per Placing Share) at any time prior to 20 February, 2006 under the Placing. In such a case, CMA Logistics Co., Ltd. will, as soon as practicable following the decision to make such reduction, and in any event not later than 21 February, 2006, caused to be published in the GEM Website, the South China Morning Post (in English) and Hong Kong Economic Times (in Chinese) an announcement of such reduction. If, for whatever reason, CMA Logistics Co., Ltd. (for itself and on behalf of the Vendor) and China Everbright (for itself and on behalf of the other Underwriters) are unable to reach an agreement on the Placing Price on or before the Price Determination Date or such other date or time as may be agreed between CMA Logistics Co., Ltd. and China Everbright (for itself and on behalf of the other Underwriters) but in any event not later than 12:00 noon on 20 February, 2006, the Placing will not become unconditional and will lapse. In such event, CMA Logistics Co., Ltd. will issue an announcement to be published on the GEM Website. Prospective investors in CMA Logistics Co., Ltd. should note that China Everbright (for itself and on behalf of the other Underwriters) is entitled to terminate the obligations of the Underwriters under the Underwriting Agreement by notice in writing to CMA Logistics Co., Ltd. upon the occurrence of any of the events set forth under “Grounds for termination” in the section headed “Underwriting” in this prospectus at any time prior to 8:00 a.m. on the listing date, currently expected to be 23 February, 2006. The said events include those of a financial, political, industrial, economic, military, legal, fiscal and, or other nature (whether or not sui generis with any of the foregoing), which in the sole opinion of China Everbright (for itself and on behalf of the other Underwriters) shall have occurred, happened or come into effect and which, among other things, shall, will or is likely to have a material adverse effect on the success of or makes it inadvisable or inexpedient to proceed with the Placing. * For identification purpose only Co S342 16 February, 2006 CHARACTERISTICS OF GEM R14.05

GEM has been established as a market designed to accommodate companies to which a high investment risk may be attached. In particular, companies may list on GEM with neither a track record of profitability nor any obligation to forecast future profitability. Furthermore, there may be risks arising out of the emerging nature of companies listed on GEM and the business sectors or countries in which the companies operate. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the main board of the Stock Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM.

The principal means of information dissemination on GEM is publication on the GEM website operated by the Stock Exchange. Companies listed on GEM are generally not required to issue paid announcements in gazetted newspapers. Accordingly, prospective investors should note that they need to have access to the GEM website in order to obtain up-to-date information on GEM-listed issuers.

—i— EXPECTED TIMETABLE A1a15(3)(f)

2006 (Note 1)

PriceDeterminationDate ...... Friday, 17 February, A1a15(3)(k) Note 11

Announcement of final Placing Price and level of indication of interests in the Placing to be published in the GEM Website onorbefore...... Wednesday, 22 February,

Allotment of Placing Shares to placees on or before ...... Wednesday, 22 February,

Despatch of our H Shares certificates via CCASS A1a15(3)(g) on or before (Note 2) ...... Wednesday, 22 February,

Dealings in our H Shares on GEM expected A1a22 to commence on ...... Thursday, 23 February,

Notes:

1. All references to time are to Hong Kong local time. In the event of any change to the expected timetable as set out in this prospectus, an announcement will be made accordingly.

2. The H Share certificates for the Placing Shares to be distributed via CCASS are expected to be deposited into CCASS on or before Wednesday 22 February, 2006 for credit to the relevant CCASS participants’ stock accounts of the Underwriters, the placees or their respective agents. No temporary documents of title will be issued.

3. Details of the structure and conditions of the Placing, including the conditions of the Placing, are set out in the section headed “Structure and conditions of the Placing” in this prospectus.

4. Investors will be informed by public announcement of any change to the above expected timetable.

— ii — CONTENTS

You should rely only on the information contained in this prospectus and the application forms to make your investment decision.

We have not authorised anyone to provide you with information that is different from what is contained in this prospectus.

Any information or representation not made in this prospectus and the application forms must not be relied on by you as having been authorised by us, the Vendors, the Sponsor, the Underwriters, the Directors or any other person involved in the Placing.

Page

Characteristics of GEM ...... i

Expected timetable ...... ii

Summary ...... 1

Definitions ...... 18

Glossary of technical terms ...... 26

Risk factors...... 27

Waivers from compliance with the GEM listing rules and the Companies Ordinance and the Exemption Notice ...... 38

Information about this prospectus and the Placing ...... 41

Directors and parties involved in the Placing ...... 46

Corporate information ...... 51

Industry overview ...... 53

Business ...... 60

Our Promoters ...... 122

Statement of business objectives ...... 138

Substantial, significant and initial management shareholders ...... 144

Directors, supervisors, management and employees ...... 149

Share capital ...... 160

Financial information ...... 163

Underwriting ...... 205

Structure and conditions of the Placing ...... 209

— iii — CONTENTS

Page

Appendix I — Accountants’ report ...... I-1

Appendix II — Unaudited Pro Forma Financial Information ...... II-1

Appendix III — Profit estimate ...... III-1

Appendix IV — Property valuation ...... IV-1

Appendix V — Summary of relevant PRC and Hong Kong laws and regulations ...... V-1

Appendix VI — Summary of the Articles of Association ...... VI-1

Appendix VII — Statutory and general information ...... VII-1

Appendix VIII — Documents delivered to the registrar of companies in Hong Kong and available for inspection ...... VIII-1

— iv — SUMMARY

This summary aims to give you an overview of the information contained in this prospectus. As it is a summary, it does not contain all the information that may be important to you. You should read the whole document before you decide to invest in the Placing Shares.

There are risks associated with any investment. Some of the particular risks in investing in the Placing New Shares are set out in the section headed “Risks factors”. You should read that section carefully before you decide to invest in the Placing Shares.

OVERVIEW OF THE BUSINESS OF OUR COMPANY

We provide a variety of logistics services mainly for car manufacturers and car components suppliers in China. Our services cover various aspects of automobile production ranging from the provision of supply chain management services relating to car components and parts to the delivery of finished vehicles. These services generally include transportation of finished vehicles and related logistic services, organisation of transportation, storage and distribution of car components and parts and to a lesser extent transportation of non-vehicle commodities.

Pursuant to a notice dated 20 June, 2002 published by Ministry of Foreign Trade and A1a62 Economic Cooperation, we were approved on 26 July, 2002 as a sino-foreign joint venture enterprise by the Municipal Government of Chongqing. Subsequently on 31 December, 2004, we were converted into a foreign-invested joint stock limited company.

Our customers include major car manufacturers in China, such as Changan Automobile, Changan Ford, Changan Suzuki, Changan Hebei and Changan Nanjing. Changan Co., the majority shareholder of Changan Automobile, is one of our Promoters. Both Changan Ford and Changan Suzuki are sino-foreign joint ventures formed by Changan Automobile and international car manufacturers. Changan Hebei and Changan Nanjing are subsidiaries of Changan Automobile. Our other major customers include Qingdao Haier Logistics Company Limited and Chengdu Baogang West Trade Company Limited. The number of our independent customers has been growing at a rapid pace. As at 31 December, 2003, we had 212 independent customers and 8 non-independent customers. At the end of 2004, there were over 460 independent customers.

We are strategically located in Chongqing which is one of the largest heavy industrial and automobile manufacturing bases in China, and a transportation hub with easy access to rail, road and river transportation. We have five Regional Distribution Centres and, or warehouses strategically located at Chongqing, Dingzhou of Hebei province and Nanjing of Jiangsu province.

For each of the two years ended 31 December, 2003 and 2004 and the nine months ended 30 September, 2005, we recorded revenues of some Rmb486.1 million, Rmb823.5 million and Rmb648.8 million, respectively, and profit attributable to shareholders of our company of Rmb21.2 million, Rmb42.6 million and Rmb46.7 million, respectively. During these periods, our sales to Changan group of companies accounted for approximately 96.0%, 93.1% and 92.0%, respectively of our turnover. (Please refer to the section headed “Risk factors” for details of our reliance on sales to Changan group of companies.)

— 1 — SUMMARY

In November 2003, we were accredited by WIT Assessment the ISO9001: 2000 certification for our quality management system in respect of the provision of network design and road transportation of goods, storage and distribution services. In July 2004, we were accredited as a major service enterprise by the Chongqing Municipality Industrial and Commercial Administration Bureau and Northern Newly Developed Economic Development Zone Sub- Bureau. In addition, we have been an approved service provider of Chengdu Baogang West Trade Company Limited and Qingdao Haier Logistics Company Limited for several years.

BUSINESS OPERATIONS

Our services are categorised into the following three main areas:

(i) Transportation of finished vehicles and related logistics services

(ii) Supply chain management services involving the organisation of transportation, distribution and storage of car components and parts

We provide supply chain management services to car manufacturers. This typically involves the organisation and storage, if necessary, of supplies of car components and parts for delivery to the car manufacturers. The car components and parts required may be imported from outside China or purchased from designated suppliers in China. Part of the car components and parts ordered by our customers are delivered to one of our five Regional Distribution Centres located at Chongqing, Nanjing and Dingzhou, or our temporary storage facilities. Currently, each of these centres except the Regional Distribution Centre in Dingzhou is equipped with computerised information technology systems that store relevant data relating to our customer’s specifications on scheduled supplies of car components and parts. Installation of similar information system at our Regional Distribution Centre at Dingzhou is currently being planned. All our Regional Distribution Centres are located within the vicinity of our car manufacturer customers.

— 2 — SUMMARY

As at the Latest Practicable Date, we lease a total of two storage facilities located in Chongqing for storing car components and parts before their delivery to the Regional Distribution Centres and, or our car manufacturer customers. During the Track Record Period, we provided logistics services relating to the supply of car components and parts for various models of automobiles manufactured by Changan Ford, Changan Automobile, Changan Hebei and Changan Nanjing. As at the Latest Practicable Date, about 17% of our total revenue generated from the supply chain management services for car components and parts were from independent customers.

We normally enter into fixed-term contracts with terms ranging from three months to three years with customers using our supply chain management services.

(iii) Transportation of non-vehicle commodities

Built on our experience in the logistics industry and our operating systems and facilities, we also provide various forms of transportation and temporary storage services in respect of non-vehicle commodities including steel, electrical household appliances, machinery and car tires. We devise for our customers appropriate transportation mode by road, rail and river or through a combination of these modes. We also make slot bookings on behalf of our customers with couriers, cargo or shipping companies, handle customs clearance and other delivery procedures, purchase insurance policies, and inspect commodities imported into or exported from China to ensure that the entire transportation process is effectively carried out. We mainly engage external transportation companies to transport non-vehicle commodities. To ensure the quality of our service, the services of these external transportation companies are monitored by our staff members throughout the whole delivery process.

We lease a storage facility to store steel and related raw materials.

As at the Latest Practicable Date, we generate all our revenue from the transportation of non-vehicle commodities from independent customers.

— 3 — SUMMARY

SHAREHOLDING STRUCTURE AND RESTRICTIONS ON DISPOSAL OF SHARES AND INITIAL INVESTMENT COSTS

The following table sets out the shareholding structure of our company immediately following the listing of our H Shares:

Date on which Approximate Moratorium shareholding Number of shareholding period Approximate interest in Shares held percentage commencing Approximate total CMAL on the on the from the average cost investment Shareholders commenced listing date listing date listing date per Share costs (Months) Rmb Rmb

Initial management shareholders Changan Co.* 27/08/2001 39,029,088 24.08% 12 1 39,200,000 APLL* 29/07/2002 33,619,200 20.74% 12 0.89 30,000,000 Minsheng Industrial* 27/08/2001 25,774,720 15.91% 12 0.89 23,000,000 Ming Sung (HK) 29/07/2002 7,844,480 4.84% 12 0.89 7,000,000 Changan Sanchan 26/03/2004 796,512 0.49% 12 1 800,000

Public shareholders Not applicable 55,000,000 33.94%

Total 162,064,000 100.00%

* Changan Co., APLL and Minsheng Industrial are substantial shareholders of our company.

Each initial management shareholder has undertaken to the Stock Exchange and our company that for a period of twelve months from the listing date (the “moratorium period”) other than pursuant to Rule 13.18 of the GEM listing rules:

2. otherwise create (nor enter into any agreement to create) nor permit the registered holder to create (or to enter into any agreement to create) any options, rights, interests or encumbrances in respect of any such interest.

Each initial management shareholder has further undertaken to the Stock Exchange and our company, that:

1. in the event that at any time during the moratorium period, it pledges, charges or otherwise disposes of any of its direct or indirect interest in the relevant securities in our company pursuant to Rule 13.18 of the GEM listing rules, or pursuant to any rights or waivers granted by the Stock Exchange under Rule 13.18(4) of the GEM listing rules, immediately inform the Stock Exchange and our company and disclose the details pursuant to Rules 17.43(1) to (4) of the GEM listing rules; and

— 4 — SUMMARY

2. having pledged or charged any of its interest in the relevant securities in our company under the paragraph above, inform our company immediately in the event that it becomes aware that the pledge or chargee has disposed of or intends to dispose of such interest and of the number of the relevant securities in our company affected.

Each of the controlling shareholders of our initial management shareholders has also undertaken to the Stock Exchange, the Sponsor and our company not to dispose of their respective shareholding interests in Changan Co., APLL, Minsheng Industrial, Ming Sung (HK) and Changan Sanchan, as the case may be, for a period of 12 months from the listing date. (Please refer to the section headed “Substantial, significant and initial management shareholders” for further details.)

Each of our Directors has undertaken to the Stock Exchange, the Sponsor and our company:

(a) not to approve, and to procure our company not to approve, the transfer of and the registration of any transfer of the Domestic Shares and/or Non-H Foreign Shares held by the initial management shareholders during the moratorium period;

(b) to procure our company to file a copy of the undertaking of each Director to the relevant Administration of Industry and Commerce for notification purposes; and

(c) to procure our company to request the relevant Administration of Industry and Commerce (i) to insert a note in the register of our company’s information maintained by the authority stating that all such Domestic Shares and, or Non-H Foreign Shares in our company held by the initial management shareholders cannot be transferred during the moratorium period; and (ii) not to register any transfer of such Domestic Shares and, or Non-H Foreign Shares held by the initial management shareholders during the moratorium period.

SALES AND MARKETING

— 5 — SUMMARY

INFORMATION TECHNOLOGY

We believe that our information technology systems have helped ensure the quality and reliability of our services. Most of our operations are automated and require little labour input. Listed below are some of the key information technology systems deployed in providing our services:

— Warehouse management system — an inventory control system implemented at our Regional Distribution Centres and storage facilities to facilitate tracking of car components and parts and finished vehicles.

— Vehicle logistics management system — this system monitors the status of transportation of finished vehicles by river, rail and road to ensure that vehicles are delivered to the correct destinations on time as specified by the customers.

— Global positioning system — this system is currently being installed in the trucks and which can be used for monitoring the location of each truck.

— Customs monitoring system — this system is mainly used by our agents in our freight forwarding operations for the management of data relating to customs declaration and clearance.

We engage third party software developers to develop customised information technology systems. These systems generally can be further tailored to meet new customers’ requirements.

NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

Immediately following the listing, various transactions which have been entered into by us and the connected persons listed below will constitute continuing connected transactions within the meaning of the GEM listing rules. These connected transactions are classified as non-exempt continuing connected transactions under the GEM listing rules, and are therefore subject to reporting, announcement and independent shareholders’ approval requirements under the GEM Listing Rules:

(i) Changan Co. and its two subsidiaries, namely Changan Lingyun and Changan Jinling;

(ii) Changan Automobile and its two subsidiaries, namely Changan Suzuki and Changan Import and Export;

(iii) Changan Ford;

(iv) Changan Hebei;

— 6 — SUMMARY

(v) Changan Nanjing;

(vi) Minsheng Group; and

(vii) Changan Transportation.

Since the transactions with the above connected persons are conducted in the ordinary and usual course of business and on a regular basis, we do not believe that it would be practical to disclose each such transaction. Accordingly, we have applied to the Stock Exchange for a waiver from strict compliance with the requirements under Rules 20.47 and 20.48 of the GEM listing rules to announce the non-exempt continuing connected transactions and to obtain the approval from our shareholders. The Stock Exchange has granted a waiver to us from strict compliance with the announcement and, or independent shareholders’ approval requirements in connection with the non-exempt continuing connected transactions pursuant to Rule 20.42(3) of the GEM listing rules. However, we are required to comply with the applicable requirements in Chapter 20 of the GEM listing rules in respect of the framework agreements entered into between the above connected persons and us upon the expiry of our financial year ending 31 December, 2006.

OUR STRENGTHS

Our Directors believe that our company has the following strengths:

— Proven profitable track record;

— Established customer base;

— Proven record of offering quality service;

— Strong financial standing;

— Good visibility of our company’s profits;

— Experienced management team;

— Low cost advantages; and

— Ability to provide quality logistics services throughout China.

— 7 — SUMMARY

USE OF PROCEEDS

We believe that the Placing will enhance our corporate profile and capital base and enable us to further expand the scale and scope of our operations.

The net proceeds from the Placing, based on a minimum Placing Price of HK$2.30, are estimated to be approximately HK$95.9 million, after deduction of expenses payable by us in relation to the Placing. We will not receive any proceeds from the sale of H Shares in the Placing by the Vendors. All such proceeds will be remitted to the NCSSF in accordance with the relevant PRC government requirements.

We presently intend to apply such net proceeds from the Placing as follows:

— approximately HK$64 million for the construction of phase I and phase II of a distribution centre for provision of supply chain management services for car components and parts to Changan Ford in Nanjing, including approximately HK$10 million for acquiring the land use rights of a piece of land in Nanjing (Note), HK$50 million for construction and purchasing machinery and equipment and HK$4 million for developing a customised information technology system.

— approximately HK$26 million for the completion of upgrading phase III and the construction of phase IV of the distribution centre for provision of supply chain management services for car components and parts to Changan Ford in Chongqing. HK$21 million will be used for construction and purchasing machinery and equipment and HK$5 million will be used in the development of an information technology software.

— the remaining balance of approximately HK$5.9 million for sub-contracting transportation services through the use of external transportation companies.

The net proceeds from the Placing based on the maximum Placing Price of HK$2.70 per Placing Share are estimated to amount to approximately HK$115 million after deduction of expenses payable by us in relation to the Placing. In the event that the final Placing Price is above the minimum Placing Price, the Directors intend to apply over 80% of the additional net proceeds from the Placing to enhance and upgrade the facilities in the existing Regional Distribution Centres and the remainder will be used as general working capital of our group.

To the extent that the net proceeds from the Placing are not immediately required for the above purposes, it is our present intention that net proceeds, to the extent permitted by the relevant PRC laws and regulations, will be placed on short-term deposits with authorised financial institutions in Hong Kong and, or the PRC.

Note: Please refer to the section headed “Other information” in appendix VII to this prospectus for details of this piece of land.

— 8 — SUMMARY

TRADING RECORD

FINANCIAL HIGHLIGHTS

For the two years ended 31 December, 2003 and 2004

— Turnover rose 69.4% from approximately Rmb486.1 million in 2003 to approximately Rmb823.5 million in 2004 due to continued increased demand for automobile related and other logistics services in China;

— Net profit in 2004 reached Rmb42.6 million, representing a growth of 100.8% as a result of the rapid turnover growth and the improvement in profit margins;

— Positive operating cash flows with a cash and bank balance of Rmb33.3 million as at the end of 2004;

— Gearing ratio improved from 19.9% in 2003 to 11.9% as at the end of 2004;

For the nine months ended 30 September, 2005

— Turnover grew 8.0% to Rmb648.8 million albeit an apparent slowdown in the automotive industry in China in 2005;

— Gross profit margin further improved from 7.8% to 12.2% due to better pricing achieved from our supply chain management business and a higher proportion of finished vehicle transportation services and river transportation service that command relatively higher profit margins;

— A 57.3% growth in net profit to Rmb46.7 million due to, amongst other things, better cost controls and an one-off adjustment of approximately Rmb10 million arising from adjusted fee income in respect of supply chain management services rendered to Changan Ford in 2004;

— Both liquidity and gearing levels remained healthy;

For the year ended 31 December, 2005

— It is expected that profitability will continue to improve further with a profit estimate of not less than Rmb55.0 million for the year ended 31 December, 2005, representing a 29.1% increase when compared to the 2004 audited results.

— 9 — SUMMARY

Consolidated profit and loss accounts

The table below sets out a summary of the audited results of our group for each of the two years ended 31 December, 2003 and 2004 and the nine months ended 30 September, 2005 which should be read in conjunction with the accountants’ report set out in appendix I to this prospectus.

Year ended Nine-month period ended 31 December, 30 September, 2003 2004 2004 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (unaudited)

Turnover 486,130 823,504 600,643 648,843 Cost of sales (451,131) (755,851) (553,659) (569,899)

Gross profit 34,999 67,653 46,984 78,944 Other gains 1,391 766 640 792 Distribution costs (8,137) (12,412) (8,721) (12,243) Administrative expenses (5,375) (11,438) (7,637) (15,340)

Operating profit 22,878 44,569 31,266 52,153 Finance costs (1,670) (1,974) (1,556) (1,316)

Profit before tax 21,208 42,595 29,710 50,837 Income tax expense —— —(4,112)

Profit attributable to shareholders of our company 21,208 42,595 29,710 46,725

Dividends 15,064 28,016 28,016 13,448

Basic earnings per Share (Note) Rmb0.32 Rmb0.40 Rmb0.28 Rmb0.42

Note: The calculation of basic earnings per Share is based on our profit attributable to shareholders of our company for the Track Record Period and the weighted average number of Shares in issue during the relevant financial year or period.

— 10 — SUMMARY

A detailed discussion of the results of our company during the Track Record Period is set forth under the paragraph headed “Management’s discussion and analysis” in the section headed “Financial Information” in this prospectus.

Balance sheets

Group Company Group Company As at As at As at As at 31 December, 31 December, 30 September, 30 September, 2003 2003 2004 2005 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000

ASSETS Non-current assets Property, plant and equipment 40,237 40,237 65,046 76,463 76,463 Prepaid lease payments 45,666 45,666 45,135 50,254 50,254 Intangible assets 2,281 2,281 3,221 2,852 2,852 Investment in subsidiaries — 1,838 ——4,950 Deferred income tax assets ——— 404 404

Total non-current assets 88,184 90,022 113,402 129,973 134,923

Current assets Trade receivables 7,958 7,958 35,013 40,924 40,924 Prepayment and other receivables 15,975 15,534 7,602 13,781 13,781 Due from related parties 109,610 109,610 206,127 236,224 236,224 Fixed bank deposits 12,498 12,498 ——— Cash and cash equivalents 18,307 18,307 33,329 33,441 28,441

Total current assets 164,348 163,907 282,071 324,370 319,370

Total assets 252,532 253,929 395,473 454,343 454,293

EQUITY Capital and reserves attributable to shareholders of our company Capital 77,500 77,500 112,064 112,064 112,064 Other reserves 406 406 (1,379) 4,046 4,046 Retained earnings 20,531 21,928 36,418 33,713 33,713

98,437 99,834 147,103 149,823 149,823 Minority interest ——— 50 —

Total equity 98,437 99,834 147,103 149,873 149,823

— 11 — SUMMARY

Group Company Group Company As at As at As at As at 31 December, 31 December, 30 September, 30 September, 2003 2003 2004 2005 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000

LIABILITIES Non-current liabilities Long-term liabilities 18,560 18,560 ———

Current liabilities Trade and other payables 123,286 123,286 197,789 188,876 188,876 Due to related parties 10,787 10,787 33,021 45,885 45,885 Dividends payable 462 462 — 40,727 40,727 Short-term bank loans ——— 25,000 25,000 Current portion of long- term liabilities 1,000 1,000 17,560 1,000 1,000 Current income tax liabilities ——— 2,982 2,982

Total current liabilities 135,535 135,535 248,370 304,470 304,470

Total liabilities 154,095 154,095 248,370 304,470 304,470

Total equity and liabilities 252,532 253,929 395,473 454,343 454,293

Net current assets 28,813 28,372 33,701 19,900 14,900

Total assets less current liabilities 116,997 118,394 147,103 149,873 149,823

An application has been made to the Securities and Futures Commission for a certificate of exemption from strict compliance with paragraphs 27 and 31 of the Third Schedule to the Companies Ordinance and the Exemption Notice in relation to the inclusion of the accountants’ report for the full financial year ended 31 December, 2005 in this prospectus on the ground that it would be unduly burdensome for our company to do so, and a certificate of exemption has been granted by the Securities and Futures Commission.

— 12 — SUMMARY

An application has also been made to the Stock Exchange for a waiver from strict compliance with Rules 7.03(1) and 11.10 of the GEM listing rules in relation to the inclusion of the accountants’ report for the full financial year ended 31 December, 2005 in this prospectus and a waiver has been granted by the Stock Exchange on the condition that the listing date should be on or before 28 February, 2006.

Our Directors confirm that they have performed sufficient due diligence on our group to ensure that up to the date of this prospectus, there has been no material adverse change in the financial position of our group since 30 September, 2005 and there is no event which would materially affect the information shown in the accountants’ report of our group, or company, as appropriate, the text of which is set forth in appendix I to this prospectus.

PROFIT ESTIMATE FOR THE YEAR ENDED 31 DECEMBER, 2005

Estimated profit attributable to Not less than Rmb 55.0 million shareholders of our company (Note 1) (equivalent to approximately HK$52.9 million)

Unaudited pro forma estimated earnings Not less than Rmb 0.34 per Share (Note 2) (equivalent to approximately HK$0.33)

SHARE OFFER STATISTICS

Based on Based on the minimum the maximum Placing Price Placing Price of HK$2.30 of HK$2.70 per H share per H share

Market capitalisation of the H Shares HK$126.5 million HK$148.5 million (Note 3)

Unaudited proforma adjusted net approximately Rmb1.52 approximately Rmb1.64 tangible assets per Share (Note 4) (equivalent to (equivalent to approximately HK$1.46) approximately HK$1.58)

Prospective price/earnings multiple approximately 7.0 times approximately 8.2 times (Note 5)

Proposed dividend payout ratio not less than 40% not less than 40% (Note 6)

— 13 — SUMMARY

Notes:

1. The estimated profit attributable to shareholders of our company for the year ended 31 December, 2005 is extracted from the section headed “Financial information — Profit estimate for the year ended 31 December, 2005” in this prospectus. The bases on which the above profit estimate for the year ended 31 December, 2005 has been prepared are summarised in appendix III to this prospectus. The estimated profit attributable to shareholders of our company for the year ended 31 December, 2005, has been prepared based on the audited consolidated results of our group for the nine months ended 30 September, 2005 and the unaudited results of our group for the remaining three months ended 31 December, 2005.

2. The calculation of the estimated earnings per Share on a pro forma basis is based on the estimated profit attributable to shareholders of our company for the year ended 31 December, 2005 and on the assumption that the Shares had been listed on the GEM since 1 January, 2005 and a total of 162,064,000 Shares had been in issue during that year. For the purpose of this calculation, the estimated profit attributable to shareholders of our company for the year ended 31 December, 2005 has not taken into account the interest income that would have earned if the net proceeds of the Placing had been received on 1 January, 2005.

3. The market capitalisation of the H Shares is calculated based on the minimum and maximum Placing Prices and a total of 55,000,000 H Shares in issue and to be issued immediately after completion of the Placing.

4. The unaudited proforma adjusted net tangible assets per Share has been arrived at after making the adjustments referred to in appendix II to this prospectus and on the basis of 162,064,000 Shares in issue and to be issued immediately after completion of the Placing.

5. The prospective price/earnings multiple is calculated based on the estimated earnings per Share as set out in note 2 above and at the minimum and maximum Placing Prices.

6. Following the listing, our Directors currently intend to declare and recommend dividends amounting in total to not less than 40% of our distributable profit in respect of the remaining period of 2005 from 1 May to 31 December, 2005.

During the board of Directors’ meeting on 7 February, 2006, the Directors resolved that not less than 40% of our profits attributable to shareholders in respect of the period from 1 May to 31 December, 2005 will be paid as dividends to all the shareholders of our company after the listing of our H Shares. Accordingly, investors in the Placing will be entitled to such dividends. The date of payment of such dividends will be decided at our shareholders’ general meeting for 2005, which is expected to be convened after listing.

Business objectives and strategies

Our Directors expect our company to develop in tandem with the anticipated rapid growth of the automotive industry in China in the long term. In particular, the Directors anticipate that the provision of automotive logistics services will continue to be our main driver of revenue growth in the near term. We plan to further expand our supply chain management logistics services for car manufacturers and develop our non-vehicle logistics services proactively including international and domestic cargo multi-mode transportation and logistics consultancy services.

— 14 — SUMMARY

We expect the volume of transactions with Changan group of companies in the coming years will continue to be high relative to other customers with sales generated from it to continue to represent a major component of our revenue in the near future. It is expected that as our company becomes more well known in the market following the listing of our H Shares on GEM we will be able to expand our customer portfolio in the automotive sector in China, and in the longer term, globally.

We have formulated the following strategies to fulfil our business objectives:

— Through enhancing our operational efficiency, we will continue to strengthen our relationship with our existing customers and to further expand our customer base.

— Capitalising on the geographical features of the Yangtze River region, our expertise in logistics services and our established relationship with shipping companies operating along the Yangtze River region, we intend to focus on the expansion of bulk cargo transportation along the Yangtze River region.

— Leveraging on our existing broad logistics network and resources, we plan to collaborate with other car manufacturers and their logistics service providers so as to pool and share our respective resources for transporting vehicles nationwide, thereby reducing logistics costs.

— Expansion of our scope of logistics services by exploring opportunities in the areas of import and export, multi-mode transportation and international freight forwarding agency with a view to becoming a comprehensive logistics service provider.

RISK FACTORS

The Directors consider that the business of our company is subject to a number of risk factors which can be categorised into (i) risks relating to our company; (ii) risks relating to the automotive industry; (iii) risks relating to the logistics industry; (iv) risks relating to the PRC and (v) risks relating to the Placing, and are summarised as follows:

Risks relating to our company

— Reliance on a single group of customers

— Competition from APLL

— Potential services liability

— Lack of sufficient funds to finance the business plans

— Dependence on sub-contractors

— Reliance on the senior management and experienced employees

— 15 — SUMMARY

— No assurance that the non-vehicle logistics services business will be successful as planned

— Leased properties in the PRC

— Changes in taxation policies

— Unclear legal status of Non-H Foreign Shares

— Possible conversion of Non-H Foreign Shares into H Shares

Risks relating to the automotive industry

— Policies of the automotive industry

— Taxation policies of the automotive industry

— Market slowdown and price competition

— Economic cycles

Risks relating to the logistics industry

— Extensive government regulations of the logistics industry

— New entrants in the transportation and logistics market in China as a result of China’s accession to the WTO

— The rate of growth of the transportation and logistics market in China may not meet our expectation

Risks relating to the PRC

— Political and economic policies of the PRC government

— Currency conversion and exchange rates

— Legal system

— Different regulatory framework

— Securities laws and regulations

— Enforceability of judgments and arbitration

— 16 — SUMMARY

— Outbreak of the Severe Acute Respiratory Syndrome (“SARS”) or other similar epidemics

— Outbreak of the H5N1 strain of bird flu (“Avian Flu”) or any other similar epidemics

Risks relating to the Placing

— Price fluctuations and liquidity of the H Shares

— Dilution of shareholders’ interests as a result of additional equity fund raising

— 17 — DEFINITIONS

In this prospectus, the following expressions have the following meanings, unless the context otherwise requires:

“Anglo Chinese” or “Sponsor” Anglo Chinese Corporate Finance, Limited, the sponsor, and a deemed licensed corporation under SFO permitted to engage in types 1, 4, 6 and 9 of the regulated activities (as defined in the SFO);

“Arranger” Anglo Chinese, which arranged for the underwriting of the Placing, including arranging and coordinating CMAL’s engagement of China Everbright and other underwriters;

“APLL” APL Logistics Ltd, a company incorporated in Singapore with limited liability and a wholly owned subsidiary of NOL. It is one of our initial management shareholders;

“APLL Group” APLL and its subsidiaries from time to time;

“Articles of Association” or the articles of association of our company, adopted on 22 “Articles” February, 2005 and as amended from time to time;

“associate(s)” has the meaning ascribed thereto in the GEM listing rules;

“board” the board of directors of our company;

“business day” any day (other than a Saturday) on which banks in Hong Kong are generally open for business;

“CCASS” The Central Clearing and Settlement System established and operated by HKSCC;

“Changan Automobile” Chongqing Changan Automobile Co., Ltd. ( ), a joint stock limited company established in the PRC on 31 October, 1996 and the shares of which are listed on the A and B share markets of the Shenzhen Stock Exchange. Changan Automobile is held as to 52.47% by Changan Co. and 47.53% by public shareholders;

“Changan Co.” Changan Automobile Company (Group) Limited ( ), a limited liability company established in the PRC on 28 October, 1996. It is one of our initial management shareholders;

“Changan Ford ( )” Changan Ford Automobile Corporation Ltd. ( ), a sino-foreign equity joint venture company established in the PRC on 27 April, 2001, which is held as to 26% by Changan Automobile and 24% by Changan Co., and 25% by each of Ford Motor Company and Ford Automobile (PRC) Co., Ltd.;

— 18 — DEFINITIONS

“Changan Group” or “Changan Changan Co. and its subsidiaries from time to time together group of companies” with Changan Ford;

“Changan Hebei ( )” Hebei Changan Automobile Co., Ltd. ( ), a limited liability company established in the PRC on 17 May, 2002 and held as to 98.74% by Changan Automobile and 1.06% by Changan Co.;

“Changan Import and Export Chongqing Changan Automobile Import and Export Co., ( )” Ltd. ( ), a limited liability company established in the PRC on 16 August, 1993, and a subsidiary of Changan Automobile;

“Changan Jinling ( )” Chongqing Changan Jinling Automobile Parts Liability Co., Ltd. ( ), a limited liability company established in the PRC on 13 August 2003 and a subsidiary of Changan Co.;

“Changan Lingyun ( )” Chongqing Changanlingyun Auto Parts Co., Ltd. ( ), a limited liability company established in the PRC on 28 April, 1999 and a subsidiary of Changan Jinling;

“Changan Nanjing ( )” Nanjing Changan Automobile Produce Company Limited ( ), a limited liability company established in the PRC on 6 June, 2000 and held as to 81.72% by Changan Automobile, 13.67% by Nanjing Dongchi Automobile Co., Ltd. ( ) and 4.61% by other shareholders;

“Changan Sanchan ( )” Chongqing Changan Sanchan Industrial Company Limited ( ), a limited liability company established in the PRC on 12 February, 1999 and an indirect wholly-owned subsidiary of Changan Co. It is one of our initial management shareholders;

“Changan Suzuki” ( ) Chongqing Changan Suzuki Automobile Co., Ltd. ( ), a sino-foreign equity joint venture company established in the PRC on 25 May, 1993 and held as to 51% by Changan Automobile, 35% by Suzuki Motor Corporation and 14% by Sojitz Corporation;

“Changan Transportation” Chongqing Changan Transportation Company Limited ( ) ( ), a limited liability company established in the PRC on 29 June, 1994 and a subsidiary of Changan Co.;

— 19 — DEFINITIONS

“China Everbright” or China Everbright Securities (HK) Limited, the sole lead “Lead Manager” manager and the sole bookrunner of the Placing and a licensed corporation under the SFO permitted to engage in types 1, 4, 6 and 9 of the regulated activities (as defined in the SFO);

“Chongqing Gangcheng CMAL Gang Cheng Co., Ltd ( ), ( )” a limited liability company established in the PRC on 3 November, 2005 and is a subsidiary of CMAL;

“Chongqing Wanyou ( )” Chongqing Wanyou Economic Development Limited Company ( ), a limited liability company established in the PRC on 29 April, 1997 and was our shareholder from 25 April, 2002 to 2003;

“our company” or “CMAL” CMA Logistics Co., Ltd. ( );

“Company Law” the Company Law of the PRC, as enacted by the Standing Committee of the Tenth National People’s Congress on 27 October, 2005 and effective on 1 January, 2006, as amended, supplemented or otherwise modified from time to time;

“Companies Ordinance” the Companies Ordinance, Chapter 32 of the Laws of Hong Kong, as amended;

“connected” or “connected has the meaning ascribed thereto in the GEM listing rules; person(s)”

“connected transaction(s)” has the meaning ascribed thereto in the GEM listing rules;

“CPPCC” Chinese People’s Political Consultative Conference ( );

“CSI Group ( )” China South Industries Group Corporation ( ), also known as China Ordnance Equipment Group Corporation ( ), a company established in the PRC on 1 July, 1999. It is a state-owned enterprise and the sole shareholder of Changan Co.;

“CSRC” China Securities Regulatory Commission, a regulatory body responsible for the supervision and regulation of the PRC national securities markets;

“Director(s)” the director(s) of our company;

— 20 — DEFINITIONS

“Domestic Shares” the issued ordinary shares in our company with a nominal value of Rmb1.00 each, subscribed by domestic shareholders in Rmb and credited as fully paid. As at the Latest Practicable Date, apart from the Domestic Shares issued to our Promoters, we have not issued any other Domestic Shares;

“Foreign Shares” both Non-H Foreign Shares and H Shares;

“GDP” gross domestic product;

“GEM” The Growth Enterprise Market of the Stock Exchange;

“GEM listing committee” the listing sub-committee of the directors of the Stock Exchange with responsibility for GEM;

“GEM listing rules” the rules governing the listing of securities on GEM;

“GEM Website” the GEM website located at www.hkgem.com;

“HKFRS” Hong Kong Financial Reporting Standards;

“HKSCC” Hong Kong Securities Clearing Company Limited;

“HKSCC Nominees” HKSCC Nominees Limited, a wholly-owned subsidiary of HKSCC;

“Hong Kong” or “HK” the Hong Kong Special Administrative Region of the PRC;

“H Shares” the overseas listed foreign invested shares in our company, with a nominal value of Rmb1.00 each, which are to be subscribed for and traded in Hong Kong dollars, and listed on GEM of the Stock Exchange;

“independent third party(ies)” a person(s) or company(ies) which is/are independent of and who is not connected with our company, any of the Promoters, Directors, Supervisors, substantial shareholders and initial management shareholders of our company or their respective associates;

“initial management Changan Co., APLL, Minsheng Industrial, Ming Sung (HK) shareholder(s)” and Changan Sanchan;

“Latest Practicable Date” 14 February, 2006 being the latest practicable date prior to the printing of this prospectus for ascertaining certain information contained herein;

“listing date” the date on which our H Shares commence trading on GEM, which is currently expected to be 23 February, 2006;

— 21 — DEFINITIONS

“Mandatory Provisions” the Mandatory Provisions for Articles of Association of Companies to be Listed Overseas ( ), for inclusion in the Articles of Association of companies incorporated in the PRC to be listed overseas, which were promulgated by the former Securities Commission of the State Council and the former Commission for Economic Restructuring of the People’s Republic of China on 27 August, 1994, as amended and supplemented from time to time;

“Ming Sung (HK)” Ming Sung Industrial Co., (HK) Limited, a company established in Hong Kong with limited liability on 31 May, 1949. It is one of our initial management shareholders;

“Minsheng Industrial” Minsheng Industrial (Group) Co., Ltd. ( ), a limited liability company established in the PRC on 10 October, 1996. It is one of our initial management shareholders;

“Minsheng International Freight” Minsheng International Freight Company Limited ( ) ( ), a company established in the PRC and a subsidiary of Minsheng Shipping;

“Minsheng Group” Minsheng Industrial and its subsidiaries from time to time;

“Minsheng Logistics” ( ) Minsheng Logistics Company Limited ( ), a limited liability company established in the PRC and a subsidiary of Minsheng Shipping;

“Minsheng Shipping” ( ) Minsheng Shipping Company Limited ( ), a limited liability company established in the PRC and a subsidiary of Minsheng Industrial;

“NCSSF” (the National Council for Social Security Fund, PRC);

“NOL” Neptune Orient Lines Limited, a company incorporated in Singapore, the shares of which are listed on the Singapore Exchange Securities Trading Limited;

“Non-H Foreign Shares” our issued ordinary shares with a nominal value of Rmb1.00 each, subscribed by our foreign Promoters, namely APLL and Ming Sung (HK), in U.S. dollars and credited as fully paid. As at the Latest Practicable Date, apart from the Non-H Foreign Shares issued to APLL and Ming Sung (HK), we have not issued any other Non-H Foreign Shares;

— 22 — DEFINITIONS

“our group”, “we” or “us” CMA Logistics Co., Ltd. and its subsidiaries from time to time;

“Placing” the conditional placing of the Placing Shares at the Placing Price, as further described in the section headed “Structure and Conditions of the Placing” to this prospectus;

“Placing New Shares” 50,000,000 H Shares being offered by our company for subscription at the Placing Price under the Placing;

“Placing Price” the placing price per Placing Share which will not be more than HK$2.70 and is currently expected to be not less than HK$2.30 (exclusive of brokerage, Stock Exchange trading fee and SFC transaction levy) at which the Placing Shares are to be offered for subscription and, or purchase under the Placing;

“Placing Shares” the 55,000,000 H Shares being offered pursuant to the Placing, as described in the section headed “Structure and Conditions of the Placing” of this prospectus;

“PRC” or “China” the People’s Republic of China which, for the purposes of this prospectus, excluding Hong Kong, Macau Special Administrative Region and Taiwan;

“PRC GAAP” generally accepted accounting principles in the PRC;

“PRC Securities Law” the Securities Law of the PRC ( ), as enacted by the Standing Committee of the Tenth National People’s Congress on 27 October, 2005 and made effective on 1 January, 2006, as amended, supplemented or otherwise modified from time to time;

“Price Determination Date” the date on which the Placing Price is determined, which is expected to be on or before 17 February, 2006 and in any event not later than 20 February, 2006;

“Promoter(s)” our Promoters, being Changan Co., APLL, Minsheng Industrial, Changan Sanchan and Ming Sung (HK);

“Qingshan” Chongqing Qingshan Industrial Co., Ltd. ( ), a limited liability company established in the PRC on 15 April, 1993 and a subsidiary of CSI Group;

— 23 — DEFINITIONS

“Regional Distribution Centres” the five regional distribution centres operated by us and located in (i) Economic Technical Development Zone, Chongqing; (ii) Jiangbei District, Chongqing; (iii) Yubei District, Chongqing, (iv) Dingzhou, Hebei Province; and (v) Nanjing, Jiangsu Province, and reference to “Regional Distribution Centre” in this prospectus refer to any one or any combination of our five regional distribution centres;

“relevant securities” having the meaning ascribed thereto in the GEM listing rules;

“Sale H Shares” the 5,000,000 H Shares to be converted from Domestic Shares into H Shares being offered for sale by the Vendors under the Placing;

“SASAC” (the PRC State-owned Assets Supervision and Administration Commission of the State Council);

“SFC” the Securities and Futures Commission of Hong Kong;

“SFO” the Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong, as amended, supplemented or otherwise modified from time to time;

“Shares” ordinary shares of our company, comprising Domestic Shares and Foreign Shares;

“Share Appreciation Right the share appreciation right incentive scheme adopted by Incentive Scheme” our company on 6 June, 2005 and as amended from time to time, details of which are set out in appendix VII;

“significant shareholders” having the meaning ascribed thereto in the GEM listing rules;

“Special Regulations” the Special Regulations of the State Council on the Overseas Offering and Listing of Shares by Joint Stock Limited Companies ( ), promulgated by the State Council on 4 August, 1994, as amended, supplemented or otherwise modified from time to time;

“State Council” the State Council of the PRC;

“Stock Exchange” The Stock Exchange of Hong Kong Limited;

“substantial shareholders” having the meaning ascribed thereto under the GEM listing rules;

— 24 — DEFINITIONS

“Supervisor(s)” the members of our supervisory committee;

“Tenth Five-Year Plan” the plan for national economic and social development of the PRC between 2001 and 2005;

“Track Record Period” the period comprising the two years ended 31 December, 2003 and 2004 and the nine months ended 30 September, 2005;

“Underwriters” China Everbright Securities (HK) Limited and the other underwriters of the Placing named in the sub-paragraph headed “underwriters” in the section headed “underwriting” in this prospectus;

“Underwriting Agreement” the underwriting agreement dated 16 February, 2006 relating to the Placing entered into between, among others, our company and the Underwriters;

“Vendor” Changan Co. and Changan Sanchan as the registered holders of the 5,000,000 Sales H Shares and NCSSF as the beneficial owner of the said 5,000,000 Sales H Shares;

“WTO” the World Trade Organisation;

“HK$” and “cent(s)” Hong Kong dollars and cents, respectively, the lawful currencies of Hong Kong;

“Rmb” Renminbi yuan, the lawful currency of the PRC;

“S$” Singapore dollars, the lawful currencies of Singapore

“sq.m.” square metre(s);

“U.S.” or “United States” the United States of America, its territories and possessions, any State of the United States and the District of Columbia;

“US$” or “U.S. dollars” United States dollars, the lawful currency of the U.S.; and

“%” per cent.

If there is any inconsistency between the Chinese names of any PRC entities, departments, facilities or titles mentioned in this prospectus and their English translations, the Chinese version shall prevail.

— 25 — GLOSSARY OF TECHNICAL TERMS

This glossary contains explanations of certain terms used in this prospectus in connection with our group and our business. The terminologies and their meanings set out below may not correspond to standard industry meanings or usages of such terms:

“global positioning system” an electronic device which can determine the location of a target by following the signal it emits;

“supply chain management” the management and analysis of data of the supply chain of a business enterprise, and in the case of a car manufacturer, such as the centralisation or organisation of the supply of car components and parts, the assembly, allocation and delivery of the same to the required destinations in a timely manner; and

“third parties logistics” the outsourcing of various elements of a company’s supply chain functions to an outside party.

— 26 — RISK FACTORS

Potential investors should carefully consider all the information set out in this prospectus and in particular should evaluate the following risks before deciding to invest in our H shares.

RISKS RELATING TO OUR COMPANY

Reliance on a single group of customers

For each of the two years ended 31 December, 2003 and 2004, and the nine months ended 30 September, 2005, our largest customer, Changan Automobile, accounted for approximately 74.9%, 48.4% and 35.5%, respectively of our turnover for the corresponding periods. Apart from Changan Automobile, our major customers include Changan Ford, Changan Nanjing, Changan Hebei and Changan Suzuki. Changan Co., the majority shareholder of Changan Automobile, is one of our Promoters. Both Changan Ford and Changan Suzuki are sino-foreign joint ventures formed by Changan Automobile and international car manufacturers. Changan Hebei and Changan Nanjing are subsidiaries of Changan Automobile. During the same period, our sales to Changan group of companies accounted for approximately 96.0%, 93.1% and 92%, respectively of our turnover. We normally enter into fixed term contracts with these customers with term ranging from three months to three years. If any of these customers ceases to do business with us or substantially reduces the volume of its business with us and if we are unable to secure new customers with similar sales volume on terms acceptable to us, our business may be adversely affected.

Competition with APLL

One of the Promoters, APLL, provides global logistics services (including transportation of finished vehicles and automotive supply chain management services) to its customers worldwide. According to the non-competition undertaking executed by APLL in favour of our company on 15 January, 2005 and as amended by a supplemental agreement dated 31 December, 2005, APLL may participate in the logistics services business, including automotive logistics services to customers other than our existing customers who, as of 15 January, 2005, engaged our automotive logistics services in China (Please refer to the “Business — Competition” section for further details of the non-competition undertaking).

The Directors note that automotive logistics and non-vehicle transportation services are and will continue to be one of the major services offered by APLL globally, including China. Accordingly, APLL may compete with us in terms of our services offered. In the event the competition from APLL leads to a significant loss of customers or business, our performance may be adversely affected.

Potential services liability

Notwithstanding care has been taken in the provision of logistics services, accidents and other mishaps, such as theft, may occur from time to time. Such accidents may expose our company to liability or other claims by our customers and other third parties. During the Track Record Period and the period thereafter up to the Latest Practicable Date, we had not been the

— 27 — RISK FACTORS subject of any service liability claims. As at the Latest Practicable Date, we have purchased insurance against our potential liability for our logistics business. However, our performance may be adversely affected by any claims. Any such claim, regardless of its merits, may incur litigation expenses and put a strain on our company’s resources. In addition, they may damage our relations with customers and affect our reputation.

Lack of sufficient funds to finance the business plans

The Directors believe that the aggregate net proceeds from the Placing will be sufficient to implement our current business plans. If, however, we are unable to generate sufficient revenues from our business or if our financial needs are larger than expected, we may need to raise funds from banks or from international capital or debt markets. If we fail to obtain adequate financing, we may have to make material modifications to our business plans and, or the intended use of proceeds as described in the section headed “Statement of business objectives” in this prospectus. Such modifications may also materially and adversely affect our business, results of operation and financial position.

Dependence on sub-contractors

Our logistics business involves outsourcing to third-party sub-contractors. Although we have implemented a strict management system in respect of the selection and assessment of sub-contractors, there may still be deficiencies in our management system. Sub-contractors may fail to complete their work as required under contracts or as required by the customers, and we may thus to a certain extent be exposed to claims in relation to the unsatisfactory performance of the sub-contractors.

Reliance on the senior management and experienced employees

We rely on our senior management in formulating our strategic direction and managing our business. Furthermore, our business development also depends upon our ability to attract and retain a team of experienced sales, marketing and other logistics professionals. The loss of services of our senior management and inability to recruit and retain a sufficient number of experienced personnel could have a material adverse effect on our operations and profitability.

Mr. Shi Chaochun, Executive Director, has joined us since inception and Mr. Hu Dahua, Finance Controller, has joined us in 2001. Mr. Shi and Mr. Hu are involved in our day-to-day management and key decision-making and have established relationship with our customers and other parties involved in our business operations. If any of Mr. Shi or Mr. Hu ceases to be employed by us and suitable replacements cannot be found, our operations may be adversely affected.

We are also unable to assure that the remuneration and incentive schemes in place will be sufficient to retain the services of the experienced employees.

— 28 — RISK FACTORS

No assurance that the non-vehicle logistics services business will be successful as planned

While the PRC government encourages the development of the logistics services industry, the integrated logistics services business operated by us is yet to be proven as an effective business model in the PRC. The success of our non-vehicle logistics services business is subject to many risks and uncertainties, including the following:

— the development of the non-vehicle logistics market in the PRC;

— the pace of development of our non-vehicle logistics services business;

— the delivery of our services based on our information technology system; and

— strong competition among non-vehicle logistics services providers, resulting from the large number of such services providers in the PRC and the expected influx of foreign players after China’s accession to the WTO.

We are unable to assure that we will be able to address all of the above risks or to execute the business strategy for the non-vehicle logistics business successfully. We cannot give any assurance that we will be successful in expanding our business beyond our current scope. The failure or inability to do so could adversely affect the business growth, results of operations and financial condition of our company.

Leased properties in the PRC

We lease a number of properties for our operations. Many of these leased properties carry short term leases ranging from one to three years. If these leases are not renewed upon expiry and if we are not able to immediately identify alternative properties appropriate for relocating our business operations, our operations will be adversely affected.

Changes in taxation policies

Pursuant to the Income Tax Law of the PRC for Enterprises with Foreign Investment and A1a63 Foreign Enterprises and tax approvals granted by the local bureau, commencing from the 2003 financial year, we are exempted from corporate income tax for the first two years, and are entitled to a 50% reduction in tax rate for corporate income tax for the following three years. Currently, our company’s status as an H-share company incorporated in the PRC does not affect its entitlement to the tax exemption and reduction. There can be no assurance that the current PRC tax laws mentioned above and their application or interpretation will remain unchanged. To the extent that there are any such changes, our tax liability may increase as a result of any such changes, thus affecting our profitability.

— 29 — RISK FACTORS

Unclear legal status of Non-H Foreign Shares

Immediately after completion of the Placing, the issued Shares of our company will comprise Domestic Shares, H Shares and Non-H Foreign Shares. The rights attaching to the H Shares and Domestics Shares are clearly provided for under the Articles of Association. Non-H Foreign Shares and Domestics Shares are not regarded as different classes of Shares of our company. At present there are no clear applicable PRC laws and regulations governing the rights attached to the Non-H Foreign Shares. In addition, the Articles of Association do not contain express provisions governing the rights of the Non-H Foreign Shares. Our legal advisers as to PRC laws advise that until new laws or regulations are introduced in this respect, holders of Non-H Foreign Shares shall be treated as in the same class as the holders of Domestic Shares (in particular, in respect of the right to attend and vote at general meetings and class meetings and to receive notice of such meetings in the same manner applicable to the holders of Domestic Shares), except that holders of the Non-H Foreign Shares should enjoy the following rights:

— to receive dividends declared by our company in foreign currencies; and

— in the event of the winding up of our company, to remit their respective shares in the remaining assets (if any) of our company out of the PRC in accordance with the applicable foreign exchange control laws and regulations in the PRC.

If any related laws or regulations are introduced in the PRC in future, the rights attaching to the Non-H Foreign Shares may be clarified and, or varied and the Articles of Association may have to be amended in connection therewith.

Possible conversion of Non-H Foreign Shares into H Shares

Each of the existing holders of Non-H Foreign Shares, being APLL and Ming Sung (HK), has given an undertaking in favour of us and the Stock Exchange that upon the occurrence of the following events, each of them shall, unless otherwise prohibited by the PRC laws or regulations, require us to convert the Non-H Foreign Shares into H Shares:

— the lapse of one year from the date on which our company was converted from a sino-foreign joint venture into a joint stock limited company and the lapse of one year from the listing date;

— approval being granted by the shareholders at the general meeting of our company and holders of the H Shares and the Domestic Shares (including Non-H Foreign Shares) at the respective class meetings to authorise the conversion of the Non-H Foreign Shares into H Shares in accordance with the Articles of Association;

— the approvals from the original approval authority or authorities in the PRC for the establishment of our company being obtained by the holders of Non-H Foreign Shares for the conversion of the Non-H Foreign Shares into H Shares;

— 30 — RISK FACTORS

— the approval from the CSRC being obtained by our company for the conversion of the Non-H Foreign Shares into new H Shares;

— approval being granted by the Stock Exchange for the listing of and permission to deal in the new H Shares converted from the Non-H Foreign Shares; and

— full compliance with relevant PRC laws, rules, regulations and policies governing companies incorporated in the PRC which seek permission to list their shares outside the PRC and with the Articles of Association and any agreement among our shareholders.

When all of the conditions mentioned above and other conditions as may be imposed by the Stock Exchange have been satisfied, Non-H Foreign Shares may be converted into H Shares.

Given that Promoters are not regarded as members of the public under the GEM listing rules, upon conversion of Non-H Foreign Shares into H Shares, our company will have to apply to the Stock Exchange for a waiver from strict compliance with Rule 25.08(2)(a) of the GEM listing rules, which requires that all the H Shares must be held by the public. There is, however, no assurance that such waiver would be obtained.

In the event that the Non-H Foreign Shares are successfully converted into H Shares and listed on the GEM, the supply of our H Shares will increase and as a result, our share price may be adversely affected.

RISKS RELATING TO THE AUTOMOTIVE INDUSTRY A1a67(e)

Whilst our goal is to become an integrated third-party logistics service provider offering a wide range of logistics services, we anticipate that revenue generated from the provision of automotive logistics services will still account for over 70% of our total turnover in the near term. The industrial and administrative policies for the automotive industry in China will have a bearing on the performance of the automotive industry, which will in turn affect our automotive logistics business. Any adverse policy changes may have a negative impact on our operation and financial performance.

Policies of the automotive industry

On 21 May, 2004, the National Development and Reform Commission officially promulgated the “Policies relating to the development of the automotive industry”. Compared to the “Policies relating to the automotive industry” formulated in 1994, the new “Policies relating to the development of the automotive industry” has amended certain areas which were inconsistent with China’s commitments under the WTO, with a view to expediting the structural adjustment and upgrading of the automotive industry; stimulating automobile consumption, facilitating the continuous development of the automobile companies, and coordinating the development of

— 31 — RISK FACTORS relevant automotive related industries. It is expected that with the new policies in place, the competitiveness of the domestic automotive industry in the international market would be enhanced. This will have long term and significant implications for the development of China’s automotive industry. However, as the new “Policies relating to the development of the automotive industry” has only been promulgated recently and a number of related measures have not yet been implemented, there are uncertainties for the automotive industry which in turn may affect our company’s automotive logistics business.

Taxation policies of the automotive industry

At present, the PRC government levies sales tax on high-end consumer goods such as automobiles. Changes in sales tax rate would have an impact on the prices of automobiles, which would in turn affect the demand for automobiles.

Following the reduction in import tariff and the withdrawal of import quota for automobiles, competition in the automotive industry has intensified, leading to a drop in automobile prices. Although such drop in automotive prices would stimulate demand for automobiles, thereby increasing the volume and demand of automotive logistics services for our company, it will also put price pressure on our automotive logistics services and affect our gross profits. In the event that the increase in sales as a result of the decrease in the price of automobiles cannot offset the negative impact on our profit margins, our profitability will be adversely affected.

Market slowdown and price competition

The implementation of macro-economic policies and austerity measures in China has resulted in a significant slowdown in growth in domestic demand for automobiles since the second quarter of 2004. The general slowdown and overcapacity of the automobile industry also intensified price competition among car manufacturers. This, together with the continued rising prices of steel, eroded the profit margins enjoyed by these manufacturers. The rising oil prices since the beginning of 2005 further weakened the market demand for automobiles. In the event the automobile market in China continues to slowdown and price competition further intensifies in the automobile industry in the PRC, our performance may be adversely affected.

Economic cycles

In general, the timing and extent of the fluctuations of the economic cycles and the automobile markets are often co-related. In a sluggish economy, demand for automobiles would be weak and our company’s automotive logistics business would inevitably be adversely affected.

— 32 — RISK FACTORS

RISKS RELATING TO THE LOGISTICS INDUSTRY

Extensive government regulations of the logistics industry

The logistics industry in the PRC is subject to a broad range of laws and regulations. As confirmed by our legal advisors as to PRC laws, our Directors believe that our company is in compliance with the relevant rules and regulations relating to the businesses we carry out.

Any change in the scope or application of these laws, regulations or approvals, however, may limit our company’s ability to conduct our businesses, increase costs, or increase competition and could have a material adverse effect on our financial results. In addition, complying with such laws and regulations may give rise to unexpected compliance costs that could have an effect on our performance. The failure to comply with such laws and regulations could also result in fines, penalties or lawsuits.

New entrants in the transportation and logistics market in China as a result of China’s accession to the WTO

The removal of barriers to entry for foreign investors in the transportation and logistics industry in China may adversely affect the future profitability of our company. Pursuant to the administrative measures for foreign invested international freight forwarding agency enterprises promulgated by the Ministry of Commerce on 1 December, 2005 and which became effective on 11 December 2005, subject to approval, foreign companies may now establish wholly owned international freight forwarding agencies in China with a minimum registered capital of US$1 million to provide, among others, freight forwarding and express delivery services. Our company anticipates that, once the transportation industry in the PRC is fully opened to foreign competition, international transportation and logistics services providers will aggressively pursue opportunities in the transportation and logistics market in the PRC, which will further intensify competition. Our company may not be able to compete effectively with the new entrants who may have longer operating histories, stronger financial, technical and managerial resources, and better access to the international capital markets than our company.

The rate of growth of the transportation and logistics market in China may not meet our expectation

The future growth rate of the transportation and logistics market in the PRC may not be as high as our company has expected. This may be the case even though the trading volumes will increase with the elimination of many of the existing trading restrictions and our company anticipates an influx of foreign investments into China following its accession to the WTO. The ramifications of China’s accession to the WTO are largely prospective and remain to be seen.

— 33 — RISK FACTORS

RISKS RELATING TO THE PRC

The assets of our company are located in the PRC and a substantial portion of our turnover is derived from the PRC. Accordingly, our performance, financial position and prospects are subject to a significant degree of economic, political and legal developments of the PRC.

Political and economic policies of the PRC government A1a67(b)

Since the late 1970s, the PRC government has been reforming the economic system in the PRC. These reforms have resulted in significant economic growth and social progress. Although the Directors believe that economic reform and macroeconomic policies and measures adopted by the PRC government will continue to have a positive effect on economic development in the PRC and that we will continue to benefit from such policies and measures, these policies and measures may from time to time be modified or revised. Any adverse changes in economic and social conditions, government policies and laws and regulations of the PRC could have adverse effect on the overall economic growth of China and the transportation and logistics industry in the PRC. Such developments could adversely affect our businesses, lead to reduction in demand for our services and adversely affect our competitive position.

Currency conversion and exchange rates A1a67(c)

Some of our expenses, such as those incurred in river transportation services, are denominated in US$ whilst not all associated revenue are denominated in US$. We have not used any forward contracts or currency borrowings to hedge our exposure to foreign currency risk. Any significant fluctuation of US$ against the Rmb may have an adverse effect on our results of operations.

Since 1994, the conversion of Rmb into foreign currencies, including Hong Kong and US$, has been based on rates set by the People’s Bank of China, which are set daily based on the previous day’s interbank foreign exchange market rates and with reference to current exchange rates on the world financial markets. Since then, including the period of the Asian financial crisis of 1997-1998, the official exchange rate for the conversion of Rmb to US$ has generally been stable. Since 21 July, 2005, Rmb is no longer be pegged to the US$ but to a basket of currencies. This revaluation resulted in the Rmb appreciating against the US$ and the HK$ by approximately 2%. Should there be significant changes in the exchange rates of US$ or HK$ against Rmb, our financial condition and results of operations may be adversely affected.

In addition, foreign exchange transactions under our capital account, including principal A1a31(1) payments in respect of foreign currency-denominated obligations, continue to be subject to significant foreign exchange controls and the approval of the PRC State Administration for Foreign Exchange. These limitations could affect the ability to obtain foreign exchange through debt or equity financing, or to obtain foreign exchange for capital expenditures.

— 34 — RISK FACTORS

Legal system A1a67(a)

The PRC legal system is primarily based on written statutes and decided legal cases have little precedential value. Although since 1979, many laws and regulations governing economic matters have been promulgated and amended in the PRC to provide general guidance on economic and business practices, the PRC legal system is still considered to be underdeveloped in comparison with the legal systems of some western countries. The interpretation of the PRC law may be inconsistent and somehow influenced by policy changes reflecting domestic, political and social changes. In addition, the enforcement of existing laws can be uncertain and unpredictable.

Significant progress has been made in the promulgation of laws and regulations dealing with economic matters such as corporate organisation and governance, foreign investment, commerce, taxation and trade. The promulgation of new laws, changes of existing laws and the abrogation of local regulations by national laws could have a negative impact on the business and prospects of our company’s business.

Different regulatory framework A1a67(d)

As most of our company’s business is conducted in the PRC, our company’s operations are governed principally by the laws of the PRC. As a PRC company offering and listing its shares outside the PRC, our company is subject to the Special Regulations and the Mandatory Provisions. The Mandatory Provisions contain certain provisions that are required to be included in the articles of association of PRC companies to be listed abroad and are intended to regulate the internal affairs of those companies. Under the Company Law and the Special Regulations, certain aspects such as the protection of shareholders’ rights and access to information are less extensive than those applicable to companies incorporated in Hong Kong, the United Kingdom, the United States and other developed countries or regions.

The Company Law is different in certain important aspects from company laws in Hong Kong, the United States and other common law countries or regions, particularly with regard to investor protection, including in such areas as derivative actions by minority shareholders and other minority protections, restrictions on directors’ powers, financial disclosure, variations of class rights, procedures at general meetings and payments of dividends.

The limited nature of investor protection under the Company Law is redressed, to a certain extent, by the introduction of the Mandatory Provisions and certain additional requirements that are imposed by the GEM listing rules, which were introduced with a view to reducing the differences between Hong Kong company law and the Company Law. The Mandatory Provisions and those additional requirements must be included in the articles of association of all PRC companies applying to be listed in Hong Kong. The articles of association of our company have incorporated the provisions required by the Mandatory Provisions and the GEM listing rules. Despite the incorporation of those provisions, there can be no assurance that shareholders of our company will enjoy protections that they may be entitled to in other jurisdictions.

— 35 — RISK FACTORS

Securities laws and regulations A1a67(a)

At present, the regulatory framework for the securities industry in the PRC is at an early stage of development. The CSRC is responsible for administering and regulating the national securities markets and drafting relevant regulations for the regulation of the national securities markets. Regulations of the State Council and the relevant implementing measures of the CSRC, such as provisions dealing with acquisitions of listed PRC companies and disclosure of information, apply to listed companies in general without being confined to companies listed on any particular stock exchange. Hence it is possible that those provisions may be applicable to a joint stock company with limited liability with shares listed on a stock exchange outside the PRC, such as our company.

On 1 January, 2006, the amended PRC Securities Law became effective. The PRC Securities Law is the fundamental law that comprehensively regulates the securities markets in the PRC and applies to the issue and trading in the PRC of shares, company bonds and other securities designated by the State Council according to law. The Company Law, the rules and regulations recently promulgated there under and laws relating to PRC companies whose shares are offered overseas provide, to a certain extent, a legal framework governing the corporate behaviour of companies, such as our company, and our Directors and shareholders. Investors should note that the regulatory framework for the securities industry in the PRC is at an early stage of development, and there may be changes which are beyond the control of our company and may affect the rights of our shareholders.

Enforceability of judgments and arbitration A1a67(f)

Our company is a joint stock limited company incorporated in the PRC with limited liability. Most of the Directors and Supervisors and most of our residents reside within the PRC, and substantially all the assets of our company and of such persons are located within the PRC. Therefore, it may not be possible for investors to effect service of process upon such persons outside the PRC or to enforce any judgments obtained from non-PRC courts against our company or such persons inside the PRC. The PRC does not have treaties or arrangements providing for the recognition and enforcement of judgments of the courts of the United Kingdom, the United States and most other western counties or Hong Kong, and therefore recognition and enforcement in the PRC of judgments obtained in such jurisdictions may be difficult, if not impossible.

The PRC is a signatory to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”) which has historically permitted reciprocal enforcement in the PRC of awards of arbitral bodies located in other New York Convention signatory countries. Following the resumption of sovereignty over Hong Kong by the PRC on 1 July, 1997, the New York Convention no longer applies to the enforcement of Hong Kong arbitration awards in other parts of the PRC. A memorandum of understanding on the arrangement for reciprocal enforcement of arbitral award between Hong Kong and the PRC was signed on 21 June, 1999. This new arrangement concerning mutual enforcement of arbitral award between the PRC and Hong Kong was approved by the Supreme Peoples Court of the PRC and the Hong Kong Legislative Council, and became effective on 1 February, 2000.

— 36 — RISK FACTORS

Outbreak of the Severe Acute Respiratory Syndrome (“SARS”) or other similar epidemics

Certain areas of China are susceptible to epidemics such as SARS. An outbreak of SARS or any outbreak of other epidemics in China might result in material disruptions of our operations, which in turn would adversely affect our financial condition and results of operations.

Outbreak of the H5N1 strain of bird flu (“Avian Flu”) or any other similar epidemics

Recently, certain Asian countries, including China, have encountered incidents of Avian Flu. This disease, which is spread through poultry populations, is capable in certain circumstances of being transmitted to humans and could be fatal. If any of our employees are identified as a possible source of spreading Avian Flu or any other similar epidemic, we may be required to quarantine the employees that have been suspected of becoming infected, as well as others that have come into contact with those employees. We may also be required to disinfect our affected operating facilities, which could adversely affect our operations. Even if we are not directly affected by the epidemic, an outbreak of Avian Flu or other similar epidemic, whether inside or outside China, could slow down or disrupt economic activities generally, which could in turn adversely affect the operations of our company and the price of the H Shares.

RISKS RELATING TO THE PLACING

Price fluctuations and liquidity of the H Shares

Prior to the Placing, there has been no public market for the H Shares and there can be no guarantee that active trading activity will develop, or if it does develop, there can be no guarantee that such trading activity will sustain following the completion of the Placing. The Placing Price may not be indicative of the price at which H Shares will be traded following the completion of the Placing and the trading price of the H Shares may fluctuate. There is no guarantee that the market price of the H Shares will not decline below the Placing Price.

Dilution of shareholders’ interests as a result of additional equity fund raising

We may need to raise additional funds in the future to finance the expansion of our existing businesses or the development of new businesses. If additional funds are raised through the issuance of new equity or equity-linked securities by our company other than on a pro rata basis to our existing shareholders, the interests of our existing shareholders may be diluted as a result of such equity fund raising.

— 37 — WAIVERS FROM COMPLIANCE WITH THE GEM LISTING RULES AND THE COMPANIES ORDINANCE AND THE EXEMPTION NOTICE

For the purpose of the listing of our H Shares on GEM, we have sought a number of waivers from the Stock Exchange and the Securities and Future Commission in relation to certain requirements under the GEM listing rules and the Companies Ordinance. Details of such waivers are described below.

ACCOUNTANTS’ REPORT FOR THE TWO FINANCIAL YEARS PRECEDING THE DATE OF THIS PROSPECTUS

Paragraph 27 of Part I of the Third Schedule to the Companies Ordinance and the Exemption Notice requires that a prospectus must include a statement as to the gross trading income or sales turnover (as may be appropriate) of our group during each of the two financial years immediately preceding the issue of this prospectus.

Paragraph 31 of Part II of the Third Schedule to the Companies Ordinance and the Exemption Notice requires that the accountants’ report set out in a prospectus must include the audited consolidated results of our group in respect of each of the two financial years immediately preceding the issue of this prospectus.

Rules 7.03(1) and 11.10 of the GEM listing rules require that the accountants’ report to be included in a prospectus must include the consolidated results of our group in respect of each of the two financial years immediately preceding the issue of the prospectus or such shorter period as may be acceptable to the Stock Exchange.

The accountant’s report included as appendix I to this prospectus includes the audited consolidated results of our group for the two years ended 31 December, 2004 and the nine months ended 30 September, 2005 and the unaudited consolidated results of our group for the nine months ended 30 September, 2005 but not the audited consolidated financial statements (including the requisite statements as to its gross trading income or sales turnover) of our group for the full financial year ended 31 December, 2005 as required under paragraphs 27 of Part I and 31 of Part II of the Third Schedule of the Companies Ordinance and the Exemption Notice, as well as Rules 7.03(1) and 11.10 of the GEM Listing Rules. As this prospectus is issued on 16 February, 2006, our Directors believe that it will be unduly burdensome for our group to include audited consolidated financial statements of our group, or company, as the case may be, for the full financial year ended 31 December, 2005.

In the circumstances, an application has been made to the Securities and Futures Commission for a certificate of exemption from strict compliance with paragraphs 27 and 31 of the Third Schedule to the Companies Ordinance and the Exemption Notice in relation to the inclusion of the accountants’ report for the full financial year ended 31 December, 2005 in this prospectus on the ground that it would be unduly burdensome for our company to do so, and a certificate of exemption has been granted by the Securities and Futures Commission.

— 38 — WAIVERS FROM COMPLIANCE WITH THE GEM LISTING RULES AND THE COMPANIES ORDINANCE AND THE EXEMPTION NOTICE

An application has also been made to the Stock Exchange for a waiver from strict compliance with Rules 7.03(1) and 11.10 of the GEM Listing Rules in relation to the inclusion of the accountants’ report for the full financial year ended 31 December, 2005 in this prospectus and the Stock Exchange has granted a waiver on the condition that the listing date should be on or before 28 February, 2006.

NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS

Details of our connected transactions are set out in the paragraph headed “Connected transactions” under the heading “Business” in this prospectus. These transactions constitute non-exempt continuing connected transactions under the GEM listing rules and are subject to reporting and, or, announcement requirements and, or shareholders’ approval requirements. Since such transactions are conducted in the ordinary and usual course of business and on a regular basis, we do not believe that it would be practical to disclose each such transaction. Accordingly, we have applied to the Stock Exchange to grant waivers from strict compliance with the requirements of Rules 20.47 and Rules 20.48 of the GEM listing rules to announce the non-exempt continuing connected transactions and to obtain the approval from the shareholders. The Stock Exchange has granted a waiver to us from strict compliance with the announcement and, or independent shareholders’ approval requirements in connection with the non-exempt continuing connected transactions pursuant to Rule 20.42(3) of the GEM listing rules. However, we are required to comply with the applicable requirements in Chapter 20 of the GEM listing rules in respect of the framework agreements entered into between us and the connected persons shown on pages 91 to 106 of this prospectus upon the expiry of our financial year ending 31 December, 2006.

ESCROW ARRANGEMENT

Under the GEM Listing Rules, the Promoters are regarded as initial management shareholders, and are subject to the requirement of Rule 13.16(1) of the GEM Listing Rules which requires that every initial management shareholder shall place in escrow, with an escrow agent and on such terms as are acceptable to the Stock Exchange, all its relevant securities for a period commencing on the date by reference to which disclosure of the shareholding of the initial management shareholder is made in the listing document and ending on the date which is twelve months from the listing date, or where an initial management shareholder’s relevant securities represent no more than 1% of the issued share capital of our company as at the listing date, for a period commencing on the date by reference to which disclosure of the shareholding of the initial management shareholder is made in the listing document and ending on the date which is six months from the listing date.

— 39 — WAIVERS FROM COMPLIANCE WITH THE GEM LISTING RULES AND THE COMPANIES ORDINANCE AND THE EXEMPTION NOTICE

We consider that Rule 13.16(1) of the GEM Listing Rules is not applicable to the Domestic Shares and Non-H Foreign Shares held by the initial management shareholders as the Domestic Shares and Non-H Foreign Shares are not represented by any form of physical scrip or title documents. Given that the Domestic Shares and Non-H Foreign Shares are in scrip-less form, the initial management shareholders may not be able to create any pledge or charge by deposit of the title documents of their respective Domestic Shares or Non-H Foreign Shares. The subject matter for custody by the escrow agent under Rule 13.16(1) of the GEM Listing Rules does not physically exist in any form as being available for custody purposes.

We have applied to the Stock Exchange for, and the Stock Exchange has granted a waiver from strict compliance with rule 13.16(1) of the GEM listing rules. Each of company and our Directors (including the Non-executive Directors and Independent Non-executive Directors) has severally undertaken to the Stock Exchange not to approve, and to procure us not to approve, the registration of any transfer of the Domestic Shares and, or Non-H Foreign Shares owned by the initial management shareholders for a period of 12 months from the listing date. We undertake to the Stock Exchange that we will submit copies of such undertakings to the Administration of Industry and Commerce for notification purpose. (Please refer to the section headed “Substantial, significant and initial management shareholders — Non-disposal undertakings” for further details.)

— 40 — INFORMATION ABOUT THIS PROSPECTUS AND THE PLACING

DIRECTOR’S RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS A1a2 R14.23

This prospectus, for which the Directors of the issuer collectively and individually accept full responsibility, includes particulars given in compliance with the Companies Ordinance and the GEM listing rules for the purpose of giving information with regard to our company. Our Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief:

1. the information contained in this prospectus is accurate and complete in all material respects and not misleading;

2. there are no other matters the omission of which would make any statement in this prospectus misleading; and

3. all opinions expressed in this prospectus have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.

CSRC APPROVAL

On 30 December, 2005, the CSRC gave its consent to our company to the application for the listing on GEM and the Placing. In granting such consent, the CSRC accepts no responsibility for the financial soundness of our company nor the accuracy of any of the statements made or opinions expressed in this prospectus.

FULLY UNDERWRITTEN A1a15(2)

This prospectus is published solely in connection with the Placing of 55,000,000 Placing Shares, at the Placing Price.

The Placing Shares are being offered by way of placing to professional, institutional and other investors at the Placing Price. The Placing is subject to the conditions set out under the section headed “Structure and Conditions of the Placing” in this prospectus. Each person subscribing for the Placing Shares will be required to, or deemed by its subscription for the Placing Shares, to confirm that it will observe all the restrictions on sale of the Placing Shares described in this prospectus. The Placing is sponsored by Anglo Chinese and fully underwritten by the Underwriters. (For further information about the underwriting arrangements, please refer to the section headed “Underwriting” in this prospectus.)

RESTRICTIONS ON OFFER OF H SHARES

No action has been taken to permit a public offering of the Placing Shares or the distribution of this prospectus in any jurisdiction other than in Hong Kong. Accordingly, this prospectus may not be used for the purpose of, and does not constitute, an offer or invitation in any jurisdiction or in any circumstances in which such offer or invitation is not authorised or to whom it is unlawful to make such an offer or invitation.

— 41 — INFORMATION ABOUT THIS PROSPECTUS AND THE PLACING

No action has been taken to offer or sell any of the Placing Shares in circumstances which will result in any placee together with its associates holding 10% or more of the total number of H Shares of our company immediately after the listing date or cause any placee not to be qualified as a public shareholder (as described in the GEM listing rules).

The following information is provided for guidance only. Prospective investors should consult their financial advisers and take legal advice, as appropriate, to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction. Prospective investors should also inform themselves as to the relevant legal requirements of applying and any applicable exchange control regulations and applicable taxes in the countries of their respective citizenship, residence or domicile.

Singapore

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Placing Shares may not be circulated or distributed, nor may the Placing Shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the Placing Shares are subscribed or purchased under Section 275 by a relevant person which is:

(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within 6 months after that corporation or that trust has acquired the Placing Shares pursuant to an offer made under Section 275 except:

(1) to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that corporation or such rights and interest in that trust are acquired at

— 42 — INFORMATION ABOUT THIS PROSPECTUS AND THE PLACING

a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the conditions specified in Section 275 of the SFA;

(2) where no consideration is or will be given for the transfer; or

(3) where the transfer is by operation of law.

APPLICATION FOR LISTING ON THE GEM

We have applied to the GEM listing committee for the listing of, and permission to deal in, A1a14(1) A1a11 the H Shares. No part of our company’s share or loan capital is listed or dealt in on any other stock exchange. At present, we are not seeking or proposing to seek listing or permission to deal in on any other stock exchange.

In compliance with Rule 25.08 and 25.09 of the GEM listing rules, if there are existing issued securities of our company in issue other than H Shares, we must ensure that all H Shares are held A1a14(4) by the public, the H Shares must normally constitute not less than 10% of the total existing issued share capital of our company, and the aggregate amount of the H Shares and such other securities of our company which are held by the public must constitute not less than 25% of our total issued share capital.

Under section 44B(1) of the Companies Ordinance, if the permission for the listing of, and dealing in the H Shares on GEM has been refused before the expiration of three weeks from the date of the closing of the subscription lists under the Placing or such longer period not exceeding six weeks as may, within the said three weeks, be notified to us for permission by or on behalf of the Stock Exchange, then any allotment made on an application in pursuance of this prospectus shall, whenever made, be void.

INDEPENDENCE OF THE SPONSOR

Anglo Chinese, the Sponsor, is independent from our company pursuant to Rule 6A.07 of the GEM listing rules.

REGISTRATION OF SUBSCRIPTION, PURCHASE AND TRANSFER OF THE H SHARES R14.08(7)(b)

We have instructed Computershare Hong Kong Investor Services Limited as our Hong Kong share registrar, and Computershare Hong Kong Investor Services Limited has agreed not to register the subscription, purchase or transfer of any H Shares in the name of any particular holder unless and until the holder delivers a signed form to the share registrar in respect of those H Shares bearing statements to the effect that:

(i) the holder agrees with us and each of our shareholders, and we agree with each shareholder to observe and comply with the Company Law, the Special Regulations and the Articles of Association;

— 43 — INFORMATION ABOUT THIS PROSPECTUS AND THE PLACING

(ii) the holder agrees with us, each of our shareholders, Directors, Supervisors, senior officers, and we, acting for ourselves and for each of our Directors, Supervisors and senior officers agree with each of our shareholders to refer all differences and claims arising from the Articles of Association or any rights or obligations conferred or imposed by the Company Law or other relevant laws and administrative regulations concerning the affairs of our company to arbitration in accordance with the Articles of Association, and any reference to arbitration shall be deemed to authorise the arbitration tribunal to conduct hearings in open session and to publish its award, which arbitration shall be final and conclusive;

(iii) the holder agrees with us and each of our shareholders that H Shares in our company are freely transferable by the holders thereof; and

(iv) the holder authorises us to enter into a contract on his behalf with each of our Directors and senior officers whereby such Directors and senior officers undertake to observe and comply with their obligations to shareholders as stipulated in the Articles of Association.

H SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS

Subject to the granting of the listing of, and permission to deal in, the H Shares to be issued and listed on GEM as described in this prospectus as well as compliance with the stock admission A1a14(2) requirements of HKSCC, the H Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the listing date or any other date HKSCC chooses. Settlement of transactions between participants of the Stock Exchange is required to take place in CCASS on the second business day after any trading day. All activities under CCASS are subject to the General Rules of CCASS and the CCASS Operation Procedures in effect from time to time. All necessary arrangements have been made for the H Shares to be admitted into CCASS.

If you are unsure about the procedures for dealings and settlement arrangement on the A1a14(3) Stock Exchange on which H Shares are listed and how such arrangements will affect your rights and interests, you should consult your stockbroker or other professional advisers.

COMMENCEMENT OF DEALINGS IN H SHARES

Dealings in H Shares on GEM are expected to commence on 23 February, 2006. H Shares will be traded in board lots of 1,000 each.

PROFESSIONAL TAX ADVICE RECOMMENDED

If you are unsure about the taxation implications of the subscription for, holding, disposal of, dealing in, or exercise of any rights in relation to the Placing Shares, you should consult an expert. We, Anglo Chinese, the Underwriters, any of their respective directors, agents or auditors or any other party involved in the Placing would not accept responsibility for tax effective on, or liability of, any person resulting from the subscription for, or purchase, holding, disposing, dealing in or exercise of any rights in relation to the Placing.

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STAMP DUTY

All H Shares issued pursuant to the Placing will be registered on our H Share register of members to be maintained in Hong Kong. Our principal register of members will be maintained by us at our registered office in the PRC.

Dealings in the Placing Shares registered on the Hong Kong H Share register of members of our company will be subject to Hong Kong stamp duty.

STRUCTURE OF THE PLACING

Details of the structure of the Placing, including conditions, are set out in the section headed “Structure and Conditions of the Placing” in this prospectus.

EXCHANGE RATE CONVERSION

For purposes of this prospectus, unless otherwise indicated, the following exchange rates have been used, where applicable, for purposes of illustration only and do not constitute a representation that any amounts have been, could have been or may be exchanged, at these or any other rates on such date or any other date:

HK$7.80 = US$1.00 HK$1.00 = Rmb1.04

— 45 — DIRECTORS AND PARTIES INVOLVED IN THE PLACING

Directors A1a41 R11.07(1) Co 3rd(6) Name Address Nationality

Executive Directors

Yin Jiaxu Room 1-2 Chinese No. 79-14 Changjiang Second Road Yuzhong District Chongqing PRC

Huang Zhangyun No. 257-26 Chinese Village 5 Dashiba Jiangbei District Chongqing PRC

Lu Xiaozhong Room 5-1 Chinese No. 71-5 Wuyi Road Yuzhong District Chongqing PRC

Shi Chaochun Flat 1, 2/F Chinese 15 Ping’an Cun Jiangbei District Chongqing PRC

James H McAdam No.22 Bukit Sedap American Ashley Green Singapore 279921

Non-executive Directors

Lu Guoji No. 81 Zhongshan Fourth Road Chinese Yuzhong District Chongqing PRC

Zhang Baolin #8 Door 3, Building 7 Chinese 7 Jinxiu Road Wuhou District Chengdu PRC

— 46 — DIRECTORS AND PARTIES INVOLVED IN THE PLACING

Name Address Nationality

Koay Peng Yen No. 2-11, Forest Manor Malaysian Lane 588, Jinfeng Road Huacao Town Minhang District Shanghai PRC

Cao Dongping No. 754, 7th Village Chinese Dashiba Jiangbei District Chongqing PRC

Wu Xiaohua No. 17-5 Chinese Haitang Xin Road Nanan District Chongqing PRC

Lau Man Yee, Vanessa 84 Coronation Road British National Singapore 269480 (Overseas)

Independent Non-executive Directors

Wang Xu No. 11-8-5 Baishulin Chinese District A, Chongqing University Chongqing PRC

Peng Qifa Room 3-6-2 Chinese Building 46 Jiangong Second Village Jiulongpo District Chongqing PRC

Chong Teck Sin 16 Jalan Kakatua Singaporean Singapore 598533

— 47 — DIRECTORS AND PARTIES INVOLVED IN THE PLACING

Name Address Nationality

Supervisors

Hua Zhanbiao No.244-16-5 Village 5, Dashiba Chinese Jiangbei District Chongqing PRC

Tang Yizhong Room 9-2 Chinese No.43 Bajiao Village Yuzhong District Chongqing PRC

Dai Baiming Room 206, No.4 Chinese Lane 2328 Hong Qiao Road Shanghai PRC

Ye Guangrong No.15-6 Kangle Garden Chinese Wulidian Jiangbei District Chongqing PRC

Chen Haihong D2-2-4 Changanjing Yuan Chinese Cha Yuan Jiangbei District Chongqing PRC

— 48 — DIRECTORS AND PARTIES INVOLVED IN THE PLACING

Sponsor and Arranger Anglo Chinese Corporate Finance, Limited A1a3 40th floor, Two Exchange Square 8 Connaught Place Central Hong Kong

Sole bookrunner and China Everbright Securities (HK) Limited sole lead manager 36th Floor Far East Finance Centre 16 Harcourt Road Hong Kong

Underwriters China Everbright Securities (HK) Limited 36th Floor Far East Finance Centre 16 Harcourt Road Hong Kong

Anglo Chinese Corporate Finance, Limited 40th floor, Two Exchange Square 8 Connaught Place Central Hong Kong

First Shanghai Securities Limited 19/F., Wing On House 71 Des Voeux Road Central Hong Kong

Kingsway Financial Services Group Limited 5/F., Hutchison House 10 Harcourt Road Central Hong Kong

Tai Fook Securities Company Limited 25/F., New World Tower 16-18 Queen’s Road Central Hong Kong

Taiwan Securities (Hong Kong) Company Limited Room 1302-05, 13/F., Tower II Admiralty Centre 18 Harcourt Road Hong Kong

— 49 — DIRECTORS AND PARTIES INVOLVED IN THE PLACING

VC Brokerage Limited 28/F., The Centrium 60 Wyndham Street Central Hong Kong

Watterson Asia Limited 5/F., 8 Queen’s Road Central Hong Kong

Legal advisers to our company SD & Partners A1a3 as to PRC law 18-20/F, Block B The Pavilion, 4002 Huaqiang Road North Shenzhen PRC

Legal advisers to our company Herbert Smith A1a3 as to Hong Kong law 23rd Floor Gloucester Tower 11 Pedder Street Hong Kong

Legal advisers to the Sponsor Mallesons Stephen Jaques A1a3 and the Underwriters 37th Floor Two International Finance Centre 8 Finance Street Central Hong Kong

Auditors and reporting accountants PricewaterhouseCoopers A1a4 Certified Public Accountants 22nd Floor Prince’s Building Central Hong Kong

Property valuer Vigers Appraisal & Consulting Limited 10th Floor, The Grande Building 398 Kwun Tong Road Kowloon Hong Kong

— 50 — CORPORATE INFORMATION

Registered office Liangjing Village A1a6 A1a43 Yuanyang Town Yubei District Chongqing

Head office and principal place of 16/F, 144-151 Singga Commercial Centre A1a6 business in Hong Kong Connaught Road West Hong Kong

Company website address (Note) http://www.camsl.com

Company secretary Yang Chuen Liang, Charles CPA, ACA A1a42(1)(a) R11.07(2)

Qualified accountant Yang Chuen Liang, Charles CPA, ACA A1a42(1)(b) R11.07(3)

Compliance officer Huang Zhangyun A1a42(1)(c) R11.07(4) Compliance adviser Anglo Chinese Corporate Finance, Limited 40th Floor Two Exchange Square 8 Connaught Place Central Hong Kong

Audit committee Peng Qifa, Wang Xu, Chong Teck Sin R11.07(6)

Authorised representatives Huang Zhangyun A1a3 R11.07(5) No. 257-26 Village 5 Dashiba Jiangbei District Chongqing PRC

Shi Chaochun Flat 1, 2/F 15 Ping’an Cun Jiangbei District Chongqing PRC

Note: Information contained in our website does not form part of this prospectus.

— 51 — CORPORATE INFORMATION

Principal bankers China Minsheng Bank Limited A1a3 No. 18 Minzhu Road Yuzhong District Chongqing

Merchants Bank of China Limited Attachment No. 1-2 No. 5, Yanghe Road Jiangbei District Chongqing

Construction Bank of China Limited No. 16, Liyu Pond Second Village Jiangzhao District Chongqing

Hong Kong share registrar and Computershare Hong Kong Investor R11.08 A1a3 transfer office Services Limited A1a43 Rooms 1712-1716 17th Floor, Hopewell Centre 183 Queen’s Road East Hong Kong

— 52 — INDUSTRY OVERVIEW R14.18

INTRODUCTION

The Chinese economy experienced rapid growth in the last decade. According to the data from the National Bureau of Statistics of China, during the period from 1995 to 2003, the average annual growth in China’s GDP was approximately 8.2%. According to the China Logistics Development Report (2004-2005), the realised growth of the domestic logistics industry increased by 8.4% to Rmb845.9 billion, which accounted for 6% of the GDP or 19.5% of the growth value of the tertiary industry.

AUTOMOTIVE LOGISTICS IN THE PRC

At present, many PRC car manufacturers manage their own supply chain, ranging from the purchase and management of components and parts, production, sales and distribution of the finished vehicles. However, there is a trend for car manufacturers to outsource part or all of the logistics management business to outside professional logistics companies in order to save production cost, reduce investment and concentrate their resources on the core business. This is especially so with the price cuts of automobiles in 2004 and the entry of foreign car manufacturers into China which outsource logistics services as a means to reduce their costs of supply chain management. Therefore, the Directors believe that there presents vast opportunities for the development of third party automotive logistics services in the PRC.

As the logistics industry in the PRC is in a stage of transition from mere transportation and warehousing of commodities to the provision of comprehensive logistics services, the Directors believe that it will take time for the domestic service providers to build up expertise, establish a modern logistics network and develop an information based logistics system.

MAJOR MARKET PLAYERS

At present, automotive logistics services providers in the PRC can be generally divided into the following categories:

(1) companies emerged from traditional transportation enterprises;

(2) companies spun off from automobile manufacturing enterprises;

(3) privately owned companies; and

(4) sino-foreign automotive logistics joint ventures.

— 53 — INDUSTRY OVERVIEW

According to the China Automotive Industry Yearbook for 2004 and 2005 and information supplied by the China Association of Car Manufacturers, the ten largest car manufacturers in China in 2004 are as follows:

2004 2003 2004 growth rate production production compared with the No Name of enterprise volume volume previous year (unit) (unit) (%)

1 China FAW Group Corporation 993,554 858,737 15.70

2 Shanghai Automotive Industry Corporation 847,526 796,969 6.34 (Group)

3 Changan Automobile 582,367 406,861 43.14 (Group) Co., Ltd.

4 Beijing Automotive Industry 538,699 347,947 54.82 Holding Co., Ltd.

5 Dongfeng Motor Corporation 530,061 419,521 26.35

6 Guangzhou Automobile Industry 209,720 122,568 71.11 Group Co., Ltd.

7 Harbin Hafei Motor Co., Ltd. 205,991 200,007 2.99

8 Anhui JAC Automotive Co., Ltd. 131,300 93,646 40.21

9 Shenyang Jinbei Automotive 110,505 124,439 -11.20 Company Limited

10 Changhe Aircraft Industries Group 104,289 118,721 -12.16

— 54 — INDUSTRY OVERVIEW

DEVELOPMENT OF AUTOMOTIVE INDUSTRY IN THE PRC

In 2004, the National Development and Reform Commission promulgated the “Policies relating to the development of automotive industry”. It put forth China’s target to develop the automotive industry as a pillar industry for its economic development by 2010. It also put in place policies such as those relating to the development structure, product development and technology as well as investment management of the automotive industry.

Meanwhile, the PRC has also adopted various measures such as preferential tax treatment to support the development of the automotive industry. On the other hand, with the further reduction in import tariff and increase in import quota, the number of imported automobiles increased in 2003 and competition with local car manufacturers intensified. However, contrary to the anticipation that imported cars will cause disastrous impact on the automotive industry with China’s accession to WTO, both the production and sales of imported and domestic cars have been high for the three years since the accession.

After China’s accession to the WTO in 2001, leading domestic car manufacturers initiated price cut to retain sales. In 2004, automobile prices dropped generally. A survey shows that the price of locally manufactured automobiles dropped by over 10% on average, while that of imported vehicles decreased by over 14% on average. In addition, increase in automobile financing has also enhanced the purchasing power for potential buyers.

Production volume of automobiles in the PRC has increased year after year from 1999 to 2004. In particular, there was a drastic increase in 2002 and 2003. Production volume of automobiles in 2003 and 2004 amounted to approximately 4,440,000 units and 5,070,000 units respectively. The automobile market is expected to develop at a relatively high growth rate for a considerable period provided there is no special economic development obstacles. The rapid and continuous growth of automotive sales in the PRC facilitates the development of the automotive logistics industry which attracts logistics enterprises including new logistics service providers and domestic or foreign logistics service providers to join and compete in the market. The chart below sets out the number of automobiles produced in the PRC since 1991.

— 55 — INDUSTRY OVERVIEW

Production volume of automobiles in the PRC

10,000 Units 550 500 450 400 350 300 250 200 150 100 50 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Years

Source: China Automotive Industry Yearbook 2005

POLICY FOR THE LOGISTICS INDUSTRY IN THE PRC

Logistics has been selected as a key industry for development under the Tenth Five-Year Plan of the PRC. The Ministry of Science and Technology of the PRC has approved certain qualified research institutes as “China Logistics Productivity Promotion Centers” and it has included the project of “Modern logistics business model and its related research and case studies” into the country’s “Tenth Five-Year key technologies R&D program”. It is expected that during the period of the Tenth Five-Year Plan, 30 modern logistics distribution centers will be established, and on that basis, it is expected that about ten professional logistics enterprises with large scale of operations and national business networks will be developed.

Based on the experiences of other countries and the actual needs of the PRC, the National Development and Reform Commission has decided to formulate the “Framework for the development plan of the modern logistics industry in China”, which was one of the key projects of the Eleventh Five-Year Plan.

With the approval of the State Council, nine ministries and commissions, including the National Development and Reform Commission and the Ministry of Commerce, issued a notice relating to the opinion on accelerating the development of the modern logistics industry of the PRC on 5 August 2004. It includes the policies concerning relaxation of entry barriers, simplification of administration and management, regularisation of the logistics market, adjustment of taxes for logistics services, support for the development of professional logistics companies, acceleration of the establishment of standardised logistics information system, acceleration of the opening up of the market to foreign investors, simplification of customs procedures and personnel training including the National Development and Reform Commission and the Standardisation Administration of China under the “National Development Plan for

— 56 — INDUSTRY OVERVIEW

Logistics Standardisation 2005-2010” jointly promulgated by PRC authorities. China will revise and formulate about 300 logistics standards so as to converge with international standards. This is a positive move for the development of China’s logistics industry. Although the automotive logistics sector has only recently emerged, new rules and policies are implemented on this sector. On 14 December, 2004, National Development and Reform Commission promulgated the “Regulation of transportation service for passenger vehicles” which was implemented on 1 June, 2005. The formulation and promulgation of the regulation are beneficial to the development of an orderly framework for the automotive logistics services sector.

DEVELOPMENT TREND OF THE AUTOMOTIVE LOGISTICS INDUSTRY IN THE PRC

It is expected that the PRC automotive industry will be developed at a high growth rate in tandem with the growth of the PRC automotive market. In particular, the Directors believe that the future development of the PRC automotive logistics market includes the following:

Entry of the international market by the PRC automotive logistics service providers

In line with the customers’ demand and the development of the PRC automotive logistics service providers, the PRC automotive logistics service providers will gradually extend their services into the overseas markets and develop international logistics business. The internationalised strategies of the foreign enterprises which enter into the Chinese market will lead to the globalisation of logistics services.

Accelerating introduction of advanced logistics technologies

Currently, the automotive logistic industry in the PRC lags behind that of other countries such as the United States. The increasing competition in the logistics market will lead to the prompt introduction of the newest technologies such as wireless communication and professional software, in order to improve the overall service quality and operating efficiency.

RELEVANT LAWS AND REGULATIONS A1a60

On 20 June, 2002, the previous Ministry of Foreign Trade and Economic Cooperation (“MOFTEC”) issued the “Notice regarding the relevant problems on the establishment of trial foreign invested logistics enterprises” (the “Notice”) which came into effect on 20 July, 2002. Pursuant to the Notice, establishment of trial foreign investment logistics enterprises was permitted in Jiangsu, Zhejiang, Guangdong, Beijing, Tianjin, Chongqing, Shanghai and Shenzhen. The Notice specifically stated the conditions and procedures of investing in the logistic business by foreign investors during the trial stage.

— 57 — INDUSTRY OVERVIEW

Pursuant to the Notice, foreign invested logistics enterprises should be established in the A1a62 form of sino-foreign equity joint ventures or sino-foreign cooperative joint ventures, and foreign investment logistics enterprises must comply with the following requirements:

(1) Their registered capital should not be less than US$5 million;

(2) For foreign invested logistics enterprises engaged in international logistics business, the shareholding of overseas investors should not be more than 50%;

(3) They should have a fixed place of operation;

(4) They should have the operating facilities necessary for conducting such business.

Upon approval, foreign invested logistics enterprises are entitled to operate international logistics business and third party logistics business.

On 5 August, 2004, nine ministries and administrative departments including the National Development and Reform Commission and the Ministry of Commerce jointly issued the “Opinion Regarding the Promotion of the Modern Logistics Industry in the PRC” (the “Opinion”).

Pursuant to the Opinion, unless otherwise provided by national laws administrative regulations and regulations promulgated by the State Council, all prior approvals for the registration of logistics enterprises with administrative departments of industry and commerce were abolished. Administrative approval for the operation of domestic railway freight- forwarding, river freight-forwarding and multimodal transportation agency, and qualification approval for international freight-forwarding were also eliminated.

According to the Opinion, industrial and commercial enterprises were encouraged to separate their logistics services business such as raw material procurement, transportation and storage and procure these services from professional logistic companies. Logistic companies were urged to grow and develop in scale and scope. The development of socialised and professional logistics enterprises by raising of capital in domestic or foreign capital markets is also encouraged. Logistic companies with assets of good quality, good operational management and growth potentials were encouraged to seek listings. Financial institutions should also support logistics companies with high efficiency and markets.

Necessary control measures were also adopted to promote the integration of the logistics resources in the industrial, commercial, transportation, freight-forwarding, multimodal transportation and warehousing industries in various areas of the PRC, reasonable planning and construction of regional logistics centres and development socialised and professional public services were also proposed.

— 58 — INDUSTRY OVERVIEW

The Opinion also accelerated the setting up and promotion of technical standards in respect of logistics Infrastructure, technical equipment, management flow and information network, with a view to formulating a concerted, united and standardised modern logistics technological system.

A national modern logistics co-ordination mechanism led by the National Development and Reform Commission was set up in order to enhance overall organisation and co-ordination. Its principal functions will be to propose policies for the development of modern logistics,to co-ordinate national modern logistics development planning, to solve major problems in the course of development of the industry and to organise and promote the development of the modern logistics industry, propose modern logistics development policy, look into problems in the course of development and organising advancement and development of the modern logistics industry.

On 1 December, 2005, the Ministry of Commerce promulgated the “Administrative measures for foreign Invested international freight forwarding agency enterprises” (“Administrative Measures”) which came into effect on 11 December, 2005.

Pursuant to the Administrative Measures, subject to approval, foreign companies may establish wholly-owned international freight forwarding agencies in China with a minimum registered capital requirement of US$1 million to provide some or all of the following services in China:

(1) slot booking (rental of ships, chartered flights, chartered slot), entrusted transportation, warehousing, packaging;

(2) supervision of loading, unloading of cargoes, packing of cargoes into and unpacking of cargoes from containers, distribution, transfer and related short distance transportation business;

(3) custom declaration and insurance agency;

(4) preparation of invoices and certificates, payment of transportation fees, settlement and payment of miscellaneous expenses;

(5) international exhibition items, personal belongings and transit cargo transportation agency;

(6) international multi-modal transportation and collective transportation (including combination of containers); and

(7) international express delivery (not including delivery of private letters and official documents of party and governmental institutions above the county level).

— 59 — BUSINESS A1a28(1)(a) Co 3rd(1)

INTRODUCTION

Pursuant to a notice dated 20 June, 2002 published by Ministry of Foreign Trade and A1a62 Economic Cooperation, we were approved on 26 July, 2002 as a sino-foreign joint venture enterprise by the Municipal Government of Chongqing . Subsequently on 31 December, 2004, we were converted into a foreign-invested joint stock limited company.

Our major customers include major car manufacturers in China, such as Changan Automobile, Changan Ford, Changan Suzuki, Changan Hebei and Changan Nanjing. Changan Co., the majority shareholder of Changan Automobile, is one of our Promoters. Both Changan Ford and Changan Suzuki are sino-foreign joint ventures formed by Changan Automobile and international car manufacturers. Changan Hebei and Changan Nanjing are subsidiaries of Changan Automobile. Our other major customers include Qingdao Haier Logistics Company Limited and Chengdu Baogang West Trade Company Limited.

HISTORY AND DEVELOPMENT

(i) Business Development Co 3rd(21)

At the end of 2001, we succeeded in securing business from Changan Automobile and Changan Ford by providing transportation of finished vehicles services to it.

We started our transportation of non-vehicle commodities services in 2003 by transporting electrical appliances for Qingdao Haier Logistics Company Limited. We also started to provide supply chain management service involving car components and parts from 2003. Changan Ford and Changan Nanjing were two of our major customers in respect of our transportation of finished vehicles and supply chain management businesses.

— 60 — BUSINESS

In August 2003 we further expanded our business and began to provide finished vehicles logistics services for Changan Hebei. In order to support our transportation network and serve our business needs, three Regional Distribution Centres were put into operation and we rented one storage facility in Chongqing by the end of 2003.

We expedited the development of our supply chain management services relating to car components and parts in view of the increasing demand for these services in China. We also secured business with other new customers including Chengdu Baogang West Trade Company Limited which engaged our logistics services for their non-vehicle commodities. As part of our expansion plan, two more Regional Distribution Centres were put into operation and we rented two storage facilities in 2004.

(ii) Corporate Development

Our company was established in the PRC on 27 August, 2001. Our shareholders at that time A1a60 were Changan Co. and Minsheng Industrial which held a shareholding interest of 51% and 49%, respectively. Our registered capital upon establishment was Rmb30 million.

On 1 January, 2002, we acquired from Chongqing Changan Automobile Fayun Company Limited (“Chongqing Changfa”), its assets and vehicle transportation business as part of our business expansion. As we did not plan to maintain the operations of Chongqing Changfa, Chongqing Changfa was deregistered on 29 April, 2004 in accordance with the relevant laws and regulations in the PRC.

On 25 April, 2002, our registered capital was increased to Rmb50 million as a result of A1a60 capital injection by new and existing shareholders. The capital contributions were Rmb18.5 million from Changan Co., Rmb11.5 million from Minsheng Industrial, Rmb7.5 million from Chongqing Wanyou, Rmb7.5 million equivalent of U.S. dollar from APLL and Rmb5 million equivalent of U.S. dollar from Ming Sung (HK). With the introduction of APLL and Ming Sung (HK) as foreign investors, we became a sino-foreign equity joint venture and were owned as to 37% by Changan Co., 23% by Minsheng Industrial, 15% by APLL, 15% by Chongqing Wanyou and 10% by Ming Sung (HK).

Pursuant to the share transfer agreements between Chongqing Wanyou and Changan Co. dated 4 April, 2003 and 1 September, 2003, Chongqing Wanyou transferred an aggregate equity interest of 9% in our company to Changan Co. for a total amount of Rmb4.5 million. Pursuant to the share transfer agreements between Chongqing Wanyou and Minsheng Industrial dated 4 April, 2003 and 1 September, 2003, Chongqing Wanyou transferred an aggregate equity interest of 6% in our company to Minsheng Industrial for a total amount of Rmb3 million. On 10 March, 2004, our registered capital was further increased to Rmb100 million, and at which time our company was owned as to 40% by Changan Co., 23% by Minsheng Industrial, 7% by Ming Sung (HK) and 30% by APLL. In accordance with the board resolutions of our company dated 11 March, 2004, Changan Co. transferred 0.8% of its equity interest in our company to Changan Sanchan for Rmb800,000.

— 61 — BUSINESS

On 14 October, 2004, we were approved by the Ministry of Commerce of the PRC to convert into a foreign-invested joint stock limited company. Accordingly, we were registered as a foreign-invested joint stock limited company on 31 December, 2004.

STATEMENT OF ACTIVE BUSINESS PURSUITS R14.15 R11.12(1)

The following paragraphs describe the active business pursuits undertaken by us from 1 January, 2003 up to the Latest Practicable Date.

For the period from 1 January, 2003 to 31 December, 2003 R14.16

Strategic development

Riding on the rapid growth of the automotive industry in China, we aimed to establish ourselves as a leading automotive logistics services provider. Following this strategic direction, we worked aggressively to expand our customer base and expand our services for our existing customers in the automobile sector. While the transportation of finished vehicles remained our focus, we expanded our business to provide supply chain management services relating to car components and parts.

Although our logistics services for non-vehicle commodities remained small in scale compared to those relating to automobile logistics, we aimed to continue exploring this business with a view to better utilising the transportation capacity of the trailer trucks on their return trips.

Sales and marketing

Our sales reached Rmb486.1 million in 2003 which was substantial considering that we were only established in August 2001. During the year, we transported over 234,000 finished vehicles and provided supply chain management services for car components and parts used for the production of about 62,000 vehicles.

In 2003, we continued to provide and expand our logistics services for Changan group of companies. For the year ended 31 December, 2003, turnover generated from the provision of logistics services to Changan group of companies amounted to some Rmb467 million, representing some 96.0% of our total turnover for that year. (Please refer to “Business — Connected transactions” section for further details of these transactions which constitute connected transactions.)

In the non-vehicle commodities sector, we started to provide transportation services for Qingdao Haier Logistics Company Limited in 2003, and mainly transported electrical appliances from Qingdao to Chongqing and from Qingdao to Shanghai and nearby areas. We also transported raw materials such as steel for Chengdu Baogang West Trade Company Limited, meeting its logistics requirements in the western region of China.

We opened branch offices in Dingzhou, Hebei Province and Shenzhen, Guangdong Province.

— 62 — BUSINESS

Facilities

The following table summarises the details of our new facilities that were put into operation in 2003:

Business segment Type and location of facilities Area (sq.m.)

Supply chain management Changan Nanjing Regional Distribution 25,042 relating to car components Centre, and parts Nanjing, Jiangsu province

Supply chain management Changan Ford Regional Distribution 8,640 relating to car components Centre, phase II, Chongqing and parts

Supply chain management Changan Co. Headquarters Regional 6,803 relating to car components Distribution Centre, Chongqing and parts

A storage facility in Chongqing was rented for supporting our supply chain management business.

Customers

As at 31 December, 2003, we had about 220 customers comprising principally car and car components and parts manufacturers. The table below shows a breakdown of our major customers and their respective contribution to our total sales during 2003.

Customers % of our total sales

Changan Automobile 74.9% Changan Ford 17.0% Changan Hebei 2.8%

Total 94.7%

All of Changan Automobile, Changan Ford, and Changan Hebei are members of Changan group of companies which are connected persons of our company. (Please refer to the subsection headed “Connected Transactions” below for further details.) Our other customers included steel producers, machinery manufacturers and trading companies.

— 63 — BUSINESS

Human resources

As at 31 December, 2003, we employed about 802 full time employees. A breakdown of the employees by function is shown below:

Administration and finance 28 Information technology 9 Sales and marketing 20 Operations 745

Total 802

For the period from 1 January, 2004 to 31 December, 2004 R14.16

Strategic development

We aimed to continue expanding our logistics business. In particular, we continued to develop our supply chain management services relating to car components and parts.

Sales and marketing

Our turnover increased by 69.4% from that of 2003 to some Rmb823.5 million in 2004. We transported over 325,000 of finished vehicles and provided supply chain management services for car components and parts used for the production of over 338,000 vehicles.

In 2004, we expanded our supply chain management services for Changan Hebei and Changan Ford. For the year ended 31 December, 2004, turnover generated from the provision of logistics services to Changan group of companies amounted to some Rmb766 million, representing some 93.1% of our total turnover for that year. (Please refer to “Business — Connected transactions” section for further details of these transactions which constitute connected transactions.) For transportation of finished vehicles, we secured Chongqing Fu Qing Transportation Company Limited as a new customer and transported finished vehicles manufactured by Beijing Hyundai Motor Company. At the same time, we continued to expand our business with other non-vehicle related customers such as Chengdu Baogang West Trade Company Limited, Qingdao Haier Logistics Company Limited and Jinfeng (China) Machinery Industrial Company Limited.

We established a representative office in Wuhan in April 2004 with a view to expanding our business there.

— 64 — BUSINESS

Facilities

The following table summarises the details of our new facilities that were put into operation in 2004:

Business segment Type and location of facilities Area (sq.m.)

Supply chain management relating Changan Hebei Regional Distribution 7,467 to car components and parts Centre, Dingzhou, Hebei province

Supply chain management relating Changan Ford Regional Distribution 8,732 to car components and parts Centre, phase III, Chongqing

Supply chain management relating Changan Industrial Park, phase I 11,438 to car components and parts Regional Distribution Centre, Chongqing

In 2004, we rented one additional storage facility in Chongqing to meet the increasing demands from customers.

Customers

As at 31 December, 2004, we had about 470 customers.

The table below sets out a breakdown of our major customers and our sales generated from them in 2004.

Customers % of our total sales

Changan Automobile 48.4% Changan Ford 31.6% Changan Hebei 9.9%

Total 89.9%

— 65 — BUSINESS

Human resources

As at 31 December, 2004, we employed about 1,242 full time employees. A breakdown of the employees by function is shown below:

Administration and finance 50 Information technology 15 Sales and marketing 36 Operations 1,141

Total 1,242

For the period from 1 January, 2005 to the Latest Practicable Date

Strategic development R14.18

During this period, we continued to expand our customer base. We achieved steady growth in revenue from the transportation of finished vehicles and non-vehicle commodities. At the same time, we strived to expand our supply chain management services relating to car components and parts in tandem with the increase in production volume by some of our car manufacturer customers.

To benefit from the favourable geographical location of the Cuntan region in Chongqing which has a comprehensive infrastructure offering easy access to the region’s major rail, road, river and air transportation systems, on 3 November, 2005, our company established a subsidiary, Chongqing Gangcheng, to expand our facilities and capacities in the Cuntan region with a view to further developing our automotive logistics business. Our initial investment and shareholding interest in Chongqing Gangcheng are Rmb5 million and 99% respectively. Changan Sanchan is the shareholder of the remaining 1% in the share capital of Chongqing Gangcheng. (For details of Chongqing Gangcheng, please refer to page VII-3 of appendix VII to this prospectus.)

Sales and marketing

The period under review saw an increase in business with our customers including Changan Ford, Changan Hebei and Changan Nanjing and growth in our capacities as our new facilities established in 2004 went into operation. As a result, our turnover increased to some Rmb648.8 million for the nine months ended 30 September, 2005. As at 30 September, 2005, we transported over 303,000 of finished vehicles and provided supply chain management services for car components and parts used for the production of over 305,000 vehicles.

— 66 — BUSINESS

For the nine month period ended 30 September, 2005, while we became less dependent on our largest customer, Changan Automobile in terms of sales as we expanded our business with other members of Changan Group of customers, namely Changan Ford, Changan Hebei and Changan Nanjing, the sales to which grew 10.4%, 42.7% and 148.6% respectively since 2004. During this period, turnover generated from the provision of logistics services to Changan group of companies amounted to some Rmb596.9 million, representing some 92.0% of our total turnover for that period. (Please refer to “Business — Connected transactions” section for further details of these transactions which constitute connected transactions.) At the same time, revenue from independent customers increased by 14.3% during this period when compared to the corresponding period in 2004.

Facilities

Other than facilities established in 2004, there were no new facilities that were put into operation during 2005.

We rent one additional storage facility in 2005.

Customers

As at 30 September, 2005, we had over 500 customers.

The table below sets out a breakdown of our major customers and our sales generated from them relative to our total turnover for the nine months ended 30 September, 2005.

Customers % of total sales

Changan Automobile 37.6% Changan Ford 33.9% Changan Hebei 13.0%

Total 84.5%

Human resources

As at 30 September, 2005, we employed about 1,416 full time employees. A breakdown of the employees by function is shown below:

Administration and finance 59 Information technology 18 Sales and marketing 46 Operations 1,293

Total 1,416

— 67 — BUSINESS

Compliance with Rule 11.12 of the GEM listing rules R11.12

Rule 11.12 (1) of the GEM listing rules requires that a new applicant must demonstrate that, throughout at least the 24 month period immediately preceding the date of submission of the listing application, it has actively pursued one focused line of business under substantially the same management and ownership as existing at the time of application for listing. Note 3 to Rule 11.12 states that a new applicant must be able to demonstrate that it has a business of both substance and potential. It further states that a business will only be regarded as having the requisite substance if the applicant can show that it has spent at least the 24 month period prior to the issue of the listing document making substantial progress in building up that business.

For the reasons more fully described below, our Directors and the Sponsor are of the view that our company has been operating substantially under the same management throughout the active business pursuits period within the meaning of Rule 11.12(1) of the GEM listing rules. Four of our Executive Directors joined our company since the inception of our company. In addition, our company has since its inception been engaged in the provision of logistics services for the automobile industry in China.

Our Directors further believe that, as described more fully in the “Statement of Active Business Pursuits” subsection above, substantial progress had been made in building up our logistics business and developing a new independent customer base during the Track Record Period. Our customers increased from 220 as at 31 December, 2003 to over 500 as at 30 September, 2005, and the number of staff employed increased from 802 to 1,416 during this period. At the same time, our business had during the Track Record Period been increasingly profitable.

While sales to Changan Group, a connected person of our company, accounted for over 90% of our turnover during the Track Record Period, our Directors believe that Rule 11.12 is complied with given that we have been operationally and, to a certain extent, financially independent of Changan group of companies and other connected persons, as elaborated in the sub-section titled “Independence of our company” below. (Further details of our continuing connected transactions with Changan Group and other connected persons are described in the “Business — Connected transactions” section.)

If Changan Group ceases to use or substantially reduces the use of our logistics services in future and we are not able to secure new customers with similar sales volume on terms acceptable to us, our business scale will be substantially reduced and our financial performance will be adversely affected. (Please refer to the “Risk Factors — Reliance on a single group of customers” section for further details.) However, given our experience in the automobile logistics market and the ability to switch the use of our Regional Distribution Centres and, or storage facilities for other customers, we believe that we would be able to provide logistics services to our existing independent and new customers other than Changan group of companies, albeit lower turnover from the independent customers is anticipated initially. At the same time, our

— 68 — BUSINESS working capital needs will be reduced accordingly. Our Directors believe that we will be able to maintain sufficient working capital to meet our operational needs through internal resources, including income generated from our over 500 independent customers, bank finances and, or through capital markets for the following reasons:

— we have maintained positive cash flows with cash and cash equivalents of some Rmb33.4 million and net assets of some Rmb149.9 million as at 30 September, 2005;

— we presently have a low gearing ratio at 16.7% as at 30 September, 2005. Given this and the “AA” credit rating granted by China Construction Bank on 27 July, 2005, it is expected that our company will be able to obtain bank financing, if required; and

— due to the nature of our services, we do not hold any inventories obviating the risk of poor liquidity or obsolete stock affecting our cashflow.

Our Directors also consider that the risks of Changan group of companies running into financial difficulties are low considering their substantial financial standing. Changan Automobile recorded audited turnover of Rmb14.3 billion and Rmb18.5 billion and net profits of Rmb1.4 billion and Rmb1.2 billion respectively for each of the two years ended 31 December, 2003 and 2004. According to published quarterly reports of Changan Automobile, it posted an unaudited net profit of Rmb215.9 million on the back of total sales of Rmb13.4 billion for the nine months ended 30 September, 2005.

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ORGANISATION STRUCTURE

Our organisation structure is shown below:

Board of Directors Supervisors’ committee

General Manager

Deputy General Manager

Department of Personnel and Department of Department of automobile Project administration information multi-modal components and parts department department technology transportation logistics

International freight- Finance Marketing Engineering Finished vehicle forwarding agency department department department logistics department department

Various automobile Various finished Various subsidiaries, Various Regional components and vehicles logistics branches and offices Distribution Centres parts logistics projects projects

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OUR STRENGTHS

— Proven profitable track record

The Track Record Period saw a solid and proven profit growth with turnover increasing at an annual rate of some 1.7 times between 2003 and 2004, while gross and net profits in 2004 posted a year-on-year surge of about two folds to Rmb67.7 million and Rmb42.6 million, respectively. For the nine months ended 30 September, 2005, net profit posted a 57% rise from the corresponding period in 2004. Based on the profit estimate of not less than Rmb55.0 million for the 2005 financial year, net profit for that year is expected to post a year-on-year growth of 29.1%.

— Established customer base

We provide logistics services to a number of major car manufacturers in China, such as Changan Ford, Changan Automobile, Changan Nanjing, Changan Hebei for several years. According to China Automotive Industry Year book for 2005, Changan Automobile is the third largest car manufacturer in China. In addition, we also provide logistics services to large enterprises in the PRC, including Chengdu Baogang West Trade Company Limited and Qingdao Haier Logistics Company Limited. Given our business model which involves accumulating in-depth knowledge of technical requirements of our car manufacturers customers, the Directors believe that it is less likely for our customers to switch to alternative logistics service providers. The increasing trend for car manufacturers to outsource automotive logistics operations further provides growth opportunities for our group.

We are a major logistics service provider of Changan Group as far as the Directors are aware. Anticipated strong sales to Changan group of companies and our established relationships with our other customers will form a solid foundation for our future development in vehicle and non-vehicle related logistics services.

— Proven record of offering quality service

In the past several years, we have established a proven record of offering quality service to meeting the high standards required of Changan group of companies such as Changan Automobile. Our business volume with Changan group of companies generated increasing sales of some Rmb 466.8 million in 2003, Rmb766.4 million in 2004 and Rmb596.9 million in the 9 months period ended 30 September, 2005.

In November 2003, we were accredited by WIT Assessment with the ISO9001: 2000 certification for quality management system in respect of the provision of network design and road transportation of goods, storage and distribution services. Our quality service was further acknowledged when in July, 2004 we were accredited as a major service enterprise by the Chongqing Municipality Industrial and Commercial Administration Bureau and Northern Newly Developed Economic Development Zone Sub-Bureau.

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— Strong financial standing

We have a strong balance sheet with audited net assets of some Rmb149.9 million and registered capital of some Rmb112.1 million as at 30 September, 2005. Our cash and cash equivalents totalled to some Rmb33.4 million as at 30 September, 2005. A large part of our trade receivables were collected within the credit period granted to our customers during the Track Record Period. As at 30 September, 2005, our bad debt provisions amounted to some Rmb 0.75 million representing merely 0.1 % of our sales for the nine month period ended 30 September, 2005. Gearing was low at some 16.7% as at 30 September, 2005. On 27 July, 2005, we obtained an “AA” credit rating from China Construction Bank. Given our financial standing and taking into account the proceeds from the listing of our H shares on GEM, we believe our future growth can be sustained by using internally generated funds and bank financing, if required.

— Experienced management team

A majority of our management team is experienced in the logistics business in the PRC.

— Low cost advantages

We benefit from the strategic geographical coverage of our Regional Distribution Centres and storage facilities that are located in the vicinity of our customers and therefore help lower transportation costs. In addition, as most of our staff are recruited in the PRC, we benefit from a low staff cost base.

— Ability to provide logistics services throughout China

The total capacity of our five Regional Distribution Centres in Chongqing, Nanjing and Dingzhou can handle car components and parts used for the production of some 440,000 finished vehicles per annum. Our Regional Distribution Centres serve both Changan group of companies and other existing and new potential customers. We manage, through sub-contracting, around 1,500 trailer trucks for supporting our transportation services throughout China. This together with our stable relationships with major shipping companies operating along the Yangtze River have enabled us to provide efficient logistics services to our customers requiring different modes of transportation.

BUSINESS OPERATIONS

Our services are categorised into the following three main areas:

— transportation of finished vehicles and related logistics services;

— supply chain management services relating to car components and parts involving organisation of transportation, distribution and storage; and

— transportation of non-vehicle commodities.

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Transportation of finished vehicles and related logistics services

We provide a full range of vehicle logistics services involving pre-delivery finished vehicles inspection, transportation planning, multi-modal transportation, handling of customs or other transportation procedures and documentation within China. In general, our car manufacturer customers will specify their requirements on quality checks standards, delivery time and destinations for their finished vehicles. Pre-delivery finished vehicles inspection is specified by the customers and usually involves inspection of the exterior, the completeness of accessories and driving manuals of the finished vehicles. Based on these requirements, we devise customised plans involving vehicle inspection, mode of transportation, route selection and delivery timetable. Transportation services comprise rail services, trucking services, and river transportation. During the Track Record Period, we provided finished vehicle logistics services and transported various models of finished vehicles including Ford Mondeo, Ford Fiesta manufactured by Changan Ford, Changan Business Car CM8, Passenger Car SC6360, Changan Raimondi, Changan Star mini car series, Changan New Star Series and Changan Special Vehicles manufactured by Changan Group.

In addition to using our own fleet of trailer trucks, we mainly engage external transportation companies to deliver finished vehicles. We normally enter into one-year term contracts with these transportation companies which are selected through a tendering process. The selected transportation companies are required to demonstrate experience in automobile transportation. We assess the quality of the services of these external transportation companies on an annual basis before we decide to renew the contracts or otherwise. In most instances, we require these external transportation companies to obtain insurance cover for damages incurred on transit. During the Track Record Period, the fees paid to external transportation companies accounted for about 95% of our total costs of sales.

The following table shows the number of vehicles transported by our company (including those transported by external transportation companies) via different modes of transportation in 2003, 2004 and the nine months ended 30 September, 2005.

September, Modes of transportation 2003 2004 2005 Number of vehicles

By road 166,853 210,925 191,248 By rail 36,563 45,602 50,727 By road/river 30,794 68,950 61,497

Total 234,210 325,477 303,472

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Supply chain management services involving the organisation of supplies, distribution, transportation and storage of car components and parts.

We provide supply chain management services primarily to car manufacturers. This typically involves the organisation and storage, if necessary, of supplies of car components and parts before these parts are delivered to the car manufacturers. At the initial stage, our car manufacturer customer will specify the types and amount of raw materials such as metal lids, plastic stripes and other car components and parts like rear view mirror and car door handles required for certain car models and the details of the suppliers. These specifications are then transmitted into our information technology system and will be used by us to plan the supply chain process to ensure accurate and efficient flow of car components and parts through our customers’ supply chain. Generally, the date of arrival for various car components and parts and their subsequent delivery to designated locations, the time allowed for car components and parts inspection and temporary storage, if necessary and final delivery dates to the destinations will be planned. The car components and parts required may be imported from outside China or supplied by designated suppliers in China. Car components and parts ordered by our customers will be delivered to one of our five Regional Distribution Centres located at Chongqing, Nanjing and Dingzhou, or our temporary storage facilities.

Our Regional Distribution Centres are usually located within the vicinity of our car manufacturers customers. Upon receipt of the automobile components and parts at our Regional Distribution Centres or our storage facilities, we will inspect the description, quality and quantity of the car components and parts to ensure that they meet the customer’s specifications. The car components and parts will then be sorted, stored, packaged if necessary and distributed to the designated car manufacturers customers.

Currently each of our Regional Distribution Centres, except the one in Dingzhou, is equipped with computerised information systems that store relevant data relating to each customer’s specifications and other information relating to schedule of supplies of car components and parts. The installation of an information system at the Regional Distribution Centre in Dingzhou is currently being planned.

During the Track Record Period, we provided supply chain management relating to car components and parts for various models of vehicles manufactured by Changan Ford, Changan Automobile, Changan Hebei and Changan Nanjing such as Changan Business Car CM8, Ford Mondeo and Fiesta. As at the Latest Practicable Date, about 17% of our revenue generated from the supply chain management services for car components and parts were from independent customers.

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Set out below is a simplified flow chart showing the key steps involved in our supply chain management services:

Receive car manufacturer customers’ specifications on automobiles components and parts requirements

Planning of supply chain process, for example, arrival date of automobile components and parts, date of delivery to our Regional Distribution Centre, delivery date of automobiles components and parts to customers

Delivery of automobile components and parts to one of our five Regional Distribution Centres

Quantity and quality inspection

Organise/sort inspected automobiles components and parts

Distribution Storage, if necessary /delivery to destinations

Re-package, if necessary

We normally enter into fixed-term contracts with terms ranging from three months to three years with our customers using our supply chain management services.

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FACILITIES

Regional Distribution Centres

We have five Regional Distribution Centres, with three in Chongqing, one in Nanjing of A1a28(8) Jiangsu province and one in Dingzhou of Hebei province.

Gross floor area (in square Name Address metres) Capacity

1 Changan Ford Yuan Yang Town, 23,390 Components and parts Regional Distribution Yubei District, for the production Centre, phases I, II Chongqing of 70,000 finished and III vehicles

2 Changan Co. Changan Automobile 6,803 Components and parts Headquarters plant, for the production Regional Distribution Jiangbei District, of 200,000 finished Centre Chongqing vehicles

3 Changan Industrial Park Kong Gang Economic 11,438 Components and parts Regional Distribution Development Zone, for the production Centre phase I Yubei District, of 50,000 finished Chongqing vehicles

4 Changan Hebei Ding Qu Highway, 7,467 Components and parts Regional Distribution Dingzhou City, for the production Centre Hebei Province of 50,000 finished vehicles

5 Changan Nanjing Yong Yang Town, 25,042 Components and parts Regional Distribution Li Shui County, for the production Centre Nanjing, of 70,000 finished Jiangsu Province vehicles

All the above Regional Distribution Centres primarily serve our major car manufacturer customers namely Changan Automobile, Changan Ford, Changan Hebei and Changan Nanjing which are all members of Changan Group (all of which are connected persons of our company) as well as many other independent customers. These five Regional Distribution Centres are equipped with information technology systems that are often tailored to the special needs of Changan Group. We may consider establishing additional distribution centres when the volume of business with a particular customer reaches a certain level that justifies investment in a new distribution centre.

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The Directors consider that the five Regional Distribution Centres are material to our business, and in particular, the provision of supply chain management services. As these centres are used to provide supply chain management services relating to car components and parts for Changan Group, they are located within the vicinity of car production facilities of Changan Group.

Of the five Regional Distribution Centres, the Changan Co. Headquarters Distribution Centre R11.17 R11.19 was constructed on land not owned by us and we rented the Regional Distribution Centre in Nanjing from Changan Nanjing. The land use rights of the land and legal title of the Changan Co. Headquarters Regional Distribution Centre are held by Changan Co. Pursuant to an agreement dated 10 January, 2004 entered into between our company and Changan Co. (“Agreement”), we were responsible for the cost of construction of the Changan Co. Headquarters Distribution Centre and the related land use rights belong to Changan Group. In return, we acquired the right to use the distribution centre for a period of ten years from 28 December, 2003 to 28 December, 2013 at no further consideration. The ten year period was determined on the basis that our company would have a considerably lengthy period to the exclusive use of the Changan Co. Headquarters Distribution Centre given the substantial investments in constructing it. As advised by our legal advisers as to PRC laws, the Agreement is valid and enforceable under PRC laws.

We are currently leasing Changan Nanjing Regional Distribution Centre from Changan R11.17 R11.19 Nanjing for a period of 10 years ending on 31 December, 2016 and the rent was under negotiation. No consideration has been paid before 31 December, 2005. The rental for the Changan Nanjing Regional Distribution Centre is subject to negotiation after 1 January, 2006.

If any of the production facilities of Changan group of companies (which are presently major Regional Distribution Centres for supplying chain management services), relocate and cease to or significantly reduce their demand for our services, and we are unable to secure orders from other customers with similar requirements and on comparable terms, the utilisation rate of our Regional Distribution Centres will decrease. Nevertheless, as our Regional Distribution Centres also serve over 500 independent customers and the machinery and equipment installed therein can generally be used to provide logistics services to different customers and are not specifically designed only for Changan Group, we will continue to develop our logistics business for our existing and potential independent customers.

The Directors consider that our leased properties used as offices or temporary storage facilities are not material to our business. These properties are referred to as “Group II — Properties rented by the Group in the PRC” in appendix IV to this prospectus. The rented warehouses are mostly used for storing car components and parts or other commodities in transit on a temporary basis before delivery to the final destinations. In view of the abundant supply of storage facilities in the regions in which we operate, the Directors do not expect any material impact on our business if the leases in respect of our temporary storage facilities are not renewed upon expiry and expect that alternatives storage facilities will be located without difficulties.

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Leased storage facilities

Details of our leased storage facilities in Chongqing during the Track Record Period are shown below:

Address Gross floor area Rental (sq.m.) (Rmb/month)

1. Dashiba First Village, 5,377 65,306 Chongqing, the PRC (Note 1) 2. No. 260, Jian Xin Dong Road, 2,068 15,776 Chongqing, the PRC 3. No. 18, Jin Chou Street, Long Xi Jie Road, 2,600 23,400 Yubei District, Chongqing, the PRC (Note 2)

Notes:

1. This property includes seven warehouses occupying a total floor area of 3,907.4 sq.m., two offices, two equipment washing areas, an unloading area, a car park and temporary staff quarters.

2. We ceased to lease this storage facility upon the expiry of the lease on 31 December, 2005.

We do not adopt any standard rates on which we will charge our customers for the provision of storage facilities. Instead, we will negotiate with our customers on a case-by-case basis taking into account various factors such as the volume, weight and value of goods involved, and the duration of storage.

Mode of transportation

Freight forwarding agency services

We offer river, rail, road and freight forwarding agency services that primarily involve procuring transportation of finished vehicles and car components and parts to designated locations within the time limits specified by the customers. Typically, upon receipt of instructions from a car manufacturer customer to arrange transportation of finished vehicles from one location to another, we book or assist our customers to book cargo space that meets the customer’s requirements. The final stage involves the arrangement of the subject goods to be picked up and delivered for shipment. Depending on the destination of the goods to be delivered and the location of the source of components, we also provide, through outsourcing to third parties, ancillary services including arranging for customs declaration and clearance, preparing, on behalf of customers, transportation and customs documentation required by the relevant PRC authorities.

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We have established relationships with various shipping companies in China. Our company possesses international freight forwarding capacity, and can therefore reach services directly through Chinese and overseas marine transportation companies. As at the Latest Practicable Date, we acquired services from international ocean carriers including China Ocean Shipping (Group) Co., K-Line as well as local carriers such as Minsheng Group and China Changjiang National Shipping Group in China. As a result of our long term relationships, we are of the view that we benefit from competitive tariff rates and we have not experienced any major difficulties in securing cargo spaces even during peak seasons.

Transportation by rail

Railway transportation services are usually offered when the destinations are located in remote areas such as Xinjiang, Yunnan, Gansu, Qinghai and Inner-Mongolia.

Trucking services

We currently have a total of about 1,500 trailer trucks under our disposal for delivering finished vehicles and car components and parts from Chongqing to Shanghai, Beijing, Tianjin, Qingdao and other cities in China.

River transportation

Our river transportation services primarily comprise feeder services for transporting finished vehicles and car components and parts along the Yangtze River region, eastern, southern and central China. As we do not own any vessels, these services are outsourced to Minsheng Group and other third party shipping brokers for booking vessels and arranging river transportation services. During the Track Record Period, we engaged major shipping companies including Minsheng Group for transporting finished vehicles by river. Transportation fees paid to Minsheng Group accounted for 83%, 89% and 88% of our total river transportation costs for each of the two years ended 31 December, 2003 and 2004 and the nine months ended 30 September, 2005, respectively.

Transportation of non-vehicle commodities and other related logistic services

Built on our experience in the automobile logistics industry and utilising our operating systems and facilities, we also provide various forms of transportation and temporary storage services in respect of non-vehicle commodities including steel, household electrical appliances, large scale machinery and car tires. We devise for our customers appropriate transportation mode by road, rail and river or through a combination of these modes. We also make or assist our customers to make slot bookings with couriers, cargo or shipping companies, handle customs clearance and other delivery procedures by outsourcing to third parties, purchase insurance policies, and inspect commodities imported into or exported from China to ensure that the entire transportation process is effectively carried out. We mainly engage external transportation companies to transport non-vehicle commodities. The services of these companies are monitored by our staff members throughout the delivery process to ensure that the standard of our service is maintained.

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We lease one storage facility to store steel and related raw materials.

As at the Latest Practicable Date, we generate all our revenue from the transportation of non-vehicle commodities from independent customers.

SALES AND MARKETING

We target to offer our services to car manufacturers in China, and in particular, expand our customer base beyond our existing portfolio. Our marketing focus is to provide comprehensive logistics services to car manufacturers ranging from the initial supply of car components and parts to the delivery of finished vehicles within or outside China. Notwithstanding the recent slowdown in the automotive industry in the PRC, we believe that there is significant growth potential in this business segment in the long run as there is a growing trend for car manufacturers to outsource their logistics requirements in order to reduce cost and as more car manufacturers enter into the China market. We believe that our experience and proven track record in offering logistics services to major car manufacturers including Changan Group form a strong foundation for marketing our services to other car manufacturers in China.

We secure new businesses through a bidding process. Although many of our customers are Changan group of companies, we enter into negotiations with their management independently and compete with other logistics service providers for business from them. As far as the Directors are aware, logistics service providers including our company are usually invited orally or in writing to present proposals to bid for logistics contracts from Changan Group. Upon receiving the invitation, our sales and marketing department will review the customers’ requirements. If we decide to pursue a particular project, a team mainly comprising sales and marketing personnel will be formed to prepare the tender. We will prepare a proposal and an implementation plan outlining the scope of services, operational process, time schedule, staff training programme if required, and give fee estimate if necessary. The tender price will be calculated based on our estimate of the costs to be incurred plus a margin at which we are prepared to perform the contract, taking into account the complexity and type of services required.

For complex projects, our technicians may make site visits to the relevant potential customers including Changan Group to gain a full understanding of the customers’ requirements. Tenders involving capital investment will be approved by our board. Projects involving capital investment of over a certain level of our total assets will be required to be approved by our shareholders.

Apart from cost considerations, the Directors understand that our customers including Changan Group would take into account a totality of factors including business capability and strengths, track records and reputation of the logistics service providers in the selection process. If we are selected as the service provider, we will enter into fixed term contracts (ranging from one to three years) with the customers. Detailed terms of the contracts are negotiated with our customers on an arm’s length basis. We conduct background check on each customer, and each contract will be subject to different levels of management approval requirements depending on the type and value of the contract. In general, the requirements on management approval

— 80 — BUSINESS procedures are stricter for high value contracts. As an example, certain senior management approval is required for contracts with a value exceeding a specified threshold. After the expiry of the contract term, we will re-negotiate the terms of services with the customers who will consider whether or not to renew the contracts with us.

To support our sales and marketing efforts, we have branch offices in Shanghai, Qingdao, Nanjing, Dingzhou, Shenzhen and Wuhan. As at the Latest Practicable Date, our sales and marketing team comprises 36 staff members headed by Mr. Huang Ming.

CUSTOMERS

We provide finished vehicle transportation and related logistics services mainly to Changan Automobile, Changan Ford, Changan Hebei and Changan Nanjing, all of which are members of Changan Group. As for our supply chain management services relating to car components and parts, our customers principally include Changan Automobile, Changan Ford, Changan Hebei, Changan Nanjing and Changan Suzuki. As for logistics services for non-vehicle commodities, our customers include Chengdu Baogang West Trade Company Limited and Qingdao Haier Logistics Company Limited which are all independent third parties.

The number of our independent customers has been growing at a rapid pace. As at 31 December, 2003, we had over 200 independent customers and 8 non-independent customers. At the end of 2004, there were over 460 independent customers and 10 non-independent customers. By 30 September, 2005, we had over 500 independent customers and 10 non-independent customers. The increase in the number of independent customers during the Track Record Period was as a result of the following:

— due to our marketing efforts, we secured more businesses from third party and car components and parts suppliers;

— we implement logistics information technology systems which allow us to keep track on the transportation or other information, resulting in better inventory control for our customers and attracting new independent customers;

— our competitive prices; and

— the expansion of our sales and marketing team to tap new businesses from independent customers.

A majority of our sales were transacted in Rmb during the Track Record Period. Payments by customers are normally made by way of telegraphic remittance.

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For each of the two years ended 31 December, 2003 and 2004 and nine months ended 30 A1a28(1)(b)(iv) September, 2005, we generated sales from our five largest customers of approximately Rmb464.7 million, Rmb764.5 million and Rmb593.4 million, representing some 96%, 93% and 91% respectively of our turnover for the corresponding period. Our sales to Changan Automobile, our sales to our largest customer in terms of sales, for each of the two years ended 31 December, 2003 and 2004 and nine months ended 30 September, 2005 were approximately Rmb360.8 million, Rmb392.2 million and Rmb243.7 million, respectively, representing some 74%, 48% and 38% respectively of our total sales for the corresponding periods.

We have entered into framework agreements with a term of three years with each of Changan group of companies which are currently our major customers to govern our continuing connected transactions. (Please refer to the paragraph headed “Non-exempt Continuing Connected Transactions” under this section for further details).

Except for Changan Co. which is one of our substantial shareholders, none of the Directors, supervisors and their respective associates or shareholders holding more than 5% of our issued share capital had any interest in any of our customers during the Track Record Period and up to the Latest Practicable Date.

INFORMATION TECHNOLOGY

— Logistics management system — this system monitors the status of transportation of goods transported by us by river, rail and road to ensure that vehicles are delivered to the correct destinations on time as specified by the customers.

— Global positioning system — this system is currently being installed in the trucks under our disposal and can be used for monitoring the location of each truck. The use of this system optimises the efficient use of our trucks.

— Customs monitoring system — this system is mainly used by our agents in our freight forwarding operations for the management of data relating to customs declaration and clearance.

We engage third party software developers to develop customised information technology systems. These systems generally can be further tailored to meet new customers’ requirements.

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CREDIT POLICY

Subject to the terms of the relevant contracts, customers are usually required to settle our invoices after the vehicles and, or commodities, as the case may be, have been delivered to their final destinations. In general, we grant our customers credit terms of up to 90 days from the date of invoice.

We regularly monitor the ageing and settlement of our accounts receivables and amounts due from related parties and make specific provisions for each financial year against all known bad debts and any amounts which are not expected to be recoverable. Commencing from 1 January, 2005, in addition to specific bad debt provisions, we began to provide general bad debt provisions based on the difference between the carrying amount of the relevant debt and the present value of estimated recoverable amounts discounted at the effective interest rate.

COMPETITION

As the logistics industry, and in particular automobile logistics industry in China, is still at its infancy stage, the Directors are not aware of a large number of competitors in China. The Directors believe that there is significant room for growth in the demand for logistics services in the automobile market in China. Competitors in the marine transportation industry in China include China Ocean Shipping (Group) Co., China Marine Transportation (Group) Co., Ltd. and China Changjiang National Shipping Group Corporation. (Please refer to the subsection headed “Major Market Players” in the “Industry Overview” section of this prospectus for further details.)

The Directors are of the view that there is a growing trend for major car manufacturers like Changan Group to partner and establish long-term relationships with reliable logistics service providers. The integrity, credibility and trading history of logistics service providers are essential since they handle sensitive information of car manufacturers such as inventory data, raw materials and car component requirements and special features of various new car models being developed or to be launched to the market. The Directors observe that once a car manufacturer selects a logistics service provider as its business partner, it is unlikely that it will easily switch to other logistics service providers. The Directors further note that in practice, such alliances between manufacturers and logistics services providers are common in the PRC market.

As for our company, we will only make substantial financial commitments to building Regional Distribution Centre to serve our customers with which we expect to establish a long term working relationship. Given the history of our trading relationship with Changan Group and our experience in automobile logistics industry, the Directors believe that the competition relating to the supply chain management business is not significant at present.

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In the near term, the Directors anticipate that the competition in the logistics business in China will intensify as the automobile logistics sector of the PRC is gradually being opened to foreign investors following China’s accession to the WTO. However, in the longer term, the Directors believe that our company will be able to compete with our peers in view of our established position in the logistics industry in China and our long-term relationships with many of our customers, including Changan Group.

Competition with APLL

One of the Promoters, APLL, provides global logistics services (including transportation of finished vehicles and automobile supply chain management services) to support the supply chain management needs of its customers worldwide. According to the non-competition undertaking executed by APLL in favour of our company on 15 January, 2005 and as amended by a supplemental agreement dated 31 December, 2005 (collectively, the “APLL Undertaking”), further details of which are shown below, APLL can offer any kind of logistics services including automotive logistics services to customers other than our existing customers who, as of 15 January, 2005, used our automotive logistics services in China. According to the APLL Undertaking, APLL will not solicit any automotive logistics business from Changan group of companies provided, among other things, APLL’s shareholding interest in our company does not fall below 20% from time to time and we remain listed on the Stock Exchange.

The Directors note that automotive and non-vehicle transportation and supply chain management services are and will continue to be two of the major services provided by APLL globally including China. Accordingly, APLL may compete with us in terms of all our services, save for automotive logistics services offered to our existing customers as of 15 January, 2005 (Please refer to the section headed “Risk factors” for further details).

As at the Latest Practicable Date, none of the directors of APLL is personally engaged in a business which competes or is likely to compete with the business of our group. Save as disclosed in this prospectus, none of the management shareholders or substantial shareholders of APLL has, as at the Latest Practicable Date, any interest in logistics business that competes or is likely to compete with our business.

Non-competition undertakings

As part of our business overlaps to some extent with our shareholders comprising Changan Group, APLL and Minsheng Group, each of Changan Co., APLL, Minsheng Industrial and Ming Sung (HK) has entered into a non-competition undertaking with our company. The Directors believe that our company’s interests will be safeguarded to a significant extent from potential competition by the various non-competition undertakings described more fully below.

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Pursuant to a non-competition undertaking dated 15 January, 2005 and as amended by a supplemental agreement dated 31 December, 2005 given by Changan Co., Changan Co. has:

(1) confirmed that Changan Co. and its associates did not engage or participate in any businesses or activities which constitute direct or indirect competition with our businesses as at 15 January, 2005;

(2) undertaken and guaranteed that, so long as, among other things, Changan Co. and its associates’ shareholding interest in our company does not fall below 20% and we remain listed on the Stock Exchange:

1 Changan Co. shall not and shall procure its associates not to, within China:

(a) whether individually or with other persons, directly or indirectly engage or participate in any form of businesses (including but not limited to investments, joint venture or cooperation) that constitute or may constitute competition with the businesses that we are currently carrying on; and

(b) provide support in any form to persons other than us to engage in businesses that constitute or may constitute competition with the businesses that we are currently carrying on.

2 Where direct or potential competition arises in the course of developing business between Changan Co. and us, Changan Co. shall give us the priority to choose except in the following circumstances:

(a) we have expressly indicated to give up the business opportunity.

(b) we do not possess the ability to obtain the business opportunity independently.

(d) the business opportunity falls outside our current scope of business.

3 Where we request assistance from Changan Co., priority will be given to us under the same terms by utilising its resources to support us in securing business.

4 Where we obtain the business independently, we shall give the priority to cooperate with Changan Co. under the same terms.

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APLL executed a non-competition undertaking in favour of our company on 15 January, 2005 as amended by a supplemental agreement dated 31 December, 2005 (collectively, “APLL Undertaking”), pursuant to which, so long as, among other things, APLL holds not less than 20% of our total issued shares and we remain listed on the Stock Exchange, APLL will not offer automotive logistics services constituting our Core Business (as defined in the APLL Undertaking) as of 15 January, 2005 to our then existing customers, who, as of 15 January, 2005, were receiving automotive logistics services from us in China. Under the APLL Undertaking, the “core business” is defined as in-plant logistics, finished product logistics, and after market logistics services in respect of finished automotive manufacturing or assembly plants which were provided by us as of 15 January, 2005 directly to our customers in China. While APLL is not required under the APLL Undertaking to refer to us new business opportunities in respect of the Core Business, APLL has agreed, under the APLL Undertaking, not to solicit our business with Changan Group or our other then existing customers as of 15 January, 2005 unless these customers cease to be our customers.

Although save as disclosed above, it is possible that APLL may compete with us for businesses including but not limited to transportation of non-vehicles. Nevertheless, it is expected that even if competition exists in this area, there will not be any significant impact on our overall performance. This is because non-vehicle transportation services contribute only a small portion of our turnover. The turnover of transportation of non-vehicle commodities represented approximately 1.9% of our turnover in 2004. by Minsheng Industrial and Ming Sung (HK)

Pursuant to a non-competition undertaking dated 15 January, 2005 has given by Minsheng Industrial and Ming Sung (HK), each of Minsheng Industrial and Ming Sung (HK) has

(1) confirmed that each of Minsheng Industrial and Ming Sung (HK) and their respective associates did not engage or participate in any businesses or activities which constitute direct or indirect competition with our businesses as at 15 January, 2005;

(2) undertaken and guaranteed that, so long as, among other things, Minsheng Industrial and Ming Sung (HK) and their respective associates’ shareholding interest in our company does not fall below 20% from time to time and we remain listed on the Stock Exchange:

1 Minsheng Industrial and Ming Sung (HK) shall not and shall procure their respective associates not to, within China,:

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(b) provide support in any form to persons other than us to engage in businesses that constitute or may constitute competition with the businesses that we are currently carrying on.

2 Where direct or potential competition arises in the course of developing business between Minsheng Industrial or Ming Sung (HK) and us, Minsheng Industrial and Ming Sung (HK) shall give us the priority to choose except in the following circumstances:

(a) we have expressly indicated to give up the business opportunity.

(b) we do not possess the ability to obtain the business opportunity independently.

(d) the business opportunity falls outside our current scope of business.

3 Where we request assistance from Minsheng Industrial or Ming Sung (HK), priority will be given to us under the same terms by utilising their resources to support us in securing business.

4 Where we obtain the business independently, we shall give the priority to cooperate with Minsheng Industrial and, or Ming Sung (HK) under the same terms.

Annual confirmation

Each of Changan Co., APLL, Minsheng Industrial and Ming Sung (HK) will provide us with an annual confirmation in respect of their compliance with the terms of the non-competition undertakings given by them. Such annual confirmation will be disclosed in our annual reports.

INTELLECTUAL PROPERTY RIGHTS A1a28(4)

We mainly engage third party software developers to develop information technology systems used for the provision of logistics services tailored to the requirements of our customers and have acquired the rights to use such information technology systems. We have also applied to register our trademark with the relevant PRC authority. (Please refer to the paragraph headed “Trademark” in appendix VII to this prospectus for further details.)

INSURANCE

We maintain insurance coverage in respect of our properties as well as finished vehicles and other goods that we transport.

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EXEMPTED CONTINUING CONNECTED TRANSACTIONS

We have entered into the following agreements with Changan Nanjing, Changan Co., APLL and Qingshan respectively, which will continue to be effective after the H Shares are listed on the Stock Exchange and constitute exempt continuing connected transactions for our company under the GEM listing rules following the listing of the H Shares. Our Directors (including Independent Non-executive Directors) are of the opinion that (i) these exempt continuing connected transactions have been concluded, and will be carried out, in the ordinary and usual course of business on normal commercial terms which are fair and reasonable, and are in the interests of our shareholders as a whole and (ii) the annual caps for these continuing connected transactions are fair and reasonable as far as the shareholders of our company as a whole are concerned.

Lease with Changan Nanjing

Changan Nanjing is mainly held as to 81.72% by Changan Automobile. Changan Automobile is a subsidiary and therefore an associate of Changan Co. Changan Nanjing is a connected person of our company so long as Changan Automobile remains an associate of Changan Co., a connected person of our company.

A lease agreement was entered into between our company (as lessee) and Changan Nanjing (as lessor) on 1 October, 2003, and was subsequently renewed on 18 October, 2005, in respect of a property in Nanjing currently occupied by our company for use as a distribution centre. The current lease is for the period from 1 January, 2006 to 31 December, 2016 and the rent is under negotiation.

During the Track Record Period, the property was provided rent free to our company. Our Directors consider that the lease is on normal commercial terms. The estimated rentals pursuant to the lease will be less than Rmb1,000,000 for the financial year ended 31 December, 2005 and each of the three financial years ending 31 December, 2008 and such charges will therefore fall within the de minimis exemption under Rule 20.31(2)(b) of the GEM listing rules and is therefore exempted from the reporting, announcement and independent shareholders’ approval requirements under the GEM listing rules.

Leases with Changan Co.

Changan Co. is a Promoter and substantial shareholder of our company and is therefore a connected person of our company.

(a) Dashiba First Village, Jiangbei District, Chongqing

A lease agreement was entered into between our company (as lessee) and Changan Co. (as lessor) on 6 June, 2005, and was subsequently renewed on 12 January, 2006 in respect of the abovementioned property in Chongqing currently occupied by our company for use as a office and warehouse. The current lease is for the period from 1 January, 2006 to 31 December, 2006. The monthly rental paid under the lease is Rmb65,306.

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For the nine months ended 30 September, 2005, our company paid to Changan Co. rentals of approximately Rmb587,754. No rentals were paid in the financial years ended 31 December, 2003 and 2004 as the lease agreement had not commenced. Our Directors consider that the lease is on normal commercial terms. The estimated rentals pursuant to the lease will be less than Rmb1,000,000 for the financial year ended 31 December, 2005 and each of the three financial years ending 31 December, 2008 and such charges will therefore fall within the de minimis exemption under Rule 20.31(2)(b) of the GEM listing rules and is therefore exempted from the reporting, announcement and independent shareholders’ approval requirements under the GEM listing rules.

(b) No. 260 Jian Xin Dong Road, Chongqing

A lease agreement was entered into between our company (as lessee) and Changan Co. (as lessor) on 30 April, 2004, and was subsequently renewed on 18 May, 2005, in respect of the abovementioned property in Chongqing currently occupied by our company for use as a warehouse. The current lease is for the period from 18 May, 2005 to 17 May, 2006. The monthly rental paid under the lease is Rmb 15,776.

For the financial year ended 31 December, 2004 and the nine months ended 30 September, 2005, our company paid to Changan Co. rentals of approximately Rmb176,552 and Rmb141,984 respectively. No rentals were paid in the financial year ended 31 December, 2003 as the lease agreement had not commenced. Our Directors consider that the lease is on normal commercial terms. The estimated rentals pursuant to the lease will be less than Rmb1,000,000 for the financial year ended 31 December, 2005 and each of the three financial years ending 31 December, 2008 and such charges will therefore fall within the de minimis exemption under Rule 20.31(2)(b) of the GEM listing rules and is therefore exempted from the reporting, announcement and independent shareholders’ approval requirements under the GEM listing rules.

Purchase of consultancy services

APLL is one of our Promoters holding 20.74% of our entire issued share capital after listing. APLL is a global logistics provider with a comprehensive network of facilities and services to support the global supply chain management needs of customers. The range of its services include consolidation, warehousing, global freight management (ocean, air, truck and rail), domestic distribution networks, international deconsolidation and information technologies that provide timely and accurate information to effectively manage supply chain activities. Pursuant to a service agreement entered into between our company and APLL’s wholly owned PRC subsidiary, APL Logistics (China) Co., Ltd (“APLLC”) dated 1 January, 2006 (the “APLLC Services Agreement”), APLL, through APLLC, will continue to provide consultancy services by secondment of experts to us on normal commercial terms for a period commencing from 1 January, 2006 and ending on 31 December, 2008.

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For the two financial years ended 31 December, 2003 and 2004 and the nine months ended 30 September, 2005, our company purchased consultancy services from APLLC for approximately Rmb622,500, Rmb830,000 and Rmb622,500 respectively. The estimated service charges involved for the year ended 31 December, 2005 amounted to approximately Rmb830,000. Our Directors confirmed that the service charges were on normal commercial terms.

Our Directors consider the terms of the continuing connected transactions under the APLLC Services Agreement to be on normal commercial terms. The estimated service charges will be approximately Rmb800,000 for each of three financial years ending 31 December, 2008 and such charges thereunder will fall within the de-minimis exemption under Rule 20.31(2)(b) of the GEM listing rules and is therefore exempted from the reporting, announcement and independent shareholders’ approval requirements under the GEM listing rules.

Provision of logistics services to Qingshan

Qingshan is a subsidiary of the ultimate controlling shareholder of our Promoter, Changan Co. and is principally engaged in the manufacturing of vehicle parts. Qingshan will continue to acquire carriage and warehousing services of vehicle parts from our company following listing pursuant to service agreements to be entered into annually between our company and Qingshan (each, a “Qingshan Services Agreement”).

For the two financial years ended 31 December, 2003 and 2004 and the nine months ended 30 September, 2005, we charged Qingshan service fees of approximately RmbNil, Rmb989,000 and Rmb447,000 respectively. The estimated service fees paid to us by Qingshan for the year ended 31 December, 2005 were less than Rmb1,000,000. The Directors confirm that the service charges were based on the then prevailing market rates.

Our Directors consider that continuing connected transactions under the Qingshan Services Agreement is on normal commercial terms. The estimated service charges will be less than Rmb1,000,000 for each of three financial years ending 31 December, 2008 and such charges will fall within the de-minimis exemption under Rule 20.31(2)(b) of the GEM listing rules and is therefore exempted from the reporting, announcement and independent shareholders’ approval requirements under the GEM listing rules.

NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS A1a56

Immediately following the listing, various transactions which have been entered into by us will constitute continuing connected transactions within the meaning of the GEM listing rules. These connected transactions are classified as non-exempt continuing connected transaction under the GEM listing rules, and are therefore subject to reporting, announcement and independent shareholders’ approval requirements.

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Connected transactions with Changan Co. and its subsidiaries (excluding Changan Automobile and its subsidiaries)

Changan Co. is one of the Promoters and substantial shareholders of our company. Upon listing of our Shares on GEM, Changan Co., together with Changan Sanchan, in which it is directly interested in 98.92%, holds an aggregate of 24.57% of the issued share capital of our company. Accordingly, Changan Co. is a connected person of our company within the meaning of the GEM listing rules.

The service fees payable by Changan Co. and two of its subsidiaries, namely, Changan Lingyun and Changan Jinling (the “Two Changan Subsidiaries”) in respect of the following services offered during the Track Record Period are as follows:

For the For the nine-month For the year ended period ended year ended 31 December, 30 September, 31 December, (Figures in Rmb’000) 2003 2004 2005 2005 (Estimate)

— Supply chain management 826 3,054 614 1,145 services relating to car components and parts logistics services — Storage and transportation — 2,039 3,136 3,877 of car components and parts

We will continue to provide the services described above to Changan Co and the Two Changan Subsidiaries pursuant to an agreement entered into between Changan Co and us on 18 January, 2006 (the “Changan Co. Framework Agreement”), which will be effective from 1 January 2006 to 31 December 2008.

Pursuant to the Changan Co. Framework Agreement, Changan Co. undertook that the transactions contemplated thereunder shall be on terms no less favourable to us than those available from independent third parties. The service fees payable by Changan Co. and the Two Changan Subsidiaries to us under the Changan Co. Framework Agreement shall be determined with reference to the following:

a. pricing relating to certain types of products and services fixed by the PRC government;

b. where there is no PRC government fixed price but a government guidance price exists, the government guidance price;

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c. where there is neither a PRC government fixed price nor a government guidance price, the market price; or

d. where none of the above is applicable, the price to be agreed between the parties based on arm’s length negotiations.

Changan Co. also agreed that it would give priority to us when outsourcing logistics services.

Based on the Changan Co. Framework Agreement and the historical service fees charged to Changan Co. and the Two Changan Subsidiaries during the Track Record Period, the Directors have anticipated that for the year ending 31 December, 2006, the aggregate annual maximum amount of service fees to be payable by Changan Co. and the Two Changan Subsidiaries will not exceed the following caps:

For the year ending 31 December, (Figures in Rmb’000) 2006 Reasons for the increase

Transportation of finished — Changan Co. and the Two Changan vehicles Subsidiaries did not require these services during the Track Record Period and in 2006 since they did not and will not engage in vehicle manufacturing during such period. Nevertheless, our company anticipates that Changan Co. may engage us to provide this service upon completion of its Jiangling project which is expected to engage in vehicle manufacturing.

Supply chain management 2,000 The anticipated increase of the total services relating to car turnover of Changan Co. and the components and parts Two Changan Subsidiaries. logistics services

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For the year ending 31 December, (Figures in Rmb’000) 2006 Reasons for the increase

Storage and transportation of 10,000 Our sales to Changan Jinling car components and parts experienced significant growth in 2005 and is expected to continue to grow in 2006. We also expect to secure new business from Jiangling Automobile Company Limited (“Jiangling”) in 2006 in respect of transportation and supply chain management services for the SUV and CV9 models of finished vehicles.

In arriving at the above caps, the Directors have considered, in addition to the specific elements as set out above, the market condition of automative logistics industry as well as the current and projected levels of logistics services provided by us to Changan Co. and the Two Changan Subsidiaries. Such caps have also been made on assumption that there will be no significant fluctuation in our cost for providing such services due to any factors which are out of our control.

The Directors, including the Independent Non-executive Directors, have confirmed that the transactions pursuant to the Changan Co. Framework Agreement will be carried out in the ordinary and usual course of business of our company and on normal commercial terms which are in the interests of our shareholders as a whole.

Connected transactions with Changan Automobile

Changan Automobile is a leading car manufacturer with its A shares and B shares listed on the Shenzhen Stock Exchange. It is held as to 52.47% by Changan Co., a Promoter, substantial shareholder and connected person of our company. As Changan Automobile is a subsidiary of Changan Co., transactions between our company and Changan Automobile and two of its subsidiaries, namely Changan Suzuki and Changan Import and Export (“Changan Auto Subsidiaries”), will constitute connected transactions within the meaning of the GEM listing rules so long as Changan Automobile remains an associate of Changan Co. and Changan Suzuki and Changan Import and Export remains a subsidiary or an associate of Changan Automobile.

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The service fees payable by Changan Automobile and the Changan Auto Subsidiaries in respect of the following services offered during the Track Record Period and the estimate for the financial year ended 31 December, 2005 are as follows:

For the For the nine-month For the year ended period ended year ended 31 December, 30 September, 31 December, (Figures in Rmb’000) 2003 2004 2005 2005 (Estimate)

Transportation of finished 334,012 358,117 231,939 326,973 vehicles

Supply chain management 29,318 26,648 15,949 18,183 relating to car components and parts

Storage and transportation of 748 13,585 1,686 2,548 car components and parts

On 18 January, 2006, our company and Changan Automobile entered into an agreement (the “Changan Automobile Framework Agreement”) in relation to our continuation of provision of services to Changan Automobile and the Changan Auto Subsidiaries following listing. Changan Automobile undertook that the transactions contemplated under the Changan Automobile Framework Agreement shall be on terms no less favourable to us than those available from independent third parties. The service fee payable by Changan Automobile and Changan Auto Subsidiaries to us shall be determined with reference to the four factors stated as (a) to (d) on pages 91 and 92 of this prospectus.

The Changan Automobile Framework Agreement will expire on 31 December, 2008, subject to renewal.

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Based on Changan Automobile Framework Agreement and the historical service charges paid by Changan Automobile and the Changan Auto Subsidiaries during the Track Record Period, the Directors have anticipated that for the year ending 31 December, 2006, the aggregate annual amount of service fees to be payable by Changan Automobile and the Changan Auto Subsidiaries will not exceed the following caps:

For the year ending 31 December, (Figures in Rmb’000) 2006 Reasons(s) for the increase

Transportation of finished 398,280 The cap amount for 2005 is lower vehicles than our annual sales to Changan Automobile in 2004 because the Directors believe that there has been a reduction in production volume of Changan Automobile amid a general slowdown in the PRC auto industry in 2005. Nonetheless, we expect to secure more businesses from Changan Suzuki in 2006. With the increase in production capacity of Changan Industrial Park production plant of Changan Automobile and anticipated increase in production output of engines, we also expect to obtain additional businesses from Changan Automobile in 2006.

Supply chain management 25,650 Same as above. relating to car components and parts

Storage and transportation of 55,600 We undertook warehousing and car components and parts distribution work for a new vehicle model in 2005, which resulted in a significant increase of our work. It is anticipated that, with the introduction of such model, the production volume of motor by Changan Automobile will increase substantially in 2006.

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In arriving at the above caps, the Directors have considered, in addition to the specific factors mentioned above, the market condition of automative logistics industry as well as the current and projected levels of logistics services provided by us to Changan Automobile and Changan Auto Subsidiaries. Such caps have also been made on assumption that there will be no significant fluctuation in our cost for providing such services due to any factors which are out of our control.

The Directors, including the Independent Non-executive Directors, have confirmed that the transactions pursuant to the Changan Automobile Framework Agreement will be carried out in the ordinary course of business of our company and on normal commercial terms which are in the interests of our shareholders as a whole.

Connected transactions with Changan Ford

Changan Ford is held as to 50% by Changan Automobile, a 52.47% subsidiary of Changan Co., a Promoter and a substantial shareholder of our company. Changan Ford is principally engaged in the manufacture of vehicles under the brand name of Ford. Changan Ford is a connected person of our company so long as it remains an associate of Changan Co., a connected person of our company.

The service fees payable by Changan Ford in respect of the following services provided during the Track Record Period are as follows:

For the For the nine-month For the year ended period ended year ended 31 December, 30 September, 31 December, (Figures in Rmb’000) 2003 2004 2005 2005 (Estimate)

Transportation of finished 34,126 120,372 87,947 111,392 vehicles

Supply chain management 45,128 132,454 109,572 145,153 relating to car components and parts

Storage and transportation of 3,215 7,452 22,417 23,393 car components and parts

In accordance with the terms of a master contract entered into between our company and Changan Ford on 21 April, 2003, we provided (i) supply chain management services to Changan Ford in 2003 for its Fiesta brand of finished vehicles; and (ii) agreed to provide logistics services to Changan Ford for its Mondeo cars, as and when they are introduced to the market at a final service fee to be agreed between the parties later. (At that time, Changan Ford’s Mondeo has not

— 96 — BUSINESS been introduced to the market and hence the related logistics service fee has not been determined.) In 2004, Changan Ford introduced Mondeo to the market. The related service fee for handling Mondeo cars in 2004 has not been agreed with Changan Ford until Changan Ford and us entered into a supplemental agreement in June, 2005 (the “Supplemental Agreement”)in which Changan Ford agreed to pay a higher price than the contracted price set out in the master contract dated 21 April, 2003 for Mondeo in view of the additional costs incurred by us in 2004 for expanding the Changan Ford Regional Distribution Centre and related headcount to meet the anticipated increased demand for Mondeo cars. The related costs of sales relating to Mondeo were booked in the 2004 accounts. However, the additional sales of approximately Rmb10,000,000 arising from the Supplemental Agreement in June, 2005 were only included in our group’s accounts for the nine months ended 30 September, 2005 when the related service fees and sales were agreed.

In general, service charges of new models of finished vehicles are determined when the relevant models are introduced to the market (and the car sale prices are determined). This may inevitably lead to adjustments to the initial contracted prices of automotive logistics services. Our contracts with Changan Ford entered during the Track Record Period went through a bidding process. In the premises, the pricing arrangements between Changan Ford and us in 2005 do not compromise the integrity of the bidding process and other internal control mechanism in place are rendered ineffective or the independence of Changan Ford from us.

On 18 January, 2006, our company and Changan Ford entered into an agreement (the “Changan Ford Framework Agreement”) in relation to our continuation of our provision of services to Changan Ford following listing.

Changan Ford undertook that the transactions contemplated under the Changan Ford Framework Agreement shall be on terms no less favourable to us than those available from independent third parties. The service fee payable by Changan Ford to us shall be determined with reference to the four factors stated as (a) to (d) on pages 91 and 92 of this prospectus.

The Changan Ford Framework Agreement will expire on 31 December, 2008, subject to renewal.

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Based on the Changan Ford Framework Agreement and the historical charges for the services previously provided to Changan Ford during the Track Record Period, the Directors have anticipated that for the year ending 31 December, 2006, the aggregate annual amount of service fees to be payable by Changan Ford will not exceed the following caps:

For the year ending 31 December, (Figures in Rmb’000) 2006 Reason(s) for the increase

Transportation of finished 273,460 The increase in sales to Changan vehicles Ford in the last quarter of 2005 was due to the introduction of a new car model, Focus, by Changan Ford. Besides, it is anticipated that the production volume of Changan Ford’s facilities will continue to increase, with new automobile models introduced in 2005 and put into full-scale production in 2006.

Supply chain management 157,160 Same as above. relating to car components and parts

Storage and transportation of 27,560 Same as above. car components and parts

In arriving at the above caps, the Directors have considered, in addition to specific factors mentioned above, the market condition of automative logistics industry as well the current and projected levels of logistics services provided by us to Changan Ford on the basis of contracts that have been signed and projects undertaken. Such caps have also been made on assumption that there will be no significant fluctuation in our cost for providing such services due to any factors which are out of our company’s control.

The Directors, including the Independent Non-executive Directors, have confirmed that the transactions pursuant to the Changan Ford Framework Agreement will be carried out in the ordinary course of business of our company and on normal commercial terms which are in the interests of our shareholders as a whole.

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Connected transactions with Changan Hebei

Changan Hebei is principally engaged in the manufacture of motor vehicles. It is held as to 93.45% by Changan Automobile (a subsidiary of Changan Co.) and 6.55% by Changan Co., a substantial shareholder of our company. Accordingly, Changan Hebei is a connected person of our company so long as Changan Automobile remains an associate of Changan Co, a connected person to our company.

The service fees payable by Changan Hebei in respect of the following services during the Track Record Period are as follows:

For the For the nine-month For the year ended period ended year ended 31 December, 30 September, 31 December, (Figures in Rmb’000) 2003 2004 2005 2005 (Estimate)

Transportation of finished 8,203 55,170 68,808 97,777 vehicles

Supply chain management 5,621 26,149 15,719 32,400 relating to car components and parts

Storage and transportation of — 378 —— car components and parts

On 18 January, 2006, our company and Changan Hebei entered into an agreement in relation to our continuation of provision of services to Changan Hebei (the “Changan Hebei Framework Agreement”). Changan Hebei undertook that the transactions conducted under the Changan Hebei Framework Agreement shall be on terms no less favourable to us than those available from independent third parties. The service fee payable by Changan Hebei to us shall be determined with reference to the four factors stated as (a) to (d) on pages 91 and 92 of this prospectus.

The Changan Hebei Framework Agreement will expire on 31 December, 2008, subject to renewal.

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Based on the Changan Hebei Framework Agreement and the previous fee charges paid by Changan Hebei during the Track Record Period, the Directors have anticipated that for the year ending 31 December, 2006, the aggregate annual amount of service fees to be payable by Changan Hebei will not exceed the following caps:

For the year ending 31 December, (Figures in Rmb’000) 2006 Reason(s) for the increase

Transportation of finished 106,950 In the last quarter of 2005, CMAL vehicles transported more finished vehicles, and recorded higher sales in respect of several models of Changan Hebei minivans due to competitive prices of these models. CMAL expects that sales of Changan Hebei’s minivans, hence CMAL’s sales generated from Changan Hebei, are expected to continue to grow in 2006.

Supply chain management 35,640 In the last quarter of 2005, CMAL relating to car components provided more supply chain and parts management services, and recorded higher sales in respect of several models of Changan Hebei minivans due to competitive prices of these models. Such trend is expected to continue in 2006.

Storage and transportation of 5,000 Same as above. car components and parts

In arriving at the above caps, the Directors have considered, in addition to the specific factors mentioned above, the market condition of automative logistics industry as well as the current and projected levels of logistics services provided by us to Changan Hebei. Such caps have also been made on assumption that there will be no significant fluctuation in our cost for providing such services due to any factors which are out of our control.

The Directors, including the Independent Non-executive Directors, have confirmed that the transactions pursuant to the Changan Hebei Framework Agreement will be carried out in the ordinary course of business of our company and on normal commercial terms which are in the interests of our shareholders as a whole.

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Connected transactions with Changan Nanjing

Changan Nanjing is held as to 63.33% by Changan Automobile, a connected person to our company, and 36.67% by Nanjing Dongchi Automobile Co., Ltd. Changan Nanjing is a connected person of our company so long as Changan Automobile remains an associate of Changan Co., a connected person to our company.

The service fees payable by Changan Nanjing in respect of the following services provided during the Track Record Period are as follows:

For the For the nine-month For the year ended period ended year ended 31 December, 30 September 31 December, (Figures in Rmb’000) 2003 20042005 2005 (Estimate)

Transportation of finished 411 7,144 29,278 39,474 vehicles

Supply chain management 5,183 13,371 8,458 14,914 relating to car components and parts

Storage and transportation of — 491 1,381 1,381 car components and parts

On 18 January, 2006, our company and Changan Nanjing entered into an agreement (the “Changan Nanjing Framework Agreement”) in relation to our continuation of provision of service of Changan Nanjing following listing.

Changan Nanjing undertook that the transactions contemplated under the Changan Nanjing Framework Agreement shall be on terms no less favourable to us than those available from independent third parties. The service fee payable by Changan Nanjing to us under the Changan Nanjing Framework Agreement shall be determined with reference to the four factors stated as (a) to (d) on pages 91 and 92 of this prospectus.

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The Changan Nanjing Framework Agreement will expire on 31 December, 2008, subject to renewal. Based on the Changan Nanjing Framework Agreement and the historical figures of the charges for the services previously provided to Changan Nanjing during the Track Record Period, the Directors have anticipated that for the year ending 31 December, 2006, the aggregate annual amount of service fees to be payable by Changan Nanjing will not exceed the following caps:

For the year ending 31 December, (Figures in Rmb’000) 2006 Reason(s) for the increase

Transportation of finished 68,400 The increase in sales generated from vehicles Changan Nanjing during the last quarter of 2005 was due to demand for additional services for transportation of finished vehicles and supply chain management services from Changan Nanjing to cope with the latter’s new CM6 model of vehicles launched in 2005. Besides, the production volume of Changan Nanjing is expected to increase substantially in 2006.

Supply chain management 16,400 The increase in sales generated from relating to car components Changan Nanjing during the last and parts quarter of 2005 was due to increased demand for transportation of finished vehicles and supply chain management services from Changan Nanjing to cope with the latter’s new CM6 model of vehicles launched in 2005.

Storage and transportation of 3,800 The production volume of Changan car components and parts Nanjing will increase substantially in 2006. It is anticipated that Changan Nanjing will engage us to provide a substantial part of vehicle logistics services it requires.

In arriving at the above caps, the Directors have considered, in addition to the specific reasons mentioned above, the market condition of automative logistics industry as well as the current and projected levels of logistics services provided by us to Changan Nanjing on the basis of contracts that have been signed and projects undertaken. Such caps have also been made on the assumption that there will be no significant fluctuation in our cost for providing such services due to any factors which are out of our control.

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The Directors, including the Independent Non-executive Directors, have confirmed that the transaction pursuant to the Changan Nanjing Framework Agreement will be carried out in the ordinary course of business of our company and on normal commercial terms which are in the interests of our shareholders as a whole.

Summary of sales generated from Changan Group of customers

In summary, the annual sales generated from Changan Group of customers during the Track Record Period and the caps for the year ending 31 December, 2006 are set out as follows:

Historical sales Total caps For the nine-month For the year For the year ended period ended ended/ending 31 December, 30 September, 31 December, (Figures in Rmb’000) 2003 2004 2005 2005 2006 (Estimates)

Transportation of finished vehicles 376,752 540,803 417,972 575,616 847,090 Supply chain management relating to car components and parts 86,076 201,676 150,312 211,795 236,850 Storage and transportation of car components and parts 3,963 23,945 28,620 31,199 101,960

Connected transactions with Minsheng Group

Minsheng Industrial is one of our Promoters and a 15.91% substantial shareholder of our company upon completion of the listing. Accordingly, Minsheng Group, including Minsheng Logistics, Minsheng Shipping and Minsheng International Freight, are connected persons to our company within the meaning of the GEM listing rules. Minsheng Logistics is held as to 61.6% by Minsheng Shipping, 28.4% by Minsheng Industrial and 10% by Minsheng International Freight. Minsheng Shipping is held as to 96.46% by Minsheng Industrial, 1.76% by Minsheng International Container Transportation Limited Company and 1.64% by Minsheng International Freight. Minsheng International Freight is held as to 90% by Minsheng Industrial and 10% by Minsheng International Container Transportation Limited Company. Minsheng International Container Transportation Limited Company is held as to 60% by Minsheng Industrial, 20% by Minsheng Shipping and 20% by Minsheng International Freight.

During the Track Record Period, Minsheng Industrial and its subsidiaries, including Minsheng Logistics, Minsheng Shipping and Minsheng International Freight provided river transportation services for carriage of finished vehicles and car components and parts to our company.

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The aggregate service fees payable by us to Minsheng Group for the two years ended 2003 and 2004 and the nine months ended 30 September, 2005 were approximately Rmb54.9 million, Rmb199.5 million and Rmb137.5 million, respectively. The total service fees paid by us to Minsheng Group during the nine months ended 30 September, 2005 decreased as compared to 2004 because in 2005, we transported more finished vehicles manufactured by Changan Automobile in Nanjing and Hebei which did not involve river transportation. As a result, the demand for river transportation services previously offered by Minsheng Group decreased in 2005. At the same time, we transported fewer finished vehicles manufactured by Changan Automobile in Chongqing and which involved river transportation. This resulted in lower transportation costs paid to Minsheng Group in 2005. Thirdly, Changan Ford was less reliant on import and export of car components and parts from and to overseas countries in 2005 as it sourced these products from domestic suppliers instead. This led to lower demand for sea freight forwarding services provided by Minsheng Group and hence lower transportation costs paid to Minsheng Group by us. In fact, the decrease in total transportation costs paid Minsheng Group in 2005 was partially offset by the increased use of river transportation to Wuhan which led to lower costs of sales. Therefore, while the total service fees paid by us to Minsheng Group in 2005 decreased, the volume of business conducted between our company and Minsheng Group had not however reduced particularly due to increased shipments delivered to Wuhan by river.

On 18 January, 2006, our company and Minsheng Industrial entered into an agreement in relation to our continuation of purchase of services from Minsheng Group (the “Minsheng Framework Agreement”). Minsheng Industrial undertook that the transactions conducted under the Minsheng Framework Agreement shall be on terms no more favourable to Minsheng Group than those available to independent third parties. The service fee payable by us to Minsheng Group shall be determined with reference to the four factors stated as (a) to (d) on pages 91 and 92 of this prospectus.

The Minsheng Framework Agreement will expire on 31 December, 2008, subject to renewal. Based on the unaudited management accounts for the year ended 31 December, 2005, the Directors estimated that the aggregate amount of service fees paid by us to Minsheng Group for the year ended 31 December, 2005 would not exceed Rmb200 million. Based on the Minsheng Framework Agreement and historical service fees previously paid by us to Minsheng Group during the Track Record Period, the Directors have anticipated that for the year ending 31 December, 2006, the aggregate annual amount of service fees to be payable by us will not exceed Rmb350 million. We anticipate that our business with Minsheng Group will increase considerably in 2006 because our Directors are given to understand that the car production volume of Changan Ford in 2006 will grow substantially due to new car models introduced. As a result, the demand for river transportation is expected to grow correspondingly. In addition, we plan to increase the transportation of steel products and car components and parts by river in 2006 since this mode of transportation is less costly (and hence more profitable) vis-a`-vis road or rail transportation. In arriving at the above-mentioned caps, the Directors have considered the market condition of automative logistics industry as well as the current and projected levels of river transportation services provided by Minsheng Group to us on the basis of contracts that have been signed and projects undertaken. We plan to use, where possible, more river transportation vis-a`-vis road or rail transportation in our logistic business since the former carries a lower cost and better profit margins than the latter.

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The Directors, including the Independent Non-executive Directors, have confirmed that the transactions pursuant to the Minsheng Framework Agreement will be carried out in the ordinary course of business of our company and on normal commercial terms which are in the interests in our shareholders as a whole.

Connected transactions with Changan Transportation

During the Track Record Period, we purchased transportation services from Changan Transportation. The service fees payable by us to Changan Transportation for the two years ended 2003 and 2004 and the nine months ended 30 September, 2005 were approximately Rmb2.5 million, Rmb2.2 million and Rmb1.9 million, respectively.

Changan Transportation is principally engaged in the provision of transportation facilities and services to logistics companies. It is a subsidiary of Changan Sanchan (a connected person to our company). Accordingly, Changan Transportation is a connected person of our company so long as Changan Transportation remains an associate of Changan Co.

On 18 January, 2006, our company and Changan Transportation entered into an agreement in relation to our continuation of purchase of services from Changan Transportation (the “Changan Transportation Framework Agreement”).

Changan Transportation undertook that the transactions conducted under the Changan Transportation Framework Agreement shall be on terms no more favourable to Changan Transportation than those available to independent third parties. The service fee payable by us to Changan Transportation shall be determined with reference to the four factors stated as (a) to (d) on pages 91 and 92 of this prospectus.

The Changan Transportation Framework Agreement will expire on 31 December, 2008, subject to renewal.

Based on the unaudited management accounts for the year ended 31 December, 2005, the Directors estimated that the aggregate amount of service fees paid by us to Changan Transportation for the year ended 31 December, 2005 did not exceed Rmb3 million. Based on the Changan Transportation Framework Agreement and the historical figures for the charges for the services previously provided to us by Changan Transportation during the Track Record Period, the Directors have anticipated that for the year ending 31 December, 2006, the aggregate annual amount of service fees to be payable to Changan Transportation will not exceed Rmb10 million. As Changan Transportation has good road transportation capacity, we expect to engage Changan Transportation to transport more engines and steel products via road transportation in 2006. As such, the cap amount is expected to increase considerably in 2006 to reflect the growth in our business volume with Changan Transportation.

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In arriving at the above caps, the Directors have considered the future expansion of our business, the market condition of automative logistics industry as well as the current and projected levels of transportation services provided by Changan Transportation to us on the basis of contracts that have been signed and projects undertaken.

The Directors, including the Independent Non-executive Directors, have confirmed that the transactions pursuant to the Changan Transportation Framework Agreement will be carried out in the ordinary course of business of our company and on normal commercial terms which are in the interests of our shareholders as a whole.

Determination of price

In respect of the aforementioned connected transactions with Changan group of companies, the relevant framework agreements have not set out the fixed prices for the services to be provided and the prices are subject to further negotiation of the parties at the time services are required. Our company will have to go through bidding processes in relation to the relevant services. (For details of the control mechanisms, please refer to the paragraph headed “The bidding process with Changan Group of customers” below.)

Application for waiver

Upon completion of the listing, the transactions contemplated under the Changan Co. Framework Agreement, Changan Automobile Framework Agreement, Changan Ford Framework Agreement, Changan Hebei Framework Agreement, Changan Nanjing Framework Agreement, Minsheng Framework Agreement and Changan Transportation Framework Agreement constitute non-exempt continuing connected transactions under the GEM listing rules (collectively “Non-exempt Continuing Connected Transactions”), and are therefore subject to the reporting, announcement and independent shareholders’ approval requirements under Rules 20.47 and 20.48 of the GEM listing rules.

The Directors (including the independent non-executive Directors) are of the opinion that the Non-exempt Continuing Connected Transactions have been conducted, and will be carried out, in the ordinary and usual course of business on normal commercial terms, are fair and reasonable, and are in the interests of the shareholders of our company as a whole. The Directors (including the Independent Non-executive Directors), after reviewing the respective bases, are of the view that the above proposed annual caps are fair and reasonable.

The Directors consider strict compliance with Rules 20.47 and 20.48 for the Non-exempt Continuing Connected Transactions to be impractical, unduly burdensome and, in particular, would add unnecessary administrative cost to our company. Accordingly, we have applied to the Stock Exchange for a waiver from strict compliance with the requirements under Rules 20.47 and 20.48 of the GEM listing rules to announce the non-exempt continuing connected transactions and to obtain the approval from our shareholders. The Stock Exchange has granted a waiver to us from strict compliance with the announcement and, or independent shareholders’ approval requirements in connection with the non-exempt continuing connected transactions pursuant to

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Rule 20.42(3) of the GEM listing rules. However, we are required to comply with the applicable requirements in Chapter 20 of the GEM listing rules in respect of the framework agreements entered into between us and the connected persons shown on pages 91 to 106 of this prospectus upon the expiry of the financial year ending 31 December, 2006.

In respect of Rules 20.35(2) and 20.36(1) of the GEM listing rules, the maximum aggregate annual value (cap) for each of the Non-exempt Continuing Connected Transactions shall not exceed the caps as set out above.

In the event of any future amendments to the GEM listing rules imposing more stringent requirements than as of the date of this Prospectus on transactions of the kind to which the Continuing Connected Transactions belong including, but not limited to, a requirement that these transactions be made conditional on approval by our company’s independent shareholders, our company will take immediate steps to ensure compliance with such requirements within a reasonable time.

Confirmation from the Sponsor

The Sponsor is of the view that (i) the Non-exempt Continuing Connected Transactions are in the ordinary and usual course of business, on normal commercial terms, fair and reasonable and in the interests of the shareholders of our company as a whole; and (ii) the annual limits for such Non-exempt Continuing Connected Transactions are fair and reasonable as far as the shareholders of our company as a whole are concerned.

General

During the Track Record Period, a substantial part of the turnover of our company was generated from members of the Changan Group, which are connected persons of our company. Further, after the listing, our company will continue to conduct the Non-exempt Continuing Connected Transactions. Each of Changan group of companies with which we have had transactions is a separate legal entity and has its own separate management and is independently run. We negotiate the provision of logistics services contracts with each of Changan group of companies on an arm’s length basis and independently. Set out below are three tables which show the amounts and percentages of businesses that have been undertaken by our company with the top 10 customers during the Track Record Period. Our company had over 210, 470 and 520 customers during each of the two years ended 31 December, 2003 and 2004 and nine months ended 30 September, 2005, respectively.

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For the year ended 31 December, 2003:

Amount in % of total Customer Name Rmb’000 sales

Changan Co. (Note) 826 0.17% Changan Automobile (Note) 360,783 74.22% Changan Ford (Note) 82,469 16.96% Changan Hebei (Note) 13,824 2.84% Changan Nanjing (Note) 5,594 1.15% Changan Import & Export (Note) 2,021 0.42% Changan Suzuki (Note) 1,274 0.26%

Changan Group Subtotal 466,791 96.02%

Qingdao Haier Logistics Co., Ltd. 2,040 0.42% Chengdu Baogang West Trade Co., Ltd. 1,429 0.29% Beijing Capital Tyre Co., Ltd. 763 0.16% Shangxi Shuanxi Trade Co., Ltd 576 0.12% Others 14,531 2.99%

TOTAL 486,130 100.00%

Note: Changan Co., Changan Automobile, Changan Ford, Changan Hebei, Changan Nanjing, Changan Suzuki and Changan Import & Export are members of Changan Group.

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For the year ended 31 December, 2004:

Amount in % of total Customers Rmb’000 sales

Changan Co. 5,093 0.62% Changan Automobile 392,240 47.63% Changan Ford 260,278 31.61% Changan Hebei 81,697 9.92% Changan Nanjing 21,006 2.55% Changan Suzuki 3,565 0.43% Changan Import & Export 2,545 0.31%

Changan Group Subtotal 766,424 93.07%

Chengdu Baogang West Trade Co., Ltd. 9,236 1.12% Qingdao Haier Logistics Co., Ltd. 8,929 1.08% (Jinfeng (China) Machinery Industrial Co., Ltd.) 3,480 0.42% Others 35,435 4.31%

TOTAL 823,504 100.00%

For the nine months ended 30 September, 2005:

Amount in % of total Customers Rmb’000 sales

Changan Co. 3,750 0.58% Changan Automobile 243,660 37.55% Changan Ford 219,936 33.90% Changan Hebei 84,527 13.03% Changan Nanjing 39,117 6.03% Changan Suzuki 3,281 0.51% Changan Import & Export 2,633 0.41%

Changan Group Subtotal 596,904 92.01%

Chengdu Baogang West Trade Co., Ltd. 6,138 0.95% Qingdao Haier Logistics Co., Ltd. 5,226 0.81% Panzhihua Steel (Group) Co., Ltd. 3,512 0.54%

Others 37,063 5.69%

TOTAL 648,843 100.00%

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The bidding process with Changan Group of customers

We secure businesses from our customers through a bidding process. During the Track Record Period, all of our turnover from Changan group of companies was derived through a bidding process. The transactions between Changan Group and our company can be broadly divided into two categories, namely (i) transportation of finished vehicles; and (ii) supply chain management services involving the organisation of transportation, distribution and storage of car components and parts.

We have in place a bidding control mechanism. At the end of each year, our annual budget and business plans for the following fiscal year will be submitted to our board for discussion and approval. During board meetings, our Directors consider the business plans that contain details of projects expected to be undertaken or services to be provided to Changan group of companies. Such details will be included in the annual budget which sets out names of target customers, types of services to be rendered, projected volume of business, projected revenues and expenses, projected gross profits and gross margins of individual projects. Upon approval by our board of directors, the budgeted amounts will be allocated to individual projects.

We will further negotiate the detailed terms of the contracts with the relevant Changan group of customers before we actually render our services. In the event that a particular project or proposal has not been budgeted for, approval by our board of directors is required if it involves capital investment over a certain amount; otherwise it has to be approved by either an authorised staff of the General Manager or heads of finance, marketing, project departments and head of the relevant business unit, depending on the amounts involved. Situations where a particular business proposal is not budgeted for and for which no board approval is required (due to the amount involved) are not common as the annual budget usually provides a buffer for small transactions that may take place between our company and its customers from time to time. Such control mechanism is applicable to both open tender and negotiated biddings.

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The following table sets out the percentage of transportation costs paid to our company by Changan group of companies during the Track Record Period as compared to the total transportation costs of Changan group of companies:

12 months ended 31 December, 2003 Total Transportation Annual capacity transportation costs paid by of Changan costs of Volume Changan group group of Changan group handled of companies companies of companies by CMAL to CMAL %of(a) (Units)* (Rmb’000) (b)* (Units) (Rmb’000) (a) over (b) Transportation of finished vehicles 432,958 629,626 234,210 376,752 59.8 Supply chain management relating to car components and parts — 297,300 — 86,076 29.0 Storage and transportation of car components and parts — 61,800 — 3,963 6.4 Subtotal 432,958 988,726 234,210 466,791 47.2

12 months ended 31 December, 2004 Total Transportation Annual capacity transportation costs paid by of Changan costs of Volume Changan group group of Changan group handled of companies companies of companies by CMAL to CMAL %of(a) (Units)* (Rmb’000) (b)* (Units) (Rmb’000) (a) over (b) Transportation of finished vehicles 530,181 786,042 325,477 540,803 68.8 Supply chain management relating to car components and parts — 437,900 — 201,676 46.1 Storage and transportation of car components and parts — 92,800 — 23,945 25.8 Subtotal 530,181 1,316,742 325,477 766,424 58.2

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Nine months ended 30 September, 2005 Pro-rated Total Transportation annual capacity transportation costs paid by of Changan costs of Volume Changan group group of Changan group handled of companies companies of companies by CMAL to CMAL %of(a) (Units)* (Rmb’000) (b)* (Units) (Rmb’000) (a) over (b) Transportation of finished vehicles 391,636 539,400 303,472 417,972 77.49 Supply chain management relating to car components and parts — 323,452 — 150,312 46.47 Storage and transportation of car components and parts — 68,536 — 28,620 41.76 Subtotal 391,636 931,388 303,472 596,904 64.09

Note: The figures relating to annual capacity of Changan group of companies and their total transportation costs are obtained after consultations with Changan group of companies.

Like other car manufacturers in China, in negotiating the service charges for the transportation of finished vehicles and parts, we take into account various factors including the distance of transportation. The actual amount of charges is then determined with reference to, among other things, the market rates offered by other logistics services providers as reflected from the following analysis:

(a) Historical transportation service charge

Below is a table showing the historical transportation service charge for various car models transported by CMAL for its Changan Group of customers:

Connected Unit price Transportation costs parties Model (Rmb’000) (Rmb/km/vehicle)

2001 2002-2004 2005

Changan Ford Fiesta 80-100 / 1.42-1.46 1.33-1.38

Changan Ford Mondeo 180-200 / 1.64 1.57

Changan Automobile Mini passenger van 50-60 0.84-1 078-1.03 0.9-0.98

Changan Hebei Mini passenger van 20-50 0.77- 0.71-0.72 0.67-0.74 0.78

Changan Nanjing Mini passenger van 50 0.84-1 078-1.03 0.71

Changan Suzuki Alto 30-50 / / 0.74

Changan Suzuki Lingyang 50-80 / / 0.96

Note: the service charges quoted above are published by the relevant Changan Group of customers for the purpose of open tender or negotiated biddings

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For models that were introduced into the market before 2001 (that is, year of establishment of our company), mini passenger vans sold by Changan Automobile, Changan Hebei and Changan Nanjing, the relevant transportation service charges from 2002 to 2004 are basically in line with those historical rates. The service charges for 2005 are relatively lower due to price competition in the market.

(b) Prices of comparable finished vehicles

Our transportation service charges for car models with similar prices sold in the same sales region are comparable to those of other automobile logistic providers. Some examples are Changan Ford’s Fiesta model and Changan Nanjing’s mini passenger vans.

As our transportation service charges are in line with those of other logistic service providers in respect of similar models sold in the same market, we consider that our prices are comparable to the market price.

Our service charges are determined based on the market demand and supply of the services and the profit margin acceptable to us. We mainly subcontract the transportation services in relation to automobile components and parts to other external transportation companies. The control mechanism in relation to the determination of transportation service charges involves the following steps:

— we participate in open tenders initiated by the customers by submitting proposals to them (which may only contain broad estimates of target price or may not contain any quotation on price at all) with a view to becoming the customers’ services provider;

— after we have been selected and become one of the prospective logistics services providers, we obtain price quotations from external transportation companies to which we may subcontract our services if we secure the business from our customer;

— we then make a detailed quotation to our customers for the services to be rendered which will involve a profit margin; and

— if we are successfully selected by our customers, we then negotiate the detailed terms of the contract (including price) to be entered into between our customers and us.

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(d) Comparisons of service charges for supply chain management and storage of car components and parts between Changan group of customers and other independent customers

We secure the contracts for provision of supply chain management and storage services of car components and parts from Changan group of companies through bidding. Our fees are charged having regard to our capital investments (including our Regional Distribution Centre), the lives of depreciable assets and the level of profits to be generated from the engagement.

Based on the above mechanism, our Directors believe that there are proper controls to ensure that our tender price, which includes a margin, is comparable to the market price.

Independence of our company

Our Directors are of the opinion that we will continue to benefit from the connected transactions with Changan Group. Our company has taken the necessary steps to maintain our operational, financial and management independence and the Directors are satisfied that we will be able to carry on our business independently. The bases of our Directors’ views are as follows:

Operational independence

— Our company is a separate legal entity duly registered in accordance with PRC law, and enjoys the legal status to operate independently from its connected persons. The board comprises fourteen directors with only four of whom, namely Yin Jiaxu, Zhang Baolin, Huang Zhangyun and Cao Dongping, are representatives of Changan Co. and Changan Sanchan.

— Each of Changan group of companies is a separate legal entity, and a separate customer A1a28(1)(b) (iii) to our company. On this basis, the largest single customer is Changan Automobile and it accounted for 74.2%, 47.6% and 37.6% of our company’s turnover for the two years ended 31 December, 2003 and 2004 and the nine months ended 30 September, 2005, respectively.

— Each of Changan group of companies has its own management which is responsible for the negotiation of contracts with our company on an arm’s length basis.

— There is in place a structure to ensure the independence of negotiations between our company and Changan group of companies. Further, shareholders (other than Changan Group) in Changan Ford and Changan Suzuki appoint half of the board members in each of these companies. The respective management of Changan group of companies negotiates the terms of any contract with our company on an arm’s length basis. The board comprises three representatives from Minsheng Industrial, three from APLL, four from Changan Co. and three Independent Non-executive Directors. Accordingly, Changan Co. does not have a majority on the board.

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— In trying to secure new logistics business from Changan group of companies, we go through a bidding process with other competitors. The decisions to select our company or other bidders are made by the relevant board of Changan group of companies.

— Changan Co.’s appointees on the board are required under our Articles of Associations to abstain from voting at the board meetings in respect of contracts to be entered with Changan group of companies including contracts involving capital investment. This helps to resolve any potential conflict of interest situations arising from some of the Directors being nominated by Changan Co. which is a substantial shareholder of our company.

— Immediately prior to listing, Changan Co. and Changan Sanchan controlled 40% of the registered capital of our company, while APLL and Minsheng Industrial (together with Ming Sung (HK)) each controlled 30%. Following the listing, Changan Co. will control less than 30% of our issued share capital, resulting in it ceasing to be our controlling shareholder under the GEM listing rules.

— Our Regional Distribution Centres and storage facilities do not form part of the production facilities of Changan group of companies. To the best knowledge of our Directors, Changan Automobile, Changan Ford, Changan Nanjing and Changan Hebei are engaged in the manufacture of finished vehicles and not the provision of logistics services.

— All our Regional Distribution Centres and storage facilities are either self-owned or leased. These facilities together with machinery and equipment used at these facilities are also self-owned, and do not belong to Changan Group.

— Our Regional Distribution Centres and storage facilities are not used exclusively for Changan Group, but can be, and are, used to render logistics services to our other independent customers. In particular, our trucks and storage racks at our facilities can be, and are, used for general transportation, loading and goods storage purposes for customers other than Changan Group.

— Our storage facilities that we lease are primarily used for storing car components and parts for all customers.

— Our investment in information technology systems for the provision of logistics services to all our customers, and not solely Changan Group, are self-funded and not financed by Changan Group.

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— Our Regional Distribution Centres mainly provide storage and delivery services to independent suppliers of car components and parts before their delivery to car manufacturers. The table below sets out details relating to connected and independent customers using our Regional Distribution Centres:

Relevant major car manufacturer Total Number of Number of Name of Regional Nature of customers using number of connected independent Distribution Centres ownership the facilities customers customers customers (Note)

Changan Co Headquarters Right of Changan 134 1 133 Distribution Centre occupation Automobile for 10 years (Headquarter)

Changan Industrial Owned Changan 38 1 37 Park Phase I Automobile Distribution Centre (Fifth Plant)

Changan Ford Owned Changan Ford 46 1 45 Distribution Centre

Changan Hebei Owned Changan Hebei 159 1 158 Distribution Centre

Changan Nanjing Leased Changan 83 1 82 Distribution Centre Nanjing

2 storage facilities Leased Changan 92 1 91 Automobile

Note: Some customers are customers of more than one Regional Distribution Centre.

— Turnover generated from independent customers have been growing rapidly in the past. By the end of 2003, we had about 210 independent customers out of a customer base of 220. By the following year, 10 of our 472 customers were independent. Since then, the number of independent customers has continued to grow amidst our expansion of logistics services to the automobile and non-vehicle commodities industries, including home appliances, steel and international freight forwarding. As a result, our reliance on Changan Group as our customers has lowered and is expected to continue in future.

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— We do not own any vessels for river transportation, but outsourced such services to external transportation companies, including Minsheng Group. We do not however only rely on Minsheng Group for transporting finished vehicles by river, which is one of several modes of transportation services offered by us. During the nine months period ended 30 September, 2005, about 17% of finished vehicles were delivered by rail, 20% by river and 63% by road (16%, 13% and 71% respectively for 2003 and 21%, 14% and 65% respectively for 2004). As at 30 September, 2005, we engaged more than ten companies for transporting finished vehicles and, or other commodities along Yangtze River and between Shanghai, Nanjing and Wuhan. Out of these companies, only Minsheng Logistics and Minsheng Shipping (which are part of Minsheng Group) are connected persons.

Management independence

— We are managed by the board independently of Changan Group which nominated four out of fourteen Directors on the board, two of whom act as Non-executive Directors and are not involved in the day-to-day management of our operations.

— According to our Articles of Association, where a Director, Supervisor, manager or other senior management of our company is in any way, directly or indirectly, materially interested in a contract, transaction or arrangement or proposed contract, transaction or arrangement with our company, other than his contract of service, he shall declare the nature and extent of his interest to the board at the earliest opportunity, whether or not the contract, transaction or arrangement or proposal is otherwise subject to the approval of the board. Unless the interested Director, Supervisor, manager or other senior management has disclosed his interest in accordance with the Articles of Association and the contract, transaction or arrangement has been approved by the board at a meeting in which the interested party is not counted in the quorum and has refrained from voting, any contract, transaction or arrangement in which such party is materially interested is voidable by our company.

— Mr. Yin Jiaxu, our Chairman and Executive Director, enjoys the same, but no more, voting rights as any other Directors of our company.

Mr. Yin is an Executive Director, Chairman, President and Secretary of Changan Co. and is responsible for the daily operations of Changan Co.. To the best knowledge of our Directors, Changan Co. does not engage in car manufacturing and we only provided car components and parts related logistics services to companies directly or indirectly controlled by Changan Co. during the Track Record Period. In addition, the sales to Changan Co. and the Two Changan Co. Subsidiaries accounted for less than 1% of the total sales of our company during the Track Record Period. As such, the active involvement of Mr. Yin in the day-to-day operations and management of Changan Co. will not give rise to a significant risk of conflict of interest.

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Mr. Yin is also a director of each of Changan Automobile, Changan Suzuki, Changan Ford, Changan Nanjing and Changan Hebei but he is not involved in the daily operations of any of these companies. Although over 90% of our company’s business are with Changan Group, nearly all the connected transactions are entered into between our company and Changan group of companies in which Mr. Yin has no active participation in the daily operations and management. Besides, as Mr. Yin is interested in all the connected transactions, he is prohibited by the Articles of Association to vote in the board meetings regarding the approval of these transactions.

— In order to further minimise potential conflict of interest in respect of matters in which Mr. Yin is interested, we have introduced the following “three-tier” control mechanism:

(i) First tier — A special working committee comprising not less than five members including the general manager, the financial controller, and heads the relevant business unit (for instance, transportation of finished vehicles or one of the Regional Distribution Centres responsible for providing supply chain management services) will be established. The role of this committee is to devise business plans and report to the management about the progress of these plans. A majority vote of the committee is required before any business plans are submitted to the independent non-executive directors in the “second tier” to decide whether to submit such plans to our board of directors for further consideration;

(ii) Second tier — The independent non-executive directors will be responsible for (1) reviewing and approving business plans or proposals submitted by the special working committee (in respect of matters that do not require board resolutions in accordance with the Articles of Association) and (2) recommending, if thought fit, the special working committee’s proposals to our board of directors for further consideration. The three independent non-executive directors are completely independent of Changan group of companies or Mr. Yin. The business plans must be approved by a majority of the independent non-executive directors; and

(iii) Third tier — In accordance with the Articles of Association, our board of directors will consider, and if appropriate, approve the business plans submitted by the independent non-executive directors. Mr. Yin will abstain from voting on any matters involving conflict of interest. In respect of matters that require shareholders’ resolutions, a shareholders’ meeting will be convened in accordance with the Articles of Association.

The Directors are of the view that the above “three-tier” control mechanism will avoid any potential conflict of interest of Mr. Yin.

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— For any contracts between our company and Changan Automobile, Changan Ford, Changan Hebei or Changan Nanjing which may give rise to a conflict of interest, Mr. Yin is required to abstain from voting at our board meetings regarding the approval of the relevant contracts in accordance with the Articles of Association. The same mechanism exists in Changan Automobile (our largest customer) and Changan Hebei, where a director will abstain from voting in the board meetings regarding the matters in which he or she is interested. As regards Changan Ford and Changan Suzuki, it is noted that each director (including Mr. Yin) is only given one vote in board meetings for approving business contracts of a significant value and a two-third majority is required to approve such contracts. As Changan Co. only controls no more than half of the board seats in each of these two companies, any potential conflict of interest that Mr. Yin will be duly avoided. For Changan Nanjing, although Changan Automobile controls four out of the seven board seats, at least one vote from each side of Changan Automobile and another shareholder, who is an independent third party controlling three other seats, is required to pass each resolution. This again ensures that Changan Co. cannot dominate the decision making process of the board of directors of Changan Nanjing.

— According to the Articles of Association, the daily operation of the board includes the convening of board meetings, supervision of the operating activities of our company and the exercise of functions and powers prescribed by our Articles of Association. The Directors have been properly carrying out their responsibilities in accordance with our Articles of Association as regards, among others, budgeting, investment, profits distribution and establishment of branch offices which have all been duly approved by the board and our shareholders. The management is then responsible for the execution of the contract in accordance with the “Rules on Contract Management” ( ). The board is also responsible for reviewing and approving other commercial projects and contracts, details of which should be set out in the annual budgets of our company. The management is then responsible for implementing the projects and contracts in accordance with the “Rules on Contract Management” ( ). The General Manager is appointed by the board to exercise the powers prescribed by our Articles of Association.

— Our Articles of Association clearly set out that, except for certain limited situations (such as approval of employee share option schemes), a Director shall abstain from voting regarding certain matter in a board meeting, and shall not be counted in the forum of the meeting, if he or any of his associates (as defined in the GEM Listing Rules) is materially interested in such matter.

Financial independence

— Our business transactions with Changan Group are conducted on normal commercial terms which are no more favourable than those entered with independent customers or suppliers. (Please refer to the “Business — Connected transactions” for comparison of terms between connected persons and independent third parties.)

— 119 — BUSINESS

— Our credit terms granted to Changan Group are for 90 days which are consistent with credit terms normally offered to independent customers. In addition, Changan Group had settled its payments due to us within the credit terms granted to them during the Track Record Period. As an example, amount due from Changan Automobile of approximately Rmb74 million representing some 16% of our total assets as at 30 September, 2005. These receivables arose from normal trading relationships with Changan Automobile and carried a credit term of 90 days. These receivables were fully settled by 31 December, 2005.

— We have a strong balance sheet recording audited net assets of some Rmb149.9 million as at 30 September, 2005 and registered capital of some Rmb112.1 million on that day.

— We obtained an “AA” credit rating from China Construction Bank on 27 May, 2005.

— As at the Latest Practicable Date, we obtained from China Merchants Bank credit facilities totalling Rmb30 million, of which Rmb25 million had been utilised. Although the bank loans are secured by amounts due from related parties, the Directors believe that as we have a sufficient asset base comprising, among others, properties with a market value of Rmb108 million as at 30 November, 2005, we will be able to provide other forms of security to banks for obtaining additional borrowings if needed and does not need to rely on finances secured by amounts due from connected persons.

— Given our experience in the automobile logistics market and the ease of switching the use of our Regional Distribution Centres and, or storage facilities for other customers, our Directors believe that we are able to further develop our logistics services for our existing and new customers other than Changan Group in the regions in which we operate, albeit lower turnover from the new customers is anticipated initially. While the scale of business operations will be reduced should Changan Group cease to be our customers in future, our operating expenses will also reduce correspondingly. In view of this and coupled with available bank financing, we believe that we will maintain sufficient working capital for our operational needs.

In the event that Changan Group relocates its production facilities, our Directors believe that our company may still continue its operations for the reasons summarised below:

— Our Regional Distribution Centres do not provide services solely to Changan Group. Rather, these centres serve over 500 independent suppliers of car components and parts.

— We will continue to develop our business with existing and potential independent customers by making full use of our current strategic locations at Chongqing, Nanjing and Hebei.

— We may lease our spare facilities to independent customers to earn additional revenue.

— 120 — BUSINESS

We believe that the possibility of relocation of production facilities by Changan Group is low in view of the likely substantial costs required for acquisition of land use rights and equipment, construction of plants and recruitment and training of new staff. Further, relocation is unlikely given the uncertainty associated with obtaining approvals from the relevant PRC authorities for relocation to another city or province. It is expected that we will continue to provide services to Changan Group at least in the next three financial years. This is provided for under the various three-year framework agreements governing our connected transactions with Changan Group until 31 December, 2008.

Finally, the existence of two other significant shareholding groups, namely APLL and Minsheng Industrial (together with Ming Sung (HK)) should provide further assurance that any potential conflicts between our company and Changan group of companies would be properly addressed and dealt with. Finally, our Directors believe that the increasing revenue from independent customers will reduce the relative contribution of sales from Changan Group in the long term.

— 121 — OUR PROMOTERS

Group Structure

We have five Promoters, namely, Changan Co., Changan Sanchan, Minsheng Industrial, Ming A1a29(2) Sung (HK) and APLL. The following diagram illustrates our corporate structure immediately following the listing of our H Shares:

NOL (incorporated in Singapore) (Note 4) 100%

Changan Co. Minsheng Industrial APLL Public shareholders (established in the PRC) (established in the PRC) (incorporated in Singapore) (Note 1) (Note 2) 98.92% 98.95% 20.74% 33.94% Changan Sanchan Ming Sung (HK) (established in (established in HK) the PRC) (Note 3) 24.08%0.49% 15.91% 4.84%

CMAL (established in the PRC)

Notes:

1. Changan Co. is wholly owned by CSI Group which is a PRC State-owned enterprise.

2. Minsheng Industrial is beneficially owned as to 8% by each of Zhou Junhua, Xie Lukang, Caoyang, Chen Xiaodong, Wu Xiaohua, Tan Hongbin and Zhang Tianming, 24% by Lu Guoji and 20% by Lu Xiaozhong. Lu Guoji, a Non-executive Director is the father of Lu Xiaozhong, an Executive Director.

3. Ming Sung (HK) is beneficially owned as to 98.95% by Minsheng Industrial and 8 individuals, namely as to 0.25% by Ho Nai Jen (deceased), 0.05% by Lee Yik Jin (deceased), 0.05% by Peng Tai Feng, 0.05% by Lee Sung Ling (deceased), 0.25% by Lee Pung Dien (deceased), 0.25% by Tong Shao Sung (deceased), 0.1% by Wang Tuh Zung and 0.05% by Chan Fung Chow (deceased) who are independent third parties.

4. NOL has been listed on the Main Board of the Singapore Exchange Securities Trading Limited (formerly known as the Stock Exchange of Singapore) since 19 May, 1981. As of 6 December, 2005, Temasek Holdings (Private) Limited, a private company owned by the Singapore government, has a total direct and deemed interest of 68.47% in NOL.

— 122 — OUR PROMOTERS

Changan Co. and Changan Sanchan

Changan Co. is a substantial shareholder of our company and one of our initial management shareholders. Immediately following the listing of our H Shares on GEM, Changan Co., together with Changan Sanchan (our another Promoter) in which Changan Co. holds 98.92% as direct interest, will collectively hold approximately 24.57% of our issued share capital. The following chart shows the group structure of Changan Group to which we provided services.

1 5% Changan Co.

98.92% 24.08% 52.47% 47.53% 11 2 70% Changan CMAL Changan Public Sanchan Automobile Shareholders

0.49%

50% 81.72%1.06% 98.94% 51% 95% 30% 2 2 2 2 2 Changan Changan Changan Ford Changan Changan Changan Import & Nanjing Hebei Suzuki Export Jinling

1 Changan Co. and Changan Sanchan together will hold 24.57% of our issued share capital immediately upon completion of the listing of our H Shares on GEM.

2 These companies are our customers. The shares in Changan Automobile are listed on the A and B share markets of the Shenzhen Stock Exchange. For the year ended 31 December, 2004, audited turnover and net profit of Changan Automobile were approximately Rmb18.5 billion and Rmb1.2 billion, respectively.

Changan Co. and Changan Suzuki have nominated four Directors to our board, namely Mr. Yin Jiaxu, Mr. Huang Zhangyun, Mr. Zhang Baolin and Ms. Cao Dongping. (Please refer to the section headed “Directors, supervisors, management and employees” in this prospectus for further details of these Directors.)

Changan Co. is one of the largest manufacturers of vehicles and car engines in terms of production volume in China. The major automobile manufacturing companies within Changan Group include Changan Automobile, Changan Suzuki, Changan Ford, Changan Nanjing and Changan Hebei.

— 123 — OUR PROMOTERS

The following table sets forth the common directors of our car manufacturer customers within Changan Group and our Company.

Changan Changan Changan Changan Changan Changan Co. Auto Ford Suzuki Nanjing Hebei

Yin Jiaxu Chairman* Chairman Chairman Chairman Chairman Chairman President and Secretary of the Party Committee Zhang Baolin Director Director

* Involved in the day-to-day operation and management of the respective companies

Changan group of companies usually engage other companies for car and related logistics services. As set out on pages 111 and 112 of the prospectus, we handled over 50% of these services for them in 2004 and 2005.

APLL and NOL

Immediately following the listing of our H Shares, NOL, through its wholly owned subsidiary, APLL, will hold approximately 20.74% of our issued share capital. APLL has nominated Mr. Koay Peng Yen, Mr. James H McAdam and Ms. Lau Man Yee, Vanessa to be our Directors. (Please refer to the section headed “Directors, supervisors, management and employees” in this prospectus for further details of these Directors.)

APLL, a company established in Singapore, is a global logistics provider with a comprehensive network of facilities and services to support the global supply chain management needs of customers. The range of its services include consolidation, warehousing, global freight management (ocean, air, truck and rail), domestic distribution networks, international deconsolidation and information technologies that increase supply chain performance.

NOL is a global transportation and logistics company incorporated in Singapore with over 12,000 employees globally. It was established in 1968 and was listed on the Main Board of the Stock Exchange of Singapore (now known as “Singapore Exchange Securities Trading Limited”) on 19 May, 1981. As of 6 December, 2005, Temasek Holdings (Private) Limited, a private company owned by the Singapore government, has a total direct and deemed interest of 68.47% in NOL. For the two years ended 26 December, 2003 and 31 December, 2004 and the three quarters ended 23 September, 2005, the audited turnover of NOL were US$5.5 billion, US$6.5 billion and unaudited turnover was US$5.3 billion, respectively. NOL recorded net profits* of US$429 million, US$943 million and unaudited net profits* of US$640 million in each of the two years ended 26 December, 2003 and 31 December, 2004 and the three quarters ended 23 September, 2005, respectively.

* Net profits attributable to equity holders of NOL

— 124 — OUR PROMOTERS

The table below sets out the details of the respective logistics businesses carried out in the PRC by subsidiaries of APLL and NOL incorporated in the PRC.

Names of subsidiaries Nature of business Place of operation A1a 28(1)(b)(v) R11.04 Provision of ship Shanghai, Beijing, R25.10 (APL Logistics (China) Co. Ltd.)* booking, Tianjin, Dalian, vanning/devanning, Qingdao, Nanjing, warehousing, Ningbo, Xiamen, documentation, freight Guangzhou, Fuzhou, forwarding Shenzhen

Provision of Shanghai (APL Logistics (Shanghai) Co. Ltd.)* warehousing logistics and related services, international trading and transit trading

Cargo brokerage, slot Beijing, Fuzhou, (American President Lines booking, custom Ningbo, Xiamen, (China) Co., Ltd.)* declaration, multimodal Suzhou, Shenzhen, transportation Guangzhou, Qingdao, Tianjin, Taizhou, Lianyungang, Wuhan, Shanghai, Nanjing, Dalian, Chongqing

Name of associated company Nature of business Place of operation

River and marine Beijing (APLL-Zhiqin (Beijing) transportation, air International Freight freight forwarding and Forwarding Co., Ltd.)* import and export (computer-related parts only) services

* English names are for reference only.

As at the Latest Practicable Date, none of the directors nominated by APLL to our board is personally engaged in a business which competes or is likely to compete with the business of our A1a 28(1)(b)(v) group. R11.04 R25.10 Minsheng Industrial and Ming Sung (HK)

Immediately following the listing of our H Shares, Minsheng Industrial and Ming Sung (HK) A1a61 will hold an aggregate of approximately 20.74% of our issued share capital. Minsheng Industrial has nominated three directors, namely Mr. Lu Guoji, Mr. Lu Xiaozhong and Mr. Wu Xiaohua. (Please refer to the section headed “Directors, supervisors, management and employees” in this prospectus for further details of these Directors.)

— 125 — OUR PROMOTERS

Minsheng Group is one of the largest private shipping enterprises in China. It provides shipping and other river transportation services along the Yangtze River and the Pearl River regions, as well as freight forwarding and trucking services. Ming Sung (HK) is engaged in river and marine transportation in Hong Kong, import and export, freight forwarding and shipping brokerage businesses.

The table below sets out details of other companies within Minsheng Group which are engaged in a business in logistic industry.

Name of subsidiaries Nature of business Place of operation A1a28(1)(b)(v) R11.04 R25.10 Minsheng Shipping Ocean and river PRC, Japan and Taiwan transportation

Minsheng International Freight International freight- PRC forwarding agency

Minsheng Logistics River and marine PRC transportation, inter-modal transportation, logistics planning and consultancy

The following table sets out the interests of certain directors of Minsheng Industrial and Ming Sung (HK) which are engaged in a business in logistic industry.

Nature of business A1a28(1)(b)(v) R11.04 Name of directors Name of entity of entity R25.10

Mr. Lu Guoji Minsheng International International freight- Mr. Lu Xiaozhong Freight forwarding agency Mr. Wu Xiaohua (Note1,2,3,4)

Mr. Lu Guoji Minsheng Logistics River and marine Mr. Lu Xiaozhong (Note 5) transportation, Mr. Wu Xiaohua inter-modal transportation, logistics planning and consultancy

— 126 — OUR PROMOTERS

Notes

1 The shareholding structure of Minsheng International Freight as at the Latest Practicable Date is as follows:

Approximate percentage Name of shareholders of shareholdings (%)

Minsheng Shipping (Note 2) 90 Minsheng International Container Transportation Limited Company (Note 3) 10

Total 100

2 The shareholding structure of Minsheng Shipping as at the Latest Practicable Date is as follows:

Approximate percentage Name of shareholders of shareholdings (%)

Minsheng Industrial (Note 4) 96.461 Minsheng International Container Transportation Limited Company 1.756 Minsheng International Freight 1.635 Xie Luhong 0.074 Wu Xiaohua 0.074

Total 100.000

3 The shareholding structure of Minsheng International Container Transportation Limited Company as at the Latest Practicable Date is as follows:

Approximate percentage Name of shareholders of shareholdings (%)

Minsheng Industrial 60 Minsheng Shipping 20 Minsheng International Freight 20

Total 100

— 127 — OUR PROMOTERS

4 The shareholding structure of Minsheng Industrial as at the Latest Practicable Date is as follows:

Approximate percentage Name of shareholders of shareholdings (%)

Lu Guoji 24 Lu Xiaozhong 20 Zhou Junhua 8 Xie Lukang 8 Caoyang 8 Chen Xiaodong 8 Wu Xiaohua 8 Tan Hongbing 8 Zhang Tianming 8

Total 100

5 The shareholding structure of Minsheng Logistics as at the Latest Practicable Date is as follows:

Approximate percentage Name of shareholders of shareholdings (%)

Minsheng Industrial 28.4 Minsheng Shipping 61.6 Minsheng International Freight 10.0

Total 100.0

Synergy with Promoters

We are an establishment of strategic alliance of leading market partitioners of car manufacturers and logistics services providers. With the consolidation of their respective strengths and expertise, we specialise in automotive logistics. As one of the common features of strategic alliance, our Promoters may participate in certain areas of business similar to that of ours. However, since logistic industry consists of a wide spectrum of divisions, there is no direct business competition among us and our Promoters. Most of our Promoters have not been and, or are not conducting business in automotive logistics in China as their principal business. Furthermore, no business restructuring has been undergone by our company since its incorporation for the purpose of excluding any logistic business from our company.

— 128 — The following table illustrates the areas in which our Promoters participate and which are similar to those of our company:

Promoter’s other Similar Business Features Target Market Major Customers business

Changan Co. — Highway — As Changan Co. is still a — The existing transportation — Changan Co. is — Manufacture of transportation military industry enterprise, it business of Changan Co. is mainly undertaking automobiles, military mainly involves in the mainly the transportation of the transportation of products and transportation of military military products, the service military products. Its chemical products. products and the of which is not available in customers are transportation and the market. In times when military organisations, warehousing of restricted there are no military which are completely products in respect of highway transportation duties, it also different from ours. transportation, which are not undertakes some other public

the service scope involved by transportation business, but of PROMOTERS OUR us. Therefore there is no lesser volume, with no overlapping relationship in the practical competitive strength. — management and staff. We also purchase certain

129 transportation capacity from it, which involves solely the — transportation of goods within the plant area. This is mainly for the convenience of the transportation vehicles of Changan Group entering and exiting the plant area. Promoter’s other Similar Business Features Target Market Major Customers business

Minsheng Group — International freight — Minsheng Group’s — Minsheng Group relies on its — The customers of — Ocean shipping and forwarding and management structure in own vessels, and mainly Minsheng Group are inland river shipping container respect of slot-booking engages in international ocean mainly manufacturers transportation in transportation assignment, customs clearance, shipping, inland river shipping and traders (other Yangtze River are all commodity inspection is transportation in Yangtze than the customers of subject to the basically same as ours, as it River, while we have no CMAL) which have approval by the mainly relies on the industrial vessels, and have solely extensive rights of Ministry of practice and the requirements agency relationship. The target import and export Communications. of the customs and the markets of Minsheng Group trading. It provides Since we have not government’s commodity are manufacturers and traders river transportation yet possessed such inspection department, and the who are conducting import to such customers, operation rights, we process used by freight- and export trading and and at the same time have no competition forwarders countrywide is international freight includes ancillary with Minsheng Group identical. The staff of forwarding business, while we services such as in this respect.

Minsheng Group and our are involved in providing customs clearance, PROMOTERS OUR company are independent, and services to Changan Group commercial belong to the respective and automotive manufacturers. inspection, and companies, and there is no Therefore, we and Minsheng declaration, and — overlapping. Group have basically different insurance. We rely

130 target markets. mainly on the business of Changan Group, while other — non-related international freight forwarding business represented about 3% of the total business volume of global freight forwarding. In respect of services, it is mainly related to slot-booking agency, customs clearance, commodity inspection, insurance. We do not own any vessels, but can charter and book slots externally. Therefore, we and Minsheng Group have different customers, and have different ways of providing services. Promoter’s other Similar Business Features Target Market Major Customers business

— Trucking — Minsheng Group provides roll- — Minsheng Group mainly relies — Minsheng Group is on-roll-off vessels and on its own vessels as a means mainly engaged in transport vehicles to our of transportation to provide the provision of company through rivers. It is transportation services to vessels as a means of completely different from our customers, while we sub- transportation, while company in respect of contract our trucking the target customers management and staff operation to other carriers to of our company are organisation. The relationship complete customer automotive between both parties is assignments. Therefore, the manufacturers, and contractual, and there is no target market of Minsheng the provision of overlapping service. The Group is actual carriers, while comprehensive

carriage of our commodities is the target market of our automotive logistics PROMOTERS OUR subject to the arrangement and company is end users. services and finished management by us. car transportation to — such customers.

131 Therefore, we and Minsheng Group

— have different customer targets and service contents. Promoter’s other Similar Business Features Target Market Major Customers business

— Logistics planning — Minsheng Group takes how to — In respect of logistics planning — As Minsheng Group and consultation complete transportation and consultation, Minsheng relies on its own services as the role of an Group mainly relies on its own means of actual consignee, and it means of transportation to transportation in the provides planning and provide the planning and provision of services consultation to customers, consultation on the to customers from while we provide transportation to customers, different industries, comprehensive production with completing the the provision of supply chain logistics services customers’ actual planning and in respect of inbound and transportation as its target consultation services outbound logistics to market, while we mainly rely in respect of freight customers, which involve on our own warehousing, forwarding is merely complicated contents and distribution center and our to ensure the requirements. Therefore, nationwide logistics network transportation plan U PROMOTERS OUR Minsheng Group and our to provide overall logistics can satisfy the company have completely planning and consultation problems raised by different management and services to customers, focusing customers. Therefore — staff. on the service of inbound and the customers are

132 outbound logistics supply mainly consignees. chain management, and to We take some large

— provide supports to customers manufacturers, on the provision of especially automotive information technology. Our manufacturers, as our customers are mainly large major service target, automotive manufacturers and and the provision of large manufacturers of home inbound and appliances. outbound logistics planning and consultation involves the core activities, such as production planning, development of new products, supply of spare parts, price, product quality. Therefore, contents of service for customers are completely different, and types of customers are also different. Promoter’s other Similar Business Features Target Market Major Customers business

APLL Group (as at — Supply chain — APLL is a global logistics — APLL has a global network of — Changan group of — APLL Group also the Latest management services service provider. It provides facilities to provide companies are not engages in Practicable Date) on automotive warehousing and distribution international as well as the major customers consolidation & logistics services of parts and domestic supply chain of APLL. As a non- deconsolidation of components for auto suppliers. services, while CMAL has competition non-automobile It also offers delivery services extensive network only in undertaking related goods, of parts from suppliers to China. Pursuant to a non- agreement was airfreight and freight plants to support production competition undertaking signed between forwarding services and assembly of finished signed by APLL with CMAL, CMAL and APLL, in China. CMAL does vehicles and to distribution APLL will not compete with direct competition in not participate in centres both domestically and CMAL in respect of the this respect does not such areas.

internationally. Finished services offered by CMAL to its exist. PROMOTERS OUR vehicle distribution services major customers as of 15 also form an integral part of January, 2005. — services provided by APLL to

133 its customers.

— — Trucking services — APLL presently engages in — APLL presently provides — Changan group of trucking services to provide transportation services mainly companies are the delivery services mainly for its for its international major customers of international customers in consolidation and retail CMAL but not that of China. Although APLL manages customers while CMAL focuses APLL. the transportation of products mainly on its Changan Group and goods for its customers, it automotive related customers does not presently own its in China. To this extent, APLL own truck fleet but relies on and CMAL presently have external service providers in different target markets. providing such services. APLL’s management structure does not overlap with CMAL. Promoter’s other Similar Business Features Target Market Major Customers business

— International freight — APLL’s operational structure — It is another major business to — In China, APLL forwarding basically is the same as CMAL APLL. APLL provides extensive presently focuses in respect of slot-booking, global coverage for all mainly on freight customs clearance and cargo transport and forwarding forwarding activities inspection, but the staff of services including air freight of a wide variety of APLL and CMAL work and ocean freight to its global products and independently under their customers for delivery of a provides its respective companies, and wide variety of goods, while customers with thus there is no overlapping. CMAL focuses mainly on visibility of their inbound freight forwarding products within the services for car components supply chain through

and parts for specific car web-enabled IT tools. PROMOTERS OUR manufactures in China. Thus, CMAL focuses on the the present target market of provision of inbound — the two companies is different. delivery and

134 forwarding services of auto parts and

— components to car manufacturers and relies on ocean carriers to provide container tracking information to its customers. Thus, the present major customers of the two companies are different. Promoter’s other Similar Business Features Target Market Major Customers business

— Warehousing service — APLL Group leases and, or — APLL currently operates many — APLL’s warehouses in operates warehouses warehouses and China are currently worldwide. Basically, APLL’s consolidation/deconsolidation mainly located near operating management centres internationally. APLL the port terminals structure is the same as CMAL. has sophisticated warehouse and it provides However, the staff of APLL management, consolidation warehousing/storage work independently from and transport management and distribution of CMAL and there is no systems that enable or retail, apparel and overlapping in their respective automate receiving, sorting, general department operations. putaway, and loading store merchandise processes. CMAL rents and, or and industrial

operates a few warehouses, products both in PROMOTERS OUR mainly in the vicinity of the China and automotive Regional internationally. The — Distribution Centres (RDC) in warehouses of CMAL

135 China, which mainly provide are located near the warehousing and distribution automotive RDCs

— of parts and components for which provide car manufacturers, in storage for particular, Changan Group, in automotive China. Hence, the target components and markets are different. parts for automotive manufacturers, in particular, Changan Group, in China. Hence, the major customers of the two companies are different. OUR PROMOTERS

The details of composition of the board of directors of Changan Co., Minsheng Industrial, Ming Sung (HK), APLL and NOL and their common directors with our company as at the Latest Practicable Date are summarized in the following table:

Composition of Common directors the board of directors with our company

Changan Co. Yin Jiaxu, Zhao Luchuan, Shi Yubao, Yin Jiaxu (Chairman, Guo Xuewu (chief financial Executive Director) and controller), Zhang Baolin, Xu Zhang Baolin (Non- Liuping, Lai Yusheng, Guo Jiao and executive Director) Wang Tingwei

Minsheng Industrial Lu Guoji, Lu Xiaozhong, Xie Lukeng, Lu Guoji (Non-executive Zou Junhua, Cao Yang, Chen Director) and Lu Xiaodong, Wu Xiaohua, Tan Hongbin Xiaozhong (Executive and Zhang Tianming Director)

Ming Sung (HK) Fang Jianming, Kiang Shiyee, Lu Guoji (Non-executive Lu Guoji, Lu Xiaozhong and Lu director) and Lu Xiaoyu Xiaozhong (Executive Director)

APLL Cheng Wai Keung and David Lim Tik NIL En

NOL Cheng Wai Keung, Dr. Friedbert NIL Malt, Ang Kong Hua, David Lim Tik En (Executive Director and Group President & Chief Executive Officer), Yasumasa Mizushima, James Connal Scotland Rankin, Willie Cheng Jue Hiang, Robert Holland, Jr., Christopher Lau Loke Sam, Timothy Charles Harris and Peter Wagner

Except Mr. Yin Jiaxu (our Chairman and Executive Director) and Mr. Lu Xiaozhong (our Executive Director), the other two common directors, Mr. Lu Guoji and Mr. Zhang Baolin, only serve as Non-executive Director of our company. The common directors do not participate in the day-to-day operation and management of our company, which rests with our General Manager in accordance with the Articles of Association of our company and the Company Law.

— 136 — OUR PROMOTERS

Our senior management does not participate in the daily operation of the Promoters. According to our Articles of Association, Directors shall abstain from voting at any resolutions in which they may have conflict of interest. Except for some specific matters as stipulated by our Articles of Association, resolutions of the board shall be passed by the affirmative vote of a simple majority of the board.

Further confirmation and Undertakings

Each of the Promoters (including the holders of Non-H Foreign Shares) has confirmed with the Stock Exchange and our company that (1) it understands the legal position, rights and responsibilities of the holders of the Non-H Foreign Shares; (2) its agreement that the holders of the Non-H Foreign Shares enjoy basically the same rights (other than certain exceptional rights which are more particularly set out in paragraph 20(h) in appendix VI to this prospectus) as those enjoyed by the holders of the Domestic Shares; and (3) it has no intention to convert the Non-H Foreign Shares before the satisfaction of the relevant conditions for such conversion as set out in the relevant sections of this prospectus.

Each of the existing holders of the Non-H Foreign Shares, being APLL and Ming Sung (HK), has given an undertaking in favour of our company and the Stock Exchange that upon the occurrence of certain events (Please refer to “appendix VI — Summary of the Articles of Association — (20) other provisions material to our company or its shareholders — (h) Legal status of Non-H Foreign Shares”), it shall, unless then prohibited by the PRC laws or regulations, request our company to convert the Non-H Foreign Shares into H Shares and each of them further undertakes that unless the Non-H Foreign Shares have been converted into H Shares, it will not join, participate or vote in our H Shares class meetings, and subject to the full compliance with PRC laws, it shall use its best endeavours to procure that such undertakings shall be binding on subsequent holders of Non-H Foreign Shares on any future transfer.

— 137 — STATEMENT OF BUSINESS OBJECTIVES R11.15

BUSINESS OBJECTIVES AND STRATEGIES

The Directors expect our company to develop in tandem with the anticipated growth of the automotive industry in China in the long term. The number of automobiles produced in China in the past years saw a steep rising trend as shown on page 56 of this prospectus. This trend is expected to continue on the back of an ongoing increase in the purchasing power of consumers and increased expenditure on durable goods such as cars. China’s accession to the World Trade Organisation is expected to further liberalise the car industry in 2006 and provide opportunities for further industry growth. We anticipate that the provision of automotive logistics services will R14.19(1)(a) continue to be our main driver of revenue in the near term. At the same time, we aim to further expand our supply chain management logistics services for car manufacturers. We will also develop other non-vehicle logistics services proactively including international and domestic cargo multi-mode transportation and logistics consultancy services.

We expect the level of logistics services to be provided to Changan Group in the coming years to continue to be high relative to other customers. Further, sales expected to be generated from Changan Group will continue to form the majority of our total turnover in the near future. Over the years, we have accumulated knowledge and experience of the requirements of our major car manufacturer customers which in the Directors’ views, will make it less likely for the long standing customers to switch to alternative logistics service providers. That said, we expect that as we become more well known in the market following the listing of our H Shares on GEM, we will be able to expand our customer portfolio in the automobile sector in China, and in the longer term, globally.

We have formulated the following strategies to fulfill our business objectives: R14.19(3)

— Through enhancing our operational efficiency, we will continue to strengthen our relationship with our existing customers, and to further expand our customer base.

— With the help of our experience in logistics services and our established relationship with shipping companies operating along the Yangtze River region, we intend to focus on the expansion of bulk cargo transportation along the Yangtze River region.

— Leveraging on our logistics network and resources, we plan to collaborate with other vehicle manufacturers, such as China FAW Group Corporation, Dongfeng Motor Group Co., Ltd and Shanghai Automobile Industry Corporation (Group), and their logistics service providers so as to pool and share our respective resources for transporting vehicles nationwide, thereby reducing logistics costs.

— We intend to expand further in the areas of distribution processing and procurement of car components and parts, and develop sophisticated information technology software. In addition, we also plan to develop supply chain management for parts and components of other manufactured goods such as machinery and household electrical appliances.

— 138 — STATEMENT OF BUSINESS OBJECTIVES

— We plan to expand our scope of logistics services by exploring opportunities in the areas of import and export, multi-mode transportation and international freight forwarding agency.

Bases and assumptions R14.19(4)

Our business objectives and strategies described above have been formulated on the following assumptions:

— there will be no material adverse changes in the existing laws (whether in Hong Kong, the PRC or any other part of the world), administrative orders, policies, industry or regulatory treatments relating to us, the automotive industry, or in the political, economic or market conditions of the countries in which we operate;

— there will be no change in the effectiveness of the licences and permits obtained by us;

— inflation, interest rates and exchange rates will not differ materially from those prevailing as of the Latest Practicable Date;

— there will be no material changes in the bases or rates of taxation applicable to us;

— we are able to, and will be able to, recruit and retain personnel for our existing business as well as our business development and future growth;

— there will be no change in the funding requirements of our group for each of the development strategies described herein from those estimated by our management;

— we will have sufficient financial resources to meet our planned capital expenditure and business development requirements during the period to which the business objectives and strategies stated herein relate;

— there will not be any unforeseeable circumstances or events occurring during the period to which the business objectives and strategies stated herein relate which may materially and adversely affect the implementation of such business objectives or strategies; and

— there will be no disasters or other events, natural, political or otherwise, which would materially disrupt the business or operations of our group or cause substantial loss, damages or destruction to our property or facilities.

— 139 — STATEMENT OF BUSINESS OBJECTIVES

Implementation plan R14.19(2)

We intend to implement our strategies in the time periods set out below. However, it should be noted that we operate in a dynamic market which is subject to rapid changes and uncertainties. Consequently, the implementation schedule set out below only reflects our present intentions, which may be subject to change in response to changes in market conditions.

For the six months period ending 30 June, 2006 31 December, 2006 30 June, 2007 31 December, 2007 R14.21

Business 1. To secure the 1. To secure the 1. To secure further 1. Expand business R14.19(1)(b) development transportation of transportation of business from volume from existing finished vehicles finished vehicles Jiangling Automobile customers, especially business (about business (about Company Limited’s car manufacturers 50,000 units) from 50,000 units) from project in respect of Changan Suzuki. Jiangling Automobile transportation of 2. Expand logistics Company Limited’s finished vehicles and business for non- 2. To secure the project in Nanchang supply chain vehicle commodities transportation of ( ) management services finished vehicles and transportation of business from 2. To secure the supply car components and Changan Automobile chain management of parts in Changan Zijin car parts business factory in Nanjing. from Changan Suzuki 2. Expand logistics business for non- 3. Expand logistics 3. To secure the supply vehicle commodities business for non- chain management of vehicle commodities car parts project from 3. Expand business Changan Zijin volume from existing 4. Consolidate and factory, Nanjing customers, especially expand business car manufacturers volume from existing 4. Expand logistics customers, especially business for non- 4. Consolidate and car manufacturers vehicle commodities expand business volume from existing 5. Consolidate and customers, especially expand business car manufacturers volume from existing customers, especially car manufacturers

Sales and To establish a marketing transportation company

Service 1. Construct phase I of 1. Construct a 1. Construct phase II of facilities car parts distribution car parts distribution car parts distribution centre for Changan centre for Changan centre for Changan Ford in Nanjing, Suzuki, about 8,000 Automobile at about 15,000 sq.m. sq.m. or form a joint Changan Industrial venture to invest in Park, about 10,000 2. Purchase 30 the distribution sq.m. transportation centre vehicles or form a 2. Construct phase II of joint venture or car parts distribution acquire a centre for Changan transportation Ford in Nanjing, company to increase about 15,000 sq.m. the number of fleet

Customers 550 600 650 700

Human 2,335 2,485 2,615 2,715 resources

— 140 — STATEMENT OF BUSINESS OBJECTIVES

USE OF PROCEEDS A1a17 A1a48

We believe that the Placing will enhance our corporate profile and capital base and enable us to further expand the scale and scope of our operations.

We presently intend to apply such net proceeds from the Placing as follows:

— approximately HK$26 million for the completion of upgrading of phase III and the construction of phase IV of the distribution centre for provision of supply chain management services for car components and parts to Changan Ford in Chongqing. HK$21 million will be used for construction and purchasing machinery and equipment and HK$5 million will be used in the development of logistics IT software.

— the remaining balance of approximately HK$5.9 million for sub-contracting transportation services through the use of external transportation companies.

Note: Please refer to the section headed “Other information” in appendix VII to this prospectus for details of this piece of land.

— 141 — STATEMENT OF BUSINESS OBJECTIVES

As shown above, we intend to apply HK$90 million of the net proceeds to construct and upgrade the distribution centres for Changan Ford in Nanjing and Chongqing respectively. The Directors are of the view that the proposed spending of HK$90 million is in our company’s best interest due to the following reasons:

— our company has since 2002 been the de facto exclusive automobile logistics services supplier of Changan Ford in respect of transportation of finished vehicles. During this period, we have established long standing and good trading relationship with Changan Ford. The construction of the two RDCs in Chongqing and Nanjing is to cater for the business expansion of Changan Ford leading to anticipated increase in demand for CMAL’s services;

— we entered into the Changan Ford Framework Agreement with Changan Ford for a term of three years expiring on 31 December, 2008 (for details of the Changan Ford Framework Agreement, please refer to the section headed “Non-exempt Continuing Connected Transactions” in the Business section). We consider this to be a sufficiently long period of trading relationship committed by Changan Ford; and

— the long-standing trading relationship between Changan Ford and our company is expected to continue in the future years for the practical reason that it would be very costly for Changan Ford to switch to another logistics service provider which may not have distribution centres/facilities within the vicinity of Changan Ford’s car manufacturing base. Our familiarity with Changan Ford’s special logistics requirements and expertise in delivery logistics services are other reasons rendering it not logical for Changan Ford to switch to other logistics service providers.

— 142 — STATEMENT OF BUSINESS OBJECTIVES

The proposed use of our net proceeds based on the minimum Placing Price of HK$2.30 per Placing Share during the period commencing from the listing date to 30 June, 2006 and for each of the six-month periods from 1 July, 2006 to 31 December, 2007 is set out below:

For the six months ended Listing date 31 31 to 30 June, December, 30 June, December, 2006 2006 2007 2007 (HK$’000) (HK$’000) (HK$’000) (HK$’000)

Construction of phase I and phase II of Regional Distribution Centre for Changan Ford in Nanjing 27,000 18,000 10,000 9,000

Completion of upgrading of phase III and construction of phase IV of Regional Distribution Centre for Changan Ford in Chongqing 26,000 ———

Sub-contracting transportation services through the use of external transportation companies 5,900 ———

58,900 18,000 10,000 9,000

— 143 — SUBSTANTIAL, SIGNIFICANT AND INITIAL MANAGEMENT SHAREHOLDERS

SUBSTANTIAL SHAREHOLDERS

So far as we are aware, after completion of the Placing, the following shareholders will be A1a45(4) Co 3rd(30) interested in 10% or more of the voting power at any of our general meeting:

Number of Shareholding Name Shares Capacity percentage

Changan Co. 39,029,088 Beneficial owner 24.08% Minsheng Industrial 25,774,720 Beneficial owner 15.91% APLL 33,619,200 Beneficial owner 20.74%

INITIAL MANAGEMENT SHAREHOLDERS

So far as we are aware, immediately following the Placing, the following shareholders will be regarded as initial management shareholders under the GEM listing rules:

Number of Shareholding Name Shares Capacity percentage

Changan Co. 39,029,088 Beneficial owner 24.08% Minsheng Industrial (Note 1) 25,774,720 Beneficial owner 15.91% Ming Sung (HK) (Note 1) 7,844,480 Beneficial owner 4.84% APLL 33,619,200 Beneficial owner 20.74% Changan Sanchan (Note 2) 796,512 Beneficial owner 0.49%

Note 1: Minsheng Industrial is 24% held by Lu Guoji and 20% by Lu Xiaozhong while Ming Sung (HK) is held as to 39.35% by Lu Xiaozhong and as to 59.6% by Lu Guoji.

Note 2: Changan Sanchan is a wholly-owned subsidiary of Changan Co..

SIGNIFICANT SHAREHOLDERS

So far as we are aware, immediately following the Placing, apart from the initial management shareholders referred to above, we do not anticipate to have other shareholders who will be interested in 5% or more of the voting power at any of our general meeting.

— 144 — SUBSTANTIAL, SIGNIFICANT AND INITIAL MANAGEMENT SHAREHOLDERS

NON-DISPOSAL UNDERTAKINGS A1a55

Escrow arrangement

Pursuant to Rule 13.16(1) of the GEM listing rules, each initial management shareholder is required to place in escrow, with an escrow agent and on terms acceptable to the Stock Exchange, its relevant securities for a period of twelve months from the listing date.

As the Domestic Shares and Non-H Foreign Shares directly or indirectly held by the initial management shareholders are not represented by any form of physical scrip or title documents, this means that the subject matter for custody by the escrow agent does not physically exist in any form available for custody purposes.

In this regard, we have applied to the Stock Exchange for, and the Stock Exchange has granted, a waiver from strict compliance with Rule 13.16(1) of the GEM listing rules.

Undertakings by initial management shareholders

Each initial management shareholders has undertaken to the Stock Exchange and our company that for a period of twelve months from the listing date (the “moratorium period”) other than pursuant to Rule 13.18 of the GEM listing rules:

Each initial management shareholder has further undertaken to the Stock Exchange and our company, that:

2. having pledged or charged any of its interest in the relevant securities in our company under the paragraph above, inform our company immediately in the event that he/she becomes aware that the pledgee or chargee has disposed of or intends to dispose of such interest and of the number of the relevant securities in our company affected.

— 145 — SUBSTANTIAL, SIGNIFICANT AND INITIAL MANAGEMENT SHAREHOLDERS

Undertakings by the controlling shareholders of initial management shareholders

By CSI Group

CSI Group has undertaken to the Stock Exchange, the Sponsor and our company that during any time of the moratorium period other than pursuant to Rule 13.18 of the GEM listing rules:

1. it will not dispose of (nor enter into any agreement to dispose of) nor permit the registered holder to dispose of (or to enter into any agreement to dispose of) any of its direct or indirect interest in the relevant securities in our company; or otherwise create (nor enter into any agreement to create) nor permit the registered holder to create (or to enter into any agreement to create) any options, rights, interests or encumbrances in respect of any such interest; and

2. it will not dispose of (nor enter into any agreement to dispose of) nor permit the registered holder to dispose of (or to enter into any agreement to dispose of) any of its direct or indirect interest in Changan Co.; or otherwise create (nor enter into any agreement to create) nor permit the registered holder to create (or to enter into any agreement to create) any options, rights, interests or encumbrances in respect of any such interest.

CSI Group has further undertaken to the Stock Exchange, the Sponsor and our company, that:

1. in the event that during any time of the moratorium period, it pledges, charges or otherwise disposes of any of its direct or indirect interest in the relevant securities and, or in Changan Co. pursuant to Rule 13.18 of the GEM listing rules, or pursuant to any rights or waivers granted by the Stock Exchange under Rule 13.18(4) of the GEM listing rules, immediately inform the Stock Exchange, the Sponsor and our company and disclose the details pursuant to Rules 17.43(1) to (4) of the GEM listing rules; and

2. having pledged or charged any of its interest in the relevant securities and, or in Changan Co., inform the Stock Exchange, the Sponsor and our company immediately in the event that it becomes aware that the pledgee or chargee has disposed of or intends to dispose of such interest and of the number of the relevant securities in our company and, or in Changan Co. affected.

By NOL

NOL has undertaken to the Stock Exchange, the Sponsor and our company that during any time of the moratorium period other than pursuant to Rule 13.18 of the GEM listing rules:

1. it will not dispose of (nor enter into any agreement to dispose of) nor permit the registered holder to dispose of (or to enter into any agreement to dispose of) any of

— 146 — SUBSTANTIAL, SIGNIFICANT AND INITIAL MANAGEMENT SHAREHOLDERS

its direct or indirect interest in the relevant securities in our company; or otherwise create (nor enter into any agreement to create) nor permit the registered holder to create (or to enter into any agreement to create) any options, rights, interests or encumbrances in respect of any such interest; and

2. it will not dispose of (nor enter into any agreement to dispose of) nor permit the registered holder to dispose of (or to enter into any agreement to dispose of) any of its direct or indirect interest in APLL; or otherwise create (nor enter into any agreement to create) nor permit the registered holder to create (or to enter into any agreement to create) any options, rights, interests or encumbrances in respect of any such interest.

NOL has further undertaken to the Stock Exchange, the Sponsor and our company, that:

1. in the event that during any time of the moratorium period, it pledges, charges or otherwise disposes of any of its direct or indirect interest in the relevant securities and, or in APLL pursuant to Rule 13.18 of the GEM listing rules, or pursuant to any rights or waivers granted by the Stock Exchange under Rule 13.18(4) of the GEM listing rules, immediately inform the Stock Exchange, the Sponsor and our company and disclose the details pursuant to Rules 17.43(1) to (4) of the GEM listing rules; and

2. having pledged or charged any of its interest in the relevant securities and, or in APLL, inform the Stock Exchange, the Sponsor and our company immediately in the event that it becomes aware that the pledgee or chargee has disposed of or intends to dispose of such interest and of the number of the relevant securities in our company and, or in APLL affected.

By Mr. Lu Guoji and Mr. Lu Xiaozhong

Each of Mr. Lu Guoji and Mr. Lu Xiaozhong has undertaken to the Stock Exchange, the Sponsor and our company that during any time of the moratorium period other than pursuant to Rule 13.18 of the GEM listing rules:

1. he will not dispose of (nor enter into any agreement to dispose of) nor permit the registered holder to dispose of (or to enter into any agreement to dispose of) any of his direct or indirect interest in the relevant securities in our company; or otherwise create (nor enter into any agreement to create) nor permit the registered holder to create (or to enter into any agreement to create) any options, rights, interests or encumbrances in respect of any such interest; and

2. he will not dispose of (nor enter into any agreement to dispose of) nor permit the registered holder to dispose of (or to enter into any agreement to dispose of) any of his respective direct or indirect interest in Minsheng Industrial and Ming Sung (HK); or otherwise create (nor enter into any agreement to create) nor permit the registered holder to create (or to enter into any agreement to create) any options, rights, interests or encumbrances in respect of any such interest.

— 147 — SUBSTANTIAL, SIGNIFICANT AND INITIAL MANAGEMENT SHAREHOLDERS

Each of Mr. Lu Guoji and Mr. Lu Xiaozhong has further undertaken to the Stock Exchange, the Sponsor and our company, that:

1. in the event that during any time of the moratorium period, he pledges, charges or otherwise disposes of any of his direct or indirect interest in the relevant securities and, or in Minsheng Industrial and, or Ming Sung (HK) pursuant to Rule 13.18 of the GEM listing rules, or pursuant to any rights or waivers granted by the Stock Exchange under Rule 13.18(4) of the GEM listing rules, immediately inform the Stock Exchange, the Sponsor and our company and disclose the details pursuant to Rules 17.43(1) to (4) of the GEM listing rules; and

2. having pledged or charged any of his interest in the relevant securities and, or in Minsheng Industrial and, or Ming Sung (HK), inform us immediately in the event that he becomes aware that the pledgee or chargee has disposed of or intends to dispose of such interest and of the number of the relevant securities in our company, Minsheng Industrial and, or Ming Sung (HK) affected.

Undertakings by our Directors

Each of our Director has undertaken to the Stock Exchange, the Sponsor and our company:

(a) not to approve, and to procure our company not to approve, the transfer of and the registration of any transfer of the Domestic Shares and, or Non-H Foreign Shares held by the initial management shareholders during the moratorium period;

(b) to procure our company to file a copy of the undertaking of each Director to the relevant Administration of Industry and Commerce for notification purposes; and

Undertakings by our company

Our company has undertaken to the Stock Exchange not to approve, and to procure the relevant PRC authority not to approve, the registration of any transfer of the Domestic Shares and, or Non-H Foreign Shares owned by the initial management shareholders during the moratorium period.

— 148 — DIRECTORS, SUPERVISORS, MANAGEMENT AND EMPLOYEES A1a41

The board consists of fourteen members, three of which are Independent Non-executive Directors. The Directors are elected in the general meetings of our company for a term of three years, renewable upon re-election and re-appointment after expiry of the term. All of the directors except Independent Non-executive Director may serve as Manager or other senior management but not supervisor. The functions and obligations of the board include convening shareholders’ general meetings and reporting its work to shareholders at these meetings, implementing shareholders’ resolutions, determining our business plans and investment proposals, formulating our annual financial budget and accounts, formulating our dividend and bonus distribution plan, formulating proposals for the increase or decrease in our registered capital and exercising any other powers conferred under our Articles of Association.

The Company Law requires a joint stock company with limited liability to establish a supervisory committee. This provision has been stipulated in our Articles of Association. Our supervisory committee consists of five members. Three members must be elected by our shareholders in a general meeting and may be removed by shareholders in a general meeting. Two members must be a representative elected by our employees. The term of Supervisor will be three years renewable upon re-election and re-appointment after expiry of the term. Supervisor may not serve as Director, Manager or senior management member of our company. The functions and obligations of our supervisory committee include reviewing financial reports and other financial information which are proposed to be presented at shareholders’ meetings, and overseeing the actions of our board and other senior officers in carrying out their duties. The supervisory committee can initiate legal proceedings against such Directors on behalf of our company. A resolution proposed at any meeting of our supervisory committee shall be adopted only if it is approved by two-thirds or more of our Supervisors.

Chairman

Mr. Yin Jiaxu ( ), aged 49, is our Chairman and an Executive Director. Mr. Yin joined our company in 2001 and is mainly responsible for formulating business strategies. In addition, Mr. Yin plays a key role in establishing relationships with major customers and overseeing expansion plans of our company. Mr. Yin also carries out such duties prescribed by our Articles of Association which include, among others, convening and chairing meetings of the Board of Directors. However, Mr. Yin is required under our Articles of Association to abstain from voting on matters in situations where a conflict of interest arises or may potentially arise. Mr. Yin was the chairman of the board of directors of Hebei Changan Shengli Automobile Company Limited (“Hebei Shengli”) from December 1998 to February 2005. On 1 February, 2005, on application of Hebei Shengli, the Intermediate Level People’s Court of Baoding granted a liquidation order on Hebei Shengli. Hebei Shengli is currently undergoing the liquidation process pending grant of final liquidation order from the court and cancellation of registration. Mr. Yin was not involved in any investigation by the Stock Exchange, the SFC, the provisional liquidators or any of the other regulators.

Mr. Yin graduated from Chongqing University with a master’s degree in engineering and from , with a master’s degree in Business Administration. He worked for Chongqing Yuzhou Gear Factory. From 1996 to 1999, Mr. Yin was the Office Director and Deputy Director of the Southwestern Bureau of the China Ordnance Equipment Group. He also served

— 149 — DIRECTORS, SUPERVISORS, MANAGEMENT AND EMPLOYEES as the Executive Deputy General Manager, General Manager and Deputy Secretary of the Party Committee of Changan Co.. Mr. Yin serves as the Deputy General Manager of CSI Group, and Chairman, President and Secretary of the Party Committee of Changan Co.. He is also the general manager of China South Industries Automobile Co..

Executive Directors

Mr. Huang Zhangyun ( ), aged 52, joined our company as an Executive Director in August 2001. Mr. Huang obtained a bachelor’s degree in Industrial Accounting from Chongqing Broadcasting University in 1986. In 2001, he obtained a master’s degree in Business Administration from the Asia International Open University (Macau). In 1970, Mr. Huang joined Jiangling Machinery Factory. Since 1996, he has been the Director, Assistant to the President and Vice President of Changan Co. From 1997 to 2003, he was also the General Manager of Changan Sanchan.

Mr. Lu Xiaozhong ( ), aged 58, joined our company as an Executive Director in August 2001. He was our general manager from October 2001 to February 2004. Mr. Lu obtained a bachelor’s degree from the Chongqing Normal University (formerly Chongqing Normal College) in 1982. From 1987 to 1988, Mr. Lu was the Deputy Head of the Chongqing Foreign Economic and Trade Commission. From 1988 until now, Mr. Lu has been the Deputy General Manager and Director of Minsheng Industrial, the Director of Ming Sung (HK) and the General Manager of Minsheng Ferry Co., Ltd. He was a committee member of the Chongqing Chinese People’s Political Consultative Conference (“CPPCC”) and the Deputy Chairman of Chongqing General Chamber of Commerce (industrial and commercial association) from 1997 to 2002. He has been a committee member of the Chongqing China National Democratic Construction Association (CNDCA) since 2002.

Mr. Shi Chaochun ( ), aged 40, joined our company as our executive deputy general manager in October 2001. He has been our general manager since February 2004 and our Executive Director since February 2005. Mr. Shi is mainly responsible for overall strategic planning and business development. Mr. Shi obtained a bachelor’s degree from Chengdu Science and Technology University in 1987 and a master’s degree in Industrial Engineering from Chongqing University in December 2002. From 1994 to 1997, Mr. Shi worked for Changan Co. as Secretary to the Vice President and the Deputy Director of the planning and development department. He worked for Shanghai North Transportation Company as Deputy General Manager from 1997 to 2001.

Mr. James H McAdam, aged 51, joined our company as an Executive Director in June 2005. He graduated from Michigan State University in 1977 with a bachelor’s degree in Arts and obtained a master’s degree in Arts from the University of San Francisco in 1998. With more than 20 years of experience in various capacities in the transportation and logistics industry, Mr. McAdam has spent over 10 years in Asia holding senior management positions in Thailand, Japan and Singapore. In 1984, he joined American President Lines Ltd. (“APL”) Chicago as District Manager in marketing department and became General Manager of APL’s Thailand office in 1988. In 1992, he served as Director for Strategic Marketing and Pricing in APL Japan and returned to APL Oakland as Vice President of Business Logistics Service in 1994. In 1999, he rejoined NOL

— 150 — DIRECTORS, SUPERVISORS, MANAGEMENT AND EMPLOYEES

Group as Vice President and Managing Director of APL’s North Asia office and was in charge of the day-to-day operations of our company’s business in Japan, North & South Korea, and the Russian Far East. In 2004, Mr. McAdam was the Senior Vice President of Business Solutions. He currently holds the position of Senior Vice President of Supply Chains Solution in APLL. As a senior management staff of NOL Group, Mr. McAdam has assumed, and may from time to time assume, other executive positions and, or directorships in any one or more NOL Group entities globally.

Non-executive Directors

Mr. Lu Guoji ( ), aged 82, joined our company as a Non-executive Director in August 2001. He was appointed as our Vice Chairman in October 2001. Mr. Lu obtained a bachelor’s degree in Civil Engineering from Chongqing Central University ( ) in 1948. Since 1984, Mr. Lu has served as the Managing Director, Deputy Chairman and Chairman of Minsheng Industrial and the Chairman of Ming Sung (HK). The State Council has been granting him a special allowance in recognition of his contribution to the country as an expert in engineering, since 1993. From 1982 to 1997, Mr. Lu was the committee member and member of the Standing Committee of Chongqing CPPCC for the seventh, eighth, ninth and tenth session. From 1997 until now, he has been the committee member of the Standing Committee of the CPPCC of Chongqing Municipality for the first session. From 1988 to 2003. Mr. Lu was the committee member of CPPCC for the seventh, eighth and ninth session at the national level.

Mr. Koay Peng Yen ( ), aged 40, joined our company as a Non-executive Director in February 2004. Mr. Koay obtained a Master of Science degree in Ocean Systems Management from the Massachusetts Institute of Technology. Mr. Koay began his career in NOL in 1988 and has progressed quickly through the ranks, holding a number of senior positions. From 1996 to 1999, he served as Head and Vice President of Corporate Planning in NOL. From 2000 to 2002, he was the Vice President for Intra-Asia, Middle East and Australia. From 2002 to 2003, he was the Senior Vice President for Trans-Pacific, based in Oakland, the United States of America. In 2003, he was APL’s Regional President for the Greater China Region. In 2004, he was appointed as, and is currently, the NOL Group’s Regional President for the Greater China Region. As a senior management staff of NOL Group, Mr. Koay has assumed, and may from time to time assume, other executive positions and, or directorships in any one or more NOL Group entities globally.

Mr. Zhang Baolin ( ), aged 43, joined our company and was appointed as a Non-executive Director in February 2004. From 1989 to 1996, he worked in Southwestern Military Industrial Bureau as Deputy Secretariat and Secretariat of the communist youth league. Mr. Zhang was Secretary of Party Committee of Chongqing Changfeng Machinery Factory ( ) from 1996 to 1998. From 1998 to 2001, he was the Deputy General Manager and General Manager of Chengdu Wan You Group Company ( ). Since 2001, Mr. Zhang has been the Deputy General Manager of Changan Co. and the General Manager of Changan Automobile Sales Co., Ltd ( ).

Ms. Cao Dongping ( ), aged 52, joined our company as a Non-executive Director in August 2001. Ms. Cao graduated from Sichuan University in 1976, majoring in Political Economics. After graduation, she worked in the planning department and the finance department

— 151 — DIRECTORS, SUPERVISORS, MANAGEMENT AND EMPLOYEES of Jiangling Machinery Factory ( ) until 1994. From 1994 to 1998, Ms. Cao was the Head of the finance department of Chongqing Jiangling Engine Co., Ltd. ( ). From May 1998 till now, Ms. Cao has taken up the posts as the Deputy Head and the Head of the finance department of Changan Co..

Mr. Wu Xiaohua ( ), aged 50, joined our company as a Non-executive Director in August 2001. Mr. Wu graduated from the Sichuan Cadre Institute ( ) in 1988, majoring in Financial Accounting. From 1976 to 1989, he was the Deputy Head of the finance department of Chuanjiang Shipping Factory of Changjiang Marine Transportation Company. From 1989 till now, Mr. Wu has been the Deputy General manager, Department Head, Deputy Chief Accountant.

Ms. Lau Man Yee, Vanessa ( ), aged 38, joined our company as a Non-executive Director in June 2005. Ms. Lau obtained a bachelor’s degree in Accountancy from the City University of Hong Kong in 1991 and a master’s degree in Business Administration from the University of Wales, Bangor, in 2001. She is a fellow member of the Chartered Association of Certified Accountants and a graduate member of the Institute of Chartered Secretaries and Administrators. Ms. Lau joined APL’s Asia Area Headquarters in Hong Kong in 1991. From 1995 to 1997, Ms. Lau worked for APL’s Singapore office as the Regional Controller. In 1998, Ms. Lau joined NOL Group and she has been working in the NOL Group on financial accounting functions since 1999. She is now NOL’s Vice President, Group Financial Accounting & Reporting. As a senior management staff of NOL Group, Ms. Lau has assumed, and may from time to time assume, other executive positions and/or directorships in any one or more NOL Group entities globally.

Independent Non-executive Directors

Ms. Wang Xu ( ), aged 42, joined our company as an Independent Non-executive Director in February 2005. Ms. Wang received her PhD from Chongqing University in 2001. She is a professor at Chongqing University. She was a member of the Decision-making Consultative Committee of the Chongqing government in China.

Mr. Peng Qifa ( ), aged 41, joined our company as an Independent Non-executive Director in February 2005. In 1998, he obtained a master’s degree in Economics from the faculty of Business Administration at Sichuan University. Mr. Peng has been approved to be a lecturer of Economics in the Chongqing Industrial Management Institute and was qualified in 1996 to teach in tertiary institution in China. Mr. Peng is a Certified Public Accountant in the PRC and also an Independent Director of Xichang Electric Company Limited.

Mr. Chong Teck Sin ( ), aged 50, joined our company as an Independent Non- executive Director in July 2005. Mr. Chong was Seksun Corporation Limited’s Group Managing Director (Commercial) until May 2004. Prior to his appointment at Seksun, he was the Strategic Development Director for China of Glaxo Wellcome Asia Pacific Pte Ltd. and before that, the Senior General Manager of China-Singapore Suzhou Industrial Park Development Co., Ltd., the Singapore Suzhou Industrial Park developer. He was with the Singapore Economic Development Board from 1986 to 1989. Mr. Chong sits on the Board of the Accounting and Corporate

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Regulatory Authority (ACRA) of Singapore. He is also the independent non-executive director of British-American Tobacco (Singapore) Pte Ltd and Eastgate Technology Ltd. He obtained the bachelor of engineering at the University of Tokyo in 1981, and subsequently obtained a Master of Business Administration degree from the National University of Singapore.

Supervisors

Mr. Hua Zhanbiao ( ), aged 38, a Supervisor, joined our company in 2004. From 1982 to 1994, he worked for Jiangling Machinery Factory. From 1995 till now, Mr. Hua has worked as Officer, Deputy Supervisor, Supervisor, Deputy Head and Deputy Party Secretary of the audit and supervisory department of Changan Co..

Mr. Tang Yizhong ( ), aged 42, a Supervisor, joined our company in 2004. Mr. Tang graduated from the Chongqing Science and Technology University ( ) in 1986. He obtained a bachelor’s degree in Accounting from the Shanghai University of Finance & Economics in 1995. From 1987 to 1993, he worked in Minsheng Shipping. From 1993 till now, Mr. Tang has worked as the Deputy Manager, Manager, Assistant to the department head and Deputy Department Head of the finance department of Minsheng Industrial.

Mr. Dai Baiming ( ), aged 34, a Supervisor, joined our company in 2005. He obtained a master’s degree in Business Administration in 2000 from the Shanghai Jiaotong University. From 1992 to 1996, he was engaged in financial affairs of China Construction Bank Shanghai Trust and Investment Co. From 1997 to 2001, he worked for Eli Lilly Greater China office as a Senior Accountant. From 2002 to 2003, he was the finance manager of Laird Group Shanghai Plant. From 2003 to 2005, he was the finance manager of APL Logistics (China) Ltd.. Immediately before joining our company, he worked as a finance manager for NOL Greater China Regional.

Mr. Ye Guangrong ( ), aged 54, was elected by the labour union of our company as a Supervisor in 2004. Mr. Ye graduated from the Distance Learning Institute of the China Communist Party Sichuan Provincial Committee School in 1998. From 1988 to November 2004, he worked in Changan Co. as Deputy Officer of the secretariat division and Director of the secretariat reception division. Since November 2004, Mr. Ye has been the Chairman of the labor union of our company.

Ms. Chen Haihong ( ), aged 37, was elected by the labour union of our company as a Supervisor in 2004. Ms. Chen graduated from the Laborer University of Weapon Industry ( ), majoring in Water Supply and Drainage. She obtained a master’s degree in Business Administration at the Asia International Open University, Macau in April 2005. Ms. Chen worked for Changan Co. from 1984 to 2001. She joined our company in 2001 and she has held various posts such as Senior Secretary, Deputy Manager and she is now the Administration Manager of our company.

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Senior Management

Mr. Li Xiwen ( ), aged 32, joined our company in 2005. Mr. Li is our deputy general manager of the human resource and administration department and is responsible for managing our Regional Distribution Centres and information technology department as well as overseeing the implementation and development of various management systems and company policies. Mr. Li graduated from Beijing Foreign Studies University in 1996 and obtained bachelor’s degree in Arts. He obtained a master’s degree in Business Administration from the Michigan State University in the United States in 2002. From August 2004 to October 2005, he was the deputy general manager of GEFCO-DTW Logistics Co., Ltd..

Mr. Huang Yong ( ), aged 49, joined our company in 2003. Mr. Huang graduated from the Distance Learning Institute of the Central Party School of the China Communist Party ( ) in 2003. Mr. Huang is the deputy general manager of the human resources and administration department and is mainly responsible for managing vehicle transportation department, multi-mode transportation department and international freight forwarding department.

Mr. Hu Dahua ( ), aged 40, joined our company in 2001. Mr. Hu is the finance controller and is mainly responsible for the financial and management reporting, budgeting, taxation, internal administration and cash management of our company. From 1986 to 1991, Mr. Hu worked for Minsheng Shipping. From 1991 to 1997, he was the Financial Manager of Ming Sung (HK). From 1997 to 1999, Mr. Hu was the Financial Manager of Minsheng International Freight. From 1991 to 2001, he was the Audit Manager and Deputy Manager of quality control of Minsheng Industrial.

Ms. Lam Lai Sha ( ), aged 33, joined our company in 2005, Ms. Lam obtained a bachelor’s degree in both Accounting and Finance from the Washington State University in the United States of America in 1997. Since 1999, Ms. Lam had served as an Assistant Accountant for HK/South China Region of APLL, Senior Financial Analyst for North Asia/Greater China region of APLL and Finance Manager of APL Greater China region, before joining our company. She is the deputy finance controller and responsible for assisting the finance controller.

Mr. Huang Xuesong ( ), aged 42, joined our company in 2005 as the secretary of the board of directors and is responsible for developing investor relationships and coordinating and convening meetings of board of directors and shareholders. Mr. Huang obtained a master’s degree in Science from Shanghai East China Normal University in 1990. From 1990 to 1995, he worked at Changan Machinery Factory ( ). From 1997 to February 2005, he worked at the finance department and the office of the board of directors of Changan Automobile.

— 154 — DIRECTORS, SUPERVISORS, MANAGEMENT AND EMPLOYEES

Mr. Huang Ming ( ), aged 43, joined our company in 2001. Mr. Huang graduated from the Distance Learning Institute of the Central Party School of the China Communist Party in 2000. Mr. Huang is the supervisor of our sales and marketing department and mainly responsible for the business development and planning of our company. Mr. Huang worked as a manager of the general affairs department and multi-modal transportation department of Shanghai North Transportation Co., Ltd. ( ) from 2000 to 2001.

Ms. Sun Yuping ( ), aged 42, joined our company in 2001. She is the senior supervisor of our finished vehicle logistics department and mainly responsible for finished vehicles logistics operation. Ms. Sun graduated from the Tianjin Professional Skills Normal College ( ). From 1997 to 2001, she was the Deputy Manager of Chongqing Changan Automobile Fayun Co., Ltd. ( ).

Mr. Zhao Yuhang ( ), aged 29, joined our company in 2005. He is a supervisor of the Nanjing Ford Project Division and is responsible for the organization and establishement of subsidiary in Jiangling. Mr. Zhao graduated from Shanghai Maritime University in 1998. From 2001 to 2004, he was the chief representative of the Japan office of Minsheng Shipping. Before that, he has been the deputy manager and manager of the export operation department and business development department of the Shanghai branch office of Minsheng Shipping.

Mr. Zhang Jianping ( ), aged 39, joined our company in 2004. Mr. Zhang is the supervisor of our human resources and administration department and mainly responsible for human resources management, internal operation control and business development of our company. Mr. Zhang obtained a Bachelor of Science degree from Sichuan University in 1988. Mr. Zhang worked for the Changan Machinery Factory from 1988 to 1994. From 1995 to 2003, he served as an Officer of the human resources department of Changan Co..

Mr. Deng Zaiming ( ), aged 50, joined our company in 2003. Mr. Deng is the supervisor of finished vehicle logistics department and mainly responsible for automotive logistics operation, planning and management. Mr. Deng graduated from the Chinese Language Department of Chongqing Normal University. From 1993 to 2002, he was the Supervisor of the regional sales department, Deputy Manager, Deputy Head and Head of the logistics management department of Changan Automobile Sales Co., Ltd.

Mr. Tang Bing ( ), aged 37, joined our company in 2003. Mr. Tang is the deputy supervisor of car parts and components logistics department and mainly responsible for operation and management of the department and the temporary storage facilities. Mr. Tang graduated from the Distance Learning Institute of the Central Party School of the China Communist Party in December 2002 and obtained a bachelor’s degree in Economics Management.

— 155 — DIRECTORS, SUPERVISORS, MANAGEMENT AND EMPLOYEES

Mr. Wang Xingya ( ), aged 44, joined our company in 2002. Mr. Wang is the supervisor of multi-mode transportation department and mainly responsible for the overall operational control and management of the transportation of car components and parts and non-vehicle commodities businesses of CMAL. He obtained a master’s degree in Business Administration from in 2005. From 1999 to 2002, Mr. Wang worked at Chongqing Changan Automobile Fayun Co., Ltd. as a Manager.

Ms. Guo Yi ( ), aged 37, joined our company in 2003. She is the supervisor of our project department and responsible for our sales and market development. She graduated from (Chongqing Military Industrial Workers University), majoring in Machinery Craft and Equipment in 1992 and graduated from the Industrial Management Faculty of Chongqing University, majoring Accounting in 1998. In 2000, she was transferred to Shanghai Northern Transportation Company and was involved in international trading and cargo transportation business.

Mr. Wu Bangping ( ), aged 50, joined our company in 2002 and is the Deputy Manager of our Shanghai branch office. He is responsible for the overall strategic planning and operational control of the Shanghai branch office. Mr. Wu graduated from state-owned Changan Machinery Factory Employees University ( ) in 1985.

Mr. Shi Jianfeng ( ), aged 35, joined our company in 2004 and is the General Manager of our branch office in Dingzhou, Hebei Province. He is responsible for the overall management of our Hebei branch office. From 2000 to 2003, Mr. Shi completed his tertiary studies in law and company management. From 2002 to 2004, he worked at Changan Hebei and was Head of its production department, transportation department and supply logistics department.

Mr. Huang Chengxun ( ), aged 49, joined our company in 2001 and is the General Manager of our branch office in Nanjing, Jiangsu Province. He is responsible for the overall strategic planning and operational control of the Nanjing branch office. Mr. Huang graduated from Nanjing Polytechnic University in 1996. From 1985 to 1995, he worked at Changan Machinery Factory. From 2000 to 2001, he worked at Shanghai Northern Transportation Company.

Mr. Yang Ming ( ), aged 31, joined our company in 2002. He is the supervisor of our international freight department and responsible for the international freight-forwarding agency business of our company. He graduated from Dalian Maritime School in 1995. From September 1995 to August 2001, Mr. Yang works at Minsheng Shipping as Business Representative and Manager of its import/export department.

Mr. Tan Chaohu ( ), aged 32, joined our company in 2001. He is the supervisor of the Changan Industrial Park Regional Distribution Centre and responsible for its management. In 2001, he graduated from Asia International Open University in Macau with a master’s degree in Business Administration. In 2001, he was the Assistant to the general manager of our company.

— 156 — DIRECTORS, SUPERVISORS, MANAGEMENT AND EMPLOYEES

Qualified Accountant

Mr. Charles Yang Chuen Liang ( ), aged 47, joined our company in 2005. He is working as our company secretary and qualified accountant of our company on a full time basis and is a member of our senior management. Mr. Yang obtained a master’s degree in Business Administration from City University of the United Kingdom in 1983. He is a member of the Institute of Chartered Accountants in England and Wales and a member of the Hong Kong Institute of Certified Public Accountants. Mr. Yang was appointed by the Hong Kong SAR government as a Justice of the Peace (“JP”) in 2004. He was selected as “Outstanding Accountant Ambassador” by the Hong Kong Institute of Certified Public Accountants in 2004. Since 1998, Mr. Yang has been a special member of Guangzhou CPPCC. He is currently a member of Hebei CPPCC and a Director of Hong Kong Asia Television Limited.

Company Secretary

Mr. Charles Yang Chuen Liang ( ), please see his biography set out in the sub-section headed “Qualified Accountant”.

Compliance Officer

Mr. Huang Zhangyun ( ), please see his biography set out in the sub-section headed “Executive Directors”.

AUDIT COMMITTEE A1a42(2)

Mr. Peng Qifa, Ms. Wang Xu and Mr. Chong Teck Sin, all being the Independent Non-executive Directors, have been appointed as members of the audit committee of our group. The audit committee was set up in compliance with the requirements as set out in rules 5.28 and 5.29 of the GEM listing rules with written terms of reference based upon the guidelines published by the Hong Kong Institute of Certified Public Accountants. Mr. Peng Qifa has been appointed as the chairman of the audit committee.

NOMINATION COMMITTEE

Our company established a nomination committee on 22 February, 2005 with written terms of reference. The nomination committee has five members comprising Ms. Lau Man Yee, Vanessa, Mr. Wu Xiaohua, Mr. Peng Qifa, Ms. Wang Xu and Mr. Chong Teck Sin; three of them, namely Mr. Peng Qifa, Ms. Wang Xu and Mr. Chong Teck Sin are Independent Non-executive Directors. The chairman of the nomination committee is Ms. Lau Man Yee, Vanessa. The nomination committee is mainly responsible for making recommendations to the board on the appointment of Directors and the management of board succession.

— 157 — DIRECTORS, SUPERVISORS, MANAGEMENT AND EMPLOYEES

REMUNERATION COMMITTEE

Our company established a remuneration committee on 22 February, 2005 with written terms of reference. The primary duties of the remuneration committee include reviewing the terms of remuneration packages, determining the award of bonuses and considering the grant of options under the Share Appreciation Right Incentive Scheme. The remuneration committee consists of Mr. Yin Jiaxu, Mr. Koay Peng Yen, Ms. Wang Xu, Mr. Chong Teck Sin and Mr. Peng Qifa, three of them, namely Ms. Wang Xu, Mr. Chong Teck Sin and Mr. Peng Qifa, are Independent Non-executive Directors. The chairman of the remuneration committee is Mr. Yin Jiaxu.

Compliance Adviser

We will appoint Anglo Chinese, which is our Sponsor, as our compliance adviser pursuant to Rule 6A.19 of the GEM listing rules. The term of the appointment shall commence on the listing date and ends on the date which we distribute our annual report in respect of our financial results for the second full financial year commencing after the listing date, subject to early termination. During the term of appointment, Anglo Chinese shall, as compliance adviser, among other things, guide and advise us as to compliance with the GEM listing rules and all other applicable rules, codes and guidelines in discharge of its duties under Chapter 6A of the GEM listing rules.

Save pursuant to the Underwriting Agreement, Anglo Chinese does not have any shareholding interest in our company or has any right (whether legally or enforceable or not) to subscribe for or to nominate to subscribe for securities in our company.

STAFF A1a28(7)

As at Latest Practicable Date, our group had 1,416 full time employees who were engaged in the following functions:

Administration and finance 59 Information technology 18 Sales and marketing 46 Operations 1,293

Total 1,416

Relationship with employees

Our company recognises the importance of training to our employees. Apart from on-the-job training, our company regularly provides internal and external training for our staff to enhance technical or product knowledge.

Our company has not experienced any significant problems with our employees or disruption to our operation due to labour disputes, nor have we experienced any difficulties in the recruitment and retention of experienced staff. The Directors believe that our company has a good working relationship with our employees.

— 158 — DIRECTORS, SUPERVISORS, MANAGEMENT AND EMPLOYEES

Staff’s remuneration

For each of the two years ended 31 December, 2003 and 2004 and the nine months ended 30 September, 2005, staff expenses amounted to approximately Rmb5.8 million, Rmb19.6 million and Rmb28.2 million respectively. Employees of our group are remunerated with monthly salary, subject to review according to our salary policy.

Staff benefits A1a28(7)

The retirement benefits of full time employees of our company in the PRC are covered by the government-sponsored pension plans under which the employees are entitled to a monthly pension based on 20% of the basic salaries of employees. The contributions made by our company in respect of the pension plans for the year ended 31 December, 2003 and 31 December, 2004 and the nine months ended 30 September, 2005 were approximately Rmb326,000, Rmb988,000 and Rmb1,731,000, respectively. The benefits of the employees in the PRC are provided in accordance with the PRC law.

Share Appreciation Right Incentive Scheme

In order to enhance our incentive mechanism, we have adopted the Share Appreciation Right Incentive Scheme. The principal terms and conditions of the Share Appreciation Right Incentive Scheme are summarized in the section headed “Summary of terms of the Share Appreciation Right Incentive Scheme” in appendix VII to this prospectus. As at the Latest Practicable Date, no share appreciation rights have been granted under the Share Appreciation Right Incentive Scheme.

— 159 — SHARE CAPITAL

The share capital of our company immediately after completion of the Placing will be as follows:

Shares issued or to be issued, fully paid or credited as fully paid: A1a23(1) A1a15(1) Co 3rd(2) Rmb

65,600,320 Domestic Shares in issue (Note 2) 65,600,320 41,463,680 Non-H Foreign Shares in issue 41,463,680 50,000,000 H Shares to be issued by our company under the Placing (Note 3) 50,000,000 5,000,000 H Shares to be converted from Domestic Shares and offered by 5,000,000 the Vendors for sale under the Placing (Note 4)

Total Shares issued and to be issued:

162,064,000 Shares 162,064,000

The minimum level of public float to be maintained by our company at all times after listing under GEM listing rules is 25% of its share capital in issue from time to time.

Notes:

1 Assumptions

This table assumes that the Placing becomes unconditional.

2. The 65,600,320 Domestic Shares do not include the Sale H Shares (i.e. 5,000,000 H Shares to be converted from Domestic Shares, offered by the Vendors for sale under the Placing according to (the “Temporary Administration Measures for Reduction of State-owned Shares for the Raising of Social Security Fund”,orthe“Reduction Measures”) promulgated by the State Council on 12 June 2001.

3. Pursuant to the approval dated 31 December, 2005 issued by the CSRC, our company is authorised to offer the H Shares for subscription and to apply for listing of the H Shares on GEM.

4. The Sale H Shares are being offered for sale by the Vendors under the Placing in compliance with the Reduction Measures. Pursuant to the Reduction Measures, holders of State-owned shares of a joint stock limited company in the PRC shall offer for sale such number of its State-owned Shares equivalent to 10% of the funds to be raised under the initial public offering of the joint stock limited company. Accordingly, an aggregate of 5,000,000 Sale H Shares (to be converted from Domestic Shares) are offered for sale at the Placing Price by the Vendors under the Placing. These H Shares will rank pari passu with the new H Shares in all respects to be offered for subscription. The net proceeds arising from the sale of the Sale H Shares by the Vendors will be remitted to the NCSSF.

5 Ranking

The Placing Shares will rank pari passu with all H Shares in issue or to be issued as mentioned in this prospectus, and will qualify for all dividends and other distributions declared, made or paid on the Shares after the date of this prospectus.

— 160 — SHARE CAPITAL

MINIMUM PUBLIC FLOAT

Under the GEM listing rules, the minimum level of public float to be maintained by our company at all times after the listing is 25% of the share capital in issue from time to time, so long as no other securities (other than H Shares) have been issued by our company. If our company has issued any securities (other than H Shares) to the public, then: (i) 100% of such H Shares must be held by the public; (ii) the percentage of H Shares held by the public shall not be less than 10% of our company’s total issued share capital; and (iii) the minimum level of public float of the aggregate of H Shares in issue and such other securities to be issued to the public shall be not less than 25% of our company’s then total issued share capital.

RANKING

Domestic Shares, Non-H Foreign Shares and H Shares are all ordinary shares in the share capital of our company. However, H Shares may only be subscribed for, dealt with, and traded in Hong Kong dollars between legal or natural persons of Hong Kong, Macau, Taiwan or any country other than the PRC. Domestic Shares may only be subscribed for, dealt with and traded in Rmb between legal or natural persons of the PRC. Non-H Foreign Shares may only be subscribed for, dealt with and traded in currencies other than Rmb between legal or natural persons of Hong Kong. Macau, Taiwan or any country other than the PRC. All dividends in respect of H Shares are to be paid by our company in HK$ whereas all dividends in respect of Domestic Shares are to be paid by our company in Rmb. All dividends in respect of Non-H Foreign Shares are to be paid by our company in US$.

Shareholders’ rights of Non-H Foreign Shares is the same as those of Domestic Shares, except that the distribution of our company’s assets and payment of dividends to shareholders of Non-H Foreign Shares are in foreign currency. According to Company Law, Domestic Shares and Non-H Foreign Shares held by the Promoters should not be sold within a period of one year from the date of the incorporation of our company. As at the date of this prospectus, none of the Domestic Shares and Non-H Foreign Shares held by the Promoters have been sold. Currently Domestic Shares and Non-H Foreign Shares will not be admitted for listing on any stock exchange and no arrangement has been made for the Domestic Shares and Non-H Foreign Shares to be traded or dealt with on any other authorized trading facility in the PRC.

As to Non-H Foreign Shares, the Articles of Association do not contain express provisions as to whether such shares constitute a different class of shares of our company. A summary of the legal opinion, prepared by the PRC legal advisers, on the rights attached to Non-H Foreign Shares (the “Legal Opinion”) is set out under the paragraph headed “Legal Status of Non-H Foreign Shares” in appendix VI to this prospectus. Each of the Promoters has confirmed to us and the Stock Exchange that it has read the Legal Opinion and fully understands the legal position, rights and responsibilities of the holders of the Non-H Foreign Shares as described therein.

— 161 — SHARE CAPITAL

Upon the occurrence of certain events and the approval of the shareholders of our company in the general meeting and the class meetings, our company may seek approval from CSRC and the Stock Exchange for the conversion of Non-H Foreign Shares into H Shares and for listing of the newly converted H Shares on GEM, but such approval may or may not be granted. In addition, upon the approval by the State Council or its authorized supervisory departments and with the consent of the Stock Exchange, the Domestic Shares may be converted into H Shares.

Investors should note that if the Non-H Foreign Shares and, or Domestic Shares are converted into H Shares, the supply of H Shares on GEM will increase significantly and the share price of H Shares may be affected as a result.

Except as described above and in relation to the dispatch of notices and financial reports to shareholders, dispute resolution, registration of shares on different parts of the register of shareholders, the method of share transfer and the appointment of dividend receiving agents, all as provided for in the Articles of Association and summarized in appendix VI to this prospectus, the Domestic Shares, Non-H Foreign Shares and the H Shares will rank pari passu with each other in all respects and, in particular, will rank equally for all dividends or distributions declared, paid or made after the date of this prospectus and are entitled to the same shareholders’ protection. The transfer of Domestic Shares and Non-H Foreign Shares is subject to such restrictions as PRC law may impose from time to time.

Save for the Placing, our company does not propose to carry out a public or private issue or to place securities simultaneously with the Placing. Our company has not approved any share or debt issue plan.

— 162 — FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS

For the two years ended 31 December, 2003 and 2004

— Net profit in 2004 reached Rmb42.6 million, representing a growth of 100.8% as a result of the rapid turnover growth and the improvement in profit margins;

— Positive operating cash flows with a cash and bank balance of Rmb33.3 million as at the end of 2004;

— Gearing ratio improved from 19.9% in 2003 to 11.9% as at the end of 2004;

For the nine months ended 30 September, 2005

— Turnover grew 8.0% from Rmb600.6 million to Rmb648.8 million despite an apparent slowdown in the automotive industry in China in 2005;

— A 57.3% growth in net profit to Rmb46.7 million mainly due to better cost controls and an one-off adjustment of approximately Rmb10 million included in net profit arising from adjusted sales prices of supply chain management services rendered to Changan Ford in 2004;

— Both liquidity and gearing levels remained healthy;

For the year ended 31 December, 2005

— 163 — FINANCIAL INFORMATION

TRADING RECORD

Consolidated profit and loss accounts

Year ended Nine-month period ended 31 December, 30 September, 2003 2004 2004 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (unaudited)

Turnover 486,130 823,504 600,643 648,843 Cost of sales (451,131) (755,851) (553,659) (569,899)

Gross profit 34,999 67,653 46,984 78,944 Other gains 1,391 766 640 792 Distribution costs (8,137) (12,412) (8,721) (12,243) Administrative expenses (5,375) (11,438) (7,637) (15,340)

Operating profit 22,878 44,569 31,266 52,153 Finance costs (1,670) (1,974) (1,556) (1,316)

Profit before tax 21,208 42,595 29,710 50,837 Income tax expense —— —(4,112)

Profit attributable to shareholders of our company 21,208 42,595 29,710 46,725

Dividends 15,064 28,016 28,016 13,448

Basic earnings per share (Note) Rmb0.32 Rmb0.40 Rmb0.28 Rmb0.42

Note: The calculation of basic earnings per share is based on our profit attributable to shareholders of our company for the Track Record Period and the weighted average number of Shares in issue during the relevant financial year or period.

— 164 — FINANCIAL INFORMATION

Balance sheets

Group Company Group Company As at As at As at As at 31 December, 31 December, 30 September, 30 September, 2003 2003 2004 2005 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000

Total non-current assets 88,184 90,022 113,402 129,973 134,923

Total current assets 164,348 163,907 282,071 324,370 319,370

Total assets 252,532 253,929 395,473 454,343 454,293

98,437 99,834 147,103 149,823 149,823 Minority interest ——— 50 —

Total equity 98,437 99,834 147,103 149,873 149,823

— 165 — FINANCIAL INFORMATION

Group Company Group Company As at As at As at As at 31 December, 31 December, 30 September, 30 September, 2003 2003 2004 2005 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000

LIABILITIES Non-current liabilities Long-term liabilities 18,560 18,560 ———

Total current liabilities 135,535 135,535 248,370 304,470 304,470

Total liabilities 154,095 154,095 248,370 304,470 304,470

Total equity and liabilities 252,532 253,929 395,473 454,343 454,293

Net current assets 28,813 28,372 33,701 19,900 14,900

Total assets less current liabilities 116,997 118,394 147,103 149,873 149,823

— 166 — FINANCIAL INFORMATION

An application has also been made to the Stock Exchange for a waiver from strict compliance with Rules 7.03(1) and 11.10 of the GEM Listing Rules in relation to the inclusion of the accountants’ report for the full financial year ended 31 December, 2005 in this prospectus and a waiver has been granted by the Stock Exchange on the condition that the listing date should be on or before 28 February, 2006.

MANAGEMENT DISCUSSIONS AND ANALYSIS

Overview

We experienced substantial growth in our business and profitability during 2003 and 2004. Our net profits for the year ended 31 December, 2004 increased two folds from the previous year while net profit margins improved to 5.2% in 2004 from 4.4% in 2003. Our results for the nine months ended 30 September, 2005 also saw continuous remarkable growth when compared to the corresponding period in 2004. It is estimated that our company would achieve a net profit of not less than Rmb55.0 million for the year ended 31 December, 2005.

Our business can be broadly categorised into the following segments:

— transportation of finished vehicles;

— supply chain management services involving the organisation of supplies, distribution and storage of car components and parts; and

— transportation of non-vehicle commodities.

Variability of performance

By building on our established customer base and expertise in logistics services, we aim to further improve our future profitability by expanding our services to Changan Group, our major customer as well as developing our non-automobile logistics business targeting independent customers. Apart from Changan Group with which we have entered into, in compliance with Chapter 20 of the GEM listing rules, framework agreements to govern our continuing connected transactions for the three full financial years after listing, we do not normally enter into long term contracts with our other customers. Due to these reasons and other factors as described in the subparagraph titled “Factors affecting our performance” below, our past performance may not be indicative of our future performance.

— 167 — FINANCIAL INFORMATION

REVENUE MODEL

In relation to transportation of finished vehicles, our fees are charged based on the number, type and, or size of vehicles transported and the distance travelled. Additional fee will be charged for storing, on a temporary basis, finished vehicles before they are delivered to their final destinations.

As for our supply chain management services, we charge service fees calculated on the basis of the value of car components and parts we transport for our customers. Additional service fees will be charged for the sorting, packaging and storing the raw materials and components if required by the customers. Additional service fees will be charged for storing commodities with reference to the volume and value of the commodities.

Our fees for transportation of non-vehicle commodities are calculated with reference to the number of units, weight, size and value of commodities transported, delivery time required and distance involved.

Factors affecting our performance

China’s automotive industry

The pace of growth of the automotive industry in China will affect to a significant extent our business and profitability. The prospects of China’s automotive industry in turn depends on the country’s industrial policy for automobiles, taxation policies, availability of consumer credit for car purchases and the broader economic environment. Our Directors note the recent press reports relating to the slowdown in the automotive industry in China caused by, amongst other things, lowered demand for certain types of vehicles and rising prices of steel, a major raw material. If these factors continue in future, the demand for our services may be adversely affected.

China’s accession to the WTO

The removal of barriers to entry for foreign investors in the logistics industry in China after China’s accession to the WTO would mean more international logistics operators coming to China. As they are often more experienced and financially stronger, this may make it more difficult for us to expand our business. However, given our established relationships with some of key car manufacturers in China, proven track record and a low cost base, we believe that we will be able to compete effectively.

Continuation of business relationships with a major customer

Our performance in the future will be affected if our business relationships with Changan Group cease. The automotive logistics industry is highly specialised and requires good knowledge, appropriate technology support and expertise in delivering logistics services tailored to the high standards often required by car manufacturers. Once car manufacturers have established trust and long term business relationships with logistics service providers like us, the

— 168 — FINANCIAL INFORMATION

Directors believe that it is unlikely they will switch to use other logistics service providers. Further, as logistics service providers will in rendering their services often be privy to commercially sensitive information of car manufacturers, the latter will only outsource their logistics operations to trustworthy and established logistics service providers. Changan Group has been our major customer for over three years. For the reasons described above and in light of the three-year framework agreements we entered with Changan Group lasting until 31 December, 2008, our Directors believe that the likelihood of Changan Group ceasing to use our services is low. (Please refer to the “Business — Connected transactions” section for details of the framework agreements.)

Pricing policy

Our pricing is affected by the competitive environment of the automotive logistics market in China. While staying competitive, emphasis is placed on quality service and efficiency in delivering comprehensive logistics services to our customers. To this end, we are committed to investing in advanced technology for supporting reliable operational systems. Past record of our quality service as evidenced by the continuing business relationship with Changan Group, a leading automobile manufacturing group in China and a major customer also gives us flexibility to price our services relatively higher than our peers.

Critical Accounting Policies

Depreciation of property, plant and equipment

Depreciation of property, plant and equipment is calculated using the straight-line method to allocate their cost less their residual values over their estimated useful lives. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. The estimated useful lives of fixed assets are as follows:

Buildings 10 - 45 years Machinery 5 years Office equipment 5 years Motor vehicles 8 years

The above estimates are determined on the basis of our Directors’ experience in the logistics business which they believe reflect closely the actual length of life of various fixed assets categories.

Accounts receivable and provision for bad and doubtful debts

Prior to 2005, we only provided specific bad debt provisions for trade receivables and amounts due from related parties the collection of which was probably in doubt. Rmb84,000 and nil bad debt expenses were incurred for each of the two years ended 31 December, 2003 and 2004, respectively. Starting from January, 2005, we also make, in addition to specific bad debt provision, general provisions for impairment of trade receivables based on the difference between the asset’s carrying amount and the present value of estimated recoverable amounts

— 169 — FINANCIAL INFORMATION discounted at the effective interest rate. Trade receivables and amounts due from related parties in the balance sheet will be stated net of such provisions. For the nine months ended 30 September, 2005 we recognised a loss of approximately Rmb745,000 for the impairment of our trade receivables and due from related parties which has been included in administrative expenses in the profit and loss accounts.

Revenue recognition

Revenue from rendering of transportation of finished vehicles, supply chain management for car components and parts and transportation of non-vehicle commodities services is recognised upon completion of services, which generally coincides with the completion date of delivery of finished vehicles, car components and parts or non-vehicle commodities to the specified destinations.

Financial overview

Turnover

The table below presents the breakdown of revenue by business segments during the Track A1a33(1) Record Period.

Year ended Year ended Nine-month period ended 31 December, 31 December, 30 September, 30 September, 2003 2004 2004 2005 Rmb’000 % Rmb’000 % Rmb’000 % Rmb’000 % (unaudited) — Transportation of finished vehicles 376,752 77.5 540,803 65.7 398,166 66.3 423,590 65.3 — Supply chain management services for car components and parts 100,939 20.8 266,956 32.4 189,505 31.6 216,221 33.3 — Transportation of non-vehicle commodities 8,439 1.7 15,745 1.9 12,972 2.1 9,032 1.4

Total 486,130 100 823,504 100 600,643 100 648,843 100

During the Track Record Period, our turnover registered strong growth across all business segments as a result of, amongst other things, new customers which experienced growth in their businesses that led to increased demand for our services.

— 170 — FINANCIAL INFORMATION

Transportation of finished vehicles accounted for the majority of our revenue. As we expanded our business with Changan Ford and Changan Hebei, our turnover benefited from these two customers during the Track Record Period. In addition, we started to provide logistics services for Changan Nanjing in 2003 and the transportation of finished vehicle services for Beijing Hyundai Motor Company in 2004, thereby expanding our customer base for finished vehicles further. With the growth of output of our customers, the volume of finished vehicles handled by us increased significantly. We transported approximately 234,210, 325,477 and 303,472 finished vehicles for the two years ended 31 December, 2003 and 2004 and the nine months ended 30 September, 2005, respectively. Revenue per vehicle was approximately Rmb1,609 in 2003, approximately Rmb1,662 in 2004 and approximately Rmb1,396 during the nine months ended 30 September, 2005. The reasons for the decrease in revenue per vehicle are two-fold. First, a lower service fee is normally levied for transporting finished vehicles by river vis-a`-vis by road, the operating cost of which is relatively higher. As a higher proportion of finished vehicles were transported by river during 2005, the revenue per vehicle decreased. Secondly, lower fees were charged for transporting finished vehicles for Changan Nanjing and Changan Hebei to reflect lower operating costs as fewer trucks were required to transport the small-sized vehicles of Changan Nanjing and Changan Hebei.

With respect to our provision of supply chain management for car components and parts, three of our Regional Distribution Centres were put into operation in 2003 and all of the five Regional Distribution Centres have been put into operation in 2004. Commencement of operation of these Regional Distribution Centres helped boost our revenue generated from the supply chain management of car components and parts during the Track Record Period. We provided supply chain management services for car components and parts for approximately 62,000, 338,000 and 305,000 units of vehicles during each of the two years ended 31 December, 2003 and 2004 and the nine months ended 30 September, 2005, respectively. We progressively put more emphasis on providing logistics services relating to the supply of car components and parts to independent customers. For each of the two years ended 31 December, 2003 and 2004 and the nine months ended 30 September, 2005, income generated from such services provided to independent customers represented 10.8%, 15.1% and 17.0% of the total revenue generated from these services.

Although transportation of non-vehicle commodities remains a relatively small business segment for us during the Track Record Period, we believe that there is potential for further expanding this business. We have been a transportation service provider for three years, including the Track Record Period for Chengdu Baogang West Trade Company Limited, servicing its transportation and storage needs in the western region of the PRC. For Qingdao Haier Logistics Company Limited, we have been one of its transportation service providers since 2003, transporting its electrical appliances from Qingdao to Chongqing, and from Qingdao to Shanghai and nearby areas. As at the Latest Practicable Date, all our customers for transportation of non-vehicle commodities were independent third parties.

— 171 — FINANCIAL INFORMATION

Cost of sales and gross profit margin Co 3rd(27)

The table below presents the breakdown of cost of sales and gross profit margin for the periods indicated. i. Cost of sales of our group

Nine-month Nine-month Year ended Year ended period ended period ended 31 December, 31 December, 30 September, 30 September, 2003 2004 2004 2005 Rmb’000 % Rmb’000 % Rmb’000 % Rmb’000 % (unaudited)

Transportation costs 441,795 97.9 730,525 96.6 535,910 96.8 539,828 94.7 Salaries and related expenses (Note 1) 1,895 0.4 8,433 1.1 6,052 1.1 13,131 2.3 Depreciation expenses (Note 2) 2,387 0.6 5,978 0.8 3,999 0.7 6,236 1.1 Others (Note 3) 5,054 1.1 10,915 1.5 7,698 1.4 10,704 1.9

Total cost of sales 451,131 100 755,851 100 553,659 100 569,899 100

During the Track Record Period, about 55% of finished vehicles were transported by road, 20% by rail and 25% by river.

Most of our costs of sales comprise transportation charges paid to external transportation carriers. Our single largest provider of transportation service for the year ended 31 December, 2003 was Chongqing Railway Freight Co., Ltd. accounting for 9.3% of our transportation costs. A1a28(1)(b) Our single largest provider of transportation services for the year ended 31 December, 2004 and (i)(ii) the nine months ended 30 September, 2005 were Minsheng International Freight and Minsheng Logistics accounting for between 13.5% and 13.6% of our transportation costs. The five largest providers of transportation service for us accounted for 29.9%, 43.4% and 34.9% of our transportation costs in 2003, 2004 and the nine months ended 30 September, 2005, respectively.

Note 1: The increase in salaries and related expenses in 2004 was notably high as additional staff were recruited to cater for our business expansion in that year.

Note 2: Depreciation expenses are mainly related to the Regional Distribution Centres, including their depreciation charges of buildings and equipment.

Note 3: These cost of sales include rent, utilities, travel expenses, office expense, postage and business tax. In 2004, these expenses increased significantly by 128% in tandem with our strong growth in sales and an increase in capital investment in Regional Distribution Centres (which saw a corresponding rise in rental, utilities, travel and other related expenses.) These expenses increased further by 39% for the nine months ended 30 September, 2005 due to an increase in business tax as a result of the substantial growth in sales . In addition, we rented an additional warehouse at the end of 2004 and as a result, our rental expenses, utilities, insurance and office expenses increased in 2005.

— 172 — FINANCIAL INFORMATION ii. Gross profit margins of our group

Nine-month Nine-month Year ended Year ended period ended period ended 31 December, 31 December, 30 September, 30 September, 2003 2004 2004 2005 %%%% (unaudited)

— Transportation of finished vehicles 6.7% 7.6% 5.5% 9.5% — Supply chain management of car components and parts 10.3% 10.7% 13.6% 19.6% — Transportation of non-vehicle commodities 20.3% 14.6% 20.3% 18.8%

Overall gross profit margin 7.2% 8.2% 7.8% 12.2%

Our gross profit margin relating to finished vehicle transportation is low as we do not own a large fleet of vehicles or vessels, and we outsource a large part of our transportation services. As a result, our transportation costs tend to be high. On the other hand, we enjoy higher gross profit margin in respect of non-vehicle commodities transportation and supply chain management services as we place less reliance on external transportation service providers.

Distribution expenses

Selling expenses were Rmb8.1 million in 2003, Rmb12.4 million in 2004 and Rmb12.2 million for the nine months ended 30 September, 2005, representing approximately 1.7%, 1.5% and 1.9% of our turnover in the respective periods. A majority of our selling expenses relate to salaries and fringe benefits paid to our sales and marketing staff, their travelling, business and communication expenses. These expenses accounted for 64.6%, 82.2% and 88.2% of the selling expenses for each of the two years ended 31 December, 2003 and 2004 and the nine months period ended 30 September, 2005, respectively. We incurred some Rmb405,000 advertising campaign for promoting our company and services during the Track Record Period.

Administration expenses

Administration expenses were approximately Rmb5.4 million in 2003, Rmb11.4 million in 2004 and Rmb15.3 million for the nine months ended 30 September, 2005, representing approximately 1.1%, 1.4% and 2.4% of our turnover in the respective periods. Included in administration expenses were salaries and related expenses of some Rmb1.1 million in 2003,

— 173 — FINANCIAL INFORMATION

Rmb4.6 million in 2004 and Rmb6.9 million for the nine months ended 30 September, 2005. The slight increase in administration expenses during the Track Record Period was as a result of:

(i) increased automation of our company’s accounting and administration systems, leading to higher amortisation expenses (of approximately Rmb492,000 in respect of software amortisation in 2004.); and

(ii) higher depreciation charges for office equipment and company cars. (Rmb449,000 in 2003; Rmb858,000 in 2004 and Rmb667,000 for the nine months ended 30 September, 2005).

Finance costs

As we have not relied heavily on external borrowing, our finance costs have been low, being approximately Rmb1.7 million in 2003, Rmb2.0 million in 2004 and approximately Rmb1.3 million for the nine months ended 30 September, 2005. For the two years ended 31 December, 2003 and 2004 and the nine months ended 30 September, 2005, approximately Rmb1,118,000, approximately Rmb1,598,000 and approximately Rmb991,000 respectively were related to interest on bank loans and other long-term payables, respectively.

Taxation expenses

Since all our operations are in the PRC, we are only subject to the PRC taxes during the Track Record Period.

As a foreign invested joint stock limited enterprise and established in the Chongqing Technological Economic Development Zone, our applicable enterprise income tax rate is 15%. In accordance with an Approval of Enjoying Favourable EIT Policy issued by the national tax bureau of Chongqing Technological Economic Development Zone on 22 May, 2003, we are entitled to exemption from enterprise income tax in 2003 and 2004, followed by a 50% tax reduction from 2005 to 2007. We have been advised by our legal advisers as to PRC law that we are entitled to enjoy exemption and reduction of corporate income tax until the end of 2007, irrespective of whether or not H shares in our company are listed on GEM.

We are required to pay 3% business tax for transportation services and 5% for storage and distribution services. The amount of business taxes incurred in each of the two years ended 31 December, 2003 and 2004 and the nine months ended 30 September, 2005 were approximately Rmb2.2 million and Rmb4.6 million and Rmb5.4 million, respectively.

For our deregistered subsidiary, Chongqing Changfa, as it was in a tax loss status during the Track Record Period, no enterprise income tax was incurred.

— 174 — FINANCIAL INFORMATION

COMPARISON OF OPERATING RESULTS

Comparison of results for the years ended 31 December, 2003 and 2004

Turnover

As we expanded all of our three major business segments aggressively in 2004, our turnover grew 69.4% from Rmb486.1 million in 2003 to Rmb823.5 million in 2004. Turnover growth rates for transportation of finished vehicles, supply chain management for car components and parts and transportation of non-vehicle commodities were 43.5%, 164.5% and 86.6%, respectively.

The following table sets out the turnover and the number of vehicles transported, where applicable, for each of our three business segments in 2003 and 2004:

Year ended 31 December, 2003 2004 Change Rmb’000 Rmb’000 %

Turnover Transportation of finished vehicles 376,752 540,803 43.5 Supply chain management for car components and parts 100,939 266,956 164.5 Transportation of non-vehicle commodities 8,439 15,745 86.6

No. of vehicles No. of vehicles Volume Transportation of finished vehicles 234,210 325,477 39.0 Supply chain management for car components and parts 62,151 338,924 445.3 Transportation of non-vehicle commodities ———

Cost of sales and gross profit margin

Cost of sales in 2004 increased substantially by 67.5% as a result of our strong sales growth. Rate of increase in cost of sales for transportation of finished vehicles, supply chain management for car components and parts and transportation of non-vehicle commodities were 42.1%, 163.1% and 99.9%, respectively.

While we have been expanding all the three business segments under our growth strategy, we focus on the supply chain management business which commands higher gross margin, and transportation of non-vehicle commodities for diversification purpose and higher gross margin. Gross profit margin for transportation of finished vehicles increased slightly in 2004 as more higher-value finished vehicles were transported and longer distances were involved. Gross profit

— 175 — FINANCIAL INFORMATION margin relating to supply chain management services remained stable in 2004 albeit the increasing competitive environment. Gross profit margin in respect of transportation of non-vehicle commodities decreased to 14.6% in 2004 from 20.3% because sales to Chengdu Baogang West Company Limited and Qingdao Haier Logistics Company Limited were more profitable in 2003 as a result of more frequent use of river and rail transportation which carried lower cost of sales. As some 66% of our turnover is generated from transportation of finished vehicles, of which the gross profit margin improved, our overall gross profit margin increased to 8.2% in 2004 (2003: 7.2%).

Distribution expenses

On the back of our strong growth in turnover, our selling expenses increased 52.5% in 2004. In order to strengthen our sales and marketing capability for supporting our business expansion in 2004, we expanded our sales staff from 20 in 2003 to 36 in number in 2004. Therefore, the salaries, travelling, business and communication expenses of our sales and marketing department rose 94.1% in 2004.

Administration expenses

Administration expenses increased 112.8% in 2004. Included in these expenses were salaries and related expenses which grew 345.0% in 2004, along with the increase in the number administration and information technology staff from 37 in 2003 to 65 in 2004. The substantial increase in salaries and related expenses was due to the following reasons:

— CMAL recruited additional managerial staff to cope with increased business volume with Changan Ford, one of our major customers, in 2004. Changan Ford Regional Distribution Centre and Changan Co. Headquarters Regional Distribution Centre were established in the latter half of 2003. Salaries paid to these managerial staff were higher than the then existing pay scale given tight labour supply in the then domestic logistics market;

— CMAL also raised the salaries and other staff payments including retirement benefit contributions, housing benefits and unemployment contributions in line with the market; and

— additional training expenses were incurred in 2004 to ensure that it has a strong and competent team of staff to cope with the anticipated business expansion.

Depreciation of office equipment and amortisation of software increased 192.2% as more office equipment and software were purchased as our business expanded.

— 176 — FINANCIAL INFORMATION

Other expenses

The following table shows the breakdown of other expenses:

Year ended 31 December, 2003 2004 Rmb’000 Rmb’000

Communication expense 614 1,097 System development expense — 531 Tax 108 335 Utility expense 380 785 Consultation fees 1,035 985 Labour related expense 88 51 Office expense 759 758 Repair and maintenance 259 1,116 Insurance expense 241 287 Consumables 685 915 Transportation and vehicle license fees 1,298 1,892 Advertising expense 405 23 Management fee 229 196 Conveyance expense 204 245 Amortization of deferred expense 194 258 Others 1,622 2,783

Total other expenses 8,121 12,257

The increase in other expenses during 2004 was in line with our business expansion during the year. Other expenses represented about 1.5% of our turnover during 2004 (2003: 1.7%). Our headcount increased by some 42% in 2004 from the previous financial year. As a result, communication, utility and transportation expenses rose. Repair and maintenance for our Regional Distribution Centres and vehicles also surged in tandem with increased business activities. During the period under review, we upgraded our information technology and management information systems.

— 177 — FINANCIAL INFORMATION

Employee benefit expense

We had 1,139 employees as at 31 December, 2004 (2003: 802 employees). Total employee benefit expenses increased notably from Rmb5.8 million in 2003 to Rmb19.6 million in 2004 mainly due to (1) the increase in our headcount, in particular logistics specialists whose salaries are relatively high, in order to cope with the expansion of our business and (2) more types of taxes paid by us in respect of our temporary and permanent staff in compliance with new labour laws in the PRC in 2004.

Finance costs

In the light of positive cashflow generated from our operations and capital injected by our shareholders during the Track Record Period, we have not relied heavily on external borrowing to support our operations. In October, 2003, we borrowed a long term loan of approximately Rmb16.6 million at an interest rate of 5.5% per annum to finance the purchase of land use rights. As a result, our finance costs increased from some Rmb1.7 million in 2003 to Rmb2 million in 2004. Interest on bank loans, of some Rmb1.4 million during 2004 accounted for approximately 5.2% of our average bank loans of Rmb29.1 million during the year. (Note: In 2003, interest on bank loans of some Rmb0.9 million represented approximately 5.4% of our average bank loans of Rmb16.6 million during the year.)

Taxation expenses

There was no enterprise income tax expense in both 2003 and 2004 as we were entitled to an exemption from enterprise income tax in these two years. As the tax rate on net sales of supply chain management for car components and parts of 3% to 5% was higher than that of transportation of finished vehicles (which commanded a lower business tax rate of 3%), our overall business taxes increased 107.7% in 2004.

Net profit

As a result of the rapid turnover growth and improvement in profit margins, our net profit in 2004 reached some Rmb42.6 million, representing a growth of 100.8%.

— 178 — FINANCIAL INFORMATION

Trade and other receivables and amounts due from related parties

Our terms of trade remained stable during 2004. Set out below is the breakdown of trade and other receivables and the ageing analysis:

(i) Trade and other receivables

As at 31 December, 2003 2004 Rmb’000 Rmb’000

Accounts receivable 7,958 16,208 Bills receivable — 18,805 Other receivables 13,536 3,990 Prepayments 2,439 3,612

23,933 42,615

(ii) Ageing analysis

As at 31 December, 2003 2004 Rmb’000 Rmb’000

0 to 90 days 7,856 12,659 91 to 180 days 90 1,707 181 to 365 days 12 1,732 Over 1 year — 110

7,958 16,208 Less: provision for impairment of receivables ——

7,958 16,208

— 179 — FINANCIAL INFORMATION

(iii) Other receivables

As at 31 December, 2003 2004 Rmb’000 Rmb’000

Advance to transportation companies 8,700 — Deposits paid to customers 1,300 1,300 Government grant receivable 1,249 1,018 Advance to employees 2,010 1,394 Others 277 278

Total 13,536 3,990

Prior to January 2004, we made cash advances to third party transportation companies in respect of the transportation services outsourced to these companies. These advances were made in order to secure prompt services from the external transportation companies whose services were in great demand at a time when, The Yangtze River Three Gorges construction project, was underway. We ceased to make these advances starting in 2004.

We pay deposits to our new customers as a guarantee for our quality service. These deposits will be returned to us in full when we complete our services which usually coincides with delivery of commodities to their final destinations.

Amounts due from related parties

As at 31 December, 2003 2004 Rmb’000 Rmb’000

(i) Trade receivables

Changan Automobile 68,510 94,074 Changan Ford 19,566 65,868 Changan Hebei 6,897 28,564 Changan Nanjing 2,639 4,415 Changan Lingyun — 1,695 Others 796 3,788

Subtotal 98,408 198,404

— 180 — FINANCIAL INFORMATION

As at 31 December, 2003 2004 Rmb’000 Rmb’000

(ii) Deposits

Changan Ford 2,111 2,005 Changan Automobile 8,291 5,718 Hebei Changan 600 — Others 200 —

Subtotal 11,202 7,723

Total amounts due to related parties 109,610 206,127

As shown above, amounts receivable from related parties mainly comprise trade receivables from Changan Group, our major group of customers and to a lesser extent, deposits paid to them as a guarantee for our quality service. In 2003, the aggregate amounts receivable from and deposits paid to Changan Group accounted for some 99.1% of our total amounts due from related parties. Amounts due from related parties (excluding deposits) represented some 20.2% and 24.1% of our turnover for each of the two years ended 31 December, 2003 and 2004, respectively. With the development of logistics business with independent customers, the aggregate amounts due from Changan Group represented 25% of our turnover in 2004.

We grant credit terms of up to 90 days to Changan Group which in general settle their payments within the credit period. Our average number of debtor turnover days in 2004 was about 110 days, which is a little higher than the average of 100 days in 2003 primarily due to bills receivable of Rmb18,805,000, the credit period of which is normally 180 days.

Trade and other payables and amounts due to related parties

We recorded trade and other payables of some Rmb197.8 million as at 31 December, 2004, representing 24% of our turnover for that year (2003: 25.4%). While the normal credit terms granted by our suppliers are up to 90 days, our suppliers may from time to time extend credit terms to 180 days.

— 181 — FINANCIAL INFORMATION

Accounts payable rose 64.7% in 2004 in tandem with business expansion in 2004. The following table shows the breakdown of trade and other payables and the ageing analysis:

(i) Trade and other payables

As at 31 December, 2003 2004 Rmb’000 Rmb’000

Accounts payable 100,902 166,168 Bills payable 11,000 — Other payables 9,088 29,924 Other taxes 1,906 1,697 Accruals 390 —

123,286 197,789

(ii) Ageing analysis of accounts payable

As at 31 December, 2003 2004 Rmb’000 Rmb’000

0 to 90 days 92,564 159,033 91 to 180 days 8,283 5,436 181 to 365 days 55 1,610 Over 1 year — 89

100,902 166,168

— 182 — FINANCIAL INFORMATION

(iii) Other payables

As at 31 December, 2003 2004 Rmb’000 Rmb’000

Guarantee deposit 4,096 25,075 Rental fee of warehouse — 1,929 Payable for property, plant and equipment 3,369 1,149 Bonus to employees 588 — Others 1,035 1,771

Total 9,088 29,924

We receive guarantee deposits from third party transportation companies as a guarantee of their services. When the vehicles, automobile parts and components or other commodities have been promptly delivered to the destinations specified by our customers, the deposits will be returned in full to the transportation companies. Guarantee deposits payable increased in 2004 from the previous year on the back of increased turnover as our business expanded.

(iv) Amounts due to related parties

Tabulate below is a breakdown of our amounts due to related parties:

As at 31 December, 2003 2004 Rmb’000 Rmb’000

Minsheng International Freight 4,807 13,233 Minsheng Logistics 4,413 14,944 Minsheng Shipping 215 4,349 Changan Transportation 1,352 495

Total amounts due to related parties 10,787 33,021

The amounts due to related parties largely comprise outsourcing fees paid to Minsheng Group for rendering river transportation services. In view of our substantial growth in business during 2004, our demand for river transportation services heightened leading to increased amounts payable to Mingsheng Group.

— 183 — FINANCIAL INFORMATION

Liquidity, gearing and interest coverage

We maintained a strong liquidity position during the Track Record Period. As at the end of 2003 and 2004, our cash and bank balances remained stable at Rmb30.8 million and Rmb33.3 million, respectively.

Our gearing ratio calculated as total bank borrowings to shareholders’ funds improved from 19.9% as at the end of 2003 to 11.9% as at the end of 2004. Interest coverage during 2004 was some 23 times (2003: 14 times) suggesting strong capability to service the group’s debt. The effective interest rate of our bank borrowings in 2004 was some 5.2% per annum.

Comparison of results between the nine months ended 30 September, 2005 and the corresponding period in 2004

Turnover

Our turnover grew 8.0% to Rmb648.8 million for the nine months ended 30 September, 2005 (September 2004: Rmb600.6 million). Turnover growth rates for transportation of finished vehicles and supply chain management for car components and parts were 6.4% and 14.1%, respectively. Turnover from transportation of non-vehicle commodities fell 30.4% for the nine months ended 30 September, 2005 as we scaled down this business segment given the rising fuel costs in 2005 that impacted our profit margin. Besides, one of our major customers for transportation of non-vehicle commodities has reduced its production volume in 2005.

During the nine months ended 30 September, 2005, sales generated from transportation of finished vehicle services continued to grow due to increase in the quantities of vehicles transported by us for Changan Hebei and Changan Nanjing. We also recorded strong growth in sales to Changan Ford due to the fact that Changan Ford’s best seller, Mondeo, was put into production only in late 2004, and the revenue generated from the related logistics services began was only recognised in 2005. Included in turnover for the nine months ended 30 September, 2005 is an one-off adjustment of approximately Rmb10 million arising from adjusted sales prices of supply chain management services rendered to Changan Ford in 2004. (Please refer to the paragraph headed “Non-exempt continuing connected transactions” in the “Business” section of this prospectus for further details.)

— 184 — FINANCIAL INFORMATION

The following table sets out the turnover and the number of vehicles transported, classified by business segments during the nine months ended 30 September, 2004 and 2005:

Nine-month period ended 30 September, 2004 2005 Change Rmb’000 Rmb’000 %

Turnover Transportation of finished vehicles 398,166 423,590 6.4 Supply chain management for car components and parts 189,505 216,221 14.1 Transportation of non-vehicle commodities 12,972 9,032 -30.4

No. of vehicles No. of vehicles Volume Transportation of finished vehicles 243,932 303,472 24.4 Supply chain management for car components and parts 267,371 305,337 14.2

Cost of sales and gross profit margin

During the nine months ended 30 September 2005, our gross profit margins for transportation of finished vehicles increased from 5.5% to 9.5% mainly because we increased the use of Wuhan as a transportation hub for finished vehicles and the use of river transportation, both of which carried lower transportation costs. Our gross profit margin for supply chain management of car components and parts improved notably from 13.6% to 19.6% mainly because we made an one-off adjustment of approximately Rmb10,000,000 to sales in 2005 after we entered into a supplemental agreement with Changan Ford in 2005 in which Changan Ford agreed to increase the historical prices of certain supply chain management contracts to compensate us for higher costs of sales in 2004. The related costs of sales have been booked in 2004 and therefore the entire Rmb10,000,000 was included in both gross profits and net profits for the nine months ended 30 September 2005. For details of the Rmb10,000,000 adjustment to sales in 2005, please refer to the paragraph headed “Non-exempt continuing connected transactions” in the “Business” section of this prospectus. Compared to the gross profit margins for the two other business segments, the gross profit margin for transportation of non-vehicle commodities dropped from 20.3% to 18.8% because we recorded lower sales from transportation of non-vehicle commodities, which used to command a higher gross profit margin, for one of our customers.

The above reasons, together with, efficient use of resources and cost monitoring, had led to an improvement in our overall gross profit margins.

— 185 — FINANCIAL INFORMATION

Distribution expenses

Our total distribution expenses of Rmb 12.2 million for the nine months ended 30 September, 2005 remained stable and represented some 1.9% of our turnover during the period (2004: 1.5%).

Included in distribution expenses were salaries and benefits, travelling, business and communication expenses of our sales and marketing department that rose 52.7% during the nine months ended 30 September, 2005 due to increase in our headcount for supporting our business development.

Administration expenses

Administration expenses almost doubled to Rmb15.3 million during the nine months ended 30 September, 2005 because of a significant increase in travelling and transportation expenses in conjunction with our business expansion in Nanjing and Hebei regions. Additional expenses were incurred in relation to the development of the Enterprise Resources Planning system to upgrade our management information systems. Taxation increased by 106.9% to some Rmb420,000 for the nine months ended 30 September, 2005 with additional property tax and stamp duty paid on newly acquired properties. In addition, from January 2005, we began to provide general bad debt provision for accounts receivables and due from related parties, which increased our bad debt expense.

Other expenses

We incurred other expenses of some Rmb9.9 million during the nine months period ended 30 September, 2005 (September 2004: Rmb8.5 million).

— 186 — FINANCIAL INFORMATION

Tabulate below is a breakdown of other expenses:

Nine-month period ended 30 September, 2004 2005 Rmb’000 Rmb’000

Communication expense 767 800 System development expense 60 — Tax 203 420 Utility expense 555 587 Consultation fees 22 720 Labour related expense 35 10 Office expense 347 457 Repair and maintenance 593 632 Insurance expense 93 102 Consumables 753 496 Transportation and vehicle license fees 150 — Advertising expense 26 28 Management fee 623 684 Amortization of deferred expense 214 119 Others 4,039 4,894

Total 8,480 9,949

Other expenses accounted for 1.5% of our turnover during the nine months period ended 30 September, 2005 (2004: 1.4%). The increase of some Rmb1.4 million in other expenses during 2005 mainly resulted from increase of consultation fees.

Employee benefit expense

We had 1,416 employees as at 30 September, 2005 (September 2004: 973 employees). Total employee benefit expenses increased two fold from Rmb13.8 million for the nine months ended 30 September, 2004 to Rmb28.2 million for the nine months ended 30 September, 2005. The significant increase in employee benefit expenses was largely due to increase in staff and workers’ bonus and welfare fund.

— 187 — FINANCIAL INFORMATION

Finance costs

We continued to reduce our reliance on external borrowings as evident in the 23.8% decrease in interest on bank loans and other long-term payable for the nine months ended 30 September, 2005.

Taxation expenses

Our company was entitled to a 50% tax reduction for the year 2005. For the nine months ended 30 September, 2005, the applicable tax rate was 7.5% and the provision for income tax amounted to Rmb4.1 million.

Net profit

We achieved a 57.3% growth in our net profit for the nine months ended 30 September, 2005 which is significantly higher than the 8.0% increase in turnover given the higher proportion of sales generated from transportation of finished vehicles to Wuhan and river transportation, both of which carry higher profit margins. An one-off adjustment of approximately Rmb10,000,000 that was included in net profit arising from adjusted sales prices of some of our supply chain management contracts with Changan Ford in 2004 also contributed to the significant rise in net profit in 2005.

Trade and other receivables and amounts due from related parties

Trade and other receivables and amounts due from related parties were Rmb54.7 million and Rmb236.2 million for the nine months ended 30 September, 2005. Amounts due from related parties was mostly of a trade nature. Debtor turnover days for the nine months ended 30 September, 2005 were 122 days. Most of our accounts receivables and bills receivables in trade and other receivables and amounts due from related parties as at the 30 September, 2005, were aged between nil to 90 days, our normal credit period. We have made a provision of approximately Rmb67,000 for the impairment of trade receivables during the nine month period ended 30 September, 2005. In addition, a provision for impairment of amounts due from related parties of Rmb678,000 was made during this period in accordance with our new provision policy that come into effect from January 2005.

Trade and other receivables of some Rmb54.7 million as at 30 September, 2005 comprised, amongst other things, accounts receivable of some Rmb22.2 million and bills receivable of some Rmb18.7 million. Subsequent settlements up to 31 December, 2005 amounted to some Rmb20.9 million in respect of accounts receivable and bills receivable as at 30 September, 2005.

— 188 — FINANCIAL INFORMATION

The following tables show details of subsequent settlements of our amounts due from related parties and accounts receivable:

Amounts due from related parties

Subsequent As at settlement up to As at 30 September, 31 December, 31 December, 2005 2005 2005 Rmb million Rmb million Rmb million

0~90 days 218.8 176.8 42.0 91~180 days 10.9 10.5 0.4 181~365 days 1.9 1.9 —

231.6 189.2 42.4

Accounts receivable

Subsequent As at settlement up to As at 30 September, 31 December, 31 December, 2005 2005 2005 Rmb million Rmb million Rmb million

0~90 days 16.5 16.5 — 91~180 days 2.8 1.9 0.9 181~365 days 3.0 1.6 1.4

Total 22.3 20.0 2.3

Of the total outstanding amount of approximately Rmb 44.7 million due from related parties and other independent customers, a majority was settled during January 2006. The Directors are of the view that no additional provision for impairment of trade receivables and amounts due from related parties needs to be made.

— 189 — FINANCIAL INFORMATION

The breakdown of other receivables as at 30 September, 2005 is as below:

As at 30 September, 2005 Rmb’000

Deposits paid to customers 300 Government grant receivable — Advance to employees 1,538 Others 382

Total 2,220

The government grants receivable relates to the acquisition of the land use rights of a piece of land on which Changan Industrial Park Regional Distribution Centre is built. The receivables have been settled in June 2005.

The cash advances to employees for business development represents amounts prepaid to employees for traveling and business development purposes. Such advances arise frequently as and when needed and we are in turn reimbursed on a regular basis. Any balances unreturned by the employees will be deducted from the salaries payable to the employees.

Trade and other payables and amounts due to related parties

Trade and other payables and amounts due to related parties were some Rmb188.9 million and Rmb45.9 million for the nine months ended 30 September, 2005. Amounts due to related parties were all of a trade nature. Creditor turnover days for the nine months ended 30 September, 2005 were 112 days.

— 190 — FINANCIAL INFORMATION

Other payables

As at 30 September, 2005 Rmb’000

Guarantee deposit 23,155 Rental fee of warehouse — Payable for property, plant and equipment 3,356 Bonus to employees 5,462 Others 2,341

Total 34,314

We receive service guarantee deposits from external transportation companies that we use. The significant guarantee deposits as at 30 September, 2005 (31 December, 2004: Rmb25.1 million) is as a result of our growth in business during 2005.

As at 30 September, 2005, we recorded construction expense payables of some Rmb3.4 million, being unpaid construction costs in relation to the construction of Changan Ford Regional Distribution Centre phase III and phase IV, Changan Hebei Regional Distribution Centre and Changan Industrial Park Regional Distribution Centre phase I.

Liquidity, gearing and interest coverage

Our liquidity level as at 30 September, 2005 remained sufficient. We maintained bank balances and cash of Rmb33.4 million as at 30 September, 2005 (31 December, 2004: Rmb33.3 million).

Our gearing ratio increased from 12.3% as at 30 September, 2004 to 17.3% as at 30 September, 2005 but remained at a healthy level. Interest coverage during the nine month period ended 30 September, 2005 was some 40 times suggesting strong capability to service the group’s debt. The effective interest rate of our bank borrowings for the nine months ended 30 September, 2005 was some 5.2% per annum.

— 191 — FINANCIAL INFORMATION

PROPERTY INTERESTS

Particulars of our group’s property interests are set out in appendix IV to this prospectus.

As at 30 November, 2005, the Group’s properties were revalued by Vigers Appraisal & Consulting Limited, an independent property valuer, and the relevant property valuation report is set out in appendix IV — Property Valuation. Pursuant to the valuation performed by Vigers Appraisal & Consulting Limited, the valuation of the Group’s reserves as at 30 November, 2005 amounted to Rmb108,000,000 (equivalent to approximately of HK$103,846,000). This resulted in revaluation surplus of approximately Rmb50,649,000 when compared with the net book value of approximately Rmb57,351,000 as at 30 November, 2005. The above adjustment does not take into account the surplus arising from revaluation of the Group’s properties. Such revaluation surplus will not be included in the Group’s consolidated accounts for the year ended 31 December, 2005. An additional depreciation of approximately Rmb1,638,000 would be charged against the profit and loss account had such assets been stated at valuation.

A reconciliation of the net book value of the relevant property interests as at 30 September, 2005 to their market value as stated in appendix IV to this prospectus is as follows:

Rmb’000

Net book value at 30 September, 2005 57,794 Depreciation for the two months ended 30 November, 2005 (443)

Net book value at 30 November, 2005 57,351 Valuation surplus 50,649

Valuation amounts at 30 November, 2005 108,000

LIQUIDITY AND CAPITAL RESOURCES A1a32(5)(a)(b)

Sources of liquidity

Our principal sources of liquidity have been, and are expected to be, cash flow from operations, and to a lesser extent, debt financing from banks. Our principal uses of cash have been, and are expected to be operational costs, and to a lesser extent, repayment of bank loans. We had aggregate cash and cash equivalents of some Rmb33.4 million as at 30 September, 2005 and some Rmb33.3 million as at 31 December, 2004. Our current ratio (being current assets divided by current liabilities) was between 1.0 times and 1.2 times as at financial year or audit period end during the track record period, suggesting healthy liquidity. In view of the nature of our business which in the near future is expected to be reliant on our business with Changan Group and taking into account proceeds from the listing, it is not expected that the mix and relative cost of capital resources will vary significantly in the near future. (Please refer to the “Business — Connected transactions” sections for further details of our business transactions with Changan Group after listing.)

— 192 — FINANCIAL INFORMATION

In the near term, the expansion of our supply chain management services through the construction and, or completion of certain phases of our distribution centres and purchase of equipment and information technology systems will be financed by proceeds from the listing of our H Shares on the Stock Exchange.

Our ability to meet our day-to-day working capital needs from internally generated cash flows will be affected by demands for our services that may be affected by factors outside our control, such as economic downturns and change in government policies that adversely affected the automobile industry in China. To the extent that we do not generate sufficient cash flow from our business operations to meet our working capital needs, we may rely on bank borrowings and, or securities offerings.

Net current assets

As at 31 December, 2005, based on unaudited consolidated management accounts, we had net current assets of approximately Rmb20,291,000. Current assets comprised trade and other receivables of approximately Rmb54,477,000, due from related parties of approximately Rmb248,548,000 and cash and cash equivalents of approximately of Rmb36,865,000. Current liabilities comprised mainly trade and other payables of approximately Rmb227,793,000, due to related parties of approximately Rmb45,025,000, dividends payable of approximately Rmb40,727,000, and tax payable of approximately Rmb6,054,000.

Directors’ opinion of the net current asset position

The Directors are of the opinion that, taking into account the internally generated resources of our company, and the estimated net proceeds of the Placing, our company has sufficient working capital for our present requirements.

Cash Flows

The following table summarises our cash flow during the Track Record Period.

Nine-month Year ended period ended 31 December, 30 September, 2003 2004 2005 Rmb million Rmb million Rmb million

Net cash from operating activities 24.5 43.5 15.7 Net cash (used in) investing activities (52.8) (34.1) (20.8) Net cash from financing activities 39.0 5.6 5.2 Net increase in cash and cash equivalents 10.7 15.0 0.1

— 193 — FINANCIAL INFORMATION

Cash flow from operating activities

Our cash inflow from operating activities represents primarily fees from customers for logistics services provided to them. In general, we receive our fee upon completion of our services which coincides with delivery of finished vehicles, automobile parts and components and, or other commodities as the case maybe to their destinations specified by our customers. The receipt of fees is certain as we only offer credit terms to customers with good credit record and other customers are charged on a “cash-on-delivery” basis. Our cash outflow from operating activities represents principally the purchase of transportation services from independent services providers, payments for business quality deposits paid to our customers, as well as payments for staff costs, selling and distribution expenses.

In 2004, net cash inflows from operating activities amounted to some Rmb43.5 million, representing an increase of some Rmb19.0 million from the previous year. This improvement mainly results from an increase of 1.7 times in turnover during 2004 with operating profit increasing for some Rmb21.7 million, representing almost a two-fold rise from 2003.

During the nine month period ended 30 September, 2005, net cash inflows from operating activities of some Rmb15.7 million were recorded. The net cash inflows resulted from the strong profitability of our company with profit for the period increasing 57.3% from Rmb29.7 million to Rmb46.7 million. Income tax of some Rmb1.5 million was paid during the period under review (31 December, 2004: Nil).

Cash flow from investing activities

Our cash inflow from investing activities represents mainly interest income from our bank deposits, which is of a relatively small amount. Our cash outflow from investing activities represents principally payments for acquiring properties, office equipment and motor vehicles for business use and interest in prepaid lease payments. The interest in prepaid lease payments represents monies paid by us in respect of the purchase of land use rights for the Chongqing Ford Regional Distribution Centre and Changan Industrial Park Regional Distribution Centre and partial payment made by us for the purchase of land use right of the new Regional Distribution Centre of Changan Ford in Nanjing.

Net cash used in investing activities of some Rmb34.1 million during 2004 mainly related to the construction of Changan Industrial Park Regional Distribution Centre, Changan Hebei Regional Distribution Centre, Changan Ford Regional Distribution Centre, phases II and III and a storage facility in Chongqing for some Rmb24.4 million and purchase of motor vehicles of some Rmb5.6 million.

In 2003, Rmb19.6 million was used in relation to the construction of Changan Industrial Park Regional Distribution Centre, Changan Ford Regional Distribution Centre phase II and our headquarter offices in Chongqing. New buildings, machinery, equipment and vehicles totalling some Rmb11.9 million were acquired. In addition, prepaid lease payments relating to the purchase of the piece of land on which the Changan Industrial Park Regional Distribution Centre is built. The amount has been transferred to construction in progress.

— 194 — FINANCIAL INFORMATION

Cash flow used in investing activities of some Rmb20.8 million during the nine month period ended 30 September, 2005 comprised the acquisition cost of land use rights of Changan Ford Regional Distribution Centre and additional equipment in Nanjing as well as the cost for completing phase 3 and phase 4 of the Changan Ford Regional Distribution Centre.

Cash flow from financing activities

Our cash inflow from financing activities consists primarily of drawdowns of bank loans and shareholders’ capital injections, which are offset by repayment of bank loans during the Track Record Period.

In 2004, net cash generated from financing activities amounted to some Rmb5.6 million which comprised capital injection of Rmb22.5 million by APLL less dividends payments totalling some Rmb15.5 million.

In 2003, a long-term bank loan of some Rmb16.6 was drawn down and we received capital of some Rmb27.5 million from our shareholders. During this year, dividends of some Rmb5.1 million were paid.

For the nine months period ended 30 September, 2005, the net cash generated from financing activities of some Rmb5.2 million represented net bank loans drawn down.

Average Debtor and Creditor Turnover Days

Our average number of debtor turnover days was about 100 days, 110 days and 122 days, respectively in 2003, 2004 and the nine months ended 30 September, 2005. The debtor turnover days 2004 is a little higher than in 2003 primarily due to bills receivable of Rmb18,805,000, the credit period of which is normally 180 days.

The debtor turnover days of 122 for the nine months period ended 30 September, 2005 is higher than those of 2003 and 2004 mainly due to an increase in accounts receivable from independent customers, which is proportionally higher than the increase in sales generated from these customers during the first nine months of 2005. These customers supply car components and parts to some of Changan group of companies while we provide warehousing and transportation of car components and parts services to them. As our service fees were calculated based on the final selling prices of the car components and parts, but which had not been finalised due to delay in price negotiations, we initially recorded lower sales generated from the independent customers before they confirm the final selling prices of car components and parts with the respective Changan group of companies.

Our average number of creditor turnover days was about 108 days, 111 days and 112 days, respectively in 2003, 2004 and the nine months ended 30 September, 2005. Our creditor turnover days are in line with the debtor turnover days because we usually pay our suppliers upon receipt of cash from our customers. We keep good business relationships with our suppliers who may sometimes extend the credit period granted to us.

— 195 — FINANCIAL INFORMATION

Capital commitments

The following table sets forth our capital expenditure commitment for property, plant and equipment at respective balance sheet dates indicated:

As at As at As at 31 December, 31 December, 30 September, 2003 2004 2005 Rmb’000 Rmb’000 Rmb’000

Authorized but not contracted for — Construction of ERP System ——805 — Construction of distribution centres — 20 30,407

Contracted but not provided for — Construction of distribution centres 10,107 611 562

As at 31 December, 2005, we had material capital commitments with a total amount of approximately Rmb34,600,000.

We expect to fund our capital expenditure and debt repayment through a combination of cash generated from operating activities, short-term and long-term borrowings, a portion of the proceeds from the Placing and other debt and equity financing. Our positive net cash flow generated from operation activities exceeded our capital expenditure in 2003 and 2004.

Operating lease commitments

Apart from above, we have future aggregate minimum lease payments due under our non-cancelable operating leases as set out blow:

As at As at As at 31 December, 31 December, 30 September, 2003 2004 2005 Rmb’000 Rmb’000 Rmb’000

Not later than one year 718 2,190 779 Later than one year and not later than five years 405 1,536 32

1,123 3,726 811

As at 31 December, 2005, our company had future minimum lease payments under non-cancellable operating leases of approximately Rmb3,100,000 in respect of office premises and distribution centres.

— 196 — FINANCIAL INFORMATION

Hedging and foreign exchange policy

Since the majority of the transactions of our company are denominated in Rmb and the exchange rate for Rmb has been stable during the Track Record Period, no hedging or other alternatives have been implemented.

As at 31 December, 2005, our company did not have outstanding hedging instruments.

Taking into account the proceeds from the new issue of H Shares, the Directors believe our A1a64 A1a31(2) company has sufficient foreign currency to pay the dividends on H Shares declared in future.

The Articles of Association require that cash dividends of H Shares be declared in Rmb and paid in HK$ to H Share holders. Conversion of Rmb into HK$ will be subject to the relevant PRC foreign exchange regulations and will be calculated at an exchange rate which will be the average of the exchange rate published by People’s Bank of China one calendar week preceding the date of declaration of dividends. If our company does not have sufficient foreign exchange reserves to distribute our dividends in HK$, the Directors intend to exchange the required HK$ from authorised banks or through other approved means.

INDEBTEDNESS

Borrowings A1a32(2) Co 3rd(23)

As at 31 December, 2003 and 2004, the bank loans of our company were guaranteed by Chongqing Sci-Tech Industrial (Group) Company Limited, an independent third party, owned by the Management Committee of Chongqing Airport Economics Development Zone (“the Management Committee”), a PRC government organisation, and were repayable in April, 2005. According to a purchase of land use rights agreement dated 1 August, 2003 between our company and the Management Committee, the Management Committee agreed to bear the interests of these bank loans. The total amount of interest was approximately Rmb1,385,000, which was accounted for as a government grant and the amount has been deducted from the purchase cost of the relevant land use right.

To the best of knowledge of the Directors, the Management Committee agreed to guarantee the bank loans and bear the interests of the bank loans because it wanted to encourage companies, such as our company, to set up their businesses in the Chongqing Airport Economics Development Zone.

The PRC lawyers of our company have advised that the above arrangement is legal and valid at PRC law. The Directors also confirmed that as at 30 September, 2005, the related bank loans had been fully paid, the guarantee provided by Chongqing Sci-Tech Industrial (Group) Company Limited was also released.

— 197 — FINANCIAL INFORMATION

As at 31 December, 2005, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this prospectus, our company did not have any indebtedness in the nature of bank borrowings, debt securities, mortgages, guarantees or other material contingent liabilities. We finance our operations mainly by internally generated funds and to a small extent, by bank financing during the Track Record Period.

Contingent liabilities and guarantees A1a32(4)

As at 31 December, 2005, our company had no material contingent liabilities, securities or guarantees. We had not entered into any material covenants relating to outstanding debts or other indebtedness, guarantees or other contingent liabilities as at 31 December, 2005.

Disclaimer

Save as disclosed herein and apart from intra-group liabilities, our company did not have A1a32(3) Co 3rd(24) outstanding at the close of business on 31 December, 2005 any loan capital, bank overdrafts and liabilities under acceptances or other similar indebtedness, debentures, mortgages, charges or loans or acceptance credits or hire purchase commitments, guarantees or other material contingent liabilities.

The Directors have confirmed that there has not been any material change in the indebtedness commitments and contingent liabilities of our company since 31 December, 2005 and up to Latest Practicable Date.

BUSINESS RISKS

Interest risk

We are exposed to interest rate risk resulting from fluctuations in interest rates on our bank loans. During the Track Record Period, interest rates on our bank loans ranged from 5.22% to 5.5%. We undertake debt obligations to support general business purpose, including capital expenditure and working capital needs. Our loans bear interest at rates that are subject to adjustment by our lenders in accordance with changes in the relevant People’s Bank of China regulations. If the People’s Bank of China increases interest rates, our financing cost will be increased. In addition, to the extent that we may need to raise debt financing in the future, upward fluctuations in interest rates will increase the cost of new debt. As we have a comparatively low level of bank borrowing, we believe interest rate fluctuations can only have a limited impact on our results of operations and financial condition.

— 198 — FINANCIAL INFORMATION

Foreign exchange risk

We conduct our business mainly in Rmb but still we keep some amount of foreign currencies. Therefore we have a certain level of exposure to foreign exchange fluctuations. Rmb is not a freely convertible currency and the PRC government may take action that could cause future exchange rates to vary significantly from current or historical exchange rates. Notwithstanding our business will be significantly impacted financially, fluctuation in exchange rates may adversely affect the value, translated or converted into HK dollars and, or other currencies, of our net assets, earnings and any dividends we declare.

Rising cost of our service

We do not own a large fleet of transportation vehicles and vessels. Instead we outsource most of our transportation functions to independent services provider. In the event that the price of fuel and other operating costs increase, these services providers may raise their charges for providing the transportation service, which in turn increase our costs and our financial condition may be adversely affected if we are not able to pass on the increase in cost to our customers.

DISCLOSURE UNDER RULE 17.15 OF THE GEM LISTING RULES A1a34(2)

By applying the assets ratio and equity capital ratio tests under Rule 19.07 of the GEM Listing Rules, the following receivables as at 30 September, 2005 are discloseable under Rule 17.15 of the GEM Listing Rules upon listing of the H Shares on the Stock Exchange:

As at As at 31 December, 30 September, Debtors 2003 2004 2005 Rmb’000 Rmb’000 Rmb’000

Changan Automobile 68,510 94,074 72,474 Changan Ford 19,566 65,868 73,508 Changan Hebei 6,897 28,564 44,365

The above receivables represent fees receivables for rendering finished vehicles transportation and supply chain management logistics services. These receivables are interest free, unsecured and have no fixed term of repayment. This being the case, our company and each of Changan Automobile, Changan Ford and Changan Hebei have agreed that the amounts due to our company will be paid to us within 90 days from the date of invoice.

Apart from the current disclosure, there are no circumstances that would give rise to a disclosure requirement under Rules 17.15 to 17.21 of the GEM Listing Rules.

— 199 — FINANCIAL INFORMATION

PROFIT ESTIMATE FOR THE YEAR ENDED 31 DECEMBER, 2005

Our Directors have estimated the consolidated profit attributable to shareholders of our company for the year ended 31 December, 2005 on the basis of our audited consolidated results of our group for the nine months ended 30 September, 2005 and the unaudited consolidated results based on management accounts for the remaining three months ended 31 December, 2005.

Our Directors estimate that, on the bases set out in “Profit Estimate” in appendix III to the prospectus, the profit attributable to shareholders of our company for the year ended 31 December, 2005 will not be less than Rmb55.0 million or approximately HK$52.9 million. (This estimate has been prepared on the basis of accounting policies consistent in all material aspects with those adopted by our group as summarised in the accountant’s report as set out in appendix I to this prospectus.)

The following sets forth certain estimated data of our company for the year ended 31 December, 2005:

Estimated profit attributable to Not less than Rmb55.0 million shareholders of our company (Note 1) (equivalent to approximately HK$52.9 million) (Note 3)

Unaudited pro forma estimated earnings per Share Not less than Rmb0.34 — Pro forma (Note 2) (equivalent to approximately HK$0.33) (Note 3)

Notes:

1. The bases on which the above profit estimate for the year ended 31 December, 2005 has been prepared are summarised in appendix III to this prospectus. The estimated profit attributable to shareholders of our company for the year ended 31 December, 2005, has been prepared based on the audited consolidated results of our group for the nine months ended 30 September, 2005 and the unaudited results of our group for the remaining three months ended 31 December, 2005.

3. The Rmb figures are translated at an exchange rate of Rmb1.04 to HK$1.00.

— 200 — FINANCIAL INFORMATION

DIVIDENDS AND WORKING CAPITAL

Dividends

According to PRC law, our distributable earnings will be equal to our net profit, determined in accordance with PRC GAAP or HKFRS; whichever is lower, less allocations to statutory and discretionary reserve funds. None of our contributions to the statutory reserve funds may be used for dividend purposes. During the years ended 31 December, 2003 and 2004, we declared and paid final dividends of Rmb15 million and Rmb28 million respectively, to our existing shareholders. Before 2004, the allocation basis of the dividends being distributed to the shareholders was the percentage of equity interest owned by the respective shareholders.

For the nine months ended 30 September, 2005, we declared dividends of Rmb13.4 million in respect of the period from 1 January, 2005 to 30 April, 2005 to our existing shareholders. The allocation dividends being distributed to the existing shareholders was based on the 112, 064,000 shares in issue as at 30 April, 2005.

In accordance with the applicable requirements of the Company Law and our Articles of Association, we may only distribute dividends from our net profit after we have made allowance for:

— recovery of losses, if any, from prior years;

— allocation to the statutory surplus reserve fund equivalent to 10% of our after-tax profit (any further appropriation is optional until balance of the fund has reached 50% of our registered capital);

— allocation to the statutory public welfare fund equivalent to between 5% of our after-tax profit, and

— allocation to a discretionary surplus reserve fund if approved by our shareholders and after allocation is made to the statutory reserve fund and the statutory public benefit fund.

In addition, the declaration of dividends is subject to the discretion of our Directors, and the amounts of dividends actually declared and paid will also depend upon the following factors:

— our general business conditions;

— our financial results;

— our capital requirements;

— 201 — FINANCIAL INFORMATION

— interests of our shareholders; and

— any other factors which the board may deem relevant.

Our Directors will declare dividends, if any, in Rmb with respect to our H Shares on a per share basis and will pay such dividends in HK$. Any final dividend for a fiscal year will be subject to our shareholders’ approval. Under the Company Law and our Articles of Association, all of our shareholders have equal rights to dividends and distributions. Holders of H Shares will share proportionately on a per share basis in all dividends and other distributions declared by our board of Directors.

During the board of Directors’ meeting on 22 February, 2005, the Directors resolved to declare and pay dividends of Rmb28,016,000, the dividend per ordinary share is approximately Rmb0.25, for the period from 1 April, 2004 to 31 December, 2004 to the then shareholders of our company, which was approved by the shareholders’ meeting on 25 March, 2005. The calculation of dividend per ordinary share of approximately Rmb0.25 for the period from 1 April, 2004 to 31 December, 2004 was based on the amounts of declared dividend of approximately Rmb28,016,000 and Rmb112,064,000 shares, being the number of shares in issue as of 31 December, 2004. The 2004 dividend will be paid out of our internal resources and, or cash generated from our operating activities prior to the listing of our H Shares on the Stock Exchange. Purchasers of our H Shares in the Global Offering will not be entitled to this dividend.

During the board of Directors’ meeting on 5 May, 2005, the Directors further resolved that all profits attributable to shareholders for the four months ended 30 April, 2005 will be distributed to the initial management shareholders while the profits attributable to shareholders for the period after 30 April, 2005 will be paid to all the shareholders of our company after the listing of our H Shares, which was approved by the shareholders’ meeting on 6 June, 2005.

During the board of Directors’ meeting on 7 February, 2006, the Directors further resolved that not less than 40% of our profits attributable to shareholders in respect of the period from 1 May to 31 December, 2005 will be paid as dividends to all the shareholders of our company after the listing of our H Shares. Accordingly, investors in the Placing will be entitled to such dividends. The date of payment of such dividends will be decided at our shareholders’ general meeting for 2005, which is expected to be convened after listing.

Dividends distributions will be financed by our internally generated funds from our operations and cash on hand at present.

On the basis of the cash flow projection prepared by us, the proposed dividend distribution will not affect the adequacy of its working capital.

— 202 — FINANCIAL INFORMATION

Working capital A1a36

The Directors are of the opinion that, taking into account the internally generated funds of, and banking facilities available to, our group and the estimated net proceeds from the Placing, our group has sufficient working capital for its present requirements.

DISTRIBUTABLE RESERVES A1a33(5)

The reserves available for distribution to the shareholders of our company as at 30 September, 2005, being the date to which the latest audited financial statements of our group were made up, amounted to approximately Rmb33.7 million.

NO MATERIAL ADVERSE CHANGE A1a38

The Directors confirm that there has been no material adverse change in the financials or trading position or prospects of our company since 30 September, 2005, being the date to which the latest audited financial statements of our company were made up.

— 203 — FINANCIAL INFORMATION

UNAUDITED PRO FORMA ADJUSTED NET TANGIBLE ASSETS A1a21

The following unaudited pro forma adjusted net tangible assets of our group is based on the audited consolidated net assets of our group attributable to shareholders of our company as at 30 September, 2005 as shown in the Accountants’ Report, the text of which is set out in appendix I to this prospectus, and adjusted as follows:

The unaudited pro forma adjusted net tangible assets has been prepared to illustrate the effect of the Placing on the audited consolidated net tangible assets of our group attributable to shareholders of our company as at 30 September, 2005 as if it had taken place on 30 September, 2005. The unaudited pro forma adjusted net tangible assets of our group has been prepared for illustrative purposes only and, because of its hypothetical nature, it may not give a true picture of the financial position of our group.

Audited consolidated net Unaudited Unaudited assets of our group Net tangible pro forma pro forma attributable to assets of our Estimated net adjusted net adjusted net shareholders of Less: group as at proceeds of the tangible tangible assets our company as at Intangible 30 September, issue of the H assets of per Share 30 September, 2005 assets 2005 Shares (Note 1) our group (Note 2) Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb HK$ equivalent

Based on the minimum Placing Price of HK$2.30 per H Share 149,823 (2,852) 146,971 99,736 246,707 1.52 1.46

Based on the maximum Placing Price of HK$2.70 per H Share 149,823 (2,852) 146,971 119,600 266,571 1.64 1.58

Notes:

1. The estimated net proceeds of the issue of the new Shares under the Placing is based on the Placing Price, after deduction of the underwriting fees and other related expenses paid/payable by our company.

2. The unaudited pro forma net tangible assets per Share is arrived at after the adjustments referred to in this section and on the basis of 162,064,000 Shares in issue and to be issued as mentioned herein.

3. As at 30 November, 2005, the Group’s properties were revalued by Vigers Appraisal & Consulting Limited, an independent property valuer, and the relevant property valuation report is set out in appendix IV — Property Valuation. Pursuant to the valuation performed by Vigers Appraisal & Consulting Limited, the valuation of our group’s properties as at 30 November, 2005 amounted to Rmb108,000,000 (equivalent to approximately HK$103,846,000). This resulted in revaluation surplus of approximately Rmb50,649,000 when compared with the net book value of approximately Rmb57,351,000 as at 30 November, 2005. The above adjustment does not take into account the surplus arising from revaluation of our group’s properties. Such revaluation surplus will not be included in our group’s consolidated accounts for the year ended 31 December, 2005. An additional depreciation of approximately Rmb1,638,000 would be charged against the profit and loss account had such assets been stated at valuation.

— 204 — UNDERWRITING

UNDERWRITERS

China Everbright Securities (HK) Limited A1a15(3)(h) Anglo Chinese Corporate Finance, Limited First Shanghai Securities Limited Kingsway Financial Services Group Limited Tai Fook Securities Company Limited Taiwan Securities (Hong Kong) Company Limited VC Brokerage Limited Watterson Asia Limited

UNDERWRITING ARRANGEMENTS AND EXPENSES

Underwriting agreement

Pursuant to the underwriting agreement, our company has agreed to offer the Placing New Shares for subscription and the vendor has agreed to offer the Sale H Shares for sale subject to the terms and conditions set out in the Underwriting Agreement and this prospectus at the Placing Price. Subject to, among other things, the listing of and permission to deal in the H Shares to be issued and to be sold as mentioned in this prospectus being granted by the GEM listing committee and the underwriting agreement becoming unconditional and not having been terminated in accordance with its terms on or before 8:00 a.m. (Hong Kong time) on the listing date, the underwriters have severally but not jointly and not jointly and severally agreed to subscribe for or purchase or procure subscribers or purchasers to subscribe for or purchase the Placing Shares at the Placing Price in accordance with the terms and conditions of the Underwriting Agreement.

Grounds for termination

China Everbright (for itself and on behalf of the other Underwriters) may in its absolute discretion termiate the arrangements set out in the Underwriting Agreement by notice in writing given to us at any time prior to 8:00 a.m. (Hong Kong time) on the listing date, if:

(a) China Everbright or any of the Underwriters becomes aware, or has reasonable cause to believe that:

(i) any statement contained in this prospectus was, when issued, is or has become untrue, incorrect or misleading in any material respect; or

(ii) any matter has arisen or has been discovered which, had it arisen or been discovered immediately before the date of this prospectus, would constitute a material omission therefrom; or

(iii) there has occurred any breach considered by China Everbright to be material in the context of the Placing or the listing of the H Shares on GEM, of the representations, warranties and undertakings under the Underwriting Agreement (save for those from Anglo Chinese, China Everbright and the Underwriters); or

— 205 — UNDERWRITING

(iv) there has occurred any event, act or omission which gives or is likely to give rise to any material liability upon any party to the Underwriting Agreement (save for those from Anglo Chinese, China Everbright or any of the Underwriters) pursuant to the warranties and indemnities contained in the Underwriting Agreement; or

(v) there has occurred any breach considered by China Everbright to be material in the context of the Placing of any of the obligations imposed upon any party to the Underwriting Agreement (save for those from Anglo Chinese, China Everbright or any of the Underwriters); or

(vi) there has occurred any material adverse change in the business or in the financial or trading position of our group or of any of our principal customers which, in the sole opinion of China Everbright, is likely to cause any material adverse change in the business or in the financial or trading position of our group; or

(b) there shall develop, occur or come into effect:

(i) any new law or regulation or any change in existing laws or regulations or any change in the interpretation or application thereof by any court or other competent authority; or

(ii) any material change (including any event or series of events occuring or relating to or otherwise having an effect on) in Hong Kong, the PRC, regional, international, financial, political, military, industrial, fiscal, regulatory, economic or market conditions or currency exchange rates or exchange controls, stock or other financial market conditions, prospects, circumstances or matters; or

(iii) any material change in the conditions of the Hong Kong or international securities markets (or in conditions affecting a section only of such markets) including, for the avoidance of doubt, any significant adverse change in the index level or value of turnover of any such markets; or

(iv) without prejudice to paragraphs (ii), (iii) above and (v) below, there is imposed any moratorium, suspension or material restriction on trading in securities generally on the Stock Exchange due to exceptional financial circumstances or otherwise, or minimum prices having been established for securities traded thereon; or

(v) without prejudice to paragraphs (ii), (iii) and (iv) above, a general banking moratorium is declared by Hong Kong or PRC authorities; or

(vi) the imposition of economic sanctions, in whatever form, directly or indirectly, by the U.S. or the European Economic Community (or any member thereof), on the PRC, Hong Kong or any other jurisdiction relevant to our company; or

— 206 — UNDERWRITING

(vii) a material change or development occurs involving a prospective change in taxation or exchange controls (or the implementation of any exchange control) in Hong Kong or the PRC; or

(viii) any investigation or litigation or claim being threatened or instigated against any of our director or any member of our group; or

(ix) any event or series of events (including, but without limitations, any act of government, acts of God, acts of terrorism, war, riot, public disorder, civil commotion, fire, flood, explosion, epidemic (including, without limitation, SARS or Avian Flu), strike or lockout);

which, in the sole opinion of China Everbright (for itself and on behalf of the Underwriters) (after consultation with our company):

(i) has or will or is likely to have a material adverse effect on the business, financial or trading conditions or prospects of our group taken as a whole; or

(ii) has or will or is likely to have a material adverse effect on the success of the Placing or the distribution of the Placing Shares; or

(iii) makes it inadvisable or inexpedient to proceed with the Placing; or

(c) the conditions precedent of the Underwriting Agreement have not been fulfilled to the reasonable satisfaction of or waived by China Everbright by 8:00 a.m. on the listing date.

Undertakings

Each of our initial management shareholders, the controlling shareholders of our initial management shareholders, each of our directors and our company has given certain undertakings, details of which are set out under the section headed “Substantial, significant and initial management shareholders” to this prospectus.

In addition, pursuant to the Underwriting Agreement, our company has undertaken to each of Anglo Chinese and China Everbright that without the prior written consent of Anglo Chinese and China Everbright (for itself and on behalf of the Underwriters), our company will not, save pursuant to the Placing, within the period of twelve months from the listing date, issue or agree to issue any shares or securities in our company or grant or agree to grant any options, warrants or other rights carrying the rights to subscribe for, or otherwise convert into, or exchange for, any securities of our company or announce an intention to do so.

— 207 — UNDERWRITING

Commission and expenses A1a15(3)(i) Co 3rd(15)

The Underwriters will, in aggregate, receive a commission of 3.8% of the aggregate Placing Price of the Placing Shares, out of which they will pay any other commission and selling concessions in connection with the Placing. The commission, together with the Stock Exchange listing fees, the Stock Exchange trading fee, transaction levy, financial advisory fee, sponsor fee, legal and other professional fee, printing and other expenses relating to the Placing are currently estimated to be approximately HK$16.0 million in aggregate. Out of such total commission and expenses, the Vendor and our company shall severally bear and pay all the costs and expenses incurred in connection with the Placing (other than the legal fees, the Stock Exchange listing fees and printing expenses which are payable by us) in proportion to the respective number of Shares offered by the Vendor and our company under the Placing.

Underwriters’ interests in our company A1a54

Save for its rights and obligations under the Underwriting Agreement, none of the Underwriters has any shareholding interests in our company or any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in our company. However, each of the Underwriters and, or its subsidiaries may subscribe for or purchase H Shares under the Placing, or purchase H Shares in the market for its own account.

Compliance Advisor Agreement A1a54

It is expected that an agreement will be entered into between Anglo Chinese and our company on or before the listing date (the “Compliance Advisor Agreement”), pursuant to which Anglo Chinese will agree to act as the compliance advisor to our company from the listing date until 31 December, 2008 or until the Compliance Advisor Agreement is terminated upon the terms and conditions set out therein.

Sponsor’s interest in our company

Save for the financial advisory and sponsorship fees to be paid to Anglo Chinese as the A1a54 Sponsor and Anglo Chinese’s interests and obligations under the Underwriting Agreement and the Compliance Advisor Agreement, neither Anglo Chinese nor any of its associates has or may, as a result of the Placing, have any shareholding interest in our group nor does any of them have any right (whether legally enforceable or not) or option to subscribe for or to nominate persons to subscribe for any H Shares in our company.

None of the directors or employees of Anglo Chinese holds any directorship in our company.

— 208 — STRUCTURE AND CONDITIONS OF THE PLACING

DETERMINATION OF THE PLACING PRICE

The Placing Price is expected to be fixed by agreement between our company (for ourselves and on behalf of the Vendor) and China Everbright (for itself and on behalf of the other Underwriters) on or before the Price Determination Date, which is expected to be 17 February, 2006 and, in any event, not later than 12:00 noon on 20 February, 2006 (Hong Kong time). If China Everbright (for itself and on behalf of the other Underwriters) and our company (for ourselves and on behalf of the Vendor) are unable to reach an agreement on the Placing Price by 12:00 noon on 20 February, 2006, the Placing will not become unconditional and will lapse.

The Placing Price will be not more than HK$2.70 per Placing Share and is expected to be not less than HK$2.30 per Placing Share. The final Placing Price will fall within the indicative Placing Price range as stated in this prospectus unless otherwise announced, as further explained below, not later than 21 February, 2006.

China Everbright (for itself and on behalf of the other Underwriters) may, where considered appropriate, based on the level of interest expressed by prospective professional, institutional, corporate and other private investors during the “book-building” process, and with the consent of our company (for ourselves and on behalf of the Vendor), reduce the indicative Placing Price range below that stated in this prospectus at any time prior to 20 February, 2006. In such case, our company will, as soon as practicable following the decision to make such reduction, and in any event not later than 21 February, 2006, caused to be published in the GEM Website, the South China Morning Post (in English) and Hong Kong Economic Times (in Chinese) an announcement of such change. Such announcement will also include confirmation or revision, as appropriate, of the working capital statement, the offer statistics, as currently set out in the section headed “Summary” in this prospectus, and any other financial information which may changes as a result of any such reduction. In the absence of any announcement being published in the GEM Website of a reduction in the indicative Placing Price range in the manner set out above, the final Placing Price, if agreed upon with us, will under no circumstances be set outside the indicative Placing Price range as stated in this prospectus.

PRICE PAYABLE ON SUBSCRIPTION

Investors have to pay the Placing Price plus 1% brokerage, 0.005% Stock Exchange trading fee and 0.005% SFC transaction levy. If the final Placing Price is determined at the upper limit of the indicative Placing Price range of HK$2.70 per Placing Share, the total amount payable by the investors will be HK$2,727.27 per board lot of 1,000 H Shares. If the final Placing Price is determined at the lower limit of the indicative Placing Price range of HK$2.30 per Placing Share, the total amount payable by the investors will be HK$2,323.23 per board lot of 1,000 H Shares.

— 209 — STRUCTURE AND CONDITIONS OF THE PLACING

PLACING

Our company and the Vendor are offering a total of 55,000,000 H Shares for subscription under the Placing. The Placing is fully underwritten by the Underwriters, subject to the terms and conditions of the Underwriting Agreement.

It is expected that the Underwriters or selling agents nominated by them on behalf of our company will conditionally place the Placing Shares with selected professional, institutional and other investors. Professional, institutional and other investors generally including brokers, dealers, companies and fund managers, whose ordinary business involves dealing in shares and other securities and corporate entities which regularly invest in shares and other securities.

The Placing is subject to the conditions stated in the paragraph headed “Conditions of the Placing” below.

CONDITIONS OF THE PLACING

Acceptance of applications for the Placing Shares are conditional upon:

(a) The GEM listing committee granting listing of and permission to deal in, the H Shares to be issued as mentioned herein; and

(b) The obligations of the Underwriters under the Underwriting Agreement becoming unconditional (or any condition(s) therein being waived by China Everbright for itself and on behalf of the Underwriters) and not terminated in accordance with the terms of the Underwriting Agreement or otherwise as set out in the section headed “Underwriting” of this prospectus, in each case, on or before the date and time specified in the Underwriting Agreement (unless and to the extent such conditions are validly waived on or before such date and time) and in any event not later than 8:00 a.m. on the listing date.

If the conditions referred to above are not fulfilled on or before the date and time specified in the Underwriting Agreement (unless and to the extent such conditions are validly waived on or before such dates and times) and in any event not later than 8:00 a.m. on the listing date, the Placing will lapse and notice of the lapse of the Placing will be published by us on the GEM Website on the next business day following such lapse.

BASIS OF ALLOCATION A1a15(3)(a)

Allocation of the Placing Shares will be based on a number of factors, including the level of R11.33 indication, timing and demand, whether or not it is expected that the relevant investors are likely to buy further Placing Shares or hold or sell their Placing Shares after the listing of the H Shares on the Stock Exchange. Such allocation is intended to result in a distribution of the Placing Shares which would lead to the establishment of a broad base of shareholders to the benefit of our company and the shareholders as a whole.

— 210 — STRUCTURE AND CONDITIONS OF THE PLACING

COMMENCEMENT OF DEALING IN H SHARES

Dealings in H Shares on GEM are expected to commence on 23 February, 2006. The H Shares will be traded in board lots of 1,000 H Shares each.

SALE H SHARES

In accordance with relevant PRC regulations, the Vendor is offering 5,000,000 Sale H Shares for sale as part of the Placing. The sale of the Sale H Shares by the Vendor has been approved by SASAC and authorised by NCSSF. SASAC has approved the allocation of 5,000,000 Shares to the NCSSF and pursuant to NCSSF’s authorisation given to our company, the sale of such Sale H Shares are being conducted by the Vendor (acting through our company) on behalf of NCSSF.

— 211 — APPENDIX I ACCOUNTANTS’ REPORT

The following is the text of a report for the purpose of incorporation in this prospectus, from A1a9(3) A1a37 the auditors and reporting accountants of our company, PricewaterhouseCoopers, Certified A1a35 Co 3rd(31) Public Accountants, Hong Kong.

7.08(4)

16 February, 2006 7.08(5)

The Directors CMA Logistics Co., Ltd. Anglo Chinese Corporate Finance, Limited

Dear Sirs,

We set out below our report on the financial information relating to CMA Logistics Co., Ltd. (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) for each of the two years ended 31 December, 2003 and 2004 and the nine-month periods ended 30 September, 2004 and 2005 (the “Relevant Periods”) for inclusion in the prospectus of the Company dated 16 February, 2006 (the “Prospectus”) in connection with the initial listing of the shares of the Company on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited.

The Company, formerly known as Chongqing Changan Minsheng Logistics Company Limited, was incorporated in the People’s Republic of China (the “PRC”) on 27 August, 2001 as a limited liability company. In 2002, the Company was converted to a sino-foreign equity joint venture. On 31 December, 2004, the Company was transformed into a joint stock limited liability company and was renamed as CMA Logistics Co., Ltd.

During the period from 1 January, 2003 to 29 April, 2004, the Company has a 100% direct interests in Chongqing Changan Fayun Company Limited (“Chongqing Changfa”), a company incorporated in the PRC. On 29 April, 2004, Chongqing Changfa was deregistered and since then has ceased to be a subsidiary of the Company. As the only other subsidiary of the Company, Chongqing CMAL Gangcheng Logistics Company Limited (“Chongqing Gangcheng”) was incorporated in 2005, the accompanying financial information has not included a consolidated balance sheet of the Group as at 31 December, 2004. The Company and its subsidiaries have adopted 31 December as their financial year end date.

The directors of the Company (the “Directors”) have prepared consolidated accounts of the Group and accounts of the Company (the “PRC GAAP Accounts”) for each of the two years ended

— I-1 — APPENDIX I ACCOUNTANTS’ REPORT

31 December, 2003 and 2004 in accordance with Accounting Standards for Business Enterprises 7.08(1)(a) and Accounting System for Business Enterprises of the PRC. The PRC GAAP Accounts for each of the two years ended 31 December, 2003 and 2004 were audited by PricewaterhouseCoopers Zhong Tian CPAs Limited Company.

For the purpose of this report, the Directors have prepared the consolidated financial 7.08(3) information of the Group and the financial information of the Company (the “Financial Information”) as set out in sections I to III below for the Relevant Periods in accordance with Hong Kong Financial Reporting Standards (“HKFRS”) issued by Hong Kong Institute of Certified Public Accountants (“HKICPA”), based on the PRC GAAP Accounts and where appropriate, unaudited management accounts of companies comprising the Group, and after making such 7.17 adjustments as are appropriate. The directors of the respective companies comprising the Group, at the Relevant Periods, are responsible for preparing accounts which give a true and fair view. In preparing these accounts, it is fundamental that appropriate accounting policies are selected and applied consistently.

For the purpose of this report, we have examined the Financial Information for each of the two years ended 31 December, 2003 and 2004 and the nine-month period ended 30 September, 2005, carried out audit procedures in accordance with Statement of Auditing Standards issued by HKICPA and carried out such additional procedures as are necessary in accordance with the Auditing Guideline “Prospectuses and the Reporting Accountant” issued by the HKICPA.

We have reviewed the Financial Information for the nine-month period ended 30 September, 2004 in accordance with the SAS 700 “Engagements to Review Interim Financial Reports” issued by the HKICPA. A review consists principally of making enquiries of the Group management and applying analytical procedures to the Financial Information and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the Financial Information for the nine-month period ended 30 September, 2004.

The Directors are responsible for the Financial Information. It is our responsibility to form an independent opinion, based on our examination and review, on the Financial Information and to report our opinion.

In our opinion, the Financial Information, for the purpose of this report, gives a true and fair 7.08(2) view of the state of affairs of the Company as at 31 December, 2003 and 2004 and 30 September, 2005 and of the Group as at 31 December, 2003 and 30 September, 2005 and of the results and cash flows of the Group for each of the two years ended 31 December, 2003 and 2004 and the nine-month period ended 30 September, 2005.

Moreover, on the basis of our review which does not constitute an audit, we are not aware of any material modifications that should be made to the Financial Information for the nine-month period ended 30 September, 2004.

— I-2 — APPENDIX I ACCOUNTANTS’ REPORT

I FINANCIAL INFORMATION 7.03(1) 7.09 11.10 11.11 (a) Consolidated profit and loss accounts

Year ended Nine-month period 31 December, ended 30 September, 2003 2004 2004 2005 Note Rmb’000 Rmb’000 Rmb’000 Rmb’000 (unaudited)

Turnover 6 486,130 823,504 600,643 648,843 7.04(1)(a) Cost of sales (451,131) (755,851) (553,659) (569,899) 7.04(1)(d)

Gross profit 34,999 67,653 46,984 78,944 Other gains 7 1,391 766 640 792 7.04(1)(b) Distribution costs (8,137) (12,412) (8,721) (12,243) Administrative expenses (5,375) (11,438) (7,637) (15,340)

Operating profit 22,878 44,569 31,266 52,153 Finance costs 10 (1,670) (1,974) (1,556) (1,316) 7.04(1)(e)

Profit before tax 21,208 42,595 29,710 50,837 7.04(1)(g) Income tax expense 11 —— —(4,112) 7.04(1)(h)

Profit attributable to shareholders of the Company 12 21,208 42,595 29,710 46,725 7.04(1)(j)

Dividends 13 15,064 28,016 28,016 13,448

Basic earnings per share 14 Rmb0.32 Rmb0.40 Rmb0.28 Rmb0.42 7.03(5)

— I-3 — APPENDIX I ACCOUNTANTS’ REPORT

(b) Balance sheets 7.03(3)(a) 7.09 11.10 Group Group Company 11.11 As at 31 Company As at 30 As at 30 December, As at 31 December, September, September, 2003 2003 2004 2005 2005 Note Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000

ASSETS Non-current assets Property, plant and equipment 17 40,237 40,237 65,046 76,463 76,463 7.04(2)(a) Prepaid lease payments 18 45,666 45,666 45,135 50,254 50,254 Intangible assets 19 2,281 2,281 3,221 2,852 2,852 Investment in subsidiaries 20 — 1,838 ——4,950 Deferred income tax assets 21 ———404 404

Total non-current assets 88,184 90,022 113,402 129,973 134,923

Current assets Trade receivables 22 7,958 7,958 35,013 40,924 40,924 Prepayment and other receivables 23 15,975 15,534 7,602 13,781 13,781 Due from related parties 33(c) 109,610 109,610 206,127 236,224 236,224 Fixed bank deposits 24 12,498 12,498 ——— Cash and cash equivalents 24 18,307 18,307 33,329 33,441 28,441

Total current assets 164,348 163,907 282,071 324,370 319,370 7.04(2)(b)

Total assets 252,532 253,929 395,473 454,343 454,293

EQUITY Capital and reserves attributable to 7.04(2)(g) shareholders of the Company Capital 25 77,500 77,500 112,064 112,064 112,064 Other reserves 26 406 406 (1,379) 4,046 4,046 Retained earnings 26 20,531 21,928 36,418 33,713 33,713

98,437 99,834 147,103 149,823 149,823 Minority interest ———50 — 7.04(2)(h)

Total equity 98,437 99,834 147,103 149,873 149,823

LIABILITIES Non-current liabilities Long-term liabilities 27 18,560 18,560 ———7.04(2)(f)

Current liabilities Trade and other payables 28 123,286 123,286 197,789 188,876 188,876 Due to related parties 33(c) 10,787 10,787 33,021 45,885 45,885 Dividends payable 462 462 — 40,727 40,727 Short-term bank loans 29 ———25,000 25,000 Current portion of long-term liabilities 27 1,000 1,000 17,560 1,000 1,000 Current income tax liabilities ———2,982 2,982

Total current liabilities 135,535 135,535 248,370 304,470 304,470 7.04(2)(c)

Total liabilities 154,095 154,095 248,370 304,470 304,470

Total equity and liabilities 252,532 253,929 395,473 454,343 454,293

Net current assets 28,813 28,372 33,701 19,900 14,900 7.04(2)(d)

Total assets less current liabilities 116,997 118,394 147,103 149,873 149,823 7.04(2)(e)

— I-4 — APPENDIX I ACCOUNTANTS’ REPORT

Year ended Nine-month period 31 December, ended 30 September, 2003 2004 2004 2005 Note Rmb’000 Rmb’000 Rmb’000 Rmb’000 (unaudited)

Total equity at beginning of the year/period 52,807 98,437 98,437 147,103 Capital injection 25 27,500 22,500 22,500 — Capital surplus 26 — 14 14 — Share issue costs 26 — (1,379) (1,371) (2,541) Profit for the year/period 26 21,208 42,595 29,710 46,725 Dividends 26 (3,078) (15,064) (15,064) (41,464) Minority interest —— —50

Total equity at end of the year/period 98,437 147,103 134,226 149,873

— I-5 — APPENDIX I ACCOUNTANTS’ REPORT

(d) Consolidated cash flow statements 7.03(4A)

Year ended Nine-month period 31 December, ended 30 September, 2003 2004 2004 2005 Note Rmb’000 Rmb’000 Rmb’000 Rmb’000 (unaudited)

Cash flows from operating activities Cash generated from operations 32 26,199 45,495 23,618 18,516 Interest paid (1,670) (1,974) (1,540) (1,288) Income tax paid —— —(1,534)

Net cash generated from operating activities 24,529 43,521 22,078 15,694

Cash flows from investing activities Purchase of property, plant and equipment and intangible assets (30,811) (32,864) (25,191) (15,898) Increase in prepaid lease payments (22,375) ——(5,688) Proceeds from disposal of property, plant and equipment 5 4 1 — Cash paid to acquire a subsidiary (1,000) (2,000) (500) — Interest received 1,391 766 640 792

Net cash used in investing activities (52,790) (34,094) (25,050) (20,794)

Cash flows from financing activities Draw-down of short-term bank loans 25,000 25,000 — 25,000 Repayment of short-term bank loans (25,000) (25,000) —— Draw-down of long-term bank loans 16,560 ——— Repayment of long-term bank loans —— —(16,560) Capital injection 27,500 22,500 22,500 — Capital contributions from minority shareholders —— —50 Share issue costs paid — (1,379) (1,371) (2,541) Dividends paid (5,099) (15,526) (15,526) (737)

Net cash generated from financing activities 38,961 5,595 5,603 5,212

Net increase in cash and cash equivalents 10,700 15,022 2,631 112

Cash and cash equivalents at beginning of year/period 7,607 18,307 18,307 33,329

Cash and cash equivalents at end of year/period 24 18,307 33,329 20,938 33,441

— I-6 — APPENDIX I ACCOUNTANTS’ REPORT

II NOTES TO FINANCIAL INFORMATION

1 Organisation and principal activities

The Company, formerly known as Chongqing Changan Minsheng Logistics Company Limited, was incorporated in the PRC on 27 August, 2001 as a limited liability company. In 2002, the Company was converted to a sino-foreign equity joint venture. On 31 December, 2004, the Company was transformed into a joint stock limited liability company and was renamed as CMA Logistics Co., Ltd. The address of the Company’s registered office is 4/F, Shi Ji Zhong Huan Building, No. 26, Li Yu Er Cun, Jiangbei District, Chongqing, the PRC.

The principal activities of the Group are the rendering of transportation of finished vehicles, supply chain management for automobile components and parts and transportation of non-vehicle commodities services.

2 Basis of preparation

The Financial Information are prepared in accordance with HKFRS, and are the first set of accounts of the Group 7.12 prepared in accordance with HKFRS. The Group has applied HKFRS 1, “First-time Adoption of Hong Kong Financial Reporting Standards” in preparing these accounts.

The statutory accounts of the Group and the Company have been prepared in accordance with PRC GAAP, which differs in certain respects from HKFRS. When preparing the Group and the Company’s Financial Information, management has amended certain accounting methods applied in the PRC GAAP accounts to comply with HKFRS. Reconciliations and descriptions of the effect of the transition from PRC GAAP to HKFRS on the Group’s equity and its net profit are presented in Note 34.

The Financial Information has been prepared under the historical cost convention.

The preparation of accounts in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated accounts, are disclosed in Note 5.

3 Principal accounting policies 7.03(8)

(a) Subsidiary

The consolidated accounts include the accounts of the Company and its subsidiaries.

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their

— I-7 — APPENDIX I ACCOUNTANTS’ REPORT

fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the profit and loss accounts.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

In the Company’s balance sheet, the investment in subsidiaries are stated at cost less accumulated impairment losses, if any. The results of the subsidiaries are accounted for by the Company on the basis of dividends received and receivable.

(b) Segment reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments.

(i) Functional and presentation currency

Items included in the accounts of the Company and its subsidiaries are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated accounts of the Group are presented in Renminbi, which is the Company’s functional and presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit and loss accounts.

(d) Property, plant and equipment

Property, plant and equipment except for construction in progress is stated at historical cost less depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the profit and loss accounts during the financial period in which they are incurred.

— I-8 — APPENDIX I ACCOUNTANTS’ REPORT

Depreciation of property, plant and equipment is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:

Buildings 10 - 45 years Machinery 5 years Office equipment 5 years Motor vehicles 8 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the profit and loss accounts.

(e) Construction in progress

Construction in progress represents buildings and plant under construction and machinery under installation and testing and which, upon completion, management intends to hold as property, plant and equipment. They are carried at cost, which includes direct costs attributable to the construction, plant and equipment and other direct costs during the construction period, less any accumulated impairment losses. No depreciation is provided for construction in progress until the construction is completed and the relevant assets have reached their expected usable condition. On completion, construction in progress is transferred to appropriate categories of property, plant and equipment at cost less accumulated impairment losses.

(f) Intangible assets

(i) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisition of a subsidiary is included in intangible assets and is tested annually for impairment and carried at cost less accumulated impairment losses. Gain and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing.

(ii) Computer software

Computer software acquired is capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised using the straight-line method over its estimated useful life, ranging from 3 to 5 years.

(g) Impairment of assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An

— I-9 — APPENDIX I ACCOUNTANTS’ REPORT

impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

(h) Prepaid lease payment

The prepaid lease payments represent the Group’s interests in land use right and are amortised over the lease period (ranging from 30 to 50 years) on a straight-line basis.

(i) Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the profit and loss accounts.

(j) Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.

(k) Share capital

Share capital is classified as equity.

Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

(l) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability, including fees and commissions paid to agents, advisers, brokers and dealers, levies by regulatory agencies and securities exchanges, and transfer taxes and duties. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the profit and loss accounts over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

(m) Deferred income tax

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated accounts of the Group. However, if the deferred income tax arises from initial recognition of an asset or liability in a transaction other than

— I-10 — APPENDIX I ACCOUNTANTS’ REPORT

a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

(n) Government grants

Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions.

Government grants relating to costs are deferred and recognised in the profit and loss accounts over the period necessary to match them with the costs that they are intended to compensate.

Government grants relating to the purchase of land use right are deducted in arriving at the carrying amount of the land use right and are recognised in the profit and loss accounts on a straight line basis over the expected lives of the related land use right.

(o) Employee benefits

Contribution to defined contribution pension scheme, medical insurance, housing fund and unemployment A1a33 (4)(b) fund are recognised as expenses in the profit and loss accounts as incurred. Pursuant to the PRC laws and regulations, contributions to the basic pension scheme, medical insurance, housing fund and unemployment fund for the Group’s local staff are to be made monthly to a government agency based on 28%, 11%, 24% and 3% respectively of the standard salary set by the provincial government, of which 20%, 9%, 12% and 2% respectively is borne by the Group and the remainder is borne by the staff. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due and are reduced by contributions forfeited by those employees who leave the scheme prior to vesting fully in the contributions.

(p) Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

— I-11 — APPENDIX I ACCOUNTANTS’ REPORT

(q) Contingent liabilities and contingent assets

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably.

A contingent liability is not recognised but is disclosed in the notes to financial information. When a change in the probability of an outflow occurs so that the outflow is probable, it will then be recognised as a provision.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain events not wholly within the control of the Group.

Contingent assets are not recognised but are disclosed in the notes to the accounts when an inflow of economic benefits is probable. When inflow is virtually certain, an assets is recognised.

(r) Revenue recognition

Revenue comprises the fair value for the sale of services, net of rebates and discounts and after eliminating sales within the Group.

Revenue from rendering of transportation of finished vehicles, supply chain management for automobile components and parts and transportation of non-vehicle commodities services is recognised upon the completion of services, which generally coincides with the date of receipt of the finished vehicle, automobile components and parts or non-vehicle commodities by the receiver.

Interest income is recognised on a time proportion basis using the effective interest method.

(s) Borrowing costs

Borrowing costs are expensed as they are incurred.

(t) Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the profit and loss accounts on a straight-line basis over the period of the lease.

(u) Dividend distribution

Dividend distribution to the Company’s shareholders is recognised as a liability in the accounts in the period in which the dividends are declared by the directors of the Company.

— I-12 — APPENDIX I ACCOUNTANTS’ REPORT

4 Financial risk management

(a) Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk and price risk), credit risk, liquidity risk and cash flow interest-rate risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.

Risk management is carried out by the Directors under policies approved by the Board of Directors. The Directors identify and evaluate financial risks in close co-operation with the Group’s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest-rate risk and credit risk.

(1) Market risk

The Group has no significant foreign exchange risk as it has limited foreign currency transactions. The Group is not significantly exposed to equity securities or commodity price risk.

(2) Credit risk

As at 31 December, 2003 and 2004 and 30 September, 2005, approximately 81%, 81%, and 79% of the total amount of trade and other receivables and due from related parties of the Company was due from the four largest customers, respectively. The carrying amount of trade and other receivables and due from related parties included in the balance sheet represents the Group’s maximum exposure to credit risk in relation to its financial assets. The Group has put in place policies to ensure that provision of logistics related services are made to customers with an appropriate credit history and the Group performs periodic credit evaluations of its customers. The Group’s historical experience in collection of trade and other receivables and due from related parties falls within the recorded allowances and the Directors are of the opinion that adequate provision for uncollectible trade and other receivables and due from related parties has been made in the accounts.

(3) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities.

(4) Cash flow and fair value interest rate risk

As the Group has no significant interest-bearing assets, the Group’s income and operating cash flows are substantially independent of changes in market interest rates.

The Group’s interest rate risk arises from long-term borrowing. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. During the Relevant Periods, all the borrowings were at fixed rates.

— I-13 — APPENDIX I ACCOUNTANTS’ REPORT

(b) Fair value estimation

The fair value of financial instruments traded in active markets (such as publicly trading and available-for- sale securities) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the current bid price; the appropriate quoted market price for financial liabilities is the current ask price.

In assessing the fair value of financial instruments that are not traded in an active market, the Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date.

The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

5 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

(a) Critical accounting estimates and assumptions

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(i) Fair value of financial assets and liabilities

The fair value of financial assets and liabilities that are not traded in an active market is determined by using valuation techniques. The Group uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at each balance sheet date. The Group has used discounted cash flow analysis for various financial assets and liabilities that were not traded in active markets.

(ii) Estimated impairment of goodwill

The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in Note 3(g). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates.

(b) Critical judgements in applying the entity’s accounting policies

Revenue recognition

The Group recognises its revenue upon completion of rendering services for transportation of finished vehicles, supply chain management for automobile components and parts and transportation of non-vehicle commodities, where the amount of revenue and costs can be measured reliably and the economic benefits

— I-14 — APPENDIX I ACCOUNTANTS’ REPORT

associated with the transaction will probably flow to the Group when such service is completed. In making its judgement in applying this recognition method, the Group made reference to various factors which include, among others, master contracts signed with certain customers, actual sales amounts of similar historical transactions, as well as confirmations received from customers.

6 Turnover and segment information

The Group is principally engaged in rendering of transportation of finished vehicles, supply chain management for automobile components and parts and transportation of non-vehicle commodities services. Revenues recognised during the Relevant Periods are as follows:

Nine-month period Year ended 31 December, ended 30 September, 2003 2004 2004 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (unaudited)

Turnover Related party transactions (Note 33(b)) Transportation of finished vehicles 376,752 540,803 398,166 417,972 Supply chain management for automobile components and parts (Note (a)) 90,039 226,610 157,445 179,379

Subtotal 466,791 767,413 555,611 597,351

Transactions with unrelated parties Transportation of finished vehicles ———5,618 Supply chain management for automobile components and parts 10,900 40,346 32,060 36,842 Transportation of non-vehicle commodities 8,439 15,745 12,972 9,032

Subtotal 19,339 56,091 45,032 51,492

Total 486,130 823,504 600,643 648,843

Note:

(a) In 2002, the Group signed a contract for providing supply chain management for automobile components and parts service from 1 January, 2002 to 31 December, 2004 with one of its major customers. According to the contract, the Group recognised the relevant income from the services provided amounting to approximately Rmb5,660,000 and Rmb7,050,000 for the nine-month period ended 30 September, 2004 and the year ended 31 December, 2004, respectively. In 2005, the Group signed a new contract with the customer which covered the period from 1 January, 2004 to 30 June, 2005. Based on the terms of the new contract, the Group recognised additional revenue for the services provided in 2004 as compensation for the relative cost increment amounting to approximately Rmb10,002,000. Such additional revenue has been recorded as revenue for the nine-month period ended 30 September, 2005.

— I-15 — APPENDIX I ACCOUNTANTS’ REPORT

The Group has only one business segment, which is the rendering of transportation of finished vehicles, supply chain management for automobile components and parts and transportation of non-vehicle commodities services. The directors of the Company consider that its primary reporting format of its segment information is its business segment.

No geographical segment information is presented as all the Group’s turnover and profit are derived within the PRC and all assets of the Group are located in the PRC, which is considered as one geographic location with similar risks and returns.

7 Other gains

Nine-month period Year ended 31 December, ended 30 September, 2003 2004 2004 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (unaudited)

Interest income 1,391 766 640 792

8 Expenses by nature 7.04(1)(f)

Nine-month period Year ended 31 December, ended 30 September, 2003 2004 2004 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (unaudited)

Transportation fee 441,795 730,525 535,910 539,828 Business tax 2,201 4,572 3,385 5,436 Employee benefit expense (Note 9) 5,814 19,579 13,805 28,189 Auditors’ remuneration 11 354 239 243 Provision for impairment of receivables 84 ——67 Provision for impairment of due from related parties ———678 Depreciation of property, plant and equipment 2,972 6,591 4,451 6,678 Amortisation of prepaid lease payments 285 531 399 569 Amortisation of intangible assets 13 492 11 369 Operating lease rentals for office premises and distribution center 382 718 538 1,642 Loss on disposal of property, plant and equipment 4 28 15 10 Entertainment expense 1,453 2,137 1,542 1,888 Travelling expense 1,508 1,917 1,242 1,936 Other expenses 8,121 12,257 8,480 9,949

Total cost of sales, distribution costs and administrative expenses 464,643 779,701 570,017 597,482

— I-16 — APPENDIX I ACCOUNTANTS’ REPORT

9 Employee benefit expense

Employee benefit expense includes emoluments of the Directors and supervisors.

Wages and salaries 4,641 15,051 10,875 20,222 Pension costs-defined contribution plans 326 988 631 1,731 Staff and workers’ bonus and welfare fund 200 500 500 3,269 Welfare and other expenses 647 3,040 1,799 2,967

Total employee benefit expense 5,814 19,579 13,805 28,189

10 Finance costs

Nine-month period Year ended 31 December, ended 30 September, 2003 2004 2004 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (unaudited)

Interest on bank loans 851 1,445 1,185 972 Interest on other long-term payable wholly repayable within five years 267 153 115 19 Finance charges on discounted bills with banks 513 114 76 144 Others 39 262 180 181

1,670 1,974 1,556 1,316

11 Income tax expense

Nine-month period Year ended 31 December, ended 30 September, 2003 2004 2004 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (unaudited)

Current PRC enterprise income tax (“EIT”) ———4,516 Deferred tax (Note 21) ———(404)

———4,112

— I-17 — APPENDIX I ACCOUNTANTS’ REPORT

As a foreign investment joint stock limited company established in the Chongqing Technological Economic Development Zone, the applicable EIT rate of the Company is 15%. In accordance with an Approval of Enjoying Favourable EIT Policy (YYSJH[2003] No.27) issued by the national tax bureau of Chongqing Technological Economic Development Zone on 27 May, 2003, the Company is entitled to exemption from EIT in 2003 and 2004 followed by a 50% tax reduction from 2005 to 2007. For the nine-month period ended 30 September, 2005, the applicable tax rate is 7.5%.

The provision for EIT of Chongqing Changfa and Chongqing Gangcheng is based on the EIT rate of 33% of the assessable income as determined in accordance with the relevant PRC EIT rules and regulations. As Chongqing Changfa reported losses during the year ended 31 December, 2003 and the nine-month period ended 30 September, 2004, no EIT expense was incurred. As Chongqing Gangcheng has not started its operation as at 30 September, 2005, no EIT expense was incurred.

No provision for Hong Kong profits tax was made as the Group had no assessable profit arising in or derived from Hong Kong during the Relevant Periods.

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the applicable EIT rates as follows:

Nine-month period Year ended 31 December, ended 30 September, 2003 2004 2004 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (unaudited)

Profit before tax 21,208 42,595 29,710 50,837

Tax at the statutory tax rate of 15% 3,181 6,389 4,457 7,626 EIT exemption (3,181) (6,389) (4,457) (3,813) Expenses not deductible for tax purposes ———299

Tax charge ———4,112

The effective tax rate for the nine-month period ended 30 September, 2005 was 8.1%.

12 Profit attributable to shareholders of the Company

For the years ended 31 December, 2003 and 2004 and the nine-month periods ended 30 September, 2004 and 2005, the profit attributable to shareholders of the Company is dealt with in the accounts of the Company to the extent of approximately Rmb21,343,000, Rmb41,198,000, Rmb28,313,000 and Rmb46,725,000 respectively.

13 Dividends

During the Board of Directors’ meeting on 21 February, 2003, the directors of the Company resolved to declare dividends of approximately Rmb3,078,000 for the period from 26 April, 2002 to 31 December, 2002. This dividend was reflected as an appropriation of retained earnings for the year ended 31 December, 2003. The rates of dividend and the number of shares ranking for dividends are not presented as the capital of the Company was not divided into shares.

— I-18 — APPENDIX I ACCOUNTANTS’ REPORT

During the Board of Directors’ meeting on 20 February, 2004, the directors of the Company resolved to declare dividends of approximately Rmb15,064,000 for the year ended 31 December, 2003. This dividend was reflected as an appropriation of retained earnings for the year ended 31 December, 2004 and the nine-month period ended 30 September 2004. The rates of dividend and the number of shares ranking for dividends are not presented as the capital of the Company was not divided into shares.

During the Board of Directors’ meeting on 22 February, 2005, the directors of the Company resolved to declare 7.04(1)(k) dividends of Rmb28,016,000, the dividend per ordinary share was approximately Rmb0.25, for the period from 1 April, 2004 to 31 December, 2004, which was approved by the General Meeting of shareholders on 25 March, 2005. This dividend was reflected as an appropriation of retained earnings for the nine-month period ended 30 September, 2005. The allocation basis of the dividends being distributed to the shareholders before 2004 was the percentage of equity interest owned by the respective shareholders and the dividend distribution in 2004 was based on the number of shares in issue of 112,064,000 as at 31 December, 2004.

During the Board of Directors’ meeting on 15 August, 2005, the directors of the Company resolved to declare dividends of Rmb13,448,000, the dividend per ordinary share was approximately Rmb0.12, for the period from 1 January, 2005 to 30 April, 2005, which was approved by the General Meeting of shareholders on 15 September, 2005. This dividend was reflected as an appropriation of retained earnings for the nine-month period ended 30 September, 2005. The allocation basis of the dividends being distributed to the shareholders was based on the number of shares in issue of 112,064,000 as at 30 April, 2005.

14 Earnings per share

Basic earnings per share is calculated by dividing the Group’s profit attributable to shareholders of the Company by the weighted average number of shares in issue during the Relevant Periods. In determining the weighted average number of shares in issue during the Relevant Periods, the capitalisation of reserves of Rmb12,064,000 (Note 25(b)) were deemed to have occurred at the beginning of the earliest period presented.

Nine-month period Year ended 31 December, ended 30 September, 2003 2004 2004 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (unaudited)

Group’s profit attributable to shareholders of the Company 21,208 42,595 29,710 46,725

Weighted average number of ordinary shares in issue (in thousands) 66,647 106,439 104,564 112,064

Basic earnings per share (Rmb per share) 0.32 0.40 0.28 0.42

Diluted earnings per share is the same as basic earnings per share as there were no potentially dilutive instruments outstanding.

— I-19 — APPENDIX I ACCOUNTANTS’ REPORT

15 Directors’ and senior management’s emoluments

(a) Directors’ emoluments A1a33(2) (a)(b)(c)(d) (e)(f)(g)

The aggregate amounts of emoluments payable to the Directors during the Relevant Periods are as follows:

Nine-month period Year ended 31 December, ended 30 September, 2003 2004 2004 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (unaudited)

Basic salaries and allowances ———81 Discretionary bonuses ———14 Retirement benefit contributions ——— 6

———101

The emoluments of the Directors during the Relevant Periods are analysed as follows:

Nine-month period Year ended 31 December, ended 30 September, 2003 2004 2004 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (unaudited)

Shi Chaochun ———101 Yin Jiaxu ———— Huang Zhangyun ———— Lu Xiaozhong ———— James H McAdam ———— Lu Guoji ———— Zhang Baolin ———— Koay Peng Yen ———— Cao Dongping ———— Wu Xiaohua ———— Lau Man Yee ———— Wang Xu ———— Peng Qifa ———— Chong Teck Sin ———— Xiang Mingqiang ———— Rick Moradian ———— Li Zhengqi ———— Quek Keng Ngak ———— Hans Hickler ———— Sung Sio Ma ————

———101

— I-20 — APPENDIX I ACCOUNTANTS’ REPORT

During the Relevant Periods, no emolument was paid to independent non-executive directors.

No director waived or agreed to waive any remuneration during the Relevant Periods.

(b) Supervisors’ emoluments A1a33(3) (a)(b)(c)(d) (e)

The aggregate amounts of emoluments payable to the supervisors during the Relevant Periods are as follows:

Nine-month period Year ended 31 December ended 30 September 2003 2004 2004 2005 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Basic salaries and allowances ———77 Discretionary bonuses ———21 Retirement benefit contributions ———10

———108

The emoluments of the supervisors during the Relevant Periods are analysed as follows:

Nine-month period Year ended 31 December ended 30 September 2003 2004 2004 2005 RMB’000 RMB’000 RMB’000 RMB’000 (unaudited)

Chen Haihong ———49 Ye Guangrong ———59 Hua Zhanbiao ———— Tang Yizhong ———— Yvonne Lee ———— Ren Qiang ———— Liu Yangchun ————

———108

No supervisor waived or agreed to waive any remuneration during the Relevant Periods.

— I-21 — APPENDIX I ACCOUNTANTS’ REPORT

The emoluments payable to the five highest paid individuals are as follows. One of the five highest paid individuals of the Company for the nine-month period ended 30 September, 2005 was also a director of the Company and the emolument was reflected in the analysis presented in note (a) above. The emoluments payable to the remaining four individuals for the nine-month period ended 30 September, 2005 are as follows:

Nine-month period Year ended 31 December, ended 30 September, 2003 2004 2004 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (unaudited)

Basic salaries and allowances 358 410 270 225 Discretionary bonuses 140 190 46 37 Retirement benefit contributions 30 35 28 26

528 635 344 288

The emoluments of the four/five highest paid individuals during the Relevant Periods are analysed as follows:

Nine-month period Year ended 31 December, ended 30 September, 2003 2004 2004 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (unaudited)

Shi Chaochun 154 177 91 — Chen Zhigang 110 ——— Huang Yong — 137 70 78 Hu Dahua 88 107 61 70 Huang Ming 88 107 61 70 Sun Yuping 88 107 61 70

528 635 344 288

The emoluments of the four/five highest paid individuals fell within the following band:

Number of individuals Nine-month period Years ended 31 December, ended 30 September, 2003 2004 2004 2005 (unaudited)

Nil to HKD1,000,000 (equivalent of Rmb1,040,000) 5554

— I-22 — APPENDIX I ACCOUNTANTS’ REPORT

During the Relevant Periods, no emoluments were paid by the Group and the Company to any of the directors, supervisors or the five highest paid individuals as an inducement to join or upon joining the Group or as compensation for loss of office.

16 Retirement benefit schemes and housing benefits A1a33(4) (a)(b)

The retirement benefits of full time employees of the Group are covered by the government-sponsored pension plans under which the employees are entitled to a monthly pension contribution based on 20% of the employees’ basic salary for the Relevant Periods.

The Group has no other obligations for the payment of retirement and other post-retirement benefits of employees or retirees other than the payments disclosed in Note 9 and Note 15 above.

Full time employees are also entitled to participate in the government-sponsored housing funds. The Group contributes on a monthly basis to these funds based on 12% of the salaries of the employees. The Group’s liability in respect of these funds is limited to the contributions payable in each year.

— I-23 — APPENDIX I ACCOUNTANTS’ REPORT

17 Property, plant and equipment

Company and Group

Office Motor Construction Buildings Machinery equipment vehicles in progress Total Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000

Cost At 1 January, 2003 9,258 261 1,225 1,537 — 12,281 Additions 2,246 908 3,884 4,602 19,622 31,262 Transfers 18,654 ———(18,654) — Disposals ——(15) ——(15)

At 31 December, 2003 30,158 1,169 5,094 6,139 968 43,528 Additions — 688 1,083 5,617 24,044 31,432 Transfers 23,906 ———(23,906) — Disposals ——(2) (42) — (44)

At 31 December, 2004 54,064 1,857 6,175 11,714 1,106 74,916 Additions 1,914 618 735 3,357 11,481 18,105 Transfers 12,312 20 ——(12,332) — Disposals — (14) (1) ——(15)

At 30 September, 2005 68,290 2,481 6,909 15,071 255 93,006

Accumulated depreciation At 1 January, 2003 — 17 194 114 — 325 Charge for the year 2,024 118 430 400 — 2,972 Disposals ——(6) ——(6)

At 31 December, 2003 2,024 135 618 514 — 3,291 Charge for the year 4,201 329 996 1,065 — 6,591 Disposals ——(1) (11) — (12)

At 31 December, 2004 6,225 464 1,613 1,568 — 9,870 Charge for the period 4,271 375 841 1,191 — 6,678 Disposals — (4) (1) ——(5)

At 30 September, 2005 10,496 835 2,453 2,759 — 16,543

Net book value At 31 December, 2003 28,134 1,034 4,476 5,625 968 40,237

At 31 December, 2004 47,839 1,393 4,562 10,146 1,106 65,046

At 30 September, 2005 57,794 1,646 4,456 12,312 255 76,463

— I-24 — APPENDIX I ACCOUNTANTS’ REPORT

Company and Group

Office Motor Construction Buildings Machinery equipment vehicles in progress Total Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000

Cost At 31 December, 2003 30,158 1,169 5,094 6,139 968 43,528 Additions — 496 1,083 3,154 22,196 26,929 Transfers 22,674 ———(22,674) — Disposals ———(21) — (21)

At 30 September, 2004 52,832 1,665 6,177 9,272 490 70,436

Accumulated depreciation At 31 December, 2003 2,024 135 618 514 — 3,291 Charge for the period 2,790 252 693 716 — 4,451 Disposals ———(5) — (5)

At 30 September, 2004 4,814 387 1,311 1,225 — 7,737

Net book value At 31 December, 2003 28,134 1,034 4,476 5,625 968 40,237

At 30 September, 2004 48,018 1,278 4,866 8,047 490 62,699

In accordance with an agreement in relation to the assistance of business expansion signed between the Company and Changan Automobile (Group) Company Limited (“Changan Co.”) on 10 January, 2004, Changan Co. provided a land use right to the Company for the construction of a distribution centre and the Company paid for the construction costs of the distribution centre. In return, the Company is entitled to use the distribution centre at no additional cost for 10 years from 28 December, 2003 to 28 December, 2013. As the land use right of the parcel of land on which the distribution centre locates belongs to Changan Co., the legal title of the distribution centre also belongs to Changan Co. The Company recorded the construction costs of the distribution centre as buildings under property, plant and equipment, and the depreciation is calculated using the straight-line method to allocate the cost over the useful life of 10 years. As at 31 December, 2003 and 2004 and 30 September, 2005, the carrying amount of the distribution centre was approximately Rmb4,698,000, Rmb4,615,000 and Rmb4,419,000 respectively.

During the Relevant Periods, depreciation expenses charged to “cost of sales”, “distribution costs” and “administrative expenses” respectively were shown as follows:

Nine-month period Year ended 31 December, ended 30 September, 2003 2004 2004 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (unaudited)

Cost of sales 2,102 5,447 3,600 5,667 Distribution costs 421 286 221 344 Administrative expenses 449 858 630 667

2,972 6,591 4,451 6,678

— I-25 — APPENDIX I ACCOUNTANTS’ REPORT

18 Prepaid lease payments

Company and Group

Land use right Rmb’000

Cost At 1 January, 2003 23,576 Additions 22,375

At 31 December, 2003 45,951 Additions —

At 31 December, 2004 45,951 Additions 5,688

At 30 September, 2005 51,639

Amortisation At 1 January, 2003 — Charge for the year 285

At 31 December, 2003 285 Charge for the year 531

At 31 December, 2004 816 Charge for the period 569

At 30 September, 2005 1,385

Net book value At 31 December, 2003 45,666

At 31 December, 2004 45,135

At 30 September, 2005 50,254

— I-26 — APPENDIX I ACCOUNTANTS’ REPORT

Company and Group

Land use right Rmb’000

Cost At 31 December, 2003 45,951 Additions —

At 30 September, 2004 45,951

Amortisation At 31 December, 2003 285 Charge for the period 399

At 30 September, 2004 684

Net book value At 31 December, 2003 45,666

At 30 September, 2004 45,267

During the years ended 31 December, 2003 and 2004 and the nine-month periods ended 30 September, 2004 and 2005, amortisation of approximately Rmb285,000, Rmb531,000, Rmb399,000 and Rmb569,000 is included in ‘cost of sales’ respectively.

During the year ended 31 December, 2003, the Company obtained a government grant of Rmb1,385,000 to compensate the borrowing cost in respect of the land use right (Note 27(a)), which was recorded as a reduction of the prepaid lease payments during the year ended 31 December, 2003.

The Group’s interests in land use right at their net book values are analysed as follows:

Company Company and Group Company and Group As at As at As at 31 December, 31 December, 30 September, 2003 2004 2005 Rmb’000 Rmb’000 Rmb’000

In Chongqing, held on: Leases of between 10 and 50 years 45,666 45,135 44,566

Outside Chongqing, held on: Leases of between 10 and 50 years ——5,688

45,666 45,135 50,254

— I-27 — APPENDIX I ACCOUNTANTS’ REPORT

19 Intangible assets

Company and Group

Computer Goodwill software Total Rmb’000 Rmb’000 Rmb’000

At 1 January, 2003 2,222 — 2,222 Additions — 72 72 Amortisation — (13) (13)

At 31 December, 2003 2,222 59 2,281 Additions — 1,432 1,432 Amortisation — (492) (492)

At 31 December, 2004 2,222 999 3,221 Amortisation — (369) (369)

At 30 September, 2005 2,222 630 2,852

At 31 December, 2003 Cost 4,000 72 4,072 Accumulated amortisation (1,778) (13) (1,791)

Net book amount 2,222 59 2,281

Company At 31 December, 2004 Cost 4,000 1,504 5,504 Accumulated amortisation (1,778) (505) (2,283)

Net book amount 2,222 999 3,221

Company and Group At 30 September, 2005 Cost 4,000 1,504 5,504 Accumulated amortisation (1,778) (874) (2,652)

Net book amount 2,222 630 2,852

— I-28 — APPENDIX I ACCOUNTANTS’ REPORT

Company and Group

Computer Goodwill software Total Rmb’000 Rmb’000 Rmb’000

At 31 December, 2003 2,222 59 2,281 Amortisation — (11) (11)

At 30 September, 2004 2,222 48 2,270

Company At 30 September, 2004 Cost 4,000 72 4,072 Accumulated amortisation (1,778) (24) (1,802)

Net book amount 2,222 48 2,270

During the years ended 31 December, 2003 and 2004 and the nine-month periods ended 30 September, 2004 and 2005, amortisation of approximately Rmb13,000, Rmb492,000, Rmb11,000 and Rmb369,000 is included in ‘administrative expenses’, respectively.

Impairment tests for goodwill

Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to the business acquired.

The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long-term average growth rate for the rendering of transportation of finished vehicles services business in which the CGU operates.

Key assumptions used for value-in-use calculations are as follows:

Gross margin as budgeted 8.2% Growth rate 5% Pre tax discount rate 16.22%

Notes:

These assumptions have been used for the analysis of the CGU within the business. Management determined budgeted gross margin and the weighted average growth rate based on past performance and its expectations for the market development. The discount rates used are pre-tax and reflect specific risks relating to the relevant business.

— I-29 — APPENDIX I ACCOUNTANTS’ REPORT

20 Investment in subsidiaries

The Company had direct interest in the following subsidiaries:

Interest held as at Place and 31 31 30 Name of Date of Registered Principal Type of Investment December December September subsidiary incorporation capital activities enterprise amount 2003 2004 2005 RMB’000 RMB’000

Chongqing Chongqing, PRC, 13 618 Transportation Limited liability 1,838 100% —— Changfa April 1999 service company Chongqing Chongqing, PRC, 3 5,000 Logistics service Limited liability 4,950 ——99% Gangcheng November 2005, company Note (b)

Company As at As at 31 December, 30 September, 2003 2004 2005 Rmb’000 Rmb’000 Rmb’000

Investment at cost: Unlisted shares — Chongqing Changfa (Note (a)) 1,838 —— Unlisted shares — Chongqing Gangcheng (Note (b)) ——4,950

1,838 — 4,950

(a) Chongqing Changfa was deregistered on 29 April, 2004. The consolidated results of the Group have not included any results and operations of Chongqing Changfa after its deregistration.

(b) As at 30 September, 2005, the application of the business license of Chongqing Gangcheng was still in progress. On 3 November, 2005, the business license of Chongqing Gangcheng was approved.

— I-30 — APPENDIX I ACCOUNTANTS’ REPORT

21 Deferred income tax

Company Company and Group Company and Group As at As at As at 31 December, 31 December, 30 September, 2003 2004 2005 Rmb’000 Rmb’000 Rmb’000

Deferred tax assets: — Deferred tax asset to be recovered after more than 12 months ——112 — Deferred tax asset to be recovered within 12 months ——292

——404

Movement in deferred tax assets is as follows:

Company and Group

Deferred tax assets:

Provision for Expenses not impairment of deductible in receivables current period Total Rmb’000 Rmb’000 Rmb’000

At 31 December, 2003 and 2004 ——— Credited to the profit and loss accounts (Note 11) 112 292 404

At 30 September, 2005 112 292 404

22 Trade receivables

Company Company and Group Company and Group As at As at As at 31 December, 31 December, 30 September, 2003 2004 2005 Rmb’000 Rmb’000 Rmb’000

Accounts receivable (Note (a)) 7,958 16,208 22,242 Bills receivable (Note (b)) — 18,805 18,682

7,958 35,013 40,924

— I-31 — APPENDIX I ACCOUNTANTS’ REPORT

Notes:

(a) The Group offers credit terms to its customers ranging from cash on delivery to 90 days. Ageing analysis of accounts receivable at the respective balance sheet dates were as follows:

Company Company and Group Company and Group As at As at As at 31 December, 31 December, 30 September, 2003 2004 2005 Rmb’000 Rmb’000 Rmb’000

0 to 90 days 7,856 12,659 16,557 91 to 180 days 90 1,707 2,789 181 to 365 days 12 1,732 2,963 Over 1 year — 110 —

7,958 16,208 22,309 Less: provision for impairment of receivables ——(67)

7,958 16,208 22,242

(b) Ageing analysis of bills receivable at the respective balance sheet dates were as follows:

Company Company and Group Company and Group As at As at As at 31 December, 31 December, 30 September, 2003 2004 2005 Rmb’000 Rmb’000 Rmb’000

0 to 180 days — 18,805 18,682

The Company has recognised a loss of approximately Rmb67,000 for the impairment of its trade receivables during the nine-month period ended 30 September, 2005. The loss has been included in ‘administrative expenses’ in the profit and loss accounts.

The carrying amounts of trade and other receivables represent their fair value.

The fair values are based on cash flows discounted using a rate based on the borrowings rate of 5.04%, 5.04% and 5.22% for the years ended 31 December, 2003 and 2004 and the nine-month period ended 30 September, 2005 respectively.

As at 31 December, 2003 and 2004 and 30 September, 2005, approximately 81%, 81% and 79% of the total amount of trade and other receivables and due from related parties was due from the four largest customers, respectively. The carrying amount of trade and other receivables and due from related parties represents the Group’s maximum exposure to credit risk in relation to its financial assets.

— I-32 — APPENDIX I ACCOUNTANTS’ REPORT

There is no interest rate risk with respect to trade and other receivables, as the interest rate is almost stable during the Relevant Periods.

23 Prepayment and other receivables

Company Group Company and Group As at As at 31 December, As at 31 December, 30 September, 2003 2003 2004 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000

Prepayment 2,439 2,439 3,612 11,561 Other receivables 13,536 13,095 3,990 2,220

15,975 15,534 7,602 13,781

24 Bank balances and cash

All the bank balances and cash are denominated in Rmb and deposited with banks in the PRC except for the equivalent amounts of approximately Rmb12,626,000, Rmb3,178,000 and Rmb156,000 as at 31 December, 2003 and 2004 and 30 September, 2005, respectively which are denominated in foreign currencies. The conversion of these Rmb denominated balances into foreign currencies and the remittance of these funds out of the PRC are subject to the rules and regulations of foreign exchange control promulgated by the PRC government.

Cash and cash equivalents comprised the following:

Company and Group Company Group Company As at As at As at As at 31 December, 31 December, 30 September, 30 September, 2003 2004 2005 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000

Cash at bank and in hand 30,805 33,329 33,441 28,441 Less: Fixed bank deposits with maturity of more than 3 months (Note (a)) (12,498) ———

Cash and cash equivalents at end of year/period 18,307 33,329 33,441 28,441

(a) The effective interest rate on bank deposits was 6.88% as at 31 December, 2003 and these deposits have a maturity of 6 months.

— I-33 — APPENDIX I ACCOUNTANTS’ REPORT

25 Capital

Movements were:

Rmb’000

At 1 January, 2003 50,000 Capital injection from owners (Note (a)) 27,500

At 31 December, 2003 77,500 Capital injection from owners (Note (a)) 22,500 Capitalisation of reserves (Note (b)) 12,064

At 31 December, 2004 and 30 September, 2005 (112,064,000 shares of Rmb1 each) 112,064

(a) Pursuant to a resolution of the owners on 21 February, 2003, the owners increased the investment in the Company and the registered capital was increased to Rmb100,000,000. Capital contributions of Rmb27,500,000 were injected in 2003 and Rmb22,500,000 were injected in 2004.

(b) Pursuant to the resolution of the Board of Directors on 30 July, 2004 and the Promoters’ Agreement dated 6 August, 2004 entered into amongst all the owners, the Company was transformed to a joint stock company with limited liability. Based on the book value of the net assets as at 31 March, 2004 amounting to approximately Rmb112,064,000 as shown on the statutory accounts prepared in accordance with the PRC GAAP, the registered capital of the Company was increased to Rmb112,064,000, divided into 112,064,000 shares of Rmb1 each, by capitalising reserves of Rmb12,064,000.

— I-34 — APPENDIX I ACCOUNTANTS’ REPORT

26 Reserves

Company

Statutory Statutory surplus public Share Capital Reserve reserve welfare issue Retained surplus Fund fund fund costs earnings Total Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Note (a) Note (b) Note (c) Note (c)

At 1 January, 2003 (Note (a)) 42 ————4,027 4,069 Net profit for the year —————21,343 21,343 Dividends (Note 13) —————(3,078) (3,078) Appropriation (Note (b)) — 364 ———(364) —

At 31 December, 2003 42 364 ———21,928 22,334 Net profit for the year —————41,198 41,198 Addition of capital surplus (Note (a)) 14 —————14 Share issue costs ————(1,379) — (1,379) Capitalisation of reserves (Note 25(b)) (56) (2,093) ———(9,915) (12,064) Dividends (Note 13) —————(15,064) (15,064) Appropriation (Note (b)) — 1,729 ———(1,729) —

At 31 December, 2004 ————(1,379) 36,418 35,039 Net profit for the period —————46,725 46,725 Share issue costs ————(2,541) — (2,541) Dividends (Note 13) —————(41,464) (41,464) Appropriation (Note (c)) ——5,311 2,655 — (7,966) —

At 30 September, 2005 ——5,311 2,655 (3,920) 33,713 37,759

At 31 December, 2003 42 364 ———21,928 22,334 Net profit for the period —————28,313 28,313 Addition of capital surplus (Note (a)) 14 —————14 Share issue costs ————(1,371) — (1,371) Capitalisation of reserves (Note 25(b)) (56) (2,093) ———(9,915) (12,064) Dividends (Note 13) —————(15,064) (15,064) Appropriation (Note (b)) — 1,729 ———(1,729) —

At 30 September, 2004 ————(1,371) 23,533 22,162

— I-35 — APPENDIX I ACCOUNTANTS’ REPORT

Group

At 1 January, 2003 (Note (a)) 42 ————2,765 2,807 Net profit for the year —————21,208 21,208 Dividends (Note 13) —————(3,078) (3,078) Appropriation (Note (b)) — 364 ———(364) —

At 31 December, 2003 42 364 ———20,531 20,937 Net profit for the year —————42,595 42,595 Addition of capital surplus (Note (a)) 14 —————14 Share issue costs ————(1,379) — (1,379) Capitalisation of reserves (Note 25(b)) (56) (2,093) ———(9,915) (12,064) Dividends (Note 13) —————(15,064) (15,064) Appropriation (Note (b)) — 1,729 ———(1,729) —

At 30 September, 2005 ——5,311 2,655 (3,920) 33,713 37,759

At 31 December, 2003 42 364 ———20,531 20,937 Net profit for the period —————29,710 29,710 Addition of capital surplus (Note (a)) 14 —————14 Share issue costs ————(1,371) — (1,371) Capitalisation of reserves (Note 25(b)) (56) (2,093) ———(9,915) (12,064) Dividends (Note 13) —————(15,064) (15,064) Appropriation (Note (b)) — 1,729 ———(1,729) —

At 30 September, 2004 ————(1,371) 23,533 22,162

— I-36 — APPENDIX I ACCOUNTANTS’ REPORT

Notes:

(a) Capital surplus

Capital surplus represents the translation differences arising from the use of actual and contracted exchange rates to translate the paid-in capital contributed by APL Logistics Limited (“APLL”) and Ming Sun Industrial Co., (HK) Limited (“Ming Sung (HK)”) in foreign currencies.

(b) Reserve Fund, Enterprise Expansion Fund and Staff and Workers’ Bonus and Welfare Fund A1a33(4)(b)

Prior to the transformation to a joint stock company, the Company was a sino-foreign equity joint venture. In accordance with the “Law of the PRC on Joint Ventures Using Chinese and Foreign Investment” and the requirement of the Company’s Articles of Association, appropriations from net profit should be made to the Reserve Fund, the Enterprise Expansion Fund and the Staff and Workers’ Bonus and Welfare Fund, after offsetting accumulated losses from prior years, and before profit distributions to the investors. The percentages to be appropriated to the Reserve Fund, the Enterprise Expansion Fund and the Staff and Workers’ Bonus and Welfare Fund are determined by the Board of Directors of the Company. Upon approval, the Reserve Fund can be used to offset accumulated losses or be converted into capital, the Enterprise Expansion Fund can be converted into capital and the Staff and Workers’ Bonus and Welfare Fund is available to fund payment of specific bonus to staff and for collective benefits.

Pursuant to a resolution of the Board of Directors dated 21 February, 2003, approximately Rmb364,000 and Rmb200,000 were appropriated to the Reserve Fund and Staff and Workers’ Bonus and Welfare fund from the net profit for the year ended 31 December, 2002 respectively.

Pursuant to a resolution of the Board of Directors dated 20 February, 2004, approximately Rmb1,729,000 and Rmb500,000 were appropriated to the Reserve Fund and Staff and Workers’ Bonus and Welfare Fund from the net profit for the year ended 31 December, 2003 respectively.

Pursuant to a resolution of the Board of Directors dated 22 February, 2005, approximately Rmb2,345,000 was appropriated to the Staff and Workers’ Bonus and Welfare Fund from the net profit for the period from 1 April, 2004 to 31 December, 2004. This resolution was approved by the General Meeting of shareholders on 25 March, 2005.

Pursuant to a resolution of the Board of Directors dated 15 August, 2005, approximately Rmb924,000 was appropriated to the Staff and Workers’ Bonus and Welfare Fund from the net profit for the period from 1 January, 2005 to 30 April, 2005. This resolution was approved by the General Meeting of shareholders on 15 September, 2005.

Staff and Workers’ Bonus and Welfare Fund is recorded as a liability under HKFRS. For the years ended 31 December, 2003 and 2004 and nine-month periods ended 30 September, 2004 and 2005, Staff and Workers’ Bonus and Welfare Fund of approximately Rmb200,000, Rmb500,000, Rmb500,000 and Rmb3,269,000 were charged to the profit and loss accounts respectively.

In accordance with the relevant laws and regulations in the PRC and Articles of Association of the Company, it is required to appropriate 10% and 5% of its annual statutory net profit, after offsetting any prior years’ losses as determined under the PRC GAAP, to the statutory surplus reserve fund and statutory public welfare fund respectively before distributing the net profit. When the balance of the statutory surplus reserve fund reaches 50% of the Company’s share capital, any further appropriation is at the discretion of shareholders. The statutory surplus reserve fund can be used to offset prior years’ losses, if any, and may be converted into share capital by issuing new shares to shareholders in proportion to their existing shareholding or by increasing the par value of the shares

— I-37 — APPENDIX I ACCOUNTANTS’ REPORT

currently held by them, provided that the remaining balance of the statutory surplus reserve fund after such issue is not less than 25% of share capital. The statutory public welfare fund can only be utilised on capital expenditure for the collective benefit of the Company’s employees such as the construction of dormitories, canteen and other staff welfare facilities, with the title of these capital items remaining with the Company. This fund is non-distributable except for liquidation situation.

Pursuant to a resolution of the Board of Directors dated 22 February, 2005, approximately Rmb3,575,000 and Rmb1,787,000 were appropriated to the statutory surplus reserve fund and the statutory public welfare fund from the net profit for the period from 1 April, 2004 to 31 December, 2004 respectively.

Pursuant to a resolution of the Board of Directors dated 15 August, 2005, approximately Rmb1,736,000 and Rmb868,000 were appropriated to the statutory surplus reserve fund and the statutory public welfare fund from the net profit for the period from 1 January, 2005 to 30 April, 2005 respectively.

(d) Discretionary surplus reserve A1a33(4)(a)

Pursuant to the Articles of Association of the Company, the Company has the discretion to appropriate its annual statutory net profit to the discretionary surplus reserve fund after the appropriation of statutory surplus reserve fund and statutory public welfare fund upon the approval by shareholders. The discretionary surplus reserve can be used to offset prior years’ losses, if any, and may be converted into share capital.

During the Relevant Periods, no discretionary surplus reserve was appropriated.

27 Long-term liabilities 7.03(7)

Company Company and Group Company and Group As at As at As at 31 December, 31 December, 30 September, 2003 2004 2005 Rmb’000 Rmb’000 Rmb’000

Guaranteed bank loans (Note (a)) 16,560 16,560 — Other long-term payable (Note (b)) 3,000 1,000 1,000

19,560 17,560 1,000 Less: current portion of long-term liabilities (1,000) (17,560) (1,000)

18,560 ——

— I-38 — APPENDIX I ACCOUNTANTS’ REPORT

The analysis of the above is as follows:

Company Company and Group Company and Group As at As at As at 31 December, 31 December, 30 September, 2003 2004 2005 Rmb’000 Rmb’000 Rmb’000

Bank loans Wholly repayable within five years 16,560 ——

Other long-term payable Wholly repayable within five years 2,000 ——

18,560 ——

Notes:

(a) As at 31 December, 2003 and 2004, the bank loans were subject to interest rate of 5.5% per annum and were guaranteed by a third party — Chongqing Sci-Tech Industrial (Group) Company Limited, which is directly owned by the Management Committee of Chongqing Airport Economic Development Zone (“the Management Committee”), a government body, and were repayable in April 2005. According to a purchase of land use right agreement between the Company and the Management Committee, in order to finance the Company to purchase the land use right, the Management Committee agreed to bear the interests of these bank loans. The total amount of the interests was approximately Rmb1,385,000, which was accounted for as a government grant and the amount has been deducted from the purchase cost of the relevant land use right (Note 18).

(b) Other long-term payable as at 31 December, 2003 and 2004 and 30 September, 2005 represented amount payable to Chongqing Changan Sanchan Industrial Company Limited (“Changan Sanchan”, became one of the shareholders of the Company in 2004) for the purchase of the equity interest of Chongqing Changfa. The total amount payable is Rmb5,838,000, of which Rmb1,838,000 was paid in January 2002, and the remaining is repayable by four equal annual instalments of Rmb1,000,000 from 2002 to 2005. The interest rate is 5.58% per annum on the remaining balance.

The effective interest rates of long-term bank loans and other long-term payable are 5.5%, 5.5%, 5.5% and 5.58%, 5.58%, 5.58% for the years ended 31 December, 2003 and 2004 and the nine-month period ended 30 September, 2005 respectively.

As the effective interest rates of long-term bank loans and other long-term payable are close to their market interest rates, the carrying amounts of long-term bank loans and other long-term payable approximate their fair value.

— I-39 — APPENDIX I ACCOUNTANTS’ REPORT

28 Trade and other payables

Company Company and Group Company and Group As at As at As at 31 December, 31 December, 30 September, 2003 2004 2005 Rmb’000 Rmb’000 Rmb’000

Accounts payable (Note (a)) 100,902 166,168 152,906 Bills payable 11,000 —— Other payables 9,088 29,924 34,314 Other taxes 1,906 1,697 1,628 Accruals 390 — 28

123,286 197,789 188,876

Note:

(a) Ageing analysis of accounts payable at the respective balance sheet dates were as follows:

Company Company and Group Company and Group As at As at As at 31 December, 31 December, 30 September, 2003 2004 2005 Rmb’000 Rmb’000 Rmb’000

0 to 90 days 92,564 159,033 147,590 91 to 180 days 8,283 5,436 4,199 181 to 365 days 55 1,610 1,117 Over 1 year — 89 —

100,902 166,168 152,906

29 Short-term bank loans

Company Company and Group Company and Group As at As at As at 31 December, 31 December, 30 September, 2003 2004 2005 Rmb’000 Rmb’000 Rmb’000

Secured short-term bank loans ——25,000

— I-40 — APPENDIX I ACCOUNTANTS’ REPORT

As at 30 September, 2005, short-term bank loans, with interest rate of 5.22% per annum, were secured by balance due from related parties arising from rendering of services with a carrying amount of approximately Rmb37,500,000 (Note 33(c)).

The carrying amounts of the short-term bank loans approximate their fair value.

30 Commitments

(a) Capital expenditure commitments for property, plant and equipment

Company Company and Group Company and Group As at As at As at 31 December, 31 December, 30 September, 2003 2004 2005 Rmb’000 Rmb’000 Rmb’000

Authorised but not contracted for — Construction of ERP System ——805 — Construction of distribution centres — 20 30,407

— 20 31,212

Contracted but not provided for — Construction of distribution centres 10,107 611 562

(b) Operating lease commitments

The future aggregate minimum lease payments due under non-cancellable operating leases for office premises and distribution center are as follows:

Company Company and Group Company and Group As at As at As at 31 December, 31 December, 30 September, 2003 2004 2005 Rmb’000 Rmb’000 Rmb’000

Not later than one year 718 2,190 779 Later than one year and not later than five years 405 1,536 32

1,123 3,726 811

— I-41 — APPENDIX I ACCOUNTANTS’ REPORT

31 Contingent liabilities

As at 30 September, 2005, the Group did not have any significant contingent liabilities.

32 Notes to consolidated cash flow statements

Cash generated from operations

Nine-month period Year ended 31 December, ended 30 September, 2003 2004 2004 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (unaudited)

Profit for the year/period 21,208 42,595 29,710 46,725 Tax ———4,112 Interest expense 1,670 1,974 1,556 1,316 Interest income (1,391) (766) (640) (792) Provision for impairment of receivables 84 ——67 Provision for impairment of due from related parties ———678 Loss on disposal of property, plant and equipment 4 28 15 10 Depreciation of property, plant and equipment 2,972 6,591 4,451 6,678 Amortisation of prepaid lease payments 285 531 399 569 Amortisation of intangible assets 13 492 11 369 Changes in working capital: Trade and other receivables 11,562 (18,682) (18,186) (12,157) Due from related parties (60,101) (96,517) (68,942) (30,775) Time deposits with maturity of more than 3 months — 12,498 —— Trade and other payables 39,281 74,517 27,184 (11,148) Due to related parties 10,612 22,234 48,060 12,864

Cash generated from operations 26,199 45,495 23,618 18,516

— I-42 — APPENDIX I ACCOUNTANTS’ REPORT

33 Related party transactions

(a) During the Relevant Periods, related parties, other than subsidiaries, and their relationship with the Group are as follows:

Name of related party Relationship

Changan Co. Shareholder APLL Shareholder Minsheng Industrial (Group) Company Limited Shareholder (“Minsheng Industrial”) APL Logistics (China) Co., Ltd. (“APLLC”) Subsidiary of APLL China South Industries Group Corporation Parent company of Changan Co. (“CSI Group”) Chongqing Changan Automobile Company Subsidiary of Changan Co. Limited (“Changan Automobile”) Chongqing Changan Jinling Automobile Parts Subsidiary of Changan Co. Liability Company Limited (“Changan Jinling”) Chongqing Changan Transportation Company Subsidiary of Changan Co. Limited (“Changan Transportation”) Chongqing Changan Yuanda Transportation Subsidiary of Changan Co. Company Limited (“Changan Yuanda”) Chongqing Changan Property Management Subsidiary of Changan Co. Company Limited (“Changan Property Management”) Chongqing Changan Lingyun Automobile Parts Subsidiary of Changan Co. Company Limited (“Changan Lingyun”) Minsheng International Freight Company Limited Subsidiary of Minsheng Industrial (“Minsheng International Freight”) Minsheng Logistics Company Limited Subsidiary of Minsheng Industrial (“Minsheng Logistics”) Minsheng Shipping Company Limited Subsidiary of Minsheng Industrial (“Minsheng Shipping”) Minsheng International Shipping Agency Subsidiary of Minsheng Industrial Company Limited (“Minsheng Shipping Agency) Chongqing Changan Import and Export Company Subsidiary of Changan Automobile Limited (“Changan Import and Export”) Hebei Changan Automobile Company Limited Subsidiary of Changan Automobile (“Changan Hebei”) Nanjing Changan Automobile Company Limited Subsidiary of Changan Automobile (“Changan Nanjing”) Chongqing Changan Suzuki Automobile Company Subsidiary of Changan Automobile Limited (“Changan Suzuki”) Chongqing Changan Ford Automobile Company Jointly controlled entity of Changan Automobile Limited (“Changan Ford”) Chongqing Tsingshan Industries Company Subsidiary of CSI Group Limited (“Chongqing Tsingshan”)

— I-43 — APPENDIX I ACCOUNTANTS’ REPORT

(b) During the Relevant Periods, the directors were of the view that the following related party transactions were carried out in the normal course of business of the Group and are continuing after the initial listing of the shares of the Company on the Growth Enterprise Market of the Stock Exchange of Hong Kong Limited. The pricing policy of each related party is based on the negotiation between each related party and the Company.

(i) Turnover from rendering of transportation of finished vehicles services

Nine-month period Year ended 31 December, ended 30 September, 2003 2004 2004 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (unaudited)

Changan Automobile 334,012 358,117 250,317 230,552 Changan Ford 34,126 120,372 94,145 87,947 Changan Hebei 8,203 55,170 48,514 68,808 Changan Nanjing 411 7,144 5,190 29,278 Changan Suzuki ———1,387

376,752 540,803 398,166 417,972

(ii) Turnover from rendering of supply chain management for automobile components and parts services

Nine-month period Year ended 31 December, ended 30 September, 2003 2004 2004 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (unaudited)

Changan Ford 48,343 139,906 105,013 131,989 Changan Hebei 5,621 26,527 10,727 15,719 Changan Automobile 26,771 34,123 21,713 13,108 Changan Nanjing 5,183 13,862 10,547 9,839 Changan Jinling 426 2,171 694 3,298 Changan Import and Export 2,021 2,545 2,366 2,633 Changan Suzuki 1,274 3,565 3,212 1,894 Chongqing Tsingshan — 989 274 447 Changan Co. 400 378 355 441 Changan Lingyun — 2,544 2,544 11

90,039 226,610 157,445 179,379

— I-44 — APPENDIX I ACCOUNTANTS’ REPORT

(iii) Transportation services provided by related parties

Nine-month period Year ended 31 December, ended 30 September, 2003 2004 2004 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (unaudited)

Minsheng International Freight 39,226 98,292 82,221 45,357 Minsheng Logistics 12,748 92,803 57,198 73,583 Minsheng Shipping 2,963 8,376 3,863 18,586 Changan Transportation 2,459 2,157 1,026 1,874

57,396 201,628 144,308 139,400

(iv) Payment of rentals by the Group

Nine-month period Year ended 31 December, ended 30 September, 2003 2004 2004 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (unaudited)

Chongqing Yuanda ———588 Changan Property Management — 177 129 142

— 177 129 730

(v) Payment of management fees by the Group

Nine-month period Year ended 31 December, ended 30 September, 2003 2004 2004 2005 Rmb’000 Rmb’000 Rmb’000 Rmb’000 (unaudited)

APLLC 623 830 623 623

The basis of management fee is on the negotiation between APLLC and the Company.

(vi) Guarantee from shareholders

Pursuant to a tax indemnity agreement signed by Changan Co., APLL, Minsheng Industrial, Ming Sung (HK) and Changan Sanchan on 21 February, 2005, the shareholders have undertaken to indemnify the Company in respect of, among others, any additional taxes, charges and penalties incurred by the Company resulting from and arising out of any alteration or amendment of any tax preferential treatment, in accordance with their respective actual shareholdings in the Company in the respective Relevant Periods, up to the initial listing date of the shares of the Company on the Growth Enterprise Market of the Stock Exchange of Hong Kong Limited.

— I-45 — APPENDIX I ACCOUNTANTS’ REPORT

(c) As at 31 December, 2003 and 2004 and 30 September, 2005, the following related party balances were all interest-free.

Due from related parties:

Company Company and Group Company and Group As at As at As at 31 December, 31 December, 30 September, 2003 2004 2005 Rmb’000 Rmb’000 Rmb’000

Balance from rendering of services Changan Automobile 68,510 94,074 72,474 Changan Ford 19,566 65,868 73,508 Changan Hebei 6,897 28,564 44,365 Changan Nanjing 2,639 4,415 31,343 Minsheng Shipping Agency ——5,385 Chongqing Tsingshan — 989 1,436 Changan Lingyun — 1,695 1,402 Changan Suzuki — 1,014 808 Changan Import and Export 396 69 336 Changan Co. 400 446 281 Changan Jinling — 1,270 223

98,408 198,404 231,561 Less: provision for impairment of due from related parties (Note a) ——(678)

Subtotal 98,408 198,404 230,883

Balance of deposits for service quality guarantee (Note b) Changan Ford 2,111 2,005 3,124 Changan Automobile 8,291 5,718 1,612 Changan Hebei 600 — 600 Changan Suzuki —— 5 Changan Nanjing 200 ——

Subtotal 11,202 7,723 5,341

Total 109,610 206,127 236,224

Notes:

(a) The Company made the provision for impairment on the balances due from related parties as the turnover rates slowed down and collection was delayed. The directors of the Company are of the opinion that provision as at 30 September, 2005 is adequate but not excessive.

— I-46 — APPENDIX I ACCOUNTANTS’ REPORT

(b) Deposits for service quality guarantee represents the deposits paid by the Company to its customers for the purpose of guaranteeing the quality of its logistics service provided. If the service quality does not meet the customers’ requirements, the deposits will be deducted by the customers as compensation.

The Group offers credit terms to its related parties ranging from cash on delivery to 90 days. Ageing analysis of trading balance from rendering of services at the respective balance sheet dates were as follows:

Company Company and Group Company and Group As at As at As at 31 December, 31 December, 30 September, 2003 2004 2005 Rmb’000 Rmb’000 Rmb’000

0 to 90 days 98,408 195,940 218,816 91 to 180 days — 439 10,856 181 to 365 days — 2,025 1,889

Total 98,408 198,404 231,561

Due to related parties:

Company Company and Group Company and Group As at As at As at 31 December, 31 December, 30 September, 2003 2004 2005 Rmb’000 Rmb’000 Rmb’000

Balance from transportation services provided by related parties Minsheng International Freight 4,807 13,233 21,587 Minsheng Logistics 4,413 14,944 21,276 Minsheng Shipping 215 4,349 1,674 Changan Transportation 1,352 495 1,348

Total 10,787 33,021 45,885

— I-47 — APPENDIX I ACCOUNTANTS’ REPORT

Ageing analysis of due to related parties at the respective balance sheet dates were as follows:

Company Company and Group Company and Group As at As at As at 31 December, 31 December, 30 September, 2003 2004 2005 Rmb’000 Rmb’000 Rmb’000

0 to 90 days 10,787 32,803 45,367 91 to 180 days — 218 510 181 to 365 days —— 8

10,787 33,021 45,885

As at 30 September, 2005, balance due from related parties arising from rendering of services amounted to approximately Rmb37,500,000 (with ageing within 90 days) had been pledged as collateral for short-term bank loans of Rmb25,000,000 (Note 29).

As at 31 December, 2003 and 2004 and 30 September, 2005, except for the balance as mentioned in the above paragraph, all the other related party balances were interest-fee and unsecured.

The carrying value of due from and due to related parties approximates their fair value due to the short-term maturity.

34 Reconciliation of the Group’s equity reported under PRC GAAP to its equity under HKFRS at the end of the latest period presented in the Group’s most recent accounts under PRC GAAP

(a) Reconciliation of equity at 1 January, 2003 (Date of transition to HKFRS):

Effect of transition to Note PRC GAAP HKFRS HKFRS Rmb’000 Rmb’000 Rmb’000

ASSETS Non-current assets Property, plant and equipment 1 35,532 (23,576) 11,956 Prepaid lease payments 1 — 23,576 23,576 Intangible assets 2,222 2,222

Total non-current assets 37,754 37,754

Current assets Trade and other receivables 2 85,088 (49,509) 35,579 Due from related parties 2 — 49,509 49,509 Bank balances and cash 20,105 20,105

Total current assets 105,193 105,193

Total assets 142,947 142,947

— I-48 — APPENDIX I ACCOUNTANTS’ REPORT

Effect of transition to Note PRC GAAP HKFRS HKFRS Rmb’000 Rmb’000 Rmb’000

EQUITY Capital 50,000 50,000 Other reserves 42 42 Retained earnings 2,765 2,765

Total equity 52,807 52,807

LIABILITIES Non-current liabilities Long-term liabilities 3,000 3,000

Current liabilities Trade and other payables 2 83,308 (175) 83,133 Due to related parties 2 — 175 175 Dividends payable 2,483 2,483 Current portion of long-term liabilities 1,000 1,000 Current income tax liabilities 349 349

Total current liabilities 87,140 87,140

Total liabilities 90,140 90,140

Total equity and liabilities 142,947 142,947

Notes:

1. The land use right was accounted for as property, plant and equipment under PRC GAAP. In accordance with HKFRS, land use right was accounted for as prepaid lease payments.

2. Due from related parties and due to related parties were accounted for as trade and other receivables and trade and other payables under PRC GAAP. In accordance with HKFRS, they were accounted for separately.

— I-49 — APPENDIX I ACCOUNTANTS’ REPORT

(b) Reconciliation of equity at 31 December, 2003:

Effect of transition to Note PRC GAAP HKFRS HKFRS Rmb’000 Rmb’000 Rmb’000

ASSETS Non-current assets Property, plant and equipment 1 87,288 (47,051) 40,237 Prepaid lease payments 1, 3 — 45,666 45,666 Intangible assets 2 503 1,778 2,281

Total non-current assets 87,791 88,184

Current assets Trade and other receivables 3, 4 132,294 (108,361) 23,933 Due from related parties 4 — 109,610 109,610 Bank balances and cash 30,805 30,805

Total current assets 163,099 164,348

Total assets 250,890 252,532

EQUITY Capital 77,500 77,500 Other reserves 406 406 Retained earnings 2 18,889 1,642 20,531

Total equity 96,795 98,437

LIABILITIES Non-current liabilities Long-term liabilities 18,560 18,560

Current liabilities Trade and other payables 4 134,073 (10,787) 123,286 Due to related parties 4 — 10,787 10,787 Dividends payable 462 462 Current portion of long-term liabilities 1,000 1,000

Total current liabilities 135,535 135,535

Total liabilities 154,095 154,095

Total equity and liabilities 250,890 252,532

— I-50 — APPENDIX I ACCOUNTANTS’ REPORT

Notes:

1. The land use right was accounted for as property, plant and equipment under PRC GAAP. In accordance with HKFRS, land use right was accounted for as prepaid lease payments.

2. The goodwill arose from the acquisition of Chongqing Changfa was amortised under PRC GAAP from the date of acquisition to the date of deregistration. In accordance with HKFRS, goodwill is tested annually for impairment and carried at cost less accumulated impairment losses, as well as when there is no indication of impairment.

3. The interest expense compensation received for the purchase of land use right from the government was credited to the finance costs under PRC GAAP. In accordance with HKFRS, it was accounted for as government grant and the amount has been deducted from the cost of the land use right.

4. Due from related parties and due to related parties were accounted for as trade and other receivables and trade and other payables under PRC GAAP. In accordance with HKFRS, they were accounted for separately.

Effect of transition to Note PRC GAAP HKFRS HKFRS Rmb’000 Rmb’000

Turnover 486,130 486,130 Cost of sales (451,131) (451,131)

Gross profit 34,999 34,999 Other revenue 1,391 1,391 Distribution costs (8,137) (8,137) Administrative expenses 1 (6,953) 1,578 (5,375)

Operating profit 21,300 22,878 Finance costs 2 (1,534) (136) (1,670)

Profit before taxation 19,766 21,208 Taxation ——

Profit attributable to shareholders of the Company 19,766 21,208

— I-51 — APPENDIX I ACCOUNTANTS’ REPORT

Notes:

1. The effect of transition to HKFRS comprised the following items:

● In accordance with HKFRS, contributions to Staff and Workers’ Bonus and Welfare Fund were charged to profit and loss accounts as expenses. Under PRC GAAP, the amount was recorded as an appropriation of profit.

● The goodwill arose from the acquisition of Chongqing Changfa was amortised under PRC GAAP from the date of acquisition to the date of deregistration. In accordance with HKFRS, goodwill is tested annually for impairment and carried at cost less accumulated impairment losses, as well as when there is no indication of impairment.

2. The interest expense compensation received for the purchase of land use right from the government was credited to the finance costs under PRC GAAP. In accordance with HKFRS, it was accounted for as government grant and the amount has been deducted from the cost of the land use right.

35 Share-based payment

On 6 June, 2005, the Company prepared a Share Appreciation Right Incentive Scheme (“SARIS”), which shall take effect subject to:

(i) The passing of the necessary resolution by the Directors of the Company to approve and adopt the SARIS; and

(ii) The Company H Share shall be listed in the Growth Enterprise Market Board of the Stock Exchange.

Pursuant to a resolution of the Board of Directors dated 29 December, 2005, the SARIS will be effective on the date when the H shares of the Company are listed on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited.

A unit of the share appreciation right will entitle the grantee thereof to request the Company to pay the grantee, upon the exercise of such right, a sum equivalent to the difference between the exercise price of such unit of right and the closing price of the H Shares as stated in the Stock Exchange’s daily quotation sheets on the date of the exercise of such unit right.

The person eligible to be granted share appreciation rights include:

(i) any Directors, Supervisors (not including independent Directors and independent Supervisors);

(ii) the General Manager, deputy general manager, Financial Controller, secretary of the board, company secretary, heads of departments, branches and subsidiaries; and

(iii) other senior management personnel and important employees who have made significant contribution to the Company as nominated by the General Manager and approved by the remuneration committee.

The maximum number of share appreciation right that may be granted under the SARIS shall not exceed 10% of the total number of shares of the Company in issue from time to time, and the share appreciation right granted to any single grantee within any consecutive 12 months shall not exceed 1% of the total number of the shares of the Company in issue from time to time.

— I-52 — APPENDIX I ACCOUNTANTS’ REPORT

Share appreciation rights will have an exercise period of five years. A person granted share appreciation rights may not exercise his or her rights in the first year after the date of grant. In each of the second, third and fourth year after the date of grant, the rights that may be exercised shall not in aggregate exceed 25%, 50% and 75%, respectively, of the total number of the share appreciation rights granted to him or her in a particular year. A person can only exercise share appreciation rights before the expiration of the exercise period.

As at the date of this accountants’ report, no share appreciation rights have been granted under the SARIS.

36 Subsequent events 7.03(9)

(a) On 21 December 2005, the Group invested RMB3,100,000 into an associate, Wuhan Chang’an Minfutong Logistics Company Limited, with registered capital of RMB10,000,000. The Group holds 31% equity interest of the Company. As at the date of this report, the business license of the Company has not been obtained. The principal activities of the Company are the rendering of finished vehicle, warehousing, cargo agency and logistics planning and consultation services.

(b) Pursuant to the resolution of the Board of Directors dated 7 February, 2006, the Directors of the Company resolved that not less than 40% of the profit attributable to shareholders of the Company for the period from 1 May to 31 December 2005 will be distributed as dividend to the shareholders of the Company.

III SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Company or its subsidiary in 7.08(1)(b) respect of any period subsequent to 30 September, 2005. In addition, no dividend or distribution has been declared, made or paid by the Company or its subsidiary in respect of any period subsequent to 30 September, 2005.

Yours faithfully, PricewaterhouseCoopers Certified Public Accountants Hong Kong

— I-53 — APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

The information set out in this appendix does not form part of the Accountants’ Report prepared by PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, the reporting accountants of our company as set out in appendix I to the prospectus, and is included herein for information only. The unaudited pro forma financial information set out below should be read in conjunction with the section headed “Financial Information” of the prospectus and the Accountants’ Report of our group set out in appendix I to the prospectus.

(A) Unaudited pro forma adjusted net tangible assets A1A21 R4.29(1),(2) (3),(4),(5),(6) The following unaudited pro forma adjusted net tangible assets of our group is based on the audited consolidated net assets of our group attributable to shareholders of our company as at 30 September, 2005 as shown in the Accountants’ Report, the text of which is set out in appendix I to this prospectus, and adjusted as follows:

Audited 7.31(1),(2), consolidated net Unaudited Unaudited (3),(4),(5), (6),(7),(8) assets of our group Net tangible pro forma pro forma attributable to assets of our Estimated net adjusted net adjusted net shareholders of Less: group as at proceeds of the tangible tangible assets our company as at Intangible 30 September, issue of the H assets of per Share 30 September, 2005 assets 2005 Shares (Note 1) our group (Note 2) Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb’000 Rmb HK$ equivalent

Based on the minimum Placing Price of HK$2.30 per H Share 149,823 (2,852) 146,971 99,736 246,707 1.52 1.46

Based on the maximum Placing Price of HK$2.70 per H Share 149,823 (2,852) 146,971 119,600 266,571 1.64 1.58

Notes:

— II-1 — APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

3. As at 30 November, 2005, our group’s properties were revalued by Vigers Appraisal & Consulting Limited, an independent property valuer, and the relevant property valuation report is set out in appendix IV — Property Valuation. Pursuant to the valuation performed by Vigers Appraisal & Consulting Limited, the valuation of our group’s properties as at 30 November, 2005 amounted to Rmb108,000,000 (equivalent to approximately HK$103,846,000). This resulted in revaluation surplus of approximately Rmb50,649,000 when compared with the net book value of approximately Rmb57,351,000 as at 30 November, 2005. The above adjustment does not take into account the surplus arising from revaluation of our group’s properties. Such revaluation surplus will not be included in our group’s consolidated accounts for the year ended 31 December, 2005. An additional depreciation of approximately RMB1,638,000 would be charged against the profit and loss account had such assets been stated at valuation.

(B) Unaudited pro forma estimated earnings per Share R4.29(1),(2) (3),(4),(5), (6),(8) The following unaudited pro forma estimated earnings per Share has been prepared on the basis set out in the notes below for the purpose of illustrating the effect of the Placing as if it had taken place on 1 January, 2005. This unaudited pro forma estimated earnings per Share has been prepared for illustrative purposes only and because of its nature, it may not give a true picture of the financial results of our group following the Placing.

Estimated profit attributable to shareholders of our company (Note 1) ...... notlessthanRmb55.0 million (about HK$52.9 million)

Unaudited pro forma estimated earnings per Share (Note 2) ...... notlessthanRmb0.34 (about HK$0.33)

Notes

— II-2 — APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

(C) Letter from the reporting accountants on the unaudited pro forma financial information relating to the unaudited pro forma net tangible assets and unaudited pro forma basic estimated earnings per share

The Directors CMA Logistics Co., Ltd.

16 February, 2006

Dear Sirs,

We report on the unaudited pro forma financial information of CMA Logistics Co., Ltd. (the “Company”) and its subsidiary (hereinafter collectively referred to as the “Group”) set out on pages II-1 to II-2 under the headings of “Unaudited pro forma adjusted net tangible assets” and “Unaudited pro forma estimated earnings per Share” (together the “Unaudited pro forma financial information”) in appendix II to the Company’s prospectus dated 16 February, 2006, in connection with the placing of the shares of the Company on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited. The unaudited pro forma financial information has been prepared by the directors of the Company (the “Directors”), for illustrative purposes only, to provide information about how the placing might have affected the relevant financial information of the Group as at 30 September, 2005.

Responsibilities

It is the responsibility solely of the Directors to prepare the unaudited pro forma financial information in accordance with paragraph 21 of appendix 1A and paragraph 7.31 of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to the principles set out in Technical Release 18/98 “Pro Forma Financial Information — Guidance for the preparers under the Listing Rules” issued by the Institute of Chartered Accountants in England and Wales.

It is our responsibility to form an opinion, as required by paragraph 7.31(7) of the Listing Rules, on the unaudited pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

— II-3 — APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

Basis of opinion

We conducted our work with reference to the principles set out in the Bulletin 1998/8 “Reporting on pro forma financial information pursuant to the Listing Rules” issued by the Auditing Practices Board in the United Kingdom, where applicable. Our work, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the unaudited pro forma financial information with the Directors.

Our work does not constitute an assurance engagement in accordance with Hong Kong Standards on Auditing, Hong Kong Standards on Review Engagements or Hong Kong Standards on Assurance Engagements issued by the Hong Kong Institute of Certified Public Accountants, and accordingly, we do not express any such assurance on the unaudited pro forma financial information.

The unaudited pro forma financial information has been prepared on the bases set out on pages II-1 to II-2 for illustrative purpose only and, because of its hypothetical nature, it may not be indicative of:

— the financial position of the Group as at 30 September, 2005 or any future dates, or

— the earnings per share of the Group for the year ended 31 December, 2005 or any future periods.

Opinion 7.31(1)

In our opinion:

a) the unaudited pro forma financial information has been properly compiled by the Directors on the basis stated;

b) such basis is consistent with the accounting policies of the Group, and

c) the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 7.31(1) of the Listing Rules.

Yours faithfully, PricewaterhouseCoopers Certified Public Accountants Hong Kong

— II-4 — APPENDIX III PROFIT ESTIMATE R14.29

Our Directors’ estimate of the profit attributable to shareholders of our company for the year ended 31 December, 2005 is set out under the heading “Profit Estimate” in the section headed “Financial information” in this prospectus.

BASES

The Directors have prepared the estimated profit attributable to shareholders of our company for the year ended 31 December, 2005 based on the audited consolidated results of our group for the nine months ended 30 September, 2005 and the unaudited consolidated results based on management accounts for the remaining three months ended 31 December, 2005. The profit estimate has been prepared on the basis of accounting policies consistent in all material respects with those adopted by our group as summarised in the accountants’ report as set out in appendix I to this Prospectus.

— III-1 — APPENDIX III PROFIT ESTIMATE

LETTERS

Set out below are the texts of the letters received by the Directors from PricewaterhouseCoopers and Anglo Chinese Corporate Finance, Limited in connection with the estimate of the profit attributable to shareholders of our company for the year ended 31 December, 2005.

The Directors CMA Logistics Co., Ltd. Anglo Chinese Corporate Finance, Limited

16 February, 2006

Dear Sirs,

We have reviewed the calculations and accounting policies adopted in arriving at the estimate of the consolidated profit attributable to shareholders of CMA Logistics Co., Ltd. (the “Company”) for the year ended 31 December, 2005 (the “Profit Estimate”) as set out in the subsection headed “Profit Estimate” in the section headed “Financial Information” in the prospectus of the Company dated 16 February, 2006 (the “Prospectus”).

We conducted our work in accordance with the Auditing Guideline 3.341 on “Accountants’ report on profit forecasts” issued by the Hong Kong Institute of Certified Public Accountants.

The Profit Estimate, for which the directors of the Company (the “Directors”) are solely responsible, has been prepared by them based on the audited consolidated results of the Company and its subsidiary (hereinafter collectively referred to as the “Group”)forthenine months ended 30 September, 2005 and the unaudited consolidated results based on management accounts for the remaining three months ended 31 December, 2005.

— III-2 — APPENDIX III PROFIT ESTIMATE

In our opinion, the Profit Estimate, so far as the calculations and accounting policies are concerned, has been properly compiled in accordance with the bases made by the Directors as set out on page III-1 of the Prospectus, and is presented on a basis consistent in all material respects with the accounting policies presently adopted by the Group as set out in our accountants’ report dated 16 February, 2006, the text of which is set out in appendix I to the Prospectus.

Yours faithfully, PricewaterhouseCoopers Certified Public Accountants Hong Kong

— III-3 — APPENDIX III PROFIT ESTIMATE R14.29 A1a34(2)

16 February, 2006

The Board of Directors CMA Logistics Co., Ltd.

Dear Sirs,

We refer to the estimate of the profit attributable to shareholders of CMA Logistics Co., Ltd. (“CMAL” or the “Company”) for the year ended 31 December, 2005 as set out in the prospectus (the “Prospectus”) of CMAL dated 16 February, 2006 (the “Profit Estimate”).

We have discussed with you the bases made by the Directors as set out in appendix III to the Prospectus upon which the Profit Estimate has been made. We have also considered the letter dated 16 February, 2006 addressed to yourselves and ourselves from PricewaterhouseCoopers regarding the accounting policies and calculations upon which the Profit Estimate has been made.

The Profit Estimate, for which the Directors are solely responsible, has been prepared by you based on the audited results of the Group for the nine months ended 30 September, 2005 and the unaudited results based on management accounts for the three months ended 31 December, 2005.

Based on the foregoing, we have formed the opinion that the Profit Estimate, for which you as Directors of the Company are solely responsible, has been made after due and careful enquiry.

Yours faithfully, For and on behalf of Anglo Chinese Corporate Finance, Limited

Stephanie Wong Director

— III-4 — APPENDIX IV PROPERTY VALUATION

The following is the text of a letter, summary of values and valuation certificate, prepared A1a9(3) A1a39 for the purpose of incorporation in this prospectus, received from Vigers Appraisal & Consulting Limited, an independent property valuer, in connection with its valuation as at 30 November, 2005 of the property interests of our group.

Vigers Appraisal & Consulting Limited International Asset Appraisal Consultants

10th Floor, The Grande Building 398 Kwun Tong Road Kowloon Hong Kong

16 February, 2006

The Directors CMA Logistics Co., Ltd. Liangjin Village Yuanyang Town Yubei District Chongqing The PRC

Dear Sirs,

In accordance with your instructions for us to value of the property interests of CMA 8.04 8.05(8) Logistics Co., Ltd. (the “Company”) in the People’s Republic of China (“the PRC”), we confirm that 8.30 we have carried out inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market value of such property interests as at 30 November, 2005.

Our valuation is our opinion of the market value which we would define as intended to mean “the estimated amount for which a Property should exchange on the date of Valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.”

In valuing the properties No. I1-2 and I4 owned by the Company in the PRC, we have 8.20 adopted a combination of the market and depreciated replacement cost approaches in assessing the land portions of the property and the buildings and structures standing on the land respectively. Hence, the sum of the two results represents the market value of the property as a whole. In the valuation of the land portions, reference has been made to the standard land price and the sales evidence as available to us in the locality. Due to the nature of the buildings and structures cannot be valued on the basis of market value, they have therefore been valued on the basis of their depreciated replacement cost. The depreciated replacement cost approach considers the current cost of replacement (reproduction) of the buildings and improvements less deductions for physical deterioration and all relevant forms of obsolescence and optimisation.

— IV-1 — APPENDIX IV PROPERTY VALUATION

The depreciated replacement cost approach generally furnishes the most reliable indication of value for property in the absence of a known market based on comparable sales. The approach is subject to adequate potential profitability of the business.

In valuing property No. I3, we have adopted the direct comparison approach making reference to the recent transactions for similar premises in the proximity.

In valuing properties in Groups II and III, we have attributed no commercial value due to the short-term nature, probation against transfer, subletting or otherwise due to lack of substantial profit rent.

Our valuation has been made on the assumption that the owner sells the property interests on the open market in its existing state without the benefit of a deferred terms contract, leaseback, joint venture, management agreement or any similar arrangement which would serve to increase the value of the property interests.

We have been provided with extracts from title documents relating to such property interest. We have not, however, searched the original documents to verify ownership or to verify existence of any lease amendment which do not appear on the copies handed to us. All documents and leases have been used for reference only. All dimensions measurements and areas are approximations.

In undertaking our valuation of the property, we have relied on the legal opinion provided by SD & Partners, the Company PRC legal adviser (“the PRC Legal Opinion”).

We have inspected the exterior and, where possible, the interior of the properties. However, we have not carried out a structural survey nor have we inspected woodwork or other parts of the structures which are covered, unexposed or inaccessible and we are therefore unable to report that any such parts of the property interests are free from defect.

We have relied to a considerable extent on information provided by you and have accepted advise given to us by you on such matters as planning approvals or statutory notices, easements, tenure, occupation, lettings, site and floor areas and in the identification of those property interests in which the Company has a valid interest.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on the property nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the property interests are free from encumbrances restrictions and outgoings of an onerous nature which could affect their values.

— IV-2 — APPENDIX IV PROPERTY VALUATION

In valuing the property interests, we have complied with the requirements set out in the HKIS Valuation Standards on Properties (First Edition 2005) published by The Hong Kong Institute of Surveyors and Chapter 8 of the Listing Rules of Growth Enterprise Market of The Stock Exchange of Hong Kong Limited.

Unless otherwise stated, all money amounts stated are in Rmb. The exchange rate used in valuing the property interests in the PRC on at 30 November, 2005 was HK$1=Rmb1.04. There has been no significant fluctuation in exchange rate between that date and the date of this letter.

We enclose herewith a summary of our valuation and the valuation certificate. 8.05(7) 8.32(1) 8.32(2) 8.33 Yours faithfully, 8.35 For and on behalf of Vigers Appraisal & Consulting Limited Raymond Ho Kai Kwong, Registered Professional Surveyor MRICS, MHKIS, MSc(e-com) Executive Director

Note: Raymond K.K. Ho, Chartered Surveyor, MRICS, MHKIS, MSc (e-com) has over nineteen years’ experience in undertaking valuations of properties in Hong Kong and Macau and has over twelve years’ experience in the valuation of properties in the PRC.

— IV-3 — APPENDIX IV PROPERTY VALUATION

SUMMARY OF VALUATION Market value as at 8.05(5)c Property 30 November, 2005

Group I — Properties owned by the Company in the PRC

I.1. Lands and buildings located in Rmb61,000,000 Liang Jing Village, (approximately Yuan Yang Town, equivalent to Yubei District, HK$58,654,000) Chongqing, the PRC.

I.2. Land and building location in Lot 33, Rmb36,000,000 Kong Gang Economic Development Zone, (approximately Shuang Feng Qiao Jie Road, equivalent to Yubei District, HK$34,615,000) Chongqing, the PRC.

I.3. Level 4, Rmb3,200,000 No. 26 Li Yu Chi Er Village, (approximately Jiangbei District, equivalent to Chongqing, HK$3,077,000) the PRC.

I.4 Land and building located in Rmb7,800,000 Ding Qu Highway, (approximately Dingzhou, equivalent to Hebei Province, HK$7,500,000) the PRC.

Total: Rmb108,000,000 (approximately equivalent to HK$103,846,000)

— IV-4 — APPENDIX IV PROPERTY VALUATION

Market value as at Property 30 November, 2005

Group II — Properties rented by the Company in the PRC

II.1. Dashiba First Village, No commercial value Jiangbei District, Chongqing, the PRC.

II.2. Office, No commercial value No. 260 Jian Xin Dong Road, Chongqing, the PRC.

II.3. No.18 Jin Chou Street, No commercial value Long Xi Jie Road, Yubei District, Chongqing, the PRC.

II.4. Room 2109, No commercial value Block A, 18 Toa Lin Road, Pudong, Shanghai, the PRC.

II.5. Block D8, No commercial value 88 Hua Yuan Road, Nanjing, the PRC.

II.6. Room 2007, No commercial value Zhongsun Building, Shenzhen, the PRC.

— IV-5 — APPENDIX IV PROPERTY VALUATION

Market value as at Property 30 November, 2005

II.7. Two units at No. 85 Yi Xiu Road No commercial value of Yong Yang Zhen (situated off Chang An Rivera, Li Shui Chang District), Nanjing, the PRC.

II.8. West portion, No commercial value 1039 Huan Cheng Bei Road, Qingdao, the PRC.

Sub total: Nil

Group III — Property occupied by the Company under contract in the PRC

III.1 Distribution Centre, No commercial value No. 260 Jian Xin Dong Road, Jiangbei District, Chongqing, the PRC.

Sub total: Nil

Total: Rmb108,000,000 (approximately equivalent to HK$103,846,000)

— IV-6 — APPENDIX IV PROPERTY VALUATION

VALUATION CERTIFICATE

Group I — Properties owned by the Company in the PRC

Particulars of Market value as at Property Description and Tenure occupancy 30 November, 2005

I.1. Lands and buildings The property comprises 2 parcel of The property is Rmb61,000,000 8.05(1) a,b,c, located in land with a total site area of occupied by the (approximately f,g,i Liang Jing Village, approximately 52,598.2 sq.m. and Company as equivalent to Yuan Yang Town, various buildings erected thereon. distribution centre HK$58,654,000) Yubei District, and warehouse. Chongqing, The buildings of the property were (Note 3) the PRC. completed in the period between 2002 and 2003.

The property has a total gross floor area of approximately 23,389.6 sq.m.

The land use rights term of lots 1 and 2 the property are both expiring on 23 December, 2038.

Notes:

1. Pursuant to two Building Ownership Certificates (document nos.: 113 Fang Di Zheng 2005 Zi Di 8.13(1) 00061-00062), the owner of the building ownership of the property is CMA Logistics Co., Ltd..

2. The PRC legal opinion states that CMA Logistics Co., Ltd. has the rights to transfer, lease and mortgage the 8.09 8.12 property.

3. This property is the Changan Ford Regional Distribution Centres, phases I, II and III, referred to in the “Business” section of the prospectus.

— IV-7 — APPENDIX IV PROPERTY VALUATION

Particulars of Market value as at Property Description and Tenure occupancy 30 November, 2005

I.2. Land and building The property comprises a parcel of The property is Rmb36,000,000 8.05(1) a,b,c, location in Lot 33, land with a site area of occupied by the (approximately f,g,i Kong Gang Economic approximately 68,795.6 sq.m. and a Company as equivalent to Development Zone, building thereon. distribution centre HK$34,615,000) Shuang Feng Qiao Jie and warehouse. Road, The property was completed in 2003. (Note 4) Yubei District, Chongqing, The property has a total gross floor the PRC. area of approximately 11,438.92 sq.m.

The land use rights term of the property expiring on 12 May, 2054 for industrial use.

Notes:

1 Pursuant to the State-owned Land Use Rights Certificate (document no.: 100 Fang Di Zheng 2005 Zi Di 151), 8.13(1) owner of the land use rights of the property is CMA Logistics Co., Ltd..

2. Pursuant to a Building Ownership Certificate (document nos.: Chong Qing Zhi Fang Quan Zheng 201 Zi Di 0170410), the owner of the building ownership of the property is CMA Logistics Co., Ltd..

3. The PRC legal opinion states that CMA Logistics Co., Ltd. has the rights to transfer, lease and mortgage the 8.09 8.12 property.

4. This property is the Changan Industrial Park Regional Distribution Centre, phase I, referred to in the “Business” section of the prospectus.

— IV-8 — APPENDIX IV PROPERTY VALUATION

Particulars of Market value as at Property Description and Tenure occupancy 30 November, 2005

I.3. Level 4, The property comprises an office The property is Rmb3,200,000 8.05(1) a,b,c, No.26 Li Yu Chi unit of the composite building occupied by the (approximately f,g,i Er Village, completed in 2002. Company as its head equivalent to Jiangbei District, office. HK$3,077,000) Chongqing, The property has a total gross floor the PRC. area of approximately 1,089.99 sq.m.

The land use rights term of the property expiring on 30 September, 2041 for commercial use.

Notes:

1. Pursuant to the Real Property Ownership Certificates (document nos.: 103 Fang Di Zheng 2005 Zi Di 01151), 8.13(1) the owner of the building ownership of the property is CMA Logistics Co., Ltd..

2. The PRC legal opinion states that CMA Logistics Co., Ltd. has the rights to transfer, lease and mortgage the 8.09 8.12 property.

— IV-9 — APPENDIX IV PROPERTY VALUATION

Particulars of Market value as at Property Description and Tenure occupancy 30 November, 2005

I.4. Land and building The property comprises a parcel of The property is Rmb7,800,000 8.05(1) a,b,c, located in land with a site area of occupied by the (approximately f,g,i Ding Qu Highway, approximately 22,504 sq.m. and Company distribution equivalent to Dingzhou, several buildings thereon. centre and HK$7,500,000) Hebei Province, warehouse. (Note 4) the PRC. The property was completed in 2004.

The property has a total gross floor area of approximately 7,467.15 sq.m.

The land use rights term of the property expiring on 3 March, 2055 for warehouse and logistic use.

Notes:

1 Pursuant to the State-owned Land Use Rights Certificate (document no.: Ding Guo Yong (2005) Zi Di 010), 8.13(1) owner of the land use rights of the property is (CMA Logistics Co., Ltd. (Dingzhou office)).

2. Pursuant to Building Ownership Certificate (document no.: Ding Zhou Shi Fang Quan Zheng Xi Cheng Qu Zi Di 0508398), the owner of the building ownership of the property is CMA Logistics Co., Ltd. (Dingzhou Office).

3. The PRC legal opinion states that CMA Logistics Co., Ltd. has the rights to transfer, lease and mortgage the 8.09 8.12 property.

4. This property is the Changan Hebei Regional Distribution Centre referred to in the “Business” section of the prospectus.

— IV-10 — APPENDIX IV PROPERTY VALUATION

Group II — Properties rented by the Company in the PRC

Market value as at Property Description and Tenure Particulars of occupancy 30 November, 2005

II.1. Dashiba First Village, The property comprises 3 The property is leased to No commercial value 8.05(1) a,b,c, Jiangbei District, buildings completed in 1994. the Company by e(i),f,i Chongqing, , 8.07 (1),(2),(3) the PRC. The property has a gross floor (Chongqing Changan Yuan area of approximately 4,166.7 Da Transportation Company sq.m. There is also a cleaning Limited) who is authorized area, loading/unloading area by the owner of the and car park with an area of property — Changan Co., approximately 1,210 sq.m. under the lease agreement for a term from 1 January, 2005 to 31 December, 2005 at a monthly rent of Rmb65,306. As advised by the Company, the renewal of the tenancy is under negotiation.

The property is currently occupied for office and warehouse use.

II.2. Office, The property comprises an The property is leased to No commercial value No. 260 unit of a 6-storey building the Company by an Jian Xin Dong Road, completed in 1995. , Chongqing, (Chongqing Changan the PRC. The property has a gross floor Property Management area of approximately 2,068 Company Limited) who is sq.m. authorized by the owner of the property — Changan Co., under the lease agreement for a term from 18 May, 2005 to 17 May, 2006 at a monthly rent of Rmb15,776.

The property is currently occupied for warehouse.

II.3. No. 18 The property comprises an The property was leased to No commercial value Jin Chou Street, unit of a 6-storey building the Company by an Long Xi Jie Road, completed in 1995. independent third party Yubei District, under the lease agreement Chongqing, The property has a gross floor for a term from 1 January, the PRC. area of approximately 2,600 2005 to 31 December, 2005 sq.m. at a monthly rent of Rmb23,400. As advised by the Company, the tenancy was not extended after the term expired.

The property was used for warehouse use.

— IV-11 — APPENDIX IV PROPERTY VALUATION

Market value as at Property Description and Tenure Particulars of occupancy 30 November, 2005

II.4. Room 2109, The property comprises a The property is leased to No commercial value Block A, unit of a 27-storey building the Company by an 18 Toa Lin Road, completed in 1999. independent third party Pudong, under the lease agreement Shanghai, The property has a gross floor for a term from 1 the PRC. area of approximately 99.17 December, 2003 to 30 sq.m. November, 2006 at a monthly rent of Rmb6,260.

The property is currently occupied for office use.

II.5. Block D8, The property comprises a The property was leased to No commercial value 88 Hua Yuan Road, unit of a 3-storey building the Company by an Nanjing, completed in 1999. independent third party the PRC. under the lease agreement The property has a gross floor for a term from 1 June, area of approximately 204.98 2005 to 31 March, 2006 at a sq.m. monthly rent of Rmb5,000. As advised by the Company and confirmed by the PRC legal opinion, the Company, as at the latest practicable date, no longer leased the property.

The property was occupied for office use.

II.6. Room 2007, The property comprises an The property is leased to No commercial value 8.05(1) a,b,c, Zhongsun Building, unit of a 21-storey building the Company by an e(i),f,i Shenzhen, completed in 1999. independent third party 8.07 (1),(2),(3) the PRC. under the lease agreement The property has a gross floor for a term from 15 March, area of approximately 89.27 2005 to 14 March, 2006 at a sq.m. monthly rent of Rmb2,410.

The property is currently occupied for office use.

— IV-12 — APPENDIX IV PROPERTY VALUATION

Market value as at Property Description and Tenure Particulars of occupancy 30 November, 2005

II.7. Two units at No.85 The property comprises two The property is leased to No commercial value Yi Xiu Road of units of a single-storey the Company by Changan Yong Yang Zhen building completed in 1999. Nanjing ( ) (situated off under the lease agreement Chang An River, The property has a gross floor for a term from 28 October, Li Shui Chang area of 25,041.60 sq.m. 2003 to 31 December, 2005 District), and has been renewed for a Nanjing, term from 1 January, 2006 the PRC. to 31 December, 2016 at a monthly rent to be agreed between the two parties.

The property is currently occupied for distribution centre. It is the Changan Nanjing Regional Distribution Centre referred to in the “Business” section of the prospectus.

II.8. West portion, The property comprises The property is leased to No commercial value 1039 Huan Cheng various units of an 11-storey the Company by an Bei Road, building completed in 1999. independent third party Qingdao, under the lease agreement the PRC. The property has a gross floor for a term from 7 area of approximately 150 November, 2004 to 6 sq.m. November, 2006 at an annual rent of Rmb50,000.

The property is currently occupied for office use.

Notes:

The PRC legal opinion states that:

i. the lease agreements of property nos. II.1-7 are legally valid and binding and the lessors have the right to let the properties; and

ii. as property no. 8 is a simple structure, hence this lease agreement is invalid. However, the Company still can use the property according to the lease agreement provided that there is no third party to object the ownership of the property or the lease agreement.

— IV-13 — APPENDIX IV PROPERTY VALUATION

Group III — Property occupied by the Company under contract in the PRC

Market value as at Property Description and Tenure Particulars of occupancy 30 November, 2005

III.1. Distribution Centre, The property comprises a unit The property is subject to a No commercial value 8.07 (1),(2),(3) No. 260 of a 3-storey building contract for a term of 10 8.05(1) Jian Xin Dong Road, completed in 2000. years from 28 December, a,b,c, e(i),f,i Jiangbei District, 2003 to 28 December, 2013 Chongqing, The property has a gross floor and the Company has the the PRC. area of approximately 6,802.99 right to use the property sq.m. and is not required to pay any fee.

The property is currently occupied by the Company for distribution centre. (Note 2)

Notes:

1. The PRC legal opinion states that:

i According to a contract entered into between the Company and Changan Group dated 10 January, 2004, the Company is responsible for contributing all construction cost to construct the property and the Company shall be entitled to use the property for a term from 28 December, 2003 to 28 December, 2013 and is not required to pay any fee. The contract is legally enforceable.

ii Changan Group has obtained the building ownership Certificate of the property.

2. This property is the Changan Co. Headquarter Regional Distribution Centre referred to in the “Business” section of the prospectus.

— IV-14 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS R25.20(3)

This appendix sets out summaries of certain aspects of the PRC legal and judicial system, its arbitration system and its company and securities law and regulations. It also contains a summary of certain Hong Kong law and regulations, including summaries of certain material differences between the PRC and Hong Kong company law, certain requirements of the GEM listing rules and the additional provisions required by the Stock Exchange for inclusion in the articles of association of the PRC issuers (as defined in the GEM listing rules).

THE PRC LAWS AND REGULATIONS

(1) The PRC legal system

The PRC legal system is based on the PRC Constitution and is made up of written laws. regulations and directives, local regulations and directives, and international treaties entered into by China. Decided court cases do not constitute binding precedents, although they are used for the purposes of judicial reference and guidance.

The National People’s Congress of the PRC (the “NPC”) and the Standing Committee of the NPC are empowered by the PRC Constitution to exercise the legislative power of the State. The NPC has the power to amend the PRC Constitution and enact and amend basic laws governing the State organs, civil and criminal matters. The Standing Committee of the NPC is empowered to interpret, enact and amend laws other than those required to be enacted by the NPC.

The State Council is the highest organ of state administration and has the power to enact administrative rules and regulations. The ministries and commissions under the State Council are also vested with the power to issue orders, directives and regulations within the jurisdiction of their respective departments. All administrative rules, regulations, directives and orders promulgated by the State Council and its ministries and commissions must not conflict with the PRC Constitution and the national laws enacted by the NPC and the Standing Committee of the NPC. In the event that any such conflict arises, the Standing Committee of the NPC has the power to annul such administrative regulations, directives and methods.

Rules, regulations or directives may be enacted or issued at the provincial or municipal people’s congresses and the standing committees of the provincial or municipal people’s congresses. The local governments may promulgate rules and directives applicable to their own administrative region. These local regulations and directives must not conflict with the PRC Constitution, the national laws, or the administrative rules and regulations promulgated by the State Council.

The power to interpret laws is vested by the PRC Constitution in the Standing Committee of the NPC. According to the Decision of the Standing Committee of the NPC Regarding the Strengthening of Interpretation of Laws ( ) passed on 10 June, 1981, the Supreme People’s Court has the power to give general interpretation on the

— V-1 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS application of laws in judicial proceedings in addition to its power to issue specific interpretation for specific cases. The State Council and its ministries and commissions are also vested with the power to give interpretation of the administrative regulations and rules which they have promulgated.

At the regional level, the power to give interpretations of the regional regulations and rules is vested in the regional legislative and administration organs which promulgate such laws.

(2) Judicial system

The people’s courts arc the judicial organs of the PRC. Under the PRC Constitution and the Law of Organisation of the People’s Courts of the PRC ( ), promulgated on I July, 1979, the people’s courts are made up of the Supreme People’s Court, the local people’s courts, military courts and other special people’s courts. The local people’s courts are divided into three levels, namely, the basic people’s courts, the intermediate people’s courts and the highest people’s courts. The basic people’s courts are divided into civil, criminal, economic and administrative divisions. The intermediate people’s courts have divisions similar to those of the basic people’s courts and other special divisions (such as the intellectual property division), in accordance with needs. The judicial work of people’s courts at lower levels is subject to the supervision of people’s courts at higher levels. The people’s procuratorates also have the right to exercise legal supervision over the proceedings of people’s courts of the same level and the lower level. The Supreme People’s Court is the highest judicial organ of the PRC. It supervises the administration of justice by the people’s courts and special people’s courts at all levels.

The people’s courts adopt a two-tier final appeal system. If a party is not satisfied with a judgement or order of the first instance of a local people’s court, it may appeal against such judgement or order to the people’s court at the next higher level, and the judgements or orders of the second instance of the Supreme People’s Court are final and binding. If, however, the Supreme People’s Court or a people’s court at a higher level finds an error in a final and binding judgement which has taken effect in any people’s courts at a lower level, or the presiding judge of a people’s court finds an error in a final and binding judgement which has taken effect in the court over which he presides, a retrial of the case may be conducted according to the judicial supervision procedures. If a party finds an error in a final and binding judgement which has taken effect, it may appeal for a retrial to the original people’s court or a people’s court at a higher level.

The PRC civil procedures are governed by the Civil Procedure Law of the PRC ( ) (the “Civil Procedure Law”) adopted on 9 April, 1991, which prescribes the criteria for instituting a civil action, the jurisdiction of the people’s courts, the procedures to be followed for conducting a civil action, the court procedures, and the procedures for enforcement of a civil judgement or order. All parties to a civil action conducted within the PRC must comply with the Civil Procedure Law. A civil case is generally heard by a people’s court located in the defendant’s place of domicile. The jurisdiction may also be selected by express agreement by the parties to a contract provided that the people’s court having the jurisdiction is located at the plaintiff’s or the defendant’s place of domicile, the place of execution or

— V-2 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS implementation of the contract or the object of the action but it must not violate the regulations in respect of hierarchy and jurisdiction of the courts as stated in the Civil Procedure Law. A foreign national, stateless person, foreign enterprise and organisation is given the same litigation rights and obligations as a citizen, legal person and other organisation of the PRC. If a foreign country’s judicial system limits the litigation rights of PRC citizens, legal person and other organisation, the PRC courts may apply the same limitations to the Civil Litigation Rights of the citizens, enterprises and organisations of that foreign country. If any party to a civil action refuses to comply with a judgement or order made by a people’s court or an award made by an arbitration organ in the PRC, the aggrieved party may apply to the people’s court to enforce the judgement, order or award. There are time limits imposed on the right to apply for such enforcement. if at least one of the parties to the dispute is an individual, the time limit is one year. If both parties to the dispute are legal persons or other institutions, the time limit is six months.

A party seeking to enforce a judgement or order of a people’s court against a party who or whose property is not within the. PRC may apply to a foreign court with jurisdiction over the case for recognition and enforcement of such judgement or order. A foreign judgement or ruling may also be recognised and enforced according to the PRC enforcement procedures by the people’s court in accordance with the principle of reciprocity or the international treaty with the relevant foreign country entered into or acceded to by the PRC which provides for such recognition and enforcement unless the people’s court considers that the recognition or enforcement of such a judgement or ruling will violate the basic legal principles of the PRC or its sovereignty or security, or for reasons of social and public interest.

(3) Arbitration and enforcement of arbitral awards

The Arbitration Law of the People’s Republic of China ( ) (the “Arbitration Law”) was passed by the Standing Committee of the NPC on 31 August, 1994 and came into effect on 1 September, 1995. It is applicable to, among other matters, trade disputes involving foreign parties where the parties have entered into a written agreement to refer the matter to arbitration before an arbitration committee constituted in accordance with the Arbitration Law. Under the Arbitration Law, an arbitration committee may. before the. promulgation by the PRC Arbitration Association of arbitration regulations, formulate interim arbitration rules in accordance with the Arbitration Law and the PRC Civil Procedure Law. Where the parties have by agreement provided arbitration as the method for dispute resolution, the people’s court will refuse to handle the case if one party institutes legal proceedings in a people’s court.

The Listing Rules and the Mandatory Provisions require an arbitration clause to be included in the articles of association of a company listed in Hong Kong and, in the case of the Listing Rules. also in a contract between the company and each director and supervisor, to the effect that whenever any dispute or claim arises from the articles of association, or from any rights or obligations conferred or imposed by the Company Law or other relevant laws and administrative regulations concerning the affairs of a company, including, but without limitation, between (i) a holder of overseas listed foreign shares and the company; (ii) a holder of overseas listed foreign shares and the directors, supervisors, general manager or other senior officers of the company; (iii) a holder of overseas listed foreign shares and a holder of domestic shares, such parties shall

— V-3 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS submit that dispute or claim for arbitration before either the China International Economic and Trade Arbitration Commission (“CIETAC”) or the Hong Kong International Arbitration Centre (“HKIAC”). If the party seeking arbitration elects to arbitrate the dispute or claim at the HKIAC, then either party may apply to have such arbitration conducted in Shenzhen according to the securities arbitration rules of the HKIAC. CIETAC is a foreign affairs arbitration organ in the PRC. CIETAC is located in Beijing with branch offices in Shenzhen and Shanghai.

Under the Arbitration Law and the PRC Civil Procedure Law, an arbitral award is final and binding on the parties. If a party fails to comply with an award, the other party to the award may apply to the people’s court for enforcement. A people’s court may refuse to enforce an arbitral award made by an arbitration commission if there is any procedural or membership irregularity specified by law or the award exceeds the scope of the arbitration agreement or is outside the jurisdiction of the arbitration commission.

A party seeking to enforce an arbitral award of a foreign affairs arbitration organ of the PRC against a party who or whose property is not within the PRC, may apply to a foreign court with jurisdiction over the case for enforcement. Similarly, an arbitral award made by a foreign arbitration body may be recognised and enforced by the PRC courts in accordance with the principles of reciprocity or any international treaty concluded or acceded by the PRC.

The PRC acceded to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”) adopted on 10 June, 1958 pursuant to a resolution of the Standing Committee of the NPC passed on 2 December, 1986. The New York Convention provides that all arbitral awards made in a state which is a party to the New York Convention shall be recognised and enforced by other parties to the New York Convention, subject to their right to refuse enforcement under certain circumstances, including where the enforcement of the arbitral award is against the public policy of the State to which the application for enforcement is made. It was declared by the Standing Committee of the NPC simultaneously with the accession of the PRC that (i) the PRC will only recognise and enforce foreign arbitral awards made within the territory of another party to the Convention on the principle of reciprocity; and (ii) the PRC will only apply the New York Convention in disputes considered under the PRC laws to arise from contractual and non-contractual mercantile legal relations.

Following the resumption of sovereignty over Hong Kong by the PRC on 1 July, 1997, the New York Convention no longer applies to the enforcement of Hong Kong arbitration awards in other parts of the PRC. A ’Memorandum of Understanding on the arrangement for reciprocal enforcement of arbitral awards between Hong Kong and China has been signed on 21 June, 1999. The new arrangement is made in accordance with the spirit of the New York Convention. To meet present day’s needs, it will allow awards made by the arbitral authorities accepted by the PRC according to the Arbitration Law to be enforced in Hong Kong. Under the agreed arrangement, Hong Kong arbitration awards will also be enforceable in China.

— V-4 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

(4) Taxation

(a) Taxes applicable to joint stock limited companies

(i) Income tax

According to the Provisional Regulations of Income Tax for Domestic Companies ( ) effective from January I994 and stipulated by the. State Council, all Chinese companies, including State-owned companies, collective-owned enterprises, private enterprises, joint stock companies and other companies (excluding joint ventures and foreign companies) are required to pay income tax at a rate of 33 per cent. on taxable income derived from their production of goods and business activities. However, income taxes could be reduced pursuant to any of new regulations promulgated by the State Council.

(ii) Value added tax (“VAT”)

Both the Provisional Rules of the People’s Republic of China on VAT ( ) effective from 1 January, 1994 and the Detailed Rules for the Implementation of the Provisional Rules of the People’s Republic of China on VAT ( ) effective from 25 December, 1993, stipulate that all units or individuals who are engaged in the sale of goods or the provision of processing, reparation, assembly, labour services, and the import and export of goods within the territory of the PRC are required to pay VAT.

The tax payers who are engaged in the sale of goods are required to pay VAT at the rate of I3% or 17%. The tax payers who are providing processing, reparation, assembly, labour services are required to pay 17% VAT. The tax payers who are exporting goods are required to pay 0% VAT, except as otherwise stipulated by the State Council.

(iii) Business tax

Both the Provisional Rules of the People’s Republic of China on Business Tax ( ) issued on 13 December, 1993 and the Detailed Rules for the Implementation of the Provisional Rules of the People’s Republic of China on Business Tax ( ) issued on 25 December, 1993, stipulate that, all units and individuals except entertainment business engaged in the provision of taxable labour services, the assignment of intangible assets or sale of immovable properties, within the territory of the PRC, are required to pay 3% or 5% business tax on their gross business turnover. The business tax with regard to the entertainment business is at the rate of 5% to 20%.

— V-5 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

(b) Taxation of shareholders

(i) Tax on dividends

On 21 July, 1993, the State Tax Bureau, by the “Notice Relating to Taxes Applicable to Enterprises with Foreign Investments, Foreign Enterprises and Foreign Nationals in Relation to Dividends and Gains obtained from the Holding and Transferring of Shares” ( , ) (the “Tax Notice of 1993”) confirmed that dividends and other profit received by foreign investors (both enterprises and individuals) from the PRC listed domestic shares, and overseas listed foreign shares such as H shares, were exempted from withholding taxes.

On 13 May, 1994, the PRC Ministry of Finance and the State Tax Bureau issued the “Notice Relating to the Individual Income Tax” ( ). According to such Notice, the dividends received by foreign individuals from foreign investment enterprises were temporarily exempted from withholding taxes.

On 26 July, 1994 the State Tax Bureau issued the Notice Relating to Taxes of Dividends Applicable to Foreign Individuals Who Hold Domestic And/Or Overseas Shares ( ) (the “Tax Notice of 1994”). The Tax Notice of 1994 stipulated that, dividends or other distributions received by foreign individuals who hold overseas shares and, or domestic listed foreign shares from a PRC listed company are, for the time being, exempted from individual income tax.

On 30 August, 1999, the Amendments to the Individual Income Tax Law of the PRC ( ) were promulgated by the Standing Committee of NPC. Under the Amendment, any foreign national who is not a resident of the. PRC will be subject to a withholding tax on dividends received from the shares of the PRC domestic enterprises. However, the exemption enjoyed by a foreign enterprise under the notices said above is not affected by the Amendment and continues to apply.

Accordingly. under current PRC laws and regulations, no withholding tax is payable in respect of dividends or other distributions on overseas shares held by any foreign enterprise or foreign national. If, however, the Tax Notice of 1993 and, or the Notice Relating to the Individual Income Tax and, or the Tax Notice of 1994 are withdrawn, a 20% withholding tax may be applied on such dividends or distributions, subject to any tax reductions pursuant to an applicable double taxation avoidance treaty.

(ii) Tax on the transfer of shares

Under the Tax Notice of 1993, foreign enterprises or foreign individuals are required to pay, withholding taxes or individual income taxes at the rate of 20%, on gains exceeding the amount of their contributions from the transfer of the shares held by them in the foreign investment enterprises.

— V-6 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

The Implementing Rules of Individual Income Tax Law of the PRC ( ) (the “Implementing Rules”), issued on 28 January, 1994, stipulate that gains realised on the sale of equity securities by an individual are subject to income tax and empower the Ministry of Finance to draft detailed rules on the mechanisms of collecting such tax. which will be taken effective after approved by the State Council. As of the day, there are still no detail rules issued.

On 20 June, 1994, the Ministry of Finance and the State Tax Bureau jointly issued the Notice on the Temporary Non-Levy of Individual Income Tax on Gains form Share Transfers ( ), exempting individuals from the payment of income tax on gains from the transfer of shares for the years 1994 and 1995. On 9 February, 1996, the Ministry of Finance and the. State Tax Bureau jointly issued the Notice on the Temporary Non-Levy of Individual Income Tax on Gains form Share Transfers for 1996 ( ), exempting individuals from the payment of income tax on gains from the transfer of shares for the years 1996. On 30 March, 1998, the Ministry of Finance and the State Tax Bureau jointly issued the Notice on the Non-Levy of Individual Income Tax on Gains form Share Transfers ( ), exempting individuals from the payment of income tax on gains from the transfer of shares of listed companies since 1997.

(iii) Tax treaties

In the event that withholding tax is payable as referred to in (i) or (ii) above, foreign enterprises without an establishment or office in the PRC and non-PRC individual investors residing in countries which have entered into the avoidance of double-taxation treaties with the PRC may be entitled to a reduction of withholding tax imposed on the payment of dividends to such investors. The PRC. is currently a party to the avoidance of double taxation treaties with a number of countries, including Australia, Canada, France, Germany, Japan, Malaysia, the Netherlands, Singapore, the United Kingdom and the US.

(iv) Stamp duty

By virtue of the. Interim Regulations Concerning Taxation Issues for Joint Stock Trial Enterprises ( ) issued on 12 June, 1992 and the Interim Regulations of the PRC Concerning Stamp Duty ( ) issued on 6 August, 1988 and taking effect on 1 October, 1988, PRC stamp duty is imposed on the transfer of the PRC listed domestic shares. However, H shares which are transferred outside the PRC are exempted from the payment of the PRC stamp duty.

(v) Inheritance tax

According to the applicable PRC laws, there is no inheritance tax.

— V-7 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

(5) Foreign exchange control

Major reforms have been introduced to the foreign exchange control system of the PRC since 1993.

On 28 December, 1993, the People’s Bank of China (“PBOC”), with the authorisation of the State Council, issued the Notice on Further Reform of the Foreign Exchange Control System ( ). Other main regulations and implementation measures include the PRC Foreign Exchange Control regulations ( )effectiveon1 April, 1996 and promulgated by the State Council on 29 January, 1996 and the Regulations on the Foreign Exchange Settlement, Sale and Payments ( ) which were promulgated by PBOC on 20 June, 1996 and took effect on 1 July, 1996 and which contain detailed provisions regulating the settlement, sale and payment of foreign exchange by domestic enterprises, individuals, economic organisations and social organisations in the PRC.

Under such new regulations, the previous dual exchange rate system for Rmb was abolished and a unified floating exchange rate system, based largely on supply and demand, was introduced. The PBOC publishes, on each business day, the Rmb exchange rate against other major foreign currencies. Such rate is to be set by reference to the Rmb/major foreign currencies trading price on the previous day on the inter-bank foreign exchange market.

In general, all organisations and individuals within the PRC, including foreign invested enterprises, are required to remit their foreign exchange earnings to the PRC. In relation to the PRC enterprises, their recurrent foreign exchange are generally required to be sold to designated banks unless specifically approved otherwise. Foreign-invested enterprises, on the other hand, are permitted to retain certain percentage of their recurrent foreign exchange earnings and the sums retained may be. deposited into foreign exchange bank accounts maintained with designated banks. Capital foreign exchange must be deposited into foreign exchange bank accounts maintained with designated banks and can generally be retained in such accounts.

At present, control on the purchase of foreign exchange is being relaxed. Enterprises which require foreign exchange for their recurrent activities such as trading activities and payment of staff remuneration may purchase foreign exchange from designated banks, subject to the production of relevant supporting documents.

In addition, where an enterprise requires any foreign exchange for the payment of dividends that are payable in foreign currencies under applicable regulations, such as dividends of H shares and distribution of profits by a foreign invested enterprise to its foreign investment party, then, subject to the due payment of tax on such dividends, the amount required may be withdrawn from funds in foreign exchange accounts maintained with designated banks, and where the amount of the funds in foreign exchange is insufficient, the enterprise may purchase additional foreign exchange from designated banks upon the presentation of the resolutions of the directors on the profit distribution plan of that enterprise.

— V-8 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

Despite the relaxation of foreign exchange control over current account transactions, the approval of the SAFE is still required before an enterprise may borrow a loan in foreign currency or provide any foreign exchange guarantee or to make any investment outside of the PRC or to enter into any other capital account transaction which involves the purchase of foreign exchange.

When conducting actual foreign exchange transactions, the designated banks may, based on the exchange rate published by the PBOC and subject to certain limits, freely determining the applicable exchange rate. The China Foreign Exchange Trading System (“CFETS”) was formally established and came into operations on 1 January, 1994, CFETS has set up a computerised network with sub-centres in several major cities, thereby forming an interbank market in which designated PRC banks can trade and settle their foreign currencies. On 25 October, 1998, the PBOC and the State Administration of Foreign Exchange (“SAFE”) jointly issued a notice, which stipulated that all the swap centres were closed from 1 December, 1998.

On 5 August, 2002, the SAFE and the China Securities Regulatory Commission (“CSRC”) jointly issued the Notice Concerning Some Issues Relating to Strengthening the Foreign Exchange Control of Overseas Listing ( ) effective on 1 September, 2002. The Notice provided that:

— within 30 days after the approval of the CSRC for the overseas issue of shares listing, a domestic enterprise holding shares of the overseas listed enterprise should proceed with the foreign exchange registration procedures at local administration authority for foreign exchange in respect of the overseas listed shares;

— within 30 days after receiving the foreign currency proceeds of the share offer, the overseas listed enterprise should transfer the balance of the foreign currency proceeds received to the PRC, after deducting the related expenses, and should not retain the proceeds overseas without the approval of local administration authority for foreign exchange. The transferred funds shall be administered as direct investment funds of the foreign investor, and subject to approval by local administration authority for foreign exchange, a special account may be opened to retain the funds, which may be used for foreign exchange settlements;

— before the proceeds are transferred to the PRC, if the overseas listed enterprise need to open an overseas account for temporary deposit of the proceeds, application can be made to local administration authority for foreign exchange to open an overseas special foreign exchange account, with a maximum time limit of three months from the date of the opening of the account;

— in the event the overseas listed enterprise is required to repurchase the company’s own overseas listed foreign shares, approval should be obtained from CSRC, after which application should be made for foreign exchange registration changes in respect of the overseas listed shares and the related opening of account overseas and approval for the remittance of funds.

— V-9 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

(6) Company law

On 29th December, 1993, the Standing Committee of the Eighth NPC adopted the Company Law, which came into effect on 1st July, 1994 and was amended on 25th December, 1999. On 27th October, 2005, the Eighteenth Standing Committee Meeting of the Tenth NPC further amended the Company Law. The revised Company Law has come into effect on 1st January, 2006.

On 4th July, 1994, the Special Regulations were passed at the Second Standing Committee Meeting of the State Council, and they were promulgated and implemented on 4th August, 1994. The Special Regulations are formulated according to the Company Law in respect of the overseas share subscription and listing of joint stock limited companies. The Mandatory Provisions were issued jointly by the Securities Commission and the State Restructuring Commission on 27th August, 1994, prescribing provisions which must be incorporated in the articles of association of joint stock limited companies to be listed overseas. Accordingly, the Mandatory Provisions have been incorporated in the articles of association. References to a “company” below are to a joint stock limited company established under the Company Law with overseas listed foreign invested shares.

Set out below is a summary of the major provisions of the Company Law as amended on October, 2005, the Special Regulations and the Mandatory Provisions.

(a) General

A “joint stock limited company” is a corporate legal person incorporated under the Company Law, whose registered capital is divided into shares of equal par value. The liability of its shareholders are limited to the extent of the shares held by them, and the liability of the company is limited to the full amount of all the assets owned by it.

A company must conduct its business in accordance with the laws and commercial ethics. A company may invest in other enterprises. However, it shall not become the contribution party which accepts joint and several liabilities of the obligations of the invested enterprise.

(b) Incorporation

A company may be incorporated by promotion or public subscription.

A company may be incorporated by a minimum of 2 promoters, but at least half of the promoters must reside within the PRC. According to the Special Regulations, State-owned enterprises or enterprises with the majority of their assets owned by the PRC Government can be restructured in accordance with the relevant regulations to become joint stock limited companies which may issue shares to overseas investors. These companies, if incorporated by public subscription, may have less than 2 subscribers and can issue new shares once incorporated.

— V-10 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

Companies incorporated by promotion are companies the entire registered capital of which is subscribed for by the promoters. Where companies are incorporated by public subscription, not less than 35% of their total shares must be subscribed for by the promoters and the remainder of their shares shall be offered.

The registered capital of a company is the amount of its total paid up capital as registered with the relevant administration bureau for industry and commerce. The minimum registered capital of a company is Rmb5 million.

The promoters shall convene an inaugural meeting within 30 days after the issued shares have been fully paid up, and shall give notice to all subscribers or make an announcement of the date of the inaugural meeting 15 days before the meeting. The inaugural meeting may be convened only with the presence of subscribers holding shares representing more than 50% of the voting rights in the company. At the inaugural meeting, matters including the adoption of draft articles of association proposed by the promoter(s) and the election of the board of directors and the supervisory committee of the company will be dealt with. All resolutions of the meeting require the approval of subscribers with at least half of the voting rights present at the meeting.

Within 30 days after the conclusion of the inaugural meeting, the board of directors shall apply to the registration authority for registration of the establishment of the company. A company is formally established and has the status of a legal person after the approval of registration has been given by the relevant administration bureau for industry and commerce and a business license has been issued.

A company’s promoter shall individually and collectively be liable for (i) the payment of all expenses and liabilities incurred in the incorporation process if the company cannot be incorporated; (ii) the repayment of subscription moneys to the subscribers together with interest at bank rates for a deposit for the same term if the company cannot be incorporated; and (iii) damages suffered by the company as a result of the default of the promoters in the course of incorporation of the company. According to the Provisional Regulations Concerning the Issue and Trading of Shares promulgated by the State Council on 22nd April, 1993 (which is only applicable to issue and trading of shares in the PRC and their related activities), if a company is established by means of subscription, the promoters of such company are required to assume joint responsibility for the accuracy of the contents of the prospectus and to ensure that the prospectus does not contain any misleading statement or omit any material information.

The promoter may make capital contribution in currencies, or in kind or by way of injection of assets, industrial property rights, non-patented technology or land use rights based on their appraised value. The amount of currency contribution shall not be less than 30% of the registered capital of the company. If a capital contribution is made other than in cash, a valuation and verification of the property contributed must be carried out.

— V-11 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

A company may issue registered or bearer share certificates. However, shares issued to promoters and legal persons shall be in the form of registered share certificates, and may not be registered under a different name or in the name of an agent.

The Special Regulations and the Mandatory Provisions provide that shares issued to foreign investors and listed overseas be issued in registered form and shall be denominated in Rmb and subscribed for in foreign currency.

Under the Special Regulations and the Mandatory Provisions, shares issued to foreign investors and investors from the territories of Hong Kong, Macau and Taiwan and listed in Hong Kong are classified as H shares, and those shares issued to investors within the PRC other than the territories specified above are known as domestic shares. In accordance with PRC regulations and rules, qualified foreign institutional investors approved by the CSRC may hold listed domestic shares.

A company may offer its shares to the public overseas with approval by the securities administration department of the State Council. Special measures shall be specifically formulated by the State Council. Under the Special Regulations, upon approval of the CSRC, a company may agree, in the underwriting agreement in respect of an issue of overseas listed foreign invested shares, to retain not more than 15% of the aggregate number of overseas listed foreign invested shares proposed to be issued after accounting for the number of underwritten shares.

The share offering price may be equal to or greater than the par value, but may not be less than the par value.

The transfer by a shareholder of its shares must be carried out through a lawfully established stock exchange. Transfer of registered shares by a shareholder must be made by means of an endorsement or by other means stipulated by law or by administrative regulations. Bearer share certificates are transferred by delivery of the certificates to the transferee.

Shares held by a promoter of a company may not be transferred within 1 year after the company’s establishment. Directors, supervisors and the manager of the company shall not, within each year, transfer more than 25% of the shares they hold in the company during their term of office and such shares of the company shall not be transferred within 1 year from the date of the company’s listing. There is no restriction under the Company Law as to the percentage of shareholding a single shareholder may hold in a company.

Transfers of shares may not be entered into the register of shareholders within 20 days before the date of a shareholders’ meeting or with 5 days before the record date set for the purpose of distribution of dividends.

— V-12 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

(d) Increase in capital

Under the Company Law, an increase in capital in a company by means of a public issue of new shares must be approved by shareholders in general meeting and meet the following conditions stipulated under the Securities Law:

(i) the company has a sound and good organisation;

(ii) the company has sustainable profitability and stable financial condition;

(iii) there has been no false reporting in the company’s financial and accounting documents during the last 3 years and no other material breach of law;

(iv) Public offers require the approval of the securities administration department of the State Council.

After payment in full for the new shares issued, the company must change its registration with the relevant administration for industry and commerce and issue a public notice accordingly.

(e) Reduction of share capital

Subject to the minimum registered capital requirements, a company may reduce its registered capital in accordance with the following procedures prescribed by the Company Law:

(i) the company shall prepare a balance sheet and financial statement;

(ii) the reduction of registered capital must be approved by shareholders in general meeting;

(iii) the company shall inform its creditors of the reduction in capital within 10 days and publish an announcement of the reduction in the newspaper within 30 days after the resolution approving the reduction has been passed;

(iv) the creditors of the company may within the statutory prescribed time limit require the company to pay its debts or provide guarantees covering the debts; and

(v) the company must apply to the relevant administration bureau for industry and commence for registration of the reduction in registered capital.

— V-13 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

(f) Repurchase of shares

A Company may not purchase its own shares other than for one of the following purposes:

(i) to reduce its registered share capital;

(ii) to merge with another company that holds its shares;

(iii) to grant shares to its employees as incentives; and

(iv) to purchase its own shares from its shareholders who vote against the resolution on regarding the merger and demerger with other company in a general meeting.

The Mandatory Provisions provide that upon obtaining approvals in accordance with the articles of association of the company and from the relevant supervisory authorities, the company may repurchase its issued shares for the foregoing purposes by way of (i) a general offer to the shareholders of the company or (ii) purchase on the stock exchange or (iii) an off-market agreement.

Under the Company Law, within a stipulated period following the purchase of the company’s own shares, a company must in accordance with applicable law and administrative regulations cancel or transfer the repurchased portion of its shares, change its registration and issue a public notice.

(g) Transfer of shares

Shares may be transferred in accordance with the relevant laws and regulations.

A shareholder may only effect a transfer of its shares on a stock exchange established in accordance with law or by other way as required by the State Council. Registered shares may be transferred after the shareholders endorse their signatures on the back of the share certificates or in any other manner specified by applicable laws and regulations.

Shares held by a promoter may not be transferred within 1 year after the company’s establishment. Directors, supervisors and the manager of the company shall not, within each year, transfer more than 25% of the shares they hold in the company during their term of office and such shares of the company shall not be transferred within 1 year from the date of the company’s listing. There is no restriction under the Company Law as to the percentage shareholding of a single shareholder of a company.

— V-14 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

(h) Shareholders

Shareholders have such rights and obligations as set forth in the articles of association of the company. The articles of association of a company are binding on each shareholder.

Under the Company Law, the rights of a shareholder include:

(i) to attend in person or appoint a proxy to attend shareholders’ general meetings, and to vote in respect of the number of shares held;

(ii) to transfer his shares at a legally established stock exchange in accordance with the Company Law and the articles of association of the company;

(iii) to inspect the company’s articles of association, minutes of shareholders’ general meetings and financial and accounting reports and to make proposals or enquiries in respect of the company’s operations;

(iv) if a resolution adopted by a shareholders’ general meeting or the board of directors violates any law or administrative regulation or infringes the lawful rights and interests of shareholders, to institute an action in People’s Court demanding that the illegal infringing action be stopped;

(v) to receive dividends in respect of the number of shares held;

(vi) to receive surplus assets of the company upon its termination in proportion to his or her shareholding; and

(vii) any other shareholders’ rights specified in the company’s articles of association.

The obligations of a shareholder include the obligation to abide by the company’s articles of association, to pay the subscription moneys in respect of the shares subscribed for, to be liable for the company’s debts and liabilities to the extent of the amount of subscription moneys agreed to be paid in respect of the shares taken up by him and any other shareholders’ obligation specified in the company’s articles of association.

(i) General meetings

The shareholders’ general meeting is the organ of authority of the company, which exercises its powers in accordance with the Company Law.

The shareholders’ general meeting exercises the following powers:

(i) to decide on the company’s operational policies and investment plans;

— V-15 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

(ii) to elect or remove the directors and decide on matters relating to the remuneration of directors;

(iii) to elect or remove the supervisors who are representatives of shareholders and decide on matters relating to the remuneration of supervisors;

(iv) to examine and approve reports of the board of directors;

(v) to examine and approve reports of the supervisory committee;

(vi) to examine and approve the company’s proposed annual financial budget and final accounts;

(vii) to examine and approve the company’s proposals for profit distribution plans and recovery of losses;

(viii)to decide on any increase or reduction of the company’s registered capital;

(ix) to decide on the issue of bonds by the company;

(x) to decide on issues such as merger, division, dissolution and liquidation of the company and other matters; and

(xi) to amend the company’s articles of association.

Shareholders’ general meetings are required to be held once every year. An extraordinary shareholders’ general meeting is required to be held within 2 months after the occurrence of any of the following circumstances:

(i) the number of directors is less than the number provided for in the Company Law or less than two-thirds of the number specified in the company’s articles of association;

(ii) the aggregate losses of the company which are not made up reach one-third of the company’s total share capital;

(iii) when shareholders holding 10% or more of the company’s issued and outstanding shares carrying voting rights request the convening of an extraordinary general meeting;

(iv) whenever the board of directors deems necessary; or

(v) the supervisory committee so requests.

(vi) other circumstances as required by the articles of associations.

— V-16 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

Shareholders’ general meetings shall be convened by the board of directors, and presided over by the chairman of the board of directors.

Notice of the meeting shall be given to all shareholders 30 days before the meeting under the Company Law and 45 days under the Special Regulations and the Mandatory Provisions, stating the matters to be considered at the meeting. Under the Special Regulations and the Mandatory Provisions, shareholders wishing to attend are required to give to the company written confirmation of their attendance 20 days prior to the meeting. Under the Special Regulations, at an annual general meeting of a company, shareholders holding 5% or more of the voting rights in the company are entitled to propose to the company in writing new resolutions to be considered at that meeting which, if within the powers of a shareholders’ general meeting, are required to be added to the agenda of that meeting.

Shareholders present at a shareholders’ general meeting have 1 vote for each share they hold.

Resolutions of the shareholders’ general meeting must be adopted by more than half of the voting rights held by shareholders present in person (including those represented by proxies) at the meeting, with the exception of matters relating to merger, division, dissolution of a company or amendments to the articles of association, which must be adopted by more than two-thirds of the voting rights held by shareholders present, including those represented by proxies at the meeting.

According to the Mandatory Provisions, the increase or reduction of share capital, the issue of bonds or debentures, and any other matters in respect of which the shareholders by ordinary resolution so decide, must be approved through special resolutions by more than two-thirds of the voting rights held by shareholders present in general meeting.

Shareholders may appoint representatives to attend shareholders’ general meetings by a written appointment document stating the scope of the exercise of the voting rights.

There is no specific provision in the Company Law regarding the number of shareholders constituting a quorum in a shareholders’ meeting. However, the Special Regulations and the Mandatory Provisions provide that a company’s annual general meeting may be convened when replies to the notice of that meeting from shareholders holding shares representing 50% of the voting rights in the company have been received 20 days before the proposed date, or if that 50% level is not achieved, the company shall within 5 days of the last day for receipt of the replies notify shareholders by public announcement of the matters to be considered at the meeting and the date and place of the meeting and the annual general meeting may be held thereafter. The Mandatory Provisions require class meetings to be held in the event of a variation or derogation of the class rights of a class. Holders of domestic invested shares and holder of overseas listed foreign invested shares are deemed to be different classes of shareholders for this purpose.

— V-17 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

(j) Directors

A company shall have a board of directors, which shall consist of 5 to 19 members. Under the Company Law, each term of office of a director shall not exceed 3 years. A director may serve consecutive terms if re-elected.

Meetings of the board of directors shall be convened at least twice a year. Notice of meeting shall be given to all directors and supervisors 10 days before the meeting. The board of directors may provide for a different method of giving notice and notice period for convening an extraordinary meeting of the board of directors.

Under the Company Law, the board of directors exercises the following powers:

(i) to convene the shareholders’ general meetings and report on its work to the shareholders’ general meetings;

(ii) to implement the resolutions passed by the shareholders in general meetings;

(iii) to decide on the company’s business plans and investment proposals;

(iv) to formulate the company’s proposed annual financial budget and final accounts;

(v) to formulate the company’s profit distribution proposals and for recovery of losses;

(vi) to formulate proposals for the increase or reduction of the company’s registered capital and the issuance of the corporate bonds;

(vii) to prepare plans for the merger, division or dissolution of the company;

(viii)to decide on the company’s internal management structure;

(ix) to appoint or dismiss the company’s general manager and based on the general manager’s recommendation, to appoint or dismiss the deputy general managers and financial officers of the company and to decide on their remuneration; and

(x) to formulate the company’s basic management system.

In addition, the Mandatory Provisions provide that the board is also responsible for formulating the proposals for amendment to the articles of association of a company.

Meetings of the board of directors shall be held only if half or more of the directors are present. Resolutions of the board of directors require the approval of more than half of all directors.

— V-18 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

If a director is unable to attend a board meeting, he may appoint another director by a written power of attorney specifying the scope of the authorization to attend the meeting on his behalf.

If a resolution of the board of directors violates the law, administrative regulations or the company’s articles of association as a result of which the company sustains serious losses, the directors participating in the resolution are liable to compensate the company. However, if it can be proven that a director expressly objected to the resolution when the resolution was voted on, and that such objections were recorded in the minutes of the meeting, such director may be relieved from that liability.

Under the Company Law, the following persons may not serve as a director of a company:

(i) persons without civil capacity or with restricted civil capacity;

(ii) persons who have committed the offence of corruption, bribery, taking of property, misappropriation of property or destruction of the social economic order, and have been sentenced to criminal punishment, where less than 5 years have elapsed since the date of completion of the sentence; or persons who have been deprived of their political rights due to criminal offence, where less than 5 years have elapsed since the date of the completion of implementation of this deprivation;

(iii) persons who are former directors, factory managers or managers of a company or enterprise which has become bankrupt and been liquidated and who are personally liable for the bankruptcy of such company or enterprise, where less than 3 years have elapsed since the date of the completion of the bankruptcy and liquidation of the company or enterprise;

(iv) persons who were legal representatives of a company or enterprise which had its business license revoked due to violation of the law and who are personally liable, where less than 3 years have elapsed since the date of the revocation of the business license;

(v) persons who have a relatively large amount of debts due and outstanding; or

(vi) persons who are State civil servants.

Other circumstances under which a person is disqualified from acting as a director of a company are set out in the Mandatory Provisions which have been incorporated in the articles of association, a summary of which is set out in appendix VI.

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The board of directors shall appoint a chairman, who is elected with approval of more than half of all the directors. The chairman of the board of directors exercises, amongst others, the following powers:

(i) to preside over shareholders’ general meetings and convene and preside over meetings of the board of directors;

(ii) to check on the implementation of the resolutions of the board of directors; and

(iii) to sign the company’s share certificates and bonds.

The Special Regulations provide that a company’s directors, supervisors, managers and other officers bear fiduciary duties and the duty to act diligently. They are required to faithfully perform their duties, protect the interests of the company and not to use their positions for their own benefit. The Mandatory Provisions (which have been incorporated into the articles of association, a summary of which is set out in appendix VI) contain further elaborations of such duties.

(k) Supervisors

A company shall have a supervisory committee composed of not less than 3 members. Each term of office of a supervisor is 3 years and he or she may serve consecutive terms if re-elected.

The supervisory committee is made up of representatives of the shareholders and an appropriate proportion of representatives of the company’s staff and workers. Directors, managers and financial officers may not act concurrently as supervisors.

The supervisory committee exercises the following powers:

(i) to review the company’s financial position;

(ii) to supervise the directors and managers in their performance of their duties and to ascertain whether or not they have violated laws, regulations or the articles of association of the company;

(iii) when the acts of a directors and managers are in a harm to the company’s interests, to require correction of these acts;

(iv) to propose the convening of extraordinary shareholders’ general meetings;

(v) to propose resolution in a general meeting;

(vi) to initiate proceedings against directors and officers;

(vii) other powers specified in the company’s articles of association.

— V-20 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

The circumstances under which a person is disqualified from being a director of a company described above apply mutatis mutandis to supervisors of a company.

The Special Regulations provide that a company’s directors and supervisors shall have fiduciary duties. They are required to faithfully perform their duties, protect the interests of the company and not to use their positions for their own benefit.

(l) Managers and officers

A company shall have a manager who shall be appointed or removed by the board of directors. The manager is accountable to the board of directors and may exercise the following powers:

(i) supervise the production, business and administration of the company and arrange for the implementation of resolutions of the board of directors;

(ii) arrange for the implementation of the company’s annual business and investment plans;

(iii) formulate plans for the establishment of the company’s internal management structure;

(iv) formulate the basic administration system of the company;

(v) formulate the company’s internal rules;

(vi) recommend the appointment and dismissal of deputy managers and any financial controller and appoint or dismiss other administration officers (other than those required to be appointed or dismissed by the board of directors);

(vii) attend board meetings as a non-voting delegate; and

(viii)other powers conferred by the board of directors or the company’s articles of association.

The Special Regulations and Mandatory Provisions provide that the senior management of a company includes the financial controller, secretary of the board of directors and other executives as specified in the articles of association of the company.

The circumstances under which a person is disqualified from being a director of a company described above apply mutatis mutandis to managers and officers of the company.

The articles of association of a company shall have binding effect on the shareholders, directors, supervisors, managers and other executives of the company. Such persons shall be

— V-21 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS entitled to exercise their rights, apply for arbitration and issue legal proceedings according to the articles of association of the company. The provisions of the Mandatory Provisions regarding the senior management of a company have been incorporated in the articles of association (a summary of which is set out in appendix VI).

(m) Duties of directors, supervisors, managers and officers

Directors, supervisors, managers and officers of a company are required under the Company Law to comply with the relevant laws, regulations and the company’s articles of association, carry out their duties honestly and protect the interests of the company. Directors, supervisors, managers and officers of a company are also under a duty of confidentiality to the company and are prohibited from divulging the secret information of the company save as permitted by the relevant laws and regulations or by the shareholders.

A director, supervisor, manager or an officer who contravenes any law, regulation or the company’s articles of association in the performance of his duties which results in any loss to the company shall be personally liable to the company.

The Special Regulations and the Mandatory Provisions provide that directors, supervisors, managers and officers of a company owe fiduciary duties to the company and are required to perform their duties faithfully and to protect the interests of the company and not to make use of their positions in the company for their own benefit.

(n) Finance and accounting

A company shall establish its financial and accounting systems according to laws, administrative regulations and the regulations of the responsible financial department of the State Council and at the end of each financial year prepare a financial report which shall be audited and verified as provided by law.

A company shall deposit its financial statements at the company for the inspection by the shareholders at least 20 days before the convening of an annual general meeting of shareholders. A company established by the public subscription method must publish its financial statements.

When distributing each year’s after-tax profits, the company shall set aside 10% of its after-tax profits for the company’s statutory common reserve fund (except where the fund has reached 50% of the company’s registered capital).

When the company’s statutory common reserve fund is not sufficient to make up for the company’s losses of the previous year, current year profits shall be used to make good the losses before allocations are set aside for the statutory common reserve fund or the statutory common welfare fund.

— V-22 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

After the company has made good its losses and made allocations to its statutory common reserve fund, the remaining profits are distributed in proportion to the number of shares held by the shareholders.

The common reserve of a company comprises the statutory common reserve, discretionary common reserve and the capital common reserve.

The capital common reserve of a company is made up of the premium over the nominal value of the shares of the company on issue and other amounts required by the relevant governmental authority to be treated as the capital common reserve.

The common reserve of a company shall be applied for the following purposes:

(i) to make up the company’s losses;

(ii) to expand the business operations of the company; and

(iii) to increase the company’s capital provided that, if the statutory common reserve is converted into registered capital, the balance of the statutory common reserve before such conversion shall not be less than 25% of the registered capital of the company.

(o) Appointment and retirement of international auditors

The Special Regulations require a company to employ an independent PRC qualified firm of accountants to audit the company’s annual report and review and check other financial reports. The auditors are to be appointed for a term commencing from the close of an annual general meeting and ending at the close of the next following annual general meeting.

If a company removes or ceases to continue to appoint the auditors, it is required by the Special Regulations to give prior notice to the auditors and the auditors are entitled to make representations before the shareholders in general meeting. The appointment, removal or non re-appointment of auditors shall be decided by the shareholders in general meeting and shall be registered with the CSRC.

(p) Distribution of profits

The Special Regulations provide that the dividends and other distributions to be paid to holders of overseas listed foreign invested shares shall be declared and calculated in Rmb and paid in foreign currency. Under the Mandatory Provisions, the payment of foreign currency to shareholders shall be made through a receiving agent.

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(q) Amendment of articles of association

Any amendments to the company’s articles of association must be made in accordance with the procedures set forth in the company’s articles of association. Any amendment of provisions incorporated in the articles of association in accordance with the Mandatory Provisions will only be effective after approval by the companies’ approval department authorized by the State Council and the CSRC. In relation to matters involving the company’s registration, its registration with the companies’ registration authority must also be changed.

(r) Termination and liquidation

A company may apply for the declaration of insolvency by reason of its inability to pay debts as they fall due. After the People’s Court has made a declaration of the company’s insolvency, the shareholders, the relevant authorities and the relevant professionals shall form a liquidation committee to conduct the liquidation of the company.

Under the Company Law, a company shall be dissolved in any of the following events:

(i) the term of its operations set down in the company’s articles of association has expired or events of dissolution specified in the company’s articles of association have occurred;

(ii) the shareholders in general meeting have resolved to dissolve the company; or

(iii) the company is dissolved by reason of its merger or demerger.

(iv) the business licence is invalidated; the operation is suspended, or the company is dissolved by order of the court.

Where the company is dissolved in the circumstances described in (i) or (ii) above, a liquidation committee must be established within 15 days. Members of the liquidation committee shall be appointed by the shareholders in a general meeting.

If a liquidation committee is not established within the stipulated period, the company’s creditors can apply to the People’s Court for its establishment. The liquidation committee shall notify the company’s creditors within 10 days after its establishment, and issue at least 3 public notices in the newspapers within 60 days. A creditor shall lodge his claim with the liquidation committee within 30 days after receiving notification, or within 90 days of the first public notice if he did not receive any notification.

— V-24 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

The liquidation committee shall exercise the following powers during the liquidation period:

(i) to handle the company’s assets and to prepare a balance sheet and an inventory of the assets;

(ii) to notify creditors or issue public notices;

(iii) to deal with and settle any outstanding businesses of the company;

(iv) to pay any tax overdue;

(v) to settle the company’s financial claims and liabilities;

(vi) to handle the surplus assets of the company after its debts have been paid off; and

(vii) to represent the company in civil lawsuits.

If the company’s assets are sufficient to meet its liabilities, they shall be applied towards the payment of the liquidation expenses, wages owed to the employees and social insurance expenses and statutory compensation, tax overdue and debts of the company. Any surplus assets shall be distributed to the shareholders of the company in proportion to the number of shares held by them.

A company shall not engage in new business operations during the liquidation period.

If the liquidation committee becomes aware that the company does not have sufficient assets to meet its liabilities, it must immediately apply to the People’s Court for a declaration for bankruptcy. Following such declaration, the liquidation committee shall hand over all affairs of the liquidation to the People’s Court.

Upon completion of the liquidation, the liquidation committee shall submit a liquidation report to the shareholders’ general meeting or the relevant supervisory department for verification. Thereafter, the report shall be submitted to the companies’ registration authority in order to cancel the company’s registration, and a public notice of its termination shall be issued.

Members of the liquidation committee are required to discharge their duties honestly and in compliance with the relevant laws. A member of the liquidation committee is liable to indemnify the company and its creditors in respect of any loss arising from his wilful or material default.

— V-25 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

(s) Overseas listing

The shares of a company shall only be listed overseas after obtaining approval from the securities regulatory authority of the State Council and the listing must be arranged in accordance with procedures specified by the State Council.

According to the Special Regulations, a company’s plan to issue overseas listed foreign invested shares and domestic invested shares which has been approved by the Securities Commission may be implemented by the board of directors of the company by way of separate issues, within 15 months after approval is obtained from the CSRC.

(t) Loss of share certificates

A shareholder may apply, in accordance with the relevant provisions set out in the PRC Civil Procedure Law, to a People’s Court in the event that share certificates in registered form are either stolen or lost, for a declaration that such certificates will no longer be valid. After such a declaration has been obtained, the shareholder may apply to the company for the issuance of replacement certificates.

The Mandatory Provisions provide for a separate procedure regarding loss of H share certificates (which has been incorporated in the articles of association, a summary of which is set out in appendix VI).

(u) Suspension and termination of listing

The trading of shares of a company on a stock exchange may be suspended if so decided by the securities administration department of the State Council under one of the following circumstances:

(i) the registered capital or share holding distribution no longer comply with the necessary requirements for a listed company;

(ii) the company failed to make public its financial position in accordance with the requirements or there is false information in the company’s financial report;

(iii) the company has committed a major breach of the law; or

(iv) the company has incurred losses for each of the preceding 3 years.

The securities administration department of the State Council may also terminate the listing of a company’s shares in the event that the company resolves to cease operation or is so instructed by its government supervisory body, or the company is declared bankrupt.

— V-26 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

(v) Merger and demerger

The merger or demerger of a company is to be decided by the shareholders in general meetings.

Companies may merge through merger by absorption or through the establishment of a newly merged entity. In the case of merger by absorption, the company which is absorbed shall be dissolved. In the case of merger by forming a new corporation, both companies will be dissolved.

A merger agreement must be signed in the case of a merging of companies and the relevant companies shall draw up their respective balance sheets and inventory of property. The companies should within 10 days of the resolution of the merger inform their respective creditors and publish a notice to the creditors in newspapers, within 30 days of the resolution to merge. Those creditors who had not received written notice may within 45 days of the notice, or within 30 days after receiving written notice, request the company to satisfy any unpaid debts or provide equivalent guarantees in cases of guarantees.

When a company demerges into 2 companies, their respective assets must be separated and separate financial accounts must be drawn up.

When a company’s shareholders approve the demerger of the company, the company should notify all its creditors within 10 days of such resolution being passed and advertise the same in newspapers within 30 days. Unless otherwise agreed with a creditor, obligations in respect of the liabilities before the demerger of the company shall be jointly and severally borne by the demerged companies.

Changes in registered particulars of the companies caused by merger or demerger must be registered in accordance with applicable laws.

(7) Securities law and regulations

At present, the PRC has promulgated a number of regulations in relation to the issue and trading of shares and disclosure of information.

In early 1993, the State Council established the Securities Committee and the CSRC. The Securities Committee is responsible for co-coordinating the drafting of securities regulations, formulating securities related polices, planning the development of securities markets, directing, coordinating and supervising all securities related institutions in the PRC and administering the CSRC. The CSRC is the regulatory arm of the Securities Committee and is responsible for the drafting of regulatory provisions of securities markets, supervising securities companies, regulating public offers of securities by the PRC companies in the PRC or overseas, regulating the trading of securities, compiling securities related statistics and undertaking research and analysis. In 1998, the Securities Committee was cancelled and its main functions were merged into the CSRC due to the restructuring reforms of the State Council.

— V-27 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

On 22 April, 1993, the State Council promulgated the Provisional Regulations Governing the Issue and Trading of Shares ( ) (the “Securities Provisional Regulations’’). These regulations deal with the application and approval procedures for public offerings of equity securities, trading in equity securities, the acquisition of listed companies, deposit, settlement, clearing and transfer of listed equity securities, the disclosure of information with respect to a listed company, investigation and penalties and dispute settlement. These regulations specifically provide that the offer of shares by a PRC company directly and indirectly outside the PRC requires the approval of the Securities Committee and also provide that separate measures will be promulgated in relation to the issue of and trading in special Renminbi- denominated shares. However, (i) if a PRC joint stock limited company proposes to issue Renminbi-denominated ordinary shares as well as special Renminbi-denominated shares, it has to comply with the Securities Provisional Regulations; and (ii) provisions of the Securities Provisional Regulations in relation to acquisitions of listed companies and disclosure of information are expressed to apply to companies listed on a stock exchange in general without being restricted to companies listed on any particular stock exchange. Such provisions may, therefore, be applicable to joint stock limited companies with shares listed on a stock exchange outside the PRC including, for instance, joint stock limited companies with shares listed on the Stock Exchange.

On 12 June, 1993, the CSRC promulgated the Implementation Measures (Provisional) on Disclosure of Information of the Public Issuing Share’s Company ( ( )) pursuant to the Securities Provisional Regulations.

Under these measures, the CSRC is responsible for supervising the disclosure of information by companies which have offered shares to the public in the PRC. These measures contain provisions regarding prospectuses and listing reports to be issued in connection with a public offering of shares in the PRC, publication of interim and annual reports and announcement of material transactions or matters by companies which have offered shares to the public. Material transactions or matters are those the occurrence of which may have a material effect on the share price of a company. They include changes to a company’s articles of association or registered capital, removal of auditors, mortgage or disposal of major operating assets or writing down the value of such assets where the amount being written down exceeds 30% of the total value of such assets, revocation by a court of any resolution passed by the shareholders or the supervisors of a company and the merger or demerger of a company. These measures also contain disclosure provisions in relation to acquisition of listed companies which supplement the requirements contained in the Securities Provisional Regulations.

On 2 September, 1993, the Securities Committee promulgated the Provisional Measures Prohibiting Fraudulent Conduct Relating to Securities ( ). The prohibitions imposed by these measures include the use. of insider information in connection with the issue of or trading in securities (insider information being defined to include undisclosed material information known to any insider, which may affect the market price of securities): the use of funds or information or through an abuse of power in creating a false or disorderly market or influencing the market price of securities or inducing investors to make investment decisions without knowledge of actual circumstances; and the making of any statement in connection with

— V-28 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS the issue of and trading in securities which is false or materially misleading or in respect of which there is any material omission. Penalties imposed for contravening any of the provisions of the measures include fines, confiscation of profits and suspension of trading. In serious cases, criminal liability may be imposed.

On 4 August, 1994, the State Council promulgated the Special Regulations. These provisions deal mainly with the issue, subscription, trading and declaration of dividends and other distributions of foreign capital stock listed aboard and disclosure of information, articles of association of joint stock limited companies having foreign capital stock listed aboard.

On 25 December, 1995, the State Council promulgated the Regulations of the State Council Concerning Domestic Listed Foreign Shares of Joint Stock Limited Companies ( ). These regulations deal mainly with the issue, subscription, trading and declaration of dividends and other distributions of domestic listed foreign shares and disclosure of information of joint stock limited companies having domestic listed foreign shares.

On 29 December, 1998, the Securities Law of the PRC ( ) (the “Securities Law”) was passed by the Standing Committee of the NPC ( ). The Securities Law took effect on 1 July, 1999. This is the first national securities law in the PRC. On 27 October, 2005, the NPC passed the revised Securities Law, and the new law came into effect on 1 January, 2006. The Securities Law is divided into 12 chapters and 240 articles regulating, among other things, the issue and trading of securities, takeovers by listed companies, securities exchanges, securities companies and the duties and responsibilities of the State Council’s securities regulatory authorities. The Securities Law is the fundamental law which comprehensively regulates activities in the PRC securities market. Article 238 of the Securities Law provides that enterprises in the PRC which intend to directly or indirectly issue securities outside the PRC or to list their securities outside the PRC must obtain prior approval from the State Council’s regulatory authorities. Article 239 of the Securities Law provides that specific measures in respect of shares of companies in the PRC which arc to be subscribed and traded in foreign currencies by person and organisation outside the PRC shall be separately formulated by the State Council. Currently, the issue and trading of foreign issued shares (including H shares and B shares) are still mainly governed by the rules and regulations promulgated by the State Council and the CSRC.

In order to further promote strict compliance of “companies listed outside China” (“Listed Company”) with the relevant domestic and foreign laws and regulations, their conscientious performance of their continuing obligations towards the investors and their establishment of a good corporate image on domestic and foreign capital markets, the State Economic and Trade Commission and the CSRC jointly issued the Opinion on Further Standardizing Operations and Reform of Companies Listed Outside China ( ) (“Standardizing Opinion”) on 29 March, 1999. The Standardizing Opinion sets out regulations governing the relationship between the Companies and their controlling entities (hereafter “controlling entities” refers to companies or enterprises with legal person status that have a controlling interest in a listed company) and the operations of the administrative organisations

— V-29 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS of the Listed Companies. The board of directors, management, the, financial and marketing organisations of a listed company must be independent from those of the controlling entity. No more than two senior management personnel from the controlling entity (i.e. the chairman of the hoard. vice-chairman of the board and executive directors) may concurrently hold the position of senior management personnel in the company. The Standardizing Opinion also requires a company to specify its decision-making process, strengthen director responsibility, establish a sound external director and independent director system, strengthen the functions of its supervisory board and secretary of the board of directors, explore methods to motivate its senior management personnel and to intensify its internal reform. On 21 September, 1999, CSRC promulgated the Examination, Approval and Supervision of Domestic Enterprises in China Applying for Listing on the Hong Kong Growth Enterprise Market Guidelines ( ) (the “Guidelines”) which set out the approval procedures with respect to the listing of PRC enterprises on the GEM. Under the Guidelines, any State-owned or private enterprise may, through its sponsor acting on its behalf, apply to CSRC for approval to list on the GEM, such application to be accompanied by documents set out in the Guidelines. One precondition for such application being that the applicant must be a company limited by shares and approved by a provincial level people’s government or and ministries authorized by the State Council. CSRC will determine whether to grant the approval within 10 days of receipt of the specified documents unless objections are received by any one of the MOC ( ), the SAFE, and, if State-owned shares are involved, the Ministry of Finance ( ).

(8) Legal opinion

SD & Partners, the Company’s legal advisers as to the PRC law, have sent to the Company a legal opinion confirming that they have reviewed the summary of relevant PRC law and regulations contained in this appendix and that, in their opinion, such summary is a correct summary of the relevant PRC law and regulations. A copy of such legal opinion is available for inspection as referred to under the paragraph headed “Documents available for inspection” in appendix VIII to this prospectus. Any person who wishes to obtain detailed information about the PRC laws and regulations is recommended to seek independent legal advice.

HONG KONG LAW’S AND REGULATIONS

(1) Company Law

The Hong Kong law applicable to a company having a share capital incorporated in Hong Kong is based on the Companies Ordinance and supplemented by the common law.

The Company, which is a joint stock limited company established in the PRC seeking a A1a60 listing of its H Shares on GEM is governed by the PRC Company Law and the PRC Securities Law which came into effect on 1 January, 2006 and all other rules and regulations promulgated pursuant to the PRC Company Law and the PRC Securities Law applicable to it joint stock limited company established in the PRC issuing overseas listed foreign shares to be listed on the Stock Exchange.

— V-30 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

Set out below is a summary of the material differences between the Hong Kong company law applicable to a company incorporated in Hong Kong and the PRC Company Law and the PRC Securities Law applicable to a joint stock limited company incorporated and existing under the PRC Company Law and the PRC Securities Law. This summary is not intended to be an exhaustive comparison:

(i) Corporate existence

Under Hong Kong company law, a company having a share capital is incorporated by the Registrar of Companies in Hong Kong issuing a certificate of incorporation and upon its incorporation, a company will acquire an independent corporate existence. A company may be incorporated as a public company or a private company. The articles of association of a private company incorporated in Hong Kong is required by the Hong Kong Companies Ordinance to contain certain provisions restricting the right of transfer of its shares. Any company which does not contain such provisions in its articles of association is a public company.

Under the PRC Company Law, a company may be incorporated by either the promotion method or the public subscription method. A company established by the public subscription method will only acquire its corporate existence after it has completed its initial share offering to the public.

Under the PRC Securities Law, a company which is authorised by the relevant securities administration authority to list its shares on a stock exchange must have registered a capital of not less than Rmb30,000,000. Hong Kong law does not prescribe any minimum capital requirements for a Hong Kong company.

Under the PRC Company Law, the capital contribution of all shareholders of a company may not be less than 30% of its registered capital.

(ii) Share capital

Under Hong Kong law, the authorised share capital of a Hong Kong company is the amount of share capital which the company is authorised to issue and a company is not bound to issue the entire amount of its authorised share capital. The PRC Company Law does not have the concept of authorised share capital. The registered capital of a joint stock limited company is the amount of the issued share capital. Any increase or reduction in registered capital must be approved by the shareholders in general meeting.

(iii) Restrictions on shareholding and transfer of shares

Under the PRC law, the domestic shares (“domestic shares”) in the share capital of a joint stock limited company which are denominated and subscribed for in Rmb may be subscribed or traded by the PRC legal and natural persons, as well as Qualified Foreign

— V-31 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

Institutional Investor approved by CSRC. The overseas listed foreign shares (“foreign shares”) issued by a joint stock limited company which are denominated in Rmb and subscribed for in a currency other than Rmb may only be subscribed and traded by investors from Hong Kong, Macau and Taiwan or any country or territory outside the PRC.

Under the PRC Company Law, shares in a joint stock limited company held by its promoters may not be transferred within one year after the date of establishment of the company. Shares issued before a company issues shares by mean of public offer shall not be transferred within one year from the date of listing of the company’s shares on stock exchanges. The directors, supervisors and senior managers shall report to the company the amount of shares held by them and the change of those shares, and the amount of shares transferred by them shall not be exceed 25% of shares held by them. In addition, shares held by directors, supervisors and senior managers, shall not be transferred within one year after the listing of their company’s shares on stock exchanges. The above mentioned persons shall not transfer their company’s shares within six months after their retirement.

There are no such restrictions on shareholdings and transfer of shares under Hong Kong law.

(iv) Financial assistance for acquisition of shares

The PRC Company Law does not contain any provision prohibiting or restricting a joint stock limited company or its subsidiaries from providing financial assistance for the purposes of an acquisition of its own or its holding company’s shares.

The Mandatory Provisions contain certain restrictions on a company and its subsidiaries providing such financial assistance similar to those under Hong Kong company law.

(v) Variation of class rights

Under Hong Kong company law, if the share capital of a company is divided into different classes of shares, special rights attaching to any class of shares may only be varied if approved by a specified proportion of the holders of the relevant class.

The PRC Company Law does not contain any specific provision relating to variation of A1a68(b) class rights. Under the Mandatory Provisions, class rights may not be varied or abrogated unless approved by a special resolution of shareholders in general meeting and by two thirds of the votes cast by shareholders of the affected class present in person or by proxy at a separate class meeting. For the purposes of a variation of class right, domestic shares and foreign shares are treated as separate classes of share except in the case of (i) an issue of shares by the joint stock limited company in any 12 month period either separately or

— V-32 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

concurrently following the approval by a special resolution of shareholders in general meeting not exceeding 20% of each of the issued domestic shares and foreign shares existing as at the date of such special resolution: and (ii) an issue of domestic shares and foreign A1a68(c) shares in accordance with the plan of the company approved by the CSRC of the State Council and which are completed within 15 months following the establishment of the company. The Mandatory Provisions contain detailed provisions relating to circumstances which are deemed to constitute a variation of class rights.

(vi) Directors

Under the PRC Company Law, an interested director of a listed company shall not vote at a meeting of the board of directors, as well as vote on behalf of other directors. This meeting of the board of directors can be convened by half of the amount of disinterested directors, and the resolution of a meeting of the board of directors shall be passed by half of the amount of disinterested directors. However, the PRC Company Law, unlike Hong Kong company law, does not contain any requirements relating to the declaration of interests in material contracts, restrictions on directors’ authority in making major dispositions, restrictions on companies providing certain benefits such as loans to directors and guarantees in respect of directors’ liability and prohibition against compensation for loss of office without shareholders’ approval. The Mandatory Provisions contain requirements and restrictions in relation to the foregoing matters similar to those applicable under Hong Kong law to Hong Kong incorporated companies.

(vii) Supervisory committee

Under the PRC Company Law, the board of directors of a joint stock limited company is subject to the supervision of a supervisory committee but there is no mandatory requirement for the establishment of a supervisory committee for a company incorporated in Hong Kong.

The Mandatory Provisions provide that each supervisor owes a duty, in the exercise of his powers, to act in good faith and honestly in what he considers to be in the best interests of the company and to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

(viii)Protection of minorities A1a68(f)

Under Hong Kong law, a shareholder who complains that the affairs of a company incorporated in Hong Kong are conducted in a manner unfairly prejudicial to his interests may petition to court either to wind up the company or to make an appropriate order regulating the affairs of the company. In addition, the Financial Secretary of the Hong Kong Government may on the application of a specified number of members, and the Securities

— V-33 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

and Futures Commission may in prescribed circumstances, appoint inspectors who are given extensive statutory powers to investigate the affairs of a company incorporated in Hong Kong. Under the PRC company law, a shareholder of a company shall excise its shareholder rights in accordance with laws, administrative regulations and articles of association, and shall not abuse its rights to impair interests of the company or other shareholders. A shareholder shall indemnify the company or other shareholders against any losses caused by abuse of its shareholder rights. The Mandatory Provisions, however, contain provisions to the effect that a controlling shareholder may not exercise its voting rights in a manner prejudicial to the interests of the shareholders generally or of some part of the shareholders of a company to relieve a director or supervisor of his duty to act honestly in the best interests of the company or to approve the expropriation by a director or supervisor of the company’s assets or the individual rights of other shareholders.

(ix) Notice of shareholders’ meetings

Under the PRC Company Law, notice of a general meeting must be given not less than 30 days before the meeting or, in the case of a company having bearer shares, public announcement of a general meeting must be made at least 45 days prior to it being held. Under the Special Regulations and the Mandatory Provisions, 45 days’ written notice must be given to all shareholders and shareholders who wish to attend the meeting must reply in writing 20 clays before the date of the meeting. For a company incorporated in Hong Kong, the minimum notice period of a general meeting convened for passing an ordinary resolution and a special resolution is 14 days and 21 clays respectively; and the notice period for an annual general meeting is 21 days.

(x) Quorum for shareholders’ meetings A1a68(a)

Under Hong Kong law, the quorum for general meeting is provided by the articles of association of the company which may not in any event be fewer than two members. The PRC Company Law does not specify any quorum requirement for general meeting but the Special Regulations and the Mandatory Provisions provide that a company’s general meeting may be held when replies to the notice of that meeting have been received from shareholders whose shares represent 50% of the voting rights in the company at least 20 days before the proposed date of the meeting, or if that 50% level is not achieved, the company shall within five days notify shareholders by public announcement and the general meeting may be held thereafter.

(xi) Voting A1a68(a)

Under Hong Kong law, an ordinary resolution is passed by a simple majority of votes cast by members present in person or by proxy at a general meeting and a special resolution is passed by a majority of not less than three fourths of votes cast by members present in person or by proxy at a general meeting.

— V-34 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

Under the PRC Company Law, the passing of any resolution requires more than half of votes cast by shareholders present in person or by proxy at a general meeting except in cases of amendment of articles of association, increase or reduction of the amount of registered capital, merger, demerger, dissolution and change of the legal status of a company which require more than two thirds of votes cast by shareholders present in person or by proxy at a general meeting.

(xii) Financial disclosure

A joint stock limited company is required under the PRC Company Law to make available at its office for inspection by shareholders its annual balance sheet, profit and loss statement, profit distribution statement, cash-flow statement and other relevant annexures 20 days before the annual general meeting of shareholders. In addition, a company established by the public subscription method under the PRC Company Law must publish its financial statements. The annual balance sheet of a PRC joint stock limited company is required to be verified by registered accountants. The Companies Ordinance requires a company to send to every shareholder a copy of its balance sheet, auditors’ report and directors’ report which are to be laid before the company in its annual general meeting not less that 21 days before such meeting.

A joint stock limited company is required under the PRC law to prepare its financial statements in accordance with the PRC accounting standards. The Mandatory Provisions require that the company must, in addition to preparing accounts according to the PRC standards, have its accounts prepared and audited in accordance with International Accounting Standards or Hong Kong accounting standards and its financial statements must also contain a statement of the financial effect of the material differences (if any) from the financial statement prepared in accordance with the PRC accounting standards.

(xiii)Information on directors and shareholders

Under the Mandatory Provisions, shareholders have the right to inspect and copy (at reasonable charges) certain information about the shareholders and directors of a PRC joint stock limited company similar to that available under Hong Kong law to shareholders of a company incorporated in Hong Kong.

(xiv) Receiving agent R25.38

Under both the PRC and Hong Kong law, dividends once declared become debts payable to shareholders (except in relation to interim dividends of Hong Kong companies, which do not constitute debts until the time they are paid generally). The limitation period for debt recovery action under Hong Kong law is six years while that under the PRC law is two years. The Mandatory Provisions require the appointment of a trust company registered under the Hong Kong Trustee Ordinance as receiving agent to receive on behalf of holders of foreign shares dividends declared and all other monies owing by a joint stock limited company in respect of such foreign shares.

— V-35 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

(xv) Merger and demerger

A merger or demerger involving a company incorporated in Hong Kong may be effected in a number of ways, such as a transfer of the whole or part of the business or property of the company in the course of being wound up voluntarily to another company pursuant to section 237 of the Companies Ordinance or a compromise or arrangement between the company and its creditors or between the company and its members pursuant to section 166 of the Companies Ordinance which requires the sanction of the court. Under the PRC law, the merger or demerger of a joint stock limited company has to be approved by shareholders in general meeting.

(xvi) Arbitration of disputes

In Hong Kong, disputes between shareholders and a company incorporated in Hong Kong or its directors may be resolved through the courts. The Mandatory Provisions provide that such disputes be referred to arbitration at the claimant’s election at either the Hong Kong International Arbitration Centre or CIETAC.

(xvii) Mandatory transfers

Under the PRC Company Law, a joint stock limited company is required to make transfers equivalent to certain prescribed percentages of its after tax profit to the statutory common reserve. There are no such requirements under Hong Kong law.

(2) The GEM listing rules

The GEM listing rules provide additional requirements which apply to an issuer which is incorporated in the PRC as a joint stock limited company and seeking a primary listing or whose primary listing is on GENT. Set out below is a summary of such principal additional requirements which apply to the Company:

(a) Compliance Adivsor

The Company is required to retain following its listing for at least the remainder of the financial year during which the listing occurs and two financial years thereafter the services of the sponsor for its listing, or other financial adviser or professional firm which is acceptable to the Stock Exchange, to provide the Company with professional advice on continuous compliance with the GEM listing rules, and to act as the Company’s principal channel of communication with the Stock Exchange on behalf of the Company. The appointment of the Compliance Adivsor may not be terminated unless in exceptional circumstances, where the sponsors is no longer able satisfactorily to perform the role, and only after first notifying the Stock Exchange of the intended termination and the reasons thereof.

— V-36 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

(b) Accountants’ report

An accountants’ report for a PRC issuer will not normally be regarded as acceptable unless the relevant accounts have been audited to a standard comparable to that required in Hong Kong. Such report will normally be required to conform to either Hong Kong accounting standards or the International Accounting Standards.

The Company is required to appoint and maintain a person authorised to accept service of process and notices on its behalf in Hong Kong throughout the period during which its securities are listed on GEM and must notify the Stock Exchange of his appointment, the termination of his appointment and his contact particulars.

(d) Public shareholdings

If at any time there are existing issued securities of a PRC issuer other than foreign shares CFI shares”) which are listed on GEM, the GEM listing rules require that all H shares must he held by the public, the H shares must normally represent not less than 10% of the PRC issuer’s issued share capital and the aggregate amount of H shares and other securities held by the public must constitute not less than 25% of the PRC issuer’s issued share capital unless the expected market capitalisation of the total existing issued share capital at the time of the listing of the H shares is over HK$4,000 million in which case, the prescribed minimum public shareholdings percentage is between 20% and 25%.

If the PRC issuer does not have existing issued securities other than H shares, the H shares must constitute not less than 25% of the issuer’s issued share capital unless the expected market capitalisation of the total existing issued share capital at the time of the listing of the H shares is over HK$4,000 million in which case, the prescribed minimum public shareholdings percentage is between 20% and 25%.

(e) Independent non-executive directors and supervisors

The independent non-executive Directors are required to demonstrate an acceptable standard of competence and adequate commercial or professional expertise to ensure that the interests of the general body of shareholders will be adequately represented. The Supervisors must have the character, expertise and integrity and be able to demonstrate a standard of competence commensurate with their position as supervisors.

— V-37 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

(f) Restrictions on purchase and subscription of its own securities

Subject to governmental approvals and the provisions of the articles of association, the company may repurchase its own H shares on GEM in accordance with the provisions of the GEM listing rules. Approval by way of special resolution of the holders of domestic shares and the holders of H shares at separate class meetings conducted in accordance with the articles of association is required for share repurchases. In seeking approvals, the Company is required to provide information on any proposed or actual purchases of all or any of its equity securities, whether or not listed or traded on GEM. The Directors must also state the consequences which the Directors are aware, if any, of any purchases which will arise under either or both of the Hong Kong Code on Takeovers and Mergers and any PRC law of a similar nature. A general mandate given to the Directors to repurchase H shares may not relate to more than 10% of the total amount of existing issued H shares of the Company.

(g) Continuing obligations and financial information

Pursuant to its application for listing on GEM, the Company has undertaken to comply, upon any of its securities being admitted to listing on GEM, with all of the requirements of the GEM listing rules from time to time in force. The GEM listing rules contain certain provisions regarding general continuing obligations, the more important of which are summarised as follows:

(i) Redeemable shares

The Company must not issue any redeemable shares unless the Stock Exchange is satisfied that the relative rights of the holders of the H shares are adequately protected.

(ii) Pre-emptive rights

Except in the circumstances mentioned below, the Directors are required to obtain the approval by a special resolution of shareholders in general meeting, and the approvals by special resolutions of the holders of domestic shares and H shares (each being otherwise entitled to vote at general meetings) at separate class meetings conducted in accordance with the articles of association, prior to (aa) authorising, allotting, issuing or granting shares or securities convertible into shares, or options, warrants or similar rights to subscribe for any shares or such convertible securities; or (bb) any major subsidiary of the Company making any such authorisation, allotment, issue or grant which will materially dilute the percentage equity interest of the Company and its shareholders in such subsidiary.

— V-38 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

No such approval will be required, but only to the extent that the existing shareholders of the Company have by special resolution in general meeting given a mandate to the Directors, either unconditionally or subject to such terms and conditions as may be specified in the resolution, to authorise, allot or issue, either separately or concurrently, domestic shares and H shares subject to a restriction that in any 12 month period (commencing on the date on which shareholders pass such special resolution) the aggregate number of domestic shares allotted or agreed to be allotted must not exceed the aggregate of 20% of the issued domestic share capital of the Company and the aggregate number of H shares allotted or agreed to be allotted must not exceed the aggregate of 20% of the issued H share capital of the Company, in each case as at the date of the passing of the relevant special resolution.

(iii) Amendment to articles of association

The Company is required not to permit or cause any amendment to be made to its articles of association which would cause the same to cease to comply with the mandatory provisions of the GEM listing rules relating to such articles of association.

(iv) Documents for inspection

The Company is required to make available at a place in Hong Kong for inspection by the public and shareholders free of charge, and for copying by shareholders at reasonable charges the following:

— a complete duplicate register of shareholders;

— a report showing the PRC of the issued share capital of the Company;

— the Company’s latest audited financial statements and the reports (if any) of the Directors, auditors and Supervisors thereon;

— special resolutions of the Company;

— reports showing the number and nominal value of securities repurchased by the Company since the end of the last financial year, the aggregate amount paid for such securities and the maximum and minimum prices paid in respect of each class of securities repurchased with a breakdown between domestic Shares and foreign Shares);

— a copy of the latest annual return filed with the SAIC or other relevant PRC authority; and

— for shareholders only, copies of minutes of meetings of shareholders.

— V-39 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

(v) Receiving agents R25.38

The Company is required to appoint one or more receiving agents in Hong Kong and pay to such agents dividends declared and other monies owing in respect of the H shares to be held, pending payment, in trust for the holders of such H shares.

(vi) Statements in share certificates

The Company is required to ensure that all its listing documents and share A1a65 R25.39 certificates include the statements stipulated below and to instruct and cause each of its share registrars not to register the subscription, purchase or transfer of any of its shares in the name of any particular holder unless and until such holder delivers to such share registrar a signed form in respect of such shares bearing statements to the effect that the acquirer of shares:

— agrees with the Company and each shareholder of the Company. and the Company agrees with each shareholder, to observe and comply with the PRC Company Law, the Special Regulations and the articles of association;

— agrees with the Company, each shareholder. Director, Supervisor, manager and other officer of the Company and the Company acting for itself and for each Director, Supervisor, manager and other officer agrees with each shareholder to refer all differences and claims arising from the articles of association or any rights or obligations conferred or imposed by the PRC Company Law or other relevant laws and administrative regulations concerning the affairs of the Company to arbitration in accordance with the articles of association. Any reference to arbitration will be deemed to authorise the arbitration tribunal to conduct its hearing in open session and to publish its award. Such arbitration will be final and conclusive;

— agrees with the Company and each shareholder of the Company that shares in the Company are freely transferable by the holder thereof; and

— authorises the Company to enter into a contract on his behalf with each Director and officer whereby such Directors and officers undertake to observe and comply with their obligations to shareholders stipulated in the articles of association.

— V-40 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

(vii) Compliance with the PRC Company Law, the Special Regulations and the articles of association.

The Company is required to observe and comply with the PRC Company Law, the Special Regulations and the articles of associations.

(viii)Contract between the Company and its Directors, officers and Supervisors.

The Company is required to enter into a contract in writing with every Director and officer containing at least the following provisions:

— an undertaking by the Director or officer to the Company to observe and comply with the PRC Company Law, the Special Regulations, the articles of association, the. Hong Kong Codes on Takeovers and Mergers and Share Repurchases and an agreement that the Company shall have the remedies provided in the articles of association and that neither the contract nor his office is capable of assignment;

— an undertaking by the Director or officer to the Company acting as agent for each shareholder to observe and comply with his obligations to shareholders stipulated in the articles of association; and

— an arbitration clause which provides that whenever any differences or claims arise from that contract, the articles of association or any rights or obligations conferred or imposed by the PRC Company Law or other relevant law and administrative regulations concerning the affairs of the Company between the Company and its Directors or officers and between a holder of H Shares and a Director or officer of the Company, such differences or claims will be referred to arbitration at either CIETAC in accordance with its rules or HKIAC in accordance with its securities arbitration rules, at the election of the claimant and that once a claimant refers a dispute or claim to arbitration, the other party must submit to the arbitral body elected by the claimant. Such arbitration will be final and conclusive.

The Company is also required to enter into a contract in writing with every Supervisor containing statements in substantially the same terms.

(ix) Subsequent listing

The Company must not apply for the listing of any of its foreign shares on a PRC stock exchange unless the Stock Exchange is satisfied that the relative rights of the holders of overseas listed foreign shares are adequately protected.

— V-41 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

(x) English translation

All notices or other documents required under Chapter 17 of the GEM listing rules to be sent by the Company to the Stock Exchange or to holders of H Shares are required to be in the English language, or accompanied by a certified English translation.

(h) General

If changes in the PRC law or market practices materially alter the validity or accuracy of any of the basis upon which the additional requirements have been prepared, then the Stock Exchange may impose additional requirements or make listing of the equity securities of a PRC issuer, including the Company, subject to such special conditions as the Stock Exchange considers appropriate. Whether or not any such changes in the PRC law or market practices occur, the Stock Exchange retains its general power under the GEM listing rules to impose additional requirements and make special conditions in respect of the listing of the Company.

(3) Other Legal and Regulatory Provision

Upon the listing of the Company on GEM, the provisions of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), the Hong Kong Codes on Takeovers and Mergers and Share Repurchases and such other relevant ordinances and regulations as may be applicable to companies listed on the Stock Exchange will apply to the Company.

(4) Securities Arbitration Rules A1a68(e)

The articles of association provide that certain claims arising from the articles of association or the PRC Company Law shall be arbitrated at either CIETAC or HKIAC in accordance with their respective rules.

The Securities Arbitration Rules of Hong Kong International Arbitration Centre contain provisions allowing an arbitral tribunal to conduct a hearing in Shenzhen for cases involving the affairs or companies incorporated in the PRC and listed on GEM so that PRC parties and witnesses may attend. Where any party applies for a hearing to take. place in Shenzhen, the tribunal shall, where satisfied that such application is based on bona fide grounds, order the hearing to take place in Shenzhen conditional upon all parties including witnesses and the arbitrators being permitted to enter Shenzhen for the purposes of the hearing. Where a party (other than a PRC party) or any of its witnesses or any arbitrator is not permitted to enter Shenzhen, then the tribunal shall order that the hearing be conducted in any practicable manner, including the use of electronic media. For the purpose of the Securities Arbitration Rules, a PRC party means a party domiciled in the PRC other than the territories of Hong Kong, Macau and Taiwan.

— V-42 — APPENDIX V SUMMARY OF RELEVANT PRC AND HONG KONG LAWS AND REGULATIONS

(5) Taxation

(a) Dividends

Where a company is not chargeable to Hong Kong profits tax, any dividends paid by it to persons who carry on a business in Hong Kong are liable to profits tax, to the extent that such dividends form part of the profits of such persons arising from their Hong Kong business.

(b) Profits tax

No tax is imposed in Hong Kong in respect of capital gains from the sale of property such as the H Shares). Persons who carry on a trade, profession or business in Hong Kong and derive income in Hong Kong from such trade, profession or business are liable to profits tax. Securities dealers carrying on a business in Hong Kong and who make trading gains from the sale and purchase of shares will he subject to profits tax. Currently, profits tax for corporations is payable at the rate of 17.5% of their assessable profits. Profits tax for individuals is levied on a progressive scale and the maximum rate is 15%.

The sale and purchase of shares are subject to stamp duty payable by both the seller and the buyer. Duty is payable with reference to the amount of the consideration or, if higher, the fair value of the shares being sold. The current rate of stamp duty is 0.1% of the amount of the consideration or, if higher, the fair value of the shares on every sold note and every bought note. Stamp duty is usually shared between the buyer and the seller equally in respect of transactions on the Stock Exchange. A fixed rate of duty of HK$5 is also payable in respect of every instrument of transfer which is required to be registered on a register or branch register maintained in Hong Kong.

(d) Estate duty

Properties situated in Hong Kong which pass or are deemed to pass upon the death of a person, wherever domiciled or resident, are liable to estate duty based on the value of the property in question. H Shares will constitute property situated in Hong Kong for estate duty purposes by virtue of them being on the Hong Kong branch register of the Company. Hong Kong estate duty is imposed on a progressive scale from 5% to 15%. The rate of and the threshold for estate duty have, in the past, been adjusted on a fairly regular basis. No estate duty is payable where the aggregate value of the dutiable estate does not exceed HK$7.5 million, and the maximum rate of duty of 15% applies where the aggregate value of the dutiable estate exceeds HK$10.5 million.

— V-43 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION R25.20(2)

Set out below is a summary of the principal provisions of the Articles of Association which were adopted at an annual general meeting of our company held on 22 February, 2005. A copy of the full Chinese texts of the Articles of Association is available .for inspection as mentioned in the section headed “Documents Delivered to the Registry of Companies and Available for Inspection” in appendix VIII to this prospectus.

(1) DIRECTORS AND SENIOR MANAGEMENT

(a) Power to allot and issue shares

There is no provision in the Articles of Association empowering the Directors to allot and A1a7(6) issue shares.

In order to increase the capital of our company, the Board must formulate a proposal and submit it for approval at a shareholders’ general meeting. Any such increase is subject to the prior approval of the relevant regulatory authorities of the PRC. Upon approval, shall be conducted in accordance with the procedures under the relevant laws, administrative regulations of the State.

(b) Power to dispose of the assets of our company or any subsidiary

The Board shall be responsible to the shareholders in general meeting.

The Board shall not, without the prior approval of shareholders in a general meeting, dispose or agree to dispose of any fixed assets of our company where the aggregate of the amount or value of the consideration for the proposed disposition, and the amount or value of the consideration for any such disposition of any fixed assets of our company that has been completed in the period of four months immediately preceding the proposed disposition, exceeds 33% of the value of our company’s fixed assets as shown in the last balance sheet placed before the shareholders in general meeting.

For the purposes of the above paragraph, disposition of fixed assets includes an act involving the transfer of an interest in assets but does not include the provision of fixed asset by way of security.

The validity of a disposition by our company of fixed assets shall not be affected by the breach of the above paragraph.

— VI-1 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

Our company shall, with the prior approval of shareholders in general meeting, enter into A1a7(2) Co 3rd(5) a contract in writing with a Director or Supervisor wherein his emoluments are stipulated. The aforesaid emoluments include:

(1) emoluments in respect of his service as Director, Supervisor or senior management of our company;

(2) emoluments in respect of his service as director, supervisor or senior management of any subsidiary of our company;

(3) emoluments in respect of the provision of other services in connection with the management of the affairs of our company and any of its subsidiaries;

(4) payment by way of compensation for loss of office or retirement from office.

No proceedings may be brought by a Director or Supervisor against our company for any interest due to him in respect of the matters mentioned above except pursuant to a contract which has been entered into in the foregoing manner.

The contract concerning the emoluments between our company and its Directors or Supervisors should provide that in the event of a takeover of our company, our Directors and Supervisors shall, subject to the prior approval of shareholders in general meeting, have the right to receive compensation or other payment in respect of his loss of office or retirement. For the purpose of this paragraph, a “takeover of our company” includes any of the following:

(1) a general acquisition offer made by any person to all shareholders;

(2) a general acquisition offer made by any person with a view to the offeror becoming a “controlling shareholder” within the meaning set out in the Articles of Association.

If the relevant Director or Supervisor does not comply with the foregoing paragraph, any sum so received by him shall belong to those persons who have sold their shares as a result of such offer. The expenses incurred in distributing that sum pro rata amongst those persons shall be borne by the relevant Director or Supervisor and not be paid out of that sum.

— VI-2 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

(d) Loans to Directors, Supervisors and other senior management

Our company shall not directly or indirectly make a loan to or provide any guarantee in connection with the making of a loan to a Director, Supervisor, general manager or other senior management of our company or of our company’s holding company or any of their respective associates.

The foregoing prohibition shall not apply to the following circumstances:

(1) the provision by our company of a loan or a guarantee in connection with the making of a loan to its subsidiary;

(2) the provision by our company of a loan or a guarantee in connection with the making of a loan or any other funds available to any of its Directors, Supervisors, general managers, and other senior management to meet expenditure incurred or to be incurred by him for the purposes of our company or for the purpose of enabling him to perform his duties properly, in accordance with the terms of a service contract approved by the shareholders in general meeting; and

(3) if the ordinary course of business of our company includes the lending of money or the giving of guarantees, our company may make a loan to or provide a guarantee in connection with the making of a loan to any of the relevant Directors, Supervisors, general managers and other senior management or their respective associates in the ordinary course of its business on normal commercial terms.

Any person who receives funds from a loan which has been made by our company acting in breach of the foregoing provisions shall, irrespective of the terms of the loan, forthwith repay such funds.

A guarantee for the repayment of a loan which has been provided by our company acting in breach of the foregoing provisions shall not be enforceable against our company, save in respect of the following circumstances:

(1) the guarantee was provided in connection with a loan which was made to an associate of any of the Directors, Supervisors, general managers and other senior management of our company or of our company’s holding company and the lender of such funds did not know of the relevant circumstances at the time of making the loan; or

(2) the collateral which has been provided by our company has already been lawfully disposed of by the lender to a bona fide purchaser.

For the purposes of the foregoing provisions, a “guarantee” includes an undertaking or property provided to secure the obligor’s performance of his obligations.

— VI-3 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

(e) Financial assistance for the acquisition of shares in our company

Our company and its subsidiaries shall not, at any time, provide any form of financial assistance to a person who is acquiring or is proposing to acquire shares in our company. This includes any person who directly or indirectly assumes any obligations as a result of the acquisition of shares in our company (the “Obligor”).

Our company and its subsidiaries shall not, at any time, provide any form of financial assistance to the Obligor for the purposes of reducing or discharging the obligations assumed by such person.

The following activities are not prohibited:

(1) the provision of financial assistance by our company where the financial assistance is given in good faith in the interests of our company, and the principal purpose of which is not for the acquisition of shares in our company, or the giving of the financial assistance is an incidental part of some larger purpose of our company;

(2) the lawful distribution of our company’s assets by way of dividend;

(3) the allotment of bonus shares as dividends;

(4) a reduction of registered capital, a repurchase of shares of our company or a reorganisation of the share capital structure of our company effected in accordance with the Articles of Association;

(5) the lending of money by our company within its scope of business and in the ordinary course of its business (provided that the net assets of our company are not thereby reduced or that, to the extent that the assets are thereby reduced, the financial assistance is provided out of distributable profits); and

(6) contributions made by our company to the employee share ownership schemes (provided that the net assets of our company are not thereby reduced or that, to the extent that the assets are thereby reduced, the financial assistance is provided out of distributable profits).

For the purposes of the foregoing provisions,

(a) “Financial assistance” includes (without limitation):

(1) gift;

(2) guarantee (including the assumption of liability by the guarantor or the provision of assets by the guarantor to secure the performance of obligations by the Obligor), compensation (other than compensation in respect of our company’s own default) or release or waiver of any rights;

— VI-4 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

(3) the provision of a loan or any other agreement under which the obligations of our company are to he fulfilled before the obligations of another party to the agreement, or a change in the parties to, or the assignment of rights under, such a loan or other agreement; or

(4) any other form of financial assistance given by our company when our company is insolvent or has no net assets or when its net assets would thereby be reduced to a material extent.

(b) “Assumption of obligations” includes the assumption of obligations by way of contract or by way of arrangement (irrespective of whether such contract or arrangement is enforceable or not and irrespective of whether such obligation is to be borne solely by the Obligor or jointly with other persons) or by any other means which results in a change in his financial position.

(f) Disclosure of interests in contracts to which our company or any of its subsidiaries is a party

Where a Director, Supervisor, general manager or other senior management of our company A1a7(1) is in any way, directly or indirectly, materially interested in a contract, transaction or arrangement or proposed contract, transaction or arrangement with our company, other than his contract of service, he shall declare the nature and extent of his interest to the Board at the earliest opportunity, whether or not the contract, transaction or arrangement or proposal therefore is otherwise subject to the approval of the Board. Unless the interested Director, Supervisor, general manager or other senior management has disclosed his interest in accordance with the Articles of Association and the contract, transaction or arrangement has been approved by the Board at a meeting in which the interested party is not counted in the quorum and has refrained from voting, any contract, transaction or arrangement in which such party is materially interested is voidable at the instance of our company except as against a bona fide party thereto acting without notice of the breach of duty by the relevant Director, Supervisor, general manager or other senior management. For the purposes of this provision, a Director, Supervisor, general manager or other senior management is deemed to be interested in any contract, transaction or arrangement in which a person connected to him is interested.

Where a Director, Supervisor, general manager or other senior management gives to the Board a general notice in writing before the date on which the question of entering into the relevant contract, transaction or arrangement is first taken into consideration by our company, stating that, by reason of the facts specified in the notice, he is interested in contracts or transactions or any other forms of arrangement which may subsequently be made by our company, that notice shall be deemed for the purposes of the foregoing to be a sufficient disclosure of the interests of the relevant Director, Supervisor, general manager or other senior management, so far as attributable to those facts, in relation to any contract, transaction or arrangement of that description which may subsequently be made by our company.

— VI-5 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

(g) Remuneration

The emoluments of a Director shall be approved by shareholders in general meeting as Co 3rd(5) referred to under the sub-paragraph (c) headed “Remuneration and payments for loss of office” above.

(h) Retirement, appointment and removal A1a7(4)

The term of office of the Chairman and other Directors shall be three years commencing from the date of appointment or re-election, renewable upon re-election.

A Director is not required to hold any shares in our company. A1a7(5) Co 3rd(5)

The Directors shall be elected and removed by the shareholders in general meeting.

A person may not serve as a Director, Supervisor, general manager or other senior management of our company if such person:

(i) has no civil capacity or has limited civil capacity;

(ii) was sentenced for the offence of corruption, bribery, expropriation, misappropriation of property or for disrupting the social and economic order, and less than five (5) years has elapsed since the sentence was served, or who has been deprived of political rights due to such crimes, where less than five (5) years has elapsed since the deprivation was completed;

(iii) was a former director, factory manager or general manager of a company or enterprise which has been dissolved or put into liquidation and was personally liable for the winding up of such company or enterprise, and less than three (3) years has elapsed since the date of completion of the dissolution and liquidation of the Company or enterprise;

(iv) was a former legal representative of a company or an enterprise which has had its business license revoked and has been ordered to close down for violating the laws, and was personally liable for that revocation, and less than three (3) years has elapsed since the date of revocation;

(v) has comparatively large amount of individual debts that have become overdue and have not been settled;

(vi) has been currently under investigation or prosecution by judicial organs for criminal offence which investigation or prosecution is not yet concluded;

— VI-6 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

(vii) is prohibited from acting as leader of an enterprise by virtue of any laws and administrative regulations;

(viii) is not a natural person; or

(ix) has been convicted by competent authorities for violation of securities-related laws and regulations, where such violation involved fraudulent or dishonest acts, and less than five (5) years has elapsed since the date of such conviction.

The validity of an act by a Director, general manager or other senior management to bona fide third party shall not be affected by any irregularity in his appointment, election or eligibility.

The board shall consist of fourteen (14) members. Members of the board shall have a chairman and a vice-chairman and twelve (12) other Directors. The chairman and vice-chairman should be elected and removed by over half of the entire member of the board.

(i) Borrowing powers

Subject to compliance with applicable laws and regulations of the PRC, our company has the Co 3rd(22) power to raise and borrow money which power includes (without limitation) the issue of debentures, the charging or pledging of part or whole of the ownership or usage right of our company’s properties. The Articles of Association do not contain any specific provision in respect A1a7(3) of the manner in which borrowing powers may be exercised by the Directors nor do they contain any specific provision in respect of the manner in which such powers may be varied, other than: (a) provisions which give the Directors the power to formulate proposals for the issuance of debentures by our company; and (b) provisions which provide that the issuance of debentures must be approved by the shareholders in a general meeting by way of a special resolution.

(j) Notice and Minutes of Board Meetings

Board meetings shall be held at least twice every year. If the time and place of the board meeting have been decided in advance, no notice of such meeting shall be required. If no advance decision has been made by the board as to the time and place of the meeting, board meetings shall be convened by way of a notice served to all Directors not less than 10 days and not more than 30 days before the date of the meeting. Upon requisition by shareholders holding over one-tenth voting rights, more than one-third of the Directors, or the members of supervisory committee, an extraordinary meeting of the board may be held. The chairman of the board shall convene and preside the meetings within ten days starting from the date when the chairman receives such requisition. The board shall keep minutes of board resolutions and the attending Directors and the person taking the minutes shall sign the board minutes.

— VI-7 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

(k) Duties

In addition to the obligations imposed by laws, administrative regulations or the listing rules of the stock exchange on which shares of our company are listed, each of our company’s Directors, Supervisors, general managers and other senior management owes a duty to each shareholder, in the exercise of the functions and powers of our company entrusted to him:

(1) not to cause our company to exceed the scope of business stipulated in its business licence;

(2) to act honestly and in the best interests of our company;

(3) not to expropriate our company’s property in any way, including (without limitation) usurpation of opportunities which benefit our company;

(4) not to expropriate the individual rights of shareholders, including (without limitation) rights to distributions and voting rights, save and except according to a restructuring of our company which has been submitted to the shareholders for approval in accordance with the Articles of Association.

Each of the Directors, Supervisors, general managers and other senior management owes a duty, in the exercise of his powers and in the discharge of his duties, to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

Each of the Directors, Supervisors, general managers and other senior management shall exercise his powers or perform his duties in accordance with the fiduciary principle and shall not put himself in a position where his duty and his interest may conflict. This principle includes (without limitation) discharging the following obligations:

(1) to act honestly in the best interests of our company;

(2) to act within the scope of his powers and not to exceed such powers;

(3) to exercise the discretion vested in him personally and not to allow himself to act under the control of another and, unless and to the extent permitted by laws, administrative regulations or with the informed consent of shareholders given in a general meeting, not to delegate the exercise of his discretion;

(4) to treat shareholders of the same class equally and to treat shareholders of different classes fairly;

(5) unless otherwise provided for in the Articles of Association or except with the informed consent of the shareholders given in a general meeting, not to enter into any contract, transaction or arrangement with our company;

— VI-8 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

(6) not to take advantage of their positions to seek business opportunities belonging to our company for themselves or others, or conduct in person or in cooperation with others, business similar to our company’s without the informed consent of the shareholders given in a general meeting;

(7) not to exploit his position to accept bribes or other illegal income or expropriate our company’s property in any way, including (without limitation) opportunities which benefit our company;

(8) not to accept commissions in connection with our company’s transactions, unless with the informed consent of the shareholders given in a general meeting;

(9) to comply with the Articles of Association, to perform his official duties faithfully, to protect our company’s interests and not to exploit his position and power in our company to advance his own interests;

(10) not to compete with our company in any way, unless with the informed consent of the shareholders given in a general meeting;

(11) not to misappropriate our company’s funds, or to deposit the funds of our company in their own or other personal bank accounts, or in violation of the Articles of Association and without the consent of the board or shareholder’s meeting, to loan such funds to others or provide assets of our company as guaranty for others;

(12) not to release any confidential information which he has obtained during his term in office, without the informed consent of the shareholders in a general meeting; nor shall he use such information otherwise than for our company’s benefit save that disclosure of such information to the court or other governmental authorities is permitted if:

(i) disclosure is required by law;

(ii) public interests so warrants;

(iii) the interests of the relevant Director, Supervisor, general managers or other senior management so requires.

Each Director, Supervisor, general managers and other senior management of our company shall not direct the following persons or entities (“associates”) to act in a manner which he is prohibited from doing:

(1) the spouse or minor child of the Director, Supervisor, general managers or other senior management;

(2) the trustee of the Director, Supervisor, general managers or other senior management or of any person described in sub-paragraph (1) above;

— VI-9 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

(3) the partner of that Director, Supervisor, general managers or other senior management or any person referred to in sub-paragraphs (1) and (2) above;

(4) a company in which that Director, Supervisor, general managers or other senior management, whether alone or jointly with one or more of the persons referred to in sub-paragraphs (1), (2) and (3) above and other Directors, Supervisors, general managers and other senior management, has de facto controlling interest;

(5) the Directors, Supervisors, general managers and other senior management of a company which is being controlled in the manner set out in sub-paragraph (4) above.

The fiduciary duties of the Directors, Supervisors, general managers and other senior management of our company do not necessarily cease with the termination of their tenure. The duty of confidentiality in respect of trade secrets of our company survives the termination of their tenure. Other duties may continue for such period as the principle of fairness may require depending on the amount of time which has lapsed between the termination and the act concerned and the circumstances and the terms under which the relationship between the relevant Director, Supervisor, general managers and the senior management on the one hand and our company on the other hand was terminated.

In addition to any rights and remedies provided by the laws and administrative regulations, where a Director, Supervisor, general managers or other senior management of our company breaches the duties which he owes to our company, our company has a right:

(1) to demand such Director. Supervisor, general managers or other senior management to compensate it for losses sustained by our company as a result of such breach;

(2) to rescind any contract or transaction which has been entered into between our company and such Director, Supervisor, general managers or other senior management or between our company and a third party (where such third party knows or should have known that such Director, Supervisor, general managers or other senior management representing our company has breached his duties owed to our company);

(3) to demand such Director, Supervisor, general managers or other senior management to account for profits made as a result of the breach of his duties;

(4) to recover any monies which should have been received by our company and which were received by such Director, Supervisor, general managers or other senior management instead, including (without limitation) commissions;

(5) to demand repayment of interest earned or which may have been earned by such Director, Supervisor, general managers or other senior management on monies that should have been paid to our company; and

— VI-10 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

(6) to take legal actions to rule that the properties obtained by such Director, Supervisor, general manager or other senior management as result of their violation of certain obligations shall be returned to our company.

Subject to the Articles of Association, a Director, Supervisor, general manager or other senior management of our company may be relieved of liability for specific breaches of his duty by the informed consent of the shareholders given at a general meeting.

(2) ALTERATIONS TO CONSTITUTIONAL DOCUMENTS

The Articles of Association shall be amended in accordance with the following procedures:

(1) the board shall adopt a proposal for the amendment of the Articles of Association in a board meeting;

(2) the board shall supply the contents of the proposal to the shareholders in writing and convene a shareholders’ meeting for approving the proposal;

(3) the proposal must be adopted by a special resolution at the shareholders’ general meeting; and

(4) submission to relevant government authorities for approval (if necessary).

The amendments to the Articles of Association involving the contents of Mandatory Provisions shall become effective upon approvals by the companies approving department and securities regulatory authority authorized by the State Council and by the CSRC. If there is any change relating to the registered particulars of our company, application shall be made for change in registration in accordance with relevant law.

(3) VARIATION OF RIGHTS OF EXISTING SHARES OR CLASSES OF SHARES A1a25(3)

Any proposal by our company to vary or abrogate the rights conferred on any class of shareholders (“class rights”) must be approved by a special resolution of shareholders in general meeting and by holders of shares of that class at a separate meeting conducted in accordance with the Articles of Association. The following circumstances shall be deemed to be a variation or abrogation of the class rights of a class:

(1) to increase or decrease the number of shares of such class, or increase or decrease the number of shares of a class having voting or equity rights or privileges equal or superior to the shares of that class;

(2) to exchange all or part of the shares of that class for shares of another class or to exchange or to create a right to exchange all or part of the shares of another class for shares of that class;

— VI-11 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

(3) to remove, or reduce rights to accrued dividends or rights to cumulative dividends attached to shares of that class;

(4) to reduce or remove preferential rights to receive dividends or to the distribution of assets in the event that our company is liquidated attached to shares of that class;

(5) to add, remove or reduce conversion privileges, options, voting rights, transfer or pre-emptive rights, or rights to acquire securities of our company attached to shares of that class;

(6) to remove or reduce rights to receive payment payable by our company in particular currencies attached to shares of that class;

(7) to create a new class of shares having voting or equity rights or privileges equal or superior to those of the shares of that class;

(8) to restrict the transfer or ownership of the shares of that class or to increase the types of restrictions attaching thereto;

(9) to allot and issue rights to subscribe for, or to convert the existing shares into, shares in our company of that class or another class;

(10) to increase the rights or privileges of shares of another class;

(11) to restructure our company in such a way so as to result in the disproportionate distribution of obligations between the various classes of shareholders;

(12) to vary or abrogate the provisions in Chapter 9 of the Articles of Association.

Shareholders of the affected class, whether or not otherwise having the right to vote at shareholders’ general meetings shall nevertheless have the right to vote at class meetings in respect of matters concerning (2) to (8) and (11) to (12) above, but interested shareholder(s) (as defined below) shall not be entitled to vote at class meetings.

Resolutions of a class of shareholders shall be passed by votes representing more than A1a59 two-thirds of the voting rights of shareholders of that class present at the relevant meeting who, according to the Articles of Association, are entitled to vote thereat.

Written notice of a class meeting shall be given to all shareholders who are registered as holders of that class in the register of shareholders 45 days before the date of the class meeting. Such notice shall give such shareholders notice of the matters to be considered at such meeting, the date and the place of the class meeting. A shareholder who intends to attend the class meeting shall deliver his written reply concerning attendance at the class meeting to our company 20 days before the date of the class meeting.

— VI-12 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

If the shareholders who intend to attend such class meeting represent more than half of the total number of shares of that class which have the right to vote at such meeting, our company may hold the class meeting; if not, our company shall within five days give the shareholders further notice of the matters to be considered, the date and the place for the class meeting by way of public announcement. Our company may then hold the class meeting after such public announcement has been made.

Notices of class meetings are only required to be served on shareholders entitled to vote at the class meeting.

Class meetings shall be conducted, as far as is possible, in the same manner as shareholders’ general meetings. The provisions of the Articles of Association relating to the manner of conducting any shareholders’ general meeting shall apply to any class meeting of shareholders. Holders of domestic shares and overseas listed foreign shares are deemed to be different classes of shareholders, while holders of domestic shares and non-listed foreign shares are not deemed to be different classes of shareholders.

The special procedures for approval by a class of shareholders shall not apply in the following circumstances:

(a) where our company issues, upon approval by a special resolution of its shareholders in general meeting, either separately or concurrently once every twelve months, not more than 20% of each of its existing issued domestic shares and overseas-listed foreign-invested shares; or

(b) where our company’s plan to issue domestic shares and overseas-listed foreign- invested shares at the time of its incorporation is carried out within fifteen months from the date of approval by the CSRC.

For the purposes of the class rights provisions of the Articles of Association, the meaning of “interested shareholders” is:

(a) in the case of a repurchase of Share by way of a general offer to all shareholders on a pro-rata basis or by way of public dealing on a stock exchange pursuant to the Articles of Association, a “controlling shareholder” within the meaning of the Articles of Association;

(b) in the case of a repurchase of Shares by an off-market contract pursuant to the Articles of Association, a holder of the Shares to which the proposed contract relates; and

(c) in the case of a restructuring proposal of’ our company, a shareholder within a class who bears a relatively lower proportion of obligation compared with that imposed on that class of shareholders under the proposed restructuring or who has an interest in the proposed restructuring different from the general interest of other shareholders of that class.

— VI-13 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

(4) ORDINARY AND SPECIAL RESOLUTIONS — MAJORITY REQUIRED

Resolutions of shareholders general meetings shall be classified into ordinary resolutions and special resolutions.

An ordinary resolution must he passed by votes representing more than one-half of the voting rights represented by the shareholders (including proxies) present at the meeting.

A special resolution must be passed by votes representing two-thirds or more of the voting rights represented by the shareholders (including proxies) present at the meeting.

(5) VOTING RIGHTS (GENERALLY, ON A POLL AND RIGHT TO DEMAND A POLL) A1a25(1)

The shareholders have the right to attend or appoint a proxy to attend shareholders’ general meetings and to vote thereat.

A shareholder (including a proxy), when voting at a shareholders’ general meeting, may exercise such voting rights as are attached to the number of voting shares which he represents. Each share, except for those held by our company itself, shall have one vote, provided that while taking the votes, any privilege or restriction appended to any class voting rights shall be complied with.

At any shareholders’ general meeting, a resolution shall be decided on a show of hands unless a poll is demanded before or after a vote is carried out by a show of hands:

(a) by the chairman of the meeting;

(b) by at least two shareholders present in person or by proxy entitled to vote thereat; or

(c) by one or more shareholders present in person or by proxy and representing 10% or more of all shares carrying the right to vote at the meeting.

Unless a poll is demanded, a declaration by the chairman that a resolution has been passed on a show of hands and the record of such in the minutes of the meeting shall be conclusive evidence of the fact such resolution has been passed. There is no need to provide evidence on the number or proportion of votes in favour of or against such resolution.

The demand for a poll may be withdrawn by the person who demands the same.

A poll demanded on the election of the chairman, or on a question of adjournment, shall be A1a13A taken forthwith. A poll demanded on any other question shall be taken at such time as the chairman of the meeting directs, and any business other than that upon which the poll has been demanded may be proceeded with, pending the taking of the poll. The result of the poll shall be deemed to be a resolution of the meeting at which the poll was demanded. On a poll taken at a meeting, a shareholder (including a proxy) entitled to two or more votes need not cast all his votes in the same way.

— VI-14 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the meeting at which the show of hands takes place or at which the poll is demanded shall have a casting vote.

(6) REQUIREMENTS FOR ANNUAL GENERAL MEETINGS

The Board shall convene a shareholders’ annual general meeting once each year within six months of the end of the preceding financial year.

(7) ACCOUNTS AND AUDIT

Our company shall formulate its own financial and accounting system and internal audit system in accordance with the relevant requirements of PRC laws, administrative regulations and the PRC accounting standards formulated by the financial department of the State Council.

Our company shall prepare financial statements at the end of each fiscal year. Such statements shall be audited and examined under the requirements of laws. The board shall place before the shareholders at every annual general meeting such financial statements prepared by our company in accordance with relevant laws, administrative regulations or directives promulgated by competent local and central governmental authorities.

The financial reports of our company shall be made available for shareholders’ inspections at our company not less than 20 days before the annual general meeting. Each shareholder of our company shall be entitled to obtain a copy of the financial reports.

Our company shall send the printed copies of the abovementioned financial reports together with the directors’ report to each share holder by mail at least 21 days before the annual general meeting. The service address shall be the address recorded in the register of shareholders.

The financial statements of our company shall, in addition to being prepared in accordance with PRC accounting standards and regulations, be prepared in accordance with either international accounting standards, or that of the overseas place where the Shares are listed. If there is any material difference between the financial statements prepared respectively in accordance with the two accounting standards, such difference shall be stated in a note to the financial statements. When our company is to distribute its after-tax profits, the lower of the after-tax profits as shown in the two financial statements shall be adopted.

Any interim and quarterly results or financial information published or disclosed by our company must also be prepared and presented in accordance with PRC accounting standards and regulations, and also in accordance with either international accounting standards or that of the overseas place of where the Shares are listed.

— VI-15 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

Our company shall prepare financial reports in respect of the first 3 and 9 months periods of each financial year of our company and publish the same not later than 45 days after the end of such period.

Our company shall prepare an interim report in respect of the first 6 months period in each financial year of our company and publish the same not later than 45 days after the end of such period.

(8) NOTICE OF MEETINGS AND BUSINESS TO BE CONDUCTED THEREAT

The shareholders’ general meeting is the organ of authority of our company and shall exercise its functions and powers according to law.

Our company shall not, without the prior approval of shareholders in general meeting, enter into any contract with any person (other than a Director, Supervisor, general manager or other senior management) pursuant to which such person shall be responsible for the management and administration of the whole or any substantial part of our company’s business.

Shareholders’ general meetings can be annual general meetings or extraordinary general meetings. Shareholders’ meetings shall be convened by the board.

The board shall convene an extraordinary general meeting within two months of the occurrence of any one of the following circumstances:

(1) where the number of Directors is less than the number stipulated in the Company Law of the PRC or two-thirds of the number specified in the Articles of Association;

(2) where the unrecovered losses of our company amount to one-third of the total amount of its share capital;

(3) where shareholder(s) holding 10% or more of our company’s issued and outstanding shares carrying voting rights request(s) in writing for the convening of an extraordinary general meeting;

(4) whenever the Board considers necessary or the supervisory committee so requests;

(5) where the accountants appointed by our company so request in accordance with the Articles of Association; and

(6) where two or more independent Directors request convening of an extraordinary general meeting.

When our company convenes a shareholders’ general meeting, written notice of the meeting shall be given not less than 45 days (but not exceeding 60 days) before the date of the meeting

— VI-16 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION to notify all of the shareholders whose names appear in the share register of the matters to be considered and the date and the place of the meeting. A shareholder who intends to attend the meeting shall deliver to our company his written reply concerning the attendance at such meeting to our company 20 days before the date of the meeting.

The shareholders holding over 3% of the total shares of our company by oneself or in total may put forward interim proposals and submit such to the board in written 10 days before the meeting. The board shall notify other shareholders within 2 days after such proposals are received and submit such proposals to the shareholders’ general meeting for discussion.

The contents of interim proposals shall fall into the scope of powers of the shareholders’ general meeting and have the specific topics for discussion and issues for resolution.

An extraordinary shareholders’ general meeting shall not decide on matters not stated in the notice of meeting.

Our company shall, based on the written notice which it replies receives 20 days before the date of the shareholders’ general meeting from the shareholders, calculate the number of voting shares represented by the shareholders who intend to attend the meeting. If the number of voting shares represented by the shareholders who intend to attend the meeting amount to more than one-half of our company’s total voting shares, our company may hold the meeting; if not, then our company shall within five days notify the shareholders again by way of public announcement the matters to be considered at, the place and date for, the meeting. Our company may then hold the meeting after such announcement.

Notice of general meeting of shareholders shall:

(a) be in writing;

(b) specify the venue, date and time of the meeting;

(d) specify the name, telephone number of the contact person of the general meeting;

(e) state the matters to be discussed at the meeting;

(f) provide such information and explanation as are necessary for the shareholders to make an informed decision on the proposals put before them. Without limiting the generality of the foregoing, where a proposal is made to amalgamate our company with another to repurchase shares of our company, to reorganise the share capital, or to restructure our company in any other way, the terms of the proposed transaction must be provided in detail together with copies of the proposed agreement, if any, and the cause and effect of such proposal must be properly explained;

— VI-17 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

(g) contain a disclosure of the nature and extent, if any, of the material interests of any Director, Supervisor, general manager or other senior management in the proposed transaction and the effect of the proposed transaction on such Director, Supervisor, general manager or other senior management in his capacity as shareholder in so far as it is different from the effect on the interests of other shareholders of the same class;

(h) contain the full text of any special resolution to be proposed at the meeting;

(i) contain a clear statement that a shareholder entitled to attend and vote at such meeting is entitled to appoint one or more proxies to attend and vote at such meeting on his behalf and that a proxy need not be a shareholder; and

(j) specify the time and place for lodging the proxy form for the relevant meeting.

Notice of shareholders’ general meeting shall be served on each shareholder (whether or not such shareholder is entitled to vote at the meeting), by personal delivery or prepaid mail to the address of the shareholder as shown in the register of shareholders. For the holders of domestic shares, notice of the meetings may also be issued by way of public announcement.

The public announcement referred to in the preceding paragraph shall be published in one or more national newspapers designated by the CSRC within the interval between 45 days and 50 days before the date of the meeting. After the publication of such announcement, the holders of domestic shares shall be deemed to have received the notice of the relevant shareholders’ general meeting.

Once the notice for convening the shareholders’ general meeting is dispatched, unless for reasons of force majeure or other accidents, the board shall not amend the time for convening the general meeting. Where change in the time for convening the general meeting is necessary as result of force majeure, the registration date for entitlement shall not be accordingly changed.

The accidental omission to give notice of a meeting to, or the non-receipt of notice of a meeting by, any person entitled to receive notice shall not invalidate that meeting or any resolutions passed thereat.

The following matters shall be resolved by way of ordinary resolution at the general meeting:

(a) working reports of the board and the supervisory committee;

(b) profit distribution proposals and proposals for making up losses formulated by the board;

— VI-18 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

(d) annual preliminary and final budgets, balance sheets, profit and loss accounts and other financial statements; and

(e) matters other than those required by the laws and administrative regulations or by the Articles of Association to be adopted by special resolution.

The following matters shall be resolved by way of special resolution of the shareholders’ general meeting:

(a) increase or reduction of our company’s share capital and the issuance of shares of any class, warrants and other similar securities;

(b) issue of debentures by our company;

(d) adjustment to the direction of the Company’s business;

(e) amendment of the Articles of Association;

(f) where our company purchases or sells any important assets, or provides a guaranty of which the amount exceeds 30% of its total assets within one year; and

(g) any other matters which should be adopted by a special resolution as required by laws, administrative regulations and the Articles of Association.

(9) TRANSFER OF SHARES

Transfer of fully paid overseas listed foreign shares listed in Hong Kong shall not be subject A1a7(8) to any restriction, nor with any lien attached.

(10) REGISTER OF SHAREHOLDERS

(I) Register of shareholders

Our company shall keep a complete register of shareholders which shall contain the following particulars:

(1) the name (title) and address (residence), the occupation or nature of each shareholder;

(2) the quantity and the class of shares held by each shareholder;

(3) the amount paid-up on or agreed to be paid-up on the shares held by each shareholder;

(4) the share certificate number(s) of the shares held by each shareholder;

— VI-19 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

(5) the date on which each person was entered in the register as a shareholder;

(6) the date on which any shareholder ceased to be a shareholder.

Unless there is evidence to the contrary, the register of shareholders shall be sufficient A1a7(9) evidence of the shareholders’ shareholdings in our company.

The register of shareholders shall comprise the following parts:

(1) the register of shareholders which is maintained at our company’s residence (other than those share registers which are described in sub-paragraphs (2) and (3) below);

(2) the register of shareholders in respect of the holders of overseas-listed foreign-invested Shares of our company which is maintained in the same place as the overseas stock exchange on which the shares are listed; and

(3) the register of shareholders which are maintained in such other place as the board may consider necessary for the purposes of listing of our company’s shares.

Our company may, in accordance with the mutual understanding and agreements made between the CSRC and overseas securities regulatory organisations, maintain the register of shareholders of overseas-listed foreign-invested shares overseas and appoint overseas agent(s) to manage such share register. The original share register for holders of H Shares shall be maintained in Hong Kong.

A duplicate of the register of shareholders for holders of overseas-listed foreign-invested shares shall be maintained at our company’s residence. The appointed overseas agent(s) shall ensure consistency between the original and the duplicate register of shareholders at all times. If there is any inconsistency between the original and the duplicate register of shareholders for holders of overseas-listed foreign-invested shares, the original register of shareholders shall prevail.

Different parts of the register of shareholders shall not overlap. No transfer of any shares registered in any part of the register shall, during the continuance of that registration, be registered in any other part of the register.

Amendments or rectification of the register of shareholders shall be made in accordance with the laws of the place where the register of shareholders is maintained.

No changes in the shareholders’ register due to the transfer of shares may be made within thirty (30) days before the date of a shareholders’ general meeting or within five (5) days before the record date for our company’s distribution of dividends.

— VI-20 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

(11) POWER OF OUR COMPANY TO PURCHASE ITS OWN SHARES AND REDUCE ITS SHARE CAPITAL

Subject to the provisions of the Articles of Association, our company may reduce its registered capital.

Our company may, in accordance with the procedures set out in the Articles of Association and with the approval of the competent authority of the PRC, repurchase its own issued shares under the following circumstances:

(1) cancellation of shares for the purpose of reducing its share capital;

(2) merging with another company that holds shares in our company;

(3) to award the employees of our company with shares;

(4) it is requested by any shareholder to purchase his shares because this shareholder raises any objection to our company’s resolution on merger or de-merger made at the shareholders’ general meeting.

Where a company needs to purchase its own shares for any of the reasons as mentioned in items (1) through (3) of the preceding paragraph, it shall be subject to a resolution of the shareholders’ general meeting. After our company purchases its own shares pursuant to the provisions of the preceding paragraph, such Shares shall, under the circumstance as mentioned in item (1), be cancelled within 10 days after the purchase; while under either circumstance as mentioned in item (2) or (4), such Shares shall be transfered or cancelled within 6 months after the purchase.

The shares purchased by our company in accordance with item (3) of the preceding paragraph shall not exceed 5% of the total shares already issued by the Company. The fund used for the share acquisition shall be paid from the after-tax profits of our Company. The shares purchased by our company shall be transferred to the employees within 1 year after the purchase.

The Company may not accept any subject matter taking the Shares of the Company as a pledge.

— VI-21 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

Our company may repurchase shares in one of the following ways, with the approval of the relevant governing authority of the PRC:

(1) by making a general offer for the repurchase of shares to all its shareholders on a pro rata basis;

(2) by repurchasing shares through public dealing on a stock exchange;

(3) by repurchasing shares outside of the stock exchange by means of an off-market agreement.

Our company must obtain the prior approval of the shareholders in a general meeting (in the manner stipulated in the Articles of Association) before it can repurchase shares outside of the stock exchange by means of an off-market agreement. Our company may, by obtaining the prior approval of the shareholders in general meeting (in the same manner), release, vary or waive its rights under an agreement which has been so entered into.

An agreement for the repurchase shares referred to in the preceding paragraph includes (without limitation) an agreement to become liable to repurchase shares or an agreement to have the right to repurchase shares.

Our company may not assign an agreement for the repurchase of its shares or any right contained in such an agreement.

As for the cancellation of repurchased shares pursuant to the Articles of Association, our company shall apply to the companies registration authority for registration of the change of its registered capital.

The aggregate par value of the cancelled shares shall be deducted from our company’s registered share capital.

Unless our company is in the course of liquidation, it must comply with the following provisions in relation to repurchase of its issued shares:

(1) where our company repurchases shares at par value, payment shall be made out of book surplus distributable profits of our company or out of proceeds of a new issue of shares made for the purpose of repurchase of old shares;

(2) where our company repurchases shares of our company at a premium to its par value. payment up to the par value may he made out of the book surplus distributable profits of our company or out of the proceeds of a new issue of shares made for the purpose of repurchase of old shares. Payment of the portion in excess of the par value shall he effected as follows:

(i) if the shares being repurchased were issued at par value, payment shall he made out of the book surplus distributable profits of our company;

— VI-22 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

(ii) if the shares being repurchased were issued at a premium to its par value, payment shall be made out of the book surplus distributable profits of our company or out of the proceeds of a new issue of shares made for the purpose of repurchase of old shares, provided that the amount paid out of the proceeds of the new issue shall not exceed the aggregate of premiums received by our company on the issue of the shares repurchased nor shall it exceed the book value of our company’s premium account (or capital reserve fund account, including the premiums on the new issue) at the time of the repurchase;

(3) our company shall make the following payments out of our company’s distributable profits:

(i) payment for the acquisition of the right to repurchase its own shares;

(ii) payment for variation of any contract for the repurchase of its shares;

(iii) payment for the release of its obligation(s) under any contract for the repurchase of shares;

(4) after our company’s registered capital has been reduced by the aggregate par value of the cancelled shares in accordance with the relevant provisions, the amount deducted from the distributable profits of our company for payment of the par value of shares which have been repurchased shall be transferred to our company’s capital reserve fund account.

Upon the reduction of registered capital, our company shall prepare a balance sheet and a list of its assets. Our company shall notify its creditors within 10 days from the date of passing of the resolution for the reduction of registered capital and shall publish the notice in a newspaper within 30 days thereof. Creditors who receive this notice shall have the right within 30 days from the date of receiving the notice. and the creditors who have not received the notice shall have the right within 45 days from the date the notice was published in the newspaper, to require our company to settle the debt or to provide corresponding security in respect of the debt.

The registered capital shall not be less than the minimum statutory requirement after the reduction of registered capital.

(12) POWER FOR ANY SUBSIDIARY OF OUR COMPANY TO OWN SHARES IN OUR COMPANY

There are no provisions in the Articles of Association preventing ownership of shares in our company by a subsidiary.

— VI-23 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

(13) DIVIDENDS AND OTHER METHODS OF PROFIT DISTRIBUTION

Our company may distribute dividends in the following form:

(a) cash; or

(b) shares.

Dividends or other payments declared by our company to be payable to holders of domestic shares shall be declared and calculated in Renminbi, and paid in Renminbi within three months after the dividend declaration date. Those payable to holders of foreign-invested shares shall be declared and calculated in Renminbi, and paid in foreign currency within three months after the dividend declaration date.

Where power is taken to forfeit unclaimed dividends, that power shall not be exercised until A1a7(7) after the expiration of the applicable limitation period.

Our company shall appoint receiving agents for holders of the overseas-listed foreign- invested shares. Such receiving agents shall receive dividends which have been declared by our company and all other amounts which our company should pay to holders of overseas-listed foreign-invested shares on such shareholders’ behalf.

The receiving agents appointed by our company shall meet the relevant requirements of the laws of the place at which the stock exchange on which our company’s shares are listed or the relevant regulations of such stock exchange.

The receiving agents appointed for holders of H Shares shall each be a company registered as a trust company under the Trustee Ordinance of Hong Kong.

(14) PROXIES

Any shareholder who is entitled to attend and vote at a meeting of our company shall be entitled to appoint one or more persons (whether a shareholder or not) as his proxies to attend and vote on his behalf, and a proxy so appointed shall:

(a) have the same rights as the shareholder to speak at the meeting;

(b) have the right to demand or join in demanding a poll; and

(c) have the right to vote by hands or on a poll, but a proxy of a shareholder who has appointed more than one proxy may only vote on a poll.

The instrument appointing, a proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing, or if the appointor is legal person, either under seal or under the hand of a director or attorney duly authorised. The instrument appointing a proxy shall be deposited at our company’s domicile or at such other place as is specified in the notice

— VI-24 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION convening the meeting not less than 24 hours prior to the time for holding the meeting at which the proxy propose to vote or the time specified for the passing of the resolution. If such instrument is signed by another person under a power of attorney or other authorisation documents given by the appointer, such power of attorney or other authorisation documents shall be notarised. The notarised power of attorney or other authorisation document shall, together with the instrument appointing the voting proxy, be deposited at our company’s domicile or at such other place as is specified in the notice convening the meeting.

If the appointor is a legal person, its legal representative or such person as is authorised by resolution of its board of directors or other governing body may attend at any meeting of shareholders of our company as a representative of the appointor.

Any form issued to a shareholder by the board for use by the shareholder for appointing a proxy to attend and vote at a meeting of our company shall be such as to enable the shareholder, according to his intention, to instruct the proxy to vote in favour of or against each resolution dealing with the business to be transacted at the meeting. Such a form shall contain a statement to the effect that, in the absence of such instructions by the shareholder, the proxy may vote as he thinks fit. A vote given in accordance with the terms of an instrument of proxy shall be valid notwithstanding the death or loss of capacity of the principal or revocation of the proxy or of the authority under which the proxy was executed, or the transfer of the shares in respect of which the proxy is given, provided that no notice in writing of such death, loss of capacity, revocation or transfer as aforesaid have been received by our company before the commencement of the meeting.

(15) CALLS ON SHARES AND FORFEITURE OF SHARES

There are no provisions in the Articles of Association relating to the making of calls on Shares or for the forfeiture of Shares.

(16) INSPECTION OF REGISTER OF SHAREHOLDERS AND SHAREHOLDERS’ OTHER RIGHTS TO INFORMATION

The holders of ordinary shares of our company shall enjoy the following rights:

(a) to receive dividends and other distributions in proportion to the number of Shares held;

(b) to attend or appoint a proxy to attend shareholders’ general meetings on his behalf and to vote thereat;

(d) to transfer give or pledge shares in accordance with laws, administrative regulations and provisions of the Articles of Association;

— VI-25 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

(e) to obtain relevant information in accordance with the Articles of Association including:

(a) the right to a copy of the Articles of Association at cost;

(b) the right to inspect and copy for reasonable charges:

(i) all parts of the register of shareholders;

(ii) personal particulars of each of the Directors, Supervisors, general managers and other senior management including:

(aa) present and former name and alias;

(bb) principal residential address;

(cc) nationality;

(dd) primary and all other part-time occupations and duties;

(ee) identification documents and their numbers;

(iii) report on the State of our company’s share capital;

(iv) reports showing the aggregate number and par value of Shares repurchased by our company since the end of the last accounting year, the aggregate amount paid by our company for the Shares repurchased and the maximum and minimum price paid in respect of each class of Shares repurchased; and

(v) minutes of Shareholder’s general meetings.

(f) in the event of the termination or liquidation of our company to participate, in the distribution of surplus assets of our company in accordance with the number of Shares held; and

(g) other rights conferred by laws, administrative regulations and the Articles of Association.

(17) QUORUM FOR GENERAL MEETINGS AND CLASS MEETINGS

Our company may convene a shareholders’ general meeting where the number of voting shares represented by those shareholders from whom our company has received, 20 days before the meeting, notices of intention to attend the meeting is more than one-half of our company’s total number of voting shares; or, if not, our company shall within five days publicly announce to the shareholders the agenda, the date and venue of the meeting. Having made announcement by way of notice, our company may convene shareholder’s general meeting.

— VI-26 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

Our company may convene a class meeting where the number of voting shares represented by those shareholders from whom our company has received, 20 days before the meeting, notices of intention to attend the meeting is more than one-half of the total number of voting shares of that class; or, if not, our company shall within five days publicly announce to the shareholders the agenda, the date and venue of the meeting. Having made announcement by way of notice, our company may convene shareholders’ class meetings.

(18) RIGHTS OF MINORITY SHAREHOLDERS IN RELATION TO FRAUD OR OPPRESSION

In addition to obligations imposed by laws, administrative regulations or required by the stock exchanges on which H Shares of our company are listed, a Controlling Shareholder (as defined below) shall not exercise his voting rights in a manner prejudicial to the interests of all or some of the shareholders of our company in respect of the following matters:

(a) to relieve a Director or Supervisor of his duty to act honestly in the best interests of our company;

(b) to approve the expropriations by a Director or Supervisor (for his own benefit or for the benefit of another person) of our company’s assets in any way, including without limitation, opportunities beneficial to our company; or

(c) to approve the expropriations by a Director or Supervisor (for his own benefit or for the benefit of another person) of the individual rights of other shareholders, including without limitation, rights to distributions and voting rights except pursuant to a restructuring of our company which has been submitted to the shareholders for approval in a general meeting in accordance with the Articles of Association.

The “controlling shareholder” refers to a shareholder whose shares occupy more than 50% of the total registered capital of our company, or a shareholder whose proportion of shares is less than 50% but who enjoys a voting right according to the shares it holds is large enough to impose a material impact upon the resolution of the shareholder’s general meeting.

(19) PROCEDURES ON LIQUIDATION

Shareholders have the right to participate in the distribution of the surplus assets of our company in proportion to the number of shares held by them in the event of a liquidation of our company:

Our company shall be dissolved and liquidated upon the occurrence of any of the following events:

(1) a resolution for dissolution is passed by shareholders at a general meeting;

(2) dissolution is necessary due to a merger or division of our company;

— VI-27 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

(3) our company is legally declared insolvent due to its failure to repay debts as they become due;

(4) its business license is canceled or it is ordered to close down or to be dissolved according to law; or

(5) any other overts prescribed by PRC laws and administrative regulations.

A liquidation committee shall be set up within 15 days of our company being dissolved pursuant to sub-paragraphs (1) and (4) of the preceding paragraph to carry out a liquidation. The liquidation committee shall comprise the Directors or any other people as determined by the shareholder’s general meeting. Where no liquidation is formed within the time limit, the creditors may plead the People’s court to designate relevant persons to form a liquidation committee.

Where our company is dissolved under sub-paragraph (2) of the preceding paragraph, the liquidation shall be in accordance with the contract entered into by the parties to the merger or de-merger during the merger or de-merger.

Where our company is dissolved under sub-paragraph (3) of the preceding paragraph, the People’s Court shall in accordance with the provisions of relevant laws organise the shareholders, relevant organisations and relevant professional personnel to establish a liquidation committee to carry out the liquidation.

Where the board proposes to liquidate our company due to reasons other than where our company’s declaration of its own insolvency, the board shall include a statement in its notice convening a shareholders’ general meeting to consider the proposal to the effect that, after making full inquiry into the affairs of our company, the board is of the opinion that our company will be able to pay its debts in full within 12 months from the commencement of the liquidation.

Upon the passing of the resolution by the shareholders in general meeting for the liquidation of our company, all functions and powers of the board shall cease.

The liquidation committee shall act in accordance with the instructions of the shareholders’ general meeting to make a report at least once every year to the shareholders’ general meeting on the committee’s income and expenses, the business of our company and the progress of the liquidation; and to present a final report to the shareholders’ general meeting on completion of the liquidation.

— VI-28 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

(20) OTHER PROVISIONS MATERIAL TO OUR COMPANY OR ITS SHAREHOLDERS

(a) General Provision

Our company is a joint stock limited company which has perpetual existence.

From the date on which the Articles of Association come into effect, the Articles of Association shall constitute a legally binding public document regulating our company’s organisation and activities, and the rights and obligations between our company and each shareholder and among the shareholders inter se.

Our company may invest in other enterprises. However, it shall not become a capital contributor bearing associated liabilities for the debts of the enterprises it invests in, unless it is otherwise provided for by any law.

(b) Share capital

Our company may, based on its operating and development needs, increase its share capital pursuant to the Articles of Association.

Our company may increase its capital in the following ways:

(i) by offering new shares for subscription to unspecified investors;

(ii) by placing new shares to its existing shareholders;

(iii) by allotting bonus shares to its existing shareholders; and

(iv) by any other means which is permitted by laws and administrative regulations.

After our company’s increase of share capital by means of the issuance of new shares has been approved in accordance with the provision of the Articles of Association, the issuance thereof should be made in accordance with procedures set out in the relevant laws and administrative regulations.

Upon approval of the State Council or its authorized regulatory departments, and with the consent of the Stock Exchange, the Domestic Shares and Non-H Foreign Shares may be converted into H Shares.

The ordinary shareholders of our company shall assume the following obligations:

(i) to comply with the Articles of Association;

— VI-29 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

(ii) to pay subscription monies according to the number of shares subscribed and the method of subscription;

(iii) other obligations imposed by laws, administrative regulations and the Articles of Association.

Shareholders are not liable to make further contribution to the share capital other than as agreed by the subscriber of the relevant shares at the time of subscription.

(d) Secretary of the Board

Our company shall have one secretary of the Board. The secretary of the Board shall be a natural person who has the requisite professional knowledge and experience, and shall be appointed by the Board. His primary responsibilities are to ensure that:

(i) our company maintains a complete organisational documents and records;

(ii) our company prepares and submits all reports and documents to the relevant authorities required by the law;

(iii) the register of shareholders of our company is properly maintained and that the persons entitled to receive our company’s records and documents are furnished therewith without delay; and

(iv) The secretary shall fulfil the duties of a company secretary in accordance with the law and the Articles of Association (including reasonable requests of the board).

(e) Supervisory Committee

Our company shall have a supervisory committee.

The Directors, general managers and other senior managements shall not act concurrently as Supervisors.

The supervisory committee shall be composed of five Supervisors. One of the members of the supervisory committee shall be the chairman. Each Supervisor shall serve for a term of three years, which term is renewable upon reelection and re-appointment.

The election or removal of the chairman of the supervisory committee shall be determined by two-thirds or more of the members of the supervisory committee.

The supervisory committee shall comprise 3 representatives nominated by the shareholders and 2 representatives nominated by the staff. The representatives of the shareholders shall be elected and removed by shareholder’s general meeting while the representatives of staff shall be elected and removed by the staff of our company democratically.

— VI-30 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

The supervisory committee shall be accountable, and will report, to the shareholders in general meeting and shall exercise the following functions and powers in accordance with law:

(1) to monitor our company’s financial situations;

(2) supervising the duty-related acts of the Directors, general managers and other senior management and bring forward proposals on the removal of any Director, general manager and other senior management who violates any law administrative regulation, the Articles of Association or any resolution of the shareholders’ general meeting;

(3) to demand any Director, general managers or any other senior management who acts in a manner which is detrimental to our company’s interest to rectify such behavior;

(4) to verify the financial information such as the financial report, business report and plans for distribution of profits to be submitted by the board to the shareholders’ general meetings and to authorise, in our company’s name, publicly certified and practicing accountants to assist in the re-examination of such information should any doubt arise in respect thereof;

(5) to propose to convene a shareholders’ extraordinary general meeting, any convening and presiding over shareholders’ general meetings when the board does not exercise the functions of convening and presiding over the shareholders’ general meetings as prescribed in this law;

(6) to bring forward proposals at shareholders’ general meetings;

(7) to represent our company in negotiations with or in bringing actions against a Director; and

(8) other functions and powers specified in any law administrative regulation the Articles of Association.

The supervisors may attend the meetings of the board, and may raise questions or suggestions on the matters to be decided by the board.

(d) General manager

Our company shall have one general manager, who shall be appointed and dismissed by the Board.

The general manager shall be accountable to the Board and shall exercise the following powers:

(i) to be in charge of our company’s operation and management and to implement the resolutions of the board;

— VI-31 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

(ii) to implement our company’s annual business plan and investment plan;

(iii) to formulate our company’s internal management structure;

(iv) to formulate our company’s basic management system;

(v) to formulate the basic rules and regulations of our company;

(vi) to propose the appointment or dismissal of our company’s deputy managers, financial controllers and senior controllers;

(vii) to make a decision to appoint or dismiss management personnel other than those required to be appointed or dismissed by the board;

(viii) to make decisions as to the awards to, and sanctions against, promotion or demotion of, change in salary of, employment or dismissal of, employees;

(ix) to represent our company externally in significant businesses according to the authorization of the board; and

(x) to exercise other powers conferred by the Articles of Association and the board.

The general manager shall be present at meetings of the board, but shall have no voting rights at the meetings if it is not a Director.

The general manager, in performing its functions and powers, shall act honestly and diligently and in accordance with laws, administrative regulations and the Articles of Association.

(e) Board

The board is accountable to the shareholders’ general meeting and exercises the following functions and powers:

(1) to be responsible for the convening of the shareholders’ general meeting and to report on its work to the shareholders’ general meeting;

(2) to implement the resolutions passed by the shareholders in general meetings;

(3) to determine our company’s business plans and investment proposals;

(4) to formulate our company’s annual preliminary and final financial budgets;

(5) to formulate our company’s profit distribution proposal and loss recovery proposal;

(6) to formulate proposals for the increase or reduction of our company’s registered capital and for the issuance of our company’s debentures;

— VI-32 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

(7) to draw up plans for the merger, division, change of our company form or dissolution of our company;

(8) to decide on our company’s internal management structure;

(9) to appoint or remove our company’s general manager and, based on the recommendations of the general manager, decide on the appointment or removal of the deputy general manager, financial controller and senior controller and their respective remuneration;

(10) to formulate our company’s basic management system;

(11) to formulate proposals for any amendment of the Articles of Association;

(12) to formulate major property acquisition or disposal plans of our company;

(13) subject to the relevant laws, regulations and the Articles of Association, to decide on the raising and borrowing of moneys, execution of mortgage, lease and contract out, and transfer of the major assets of our company and may authorize the general manager to exercise limited powers within a specified period;

(14) to make proposal to the general meeting for the appointment or change of Public Certified Accountants for the audit of our company; and

(15) to exercise any other powers conferred by the shareholders in general meeting or the Articles of Association.

Except the Board’s resolutions in respect of the matters specified in sub-paragraphs (6), (7) and (11) above which shall be passed by the affirmative vote of more than two-thirds of all the Directors. the Board’s resolutions in respect of all other matters may be passed by the affirmative vote of more than half of the Directors.

Meetings of the Board of Directors shall be held only if more than half of the Directors (including any alternate Director appointed pursuant to the Articles of Association) are present.

Each Director shall have one vote.

Where a Director is interested in any resolution proposed at a Board meeting, such Director shall have no right to vote nor may vote on behalf of any other person. Such Director shall not be counted in the quorum of the relevant meeting.

— VI-33 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

The meeting of the board shall not be held unless more than half of the disinterested directors are present at the meeting. A resolution of the board shall be adopted by more than half of the disinterested directors. If the number of disinterested directors in person is less than 3 persons, the matter shall be submitted to the shareholders’ general meeting for deliberation.

Where there is an equality of votes cast both for and against a resolution, the chairman of the board shall have a casting vote.

(f) Accounts and audit

(i) Appointment of an auditor

Our company shall appoint an independent firm of certified public accountants (“CPA”) which is qualified under the relevant regulations of the PRC to audit our company’s annual financial reports and review our company’s other financial reports.

The term of office of an auditor shall commence from the conclusion of the annual general meeting of shareholders at which the appointment is made and end at the conclusion of the next annual general meeting of shareholders.

If there is a vacancy of the position of the auditors of our company, the Board may appoint a CPA firm to fill such vacancy before the convening of the shareholders’ general meeting. Any other CPA firm which has been appointed by our company may continue to act during the period during which a vacancy arises.

The shareholders in general meeting may by ordinary resolution remove an auditor before the expiration of its term of office, irrespective of any terms in the contract between our company and the auditors. However, the auditors’ right to claim for damages which arise from its removal shall not be affected thereby.

The remuneration of auditors or the manner in which such auditor is to be remunerated shall be determined by the shareholders in general meeting. The remuneration of an accountant appointed by the board shall be determined by the board.

(ii) Change and removal of an accounting firm

Our company’s appointment of, removal of and non-reappointment of a certified public accountants’ firm shall be resolved by shareholders in general meeting. The relevant resolution of the shareholders’ general meeting shall be filed with the securities authority of the State Council.

— VI-34 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

Where a resolution is proposed to be passed at a general meeting of shareholders to appoint as auditor a person other than an incumbent auditor, to fill a casual vacancy in the office of auditor, to reappoint as auditor a retiring auditor who was appointed by the board to fill a casual vacancy, or to remove an auditor before the expiration of his term of office, the following provisions shall apply:

(aa) A copy of the proposal shall be sent to the firm proposed to be appointed or proposing to leave its post or the firm which has left its post (leaving includes leaving by removal, resignation and retirement) before notice of meeting is given to the shareholders.

(bb) If the auditor leaving its post makes representations in writing and requests our company to notify such representations to the shareholders, our company shall (unless the representations are received too late) take the following measures:

(i) in any notice of the resolution given to shareholders, state the fact of the representations having been made; and

(ii) attach a copy of the representations to the notice and deliver it to the shareholders in the manner stipulated in the Articles of Association.

(cc) if the auditor’s representations are not sent in accordance with the preceding paragraph, the auditor may (in addition to its right to be heard) require that the representations be read out at the shareholders’ general meeting and may lodge further complaints.

(dd) An auditor which is leaving its post shall be entitled to attend:

(i) the shareholders’ general meeting at which its term of office would otherwise have expired;

(ii) any shareholders’ general meeting at which it is proposed to fill the vacancy caused by its removal; and

(iii) any shareholders’ general meeting convened on its resignation;

and to receive all notices of, and other communications relating to, any such meetings, and to speak at any such meeting in relation to matters concerning its role as the former auditor of our company.

— VI-35 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

(iii) Resignation of an auditor

A CPA firm may resign its office by depositing at our company’s legal address a resignation notice which shall become effective on the date of such deposit or on such later date as may be stipulated in such notice. Such notice shall contain the following statements:

(1) a statement to the effect that there are no circumstances connected with its resignation which it considers should be brought to the notice of the shareholders or creditors of our company; or

(2) a statement of any such circumstances.

Where a notice is deposited under the preceding paragraph, our company shall within 14 days send a copy of the notice to every shareholder who is entitled to receive a report on its financial situation at the address registered in the register of shareholders.

Where the auditor’s notice of resignation contains a statement in respect of the above, it may require the board to convene a shareholders’ extraordinary general meeting for the purpose of receiving an explanation of the circumstances connected with its resignation.

(g) Dispute resolution

Our company shall abide by the following principles for dispute resolution:

(1) Whenever any disputes or claims arise between holders of the overseas-listed foreign-invested shares and our company; holders of the overseas-listed foreign- invested shares and our company’s Directors, Supervisors, general manager, deputy general managers or other senior management; or holders of the overseas-listed foreign-invested shares and holders of domestic shares and holders of non-listed foreign-invested shares, in respect of any rights or obligations arising from these Articles of Association or any rights or obligations-conferred or imposed by the Company Law of the PRC and special regulations (including other relevant laws) or any other relevant PRC laws and administrative regulations concerning the affairs of our company, such disputes or claims shall be referred by the relevant parties to arbitration.

Where a dispute or claim of rights referred to in the preceding paragraph is referred to arbitration, the entire claim or dispute must be referred to arbitration, and all persons who have a cause of action based on the same facts giving rise to the dispute or claim or whose participation is necessary for the resolution of such dispute or claim, shall, where such person is the Shareholders, Directors, Supervisors, general manager or other senior management of our company, comply with the arbitration.

Disputes in relation to the definition of shareholders and disputes in relation to the register of shareholders need not be resolved by arbitration.

— VI-36 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

(2) A claimant may elect arbitration at either the China International Economic and Trade Arbitration Commission in accordance with its Rules or the Hong Kong International Arbitration Centre in accordance with its Securities Arbitration Rules. Once a claimant refers a dispute or claim to arbitration, the other party must submit to the arbitral body elected by the claimant.

If a claimant elects arbitration at Hong Kong International Arbitration Centre, any party to the dispute or claim may apply for a hearing to take place in Shenzhen in accordance with the Securities Arbitration Rules of the Hong Kong International Arbitration Centre.

(3) Whenever any disputes or claims arising between holders of the overseas-listed foreign-invested shares and our company, holders of the overseas-listed foreign- invested shares and the Directors, Supervisors, general managers or other senior administrative officers, or between holders of the non-listed foreign-invested shares and holders of domestic shares as well as between holders of non-listed foreign- invested shares, based on laws, administrative regulations and the Articles of Association or any rights or obligations concerning the affairs of our company, such disputes or claims shall be referred by the relevant parties for arbitration at Hong Kong International Arbitration Centre in accordance with the arbitration rules effective from time to time.

(4) If any disputes or claims of rights are settled by way of arbitration in accordance with sub-paragraphs (1), (3) of this paragraph, the laws of the PRC shall apply, save as otherwise provided in the laws and administrative regulations.

(5) The award of an arbitral body shall be final and conclusive and binding on all parties.

(h) Legal status of Non-H Foreign Shares

Set out below is a summary of the legal opinions of SD & Partners, the legal advisers to our company as to PRC law, on the rights attached to Non-H Foreign Shares.

Although the Mandatory Provisions provide for the definitions of “domestic shares”, “foreign shares” and “overseas listed foreign shares” (which definitions have been adopted in the Articles of Association), the rights attached to Non-H Foreign Shares (which are subject to certain restrictions on transfer as referred to in this prospectus and may become H Shares upon obtaining the requisite approvals from, among other bodies, the CSRC and the Stock Exchange) are not expressly provided for under the existing PRC law or regulations. However, the creation by our company and the subsistence of the Non-H Foreign Shares do not contravene any PRC law or regulations.

— VI-37 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

At present, there are no clear applicable PRC law and regulations governing the rights attached to the Non-H Foreign Shares. The PRC legal advisers advise that until new laws or regulations are introduced in this aspect, holders of Non-H Foreign Shares shall be treated to be in the same class as the holders of Domestic Shares (in particular, in respect of the right to attend and vote in the general meetings and class meetings and to receive notice of such meetings in the same manner applicable to holders of Domestic Shares), except that holders of Non-H Foreign Shares shall enjoy the following rights:

(a) to receive dividends declared by our company in foreign currencies;

(b) in the event of the winding up of our company, to remit their respective shares in the remaining assets (if any) of our company out of the PRC in accordance with the applicable foreign exchange control law and regulations in the PRC.

As advised by the PRC legal advisers, the following conditions should be satisfied before the Non-H Foreign Shares could be converted into H Shares:

(a) lapse of one year from the date on which our company was converted from a sino-foreign joint venture into a joint stock limited company and the lapse of one year from the listing date, whichever is the later;

(b) approval being granted by the shareholders at the general meeting of our company and holders of the H Shares and the Domestic Shares (including Non-H Foreign Shares) at the respective class meetings to authorise the conversion of the Non-H Foreign Shares into H Shares in accordance with the Articles of Association;

(c) the approvals from the original approval authority or authorities in the PRC for the establishment of our company being obtained by the holders of Non-H Foreign Shares for the conversion of the Non-H Foreign Shares into H Shares;

(d) the approval from the CSRC being obtained by our company for the conversion of the Non-H Foreign Shares into H Shares;

(e) approval being granted by the Stock Exchange for the listing of and permission to deal in the new H Shares converted from the Non-H Foreign Shares; and

(f) full compliance with relevant PRC laws, rules, regulations and policies governing companies incorporated in the PRC which seek permission to list their shares outside the PRC and with the Articles of Association and any agreement among our shareholders.

— VI-38 — APPENDIX VI SUMMARY OF THE ARTICLES OF ASSOCIATION

When all of the conditions mentioned above and other conditions as may be imposed by the Stock Exchange have been satisfied, Non-H Foreign Shares may be converted into H Shares.

Given that holders of Non-H Foreign Shares are not regarded as members of the public under the GEM listing rules, upon conversion of Non-H Foreign Shares into H Shares in fulfillment of the above conditions, our company will have to apply to the Stock Exchange for a waiver from strict compliance with Rule 25.08(2)(a)(i) of the GEM listing rules, which requires that all the H Shares must be held by the public. There is, however, no assurance that such waiver would be granted.

Each of the Promoters has provided a confirmation that it fully understands the legal position, rights and responsibilities of the holders of the Non-H Foreign Shares.

— VI-39 — APPENDIX VII STATUTORY AND GENERAL INFORMATION

A. FURTHER INFORMATION ABOUT OUR COMPANY

1. Incorporation A1a5

Our company was established in the PRC under the Company Law as a joint stock limited A1a6 company on 31 December, 2004 by the Promoters. Our company has established a place of business in Hong Kong at 16/F, 144-151 Singga Commercial Centre, Connaught Road West, Hong Kong and has been registered as an oversea company in Hong Kong under Part Xl of the Companies Ordinance on 13 September, 2005. Lam Lai Sha, Lisa has been appointed as the authorised representative of our company for the acceptance of service of process in Hong Kong.

As our company was established in the PRC, it is subject to the relevant laws and regulations of the PRC. A summary of the relevant laws and regulations of the PRC is set out in appendix V and a summary of the Articles of Association is set out in appendix VI to this prospectus.

2. Restructuring A1a26(1)(2)

The establishment of our company as a joint stock limited company and the restructuring of our company in preparation for listing of the H shares on GEM involved, among other matters, the following procedures and approvals:

(a) On 6 August, 2004, the Promoters entered into a promoters’ agreement whereby the Promoters agreed to establish our company.

(b) On 14 October, 2004, Ministry of Commerce of the People’s Republic of China issued A1a5 an approval (Shang Zi Pi [2004] 1523) [2004]1523 ) approving the establishment of our company as a joint stock limited company.

(c) On 8 December, 2004, the inaugural meeting of our company was held by the Promoters at which, among other resolutions,

(i) the report on the preparatory work for the establishment of our company were approved; and

(ii) the initial articles of association of our company were adopted.

(d) On 31 December, 2004, the Administration of Industry and Commence of Chongqing issued the business licence of our company, whereupon our company was established as a joint stock limited company.

(e) On 30 December, 2005, the CSRC issued an approval (Zheng Jian Guo He Zi [2005] No. 34, [2005]34 ) authorising our company to issue overseas listed foreign-invested shares for listing on GEM.

— VII-1 — APPENDIX VII STATUTORY AND GENERAL INFORMATION

3. Changes in registered capital

(a) At the time of the establishment of our company as a joint stock limited company on 31 December, 2004, its initial registered capital was Rmb112,064,000, divided into 112,064,000 Shares of par value of Rmb1.00 each, all of which were held and fully paid up or credited as fully paid up as follows:

Approximate No. of percentage of Promoters Shares held shareholding

Changan Co. 43,929,088 39.2% APLL 33,619,200 30% Minsheng Industrial 25,774,720 23% Ming Sung (HK) 7,844,480 7% Changan Sanchan 896,512 0.8%

Total: 112,064,000 100%

(b) Immediately after the Placing, the registered capital of our company will be Rmb162,064,000, made up of 107,064,000 existing Shares (comprising Domestic Shares and Non-H Foreign Shares) and 55,000,000 H Shares, fully paid up or credited as fully paid up, representing approximately 66.06% and 33.94% of the registered capital respectively, all of which are held as follows:

Approximate No. of Shares percentage of Shareholders held shareholding

Changan Co. 39,029,088 24.08% APLL 33,619,200 20.74% Minsheng Industrial 25,774,720 15.90% Ming Sung (HK) 7,844,480 4.84% Changan Sanchan 796,512 0.49% Holders of H Shares 55,000,000 33.94%

Total: 162,064,000 100%

Save as disclosed herein, there has been no alteration in the share capital of our company since its establishment.

— VII-2 — APPENDIX VII STATUTORY AND GENERAL INFORMATION

4. Proceedings at our company’s general meetings

(a) At the general meeting of our company held on 22 February, 2005, the following resolutions, among others, were passed pursuant to which:

(i) the application of the listing of the H Shares on GEM was approved;

(ii) the Board was authorised to deal with all applications and approvals relating to the listing of the H Shares on GEM and to approve and amend all documents in relation thereto;

(iii) the Articles of Association were adopted and the Directors were authorised to amend the Articles of Association in accordance with any comments from the relevant government authorities in the PRC, the Stock Exchange and other relevant parties relating to the listing of the H Shares on GEM;

(iv) in accordance with the Temporary Administration Measures on the Reduction of State-owned Shares for the Raising of Social Security Fund ( ), the conversion of an aggregate 5,000,000 existing Shares into Sale H Shares and the sale thereof by NCSSF under the Placing was approved; and

(v) the issue of H Shares, increase of registered capital and the listing of the H Shares on GEM by the end of the year 2005 were approved.

(b) by resolution of all shareholders of our company dated 6 February, 2005:

(i) the time limit for the resolution as described in paragraph (v) above was extended by one year till the end of the year 2006; and

(ii) the appointment of Dai Baiming as supervisor was approved.

B. SUBSIDIARIES

As at the Latest Practicable Date, our company had the following subsidiary, which was established under the laws of PRC:

Percentage of equity Place and Paid-up interests date of registered attributable to Name establishment capital our company Principal activities

Chongqing PRC Rmb5,000,000 99% Warehousing, logistic Gangcheng 3 November, 2005 planning and advisory services

— VII-3 — APPENDIX VII STATUTORY AND GENERAL INFORMATION

C. FURTHER INFORMATION ABOUT THE BUSINESS

1 Summary of material contracts Co 3rd(17)

The following contracts (not being contracts entered into in the ordinary course of business), except the Underwriting Agreement, are in Chinese and were entered into by our company within the two years preceding the date of this prospectus and are or may be material:

(a) a non-competition undertaking entered into between Changan Co. and our company on 15 January, 2005, together with a supplemental agreement entered into on 31 December, 2005, pursuant to which Changan Co. undertakes not to compete with our company in various areas of business;

(b) a non-competition undertaking entered into between APLL and our company on 15 January, 2005, together with a supplemental agreement entered into on 31 December, 2005, pursuant to which APLL undertakes not to compete with our company in various areas of business;

(c) a non-competition undertaking entered into among Minsheng Industrial, Ming Sung (HK) and our company on 15 January, 2005, together with a supplemental agreement entered into on 31 December, 2005, pursuant to which Minsheng Industrial and Ming Sung (HK) undertake not to compete with our company in various areas of business; and

(d) the Underwriting Agreement dated 16 February, 2005 entered into between, among others, our company, and the Underwriters, details of which are set out in the section headed “Underwriting” of this prospectus.

2 Trademark

As at the Latest Practicable Date, our company has applied for the following trademarks:

Place of Application Trademark Class Application Application Date Number

1. 39 PRC 5 April, 2004 3996142

2. 39 PRC 5 April, 2004 3996143

Class 39 : it includes the provision of transportation and freight forwarding services by rail, maritime and air.

— VII-4 — APPENDIX VII STATUTORY AND GENERAL INFORMATION

D. FURTHER INFORMATION ABOUT DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND STAFF

1. Particulars of Directors’ and Supervisor’ service contracts A1a46(1) A1a51

Each of the Directors (including the non-executive Director and the independent non- executive Directors) and Supervisors has entered into a service contract with our company for a term of three years commencing from the listing date. Each of the Directors and Supervisors was appointed as director and supervisor of our company respectively subject to termination in certain circumstances as stipulated in the relevant service contracts.

The current basic annual salaries of the Directors and Supervisors are as follows:

Directors (Rmb’000)

Yin Jiaxu Nil Huang Zhangyun Nil Lu Xiaozhong Nil Shi Chaochun Nil (note 1) James H McAdam Nil Lu Guoji Nil Zhang Baolin Nil Koay Peng Yen Nil Cao Dongping Nil Wu Xiaohua Nil Lau Man Yee, Vanessa Nil Wang Xu 50 Peng Qifa 50 Chong Teck Sin 50

Supervisors (Rmb’000)

Hua Zhan Biao Nil Tang Yizhong Nil Dai Baiming Nil Ye Guangrong Nil (note 2) Chen Haihong Nil (note 3)

Notes:

1. Mr. Shi Chaochun, by acting as the General Manager of our company, receives a basic annual salary of Rmb200,000.

2. Mr.Ye Guangrong, by acting as the Chairman of the labour union of our company, receives a basic annual salary of Rmb80,000.

3. Ms. Chen Haihong, by acting as the Administration Manager of our company, receives a basic annual salary of Rmb55,000.

— VII-5 — APPENDIX VII STATUTORY AND GENERAL INFORMATION

2. Directors’ and Supervisors’ remuneration A1a33(2)(a)(b) A1a46(2)(3)

(a) Directors

An aggregate of salaries, housing allowances, other allowances and benefits in kind paid by our company to the Directors for each of the two years ended 31 December, 2003 and 2004 and the nine months ended 30 September, 2005 were approximately nil, nil and Rmb101,000 respectively. Further information in respect of the Directors’ remuneration and emoluments is set out in appendix I to this prospectus.

Under the arrangements currently in force, our company estimates that the remuneration (including benefits in kind and excluding discretionary bonus, if any) of the Directors payable for the year ended 31 December, 2005 and the year ending 31 December, 2006 will be approximately Rmb200,000 and Rmb400,000, respectively.

(b) Supervisors

An aggregate of salaries, housing allowances, other allowances and benefits in kind paid by our company to the Supervisors for each of the two years ended 31 December, 2003 and 2004 and the nine months ended 30 September, 2005 were approximately nil, nil and Rmb108,000 respectively. Further information in respect of the Supervisors’ remuneration and emoluments is set out in appendix I to this prospectus.

Under the arrangements currently in force, our company estimates that the remuneration (including benefits in kind and excluding discretionary bonus, if any) of the Supervisors payable for the year ended 31 December, 2005 and the year ending 31 December, 2006 will be approximately Rmb135,000 and Rmb155,000, respectively.

(c) The remuneration provided to the executive Directors are determined on the basis of, A1a46(4) among other things, the relevant executive Director’s experience, responsibility and the time devoted to our company.

— VII-6 — APPENDIX VII STATUTORY AND GENERAL INFORMATION

E. DISCLOSURE OF INTERESTS A1a45(1)(a) (b)(c)

1. Disclosure of interests

Immediately following the completion of the Placing, none of the Directors, Supervisors and general manager of our company has any interests or short positions in the shares, underlying shares and debentures of our company or any associated corporation (within the meaning of Part XV of the SFO) which (i) will have to be notified to our company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short position which they are taken or deemed to have under such provisions of the SFO); or (ii) will be required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) will be required, pursuant to Rules 5.46 to 5.67 of the GEM listing rules relating to securities transactions by directors to be notified to our company and the Stock Exchange.

2. Substantial shareholders A1a45B

So far as the Directors are aware, immediately following the completion of the Placing, the persons (other than a Director, Supervisor or general manager of our company) who will have an interest or short position in the shares or underlying shares of our company which would fall to be disclosed to our company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, who are expected, directly or indirectly, to be interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of our company are as follows:

Approximate percentage Number of Approximate shareholding Existing and percentage in the total Class Shares shareholding registered Capacity in that class capital of our Name Capacity (Long position) of securities company (Note 1)

Changan Co. Beneficial 39,825,600 60.71% 24.57% owner Domestic Shares (Note 2) Mingsheng Industrial Beneficial 25,774,720 39.29% 15.90% owner Domestic Shares APLL Beneficial 33,619,200 81.08% 20.74% owner Non-H Foreign Shares Ming Sung (HK) Beneficial 7,844,480 18.92% 4.84% owner Non-H Foreign Shares

Note 1: Immediately upon completion of the Placing, our company will have 65,600,320 Domestic Shares, 41,463,680 Non-H Foreign Shares and 55,000,000 H shares in issue respectively.

Note 2: Changan Co. directly holds 24.08% of the total issued Shares and through its wholly owned subsidiary, Changan Sanchan, indirectly holds additional 0.49% of our total issued Shares.

— VII-7 — APPENDIX VII STATUTORY AND GENERAL INFORMATION

3. Disclaimers

Save as disclosed in this prospectus:

(a) none of the Directors, Supervisors or any of the parties listed in paragraph E10 of this A1a47(1)(a)(b) Co 3rd(19) appendix is directly or indirectly interested in the promotion of our company, or in any assets which have within the two years immediately preceding the date of this prospectus been acquired or disposed of by or leased to our company, or are proposed to be acquired or disposed of by or leased to our company;

(b) none of the Directors or Supervisors is materially interested in any contract or A1a47(2) arrangement subsisting at the date of this prospectus which is significant in relation to the business of our company;

(i) is interested legally or beneficially in any shares of our company; or

(ii) has any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities of our company;

(d) none of the Directors or Supervisors has entered or proposed to enter into a service A1a46(1) contract with our company (other than contracts expiring or determinable by the employer within one year without payment of compensation other than statutory compensation);

(e) no amount of cash, securities or other benefit have been paid, allotted or given within the two years immediately preceding the date of this prospectus to any Promoter nor is any such amount of cash, securities or other benefit proposed to be paid, allotted or given; and

(f) none of the Directors, Supervisors, their respective associates or any shareholder (which to the knowledge of the Directors owns more than 5% of the registered capital of our company) has any interest in any of our company’s five largest customers or five largest suppliers for the two years ended 31 December, 2003 and 2004.

— VII-8 — APPENDIX VII STATUTORY AND GENERAL INFORMATION

F. SUMMARY OF TERMS OF THE SHARE APPRECIATION RIGHT INCENTIVE SCHEME

The following is a summary of the principal terms of the Share Appreciation Right Incentive Scheme conditionally approved and adopted by our company on 6 June, 2005 and amended on 6 February, 2006:

(a) Grantees

The person eligible to be granted share appreciation rights include:

(i) any Directors, Supervisors (not including independent Directors and independent Supervisors);

(ii) the General Manager, deputy general manager, Financial Controller, secretary of the board, company secretary, heads of departments, branches and subsidiaries; and

(iii) other senior management personnel and important employees who have made significant contribution to our company as nominated by the General Manager and approved by the remuneration committee.

(b) Entitlement of the Grantee

A unit of the share appreciation right will entitle the grantee thereof to request our company to pay the grantee, upon the exercise of such right, a sum equivalent to the difference between the exercise price of such unit of right and the closing price of the H Shares as stated in the Stock Exchange’s daily quotation sheets on the date of the exercise of such unit right.

The exercise price for the share appreciation right granted under of the Share Appreciation Right Incentive Scheme will be a price determined by the remuneration committee and notified to each grantee, which shall be the higher of the following:

(i) the closing price of the H Shares as stated in the Stock Exchange’s daily quotation sheet on the date of grant; and

(ii) the average of the closing price of the H Shares as stated in the Stock Exchange’s daily quotations sheets for the five (5) business days immediately preceding the date of grant.

— VII-9 — APPENDIX VII STATUTORY AND GENERAL INFORMATION

(d) Time of Exercise of the Share Appreciation Right

Share appreciation rights will have an exercise period of five (5) years. A person granted share appreciation rights may not exercise his or her rights in the first year after the date of grant. In each of the second, third, fourth and fifth year after the date of grant, the rights that may be exercised shall not in aggregate exceed 25%, 50%, 75% and 100%, respectively, of the total number of the share appreciation rights granted to him or her in a particular year. The share appreciation rights will lapse by the end of the exercise period of five (5) years.

(e) Expiry of Share Appreciation Right

A share appreciation right shall lapse automatically (to the extent not already exercised) on the earliest of:

(i) the expiry of the exercise period of the share appreciation right;

(ii) the expiry of any of the periods referred to in sub-paragraphs (h) and (i) in this section;

(iii) the date of the commencement of the winding-up of our company (to be determined by the relevant law);

(iv) the date on which the employment of the grantee has been terminated on the grounds that he or she has been guilty of serious misconduct or has been convicted of any criminal offence involving his or her integrity or honesty or (if so determined by the Board) on any other ground on which an employer would be entitled to terminate his or her employment pursuant to any applicable laws or under the grantee’s service contract with our company or the relevant subsidiary of our company. A resolution of the Board to the effect that the employment of a grantee has or has not been terminated on one or more of the grounds specified in this paragraph (iv) shall be conclusive; or

(v) the date on which the grantee has committed any act of bankruptcy or has become insolvent or has made arrangements or composition with his or her creditors.

(f) Maximum Number of Share Appreciation Rights That May Be Granted

The maximum number of share appreciation right that may be granted under the Share Appreciation Right Incentive Scheme shall not exceed 10% of the total number of Shares of our company in issue from time to time, and the share appreciation right granted to any single grantee within any consecutive 12 months shall not exceed 1% of the total number of the Shares of our company in issue from time to time.

— VII-10 — APPENDIX VII STATUTORY AND GENERAL INFORMATION

(g) Rights Are Personal to Grantee

A share appreciation right is personal to the grantee and is not assignable and no grantee shall in any way sell, transfer, charge, mortgage, encumber or create any interest in favour of any third party over or in relation to any share appreciation right or enter into any agreement to do any of the foregoing.

(h) Rights on Cessation of Employment

If the grantee of a share appreciation right leaves the service of our company or the branches and subsidiaries of our company for any reason other than death or the termination of his or her employment on one or more grounds as specified in sub-paragraph (e)(iv) of this section, the grantee may exercise the share appreciation right that has been granted at the date of cessation (to the extent the share appreciation right has not already been exercised) within the period of one month following the date of such cessation, which day shall be the last working day with our company whether salary is paid in lieu of notice or not and are not subject to the limitation stated in sub-paragraph (d) of this section.

(i) Rights on Death

If the grantee of a share appreciation right dies before exercising the share appreciation right in full and none of the certain events which would be a ground as specified in paragraph (e)(iv) of this section for termination of his or her employment exists, the grantee’s personal representative(s) shall be entitled to exercise the share appreciation right (to the extent that the share appreciation right has not already been exercised) within a period of twelve months from the date of death or such longer period as the remuneration committee may determine and are not subject to the limitation stated in sub-paragraph (d) of this section.

(j) Effects of Alterations to Capital

In the event an alteration in the capital structure of our company (which is limited to a capitalization of profits or reserves, rights issue, consolidation, sub-division or reduction of share capital) whilst any share appreciation right remains exercisable, and provided that such alterations (if any) have been certified by the auditors of our company at that time as fair and reasonable; corresponding alterations should be made regarding the subject matter, the exercise price and, or the method of the exercise of the share appreciation rights (so far as unexercised), provided that such alteration shall be made so as to place the grantee in the position as similar as would have been the case had such alteration not been made. However, no alteration shall be made if the alteration in the capital structure of our company is the result of an issue of Shares in the capital of our company as consideration in a transaction.

— VII-11 — APPENDIX VII STATUTORY AND GENERAL INFORMATION

(k) Rights on a Compromise or Arrangement

If, pursuant to the relevant laws, a compromise or arrangement between our company and its members or creditors is proposed for the purpose of or in connection with a scheme for the reconstruction or amalgamation of our company, our company shall give notice to all grantees (or their personal representative(s)) on the same date as it dispatches the notice to each member or creditor of our company summoning the meeting to consider such a compromise or arrangement, and thereupon the grantee (or his or her personal representative(s)) may forthwith and until the expiry of the period commencing with such date and ending at 12:00 noon on the day before the date on which such compromise or arrangement is sanctioned by the court exercise any of his or her share appreciation rights (to the extent not already exercised) either in full or in part. Upon such compromise or arrangement becoming effective, all share appreciation rights shall lapse except insofar as previously exercised under the Share Appreciation Right Incentive Scheme.

(l) Period of Share Appreciation Right Incentive Scheme

The Share Appreciation Right Incentive Scheme shall remain in full force for a period of ten (10) years commencing on the adoption date of the Share Appreciation Right Incentive Scheme unless terminated pursuant to a resolution passed in a general meeting or a meeting of the board, after which time no further share appreciation rights will be granted but the provisions of the Share Appreciation Right Incentive Scheme shall in all other respects remain in full force and effect.

(m) Limit on the Grant and Exercise of Share Appreciation Right

Our company may not grant Share Appreciation Right after a event has occurred or a matter has been the subject of a decision which may have a significant impact on the price of Shares, until such information has been announced in accordance with the requirements of Chapter 16 of the GEM listing rules. Grantees of Share Appreciation Right in possession of the above information may not exercise the Share Appreciation Right before the announcements as mentioned above have been made.

In particular, Share Appreciation Right may not be granted or exercised during the period commencing one month immediately preceding the earlier of:

(1) the date of the board meeting for the approval of our company’s results for any year, half-year or quarter-year period or any other interim period; and

(2) the deadline for our company to publish an announcement of its results for any year, half-year or quarter-year period under the GEM listing rules, and ending on the date of the results announcement. The period during which no option may be granted or exercised will cover any period of delay in the publication of a results announcement.

— VII-12 — APPENDIX VII STATUTORY AND GENERAL INFORMATION

The amount which our company may use to pay the grantees in each financial year for the exercise of their Share Appreciation Right should not exceed 10% of the audited net profit attributable to shareholders of our company in previous financial year.

(n) Alteration to Share Appreciation Right Incentive Scheme

For alterations to the Share Appreciation Right Incentive Scheme, those beneficial to the grantees must be subject to the prior approval in a general meeting, and those regarding the authority of the remuneration committee in relation to the alteration of the Share Appreciation Right Incentive Scheme must be approved in a general meeting. Otherwise, the Share Appreciation Right Incentive Scheme may be altered in any respect by resolution of the remuneration committee. No such alteration shall operate to affect adversely the terms of issue of any share appreciation right granted or agreed to be granted prior to such alteration unless written consent has been obtained from the relevant grantees or potential grantees.

(o) Present Status of the Share Appreciation Right Incentive Scheme

As at the date of this Prospectus, no share appreciation right has been granted or agreed to be granted by our company under the Share Appreciation Right Incentive Scheme.

(p) Conditions

The Share Appreciation Right Incentive Scheme shall take effect subject to the listing of H Shares on the GEM.

G. OTHER INFORMATION

1. Tax indemnity A1a10

Pursuant to an agreement between the shareholders dated 21 February, 2005, our shareholders had agreed that, in respect of the period commencing from the incorporation of our company as a limited company and ending on the date of listing, if there shall occur any changes to the tax preferential status of our company resulting in additional tax liability or expenses to our company, the shareholders shall indemnify our company for such losses, in proportion to their respective shareholding during the relevant period. Our legal advisers as to PRC law has advised that such indemnity is also enforceable by our company against the shareholders.

The Directors have been advised that no material liability for estate duty is likely to fall on our group under PRC law.

— VII-13 — APPENDIX VII STATUTORY AND GENERAL INFORMATION

2. Litigation A1A40

Our company is not engaged in any litigation or arbitration of material importance and, so far as the Directors are aware, no litigation, arbitration or claim of material importance is pending or threatened against our company.

3. Underwriters

The Underwriters will receive underwriting commission pursuant to the Underwriting Agreement.

4. Sponsor

The Sponsor has made an application on behalf of our company to the GEM Listing Committee for the listing of, and the permission to deal in, the H Shares in issue and to be issued or sold as mentioned in this prospectus.

The Sponsor will receive normal professional fees for the advisory services to be provided to our company as compliance adviser from the listing date until 31 December, 2008.

5. No material adverse change

The Directors confirm that there has been no material adverse change in the financial or trading position of our company since 30 September, 2005.

6. Preliminary expenses A1a20(1)(2)

The preliminary expenses of our company were approximately Rmb197,000 payable by our Co 3rd(15) company.

7. Promoters A1a8(1)(2)

The Promoters of our company are Changan Co., APLL, Minsheng Group, Ming Sung (HK), Changan Sanchan. Save as disclosed in this prospectus, within the two years immediately preceding the date of this prospectus, no cash, securities or other benefit has been paid, allotted or given or is proposed to be paid, allotted or given to the Promoters in connection with the Placing or the related transactions described in this prospectus.

— VII-14 — APPENDIX VII STATUTORY AND GENERAL INFORMATION

8. Particulars of the Vendors A1a15(3)(j)

The name, address and description of the Vendors which offered the Sale H Shares (which Co 3rd(29) would have been converted from Domestic Shares into H Shares prior to the Placing) for sale under the Placing are as follows:

Number of H Shares offered for sale under Name Address Description the Placing

Changan Co. 260 Jianxindong Road, Limited liability company 4,900,000 (as registered Jiangbei District, established in the PRC holder) Chongqing, PRC

Changan Sanchan 260 Jianxindong Road Limited liability company 100,000 (as registered Jiangbei District established in the PRC holder) Chongqing, PRC

NCSSF No. A2, Yue Tan Street, An entity set up by the State 5,000,000 (as beneficial Xi Cheng District, Council, its principal function owner in respect Beijing, PRC including asset management of of the above the social security fund shareholdings) of the PRC

9. Particulars of the property proposed to be acquired by us in connection with the listing of A1a49(1) (a)(b)(c) our H Shares and relevant details of the vendor of such property as required to be disclosed pursuant to paragraph 12, Third Schedule to the Companies Ordinance are as follows:

Particulars of transactions relating to the property completed within the 2 preceding years in which the vendor or any person who is/was at the time of the transaction, our promoter/director/ proposed director had any Name of vendor Address of vendor Amount payable direct or indirect interest

Nanjing Textile Industrial 115 Hongwu Road, Rmb11,340,000 Nil A1a50 (Group) Corp. Nanjing, the People’s ( ) Republic of China

— VII-15 — APPENDIX VII STATUTORY AND GENERAL INFORMATION

10. Qualifications of experts A1a9(1)

Name Qualifications Co S342B

Anglo Chinese Licensed corporation to conduct types 1, 4, 6 and 9 regulated activities under the SFO

PricewaterhouseCoopers Certified Public Accountants

SD & Partners PRC lawyers

Vigers Appraisal & Consulting Limited Property valuer

11. Consents of experts A1a9(2)

Each of Anglo Chinese, PricewaterhouseCoopers, SD & Partners and Vigers Appraisal & Consulting Limited has given and has not withdrawn its written consent to the issue of this prospectus with inclusion of its report and, or letter and, or valuation certificates and, or the references to its name in the form and context in which they are respectively included.

12. Binding effect

This document shall have the effect, if an application is made in pursuance hereof, of rendering all persons concerned bound by all the provisions (other than the penal provisions) of sections 44A and 44B of the Companies Ordinance so far as applicable.

13. Miscellaneous

Save as disclosed in this prospectus:

(a) within the two years immediately preceding the date of this prospectus, no share or A1a26(1)(2) loan capital of our company has been issued or agreed to be issued fully or partly paid either for cash or a consideration other than cash;

(b) no share or loan capital of our company is under option or is agreed conditionally or unconditionally to be put under option;

(c) within the two years immediately preceding the date of this prospectus, no A1a13 commissions, discounts, brokerages or other special terms have been granted in connection with the issue or sale of any capital of our company;

(d) within the two years immediately preceding the date of this prospectus, no commission (but not including commission to sub-underwriters) has been paid or payable to any person for subscribing or agreeing to subscribe, or procuring or agreeing to procure subscription, for any shares or debenture of our company;

— VII-16 — APPENDIX VII STATUTORY AND GENERAL INFORMATION

(e) our company has not issued or agreed to issue any founders, management or deferred shares;

(f) none of the equity and debt securities of our company is listed or dealt in any other A1a24 stock exchange nor is any listing or permission to deal being or proposed to be sought;

(g) our company has no outstanding convertible debt securities; A1a23(2)

(h) there are no procedures for the exercise of any right of pre-emption or transferability of subscription rights;

(i) there are no arrangements under which future dividends are waived or agreed to be waived; and

(j) there have been no interruptions in our business which may have or have had a significant effect on our financial position in the last 12 months.

— VII-17 — APPENDIX VIII DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES IN HONG KONG AND AVAILABLE FOR INSPECTION

DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES

The documents attached to the copy of this prospectus delivered to the Registrar of Co S342C Companies in Hong Kong for registration were the written consents referred to in the paragraph headed “Consents of experts” in appendix VII to this prospectus, a statement of the particulars of the Vendor and copies of the material contracts referred to in the paragraph headed “Material Contracts” in appendix VII to this prospectus and the statement of adjustments received from PricewaterhouseCoopers in arriving at the figures set out in the accountants’ report set out in appendix I to this prospectus.

DOCUMENTS AVAILABLE FOR INSPECTION A1a52(1) (2)(3)(4)(5)

Copy of each of the following documents will be available for inspection at the office of Herbert Smith at 23rd Floor, Gloucester Tower, 11 Pedder Street, Central, Hong Kong during normal business hours up to and including the date which is 14 days from the date of this prospectus:

(a) the Articles of Association;

(b) the accountants’ report received from PricewaterhouseCoopers, the text of which is set out in appendix I to this prospectus and the statement of adjustments;

(c) a letter from PricewaterhouseCoopers relating to the unaudited pro forma financial information, the text of which is set out in appendix II to this prospectus;

(d) the audited financial statements as have been prepared in accordance with PRC GAAP for our group for each of the two years ended 31 December, 2004;

(e) the letters relating to profit estimate, the texts of which are set out in appendix III to this prospectus;

(f) the letter, summary of valuation and valuation certificate relating to the property interests of our company prepared by Vigers Appraisal & Consulting Limited, the texts of which are set out in appendix IV to this prospectus;

(g) the PRC legal opinion dated 16 February, 2006 issued by SD & Partners, our legal advisers company as to PRC laws;

(h) copies of the material contracts referred to in the paragraph headed “Summary of material contracts” in appendix VII to this prospectus;

— VIII-1 — APPENDIX VIII DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES IN HONG KONG AND AVAILABLE FOR INSPECTION

(i) the service agreements referred to in the paragraph headed “Particulars of Directors’ and Supervisors’ service contracts” in appendix VII to this prospectus;

(j) the written consents referred to in the paragraph headed “Consents of experts” in appendix VII to this prospectus; and

(k) all statutes and regulations which are referred to in the paragraph headed “Summary of Relevant PRC and Hong Kong Laws and Regulations” in appendix V to this prospectus.

— VIII-2 —