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2005... 3... 4... 6... 9... 10... 14 2

2005 1 2 3 4 3

2005 1 Shanghai Zhenhua Port Machinery Co.,Ltd. 2 A A A B B B 3 http://www.zpmc.com zpmc@public.sta.net.cn 4 5 E-mailzpmc@public.sta.net.cn E-mailzpmc@public.sta.net.cn 6 http://www.sse.com.cn 7 1992 2 14 3470 023817 310042607206953 202 11 202 11 4

2005 1 : : 9,651,158,313 8,088,618,287 9,037,357,543 19.32 8,307,232,610 6,340,391,198 7,488,372,918 31.02 13,139,556,531 10,828,538,152 11,955,452,259 21.34 3,933,938,070 3,487,064,467 3,465,996,854 12.82 2.55 3.39 3.37-24.78 2.55 3.39 3.37-24.78 16 568,174,218 218,060,663 215,125,867 160.56 565,867,384 220,209,546 217,274,750 156.97 0.3687 0.2388 0.2356 54.40 % 14.44 9.67 9.55 4.77-1,184,476,905-588,266,531-588,266,531 101.35 2004 102728 154092 154092 91300, 102728 2 : : 3,848,387-1,712,837 171,283.7 2,306,833.7 3 9 : : % 18.39 19.29 0.47 0.47 15.05 15.79 0.38 0.38 14.44 15.15 0.37 0.37 14.38 15.09 0.37 0.37 5

2005 : 1 517,000,000 258,500,000 775,500,000 321,112,000 160,556,000 481,668,000 195,888,000 97,944,000 293,832,000 0 0 0 2 0 0 0 3 0 0 0 4 0 0 0 517,000,000 258,500,000 775,500,000 1 290,280,000 145,140,000 435,420,000 2 220,000,000 110,000,000 330,000,000 3 0 0 0 4 0 0 0 510,280,000 255,140,000 765,420,000 1,027,280,000 513,640,000 1,540,920,000 2004 2004 2004 1,027,280,000 10 5 513,640,000 1 513,640,000 2004 (2005) 128 1 47,060 2 : ( ) (%) ( ) 0 321,112,000 31.26 0 6

2005 ZHEN HUA ENGINEERING COMPANY LIMITED 0 192,225,000 18.71 0 TOYO SECURITIES ASIA LTD. A/C CLIENT -1,999,644 16,504,069 1.61 432,792 12,218,586 1.19 3,899,900 10,999,900 1.07 HKSBCSB S/A-BANQUE INT.A LUXEMBOURG S/A HSBC GLOBAL INV. FUNDS CHINESE EQUITY 0 10,536,156 1.03 NIKKOCITI TRUST AND BANKING CORPORATION S/A RE: JF CHINA 500,000 9,705,000 0.94 MOTHER FUND (716000) HSBC CHINA MOMENTUM FUND 5,532,214 9,220,424 0.90 7,065,812 8,200,234 0.80 200,000 8,042,242 0.78 : (1) ZHEN HUA ENGINEERING COMPANY LIMITED ( ) ( ) (2)2005 5 18 2004 04 2005 7 14 102728 154092 2005 6 30 102728 (3) A 34168 B 12889 3 3 A BH TOYO SECURITIES ASIA LTD. A/C CLIENT 16,504,069 B 12,218,586 A 10,999,900 A HKSBCSB S/A-BANQUE INT.A LUXEMBOURG S/A HSBC GLOBAL INV. FUNDS CHINESE EQUITY 10,536,156 B NIKKOCITI TRUST AND BANKING CORPORATION S/A RE: JF CHINA MOTHER FUND (716000) 9,705,000 B HSBC CHINA MOMENTUM FUND 9,220,424 B 8,200,234 A 8,042,242 A SCBHK A/C BONY S/A MATTHEWS INTL FUNDS - MATTHEWS DRAGON CENTURY CHINA FUND 7,896,382 B 50 7,291,643 A 7

2005 ( ) ( ) 4 8

2005 2005 1 27,, 2005 1 29 9

2005 : : 2005 6 30 2004 12 31 13,139,556,531 10,828,538,152 2,311,018,379 21.34 1,241,864,462 392,678,271 849,186,191 216.26 452,244,653 54,014,222 398,230,431 737.27 2005 6 30 2004 6 30 723,536,578 378,195,679 345,340,899 91.31 568,174,218 218,060,663 350,113,555 160.56 115,660,031 60,802,800 54,857,231 90.22 6,349,853 68,964,516-62,614,369-90.79-222,580,435 191,690,635-414,271,070-216.11 (1) (2) (3) (4) (5) (6) 1 (1) 580040.46 86% 14% 59349.95 142.04 56817.42 160.56 (2) 10% (10%) 10

2005 : : (%) (%) 1.56 5,440,726,984 4,736,034,408 12.95 73.41 70.35 0.85 359,677,603 337,769,676 6.09 17.33 18.40 -- (3) : : () 1,631,854,635 77.72 1,515,954,733 73.19 952,447,471 38.98 807,626,717 44.18 488,906,016 65.00 278,846,777 156.46 124,768,238 (4) 131.03 (5) : : 5,000,000 92,002,050 90,960 5,000,000 69,093,230 37,085 5,000,000 19,753,960 94,558 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 10,000 1,162,206,328-146,693 11

2005 ZPMC(M)SDN.BHD 100,000 12 120,000,000 673,617,164 337,322, 100,000,000 400,292,760 259,844 2 1. 2 3 1 2004 96,690 85,058 2 : : 19,474 21,163 19,069 14,067 19,975 18,280 4 2,869 2,585 19,980 20,360 2,980 2,966 2,980 2,994 2 3000 2,960 2,643

2005 6,403 6,403 96,690 85,058 35,000 / / 3 13

2005 2005 5 18 2004 2004 2004 456,907,889 458,019,435 427,425,415 428,536,961 2004 458,019,435 10 45,801,943 10 45,801,943 45 206,108,745 159,198,258 2,768,309 161,963,567 2005 2003 2004 2004 178,817,658 2004 2004 12 31 102,728 10 1.20 ( ) 123,273,600 55,544,058 10 5 2004 2005 6 28 2005 7 14 1 () 68,529,420 2 14

2005 () 1,310,281 12005 1-3 68,529,420 22005 1-3 1,310,281 3 2005 1 27 2005 1 29 2005 3 25 89,051,700 55% 2005 3 25 2005 1-3 3 : : 0 4,174,487 / / 0 4,174,487 55 2005 3 25 4 1 2005 3 2002 4128.6 13,129,300 2 897,272,000 455,000,000 1 15

2005 2 3 4 5 6 5% 5% 700,000 1)2004 A 11428 A 3418.6619 2004 12 31 1339.23 6670.1081 2005 1 31 3 31 2005 1 26 3 25 2) 2005 3 16 2005 7 15 3) 2005 1 29 4) 2005 5 12 2005 5 26 5) - - 2005 7 11 2005 1 1-2005 16

2005 16,854,091 2004 10,357,365 2004 8,120,907 2004 1,624,181 2005 4,213,522 2004 6 30 6 2,934,796 2005 7 13 - WWW.ZPMC.COM (WWW.SSE.COM.CN) 6) B B 2005 2005 7 13 8 16 7) 2005 7 13 20051 C3 2005-01-26 A A20 (WWW.SSE.COM.CN) 20052 C8 2005-01-28 C5 600320 900947 20053 26 2005-01-29 A25 20054 C3 2005-03-16 B16 20055 C39 2005-03-25 A A7 4344 2004 2005 2005-04-09 B5 20056 43 2005-04-09 B5 20057 43 2005-04-09 B5 20058 C11 2005-05-10 C7 20059 C7 2005-05-19 A27 200510 C11 2005-05-26 A14 200511 C11 2005-05-26 A14 200512 A27 2005-06-28 B4 17

2005 2005 8 30 18

( ) 20050630 (, ) 2005 06 30 20041231 20050630 20041231 (1) 1,302,172,284 1,527,021,328 1,073,833,211 1,466,876,565 4,000,000 3,000,000 4,000,000 3,000,000 (2), (1) 2,072,493,623 2,142,606,848 2,132,318,963 2,193,310,483 (3), (2) 67,377,273 49,872,258 235,200,868 127,566,389 (4) 1,241,864,462 392,678,271 1,087,180,322 392,336,420 (5) 1,014,231,944 857,869,951 1,006,298,399 857,759,534 (6) 3,868,105,406 3,115,569,631 3,738,297,275 3,054,021,123 11,570,789-2,695,000-7) ( 69,342,532-69,342,532-9,651,158,313 8,088,618,287 9,349,166,570 8,094,870,514 (8), (3) 31,061,165 82,620,337 240,319,375 95,200,824 19,665,579 - - - 4,004,675,074 3,245,485,411 3,321,786,209 3,220,759,752 (1,049,248,822) (707,337,786) (810,097,838) (699,506,059) (9) 2,955,426,252 2,538,147,625 2,511,688,371 2,521,253,693 (10) 452,244,653 54,014,222 317,180,714 54,014,222 3,407,670,905 2,592,161,847 2,828,869,085 2,575,267,915 (11) 33,785,773 35,007,234 12,967,922 13,713,077 1,745,755 - - - 35,531,528 35,007,234 12,967,922 13,713,077 (12) 14,134,620 30,130,447 14,134,620 30,130,447 13,139,556,531 10,828,538,152 12,445,457,572 10,809,182,777-2 -

( ) 2005630 () (, ) 20050630 20041231 20050630 20041231 (13) 3,889,448,550 2,996,775,000 3,866,274,350 2,996,775,000 (14) 129,690,750-129,690,750 - (15) 1,168,760,000-1,168,760,000 - (16) 1,002,301,726 576,575,581 981,496,053 564,275,370 (16) 379,589,893 232,444,268 129,483,802 231,385,537 (6) 435,695,420 971,029,394 435,695,420 971,029,394-319,059 - - 10,510,308 7,731,737 5,927,806 4,808,822 (17) 123,273,600-123,273,600 - (18) 6,507,809 17,820,251 3,779,159 17,281,733 (16) 361,461,941 367,154,803 313,134,117 357,239,361 (19) 172,042,613 179,073,290 169,931,780 184,229,812 (21) 627,950,000 905,817,300 627,950,000 905,817,300 (20) - 85,650,515-85,650,515 8,307,232,610 6,340,391,198 7,955,396,837 6,318,492,844 22) ( 729,622,250 999,637,000 548,622,250 999,637,000 9,036,854,860 7,340,028,198 8,504,019,087 7,318,129,844 168,763,601 1,445,487 - - (23) 1,540,920,000 1,027,280,000 1,540,920,000 1,027,280,000 (24) 1,188,305,820 1,699,972,835 1,188,305,820 1,699,972,835 (25) 580,993,974 580,993,974 580,993,974 580,993,974 144,307,653 144,307,653 144,307,653 144,307,653 (26) 623,718,276 178,817,658 631,218,691 182,806,124 3,933,938,070 3,487,064,467 3,941,438,485 3,491,052,933 13,139,556,531 10,828,538,152 12,445,457,572 10,809,182,777-3 -

( ) 2005630 6 (, ) 20051-6 20041-6 20051-6 20041-6 ( ) ( ) (27), (4) 5,800,404,587 3,444,024,534 5,798,204,587 3,444,024,534 27), ( (5) (5,073,804,084) (3,065,486,456) (5,094,638,035) (3,078,620,958) (3,063,925) (342,399) (19,506) (263,249) 723,536,578 378,195,679 703,547,046 365,140,327 1,489,513 5,588,109 743,217 5,588,108 (10,771,268) (7,315,310) (10,771,268) (7,315,310) (115,660,031) (60,802,800) (94,089,379) (48,017,308) - (28) (6,349,853) (68,964,516) (3,284,849) (67,873,974) 592,244,939 246,701,162 596,144,767 247,521,843 (29), ( 6) 2,967,406 889,251 3,320,193 1,390,124 3,000,494 702,644 1,468,228 295,736 (4,713,331) (3,090,292) (4,556,509) (2,885,520) 593,499,508 245,202,765 596,376,679 246,322,183 (30) (25,005,002) (27,134,816) (24,690,512) (27,018,551) (320,288) (7,286) - - 568,174,218 218,060,663 571,686,167 219,303,632 1. - - - - 2. - - - - 3. - - 3,260,885 3,260,885 4. ( ) - - - - 5. - - - - 6. - - - - - 4 -

( ) 2005630 6 (, ) 20051-6 20041-6 20051-6 20041-6 ( ) ( ) 568,174,218 218,060,663 571,686,167 219,303,632 178,817,658 287,025,674 182,806,124 289,902,594 746,991,876 505,086,337 754,492,291 509,206,226 - - - - - - - - - - - - 746,991,876 505,086,337 754,492,291 509,206,226 - (182,600,000) - (182,600,000) (123,273,600) (91,300,000) (123,273,600) (91,300,000) 623,718,276 231,186,337 631,218,691 235,306,226-5 -

( ) 2005 6 30 6 (, ) 5,291,357,743 5,184,272,022 339,585,163 339,585,163 132,465,186 97,159,200 5,763,408,092 5,621,016,385 (6,287,733,161) (6,383,399,476) (224,545,300) (139,520,376) (52,691,149) (42,952,744) (382,915,387) (237,720,412) (6,947,884,997) (6,803,593,008) (1,184,476,905) (1,182,576,623) 226,323 226,323 292,105 292,105 8,794,139 7,984,522 9,312,567 8,502,950 - (140,051,700) (429,450,715) (403,772,038) (429,450,715) (543,823,738) (420,138,148) (535,320,788) 142,656,677-142,656,677-2,639,415,000 2,639,415,000 1,295,610,750 1,295,610,750 4,077,682,427 3,935,025,750 (2,582,797,700) (2,498,797,700) (112,850,109) (109,105,384) (2,695,647,809) (2,607,903,084) 1,382,034,618 1,327,122,666 - - (222,580,435) (390,774,745) - 6 -

( ) 2005 6 30 6 () (, ) 1. 568,174,218 571,686,167 320,288-13,094,438 13,094,438 129,751,601 114,284,447 1,221,461 745,155 (332,191) (7,175,291) 357,164 357,164 103,146,145 100,211,037 (2,967,406) (3,320,193) 15,995,827 15,995,827 (1,420,185,032) (1,365,884,754) (870,022,282) (829,883,064) 273,381,619 207,312,444 3,587,245 - (1,184,476,905) (1,182,576,623) 2. - - 3. 1,294,948,466 1,066,609,393 (1,517,528,901) (1,457,384,138) (222,580,435) (390,774,745) - 7 -

( ) 20050630 01 1 20041231 2005630 54,895,857 54,895,857 15,358,675 15,358,675 0 0 70,254,532 70,254,532 43,159,432 43,159,432 15,358,675 15,358,675 - - 58,518,107 58,518,107 11,736,425 11,736,425 - - - - 11,736,425 11,736,425 - - - - - - - - - - - - - - - - - - - - - - - - 19,681,012 19,681,012 1,584,150 1,584,150 (3,848,387) (3,848,387) 17,416,775 17,416,775 3,848,387 3,848,387 - - (3,848,387) (3,848,387) - - 15,832,625 15,832,625 1,584,150 1,584,150 - - 17,416,775 17,416,775 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

( ) 2005 6 30 6

( ) 2005 6 30 6 1 2-3 4 5 6-7 8-66

200021 202 11 (21) 6123 8888 (21) 6123 8800 (2005)1730 ( ) ( ) ( ) ( )2005 6 30 2005 6 30 6 2005 6 30 2005 6 30 6 2005 8 30

( ) 2005 6 30 6 ( ) ( ) ( ) ( )1997 9 8 ( ) (1) (2) 1 1 12 31 (3) (4) (5) - 8 -

( ) 2005 6 30 6 ( ) () (6) (7) (1) (2) - 9 -

( ) 2005 6 30 6 ( ) () (8) (9) (10) - 10 -

( ) 2005 6 30 6 ( ) () (10) () 0% - 30% 0% - 100% 50% - 100% 100% (11) - 11 -

( ) 2005 6 30 6 ( ) () (12) (1) (2) - 12 -

( ) 2005 6 30 6 ( ) () (13) 20%20% 20% 20% 20%20% 10 (14) 2001 1 1-13 -

( ) 2005 6 30 6 ( ) () (14) () - 20 10% 4.5% - 50 60% 2% 10 10% 9% 5 10% 18% 5 10% 18% 5 10% 18% / - 14 -

( ) 2005 6 30 6 ( ) () (15) (16) 30 11 5 2001 1 1 2001 1 1-15 -

( ) 2005 6 30 6 ( ) () (17) (18) / / (19) (20) ( (12)) (21) - 16 -

( ) 2005 6 30 6 ( ) () (22) (23) (1995)11 2005 6 30 50 10% 10% - 17 -

( ) 2005 6 30 6 ( ) - - 2005 7 11 2005 1 1-2005 16,854,091 2004 10,357,365 2004 8,120,907 2004 1,624,181 2005 4,213,522 2004 6 30 6 2,934,796 (i) 17% 17% 17% (ii) 3% 3% - 18 -

( ) 2005 6 30 6 ( ) () (iii) (1) 15% 70% 10% 2005 70% 10% (2) (1991)166 (97)0134 15% (3) 33% (4) 33% (5) ( ) 17.5% (6) (1991)166 15% (7) (1991)166 15% - 19 -

( ) 2005 6 30 6 ( ) 5,000,000 4,500,000 90% - 5,500,000 4,950,000 90% - 5,000,000 3,500,000 70% - (3) ( ) 10,000-99.99% - 120,000,000 66,000,000 55% - (4) 100,000,000 51,000,000 51% - (5) 1,000,000 900,000 90% 9% (1) 1,000,000 900,000 90% 5.5% (1) 1,000,000 900,000 90% 5.5% (1) ZPMC(M)SDN.BHD. 100,000 2 100% - (1) 500,000 500,000-54% (2) - 20 -

( ) 2005 6 30 6 ( ) () (1) 2005 6 30 ZPMC (M) SDN. BHD. (2) 2005 6 30 10% 10% (3) 2005 1 1 (i) 2005 1 1 163,302 (ii) 2005 1 1 2005 6 30 790,028 94,558 94,558 (4) 2005 1 27 2005 3 25 89,051,700 55% 2005 3 25-21 -

( ) 2005 6 30 6 ( ) () (i) 2005 3 25 209,917,519 650,000 546,896,744 2,221,870 759,686,133 239,666,727 265,000,000 504,666,727 255,019,406 (ii) 89,051,700 2005 3 25 255,019,406 (114,758,733) 140,260,673 (61,928,286) 78,332,387 10,719,313-22 -

( ) 2005 6 30 6 ( ) () (iii) 89,051,700 2005 3 25 (182,545,075) (93,493,375) (iv) 2005 3 25 2005 6 30 4,352,239 584,470 337,322 (5) 2005 1 27 51,000,000 ( ) 2005 1 31 51% - 23 -

( ) 2005 6 30 6 ( ) 1 2005 06 30 2004 12 31 138,535 147,323 1,278,219,092 1,514,424,328 23,814,657 12,449,677 1,302,172,284 1,527,021,328 2005 6 30 30,212,989 8.2765 250,057,803 11,256,185 4.9093 55,259,989 2,277,843 14.9544 34,063,775 3,147,226 9.9610 31,349,518 531,352 6.7393 3,580,941 1,808,517 1.0649 1,925,890 380,743 0.0751 28,612 707 5.7298 4,051 89 6.3113 562 376,271,141 2005 6 30 2004 12 31 1,302,172,284 1,527,021,328 (7,223,818) (9,492,427) 1,294,948,466 1,517,528,901-24 -

( ) 2005 6 30 6 ( ) () 2 2005 6 30 2004 12 31 2,131,011,730 2,185,766,280 (58,518,107) (43,159,432) 2,072,493,623 2,142,606,848 (a) 2005 6 30 2004 12 31 % % 2,073,514,684 98 (2,849,958) 2,124,908,929 98-31,857,247 1 (30,028,350) 30,028,350 1 (14,924,286) 21,987,034 1 (21,987,034) 27,176,236 1 (24,582,381) 3,652,765 - (3,652,765) 3,652,765 - (3,652,765) 2,131,011,730 100 (58,518,107) 2,185,766,280 100 (43,159,432) - 25 -

( ) 2005 6 30 6 ( ) () 2 () (a) () (1) APPA 3,652,765 (2) 19,860,372 PECEM 2,126,662 (3) 29,498,654 14,924,286 14,574,368 529,696 (4) 32,285,962 2,849,958 (b) (c) 5% (5%) 424,455,429 20% - 26 -

( ) 2005 6 30 6 ( ) () 3 2005 6 30 2004 12 31 79,113,698 61,608,683 (11,736,425) (11,736,425) 67,377,273 49,872,258 (a) 2005 6 30 2004 12 31 % % 48,579,463 62-46,831,012 76-5,027,487 6-2,155,062 3-25,300,850 32 (11,736,425) 11,977,213 20 (11,736,425) 205,898 0-645,396 1-79,113,698 100 (11,736,425) 61,608,683 100 (11,736,425) 11,736,425 2004 13,129,300 (b) (c) 5%(5%) 62,850,151 79% - 27 -

( ) 2005 6 30 6 ( ) () 4 2005 6 30 2004 12 31 1,241,864,462 392,678,271 (a) (b) 5%(5%) 5 2005 6 30 2004 12 31 1,031,648,719 873,702,576 : (17,416,775) (15,832,625) 1,014,231,944 857,869,951 2005 2005 11 630 15,832,625 1,584,150-17,416,755-28 -

( ) 2005 6 30 6 ( ) () 6 / - 2005 6 30 2004 12 31 7,599,577,033 5,006,577,692 437,361,009 430,985,770 (4,168,832,636) (2,321,993,831) 3,868,105,406 3,115,569,631-2005 6 30 2004 12 31 991,383,021 1,673,901,759 (66,081,833) (24,098,438) (489,605,768) (678,773,927) 435,695,420 (971,029,394) 2005 6 30 ( ) 17,099,315,336 2005 6 30 23,919,003-29 -

( ) 2005 6 30 6 ( ) () 7 2005 6 30 2004 12 31 ( 28) (69,342,532) - 2005 6 30 2005.6.30 10,000,000 (EUR/USD) 1.2205 1.2848 2006 1 03 15,000,000 (EUR/USD) 1.2225 1.2853 2006 2 03 50,000,000 (USD/RMB) 8.0746 8.0564 2006 2 28 50,000,000 (USD/RMB) 8.0476 8.0346 2006 3 28 200,000,000 (USD/RMB) 8.0189 8.0107 2006 4 27 822,150,000 (RMB/USD) 8.2735 8.2215 2005 7 12 397,325,000 (RMB/USD) 8.0065 7.9465 2006 2 28 396,075,000 (RMB/USD) 7.9765 7.9215 2006 3 28 1,573,300,000 (RMB/USD) 7.9265 7.8665 2006 4 27 15,000,000 (EUR/USD) 1.2164 1.2816 2005 10 27 10,000,000 (EUR/USD) 1.2172 1.2818 2005 11 15 20,000,000 (EUR/USD) 1.2139 1.3486 2005 12 09-30 -

( ) 2005 6 30 6 ( ) () 8 2005 2005 11 630 (1) 6,566,375 700,000 - (3,791,278) - 3,475,097 (2) 68,133,473-4,062,800 (71,768,441) (427,832) - (3) 7,920,489 - - - - 7,920,489 (4) - 20,559,464 - - (893,885) 19,665,579 82,620,337 21,259,464 4,062,800 (75,559,719) (1,321,717) 31,061,165-31 -

( ) 2005 6 30 6 ( ) () 8 () (1) 2005 () 2005 () 11 ()630 2001-2011 70% 3,500,000 (3,500,000) 3,791,278 (3,791,278) - - 2001-2021 100% 1,000,000-1,000,000 - - 1,000,000 2001-2021 100% 1,000,000-900,000 100,000-1,000,000 2001-2021 100% 1,000,000-900,000 100,000-1,000,000 ZPMC (M) SDN. BHD. 2002-100% 4 (24,907) (24,903) - - (24,903) 2000-2030 100% 500,000 - - 500,000-500,000 7,000,004 (3,524,907) 6,566,375 (3,091,278) - 3,475,097 (23) - 32 -

( ) 2005 6 30 6 ( ) () 8 () (2) 2005 2005 () 11 630 1996-2011 40% 67,040,000 (67,040,000) 68,133,473 4,062,800 (427,832) (71,768,441) - 2005 3 25 2000 17,113,263 2001-2010 10,267,983 (427,832) (7,273,112) 9,840,151-33 -

( ) 2005 6 30 6 ( ) () 8 () (3) 2001-6,120,489 2.13% ( ) 2002-2017 300,000 10% ( ) 2002-2007 500,000 10% ( ) 2002-2012 1,000,000 10% 7,920,489-34 -

( ) 2005 6 30 6 ( ) () 8 () (4) 2000 2005 17,113,263 2001 2010 9,840,151 (427,832) (7,700,944) 9,412,319 10,719,313 2005 2011 10,719,313 (466,053) (466,053) 10,253,260 20,559,464 (893,885) (8,166,997) 19,665,579-35 -

( ) 2005 6 30 6 ( ) () 9 2004 12 31 1,860,514,995 1,012,359,625 66,305,949 287,510,959 18,793,883 3,245,485,411 1,637,810 4,336,196 66,198 652,119,352 3,650 658,163,206-6,876,016 - - - 6,876,016 147,000 55,332,108 3,818,219 38,856,169 338,882 98,492,378 - (2,578,717) (1,186,280) (276,820) (300,120) (4,341,937) 2005 6 30 1,862,299,805 1,076,325,228 69,004,086 978,209,660 18,836,295 4,004,675,074 2004 12 31 231,667,117 296,049,681 35,445,950 137,134,803 7,040,235 707,337,786 701,277 2,995,984 39,935 212,113,210 1,697 215,852,103 42,668,629 44,231,804 4,135,333 37,513,993 1,201,842 129,751,601 - (2,109,313) (1,066,067) (249,138) (268,150) (3,692,668) 2005 6 30 275,037,023 341,168,156 38,555,151 386,512,868 7,975,624 1,049,248,822 2005 6 30 1,587,262,782 735,157,072 30,448,935 591,696,792 10,860,671 2,955,426,252 2004 12 31 1,628,847,878 716,309,944 30,859,999 150,376,156 11,753,648 2,538,147,625-36 -

( ) 2005 6 30 6 ( ) () 10 2004 2005 12 31 630 450,000,000 53,879,222-117,275,880 (6,447,016) 164,708,086 90% 11 136,400,000-106,109,315 28,954,624-135,063,939 99% 176,000,000 - - 70,544,690-70,544,690 40% 450,000,000 - - 28,132,586 (429,000) 27,703,586 95% 5 14,800,000 - - 13,390,656-13,390,656 90% 15,700,000 135,000-8,224,907-8,359,907 99% 19,000,000 - - 7,966,887-7,966,887 99% 850,000,000 - - 7,561,875-7,561,875 99% 11 7,000,000 - - 6,080,161-6,080,161 90% 17,000,000 - - 3,910,593-3,910,593 98% 6 7 17,000,000 - - 5,060,502-5,060,502 30% 7,000,000 - - 1,063,784-1,063,784 92% 3,500,000 - - 746,501-746,501 95% 10 3,400,000 - - 30,355-30,355 99% 9 630,500 - - 27,820-27,820 4% 4 5 5,800,000 - - 24,691-24,691 99% 4 13,774,200 - - 620-620 99% 54,014,222 106,109,315 298,997,132 (6,876,016) 452,244,653 - - 392,352-392,352 5.546%(2004 5.588%) -37-

( ) 2005 6 30 6 ( ) () 11 2004 2005 12 31 630 / 50,224,331 (17,242,166) 33,790,075 - (807,910) 32,982,165 21.5 7,310,344 (6,559,011) 1,043,099 - (291,766) 751,333 1 1,264,850 (1,212,575) 174,060 - (121,785) 52,275 0.5 58,799,525 (25,013,752) 35,007,234 - (1,221,461) 33,785,773 1997-38-

( ) 2005 6 30 6 ( ) () 12 2005 6 30 2004 12 31 14,134,620 30,130,447 13 2005 6 30 2004 12 31 3,889,448,550 2,996,775,000 453,900,000 11,000,000 (2004 350,000,000 ) 3.11% 5.12% (2004 2.12%4.70%) 14 2005 6 30 2004 12 31 129,690,750-2005 9 20 1,955,417 (2004 10,409,205 ) -39-

( ) 2005 6 30 6 ( ) () 15 2005 2005 1 1 6 30 1,200,000,000 (34,080,000) - 1,165,920,000 2,840,000 1,168,760,000 [2005]131 ( ) 2005 5 27 12,000,000 100 1,200,000,000 16 (1) 7,100,254 5%(5%) (2) 5%(5%) -40-

( ) 2005 6 30 6 ( ) () 16 () (3) 2005 6 30 2004 12 31 283,196,634 298,023,369 24,207,721 9,898,313 8,667,286 1,834,920 ( ()(6)(e)) 4,174,487 44,808,006 2,763,960 3,515,722 ( ()(6)(e)) - 1,772,762 38,451,853 7,301,711 361,461,941 367,154,803 ( ) 5%(5%) 2005 6 30 2004 12 31 ( ) 4,174,487 - -41-

( ) 2005 6 30 6 ( ) () 17 2004 2005 12 31 630 ( ) - 38,533,440-38,533,440-23,067,000-23,067,000-439,560-439,560 B - 26,400,000-26,400,000 A - 34,833,600-34,833,600-123,273,600-123,273,600 2004 2005 5 19 2004 18 2005 6 30 2004 12 31 (44,574,539) (43,674,165) 45,660,683 59,736,029 5,421,665 1,758,387 6,507,809 17,820,251 19 2005 6 30 2004 12 31 157,219,180 138,052,020 11,473,455 18,171,941 1,783,382 21,000,000 1,566,596 1,849,329 172,042,613 179,073,290-42-

( ) 2005 6 30 6 ( ) () 20 2005 6 30 2004 12 31-85,650,515 21 2005 6 30 2004 12 31 ( ()(6)(c)) 455,000,000 505,000,000-160,000,000 172,950,000 240,817,300 627,950,000 905,817,300 3.51%6.03%(2004 1.86%6.03%) 20,000,000 (2004 28,200,000 ) -43-

( ) 2005 6 30 6 ( ) () 22 2005 6 30 2004 12 31 729,622,250 999,637,000 2005 6 30 36,000,000 2007 02 5.47% 45,000,000 2006 12 6.03% 70,350,250 2006 7 Libor+0.8% 397,272,000 2008 1 1.86% 70,000,000 2006 10 5.49% 34,000,000 2007 11 5.76% 31,000,000 2007 12 5.76% 46,000,000 2008 3 5.76% 729,622,250 2005 6 30 442,272,000 (2004 742,272,000 ) ( ) ( ()(6)(c)) -44-

( ) 2005 6 30 6 ( ) () 23 1 2004 2005 12 31 630-321,112,000 160,556,000 481,668,000-195,888,000 97,944,000 293,832,000 517,000,000 258,500,000 775,500,000-290,280,000 145,140,000 435,420,000-220,000,000 110,000,000 330,000,000 1,027,280,000 513,640,000 1,540,920,000 2004 2004 2004 1,027,280,000 2004 10 5 513,640,000 1 513,640,000 (2005) 128-45-

( ) 2005 6 30 6 ( ) () 24 2004 2005 12 31 630 1,570,853,966 - (513,640,000) 1,057,213,966-36,210,228 - (2,350,031) 33,860,197-88,151,793 2,350,031-90,501,824-4,756,848 1,972,985-6,729,833 1,699,972,835 4,323,016 (515,990,031) 1,188,305,820 25 2004 12 31 2005 6 30 144,307,653 144,307,653 292,378,668 580,993,974 (1) 10% 50% (2) 5%10% (3) -46-

( ) 2005 6 30 6 ( ) () 26 2005 1-6 161,963,567 - ( ) 16,854,091 178,817,658 568,174,218 - (123,273,600) 623,718,277 2004 2004 1,027,280,000 10 1.2 123,273,600 ( 17) 27 (a) 2005 1-6 2004 1-6 ( ) 5,440,726,984 3,137,475,110 359,677,603 306,549,424 5,800,404,587 3,444,024,534 2005 1-6 2004 1-6 ( ) 4,736,034,408 2,780,213,740 337,769,676 285,272,716 5,073,804,084 3,065,486,456-47-

( ) 2005 6 30 6 ( ) () 27 () (b) 2005 1-6 2004 1-6 ( ) ( ) ( ) 1,631,854,635 1,467,414,312 918,218,916 850,022,691 ( )(i) 1,515,954,733 1,280,278,770 875,298,675 763,397,923 952,447,471 811,103,828 685,313,426 592,405,380 807,626,717 755,453,966 560,150,521 511,661,474 488,906,016 462,654,173 296,313,445 272,690,415 278,846,777 201,714,375 108,729,551 75,308,573 124,768,238 95,184,660 - - - 5,800,404,587 5,073,804,084 3,444,024,534 3,065,486,456 (i) 2005 2004 ( ) ( ) (c) 1,786,376,097 31% 28 2005 1-6 2004 1-6 ( ) 106,831,675 73,636,263 (10,755,551) (11,918,142) 84,468,181 29,800,486 (117,695,877) (34,744,661) ( 15) 2,840,000 - ( )/ ( 7) (69,342,532) 9,607,199 10,003,957 2,583,371 6,349,853 68,964,516-48-

( ) 2005 6 30 6 ( ) () 29 2005 1-6 2004 1-6 ( ) ( 8) 4,062,800 692,942 (1) 226,323 1,051,969 ( 8) (1,321,717) (855,660) 2,967,406 889,251 1 ( ) ( ) ( 2005 1-6 93,314 9,090 123,919 30 2005 1-6 2004 1-6 ( ) 46,653,634 27,134,816 (37,644,459) - ( 12) 15,995,827-25,005,002 27,134,816 (2000)49 2004 37,644,459 2004-49-

( ) 2005 6 30 6 ( ) () 31 32 33-50-

( ) 2005 6 30 6 ( ) 1 2005 6 30 2004 12 31 2,190,837,070 2,236,469,915 (58,518,107) (43,159,432) 2,132,318,963 2,193,310,483 (a) 2005 6 30 2004 12 31 % % 2,135,168,921 98 (2,849,958) 2,176,142,260 98-30,028,351 1 (30,028,350) 29,498,654 1 (14,924,286) 21,987,034 1 (21,987,034) 27,176,236 1 (24,582,381) 3,652,765 - (3,652,765) 3,652,765 - (3,652,765) 2,190,837,070 100 (58,518,107) 2,236,469,915 100 (43,159,432) -51-

( ) 2005 6 30 6 ( ) () 1 () (a) () (1) APPA 3,652,765 (2) 19,860,372 PECEM 2,126,662 (3) 29,498,654 14,924,286 14,574,368 529,696 (4) 32,285,962 2,849,958 (b) (c) 5% (5%) 424,455,429 19% -52-

( ) 2005 6 30 6 ( ) () 2 2005 6 30 2004 12 31 246,937,293 139,302,814 (11,736,425) (11,736,425) 235,200,868 127,566,389 (a) 2005 6 30 2004 12 31 % % 230,464,170 93-124,710,026 89-4,095,675 2-2,155,051 2-12,171,550 5 (11,736,425) 11,977,213 9 (11,736,425) 205,898 - - 460,524 - - 246,937,293 100 (11,736,425) 139,302,814 100 (11,736,425) (b) (c) 5%(5%) 200,017,720 81% -53-

( ) 2005 6 30 6 ( ) () 3 2005 2005 11 630 (1) 19,146,862 211,820,137 1,972,985 352,787 - (893,885) 232,398,886 (2) 68,133,473 - - 4,062,800 (71,768,441) (427,832) - (3) 7,920,489 - - - - - 7,920,489 95,200,824 211,820,137 1,972,985 4,415,587 (71,768,441) (1,321,717) 240,319,375-54-

( ) 2005 6 30 6 ( ) () 3 () (1) 2005 () 11 2005 () 630 1996-2016 90% 4,500,000 3,478,749 7,896,885 - - 81,864-7,978,749 2001-2011 90% 4,950,000 195,879 5,112,502 - - 33,377-5,145,879 2001-2011 70% 3,500,000 357,469 3,791,278 - - 66,191-3,857,469 2001-2021 90% 900,000-900,000 - - - - 900,000 2001-2021 90% 900,000-900,000 - - - - 900,000 2001-2021 90% 900,000-900,000 - - - - 900,000 ( ) 2002-99.99% - (475,593) (328,900) - - (146,693) - (475,593) ZPMC (M) SDN. BHD. 2002-100% 4 (24,907) (24,903) - - - - (24,903) 1996-2011 55% 160,820,137 1,264,627-160,820,137 1,972,985 185,527 (893,885) 162,084,764 2005-2025 51% 51,000,000 132,521-51,000,000-132,521-51,132,521 227,470,141 4,928,745 19,146,862 211,820,137 1,972,985 352,787 (893,885) 232,398,886-55-

( ) 2005 6 30 6 ( ) () 3 () (1) () 2000 2005 17,113,263 2001 2010 9,840,151 (427,832) (7,700,944) 9,412,319 10,719,313 2005 2011 10,719,313 (466,053) (466,053) 10,253,260 20,559,464 (893,885) (8,166,997) 19,665,579-56-

( ) 2005 6 30 6 ( ) () 3 () (2) 2005 2005 () 11 630 1996-2011 40% 67,040,000 (67,040,000) 68,133,473 4,062,800 (71,768,441) (427,832) - 2000 17,113,263 2001-2010 10,267,983 (427,832) (7,273,112) 9,840,151-57-

( ) 2005 6 30 6 ( ) () 3 () (3) 2001-6,120,489 2.13% ( ) 2002-2017 300,000 10% ( ) 2002-2007 500,000 10% ( ) 2002-2012 1,000,000 10% 7,920,489-58-

( ) 2005 ( ) () 4 2005 1-6 2004 1-6 ( ) 5,440,726,984 3,137,475,110 357,477,603 306,549,424 5,798,204,587 3,444,024,534 5 2005 1-6 2004 1-6 ( ) 4,753,297,599 2,792,056,076 341,340,436 286,564,882 5,094,638,035 3,078,620,958 6 2005 1-6 2004 1-6 ( ) 4,415,587 1,193,815 ( 3) 226,323 1,051,969 (1) ( 3) (1,321,717) (855,660) 3,320,193 1,390,124 1 ( ) ( ) ( 2004 93,314 9,090 123,919-1-

( ) 2005 ( ) (1) ( ) 9 3470 77 301 1628 2627 108 24 301 ( ) 19F CHINA - HARBOUR BLDG 370-374 KING S RD NORTH POINT,HK 3470 701 3470 1201 3470 1101 ZPMC(M) Suite 1701, 17F, Wisma - SDN.BHD. Hamzah-Kong Hing No.1 Leboh Ampang 50100 Kuala Lumpur 52 () -2-

( ) 2005 ( ) (2) 2005 1 1 2005 6 30 2,345,490,000 - - 2,345,490,000 ( ) 5,000,000 - - 5,000,000 5,500,000 - - 5,500,000 5,000,000 - - 5,000,000 ( ) 10,000 - - 10,000 90,000,000 30,000,000-120,000,000-100,000,000-100,000,000 1,000,000 - - 1,000,000 1,000,000 - - 1,000,000 1,000,000 - - 1,000,000 ZPMC(M)SDN. BHD. 100,000 - - 100,000 500,000 - - 500,000 () -3-

( ) 2005 ( ) (3) 2005 1 1 2005 6 30 % % % % 321,112,000 31.26 160,556,000 31.26% - - 481,668,000 31.26 ( ) 2005 6 30 ( ) ( ) 50.33% (4) 2005 1 1 2005 6 30 % % % % 4,500,000 90% - - - - 4,500,000 90% 4,950,000 90% - - - - 4,950,000 90% 3,500,000 70% - - - - 3,500,000 70% 10,000 99.99% - - - - 10,000 99.99% ( ) - - 51,000,000 51% - - 100,000,000 51% - - 60,000,000 55% - - 66,000,000 55% 900,000 90% - - - - 900,000 90% 900,000 90% - - - - 900,000 90% 900,000 90% - - - - 900,000 90% ZPMC (M) SDN.BHD. 100,000 100% - - - - 100,000 100% () -4-

( ) 2005 ( ) (5) 18.71% 0.36% (6) (a) 2005 1-3 2004 68,529,420 236,137,103 (b) 2005 1-3 2004 1,310,281 6,669,018 (c) ( ) - 455,000,000 442,272,000 () (6) () -5-

( ) 2005 ( ) (d) 2005 6 30 2004 12 31 (e) 13,129,300-2005 6 30 2004 12 31 ( ) 4,174,487 - - 44,808,006-1,772,762 4,174,487 46,580,768 2005 6 30 2004 12 31 (1) 1,248,647,229 943,941,893 2005 6 30 2004 12 31 (2) 2005 6 30 8,992,660 28,943,808-6-

( ) 2005 ( ) - 2005 6 30 2004 12 31 15,956,000 14,037,667 15,364,280 11,562,613 15,616,222 11,416,222 168,839,303 144,030,636 215,775,805 181,047,138-2005 6 30 2004 12 31 55,822,059 34,240,374-2005 6 30 1,151,866,873 (2004 887,315,115 ) -7-

( ) 2005 ( ) (1) 2003 12 31 2005 2 16 (2005) 000118 (2) 2005 7 11-8-

Shanghai Zhenhua Port Machinery Co. Ltd. Financial Statements and Audit Report 6 Months Period Till June 30, 2005 Shanghai Zhenhua Port Machinery Co. Ltd.

Financial Statements and Audit Report 6 Months Period Till June 30, 2005 Mailing Address: 11F PricewaterhouseCoopers Center 202 Hu Bin Road Shanghai 200021 People s Republic of China Telephone: +86 (21) 6123 8888 Facsimile: +86 (21) 6123 8800 Contents Page Report of the Auditors 3 Consolidated and Parent Company Balance Sheet 2-3 Consolidated and Parent Company Profit and Loss Statement 4 Consolidated and Parent Company Profit Distribution Statement 5 Consolidated and Parent Company Cash Flow Statement 6-7 Note to the Statements 8-66 2

REPORT OF THE AUDITORS Mailing Address: 11F PricewaterhouseCoopers Center 202 Hu Bin Road Shanghai 200021 People s Republic of China Telephone: +86 (21) 6123 8888 Facsimile: +86 (21) 6123 8800 PWC Zhongtian ShenZi (2005) No. 1730 TO THE SHAREHOLDERS OF SHANGHAI ZHENHUA PORT MACHINERY CO., LTD. (Incorporated in the People s Republic of China with limited liability) We have audited the accompanying consolidated and parent company s balance sheets of Shanghai Zhenhua Port Machinery Co., Ltd. ( the Company ) and its subsidiaries ( the Group ) as of 30 Jun. 2005 and the related consolidated and parent company s statements of income, cash flows and changes in shareholders equity for the 6 months ended by Jun. 30, 2005. These financial statements are the responsibility of the Company s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Group and the Company as of Jun. 30, 2005 and the results of the operations and the cash flows for the 6 months ended by Jun. 30, 2005 in accordance with enterprise accounting standards and Enterprise Accounting Systems nationally accepted. PricewaterhouseCoopers Zhongtian Public Certified Accountants Aug. 30, 2005 Certified accountants 3

Shanghai Zhenhua Port Machinery Co. Ltd. Financial Statements and Audit Report 6 Months Period Till June 30, 2005 (Monetary unit thousand yuan RMB, except for otherwise specified) I. General Information Shanghai Zhenhua Port Machinery (Group) Co., Ltd. ( the Company or Parent Company ) was established in Shanghai, on 8 September 1997 as part of an exercise to reorganise its predecessor, Shanghai Zhenhua Port Machinery Company Limited ( Zhenhua ), The Company, together with its consolidated subsidiaries (hereinafter the Group ) principally engages in such activities as of the design, manufacture, sale, and installation of port machinery, project vessels, steel structure and related spare parts and accessories; lease of selfmanufactured container cranes and sales of self-manufactured products; provide marine forwarding services with specific vessels for container cranes and engage in steel structure construction project. II. Accounting policies, accounting estimates and consolidated statements preparation method (1) Basis of preparation The financial statements are prepared in accordance with nationally accepted enterprise accounting standards and Enterprise Accounting System. (2) Accounting year Calendar year, from January 1 till December 31. (3) Monetary Currency Renminbi is the monetary currency. (4) Booking basis and pricing policies Booking is based on accrual basis; assets acquisition is priced according to real cost, otherwise will be specified in the notes. In case of asset devaluation incur, devaluation provision will be made. (5) Foreign currency translation Transactions denominated in foreign currencies are translated into Renminbi at the exchange rates stipulated by the People s Bank of China prevailing on the first day of the month in which the transactions took place. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into Renminbi at the exchange rates stipulated by the People s Bank of China. Exchange differences arising from these translations are taken to the income statement, with exception that gains/losses related to special foreign currency fund borrowing during fixed assets purchase period. 4

Shanghai Zhenhua Port Machinery Co. Ltd. Financial Statements and Audit Report 6 Months Period Till June 30, 2005 (Monetary unit thousand yuan RMB, except for otherwise specified) II. Accounting policies, accounting estimates and consolidated statements preparation method (Cont d) (6) Foreign currency statements translation All assets and liabilities in the foreign currency balance statements are translated into Renminbi at the exchange rate stipulated by the People s Bank of China on the date of the balance sheet. Shareholders equity are translated into Renminbi at the exchange rate stipulated by the Peoples Bank of China on the day of the transaction, except for undistributed profit, which is confirmed by the amount in the profit distribution statement after translation. Incomes statements of foreign entities are translated into Renminbi at average exchange rates for the year, differences thus occurred are taken into the translation difference item in the balance sheet. Cash flow statements are translated at the exchange rates ruling on balance sheet day. (7) Time foreign exchange arbitrage transaction This Group mainly engage in foreign-oriented business. To avoid foreign exchange risks, this Group signed time foreign exchange contracts with several banks. Time contracts are booked in real costs, and the fair value will be evaluated at the end of the period. Time foreign exchange contract is regarded as a derivative financial tool, and the ways to confirm the gains or losses from the end-of-period fair value evaluation are divided, based on whether applicable to arbitrage accounting, into: (i) (ii) Gains or losses from end-of-period fair value evaluation to time foreign exchange contracts not applicable to arbitrage accounting, are directly taken into the income statement. Time foreign exchange contracts consist of fair value arbitrage and cash flow arbitrage. Gains or losses from end-of-period fair value evaluation to time foreign exchange arbitrage contracts, are directly taken into the income statement. Gains or losses from end-of-period fair value evaluation to time foreign exchange contracts as cash flow arbitrage, are first booked into the arbitrage reserve in the shareholders equity. When the expected future transaction or the Company s promised items are realized and confirmed as asset or liability, the gains or losses in the arbitrage reserve in the shareholders equity will be transferred from the arbitrage reserve into income statement. 5

Shanghai Zhenhua Port Machinery Co. Ltd. Financial Statements and Audit Report 6 Months Period Till June 30, 2005 (Monetary unit thousand yuan RMB, except for otherwise specified) II. Accounting policies, accounting estimates and consolidated statements preparation method (Cont d) (8) Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand and deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less. Bank deposits with limits are not listed as cash or cash equivalents in the cash flow statements. (9) Short-term investment Short-term investments refer to stocks, bonds and fund investment that can be cashed and held less than 12 months, valued by the real investment cost at acquisition deducting not-yet collected but announced cash dividends or not-yet collected but calculated dividends interest. Income such as dividends interests received during short-term investment period directly offsets investment cost, except for the cash dividends or interests already into receivables. End of period valuation of short term investment is based on the lower of cost and market. The part of the market value less than cost is provided for short term devaluation provision. The short term investment devaluation provision is made based on the total investment by the end of the period. If the market value of the short term investment exceeds the book value, the devaluation will be returned within prior year confirmed devaluation loss. (10) Receivables and bad debts provision Receivables refer to receivable accounts and other receivables. The Group provides for possible bad debts. Receivables are shown in net value of real amount less bad debt provision. Provision of bad debts is made after careful assessment of the collectability of receivables. On the day of the balance sheet when receivables due according to contracts, the Group made special bad debt provision for difficult-to-collect items considering the reality and experience and years overdue in the following proportion range. 6

Shanghai Zhenhua Port Machinery Co. Ltd. Financial Statements and Audit Report 6 Months Period Till June 30, 2005 (Monetary unit thousand yuan RMB, except for otherwise specified) II. Accounting policies, accounting estimates and consolidated statements preparation method (Cont d) (12) Building contracts For customized large port equipment with fixed price, because the start and the finishing of the project are in different accounting years, the Company uses building-contract method to calculate the revenue and the cost. If the selling result of individual building contract can be reliably estimated, the revenue and expenses can be recognized in proportion of completeness on the day of balance sheet. Project progress proportion is made on the report day according to the revenue recognition stage stipulated in the contract. The Company confirmed the following 3 revenue recognition stages: Stage 1: body steel structure completed and erected; Stage 2: manufacturing, installation and initial testing completed, product ex-plant qualification certificate issued, shipping documents acquired, product ready to be shipped; Stage 3: product finally delivered after being checked and approved by purchaser, final delivery certificate issued by purchaser acquired. The company will analyze the building contracts completed in prior year and recognize progress proportion of each revenue recognition stage on the basis of the proportion of the cost of the revenue recognition stage in real total costs and recognize it as the progress proportion at various stages in current period. When individual building contract result is not able to be reliably estimated, the following methods are used: (i) (ii) When contract cost can be covered, contract revenue is recognized according to real contract cost that can be covered, contract cost is recognized as expenses in the period when cost incurs. When contract cost can not be covered, it can be recognized as expenses immediately when it incurs; no contract revenue is confirmed. When expected total contract cost exceeds total revenue, the expected losses should be immediately recognized as expenses in current period. When contract value is settled in installments, the settled installment is recognized as settled value, which will be transferred and set off with related accumulated costs and confirmed margin on the day of building contract completed. On the balance sheet day, when the addition of accumulated costs and confirmed margin exceeds the accumulated settled value, the difference is listed as completed but not yet settled item in current assets. Otherwise, it will be listed in settled but not completed item in current liabilities. 8

Shanghai Zhenhua Port Machinery Co. Ltd. Financial Statements and Audit Report 6 Months Period Till June 30, 2005 (Monetary unit thousand yuan RMB, except for otherwise specified) II. Accounting policies, accounting estimates and consolidated statements preparation method (Cont d) (13) Long term share investment Cost involved in long term share investment is booked in real payment amount. The Group adopts equity method when investment takes 20% or above in investee s total voting shares, or when the Group has great influence over investee s financial or operational decisions although the share is less than 20%; cost method is adopted when the Group takes less than 20% in investee s total voting shares, or when the Group can exercise no big influence over the investee s financial or operational decisions although the Group has 20% or above voting shares in the investee. In equity method for long term share investment, the difference when initial investment cost lower than equity enjoyable in the investee is calculated as capital reserve. The difference when initial investment cost higher than equity enjoyable in the investee is amortized in straight line method within the investment period but 10 years in maximum. In equity method, gains/losses of investment are recognized by the amount of investee s current period net profit or net loss share enjoyable or bearable. When investee announces dividends, long term share investment should be set off. In cost method, investment income is recognized at the time when investee announces dividends. Long term investment devaluation provision is made for the difference of the returnable amount lower than the book value, when expected return amount is lower than the book value and the lowered value is not possible to be recovered in foreseen future, due to worsened operating situations of the investee. (14) Valuation of fixed assets and depreciation Fixed assets consist of houses, buildings and equipments related to operation with rather high value, for use of at least above one year owned or held for manufacturing goods, providing service, leasing or business management. Land use rights book value is part of the costs of houses or buildings from January 1, 2001 when land is used for self-use projects. Purchased or newly built fixed assets are booked according to the costs at acquisition. The fixed assets valued at the time when the Company was reorganized are booked in the valuation made by the state-owned assets administration authorities. Fixed assets depreciation is made in straight line method and is accrued by deducting expected net remained value from purchase value within the expected years for use. When devaluation provision have been made to fixed assets, the depreciation ratio and amount will be decided on the net book value after devaluation and the remained years for use. 9

Shanghai Zhenhua Port Machinery Co. Ltd. Financial Statements and Audit Report 6 Months Period Till June 30, 2005 (Monetary unit thousand yuan RMB, except for otherwise specified) II. Accounting policies, accounting estimates and consolidated statements preparation method (Cont d) (15) Construction in progress Construction in progress refers to capitalized assets under construction or installation. It is booked as project costs in real expenditure. Valuation of costs consist of building expenses and other direct expenses, machine and equipment purchase price, installation expenses and loan expenses specially for the project before it reaches the condition for use. When the project under construction reaches the condition for use, it is transferred into fixed assets items and depreciation will be made from the following month. In case the construction is in long time stop and will not restarted in foreseeable future or the project is already backward either in functions or in technology and the financial benefits is clearly uncertain, the lower part of the returnable amount than the book value is provided as devaluation. (16) Intangible assets and amortization Intangible assets consist of land use rights, employee house use rights and software use cost. They are booked in really paid price or evaluation at the time of the Company s reorganization, and are amortized in straight line method in the following expected years for use: Expected years for use Land use rights Employee house use rights Software use cost 30 years 11 years 5 years From January 1, 2001, land use rights purchased or acquired in way of paying land transfer fee are calculated in real payment amount and are accounted as intangible assets. When land is used for constructing self-use project, the book value of land use rights is fully transferred into costs of projects in progress. In case of projects occurred before Jan. 1, 2001, the Company sticks to original stipulations. No adjustment is made. When the financial earning capability of intangible assets is seriously affected, the lower part of returnable amount than the book value is provided for as devaluation, in method of the lower of book value or returnable amount. When intangible assets are not bringing up financial benefits, their book value is fully transferred into current income statement. 11

Shanghai Zhenhua Port Machinery Co. Ltd. Financial Statements and Audit Report 6 Months Period Till June 30, 2005 (Monetary unit thousand yuan RMB, except for otherwise specified) II. Accounting policies, accounting estimates and consolidated statements preparation method (Cont d) (17) Loan expenses Loan expenses such as interest, auxiliary expenses and foreign exchange differences from special loans for purchasing fixed assets are capitalized and calculated into that asset s cost, when asset expenditure and loan expenses incur and when purchasing or building activities start as a necessity to make that asset reach expected usable condition. When the purchased or built fixed asset reached expected usable condition, capitalization stops and loan expenses that follow are taken into current profit/loss statement. The interest expenses in loan expenses are capitalized in the amount of the weighted average accumulated expenditure on current period fixed asset purchase and the related loan s weighted average interest rate, within the limit of really incurred interest expenses of current period special loan. The capitalized amount of foreign exchange difference for foreign currency special loan and significant special loan auxiliary expenses is decided by the real incurred amount. Loan expenses arising from other loans are directly booked into current period financial expenses. (18) Bonds payable Bonds issued are recognized as liabilities in real issuing price. Difference between bond issuing price and bond face value is booked as bond premium/discount, amortized in straight line method during bond existence period. (19) Profit distribution Cash dividends approved by general annual meeting are transferred out from shareholders equity within the period of the approval. (20) Revenue recognition Revenue from sales of large port equipment is recognized by the proportion of completeness (see Note II (12)) Interest income is recognized by deposit term and real interest rate. Subsidy income is recognized by the time of receiving. (21) Leases When all risks and rewards related to assets ownership have in reality transferred on the 12