CHINESE MARITIME TRANSPORT LTD. AND … · AND SUBSIDIARIES Consolidated Financial Statements December 31, ... Decrease in notes and accounts payable ... general sales agent for Saudi

CHINESE MARITIME TRANSPORT LTD. AND SUBSIDIARIES

Consolidated Financial Statements

December 31, 2011 and 2010 (With Independent Auditors' Report Thereon)

The accompanying financial statements are not intended to present the financial position, results of operations, and cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices to review such financial statements are those generally accepted and applied in the Republic of China. The auditors’ report and the accompanying financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of, the English and Chinese language auditors’ report and financial statements, the Chinese version shall prevail.

Independent Auditors’ Report

The Board of Directors Chinese Maritime Transport Ltd.: We have audited the accompanying consolidated balance sheets of Chinese Maritime Transport Ltd. and Subsidiaries as of December 31, 2011 and 2010, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for the years then ended. These consolidated 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 audits. The financial statements of certain subsidiaries and long-term investments accounted for under the equity method were audited by other auditors, whose reports were furnished to us. The total assets of those consolidated subsidiaries mentioned above constituted 4.33% and 2.28% of the consolidated totals as of December 31, 2011 and 2010, respectively, and the net revenue constituted 0%, of the consolidated totals for the years then ended. The long-term equity investments mentioned above amounted to NT$3,002,412,000 and NT$2,770,606,000 as of December 31, 2011 and 2010, respectively, and related investment income was NT$148,161,000 and NT$202,259,000, respectively, for the years then ended. We conducted our audits in accordance with Republic of China generally accepted auditing standards and the “Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants”. Those standards and regulations require that we plan and perform the audit to obtain reasonable assurance about whether the 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 audits and the reports of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the aforementioned reports of other auditors, the consolidated financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of Chinese Maritime Transport Ltd. and Subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for the years then ended, in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, and Republic of China generally accepted accounting principles. Taipei, Taiwan (Republic of China) March 21, 2011

See accompanying notes to consolidated financial statements.


Consolidated Statements of Cash Flows

For the years ended December 31, 2011 and 2010 (expressed in thousands of New Taiwan dollars)

2011 2010 Cash flows from operating activities:

Consolidated net income $ 1,004,101 1,932,149 Adjustments to reconcile consolidated net income to net cash provided by operating activities:

Depreciation and amortization 415,898 456,041 Investment income under equity method, net (148,161) (202,259)Cash dividends from investee companies accounted for under the equity method

211,151

211,151

Gain on disposal of fixed assets (298,145) (419,326)Decrease (increase) in financial assets at fair value through profit or loss – current

1,955

(51,479)

Decrease (increase) in notes and accounts receivable (23,973) 20,021 Decrease (increase) in other current financial assets (12,243) 6,437 Increase in other current assets (15,121) (20,258)Decrease in notes and accounts payable (9,231) (20,161)Decrease in accrued expenses and other current liabilities (59,933) (471,803)Decrease in advance receipts (362,177) (322,537)Deferred tax expense (benefit) 42,100 75,008 Others 5,140 6,995

Net cash provided by (used in) operating activities 751,361 1,199,979 Cash flows from investing activities:

Addition to available-for-sale financial assets - (58,401)Decrease (increase) in held-to-maturity financial assets 18,233 (18,233)Increase in long-term equity investment and property investment (276,289) - Additions to property and equipment (2,435,431) (2,119,105)Proceeds from sale of property and equipment 356,054 660,800 Decrease (increase) in restricted assets 2,006 377,669 Increase in deferred expenses and others (17,000) (54,909)Proceeds from sale of available – for-sale financial assets 60,894 -

Net cash provided by (used in) investing activities (2,291,533) (1,212,179)Cash flows from financing activities:

Increase in short-term loans and commercial paper payable 714,866 210,035 Increase in long-term loans 1,701,720 - Decrease in long-term loans (376,969) (1,253,485)Cash dividends (820,715) (1,538,841)Others 59 (255)

Net cash provided by (used in) financing activities 1,218,961 (2,582,546)Foreign currency translation effects 115,432 (334,704)Net increase (decrease) in cash and cash equivalents (205,779) (2,929,450)Cash and cash equivalents at beginning of year 5,649,326 8,578,776 Cash and cash equivalents at end of year $ 5,443,547 5,649,326 Supplemental disclosures of cash flow information:

Cash paid during the year for: Interest $ 137,065 129,076 Income tax $ 136,650 515,071

Investing and financing activities not affecting current cash flows:

Current portion of long-term loans $ 436,306 490,677 Property and equipment transferred to non-current assets held for sale $ 3,510 -

(Continued)


Notes to Consolidated Financial Statements

December 31, 2011 and 2010 (expressed in thousands of New Taiwan dollars unless otherwise specified)

(1) Organization

Chinese Maritime Transport Ltd. (the Company), previously named Associated Transport Inc., was incorporated as a company limited by shares on January 31, 1978, in the Republic of China. The Company’s common shares were listed on the Taiwan Stock Exchange (TSE). The main activities of the Company are bulk-carrier transportation through its 100%-owned overseas subsidiaries and domestic container hauling, vessel transportation, warehousing, and related business, and acting as the general sales agent for Saudi Arabian Airlines. The Company also owns investment companies to engage in the business of investment. Based on the organization of the Group and distribution of duties, the Company leads and invests in the businesses in the Group related to transportation. The organization and business of the significant subsidiaries of the Company are as follows: Chinese Maritime Transport (S) Pte. Ltd. (CMTS) was incorporated in March 1994 in Singapore. CMTS, 100% owned by the Company, acts as a holding company for the Company’s shipping investment activities in Singapore. For Group operation purposes, Chinese Maritime Transport (Hong Kong), Limited (CMT HK) obtained 16,383,000 new shares (98.69% ownership) of CMTS for US$12,900,000 at April 1, 2011. The percentage of CMTS directly held by the Company decreased to 1.31%. CMTS became a subsidiary of CMT HK. The direct and indirect percentage of CMTS held by the Company is still 100%. As of December 31, 2011, the total issued common stock amounted to $13,050. Chinese Maritime Transport (Hong Kong), Limited (CMT HK) was incorporated in June 2004 in Hong Kong. CMT HK acts as a holding company for the Company’s shipping investment activities in Hong Kong. Its subsidiaries own and operate 5 cape-sized bulk carriers with 880 thousand DWT in total, and 3 cape-sized bulk carriers are being built. As of December 31, 2011, the total issued common stock amounted to US$1,050,000. Associated Transport Inc. (ATI) was incorporated in 2003 and engages in container trucking. As of December 31, 2011, the total issued common stock amounted to $200,000. CMT Logistics Co., Ltd. (CMTL) was incorporated in February 1975 and engages in warehousing, logistics, and operating distribution centers. As of December 31, 2011, the total issued common stock amounted to $192,000. AGM Investment Ltd. (AGM) was incorporated in 2005. Hope Investment Ltd. (HIL) and Mo Hsin Investment Ltd. (MHI) were incorporated in 2006. These companies engage in investment activities. As of December 31, 2011, the total issued common stock of AGM, MHI and HIL amounted to $50,000, $100,000 and $1,150,000, respectively. As of December 31, 2011 and 2010, the number of employees hired by the Company and the above subsidiaries was approximately 399 and 441, respectively.

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(Continued)

(2) Summary of Significant Accounting Policies The consolidated financial statements of Chinese Maritime Transport Ltd. and subsidiaries have been prepared in the local currency and in Chinese. These consolidated financial statements are the English translation of the Chinese version prepared and used in Taiwan, the Republic of China (ROC). If there is any conflict between, or any difference in the interpretation of, the English and Chinese language consolidated financial statements, the Chinese version shall prevail. The consolidated financial statements are prepared in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, and accounting principles and practices generally accepted in the Republic of China (ROC). The significant accounting policies and measurement bases adopted in preparing the accompanying consolidated financial statements are summarized as follows: (a) Reporting entities of the consolidated financial statements and basis of consolidation

Investees that the Company has the power to control are included in the Company’s consolidated financial statements. The Company prepares consolidated financial statements by quarter. As of December 31, 2011 and 2010, the details of the subsidiaries included in the consolidated financial statements and the Company’s direct and indirect percentage of ownership were as follows: Name of Percentage of ownership (%)investor Name of subsidiary Core business 2011 2010

The Company 1. CMTS Investment holding of ship-

owning companies 1.31 100

〃 2. CMT HK Investment holding of ship-owning companies

100 100

〃 3. CMTL Warehouse management 100 100 〃 4. AGM Investment 100 100 〃 5. HIL 〃 100 100 〃 6. MHI 〃 100 100 〃 7. ATI Container trucking 100 100 〃 8. Kinmen Development Corp.

(KDC) Lease and sale of buildings 100 100

〃 9. Associated Motor Co., Ltd. (AMC)

Vehicle repair services - (note 1) - (note 1)

〃 10. CMT Travel Service Ltd. Travel 100 100 CMTS 11. CMTF Bulk-carrier transportation 100 100 〃 12. AG ACT 〃 100 100 〃 13. CFR 〃 100 (note 2)

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(Continued)

Name of Percentage of ownership (%)investor Name of subsidiary Core business 2011 2010

CMT HK 14. CPS Bulk-carrier transportation 100 100 〃 15. CPE 〃 100 100 〃 16. CPG 〃 100 100 〃 17. CPN 〃 100 100 〃 18. CPD 〃 100 100 〃 19. CCL Bulk chartering services 100 100 〃 20. CPT Bulk-carrier transportation 100 100 〃 21. CTU 〃 100 100 〃 22. CTD 〃 100 100 〃 23. CMTS Investment holding of ship-

owning companies 98.69 -

ATI 24. CST Container trucking 100 100 〃 25. HYT 〃 100 100 〃 26. MHT 〃 100 100 〃 27. APT 〃 100 100

Note 1: Liquidation completed in the second quarter of 2010. Note 2: The company was established in 2011. The Company and all companies mentioned above consolidated in the accompanying financial statements are jointly called “the Consolidated Company”. All significant inter-company transactions and unrealized gains or losses from such transactions have been eliminated in the consolidated financial statements.

(b) Foreign currency transactions The Consolidated Company’s reporting currency is the New Taiwan dollar. Non-derivative foreign currency transactions are recorded at the exchange rates prevailing at the transaction date. At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are translated using the exchange rates on that date. The resulting unrealized exchange gain (loss) from such translations is reflected in the accompanying consolidated statements of income. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated at the foreign exchange rates ruling at the dates the fair value was determined. If the non-monetary assets or liabilities are measured at fair value through profit or loss, the resulting unrealized exchange gain (loss) from such translations is reflected in the accompanying consolidated statements of income. If the non-monetary assets or liabilities are measured at fair value through stockholders’ equity, the resulting unrealized exchange gain (loss) from such translations is recorded as a separate component of stockholders’ equity.

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(Continued)

For foreign subsidiaries and investees, their foreign currency financial statements have to be translated into the Company’s reporting currency. Translation adjustments resulting from the translation of foreign currency financial statements into the Company’s reporting currency are accounted for as translation adjustment, which is a separate component of stockholders’ equity. The assets and liabilities accounts of foreign subsidiaries reported in foreign currencies are translated into New Taiwan dollars at the exchange rates prevailing on the balance sheet date. Shareholders’ equity is translated at historical rates, with the exception of the beginning balance of retained earnings which is carried over from the previous year. Dividends are translated at the rate prevailing on the date of declaration. Revenues, costs and expenses are translated at the weighted-average exchange rates during the reporting period.

(c) Accounting estimates The preparation of the accompanying consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates.

(d) Distinction between current and non-current assets and liabilities Cash or cash equivalents, and assets that will be held primarily for the purpose of being traded or are expected to be realized within 12 months after the balance sheet date are classified as current assets; all other assets shall be classified as non-current. Liabilities that will be held primarily for the purpose of being traded or are expected to be settled within 12 months after the balance sheet date are classified as current liabilities; all other liabilities shall be classified as non-current.

(e) Impairment of assets

The Consolidated Company assesses at each balance sheet date whether there is any indication that an asset (individual asset or cash-generating unit) other than goodwill may have been impaired. If any such indication exists, the Consolidated Company estimates the recoverable amount of the asset. The Consolidated Company recognizes impairment loss for an asset whose carrying value is higher than the recoverable amount. The Consolidated Company reverses an impairment loss recognized in prior periods for assets other than goodwill if there is any indication that the impairment loss recognized no longer exists or has decreased. The carrying value after the reversal should not exceed the recoverable amount or the depreciated or amortized balance of the assets assuming no impairment loss was recognized in prior periods.

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(Continued)

(f) Cash equivalents Cash equivalents represent investments in commercial paper with a maturity of three months or less from the date of investment.

(g) Financial assets measured at fair value through profit or loss Financial instruments of the Consolidated Company are classified into this category if the purpose of acquisition is principally for selling or repurchasing in the near term. Except for effective hedging derivative financial instruments, all financial derivatives are included in this category. Changes in fair values are charged to current operations. Subsequent measurement is at fair value, and changes in fair value are recognized as current income or loss. Financial assets purchased or sold as trade practices are recognized by using trade-date accounting.

(h) Available-for-sale financial assets

Financial instruments of the Consolidated Company classified into this category are measured at fair value and additional transaction cost. Subsequent measurement is at fair value, and any changes, excluding impairment loss and unrealized foreign currency exchange gain or loss, are reported as a separate component of stockholders’ equity until realized. Realized gain or loss on financial instruments is charged to current operations. Financial assets purchased or sold as trade practices are recognized by using trade-date accounting. If there is objective evidence of impairment, an impairment loss is recognized. If, in a subsequent period, events or changes in circumstances indicate that the amount of impairment loss has decreased, the previously recognized impairment loss for equity securities is reversed to the extent of the decrease and recorded as an adjustment to equity, while for debt securities, the reversal is allowed through profit or loss provided that the decrease is clearly attributable to an event which occurred after the impairment loss was recognized.

(i) Held-to-maturity financial assets

If the Consolidated Company intends and is able to hold debt securities to maturity, debt securities are carried at amortized cost under the effective interest method. The initial recognition is at fair value and additional transaction cost. Gain or loss is recognized when held-to-maturity financial assets are realized, impaired in value, or amortized. Financial assets purchased or sold as trade practices are recognized by using trade-date accounting. If any objective evidence of impairment exists, impairment loss is recognized. If, in a subsequent period, the impairment loss decreases and the decrease is clearly attributable to an event which occurred after the impairment loss is recognized, the previously recognized impairment loss is reversed to the extent of the decrease. The reversible amount may not exceed the amortized cost that would have been determined if no impairment loss had been recognized.

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(Continued)

(j) Notes and accounts receivable, and other receivables Notes and accounts receivable are the creditors’ rights from selling goods or rendering services. Other receivables are the receivables provided from non-operating income. Notes and accounts receivable, and other receivables are measured at amortized cost. The Consolidated Company considers evidence of impairment for notes and accounts receivable, and other receivables at both a specific asset and collective level. All individually significant receivables are assessed for specific impairment. All individually significant receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Notes and accounts receivable, and other receivables that are not individually significant are collectively assessed for impairment by grouping together notes and accounts receivable, and other receivables with similar risk characteristics. An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognized in profit or loss and reflected in an allowance account against notes and accounts receivable, and other receivables. When determining the amount of impairment loss, the estimated future cash flow will include any collateral involved and related insurance recoverable. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss shall be reversed either directly or by adjusting an allowance account. The reversal shall not result in a carrying amount of the financial asset that exceeds what the amortized cost would have been had the impairment not been recognized at the date the impairment is reversed. Before December 31, 2010, the allowance for doubtful accounts was based on the likelihood of collection of the Company’s accounts receivable balances. The amount of the allowance for doubtful accounts was determined based on an aging analysis, the collection history, the credit rating of the Company’s clients, and the internal credit policy of the Company.

(k) Long-term investments under equity method Long-term investments are accounted for under the equity method when the percentage of ownership held by the Company and its subsidiaries equals or exceeds 20% or if the Company and its subsidiaries own less than 20% of the investee’s common stock but have significant influence on the investee’s operations.

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(Continued)

The difference between the cost of the investment and the amount of underlying equity in net assets of an investee attributed to depreciable or amortizable assets is amortized over the estimated remaining economic years. The difference attributed to the carrying amount in excess of or lower than the fair value of assets is written off entirely when the difference disappears. The cost of investment in excess of the fair value of identifiable net assets is recognized as goodwill and is not amortized. The difference attributed to the fair value of identifiable net assets in excess of the cost of investment causes a proportional decrease in the carrying amount of non-current assets. When the carrying amount of non-current assets is decreased to zero, the remaining difference is recognized as extraordinary gain or loss. Unrealized inter-company profits or losses resulting from transactions between the Company and its subsidiaries and investees accounted for under the equity method are deferred until realized, or are amortized based on the useful lives of the assets that give rise to such unrealized profits or losses. When the equity adjustment accounts of investee companies accounted under the equity method, including revaluation increments, cumulative translation adjustments, and unrealized gain or loss on financial instruments, are changed, the change is reflected in those accounts and long-term equity investment under the equity method based on the percentage of ownership.

(l) Property and equipment, rental assets, and depreciation Property and equipment are stated at cost, and can be revalued at government-declared values or indexes. Repairs and maintenance are charged to expenses as incurred; major renewals and improvements are capitalized and depreciated accordingly. Excluding land, depreciation of property and equipment is provided using the straight-line method over the estimated useful lives of the respective assets. When the property and equipment have reached the end of their estimated useful lives but are still in use, the remaining cost is depreciated using the same method over the estimated remaining useful lives of the assets. The useful lives of respective assets are summarized as follows:

- Buildings: 17~55 years. - Building improvements: 3~15 years. - Container transportation equipment: 4~7 years. - Shipping transportation equipment: 2~20 years. - Container terminal facility: 4~60 years. - Furniture, fixtures and other equipment: 3~12 years.

Property and equipment leased to other parties under operating leases are classified as rental assets. The rental income is recorded as non-operating income after the related depreciation is accounted for as a deducted item.

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(Continued)

Real estate investments are recognized at cost and are depreciated over their useful lives using the straight-line method. The Company will recognize loss if there is any indication that impairment has incurred and is unlikely to be recovered.

(m) Non-current assets held for sale Non-current assets and groups of assets and liabilities which comprise disposal groups are classified as “held for sale” when all of the following criteria are met: a decision has been made to sell; the assets are available for immediate sale in their present condition subject only to terms that are usual and customary for sales of such assets or disposal groups; and their sale within one year must be highly probable. Non-current assets or disposal groups classified as held for sale are measured at the lower of their book value or fair value, less costs to sell. Non-current assets or disposal groups classified as held for sale are not depreciated, amortized or depleted. Non-current assets or disposal groups classified as held for sale and the related liabilities are shown as separate line items on the balance sheet. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale shall continue to be recognized.

An impairment loss is recognized for any initial or subsequent write-down of the assets or disposal group to fair value less costs to sell in the income statement. A gain from any subsequent increase in fair value less costs to sell of an asset or a disposal group shall be recognized, but not in excess of the cumulative impairment loss that has been recognized previously in accordance with ROC Statement of Financial Accounting Standards (SFAS) No. 35 “Impairment of Assets”.

(n) Commercial paper payable

Commercial paper payable is measured at present value. Any discount on commercial paper payable decreases the commercial paper payable.

(o) Intangible assets Other than an intangible asset acquired by way of a government grant, which should be measured at its fair value, an intangible asset shall be measured initially at cost. After initial recognition, an intangible asset shall be measured at its cost plus revaluation increment revalued in accordance with the regulations, less any accumulated amortization and any accumulated impairment losses. The amortizable amounts of intangible assets are determined after deducting residual values from their original costs. Amortization is made on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. An intangible asset with an indefinite useful life shall not be amortized. The estimated useful lives for the computer software are 3 years.

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(Continued)

The residual value, the amortization period, and the amortization method for an intangible asset with a definite useful life shall be reviewed at least at each fiscal year-end. The useful life of an intangible asset that is not being amortized shall be reviewed each period to determine whether events and circumstances continue to support an indefinite useful life assessment for that asset. Any changes shall be accounted for as changes in accounting estimates.

(p) Deferred expenses Dry-docking expenses incurred are capitalized and taken directly to deferred expenses and amortized over 30 to 36 months.

(q) Employee retirement plan In accordance with the Labor Standards Law and related regulations, for entities of the Consolidated Company in the ROC, each employee will earn two months of salary for each of the first 15 years of service and one month of salary for each service year from the sixteenth year on. The maximum amount is 45 months of salary. Salary is defined as the average salary for the six-month period before retirement. Under the related regulations, the Consolidated Company is responsible for all pension payments. Under the Labor Pension Act, a defined contribution pension plan should be implemented for all new employees and for any employees employed before the enforcement date (July 1, 2005) of that Act who choose the new plan. For the employees who are covered under the defined contribution pension plan, the Company and its domestic subsidiaries have made a monthly cash contribution of 6% of salaries and wages to employees’ individual pension fund accounts at the Bureau of Labor Insurance based on the Labor Pension Act, and the contribution was recorded as pension expenses in the accompanying statements of income. For the above defined benefit pension plan, the Company and CMTL, under the Labor Standards Law, previously made a monthly cash contribution of 9% and 9.5%, respectively, of salaries and wages to a pension fund maintained with Bank of Taiwan (previously the “Central Trust of China”) to meet the above obligation. Payment of employee retirement benefits will be made by the pension fund first. The Consolidated Company has its pension plan actuarially valued on the balance sheet date and recognizes the net periodic pension costs. As a result, the excess of the accumulated benefit obligation over the fair value of plan assets is recognized as pension obligation. The Consolidated Company recognizes net periodic pension costs including expected returns on plan assets and amortization of net unrecognized transition obligations over the average remaining service period of the employees. CMTS and CMT HK’s subsidiary – CCL – do not recognize any pension cost or pension liabilities because of no full-time employees. CMT HK and CMT HK’s subsidiaries, have made monthly cash contributions of 5% to 20% of salaries to the pension fund designated by local government, and recognized them as current expense in accordance with local regulations.

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(Continued)

(r) Revenues and cost recognition Freight revenue is recognized after providing transportation service. The rental income of vessels is recognized in accordance with the rental contract. Warehouse storage charges and terminal handling fees are recognized after service is provided. Operating cost is recognized as incurred.

(s) Employees’ bonuses and directors’ and supervisors’ remuneration Employees’ bonuses and directors’ and supervisors’ remuneration based on the ROC Company Act and the Company’s articles of incorporation and appropriated after January 1, 2008, are accounted for by Interpretation (96) 052 issued by the Accounting Research and Development Foundation (ARDF). The Company and its domestic subsidiaries estimate the amount of employees’ bonuses and directors’ and supervisors’ remuneration according to the Interpretation and recognize it as expenses. Differences between the amount approved in the shareholders’ meeting and recognized in the financial statements, if any, are accounted for as changes in accounting estimates and recognized as profit or loss in the year of earnings distribution.

(t) Income tax Income tax is calculated based on accounting income. The amount of deferred tax liabilities or assets is calculated by applying the provisions of enacted tax law to determine the amount of tax payable or refundable, currently or in future years. The tax effects of taxable temporary differences are recorded as deferred tax liabilities. The tax effects of deductible temporary differences are recognized as deferred tax assets. An allowance is provided for deferred tax assets that may not be realized in the future. Deferred tax assets or liabilities are classified as current or non-current based on the classification of the asset or liability that resulted in the deferred item or, on certain transactions not directly related to an asset or liability, on the timing of the expected reversal date. Investment tax credits are accounted for using the flow-through method. Therefore, investment tax credits generated from acquisition of machinery and equipment are recognized as deferred income tax assets in the year in which the credit arises. The 10% surtax on undistributed earnings of the Company and its domestic subsidiaries is recorded as current income tax expense after the resolution to appropriate retained earnings is approved in a stockholders’ meeting. The income tax returns of the Consolidated Company are filed based on the Company’s and each subsidiary’s local tax law. The income tax expense of the Consolidated Company is the summation of the income tax expense of the Company and its subsidiaries.

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(Continued)

(u) Earnings per share Earnings per share of common stock are computed based on the weighted-average number of common shares outstanding during the period. Earnings per share for the prior period are retroactively adjusted to reflect the effects of new shares issued by transferring capital surplus and retained earnings. Employee stock bonuses which have not yet been approved by the stockholders’ meeting are potential common shares. Only basic earnings per share are disclosed if there is no dilution effect. Otherwise, both basic and diluted earnings per share are disclosed. For the purpose of calculating diluted net income per share, the potential common shares are deemed to have been converted into common stock at the beginning of the period, and the effect on net income of the additional common shares outstanding is considered accordingly.

(v) Operating segments An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity). The segment’s operating results are reviewed regularly by the entity’s chief operating decision maker to make decisions pertaining to the allocation of resources to the segment and to assess its performance for which discrete financial information is available.

(3) Changes in Accounting Policy (a) Effective from January 1, 2011, the Consolidated Company measured its loans and receivables in

accordance with the revised SFAS No. 34 “Financial Instruments: Recognition and Measurement”. The Company classified, measured, and disclosed the loans and receivables according to SFAS No. 34. The change had no significant effect on the Consolidated Company’s financial statements for the year ended December 31, 2011.

(b) Effective from January 1, 2011, the Consolidated Company adopted SFAS No. 41 “Operating

Segments”. In accordance with SFAS No. 41, an entity shall disclose information to enable users of its financial statements to evaluate the nature and financial effects of the business activities in which it engages and the economic environments in which it operates. The Consolidated Company determines and presents operating segments based on the information that is internally provided to the chief operating decision maker. The operating segment information is disclosed in the consolidated financial statements and not disclosed in the separate financial statements. This Standard supersedes SFAS No. 20 “Segment Reporting.” Such changes in accounting principle did not have any effect for the year ended December 31, 2011. The comparative information for 2011 was restated.

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(Continued)

(4) Cash and Cash Equivalents

December 31, 2011 December 31, 2010 Petty cash, checking accounts, and demand deposits $ 1,644,237 1,928,502 Time deposits 3,721,340 3,555,826 Cash equivalent – commercial paper 77,970 164,998 $ 5,443,547 5,649,326

(5) Financial Instruments

December 31, 2011 December 31, 2010 Financial assets measured at fair value through

profit or loss:

Financial assets held for trading: Listed stocks $ 1,163 5,096 Open-end mutual funds 1,309 2,088

$ 2,472 7,184 Financial assets designated as assets measured at fair value through profit or loss:

Credit linked and fixed revenue coupon (BNP Paribas – Market Access Product Linked to China Government Bond)

$ 30,605

28,684

Credit linked and fixed revenue coupon (Deutsche Bank – China Credit Linked Deposit)

29,367

28,531

$ 59,972 57,215 Available-for-sale financial assets – current

DB Platinum – Dynamic Money Market Fund $ - 58,401 Held-to-maturity financial assets – current

Financial Bonds – CPC Corporation, Taiwan Bonds

$ - 18,233

(a) As of December 31, 2011 and 2010, the unrealized gain or loss on financial assets measured at fair

value through profit or loss from changes in fair value was a gain of $320 and a loss of $305, respectively.

(b) A credit linked and fixed revenue coupon is a hybrid instrument. Even though it is required to

separately record the host contract and embedded derivative, they are recognized as financial assets designated as at fair value through profit or loss. This is because the fair value of the embedded derivative cannot be reliably measured as of the acquisition date.

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(Continued)

(c) As of December 31, 2011 and 2010, the unrealized losses on available-for-sale financial assets recorded as a separate component of stockholders’ equity amounted to $1,696 and $446, respectively. The Consolidated Company sold all of available-for-sale financial assets amounting to $60,894 (US$2,012,000) and recognized the related gain accounting to $206 (US$7,000). As of December 31, 2011, the above receivable was collected.

(d) The Consolidated Company subscribed to the financial debentures issued by CPC Corporation in excess of par value of $18,000 in 2010. The maturity date of the debentures is November 27, 2011. The interest is paid annually on each November 27 at a rate of 2.06%.

(6) Notes and Accounts Receivable – Third Parties

December 31, 2011 December 31, 2010 Notes receivable $ 31,100 34,373 Accounts receivable 116,117 102,488 147,217 136,861 Less: allowance for doubtful accounts (1,794) (6,288) $ 145,423 130,573 The notes and accounts receivable which are realizable within 1year are note discounted, and the book value is assumed to be the approximate fair value.

(7) Long-term Investments Under Equity Method December 31, 2011 December 31, 2010 Ownership % Amount Ownership % Amount Taiwan Navigation Co., Ltd. 24.638 $ 2,950,410 23.000 2,770,606 Global Energy Maritime Co., Ltd. 26.000 52,002 - $ 3,002,412 2,770,606

(a) Net investment income on long-term equity investments accounted for under the equity method

for the years ended December 31, 2011 and 2010, amounted to $148,161 and $202,259, respectively, based on the investees’ audited financial statements.

(b) The market price of the shares of Taiwan Navigation Co., Ltd., a listed investee company

accounted for under the equity method, based on the closing price of December 31, 2011 and 2010, amounted to $3,233,523 and $3,570,372, respectively. The pledge information is summarized in note 19.

14



(Continued)

(c) On June 14, 2010, the Consolidated Company’s board of directors resolved to enter into an agreement with CPC Corporation, Taiwan, and U-Ming Marine Transport Corp. to set up a joint venture company, Global Energy Maritime Co., Ltd. (GEM), to engage in the oil tanker business. GEM had been incorporated on March 24, 2011, and approved by the Ministry of Economic Affairs, R.O.C. According to the agreement, the Company owns 26% of the shares of GEM. As of December 31, 2011, the investment in GEM was $54,600.

(d) Cash dividend receivable as of December 31, 2011 and 2010, amounting to $211,151, was

recorded as deduction of long-term equity investments.

(8) Real Estate Investments

CMTS bought five buildings and related land usage rights for $116,887 (SGD 5,571,000) from a real estate company, Ho Bee (Sentosa) Pte. Ltd., in February 2006, and bought a building and related land usage right for $33,044 (SGD 1,443,000) from Locks Oil & Chemical (Singapore) in January 2011. As of December 31, 2011, the above payments were made and recorded under long-term investment – real estate investments.

(9) Property and Equipment / Rental Assets

(a) The Company’s and CMTL’s land was revalued in 1993 and 1984, respectively, (according to the present and the adjusted revalued amount in 2011.) The revaluation was as follows:

December 31, 2011 December 31, 2010 Revaluation increment:

Property and equipment $ 1,489,724 357,800 Rental assets 16,715 18,312

Revaluation increment, gross 1,506,439 376,112 Less: provision for land value increment tax (444,344) (87,224) Revaluation increment, net $ 1,062,095 288,888

(b) The rental assets are summarized as follows:

December 31, 2011 December 31, 2010 Land $ 2,379 46,479 Buildings and improvement 3,769 15,275 Revaluation increment – land 16,715 18,312 Cost and revaluation increment 22,863 80,066 Less: accumulated depreciation (2,152) (6,242) Rental assets, net $ 20,711 73,824

15



(Continued)

Rental income was received in accordance with the rental contracts, which were renewed periodically. According to the existing rental contracts, the ending periods of the contracts is December 31, 2014. The expected rental income to be received in future years is as follows:

Period Amount 2012.01.01~2012.12.31 $ 1,200 The rental income (net of the depreciation expense) for the years ended in December 31, 2011 and 2010, amounted to $4,994 and $4,653, respectively.

(c) There was no capitalized interest for the years ended December 31, 2010 and 2011. (d) CMTF had entered into an agreement to sell a bulk-carrier to the third party in 2010. The selling

price of $626,905 (US$19,646,000) minus the book value of $204,440 results in a gain on disposal of the bulk-carrier, amounting to $422,465. The Consolidated Company completed the ownership transfer on July 20, 2010, and recognized the related gain. As of December 31, 2010, the above receivable was collected.

(e) CPS had entered into an agreement to sell a bulk-carrier to a third party in 2011. The selling price of $317,076 (US$11,620,000) minus the book of value $50,442 results in a gain on disposal of the bulk-carrier, amounting to $266,634. The Consolidated Company completed the ownership transfer on April 12, 2011 and recognized the related gain. As of December 31, 2011, the above receivable was collected.

(f) The Company entered into an agreement to sell the land and building to a related party amounting to $4,500, and completed the ownership transfer on January, 2012. The book value of these land and building amounted to $3,325 and $185, and the sum of $3,510 were reclassified as non-current assets held for sale. The transaction are summarized in notes 18 and 21.

(g) The information on pledged property and equipment and rental assets is summarized in note 19.

(10) Short-term Loans and Commercial Paper Payable

December 31, 2011 December 31, 2010 Secured loans $ - 250,000 Credit loans 615,000 - Commercial paper payable 750,000 400,000 Less: discount on commercial paper payable (320) (186) $ 1,364,680 649,814 Unused credit lines $ 1,518,734 2,030,000 Range of interest rates 0.82%~1.46% 0.76%~1.10%

16



(Continued)

The assets pledged for commercial paper payable as of December 31, 2011 and 2010, are summarized in note 19.

(11) Long-term Loans

Debtor

Bank

Usage and redemption period

December 31, 2011

December 31, 2010

CMT Mega International Commercial

Bank Working capital (five installments,

quarterly, 2010.08~2012.10) $ - 240,000

〃 Industrial Bank of Taiwan Working capital (seven installments, semi-annually, 2008.11~2011.11)

- 27,500

CPG Deutsche Schiffs Bank Acquisition of assets (twenty installments, semi-annually, 2006.06~2015.12)

412,406 453,496

CPE Mega International Commercial Bank (formerly International Commercial Bank of China)

Acquisition of assets (twenty installments, semi-annually, 2005.12~2015.6)

335,592 381,609

CPD Deutsche Schiffs Bank Acquisition of assets (twenty installments, semi-annually, starting approximately from 2011)

1,101,881 1,175,446

CTU Mega International Commercial Bank

Acquisition of assets (twenty installments, semi-annually, 2012.01~2022.01)

1,362,375 -

CTD 〞〞 390,548 - CMTL Cathay United Bank Working capital (ten installments,

quarterly, 2010.5~2012.11, plus $67,000 for last payment) (note)

47,000

47,000

3,649,802 2,325,051 Less: current portion (436,306) (490,677) $ 3,213,496 1,834,374 Range of interest rates during the year 0.85%~1.80% 0.93%~1.50% Note: The Consolidated Company repaid part of loans in advance due to operating capital management.

(a) The assets pledged as of December 31, 2011 and 2010, to secure long-term loans are summarized

in note 19.

17



(Continued)

(b) As of December 31, 2011, the repayment schedule for the long-term loans was as follows:

Period Amount 2012.01.01~2013.12.31 $ 436,306 2013.01.01~2014.12.31 551,424 2014.01.01~2015.12.31 504,424 2015.01.01~2016.12.31 470,309 After 2016.01.01 1,687,339 $ 3,649,802

(12) Bonds Payable

The Company issued secured bonds at face value. The interest is calculated and paid annually from the date of issuance. The bonds payable on December 31, 2011 and 2010, were as follows: Guarantee

bank Interest rate

Issuance date

Duration

December 31, 2011

December 31, 2010

The first secured bonds payable

Shanghai Commercial Bank

2.90% September 2008

Redeemable five years after date of issuance

$ 1,000,000 1,000,000

The second secured bonds payable

Maga International Commercial Bank

2.21% May 2009 Redeemable five and a half years after date of issuance

1,000,000 1,000,000

〃 Cathay United Bank


500,000 500,000

〃 Shanghai Commercial Bank


500,000

500,000

$ 3,000,000 3,000,000 The interest expense for the above bonds payable was $73,200 and $75,626 for years ended December 31, 2011 and 2010, respectively.

18



(Continued)

(13) Pension (a) The Company made an actuarial valuation of its pension plan using December 31, 2011 and 2010,

as the measurement dates. According to the actuarial reports, the reconciliation of the funded status and prepaid pension was as follows:

December 31, 2011 December 31, 2010 Benefit obligations:

Vested benefit obligation $ (53,519) (45,844) Non-vested benefit obligation (9,604) (14,483) Accumulated benefit obligation (63,123) (60,327) Additional benefits based on future salary increase

(6,730)

(4,297)

Projected benefit obligation (69,853) (64,624) Fair value of plan assets 36,409 37,214 Funded status (33,444) (27,410) Unrecognized pension loss 33,888 32,426 Adjustment to minimum liabilities (27,158) (28,129) Accrued pension liabilities $ (26,714) (23,113)

(b) CMTL made an actuarial valuation of its pension plan using December 31, 2011 and 2010, as the

measurement dates. According to the actuarial reports, the reconciliation of the funded status and accrued pension liability was as follows:

December 31, 2011 December 31, 2010 Benefit obligations:

Vested benefit obligation $ (79,525) (73,403) Non-vested benefit obligation (37,628) (42,090) Accumulated benefit obligation (117,153) (115,493) Additional benefits based on future salary

increase

(11,290)

(11,960) Projected benefit obligation (128,443) (127,453)

Fair value of plan assets 22,696 23,348 Funded status (105,747) (104,105) Unrecognized pension loss 10,181 8,999 Accrued pension liability $ (95,566) (95,106)

19



(Continued)

(c) The net periodic pension costs of the Company and CMTL were as follows:

2011 2010 Service cost $ 6,902 8,170 Interest cost 3,179 4,643 Actual return on plan assets (797) (1,721) Amortization and deferral 3,559 2,621 Accrued manager pension - 1,977 Deduction in interest - (3,173) Net pension costs of defined benefit

pension plan $ 12,843

12,517

Net pension costs of defined contribution pension plan

$ 4,765

3,971

(d) Actuarial assumptions of the Company and CMTL were as follows:

2011 2010 Discount rate 1.625%~1.88% 1.75% Future salary increase rate 1.00%~3.50% 1.00%~3.50% Expected long-term rate of return on plan assets 1.625%~1.88% 1.75%

(e) As of December 31, 2011 and 2010, the pension expenses for the other consolidated subsidiaries

were $3,465 and $6,710, respectively. (f) As of December 31, 2011 and 2010, the pension expenses for the other consolidated subsidiaries

were $160,289 and $145,333, respectively. (g) For the year ended December 31, 2011, the Consolidated Company’s actual payment of employee

pensions amounted to $10,065. For the year ended December 31, 2010, the Consolidated Company’s actual payment of employee retirement amounted to $71,815 after deducting $66,351 from the pension fund maintained with Bank of Taiwan; the remaining $5,464 was recorded as periodic expense.

(14) Stockholders’ Equity

(a) Common stock As of December 31, 2011 and 2010, the authorized capital was $3,600,000, and the total issued common stock amounted to $2,564,736 at par value of $10 (New Taiwan dollars) per share.

20



(Continued)

(b) Capital surplus and appropriation of retained earnings

(i) Capital surplus From the year of 2011, pursuant to the ROC Company Act, capital surplus should be used to offset a deficit first and then converted the realized capital surplus into capital or distributed as cash dividends. The aforementioned realized capital surplus was generated from the excess of the issuance is priced over the par value of capital stock and donations for the year of 2011. According to Regulations Governing the Offering and Issuance of Securities by Securities Issuers, capital increases by transferring paid-in capital in excess of par value should not exceed 10% of total common stock outstanding. In addition, capital increases by transferring paid-in capital in excess of par value can only commence in the following year. As of December 31, 2011 and 2010, the Company had recognized an increase in its capital surplus to reflect the change in percentage of ownership of investees amounting to $42,503. The capital surplus mentioned above, which is not that mentioned in Article 241 of the ROC Company Act, cannot be used to increase common stock.

(i) Legal reserve

According to the amended Company Act which was announced in January 2012, the Company must retain 10% of its annual income as a legal reserve until such retention equals the amount of the paid-in capital. If a company has no accumulated deficit, it may, in pursuant to a resolution approved by the stockholders meeting, distribute its legal reserve by issuing new shares or cash for the portion in excess of 25% of the paid-in capital.

(iii) Appropriation of retained earnings and dividend policy According to the Company’s articles of incorporation amended on May 27, 2009, 10% of annual net income (less payment of corporate income tax and losses of prior years, if any) shall be appropriated as legal reserve, and when there is a reduction in stockholders’ equity at the end of the year, the Company should appropriate the same amount as special reserve from retained earnings. The remaining balance, if any, should be distributed as follows: - 0.5% ~2% as employees’ bonuses. - Remuneration to directors and supervisors not exceeding 2%. - The remainder and the accumulated unappropriated earnings of prior years are

distributable as dividends to stockholders. The distribution rate is based on the proposal of the Company’s board of directors and approved in the stockholders’ meeting.

Dividends are paid in cash or stock from retained earnings, and the amount of cash dividends should not be less than 10% of total dividends. However, if the cash dividend per share is less than $0.1 (New Taiwan dollar), a stock dividend will be paid instead.

21



(Continued)

According to SFB regulations, when the Company has a net debit balance of the stockholders’ equity account, there must be an equal special reserve set aside from current net income or unappropriated earnings of prior years. When the debit balance of the stockholders’ equity account is reversed, the reversal of the amount of special reserve for distribution is permitted in the following year. The Company estimates the amount of employees’ bonuses and directors’ and supervisors’ remuneration according to the ROC Company Act and the Company’s articles of incorporation in preparing the financial statements. The appropriated percentages of employees’ bonuses and directors’ and supervisors’ remuneration were 1% and 1%, respectively, of net income after deducting the legal reserve. The Company recognized employees’ bonuses and directors’ and supervisors’ remuneration in total amounting to $18,074 and $19,290 for the years ended December 31, 2011 and 2010, respectively. If shares of stock are to be distributed as employees’ bonuses, the number of shares will be based on the closing price of the day before the shareholders’ meeting and considering the ex-rights and ex-dividend effects. Differences between the amount approved in the shareholders’ meeting and recognized in the financial statements, if any, are accounted for as changes in accounting estimates and recognized as profit or loss in the following year.

(iv) Based on the resolutions approved by the stockholders during the annual stockholders’ meeting held on April 16, 2010, and June 9, 2011, appropriations of cash dividends were $6 (New Taiwan dollars) and $3.2 (New Taiwan dollars) per share, amounting to $1,538,841 and $820,715, respectively. Furthermore, the earnings distributions to employees, directors and supervisors for the fiscal years 2010 and 2009 were as follows: 2010 2009 Employees’ bonuses – cash $ 9,645 12,923 Directors’ and supervisors’ remuneration 9,645 25,847 $ 19,290 38,770 The above earnings distribution had no difference from the resolution by the meeting of the board of directors. The related information about earnings distribution can be queried in the Market Observation Post System after the stockholders’ meetings.

22



(Continued)

(15) Income Tax (a) The Company and its ROC subsidiaries are subject to income tax at a statutory rate of 17% in 2011

and 2010. The Company and its ROC subsidiaries are also subject to the “Income Basic Tax Act” to calculate income tax. In accordance with the tax statutes of Singapore, except for income from shipping, which is tax free, CMTS and its subsidiaries’ income is subject to a 26% income tax in Singapore. CMT HK and its subsidiaries’ ownership was all held by a foreign investor, and their freight revenue was earned from outside of Hong Kong. There is an income tax exemption on freight income earned out of Hong Kong. The Consolidated Company’s income tax expense for the years ended December 31, 2011 and 2010, was as follows: 2011 2010 Current income tax expense $ 40,997 22,303 10% surtax on unappropriated earnings 14,377 104,583 Deferred tax expense (benefit)

Deferred tax effect resulting from change in income tax rate - (5,086) Increase in overseas long-term investment income under

equity method 42,816

74,061

Others (716) 6,033 Income tax expense $ 97,474 201,894

(b) The differences between “expected” income tax computed by applying the statutory income tax

rates and income tax expense are summarized as follows: 2011 2010 "Expected" income tax $ 247,056 450,357 10% surtax on unappropriated earnings 14,377 104,583 Tax effect of tax exemption for overseas income (173,366) (306,365) Tax effect of tax exemption for long-term investment income

under equity method (25,187)

(34,384)

Tax effect resulting from change in income tax rate - 534 The amount of basic income tax in excess of the regular income tax

-

6,394

Non-deductible securities trading loss (securities trading gain) (9) (26,537) Dividend revenue-overseas 33,150 - Unrealized loss on financial instruments and others 1,453 7,312 Income tax expense $ 97,474 201,894

23



(Continued)

(c) As of December 31, 2011 and 2010, deferred income tax assets (liabilities) were as follows:

December 31, 2011 December 31, 2010 Deferred tax assets:

Foreign currency translation adjustments $ 67,659 132,388 Accrued pension liability 16,246 16,168 Others 654 768 Less: provision for deferred tax assets (654) (654)

83,905 148,670 Deferred tax liabilities:

Investment income recognized under the equity method – overseas

(116,877)

(74,061)

Others (645) (1,397) (117,522) (75,458) Deferred tax assets (liabilities), net $ (33,617) (73,212) Net deferred tax assets or liabilities were presented in the balance sheets as follows: December 31, 2011 December 31, 2010 Deferred tax assets – current $ - 114 Deferred tax liabilities – current (3) - Deferred tax assets – non-current 16,246 73,098 Deferred tax liabilities – non-current (49,860) - $ (33,617) 73,212

The subsidiaries of the Company, CMT HK and CMTS, did not appropriate their earnings before December 31, 2009, and appropriated 25% of the periodic earnings after January 1, 2010 according to their dividend distribution policy. Besides, the Company does not expect to dispose the stock investments of CMT HK and CMTS in the foreseeable future, and can control the timing of the reversal of temporary difference arising from the difference between the book value and the tax basis of its long-term equity investment in its foreign subsidiaries (CMT HK and CMTS) and unappropriated earnings. Therefore, the temporary difference is not expected to reverse in the foreseeable future and a deferred tax liability should not be recognized.

(d) The income tax returns of the Company and the Company’s other ROC subsidiaries were

examined for the years through 2009.

24



(Continued)

(e) Information on imputation credit account (ICA)

December 31, 2011 December 31, 2010 Unappropriated earnings retained after January 1, 1998 $ 5,372,584 6,156,861 ICA balance $ 477,391 488,380

2011 2010 Creditable ratio for earnings distribution to resident shareholders in the ROC

9.27% (estimated)

10.68% (actual)

(16) Earnings per Share

2011 2010 Before

income taxAfter

income taxBefore

income tax After

income tax Basic earnings per share:

Consolidated net income $ 1,101,575 1,004,101 2,134,043 1,932,149 Weighted-average number of shares

outstanding (thousands) 256,474

256,474

256,474

256,474

Basic earnings per share (dollars) $ 4.30 3.92 8.32 7.53Diluted earnings per share:

Consolidated net income $ 1,101,575 1,004,101 2,134,043 1,932,149 Weighted-average number of shares

outstanding (thousands) 256,474

256,474

256,474

256,474

Effects of dilutive potential common stock: Employees’ bonuses 294 294 192 192

256,768 256,768 256,666 256,666 Diluted earnings per share (dollars) $ 4.29 3.91 8.31 7.53

25



(Continued)

(17) Information about Financial Instruments (a) The book values of financial instruments with a short maturity approximate to their fair values.

As of December 31, 2011 and 2010, the fair values of other financial instruments were as follows:

December 31, 2011 December 31, 2010

Carrying amount

Fair value

Carrying amount

Fair value

Financial assets:

Financial assets measured at fair value through profit or loss – current

$ 62,444

62,444

64,399

64,399

Available-for-sale financial assets – current

-

-

58,401

58,401

Held-to-maturity financial assets – current

-

-

18,233

18,233

Financial liabilities: Long-term loans 3,649,802 3,649,802 2,325,051 2,325,051Bonds payable 3,000,000 3,000,000 3,000,000 3,000,000

Off-balance-sheet financial instruments: Guarantee for bank loans - 7,483,343 - 5,220,790

(b) The following methods and assumptions were used in estimating fair values:

(i) The book value of short-term financial instruments is considered to be the fair value because of the short-term nature of these instruments, and the book value method is considered to be a reasonable basis to assess the fair value. Such method is applicable to cash and cash equivalents, notes and accounts receivable or payable, other current financial assets, short-term loans and commercial paper payable, accrued expenses and other payable.

(ii) If public quoting of financial assets and liabilities is available, then the quoted price will be

the fair value. If market value is not available, an assessment method will be used. The assumptions used by financial market traders for similar financial instruments when quoting their prices are used as a reference. The terms of similarity include the credit rating of the debtor, the method of computing interest expense for the remaining period of the contract, the remaining period for payment of principal, and the currency.

(iii) Financial assets held to maturity:

Held-to-maturity financial assets are carried at amortized cost under the effective interest method; the book value is equivalent to the fair value due to the interest rate originally obtained being close to the market interest rate.

26



(Continued)

(iv) The fair values of the long-term loans were based on the present value of future cash flow, and the discount rates were the interest rate of similar loan agreements which the Consolidated Company could obtain. The fair values approximate their book values on the balance sheet date.

(v) The fair values of bonds payable are based on quoted market prices. However, the fair

values are not expected to equal future cash outflow. (vi) The fair values of bank loan guarantees are based on the loan contracts.

(c) The fair value of the financial instruments evaluated by the Consolidated Company under public quoting or an assessment method is summarized as follows:

December 31, 2011 December 31, 2010 Public

quote value Assessment value

Public quote value

Assessment value

Financial assets: Cash and cash equivalents $ 5,443,547 - 5,649,326 - Financial assets measured at fair value through profit or loss – current

2,472

59,972

7,184

57,215

Available-for-sale financial assets – current - - - 58,401Held-to-maturity financial assets – current - - - 18,233Notes and accounts receivable (including related parties)

-

262,388

-

238,415

Other current financial assets - 22,730 - 10,487Financial liabilities:

Short-term loans and commercial paper payable

-

1,364,680

-

649,814

Notes and accounts payable - 132,829 - 142,060Accrued expenses and other payable - 260,126 - 320,056Long-term loans - 3,649,802 - 2,325,051Bonds payable - 3,000,000 - 3,000,000 For the years ended December 31, 2011 and 2010, the net gain or loss resulting from changes in fair values determined by public quoting or an assessment method amounted to a loss of $541 and a gain of $155,158, respectively.

(d) Information about significant financial risk

(i) Market risk

The equity securities held by the Consolidated Company, other than those accounted for under equity method, are classified as financial assets measured at fair value through profit or loss. As these assets are measured at fair value, the Consolidated Company has risk exposure related to changes in fair value in an equity securities market.

27



(Continued)

(ii) Credit risk The Company and its subsidiaries evaluate the financial condition of their customers when taking sales orders to reduce credit risk of related accounts receivable. The maximum amounts of loss are the contract value. The primary potential credit risk is from financial instruments like cash, cash equivalents, equity securities accounted for other than under the equity method, and accounts receivable. The Consolidated Company’s cash deposits are maintained with different financial institutions. Cash equivalents represent investments in commercial paper with a maturity of three months or less from the date of investment. Equity securities accounted for other than under the equity method were funds and listed stock issued by companies with a good credit rating. The Consolidated Company manages credit risk exposure related to each financial institution and believes that there is no significant concentration of credit risk of cash and cash equivalents. The aggregation of sales to the Consolidated Company’s major customers exceeding 10% of the Consolidated Company’s total sales accounted for 67% and 58% of the total net sales for the six-month periods ended December 31, 2011 and 2010, respectively. In order to reduce credit risk, the Consolidated Company assesses the financial status of the customers and the possibility of collection of receivables in order to estimate an adequate allowance for doubtful accounts on a regular basis. The customers have had a good credit and profit record. The Consolidated Company has never suffered a significant credit loss.

(iii) Liquidity risk

As the capital and working capital of the Consolidated Company are sufficient to fulfill all contract obligations, there is no liquidity risk related to unfulfilled contract obligations. The fund and securities investment by the Consolidated Company has quoted prices and could be publicly sold at the approximate market price.

(iv) Cash flow risk from changes in interest rates

The bonds payable are fixed-interest-rate debts. Changes in market interest rates have no effect on future cash flow. The Consolidated Company’s short-term and long-term loans are both based on floating interest rates. Changes in the prevailing market rate will affect the interest on short-term and long-term loans and cause future cash flows to fluctuate. The Consolidated Company will increase its cash outflow by $12,536 in the following year for every 0.25% increase in the market rate, based on the outstanding loan balances.

28



(Continued)

(18) Related-party Transactions (a) Names of related parties and their relationship

Related Party Relationship Orient Overseas Container Line (Taiwan)

Limited (OTWL) Related party in essence

Orient Overseas Container Line Logistic (Taiwan) Ltd. (OLTWL)

〃

Associated International Inc. (AII) The Company’s chairman is a director of AII CMT Land Development Inc. (CMD) Subsidiary company of AII Associated Development Inc. (ADI) 〃 The directors, supervisor, chief executive

officer, and executive vice president The Consolidated Company’s main management

(b) Summary of significant transactions with related parties

(i) Freight revenue

2011 2010

Amount

% of operatingrevenue

Amount


OTWL $ 895,767 26 801,837 19 OLTWL 56,187 2 118,736 3 $ 951,954 28 920,573 22 The collection periods for related parties are similar to those for ordinary customers: within 30 to 45 days. There are different terms and conditions in the service contracts with different parties. If the contracts have similar terms and conditions, the selling prices for related parties and ordinary customers are not significantly different. Accounts receivable resulting from the above transactions were as follows: December 31, 2011 December 31, 2010 Amount % Amount % OTWL $ 83,732 32 81,430 34 OLTWL 10,799 4 9,914 4 $ 94,531 36 91,344 38

29



(Continued)

(ii) Logistics revenue

2011 2010

Amount


Amount


AII $ 81,860 2 80,095 2

CMTL’s selling price for related parties is cost plus 25%. When AII receives cash from customers, AII will pay CMTL immediately. The accounts receivable resulting from the above transactions are summarized below:

December 31, 2011 December 31, 2010 Amount % Amount % AII $ 22,434 9 16,498 7

(iii) Operating expenses

The Consolidated Company’s rental payments to related parties for parking spaces are summarized below: 2011 2010

Amount

% of operatingexpenses

Amount

% of operating expenses

CMD $ 4,751 1 4,891 1 AII - - 3,724 1 $ 4,751 1 8,615 2 The consolidated Company entered into rental agreements with related parties from November 2008 to December 2014. The prices were similar to market prices, and the rentals were paid monthly.

(iv) Property transaction ATI purchased land and buildings for business use from CMD. The purchase price was $12,471 (including land price of $8,592 and buildings price of $3,879), based on the appraisal report issued by Information Service, Ltd. as well as the negotiation between the two parties. The ownership was transferred on December 30, 2010. As of December 31, 2010, the price of land and buildings amounting to $7,599 would still be unpaid until January 2011, and was recorded as accrued expenses and other non-current financial liabilities.

30



(Continued)

The Company entered into an agreement to sell the land and building to ADI amounting to $4,500. The traction is summarized in notes 9 and 21.

(v) Salaries and remuneration of main management The Consolidated Company paid salaries and remuneration to the directors, supervisors, chief executive officer, and executive vice president in 2011 and 2010 as follows: 2011 2010 Salaries $ 32,232 32,979 Incentives 9,752 17,847 Transportation allowance 265 322 Employees’ bonus 2,880 2,095 Note: The employees’ bonus for 2011 was an estimate. Please see note 14.

(19) Pledged Assets

Assets Subject December 31, 2011

December 31, 2010

Long-term investments under

equity method – stock Commercial paper payable and

long-term loans and credit lines $ 1,300,533 1,040,527

Property and equipment – land and buildings

Short-term and long-term loans 816,990

337,887

Property and equipment – transportation equipment and warehouse storage equipment

Short-term and long-term loans 6,431,721

3,615,850

Rental assets – land and buildings

Short-term and long-term loans - 2,862

Refundable deposits and pledged time deposits

Guarantee for construction payments, letters of credit, warehouse deposits, long-term loans, and guarantee for letters of credit for ETC and import duty

67,491

69,497

$ 8,616,735 5,066,623

31



(Continued)

(20) Commitments and Contingent Liabilities

(a) According to CMTL’s contracts for leasing warehouses, offices, and parking spaces, the payment schedule for rental was as follows:

Period Amount

2012.01.01~2012.12.31 $ 48,825 2013.01.01~2013.12.31 27,265 2014.01.01~2014.12.31 27,333 2015.01.01~2015.12.31 19,142 2016.01.01~2016.12.31 18,445 After 2017.01.01 21,464 $ 162,474

After 2017, the charge rental total approximately amounted to $23,374, according to the Bank of Taiwan, annually deposit interest rate of 1.345% discount present value amounted to $21,464.

(b) In order to extend business scale, the Consolidated Company entered into a land lease contract with the third party on November 24, 2011. The annual rental expense is based on 13.66% of the present value announced by the municipal and country government from the day of contract to October 23, 2021. However, the land can be used after being remodeled. Hence, it is rent-free during the construction period and within 12 months from the contract date according to the term of the above contract. As of the audit report date, the rental has not yet been calculated.

(c) In order to extend business scale, subsidiaries took over a bulk-carrier construction contract from

third parties on September 28, 2007. Additionally, on April 9, 2010, subsidiaries entered into a bulk-carrier construction contract with a shipbuilding company; also, on April 13, 2010, subsidiaries entered into two bulk-carrier construction contracts. The related information was as follows:

Purchaser Date of contract Total price Date of delivery Price paid CTD April 13, 2010 1,953,060 January 2012 979,134 (USD64,500,000) (Note) (USD32,336,000)CPN&CPT September 28, 2007, 4,027,240 August 2012 & 1,503,069

& April 9, 2010 (USD133,000,000) February 2013 (Note) (USD49,639,000)Note: These are the estimated dates of delivery.

(d) As of 2011 and 2010, the Company had promissory notes amounting to $3,102,100 as guarantee for bonds payable.

32



(Continued)

(e) As of December 31, 2011, the Consolidated Company still had several long-term leases of its ships with customers in effect. The ending periods of the contracts are from March 2012 to February 2017.

(f) The Consolidated Company provided guarantees to related parties as follows (expressed in

thousands of New Taiwan or U.S. dollars):

Guarantor Guarantee Subject December 31, 2011

December 31, 2010

The Company CPE Bank loans $ 335,654

(USD 11,085) 381,603 (USD 13,100)

The Company CPN Guarantee for ship construction payments

462,981 (USD 15,290)

445,398 (USD 15,290)

The Company CPT Guarantee for ship construction payments

384,556 (USD 12,700)

369,951 (USD 12,700)

The Company CTU Guarantee for ship construction payments

1,948,518 (USD 64,350)

563,666 (USD 19,350)

The Company CTD Guarantee for ship construction payments

1,362,600 (USD 45,000)

563,666 (USD 19,350)

The Company ATI Bank loans 200,000

200,000

CMT HK CPG Bank loans 412,474 (USD 13,622)

453,496 (USD 15,568)

CMT HK CPD Guarantee for ship construction payments, and bank loans

1,907,640 (USD 63,000)

1,835,190 (USD 63,000)

CMT HK CCL Guarantee for purchase FFA

423,920 (USD 14,000)

407,820 (USD 14,000)

$ 7,438,343 5,220,790 (f) In 2009, the Consolidated Company signed an addendum to one of the original long-term

chartering contracts. In accordance with the agreement, the customer paid part of rental fees in advance. Additionally, the customer has to pay the rental periodically from January 2010 to August, 2014.

(21) Subsequent Events

(a) The Company entered into an agreement to sell a bulk-carrier to a related party amounting to

US$4,500. The above receivable had been collected in January 2012. The transaction is summarized in notes 9 and 18.

(b) The bulk-carrier of the subsidiary Company, CTD, was launched into business in January 10,

2012.

33



(Continued)

(c) The subsidiary company of the Company, Kimen Development Corp. (KDC), decided to dismiss itself based on the board of directors’ resolution on December 20, 2011, and be settled on February 24, 2012.

(22) Others

(a) Employee expenses, depreciation expenses, and amortization expenses for the six-month periods

ended December 31, 2011 and 2010, were as follows:

2011 Operating

cost Operating expenses

Total

Employee expenses Salaries and wages $ 274,785 206,517 481,302 Labor and health insurance 5,787 19,373 25,160 Pension expense 8,041 13,032 21,073 Other 11,729 4,352 16,081

Depreciation expenses (note) 346,419 11,250 357,669 Amortization expenses 53,581 1,003 54,584 2010 Operating

cost Operating expenses

Total

Employee expenses Salaries and wages $ 292,525 194,805 487,330 Labor and health insurance 48,425 9,787 58,212 Pension expense 6,925 21,737 28,662 Other 9,939 4,229 14,168

Depreciation expenses (note) 368,486 10,217 378,703 Amortization expenses 72,897 1,459 74,356 Note: excluding the deduction of rental income of $3,645 and $2,982 for the years ended

December 31, 2011 and 2010, respectively.

34



(Continued)

(b) Significant impact on the foreign currency financial assets and liabilities was as follows (in thousands):

December 31, 2011 December 31, 2010 Foreign

Currency Exchange Rate

NTD

Foreign Currency

Exchange Rate

NTD

Financial assets:

Monetary items – USD 147,148 30.28 4,455,641 159,924 29.13 4,658,592

Financial liabilities: Monetary items –

USD 120,683 30.28 3,654,281 70,059 29.13 2,040,823 (23) Segment Information

(a) Industrial information

The Consolidated Company’s industrial information is summarized as follows:

2011

Inland trucking department

Shipping

department

Terminal & logistics

department

Others

Eliminations

Consolidated

Revenue from third parties

$ 1,494,245 1,532,907 383,803 8,134 - 3,419,089

Revenue from the parent company and consolidated subsidiaries

1,374,057

168,023

107

-

(1,542,187)

- Total revenues $ 2,868,302 1,700,930 383,910 8,134 (1,542,187) 3,419,089 Segment income $ 12,985 753,602 41,372 526 2,653 811,138 Investment income 148,161 Non-operating income

of the Consolidated Company, net

279,442

Interest expense (137,166)Consolidated income

before tax

$ 1,101,575 Identifiable assets $ 2,481,639 12,527,822 1,596,193 201,319 (150,012) 16,656,961 Rental assets 20,711 Long-term investment 3,133,527 Total assets $ 19,811,199 Depreciation and

amortization $ 150,550

230,056

31,603

44

-

412,253

Capital expenditure $ 216,921 2,198,384 21,544 - - 2,436,849

35



(Continued)

2010

Inland trucking department

Shipping

department

Terminal & logistics

department

Others

Eliminations

Consolidated

Revenue from third parties

$ 1,508,480 2,285,411 377,424 10,479 - 4,181,794

Revenue from the parent company and consolidated subsidiaries

1,223,482

291,120

353

-

(1,514,955)

- Total revenues $ 2,731,962 2,576,531 377,777 10,479 (1,514,955) 4,181,794Segment income $ 16,099 1,330,268 38,719 1,712 979 1,387,777Investment income 202,259Non-operating income

of the Consolidated Company, net

679,564

Interest expense (135,557)Consolidated income

before tax

$ 2,134,043Identifiable assets $ 2,236,666 10,574,676 585,161 397,945 (6,115) 13,788,333Rental assets 73,824Long-term investment 2,866,711Total assets $ 16,728,868Depreciation and

amortization $ 95,330

324,358

33,371

-

-

453,059

Capital expenditure $ 230,583 1,865,610 22,912 - - 2,119,105 (b) Geographic information

The geographic information of the Consolidated Company’s Group’s sales presented by customer location and non-current assets presented by location were as follows: a. Revenue from external customers:

Country 2011 2010 Taiwan $ 1,946,035 1,946,426 China 1,057,344 1,179,854 Others 415,710 1,055,514 $ 3,419,089 4,181,794

36



(Continued)

b. Non-current Assets:

Country 2011 2010 Taiwan $ 2,738,842 1,838,680 Hong Kong 8,049,671 5,847,408 Others 131,268 96,681 $ 10,919,781 7,782,769

(c) Major customers

Sales to individual customers constituting over 10% of the total revenue in the consolidated statements of income of 2011 and 2010 are summarized as follows:

2011 2010 Nature of services Amount % Amount %

Customer:

A Company Container transportation

$ 895,767

26

801,837

19

B Company Container transportation

344,388

10

337,284

8

F Company Vessel transportation 207,511 6 471,387 11 H Company Vessel transportation 1,057,048 31 1,137,010 28

$ 2,504,714 73 2,747,518 66

(24) Pre-disclosure of the adoption of International Financial Reporting Standards (a) According to the Rule No. 0990004943 issued by financial Supervisory Commission Executive

Yuan (FSC) on February 2, 2010, staring 2013, companies with shares listed on the TSE or traded on the Taiwan GreTai Securities Market or emerging Stock market should prepared the consolidated financial statement in accordance with the International financial Reporting Standards, International Accounting Standards, International financial reporting Interpretations committed (IFRIC), Interpretations committee (SIC) and the other interpretations approved by FSC. Due to the aforementioned amendments, the consolidated company established a taskforce to monitor and execute the IFRSs adoption plan. Da-fong, Chang, the senior manager, is responsible for the conversion plan. The important plan items, responsible divisions and plan progress are listed as follows:

37



(Continued)

Contents of plan

Responsible department Status of execution

Assessment phase (from January 1, 2010 to December 31, 2011): ◎ Make a plan to adopt the IFRSs and set up a project

team ◎ Compare and analyze the differences between the

existing accounting policies and the accounting policies to be adopted under IFRSs

◎ Assess the adjustments of the existing accounting policies

◎ Assess the applicability of the IFRS 1-“First-time Adoption of International Financial Reporting Standards”

◎ Assess the adjustments of the related information technology system and internal control

Accounting Department Accounting Department Accounting Department Accounting Department Internal Audit Department and IT Department

Completed Completed Completed Completed Completed

Preparation phase (from January 1, 2011 to December 31, 2012): ◎ Determine how to adjust the existing accounting

policies in accordance with IFRSs ◎ Determine how to apply to the IFRS 1-“First-time

Adoption of International Financial Reporting Standards”

◎ Adjust the related information technology system and internal control

Accounting Department Accounting Department Internal Audit Department and IT Department

Completed Completed In Progress

Implementation Phase (from January 1, 2012 to December31, 2013): ◎ Test run the adjusted related information technology

system ◎ Gather information to prepare the opening balance

sheets and comparative financial statements in conformity with IFRSs

◎ Prepare financial statements in conformity with IFRSs

IT Department Accounting Department Accounting Department

38



(Continued)

(b) As of December 31, 2011, the Group had assessed the material differences shown below between the existing accounting policies and the accounting policies to be adopted under IFRSs:

Accounting issues Description of differences

Mergers and business combinations – non- controlling interest

Under ROC GAAP: Whether the acquirer has pre-acquisition controlling interests in an investee at the acquisition date or not, the acquirer doesn’t remeasure the pre-acquisition interest at fair value. Under IFRSs: Non-controlling interests (NCI) are recognized initially at fair value or at their proportionate interest in the recognized amount of the identifiable net assets of the acquiree at the acquisition date.

Business combinations – changes in a parent's ownership interest in a subsidiary

Under ROC GAAP: The difference between the disposal price and the carrying amount of the long-term equity investment under the equity method on the disposal date is being recognized as gain or loss from the disposal of the long-term equity investment. The associated capital surplus and other equity items resulting from the long-term equity investment are reclassified into current gain or loss in proportion with the disposal of the long-term equity investment. Under IFRSs: Changes in a parent’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions (ie transactions with owners in their capacity as owners). In such circumstances, the carrying amounts of the controlling and non-controlling interests shall be adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received shall be recognized directly in equity and attributed to the owners of the parent company. If a parent company loses control of a subsidiary, it derecognizes the assets (including any goodwill) and liabilities of the subsidiary at their carrying amounts at the date when control is lost. It also derecognizes the carrying amount of any non-controlling interests in the former subsidiary at the date when control is lost (including any components of other comprehensive income attributable to them). A parent company recognizes any resulting difference as a gain or loss in profit or loss attributable to the parent company. A parent company recognizes the investment retained in the former subsidiary at its fair value at the date when control is lost, and reclasses the investment as long-term investment under the equity method or other financial assets.

39



(Continued)


Associates – changes in a parent's ownership interest in a associate

Under ROC GAAP: There will be changes in the parent's ownership interest if the parent company does not invest in the associated enterprises in proportion with its ownership percentage when the associated enterprises increased its common stock. The difference between the book value and the equity belonging to the parent company should be calculated and adjusted to the capital surplus or retained earnings. Under IFRSs: The differences between the fair value of the identifiable net assets and the investment costs of the associated enterprises (due to the above changes) are recognized in profit or loss.

Property, plant and equipment – components

Under ROC GAAP: There is no principle for the depreciation of the different useful life in each part of an item of the property, plant and equipment. Under IFRSs: Each part of an item of the property, plant and equipment with a cost that is significant in relation to the total cost of the item and with a useful life that is different from the useful life of the item shall be depreciated separately.

Investment property Under ROC GAAP: Property held by a lessee under an operating lease is not classified as property; rather, it is accounted for as an operating lease. There is no guidance on accounting policy of investment property. Under IFRSs: Investment property is property held to earn rental income or for capital appreciation or both. A portion of a dual-use property is classified as investment property only if the portion could be sold or leased out under a finance lease. Otherwise, the entire property is classified as property, plant and equipment unless only an “insignificant” portion is held for own use. Subsequent to initial recognition, all investment property is measured using either the fair value model or the cost mode. When the fair value model is chosen, changes in fair value are recognized in profit or loss.

Employee benefits – unrecognized transition net asset or net obligation

Under ROC GAAP: Unrecognized net transition asset or obligation is amortized into net pension cost by using straight-line method over the average remaining service period of the employees. Under IFRSs: The unrecognized net transition asset or obligation should not exist any longer; it must be adjusted to retained earnings at the date of transition to IFRSs.

40




Employee benefits – actuarial gains and losses of defined benefit plans

Under ROC GAAP: It is not allowed to recognize actuarial gains and losses from defined benefit plans directly to equity; instead, actuarial gains and losses should be accounted for under the corridor approach which resulted in the deferral of gains and losses. Under IFRSs: Actuarial gains and losses are recognized immediately in full in the period in which they occur as other comprehensive income.

Employee benefits – compensated absences

Under ROC GAAP: The compensation for paid absences is recognized in the year in which the cash is given to the employees as salary expense instead of the year when holidays are given to the employees. Under IFRSs: The obligation for paid absences should be accrued if the obligation relates to the employees' past services, in which the obligation can be reliably estimated. The estimated amount is recognized as salary expense and accrued liabilities.

Income tax – reclassification of deferred tax and valuation allowance

Under ROC GAAP: Deferred income tax assets or liabilities are classified as current or non-current based on the classification of items that resulted in the deferred assets or liabilities, or if it is based on the timing of the expected reversal for certain transactions not directly related to an asset or liability. An allowance is provided on deferred tax assets that may not be realized in the future. Under IFRSs: Deferred tax assets or liabilities are classified as non-current in the statement of financial position. A deferred tax asset is recognized to the extent that it is probable that it will be realized, and the allowance of the defer tax asset should no longer exist.

(c) The aforementioned assessment is based on the International Financial Reporting Standards,

International Accounting Standards, and the interpretations approved by FSC. However, the assessment result may be impacted by the addition or the amendment of IFRSs issued or proposed by the International Accounting Standards Board and the possible future rules issued by FSC.



Consolidated Statements of Income

For the years ended December 31, 2011 and 2010 (expressed in thousands of New Taiwan dollars, except earnings per share,

which are expressed in New Taiwan dollars)

2011 2010 Amount % Amount % Operating revenue (note 18):

Freight revenue – vessel chartering $ 1,532,907 45 2,285,411 55 Freight revenue – container hauling, net 1,494,245 44 1,508,480 36 Logistics revenue 383,803 11 377,424 9 Freight revenue – airline agent and others 8,134 - 10,479 -

3,419,089 100 4,181,794 100 Operating cost (notes 18 and 22):

Freight cost – vessel chartering 611,113 18 859,852 21 Freight cost – container hauling 1,308,089 38 1,270,388 30 Logistics cost 298,814 9 296,050 7 Freight cost – airline agent and others 4,970 - 7,341 -

2,222,986 65 2,433,631 58 Gross profit 1,196,103 35 1,748,163 42 Operating expenses (notes 14, 18 and 22) 384,965 11 360,386 9 Operating income 811,138 24 1,387,777 33 Non-operating income and gains:

Interest income 19,387 - 17,069 - Investment income under equity method, net (note 7) 148,161 4 202,259 5 Foreign exchange gain, net - - 60,051 1 Gain on valuation of financial assets (notes 5 and 17) - - 155,158 4 Gain on disposal of fixed assets (note 9) 298,145 9 419,326 10 Others 23,036 1 41,488 1 488,729 14 895,351 21

Non-operating expenses and losses: Interest expense (note 12) 137,166 4 135,557 3 Foreign exchange loss, net 47,750 2 - - Others (notes 5 and 17) 13,376 - 13,528 -

198,292 6 149,085 3 Income before tax 1,101,575 32 2,134,043 51 Income tax expense (note 15) 97,474 3 201,894 5 Consolidated net income $ 1,004,101 29 1,932,149 46 Before

income taxAfter

income tax Before

income taxAfter

income taxBasic earnings per share (note 16) $ 4.30 3.92 8.32 7.53 Diluted earnings per share (note 16) $ 4.29 3.91 8.31 7.53



Consolidated Balance Sheets

December 31, 2011 and 2010 (expressed in thousands of New Taiwan dollars)

2011 2010 Assets Amount % Amount %

Current assets:

Cash and cash equivalents (note 4) $ 5,443,547 27 5,649,326 34Financial assets measured at fair value through profit or loss – current (note 5)

62,444

-

64,399

-

Available-for-sale financial assets – current (note 5) - - 58,401 - Held-to-maturity financial assets – current (note 5) - - 18,233 - Notes and accounts receivable (note 6) 145,423 1 130,573 1Notes and accounts receivable – related parties (note 18) 116,965 1 107,842 1Other current financial assets 22,730 - 10,487 - Non-current assets held for sale (notes 9,18 and 21) 3,510 - - - Other current assets (note 15) 78,141 1 63,134 -

5,872,760 30 6,102,395 36Investments:

Long-term investments under equity method (notes 7 and 19) 3,002,412 15 2,770,606 17Real estate investment – non-current (note 8) 131,115 1 96,105 1

3,133,527 16 2,866,711 18Property and equipment (notes 9, 18 and 19):

Land 307,980 2 552,872 3Buildings 191,358 1 163,022 1Transportation equipment 8,667,727 44 6,643,370 40Container terminal facility 451,409 2 488,789 3Furniture, fixtures and other equipment 76,150 - 73,342 - Land revaluation increment 1,489,724 7 357,800 2 11,184,348 56 8,279,195 49Less: accumulated depreciation (2,116,919) (11) (2,003,581) (12)

accumulated impairment (955,330) (5) (919,199) (5)Construction in progress and prepayment for purchase of equipment 2,481,800 13 2,117,822 13

10,593,899 53 7,474,237 45Intangible assets:

Computer software 1,656 - 3,566 - Other assets:

Rental assets (notes 9 and 19) 20,711 - 73,824 - Restricted assets and others (note 19) 67,491 - 69,497 1Deferred expenses 104,909 1 65,540 - Deferred income tax assets – non-current (note 15) 16,246 - 73,098 -

209,357 1 281,959 1Total assets $ 19,811,199 100 16,728,868 100

2011 2010 Liabilities and Stockholders’ Equity Amount % Amount %

Current liabilities:

Short-term loans and commercial paper payable (note 10) $ 1,364,680 7 649,814 4Notes and accounts payable 132,829 1 142,060 1Accrued expenses and other current liabilities (note 15) 260,126 1 320,056 2Advance receipts (note 20) 366,298 2 376,520 2Current portion of long-term loans (note 11) 436,306 2 490,677 3

2,560,239 13 1,979,127 12Long-term liabilities:

Bonds payable (note 12) 3,000,000 15 3,000,000 18Long-term loans (note 11) 3,213,496 16 1,834,374 11Provision for land value increment tax (note 9) 444,344 2 87,224 -

6,657,840 33 4,921,598 29Other liabilities:

Accrued pension liabilities (note 13) 122,280 1 118,219 1Long-term advance receipts (note 20) 198,179 1 526,439 3Deferred tax liabilities and others (note 15) 51,293 - 1,387 -

371,752 2 646,045 4Total liabilities 9,589,831 48 7,546,770 45

Common stock (note 14) 2,564,736 13 2,564,736 15Capital surplus (note 14) 42,503 - 42,503 - Retained earnings (note 14):

Legal reserve 1,385,661 7 1,192,446 7Special reserve 774,448 4 - - Unappropriated retained earnings 5,372,584 27 6,156,861 37 7,532,693 38 7,349,307 44

Equity adjustments: Cumulative translation adjustments (479,326) (2) (853,304) (5)Net loss not recognized as pension cost (27,158) - (28,129) - Unrealized gains on financial instruments (note 9) (1,111) - 5,494 - Unrealized land revaluation increment 589,031 3 101,491 1 81,436 1 (774,448) (4)

Total stockholders’ equity 10,221,368 52 9,182,098 55

Total liabilities and stockholders’ equity $ 19,811,199 100 16,728,868 100



Consolidated Statements of Changes in Stockholders' Equity

For the years ended December 31, 2011 and 2010 (expressed in thousands of New Taiwan dollars)

Retained earnings Unrealized Unrealized

Common stock

Capital surplus

Legal reserve

Special reserve

Unappropriatedretained earnings

Cumulative translation

adjustments

Unrecognizedpension cost

gains on financial

instruments

land revaluation increment Total

Balance as of December 31, 2009 $ 2,564,736 42,503 905,260 - 6,050,739 (31,874) - 16,295 101,491 9,649,150 Appropriations (Note a): -

Legal reserve - - 287,186 - (287,186) - - - - - Cash dividends - - - - (1,538,841) - - - - (1,538,841)

Consolidated net income for 2010 - - - - 1,932,149 - - - - 1,932,149 Net loss not recognized as pension cost - - - - - - (28,129) - - (28,129) Long-term investment under equity methods

adjustments -

-

-

-

-

(152,400)

-

(10,801)

-

(163,201)

Foreign currency financial statement translation adjustments

-

-

-

-

-

(669,030)

-

-

-

(669,030)

Balance as of December 31, 2010 2,564,736 42,503 1,192,446 - 6,156,861 (853,304) (28,129) 5,494 101,491 9,182,098 Appropriations (Note b):

Legal reserve - - 193,215 - (193,215) - - - - - Special reserve - - - 774,448 (774,448) - - - - - Cash dividends - - - - (820,715) - - - - (820,715)

Long-term investment under equity methods adjustments

-

-

-

-

-

57,948

-

(6,605)

371,127

422,470

Consolidated net income for 2011 - - - - 1,004,101 - - - - 1,004,101 Net loss not recognized as pension cost - - - - - - 971 - - 971 Foreign currency financial statement translation

adjustments -

-

-

-

-

316,030

-

-

-

316,030

Unrealized land revaluation increment - - - - - - - - 116,413 116,413 Balance as of June 30, 2011 $ 2,564,736 42,503 1,385,661 774,448 5,372,584 (479,326) (27,158) (1,111) 589,031 10,221,368 Note a: Directors’ and supervisors’ remuneration amounting to $25,847 and employees’ bonuses amounting to $12,923 were recognized in the 2009 statement of income. Note b: Directors’ and supervisors’ remuneration amounting to $9,645 and employees’ bonuses amounting to $9,645 were recognized in the 2010 statement of income.

Documents

CHINESE MARITIME TRANSPORT LTD. AND … · AND SUBSIDIARIES Consolidated Financial Statements December 31, ... Decrease in notes and accounts payable ... general sales agent for Saudi