CHINA GLOBAL LINES GROUP Intellectual Capital Report 2009

1/13/2010

TABLE OF CONTENTS

1 Introduction ....................................................................................................... 1 2 Words from the President................................................................................. 1 3 Milestones.......................................................................................................... 2 4 Intellectual Capital Management Process ....................................................... 6 5 Stakeholders Expectation................................................................................. 6 6 Knowledge Captial ............................................................................................ 7

6.1 Human Capital .......................................................................................... 8 6.2 Structural Capital ...................................................................................... 8 6.3 Relational Capital...................................................................................... 8

7 Risk Assessment............................................................................................... 9 8 Future Development........................................................................................ 12

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1 Introduction

Being a set of simple management tools, Intellectual Capital Management (ICM) provides a systematic approach in identifying, classifying, evaluating and controlling the invisible resources of an enterprise. By applying the ICM, China Global Lines (CGL) Group can exploit effectively and efficiently the existing resources to a greater extent and at the same time cultivate new resources by combining a wide variety of knowledge in our different departments.

2 Words from the President

CGL commit to ship the right goods to the right place at the right time to satisfy the need of our society, personal goal are not just for money reward, the enterprises are not purely for profit. The mission is to provide excellent shipping service to enhance the well being of our society.

- We connect China to the Global.

- We commit and devote to provide shipping and forwarding services with excellence.

- We commit to create win-win situation among customers, agents, carriers, service providers and ourselves to achieve long-term beneficial business environment.

- We keep on investing in people, upgrading equipment and facility to meet the present and future needs of customers and business partners.

SERVING THE CUSTOMER WHOLEHEARTEDLY WITH FULL STRENGTH TO ACHIEVE A BRIGHTER FUTURE.

Our President – Mr. Byron Lee

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3 Milestones

CGL was established in August 1999 with 10 persons. Over the years, we progressively expanded into a national wide company with over 200 professionals in worldwide. The main business scope of CGL includes sea and airfreight forwarding, custom clearance, trucking, distribution, buyer consolidation, project cargo transportation and logistics service, especially that we are also expert in handling firework shipment.

CGL with Headquarter located in Hong Kong, branch and associated offices located strategically in key cities of China, - Shenzhen, Foshan, Xiamen, Shanghai and Ningbo.

Hong Kong Headquarter

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Shenzhen Branch Xiamen Branch

Shanghai Branch

Ningbo Branch

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In 2004 to 2007, CGL obtained Class A & Non-Vessel Operating Common Carrier (NVOCC) license in China through CEPA, and trade under the name “CGL Flying Fish Logistics (Shanghai) Limited”, which legally provide full range of logistics services throughout China.

Class A License

Non-Vessel Operation Common Carrier (NVOCC) License

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In 2005, CGL cooperated with Norfram Logistics to establish a Sales and Marketing joint venture company “CGL Norfram Logistics Limited” (Now named as “CGL Manuport Logistics Limited”) to focus business development between China and Europe. European sales and marketing professional are deployed in China to serve the European shipping public in China

In 2008, we established CGL Holding Ltd to hold all existing companies of CGL Group to enhance organization structure. The CGL Holding Ltd performs & contributes finance management and corporate management for the CGL group.

In mid 2008, we establish CGL Flying Fish Logistics (Shanghai) Ltd – Ningbo office that focus to provide LCL consolidation service to shipping public.

In late 2008, we establish CGL Eastern Network Ltd that focus to provide airfreight service to the shipping public,

In 2008, CGL group with turnover more than US$26 millions handled more than 40,000 TEUS and more than 500 tons of air cargo.

Joint Venture with foreign logistics giants perfects our oversea network enabling us to provide tailor-made service to satisfy local requirements of customer in foreign countries.

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CGL is a member of Hong Kong Sea Transportation Logistics Association (HKSTLA). Our founder, as well as our managing director, Mr. Byron Lee who had over 30 years shipping business experience, was elected as the Vice Chairman of HKSLTA. Mr. Lee is also the founder & Chairman of SME Mentorship Association Limited, which serves the business community of small and medium enterprises.

4 Intellectual Capital Management Process

We at CGL have initiated our Intellectual Capital Management process, which involves:

- Analyzing our existing company knowledge, recording it as far as possible and making it sharable within our company. This is our company’s ‘intellectual capital’.

- Identifying potential business development opportunities based on our existing intellectual capital and starting to develop plans for them; and

- Assessing risks involved in protecting our company’s intellectual assets and using an effective strategies to minimize business risk.

5 Stakeholders Expectation

What Our Clients and Stakeholders have come to expect of us

As a company which is focused on satisfying our customers and forming valuable partnerships with employees, shareholders, suppliers and the public, we are committed to evaluating our stakeholders’ needs and constantly re-aligning our operations and policies in order to meet them effectively.

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6 Knowledge Captial

We at CGL have a rich store of expertise, experience and relationships with stakeholders. These are supported by an excellent company management structure and organization.

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CGL Hong  Kong HQ

CGL Eartern Network

CGL Shanghai CGL Ningbo CGL Xiamen CGL Shenzhen CGL Foshan

Average Year of Experience of Staffs

Management Supervisors Senior  Staffs General Staffs

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Our knowledge capital can be summarized as follows:

6.1 Human Capital

- CGL’s staff have a high level of skill and experience rising from academic and pre-employment study and work experience, e.g Mr. Ricky Shon are MBA holder and Mr. Samson Lee obtained his Master Degree from Imperial College, UK.

- We possess excellent teamwork within a small workforce, enhanced by regular team-building effort For example.

- Our staff have great communications skills.

6.2 Structural Capital

We at CGL value good management and organization, including:

- Standard Operation Procedure (SOP), which provides the basis for consistent work standard and a short learning curve for new recruits.

- An well understood incentive scheme system which helps to encourage excellence and retain the best staff.

- An effective data security policy which ensures that our clients’ data is safe.

- A well-implemented software management system to ensure legal compliance and keep our systems working without interruption.

6.3 Relational Capital

- Effective working relationships with government, professional and regulatory bodies, so that we can show the world that we operate at the highest professional standards.

- Good customer support developed through regular focus-group meetings. Responding to consumer demand is our main focus. We continually monitor the market to respond flexibly and quickly to change.

- Co-operative management-shop floor relationship. With a happy workforce we ensure the best service for our customers and aim to retain the best workforce.

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7 Risk Assessment

CGL’s Risk Analysis and Mitigation Measures

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CGL is committed to transparency in assessing its risks and maintaining a healthy and active risk mitigation programme. Assessing risk and systematically developing risk management measures help us maintain our strength in the market.

Our risk assessment process involves identifying and managing risks relating to our intellectual capital. We assess the probability of certain risks arising and the harm that could be caused to us if these risks emerge. As a result, we have developed a strategy to minimize risks to the company.

- We have developed an enhanced staff retention programme to address the risk of loss of expertise.

- We have developed a formal training programme to ensure that our staff possess the most up-to-date technical skills.

- We will ensure that our staffs enjoy competitive remuneration and conditions of work to reduce staff turnover.

- Formal and individual informal meetings are planned to share with role, responsibilities, expectation and company considerations. It is useful to explore opportunities and challenges for business

- We have regular IT security and software management reviews to provide our clients with maximum confidence in our system reliability.

- We have launched a programme to identify and maintain patent protection for our inventions, registration of our trademarks and designs and good management for our copyrights in Hong Kong as well as in our target markets.

- Win-win policy is important. Careful business partner selection is taken into account., and long-term business relationship can make us grow health and strong.

- We have strengthened market research and focus group studies to ensure that we provide the highest standard of service to clients, the most effective partnership with suppliers and transparency with regulators.

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8 Future Development

CGL as a Creative Knowledge Enterprise

We will build on our existing strength and further strengthen our IC. We aim to achieve this by close monitoring, regular evaluation and improvement of our SOPs. We will also streamline and centralize our system, such as accounting and financial control, database of customers and agent contacts and HR management, to ensure proper management of our IC. Our Hong Kong head office will act as the hub of IC management center through effective and two-way communication and knowledge sharing with other branch offices of the whole company group.

With the proper management and improvement of our IC, we are in a better position to identify and further develop our business. For example, in end of 2009, CGL intend to set up sales office in Yiwu city in China. During the recent years, Yiwu has grown up rapidly from a small village to a famous city in China as a commdoties trade center. People from all over the world come to Yiwu City to buy commodities for resale in other parts of China or abroad. To make sure we fully utilize our expertise and knowledge, resources in our Ningbo office will be deployed to establish and carry out the initial start up of the Yiwu office. Additional staff will be recruited for Yiwu office, which will be under the management of our Ningbo office for the purpose of knowledge capital transfer and sharing initially. Our long plan is to develop Yiwu office as an independent office, which enable us to tap into this new and still rapid developing market.

To conclude, we consider Intellectual Capital Management as a very useful tool to develop our business. We will continue to further improve and review our Intellectual Capital Management on a regular basis. With this, we are confident that we will serve our existing clients and stakeholders better and develop exciting new markets more effectively.