##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 20-F
 (Mark One)
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF
THE SECURITIES EXCHANGE ACT OF 1934
 OR
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 OR
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 Date of event requiring this shell company report
 For the transition periodfrom  to .
 Commission file number: 001-33036
 Mindray Medical International Limited
      th
    Title of each class
    
    Name of each exchange on which registeredAmerican Depositary Shares, each representing oneClass A ordinary share, par value HK$0.001 per share
    
    New York Stock Exchange
     s
 o þ
 o þ
 þ o
  o o þ
 o þ
 o þ




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##### 



MINDRAY MEDICAL INTERNATIONAL LIMITED
 TABLE OF CONTENTS
 PageINTRODUCTION
    
    
    1PART I.
    
    
    
    
    3ITEM 1.
    
    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
    
    
    3ITEM 2.
    
    OFFER STATISTICS AND EXPECTED TIMETABLE
    
    
    3ITEM 3.
    
    KEY INFORMATION
    
    
    3ITEM 4.
    
    INFORMATION ON THE COMPANY
    
    
    26ITEM 4A.
    
    UNRESOLVED STAFF COMMENTS
    
    
    50ITEM 5.
    
    OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    50ITEM 6.
    
    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    70ITEM 7.
    
    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    80ITEM 8.
    
    FINANCIAL INFORMATION
    
    
    82ITEM 9.
    
    THE OFFER AND LISTING
    
    
    83ITEM 10.
    
    ADDITIONAL INFORMATION
    
    
    84ITEM 11.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    92ITEM 12.
    
    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    93PART II.
    
    
    
    
    93ITEM 13.
    
    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.
    
    
    93ITEM 14.
    
    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.
    
    
    93ITEM 16A.
    
    AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    94ITEM 16B.
    
    CODE OF ETHICS
    
    
    94ITEM 16C.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    94ITEM 16D.
    
    EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    
    
    94ITEM 16E.
    
    PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
    
    
    95PART III.
    
    
    
    
    95ITEM 17.
    
    FINANCIAL STATEMENTS
    
    
    95ITEM 18.
    
    FINANCIAL STATEMENTS
    
    
    95ITEM 19.
    
    EXHIBITS.
    
    
    95EX-8.1 LIST OF SUBSIDIARIESEX-12.1 CERTIFICATION OF CO-CEOEX-12.2 CERTIFICATION OF CO-CEOEX-12.3 CERTIFICATION OF CHIEF FINANCIAL OFFICEREX-13.1 CERTIFICATION PURSUANT TO RULE 13A-14(B)EX-23.1 CONSENT OF DELOITTE TOUCHE TOHMATSU CPA LTD.EX-23.2 CONSENT OF FROST & SULLIVAN




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##### Table of Contents



INTRODUCTION
  
    
    we, us, our company, our, Mindray International and Mindray refer to Mindray
Medical International Limited, and its consolidated subsidiaries, including Shenzhen
Mindray Bio-Medical Electronics Co., Ltd., or Shenzhen Mindray, and Shenzhen Mindrays
predecessor entities;
    
    China or PRC refers to the Peoples Republic of China, excluding, for purposes of
this annual report only, Taiwan and the Special Administrative Regions of Hong Kong and
Macau;
    
    All references to Renminbi or RMB are to the legal currency of China, all references
to US dollars, dollars, $ or US$ are to the legal currency of the United States,
and all references to HK$ are to the legal currency of the Hong Kong Special
Administrative Region of China;
    
    ordinary shares refers to our Class A and Class B ordinary shares, par value HK$0.001
per share;
    
    ADSs refers to our American depositary shares, each of which represents one Class A
ordinary share;
    
    ADRs refers to American depositary receipts, which, if issued, evidence our ADSs;
    
    PRC GAAP refers to accounting principles and the relevant financial regulations
applicable to PRC enterprises; and
    
    US GAAP refers to generally accepted accounting principles in the United States.
   FORWARD-LOOKING STATEMENTS
  
    
    our goals and strategies;
 1




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##### Table of Contents




    
    our future business development, financial condition and results of operations;
    
    the expected growth of the medical device market in China and internationally;
    
    relevant government policies and regulations relating to the medical device industry;
    
    market acceptance of our products;
    
    our expectations regarding demand for our products;
    
    our ability to expand our production, our sales and
distribution network and other aspects of our operations, including
our planned sales and service offices in Brazil, Europe, Mexico and
Russia, the planned new manufacturing facility in
Shenzhen, the planned new research and development center adjacent to
our headquarters in Shenzhen, and the planned new research and development and manufacturing
facility in Nanjing;
    
    our ability to stay abreast of market trends and technological advances;
    
    our ability to effectively protect our intellectual property rights and not infringe on
the intellectual property rights of others;
    
    our plan to launch several new products in 2007;
    
    our intention to pay annual cash dividends to our shareholders;
    
    competition in the medical device industry in China and internationally; and
    
    general economic and business conditions in the countries where our products are sold.
   Market Data and Forecasts
  2




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PART I.
 
 ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
  
 ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
  
 ITEM 3. KEY INFORMATION
 A. Selected Financial Data
    3




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For the Year Ended December 312002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    2006RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    RMB
    
    
    US$(In thousands, except share and per share data)Statement of Operations Data:Net revenues
    
    
    306,592
    
    
    
    460,254
    
    
    
    697,837
    
    
    
    1,078,573
    
    
    
    1,514,981
    
    
    
    194,126Cost of revenues (1)
    
    
    (141,004
    )
    
    
    (210,565
    )
    
    
    (319,013
    )
    
    
    (493,326
    )
    
    
    (687,484
    )
    
    
    (88,093
    )Gross profit
    
    
    165,588
    
    
    
    249,689
    
    
    
    378,824
    
    
    
    585,247
    
    
    
    827,497
    
    
    
    106,033Operating expenses:Selling expenses (1)
    
    
    (43,567
    )
    
    
    (61,322
    )
    
    
    (92,177
    )
    
    
    (146,499
    )
    
    
    (211,858
    )
    
    
    (27,147
    )General and administrative expenses (1)
    
    
    (23,497
    )
    
    
    (35,808
    )
    
    
    (32,340
    )
    
    
    (112,082
    )
    
    
    (76,010
    )
    
    
    (9,740
    )Research and development expenses (1)
    
    
    (24,797
    )
    
    
    (39,781
    )
    
    
    (61,604
    )
    
    
    (106,147
    )
    
    
    (149,141
    )
    
    
    (19,111
    )Expense of in-progress research & development
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,835
    )
    
    
    (4,079
    )Other general expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    202
    
    
    
    26Operating income
    
    
    73,726
    
    
    
    112,778
    
    
    
    192,703
    
    
    
    220,519
    
    
    
    358,855
    
    
    
    45,982Other income
    
    
    1,519
    
    
    
    1,934
    
    
    
    1,405
    
    
    
    9,462
    
    
    
    8,497
    
    
    
    1,089Other
expenses
    
    
    (608
    )
    
    
    (16
    )
    
    
    (1,366
    )
    
    
    (252
    )
    
    
    (2,481
    )
    
    
    (318
    )Interest income
    
    
    1,322
    
    
    
    531
    
    
    
    3,087
    
    
    
    3,854
    
    
    
    27,890
    
    
    
    3,574Interest expense
    
    
    (3,746
    )
    
    
    (2,815
    )
    
    
    (3,324
    )
    
    
    (2,019
    )
    
    
    (462
    )
    
    
    (59
    )Income before income taxes and minority
interests
    
    
    72,153
    
    
    
    112,412
    
    
    
    192,505
    
    
    
    231,564
    
    
    
    392,299
    
    
    
    50,268Provision for income taxes
    
    
    (4,817
    )
    
    
    (7,624
    )
    
    
    (10,758
    )
    
    
    (18,066
    )
    
    
    (24,057
    )
    
    
    (3,083
    )Minority interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,409
    )
    
    
    (6,456
    )
    
    
    (827
    )Net income
    
    
    67,335
    
    
    
    104,788
    
    
    
    181,747
    
    
    
    205,089
    
    
    
    361,786
    
    
    
    46,358Deemed dividend on issuance of convertible
redeemable preferred shares at a discount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,031
    )
    
    
    
    
    
    
    Income attributable to ordinary shareholders
(2)
    
    
    67,335
    
    
    
    104,788
    
    
    
    181,747
    
    
    
    191,058
    
    
    
    361,786
    
    
    
    46,358Basic earnings per share
    
    
    RMB0.78
    
    
    
    RMB1.22
    
    
    
    RMB2.11
    
    
    
    RMB2.31
    
    
    
    RMB4.16
    
    
    
    US$0.53Diluted earnings per share
    
    
    RMB0.78
    
    
    
    RMB1.22
    
    
    
    RMB2.11
    
    
    
    RMB2.31
    
    
    
    RMB3.75
    
    
    
    US$0.48Shares used in computation of:Basic earnings per share
    
    
    86,000,000
    
    
    
    86,000,000
    
    
    
    86,000,000
    
    
    
    82,790,427
    
    
    
    87,066,163
    
    
    
    86,066,163Diluted earning per share
    
    
    86,000,000
    
    
    
    86,000,000
    
    
    
    86,000,000
    
    
    
    82,790,427
    
    
    
    96,370,084
    
    
    
    96,370,084
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As of December 31,2005
    
    2006RMB
    
    RMB
    
    US$(In thousands)Balance Sheet Data:Cash and cash equivalents
    
    
    446,143
    
    
    
    1,709,596
    
    
    
    219,064Working capital (3)
    
    
    468,831
    
    
    
    1,631,060
    
    
    
    209,000Total assets
    
    
    840,835
    
    
    
    2,557,123
    
    
    
    327,664Total liabilities
    
    
    243,877
    
    
    
    374,208
    
    
    
    47,950Minority interests
    
    
    37,596
    
    
    
    11
    
    
    
    1Total shareholders equity
    
    
    271,569
    
    
    
    2,182,915
    
    
    
    279,714
 
 (1)
    
    Share-based compensation changes incurred during the period related to: For the Year Ended December 31,2002
    
    2003
    
    2004
    
    2005
    
    2006
    
    2006RMB
    
    RMB
    
    RMB
    
    RMB
    
    RMB
    
    US$(In thousands)Cost of revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    268
    
    
    
    614
    
    
    
    79Selling expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,576
    
    
    
    6,372
    
    
    
    816General and administrative expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59,014
    
    
    
    12,195
    
    
    
    1,563Research and development expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,071
    
    
    
    6,873
    
    
    
    881
 
 (2)
    
    Income attributable to ordinary shareholders includes income attributable to both Class
A ordinary share shareholders and Class B ordinary share shareholders on a pro-rata basis.(3)
    
    Working capital is equal to current assets less current liabilities. Exchange Rate Information
   5




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Average(1)
    
    High
    
    Low
    
    Period-end(RMB per US $1.00)2002
    
    
    8.2770
    
    
    
    8.2800
    
    
    
    8.2669
    
    
    
    8.28002003
    
    
    8.2770
    
    
    
    8.2800
    
    
    
    8.2772
    
    
    
    8.27692004
    
    
    8.2768
    
    
    
    8.2774
    
    
    
    8.2764
    
    
    
    8.27652005
    
    
    8.1940
    
    
    
    8.2765
    
    
    
    8.0702
    
    
    
    8.07022006
    
    
    7.9579
    
    
    
    8.0702
    
    
    
    7.8041
    
    
    
    7.8041December
    
    
    7.8219
    
    
    
    7.8350
    
    
    
    7.8041
    
    
    
    7.80412007January
    
    
    7.7876
    
    
    
    7.8127
    
    
    
    7.7705
    
    
    
    7.7714February
    
    
    7.7502
    
    
    
    7.7632
    
    
    
    7.7410
    
    
    
    7.7410March
    
    
    7.7369
    
    
    
    7.7454
    
    
    
    7.7232
    
    
    
    7.7232April
    
    
    7.7247
    
    
    
    7.7345
    
    
    
    7.7090
    
    
    
    7.7090May
    
    
    7.6773
    
    
    
    7.7065
    
    
    
    7.6463
    
    
    
    7.6463June
(through June 26)
    
    
    7.6359
    
    
    
    7.6680
    
    
    
    7.6175
    
    
    
    7.6178
 
 (1)
    
    Annual averages are calculated from month-end rates. Monthly averages are calculated
using the average of the daily rates during the relevant period. B.
    
    Capitalization and Indebtedness
  C.
    
    Reasons for the Offer and Use of Proceeds
  D.
    
    Risk Factors
 RISKS RELATING TO OUR BUSINESS AND INDUSTRY
 We may fail to effectively develop and commercialize new products, which would materially and
adversely affect our business, financial condition, results of operations and prospects.
  6




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
    
    accurately assess technology trends and customer needs and meet market demands;
    
    optimize our manufacturing and procurement processes to predict and control costs;
    
    manufacture and deliver products in a timely manner;
    
    increase customer awareness and acceptance of our products;
    
    minimize the time and costs required to obtain required regulatory clearances or approvals;
    
    anticipate and compete effectively with other medical device developers, manufacturers
and marketers;
    
    price our products competitively; and
    
    effectively integrate customer feedback into our research and development planning.
 We depend on distributors for a significant majority of our revenues and will rely on adding
distributors both in China and internationally for most of our revenue growth. Failure to maintain
relationships with our distributors or to otherwise expand our distribution network would
materially and adversely affect our business.
  We may be unable to effectively structure and manage our distribution network, and our
business, prospects and brand may be materially and adversely affected by actions taken by our
distributors.
  
    
    sell products that compete with our products that they have contracted to sell for us;
 7




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
    
    sell our products outside their designated territory, possibly in violation of the
exclusive distribution rights of other distributors;
    
    fail to adequately promote our products;
    
    fail to provide proper training, repair and service to our end-users; or
    
    violate the anti-corruption laws of China, the United States or other countries.
   International expansion may be costly, time consuming and difficult. If we do not successfully
expand internationally, our profitability and prospects would be materially and adversely affected.
   
    
    political instability;
    
    economic instability and recessions;
    
    changes in tariffs;
 
 8




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
    
    difficulties of administering foreign operations generally;
    
    limited protection for intellectual property rights;
    
    obligations to comply with a wide variety of foreign laws and other regulatory requirements;
    
    increased risk of exposure to terrorist activities;
    
    financial condition, expertise and performance of our international distributors;
    
    export license requirements;
    
    unauthorized re-export of our products;
    
    potentially adverse tax consequences; and
    
    inability to effectively enforce contractual or legal rights.
 If we fail to accurately project demand for our products, we may encounter problems of
inadequate supply or oversupply, especially with respect to our international markets, which would
materially and adversely affect our financial condition and results of operations, as well as
damage our reputation and brand.
   9
    Table of Contents    We depend on our key personnel, and our business and growth may be severely disrupted if we
lose their services.
   Our business is subject to intense competition, which may reduce demand for our products and
materially and adversely affect our business, financial condition, results of operations and
prospects.
  
    
    greater financial and other resources;
    
    larger variety of products;
    
    more products that have received regulatory approvals;
    
    greater pricing flexibility;
    
    more extensive research and development and technical capabilities;
    
    patent portfolios that may present an obstacle to our conduct of business;
    
    greater knowledge of local market conditions where we seek to increase our international
sales;
 
 10    Table of Contents  
    
    stronger brand recognition; and
    
    larger sales and distribution networks.
    We currently rely on one manufacturing, assembly and storage facility for our products and are
developing three additional facilities. Any disruption to our current manufacturing facility or in
the development of these new facilities could reduce or restrict our sales and harm our reputation.
    11
    Table of Contents  If we are unable to obtain adequate supplies of required materials and components that meet
our production standards at acceptable costs or at all, our ability to accept and fulfill product
orders with the required quality and at the required time could be restricted, which could
materially and adversely affect our business, financial condition and results of operations.
  Failure to manage our growth could strain our management, operational and other resources,
which could materially and adversely affect our business and prospects.
  
    
    continued enhancement of our research and development capabilities;
    
    hiring and training of new personnel;
    
    information technology system enhancement;
    
    stringent cost controls and sufficient liquidity;
    
    strengthening of financial and management controls and information technology systems; and
    
    increased marketing, sales and sales support activities.
  We generate a significant portion of our revenues from a small number of products, and a
reduction in demand for any of these products could materially and adversely affect our financial
condition and results of operations.
 12
    Table of Contents  If we fail to protect our intellectual property rights, it could harm our business and
competitive position.
     We may be exposed to intellectual property infringement and other claims by third parties
which, if successful, could disrupt our business and have a material adverse effect on our
financial condition and results of operations.
 13
    Table of Contents    
    
    pay damage awards;
    
    seek licenses from third parties;
    
    pay ongoing royalties;
    
    redesign our products; or
    
    be restricted by injunctions,
  Unauthorized use of our brand name by third parties, and the expenses incurred in developing
and preserving the value of our brand name, may adversely affect our business.
  If we fail to obtain or maintain applicable regulatory clearances or approvals for our
products, or if such clearances or approvals are delayed, we will be unable to commercially
distribute and market our products at all or in a timely manner, which could significantly disrupt
our business and materially and adversely affect our sales and profitability.
  14
    Table of Contents  We are subject to product liability exposure and have limited insurance coverage. Any product
liability claims or potential safety-related regulatory actions could damage our reputation and
materially and adversely affect our business, financial condition and results of operations.
   Our revenues and profitability could be materially and adversely affected if there is a
disruption in our existing arrangements with our original design manufacturing and original
equipment manufacturing customers.
 15
    Table of Contents    Our quarterly revenues and operating results are difficult to predict and could fall below
investor expectations, which could cause the trading price of our ADSs to decline.
  
    
    the loss of key customers;
    
    changes in pricing policies by us or our competitors;
    
    variations in the purchasing cycles of our customers;
    
    the length of our sales and delivery cycle;
    
    the timing and market acceptance of new product introductions by us or our competitors;
    
    the timing of receipt of government incentives;
    
    changes in the industry operating environment;
    
    changes in government policies or regulations (including anti-commercial bribery laws
and SFDA approval procedures for new products) or their enforcement; and
    
    a downturn in general economic conditions in China or internationally.
   If we experience a significant number of warranty claims, our costs could substantially
increase and our reputation and brand could suffer.
 16
    Table of Contents    Our corporate actions are substantially controlled by our principal shareholders. Our
dual-class ordinary share structure with different voting rights could discourage others from
pursuing any change of control transactions that our shareholders may view as beneficial.
   Anti-takeover provisions in our charter documents may discourage our acquisition by a third
party, which could limit our shareholders opportunity to sell their shares, including Class A
ordinary shares represented by our ADSs, at a premium.
    17
    Table of Contents  We may undertake acquisitions, which may have a material adverse effect on our ability to
manage our business, and may end up being unsuccessful.
  
    
    the integration of new operations, services and personnel;
    
    unforeseen or hidden liabilities;
    
    the diversion of resources from our existing businesses and technologies;
    
    our inability to generate sufficient revenue to offset the costs of acquisitions; and
    
    potential loss of, or harm to, relationships with employees or customers, any of which
could significantly disrupt our ability to manage our business and materially and adversely
affect our business, financial condition and results of operations.
 We may need additional capital, and we may be unable to obtain such capital in a timely manner
or on acceptable terms, or at all.
  
    
    our future financial condition, results of operations and cash flows;
    
    general market conditions for capital raising activities by medical device and related
companies; and
    
    economic, political and other conditions in China and internationally.
 18
    Table of Contents  We may become a passive foreign investment company, or PFIC, which could result in adverse
United States federal income tax consequences to US holders
    We may be unable to ensure compliance with United States economic sanctions laws, especially
when we sell our products to distributors over which we have limited control.
 19
    Table of Contents    We may be unable to establish and maintain an effective system of internal control over
financial reporting, and as a result we may be unable to accurately report our financial results or
prevent fraud.
   RISKS RELATED TO DOING BUSINESS IN CHINA
 Changes in Chinas economic, political and social condition could adversely affect our
financial condition and results of operations.
 20
    Table of Contents    The PRC legal system embodies uncertainties that could limit the legal protections available
to you and us.
  Our failure to obtain the prior approval of the China Securities Regulatory Commission, or the
CSRC, of the listing and trading of our ADSs on the New York Stock Exchange could have a material
adverse effect on our business, operating results, reputation and trading price of our ADSs.
   www.sec.gov.
 21
    Table of Contents  Recent PRC regulations relating to offshore investment activities by PRC residents may
increase the administrative burden we face and create regulatory uncertainties that could restrict
our overseas and cross-border investment activity, and a failure by our shareholders who are PRC
residents to make any required applications and filings pursuant to such regulations may prevent us
from being able to distribute profits and could expose us and our PRC resident shareholders to
liability under PRC law.
    We rely principally on dividends and other distributions on equity paid by our operating
subsidiary to fund cash and financing requirements, and limitations on the ability of our operating 22
    Table of Contents   subsidiary to pay dividends to us could have a material adverse effect on our ability to
conduct our business.
   Restrictions on currency exchange may limit our ability to utilize our revenues effectively.
  Fluctuations in exchange rates could result in foreign currency exchange losses.
 23
    Table of Contents      The discontinuation of any of the preferential tax treatments or the financial incentives
currently available to us in the PRC could adversely affect our financial condition and results of
operations.
   24
    Table of Contents        Any future outbreak of severe acute respiratory syndrome or avian flu in China, or similar
adverse public health developments, may severely disrupt our business and operations.
 25
    Table of Contents    
 ITEM 4. INFORMATION ON THE COMPANY
 A. History and Development of the Company
  th http://www.mindray.com.
 B. Business overview
 Overview
   26    Table of Contents  Products
   510(k)
 27
    Table of Contents  Clearances/Business Segment
    
    Key Products
    
    Description
    
    MarksPatient Monitoring Devices
    
    PM-8000 Series
    
    8.4 color display with 8 waveforms; arrhythmia
analysis; pacemaker detection; built-in recorder;
networkable, 96-hour graphic and tabular parameter
trends; portable
    
    CE, TUV, FDAPM-9000 Series
    
    Same as above, but uses a 10.4 or 12.1 color display
    
    CE, TUV, FDA (PM-9000 Express only)Hypervisor VI
    
    Central monitoring system; optional dual-screen to
display maximum 32-bed information; maximum
64-patient monitoring by telemetry system, LAN or
wireless LAN networking; bi-directional communication
between bedside monitors and central station; large
storage capacity: 72-hour full disclosure waveform
review, 240-hour trend table review, 720 alarm
records and 20,000 patient records.
    
    CE, TUV, FDADiagnostic Laboratory Instruments
    
    BC-2800
    
    Hematology analyzer; 3-part differential; 19
parameters; fully-automated; automatic diluting,
lyzing, mixing, rinsing and clog clearing of samples;
storage for 10,000 samples; built-in thermal
recorder; up to 30 samples per hour; color display
    
    CE, TUVBC-3000 Series
    
    Same as above, except storage for 35,000 samples; up
to 60 samples per hour
    
    CE, TUV, FDA
(BC-3200 only)BS-300
    
    Biochemistry analyzer; fully-automated; automatic
probe cleaning, liquid level detection, collision
protection and dilution; up to 300 tests per hour, up
to 50 on-board chemistries; three independent probes;
refrigerated reagent compartment
    
    CE, TUVUltrasound Imaging Systems
    
    DP-8800 Series
    
    Mobile (with roll-cart); multi-purpose  abdomen,
urology, gynecology, obstetrics, small parts,
orthopedics; 14 monitor, multi-language interface;
digital imaging
    
    CE, TUVDP-9900 Series
    
    Same as DP-8800, plus tissue harmonic imaging and
tissue specialty imaging
    
    FDA, CE, TUV (DP-9900 only)DP-6600
    
    Portable; multi-purpose; 10 monitor; digital imaging
    
    FDA, CE, TUV
  Clearances/Business Segment
    
    Products
    
    Description
    
    MarksPatient Monitoring Devices
    
    Beneview T8/T6
    
    High-end patient
monitoring device;
up to three
independent
displays on a 17
color display; 8
waveform displays;
13 module slots for
flexible
configuration;
built-in recorder;
networkable,
120-hour graphic
and tabular
parameter trends;
portable
    
    CE, TUVWATO EX-50/60
    
    Anesthesia machine;
dual-flow tubes for
oxygen and nitrogen
dioxide and air;
selectable
ventilation modes;
automatic volume
compensation;
built-in carbon
dioxide
measurement; 8.4
color screenDiagnostic Laboratory Instruments
    
    BC-5500
    
    Hematology
analyzer; five-part
differential; 27
parameters;
fully-automated;
automatic diluting,
lyzing, mixing,
rinsing and clog
clearing of
samples; storage
for 40,000 samples;
up to 80 samples
per hour; color
touch screen
    
    CE, TUVBS-400
    
    Biochemistry
analyzer;
fully-automated;
automatic probe
cleaning, liquid
level detection,
collision
protection and
dilution; up to 400
tests per hour; up
to 77 on-board
chemistries; three
independent probes;
refrigerated
reagent
compartment.Ultrasound Imaging Systems
    
    DC-6
    
    Mobile (with
roll-cart);
multi-purpose 
abdomen, urology,
gynecology,
cardiology,
obstetrics, small
parts, orthopedics;
color monitor,
multi-language
interface; digital
imaging; DVD
recorder
    
    FDA, CE, TUV
 28
    Table of Contents  Business Segment
    
    Products
    
    DescriptionPatient Monitoring Devices
    
    Beneview T5
    
    Lower-end version of our Beneview T8/T6 patient monitoring devicesDiagnostic Laboratory Instruments
    
    BC-5300
    
    Lower-end version of our BC-5500 five-part hematology analyzerBS-100
    
    Lower-end version of our BS-200 biochemistry analyzerUltrasound Imaging Systems
    
    DC-3
    
    Lower-end version of our DC-6 color Doppler ultrasound imaging systemM-5
    
    Our first portable color Doppler ultrasound imaging system
 Patient Monitoring Devices
    Diagnostic Laboratory Instruments
  29
    Table of Contents  Hematology analyzers
 Biochemistry analyzers
  Ultrasound Imaging Systems
  30
    Table of Contents  Distribution, Direct Sales and Marketing
  Distribution
 Exclusive distributors.
   Non-exclusive distributors.
 31
    Table of Contents  Performance review.
 Direct Sales
   Marketing
  Customers
  Our distributors.
 32
    Table of Contents  ODM and OEM customers.
 Hospital and government agency customers
 Customer Support and Service
  End-User Support and Service.
 Distributor Support and Service.
 33
    Table of Contents     International Sales and Support
  Manufacturing and Assembly
   
    
    Increase use of common resources within and across products. By identifying resources
that can be commonly applied within and across products, we are able to purchase raw
materials and components in greater quantities, which often results in reduced material and
component costs. As we improve existing products and develop new products, we look to carry
over common resources. The cost of the new or improved product can be reduced as a result
of the lower costs already in place from volume purchases. As more products utilize common
resources, the resulting increased purchases of common resources further reduces costs,
with benefits across a range of products.
    
    Increase use of in-house manufactured components. To better optimize the benefit of our
use of common resources across business segments and increasing sales levels, we produce
the majority of the components that go into our products. As we continue to refine our use
of common
 34
    Table of Contents  resources and grow our revenues, we anticipate creating additional economies of scale,
allowing us to move additional component production in-house, thereby lowering our
production costs.
    
    Increase use of common manufacturing and assembly practices within and across business
segments. We continually seek to identify common manufacturing and assembly practices both
within and across business segments. By identifying common manufacturing and assembly
practices for new products, we seek to reduce capital outlays for new manufacturing
equipment. This also allows us to spread our manufacturing team across fewer manufacturing
and assembly stations, creating a streamlined manufacturing and assembly workflow. We
believe this increases employee efficiency, with employees required to learn to manufacture
or assemble fewer components, and reduces our training costs.
     35
    Table of Contents      Intellectual Property
    36
    Table of Contents  Competition
  37
    Table of Contents      Patient monitoring devices.
 Diagnostic laboratory instruments. For
  Ultrasound imaging systems.
   38    Table of Contents  Seasonality
  Insurance
   Facilities
    Legal Proceedings
  39
    Table of Contents   Regulation
  China
 Classification of Medical Devices
    Production Permit
 40
    Table of Contents     Distribution License
  Registration Requirement
   Regulation of Reagents
   41
    Table of Contents  Continuing SFDA Regulation
  
    
    SFDAs quality system regulations which require manufacturers to create, implement and
follow certain design, testing, control, documentation and other quality assurance
procedures;
    
    medical device reporting regulations, which require that manufacturers report to the
SFDA certain types of adverse reaction and other events involving their products; and
    
    SFDAs general prohibition against promoting products for unapproved uses.
   
    
    fines, injunctions and civil penalties;
    
    recall or seizure of our products;
    
    the imposition of operating restrictions, partial suspension or complete shutdown of
production; and
    
    criminal prosecution.
 Radio Transmission Equipment Type Approval Certificate
  China Compulsory Certification Requirements
  42
    Table of Contents  Software Enterprise Designation
  United States
    510(k) clearance pathway
   43
    Table of Contents  Premarket approval pathway
   Continuing FDA regulation
  
    
    quality system regulation, or QSR, which requires manufacturers to follow design,
testing, control, documentation and other quality assurance procedures during the
manufacturing process, otherwise known as Good Manufacturing Practices, or GMPs;
    
    labeling regulations, which prohibit the promotion of products for unapproved or
off-label uses and impose other restrictions on labeling; and
    
    medical device reporting regulations, which require that manufacturers report to the FDA
if their device may have caused or contributed to a death or serious injury or
malfunctioned in a way that would likely cause or contribute to a death or serious injury
if it were to recur.
  
    
    fines, injunctions, and civil penalties;
    
    recall or seizure of our products;
    
    operating restrictions, partial suspension or total shutdown of production;
    
    refusing our request for 510(k) clearance or premarket approval of new products;
    
    withdrawing 510(k) clearance or premarket approvals that are already granted; and
    
    criminal prosecution.
 
 44
    Table of Contents  European Union
   Other National and Provincial Level Laws and Regulations in China
   Foreign Exchange Control and Administration
  
    
    The Foreign Currency Administration Rules (1996), as amended; and
    
    The Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996),
or the Administration Rules.
   45
    Table of Contents     Regulation of Foreign Exchange in Certain Onshore and Offshore Transactions
  
    
    prior to establishing or assuming control of an offshore company for the purpose of
financing that offshore company with assets or equity interests in an onshore enterprise in
the PRC, each PRC resident, whether a natural or legal person, must complete the overseas
investment foreign exchange registration procedures with the relevant local SAFE branch;
    
    an amendment to the registration with the local SAFE branch is required to be filed by
any PRC resident that directly or indirectly holds interests in that offshore company upon
either (1) the injection of equity interests or assets of an onshore enterprise to the
offshore company or (2) the completion of any overseas fund raising by such offshore
company; and
    
    an amendment to the registration with the local SAFE branch is also required to be filed
by such PRC resident when there is any material change in the capital of the offshore
company and not related to inbound investment, such as (1) an increase or decrease in its
capital, (2) a transfer or swap of shares, (3) a merger or divesture, (4) a long-term
equity or debt investment or (5) the creation of any security interests over the relevant
assets located in China.
  46
    Table of Contents     Regulation of Overseas Listings
    47
    Table of Contents   www.sec.gov.
  Dividend Distributions
   C. Organizational Structure
  48
    Table of Contents  49
    Table of Contents  D. Property, Plant and Equipment
    
 ITEM 4A. UNRESOLVED STAFF COMMENTS
  
 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
  A. Operating Results
 Overview
   50
    Table of Contents  Pricing
    51
    Table of Contents  Revenues
     Patient Monitoring Devices
 Diagnostic Laboratory Instruments
 Ultrasound Imaging Systems
 52
    Table of Contents  
    
    the level of acceptance of our products among hospitals and other healthcare facilities;
    
    our ability to attract and retain distributors;
    
    new product introductions by us and our competitors;
    
    our ability to maintain prices for our products at levels that provide favorable margins; and
    
    our ability to expand into new international markets.
 53
    Table of Contents  Cost of Revenues
     Gross Profit and Gross Margin
  54
    Table of Contents  Operating Expenses
  Selling Expenses
    General and Administrative Expenses
  Research and Development Expenses
  55
    Table of Contents  Employee Share-Based Compensation Expenses
    Employee Share-Based Compensation Related to:
    
    2004
    
    2005
    
    2006(In RMB thousands)Cost of revenues
    
    
    
    
    
    
    268
    
    
    
    614Selling expenses
    
    
    
    
    
    
    8,576
    
    
    
    6,372General and administrative expenses
    
    
    
    
    
    
    59,014
    
    
    
    12,195Research and development expenses
    
    
    
    
    
    
    3,071
    
    
    
    6,873
   Other Income (Expense)
  56
    Table of Contents  Taxes and Incentives
         57
    Table of Contents  58
    Table of Contents  Results of Operations
  Year Ended December 31,2004
    
    2005
    
    2006% of Total
    
    
    
    
    
    % of Total
    
    
    
    
    
    
    
    
    
    % of TotalNet
    
    
    
    
    
    Net
    
    
    
    
    
    
    
    
    
    NetAmount
    
    Revenues
    
    Amount
    
    Revenues
    
    Amount
    
    Amount
    
    RevenuesRMB
    
    
    
    
    
    RMB
    
    RMB
    
    RMB(In thousands, except percentages)Net Revenues
    
    
    697,837
    
    
    
    100.0
    %
    
    
    1,078,573
    
    
    
    100.0
    %
    
    
    1,514,981
    
    
    
    194,126
    
    
    
    100.0
    %Cost of Revenues (1)
    
    
    (319,013
    )
    
    
    45.7
    
    
    
    (493,326
    )
    
    
    45.7
    
    
    
    (687,484
    )
    
    
    (88,093
    )
    
    
    45.4Gross profit
    
    
    378,824
    
    
    
    54.3
    
    
    
    585,247
    
    
    
    54.3
    
    
    
    827,497
    
    
    
    106,033
    
    
    
    54.6Operating expenses:Selling expenses (1)
    
    
    (92,177
    )
    
    
    13.2
    
    
    
    (146,499
    )
    
    
    13.6
    
    
    
    (211,858
    )
    
    
    (27,147
    )
    
    
    14.0General and
administrative
expenses (1)
    
    
    (32,340
    )
    
    
    4.6
    
    
    
    (112,082
    )
    
    
    10.4
    
    
    
    (76,010
    )
    
    
    (9,740
    )
    
    
    5.0Research and
development
expenses (1)
    
    
    (61,604
    )
    
    
    8.8
    
    
    
    (106,147
    )
    
    
    9.8
    
    
    
    (149,141
    )
    
    
    (19,111
    )
    
    
    9.8Expenses of
in-progress
research &
development
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,835
    )
    
    
    (4,079
    )
    
    
    2.1Other general
expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    202
    
    
    
    26
    
    
    
    Total operating
expenses
    
    
    (186,121
    )
    
    
    26.7
    
    
    
    (364,728
    )
    
    
    33.8
    
    
    
    (468,642
    )
    
    
    (60,047
    )
    
    
    30.9Operating income
    
    
    192,703
    
    
    
    27.6
    
    
    
    220,519
    
    
    
    20.4
    
    
    
    358,855
    
    
    
    45,983
    
    
    
    23.7Other income
(expense) (2)
    
    
    (198
    )
    
    
    0.0
    
    
    
    11,045
    
    
    
    1.0
    
    
    
    33,444
    
    
    
    4,286
    
    
    
    2.2Income before
income taxes and
minority interests
    
    
    192,505
    
    
    
    27.6
    
    
    
    231,564
    
    
    
    21.5
    
    
    
    392,299
    
    
    
    50,268
    
    
    
    25.9Provision for
income taxes
    
    
    (10,758
    )
    
    
    1.5
    
    
    
    (18,066
    )
    
    
    1.7
    
    
    
    (24,057
    )
    
    
    (3,083
    )
    
    
    1.6Minority interests
    
    
    
    
    
    
    
    
    
    
    (8,409
    )
    
    
    0.8
    
    
    
    (6,456
    )
    
    
    (827
    )
    
    
    0.4Net income
    
    
    181,747
    
    
    
    26.0
    %
    
    
    205,089
    
    
    
    19.0
    %
    
    
    361,786
    
    
    
    46,358
    
    
    
    23.9
    %
 
 (1)
    
    Share-based compensation charges incurred during the period related to: Year Ended December 31,2004
    
    2005
    
    2006% of
    
    
    
    
    
    % of
    
    
    
    
    
    
    
    
    
    % ofTotal Net
    
    
    
    
    
    Total Net
    
    
    
    
    
    
    
    
    
    Total NetAmount
    
    Revenues
    
    Amount
    
    Revenues
    
    Amount
    
    Amount
    
    RevenuesRMB
    
    
    
    
    
    RMB
    
    
    
    
    
    RMB
    
    US$(In thousands)Cost to revenues
    
    
    
    
    
    
    
    
    
    
    268
    
    
    
    0.0
    %
    
    
    614
    
    
    
    79
    
    
    
    0.0
    %Selling expenses
    
    
    
    
    
    
    
    
    
    
    8,576
    
    
    
    0.8
    %
    
    
    6,372
    
    
    
    816
    
    
    
    0.4
    %General and
administrative
expenses
    
    
    
    
    
    
    
    
    
    
    59,014
    
    
    
    5.5
    %
    
    
    12,195
    
    
    
    1,563
    
    
    
    0.8
    %Research and
development
expenses
    
    
    
    
    
    
    
    
    
    
    3,071
    
    
    
    0.3
    %
    
    
    6,873
    
    
    
    881
    
    
    
    0.5
    %
 (2)
    
    Other income (expense) is the sum of the line items other income, net plus interest income
less interest expense from our consolidated financial statements.
 59
    Table of Contents  Comparison of Years Ended December 31, 2004, December 31, 2005 and December 31, 2006
 Net Revenues
  Year ended December 312004
    
    2005
    
    2006Net
    
    
    
    
    
    Net
    
    Net
    
    
    
    
    
    
    
    
    
    NetRevenues
    
    Net Revenues
    
    Revenues
    
    Revenues
    
    
    
    
    
    
    
    
    
    RevenueRMB
    
    % of Total
    
    RMB
    
    % of Total
    
    RMB
    
    US$
    
    % of Total(in thousands, except percentages)Geographic Data:China
    
    
    459,602
    
    
    
    65.9
    %
    
    
    626,997
    
    
    
    58.1
    %
    
    
    779,378
    
    
    
    99,868
    
    
    
    51.4
    %Other Asia
    
    
    103,604
    
    
    
    14.8
    
    
    
    181,094
    
    
    
    16.8
    
    
    
    220,320
    
    
    
    28,231
    
    
    
    14.5
    %Europe
    
    
    51,720
    
    
    
    7.4
    
    
    
    135,586
    
    
    
    12.6
    
    
    
    259,418
    
    
    
    33,241
    
    
    
    17.1
    %North America
    
    
    52,825
    
    
    
    7.6
    
    
    
    69,135
    
    
    
    6.4
    
    
    
    120,149
    
    
    
    15,396
    
    
    
    7.9
    %Other
    
    
    30,086
    
    
    
    4.3
    
    
    
    65,761
    
    
    
    6.1
    
    
    
    135,716
    
    
    
    17,390
    
    
    
    9.0
    %Total net revenues
    
    
    697,837
    
    
    
    100.0
    %
    
    
    1,078,573
    
    
    
    100.0
    %
    
    
    1,514,981
    
    
    
    194,129
    
    
    
    100.0
    %Segment Data: (1)Patient monitoring devices
    
    
    364,994
    
    
    
    54.9
    %
    
    
    496,464
    
    
    
    47.8
    %
    
    
    600,332
    
    
    
    76,925
    
    
    
    40.1
    %Diagnostic laboratory instruments
    
    
    172,703
    
    
    
    26.0
    
    
    
    263,162
    
    
    
    25.3
    
    
    
    438,018
    
    
    
    56,127
    
    
    
    29.3
    %Ultrasound imaging systems
    
    
    112,739
    
    
    
    17.0
    
    
    
    264,267
    
    
    
    25.5
    
    
    
    438,128
    
    
    
    56,141
    
    
    
    29.3
    %Others
    
    
    14,481
    
    
    
    2.1
    
    
    
    14,334
    
    
    
    1.4
    
    
    
    20,683
    
    
    
    2,650
    
    
    
    1.3
    %Total net segment revenues
    
    
    664,917
    
    
    
    100.0
    %
    
    
    1,038,227
    
    
    
    100.0
    %
    
    
    1,497,161
    
    
    
    191,843
    
    
    
    100.0
    %
 
 (1)
    
    The segment information was prepared primarily in accordance with PRC GAAP.    60
    Table of Contents  Cost of Revenues
  Gross Profit and Gross Margin
  Operating Expenses
  61
    Table of Contents  Selling Expenses
  
    
    increases in salaries and bonus payments resulting primarily from a growing sales
headcount, particularly on our international sales team, accounted for 38.5% of the
increase in 2004, 46.3% of the increase in 2005 (excluding employee share-based
compensation expenses relating to a share grant contributed by shareholders of RMB8.6
million), and 27.0% of the increase in 2006;
    
    increases in travel and entertainment expenses accounted for 13.8% of the increase in
2004, 22.5% of the increase in 2005, and 11.7% of the increase in 2006;
    
    increases in marketing and training expenses accounted for 25.9% of the increase in
2004, 8.3% of the increase in 2005, and 27.8% of the increase in 2006; and
    
    an increase in 2005 in employee share-based compensation expenses related to a share
grant contributed by shareholders as compensation for past and current services provided,
which accounted for 5.9% of the increase in 2005. Share-based compensation expenses
decreased RMB2.2 million (US$0.3 million) in 2006.
 General and Administrative Expenses
  Research and Development Expenses
  62
    Table of Contents  Expense of In-Progress Research and Development
  Other Income (Expense)
  Provision for Income Taxes
  Minority Interests
  Net Income
  63
    Table of Contents  B. Liquidity and Capital Resources
 Liquidity and Capital Resources
 Years ended December 312004
    
    2005
    
    2006RMB
    
    RMB
    
    RMB
    
    US$(In thousands)Cash and cash equivalents
    
    
    178,556
    
    
    
    446,143
    
    
    
    1,709,596
    
    
    
    219,064Net cash from operating activities
    
    
    165,840
    
    
    
    363,385
    
    
    
    544,705
    
    
    
    69,797Net cash used in investing activities
    
    
    (21,591
    )
    
    
    (62,428
    )
    
    
    (178,857
    )
    
    
    (22,918
    )Net cash (used in) from financing activities
    
    
    (95,990
    )
    
    
    (33,370
    )
    
    
    924,397
    
    
    
    118,450
 Operating Activities
    Investing Activities
  
  64
    Table of Contents  Financing Activities
      65
    Table of Contents  Capital Expenditures
  Critical Accounting Policies
  Allowance for Doubtful Accounts
  Provisions for Inventories
  66
    Table of Contents  Provisions for Income Taxes
  Revenue Recognition
   Valuation of Share-Based Compensation
   67
    Table of Contents  C. Research and Development
    68
    Table of Contents  D. Trend Information
  E. Off-Balance Sheet Commitments and Arrangements
  F. Tabular Disclosure of Contractual Obligations
  Contractual ObligationsLess than
    
    
    
    
    
    More than1 Year
    
    1-3 Years
    
    3-5 Years
    
    5 Years
    
    Total
    
    TotalRMB
    
    RMB
    
    RMB
    
    RMB
    
    RMB
    
    US$(In thousands)Capital commitments
    
    59,972
    
    512
    
    
    
    
    
    60,484
    
    7,750Operating leases (1)
    
    7,045
    
    11,640
    
    
    
    
    
    18,685
    
    2,394Bank loans
    
    
    
    
    
    
    
    
    
    
    
    Notes payable
    
    50,625
    
    
    
    
    
    
    
    50,625
    
    6,487Total
    
    117,642
    
    12,152
    
    
    
    
    
    129,794
    
    16,631
 
 (1)
    
    Operating leases are for office premises and our assembly and manufacturing facility. 69
    Table of Contents  ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 A. Directors and Senior Management
  Name
    
    Age
    
    PositionXu Hang
    
    
    45
    
    
    Chairman and Co-Chief Executive OfficerLi Xiting
    
    
    56
    
    
    Director, President and Co-Chief Executive OfficerJoyce I-Yin Hsu
    
    
    32
    
    
    Director and Chief Financial OfficerCheng Minghe
    
    
    45
    
    
    Executive Vice President of Sales and MarketingMu Lemin
    
    
    52
    
    
    Executive Vice President of AdministrationYan Baiping
    
    
    43
    
    
    Executive Vice President of Research and DevelopmentTim Fitzpatrick
    
    
    40
    
    
    General CounselChen Qingtai (1)
    
    
    70
    
    
    DirectorRonald Ede (1)(2)(3)
    
    
    48
    
    
    DirectorAndrew Wolff (2)(3)
    
    
    38
    
    
    DirectorWu Qiyao (1)(2)(3)
    
    
    70
    
    
    Director
 
 (1)
    
    Member, audit committee(2)
    
    Member, compensation committee(3)
    
    Member, nomination committee Xu Hang
 Li Xiting
 Joyce I-Yin Hsu
 70
    Table of Contents  Cheng Minghe
 Mu Lemin
 Yan Baiping
 Tim Fitzpatrick
 Chen Qingtai
 Ronald Ede
 71
    Table of Contents  Andrew Wolff
 Wu Qiyao
  B. Compensation
 Remuneration and Borrowing
  Compensation of Directors and Executive Officers
  2006 Employee Share Incentive Plan
    72
    Table of Contents  .
 Number ofOrdinary Sharesto be Issued
    
    Exercise Price perupon Exercise
    
    Ordinary ShareName
    
    of Options
    
    (in US Dollars)
    
    Date of Grant
    
    Date of ExpirationXu Hang
    
    
    600,000
    
    
    
    11.00
    
    
    September 8, 2006
    
    September 8, 2014Li Xiting
    
    
    600,000
    
    
    
    11.00
    
    
    September 8, 2006
    
    September 8, 2014Cheng Minghe
    
    
    200,000
    
    
    
    5.00
    
    
    February 22, 2006
    
    February 22, 2014Joyce I-Yin Hsu
    
    
    *
    
    
    
    5.00
    
    
    February 22, 2006
    
    February 22, 2014Yan Baiping
    
    
    *
    
    
    
    5.00
    
    
    February 22, 2006
    
    February 22, 2014Mu Lemin
    
    
    *
    
    
    
    5.00
    
    
    February 22, 2006
    
    February 22, 2014Chen Qingtai
    
    
    *
    
    
    
    11.00
    
    
    September 8, 2006
    
    September 8, 2014Ronald Ede
    
    
    *
    
    
    
    11.00
    
    
    September 8, 2006
    
    September 8, 2014Wu Qiyao
    
    
    *
    
    
    
    11.00
    
    
    September 8, 2006
    
    September 8, 2014Andrew Wolff
    
    
    *
    
    
    
    11.00
    
    
    September 8, 2006
    
    September 8, 2014Tim Fitzpatrick
    
    
    *
    
    
    
    13.50
    
    
    September 25, 2006
    
    September 25, 2014
 
 *
    
    Upon exercise of all options granted, would beneficially own less than 1% of our outstanding ordinary shares. 73
    Table of Contents  Employment Agreements
   
    
    serve, invest or assist in any business that competes with any significant aspect of the
business of us or our affiliated entities; or
    
    solicit, induce, recruit or encourage any person to terminate his or her employment or
consulting relationship with us or our affiliated entities.
 C. Board Practices
 Duties of Directors
   74
    Table of Contents  
    
    convening shareholders annual general meetings and reporting its work to shareholders
at such meetings;
    
    issuing authorized but unissued shares and redeem or purchase outstanding shares of our
company;
    
    declaring dividends and distributions;
    
    appointing officers and determining the term of office and compensation of officers;
    
    exercising the borrowing powers of our company and mortgaging the property of our
company; and
    
    approving the transfer of shares of our company, including
the registering of such shares in our share register.
 Terms of Directors and Executive Officers
   Appointment of the GS Funds Director
  Qualification
  Board Committees
  75
    Table of Contents  Audit Committee
   
    
    recommending to our shareholders, if appropriate, the annual re-appointment of our
independent auditors and pre-approving all auditing and non-auditing services permitted to
be performed by the independent auditors;
    
    annually reviewing an independent auditors report describing the auditing firms
internal quality control procedures, any material issues raised by the most recent internal
quality control review, or peer review of the independent auditors and all relationships
between the independent auditors and our company;
    
    setting clear hiring policies for employees or former employees of the independent
auditors;
    
    reviewing with the independent auditors any audit problems or difficulties and
managements response;
    
    reviewing and approving all proposed related-party transactions, as defined in Item 404
of Regulation S-K promulgated by the SEC;
    
    discussing the annual audited financial statements with management and the independent
auditors;
    
    discussing with management and the independent auditors major issues regarding
accounting principles and financial statement presentations;
    
    reviewing reports prepared by management or the independent auditors relating to
significant financial reporting issues and judgments;
    
    reviewing with management and the independent auditors the effect of regulatory and
accounting initiatives, as well as off-balance sheet structures on our financial
statements;
    
    discussing policies with respect to risk assessment and risk management;
    
    reviewing major issues as to the adequacy of our internal controls and any special audit
steps adopted in light of material control deficiencies;
    
    timely reviewing reports from the independent auditors regarding all critical accounting
policies and practices to be used by our company, all alternative treatments of financial
information within US GAAP that have been discussed with management and all other material
written communications between the independent auditors and management;
 76
    Table of Contents  
    
    establishing procedures for the receipt, retention and treatment of complaints received
from our employees regarding accounting, internal accounting controls or auditing matters
and the confidential;
    
    anonymous submission by our employees of concerns regarding questionable accounting or
auditing matters;
    
    annually reviewing and reassessing the adequacy of our audit committee charter;
    
    such other matters that are specifically delegated to our audit committee by our board
of directors from time to time;
    
    meeting separately and periodically with management, the internal auditors and the
independent auditors; and
    
    reporting regularly to the full board of directors.
 Compensation Committee
   
    
    reviewing and approving corporate goals and objectives relevant to the compensation of
our co-chief executive officers, evaluating the performance of our co-chief executive
officers in light of those goals and objectives, and setting the compensation level of our
co-chief executive officers based on this evaluation;
    
    reviewing and making recommendations to our board of directors regarding our
compensation policies and forms of compensation provided to our directors and officers;
    
    reviewing and making recommendations to our co-chief executive regarding the
compensation level, share-based compensation and bonuses for our officers other than our
co-chief executive officers;
    
    reviewing and determining cash and share-based compensation for our directors;
    
    administering our equity incentive plans in accordance with the terms thereof; and
    
    such other matters that are specifically delegated to the compensation committee by our
board of directors from time to time.
 Nominations Committee
  77
    Table of Contents  Corporate Governance
   Differences in Corporate Law
 http://ir.mindray.com
 Interested Transactions
  D. Employees
  As of December 31, 2006Manufacturing
    
    
    829Research and development
    
    
    719General and administration
    
    
    131Marketing and sales
    
    
    690Customer support and service
    
    
    203Procurement and supply management
    
    
    172Total
    
    
    2,744
   78
    Table of Contents  E. Share Ownership
  
    
    each of our directors and executive officers who beneficially own our ordinary shares; and
    
    each person known to us to own beneficially more than 5% of our ordinary shares.
  Ordinary Shares
    
    PercentageBeneficially Owned
    
    Of Votes HeldName
    
    Number
    
    Percent
    
    PercentDirectors and Executive OfficersXu Hang (1)**
    
    
    22,016,758
    
    
    
    20.4
    %
    
    
    38.7
    %Li Xiting (2)**
    
    
    19,080,214
    
    
    
    17.7
    %
    
    
    33.5
    %Cheng Minghe (3)**
    
    
    3,109,938
    
    
    
    2.9
    %
    
    
    5.5
    %Joyce I-Yin Hsu
    
    
    *
    
    
    
    *
    
    
    
    *Yan Baiping
    
    
    *
    
    
    
    *
    
    
    
    *Mu Lemin
    
    
    *
    
    
    
    *
    
    
    
    *Tim Fitzpatrick
    
    
    *
    
    
    
    *
    
    
    
    *Chen Qingtai
    
    
    
    
    
    
    
    
    
    
    Ronald Ede
    
    
    
    
    
    
    
    
    
    
    Andrew Wolff (4)
    
    
    5,725,105
    
    
    
    5.3
    %
    
    
    2.0
    %Wu Qiyao
    
    
    
    
    
    
    
    
    
    
    Other 5% ShareholdersAble Choice Investments Limited
    
    
    7,160,432
    
    
    
    6.6
    %
    
    
    2.5
    %The GS Funds (5)
    
    
    5,725,105
    
    
    
    5.3
    %
    
    
    2.0
    %
 
 *
    
    Upon exercise of all options currently exercisable or vesting within 60 days of the date of this annual report,
would beneficially own less than 1% of our ordinary shares.**
    
    Mr. Xu Hang, Mr. Li Xiting, and Mr. Cheng Minghe hold Class B ordinary shares.(1)
    
    All holdings are Class B ordinary
shares. Mr. Xu is the sole shareholder
and exercises investment and voting
power over the shares held by New
Dragon (No. 12) Investments Limited,
or New Dragon. New Dragon is a Cayman
Islands company and its address is
Ugland House, P.O. Box 309, George
Town, Grand Cayman, Cayman Islands.(2)
    
    All holdings are Class B ordinary
shares. Mr. Li is the sole shareholder
and exercises investment and voting
power over the shares held by Quiet
Well Limited. Quiet Well Limited is a
BVI company and its address is 79
    Table of Contents  Tropic
Isle Building P.O. Box 438, Road Town,
Tortola, BVI.(3)
    
    All holdings are Class B ordinary
shares, which are held by City Legend
Limited, or City Legend. Mr. Cheng is
the controlling shareholder and
exercises investment and voting power
over the shares held by City Legend.
City Legend is a BVI company and its
address is P.O. Box 3152, Road Town,
Tortola, BVI.(4)
    
    Represents shares owned by the GS
Funds. Mr. Wolff, one of our directors
and a managing director in the
Principal Investment Area of Goldman
Sachs (Asia) L.L.C., a wholly-owned
subsidiary of The Goldman Sachs Group,
Inc., disclaims beneficial ownership
of such shares except to the extent of
his pecuniary interest therein, if
any. The mailing address for Mr. Wolff
is c/o Goldman Sachs & Co., 85 Broad
Street, 10th Floor, New
York, NY 10004.(5)
    
    Includes a total of 5,725,105 shares
owned by GS Capital Partners V Fund,
L.P., a Delaware limited partnership;
GS Capital Partners V Offshore Fund,
L.P., a Cayman Islands exempted
limited partnership; GS Capital
Partners V Institutional, L.P., a
Delaware limited partnership and GS
Capital Partners V GmbH & Co. KG, a
German KG. Each of the GS Funds has a
mailing address of c/o Goldman, Sachs
& Co., 85 Broad Street, 10th Floor,
New York, NY 10004. Affiliates of The
Goldman Sachs Group, Inc. are the
general partner, managing general
partner or investment manager of each
of the GS Funds, and each of the GS
Funds shares voting and investment
power with certain of its respective
affiliates.Each of the GS Funds is affiliated
with or managed by Goldman, Sachs &
Co., a wholly-owned subsidiary of The
Goldman Sachs Group, Inc. The joint
bookrunner of this offering, Goldman
Sachs (Asia) L.L.C., is also an
affiliate of The Goldman Sachs Group,
Inc. Each of The Goldman Sachs Group,
Inc., Goldman, Sachs & Co. and Goldman
Sachs (Asia) L.L.C. disclaims
beneficial ownership of the shares
owned by each of the GS Funds, except
to the extent of their pecuniary
interest therein.  
 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 A. Major Shareholders
  B. Related Party Transactions.
 Shareholders Agreement
  80
    Table of Contents  Registration Rights Agreement
  Acquisition of Minority Interest
  Secondary Offering
  C. Interests of Experts and Counsel
  81
    Table of Contents  ITEM 8. FINANCIAL INFORMATION
 A. Consolidated statements and other financial information.
  Legal Proceedings
  Dividend Policy
     82
    Table of Contents  B.
    
    Significant Changes
  
 ITEM 9. THE OFFER AND LISTING.
 A.
    
    Offering and listing details.
 Price Range of Our ADSs
  High
    
    Low2006 (from September 26, 2006)September
    
    US$
    17.72
    
    
    US$
    15.20October
    
    US$
    19.60
    
    
    US$
    15.60November
    
    US$
    24.72
    
    
    US$
    18.21December
    
    US$
    27.20
    
    
    US$
    21.902007January
    
    US$
    26.85
    
    
    US$
    22.75February
    
    US$
    29.30
    
    
    US$
    21.11March
    
    US$
    25.88
    
    
    US$
    22.51April
    
    US$
    25.38
    
    
    US$
    22.76May
    
    US$
    29.03
    
    
    US$
    22.99June
(through June 26, 2007)
    
    US$
    31.49
    
    
    US$
    30.61
  B.
    
    Plan of DistributionNot applicable.C.
    
    MarketsSee Item 9.A above.D.
    
    Selling ShareholdersNot applicable.E.
    
    DilutionNot applicable.B.
    
    Expenses of the IssueNot applicable.
 83
    Table of Contents  ITEM 10. ADDITIONAL INFORMATION.
 A.
    
    Share capitalNot applicable.B.
    
    Memorandum and Articles of Association
  C.
    
    Material Contracts
  D.
    
    Exchange ControlsForeign exchange in China is primarily regulated by:
 
    
    The Foreign Currency Administration Rules (1996), as amended; and
    
    The Administration Rules of the Settlement, Sale and Payment of Foreign Exchange
(1996), or the Administration Rules.
    84
    Table of Contents  Regulation of Foreign Exchange in Certain Onshore and Offshore Transactions
  
    
    prior to establishing or assuming control of an offshore company for the purpose of
financing that offshore company with assets or equity interests in an onshore
enterprise in the PRC, each PRC resident, whether a natural or legal person, must
complete the overseas investment foreign exchange registration procedures with the
relevant local SAFE branch;
    
    an amendment to the registration with the local SAFE branch is required to be filed
by any PRC resident that directly or indirectly holds interests in that offshore
company upon either (1) the injection of equity interests or assets of an onshore
enterprise to the offshore company or (2) the completion of any overseas fund raising
by such offshore company; and
    
    an amendment to the registration with the local SAFE branch is also required to be
filed by such PRC resident when there is any material change in the capital of the
offshore company and not related to inbound investment, such as (1) an increase or
decrease in its capital, (2) a transfer or swap of shares, (3) a merger or divesture,
(4) a long-term equity or debt investment or (5) the creation of any security interests
over the relevant assets located in China.
   85
    Table of Contents  E.
    
    Taxation
  Cayman Islands Taxation
    
    
    no law which is enacted in the Cayman Islands imposing any tax to be levied on profits
or income or gains or appreciation applies to us or our operations; and
    
    the aforesaid tax or any tax in the nature of estate duty or inheritance tax are not
payable on our ordinary shares, debentures or other obligations.The undertaking that we have obtained is for a period of 20 years from 28 June, 2005.
 86
    Table of Contents  United States Federal Income Taxation
  
    
    dealers in securities or currencies;
    
    traders in securities that elect to use a mark-to-market method of accounting for
securities holdings;
    
    banks or other financial institutions;
    
    insurance companies;
    
    tax-exempt organizations;
    
    partnerships and other entities treated as partnerships or other pass through entities
for US federal income tax purposes or persons holding ADSs and ordinary shares through any
such entities;
    
    regulated investments companies or real estate investment trusts;
    
    persons that hold ADSs and Shares as part of a hedge, straddle, constructive sale,
conversion transaction or other integrated investment;
    
    US Holders (as defined below) whose functional currency for tax purposes is not the US
dollar;
    
    US expatriates or persons treated as residents of more than one country;
    
    persons liable for alternative minimum tax; or
    
    persons who actually or constructively own 10% or more of the total combined voting
power of all classes of our shares (including ADSs and ordinary shares) entitled to vote.
  Prospective purchasers and existing holders are urged to consult with their own tax advisors
concerning the particular US federal income tax consequences to them of the purchase,
 87
    Table of Contents  ownership and disposition of our ADSs and ordinary shares, as well as the consequences to them
arising under the laws of any other taxing jurisdiction.
  
    
    a citizen or resident of the United States for US federal income tax purposes;
    
    a corporation, or other entity taxable as a corporation, that was created or organized
in or under the laws of the United States or any political subdivision thereof;
    
    an estate the income of which is subject to US federal income tax regardless of its
source; or
    
    a trust if (a) a court within the United States is able to exercise primary supervision
over its administration and one or more US persons have the authority to control all
substantial decisions of the trust, or (b) the trust has a valid election in effect to be
treated as a US person.
   US Holder
 Dividends on ADSs and Ordinary Shares
    88
    Table of Contents  Sales and other dispositions of ADSs and Ordinary Shares
  Passive Foreign Investment Company
     89
    Table of Contents  US Information Reporting and Backup Withholding Rules
  90
    Table of Contents  PROSPECTIVE PURCHASERS AND EXISTING HOLDERS OF OUR ADSS AND ORDINARY SHARES SHOULD CONSULT
WITH THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR
PARTICULAR SITUATIONS AS WELL AS ANY ADDITIONAL TAX CONSEQUENCES RESULTING FROM PURCHASING, HOLDING
OR DISPOSING OF ADSS AND ORDINARY SHARES, INCLUDING THE APPLICABILITY AND EFFECT OF THE TAX LAWS OF
ANY STATE, LOCAL OR FOREIGN JURISDICTION, INCLUDING ESTATE, GIFT, AND INHERITANCE LAWS.
 F.
    
    Dividends and Paying AgentsNot applicable.G.
    
    Statement by Experts.Not applicable.H.
    
    Documents on Display
    http://www.sec.gov
 91
    Table of Contents  I.
    
    Subsidiaries InformationNot applicable.
 
 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 Quantitative and Qualitative Disclosures about Market Risk
 Foreign Exchange Risk
      92
    Table of Contents  Interest Rate Risk
  Inflation
  
 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.
  
 PART II.
 
 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.
  
 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.
  ITEM 15. CONTROLS AND PROCEDURES.
  Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  93
    Table of Contents  ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT.
  
 ITEM 16B. CODE OF ETHICS.
  
 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
  2004
    
    
    2005
    
    
    2006Audit fees (1)
    
    
    
    
    
    $
    100,000
    
    
    $
    525,093Audit-related fees (2)
    
    
    
    
    
    $
    6,649
    
    
    $
    825,032All other fees (3)
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    Audit fees means the aggregate fees billed in each of the fiscal years listed
for professional services rendered by our principal auditors for the audit of our
annual financial statements.(2)
    
    Audit-related fees means the aggregate fees billed in each of the fiscal
years listed for assurance and related services by our principal auditors that are
reasonably related to the performance of the audit or review of our financial
statements and are not reported under Audit fees. Services comprising the fees
disclosed under the category of Audit-related fees involve principally the issue of
comfort letter and rendering of listing advice in 2006 in connection with our initial
public offering.(3)
    
    All other fees means the aggregate fees billed in 2006 for consultation
services rendered by our principal auditors in connection with Section 404 of the
Sarbanes-Oxley Act of 2002.  
 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.
  94
    Table of Contents  ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS.
  
 PART III.
 
 ITEM 17. FINANCIAL STATEMENTS.
  
 ITEM 18. FINANCIAL STATEMENTS.
  
 ITEM 19. EXHIBITS.
 ExhibitNumber
    
    Description3 .1*
    
    Third Amended and Restated Memorandum and Articles of Association of
Mindray Medical International Limited.4.1*
    
    Form of American Depositary Receipt.4.2*
    
    Specimen Certificate for Class A Ordinary Shares.4.3*
    
    Form of Deposit Agreement among Mindray Medical International Limited, The Bank
of New York and owners and holders of the American Depositary Shares.4.4*
    
    Shareholders Agreement between Mindray International Holdings Ltd., Shenzhen
Mindray Bio-Medical Electronics Co., Ltd., the several shareholders named
therein, and the several investors named therein, dated September 26, 2005.4.5*
    
    Registration Rights Agreement between Mindray Medical International Limited and
the several investors named therein, dated September 5, 2006.8.1
    
    List of Subsidiaries.10.1*
    
    Amended and Restated Employee Share Incentive Plan and form of Option Agreement.10.2*
    
    Form of Indemnification Agreement with the officers and directors of Mindray
Medical International Limited.10.3*
    
    Form of Employment Agreement of Mindray Medical International Limited.10.4*
    
    Grant Contract of Use Right of State-owned Land of Mindray headquarters
building between Shenzhen Mindray Bio-Medical Electronics Co., Ltd. and
Shenzhen Planning and State-owned Land Bureau, dated July 18, 2001.10.5*
    
    Agreement for Assignment of Trademark between Chang Run Da Electronic
(Shenzhen) Co., Ltd. and Shenzhen Mindray Bio-Medical Electronics Co., Ltd.,
dated November 20, 2002.10.6*
    
    Purchase Agreement of New Energy Building between Shenzhen Mindray Bio-Medical
Electronics Co., Ltd. and Shenzhen Mindray Electronic Co., Ltd., dated April 9,
2002.10.7*
    
    Lease Agreement of Reagent and Manufacturing building between Shenzhen Mindray
Bio-Medical Electronics Co., Ltd. and Shenzhen Zhongguan Company Limited, dated
June 28, 2004.10.8*
    
    Lease Agreement of Manufacturing Building between Shenzhen Mindray Bio-Medical
Electronics Co., Ltd. and Shenzhen Zhongguan Company Limited, dated July 27,
2005.10.9*
    
    Subscription and Share Purchase Agreement dated July 6, 2005 and Subscription
and Share Purchase Amendment Agreement dated August 22, 2005.10.10*
    
    Form of Agreement on Transfer of Shares of Shenzhen Mindray Bio-Medical
Electronics Co., Ltd.
 95
    Table of Contents  ExhibitNumber
    
    Description10.11*
    
    Form of Equity Transfer Agreement.10.12
    
    Investment Cooperation Agreement between Mindray Medical International Limited
and the Management Committee of the Nanjing Jiangning Economic and
Technological Development Zone, dated December 27, 2006.12.1
    
    Certification of Co-Chief Executive Officer pursuant to Rule 13a-14(a) (17 CFR
240.13a-14(a)) or Rule 15d-14(a) (17 CFR 240.15d-14(a)).12.2
    
    Certification of Co-Chief Executive Officer pursuant to Rule 13a-14(a) (17 CFR
240.13a-14(a)) or Rule 15d-14(a) (17 CFR 240.15d-14(a)).12.3
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) (17 CFR
240.13a-14(a)) or Rule 15d-1(a) (17 CFR 240.15d-14(a)).13.1
    
    Certification pursuant to Rule 13a-14(b) (17 CFR 240.13a-14(b)) or Rule
15d-14(b)(17 CFR 240.15d-14(b)) and 18 U.S.C Section 1350.23.1
    
    Consent of Deloitte Touche Tohmatsu
CPA Ltd., Independent Registered Public Accounting Firm.23.2
    
    Consent of Frost & Sullivan.
 
 *
    
    Previously filed with the Registrants registration statement on Form F-1 (File No.
333-137140).
    
    Previously filed with the Registrants registration statement on Form F-1 (File No. 333-140028). 96
    Table of Contents  SIGNATURE
  Date: June 27, 2007
    
    MINDRAY MEDICAL INTERNATIONAL LIMITED/s/Joyce I-Yin HsuName:
Title:
    
    Joyce I-Yin Hsu
Director and Chief Financial
Officer
 97
    Table of Contents  MINDRAY MEDICAL INTERNATIONAL LIMITED
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2006
 PAGE(S)Report of Independent Registered Public Accounting Firm
    
    
    1Consolidated Statements of Operations for the Years Ended
December 31, 2004, 2005 and 2006
    
    
    2Consolidated Balance Sheets as of December 31, 2005 and 2006
    
    
    3 - 4Consolidated Statements of Shareholders Equity and Comprehensive
Income for the Years Ended December 31, 2004, 2005 and 2006
    
    
    5Consolidated Statements of Cash Flows for the Years Ended
December 31, 2004, 2005 and 2006
    
    
    6 - 7Notes to Consolidated Financial Statements for the Years Ended
December 31, 2004, 2005 and 2006
    
    
    8  31
    Table of Contents  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      Deloitte Touche Tohmatsu CPA Ltd.
Shenzhen
  F-1
    Table of Contents  MINDRAY MEDICAL INTERNATIONAL LIMITED
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Year ended December 31,2004
    
    
    2005
    
    
    2006
    
    
    2006RMB000
    
    
    RMB000
    
    
    RMB000
    
    
    US$000(In thousands, except share and per share data)Net revenues
    
    
    697,837
    
    
    
    1,078,573
    
    
    
    1,514,981
    
    
    
    194,126Cost of revenues (a)
    
    
    (319,013
    )
    
    
    (493,326
    )
    
    
    (687,484
    )
    
    
    (88,093
    )Gross profit
    
    
    378,824
    
    
    
    585,247
    
    
    
    827,497
    
    
    
    106,033Operating expenses:Selling expenses (a)
    
    
    (92,177
    )
    
    
    (146,499
    )
    
    
    (211,858
    )
    
    
    (27,147
    )General and administrative expenses (a)
    
    
    (32,340
    )
    
    
    (112,082
    )
    
    
    (76,010
    )
    
    
    (9,740
    )Research and development expenses (a)
    
    
    (61,604
    )
    
    
    (106,147
    )
    
    
    (149,141
    )
    
    
    (19,111
    )Expense of in-progress research and development
    
    
    
    
    
    
    
    
    
    
    (31,835
    )
    
    
    (4,079
    )Other general expenses
    
    
    
    
    
    
    
    
    
    
    202
    
    
    
    26Operating income
    
    
    192,703
    
    
    
    220,519
    
    
    
    358,855
    
    
    
    45,982Other income
    
    
    1,405
    
    
    
    9,462
    
    
    
    8,497
    
    
    
    1,089Other expenses
    
    
    (1,366
    )
    
    
    (252
    )
    
    
    (2,481
    )
    
    
    (318
    )Interest income
    
    
    3,087
    
    
    
    3,854
    
    
    
    27,890
    
    
    
    3,574Interest expense
    
    
    (3,324
    )
    
    
    (2,019
    )
    
    
    (462
    )
    
    
    (59
    )Income before income taxes and minority interests
    
    
    192,505
    
    
    
    231,564
    
    
    
    392,299
    
    
    
    50,268Provision for income taxes
    
    
    (10,758
    )
    
    
    (18,066
    )
    
    
    (24,057
    )
    
    
    (3,083
    )Minority interests
    
    
    
    
    
    
    (8,409
    )
    
    
    (6,456
    )
    
    
    (827
    )Net income
    
    
    181,747
    
    
    
    205,089
    
    
    
    361,786
    
    
    
    46,358Deemed dividend on issuance of convertible redeemable
preferred shares at a discount
    
    
    
    
    
    
    (14,031
    )
    
    
    
    
    
    
    Income attributable to ordinary shareholders
    
    
    181,747
    
    
    
    191,058
    
    
    
    361,786
    
    
    
    46,358Basic earnings per share
    
    RMB2.11
    

    
    RMB2.31
    

    
    RMB4.16
    

    
    
    US$ 0.53Diluted earnings per share
    
    RMB2.11
    

    
    RMB2.31
    

    
    RMB3.75
    

    
    
    US$ 0.48Shares used in computation of:Basic earnings per share
    
    
    86,000,000
    
    
    
    82,790,427
    
    
    
    87,066,163
    
    
    
    87,066,163Diluted earnings per share
    
    
    86,000,000
    
    
    
    82,790,427
    
    
    
    96,370,084
    
    
    
    96,370,084
  Year ended December 31,2004
    
    2005
    
    2006
    
    2006RMB000
    
    RMB000
    
    RMB000
    
    US$000Share-based compensation charges incurred
during the year related to:Cost of revenues
    
    
    
    
    
    
    268
    
    
    
    614
    
    
    
    79Selling expenses
    
    
    
    
    
    
    8,576
    
    
    
    6,372
    
    
    
    816General and administrative expenses
    
    
    
    
    
    
    59,014
    
    
    
    12,195
    
    
    
    1,563Research and development expenses
    
    
    
    
    
    
    3,071
    
    
    
    6,873
    
    
    
    881
  F-2
    Table of Contents  MINDRAY MEDICAL INTERNATIONAL LIMITED
 
 CONSOLIDATED BALANCE SHEETS
 December 31,2005
    
    2006
    
    2006RMB000
    
    RMB000
    
    US$000(In thousands, except share and per share data)ASSETSCurrent assets:Cash and cash equivalents
    
    
    446,143
    
    
    
    1,709,596
    
    
    
    219,064Restricted cash
    
    
    7,727
    
    
    
    
    
    
    
    Short-term investments
    
    
    
    
    
    
    13,312
    
    
    
    1,706Account receivables (less allowance for doubtful
accounts of RMB2,016 for 2005 and
RMB5,662 (US$726) for 2006, respectively)
    
    
    71,330
    
    
    
    104,679
    
    
    
    13,413Inventories
    
    
    105,422
    
    
    
    122,071
    
    
    
    15,642Value added tax receivables
    
    
    12,963
    
    
    
    
    
    
    
    Other receivables
    
    
    13,987
    
    
    
    11,774
    
    
    
    1,509Prepayments and other
    
    
    17,134
    
    
    
    19,263
    
    
    
    2,468Deferred tax assets
    
    
    406
    
    
    
    2,747
    
    
    
    352Total current assets
    
    
    675,112
    
    
    
    1,983,442
    
    
    
    254,154Loans to employees
    
    
    8,460
    
    
    
    4,851
    
    
    
    622Long-term investments
    
    
    
    
    
    
    105,573
    
    
    
    13,528Other assets
    
    
    2,020
    
    
    
    2,124
    
    
    
    272Property, plant and equipment, net
    
    
    152,489
    
    
    
    186,980
    
    
    
    23,959Land use right
    
    
    2,639
    
    
    
    2,505
    
    
    
    321Deferred tax assets
    
    
    115
    
    
    
    
    
    
    
    Intangible assets, net
    
    
    
    
    
    
    149,479
    
    
    
    19,154Goodwill
    
    
    
    
    
    
    122,169
    
    
    
    15,654Total assets
    
    
    840,835
    
    
    
    2,557,123
    
    
    
    327,664LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Notes payable
    
    
    17,153
    
    
    
    50,625
    
    
    
    6,487Accounts payable
    
    
    62,809
    
    
    
    79,352
    
    
    
    10,169Customers deposits
    
    
    29,827
    
    
    
    47,007
    
    
    
    6,023Salaries payables
    
    
    43,653
    
    
    
    55,676
    
    
    
    7,134Other payables
    
    
    44,825
    
    
    
    100,082
    
    
    
    12,824Income taxes payable
    
    
    2,928
    
    
    
    11,703
    
    
    
    1,500Other taxes payable
    
    
    5,086
    
    
    
    7,937
    
    
    
    1,017Total current liabilities
    
    
    206,281
    
    
    
    352,382
    
    
    
    45,154
 F-3
    Table of Contents  MINDRAY MEDICAL INTERNATIONAL LIMITED
 CONSOLIDATED BALANCE SHEETS
 December 31,2005
    
    
    2006
    
    
    2006RMB000
    
    
    RMB000
    
    
    US$000(In thousands, except share and per share data)Deferred tax
    
    
    
    
    
    
    21,815
    
    
    
    2,795Commitments and contingencies (Note 18)Minority interests
    
    
    37,596
    
    
    
    11
    
    
    
    1Mezzanine equity:Convertible redeemable preferred shares (HK$0.001
par value: 1,000,000,000 and nil shares authorized
in 2005 and 2006, respectively and 10,074,977 and
nil shares issued and outstanding for 2005 and 2006,
respectively
    
    
    325,389
    
    
    
    
    
    
    
    Shareholders equity:Ordinary shares (HK$0.001 par value: 5,000,000,000
shares authorized and 75,350,054 for
2005, and 105,727,677 for 2006, respectively issued
and outstanding)
    
    
    79
    
    
    
    110
    
    
    
    14Additional paid-in capital
    
    
    45,773
    
    
    
    1,934,937
    
    
    
    247,939Retained earnings
    
    
    225,717
    
    
    
    266,833
    
    
    
    34,191Accumulated other comprehensive loss
    
    
    
    
    
    
    (18,965
    )
    
    
    (2,430
    )Total shareholders equity
    
    
    271,569
    
    
    
    2,182,915
    
    
    
    279,714Total liabilities and shareholders equity
    
    
    840,835
    
    
    
    2,557,123
    
    
    
    327,664
  F-4
    Table of Contents  MINDRAY MEDICAL INTERNATIONAL LIMITED
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
AND COMPREHENSIVE INCOME
 Additional
    
    
    
    
    
    OtherOrdinary
    
    paid-in
    
    Retained
    
    comprehensive
    
    
    
    
    
    Comprehensiveshare capital
    
    capital
    
    earnings
    
    loss
    
    Total
    
    incomeNumber
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB000(In thousands, except share and per share data)As of January 1, 2004
    
    
    86,000,000
    
    
    
    89
    
    
    
    86,177
    
    
    
    164,474
    
    
    
    
    
    
    
    250,740
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    181,747
    
    
    
    
    
    
    
    181,747
    
    
    
    181,747Dividends paid (RMB1.00 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (86,000
    )
    
    
    
    
    
    
    (86,000
    )
    
    
    As of December, 2004
    
    
    86,000,000
    
    
    
    89
    
    
    
    86,177
    
    
    
    260,221
    
    
    
    
    
    
    
    346,487
    
    
    
    181,747Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    205,089
    
    
    
    
    
    
    
    205,089
    
    
    
    205,089Dividends paid (RMB2.40 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (206,400
    )
    
    
    
    
    
    
    (206,400
    )Effect of reverse merger on
minority interests
    
    
    (7,649,946
    )
    
    
    (7
    )
    
    
    (10,008
    )
    
    
    (19,162
    )
    
    
    
    
    
    
    (29,177
    )
    
    
    Conversion of ordinary shares to convertible
redeemable preferred shares
    
    
    (3,000,000
    )
    
    
    (3
    )
    
    
    (89,820
    )
    
    
    
    
    
    
    
    
    
    
    (89,823
    )
    
    
    Capital contributions related to
reverse merger
    
    
    
    
    
    
    
    
    
    
    130
    
    
    
    
    
    
    
    
    
    
    
    130
    
    
    
    Deemed dividend on issuance of convertible
redeemable preferred shares at a discount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,031
    )
    
    
    
    
    
    
    (14,031
    )
    
    
    Capital contributions in connection with
share-based compensation, net
    
    
    
    
    
    
    
    
    
    
    59,294
    
    
    
    
    
    
    
    
    
    
    
    59,294
    
    
    
    As of December 31, 2005
    
    
    75,350,054
    
    
    
    79
    
    
    
    45,773
    
    
    
    225,717
    
    
    
    
    
    
    
    271,569
    
    
    
    205,089Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    361,786
    
    
    
    
    
    
    
    361,786
    
    
    
    361,786Dividends paid (RMB1.60 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (135,500
    )
    
    
    
    
    
    
    (135,500
    )
    
    
    Dividends paid (RMB2.00 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (185,170
    )
    
    
    
    
    
    
    (185,170
    )
    
    
    Conversion of convertible redeemable preferred
share to ordinary shares
    
    
    10,074,977
    
    
    
    10
    
    
    
    325,379
    
    
    
    
    
    
    
    
    
    
    
    325,389
    
    
    
    Issuance of ordinary shares for acquisition of
minority interests
    
    
    7,649,646
    
    
    
    8
    
    
    
    310,911
    
    
    
    
    
    
    
    
    
    
    
    310,919
    
    
    
    Issuance of ordinary shares
    
    
    12,643,000
    
    
    
    13
    
    
    
    1,227,088
    
    
    
    
    
    
    
    
    
    
    
    1,227,101
    
    
    
    Restricted shares
    
    
    10,000
    
    
    
    
    
    
    
    879
    
    
    
    
    
    
    
    
    
    
    
    879
    
    
    
    Share-based compensation
    
    
    
    
    
    
    
    
    
    
    24,907
    
    
    
    
    
    
    
    
    
    
    
    24,907
    
    
    
    Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,965
    )
    
    
    (18,965
    )
    
    
    (18,965
    )As of December 31, 2006
    
    
    105,727,677
    
    
    
    110
    
    
    
    1,934,937
    
    
    
    266,833
    
    
    
    (18,965
    )
    
    
    2,182,915
    
    
    
    342,821As of December 31, 2006 (US$000)
    
    
    105,727,677
    
    
    
    14
    
    
    
    247,939
    
    
    
    34,191
    
    
    
    (2,430
    )
    
    
    279,714
    
    
    
    43,928
  F-5
    Table of Contents  MINDRAY MEDICAL INTERNATIONAL LIMITED
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year ended December 31,2004
    
    2005
    
    2006
    
    2006RMB000
    
    RMB000
    
    RMB000
    
    US$000(In thousands)Cash flows from operating activities:Net income
    
    
    181,747
    
    
    
    205,089
    
    
    
    361,786
    
    
    
    46,358Adjustments to reconcile net income to net cash from operating
activities:Amortization of land use right
    
    
    134
    
    
    
    134
    
    
    
    134
    
    
    
    17Depreciation of property, plant and equipment
    
    
    16,003
    
    
    
    25,346
    
    
    
    38,430
    
    
    
    4,924Allowance (reversal) for doubtful receivables
    
    
    199
    
    
    
    (432
    )
    
    
    3,521
    
    
    
    451Expense of in-progress research and development
    
    
    
    
    
    
    
    
    
    
    34,121
    
    
    
    4,372Impairment loss on long-lived assets
    
    
    1,373
    
    
    
    
    
    
    
    
    
    
    
    Loss (gain) on disposal of property, plant and equipment
    
    
    244
    
    
    
    60
    
    
    
    (202
    )
    
    
    (26
    )Employee share-based compensation
    
    
    
    
    
    
    70,929
    
    
    
    26,054
    
    
    
    3,339Income attributable to the minority interests
    
    
    
    
    
    
    8,409
    
    
    
    6,456
    
    
    
    827Changes in current asset and liabilities:(Increase) in accounts receivables
    
    
    (13,738
    )
    
    
    (32,381
    )
    
    
    (37,005
    )
    
    
    (4,742
    )(Increase) in inventories
    
    
    (20,980
    )
    
    
    (19,128
    )
    
    
    (16,733
    )
    
    
    (2,144
    )(Increase) decrease in value added tax receivables
    
    
    871
    
    
    
    (3,899
    )
    
    
    12,963
    
    
    
    1,661(Increase) decrease in other receivables
    
    
    (10,128
    )
    
    
    5,534
    
    
    
    3,162
    
    
    
    405Increase in prepayments and other
    
    
    (1,352
    )
    
    
    (4,071
    )
    
    
    (2,174
    )
    
    
    (278
    )(Increase) decrease in deferred taxes assets
    
    
    (1,234
    )
    
    
    1,070
    
    
    
    (2,843
    )
    
    
    (364
    )(Increase) in other assets
    
    
    
    
    
    
    
    
    
    
    (106
    )
    
    
    (14
    )Increase in notes payables
    
    
    
    
    
    
    17,153
    
    
    
    33,472
    
    
    
    4,289Increase in accounts payable
    
    
    18,497
    
    
    
    29,794
    
    
    
    16,788
    
    
    
    2,151Increase (decrease) in customers deposits
    
    
    (13,378
    )
    
    
    13,870
    
    
    
    17,179
    
    
    
    2,201Increase in salaries payable
    
    
    10,532
    
    
    
    17,059
    
    
    
    12,023
    
    
    
    1,541Increase (decrease) in other payables
    
    
    (352
    )
    
    
    27,778
    
    
    
    30,862
    
    
    
    3,955Increase in income taxes payable
    
    
    754
    
    
    
    485
    
    
    
    3,768
    
    
    
    483Increase (decrease) in other taxes payable
    
    
    (3,352
    )
    
    
    586
    
    
    
    3,049
    
    
    
    391Net cash from operating activities
    
    
    165,840
    
    
    
    363,385
    
    
    
    544,705
    
    
    
    69,797Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    (28,142
    )
    
    
    (68,245
    )
    
    
    (72,393
    )
    
    
    (9,276
    )Proceeds from disposal of property, plant and equipment
    
    
    118
    
    
    
    205
    
    
    
    1,090
    
    
    
    140Decrease in restricted cash
    
    
    10,264
    
    
    
    4,109
    
    
    
    7,727
    
    
    
    990(Increase) in short-term investments
    
    
    
    
    
    
    
    
    
    
    (13,277
    )
    
    
    (1,701
    )(Increase) in long-term investments
    
    
    
    
    
    
    
    
    
    
    (105,613
    )
    
    
    (13,533
    )Loans (advanced to) repaid from employees
    
    
    (3,831
    )
    
    
    1,503
    
    
    
    3,609
    
    
    
    462Net cash used in investing activities
    
    
    (21,591
    )
    
    
    (62,428
    )
    
    
    (178,857
    )
    
    
    (22,918
    )Cash flows from financing activities:Repayment of bank loans
    
    
    (10,000
    )
    
    
    (37,000
    )
    
    
    
    
    
    
    Dividends paid
    
    
    (86,000
    )
    
    
    (206,400
    )
    
    
    (338,679
    )
    
    
    (43,398
    )Contributions from shareholders
    
    
    
    
    
    
    130
    
    
    
    
    
    
    
    Issue of preferred shares (net of direct incremental costs of
RMB15,351 (US$1,942) in 2005)
    
    
    
    
    
    
    209,900
    
    
    
    
    
    
    
    Issue of ordinary shares (net of direct incremental costs of
RMB27,524 (US$3,482) in 2006)
    
    
    
    
    
    
    
    
    
    
    1,227,675
    
    
    
    157,312Proceeds collected for shareholders
    
    
    
    
    
    
    
    
    
    
    35,401
    
    
    
    4,536Net cash used in (generated from) financing activities
    
    
    (95,990
    )
    
    
    (33,370
    )
    
    
    924,397
    
    
    
    118,450
 F-6
    Table of Contents  MINDRAY MEDICAL INTERNATIONAL LIMITED
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year ended December 31,2004
    
    2005
    
    2006
    
    2006RMB000
    
    RMB000
    
    RMB000
    
    US$000(In thousands)Net increase in cash and cash equivalents
    
    
    48,259
    
    
    
    267,587
    
    
    
    1,290,245
    
    
    
    165,329Cash and cash equivalents at beginning of period
    
    
    130,297
    
    
    
    178,556
    
    
    
    446,143
    
    
    
    57,168Effect of exchange rate changes
    
    
    
    
    
    
    
    
    
    
    (26,792
    )
    
    
    (3,433
    )Cash and cash equivalents at end of period
    
    
    178,556
    
    
    
    446,143
    
    
    
    1,709,596
    
    
    
    219,064Supplemental schedule of cash flow information:Income tax paid
    
    
    (11,238
    )
    
    
    (16,511
    )
    
    
    (23,907
    )
    
    
    (3,063
    )Interest paid
    
    
    (2,149
    )
    
    
    (1,557
    )
    
    
    
    
    
    
    Non-cash investing and financing activities:Issuance of shares to employees
    
    
    
    
    
    
    70,929
    
    
    
    26,054
    
    
    
    3,339Deemed dividend on issuance of convertible redeemable
preferred shares at a discount
    
    
    
    
    
    
    14,031
    
    
    
    
    
    
    
    Proceeds receivable from disposal of property, plant
and equipment
    
    
    
    
    
    
    2,165
    
    
    
    
    
    
    
    
  F-7
    Table of Contents  1.
    
    Organization and Principal Activities
    F-8
    Table of Contents  2.
    
    Summary of Significant Accounting Policies
 (a)
    
    Basis of presentation and principles of consolidationThe consolidated financial statements of the Company have been prepared in accordance
with the accounting principles generally accepted in the United States of America
(US GAAP).The consolidated financial statements include the financial statements of the Company
and all its majority-owned subsidiaries. All significant inter-company transactions
have been eliminated on consolidation.(b)
    
    Use of estimatesThe preparation of consolidated financial statements in conformity with US GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the reported amounts of revenues and expenses
in the financial statements and accompanying notes. The significant accounting
estimates which have had an impact on the Companys financial statements include
share-based compensation, impairment of intangible assets, allowance for doubtful
accounts receivable, income taxes, inventory and provision of warranty. Actual
results could differ from those estimates.(c)
    
    Cash and cash equivalentsCash and cash equivalents consist of cash on hand and highly liquid short-term
deposits which are unrestricted as to withdrawal and use, and which have maturities
of three months or less from the date of purchase.(d)
    
    Restricted cashRestricted cash are cash balances pledged for the facility used to issue letters of
credit and short-term bank loans.(e)
    
    Short-term investmentsShort-term investments primarily represent an investment in a short-term debt
instrument that approximates its fair value due to the short-term nature of these
instruments.(f)
    
    InventoriesInventories are stated at the lower of cost or market value. Cost is calculated
using the weighted average cost method. Write downs of potentially obsolete or
slow-moving inventory are recorded based on the managements specific analysis of
future sales forecasts and economic conditions.
 F-9
    Table of Contents  (g)
    
    Property, plant and equipment, netProperty, plant and equipment are carried at cost less accumulated depreciation.
Assets under construction are not depreciated until construction is completed and the
assets are ready for their intended use. Gains and losses from the disposal of
property, plant and equipment are included in income from operations.Depreciation is computed on a straight-line basis over the estimated useful lives of
assets as follows:
 Classification
    
    YearsBuildings
    
    20  yearsPlant and machinery
    
    3 to 5 yearsElectronic equipments, furniture and fixtures
    

    3 to 5 yearsMotor vehicles
    
    5 years
 (h)
    
    Land use rightAll land in the PRC is owned by the PRC government. The government in the PRC,
according to PRC law, may sell the right to use the land for a specified period of
time. Thus, all of the Companys land purchases in the PRC are considered to be
leasehold land and are stated at cost less accumulated amortization and any
recognized impairment loss. The cost of the land use right is amortized on a
straight-line basis over 20 years.(i)
    
    GoodwillThe excess of the purchase price over the fair value of net assets acquired is
recorded on the consolidated balance sheet as goodwill. Goodwill is not amortized,
but is tested for impairment at the reporting unit level on at least an annual basis.
The evaluation of goodwill for impairment involves two steps (1) the identification
of potential impairment by comparing the fair value of a reporting unit with its
carrying amount, including goodwill and (2) the measurement of the amount of goodwill
loss by comparing the implied fair value of the reporting unit goodwill with the
carrying amount of that goodwill and recognizing a loss by the excess of the latter
over the former. In order to assess the magnitude of any impairment loss, the
Company will measure fair value based either on internal models or with the
assistance of third party valuation experts.(j)
    
    Impairment or disposal of long-lived assetsThe Company reviews its long-lived assets for potential impairment based on a review
of projected undiscounted cash flows associated with these assets. Long-lived assets
are evaluated for impairment whenever events and circumstances exist that indicates
the carrying amount of these assets may not be recoverable. Measurement of
impairment losses for long-lived assets that the Company expects to hold and use is
based on the difference between the estimated fair value of the assets and the
carrying amount.
 F-10
    Table of Contents  Long-lived assets to be disposed of are stated at lower of fair value or carrying
amount. Expected future operating losses from any discontinued operations would be
recorded in the periods in which the losses are incurred.(k)
    
    Mezzanine equityConvertible redeemable preferred shares issued in 2005 that carry a redemption
feature were classified as mezzanine equity.(l)
    
    Revenue recognitionThe Company recognizes revenues when all the following conditions have been
satisfied: 
    
    There is persuasive evidence of an arrangement;
    
    Delivery has occurred (e.g., an exchange has taken place);
    
    The sales price is fixed or determinable; and
    
    Collectibility is reasonably assured. All revenues are based on firm customer orders with fixed terms and conditions. The
Company does not provide its customers with the right of return, price protection or
cash rebates. For products which include software, the software is incidental to the
product as a whole, and the Company does not provide any significant post customer
support services and does not provide customers with upgrades. Accordingly, revenues
from the sale of products is recognized when the risks and rewards are passed to the
customer, which is typically upon shipment, when the terms are free-on-board shipping
point, or upon delivery. There are no customer acceptance provisions associated with
the Companys products, except related to the standards and quality of a given
product.The Company offers sales incentives to certain customers in the form of future
credits for free products. The costs of the sales incentives are accrued as cost of
revenues with a corresponding current liability. The Company recognizes the cost of
these incentives as each of the required revenue transactions that results in
progress by the customer toward earning the sale incentive occurs.The Company presents revenues net of value-added tax collected from customers at 17%,
which amounts to RMB73,229, RMB101,327 and RMB134,683 (US$17,258) for 2004, 2005 and
2006, respectively. Additionally, the Company recognizes as a component of revenues a value-added
tax refund received by the operating subsidiaries of the Company, pursuant to
Certain Policies to Encourage the Development of Software and Integrated Circuit
Industries as New and High Technology Enterprises at a rate of 14% of the sales
value for self-developed software only. Such software is an integrated component of
the Companys products even though the Company considers such software to be
incidental to the product. The amount of refund for such value-added tax included in
net revenues was RMB24,555, RMB32,121 and RMB774 (US$99) for 2004, 2005 and 2006, respectively.
The PRC government changed the regulation in 2006 and the Companys integrated
software no longer qualifies for the value-added tax refund related to sale of
self-developed software.
 F-11
    Table of Contents  (m)
    
    Shipping and handling costsShipping and handling costs are classified as cost of revenues. During 2004, 2005
and 2006, shipping and handling costs classified as cost of revenues were RMB7,990,
RMB16,582 and RMB28,055 (US$3,595), respectively.(n)
    
    Government subsidiesGovernment subsidies include cash subsidies and advance subsidies received from the
PRC government by the operating subsidiaries of the Company. Such subsidies are
generally provided in relation to the development of new high technology medical
products and as well as incentives from the local government for investing in the
high technology industry in the region. There is no assurance that the Company will
receive similar or any subsidies in the future. Cash subsidies are recognized as
other income when received and when all the conditions for their receipt have been
satisfied. Cash subsidies recognized as other income were RMB1,187, RMB8,837 and
RMB4,665 (US$598) in 2004, 2005 and 2006, respectively. Advance subsidies received
have been recorded as a current liability.(o)
    
    Research and development costsResearch and development (R&D) costs are incurred in the development of the new
products and processes, including significant improvements and refinements to
existing products. All costs are expensed as incurred.(p)
    
    Advertising expensesThe Company expenses advertising costs as incurred. Advertising expenses were
RMB5,818, RMB5,936 and RMB5,513 (US$706) in 2004, 2005 and 2006, respectively, and
are classified as selling expenses.(q)
    
    Staff retirement plan costsThe Companys costs related to its defined contribution staff retirement plans are
expensed as incurred. (See Note 16).(r)
    
    Share-based compensationThe Company accounts for share-based compensation to employees of the Company based
on the fair value of the ordinary shares at the date of grant, and will record
compensation expense to the extent the fair value of the shares transferred is
determined to be greater than the price paid by the employee.The Company incurred three separate compensation charges in 2005, which amounted to
RMB70,929 (US$9,089). One charge, which totaled RMB26,335 (US$3,375), was recorded
in connection with 1,277,339 shares transferred in January 2005 to certain management
level employees by the shareholders of the Company for past and current services to
the Company. A corresponding amount has been recorded as a capital contribution from
shareholders. The Company determined the fair value of such shares by means of
weighing evenly the results of a discounted cash flow analysis and a market-based
approach (known as guideline company method) with the assistance of an
 F-12
    Table of Contents  independent
third party valuation expert. The discounted cash flow method derived by management
considered the Companys future business plan, specific business and financial risks,
the stage of development of the Companys operations and economic and competitive
elements affecting the Companys business, industry and market.Another charge of RMB11,635 (US$1,491) was recorded in connection with both the
issuance of 3,000,000 preferred shares to certain employees and one non-employee
director in September 2005 in exchange for 3,000,000 of their ordinary shares. The
compensation expense was calculated based on the difference between the fair value of
the ordinary and preferred shares. The Company engaged an independent third party
valuation expert to provide assistance in estimating the fair value of the Company on
the date of transaction, September 26, 2005, and allocating the enterprise value
between the ordinary and preferred shares. The valuation resulted in a deemed value
per share of the preferred and ordinary shares equal to US$4.18 and US$3.70,
respectively.Lastly, the Company recorded a charge of RMB32,959 (US$4,223) in relation to an
earnings adjustment provision entered into between the Preferred shareholders and
certain employees in connection with the employees sale of the preferred shares to
such Preferred shareholders. The amount recorded is based on the fair value of the
ordinary shares multiplied by Companys best estimate of the number of shares to be
provided to such employees pursuant to this performance-type award.
The number of shares to be transferred is contingent upon the Company meeting certain pre-defined
net income levels for the year ended December 31, 2005. A corresponding amount has
been recorded as a capital contribution from shareholders. The Company and the
Preferred shareholders settled the earnings adjustment provision on June 15, 2006 and
approximately 1.1 million preferred shares, recorded as outstanding as of December 31,
2005, were converted into ordinary shares upon transfer to the employees.On February 22, 2006, the Company implemented a new share-based
compensation plan, which permits the Company to grant share options to certain members
of senior management and key employees. See Note 13 for further disclosures.(s)
    
    Income taxesThe Company follows the asset and liability method of accounting for income taxes.
Under the asset and liability method, the change in the net deferred tax asset or
liability is included in the computation of net income. Deferred tax assets and
liabilities are measured using enacted tax rates applicable to taxable income in the
years in which temporary differences are expected to be recovered or settled.
Deferred tax assets are evaluated and, if realization is not considered to be more
likely than not, a valuation allowance is provided.(t)
    
    Earnings per shareBasic earnings per share is computed by dividing net income, adjusted for dividends
attributable to Preferred shareholders, by the weighted average number of ordinary shares outstanding during the year.Diluted earnings per share gives effect to all dilutive potential ordinary shares
outstanding during the year. The weighted average number of ordinary shares
outstanding is adjusted to include the number of additional ordinary shares that
would have been outstanding if the dilutive potential ordinary shares had been
issued. The assumed conversion of the
 F-13
    Table of Contents  preferred shares into 2,784,309 of ordinary shares is anti-dilutive as of December
31, 2005 as a result of the deemed dividends incurred during the period.(u)
    
    Foreign currency transactionsAll transactions in currencies other than functional currencies during the year are
remeasured at the exchange rates prevailing on the respective transaction dates.
Monetary assets and liabilities existing at the balance sheet date denominated in
currencies other than functional currencies are remeasured at the exchange rates
existing on that date. Exchange differences are recorded in the consolidated
statement of operations.Assets and liabilities are translated using exchange rates in effect at each year end
and average exchange rates are used for the income statements. Translation
adjustments resulting from translation of these financial statements are reflected as
a component of other comprehensive income (loss) in the statement of shareholders
equity.(v)
    
    Convenience translation into United States DollarsThe consolidated financial statements of the Company are stated in Renminbi (RMB).
The translation of RMB amounts as of and for the year ended December 31, 2006 into
United States dollar (US$) is included solely for the convenience of readers and
has been made at the rate of RMB7.8041 to US$1.00, which is based on the noon buying
rate in The City of New York for cable transfers of Renminbi as certified for customs
purposes by the Federal Reserve Bank of New York at December 29, 2006. Such
translations should not be construed as representations that RMB amounts could be
converted into US$ at that rate or any other rate.(w)
    
    Comprehensive incomeThe Company has adopted Statement of Financial Accounting Standards (SFAS) No. 130,
Reporting Comprehensive Income, which establishes standards for reporting and
display of comprehensive income, its components and accumulated balances.
Comprehensive income is defined to include all changes in equity except those
resulting from investments by owners and distributions to owners. Among other
disclosures, SFAS No. 130 requires that all items that are required to be recognized
under current accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as other
financial statements. During the periods presented, the Companys comprehensive
income includes its net income and foreign currency translation adjustments.(x)
    
    Fair value disclosuresThe carrying amounts of cash and cash equivalents, short-term investments, accounts
receivable, value added tax receivables, other receivables, short-term bank loans,
notes payable, accounts payable, customers deposits, salaries payables, other taxes
payable and other payables approximate their fair values due to the short term nature
of these instruments.The book value of long term debt instruments approximates their fair value due to the
held-to-maturity purpose.
 F-14
    Table of Contents  The convertible redeemable preferred shares were recorded at their fair value upon
issuance and subsequently at their accreted values, which approximate the cash outlay
which would be due upon settlement, if not converted into common shares.(y)
    
    Concentration of riskFinancial instruments that potentially expose the Company to concentrations of credit
risk consist primarily of cash and cash equivalents, accounts receivables and long
term investment. The Company places its cash and cash equivalents with financial
institutions with high-credit ratings and quality.The Company generally requires upfront payment or a significant installment prior to
delivery of their products. As a consequence, management believes the Companys
exposure to credit risk is limited. The Company establishes an allowance for doubtful
receivables primarily based upon the age of receivables and factors surrounding the
credit risk of specific customers. Allowance for doubtful accounts was RMB2,016 and
RMB5,662 (US$726) in 2005 and 2006, respectively.The Company invests its funds into the unit trust with capital guaranteed by
financial institutions with high-credit ratings and quality(z)
    
    Recent changes in accounting standardsIn September 2006, the FASB issued SFAS No. 157, Fair Value Measurement. SFAS 157
addresses standardizing the measurement of fair value for companies that are required
to use a fair value measure of recognition for recognition or disclosure purposes.
The FASB defines fair value as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market participants at
the measure date. SFAS 157 is effective for financial statements issued for fiscal
years beginning after November 15, 2007 and interim periods within those fiscal
years. The Company is currently evaluating the impact, if any, of SFAS 157 on its
financial position, results of operations and cash flows.In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation
No.48, Accounting for Uncertainty in Income Taxes (FIN 48) clarifies the
accounting for uncertainty in income taxes recognized in an enterprises financial
statements in accordance with FASB Statement No. 109, Accounting for Income Taxes.
FIN 48 prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be taken
in a tax return. FIN 48 also provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosure and transition.
FIN 48 will be effective for the Company beginning in fiscal year 2007. The Company
does not anticipate that the adoption of this statement will have a material effect
on the Companys financial position or results of operations.In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid
Instruments-an amendment of FASB Statements 133 and 140, which is effective for all
financial instruments acquired or issued after the beginning of an entitys first
fiscal year that begins after September 15, 2006. The statement improves financial
reporting by eliminating the exemption from applying SFAS No. 133 to interests in
securitized financial assets so that similar instruments are accounted for similarly
regardless of the form of the instruments. The Statement also improves financial
reporting by allowing a preparer to
elect fair value measurement at acquisition, at issuance, or when a previously
 F-15
    Table of Contents  recognized financial instrument is subject to a re-measurement event, on an
instrument-by-instrument basis, in cases in which a derivative would otherwise have
to bifurcated, if the holder elects to account for the whole instrument on a fair
value basis. The Company does not anticipate that the adoption of this statement
will have a material effect on the Companys financial position or results of
operations.In September 2005, the FASBs Emerging Issues Task Force (EITF) reached a final
consensus on Issue 04-13, Accounting for Purchases and Sales of Inventory with the
Same Counterparty (EITF 04-13). EITF-04-13 requires that two or more legally
separate exchange transactions with the same counterparty be combined and considered
a single arrangement for purposes of applying APB Opinion No. 29, Accounting for
Nonmonetary Transactions, when the transactions are entered into in contemplation of
one another. EITF 04-13 is effective for new arrangements entered into, or
modifications or renewals of existing arrangements, in interim or annual periods
beginning after March 15, 2006. The adoption of this statement did not have a
material effect on the Companys financial position or results of operations.In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections
(SFAS 154), which replaces Accounting Principles Board Opinion No. 20, Accounting
Changes and SFAS No. 3, Reporting Accounting Changes in Interim Financial
Statements  An Amendment of APB Opinion No. 28. SFAS 154 provides guidance on the
accounting for and reporting of accounting changes. It establishes retrospective
application, or the latest practicable date, as the required method for reporting a
change in accounting principle and the reporting of a correction of an error. SFAS
154 is effective for accounting changes and corrections of errors made in fiscal
years beginning after December 15, 2005. The adoption of this statement did not have
a material effect on the Companys financial position or results of operations.In March 2005, the FASB issued FASB Interpretation No. (FIN) 47, Accounting for
Conditional Asset Retirement Obligations, an interpretation of SFAS No. 143 (FIN
47). FIN 47 clarifies that an entity is required to recognize a liability for a
legal obligation to perform an asset retirement activity if the fair value can be
reasonably estimated even though the timing and/or method of settlement are
conditional on a future event. FIN 47 is required to be adopted for annual reporting
periods ending after December 15, 2005. The Company is evaluating the effect of the
adoption of FIN 47. The adoption of this statement did not have a material effect on
the Companys financial position or results of operations.In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payments
(SFAS 123R) This statement eliminates the option to apply the intrinsic value
measurement provisions of Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees,  to stock compensation awards issued to
employees. Rather, SFAS 123R requires companies to measure the cost of employee
services received in exchange for an award of equity instruments based on the
grant-date fair value of the award. That cost will be recognized over the period
during which an employee is required to provide services in exchange for the
awardthe requisite service period (usually the vesting period). SFAS 123R applies
to all awards granted after the required effective date and to awards modified,
repurchased, or cancelled after that date. SFAS 123R will be effective for the
fiscal year beginning January 1, 2006. The adoption of this statement did not have a
material effect on the Companys financial position or results of operations.
 F-16
    Table of Contents  3.
    
    Investment in SubsidiariesSubsidiariesParticulars regarding the legal subsidiaries as of December 31, 2006 are as follows:
 Percentage ofordinary share/Place of
    
    registeredestablishment
    
    capital held
    
    PrincipalName of company
    
    and operation
    
    by the Company
    
    activitiesGiant Glory Investments 
Limited
    
    BVI
    
    
    100
    %
    
    Investment holdingGreatest Elite Limited
    
    BVI
    
    
    100
    %
    
    Investment holdingMindray (UK) Limited
    
    United Kingdom
    
    
    100
    %
    
    Marketing of
medical equipmentMindray USA Corp.
    
    United States of
America
    
    
    100
    %
    
    Sales and marketing
of medical equipmentMindray Research and Development Limited
    
    BVI
    
    
    100
    %
    
    Investment holdingMindray Global Limited
    
    BVI
    
    
    100
    %
    
    Investment holdingMindray Medical USA Corp.
    
    United States of
America
    
    
    100
    %
    
    Research and development
of medical equipments
and related productsShenzhen Mindray
Bio-Medical Electronics
Co., Ltd.
    
    PRC
    
    
    99.9
    %
    
    Manufacturing and
trading of medical
equipments and
research and
development of
related productsBeijing Shen Mindray
Medical Electronics
Technology Research
Institute Co., Ltd.
    
    PRC
    
    
    99.9
    %
    
    Research and
development
of medical
equipment
 4.
    
    Acquisition of Minority InterestOn April 20, 2006, the Company acquired approximately 8.9% of the minority interest in
Shenzhen Mindray in exchange for 7,649,646 ordinary shares. After the acquisition, the
Company owns approximately 99.99% of Shenzhen Mindray. The results of Shenzhen Mindrays
operations, attributable to the approximately 8.9% interest acquired have been included in
the Companys consolidated financial statements for the year ended on December 31, 2006.
 F-17
    Table of Contents  The aggregate purchase price was determined to be RMB310,919, based on issuance of 7,649,646
ordinary shares valued at RMB40.64 (US$5.21) per share. The value of the ordinary shares
issued by the Company was determined based on the fair value of the ordinary shares on
February 20, 2006, which is the date when the terms and conditions of the purchase were
agreed. The Company determined the fair value of such shares by means of weighing evenly
the results of a discounted cash flow analysis and the market approach (known as guideline
company method) with the assistance of an independent third party valuation expert. The
discounted cash flow method derived by management considered the Companys future business
plan, specific business and financial risks, the stage of development of the Companys
operations and economic and competitive elements affecting the Companys business, industry
and market. The Company then allocated the resulting enterprise value between the ordinary
and the convertible redeemable preferred shares.The following table summarizes the fair values of the portion of the assets acquired and
liabilities assumed at the date of the minority interest acquisition.
 As of April 20, 2006RMB000
    
    US$000Current assets
    
    
    38,247
    
    
    
    4,901Property, plant, and equipment
    
    
    15,040
    
    
    
    1,927Other long-term assets
    
    
    1,080
    
    
    
    138Intangible assets
    
    
    183,600
    
    
    
    23,526Goodwill
    
    
    94,629
    
    
    
    12,126Total assets acquired
    
    
    332,596
    
    
    
    42,618Less: Current liabilities
    
    
    21,677
    
    
    
    2,778Net assets acquired
    
    
    310,919
    
    
    
    39,840
 During the year ended of December 31, 2006, management
of the Group determined to expense the full amount of in-progress research and development in view of no alternative future use
for the amount of assets5.
    
    InventoriesInventories consist of following:
 As of December 31,2005
    
    2006
    
    2006RMB000
    
    RMB000
    
    US$000Raw materials
    
    
    24,601
    
    
    
    39,983
    
    
    
    5,123Work-in-progress
    
    
    51,729
    
    
    
    50,266
    
    
    
    6,441Finished goods
    
    
    29,092
    
    
    
    31,822
    
    
    
    4,078105,422
    
    
    
    122,071
    
    
    
    15,642
 F-18
    Table of Contents  6.
    
    Long-term Investments
 For investment purposes, the Company entered into agreements with Shenzhen International
Trust & Investment Co., Ltd. (the Trust) pursuant to which the Company deposited total
cash of RMB103,000 (US$13,198) with the Trust, which the Trust then lent to third party
borrowers. The amounts deposited of RMB23,000 (US$2,947) and RMB80,000 (US$10,251) are
receivable on demand beginning two years from the date of the agreements at April 12, 2006
and June 12, 2006, respectively. The receivables pay interest at 4.2% to 4.25% per annum
and both the principal and interest, payable by the third party to the Trust have been
guaranteed by the Bank of China to the Trust. Interest income of RMB2,573 (US$330) was
accrued as of December 31, 2006.7.
    
    Property, Plant and Equipment, netProperty, plant and equipment, net consist of following:
 As of December 31,2005
    
    2006
    
    2006RMB000
    
    RMB000
    
    US$000Buildings
    
    
    95,701
    
    
    
    100,666
    
    
    
    12,899Plant and machinery
    
    
    23,279
    
    
    
    53,492
    
    
    
    6,854Electronic equipment, furniture and fixtures
    
    
    78,150
    
    
    
    93,951
    
    
    
    12,039Motor vehicles
    
    
    8,708
    
    
    
    9,128
    
    
    
    1,170Construction in progress
    
    
    669
    
    
    
    21,431
    
    
    
    2,746Total
    
    
    206,507
    
    
    
    278,668
    
    
    
    35,708Less: Accumulated depreciation
    
    
    (54,018
    )
    
    
    (91,688
    )
    
    
    (11,749
    )Net book value
    
    
    152,489
    
    
    
    186,980
    
    
    
    23,959
 As at December 31, 2005 and 2006, property with net book value of RMB62,922 and RMB59,714
(US$7,651), respectively was pledged for the available loan facilities.Depreciation expenses were RMB16,003, RMB25,346 and RMB38,430 (US$4,924) in 2004, 2005 and
2006, respectively,
 F-19
    Table of Contents  8.
    
    Acquired intangible assets, netThe intangible assets, net, of RMB149,479 (US$19,154) acquired from the minority interest
acquisition in April 2006 (Note 4) are amortized on a straight-line basis based on the
estimated useful lives ranging from 3 to 11 years.Acquired intangible assets consist of the following:
 As of December 31,2005
    
    2006
    
    2006RMB000
    
    RMB000
    
    US$000Customer relation
    
    
    
    
    
    
    2,224
    
    
    
    285Trademark
    
    
    
    
    
    
    44,635
    
    
    
    5,719Contract backlog
    
    
    
    
    
    
    62
    
    
    
    8In-progress research and development
    
    
    
    
    
    
    31,835
    
    
    
    4,079Completed technology
    
    
    
    
    
    
    41,940
    
    
    
    5,374Core technology
    
    
    
    
    
    
    62,904
    
    
    
    8,061Total
    
    
    
    
    
    
    183,600
    
    
    
    23,526Less: Accumulated expense
    
    
    
    
    
    
    (34,121
    )
    
    
    (4,372
    )Net
    
    
    
    
    
    
    149,479
    
    
    
    19,154
 The Company reviews its intangible assets for potential impairment based on a review of
projected discounted cash flows associated with these assets either using its internal
models or independent valuations. Intangible assets are evaluated for impairment whenever
events and circumstances exist that indicates the carrying amount of these assets may not be
recoverable. Measurement of impairment losses for intangible assets that the Company
expects to hold and use is based on the difference between the estimated fair value of the
assets and the carrying amount. Intangible assets to be disposed of are stated at lower of
fair value or carrying amount. The Company will record amortization expense of RMB18,830,
RMB18,830, RMB18,830, RMB16,313 and RMB5,828 for 2007, 2008, 2009,
2010 and 2011, respectively.9.
    
    Notes payables
 As of December 31,2005
    
    2006
    
    2006RMB000
    
    RMB000
    
    US$000Notes payables
    
    
    17,153
    
    
    
    50,625
    
    
    
    6,487
 The Company has total available loan and notes payables facilities of RMB220,000 and
RMB300,000 (US$38,441) with various banks, of which RMB202,847 and RMB249,375 (US$31,954)
were available as of December 31, 2005 and 2006, respectively. The funds borrowed under
these facilities are generally repayable within one year.
 F-20
    Table of Contents  10.
    
    Convertible redeemable preferred sharesIn September 2005, the Company issued 10,074,977 convertible redeemable preferred shares
(preferred shares), of which 7,074,977 preferred shares were issued to a third party
investor (Preferred shareholders) for cash proceeds of US$27,839. The remaining 3,000,000
preferred shares were issued to four employees of the Company in exchange for 3,000,000
ordinary shares, for purposes of selling these preferred shares to such third party
investor. In connection with the transaction, three of the four employees (Employee
shareholders) also entered into a performance arrangement with the third party investor.The Company recorded the initial carrying amount of the convertible redeemable preferred
shares at RMB340,740 (US$43,662) or approximately US$4.18 per share, which was the
determined to be the fair value of such shares at the date of issuance. The Company
determined the fair value of such shares by means of weighing evenly the results of a
discounted cash flow analysis and the market approach (known as guideline company method)
with the assistance of an independent third party valuation expert. The discounted cash
flow method derived by management considered the Companys future business plan, specific
business and financial risks, the stage of development of the Companys operations and
economic and competitive elements affecting the Companys business, industry and market. The
Company then allocated the resulting enterprise value between the ordinary and preferred
shares. The initial carrying value of the preferred shares was offset by direct cost of
equity issuance of RMB15,351 (US$1,967).The Preferred shareholders paid approximately US$3.93 per preferred share, which represents
a discount to their fair value of approximately US$4.18 per share. The Company recognized a
deemed dividend of RMB14,031 (US$1,798) for the benefit the Preferred shareholders received,
which is equal to the amount of the discount for the preferred shares issued.- Conversion.The preferred shares is were converted into 8,975,105 ordinary shares as
determined by dividing US$3.97 by the then prevailing conversion price on September 26,
2006, the effective date of the Companys initial public offering.- Performance adjustment. The sale of 2,000,000 preferred shares to the Preferred
shareholders directly by certain Employee shareholders is subject to adjustment based on the
Companys result for the year ending December 31, 2005. This performance adjustment
provision specifies that in the event the Companys results are less than or greater than
certain predefined amounts, the Preferred shareholders would either receive additional
preferred shares if the Companys earnings is less than the pre-defined amount or return to
the Employee shareholders a certain number of shares (or cash) in the event the earnings
adjustment is met or exceeded. Both the Preferred shareholders and Employee shareholders
have placed in escrow 1,369,422 preferred shares and 1,800,425 ordinary shares,
respectively, which represents the maximum number of shares subject to exchange pursuant to
this provision. Upon exchange, the shares received by the Preferred shareholders pursuant
to the performance adjustment formula will remain as preferred shares and the shares
received by the Employee shareholders pursuant to the performance adjustment formula will be
converted into ordinary shares. As discussed in Note 2 (r), the Company has recorded a
share-based compensation charge of RMB11,635 (US$1,491) in connection with issuance of
preferred shares to the employees in September 2005 and RMB32,959 (US$4,223) in relation to
the performance adjustment provision on the basis that the Company expects the predefined
earnings level will be exceeded. The performance adjustment was settled and 1.1 million
preferred share converted to ordinary shares and transferred to the employee shareholders on
June 15, 2006. For such compensation charge, a corresponding amount has been recorded as a
capital contribution from the Preferred shareholders.
 F-21
    Table of Contents  11.
    
    Other payables
 As of December 31,2005
    
    2006
    
    2006RMB000
    
    RMB000
    
    US$000Proceeds payable to selling shareholders
    
    
    
    
    
    
    34,854
    
    
    
    4,466Accrued professional fees
    
    
    11,555
    
    
    
    
    
    
    
    Accrued other expenses
    
    
    9,908
    
    
    
    33,363
    
    
    
    4,275Advance subsidies
    
    
    14,500
    
    
    
    17,900
    
    
    
    2,294Others
    
    
    8,862
    
    
    
    13,965
    
    
    
    1,78944,825
    
    
    
    100,082
    
    
    
    12,824
 12.
    
    Capital StructureIn September 2005, in connection with the share exchange disclosed in Note 1, Mindray
International issued 75,350,054 ordinary shares and 3,000,000 preferred shares, each with a
par value of HK$0.001 in exchange for 78,350,054 ordinary shares of Shenzhen Mindray which
equals approximately 91.11% of the 86,000,000 outstanding shares in Shenzhen Mindray. The
share exchange, which occurred on a one for one basis, was accounted for as a reverse
merger, and Shenzhen Mindray was deemed to be the accounting acquirer. The 7,649,946
ordinary shares of Shenzhen Mindray (representing approximately 8.9% of the 86,000,000
outstanding shares) that were held by shareholders that did not exchange and thus were not
acquired by Mindray International accordingly became minority interest of the consolidated
entity as of the date of the reverse merger. In addition, the 86,000,000 ordinary shares
outstanding from January 1, 2003 through the date of the reverse merger equal the number of
ordinary shares of Shenzhen Mindray which were legally outstanding during this period.In September 2005, the Company issued 7,074,977 convertible redeemable preferred shares to a
third party investor.As a result of the PRC laws and regulations, the Companys PRC subsidiaries are restricted
in their ability to transfer a portion of their net assets either in the form of dividends,
loans or advances, which restricted portion amounted to approximately RMB378,255 (US$48,469)
as of December 31, 2006. This amount is made up of the registered equity of the PRC
subsidiaries and the statutory reserves disclosed in Note 19.Beginning in 2007, the Company expects to distribute annual
cash dividends to the
shareholders. The declaration of dividends, if any, is subject to approval by the Board of
Directors.On June 15, 2006, the Company also converted 1,099,872 convertible redeemable preferred
shares to ordinary shares as a result of the settlement of the performance adjustment (see
Note 10).On September 26, 2006, the Company issued an additional 12,643,000 shares upon completion of
its initial public offering (the IPO). Effective on the date of the IPO, the Companys
authorized share capital consisted of two classes of ordinary shares: 4,000,000,000 Class A
ordinary shares 1,000,000,000 Class B ordinary shares. On the same date, the Company
converted the 8,975,105 convertible redeemable preferred shares to Class A ordinary shares.
After the completion of the
 F-22
    Table of Contents  IPO, the Company has 60,289,767 Class A ordinary shares and 45,437,910 Class B ordinary
shares issued and outstanding.13.
    
    Share-based compensation planPursuant to the 2006 Employee Share Option Plan, the Company granted options for the
purchase of a maximum of 7,033,000 shares in the Company, subject to vesting requirements.
The options entitle the option holder to acquire one ordinary share of the the Company at an
exercise price of US$5.00 (RMB39.02) per share. The options expire eight years from the
date of grant, and are subject to graded vesting, with approximately 25% of the options
vesting on January 31, 2007, 2008, 2009 and 2010, respectively. In addition to the
requirement that the employee be employed at the time of vesting, the vesting of each option
is subject to employees meeting individual performance targets based on evaluations of each
individual employee.The Company granted 3,200,300 options on September 8,
2006, pursuant to the same plan and are subject to similar vesting
requirement.The Company has adopted SFAS 123R and recognizes the fair value of the granted options over
the required service period based on the Companys estimate of the number of shares which
will vest.Management used the Black-Scholes option pricing model to estimate the fair value of the
options on grant date with the following weighted-average assumptions:
 February 22, 2006
    
    September 8, 2006Risk-free interest rate
    
    
    5.16
    %
    
    
    5.29
    %Expected life
    
    5.25 years
    
    5.25 yearsAssumed volatility
    
    
    33.2
    %
    
    
    33.1
    %Expected dividends
    
    
    3.00
    %
    
    
    3.00
    %Fair value on grant date
    
    US$
    1.35
    
    
    US$
    2.93(RMB10.54)
    
    (RMB22.87)
 Assumed volatility is derived by referring to the average annualized standard deviation of
the share price of listed comparable companies. The expected life of the option has been
assumed to be exercised evenly throughout the option life. The risk free interest rate is
based on the yield to maturity of the PRC government bond as of the grant date with maturity
closest to the relevant option expiry date. Managements best estmate is that the individual
performance targets will be achieved. If such targets are not met, total compensation cost
may decrease and certain recognized compensation cost will be reversed.
 F-23
    Table of Contents  A summary of option and non-vested shares under the Plan as of December 31, 2006 and changes
in the year is presented below:
 Number of
    
    AverageOptions
    
    Shares
    
    Exercise priceUS$Outstanding as of January 1, 2006
    
    
    
    
    
    
    Granted on February 22, 2006
    
    
    7,033,000
    
    
    
    5.00Granted on September 8, 2006
    
    
    3,200,300
    
    
    
    11.12Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (413,141
    )
    
    
    5.76Outstanding and non-vested as of December 31, 2006
    
    
    9,820,159
    
    
    
    6.96Exercisable as of December 31, 2006
    
    
    630,000
    
    
    
    5.00
 As of December 31, 2006, there was RMB64,094 (US$8,213)
of total unrecognized compensation
cost related to non-vested share options granted under the Plan. That cost is expected to
be recognized over approximately 3 years.14.
    
    Earnings per Share
 Year ended December 31,2004
    
    2005
    
    2006
    
    2006RMB000
    
    RMB000
    
    RMB000
    
    US$000Net income for the period
    
    
    181,747
    
    
    
    205,089
    
    
    
    361,786
    
    
    
    46,358Deemed dividends on issuance of convertible
redeemable preferred shares
    
    
    
    
    
    
    (14,031
    )
    
    
    
    
    
    
    Income attributable to ordinary shareholders
    
    
    181,747
    
    
    
    191,058
    
    
    
    361,786
    
    
    
    46,358Weighed average number of ordinary shares for
the calculation of basic earning per share
    
    
    86,000,000
    
    
    
    82,790,427
    
    
    
    87,066,163
    
    
    
    87,066,163Effect of dilutive potential ordinary shares
attributable to share options and preference share
    
    
    
    
    
    
    
    
    
    
    9,303,921
    
    
    
    9,303,921Weighted average number of ordinary shares for
the calculation of diluted earnings per share
    
    
    86,000,000
    
    
    
    82,790,427
    
    
    
    96,370,084
    
    
    
    96,370,084
 15.
    
    Other Income
 Year ended December 31,2004
    
    2005
    
    2006
    
    2006RMB000
    
    RMB000
    
    RMB000
    
    US$000Government subsidies
    
    
    1,181
    
    
    
    8,837
    
    
    
    4,665
    
    
    
    598Interests from investments
    
    
    
    
    
    
    
    
    
    
    2,600
    
    
    
    333Gains from investments
    
    
    
    
    
    
    
    
    
    
    392
    
    
    
    50Others
    
    
    224
    
    
    
    625
    
    
    
    840
    
    
    
    108Other income
    
    
    1,405
    
    
    
    9,462
    
    
    
    8,497
    
    
    
    1,089
 F-24
    Table of Contents  16.
    
    Staff Retirement PlanAs stipulated under the rules and regulations in the PRC, the Companys subsidiaries are
required to contribute certain percentage of payroll costs of its employees to a
state-managed retirement schemes operated by the local governments for its employees in the
PRC. After the contribution, the Company has no further obligation for actual payment of
the retirement benefits.The cost of the Companys contributions to the staff retirement plans in the PRC amounted to
RMB4,241, RMB7,286 and RMB10,221 (US$1,310) in 2004, 2005 and 2006, respectively. The
contributions outside PRC amounted to nil in 2004 and 2005 and RMB16 (US$2) in 2006.17.
    
    Income TaxesThe components of income taxes are as follows:
 Year ended December 31,2004
    
    2005
    
    2006
    
    2006RMB000
    
    RMB000
    
    RMB000
    
    US$000PRC
    
    
    10,758
    
    
    
    18,066
    
    
    
    24,057
    
    
    
    3,083
 The Company is a tax exempted company incorporated in the Cayman Islands and is not subject
to taxation under the current Cayman Islands law. Subsidiaries operating in the PRC are
subject to income taxes as described below and the subsidiaries incorporated in the BVI are
not subject to taxation.The basic corporate tax rate for the Sino-Foreign Equity Joint Venture in the PRC is
currently 33% (30% state tax and 3% local tax). However, as Shenzhen Mindray is a
production enterprise located in Shenzhen special economic zone, and as of December 31, 2006
the applicable income tax rate is 15%. It is entitled to a tax exemption for two years from
year of its first taxable profit and a 50% tax reduction for the third to fifth year (7.5%
state tax and Nil% local tax). The first profitable year was 1999. Shenzhen Mindray also has
been designated as a new and high technology enterprise, and hence it has been eligible to
receive a special additional tax holiday which represents a reduction in income tax of 50%
resulting in a reduced tax rate of 7.5% for three years beginning with 2004 through the
fiscal year ending December 31, 2006. Beginning 2007, Shenzhen Mindray will be subject to
15% income tax.On March 16, 2007, the 10th Peoples Congress of China passed the China Unified
Corporate Income Tax Law (the New CIT Law), which will become effective on January 1, 2008.
The New CIT Law establishes a single unified 25% income tax rate for most companies with some
preferential income tax rates to be applicable to qualified hi-tech enterprises. The
Company cannot currently determine whether it will be subject to the 25% rate or whether it
will qualify for a preferential rate as a qualified hi-tech enterprise. The related
detailed implementation rules and regulations (the IRRs) setting forth the definition of
various terms and the interpretation and application of the provisions of the New CIT Law are
expected to be promulgated by the State Council within 2007. In the event the Company does
not qualify as a hi-tech enterprise after the promulgation of the IRRs, it will take a
one-time loss related to the deferred tax liabilities that have been accrued historically at
the 15% income tax rate to increase the historical accrual. The amount of loss related to
such adjustment is estimated to be RMB13.1 million (US$1.7 million) based on the accrued
deferred tax liabilities as of December 31, 2006.
 F-25
    Table of Contents  Beijing Shen Mindray Bio-Medical Electronics Technology Research Co., Ltd. is entitled to a
corporate income tax exemption for three years from its first year of operations and 50% tax
reduction for the fourth to sixth year (15% state tax and Nil% local tax).Mindray USA Corp. and Mindray Medical USA Corp. follow FASB Statement No. 109 Accounting
for Income Taxes, which requires an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are computed
annually for differences between the financial statement and tax basis of assets and
liabilities that will result in taxable or deductible amounts in the future based on enacted
tax laws and rates applicable to the periods in which the difference are expected to affect
taxable income.Mindray (UK) Limited is calculated at 19% of the estimated assessable profit for the year.The Companys deferred tax assets/(liabilities) as of December 31, 2005 and 2006 are
attributable to the following:
 As of December 31,2005
    
    2006
    
    2006RMB000
    
    RMB000
    
    US$000Deferred tax assets:Inventory provision
    
    
    287
    
    
    
    575
    
    
    
    74Provisions and accruals
    
    
    119
    
    
    
    2,172
    
    
    
    278Depreciation
    
    
    115
    
    
    
    94
    
    
    
    12Others
    
    
    
    
    
    
    513
    
    
    
    66Total
    
    
    521
    
    
    
    3,354
    
    
    
    430Deferred tax liabilities:Acquired intangible assets
    
    
    
    
    
    
    (22,422
    )
    
    
    (2,873
    )Total
    
    
    
    
    
    
    (22,422
    )
    
    
    (2,873
    )
 At the balance sheet date, the Company has gross net
operating losses of RMB2,890 (US$370) available
for offset against future profits. No deferred tax asset has been
recognized due to the
unpredictability of future profit streams. The gross net operating losses carried forward as
of December 31, 2006 will expire starting in 2026 if not utilized.
 F-26
    Table of Contents  A reconciliation of income tax expense to the amount computed by applying the current tax
rate to the income before income taxes in the consolidated statements of operations is as
follows:
 Year ended December 31,2004
    
    2005
    
    2006
    
    2006RMB000
    
    RMB000
    
    RMB000
    
    US$000Income before income taxes
    
    
    192,505
    
    
    
    231,564
    
    
    
    392,299
    
    
    
    50,268PRC enterprise income tax rate
    
    
    15
    %
    
    
    15
    %
    
    
    15
    %
    
    
    15
    %Income tax at PRC enterprise income
tax rate on income before income taxes
    
    
    28,876
    
    
    
    34,735
    
    
    
    58,845
    
    
    
    7,540Effect of net income (loss) for which no
income tax benefit/ expense is receivable/
payable
    
    
    548
    
    
    
    3,442
    
    
    
    2,268
    
    
    
    291Employee share-based compensation
    
    
    
    
    
    
    10,639
    
    
    
    3,908
    
    
    
    501Non-taxable VAT refund
    
    
    (3,683
    )
    
    
    (4,818
    )
    
    
    (116
    )
    
    
    (15
    )Additional deduction on R&D expenses
    
    
    (4,225
    )
    
    
    (7,866
    )
    
    
    (9,578
    )
    
    
    (1,227
    )Effect of tax holidays and tax concessions
    
    
    (10,758
    )
    
    
    (18,066
    )
    
    
    (31,270
    )
    
    
    (4,007
    )Total income tax expense
    
    
    10,758
    
    
    
    18,066
    
    
    
    24,057
    
    
    
    3,083
 The additional tax that would otherwise have been payable without tax holidays and tax
concessions amounted to approximately RMB10,758, RMB18,066 and RMB31,270 (US$4,007) in 2004,
2005 and 2006, respectively (representing a reduction in basic earnings per share of
RMB0.13, RMB0.22 and RMB0.36 (US$0.05) in 2004, 2005 and 2006,
respectively).18.
    
    Commitments and Contingencies
 (a)
    
    Lease commitmentsRental expenses under operating leases were RMB4,246, RMB5,853 and RMB7,323 (US$938)
in 2004, 2005 and 2006, respectively.As of December 31, 2006, the Company was obligated under operating leases, which
relate to buildings, requiring minimum rentals as follows:Year ending December 31,
 2007
    
    
    7,0452008
    
    
    6,1592009
    
    
    4,0732010
    
    
    1,4082011
    
    
    2012 and thereafter
    
    
    RMB000
    
    
    18,685US$000
    
    
    2,394
 F-27
    Table of Contents  (b)
    
    Capital commitments
 As of December 31, 2006, the Company had outstanding capital commitments for
property, plant and equipment totaling RMB60,484 (US$7,750).(c)
    
    ContingenciesThe Company is subject to claims and legal proceedings that arise in the ordinary
course of its business operations. Each of these matters is subject to various
uncertainties, and it is possible that some of these matters may be decided
unfavorably to the Company. The Company does not believe that any of these matters
will have a material adverse affect on its business, assets or operations.The Company issues indemnifications and warranties in certain instances in the
ordinary course of business with its customers. Historically, costs incurred to
settle claims related to these indemnifications and warranties have not been material
to the Companys financial position, results of operations or cash flows. The fair
value of the indemnifications and warranties that the Company issued during 2004,
2005 and 2006 were not material to the Companys financial position, results of
operations or cash flows.
 19.
    
    Distribution of ProfitsAs stipulated by the relevant PRC laws and regulations applicable to the Companys
subsidiaries in the PRC, the Company is required to make appropriations from net income as
determined in accordance with accounting principles and the relevant financial regulations
applicable to PRC enterprise (PRC GAAP) to non-distributable reserves (also referred to as
statutory common reserves) which included a statutory surplus reserve and a statutory
welfare reserve as of December 31, 2005. Based on newly revised PRC Company law which took
effect on January 1, 2006, the PRC subsidiaries are no longer required to make
appropriations to the statutory welfare reserve but appropriation to the statutory surplus
reserve are still required to be made at not less than 10% of the profit after tax as
determined under PRC GAAP. The appropriations to statutory surplus reserve are required
until the balance reaches 50% of the subsidiaries registered capital.The statutory surplus reserve is used to offset future extraordinary losses. The
subsidiaries may, upon a resolution passed by the shareholders, convert the statutory
surplus reserve into capital. The statutory welfare reserve was used for the collective
welfare of the employees of subsidiaries. These reserves represent appropriations of
retained earnings determined according to PRC law and may not be distributed. There were no
appropriations to reserves by the Company other than the Companys subsidiaries in the PRC
during any of the periods presented. However, as a result of these laws, approximately
RMB117,749 (US$15,088) is not available for distribution as of December 31, 2006.20.
    
    Segment ReportingThe Company has three reportable segments based on its major product groups: patient
monitoring devices, diagnostic laboratory instruments and ultrasound imaging systems. Each
reportable segment derives its revenues from the sale of their product, which is the
responsibility of a member of the senior management of the Company who has knowledge of
product and service specific operational risks and opportunities. The Companys chief
operating decision makers have been identified as the Chairman and the President, who review
the consolidated results when making decisions about allocating resources and assessing
performance of the Company.
 F-28
    Table of Contents  The Company has combined two operating segments to arrive at the diagnostic laboratory
instruments reporting segment. In particular, the biochemistry analyzers and hematology
analyzers are operating segments which exhibit similar long-term financial performance and
economic characteristics and also similar in nature of the products, production processes,
the type of customers and distribution methods.The accounting policies underlying the financial information provided for the segments are
based primarily on statutory accounting requirements in the PRC. The principal measurement
differences between this financial information and the consolidated financial statements are
described below. The Company does not allocate operating expenses to individual reporting
segments when making decisions about resources to be allocated to the segment and assessing
its performance. All revenues are attributed to sales to external parties.For the year ended December 31,
 Patient
    
    Diagnostic
    
    Ultrasoundmonitoring
    
    laboratory
    
    imaging2006
    
    devices
    
    instruments
    
    systems
    
    Others
    
    TotalRMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB000Net revenues
    
    
    600,332
    
    
    
    438,018
    
    
    
    438,128
    
    
    
    20,683
    
    
    
    1,497,161Cost of revenues
    
    
    (241,234
    )
    
    
    (192,093
    )
    
    
    (189,941
    )
    
    
    (36,161
    )
    
    
    (659,429
    )Gross profit (loss)
    
    
    359,098
    
    
    
    245,925
    
    
    
    248,187
    
    
    
    (15,478
    )
    
    
    837,732
 Patient
    
    Diagnostic
    
    Ultrasoundmonitoring
    
    laboratory
    
    imaging2005
    
    devices
    
    instruments
    
    systems
    
    Others
    
    TotalRMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB000Net revenues
    
    
    496,464
    
    
    
    263,162
    
    
    
    264,267
    
    
    
    14,334
    
    
    
    1,038,227Cost of revenues
    
    
    (202,821
    )
    
    
    (115,720
    )
    
    
    (130,919
    )
    
    
    (27,284
    )
    
    
    (476,744
    )Gross profit (loss)
    
    
    293,643
    
    
    
    147,442
    
    
    
    133,348
    
    
    
    (12,950
    )
    
    
    561,483
 Patient
    
    Diagnostic
    
    Ultrasoundmonitoring
    
    laboratory
    
    imaging2004
    
    devices
    
    instruments
    
    systems
    
    Others
    
    TotalRMB000
    
    RMB000
    
    RMB000
    
    RMB000
    
    RMB000Net revenues
    
    
    364,994
    
    
    
    172,703
    
    
    
    112,739
    
    
    
    14,481
    
    
    
    664,917Cost of revenues
    
    
    (144,299
    )
    
    
    (81,554
    )
    
    
    (56,136
    )
    
    
    (22,214
    )
    
    
    (304,203
    )Gross profit (loss)
    
    
    220,695
    
    
    
    91,149
    
    
    
    56,603
    
    
    
    (7,733
    )
    
    
    360,714
 F-29
    Table of Contents  A reconciliation of the amounts presented for reportable segments to the consolidated
totals is as follows:
 Year ended December 31,2004
    
    2005
    
    2006
    
    2006RMB000
    
    RMB000
    
    RMB000
    
    US$000Total revenues per segment reporting
    
    
    664,917
    
    
    
    1,038,227
    
    
    
    1,497,161
    
    
    
    191,843Reconciling adjustments:Reclassification of VAT refund (a)
    
    
    24,555
    
    
    
    32,121
    
    
    
    774
    
    
    
    99Reclassification of shipping and handling
fees charged to customers (b)
    
    
    2,583
    
    
    
    8,225
    
    
    
    17,046
    
    
    
    2,184Contract revenues on completed contract (c)
    
    
    5,782
    
    
    
    
    
    
    
    
    
    
    
    Total consolidated net revenues, as reported
    
    
    697,837
    
    
    
    1,078,573
    
    
    
    1,514,981
    
    
    
    194,126Total cost of revenues per segment reporting
    
    
    304,203
    
    
    
    476,744
    
    
    
    659,429
    
    
    
    84,498Reconciling adjustments:Reclassification of shipping and handling
fees from operating expenses (b)
    
    
    7,990
    
    
    
    16,582
    
    
    
    28,055
    
    
    
    3,594Contract costs on completed contract (c)
    
    
    6,820
    
    
    
    
    
    
    
    
    
    
    
    Total consolidated cost of revenues, as reported
    
    
    319,013
    
    
    
    493,326
    
    
    
    687,484
    
    
    
    88,093Gross profit per segment reporting
    
    
    360,714
    
    
    
    561,483
    
    
    
    837,732
    
    
    
    107,345Reconciling adjustments:Reclassification of VAT refund (a)
    
    
    24,555
    
    
    
    32,121
    
    
    
    774
    
    
    
    99Reclassification of shipping and handling
fees, net (b)
    
    
    (5,407
    )
    
    
    (8,357
    )
    
    
    (11,009
    )
    
    
    (1,411
    )Contract costs on completed contract (c)
    
    
    (1,038
    )
    
    
    
    
    
    
    
    
    
    
    Total consolidated gross profit, as reported
    
    
    378,824
    
    
    
    585,247
    
    
    
    827,497
    
    
    
    106,033Operating expenses
    
    
    (186,121
    )
    
    
    (364,728
    )
    
    
    (468,642
    )
    
    
    (60,051
    )Operating income
    
    
    192,703
    
    
    
    220,519
    
    
    
    358,855
    
    
    
    45,982Other income
    
    
    1,405
    
    
    
    9,462
    
    
    
    8,497
    
    
    
    1,089Other expenses
    
    
    (1,366
    )
    
    
    (252
    )
    
    
    (2,481
    )
    
    
    (318
    )Interest income
    
    
    3,087
    
    
    
    3,854
    
    
    
    27,890
    
    
    
    3,574Interest expense
    
    
    (3,324
    )
    
    
    (2,019
    )
    
    
    (462
    )
    
    
    (59
    )Income before income taxes and minority interests
    
    
    192,505
    
    
    
    231,564
    
    
    
    392,299
    
    
    
    50,268
 F-30
    Table of Contents  Note (a)  VAT refunds are classified as Other income under segment reporting and
included in net revenues in the consolidated statement of operations.Note (b)  Shipping and handling costs charged to customers are included in operating
expenses and netted against the expense under segment reporting and are reclassified against
revenues for the consolidated net revenues as reported. Shipping and handling expenses are
classified as operating expenses under segment reporting and included in cost of revenues in
the consolidated statement of operations.Note (c)  The design service provided in 2004 was recognized based on completion of
contractual milestones in segment reporting and were accounted for using the completed
contract method in the consolidated statement of operations.Geographic disclosuresThe Companys revenues by geography are based on country of customer destination. The net
revenues attributable by country of domicile and other countries are as follows:
 Year ended December 31,2004
    
    2005
    
    2006
    
    2006RMB000
    
    RMB000
    
    RMB000
    
    US$000PRC
    
    
    459,602
    
    
    
    626,997
    
    
    
    779,378
    
    
    
    99,868Other countries
    
    
    238,235
    
    
    
    451,576
    
    
    
    735,603
    
    
    
    94,258Total consolidated net revenues
    
    
    697,837
    
    
    
    1,078,573
    
    
    
    1,514,981
    
    
    
    194,126
 No net revenues attributable to any individual Country were material, other
than in the PRC, in any of the reporting periods. All the long-lived assets of the Company
are located in the PRC and the Company does not allocate such assets to individual segments.Major customersThere are no single customers who contributed for 10% or more of the Companys net revenues
in 2004, 2005 and 2006.21.
    
    Related party transactionsFor the year ended December 31, 2006, the Company did not enter into any material
transaction with its related parties.
 F-31