CM Energy Tech Co., Ltd. — Interim / Quarterly Report 2016

Aug 30, 2016

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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TSC Group Holdings Limited

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 206)

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2016

The board (the “Board”) of directors (the “Directors”) of TSC Group Holdings Limited (the “Company”or “TSC”) is pleased to announce the unaudited results of the Company and its subsidiaries (collectively the “Group”) for the six months ended 30 June 2016, together with the unaudited comparative figures for the corresponding period in 2015 as follows:

RESULTS HIGHLIGHTS

• The Group’s turnover for the six months ended 30 June 2016 reached approximately US$75.5 million, representing a decrease of approximately 36.9% from US$119.6 million for the same period for 2015;

• Gross profit amounted to approximately US$25.0 million for the six months ended 30 June 2016, representing a decrease of approximately 33.8% from US$37.7 million for the same period for 2015;

• Net profit attributed to equity shareholders of the Company amounted to approximately US$2.3 million for the six months ended 30 June 2016, representing approximately 75.5% decrease over the same period for 2015;

• Earnings per share for the six months ended 30 June 2016 was US0.35 cent, representing a decrease of 74.1% compared with US1.35 cent for the same period in 2015. The basis of calculating the earnings per share is detailed in note 9;

• The Directors do not recommend the payment of an interim dividend for the six months ended 30 June 2016.

– 1 –

CONDENSED CONSOLIDATED INCOME STATEMENT

Notes Revenue 3, 4 Cost of sales Gross profit Other revenue and net income 5 Selling and distribution expenses General and administrative expenses Other operating expenses Profit from operations Finance costs 6 Share of results of associate Profit before taxation 6 Income tax 7 Profit for the period Attributable to: Equity shareholders of the Company Non-controlling interests Profit for the period Earnings per share Basic 9(a) Diluted 9(b)

For the six months ended 30 June 2016 2015 (unaudited) (unaudited) US$’000 US$’000 75,471 119,566 (50,500) (81,832) 24,971 37,734 2,681 478 (3,939) (5,277) (16,248) (17,994) (2,865) (2,211) 4,600 12,730 (1,769) (2,404) 1 – 2,832 10,326 (571) (1,079) 2,261 9,247 2,415 9,466 (154) (219) 2,261 9,247 US0.35 cent US1.35 cent US0.34 cent US1.34 cent

– 2 –

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Notes Profit for the period Other comprehensive income for the period: Items that may be reclassified subsequently to profit or loss: – Exchange differences on translation of financial statements of subsidiaries and associate (with nil tax effect) Total comprehensive income for the period Attributable to: Equity shareholders of the Company Non-controlling interests Total comprehensive income for the period

For the six months ended 30 June 2016 2015 (unaudited) (unaudited) US$’000 US$’000 2,261 9,247 (113) (272) 2,148 8,975 2,267 8,990 (119) (15) 2,148 8,975

– 3 –

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Notes NON-CURRENT ASSETS Property, plant and equipment 10 Property under development Interests in leasehold land held for own use under operating leases Goodwill Other intangible assets Interest in associate Other financial assets Prepayments 11 Deferred tax assets CURRENT ASSETS Inventories Trade and other receivables 11 Gross amount due from customers for contract work Amount due from a related company Tax receivable Pledged bank deposits Cash at bank and in hand CURRENT LIABILITIES Trade and other payables 12 Bank loans and other borrowings Tax payable NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES	As at 30 June 2016 (unaudited) US$’000 40,050 21,804 7,744 20,986 5,263 189 4,660 28 11,313 112,037 58,503 106,996 239,305 101 105 1,803 27,483 434,296 259,039 17,364 4,668 281,071 153,225 265,262	As at 31 December 2015 (audited) US$’000 42,400 18,732 8,063 22,996 6,464 193 4,661 46 12,036 115,591 58,523 107,293 236,539 101 132 5,045 46,505 454,138
		278,230 28,725 5,326 312,281 141,857 257,448

– 4 –

Notes NON-CURRENT LIABILITIES Bank loans and other borrowings Deferred tax liabilities NET ASSETS CAPITAL AND RESERVES Share capital Reserves Total equity attributable to equity shareholders of the Company Non-controlling interests TOTAL EQUITY	As at 30 June 2016 (unaudited) US$’000 44,689 516 45,205 220,057 9,094 209,676 218,770 1,287 220,057	As at 31 December 2015 (audited) US$’000 38,185 268
		38,453
		218,995
		9,094 207,530
		216,624 2,371
		218,995

– 5 –

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2016

Balance at 1 January 2015 (audited) Changes in equity for the six months ended 30 June 2015: Profit for the period Other comprehensive income Total comprehensive income Share purchase for shares Award plan Shares issued under share option schemes Equity-settled share-based transactions Balance at 30 June 2015 (unaudited) Balance at 1 January 2016 (audited) Changes in equity for the six months ended 30 June 2016: Profit for the period Other comprehensive income Total comprehensive income Share purchase for shares Award plan Shares issued under share option schemes Equity-settled share-based transactions Dividends paid to non-controlling shareholder Transfer to reserve funds Balance at 30 June 2016 (unaudited)					Attributable to equity shareholders of the Company	Attributable to equity shareholders of the Company	Attributable to equity shareholders of the Company	Attributable to equity shareholders of the Company	Attributable to equity shareholders of the Company			Total US$’000 221,887 9,466 (476) 8,990 (1,027) 243 436 230,529	Non- controlling interests US$’000 3,280 (219) 204 (15) – – – 3,265	Total equity US$’000 225,167 9,247 (272) 8,975 (1,027) 243 436 233,794
		Share capital US$’000 9,066 – – – – 28 – 9,094	Share premium US$’000 127,485 – – – – 320 – 127,805	Merger reserve US$’000 2,161 – – – – – – 2,161	Exchange reserve US$’000 3,626 – (476) (476) – – – 3,150	Employee share-based compensation reserve US$’000 5,939 – – – – (105) 436 6,270	Share held for share award plan US$’000 – – – – (1,027) – – (1,027)	Capital reserve US$’000 512 – – – – – – 512	Revaluation reserve US$’000 627 – – – – – – 627	Reserve funds US$’000 7,289 – – – – – – 7,289	Retained profits US$’000 65,182 9,466 – 9,466 – – – 74,648
		9,094	127,805	2,161	(3,015)	6,157	(1,285)	512	627	8,815	65,753	216,624	2,371	218,995
		–	–	–	–	–	–	–	–	–	2,415	2,415	(154)	2,261
		–	–	–	(148)	–	–	–	–	–	–	(148)	35	(113)
		–	–	–	(148)	–	–	–	–	–	2,415	2,267	(119)	2,148
		–	–	–	–	–	–	–	–	–	–	–	–	–
		–	–	–	–	–	–	–	–	–	–	–	–	–
		–	–	–	–	(121)	–	–	–	–	–	(121)	–	(121)
		–	–	–	–	–	–	–	–	–	–	–	(965)	(965)
		–	–	–	–	–	–	–	–	267	(267)	–	–	–
		9,094	127,805	2,161	(3,163)	6,036	(1,285)	512	627	9,082	67,901	218,770	1,287	220,057

– 6 –

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW

Operating activities Cash used in operations People’s Republic of China (“PRC”) enterprise income tax and oversea tax paid Net cash used in operating activities Investing activities Payment for the purchase of property, plant and equipment Interest received Construction expenditure on property under development Decrease/(increase) in pledged bank deposits Other cash flows generated from/(used in) investing activities Net cash used in investing activities Financing activities Proceeds from shares issued under share option schemes (Repayment of)/proceeds from bank loans and other borrowings Interest paid Dividends paid to non-controlling shareholder Net cash (used in)/generated from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at 1 January Effect of foreign exchanges rates changes Cash and cash equivalents at 30 June

For the six months ended 30 June 2016 2015 (unaudited) (unaudited) US$’000 US$’000 (9,511) (14,497) (1,193) (1,484) (10,704) (15,981) (638) (1,282) 436 83 (3,617) (5,064) 3,242 (2,331) 5 (1,090) (572) (9,684) – 243 (4,857) 6,564 (1,769) (2,404) (965) – (7,591) 4,403 (18,867) (21,262) 46,505 52,337 (155) (46) 27,483 31,029

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NOTES TO THE FINANCIAL STATEMENTS

1. CORPORATE INFORMATION

The Company was incorporated in the Cayman Islands as an exempt company with limited liability on 22 February 2005 under the Companies Law, Cap 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands and was listed on the Main Board of the Stock Exchange of Hong Kong Limited (the “Stock Exchange”) (the “Main Board”) on 5 June 2009.

The condensed consolidated financial statements for the six months ended 30 June 2016 have not been audited by the Company’s auditors, but have been reviewed by the Company’s audit committee.

2. SIGNIFICANT ACCOUNTING POLICIES

The unaudited condensed consolidated financial statements have been prepared in accordance with the applicable disclosure requirements of the Rules Governing the Listing of Securities (the “Listing Rules”) on the Stock Exchange, the Hong Kong Accounting Standard (“HKAS”) 34 “Interim Financial Reporting” and other relevant HKASs and Interpretations and the Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

The unaudited condensed consolidated financial statements have been prepared on the historical cost basis.

The accounting policies used in the condensed consolidated financial statements are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended 31 December 2015.

In the current interim period, the HKICPA has issued a few amendments to HKFRSs that are first effective for the current accounting period of the group and the company. Of these, the following developments are relevant to the group’s financial statements:

• Annual Improvements to HKFRSs 2012–2014 Cycle

• Amendments to HKAS1. Presentation of financial statements: Disclosure initiative.

The adoption of the above new and revised HKFRSs had no significant financial impact on these unaudited condensed consolidated financial statements.

The Group has not applied any new or revised HKFRSs that have been issued but are not yet effective for the current accounting period.

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3. REVENUE

The principal activities of the Group are the design, manufacturing, installation and commissioning of capital equipment and packages on land and offshore rigs, design and manufacture of oilfield expendables and supplies, and the provision of engineering services.

Revenue represents the invoiced value of goods supplied to customers, revenue from construction contracts and revenue from engineering services. The amount of each significant category of revenue recognised during the period is as follows:

Capital equipment and packages – Sales of capital equipment – Construction contracts revenue Oilfield expendables and supplies – Sales of expendables and supplies Engineering services – Service fee income	Unaudited For the six months ended 30 June 2016 30 June 2015 US$’000 US$’000 11,193 19,590 31,472 67,950 42,665 87,540 30,067 26,010 2,739 6,016 75,471 119,566	Unaudited For the six months ended 30 June 2016 30 June 2015 US$’000 US$’000 11,193 19,590 31,472 67,950 42,665 87,540 30,067 26,010 2,739 6,016 75,471 119,566
		87,540 26,010 6,016
		119,566

4. REVENUE AND SEGMENT REPORTING

The Group manages its business by divisions, which are organised by a mixture of both business units (products and services) and geography. In a manner consistent with the way in which information is reported internally to the Group’s most senior executive management for the purposes of resource allocation and performance assessment, the Group has presented the following three reportable segments. No operating segments have been aggregated to form the following reportable segments.

• Capital equipment and packages:

• the design, manufacturing, installation and commissioning of capital equipment and packages on land and offshore rigs

• Oilfield expendables and supplies:

• the manufacturing and trading of oilfield expendables and supplies

• Engineering services:

the provision of engineering services

– 9 –

(a) Segment results, assets and liabilities

For the purposes of assessing segment performance and allocating resources between segments, the Group’s senior executive management monitors the results, assets and liabilities attributable to each reportable segment on the following bases:

Segment assets include all tangible assets, goodwill, intangible assets and current assets with the exception of interest in associate, other financial assets, cash at bank and in hand, pledged bank deposits, tax recoverables and other unallocated head office and corporate assets. Segment liabilities include trade and other payables and provisions attributable to the activities of the individual segment, with the exception of bank loans and other borrowings, tax payables and other unallocated head office and corporate liabilities.

Revenue and expenses are allocated to the reportable segments with reference to revenue generated by those segments and the expenses incurred by those segments or which otherwise arise from the depreciation or amortisation of assets attributable to those segments.

The measure used for reporting segment profit is “segment results” i.e. “adjusted earnings before finance costs and taxes” of individual segment. To arrive at segment results, the Group’s earnings are further adjusted for share of results of associate, finance costs and items not specifically attributed to individual segment, such as directors’ and auditors’ remuneration and other head office or corporate income and expenses.

In addition to receiving segment information concerning segment results, management is provided with segment information concerning revenue (including inter-segment revenue), depreciation and amortisation and additions to non-current segment assets used by the segments in their operations. Inter-segment revenue is priced with reference to prices charged to external parties for similar orders.

Information regarding the Group’s reportable segments as provided to the Group’s most senior executive management for the purposes of resource allocation and assessment of segment performance.

– 10 –

The segment results for the periods ended 30 June 2016 and 2015 is set out below.

Revenue from external customers Inter-segment revenue Reportable segment revenue Reportable segment results	Capital equipment and packages Unaudited For the period ended 30 June 30 June 2016 2015 US$’000 US$’000 42,665 87,540 102 1,661 42,767 89,201 3,687 15,867	Oilfield expendables and supplies Unaudited For the period ended 30 June 30 June 2016 2015 US$’000 US$’000 30,067 26,010 1,200 7,515 31,267 33,525 3,123 2,188	Engineering services Unaudited For the period ended 30 June 30 June 2016 2015 US$’000 US$’000 2,739 6,016 382 41 3,121 6,057 (846) (2,181)	Total Unaudited For the period ended 30 June 30 June 2016 2015 US$’000 US$’000 75,471 119,566 1,684 9,217 77,155 128,783 5,964 15,874	Total Unaudited For the period ended 30 June 30 June 2016 2015 US$’000 US$’000 75,471 119,566 1,684 9,217 77,155 128,783 5,964 15,874
					128,783
					15,874

The segment assets and liabilities as at 30 June 2016 and 31 December 2015 is set out below:

	Capital	equipment	Oilfield	expendables
	and packages		and	supplies	Engineering services		Total
	As at	As at	As at	As at	As at	As at	As at		As at
	30 June	31 December	30 June	31 December	30 June	31 December	30 June	31	December
	2016	2015	2016	2015	2016	2015	2016		2015
	(unaudited)	(audited)	(unaudited)	(audited)	(unaudited)	(audited)	(unaudited)		(audited)
	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000		US$’000
Reportable segment
assets	420,659	426,101	62,916	55,905	15,172	17,657	498,747		499,663
Reportable segment
liabilities	237,179	258,255	19,072	16,182	2,153	3,295	258,404		277,732

– 11 –

(b) Reconciliation of reportable segment revenue, profit or loss, assets and liabilities

Revenue Reportable segment revenue Elimination of inter-segment revenue Condensed consolidated revenue Profit Segment results Finance costs Share of results of associate Unallocated head office and corporate income and expenses Condensed consolidated profit before taxation Assets Reportable segment assets Interest in associate Deferred tax assets Other financial assets Tax recoverable Pledged bank deposits Cash at bank and in hand Unallocated head office and corporate assets Condensed consolidated total assets Liabilities Reportable segment liabilities Bank loans and other borrowings Tax payable Deferred tax liabilities Unallocated head office and corporate liabilities Condensed consolidated total liabilities

Unaudited For the six months ended 30 June 2016 2015 US$’000 US$’000 77,155 128,783 (1,684) (9,217) 75,471 119,566 5,964 15,874 (1,769) (2,404) 1 – (1,364) (3,144) 2,832 10,326 As at As at 30 June 31 December 2016 2015 (unaudited) (audited) US$’000 US$’000 498,747 499,663 189 193 11,313 12,036 4,660 4,661 105 132 1,803 5,045 27,483 46,505 2,033 1,494 546,333 569,729 (258,404) (277,732) (62,053) (66,910) (4,668) (5,326) (516) (268) (635) (498) (326,276) (350,734)

– 12 –

(c) Geographic information

• The following table sets out information about the geographical locations of (i) the Group’s revenue from external customers and (ii) the Group’s property, plant and equipment, property under development, interest in leasehold land held for own use under operating lease, goodwill, other intangible assets, interest in associate, other financial assets and non-current portion of prepayments (“specified non-current assets”). The geographical location of customers is based on the location of the customers. The geographical location of the specified non-current assets is based on the physical location of the assets, in the case of property, plant and equipment, property under development and interest in leasehold land held for own use under operating leases, the location of the operations to which they are allocated, in the case intangible assets and goodwill, and the location of operations, in the case of interest in associate and non-current portion of prepayments.

Hong Kong Mainland China North America South America Europe Indonesia Singapore Others (Other part of Asia, India, Russia etc.)	Revenue from external customers For the six months ended 30 June 2016 For the six months ended 30 June 2015 (unaudited) (unaudited) US$’000 US$’000 – – 38,509 48,755 14,451 59,487 18,550 6,467 1,133 2,890 1,719 – 542 334 567 1,633 75,471 119,566	Specified non-current assets As at 30 June 2016 As at 31 December 2015 (unaudited) (audited) US$’000 US$’000 195 195 59,122 58,803 17,993 17,937 338 389 21,192 24,435 – – 57 8 1,827 1,788 100,724 103,555	Specified non-current assets As at 30 June 2016 As at 31 December 2015 (unaudited) (audited) US$’000 US$’000 195 195 59,122 58,803 17,993 17,937 338 389 21,192 24,435 – – 57 8 1,827 1,788 100,724 103,555
			103,555

5. OTHER REVENUE AND NET INCOME

Interest income Net foreign exchange gain Government subsidies Others	Unaudited For the six months ended 30 June 2016 30 June 2015 US$’000 US$’000 436 83 929 – 766 – 550 395 2,681 478	Unaudited For the six months ended 30 June 2016 30 June 2015 US$’000 US$’000 436 83 929 – 766 – 550 395 2,681 478
		478

– 13 –

6. PROFIT BEFORE TAXATION

Profit before taxation is arrived at after charging/(crediting):

(a) Finance costs

	Unaudited	Unaudited	Unaudited
	For the six	months ended
30 June 2016			30 June 2015
	US$’000		US$’000
Interest on bank loans and other borrowings	2,190		2,404
Less: Interest expenses capitalised into property under development*	(421)		–
	1,769		2,404
* The borrowing cost have been captialised at the rate of 6.87%–7.09% per annum.
Other items
Amortisation of interest in leasehold land held for own use
under operating lease and intangible assets	1,497		1,486
Depreciation	1,736		2,322
Research and development costs	477		1,770
Impairment losses on inventories	153		–
Impairment losses on doubtful debts	1,105		–
Net foreign exchange (gain)/loss	(929)		827
Gain on disposal of property, plant and equipment	5		14
Auditor remuneration	419		347

(b) Other items

– 14 –

7. INCOME TAX

Current tax Provision for the period – Hong Kong Profits tax – People’s Republic of China (“PRC”) enterprise income tax – Overseas corporation income tax Deferred tax Origination of temporary differences	Unaudited For the six months ended 30 June 2016 30 June 2015 US$’000 US$’000 744 – 155 1,085 273 539 1,172 1,624 (601) (545) 571 1,079

The provision for Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profits for the six months ended 30 June 2016. During the same period in 2015, no provision for Hong Kong Profits Tax was made in the financial statements as the Group did not have assessable profits subject to Hong Kong Profits Tax. Taxation for subsidiaries in other jurisdictions is charged at the appropriate current rates of taxation ruling in the relevant jurisdictions. During both periods, certain PRC subsidiaries were subject to tax at reduced rates of 15% under the relevant PRC tax rules and regulations.

8. DIVIDENDS

The Board does not recommend the payment of an interim dividend for the six months ended 30 June 2016 (six months ended 30 June 2015: Nil).

9. EARNINGS PER SHARE

(a) Basic earnings per share

The calculation of the basic earnings per share for the six months ended 30 June 2016 are based on the profit attributable to ordinary equity shareholders of the Company of approximately US$2,415,000 (six months ended 30 June 2015: US$9,466,000) and the weighted average number of 699,820,000 (six months ended 30 June 2015: 700,946,000) ordinary shares in issue during the period.

(b) Diluted earnings per share

The calculation of diluted earnings per share for the six months ended 30 June 2016 are based on the profit attributable to ordinary equity shareholders of the Company of approximately US$2,415,000 (six months ended 30 June 2015: US$9,466,000) and the weighted average number of 701,550,000 (six months ended 30 June 2015: 708,599,000) ordinary shares after adjusting for the effects of all dilutive potential ordinary shares under the Company’s share option schemes.

– 15 –

10. PROPERTY, PLANT AND EQUIPMENT

During the period, additions to property, plant and equipment amounted to approximately US$638,000 (six months ended 30 June 2015: US$1,282,000).

11. TRADE AND OTHER RECEIVABLES

Trade debtors and bills receivable Less: allowances for doubtful debts Other receivables, prepayments and deposits Less: Non-current portion of prepayments	As at 30 June 2016 US$’000 (unaudited) 105,115 (8,634) 96,481 10,543 107,024 28 106,996	As at 31 December 2015 US$’000 (audited) 99,176 (7,590) 91,586 15,753 107,339 46 107,293

The credit terms offered by the Group to its customers differ with each product/service. The credit terms offered to customers of oilfield expendables and supplies and engineering services are normally 30 to 90 days. The credit terms offered to customers of capital equipment and packages are negotiated on a caseby-case basis. Deposits ranging from 10% to 30% of the contract sum are usually required. The balance of 60% to 85% would be payable upon contract milestones being completed. The remaining 5% to 10% of the contract sum represents the retention money and is payable within up to 18 months after delivery of the products or 1 year after completion of the onsite testing, whichever is earlier.

– 16 –

Included in trade and other receivables are trade debtors and bills receivable (net of allowance for doubtful debts) with the following ageing analysis as of the balance sheet date:

Current Less than 1 month past due 1 to 3 months past due More than 3 months but within 12 months past due More than 12 months past due Amounts past due 12. TRADE AND OTHER PAYABLES Trade creditors and bills payable Other payables and accrued charges	As at 30 June 2016 US$’000 (unaudited) 8,705 7,411 19,114 37,319 23,932 87,776 96,481 As at 30 June 2016 US$’000 (unaudited) 232,460 26,579 259,039	As at 31 December 2015 US$’000 (audited) 28,780
		15,779 7,365 21,660 18,002
		62,806
		91,586
		As at 31 December 2015 US$’000 (audited) 217,978 60,252
		278,230

Included in trade and other payables are trade creditors and bills payable with the following ageing analysis as of the balance sheet date:

Within 1 month More than 1 month but within 3 months More than 3 months but within 12 months More than 12 months but within 24 months More than 24 months	As at 30 June 2016 US$’000 (unaudited) 210,775 4,388 12,419 3,912 966 232,460	As at 31 December 2015 US$’000 (audited) 194,669 6,094 13,956 2,414 845
		217,978

– 17 –

13. MATERIAL RELATED PARTY TRANSACTIONS

In addition to the transactions and balances disclosed elsewhere in these condensed consolidation financial statements, the Group entered into the following related party transactions with subsidiaries of a substantial shareholder of the Group.

Transactions with related companies

	Unaudited	Unaudited
	For the six	months ended
	30 June 2016	30 June 2015
	US$’000	US$’000
Sales of capital equipment and packages	944	6,688

In the opinion of the Company’s directors, the above transactions were carried out on normal commercial terms and in the ordinary course of business.

14. EMPLOYEE SHARE-BASED ARRANGEMENT

The Group operates a share option scheme and the share award plan as part of the benefits of its employees. Under the share award plan, the Board is allowed to make awards as long-term incentives for selected senior executives of the Group in addition to share option plan which they may be eligible to receive under the share award plan.

The employee share-based compensation expenses in relation to the options and share awards are charged to profit or loss under staff costs over the relevant vesting periods with a corresponding increase in employee share-based compensation reserve.

During the six months ended 30 June 2016, no share options were granted under the share award plan.

15. COMPARATIVE FIGURES

Certain comparative figures have been reclassified to confirm to conform to the current period’s presentation certain.

– 18 –

MANAGEMENT DISCUSSION AND ANALYSIS

OVERVIEW

TSC is a global product and service provider serving both the onshore and offshore oil and gas E&P industry worldwide. These principal activities remained unchanged for the period ended 30 June 2016.

Our Capital Equipment and Packages segment comprises design, manufacture, installation and commissioning of capital equipment and packages for land and offshore rigs. Our equipment is highly engineered and automated for drilling, mechanical handling, jacking systems, solids control, power control and drives, tensioning and compensation systems for various offshore drilling rigs, completion, intervention and workover vessels for oil, gas wells as well as for land rigs.

Our rig Maintenance, Repair and Operations (“MRO”) segments comprise two business units; the MRO Supplies business unit which comprises the manufacture and sales of oilfield expendables and spares, and the MRO Services business unit which provides a comprehensive range of engineering and maintenance services for our products as well as equipment manufactured by other suppliers.

Alliance Offshore Drilling Pte. Ltd. (“AOD”), incorporated and based in Singapore, is a wholly-owned subsidiary of the Group. Its primary business is to implement the alliance strategy with our partners, Zentech Incorporated and CSSC Huangpu Wenchong Shipbuilding Company Ltd. to build, sell and lease certain type of jack-up rigs. Our first 400 ft jackup rig, R-550D, is under construction with estimated delivery at the third quarter of 2016. The objective of the strategic alliance is to leverage resources and partnership to create “All-Win” relationship to grow the Company.

INDUSTRY REVIEW

The first half of 2016 was an extremely challenging year for the industry as the price of oil fell by over 50% from US$107 per barrel in July 2014 to current levels hovering around low US$40 per barrel. The impact of OPEC lifting production targets to produce at maximum rates, combining with the slower than expected decline in shale production in North America, have resulted in an oversupply market. As a result, overall commodity prices fell dramatically, with oil price dropping to a 12-year low at the end of June 2016.

According to the International Energy Agency (“IEA”), growth estimates for global oil demand is at 1.2 million barrels a day to average 95.6 million a day. This growth is weaker than the fiveyear (2010 – 2015) peak of 1.6 million barrels a day, amid slowdowns in Europe, China and the U.S.

– 19 –

Major Oil and Gas (“O&G”) companies have reacted swiftly to plunging oil prices, dramatically cutting capital expenditure budgets. Global O&G Capital Expenditure (“CAPEX”) fell 10 per cent in 2015, and has shrunk further in the first six months of 2016.

The impact on the offshore oil and gas sector has been dramatic with numerous projects or campaigns cancelled or deferred, contracts retendered to achieve lower pricing and renegotiation of rates on longer term projects.

BUSINESS REVIEW

In the first half of 2016, the Group’s main business was focusing on the provision of capital equipment and package for onshore and offshore rigs, as well as MRO supplies and services to onshore and offshore rig operations.

In January 2016, TSC Oil & Gas Services successfully completed the quotation application documents for submission to the NEEQ. The submission was approved by NEEQ in April 2016 and TSC Oil & Gas is now listed on the NEEQ.

The 400 feet jack-up rig (R-550D) was successfully undocked and has completed Jacking trials. The rig is currently in final phase of commissioning at CSSC Huangpu Wenchong Shipyard (“HPWS”) in Guangzhou.

The Group established a Joint Venture (“JV”) with Offshore CC FZE in August 2016. The JV’s objective is to provide cost effective and practical solutions for a rapidly growing demand for Plug and Abandonment (“P&A”) operations on offshore oil wells and decommissioning platform removal (“Decommissioning”).

Through the JV, the Group leverages its expertise in drilling engineering, offshore rig equipment manufacturing and jack-up rig solution capabilities in a more profitable segment of the oil and gas industry.

– 20 –

FINANCIAL REVIEW

	30 June 2016 30 June 2015	30 June 2016 30 June 2015	Decrease	Decrease
	(unaudited)	(unaudited)
	US$’000	US$’000	US$’000		%
Revenue	75,471	119,566	(44,095)		(36.9%)
Gross profit	24,971	37,734	(12,763)		(33.8%)
Gross profit margin	33.1%	31.6%
Profit from operations	4,600	12,730	(8,130)		(63.9%)
Profit for the period	2,261	9,247	(6,986)		(75.5%)
Earnings per share (Basic)	US0.35 cent US1.35 cent
Earnings per share (Diluted)	US0.34 cent US1.34 cent
Revenue for the first six months of 2016 decreased by 36.9% to US$75.5 million from
US$119.6 million in 2015. The net profit for the first six months of 2016 was				US$2.3 million,
representing a decrease of 75.5% from the previous year of US$9.2 million. The decrease in net
profit was mainly due to the downturn in worldwide drilling activities and resulted in					decrease
in operating profit in capital equipment and packages segment.
Segment Information by Business Segments
	30 June 2016	30 June 2015		Decrease
	US$’000 % of total	US$’000	% of total US$’000		%
Revenue
Capital Equipment and Packages	42,665 56.5%	87,540	73.2% (44,875)		(51.3%)
Oilfield Expendables and
Supplies	30,067 39.8%	26,010	21.8%	4,057	15.6%
Engineering Services	2,739 3.7%	6,016	5.0% (3,277)		(54.5%)
Total	75,471 100.0%	119,566	100.0% (44,095)		(36.9%)

Capital Equipment and Packages

Revenue from the capital equipment and packages segment decreased from US$87.5 million in the first half year of 2015 to US$42.7 million in the first half year of 2016. This was mainly due to the decrease of upstream oil companies CAPEX and the market demand for our related products. The gross profit ratio of this segment decreased from 25.7% in the first half year of 2015 to 17.0% in the first half year of 2016.

– 21 –

Oilfield Expendables and Supplies (MRO Supplies)

Revenue from the Oilfield expendables and supplies segment slightly increase from US$26.0 million in the first half year of 2015 compared to US$30.1 million in the first half year of 2016. This was mainly due to the expansion of Venezuela market and approximately US$17 million was recognized in the period.

Engineering Services (MRO Services)

The decrease of 54.5% in engineering services revenue from US$6.0 million in the first half year of 2015 to US$2.7 million in the first half year of 2016 came from the downturn in worldwide drilling activities and less repair and maintenance services required.

Gross Profit and Gross Profit Margins

Overall gross profit decreased by 33.8% from US$37.7 million to US$25.0 million with the decrease of 36.9% in Group’s revenue. Gross profit margin remained at around 33.1% in the first half year of 2016.

Other Revenue and Net Income

Other revenue and net income increased from US$0.5 million in the first half of 2015 to US$2.7 million in the first half of 2016 due to US$0.9 million gain on foreign exchange recognized during the period compared to US$0.8 million exchange loss recognize in the same period of 2015.

Operating Expenses and Profit Attributable to Equity Shareholders of the Company

Selling & Distribution Expenses

Selling & distribution expenses decreased 25.4% by US$1.3 million from US$5.3 million in the first half year of 2015 to US$3.9 million in the first half year of 2016. The decrease came from the cost reduction exercises implemented in line with the decline in business activity.

General & Administrative Expenses

General & administration expenses decreased from US$18.0 million in the first half year of 2015 to US$16.2 million in the first half of 2016 by 9.7%. The decrease is primarily due to the cost reduction exercises implemented during the period.

Other Operating Expenses

The other operating expenses increased from US$2.2 million from the first half year of 2015 to US$2.9 million from the first half year of 2016. It is mainly due to impairment losses in doubtful debts of US$1.1 million for the period ended 30 June 2016.

– 22 –

Finance Costs

Finance cost decreased from US$2.4 million to US$1.8 million in the first half year of 2016. The decrease is mainly due to the interest expense for the unsecured notes issued and paid in the 4th quarter of 2015.

Group’s Liquidity and Capital Resources

As at 30 June 2016, the Group carried fixed assets of approximately US$69.6 million (31 December 2015 – US$69.2 million) comprising property, plant and equipment, property under development and interest in leasehold land held for own use under operating leases. The Group had intangible assets of approximately US$26.2 million (31 December 2015 – US$29.5 million).

As at 30 June 2016, the Group’s interest in associate was approximately US$0.2 million (30 June 2015 – 0.2 million). The Group had deferred tax assets of approximately US$11.3 million (31 December 2015 – US$12.0 million). The Group had other financial assets of approximately US$4.7 million (31 December 2015 – US$4.7 million) and non-current portion of prepayments was approximately US$0.1 million (31 December 2015 – US$0.1 million).

As at 30 June 2016, the Group had current assets of approximately US$434.3 million (31 December 2015 – US$454.1 million). Current assets mainly comprised cash and bank in hand of approximately US$27.5 million (31 December 2015 – US$46.5 million), pledged bank deposits of approximately US$1.8 million (31 December 2015 – US$5.0 million), inventories of approximately US$58.5 million (31 December 2015 – US$58.5 million), trade and other receivables of approximately US$107.0 million (31 December 2015 – US$107.3 million), gross amount due from customers for contract work of US$239.3 million (31 December 2015 – US$236.5 million), and amount due from a related company of approximately US$0.1 million (31 December 2015 – US$0.1 million).

As at 30 June 2016, current liabilities amounted to approximately US$281.1 million (31 December 2015 – US$312.3 million), mainly comprising trade and other payables of approximately US$259.0 million (31 December 2015 – US$278.2 million), bank loans and other borrowings of approximately US$17.4 million (31 December 2015 – US$28.7 million) and current taxation of approximately US$4.7 million (31 December 2015 – US$5.3 million).

As at 30 June 2016, the Group had non-current liabilities of approximately US$45.2 million (31 December 2015 – US$38.5 million), comprising bank loans and other borrowings of approximately US$44.7 million (31 December 2015 – US$38.2 million) and deferred tax liabilities of approximately US$0.5 million (31 December 2015 – US$0.3 million). Gearing ratio was 59.8%, as compared to 61.6% in 2015.

– 23 –

Significant Investments and Disposals

There were no other significant investments or disposals during the period.

Capital Structure

At the beginning of the year at 1 January 2016, there were 707,120,204 shares in issue (the “Shares”) and the Company carried a share capital of approximately US$9,094,000. There were no issue of shares during the first six months of 2016.

Foreign Currency Exchange Exposures

The Group is exposed to currency risk primarily through sales and purchases that are denominated in a currency other than the functional currency of the operations to which they relate. The Group has foreign exchange exposure as most of the Group’s subsidiaries in the PRC carried out production locally with Renminbi while approximately 50% of the Group’s turnover was denominated in United States dollars. As at 30 June 2016, no related hedges were made by the Group.

In order to mitigate that foreign exchange exposure, we may utilize foreign currency forward contracts to better match the currency of our revenues and associated costs in the future. However, we do not use foreign currency forward contracts for trading or speculative purposes. The Group will actively explore ways to hedge or reduce currency exchange risk in future.

Contingent Liabilities

As at 30 June 2016, the Company has outstanding guarantees issued to banks in respect of banking facilities granted to a subsidiary. The Directors do not consider it probable that a claim will be made against the Company under any of the guarantees. The maximum liability of the Company at the end of the reporting period under the guarantees issued is the facilities drawn down by a subsidiary of US$Nil (2015: US$Nil).

Employees and Remuneration Policy

As at 30 June 2016, the Group had approximately 984 full-time staff in the USA, the United Kingdom (“UK”), Brazil, United Arab Emirates, Russia, Singapore, Mexico, Columbia, Venezuela, Hong Kong and the PRC. The Group’s remuneration policy is basically determined by the performance of individual employee and the market condition. The Group also provides other benefits to its employees, including medical schemes, pension contributions and share option schemes.

– 24 –

Future Plans for Material Investments, Capital Assets and Capital Commitment

TSC China purchased new land use rights in Qingdao, China to consolidate operations and increase production capacity and efficiency. The new facilities will also be able to meet increased R&D needs and production capacity.

TSC continues to explore plans to acquire expertise and expand capabilities by way of purchasing assets or acquisition of equity interest in companies with such expertise and or capability.

Strategy, Prospects and Order Book

Strategies

TSC continues to execute a 3-tier business strategy which can be visualized as a pyramid where the base comprises our “cash cow” business of MRO Supplies and Services (which include Repair, Engineering, Training, Installation and Commissioning), Land Rigs, Solids Control and other developed range of equipment. These business are now consolidated into Oil and Gas Services Business Group (“OGS”) The mid-section of the pyramid, which we call “revenue boosters”, comprises our individual sales of the wide range of products such as Deck Cranes, Mechanical Handling, Jacking Systems, Jack-up Rack and Chord, Electrical Controls and Drives. These are equipment which we design and supply individually are now consolidated into Offshore Business Group (“OFS”). The top section of our strategy pyramid, our “growth engine”, where we tailor our range of products as Offshore Integrated Solutions (“OIS”), addressing customers’ needs by leveraging TSC’s product range, engineering capability, project execution and financial needs taken together as one product offering.

This 3-tier business strategy is complemented with marketing and operational strategies which as a whole serves to meet our vision to transform TSC into a formidable player in the global oil and gas service and equipment industry. We also adopt a “4D” approach where our teams are Customer-Driven, Service-Driven, Solution-Driven and Result-Driven in everything we do. This enables us to achieve the penetration into the markets that we want to win as well as to deliver our products and services on time, on quality and within budget.

Prospects

TSC’s strategies are also tied in with the strategies of our partners and alliances with synergistic and complementary capabilities to form the bigger picture that TSC needs in order to implement the growth path we have set. As execution of this long term strategy unfolds, we can witness the successful transformation of TSC business profile to higher level of penetration and participation in the global demand for our products. The feedback that we have received from prospective customers are encouraging. Our customers, in the emerging markets that we choose to establish our presence, highly appreciate our approach which is unique in the market compared to what is currently available in the market. We are optimistic about our long term prospects.

– 25 –

During the Period, the Group completed the spinoff of OGS Business Group under TSC Oil and Gas Services Holdings Ltd. (“TSC Oil & Gas Services”) (formerly known as “TSC (Qingdao) Manufacture Co., Ltd”). Quotation of its shares on the National Equities Exchange and Quotation System (“NEEQ”, also known as the “New Third Board”) was recently approved and quotation of TSC Oil & Gas Services commenced on 19 July 2016.

Order Book

As at 30 June 2016, the Group as a whole carried an order backlog of approximately US$114.1 million, of which US$49.5 million relates to Capital Equipment and Packages, US$62.7 million relates to MRO Supplies and US$1.9 million relates to MRO Services.

Share Award Plan

The Company adopted a share award plan (“Share Award Plan”) on 16 January 2015 (the “Adoption Date of Share Award Plan”). The Share Award Plan does not constitute a share option scheme pursuant to Chapter 17 of the Listing Rules and is awarded at the discretion of the Company. The purpose of the Share Award Plan is to recognize the contributions of officers and employees of the Group (the “Eligible Persons”), excluding any Directors and any other connected persons of the Group, towards the development of the Group in the past or as incentives to selected grantees to achieve higher than target profits for the Group and to align the interests of the selected grantees with sustainable growth and development of the Group.

The total number of Shares purchased under the Share Award Plan shall not exceed 3% of the issued Shares at the Adoption Date of the Share Award Plan. A trust has been set up and Treasure Maker Investments Limited has been appointed as the trustee (the “Trustee”). Pursuant to the Share Award Plan, the Trustee may purchase Shares from the public market out of cash contributed by the Company from time to time. Shares purchased under the Share Award Plan will be held in trust for the Eligible Persons until such Shares are vested in accordance with the provisions of the rules relating to the Share Award Plan. The Share Award Plan will be effective for a period until 15 January 2025 unless terminated at the discretion of the Board at an earlier date.

No grant was made during the six months ended 30 June 2016. As at 30 June 2016, the trustee held 5,095,000 Shares (representing 0.72% of the issued share capital of the Company) on trust under the Share Award Plan.

– 26 –

Share Award Incentive Scheme

The Company adopted a share award incentive scheme (“Share Award Incentive Scheme”) on 27 May 2016 (the “Adoption Date of Share Award Incentive Scheme”). The purposes of the Share Award Incentive Scheme are (i) to align the interests of Eligible Persons with those of the Group through ownership of Shares, dividends and other distributions paid on Shares and/or the increase in value of the Shares; and (ii) to encourage and retain Eligible Persons to make contributions to the long-term growth and profits of the Group. The Share Award Incentive Scheme is a separate scheme from the Share Award Plan adopted by the Company on 16 January 2015, which is specifically for granting Share awards sourced from existing Shares purchased from the stock market. The Share Award Incentive Scheme will give the Company flexibility in granting Awards of new Shares. The Share Award Incentive Scheme will be effective for a period until 26 May 2026 unless terminated at the discretion of the Board at an earlier date.

The Company has approved the adoption of the Share Award Incentive Scheme on 27 May 2016 by the shareholders by poll at the AGM, pursuant to which new Shares of not more than 3% of the total number of issued Shares as at the Adoption Date of Share Award Incentive Scheme (i.e. 21,213,606 new Shares) will be allotted and issued to the Trustee by the Company, and will be held on trust by the Trustee for the Selected Participants before vesting. For details, please refer to the Company’s announcement dated 7 April 2016 and the Company’s circular dated 8 April 2016.

No grant was made during the six months ended 30 June 2016. As at 30 June 2016, the total number of shares that may be granted under the Share Award Incentive Scheme is 21,213,606 Shares, representing 3% of the issued share capital of the Company.

Change in Information of Directors

The change in the information of directors since the publication of the 2015 annual report is set out below pursuant to Rule 13.51(B)(1) of the Listing Rules:

Director’s position

• Mr. Zhang Menggui, Morgan, (“Mr. Zhang”) resigned as Chief Executive Officer from the Company to serve as the executive Chairman of Oil and Gas Services Business Group. Mr. Zhang has been re-designated from Executive Director to Non-executive Director of the Company.

Directors’ Emoluments

• The basic annual salary of Mr. Jiang Bing Hua in 2016 has been adjusted from HK$2,700,000 to HK$1,940,000, and the basic annual salary of Mr. Zhang Menggui, Morgan in 2016 has also been adjusted from HK$2,700,000 to HK$1,940,000.

– 27 –

Change of non-executive Director

On 29 June 2016, Mr. Wang Jianzhong was recommended by the Company’s nomination committee to be appointed as non-executive Director of the Company. Subsequently, the Company convened the meeting of the Board and resolved to appoint Mr. Wang Jianzhong as non-executive Director of the Company with effect from 4 July 2016. On the same day, Mr. Yu Yuqun resigned as non-executive Director of the Company. Mr. Yu Yuqun has resigned to devote more time to his personal commitments.

The Company would like to take this opportunity to thank Mr. Yu Yuqun for his valuable contribution during his tenure as non-executive Director of the Company.

Change of Chief Financial Officer

With effect from 2 May 2016, Mr. Chung Man Lai, Desmond, has resigned from the position of acting chief financial officer of the Company due to family issues; and Mr. Lim Joo Heng, Paul, has been appointed as acting chief financial officer of the Company to take over the management of financial matters of the Company.

Non-Exempt Continuing Connected Transaction

In view of the expiry of the old master agreement on 31 December 2014, the Company (as seller) entered into a new master agreement (the “New Master Agreement”) with CIMC Raffles Offshore (Singapore) Limited (“CIMC Raffles”) (as buyer) on 10 April 2015 in relation to the sale of the products (which include the equipment used on offshore platforms including but not limited to power control package, jacking system, BOP handling and transport, burner boom, etc. and the project(s) or others related to offshore platforms including (i) cantilever and drill floor projects; (ii) rack material cutting projects; (iii) other material processing projects; and (iv) design, engineering and consulting service projects) by the Company to CIMC Raffles for the three years ending 31 December 2017 (the “Transaction”). Pursuant to the New Master Agreement, the annual caps for each of the three years ending 31 December 2017 are US$100 million (equivalent to approximately HK$780 million (the “Annual Caps”).

Since the applicable percentage ratios as defined under Rule 14.07 of the Listing Rules for each of the Annual Caps exceed 25%, the Transaction constitutes non-exempt continuing connected transaction for the Company under Chapter 14A of the Listing Rules and is subject to the reporting, annual review, announcement and independent shareholders’ approval requirements.

– 28 –

Accordingly, China International Marine Containers (Group) Co., Limited, China International Marine Containers (Hong Kong) Limited, Mr. Brian Chang, Mr. Yu Yuqun and their respective associates had abstained from voting on the approval of the New Master Agreement and the Annual Caps at the extraordinary general meeting (“EGM”). On 5 June 2015, the New Master Agreement and the Annual Caps were approved by the independent shareholders by poll at the EGM. Details of the Transaction were announced on 10 April 2015 and in the circular dated 20 May 2015 which were all published on the websites of the Stock Exchange and the Company.

For the six months ended 30 June 2016, the Group has no new sales contracts with CIMC Raffles under the continuing connected transactions mandate pursuant to the New Master Agreement approved by the Company’s independent shareholders at EGM. The actual sales amount of those continuing connected transactions between the Group and CIMC Raffles was approximately US$0.9 million for the period ended 30 June 2016.

The Quotation of TSC Oil & Gas Services on The National Equities Exchange and Quotations System (The “New Third Board”)

It is also noteworthy that the Group has received the approval for the application for the quotation of shares of TSC Oil & Gas Services on the NEEQ in the PRC. The quotation of shares of TSC Oil & Gas Services commenced on 19 July 2016 and will trade under the stock code of 837290. This spinoff will help unlock the value of TSC Oil & Gas Services and provide it an independent fund-raising platform with respect to its own operations and future expansion.

Subsequent Events

Save as disclosed in this announcement, no subsequent events occurred after 30 June 2016 which may have significant effects on the assets and liabilities of future operations of the Group.

– 29 –

DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITIONS IN

SHARES, UNDERLYING SHARES AND DEBENTURES

As at 30 June 2016, the interests and short positions of the Directors and Chief Executives of the Company in the Shares, underlying Shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the “SFO”)), as recorded in the register required to be kept by the Company pursuant to Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) contained in the Listing Rules, were as follows:

Long positions in ordinary Shares and underlying Shares of the Company:

Name of Directors Mr. Zhang Menggui_(Note 1) Mr. Jiang Bing Hua(Note 1) Mr. Jiang Longsheng Mr. Brian Chang(Note 2)_ Mr. Chan Ngai Sang, Kenny Mr. Bian Junjiang Mr. Guan Zhichuan

Number of issued ordinary Shares of HK$0.10 each in the Company Number of underlying Shares (in respect of share options granted under the Refreshment Approximate percentage of the Company’s Personal interests Family interests Corporate interests Other interests Total of the Post- IPO Scheme) issued share capital (Note 3) 4,656,000 – 120,046,200 – 124,702,200 0 17.64% 4,656,000 – 120,046,200 – 124,702,200 0 17.64% – – – – – 400,000 0.06% – – 66,072,800 – 66,072,800 – 9.34% 500,000 – – – 500,000 0 0.07% – – – – – 350,000 0.05% 300,000 – – – 300,000 0 0.04%

Notes:

1. Global Energy Investors, LLC. is the beneficial owner of 120,046,200 Shares. The entire share capital of Global Energy Investors, LLC. is beneficially owned as to 50% each by Mr. Zhang Menggui and Mr. Jiang Bing Hua, both are the executive Directors of the Company. Accordingly, both Mr. Zhang Menggui and Mr. Jiang Bing Hua are deemed to be interested in the 120,046,200 Shares beneficially owned by Global Energy Investors, LLC. under Part XV of the SFO.

2. Mr. Brian Chang indirectly holds 66,072,800 shares through Windmere International Limited which is his wholly-owned company. Accordingly, he is deemed to be interested in the shares held by Windmere International Limited under Part XV of the SFO.

3. Please refer to the section “Share Option Schemes” below for details of share options held by the Directors and Chief Executives of the Company.

– 30 –

Save as disclosed above, as at 30 June 2016, none of the Directors or Chief Executives of the Company had any interest or short position in the Shares, underlying Shares or debentures of the Company or any of its associated corporations as recorded in the register required to be kept under Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code contained in the Listing Rules.

SUBSTANTIAL SHAREHOLDERS’ AND OTHER PERSONS’ INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES

As at 30 June 2016, the following persons had interests or short positions in the Shares and underlying Shares of the Company as recorded in the register of interests required to be kept by the Company pursuant to Section 336 of the SFO:

(i) Long positions in ordinary Shares and underlying Shares of the Company:

			Approximate
			percentage of
		Number of	the Company’s
	Capacity and	Shares/underlying	issued share
Name	nature of interest	Shares held	capital
Madam Chen Fengying_(Note 1)_	Interest of the spouse	124,702,200 Shares	17.64%
Madam Zhang Jiuli_(Note 2)_	Interest of the spouse	124,702,200 Shares	17.64%
Global Energy Investors, LLC.(Note 3)	Corporate	120,046,200 Shares	16.98%
Windmere International Limited_(Note 4)_	Corporate	66,072,800 Shares	9.34%
China International Marine Containers
(Group) Company Limited_(Note 5)_	Corporate	92,800,000 Shares	13.12%
China International Marine Containers
(Hong Kong) Limited_(Note 5)_	Corporate	92,800,000 Shares	13.12%
Harmony Master Fund_(Note 6)_	Corporate	71,106,800 Shares	10.06%

– 31 –

Notes:

1. These interests represent the same block of Shares and share options held by Mr. Zhang Menggui as shown in the above section headed “DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES”. Since Madam Chen Fengying is the spouse of Mr. Zhang Menggui, she is deemed to be interested in the Shares and share options held by him under Part XV of the SFO.

2. These interests represent the same block of Shares and share options held by Mr. Jiang Bing Hua as shown in the above section headed “DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES”. Since Madam Zhang Jiuli is the spouse of Mr. Jiang Bing Hua, she is deemed to be interested in the Shares and share options held by him under Part XV of the SFO.

3. This interest represents the same block of corporate interest held by Mr. Zhang Menggui and Mr. Jiang Bing Hua as shown in the above section headed “DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES”.

4. Mr. Brian Chang indirectly holds 66,072,800 Shares through Windmere International Limited which is his wholly-owned company. Mr. Brian Chang’s interest is shown in the above section headed “DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES”. Accordingly, he is deemed to be interested in the shares held by Windmere International Limited under Part XV of the SFO.

5. China International Marine Containers (Hong Kong) Limited (“CIMC HK”) is the beneficial owner of 92,800,000 Shares. CIMC HK is a wholly-owned subsidiary of China International Marine Containers (Group) Company Limited (“CIMC Group”). Therefore, CIMC Group is deemed to be interested in the 92,800,000 Shares of the Company held by CIMC HK under Part XV of the SFO.

6. Harmony Master Fund (“Harmony Fund”) is a long-only equity fund registered in Cayman Islands. Harmony Fund is managed by DM Fund Management Limited, a company registered in Cayman Islands and a subsidiary of DM Capital Limited, a company incorporated in British Virgin Islands. Harmony Fund primarily holds long equity positions in small capitalization stocks that derive a majority of their revenues within the Greater China region.

– 32 –

(ii) Long positions in Shares of a subsidiary of the Company:

	Name of substantial	Percentage of
Name of subsidiary	shareholder	shareholding
Jurun Limited	Xingbo Limited	21%
TSC Manufacturing and Supply De	Independence Drilling S.A.	40%
Colombia S.A.S
Forum Drilling Services Pte. Ltd.	Duhen Thomas, Francois,	20%
	Marie
ATS Energy LLC	Axion Services Inc.	33%
	Petromax Industry Inc.	16%
Texas Unconventional Resources LLC	Mr. YANG Anping	20%

Save as disclosed above, as at 30 June 2016, no persons (other than the Directors and Chief Executives of the Company whose interests are set out under the paragraph headed “DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITION IN SHARES, UNDERLYING SHARES AND DEBENTURES” above and the section headed “SHARE OPTION SCHEMES” below), had an interest or short position in the Shares or underlying Shares of the Company as recorded in the register to be kept under Section 336 of the SFO.

SHARE OPTION SCHEMES

The purpose of the Pre-IPO Share Option Scheme (the “Pre-IPO Scheme”), Post-IPO Share Option Scheme (the “Post-IPO Scheme”) and the New Share Option Scheme (the “New Scheme”) are to create incentive to the employees, Directors and other eligible participants.

Pre-IPO Scheme and Post-IPO Scheme

Pursuant to written resolutions of all shareholders of the Company on 19 and 20 October 2005, the Company adopted a Pre-IPO Scheme and a Post-IPO Scheme respectively.

The Pre-IPO Scheme ceased to be effective on 21 November 2005 save for the unexercised portion of the options granted and accepted during its life time, of which none of the share option remain valid and outstanding as at 30 June 2016.

– 33 –

Pursuant to the Post-IPO Scheme, the Directors granted (i) 7,280,000 share options at HK$2.43 each to 14 employees of the Group on 10 May 2007, (ii) 9,700,000 share options at HK$5.60 each to 51 employees and 2 consultants of the Group on 12 November 2007, (iii) 2,000,000 share options at HK$5.23 each to 3 employees of the Group on 15 January 2008, (iv) 5,000,000 share options at HK$2.32 each to 6 employees of the Group on 12 August 2008 and (v) 16,050,000 share options at HK$0.54 each to 8 Directors and 38 employees of the Group on 29 December 2008.

Based on a valuation report done by an independent valuer, Jones Lang LaSalle Sallmanns, the value of the options granted on 10 May 2007, 12 November 2007, 15 January 2008, 12 August 2008 and 29 December 2008 under the Post-IPO Scheme were HK$7,252,000, HK$21,812,000, HK$4,166,000, HK$4,736,000 and HK$3,499,200 respectively.

The closing prices of the Company’s Shares on the preceding option granted on 9 May 2007, 9 November 2007, 14 January 2008, 11 August 2008 and 24 December 2008 under the Post-IPO Scheme were HK$2.50, HK$5.58, HK$5.18, HK$2.22 and HK$0.50 respectively.

On 4 November 2008, the refreshed scheme mandate limit of 54,890,800 Shares in respect of the granting of share options under the Post-IPO Scheme (the “Refreshment”) was approved at the extraordinary general meeting duly convened and held. On 13 November 2008, the Stock Exchange has granted the listing of, and permission to deal in, the Shares which may fall to be issued and allotted upon the exercise of any options that may be granted under the Refreshment.

The Post-IPO Scheme including the Refreshment, was conditionally terminated by the Board on 6 May 2009. Upon the transfer of the listing of shares of the Company from the GEM to the Main Board on 5 June 2009, the termination of the Post-IPO Scheme became effective. Thereafter, no further option had been offered or granted under the Post-IPO Scheme. Pursuant to the Post-IPO Scheme, options previously granted but unexercised under the Post-IPO Scheme will remain valid and exercisable in accordance with their terms of issue, of which a total of 14,822,000 share options, representing 2.10% of the issued share capital of the Company, remain valid and outstanding as at 30 June 2016.

– 34 –

New Scheme

On 5 August 2009 (the “Adoption Date”), the adoption of the new Share Option Scheme for granting up to 56,254,040 share options (the “New Scheme”) which complies with the Listing Rules was approved at the extraordinary general meeting duly convened and held. On 10 August 2009, the Stock Exchange has granted the listing of, and permission to deal in, the Shares which may fall to be issued and allotted upon the exercise of any options that may be granted under the New Scheme. This became effective from the Adoption Date and will expire on 5 August 2019. Pursuant to the New Scheme, the Directors granted (i) 20,295,000 share options at HK$2.06 each to 82 employees of the Group on 18 September 2009, (ii) 9,070,000 share options at HK$1.27 each to 29 employees of the Group on 1 September 2010, (iii) 2,400,000 share options at HK$1.97 each to 2 employees of the Group on 21 February 2011, (iv) 10,780,000 share options at HK$1.02 each to 18 employees of the Group on 4 September 2012, (v) 6,025,000 share options at HK$2.9 each to 23 employees of the Group on 30 August 2013, (vi) 2,400,000 share options at HK$4.16 each to 6 employees of the Group on 2 September 2014, and (vii) 1,500,000 share options at HK$2.11 each to 9 employees of the Group on 24 December 2014. Based on valuation reports done by independent valuers, Jones Lang LaSalle Sallmanns and Ascent Partners, the value of the options granted on 18 September 2009, 1 September 2010, 21 February 2011, 4 September 2012. 30 August 2013, 2 September 2014 and 24 December 2014 under the New Scheme were HK$18,701,000, HK$4,602,100, HK$1,973,100, HK$6,934,500, HK$11,305,500, HK$5,232,000 and HK$1,652,000 respectively. The closing price of the Company’s Shares on the preceding option granted on 17 September 2009, 31 August 2010, 18 February 2011 and 3 September 2012, 29 August 2013, 1 September 2014, and 23 December 2014 under the New Scheme were HK$1.85, HK$1.23, HK$1.92, HK$1.01, HK$2.78, HK$3.99, and HK$2.03 respectively. Pursuant to the New Scheme, options previously granted but unexercised under the New Scheme will remain valid and exercisable in accordance with their terms of issue, of which a total of 30,108,000 share options, representing 4.26% of the issued share capital of the Company, remain valid and outstanding as at 30 June 2016. Save as disclosed above, no option had been granted or agreed to be granted by the Company pursuant to the New Scheme.

The total number of share options that may be further granted under all the share option schemes as at the date of this announcement is 3,784,040 Shares, representing 0.54% of the issued share capital of the Company.

As at the date of this announcement, the total number of share options granted and outstanding under all the share option schemes is 44,930,000 Shares, representing 6.35% of the issued share capital of the Company.

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Details of movement of options under the Post-IPO Scheme including the Refreshment, for the six months ended 30 June 2016 were as follows:

Name or category of participant Date of grant Exercisable period Exercise price per share (Notes 1 & 2) (Notes 1, 2 & 3) HK$ (i) Employees 10.05.2007 10.11.2007 to 09.05.2017 2.43 Sub-total (ii) Employees 12.11.2007 12.05.2008 to 11.11.2017 5.60 Sub-total (iii) Employees 15.01.2008 15.07.2008 to 14.01.2018 5.23 Sub-total (iv) Employees 12.08.2008 12.02.2009 to 11.08.2018 2.32 Sub-total (v) Directors: Mr. Zhang Menggui 29.12.2008 29.06.2009 to 28.12.2018 0.54 Mr. Jiang Bing Hua 29.12.2008 29.06.2009 to 28.12.2018 0.54 Mr. Jiang Longsheng 29.12.2008 29.06.2009 to 28.12.2018 0.54 Mr. Chan Ngai Sang, Kenny 29.12.2008 29.06.2009 to 28.12.2018 0.54 Mr. Bian Junjiang 29.12.2008 29.06.2009 to 28.12.2018 0.54 Mr. Guan Zhichuan 29.12.2008 29.06.2009 to 28.12.2018 0.54 Employees and other 29.12.2008 29.06.2009 to 28.12.2018 0.54 Sub-total Total	Balance as at 01.01.2016 3,982,000 3,982,000 5,990,000 5,990,000 2,000,000 2,000,000 1,700,000 1,700,000 0 0 400,000 0 350,000 0 750,000 980,000 1,730,000 15,402,000			Number of share options	Number of share options		Balance as at 30.06.2016 3,982,000
			Granted during the period (Note 4) – – – – – – – – – – – – – – – – – –	Exercised during the period (Note 4) – – – – – – – – – – – – – – – – – –	Cancelled during the period (Note 4) – – – – – – – – – – – – – – – – – –	Lapsed during the period (Note 4) – – (580,000) (580,000) – – – – – – – – – – – – – (580,000)
							3,982,000
							5,410,000
							5,410,000
							2,000,000
							2,000,000
							1,700,000
							1,700,000
							0 0 400,000 0 350,000 0
							750,000
							980,000
							1,730,000
							14,822,000

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Notes:

1. All dates are shown day, month, year.

2. The vesting period of the options is 5 years and starts from the date of grant and becomes vested at stepped semi-annual increments of 10% of the total options granted for a period of 5 years from the date of grant.

3. These grants are exercisable, starting from the first anniversary of the listing date at stepped semiannual increments of 10% of the total options granted, for a period not later than 10 years from the date of grant.

4. The period refers to the six months ended 30 June 2016.

Details of movement of options under the New Scheme for the six months ended 30 June 2016 were as follows:

Name or category of participant Date of grant Exercisable period Exercise price per share (Notes 1 & 2) (Notes 1, 2 & 3) HK$ (i) Employees 18.09.2009 18.03.2010 to 17.09.2019 2.06 (ii) Employees 01.09.2010 01.03.2011 to 31.08.2020 1.27 (iii) Employees 21.02.2011 21.08.2011 to 20.02.2021 1.97 (iv) Employees 04.09.2012 04.03.2013 to 03.09.2022 1.02 (v) Employees 30.08.2013 28.02.2014 to 29.08.2023 2.9 (vi) Employees 02.09.2014 02.03.2015 to 01.09.2024 4.16 (vii) Employees 24.12.2014 24.06.2015 to 23.12.2024 2.11 Total	Balance as at 01.01.2016 8,558,000 4,460,000 2,400,000 7,065,000 5,080,000 2,400,000 1,500,000 31,463,000			Number of share options	Number of share options		Balance as at 30.06.2016 8,058,000 4,430,000 2,400,000 7,065,000 4,255,000 2,400,000 1,500,000
			Granted during the period (Note 4) – – – – – – – –	Exercised during the period (Note 4) – – – – – – – –	Cancelled during the period (Note 4) – – – – – – – –	Lapsed during the period (Note 4) (500,000) (30,000) – (825,000) – – – (1,355,000)
							30,108,000

Notes:

1. All dates are shown day, month, year.

2. The vesting period of the options is 5 years and starts from the date of grant and becomes vested at stepped semi-annual increments of 10% of the total options granted for a period of 5 years from the date of grant.

3. These grants are exercisable, starting from the first anniversary of the listing date at stepped semiannual increments of 10% of the total options granted, for a period not later than 10 years from the date of grant.

4. The period refers to the six months ended 30 June 2016.

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Save as disclosed above, none of the Directors or their spouses and children under the age of 18 had any right to subscribe for the securities of the Company, or had exercised any such right for the six months ended 30 June 2016.

COMPETITION AND CONFLICT OF INTERESTS

None of the Directors, the management shareholders or substantial shareholders of the Company or any of their respective associates (as defined under the Listing Rules) has engaged in any businesses that competes or may compete, either directly or indirectly, with the business of the Group, or has any other conflict of interests with the Group during the six months period ended 30 June 2016.

AUDIT COMMITTEE

The Company established an audit committee on 20 October 2005 with terms of reference in compliance with Rules 3.21 of the Listing Rules. The primary duties of the audit committee are to review and supervise the financial reporting process and internal controls of the Group.

The audit committee comprises three members, namely Mr. Chan Ngai Sang, Kenny (being the chairman of the audit committee), Mr. Bian Junjiang and Mr. Guan Zhichuan. All of them are independent non-executive Directors. The audit committee of the Company has reviewed the unaudited financial results of the Group for the six months ended 30 June 2016 and are of the opinion that the preparation of such results complied with the applicable accounting standards and requirements and that adequate disclosures have been made.

REMUNERATION COMMITTEE

The remuneration committee was established on 20 October 2005 with written terms of reference in compliance with the Code. It comprises three independent non-executive Directors, namely Mr. Bian Junjiang (being the Chairman), Mr. Chan Ngai Sang, Kenny and Mr. Guan Zhichuan; and two executive Directors, namely, Mr. Jiang Bing Hua and Mr. Zhang Menggui, Morgan.

NOMINATION COMMITTEE

The nomination committee was established on 5 June 2009 with written terms of reference in compliance with the Code. A majority of its current members are independent non-executive Directors. Currently, the members of the committee are Mr. Jiang Bing Hua (being the chairman), Mr. Zhang Menggui, Morgan, Mr. Chan Ngai Sang, Kenny, Mr. Bian Junjiang and Mr. Guan Zhichuan.

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RISK MANAGEMENT AND INTERNAL CONTROL

Based on the respective assessments made by management and the Corporate Governance team responsible for internal audit activities, the Audit Committee considered that for the first six months of 2016:

• The risk management and internal controls and accounting systems of the Group remain in place and functioning effectively, and were designed to provide reasonable but not absolute assurance that material assets are protected, business risks attributable to the Group were identified and monitored, material transactions were executed in accordance with management’s authorization and the interim financial information were reliable for publication.

• An ongoing process is in place for identifying, evaluating and managing the significant risks faced by the Group.

DIRECTORS’ INTERESTS IN CONTRACTS

No contract of significance to which the Company or any of its subsidiaries was a party, and in which a Director had a direct and indirect material interest, subsisted during or at the end of the six months ended 30 June 2016.

COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS BY

DIRECTORS

The Company has adopted the Model Code set out in Appendix 10 to the Listing Rules as its own code of conduct for dealings in securities of the Company by Directors. All Directors of the Company have confirmed, following specific enquiry by the Company, that they have complied with the required standard set out in the Model Code during the six months ended 30 June 2016.

COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE PRACTICES

The Company is committed to maintaining a high standard of corporate governance practices to ensure transparency so that the interests of our shareholders and the cooperative development among customers, employees and the Group can be safeguarded. The Company has adopted the Code on Corporate Governance Practices of the Stock Exchange.

During the period, the Company has complied with the code provisions (“CG Codes”) of the Code on Corporate Governance Practices during the six months period from 1 January 2016 to 30 June 2016 as set out in Appendix 14 to Listing Rules at that time except for the deviation from CG Code A.6.7 where one executive director, three independent non-executive directors and three non-executive directors were absent from the last annual general meeting of the Company held on 27 May 2016 as they were away from Hong Kong due to other important engagements at the time of these meetings.

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PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES OF THE COMPANY

For the six months ended 30 June 2016, neither the Company nor any of its subsidiaries purchased, redeemed or sold any of the Company’s listed securities, except that the trustee of the share award plan, pursuant to the terms of the rules and trust deed of the share award plan, purchased on the Stock Exchange a total number of 5,095,000 TSC shares at a total consideration of about HK$9,999,418.

DISCLOSURE OF INFORMATION ON THE WEBSITE OF THE STOCK EXCHANGE

An interim report for the six months ended 30 June 2016 containing all the information required by Appendix 16 to the Listing Rules will be dispatched to shareholders of the Company and published on the website of the Stock Exchange (http://www.hkex.com.hk) and the website of the Company (http://www.t-s-c.com) in due course.

ACKNOWLEDGEMENT

The Directors would like to take this opportunity to express our sincere thanks to all the shareholders for their continuous support and to all our staff for their dedication and contribution to the Group during the reporting period.

By Order of the Board TSC Group Holdings Limited Jiang Bing Hua Executive Chairman

Hong Kong, 30 August 2016

As of the date of this announcement, the Board comprises 1 executive Director, namely Mr. Jiang Bing Hua; 4 non-executive Directors, namely Mr. Zhang Menggui, Mr. Jiang Longsheng, Mr. Brian Chang and Mr. Wang Jianzhong; and 4 independent non-executive Directors, namely Mr. Chan Ngai Sang, Kenny, Mr. Bian Junjiang, Mr. Guan Zhichuan and Mr. Robert William Fogal Jr.

– 40 –