COSCO SHIPPING Development Co., Ltd. - Annual Report 2020

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中遠海運發展股份有限公司 COSCO SHIPPING Development Co., Ltd.*

(A joint stock company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 02866)

ANNUAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2020

FINANCIAL HIGHLIGHTS (UNDER HKFRSs)

Revenue amounted to RMB14,421,919,000
Profit before tax from continuing operations amounted to RMB1,760,958,000
Profit attributable to owners of the parent of the Company for the year amounted to RMB2,130,271,000
Basic earnings per share attributable to ordinary equity holders of the parent of the Company amounted to RMB0.1556
The Board proposed the payment of a final dividend of RMB0.056 per share (inclusive of applicable tax)

The board of directors (the “ Board ”) of COSCO SHIPPING Development Co., Ltd. (the “ Company ” or “ COSCO SHIPPING Development ”) is pleased to announce the consolidated financial information of the Company and its subsidiaries (the “ Group ”) for the year ended 31 December 2020 (the “ Period ”) prepared under Hong Kong Financial Reporting Standards (“ HKFRSs ”), together with the comparative figures for the year ended 31 December 2019.

CHAIRMAN’S STATEMENT

In early 2020, the COVID-19 pandemic swept the world and hit the global economy hard. Major developed economies were affected by the lingering pandemic and saw slow recovery. In contrast, China quickly brought the pandemic under control and resumed work and production steadily, making it the first to break the shackle of COVID-19 and achieve recovery. In the second half of the year, the gradual resumption of work and production and the economic stimulus policies adopted by some countries boosted global trade to a certain extent. As a result, the shipping market picked up rapidly amid robust transportation demand, bringing good market opportunities for the recovery of the upstream and downstream shipping industry chain.

Faced with the downward pressure on macro-economy and the continuous spread of COVID-19 abroad, the Company persisted in reform and innovation, deepened the improvement of quality and efficiency, and had highly motivated staff work against the headwinds. Thanks to these, the Company saw an improving business landscape and continuous growth in economic efficiency.

In 2020, the Company recorded a revenue of RMB14.422 billion, an increase of 49% from 2019, and a net profit attributable to owners of the parent of RMB2.130 billion, an increase of 22% from 2019. The basic earnings per share amounted to RMB0.1556.

The Board proposed a final dividend of RMB0.056 per share.

REVIEW OF OPERATIONS

In 2020, the Company confidently made coordinated efforts to withstand the test of the market, seized market opportunities to implement the strategy of industry-finance integration, and endeavored to make new breakthroughs in the field of shipping finance. The Company also made continuous efforts to explore new business models, tap and integrate new competitive advantages, and continuously improve high-quality development.

I. THE LEASING SEGMENT ACHIEVED WIN-WIN RESULTS IN THE INDUSTRIAL CHAIN BASED ON INDUSTRY-FINANCE INTEGRATION

1. Vessel Leasing Business Leveraged Industrial Chain Advantages to Expand into New Business Areas

We continued to “integrate industry and finance and facilitate industry development with finance for synergy”, and made breakthroughs in extending financial services in the shipping industry chain. In 2020, the Company partnered with COSCO SHIPPING Specialized Carriers Co., Ltd. and COSCO SHIPPING Heavy Industry Co., Ltd. (“ COSCO SHIPPING Heavy Industry ”) to manufacture and lease out 10 multipurpose vessels; and cooperated with COSCO SHIPPING Bulk Co., Ltd. and COSCO SHIPPING Heavy Industry on the operating lease of 16 bulk carriers designated to serve Aluminum Corporation of China Limited in Guinea, thus expanding the Company’s leasing fleet and facilitating the development of its principal shipping business. In addition to managing its existing business, the Company steadily developed external markets and extended to major transportation-related lease business, in an effort to create new profit growth drivers.

2. Container Leasing Business Exerted In-house Synergy to Innovate in Business Models

Faced with the significant changes in market environment in 2020, the Company’s container leasing business drew on in-house synergy to increase revenue and cut expenditure amid market headwinds in the first half of the year through early business development and revitalization of ground containers; and seized market opportunities in the second half of the year to capitalize on the outstanding advantages and market influence of its industrial chain, thus achieving good returns. Meanwhile, the Company innovated in business models, explored new modes of cooperation with big clients, and expanded new container trading business and mobile warehousing business, in an effort to improve returns on assets.

3. Other Leasing Businesses Focused on Improving Quality and Efficiency and Deepening SOE Reform

The Company is committed to enhancing efficiency by specialization, by going deep, improving efficiency and ensuring returns in the field of financial leasing. In 2020, COSCO SHIPPING Leasing Co., Ltd., a subsidiary of the Company, successfully introduced external strategic investors, marking a major breakthrough in equity diversification and mixed ownership reform. This further consolidated its superior competitive position in the industry and helped it realize transformation and upgrading, which in turn will enhance the long-term investment return of COSCO SHIPPING Development.

II. CONTAINER MANUFACTURING SEGMENT IMPROVED MANAGEMENT CAPABILITIES TO MEET MARKET DEMAND

In 2020, under the severity of the global pandemic, the market experienced a structural shortage of containers. The Company closely followed market dynamics, pursued economies of scale and synergy, enhanced management efficiency, and strengthened cost control. While ensuring production continuity and achieving good economic returns, the Company exerted its industry influence to provide important logistics support services for international and domestic dual circulation. In the meantime, the Company made efforts to explore diversified development by strengthening product R&D and expanding container business in the fields of environmental protection, healthcare, special logistics, agriculture and scientific research etc., with a view to improving its comprehensive competitiveness.

In January 2021, the Company convened a board meeting to consider and approve the “Proposal of COSCO SHIPPING Development Co., Ltd. on Issuing Shares to Purchase Assets and Raise Ancillary Funds and Related Party Transaction”, with an aim to further integrate the Group’s container manufacturing assets, optimize production capacity, enhance technological capabilities, and facilitate synergy between leasing and manufacturing. The transaction will, in advance, honor the commitment made by the controlling shareholder in 2019 to inject acquired container manufacturing assets into the Company in three years, and give a strong impetus for the Company to achieve its strategic objectives for the 14th Five-Year Plan period. This is a response to the expectations of the capital market, and will effectively enhance the interests of shareholders.

III. INVESTMENT AND SERVICES SEGMENT FURTHER DEVELOPED INDUSTRY CHAIN FINANCE AND INNOVATED IN INDUSTRY-FINANCE INTEGRATION MODEL

The Company continuously promoted the development of industry chain finance in various sub-sectors by intensifying the integration of industry chain resources based on the shipping logistics business to maximize the advantages in facilitating industry development with finance. In 2020, the Company innovated in industry-finance integration model and introduced external resources to jointly create products, manage assets and optimize operations. In addition, it revitalized its existing financial assets and concentrated on shipping finance, and achieved good returns on a number of investment projects. By creating a one-stop supply chain finance service platform, the Company can provide more comprehensive financial solutions and enhance the ability of its finance segment to serve its principal shipping business.

IV. PROMOTING AN ACTIVE DIVIDEND DISTRIBUTION POLICY TO SAFEGUARD THE INTERESTS OF INVESTORS

The Company is dedicated to safeguarding the interests of investors and promoting its long-term sustainable development. As such, it has paid cash dividends for two consecutive years to share its development achievements with shareholders. In 2020, the Company completed the dividend distribution to A-share and H-share investors for 2019 by distributing a total of approximately RMB520 million of cash dividends to all shareholders. The Company will continue to reward investors with an active and stable dividend distribution policy.

V. STRENGTHENING THE RISK MANAGEMENT SYSTEM UNDER THE COVID-19 PANDEMIC TO IMPROVE INTERNAL CONTROL CAPABILITIES

In 2020, in an active response to the impact of the COVID-19 pandemic, the Company carried out special screening of COVID-19-related risks, strengthened compliance risk control for all business segments, and conducted risk assessment on major finance and investment projects. Meanwhile, the Company continuously promoted the construction of the rule of law, strictly controlled legal compliance risks, effectively implemented risk limit management, reinforced credit risk management, improved the sanctions compliance and anti-monopoly compliance management systems, carried out contract investigation and contract lifecycle management, and improved the major emergency response mechanism, so as to enhance internal control capabilities in all aspects. In 2020, all business segments were operating soundly with controllable risks.

VI. PRACTICING SOCIAL RESPONSIBILITY AND PROMOTING SUSTAINABLE DEVELOPMENT

In 2020, faced with the complex and severe environment at home and abroad, the Company adhered to its original intention in shipping finance and pursued high-quality development based on the dual circulation development pattern. The Company tapped scientific research and medical needs, strengthened innovation and R&D, and designed and manufactured special containers such as Antarctic scientific expedition containers and intelligent medical containers; upheld the concept of green development, constantly improved the environmental management system, and took effective measures to address climate change; honored its social responsibility by facilitating regional economic and social development and supporting targeted assistance projects to help with poverty alleviation. With a firm belief that sustainable development is the “golden key” to solve the current global problems, the Company integrates the concept of sustainable development into its core strategy and operations, and promotes the development of the real economy with shipping finance.

OUTLOOK

In 2021, the global economy will gradually recover, and China’s economy will steadily continue its positive growth. The supply-demand balance in the shipping market is expected to improve, and the global trade landscape will see structural changes. Financial market regulation is moving towards a well-established risk control mechanism with tightening financial policies. In the future, the normalization of epidemic prevention and control and changes in economic policies of major economies will present new uncertainties, and global economy and trade will reach a new balance. Currently, the sound momentum of the new economy, the ongoing advancement of high-tech industries, and the construction of a dual circulation development pattern will bring many opportunities for the upstream and downstream of the shipping industry chain. In this context, the shipping finance ecosystem empowered by supply chain finance is expected to improve gradually.

Through efforts made during the 13th Five-Year Plan period, COSCO SHIPPING Development has made great progress in its shipping finance business, especially in industry-finance integration. The Company made new breakthroughs in combining leasing and manufacturing and combining leasing and shipping, and saw its supply chain finance platform take shape, marking achievements in shipping finance investment. In 2021, the Company will thoroughly implement the new development concept and accelerate the construction of a new development pattern to fit into the dual circulation strategy, build a new ecosystem and develop a first-class enterprise. To this end, the Company will focus on the principal shipping and logistics business to build an integrated supply chain finance service platform, and resolutely empower the principal business with industry-finance integration, so as to enhance the ability of value creation and achieve high-quality development during the 14th Five-Year Plan period.

In terms of shipping and industry-related leasing segment, the Company will deepen the integration of industry and finance, build industry influence, integrate resources and leverage its professional and platform advantages to develop external business; capitalize on the industrial chain advantages of the container leasing and manufacturing business to strengthen synergy between leasing and manufacturing, increase the proportion of reefer and special containers, and reinforce market-oriented development and international expansion; promote new modes of cooperation with big clients and extend the container leasing industry chain to increase profit growth drivers.

In terms of container manufacturing segment, the Company will promote the project of issuing shares to purchase assets and raise supporting funds, with a view to optimizing production capacity, increasing product diversification and maximizing synergy. The Company will extend the container industry chain, actively expand into markets, strengthen industry benchmarking, improve management practices, enhance quality and efficiency, and speed up technology R&D to enhance comprehensive competitiveness, so as to develop a leading company with high intelligence and a high capacity utilization rate.

In terms of investment and services segment, the Company will provide industry-finance services based on the principal shipping business, build an innovative investment platform, promote the development of industrial funds to empower the principal business, explore and develop industry-finance business, and further enhance the advantages of its integrated supply chain finance services. As to investment management business, the Company will, with a focus on “facilitating industry development with finance”, constantly optimize asset allocation, uphold diversified investment strategies, explore and research the fields of major transportation and technological innovation, and tap investment opportunities to improve investment returns.

In addition, the Company will continue to improve the risk management infrastructure, promote the implementation of a comprehensive risk management system, and strengthen risk management for financial investment and leasing business. In the meantime, the Company will further improve its safety production system and reinforce epidemic prevention and control measures, so as to create a safe environment for its production and operations.

The extraordinary year of 2020 has created a new starting point for 2021, and the new journey of the 14th Five-Year Plan is around the corner. COSCO SHIPPING Development will uphold its original intention in shipping finance and its new mission, embrace innovation to secure new achievements, and grasp opportunities of the times to develop into an excellent financial service provider in the shipping industry with COSCO SHIPPING characteristics.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 2020

Notes CONTINUING OPERATIONS REVENUE Cost of sales Gross profit Other income 5 Other gains, net 6 Selling, administrative and general expenses Expected credit losses Finance costs Share of profits of associates Share of losses of joint ventures PROFIT BEFORE TAX FROM CONTINUING OPERATIONS Income tax expense 7 PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS DISCONTINUED OPERATION Profit for the year from a discontinued operation PROFIT FOR THE YEAR Attributable to: Owners of the parent Non-controlling interests EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT (expressed in RMB per share) 9 Basic and diluted – For profit for the year – For profit from continuing operations	For the year ended 31 December 2020 RMB’000 14,421,919 (10,834,932) 3,586,987 286,950 155,593 (1,373,487) (622,339) (2,253,120) 1,985,148 (4,774) 1,760,958 (318,773) 1,442,185 688,086 2,130,271 2,130,271 – 2,130,271 0.1556 0.0964	For the year ended 31 December 2019 RMB’000 (Restated) 9,665,682 (7,202,187) 2,463,495 330,133 919,235 (1,178,677) (417,563) (3,540,784) 2,292,840 (1,077) 867,602 (199,749) 667,853 1,076,880 1,744,733 1,744,733 – 1,744,733 0.1285 0.0355

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2020

PROFIT FOR THE YEAR OTHER COMPREHENSIVE INCOME Other comprehensive income that may be reclassified to profit or loss in subsequent periods: Associates: Share of other comprehensive (loss)/income Reclassification to profit or loss Share of other comprehensive loss of joint ventures Effective portion of cash flow hedges Exchange differences on translation of foreign operations Net other comprehensive income that may be reclassified to profit or loss in subsequent periods Other comprehensive (loss)/income that may not be reclassified to profit or loss in subsequent periods: Share of other comprehensive (loss)/income of associates Net other comprehensive (loss)/income that may not be reclassified to profit or loss in subsequent periods OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF TAX TOTAL COMPREHENSIVE INCOME FOR THE YEAR Attributable to: Owners of the parent Non-controlling interests	For the year ended 31 December 2020 RMB’000 2,130,271 (173,894) (168,459) (342,353) (12) (11,751) 684,783 330,667 (13,390) (13,390) 317,277 2,447,548 2,447,548 – 2,447,548	For the year ended 31 December 2019 RMB’000 1,744,733 302,336 – 302,336 (59) (30,084) (187,211) 84,982 51,295 51,295 136,277 1,881,010 1,881,010 – 1,881,010

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 31 DECEMBER 2020

Note NON-CURRENT ASSETS Property, plant and equipment Investment properties Right-of-use assets Intangible assets Investments in joint ventures Investments in associates Financial assets at fair value through profit or loss Finance lease receivables Factoring receivables Derivative financial instruments Deferred tax assets Other long term prepayments Total non-current assets CURRENT ASSETS Inventories Trade and notes receivables 10 Prepayments and other receivables Financial assets at fair value through profit or loss Finance lease receivables Factoring receivables Derivative financial instruments Pledged deposits Cash and cash equivalents Total current assets Total assets	31 December 2020 RMB’000 55,324,708 98,144 222,407 39,256 180,727 20,841,847 3,932,754 27,568,809 365,032 – 284,670 45,984 108,904,338 962,410 2,445,764 1,054,541 654,224 18,296,935 1,083,635 – 590,146 12,046,801 37,134,456 146,038,794	31 December 2019 RMB’000 56,818,972 105,547 274,620 27,174 188,827 25,665,387 4,266,308 26,623,268 428,409 569 243,651 50,641 114,693,373 881,129 1,111,000 458,969 490,967 15,532,797 1,123,489 960 566,339 9,635,096 29,800,746 144,494,119

continued/...

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED) 31 DECEMBER 2020

Note CURRENT LIABILITIES Trade payables 11 Other payables and accruals Contract liabilities Derivative financial instruments Bank and other borrowings Corporate bonds Lease liabilities Tax payable Total current liabilities NET CURRENT LIABILITIES TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Bank and other borrowings Corporate bonds Lease liabilities Derivative financial instruments Deferred tax liabilities Government grants Other long term payables Total non-current liabilities Net assets EQUITY Share capital Treasury shares Special reserves Other reserves Other equity instruments Retained profits Other comprehensive loss Total equity	31 December 2020 RMB’000 3,100,895 4,771,247 162,354 8,654 47,252,731 9,272,114 100,998 198,482 64,867,475 (27,733,019) 81,171,319 45,527,948 8,287,546 53,858 12,285 104,888 9,934 2,804,852 56,801,311 24,370,008 11,608,125 (233,428) 1,360 (2,722,662) 6,000,000 12,206,348 (2,489,735) 24,370,008	31 December 2019 RMB’000 2,553,700 3,658,271 150,194 3,445 43,066,519 4,273,467 391,082 174,881 54,271,559 (24,470,813) 90,222,560 54,853,209 8,271,400 148,648 8,590 350,975 11,484 2,370,536 66,014,842 24,207,718 11,608,125 (233,428) 1,606 (2,338,187) 7,000,000 10,976,614 (2,807,012) 24,207,718

NOTES TO FINANCIAL STATEMENTS 31 DECEMBER 2020

1. CORPORATE AND GROUP INFORMATION

COSCO SHIPPING Development Co., Ltd. (the “Company”) is a joint stock company with limited liability established in the People’s Republic of China (the “PRC”). The address of the Company’s registered office is Room A-538, International Trade Center, China (Shanghai) Pilot Free Trade Zone, Shanghai, the PRC.

During the year, the principal activities of the Group were as follows:

(a) Operating leasing and financial leasing;
(b) Manufacture and sale of containers;
(c) Provision of financial and insurance brokerage services; and
(d) Equity investment.

In the opinion of the directors, the immediate holding company and the ultimate holding company of the Company are China Shipping Group Company Limited and China COSCO Shipping Corporation Limited, respectively, both established in the PRC.

2 BASIS OF PREPARATION

These financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention, except for certain financial instruments which have been measured at fair value. These financial statements are presented in Renminbi (“RMB”) and all values are rounded to the nearest thousand except when otherwise indicated.

The financial statements have been prepared on the going concern basis notwithstanding that the Group had net current liabilities of RMB27,733,019,000 as at 31 December 2020. The directors of the Company are of opinion that based on the available unutilised banking facilities as at 31 December 2020, the Group will have the necessary liquid funds to finance its working capital and to meet its capital expenditure requirements. Accordingly, the directors are of the opinion that it is appropriate to prepare the financial statements on a going concern basis.

Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries (collectively referred to as the “Group”) for the year ended 31 December 2020. A subsidiary is an entity (including a structured entity), directly or indirectly, controlled by the Company. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee (i.e., existing rights that give the Group the current ability to direct the relevant activities of the investee).

When the Company has, directly or indirectly, less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

(a) the contractual arrangement with the other vote holders of the investee;
(b) rights arising from other contractual arrangements; and
(c) the Group’s voting rights and potential voting rights.

The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies. The results of subsidiaries are consolidated from the date on which the Group obtains control and continue to be consolidated until the date that such control ceases.

Profit or loss and each component of other comprehensive income are attributed to the owners of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control described above. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognises (i) the assets (including goodwill) and liabilities of the subsidiary, (ii) the carrying amount of any non-controlling interest and (iii) the cumulative translation differences recorded in equity; and recognises (i) the fair value of the consideration received, (ii) the fair value of any investment retained and (iii) any resulting surplus or deficit in profit or loss. The Group’s share of components previously recognised in other comprehensive income is reclassified to profit or loss or retained profits, as appropriate, on the same basis as would be required if the Group had directly disposed of the related assets or liabilities.

3 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES

The Group has adopted the Conceptual Framework for Financial Reporting 2018 and the following revised HKFRSs for the first time for the current year’s financial statements.

Amendments to HKFRS 3 Definition of a Business Amendments to HKFRS 9, HKAS 39 and HKFRS 7 Interest Rate Benchmark Reform Amendment to HKFRS 16 Covid-19-Related Rent Concessions Amendments to HKAS 1 and HKAS 8 Definition of Material

The nature and the impact of the Conceptual Framework for Financial Reporting 2018 and the revised HKFRSs are described below:

(a) Conceptual Framework for Financial Reporting 2018 (the “Conceptual Framework”) sets out a comprehensive set of concepts for financial reporting and standard setting, and provides guidance for preparers of financial statements in developing consistent accounting policies and assistance to all parties to understand and interpret the standards. The Conceptual Framework includes new chapters on measurement and reporting financial performance, new guidance on the derecognition of assets and liabilities, and updated definitions and recognition criteria for assets and liabilities. It also clarifies the roles of stewardship, prudence and measurement uncertainty in financial reporting. The Conceptual Framework is not a standard, and none of the concepts contained therein override the concepts or requirements in any standard. The Conceptual Framework did not have any significant impact on the financial position and performance of the Group.

3 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES (CONTINUED)

(b) Amendments to HKFRS 3 clarify and provide additional guidance on the definition of a business. The amendments clarify that for an integrated set of activities and assets to be considered a business, it must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output. A business can exist without including all of the inputs and processes needed to create outputs. The amendments remove the assessment of whether market participants are capable of acquiring the business and continue to produce outputs. Instead, the focus is on whether acquired inputs and acquired substantive processes together significantly contribute to the ability to create outputs. The amendments have also narrowed the definition of outputs to focus on goods or services provided to customers, investment income or other income from ordinary activities. Furthermore, the amendments provide guidance to assess whether an acquired process is substantive and introduce an optional fair value concentration test to permit a simplified assessment of whether an acquired set of activities and assets is not a business. The Group has applied the amendments prospectively to transactions or other events that occurred on or after 1 January 2020. The amendments did not have any impact on the financial position and performance of the Group.
(c) Amendments to HKFRS 9, HKAS 39 and HKFRS 7 address issues affecting financial reporting in the period before the replacement of an existing interest rate benchmark with an alternative risk-free rate (“RFR”). The amendments provide temporary reliefs which enable hedge accounting to continue during the period of uncertainty before the introduction of the alternative RFR. In addition, the amendments require companies to provide additional information to investors about their hedging relationships which are directly affected by these uncertainties. The amendments did not have any impact on the financial position and performance of the Group as the Group does not have any interest rate hedging relationships.
(d) Amendment to HKFRS 16 provides a practical expedient for lessees to elect not to apply lease modification accounting for rent concessions arising as a direct consequence of the COVID-19 pandemic. The practical expedient applies only to rent concessions occurring as a direct consequence of the pandemic and only if (i) the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change; (ii) any reduction in lease payments affects only payments originally due on or before 30 June 2021; and (iii) there is no substantive change to other terms and conditions of the lease. The amendment is effective for annual periods beginning on or after 1 June 2020 with earlier application permitted and shall be applied retrospectively. The Group has applied the amendment prospectively to transactions or other events that occurred on or after 1 June 2020. The amendment did not have any impact on the financial position and performance of the Group.
(e) Amendments to HKAS 1 and HKAS 8 provide a new definition of material. The new definition states that information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. The amendments clarify that materiality will depend on the nature or magnitude of information, or both. The amendments did not have any significant impact on the financial position and performance of the Group.

4. OPERATING SEGMENT INFORMATION

During the year ended 31 December 2020, the Group is organised into business units based on their products and services and has four reportable operating segments as follows:

(a) The shipping and industry-related leasing segment, which renders vessel chartering, container leasing and finance lease services;
(b) The container manufacturing segment, which manufactures and sells containers;
(c) The investment and financial services segment, which focuses on equity or debt investment and insurance brokerage services; and
(d) The “others” segment comprises, principally, cargo and liner agency services.

Management monitors the results of the Group’s operating segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on reportable segment profit/loss, which is a measure of adjusted profit/loss before tax from continuing operations. The adjusted profit/loss before tax from continuing operations is measured consistently with the Group’s profit/ loss before tax from continuing operations except that unallocated selling and administrative expenses and non-lease-related finance costs are excluded from such measurement.

Segment assets are measured consistently with the Group’s assets.

Segment liabilities exclude certain bank and other borrowings and corporate bonds as these liabilities are managed on a group basis.

Intersegment sales and transfers are transacted with reference to the selling prices used for sales made to third parties at the then prevailing market prices.

Segment revenue Sales of containers Fee and commission income Total revenue from contracts with external customers Other revenue from external customers Total revenue from external customers Intersegment revenue from contracts with customers Total revenue Segment results Elimination of intersegment results Unallocated selling, administrative and general expenses Unallocated finance costs Profit before tax from continuing operations		For theyear ended 31 December 2020	For theyear ended 31 December 2020	For theyear ended 31 December 2020	Total RMB’000 6,487,575 41,359 6,528,934 7,892,985 14,421,919 1,650,087 16,072,006 2,507,289 (97,363) (180,948) (468,020) 1,760,958
	Shipping and industry- related leasing RMB’000 – – – 7,750,919 7,750,919 – 7,750,919 510,969	Container manufacturing RMB’000 6,487,575 – 6,487,575 – 6,487,575 1,642,691 8,130,266 284,428	Investment and financial services RMB’000 – 41,359 41,359 142,066 183,425 7,396 190,821 1,738,484	Others RMB’000 – – – – – – – (26,592)

Profit before tax from continuing operations

4. OPERATING SEGMENT INFORMATION (CONTINUED)

	For theyear ended 31 December 2019	For theyear ended 31 December 2019	For theyear ended 31 December 2019
Shipping and industry- related leasing RMB’000 (Restated) – – – 6,472,806 6,472,806 – 6,472,806 67,411	Container manufacturing RMB’000 (Restated) 3,076,280 – 3,076,280 – 3,076,280 1,506,420 4,582,700 (202,854)	Investment and financial services RMB’000 (Restated) – 39,940 39,940 76,656 116,596 8,053 124,649 1,961,556	Others RMB’000 (Restated) – – – – – – – (75,789)	Total RMB’000 (Restated) 3,076,280 39,940
				3,116,220 6,549,462
				9,665,682 1,514,473
				11,180,155

				1,750,324 3,952 (144,105) (742,569)
				867,602

Interest income Government grants related to the ordinary course of business Government subsidies Super-deduction of valued-added input tax Fees refunded for individual income tax withheld Others	For the year ended 31 December 2020 RMB’000 141,764 1,550 126,050 37 251 17,298 286,950	For the year ended 31 December 2019 RMB’000 191,010 1,552 90,600 31 204 46,736
		330,133

6. OTHER GAINS

Gain on disposal of items of property, plant and equipment Gain on disposal of investments in associates Changes in fair value of financial assets at fair value through profit or loss Net foreign exchange (loss)/gain Others	For the year ended 31 December 2020 RMB’000 25,686 219,316 26,202 (126,820) 11,209 155,593	For the year ended 31 December 2019 RMB’000 82,630 – 747,033 57,448 32,124
		919,235

7. INCOME TAX

According to the Corporate Income Tax (“CIT”) Law of the PRC, which was effective from 1 January 2008, the CIT rate applicable to the Company and its subsidiaries established in the PRC was 25% for the years ended 31 December 2020 and 2019.

Hong Kong profits tax was provided at the rate of 16.5% (2019: 16.5%) on the estimated assessable profits of the Group’s companies operating in Hong Kong during the year.

Taxes or profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries or jurisdictions in which the Group operates.

Current income tax: Mainland China Hong Kong United States Elsewhere Deferred income tax	For the year ended 31 December 2020 RMB’000 293,583 22,746 14,620 519 331,468 (12,695) 318,773	For the year ended 31 December 2019 RMB’000 211,398 7,083 10,191 433
		229,105 (29,356)
		199,749

8. DIVIDENDS

		For the year	For the year
		ended	ended
		31 December	31 December
		2020	2019
		RMB’000	RMB’000
Proposed final dividend – RMB0.056	(2019: RMB0.045) per ordinary share	645,596	518,782

The proposed final dividend for the year is subject to the approval of the Company’s shareholders at the forthcoming annual general meeting.

The Board proposed the payment of a final dividend of RMB0.056 (2019: RMB0.045) per share (inclusive of applicable tax), totalling approximately RMB645,596,000 (2019: RMB518,782,000) calculated based on 11,528,497,997 shares, being the number of issued shares of the Company of 11,608,125,000 as at 30 March 2021 deducting 79,627,003 A shares repurchased by the Company, for the year ended 31 December 2021.

9. EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT

Basic earnings per share amount is calculated by dividing the profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares in issue during the year.

Earnings Profit attributable to ordinary equity holders of the parent, used in the basic earnings per share calculation From continuing operations From a discontinued operation Interest on perpetual debts* Profit attributable to equity holders of the parent before interest on perpetual debts Attributable to: From continuing operations From a discontinued operation	For the year ended 31 December 2020 RMB’000 1,118,640 688,086 1,806,726 323,545 2,130,271 1,442,185 688,086 2,130,271	For the year ended 31 December 2019 RMB’000 410,399 1,076,880
		1,487,279 257,454
		1,744,733

		667,853 1,076,880
		1,744,733

9. EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT (CONTINUED)

	For the year	For the year
	ended	ended
	31 December	31 December
	2020	2019
	’000	’000
Shares
Weighted average number of ordinary shares in issue during the year
used in the basic earnings per share calculation	11,608,125**	11,575,875

The Company issued perpetual debts during the year ended 31 December 2019. The dividend distribution and repurchase of shares of the Company triggered the mandatory interest payment event of perpetual debts. For the purpose of calculating basic earnings per ordinary share in respect of the years 2020 and 2019, RMB323,545,000 (2019: RMB257,454,000) attributable to perpetual debts was deducted from profits attributable to equity holders of the Company.
** As the diluted earnings per share amount is increased when taking share options into account, the share options had an anti-dilutive effect on the basic earnings per share for the year and were ignored in the calculation of diluted earnings per share. There was no dilution effect on the ordinary shares for the year ended 31 December 2020 and 2019.

10. TRADE AND NOTES RECEIVABLES

An ageing analysis of the trade receivables as at the end of the reporting period, based on the invoice date and net of loss allowance, is as follows:

Within 3 months 3 to 6 months 6 to 12 months Over 1 year	31 December 2020 RMB’000 1,615,687 316,036 124,612 1,503 2,057,838	31 December 2019 RMB’000 965,844 88,287 35,793 4,375
		1,094,299

11. TRADE PAYABLES

An ageing analysis of the trade payables as at end of the reporting date, based on the invoice date, is as follows:

Within 3 months 3 to 6 months 6 to 12 months 1 to 2 years	31 December 2020 RMB’000 2,557,729 374,716 145,657 22,793 3,100,895	31 December 2019 RMB’000 1,980,343 374,247 184,017 15,093
		2,553,700

12. EVENTS AFTER THE REPORTING PERIOD

On 30 March 2021, the Board proposed the payment of a final dividend of RMB0.056 per share (inclusive of applicable tax for the year ended 31 December 2020), totalling approximately RMB645,596,000 calculated based on 11,528,497,997 shares, being the number of issued shares of the Company of 11,608,125,000 as at 30 March 2021 deducting 79,627,003 A shares repurchased by the Company, which is subject to the approval of shareholders of the Company at the forthcoming annual general meeting of the Company (the “ AGM ”).

MANAGEMENT DISCUSSION AND ANALYSIS

OPERATING ENVIRONMENT

In the first half of 2020, the global economy was in the doldrums due to the COVID-19 pandemic. In the second half of the year, global trade picked up as the pandemic was well under control in China and some countries adopted economic stimulus policies. Given strong market demand and limited turnover of containers under the pandemic, the shipping market enjoyed a rapid recovery.

Currently, the global economy is gradually recovering, and China’s economy is growing steadily. Digital technology is widely used and has huge room for growth. Yet, financial regulatory policies are tightening, and the uncertainty of relations between major economies remains, which will lead to a new landscape for global economy and trade.

FUTURE DEVELOPMENT STRATEGY OF THE COMPANY

1. Strategic Position

COSCO SHIPPING Development will integrate shipping logistics-related resources including cargo source, capital, information, and equipment and fully leverage its advantages in the shipping industry to serve and empower the shipping logistics industry, expand the capital flow value of the shipping logistics ecosystem, and develop into an excellent industrial finance operator with COSCO SHIPPING characteristics.

2. Development Goals

With a focus on integrated logistics industry, the Company will develop container manufacturing, container leasing and shipping leasing business as the core business and shipping supply chain finance services as auxiliary business, with a view to pursuing industry-finance integrated development underpinned by investment. Leveraging the advantage of its container industry chain, the Company will explore container-based Fintech integrating the flow of goods, capital and information and provide one-stop supply chain finance services covering logistics, financing and risk management, in an effort to empower its shipping logistics ecosystem, enhance the loyalty of industry chain customers and create value for customers. With market-oriented approaches, professional strengths and an international vision, the Company aspires to grow into an excellent financial operator in the shipping industry with COSCO SHIPPING characteristics.

3. Development Plans

(1) Shipping leasing and container leasing business

The vessel leasing business focuses on the operating lease or finance lease of various vessels, such as container vessels and dry bulk cargo vessels. The Company will, based on its existing business, gradually set up a high-level professional investment and financing team and strengthen the synergy between “leasing and manufacturing, leasing and trading, and leasing and shipping”, so as to become a first-class domestic ship owner leasing enterprise. In the short term, the Company will optimize the current business model of industry-finance integration for the fleet and build a leading management platform for shipping equipment leasing within the Group focusing on shipping leasing assets such vessels and port equipment. In the long run, it is to gradually increase the proportion of external business and work out a “one-stop” business model leveraging COSCO SHIPPING’s advantages of full industrial chain deployment, in an attempt to establish a unique competitive edge in the industry.

The container leasing business, as an integral part of the container industry chain, mainly involves container leasing and trading of various kinds. The Company will leverage its unique leasing-manufacturing coordination capability and influence in the global container industry, strengthen inter-industry cooperation for win-win results, and extend business along the container industry chain, to develop into a world-leading leasing company with unique competitive edges. In the short term, the Company will follow the guideline of “consolidating core businesses while seizing market opportunities”, strengthen the development on special container and reefer container business, study smart container leasing, improve the coordination between “manufacturing and leasing” and between “leasing and shipping”, promote the dual model of lease and sale, strengthen value creation capabilities, and generate synergy. In the long term, the Company will strive to seize market opportunities, actively enhance asset quality, optimize its contract portfolios, and improve its capital structure so as to enhance the rate of return.

(2) Container manufacturing business

In respect of container manufacturing, the Company will focus on industrial collaboration, intelligent manufacturing and diversified development, guarantee the container supply security of the principal shipping business, and coordinate with the shipping finance business of the industry-finance platform while creating value for the industry, in a drive to achieve high-quality development of the container manufacturing segment. The Company will promote the integration of assets and improve quality and efficiency, improve the synergy in the container industry chain, strengthen dry container manufacturing, enhance the development on special container and reefer container business, explore the research and development of smart containers, and branch out into peripheral equipment of containers centering on the application scenarios of containers. We will improve and maintain the industry’s healthy operating environment, with an aim to develop ourselves into a world-class container manufacturing company with strong technological edge and high capacity utilization and profitability.

(3) Supply chain finance services

The Company will uncover market demands, constantly explore the financial services business opportunities in the supply chain, accelerate the construction of risk control data model for medium and small enterprises, seize opportunities to expand the market share of international commercial factoring business, effectively tap into the advantages of integrated services (comprising leasing, factoring, small loans, insurance and industrial funds), focus on customers in shipping logistics industry, strive to improve the financial ecology of the shipping logistics supply chain for smooth integration of industry and finance and capital operation, provide one-stop supply chain finance services covering logistics, finance and risk management to boost industry stickiness, improve bargaining power, and enhance the value of cargo source.

(4) Investment management

We will give equal weight to strategic value and financial returns, adhere to the principal business of shipping logistics, aim at integration of industry and finance utilizing investment measures, continuously focus on investment areas, optimize investment portfolios, strengthen asset operation, effectively control the fluctuation risks of portfolios and increase investment gains to smooth out the shipping business cycle. The Company will maintain its investment focus and make full use of capital to attract and integrate high-quality assets, intellectual property and resources based on the application scenarios of shipping, port and logistics industries, and then provide intelligence and capital injection services for the “digitalised, networked and intelligent” development of the shipping logistics industry, in an effort to boost industry upgrading.

MAJOR RISKS AND COUNTERMEASURES

1. Macroeconomic Risks

At present, the world is undergoing seismic changes at an accelerated pace, with increased fluctuation sources and risk triggers, sudden and perplexing changes, complicated and sensitive surrounding environment, arduous and onerous tasks of reform, development and stabilization, and more and greater predictable and unpredictable risks and challenges. As the Company transforms into an integrated financial service platform that leverages its experience in the shipping industry to focus on shipping and other industrial leasing businesses, with an extensive business network at home and abroad, it has broad exposure to macroeconomic environment both domestically and globally. To tackle the macroeconomic uncertainties, the Company has built and kept improving its risk monitoring and management system to guarantee operation and asset security.

2. Credit Risk

Credit risk refers to the risk of the Company suffering unexpected losses arising from any failure or delay of a counterparty to perform its contractual obligations or from any unfavorable change of a counterparty’s credit standing. The Company’s credit risk is mainly from operating lease, factoring, container production and sales, and investment in fixed-income financial products. The Company has established and implements a sound credit risk management system, including setting annual credit risk limits based on the Company’s risk appetite, dynamically monitoring the implementation of credit risk limits and giving early warnings as needed, and establishing and implementing a series of credit management measures.

3. Market Risk

This refers to the risk of the Company’s unexpected losses arising from unfavourable movements in interest rates, exchange rates, prices of equity or fixed-income product, etc. While building up and improving its market risk management mechanism, the Company has formulated market risk management policy, qualitative and quantitative monitoring standards, determined market risk limits, and defined the management responsibilities and functional division for departments responsible for market risk.

4. Capital Liquidity Risk

This refers to the risk of the Company’s failure to obtain sufficient funds in a timely manner or failure to do so at reasonable cost in order to repay debt upon maturity or fulfill other payment obligations. Depending on factors such as strategies, business structure, risk situation and market environment, and taking full account of the impact of other risks on liquidity and its overall risk appetite, the Company will determine its liquidity risk appetite and risk tolerance, and gradually build up a liquidity risk limit management system. The Company will take measures such as regular assessment, monitoring and establishment of firewalls and stress test to effectively prevent liquidity risk.

5. Strategy Risk

Strategy risk refers to the risk that the actual results of the selection and implementation of the strategy may deviate from the expected goal of the strategy due to uncertainties in the internal and external environment of the Company. The Company has set up and continually improved its working procedures for strategy risk management to identify, analyze and monitor strategy risk. The Company makes strategic planning after taking full consideration of factors such as market environment, its risk appetite and capital position, regularly reviews the strategic planning to strengthen its implementation.

6. Company-wide Concentration Risk

The fact that the individual risks or risk portfolios of the Company’s business units are concentrated within the Company may directly or indirectly lead to heightened concentration or convergence of single types. The Company will set its company-wide concentration risk limits based on factors such as its overall risk appetite and tolerance, size of capital, assets and liabilities, transaction types (e.g. investment asset classes etc.), counterparty characteristics, trading risk rating (e.g. credit rating etc.), and perform concentration risk limit management.

7. Risk of Industry Competition

The leasing industry in which the Company operates after its transformation is known for fierce competition in terms of rent, leasing terms, customer services and reliability. With its market-oriented system, differentiated strengths and international vision, the Company will focus on shipping finance and give full play to its advantages in shipping logistics to establish a “one-stop” financial service platform which combines industry with finance, facilitates industry development with finance and seeks synergy of multiple businesses, so as to cope with market competition in an active manner.

FINANCIAL REVIEW OF THE GROUP

The Group recorded operating revenue of RMB14,421,919,000 for 2020, representing an increase of 49.2% as compared with RMB9,665,682,000 of last year; total profit before income tax from continuing operations amounted to RMB1,760,958,000, representing an increase of 103.0% as compared with RMB867,602,000 of last year; profit attributable to owners of the parent of the Company for the year amounted to RMB2,130,271,000, representing an increase of 22.1% as compared with RMB1,744,733,000 of last year.

Analysis of segment results is as follows:

Unit: RMB’ 000

Segment Shipping and industry-related leasing business Container manufacturing business Investment and financial service business Offset amount Total		Revenue	Change (%) 19.7 77.4 53.1 9.0 49.2		Cost
	2020 7,750,919 8,130,266 190,821 (1,650,087) 14,421,919	2019 (Restated) 6,472,806 4,582,700 124,649 (1,514,473) 9,665,682		2020 4,795,194 7,548,865 43,494 (1,552,621) 10,834,932	2019 (Restated) 4,019,459 4,582,348 39,218 (1,438,838) 7,202,187	Change (%) 19.3 64.7 10.9 7.9
						50.4

1. ANALYSIS OF SHIPPING AND INDUSTRY-RELATED LEASING BUSINESS

1) Operating Revenue

The Group recorded leasing revenue of RMB7,750,919,000 for 2020, representing an increase of 19.7% compared with RMB6,472,806,000 of last year, which accounted for 53.7% of the total revenue of the Group. The increase was mainly due to the impact of the further expansion of the market-oriented vessel finance leasing project during the year.

Revenue from vessel leasing and related business amounted to RMB674,560,000, representing an increase of 13.4% as compared with RMB594,599,000 of last year, of which revenue from vessel operating leasing amounted to RMB96,506,000, and revenue from vessel finance leasing amounted to approximately RMB578,054,000.

Revenue from container leasing business amounted to RMB4,362,594,000, representing an increase of 28.1% as compared with RMB3,405,190,000 of last year. The increase was mainly due to the increase in the revenue from the container leasing segment as the Company leveraged the synergy between leasing and manufacturing to proactively explore the market and seized the market opportunities of shortage in repositioned containers in shipping routes across Europe and the USA to accelerate sales of second-hand containers and proactively reduce inventory of second-hand containers in Europe and the USA during the year.

Revenue from other industry-related finance leasing amounted to RMB2,713,765,000, representing an increase of 9.7% as compared with RMB2,473,017,000 of last year. The increase in revenue from other industry-related finance leasing was mainly due to the increase in revenue from finance leasing attributable to the growth of the finance leasing business during the Period.

2) Operating Costs

Operating costs of the leasing business mainly include depreciation of self-owned containers, net carrying value of sale of containers returned upon expiry and financing costs of leased-in vessels and containers. Operating costs of the leasing business for 2020 amounted to RMB4,795,194,000, representing an increase of 19.3% as compared with RMB4,019,459,000 of last year.

2. ANALYSIS OF CONTAINER MANUFACTURING BUSINESS

1) Operating Revenue

In 2020, the Group’s container manufacturing business realized operating revenue of RMB8,130,266,000, representing an increase of 77.4% as compared with RMB4,582,700,000 of last year, which accounted for 56.4% of the total revenue of the Group. Such substantial increase was mainly due to the increase in both sales volume and price of containers as a result of shortage in repositioned containers in shipping routes across Europe and the USA and buoyant demands in the domestic container market caused by the COVID-19 pandemic. During the Period, the aggregate container sales was 605,600TEU, representing an increase of 50.3% as compared with 402,943TEU of last year.

2) Operating Costs

The operating costs of the container manufacturing business mainly consist of raw material costs, employee compensation and depreciation expenses. The operating costs amounted to RMB7,548,865,000 in 2020, representing an increase of 64.7% as compared with RMB4,582,348,000 of last year. Such year-on-year increase in costs was mainly due to the increase in production costs such as materials and labor as the sales volume of containers increased during the year.

3. ANALYSIS OF INVESTMENT AND FINANCIAL SERVICE BUSINESS

1) Operating Revenue

In 2020, the financial services business realized revenue of RMB190,821,000, representing an increase of 53.1% as compared with RMB124,649,000 of last year and accounting for 1.3% of the Group’s total revenue.

2) Operating Costs

The operating costs in 2020 were RMB43,494,000, representing an increase of 10.9% as compared with RMB39,218,000 of last year.

3) Investment Income

In 2020, the income from investment business was RMB2,225,892,000, representing a decrease of 26.8% as compared with RMB3,038,796,000 of last year. Such decrease in income was mainly attributable to the narrowed margin of the fair value of investments at fair value through profit or loss held by the Group as compared with last year.

GROSS PROFIT

Due to the above reasons, the Group recorded gross profit of RMB3,586,987,000 for 2020 (2019: gross profit of RMB2,463,495,000).

SIGNIFICANT SECURITIES INVESTMENT

During the year ended 31 December 2020, the Company’s equity investments in associates and joint ventures generated a profit of RMB1,980,374,000, which was mainly attributable to the profits from China Everbright Bank Co., Ltd., China International Marine Containers (Group) Co., Ltd. and China Bohai Bank Co., Ltd. for the Period.

	Sources	of the	shareholding		Purchase		Purchase			Purchase		Purchase				Purchase				Purchase
		Accounting	ledger		Investment	in associates	Investment	in associates		Investment	in associates	Financial assets	at fair value	through	profit or loss	Financial assets	at fair value	through	profit or loss	Financial assets	at fair value	through	profit or loss
Dividends	received	during the	Period	(RMB)	–		97,634,000			154,936,000		884,000				10,812,000				11,274,000				275,540,000
		Gain from	disposal	(RMB)	–		219,316,000			–		–				44,299,000				107,337,000				370,952,000
Changes in	other reserve	during the	Period	(RMB)	(107,732,000)		(72,088,000)			(18,759,000)		–				–				–				(198,579,000)
		Gain during	the Period	(RMB)	894,894,000		302,789,000			468,470,000		(6,469,000)				(150,841,000)				(143,572,000)				1,365,271,000
	Book value	at the end	of the Period	(RMB)	9,230,792,000		1,964,084,000			4,565,752,000		26,583,000				493,270,000				996,139,000				17,276,620,000
	Shareholding	at the end	of the Period	(%)	11.12		4.69			1.34		0.22				0.06				3.17				╱
Shareholding	at the	beginning of	the Period	(%)	13.67		22.71			1.38		0.22				0.97				3.94				╱
		Investment	cost	(RMB)	5,749,379,000		1,313,596,000			3,398,255,000		25,452,000				539,115,000				1,155,438,000				12,181,235,000
			Company name		China Bohai Bank	Co., Ltd.	China International	Marine Containers	(Group) Co., Ltd.	China Everbright	Bank Co., Ltd.	Shanghai AJ Group	Co., Ltd.			CNPC Capital	Company Limited			Minmetals Capital	Co., Ltd.
			Stock code		09668		000039/02039			601818		600643				000617				600390				Total

	Sources	of the	shareholding			Purchase		Purchase		Purchase			Purchase			Purchase		Purchase		Purchase
		Accounting	ledger		Investment	in associates	Investment	in associates	Investment	in associates	Investment	in joint	ventures		Investment	in associates	Investment	in associates	Investment	in associates
Dividends	received	during the	Period	(RMB)		54,614,000		–		10,000,000			–			–		–		78,634,000	143,248,000
		Gain from	disposal	(RMB)		–		–		–			–			–		–		–	–
Changes in	other reserve	during the	Period	(RMB)		(10,827,000)		18,966,000		–			–			–		–		(3,497,000)	4,642,000
		Gain during	the Period	(RMB)		108,833,000		38,966,000		44,460,000			(6,449,000)			3,869,000		1,282,000		116,957,000	307,918,000
	Book value	at the end of	the Period	(RMB)		1,363,118,000		1,046,003,000		350,966,000			127,589,000			22,767,000		92,817,000		2,119,197,000	5,112,457,000
	Shareholding	at the end	of the Period	(%)		3.74		16.00		10.00			25.00			12.50		45.00		23.38	╱
	Shareholding	at the beginning	of the Period	(%)		3.74		16.00		10.00			25.00			12.50		45.00		23.38	╱
		Investment	amount	(RMB)		1,077,153,000		998,400,000		100,000,000			125,000,000			20,000,000		90,000,000		1,934,677,000	4,345,230,000
			Name of investee			Bank of Kunlun Co., Ltd.		Shanghai Life Insurance Co., Ltd.		CIB Fund Management Co., Ltd.		Shanghai Haisheng Shangshou	Financial Leasing Co., Ltd.	Chinese Enterprise Elephant	Financial Information Services	Company Limited	Shanghai COSCO SHIPPING	Microfinance Company Limited	COSCO SHIPPING Finance	Company Limited	Total

(a) Summary of principal business of the investees in the investments

Name of Investee	Exchange	Principal businesses
China Bohai Bank Co., Ltd.	Hong Kong Stock Exchange	Bank business
Bank of Kunlun Co., Ltd.	╱	Bank business
Shanghai Life Insurance Co., Ltd.	╱	Insurance business
CIB Fund Management Co., Ltd.	╱	Fund management business
Shanghai Haisheng Shangshou	╱	Leasing business
Financial Leasing Co., Ltd.
Chinese Enterprise Elephant	╱	Financial information service
Financial Information Services
Shanghai COSCO SHIPPING	╱	Loan extending and
Microfinance Company Limited		other business
COSCO SHIPPING Finance	╱	Bank business
Company Limited
China International Marine	Shenzhen Stock Exchange/	Manufacturing and sales
Containers (Group) Co., Ltd.	Hong Kong	of containers
(“CIMC”)	Stock Exchange
Shanghai AJ Group Co., Ltd.	Shanghai Stock Exchange	Investment in industries
		and other financial business
China Everbright Bank Co., Ltd.	Shanghai Stock Exchange	Bank business
Minmetals Capital Co., Ltd.	Shanghai Stock Exchange	Integrated financial business
CNPC Capital Company Limited	Shenzhen Stock Exchange	Integrated financial business

The stock market was volatile in 2020. The Company expects that the investment portfolio of the Group (including the above major investments) will be subject to, among other things, the movement of interest rates, market factors and macroeconomic factors. Moreover, the market value of individual shares will be affected by relevant companies’ financial results, development plan as well as the prospects of the industry where they operate. To mitigate relevant risks, the Group will take appropriate measures in due course and adjust its investment strategies in response to the changes in market conditions.

IMPAIRMENT OF SIGNIFICANT ASSETS

In accordance with the relevant provisions of the HKFRSs, the Company had conducted impairment testing for the fixed-assets within the scope of the consolidated financial statements as at 31 December 2020, and made impairment provisions accordingly based on the principle of prudence in order to truly reflect the Company’s financial conditions and operating results as at 31 December 2020.

In 2020, the Group made provision for impairment of fixed assets in the aggregate amount of RMB722,793,000, mainly comprising (i) the provision for impairment of RMB417,294,000 made due to the estimated discounted present value of the lease receivables as at the lease commencement date being lower than the book value of the vessels as a result of the decline in the exchange rate of the U.S. dollar following the change in the lease method of certain self-owned vessels pursuant to the vessel leasing service master agreement dated 30 October 2020 entered into by the Company; and (ii) the provision for impairment of RMB270,123,000 made due to the estimated disposal price of scrapped containers of the Group being lower than the book value in light of the piling up of scrapped containers in North America and the unfavourable prospects for disposal of scrapped containers in the market.

INCOME TAX

From 1 January 2020 to 31 December 2020, the corporate income tax (“CIT”) rate applicable to the Company and its other subsidiaries in the PRC was 25%.

Pursuant to the relevant new CIT regulations, the profits derived from the Company’s offshore subsidiaries shall be subject to applicable CIT when dividends were declared by such offshore subsidiaries. The Company uses an applicable tax rate in accordance with relevant regulations to pay CIT on profits of the offshore subsidiaries.

SELLING, ADMINISTRATIVE AND GENERAL EXPENSES

For the year ended 31 December 2020, the Group’s selling, administrative and general expenses were RMB1,373,487,000, representing an increase of 16.5% as compared with 2019.

OTHER GAINS, NET

For the year ended 31 December 2020, other gains of the Group were RMB155,593,000, representing a decrease in gains of approximately RMB763,642,000 as compared with other gains of RMB919,235,000 for 2019, which was mainly attributable to the narrowed margin of fair value of the securities held by the parent of the Company as compared with last year.

PROFIT ATTRIBUTABLE TO OWNERS OF THE PARENT FOR THE YEAR

In 2020, the profit attributable to owners of the parent of the Company for the year was RMB2,130,271,000, representing an increase of 22.1% as compared with RMB1,744,733,000 for 2019.

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

Analysis of Liquidity and Borrowings

The Group’s principal sources of liquidity are cash flow from operating business and short-term bank borrowings. The Group’s cash is mainly used for expenses of operating cost, repayment of loans, construction of new vessels, procurement of containers, and support of the Group’s financial leasing business. During the Period, the Group’s net operating cash inflow was RMB9,749,088,000. As at 31 December 2020, the Group’s cash and bank balances were RMB12,046,801,000.

As at 31 December 2020, the Group’s total bank loans and other borrowings were RMB92,780,679,000, of which RMB47,252,731,000 is repayable within one year. The Group’s long-term bank loans are mainly used to finance the procurement of containers, the acquisition of financial lease assets and replenishment of liquidity.

As at 31 December 2020, the Group’s RMB-denominated bonds payable amounted to RMB17,559,660,000, and all proceeds raised from the bonds were used for the replenishment of liquidity and the repayment of loans.

The Group’s RMB borrowings at fixed interest rates amounted to RMB21,741,271,000. USD borrowings at fixed interest rates amounted to USD518,360,000 (equivalent to approximately RMB3,382,246,000), RMB borrowings at floating interest rates amounted to RMB11,999,787,000, and USD borrowings at floating interest rates amounted to USD8,529,997,000 (equivalent to approximately RMB55,657,375,000). The Group’s borrowings are settled in RMB or USD while its cash and cash equivalents are also primarily denominated in RMB and USD.

It is expected that capital needs for regular liquidity and capital expenditure can be funded by the internal cash flow of the Group or external financing. The Board will review the operating cash flow of the Group from time to time. It is the intention of the Group to maintain an appropriate composition of equity and debt to constantly achieve an effective capital structure.

Net Current Liabilities

As at 31 December 2020, the Group’s net current liabilities amounted to RMB27,733,019,000. Current assets mainly include: the current portion of the finance lease receivables of RMB18,296,935,000, inventories of RMB962,410,000, trade and notes receivables of RMB2,445,764,000, prepayments and other receivables of RMB1,054,541,000, factoring receivables of RMB1,083,635,000, the current portion of financial assets at fair value through profit or loss of RMB654,224,000, cash and cash equivalents of RMB12,046,801,000, and pledged deposits of RMB590,146,000. Current liabilities mainly include: trade payables of RMB3,100,895,000, other payables and accruals of RMB4,771,247,000, contract liabilities of RMB162,354,000, tax payables of RMB198,482,000, the current portion of bank and other borrowings of RMB47,252,731,000, the current portion of corporate bonds of RMB9,272,114,000, and current portion of lease liabilities of RMB100,998,000.

Cash Flows

For the year of 2020, the Group’s net cash inflow generated from operating activities was RMB9,749,088,000, denominated principally in RMB and USD, representing an increase of RMB1,325,023,000 as compared with that of RMB8,424,065,000 in 2019. Cash and cash equivalents balances at the end of 2020 increased by RMB2,411,705,000 year-on-year, mainly reflecting the fact that the net cash inflow generated from operating activities was more than the net cash outflow used in financing activities and the net cash outflow used in investing activities. The cash outflow used in financing activities of the Group during the year was mainly used for the payment of interest in bank loans and commercial bills and such proceeds were used mainly for the purposes of short-term operation and purchase and construction of containers.

The following table provides the information regarding the Group’s cash flow for the years ended 31 December 2020 and 31 December 2019:

		Unit: RMB
	2020	2019
Net cash generated from operating activities	9,749,088,000	8,424,065,000
Net cash used in investing activities	(4,883,807,000)	(10,383,969,000)
Net cash used in financing activities	(1,971,428,000)	(3,715,251,000)
Impact of exchange rate movement on cash	(482,148,000)	61,057,000
Net increase/(decrease) in cash and cash equivalents	2,411,705,000	(5,614,098,000)

Net Cash Generated from Operating Activities

For the year ended 31 December 2020, the net cash inflow generated from operating activities was RMB9,749,088,000, representing an increase of RMB1,325,023,000 as compared with that of RMB8,424,065,000 for 2019. Overall, cash flow of operating activities maintained a stable and positive trend.

Net Cash Used in Investing Activities

For the year ended 31 December 2020, the net cash outflow used in investing activities was RMB4,883,807,000, representing a decrease of RMB5,500,162,000 as compared with that of RMB10,383,969,000 for 2019. It was mainly because the Group stepped up its effort in asset revitalization during the year and recovered a large amount of capital arising from the disposal of equity and financial assets such as CIMC and China Railway Signal & Communication Corporation Limited.

Net Cash Used in Financing Activities

For the year ended 31 December 2020, the net cash outflow used in financing activities was RMB1,971,428,000, representing a decrease of RMB1,743,823,000 as compared with the net cash inflow generated from financing activities of RMB3,715,251,000 for 2019. For the year of 2020, the Group’s new bank and other borrowings and corporate bonds amounted to RMB72,009,961,000, repayment of bank and other borrowings, corporate bonds, perpetual bonds and lease obligation principal amounted to RMB69,450,604,000, the payment of interest amounted to RMB3,644,897,000, and the payment of dividend and interest in perpetual debt amounted to RMB843,824,000.

Trade and Notes Receivables

As at 31 December 2020, the Group’s balance of trade and notes receivables was RMB2,445,764,000, representing an increase of RMB1,334,764,000 as compared with last year, of which note receivables increased by RMB371,225,000 and trade receivables increased by RMB963,539,000.

Gearing Ratio Analysis

As at 31 December 2020, the Company’s net gearing ratio (i.e. net debts over shareholders’ equity) was 402%, lower than 416% of last year. Net gearing ratio had a slight decrease as compared with that of last year.

Foreign Exchange Risk Analysis

Revenues and costs of the Group’s shipping-related leasing business and container manufacturing operations are settled or denominated in USD. As a result, the impact on the net operating revenue due to RMB exchange rate fluctuation can be offset by each other to a certain extent. During the Period, the Group recorded an exchange loss of RMB126,820,000 for the Period which was mainly due to fluctuations of the USD exchange rate in 2020; the increase in exchange difference which was charged to equity attributable to shareholders of the parent of the Company amounted to RMB684,783,000. The Group will continue to monitor the exchange rate fluctuation of RMB and major international settlement currencies, reduce the loss arising from exchange rate fluctuation, and take appropriate measures to mitigate the Group’s foreign exchange risk when necessary.

Capital Expenditures

For the year ended 31 December 2020, the Group’s expenditures on the acquisition of container vessels, vessels under construction and containers, and other expenditures amounted to RMB6,717,118,000; expenditures on the acquisition of finance lease assets amounted to RMB24,695,677,000.

Capital Commitments

As at 31 December 2020, the Group had RMB7,028,381,000 in capital commitment to property, plant and equipment which had been contracted but not provided for, and RMB423,215,000 in equity investment commitment.

Pledge

As at 31 December 2020, certain container vessels and containers with net carrying value of approximately RMB25,232,185,000 (2019: RMB25,765,286,000), finance lease receivables of RMB24,367,438,000 (2019: RMB24,015,141,000) and pledge deposits of RMB279,603,000 (2019: RMB237,539,000) of the Group were pledged for the grant of bank credit and issuance of bonds.

SUBSEQUENT EVENTS

On 30 March 2021, the Board proposed the payment of a final dividend of RMB0.056 per share (inclusive of applicable tax) for the year ended 31 December 2020, totalling approximately RMB645,596,000 calculated based on 11,528,497,997 shares, being the number of issued shares of the Company of 11,608,125,000 as at 30 March 2021 deducting 79,627,003 A shares repurchased by the Company, which is subject to the approval of shareholders of the Company at the forthcoming annual general meeting (the “ AGM ”） of the Company.

CONTINGENT LIABILITIES

As at 31 December 2020, there were no significant contingent liabilities for the Group.

EMPLOYEES, TRAINING AND BENEFITS

As at 31 December 2020, the Group had 7,964 employees, and the total staff costs for the Period (including staff remuneration, welfare cost and social insurance fees etc.) amounted to approximately RMB2,036,763,000 (including outsourced labour costs).

Remuneration management, as one of the most effective incentives and a form of enterprise value distribution, is carried out on the basis of total budget control, value creation, internal fairness, market competition and sustainable development. Based on the principle of “contractualized management, differential compensation”, the senior management of the Company has introduced and implemented the professional manager system and strengthened the incentive and restraint mechanism based on performance management. The Company’s comprehensive remuneration system applicable to the employees mainly consists of two aspects: (1) salaries, including position/ title salary, performance salary, special incentives and allowances; and (2) benefits, including mandatory social insurance, provident housing fund as stipulated by the state and its own corporate welfares.

To support the Company’s human resources management reform, talent development and cultivation, the Company has constructed its employee training system to make it based on identification of demand, with the support of clearly defined responsibilities and list-based management. We have enhanced the training content and implementation system, and improved the effectiveness of training resource allocation, staff training participation and satisfaction. Based on the training system, various training programmes were designed and implemented to address different types of business and positions, covering topics such as transformation and innovation, industry development, management capability, financial business, risk management, safety and individual caliber.

MATERIAL ACQUISITIONS OR DISPOSALS OF SUBSIDIARIES AND AFFILIATED COMPANIES

During the year ended 31 December 2020, the Group did not have any material acquisitions or disposals of subsidiaries and affiliated companies.

DIVIDEND

The Board proposed to distribute a final dividend of RMB0.056 per share (inclusive of applicable taxes) for the year ended 31 December 2020 (2019: RMB0.045 per share), subject to the approval of shareholders of the Company at the forthcoming AGM. The final dividend will be denominated and declared in RMB, payable to the holders of A shares and H shares of the Company in RMB and Hong Kong dollars, respectively within two months after the approval at the AGM.

The Company will, in due course, disclose further details including, among other things, the expected timetable and arrangements of closure of register of members of H shares by the Company, and the proposal to distribute final dividend.

PURCHASE, SALE OR REDEMPTION OF THE LISTED SECURITIES OF THE COMPANY

During the year ended 31 December 2020, neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the listed securities of the Company.

AUDIT COMMITTEE

The Audit Committee of the Company (the “ Audit Committee ”) consists of two independent non-executive directors, namely Mr. Lu Jianzhong and Mr. Cai Hongping, and one non-executive director, namely Mr. Huang Jian. The Audit Committee has discussed with the independent auditor of the Company, Ernst & Young, and reviewed the annual results of the Group for the year ended 31 December 2020.

This annual results announcement is based on the Company’s consolidated financial statements for the year ended 31 December 2020 which have been agreed with the auditor of the Company.

CORPORATE GOVERNANCE CODE

The Board has confirmed that the Company was in full compliance with all the code provisions of the Corporate Governance Code set out in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “ Hong Kong Stock Exchange ”) (the “ Listing Rules ”) for the year ended 31 December 2020.

MODEL CODE FOR SECURITIES TRANSACTIONS

The Company has adopted a code of conduct regarding securities transactions by directors, supervisors and relevant employees on terms no less exacting than the required standard set out in the Model Code for Securities Transactions by Directors of Listed Issuers (the “ Model Code ”) as set out in Appendix 10 to the Listing Rules. Having made specific enquiry by the Company of all directors and supervisors, the directors and supervisors have each confirmed their compliance with the required standard set out in the Model Code regarding securities transactions by directors and supervisors during the Period. The Company is not aware of any non-compliance with these guidelines by the relevant employees.

SCOPE OF WORK OF ERNST & YOUNG

The figures in respect of the Group’s consolidated statements of financial position, consolidated statements of profit or loss, consolidated statements of cash flows and the related notes thereto for the year ended 31 December 2020 as set out in this results announcement have been verified by the Group’s auditor, Ernst & Young, to be consistent with the amounts set out in the Group’s consolidated financial statements for the year. The work performed by the Company’s auditor in this respect does not constitute an assurance engagement in accordance with Hong Kong Standards on Auditing, Hong Kong Standards on Review Engagements or Hong Kong Standards on Assurance Engagements issued by the Hong Kong Institute of Certified Public Accountants and consequently no assurance has been expressed by the Company’s auditor on this results announcement.

DISCLOSURE OF INFORMATION

This announcement is published on the website of the Hong Kong Stock Exchange at http://www.hkexnews.hk and the Company’s website at http://development.coscoshipping.com. The annual report of the Company for year ended 31 December 2020 will be despatched by the Company to its shareholders and published on the aforesaid websites of the Hong Kong Stock Exchange and the Company in due course.

By order of the Board COSCO SHIPPING Development Co., Ltd. Cai Lei Joint Company Secretary

Shanghai, the People’s Republic of China 30 March 2021

As at the date of this announcement, the Board comprises Mr. Wang Daxiong, Mr. Liu Chong and Mr. Xu Hui, being executive directors of the Company, Mr. Huang Jian, Mr. Liang Yanfeng and Mr. Ip Sing Chi, being non-executive directors of the Company, and Mr. Cai Hongping, Ms. Hai Chi Yuet, Mr. Graeme Jack, Mr. Lu Jianzhong and Ms. Zhang Weihua, being independent non-executive directors of the Company.

The Company is a registered non-Hong Kong company as defined in the Companies Ordinance (Chapter 622 of the Laws of Hong Kong) and it is registered under its Chinese name and under the English name “COSCO SHIPPING Development Co., Ltd.”

AI assistant

COSCO SHIPPING Development Co., Ltd. — Annual Report 2020

50782_rns_2021-03-30_7cae58ec-0d86-4305-9b61-10d73f44eb00.pdf

中遠海運發展股份有限公司 COSCO SHIPPING Development Co., Ltd.*

ANNUAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2020

FINANCIAL HIGHLIGHTS (UNDER HKFRSs)

CHAIRMAN’S STATEMENT

REVIEW OF OPERATIONS

I. THE LEASING SEGMENT ACHIEVED WIN-WIN RESULTS IN THE INDUSTRIAL CHAIN BASED ON INDUSTRY-FINANCE INTEGRATION

1. Vessel Leasing Business Leveraged Industrial Chain Advantages to Expand into New Business Areas

2. Container Leasing Business Exerted In-house Synergy to Innovate in Business Models

3. Other Leasing Businesses Focused on Improving Quality and Efficiency and Deepening SOE Reform

II. CONTAINER MANUFACTURING SEGMENT IMPROVED MANAGEMENT CAPABILITIES TO MEET MARKET DEMAND

III. INVESTMENT AND SERVICES SEGMENT FURTHER DEVELOPED INDUSTRY CHAIN FINANCE AND INNOVATED IN INDUSTRY-FINANCE INTEGRATION MODEL

IV. PROMOTING AN ACTIVE DIVIDEND DISTRIBUTION POLICY TO SAFEGUARD THE INTERESTS OF INVESTORS

V. STRENGTHENING THE RISK MANAGEMENT SYSTEM UNDER THE COVID-19 PANDEMIC TO IMPROVE INTERNAL CONTROL CAPABILITIES

VI. PRACTICING SOCIAL RESPONSIBILITY AND PROMOTING SUSTAINABLE DEVELOPMENT

OUTLOOK

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 31 DECEMBER 2020

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED) 31 DECEMBER 2020

1. CORPORATE AND GROUP INFORMATION

2 BASIS OF PREPARATION

Basis of consolidation

3 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES

4. OPERATING SEGMENT INFORMATION

4. OPERATING SEGMENT INFORMATION (CONTINUED)

6. OTHER GAINS

7. INCOME TAX

8. DIVIDENDS

9. EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT

9. EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT (CONTINUED)

10. TRADE AND NOTES RECEIVABLES

11. TRADE PAYABLES

12. EVENTS AFTER THE REPORTING PERIOD

MANAGEMENT DISCUSSION AND ANALYSIS

OPERATING ENVIRONMENT

FUTURE DEVELOPMENT STRATEGY OF THE COMPANY

1. Strategic Position

2. Development Goals

3. Development Plans

(2) Container manufacturing business

(3) Supply chain finance services

(4) Investment management

MAJOR RISKS AND COUNTERMEASURES

1. Macroeconomic Risks

2. Credit Risk

3. Market Risk

4. Capital Liquidity Risk

5. Strategy Risk

6. Company-wide Concentration Risk

7. Risk of Industry Competition

FINANCIAL REVIEW OF THE GROUP

1. ANALYSIS OF SHIPPING AND INDUSTRY-RELATED LEASING BUSINESS

1) Operating Revenue

2) Operating Costs

2. ANALYSIS OF CONTAINER MANUFACTURING BUSINESS

1) Operating Revenue

2) Operating Costs

3. ANALYSIS OF INVESTMENT AND FINANCIAL SERVICE BUSINESS

1) Operating Revenue

2) Operating Costs

3) Investment Income

GROSS PROFIT

SIGNIFICANT SECURITIES INVESTMENT

(a) Summary of principal business of the investees in the investments

IMPAIRMENT OF SIGNIFICANT ASSETS

INCOME TAX

SELLING, ADMINISTRATIVE AND GENERAL EXPENSES

OTHER GAINS, NET

PROFIT ATTRIBUTABLE TO OWNERS OF THE PARENT FOR THE YEAR

LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE

Analysis of Liquidity and Borrowings

Net Current Liabilities

Cash Flows

Net Cash Generated from Operating Activities

Net Cash Used in Investing Activities

Net Cash Used in Financing Activities

Trade and Notes Receivables

Gearing Ratio Analysis

Foreign Exchange Risk Analysis

COSCO SHIPPING Development Co., Ltd. Annual Report 2020