Dida Inc. — Annual Report 2010

Mar 16, 2011

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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CHINA SHIPPING DEVELOPMENT COMPANY LIMITED 中海發展股份有限公司

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

(Stock Code: 1138)

ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2010

Financial Highlights

• Revenue increased by approximately 29.3% to approximately RMB11.284 billion

• Profit attributable to equity holders increased by approximately 61.2% to approximately RMB1.717 billion

• Earnings per share was RMB0.5042

• A final dividend of RMB0.17 per share is recommended by the Board

The board (the “ Board ”) of directors (the “ Directors ”) of China Shipping Development Company Limited (the “ Company ”) is pleased to announce the annual results of the Company and its subsidiaries (together referred to as the “ Group ”) for the year ended 31 December 2010 (the “ Reporting Period ”), together with the comparative figures for the year ended 31 December 2009. The Group’s annual results have been audited by Baker Tilly Hong Kong Limited (天職香港會計師事務所有限公司) (certified public accountants in Hong Kong), the Company’s international auditors.

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1. PRINCIPAL FINANCIAL DATA AND STATISTICS HIGHLIGHTS

The annual results of the Group for the Reporting Period have been audited by Baker Tilly Hong Kong Limited and compared with those for the year ended 31 December 2009 set out as follows:

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year ended 31 December 2010

Revenue Turnover Operating costs Gross Profit Other income and gains Marketing expenses Administrative expenses Other expenses Share of profits of jointly-controlled entities Finance costs PROFIT BEFORE TAX Tax PROFIT FOR THE YEAR Other comprehensive expenses Exchange realignment Net (loss)/gain on cash flow hedges Other comprehensive expenses for the year Total comprehensive income for the year Profit for the year attributable to: Equity holders of the parent Non-controlling interests Total comprehensive income for the year attributable to: Equity holders of the parent Non-controlling interests Earnings per share — basic	2010 RMB’000 11,283,594 (8,930,842) 2,352,752 201,883 (42,887) (315,759) (36,007) 216,596 (205,170) 2,171,408 (449,445) 1,721,963 (178,859) (13,642) (192,501) 1,529,462 1,716,522 5,441 1,721,963 1,524,427 5,035 1,529,462 50.42 cents	2009 RMB’000 8,729,969 (7,260,412) 1,469,557 251,572 (38,955) (286,756) (44,397) 61,099 (69,783) 1,342,337 (277,696) 1,064,641 (10,353) 7,738 (2,615) 1,062,026 1,064,794 (153) 1,064,641 1,062,195 (169) 1,062,026 31.28 cents

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION 31 December 2010

NON-CURRENT ASSETS Property, plant and equipment Investments in jointly-controlled entities Available-for-sale investments Derivative financial instruments Total non-current assets CURRENT ASSETS Bunker oil inventories Trade and bills receivables Prepayments, deposits and other receivables Assets classified as held for sale Cash and cash equivalents Total current assets CURRENT LIABILITIES Trade and bills payables Other payables and accruals Provisions - current portion Tax payable Current portion of notes, interest-bearing bank and other borrowings Total current liabilities NET CURRENT (LIABILITIES)/ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES	2010 RMB’000 35,385,957 2,574,217 4,300 — 37,964,474 --------------- 449,285 891,063 343,618 — 1,061,735 2,745,701 --------------- 913,721 1,146,208 — 78,604 2,423,850 4,562,383 --------------- ----------------------------- (1,816,682) --------------- ----------------------------- 36,147,792	2009 RMB’000 28,648,891 1,614,781 4,300 1,326
		30,269,298 --------------- 349,736 670,257 362,996 55,115 2,222,147
		3,660,251 --------------- 1,037,843 839,735 20,000 9,745 1,322,373
		3,229,696 --------------- ----------------------------- 430,555 --------------- ----------------------------- 30,699,853

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EQUITY Equity attributable to equity holders of the parent Issued capital Reserves Proposed final dividend Non-controlling interests Total equity NON-CURRENT LIABILITIES Other loan Provisions Derivative financial instruments Notes, interest-bearing bank and other borrowings Deferred tax liabilities Total non-current liabilities TOTAL EQUITY AND NON-CURRENT LIABILITIES	2010 RMB’000 3,404,552 18,595,219 578,774 22,578,545 512,916 23,091,461 --------------- 429,934 85,500 13,218 12,122,219 405,460 13,056,331 --------------- ----------------------------- 36,147,792	2009 RMB’000 3,404,552 17,649,566 340,455
		21,394,573 243,281
		21,637,854 --------------- 441,658 81,000 1,125 8,215,534 322,682
		9,061,999 --------------- ----------------------------- 30,699,853

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CONSOLIDATED STATEMENT OF CASH FLOWS Year ended 31 December 2010

Net cash inflow from operating activities INVESTING ACTIVITIES Interest received Acquisition of subsidiary Payments for construction in progress Purchases of property, plant and equipment Proceeds from disposal of assets held for sale Proceeds from disposal of property, plant and equipment Dividends received from jointly-controlled entities Dividends received from available-for-sale investments Investments in jointly-controlled entities Acquisition of subsidiary under common control Net cash outflow used in investing activities FINANCING ACTIVITIES Interest paid Dividend paid Proceeds from issue of medium-term notes Proceeds from termination of cross currency swaps Payments for termination of interest rate swaps New bank loans Repayment of bank loans Contribution from minority shareholders of subsidiaries Net cash inflow from financing activities NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR Effect of foreign exchange rate changes, net CASH AND CASH EQUIVALENTS AT END OF YEAR ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances	2010 RMB’000 2,754,300 14,986 (49,108) (7,927,479) (95,057) 87,864 264,650 — 1,343 (742,840) — (8,445,641) (363,888) (340,455) — — — 7,012,374 (1,871,627) 117,600 4,554,004 (1,137,337) 2,222,147 (23,075) 1,061,735 1,061,735	2009 RMB’000 1,908,308 30,429 — (3,739,485) (4,674) — 205,379 150,000 1,319 (75,000) (100,276) (3,532,308) (246,303) (1,021,366) 5,000,000 60,441 (34,011) 6,025,904 (7,920,648) 49,000 1,913,017 289,017 1,942,970 (9,840) 2,222,147 2,222,147

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Notes:

1. SIGNIFICANT ACCOUNTING POLICIES

1.1 STATEMENT OF COMPLIANCE

The consolidated financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (“HKFRSs”), which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”), Interpretations and Accounting Guidelines 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. These financial statements also complied with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. A summary of the significant accounting policies adopted by the Group is set out below.

The HKICPA has issued certain new and revised HKFRSs that are first effective or available for early adoption for the current accounting period of the Group and the Company. Judgements made by management in the application of HKFRSs that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in the consolidated financial statements.

1.2 BASIS OF CONSOLIDATION

The consolidated financial statements have been prepared on the historical cost basis, except for certain financial instruments, which are measured at fair value, as explained in the accounting policies set out below.

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Non-controlling interests in subsidiaries are presented separately from the Group’s equity therein.

Allocation of total comprehensive income to non-controlling interests

Total comprehensive income and expense of a subsidiary is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests

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having a deficit balance. Prior to 1 January 2010, losses applicable to the non-controlling interests in excess of the non-controlling interests in the subsidiary’s equity were allocated against the interests of the Group except to the extent that the non-controlling interests had a binding obligation and were able to make an additional investment to cover the losses.

Changes in the Group’s ownership interests in existing subsidiaries

Changes in the Group’s ownership interests in existing subsidiaries on or after 1 January 2010

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

When the Group losses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. Where certain of assets the subsidiary are measured at revalued amounts or fair values and the related cumulative gain or loss has been recognised in other comprehensive income and accumulated in equity, the amounts previously recognised in other comprehensive income and accumulated in equity are accounted for as if the Company had directly disposed of the related assets (i.e. reclassified to consolidated statement of comprehensive income or transferred directly to retained profits). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under HKAS 39 “Financial instrument” Recognition and measurement” or, when applicable, the cost on initial recognition of an investment in an associated or jointly controlled entity.

Changes in the Group’s ownership interests in existing subsidiaries prior to 1 January 2010

Increases in interests in existing subsidiaries were treated in the same manner as the acquisition of subsidiaries, with goodwill or a bargain purchase gain being recognised where appropriate. For decreases in interests in subsidiaries, regardless of whether the disposals would result in the Group losing control over the subsidiaries, the difference between the consideration received and the adjustment to the non-controlling interests was recognised in consolidated statement of comprehensive income.

Business combination

Business combination that took place on or after 1 January 2010

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum

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of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in consolidated statement of comprehensive income as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date except that:

• deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with HKAS 12 “Income taxes” and HKAS 19 “Employee benefit” respectively;

• liabilities or equity instruments related to share-based payment transactions of the acquiree or the replacement of an acquiree’s share-based payment transactions with share-based payment transactions of the Group are measured in accordance with HKFRS 2 “Share-based payment” at the acquisition date; and

• assets (or disposal groups) that are classified as held for sale in accordance with HKFRS 5 “Non-current assets held for sale and discontinued operations” are measured in accordance with that Standard.

Goodwill is measured as the excess of the sum of the consideration transferred and the amount of any non-controlling interests in the acquiree over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after assessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred and the amount of any non-controlling interests in the acquiree, the excess is recognised immediately in consolidated statement of comprehensive income as a bargain purchase gain.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net assets on a transaction by transaction basis.

Business combinations that took place prior to 1 January 2010

Acquisition of businesses was accounted for using the purchase method. The cost of the acquisition was measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination.

The acquiree’s identifiable assets, liabilities and contingent liabilities that met the relevant conditions for recognition were generally recognised at their fair value at the acquisition date.

Goodwill arising on acquisition was recognised as an asset and initially measured at cost, being the excess of the cost of the acquisition over the Group’s interest in the recognised amounts of

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the identifiable assets, liabilities and contingent liabilities recognised. If, after assessment, the Group’s interest in the recognised amounts of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeded the cost of the acquisition, the excess was recognised immediately in consolidated statement of comprehensive income.

The minority interest in the acquiree was initially measured at the minority interest’s proportionate share of the recognised amounts of the assets, liabilities and contingent liabilities of the acquiree.

Merger accounting for common control combination

The consolidated financial statements incorporate the financial statements of the combining entities or businesses in which the common control combination occurs as if they had been combined from the date when the combining entities or businesses first came under the control of the controlling party.

The net assets of the combining entities or businesses are combined using the existing book values from the controlling parties’ perspective. No amount is recognised in consideration for goodwill or excess of acquirers’ interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination, to the extent of the continuation of the controlling party’s interest.

The consolidated statement of comprehensive income includes the results of each of the combining entities or businesses from the earliest date presented or since the date when the combining entities or businesses first came under common control, where there is a shorter period, regardless of the date of the common control combination.

The comparative amounts in the consolidated financial statements are presented as if the entities or businesses had been combined at the previous balance sheet date or when they first came under common control, whichever is shorter.

Transaction costs, including professional fees, registration fees, costs of furnishing information to equity holders, costs or losses incurred in combining operations of the previously separate businesses, etc., incurred in relation to the common control combination that is to be accounted for by using merger accounting is recognised as an expense in the year in which it is incurred.

2. APPLICATION OF NEW AND REVISED HKFRSs

In the current year, the Group has applied the following new and revised standards, amendments and interpretations (hereinafter collectively referred to as “new and revised HKFRSs”) issued by the HKICPA that are effective for the Group’s financial year beginning 1 January 2010.

HKFRSs (Amendments)	Improvements to HKFRSs issued in 2009
HKFRSs (Amendments)	Amendments to HKFRSs 5 as part of improvements to
	HKFRSs issued in 2008
HKAS 27 (Revised 2008)	Consolidated and separate financial statements
HKAS 39 (Amendments)	Eligible hedged items

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HKFRS 2 (Amendments) Group cash-settled share-based payment transactions HKFRS 3 (Revised 2008) Business combinations HK(FRIC) - 17 Distributions of non-cash assets to owners HK - Int 5 Classification by the borrower of a term loan that contains a repayment on demand clause

Except as disclosed below, the adoption of the new and revised HKFRSs has had no material effect on the consolidated financial statements of the Group for the current or prior accounting periods.

HKFRS 3 (Revised 2008) “Business combinations”

HKFRS 3 (Revised 2008) “Business combinations” has been applied prospectively from 1 January 2010. Its application has affected the accounting for the acquisition as disclosed in consolidated financial statements.

• HKFRS 3 (Revised 2008) allows a choice on a transaction-by-transaction basis for the measurement of non-controlling interests at the date of acquisition (previously referred to as ‘minority’ interests) either at fair value or at the non-controlling interests’ share of recognised identifiable net assets of the acquiree.

• HKFRS 3 (Revised 2008) changes the recognition and subsequent accounting requirements for contingent consideration. Previously contingent consideration was recognised at the acquisition date only if payment of the contingent consideration was probable and it could be measured reliably; any subsequent adjustments to the contingent consideration were always made against the cost of the acquisition. Under the revised standard, contingent consideration is measured at fair value at the acquisition date; subsequent adjustments to the consideration are recognised against the cost of acquisition only to the extent that they arise from new information obtained within the measurement period (a maximum of 12 months from the acquisition date) about the fair value at the acquisition date. All other subsequent adjustments to contingent consideration classified as an asset or a liability are recognised in consolidated statement of comprehensive income.

• HKFRS 3 (Revised 2008) requires acquisition-related costs to be accounted for separately from the business combination, generally leading to those costs being recognised as an expense in consolidated statement of comprehensive income as incurred, whereas previously they were accounted for as part of the cost of the acquisition.

The impact of adoption of HKFRS 3 (Revised 2008) on the acquisition during the current year has been related to the acquisition-related costs. It requires acquisition-related costs to be accounted for separately from the business combination. As a result, the Group has recognised these costs as an expense in consolidated statement of comprehensive income, whereas previously they would have been accounted for as part of the cost of the acquisition. The acquisition costs in the current year were insignificant.

HKAS 27 (Revised 2008) “Consolidated and separate financial statements”

The revised standard has affected the Group’s accounting policies regarding changes in the Group’s ownership interests in its subsidiaries that do not result in loss of control. In prior years,

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in the absence of specific requirements in HKFRSs, increases in interests in existing subsidiaries were treated in the same manner as the acquisition of subsidiaries, with goodwill or a bargain purchase gain being recognised, when appropriate; for decreases in interests in existing subsidiaries that did not involve a loss of control, the difference between the consideration received and the adjustment to the non-controlling interests was recognised in consolidated statement of comprehensive income. Under HKAS 27 (Revised 2008), all such increases or decreases are dealt with in equity, with no impact on goodwill or consolidated statement of comprehensive income.

When control of a subsidiary is lost as a result of a transaction, event or other circumstance, the revised standard requires that the Group derecognises all assets, liabilities and non-controlling interests at their carrying amount. Any retained interest in the former subsidiary is recognised at its fair value at the date the control is lost. A gain or loss on loss of control is recognised in consolidated statement of comprehensive income as the difference between the proceeds and these adjustments, if any. The adoption of HKAS 27 (Revised 2008) had no material impact in the current year.

In addition, the Group also applied the consequential amendments of the other HKFRSs resulting from the issuance of HKFRS 3 (Revised 2008) and HKAS 27 (Revised 2008). Particularly HKAS 31 “Interests in Joint Ventures” for the acquisitions of jointly controlled entities in the current year. The adoption of the consequential amendments had no material impact on the consolidated financial statements.

The Group has not early applied the following new and revised HKFRSs that have been issued but are not yet effective.

HKFRSs (Amendments)	Improvements to HKFRSs issued in 2010 except for	Improvements to HKFRSs issued in 2010 except for	the
	amendments to HKFRSs 3 (Revised 2008),	HKAS 1	and
	HKAS 281
HKFRS 1 (Amendments)	Limited Exemption from Comparative	HKFRS	7
	disclosures for first-time adopter3
HKFRS 7 (Amendments)	Disclosures - Transfers of financial assets5
HKFRS 9	Financial instruments7
HKAS 12 (Amendments)	Deferred tax: recovery of underlying assets6
HKAS 24 (Revised 2009)	Related party disclosures4
HKAS 32 (Amendments)	Classification of rights issue2
HK(FRIC) - INT 14	Prepayments of a minimum funding requirement4
(Amendments)
HK(FRIC) - INT 19	Extinguishing financial liabilities with equity	instruments3

• 1 Effective for annual periods beginning on or after 1 July 2010 or 1 January 2011, as appropriate.

• 2 Effective for annual periods beginning on or after 1 February 2010. 3 Effective for annual periods beginning on or after 1 July 2010. 4 Effective for annual periods beginning on or after 1 January 2011. 5 Effective for annual periods beginning on or after 1 July 2011. 6 Effective for annual periods beginning on or after 1 January 2012. 7 Effective for annual periods beginning on or after 1 January 2013.

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New and revised HKFRSs in issue but not yet effective

HKFRS 9 “Financial Instruments” introduces new requirements for the classification and measurement of financial assets and will be effective from 1 January 2013, with earlier application permitted. The standard requires all recognised financial assets that are within the scope of HKAS 39 “Financial Instruments: Recognition and Measurement” to be measured at either amortised cost or fair value. Specifically, debt investments that (i) are held within a business model whose objective is to collect the contractual cash flows and (ii) have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost. All other debt investments and equity investments are measured at fair value.

In relation to financial liabilities, the significant change relates to financial liabilities that are designated as at fair value through profit or loss. Specifically, under HKFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the presentation of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in consolidated statement of comprehensive income. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to consolidated statement of comprehensive income. Previously, under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was presented in consolidated statement of comprehensive income.

The application of HKFRS 9 will affect the classification and measurement of the Group’s available-for-sale investments and might affect the classification and measurement of other financial assets. As at 31 December 2010, no financial liability has been designated as at fair value through profit and loss, the application of HKFRS 9 will affect the measurement of such financial liability if designation is made in the future.

The directors of the Company anticipate that the application of the other new and revised HKFRSs will have no material impact on the results and the financial position of the Group.

3. REVENUE AND SEGMENT INFORMATION

Segment information is presented by way of two segment formats: (i) on a primary segment reporting basis, by business segment; and (ii) on a secondary segment reporting basis, by geographical segment.

The Group’s operating businesses are structured and managed separately, according to the nature of their operations and the services they provide. Each of the Group’s business segments represents a strategic business unit that offers services which are subject to risks and returns that are different from those of the other business segments. The Group’s business segments are categorised as follows:

• (i) oil shipment;

• (ii) dry bulk shipment;

• coal shipment

• other dry bulk shipment

• (iii) rental income from vessel chartering

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Business segments

There is seasonality for the Group’s turnover but the effect is small. An analysis of the Group’s turnover and contribution to profit from operating activities by principal activity and geographical area of operations for the year is set out as follows:

By principal activity: Oil shipment Dry bulk shipment - Coal shipment - Other dry bulk shipment Rental income from vessels chartering Other income and gains Marketing expenses Administrative expenses Other expenses Share of profits of jointly-controlled entities Finance costs Profit before tax Total segment assets Oil shipment Dry bulk shipment Unallocated corporate assets Total segment liabilities Oil shipment Dry bulk shipment Unallocated corporate liabilities	2010 Turnover Contribution RMB’000 RMB’000 6,097,958 1,150,397 3,509,492 834,899 1,676,144 367,456 — — 11,283,594 2,352,752 201,883 (42,887) (315,759) (36,007) 216,596 (205,170) 2,171,408 21,605,564 15,853,841 3,250,770 40,710,175 10,334,938 6,877,739 406,037 17,618,714		2009 Turnover Contribution RMB’000 RMB’000 4,913,520 987,568 2,765,739 500,196 854,432 (16,142) 196,278 (2,065) 8,729,969 1,469,557 251,572 (38,955) (286,756) (44,397) 61,099 (69,783) 1,342,337 18,747,527 12,827,768 2,354,254 33,929,549 8,140,444 3,813,646 337,605 12,291,695

The accounting policies of the reportable segments are the same as the Group’s accounting policies. Segment contribution represents the profit earned by each segment without allocation of central administration costs (including director’s remuneration), marketing expenses, other expenses, share of profit of jointly-controlled entities, other income and gains and finance costs. This is the measure reported to Chief operating decision makers for the purposes of resource allocation and performance assessment.

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The net book values of oil vessels and dry bulk vessels at 31 December 2010 amounted to RMB17,419,190,000 and RMB9,531,326,000 respectively (2009: RMB13,168,917,000 and RMB5,315,399,000 respectively).

Geographical segments

By geographical area: Domestic International Other income and gains Marketing expenses Administrative expenses Other expenses Share of profits of jointly-controlled entities Finance costs Profit before tax Turnover Total segment turnover Less: inter-company transactions Total consolidated turnover	2010 Turnover Contribution RMB’000 RMB’000 7,223,435 1,973,829 4,060,159 378,923 11,283,594 2,352,752 201,883 (42,887) (315,759) (36,007) 216,596 (205,170) 2,171,408 11,283,594 — 11,283,594	2009 Turnover Contribution RMB’000 RMB’000 5,282,014 1,434,987 3,447,955 34,570 8,729,969 1,469,557 251,572 (38,955) (286,756) (44,397) 61,099 (69,783) 1,342,337 8,729,969 — 8,729,969

The principal assets employed by the Group are located in the PRC, and accordingly, no segment analysis of assets and expenditure has been prepared for the year.

No revenue from customers contributing over 10% of the total sales of the Group for both years.

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4. OTHER INCOME AND GAINS

	Group
	2010	2009
	RMB’000	RMB’000
Other income
Interest income	14,986	30,429
Government subsidies (Note)	31,346	33,377
Others	8,537	4,561
	54,869	68,367
	---------	---------
Other gains/(losses)
Gain on disposal of property, plant and equipment, net	178,553	125,311
Exchange losses, net	(41,687)	(5,096)
Dividends receive from available-for-sale investment	1,343	1,319
Gains on termination of cross currency swaps	—	60,441
Others	8,805	1,230
	147,014 ---------	183,205 ---------
	-----------------------------------	-----------------------------------
Other income and gains	201,883	251,572
Note:

During the year, the Group received government subsidies for business development purpose. There were no unfulfilled conditions or contingencies relating to these subsidies.

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5. PROFIT BEFORE TAX

The Group’s profit before tax is arrived at after charging/(crediting):

Cost of shipping services rendered: Bunker oil inventories consumed and port fees Others (Including vessel depreciation and crew expenses) Depreciation Operating lease rentals: Land and buildings Vessels Total operating lease rentals Auditor’s remuneration Staff costs: Wages, salaries, crew expenses and related expenses Pension scheme contributions Total staff costs Gain on disposal of property, plant and equipment, net (Reversal of provision)/provision for bad and doubtful debts Written off of bad and doubtful debts Gains on termination of cross currency swaps Losses on termination of interest rate swaps Dry-docking and repairs Government subsidies

Group 2010 2009 RMB’000 RMB’000 4,523,307 3,269,953 4,407,535 3,990,459 1,404,441 1,071,585 33,617 37,575 351,692 418,276 385,309 455,851 3,039 2,980 1,419,013 1,198,250 137,811 132,099 1,556,824 1,330,349 (178,553) (125,311) (207) 207 1,169 — — (60,441) — 34,011 526,125 487,851 (31,346) (33,377)

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6. FINANCE COSTS

Total finance costs Interest expenses on: - Bank loans Interest on bank loans, overdraft or loan from capital market wholly repayable or by installment within five years Interest on bank loans, overdraft or loan from capital market not required wholly repayable or by installment within five years - Notes Hedge loan interest Other loan or borrowings costs and charges Less: Interest capitalised Finance costs	Group 2010 RMB’000 94,351 51,077 199,825 12,676 5,959 363,888 (158,718) 205,170	2009 RMB’000 116,028 49,927 56,553 17,545 6,251 246,304 (176,521) 69,783

1. TAX

Hong Kong Profits Tax

Hong Kong profits tax was not provided for in the consolidated financial statements as the Group did not have any assessable profits arising in Hong Kong during the years ended 31 December 2010 and 2009.

PRC Corporate Income Tax

On 16 March 2007, the National People’s Congress approved the Corporate Income Tax Law of the PRC (the “new CIT Law”). The Group is entitled to a preferential income tax rate of 18%-24% effective from 1 January 2008. The existing preferential tax rate currently enjoyed by the Group is gradually transited to the new standard rate of 25% over a five-year transitional period. Accordingly, the PRC corporate income tax of the Group has been provided at the rate of 22% (2009:20%) on the estimated assessable profits for the year.

Non-resident enterprises without an establishment or a place of business in the PRC or which have an establishment or a place of business in the PRC but which relevant income is not effectively connected with the establishment or a place of business in the PRC, will be subject to withholding tax at the rate of 10% (unless reduced by treaty) on various types of passive income such as dividends derived from sources within the PRC. The Group has already assessed the impact regarding this withholding tax and considered the withholding tax would not have a significant impact on the results of operations and financial position of the Group.

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	Group
	2010	2009
	RMB’000	RMB’000
Group:
Current - Hong Kong	—	—
PRC
- Charge for the year	366,682	259,933
- (Over)/ under provision in prior years	(15)	30,187
Deferred tax	82,778	(12,424)
Total tax charge for the year	449,445	277,696

Income tax for the year of jointly-controlled entities attributable to the Group amounted to RMB77,962,000 (2009: RMB14,189,000).

A reconciliation of the tax expense applicable to profit before tax using the statutory rate for the country in which the Company, its subsidiaries and jointly-controlled entities are domiciled to the tax expense at the effective tax rate, and a reconciliation of the applicable rate (i.e., the statutory tax rate) to the effective tax rate, is as follows:

Profit before tax Tax at the statutory tax rate Higher tax rate for specific provinces Adjustments in respect of current tax of previous periods Expenses not deductible for tax Income not subject to tax Tax charge at the Group’s effective rate	2010 RMB’000 % 2,171,408 477,710 22.0 14,884 0.7 (15) 0.0 15,650 0.7 (58,784) (2.7) 449,445 20.7	2009 RMB’000 % 1,342,337 268,468 20.0 6,981 0.5 30,187 2.2 6,556 0.5 (34,496) (2.6) 277,696 20.6

Tax payable in the consolidated statement of financial position represented by:

Income tax payable at the beginning of the year Provision for Corporate income tax during the year Adjustments in respect of current tax of previous periods Income tax paid Income tax payable at the end of the year	2010 RMB’000 9,745 366,682 (15) (297,808) 78,604	2009 RMB’000 63,039 259,933 30,187 (343,414) 9,745

— 18 —

8. PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT

The consolidated profit attributable to equity holders of the parent for the year ended 31 December 2010 includes a profit of RMB1,535,720,000 (2009: RMB1,231,123,000) which has been dealt within the financial statements of the Company.

9. DIVIDEND

The dividend paid in 2010 was RMB340,455,000 representing 2009 final dividend of RMB0.10 per share (2009: Dividend paid in 2009 was RMB1,021,366,000 representing 2008 final dividend of RMB0.30 per share).

	2010	2009
	RMB’000	RMB’000
Proposed final dividend: RMB 0.17 (2009: RMB 0.10)
per ordinary share	578,774	340,455

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

10. BASIC EARNINGS PER SHARE

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

	2010	2009
Profit attributable to equity holders of the parent (RMB’000)	1,716,522	1,064,794
Weighted average number of ordinary shares in issue
(thousands)	3,404,552	3,404,552
Basic earnings per share (RMB cents per share)	50.42	31.28

As the Company does not have any potential dilutive ordinary shares during the year ended 31 December 2010 (2009: Nil), no diluted earnings per share is presented.

11. TRADE AND BILLS RECEIVABLES

		Group	Company	Company
	2010	2009	2010	2009
	RMB’000	RMB’000	RMB’000	RMB’000
Trade and bills receivables	891,063	670,464	672,540	552,018
Provision for doubtful debts	—	(207)	—	—
Trade and bills receivables, net	891,063	670,257	672,540	552,018

The carrying amounts of trade and bills receivables approximate their fair values.

— 19 —

An aged analysis of the trade and bills receivables of the Group and the Company at the end of the reporting period, based on the invoice date, is as follows:

1 - 3 months 4 - 6 months 7 - 9 months 10 - 12 months 1 - 2 years Provision for doubtful debts Trade and bills receivables, net 1 - 3 months 4 - 6 months 7 - 9 months 10 - 12 months Provision for doubtful debts Trade and bills receivables, net	Group 2010 2009 Balance Percentage Balance Percentage RMB’000 % RMB’000 % 813,110 92 649,721 97 65,631 7 12,949 2 10,690 1 984 — 1,615 — — — 17 — 6,810 1 891,063 100 670,464 100 — (207) 891,063 670,257 Company 2010 2009 Balance Percentage Balance Percentage RMB’000 % RMB’000 % 608,954 90 538,467 98 58,484 9 12,594 2 5,051 1 957 — 51 — — — 672,540 100 552,018 100 — — 672,540 552,018	Group 2010 2009 Balance Percentage Balance Percentage RMB’000 % RMB’000 % 813,110 92 649,721 97 65,631 7 12,949 2 10,690 1 984 — 1,615 — — — 17 — 6,810 1 891,063 100 670,464 100 — (207) 891,063 670,257 Company 2010 2009 Balance Percentage Balance Percentage RMB’000 % RMB’000 % 608,954 90 538,467 98 58,484 9 12,594 2 5,051 1 957 — 51 — — — 672,540 100 552,018 100 — — 672,540 552,018
		100

No impairment loss is provided for the trade receivables that are neither past due nor impaired because these receivables are within credit period granted to the respective customers and the management considers the default rate is low for such receivables based on historical information and past experience.

In determining the recoverability of a trade receivables, the Group considers any change in credit quality of the trade receivables from the date credit was initially granted up to the reporting date. In view of the good settlement history of those receivables of the Group which are past due but not impaired for the year, the directors of the Company consider that no allowance is required.

Included in trade receivables are debtors with carrying amount of approximately RMB13,987,000 (2009:RMB20,743,000) which are past due as at the reporting date for which the Group had not provided for impairment loss (2009:RMB207,000) as there has not been a significant change in credit quality and the amounts are still considered recoverable.

— 20 —

Ageing of trade receivables which are past due but not impaired:

		Group	Group	Company	Company
		2010	2009	2010	2009
		RMB’000	RMB’000	RMB’000	RMB’000
1	- 6 months	12,355	12,949	11,389	12,594
7	months - above 1 year	1,632	7,587	51	957
		13,987	20,536	11,440	13,551

The Group normally allows an average credit period of 30 days to its major customers. In view of the fact that the Group’s trade receivables relate to a large number of diversified customers, there is no significant concentration of credit risk. Trade receivables are non-interest-bearing.

IMPAIRMENT OF TRADE RECEIVABLES

Impairment losses in respect of trade receivables are recorded using an allowance account unless the Group is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against trade receivables directly. In addition, impairment loss of RMB1,169,000 (2009:Nil) was directly written off against the trade receivables.

Movements on the provision for impairment of trade receivables are as follows:

	Group	Group	Company	Company
	2010	2009	2010	2009
	RMB’000	RMB’000	RMB’000	RMB’000
At 1 January	207	—	—	—
(Reversal of provision)/provision for bad
and doubtful debts	(207)	207	—	—
At 31 December	—	207	—	—

The Group does not hold any collateral over these balances.

The carrying amounts of the trade and bills receivables are denominated in the following currencies:

	Group	Group	Company	Company
	2010	2009	2010	2009
	RMB’000	RMB’000	RMB’000	RMB’000
USD	269,552	217,539	124,963	104,411
RMB	621,511	452,718	547,577	447,607
	891,063	670,257	672,540	552,018

— 21 —

12. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

Group 2010 2009 RMB’000 RMB’000 Prepayments 29,818 42,692 Deposits and other receivables 186,005 222,283 Due from fellow subsidiaries 127,795 98,021 Due from subsidiaries — — 343,618 362,996	Company 2010 2009 RMB’000 RMB’000 8,070 33,749 148,403 181,904 63,318 64,950 3,865,510 3,263,003 4,085,301 3,543,606	Company 2010 2009 RMB’000 RMB’000 8,070 33,749 148,403 181,904 63,318 64,950 3,865,510 3,263,003 4,085,301 3,543,606
		3,543,606

The amounts due from fellow subsidiaries and subsidiaries are unsecured, non-interest bearing and repayable on demand.

The carrying amounts of the prepayments, deposits and other receivables of the Group and Company are denominated in the following currencies:

Group 2010 2009 RMB’000 RMB’000 USD 120,091 199,517 RMB 186,138 145,419 AUD 14,100 6,146 JPY 11,265 4,428 HKD 7,350 3,862 EUR 1,258 1,696 GBP 1,479 1,350 Others 1,937 578 343,618 362,996	Company 2010 2009 RMB’000 RMB’000 3,561,863 3,192,470 503,774 337,040 3,786 3,641 11,224 4,762 961 2,234 1,237 1,649 1,479 1,350 977 460 4,085,301 3,543,606	Company 2010 2009 RMB’000 RMB’000 3,561,863 3,192,470 503,774 337,040 3,786 3,641 11,224 4,762 961 2,234 1,237 1,649 1,479 1,350 977 460 4,085,301 3,543,606
		3,543,606

13. TRADE AND BILLS PAYABLES

	Group	Group	Company	Company
	2010	2009	2010	2009
	RMB’000	RMB’000	RMB’000	RMB’000
Trade and bills payables	485,120	792,686	277,649	723,147
Due to subsidiaries	—	—	2,512	—
Due to fellow subsidiaries	428,601	245,157	427,496	210,078
	913,721	1,037,843	707,657	933,225

The carrying amounts of trade and bills payables approximate to their fair values.

The amounts due to subsidiaries and fellow subsidiaries are unsecured, non-interest bearing and repayable on demand.

— 22 —

An aged analysis of trade and bills payables at the end of the reporting period, based on the invoice dates, is as follows:

1 - 3 months 4 - 6 months 7 - 9 months 10 - 12 months 1 - 2 years Over 2 years 1 - 3 months 4 - 6 months 7 - 9 months 10 - 12 months 1 - 2 years Over 2 years	Group 2010 2009 Balance Percentage Balance Percentage RMB’000 % RMB’000 % 706,129 77 921,661 89 60,709 7 30,978 3 58,871 6 46,084 4 79,755 9 20,415 2 7,605 1 14,316 1 652 — 4,389 1 913,721 100 1,037,843 100 Company 2010 2009 Balance Percentage Balance Percentage RMB’000 % RMB’000 % 548,025 79 821,806 88 38,284 5 31,071 3 44,760 6 45,381 5 73,619 10 14,209 2 2,318 — 16,480 2 651 — 4,278 — 707,657 100 933,225 100	Group 2010 2009 Balance Percentage Balance Percentage RMB’000 % RMB’000 % 706,129 77 921,661 89 60,709 7 30,978 3 58,871 6 46,084 4 79,755 9 20,415 2 7,605 1 14,316 1 652 — 4,389 1 913,721 100 1,037,843 100 Company 2010 2009 Balance Percentage Balance Percentage RMB’000 % RMB’000 % 548,025 79 821,806 88 38,284 5 31,071 3 44,760 6 45,381 5 73,619 10 14,209 2 2,318 — 16,480 2 651 — 4,278 — 707,657 100 933,225 100
		100

The trade and bills payables are non-interest-bearing and are normally settled in 1 - 3 months.

The trade and bills payables are denominated in the following currencies:

	Group	Group	Company	Company
	2010	2009	2010		2009
	RMB’000	RMB’000	RMB’000	RMB’000
USD	250,190	229,579	111,549	129,874
RMB	640,829	790,498	588,328	785,900
JPY	4,446	7,542	1,057		7,430
AUD	6,893	4,795	252		4,702
GBP	608	2,042	548		2,042
EUR	1,495	—	476		—
HKD	7,239	2,977	4,714		2,922
Others	2,021	410	733		355
	913,721	1,037,843	707,657	933,225

— 23 —

II. MANAGEMENT DISCUSSION AND ANALYSIS

1. Analysis of the International and Domestic Shipping Market during the Reporting Period

The Group is principally engaged in the cargo shipping business which mainly consists of the shipment of oil and dry bulk cargoes (primarily coal and iron ore) along the coastal region of the PRC and internationally.

In 2010, global economy and trade gradually recovered. Driven by the rapid development of the emerging economies in Asia, the shipping market showed gradual recovery and growth. However, due to a large number of new vessels delivered, the market rebound was hindered with insufficient growth momentum.

As for the dry bulk cargo shipping market, the “China Factor” again dominated and exerted significant influences over the international dry bulk cargo shipping market. Affected by the macroeconomic control policy implemented by the Chinese government, some steel mills in China began to reduce production with a falling demand for iron ore. According to statistics of General Administration of Custom of the PRC, China imported 618 million tons of iron ore in 2010, representing a decrease of 1.4% compared with the same period in 2009. This marked a first year-on-year decline for 12 years. Under the influence of various factors such as excess supply of shipping capacity, the “China Factor” and the climate factors, the Baltic Dry Bulk Freight Rate Index (the “BDI”) fluctuated at low levels and averaged daily in 2010 at 2,758 points, up 5.4% compared with the same period in 2009.

The domestic coastal bulk shipping market experienced heavy fluctuations in 2010, with weak shipping demand in peak seasons. The coastal dry bulk freight index (“CCBFI”) averaged daily in 2010 at 1,460 points, up 19.8% compared with the same period in 2009.

In 2010, the global economic recovery drove up the demand for oil. In the first half of 2010, the international crude oil shipping market remained active. In the second half of 2010, due to a large number of new vessels delivered, the increasing supply of shipping capacity significantly outpaced the rising demand for oil, leading to a continued downturn in the international oil tanker market. In 2010, the Baltic Dirty Oil Tanker Freight Rate Index (“BDTI”) in 2010 averaged daily at 896 points, representing an increase of 54.2% compared with the same period in 2009. The World Scale Index (“WSI”) for shipping routes from the Middle East to Japan, being one of the freight rate indicators for very large crude oil carriers (“VLCC”) in 2010 averaged daily at 71.6 points, representing an increase of 71.7% compared with the same period in 2009. The average daily revenue increased by 27.0% compared with the same period in 2009.

In 2010, the domestic economy sustained progressive recovery. The demand for coastal oil showed strong growth while the freight rate remained stable. The overall domestic coastal oil shipment market remained steady.

— 24 —

2. Analysis of the Principal Operations of the Group

Despite the complex and volatile market environment in 2010, the Group firmly focused on its core business of domestic coastal coal shipping and oil shipping business, continued to adhere to its policy of “ reinforcing coastal business and developing clean transportation”, and put more effort into market expansion. The Group also enhanced its association and cooperation with customers, optimized its fleet portfolio and strengthened its internal control. As a result, the Group’s operations and safety management worked smoothly, maintaining an overall sound and steady development.

During the Reporting Period, the shipping volume achieved by the Group was approximately 269.72 billion tonne-nautical miles, and the total revenue derived from shipment was approximately RMB11.284 billion, representing an increase of 21.7% and 29.3% as compared with those of the same period in 2009 respectively. The operating costs was approximately RMB8.931 billion, representing an increase of 26.5% as compared with that of the same period in 2009. Net profit attributable to equity holders of the parent was approximately RMB1.717 billion, representing an increase of 61.2% as compared with that of the same period in 2009. Earnings per share was approximately RMB0.5042.

Principal Operations by Products Transported

					Increase in
				Increase in	operating
			Gross	revenue as	costs as	Change in gross
Industry or Product		Operating	profit	compared	compared	profit margin as
Description	Revenue	costs	margin	with 2009	with 2009	compared with 2009
	(RMB’000)	(RMB’000)	(%)	(%)	(%)
Coal shipments	3,509,492	2,674,593	23.8	26.9	18.1	up 5.7
						percentage points
Oil shipments	6,097,958	4,947,561	18.9	24.1	26.0	Down 1.2
						percentage points
Other bulk shipments	1,676,144	1,308,688	21.9	96.2	50.3	up 23.8
						percentage points
Total	11,283,594	8,930,842	20.9	29.3	26.5	up 4.1
						percentage points
**Principal Operations **	by Geographical Regions
						Increase/
						(decrease) in
						revenue as
						compared
Regions					Revenue with 2009
					(RMB’000) (%)
Domestic shipment					7,223,435 36.8
International shipment					4,060,159 17.8

— 25 —

(1) Shipping business — Dry bulk shipments

In 2010, faced with the volatile market environment, the Group was able to maintain overall balanced growth in its three major segments, being coastal transportation, clean transportation and joint ventures by fully leveraging on its advantages in corporate brand, service and scale. For coastal shipping, the Group focused on power and coal contracts of affreightment (“COA contracts”), seized opportunities of market fluctuations to increase other cargo types and optimized and adjusted the customer portfolio. As for international dry bulk cargo shipping, the Group consolidated the relevant business divisions, strengthened the market analysis and study, stepped up efforts in increasing international shipping capacity in a timely manner and vigorously expanded demand sources such as imported iron ore, coal and steel. In addition, the Group fully leveraged on the advantage of its fleet for both domestic and international shipping market and achieved considerable growth in its international bulk cargo shipping business. In 2010, the Group’s international markets dry bulk cargo shipping capacity accounted for 15.8% of its dry bulk cargo shipping capacity. Profit from international dry bulk cargo shipping accounted for 34.2% of profit from dry bulk cargo shipping.

In 2010, the Group achieved a shipping volume of approximately 108.98 billion tonne-nautical miles of dry bulk cargo, and derived revenue of approximately RMB5.185 billion, representing increases of 14.2% and 43.2% as compared with those of the same period in 2009 respectively.

An analysis of the transportation volume and revenue in terms of product types is as follows:

Transportation volume by types

			Increase/
			(decrease)
			in volume
			as compared
	In 2010	In 2009	with 2009
	(billion tonne	(billion tonne	(%)
	nautical miles)	nautical miles)
Domestic Shipment	59.00	55.68	6.0
Coal	50.45	48.82	3.3
Other dry bulk	8.55	6.86	24.6
International Shipment	49.98	39.76	25.7
Coal	4.37	7.30	(40.1)
Other dry bulk	45.61	32.46	40.5
Total	108.98	95.44	14.2

— 26 —

Revenue by product types

(RMB Domestic Shipment Coal Other dry bulk International Shipment Coal Other dry bulk Total	In 2010 million) (RMB 3,777 3,296 481 1,408 213 1,195 5,185	In 2009 Increase/ (decrease) in revenue as compared with 2009 (%) million) 2,808 34.5 2,521 30.7 287 67.6 812 73.4 245 (13.1) 567 110.8 3,620 43.2

Note: Other bulk cargoes include metal ore, non-metallic ore, steel, cement, timber, grain, fenilizer and so on except for coal.

(2) Shipping business — Oil shipments

In 2010, as for international oil shipment, the Company closely followed the market trend and adjusted its operating strategy in a timely manner. While implementing the operation and management of large vessels, the Company actively contracted for COA cargo sources. As for domestic oil shipping, the Group actively adjusted its shipping capacity and strived to consolidate its existing market while actively expanding its incremental market. The Group continued to sustain its market share of approximately 65% in the domestic crude oil shipping market.

— 27 —

In 2010, the Group achieved a shipping volume of approximately 160.74 billion tonne-nautical miles of oil shipment, representing an increase of 27.3% as compared with that of the same period in 2009, and the revenue achieved was approximately RMB6.099 billion, representing an increase of 24.1% as compared with that of the same period in 2009. An analysis of the transportation volume and revenue in terms of product types is as follows:

Transportation volume and revenue in terms of products types

			Increase/
			(decrease) in
			volume as
			compared with
	In 2010	In 2009	2009
	(billion tonne	(billion tonne	(%)
	nautical miles)	nautical miles)
Domestic Shipment	26.85	19.5	37.7
Crude oil	20.74	15.31	35.5
Refined oil	6.11	4.19	45.8
International Shipment	133.89	106.76	25.4
Crude oil	105.27	70.49	49.3
Refined oil	28.62	36.27	(21.1)
Total	160.74	126.26	27.3
Revenue by product types
			Increase/
			(decrease) in
			revenue as
			compared with
	In 2010	In 2009	2009
	(RMB million)	(RMB million)	(%)
Domestic Shipment	3,446	2,473	39.3
Crude oil	2,826	2,052	37.7
Refined oil	620	421	47.3
International Shipment	2,653	2,440	8.7
Crude oil	1,565	1,028	52.2
Refined oil	1,088	1,412	(22.9)
Total	6,099	4,914	24.1

— 28 —

(3) Costs analysis

In 2010, the Group continued to focus on its objectives of “increasing revenue, reducing expenses, controlling costs and improving efficiency”. The Group vigorously implemented refined management and steadily promoted comprehensive budget management. Through adopting advanced operating costs control and management in various aspects, the Group effectively controlled its major transportation costs such as fuel cost, port charges and repair expenses.

The total operating costs incurred in 2010 was approximately RMB8.931 billion, an increase of 26.5% as compared with 2009, which was 2.8 percentage points lower as compared with the growth of operating revenue. The composition of the main operating costs are as follows:

In 2010 In 2009 (RMB ’000) (RMB ’000) Fuel cost 3,845,000 2,670,000 Port cost 818,000 722,000 Labor cost 1,314,000 1,222,000 Lubricants expenses 232,000 193,000 Depreciation 1,364,000 1,050,000 Insurance expenses 224,000 237,000 Repair expenses 526,000 488,000 Charter cost 352,000 220,000 Others 256,000 260,000 Total 8,931,000 7,062,000	Increase/ (Decrease) Composition Ratio in 2010 (%) (%) 44.0 43.1 13.3 9.2 7.5 14.7 20.2 2.6 29.9 15.3 (5.5) 2.5 7.8 5.9 60.0 3.9 (1.5) 2.8 26.5 100.0	Increase/ (Decrease) Composition Ratio in 2010 (%) (%) 44.0 43.1 13.3 9.2 7.5 14.7 20.2 2.6 29.9 15.3 (5.5) 2.5 7.8 5.9 60.0 3.9 (1.5) 2.8 26.5 100.0
		100.0

The fuel cost incurred by the Group in 2010 was approximately RMB3.845 billion, an increase of 44.0% as compared with 2009, representing 43.1% of the total operating cost. Such change was due to the significant increase of international oil prices as compared with 2009. The average price of Singapore 380CST fuel for 2010 increased by 25.3% as compared with the same period in 2009. In 2010, the Group further enhanced its fuel saving, and in light of the total shipping turnover volume increase of 21.7%, the total fuel consumption of the Group amounted to 968,800 tonnes, representing an increase of 11.9% as compared with the same period in 2009. The fuel consumption per thousand nautical miles was 3.59 kg, representing a decrease of 8.1% as compared with that of the same period in 2009.

The Group’s depreciation expenses incurred in 2010 amounted to approximately RMB1,364 million, an increase of 29.9% as compared with that of the same period in 2009, representing 15.3% of the total operating costs. Such change was due to the daily average capacity increase of 23.1% as a result of the delivery of 9 new tankers and 12 new bulk vessels.

— 29 —

(4) Interests in the jointly-controlled entities results

In 2010, the Group has recognised its profits in the 6 jointly-controlled entities of approximately RMB217 million, representing an increase of 254.5% as compared with that of the same period in 2009. The main reason for such change was due to the increases in the cargo volume and freight in domestic bulk shipping business, and the operating results achieved by the 6 jointly-controlled entities of the Group. In 2010, the 6 jointly-controlled entities achieved a shipping volume of 59.87 billion tonne-nautical miles, an increase of 92.4% as compared with the same period in 2009. The turnover achieved by the 6 jointly-controlled entities in 2010 was approximately RMB5,404 billion, with a net profit of approximately RMB473 million, representing increases of 239% and 272.4% as compared with the same period in 2009 respectively.

As at 31 December 2010, the 6 jointly-controlled entities owned 49 bulk vessels with a total capacity of 2,472,000 deadweight tonnes and 24 vessels under construction with the capacity of 1,234,000 deadweight tonnes.

The operating results achieved by the 6 jointly-controlled entities in 2010 are as follows:

	Interest held
	by the	Shipping	Operating
Company name	Company	volume	revenue	Net profit
		(billion tonne
		nautical
		miles)	(RMB’000)	(RMB’000)
Shanghai Times Shipping Co.,
Limited	50%	27.01	1,747,724	111,029
Shanghai Friendship Marine
Co., Limited	50%	1.57	140,081	10,951
Huahai Petrol Transportation &
Trading Co., Limited	50%	1.80	153,369	4,821
Guangzhou Development
Shipping Co., Limited	50%	1.36	267,486	13,293
Shenhua Zhonghai Marine Co.,
Limited	49%	28.13	2,996,799	294,514
China Shipping Finance Co.,
Limited	25%	N/A	98,628	38,881

Notes:

• (1) On 17 May 2010, the Company entered into a share transfer agreement with Shanghai Shipping (Group) Company, a wholly-owned subsidary of China Shipping (Group) Company and a connected person of the Company, pursuant to which the Company agreed to purchase the 50% equity interest of Huahai Petrol Transportation & Trading Co., Limited, for a consideration of RMB144,459,154.80 in cash.

• (2) At the first Board meeting of 2010 held on 29 January 2010, the Company passed the resolution regarding the capital contribution agreement signed by the Company and China Shenhua Energy Company Limited in relation to the increase in registered

— 30 —

capital in Zhuhai New Century Shipping Company Limited. In accordance with the agreement, both parties agreed to increase capital contribution to Zhuhai New Century Shipping Company for the first installment in 2010, and it is supposed that the total amount of the capital increase to be contributed by both parties from 2010 to 2012 will be approximately RMB4.6 billion. As at the end of Reporting Period, the Company has contributed RMB149,000,000 to Zhuhai New Century Shipping Company Limited for the first installment, and the date of finalization was 25 June 2010. Following the contributions by both parties, the company name changed from Zhuhai Century Shipping Company Limited to Shenhua Zhonghai Marine Company Limited, and the equity interest held by the Company changed from 50% to 49%.

• (3) In accordance with the resolution passed at the seventh Board meeting of 2010 held on 16 August 2010, the Company entered into a share transfer agreement with Guangzhou Development Coal Investment Co., Limited, pursuant to which the Company acquired 50% registered capital of Guangzhou Development Shipping Co., Limited from Guangzhou Development Coal Investment Co., Limited at a consideration of RMB327,922,000.

3. Financial analysis

• (1) Net cash inflow

The net cash inflow from operating activities of the Group increased from approximately RMB1,908,308,000 for the year ended 31 December 2009 to approximately RMB2,754,300,000 for the year ended 31 December 2010, representing an increase of 44.3%.

(2) Capital commitments

The Group and the Company had capital commitments as at 31 December 2010, of which RMB3,478,709,000 (2009: RMB1,509,107,000 from the Group and RMB793,814,000 (2009: RMB872,916,000) from the Company will be due within the next financial year.

Authorized and contracted for construction and purchases of vessels (Note) Equity Investments	Group 2010 2009 RMB’000 RMB’000 20,436,403 17,464,664 2,111,649 2,103,051 22,548,052 19,567,715	Company 2010 2009 RMB’000 RMB’000 9,214,159 7,367,064 2,111,649 2,103,051 11,325,808 9,470,115	Company 2010 2009 RMB’000 RMB’000 9,214,159 7,367,064 2,111,649 2,103,051 11,325,808 9,470,115
			9,470,115

Note:

According to the construction purchase agreements entered into by the Group in 2006 to 2010, these capital commitments will fall due as from 2011 to 2013 respectively.

— 31 —

(3) Capital structure

As at 31 December 2010, the interest attributable to the shareholders of the parent, bank loans and interest-bearing borrowings amounted to approximately RMB23,091,461,000 and approximately RMB 14,976,003,000 respectively. As at 31 December 2010, the debt-to-equity ratio was 64.9% (31 December 2009:46.1%).

(4) Notes, interest-bearing bank and other borrowings

(a) The Group’s notes, interest-bearing bank and other borrowings are analysed as follows:

Annual Effective interest Maturity (%) Current (i) Bank loan Secured 10% discount to the People’s Bank of China (“PBC”) Benchmark interest rate, Libor + 0.38% to 1.40% 2011 Unsecured Libor + 0.35% to 0.85% 2011 (ii) Other borrowings Unsecured 10% discount to the PBC Benchmark interest rate, 5.004% 2011 Notes, interest-bearing bank and other borrowings - current portion	2010 RMB’000 561,041 662,809 1,223,850 1,200,000 2,423,850	Group 2009 RMB’000 780,963 541,410 1,322,373 — 1,322,373	Company 2010 2009 RMB’000 RMB’000 35,539 — 231,794 541,410 267,333 541,410 1,200,000 — 1,467,333 541,410	Company 2010 2009 RMB’000 RMB’000 35,539 — 231,794 541,410 267,333 541,410 1,200,000 — 1,467,333 541,410
				541,410
				—
				541,410

— 32 —

Annual Group Company Effective interest Maturity 2010 2009 2010 2009 (%) RMB’000 RMB’000 RMB’000 RMB’000

Non-current

(i) Bank loan

Secured 10% discount to the PBC Benchmark interest rate, Libor + 0.38% to 1.40% 2012-2021 4,590,795 3,229,216 319,849 — (ii) Notes Unsecured 3.90% to 4.18% 2012-2014 4,989,873 4,986,318 4,989,873 4,986,318

(iii) Other borrowings Unsecured 10% discount to the PBC Benchmark 2013 - interest rate, 4.86% 2015 2,541,551 — 2,541,551 — Notes, interest-bearing bank and other borrowings - Non-current portion 12,122,219 8,215,534 7,851,273 4,986,318

The Group’s bank loans are secured by pledges or mortgages of the Group’s 15 vessels (2009: 9 vessels) and another 2 vessels under construction (2009: 4 vessels under construction) with total net carrying amount of RMB7,585,649,000 (2009: RMB5,943,403,000) at 31 December 2010.

The carrying amounts of the Group’s and the Company’s notes, interest-bearing bank and other borrowings approximate their fair values.

Except for secured bank loans of RMB4,796,448,000 (2009: RMB4,010,179,000) and unsecured bank loans of RMB649,010,000 (2009: RMB341,410,000) which are denominated in USD, all borrowings are denominated in RMB.

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• (b) At 31 December 2010, the Group’s notes, interest-bearing bank and other borrowings were repayable as follows:

Analysed into: (i) Bank loans: Within one year or on demand In the second year In the third to fifth year, inclusive Over five years (ii) Notes: In the second year In the third to fifth year, inclusive (iii) Other borrowings: Within one year or on demand In the second year In the third to fifth year, inclusive	Group 2010 2009 RMB’000 RMB’000 1,223,850 1,322,373 612,084 397,004 1,866,396 1,191,012 2,112,315 1,641,200 5,814,645 4,551,589 1,995,946 — 2,993,927 4,986,318 4,989,873 4,986,318 1,200,000 — 200,000 — 2,341,551 — 3,741,551 — 14,546,069 9,537,907	Company 2010 2009 RMB’000 RMB’000 267,333 541,410 35,539 — 106,617 — 177,693 — 587,182 541,410 1,995,946 — 2,993,927 4,986,318 4,989,873 4,986,318 1,200,000 — 200,000 — 2,341,551 — 3,741,551 — 9,318,606 5,527,728	Company 2010 2009 RMB’000 RMB’000 267,333 541,410 35,539 — 106,617 — 177,693 — 587,182 541,410 1,995,946 — 2,993,927 4,986,318 4,989,873 4,986,318 1,200,000 — 200,000 — 2,341,551 — 3,741,551 — 9,318,606 5,527,728
			541,410
			— 4,986,318
			4,986,318
			— — —
			—
			5,527,728

Included in other borrowings represent an amount of RMB1,441,551,000 (2009: Nil) were borrowed from China Shipping Finance Co., Limited, a jointly controlled entity of the Company. As at 31 December 2010, the current and non-current portion of this borrowing amounted to RMB200,000,000 (2009: Nil) and RMB1,241,551,000 (2009: Nil) respectively.

Included in other borrowings represent an amount of RMB2,300,000,000 (2009: Nil) were borrowed from the Company’s ultimate holding company. As at 31 December 2010, the current and non-current portion of this borrowing amounted to RMB1,000,000,000 (2009: Nil) and RMB1,300,000,000 (2009: Nil) respectively.

— 34 —

(c) Details of the notes at 31 December 2010 are as follows:

Principal amount Notes issuance cost Proceeds received Accumulated amortisation	Group and Company 2010 2009 RMB’000 RMB’000 5,000,000 5,000,000 (14,496) (14,496) 4,985,504 4,985,504 4,369 814 4,989,873 4,986,318

Notes with principal amount of RMB3,000,000,000 and RMB2,000,000,000 were issued by the Group to investors on 3 August 2009 and 26 November 2009 respectively. The notes carried a fixed interest yield of 3.90% and 4.18% per annum respectively and were issued at a price of 100 per cent of their principal amount, resulting in no discount on the issue. The notes bear interest from 4 August 2009 and 27 November 2009 respectively, payable annually in arrear on 4 August and 27 November of each year. The notes will mature on 3 August 2014 and 26 November 2012 respectively at their principal amount.

(5) Cash and cash equivalents

Cash at banks generates interest income at floating rates based on daily bank deposit rates. Short-term fixed deposits are deposited for various periods of between one day to three months depending on the immediate cash requirements of the Group, and interest income shall accrue at the respective short-term fixed deposit rates. The carrying amounts of the cash and cash equivalents approximate their fair values. At the statement of financial position date, the cash and bank balances of the Group denominated in USD amounted to approximately RMB351,880,000 (2009:RMB493,700,000).

Included in cash and cash equivalents represent an amount of RMB307,451,000 (2009: Nil) of bank balance deposited with China Shipping Finance Co., Limited, a jointly controlled entity of the company.

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Cash and cash equivalents are denominated in the following currencies:

USD RMB HKD EUR GBP SGD JPY	Group Company 2010 2009 2010 2009 RMB’000 RMB’000 RMB’000 RMB’000 351,880 493,700 85,130 98,326 705,513 1,725,226 315,905 1,434,975 1,376 2,132 41 31 1,021 1,037 1,021 1,037 33 46 33 46 1,905 — — — 7 6 7 6 1,061,735 2,222,147 402,137 1,534,421	Group Company 2010 2009 2010 2009 RMB’000 RMB’000 RMB’000 RMB’000 351,880 493,700 85,130 98,326 705,513 1,725,226 315,905 1,434,975 1,376 2,132 41 31 1,021 1,037 1,021 1,037 33 46 33 46 1,905 — — — 7 6 7 6 1,061,735 2,222,147 402,137 1,534,421
		1,534,421

(6) Risk on foreign currency

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to United States Dollar (“USD”) and Hong Kong Dollar (“HKD”) against RMB. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities.

At 31 December 2010, if USD and HKD had weakened or strengthened by 1% against RMB with all other variables held constant, post-tax profit for the year 2010 would have been RMB45,689,000 (2009: RMB37,607,000) higher or lower, mainly as a result of foreign exchange gains or losses on translation of USD and HKD denominated trade receivables and payables and cash and cash equivalents.

The Group does not have significant exposure to foreign exchange risk.

As at 31 December 2010, the Group’s foreign exchange liabilities mainly comprised of bank borrowings in USD equivalent to approximately RMB5,445,458,000. In addition, the Company would pay dividend for H shares in HKD.

Given the increasing significance of the Group’s international shipping business, changes in exchange rates will have certain impact on the Group’s profitability. Therefore, the Group will further strengthen its efforts in monitoring and studying exchange rate fluctuations, and will actively implement effective measures to strive to avoid exchange rate fluctuation risks. Firstly, the Group will strive to break even USD for its operations. Secondly, the Group will conscientiously analyze and compare available financial instruments for averting exchange rate risks, so as to hedge and lock in financial costs, and to effectively protect against risks caused by exchange rate fluctuations.

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4. Others

(1) Investment and fleet expansion projects

In 2010, the Group has achieved further improvement in both investment and fleet expansion.

In 2010, the total investment of the Group was approximately RMB8,765,380,000, of which approximately RMB8,022,540,000 was paid for the purchase of fixed assets (vessels) in cash.

In terms of external investment: (1) For oil transportation business: the Group acquired 50% equity interest of Huahai Petrol Transportation & Trading Co., Limited in 2010；China Shipping Development（Singapore）Shipping Co., Limited was established to explore overseas oil transportation business; (2) For dry bulk transportation business, the Group strengthened cooperation with its major customers. Both the Group and China Shenhua Energy Company Limited increased capital contribution to Shenhua Zhonghai Marine Company Limited for the first installment in 2010; Shanghai Jiahe Shipping Co., Limited. was jointly established by the Company and Shanghai Shenergy Co. Limited in 2010; Tjianjin Zhonghai Huarun was also jointly established by the Company and China Resources Power Logistic (Tianjin) Co., Limited by means of increasing capital contribution; The Group acquired 50% equity interest of Guangzhou Development Shipping Co., Limited; and (3) For LNG shipping business, the board of directors of the Company approved the joint establishment of a LNG shipping and investment company together with Sinopec Kantons Holding Limited in November 2010.

In terms of fleet expansion, 9 new tankers with a total capacity of 1,380,000 deadweight tonnes and 12 new bulk vessels with total capacity of 1,416,000 deadweight tonnes have been delivered for use in 2010. In addition, to cope with the changes in shipping market, the Group has upgraded 7 old vessels with a total net assets of approximately RMB222,160,000 in 2010, and approximately RMB309,710,000 has been paid for the transformation of these old vessels.

As at 31 December 2010, the Group owned 176 vessels with a total capacity of 11,366,000 deadweight. The composition of the Group’s fleet is as follows:

Number of vessels Deadweight tonnes (‘000) Tankers 69 6,387 Dry bulk vessels 107 4,979 Total 176 11,366	Average age (years) 8.0 17.7
	14.3

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(2) Material asset disposals

In 2010, the Group disposed of 15 old vessels of 344,000 deadweight tonnes, including 3 tankers of 81,000 deadweight tonnes and 12 bulk vessels of 404,000 deadweight tonnes. The details of such disposals are as follows:

		Profit arising
	Price of	from disposal	Connected
Assets sold	Disposal	of assets	transaction	Pricing Policy
	(RMB’000)	(RMB’000)	(Yes/No)
Daqing 217	5,030	1,203	No	Market price
Daqing 234	17,601	7,985	No	Market price
Gui He	33,224	15,551	Yes	Market price
Hua De	18,485	12,884	No	Market price
Yin Bin	47,038	15,140	No	Market price
Yin Yang	45,520	21,064	No	Market price
Hua Zhong	18,992	13,034	No	Market price
Hua Nan	22,044	15,116	No	Market price
Hua Kun	18,696	12,820	No	Market price
Xue Feng Ling	20,195	9,294	No	Market price
Hu Zhou	24,359	16,851	No	Market price
Daqing 87	23,691	8,451	No	Market price
Senhai 1	13,103	8,940	Yes	Market price
Da Yu Shan	25,424	12,088	No	Market price
Lian Chi	23,093	8,226	Yes	Market price
Total	356,495	178,647

(3) Vessel safety management

While striving to achieve both transportation and economic efficiency, the Group actively proceeded with the improvement and operation of the vessel safety management system, carried out seasonal climate change and interim safety work and strengthened efforts in preventing attacks from pirates. In 2010, the Group’s vessels did not encounter any attacks in the regions with high piracy risks. The Group carefully planned the security work during the Shanghai Expo and the Guangzhou Asian Games and provided positive assurance and support for the successful opening of the 2010 Shanghai Expo and the 16th Guangzhou Asian Games, achieving the target of maintaining production safety and the stability of the Company.

(4) System establishment

In 2010, the Group continued to improve systems and processes and implemented sophisticated management and information systems in an all-round manner. Through comprehensive budget management, the Group further controlled costs and further reinforced risk prevention, particularly the prevention of business risks, through comprehensive risk management system.

— 38 —

5. Outlook and highlights for 2011

(1) Prediction and Analysis of International and Domestic Shipping Markets

In 2011, the first year of the “TwelveFive-year Plan”, the World’s economy is expected to continue to resume growth, although there still remain quite a lot of uncertainties. China’s economy as a whole is favorable, while there are certain outstanding issues and conflicts and increasing pressure for economic restructuring. Despite demand from domestic and international shipping market which will continue to grow, over capacity of global fleet will still be grim and international oil price will continue to remain high. As shown from various analysis and forecast, it will take time for full recovery of the international dry bulk shipping market and the international oil transportation market. Our overall observation of the shipping market is cautiously optimistic with different market segments having different performance.

With increasing domestic demand of oil, the coastal oil transportation market is expected to continue steady growth in 2011. As at 11 March 2011, the Group had completed signing contracts of affreightment in respectof shipping of dry bulk cargo along coastal areas in 2011 (COA contracts) with a slight year-on-year increase in shipping rate and shipping volume.

(2) Operational target for 2011

In 2011, 26 new vessels of the Group with a total tonnage of 3,191,000 deadweight tonnes are scheduled to be delivered for use, including 4 tankers of 536,000 deadweight tonnes and 22 bulk vessels of 2,655,000 deadweight tonnes. As a result, the total shipping capacity of the Group which could be used in the Group’s operations in 2011 is expected to be 13.50 million deadweight tonnes, representing an increase of 22.9% as compared with that of the same period in 2010. Based on its view of the domestic and overseas shipping markets in 2011, and taking into account of the delivery of new vessels, the Group’s operating targets are as follows: shipping volume of approximately 364.9 billion tonne nautical miles, an increase of 35.3% as compared with 2010; estimated turnover of approximately RMB13.98 billion, an increase of 22.5%; operating costs of approximately RMB10.84 billion, an increase of 21.4% as compared with 2010.

(3) Work initiatives in 2011

To cope with the current market situation, the Group will:

• i) actively implement the strategy of reinforcing its coastal business and developing its offshore business, continue to strengthen strategic partnership with major customers, further consolidate and expand the Company’s share in both domestic and international shipping markets. Cooperation and alliances will be a major trend of the shipping market in future as they can strengthen cooperation within the industry, reducecombined cost and improve industrial competitiveness. To this end, the Company will continue to actively build strategic alliances with cargo owners and ship owners, maximize scale capacity advantage and enhance operational efficiency of ships through strengthening formation of joint venture companies, signing long-term COA contracts and other means.

— 39 —

In recent years, the Company has actively implemented its strategies of cooperation with major customers, and sought to change the development mode based on stable supply and market expansion. For bulk cargoes transportation, the Company has actively promoted strategic cooperation with Huaneng, Shenhua, Baosteel, Shougang, China Resources, Shenergy, Shanghai Electric Power and Guangzhou Holding through joint venture partnerships and other means. As a result, the Company has quickly expanded its size of controllable capacity and enhanced control of the coastal thermal coal transportation market. The focus of 2011 will continue to be the work requirements of “improvement and development of coastal operation, expansion and development of off shore operation and stable development of joint ventures”; improving operation and management of the large ships newly commenced production; striving to adjust supply structure and customer structure; and enhancing scale, management and efficiency. For oil product transportation, the Company will strengthen consolidation of cooperation with domestic and foreign oil companies, seize market opportunities for domestic and foreign trades, improve operation of large ships such as VLCC, stable base supply, nurture ocean management team and enhance comprehensive benefits.

ii) implement further adjustments to vessel composition, and endeavor to deliver new vessels. In accordance with the signed book orders for new vessels, the delivery of new vessels of the Group are as follows:

	**In **	2011	**In **	2012	**In **	2013
		Capacity		capacity		capacity
		(deadweight		(deadweight		(deadweight
	numbers	tones)	numbers	tones)	numbers	tones)
Tankers	4	536,000	11	714,000	2	640,000
Bulk vessels	22	2,655,000	34	3,572,000	4	192,000

2011 and 2012 are the peak years for the Group to take delivery of new vessels. The Group will get well-prepared in all aspects including ship construction supervision, crew training and selection as well as management and training of personnel, so as to ensure the efficient acquisition, management and operation of large vessels, and to provide high-quality human resources to build a world-class tanker fleet and optimise bulk cargo shipment, hence achieving the coordinated development of our fleet and workforce.

iii) strengthen its cost control system to enhance cost effectiveness. In 2011, the Group will continue to strengthen control over management and other fees to prevent the rebound thereof. Fuel costs are one of the Group’s major costs. The Group will continue to strengthen energy-saving and the use of energy-saving technologies, implement the policy of economic speed and strive to control fuel costs.

— 40 —

• iv) expand its financing sources to secure development funds for the Company. According to the Group’s shipbuilding plans, the capital expenditure of the Group from 2011 to 2013 is RMB12.22 billion, RMB7.36 billion and RMB1.02 billion respectively. Meanwhile, the associated and joint venture companies of the Group have a strong demand for capital increases. In this connection, the Company will further strengthen cooperation with banks to maintain smooth financing channels and establish contingency plans for financing. In 2011, the Company will strive to complete the issue of A share convertible corporate bonds of not exceeding RMB3.95 billion with a view to further improving the Company’s capital structure and reducing its financing cost.

• v) continue to implement sophisticated management, further promote overall budget management and risk management and implement information system. According to the plans of the relevant ministries and committees under the central government, “Basic Standards for Enterprise Internal Control” and “Implementation Guidelines for Enterprise Internal Control” will be applicable to companies that are both listed home and abroad with effect from 2011. The Company will take this opportunity to strengthen its internal control and streamline its internal structure, so as to provide reliable support and protection for its steady and healthy development.

• vi) continue to strengthen safety and security. We will work hard to avoid possibilities of ship collision, carry out anti-piracy, fire prevention and anti-pollution measures, and will construct and operate a comprehensive security system.

III. OTHER SIGNIFICANT EVENTS

• (1) Results, dividends and closure of the H Share register

The net profit of the Company for 2010, as determined in accordance with PRC GAAP, was approximately RMB175,232,000, 10% of which will be transferred to the statutory surplus reserve. According to the relevant laws and regulations, the Company’s reserves available for distribution are determined based on the lower of the amount determined under PRC GAAP and the amount determined under HK GAAP.

The Directors recommended the payment of a final dividend of RMB0.17 per share in respect of the year 2010 to shareholders on the register of members at the close of business on 26 April 2011. There was no arrangement under which a shareholder of the Company has waived or agreed to waive any dividends. This recommendation has been incorporated in the financial statements as an allocation of retained profits within the equity section of the statement of financial position.

The H share register of members of the Company will be closed from Wednesday, 27 April 2011 to Friday, 27 May 2011, both days inclusive, during which period no transfer of H shares will be registered. Shareholders whose names appear on the H share register of members of the Company on Friday, 27 May 2011 will be entitled to the proposed final dividends. In order to qualify for the proposed final dividend and to determine the identity of the shareholders who are entitled to attend and vote at the 2011 annual general meeting of the Company, all duly completed transfer forms accompanied by the relevant share certificates must be lodged with the

— 41 —

share registrar of the Company’s H shares, Hong Kong Registrars Limited at Rooms 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not later than 4:30 p.m. on Tuesday, 26 April 2011. The H shares of the Company will trade ex-dividend on Thursday, 21 April 2011.

(2) Medical insurance scheme

As required by the regulations of the PRC government effective from 1 July 2001, the Company participates in a defined contribution medical insurance scheme organised by PRC social security authorities. Under the scheme, the Company is required to make monthly contributions at the rate of 12% of the total salaries of the employees after certain adjustments on individual employee’s salary in accordance with the applicable regulations. In addition, pursuant to the aforementioned regulations, the contributions are accounted for as staff welfare payables accrued by the Company. The Company has no obligation for the payment of medical benefits beyond such contributions to the registered insurance companies.

Since 1 July 2010, the Company has developed a defined medical insurance scheme according to the spirit of the State to advocate the establishment of a multi-level enterprise medical security system and of the “Notice on Enterprise Income Tax Policies Relating to Defined Contribution Retirement Insurance and Defined Medical Insurance (Cai Shui [2007] No. 27). Under the scheme, the Company shall make a provision of 5% of the total salary of employees, which shall be deposited into a special account for defined medical insurance fund.

(3) Pension and Enterprise annuity schemes

i) PRC (other than Hong Kong)

Pension scheme

The Group is required to contribute to a pension scheme (the “Scheme”) for its eligible employees. Under the Scheme, the Group’s retirement benefit obligations to its existing retired and future retiring employees except for the medical expenses to retired employees, are limited to its annual contributions equivalent to the range of 18%-22% (2009: 18%-22%) of the basic salaries of the Group’s employees, after certain adjustments on individual employee’s salaries in accordance with applicable regulations. Contributions by the Group to the Scheme for the year ended 31 December 2010 amounted to RMB137,811,000 (2009: RMB132,099,329).

Enterprise annuity scheme

In the year 2009, after the resolution held between the representatives of the Group’s Labour Union and the Board, a scheme on the enterprise annuity has been set up. The annuity scheme confirms that the employer’s contributions will be 5% of the total staff costs of previous year. The employees’ contributions will be 1.25% of their income from previous year and the employer’s contributions for the management staff should not be 5 times more than the staff average.

— 42 —

The enterprise annuity scheme is effective as on 1 January 2009. According to the scheme, actual amount incurred as labour cost of the Group in 2010 amounted to RMB46,822,000 (2009: RMB73,570,000).

The Group has no further obligations beyond the annual contributions. In the opinion of the directors of the Group, the Group did not have any significant liabilities beyond the above contributions in respect of the retirement benefits of its employees.

ii) Hong Kong

The Group operates a MPF Scheme under the Hong Kong Mandatory Provident Fund Schemes Ordinance for employees employed in Hong Kong. The MPF Scheme is a defined contribution retirement scheme administered by independent trustees. Under the MPF Scheme, the employer and its employees are each required to make contributions to the MPF Scheme at 5% of the employees’ relevant income, subject to a cap of monthly relevant income of HK$20,000. Contributions to the MPF Scheme vest immediately.

(4) Directors’ and supervisors’ interests and short positions in shares and underlying shares of the Company

As at 31 December 2010, none of the Directors, supervisors, chief executives or, to the best knowledge of the Directors, their associates had registered an interest or short position in the shares and underlying shares of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) that was required to be recorded pursuant to Section 352 of the SFO, or otherwise required to be notified to the Company and The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”).

(5) Purchase, sale or redemption of the Company’s listed securities

Neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the

Company’s listed securities during the Reporting Period.

(6) Compliance with the Code on Corporate Governance Practices

During the Reporting Period, the Company has complied with the code provisions set out in the Code on Corporate Governance Practices contained in Appendix 14 of the Rules Governing the Listing of Securities on the Stock Exchange (the “Listing Rules”).

(7) Audit Committee

In compliance with Rule 3.21 of the Listing Rules, the Company has established an audit committee to review the financial reporting procedures and internal control and to provide guidance thereto. The audit committee of the Company comprises the four independent non-executive Directors of the Company.

The audit committee has reviewed the annual results of the Company for the Reporting Period.

— 43 —

(8) Remuneration Committee

The remuneration committee comprised of the four independent non-executive Directors of the Company. The remuneration committee of the Company has adopted terms of reference which are in line with the Code on Corporate Governance Practices contained in Appendix 14 of the Listing Rules.

(9) Compliance with the Model Code as set out in Appendix 10 to the Listing Rules

The Company has adopted a code of conduct regarding Directors’ securities transactions in accordance with the required standard set out in the Model Code.

Following specific enquiries made with the Directors, supervisors and chief executive of the Company, the Company has confirmed that each of them has complied with the Model Code during the Reporting Period.

(10) Employees

Adjustment of employee remuneration is calculated in accordance with the Company’s turnover and profitability and is determined by assessing the correlation between the total salary paid and the economic efficiency of the Company. Under this mechanism, management of employees’ remuneration will be more efficient while employees will be motivated to work hard to bring encouraging results for the Company. The Company does not maintain any share option scheme for its employees and the employees do not receive any bonus. The Company regularly provides to its administrative personnel training on various subjects, including operation management, foreign languages, computer skills, industry know-how and policies and laws. Such training may be in different forms, such as seminars, site visits and study tours.

As at 31 December 2010, the Company had 5,714 employees. During the Reporting Period, the total staff cost was approximately RMB1,556,824,000 (In 2009: RMB1,330,349,000).

(11) Contingent Liabilities

• i) In December 2005, one of the Company’s oil tankers “Daiqing 91” leaked fuel during its voyage in the waters of the Bohai Bay of The FRC. A hull crack of approximately 4.5m was discovered After the investigation done by the Maritime Safety Administration which affirmed the hull cracking, the leakage polluted the sea. The Company formed an incident management team. Hence, there was a settlement agreement among Ministry of Communication, the Company and local authorities such as Maritime Safety Administration of Shandong Province and that the Company would assume responsibility of the accident. As the Company had been insured with the United Kingdom Mutual Steamship Assurance Association. The Company had made sufficient provision for its estimated loss. As at 31 December 2010, the Company is still in the process of settlement, litigation and claiming compensation from the insurance company.

• ii) In December 2007, “Fuzhou” collided with “Chongcheong 118”, which sunk afterwards. According to the judgement made by the Maritime Law Count at Shanghai on 9 March 2009, Shanghai Boshan Steel has lost its appeal and the Company is allowed to set up a

— 44 —

Limitation Fund for Maritime Claims Liability amounting to RMB16,318,000. Since the Company had been insured, all compensation will be borne by the insurance company. As at 31 December 2010, the Company is still in the process of settling all the issues concerned.

• iii) In September 2009, one of the Company’s cargo vessels “Wanshoushan” leaked during its voyage in the waters of the Sulu Sea. An incident management team was set up and had made sufficient provision for its estimated loss based on its previous experience in handling similar cases. The Company had been insured with an insurance company and had made provision of its liability. Up to 31 December 2010, the Company is still in the process of investigating the damages.

• iv) In December 2010, one of the Company’s cargo vessels “Jiaxinshan” leaked with apparent conditions of goods in the cargo seriously liquidified during its voyage into the waters near Sulu Sea of the Philippines. The safety of the vessel and other cargo were endangered and the cargo was sea damaged. The cargo was then unloaded and dried in the Philippines pending negotiations and settlement. A provision of total of RMB4,500,000 was recognised. Up to 31 December 2010, the Company is still in the process of settling all issues concerned.

• v) In March 2009, Guangzhou Shipping signed a thirteen-year loan agreement in the amount not exceeding RMB500,000,000 with a commercial bank for the construction of two 57,000 deadweight tons vessels. Guangzhou Development Industry (Holdings) Co., Limited (“Guangzhou Holdings”) entered into a guarantee contract with the commercial bank to provide guarantees to secure the bank loan in the maximum amount of RMB500,000,000. The guarantee period given by Guangzhou Holding is the same as the period of the loan agreement.

On 16 August 2010, the Company acquired 50% registered capital of Guangzhou Shipping, a wholly owned subsidiary of Guangzhou Development Coal Investment Co., Limited. At the 14th board meeting in 2010, the Company passed the resolution to offer a counter-guarantee letter in the maximum amount of RMB250,000,000 to Guangzhou Holdings, in accordance with the joint venture agreement signed with Guangzhou Development Coal Investment Co., Limited signed on 16 August 2010.

(12) Change of international auditors

During the Reporting Period, UHY Vocation HK CPA Limited (“UHY Hong Kong”) transferred its H-share audit business to Baker Tilly Hong Kong Limited (天職香港會計師事務所有限公司) (“Baker Tilly Hong Kong”). UHY Hong Kong tendered its resignation to the Company as international auditors of the Company with effect from 16 November 2010. The appointment of Baker Tilly Hong Kong was approved, confirmed and ratified in the extraordinary general meeting of the Company on 25 January 2011. UHY Hong Kong confirmed in its letter of resignation dated 16 November 2010 that there was no disagreement between UHY Hong Kong and the Company, nor were there matters connected with its resignation that needed to be brought to the attention of the creditors, audit committee or shareholders of the Company. The Board also

— 45 —

confirmed that there were no other matters in respect of the change of international auditors which should be brought to the attention of the shareholders of the Company. For further details, please refer to the Company’s announcements dated 1 November 2010, 18 November 2010 and 25 January 2011.

(13) Events after reporting period

• (i) The Company passed the resolution in a board meeting held on 30 January 2011 regarding the issuance of convertible bonds. The Company proposed to issue convertible bonds in principal amount equal to or not more than RMB3.95 billion convertible into new A shares of the Company (the “Convertible Bonds”). The issuance of the Convertible Bonds is conditional upon the approval of State-owned Assets Supervision and Administration Commission of the State Council and China Securities and Regulatory Commission. For further details, please refer to the Company’s announcement dated 31 January 2011 and circular dated 16 February 2011.

• (ii) Mr. Mao Shijia resigned as an executive director of the Company and a member of the Board’s strategy committee with effect from 30 January 2011. The Company proposed to appoint Mr. Yan Zhichong as an executive director of the Company subject to the approval of the Company’s shareholders at the forthcoming extraordinary general meeting. Mr. Yan Zhichong resigned as the supervisor of the Company and was appointed as the general manager of the Company with effect from 21 January 2011. For further details, please refer to the Company’s announcements dated 21 January 2011 and 31 January 2011 and circular dated 16 February 2011.

• (iii) The Company proposed to adopt a new set of articles of association to replace the existing one for the purpose of improving corporate governance and updating the articles of association. The proposed adoption is subject to the approval of the Company’s shareholders at the forthcoming extraordinary general meeting. For further details, please refer to the Company’s announcement dated 11 March 2011.

• (14) Publication of annual results on the internet website of the Company and The Stock Exchange of Hong Kong Limited

An annual report of the Company containing all the financial and relevant information as required under the Listing Rules will be posted on the website of the Company and the Hong Kong Stock Exchange in due course.

The financial information set out above does not constitute the Company’s statutory financial statements for the years ended 31 December 2009 and 2010, but is derived from the consolidated financial statements prepared in accordance with accounting principles generally accepted in Hong Kong and complies with accounting standards issued by the HKICPA. Those consolidated financial statements for the year ended 31 December 2010, which will contain an unqualified

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auditors’ report, will be delivered to the Registrar of Companies, and delivered to shareholders as well as made available on the Company’s website at http://www.cnshippingdev.com.

By order of the Board Li Shaode Chairman

16 March 2011 Shanghai, the PRC

As at the date of this announcement, the board of directors of the Company is comprised of Mr. Li Shaode, Mr. Ma Zehua, Mr. Lin Jianqing, Mr. Wang Daxiong, Mr. Zhang Guofa and Mr. Qiu Guoxuan as executive directors, Mr. Zhu Yongguang, Mr. Gu Gongyun, Mr. Zhang Jun and Mr. Lu Wenbin as independent non-executive directors.

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