Dida Inc. — Annual Report 2017

Mar 28, 2017

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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COSCO SHIPPING ENERGY TRANSPORTATION CO., LTD.[*] 中遠海運能源運輸股份有限公司

(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 2016

FINANCIAL HIGHLIGHTS

• Revenue of the continuing operations of the Group for 2016 was approximately RMB9.66 billion, representing a decrease of approximately 9.81% as compared to 2015

• Profit for the year attributable to owners of the Company for 2016 was approximately RMB1.93 billion, representing an increase of approximately 63.78% as compared to 2015

• The basic and diluted earnings per share for 2016 were RMB47.97 cents

• • The Board recommends the payment of a final dividend of RMB19 cents per share for 2016

The board (the “ Board ”) of directors (the “ Directors ”) of COSCO SHIPPING Energy Transportation Co., Ltd. (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 2016 (the “ Reporting Period* ”), together with the comparative figures for the year ended 31 December 2015. 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 auditor.

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I. PRINCIPAL FINANCIAL DATA AND STATISTICS HIGHLIGHTS

The annual results of the Group for the Reporting Period as audited by Baker Tilly Hong Kong Limited and compared with those for the year ended 31 December 2015 are set out as follows:

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the year ended 31 December 2016

Note Continuing operations Turnover 5 Operating costs Gross profit Other income and net gains 6 Marketing expenses Administrative expenses Other expenses Share of profits of associates Share of profits of joint ventures Finance costs 7 Profit before tax Income tax 8 Profit for the year from continuing operations Discontinued operation Profit/(loss) for the period/year from discontinued operation, net of tax 11 Profit for the year	2016 RMB’000 9,658,291 (6,956,661) 2,701,630 10,039 (14,697) (678,259) (65,838) 268,099 169,458 (869,544) 1,520,888 (314,714) 1,206,174 760,501 1,966,675	2015 (Restated) RMB’000 10,709,298 (7,505,633) 3,203,665 1,004,508 (15,055) (498,083) (55,731) 215,932 223,506 (1,056,665) 3,022,077 (237,122) 2,784,955 (1,527,222) 1,257,733

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Other comprehensive income Items that will not be reclassified subsequently to profit or loss, net of nil tax: Remeasurement of defined benefit plan payable Items that may be reclassified subsequently to profit or loss, net of tax: Exchange realignment Fair value loss on available-for-sale investments Net loss on cash flow hedges Release upon disposal of discontinued operation Share of other comprehensive (expense)/income of associates Share of other comprehensive income of joint ventures Other comprehensive income for the year Total comprehensive income for the year Profit for the year attributable to owners of the Company: - Continuing operations - Discontinued operation Profit for the year attributable to non-controlling interests: - Continuing operations - Discontinued operation Profit for the year	2016 RMB’000 (160) 443,913 (4,488) (30,641) 362,032 (23,590) 71,113 818,179 2,784,854 1,191,541 742,523 1,934,064 14,633 17,978 32,611 1,966,675	2015 (Restated) RMB’000 — 352,977 — (104,840) — 3,457 56,555 308,149 1,565,882 2,774,179 (1,593,258) 1,180,921 10,776 66,036 76,812 1,257,733

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		2016	2015
	Note		(Restated)
		RMB’000	RMB’000
Total comprehensive income for the year
attributable to:
Owners of the Company		2,787,042	1,554,173
Non-controlling interests		(2,188)	11,709
		2,784,854	1,565,882
Earnings per share	10
			(Restated)
		RMB cents	RMB cents
From continuing and discontinued operations
- Basic and diluted		47.97	29.70
From continuing operations
- Basic and diluted		29.55	69.78

Details of the dividends for the Reporting Period are disclosed in note 9.

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION At 31 December 2016

31 December 2016 31 December 2015 (Restated) RMB’000 RMB’000 NON-CURRENT ASSETS Investment properties 1,104,907 1,097,975 Property, plant and equipment 41,854,733 63,136,985 Prepaid land lease payments 79,599 81,978 Goodwill 58,168 — Investments in associates 1,994,902 2,040,968 Investments in joint ventures 2,169,448 6,187,294 Loan receivables 1,453,585 2,119,286 Available-for-sale investments 279,761 125,863 Deferred tax assets 52,258 486,993 49,047,361 75,277,342 CURRENT ASSETS Current portion of loan receivables 18,899 — Inventories 451,402 715,086 Trade and bills receivables 1,206,458 2,791,298 Prepayments, deposits and other receivables 908,984 1,887,095 Pledged bank deposits 24,134 45,731 Cash and cash equivalents 6,364,583 4,863,247 8,974,460 10,302,457	1 January 2015 (Restated) RMB’000 1,139,996 60,980,247 86,922 — 1,711,702 5,990,867 786,540 90,984 462,108
	71,249,366
	— 1,092,022 2,273,078 1,115,889 769,688 4,447,091
	9,697,768

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31 December 2016 31 December 2015 (Restated) RMB’000 RMB’000 CURRENT LIABILITIES Trade and bills payables 1,349,984 1,477,972 Other payables and accruals 1,153,027 1,165,492 Current portion of provision and other liabilities 302,551 181,308 Current portion of derivative financial instruments — 4,258 Current portion of interest-bearing bank and other borrowings 4,624,633 11,063,827 Current portion of other loans 2,251 — Current portion of obligations under finance leases — 48,751 Current portion of bonds payable — — Current portion of employee benefits payable 12,620 13,130 Tax payable 120,136 134,312 7,565,202 14,089,050 NET CURRENT ASSETS/(LIABILITIES) 1,409,258 (3,786,593) TOTAL ASSETS LESS CURRENT LIABILITIES 50,456,619 71,490,749

1 January 2015 (Restated) RMB’000 1,866,235 557,323 189,261 18,578 9,758,444 44,714 43,979 4,143,383 — 5,092 16,627,009 (6,929,241) 64,320,125

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31 December 2016 31 December 2015 (Restated) RMB’000 RMB’000 EQUITY Equity attributable to owners of the Company Issued capital 4,032,033 4,032,033 Reserves 23,381,056 27,675,185 27,413,089 31,707,218 Non-controlling interests 9,993 862,874 TOTAL EQUITY 27,423,082 32,570,092 NON-CURRENT LIABILITIES Provision and other liabilities 208,068 174,553 Derivative financial instruments 474,988 411,385 Interest-bearing bank and other borrowings 16,881,809 32,411,923 Other loans 1,049,820 1,199,539 Obligations under finance leases — 354,003 Bonds payable 3,982,045 3,978,488 Employee benefits payable 140,890 145,380 Deferred tax liabilities 295,917 245,386 23,033,537 38,920,657 TOTAL EQUITY AND NON-CURRENT LIABILITIES 50,456,619 71,490,749	1 January 2015 (Restated) RMB’000 3,481,405 22,225,929
	25,707,334 596,657
	26,303,991
	158,821 291,553 31,956,005 930,946 404,481 3,975,124 — 299,204
	38,016,134
	64,320,125

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CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2016

NET CASH GENERATED FROM OPERATING ACTIVITIES INVESTING ACTIVITIES Interest received Payments for construction in progress Purchases of property, plant and equipment Proceeds from disposal of property, plant and equipment Loans to associates Loans to joint ventures Loans to fellow subsidiaries Repayment from associates Repayment from fellow subsidiaries Dividends received from associates Dividends received from joint ventures Dividends received from available-for-sale investments Acquisition of a subsidiary from business combination involving entities under common control Acquisition of a subsidiary, net of cash (paid)/acquired Acquisition of additional interests in a subsidiary Net cash inflow from disposal of discontinued operation Investments in associates Investments in joint ventures Decrease in pledged bank deposits NET CASH GENERATED FROM/(USED IN) INVESTING ACTIVITIES	2016 RMB’000 12,064,988 205,810 (4,228,891) (48,788) 56,133 (18,231) (454,600) — 1,238,884 10,566,129 200,000 504,938 9,640 (6,629,409) (206,024) — 4,131,313 — (133,320) 21,597 5,215,181	2015 (Restated) RMB’000 7,600,649 90,430 (3,802,415) (77,217) 676,361 (1,219,347) (9,144) (325,540) — 355,540 160,000 670,521 23,442 — 2,783 37,302 — (266,411) (566,357) 723,957 (3,526,095)

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FINANCING ACTIVITIES Interest paid Dividends paid Dividends paid to non-controlling interests of subsidiaries Cash and cash equivalents distributed on dividend in specie Increase in other loans Repayment of other loans Increase in interest-bearing bank and other borrowings Repayment of interest-bearing bank and other borrowings Capital element of finance leases rental paid Redemption of corporate bonds Redemption of convertible bonds Capital contribution from former shareholder NET CASH USED IN FINANCING ACTIVITIES NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT 1 JANUARY Effect of foreign exchange rate changes, net CASH AND CASH EQUIVALENTS AT 31 DECEMBER	2016 RMB’000 (1,131,831) (403,203) (11,850) — 214,980 (5,031) 4,310,640 (18,807,756) (38,330) — — — (15,872,381) 1,407,788 4,863,247 93,548 6,364,583	2015 (Restated) RMB’000 (1,561,645) (120,961) (6,967) (67,381) 291,011 (14,726) 14,723,515 (16,232,144) (57,164) (1,000,000) (34,744) 224,390 (3,856,816) 217,738 4,447,091 198,418 4,863,247

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Notes:

1. CORPORATE INFORMATION

The Company is a joint stock company with limited liability established in the People’s Republic of China (the “ PRC ”). The registered office of the Company is Room A-1015, No.188 Ye Sheng Road, China (Shanghai) Pilot Free Trade Zone, the PRC and, effective from 29 November 2016, the principal place of business has been changed to 18th Floor, 118 Yuanshen Road, Pudong New District, Shanghai, the PRC.

Pursuant to a special resolution passed on 19 September 2016, and upon the issuance of a new business license dated 18 October 2016 by the Administration for Industry & Commerce of Shanghai in the PRC, the Company changed its Chinese name from “中海發展股份有限公司” to “中遠海運能源運輸股份有限公司” and its English name from “China Shipping Development Company Limited” to “COSCO SHIPPING Energy Transportation Co., Ltd.” (the “Change of Name”).

During the Reporting Period, the Group were involved in the following principal activities:

(a) investment holding; and/or

(b) oil and cargo shipment along the PRC coast and international shipment; and/or

(c) vessel chartering.

As at 31 December 2015, China Shipping (Group) Company (“ China Shipping ”), a company established in the PRC, was regarded as the Company’s ultimate holding company. On 4 May 2016, the Company received a notice from China Shipping, pursuant to which, on 4 May 2016, the State-owned Assets Supervision and Administration Commission of the State Council, the PRC (the “ SASAC ”) gratuitously transferred its entire equity interest in China Shipping to China COSCO Shipping Corporation Limited (“ COSCO Shipping ”), a company established in the PRC (the “ Controlling Shareholder Restructuring ”). Upon the completion of the Controlling Shareholder Restructuring, China Shipping became a wholly-owned subsidiary of COSCO Shipping. As at 31 December 2016, in the opinion of the Directors, China Shipping and COSCO Shipping were the Company’s immediate holding company and ultimate holding company respectively.

The H-Shares and A-Shares of the Company are listed on the Main Board of The Stock Exchange of Hong Kong Limited and The Shanghai Stock Exchange respectively.

These consolidated financial statements are presented in Renminbi (“ RMB ”), which is the functional currency of the Group, and all values are rounded to the nearest thousand except where otherwise indicated.

These consolidated financial statements have been approved for issue by the Board on 28 March 2017.

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2. SIGNIFICANT ACCOUNTING POLICIES

2.1 Statement of compliance

These consolidated financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (“ HKFRSs ”), which collective term includes all applicable individual HKFRSs, Hong Kong Accounting Standards (“ HKASs ”) and 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 consolidated financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “ Listing Rules ”).

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. The consolidated financial statements provide information on any changes in accounting policies resulting from initial application of these developments to the extent that they are relevant to the Group for the current and prior periods reflected in the consolidated financial statements.

2.2 Basis of preparation

In accordance with the asset transfer agreements entered into between the Company and China Ocean Shipping (Group) Company (“ China Ocean Shipping ”) on 29 March 2016, the Company acquired 100% equity interest in COSCO SHIPPING Tanker (Dalian) Co., Ltd. (formerly known as Dalian Ocean Shipping Company Limited) (“ Dalian Tanker ”) at a consideration of RMB6,629,408,800. The acquisition of Dalian Tanker was completed on 30 June 2016 and has been accounted for as combination of businesses under common control since the Directors consider that the Company and Dalian Tanker are under common control of the SASAC both before and after the above mentioned acquisition.

The aforementioned acquisition of Dalian Tanker from China Ocean Shipping has been accounted for using the principles of merger accounting, as prescribed in Accounting Guideline 5 “Merger Accounting for Common Control Combinations” issued by the HKICPA. The financial information of Dalian Tanker has been incorporated into these consolidated financial statements. As a result, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the prior years have been restated to include the operating results and cash flows of Dalian Tanker. The consolidated statements of financial position as at 31 December 2015 and 1 January 2015 have been restated to include the assets and liabilities of Dalian Tanker. Respective notes to the consolidated financial statements have also been restated. All significant intragroup transactions, balances, income and expenses are eliminated on combination.

These consolidated financial statements have been prepared on the historical cost basis, except that the following assets and liabilities are measured at fair values:

• investment properties;

• certain available-for-sale investments that are measured at fair value; and

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• derivative financial instruments.

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

The preparation of consolidated financial statements in conformity with HKFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements made by management in the application of HKFRSs that have a significant effect on the consolidated financial statements and estimates with a significant risk of material adjustment in the next year are discussed in the consolidated financial statements.

3. ADOPTION OF NEW AND REVISED HKFRSs AND CHANGES IN ACCOUNTING POLICIES

Impact of new and revised HKFRSs

In the current year, the Group has adopted the following amendments to HKFRSs issued by the HKICPA that are first effective and relevant to the Group’s financial year beginning on 1 January 2016.

Amendments to HKFRSs Annual Improvements to HKFRSs 2012-2014 Cycle Amendments to HKAS 1 Disclosure Initiative Amendments to HKAS 16 Clarification of Acceptable Methods of Depreciation and and HKAS 38 Amortisation Amendments to HKAS 27 Equity Method in Separate Financial Statements Amendments to HKFRS 11 Accounting for Acquisition of Interests in Joint Operations

The adoption of the amendments to HKFRSs in the current year has had no material impact on the consolidated financial statements of the Group for the current or prior years and/or on the disclosures set out in these consolidated financial statements.

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Impact of new and revised HKFRSs issued but not yet effective

The Group has not early applied the following new and revised HKFRSs that have been issued and relevant to the Group but are not yet effective for the financial year beginning on 1 January 2016.

Amendments to HKFRSs Annual Improvements to HKFRSs 2014-2016 Cycle[4] Amendments to HKAS 7 Disclosure Initiative[1] Amendments to HKAS 12 Recognition of Deferred Tax Assets for Unrealised Losses[1] HKFRS 9 Financial Instruments[2] Amendments to HKFRS 10 Sale or Contribution of Assets between an Investor and its and HKAS 28 Associate or Joint Venture[5] HKFRS 15 Revenue from Contracts with Customers[2] HKFRS 16 Leases[3]

• 1 Effective for annual periods beginning on or after 1 January 2017.

• 2 Effective for annual periods beginning on or after 1 January 2018.

• 3 Effective for annual periods beginning on or after 1 January 2019.

• 4 Effective for annual periods beginning on or after 1 January 2017 or 1 January 2018 as appropriate.

• 5 Available for application — the mandatory effective date will be determined when the outstanding phase of amendments to HKFRS 10 and HKAS 28 are finalised.

The Group is in the process of making an assessment of what the impact of these new and revised standards is expected to be in the period of initial application. So far the Group has identified some aspects of the new standards which may have a significant impact on the consolidated financial statements. Further details of the expected impacts are discussed below. As the Group has not completed its assessment, further impacts may be identified in due course and will be taken into consideration when determining whether to adopt any of these new requirements before their effective date and which transitional approach to take, where there are alternative approaches allowed under the new standards.

HKFRS 9

HKFRS 9 will replace the current standard on accounting for financial instruments, HKAS 39. HKFRS 9 introduces new requirements for classification and measurement of financial assets, calculation of impairment of financial assets and hedge accounting. On the other hand, HKFRS 9 incorporates without substantive changes the requirements of HKAS 39 for recognition and derecognition of financial instruments and the classification of financial liabilities. Expected impacts of the new requirements on the Group’s consolidated financial statements are as follows:

(a) Classification and measurement

HKFRS 9 contains three principal classification categories for financial assets: measured at (1) amortised cost, (2) fair value through profit or loss (“ FVTPL ”) and (3) fair value through other comprehensive income (“ FVTOCI ”) as follows:

• The classification for debt instruments is determined based on the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the asset. If a debt instrument is classified as FVTOCI then effective interest, impairments and gains or losses on disposal will be recognised in profit or loss.

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• For equity securities, the classification is FVTPL regardless of the entity’s business model. The only exception is if the equity security is not held for trading and the entity irrevocably elects to designate that security as FVTOCI. If an equity security is designated as FVTOCI then only dividend income on that security will be recognised in profit or loss. Gains, losses and impairments on that security will be recognised in other comprehensive income without recycling.

Based on the preliminary assessment, the Group expects that its financial assets currently measured at amortised cost and FVTPL will continue with their respective classification and measurements upon the adoption of HKFRS 9.

With respect to the Group’s financial assets currently classified as “available-for-sale”, these are investments in equity securities which the Group may classify as either FVTPL or irrevocably elect to designate as FVTOCI (without recycling) on transition to HKFRS 9. The Group has not yet decided whether it will irrevocably designate these investments as FVTOCI or classify them as FVTPL. Either classification would give rise to a change in accounting policy as the current accounting policy for available-for-sale equity investments is to recognise fair value changes in other comprehensive income until disposal or impairment, when gains or losses are recycled to profit or loss in accordance with the Group’s policies set out in the consolidated financial statements. This change in policy will have no impact on the Group’s net assets and total comprehensive income but will impact on reported performance amounts such as profit and earnings per share.

The classification and measurement requirements for financial liabilities under HKFRS 9 are largely unchanged from HKAS 39, except that HKFRS 9 requires the fair value change of a financial liability designated at FVTPL that is attributable to changes of that financial liability’s own credit risk to be recognised in other comprehensive income (without reclassification to profit or loss). The Group currently does not have any financial liabilities designated at FVTPL and therefore this new requirement may not have any impact on the Group on adoption of HKFRS 9.

(b) Impairment

The new impairment model in HKFRS 9 replaces the “incurred loss” model in HKAS 39 with an “expected credit loss” model. Under the expected credit loss model, it will no longer be necessary for a loss event to occur before an impairment loss is recognised. Instead, an entity is required to recognise and measure expected credit losses as either 12-month expected credit losses or lifetime expected credit losses, depending on the asset and the facts and circumstances. This new impairment model may result in an earlier recognition of credit losses on the Group’s trade receivables and other financial assets. However, a more detailed analysis is required to determine the extent of the impact.

(c) Hedge accounting

HKFRS 9 does not fundamentally change the requirements relating to measuring and recognising ineffectiveness under HKAS 39. However, greater flexibility has been introduced to the types of transactions eligible for hedge accounting. The Group preliminarily assesses that its current hedge relationships will qualify as continuing hedges upon the adoption of HKFRS 9 and therefore it expects that the accounting for its hedging relationships will not be significantly impacted.

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HKFRS 15

HKFRS 15 establishes a comprehensive framework for recognising revenue from contracts with customers. HKFRS 15 will replace the existing revenue standards, HKAS 18 “Revenue”, which covers revenue arising from sale of goods and rendering of services. The Group is currently assessing the impacts of adopting HKFRS 15 on its consolidated financial statements. Based on the preliminary assessment, the Group has identified the following areas which are likely to be affected:

Timing of revenue recognition

Currently, the Group’s revenue arising from the provision of services is recognised over time, whereas revenue from the sale of goods is generally recognised when the risks and rewards of ownership have passed to the customers. Under HKFRS 15, revenue is recognised when the customer obtains control of the promised good or service in the contract. HKFRS 15 identifies three situations in which control of the promised good or service is regarded as being transferred over time:

• (i) When the customer simultaneously receives and consumes the benefits provided by the entity’s performance, as the entity performs;

• (ii) When the entity’s performance creates or enhances an asset (for example work in progress) that the customer controls as the asset is created or enhanced;

• (iii) When the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date.

If the contract terms and the entity’s activities do not fall into any of these three situations, then under HKFRS 15 the entity recognises revenue for the sale of that good or service at a single point in time, being when control has passed. Transfer of risks and rewards of ownership is only one of the indicators that will be considered in determining when the transfer of control occurs.

As a result of this change from the risk-and-reward approach to the contract-by-contract transfer-of-control approach, it is possible that once the Group adopts HKFRS 15 some of the Group’s contracts that are currently recognised at a point in time may meet the HKFRS 15 criteria for revenue recognition over time. This will depend on the terms of the sales contract and the enforceability of any specific performance clauses in that contract, which may vary depending on the jurisdiction in which the contract would be enforced. It is also possible that for the remainder of the Group’s contracts the point in time when revenue is recognised may be earlier or later than under the current accounting policy. However, further analysis is required to determine whether this change in accounting policy may have a material impact on the amounts reported in any given financial reporting period.

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HKFRS 16

Currently the Group classifies leases into finance leases and operating leases and accounts for the lease arrangements differently, depending on the classification of the lease. The Group enters into some leases as the lessor and others as the lessee. HKFRS 16 is not expected to impact significantly on the way that lessors account for their rights and obligations under a lease. However, once HKFRS 16 is adopted, lessees will no longer distinguish between finance leases and operating leases. Instead, subject to practical expedients, lessees will account for all leases in a similar way to current finance lease accounting, i.e. at the commencement date of the lease the lessee will recognise and measure a lease liability at the present value of the minimum future lease payments and will recognise a corresponding “right-of-use” asset. After initial recognition of this asset and liability, the lessee will recognise interest expense accrued on the outstanding balance of the lease liability, and the depreciation of the right-of-use asset, instead of the current policy of recognising rental expenses incurred under operating leases on a systematic basis over the lease term. As a practical expedient, the lessee can elect not to apply this accounting model to short-term leases (i.e. where the lease term is 12 months or less) and to leases of low-value assets, in which case the rental expenses would continue to be recognised on a systematic basis over the lease term.

HKFRS 16 will primarily affect the Group’s accounting as a lessee of leases for property, plant and equipment which are currently classified as operating leases. The application of the new accounting model is expected to lead to an increase in both assets and liabilities and to impact on the timing of the expense recognition in the statement of profit or loss over the period of the lease. As at 31 December 2016, the majority of Group’s future minimum lease payments under non-cancellable operating leases are payable either within one year, between one and five years after the reporting date or in more than five years. Some of these amounts may therefore need to be recognised as lease liabilities, with corresponding right-of-use assets, once HKFRS 16 is adopted. The Group will need to perform a more detailed analysis to determine the amounts of new assets and liabilities arising from operating lease commitments on adoption of HKFRS 16, after taking into account the applicability of the practical expedient and adjusting for any leases entered into or terminated between now and the adoption of HKFRS 16 and the effects of discounting.

The Group is considering whether to adopt HKFRS 16 before its effective date of 1 January 2019. However, early adoption of HKFRS 16 is only permitted if this is no earlier than the adoption of HKFRS 15. It is therefore unlikely that HKFRS 16 will be adopted before the effective date of HKFRS 15, being 1 January 2018.

4. CHANGES IN ACCOUNTING ESTIMATES

Effective from 1 January 2016, the Group adjusted the residual value of vessels from USD420 (equivalent to RMB2,560) to USD280 (equivalent to RMB1,818) per light displacement ton. Effective from 1 October 2016, the Group adjusted the estimated useful lives of vessels from 25 years to a range of 22 to 30 years whereas used vessels acquired are depreciated over their estimated remaining useful lives. As a result of these changes in accounting estimates, the depreciation increased by approximately RMB104,016,000 for the Reporting Period, and that would have increased by approximately RMB1,652,459,000 for the future periods.

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5. 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 business segments are categorised as follows:

• (i) oil shipment

• oil shipment

• vessel chartering

• (ii) dry bulk shipment

• coal shipment

• iron ore shipment

• other dry bulk shipment

• vessel chartering

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 other business segments.

Dry bulk shipment segment was discontinued on 30 June 2016 (see note 11).

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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 Reporting Period is set out as follows:

By principal activity : Continuing operations Oil shipment - Oil shipment - Vessel chartering Others Discontinued operation Dry bulk shipment - Coal shipment - Iron ore shipment - Other dry bulk shipment - Vessel chartering Other income and net gains Marketing expenses Administrative expenses Other expenses Share of profits of associates Share of profits of joint ventures Finance costs Elimination of discontinued operation Profit before tax		2016 Turnover Contribution RMB’000 RMB’000 7,272,450 2,031,913 2,264,478 741,200 9,536,928 2,773,113 121,363 (71,483) 9,658,291 2,701,630 729,618 (10,058) 1,075,647 234,534 390,046 (64,254) 666,480 (73,190) 2,861,791 87,032 12,520,082 2,788,662 10,039 (14,697) (678,259) (65,838) 268,099 169,458 (869,544) (87,032) 1,520,888		2015 Turnover Contribution (Restated) (Restated) RMB’000 RMB’000 8,691,879 3,038,607 1,920,821 292,137 10,612,700 3,330,744 96,598 (127,079) 10,709,298 3,203,665 1,562,249 41,629 2,260,133 185,647 809,473 (80,639) 1,502,159 34,366 6,134,014 181,003 16,843,312 3,384,668 1,004,508 (15,055) (498,083) (55,731) 215,932 223,506 (1,056,665) (181,003) 3,022,077

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Total segment assets Oil shipment Dry bulk shipment (discontinued) Others Total segment liabilities Oil shipment Dry bulk shipment (discontinued) Others	2016 RMB’000 41,871,688 — 16,150,133 58,021,821 17,702,082 — 12,896,657 30,598,739	2015 (Restated) RMB’000 41,174,217 35,051,713 9,353,869
		85,579,799
		31,076,636 15,928,745 6,004,326
		53,009,707

The accounting policies of the reportable segments are the same as the Group’s accounting policies. Segment contribution represents the gross profit incurred by each segment without allocation of central administration costs (including emoluments of directors, supervisors and senior management), marketing expenses, other expenses, share of profits of associates, share of profits of joint ventures, other income and net gains and finance costs. This is the measure reported to the Group’s chief operating decision makers for the purposes of resource allocation and performance assessment.

As at 31 December 2016, the net carrying amounts of the Group’s oil tankers, liquefied petroleum gas (“ LPG ”) vessels, liquefied natural gas (“ LNG ”) vessels and dry bulk vessels were RMB30,634,523,000 (2015: RMB29,619,447,000), RMB75,724,000 (2015: RMB88,585,000), RMB1,616,907,000 (2015: RMBnil) and RMBnil (2015: RMB25,204,771,000) respectively.

— 19 —

Geographical segments

2016 Turnover Contribution RMB’000 RMB’000 By geographical area : Continuing operations Domestic 2,593,038 1,097,631 International 7,065,253 1,603,999 9,658,291 2,701,630 Discontinued operation Domestic 1,248,307 61,954 International 1,613,484 25,078 2,861,791 87,032 12,520,082 2,788,662 Other income and net gains 10,039 Marketing expenses (14,697) Administrative expenses (678,259) Other expenses (65,838) Share of profits of associates 268,099 Share of profits of joint ventures 169,458 Finance costs (869,544) Elimination of discontinued operation (87,032) Profit before tax 1,520,888 Turnover Total segment turnover 12,520,082 Less: inter-segment transactions — Total consolidated turnover 12,520,082

2015 Turnover Contribution (Restated) (Restated) RMB’000 RMB’000 2,464,766 1,022,342 8,244,532 2,181,323 10,709,298 3,203,665 2,663,532 (60,411) 3,470,482 241,414 6,134,014 181,003 16,843,312 3,384,668 1,004,508 (15,055) (498,083) (55,731) 215,932 223,506 (1,056,665) (181,003) 3,022,077 16,843,312 — 16,843,312

— 20 —

Other information

Oil shipment Dry bulk shipment (discontinued) RMB’000 RMB’000 The Reporting Period Additions to non-current assets 2,467,590 25,299 Depreciation and amortisation 1,636,954 552,828 Provision for onerous contracts 288,763 9,557 Loss on disposal of property, plant and equipment, net (315,637) (2,133) Interest income 29,297 2,074 Year ended 31 December 2015 (restated) Additions to non-current assets 2,600,625 222,619 Depreciation and amortisation 1,409,997 1,027,999 Provision for onerous contracts 101,448 45,135 (Loss)/gain on disposal of property, plant and equipment, net (75,846) (1,345,412) Interest income 33,467 6,283	Others RMB’000 1,704,180 29,325 115,557 (8) 56,868 2,317,569 21,490 79,048 1 69,340	Total RMB’000 4,197,069 2,219,107 413,877 (317,778) 88,239
		5,140,813 2,459,486 225,631 (1,421,257) 109,090

The principal assets employed by the Group are located in the PRC and, accordingly, no geographical segment analysis of assets and expenditures has been prepared for the Reporting Period and year ended 31 December 2015.

Major customers

During the Reporting Period, management recognised the following two (2015: two) customers as the Group’s major customers. Revenue arising from the provision of oil transportation services to the major customers were set out as follows:

Customer A Customer B	2016 2015 (Restated) RMB’000 RMB’000 2,537,047 2,680,397 1,288,920 1,208,355

— 21 —

6. OTHER INCOME AND NET GAINS

Continuing operations Other income Government subsidies (note) Interest income from loan receivables Bank interest income Dividends received from available-for-sale investments Rental income from investment properties Others Other gains/(losses) Gain on revaluation of investment properties, net Exchange losses, net Impairment losses on available-for-sale investments Fair value gain on step acquisition of a subsidiary Loss on disposal of property, plant and equipment, net Others Other income and net gains	2016 RMB’000 238,753 45,348 40,817 9,640 16,085 38,804 389,447 1,212 (72,261) — 6,603 (315,645) 683 (379,408) 10,039	2015 (Restated) RMB’000 849,279 62,047 40,760 22,688 30,387 54,410 1,059,571 53,311 (92,125) (37,324) — (75,845) 96,920 (55,063) 1,004,508

Note:

The government subsidies represent the subsidies granted for early retirement of vessels, business development purpose and refund of value-added tax. There were no unfulfilled conditions or contingencies relating to these subsidies.

— 22 —

7. FINANCE COSTS

Continuing operations Total finance costs Interest expenses on: - bank loans and other borrowings - corporate bonds - hedge loan - convertible bonds Other finance charges Less: Interest capitalised Finance costs	2016 RMB’000 876,531 207,350 3,301 — — 1,087,182 (217,638) 869,544	2015 (Restated) RMB’000 976,464 232,763 1,807 14,677 404 1,226,115 (169,450) 1,056,665

During the Reporting Period, the capitalisation rate applied to funds borrowed and utilised for the vessels under construction was at a rate of 2.82% to 3.18% (2015: 1.45% to 6.15%) per annum.

— 23 —

8. INCOME TAX

Note Continuing operations Current tax Hong Kong Profits Tax (i) - provision for the year - under/(over) provision in respect of prior years PRC Corporation Income Tax (ii) - provision for the year - under provision in respect of prior years Deferred tax Origination and reversal of temporary differences Total income tax expense Note:	2016 2015 (Restated) RMB’000 RMB’000 744 571 19 (161) 271,300 210,769 26,038 4 298,101 211,183 16,613 25,939 314,714 237,122

• (i) Hong Kong Profits Tax

The provision for Hong Kong Profits Tax was provided at 16.5% (2015: 16.5%) on the estimated assessable profits for the Reporting Period.

(ii) PRC Corporate Income Tax

Under the Law of the PRC on Corporate Income Tax Law (the “ CIT Law ”) and Implementation Regulation of the CIT Law, the tax rate of the Group is 25% (2015: 25%).

— 24 —

9. DIVIDENDS

Dividends recognised and paid as distribution during the Reporting Period: Final dividend for 2015 - RMB0.10 (2015: Final dividend for 2014 - RMB0.03) per share	2016 RMB’000 403,203	2015 RMB’000 120,961

Final dividend of RMB0.10 per share in respect of the year ended 31 December 2015 was approved by independent shareholders at the annual general meeting held on 20 May 2016 and a total amount of RMB403,203,000 was paid during the Reporting Period.

At the Board meeting held on 28 March 2017, the Directors proposed a final dividend of RMB766,086,000, representing RMB0.19 per share, in respect of the Reporting Period. This proposed final dividend is subject to the approval of the Company’s independent shareholders at the forthcoming annual general meeting on a date to be fixed, and has not been recognised as a liability at the end of the Reporting Period.

10. EARNINGS PER SHARE

(a) From continuing and discontinued operations

The calculation of basic and diluted earnings per share is based on the profit for the year attributable to owners of the Company of RMB1,934,064,000 (2015: RMB1,180,921,000) and the weighted average number of ordinary shares of 4,032,033,000 (2015: 3,975,547,000) shares in issue during the Reporting Period.

— 25 —

(b) From continuing operations

The calculation of basic and diluted earnings per share from continuing operations attributable to owners of the Company is based on the earnings figures calculated as follows:

Profit for the year attributable to owners of the Company Less: profit/(loss) for the period/year from discontinued operation attributable to owners of the Company Profit for the year from continuing operations attributable to owners of the Company	2016 RMB’000 1,934,064 742,523 1,191,541	2015 (Restated) RMB’000 1,180,921 (1,593,258) 2,774,179

The denominators used are the same as those detailed above for basic and diluted earnings per share from continuing and discontinued operations (see note 10(a)).

(c) From discontinued operation

The calculation of basic and diluted earnings/(loss) per share from discontinued operation is based on the profit for the period from discontinued operation attributable to owners of the Company of RMB742,523,000 (2015: loss for the year of RMB1,593,258,000) and the denominators used are the same as those detailed above for basic and diluted earnings per share from continuing and discontinued operations (see note 10(a)).

— 26 —

11. DISCONTINUED OPERATION

In order to build a specialised crude oil and refined oil transportation fleet and to become a global leader in the oil transportation market in terms of transportation capacities, the Group entered into an asset transfer agreement to dispose of the entire dry bulk shipment segment, which included China Shipping Bulk Carrier Co., Limited (“ Bulk Carrier ”), a former wholly-owned subsidiary of the Company, and its subsidiaries, associates and joint ventures, to China COSCO Bulk Shipping (Group) Co., Ltd. (“ COSCO Bulk ”) at a consideration of RMB4,993,243,000 which was settled on a net basis with the acquisition of Dalian Tanker during the Reporting Period. The transaction became effective subsequent to the approval by independent shareholders at the annual general meeting held on 20 May 2016. On 30 June 2016, the Group completed the whole transaction of disposal of dry bulk shipment segment and the acquisition of Dalian Tanker.

The dry bulk shipment segment was not previously classified as held-for-sale or as a discontinued operation. The comparative consolidated statement of profit or loss and other comprehensive income has been restated to show the discontinued operation separately from continuing operations.

(a) Results of discontinued operation

		For the	For the
		six months	year ended
		ended 30 June	31 December
	Note	2016	2015
		RMB’000	RMB’000
Turnover		2,861,791	6,134,014
Operating costs and other operating expenses		(3,075,185)	(6,588,405)
Other income and net losses		(26,591)	(1,199,938)
Share of (losses)/profits of associates and joint
ventures		(60,252)	42
Results from operating activities		(300,237)	(1,654,287)
Income tax credit		93,886	127,065
Results from operating activities, net of tax		(206,351)	(1,527,222)
Gain on disposal of discontinued operation		966,852	—
Profit/(loss) for the period/year		760,501	(1,527,222)
Profit/(loss) for the period/year attributable to:
Owners of the Company		742,523	(1,593,258)
Non-controlling interests		17,978	66,036
		760,501	(1,527,222)
Earnings/(loss) per share	10(c)
		RMB cents	RMB cents
From discontinued operation
- Basic and diluted		18.42	(40.08)

— 27 —

(b) Net cash generated from discontinued operation

			For the	For the
			six months	year ended
			ended 30 June	31 December
			2016	2015
			RMB’000	RMB’000
Net	cash	generated from operating activities	1,217,130	1,952,527
Net	cash	used in investing activities	(43,233)	(121,876)
Net	cash	used in financing activities	(628,678)	(1,704,895)
Net	cash	inflow for the period/year	545,219	125,756

(c) Effect of disposal on the financial position of the Group

The carrying amounts of the identified assets/(liabilities) of discontinued operation at the date of disposal are as follows:

	30 June 2016
	RMB’000
Property, plant and equipment	24,999,770
Investment in an associate	315,165
Investments in joint ventures	3,880,361
Available-for-sale investments	4,300
Deferred tax assets	579,363
Inventories	298,893
Trade and bills receivables	1,660,360
Prepayments, deposits and other receivables	3,456,816
Cash and cash equivalents	1,201,073
Trade and bills payables	(590,836)
Other payables and accruals	(17,390,349)
Provision and other liabilities	(63,293)
Interest-bearing bank and other borrowings	(12,322,281)
Other loans	(875,349)
Obligations under finance leases	(378,610)
Tax payable	(2,765)

— 28 —

30 Net assets disposed of Safety fund reserve Cumulative exchange differences in respect of the net assets of the subsidiaries reclassified from equity to profit or loss upon disposal of the subsidiaries Non-controlling interests Gain on disposal Total consideration satisfied by: Consideration received in cash Payable in respect of compensation to COSCO Bulk for the decrease in equity under transition period (note) Net cash inflow on disposal: Consideration received in cash Cash and cash equivalents disposed of Net cash inflow

June 2016 RMB’000 4,772,618 (47,493) 362,032 (1,060,766) 966,852 4,993,243 5,332,386 (339,143) 4,993,243 5,332,386 (1,201,073) 4,131,313

Note:

The payable to COSCO Bulk was included in other payables and accruals as at 31 December 2016.

12 BUSINESS COMBINATIONS

(a) Business combination involving entities under common control

On 29 March 2016, the Company acquired 100% equity interest in Dalian Tanker from China Ocean Shipping at a consideration of RMB6,629,408,800 which was settled on a net basis with the disposal of discontinued operation during the Reporting Period. The principal activities of Dalian Tanker were oil and LPG shipment along the PRC coast and international shipment. The financial statements of Dalian Tanker are consolidated by the Group as the Group has control over operating and financial policies of this entity.

As mentioned in note 2.2, the Group has applied merger accounting as prescribed in Accounting Guideline 5 to account for the business combination involving entities under common control. Accordingly, Dalian Tanker has been combined since 1 January 2015, the earliest financial period presented, as if the acquisition had occurred at that time.

— 29 —

• (1) The reconciliation of the effect arising from the business combination involving entities under common control on the consolidated statements of financial position as at 31 December 2016 and 2015 and 1 January 2015 are as follows:

At 31 December 2016 Non-current assets Investment in a subsidiary Other non-current assets Current assets Other current assets Cash and cash equivalents Current liabilities Other current liabilities Net current assets/(liabilities) Total assets less current liabilities Equity Equity attributable to owners of the Company Issued capital Reserves Non-controlling interests Total equity Non-current liabilities Other non-current liabilities Total equity and non-current liabilities	The Group excluding Dalian Tanker RMB’000 6,629,409 34,232,653 40,862,062 2,530,375 4,868,030 7,398,405 4,416,411 2,981,994 43,844,056 4,032,033 23,106,183 27,138,216 (25,132) 27,113,084 16,730,972 43,844,056	Dalian Tanker Adjustment Consolidated RMB’000 RMB’000 RMB’000 — (6,629,409) — 14,814,708 — 49,047,361 14,814,708 (6,629,409) 49,047,361 1,245,224 (1,165,722) 2,609,877 1,496,553 — 6,364,583 2,741,777 (1,165,722) 8,974,460 4,314,513 (1,165,722) 7,565,202 (1,572,736) — 1,409,258 13,241,972 (6,629,409) 50,456,619 6,378,153 (6,378,153) 4,032,033 526,129 (251,256) 23,381,056 6,904,282 (6,629,409) 27,413,089 35,125 — 9,993 6,939,407 (6,629,409) 27,423,082 6,302,565 — 23,033,537 13,241,972 (6,629,409) 50,456,619	Dalian Tanker Adjustment Consolidated RMB’000 RMB’000 RMB’000 — (6,629,409) — 14,814,708 — 49,047,361 14,814,708 (6,629,409) 49,047,361 1,245,224 (1,165,722) 2,609,877 1,496,553 — 6,364,583 2,741,777 (1,165,722) 8,974,460 4,314,513 (1,165,722) 7,565,202 (1,572,736) — 1,409,258 13,241,972 (6,629,409) 50,456,619 6,378,153 (6,378,153) 4,032,033 526,129 (251,256) 23,381,056 6,904,282 (6,629,409) 27,413,089 35,125 — 9,993 6,939,407 (6,629,409) 27,423,082 6,302,565 — 23,033,537 13,241,972 (6,629,409) 50,456,619
			49,047,361
			2,609,877 6,364,583
			8,974,460
			7,565,202
			1,409,258
			50,456,619
			4,032,033 23,381,056
			27,413,089 9,993
			27,423,082
			23,033,537
			50,456,619

— 30 —

The Group excluding Dalian Tanker RMB’000 At 31 December 2015 Non-current assets Other non-current assets 61,912,752 Current assets Other current assets 4,380,012 Cash and cash equivalents 2,085,889 6,465,901 Current liabilities Other current liabilities 10,129,192 Net current liabilities (3,663,291) Total assets less current liabilities 58,249,461 Equity Equity attributable to owners of the Company Issued capital 4,032,033 Reserves 21,665,173 25,697,206 Non-controlling interests 825,997 Total equity 26,523,203 Non-current liabilities Other non-current liabilities 31,726,258 Total equity and non-current liabilities 58,249,461

Dalian Tanker Adjustment Consolidated (Restated) RMB’000 RMB’000 RMB’000 13,362,106 2,484 75,277,342 1,062,048 (2,850) 5,439,210 2,777,358 — 4,863,247 3,839,406 (2,850) 10,302,457 3,961,540 (1,682) 14,089,050 (122,134) (1,168) (3,786,593) 13,239,972 1,316 71,490,749 6,378,153 (6,378,153) 4,032,033 (368,944) 6,378,956 27,675,185 6,009,209 803 31,707,218 36,877 — 862,874 6,046,086 803 32,570,092 7,193,886 513 38,920,657 13,239,972 1,316 71,490,749

— 31 —

The Group excluding Dalian Tanker RMB’000 At 1 January 2015 Non-current assets Other non-current assets 59,295,029 Current assets Other current assets 4,006,134 Cash and cash equivalents 2,449,240 6,455,374 Current liabilities Other current liabilities 13,717,842 Net current (liabilities)/assets (7,262,468) Total assets less current liabilities 52,032,561 Equity Equity attributable to owners of the Company Issued capital 3,481,405 Reserves 18,347,595 21,829,000 Non-controlling interests 818,729 Total equity 22,647,729 Non-current liabilities Other non-current liabilities 29,384,832 Total equity and non-current liabilities 52,032,561

Dalian Tanker Adjustment Consolidated RMB’000 RMB’000 (Restated) RMB’000 11,950,362 3,975 71,249,366 1,243,853 690 5,250,677 1,997,851 — 4,447,091 3,241,704 690 9,697,768 2,909,167 — 16,627,009 332,537 690 (6,929,241) 12,282,899 4,665 64,320,125 7,189,225 (7,189,225) 3,481,405 (3,314,530) 7,192,864 22,225,929 3,874,695 3,639 25,707,334 (222,072) — 596,657 3,652,623 3,639 26,303,991 8,630,276 1,026 38,016,134 12,282,899 4,665 64,320,125

— 32 —

The above adjustments represent adjustments to eliminate the paid-up capital of Dalian Tanker against the Group’s investment cost in Dalian Tanker and current accounts between the Group and Dalian Tanker as at 31 December 2016 and 2015 and 1 January 2015 respectively and adjustments to achieve consistency of accounting policies.

• (2) The effect of the business combination involving entities under common control, described above, on the Group’s basic and diluted earnings per share for the year ended 31 December 2015 is as follows:

	Impact on basic
	and diluted
	earnings per share
	RMB cents
As previously reported	10.49
Restatement arising from business combination involving
entities under common control	19.21
Restated	29.70

• (3) The effect of business combination involving entities under common control, described above, on the Group’s profit for the year for the year ended 31 December 2015 is as follows:

As previously reported Restatement arising from business combination involving entities under common control Restated	RMB’000 489,755 767,978
	1,257,733

(b) Business combination not involving entities under common control

In prior years, the Group held 8% equity interest in 深圳市三鼎油運貿易有限公司 (“ Shenzhen Sanding ”) and the investment was recognised as available-for-sale investments in the consolidated financial statements. On 22 August 2016, the Group entered into a sale and purchase agreement with another shareholder, 廣州振華船務有限公司 (“ Guangzhou Zhenhua ”), and pursuant to the sale and purchase agreement, the Group agreed to acquire the 43% equity interest held by Guangzhou Zhenhua in Shenzhen Sanding at a consideration of RMB251,981,000 (the “ Step Acquisition ”).

Shenzhen Sanding is principally engaged in provision of oil transportation and vessel chartering services. The Group considers that the Step Acquisition provides a good opportunity to enlarge the Group’s business scope.

— 33 —

As at 12 November 2016 (the “ Acquisition Date ”), the fair value of the Group’s 8% equity interest in Shenzhen Sanding was RMB36,058,000. Compared with its carrying amount before valuation of RMB29,455,000, a fair value gain of RMB6,603,000 was recognised in other income and net gains during the Reporting Period.

Upon the completion of the Step Acquisition, the Company holds a total of 51% equity interest in Shenzhen Sanding which is regarded as a non-wholly-owned subsidiary of the Company and was consolidated into the Group during the Reporting Period.

• (i) Fair value of identifiable assets and liabilities of Shenzhen Sanding as at the Acquisition Date were as follows:

	12 November 2016
	RMB’000
Non-current assets
Property, plant and equipment	448,599
Available-for-sale investments	193,526
Deferred tax assets	52,571
	694,696
Current assets
Inventories	2,759
Trade and bills receivables	13,054
Prepayments, deposits and other receivables	80,161
Cash and cash equivalents	43,553
	139,527
Current liabilities
Trade and bills payables	6,932
Other payables and accruals	4,507
Dividends payable	20,000
Current portion of interest-bearing bank and other borrowings	30,185
Tax payable	9,146
	70,770

— 34 —

		12 November 2016
		RMB’000
	Non-current liabilities
	Interest-bearing bank and other borrowings	271,665
	Deferred tax liabilities	41,060
		312,725
	Fair value of identifiable net assets acquired	450,728
	Non-controlling interests	(220,857)
	Fair value of identifiable net assets attributable to the
	equity interest acquired by the Group	229,871
(ii)	Goodwill arising from the Step Acquisition
		RMB’000
	Consideration satisfied by:
	Fair value of the Group’s 8% equity interest in Shenzhen
	Sanding	36,058
	Cash paid	249,577
	Payable to Guangzhou Zhenhua	2,404
	Total consideration	288,039
	Less: fair value of identifiable net assets attributable to
	the equity interest acquired by the Group	(229,871)
	Goodwill	58,168

No acquisition-related costs arising from the Step Acquisition have been incurred.

Goodwill arose from these acquisitions because the cost of the economy of scale could be achieved upon completion of the acquisition. In addition, the consideration paid for the combination effectively included amounts in relation to the benefit of expected synergies, revenue growth, future market development and the assembled workforce of the above companies. These benefits are not recognised separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets.

None of goodwill arising from the Step Acquisition is expected to be deductible for tax purposes.

— 35 —

(iii) Net cash outflow on the Step Acquisition

Consideration paid by cash Cash and cash equivalents of the subsidiary acquired Net cash outflow on the Step Acquisition	RMB’000 249,577 (43,553) 206,024

• (iv) Impact of the Step Acquisition on the results of the Group

Shenzhen Sanding contributed RMB24,418,000 to turnover and profit of RMB5,557,000 to the Group’s results for the Reporting Period.

Had the Step Acquisition been effected on 1 January 2016, Shenzhen Sanding would have contributed RMB194,066,000 to turnover and profit of RMB92,986,000 to the Group’s results for the Reporting Period. This pro-forma information is for illustration purposes and should not be viewed as an indication of the result of operations that would have occurred if the Step Acquisition had been completed on 1 January 2016.

13. COMPARATIVE FIGURES

Certain comparative figures have been represented as a result of the application of merger accounting due to the business combination involving entities under common control and the operation discontinued on 30 June 2016.

— 36 —

II. MANAGEMENT DISCUSSION AND ANALYSIS

1. ANALYSIS OF THE INTERNATIONAL AND DOMESTIC SHIPPING MARKET DURING THE REPORTING PERIOD

(1) International oil shipping market

In 2016, the international oil transportation market suffered from various adverse factors such as the slowdown of global economic growth, the sluggish increase in international oil prices, OPEC continuing to consider reducing oil production, and the significant increase in new transportation capacity, while overall transportation prices appeared to have started on a downward trend. For the very large crude carrier ( VLCC ) market, the annual average transportation price of the three major traditional routes (the Middle East - Far East TD3, Middle East - US Gulf TD1, West Africa - China TD15) dropped more than 30% month-on-month, while for the international white oil market, the annual average transportation price of the three types of vessels (LR2、LR1、MR) in the three traditional routes (Middle East - Japan TC1, the Middle East - Japan TC5, West India - Japan TC12) declined 38%, 39% and 38% month-on-month respectively.

(2) Domestic oil shipping market

With the continuous implementation of the oil and gas reform, domestic crude oil import rights and imported crude oil usage rights have been expanded, and local oil refineries have recorded higher operating rates. Pursuant to the statistics of the customs department, import of crude oil in China increased by 13.6% to 381 million tonnes in 2016. Domestic transportation demand for crude oil in 2016 bloomed amid a healthy supply of crude oil.

(3) LNG transportation market

In 2016, domestic demand for natural gas increased, leading to a restoration of growth in volume of LNG import. Since international prices of LNG was hovering at a low level in line with crude oil prices, the decline in import cost of LNG favoured the import market to a certain extent. In 2016, import volume of LNG in China increased by 32.97% to 26.1540 million tonnes year-on-year.

— 37 —

2. REVIEW OF OPERATING RESULTS DURING THE REPORTING PERIOD

In 2016, the Group underwent a major asset restructuring. As at 30 June 2016, the Group completed the disposal of dry bulk shipping segment and the acquisition of Dalian Tanker.

The Group is committed to implementing the overall direction of “business innovation and efficiency, deepening of reform and innovative development”, further strengthening the strategy of “global operation and sale under one brand”, and holding to the ideology of “leading globally by safe operation and sale”. The Group actively developed innovative business models and strived to integrate the outcomes of reform and reorganization. As a result, the Group was able to exert scale and synergistic effects at the outset and achieve desired results in business, reform, development, innovation, risk control and other aspects.

In 2016, the volume of cargo shipped by the continuing operations of the Group increased by 0.76% year-on-year to 104 million tonnes, while the transport turnover decreased by 4.16% year-on-year to 348.08 billion tonne-nautical miles. Revenue derived from the continuing operations decreased by 9.81% year-on-year to RMB9.658 billion, while operating costs decreased by 7.31% year-on-year to RMB6.957 billion.

In 2016, the volume of cargo shipped by the discontinued operation of the Group was 63 million tonnes, while the transport turnover was 165.954 billion tonne-nautical miles. Revenue derived from the discontinued operation was RMB2.862 billion, while operating costs was RMB2.775 billion.

The profit attributable to owners of the Group was RMB1.934 billion, and the basic and diluted earnings per share was RMB47.97 cents.

— 38 —

(1) Revenue from Principal Operations

In 2016, overall details of the Group’s principal operations by products transported and geographical regions were as follows:

Principal Operations by Products Transported

Industry or Product Description Revenue (RMB’000) Continuing operations Oil shipment 7,272,450 Vessel chartering 2,264,478 Others 121,363 Discontinued operation Dry bulk shipment 2,861,791 Total 12,520,082	Operating costs Gross profit margin Increase/ (decrease) in revenue as compared to 2015 Increase/ (decrease) in operating costs as compared to 2015 Increase/ (decrease) in gross profit margin as compared to 2015 (RMB’000) (%) (%) (%) (%) 5,240,537 27.9 -16.3 -7.3 -7.0 1,523,278 32.7 17.9 -6.5 17.5 192,846 -58.9 25.6 -13.8 72.7 2,774,759 3.0 -53.3 -53.4 0.1 9,731,420 22.3 -25.7 -27.7 2.2

Principal Operations by Geographical Regions

		Increase/
		(decrease)
		in revenue
		as compared
Regions	Revenue	to 2015
	(RMB’000)	(%)
Continuing operations
Domestic shipment	2,593,038	5.2
International shipment	7,065,253	-14.3
Discontinued operation
Domestic shipment	1,248,307	-53.1
International shipment	1,613,484	-53.5

— 39 —

(2) Shipping business — Oil shipment

For international oil shipment, the Group 1) increased the proportion of its leasing business so as to lock in gains and avoid the risk of market downturn. The current proportion of the Group’s VLCCs that are leased out is approximately 30%, which allows the Group to better ensure that a profit can be realized; 2) continued to enhance its market analysis and estimation abilities, while at the same time focusing on long-haul routes at the height of the market to lock in the gains, and focusing on short-haul routes and on adjusting vessel positions as the market slumped, so as to constantly enhance its ability to adapt to market fluctuations; 3) achieved transportation of total import of five major domestic oil companies of 44.13 million tonnes in 2016, accounting for 52.1% of the total volume of the Group. The Group continued to play the core role in “domestic transportation of domestic oil” to consolidate and improve the proportion of basic sources, so as to effectively avoid market fluctuations; and 4) actively promoted the construction of overseas outlets of British companies and US companies, and completed the business integration of Hong Kong companies, laying a solid foundation for the Group’s strategy of “Global operation and sale under one brand”.

For domestic oil shipment, the Group 1) capitalised on a linkage advantage of domestic and international trade market, and strived to improve its operating results. Since the domestic market performed significantly better than the international market, the Group turned all crude oil tankers for domestic and foreign trade to domestic transportation; 2) adhered to a strategy of targeting major customers and maintaining a high proportion of COA contracts. In addition to the renewal of COA contracts with its original major customers, the Group entered into a cooperation in domestic transshipment with China National United Oil Corporation and established a winter/summer transportation price differentiation mechanism with several large local refineries in Shandong so as to stabilise supply from local refineries; and 3) promoted business model innovation, improved the operating efficiency of vessels and customer service standards. The Group strengthened “customer thinking”, implemented a pilot “customer management system”, provided one-on-one personal service to customers to promote the innovation in norm of domestic transportation. In 2016, the Group completed a domestic oil shipping volume of approximately 16.38 billion tonne-nautical miles, representing a 0.31% increase year-on-year, with a 5.16% increase year-on-year in transportation income to approximately RMB2,568.02 million and a 0.8% year-on-year increase in gross profit rate to 42.6%. The Group’s market share in domestic oil shipment market remained at around 55%.

— 40 —

In 2016, the Group completed an international shipping volume of approximately 331.57 billion tonne-nautical miles of oil, representing a decrease by approximately 4.37% year-on-year (mainly due to the leasing out of some previously self-owned vessels), with a 14.71% year-on-year decrease in transportation income to approximately RMB6.969 billion and a decrease of approximately RMB631 million by 27.32% year-on-year in gross profit (gross profit margin being 24.10%) to approximately RMB1.679 billion.

In 2016, the Group completed an oil shipping volume of approximately 347.94 billion tonne-nautical miles of oil, representing a year-on-year decrease of approximately 4.16%, and recorded an operating revenue of approximately RMB9.537 billion, representing a year-on-year decrease of approximately 10.14%. An analysis of the transportation volume and revenue in terms of product types is as follows:

Transportation volume by product types

										Increase/
			2016					2015		(decrease)
	(billion tonne-				(billion tonne-
	nautical miles)				nautical miles)					(%)
Domestic			16.38					16.33		0.31
Crude oil			15.73					15.71		0.08
Refined oil			0.65					0.62		6.17
International			331.56					346.71		-4.37
Crude oil			311.22					311.20		0.01
Refined oil			20.34					35.51		-42.72
Total			347.94					363.04		-4.16

— 41 —

Revenue by shipment types

									Increase/
			2016				2015		(decrease)
	(RMB million)				(RMB million)				(%)
Domestic		2,568.02				2,442.00			5.16
Crude oil		2,341.31				2,243.55			4.36
Refined oil		113.60					108.98		4.24
Vessel charting		113.11					89.47		26.42
International		6,968.91				8,170.70			-14.71
Crude oil		4,232.79				5,182.37			-18.32
Refined oil		584.77				1,156.98			-49.46
Vessel chartering		2,151.35				1,831.35			17.47
Total		9,536.93				10,612.70			-10.14

(3) Shipping business — Dry bulk shipment

In 2016, the Group completed a dry bulk shipping volume of approximately 165.95 billion tonne-nautical miles, achieving an operating revenue of approximately RMB2.86 billion. The shipping volume and operating revenue in terms of product types are as follows:

Transportation volume by types

Domestic Coal Iron ore Other dry bulk (note) International Coal Iron ore Other dry bulk (note) Total		1st half 2016 (billion tonne- nautical miles) 45.95 27.27 9.69 8.99 120.00 14.92 85.49 19.59 165.95		1st half 2015 Increase/ (decrease) (billion tonne- nautical miles) (%) 35.39 29.86 27.23 0.13 3.05 217.94 5.11 76.09 121.06 -0.88 8.84 68.83 100.83 -15.21 11.39 71.92 156.45 6.08		2015 (billion tonne- nautical miles) 72.11 53.10 7.72 11.29 231.09 20.08 176.74 34.27 303.20

— 42 —

Revenue by product types

Domestic Coal Iron ore Other dry bulk (note) Vessel chartering International Coal Iron ore Other dry bulk (note) Vessel chartering Total		1st half 2016 (RMB million) 1,248.31 550.88 109.89 132.66 454.88 1,613.48 178.74 965.75 257.39 211.60 2,861.79		1st half 2015 Increase/ (decrease) (RMB million) (%) 1,162.85 7.35 657.68 -16.24 72.19 52.22 126.12 5.19 306.86 48.24 1,638.40 -1.52 93.30 91.58 1,034.26 -6.62 153.05 68.17 357.79 -40.86 2,801.25 2.16		2015 (RMB million) 2,663.53 1,310.76 149.83 264.02 938.92 3,470.48 251.49 2,110.30 545.45 563.24 6,134.01

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

(4) Development of LNG Transportation Business

In 2016, the Group continuously and steadily promoted various existing LNG projects and actively coordinated businesses to ensure that vessels under the Mobil project are operated smoothly. In addition, the Group oversaw and promoted the construction of the APLNG project, and fully cooperated in the supervision and construction of the vessels in the YAMAL project. The Group carefully prepared and actively participated in the competition for new projects, in an effort to expand its LNG vessel management business and to improve economic efficiency.

In 2016, COSCO SHIPPING LNG Investment (Shanghai) Co., Ltd., a wholly-owned subsidiary of the Company, with one vessel under operation during the Reporting Period, achieved an annual revenue of approximately RMB36.31 million and a net profit of approximately RMB19.58 million; China LNG Shipping (Holdings) Limited (“ CLNG ”), a joint venture of the Group, with six vessels under operation during the Reporting Period, achieved an annual revenue of approximately RMB1.041 billion and a net profit of approximately RMB369 million in which the share of profits of the joint venture contributed to

— 42 —

the Group was approximately RMB108 million. In addition, East China LNG Shipping Investment Co., Limited (“ ELNG ”) and North China LNG Shipping Investment Co., Limited (“ NLNG ”) , two non-wholly-owned subsidiaries of the Company, recognised their share of profits of associates which amounted to approximately RMB11.59 million and approximately RMB19.82 million respectively. At the end of the Reporting Period, the Group and the joint ventures had a total of 23 LNG vessels with approximately 3.98 million cubic meters under construction and expected to be delivered before the end of 2020.

3. COSTS AND EXPENSES ANALYSIS

In 2016, the Group conscientiously implemented the requirements of the Board of Directors on the enhancement of management and the increase of efficiency and cost reduction, so as to further emphasise the strategic positioning of “cost as the winning factor”. The Group started with the management of operations and overall budget in its effort to strengthen cost control, and was able to effectively control various costs and expenses. In 2016, the principal operating cost of the continuing operations of the Group amounted to a total of approximately RMB6.957 billion, down by 7.31% year-on-year, indicating that effective cost control ensured a significant improvement in the operating profit of the Group. The following table sets forth the constitution of costs of the principal operations of the Group:

				Composition
			Increase/	ratio in
Item	2016	2015	(decrease)	2016
	(RMB’000)	(RMB’000)	(%)	(%)
Continuing operations
Fuel costs	1,395,564	1,981,565	-29.57	20.06
Port costs	773,765	844,420	-8.37	11.12
Sea crew cost	984,197	1,003,718	-1.94	14.15
Lubricants expenses	140,911	201,480	-30.06	2.03
Depreciation	1,615,398	1,372,394	17.71	23.22
Insurance expenses	152,309	143,140	6.41	2.19
Repair expenses	264,025	308,387	-14.39	3.80
Charter cost	994,533	1,390,246	-28.46	14.30
Others	635,959	260,283	144.33	9.13
Total	6,956,661	7,505,633	-7.31	100.00

— 43 —

Fuel costs were the main cost of the Group. In 2016, the Group fully exploited the post restructuring integrated management and control efficiency of COSCO Shipping Group’s operation platform. Through strengthening cooperation with suppliers and traders, the Group improved its market estimation mechanism and took advantage of the slump in international fuel prices to lock in fuel costs. At the same time, through maximizing cruising speed efficiency, the Group aimed to control cargo oil heating, washing, filling, ballast water replacement and other technical aspects and improve fuel efficiency.

In 2016, fuel costs of the continuing operations of the Group were approximately RMB1.396 billion, down by 29.57% year-on-year, accounting for 20.06% of the operating cost. The Group has maintained a significant outcome in cost control through adopting economic speed, centralised purchasing, oil lock and various energy saving measures. The fuel consumption of the continuing operations was 793,416 tonnes with a decrease of 0.50% year-on-year, while average fuel consumption was 2.28 kg/1,000 nautical mile.

4. OPERATING RESULTS OF THE JOINT VENTURES AND THE ASSOCIATES

• (1) The operating results achieved by the 4 joint ventures in 2016 are as follows:

			2016	2016	2016
	Interest held		Shipping	Operating	Net
Company name	by the Group		volume	revenue	profit
			(billion	(RMB’000)	(RMB’000)
			tonne-
			nautical
			miles)
CLNG		50%	18.7	1,040,917	215,685
Sino-Ocean Shipping Co., Ltd.		50%	1.2	67,651	21,637
Huahai Petrol Transportation &
Trading Co., Limited		50%	1.95	150,648	24,762
Offshore Oil (Yangpu) Shipping
Co., Ltd.		43%	1.56	184,245	68,534

— 44 —

• (2) The operating results achieved by the an associate in 2016 is as follows:

		2016	2016
	Interest held	Shipping	Operating	2016
Company name	by the Group	volume	revenue	Net profit
		(billion	(RMB’000)	(RMB’000)
		tonne-
		nautical
		miles)
Shanghai Beihai Shipping
Company Limited	40%	13.23	1,280,925	545,969

In 2016, the net profit achieved by China Shipping Finance Co., Limited (“ CS Finance ”), a non-shipping joint venture, in which the Company held a 25% equity interest, was approximately RMB107 million.

5. Financial analysis

(1) Net cash generated from operating activities

The net cash generated from operating activities of the Group for the Reporting Period was approximately RMB12,064,988,000, representing an increase of approximately 58.74% as compared to approximately RMB7,600,649,000 for the year ended 31 December 2015.

(2) Capital commitments

Note Authorised and contracted but not provided for: Construction and purchases of vessels (i) Project investments (ii) Equity investments (iii)	2016 RMB’000 8,891,396 655,930 — 9,547,326	2015 (Restated) RMB’000 12,148,434 696,341 777,517
		13,622,292

Note:

• (i) According to the construction and purchase agreements entered into by the Group, these capital commitments will fall due in 2017 to 2018.

— 45 —

• (ii) Included capital commitments in respect of project investments are commitments to invest in certain projects held by CLNG.

• (iii) Included capital commitments in respect of equity investments are commitments to invest in China Ore Shipping Pte. Ltd. and Shenhua Zhonghai Marine Co., Limited. The capital commitments were derecognised on 30 June 2016 resulting from the discontinued operation.

In addition to the above, the Group’s share of the capital commitments of its associates which are contracted for but not provided amounted to RMB121,969,000 (2015: RMB121,975,000). The Group’s share of the capital commitments of its joint ventures, which are contracted for but not provided amounted to RMB2,267,070,000 (2015: RMB2,929,925,000).

(3) Capital structure

The Group’s net debt-to-equity ratio as at the end of Reporting Period is as follows:

Total debts Less: cash and cash equivalents Net debt Total equity Net debt-to-equity ratio Trade and bills receivables Trade and bills receivables from third parties Trade receivables from joint ventures Trade receivables from fellow subsidiaries Less: allowance for doubtful debts	2016 RMB’000 26,540,558 (6,364,583) 20,175,975 27,423,082 74% 2016 RMB’000 1,223,309 122 5,526 1,228,957 (22,499) 1,206,458	2015 (Restated) RMB’000 49,056,531 (4,863,247) 44,193,284 32,570,092 136% 2015 (Restated) RMB’000 2,741,667 40,200 12,525 2,794,392 (3,094) 2,791,298

(4) Trade and bills receivables

— 46 —

As of the end of the Reporting Period, the ageing analysis of trade and bills receivables, based on the invoice date and net of allowance for doubtful debts, is as follows:

Within 3 months 4 - 6 months 7 - 9 months 10 - 12 months 1 - 2 years Over 2 years	2016 2015 (Restated) RMB’000 RMB’000 909,021 2,060,861 104,940 621,775 102,566 63,549 28,127 40,055 60,995 4,983 809 75 1,206,458 2,791,298	2016 2015 (Restated) RMB’000 RMB’000 909,021 2,060,861 104,940 621,775 102,566 63,549 28,127 40,055 60,995 4,983 809 75 1,206,458 2,791,298
		2,791,298

The Group normally allows a credit period of 30 to 120 days to its major customers. In view of the fact that the Group’s trade and bills receivables relate to a large number of diversified customers, there is no significant concentration of credit risk. Trade and bills receivables are non-interest-bearing.

(5) Trade and bills payables

Trade and bills payables to third parties Trade payables to immediate holding company Trade payables to fellow subsidiaries Trade payables to joint ventures Trade payables to related companies - joint ventures of immediate holding company - joint ventures of fellow subsidiaries	2016 2015 (Restated) RMB’000 RMB’000 752,489 932,282 1,374 729 596,121 497,475 — 3,260 — 12,844 — 31,382 1,349,984 1,477,972	2016 2015 (Restated) RMB’000 RMB’000 752,489 932,282 1,374 729 596,121 497,475 — 3,260 — 12,844 — 31,382 1,349,984 1,477,972
		1,477,972

— 47 —

An ageing analysis of trade and bills payables at the end of the Reporting Period, based on the invoice date, is as follows:

Within 3 months 4 - 6 months 7 - 9 months 10 - 12 months 1 - 2 years Over 2 years	2016 2015 (Restated) RMB’000 RMB’000 1,038,903 974,630 58,469 121,471 35,738 52,316 3,835 80,573 19,530 39,559 193,509 209,423 1,349,984 1,477,972	2016 2015 (Restated) RMB’000 RMB’000 1,038,903 974,630 58,469 121,471 35,738 52,316 3,835 80,573 19,530 39,559 193,509 209,423 1,349,984 1,477,972
		1,477,972

Trade and bills payables are non-interest-bearing and are normally settled in one to three months.

(6) Provision and other liabilities

Provision for onerous contracts Others Less: current portion Non-current portion	2016 2015 (Restated) RMB’000 RMB’000 495,338 340,447 15,281 15,414 510,619 355,861 (302,551) (181,308) 208,068 174,553

As at 31 December 2016, the Group has a provision of RMB495,338,000 (2015: RMB340,447,000) for onerous contracts relating to the non-cancellable chartered-in vessel contracts.

As at 31 December 2016, the committed charter hire expenses of non-cancellable chartered-in vessel contracts with lease term expiring over twenty-four months from the end of the Reporting Period and with period not being covered by chartered-out vessel contracts of which management cannot reliably assess their onerous contracts amounted to approximately RMB3,946,995,000 (2015: RMB4,509,494,000).

— 48 —

(7) Derivative financial instruments

Liabilities Current portion Non-current portion	2016 2015 (Restated) RMB’000 RMB’000 — 4,258 474,988 411,385 474,988 415,643	2016 2015 (Restated) RMB’000 RMB’000 — 4,258 474,988 411,385 474,988 415,643
		415,643

As at 31 December 2016, the Group held thirty (2015: thirty-two) interest rate swap agreements and the total notional principal amount of the outstanding interest rate swap agreements was approximately USD537,040,000 (equivalent to approximately RMB3,725,448,000) (2015: approximately USD709,800,000 (equivalent to approximately RMB4,609,159,000)). The interest rate swap agreements, with maturity in 2031 and 2032 (2015: 2016, 2031 and 2032), are designated as cash flow hedges in respect of certain bank borrowings of the Group with floating interest rates.

During the Reporting Period, the floating interest rates of the bank borrowings were 3-month London Inter-bank Offered Rate (“ Libor ”) plus 0.42%, 0.65% or 2.20% (2015: 3-month Libor plus 0.42%, 0.65% or 2.20%).

(8) Interest-bearing bank and other borrowings

Current liabilities (i) Bank borrowings Secured Unsecured	2016 2015 (Restated) RMB’000 RMB’000 1,119,250 1,891,949 3,475,198 6,583,848 4,594,448 8,475,797	2016 2015 (Restated) RMB’000 RMB’000 1,119,250 1,891,949 3,475,198 6,583,848 4,594,448 8,475,797
		8,475,797

— 49 —

(ii) Other borrowings Secured Unsecured Interest-bearing bank and other borrowings - current portion Non-current liabilities (i) Bank borrowings Secured Unsecured (ii) Other borrowings Secured Unsecured Interest-bearing bank and other borrowings - non-current portion	2016 RMB’000 — 30,185 30,185 4,624,633 11,460,562 5,149,582 16,610,144 — 271,665 271,665 16,881,809	2015 (Restated) RMB’000 8,670 2,579,360
		2,588,030
		11,063,827
		16,672,834 10,339,898
		27,012,732
		100,470 5,298,721
		5,399,191
		32,411,923

— 50 —

As at 31 December 2016, the Group’s interest-bearing bank and other borrowings were secured by pledges of the Group’s 24 (2015: 67) vessels and 5 (2015: 6) vessels under construction with total net carrying amount of RMB11,150,917,000 (2015: RMB25,186,540,000) and RMB6,568,108,000 (2015: RMB6,004,226,000) respectively and pledged bank deposits.

As at 31 December 2016, secured bank borrowings of RMB12,479,811,000 (2015: RMB17,101,903,000), unsecured bank borrowings of RMB7,342,329,000 (2015: RMB11,607,123,000) and unsecured other borrowings of RMBnil (2015: RMB1,948,080,000) are denominated in USD.

(9) Bonds payable

(a) Corporate bonds

The movement of the corporate bonds during the Reporting Period is set out below:

At 1 January Interest charge Redemption At 31 December Less: current portion Non-current portion	2016 RMB’000 3,978,488 3,557 — 3,982,045 — 3,982,045	2015 RMB’000 4,973,360 5,128 (1,000,000) 3,978,488 — 3,978,488

(b) Convertible bonds

On 13 February 2015, the Company completed its redemption of all outstanding convertible bonds. The convertible bonds were delisted from the Shanghai Stock Exchange on 13 February 2015.

No interest expense was recognised in profit or loss in respect of the convertible bonds for the Reporting Period (2015: RMB14,677,000).

— 51 —

(10) Contingent liabilities

• (i) On 20 February 2011, an oil tanker of Dalian Tanker, “Yang Mei Hu”, during the time of berthing in Mohammedia port, clashed the dock bollard. On the same day, the dock authority applied for the detention of “Yang Mei Hu” and required Dalian Tanker to compensate losses incurred by the above event. In March 2011, after the protection and indemnity club of “Yang Mei Hu” provided a guarantee letter in the amount of Dirham55 million (approximately RMB37 million) for security, “Yang Mei Hu” left the port. In April 2014, the dock authority filed suit in the local court of Morocco and required Dalian Tanker to compensate the loss in the amount of approximately RMB28 million.

Since Dalian Tanker had been insured, all compensations will be borne by the insurance companies, according to the membership certificate underwriting agreement. On 10 November 2016, one of the insurance companies paid Dirham24 million (approximately RMB16 million) to the dock authority for settlement. The case was resolved after the Group settled such amount.

• (ii) In August 2011, one of the Group’s cargo vessels “Bihuashan” collided with “Li Peng 1”, which caused “Li Peng 1” to sink afterwards. The Group has set up a Limitation of Liability for Maritime Claims Fund amounting to RMB22,250,000. Since the Group had been insured, all compensation will be borne by the insurance company. As at 31 December 2016, such contingent liability has been removed as a result of the operation discontinued on 30 June 2016.

• (iii) In January 2012, fuel leakage occurred in one of the Group’s tanker “Daiqing 75” during its voyage in Bohai Sea of the PRC. As at 30 June 2015, claims on damage caused by the fuel leakage amounted to an aggregate of RMB19,370,000 plus court costs. Of which, RMB11,250,000 had been fully settled by insurance companies. Since the Company had been insured with PICC Property and Casualty Company Limited and West of England Insurance Services (Luxembourg) S.A., all compensation will be borne by the insurance companies. On 24 July 2015, the court announced the final claims on damage to be RMB4,000,000 and the Group agreed to settle the issues concerned with the amount. The fuel leakage incident in relation to the “Daiqing 75” tanker was resolved after the Group settled such amount.

— 52 —

• (iv) ELNG holds 30% equity interest in each of Aquarius LNG Shipping Limited (“ Aquarius LNG ”) and Gemini LNG Shipping Limited (“ Gemini LNG ”), and NLNG holds 30% equity interest in each of Capricorn LNG Shipping Limited (“ Capricorn LNG ”) and Aries LNG Shipping Limited (“ Aries LNG ”). Each of these four companies above entered into ship building contracts for the construction of one LNG vessel. After the completion of the LNG vessels, the four companies would, in accordance with time charters agreements to be signed, lease the LNG vessels to the following charterers:

Company name Charterer Aquarius LNG Papua New Guinea Liquefied Natural Gas Global Company LDC Gemini LNG Papua New Guinea Liquefied Natural Gas Global Company LDC Aries LNG Mobil Australia Resources Company Pty Ltd. Capricorn LNG Mobil Australia Resources Company Pty Ltd.

On 15 July 2011, the Company entered into four guaranteed leases (the “ Lease Guarantees ”). According to the Lease Guarantees, the Company irrevocably and unconditionally provided the charterers, successors and transferees of the four companies listed above with guarantee (1) for the four companies to fulfil their respective obligations under the lease term, and (2) to secure 30% of amounts payable to charterers under lease term.

According to the term of the Lease Guarantees and taking into account the possible increase in the value of the lease commitments and the percentage of shareholdings by the Company in the above four companies, the amount of lease guaranteed by the Company is limited to USD8,200,000 (approximately RMB56,883,000).

The guarantee period is limited to that of the lease period, which is twenty years.

• (v) On 9 March 2013, one of the Group’s cargo vessels “CSB Talent” had a broken bollard caused by strong wind at the dock and collided with several parked vessels nearby, which resulted in damage of the floating dock and other facilities. In March 2014, claims on damage caused by the collision amounted to an aggregate of RMB173,865,000. Since the Company had been insured with PICC Property and Casualty Company Limited (Guangzhou Branch) and The London Steam Ship Owners Mutual Insurance Association

— 53 —

Limited, all compensation will be borne by the insurance companies. As at 31 December 2016, such contingent liability has been removed as a result of the operation discontinued on 30 June 2016.

• (vi) On 23 December 2013, five oil tankers of the Group “Danchi”, “Baichi”, “Daiqing 71”, “Daiqing 72” and “Ruijintan” extracted oil from “Bohaiyouyihao”. This act was sued by a group of plaintiffs for ocean pollution. As at 23 April 2014, claims on damage caused by ocean pollution amounted to an aggregate of RMB47,452,000. Since the Company had been insured with PICC Property and Casualty Company Limited (Shanghai Branch), the London P&I Club and SKULD, all compensation will be borne by the insurance companies. On 3 November 2015, the court approved the plaintiffs to withdraw the claims after an arbitration on 28 August 2015.

• (vii)At the 2014 seventh Board meeting held on 30 June 2014, the Company approved the ship building contracts, time charter agreements and supplemental construction contract signed by three joint ventures of the Company for the Yamal LNG project. To secure the obligation of the ship building contracts, time charter agreements and supplemental construction contracts, the Company provides corporate guarantees to the shipbuilders, Daewoo Shipbuilding & Marine Engineering Co., Ltd. and DY Maritime Limited. The total aggregate liability of the Company under the corporate guarantees is limited to USD490,000,000 (approximately RMB3,399,130,000). In addition, the Company provides owner’s guarantees to the charterer, YAMAL Trade Pte. Ltd. The total aggregate liability of the Company under the owner’s guarantees is limited to USD6,400,000 (approximately RMB44,397,000).

• (viii) At the 2015 sixth Board meeting on 28 April 2015, the Company approved Bulk Carrier to guarantee not more than 50% of the total debt of Guangzhou Development Shipping Co., Limited, including loan and accrued interest limited to approximately RMB26,250,000, where the guarantee was unconditional and non-cancellable. The guarantee was derecognised on 30 June 2016 resulting from the discontinued operation.

(11) Foreign exchange risk management

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

— 54 —

As at 31 December 2016, if USD and HKD had weakened or strengthened by 1% against RMB with all other variables held constant, post-tax profit for the year would have been RMB8,957,000 lower/higher (2015: RMB12,951,000 higher/lower), mainly as a result of foreign exchange gains or losses on translation of USD and HKD denominated cash and cash equivalents, receivables and payables and borrowings.

(12) Interest rate risk management

Other than the deposits placed with banks and financial institutions and loan receivables, the Group has no other significant interest-bearing assets. As the average interest rates applied to the deposits are relatively low, the Directors are of the opinion that the Group is not exposed to any significant interest rate risk for these assets held as at 31 December 2016 and 2015.

The Group’s exposures to interest rate risk also arises from its borrowings. Loan receivables and borrowings issued at variable rates expose the Group to cash flow interest rate risk. Management monitors the capital market conditions and certain interest rate swap agreements with banks have been used to achieve optimum ratio between fixed and floating rates borrowings.

As at 31 December 2016, if interest rates had been 100 basis points higher/lower with all other variables held constant, the Group’s post-tax profit for the year would have been RMB150,432,000 (2015: RMB267,561,000) lower/higher, mainly as a result of higher/lower interest income on loan receivables and interest expenses on borrowings issued at floating rates.

6. Others

(1) Fleet expansion projects

In 2016, the Group has achieved further improvement in its fleet expansion.

In 2016, the cash outflow from investment activities of the Group was approximately RMB11.72 billion which has been paid for construction of new vessels, acquisition of a subsidiary and capital increases into joint ventures of the Company, including capital expenditure of approximately RMB4.23 billion paid for the purchase of new vessels by the Group.

In terms of fleet expansion, 4 new tankers with a total capacity of approximately 746,000 deadweight tonnes and 1 new LNG vessel with capacity of approximately 174,000 cubic metres have been delivered for use in 2016.

— 55 —

As at 31 December 2016, the composition of the Group’s fleet is as follows:

		Deadweight
		tonnes/
	Number of	Cubic	Average
	vessels	metres	age
		(‘000)	(years)
Oil Tankers	100	14,664	7.5
LPG vessels	4	12	10.9
LNG vessel (note)	1	174	0.2
Total	105	14,678/174	7.6

Note: The carrying capacity of LNG vessel is measured in cubic metres.

7. Outlook and highlights for 2017

(1) Competitive landscape and development trend in the industry

In 2017, the delivery of tanker transportation capacity reached a cycle peak. The situation of oversupply will further intensify, and as a result, the international oil transport market situation is still grim. However, the forthcoming implementation of the Ballast Water Treatment Convention during the year may lead to the temporary withdrawal of some of the transportation capacity from the market. To a further extent, this may lead to the result that the U.S. shale oil and gas revolution will promote the formation of the new pattern of oil and gas resources from the East and the West. The international crude oil market will form the two major export centres of North America and the Middle East. Asian countries such as China and India will experience rapid growth in energy consumption. Asia will become the focus of global energy trade. The adjustment of the global oil and gas trade and transport pattern has provided an opportunity for us to optimize the market structure, the cargo source structure, the route structure and the customer mix.

Affected by factors like production reduction in marine oil and pipelining of transshipment oil, the domestic oil shipment market is expected to suffer under shrinking domestic trade sources. The oil import rights expansion policy for domestic local oil refineries remains unchanged, which should boost demand for imported crude oil among domestic refineries. Overall, the domestic oil shipment market is expected to remain stable.

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The fundamental circumstances of the LNG shipping market is unlikely to improve. In addition, as the fleet size is expected to grow by 13%, transportation prices are expected to remain low. Although the LNG transportation market appears sluggish in the short term, its medium and long term prospects are promising. Currently, there are construction plans for liquefaction capacity of 152 million tonnes globally. As more LNG plants commence operation in 2018, LNG trade is expected to thrive, and the oversupply in the LNG shipment market is expected to improve.

(2) Development strategies of the Company

In the face of a complex market environment, the Group intends to adhere to the “strategic leadership and innovation drive” and “maintenance of global leading position in fleet size, industrial leading position in business structure, global leading position in safety marketing and business model” strategies under the leadership of the Board, so as to enhance the risk resistant ability, sustainable development and core competitiveness of the Group.

(3) Operational plans

In 2017, the Group expects to add 13 new oil tankers with a total tonnage of 2,360,000 deadweight tonnes of shipping capacity, and 3 new LNG vessels with a total shipping capacity of 520,000 cubic meters. It is anticipated that the following will be put into use throughout the year: 113 oil tankers of 17.02 million deadweight tonnes, 4 LPG vessels of 10,000 deadweight tonnes, and 4 LNG vessels of 700,000 cubic meters.

Based on the market conditions of the domestic and international shipping industry in 2017, and taking into account the delivery of new vessels, the Group’s major operating goals in 2017 are as follows: shipment turnover volume of 389.6 billion tonne-nautical miles; operating revenue of RMB10.2 billion; operating costs of RMB7.5 billion.

(4) Work initiatives of the Company

In response to the current market environment, the Group will adhere to the following tasks:

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A. Commitment to outperforming the market, leading the innovation in business model and building new ecology for corporate development.

For the international oil shipment market, the Group will achieve a reasonable distribution of the fleet and forecast the shipping price scientifically, so as to grasp the periodic peak of the market by taking mutual reference to the prediction of shipping price and the transportation volume and hence to realise the transition of experience management to scientific management. It will continue to strengthen safety marketing and promote the contracting of the COA. Advantages of overseas outlets in terms of location, information and platform will be utilised for expanding the western market in depth and establishing excellent triangular routes to realise the diversification of supply structure, customer structure and route structure. The Group will seriously study the proportion among domestic shipping and third country transportation, leasing and self-operation, so as to enlarge the extent of leasing in market bloom to lock in basic income and reduce the exposure risk. Also, new trend of refined oil export will be in high profile, with proper overall arrangement in advance to ensure maximum operating efficiency.

For the domestic oil shipment market, the Group will continue to commit to becoming a leader in innovation of business model, and work hard for the continuous growth in the domestic market. The leading edge in business structure will be fully utilised for providing customers with comprehensive logistics solutions. On the one hand, various innovative business cooperation models will be promoted to improve transportation quality, operational efficiency and vessel profitability. On the other hand, communication with the core customers who have the edge on research and estimation for the upstream market will be strengthened. The Group will also understand the market trends from the supply side and strengthen the business cooperation with local refineries in accordance with the implementation of the national mixed ownership reform and the further unlashing of the quota of imported crude oil, so as to grasp the changes in market demand to seize market opportunities.

For the LNG transportation, the Group will broaden its thinking and establish extensive contacts with major international LNG sellers to seek cooperation opportunities for third-party LNG projects. At the same time, the development of domestic private shippers will also be emphasised to formulate corresponding project intervention strategies to promote the development and expansion of LNG business.

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• B. By adhering to the strategy of placing cost as the priority, the Group puts great effort in cost reduction and efficiency promotion. Currently, the international oil price is rising and fluctuating. The Group will continue to implement the fuel price locking mechanism to improve the accuracy of estimation of the trend of oil prices, with target reference value determined scientifically, so as to stay in line with the market pace by developing long, medium and short term operation plans. Meanwhile, reasonable speed will be determined for best efficiency and lean management on different parts of fuel consumption will be comprehensively strengthened to control fuel consumption.

• C. By strengthening capital management, the Group strives to reduce the capital cost. Composition of the liabilities will be analysed in depth, and adjust the currency structure according to exchange rate of USD and RMB. In addition, capital cost will be lowered. The Group will also coordinate the planned stock funds, so as to ensure a reasonable level of cash flow.

• D. By adhering to innovation drive, the Group promotes leapfrog development in fleet scale to expand the new path of industrial upgrading. Relationship between supply and demand in the shipping market and the trend of changes in asset prices will be in high profile. The Group will also explore to a greater extent the possibility of participating in the upstream and downstream business chain, so as to further enhance the overall risk resistant capacity.

• E. By ensuring safety and controlling risk, the Group comprehensively strengthens the risk control to create a new prevention barrier for risk. Development in 2017 will be accelerated, in which the keynotes will be tight schedule, heavy mission and speedy pace. The Group will continue to adhere to the safety management objectives of “personnel safety, equipment safety, standard safety, environmental safety and management safety”, implementing the safe production responsibility system and enhancing the core competitiveness of the Group. At the same time, the special risk assessment will be strengthened and relevant applicable responsive measures and contingency plans will be formulated in accordance with the risk assessed to ensure quality and efficiency of the development.

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• F. By strengthening the team of talents and fleet, the group builds a first-class shipping team. By strengthening the pool of talents and fleet, a first-class shipping team will be established. The Group will scientifically grasp the pattern of the growth of young cadres, with targets and strategies in building a reserve of talents, as well as cultivating expert talents who have the ability to master complex problems, and promoting the introduction of professional talents. At the same time, establishment of backbone of the crew team will be strengthened along with the times to build the first-class crew in line with the development of the fleet.

8. OTHER SIGNIFICANT EVENTS

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

The H share register of members of the Company will be closed from Tuesday, 9 May 2017, to Thursday, 8 June 2017, both days inclusive, during which period no transfer of H shares will be effected and registered. Shareholders whose names appear on the H share register of members of the Company on Thursday, 8 June 2017 will be eligible to attend and vote at the annual general meeting of the Company. In order to be entitled to attend and vote at the annual general meeting of the Company, all duly completed transfer forms accompanied by the relevant share certificates must be lodged with the share registrar of the Company’s H shares, Hong Kong Registrars Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not later than 4:30 p.m. on Monday 8 May 2017.

To ascertain shareholders’ entitlement to the proposed final dividend, the H share register of members of the Company will be closed from Tuesday, 20 June 2017 to Friday, 30 June 2017, both days inclusive, during which period no transfer of H shares will be effected and registered. Shareholders whose names appear on the Company’s H share register of members Friday, 30 June 2017 will be qualified for the proposed final dividend. In order to qualify for the proposed final dividend, shareholders must lodge all duly completed transfer forms accompanied by the relevant share certificates with the share registrar of the Company’s H shares, Hong Kong Registrars Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not later than 4:30 p.m. Monday, 19 June 2017. The proposed final dividend (the payment of which is subject to the shareholders’ approval at the forthcoming annual general meeting) is to be payable on or before Wednesday, 30 August 2017 to shareholders whose names appear on the H share register of members of the Company on Friday, 30 June 2017.

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(2) Medical insurance scheme

As required by the regulations of the PRC local 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 basic salaries of the employees. 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 2009 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 19% to 20% (2015: 18% to 22%) of the basic salaries of the Group’s employees. Contributions made by the Group to the Scheme for the Reporting Period amounted to RMB77,277,000 (2015: RMB88,482,000).

Enterprise annuity scheme

In 2008, the representatives of the Group’s Labour Union and the Board resolved to approve and adopt an enterprise annuity scheme. Pursuant to the annuity scheme the employer’s contributions will be 5% of the total staff costs of the previous year. The employees’ contributions will be 1.25% of their income from the previous year and the employer’s contributions for the management staff should not be five times more than the staff average.

The enterprise annuity scheme became effective on 1 January 2008. Under the scheme, actual amount incurred as labour cost in 2016 amounted to RMB15,452,000 (2015: RMB7,505,000).

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The Group has no further obligations beyond the annual contributions. In the opinion of the Directors, 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 Mandatory Provident Fund Scheme (“ 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% (2015: 5%) of the employees’ relevant income, subject to a cap of monthly relevant income of HKD30,000 effective as on 1 June 2014. Contributions to the MPF Scheme vest immediately. Contributions made by the Group to the MPF Scheme for the Reporting Period amounted to RMB594,000 (2015: RMB1,015,000).

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

As at 31 December 2016, 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 Securities and Futures Ordinance (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 pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “ Model Code ”) as set out in Appendix 10 to the Listing Rules.

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

During the Reporting Period, neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company’s listed securities.

(6) Compliance with the Corporate Governance Code

The Board is committed to the principles of corporate governance for a value-driven management that is focused on enhancing shareholders’ value. In order to enhance independence, accountability and responsibility, the posts of chairman of the Board and the chief executive officer are assumed by different individuals so as to maintain independence and balanced views.

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In the opinion of the Directors, save as disclosed below, the Company has complied with the code provisions of the Corporate Governance Code as set out in Appendix 14 of the Listing Rules throughout the year ended 31 December 2016.

As provided for in code provision A.6.7, independent non-executive Directors and other non-executive Directors should attend general meetings and develop a balanced understanding of the views of shareholders. Mr. Wang Wusheng, Mr. Ip Sing Chi, Mr. Rui Meng and Mr. Teo Siong Seng, independent non-executive Directors, were unable to attend the annual general meeting held on 20 March 2016 (the “ 2016 AGM ”) due to prior business commitments. In addition to the 2016 AGM, Mr. Ip Sing Chi and Mr. Teo Siong Seng, were unable to attend the extraordinary general meeting of the Company held on 19 September 2016 due to prior business commitments.

The Company will keep its corporate governance practices under continuous review to ensure their consistent application and will continue to improve our practices having regard to the latest developments including any new amendments to the Corporate Governance Code.

The Company has established four professional committees under the Board, namely the Audit Committee, the Remuneration and Appraisal Committee, the Strategy Committee and the Nomination Committee, with defined terms of reference.

(7) Audit Committee

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 three independent non-executive Directors.

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

(8) Remuneration and Appraisal Committee

The remuneration and appraisal committee of the Company comprises five independent non-executive Directors of the Company. The remuneration and appraisal committee of the Company has adopted terms of reference which are in line with the Corporate Governance Code contained in Appendix 14 of the Listing Rules.

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• (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 confirms that each of them has complied with the Model Code during the Reporting Period.

(10) Employees

The adjustments 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. Save for the remuneration policy disclosed above, the Company does not maintain any share option scheme for its employees and the employees do not receive any bonus. The Company regularly provides its administrative personnel with 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 2016, the Company had 8,068 employees (as at 31 December 2015: 10,625 employees). During the Reporting Period, the total staff cost was approximately RMB2,054 million (2015: approximately RMB2,411 million).

(11) Events after the Reporting Period

On 20 January 2017, the Board announced that the Company entered into an capital contribution agreement with China Shipping and COSCO SHIPPING Development Co., Ltd., pursuant to which all three parties agreed to have capital contributions by way of cash in proportion to their existing shareholdings in CS Finance. As a result, the Company will contribute RMB150 million to CS Finance as capital injection. Upon the completion of the capital contribution, the registered capital of CS Finance will be increased to RMB1,200 million while the equity interest holds by the Company in CS Finance remains at 25%. The Board considered that making a further capital contribution to CS Finance will bring considerable economic benefits to the Company.

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(12) Update of the Articles of Association

By a special resolution passed at the extraordinary general meeting of the Company held on 19 September 2016, the Company made certain amendments to its articles of association in relation to, among other things, (i) the Change of Name, and (ii) miscellaneous changes with a view to further enhancing corporate governance and investor protection. Further details of the amendments are set out in the Company’s circular dated 4 August 2016.

(13) Publication of annual results on the website of 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 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 2016 and 2015, 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 Reporting Period, which will contain an unqualified auditors’ report, will be delivered to the Companies Registry, and delivered to shareholders as well as made available on the Company’s website at http://www.coscoshippingenergy.com.

By order of the Board COSCO SHIPPING Energy Transportation Co., Ltd. * Sun Jiakang

Chairman

28 March 2017 Shanghai, the PRC

As at the date of this announcement, the Board of Directors of the Company comprises Mr. Sun Jiakang, Mr. Liu Hanbo and Mr. Lu Junshan as executive Directors, Mr. Feng Boming, Mr. Zhang Wei and Ms. Lin Honghua as non-executive Directors, Mr. Wang Wusheng, Mr. Ruan Yongping, Mr. Ip Sing Chi, Mr. Rui Meng and Mr. Teo Siong Seng as independent non-executive Directors.

* for identification purpose only

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