Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2016

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2016 Annual Report

Stock code: 600320 900947

The company referred to: Shanghai Zhenhua Heavy, Zhenhua B share

Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2016 Important Notice I. Hereunder, the Board of Directors, the Supervisory Board, directors, supervisors and senior executives of the Company guarantee that the Annual Report is of authenticity, accuracy and integrity; it contains no major omission, false record or serious misleading statement; they will be responsible both individually and jointly for any of above guaranty. II. All the directors of the company attend meeting of the board of directors. III. Ernst & Young LLP. (Special general partnership) issued standard unqualified audit report for the Company. IV. The Company′s responsible person Song Hailiang, accounting responsible person Huang Qingfeng and accounting responsible person (accounting chief) Wang Jue hereby declare that the financial reports in this Annual Report are true, accurate and complete. V. Report period profit distribution preplan or preplan for capital reserve transfer to increase capital stock as audited by the board not to distribute profit; not to convert reserve into capital stock. VI. Risks declaration of prospective statements □Applicable √Not applicable VII. Whether non-operational fund occupancy by the controller and its related parties exists with the Company? No. VIII. Whether there is external guaranty provision violating regulation or procedural decision-making within the Company? No. IX. Significant risk remind √Applicable □Not applicable The Company has described the risks in the annual report in details and the investors shall pay attention to that. Refer to the related chapters in the directors’ report for the description of the risk of the Company. X. Others □Applicable √Not applicable

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2016 Annual Report

Contents Chapter I

Definition ............................................................................................................................. 3

Chapter II

Company Profiles and Key Financial Indicator .................................................................. 3

Chapter III

Business Profile ................................................................................................................. 9

Chapter IV

Discussion and Analysis of the Board of Directors ........................................................ 10

Chapter V

Substantial Events ............................................................................................................ 23

Chapter VI

Equity Movement and Shareholder′s Profile ............................................................... 46

Chapter VII

Preferred stock information ........................................................................................... 53

Chapter VIII

Directors, Supervisors, Senior Executives and Employees .......................................... 54

Chapter IX

Company Governance ..................................................................................................... 64

Chapter X

Company Bond Information ............................................................................................. 68

Chapter XI

Financial Statements ....................................................................................................... 71

Chapter XII

Backup Documents Contents ....................................................................................... 507

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2016 Annual Report

Chapter I I.

Definition

Definition

Terms used in this report means the following except for otherwise specified: Definition of frequently used terms The Company

Refers to

Shanghai Zhenhua Heavy Industries Co., Ltd.

CCCC, controlling shareholder

Refers to

China Communications Co., Ltd.

Effective controller

Refers to

China Communications Construction Group

Chapter II I.

Company Profiles and Key Financial Indicator

Company information

Statutory company name in Chinese

Shanghai Zhenhua Heavy Industries Co., Ltd.

Statutory Chinese Abbreviation of the Company English name of the Company

Shanghai Zhenhua Heavy

SHANGHAI ZHENHUA HEAVY INDUSTRIES CO.,LTD.

English Abbreviation of the Company

ZPMC

Legal representative

II.

III.

Song Hailiang

Contact information Board secretary

Securities Affair Agent

Name

Wang Jue

Li Min

Address

3261 Dongfang Road, Shanghai

3261 Dongfang Road, Shanghai

Tel.

021-50390727

021-50390727

Fax

021-31193316

021-31193316

Email

[email protected]

[email protected]

Basic information of the Company

Registered address

3470, South Pudong Road, Shanghai

Post code

200125

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2016 Annual Report

Office address

3261 Dongfang Road, Shanghai

Post code

200125

Website

http://www.zpmc.com

Email

[email protected]

IV. Information disclosure and reference Designated media for information

Shanghai Securities News, Hong Kong Wen Wei Po

Website designated by China Security Regulatory Commission for disclosure of annual report

www.sse.com.cn

Annual report available at of the Company

V.

Securities and Law Affairs Office

Stock Profiles of the Company Stock Profiles of the Company

Short form of Stock type

Stock exchange listed at

Short form of stock

Share code

Stock before change

A-share

Shanghai Stock Exchange

Shanghai Zhenhua Heavy

600320

ZPMC Industries

B-share

Shanghai Stock Exchange

Zhenhua B-share

900947

-

VI. Others

CPA’s employed by the Company(Domestic)

Title

Ernst & Young (special general partnership)

Office address

Room 01-12, 17th Floor, No.1 Dongfang Dongcheng District, Beijing

CPAs to sign

Yang Lei, Tao Baiyi

VII. Major Accounting Data and Financial Indicators in Last Three Years (I) Major accounting data Unit: Yuan Currency: RMB

Major 2016 accounting data

2015

Growth 2014 over same period prior After adjustment year (%)

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Before adjustment

2016 Annual Report

Operating Income

24,348,087,928

23,272,394,677

4.62

25,477,011,081

25,069,421,487

Net Profit 212,419,946 attributable to shareholders of the Company

212,411,967

0.004

202,223,273

199,386,986

Net Profit after 157,445,435 deducting non-recurring gains/losses

-214,409,604

Not -79,581,135 applicable

-79,581,135

Net cash 1,658,422,636 generated from operating activities

-1,831,961,473

Not -863,628,925 applicable

-873,383,052

End of 2016

Growth End of 2014 over same period prior year After adjustment

End of 2015

Before adjustment

(%) Net asset 15,196,736,263 attributable to shareholders of the Company

14,869,572,883

2.20

14,990,495,511

14,780,603,810

Total assets

59,020,752,259

3.05

58,024,869,184

56,145,227,254

60,823,819,098

(II) Major Financial Indicators

Major financial index

2016

2015

2014 Growth over same period prior year (%) After Before adjustment adjustment

Basic EPS (Yuan/share)

0.05

0.05

0.00

0.05

0.05

Diluted EPS (Yuan/share)

0.05

0.05

0.00

0.05

0.05

deducting 0.04

-0.05

Not applicable

-0.02

-0.02

Weighted average net assets earnings 1.41 (%)

1.41

0.00

1.36

1.36

Weighted average net assets earnings 1.05 ratio after deducting non-recurring gains/losses(%)

-1.45

Increase point

Basic EPS after non-recurring gains/losses(Yuan/share)

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2.5

base -0.54

-0.54

2016 Annual Report

Description of the main accounting data and financial indicators for the first three years at the end of the reporting period √Applicable □Not applicable 1. The company changed its accounting policies about methods on taxes calculation and report according to the Provision on Value-Added Tax issued by Ministry of Finance in Dec. 2016. It had no impact on the consolidation of 2016 and 2015 financial statement, as well as the net profit and owner’s equity. It can be seen on the 19th board meeting announcement. 2. This year, the company acquired 32.51% of the equity of CCCC Tianhe Co., Ltd, and obtained its control rights through a concerted action agreement. Since China Communication Construction Co., Ltd is the controlling shareholder of the Company and CCCC Tianhe Co., Ltd before the acquisition, so this is the acquisition under the same control. The assets and liabilities of CCCC Tianhe acquired are accounted as the historical cost and included in the consolidated financial statements, namely regarded CCCC Tianhe as a part of the Company and the presented in the earliest period. Accordingly, the company has relisted the beginning balance of the corresponding data. VIII.

Accounting data difference in domestic and international accounting standards

(I)Difference of net profit and net assets attributable to shareholders of listed company in the financial report disclosed according to international accounting standards and domestic accounting standards. □Applicable√Not applicable (II) Difference of net profit and net assets attributable to shareholders of listed company disclosed in accordance with the foreign and domestic accounting standards. □Applicable√Not applicable (III) Description of the difference between accounting standards at home and aboard. □Applicable√Not applicable IX. Quarterly Major Financial Indicator in 2016 Unit: Yuan Currency: RMB Q1 (Jan-Mar) Operating Income

Q2 (Apr-June)

Q3 (July-Sept)

Q4 (October-December)

4,635,581,695

7,166,060,906

6,590,100,486

5,956,344,841

53,657,723

58,635,638

43,276,720

56,849,865

Net profit attributable to shareholders of listed company after deducting non-recurring gains and losses

33,458,662

77,209,410

27,270,343

19,507,020

Net cash generated operating activities

384,687,691

-279,931,650

4,210,477

1,549,456,118

Net Profit attributable shareholders of the Company

to

from

Description of difference between quarterly data and disclosed periodic data □Applicable√Not applicable X.

Items and amount of non-recurring gains/losses

√Applicable □Not applicable

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2016 Annual Report

Unit: Yuan Currency: RMB Items of non-recurring gains/losses

2016

2015

2014

Gains and losses on disposal of non-current 1,340,612 assets

9,338,797

13,948,136

Government subsidy on current profit and loss 45,042,910 statement except for those closely related to the Company′s operation, enjoyed by certain state standard or certain quota

22,847,200

20,316,889

Current net profit and loss of the subsidiary 0 under the same control of the company from the beginning to the consolidated day

55,523,666

15,289,013

Gains/losses on fair value movement of tradable 23,420,959 financial assets, tradable financial liabilities held except for valid hedging business related with company’s normal operation, and investment income acquired from disposal of tradable financial assets, tradable financial liabilities and financial assets available for sale

445,766,951

286,253,779

Non-operation revenue/expense apart from 6,435,660 above

15,490,536

15,164,034

Minor shareholder′s equity impact

-6,708,080

-31,568,397

-9,922,714

Income tax impact

-14,557,550

-90,577,182

-59,244,729

Total

54,974,511

426,821,571

281,804,408

XI. Items calculated by fair value √Applicable □Not applicable Unit: Yuan Currency: RMB Item name

Beginning Balance Closing Balance

Current movement

Impact on Current Profit

Forward foreign exchange contract-Fair 676,082 Value appraisal income

4,615,775

3,939,693

3,939,693

Forward foreign exchange contract-Fair -24,918,115 Value appraisal income loss

0

24,918,115

24,918,115

Equity Instrument sale-Jiangxi Huawu

available

for

337,650,826

313,612,402

-24,038,424

1,112,890

Equity Instrument sale-Qingdao port

available

for

298,821,560

340,253,175

41,431,615

13,058,634

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2016 Annual Report

Equity Instrument sale-CRSC

available

for

Equity Instrument available sale-Shenwan Hongyuan

for

530,976,235

615,346,381

84,370,146

2,814,813

1,734,399

1,366,388

-368,011

24,291

Equity Instrument available for sale46,000,000 financial products

0

-46,000,000

2,101,669

Total

1,275,194,121

84,253,134

47,970,105

1,190,940,987

XII. Others □Applicable√Not applicable

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2016 Annual Report

Chapter III I.

Business Profile

The Company engaged in the main business, operation model and industry profile of the Company during the reporting period

The company is a well-known enterprise of heavy equipment manufacturing industry, and state-owned listed company holding A, B shares, headquartered in Shanghai, There are ten production bases in Shanghai, Nantong and other cities. Since 1998, it has been in the first place in global container crane order ranking. To seek for further development, the company actively explored the large steel structure and offshore heavy equipment market while consolidated the port machinery market. The company business scope includes: design, construction, installation and contracting of large port loading system and equipment, offshore heavy equipment, engineering machinery, engineering ships and large metal structural parts and their components and spare parts, ship repair; self-produced crane rental business, sales of the company products; international shipment by available machine special transportation ships, steel structure engineering professional contracting (operate the business if the related license is required). II.

Description of the massive change in main assets of the company during the reporting period

□Applicable√Not applicable III. Analysis on the core competence during the reporting period √Applicable □Not applicable There is no significant change in core competitiveness of the Company during the reporting period.

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2016 Annual Report

Chapter IV I.

Discussion and Analysis of the Board of Directors

Discussion and analysis of the Board

During the reporting period, facing the complicated situation both at home and abroad, the Company Board of Director and the management led all the employees to deeply implement “4321” and “1521” strategy and fully apply the 24 letters principle: “firm foundations, always innovate, adjust structure, change mode, integrate resources, reinforce management, develop culture and increase quality”. With focus on the enhancement of operation quality and core competitiveness, the Company aim to build a world-class company with international competition strength base on the assurance of the company’s stable and healthy continuous development in new state, reform and development. During the reporting period, the market structure was effectively adjusted, and the reform as deepened, the layout was gradually optimized and the ability to allocate the global resources was improved. Various business sectors achieved remarkable results while the profit increased steadily. The company made new records in the port machinery market, now the products were sold in 97 countries and regions in the world. Especially, the Quay Cranes occupied the 82% market share in the global market counted by a famous English magazine-World Cargo News, which saw the peak since the company was founded in 1992.Though the global marine industry still developed slowly, the Company even made progress by strategies adjustment, the Company successfully produced 1000t wind turbine installation vessels, crane ships with autopilot and all-direction propeller system as well as programs like the two SEP-650 gained marvelous attention in this market. The big heavy special steel structure projects had more expansion and layout. There were highlights in the system integration and general contracting market. Our investment Portfolio has achieved gradual improvement, the shipping, installation and offshore wind power market have a higher level of potential the electrical market under going a steady development. The layout of the integrated services market was improved further. II.

Operation performance during reporting period

In period of report, the Company realized operation revenue 24.348 billion RMB, increased by 4.62%; realized net profits 212 million RMB which belongs to parent company, nearly the same to 2015. (I)Major business analysis P&L and Cash Flow Statement related item movement analysis Unit: Yuan Currency: RMB Item

Report Year

Prior Year

Growth (%)

Operating Income

24,348,087,928

23,272,394,677

4.62

Operating Cost

19,727,663,875

19,717,314,855

0.05

Selling expenses

100,435,778

79,388,743

26.51

Management expenses

1,759,032,746

1,551,222,564

13.4

Financial expenses

1,218,992,788

1,532,851,096

-20.48

Net cash flow from operating activities

1,658,422,636

-1,831,961,473

Not applicable

Net cash flow from investment activities

-726,215,078

2,565,598,510

-128.31

Net cash flow from financing activities

152,344,993

-318,811,177

Not applicable

R&D expenses

851,544,356

717,412,492

18.70

Operation taxes and surcharges

152,175,837

24,550,179

519.86

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2016 Annual Report

Changes in fair value gains and losses - net 1,221,116,175

637,391,199

91.58

Gain on investment

118,513,425

498,236,958

-76.21

Net profits

307,344,236

194,205,688

58.26

Balance arising from the translation of 25,605,643 foreign currency financial statements

10,400,161

146.20

Total comprehensive income attributed to 327,163,380 parent company owners

100,532,162

225.43

Minority interest

-18,206,279

-

1.

94,924,290

Revenue and cost analysis

√Applicable □Not applicable 1.The operation revenues and costs increased because the selling of new projects increased. The average of gross margin in products increased because of the increase of operating income and the improvement of our management. 2. The sales expenses increased due to the expansion on global market. 3. The management expenses increased because the R&D expense increased this year. 4. The financial expenses decreased because of the decrease of exchange loss and interest cost. 5. The cash flow net amount in operation changed because the raw materials purchasing expenses and payment of engineering expenses increased. 6. The cash flow net amount in investment changed because our bank financial products became due and the profits increased. 7. The cash flow net amount in financing changed because the repayment of bank loan increased this year. 8. The R&D expenses increased because the important R&D projects like automated terminal increased this year. 9. The operation taxes and surcharges increased because the management expenses now are included in the operation taxes and surcharges according to the new accounting rules. 10. The fair value gains and losses – net amount increased because the increase of the products and account receivable depreciation reserves as well as the predictable losses that bring by contracts. 11. The gain on investment decreased because the restriction on bank financial products purchasing which led to profit decrease. 12. The net profit increased because the gross profit of the product increased. 13. The balance arising from the translation of foreign currency financial statements increased due to the changes of exchange rate. 14. The total comprehensive income attributed to parent company owners increased because the fair value of financial assets available for sale increased. 15. The minority interest changed because the total net profit of the non-wholly owned subsidiaries of the Company increased.

(1) Major business by industry, product and region Unit: Yuan Currency: RMB

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Major business by products

Gross margin (%)

Operation Operation revenue cost Gross margin increase increase increase over prior over prior over prior year (%) year(%) year(%)

By product

Operating Income Operation cost

Container cranes

17,082,391,036

13,067,811,357

23.50

13.92

8.54

Increase percentage points

3.80

Bulk-cargo machinery parts

3,154,983,915

3,054,772,000

3.18

56.70

64.02

Decreased by percentage points

4.32

Heavy equipments

1,284,872,909

1,279,775,256

0.40

-67.76

-67.60

Decreased by percentage points

0.48

Steel structure and 1,035,829,290 related income

938,105,979

9.43

25.38

17.78

Increase 5.83 percentage points

Construction-transfer 1,005,087,825 projects

1,019,082,565

-1.39

95.52

127.63

Decreased by 14.30 percentage points

Vessel shipping and 580,231,787 others

166,282,313

71.34

-14.77

-55.84

Increase 26.65 percentage points

Gross margin (%)

Operation Operation revenue cost Gross margin increase increase increase over prior over prior over prior year (%) year(%) year(%)

Major business by region

By region

Operating Income Operation cost

Mainland, China

9,057,171,421

7,486,770,441

17.34

9.51

11.28

Decreased by percentage points

1.31

Asia (excluding 8,774,618,285 Mainland, China)

7,454,726,034

15.04

49.88

55.99

Decreased by percentage points

3.33

America

1,660,773,333

1,025,270,894

38.27

-63.54

-75.11

Increase 28.68 percentage points

Europe

1,694,807,875

1,564,465,012

7.69

-25.15

-29.01

Increase 5.02 percentage points

China 1,939,957,027

1,250,525,343

35.54

80.9

45.75

Increase 15.55 percentage points

Mainland, (export) Africa

814,524,109

605,690,798

25.64

-2.51

-7.64

Increase 4.13 percentage points

Oceania

201,544,712

138,380,948

31.34

24.44

6.17

Increase 11.81 percentage points

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Description of main business by industry, product, and region √Applicable □Not applicable Note: the amounts in the “Mainland, China (export)” means operation income exported to the overseas subsidiaries or affiliates, and then sold to the domestic customers. (2) Production volume and sales volume analysis table Description of production volume and sales volume The Company mainly manufactures and sells the large port equipment, heavy equipment and steel structure, the "Accounting Standards- Construction Contract" is applicable.The income shall be confirmed according to the completion percentage method, so this table is not applicable. (3) Cost analysis statement Unit: Yuan Product category

Product

Container cranes

Cost composition

Report amount

Report period Report Total cost amount period period rate Amount in the same in the same compared in total period last year period last with the cost (%) year (%) same period last year (%) 66.93

12,039,998,425

61.83

8.54

Bulk-cargo machinery Raw material, 3,054,772,000 parts labor, production costs

15.64

1,862,388,384

9.56

64.02

Heavy equipments

6.55

3,950,151,042

20.29

-67.60

4.80

796,465,278

4.09

17.78

Construction-transfer Subcontracting 1,019,082,565 projects expenses, raw materials

5.22

447,701,799

2.30

127.63

Vessel shipping and Labor, fuel 166,282,313 others consumption, depreciation etc.

0.85

376,525,357

1.93

-55.84

Steel structure related income

Raw material, 13,067,811,357 labor, production costs

Raw material, 1,279,775,256 labor, production costs and Raw material, 938,105,979 labor, production costs

Other description of cost analysis □Applicable√Not applicable

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2016 Annual Report

(4) Main clients and suppliers statement √Applicable □Not applicable The sales of the first five clients reached to 6,245.59 million yuan which accounted for 26% of the whole sales, and the related sales among them were 0. The purchase amount of the first five suppliers reached to 1,839.73 million yuan which accounted for 10.13% of the whole, and the related purchase amount among them were 0. II. Cost □Applicable√Not applicable III. R&D expenses R&D expenses breakdown √Applicable □Not applicable Unit: Yuan R&D into cost expenses in reporting year

851,544,356

R&D into capital expenses in reporting year

0

R&D expenses total

851,544,356

Total R&D expenses ratio in operation revenue 3.5 (%) R&D employees quantity

1617

R&D employees’ ratio in the total employees 18.25 (%) R&D expenses ratio in capital (%)

0

Deliberation √Applicable □Not applicable During the reporting period, the company was honored “Key industrial enterprises in well using intellectual property” by MIIT, the "Project of American New Bay Bridge" won the first prize of Shanghai Scientific and Technological Progress. Also, the company founded Shanghai Off-shore Engineer Research Institute with Shanghai Maritime University. This year our center of Lifting and Pipe laying Engineer Offshore was evaluated by the national Ministry of Science and Technology as well the assessments on Shanghai Intelligent Welding and Port Machinery Engineer centers by Shanghai STCSM. 4. Cash flow √Applicable □Not applicable The net cash flow from operating activities was 1.658 billion Yuan, mainly due to increase orders and payment for the purchase of raw materials and engineering costs. The net cash flows from the investment activities was -0.726 billion Yuan,mainly due to increase payment of the bank financial product due. The net cash flow from the financing activities is 0.152 billion Yuan, mainly due to the increasing repayment of bank loan, and the changes of exchange rate contributed 0.075 billion Yuan changes. (II) Description of non-major business causing significant change to profit

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2016 Annual Report

□Applicable√Not applicable (III) Assets and liabilities analysis √Applicable □Not applicable 1. Assets/liabilities statements Unit: Yuan

Item

Reporting Reporting period end period Prior period amount over over Closing balance at end over Closing balance at end Prior period total total assets reporting period end prior period end end amount assets (%) change ratio (%) (%)

Cash and cash equivalents

3,597,044,199

5.91

2,458,333,716

4.17

46.32

Non-current assets due within 1,384,438,569 one year

2.28

2,625,135,212

4.45

-47.26

Long-term equity investment

2,201,421,453

3.62

1,597,134,817

2.71

37.84

Advance payment

292,941,206

0.48

423,603,129

0.72

-30.85

Interest payable

140,195,803

0.23

289,590,733

0.49

-51.59

Non-current liabilities due within 799,574,356 one yea

1.31

6,837,115,692

11.58

-88.31

Other current liabilities

3,996,025,335

6.57

1,995,655,739

3.38

100.24

Long term loans

3,925,335,497

6.45

1,761,904,000

2.99

122.79

Long-term payable

1,618,361,164

2.66

719,861,943

1.22

124.82

Provision

293,115,783

0.48

220,141,178

0.37

33.15

Other comprehensive income

322,403,671

0.53

207,660,237

0.35

55.26

Minority equity

1,290,413,687

2.12

917,076,421

1.55

40.71

Other statement 1. The cash and cash equivalents increased because the account receivable was due and the external payment decreased. 2. The non-current assets due within one year are increased mainly because the receivable of the long-term receivables of the NanjingNing High-tech “construction-transfer” project was due. 3. The long-term equity investment is increased mainly because the Company had more investment in overseas corporate. 4. The deposit received decreased because this item was due, the company closed an account. 5. The interest payable decreased mainly because the Company paid the loan interest this year. 15 / 507

2016 Annual Report

6. Non-current liabilities due within one year decreased because the long-term loan that due within one year was due. 7. The other current liabilities increased because of the issue of short-term bonds. 8. The long-term loan increased because the meet the long-term development, 9. The long-term payable increased because the increase of equipment Leasing. 10. The provision increased because the company accrued the expense of services after sale. 11. The other comprehensive income increased because the fair value of financial assets available for sale increased. 12. The minority equity increased because the capital investment of the minority shareholders increased this year. 2. Restriction on main assets at the reporting period end √Applicable □Not applicable Restriction on main assets at the reporting period end

Item

Reporting period end book value

Reasons of restriction

Cash and cash equivalents

99,839,013

Open L/Cs and bond of L/Gs

Fixed assets

2,438,314,390

For mortgage of loans

Restricted long-term account payable

2,996,201,650

For pledge of loans

Total

5,534,355,053

3. Others □Applicable√Not applicable (IV) Industry operating conditions analysis In 2016, the Company signed the new contract of port machinery with amount of 2.617 billion USD, decreased by 20.46% on yearly basis. The Company signed new contracts of marine engineering products and steel structure with amount of 537 million USD, decreased by 35% on yearly basis. The Company signed new contracts of PPP investment with amount of 10.021 billion Yuan. The global shipping market is readjusted, the port machinery market is maintaining an usual level, the domestic market needs time to develop. We can see that the needs of traditional port machinery reached saturation when the automatic equipments need is rising. The global market of ore and oil development keeps declining, and it won’t be recovered in a short time. When it comes to the situation of steel structure market, it benefits from the blueprint of One Belt One Road. In the meanwhile, the company investment and exploration both at home and aboard are rising that will contribute a lot to the traditional major works. (V) Investment analysis 1. External equity investment overall analysis √Applicable □Not applicable Investment amount of period end

3,514,993,959

Investment amount movement

705,681,962

Investment

1,428,141,461

amount

same

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2016 Annual Report

period prior year Investment amount movement ratio (%)

-50.59

(1) Major equity investment □Applicable√Not applicable (2 )Major non-equity investment □Applicable√Not applicable (3) Finance assets measured by fair value √Applicable □Not applicable Invested companies Unit: RMB

Stock code

300095

Short Initial form of investment stock cost

Equity ratio of period begin (%)

Equity ratio of Book value period period end end (%)

Huawu share

7.22

5.90

313,612,402

1,112,890

-24,038,424

Finance assets Pay in available-for-sale currency

2.16

2.16

340,253,175

13,058,634

41,431,614

Finance assets Market available-for-sale purchasing

617,854,000

1.4

1.4

615,346,381

2,814,813

84,370,147

Finance assets Market available-for-sale purchasing

937,441,194

/

/

1,269,211,958

16,986,337

101,763,337

/

11,071,606

06198 (H-share)

Qingdao 308,515,588 Port

03969 (H-share)

CRSC

Total

Owner’s Gains and equity of losses of Accounting movement of reporting account reporting period period

Source of equity

/

Share-participating condition of financial companies Unit: RMB

Gains and losses of reporting period (Yuan)

Owner’s equity movement of reporting period (Yuan)

Accounting account

Source equity

Name of invested company

Initial investment (Yuan)

Equity ratio of period begin (%)

Shenwan Hongyuan

200,000

Less than 0.01

Less than 0.01

1,366,388

24,291

-368,011

Finance assets available-for-sale

Subscription

Total

200,000

/

/

1,366,388

24,291

-368,011

/

/

Equity ratio of period end (%)

Book value of period end (Yuan)

(VI) Major assets and equity sales □Major assetsot applicable (VII)Key subsidiaries and share-participating companies

17 / 507

of

2016 Annual Report

√Applicable □Not applicable Unit: RMB Company

Major product or service

Registered capital

Asset scale

Net profit/(loss)

Shanghai Zhenhua Port Machinery (Hong Kong) Co., Ltd.

Design, manufacturing and sales of port machinery, engineering vessel, steel structure and other parts

50,000,000

10,427,736,759

3,352,889

Shanghai Zhenhua Shipping Co., Ltd

Operation of sea transportation in coastal waters; ordinary transportation in the middle and lower reaches of Yangtze River; transportation of port machinery.

120,000,000

2,299,892,178

54,894,998

Nantong Zhenghua Heavy Equipment Manufacturing Co., Ltd

Installation of heavy port equipment, engineering vessels, heavy metal structure and its parts; Gear box, container yard crane, super heavy-duty bridge steel structure, heavy marine machinery equipment, weaving, installation; lease of cranes; contracting of steel structures etc

854,936,900

2,422,076,284

-59,150,920

Shanghai Zhenhua Heavy Industries Group (Nantong) Transmitter Co., Ltd

Construction and installation of large-scale port equipment, engineering vessels, offshore heavy equipment, machinery and equipment, wind power generation equipment to use gear box; large slewing bearings, transmission, dynamic positioning, large anchor cutter, offshore oil platform lifting device and components, accessories related weaving.

300,000,000

2,742,735,527

22,259,257

Shanghai Zhenhua marine engineering service Co., Ltd (Primitive name: Shanghai Zhenhua Heavy Industries Vessel Transport Co., Ltd)

International land, air, maritime freight forwarding, business, domestic freight forwarding, undertaking large-scale port equipment, marine equipment, marine engineering materials sales, marine construction and engineering and ship leasing, engaged in import and export of goods and technologies, transit trade, trade between enterprises and trade agents within the free trade zone.

100,000,000

304,927,252

-18,779,615

Zhenhua Pufeng Wind Energy (HongKong) Co., Ltd

Offshore wind turbine installation

16,326,531

17,510,018

-19,659,559

CCCC Tianhe Co., Ltd

Integration design, R&D and manufacturing of shield machine system with diameter of over 6m;integration design, R&D and manufacturing of tunnel boring machine (TBM) system

2,722,807,116

85,197,056

HKD

USD

18 / 507

681,627,100

2016 Annual Report

with diameter of over 5m; design, R&D and manufacturing of marine machinery and parts, cranes and parts, bridges and high damping bracket for buildings; sales of self-produced products. whole sales and import & export business of marine machinery and parts, cranes and parts, bridges and high damping bracket for buildings (if the state-operated trade commodities, design quota and license management is not involved, the related national rules will prevail);installation, maintenance, leasing, consulting, technical services for our products.(foreign capital proportion is less than 25%) (as for the items requiring the approval, carry out the business activities after obtaining the approval from the authorities) Shanghai Zhenhua Heavy Port Machinery General Equipment Co.,Ltd.

Sales of port loading machine, bulk cargo and container machine, port engineering vessels (including floating engineering crane), material handling mechanical products and parts, sales and technical services, installation and maintenance, technical consultation of all types of machine and equipment, key parts of the raw materials and accessories equipment.

2,184,730,000

2,273,914,423

12,569,775

Nanjing Ninggao New Channel Construction Co.,Ltd

Engaged in construction, investment and management of Ninggao NewChannel project.

100,000,000

3,140,658,145

109,557,250

Shanghai Zhenhua Heavy Industries Qidong Marine Co., Ltd

Machinery manufacturing 303,000,000

1,894,868,401

-6,401,505

Jiangsu LongYuan Zhenhua Marine Engineering Co.,Ltd

Steel structure fabrication and installation, Foundation construction of offshore wind power facilities, equipment installation and maintenance, submarine cable system construction, maintenance, marine construction, equipment installation and maintenance, and installation of equipment leasing.

260,000,000

1,278,961,358

46,943,972

900,000,000

1,364,677,410

4,801,514

5,000,000,000

22,840,873,119

251,014,262

50,000,000

315,835,115

-16,452,070

CCCC Estate Yixing Co., Ltd.

Engaged in real estate development.

CCCC Financial Leasing Co., Ltd

Financing lease

China

Construction of port, waterway, highway

19 / 507

2016 Annual Report

Communications Construction USA Inc.

and bridge.

USD

(VIII) Conditions of the structure of and share-participating companies □Applicable√Not applicable III. (I)

The Company’s discussion and analysis of the Company’s future development Sector competition pattern and development trend

√Applicable □Not applicable According to the analysis of port machinery market about purchase orders, the company reached to a peak in 2015 because of the major projects of automatic-port equipment sets. And it back blended to normal amount since changes of global economic and trends of trade. The domestic market keep steady, the Asia market remain firm, the North America market is still in the adjustment period,and markets in Africa and Latin America are full of potentiality, but the Europe and Australia ones are declining. The world economic and trades conditions are in downturns, Britain exited from EU and other members want to follow it, which makes the situation more puzzling. Many shipping lines are in dilemma. The Hanjin shipping Co. bankrupted, the MAERSK Group needed to be reorganized, the three top shipping companies must consolidated as well as Zhongyuan and Zhonghai. These changes had an influence on the market and investment on port construction. So, the port machinery market will definitely be in huge pressure. The global shipping market is readjusted, the port machinery market is maintaining an usual level, the domestic market needs time to develop. We can see that the needs of traditional port machinery reached saturation. The total needs are declining, so the operation and competitiveness will be worsening. Though the global needs are declining in the port machinery market, but there are some hot-spots some area. The trend of world economic center transformation to the Asian-Pacific region is more apparent. Chinese economic growth will still remain at about 6.5% in 2017.And the economic growth Southeast Asia will reach to 4.8%, predicted by Asian Development Bank in 2017.With the consolidation of ASEAN economic speeding up and the One Belt One Road strategy, the trading level of 65 countries of Asia, Africa and Europe will be enhanced, that will produce a lot of demands on port machinery. The company thinks that the market will still be in the adjustment, the port machinery work will increase slightly. The marine market has kept declining over two years, the company now is facing huge pressure on difficulties in manufacturing ships, financing and making new orders. The world economic development is still in the deep adjustment period, the consumption of oil and gas is not so good, now we can see that the supply exceeds demand. The rental of marine equipments became lower and lower so do the newly made ships and the used ones. Even the price of oil and gas increase and the explosion of oil and gas became better, the recovery weak state will continue for a long time because of the surplus of oil platforms and marine supported ships. In general, the low oil price that led to the decline of demand of equipments, the surplus of equipments and huge amount of orders make the world marine equipment market’s recovery weak state will continue for a long time. Delay, be put on ice and even cancel projects and orders will become common. With One Belt One Road strategy and Yangtze River economic belt improvement, solid foundation at home and aboard, the recovery of offshore wind power facilities market, the capacity steel structure market are enhancing. Although the company has its advantage on the steel structure of bridge in high-end market, but it still in the middle and lower reach to the industry chain. There is cut-throat competition in the steel structure of bridge market, and the price of offshore wind power facilities nearly reach to the cost. Also there are some exacting terms in contracts. The lack of structural supply, technology and manufacturing experience in high-end marine region, on advantages in low-end marine region. The financial sector’s protection, transportation cost and etc. bring challenges to the steel structural industry. (II)

The Companyial sector’s protection,

√Applicable pplicapplicable

20 / 507

2016 Annual Report

The Board systematically and scientifically studied the basic situation both at home and abroad, analyzed domestic reform status, analyzed major competitions and self-owned advantages and disadvantages. The Board clearly set the overall development concept, key tasks and guarantee measures in 2017, focusing on innovating drive, transformation and upgrade, improving the quality and efficiency, which ensures the stable development of the Company in new common state, reform and development. 1. Strategic position: to build the Company into an excellent international company. Build the industry layout of vertical integration, horizontal correlation limited diversification and internationalization. Build No. 1 general contractor of port machinery manufacturing and automated port system; world-famous and domestic leading marine engineering equipment integrator; world-famous and Asia No. 1 marine engineering services and new energy engineering general contractor; world-famous and domestic leading electrical system general contractor; world-famous special overseas developer and industry well-known equipment manufacturer and transit infrastructure investment operator. 2. The overall working concept for 2017: Establish innovative, coordinative, green, open and sharing development concept, surrounding “one center”, promote “three industrialization” target, emphasize the “4 main lines”, establish “6 driving forces” and improve “6 capacities”, insist on “24 word′s principle”, continue to act as a powerful player, lay foundation to become the world excellent company with international competition. 3. 2017 major tasks: (1)Continuously develop eight major works and make sure for the stable growth. (2)Continuously center on reform and innovation principle and make the business strategies done. (3)Continuously center on overall cost efficiency and focus on basis management and benefit increasing. (4)Continuously center on solid foundation and improve the operation quality (5)Continuously strengthen team building and improve the human resources management ability. (6)Continuously strengthen party buildings as a state-own enterprise and fight for corruption. (III) Business planning √Applicable □Not applicable In 2017, the Company plans to achieve steady growth in revenue, and signs more new orders, implements “insist on the innovation and development, the coordinated development, the green development, open development and sharing development” ; insist on five development concepts to accelerate the innovation, mergers and acquisitions, digitalization and internationalization development r, focus on reform and innovation, deepen the organizational structure adjustment, reduce the cost and improve the efficiency, consolidate the foundation, enhance the operation quality, accelerate the integration of resources, increase the gross profit margin, to ensure the stable development of the company in new common state, reform and development. (IV)

Possible risks

√Applicable □Not applicable Market risk: the international economy is still in the declining state with limited growth, the slow economic development may become the “new ordinary state” in the domestic market. The industry trend is impacted by the decreasing ore and oil prices. The shipping capacity is excessive and the port machinery market increased a little. The marine heavy industry is in the low position in the market. As for the offshore oil and gas service, the large piece handing and movement transportation market decreases with excessive capacity. The port machinery market is still in main position in scale and profit contribution, but other markets are still being cultivated. Solution: facing the market challenges at home and abroad, the Company will deepen the reform, consolidate the basic management and enhance the risk resistance, focus on “1.5.2.1”for optimal adjustment of market and business structure; to promote the four transition from selling products to sell excellent products (Technology); from selling equipment to selling system; from selling hardware to selling software (service); from the production mode, management mode, the business model in Industry 2.0 change to new model, profit model innovation in Industry 4.0, promote structure adjustment and resources integration, drive structure adjustment and resource integration; drive enterprise sustainable development by transformation and upgrade. 21 / 507

2016 Annual Report

Financial risks: credit risk and exchange rate risk, increased volatility of the RMB bidirectional fluctuation of exchange rate and large load capacity. Solution: Develop rational planning for forward rate look, control exchange rate risk, emphasis on research on policies and strategies of foreign exchange risk management, pay close attention to change in exchange rates, regularly complete analysis of exchange rate movements, conduct strict implementation of financial derivatives related to the approval process, produce good statistics on product current exchange rate, further reinforce the basic work of foreign exchange management, and reduce the company’s exchange rate risk. By arranging favorable settlement terms in the contract (such as the signing of a contract with the RMB exchange rate pegged, increase the prepayments proportion plus early settlement, etc.), or within the range permitted by the country’s financial foreign exchange policy, make use of hedging, foreign exchange factoring and other appropriate financial instruments or means to control and lock the exchange rate risk. As for credit risk, by reducing raw material reserves, compression of infrastructure spending, adjusting the company’s debt structure through a variety of ways (such as medium-term notes, short-term bonds), reducing financing costs, strengthening the collection of accounts receivable, gradually reducing the amount of bank debt, reduce business risks. (V) Other □Applicable√Not applicable IV. Explanation of the case and reasons that company does not disclose due to rules not applicable or special reasons □Applicable√Not applicable

22 / 507

2016 Annual Report

Chapter V

Substantial Events

I.

The plan for the distribution of ordinary profits or the transfer of capital accumulation fund

(I)

The formulation, implementation or adjustment of the cash dividends policy

√Applicable □Not applicable According to CSRC Notification on further implementation of issues concerning listed company cash dividends sharing (Zhengjian Fa [2012]37), as proposed by the 10th meeting of the Company’s fifth session of Board held on August 21, 2012, amendment would be made to the Articles of Association of the Company concerning profit distribution and cash dividends policy, and as result dividends sharing standard and proportion are clear, related decision making program and mechanism compete, with full maintenance of small shareholders’ legitimate rights and interests, giving them full excess to expressing their views and demands. (Ⅱ) Profit distribution pre-plan or plan, capital reserve converted into share capital plan or preplan of the Company for last three years (including report period) Unit: Yuan Currency: RMB

Bonus Year

The ratio of net Net profit Dividend for Shares Cash dividend attributable to listed profit attributable to Bonus share every 10 shares converted for amount listed company for every 10 company (Yuan) (before every 10 shares shareholders in shares (share) shareholders in (before tax) tax) (share) profit-sharing year profit-sharing year (%)

2016

0

0

0

0

212,419,946

0

2015

0

0

0

0

212,411,967

0

2014

0

0

0

0

202,223,273

0

(III) Share repurchase is included in the cash dividend by cash offer □Applicable√Not applicable (IV)

The profit in the report period and the profit that can be distributed by common shareholders of parent company are positive, if the cash profit distribution plan of common stock is not proposed, the company shall disclose the reasons, purpose and use plan of the profit not distributed in details

√Applicable □Not applicable Reason for profit in the report period and the profit that can be distributed by common shareholders of parent company are positive but the common stock cash profit distribution plan is not proposed

Purpose and use plan of profits not distributed

Although the company made profit in 2016 the company was in the important period of adjustment of the business structure. The bank liability with interest is still large, accounting for a higher proportion of the total liabilities. In order to effectively For the daily operation of the company reduce the turnover of capital and operating risk, and maintain the long-term interest of shareholders. The profits distribution plan in 2016 is:, not distributed or capital reserve for capital stock. II. Commitment performance

23 / 507

2016 Annual Report

(I)

Note of the board of directors and the board of supervisors for "non-standard audit report" of the accounting firm.

□Applicable√Not applicable (II)

Analysis of the reasons and impact of the board of directors on the changes of accounting policies, accounting estimates and accounting methods

Whether to achieve the original profit forecast and the analysis for reasons □Achieved □Not Achieved √Not applicable III. Capital occupied situation and clearing arrears progress in the report period □Applicable√Not applicable IV. Notes of the board of directors for "non-standard audit report" of the accounting firm □Applicable√Not applicable V. The analysis of reasons and effects on the changes of accounting policies, accounting estimates and the major error correction (I)The analysis of reasons and effects on the changes of accounting policies and accounting estimates √Applicable □Not applicable In December 2016, the Ministry of Finance promulgated the Treatment Provisions for Value-added Tax (Cai Kuai [2016] No. 22, relevant taxes accounting documents and accounting policy for presentation shall be changed according to the provisions. I. The title of “Business tax and Charges” is changed to “Tax and Charges”, which accounts consumption tax, urban maintenance and construction tax, resource tax, education surcharges and the property tax, land use tax, vehicle use taxes, stamp duty and other relevant taxes for enterprise ' s business activities; the project “Business tax and Charges” is adjusted to “Tax and Charges”. Since May 1, 2016, “Tax and Charges” listed in the profit statement is no longer listed in "Management Fee"; the charges produced before May 1, 2016 (with the exception of the the property tax and land use tax have been included in the “Business tax and Charges” related to the investment real estate), are still listed in "Management Fee". Due to the above requirements, the content of the presentation is different between the year 2016 and 2015 of "Tax and Charges" and "Management Fees", but had no effect on for the year 2016 and 2015 merger and net profit and the merger and shareholders' equity. 2. "VAT Payable" account under the "Taxes Payable", "VAT Unpaid", " Pending Deduct VAT on Purchase", “Input Tax on Pending Certification" and "Left the Deductible Tax" shall be listed in the "Other Current Assets" in the balance sheet or "Other Non-current Assets"; the same as "Taxes Payable, Stay - recognition Tax ". Due to the above requirements, the content of the presentation is different between the year 2016 and 2015 of "Other Current Assets" in the balance sheet or "Other Non-current Assets", but in the end of 2015 the merger and the company had no effect on the balance sheet. (II) The analysis of reasons and effects on the changes of the major error correction □Applicable√Not applicable (III)Communicate with former accounting firm □Applicable√Not applicable (IV)Other statement □Applicable√Not applicable VI Appointment and dismissal of accounting firm Unit: (10,000) Yuan Original appointment

24 / 507

Currency: RMB

Current appointment

2016 Annual Report

Domestic accounting firm

PricewaterhouseCoopers Co. Ltd.

Zhong

Tian

CPAs Ernst & Young (Special general partnership)

(Special general partnership) Domestic accounting firm payment

340

Domestic accounting firm audit 22 period

1

Name

Payment

Internal control audit accounting Ernst & Young (special general partnership) firm

40

Appointment and dismissal of accounting firm √Applicable □Not applicable In accordance with relevant provisions of SASAC, the audit team of PricewaterhouseCoopers Zhong Tian CPAs Co. Ltd. (Special general partnership) has provided audit services for the company for many years. By the decision for 11th meeting of the Board of Directors and 2015 Annual General Meeting of Shareholders, Ernst & Young (special general partnership) is hired as compay’s domestic auditing institution in 2016. Change to appointment accounting firm during auditing period □Applicable√Not applicable VII. Face with the risk for suspended marketing (I) Reasons for suspended marketing □Applicable√Not applicable (II) To make measures for the company □Applicable√Not applicable VIII The situations and reasons for delisting □Applicable√Not applicable VI. Bankruptcy reorganization related matters □Applicable√Not applicable X. Substantial lawsuits, arbitrations √The Company has major litigation and arbitration. The Company has no major litigation and arbitration. (I) Lawsuits, arbitrations disclosed in the provisional announcement without subsequent progress □Applicable √Not applicable (II) Lawsuits, arbitrations not disclosed in the provisional announcement with subsequent progress √Applicable □Not applicable Unit: Yuan Currency: RMB In the report period

25 / 507

2016 Annual Report

Prosecut (applicant)

Party Type of with Suit or Defenda suing or joint (arbitration) nt arbitratio liabilitie profiles) n s

Shanghai Zhenhua Heavy Petrofac No Industries Co., Ltd

Suit (arbitratio Suit Suit n) (arbitration (arbitratio constitutes ) amount n) project involved progress liabilities or not

In 2013, the Company has signed the construction and sales contract about a 6000 ton piping ship with Petrofac (JSD6000) Limited (hereinafter referred to as Petrofac). On October 9, 2015, We stand Petrofac for about issued $200 Contract million; Termination Petrofac's Letter with counterclai the reason Arbitratio m calls for 0 that the $182 n project is million or delayed and $213 meets the million in termination two article. different Petrofac ways. asked for terminating the contract and requested the Company to return the prepaid payment and interest, as well as assumed the responsibility of the loss caused by the termination of the contract. The 26 / 507

Suit Suit (arbitration) (arbitratio ruling n) ruling implementati and impact on

Court to Not be open ruled soon

yet

Not yet ruled

2016 Annual Report

Company rejected the claim. Petrofac honored the demand guarantee from the opening bank in December 2015, with total amount of 44,720,000 USD. The Company established special team and hired senior legal team both at home and abroad to actively advocate the Company’s rights and protect the Company’s rights from damaged. The Company has applied for arbitration to the London International Arbitration Court in January and asked Petrofac to return the payment of Letter of Guarantee and compensated for the loss of $200 million. After receiving the arbitration applicant of the Company, Petrofac filled a counterclaim, 27 / 507

2016 Annual Report

and asked the Company for compensating about 182 million USD or 213 million USD under the requirements of continuing built ship or not continuing built ship.

Flour Company

Shanghai Zhenhua Heavy No Industrie s Co., Ltd

In 2008 the Company and Flour Limited (hereinafter referred to as "Fluor") signed an agreement of sales and installation for wind power steel pipe pile products for the British Wind Power Project. In the project construction process, the About Lawsuits Company and £250 Fluor, by way million of friendly consultations and in the spirit of good cooperation, maintain dispute handling normal communicati on mechanism. In 2010, for the implementati on of the contract, after review by the board of 28 / 507

0

The quantitativ The e quantitative Court to examinatio examination be open n of a case of a case has soon has not yet not yet been been rendered rendered

2016 Annual Report

directors of the Company, the Company signed a mutual exemption letter with Fluor, and in 2011 settled the remaining payment. Afterwards, Flour produced claim to the Company for quality compensation , and requested the Company to cash the pay-on-claim quality guarantee bond, while the Company rejected the claim. On March 20, 2014, Flour cashed the above amount of 23,409,750 euro letter of guarantee to the bank opened the letter of guarantee. In September 2014, Flour initiated proceedings for the breach caused by the problems related to the product quality to High Court of Justice, Queen’s Bench Division, The 29 / 507

2016 Annual Report

Technology and Construction Court (hereinafter referred to as “TCC Court of Britain Queen’s Bench”) and asked the Company for the compensation of 250 million Pounds for additional test and repair cost, project period delay and related loss. (including the cashed letter of guarantee amount of 23,409,750 Euro). The Company didn’t acknowledge the claim for the compensation from Flour. Since then, the Company prepared the evidence disclosure, witness testimony, exchange work and other preparatory work before the court. From February to March, April, June of 2016, British High Court TCC court was in 30 / 507

2016 Annual Report

trial for first instance on obligation part. The court trail plan of the first instance’s quantitative part will be in trail in May, 2017.

Shanghai Zhenhua Nantong Heavy Huafu Indusries(Grou Port Co., p) Co., Ltd, Ltd, Li No Shanghai Aidong, Zhenhua Port Zhao Machinery Xiaohua Heavy Industry Co., Ltd.

At the end of February 2014, the company completed the increasing assets for original Jiangsu Daoda Ocean Engineering Co., Ltd, the capital of 67% stake, at the same time, before February 28, 2014, the losses of the company is in RMB charged of by 368.722 Lawsuits the original million shareholders - Yuan Li Aidong, Zhao Xiaohua of Nantong Huafu Port Co., Ltd. During the ubsequent business process, find the disclose false of parts of the company litigation matters or debt leading to produce a series of losses, 31 / 507

0

Court to Not be open ruled soon

yet

Not yet ruled

2016 Annual Report

through the related audit and adjustment, etc, that loss of RMB 368.7222 million Yuan should be in charged in the original shareholders and the lawsuit again after an inconclusive. (III) Other statements □Applicable √Not applicable XI. Punishment and correction of listed company and its directors, supervisors and senior executives, the controlling shareholder, actual controller and purchasers □Applicable √Not applicable XII. During the period of report, the credit statement for the company, holding shareholder and actual controller □Applicable √Not applicable XIII. Company equity incentive plan, employee ownership plan or other employee incentive situations and its influence (I) Incentive awarded for events disclosed in the provisional announcement and without changes or progresses of following-up implementation □Applicable √Not applicable (II) Incentive awarded for events not disclosed in the provisional announcement Stock ownership incentive awarded □Applicable √Not applicable Other descriptions □Applicable √Not applicable Employee stock ownership plan □Applicable √Not applicable Other incentive awarded □Applicable √Not applicable XIV.Magnificent related transactions (I) Related transactions in connection with routine operations 1. Events disclosed in the provisional announcement and without changes or progresses of following-up implementation √Applicable □Not applicable

32 / 507

2016 Annual Report

Events overview

Index

The twelfth meeting of sixth Board of Directors on June Shanghai Stock Exchange website: www.sse.com.cn and 30, 2016approved “Proposal to Invest and Establish Shanghai Securities News and Hong Kong Wen Wei Po on Chengdong District of Huaiyin and PPP project of Jul 2, 2016. surround port”, “Proposal to Invest and Establish Urban life support and infrastructure of Zhenjiang,Jiangsu ” The seventeenth meeting of sixth Board of Directors on Shanghai Stock Exchange website: www.sse.com.cnand Dec. 26, 2016approved “Proposal toPhase I Project of Shanghai Securities News and Hong Kong Wen Wei Po on Investemnt in Building Xiangtan Xiashesi Jingyisu River December 27, 2016. to Huashi Road”.

2. Events disclosed in the provisional announcement and without changes or progresses of following-up implementation □Applicable √Not applicable 3. Events not disclosed in the provisional announcement √Applicable □Not applicable Unit: Yuan Currency: RMB

Related party Incidence transaction relation

Pricing Type of related Type of related principle party transaction related transaction transaction

Related of Price of related transaction transaction amount (%)

CCCC Second Parent Sell goods Harbor company ′ s Engineering Co., wholly-owned Ltd. subsidiary

Purchase port Based on 389,557,043 machinery market price from the Company

1.60

CCCC Parent Sell goods International company ′ s Shipping Co., wholly-owned Ltd subsidiary

Purchase port Based on 233,003,192 machinery market price from the Company

0.96

CHUWA Parent Sell goods BUSSAN company ′ s company limited wholly-owned subsidiary

Purchase port Based on 193,053,287 machinery market price from the Company

0.79

China Road and Parent Sell goods Bridge Co., Ltd company ′ s wholly-owned subsidiary

Purchase port Based on 179,013,839 machinery market price from the Company

0.74

CCCC Third Parent Sell goods Harbor company ′ s Engineering wholly-owned Investigation subsidiary and Design

Purchase port Based on 175,876,344 machinery market price from the Company

0.72

33 / 507

2016 Annual Report

Institute Co., Ltd CCCC Tianjin Parent Sell goods Waterway company ′ s Bureau Co., Ltd. wholly-owned subsidiary

Purchase port Based on 155,198,269 machinery market price from the Company

0.64

China Harbor Parent Sell goods Engineering Co., company ′ s Ltd wholly-owned subsidiary

Purchase port Based on 147,800,178 machinery market price from the Company

0.61

CCCC Tunnel Parent Sell goods Engineering Co., company ′ s Ltd wholly-owned subsidiary

Purchase port Based on 144,526,777 machinery market price from the Company

0.59

CCCC Fourth Parent Sell goods Harbor company ′ s Engineering wholly-owned Investigation subsidiary and Design Institute Co., Ltd

Purchase port Based on 121,403,077 machinery market price from the Company

0.50

Road & Bridge Parent Sell goods International company ′ s Co., Ltd. wholly-owned subsidiary

Purchase port Based on 81,639,431 machinery market price from the Company

0.34

CCCC Third Parent Sell goods Harbor company ′ s Engineering Co., wholly-owned Ltd. subsidiary

Purchase port Based on 81,407,370 machinery market price from the Company

0.33

No.3 Parent Sell goods Engineering Co., company ′ s Ltd. of CCCC wholly-owned Second Harbor subsidiary Engineering Co., Ltd.

Purchase port Based on 69,043,050 machinery market price from the Company

0.28

No.2 Parent Sell goods Engineering Co., company ′ s Ltd. of CCCC wholly-owned Second Harbor subsidiary Engineering Co., Ltd.

Purchase port Based on 62,720,000 machinery market price from the Company

0.26

No.2 Parent Sell goods Engineering Co., company ′ s Ltd. of CCCC wholly-owned First Harbor subsidiary Engineering Co., Ltd.

Purchase port Based on 42,279,112 machinery market price from the Company

0.17

34 / 507

2016 Annual Report

CCCC-SHEC Parent Sell goods Second company ′ s Engineering Co., wholly-owned Ltd. subsidiary

Purchase port Based on 37,101,137 machinery market price from the Company

0.15

Friede & Parent Sell goods Goldman, Llc company ′ s wholly-owned subsidiary

Purchase port Based on 26,755,168 machinery market price from the Company

0.11

CCCC Fourth Parent Sell goods Harbor company ′ s Engineering wholly-owned Institute Co., subsidiary Ltd.

Purchase port Based on 26,568,685 machinery market price from the Company

0.11

CCCC Third Parent Sell goods Highway company ′ s Engineering wholly-owned Bureau Co., Ltd subsidiary

Purchase port Based on 22,068,890 machinery market price from the Company

0.09

CCCC Parent Sell goods Financing company ′ s Rental Co., Ltd. wholly-owned subsidiary

Purchase port Based on 20,652,755 machinery market price from the Company

0.08

Hainan CCCC Parent Sell goods Fourth Harbor company ′ s Construction wholly-owned Co., Ltd subsidiary

Purchase port Based on 19,279,683 machinery market price from the Company

0.08

CCCC Fourth Parent Sell goods Harbor company ′ s Engineering Co., wholly-owned Ltd subsidiary

Purchase port Based on 17,389,362 machinery market price from the Company

0.07

Jiangsu Joint venture LongYuan Zhenhua Marine Engineering Co.,Ltd

Sell goods

Purchase port Based on 16,648,649 machinery market price from the Company

0.07

CCCC Second Parent Sell goods Highway company ′ s Engineering wholly-owned Bureau Co., Ltd. subsidiary

Purchase port Based on 11,802,499 machinery market price from the Company

0.05

China Parent Sell goods Communications company ′ s Corporation wholly-owned subsidiary

Purchase port Based on 11,627,327 machinery market price from the Company

0.05

CCCC China

Purchase port Based machinery

0.04

East Parent Sell goods company ′ s

35 / 507

on 10,697,446

2016 Annual Report

Investment Co., wholly-owned Ltd subsidiary

from Company

CCCC First Parent Sell goods Harbor company ′ s Engineering Co., wholly-owned Ltd. subsidiary

Purchase port Based on 8,219,845 machinery market price from the Company

0.03

CCCC Highway Parent Sell goods Bridges National company ′ s Engineering wholly-owned Research Centre subsidiary Co., Ltd.

Purchase port Based on 4,829,060 machinery market price from the Company

0.02

Hong Kong Parent Sell goods Zhenhua company ′ s Engineering Co., wholly-owned Ltd. subsidiary

Purchase port Based on 134,656 machinery market price from the Company

0.00

Zhenhua Marine Joint venture Energy (Hong Kong) Co., Ltd

Other

Lease the ships Based on 169,580,194 from the market price Company

0.70

CCCC Tunnel Parent Other Engineering Co., company ′ s Ltd wholly-owned subsidiary

Lease the Based on 125,440,000 shield from the market price Company

0.52

China Parent Other Communications company ′ s Corporation wholly-owned subsidiary

Lease the ships Based on 1,606,804 from the market price Company

0.01

CCCC Third Parent Other Harbor Second company ′ s Engineering Co., wholly-owned Ltd subsidiary

Lease the Based on 501,755 shield from the market price Company

0.00

CCCC Tianjin Parent Accepting Waterway company ′ s labor Bureau Co., Ltd. wholly-owned subsidiary

Entrusting Based on 331,677,108 company for market price processing

1.83

CCCC Second Parent Accepting Highway company ′ s labor Consultant wholly-owned Co., Ltd. subsidiary

Entrusting Based on 91,221,324 company for market price processing

0.50

CCCC Fourth Parent Accepting Highway company ′ s labor Engineering Co., wholly-owned Ltd. subsidiary

Entrusting Based on 75,048,039 company for market price processing

0.41

CCCC

Entrusting

0.35

Third Parent

Accepting

the market price

36 / 507

Based

on 64,290,666

2016 Annual Report

Harbor company ′ s labor Engineering Co., wholly-owned Ltd. subsidiary

company for market price processing

No.1 Parent Accepting Engineering Co., company ′ s labor Ltd. of CCCC wholly-owned First Harbor subsidiary Engineering Co., Ltd.

Entrusting Based on 22,573,250 company for market price processing

0.12

Shanghai Parent Accepting Communications company ′ s labor Construction wholly-owned Contracting Co., subsidiary Ltd

Entrusting Based on 21,633,168 company for market price processing

0.12

Jiangsu Joint venture LongYuan Zhenhua Marine Engineering Co.,Ltd

Accepting labor

Entrusting Based on 14,565,939 company for market price processing

0.08

China Parent Accepting Communications company ′ s labor Corporation wholly-owned subsidiary

Entrusting Based on 13,661,221 company for market price processing

0.08

CCCC Second Parent Accepting Highway company ′ s labor Engineering wholly-owned Bureau Co., Ltd. subsidiary

Entrusting Based on 7,079,715 company for market price processing

0.04

CCCC Tianjin Parent Accepting Industry and company ′ s labor Trade Co., Ltd. wholly-owned subsidiary

Entrusting Based on 296,154 company for market price processing

0.00

CCCC East Parent Accepting China company ′ s labor Investment Co., wholly-owned Ltd subsidiary

Entrusting Based on 247,863 company for market price processing

0.00

CCCC Third Parent Accepting Harbor company ′ s labor Engineering wholly-owned Investigation subsidiary and Design Institute Co. Ltd.

Entrusting Based on 56,913 company for market price processing

0.00

Shanghai Jiangtian Industrial Ltd

Entrusting Based on 25,173 company for market price processing

0.00

Parent Accepting company ′ s labor Co., wholly-owned subsidiary

37 / 507

2016 Annual Report

CTTIC Shanghai Ltd

Parent Accepting Co., company ′ s labor wholly-owned subsidiary

Entrusting Based on 17,094 company for market price processing

0.00

CHUWA Parent Purchase BUSSAN company ′ s goods company limited wholly-owned subsidiary

Supply materials Company

Based on 182,477,645 to market price

1.01

Shanghai Joint venture Zhenhua Heavy Industries (Group) Changzhou Paint Co., Ltd.

Purchase goods

Supply materials Company

Based on 120,664,901 to market price

0.66

CCCC Shanghai Parent Purchase Equipment company ′ s goods Engineering Co., wholly-owned Ltd subsidiary

Supply materials Company

Based on 100,037,221 to market price

0.55

CCCC Fourth Parent Purchase Highway company ′ s goods Engineering Co., wholly-owned Ltd. subsidiary

Supply materials Company

Based on 2,993,504 to market price

0.02

CCCC Tianjin Parent Purchase Port & company ′ s goods Waterway wholly-owned Prospection & subsidiary Design Research Institute Co., Ltd.

Supply materials Company

Based on 1,084,615 to market price

0.01

CCCC Tianjin Parent Purchase Port Prospection company ′ s goods & Design wholly-owned Research subsidiary Institute Co., Ltd.

Supply materials Company

Based on 1,084,615 to market price

0.01

Nanjing CCCC Parent Purchase Weisanlu River company ′ s goods Tunnel Co., Ltd wholly-owned subsidiary

Supply materials Company

Based on 72,175 to market price

0.00

China Parent Purchase Communication company ′ s goods Materials & wholly-owned Shipment Co., subsidiary Ltd

Supply materials Company

Based on 14,248 to market price

0.00

Total

/

38 / 507

3,658,247,435

8.61

2016 Annual Report

Details about the returned sales with high amount Explanation of related trade

Note: May 9, 2016, the Company 2015 Annual General Meeting approved ”Motion on the Company Signing Framework Agreement with CHINA COMMUNICATIONS CONSTRUCTION CO., LTD on Routine Related Transactions.” In 2016, our company and its subordinate units and the China Communications Corporation and its subsidiary bodies could undertake related party transactions in the daily operation on annual basis with transaction amount not exceeding 11 billion Yuan. The Annual General Meeting has authorized the Company ′ s management to handle relevant specific matters.

(Ⅱ) Associated transactions of asset or equity acquisition, sales 1.Events disclosed in the following-up implementation

provisional

announcement

and

without

changes

or progresses of

□Applicable √Not applicable 2. Events disclosed in the provisional announcement and without changes or progresses of following-up implementation □Applicable √Not applicable 3. Events not disclosed in the provisional announcement □Applicable √Not applicable 4. When the performance agreement is concerned, the performance during the reporting period shall be disclosed □Applicable √Not applicable (III) Major related transactions of common foreign investment 1. Events disclosed in the following-up implementation

provisional

announcement

and

without

changes

or progresses of

√Applicable □Not applicable Events overview

Index

The thirteenth meeting of sixth Board of Directors on Shanghai Stock Exchange website: www.sse.com.cnand Aug. 30th, 2016 approved “Proposals for the Shanghai Securities News and Hong Kong Wen Wei Po on Establishment of Zhenhua Huigu (China) Geological August 31, 2016. Services Co., Ltd”, “Proposal for Joint Stock to Latin American’s Regional Company” The thirteenth meeting of sixth Board of Directors on Shanghai Stock Exchange website: www.sse.com.cnand 39 / 507

2016 Annual Report

Aug. 30th, 2016 approved “Proposals for the Shanghai Securities News and Hong Kong Wen Wei Po on Establishment of Zhenhua Huigu (China) Geological October 29, 2016. Services Co., Ltd”, “Proposal for Joint Stock to Latin American’s Regional Company” The thirteenth meeting of sixth Board of Directors on Shanghai Stock Exchange website: www.sse.com.cnand Aug. 30th, 2016 approved “Proposals for the Shanghai Securities News and Hong Kong Wen Wei Po on Establishment of Zhenhua Huigu (China) Geological December 20, 2016. Services Co., Ltd”, “Proposal for Joint Stock to Latin American’s Regional Company” 2. Events disclosed in the provisional announcement and without changes or progresses of following-up implementation □Applicable √Not applicable 3. Events not disclosed in the provisional announcement □Applicable √Not applicable (IV) Current accounts of credits and liabilities with related parties 1.Events disclosed in the following-up implementation

provisional

announcement

and

without

changes

or progresses of

□Applicable √Not applicable 2. Events disclosed in the provisional announcement and without changes or progresses of following-up implementation □Applicable √Not applicable 3. Events not disclosed in the provisional announcement √Applicable □Not applicable Unit: Yuan Currency: RMB

Related party

Incidence relation

Related party The Company providing fund to Company related party providing fund Opening balance

Current amount

Closing

Opening

balance

balance

CCCC Financial Parent Co., Ltd company ′ s 134,534,649 528,772,323 663,306,972 0 wholly-owned subsidiary

providing

fund

to

the

Current amount

Closing

300,000,000

300,000,000

balance

CCCC Parent Financing company ′ s Rental Co., Ltd. wholly-owned 0 subsidiary

0

0

1,118,000,000 2,120,845,793 3,238,845,793

CCCC Leasing Parent Jiahuayi Co., company ′ s 0 Ltd wholly-owned

0

0

383,838,000

40 / 507

-383,838,000 0

2016 Annual Report

subsidiary CCCC Leasing Parent Jiahuayi Co., company ′ s 0 Ltd wholly-owned subsidiary

0

0

383,838,000

-383,838,000 0

China Parent Communications company ′ s 0 Corporation wholly-owned subsidiary

0

0

104,440,235

-1,112,929

103,327,306

Shanghai Jiangtian Industrial Ltd

Parent company ′ s 0 Co., wholly-owned subsidiary

0

0

17,586,085

-831,502

16,754,583

Tianjin Waterway Ltd

Parent Co., company ′ s 0 wholly-owned subsidiary

0

0

25,079,494

0

25,079,494

CHUWA Parent BUSSAN company ′ s company limited wholly-owned 0 subsidiary

0

0

6,269,873

0

6,269,873

Hong Kong Parent Zhenhua company ′ s 0 Engineering Co., wholly-owned Ltd. subsidiary

0

0

346,005

0

346,005

Macau Zhenhua Parent Bay Engineering company ′ s 0 Co., Ltd. wholly-owned subsidiary

0

0

6,593

0

6,593

Total

134,534,649 528,772,323 663,306,972 2,039,404,285 1,651,225,362 3,690,629,647

Reasons of related credits and Dividends payable by the Company to related parties, investment of the cancellation liabilities of s subsidiary and current amount loan. (V) Other □Applicable √Not applicable XV. Major contracts and their implantation (1)Entrusting, contracting and leasing 1.

Entrusting

□Applicable √Not applicable 2. Contracting □Applicable √Not applicable

41 / 507

2016 Annual Report

3. Leasing √Applicable □Not applicable Unit: Yuan Currency: RMB

Lessor

Lessee

Rental Rental Whether income revenue related determined impact on party by the transactions Protocol company

Amount Lease d Lease start Lease term Rental involving assets date nation date income leased assets

Shanghai Zhenlong Asset The Management Housing Aug 284,337,357 Company Co., Ltd, and Rental 2012 other companies

10,

2025/07/09 46,314,775

Protocol agreed

46,314,775 No

Related transactions (II)

Provide guarantee to related parties

√Applicable □Not applicable Unit: Currency: RMB Total guaranties for subsidiaries incurred in report period (excluding those for held subsidiaries) Relationship between guaranty (2)Guaranty Guaranteed party party and listed corporation

Guarantee amount

Guaranty Guaranteed Whether current Whether the Whether Guaranteed there is Guaranty Guaranty date Guarantee is guaranty classification counter (agreement Start date terminal implemented overdue guarantee date sign date)

Whether guarantee Related to related Relate party

2014

2014

2017

Nov. 11

Nov. 11

Nov. 11

The Company

Home office Jiangsu Yanwei 19,184,000 Port Co., Ltd

The Company

Home office Zhenhua Marine 177,247,287 2015 2015 2017 Energy September September April 14 (Hongkong) Co., 14 14 Ltd.

Total guaranties for subsidiaries incurred in report period 0 (excluding those for held subsidiaries) Total Guarantee balance at the end of report period (A)

196,431,287

Guaranty of the company and subsidiaries Total guaranties for subsidiaries incurred in report period

1,016,850,000

Total guaranties for subsidiary balance at the end of report period 3,210,021,000 (B) Company guaranty total amount (guaranty for subsidiaries ) Total guarantee amount (A+B)

3,406,452,287

Proportion of net assets of the Company (%)

20.66

In which:

42 / 507

Joint and No several liability

No

No

No

General guarantee

No

Yes

Yes

No

Joint venture

2016 Annual Report

Amount guaranties to shareholders, effective controller and its 0 related parties (C) Amount guaranties to shareholders, effective controller and its 3,387,268,287 related parties (C) Amount of guaranties exceeding 50% of net assets (E)

0

Total of the above 3 kinds of guarantee(C+D+E)

3,387,268,287

Note: the first interim general meeting of stockholders held on September 22, 2008 approved "Proposal of Company Providing Financing Guarantee to Subsidiary Shanghai Zhenhua Port Machinery (Hong Kong) Co., Ltd.", and agreed to provide financing support Guarantee status explanation to Hong Kong subsidiary. The bank will issue guarantee for the loan with the upper limit of 500 million USD. The Company will provide the guarantee to Hong Kong subsidiary in the report period. The twenty-ninth and thirtieth meeting of fifth Board of Directors meeting approved other guarantees.

(III) Non-financial companies entrusted investment financing and derivatives 1. Entrusted financing √Applicable □Not applicable Unit: Yuan Currency: RMB Principal actually covered

The Related amount of Related Suit trade provision party involved or not for transaction? or not impairment

Partner

Financing product type

Financing Starting product amount day

Ending day

Reward

Principal actually covered

A Bank

Bank Financial Product

100,000,000

2016/5/24

2016/11/22

Interest upon maturity

100,000,000

1,969,590

Yes

0

No

No

B Bank

Floating proceeds financial product

44,000,000

2015/12/31 2016/1/12

Interest upon maturity

44,000,000

32,547

Yes

0

No

No

B Bank

Floating proceeds financial product

2,000,000

2015/12/31 2016/3/21

Interest upon maturity

2,000,000

11,984

Yes

0

No

No

B Bank

Floating proceeds financial product

14,000,000

2016/1/8

2016/3/31

Interest upon maturity

14,000,000

87,548

Yes

0

No

No

Total

/

160,000,000

/

/

/

160,000,000

2,101,669

/

0

/

/

Principal not withdrew overdue accumulated income amount (Yuan)

and

Description of the entrusted financing

0 Note: the tenth meeting of sixth Board of Directors meeting and 2015 general meeting of shareholders approved the relevant amount of the entrusted financing issues in the table above by the report day.

2. Entrusted loans □Applicable √Not applicable 3. Investment in other financing investments and derivatives □Applicable √Not applicable (IV) Other substantial contracts √Applicable □Not applicable

43 / 507

2016 Annual Report

1. On Jan. 9, 2016 the Company published announcement signed general contracting contract of automation loading system with PSA, details see Shanghai Securities News and Hong Kong Wen Wei Po. 2. On July 2, 2016, the Company published announcement signed sales contract of automation container crane with Huaiyin Port East Area and PPP etc., details see Shanghai Securities News and Hong Kong Wen Wei Po. 3. On Jul 2, 2016, the Company published announcement signed sales contract of Zhenjiang School Life Support and Infrastructure, details see Shanghai Securities News and Hong Kong Wen Wei Po. 4. On Dec. 27, 2016, the Company published announcement winning the bid of the First phase of the project of Yisu River to Huashi Road in Xiangtan with Sangong Ju, and CAUPO, details see Shanghai Securities News and Hong Kong Wen Wei Po. XVI.Other current liabilities √Applicable □Not applicable 1. The Company issued 2,000,000,000 Yuan First short-term financing bonds in April 28, 2016, with term of 1 year and the fixed annual interest rate of 3.7%, principal and interest paid at one time on Appril 29, 2017. 2. The Company issued 2,000,000,000 Yuan First short-term financing bonds in October 28, 2016. The note term is 270 days, and the annual interest of face value is 3.2%, capital with interest shall be repaid at one time on Friday, July 28, 2017. Note: The bonds above have no mortgage or security.。 XIII. Active fulfillment of social responsibilities (I) Poverty alleviation work situation of listed company □Applicable √Not applicable (II) Social responsibility work √Applicable □Not applicable The Company actively fulfills its social responsibilities, effectively adjusts industrial structure and business arrangement, optimizes development strategy, forms 8 business sectors arrangements; increases investment in R&D; enhances the innovation capacity; promote technological progress; actively promote the overseas center construction, improve the service response speed to the global customers and provide customers with high quality and rapid services. Company always adheres to the "people-oriented", to safeguard employees' rights and interests, actively build development platform for the worker, encourage the staff innovation, establish the typical innovation, forming a good enterprise atmosphere; attach great importance to link with the community and schools, strengthen smooth and friendly development situation between social enterprises and colleges, promote enterprise culture to further integrate into society; advocate green sustainable development, advocate green production, green office, green propaganda (III) The explain for environmental protection of the environmental protection department of the company and its subsidiary □Applicable √Not applicable (IV)Other □Applicable √Not applicable XVIII. Negotiable company bond (I) The issuance of bond transfer □Applicable √Not applicable (II) The status for holder and guarantor of bond transfer during the report period □Applicable √Not applicable

44 / 507

2016 Annual Report

(III) The status for bond transfer □Applicable √Not applicable The status for bond transfer during the report period □Applicable √Not applicable (IV) Adjustment of the bond transfer □Applicable √Not applicable (V) The company's liabilities, the change of credit and the cash arrangement for the repayment of the debt in the next year □Applicable √Not applicable (VI) Other information about transfering debt □Applicable √Not applicable

45 / 507

2016 Annual Report

Chapter VI

Equity Movement and Shareholder′s Profile

I. The sheet for change of common stock shares (1) The sheet for change of common stock shares 1. The sheet for change of common stock shares During the reporting period, the total number of shares and share capital structure of the Company have not changed. 2. The explain for change of common stock shares □Applicable √Not applicable 3. The impact of the common stock changes on financial indicators such as earnings and net asset per share in the last year and recently (if yes) □Applicable √Not applicable 4. Other content that the company considers necessary or securities regulator to require disclosure □Applicable √Not applicable (II) Stock with sales limit change □Applicable √Not applicable II. Issuance and listing of securities (I) The issuance of securities by the time of the reporting period □Applicable √Not applicable Description of securities issuance as of the time of reporting period (different interest rates for the period of maturity) □Applicable √Not applicable (II) The total number of common shares and the changes in the structure of the shareholders and the structure of the company's assets and liabilities □Applicable √Not applicable (III) The status of existing internal employment stocks □Applicable √Not applicable III. Particulars about shareholder and effective controller of the Company (I)

Number of shareholders

Number of shareholders at period end

269,424

Total shareholders end of 5th trading day prior to release day of 265,667 current annual report (II)

End to report period, shareholding profile of top 10 shareholders and top 10 current shareholders (or Tradable shareholders) Unit: share

Shareholding profile of top 10 shareholders Shareholder′s Name

Movement During the

Total held

shares

%

46 / 507

Shares held

Share pledged or frozen

Shareholder

2016 Annual Report

(Full name)

Year

subject to conditional sales

Share status

China Communication Construction Co., Ltd

0

1,265,637,849

28.83

0

No

ZHEN HUA ENGINEERING COMPANY LIMITED

0

749,677,500

17.08

0

No

Central Huijin Assets Management Co., Ltd

0

74,482,200

1.70

Unknown

China Securities Finance Co., Ltd

0

56,788,474

1.29

Unknown

BOSARE FUNDS- - agricultural bank - BOSARE China Securities Financial Assets Management Plan Dacheng Funds - agricultural bank - Dacheng China Securities Financial Assets Management Plan ICBC Credit Suisse Fund - agricultural bank - ICBC CreditSuisse China Securities Financial Assets Management Plan GF Fund - agricultural bank - GF China Securities Financial Assets Management Plan China Asset Management agricultural bank - China Asset Management China Securities Financial Assets Management Plan

Nature Amount 0

State legal

0

Overseas legal person

Unknown

Unknown

Unknown 0

16,546,600

0.38

Unknown

Unknown 0

16,546,600

0.38

Unknown

Unknown 0

16,546,600

0.38

Unknown

Unknown 0

16,546,600

0.38

Unknown

Unknown 0

16,546,600

0.38

Unknown

Harvest Fund- agricultural bank- Harvest Fund China Securities Financial Assets Management Plan

Unknown 0

16,546,600

0.38

Unknown

Southern Fund - agricultural bank - Southern Fund China

0

16,546,600

0.38

Unknown

Unknown

47 / 507

2016 Annual Report

Securities Financial Assets Management Plan E fund management - agricultural bank-E fund management China Securities Financial Assets Management Plan Yinhua Fund - agricultural bank - Yinhua Fund China Securities Financial Assets Management Plan Lombarda China Fund Management - agricultural bank - Lombarda China Fund Management China Securities Financial Assets Management Pla

Unknown 0

16,546,600

0.38

Unknown

Unknown 0

16,546,600

0.38

Unknown

Unknown

0

16,546,600

0.38

Unknown

Particulars about top 10 shareholders of shares not subject to conditional sales Shares not subject to conditional sales held at periodv

Shareholder name

China Ltd

Communication

ZHEN HUA LIMITED

Construction

ENGINEERING

Co.,

COMPANY

1,265,637,849

Type and quantity of shares Type

RMB common shares

749,677,500

Shares with foreign investment listed on domestic market

Central Huijin Assets Management Co., Ltd

74,482,200

RMB common shares

China Securities Finance Co., Ltd

56,788,474

RMB common shares

BOSARE FUNDS - agricultural bank - BOSARE China Securities Financial Assets Management Plan

16,546,600

Dacheng Funds - agricultural bank - Dacheng China Securities Financial Assets Management Plan

16,546,600

RMB common shares

RMB common shares

ICBC Credit Suisse Fund - agricultural bank - ICBC Credit Suisse China Securities Financial Assets Management Plan

16,546,600

RMB common shares

GF Fund - agricultural bank - GF China

16,546,600

RMB common shares

48 / 507

Amount

2016 Annual Report

Securities Financial Assets Management Plan China Asset Management agricultural bank - China Asset Management China Securities Financial Assets Management Plan

16,546,600

Harvest Fund - agricultural bank - Harvest Fund China Securities Financial Assets Management Plan

16,546,600

Southern Fund - agricultural bank - Southern Fund China Securities Financial Assets Management Plan

16,546,600

E fund management-agricultural bank-E fund management China Securities Financial Assets Management Plan

16,546,600

Yinhua Fund-agricultural bank-Yinhua Fund China Securities Financial Assets Management Plan

16,546,600

Zhongou Fund - agricultural bank - Zhongou Fund China Securities Financial Assets Management Plan

16,546,600

Explanation on the above related relationship or consistent action

RMB common shares

RMB common shares

RMB common shares

RMB common shares

RMB common shares

RMB common shares

1. Among above top 10 shareholders, CHINA COMMUNICATIONS CONSTRUCTION CO., LTD. Constitutes related party relationship with ZHEN HUA ENGINEERING COMPANY LIMITED, ZHEN HWA HARBOUR CONSTRUCTION COMPANY LIMITED, with ultimate controller being China Communications Group Corporation. The Company is not aware of whether they have associated relationship among them or belong to the consistent actionists as defined in Administrative Rules on Disclosure of Information on Stock Change of Listed Company′s Shareholders. On January 8, 2014, the Company disclosed the “Announcement on Changes in Shareholders’ Equity”, according to which Hong Kong (ZHEN HUA ENGINEERING COMPANY LIMITED) was to transfer all the shares it held to CCCC International (Hong Kong) Holdings Limited. After the transfer of shares, the controlling shareholder of the Company and the actual controller remain unchanged. The share transfer is required to obtain the SAC of the State Council and other department for approval.

Particulars about top 10 shareholders of shares not subject to conditional sales □Applicable √Not applicable (III) A strategic investor or a general legal person shall be the top 10 shareholder because of new stocks □Applicable √Not applicable IV. Controlling shareholders and actual controllers (I)Particulars about the corporate controlling shareholder 1 Legal representative √Applicable □Not applicable Name

China Communication Construction Co., Ltd

49 / 507

2016 Annual Report

The person in charge of the unit/legal Liu Qitao representative Date of incorporation

October 8, 2006

Principal business

Engaging in the general contracting of construction projects for ports, channels, highways and bridges both home and abroad, including technical and economic consultation of engineering, feasibility study, survey, construction, supervision, procurement and supply for related complete set of equipment or materials, and equipment installation: undertaking the general contracting of the construction of industrial and civil works, railway, metallurgy, petrochemical, power and water conservancy facilities, channel, mine and municipal works; import and export business; real estate development and property management, investment and management of logistics, transportation, hotel and tourist industries.

2. Natural person □Applicable √Not applicable 3. Special status of actual controllers not existed □Applicable √Not applicable 4. Changes index and date for actual controllers during the report period □Applicable √Not applicable 5. Block diagram of property right and control relationship between Company and controlling shareholders √Applicable □Not applicable

中国交建 持股 100%

持股 100%

香港振华工程有限公司 持股 17.08%

澳门振华海湾工程有限公司

持股 28.83%

持股 0.33%

上海振华重工(集团)股份有限公司

(III)

Particulars about the actual controllers

1 Legal representative √Applicable □Not applicable Name

China Communication Construction Co., Ltd

Legal representative:

Liu Qitao

Date of establishment

December 8, 2005

Main operating business

Engaging in the general contracting of construction projects for ports, channels, highways and bridges both home and abroad, including technical and economic consultation of engineering, feasibility study, survey, construction, supervision, procurement and supply for related complete set of equipment or materials, and equipment installation: 50 / 507

2016 Annual Report

undertaking the general contracting of the construction of industrial and civil works, railway, metallurgy, petrochemical, power and water conservancy facilities, channel, mine and municipal works; import and export business; real estate development and property management, investment and management of logistics, transportation, hotel and tourist industries. 2. Natural person □Applicable √Not applicable 3. Special status of actual controllers not existed □Applicable √Not applicable 4. Changes index and date for actual controllers during the report period □Applicable √Not applicable 5. Block diagram of property right and control relationship between Company and actual controllers. √Applicable □Not applicable 国务院国资委

中国集团

中国交建 持股 100%

持股 100%

香港振华工程有限公司 持股 17.08%

澳门振华海湾工程有限公司

持股 28.83%

持股 0.33%

上海振华重工(集团)股份有限公司

6. The actual controller controls the company through a trust or other asset management style □Applicable √Not applicable (III). Controlling shareholders and actual controllers □Applicable √Not applicable V.Other corporate shareholders holding over 10% of the Company′s shares √Applicable □Not applicable Unit: Yuan Currency: RMB

Corporate shareholders

The person in charge of the Date of establishment unit/legal representative

ZHEN HUA Wang Yan ENGINEERING COMPANY LIMITED

May 14, 1982

51 / 507

Organization Registered capital code

Main business

-

Marine works, roads and bridges, dredging and site formation, port machinery,

35,000,000

operating

2016 Annual Report

survey and design. Description

China Communications Construction Co., Ltd. Holds 100% stake of ZHEN HUA ENGINEERING COMPANY LIMITED, the ultimate shareholder is China Communications Construction Group Co., Ltd

VI. Share limit reduction □Applicable √Not applicable

52 / 507

2016 Annual Report

Chapter VII

Preferred stock information

□Applicable √Not applicable

53 / 507

2016 Annual Report

Chapter VIII

Directors, Supervisors, Senior Executives and Employees

I.

Change of holdings and remuneration

(I)

Shareholding changes and remuneration of directors, supervisors and senior executives under employment or retired during report period.

√Applicable □Not applicable Unit: share

Name

Title (note)

Sex Age

Start of Tenure

End of Tenure

Total paid by the Whether Shares Change Company paid by held at the Shares at in during related Reason beginning end of year report report parties of of year period period the (RMB Company 10,000)

Song Hailiang

Chairman of theBoard

M

52

April 21, 2015

April 20, 2018

0

0

0 N/A

0

Yes

Zhu Lianyu

Vice Chairman of the M Board, Party Secretary

47

April 21, 2015

April 20, 2018

0

0

0 N/A

100.04

No

Huang Qingfeng

Director, President

M

42

April 21, 2015

April 20, 2018

0

0

0 N/A

100.04

No

Chen Qi

Director

F

55

April 21, 2015

April 20, 2018

0

0

0 N/A

0

Yes

Yan Yunfu

Director,Chief Engineer

M

58

April 21, 2015

April 20, 2018

0

0

0 N/A

83.03

No

Liu Qizhong

Director, Vice President

M

53

April 21, 2015

April 20, 2018

0

0

0 N/A

88.04

No

Dai Wenkai

Director, Vice President

M

50

April 21, 2015

April 20, 2018

0

0

0 N/A

80.03

No

Wang Jue

Director, Secretary

M

53

April 21, 2015

April 20, 2018

0

0

0 N/A

83.03

No

CFO,

Board

54 / 507

2016 Annual Report

She Lian

Independent Director

M

58

April 21, 2015

April 20, 2018

0

0

0 N/A

12

No

Gu Wei

Independent Director

M

60

April 21, 2015

April 20, 2018

0

0

0 N/A

12

No

Ling He

Independent Director

M

65

April 21, 2015

April 20, 2018

0

0

0 N/A

12

No

Yang Jun

Independent Director

M

60

April 21, 2015

April 20, 2018

0

0

0 N/A

12

No

Cui Wei

Supervisor, deputy secretary of the Party committee, commission for M Discipline Inspection, trade union chairman

41

April 21, 2015

April 20, 2018

0

0

0 N/A

80.03

No

Zhang Minghai

Supervisor

M

55

April 21, 2015

April 20, 2018

20,259

20,259

0 N/A

72.08

No

Xiang Xudong

Supervisor

M

41

April 21, 2015

April 20, 2018

0

0

0 N/A

69.92

No

Liu Jianbo Vice president

M

54

April 21, 2015

April 20, 2018

0

0

0 N/A

83.03

No

Zhou Qi

Vice president

M

45

April 21, 2015

April 20, 2018

0

0

0 N/A

80.03

No

Chen Bin

Vice president

M

43

April 21, 2015

April 20, 2018

89,440

89,440

0 N/A

80.03

No

Shan Jianguo

Vice president

M

53

April 21, 2015

April 20, 2018

0

0

0 N/A

80.03

No

Zhang Jian

Vice president

M

48

April 21, 2015

April 20, 2018

0

0

0 N/A

80.03

No

Fei Guo

Chief engineer

M

55

April 21, 2015

April 20, 2018

0

0

0 N/A

78.03

No

Li Ruixiang

Chief economist

M

42

April 21, 2015

April 20, 2018

0

0

0 N/A

83.03

No

Sun Li

General counsel

M

45

April 21, 2015

April 20, 2018

0

0

0 N/A

78.03

No

55 / 507

2016 Annual Report

Ge Ming

Former Director

Total

/

Name

Independent

M

66

April 21, 2015

November 25, 2016

/

/

/

/

0

0

109,699

109,699

0 N/A 0 /

11 1,457.48

No /

Main work experience

born in 1965, male, Ph.D., professor-level senior engineer, began his career in July 1987, served as engineer, Design Office director, Vice President, President, member of Party Committee, Vice Secretary of the Party Committee, Chairman of the Board and simultaneously General Manager with Song CCCC Water Transportation Planning and Design Institute Co., Ltd.; current vice President of China Communications Construction Co., Ltd. and Hailiang simultaneously General Manager of Equipment Manufacturing Marine Heavy Industry Department and Chairman of the Board of Zhenhua Heavy Industries.

Zhu Lianyu

born in 1970, male, Ph.D., professor-level senior engineer; began his career in September 1992, served as engineer, equipment leader of overseas project, vice chief of Marine Machine Department, manager of Enterprise Development Department of CCCC First Harbor Engineering Co., Ltd; general manager of CCCC International Shipping Co., Ltd, general manager of Equipment Manufacturing Marine Heavy Industry Department of China Communications Construction Co., Ltd.; current vice Chairman of the Board and secretary of Party Committee.

born in 1972, male, EMBA, senior engineer; began his career in August 1996, used to be quality project chief, director of field bridge office of quality management department; deputy manager of after-sales department, general manager of Quality Inspection Company; vice director of off-shore Huang office, director of Quality Safety Department, director of Product Service Center and assistant president of the Group; from Jan. 2005 on is VP of the Qingfeng Company and executive vice president and director of Production and Project Management Center since 2014, current director and president of the Company. born in 1962, female, master degree, senior engineer, was project manager of China Harbor Engineering Co., Ltd. Import and Export Port Machinery Division, China Harbor (Group) Co., Ltd. Industry and Trade Business Unit deputy general manager, General manager; China Communications Chen Qi Construction Co., Ltd Industry and Trade Business Unit general manager; has been director of the Company since 2011, current executive general manager of Equipment Manufacturing Marine Heavy Industry Department of China Communications Construction Co., Ltd. Yan Yunfu

born in 1959, male, EMBA, professor-level senior engineer; served as Vice Chief of Technical Department, Manager of Mechanical Design Department, Vice General Engineer, General Engineer and VP of the Company, President of Land Heavy Industry Equipment Design Institute, is director of board of the Company since 2004, current director and general engineer.

Liu born in 1964, male, bachelor degree, senior economist; was Vice Manager, Manager of Operating Department, was director of the Company since Qizhong 1997, current director and VP of Company. Dai

born in 1967, male, master of physics, EMBA, senior engineer. Began his career in 1993, was Vice Manger and Manager of Operating Department,

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2016 Annual Report

Wenkai Vice Chief Economist, Chief Economist; current director and VP of the Company.

Wang Jue

born in 1964, male, MBA, CPA and senior accountant, successively held the posts of director and General Accountant of the Financial Office of No.3 Engineering Co., Ltd. Of CCCC Third Harbor Engineering Co., Ltd., Chief of Audit Department, Chief of Financial Department and Vice General Accountant; is the Chief Financial Executive and Secretary of the Board of Directors of the Company since November of 2005; director of Company from 2006 to 2011, current director, CFO and Secretary of the Board of Directors of the Company.

born in 1959, male, professor, doctoral tutor; from 1995 on, enjoys special government allowances from the State Council since 1995; deputy director and Party Secretary of the Department of Business Administration, Wuhan University of Communications Science; chief editor of "Transportation Enterprise Management" magazine run by Ministry of Transportation; director of Early Warning Management Research Center, Wuhan University of She Lian Technology, Professor of Management, doctoral tutor; director of Early Warning Management Research Center, Huazhong University of Science and Technology, Professor of Management, doctoral tutor; Professor of CEIBS Emergency Management Institute incumbent National School of Administration, doctoral tutor, current independent director of the Company. born in 1957, male, Ph.D., professor and doctoral tutor; since 1982, has been teaching at Shanghai Maritime University; since the year 2000, enjoys special government allowances from the State Council, and the IEEE Society member, MTS Society member and the British Royal Physical Society member, senior member of China Electro technical Society, senior member of Chinese Society of Naval Architects, senior member of Chinese Gu Wei Mechanical Engineering Society; is currently director of the Key Laboratory of the Ministry of Transportation's Shipping Technology and Control Engineering; member of China Electro technical Society's Vessel Electrical Committee; member of the Committee of Experts of Shanghai Jiaotong Electronics Industry Association; procurement consulting expert of Shanghai Municipal Government; member of the Committee of Experts of Ministry of Transport East China Sea Rescue Bureau and other duties; current independent director of the Company. born in 1952, male, professor, senior editor (Senior professional title) of Liberation Daily, director of Shanghai Journalists Association, director of Shanghai Institute of Essays, served as member, assistant chief editor, director of Editing Department of the democratic and legal magazine agency, Ling He vice director and director of Comment Department of Liberation Daily, main editor of Liberation Daily, chief editor of Liberty Forum; with honor of the first National 100 Journalists, China News first prize for three times, Shanghai News first prize for 15 times, current independent director of the Company. born in 1957, male, master degree, served as intermediate and Senior court judge of Shanghai Court, president and members of the judicial committee member, Property Trade Operation Director of Shanghai United Property Rights Exchange, now is the assistant president of Shanghai United Property Rights Exchange, general manager of Beijing HQ, director of Financial Property Rights Trade Center, arbitrator of China International Yang Jun Economic and Trade Arbitration Commission, Shanghai International Economic and Trade Arbitration Commission, arbitrator of Shanghai Arbitration Commission, Shanghai Financial Arbitration Court, expert of China domain name dispute resolution center, director of Intellectual Property Association of China Law Society, director of Company Law Research Society of Shanghai Law Society, director of Shanghai Patent / Trademark / Copyright Association, current independent director of the Company. born in 1976, male, bachelor degree, began his career in 2000, served as deputy director (hosting) of general manager office, legal consultant office of Cui Wei CCCC First Harbor Co., Ltd, director and minister of Party Work Department and President Affair Office of Zhenhua Heavy Industry Co., Ltd, current chief supervisors, deputy secretary of the Party committee, secretary of Commission for Discipline Inspection, chairman of Trade Union

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2016 Annual Report

born in1962, male, master degree, professor-level senior engineer; formerly Shanghai Port Machinery Plant Technology Division engineer; mechanical office deputy manager, deputy chief engineer, general manager of Mechanical Office Shore Bridge First Company, of the machinery Zhang to do the shore bridge, general manager of Land-base Heavy Industry Co., Ltd. with Shanghai Zhenhua Heavy Industries (Group) Co., Ltd.; currently Minghai Land-based Heavy Industry Research Design vice president and also Shore Bridge Design Institute director; chief supervisor of the Company since 2011.

born in 1976, male, bachelor degree, senior engineer; served as Vice Director and Vice Manager of Quality Department, General manager of Zhenhua Xiang Heavy Industry Inspection Co., Ltd, current employee representative supervisor, Party Secretary and Vice General Manager of Zhenhua Heavy Xudong Industry Changxin branch. Liu Jianbo

born in 1963, male, master degree,senior engineer; was engineer at technological office of Shanghai Port Machinery Plant; assistant director in engineering with Technology Office of Shanghai Container Dock Co. Ltd., deputy general manager and general manager of ZPMC Changxing Base; current VP of the Company and chairman of board of Shanghai Zhenhua Marine Engineering Service Co., Ltd.

Zhou Qi

born in 1972, male, EMBA, senior engineer; was manager and deputy general engineer, general manager and chief engineer of the Electric Appliance Office of the Company; current VP of the Company and chairman of Company Electric Group. born in 1974 , male, EMBA, senior engineer; project quality leader of Quality Control office, deputy manager of tire crane office of quality control office, manager of quality control office, deputy general manager and general manager of quality control company, vice director of quality and

Chen Bin safety office, manager of Quality Safety Office; supervisor of the Company, general manager of Shanghai Zhenhua Shipment Co., Ltd, president assistant of the Company, current VP of Company and general manager of Shanghai Zhenhua Marine Engineering Service Co., Ltd.

born in 1964, male, bachelor degree, served in Shanghai Port Machinery Manufacturing Plant, started to work in Shanghai Zhenhua Port Machinery Shan Co., Ltd from 1992, served as engineer, chief engineer of Machinery Office, general manager of Design company, deputy director and director of Jianguo Machinery Office, manager of budget assessment department, is now the VP and president of Land Heavy Industry Institute.

Zhang Jian

born in 1969, male, MBA, served as technician, production planner and assistant of director of No. 2 Panel beater of Shanghai Port Machinery Manufacturing Plant, chief of Changzhou Plant of Shanghai Port Machinery Manufacturing Plant, vice general manager of Shanghai Port Machinery Co., Ltd, vice general manager of Shanghai Port Machinery Heavy Industry Co., Ltd, general manager, assistant of president of Port Machinery Co., Ltd, current VP.

born in 1962, male, EMBA, professor level senior engineer, served as engineer of Shanghai Port Machinery Plant, director of No. 5 electrical office, Fei Guo vice chief engineer, director of Development Office of Shanghai Zhenhua Port Machinery Co., Ltd, VP and executive director of Shanghai Zhenhua Heavy Industry Electric Co., Ltd, current chief engineer of Company. Li

born in 1975, male, bachelor degree, served as vice manager of Manufacturing Department, vice director of Quality Safety Office of Zhangjiagang

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2016 Annual Report

Ruixiang Base of Shanghai Machinery Plant; manager of Quality Inspection Company, vice director of Quality and Safety Office, vice general manager, generally manager, of machinery supporting base, Party branch secretary and president assistant, current chief economist and general manager of budget assessment department 1. born in 1972, male, EMBA, senior engineer; was project supervisor of Operating Department, vice manager and assistant of General Manager of the Company, Vice President and director of the Company , current Chief Legal Counsel of Company Sun Li

Other description □Applicable √Not applicable (II) Stock ownership incentive awarded for the directors, supervisors and senior executives during the reporting period □Applicable √Not applicable Office-holding of directors, supervisors and senior executives under employment or retired during report period. (I)

Particulars about office-holding with shareholding companies

√Applicable □Not applicable Name

Name of shareholder

Title in the shareholding company

Starting date of service term

Song Hailiang

China Communication Construction Co., Ltd

Vice president

January 27, 2014

Chen Qi

China Communication Construction Co., Ltd

General manager of Industry and Trade Department

December 29, 2009

Particulars about office-holding with shareholding companies

(II) Particulars about office-holding with other companies √Applicable □Not applicable Name

Name of companies

59 / 507

Title

2016 Annual Report

She Lian

CEIBS Emergency Management Institute Incumbent National School Professor, doctoral tutor of Administration

Gu Wei

Shipping Technology and Engineering key Lab of Ministry of Transportation, Vessel Electrical Committee of China Electro technical Society, Control Committee of Experts of Shanghai Jiaotong Electronics Director, professor, doctoral Industry Association; procurement consulting expert of Shanghai Municipal member, committee member Government; Committee of Experts of Ministry of Transport East China Sea Rescue Bureau and other duties

Ling He

Liberation Daily, Shanghai Journalists Association, Shanghai Institute of Senior editor (Senior professional title), director Essays.

Yang Jun

Shanghai United Property Rights Exchange, Financial Property Rights Trade Center, Chin International Economic and Trade Arbitration Commission, Shanghai International Economic and Trade Arbitration Commission, Shanghai Arbitration Commission, Shanghai Arbitration Assistant president, general manager, director, Institute of finance, the Chinese domain name dispute solution center, arbitrator, expert, director jurisprudence of China Intellectual Property Association, Company Law Association of Shanghai Law Society, Shanghai Patent/Trademark/Copyright Association.

tutor,

council

Description of position held in other companies and institutions

III.

Remuneration of Directors, Supervisors and senior executives

√Applicable □Not applicable In accordance with the Articles of Association, the remuneration of Directors and Supervisors are subject to Decision-making procedures for remuneration of the Annual Shareholder’s General Meeting and the remuneration of the management are assessed and Directors, Supervisors and senior executives approved by the President. Calculation basis for remuneration of Directors, Basic salary plus performance bonus, combined with assessment utilizing quantizing index of production and Supervisors and senior executives operation. Total remuneration received by all directors, Chairman Song Hailiang, vice chairman Zhu Lianyu and director Chen Qi are not paid by the Company,

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2016 Annual Report

supervisors and senior executives

whereas all other director, supervisor and senior executives are paid by the Company

Total remuneration received by all directors, 14.5748 million yuan supervisors and senior executives at period end

IV. Particulars about changes of directors, supervisors and senior executives √Applicable □Not applicable

V.

Name

Title

Change

Reason

Zhu Lianyu

Deputy director

Election

Job demand

Ge Ming

Independent Director

Leaving post

Personal reason

Punishment in the recent three years by securities regulatory agencies

□Applicable √Not applicable

61 / 507

2016 Annual Report

VI. Employee status of the Parent Company and its key subsidiaries (I)

Particulars about employee

Number of employees of Parent Company in service

3,200

Number of employees of key subsidiaries in service

5,661

Total headcount in employment

8,861

Number of retired employees with the costborne by the parent company and subsidiaries

0

In specialties Classification

Number

Production staff

3,301

Production staff

211

Technical staff

4,524

Financial staff

125

Administrative staff

700

Total

8,861 Educational level

Education

Number (person)

Doctor

27

Master

522

Undergraduate

3,731

Junior College

2,684

Technical secondary school

1,897 Total

8,861

(II) Remuneration policies √Applicable □Not applicable In line with the Company′s development strategy, continuously perfect distribution incentive system, perfect performance assessment system, establish a system linking performance distribution and unit or office performance, staff performance, industrial characters and post value; establish a salary incentive system linking staff achievement, position duty and value contribution and establish a distribution mode integrating with market.

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2016 Annual Report

(III) Training program √Applicable □Not applicable At each year start, the Company sets up all-staff annual educational and training plan and implements according to the plan to improve the competence level and professional quality of staff at various levels. In line with the Company′s development strategy, gradually establish a rigid staff training system with systematic, directional and continuous features.

(IV) Labor outsourcing situation √Applicable □Not applicable Labor outsourcing hours

10058048 hours

Total Labor outsourcing remuneration

324.49 million yuan

VII. Others □Applicable √Not applicable

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2016 Annual Report

Chapter IX Company Governance I.

Company governance profile

√Applicable □Not applicable The Company strictly followed the regulations specified in “Company law”, “Securities Law”, “Stock Listing Rules”, Company Articles of Association” and the legal requirements of China Securities Regulatory Commission in the report period, to standardize the company’s daily operation, further establish and improve the internal control system, improve the internal control management and corporate governance structure, strengthen the insider information management, strengthen the information disclosure, continuously improve the company governance, making efforts to improve the construction of legal person governance structure, and gradually establish a modern enterprise system, earnestly protect the legal rights and interests of the company and all the shareholders, ensuring the sustainable and stable development. After the inspection, the staffs who know the insider information didn’t trade the stocks of the company before significant price information is disclosed. After the inspection, the staffs who know the insider information didn’t trade the stocks of the company before significant price information is disclosed. Whether there is any difference between the company governance and the regulation of the China Securities Regulatory Commission, if any, the reason should be explained. □Applicable √Not applicable

II.

Shareholders conference Session

Date

2015 shareholders conference

May 09, 2016

Query index of the specified website with resolution published www.sse.com.cn,

Disclosure date of resolution publication May 10, 2016

Enter the stock code

Description of General Meeting □Applicable √Not applicable

III.

Directors duties performance

(I)

Participation of directors in the Board of Directors and the shareholders conference Participatio n in the shareholders conference

Participation in the Board of Directors

Director Independen t director or Name not

Song

No

Desired Participation participatio Participatio numbers in n time in n time in communicatio the Board of person n way Directors

9

1

8

64 / 507

Not participate Participatio Entrusted Absenc d in the n time in e participatio meeting in shareholders n numbers times person for conference continuous two times? 0

0

No

1

2016 Annual Report

Hailiang Zhu Lianyu

No

9

1

8

0

0

No

1

Huang Qingfen g

No

9

1

8

0

0

No

0

Chen Qi

No

9

1

8

0

0

No

1

Yan Yunfu

No

9

1

8

0

0

No

0

Liu Qizhong

No

9

1

8

0

0

No

0

Dai Wenkai

No

9

1

8

0

0

No

0

Wang Jue

No

9

1

8

0

0

No

1

She Lian

Yes

9

1

8

0

0

No

1

Gu Wei

Yes

9

1

8

0

0

No

1

Ling He

Yes

9

1

8

0

0

No

0

Yang Jun

Yes

9

1

8

0

0

No

0

Ge Ming

Yes

6

1

5

0

0

No

0

Explanation for not participated in the meeting in person for continuous two times □Applicable √Not applicable Number of directors meeting held in the year

9

In which: onsite meeting

1

Meetings held in communication method

8

Combined with onsite meeting and meetings held in communication method

0

(II) Objection proposed by independent director to the company issues □Applicable √Not applicable During the report period, the independent directors didn’t propose any objection to the proposals of from the board of directors of the year and other proposals not from the board of directors meeting.

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2016 Annual Report

(III) Others □Applicable √Not applicable

IV. The special opinions and suggestions put forward by the special committee of the board of directors during the reporting period shall disclose the specific situation □Applicable √Not applicable

V.

Description of risk found by the Board of Supervisors

□Applicable √Not applicable

VI. If the Company is unable to guarantee its independence and cannot maintain its independent operating capability in respect of its business, personnel, assets, institutions and finance, etc. □Applicable √Not applicable Corresponding solution, work progress and follow - up work plan exist for the company with competition in the industry □Applicable √Not applicable

VII. Evaluation system of senior executives, the establishment and implementation of incentive system in the report period √Applicable □Not applicable The Company appoints the directors, supervisors and senior executives in accordance with the provisions of Company Law and the Articles of Association, has built up a preliminary the cultivation, selection, supervision, assessment, reward and punishment, constraint system for the company’s senior executives suitable for the actual situation. The Company formulated the administrative methods for relevant senior executives. According to the production and development need of the Company, the senior executives are appointed, resigned and assessed following the principles of “from top to bottom integrating the virtue and talent”. The Company assessed the senior executives according to the due diligence and job performance, the company will gradually improve the existing performance evaluation system and salary system, promote medium- and long term incentive system for all senior executives and the core technical personnel of the company, to continue to stimulate the enthusiasm of the senior executives, to create new performance, and ensure the benefit maximization and standardize the operation of the company.

VIII. Disclose the internal control self-assessment report √Applicable □Not applicable “2016 Company Annual Internal Control Evaluation Report” is published in the Shanghai Stock http://www.sse.com.cn Significant defect of internal control in the report period □Applicable √Not applicable

IX. Internal control audit report description √Applicable □Not applicable The Company hired Ernst & Young LLP (special general partnership) to audit the effectiveness of the internal control of the financial report on December 31, 2016, issued a standard internal control audit report without advice (see 66 / 507

2016 Annual Report

Appendix). Disclose the internal control audit report or not: Yes

X.

Others

□Applicable √Not applicable

67 / 507

2016 Annual Report

Chapter X

Company Bond Information

□Applicable √Not applicable

68 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd.

Financial statement (audited)

December 31, 2016

Shanghai Zhenhua Heavy Industries Co., Ltd. Content

Page I.

Audit Report

II.

Financial statement (audited)

1 - 2

Consolidated and Company’s B/S

3 - 5

Consolidated statement of income

6 - 7

Consolidated Statement of Change in Equity

8 - 9

Consolidated statement of cash flow

10 - 11

Consolidated and company assets balance sheet

12 - 13

Profit statement of the parent company

14

Statement of Change in Equity of the parent company

15 - 16

Parent company statement of cash flow

17 - 18

Financial Statements Notes

19 - 194

Supplementary Information 1. Details of non-recurring profit and loss for current period

1

2. Return on equity and earnings per share

1

Audit Report Ernst & Young (2017) Shenzi No.61249778_B01 To the Shareholders of Shanghai Zhenhua Heavy Industries Co., Ltd., We have audited the accompanying consolidated as well as company’s financial statement of Shanghai Zhenhua Heavy Industries Co., Ltd., including the company’s and the consolidated balance sheets as of December 31, 2016, 2016’s P&L and company’s income statement, shareholders’ equity movement statements, cash flow statements and notes to the financial statements. I. The Management Responsibilities on the Statements Preparing and fairly stating financial statements are the responsibilities of the management of Shanghai Zhenhua Heavy Industries Co., Ltd.. These responsibilities include: (1) The preparation of financial statements in accordance with the provisions of the corporate accounting standards, and to achieve a fair reflection; (2) Design, implement and maintain the necessary internal controls, to material misstatement due to fraud or error in the financial statements. II. The CPA’s Responsibilities Our responsibilities are to provide audit opinions based on our auditing. We conducted the audit on the basis of China CPA Norms, which requires us to abide by professional virtues and norms to plan and conduct audit to ensure there exist no serious reporting errors in the financial statements. The audit includes implementing the audit procedures to acquire financial statements figures and disclosed audit evidence. Audit procedures are chose based on CPA’s judgment, including the estimate of risks for possible misreports due to cheating or errors. When estimating risks, certified public accountants consider internal control related to the financial statements preparation and fair presentation, in order to design audit procedures that are appropriate. The audit also includes the evaluating of the appropriateness of utilization of accounting policies and accounting estimates by the management, and the evaluating of the total reporting of the financial statements. We believe that we have acquired sufficient and appropriate audit evidences, which provide the basis for the auditor’s opinions.

71 / 507

Audit Report (continued) Ernst & Young (2017) Shenzi No.61249778_B01 III. Auditor’s Opinions In our opinion, the accompanying financial statements of Zhenhua Heavy Industries has been prepared according to stipulations of the enterprise accounting norms and present fairly, in all material respects, the financial position of the Consolidation and Zhenhua Heavy Industries as of December 31, 2016 and of the results of its operations and its cash flows in 2016.

Ernst & Young Global Limited

CPA:

The accounting firm (special general partnership)

CPA:

Beijing, China

March 27, 2017

72 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd. Consolidated balance sheet Dec. 31, 2016 RMB Yuan Assets

Note V

December 31, 2016

December 31, 2015

Monetary capital

1

3,597,044,199

2,458,333,716

Financial assets measured at fair value with the change

2

4,615,775

676,082

accounted in current profit and loss Notes receivable

3

296,920,781

243,159,622

Receivables

4

4,230,746,458

3,894,762,468

Prepayment

5

900,422,234

1,226,345,632

Other Receivables

6

736,554,593

667,660,167

Stock

7

6,776,086,014

5,785,699,346

Construction completed account yet has not been settled

8

11,105,813,767

11,217,591,856

Non-current assets due within one year

9

1,384,438,569

2,625,135,212

10

553,363,139

553,205,272

29,586,005,529

28,672,569,373

Current assets

Other current assets Total current assets Non-current assets Financial assets available-for -sale

11

1,313,572,506

1,212,177,180

Long-term

12

3,791,218,020

3,558,501,537

13

2,201,421,453

1,597,134,817

Real estate as investment

14

473,380,251

361,172,808

Fixed assets

15

15,022,782,366

15,655,536,876

Projects in process

16

4,025,449,461

3,577,371,504

Intangible assets

17

3,744,448,606

3,819,437,866

Goodwill

18

149,212,956

149,212,956

Long-term prepaid expenses

19

10,881,263

4,592,043

Deferred corporate tax

20

505,446,687

413,045,299

receivables

Long-term investment

stock

ownership

73 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd. Consolidated balance sheet (continued) Dec. 31, 2016 RMB Yuan Total non-current assets

31,237,813,569

30,348,182,886

Total assets

60,823,819,098

59,020,752,259

The notes of the financial statements are part of the financial statements.

74 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd. Consolidated balance sheet (continued) Dec. 31, 2016 RMB Yuan Liabilities equity

and

stockholders’

Note V

December 31, 2016

December 31, 2015

Short term loans

22

21,485,919,393

18,216,928,490

Financial liabilities measured at fair value with the change accounted in current profit and loss

23

-

24,918,115

Notes payable

24

1,905,121,706

1,785,201,236

Payables

25

5,103,018,897

5,471,141,022

Pre-received payment

26

292,941,206

423,603,129

8

2,393,446,122

2,866,437,832

Employee remuneration payable

27

264,549,756

257,822,610

Tax payables

28

251,000,724

251,551,006

Interest payable

29

140,195,803

289,590,733

Dividend payable

30

31,701,965

32,237,912

Other payables

31

1,225,135,428

1,604,523,386

32

799,574,356

6,837,115,692

33

3,996,025,335

1,995,655,739

37,888,630,691

40,056,726,902

Current liabilities

Construction account

not

completed

Non-current liabilities within one year

due

Other current liabilities Total current liabilities Non-current liabilities Long-term loans

34

3,925,335,497

1,761,904,000

Bond payables

35

1,618,361,164

719,861,943

Predicted liabilities

36

293,115,783

220,141,178

Deferred profit

37

451,036,024

405,425,947

20

104,164,573

70,042,985

38

56,025,416

-

Deferred liabilities

corporate

tax

Other non-current liabilities

75 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd. Consolidated balance sheet (continued) Dec. 31, 2016 RMB Yuan Total non-current liabilities Total liabilities

6,448,038,457

3,177,376,053

44,336,669,148

43,234,102,955

The notes of the financial statements are part of the financial statements.

76 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd. Consolidated balance sheet (continued) Dec. 31, 2016 RMB Yuan Liabilities equity

and

stockholders’

Note V

December 31, 2016

December 31, 2015

Share capital

39

4,390,294,584

4,390,294,584

Contributed surplus

40

5,526,978,575

5,526,978,575

Other comprehensive profits

41

322,403,671

207,660,237

Surplus reserves

43

1,603,122,982

1,576,100,786

Profit not distributed

44

3,353,936,451

3,168,538,701

15,196,736,263

14,869,572,883

1,290,413,687

917,076,421

16,487,149,950

15,786,649,304

60,823,819,098

59,020,752,259

Shareholders' equity

Total shareholders’ equity attributed to parent company Minority equity Total shareholders’ equity Total liabilities shareholders’ equity

and

77 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd. Consolidated balance sheet (continued) Dec. 31, 2016 RMB Yuan

The notes of the financial statements are part of the financial statements. Financial statements signed by:

Enterprise principal: principal:

Accounting principal:

78 / 507

Accounting firm

Shanghai Zhenhua Heavy Industries Co., Ltd. Consolidated income statement Year 2016 RMB Yuan Note V

2016

2015

Operating revenue

45

24,348,087,928

23,272,394,677

Less: Operating cost

45

19,727,663,875

19,717,314,855

Operation taxes and surcharges

46

152,175,837

24,550,179

Selling expense

47

100,435,778

79,388,743

Management expense

48

1,759,032,746

1,551,222,564

Financial expenses

49

1,218,992,788

1,532,851,096

Assets impairment loss

50

1,221,116,175

637,391,199

Add: Changes in fair value gains and losses

51

28,857,808

(21,225,034)

Gain on investment

52

118,513,425

498,236,958

Investment gains

99,395,952

55,252,057

Operating profit

316,041,962

206,687,965

63,643,243

70,713,471

6,649,827

14,128,543

10,824,061

5,665,872

5,309,215

4,789,746

368,861,144

271,735,564

61,516,908

77,529,876

307,344,236

194,205,688

by the consolidated under the same control

-

42,357,907

Net profit attributable to the

212,419,946

212,411,967

In which: Investment gains to affiliated companies and joint ventures

Add: Non-operating income In which: Non-current disposal income

53 assets

Less: Non-operating expense In which: Non-current disposal loss

54

assets

Total profit Less: Corporate income tax expense

56

Net profit In which: Net profit achieved before the merging

79 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd. Consolidated income statement (continued) Year 2016 RMB Yuan parent company shareholders Minority interest

94,924,290

(18,206,279)

The notes of the financial statements are part of the financial statements.

80 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd. Consolidated income statement (continued) Year 2016 RMB Yuan Note V

2016

2015

Portion of other comprehensive income to be reclassified as profit or loss under equity method

4,801,990

1,256,397

Fair value change profit or loss of financial assets available for sale

84,335,801

(123,536,363)

Conversion difference of foreign currency statements

25,605,643

10,400,161

41

114,743,434

(111,879,805)

41

7,765,004

5,309,103

429,852,674

87,634,986

Total comprehensive income attributable to the parent company shareholders

327,163,380

100,532,162

Total comprehensive income attributable to the minority

102,689,294

(12,897,176)

Basic earnings per share

0.05

0.05

Diluted earnings per share

0.05

0.05

Net amount after tax of other comprehensive income Other comprehensive income that will be reclassified into gains and losses subsequently

Net amount after tax attributed to minority Total comprehensive income In which:

Profit per share

57

The notes of the financial statements are part of the financial statements.

81 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd. Consolidated statement of change in stockholder equity Year 2016 RMB Yuan Shareholders’ equity attributed to parent company

Minority

stockholders’ equity

Share capital

Contributed surplus

Other comprehensi ve income

Surplus reserves

Special reserve

Undistribute d profit

Subtotal

Equity

Total

4,390,294,584

5,526,978,5 75

207,660,237

1,576,100,78 6

-

3,168,538,70 1

14,869,572,88 3

917,076,421

15,786,649,30 4

-

-

114,743,434

-

-

212,419,946

327,163,380

102,689,294

429,852,674

-

-

-

-

-

-

-

273,048,439

273,048,439

1. Picking surplus reserves

-

-

-

27,022,196

-

(27,022,196)

-

-

-

2. Distribution to shareholders

-

-

-

-

-

-

-

(2,400,467)

(2,400,467)

-

-

-

-

26,851,099

-

26,851,099

-

26,851,099

I. Balance at the beginning of current year II. Amount of increased/decreas ed in this year (I) Total comprehensive income (II) Capital increased and reduced by shareholders 1. Capital increased by shareholders (III) Profit distributed

(IV) reserve

Special

1. Picking in this

82 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd. Consolidated statement of change in stockholder equity (continued) Year 2016 RMB Yuan year 2. Use in this year

-

-

-

-

(26,851,09 9)

-

(26,851,099)

-

(26,851,099)

III. Balance at the end of current year

4,390,294,584

5,526,978,5 75

322,403,671

1,603,122,98 2

-

3,353,936,45 1

15,196,736,26 3

1,290,413,68 7

16,487,149,95 0

The notes of the financial statements are part of the financial statements.

83 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd. Consolidated statement of change in stockholder equity Year 2015 RMB Yuan Shareholders’ equity attributed to parent company

I. Balance at the beginning of current year

Minority

stockholders’ equity

Share capital

Contributed surplus

Other comprehensive income

Surplus reserves

Undistributed profit

Subtotal

Equity

Total

4,390,294,584

5,738,241,686

319,540,042

1,554,606,025

2,987,813,174

14,990,495,511

618,105,524

15,608,601,035

-

-

(111,879,805)

-

212,411,967

100,532,162

(12,897,176)

87,634,986

-

-

-

-

-

-

273,402,314

273,402,314

-

-

-

21,494,761

(21,494,761)

-

-

-

-

-

-

-

(10,191,679)

(10,191,679)

II. Amount of increased/decreased in this year (I) Total comprehensive income (II) Capital increased and reduced by shareholders 1. Capital increased by shareholders (III) distributed

Profit

1. Picking reserves

surplus

2. Distribution shareholders

to

(IV) Business Combination under Common Control

(31,383,031) (21,191,352)

-

(211,263,111)

-

-

84 / 507

-

(211,263,111)

59,657,111

(151,606,000)

Shanghai Zhenhua Heavy Industries Co., Ltd. Consolidated statement of change in stockholder equity (continued) Year 2015 RMB Yuan III. Balance at the end of current year

4,390,294,584

5,526,978,575

207,660,237

1,576,100,786

3,168,538,701

The notes of the financial statements are part of the financial statements.

85 / 507

14,869,572,883

917,076,421

15,786,649,304

Shanghai Zhenhua Heavy Industries Co., Ltd. Consolidated Statement of Cash Flows Year 2016 RMB Yuan Note V

2016

2015

21,354,693,208

19,506,900,429

917,117,592

984,630,764

437,301,182

447,191,781

Subtotal of cash receipt from operation activities

22,709,111,982

20,938,722,974

Cash payment of purchase commodity and receiving labor

18,154,428,952

20,174,319,424

Cash payment to and for the employee

1,782,356,763

1,753,695,004

525,276,408

269,565,520

588,627,223

573,104,499

21,050,689,346

22,770,684,447

1,658,422,636

(1,831,961,473)

160,000,000

8,014,070,972

53,350,539

444,664,901

13,381,153

51,566,366

852,787,742

93,974,040

1,079,519,434

8,604,276,279

I. Cash generated from operating activities Cash receipt from products sales and labor provision Tax return received Net cash from other operating activities

58

Tax payment Other cash payments relating to operating activities Subtotal cash disburse operating activities

58

of

Net cash flows from operating activities

59 (1)

II. Cash flow of investment Cash receipt of investment return Cash receipt of investment gains

obtaining

Losses on disposal of fixed assets, intangible assets and other long-term assets Net cash received Other cash receipts relating to investing activities Subtotal

of

investment

58

cash 86 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd. Consolidated Statement of Cash Flows (continued) Year 2016 RMB Yuan receipt Cash payment of construction of fixed assets, project in process and intangible assets

1,157,412,752

2,068,707,329

Cash payment of investment

1,157,412,752

2,068,707,329

-

76,606,000

Subtotal of cash disburse of investment activities

1,805,734,512

6,038,677,769

Net cash flows from operating activities

(726,215,078)

2,565,598,510

Net cash paid for acquiring subsidiaries and other business units

59 (2)

The notes of the financial statements are part of the financial statements.

87 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd. Consolidated Statement of Cash Flows (continued) Year 2016 RMB Yuan Note V

2016

2015

36,889,288,147

31,419,366,773

4,000,000,000

2,000,000,000

3,038,684,232

4,740,276,534

43,927,972,379

38,159,643,307

40,386,569,653

35,746,949,298

1,247,523,244

1,591,961,686

2,141,534,489

1,139,543,500

of

43,775,627,386

38,478,454,484

Net cash flows from operating activities

152,344,993

(318,811,177)

IV. Influence of exchange rate changed to cash

74,727,024

40,816,432

V. Net increase in cash and cash equivalents

1,159,279,575

455,642,292

Add: Cash and cash equivalent Closing balance

2,337,925,611

1,882,283,319

3,497,205,186

2,337,925,611

III. Cash activities

flow

of

financing

Cash received from borrowings Cash received from issuing bonds Receipt of other cash related to financing activities Subtotal of cash receipt financing activities

58

of

Cash to pay the debts Cash payment of dividend distribution or interest Payment of other cash related to financing activities Subtotal of cash disburse financing activities

VI. Cash and cash Closing balance

equivalent

58

59 (3)

88 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd. Consolidated Statement of Cash Flows (continued) Year 2016 RMB Yuan

The notes of the financial statements are part of the financial statements.

89 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd. Balance sheet of the company Year 2016 RMB Yuan Assets

Note XII

December 31, 2016

December 31, 2015

1,972,249,599

1,905,662,392

4,615,775

192,133

259,055,935

226,205,622

6,476,087,696

6,782,715,639

1,960,350,424

2,237,777,316

13,878,003,016

11,305,096,974

Stock

5,589,869,550

6,093,661,038

Construction completed account yet has not been settled

8,583,910,209

8,529,348,226

173,417,465

170,144,226

38,897,559,669

37,250,803,566

356,606,562

380,644,986

8,582,775,282

7,390,184,826

473,380,251

361,172,808

5,633,993,352

6,084,245,840

761,374,018

759,763,993

1,664,941,415

1,691,754,895

474,102,945

398,842,987

Total non-current assets

17,947,173,825

17,066,610,335

Total assets

56,844,733,494

54,317,413,901

Current assets Monetary capital Financial liabilities measured at fair value with the change accounted in current profit and loss Notes receivable Receivables

1

Prepayment Other receivables

Non-current assets

2

10

Total current assets Non-current assets Available-for-sale financial assets Long-term stock ownership investment

3

Real estate as investment Fixed assets Projects in process Intangible assets Deferred corporate tax

90 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd. Balance sheet of the company (continued) Year 2016 RMB Yuan

The notes of the financial statements are part of the financial statements.

91 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd. Balance sheet of the company (continued) Year 2016 RMB Yuan Liabilities and stockholders’ Note XII equity

December 31, 2016

December 31, 2015

18,095,748,393

14,899,812,954

-

22,611,400

Notes payable

1,860,260,636

1,804,985,262

Payables

6,072,079,752

7,717,863,159

291,785,327

221,831,681

3,989,249,948

3,564,886,225

Employee remuneration payable

253,913,374

247,867,168

Tax payables

101,878,736

33,357,053

Interest payable

128,368,841

274,442,941

Dividend payable

352,598

352,598

1,852,554,158

1,623,119,170

407,455,030

5,514,245,635

Other current liabilities

3,996,025,335

1,995,655,739

Total current liabilities

37,049,672,128

37,921,030,985

2,891,136,000

778,404,000

Long-term payables

905,899,355

-

Predicted liabilities

284,982,328

213,158,056

Deferred profit

327,313,110

274,380,601

4,409,330,793

1,265,942,657

41,459,002,921

39,186,973,642

Current liabilities Short term loans Financial liabilities measured at fair value with the change accounted in current profit and loss fair value with the change

Pre-received payment Construction account

not

completed

Other payables Non-current liabilities within one year

due

Non-current liabilities Long-term loans

Total non-current liabilities Total liabilities Shareholders' equity 92 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd. Balance sheet of the company (continued) Year 2016 RMB Yuan Share capital

4,390,294,584

4,390,294,584

Contributed surplus

5,792,527,600

5,792,527,600

264,075,193

279,006,839

Surplus reserves

1,602,614,709

1,575,592,513

Profit not distributed

3,336,218,487

3,093,018,723

15,385,730,573

15,130,440,259

56,844,733,494

54,317,413,901

Other comprehensive income

Total shareholders’ equity Total liabilities shareholders’ equity

and

The notes of the financial statements are part of the financial statements.

93 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd. Income statement of the company Year 2016 RMB Yuan Note XII

2016

2015

Operating revenue

4

24,248,483,693

21,869,889,813

Less: Operating cost

4

20,545,946,108

19,069,970,322

Operation taxes and surcharges

62,382,292

10,246,519

Selling expense

81,744,285

63,655,157

Management expense

1,163,620,534

1,054,137,881

Financial expenses

1,029,965,201

1,311,666,888

Assets impairment loss

1,208,850,889

634,618,962

27,035,042

(19,402,267)

102,879,065

499,257,330

Investment gains

99,395,952

61,885,725

Operating profit

285,888,491

205,449,147

Add: Non-operating income

8,682,882

24,915,350

In which: Non-current assets disposal income

1,376,710

2,991,948

Less: Non-operating expense

7,961,979

1,940,975

In which: Non-current assets disposal loss

4,373,646

1,931,654

286,609,394

228,423,522

16,387,434

13,475,916

270,221,960

214,947,606

Add: Changes in fair value gains and losses Gain on investment

5

In which: Investment gains to affiliated companies and joint ventures

Total profit Less: Corporate expense

income

tax

Net profit Net amount after tax of other comprehensive income Other comprehensive income that will be reclassified into gains and losses subsequently 94 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd. Income statement of the company (continued) Year 2016 RMB Yuan Portion of other comprehensive income to be reclassified as profit or loss under equity method

4,801,990

1,256,397

Fair value change profit or loss of financial assets available for sale

(20,432,661)

(73,498,300)

Conversion difference of foreign currency statements

699,025

158,108

(14,931,646)

(72,083,795)

255,290,314

142,863,811

Total comprehensive income

The notes of the financial statements are part of the financial statements.

95 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd. Statement of change in stockholder equity of the company Year 2016 RMB Yuan Special reserve

Surplus reserves

279,006,839

-

1,575,592,5 13

3,093,018,7 23

15,130,440,2 59

-

(14,931,646 )

-

-

270,221,960

255,290,314

-

-

-

-

27,022,196

(27,022,196 )

-

1. Picking in this year

-

-

-

14,726,377

-

-

14,726,377

2. Usage in this year

-

-

-

(14,726,37 7)

-

-

(14,726,377)

III. Balance at the end of current

4,390,294,5 84

5,792,527,6 00

264,075,193

-

1,602,614,7 09

3,336,218,4 87

15,385,730,5 73

I. Balance at the beginning of current year

Share capital

Contributed surplus

4,390,294,5 84

5,792,527,6 00

-

Other comprehensi ve income

Undistribut Total ed profit shareholder’s equity

II. Amount of increased/decreas ed in this year (I) Total comprehensive income (II) Profit distribution 1. Picking surplus reserves Special reserve

96 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd. Statement of change in stockholder equity of the company (continued) Year 2016 RMB Yuan year

The notes of the financial statements are part of the financial statements.

97 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd. Statement of change in stockholder equity of the company (continued) Year 2016 RMB Yuan Share capital

Contributed surplus

Other comprehensive income

Surplus reserves

Undistributed profit

Total shareholder’s equity

4,390,294,584

5,789,984,601

351,090,634

1,554,097,752

2,899,565,878

14,985,033,449

-

-

(72,083,795)

-

214,947,606

142,863,811

1. Picking surplus reserves

-

-

-

21,494,761

(21,494,761)

(III) Business Combination under Common Control

-

2,542,999

-

-

-

2,542,999

III. Closing balance

4,390,294,584

5,792,527,600

279,006,839

1,575,592,513

3,093,018,723

15,130,440,259

I. Balance at the beginning of current year II. Amount of increased/decreased in this year (I) Total comprehensive income (II) Profit distribution

The notes of the financial statements are part of the financial statements. 98 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd. Statement of cash flows of the company Year 2016 RMB Yuan Note XII

2016

2015

18,091,209,000

17,397,816,931

Tax return received

822,041,413

977,076,832

Description of obtained net cash from other operating activities:

395,515,334

389,419,585

Subtotal of cash receipt from operation activities

19,308,765,747

18,764,313,348

Cash payment of purchase commodity and receiving labor

17,894,901,564

19,747,089,361

Cash payment to and for the employee

965,476,776

980,395,055

91,325,029

47,632,264

432,920,475

560,532,424

19,384,623,844

21,335,649,104

(75,858,097)

(2,571,335,756)

100,000,000

7,822,070,972

37,716,179

439,051,605

8,290,642

39,046,255

-

98,461,064

I. Cash generated from operating activities Cash receipt from products sales and labor provision

Tax payment Description of other obtained cash payments relating to operating activities: Subtotal cash disburse operating activities

of

Net cash flows from operating activities

6

II. Cash flow of investment Cash receipt of investment return Cash receipt of investment gains

obtaining

Losses on disposal of fixed assets, intangible assets and other long-term assets Net cash received Other cash receipts relating to investing activities 99 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Statement of cash flows of the company (continued) Year 2016 RMB Yuan Subtotal receipt

of

investment

cash 146,006,821

8,398,629,896

257,016,945

462,866,404

1,222,623,689

3,301,502,230

Net cash paid by obtaining subsidiary and other business entities

-

165,000,000

Subtotal of cash disburse of investment activities

1,479,640,634

3,929,368,634

Net cash flows from operating activities

1,333,633,813

(4,469,261,262)

Cash payment of construction of fixed assets, project in process and intangible assets Cash payment of investment

The notes of the financial statements are part of the financial statements.

100 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Statement of cash flows of the company (continued) Year 2016 RMB Yuan Note XII

2016

2015

32,313,411,400

25,288,627,079

Cash received from issuing bonds

4,000,000,000

2,000,000,000

Receipt of other cash related to financing activities

1,817,635,793

2,418,923,970

Subtotal of cash receipt of financing activities

38,131,047,193

29,707,551,049

Cash to pay the debts

35,132,081,497

28,697,183,212

Cash payment of dividend distribution or interest

1,032,636,806

1,263,355,113

Payment of other cash related to financing activities

526,482,447

1,139,543,500

Subtotal of cash disburse of financing activities

36,691,200,750

31,100,081,825

Net cash flows from operating activities

1,439,846,443

(1,392,530,776)

IV. Influence of exchange rate changed to cash

35,989,736

28,442,821

V. Net increase in cash and cash equivalents

66,344,269

533,837,551

Add: Cash and cash equivalent Closing balance

1,806,066,316

1,272,228,765

1,872,410,585

1,806,066,316

III. Cash flow of financing activities Cash received from borrowings

VI. Cash and cash equivalent Closing balance

6

The notes of the financial statements are part of the financial statements.

101 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Notes to financial statements Year 2016 RMB Yuan I.

Basic information of the group

Shanghai Zhenhua Heavy Industries (Group) Co., Ltd. (hereinafter “the Company”) was established in Shanghai, on September 8, 1997 as part of an exercise to reorganize its predecessor, Shanghai Zhenhua Port Machinery Company Limited. The Company is registered in P. R. China’s Shanghai. As approved by Zheng Wei Fa Zi (1997) No.42 document issued by the Securities Commission under the State Council, the Company issued 100 million listed foreign investment shares (B-shares) to overseas investors from July 15, 1997 till July 17, 1997. The B-shares were listed for trading at Shanghai Stock Exchange on Aug. 5, 1997. As approved by Gongsi Zi (2000) No. 200 of China Securities Regulatory Commission, the Company added issuing of 88 million RMB common shares (A- shares) to domestic investors in Dec. 2000. The A-shares were listed for trading at Shanghai Stock Exchange on Dec 21, 2000. In accordance with Zhen Jian Fa Xing Zi (2004) No.165 by China Securities Regulatory Commission, the Company issued 114,280,000 A-shares to domestic investors on Dec. 23, 2004.The said issuances were listed at Shanghai Stock Exchange respectively on Dec. 31, 2004 and Jan 31, 2005 for trading. In accordance with Zhen Jian Fa Xing Zi (2007) No.3466 by China Securities Regulatory Commission, the Company issued 125,515,000 A-shares to domestic investors on October 15,2007.The said issuances were listed at Shanghai Stock Exchange respectively on October 23, 2007 and January 23, 2008 for trading. As approved by CSRC Zheng Jian Xuke (2009) No.71 document, the Company issued non-publicly 169,794,680 A-shares on Sep. 22, 2008, to its controller China Communications Construction Co., Ltd. (“China Communications Corporation”).A-shares issued non-publicly are circulation stock with limited sale conditions. From Mar. 20, 2012 on, limitation term expires for above-mentioned A-shares which are listed at Shanghai Stock Exchange for trading. As of 2016 and Dec. 31, 2015, after all issues of shares and bonus shares distribution, capital stock of the Company is increased to 4,390,294,584 shares, par value per share 1 Yuan, totally 4,390,294,584 Yuan.

102 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan I.

Basic information of the group

On Dec. 18, 2005, China Road and Bridge Construction Group General Company combined with the company’s controlling holder China Harbor Construction (Group) General Company after reorganization into China Transportation Construction (Group) Co. Ltd. (hereafter called Communications Group).In accordance with the Reply to Issue Concerning Listing of China Communications Construction Co. Ltd. Entirely after Reorganization on Both Domestic and Overseas Market (Guozi Gaige [2006] No.1063) by State Assets Commission on Aug. 16, 2006, Reply to Issue Concerning Management of State Stock of China Communications Construction Co. Ltd. (Guozi Chanquan [2006] No.1072) on Sep.30, 2006, which granted the reorganization proposal of Communications Group, and in addition to the Reply to Approve China Communications Construction Co. Ltd.’s Announcement of Purchase Report of Road and Bridge Construction Co. Ltd. and Shanghai Zhenhua Port Machinery (Group) Co. Ltd. and the Exemption of Purchase Offer Obligations (Zhengjian Gongsi Zi [2006] No. 227), on Oct.8, 2006 Communications Group solely initiated the establishment of China Communications Construction Co. Ltd. (hereinafter called Communications Company), and invested the stock rights of the Company it held into the newly established Communications Company. With completion of reorganization, Communications Company thus becomes the controlling shareholder of the Company. The company and subsidiaries (hereinafter called “the Company”) mainly engage in: design, construction, installation and contracting of large port loading system and equipment, offshore heavy equipment, engineering machinery, engineering ships and large metal structural parts and their components and spare parts; ship repair; self-produced crane rental business, sales of the company products; international shipment by available machine special transportation ships, steel structure engineering professional contracting. The financial statements have been approved by the company's board of directors on Mar.27, 2017. The scope of consolidation of the consolidated statements is confirmed based on the control, refer to the footnote for the year’s changing situation and the consolidated subsidiaries consisted in the scope. II. Basis of preparation of financial statements The financial statements are prepared on the basis of Enterprise Accounting Standards – Basic Standards issued by the financial department and the subsequently issued and revised guidelines, explanation of the accounting standards, and other related 103 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan stipulations (hereinafter totally called “Enterprise Accounting Standards”).

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Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan II. Basis of Preparation of Financial Statements (continued) As of December 31, 2016, the Group's current liabilities exceed current assets by about 83 billion Yuan. In the preparation of the financial statements for the year, given the amount of bank credit, financing record the Group has achieved to obtain, good cooperation relationship with banks and financial institutions and the operating performance, the board of directors of the Company considers that the Group is able to continue to acquire sufficient operating cash flow and sources of financing, to ensure funds required for repayment of debt maturity and capital expenditure. Therefore, the board of directors of the Company ensures that the Group will continue to operate, and thus to base the preparation of the financial statements for the year on sustainable operation. The preparation of the financial statements, in addition to certain financial instruments, are based on the principle of historical cost valuation. If an asset is impaired, the impairment provision shall be made in accordance with the relevant provisions. III. Major Accounting Policies and Accounting Estimates The Company determines specific accounting policies and accounting estimates based on actual operating characteristics, which mainly reflects in the provision for bad debts receivable, inventory valuation methods, depreciation of fixed assets, amortization of intangible assets, investment real estate measurement model and income recognition and measurement and so on. 1. Declaration on Abiding by the Enterprise Accounting Standards The financial statements follow the requirements of enterprise accounting standards, which authentically and completely reflect the consolidated and the Company’s financial status on Dec. 31 of 2016 and the consolidated and the Company’s operating result and cash flow during 2016. 2. Accounting Period The Group's accounting period is the calendar year, from January 1 to December 31 each year. 3. Recording Currency RMB is the monetary currency of the Group and in the preparation of the financial statements. Unless otherwise specified, the amount unit is RMB.

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Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan III. Major Accounting Policies and Accounting Estimates (continued) 3. Recording Currency The subsidiaries, joint ventures and associated enterprises of the Group shall, on the basis of the main economic environment in which they operate, decide on their own standard currency, and convert them into RMB when preparing financial statements. 4. Corporate Merger Increase The term "business combination" refers to a transaction or event in which a merger of two or more than two individual enterprises forms a reporting entity. The enterprise merger is divided into enterprise merger under the same control and enterprise merger not under the same control. Business Combination under Common Control The merger of enterprises under the same controller refers to the enterprises involved in the merger will be controlled by the same party or the same multiple parties before and after the merger, and which is not temporary. The merger of the enterprise under the same control, the party who gains the control of other enterprises involved in the merger on the combination day shall be the merging party, and the other enterprises involved will be the merged party. The combination date refers to the date on which the merging party actually obtains control of the merged party. The assets and liabilities the merging party obtains in the merger of enterprises under the same control (including the goodwill formed by the acquisition of the ultimate controlling party of the merged party), shall be processed with relevant accounting treatment according to the date of merger on the basis of the book value of the financial statements from the ultimate controlling party. The difference between the book value of the net assets acquired by the merger party and the merger consideration paid is adjusted to the capital reserve. When capital reserve is not sufficient to compensate, retained interest is thus adjusted. Corporate Merger under Different Control The merger of enterprises not under the same controller refers to the enterprises involved in the merger will not be controlled by the same party or the same multiple parties before and after the merger. The merger of the enterprises not under the same control, the party who gains the control of other enterprises involved in the merger on the combination day shall be the purchaser, and the other enterprises involved will be the acquiree. The combination date refers to the date on which the purchaser actually obtains control of the acquiree. 106 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan The identifiable assets, liabilities and contingent liabilities obtained by the purchasers of the merger of enterprises not under the same controller on purchase day

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Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan III. Major Accounting Policies and Accounting Estimates (continued) 4. Corporate Merger Increase (continued) Corporate Merger under Different Control (continued) The summation of the fair value of the combined consideration paid by the merger (or fair value of the issued equity securities) and the held fair value of the equity of the acquiree before the purchase day larger than the difference in the fair value of the identifiable net assets of the acquiree is confirmed as goodwill, and subtract the accumulated impairment losses with cost for subsequent measurement. The summation of the fair value of the combined consideration paid by the merger (or fair value of the issued equity securities) and the held fair value of the equity of the acquiree before the purchase day less than the difference in the fair value of the identifiable net assets of the acquiree, firstly double-check the fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree, and the fair value of the combined consideration paid (or fair value of the issued equity securities), and the measurement of the held fair value of the equity of the acquiree before the purchase day, after review, if the summation of the fair value of the combined consideration paid by the merger (or fair value of the issued equity securities) and the held fair value of the equity of the acquiree before the purchase day still less than the difference in the fair value of the identifiable net assets of the acquiree, the difference shall be recorded in the current profits and losses. 5. Preparation of Consolidated Statements The consolidated scope of consolidated financial statements is based on control, including the financial statements of the Company and its subsidiaries as of December 31, 2016.A subsidiary is a subject which is controlled by the Company (including the enterprise, the separable part of the invested entity, and the structural entity controlled by the Company) When preparing consolidated financial statements, the subsidiary adopts the accounting period and accounting policies consistent with the Company. Assets, liabilities, equity, income, expenses and cash flows arising from all transactions between the Group's internal companies are fully offset at the time of the merger. The current loss of the minority shareholders of the subsidiary exceeds the share enjoyed by the minority shareholders in the initial shareholders' equity of the subsidiary company, and the balance still reduces the number of shareholders' equity.

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Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan III. Major Accounting Policies and Accounting Estimates (continued) 5. Preparation of Consolidated Statements (continued) The current loss of the minority shareholders of the subsidiary exceeds the share enjoyed by the minority shareholders in the initial shareholders' equity of the subsidiary company, and the balance still offsets the equity of minority shareholders. When preparing consolidated financial statements, the subsidiary company's financial statements are adjusted on the basis of the fair value of identifiable assets, liabilities and contingent liabilities determined on the date of purchase. For the subsidiaries acquired through the merger of enterprise under the same control, the operating results and cash flows of the merged party shall be included in the consolidated financial statements at the beginning of the merger period. When preparing the consolidated financial statements, relevant items of the financial statements of the previous period shall be adjusted and the reporting entity formed after the merger is regarded as having been in existence since the ultimate controlling party began to implement control. If changes in the relevant facts and circumstances lead to changes in one or more of the elements of the control, the Group will reevaluate whether or not the investee is controlled. 6. Cash and Cash Equivalents Cash refers to the Group's cash in stock and deposits that are available for payment at any time; Cash equivalents refer to investments held by the Group of short-term, highly liquid and readily convertible to known amounts of cash, with an insignificant risk of changes in value. 7. Translation of Foreign Currency Business and Foreign Currency Statements In the case of a foreign currency transaction, the Group changes the amount of foreign currency into the amount of the recording currency.

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Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan III. Major Accounting Policies and Accounting Estimates (continued) 7. Translation of Foreign Currency Business and Foreign Currency Statements (continued) At the time of initial confirmation, the foreign currency transaction shall convert the amount of the foreign currency into the amount of the recording currency at the spot rate of the transaction. At the balance sheet date, the currency exchange rate of the currency denominated items shall be translated at the spot exchange rate at sight on the balance sheet date. The resulting settlement and monetary items, except for the translation differences, which belongs to the purchase and construction of qualified assets of specialized foreign currency in accordance with the principle of processing the capitalization of borrowing costs, are included in the current profits and losses. Non-currency items of foreign currency calculated on historical cost basis are still translated at the rate at sight on the date of transaction, not changing the amount of its recording currency. The foreign currency non-monetary items measured at fair value shall be converted at the spot exchange rate on the basis of the fair value determination date, and the resulting difference shall be recorded in the current profits and losses or other comprehensive income according to the nature of the non-monetary items. In the case of overseas operations, the Group changes its recording currency into RMB in preparing the financial statements: for Assets/liabilities items in the Assets/liabilities statements, exchange rate at sight on the Assets/liabilities statements date is used for translation. In the shareholders ' equity, except retained earnings items, other items are translated using the spot exchange rate at the time of incurrence; the income and expense items in the income statement shall be translated at the spot exchange rate of the transaction. Translation of foreign currency financial statements in accordance with the above translation difference is recognized as other comprehensive income. When dealing with overseas operations, other comprehensive income related to the overseas operation shall be transferred into the current profits and losses, part of the disposal is calculated according to the proportion of disposal. Foreign currency cash flow are translated by the spot exchange rate on the day of cash flows incurrence. Cash flow from offshore subsidiaries are translated by the spot exchange rate on the day of cash flows incurrence. Effect of exchange rate changes on cash amount is shown separately in the cash flow statements as an adjustment item. 8. Financial Instruments A financial instrument is a contract that forms the financial assets of an enterprise and forms financial liabilities or equity instruments of other enterprises. 110 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan Confirmation and Termination of Financial Instruments The Group identifies a financial asset or financial liability when becomes a party to a financial instrument contract.

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Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan III. Major Accounting Policies and Accounting Estimates (continued) 8. Financial Instruments (continued) Satisfying the following conditions, derecognise a financial asset (or part of a financial asset or a group of similar financial assets), which is to be transferred from its account and balance sheet: (1) the right to receive cash flows from financial assets expires; (2)The right to receive the cash flow of the financial asset has been transferred, or have assumed the obligation in the "pass-through agreement" to take timely collected cash flow to the third party in full payment; and (a) has transferred substantially almost all the risks and rewards of ownership of the financial asset, or (b) although does not transfer or retain substantially nearly all of the risks and rewards of ownership of the financial asset, but has given up the control over the financial asset. In the event that the liability of a financial liability has been fulfilled, withdrawn or expired, the financial liabilities will be derecognised. If the existing financial liability is replaced by the same creditors with another financial liabilities of virtually entirely different terms, or the terms of the existing liabilities are almost entirely modified substantially, such substitutions or modifications shall be used for the termination of the original liability and the recognition of the new liabilities and the difference shall be included in current profits and losses. Buying and selling financial assets in a conventional manner, confirm and terminate the transaction on the basis of trade-date accounting. The conventional way to buy and sell financial assets refers to collecting or delivering financial assets within the time limit prescribed in the law or the prevailing practice in accordance with the terms and conditions of the contract. Trading day is the date on which the Group commits to buy or sell financial assets. Classification and Measurement of Financial Assets The Group’s financial assets are classified at the beginning of recognition into: Financial assets calculated by fair value whose movement booked into current income statement, held to maturity investment, loans and Receivables, Available-for-sale financial assets. Financial assets are measured at fair value at the time of initial recognition. Of the financial assets whose amount initially recognized fair value and changes into current profit or loss statement, related transaction costs incurred at acquisition are included directly in current profit or loss, other financial assets transaction costs are included in the initially recognized amount. The Group does not 112 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan held maturity investment. Subsequent measurement of financial assets depends on their classification.

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Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan III. Major Accounting Policies and Accounting Estimates (continued) 8. Financial Instruments

(continued)

Financial assets measured at fair value and whose variation is included in the current profits and losses Financial assets measured at fair value and whose changes are recorded in the profits and losses of the current period shall include the trading financial assets and the financial assets designated at the time of initial recognition, which are measured at fair value and whose changes are recorded in the profits and losses of the current period. Trading financial assets are financial assets that meet one of the following conditions: getting the financial assets for the purpose of selling in the short term; belonging to the part of a combination of identifiable financial for centralized management, and there is objective evidence that the company has recently adopted a short-term profit approach to manage the portfolio; belonging to the derivatives, but the derivatives that are designated and are effective hedging tool, the derivatives which belong to financial guarantee contracts and the derivatives that are linked to equity instrument investment which has no offer in the active market and its fair value cannot be measured reliably and shall be settled through the delivery of the equity instrument must be excluded. For such financial assets, use fair value to have subsequent measurement, all realized and unrealized gains and losses are included in the current profits and losses. Dividends or interest income related to the financial assets measured at fair value and whose changes are included in the current profits and losses shall be recorded in the profits and losses of the current period. Classification and measurement of financial assets (continued) The equity instrument investment that has no offer in the active market and whose fair value cannot be measured reliably shall not be designated as a financial asset that is measured at fair value and its changes are recorded in the current profits and losses. An enterprise shall not be reclassified as other financial assets after a financial asset is divided at the time of initial confirmation into financial assets measured at fair value and whose changes are recorded in the current profits and losses; other types of financial assets may also not be reclassified as financial assets measured at fair value and whose changes are recorded in the profits and losses of the current period. In accordance with the above conditions, the Group's financial assets mainly include forward foreign exchange contracts.

Loads and Receivables 114 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan III. Major Accounting Policies and Accounting Estimates (continued) 8. Financial Instruments

(continued)

Loads and receivables are non-derivative financial assets which have no quotation on active market, whose collectable amount is fixed or can be determined. For such financial assets, adopt the actual interest rate method in accordance with the amortized cost to have subsequent measurement, gains or losses arising from its amortization or impairment are included in the current profits and losses. Fair value changes of Available for sale financial assets refer to the non-derivative financial assets that are designated as available for sale at the time of initial recognition, and the financial assets other than those listed above. For such financial assets, use fair value for subsequent measurement. The discount or premium is amortized using the effective interest method and recognized as interest income or expense. In addition to the impairment loss and foreign currency financial assets exchange balance is recognised in profit or loss for the period, the changes in fair value of available for sale financial assets are recognised as other comprehensive income, and the cumulative gain or loss is transferred to the current profits and losses until the financial asset has been derecognised or impaired. Dividends or interest income related to the available for sale financial assets shall be included in the current profits and losses. Equity instrument investments that are not quoted in an active market and whose fair value cannot be reliably measured shall be measured at cost. Classification and Measurement of Financial Liabilities. The Group's financial liabilities are classified at the time of initial recognition as: financial liabilities measured at fair value and whose changes are recorded in the current profits and losses, other financial liabilities, and derivative instruments that are designated as effective hedging instruments. For the financial liabilities measured at fair value and whose changes are included in the current profits and losses, the relevant transaction costs shall be directly included in the current profits and losses, and the related transaction costs of other financial liabilities shall be included in the initial recognition amount. The Group has no derivative instruments designated as effective hedging instruments. Subsequent measurement of financial liabilities depends on their classification:

Measured at fair value and the changes are recorded into the profits and losses of the current financial liabilities 115 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan III. Major Accounting Policies and Accounting Estimates (continued) 8. Financial Instruments (continued) Financial liabilities measured at fair value and the variations included in the current profits and losses include the financial liabilities of trading financial liabilities and those specified at fair value and whose variations are included in the current profits and losses in the initial recognition. Trading financial assets are financial assets that meet one of the following conditions: undertaking the financial liabilities in order to repurchase in the near future; belonging to the part of a combination of identifiable financial for centralized management, and there is objective evidence that the company has recently adopted a short-term profit approach to manage the portfolio; belonging to the derivatives, but the derivatives that are designated and are effective hedging tool, the derivatives which belong to financial guarantee contracts and the derivatives that are linked to equity instrument investment which has no offer in the active market and its fair value cannot be measured reliably and shall be settled through the delivery of the equity instrument must be excluded. For such financial liabilities, have subsequent measurement in accordance with the fair value, all realized and unrealized gains and losses are included in the current profits and losses. An enterprise shall not be reclassified as other financial liabilities after a financial liability is divided at the time of initial confirmation into financial liabilities measured at fair value and whose changes are recorded in the current profits and losses; other types of financial liabilities may also not be reclassified as financial liabilities measured at fair value and whose changes are recorded in the profits and losses of the current period. In accordance with the above conditions, the financial liabilities designated by the Group include the forward foreign exchange contracts.

Other financial liabilities For such financial liabilities, use the actual interest rate method in accordance with the amortized cost to have subsequent measurement.

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Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan III. Major Accounting Policies and Accounting Estimates (continued) 8. Financial Instruments

(continued)

Financial Instruments Offset When meet the following conditions simultaneously, the net amount after financial assets and financial liabilities offsetting shall be listed in the balance sheet: having the legal right to offset the recognised amount, and that legal rights are currently enforceable; the plan is to be settled in net, or at the same time, realise the financial assets and pay off the financial liabilities. Financial Guarantee Contract A financial guarantee contract is a contract signed between the guarantor and the creditor, when the debtor fails to perform the obligations, the guarantor shall perform the obligation or bear the liability in accordance with the contract. The financial guarantee contract is measured at fair value at the time of initial confirmation, does not belong to the financial guarantee contract designated as the financial liabilities measured at fair value and whose changes are included in the current profits and losses, after initial recognition, in accordance with the amount confirmed by the current best estimate of the expenditure required to perform the relevant obligations at the balance sheet date and the balance of the initial recognition amount deducing the accumulative amortization determined in accordance with the revenue recognition principle, have subsequent measurement with the higher of which two. Derivative Financial Instruments The Group uses derivative financial instruments such as forward exchange contracts to hedge against exchange rate risk. Derivative financial instruments are measured on the basis of the fair value of the derivative trading contract on the signing day, and have subsequent measurement with its fair value. The derivative financial instrument whose fair value is positive is recognized as an asset, and the one whose fair value is negative is recognised as a liability. However, for the derivative financial instruments that are linked to equity instrument which has no offer in the active market and its fair value cannot be measured reliably and shall be settled through the delivery of the equity instrument shall be measured at cost. In addition to the part of an effective hedge in a cash flow hedge included in other comprehensive income, and rolled out from the current profits and losses in the event that the hedged item affects the profit or loss, gains or losses arising from changes in fair value of derivative instruments are directly included into the current profits 117 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan and losses.

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Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan III. Major Accounting Policies and Accounting Estimates (continued) 8. Financial instruments (continued) Financial Assets Impairment The Group checks up over the carrying value of the financial assets on balance sheet date. If there is objective evidence that particular financial assets are impaired, provision for impairment is made. The objective evidence to prove financial assets impairment refers to the items which actually happened after initial confirmation of financial assets, influenced the estimated future cash flows of the financial assets, and its impact can be reliably measured by the enterprise. Objective evidence of impairment of financial assets, including serious financial difficulties, debt occurred to the issuer or debtor. Violating the terms of the contract (such as payment of interest or principal default or late), the debtor is likely to collapse or have other financial restructuring, and public data shows the expected future cash flow has been reduced and measurable.

Financial assets measured at amortised cost In the event of impairment, the book value of the financial asset is reduced through the allowance for project value to the current value of estimated future cash flows (excluding the future credit losses that have not yet occurred), the amount of write downs shall be recorded in the current profits and losses. The present value of the expected future cash flow is determined in accordance with the original effective interest rate of the financial asset discounting (the actual interest rate determined at the time of the initial confirmation), and the value of the underlying collateral is taken into account. The impaired Interest income uses the discount rate used to discount future cash flows in the light of the determination of impairment losses as the interest rates to calculate and determine. For loans and receivables, if there is no real expectation of future recovery and all collateral has been realized or transferred to the Group, transfer the loans and receivables and have associated impairment provision. If the amount of individual financial assets is significant, individual impairment test is conducted. If there is objective evidence to prove that the impairment has occurred, the impairment loss is calculated in current profit and loss after confirming. The financial assets that are not significant for the individual amount shall include an impairment test or a separate impairment test in a portfolio of financial assets with similar credit risk characteristics. Separate testing of financial assets that have not been impaired (including a single amount of significant and non-significant financial 119 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan assets), shall have an impairment test for a portfolio of financial assets with similar credit risk characteristics. The financial assets that have been recognised for impairment losses are not included in the impairment test of a portfolio of financial assets with similar credit risk characteristics.

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Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan III. Major Accounting Policies and Accounting Estimates (continued) 8. Financial Instruments (continued) Devaluation of Finance Assets (continued) After the Group confirms the impairment losses on financial assets measured at amortised cost, if there is objective evidence that the financial assets value has been restored, and it is objectively related with the events incurred after the confirmation of the loss, the previously recognized impairment loss is reversed into current profit or loss. However, the book value after the reversal does not exceed the amortized cost of the financial asset at the reversal date, assuming that the impairment provision is not included.

Fair value changes of If there is objective evidence that the financial asset impairment has occurred, the cumulative losses originally included in other comprehensive income due to the decline in the fair value, shall be transferred out and included in the current profits and losses. The transferred cumulative loss refers to the initial acquisition cost of the financial assets available for sale deduct the retrieved principal and the amortized amount, the balance between the current fair value and the original value of the impairment loss which has been included in the profits and losses. Objective evidence proving impairment of available-for-sale equity instruments investments includes serious or non-temporary decline in fair value. "Serious" is judged on the basis of the fair value below the cost, and "non-temporary" is judged according to the length of period when the fair value is lower than the cost. If there is any objective evidence of impairment, the roll-out accumulated loss shall be the balance of the acquisition cost after deducting the current fair value and the impairment loss which has been included in the profits or losses. Impairment losses on equity instrument investment available for sale are not reversed through profit or loss, and the increase in fair value after impairment is recognised directly in other comprehensive income. It needs to judge when determining what is "serious" or "non-temporary". The Group judges on the basis of the level or duration of the fair value below cost combined with other factors. For the debt instruments investment available for sale, the impairment is assessed in the same manner as the financial assets measured at amortised cost. However, the roll-out accumulated loss is the balance of the amortized cost after deducting the current fair value and the impairment loss that has been included in the profits or losses. The 121 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan impaired Interest income uses the discount rate used to discount future cash flows in the light of the determination of impairment losses as the interest rates to calculate and determine.

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Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan III. Major Accounting Policies and Accounting Estimates (continued) 8. Financial Instruments (continued) For the debt instruments available for sale that have recognized impairment losses, in the subsequent accounting period, the fair value has risen and objectively related to events that occur after the impairment losses were recognised, the previously recognised impairment losses shall be reversed and included in the current profits and losses.

Financial assets measured at cost If there is objective evidence that shows the impairment of the financial assets, the book value of the financial assets and the balance between the market return rate then in accordance with the similar financial assets and the discounted present value of future cash flows is recognized as impairment loss and shall be included into the profits and losses of the current period. The occurred value decrease loss is not returned in the next period. Transfer of Financial Assets When substantially all the risks and rewards of ownership of the financial assets are transferred to the transferee, the Group derecognizes the financial asset; when such risks and rewards retains, the financial asset is not derecognized. When the Group has neither transferred nor retained substantially all the risks and rewards of ownership of financial assets, they're disposed by the following circumstances: when the control of the financial asset is given up, derecognize the financial assets and recognize assets and liabilities arising; when the control is not given up, recognize the financial assets and liabilities accordingly by the extent of its continuing involvement in the transferred financial assets. By continuing to involve in the manner in which financial security is provided for the transferred financial assets, confirm the assets formed by the continuing involvement in accordance with the lower between the book value of the financial asset and the amount of the financial guarantee. The amount of the financial guarantee refers to the maximum amount to be asked to repaid in the received consideration.

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Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan III. Major Accounting Policies and Accounting Estimates (continued) 9. Accounts Receivable Receivables include accounts receivable, other receivables, prepayments and others. The fair value of the contract or agreement receivable from the buyer or the service receiver shall be regarded as the initial recognition amount. (a) Accounts receivable Big single amount, provided for bad debt separately As of accounts receivable with single big amount, individual test is made on value depreciation. When proof shows the Group is not able to collect the account receivable as prescribed, bad debt provision is made. Standard of single big amount: top 5 of the receivable from third party Method of bad debt provision being made with big single amount: based on the difference of the present value of the expected future cash flow of the account receivable lower than its book value. Reason for individual accrual of bad debt provision: proof shows the Group will not be able to the accounts receivable on the basis of former clauses. Method of accrual of bad debt provision: accrued according to the difference between the present value of its expected future cash flow lower than its book value Bad debt reserve is calculated as per the credit risk combination Accounts receivable not with big single amount, together with accounts receivable whose value is not decreased after being individual test, are classified into groups by credit risk features and bad debt provision is made, on the basis of actual loss rate of prior period accounts receivable of the same or similar kind, with similar credit risk features, combining present situation. Credit risk groups are determined by the following criteria: Group 1 Accounts receivable from related party Group 2 Accounts receivable from third party Method of bad debt provision being made by credit risk groups:

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Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan III. Major Accounting Policies and Accounting Estimates (continued) 9. Accounts Receivable (continued) Group 1 Bad debt provision shall not be made of accounts receivable from related party except proof shows the Group is not able to collect them. Group 2 Debt age analysis method (considering future collection) Accounts receivable (continued) Bad debt reserve is calculated as per the credit risk combination

(continued)

Among the groups, proportion of accrual on aging analysis basis is listed as follows: Debt age

Provision proportion

One to six months

-

Seven to twelve months

1%

One to two years

15%

Two to three years

30%

Three to four years

50%

Four to five years

75%

Above five years

100%

(b) Other receivables Big single amount, provided for bad debt separately As for other receivables of big single amount, individual impairment test is made. When proof exists to show the Group will not be able to collect them according to prescribed clauses, bad debt provision is made. Standard of single big amount: top 5 of the receivable from third party

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Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan III. Major Accounting Policies and Accounting Estimates (continued) 9. Accounts Receivable (continued) Method of bad debt provision being made with big single amount: based on the difference of the present value of the expected future cash flow of the other receivables lower than its book value. (b) Other receivables (continued) Other accounts receivable for insignificant single amount and single Provision for bad debts Reason for individual accrual of bad debt provision: proof shows the Group will not be able to the other receivables on the basis of former clauses. Reason for individual accrual of bad debt provision: proof shows the Group will not be able to the other receivables on the basis of former clauses. Group assessment for provision for bad debts Other accounts receivable not with big single amount, together with accounts receivable whose value is not decreased after being individual test, are classified into groups by credit risk features and bad debt provision is made, on the basis of actual loss rate of prior period accounts receivable of the same or similar kind, with similar credit risk features, combining present situation. Credit risk groups are determined by the following criteria: Group 1

Guarantee deposit (excluding quality guarantee deposit)

Group 2

Employee individual loans and reserve funds

Group 3

Other accounts receivable

Method of bad debt provision being made by credit risk groups: Group 1

Except for that the objective evidence proves that the Group can’t retake the payment according to the original articles of other receivables, the Group shall not make bad debt provision for the cash deposit (excluding quality cash deposit)

Group 2

Bad debt provision shall not be made of accounts receivable from employee’s loan and reserve fund except proof shows the Group is not able to collect 126 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan them. Group 3

Debt age analysis method

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Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan III. Major accounting policies and accounting estimates (continued) 9. Accounts receivable (continued) (b) Other receivables (continued) Group assessment for provision for bad debts (continued) Among the groups, proportion of accrual on aging analysis basis is listed as follows: Debt age

Provision proportion

One to six months

-

Seven to twelve months

1%

One to two years

15%

Two to three years

30%

Three to four years

50%

Four to five years

75%

Above five years

100%

10. Inventories Stock includes raw materials purchased spare parts and semi-products, reported in the lower between cost and cashable net value. Inventories are initially measured at cost. Inventory costs include purchase costs, processing costs and other costs. The actual cost is determined by the weighted average method when sending out the stock. Turn-over materials include perishables and packing materials etc. Perishables are amortized by turns while packing is amortized at one time. The inventory system uses a perpetual inventory system.

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Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan III. Major accounting policies and accounting estimates (continued) 10. Inventories (continued) At the balance sheet date, inventories are measured at the lower of cost and net realizable value, for the cost that is higher than the net realizable value, the provision for depreciation of inventories shall be included in the current profits and losses. If the influence factors of the provision for depreciation of inventories before have disappeared, making the net realizable value of inventories higher than the book value, in the amount of original provision for depreciation of inventories, the previously reduced amount shall be recovered and the reversed amount shall be recorded in the current profits and losses. Net the the for and

realizable value is the amount that the estimated selling price of the stock minus cost that would incur at the time of completion, the estimated cost of sales, and amount of the relevant taxes and fees in the daily activities. For the provision loss on decline in value of inventories, raw materials are classified by category, finished goods are accounted for by a single inventory item.

11. Construction contract For customized large port equipment with fixed price, because the start and the finishing of the project are in different accounting years, the Company uses building-contract method to calculate the revenue and the cost. (a) If the selling result of individual building contract can be reliably estimated, the revenue and expenses can be recognized in proportion of completeness on the day of balance sheet. The result of the construction contract can be estimated reliably, which means that the economic benefit associated with the contract is likely to flow into the group. The actual cost of the contract can be measured clearly and reliably. In the case of a fixed cost contract, the following conditions must be satisfied: the total contract revenue can be measured reliably, and the contract completion progress and the cost to be taken for the completion of the contract can be reliably determined. The amount of the total contract income, including the initial revenue stipulated in the contract and income resulting from contract change, claim, award, etc. The Group determines the progress of the Contract Completion by the following methods: (i) Project progress proportion is made on the report day according to the revenue recognition stage stipulated in the contract. The Company confirmed the following 3 revenue recognition stages: Stage 1: body steel structure completed and erected; 129 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan Stage 2: manufacturing, installation and initial testing completed, product ex-plant qualification certificate issued, shipping documents acquired, product ready to be shipped; Stage 3: product finally delivered after being checked and approved by purchaser, final delivery certificate issued by purchaser acquired.

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Shanghai Zhenhua Heavy Industries Co., Ltd Notes to financial statements (continued) Year 2016 RMB Yuan III. Major accounting policies and accounting estimates (continued) 11. Construction contract (continued) The Group will analyze the building contracts completed in prior year and recognize progress proportion of each revenue recognition stage on the basis of the proportion of the cost of the revenue recognition stage in real total costs and recognize it as the progress proportion at various stages in current period. (ii) For heavy equipment and construction project, progress of completeness is recognized by the proportion of accumulated cost incurred in total expected cost. The accumulated cost does not include that related to contract future activities. (iii) Progress of completeness of steel structures is determined by the proportion of cumulative tons of processing completed in total tons of processing. (b) When individual building contract result is not able to be reliably estimated, the following methods are used: (i) When contract cost can be covered, contract revenue is recognized according to real contract cost that can be covered, contract cost is recognized as expenses in the period when cost incurs. (ii) When contract cost cannot be covered, it can be recognized as expenses immediately when it incurs; no contract revenue is confirmed. (c) When expected total contract cost exceeds total revenue, the expected losses should be immediately recognized as expenses in current period. (d) When contract value is settled in installments, the settled installment is recognized as settled value, which will be transferred and set off with related accumulated costs and confirmed margin on the day of building contract completed. On the balance sheet day, when the addition of accumulated costs and confirmed margin exceeds the accumulated settled value, the difference is listed as completed but not yet settled item in current assets. Otherwise, it will be listed in settled but not completed item in current liabilities.

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Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

III. Major accounting policies and accounting estimates (continued) 12.

Long-term equity investments

Long term equity investment including: Long term equity investment into the Company’s subsidiaries, joint venture and associate. Long term equity investments are initially measured by the initial investment cost on acquisition. Long term equity investments obtained by the merger of the enterprises under the same control take the share of the book value in the consolidated financial statements acquired by the merging party owner on the combination day as the initial investment cost; The difference between the initial investment cost and the book value of the combined consideration is adjusted to the capital reserve.(When capital reserve is not sufficient to compensate, retained interest is thus adjusted); Other comprehensive income of the prior to the date of the merger, when handling the investment, it shall carry out the accounting treatment on the same basis of the relevant assets or liabilities directly disposed of by the invested entity, the investment, it shall carry out the accounting treatment on the same basis of the relevant assets or liabilities directly disposed of by the invested entity, the shareholders’ rights and interests recognized by the other changes in the equity of the invested entity other than net gains/losses, other comprehensive income and profit distribution shall be transferred fully into the current profits and losses when handling the investment; In which, if it is still long term equity investment after the disposal, carry forward in proportion, if it is converted to the financial instruments, then carry forward fully.

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III. Major accounting policies and accounting estimates (continued) 12.

Long-term equity investments (continued)

Long term equity investments obtained by the merger of the enterprises not under the same control take the combined cost as the initial investment cost(the merger of enterprises not under the same control realized by two or more transactions of exchanges take the combination costs of the book value of equity investments held by acquiree prior to purchase date and newly increased investment cost on purchase day as the initial investment cost, the costs of consolidation include the summation of the assets paid by the purchaser, the liabilities incurred or assumed, the fair value of the equity securities issued; other comprehensive income of the prior to the purchasing date recognized by the equity method accounting, when handling the investment, it shall carry out the accounting treatment on the same basis of the relevant assets or liabilities directly disposed of by the invested entity, the shareholders’ rights and interests recognized by the other changes in the equity of the invested entity other than net gains/losses, other comprehensive income and profit distribution shall be transferred fully into the current profits and losses when handling the investment; In which, if it is still long term equity investment after the disposal, carry forward in proportion, and if it is converted to the financial instruments, then carry forward fully; when equity investments held prior to the purchasing date as financial instrument included in the cumulative changes in fair value of other comprehensive income is counted according to the cost method, it shall be transferred fully into the current profit and loss. Long term equity investments acquired other than long term equity investments formed by the business combination, shall determine the initial investment cost according to the following methods: obtained by making payment in cash, it shall take the actual purchase price paid and the directly related costs and taxes with the acquisition of long term equity investment and other necessary expenses as the initial investment cost; obtained by issuing equity securities, it shall take the fair value of the issuance of equity securities as the initial investment cost. The Company can measure the long term equity investments which can be controlled by the investment enterprises with the cost method in the individual financial statements of the Company. Control means having the power to decide on investee, and thus obtaining the variable gains from its operation, with the ability to utilize the power of the investee to influence the gains amount. When the cost method is used, the long-term equity investment is determined by the initial investment cost. The cost of the long-term equity investment shall be adjusted if the investment is added or withdrawn. The cash dividends or profits declared by the invested entity shall be recognized as the current investment income.

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Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

III. Major accounting policies and accounting estimates (continued) 12.

Long-term equity investments (continued)

If the group has a joint control or significant influence on the invested entity, the long-term equity investment shall be accounted by the equity method. Co-control means enjoying control over certain arrangement according to contract. Such arranged activities must be decided upon agreement of the Group and the other participants that share the control rights. Significant effect means that the company possesses the right of decision-making participation in the financial and operating policies of the investee but is not able to control or co-control with other party the making of such policies. When using the equity method, if the initial cost of a long-term equity investment larger than the share of fair value of identifiable net assets of the invested enterprise, it shall be included in the initial investment cost of long-term equity investment; if the initial cost of a long-term equity investment less than the share of fair value of identifiable net assets the invested enterprise, the difference shall be included in the current profits and losses and the cost of the long-term equity investment shall be adjusted. When using the equity method, after obtaining a long-term equity investment, in accordance with the share of other comprehensive income and net income achieved by the invested enterprise which should be enjoyed or shared, respectively confirm the investment profit and loss and other comprehensive income, and adjust the book value of the long-term equity investment. In confirmation of the share of the net profit or loss of the invested entity, based on the fair value of the identifiable assets of the invested entity when obtaining the investment, in accordance with the Group's accounting policies and accounting periods, offset the internal transaction gains and losses between affiliated enterprises and joint ventures and attribute to the investing party in accordance with the enjoyed proportion (but the loss of internal transactions is an impairment loss of assets, which should be fully recognized), confirm the net profit of the invested entity after adjustment, except for the assets that are invested or sold to form a business. In accordance with the portion of the profits or cash dividends declared by the investee entity, the book value of the long-term equity investment shall be reduced accordingly. The Group confirms the net losses of the invested enterprise, the book value of the long-term equity investment and other long-term interests in the net investment of the invested entity is reduced to zero, except for which the Group bears extra liability for loss. For the other changes in the equity of the invested entity other than net gains/losses, other comprehensive income and profit distribution, the book value of the long-term equity investment shall be adjusted and included in the shareholders' equity.

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III. Major accounting policies and accounting estimates (continued) 12.

Long-term equity investments (continued)

For the disposal of long term equity investment, the difference between the book value and the actual purchase price shall be included in the profits and losses of the current period. Long term equity investments accounted for using the equity method, terminating the equity method, other comprehensive income related with the original equity accounting shall carry out the accounting treatment on the same basis of the relevant assets or liabilities directly disposed of by the invested entity, the shareholders’ rights and interests recognized by the other changes in the equity of the invested entity other than net gains/losses, other comprehensive income and profit distribution shall be it shall be transferred fully into the current profits and losses; Still using the equity method, other comprehensive income related with the original equity accounting shall carry out the accounting treatment on the same basis of the relevant assets or liabilities directly disposed of by the invested entity and transfer into the current profits and losses in proportion, the shareholders’ rights and interests recognized by the other changes in the equity of the invested entity other than net gains/losses, other comprehensive income and profit distribution shall be transferred into the current profits and losses in proportion. 13.

Real estate as investment

Investment real estate refers to real estate held for purposes of earning rentals or capital gain, including leased-out land use right and leased-out buildings. Initial measurement is made by cost. Subsequent expenditure relating to investment real estate, when economic benefits related to such assets are likely to flow into the Group and its cost can be measured reliably, is accounted into the cost of investment real estate. Otherwise, it is included in the current profits and losses statements at the time of incurrence. Cost models for all investment property are adopted by the Group to undertake follow-up measures. Depreciation or amortization is made for buildings and land use rights according to their estimated useful life and residual value rate. Investment real estate rate and years of estimated useful life and residual value depreciation (amortization) rates are listed below: Estimated useful life Estimated residual value rate Annual depreciation (amortization) rate

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III. Major accounting policies and accounting estimates (continued) 13.

Real estate as investment (continued)

Building Land use rights

30 years

0%

3.3%

Land use years

0%

Decided by estimated net residual value and land use years

The anticipated service life of investment real estate, estimated net residual values and depreciation (amortization) method is reviewed and made appropriate adjustments at least at each year end. When purpose of investment property changes to self-use, from the date of change, convert the investment properties to fixed assets or intangible assets. When self-use property changes to the purpose of earning rentals or for capital appreciation from the date of change, convert the fixed assets or intangible assets to investment properties. Upon conversion, book value before the conversion is the recorded as the converted value. 14.

Fixed assets

Fixed assets are confirmed when financial benefits related will probably flow into the Group and their costs can be reliably valued. Subsequent expenditure relating to fixed assets, when passing validation, is accounted into the cost of fixed assets, and related book value for the replaced part ceases confirmation. Otherwise, subsequent expenses are booked into current income statement at the time of incurrence.

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III. Major accounting policies and accounting estimates (continued) 14.

Fixed assets (continued)

In addition to the formation of the extracted safety production cost, the depreciation of fixed assets is calculated and withdrawn by the average method of years, and the service life, expected net residual value rate and annual depreciation rate of the fixed assets are as follows: Useful life

Estimated residual value rate

Annual depreciation rate

20-40 years

0%

2.5%-5%

3-20 years

0%/Based on the price of wasted vessel steel

Calculated in estimated net residual value and estimated service life

Office equipment and electrical equipment

3-5 years

0%

20%-33.3%

Transportation means (other than vessels)

5 years

0%

20%

10-25 years

5%/10%

3.6%-9.5%

House and building Manufacturing equipment

Vessels

Depreciation for fixed assets under financing lease is calculated in accordance with policy for fixed assets. If the acquisition of ownership of the leased asset at the expiration of the lease period can be confirmed rationally, depreciation shall be accrued within the service life of the leased asset. If not, depreciation shall be accrued within lease term or the service life of the leased asset, whichever is shorter. Double check is made by the group to the estimated life of use, estimated net residual value and method of depreciation at least at the end of each report year and necessary adjustment is made. 15.

Construction in progress

Construction in progress is booked as project costs in real expenditure, which includes necessary project expenditure occurred in construction period, capitalized loan expenses which make the construction in progress reach expected status of use and other relevant expenses.

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III. Major accounting policies and accounting estimates (continued) 15.

Construction in progress (continued)

When the project under construction reaches the expected condition for use, it is transferred into fixed assets items. 16.

Loan expenses

Loan expenses refers to the interest and other relevant costs arising from the loan of Group, including the loan interest, the amortization of the discount or premium, auxiliary expenses and the exchange difference arising from the foreign currency loan. Loan expenses borrowed to purchase, construct or manufacture assets applicable to be capitalized shall be capitalized. Other loan expenses shall be taken into current profit/loss statement. Assets applicable to be capitalized refers to assets such as fixed assets and investment real estates which take rather long period of time to purchase, construct or manufacture in order to reach their expected state of use or sale. Loan expense can be capitalized when it meets the following conditions: (1) Asset expenditures have incurred; (2) Loan expenses have incurred; (3) Purchasing, building or manufacturing activities start as a necessity to make that asset reach expected usable or salable condition. When the purchased, built or manufactured fixed asset reached expected usable or salable condition, stop capitalization. Loan expenses that follow are taken into current profit/loss statement. The amount of interest capitalization in each accounting period during the capitalization period is determined by the following method: (1) Amount of expenses of special loans is determined by the interest expense actually incurred in the current period to less the temporary deposit interest income or the investment income.

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III. Major accounting policies and accounting estimates (continued) 16.

Loan expenses (continued)

(2) Amount of expenses of general loans is determined by the weighted average amount of expenses of accumulated asset expenses exceeding that of special loans to multiply the weighted average actual interest rate of the general expenses. In case purchasing, building or manufacturing activities of assets ceases accidentally for reasons other than reaching expected usable or salable status and term of cease exceeds 3 months on end, capitalization of loan expenses shall be stopped. Loan expenses occurring during the term of cease shall be confirmed and taken into profit/loss statement until purchasing, building or manufacturing activities resume. 17.

Intangible assets

Intangible assets are confirmed when financial benefits related will probably flow into the Group and their costs can be reliably valued, and initial measure is taken by cost. However, intangible assets acquired in merger under the same control can be measured reliably, that is, intangible assets are recognized as intangible assets and measured at fair value. The evaluation value confirmed by the state-owned administration department acts as the book value for the intangible assets invested by the state-owned shareholders at the re-structuring of the Company. Service life of intangible assets shall be confirmed as the term in which they can bring benefits to the company. If the term in which intangible assets bring benefits to the company can be expected, such assets shall be confirmed as intangible assets with uncertain service life. Service life of intangible assets are as follows: Expected years for use Rights of land use

Years of land use

Software use cost

5 years

Patented technologies

10 years

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Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

III. Major accounting policies and accounting estimates (continued) 17.

Intangible assets (continued)

Land use right obtained by the Group is usually accounted for as intangible assets. For self-developed and self-constructed buildings, relevant land use right and the buildings shall be regarded as intangible assets and fixed assets respectively. If the price paid for outsourced land and building is difficult to distribute in a reasonable way between the land use rights and the building, they are all regarded as fixed assets. Intangible assets with limited service life are amortized in straight line method in the expected years for use. Double check is made by the group at least at the end of each year to expected life in use and amortization method of intangible assets with limited use of life and adjustment is thus made. The Group classifies the expenses of the internal R & D project into expenses in research phase and expenses in development phase. Expenditure in research phase shall be included in the current profits and losses statements at the time of incurrence. Expenses in development stage are capitalized when simultaneously satisfying the following conditions: It is technically feasible to complete the intangible assets to make them usable and marketable; the management has the intention to complete the intangible assets and to use them or to sell them; the ways intangible assets yield financial benefits. It’s able to prove the products manufacturing by intangible assets exist in the market, or intangible assets are in the market, or intangible intended to be used for interior; Enough technology and financial resources and other resources support and will enable the completion of the development of the intangible assets and make them to be used to sell; Expenses belonging to the intangible assets can be reliably measured. Expenses of development stage not satisfying the conditions are put into current P&L. 18.

Assets impairment

The impairment of assets except inventories, deferred income tax and financial assets is determined as follows: The Group will determine whether there is sign of impairment for assets on the balance sheet date. If there is sign of impairment, the Group will estimate recoverable amount and conduct impairment test. Impairment test is made at least once at the end of each year for goodwill formed because of enterprise merger no matter whether there is sign of impairment. Impairment test is made at least once each year for the intangible assets not reaching the usable state.

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III. Major accounting policies and accounting estimates (continued) 18.

Assets impairment provision (continued)

The collectible amount is the higher between net amount of asset’s fair value deducting disposal expenses and the present value of expected future cash flow. Collectible amount is estimated by individual piece of asset. In case collectible amount of individual asset is difficult to value, collectible amount of asset group to which they said individual asset belongs is confirmed. An asset group can be confirmed on the basis that its main cash in-flow is generated independently of other assets or asset groups. When the collectible amount of the asset or asset group is lower than its carrying value, the Group reduces its carrying value to the recoverable amount, the amount written down is included in the current profits and losses, and the corresponding asset impairment provision is withdrawn. In terms of goodwill impairment test, the carrying value of goodwill formed by the merger of the enterprise shall be amortized to the relevant asset group by reasonable means from the date of purchase; it shall be amortized to relevant combination of asset groups when it is difficult to amortize the relevant asset group to the relevant asset group. The relevant asset group or combination of asset groups is an asset group or combination of asset groups that can benefit from the synergy effect of the enterprise merger, and is not larger than the reporting subsection determined by the group. For impairment test of relevant asset groups or combination of asset groups that contain goodwill, if there is a sign of impairment, the impairment test on the asset group or the asset group that does not include goodwill is performed first. Then calculate the recoverable amount and confirm corresponding impairment loss. Next, impairment test is made to relevant asset groups or combination of asset groups that contain goodwill. If the collectible amount is lower than carrying value of the asset. The impairment loss is firstly to compensate the book value of the goodwill amortized in the asset group or portfolio, and then to compensate the book value of other assets in the proportion of the book value of other assets except for the goodwill in the asset group or portfolio. Once asset impairment provision is made, it shall not be transferred back in the following accounting period.

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III. Major accounting policies and accounting estimates (continued) 19.

Long-term unamortized expenses

The long-term unamortized expenses shall be amortized by straight-line method, and the amortization period is as follows: Amortization period Improve operation of leased fixed asset 20.

Employee remuneration

The employee compensation means all forms of remuneration or compensation that the Group pays for obtaining the service to be provided by the employees or severing labor relation, mainly including short-term compensation, post-employment benefit, dismission welfare and other long-term employee benefits. The benefits provided by the Group to the employee’s spouse, children, dependent, survivor of the deceased employee is also contained in the employee compensation. Short-term pay The Group takes the actual short-term remuneration as debt during the accounting period when the employees provide service. It will be booked in the current profit and loss or related assets cost, in which the non-currency benefit is accounted according to the fair value. Welfare after resignation - defined drawing plan The Group shall buy endowment insurance and unemployment insurance managed by the local government and open annuity for employees. The corresponding expenditure is included in the current profits and losses statements at the time of incurrence. 21.

Estimated liabilities

In addition to contingent consideration or contingent liability of an enterprise merger under non-unitary control, when a contingency related liability meets the following conditions, the Group recognizes it as an estimated liability: (1) This liability is the current liability of the Group; (2) The fulfillment of the liability may cause outflow of financial Interest; 21.

Estimated liabilities (continued)

(3) The amount of the liability can be measured reliably. Expected liabilities are initially valued by the best estimates to be spent on fulfillment of related present obligation, combining risks and uncertainty with probabilities and time value of currency. The book value of expected liabilities is double-checked and thus adjusted on B/S day to reflect present best estimates. Where there is conclusive evidence that the carrying value does not reflect the current best estimate, the book value is adjusted in accordance with the current best estimate. 22.

Revenue

Revenue is confirmed when related benefits may flow into the Group, sales can be reliably calculated, and the following conditions are met. 142 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

III. Major accounting policies and accounting estimates (continued) (a) Revenue from sales of large port equipment, ocean heavy equipment, product of steel structure and construction project is recognized by the proportion of completeness. (b) Income from ship transportation is recognized at the completion of the voyage. (c) Income is recognized at the time of delivery for the sale of spare goods or parts. (d) Interest income is recognized by deposit term and real interest rate. (e) Operating leasing income is recognized in leasing period by straight line method. (f) Activities under the construction and transfer of contracts usually include construction and transfer. As for constructing item the Group responsible for, in the construction phase, in accordance with the construction contract standards, when the results can be estimated reliably, the construction contract revenue should be valued by the fair value of consideration chargeable, at the same time to confirm the "Long term receivables", to be written off when payment received from the owners.

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III. Major accounting policies and accounting estimates (continued) 23.

Government subsidy

Government subsidies are recognized when they are able to meet the conditions attached and can be received. Where government subsidies are monetary assets, they are measured in amounts received or receivable. Where the government subsidies are non-monetary assets, they shall be measured at fair value; if the fair value cannot be reliably obtained, it shall be measured in nominal amount. According to government documents, for long-term assets for the purposes of purchasing and constructing or formed in other ways, relevant subsidy shall be recognized as government subsidy related to assets; if it is not clear in the government documents, judgment shall be based on the basic conditions necessary to obtain the subsidy. If the basic condition is that long-term assets are for the purposes of purchasing and constructing or formed in other ways, the subsidy is recognized as government subsidy related to assets. Otherwise, it shall be recognized as government subsidy related to income. Government subsidy related to the income when used to compensate related expenses or losses in future periods is recognized as deferred income and is booked into current P&L in the period when related expenses are recognized. That used to compensate paid expenses or losses is booked directly into current P&L. If the government subsidy related to the assets is recognized as deferred income and distributed within the life time of the assets, it is booked into current P&L. If the government subsidy is accounted in namely amount, it is booked directly into current P&L 24.

Income tax expense

Income tax includes current income tax and deferred income tax. In addition to the goodwill adjustment arising from the merger of the enterprise, or transactions or relevant matters directly included in the shareholder's equity, the income tax expenses or income shall be included in the current profits and losses. The Group’s income tax liabilities or assets formed during the current period and previous period shall be measured by the amount of income tax payable or returned in accordance with the provisions of the Tax Law.

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III. Major accounting policies and accounting estimates (continued) 24.

Income tax expense (continued)

For the margin between the book value and tax base of some asset, liability items and the temporary differences generated from the difference between the book value and tax base of the item that is not recognized as the asset and liability but which tax base can be determined according to tax law, the deferred income tax asset and deferred income tax liabilities are recognized by using the balance sheet liability method. The deferred income tax liabilities are recognized on the basis of various taxable temporary differences unless:

(1) Taxable temporary differences arise from the following transaction: The initial recognition of goodwill, or the initial recognition of assets or liabilities arising from transactions with the following characteristics: the transaction is not an enterprise merger, and the accounting profits, taxable income and deductible loss are not affected when the transaction occurs. (2) For investment-related taxable temporary differences of subsidiaries, associates and joint ventures, the time of the temporary difference reversal can be controlled and the temporary difference will not likely be transferred back in the foreseeable future. For deductible temporary differences, deductible losses and tax credits can be carried over to future years, and the Group will confirm the deferred income tax assets arising therefrom to the extent that it is likely to obtain the amount of future taxable income that is used to offset temporary differences, deductible losses and tax credits, unless:

(1) Deductable temporary differences arise from the following transaction: the transaction is not an enterprise merger, and the accounting profits, taxable income and deductible loss are not affected when the transaction occurs. (2) Deferred income tax assets generated from investment-related provisional difference of subsidiaries, associates and joint ventures are confirmed as deferred income tax assets, when the temporary difference is able to be transferred back in the foreseeable future and when possible taxable income which is used to compensate the provisional difference can be possibly obtained in future.

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III. Major accounting policies and accounting estimates (continued) 24.

Income tax expense (continued)

On B/S day, deferred income tax assets and deferred income tax liabilities are calculated by tax rate applicable to the period of term the assets or liabilities are expected to be collected back in accordance with regulations of tax law, and reflect income tax effect from the way that assets or liabilities are expected to be collected back. On B/S day, the Group reviews the carrying value of the deferred income tax assets, and if it is likely that taxable income obtained in future periods is not enough to deduct the benefits from carrying value of the deferred income tax assets, the carry value of deferred income tax assets shall be written down. On the balance sheet date, the Group reevaluates unrecognized deferred income tax assets and recognizes the deferred income tax assets to the extent that sufficient taxable income is likely to be transferred back to all or part of the deferred income tax assets. If there is a legal right to netting the current income tax assets and current income tax liabilities and the deferred income tax is relevant to the same subject of tax and the same tax administration department, then the deferred income tax assets and deferred income tax liabilities shall be presented in net amount after offset. 25.

Leases

The finance lease criteria: transfers substantially all the risks and rewards of ownership of an asset leased. Act as a tenant of operating lease The rental expenses of operating leases are included in the asset cost or the current P&L according to straight-line method in the lease period. Act as a leaser of operating lease The rental income of the operating lease is included in the asset cost or the current P&L according to straight-line method in the lease period. Act as a tenant of financing lease

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III. Major accounting policies and accounting estimates (continued) 25.

Leases (continued)

The lower one of the fair value of the leased asset and the minimum rental payment the present value is accounted in the book as the leased assets. The minimum lease payment is the carrying value of long term payable. The difference between the booking value of leased assets and the minimum lease payment is not confirmed as the financing charges. It is amortized within the leasing period according to the actual interest method. Contingent rental is included in the current profits and losses statements at the time of incurrence. Leaseback Leaseback for financing purposes will be treated as a whole, which is accounted by mortgage loan, on the condition that asset sale is related to lease transaction and can be repurchased when the lease term expires. 26.

Profit distribution

Cash dividends of the Company are recognized as liabilities after approval by the general meeting of shareholders. 27.

Safety production costs

The safety production expense extracted in accordance with the regulations shall be included into the cost of relevant products or current profit or loss, and shall also be included into the special reserve; if safety production expense is disbursement cost, it shall deduct the special reserve directly; if safety production expenses are forms into fixed assets, the fixed assets shall be confirmed when reaching expected usable status, deducting equivalent special reserve and the accumulated depreciation shall be confirmed.

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III. Major accounting policies and accounting estimates (continued) 28.

Fair Value Measurement

The Group measures derivative financial instruments and listed equity instruments investments at fair value on B/S day. Fair value refers to the price that a market participant gains or pay for sale of an asset or transfer of a liability in an orderly transaction occurring on the measurement date. For relevant assets or liabilities measured by fair value, the orderly transaction for sale of an asset or transfer of a liability is assumed to be conducted in the main market. If it relevant assets or liability measured by fair value do not exist in the market, the transaction is assumed to be conducted in the most advantageous market for relevant assets or liabilities. The main market (or the most advantageous market) is the trading market in which the Group is able to enter on the measurement date. The Group assumes that market participants intend to realize their maximize economic benefits when pricing the assets or liabilities. For non-financial assets measured by fair value, the ability of market participants to put the assets in best use for economic benefits, or to sell the assets to other market participants that can put the assets in best use for economic benefits. Estimation technique that is applicable and supported by sufficient available data and other information is adopted. Priority is given to the observed input value, and the unobservable input value is used only if the observable input value cannot be obtained or is not practicable. For assets and liabilities measured or disclosed at fair value in the financial statements, fair value level shall be determined by the input value of lowest level, which is important for the fair value measurement as a whole: the input value of the first level is the unadjusted quotation on the active market of the same assets or liabilities that can be obtained on the measurement date; the input value of the second level is the input value that may be observed directly or indirectly by the relevant assets or liabilities except the first level input value; the input value of the third level is the unobservable input value of the relevant assets or liabilities. On B/S day, the Group reevaluates the assets and liabilities that continue to be measured at fair value as recognized in the financial statements to determine whether a conversion has occurred at the fair value level.

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Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

III. Major accounting policies and accounting estimates (continued) 29.

Major accounting judgments and estimates

For the preparation of financial statements, the management is required to make judgments, estimates and assumptions that will affect the presentation amount of income, costs, assets and liabilities and disclosure thereof, as well as disclosure of contingent liabilities on B/S day. However, the results of these assumptions and uncertainties may result in significant adjustments to the carrying amount of future affected assets or liabilities. Uncertainty of estimates The following key assumptions about the future on the balance sheet date and other key sources of estimate uncertainty may lead to significant adjustments in the carrying amount of assets and liabilities during future accounting periods. Construction contract Construction contract is adopted to calculate its revenue and cost for large port equipment and construction projects. During the course of the project, the group shall continuously review and revise the expected total cost of the construction contract based on the situation of actual cost of the construction contract and the actual cost of the similar products in the reference, so that the expected total cost of the contract is approximate to its final actual cost. If there is a discrepancy between the expected total cost and the actual total cost of contracts in the future, the discrepancy will affect the cost confirmed by the Group this year. At the same time, the Group management regularly performs impairment testing on construction contracts. If the expected total cost of the construction contract exceeds the total contract income, the contract expected loss shall be calculated and withdrawn. Changes of the expected total cost due to continuous review and revision may affect the carrying value of the construction completed amount not closed/construction uncompleted amount closed and impairment losses during the estimated changes.

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Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

III. Major accounting policies and accounting estimates (continued) 29.

Major accounting judgments and estimates (continued)

Uncertainty of estimates (continued) Impairment of receivables The management of the Group continues to pay attention to the recoverable extent of the receivables, and estimates the bad debt reserves of the accounts receivable based on the analysis of the actual conditions (including but not limited to the repayment capacity of the debtor, the age of the accounts receivable, the collection after the period),In case of any event or change, if the estimate adopted is changed, the estimate shall be adjusted accordingly, and the appropriate bad debt reserve for receivables shall be accrued. If the expected amount is different from the original estimate, the difference will affect the carrying value of the receivable and the impairment loss during the estimated change. Inventory impairments The management shall estimate the net realizable value of inventories in time so as to estimate inventory falling price reserves. If any event or circumstance changes, it is necessary to use the estimate to prepare the inventory falling price if the inventory is not likely to realize the relevant value. If the expected amount is different from the original estimate, the difference will affect the carrying value of the inventories and the impairment loss during the estimated change. Service life and the net residual value of fixed assets Expected service life and the net residual value of fixed assets are estimated by the Group. These estimates are based on the actual service life and net residual value of fixed assets similar in nature and function. Technological innovation and the actions taken by competitors due to severe industry cycles may cause major changes to such estimates; changes in the economic environment, technical environment and other environmental changes in service life of fixed assets may also lead to significant changes in the expected implementation of the economic benefits associated with fixed assets.

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Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

III. Major accounting policies and accounting estimates (continued) 29.

Major accounting judgments and estimates (continued)

Uncertainty of estimates (continued) Impairment of non-current assets except financial assets (except goodwill) The Group determines whether there is any indication of possible impairment of non-current assets other than financial assets on the B/S day. For non-current assets except financial assets, when there are indications that its carrying amount is not recoverable, an impairment test is conducted. Impairment is indicated when the carrying value of the asset or asset group is higher than the recoverable amount, that is, the higher one between the net amount of the fair value lessing the disposal expenses and the present value of the expected future cash flows.Net amount gained by fair value lessing disposal expenses shall be determined by the price in sale agreement of similar assets in fair transaction or market price observed lessing the incremental cost attributable to the assets. The management must estimate the expected future cash flow of the asset or asset group and select the appropriate discount rate to determine the present value of the future cash flow when estimating current value of future cash flow. Goodwill impairments Impairment test for goodwill shall be conducted at least annually. This requires estimate of the present value of the future cash flows of the asset group or the asset group to which goodwill is distributed. The Group shall estimate the expected future cash flow of asset or asset group and select the appropriate discount rate to determine the present value of the future cash flow when estimating current value of future cash flow. Income tax and deferred income tax The Company was recognized as a high-tech enterprise in 2014. The company calculated and paid the enterprise income tax at the rate of 15% according to the relevant income tax laws. According to the relevant regulations, one condition for the qualification of high-tech enterprises is that the proportion of R & D expenditure in sales income must not be lower than the specified proportion, in which the proportion is 3% for enterprise with annual sales income more than 200 million Yuan. If the final determination result given by tax authority in charge is different from that of the company, the difference will affect the income tax expenses of the year.

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Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

III. Major accounting policies and accounting estimates (continued) 29.

Major accounting judgments and estimates (continued)

Uncertainty of estimates (continued) Income tax and deferred income tax (continued) In addition, the Group calculates enterprise income tax and deferred income tax in accordance with current tax laws and takes into consideration applicable income tax provisions and tax preferences. There is uncertainty in the final tax treatment for some of the transactions and events involved in normal operations. The Group needs to make significant judgments when the income tax is calculated and withdrawn. The Group shall estimate whether additional taxes need to be paid in respect of future tax adjustments for tax purposes so as to confirm corresponding income tax liabilities. If the final determination result of these tax matters is different from the originally entered amount, the difference will affect the amount of income tax and deferred income tax for the period of final determination. When evaluating temporary differences, the Group also considers the possibility that deferred income tax assets can be recovered. The temporary differences mainly include the effects of deductible losses, asset impairment provision, unrealized profits of internal transactions, expected liabilities that have not been approved before tax, interest not yet paid, wages and salaries, financial assets whose changes are measured at fair value and included in current profits and losses, and changes in the fair value of liabilities. The confirmation of the deferred income tax assets is based on the estimation of the Group and assumes that the deferred income tax assets are reversed through the Group’s continuous operation in the foreseeable future. At the same time, the Group also takes into account the deferred tax assets and the tax rate at which the deferred income tax liabilities are reversed. Based on the experience gained by the Company for many years, as well as the continuous input into the research and development projects, the Company is expected to obtain the qualification of high-tech enterprises the year and beyond, and hereby calculate and confirm the deferred income tax assets and deferred income tax liabilities at the preferential tax rate. The Group has calculated and withdrawn income tax liabilities and deferred income tax items of this year based on current tax laws and current best estimates and assumptions. In the future, tax liabilities and deferred income tax items may need to be adjusted due to changes of tax laws or related circumstances.

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Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

III. Major accounting policies and accounting estimates (continued) 30.

Change to accounting policies and accounting estimates

Change to accounting policies Change to tax presentation In 2016, the Group will adjust the “Business tax and additional” items in the income statement to “tax and add - on” items in accordance with the requirements of “VAT Accounting Disposal Regulations” (Financial Accounting[2016] No.22); the taxes on house property, land use tax, vehicle and vessel use tax, stamp duty, etc. arising from the operation activities of the enterprise shall be listed in the “tax and add - on” project as of May 1, 2016, and shall not be listed in the “administrative expenses” project; (except that it was originally included in “Business Tax” and “Additional”) The real estate tax and land use tax related to investment real estate of the project are still listed in the project of “administrative expenses”. The credit balance of the detailed accounting items (“tax for goods to be transferred” etc.) in the accounting item of “tax payable” shall be classified by “tax payable” to “other non - current liabilities” in the balance sheet by the end of 2016; the credit balance of the above detailed items at the end of 2015 shall be presented in the original presentation. As a result of the above requirements, the contents of the “tax and plus” and “overhead” items in 2016 and 2015, the “overhead”, the “tax payable” at the end of 2016 and at the end of 2015 and “other non - current liabilities” are presented differently, but there is no impact on the merger of 2016 and 2015 and the net profit and consolidation of the company and the Company’s Membership Interests.

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Shanghai Zhenhua Heavy Industries Co.,Ltd Notes to financial statements Year 2016 RMB Yuan IV. Taxes 1.

Main tax types and the ratio

VAT



The Group’s product sales business is applicable to VAT. Among which, the domestic product sales output tax ratio is 17%, export sales output tax ratio is subject to “exemption, counteraction, refund”, the applicable refunding ratio is 17%, 15% and 13%.The Group’s vessel transport business revenue is applicable to VAT with the tax ratio of 11%; the equipment rental is applicable to VAT with tax ratio of 17%; the equipment rental is applicable to the VAT’s simple collection method, and the tax ratio halved is 2%; the Group’s rental housing is applicable to the VAT’s simple collection method since May 1, 2016, the ratio is 5%; the “Construction-Transfer” project is applicable to VAT, the ratio is 11%. The above output tax shall calculate and pay VAT after deducting the amount of input tax deductible, except for the applicable VAT’s simple collection method.

Business tax



Business tax applied to revenues of the Group from rental housing with rate of 5%. Business tax is applicable to the revenues of “Construction-Transfer” projects with rate of 3%. Business tax shall be replaced by VAT since May 1, 2016.

Urban maintenance – and construction tax and educational surtax

The Group calculates and pays by 7% and 3% of the actual payment of turnover tax.

income –

Corporate income tax is calculated and paid in accordance with P.R. China Corporate Income Tax Law (“Income Tax Law”).According to the High-tech Enterprise Recognition Management Approaches (Guo Ke Fa Huo [2016] 32,) and the High-tech Enterprise Recognition Management Work Guidelines (Guo Ke Fa Huo [2016] 195) and the Notification on Announcing List of Second Batch of Shanghai Municipality 2014 High-tech Enterprises Recognition, the Company was recognized as a high-tech enterprise in the year2014, and was awarded the High-tech Enterprise Certificate (certificate number: GR201431001646). The certificate is valid for 3 years. According to Article 28 of the Income Tax Law, the Company actually applied a 15% corporate income tax rate this year (2015: 15%).

Corporate tax

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Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

IV. Taxes (continued) 1.

Main tax types and the ratio (continued)

The applicable income tax rates of the Company and the controlling subsidiaries are as follows: Registration place

2016

2015

Applicable tax rate

Applicable tax rate

Pudong New District

15%

15%

Chongming

25%

25%

Hongkong

16.5%

16.5%

Pudong New District

25%

25%

Nantong Zhenhua Heavy Industry Equipment Manufacturing Co., Ltd.

Nantong, Jiangsu

25%

25%

Shanghai Zhenhua Group

Nantong, Jiangsu

15%

15%

Industries

Pudong New District

25%

25%

Nantong Zhenhua Heavy Industry Steel Structure Processing Co., Ltd.

Nantong, Jiangsu

25%

25%

Jiangyin Zhenhua Port Machinery Steel Structure Manufacturing Co., Ltd.

Jiangyin, Jiangsu

25%

25%

Shanghai Zhenhua Heavy Industries Steel Structure Co., Ltd.

Pudong New District

25%

25%

The Company Shanghai Zhenhua Port Machinery Heavy Industry Co., Ltd. Shanghai Zhenhua Port Machinery (Hong Kong) Co., Ltd. (Note 1) Shanghai Zhenhua Shipping Co. Ltd.

Heavy

(Nantong) Transmission Co.,Ltd.(Note 2) Shanghai Zhenhua Electric Co.,Ltd.

Heavy

Industries

Machinery

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Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

IV. Taxes (continued) 1.

Main tax types and the ratio (continued)

Shanghai Zhenhua Heavy Industries Vessel Transport Co., Ltd

Yangshan, Shanghai

25%

25%

25%

25%

Pudong New District

25%

25%

Heavy

Pudong New District

25%

25%

Industry

Jingang, Jiangsu

25%

25%

Nantong, Jiangsu

15%

15%

Nantong, Jiangsu

25%

25%

Jiahua Shipment Co., Ltd (Note 1)

Hongkong

16.5%

16.5%

Zhenhua Pufeng Wind Power (Hong Kong) Co.,Ltd (Note 1)

Hongkong

16.5%

16.5%

Zhenhua Shende Offshore

Hongkong

16.5%

16.5%

Changshu, Jiangsu

15%

25%

Bonded Port Shanghai Zhenhua Testing Technology Consulting Co., Ltd.Pudong New District Shanghai Zhenhua Port Machinery General Equipment Co., Ltd Shanghai Port Machinery Industries Co., Ltd. Shanghai Zhenhua (Group)

Heavy

Zhangjiagang Port Machinery Co., Ltd. Shanghai Zhenhua Heavy Industries Qidong Ocean Engineering Co., Ltd. (Note 2) Jiangsu Daoda Marine Engineering Co., Ltd.

Installation Co.,Ltd (Note 1) CCCC Tianhe

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Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

IV. Taxes (continued) 1.

Main tax types and the ratio (continued) Registration place

2016

2015

Applicable tax rate

Applicable tax rate

CCCC Investment Development Qidong Co., Ltd

Nantong, Jiangsu

25%

25%

CCCC Liyang City Construction Co., Ltd

Investment

Liyang, Jiangsu

25%

25%

CCCC (Huaian) Development Co., Ltd.

Construction

Huaian, Jiangsu

25%

N.A.

CCCC Zhenjiang Construction Development Co., Ltd

Investment Management

Zhenjiang, Jiangsu

25%

N.A.

ZPMC Netherlands B.V. (Note 3)

Rotterdam, Netherlands

the

20%

20%

Hotel de Herberg B.V. (Note 3)

Rotterdam, Netherlands

the

20%

20%

ZPMC Espana S.L.(Note 4)

Spain

28%

28%

Los Barrios ZPMC GmbH Hamburg(Note 5)

Hamburg Germany

32.28%

32.28%

ZPMC Lanka Company

Colombo, Sri Lanka

17.5%

17.5%

15%

15%

(Private) Limited(Note 6) ZPMC North Amercia Inc.(Note 7)

Delaware, USA

Co., Ltd. (Note 2)

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Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

IV. Taxes (continued) 1.

Main tax types and the ratio (continued)

Fujian CCCC Qianda Heavy Industry Co., Ltd.

Minhou, Fujian

25%

25%

Nanjing Ninggao New Construction Co., Ltd.

Nanjing, Jiangsu

25%

25%

ZPMC Korea Co., Ltd.(Note 8)

Pusan, Korea

10%

10%

ZPMC Engineering Africa

The Republic of South Africa

28%

28%

(Pty) Ltd.(Note 9)

KwaZulu - Natal

ZPMC Engineering

Mahala, India

30%

30%

(India) Private Limited(Note 10)

Strabang

ZPMC Southeast

Singapore

17%

17%

Singapore

17%

17%

Malaysia

20%

20%

ZPMC Australia Company

Australia

30%

30%

(Pty) Ltd.(Note 13)

New South Wales

ZPMC Brazil Holdings Ltda.(Note 14)

Rio de Janeiro, Brazil

25%

13%

ZPMC Limited Liability

Moscow, Russia

20%

20%

Channel

The applicable income tax rates of the Company and the controlling subsidiaries are as follows (continued):

Asia Holding Pte. Ltd.(Note 11) ZPMC Southeast Asia Pte. Ltd.(Note 11) ZPMC Engineering (Malaysia) Sdn. Bhd.(Note 12)

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Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

IV. Taxes (continued) 1.

Main tax types and the ratio (continued)

Company(Note 15) ZPMC NA East Coast Inc.(Note 7)

Delaware, USA

15%

15%

ZPMC NA Huston Inc.(Note 7)

Delaware, USA

15%

15%

ZPMC Middle East FZE(Note 16)

Dubai, UAE

0%

N.A.

The applicable income tax rates of the Company and the controlling subsidiaries are as follows (continued): Registration place

2016

2015

Applicable tax rate

Applicable tax rate

ZPMC UK LTD(Note 17)

Cardiff, UK

20%

N.A.

ZPMC Brazil Service

Brazilian Santos

25%

N.A.

Portuarios LTDA (Note 18)

Note 1: Shanghai Zhenhua Port Machinery (Hong Kong) Co., Ltd., Jiahua Shipping Co., Ltd, Zhenhua Pufeng Wind Power(Hong Kong) Co., Ltd and Zhenhua Shende Offshore Engineering Installation Co., Ltd. are legal entities registered in Hong Kong, China. Based on Hong Kong’s taxation regulations, the Shanghai Zhenhua Port Machinery (Hong Kong) Co., Ltdactually fits in a profit tax rate of 16.5% (2015:16.5%). Note 2: Shanghai Zhenhua Heavy Industry Group (Nantong) Drive Machinery is recognized as hitech enterprise in August, 2013 and won Hi-tech Enterprise Certificate (No. GR201632001352) in 2016 with the valid terms of 3 years. Shanghai Zhenhua Heavy Industries Qidong Ocean Engineering Company is recognized as hi-tech enterprise in November, 2015 and won Hi-tech Enterprise Certificate (No.GF201532000832) with the valid terms of 3 years. CCCC Tianhe Company is recognized as hitech enterprise in August, 2015 and won Hi-tech Enterprise Certificate (No. GF201532000389) with the valid terms of 3 years. According to Article 28 of the Income Tax Law, the Company actually applied a 15% corporate income tax rate this year (2015: Shanghai Zhenhua Heavy Industries Group(Nantong) Transmission Machinery Co., Ltd. and Shanghai Zhenhua Heavy Industries Qidong Ocean Engineering Co., Ltd. is 15%, and CCCC Tianhe Company is 25%).

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Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

IV. Taxes (continued) 1.

Main tax types and the ratio (continued)

Note 3:

ZPMC Netherlands B.V, Hotel de Herberg B.V. and Daoda (Holland) Marine Technology Co., Ltd are private limited liability companies registered in Holland. According to related provisions of the income tax in Holland, the enterprise revenue tax is collected with the progressive tax rate in excess of specific amount for the profit of the Company. The tax rate is 20% for the profit less than 200000 Euro, and 25% for the profit over 200000 Euro. The actual income tax rate is 20% this year (2015: 20%).

Note 4:

ZPMC España S.L. is the limited liability company registered in Spain. According to related provisions of the income tax in Spain, the enterprise revenue tax is collected with the progressive tax rate in excess of specific amount for the profit of the Company. The tax rate is 25% for the consolidated profits of the Company less than 300000 Euro, and 28% for the profit over 300000 Euro. The actual income tax rate is 28% this year. (2015: The tax rate is 25% for the consolidated profits of the Company less than 300000 Euro, and 30% for the profit over 300000 Euro. The actual income tax rate is 28% in 2015).

Note 5:

ZPMC GmbH Hamburg is registered in Germany, a limited liability company; according to Germany’s related provisions of the income tax act, applicable income tax rate for the year is 30.6%, and on the basis of the corresponding income tax amount, 5.5% of solidarity surcharge is imposed; the actual total income tax rate applicable to 32.28% (2015: 32.28%).

Note 6:

ZPMC LANKA COMPANY (PRIVATE) LIMITED is a limited liability company registered in Sri Lanka; according to the related income tax provisions of Sri Lanka, the applicable income tax rate is 17.5% (2015: 17.5%).

Note 7:

ZPMC North Amercian Inc., ZPMC NA East Coast Inc., ZPMC NA Huston Inc., are the limited liability companies registered in USA; according to the related income tax provisions of USA, the applicable income tax rate is 15% (2015: 15%).

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Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

IV. Taxes (continued) 1.

Main tax types and the ratio (continued)

Note 8:

ZPMC Korea Co., Ltd. is limited liability company registered in Korea. According to related provisions of the income tax in Korea, the enterprise revenue tax is collected with the progressive tax rate in excess of specific amount for the profit of the Company. The tax rate is 10% for the profit less than 200 million won, and 20% for the profit between 200 million won and 20,000 million won, and 22% for the profit over 200 million won. The actual income tax rate is 10% this year (2015: 10%).

Note 9:

ZPMC Engineering Africa (PTY) LTD. is a limited liability company registered in Republic of South Africa; according to the related income tax provisions of Republic of South Africa, the applicable income tax rate is 28% (2015: 28%).

Note 10:

ZPMC Engineering (India) Private Limited is a limited liability company registered in India; according to the related income tax provisions of India, the applicable income tax rate is 30% (2015: 30%).

Note 11:

ZPMC Southeast Asia Holding PTE. LTD. is a limited liability company registered in Singapore; according to the related income tax provisions of Singapore, the applicable income tax rate is 17% (2015: 17%).

Note 12:

ZPMC Engineering (Malaysia) Sdn. Bhd.is a limited liability company registered in Malaysia; according to the related income tax provisions of Malaysia, the applicable income tax rate is 20% (2015: 20%).

Note 13:

ZPMC Australia Company (PTY) LTD. is a limited liability company registered in Australia; according to the related income tax provisions of Australia, the applicable income tax rate is 30% (2015: 30%).

Note 14:

ZPMC Brazil Holdings Ltda. is a limited liability company registered in Brazil; according to the related income tax provisions of Brazil, the applicable income tax rate is 25% (2015: 13%).

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Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

IV. Taxes (continued) 1.

Main tax types and the ratio (continued)

Note 15:

ZPMC Limited Liability Company is a limited liability company registered in Russia; according to the related income tax provisions of Russia, the applicable income tax rate is 20% (2015: 20%).

Note 16:

ZPMC Middle East FZE is a limited liability company registered in Dubai, United Arab Emirates; according to the related income tax provisions of Dubai, United Arab Emirates, the applicable income tax rate is 0%.

Note 17:

ZPMC UK LTD is a limited liability company registered in Cardiff; according to the related income tax provisions of Cardiff, the applicable income tax rate is 20%.

Note 18:

ZPMC Brazil Service Portuarios LTDA is a limited liability company registered in Santos Brazil; according to the related income tax provisions of Santos Brazil, the applicable income tax rate is 25%.

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Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements

1.

Monetary capital

Cash on hand Bank deposit Other monetary capital

2016

2015

774,626

746,967

3,496,430,560

2,318,579,147

99,839,013

139,007,602

3,597,044,199

2,458,333,716

As of Dec, 31, 2016, the other monetary capital with restricted is RMB 99,839,013 Yuan, which is the margin deposit that our Group applied to banks for letters of credit and bank guarantees (Dec, 31, 2015: the other monetary capital with restricted is RMB 120,408,105 Yuan, which is the margin deposit that our Group applied to banks for letters of credit and bank guarantees and the foreign exchange settlement capital deposited in bank of RMB 18,599,497 Yuan). As of Dec, 31, 2016, the monetary capital deposited abroad by the Group is RMB 621,197,660 Yuan (Dec, 31, 2015: RMB 299,033,408 Yuan). Interest income from bank deposits shall be obtained in accordance with the current interest rate. Deposit term for the short term fixed deposit is 7 days, and the interest income shall be obtained in accordance with the fixed time deposit interest rate. 2.

Financial assets measured at fair value and whose variation is included in the current profits and loss 2016

2015

4,615,775

676,082

Trading financial assets Derivative assets

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Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

As of Dec. 31, 2016, in the forward foreign exchange contract established by the derivate financial instruments held by the Group with bank but not due: Total amount of principal in Won for USD contract is Won 15,018,200,000 (2015: USD for RMB contract is USD 50,000,000); agreed exchange rate is 1,145.45 to 1,145.50 (6.3604 to 6.7470, 2015contract is due between Jan. 25, 2017 and Dec. 29, 2017 (January 20, 2016 and August 25, 2016). Closing fair value estimated gains/losses of above forward foreign exchange contracts are shown in transactional bank confirmed amount or the amount based on end-of market exchange rate. 3.

Notes receivable

Bank acceptance draft Commerce acceptance draft

2016

2015

286,220,781

230,959,622

10,700,000

12,200,000

296,920,781

243,159,622

As of December 31, 2016, no bill receivable is pledged to the Bank. 2. The final has been endorsed or discounted, and notes receivable that the balance sheet date has not expired yet 2016 Termination confirmed Bank acceptance bill

471,132,348

2015 Termination unconfirmed 4,390,096

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Termination confirmed 302,708,598

Termination unconfirmed -

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

4.

Accounts receivable

Long-term receivables analyzed by age: 2016

2015

2,412,791,452

2,579,542,464

7 to 12 months

762,252,912

553,868,900

1 to 2 years

864,213,900

621,512,391

2 to 3 years

363,374,243

501,080,688

3 to 4 years

383,314,678

172,256,976

4 to 5 years

136,097,550

106,602,535

Over 5 years

648,577,646

496,747,275

5,570,622,381

5,031,611,229

1,339,875,923

1,136,848,761

4,230,746,458

3,894,762,468

Within 6 months

Less: receivables - provisions for bad debt

Change of receivables - provisions for bad debt: Opening balance in current year

Provision in this year

Change back this year

Write-Off in this year

Closing balance in current year

2016

1,136,848,761

209,863,641

(4,997,815)

(1,838,664)

1,339,875,923

2015

858,128,277

287,019,897

(8,299,413)

-

1,136,848,761

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Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

4.

Accounts receivable (continued) 2016 Closing balance Amount

Proportio n

2015

Provision for bad debts Amount

Withdraw ing

%

Accounts receivables that are individuall y insignifica nt but provision for bad debts Bad

Closing balance Amount

Provision for bad debts

Proportio n

%

Amount

Withdraw ing

%

%

159,594,037

3

159,594,037

100

257,212,586

5

257,212,586

567,576,374

10

-

-

716,117,651

14

-

4,557,809,557

82

895,607,566

20

3,895,457,967

78

716,813,150

100

debt reserve is calculated as per the credit risk combinatio n

-Related party -Non-related party Accounts receivables that are individuall y insignifica nt but provision for bad debts is assessed individuall

166 / 507

18

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued) y 285,642,413

5

284,674,320

100

162,823,025

3

162,823,025

100

5,570,622,381

100

1,339,875,923

24

5,031,611,229

100

1,136,848,761

23

167 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

4.

Accounts receivable (continued)

As of Dec, 31, 2016, situation of the accounts receivables that are individually insignificant but provision for bad debts is assessed individually is as follows: Book value balance

Bad debt provision

Provision ratio

Provision reasons

159,594,037

159,594,037

100%

Contract dispute

Accounts receivable 1

As of Dec, 31, 2015, situation of the accounts receivables that are individually insignificant but provision for bad debts is assessed individually is as follows: Book value balance

Bad debt provision

Provision ratio

Provision reasons

Accounts receivable 1

149,393,086

149,393,086

100%

Contract dispute

Accounts receivable 2

107,819,500

107,819,500

100%

Counter-party seriously lacks funds

257,212,586

257,212,586

100%

Accounts receivable for which the bad debt reserve is calculated as per the aging analysis method: 2016 Closing balance

Within 6 month s 7

12 month s

2015

Provision for bad debts

Closing balance

Provision for bad debts

Amount

Amount

Proportion

Amount

Amount

Proportion

2,127,697,593

-

-

2,039,019,778

-

-

691,765,805

6,917,658

1

486,194,724

3,811,519

1

168 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

4.

Accounts receivable (continued)

1 - 2 years

668,819,686

100,322,953

15

540,630,618

79,588,609

15

2 - 3 years

302,286,737

90,686,021

30

173,228,095

51,968,428

30

3 - 4 years

101,304,733

50,652,291

50

115,657,539

56,328,769

49

4 - 5 years

75,625,443

56,719,083

75

51,739,809

36,128,421

70

Over 5 years

590,309,560

590,309,560

100

488,987,404

488,987,404

100

4,557,809,557

895,607,566

20

3,895,457,967

716,813,150

18

As of Dec, 31, 2016, situation of the other accounts receivables that are individually not insignificant but provision for bad debts is assessed individually is as follows: Book value balance

Bad debt provision

Provision ratio

Reason

Accounts receivable 1

107,819,500

107,819,500

100%

Counter-party seriously lacks funds

Accounts receivable 2

50,365,000

50,365,000

100%

Counter-party seriously lacks funds

Accounts receivable 3

27,748,069

27,748,069

100%

Contract dispute

Accounts receivable 4

21,932,297

21,932,297

100%

Contract dispute

169 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

4.

Accounts receivable (continued)

Accounts receivable 5

19,480,920

18,512,827

95%

Contract dispute

Accounts receivable 6

17,735,070

17,735,070

100%

Contract dispute

Accounts receivable 7

10,049,240

10,049,240

100%

Contract dispute

Accounts receivable 8

7,664,629

7,664,629

100%

Contract dispute

Accounts receivable 9

7,421,237

7,421,237

100%

Contract dispute

Accounts receivable 10

7,306,800

7,306,800

100%

Contract dispute

Accounts receivable 11

4,557,644

4,557,644

100%

Contract dispute

Accounts receivable 12

3,562,007

3,562,007

100%

Contract dispute

285,642,413

284,674,320

100%

170 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

4.

Accounts receivable (continued)

As of Dec, 31, 2015, situation of the other accounts receivables that are individually not insignificant but provision for bad debts is assessed individually is as follows: Book value balance

Bad debt provision

Provision ratio

Provision reasons

Accounts receivable 1

50,365,000

50,365,000

100%

Counter-party seriously lacks funds

Accounts receivable 2

25,974,465

25,974,465

100%

Contract dispute

Accounts receivable 3

20,530,426

20,530,426

100%

Contract dispute

Accounts receivable 4

18,235,736

18,235,736

100%

Contract dispute

Accounts receivable 5

16,150,830

16,150,830

100%

Contract dispute

Accounts receivable 6

9,758,221

9,758,221

100%

Contract dispute

Accounts receivable 7

7,260,803

7,260,803

100%

Contract dispute

Accounts receivable 8

6,946,886

6,946,886

100%

Contract dispute

Accounts receivable 9

4,266,328

4,266,328

100%

Contract dispute

Accounts receivable 10

3,334,330

3,334,330

100%

Contract dispute

162,823,025

162,823,025

100%

As of Dec. 31, 2016, the accounts receivable summary analysis of top 5 arrears is shown as following:

171 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

4.

Accounts receivable (continued) Accounting for balance of receivables

Balance of top 5 account receivables

Balance

Bad debt provision amount

Proportion in total accounts receivable

862,228,750

382,166,701

15%

As of Dec. 31, 2015, the accounts receivable summary analysis of top 5 arrears is shown as following: Accounting for balance of receivables

Total amount of top 5 account receivables account receivables

5.

Balance

Bad debt provision amount

Proportion in total accounts receivable

1,045,784,935

382,306,518

21%

Advanced payment

Long-term payables analyzed by age:

Within one year

2016

2015

Booking balance %

Booking balance %

743,820,095

83

994,457,189

81

1 to 2 years

72,700,327

8

118,979,425

10

2 to 3 years

41,846,911

4

25,983,355

2

Over 3 years

42,054,901

5

86,925,663

7

900,422,234

100

1,226,345,632

100

As of Dec. 31, 2016, the Company’s prepayment with age over a year is RMB 156,602,139 Yuan (Dec.31, 2015: RMB 231,888,443 Yuan), mainly prepayment for the procurement of imported parts, which has not been yet settled because purchased imported parts not delivered. 172 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

5.

Advanced payment (continued)

As of Dec. 31, 2016, the summary analysis payment with top five ending balance collected by the party in debt is shown as following: Advanced payment

Total advances balance of top 5

Amount

Proportion in total

265,464,546

29%

As of Dec. 31, 2015, the summary analysis payment with top five ending balance collected by the party in debt is shown as following: Advanced payment Amount

Proportion in total

497,490,559

41%

2016

2015

722,015,188

552,591,379

7 to 12 months

3,320,248

30,829,138

1 to 2 years

5,050,048

60,426,009

2 to 3 years

17,396,586

6,649,212

3 to 4 years

3,690,767

1,069,700

4 to 5 years

223,263

4,944,478

Total advances balance of top 5 6. Other accounts receivable Other accounts receivables analyzed by age:

Within 6 months

173 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Over 5 years

22,533,895

39,212,788

774,229,995

695,722,704

174 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

6. Other accounts receivable (continued) Less: other receivables provisions for bad debt

37,675,402

28,062,537

736,554,593

667,660,167

Change of other receivables - provisions for bad debt: Opening balance in current year

Provision in this year

Change back this year

Write-Off in this year

Closing balance in current year

2016

28,062,537

9,612,865

-

-

37,675,402

2015

27,148,264

914,273

-

-

28,062,537

2016 Closing balance

2015

Provision for bad debts

Closing balance

Provision for bad debts

Amount Proportion

Amount Withdrawing

Amount Proportion

Amount Withdrawing

%

%

%

%

Accounts 23,410,851 receivables that are individually insignificant but provision for bad debts

3 7,023,255

175 / 507

30

-

-

-

-

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

6. Other accounts receivable (continued) Bad debt reserve is calculated as per the credit risk combination-Guaran ty deposit (excluding quality guarantee deposit)

227,641,09 5

30

-

-

153,602,04 9

22

-

-

-Employee individual loans and reserve funds reserve funds

119,097,93 6

15

-

-

141,150,87 1

20

-

-

-Others

386,333,01 1

50

12,905,04 5

3

383,162,68 2

55

10,255,43 5

3

Accounts receivables that are individually insignificant but provision for bad debts is assessed individually

17,747,102

2

17,747,10 2

10 0

17,807,102

3

17,807,10 2

10 0

774,229,99 5

10 0

37,675,40 2

5

695,722,70 4

10 0

28,062,53 7

4

As of Dec, 31, 2016, situation of the other accounts payables that are individually insignificant but provision for bad debts is assessed individually is as follows:

Other

accounts

Book value balance

Bad debt Provision ratio provision

23,410,851

7,023,255 176 / 507

30%

Provision reasons Contract

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

payables 1

dispute

In combination, other payables for which the bad debt reserve is calculated as per the aging analysis method:

177 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

6. Other accounts receivable (continued) 2016

2015

Closing Provision for bad debts balance

Within months

Amount

Amount

6 357,174,789

-

Proportion

Closing Provision for bad debts balance Amount

Amount

Proportion

- 353,228,089

-

-

7 - 12 months

2,872,043

28,720

1

3,927,262

39,271

1

1 years

2

1,530,100

229,515

15

15,680,501

2,352,075

15

2 years

3

14,946,482

4,483,945

30

3,203,485

961,037

30

3 years

4

3,203,035

1,601,517

50

180,855

90,427

50

4 years

5

180,855

135,641

75

519,460

389,595

75

Over years

5

6,425,707

6,425,707

100

6,423,030

6,423,030

100

386,333,011

12,905,045

3 383,162,682

10,255,435

3

As of Dec, 31, 2016, situation of the other accounts receivables that are individually insignificant but provision for bad debts is assessed individually is as follows: Book value balance

Bad debt Provision ratio provision

178 / 507

Provision reasons

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Other receivables1

5,540,286

5,540,286

100%

Contract cancelled

Other receivables2

4,214,642

4,214,642

100%

Bankruptcy of the opposite side

Other receivables3

3,037,042

3,037,042

100%

Contract cancelled

Other receivables4

1,692,765

1,692,765

100%

Contract cancelled

179 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

6. Other accounts receivable (continued) Others

3,262,367

3,262,367

100%

17,747,102

17,747,102

100%

As of Dec, 31, 2015, situation of the other accounts receivables that are individually insignificant but provision for bad debts is assessed individually is as follows: Book

value Bad debt Provision ratio Provision balance provision reasons

Other receivables1

5,540,286

5,540,286

100%

Contract cancelled

Other receivables2

4,214,642

4,214,642

100%

Bankruptcy of the opposite side

Other receivables3

3,037,042

3,037,042

100%

Contract cancelled

Other receivables4

1,692,765

1,692,765

100%

Contract cancelled

Others

3,322,367

3,322,367

100%

17,807,102

17,807,102

100%

Category of other payables by nature of payment 2016

2015

Unsettled tax and surtax receivable

169,252,637

138,270,252

Bid bond payments

153,797,532

45,724,321

180 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Products or field service temporary loans

93,565,532

93,107,920

Customs guaranty deposit

71,148,199

104,071,196

Export tax rebate

63,023,350

101,381,047

181 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

6. Other accounts receivable (continued) Employee’s loans receivable

43,553,963

48,042,951

Payments deposit for third party receivable

39,969,061

36,490,744

Lease receivables

33,434,668

33,484,980

Deposit receivable

6,742,361

13,806,532

99,742,692

81,342,761

774,229,995

695,722,704

Others

Other receivables with top five ending balance collected by the party in debt as of December 31, 2016 Closing balance

Proportion in other total ending balance receivable (%)

Nature

Other receivables 1

71,148,199

9

Other receivables 2

50,000,000

6

Bid bond

Within 1 year

-

Other receivables 3

50,000,000

6

Bid bond Within 1 year

-

Other

33,434,668

5

Lease fund Within 1 year

-

182 / 507

Account age

Provision for bad debts Closing balance

Customs Within 1 year guarantee deposit

-

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

receivables 4 Other receivables 5

23,410,851

3

227,993,718

29

Advance money for another

2 to 3 years

7,023,255

7,023,255

Other receivables with top five ending balance collected by the party in debt as of December 31, 2015

183 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

6.

Other accounts receivable (continued) Closing balance

Proportion in other total ending balance receivable (%)

Other receivables 1

90,780,980

Other receivables 2

33,484,980

Share transfer

Nature

Account age

Provision for bad debts Closing balance

13

Customs Within 1 year guarantee deposit

-

5

Lease fund Within 1 year

-

1-2 years

Other receivables 3

12,444,088

2

and sale of equipment

and over 5 years

3,944,088

Other receivables 4

10,000,000

1

Fixed assets disposal fund

2-3 years

-

Other receivables 5

5,540,286

1

Advance payment of materials

over 5 years

5,540,286

152,250,334

22

7.

9,484,374

Inventories 2016

2015 184 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued) Booking balance

Falling price reserves

Booking balance

Booking balance

Falling price reserves

Booking balance

Raw materials and purchased parts

2,851,653,92 6

141,839,752

2,709,814,17 4

4,063,294,03 2

324,784,79 2

3,738,509,24 0

Unfinishe d products

5,190,856,98 6

1,124,585,14 6

4,066,271,84 0

2,279,404,26 4

232,214,15 8

2,047,190,10 6

185 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

7.

Inventories (continued)

Merchandis e inventory

11,153,985

11,153,985

-

11,153,985

11,153,985

-

8,053,664,89 7

1,277,578,88 3

6,776,086,01 4

6,353,852,28 1

568,152,93 5

5,785,699,34 6

The Group is in the manufacture of marine heavy equipment products that are already under construction but have not yet signed sales orders. Conditions of inventory revaluation reserve are as follows: 2016 Opening balance in current year

Provision in Deduction in Closing balance this year this year Return in current year or resell

Raw materials and purchased parties

324,784,792

4,565,125

(187,510,165)

141,839,752

Unfinished products

232,214,158

892,370,988

-

1,124,585,146

Merchandise inventory

11,153,985

-

-

11,153,985

568,152,935

896,936,113

(187,510,165)

1,277,578,883

2015 Opening balance in current year

Raw

materials

Provision in Deduction in Closing balance this year this year Return in current year or resell

373,339,801

186 / 507

(48,555,009)

324,784,792

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

and purchased parties Unfinished products

130,810,331

158,448,216

187 / 507

(57,044,389)

232,214,158

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

7. Inventories (continued) Merchandise inventory

11,153,985

-

-

11,153,985

515,304,117

158,448,216

105,599,398

568,152,935

Conditions of inventory revaluation reserve are as follows: Reason for impairment Particular basis of provision of the returned or determining net realizable resold inventory in the value report year Raw materials and purchased parts

the difference between the realizable value of raw material and purchased parts due to lower product sales price and the book value

Steel prices rose or sold abroad

Inventories goods

the difference between the realizable value of inventories goods and the book value

None

the difference between the realizable value of semi products and the book value

None

Semi products

8. Construction completed but account not settled/Construction not completed and account settled Construction completed account yet has not been settled 2016 188 / 507

2015

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Accumulated cost incurred

41,699,798,181

36,191,103,411

margin

4,502,784,376

3,630,893,816

Less: Accumulated accounts settled

34,669,961,103

28,302,110,279

Accumulated confirmed

189 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

8. Construction completed but account not settled/Construction not completed and account settled (continued) Accumulated expected contract losses confirmed

426,807,687

302,295,092

11,105,813,767

11,217,591,856

accounts

18,189,689,578

22,695,320,583

margin

2,105,056,605

2,354,514,459

13,716,197,938

17,575,517,723

25,011,087

101,149,431

2,393,446,122

2,866,437,832

Construction not completed account 2016

2015

Accumulated settled Less: Accumulated confirmed

Accumulated cost incurred Add: Accumulated expected contract losses confirmed

Expected contract losses 2016

Opening balance Addition report in current year period

Deduction Closing balance report year in current year

Construction completed account not closed

302,295,092

315,817,045

(191,304,450)

426,807,687

Account closed construction not completed

101,149,431

73,576,110

(149,714,454)

25,011,087

190 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

403,444,523

389,393,155

191 / 507

(341,018,904)

451,818,774

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

8. Construction completed but account not settled/Construction not completed and account settled (continued) 2015

Opening balance Addition report in current year period

Deduction Closing balance report year in current year

Construction completed account not closed

292,239,376

191,716,159

(181,660,443)

302,295,092

Account closed construction not completed

20,778,569

113,191,465

(32,820,603)

101,149,431

313,017,945

304,907,624

(214,481,046)

403,444,523

As of Dec. 31, 2016, amount of contracts still in construction (VAT not included) is about 38,629,601,047 Yuan (Dec. 31, 2015: 40,657,492,935 Yuan). Probable fines in case of delay in delivery as contracted: 2016

2015

Bank issued valid guaranty letter

19,456,969,669

17,808,442,159

Bank didn’t issue guaranty letter

281,462,898

1,875,250,415

19,738,432,567

19,683,692,574

2016

2015

9. Non-current asset due within 1 year

Long-term receivable within one year

due

192 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

(Note V.12)

1,384,438,569

193 / 507

2,625,135,212

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

10. Other current assets 2016

2015

The input tax amount to be deducted

553,363,139

507,205,272

Bank short-term financing products

-

46,000,000

553,363,139

553,205,272

11. Financial assets available for sale 2016 Booking balance

2015

Provision for impairment

Booking balance

Booking balance

Provision for impairment

Booking balance

Available-for-sale equity instruments To be 1,270,578,346 measured per fair value

-

1,270,578,346

1,169,183,020

-

1,169,183,020

72,994,160

30,000,000

42,994,160

72,994,160

30,000,000

42,994,160

1,343,572,506

30,000,000

1,313,572,506

1,242,177,180

30,000,000

1,212,177,180

To be measured per cost

Financial assets available for sale and measured by fair value:

Cost of the equity instrument/amortized cost

2016

2015

937,641,194

937,641,194

194 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

of debt instrument

195 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

11. Financial assets available for sale (continued) Amounts from changes of fair value to be included in other comprehensive income accumulatively Fair value

332,937,152

231,541,826

1,270,578,346

1,169,183,020

The available-for-sales equity instruments measured at fair value include: (I) The Group holds 5.9% shares of stock of Jiangxi Huawu Brake Co., Ltd (Dec 31, 2015: 7.22%) and the initial investment cost is 11,071,606Yuan. The available-for-sales equity instruments measured at fair value is confirmed by the closing price of the last trading day of Shenzhen Stock Exchange. As of Dec 31, 2016, the Company has confirmed the profit of RMB 302,540,796 Yuan available for-sales equity instruments, accounted in other comprehensive profit. The Group received RMB 1,112,890 Yuan cash dividends from Jiangxi Huawu Brake Co., Ltd, accounted in investment income. (ii). The Group holds 2.16% (Dec 31, 2015: 2.16%) shares of stock of Qingdao Port International Co., Ltd and the initial investment cost is 308,515,588 Yuan. The available-for-sales equity instruments measured at fair value is confirmed by the closing price of the last trading day of Hong Kong Stock Exchange. As of Dec 31, 2016, the Company has confirmed the profit of RMB 31,737,587 Yuan available for-sales equity instruments, accounted in other comprehensive profit. The Group received RMB 13,058,634 Yuan cash dividends from Qingdao Port International Co., Ltd, accounted in investment income. (iii) The Group holds 1.40 (Dec 31, 2015: 1.40%) shares of stock of CRSC and the initial investment costs RMB 617,854,000 Yuan. The available-for-sales equity instruments measured at fair value is confirmed by the closing price of the last trading day of Hong Kong Stock Exchange. As of Dec 31, 2016, the Company has confirmed the loss of RMB 2,507,619 Yuan available for-sales equity instruments, accounted in other comprehensive profit. 196 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

The Group received RMB 2,814,813 Yuan cash dividends from CRSC, accounted in investment income.

197 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

11. Financial assets available for sale (continued) Financial assets available for sale and measured by fair value (continued): (iv). The Group holds less than 0.01% shares of stock of Shenwan Hongyuan Group and the initial investment cost is RMB 200,000 Yuan. The available-for-sales equity instruments measured at fair value is confirmed by the closing price of the last trading day of Shenzhen Stock Exchange. As of Dec 31, 2016, the Company has confirmed the profit of RMB 1,166,388 Yuan available for-sales equity instruments, accounted in other comprehensive profit. The Group received RMB 24,291 Yuan cash dividends from Shenwan Hongyuan Group, accounted in investment income. Financial assets available for sale and measured by cost: 2016 Booking balance Opening

21st Century Science and Technology Investment Co., Ltd.

This increase

This decrease

Closing

Shareholding

Cash bonuses

ratio

in this year

30,000,000

-

-

30,000,000

8.96%

-

13,000,000

-

-

13,000,000

10%

-

CCCC Highway Bridges National Engineering Research Centre Ltd.

Co.,

CCCC Dredging Technology Equipment 198 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

State Engineering Research

199 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

11. Financial assets available for sale (continued) Center Ltd.

Co., 6,400,000

-

-

6,400,000

3.2%

-

800,000

-

-

800,000

10%

-

Shanghai Zhenhua Port Machinery (Group)

1,500,000

-

-

1,500,000

10%

-

Ningbo Transmission Machinery Co., Ltd of Shanghai Zhenhua Port Machinery (Group)

1,296,000

-

-

1,296,000

10%

-

Hunan Fengri Power & Electric Co., Ltd.

19,998,160

-

-

19,998,160

6.38%

-

72,994,160

-

-

72,994,160

Longchang Lifting Equipment Co., Ltd. of Shanghai Zhenhua Port Machinery (Group) Shenyang Elevator Co., Ltd of

200 / 507

-

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

201 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

11. Financial assets available for sale (continued) Available-fo r-sale equity instruments Provision for impairment 21st Century Science and Technology Investment Co., Ltd.

(30,000,00 0)

-

-

(30,000,00 0)

42,994,160

-

-

42,994,160

Financial assets available for sale and measured by cost (continued): 2015 Booking balance

Opening

This increase

Reclassification

-

-

Closing

Shareholding

Cash bonuses

ratio

in this year

Available-for-sale equity instruments - cost 21st Century Science and Technology Investment Co., Ltd.

30,000,000

CCCC Highway Bridges National Engineering Research

202 / 507

30,000,000

8.96%

-

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Center Co., Ltd.

13,000,000

-

-

203 / 507

13,000,000

10%

-

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

11. Financial assets available for sale (continued) CCCC Dredging Technology Equipment State Engineering Research Center Co., Ltd.

6,400,000

-

-

6,400,000

3.2%

-

Longchang Lifting Equipment Co., Ltd. of Shanghai Zhenhua Port Machinery (Group)

800,000

-

-

800,000

10%

-

1,500,000

-

-

1,500,000

10%

-

740,000

556,000

-

1,296,000

10%

9,465,520

-

Shenyang Elevator Ltd of Shanghai Zhenhua Machinery (Group)

Co.,

Port

Ningbo Transmission Machinery Co., Ltd of Shanghai Zhenhua Port Machinery (Group)

Shenwan Hongyuan Group Hunan

Fengri

200,000

-

(200,000)

-

less than 0.01%

-

19,998,160

-

19,998,160

6.38%

204 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Power & Electric Co., Ltd. 52,640,000

20,554,160

(200,000)

205 / 507

72,994,160

9,465,520

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

11. Financial assets available for sale (continued) Available-for-sale equity instruments - Provision for impairment 21st Century Science and Technology Investment Co., Ltd.

(30,000,000)

-

-

(30,000,000)

22,640,000

20,554,160

(200,000)

42,994,160

The available-for-sale financial assets measured in cost are the non-listed stock investment held by the Group. There is no active market quotation for the investment. The change range of the reasonable count of fair value is higher. The probability of the fair value estimate can’t be reasonably confirmed, so the fair value can’t be reliably measured. The Group has no plan to dispose the investment.

12. Long-term receivables 2016

2015

5,142,731,788

5,594,243,805

32,924,801

589,392,944

5,175,656,589

6,183,636,749

1,384,438,569

2,625,135,212

“Construction-Transfer” project accounts receivable - Capital - Interest receivable

Less: long-term receivable due within one year (Note V.9)

206 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

3,791,218,020

207 / 507

3,558,501,537

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

12. Long-term receivables (continued) The Group in 2013 undertook the Nanjing to Gaochun New Channel project and Nanjing-Gaochun Inter-city Rail Transit Phase II (cross-lake section) project (referred to as "Nanjing High Speed 'Construction - transfer' Item"); total investment of the project 5,918,800,000 Yuan, the construction of Item for a period of 2 years, repurchase period is 2.5 years, return on investment 3 - 5year, bank loans surface 30% over benchmark interest rate. The Group established a wholly owned subsidiary Nanjing Ninggao New Channel Construction Co., Ltd. responsible for the financing and construction management of the said project. By October, 2015, the entire line was open to traffic. The returned payments shall be reclassified to the long term accounts receivable in 2017 according to the contract terms. The Group undertook Jiangsu Qidong Lvsi port surrounded PPP project in 2015, with total investment of 2 billion Yuan. The project construction period is 2 years, and the repurchase period is 10 years, the return on investment is the bank loans benchmark interest rate increased by 30% for over 5 years. The Group, CCCC Tianjin Waterway Bureau Co., Ltd. and Jiangsu Qidong Lvsi Port Economic Development Zone Management Committee jointly established CCCC Qidong Investment Development Co., Ltd. responsible for the project investment, financing and construction management. The Group undertook the Phase I of infrastructure and public utilities projects of Jiangsu Zhongguancun Science and Technology Industrial Park in 2015. The project total investment is 3.7 billion Yuan, with project construction period of 2 years, the purchase back period is 4 years, the return on investment is the bank loans benchmark interest rate increased by 30% for over 5 years. The Group, CCCC Shanghai Waterway Bureau Co., Ltd., CCCC East China Investment Co., Ltd., CCCC Second Highway Survey Design and Research Institute Co., Ltd. And Jiangsu Zhongguancun Science and Technology Industrial Park Administrative Committee jointly established CCCC Liyang City Investment Construction Co., Ltd. responsible for the project investment, financing and construction management. The Group undertook Zhenjiang campus life mating project in 2016, with total investment of 6 billion Yuan. The project construction period is 2 years, and the repurchase period is 3 years, the return on investment is the annual rate 7%.The Group, CCCC The Second Harbor Engineering Bureau Co., Ltd., CCCC East China Investment Co., Ltd., CCCC Highway Planning and Design Institute Co., Ltd., CCCC East China Investment Co., Ltd., and 208 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Zhenjiang Higher Education Investment Development (Group) Co., Ltd. jointly established CCCC Zhenjiang Investment Construction Management Development Co., Ltd. responsible for the project investment, financing and construction management.

209 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

12. Long-term receivables (continued) The Group undertook the Huaian City, Huaiyin port east district and transportation infrastructure projects in 2016.The total investment of 2.855 billion Yuan. The project construction period is 2 years, and the repurchase period is 6 years, the return on investment is the bank loans benchmark interest rate for over 5 years. The Group, CCCC The Third Harbor Engineering Bureau Co., Ltd., CCCC The First Highway Survey and Design Institute Co., Ltd., CCCC East China Investment Co., Ltd. and Huaian City Huaiyin Traffic Investment Co., Ltd. jointly established CCCC Huaian Construction Development Co., Ltd. responsible for the project investment, financing and construction management. As of Dec. 31, 2016, the long-term receivables refer to the investment amount as principal the Group invested in "Construction - Transfer" project, interest receivable subject to confirmation of financing return according to the contract. As of Dec. 31, 2016, the long-term receivable RMB 2,996,201,650 Yuan is the pledged in full amount to the bank as the guarantee of long-term loan of RMB 727,000,000 Yuan and (Dec 31, 2015: RMB 5,680,467,098 Yuan and long-term loan of RMB 2,187,000,000 Yuan (Note V (34 (ii))). Long-term receivables analyzed by age: 2016

2015

1,956,609,083

844,466,601

1 to 2 years

518,450,490

3,121,550,855

2 to 3 years

2,700,597,016

2,217,619,293

5,175,656,589

6,183,636,749

1,384,438,569

2,625,135,212

3,791,218,020

3,558,501,537

Within one year

Less: long-term receivable due within one year

13. Long-term equity investments 210 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

13. Long-term equity investments (continued)

Joint venture Associates

2016

2015

200,209,849

175,387,196

2,001,211,604

1,421,747,621

2,201,421,453

1,597,134,817

Joint venture: 2016 Opening balance

Jiangsu LongYuan Zhenhua Marine Engineering Co.,Ltd

This change

Closing balance

Closing impairment reserve

Increase investmen t

Decrease investmen t

Investmen t profit and loss

171,577,489

-

-

25,046,72 2

196,624,211

-

3,059,427

-

-

(224,069)

2,835,358

-

-

-

-

-

-

-

750,280

-

-

-

750,280

-

ZPMC Mediterranean Liman Makinalari Ticaret Anonim Sirketi Zhenhua Energy Kong) Ltd(i)

Marine (Hong Co.,

Cranetech Global

211 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Sdn. Bnd.

175,387,196

-

-

212 / 507

24,822,65 3

200,209,849

-

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

13. Long-term equity investments (continued) 2015 Opening This change Closing Closing balance Increase investment

Decrease investment

Investment profit and loss

Opening balance

reserve

This change

Increase investment

Jiangsu LongYuan Zhenhua Marine Engineerin g Co., Ltd

balance impairment

Decrease investment

162,922,64 1

-

-

327,639

-

Closing balance

Closing impairment reserve

Investment profit and loss

8,654,848

171,577,48 9

-

-

2,731,788

3,059,427

-

-

(6,633,668 )

-

-

ZPMC Mediterran ean Liman Makinalari Ticaret Anonim Sirketi Zhenhua Marine Energy (Hong Kong) Co.,

6,633,668

-

213 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Ltd

214 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

13. Long-term equity investments (continued) Cranetech Global Sdn. Bnd.(ii)

169,883,94 8

750,280

-

750,280

-

-

750,280

-

4,752,968

175,387,19 6

-

Joint venture (continued): (i) On May 5, 2014, the subsidiary of the Company and the partner invested to establish Zhenhua Marine Energy (Hong Kong) Co., Ltd (Zhenhua Marine Energy).The registered capital is 5,969,998 USD;, the subsidiary of the Company contributed 3,044,699 USD, holding 51% of the shares. The company focused on the vessel transportation business. Based on the regulations of the shareholder agreement, the significant issues of the company shall be agreed by at least 75% shareholders via voting. The Group has no control rights but joint controls the company together with the partner. On January 20, 2016, the Group and RBF HK Limited (other shareholder of Zhenhua Marine Energy) singed the exit contract about Zhenhua Marine Energy. The Group has the rights to sell 51% of the total shares of Zhenhua Marine Energy to RBF HK Limited when meeting the related articles of the exit contract; or purchased 32.5% of the total shares of Zhenhua Marine Energy from RBF HK Limited. RBF HK Limited began to execute its right of holding 51% shares of Zhenhua Marine Energy on June 2, 2016, in accordance with the signed exit contract, but ultimately failed to meet all the share delivery conditions of exiting the contract agreement, the purchase rights has been expired on November 23, 2016.As of Dec, 31, 2016, the Group has not exercised its purchasing right to purchase 32.5% shares of Zhenhua Marine Energy held by RBF HK Limited. The Group considered that the purchasing right of purchasing 32.5% shares of joint venture held by the RBF HK Limited (other shareholder of Zhenhua Marine Energy) was unable to control Zhenhua Marine Energy. As of Dec, 31, 2016, the Group considered that this fair value of this purchasing right wasn’t significant. (ii) On July 30, 2015, the subsidiary of the Company and the partner invested to establish Cranetech Global Sdn. Bhd..The registered capital is 1,000,000 MYR;, the subsidiary of 215 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

the Company contributed 499,999 MYR, holding 49.99% of the shares. The company focused on the spare parts sales. Based on the regulations of the shareholder agreement, the significant issues of the company shall be agreed by both parties. Therefore, the jointly controls the company together with the partner. Associates:

216 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

13. Long-term equity investments (continued) 2016 Opening balance

This change

Closing balance

Increase investment

Investment profit and loss

Other comprehensiv e income adjustment

Declaration of cash dividend or profit

Closing Impairmen t reserve

CCCC Marine Engineering Vessel Technology Research Centre Co., Ltd

15,269,200

-

376,318

-

-

15,645,518

-

Shanghai Zhenhua Heavy Industries (Group) Changzhou Paint Co., Ltd.

14,626,156

-

1,978,952

-

(1,833,066)

14,772,042

-

CCCC Estate Yixing Co., Ltd.

174,697,785

-

916,743

-

-

175,614,528

-

CCCC Financing Rental Co., Ltd.(i)

1,141,740,69 8

420,000,00 0

75,648,845

255,310

(32,400,000 )

1,605,244,85 3

-

75,413,782

-

(4,347,559 )

4,546,680

-

75,612,903

-

China Communication s Construction USA Inc. CCCC South American 217 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Regional Company SARL (ii) -

114,321,76 0

-

-

-

114,321,760

-

1,421,747,62 1

534,321,76 0

74,573,299

4,801,990

(34,233,066 )

2,001,211,60 4

-

218 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

13. Long-term equity investments (continued) 2015 Opening balance

This change

Closing balance

Increase investment

Investment profit and loss

Other comprehensive income adjustment

Declaration of cash dividend or profit

Closing Impairment reserve

CCCC Marine Engineering Vessel Technology Research Centre Co., Ltd

15,079,243

-

189,957

-

-

15,269,200

-

Shanghai Zhenhua Heavy Industries (Group) Changzhou Paint Co., Ltd.

14,349,607

-

1,956,549

-

(1,680,000)

14,626,156

-

174,686,810

-

10,975

-

-

174,697,785

-

551,350,475

540,000,000

50,390,223

-

-

1,141,740,698

-

-

76,206,000

(2,048,615)

1,256,397

-

75,413,782

-

755,466,135

616,206,000

50,499,089

1,256,397

(1,680,000)

1,421,747,621

-

CCCC Yixing Ltd.

Estate Co.,

CCCC Financing Rental Co., Ltd.(i) China Communications Construction USA Inc.(iii)

(i) As of May 29, 2015, the Company increased the capital to CCCC Financial Rental Co., Ltd of RMB 540,000,000 Yuan. After the capital increased, the Group’s investment costs 219 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

to CCCC Financial Rental Co., Ltd increased to RMB 1,080,000,000 Yuan. The holding proportion is the same, that is 30%. As of May 31, 2016, the Company increased the capital to CCCC Financial Rental Co., Ltd of RMB 420,000,000 Yuan. After the capital increased, the Group’s investment costs to CCCC Financial Rental Co., Ltd increased to RMB 1,500,000,000 Yuan. The holding proportion is the same, that is 30%.

220 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

13. Long-term equity investments (continued) (ii) As of Dec. 15, 2016, the Company invested 16,480,000 USD (in RMB 114,321,760 Yuan) to share CCCC South American Regional Company SARL. The registration capital is 103,000,000 USD, in RMB 114,321,760 Yuan, holding 16% of the share. The company focuses on port construction business. Based on the regulations of the shareholder agreement, the Company has the right to designate one director to that company and implement significant impact to that company. (iii) As of Oct. 8, 2015, the Company invested to establish China Communications Construction USA Inc.. The registration capital is 50,000,000 USD, and the Company’s investment is 12,000,000 USD, in RMB 76,206,000 Yuan, holding 24% of the share. The company focuses on port construction business.

14. Investment property Investment property measured at cost: 2016 Premises and buildings

Land use right

Total

Opening balance

260,039,373

209,845,794

469,885,167

Fixed transfer-in

137,781,316

-

137,781,316

397,820,689

209,845,794

607,666,483

63,874,113

44,838,246

108,712,359

9,647,865

-

9,647,865

Original book value

assets

Closing balance Accumulated depreciation Opening balance Fixed

assets

221 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

transfer-in Provision amortization Closing balance

or

10,601,341

5,324,667

15,926,008

84,123,319

50,162,913

134,286,232

Book value

222 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

14. Real estate as investment (continued) Book value at the end 313,697,370 of year

159,682,881

473,380,251

Book value at the 196,165,260 beginning of year

165,007,548

361,172,808

2015 Premises and buildings

Land use right

Total

260,039,373

209,845,794

469,885,167

55,489,717

39,513,581

95,003,298

8,384,396

5,324,665

13,709,061

63,874,113

44,838,246

108,712,359

Book value at the end of year

196,165,260

165,007,548

361,172,808

Book value at the beginning of year

204,549,656

170,332,213

374,881,869

Original book value Opening and closing balance Accumulated depreciation Opening balance Provision amortization

or

Closing balance Book value

223 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

14. Real estate as investment (continued) As of Dec. 31, 2016, real estate as investment of not completing the certificate of title is as follows:

House and building

Book value

Reasons for not completing the certificate of title

284,337,357

Property application procedures are still under approval

15. Fixed assets 2016 Houses and buildings

Machinery equipment

Office electroni c equipment

Transportati on tools (except for vessel)

Vessel

Total

Opening balance

11,616,605,3 96

6,773,564,9 36

230,069,1 74

263,556,659

7,044,013,0 15

25,927,809,1 80

Purchase

151,768,037

35,813,084

16,754,53 5

25,392,444

96,717,619

326,445,719

21,998,269

28,683,570

-

-

299,120,833

349,802,672

(137,781,316

-

-

-

-

(137,781,316

Original book value

Constructi on in progress transfer-i n Transfer-o ut to the

224 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

investment property Dispositio n or scrapping Closing balance

)

)

(1,607,253)

(119,329,31 6)

(5,728,31 4)

(15,671,365)

(9,995,664)

(152,331,912 )

11,650,983,1 33

6,718,732,2 74

241,095,3 95

273,277,738

7,429,855,8 03

26,313,944,3 43

225 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

15. Fixed assets (continued) Accumulated depreciation Opening balance

2,733,703,55 0

4,473,964,11 2

159,312,83 5

183,537,690

2,721,754,11 7

10,272,272,30 4

381,944,729

428,237,329

17,429,109

16,885,021

324,332,721

1,168,828,909

(9,647,865)

-

-

-

-

(9,647,865)

(481,275)

(111,702,878 )

(5,448,937 )

(15,331,361 )

(7,326,920)

(140,291,371)

3,105,519,13 9

4,790,498,56 3

171,293,00 7

185,091,350

3,038,759,91 8

11,291,161,97 7

Book value at the end of year

8,545,463,99 4

1,928,233,71 1

69,802,388

88,186,388

4,391,095,88 5

15,022,782,36 6

Book value at the beginning of year

8,882,901,84 6

2,299,600,82 4

70,756,339

80,018,969

4,322,258,89 8

15,655,536,87 6

Provision Transfer-ou t to the investment property Disposition or scrapping Closing balance Book value

2015

226 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

15. Fixed assets (continued) Houses and buildings

Machinery equipment

Office electronic equipment

Transportati on tools (except for vessel)

Vessel

Total

11,604,062,9 41

7,619,840,7 61

224,037,85 6

299,095,591

5,787,470,5 98

25,534,507,7 47

-

92,012,999

22,587,196

10,147,948

92,568,573

217,316,716

22,188,417

79,192,802

348,905

806,376

1,163,973,8 44

1,266,510,34 4

transfer-i n this year

-

(854,863,28 1)

-

-

-

(854,863,281 )

Dispositio n or scrapping

(9,645,962)

(162,618,34 5)

(16,904,78 3)

(46,493,256)

-

(235,662,346 )

11,616,605,3 96

6,773,564,9 36

230,069,17 4

263,556,659

7,044,013,0 15

25,927,809,1 80

2,367,995,92 8

4,298,721,1 60

147,156,90 7

216,008,230

2,434,066,3 53

9,463,948,57 8

Original book value Opening balance Purchase Constructi on in progress transfer-i n Projects in process

Closing balance Accumulate d depreciati on Opening balance

227 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Provision

368,126,953

553,828,270

22,112,064

3,396,292

287,687,764

1,235,151,34 3

-

(233,392,84 0)

-

-

-

(233,392,840 )

Projects in process transfer-i n this year

228 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

15. Fixed assets (continued) Dispositio n or scrapping

(2,419,331)

(145,192,478 )

(9,956,136 )

(35,866,832 )

-

(193,434,777)

2,733,703,55 0

4,473,964,11 2

159,312,83 5

183,537,690

2,721,754,11 7

10,272,272,30 4

Book value at the end of year

8,882,901,84 6

2,299,600,82 4

70,756,339

80,018,969

4,322,258,89 8

15,655,536,87 6

Book value at the beginning of year

9,236,067,01 3

3,321,119,60 1

76,880,949

83,087,361

3,353,404,24 5

16,070,559,16 9

Closing balance Book value

As of Dec. 31, 2016,the fixed assets are regarded as loan mortgage: Loan Original price

Book value

Property

Amount

Machinery equipment

1,403,907,681

555,450,350

Long term payable

575,223,848

Vessel

2,532,724,844

1,882,864,040

Long term payable

1,507,146,538

3,936,632,525

2,438,314,390

2,082,370,386

As of Dec. 31, 2015,the fixed assets are regarded as loan mortgage: Loan Original price

Book value 229 / 507

Property

Amount

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Machinery equipment

688,768,652

542,853,378 Short term loan

230 / 507

500,000,000

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

15. Fixed assets (continued) Vessel

1,050,416,521

1,036,238,241

1,739,185,173

1,579,091,619

Long term payable

779,232,000

1,279,232,000

As of Dec. 31, 2016 and Dec. 31, 2015, book value of the fixed assets for operating lease:

Vessel

2016

2015

1,882,864,040

1,036,238,241

As of Dec. 31, 2016, fixed assets status of not completing the certificate of title is as follows:

House and building

Book value

Reasons for not completing the certificate of title

3,579,676,294

Property application procedures are still under approval

16. Construction in progress Dec. 31, 2016

Dec. 31, 2015

Booking balance

Provision for impairment

Booking balance

Booking balance

Provision for impairment

Booking balance

Nantong base infrastructure construction

53,892,601

-

53,892,601

29,440,311

-

29,440,311

Changxing base infrastructure

16,743,055

-

16,743,055

32,251,760

-

32,251,760

231 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

construction

232 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

16. Construction in progress (continued) Base heavy machinery and engineering equipment in construction

3,202,580,355

-

3,202,580,355

2,889,709,277

-

2,889,709,277

Office buildings and ancillary facilities

-

-

-

606,274

-

606,274

Shield machine parts project

55,402,134

-

55,402,134

-

-

-

Nanhui base infrastructure construction

5,888,313

-

5,888,313

3,893,441

-

3,893,44

690,943,003

-

690,943,003

621,470,441

-

621,470,441

4,025,449,461

-

4,025,449,461

3,577,371,504

-

3,577,371,504

Large mechanical transformation and upgrading project

Changes of the important projects under construction in 2016 are as follows: Budget

Nantong base infrastruct ure constructio

6,465,698,0 00

Opening balance

29,440,311

This increase

Transfer-in of fixed assets

28,515,986

233 / 507

-

Fixed assets transfer-in this year

Intangible assets transfer-in this year

(note V.15)

(note V.17)

(4,063,696)

-

Closing balance

53,892,601

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

n

234 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

16. Construction in progress (continued) Changxing base infrastruct ure constructio n

8,645,540,0 00

32,251,760

6,100,428

-

(21,609,133 )

-

16,743,055

Base heavy machinery and engineering equipment in constructio n

3,916,155,8 61

2,889,709,2 77

639,000,626

-

(322,437,12 3)

(3,692,425)

3,202,580,3 55

5,000,000

606,274

-

-

(606,274)

-

-

99,956,500

-

55,402,134

-

-

-

55,402,134

Nanhui base infrastruct ure constructio n

504,500,500

3,893,441

1,994,872

-

-

-

5,888,313

Large mechanical transformat ion and upgrading project

700,000,000

621,470,441

70,559,008

-

(1,086,446)

-

690,943,003

801,573,054

-

(349,802,67 2)

(3,692,425)

4,025,449,4 61

Office buildings and ancillary facilities Shield machine parts project

3,577,371,5 04

235 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Changes of the important projects under construction in 2015 are as follows:

236 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

16. Construction in progress (continued) Budget

Opening balance

This increase

Transfer-i n of fixed assets

Fixed assets transfer-in this year

Intangible assets transfer-in this year

(note V.15)

(note V.15)

(note V.17)

Closing balance

Nantong base infrastruct ure constructio n

6,465,698,0 00

22,012,970

20,262,621

-

(12,835,280)

-

29,440,311

Changxing base infrastruct ure constructio n

8,645,540,0 00

361,078,310

152,687,101

-

(17,014,084)

(464,499,56 7)

32,251,760

Base heavy machinery and engineering equipment in constructio n

3,419,155,8 61

2,422,182,7 64

1,699,302,5 21

-

(1,231,776,00 8)

-

2,889,709,2 77

5,000,000

355,140

5,136,106

-

(4,884,972)

-

606,274

504,500,500

3,157,532

735,909

-

-

-

3,893,441

Office buildings and ancillary facilities Nanhui base infrastruct ure constructio n Large mechanical transformat ion

237 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

and upgrading project Information system development

630,699,732

-

-

621,470,41 1

-

-

621,470,441

5,581,847

-

5,581,847

-

-

(5,581,847)

-

2,808,786,7 16

1,883,706,1 05

621,470,44 1

(1,266,510,34 4)

(470,081,41 4)

3,577,371,5 04

238 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

16. Construction in progress (continued) Changes of the important projects under construction in 2016 are as follows: Proport ion of project investm ent to budget

Project progress (Note 1)

Accumula tive amount of interest capitali zation

Among which: interest capitali zation for the current year

Interest capitali zation rate for the current year

Financia l sourcing

99%

99%

-

-

-

Owned funds and bank loans

Changxing base infrastructure construction

82%

82%

23,531,836

-

-

Owned funds and bank loans

Base heavy engineering construction

and in

87%

87%

96,492,705

-

-

Owned funds and bank loans

Office buildings and ancillary facilities

100%

100%

-

-

-

Owned funds

Shield machine parts project

55%

55%

268,297

268,297

4.75%

Bank loans

Nanhui base construction

91%

91%

-

-

-

Owned funds

99%

99%

-

-

-

Owned funds

120,292,83 8

268,297

Nantong base construction

infrastructure

machinery equipment

Owned funds and bank loans

infrastructure

Large mechanical transformation and upgrading project

239 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

16. Construction in progress (continued)

Proporti on of project investme nt to budget

Project progress (Note 1)

Accumula tive amount of interest capitali zation

Among which: interest capitali zation for the current year

infrastructure

99%

99%

-

-

-

Owned funds

Changxing base infrastructure construction

82%

82%

23,531,836

-

-

Owned funds

Base heavy engineering construction

machinery equipment

and in

82%

82%

96,492,705

-

-

Owned funds

engineering construction

equipment

in

Office buildings and ancillary facilities

99%

99%

-

-

-

Owned funds

Nanhui base construction

90%

90%

-

-

-

Owned funds

0%

0%

-

-

-

Owned funds

100%

100%

-

-

-

Owned funds

120,024,54 1

-

Nantong base construction

infrastructure

Interest Financia capitali l zation sourcing rate for the current year

Large mechanical transformation and upgrading project Information system development

240 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

16. Construction in progress (continued) Note 1: Project progress is estimated based on budget and accumulated input.

17. Intangible assets 2016 Land use right

Software usage fee

Patent right

Total

4,246,345,484

46,219,868

65,201,810

4,357,767,162

-

3,692,425

-

3,692,425

16,129,485

2,206,555

-

18,336,040

4,262,474,969

52,118,848

65,201,810

4,379,795,627

467,548,195

33,094,826

37,686,275

538,329,296

87,762,464

2,667,970

6,587,291

97,017,725

555,310,659

35,762,796

44,273,566

635,347,021

Book value at the end of year

3,707,164,310

16,356,052

20,928,244

3,744,448,606

Book value at the

3,778,797,289

13,125,042

27,515,535

3,819,437,866

Original value

book

Opening balance Construction progress transfer-in

in

Purchase Closing balance Accumulated amount amortization

of

Opening balance Provision amortization

or

Closing balance Book value

241 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

beginning of year

242 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

17. Intangible assets (continued) 2015 Land use right

Software usage fee

Patent right

Total

3,781,845,917

38,176,745

65,201,810

3,885,224,472

464,499,567

5,581,847

470,081,414

-

2,461,276

-

2,461,276

4,246,345,484

46,219,868

65,201,810

4,357,767,162

Opening balance

381,984,998

31,798,450

31,098,984

444,882,432

Provision or amortization

85,563,197

1,296,376

6,587,291

93,446,864

Closing balance

467,548,195

33,094,826

37,686,275

538,329,296

Book value at the end of year

3,778,797,289

13,125,042

27,515,535

3,819,437,866

Book value at the beginning of year

3,399,860,919

6,378,295

34,102,826

3,440,342,040

Original value

book

Opening balance Projects process

in

Purchase Closing balance Accumulated amount of amortization

Book value

243 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

17. Intangible assets (continued) In 2016, the Group totally expended RMB 851,544,356 Yuan on R&D (2015:717,412,492 Yuan, see Note V (48)).The expenses are not capitalized. Above mentioned intangible assets do not include any expenditure on R&D. As of Dec. 31, 2016, there is no mortgage of the loan in the intangible assets. As of Dec. 31, 2016, intangible assets of not completing the certificate of title is as follows:

Land use rights

Book value

Reasons for not completing the certificate of title

463,005,986

Property application procedures are still under approval

18. Goodwill 2016 Opening balance Addition report in current year period Shanghai Zhenhua Heavy Industries Qidong Marine Co., Ltd

149,212,956

-

Deduction Closing balance report year in current year -

149,212,956

2015 Opening balance Addition report in current year period Shanghai Zhenhua Heavy Industries

149,212,956

-

244 / 507

Deduction Closing balance report year in current year -

149,212,956

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Qidong Marine Co., Ltd

245 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

18. Goodwill (continued) The goodwill added in report period is caused by purchase shares of Shanghai Zhenhua Heavy Industries Qidong Ocean Engineering Co., Ltd. in 2014. As of Dec, 31, 2016, the Group did not accrue the goodwill impairment preparation. In impairment testing, the book value of the goodwill is allocated to asset group benefited from synergistic effect of expected enterprise consolidation. The collectable amount in assets group is measured based on five-year period approved by management and in cash flow forecast method. Cash flow over 5-year period is calculated based on estimated growth rate. Key hypotheses of future cash flow discount method: Growth rate in predictive period

7.41%-12.50%

Sustainable growth rate

3%

Gross profit rate

11.75%-13.70%

Discount rate

11%

The weighted average growth rate adopted by management is in accordance with the forecast data in industrial report and does not exceed the industrial long-term average growth rate. The management determines gross rate according to forecast to historical experience and market development and adopts pre tax rate which can reflect related assets group with specific risks as discount rate. Above hypothesis is used to analyze collectable amount of assets group. 19. Long-term unamortized expenses 2016

246 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

19. Long-term unamortized expenses (continued)

Fixed assets under operating lease

Opening balance

Addition report year

Deduction report year

Other decrease

Closing balance

4,592,043

9,545,510

(3,256,290)

-

10,881,263

Opening balance

Addition report year

Deduction report year

Other decrease

Closing balance

-

4,604,044

(12,001)

-

4,592,043

2015

Fixed assets under operating lease

20. Deferred corporate tax assets and liabilities Deferred corporate tax assets before offset 2016

Assets impairment provision Profit realized

not in

2015

Deductible

Deferred

Deductible

Deferred

temporary difference and losses

corporate tax assets

temporary difference and losses

corporate tax assets

3,034,109,090

455,116,363

2,071,800,834

310,888,702

141,961,692

22,041,889

-

-

247 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

internal trading Expected liabilities

285,223,845

42,783,577

248 / 507

214,619,364

32,339,037

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

20. Deferred corporate tax assets and liabilities (continued) Salaries and wages unpaid Unpaid interest

27,802,006

4,170,301

286,998,209

43,049,731

128,368,841

19,255,326

274,442,941

41,166,441

-

-

24,918,115

3,772,318

-

-

96,571,793

15,934,346

47,536,247

7,130,437

53,508,679

12,307,170

6,815,216

1,022,282

123,919,655

18,918,211

3,671,816,937

551,520,175

3,146,779,590

478,375,956

Fair value change that the financial debts are measured at fair value change with its change accounted in current profit and loss Fair value changes of available-for-sale financial assets Deferred income Deductible deficit

Deferred corporate tax liabilities before offset:

Fixed

assets

Tax payable

Tax payable

Tax payable

Tax payable

provisional difference

corporate tax liabilities

provisional difference

corporate tax liabilities

409,482,226

74,116,286

359,472,141

59,312,902

249 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

depreciation

250 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

20. Deferred corporate tax assets and liabilities (continued) Fair value change that the financial debts are measured at fair value change with its change accounted in current profit and loss

4,615,775

692,369

676,082

108,672

Fair value changes of available-for-sale financial assets

332,937,152

50,495,661

328,113,620

49,370,483

Asset evaluation increment from enterprise merger not under the same control

166,224,963

24,933,745

177,210,567

26,581,585

913,260,116

150,238,061

865,472,410

135,373,642

Net value of deferred corporate tax assets and deferred corporate tax liabilities after offset: 2016

2015

Deferred Deferred corporate tax corporate tax assets and assets and liabilities liabilities closing offset closing balance amount after offset

Deferred Deferred corporate tax corporate tax assets and assets and liabilities liabilities closing offset closing balance amount after offset

251 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Deferred corporate assets

tax

Deferred corporate tax liabilities

46,073,488

505,446,687

65,330,657

413,045,299

46,073,488

104,164,573

65,330,657

70,042,985

252 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

20. Deferred corporate tax assets and liabilities (continued) Details of unacknowledged deferred corporate tax assets:

Deductible deficit

2016

2015

1,276,126,566

1,352,502,582

Deductible loss of unacknowledged deferred corporate tax assets will be mature in the year as follows: 2016

2015

2016

-

132,359,784

2017

185,000,368

239,989,509

2018

262,745,183

262,745,183

2019

341,404,744

341,568,548

2020

373,462,715

375,839,558

2021

113,513,556

-

1,276,126,566

1,352,502,582

21. Assets impairment provision 2016 Opening balance

This provision

This decrease

Closing balance

transfer-back Reseller/cancel after verification Provision 1,164,911,298 219,476,506

(4,997,815) 253 / 507

(1,838,664) 1,377,551,325

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

for bad debts

254 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

21. Assets impairment provision (continued) In which: Receivables Other receivables Expected contract loss Inventory falling reserves

1,136,848,7 61

209,863,641

(4,997,815)

(1,838,664)

1,339,875,9 23

28,062,537

9,612,865

-

-

37,675,402

389,393,155

(186,569,70 6)

(154,449,19 8)

451,818,774

568,152,935

896,936,113

(93,122,078 )

(94,388,087 )

1,277,578,8 83

30,000,000

-

-

-

30,000,000

2,166,508,7 56

1,505,805,7 74

(284,689,59 9)

(250,675,94 9)

3,136,948,9 82

403,444,523

price

Provision for impairment of financial assets available-for-sa le

2015 Opening balance

This provision

This decrease

transfer-back Reseller/cancel after verification Provision for bad debts 885,276,541 289,433,716

9,798,959 255 / 507

1,164,911,298

Closing balance

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

In which: Receivables 858,128,277 287,019,897

(8,299,413)

- 1,136,848,761

Other receivables

(1,499,546)

-

27,148,264

2,413,819

256 / 507

28,062,537

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

21. Assets impairment provision (continued) Expected contract loss

304,907,62 313,017,945 4

Inventory falling reserves

158,448,21 515,304,117 6

price

-

(214,481,04 6)

403,444,523

(105,599,39 8)

-

568,152,935

-

-

-

30,000,000

1,743,598,6 752,789,55 03 6

(115,398,35 7)

(214,481,04 6)

2,166,508,7 56

Provision for impairment of financial assets available-for-sa le

30,000,000

22. Short term loans 2016

2015

4,390,096

-

2,863,171,000

2,842,115,536

-

500,000,000

18,618,358,297

14,874,812,954

21,485,919,393

18,216,928,490

Pledged loans(i) Mortgage loans(ii) Guaranteed loans(iii) Credit loans

As of Dec. 31, 2016, the annual interest rate of the above loans is from 0.81% - 5.65%, (Dec. 31, 2015: 1.12% - 6.00%). (i). As of Dec. 31, 2016, RMB 4,390,096 Yuan (Dec. 31, 2015: none) of bank pledged loan is the bank acceptance bill discount, see Note V (3). 257 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

(ii). As of Dec. 31, 2016, bank guarantee loan USD 191,500,000 in RMB1,328,435,500 Yuan (Dec. 31, 2015: USD 207,260,000, in RMB 1,345,863,536Yuan), is the bank loan by the Company’s subsidiary guaranteed with the letters of guarantee issued, within the credit lines awarded to the Company. As of Dec. 31, 2016, bank guarantee loan USD 91,500,000, in RMB634,735,500 Yuan (Dec. 31, 2015: USD 195,000,000, in RMB 1,266,252,000Yuan), is the bank loan of the Company’s subsidiary, guaranteed by the Company, and the Company will provide the credit guarantee.

258 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

22. Short term loans (continued) As of Dec. 31, 2016, the bank guarantee loan of 900,000,000 Yuan is the loan borrowed from the subsidiary, and the Company provides the guarantee (Dec. 31,2015: 230,000,000 Yuan is the loan borrowed from the subsidiary, and the Company provides the credit guarantee. (iii). As of Dec. 31, 2015, the bank mortgage loan of 500,000,000 Yuan is obtained by mechanical equipment with book value of 542,853,378 Yuan (Original price of688,768,65 Yuan) (Note V (15)) selling to CCCC Financial Rental Co., Ltd and bank in way of rental after sales. The loan term is 1 year. The loan has been paid back on Dec. 6, 2016. 23. Measured at fair value and the changes are recorded into the profits and losses of the current financial liabilities 2016

2015

-

24,918,115

2016

2015

1,905,121,706

1,785,201,236

2016

2015

purchase and manufacturing

4,853,217,936

5,221,670,634

Equipment purchase payables

121,413,650

136,011,638

86,257,192

73,171,633

Trading liabilities

financial

Financial derivative assets 24. Notes payable

Bank acceptance draft 25. Accounts payable

Material product payables

Infrastructure

building

259 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

payables Retention payables

37,826,248

34,726,344

Port use payables

4,303,871

5,560,773

5,103,018,897

5,471,141,022

260 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

25. Accounts payable (continued) Accounts payable analyzed by age: 2016 Amount

2015 Proportion in Amount total

Proportion in total

Within one year

3,749,654,509

73%

4,233,618,165

77%

Above one year

1,353,364,388

27%

1,237,522,857

23%

5,103,018,897

100%

5,471,141,022

100%

By Dec. 31, 2016, accounts payable aging above 1 year mainly being payables of imported parts. 26. Prepayment received

Goods sale received

prepayment

2016

2015

292,941,206

423,603,129

Prepayment received analyzed by age: Dec. 31, 2016

Dec. 31, 2015

Amount

Proportion in total

Amount

Proportion in total

Within one year

268,730,790

92%

348,798,640

82%

Above one year

24,210,416

8%

74,804,489

18%

292,941,206

100%

423,603,129

100%

By Dec. 31, 2016, accounts payable aging above 1 year mainly being payables of hull 261 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

construction payments and spare parts payments received in advance that has not been settled yet.

262 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

27. Salary payable 2016 Short-term pay

2015 263,414,249

256,306,845

1,135,507

1,515,765

264,549,756

257,822,610

Welfare after resignation defined drawing plan

Short-term pay listing: 2016 Opening balance in current year

Addition report period

Deduction report year

Closing balance in current year

222,647,867

1,223,482,995

(1,217,155,923)

228,974,939

-

24,847,047

(24,847,047)

-

Social security

747,129

123,657,388

(123,783,841)

620,676

Including: medical insurance

614,763

104,976,902

(105,076,510)

515,155

Labor injury fund

98,397

8,787,233

(8,812,499)

73,131

Birth insurance

33,969

9,893,253

(9,894,832)

32,390

435,294

113,233,900

(113,205,494)

463,700

32,476,555

19,136,815

(18,258,436)

33,354,934

-

8,424,852

(8,424,852)

-

Salary, allowance subsidy

bonus, and

Staff welfare

Housing fund Labor union fund and staff education expenditure Others

263 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued) 256,306,845

1,512,782,997

264 / 507

(1,505,675,593)

263,414,249

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

27. Salary payable (continued) 2015 Opening balance Addition report in current year period Salary, bonus, allowance and subsidy Staff welfare

210,975,170

Deduction Closing balance report year in current year

1,147,483,869 (1,135,811,172)

222,647,867

-

31,565,042

(31,565,042)

-

Social security

928,094

112,537,032

(112,717,997)

747,129

Including: medical insurance

757,763

95,224,571

(95,367,571)

614,763

Labor fund

111,984

9,306,893

(9,320,480)

98,397

58,347

8,005,568

(8,029,946)

33,969

512,785

97,350,291

(97,427,782)

435,294

31,121,189

16,234,764

(14,879,398)

32,476,555

188,225

11,997,705

(12,185,930)

-

1,417,168,703 (1,404,587,321)

256,306,845

injury

Birth insurance Housing fund Labor union fund and staff education expenditure Others

243,725,463 Listings of setting drawing plan:

265 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

27. Salary payable (continued) 2016 Opening balance Addition report in current year period Basic pension insurance Unemployment insurance expense Enterprise’s annuity payment

Deduction Closing balance report year in current year

1,429,703

216,311,014

(216,661,564)

1,079,153

-

48,394,936

(48,394,936)

-

86,062

11,665,639

(11,695,347)

56,354

1,515,765

276,371,589

(276,751,847)

1,135,507

2015 Opening balance Addition report in current year period Basic pension insurance Unemployment insurance expense Enterprise’s annuity payment

Deduction Closing balance report year in current year

1,719,925

194,575,647

(194,865,869)

1,429,703

-

66,460,214

(66,460,214)

-

117,547

13,541,199

(13,572,684)

86,062

1,837,472

274,577,060

(274,898,767)

1,515,765

266 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

28. Taxes and charges payable 2016

2015

72,920,316

36,379,940

-

105,775,332

142,223,431

46,989,244

4,734,973

4,664,656

2,720,271

8,832,871

2,561,018

6,664,267

25,840,715

42,244,696

251,000,724

251,551,006

2016

2015

Interest on corporate bond

61,068,417

197,867,828

Interest on loan payable

79,127,386

91,722,905

140,195,803

289,590,733

2016

2015

CCCC Tianjin Dredging Co., Ltd

25,079,494

25,079,494

CHUWA BUSSAN company limited

6,269,873

6,269,873

VAT Business tax Corporate income tax Individual income tax Urban maintenance construction tax

and

Educational surtax Others

29. Interest payable

30. Dividends payable

267 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

268 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

30. Dividends payable (continued) Hong Kong Zhenhua Engineering Co., Ltd

346,005

346,005

Macau Zhenhua Harbor Engineering Co., Ltd

6,593

6,593

China Communications Corporation

-

502,283

Access Engineering Plc.

-

33,664

31,701,965

32,237,912

As of Dec. 31, 2016, the dividends payable over one 1 year is RMB 31,701,965 Yuan (Dec. 31, 2015: RMB 542,540 Yuan) is the Group actual payments that the minority shareholders of related party’s required. 31. Other payables 2016

2015

Related parties loans

523,000,000

1,118,000,000

Construction deposit

278,510,650

205,692,211

CCCC investment payment(i)

100,971,833

100,971,833

Related parties payables

308,637,187

50,158,344

-

25,997,127

14,015,758

103,703,871

1,225,135,428

1,604,523,386

Tax to be carried forward Others

(i). The Group completed the cancellation of a subsidiary during the year 2011.The balance of 25,971,833 Yuan shall be accounted into the payable by the Group attributable 269 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

to shareholders of the subsidiary of another CCCC liquidation of the investment; meanwhile, the Group completed the acquisition of subsidiary of CCC in 2015. The balance of 75,000,000 Yuan is the payment of the Group to CCC.

270 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

31. Other payables (continued) Other accounts payable analyzed by age: Dec. 31, 2016

Dec. 31, 2015

Amount

Proportion

Amount

Proportion

Within one year

978,705,261

80%

1,468,169,962

92%

Above one year

246,430,167

20%

136,353,424

8%

1,225,135,428

100%

1,604,523,386

100%

As of Dec. 31, 2016, other payables aged over one year mainly payables to related parties, deposits to outsourced construction team and quality guarantee deposit received. 32. Non-current liabilities due within one year 2016

2015

270,000,000

2,977,796,000

due

-

3,799,949,635

Non-current liabilities due within one year (Note V.35)

529,574,356

59,370,057

799,574,356

6,837,115,692

Less: long-term loan within one year (Note V.34) Less: bonds payable within 1 year

Bonds payable Approved by the Z.S.X.Z. (2011) MTN25 Document “Acceptance Notice of the National Association of Financial Market Institutional Investors” of National Association of Financial Market Institutional Investors, the Company issued a medium - term note of RMB 3,800, 000.00 Yuan on February 24, 2011. The term of this medium - term note is 5 years, and the annual interest rate is 5. 85% each year. The bond issue costs are paid annually. The bond has no collateral or security and is fully repaid in February 2016. 271 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

As of December 31, 2016, the balance of bonds payable is as follows:

272 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

32. Non-current liabilities due within one year (continued) Total face value

Issue cost

Opening balance

Amortization of this year's issuance cost

This repayment

Closing balance

3,800,000,000

(56,450,000)

3,799,949,635

50,365

(3,800,000,00 0)

-

Issued in 2011 Note of first mid-term

As of December 31, 2015, the balance of bonds payable is as follows: Total face value

Issue cost

Opening balance

Amortization of this year's issuance cost

This repayment

Closing balance

3,800,000,000

(56,450,000)

3,799,615,401

(11,400,000)

11,734,234

3,799,949,635

Issued in 2011 Note of first mid-term

33. Other current liabilities 2016

2015

Short-term financing securities of the first term of 2016

1,998,695,891

-

Super short-term financing securities of the first term of 2016

1,997,329,444

-

Short-term financing securities of the first term of 2015

-

1,995,655,739

3,996,025,335

1,995,655,739

273 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Related detail of short-term bonds payable is as follow:

274 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

33. Other current liabilities (continued) Face value

Issue cost Amortization of issue cost

December 31, 2016

Issued in 2016 Short-term financing securities of the first term

2,000,000,000

(4,000,000)

2,695,891

1,998,695,891

Super short-term financing securities of the first term

2,000,000,000

(3,450,000)

779,444

1,997,329,444

Issue cost Amortization of issue cost

December 31, 2015

Face value

Issued in 2015 Short-term financing securities of the first term

2,000,000,000

(5,000,000)

655,739

1,995,655,739

As approved by the No.CP47925 "China Inter-bank Market Dealers Association File Receiving Registration Notice" issued by China inter-bank market dealers association in the City Association (2014) , the Company can issue registered amount of RMB 5,000,000,000Yuan short-term financing bonds, the registered amount shall be valid for 2 years from Dec. 3, 2014. As approved by the No.SCP321 "China Inter-bank Market Dealers Association File Receiving Registration Notice" issued by China inter-bank market dealers association in the City 275 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Association (2016) , the Company can issue registered amount of RMB 10,000,000,000Yuan super short-term financing bonds, the registered amount shall be valid for 2 years from Oct. 19, 2016. The Company issued RMB 2,000,000,000 Yuan short-term financing bonds on Nov. 11, 2015, the note term is 1 year, and the fixed annual interest is 3.5%, capital with interest shall be repaid at one time at maturity. The short term financing bonds has been expired in November 2016 and has been paid up.

276 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

33. Other current liabilities (continued) The Company issued RMB 2,000,000,000 Yuan short-term financing bonds of the first term on April 28, 2016, the note term is 1 year, and the annual interest of face value is 3.7%, capital with interest shall be repaid at one time on April 29, 2017. The Company issued RMB 2,000,000,000 Yuan super short-term financing bonds of the first term on Oct. 28, 2016.The note term is 270 days, and the annual interest of face value is 3.2%, capital with interest shall be repaid at one time on Friday, July 28, 2017. The bonds above have no mortgage or security. 34. Long term loans 2016

2015

3,121,485,497

2,492,700,000

Mortgage loans(i)

346,850,000

60,000,000

Pledged loans(ii)

727,000,000

2,187,000,000

4,195,335,497

4,739,700,000

Guaranteed loans

-

(60,000,000)

Credit loans

-

(1,714,296,000)

(270,000,000)

(1,203,500,000)

(270,000,000)

(2,977,796,000)

3,925,335,497

1,761,904,000

Credit loans

Less: long-term loan within one year

Mortgage loans

As of Dec. 31, 2016, the annual interest rate of the above loans is from 1.20% - 6.89%, (Dec. 31, 2015: 1.20% - 6.91%). As of Dec. 31, 2016, the bank guarantee loan of 346,850,000 Yuan is the loan borrowed 277 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

from the subsidiary, and the Company provides the guarantee. The interest is paid quarterly; the principal shall be paid on July 27, 2018.

278 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

34. Long term loans (continued) As of Dec. 31, 2015, the bank guarantee loan of 60,000,000 Yuan is the loan borrowed from the subsidiary, and the Company’s related company (CCCC Tianjin Waterway Bureau Co., Ltd.) provides the guarantee. The interest is paid quarterly, the principal shall be paid on Feb. 22, 2016 and August 22, 2016. (ii). As of Dec. 31, 2016, multiple pledge loans of the bank is 727,000,000 Yuan (Dec. 31, 2015: RMB 2,187,000,000 Yuan) in total as pledge of the wholly-owned subsidiary of the Group - Nanjing Ninggao New Channel Construction Co., Ltd. “construction-transfer” project long-term receivable in whole amount (Note V (12)).The interest is paid quarterly, the principal shall be paid between June 21, 2017 and Nov. 25, 2018 (Dec 31, 2015: the principal shall be paid between June 21, 2016 and Nov. 25, 2018). 35. Long-term payable

Sale-leaseback funds(i)

financing

“Construction-transfer” project funds(ii) Less: sale-leaseback financing funds due within one year (Note V.32)

2016

2015

2,082,370,386

779,232,000

65,565,134

-

(529,574,356)

(59,370,057)

1,618,361,164

719,861,943

(i). As of Dec. 31, 2016, the long-term payable of RMB 2,082,370,386 Yuan (Dec. 31, 2015: 779,232,000) is obtained by vessel with book value of RMB 1,882,864,040 Yuan (Dec. 31, 2015: RMB 1,036,238,241 Yuan) (Note V (15)) and the mechanical equipment with book value of RMB 555,450,350 Yuan (Dec. 31, 2015: None (Note V (15)) selling to financing lease company and bank in way of rental after sales. The financing term is 4 to 6 years (Dec. 31, 2015: 6 years).The Group pays the sale-leaseback financing funds to financing lease company every year on schedule in accordance with the Contract terms. The Group will take the trade as the mortgage loan. 279 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

(ii). The Company’s subsidiary and the Construction Party of “construction-transfer” project construction agreed that part of the project payments will be paid to the Construction Party after the final acceptance of the “construction-transfer” project within a certain term. The Group expects that the above “Construction-transfer” project funds will be paid in 2019.

280 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

36. Estimated liabilities 2016 Opening balance Addition report in current year period Estimated aftersales service cost

Deduction Closing balance report year in current year

216,306,557

235,780,889

(161,871,330)

290,216,116

Product quality guarantee

1,176,471

-

(934,954)

241,517

Others

2,658,150

-

-

2,658,150

220,141,178

235,780,889

(162,806,284)

293,115,783

2015 Opening balance Addition report in current year period Estimated aftersales service cost

Deduction Closing balance report year in current year

200,563,933

183,742,973

(168,000,349)

216,306,557

Product quality guarantee

2,466,240

306,368

(1,596,137)

1,176,471

Pending litigation arbitration

5,725,890

-

(5,725,890)

-

3,488,353

-

(830,203)

2,658,150

212,244,416

184,049,341

(176,152,579)

220,141,178

or

Others

37. Deferred income 281 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

2016

282 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

37. Deferred income (continued) Opening balance Addition report in current year period Government grants Land compensation

Deduction Closing balance report year in current year

323,237,563

70,020,819

(22,478,059)

370,780,323

82,188,384

-

(1,932,683)

80,255,701

405,425,947

70,020,819

(24,410,742)

451,036,024

2015 Opening balance Addition report in current year period Government grants Land compensation

Deduction Closing balance report year in current year

256,227,380

115,204,307

(48,194,124)

323,237,563

84,120,528

-

(1,932,144)

82,188,384

340,347,908

115,204,307

(50,126,268)

405,425,947

As of December 31, 2016, the liabilities projects involved government grants are as follow: Opening New Amounts balance subsidies of included in the current non-operating period income in the current period Non-operating 283 / 507

Other changes

Closing balance

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

income Lifting cable layout vessel R&D project

92,500,000

-

284 / 507

-

-

92,500,000

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

37. Deferred income (continued) Submarine pipeline laying R&D project

43,125,500

-

(2,000,000)

-

41,125,500

Automated dock R&D project

25,620,000

-

-

-

25,620,000

Floating crane R&D project

19,510,000

-

-

-

19,510,000

Intelligent equipment for container yard

5,985,000

12,600,000

-

(640,000)

17,945,000

Research project of deep water drilling ship and related equipment

5,360,000

9,500,000

-

-

14,860,000

50000 ton semi-submersible ship R&D projects

14,000,000

-

-

-

14,000,000

Drilling platform development project

13,650,000

3,040,000

-

(3,880,000)

12,810,000

8,000,000

2,000,000

-

-

10,000,000

Transportation positioning system R&D project

285 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

37. Deferred income (continued) Comprehensive standardization of intelligent manufacturing for marine

5,300,000

4,700,000

-

-

10,000,000

Large underwater manipulator system equipment R&D

7,000,000

3,000,000

-

(792,000)

9,208,000

10,250,000

-

(1,057,661)

-

9,192,339

8,000,000

400,000

-

-

8,400,000

-

8,000,000

-

-

8,000,000

17,900,000

-

(10,700,000)

-

7,200,000

Marine engineering positioning system R&D project Drilling package project

R&D

Marine manufacturing process optimization R&D project Nantong Drive R&D projects

286 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

37. Deferred income (continued) Intelligent transportation system of Automatic Guided Vehicle (AGV)

-

6,000,000

-

-

6,000,000

CCC DCM ship achievement transformation project

-

7,000,000

(1,093,750)

-

5,906,250

Development and industrialization of large deep water crane piping ship

5,340,000

232,000

-

-

5,572,000

Self-elevating platform central control system

-

3,500,000

-

-

3,500,000

Special gear shaft for port machinery Finishing intelligent production line

-

3,200,000

-

(640,000)

2,560,000

Intelligent electric differential traction bridge crane

-

2,030,000

-

(586,000)

1,444,000

287 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

37. Deferred income (continued) Other R&D projects

41,697,063

4,818,819

(960,751)

(127,897)

45,427,234

Other R&D projects

323,237,563

70,020,819

(15,812,162)

(6,665,897)

370,780,323

As of December 31, 2015, the liabilities projects involved government grants are as follow: Opening New Amounts balance subsidies of included in the current non-operating period income in the current period

Other changes

Closing balance

Non-operating income Lifting cable layout vessel R&D project

94,050,000

-

-

(1,550,000)

92,500,000

Submarine pipeline laying R&D project

23,901,800

25,100,000

-

(5,876,300)

43,125,500

Automated dock R&D project

21,900,000

4,320,000

-

(600,000)

25,620,000

Floating crane R&D project

19,510,000

-

-

-

19,510,000

288 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Nantong Drive R&D projects

8,700,000

9,200,000

289 / 507

-

-

17,900,000

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

37. Deferred income (continued) 50000 ton semi-submersible ship R&D projects

-

14,000,000

-

-

14,000,000

Drilling platform development project

13,850,000

-

(200,000)

-

13,650,000

Marine engineering positioning system R&D project

10,250,000

-

-

-

10,250,000

Transportation positioning system R&D project

8,000,000

-

-

-

8,000,000

Drilling package R&D project

8,000,000

-

-

-

8,000,000

Large underwater manipulator system equipment R&D

-

7,000,000

-

-

7,000,000

Intelligent equipment for container yard

-

7,200,000

-

(1,215,000)

5,985,000

290 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

37. Deferred income (continued) Research project of deep water drilling ship and related equipment

-

16,000,000

Development and industrialization of large deep water crane piping ship

5,340,000

Comprehensive standardization of intelligent manufacturing for marine

-

Other R&D projects

42,725,580

- (10,640,000)

5,360,000

-

-

-

5,340,000

10,000,000

-

(4,700,000)

5,300,000

22,384,307 (21,569,924)

(1,842,900)

41,697,063

256,227,380 115,204,307 (21,769,924) (26,424,200) 323,237,563 The above-mentioned government subsidy is related to the income. Other changes in this year are the research and development subsidies allocated to the partners under the cooperative R & D agreement. Land compensation funds shall be compensated by the Company’s subsidiaries. The amount of compensation shall be amortized on average for 50 years. 38. Other non-current liabilities

Stay - recognition tax

2016

2015

56,025,416

-

291 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

38. Other non-current liabilities (continued) During the “Construction - Transfer” project, the Group adopts the construction contract to calculate its income. At the date of the balance sheet, the income of part of the construction contract and interest income have not reached the time point of the value - added tax obligation. The end - of - term credit balance of such accounting items as “tax for tax payable - to - transferred output tax” shall be classified by the “tax payable” to “other non - current liabilities” in the balance sheet at the end of 2016 in, accordance with the requirements of “Provisions on Treatment of Value - added Tax Accounting” in 2016 (according to the Accounting Regulations 2016). 39. Capital stock 2016 Opening balance

Change in this year

Closing balance

issuing new shares

stock dividend

Accumulation fund turn add

Other

subtotal

Unlimited shares sold conditions -RMB ordinary shares

2,768,331,384

-

-

-

-

-

2,768,331,384

Foreign share

1,621,963,200

-

-

-

-

-

1,621,963,200

4,390,294,584

-

-

-

-

-

4,390,294,584

2015 Opening balance

Change in this year

292 / 507

Closing balance

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued) issuing new shares

stock dividend

Accumulation fund turn add

293 / 507

Other

subtotal

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

39. Capital stock (continued) Unlimited shares sold conditions -RMB ordinary shares

2,768,331,384

-

-

-

-

-

2,768,331,384

-Foreign share

1,621,963,200

-

-

-

-

-

1,621,963,200

4,390,294,584

-

-

-

-

-

4,390,294,584

40. Capital reserve 2016 Opening balance Addition report in current year period Capital premium

stock

Deduction Closing balance report year in current year

5,415,833,470

-

-

5,415,833,470

(16,203,111)

-

-

(16,203,111)

-

-

(711,345)

Other capital surplus -Business Combination under Common Control

-Purchasing of (711,345) minority interest of subsidiaries 294 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

-Transfer-in of capital reserve

128,059,561

-

-

128,059,561

5,526,978,575

-

-

5,526,978,575

295 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

40. Capital reserve (continued) 2015 Opening balance Addition report in current year period Capital premium

stock

Deduction Closing balance report year in current year

5,415,833,470

-

-

5,415,833,470

-Business Combination under Common Control

195,060,000

-

(211,263,111)

(16,203,111)

-Purchasing of minority interest of subsidiaries

(711,345)

-

-

(711,345)

-Transfer-in of capital reserve

128,059,561

-

-

128,059,561

5,738,241,686

-

(211,263,111)

5,526,978,575

Other capital surplus

41. Other comprehensive income Accumulative balance of other comprehensive income attributable to the parent company in the balance sheet:

296 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

41. Other comprehensive income (continued) January 1

Change December 31,

2015

2015

Change

December 31 2016

Other comprehensive income that will be reclassified into gains and losses subsequently -Portion of other comprehensive income to be reclassified as profit or loss under equity method

-

1,256,397

1,256,397

4,801,990

6,058,387

-Fair value change profit or loss of financial assets available for sale

321,642,049 (123,536,363)

198,105,686

84,335,801

282,441,487

-Converted difference in Foreign Currency

(2,102,007)

8,298,154

25,605,643

33,903,797

10,400,161

297 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Statements 319,540,042 (111,879,805)

207,660,237

298 / 507

114,743,434

322,403,671

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

41. Other comprehensive income (continued) Amount incurred by other comprehensive income in the income statement: 2016 Amount incurred

Less: it was included in other

Less:income

Parent

Minority stockholder's

before tax

comprehensive income at prior period

tax

company

interest

-

4,801,990

-

and was transferred into profit and loss at current period Other comprehensive income that will be reclassified into gains and losses subsequently -Portion of other comprehensive income to be reclassified as profit or loss under equity method Fair value change profit or loss of

4,801,990

-

299 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

financial assets available sale

for

300 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

41. Other comprehensive income (continued) -Fair value change profit or loss of financial assets available for sale -Converted difference Foreign Currency Statements

101,395,326

-

17,059,525

84,335,801

-

33,370,647

-

-

25,605,643

7,765,004

139,567,963

-

17,059,525

114,743,434

7,765,004

Amount incurred

Less: it was included in other

Less:income

Parent

Minority stockholder's

before tax

comprehensive income at prior period

tax

company

interest

in

2015

and was transferred into profit and loss at current period Other comprehensive income that will be reclassified 301 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

into gains and losses subsequently

302 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

41. Other comprehensive income (continued) -Portion of other comprehensive income to be reclassified as profit or loss under equity method Fair value change profit or loss of financial assets available for sale

1,256,397

-

-

1,256,397

-

Fair value change profit or loss of financial assets available for sale

280,878,768

363,049,437

41,365,694

(123,536,363)

-

15,709,264

-

-

10,400,161

5,309,103

297,844,429

363,049,437

41,365,694

(111,879,805)

5,309,103

-Converted difference Foreign Currency Statements

in

42. Specialized reserve 2016 Opening balance Addition report 303 / 507

Deduction Closing balance

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Safety production costs

in current year

period

-

26,851,099

report year in current year (26,851,099)

-

According to the relevant requirements of the “Administrative Measures for the Extraction and Use of Safety in Production of Enterprises”, enterprises engaged in large - scale machinery manufacture, construction engineering construction, etc., shall draw safe production costs according to the standards. Increase and decrease the safety production cost of this year in accordance with relevant requirements.

304 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

43. Surplus reserve 2016 Opening balance Addition report in current year period Surplus reserves Other surplus reserve

Deduction Closing balance report year in current year

1,283,722,118

27,022,196

-

1,310,744,314

292,378,668

-

-

292,378,668

1,576,100,786

27,022,196

-

1,603,122,982

2015 Opening balance Addition report in current year period Surplus reserves Other surplus reserve

Deduction Closing balance report year in current year

1,262,227,357

21,494,761

-

1,283,722,118

292,378,668

-

-

292,378,668

1,554,606,025

21,494,761

-

1,576,100,786

According to P. R. China Company Law, the Company’s Article of Association and board meeting decisions, the Company accrues 10% of its net profit as statutory surplus reserve. When statutory surplus reserve accumulated reached50% of the Capital stock, the Company can stop accruing. Statutory surplus reserve can be used to compensate loss upon approval, or to increase Capital stock. The Company′s statutory surplus reserve is RMB 27,022,196 Yuan in 2016(2015: RMB 21,494,761 Yuan).

305 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

44. Undistributed profit 2016

2015

Undistributed profit at beginning of the period

3,168,538,701

2,987,813,174

Net profit attributable to parent company

212,419,946

212,411,967

surplus

(27,022,196)

(21,494,761)

dividends

-

(10,191,679)

Undistributed profit at end of the period

3,353,936,451

3,168,538,701

Less: statutory reserve Common payable

stock

45. Operating income and operating cost 2016

Main operations Other operations

2015

Income

Cost

Income

Cost

24,143,396,762

19,525,829,470

23,014,315,324

19,473,230,285

204,691,166

201,834,405

258,079,353

244,084,570

24,348,087,928

19,727,663,875

23,272,394,677

19,717,314,855

Major operating income and operating cost are listed as follows:

306 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

45. Operating income and operating cost (continued) 2016

2015

Major operating Major operating Major operating Major operating income cost income cost Container cranes

17,082,391,036

13,067,811,357

14,994,515,929

12,039,998,425

Bulk machinery

3,154,983,915

3,054,772,000

2,013,370,826

1,862,388,384

Heavy equipment

1,284,872,909

1,279,775,256

3,985,411,881

3,950,151,042

Steel structures and related income

1,035,829,290

938,105,979

826,175,120

796,465,278

“Construction – transfer” Item

1,005,087,825

1,019,082,565

514,064,790

447,701,799

Vessel shipping and others

580,231,787

166,282,313

680,776,778

376,525,357

24,143,396,762

19,525,829,470

23,014,315,324

19,473,230,285

Other operating income and other operating cost 2016

2015

Other operating Other operating Other operating Other operating income cost income cost Sales materials Equipment leasing

of

81,273,472

139,919,381

132,403,534

146,110,137

123,417,694

61,915,024

125,675,819

97,974,433

and 307 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

others 204,691,166

201,834,405

308 / 507

258,079,353

244,084,570

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

46. Business taxes and surcharges 2016

2015

47,494,080

10,974,073

15,645,413

6,074,911

Educational surtax

12,504,639

5,496,235

House property tax

48,028,255

-

Land use tax

16,874,815

-

Stamp tax

9,661,367

-

Others

1,967,268

2,004,960

152,175,837

24,550,179

2016

2015

53,604,675

44,644,978

Travel expenses

24,261,692

22,084,463

Office expenses

5,063,286

3,739,877

Sales service expenses

3,561,444

285,529

Exhibition expenses

2,866,724

2,176,378

Tender expenses

1,582,134

1,797,466

Advert expenses

1,370,622

1,651,244

Business tax Urban maintenance construction tax

and

47. Selling expenses

Employee payable

remuneration

309 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

310 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Maintenance costs (including materials)

574,737

179,725

Fixed assets depreciation

135,265

135,960

7,415,199

2,693,123

100,435,778

79,388,743

2016

2015

851,544,356

717,412,492

remuneration

435,509,342

344,563,366

assets

97,017,725

93,446,864

employing

76,540,843

54,836,758

Fixed assets depreciation

73,752,507

67,811,262

Office expenses

43,843,424

43,037,316

Taxes

39,216,370

109,946,415

Travel expenses

21,821,209

16,708,445

Consulting fees

18,030,885

5,869,779

Business expenses

15,921,003

14,853,947

13,574,204

10,445,654

Others

48. Administrative expenses

R&D expenses Employee payable Intangible amortization Expenses on intermediary

entertainment

Informatization expenses

311 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Insurance expenses

7,865,652

8,582,832

Maintenance expense

6,483,287

3,626,881

(To be continued)

312 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

48. Administrative expenses (continued) (Continued)

2016

2015

1,723,476

1,589,710

56,188,463

58,490,843

1,759,032,746

1,551,222,564

2016

2015

1,095,191,900

1,279,031,963

308,686,445

369,131,564

268,297

-

369,552,810

562,525,676

7,869,961

12,389,973

55,332,859

48,035,048

1,218,992,788

1,532,851,096

Conference expenses Others

49. Finance expenses

Interest expenditure Less: interest income Less: capitalized amount of interest Foreign exchange loss Amortization of issue cost of intermediate term bills Others

The capitalization amount of loan expenses is included in the construction in progress. 50. Impairment on assets

Loss on V.21)

inventory

(Note

2016

2015

803,814,035

52,848,818

313 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Loss on bad debt (Note V.21)

214,478,691

314 / 507

279,634,757

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

50. Impairment on assets (continued) Expected contract (Note V.21)

losses

202,823,449

304,907,624

1,221,116,175

637,391,199

2016

2015

Measured at fair value and the changes are recorded into the profits and losses of the current financial asset (Note V.2)

3,939,693

(25,058,919)

Measured at fair value and the changes are recorded into the profits and losses of the current financial liabilities (Note V.23)

24,918,115

3,833,885

28,857,808

21,225,034

51. Gain/loss from fair-value changes

52. Investment income 2016

2015

Investment gains from long-term equity verified by equity method (Note V.13)

99,395,952

55,252,057

Investment gains from disposal financial assets available-for-sale–equity tool period (Note V.11)

-

9,465,520

315 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Investment income of available-for-sale financial assets (Note V.11)

17,010,628

316 / 507

6,402,396

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

52. Investment income (continued) Bank financial products investment income Investment income disposal available-for-sale financial assets

from of

2,101,669

393,033,507

5,176

34,083,478

-

-

-

498,236,958

53. Non-operating income 2016

2015

Accrued in current period Non-recurring profit and loss

Gains from disposal of non-current assets

6,649,827

14,128,543

6,649,827

Among which: gains on the disposal of fixed assets

6,649,827

14,128,543

6,649,827

Government grants

45,042,910

40,881,189

45,042,910

Donation obtained

-

2,549,000

-

11,950,506

13,154,739

100%

63,643,243

70,713,471

63,643,243

Others

Government subsidy included in the current profits and losses:

317 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Financial allocation

2016

2015

Related to assets/income

39,982,226

36,449,045

Related to income

318 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

53. Non-operating income (continued) Science and technology subsidy

3,128,000

2,500,000

Related to income

Land compensation (Note V.37)

1,932,684

1,932,144

Related to assets

45,042,910

40,881,189

2016

2015

Accrued in current period

Non Current assets disposal loss

5,309,215

4,789,746

5,309,215

Among which: losses on the disposal of fixed assets

5,309,215

4,789,746

5,309,215

External donation

20,000

530,000

20,000

External donation

3,474,664

39,593

3,474,664

Others

2,020,182

306,533

2,020,182

10,824,061

5,665,872

10,824,061

54. Non-operating expenses

Non-recurring profit and loss

55. Cost classification by nature Further information about the Group’s operating costs, sales expenses and management expenses are classified by nature as follows:

319 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

55. Cost classification by nature (continued) 2016

2015

Expendable raw material and low value consumables

14,371,771,965

14,623,452,686

Employee remuneration (Note V (27))

1,789,154,586

1,691,745,763

(Note V (14), (15),(17), (19))

1,285,028,932

1,342,307,268

External coordination costs

1,277,245,080

911,640,427

Transportation expenses

671,016,351

749,214,023

Technical R & D expenses (Note V (48))

851,544,356

717,412,492

Energy expenses

298,219,379

280,917,025

On-site expenses

216,944,442

194,104,215

Rental fee

172,780,365

162,684,322

After-sales costs

127,301,003

125,219,471

76,540,843

54,836,758

Office expenses

48,906,710

51,688,823

Travel expenses

46,082,901

38,792,908

Depreciation amortization expenses

and

installation

Expenses on intermediary

employing

320 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Taxes (Note V (48)

39,216,370

109,946,415

Business expenses

15,921,003

14,853,947

entertainment

321 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

55. Cost classification by nature (continued) Informatization expenses

13,574,204

10,445,654

1,582,134

1,797,466

284,301,775

266,866,499

21,587,132,399

21,347,926,162

2016

2015

in

136,856,233

49,477,423

Deferred income tax expense

(75,339,325)

28,052,453

61,516,908

77,529,876

Bidding fee Other expenses

56. Income tax expense

Income tax expenses current period

The relationship between income tax expense and total profit is as follows: 2016

2015

368,861,144

271,735,564

Income tax expense calculated according to the applicable tax rate (15%)

55,329,171

40,760,335

Subsidiaries applied to the influence of different tax rate

21,202,805

20,241,955

Gains and loss gains and loss joint venture and jointly run enterprise

(14,966,483)

(8,287,809)

Total profit

322 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Non-taxable income

(108,251)

323 / 507

(2,876,713)

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

56. Income tax expense (continued) Non-deductible costs, expenses and losses

2,972,594

3,305,801

Income tax before adjusting

(8,933,223)

(47,286)

Use the deductible deficit of the previous year

(10,334,298)

(2,795,677)

Effect of the deductible temporary difference or the deductible loss of the deferred income tax assets which wasn’t conformed at current period

39,776,493

50,070,071

Deduction of technological development expenses

(23,421,900)

(22,840,801)

61,516,908

77,529,876

Income tax expense 57. Earnings per share

The basic earnings per share shall be calculated in accordance with the current net profits of the ordinary shareholders of the company divided by the weighted average of the common stock issued. The basic earnings per share and diluted earnings per share are calculated as follows: 2016

2015

Net profit attributive to holders of common shares of the Company

212,419,946

212,411,967

Weighted average of outstanding common stock

4,390,294,584

4,390,294,584

324 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Basic earning per share

0.05

0.05

In 2016 and 2015, the Company does not have a diluted potential common stock, so diluted earnings per share are equal to the basic earnings per share.

325 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

58. Cash flow statements notes 2016

2015

297,589,755

288,908,075

97,318,883

132,383,428

4,488,988

10,574,725

532,240

7,958,851

37,371,316

7,366,702

437,301,182

447,191,781

Customs guarantee deposit paid

264,666,758

323,819,681

Selling and expenses

201,911,238

188,362,388

55,332,859

48,035,048

26,613,797

6,476,300

40,102,571

6,411,082

Net cash from other operating activities Customs deposits received Cash receipt of government allowance and bonus Employee’s loans received Cash receipt from income from fines Others

Other cash payments relating to operating activities

administrative

Financial formality cost

expenses

R&D subsidy paid cooperation units Others

to

326 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

588,627,223

327 / 507

573,104,499

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

58. Cash flow statements notes (continued) 2016

2015

852,787,742

93,974,040

344,790,000

2,681,198,220

loans

2,420,845,793

1,785,676,000

Capital invested by minority shareholders

273,048,439

273,402,314

3,038,684,232

4,740,276,534

326,925,000

1,123,143,500

7,450,000

16,400,000

38,776,961

-

Other cash receipts relating to investing activities Interest income Cash receipts related to other financing activities Recovery of restricted bank deposits Related received

parties

Other cash payments relating to financing activities Restricted refundable

bank

deposits

Short and super short term notes issuance cost expenses

Offshore financing against domestic guarantee expenses

328 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Compensative parties loans

related

1,768,382,528

-

2,141,534,489

1,139,543,500

329 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

59. Supplementary information of cash flow statements (1) Supplementary information of cash flow statements Reconciliation of net profit to cash flows from operating activities: 2016

2015

307,344,236

194,205,688

impairment

1,221,116,175

637,391,199

Depreciation of fixed assets, depletion of oil gas assets, depreciation of productive living assets

1,184,754,917

1,248,860,404

assets

100,274,015

93,446,864

Net gain on disposal of fixed assets, intangible assets

(1,340,612)

(9,338,797)

Changes in fair value gains and losses

(28,857,808)

21,225,034

Financial expenses

1,256,194,822

1,752,677,447

Investment gains

(118,513,425)

(498,236,958)

(75,339,325)

28,052,453

(1,794,200,703)

(1,371,334,146)

(409,587,873)

(3,108,564,518)

Net profit Add: Assets provision

Intangible amortization

Increase/decrease in deferred income tax asset (increase was filled in with “-”) Inventory reduction Increase

of

construction

330 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

contract price Decrease/increase operating receivables

in

94,234,166

331 / 507

(902,563,051)

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

59. Supplementary information of cash flow statements (continued) Decrease/increase operating payables

in

(77,655,949)

82,216,908

from

1,658,422,636

(1,831,961,473)

2016

2015

2,038,671,320

1,629,629,350

2016

2015

Cash balance at end of year

3,497,205,186

2,337,925,611

Less: cash at beginning of year

2,337,925,611

1,882,283,319

Net increase in cash and cash equivalents

1,159,279,575

455,642,292

Net cash flows operating activities

Endorsement of acceptance received sales and services

bank from

Net alteration of cash and cash equivalents:

(2) Net cash received from disposal of subsidiaries and other business units Information of acquiring subsidiaries

Price of subsidiaries

acquiring

332 / 507

2016

2015

-

211,263,111

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Less: Cash and cash equivalents for acquiring subsidiaries

-

(134,657,111)

Net cash paid for acquiring subsidiaries and other business units

-

76,606,000

333 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

59. Supplementary information of cash flow statements (continued) (3) Cash and cash equivalents 2016

2015

3,497,205,186

2,337,925,611

774,626

746,967

Deposits that can be readily paid

3,496,430,560

2,318,579,147

Other monetary capitals that can be readily paid

-

18,599,497

Cash equivalents

-

-

3,497,205,186

2,337,925,611

Cash Among which: Cash on hand

Cash and cash equivalent Closing balance

60. Assets with restricted ownership and right of use 2016

2015

capital

99,839,013

120,408,105

Note 1

Fixed assets (note V.15)

2,438,314,399

1,579,091,619

Note 2

Long-term receivables V.12)

2,996,201,650

5,680,467,098

Note 3

5,534,355,062

7,379,966,822

Monetary (note V.1)

(note

Note 1: As of Dec, 31, 2016, the monetary capital with restricted is RMB 99,839,013 Yuan, 334 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

which is the margin deposit that our Group applied to banks for letters of credit and bank guarantees (Dec, 31, 2015: RMB 120,408,105 Yuan). Note 2: As of Dec. 31, 2016, the vessel with book value of RMB 1,882,864,040 Yuan (Dec. 31, 2015: RMB 1,036,238,241 Yuan) (Note V (15)) and the mechanical equipment with book value of RMB 555,450,350 Yuan (Dec. 31, 2015: None (Note V (15)) selling to financing lease company and bank in way of rental after sales. The financing term is 4 to 6 years.

335 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

60. Assets with restricted ownership and right of use (continued) As of Dec. 31, 2015, the mechanical equipment with book value of RMB 542,853,378 Yuan selling to financing lease company and bank in way of rental after sales. The borrowing term is 1 year, and the borrowings have been paid on Dec. 31, 2016. Note 3: As of Dec. 31, 2016, the Nanjing Highway “construction-transfer” project long-term receivable with book value RMB 2,996,201,650 Yuan (Dec. 31, 2015: RMB 5,680,467,098 Yuan) is used for obtaining bank loan pledge. 61. Foreign currency monetary items: 2016

2015

Original

Exchange rate

Equivalent RMB

Original

Exchange rate

Equivalent RMB

USD

356,373,402

6.9370

2,472,162,288

137,115,012

6.4936

890,370,042

EUR

25,423,957

7.3068

185,767,768

57,367,233

7.0952

407,031,992

SGD

20,744,399

4.7995

99,562,745

1,592,667

4.5875

7,306,360

NZD

625

4.8191

3,012

625

4.4426

2,777

HKD

18,540,418

0.8945

16,584,404

221,140

0.8378

185,271

1,462,267

8.5094

12,443,017

2,514,663

9.6159

24,180,748

2,038,285,822

0.0058

11,822,058

668,453,325

0.0055

3,676,493

567,011

18.0060

10,209,598

580,139

16.8966

9,802,377

JPY

144,285,734

0.0596

8,598,131

521,999

0.0539

28,136

Rand

14,635,312

0.5083

7,439,129

3,036,362

0.4174

1,267,377

168,823,164

0.0463

7,816,513

201,277,172

0.0460

9,258,750

1,190,016

5.0157

5,968,763

310,654

4.7276

1,468,648

Monetary capital

Pound South won

Korean

Oman riyal

Sri rupee AUD

Lankan

336 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

Indian rupee Real

23,686,064

0.1023

2,422,824

11,372,514

0.0977

1,111,095

708,428

2.1357

1,512,989

937,867

1.6483

1,545,886

337 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

61. Foreign currency monetary items: (continued) Rupee Malaysian ringgit CAD

12,938,990

0.1161

1,502,217

53,495,135

0.0885

4,734,319

838,089

1.5507

1,299,625

-

-

-

423

5.1406

2,176

15,452

4.6814

72,337

2,845,117,257

1,362,042,608

Accounts receivable USD

382,943,787

6.9370

2,656,481,050

284,106,383

6.4936

1,844,873,209

EUR

50,412,079

7.3068

368,350,979

50,889,618

7.0952

361,072,018

SGD

62,524,894

4.7995

300,088,229

36,803,153

4.5875

168,834,464

Pound

3,311,616

8.5094

28,179,865

87,474

9.6159

841,141

CAD

5,248,147

5.1406

26,978,624

5,267,000

4.6814

24,656,934

AED

6,268,825

1.8890

11,841,810

-

-

-

Saudi riyal

5,865,574

1.8497

10,849,552

6,132,462

1.7356

10,643,501

67,543,175

0.0463

3,127,249

50,964,343

0.0460

2,344,360

272,129

5.0157

1,364,917

326,303

4.7276

1,542,630

1,631,102

0.5083

829,089

9,836,195

0.4174

4,105,628

142,923,050

0.0058

828,954

501,139,157

0.0055

2,756,265

HKD

196,859

0.8945

176,090

206,025

0.8378

172,608

Rupee

481,395

0.1161

55,890

-

-

-

Indian rupee

181,114

0.1023

18,526

5,413,116

0.0977

528,861

4,828

2.1357

10,311

65,200

1.6483

107,469

Sri rupee

Lankan

AUD Rand South won

Real

Korean

338 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued) 3,409,181,135

339 / 507

2,422,479,088

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

61. Foreign currency monetary items: (continued) 2016 Original

2015

Exchange rate

Equivalent RMB

Original

Exchange rate

Equivalent RMB

3,989,080

6.9369

27,671,849

8,784,474

6.4936

57,042,860

Pound

195,990

8.5094

1,667,757

8,346

9.6159

80,254

AUD

103,710

5.0157

520,178

375,870

4.7276

1,776,963

EUR

12,329

7.3070

90,088

3,930,049

7.0952

27,884,484

5,285,609

0.0058

30,657

45,916,744

0.0055

252,542

SGD

-

-

-

652,109

4.5875

2,991,550

Omani rial

-

-

-

33,018

16.8966

557,892

CAD

-

-

-

3,500

4.6814

16,385

Other receivables USD

South won

Korean

29,980,529

90,602,930

Accounts payable USD

120,343,389

6.9370

834,822,091

135,530,187

6.4936

880,078,822

EUR

38,684,841

7.3068

282,662,394

42,578,241

7.0952

302,101,136

JPY

161,884,564

0.0596

9,648,320

10,150,520

0.0539

547,113

Pound

67,565

8.5094

574,938

22,236

9.6159

213,819

SGD

20,934

4.7995

100,475

2,848,622

4.5875

13,068,053

AUD

10,018

5.0157

50,247

40,888

4.7276

193,302

-

-

-

2,136,087

1.6719

3,571,324

Dirham

340 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

South won

Korean

-

-

-

341 / 507

44,915,818

0.0055

247,037

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

61. Foreign currency monetary items: (continued) HKD

-

-

-

78,850

0.8378

66,061

Rupee

-

-

-

85,295

0.0885

7,549

1,127,858,465

1,200,094,216

Other payables USD

4,985,404

6.9370

34,583,748

4,456,481

6.4936

28,938,605

HKD

8,074,953

0.8945

7,223,045

-

-

-

EUR

10,092,794

7.3509

74,191,119

3,144,887

7.0952

22,313,602

SGD

-

-

982,209

4.5875

4,505,884

Pound

-

-

36,849

9.6159

354,336

115,997,912

56,112,427

Short-term loans USD

837,000,000

6.9370

5,806,269,000

1,767,690,890

6.4936

11,478,677,563

Euro

67,901,197

7.3068

496,140,465

15,961,626

7.0952

113,250,929

6,302,409,465

11,591,928,492

2016 Original

2015

Exchange rate

Equivalent RMB

Original

Exchange rate

Equivalent RMB

-

-

110,000,000

6.4936

714,296,000

Long-term loans due within one year USD Long-term payables

-

due 342 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

within one year

343 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

V.

Notes to items in the consolidated financial statements (continued)

61. Foreign currency monetary items: (continued) USD

17,604,054

6.9370

122,119,326

9,142,857

6.4936

59,370,057

USD

50,000,000

6.9370

346,850,000

-

-

-

Euro

20,000,000

7.3068

146,136,000

20,000,000

7.0952

141,904,000

Long-term loans

492,986,000

141,904,000

Long-term payable USD

93,253,088

6.9370

646,896,674

344 / 507

110,857,143

6.4936

719,861,943

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

VI. Consolidation scope change

1.

Change in scope of consolidation for other reasons

The Company’s subsidiary company was renamed as Shanghai Zhenhua Heavy Industries Vessel Transport Co., Ltd. on February 5, 2016. The Company established the wholly-owned subsidiary ZPMC UK LD with cash of 300,000 pond on March 10, 2016. The Company set up a wholly - owned subsidiary ZPMC Middle East FZE on June 12, 2016. The controlling subsidiary ZPMC Brazil Service Portuarios LTDA was jointly established by the Company’s subsidiary and Port Side Construction LTDA with 90,000 Real of cash on April 25, 2016.As of December 31, 2016, the Group’s shareholding ratio to the subsidiary is 80%. The Company paid USD10,000,000 in cash on July 15, 2016 to Huaian Huaiyin Transportation Co., Ltd., Zhongjiao Huadong Investment Co., Ltd., CCCC Third Harbor Engineering Co., Ltd. and CCCC First Highway Investigation and Design Research Institute Co., Ltd. jointly contributed and established Sino - intersection (Huaian) Construction Development Co., Ltd. As of December 31, 2016, the Group’s shareholding ratio to the subsidiary is 66%. The Company has set up the controlling subsidiary company (Zhenjiang) Construction Development Co., Ltd. with RMB 6,300,000 in cash, RMB 560,700, 000.00 Yuan, China - AC East China Investment Co., Ltd., CCCC Second Harbor Engineering Co., Ltd., CCAC Highway Planning & Design Co., Ltd. and Zhenjiang University Investment Construction Development (Group) Co., Ltd. As of December 31, 2016, the Group’s shareholding ratio to the subsidiary is 63%. The original subsidiary of the Company, ZPMC - OTL Marine Contractor USA USA, was cancelled on November 30, 2016 and changed into the office of the subsidiary of the Company. The Company and its subsidiaries Shanghai Zhenhua Heavy Industries Machinery Companion Co., Ltd. and Shanghai Zhenhua Heavy Industries Group (Nantong ) Co., Ltd. have cancelled the industrial and commercial enterprises on December 23, 2016, and changed into subsidiary companies of the Company. Jiangsu Taoda Marine Equipment Technology Co., Ltd., an atomic company, cancelled the industrial and commercial cancellation on December 16, 2016.

345 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

VII. Interests in Other Entities

1.

Interests in subsidiary

The information of the Company’s subsidiaries are as follows: Shareholding ratio(%)

Gain

Direct

mode

Main operating address

Registered in

Shanghai Zhenhua Port Machinery Heavy Industry Co., Ltd.

Chongming District, Shanghai

Chongming District, Shanghai

Machinery manufacturing

94.76%

Investment to set up

Shanghai Zhenhua Port Machinery (Hong Kong) Co., Ltd.

Hongkong

Hongkong

Trade selling

99.99%

Investment to set up

Pudong New District, Shanghai

Pudong New District, Shanghai

Ship transportation

55%

Investment to set up

Nantong Zhenhua Heavy Equipment Manufacturing Co., Ltd.

Nantong, Jiangsu

Nantong, Jiangsu

Machinery manufacturing

100%

Investment to set up

Shanghai Zhenhua Heavy Industries Group (Nantong)

Nantong, Jiangsu

Nantong, Jiangsu

Machinery manufacturing

100%

Investment to set up

Pudong New District, Shanghai

Pudong New District, Shanghai

Electrical equipment research and development

100%

Investment to set up

Subsidiary name

Shanghai Zhenhua Shipping Ltd.

Co.,

Business nature

Indirect

Transmission Machinery Co., Ltd Shanghai Zhenhua Heavy Industries Electric Co., Ltd.

346 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31, 2016 RMB Yuan

VII. Interests in Other Entities (continued)

1.

Interests in subsidiary (continued)

Nantong ZPMC Steel Structure Processing Co.,Ltd.

Nantong, Jiangsu

Nantong, Jiangsu

Machinery manufacturing

75%

25%

Investment to set up

Jiangyin ZPMC Steel Structure Manufacturing Co., Ltd.

Jiangyin, Jiangsu

Jiangyin, Jiangsu

Machinery manufacturing

75%

25%

Investment to set up

Shanghai Zhenhua Heavy Industries Steel Structure Co., Ltd.

Pudong New District, Shanghai

Pudong New District, Shanghai

Machinery manufacturing

49%

Investment to set up

Shanghai Zhenhua Heavy Industries Vessel Transport Co., Ltd.

Yangshan Free Trade Port Area, Shanghai

Yangshan Free Trade Port Area, Shanghai

Ship transportation

100%

Investment to set up

Shanghai Zhenhua Testing Technology Consulting Co., Ltd.

Pudong New District, Shanghai

Pudong New District, Shanghai

Technology consulting

100%

Investment to set up

ZPMC Netherlands B.V

Rotterdam

Rotterdam

Trade selling

100%

Investment to set up

Hotel de Herberg B.V.

Rotterdam

Rotterdam

Trade selling

100%

Investment to set up

ZPMC Espana S.L

Spanish Los Barrios

Spanish Los Barrios

Trade selling

100%

Investment to set up

Germany Hamburg

Germany Hamburg

Trade selling

ZPMC Hamburg

GmbH

347 / 507

100%

Investment to set up

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31, 2016 RMB Yuan

VII. Interests in Other Entities (continued)

348 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31, 2016 RMB Yuan

VII. Interests in Other Entities (continued)

1.

Interests in subsidiary (continued)

ZPMC Lanka Company (Private) Limited

Sri Lanka

Sri Lanka

Trade selling

70%

Investment to set up

ZPMC North America Inc.

USA Delaware

USA Delaware

Trade selling

100%

Investment to set up

ZPMC Korea Co., Ltd.

South Korea Busan

South Korea Busan

Trade selling

70%

Investment to set up

ZPMC Engineering Africa (Pty) Ltd.

Kwazulu-Natal Province, Republic of South Africa

Kwazulu-Natal Province, Republic of South Africa

Trade selling

100%

Investment to set up

ZPMC Engineering (India) Private

Maharashtra State

Maharashtra State

Trade selling

100%

Investment to set up

Singapore

Singapore

Trade selling

100%

Investment to set up

ZPMC Southeast Asia Pte. Ltd.

Singapore

Singapore

Trade selling

70%

Investment to set up

ZPMC Engineering (Malaysia) Sdn. Bhd.

Malaysia

Malaysia

Trade selling

70%

Investment to set up

ZPMC Australia Company (Pty) Ltd.

New south wales, Australia

New south wales, Australia

Trade selling

100%

Investment to set up

Shanghai Zhenhua Heavy Industry General Equipment Co.,

Pudong New District, Shanghai

Pudong New District, Shanghai

Machinery manufacturing

100%

Corporate merger under different control

Limited ZPMC Asia

Southeast

Holding Ltd.

Pte.

349 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31, 2016 RMB Yuan

VII. Interests in Other Entities (continued) Ltd.

350 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31, 2016 RMB Yuan

VII. Interests in Other Entities (continued)

1.

Interests in subsidiary (continued)

Shanghai Port Machinery Heavy Industries Co., Ltd.

Pudong New District, Shanghai

Pudong New District, Shanghai

Machinery manufacturing

Shanghai Zhenhua Heavy Industries (Group) Zhangjiagang Port Machinery Co., Ltd.

Zhangjiagang, Jiangsu

Zhangjiagang, Jiangsu

Machinery manufacturing

90%

Corporate merger under different control

Nanjing Ninggao New Channel Co., Ltd.

Nanjing, Jiangsu

Nanjing, Jiangsu

Trade selling

100%

Investment to set up

Shanghai Zhenhua Heavy Industries Qidong Marine Co., Ltd

Nantong, Jiangsu

Nantong, Jiangsu

Machinery manufacturing

67%

Corporate merger under different control

Jiahua Shipment Co., Ltd (Note 1)

Hongkong

Hongkong

Ship transportation

70%

Investment to set up

Zhenhua Pufeng Wind Power (Hong Kong) Co.,Ltd

Hongkong

Hongkong

Ship transportation

51%

Investment to set up

Zhenhua Shende Offshore Installation Co.,Ltd

Hongkong

Hongkong

Ship transportation

70%

Investment to set up

ZPMC Brazil Holdings Ltda.

Rio DE Janeiro, Brazil

Rio DE Janeiro, Brazil

Trade selling

99%

1%

Investment to set up

ZPMC Limited Liability Company

Moscow, Russia

Moscow, Russia

Trade selling

85%

351 / 507

74.02%

Corporate merger under different control

Investment to set up

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31, 2016 RMB Yuan

VII. Interests in Other Entities (continued) ZPMC NA East Coast lnc.

Virginia

Delaware

Trade selling

100%

Investment to set up

ZPMC NA Huston lnc.

Texas

Delaware

Trade selling

100%

Investment to set up

352 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31, 2016 RMB Yuan

VII. Interests in Other Entities (continued)

1.

Interests in subsidiary (continued)

The information of the Company’s subsidiaries are as follows (continued): Main operating address

Registered in

Business nature

Shareholding ratio(%)

Direct CCCC Tianhe Co., Ltd. (Note 2)

Gainmode

Indirect

Changshu, Jiangsu

Changshu, Jiangsu

Machinery manufacturing

CCCC Heavy Co.,

Fuzhou, Fujian

Fuzhou, Fujian

Machinery manufacturing

CCCC Investment Development Qidong Co., Ltd (note 3)

Nantong, Jiangsu

Nantong, Jiangsu

Engineering construction

47.50%

Investment to set up

CCCC Liyang City Investment Construction Co., Ltd (Note 4)

Liyang, Jiangsu

Liyang, Jiangsu

Engineering construction

48%

Investment to set up

ZPMC UK LD

Cardiff

Cardiff

Trade selling

100%

Investment to set up

ZPMC Middle East Fze

AED

AED

Trade selling

100%

Investment to set up

ZPMC Brazil Serviço Portuários LTDA

Santos, Brazil

Santos, Brazil

Trade selling

80%

Investment to set up

CCCC (Huaian) Construction Development Co., Ltd.

Huaian, Jiangsu

Huaian, Jiangsu

Engineering construction

5%

Fujian Qianda Industry Ltd.

353 / 507

32.51%

Corporate merger under different control 51%

61%

Corporate merger under different control

Investment to set up

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31, 2016 RMB Yuan

VII. Interests in Other Entities (continued) CCCC Zhenjiang Investment Construction Management Development Co., Ltd

Zhenjiang, Jiangsu

Zhenjiang, Jiangsu

Engineering construction

354 / 507

63%

Investment to set up

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31, 2016 RMB Yuan

VII. Interests in Other Entities (continued)

1.

Interests in subsidiary (continued)

Note 1: Based on constitution of Shanghai Zhenhua Heavy Industries Steel Structure Co., Ltd, Company has right to appoint and dismiss most members in board of directors. In fact, Company obtains control right, so Company is included in Group financial statements consolidation scale. Note 2: the Group has completed the procedures of stock change of CCCC Tianhe Co., Ltd. The Group obtained 55.98% of the shareholders' meeting and 80% of the board's voting rights via amendment of Articles of Association of CCCC Tianhe Co., Ltd, reconstruction of Board of directors and signing the agreement of the concerted action with China Communications Corporation, one of the shareholders of CCCC Tianhe Co., Ltd. Based on the Articles of Association, the Group has obtained the control rights of the company and includes it into the consolidation scope. Note 3: The Group obtained 95% of the shareholders’ meeting and 100% the voting rights of the board of directors by signing concerted action agreement with CCCC Tianjin Waterway Bureau Co., Ltd. Based on the Articles of Association; the Group obtained the control rights of the company and includes it into the consolidation scope. Note 4: The Group obtained 76% of the shareholders' meeting and 71% the voting rights of the board of directors by signing concerted action agreement with CCCC Shanghai Waterway Bureau Co., Ltd. and CCCC East China Investment Co., Ltd... Based on the Articles of Association, the Group obtained the control rights of the company and includes it into the consolidation scope. Based on the Articles of Association, the Group obtained the control rights of the company and includes it into the consolidation scope. The information of the Company’s subsidiaries is as follows (continued): Important minority subsidiary company exists as follows: 2016 Proportion of shareholding

Minority shareholders'

Dividend payments to

Accumulated minority

for minority

interests

minority shareholders

shareholders' equity

355 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31, 2016 RMB Yuan

VII. Interests in Other Entities (continued)

CCCC Tianhe Co., Ltd

67.49%

57,388,211

356 / 507

-

561,643,011

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31, 2016 RMB Yuan

VII. Interests in Other Entities (continued)

1.

Interests in subsidiary (continued)

2015 Proportion of shareholding

Minority shareholders'

Dividend payments to

Accumulated minority

for minority

interests

minority shareholders

shareholders' equity

67.49%

28,251,819

31,349,367

504,254,800

CCCC Tianhe Co., Ltd

Main financial information of above subsidiary this information is the amount of mutual offset between the enterprises within the Group: 2016

CCCC Tianhe Co., Ltd

Current asset

Non-current asset

Total assets

Current liabilities

Non-current liabilities

Total liabilities

1,498,862,582

1,224,395,571

2,723,258,153

(1,660,805,16 6)

(230,591,014)

(1,891,396,18 0)

2016

CCCC Tianhe Co., Ltd

Operating revenue

Net profit

Total comprehensive income

Operating cash flow

1,101,425,520

85,197,056

85,197,056

35,261,157

2015

CCCC

Tianhe

Current asset

Non-current asset

Total assets

Current liabilities

Non-current liabilities

Total liabilities

1,134,335,686

1,118,330,758

2,252,666,444

(1,462,753,598)

(43,115,047)

(1,505,868,645)

357 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31, 2016 RMB Yuan

VII. Interests in Other Entities (continued) Co., Ltd

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Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31, 2016 RMB Yuan

VII. Interests in Other Entities (continued)

1.

Interests in subsidiary (continued) 2015

CCCC Tianhe Co., Ltd 2.

Operating revenue

Net profit

Total comprehensive income

Operating cash flow

804,955,947

42,357,907

42,357,907

68,610,363

Gains and loss gains and loss joint venture and jointly run enterprise

Main operating address Registered in Business nature Registered Shareholding ratio (%) Accounting treatment Direct

capital

Indirect

Joint venture Jiangsu LongYuan Zhenhua Marine Engineering Co.,Ltd

Jiangsu Nantong

Jiangsu Nantong

Ocean engineering construction

50%

-

Equity method

ZPMC Mediterranean Liman Makinalari Ticaret Anonim Sirketi

Istanbul Turkey

Istanbul Turkey

Port equipment technical services

50%

-

Equity method

Zhenhua Marine Energy (Hongkong) Co., Ltd.

Hongkong

Hongkong

Ship transportation

51%

-

Equity method

Cranetech Global Sdn. Bhd.

Malaysia

Malaysia

Port equipment technical services

49.99%

-

Equity method

359 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31, 2016 RMB Yuan

VII. Interests in Other Entities (continued)

2.

Gains and loss gains and loss joint venture and jointly run enterprise (continued)

Associates CCCC Marine Engineering Vessel Technology Research Centre Co., Ltd

Pudong, Shanghai

Pudong, Shanghai

Ship technology development consulting

25%

-

Equity method

CCCC Estate Yixing Co., Ltd.

Wuxi, Jiangsu

Wuxi, Jiangsu

Real estate development

20%

-

Equity method

Shanghai Zhenhua Heavy Industries (Group) Changzhou Paint Co., Ltd.

Changzhou, Jiangsu

Changzhou, Paint Jiangsu manufacturing

20%

-

Equity method

CCCC Financing Rental Co., Ltd.

Pudong, Shanghai

Pudong, Finance lease Shanghai fund

30%

-

Equity method

China Communications Construction USA Inc.

USA

USA

Port, Channel Highway and Bridge Construction

24%

-

Equity method

CCCC South American Regional Company SARL

USA

USA

Port, Channel Highway and Bridge Construction

16%

-

Equity method

(Note 2) 2.

Gains and loss gains and loss joint venture and jointly run enterprise (continued)

Note 1: On May 5, 2014, the subsidiary of the Company and the partner invested to establish Zhenhua Marine Energy (Hong Kong) Co., Ltd. The registered capital is 5,969,998 USD;, the subsidiary of the Company contributed 3,044,699 USD, holding 51% of the shares. The company focused on the vessel transportation business. Based on the regulations of the 360 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31, 2016 RMB Yuan

VII. Interests in Other Entities (continued)

shareholder agreement, the significant issues of the company shall be agreed by at least 75% shareholders via voting. The Group has no control rights but joint controls the company together with the partner.

361 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31, 2016 RMB Yuan

VII. Interests in Other Entities (continued)

2.

Gains and loss gains and loss joint venture and jointly run enterprise (continued)

Note 2: As of Dec. 15, 2016, the Company invested 16,480,000 USD (in RMB 114,321,760 Yuan) to share CCCC South American Regional Company SARL. The registration capital is 103,000,000 USD, in RMB 114,321,760 Yuan, holding 16% of the share. The company focuses on port construction business. Based on the regulations of the shareholder agreement, the Company has the right to designate one director to that company and implement significant impact to that company. The significant financial information of the main jointly run enterprise: The amount in the consolidated financial statements of the joint venture takes into account the fair value of the identifiable assets and liabilities of the consortium in the acquisition of investments and the impact of the harmonization of accounting policies. CCCC Financing Rental Co., Ltd.

2016

2015

9,420,615,029

3,409,763,003

Non-current assets

13,727,208,395

8,353,597,281

Total assets

23,147,823,424

11,763,360,284

(10,051,593,074)

(4,441,872,270)

(7,249,806,724)

(3,515,685,686)

(17,301,399,798)

(7,957,557,956)

Owners’ equity

5,846,423,626

3,805,802,328

The share of net assets calculated by the share holding ratio

1,605,244,853

1,141,740,698

The book value of the investment for joint

1,605,244,853

1,141,740,698

Current assets

Current liabilities Non-current liabilities Total liabilities

362 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31, 2016 RMB Yuan

VII. Interests in Other Entities (continued)

ventures CCCC Financing Rental Co., Ltd.

2016

363 / 507

2015

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31, 2016 RMB Yuan

VII. Interests in Other Entities (continued)

2.

Gains and loss gains and loss joint venture and jointly run enterprise (continued)

Operating revenue

780,323,172

456,990,739

Finance expenses - interest expenditure

5,790,545

2,876,941

Finance expenses - interest expenditure

8,495,925

1,568,222

85,261,887

55,688,952

251,014,262

167,967,410

Other comprehensive income

580,861

270,171

Total comprehensive income

258,329,639

168,237,582

32,400,000

-

Income tax expense Net profit

Dividend received

The non-significant joint venture and associates of the summary financial information: Joint venture 2016

2015

200,209,849

175,387,196

24,822,653

4,752,968

Other comprehensive income

-

-

Total comprehensive income

23,247,916

4,752,968

Total book investment

value

of

The share of net assets calculated by the Net profit(i)

364 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31, 2016 RMB Yuan

VII. Interests in Other Entities (continued)

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Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31, 2016 RMB Yuan

VII. Interests in Other Entities (continued)

2.

Gains and loss gains and loss joint venture and jointly run enterprise (continued)

Associates 2016

2015

395,966,751

280,006,923

(1,075,546)

108,866

Other comprehensive income

4,546,680

1,256,397

Total comprehensive income

(3,471,134)

1,365,263

Total book investment

value

of

The share of net assets calculated by the Net profit(i)

(i) Net profits and other comprehensive benefits have taken into account the fair value of identifiable assets and liabilities and the adjustment impact of the harmonization of accounting policies at the time of investment. On December 31, 2016, the Group provided USD 25.551 million of loan guarantee of overseas loan under domestic guarantee to the joint venture Zhenhua Marine Energy (Hong Kong) Co., Ltd. The total converted guarantee amount in RMB is 177,247,287yuan which will be due on April 14, 2017.The amount above reflects the max loss caused to the Group once it breaches the agreement. The joint venture Zhenhua Marine Energy (Hong Kong) Co., Ltd. has health finance with no predicted significant debt breach risk. The Group didn’t confirm the debt related to the financial guarantee.

366 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

VIII. Financial risks

1.

Financial instruments

The booking value of the various financial instruments on the balance sheet date is as follows: December 31, 2016 Financial assets Financial assets measured at fair value and whose variation is included in the current profits and losses

Loans and receivables

financial assets available-for-sale

Total

-

3,597,044,199

-

3,597,044,199

4,615,775

-

-

4,615,775

Notes receivable

-

296,920,781

-

296,920,781

Accounts receivable

-

4,230,746,458

-

4,230,746,458

Other receivables

-

433,130,407

-

433,130,407

Non-current asset due within 1 year

-

1,384,438,569

-

1,384,438,569

Available-for-sale financial assets

-

-

1,313,572,506

1,313,572,506

Monetary capital Measured at fair value and the changes are recorded into the profits and losses of the current financial assets

367 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

VIII. Financial risks (continued) Long-term receivables

-

3,791,218,020

-

3,791,218,020

4,615,775

13,733,498,434

1,313,572,506

15,051,686,715

368 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

VIII. Financial risks (continued)

1.

Financial instruments (continued)

Financial liabilities Others Financial liabilities Short term loans

21,485,919,393

Notes payable

1,905,121,706

Payables

5,103,018,897

Interest payable

140,195,803

Dividend payable

31,701,965

Other payables

1,225,135,428

Non-current liabilities due within one year

799,574,356

Other current liabilities

3,996,025,335

Long-term loans

3,925,335,497

Long-term payables

1,618,361,164 40,230,389,544

369 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

VIII. Financial risks (continued)

1.

Financial instruments (continued)

December 31, 2015 Financial assets Financial assets measured at fair value and whose variation is included in the current profits and losses

Loans and receivables

financial assets available-for-sale

Total

-

2,458,333,716

-

2,458,333,716

676,082

-

-

676,082

Notes receivable

-

243,159,622

-

243,159,622

Accounts receivable

-

3,894,762,468

-

3,894,762,468

Other receivables

-

667,660,167

-

667,660,167

Non-current asset due within 1 year

-

2,625,135,212

-

2,625,135,212

Other assets

current

-

46,000,000

-

46,000,000

Available-for-sale

-

-

1,212,177,180

1,212,177,180

Monetary capital Measured at fair value and the changes are recorded into the profits and losses of the current financial liabilities

370 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

VIII. Financial risks (continued) financial assets Long-term receivables

-

3,558,501,537

-

3,558,501,537

676,082

13,493,552,722

1,212,177,180

14,706,405,984

371 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

VIII. Financial risks (continued)

1.

Financial instruments (continued)

December 31, 2015 (continued) Financial liabilities Financial assets measured at fair value and whose variation is included in the current profits and losses

Loans and receivables financial assets available-for-sale

Total

-

18,216,928,490

18,216,928,490

24,918,115

-

24,918,115

Notes payable

-

1,785,201,236

1,785,201,236

Payables

-

5,471,141,022

5,471,141,022

Interest payable

-

289,590,733

289,590,733

Dividend payable

-

32,237,912

32,237,912

Other payables

-

1,604,523,386

1,604,523,386

Non-current liabilities due within one year

-

6,837,115,692

6,837,115,692

Other liabilities

-

1,995,655,739

1,995,655,739

-

1,761,904,000

1,761,904,000

Short term loans Measured at fair value and the changes are recorded into the profits and losses of the current financial liabilities

Long-term loans

current

372 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

VIII. Financial risks (continued) Long-term payables

-

719,861,943

719,861,943

24,918,115

38,714,160,153

38,739,078,268

373 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

VIII. Financial risks (continued)

2. Transfer of financial assets Transfer transferred financial assets that have been globally terminated but continue to be involved On December 31, 2016, the book value of the bank acceptance bill that the Group has endorsed to the supplier for clearing accounts payable is RMB 471,132,348 (December 31, 2015: RMB 302,708,598 ).On December 31, 2016, its maturity date is 1 to, 11 months, and in accordance with the relevant provisions of the Notes Law, if the acceptance bank refuses to pay, its holder is entitled to recourse to the Group (”continue to be involved”).The Group considers that the Group has transferred almost all of its risks and rewards and therefore terminates the carrying value of its settled accounts payable in connection with it. The maximum losses and undiscounted cash flows that continue to be involved and repurchase are equal to their book value. The Group considers that it is not important to continue to engage in fair value. Transfer transferred financial assets that have been globally terminated but continue to be involved (continued) In 2016, the Group shall not be involved in any gains or expenses that have ceased to be recognized in the current year and in aggregate due to continued involvement. 3.

Financial instruments

The Group’s operations face various financial risks: credit risk, liquidity risk and market risk (mainly exchange rate risk and interest rate risk).The Group’s overall risk management plan addresses the unpredictability of financial markets and seeks to reduce the potential adverse impact on the Group’ s financial performance. Credit risks The Group manages credit risks by portfolio classification. Credit risks mainly originate from notes receivables, accounts receivable, other receivables, available-for-sale financial assets and long-term receivables etc. Other financial assets of the Group include available - for - sale financial assets, other receivables and certain derivatives, whose credit risk arises from counterparty default and the maximum exposure is equal to the carrying amount of these instruments. The Group also faces credit risk for providing financial security, as disclosed in Note XI. 374 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

VIII. Financial risks (continued)

3.

Financial instruments (continued)

Since the Group is trading only with a recognized and credibility third party, no collateral is required. Since the Group is trading only with a recognized and credibility third party, no collateral is required. Since the Group’s accounts receivable are widely dispersed across sectors and industries, there is no significant credit risk concentration within the Group. The Group does not hold any collateral or other credit enhancements to the balance of accounts receivable. Credit risks (continued) Bank deposits of the Group and other current assets -bank financial products are mainly put in state-owned banks and other large or medium-sized listed banks. In addition, speaking of notes receivable, other accountant receivables, and other receivable, the Group established related policies to control credit risks. The Group evaluates clients’ credit qualification and sets corresponding credit terms on the basis of clients’ financial status, possibility of obtaining guaranty from a third-party, credit record and other factors including current market status rating. The Group monitors clients’ credit record on regular basis. When client is found with bad credit record, the Group will sent out written calls, shorten credit terms or cancel credit terms, in an attempt to ensure that the Group’s overall credit risks be within control. On December 31, 2016, the term analysis of financial assets with maturity due to no impairment of either individual or combination has been analyzed as follows: 2016 Total

Notes receivable

not overdue overdue

within 1 year

Overdue time 1-2 years 2-3 years

over 3 years

296,920,781

296,920,781

-

-

-

-

Accounts receivables

2,695,273,967

2,405,484,652

70,487,107

18,329,699

58,173,966

142,798,542

Other receivables

703,913,820

703,913,820

-

-

-

-

375 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

VIII. Financial risks (continued) Non-current liabilities due within one year

1,384,438,569

1,384,438,569

-

-

-

-

Long-term receivables

3,791,218,020

3,791,218,020

-

-

-

-

376 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

VIII. Financial risks (continued)

3.

Financial instruments (continued)

2015 Total

Notes receivable

not overdue overdue

within 1 year

1-2 years

Overdue time 2-3 years over 3 years

243,159,622

243,159,622

-

-

-

-

Accounts receivables

2,755,137,429

2,420,391,157

60,727,290

78,154,461

177,744,854

18,119,667

Other receivables

647,981,009

647,981,009

-

-

-

-

Non-current assets due within one year

2,625,135,272

2,625,135,272

-

-

-

-

46,000,000

46,000,000

-

-

-

-

3,558,501,537

3,558,501,537

-

-

-

-

Other current assets Long-term receivables

Credit risks (continued) As of December 31, 2016, accounts receivable that have not been past due and impaired are related to a large number of decentralized customers who have not recently been documented. As of December 31, 2016, accounts receivable that have been overdue but not impaired are related to a large number of independent customers who have good transaction records with the Group. Based on past experience, the Group considers that no provision for impairment is required since the credit quality has not changed significantly and is still considered recoverable.

377 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

VIII. Financial risks (continued)

3.

Financial instruments (continued)

Liquidity risks Subsidiaries within the Group are responsible for their own prediction of cash flow. The financial section of the head office continues to monitor the capital demand for short-term and long-term capital at the group level after collecting all predictions of subsidiaries, to ensure sufficient cash reserve and cashable securities. Meanwhile, the financial section of the head office continues to monitor the financial and non-financial factors prescribed in credit agreements and loan agreements, to ensure the Group should get sufficient line of credit from key financial institutions to satisfy capital demand both in short term and long term. On Dec. 31, 2016, as of B/S day, various financial assets and liabilities of the Group are listed as follows by due dates in undiscounted contracted cash flow (principal and interest included): 2016 Within 1 year

1-2 years

2-5 years

Over 5 years

Total

21,839,991,371

-

-

-

21,839,991,371

Notes payable

1,905,121,706

-

-

-

1,905,121,706

Payables

5,103,018,897

-

-

-

5,103,018,897

Interest payable

140,195,803

-

-

-

140,195,803

Dividend payable

31,701,965

-

-

-

31,701,965

Other payables

1,244,199,969

-

-

-

1,244,199,969

Non-current liabilities due within one year

835,619,032

-

-

-

835,619,032

Short loans

term

378 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

VIII. Financial risks (continued) Other current liabilities statement

4,123,027,778

-

379 / 507

-

-

4,123,027,778

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

VIII. Financial risks (continued)

3.

Financial instruments (continued)

Long-term loans

-

1,869,935,509

2,202,260,025

58,345,000

4,130,540,534

Long-term payables

-

543,599,402

1,219,108,721

-

1,762,708,123

Financial guarantee

196,431,287

-

-

-

196,431,287

35,419,307,808

2,413,534,911

3,421,368,746

58,345,000

41,312,556,465

Liquidity risks (continued) On Dec. 31, 2015, as of B/S day, various financial assets and liabilities of the Group are listed as follows by due dates in undiscounted contracted cash flow (principal and interest included): 2015 Within 1 year

1-2 years

2-5 years

Over 5 years

Total

18,503,526,869

-

-

-

18,503,526,869

Notes payable

1,785,201,236

-

-

-

1,785,201,236

Payables

5,471,141,022

-

-

-

5,471,141,022

Interest payable

289,590,733

-

-

-

289,590,733

Dividend payable

32,237,912

-

-

-

32,237,912

Other payables

1,604,523,386

-

-

-

1,604,523,386

Non-current liabilities due within one

6,951,051,584

-

-

-

6,951,051,584

Short loans

term

380 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

VIII. Financial risks (continued) year Other current liabilities Long-term loans

2,061,250,000

-

-

-

2,061,250,000

75,597,542

726,184,434

1,076,400,504

-

1,878,182,480

381 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

VIII. Financial risks (continued)

3.

Financial instruments (continued)

Long-term payables

32,465,774

149,197,695

415,462,011

253,938,352

851,063,832

Financial guarantee

185,101,974

-

-

-

185,101,974

36,991,688,032

875,382,129

1,491,862,515

253,938,352

39,612,871,028

Market risks Interest rate risks Interest rate risks of the Group mainly originate from long-term liabilities with interest including long term bank loans and long-term payables. Financial liabilities with flexible rates confront the Group with cash flow interest rate risks, while financial liabilities with fixed rates put the Group against fair value interest rate risks. The Group fixes the fraction of contracts with fixed rates and those with flexible rates based on corresponding market environment. As of Dec. 31, 2016, the Group’s long-term liabilities with interests include only contracts with flexible rates priced in RMB, USD and Euro and contracts with fixed rates priced in RMB and USD. Market risks (continued) Interest rate risks (continued) The risk of market interest rate changes which the Group faces is mainly related to the long-term liability of the Group for interest-bearing interest rates. The financial division of the Group keeps close watch over the interest rates level of the Group. Since the rise of interest rates will increase the cost of newly added liabilities with interests, interest expenses on unpaid liabilities with interests priced in flexible rates, and will significantly impact the financial results of the Group, the management will lower the rate risks via swap contracts based on current market status. In 2015 and 2016, the Group had no such swap arrangements.

382 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

VIII. Financial risks (continued)

3.

Financial instruments (continued)

The following table shows the sensitivity analysis of the interest rate risk, reflecting the effect of the reasonable and possible changes in the interest rate on net income after tax (through the impact of floating interest rates) and other consolidated income when interest rates are reasonable and possible under other variables. 2016 Base point

Net profit or loss

Net amount after tax of

total

other comprehensive income

stockholders' equity

Increase/(decrease)

Increase/(decrease)

Increase/(decrease)

Increase/(decrease)

RMB

+100

(19,483,309)

-

(19,483,309)

RMB

-100

19,483,309

-

19,483,309

Base point

Net profit or loss

Net amount after tax of

total

other comprehensive income

stockholders' equity

2015

Increase/(decrease)

Increase/(decrease)

Increase/(decrease)

Increase/(decrease)

RMB

+100

(20,670,010)

-

(20,670,010)

RMB

-100

(20,670,010)

-

(20,670,010)

Exchange rate risk

383 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

VIII. Financial risks (continued)

3.

Financial instruments (continued)

The Group is exposed to transactional currency risk. Such risks are due to sales or purchases made by the operating entity in currencies other than its currency. The Group’s main production is located in China, but the main business is settled in USD and EUR. Therefore, the foreign currency assets and liabilities recognized by the Group and the future foreign currency transactions (foreign currency assets and liabilities and the pricing currency denominated in foreign currency transactions are mainly USD and EUR). The Financial Department of the Group’s headquarters is responsible for monitoring the size of the Group’ s foreign currency transactions and foreign currency assets and liabilities to minimize the exposure to foreign currency risks; to that end, the Group has signed forward foreign exchange contracts to achieve the purpose of circum circumvention of a partial foreign exchange risk. On December 31, 2016 and December 31, 2015, the Group’s outstanding forward foreign exchange contracts are disclosed in Notes V.2 and 23. The following table shows the sensitivity analysis of the exchange rate risk, reflecting the impact on net gains (due to changes in the fair value of currency assets and monetary liabilities) and net after - tax (due to changes in the fair value of forward exchange contracts) of net gains and losses (due to changes in the fair value of monetary assets and monetary liabilities) and other consolidated gains in the case of reasonable and possible changes in the United States dollar under other variables. 2016 Dollar currency rate

Net profit or loss

Net amount after tax of

Total

other comprehensive income

stockholders' equity

Increase/(decrease)

Increase/(decrease)

Increase/(decrease)

Increase/(decrease)

Depreciation of RMB against USD

(1%)

26,232,074

-

26,232,074

Appreciation of RMB against

1%

(26,232,074)

-

(26,232,074)

384 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

VIII. Financial risks (continued) USD

2015 Dollar currency rate

Net profit or loss

385 / 507

Net amount after tax of

Total

other comprehensive income

stockholders' equity

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

VIII. Financial risks (continued)

3.

Financial instruments (continued) Increase/(decrease)

Increase/(decrease)

Increase/(decrease)

Increase/(decrease)

Depreciation of RMB against USD

(1%)

94,255,964

-

94,255,964

Appreciation of RMB against USD

1%

(94,255,964)

-

(94,255,964)

4.

Capital management

The objective of the Group’s capital management policy is to ensure that the Group is able to operate on a continuous basis to provide returns to shareholders and to benefit other stakeholders while maintaining the best capital structure to reduce capital costs. To maintain or adjust capital structure, the Group may adjust the dividend amount paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The total capital of the Group is the Membership Interests listed in the consolidated balance sheet. The Group is not subject to mandatory external capital requirements and utilizes debt ratio monitoring capital. This ratio is calculated by dividing the net debt by total capital. Net debt is reduced by cash and cash equivalents for total borrowing (including short - term loans included in the consolidated balance sheet), other non - current liabilities that are due within one year, other current liabilities, long - term loans, bonds payable, and other payable and long - term payables. The total capital is Membership Interests total plus net debt). As of December 31, 2016 and December 31, 2015, the ratio of liabilities of the Group is as follows: December 31, 2016

December 31, 2015

64%

64%

Ratio of liabilities

386 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

IX. Fair Value Measurement

The tire attributed to the fair value measurement results is determined by the min tire of the input value with significant meaning to the fair value measurement. Tier One: quotation of the same kind of assets or liabilities on activating market. Tier Two: input value of assets or liabilities observable directly or indirectly except for market quotation at Tier One. Tier Three: unobservable input value of related assets and liabilities 1.

Assets and liabilities measured at fair value

On Dec. 31, 2016, continuous financial assets measured by fair value are listed as follows based on above 3 tiers: To be measured per fair value Active market quotation

Important observa ble input value

Important non-observable input value

(Tier One)

(Tier Two)

(Tier Three)

Total

-

4,615,775

-

4,615,775

1,270,578,346

-

-

1,270,578,346

1,270,578,346

4,615,775

-

1,275,194,121

Financial assets Financial assets measured at fair value with the change accounted in current profit and loss Forward foreign exchange contracts Available-for-sale financial assets Available-for-sale equity instruments

387 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

IX. Fair Value Measurement (continued)

On Dec. 31, 2015, continuous financial assets measured by fair value are listed as follows based on above 3 tiers:

388 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

IX. Fair Value Measurement (continued)

1.

Assets and liabilities measured at fair value (continued) To be measured per fair value Active market quotation

Important observable input value

Important non-observable input value

(Tier One)

(Tier Two)

(Tier Three)

Total

-

676,082

-

s676,082

Bank short-term financing products

-

46,000,000

-

46,000,000

Available-for-sale equity instruments

1,169,183,020

-

-

1,169,183,020

1,169,183,020

46,676,082

-

1,215,859,102

Financial assets Financial assets measured at fair value with the change accounted in current profit and loss Forward foreign exchange contracts Available-for-sale financial assets

On Dec. 31, 2015, continuous liabilities measured by fair value are listed as follows based on above 3 tiers:

389 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

IX. Fair Value Measurement (continued)

1.

Assets and liabilities measured at fair value (continued) To be measured per fair value Active market quotation

Important observable input value

Important non-observable input value

(Tier One)

(Tier Two)

(Tier Three)

Total

-

24,918,115

-

24,918,115

Financial liabilities Financial liabilities measured at fair value with the change accounted in current profit and loss Forward foreign exchange contracts

The Group regards the event occurring date transferring between the tires as the time point for confirmation. There is no transfer between tire 1 and 2 this year. As for the financial instrument traded on active market, the Group will confirm the fair value with the quotation in the active market; as for the financial instrument not traded on active market, the Group confirms the fair value using the value estimation technology. Cash flow discount model is used as value estimation model. The input values of the value estimate technology includes the riskless interest rate and long exchange rate. Related information of fair value measurement at tire 2: December 31, 2016 Fair value Financial assets measured

Value estimate technology

Observable input values Name

Scope

Cash flow South Korean won to USD

1,145.45-

390 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

IX. Fair Value Measurement (continued)

at fair value with the change accounted in current profit and loss -USD exchange contract

long

4,615,775

Cash flow discount model

391 / 507

forward rate

1,145.50

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

IX. Fair Value Measurement (continued)

1.

Assets and liabilities measured at fair value (continued) December 31, 2015 Fair value

Value estimate technology

Observable input values Name

Scope

Measured at fair value and the changes are recorded into the profits and losses of the current financial asset

-USD exchange contract

long

676,082

Cash flow

USD to RMB

6.5824-

Cash flow discount model

forward rate

6.7302

December 31, 2015 Fair value

Financial assets available sale -Bank short-term financing product

Value estimate technology

Observable input values Name

Scope

Cash flow Contract agreed

0%-

for

46,000,000

discount model

December 31, 2015 392 / 507

profit rate

2.95%

Observable input values

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

IX. Fair Value Measurement (continued)

Fair value

Value estimate technology

393 / 507

Name

Scope

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

IX. Fair Value Measurement (continued)

1.

Assets and liabilities measured at fair value (continued)

Measured at fair value and the changes are recorded into the profits and losses of the current financial liabilities

-USD exchange contract 2.

long

(24,918,115)

Cash flow

USD to RMB

6.4971-

discount model

forward rate

6.7302

Assets and liabilities not measured at fair value but disclosing the fair value

Financial assets and financial debt measured with amortized cost include: receivables, long-term receivables, short-term loan, payables, long-term loan and payable bond. The long-term receivables are the receivables with floating rate. The difference between the book value and fair value is small. Besides the financial assets and financial debt below, the difference between the book values and fair values of the financial assets and financial debt not measured at the fair value is small. The following is the book value and fair value of all kinds of financial instruments other than the equity instruments that have little difference between the carrying value and the fair value, and are not quoted in the active market and whose fair value cannot be measured reliably: 2016

2015

Booking value

Fair value

Booking value

Fair value

-Long-term loans

3,925,335,497

3,905,480,658

1,761,904,000

1,700,572,166

-Long-term payables

1,618,361,164

1,638,536,115

719,861,943

704,509,277

Financial liabilities

394 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

IX. Fair Value Measurement (continued)

5,543,696,661

5,544,016,773

2,481,765,943

2,405,081,443

As for the long-term loan, long-term payables and payables without active market, the fair value is confirmed by the future cash flow specified in the contract according to the comparable credit level and the same cash flow rate provided in the same conditions, which belongs to tire 3.

395 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions

1.

Parent company

Name of parent company

Registered place

Business nature

Registered capital

Parent company’s holding proportion in the Corporation (%)

Parent company’s voting proportion in the Corporation (%)

China Communications Corporation

No. 88, Outer Street No. Third, Andingmen, Dongcheng District, Beijing

Port project contracting and related businesses

16,174,735,425

28.828%

28.828%

As of Dec. 31, 2016, China Communications Corporation and its controlled Hong Kong Zhenhua Engineering Co., Ltd. (holding 17.076% stake of the Company) and Macau Zhenhua Bay Engineering Co., Ltd. (holding 0.325% stake of the Company) together hold 46.229% of the Company’s stake (Dec. 31, 2015: 46.229%). The final controlling party of the Company is China Communications Construction Group Co., Ltd. 2.

Subsidiary

See Note VII.1 for details about subsidiary 3.

Joint venture and associates

See Note VII.2 for details about joint venture and associates. 4.

Other related parties Related party

CCCC First Harbor Engineering Co., Ltd.

Controlled by the same parent company

No.1 Engineering Co., Ltd. of CCCC First Harbor Engineering Co., Ltd.

Controlled by the same parent company

396 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

No.2 Engineering Co., Ltd. of CCCC First Harbor Engineering Co., Ltd.

Controlled by the same parent company

No.5 Engineering Co., Ltd. of CCCC First Harbor Engineering Co., Ltd.

Controlled by the same parent company

Installation Engineering Co., Ltd. of CCCC First Harbor Engineering Co., Ltd.

Controlled by the same parent company

397 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

4.

Other related parties (continued)

CCCC First Harbor City Traffic Engineering Co., Ltd

Controlled by the same parent company

CCCC First Harbor First Engineering Co., Ltd

Controlled by the same parent company

No. 6 Engineering Co., Ltd of CCCC First Highway engineering Co., Ltd.

Controlled by the same parent company

CCCC Second Harbor Engineering Co., Ltd.

Controlled by the same parent company

No.2 Engineering Co., Ltd. of CCCC Second Harbor Engineering Co., Ltd.

Controlled by the same parent company

No.3 Engineering Co., Ltd. of CCCC Second Harbor Engineering Co., Ltd.

Controlled by the same parent company

CCCC Second harbor engineering investigation and Design Institute Co., Ltd

Controlled by the same parent company

CCCC Second Highway Engineering Bureau Co., Ltd.

Controlled by the same parent company

CCCC-SHEC Second Engineering Co., Ltd.

Controlled by the same parent company

CCCC Third Harbor Engineering Co., Ltd.

Controlled by the same parent company

CCCC Third Harbor Second Engineering Co., Ltd

Controlled by the same parent company

Third Engineering Company of CCCC Fourth Harbor Engineering Co., Ltd

Controlled by the same parent company

(To be continued)

398 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

4.

Other related parties (continued) Related party

(continued) CCCC Fourth Harbor Engineering Investigation and Design Institute Co., Ltd

Controlled by the same parent company

CCCC Fourth Harbor Engineering Institute Co., Ltd.

Controlled by the same parent company

CCCC Fourth Highway Engineering Co., Ltd.

Controlled by the same parent company

Shanghai Zhenhua Heavy Industries (Group) Changzhou Paint Co., Ltd.

Controlled by the same parent company

Hong Kong Zhenhua Engineering Co., Ltd

Controlled by the same parent company

Zhenhua Marine Energy (Hong Kong) Co., Ltd

Controlled by the same parent company

CCCC Third Harbor Engineering Xing ‘an Construction Engineering Co., Ltd.

Controlled by the same parent company

CCCC Third Harbor Engineering Investigation and Design Institute Co., Ltd

Controlled by the same parent company

CCCC Third Highway Engineering Bureau Co., Ltd

Controlled by the same parent company

CCCC Fourth Harbor Engineering Co., Ltd

Controlled by the same parent company

Second Engineering Company of CCCC Fourth Harbor Engineering Co., Ltd

Controlled by the same parent company

Macau Zhenhua Harbor Engineering Co., Ltd

Controlled by the same parent company

CCCC Financial Co., Ltd

Controlled by the same parent company 399 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

4.

Other related parties (continued)

China Communication Materials & Shipment Co., Ltd

Controlled by the same parent company

CCCC Financial Leasing CO., Ltd

Controlled by the same parent company

CCCC Rental Jiahuayi Co., Ltd

Controlled by the same parent company

CCCC Rental Jiahuaer Co., Ltd

Controlled by the same parent company

Road & Bridge International Co., Ltd.

Controlled by the same parent company

CCCC International Shipping Co., Ltd

Controlled by the same parent company

Shanghai Waterway Logistics Co., Ltd.

Controlled by the same parent company

Shanghai Jiangtian Industrial Co., Ltd

Controlled by the same parent company

Shanghai Zhensha Longfu Machinery Co., Ltd

Controlled by the same parent company

CCCC Shanghai Equipment Engineering Co., Ltd

Controlled by the same parent company

Shanghai Communications Contracting Co., Ltd

Controlled by the same parent company

Construction

CTTIC Shanghai Co., Ltd

Controlled by the same parent company

CCCC Tianjin Industry and Trade Co., Ltd.

Controlled by the same parent company

CCCC Tianjin Dredging Co., Ltd

Controlled by the same parent company

400 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

4.

Other related parties (continued)

Tianjin Dredging Company—Binhai Environmental Protection Engineering Co., Ltd

Controlled by the same parent company

CCCC Tianjin Port & Waterway Prospection & Design Research Institute Co., Ltd.

Controlled by the same parent company

CCCC Tianjin Port Prospection & Design Research Institute Co., Ltd.

Controlled by the same parent company

Jiangsu Long Yuan Engineering Co., Ltd

Marine

Controlled by the same parent company

Nanjing CCCC Weisanlu River Tunnel Co., Ltd

Controlled by the same parent company

Hainan CCCC Fourth Harbor Construction Co., Ltd

Controlled by the same parent company

China Communications Water Transportation Design & Research Co., Ltd

Controlled by the same parent company

Zhenhua

(To be continued)

401 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

4.

Other related parties (continued) Related party

(continued) CCCC Highway Planning and Design Institute Co., Ltd

Controlled by the same parent company

CCCC Tunnel Engineering Co., Ltd

Controlled by the same parent company

CCCC East China Investment Co., Ltd

Controlled by the same parent company

CCCC Highway Bridges National Engineering Research Centre Co., Ltd.

Controlled by the same parent company

China Harbor Engineering Co., Ltd

Controlled by the same parent company

China Road and Bridge Co., Ltd

Controlled by the same parent company

Beijing Qiaoyu Science and Technology Co., Ltd

Controlled by the same parent company

CHUWA BUSSAN company limited

Controlled by the same parent company

Yueyang Chenglingji Xingang Co., Ltd.

Controlled by the same parent company

Friede & Goldman, Llc.

Controlled by the same parent company

5.

Main transactions

The Group and the related party, the transaction price is based on mutual agreement and with reference to market price as the pricing basis. (1) Related party trading goods and services Selling goods to related party 2016 402 / 507

2015

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

CCCC Second Harbor Engineering Co., Ltd.

389,557,043

403 / 507

277,237,614

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

5.

Main transactions (continued)

CCCC International Shipping Co., Ltd

233,003,192

-

CHUWA BUSSAN company limited

193,053,287

331,102,486

China Road and Bridge Co., Ltd

179,013,839

1,089,606

CCCC Third Harbor Engineering Investigation and Design Institute Co., Ltd

175,876,344

4,515,993

CCCC Tianjin Dredging Co., Ltd

155,198,269

-

China Harbor Co., Ltd

Engineering

147,800,178

34,099,381

CCCC Tunnel Engineering Co., Ltd

144,526,777

52,226,007

CCCC Fourth Harbor Engineering Investigation and Design Institute Co., Ltd

121,403,077

-

Road & Bridge International Co., Ltd.

81,639,431

-

CCCC Third Harbor Engineering Co., Ltd.

81,407,370

257,912,687

No.3 Engineering Co., Ltd. of CCCC Second Harbor

69,043,050

-

404 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

Engineering Co., Ltd. CCCC-SHEC Second Engineering Co., Ltd.

62,720,000

405 / 507

3,678,378

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

5.

Main transactions (continued)

No.2 Engineering Co., Ltd. of CCCC First Harbor Engineering Co., Ltd.

42,279,112

643,333

CCCC-SHEC Second Engineering Co., Ltd.

37,101,137

75,530,025

Friede & Goldman, Llc.

26,755,168

140,108,319

CCCC Fourth Harbor Engineering Institute Co., Ltd.

26,568,685

-

CCCC Third Highway Engineering Bureau Co., Ltd

22,068,890

38,213,139

CCCC Financing Rental Co., Ltd.

20,652,755

12,020,237

Hainan CCCC Fourth Harbor Construction Co., Ltd

19,279,683

17,202,584

CCCC Second Harbor Engineering Co., Ltd.

17,389,362

44,663,030

Jiangsu LongYuan Zhenhua Marine Engineering Co., Ltd

16,648,649

53,734,600

(To be continued)

406 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

5.

Main transactions (continued)

(1) Related party trading goods and services (continued) Selling goods or assets to related parties (continued) 2016

2015

CCCC Second Highway Engineering Bureau Co., Ltd

11,802,499

56,534,225

China Communications Corporation

11,627,327

14,436,561

CCCC East China Investment Co., Ltd

10,697,446

-

CCCC First Harbor Engineering Co., Ltd.

8,219,845

-

(continued)

CCCC Highway Bridges National Engineering Research 4,829,060

-

Hong Kong Zhenhua Engineering Co., Ltd

134,656

-

Second Engineering Company of CCCC Fourth Harbor Engineering Co., Ltd

-

24,687,230

Second Engineering Company of CCCC Fourth Harbor Engineering Co., Ltd

-

18,699,952

407 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

Nanjing CCCC Weisanlu River Tunnel Co., Ltd

-

408 / 507

15,362,383

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

5.

Main transactions (continued)

No.1 Engineering Co., Ltd. of CCCC First Harbor Engineering Co., Ltd.

-

3,173,735

CCCC Shanghai Equipment Engineering Co., Ltd

-

1,222,449

2,310,296,131

1,478,093,954

Related party provided labor service for the Company 2016

2015

CCCC Tianjin Dredging Co., Ltd

331,677,108

202,023,996

CCCC Second Highway Consultant Co., Ltd.

91,221,324

-

CCCC Fourth Highway Engineering Co., Ltd.

75,048,039

-

CCCC Third Harbor Engineering Co., Ltd.

64,290,666

-

No.1 Engineering Co., Ltd. of CCCC First Harbor Engineering Co., Ltd.

22,573,250

-

(To be continued)

409 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

5.

Main transactions (continued)

(1) Related party trading goods and services (continued) Related party provided labor service for the Company (continued) 2016

2015

Shanghai Communications Construction Contracting Co., Ltd

21,633,168

-

Jiangsu Long Yuan Zhenhua Marine Engineering Co.,Ltd

14,565,939

-

China Communications Corporation

13,661,221

15,608,642

CCCC Second Highway Engineering Bureau Co., Ltd

7,079,715

10,713,240

CCCC Tianjin Industry and Trade Co., Ltd.

296,154

-

CCCC East China Investment Co., Ltd

247,863

30,900,000

CCCC Third Harbor Engineering Investigation and Design Institute Co., Ltd

56,913

-

Shanghai Jiangtian Industrial Co., Ltd

25,173

-

CTTIC Shanghai Co., Ltd

17,094

-

(continued)

410 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

642,393,627

411 / 507

259,245,878

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

5.

Main transactions (continued)

Purchase products from related parties 2016

2015

CHUWA BUSSAN company limited

182,477,645

291,769,656

Shanghai Zhenhua Heavy Industries (Group) Changzhou Paint Co., Ltd.

120,664,901

104,139,666

CCCC Shanghai Equipment Engineering Co., Ltd

100,037,221

137,622,776

CCCC Fourth Highway Engineering Co., Ltd.

2,993,504

-

CCCC Tianjin Port & Waterway Prospection & Design Research Institute Co., Ltd.

1,084,615

-

CCCC Tianjin Port Prospection & Design Research Institute Co., Ltd.

1,084,615

-

Nanjing CCCC Weisanlu River Tunnel Co., Ltd

72,175

-

China Communication Materials & Shipment Co., Ltd

14,248

16,721,301

408,428,,924

550,253,399

2016

2015

(2) Pay dividend to related parties

412 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

China Communications Corporation

502,283

413 / 507

-

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

5.

Main transactions (continued)

(3) Net deposit to related parties 2016

2015

528,772,323

14,114,145

2016

2015

2,120,845,793

1,018,000,000

300,000,000

-

CCCC Rental Jiahuayi Co., Ltd

-

383,838,000

CCCC Rental Jiahuaer Co., Ltd

-

383,838,000

2,420,845,793

1,785,676,000

CCCC Financial Co., Ltd (4) Loans to Related parties

CCCC Financing Rental Co., Ltd. CCCC Financial Co., Ltd

(5) Received interest from related parties 2016

2015

513,218

616,290

2016

2015

46,047,152

53,723,710

CCCC Financial Co., Ltd (6) Pay interest to related parties

CCCC Financing Rental Co., Ltd.

414 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

CCCC Financial Co., Ltd

11,201,250

13,594,125

8,819,415

11,483,154

CCCC Rental Jiahuayi Co., Ltd

415 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

5.

Main transactions (continued)

CCCC Rental Jiahuaer Co., Ltd

(7)

8,819,415

11,483,154

74,887,232

90,284,143

Leasing

The Group as lessor Types of leasing assets

2016

2015

Zhenhua Marine Energy (Hong Kong) Co., Ltd

Ship

169,580,194

67,924,038

CCCC Tunnel Engineering Co., Ltd

Shield

125,440,000

14,365,684

Ship

1,606,804

3,384,615

CCCC Third Harbor Second Engineering Co., Ltd

Shield

501,755

-

No.3 Engineering Co., Ltd. of CCCC Second Harbor Engineering Co., Ltd.

Shield

-

19,671,628

297,128,753

105,345,965

China Communications Corporation

(8)

Guarantee 416 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

The Company as guarantor

417 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

5.

Main transactions (continued)

Zhenhua Marine Energy (Hong Kong) Co., Ltd

Guarantee

Guarantee

Guarantee

Whether the Guarantee is

amount

start date

due date

implemented

177,247,287

September 14, 2015

April 14, 2017

No

In current period, the Group provide loan guarantee to Zhenhua Marine Energy (Hong Kong) Co., Ltd for free. The total converted guarantee amount in RMB is 177,247,287yuan (2015: RMB 165,917,974 yuan). (9).

Key executives’ salaries

Key executives’ salaries

2016

2015

14,574,800

12,544,400

The number of key executives of the Group in 2016 is 24 (2014: 29). The salaries of the newly added executives and the resigned executives are calculated according to the tenure. It is calculated on a yearly basis for other employees. X. Related party relationships and transactions (continued) 6.

Promises with related parties

The following are promises contracted but not necessarily shown on balance sheet with related parties as of balance sheet day: Related party provided labor service for the Company

2016

2015

CCCC Tianjin Dredging Co., Ltd

1,344,348,653

-

835,973,095

-

CCCC

Fourth

Highway

418 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

Engineering Co., Ltd.

419 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

6.

Promises with related parties (continued)

CCCC Third Harbor Engineering Co., Ltd.

387,588,088

79,010,254

No.1 Engineering Co., Ltd. of CCCC First Harbor Engineering Co., Ltd.

139,829,924

-

CCCC Second Highway Consultant Co., Ltd.

34,418,446

-

CCCC Tunnel Engineering Co., Ltd

5,265,067

23,777,752

Shanghai Communications Construction Contracting Co., Ltd

650,837

-

CCCC Second Harbor Engineering Co., Ltd

-

70,313,613

CCCC Third Harbor Engineering Xing’an Construction Engineering Co., Ltd.

-

37,076,943

Installation Engineering Co., Ltd. Of CCCC First Harbor Engineering Co., Ltd.

-

29,435,537

China Communications Corporation

-

29,333,629

CCCC First Harbor Engineering Co., Ltd.

-

1,000,000

420 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

2,748,074,110

421 / 507

269,947,728

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

6.

Promises with related parties (continued)

Leased assets from related parties

2016

2015

Shanghai Waterway Logistics Co., Ltd

-

1,800,000

Leased assets to related parties

2016

2015

Zhenhua Marine Energy (Hong Kong) Co., Ltd

1,522,081,855

1,582,750,064

China Communications Corporation

-

2,880,000

1,522,081,855

1,585,630,064

The related parties build base and production workshop 2016

2015

-

13,750,000

2016

2015

CCCC Tianjin Dredging Co., Ltd

495,528,226

-

CCCC Second Harbor Engineering Co., Ltd.

126,518,010

269,536,252

CCCC Third Harbor Engineering Co., Ltd.

Selling goods or assets to related parties

422 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

6.

Promises with related parties (continued)

Road & Bridge International Co., Ltd.

74,183,233

-

No.3 Engineering Co., Ltd. of CCCC Second Harbor Engineering Co., Ltd.

69,043,050

-

CCCC Second Highway Engineering Bureau Co., Ltd.

55,801,029

-

CCCC Financing Rental Co., Ltd.

41,121,422

650,726,496

China Road and Bridge Co., Ltd

28,043,324

138,189

CCCC International Shipping Co., Ltd

26,318,763

-

CHUWA BUSSAN company limited

13,138,761

-

CCCC Third Harbor Engineering Co., Ltd.

11,620,766

47,321,305

(To be continued)

423 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

6.

Promises with related parties (continued)

Selling goods or assets to related parties (continued) 2016

2015

CCCC Tunnel Engineering Co., Ltd

11,054,256

9,119,658

Friede & Goldman, Llc.

11,000,000

102,518,684

Hainan CCCC Fourth Harbor Construction Co., Ltd

7,723,504

507,461

China Communications Water Transportation Design & Research Co., Ltd

6,672,629

6,672,629

No.1 Engineering Co., Ltd. of CCCC First Harbor Engineering Co., Ltd.

5,264,957

6,210,620

5,058,462

126,461,538

No.2 Engineering Co., Ltd. of CCCC First Harbor Engineering Co., Ltd.

4,528,473

9,701,516

CCCC-SHEC Second Engineering Co., Ltd.

1,541,429

1,541,429

(continued)

CCCC Fourth Harbor Engineering Investigation and Design Institute Co., Ltd

424 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

CCCC Third Highway Engineering Bureau Co., Ltd

1,127,786

425 / 507

3,850,109

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

6.

Promises with related parties (continued)

CCCC First Harbor Engineering Co., Ltd.

341,880

-

CCCC Fourth Harbor Engineering Institute Co., Ltd.

36,103

-

China Communications Corporation

-

74,715,733

China Harbor Co., Ltd

Engineering

-

63,799,620

Second Engineering Company of CCCC Fourth Harbor Engineering Co., Ltd

-

14,872,470

No.2 Engineering Co., Ltd. of CCCC Second Harbor Engineering Co., Ltd.

-

7,494,175

Jiangsu LongYuan Zhenhua Marine Engineering Co.,Ltd

-

450,106

CCCC Fourth Harbor Engineering Co., Ltd

-

333,806

CCCC Third Harbor Second Engineering Co., Ltd

-

144,794

926,623,013

1,396,116,590

Signed a standby leasing agreement with the related party On December 16,2015, the Company signed ship rental standby agreement with CCCC Rental Jiahuayi Co., Ltd and CCCC Rental Jiahuaer Co., Ltd, with the rental term from March 426 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

5, 2016 to December 5, 2021.The Company will pay contractual compensations when the ship rental agreement signed by the subsidiary and Zhenhua Marine Energy (Hong Kong) Co., Ltd can’t be performed. The max contractual amount is RMB 737,304,000 Yuan.

427 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

7.

Receivables from related parties 2016

2015

Closing balance

Provision for bad debts

Closing balance

Provision for bad debts

No.1 Engineering Co., Ltd. of CCCC First Harbor Engineering Co., Ltd.

100,793,713

-

40,000,000

-

CCCC Fourth Harbor Engineering Investigation and Design Institute Co., Ltd

88,776,000

-

29,592,000

-

CCCC First Harbor Engineering Co., Ltd.

72,345,219

-

90,636,388

-

China Communications Corporation

58,509,343

-

27,772,867

-

Jiangsu LongYuan Zhenhua Marine Engineering Co., Ltd

37,087,652

-

45,398,459

-

China Harbor Engineering Co., Ltd

33,636,903

-

15,125,880

-

CCCC Second Harbor Engineering Co.,

31,166,430

-

56,432,975

-

Accounts receivable

428 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

Ltd. CCCC Third Harbor Engineering Co., Ltd.

32,184,194

-

429 / 507

56,419,273

-

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

7.

Receivables from related parties (continued)

CCCC Fourth Harbor Engineering Co., Ltd

24,670,995

-

19,047,086

-

China Communications Water Transportation Design & Research Co.,Ltd

18,382,000

-

-

-

Friede & Goldman, Llc.

16,718,142

-

114,763,068

-

Road & Bridge International Co., Ltd.

9,032,783

-

-

-

CCCC-SHEC Second Engineering Co., Ltd.

6,098,300

-

13,171,700

-

CCCC Fourth Harbor Engineering Investigation and Design Institute Co., Ltd

6,000,000

-

6,000,000

-

(To be continued) 430 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

431 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

7.

Receivables from related parties (continued) 2016 Closing balance Provision bad debts

2015

for Closing balance Provision bad debts

for

Accounts receivable (continued) (continued) No.2 Engineering Co., Ltd. of CCCC Second Harbor Engineering Co., Ltd.

5,700,505

-

8,999,544

-

CCCC Highway Bridges National Engineering Research

5,650,000

-

-

-

Second Engineering Company of CCCC Fourth Harbor Engineering Co., Ltd

5,233,497

-

10,402,788

-

No.2 Engineering Co., Ltd.

5,053,317

-

5,753,557

-

of 432 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

CCCC First Harbor Engineering Co., Ltd.

433 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

7.

Receivables from related parties (continued)

CCCC Third Harbor Second Engineering Co., Ltd

5,008,691

-

-

Tianjin Dredging Company—Binhai Environmental Protection Engineering Co., Ltd

2,170,000

-

2,170,000

-

CCCC-SHEC Second Engineering Co., Ltd.

1,438,507

-

14,753,046

-

CCCC Marine Engineering Vessel Technology Research Centre Co., Ltd

1,100,000

-

1,100,000

-

CCCC Third Harbor Engineering Xing’an Construction Engineering Co., Ltd.

331,860

-

-

434 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

435 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

7.

Receivables from related parties (continued)

Installation Engineering Co., Ltd.of CCCC First Harbor Engineering Co., Ltd.

253,297

-

900,797

-

CCCC Tianjin Industry and Trade Co., Ltd.

140,711

-

-

-

Yueyang Chenglingji Xingang Co., Ltd.

48,680

-

42,000

-

CCCC Shanghai Equipment Engineering Co., Ltd

45,635

-

1,083,425

-

Zhenhua Marine Energy (Hong Kong) Co., Ltd

-

-

69,319,180

-

CHUWA BUSSAN company limited

-

-

45,103,892

-

CCCC Second Highway Engineering Bureau Co., Ltd.

-

-

25,595,000

-

436 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

437 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

7.

Receivables from related parties (continued)

No.1 Engineering Co., Ltd. of CCCC First Harbor Engineering Co., Ltd.

-

-

5,760,000

-

CCCC Tunnel Engineering Co., Ltd

-

-

4,809,915

-

CCCC First Harbor City Traffic Engineering Co., Ltd

-

4,719,000

No.2 Engineering Co., Ltd. of CCCC Second Harbor Engineering Co., Ltd.

-

-

1,245,810

-

567,576,374

-

716,117,651

-

2016 Closing balance

2015 Provision for Closing balance bad debts 438 / 507

Provision for bad debts

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

Monetary capital CCCC Financial Co., Ltd

663,820,190

-

Other receivables

439 / 507

134,534,649

-

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

7.

Receivables from related parties (continued)

Jiangsu LongYuan Zhenhua Marine Engineering Co.,Ltd

1,750,622

-

1,726,800

-

CCCC First Harbor Engineering Co., Ltd.

100,000

-

-

-

No.1 Engineering Co., Ltd. of CCCC First Harbor Engineering Co., Ltd.

-

-

10,000,000

-

1,850,622

-

11,726,800

-

7,210,205

-

-

-

China Communications Corporation

-

-

7,192,680

-

CCCC Third Harbor Engineering

-

-

2,200,000

-

Advanced payment CCCC East China Investment Co., Ltd

440 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

Xing ‘an Construction Engineering Co., Ltd.

441 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

7.

Receivables from related parties (continued)

CCCC Shanghai Equipment Engineering Co., Ltd

-

-

630,000

-

7,210,205

-

10,022,680

-

8. Balances of payables to related parties 2016

2015

CHUWA BUSSAN company limited

358,758,413

296,437,449

CCCC-SHEC Second Engineering Co., Ltd.

221,168,711

187,941,127

CCCC Second Highway Engineering Bureau Co., Ltd

149,221,661

259,445,458

CCCC Third Harbor Engineering Co., Ltd.

115,648,769

43,224,566

CCCC Tianjin Dredging Co., Ltd

92,096,212

162,023,996

CCCC Fourth Highway Engineering Co., Ltd.

81,806,205

-

CCCC Second Highway Consultant Co., Ltd.

48,804,871

-

CCCC Tunnel Engineering Co., Ltd

29,059,546

28,854,070

Accounts payable

442 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

443 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

8. Balances of payables to related parties (continued) Jiangsu LongYuan Zhenhua Marine Engineering Co.,Ltd

17,042,149

-

CCCC Shanghai Equipment Engineering Co., Ltd

14,170,536

32,594,294

No.1 Engineering Co., Ltd. of CCCC First Harbor Engineering Co., Ltd.

11,410,703

-

CCCC Third Harbor Engineering Xing’an Construction Engineering Co., Ltd.

10,051,352

10,051,352

Shanghai Communications Construction Contracting Co., Ltd

9,675,865

-

CCCC Marine Engineering Vessel Technology Research Centre Co., Ltd

9,363,830

9,363,830

China Communications Corporation

8,777,876

-

Shanghai Zhenhua Heavy Industries (Group) Changzhou Paint Co., Ltd.

8,725,170

24,086,487

CCCC Tianjin Industry and Trade Co., Ltd.

1,178,100

-

CCCC East China Investment Co., Ltd

290,000

-

444 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

445 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

8. Balances of payables to related parties (continued) China Communications Water Transportation Design & Research Co.,Ltd

160,000

160,000

China Communication Materials & Shipment Co., Ltd

16,670

14,821,551

Shanghai Jiangtian Industrial Co., Ltd

4,380

289

Beijing Qiaoyu Science and Technology Co., Ltd

-

1,198,882

1,187,431,019

1,070,203,351

2016

2015

Engineering

736,500

736,500

Jiangsu LongYuan Zhenhua Marine Engineering Co.,Ltd

366,574

-

CCCC Shanghai Equipment Engineering Co., Ltd

100,000

-

CCCC Tunnel Engineering Co., Ltd

-

107,781,197

No.2 Engineering Co., Ltd. of CCCC Second Harbor

-

82,277,608

Advance receipts China Harbor Co., Ltd

446 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

Engineering Co., Ltd.

447 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

8. Balances of payables to related parties (continued) CHUWA BUSSAN company limited

-

32,378,055

No.1 Engineering Co., Ltd. of CCCC First Harbor Engineering Co., Ltd.

-

1,788,70

China Communications Corporation

-

934,516

No.2 Engineering Co., Ltd. of CCCC Second Harbor Engineering Co., Ltd.

-

699,388

Friede & Goldman, Llc.

-

599,112

CCCC Third Harbor Engineering Xing ‘an Construction Engineering Co., Ltd.

-

200,000

1,203,074

227,395,077

Hong Kong Zhenhua Engineering Co., Ltd

346,005

346,005

Macau Zhenhua Harbor Engineering Co., Ltd

6,593

6,593

CCCC Tianjin Dredging Co., Ltd

25,079,494

25,079,494

Dividend payable

448 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

8. Balances of payables to related parties (continued) CHUWA BUSSAN company limited

6,269,873

6,269,873

China Communications Corporation

-

502,283

31,701,965

32,204,248

132,917

1,784,054

2016

2015

China Communications Corporation

103,327,306

103,937,952

CCCC Financing Rental Co., Ltd.

100,000,000

1,118,000,000

Shanghai Jiangtian Industrial Co., Ltd

16,754,583

17,586,085

CCCC Third Harbor Engineering Co., Ltd.

3,195,324

3,376,879

CCCC-SHEC Second Engineering Co., Ltd.

7,912,758

7,912,758

CCCC Tianjin Dredging Co., Ltd

2,000,000

2,669,988

Interest payable CCCC Financing Rental Co., Ltd.

Other payables

449 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

8. Balances of payables to related parties (continued) CCCC Tunnel Engineering Co., Ltd

1,819,211

1,637,656

CCCC Second Highway Engineering Bureau Co., Ltd

1,437,244

13,750,047

Jiangsu LongYuan Zhenhua Marine Engineering Co.,Ltd

143,395

-

Shanghai Zhenhua Heavy Industries (Group) Changzhou Paint Co., Ltd.

99,606

-

CCCC Shanghai Equipment Engineering Co., Ltd

89,000

-

Longfu

-

257,612

CCCC Third Harbor Engineering Xing’an Construction Engineering Co., Ltd.

-

1,200

236,778,427

1,269,130,177

100,000,000

-

407,455,030

-

Shanghai Zhensha Machinery Co., Ltd

Short-term loans CCCC Financial Co., Ltd Non-current liabilities due within one year CCCC Financing Rental Co., Ltd.

450 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

CCCC Rental Jiahuayi Co., Ltd

61,059,663

451 / 507

29,685,028

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

X.

Related party relationships and transactions (continued)

8. Balances of payables to related parties (continued) CCCC Rental Jiahuaer Co., Ltd

61,059,663

29,685,029

529,574,356

59,370,057

CCCC Financing Rental Co., Ltd.

905,899,356

-

CCCC Rental Jiahuayi Co., Ltd

323,448,337

359,930,972

CCCC Rental Jiahuaer Co., Ltd

323,448,337

359,930,971

CCCC Tianjin Dredging Co., Ltd

65,565,134

-

1,618,361,164

719,861,943

Long-term payable

452 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XI. Promises and contingencies

1. Significant promises (1) Capital expense promises List in the following is the capital expenses promises not yet to be listed in the financial statements but the contracts have been signed on the balance sheet date.

House, building equipment

and

December 31, 2016

December 31, 2015

225,842,432

206,585,921

(2) Operating leasing Promises List in the following is the minimum leasing payment of the Group in the future according to the irrevocable operating leasing contract that has been signed: December 31, 2016

December 31, 2015

Within one year

58,763,290

57,354,128

One to two years

58,264,180

57,733,328

Two to three years

58,689,123

57,235,328

Over 3 years

76,480,021

138,342,848

252,196,614

310,665,632

(3) L/C Promises The company entrusted bank to issue several L/C to purchase imported components or parts. As of Dec. 31, 2016, the unpaid amount under the L/C’s is about RMB 2,464,170,714 Yuan (Dec. 31, 2015: RMB 2,226,236,545 Yuan).

453 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XI. Promises and contingencies (continued)

2. Contingencies As of Dec 31, 2016, the significant contingencies of the Group are as follows: (1) In 2008, the Company signed an agreement of sales and installation for wind power steel pipe pile products for the British Wind Power Project with Flour Limited (hereinafter referred to as "Fluor") .In the project construction process, the Company and Fluor, by way of friendly consultations and in the spirit of good cooperation, maintain dispute handling normal communication mechanism. In June 2010, for the implementation of the contract, after review by the board of directors of the Company, the Company signed a mutual exemption letter with Fluor, and in 2011 settled the remaining payment. Afterwards, Flour produced claim to the Company for quality compensation, and requested the Company to cash the pay-on-claim quality guarantee bond, while the Company rejected the claim. On March 20, 2014, Flour cashed the amount of 23,409,750 euro bond to guarantee bond bank. In September 2014, Flour initiated proceedings for the breach caused by the problems related to the product quality to High Court of Justice, Queen’s Bench Division, The Technology and Construction Court (hereinafter referred to as “TCC Court of Britain Queen’s Bench”) and asked the Company for the compensation of 250 million Pounds for additional test and repair cost, project period delay and related loss. (Including the cashed bond amount of 23,409,750 Euro). The Company didn’t acknowledge the claim for the compensation from Flour. Since then, the Company prepared the evidence disclosure, witness testimony, exchange work and other preparatory work before the court. From February to March, April, April, June, the Trial Chamber of the British High Court held a trial of the responsibility for the first instance, the trial of the quantitative part of the first instance continued in May 2017. At present, the Company is actively preparing works on ration part before the court, including exchanging testimony of witnesses, disclosing and drafting document, and exchanging expert report in respect of ration and work period.

454 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XI. Promises and contingencies (continued)

2. Contingencies (continued) The Company attached great importance to this case, established special team and hired senior legal team both at home and abroad to actively advocate the Company’s rights and protect the Company’s rights from damaged. At present, this case is still at the stage of preparing and exchanging various litigation documents and evidences before the first instance on ration part. Therefore, the Company is unable to reliably estimate the possible result of the case, possible loss and profit possibility and amount arising from that. The Company will timely disclose the related impact based on the progress. (2) In 2013, the Company has signed the construction and sales contract about a 6000 tons piping ship with Petrofac (JSD6000) Limited (hereinafter referred to as Petrofac).The Company kept normal contact with Petrofac in the process of the construction. On October 9, 2015, Petrofac issued Contract Termination Letter with the reason that the project is delayed and meets the termination article. Petrofac asked for terminating the contract and requested the Company to return the prepaid payment and interest, as well as assumed the responsibility of the loss caused by the termination of the contract. The Company rejected the claim. Petrofac honored the demand guarantee from the opening bank in December 2015, with total amount of 44,720,000 USD. The Company attached great importance to this case, established special team and hired senior legal team both at home and abroad to actively advocate the Company’s rights and protect the Company’s rights from damaged. The Company has applied for arbitration to the London Court of International Arbitration in January 2016, and asked Petrofac to return the payment of Letter of Guarantee and compensated for the loss in total of 200 million USD. After receiving the arbitration applicant of the Company, Petrofac filled a counterclaim, and asked the Company for compensating about 182 million USD or 213 million USD under the requirements of continuing built ship or not continuing built ship. At present, the arbitration court has been build. The company has submitted attribution schedule by negotiation with Petrofac, with two rounds of arbitration documents on respective opinions. The trail of the case has not yet initiated officially, and the relative materials are on preparation stage, such as evidentiary document, testimony of witnesses and expert report. Therefore, the Company is unable to reliably estimate the possible result of the case, possible loss and profit possibility and amount arising from that. The Company will timely disclose the related impact based on the progress.

455 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XI. Promises and contingencies (continued)

2. Contingencies (continued) (3) On December 31, 2016, the Group provided USD 25.551 million of loan guarantee of overseas loan under domestic guarantee to the joint venture Zhenhua Marine Energy (Hong Kong) Co., Ltd. The total converted guarantee amount in RMB is 177,247,287yuan which will be due on April 14, 2017.The amount above reflects the max loss caused to the Group once it breaches the agreement. The joint venture Zhenhua Marine Energy (Hong Kong) Co., Ltd. has health finance with no predicted significant debt breach risk. The Group didn’t confirm the debt related to the financial guarantee. (4) As of Dec. 31, 2015, the Group provided financial guarantee amount of 19,184,000 Yuan to customer Jiangsu Yanweigang Port Co., Ltd which will be due on Nov 11, 2017.The amount above reflects the max loss caused to the Group once it breaches the agreement. The Jiangsu Yanweigang Port Co., Ltd has health finance with no predicted significant debt breach risk. The Group didn’t confirm the debt related to the financial guarantee.

456 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements

1. Accounts receivable 2016

2015

Accounts receivable

7,787,866,391

7,891,037,413

Less: Bad debt provision

1,311,778,695

1,108,321,774

6,476,087,696

6,782,715,639

2016

2015

4,697,825,773

5,529,667,647

7 to 12 months

754,026,913

513,185,844

1 to 2 years

846,748,647

603,261,900

2 to 3 years

347,663,847

496,633,694

3 to 4 years

377,828,003

170,481,093

4 to 5 years

132,261,040

102,873,101

Over 5 years

631,512,168

474,934,134

7,787,866,391

7,891,037,413

1,311,778,695

1,108,321,774

6,476,087,696

6,782,715,639

Long-term receivables analyzed by age:

Within 6 months

Less: Bad debt provision

Change of receivables - provisions for bad debt:

457 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

1. Accounts receivable (continued) Opening balance in current year

Provision in this year

Changeback back this year

Write-Off in this year

Closing balance in current year

2016

1,108,321,774

203,456,921

-

-

1,311,778,695

2015

832,754,361

275,567,413

-

-

1,108,321,774

The accounts receivable are analyzed by types as follows: 2016

2015

Closing balance Amount

Proportion

Provision for bad debts

Closing balance

Amount

Amount

Withdrawing

% Accounts receivables that are individually insignifican t but provision for bad debts

%

Provision for bad debts Proportion

Amount

Withdrawing

%

%

159,594,037

2

159,594,037

100

257,212,586

3

257,212,586

100

-Related party

3,350,449,30 6

43

-

-

3,967,741,78 1

51

-

-

-Third party

3,992,180,63 5

51

867,510,413

22

3,503,260,02 1

44

688,286,163

20

Accounts receivables that are individually insignifican t but provision for bad debts is assessed individually

285,642,413

4

284,674,245

100

162,823,025

2

162,823,025

100

7,787,866,39 1

100

1,311,778,69 5

17

7,891,037,41 3

100

1,108,321,77 4

14

Bad debt reserve is calculated as per the credit risk combination

458 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

1. Accounts receivable (continued) As of Dec, 31, 2016, situation of the accounts receivables that are individually insignificant but provision for bad debts is assessed individually is as follows: Book value balance Accounts receivable 1

159,594,037

Bad debt Provision ratio provision (%) 159,594,037

100%

Reason

Contract dispute

As of Dec, 31, 2015, situation of the accounts receivables that are individually insignificant but provision for bad debts is assessed individually is as follows: Book value balance

Bad debt Provision ratio provision

Provision reasons

Accounts receivable 1

149,393,086

149,393,086

100%

Contract dispute

Accounts receivable 2

107,819,500

107,819,500

100%

Counter-party seriously lacks funds

257,212,586

257,212,586

100%

Accounts receivable for which the bad debt reserve is calculated as per the aging analysis method:

459 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

1. Accounts receivable (continued) 2016

2015

Closing Provision for bad debts balance

Closing Provision for bad debts balance

Amount

Amount

Proportio n

Amount

Amount

Proportio n

Withi n 6 month s

1,638,214,66 1

-

-

1,725,233,94 0

-

-

7 - 12 month s

669,637,393

6,696,374

1

449,328,126

3,442,852

1

1 - 2 years

649,760,167

97,704,025

15

530,521,126

78,072,185

15

2 - 3 years

293,717,341

88,115,202

30

168,781,101

50,634,330

30

3 - 4 years

95,818,058

47,909,029

50

113,881,656

55,440,828

49

4 - 5 years

71,788,934

53,841,700

75

48,339,809

33,521,705

69

Over 5 years

573,244,081

573,244,08 3

100

467,174,263

467,174,26 3

100

3,992,180,63 5

867,510,41 3

22

3,503,260,02 1

688,286,16 3

20

As of Dec, 31, 2016, situation of the other accounts receivables that are individually 460 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

not insignificant but provision for bad debts is assessed individually is as follows: Book value balance

Bad debt Provision ratio provision

Reason

Accounts receivable 1

107,819,500

107,819,500

100%

Contract dispute

Accounts receivable 2

50,365,000

50,365,000

100%

Counter-party seriously lacks funds

461 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

1. Accounts receivable (continued) Accounts receivable 3

27,748,069

27,748,069

100%

Contract dispute

Accounts receivable 4

21,932,297

21,932,297

100%

Contract dispute

Accounts receivable 5

19,480,920

18,512,752

95%

Contract dispute

Accounts receivable 6

17,735,070

17,735,070

100%

Contract dispute

Accounts receivable 7

10,049,240

10,049,240

100%

Contract dispute

Accounts receivable 8

7,664,629

7,664,629

100%

Contract dispute

Accounts receivable 9

7,421,237

7,421,237

100%

Contract dispute

Accounts receivable 10

7,306,800

7,306,800

100%

Contract dispute

Accounts receivable 11

4,557,644

4,557,644

100%

Contract dispute

Accounts receivable 12

3,562,007

3,562,007

100%

Contract dispute

285,642,413

284,674,245

100%

462 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

1. Accounts receivable (continued) As of Dec, 31, 2015, situation of the other accounts receivables that are individually not insignificant but provision for bad debts is assessed individually is as follows: Book value balance

Bad debt Provision ratio provision (%)

Reason

Accounts receivable 1

50,365,000

50,365,000

100%

Counter-party seriously lacks funds

Accounts receivable 2

25,974,465

25,974,465

100%

Contract dispute

Accounts receivable 3

20,530,426

20,530,426

100%

Contract dispute

Accounts receivable 4

18,235,736

18,235,736

100%

Contract dispute

Accounts receivable 5

16,150,830

16,150,830

100%

Contract dispute

Accounts receivable 6

9,758,221

9,758,221

100%

Contract dispute

Accounts receivable 7

7,260,803

7,260,803

100%

Contract dispute

Accounts receivable 8

6,946,886

6,946,886

100%

Contract dispute

Accounts receivable 9

4,266,328

4,266,328

100%

Contract dispute

Accounts receivable 10

3,334,330

3,334,330

100%

Contract dispute

463 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

162,823,025

162,823,025

464 / 507

100%

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

1. Accounts receivable (continued) As of Dec. 31, 2016, the accounts receivable summary analysis of top 5 arrears is shown as following: Accounting for balance of receivables

Total amount of top 5 account receivables account receivables

Balance

Bad debt provision amount

Proportion in total accounts receivable

2,641,634,401

42,868,900

34%

As of Dec. 31, 2015, the account receivable summary analysis of top 5 debtors is shown as following: Accounting for balance of receivables

Total amount of top 5 account receivables account receivables

Balance

Bad debt provision amount

Proportion in total accounts receivable

3,094,418,881

-

39%

465 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

2. Other accounts receivable Other accounts receivables analyzed by age: 2016

2015

13,861,142,297

11,225,646,626

1 to 2 years

4,247,938

55,855,439

2 to 3 years

14,168,062

4,952,612

3 to 4 years

3,685,185

980,855

4 to 5 years

180,855

686,960

Over 5 years

15,281,311

35,555,503

13,898,705,648

11,323,677,995

20,702,632

18,581,021

13,878,003,016

11,305,096,974

Within one year

Less: Bad debt provision

Change of other receivables - provisions for bad debt: Opening balance in current year

Provision in this year

Changeback back this year

Write-Off in this year

Closing balance in current year

2016

18,581,021

2,121,611

-

-

20,702,632

2015

16,776,791

1,804,230

-

-

18,581,021

466 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

2. Other accounts receivable (continued) Other accounts receivables analyzed by types: 2016 Closing balance Amount

Proportion

2015 Provision for bad debts Amount

Withdrawing

% Big single amount, provided for bad debt separately

Closing balance Amount

%

Proportion

Provision for bad debts Amount

%

Withdrawing %

-

-

-

-

-

-

-

-

99,337,723

1

-

-

149,741,517

1

-

-

102,865,415

1

-

-

127,444,785

1

-

-

13,685,062,13 5

98

9,262,257

-

11,035,051,31 8

98

7,140,646

-

11,440,375

-

11,440,375

100

11,440,375

-

11,440,375

100

13,898,705,64 8

100

20,702,632

11,323,677,99 5

100

18,581,021

Bad debt reserve is calculated as per the credit risk combination -Guaranty deposit (excluding quality guarantee deposit) -Employee individual loans and reserve funds -Others

Single amount, though not significant, separate provision for bad debt made

467 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

2. Other accounts receivable (continued) As of December 31, 2016, the Company has no separate provision for bad debt for other accounts receivable with significant individual amount. In combination, other receivables for which the bad debt reserve is calculated as per the aging analysis method: 2016 Closing balance

2015

Provision for bad debts

Closing balance

Provision for bad debts

Amount

Amount

Proportion

Amount

Amount

Proportion

6

13,662,394,513

-

-

11,008,231,524

-

-

7 - 12 months

2,834,483

28,345

1

3,927,262

39,273

1

1 - 2 years

747,938

112,191

15

15,680,501

2,352,076

15

2 - 3 years

11,881,104

3,564,331

30

3,203,485

961,044

30

3 - 4 years

3,202,985

1,601,492

50

180,855

90,427

50

4 - 5 years

180,855

135,641

75

519,460

389,595

75

3,820,257

3,820,257

100

3,308,231

3,308,231

100

13,685,062,135

9,262,257

11,035,051,318

7,140,646

Within months

Over years

5

As of Dec. 31, 2016 and Dec. 31, 2015, other receivables which single amount, though not significant, separate provision for bad debt made:

468 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

2. Other accounts receivable (continued) Book value balance

Bad debt provision

Provision ratio (%)

Reason

Other receivables 1

1,692,765

1,692,765

100

Contract cancelled

Other receivables 2

1,170,282

1,170,282

100

Contract cancelled

Other receivables 3

5,540,286

5,540,286

100

Contract cancelled

Other receivables 4

3,037,042

3,037,042

100

Contract cancelled

11,440,375

11,440,375

100

Category of other payables by nature of payment 2016

2015

13,429,629,328

10,700,493,210

119,175,846

138,270,252

55,755,562

101,381,047

60,496,560

82,048,741

Customs guaranty deposit

71,148,199

104,071,196

Bid bond payments

29,189,524

45,670,321

Employee’s loans receivable

42,368,855

45,396,044

Lease receivables

33,434,668

33,484,980

Intercourse funds of subsidiary Unsettled receivable

tax

and

surtax

Export tax rebate Products or field temporary loans

service

469 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued) Others

57,507,106

72,862,204

13,898,705,648

11,323,677,995

470 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

2. Other accounts receivable (continued) Other receivables with top five ending balance collected by the party in debt as of December 31, 2016 Closing balance

Proportion in other total ending balance receivable (%)

Other receivables 1

4,370,239,666

Other receivables 2

Nature

Account age

Provision for bad debts Closing balance

31

Intercourse Within one year funds of subsidiary

-

2,518,908,707

18

Intercourse Within one year funds of subsidiary

-

Other receivables 3

2,092,489,070

15

Intercourse Within one year funds of subsidiary

-

Other receivables 4

2,077,530,443

15

Intercourse Within one year funds of subsidiary

-

Other receivables 5

1,458,611,248

10

Intercourse Within one year funds of subsidiary

-

12,517,779,134

89

-

Other receivables with top five ending balance collected by the party in debt as of December 31, 2015 Closing balance

Proportion in other total ending balance receivable (%)

471 / 507

Nature

Account age

Provision for bad debts Closing balance

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued) Other receivables 1

2,521,927,692

22

Intercourse Within one year funds of subsidiary

-

Other receivables 2

2,375,267,363

21

Intercourse Within one year funds of subsidiary

-

Other receivables 3

1,506,297,530

13

Intercourse Within one year funds of subsidiary

-

Other receivables 4

1,283,337,049

11

Intercourse Within one year funds of subsidiary

-

472 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

2. Other accounts receivable (continued) Other receivables 5

1,144,708,573

10

8,831,538,207

77

Intercourse Within one year funds of subsidiary

-

-

3. Long-term equity investments

Subsidiary Joint venture Associates

2016

2015

6,381,423,422

5,793,119,602

199,459,569

174,636,916

2,001,892,291

1,422,428,308

8,582,775,282

7,390,184,826

473 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

3. Long-term equity investments (continued) (1) Subsidiary 2016 2015

Increase/ decrease in current year

Dec. 31

Additional investment/ disinvestment

Dec. 31

Shanghai Zhenhua Port Machinery Heavy Industry Co., Ltd.

4,950,000

5,014,200

9,964,200

Shanghai Zhenhua Heavy Industries Machinery Co., Ltd.

5,014,200

(5,014,200)

-

Shanghai Zhenhua Port Machinery (Hong Kong) Co., Ltd.

-

-

-

Shanghai Zhenhua Shipping Co., Ltd.

140,260,673

-

140,260,673

Shanghai Zhenhua Heavy Industries (Group) Changzhou Paint Co., Ltd.

4,518,000

-

4,518,000

Nantong Zhenhua Heavy Industry Equipment Manufacturing Co., Ltd.

854,936,900

-

854,936,900

Nantong Zhenhua Heavy Industry Steel Structure Processing Co., Ltd.

598,110

-

598,110

474 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued) Jiangyin Zhenhua Port Machinery Steel Structure Manufacturing Co., Ltd.

579,983

475 / 507

-

579,983

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

3. Long-term equity investments (continued) Shanghai Zhenhua Heavy Industry General Equipment Co., Ltd.

2,201,086,744

-

2,201,086,744

Shanghai Zhenhua Heavy Industries Group (Nantong) Transmission Machinery Co., Ltd.

300,000,000

300,000,000

600,000,000

Shanghai Zhenhua Heavy Industries Group (Nantong) Co., Ltd.

300,000,000

(300,000,000)

-

Shanghai Zhenhua Heavy Industries Electric Co., Ltd.

50,000,000

-

50,000,000

207,940

-

207,940

2,334,799

13,283,280

15,618,079

Shanghai Zhenhua Heavy Industries Vessel Transport Co., Ltd.

100,000,000

-

100,000,000

Shanghai Zhenhua Testing Technology Consulting Co., Ltd.

7,000,000

-

7,000,000

6,183,978

-

6,183,978

Nanjing Ninggao New Channel Construction Co., Ltd.

1,098,000,000

-

1,098,000,000

Shanghai Zhenhua Heavy Industries Qidong

203,000,000

-

203,000,000

ZPMC GmbH Hamburg ZPMC Netherlands B.V.

ZPMC Lanka Company (Private) Limited

476 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued) Marine Co., Ltd

477 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

3. Long-term equity investments (continued) ZPMC Engineering Africa (Pty) Ltd.

3,084,000

-

3,084,000

ZPMC Korea Co., Ltd.

2,876,209

-

2,876,209

2,953,200

-

2,953,200

2,708,500

-

2,708,500

18,564,520

-

18,564,520

ZPMC Engineering (India) Private Limited ZPMC Australia Company (Pty) Limited ZPMC North America Inc.

(To be continued)

478 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

3. Long-term equity investments (continued) (1) Subsidiary (continued) 2015

Increase/ decrease in current year

2016

Dec. 31

Additional investment/ disinvestment

Dec. 31

Holding Pte. Ltd.

3,875,949

-

3,875,949

ZPMC Brazil Ltda.

Holdings

2,985,272

(48,501)

2,936,771

ZPMC Limited Liability Company

4,357,626

-

4,357,626

CCCC Liyang City Investment Construction Co., Ltd

183,000,000

-

183,000,000

CCCC Tianhe Co., Ltd.

242,542,999

-

242,542,999

CCCC Investment Development Qidong Co., Ltd

47,500,000

-

47,500,000

CCCC Zhenjiang Investment Construction Management Development Co., Ltd

-

567,000,000

567,000,00

ZPMC Middle East Fze

-

5,271,120

5,271,120

ZPMC UK LD

-

2,797,921

2,797,921

(continued) ZPMC Southeast Asia

479 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued) 5,793,119,602

480 / 507

588,303,820

6,381,423,422

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

3. Long-term equity investments (continued) 2015 2014

Increase/ decrease in current year

2015

Dec. 31

Additional investment/ disinvestment

Dec. 31

Shanghai Zhenhua Port Machinery Heavy Industry Co., Ltd.

4,950,000

-

4,950,000

Shanghai Zhenhua Heavy Industries Machinery Co., Ltd.

5,014,200

-

5,014,200

Shanghai Zhenhua Port Machinery (Hong Kong) Co., Ltd.

-

-

-

Shanghai Zhenhua Shipping Co., Ltd.

140,260,673

-

140,260,673

Shanghai Zhenhua Heavy Industries (Group) Changzhou Paint Co., Ltd.

4,518,000

-

4,518,000

Nantong Zhenhua Heavy Industry Equipment Manufacturing Co., Ltd.

854,936,900

-

854,936,900

481 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

3. Long-term equity investments (continued) Nantong Zhenhua Heavy Industry Steel Structure Processing Co., Ltd.

598,110

-

598,110

Jiangyin Zhenhua Port Machinery Steel Structure Manufacturing Co., Ltd.

579,983

-

579,983

Shanghai Zhenhua Heavy Industry General Equipment Co., Ltd.

2,201,086,744

-

2,201,086,744

Shanghai Zhenhua Heavy Industries Group (Nantong) Transmission Machinery Co., Ltd. (To be continued)

482 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

3. Long-term equity investments (continued) (1) Subsidiary (continued) 2014

Increase/ decrease in current year

2015

Dec. 31

Additional investment/ disinvestment

Dec. 31

300,000,000

-

300,000,000

Shanghai Zhenhua Heavy Industries Group (Nantong) Co., Ltd.

300,000,000

-

300,000,000

Shanghai Zhenhua Heavy Industries Electric Co., Ltd.

50,000,000

-

50,000,000

ZPMC GmbH Hamburg

207,940

-

207,940

ZPMC B.V.

Netherlands

149,717

2,185,082

2,334,799

Shanghai Zhenhua Heavy Industries Vessel Transport Co., Ltd.

100,000,000

-

100,000,000

Shanghai Zhenhua Testing Technology Consulting Co., Ltd.

7,000,000

-

7,000,000

(continued)

483 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

ZPMC Lanka Company (Private) Limited

6,183,978

484 / 507

-

6,183,978

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

3. Long-term equity investments (continued) Nanjing Ninggao New Channel Construction Co., Ltd.

1,090,000,000

8,000,000

1,098,000,000

Shanghai Zhenhua Heavy Industries Qidong Marine Co., Ltd

203,000,000

-

203,000,000

ZPMC Engineering Africa (Pty) Ltd.

3,084,000

-

3,084,000

ZPMC Korea Co., Ltd.

2,876,209

-

2,876,209

2,953,200

-

2,953,200

(Pty) Limited

2,708,500

-

2,708,500

ZPMC North America Inc.

1,850,430

16,714,090

18,564,520

3,875,949

-

3,875,949

-

2,985,272

2,985,272

ZPMC Engineering (India) Limited

Private

ZPMC Company

Australia

ZPMC Southeast Asia Holding Pte. Ltd. ZPMC Brazil Holdings Ltda.

485 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

ZPMC Limited Liability Company

-

486 / 507

4,357,626

4,357,626

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

3. Long-term equity investments (continued) CCCC Liyang Investment Construction Ltd

-

183,000,000

183,000,000

Co.,

-

242,542,999

242,542,999

CCCC Investment Development Qidong Co., Ltd

-

47,500,000

47,500,000

5,285,834,533

507,285,069

5,793,119,602

CCCC Ltd.

Tianhe

City Co.,

(2) Joint venture 2016 Beginning

Change in current year

Ending book value

Ending depreciation reserve

balance

Additional investment

Withdrawn investment

Investment profit and loss under equity method

171,577,489

-

-

25,046,722

196,624,211

-

3,059,427

-

-

(224,069)

2,835,358

-

Joint venture Jiangsu LongYuan Zhenhua Marine Engineering Co.,Ltd ZPMC Mediterranean Liman Makinalari

487 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued) Ticaret Anonim Sirketi 174,636,916

-

-

488 / 507

24,822,653

199,459,569

-

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

3. Long-term equity investments (continued) 2015 Beginning

Change in current year

Ending book value

Ending depreciation reserve

balance

Additional investment

Withdrawn investment

Investment profit and loss under equity method

162,922,641

-

-

8,654,848

171,577,489

-

327,639

-

-

2,731,788

3,059,427

-

163,250,280

-

-

11,386,636

174,636,916

-

Joint venture Jiangsu Long Yuan Zhenhua Marine Engineering Co.,Ltd ZPMC Mediterranean Liman Makinalari Ticaret Anonim Sirketi

(3) Associates 2016 Beginning balance

Change in current

Additional investment

Investment profit and loss under equity method

Adjustments to other comprehensive income

489 / 507

Ending book value

Cash dividends or profits that are announced to be released

Ending Depreciation reserve

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued) CCCC Marine Engineering Vessel Technology Research Centre Co., Ltd

15,269,200

-

376,318

490 / 507

-

-

15,645,518

-

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

3. Long-term equity investments (continued) Shanghai Zhenhua Heavy Industries (Group) Changzhou Paint Co., Ltd.

15,306,843

-

1,978,952

-

(1,833,066)

15,452,729

-

Estate Co.,

174,697,785

-

916,743

-

-

175,614,528

-

CCCC Financing Rental Co., Ltd.

1,141,740,698

420,000,000

75,648,845

255,310

(32,400,000)

1,605,244,853

-

75,413,782

-

(4,347,559)

4,546,680

-

75,612,903

-

-

114,321,760

-

-

-

114,321,760

-

1,422,428,308

534,321,760

74,573,299

4,801,990

(34,233,066)

2,001,892,291

-

CCCC Yixing Ltd.

China Communications Construction USA Inc. CCCC South American Regional Company SARL

2015 Beginning balance

Change in current

Additional investment

Investment profit and loss under equity method

Adjustments to other comprehensive income

491 / 507

Ending book value

Cash dividends or profits that are announced to be

Ending Depreciation reserve

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued) released CCCC Marine Engineering Vessel Technology Research Centre Co., Ltd

15,079,243

-

189,957

492 / 507

-

-

15,269,200

-

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

3. Long-term equity investments (continued) Shanghai Zhenhua Heavy Industries (Group) Changzhou Paint Co., Ltd. CCCC Yixing Ltd.

Estate Co.,

CCCC Financing Rental Co., Ltd.

15,030,294

-

1,956,549

-

(1,680,000)

15,306,843

-

174,686,810

-

10,975

-

-

174,697,785

-

551 ,350,475 540,000,000

50,390,223

-

1,605,244,853

-

-

China Communications Construction USA Inc.

4.

-

76,206,000

(2,048,615)

1,256,397

-

75,413,782

-

756,146,822

616,206,000

50,499,089

1,256,397

(1,680,000)

1,422,428,308

-

Operating income and operating cost 2016

Main operations Other operations

2015

Income

Cost

Income

Cost

22,901,854,062

19,219,649,675

20,816,918,328

18,021,832,539

1,346,629,631

1,326,296,433

1,052,971,485

1,048,137,783

24,248,483,693

20,545,946,108

21,869,889,813

19,069,970,322

The main operating revenue and cost analyzed by product are listed as followings: 2016

2015

493 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

Major operating Major operating Major operating Major operating income cost income cost Container cranes

16,966,005,765

13,385,624,468

494 / 507

14,856,548,107

12,151,678,786

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

4.

Operating income and operating cost (continued)

Bulk machinery

3,133,488,466

3,134,543,276

1,994,845,361

1,901,125,005

Heavy equipment

1,773,587,826

1,760,404,529

3,085,784,614

3,140,472,952

Steel structure and related income

1,028,772,006

939,077,402

879,740,246

828,555,796

22,901,854,063

19,219,649,675

20,816,918,328

18,021,832,539

Other operating income and Other operating cost 2016

2015

Other operating Other operating Other operating Other operating income cost income cost Sales materials Equipment leasing others

of

1,063,590,327

1,110,261,460

775,268,362

858,260,360

283,039,304

216,034,973

277,703,123

189,877,423

1,346,629,631

1,326,296,433

1,052,971,485

1,048,137,783

and

5. Investment income 2016

2015

Investment income from long-term equity verified by cost method

400,633

9,465,520

Investment gains from long-term equity verified by

99,395,952

61,885,725

495 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

equity method Investment gains from available-for-sale financial assets during holding period

1,112,890

496 / 507

789,100

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

5. Investment income (continued) Bank financial products investment income Investment income disposal available-for-sale financial assets

1,969,590

393,033,507

5,176

34,083,478

102,879,065

499,257,330

from of

6. Supplementary information of cash flow statements Reconciliation of net profit to cash flows from operating activities: 2016

2015

270,221,960

214,947,606

impairment

1,208,850,889

634,618,962

Depreciation of fixed assets, depletion of oil gas assets, depreciation of productive living assets

510,588,106

563,202,254

53,045,981

49,544,923

Net profit Add: Assets provision

Intangible amortization

assets

Losses on disposal of fixed assets, intangible assets and other long-term assets 2,996,936 Changes in fair value gains

(1,060,294) (27,035,042) 497 / 507

19,402,267

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

and losses Financial expenses

1,504,100,506

498 / 507

1,541,640,234

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XII. Notes to items in the Company’s statements (continued)

6. Supplementary information of cash flow statements (continued) Investment gains Increase/decrease in deferred income tax asset (increase was filled in with “-”) Increase of

inventories

Increase of construction contract price

(102,879,065)

(499,257,330)

(70,957,061)

13,227,627

(295,457,421)

(1,377,428,119)

321,427,489

(1,544,276,536)

Decrease/increase operating receivables

in

(2,249,861,228)

(4,007,049,883)

Decrease/increase operating payables

in

(1,200,900,147)

1,821,152,533

from

(75,858,097)

(2,571,335,756)

Net cash flows operating activities

Net alteration of cash and cash equivalents: 2016

2015

Cash balance at end of year

1,872,410,585

1,806,066,316

Less: cash at beginning of year

1,806,066,316

1,272,228,765

Net increase in cash and cash equivalents

66,344,269

533,837,551

499 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XIII.

Events after assets balance date

As of the date of approval of this financial statement, the Company is not required to disclose any future events of the balance sheet date.

500 / 507

Shanghai Zhenhua Heavy Industries Co.,Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XIV. Other important matters

1.

Report by branches

The Group determines the operating branch based on internal organizational structure, management requirement and internal report system, determine the report branch based on business branch, and disclose the information of branch. Operating branch refers to the components that the Group coincides with all the following requirements: (1) it may earn revenues and incur expenses in daily activities; (2) its operating results are regularly reviewed by the Group’s management to make decisions about resource to be allocated to the branch and assess its performance; (3) The Group is able to obtain its accounting information regarding financial position, operating results and cash flows, etc. Two operating branches or above, with same economic characteristics and meeting relative requirements, can be integrated to a new one. The Group identifies the business as an operating branch based on internal organization structure, management requirement and internal report system, and carry out analysis and assessment. Products and labor service Income from external transaction 2016

2015

Container crane

17,082,391,036

14,994,515,929

Weight equipment

1,284,872,909

3,985,411,881

Bulk machine part

3,154,983,915

2,013,370,826

“Construction-transfer” project

1,005,087,825

514,064,790

Steel structure and related income

1,035,829,290

826,175,120

580,231,787

680,776,778

81,273,472

132,403,534

Shipping and others Sales materials

501 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XIV.

Other important matters (continued)

Equipment leasing and others

123,417,694

125,675,819

24,348,087,928

23,272,394,677

502 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XIV.

1.

Other important matters (continued)

Report by branches (continued)

Geographic Income from external transaction 2016

2015

9,261,862,587

8,528,436,051

8,774,618,285

5,854,518,426

The America

1,660,773,333

4,555,300,460

Europe

1,694,807,875

2,264,289,477

1,939,957,027

1,072,367,341

1,016,068,821

997,482,922

24,348,087,928

23,272,394,677

Mainland China Asia (excluding China)

Mainland sales) Others

China

mainland

(export

Income from external transaction ascribes to the area where custom located.

503 / 507

Shanghai Zhenhua Heavy Industries Co., Ltd Note for financial statements (continued) Dec. 31,2016 RMB Yuan

XIV.

1.

Other important matters (continued)

Report by branches (continued)

Geographic (continued) Non-current assets

Mainland China Asia (excluding China) Others

mainland

2016

2015

19,820,827,959

19,972,238,305

3,418,721,827

3,435,683,134

37,392,161

10,189,659

23,276,941,947

23,418,111,097

Non-current asset ascribes to the local area, excluding financial asset and deferred income tax assets.

504 / 507

1. Details of non-recurring profit and loss for current period 2016

2015

1,340,612

9,338,797

45,042,910

22,847,200

Profit and loss from change of fair values due to the holding of trading financial assets and liabilities, and investment incomes obtained from the disposals of trading financial assets and liabilities and available-for-sale financial assets

23,420,959

445,766,951

Current profit and loss of the subsidiary generated from consolidation of enterprises under the same control from the beginning to the end of the period

-

55,523,666

Gains from disposal non-current assets

of

Government subsidy included in the current profits and losses (except for those which closely associated with normal business operations, in line with national policies and regulations, and continuous enjoyment in accordance with certain standards in terms of unified quota or ration) Holding of trading financial assets and liabilities

505 / 507

1. Details of non-recurring profit and loss for current period (continued) Other non-operating incomes and expenditures except above items Income tax influence Minority shareholders’ equity influence (after tax)

6,435,660

15,490,536

(14,557,550)

(90,577,182)

(6,708,080)

(31,568,397)

54,974,511

426,821,571

2. Return on equity and earnings per share Earnings per share Weighted average return on net assets yield (%)

Basic earnings per share

Diluted earnings per share

2016

2015

2016

2015

2016

2015

Net profit attributive to holders of common shares of the Company

1.41%

1.41%

0.05

0.05

0.05

0.05

Net profit attributive to holders of common shares of the Company after deducting the non-recurring profit and loss

1.05%

(1.45%)

0.04

(0.05)

0.04

(0.05)

506 / 507

Chapter XII

Backup Documents Contents

Backup documents contents

Accounting statements signed and sealed by legal representative, responsible person for accounting, and responsible person of accounting firm.

Backup documents contents

Original of audit report sealed by accountant firm and signed and sealed by certified accountant.

Backup documents contents

Originals of all documents and announcements published in newspaper designated by China Securities Regulatory Commission within report period Director: Song Hailiang Date of submission upon approved by the board of director: March 29, 2017

Revised information □Applicable √Not applicable

507 / 507

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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2016

2016 Annual Report Stock code: 600320 900947 The company referred to: Shanghai Zhenhua Heavy, Zhenhua B share Shanghai Zhenhua Heavy Industries Co...

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