CSSC Offshore & Marine Engg : SUMMARY OF THE 2019 INTERIM REPORT

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

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

Stock Code of H Share: 00317

SUMMARY OF THE 2019 INTERIM REPORT

§1 IMPORTANT NOTES

1. The financial information contained in this summary of the interim report (the "Report") for the six months ended 30 June 2019 (the "Reporting Period") of CSSC Offshore & Marine Engineering (Group) Company Limited (hereinafter referred to as "COMEC" or the "Company", together with its subsidiaries, the "Group") is prepared in accordance with the PRC Accounting Standards for Business Enterprises and Relevant Regulations (the "Accountant Standards and Regulations"), and the financial information contained in this summary has been reviewed and confirmed by the Audit Committee.
2. All Directors of the Company attended the 18th meeting of the ninth session of the Board held on 29 August 2019. The 2019 interim report was unanimously approved at the meeting.
3. The 2019 interim financial report of the Company is unaudited.
4. The Report is a summary of the full text of the 2019 interim report. Investors are advised to carefully read the full text of such report for details.
5. The Report is made pursuant to Rule 13.49(6) of the Rules Governing the Listing of Securities (the "Listing Rules") on The Stock Exchange of Hong Kong Limited (the "Stock Exchange").
6. The Report is prepared in both English and Chinese. In the event that different interpretation occurs, the Chinese version shall prevail.

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§2 BASIC INFORMATION OF THE COMPANY

2.1 Key financial information and indicators

2.1.1 Key accounting figures

				Unit: RMB
Key accounting information	Reporting Period (From	Corresponding period of last year	Change (%)
	January to June)
	After adjustment	Before adjustment
Operating income	7,816,085,319.68	8,473,768,799.74	8,219,935,619.41	-7.76
Net profit attributable to shareholders of the Company	390,750,329.92	-361,945,458.99	-294,982,112.04	Not applicable
Net profit attributable to shareholders of the Company	-421,908,383.84	-484,093,600.23	-484,093,600.23	Not applicable
after deduction of non-recurring gains and losses
Net cash flows from operating activities	-3,200,477,314.96	-2,516,418,429.18	-2,523,805,949.33	Not applicable
	As at the end of the	As at the end of last year	Change (%)
	Reporting Period
	After adjustment	Before adjustment
Net assets attributable to shareholders of the Company	10,125,809,826.58	9,727,437,689.21	9,727,437,689.21	4.10
Total assets	47,556,535,725.13	47,475,344,086.37	47,475,344,086.37	0.17

At the end of 2018, the Company completed the acquisition of 100% equity of Guangzhou Wenchong Dockyard Co., Ltd. (hereinafter referred to as "Wenchong Dockyard"), which belongs to the business combination under the same control. When the Company prepared the consolidated financial statements, according to the accounting treatment principle of the business combination under the same control, retrospective adjustments were made to the Income Statement and the Cash Flow Statement for the same period of the previous year.

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2.1.2 Key financial indicators

Key financial indicators	Reporting Period	Corresponding period of last year	Change (%)
	(From January
	After adjustment	Before adjustment
	to June)
Basic earnings per share (RMB/share)	0.2764	-0.2561	-0.2087	Not applicable
Diluted earnings per share (RMB/share)	0.2764	-0.2561	-0.2087	Not applicable
Basic earnings per share after deduction of	-0.2985	-0.3425	-0.3425	Not applicable
non-recurring gains and losses (RMB/share)
Weighted average return on equity (%)	3.93	-3.19	-2.67	Increase	of	7.12	percentage
				points
Weighted average return on equity after	-4.25	-4.38	-4.38	Increase	of	0.13	percentage
deduction of non-recurring gains and losses(%)				points

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2.1.3 Extraordinary items and their amounts

		Unit: RMB
Extraordinary items	Amount	Note (where
		applicable)
Gain or loss on disposal of non-current assets	-201,358.22
Tax relief and reduction with approval exceeding	48,182,634.25
authority or without formal approval or of non-recurring
nature
Gain or loss on entrusted investments or assets under	9,700,821.37
management
Gain or loss on changes in fair value of financial assets	56,656,571.28
held-for-trading, derivative financial assets, financial
liabilities held-for-trading and derivative financial
liabilities, and investment income from disposal of
financial assets held-for-trading, derivative financial
assets, financial liabilities held-for-trading, derivative
financial liabilities and other debt investment, except for
effective hedging transactions that are closely related to
the Company's normal operation
Other non-operating income and expenses apart from	1,248,257,188.46	Mainly the net income
the aforesaid items		of relocation
		compensation of
		RMB1.248 billion
Effect of minority interests	-356,764,518.18
Effect of income tax	-193,172,625.20
Total	812,658,713.76

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§3 STAFF AND REMUNERATION POLICY

The remuneration of the employees of the Group includes salaries, bonuses and other fringe benefits prescribed by the government. The Group applies different rates of remuneration for different employees, which are determined based on their positions and performance pursuant to the relevant PRC laws and regulations. As at 30 June 2019, the Group had a total of 15,362 employees. For the period ended 30 June 2019, the remuneration paid by the Group to employees was RMB1.058 billion in aggregate.

§4 MANAGEMENT'S DISCUSSION AND ANALYSIS

4.1 Discussion and analysis of overall operation during the Reporting Period

1. Development of the shipbuilding market in the first half of 2019

New shipbuilding orders around the world continue to decrease. Affected by factors such as the expected downturn of the global economy and the increasing uncertainty of international trade development, shipowners' investment confidence has been frustrated. In the first half of 2019, the global new shipbuilding orders only amounted to 25.36 million DWT, representing a decrease of 52% compared with the corresponding period of last year. Among them, China, South Korea and Japan respectively took over 13.72 million DWT, 7.72 million DWT and 3.16 million DWT, down 25%, 61% and 78% respectively, with an international market share of 54%, 30% and 12% respectively.

The prices of new ships continued to rise steadily. On one hand, the prices of raw materials such as steel continued to rise successively, and at the same time, labor cost pressure is significant. On the other hand, the demand for new ships has tightened again, and the shipyard's awareness of grabbing orders has been strengthened. Against the above background, in the first half of 2019, the price of new ships rebounded weakly and showed some signs of loosening. As at the end of June 2019, the ClarkSea Index rose to 131 points, stable since the beginning of the year.

(2) Operation of the Group

During the Reporting Period, the Group secured new shipbuilding orders with contract value of RMB8,772 million, representing a decrease of 48.17% compared with the corresponding period of last year; operating income of the Group prepared in accordance with the Accounting Standards for Business Enterprises amounted to RMB7,816 million, representing a decrease of 7.76% compared with the corresponding period of last year. Net profit attributable to the shareholders of the Company amounted to RMB391 million. Earnings per share were RMB0.2764, and earnings per share after deduction of non-recurring gains and losses were RMB-0.2985.

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4.2 Main business analysis

4.2.1 Analysis of changes in relevant items in the financial statements

			Unit: RMB
Item	Reporting Period	Corresponding period of last	Change (%)
		year
Operating income	7,816,085,319.68	8,473,768,799.74	-7.76
Operating costs	7,626,860,800.81	8,383,297,494.76	-9.02
Selling expenses	8,547,839.97	31,034,687.54	-72.46
Administrative expenses	374,142,028.48	392,266,908.95	-4.62
Finance cost	86,228,563.48	109,318,180.54	-21.12
Research and development expense	226,390,380.65	201,450,733.11	12.38
Net cash flows from operating activities	-3,200,477,314.96	-2,516,418,429.18	Not applicable
Net cash flows from investing activities	-1,369,802,592.40	-1,362,326,686.52	Not applicable
Net cash flows from financing activities	894,637,628.77	-256,254,227.59	Not applicable

Reason for change in operating income: factors such as the decrease in the number of orders as a result of the sluggish shipbuilding market and the relocation and consolidation of the plant, etc.

Reason for change in operating costs: factors such as the decrease in the number of orders as a result of the sluggish shipbuilding market and the relocation and consolidation of the plant, etc.

Reason for change in selling expenses: mainly due to the reversal of provision for warranty expenses during the period.

Reason for change in administrative expenses: mainly due to the decrease in employee remuneration.

Reason for change in finance cost: mainly due to the decrease in net exchange loss during the period.

Reason for change in research and development expense: mainly due to the strengthening of technical research and development during the period.

Reason for change in net cash flow from operating activities: mainly due to the progress of collection during this period is lower than the progress of payment.

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Reason for change in net cash flow from investing activities: mainly due to the fixed deposits over three months during the period.

Reason for change in net cash flow from financing activities: mainly due to the introduction of investors for the subsidiary of the Company.

4.2.2 Details of the composition of the Company's profits or material changes of the sources of profits

				Unit: RMB
Item	Reporting Period	Corresponding period of	Change (%)	Reason for change
		last year
Selling expenses	8,547,839.97	31,034,687.54	-72.46	Reversal of provision for warranty expenses
	during the period
Other income	5,517,547.40	8,439,920.30	-34.63	Decrease in government grants during this
	period
Investment income	-200,623,239.54	20,390,428.51	-1,083.91	Settlement loss of forward contracts during the
	period
Gain on change in fair value	264,450,151.28	-221,420,289.98	Not applicable	Changes in fair value such as handheld foreign
	exchange contracts from changes in exchange rates
Loss on impairment of credit	-8,451,275.85	-9,818,347.40	Not applicable	Increase in the provision on bad debts during the
	period
Gains from disposal of asset	-249,851.06		Not applicable	Loss of fixed assets disposal during the period
Non-operating income	1,253,089,251.01	564,305,723.58	122.06	Recognition of net income from compensation
	for relocation during the period
Non-operating expenses	1,625,913.57	57,469,748.98	-97.17	Settlement of arbitration in relation to a
	subsidiary of the Company in previous period
Income tax expense	93,984,992.93	-32,894,664.43	Not applicable	Increase in deferred income tax expenses
Gain or loss attributable to	218,874,532.94	-64,933,196.71	Not applicable	Introduction of new shareholders for subsidiaries
minority interests	in previous period
Net after tax for other	10,401,824.34	-2,300,574.80	Not applicable	Changes in fair value of investments in other
comprehensive income	equity instruments

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4.2.3 Analysis of assets and liabilities

Unit: RMB

Name of project	Amount at the end of	Proportion	Amount at the end	Proportion	Change of		Description
		current period	among total	of last period	amount at the end
		among total
			assets at the		of current period
				assets at the
			end of		compared with
				end of last
			current		that of the end of
				period (%)
			period (%)		last period (%)
							Under the impact that collection
Cash at bank and on hand	7,033,700,046.08	14.79	10,337,887,158.50	21.78	-31.96	progress in this period is lower than
							the payment progress
Accounts receivable	3,514,084,587.92	7.39	2,562,295,160.42	5.40	37.15	More dues in the period
							Impact	of	recognization	of
Other receivables	993,612,135.28	2.09	326,086,350.28	0.69	204.71	relocation	compensation	in	the
							period
Other current assets	243,646,496.83	0.51	365,378,116.05	0.77	-33.32	Reduction		in	VAT	tax
							retaining/credit
Right-of-use asset	176,233,075.65	0.37			Not applicable	Impact of implementing new lease
							standards
Construction in progress	1,010,238,554.59	2.12	762,567,676.87	1.61	32.48	Impact of increased investment in
fixed assets
Other non-current assets	26,470,552.78	0.06	80,251,531.97	0.17	-67.02	Non-current prepayment reduction
Short-term borrowings	7,524,383,875.11	15.82	4,304,387,255.88	9.07	74.81	New borrowing
							Changes in fair value such as
Financial	liabilities	202,774,080.82	0.43	431,894,056.78	0.91	-53.05	handheld		foreign		exchange
held-for-trading		contracts from changes in exchange
							rates
Notes payable		1,850,172,981.45	3.89	2,730,396,298.20	5.75	-32.24	Expired bill acceptance
Employee	benefits	62,783,802.68	0.13	41,351,166.51	0.09	51.83	Impact of the current provision of
payable							remuneration
Taxes payable		75,307,785.25	0.16	48,140,024.18	0.10	56.43	Increase in corporate income tax in
	the current period
Non-current	liabilities	1,489,900,000.00	3.13	4,414,000,000.00	9.30	-66.25	Repayment of borrowings
due within one year
Lease liabilities		128,738,531.12	0.27			Not applicable	Impact of	implementing	new
							leasing criteria
				8

4.2.4 Principal businesses by product and by region

					Unit: RMB
	Principal businesses by product
Product name	Current period	Corresponding period of last year
	Principal operating income	Principal operating costs	Principal operating		Principal operating costs
			income
Ship products	6,396,382,932.72	6,408,256,088.84	7,048,076,362.01	7,012,553,796.09
Offshore engineering	320,174,444.06	308,775,195.75	89,831,168.14	127,420,426.77
products
Steel structure	357,375,955.95	336,439,069.43	355,507,842.84	336,513,278.10
Ship maintenance and	350,573,955.00	283,999,906.72	240,520,485.18	231,127,974.41
renovation
Electromechanical	353,730,044.91	274,739,504.22	635,426,307.18	611,249,880.52
products and others
Total	7,778,237,332.64	7,612,209,764.96	8,369,362,165.35	8,318,865,355.89
	Principal businesses by region
Region	Current period	Corresponding period of last year
Principal operating income	Principal operating costs	Principal operating		Principal operating costs
			income
China (including Hong	4,288,158,574.46	3,927,968,512.95	4,897,866,494.08		4,837,736,705.30
Kong, Macau and Taiwan)
Other regions in Asia	465,016,224.86	482,841,130.20	304,627,419.16		290,592,847.26
Europe	1,453,931,398.50	1,565,932,402.43	1,780,158,856.74		1,839,122,563.46
Oceania	452,946,939.48	457,191,994.41	235,552,115.80		233,346,125.82
North America	185,390,271.74	209,953,701.35	874,090,624.27		836,142,801.47
Africa	905,706,498.41	927,314,539.90	227,579,212.20		232,186,013.45
South America	27,087,425.19	41,007,483.72	49,487,443.10		49,738,299.13
Total	7,778,237,332.64	7,612,209,764.96	8,369,362,165.35		8,318,865,355.89
		9

4.3 Analysis of investment status

4.3.1 Information on equity investments

The Company is a holding company. As at the end of the Reporting Period, the balance of equity investments made by the Group amounted to RMB740,036,800, representing an decrease of 0.12% from RMB740,935,300 as at the beginning of the year.

4.4 Non-raised funds investment projects

During the reporting period, the Company had no investment projects for raised funds.

§5 SIGNIFICANT EVENTS

5.1 Assets transactions and merger of enterprises

5.1.1 Equity sale

On 4 April 2019, the 13th meeting of the 9th session of the Board of Directors of the Company reviewed and approved the "Proposal on Major Adjustment of Structure of the Material Asset Restructuring Plan of the Company" and its related proposals. According to the strategic layout of China State Shipbuilding Corporation Limited (hereinafter referred to as "CSSC") and the changes in market-baseddebt-to-equity swaps, it was proposed to adjust the Company's material asset restructuring plan. The adjusted plan didn't involve the issuance of shares to purchase assets, the transaction method was changed to asset swap, and the Company's main business would change, all which were expected to constitute a material asset swap. The material asset restructuring plan was intended to be adjusted as follows: the Company intended to carry out asset swaps with CSSC. The Company intended to swap in 100% equity interest of Eastern Shanghai Heavy Machinery Co., Ltd., 100% equity interest of CSSC Marine Power Co. Ltd., 51% equity interest of CSSC Marine Power Institute Co., Ltd. and 15% equity interest of Shanghai CSSC Mitsui Shipbuilding Diesel Engine Co., Ltd. held by CSSC., and swap out part of the equity interest of CSSC Huangpu Wenchong Shipbuilding Company Limited (hereinafter referred to as "Huangpu Wenchong") and Guangzhou Shipyard International Company Limited (hereinafter referred to as "GSI") held by the Company that are equivalent in value to the above-mentionedswap-in assets.

On 7 August 2019, the 16th meeting of the 9th session of the Board of the Company reviewed and

10

approved the "Proposal on Major Adjustment of Structure of the Material Asset Restructuring Plan (the Plan) of the Company" and related proposals. CSSC and China Shipbuilding Industry Corporation have drawn up strategic restructuring, and at the same time there is horizontal competition between the Company, CSSC and China Shipbuilding. Considering the fact that overcapacity in the civilian product ship market is difficult to substantially improve in the short term, so in order to improve the Company's financial position, improve profitability, smoothly promote market-orienteddebt-to-equity swap project and resolve horizontal competition, the Company intends to adjust the material assets restructuring plan reviewed and disclosed at the 13th meeting of the 9th session of the Board of Directors. The adjusted plan does not involve the issuance of shares to purchase assets and asset swap, and the transaction method is changed to assets sale. The specific content is as follows: the Company sells 27.4214% of the equity of GSI to China Shipbuilding, who pays the transaction consideration by way of non-public issuance of A shares to the Company, and at the same time, the Company waives the pre-emptive rights of first refusal to acquire the 23.5786% equity in GSI and the 30.9836% equity in Huangpu Wenchong held and intended to transfer by market-orienteddebt-to-equity investors of GSI and Huangpu Wenchong. Upon completion of the transaction, the Company is expected to acquire a approximately 5.28% equity in China Shipbuilding. Upon completion of the above, the Company will hold a 49% equity in GSI, and will no longer have a consolidated statement on it; and the Company will hold a 69.0164% equity in Huangpu Wenchong, which will remain a holding subsidiary within the scope of the Company's consolidated statements. For details, please refer to the "Resolutions of the 13th Meeting of the 9th session of the Board of Directors of CSSC Offshore" and the "Resolutions of the 16th Meeting of the 9th session of the Board of Directors of CSSC Offshore" issued on the website of the Shanghai Stock Exchange (www.sse.com.cn), the website of the Stock Exchange (www.hkexnews.hk) and the website of the Company (comec.cssc.net) on 4 April 2019 and 7 August 2019.

5.2 Profit distribution and cash dividend policy

5.2.1 Implementation of profit distribution proposal during the Reporting Period

As considered and passed at the annual general meeting of 2018 of the Company held on 28 May 2019, the Company's 2018 annual profit distribution plan is as follows: according to Item 4 of Section (III) of the Profit Distribution Policy, the Article 215 of the Articles of Association of CSSC Offshore & Marine Engineering (Group) Company Limited, in view of the Company's net profit attributable to shareholders of listed companies in 2018 is negative, the Company decides not to distribute dividends for 2018, nor

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would it convert any capital reserve into share capital.

5.2.2 Profit distribution during the Reporting Period

The Company will not make profit distribution or convert any capital reserve into share capital for the first half of 2019.

5.3 Material litigations, arbitrations and matters commonly concerned by media

On 31 December 2010, the Company and its subsidiary Guangzhou Guangli Shipbuilding Human Resources Service Company Limited ("Guangli") filed four lawsuits at the Zhenjiang Intermediate People's court of Jiangsu province, being a case on the Company's claim against Jiangsu Shenghua for return of properties, a case on technical service contract dispute, and the cases on Guangli's claim against Jiangsu Shenghua for 79,600 ton bulk carriers 1# and 2# installment work contract disputes. On 4 June 2013, Wuhan Maritime Court mediated the litigation between the Company and Jiangsu Shenghua, and Jiangsu Shenghua had returned all the related assets. As for the case that the Company claimed against Jiangsu Shenghua in relation to a dispute over technical service contract, and the case that Guangli claimed against Jiangsu Shenghua for 79,600 ton bulk carriers 1# and 2# installment work contract disputes, please refer to the "Significant Events - (I) Significant Litigations and Arbitrations" in the annual report of the Company for the year 2011 for details.

The Company attended the second meeting of creditors on 27 April 2017 and received a ruling made by Zhenjiang Intermediate Court on 17 May 2017 which approved the proposal for liquidation and realization of properties of Jiangsu Shenghua. The valuation of the existing properties, land and structures erected thereon and machinery and equipment of Jiangsu Shenghua was completed, and its ships under construction were still under valuation. Land, properties, machinery and other related assets have been bid at RMB77.65 million. The 3rd meeting of debtors for liquidation is expected to be held within 2019.

Save as disclosed, as at 30 June 2019, the Company was not involved in any material litigations or arbitrations and, to the best of the knowledge of the Company, there were no material litigations or arbitrations pending or threated against or by the Company.

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5.4 Entrustment, contracting and leasing matters

5.4.1 Leasing

Unit: RMB in ten thousand

Name of lessor

Name of

Assets

Amount

Date of

Date on which

Rental

Basis for

Impact of

Whether

Relationship

lessee

leased

of

commencemen

the lease will

income

determination

rental

related

assets

t of lease

be terminated

of rental

income on

transaction

leased

income

the

Company

The

date

on

Yes

Sister company

Guangzhou

Land,

which

the

of the Group

relocation

is

Ship Industrial

Huangpu

buildings

-

2014.5.1

completed

and

-

Company

Wenchong

and

production

Limited

structures

commences at

the new plant

2018.11.1

The

date

on

Yes

Sister company

Guangzhou

Land,

which

the

of the Group

relocation

is

Wenchong

Wenchong

buildings

-

completed

and

-

-

-

Properties Co.,

Shipyard

and

production

Ltd.

structures

commences at

the new plant

Description of leases:

Guangzhou Ship Industrial Co., Ltd. and Huangpu Wenchong entered into a lease agreement in relation to land use right, pursuant to which Guangzhou Company shall lease the land use right owned by it in relation to the land at the Changzhou Plant to Huangpu Wenchong for its operational use. The rent for the land use right shall be determined based on the principle of asset depreciation, amortisation and taxes. The rent shall be paid on an annual basis in the form of cash at bank and on hand. The term for the aforesaid lease of land use right commenced on 1 May 2014 and will end on the date on which the relocation of Huangpu Wenchong is completed and production commences at the new plant.

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Guangzhou Wenchong Properties Co., Ltd. and Guangzhou Wenchong Shipyard Co. Ltd. (hereinafter referred to as "Wenchong Shipyard") entered into a lease agreement in relation to land use right, and leased part of the land use rights of the Wenchong Plant owned by it to Wenchong Shipyard for operation. The rent for the land use right shall be determined based on the principle of asset depreciation, amortisation and taxes. The rent shall be paid on an annual basis in the form of cash at bank and on hand. The term for the aforesaid lease of land use right commenced on 1 November 2018 and will end on the date on which the relocation of Wenchong Shipyared is completed and production commences at the new plant.

5.4.2 Guarantee

Unit: RMB

External guarantees by the Company (excluding guarantees for its subsidiaries)

Guara

Relationsh

Guarantee

Amount of

Date of

Guarantee

Guarantees

Type of

Whether

Whether

Overdue

Existence

Whether

Relati

ntor

ip between

d entity

guarantee

guarantee

s Date of

Date of

guarante

fully

guarantee

amount

of counter

provided

onship

guarantor

(date of

commence

expiry

e

executed

is

guarantee

for

and the

signing of

ment

overdue

related

Company

agreement

party

)

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Total amount of guarantees during the Reporting Period

-

(excluding guarantees provided for its subsidiaries)

Total balance of guarantees at the end of the Reporting Period (A)

-

(excluding guarantees provided for its subsidiaries)

Guarantees provided by the Company for its subsidiaries

Total amount of guarantees provided for its subsidiaries during the Reporting

520,000,000.00

Period

Total balance of guarantees provided for its subsidiaries at the end of the

820,000,000.00

Reporting Period (B)

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Total amount of guarantees provided by the Company (including those provided for its subsidiaries)

Total amount of guarantees (A+B)	820,000,000.00
Total amount of guarantees as a percentage of the Company's net assets (%)	5.41
Including:
Amount of guarantees provided for shareholders, actual controllers and	-
related parties (C)
Amount of debt guarantees provided directly or indirectly for companies	120,000,000.00
with gearing ratio of over 70% (D)
Total amount of guarantees in excess of 50% of net assets (E)	-
Sum of the above three guarantees (C+D+E)	120,000,000.00
Description of outstanding guarantees which may incur several and joint	Not applicable
liability
Note on guarantees	During the Reporting Period, the Group provided guarantee with a total balance of guarantee of
	RMB820 million, all of which are guarantees provided by Huangpu Wenchong, a subsidiary controlled
	by the Company, to a wholly-owned subsidiary thereof. The guarantee items are comprehensive credit
	guarantee and working capital loan guarantee, etc. The cap set out in the framework for the proposed
	guarantees between the Company and its subsidiaries for the year 2019 and their amounts has not been
	exceeded.

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5.5 Environmental information

5.5.1 Description of the environment protection of the Company and its major subsidiaries falling to be the key waste water emission entities as announced by the environment protection authorities of the PRC

According to the Circular on the List of the Key Pollution Discharge Entities in Guangzhou for 2019 (Sui Huan [2019] No. 45) issued by Guangzhou Environmental Protection Bureau in March 2019, five members of the Group, namely GSI, Huangpu Wenchong, Guangzhou Longxue Pipe Co., Ltd. (hereinafter referred to as "Longxue Pipe"), Wenchong Shipyard and Guangzhou Huangchuan Ocean Engineering Co. Ltd (hereinafter referred to as "Huangchuan Ocean Engineering"), were included as key pollution discharge entities in Guangzhou for 2019. According to a circular (Sui Nan Huan Shui [2017] No. 75) issued on 29 March 2017, Wenchong Dockyard was included as a key pollution discharge entity in Nansha District.

5.5.1.1 Information on pollution discharge

1. GSI

The main pollutants discharged in the production process of GSI are waste gas, waste water, solid waste and noise.

(1) Waste gas

The waste gas generated by GSI mainly represents dust and organic waste gas. GSI has established waste gas treatment devices to ensure that the emission concentration of the air pollutant emitted reaches the level II, period II standard for type II control region set out in the Emission Limits of Air Pollutants of Guangdong Province. During the Reporting Period, there existed no waste gas emissions of GSI that exceeded the standard.

(2) Waste water

The waste water generated by GSI includes production waste water and domestic waste water. The production waste water represents mainly the oily waste water generated in the mooring experiments of ship wharves and the pipeline oil intermingling process. The domestic waste water is from the sewage generated at the production area and the office area. During the Reporting Period, GSI discharged a total of 224,175 tonnes of waste water, the water pollutant emission concentration of which has reached the level I, period II standard set out in the Emission Limits of Air Pollutants of Guangdong Province.

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(3) Solid waste (including hazardous waste)

The solid waste generated by GSI is mainly classified into two types, being production solid waste and domestic refuse. GSI collects and separates the solid waste generated. Recyclable solid waste such as waste metal is utilised by waste material recycling companies, non-recyclable solid waste is disposed of by the environmental protection companies and transported to a qualified landfill for disposal, and domestic garbage shall be collected and disposed of by the local environmental sanitation authorities. Qualified entities with hazardous waste business license are appointed to treat hazardous waste. During the Reporting Period, GSI disposed of a total of 14,520 tonnes of general solid waste and a total of 418.92 tonnes tons of hazardous waste.

(4) Noise

The noise generated by GSI is mainly production noise. It conducts noise emission detection at boundary on a regular basis to ensure that the noise at boundary meets the level II standard set out in the Emission Standard for Industrial Enterprise Noise at Boundary.

2. Longxue Pipe

The main pollutants discharged in the production process of Longxue Pipe are waste gas, waste water, solid waste and noise.

(1) Waste gas

The waste gas generated by Longxue Pipe includes dust gas, organic waste gas and acid mist gas, and the emission concentration of the air pollutant emitted met the level II, period II standard for type II control region set out in the Emission Limits of Air Pollutants of Guangdong Province. During the Reporting Period, there existed no waste gas emissions of Longxue Pipe that exceeded the standard.

(2) Waste water

The waste water generated by Longxue Pipe includes acid and alkali flushing waste water, etc. During the Reporting Period, Longxue Pipe discharged a total of 6,553 tonnes of waste water, and the emission concentration of water pollutants met the level III, period II standard set out in the Emission Limits of Water Pollutants of Guangdong Province. During the Reporting Period, there existed no waste water emissions of Longxue Pipe that exceeded the standard.

(3) Solid waste (including hazardous waste)

The solid waste generated by Longxue Pipe includes hazardous waste (phosphate slag sludge etc.),

17

general industrial solid waste and domestic refuse. Qualified entities are appointed to dispose of hazardous waste generated by it. During the Reporting Period, Longxue Pipe disposed of a total of

516.74 tonnes of solid waste.

(4) Noise

The noise generated by Longxue Pipe represents mainly production noise. The noise at boundary met the level II standard set out in the Emission Standard for Industrial Enterprise Noise at Boundary.

3. Huangpu Wenchong

The main pollutants discharged in the production process of Huangpu Wenchong are waste water, waste gas, solid waste and noise.

(1) Waste gas

The waste gas generated by Huangpu Wenchong mainly represents dust waste gas and volatile organic waste gas during the production process. It has established waste gas treatment devices to ensure that the emission concentration of the air pollutant emitted meets the level II, period II standard for type II control region set out in the Emission Limits of Air Pollutants of Guangdong Province. During the Reporting Period, there existed no waste gas emissions of Huangpu Wenchong that exceeded the standard.

(2) Waste water

The waste water generated by Huangpu Wenchong includes production waste water and domestic waste water. The production waste water represents mainly the oily waste water generated in the mooring experiments of ship wharves, workshop industrial waste water, and cabin-cleaning oily waste water. The domestic waste water is from the sewage generated at the production area and the office area. The cabin-cleaning oily waste water following disposal at the oily water disposal station, together with domestic sewage and other industrial waste water, is discharged into municipal sewage pipelines. During the Reporting Period, Huangpu Wenchong discharged a total of 328,396 tonnes of waste water, the water pollutant emission concentration of which has met the level III, period II standard set out in the Emission Limits of Water Pollutants of Guangdong Province. During the Reporting Period, there existed no waste water emissions of Huangpu Wenchong that exceeded the standard.

(3) Solid waste (including hazardous waste)

The solid waste generated by Huangpu Wenchong is mainly divided into two categories, being production solid waste and domestic refuse, which are further divided into three types based on the

18

characteristics of solid waste, namely recyclable solid waste, non-recyclable solid waste (industrial refuse) and hazardous waste.

Huangpu Wenchong collects and separates solid waste. Recyclable solid waste such as waste metal is utilised by waste material recycling companies, and non-recyclable solid waste (industrial refuse) is delivered to Guangzhou Shijie Environment Protection Equipment Co., Ltd. for transportation and disposal. Domestic refuse is delivered to the environmental sanitation authority of Changzhou Street, while Zhaoqing Xin Rong Chang Environmental Protection Co., Ltd., Guangdong Xinsheng Environmental Technology Co., Ltd. and Miluo Wanrong Solid Waste Processing Co., Ltd., which are qualified, are appointed to dispose of hazardous waste. During the Reporting Period, 990 tonnes of solid waste (industrial refuse) and 204.47 tonnes of hazardous waste were disposed of.

(4) Noise

The noise generated by Huangpu Wenchong represents mainly production noise and mechanical noise. The noise at boundary met the level II standard set out in the Emission Standard for Industrial Enterprise Noise at Boundary (GB12348-2008).

4. Wenchong Shipyard

The main pollutants discharged in the production process of Wenchong Shipyard are waste gas, waste water, solid waste and noise.

(1) Waste gas

The waste gas generated by Wenchong Shipyard mainly represents organic waste gas and dust. It has five sets of organic waste gas purification treatment devices and seven filter dust removers to ensure that the emission concentration of the air pollutant emitted meets the level II, period II standard set out in the Emission Limits of Air Pollutants of Guangdong Province (DB44/27-2001). During the Reporting Period, all its waste gas emissions met the standard.

(2) Waste water

The waste water generated by Wenchong Shipyard includes production waste water and domestic waste water. The production waste water represents mainly the oily waste water generated in the mooring experiments of ship wharves and the pipeline oil intermingling process. The domestic waste water is from the sewage generated at the production area and the office area. The emission concentration of its water pollutants met the level B limit set out in the table 1 in the Wastewater Quality Standards for Discharge to Municipal Sewers (CJ343-2010). During the Reporting Period,

19

Wenchong Shipyard discharged a total of 125,290 tonnes of waste water.

(3) Solid waste (including hazardous waste)

The solid waste generated by Wenchong Shipyard includes hazardous waste, general industrial solid waste and domestic refuse. Qualified entities are appointed to dispose of hazardous waste generated by it. During the Reporting Period, Wenchong Shipyard disposed of 2,548 tonnes of general industrial waste and 639.48 tonnes of hazardous waste.

(4) Noise

The noise generated by Wenchong Shipyard represents mainly production noise and mechanical noise. The noise at boundary met the level II standard set out in the Emission Standard for Industrial Enterprise Noise at Boundary (GB12348-2008).

5. Huangchuan Ocean Engineering

The main pollutants discharged in the production process of Huangchuan Ocean Engineering are waste gas, waste water, solid waste and noise.

(1) Waste gas

The waste gas generated by Huangchuan Ocean Engineering mainly represents dust and organic waste gas. It has established waste gas treatment devices to ensure that the emission concentration of the air pollutant emitted meets the level II, period II standard for type II control region set out in the Emission Limits of Air Pollutants of Guangdong Province. During the Reporting Period, there existed no waste gas emissions of Huangchuan Ocean Engineering that exceeded the standard.

(2) Waste water

The waste water generated by Huangchuan Ocean Engineering includes production waste water and domestic waste water. The production waste water represents mainly the oily waste water generated in the mooring experiments of ship wharves and the pipeline oil intermingling process. The domestic waste water is from the sewage generated at the production area and the office area. During the Reporting Period, Huangchuan Ocean Engineering discharged a total of 137,317 tonnes of waste water, the water pollutant emission concentration of which has met the level I, period II standard set out in the Emission Limits of Air Pollutants of Guangdong Province, and no standard had been exceeded.

(3) Solid waste (including hazardous waste)

The solid waste generated by Huangchuan Ocean Engineering includes mainly three types, namely

20

recyclable solid waste, non-recyclable solid waste and hazardous waste. Huangchuan Ocean Engineering collects and separates the solid waste generated. Recyclable solid waste such as waste metal is utilised by waste material recycling companies. Qualified entities are appointed to treat non-recyclable solid waste and hazardous waste. During the Reporting Period, Huangchuan Ocean Engineering disposed of 2,328.14 tonnes of industrial refuse and 141.62 tonnes of hazardous waste.

(4) Noise

The noise generated by Huangchuan Ocean Engineering is mainly production noise. It conducts noise emission detection at boundary on a regular basis to ensure that the noise at boundary meets the level II standard set out in the Emission Standard for Industrial Enterprise Noise at Boundary, and no standard had been exceeded

6. Wenchong Dockyard

The main pollutants discharged in the production process of Wenchong Dockyard are waste gas, waste water, solid waste and noise.

(1) Waste gas

The waste gas generated by Wenchong Dockyard mainly represents dust and organic waste gas. Electromechanical organic waste gas comes from the production process of dipping paint and baking paint and is discharged through a 15-metre exhaust funnel; acid mist exhaust comes from the side suction hood alongside the acid tank of chemical cleaning yard of electromechanical general workshop, and waste gas is pumped to a KTXD-20K fiberglass purification tower by a fan for purification treatment and then discharged through a 15-metre exhaust funnel. The emission concentration of the air pollutant emitted meets the level II, period II standard for type II control region set out in the Emission Limits of Air Pollutants of Guangdong Province. During the Reporting Period, no waste gas emissions of Wenchong Dockyard had exceeded the standard.

(2) Waste water

The waste water generated by Wenchong Dockyard includes production waste water and domestic sewage. The production waste water mainly comes from docks, ship maintenance wharves, hatch cover repair yard, electromechanical general workshop, pipe processing workshop and air compressor station. The domestic sewage is from the sewage generated at the production area and the office area. During the Reporting Period, Wenchong Dockyard discharged a total of 33,501 tonnes of waste water, the water pollutant emission concentration of which has met the level I, period II standard set out in the Emission Limits of Air Pollutants of Guangdong Province, and no standard had been exceeded.

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(3) Solid waste (including hazardous waste)

The solid waste generated by Wenchong Dockyard mainly includes: waste steel, waste copper ore, waste welding materials, waste mineral oil, oily wastewater, waste acid and wastewater treatment sludge, paint residue and industrial refuse. Qualified entities are appointed to recover various wastes for comprehensive utilisation or disposal. A general industrial solid waste dump and a hazardous waste temporary storage are set up in the plant area. During the Reporting Period, Wenchong Dockyard disposed of 45,285 tonnes of solid waste and 1,520 tonnes of hazardous waste.

(4) Noise

The noise generated by Wenchong Dockyard mainly comes from production processes such as sandblasting derusting, steel plate correction, plasma cutting and electric welding and fixed equipment such as air compressor, fan, water pump and transformer. The sources of noise are mainly located at docks, ship maintenance wharves/hatch cover repair yard, hull workshop, pipe workshop, water supply pump room, sewage lift pump room, air compressor station and substation, etc. By optimising plant layout, giving priority to adopting low noise equipment and setting up dedicated machine rooms equipped with sound insulation/silencing/vibration reduction measures, the impact of noise on the external environment was mitigated.

5.5.1.2 Construction and operation of pollution prevention facilities

1. GSI

GSI has established 26 sets of cyclone + filter cartridge dust collectors and 24 sets of sinking dust collectors for dust discharged, 10 sets of activated carbon adsorption + catalytic combustion purification treatment devices for organic waste gas, and a domestic sewage treatment station and an oily wastewater treatment station for the waste water generated. For production noise, it mainly reduces the impacts of production noise through equipment selection, building enclosure, establishing sound insulation covers, installing damping pads and mufflers. In addition, it conducts day-to-day operation inspection, repair and maintenance of pollutant treatment facilities for waste water, waste gas, solid waste and noise in strict compliance with the requirements of the Regulations on Prevention and Control of Environmental Pollution of GSI to ensure that the facilities operate normally and the pollutants are not discharged until treated and meeting the standard.

2. Longxue Pipe

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Longxue Pipe has established water filter dust removers for zinc oxide dust discharged, activated carbon adsorption purification devices for organic waste gas, and acid mist towers and washing towers for acid mist waste gas, sewage treatment station for waste water, and established separate machine rooms and adopted noise reduction and other measures for high noise equipment. It conducts day-to-day operation inspection, repair and maintenance of pollutant treatment facilities for waste water, waste gas, solid waste and noise to ensure that the facilities operate normally and the pollutants are not discharged until treated and meeting the standard.

3. Huangpu Wenchong

Huangpu Wenchong has established a sewage water treatment station to treat the dirty oil in the ship's clearing. The industrial waste gas treatment system was installed in the steel plate pretreatment line and painting room, and the above equipment and facilities were operating normally.

Huangpu Wenchong has established 5 sets of cyclone + filter cartridge dust collectors for the 2-metre and 3-metre steel plate pre-treatment lines and painting rooms which generate dust, 3 sets of activated carbon adsorption + catalytic combustion purification treatment devices for the 2-metre and 3-metre steel plate pre-treatment lines and painting rooms which generate organic waste gas, and a domestic sewage treatment station and an oily wastewater treatment station for the waste water generated. For production noise, it mainly reduces the impacts of production noise through equipment selection, building enclosure, establishing sound insulation covers, installing damping pads and mufflers. In addition, it conducts day-to-day operation inspection, repair and maintenance of pollutant treatment facilities for waste water, waste gas, solid waste and noise in strict compliance with the requirements of the Environmental Protection Management Measures of Huangpu Wenchong to ensure that the facilities operate normally and the pollutants are not discharged until treated and meeting the standard.

4. Wenchong Shipyard

For waste gas emission, Wenchong Shipyard has established 5 sets of activated carbon adsorption + catalytic combustion desorption treatment devices and 7 sets of cyclone dust removal and filter cartridge dust collectors at the painting workshop and the steel plate pre-treatment workshop. For waste water emission, it completed the rain and sewage diversion project (for shipbuilding space), and production waste water and domestic waste water are directly discharged to the waste water treatment plant through municipal pipelines. For noise, it adopts measures including installing sound insulation and noise elimination facilities to reduce the impacts of production noise, and conducts day-to-day operation inspection, repair and maintenance of pollutant treatment facilities for waste water, waste gas, solid waste and noise to ensure that the facilities operate normally and the pollutants are not

23

discharged until treated and meeting the standard.

5. Huangchuan Ocean Engineering

Huangchuan Ocean Engineering has established a sewage treatment station to treat production waste water and domestic waste water, installed cyclone + filter cartridge dust collectors at the steel pre-treatment line and sandblasting room, and 12 sets of activated carbon adsorption + catalytic combustion purification treatment devices for organic waste gas. All these facilities operate normally. For production noise, it mainly reduces the impacts of production noise through equipment selection, building enclosure, establishing sound insulation covers, installing damping pads and mufflers, etc.

6. Wenchong Dockyard

Wenchong Dockyard has 6 sets of sewage treatment systems. Oily wastewater is treated at the oily wastewater treatment station and then discharged into the sewage treatment station in the dock area for further treatment. Chemical cleaning wastewater is treated at the chemical cleaning wastewater treatment station and then discharged into the sewage treatment station in the wharf area for further treatment. General production waste water and domestic sewage are delivered to the sewage treatment station in the dock area and the sewage treatment station in the wharf area. Slurry water generated by high pressure water cleaning operation undergoes flocculation and sedimentation treatment. Welding flue gas at hull workshop is treated by mobile welding flue gas purifier. Welding flue gas at pipe workshop is filtered by a welding flue gas treatment system. Organic waste gas generated by immersion and drying at the electromechanical general workshop is purified by an activated carbon absorption device. Acid mist waste gas generated by chemical cleaning is purified by a fiberglass acid mist purification tower. The above environmental treatment equipment is in good condition and operates effectively.

5.5.1.3 Environmental impact assessment for construction projects and other administrative permission for environmental protection

1. GSI

GSI strictly complies with the requirements of the relevant environmental laws and regulations and conducts the "Three simultaneousness" work for the environmental protection for construction projects. On 11 January 2006, the former State Environmental Protection Administration issued a reply to the Environmental Impact Report on the Civil Product Shipbuilding Area Project of Phase I of the CSSC Longxue Shipbuilding Base (Huan Shen [2006] No. 22), and the project passed the inspection and acceptance of the Ministry of Environmental Protection on 27 July 2010. The Nansha

24

Environmental Protection Bureau of Guangzhou issued the Letter of Review Opinions for the Environment Report for the General Warehouse Technical Upgrade Project of Guangzhou Shipyard International Company Limited on 18 August 2015, and the project passed the inspection and acceptance of Nansha Environmental Protection and Water Affairs Bureau of Guangzhou on 29 December 2016. GSI has obtained the pollutant discharge permit in accordance with the requirements of environmental protection laws and regulations. In 2019, the environmental protection completion acceptance of the 1# sectional welding workshop expansion project was completed.

2. Longxue Pipe

Longxue Pipe strictly complies with the requirements of the relevant environmental laws and regulations and conducts the "Three simultaneousness" work for the environmental protection for construction projects. Nansha Environmental Protection Bureau of Guangzhou issued a reply to the Environmental Impact Report on the Phase I Construction Project of Guangzhou Longxue Pipe Co., Ltd. (Sui Nan Qu Huan Guan Huan Guan Ying [2010] No. 104) on 30 August 2010, and the project passed the inspection and acceptance of Nansha Environmental Protection Bureau of Guangzhou in 2012. Longxue Pipe has obtained the pollutant discharge permit in accordance with the requirements of environmental protection laws and regulations.

3. Huangpu Wenchong

The construction of the environmental protection facilities of the general technical upgrade project of Huangpu Wenchong was substantially completed. Currently the environmental acceptance report has been prepared and it is in the process of applying for on-site inspection and acceptance for environmental protection in accordance with the procedures. Huangpu Wenchong has obtained the pollutant discharge permit in accordance with the requirements of environmental protection laws and regulations.

4. Wenchong Shipyard

Wenchong Shipyard owns environmental protection administrative licenses including the Pollutant Discharge Permit of Guangdong Province, the Drainage permit and the Radiation Safety License. In 2018, the Company conducted the construction project environmental impact assessment and completed the preparation of environmental impact report for painting workshop E/F and the temporary storage site for hazardous wastes, which completed the inspection and acceptance and was put it into normal operation in May 2019. Wenchong Shipyard has obtained the pollutant discharge permit in accordance with the requirements of environmental protection laws and regulations.

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5. Huangchuan Ocean Engineering

The acceptance approvals for the offshore engineering Phase I, offshore engineering production capacity expansion and offshore engineering supplementary projects of Huangchuan Ocean Engineering, all of which were completed, had been obtained. The pollutant discharge permit had been obtained in 2014. A reply from Nansha Environmental Protection and Water Affairs Bureau to the environment impact assessment of the newly-built Longxue Gas Cylinder Transfer Station (Sui Nan Qu Huan Shui Guan Ying (2017) No. 93) was obtained, and the inspection and acceptance is completed in April 2019. A reply to the investment project was obtained from Nansha Environmental Protection Bureau (Sui Nan Kai Huan Guan Ying [2014] No. 190) in 2014, and the project is currently under construction. Huangchuan Ocean Engineering has obtained the pollutant discharge permit in accordance with the requirements of environmental protection laws and regulations.

6. Wenchong Dockyard

Wenchong Dockyard received the phase 1 and phase 2 environmental impact assessment approvals (Huan Shen [2006] No. 681 and Huan Shen [2007] No. 526) in 2006 and 2007, respectively. In June 2011, China National Environmental Monitoring Centre prepared the Monitoring Report on Completion Acceptance for Environmental Protection of the Ship Maintenance Project of Longxue Shipbuilding Facility of CSSC, and the Ministry of Environmental Protection issued an approval (Huan Yan [2010] No. 208). The Environmental Protection Bureau of Nansha District also issued approvals for the environmental impact assessment of construction of a new special pipe workshop and the extension of 2# dock (Sui Nan Kai Huan Guan Ying [2015] No. 143 and Sui Nan Qu Huan Shui Guan Ying [2017] No. 231). Wenchong Dockyard has obtained the pollutant discharge permit in accordance with the requirements of environmental protection laws and regulations.

5.5.1.4 Emergency plans for sudden environmental events

1. GSI and Longxue Pipe

Both GSI and Longxue Pipe have prepared the Emergency Plan for Sudden Environmental Events in accordance with the relevant requirements for safety and environmental protection in the PRC, which were filed with the environmental protection authorities in the first half of 2017.

Both GSI and Longxue Pipe have established an emergency rescue leading team and an emergency rescue professional team. The emergency plan sets out clear emergency response procedures, the position responsibilities of emergency personnel and the emergency response measures for various

26

environmental risks in day-to-day operation (such as safety training, file drills and material support).

2. Huangpu Wenchong

The emergency plan for sudden environmental events developed by Huangpu Wenchong passed expert review and was filed with Huangpu Environmental Protection Bureau in 2015. A retrospective review has been conducted in the second half of 2018 to assess its applicability and effectiveness.

Huangpu Wenchong has established an emergency rescue leading team and an emergency rescue professional team. The emergency plan sets out clear emergency response procedures, the position responsibilities of emergency personnel and the emergency response measures for various environmental risks in day-to-day operation (such as safety training, file drills and material support).

3. Wenchong Shipyard

In October 2018, Wenchong Shipyard launched the second round of environmental emergency plan and risk assessment. The work experienced site survey, data collection, pre-planning, report preparation, expert review, on-site rectification and other stages, and in January 2019, it successfully completed the filing of Huangpu Environmental Protection Bureau. The results of the work were mainly presented as Emergency Plan for Sudden Environmental Events, the Risk Assessment Report for Sudden Environmental Events and the Company Emergency Resources Investigation Report. At the beginning of the year, the Company formulated and released the drill plan of annual safety environment emergency plan, and each department completed the task according to the schedule.

4. Huangchuan Ocean Engineering

The Emergency Plan for Sudden Environmental Events developed by Huangchuan Ocean Engineering passed expert review and was filed with Nansha Environmental Protection Bureau in 2014. Another review was conducted in later 2016 to re-assess its applicability and effectiveness, and it was re-filed with Nansha Environmental Protection and Water Affairs Bureau in January 2017.

5. Wenchong Dockyard

The Emergency Plan for Sudden Environmental Events and the Risk Assessment Report for Sudden Environmental Events developed by Wenchong Dockyard passed expert review and was filed with the Environmental Protection and Water Affairs Bureau of Nansha District in August 2017. No environmental pollution incidents had occurred in 2018. An emergency drill for sudden environmental events was organised once a year.

5.5.1.5 Emergency plans for sudden environmental events

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The Group's key pollutant discharge entities appoint qualified testing institutions on a regular basis to monitor the discharge of pollutants including waste water, waste gas, noise and radiation as well as whether the pollutants discharged have met the relevant standards, which are subject to ad-hoc regulatory supervision by environmental protection authorities.

5.6 Notes on other significant events

5.6.1 Details of charges on the assets of the Group

As at 30 June 2019, the Company had a total of bank deposits amounting to RMB2,185 million pledged to secure long- and short-term borrowings, letters of guarantee, letters of credit, projects or as deposit for bank drafts. Save as disclosed above, no other assets of the Company were pledged.

5.6.2 Gearing ratio

As at 30 June 2019, the Group's gearing ratio (total liabilities/total assets x 100%) was 68.16% (as at the beginning of the Reporting Period: 69.76%), basically unchanged from the beginning of the year.

5.6.3 Repurchase, disposal or redemption of securities of the Company

The Group has not made any purchase, disposal or redemption of securities of the Company or any of its subsidiaries during the Reporting Period.

§6 CORPORATE GOVERNANCE REPORT

During the Reporting Period, the general meeting of the Company, the Board and the management performed their specific responsibilities and regulated corporate operation to ensure the true, accurate and complete disclosure of corporate information. Specialized committees of the Board carried out works in accordance with their respective duties, and independent non-executive Directors played an important role in the work of Board.

6.1 Corporate Governance

The Company keeps improving its corporate governance structure in accordance with the Company Law of the People's Republic of China, the Securities Law of the People's Republic of China, relevant laws and regulations issued by the China Securities Regulatory Commission and the requirements of the listing rules of the Shanghai Stock Exchange and The Stock Exchange of Hong Kong Limited. To date, the Company's governance had no material difference from the Company Law and relevant regulations of the China Securities Regulatory Commission. Saved as disclosed below, during the six

28

months ended 30 June 2019, the Company has applied the codes set out in the Corporate Governance Code and Corporate Governance Report (the "CG Code") contained in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, and has complied with all the code provisions, except that for the purpose of Code Provision A.6.7 of the CG Code, Mr. Chen Zhongqian, Mr Xiang Huiming and Mr. Chen Ji, being executive Directors, Mr. Shi Jun, being non-executive Directors, and Mr. Liu Renhuai, being independent non-executive Directors, were unable to attend the annual general meeting of 2018 of the Company held on 28 May 2019 for work reason.

6.2 Securities Transactions by Directors

The Company has strictly complied with the relevant restrictive provisions imposed by PRC and Hong Kong regulatory organs in relation to securities transactions by directors and has consistently upheld the principle of complying with the most stringent provisions and had adopted the Model Code for Securities Transactions by Directors of Listed Issuers in Appendix 10 to the Listing Rules. The Company has made specific inquiry of all its directors for preparing this Report and all directors have confirmed that they have complied with the required standard of dealings as set out in the Model Code for Securities Transactions by Directors of Listed Issuers during the Reporting Period.

6.3 Meetings of the Board

To date a total of 7 meetings (including 5 meetings held in writing) were held by the Board. All Directors attended these meetings (including attendance by proxy). In addition, the Audit Committee held 6 meetings to consider issues including the annual report of the Company for the year 2018, the report on the internal control review, the first quarterly report for the year 2019 and major asset sales, etc.; the Emolument and Examination Committee held 1 meeting to consider the resolutions on the remuneration of the Directors, Supervisors and senior management of the Company for the year 2018; the Strategy Committee held 1 meeting, on which the Company made a report on its development strategy and capital operation. To date, the general meeting of the Company, the Board and the management performed their specific responsibilities and regulated corporate operation to ensure the true, accurate, complete, timely and fair disclosure of corporate information. Specialized committees of the Board carried out works in accordance with their respective duties, and independent non-executive Directors played an important role in the work of Board.

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§7 FINANCIAL STATEMENTS PREPARED UNDER THE

ACCOUNTINGSTANDARDS OF THE PRC

(Amounts denominated in Renminbi unless otherwise specified)

Consolidated Balance Sheet

30 June 2019

Prepared by: CSSC Offshore & Marine Engineering (Group) Company Limited

		Unit: RMB
Item	30 June 2019	31 December 2018
Current assets:
Cash at bank and on hand	7,033,700,046.08	10,337,887,158.50
Settlement reserve
Placements with banks and non-bank
financial institutions
Financial assets held-for-trading	47,015,330.33	11,685,155.01
Financial assets at fair value through
profit or loss
Derivative financial assets
Notes receivable	102,780,137.27	130,810,712.06
Accounts receivable	3,514,084,587.92	2,562,295,160.42
Receivable financing
Prepayments	3,632,961,295.56	3,020,857,780.23
Insurance premium receivable
Reinsurance premium receivable
Reserves for reinsurance contract
receivable
Other receivables	993,612,135.28	326,086,350.28
Including: Interest receivable	28,584,999.26	46,907,817.53
Dividends receivable	185,273.02
Financial assets purchased under
agreements to resell
Inventories	5,531,246,793.46	4,955,993,857.79
Contract assets	7,516,302,519.33	6,860,770,802.28
Assets held for sale
Non-current assets due within one year	400,000,000.00	463,415,968.00
Other current assets	243,646,496.83	365,378,116.05
Total current assets	29,015,349,342.06	29,035,181,060.62
Non-current assets:
	30

Loans and advances to customers
Debt investments
Available-for-sale financial assets
Other debt investments
Held-to-maturity investments
Long-term receivables	2,176,499,290.71	1,976,516,046.20
Long-term equity investments	740,036,766.87	740,935,298.11
Investments in other equity instruments	71,478,588.58	63,403,225.93
Other non-current financial assets
Investment properties	21,308,295.44	21,622,651.52
Fixed assets	11,662,555,258.81	12,046,436,020.38
Construction in progress	1,010,238,554.59	762,567,676.87
Productive biological assets
Oil and gas assets
Right-of-use asset	176,233,075.65
Intangible assets	2,053,979,115.18	2,084,830,278.97
Development expenses
Goodwill	144,231,195.67	144,231,195.67
Long-term prepaid expenses	83,338,711.86	79,285,603.23
Deferred income tax assets	374,816,976.93	440,083,496.90
Other non-current assets	26,470,552.78	80,251,531.97
Total non-current assets	18,541,186,383.07	18,440,163,025.75
Total assets	47,556,535,725.13	47,475,344,086.37
Current liabilities:
Short-term borrowings	7,524,383,875.11	4,304,387,255.88
Loans from central bank
Placements from banks and other
financial institutions
Financial liabilities held-for-trading	202,774,080.82	431,894,056.78
Financial liabilities at fair value through
profit or loss
Derivative financial liabilities
Notes payable	1,850,172,981.45	2,730,396,298.20
Accounts payable	8,263,699,493.42	7,958,832,249.26
Advances from customers
Securities sold under agreements to
repurchase
	31

Deposits from customers and other banks
Brokerage for securities trading
Brokerage for underwriting securities
Employee benefits payable	62,783,802.68	41,351,166.51
Taxes payable	75,307,785.25	48,140,024.18
Other payables	284,772,011.61	336,922,424.57
Including: Interest payable	31,141,150.16	16,734,825.58
Dividends payable	394,042.49	304,042.49
Fee and commission payable
Reinsured accounts payable
Contract liabilities	6,469,940,246.41	7,112,391,961.78
Liabilities held for sale
Non-current liabilities due within one	1,489,900,000.00	4,414,000,000.00
year
Other current liabilities	233,992,036.02	182,190,818.20
Total current liabilities	26,457,726,312.77	27,560,506,255.36
Non-current liabilities:
Reserves for insurance contracts
Long-term borrowings	4,721,457,000.00	4,339,619,500.00
Bonds payable
Including: Preference shares
Perpetual bonds
Lease liabilities	128,738,531.12
Long-term payables	99,370,000.00	99,370,000.00
Long-term employee benefits payable	239,715,834.08	248,554,297.66
Estimated liabilities	685,301,841.13	802,016,709.10
Deferred income	73,859,885.16	59,916,128.16
Deferred tax liabilities	6,949,522.36	8,950,648.02
Other non-current liabilities
Total non-current liabilities	5,955,392,613.85	5,558,427,282.94
Total liabilities	32,413,118,926.62	33,118,933,538.30
Owners' equity (or shareholders'
interests):
Paid-in capital (or share capital)	1,413,506,378.00	1,413,506,378.00
Other equity instruments
Including: Preference shares
	32

Perpetual bonds
Capital reserve	9,549,636,081.11	9,549,580,748.34
Less: Treasury shares
Other comprehensive income	-38,046,780.32	-45,615,426.57
Special reserve	1,224,467.93	1,226,639.50
Surplus reserve	962,441,825.31	962,441,825.31
Provision for general risks
Undistributed profit	-1,762,952,145.45	-2,153,702,475.37
Total equity (or shareholders' interests)
attributable to owners of the Parent	10,125,809,826.58	9,727,437,689.21
Company
Minority interests	5,017,606,971.93	4,628,972,858.86
Total owners' equity (or shareholders'	15,143,416,798.51	14,356,410,548.07
interests)
Total liabilities and owners' equity (or	47,556,535,725.13	47,475,344,086.37
shareholders' interests)
Legal representative: Han Guangde	Person in charge of	accounting: Hou Zengquan

Head of accounting department: Xie Weihong

33

Balance Sheet of the Parent Company

30 June 2019

Prepared by: CSSC Offshore & Marine Engineering (Group) Company Limited

		Unit: RMB
Item	30 June 2019	31 December 2018
Current assets:
Cash at bank and on hand	107,410,995.53	99,371,121.05
Financial assets held-for-trading
Financial assets at fair value through
profit or loss
Derivative financial assets
Notes receivable
Accounts receivable	39,819,173.31	46,428,670.20
Receivable financing
Prepayments	1,878,270.09	2,100,230.64
Other receivables	9,290,612.44	9,520,031.06
Including: Interest receivable	44,340.01	558,431.55
Dividends receivable
Inventories	79,170,565.28	98,897,393.27
Contract assets
Assets held for sale
Non-current assets due within one	500,000,000.00
year
Other current assets	861,243,460.53	761,163,163.71
Total current assets	1,598,813,077.18	1,017,480,609.93
Non-current assets:
Debt investments
Available-for-sale financial assets
Other debt investments
Held-to-maturity investments
Long-term receivables
Long-term equity investments	7,919,870,080.03	7,921,435,986.83
Investments in other equity
instruments
Other non-current financial assets
Investment properties
Fixed assets	67,806,780.87	70,839,970.49
	34

Construction in progress
Productive biological assets
Oil and gas assets
Right-of-use asset	2,351,330.29
Intangible assets	10,322,758.93	10,468,726.74
Development expenses
Goodwill
Long-term prepaid expenses	893,924.55
Deferred income tax assets	20,000,000.00	20,000,000.00
Other non-current assets	435,653,145.42	633,860,105.78
Total non-current assets	8,456,898,020.09	8,656,604,789.84
Total assets	10,055,711,097.27	9,674,085,399.77
Current liabilities:
Short-term borrowings	850,000,000.00	650,000,000.00
Financial liabilities held-for-trading
Financial liabilities at fair value
through profit or loss
Derivative financial liabilities
Notes payable
Accounts payable	48,635,181.56	58,845,591.58
Advances from customers
Contract liabilities	48,817,564.81	65,497,566.97
Employee benefits payable
Taxes payable	2,339,036.89	3,217,292.29
Other payables	45,969,343.85	41,994,848.71
Including: Interest payable	891,458.34	731,881.94
Dividends payable	304,042.49	304,042.49
Liabilities held for sale
Non-current liabilities due within	200,000,000.00
one year
Other current liabilities	352,329.61	77,418.16
Total current liabilities	1,196,113,456.72	819,632,717.71
Non-current liabilities:
Long-term borrowings
Bonds payable
Including: Preference shares
	35

Perpetual bonds
Lease liabilities	2,399,044.36	-
Long-term payables	99,370,000.00	99,370,000.00
Long-term employee benefits
payable
Estimated liabilities
Deferred income
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities	101,769,044.36	99,370,000.00
Total liabilities	1,297,882,501.08	919,002,717.71
Owners' equity (or shareholders'
interests):
Paid-in capital (or share capital)	1,413,506,378.00	1,413,506,378.00
Other equity instruments
Including: Preference shares
Perpetual bonds
Capital reserve	6,147,927,729.10	6,147,927,729.10
Less: Treasury shares
Other comprehensive income
Special reserve
Surplus reserve	472,670,941.45	472,670,941.45
Undistributed profit	723,723,547.64	720,977,633.51
Total owners' equity (or	8,757,828,596.19	8,755,082,682.06
shareholders' interests)
Total liabilities and owners' equity	10,055,711,097.27	9,674,085,399.77
(or shareholders' interests)

Legal representative: Han Guangde	Person in charge of accounting: Hou Zengquan
Head of accounting department: Xie Weihong

36

Consolidated Income Statement

From January to June 2019

		Unit: RMB
Item	1st half of 2019	1st half of 2018
I. Total operating income	7,816,085,319.68	8,473,768,799.74
Including: Operating income	7,816,085,319.68	8,473,768,799.74
Interest income
Premium earned
Fee and commission income
II. Total operating costs	8,354,963,237.47	9,157,920,887.93
Including: Operating costs	7,626,860,800.81	8,383,297,494.76
Interest expense
Fee and commission expenses
Refunded premiums
Net amount of compensation payout
Net increase in insurance contracts reserve
Policy dividend payment
Reinsured expenses
Taxes and surcharges	32,793,624.08	40,552,883.03
Selling expenses	8,547,839.97	31,034,687.54
Administrative expenses	374,142,028.48	392,266,908.95
Research and development expense	226,390,380.65	201,450,733.11
Finance cost	86,228,563.48	109,318,180.54
Including: Interest expenses	195,683,733.87	185,234,311.41
Interest income	128,327,120.98	107,911,578.77
Add: Other income	5,517,547.40	8,439,920.30
Investment income (loss expressed with	-200,623,239.54	20,390,428.51
"-")
Including:Investment income in associates	-2,542,980.91	-4,716,485.94
and joint ventures
Derecognition income of financial assets
measured at amortised cost (loss expressed
with "-")
Exchange gain (loss expressed with "-")
Net gain on exposure hedging (loss
expressed with "-")
Gain on change in fair value (loss	264,450,151.28	-221,420,289.98
expressed with "-")
Loss on impairment of credit (loss	-8,451,275.85	-9,818,347.40
expressed with "-")
	37

Loss on impairment of assets (loss	-69,618,896.09	-80,048,917.97
expressed with "-")
Gains from disposal of asset (loss	-249,851.06
expressed with "-")
III. Operating profit (loss expressed with	-547,853,481.65	-966,609,294.73
"-")
Add: Non-operating income	1,253,089,251.01	564,305,723.58
Less: Non-operating expenses	1,625,913.57	57,469,748.98
IV. Total profit (total loss expressed with	703,609,855.79	-459,773,320.13
"-")
Less: Income tax expense	93,984,992.93	-32,894,664.43
V. Net profit (net loss expressed with "-")	609,624,862.86	-426,878,655.70
(1) By continuity of operations
1.Net profit from continuing operations	609,624,862.86	-426,878,655.70
(net loss expressed with "-")
2.Net profit from discontinued operations
(net loss expressed with "-")
(2) By ownership
1.Net profit attributable to shareholders of	390,750,329.92	-361,945,458.99
the Parent Company (net loss expressed
with "-")
2.Gain or loss attributable to minority	218,874,532.94	-64,933,196.71
interests (net loss expressed with "-")
VI. Net after tax for other comprehensive	10,401,824.34	-2,300,574.80
income
Net after tax for other comprehensive	7,568,646.25	-4,018,109.52
income attributable to owners of the Parent
Company
(1) Other comprehensive income that may	7,520,933.58	-2,271,924.51
not be reclassified to profit or loss
1. Change in remeasurement of defined
benefit plans
2. Other comprehensive income that may
not be reclassified to profit or loss under
equity method
3. Change in fair value of investments in	7,520,933.58	-2,271,924.51
other equity instruments
4. Change in fair value of own credit risk
(2) Other comprehensive income that may	47,712.67	-1,746,185.01
be reclassified to profit or loss
1. Other comprehensive income that may		-120,904.30
be reclassified to profit or loss under equity
method
2. Change in fair value of other debt
investments
3. Gain or loss on change in fair value of
available-for-sale financial assets
4. Amount included in other
comprehensive income on reclassification
of financial assets
5. Gain or loss on re-classification of
held-to-maturity investment into
	38

available-for-sale financial assets
6. Provision for credit impairment of other
debt investments
7. Cash flow hedges reserve (effective
portion of gain or loss on cash flow
hedges)
8. Exchange differences arising from	47,712.67
translation of foreign currency financial		-1,625,280.71
statements
9. Others
Net other comprehensive income after tax	2,833,178.09	1,717,534.72
attributable to minority interests
VII. Total comprehensive income	620,026,687.20	-429,179,230.50
Total comprehensive income attributable to	398,318,976.17	-365,963,568.51
owners of the Parent Company
Total comprehensive income attributable to	221,707,711.03	-63,215,661.99
minority interests
VIII. Earnings per share:
(1) Basic earnings per share (RMB/share)	0.2764	-0.2561
(2) Diluted earnings per share (RMB/share)	0.2764	-0.2561

Legal representative: Han Guangde

Person in charge of accounting: Hou Zengquan

Head of accounting department: Xie Weihong

39

Income statement of the Parent Company

From January to June 2019

		Unit: RMB
Item	1st half of 2019	1st half of 2018
I. Operating income	91,961,389.81	82,239,576.72
Less: Operating costs	89,042,949.57	91,645,798.74
Taxes and surcharges	1,396,458.92	851,127.95
Selling expenses	1,245,236.98	2,434,118.29
Administrative expenses	10,051,417.16	8,623,652.56
Research and development expense
Finance cost	-13,932,102.59	-11,803,521.19
Including: Interest expenses	14,208,124.99	2,282,026.39
Interest income	28,187,838.37	14,887,597.24
Add: Other income
Investment income (loss expressed with "-")	-1,479,212.18	-3,699,482.54
Including:Investment income in associates and	-1,479,212.18	-3,699,482.54
joint ventures
Derecognition income of financial assets
measured at amortised cost (loss expressed
with "-")
Net gain on exposure hedging (loss expressed
with "-")
Gain on change in fair value (loss expressed
with "-")
Loss on impairment of credit (loss expressed	67,779.32	-52,178.31
with "-")
Loss on impairment of assets (loss expressed
with "-")
Gains from disposal of asset (loss expressed
with "-")
II. Operating profit (loss expressed with "-")	2,745,996.91	-13,263,260.48
Add: Non-operating income
Less: Non-operating expenses	82.78	31,132.31
III. Total profit (total loss expressed with "-")	2,745,914.13	-13,294,392.79
Less: Income tax expense
IV. Net profit (net loss expressed with "-")	2,745,914.13	-13,294,392.79
(1) Net profit from continuing operations (net	2,745,914.13	-13,294,392.79
loss expressed with "-")
(2) Net profit from discontinued operations
(net loss expressed with "-")
V. Net after tax for other comprehensive
income
(1) Other comprehensive income that may not
be reclassified to profit or loss
	40

1.Change in remeasurement of defined benefit plans

2.Other comprehensive income that may not be reclassified to profit or loss under equity method

3. Change in fair value of investments in other equity instruments

4.Change in fair value of own credit risk

1. Other comprehensive income that may be reclassified to profit or loss
   1.Other comprehensive income that may be reclassified to profit or loss under equity method
   2.Change in fair value of other debt investments
   3.Gain or loss on change in fair value of available-for-sale financial assets 4.Amount included in other comprehensive income on reclassification of financial assets 5.Gain or loss on re-classification of held-to-maturity investment into available-for-sale financial assets 6.Provision for credit impairment of other debt investments
   7. Cash flow hedges reserve (effective portion of gain or loss on cash flow hedges)
   8. Exchange differences arising from translation of foreign currency financial statements

9. Others
VI. Total comprehensive income	2,745,914.13	-13,294,392.79
VII. Earnings per share:

1. Basic earnings per share (RMB/share)
2. Diluted earnings per share (RMB/share)

Legal representative: Han Guangde

Person in charge of accounting: Hou Zengquan

Head of accounting department: Xie Weihong

41

Consolidated Cash Flow Statement

From January to June 2019

		Unit: RMB
Item	1st half of 2019	1st half of 2018
I. Cash flows from operating activities:
Cash received from sale of goods or	6,058,118,267.56	7,463,810,563.14
rendering of services
Net increase in deposits from customers
and deposits from other banks
Net increase in loans from central bank
Net increase in placements from other
financial institutions
Cash receipts of premium for direct
insurance contracts
Net cash received from reinsurance
business
Net increase in deposits from insurance
policy holders and investment
Cash receipts of interest, fees and
commissions
Net increase in placements from other
financial institutions
Net increase in sales and repurchase
operations
Cash receipts of brokerage for securities
trading
Cash received from tax refund	596,547,275.43	719,882,130.21
Other cash receipts relating to operating	1,137,939,919.46	312,895,079.83
activities
Sub-total of cash inflows from operating	7,792,605,462.45	8,496,587,773.18
activities
Cash paid for goods and services	9,667,631,483.97	9,329,424,056.63
Net increase in loans and advances to
customers
Net increase in central bank and interbank
deposits
Cash paid for claims of direct insurance
contracts
Net increase in financial assets held for
trading
Net increase in placements with banks and
non-bank financial institutions
Cash paid for interest, fees and
commissions
Cash paid for dividends of insurance
policies
Cash paid to and on behalf of employees	945,314,358.75	936,168,386.41
Payments of taxes	71,995,816.45	77,861,967.74
Other cash payments relating to operating	308,141,118.24	669,551,791.58
activities
	42

Sub-total of cash outflows from operating	10,993,082,777.41	11,013,006,202.36
activities
Net cash flows from operating activities	-3,200,477,314.96	-2,516,418,429.18
II. Cash flows from investing activities:
Cash receipts from recover of investments	300,000,000.00	701,000,000.00
Cash receipts from investment income	6,060,784.49	19,089,809.90
Net cash receipts from disposal of fixed	222,809.08	382,308.97
assets, intangible assets and other
long-term assets
Net cash receipts from disposal of		60,448.29
subsidiaries and other business units
Other cash receipts relating to investing	1,720,638,033.71	515,870,456.93
activities
Sub-total of cash inflows from investing	2,026,921,627.28	1,236,403,024.09
activities
Cash paid for acquisition of fixed assets,	371,211,006.35	369,164,988.71
intangible assets and other long-term assets
Cash paid for investments	630,614,976.25	37,001,000.00
Net increase in pledged loans
Net cash paid for acquisition of
subsidiaries and other business units
Other cash payments relating to investing	2,394,898,237.08	2,192,563,721.90
activities
Sub-total of cash outflows from investing	3,396,724,219.68	2,598,729,710.61
activities
Net cash flows from investing activities	-1,369,802,592.40	-1,362,326,686.52
III. Cash flows from financing activities:
Cash receipts from receiving investments		4,800,000,000.00
Including: Cash received by subsidiaries		4,800,000,000.00
from receiving investments made by
minority interest
Cash receipts from borrowings obtained	6,920,297,222.23	3,243,008,500.00
Cash receipts from issuance of bonds
Other cash receipts relating to financing	167,000,000.00	77,500,000.00
activities
Sub-total of cash inflows from financing	7,087,297,222.23	8,120,508,500.00
activities
Cash paid for repayment of debts	6,002,152,246.16	8,170,850,316.47
Cash paid for dividends, profit distribution	190,507,347.30	204,910,011.12
or interest expenses
Including: Dividends and profits paid by
subsidiaries to minority interests
Other cash payments relating to financing		1,002,400.00
activities
Sub-total of cash outflows from financing	6,192,659,593.46	8,376,762,727.59
activities
Net cash flows from financing activities	894,637,628.77	-256,254,227.59
IV. Effect of change in exchange rate on	-12,849,024.61	-4,911,266.62
	43

cash and cash equivalents
V. Net increase in cash and cash	-3,688,491,303.20	-4,139,910,609.91
equivalents
Add: Beginning balance of cash and cash	8,536,815,355.09	11,634,582,111.41
equivalents
VI. Ending balance of cash and cash	4,848,324,051.89	7,494,671,501.50
equivalents

Legal representative: Han Guangde	Person in charge of accounting: Hou Zengquan
Head of accounting department: Xie Weihong

44

Cash Flow Statement of the Parent Company

From January to June 2019

		Unit: RMB
Item	1st half of 2019	1st half of 2018
I. Cash flows from operating activities:
Cash received from sale of goods or rendering	92,718,196.49	111,009,558.75
of services
Cash received from tax refund
Other cash receipts relating to operating	5,541,582.32	8,983,184.27
activities
Sub-total of cash inflows from operating	98,259,778.81	119,992,743.02
activities
Cash paid for goods and services	70,136,338.25	86,368,622.84
Cash paid to and on behalf of employees	13,959,493.28	13,733,025.10
Payments of taxes	6,960,485.78	2,153,426.93
Other cash payments relating to operating	13,530,530.32	19,464,265.64
activities
Sub-total of cash outflows from operating	104,586,847.63	121,719,340.51
activities
Net cash flows from operating activities	-6,327,068.82	-1,726,597.49
II. Cash flows from investing activities:
Cash receipts from recover of investments
Cash receipts from investment income	86,694.62
Net cash receipts from disposal of fixed assets,
intangible assets and other long-term assets
Net cash receipts from disposal of subsidiaries
and other business units
Other cash receipts relating to investing	128,363,097.20	505,019,623.61
activities
Sub-total of cash inflows from investing	128,449,791.82	505,019,623.61
activities
Cash paid for acquisition of fixed assets,	74,195.75	570,972.49
intangible assets and other long-term assets
Cash paid for investments		30,000,000.00
Net cash paid for acquisition of subsidiaries and
other business units
Other cash payments relating to investing	530,000,000.00	400,000,000.00
activities
Sub-total of cash outflows from investing	530,074,195.75	430,570,972.49
activities
Net cash flows from investing activities	-401,624,403.93	74,448,651.12
III. Cash flows from financing activities:
Cash receipts from receiving investments
Cash receipts from borrowings obtained	400,000,000.00
	45

Cash receipts from issuance of bonds
Other cash receipts relating to financing
activities
Sub-total of cash inflows from financing	400,000,000.00
activities
Cash paid for repayment of debts		491,000,000.00
Cash paid for dividends, profit distribution or	14,008,652.77	2,642,689.99
interest expenses
Other cash payments relating to financing
activities
Sub-total of cash outflows from financing	14,008,652.77	493,642,689.99
activities
Net cash flows from financing activities	385,991,347.23	-493,642,689.99
IV. Effect of change in exchange rate on cash		-647,405.27
and cash equivalents
V. Net increase in cash and cash equivalents	-21,960,125.52	-421,568,041.63
Add: Beginning balance of cash and cash	99,371,121.05	513,258,307.19
equivalents
VI. Ending balance of cash and cash	77,410,995.53	91,690,265.56
equivalents

Legal representative: Han Guangde	Person in charge of accounting: Hou Zengquan
Head of accounting department: Xie Weihong

46

§8 Notes to Consolidated Financial Statements

1. BASIS FOR PREPARATION OF FINANCIAL STATEMENTS
   (1) Basis for preparation

Based on going-concern assumption and transactions and events actually occurred, the consolidated financial statements of the Group have been prepared in accordance with Accounting Standards for Business Enterprises issued by the Ministry of Finance of the PRC, (hereinafter referred to as the "Accounting Standards for Business Enterprises"),

and No. 15 of regulations on information disclosures of companies that issue public offering shares - General Rules of preparing financial reports (revised in 2014) issued by China Securities Regulatory Commission (CSRC), the applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the "Listing Rules") and regulations of Hong Kong Companies Ordinance as well as the accounting policies and estimation of the Group.

(2) Going-concern

The management of the Group has assessed its ability to operate on a continuing basis for the 12 months from 30 June 2019 and is of the view that its existing financial position should be sufficient to meet the production and operation of the Group. As such, these financial statements are prepared on a going-concern basis.

1. STATEMENT OF COMPLIANCE WITH ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES

The financial statements have been prepared in accordance with the Accounting Standards for Business Enterprises, and reflect a true and fair view of the financial position, the operating results and cash flows of the Company and the Group. Changes in significant accounting policies during the period:

(1) Details of and reason for changes

On 7 December 2018, the Ministry of Finance revised the Accounting Standards for Business Enterprises No. 21 - Leases (hereinafter referred to as "New Lease Standards"), requiring companies listed at the same time both domestically and overseas, and listed

47

overseas and adopting IFRS or Accounting Standards for Business Enterprises to prepare financial statements, to implement the New Lease Standards since 1 January 2019.

The Group implemented the New Lease Standards from 1 January, 2019, and adjusted the relevant accounting policies. The adjusted accounting policies are detailed in Note 3 (32).

(2) Principal impacts of changes

The New Lease Standards replaces the Accounting Standards for Business Enterprises No. 21 - Leases, issued in the Notice of the Ministry of Finance on Releasing 38 Specific Standards including (CaiKuai [2006] No. 3) promulgated by the Ministry of Finance on 15 February 2006(collectively referred to as the Original Lease Standards).

Under the Original Lease Standards, the lessee needs to distinguish between operating leases and financial leases, and only requires accounting for financial leases. The accounting treatment in the case of option revaluation or contract change after the start date of the lease period is not regulated. If the lessor has an operating lease, it only requires the lessor to disclose the carrying value of each type of leased asset.

Under the New Lease Standards, the lessee no longer divides the lease into an operating lease or a finance lease, but adopts a uniform accounting treatment model to identify right-of-use assets and lease liabilities for all leases other than short-term leases and low-value asset leases, and depreciation and interest expenses are provided respectively. The New Lease Standards clearly stipulate that when a major event or change within the controllable scope of the lessee occurs, and which will impact that whether the lessee is reasonably certain that the option will be exercised, then the lessee should determine whether it will reasonably exercise the option to renew the lease, purchase option or not exercise the lease termination option to re-evaluate. The lessor needs to disclose information such as the relevant rental income and the undiscounted lease receipts.

The Group analyzed the classification and other changes of the lessee's operating leases and finance leases, so as to assess the impact of the New Lease Standards on the

48

financial statements. According to the New Lease Standards, the right-of-use assets and lease liabilities were recognized on 1 January 2019 respectively, but it hadn't impact on the owner's equity as at1 January 2019.

The impacts on the relevant items in the consolidated financial statements are as follows:

Item	31 December 2018	1 January 2019	After adjustment
Total assets	47,475,344,086.37	47,674,684,587.19	199,340,500.82
Including:		199,340,500.82	199,340,500.82
Right-of-use assets
Total liabilities	33,118,933,538.30	33,318,274,039.12	199,340,500.82
Including: Lease		152,171,100.46	152,171,100.46
liabilities
Other current	182,190,818.20	229,360,218.56	47,169,400.36
liabilities
Total owners' equity	14,356,410,548.07	14,356,410,548.07

The implementation of the New Lease Standards by the Group has no impact on the items of statements of the Parent Company.

1. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS

For the financial statement data disclosed below, unless otherwise stated,

"Beginning balance" refers to the balance as at 1 January 2019; and "Ending balance" refers to the balance as at 30 June 2019. "Current period" refers to the period from 1 January 2019 to 30 June 2019; and "Corresponding period of last year" refers to the period from 1 January 2018 to 30 June 2018. The currency unit is RMB.

1.Notes receivable

(1) Types of notes	Ending balance	Beginning balance
receivable Item
Bank acceptance bills	61,186,175.25	83,544,762.52
Commercial acceptance bills	41,593,962.02	47,265,949.54
Total	102,780,137.27	130,810,712.06

Among the above notes receivable of the Group, RMB102,080,137.27 had an ageing of

less than 180 days, and RMB700,000.00 had an ageing of 181-360 days.

49

(2) Notes receivable pledged as at the end of the period

None.

1. Notes receivable which have been endorsed or discounted to other party at the end of period but not yet expired at the balance sheet date

Item	Amount derecognised at the end of period	Amount not derecognised at the end of period
Bank acceptance bills	109,491,349.46
Commercial acceptance bills	118,215,300.00
Total	227,706,649.46

(4) Notes transferred to accounts receivable at the end of period due to non-performance of drawers:

None.

(5) Disclosure by the method using which the provision for bad debts is made

		Ending balance			Beginning balance
	Book balance	Provision for bad debts		Book balance	Provision for bad
		debts
Type
	Percentage		Percentage	Carrying value		Percentage		Percentage	Carrying value
	Amount	Amount	of		Amount	Amount	of
	(%)	provision		(%)	provision
				(%)					(%)

50

Provision
for bad
debts
made on
an
individual
basis
Provision
for bad
debts	102,780,137.27	100.00			102,780,137.27	130,810,712.06	100.00			130,810,712.06
made on a
collective
basis
Including:
Due
within one	102,780,137.27	100.00			102,780,137.27	130,810,712.06	100.00			130,810,712.06
year
Total	102,780,137.27				102,780,137.27	130,810,712.06				130,810,712.06

51

1.Accounts receivable

Item	Ending balance	Beginning balance
Accounts receivable	3,556,720,649.13	2,599,936,504.41
Less: Provision for bad debts	42,636,061.21	37,641,343.99
Net amount	3,514,084,587.92	2,562,295,160.42

(1)Disclosure by ageing

Ageing		Ending balance
Accounts receivable	Provision for bad debts	Percentage of
	provision (%)
Within one year	3,378,144,962.11	16,816,771.04	0.50
1-2 years	103,546,553.35	3,849,040.07	3.72
2-3 years	38,236,286.17	1,047,964.76	2.74
3-4 years	9,717,922.32	259,112.84	2.67
4-5 years	8,917,724.88	6,039,982.30	67.73
Over 5 years	18,157,200.30	14,623,190.20	80.54
Total	3,556,720,649.13	42,636,061.21	1.20

(Continued)

Ageing		Beginning balance
Accounts receivable	Provision for bad debts	Percentage of
	provision (%)
Within one year	2,081,143,908.20	11,024,919.02	0.53
1-2 years	367,021,421.08	5,658,962.57	1.54
2-3 years	89,601,945.13	945,758.24	1.06
3-4 years	38,876,710.70	1,367,823.98	3.52
4-5 years	7,008,378.15	4,324,220.61	61.7
Over 5 years	16,284,141.15	14,319,659.57	87.94
Total	2,599,936,504.41	37,641,343.99	1.45

(2)Credit period of accounts receivable

Business	Credit period
Shipbuilding	One month after issue of invoices
Other business	Generally 1 to 6 months

52

(3)Disclosure by the method using which the provision for bad debts is made

Ending balance

Beginning balance

Book balance

Provision for bad debts

Book balance

Provision for bad debts

Type

Percenta

Carrying value

Percenta

Carrying value

Amount

Percent

Amount

ge of

Amount

Percentag

Amount

ge of

age (%)

provisio

e (%)

provision

n (%)

(%)

Provision

for bad

debts

made on

24,657,976.81

0.69

24,657,976.81

100.00

25,848,053.85

0.99

24,818,059.11

96.02

1,029,994.74

an

individual

basis

Including:

Accounts

receivable

of which

the credit

risk has

24,657,976.81

0.69 24,657,976.81

100.00

25,848,053.85

0.99 24,818,059.11

96.02

1,029,994.74

significantl

1. increased since initial recognition

53

Provision
for bad
debts	3,532,062,672.32	99.31	17,978,084.40	0.50	3,514,084,587.9	2,574,088,450.5	99.01	12,823,284.88	0.50	2,561,265,165.6
made on a	2	6	8
collective
basis
Including:
Accounts
receivable
of which
the credit					3,514,084,587.9	2,574,088,450.5				2,561,265,165.6
risk has not	3,532,062,672.32	99.31	17,978,084.40	0.50	99.01	12,823,284.88	0.50
significantl					2	6				8
y increased
since initial
recognition
Total	3,556,720,649.13	/	42,636,061.21	/	3,514,084,587.9	2,599,936,504.4		37,641,343.99		2,562,295,160.4
					2	1				2

54

a)Provision for bad debts made on an individual basis：

		Ending balance
Name of entity			Percentage
Book balance	Provision for	of	Reasons for
	bad debts	provision	provision
			(%)
TENOVA AUSTRALIA				Very		little
4,199,465.15	4,199,465.15	100	chance		of
PTY LTD
			recovery
				CITIC Insurance
				has paid	for	it,
VARADA ONE PTE LTD	3,592,030.75	3,592,030.75	100	and			the
				remaining	debts
				cannot		be
				recovered
				The
GUANGZHOU HUAYU				counterparty lost
ELECTROMECHANICAL	3,549,843.68	3,549,843.68	100	the suit but has
EQUIPMENT CO., LTD.				no	executable
				property
				Long	overdue
WHL-FONKWANG	2,803,318.60	2,803,318.60	100	and	there	are
signs			of
				impairment
				Quality
CONTSHIPS				problems,	and
2,062,410.00	2,062,410.00	100	the	remaining
MANAGEMENT INC
			debts	cannot	be
				recovered
				CITIC Insurance
				has paid	for	it,
FAIRLAND	1,711,800.30	1,711,800.30	100	and			the
ENTERPRISES LIMITED	remaining	debts
				cannot		be
				recovered
EVALEND SHIPPING				The	balance
1,368,092.80	1,368,092.80	100	cannot		be
CO.S.A.
			recovered
GUANGZHOU				The	balance
NANFANG SPECIAL	1,186,418.63	1,186,418.63	100	cannot		be
COATING CO., LTD.				recovered
				Very		little
Other companies	4,184,596.90	4,184,596.90	100	chance		of
				recovery
Total	24,657,976.81	24,657,976.81

Description of provision for bad debts made on an individual basis:

The Group determines the accounts receivable with an ageing of over one year since date of initial recognition and for which there are indications of impairment to be the

55

accounts receivable the credit risk of which has significantly increased since initial recognition, and determine expected credit loss and make provision for bad debts based on the difference between the carrying amount of the accounts receivable and the present value of the cash flows expected to be received for the accounts receivable.

b)Provision for bad debts made on a collective basis：

Accounts receivable of which the credit risk has not significantly increased since initial recognition

Name		Ending balance
Accounts receivable	Provision for bad debts	Percentage of
	provision (%)
Within one year	3,364,801,868.32	17,141,780.38	0.50
1-2 years	118,181,073.41	590,905.37	0.50
2-3 years	38,493,021.02	192,465.11	0.50
3-4 years	4,617,883.45	23,089.42	0.50
4-5 years	2,586,880.23	12,934.40	0.50
Over 5 years	3,381,945.89	16,909.72	0.50
Total	3,532,062,672.32	17,978,084.40	-

Recognition criteria and description of provision for bad debts made on a collective basis:

The Group determines the accounts receivable which have not been tested individually for impairment to be the accounts receivable the credit risk of which has not significantly increased since initial recognition. Based on the actual credit loss for previous years and considering forwarding information for the year, the Group expects the default loss ratio to be 0.5%, determines the expected credit loss of accounts receivable and makes provision for bad debts based on 0.5% of the balance at the balance sheet date.

(4) Provision for bad debts

Type	Beginning	Amount of changes during the period	Ending
balance	Provision	Recovered	Resale or	balance
		or reversed	written-off
Provision for	37,641,343.99	5,073,243.03	-78,525.81		42,636,061.21
bad debts of
		56

accounts receivable

Total

37,641,343.99 5,073,243.03

-78,525.81

42,636,061.21

Provision for bad debts made, reversed or recovered during the period None

(5) Accounts receivable written-off during the period None

(6) Top five accounts receivable by ending balance of debtors

	Relationship			Percentage of ending	Ending
Name			balance of total	balance of
with the	Ending balance	Ageing
of entity	accounts receivable	provision for
Group
			(%)	bad debts
Entity 1	Third party	654,161,755.00	Within	18.39	3,270,808.78
3 years
Entity 2	Third party	546,826,100.00	Within	15.37	2,734,130.50
1 years
Entity 3	Third party	240,614,500.00	Within	6.77	1,203,072.50
1 years
Entity 4	Third party	231,217,794.25	Within	6.50	1,156,088.97
1 years
Entity 5	Third party	198,875,321.36	Within	5.59	994,376.61
1 years
Total		1,871,695,470.61		52.62	9,358,477.36

(7) Accounts receivable derecognised arising from transfer of financial assets:

None

1. Amounts of assets and liabilities transferred from accounts receivable with continuing involvement:

None

3.Notes payable

Type	Ending balance	Beginning balance
Commercial acceptance	172,436,000.00	443,823,404.95
bills
Bank acceptance bills	1,677,736,981.45	2,286,572,893.25
Total	1,850,172,981.45	2,730,396,298.20

Total notes payable due and unpaid as at the end of the period amounted to RMB0. Among the above notes payable of the Group, RMB1,850,172,981.45 had an ageing

57

of less than 180 days, and RMB0 had an ageing of 181-360 days.

4.Accounts payable

(1) Accounts payable

Item	Ending balance	Beginning balance
Materials purchased	5,337,380,952.21	4,074,770,064.65
Payment for construction in	203,180,831.94	114,327,903.77
progress
Balance of product	501,891,057.70	552,199,468.38
payment
Retention money	1,403,895,952.68	1,485,763,195.74
Other construction and	817,350,698.89	1,731,771,616.72
labour services
Total	8,263,699,493.42	7,958,832,249.26

(2) Ageing of accounts payable

Ageing	Ending balance	Beginning balance
Within one year	4,240,616,477.43	4,318,781,010.73
1-2 years	3,595,485,611.02	2,967,761,937.65
2-3 years	185,097,253.80	417,041,372.35
Over 3 years	242,500,151.17	255,247,928.53
Total	8,263,699,493.42	7,958,832,249.26

(3) Significant accounts payable with ageing over one year

		Including: Amount	Reason for
Item	Ending balance	over one year	unsettlement or
			carrying forward
China Shipbuilding Industry
Corporation 704 Research	344,756,750.00	75,373,000.00	Goods not arrived
Institute
China Shipbuilding Industry			Equipment
		warranty and
Complete Logistics	364,218,447.18	288,114,730.04
provisional
(Guangzhou) Co., Ltd.
		estimates
China Shipbuilding NDRI	88,963,459.50	69,402,429.21	Goods not arrived
Engineering Co., Ltd.
Shanghai CSSC Mitsui
Shipbuilding Diesel Engine	67,965,880.35	67,965,880.35	Goods not arrived
Co., Ltd.
			Equipment
Drass Energy Srl	47,356,646.10	47,356,646.10	warranty and
provisional
			estimates
CSSC Marine Power Co.	50,814,386.91	36,820,669.00	Goods not arrived
	58

		Including: Amount	Reason for
Item	Ending balance	over one year	unsettlement or
			carrying forward
Ltd.
			Equipment
AL NEHRA PETROME	45,017,175.95	45,017,175.95	warranty and
FZE	provisional
			estimates
			Equipment
Shanghai Haixun Electrical	35,599,015.43	27,596,124.12	warranty and
Engineering Co., Ltd.	provisional
			estimates
			Equipment
Wenzhou Bohong Electric	35,330,240.00	35,330,240.00	warranty and
Co., Ltd.	provisional
			estimates
			Equipment
CSSC Systems Engineering	29,053,000.00	18,255,000.00	warranty and
Research Institute	provisional
			estimates
			Equipment
Guangzhou Ship Industrial	23,852,799.34	14,098,106.40	warranty and
Co., Ltd.	provisional
			estimates
			Equipment
Wuxi Hainuo Equipment	13,523,010.00	6,443,500.00	warranty and
Technology Co., Ltd.	provisional
			estimates
			Equipment
Anqing CSSC Diesel Engine	8,676,575.76	3,719,000.00	warranty and
Co., Ltd.	provisional
			estimates
			Equipment
D&A Technology	2,450,082.60	2,450,082.60	warranty and
(Shanghai) Co., Ltd.	provisional
			estimates
Shanghai Zhen Nan			Equipment
		warranty and
Engineering Supervision	1,105,920.00	1,105,920.00
provisional
Co., Ltd.
		estimates
Total	1,158,683,389.12	739,048,503.77	--

5.Undistributed profit

Item	Current period	Corresponding period
of last year
Undistributed profit as at the end of last year	-2,153,702,475.37	1,228,681,091.09
before adjustment
Add: Beginning adjustment to undistributed		-1,513,529,343.99
profit
Including: Accounting policy change		-29,547,841.37
	59

Item	Current period	Corresponding period
of last year
Changes in business combination under		-1,483,981,502.62
common control
Undistributed profit as at the beginning of	-2,153,702,475.37	-284,848,252.90
the year after adjustment
Add: Net profit attributable to owners of the	390,750,329.92	-361,945,458.99
Parent Company for the current period
Add: Transfer from other comprehensive		159,937.61
income to retained earnings
Less: Statutory surplus reserve set aside
Undistributed profits as at the end of the	-1,762,952,145.45	-646,633,774.28
period

6.Net current assets

Item	Ending balance	Beginning balance
Current assets	29,015,349,342.06	29,035,181,060.62
Less: Current liabilities	26,457,726,312.77	27,607,675,655.72
Net current assets	2,557,623,029.29	1,427,505,404.90

7.Total assets less current liabilities

Item	Ending balance	Beginning balance
Total assets	47,556,535,725.13	47,674,684,587.19
Less: Current liabilities	26,457,726,312.77	27,607,675,655.72
Total assets less current liabilities	21,098,809,412.36	20,067,008,931.47

8.Operating income and operating cost

Item	Current period	Corresponding period of last year
Income	Cost	Income	Cost
Principal	7,778,237,332.64	7,612,209,764.96	8,369,362,165.35	8,318,865,355.89
business
Other	37,847,987.04	14,651,035.85	104,406,634.39	64,432,138.87
business
Total	7,816,085,319.68	7,626,860,800.81	8,473,768,799.74	8,383,297,494.76

Gross profit from principal business

Item	Current period	Corresponding
		period of last year
Income from principal business	7,778,237,332.64	8,369,362,165.35
Cost of principal business	7,612,209,764.96	8,318,865,355.89
Gross profit	166,027,567.68	50,496,809.46
	60

(1) Principal business - by product

Product name	Current period	Corresponding period of last
year
Income from principal
business:
Ship products	6,396,382,932.72	7,048,076,362.01
Offshore engineering	320,174,444.06	89,831,168.14
products
Steel structure engineering	357,375,955.95	355,507,842.84
Ship maintenance and	350,573,955.00	240,520,485.18
modification
Electromechanical products	353,730,044.91	635,426,307.18
and others
Total	7,778,237,332.64	8,369,362,165.35
Cost of principal
business:
Ship products	6,408,256,088.84	7,012,553,796.09
Offshore engineering	308,775,195.75	127,420,426.77
products
Steel structure engineering	336,439,069.43	336,513,278.10
Ship maintenance and	283,999,906.72	231,127,974.41
modification
Electromechanical products	274,739,504.22	611,249,880.52
and others
Total	7,612,209,764.96	8,318,865,355.89

(2) Principal business - by region

Region	Current period	Corresponding period of last
year
Income from
principal business:
China (including Hong
Kong, Macau and	4,288,158,574.46	4,897,866,494.08
Taiwan)
Other regions in Asia	465,016,224.86	304,627,419.16
Europe	1,453,931,398.50	1,780,158,856.74
Oceania	452,946,939.48	235,552,115.80
North America	185,390,271.74	874,090,624.27
Africa	905,706,498.41	227,579,212.20
South America	27,087,425.19	49,487,443.10
Total	7,778,237,332.64	8,369,362,165.35
Cost of principal
business:
China (including Hong	3,927,968,512.95	4,837,736,705.30
	61

Region	Current period	Corresponding period of last
year
Kong, Macau and
Taiwan)
Other regions in Asia	482,841,130.20	290,592,847.26
Europe	1,565,932,402.43	1,839,122,563.46
Oceania	457,191,994.41	233,346,125.82
North America	209,953,701.35	836,142,801.47
Africa	927,314,539.90	232,186,013.45
South America	41,007,483.72	49,738,299.13
Total	7,612,209,764.96	8,318,865,355.89

(3) Other operating income and other operating costs

Product name	Current period	Corresponding period of
last year
Income from other business:
Sale of materials	2,048,823.69	31,907,025.67
Sales of scrap materials	7,087,797.12	25,700,264.58
Service	2,485,339.00	5,702,348.52
Rental	14,528,154.73	14,529,232.56
Energy	4,589,817.59	15,478,663.12
Others	7,108,054.91	11,089,099.94
Total	37,847,987.04	104,406,634.39
Costs of other business
Sale of materials	3,652,671.21	29,832,841.15
Sales of scrap materials	354,288.04	10,044,096.72
Service	1,529,120.77	4,218,850.36
Rental	3,520,023.13	6,214,967.98
Energy	2,320,357.02	6,324,061.50
Others	3,274,575.68	7,797,321.16
Total	14,651,035.85	64,432,138.87

(4) Revenue from contracts

	Shipbuilding	Steel structure	Ship
Breakdown	maintenance
and related	engineering	Others
of	and related	Total
business	business	segment
contracts	business
segment	segment
	segment
		62

	Shipbuilding	Steel structure	Ship
Breakdown	maintenance
and related	engineering	Others
of	and related	Total
business	business	segment
contracts	business
segment	segment
	segment
Product	6,968,745,653.3	320,013,669.1	279,054,865.7	248,271,131.4	7,816,085,319.6
type	7	2	3	6	8
Ship	6,321,473,680.3				6,321,473,680.3
products	5				5
Offshore
engineerin	320,165,116.54				320,165,116.54
g products
Steel
structure	929,049.62	320,013,669.1		7,359,031.24	328,301,749.98
engineerin	2
g
Ship
maintenanc			279,054,865.7
e and	83,316,543.30			362,371,409.03
	3
modificatio
n
Electromec
hanical	162,437,559.52			58,320,367.30	220,757,926.82
products
and others
Other	80,423,704.04			182,591,732.9	263,015,436.96
business			2
By region	6,968,745,653.3	320,013,669.1	279,054,865.7	248,271,131.4	7,816,085,319.6
of
7	2	3	6	8
operation
Domestic	3,693,912,513.5	180,437,946.6	58,315,727.75	225,595,176.1	4,158,261,364.1
2	6	8	1
Overseas	3,274,833,139.8	139,575,722.4	220,739,137.9	22,675,955.28	3,657,823,955.5
5	6	8	7
Type of	6,968,745,653.3	320,013,669.1	279,054,865.7	248,271,131.4	7,816,085,319.6
market or
7	2	3	6	8
customer
State-owne	2,599,631,367.3	164,478,707.7			2,892,204,926.2
d	49,106,509.89	78,988,341.26
6	8	9
enterprises
Private	3,867,938,796.0	23,465,968.81	9,209,217.86	167,854,769.2	4,068,468,751.9
enterprises	9	3	9
Foreign	501,175,489.92	132,068,992.5	220,739,137.9	1,428,020.97	855,411,641.40
enterprises	3	8
Type of	6,968,745,653.3	320,013,669.1	279,054,865.7	248,271,131.4	7,816,085,319.6
contracts	7	2	3	6	8
Fixed price	6,968,745,653.3	196,715,382.0	905,172.41	69,064,305.20	7,235,430,513.0
7	4	2
Cost plus		123,298,287.0	278,149,693.3	179,206,826.2	580,654,806.66
	8	2	6
By date of	6,968,745,653.3	320,013,669.1	279,054,865.7	248,271,131.4	7,816,085,319.6
transfer of
7	2	3	6	8
goods
		63

	Shipbuilding	Steel structure	Ship
Breakdown	maintenance
and related	engineering	Others
of	and related	Total
business	business	segment
contracts	business
segment	segment
	segment
Performed	6,905,661,984.15	179,564,510.05	2,823,694.00	132,267,914.90	7,220,318,103.10
over time
Performed
at a point	63,083,669.22	140,449,159.07	276,231,171.73	116,003,216.56	595,767,216.58
in time
By contract	6,968,745,653.37	320,013,669.12	279,054,865.73	248,271,131.46	7,816,085,319.68
term
Short-term	75,738,200.94	197,972,109.51	279,054,865.73	-6,607,101.88	546,158,074.30
Long-term	6,893,007,452.43	122,041,559.61		254,878,233.34	7,269,927,245.38
By sales	6,968,745,653.37	320,013,669.12	279,054,865.73	248,271,131.46	7,816,085,319.68
channel
Direct	6,968,745,653.37	320,013,669.12	279,054,865.73	244,561,434.53	7,812,375,622.75
sales
Sale
through				3,709,696.93	3,709,696.93
distributors
Total	6,968,745,653.37	320,013,669.12	279,054,865.73	248,271,131.46	7,816,085,319.68

(5) Top five customers by operating income

	Relationship with the		Percentage of total
Customers	Current period	income from principal
Group
		business (%)
Customer 1	Third party	691,944,284.78	8.90
Customer 2	Third party	456,897,852.00	5.87
Customer 3	Third party	377,859,124.01	4.86
Customer 4	Third party	274,535,038.40	3.53
Customer 5	Third party	206,390,040.12	2.65
Total		2,007,626,339.31	25.81

(6) Purchase amounts from top five suppliers

	Relationship with the			Percentage of total
Suppliers		Current period	operating costs from
Group
			principal business (%)
Supplier 1	Under common		1,744,639,226.04	22.92
control of CSSC
Supplier 2	Third party		221,197,400.00	2.91
Supplier 3	Under common		181,604,631.22	2.39
	control of CSSC
Supplier 4	Under common		146,000,854.71	1.92
	control of CSSC
Supplier 5	Under common		119,551,400.00	1.57
		64

	Relationship with the		Percentage of total
Suppliers	Current period	operating costs from
Group
		principal business (%)
	control of CSSC
Total		2,412,993,511.97	31.71

9.Finance cost

(1) Breakdown of interest expenses

Item	Current period	Corresponding period of
last year
Interest expenses	195,683,733.87	185,234,311.41
Less: Interest income	128,327,120.98	107,911,578.77
Less: Net exchange gains
Add: Net exchange losses	9,530,677.58	27,617,939.02
Add: Other expenses	9,341,273.01	4,377,508.88
Total	86,228,563.48	109,318,180.54

(2) Breakdown of interest costs

Item	Current period	Corresponding period of
last year
Interest on bank borrowings and
overdraft
Interest on bank borrowings due within	167,155,568.34	186,321,275.57
5 years
Other borrowings
Interest on other borrowings due within	48,418,643.84	21,514,993.95
5 years
Other interest expenses
Sub-total	215,574,212.18	207,836,269.52
Less: Interest capitalised	640,478.31	2,391,958.11
Less: Finance interest discount	19,250,000.00	20,210,000.00
Total	195,683,733.87	185,234,311.41

(3)Breakdown of interest income

Item	Current period	Corresponding period of
last year
Interest income from bank deposits	127,146,879.69	102,519,715.02
Interest income from receivables	1,180,241.29	5,391,863.75
Total	128,327,120.98	107,911,578.77

65

10.Investment income

Item	Current period	Corresponding period of last
year
Gain on long-term equity
investments accounted for using	-2,542,980.91	-4,716,485.94
equity method
Investment income from disposal
of long-term equity investments		-42,655.82
Investment income from holding
entrusted wealth management	9,700,821.37	25,683,820.27
products
Investment income from disposal
of financial assets	-207,793,580.00	-548,000.00
held-for-trading
Dividend income from holding
investments in other equity	12,500.00	13,750.00
instruments
Total	-200,623,239.54	20,390,428.51

Other description: Investment income from investment in listed companies and non-listed companies for the period amounted to RMB0 (corresponding period of last year: RMB 0) and RMB-200,635,739.54 (corresponding period of last year: RMB20,390,428.51), respectively.

11.Gain on change in fair value

Source of gain on change in fair value	Current period	Corresponding
period of last year
Change in fair	value	of	financial assets	31,425,173.63	5,200,410.94
held-for-trading
Change in fair	value	of	held-for-trading	233,024,977.65	-226,620,700.92
financial liabilities
	Total			264,450,151.28	-221,420,289.98

12.Non-operating income

(1) Breakdown of non-operating income

			Amount included in
Item	Current period	Corresponding	non-recurring gains
period of last year	and losses for
			current period
Total gain on disposal of	447,925.19	40,516.04	447,925.19
non-current assets
Including: Gain on	447,925.19	40,516.04	447,925.19
disposal of fixed assets
Government grants	3,157,656.14	1,497,926.10	3,157,656.14
Compensation for assets	1,247,867,578.32	553,814,885.69	1,247,867,578.32
relocation
	66

Penalty income	167,217.00	94,929.26	167,217.00
Compensation income		1,100,424.56
Transfer from claims
under the balance of social		7,251,931.72
securityfund
Others	1,448,874.36	505,110.21	1,448,874.36
Total	1,253,089,251.01	564,305,723.58	1,253,089,251.01

The amount included in non-recurring gains and losses for the current period was RMB1,253,089,251.01 (corresponding period of last year: RMB564,305,723.58).

Note: On 26 April, 2019, the subsidiary Wenchong Shipyard and Guangzhou Wenchong Properties Co., Ltd. (hereinafter referred to as "Wenchong Properties") signed the First Phase Relocation Agreement of Wenchong Shipyard, which agreed that Wenchong Shipyard will stop the entire production and operation activities on the first phase of the relocation site before 26 April 2019, and the relevant assets will be handed over. Wenchong Properties will compensate accordingly according to the compensation standard for the relocation and resettlement losses of the first phase of relocation site, and after deducting the relevant expenses, RMB1.248 billion of compensation income is recognized in the current period.

(2) Government grants included in current profit or loss

		Corresponding	Relating to
Item	Current period	assets/relating to
period of last year
		revenue
Grants for use of onshore	2,120,000.00		Relating	to
power by berthing ships		revenue
Separation and transfer of
water, power and gas supply	910,064.94	910,064.94	Relating	to
and property			revenue
managementbusiness
Quality project funding	96,499.80		Relating	to
	revenue
Base constructionsubsidy	31,091.40	31,091.40	Relating to assets
Special funds for fair trade in		300,000.00	Relating	to
imports and exports			revenue
Trade friction response		165,000.00	Relating	to
research fund			revenue
Other projects		91,769.76	Relating	to
			revenue
Total	3,157,656.14	1,497,926.10	-

(3) Description of profit from disposal of properties

67

Non-operating income of the Group for the current period included profit from disposal of properties of RMB0 (corresponding period of last year: RMB0).

13.Income tax expense

(1) Income tax expense sheet

	Item	Current period	Corresponding period of
	last year
Current income tax expense	29,434,469.43	-5,941,046.06
1.	China	29,475,982.38	1,309,880.47
2.	Hong Kong
3.	Macau income tax
4.	Over-provision	-41,512.95	-7,250,926.53
(under-provision) in prior years
Deferred income tax expense	64,550,523.50	-26,953,618.37
Total	93,984,992.93	-32,894,664.43

(2) Reconciliation of accounting profit and income tax expenses

Item	Current period	Corresponding period of last
year
Total profit	703,609,855.79	-459,773,320.13
Income tax expenses
calculated at	175,902,463.95	-114,943,330.03
statutory/applicable
taxrate
Impact of different tax	-122,732,804.36	27,355,244.76
rates for subsidiaries
Impact of adjustment for
income tax for previous	-398,986.13	-7,653,583.87
period
Impact of non-taxable	-761,970.24	1,222,888.68
income
Impact of non-deductible	95,539.58	-242,746.18
costs, expenses and losses
Impact of utilisation of
deductible loss for which
no deferred tax assets	-73,186,503.66	-5,545,281.99
were previously
recognised
Impact of deductible
temporary differences for
which no deferred tax	131,984,166.14	66,968,060.93
assets or deductible
losses were recognised
for current period
Others (additional	-16,916,912.35	-55,916.73
deduction effect)
	68

Income tax expense	93,984,992.93	-32,894,664.43

(3) Main taxes and rates

		Tax basis	Tax rate
PRC enterprise	Taxable income	15%、20%、25%
income tax
Hong Kong	Taxable income	16.5%
profits tax
		Domestic sales; provision of processing, repair	16%、13%
		and repair services; rental income
-Value-added
Revenue from construction and installation business	10%、9%
tax	Note
		Modern services industry	6%
-City maintenance	Turnover tax payable
and construction		7%
tax
-Educational	Turnover tax payable	3%
surcharge
-Local	Turnover tax payable
educational		2%
surcharge

Note: In accordance with the Announcement of the Ministry of Finance, the Tax Administration and the General Administration of Customs on Deepening the Policies Related to Value-Added Tax Reform (Cai Shui Hai Announcement [2019] No. 39), with effect from 1 April 2019, the rates of value-added tax for the taxable sales or imports of goods of the Group had been changed from 16% and 10% to 13% and 9%, respectively.

Notes on taxpayers subject to different enterprise income tax rates:

Name of entity		Tax rate	Remarks
The Company		25%
CSSC Huangpu Wenchong Shipbuilding		15%
Company Limited
Guangzhou Wenchong Shipyard Co., Ltd.		15%
Guangzhou Hongfan Computer Technology		15%
Co., Ltd.
Guangzhou Wenchong Dockyard Co., Ltd.		15%
Glory Group Development Limited		16.50%	Incorporated in
	Hong Kong
Fonkwang Development Limited		16.50%	Incorporated in
	Hong Kong
Wah Shun International Marine Limited		16.50%	Incorporated in
	Hong Kong
	69

WahLoong International Marine Limited	16.50%	Incorporated in
Hong Kong
Zhanjiang Nanhai Ship Hi-Tech Services Ltd.	20%	Small low-profit
enterprise
Guangzhou Xingji Maritime Engineering	20%	Small low-profit
Design Co., Ltd.	enterprise
Other subsidiaries	25%

(4)Preferential taxation treatment

1. Value-added tax

Export income: The Group is an enterprise engaged in production and operation. Tax relief, credit and rebate policy is applicable to all of its self-produced goods for export. The tax rebate rate is 16%for ship products, 9% for steel structure products and 15% for large equipment. Since 1 April 2019, the original 16% tax rate is adjusted to 13%; the original 10% tax rate is adjusted to 9%; for those export service with original 16% tax rate and export tax rebate rate of 16%, the export tax rebate rate is adjusted to 13%; for export goods and cross-border taxable activities with original application of 10% tax rate and export tax rebate rate of 10%, the export tax rebate rate is adjusted to 9%.

Revenue from military products: Value-added tax is exempted for military production (order) contracts upon completion of the relevant procedures for tax relief.

Revenue from software: In accordance with the Circular of the State Administration of Taxation of the Ministry of Finance on the Value-added Tax Policy of Software Products (Cai Shui [2011] No. 100), for sales of self-developed software by a value-added tax general taxpayer, the portion of actual value- added tax burden in excess of 3% may be recovered upon payment in accordance with the relevant policy.

2. Enterprise income tax

Huangpu Wenchong, the subsidiary of the Company, passed again the review of high-tech enterprises in 2018, and obtained the Certificate of Hi-tech Enterprise with a validity period of three years. Its enterprise income tax for 2019 was paid at a rate of 15%.

Wenchong Shipyard, the subsidiary of the Company, passed again the review of high-tech enterprises in 2019, and obtained the Certificate of Hi-tech Enterprise with

70

a validity period of three years. Its enterprise income tax for 2019 was paid at a rate of 15%.

Hongfan Technology, the subsidiary of the Company, passed the review of high-tech enterprises in 2017, and obtained the Certificate of Hi-tech Enterprise with a validity period of three years. Its enterprise income tax for 2019 was paid at a rate of 15%.

Wenchong Dockyard, the subsidiary of the Company, passed the review of high-tech enterprises in 2018, and obtained the Certificate of Hi-tech Enterprise with a validity period of three years. Its enterprise income tax for 2019 was paid at a rate of 15%.

GSI, the subsidiary of the Company, passed again the review of high-tech enterprises in 2017, and obtained the Certificate of Hi-tech Enterprise with a validity period of three years. As it did not choose preferential taxation treatment, its enterprise income tax for the reporting period continued to be paid at a rate of25%.

14.Earnings per share

Basic earnings per share shall be calculated by profit or loss attributable to ordinary equity holders of the Company (the numerator) divided by the weighted average number of ordinary shares outstanding (the denominator) during the period.

The numerator of the diluted earnings per share attributable to ordinary shareholders is the Company's net profit after adjustment of the following factors: (1) the recognised interest expense of dilutive potential ordinary shares; (2) income or expense that would result from the conversion of dilutive potential ordinary shares; and (3) the related income tax effects of the above adjustments.

The denominator of diluted earnings per share is equal to the sum of: (1) the weighted average number of issued ordinary shares of the Company in basic earnings per share; and (2) the weighted average number of shares after conversion of the dilutive potential ordinary shares into ordinary shares.

In calculating the weighted average number of shares after conversion of dilutive potential ordinary shares into ordinary shares, the dilutive potential ordinary shares which were converted in previous years are assumed to be converted at the beginning of current period and the dilutive potential ordinary shares which were converted

71

during current period are assumed to be converted at the date of issue.

The calculation of basic earnings per share and diluted earnings per share are as follows:

Item	No.	Current period	Corresponding
	period of last year
Net profit attributable to	1	390,750,329.92	-361,945,458.99
shareholders of the Parent Company
Non-recurring gains and losses
attributable to the Parent	2	812,658,713.76	122,148,141.24
Company
Net profit attributable to
shareholders of the Parent	3=2-1	-421,908,383.84	-484,093,600.23
Company, net of non-recurring
gains and losses
Total number of shares at the	4	1,413,506,378.00	1,413,506,378.00
beginning of the year
Number of shares increased due to
transferring capital reserve into	5
share capital or dividend
distribution of shares (I)
Number of shares increased due to
issuance of new shares or debt for	6
equity swap (II)
Number of months from next
month to the year-end regarding the	7
number of shares (II)
Number of shares decreased due to	8
stock repurchase
Number of months from the next
month to the year-end regarding the	9
decrease of shares
Number of shares decreased due to	10
capital reduction
Number of months in the reporting	11	6	6
period
Weighted average number of	12	1,413,506,378.00	1,413,506,378.00
ordinary shares outstanding
Weighted average number of
ordinary shares outstanding
following adjustments in relation to
business combination under	13	1,413,506,378.00	1,413,506,378.00
common control for the purposes of
earnings per share after deduction
of non-recurring gains and losses
Basic earnings per share(I)	14=1÷12	0.2764	-0.2561
Basic earnings per share(II)	15=3÷13	-0.2985	-0.3425
Potential diluted interests of
ordinary shares recognised as	16
expense

72

Item	No.	Current period	Corresponding
	period of last year
Transfer fee	17
Income tax rate	18	0.25	0.25
Weighted average amount of
ordinary shares increased due to	19
warrant, share options, and
convertible bonds,etc.
	20=[1+(16-
Diluted earnings per share (Ⅰ )	18)×(1-	0.2764	-0.2561
17)]÷(12+1
	9)
	21=[3+(16
Diluted earnings per share (Ⅱ)	－18)×(1-	-0.2985	-0.3425
17)]÷(13+1
	9)

15.Dividends

Final dividends for the year-ended 31 December 2018 totaling RMB0 (corresponding period of last year: RMB0) were declared and paid during the six months ended 30 June 2019.

The Company will not distribute the interim dividends for the six month period ended 30 June 2019 (corresponding period of last year: Nil).

16.Depreciation and amortisation

	Current period	Corresponding period of last
	year
Depreciation of investment	314,356.08	314,356.08
properties
Depreciation of fixed assets	363,588,104.88	393,699,755.60
Amortisation of intangible	31,133,922.41	31,550,265.83
assets
Amortisation of long-term	7,361,072.30	1,845,410.10
prepaid expenses
Depreciation of right-of-use	26,287,149.55
assets
Total	428,684,605.22	427,409,787.61

17.Gains (or losses) on disposal of investments or properties

Gains (or losses) on disposal of investments during the current period were RMB0 (corresponding period of last year: RMB188,161.90), and investment income on cancellation of Longxue Properties, a subsidiary of the Company, was RMB0

73

(corresponding period of last year: RMB-42,655.82).

Gains on disposal of properties during the current period were RMB0 (corresponding period of last year: RMB0)

IV. SEGMENT INFORMATION

1.Basis for determination of reportable segments and accounting policies

According to the Group's internal organizational structure, management requirements, and internal reporting system, the segments of the operation can be divided into 4 categories based on the different types of main products. The management of the Group evaluates operating outcomes of these segments periodically in order to make decisions concerning resource distributions and operating result assessments. The Group is currently organized into shipbuilding, steel structure engineering, ship repair and related business and others.

Segment reporting information is disclosed according to accounting policies and measurement basis used in reports presented by each segment to the management. These accounting policies and measurement basis are consistent with those adopted in drafting financial statements.

2.Financial information of reportable segments during the period

(1) Profit before tax, assets and liabilities for segments by product or business

74

Current period

Item	Shipbuilding and	Steel structure	ship repair and	Other segments	Inter-segment	Total
related business	engineering	related business	elimination
Operating income	8,163,215,956.79	438,843,173.74	281,878,559.73	742,751,349.95	-1,810,603,720.53	7,816,085,319.68
Including:	6,968,745,653.37	320,013,669.12	279,054,865.73	248,271,131.46	-	7,816,085,319.68
Revenue from
external
transactions
Revenue from	1,194,470,303.42	118,829,504.62	2,823,694.00	494,480,218.49	-1,810,603,720.53
intra- segment
transactions
Operating costs	8,143,237,454.33	413,911,766.76	243,599,568.60	719,951,004.87	-1,893,838,993.75	7,626,860,800.81
Charges during the	527,118,126.73	42,485,743.23	97,203,992.58	30,341,273.90	-1,840,323.86	695,308,812.58
period
Segment total	762,844,365.46	-15,955,374.31	-57,906,889.17	10,337,143.29	4,290,610.52	703,609,855.79
profit
Total assets	47,611,012,116.40	1,388,714,530.54	2,417,802,622.36	12,653,779,245.18	-16,514,772,789.35	47,556,535,725.13
Total liabilities	32,354,058,427.77	1,112,569,618.23	2,471,657,616.79	2,948,791,231.06	-6,473,957,967.23	32,413,118,926.62
Supplementary			-
information
Capital	1,284,222,110.56	2,702,028.55	12,143,108.54	2,758,734.95	-300,000,000.00	1,001,825,982.60
expenditure
Impairment loss	77,708,026.97	558,718.94	-199,251.13	30,761.71	-28,084.55	78,070,171.94
recognized during
current period
Depreciation and	347,843,378.03	3,474,563.59	36,222,072.15	42,345,016.48	-1,200,425.03	428,684,605.22
amortisation
expense

75

Corresponding period of last year

Item	Shipbuilding and	Steel structure	ship repair and	Other segments	Inter-segment	Total
related business	engineering	related business	elimination
Operating income	7,482,255,001.47	479,097,588.64	253,833,180.33	453,837,935.57	-195,254,906.27	8,473,768,799.74
Including:	7,292,183,938.79	479,013,537.38	253,833,180.33	448,738,143.24		8,473,768,799.74
Revenue from
external
transactions
Revenue from	190,071,062.68	84,051.26		5,099,792.33	-195,254,906.27
intra- segment
transactions
Operating costs	7,476,190,588.38	453,453,141.90	243,389,105.75	398,393,203.89	-188,128,545.16	8,383,297,494.76
Charges during the	562,582,681.78	20,872,243.73	99,866,675.39	38,206,235.26	12,542,673.98	734,070,510.14
period
Segment total	-402,599,545.64	5,717,290.10	-89,369,084.21	5,804,967.47	20,673,052.15	-459,773,320.13
profit
Total assets	48,871,338,220.68	1,164,236,972.75	2,379,417,256.47	10,249,175,834.91	-15,188,824,198.44	47,475,344,086.37
Total liabilities	34,225,463,809.53	874,376,973.12	2,371,477,071.83	1,090,599,358.83	-5,442,983,675.01	33,118,933,538.30
Supplementary
information
Capital	410,814,091.88	10,450,008.43	34,317,369.22	50,584,519.18	-100,000,000.00	406,165,988.71
expenditure
Impairment loss	91,466,143.03	-484,217.97	-1,267,986.37	153,326.68		89,867,265.37
recognized during
current period
Depreciation and	350,744,067.39	3,030,163.40	36,857,081.12	36,483,404.17	295,071.53	427,409,787.61
amortisation
expense

76

(2) Revenue from external transactions by origin of revenue

Revenue from external transactions	Current period	Corresponding period of last
year
Revenue from external transactions derived	7,742,032,051.13	8,451,343,321.91
from China
Revenue from external transactions derived	74,053,268.55	22,425,477.83
from other countries
Total	7,816,085,319.68	8,473,768,799.74

(3) Non-current assets by location of assets

Total non-current assets	Ending balance	Beginning balance
Non-current assets within China	14,536,622,713.50	17,072,158,586.14
Non-current assets in other countries	641,732,046.48	727,749,130.41
Total	15,178,354,759.98	17,799,907,716.55

Note: Total non-current assets exclude financial assets and total deferred tax assets.

77

§9 DOCUMENTS AVAILABLE FOR INSPECTION

The 2019 interim report will be available at the following addresses and websites:

HKEXnews website of the Stock	www.hkexnews.hk
Exchange of Hong Kong Limited
Website of the Shanghai Stock	www.sse.com.cn
Exchange
Place for inspection of the interim	Office of the Board of Directors, Floor 15, Ship Building,
report	No.137 Gexin Road, Haizhu District, Guangzhou

By order of the Board

CSSC Offshore & Marine Engineering (Group) Company Limited

Han Guangde

Chairman

Guangzhou, 29 August 2019

As at the date of this announcement, the Board comprises eleven Directors, namely executive Directors Mr. Han Guangde, Mr. Chen Zhongqian, Mr. Chen Liping, Mr. Sheng Jigang, Mr. Xiang Huiming and Mr. Chen Ji, non-executive Director Mr. Shi Jun and independent non-executive Directors Mr. Wang Yichu, Mr. Min Weiguo, Mr. Liu Renhuai and Mr. Yu Shiyou.

78