Õñ»ªÖع¤£º2015ÄêÄê¶È±¨¸æ£¨Ó¢Îİ棩

2015 Annual Report

Stock code: 600320 900947 The company referred to: Shanghai Zhenhua

Heavy,Zhenhua B share

Shanghai Zhenhua Heavy Industries Co.,

Ltd. Annual Report 2015

Important Notice

I.Hereunder, the Board of Directors, the Supervisory Board, directors, supervisors and

senior executives of the Company guarantee that the Annual Report is of authenticity,

accuracy and integrity; it contains no major omission, false record or serious misleading

statement; they will be responsible both individually and jointly for any of above

guaranty.

II. All the directors of the company attend meeting of the board of directors.

III. PrincewaterhouseCoopers Zhong Tian LLP.(Special general partnership)issued

standard unqualified audit report for the Company.

IV. The Company¡äs responsible person Song Hailiang, accounting responsible person

Huang Qiangfeng and accounting responsible person £¨accounting chief£©Wang Jue

hereby declare that the financial reports in this Annual Report are true, accurate and

complete.

V. Report period profit distribution preplan or preplan for capital reserve transfer to

increase capital stock as audited by the board: not to distribute profit; not to convert

reserve into capital stock.

VI. Whether non-operational fund occupancy by the controller and its related parties

exists with the Company:

No.

VII. Whether there is external guaranty provision violating regulation or procedural

decision-making within the Company:

No.

VIII. Significant risk remind

The Company has described the risks in the annual report in details and the investors

shall pay attention to that. Refer to the related chapters in the directors¡¯ report for the

description of the risk of the Company.

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2015 Annual Report

Contents

Chapter ¢ñ Definition ....................................................................................................................3

Chapter II Company Profiles and Key Financial Indicators..........................................................3

Chapter III Company Business Overview.....................................................................................7

Chapter IV Management Discussion and Analysis ......................................................................6

Chapter ¢õ Important Events ......................................................................................................16

Chpater ¢ö Common Equity Movement and Shareholder¡äs Profile.........................................25

Chapter ¢÷ Preferred stock related information ........................................................................28

Chapter VIII Directors, Supervisors, Senior Executives and Employees¡­¡­¡­¡­¡­¡­¡­¡­¡­...29

Chapter IX Company Governance¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­...¡­37

Chapter X Company Bond Information¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­...38

Chapter XI Financial Statements¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­..39

Chapter XII Backup Documents Contents¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­¡­182

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2015 Annual Report

Chapter ¢ñ Definition

I. Definition

Terms used in this report means the following except for otherwise specified:

Definition of frequently used terms

The Company Refers to Shanghai Zhenhua Heavy Industries

Co., Ltd.

CCCC, controlling shareholder Refers to China Communications Co., Ltd.

Effective controller Refers to China Communications Construction

Group

Chapter II Company Profiles and Key Financial Indicator

1. Company information

Statutory company name in Chinese ÉϺ£Õñ»ªÖع¤(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾

Statutory Chinese Abbreviation of the Õñ»ªÖع¤

Company

English name of the Company SHANGHAI ZHENHUA HEAVY INDUSTRIES

CO.,LTD.

English Abbreviation of the Company ZPMC

Legal representative Song Hailiang

2. Contact information

Board secretary Securities Affair Agent

Name Wang Jue Li Min

Address 3261 Dongfang Road 3261 Dongfang Road

Shanghai Shanghai

Tel. 021-50390727 021-50390727

Fax 021-31193316 021-31193316

Email IR@zpmc.com IR@zpmc.com

3. Basic information of the Company

Registered address 3470, South Pudong Road, Shanghai

Post code 200125

Office address 3261 Dongfang Road, Shanghai

Post code 200125

Website http://www.zpmc.com

Email zpmc@public.sta.net.cn

4. Information disclosure and reference

Designated media for information Shanghai Securities News, Hong Kong Wen Wei

Po disclosure

Website designated by China Security www.sse.com.cn

Regulatory Commission for disclosure of

3

2015 Annual Report

annual report

Annual report available at of the Company Securities and Law Affairs Office

5. Stock Profiles of the Company

Stock Profiles of the Company

Short form of Stock exchange Short form of Share code Stock before

Stock type listed at stock change

A-share Shanghai Stock Zhenhua Heavy 600320 ZPMC Industries

Exchange

B-share Shanghai Stock Zhenhua B-share 900947 -

Exchange

6. Other

Title PrincewaterhouseCoopers Zhong Tian (Special

General Partnership)CPAs Co., Ltd

CPA ¡ä s employed by

Office address 11th Floor, No.202 Hubin Road, Shanghai

the Company(Domestic)

CPAs to sign Zhao Bo

Jin Wen

7. Major Accounting Data and Financial Indicators in Last Three Years

(1) Major accounting data

2014 Growt 2013

h over

Major same

accounting 2015 After Before period After Before

data adjustment adjustment prior adjustment adjustment

year

(%)

Operating 23,272,394,677 25,477,011,081 25,069,421,487 -8.65 23,453,747,413 23,201,555,800

Income

Net Profit 212,411,967 202,223,273 199,386,986 5.04 145,905,039 139,836,320

attributable to

shareholders

of the

Company

Net Profit after -214,409,604 -79,581,135 -79,581,135 Not a -1,009,219,217 -1,009,219,217

deducting pplica

non-recurring ble

gains/losses

Net cash -1,831,961,473 -863,628,925 -873,383,052 Not 1,064,167,754 965,483,749

generated applic

from able

operating

activities

Growt

End of 2014 End of 2013

h over

same

End of 2015 period

After Before prior After Before

adjustment adjustment adjustment adjustment

year£¨

%£©

Net asset 14,869,572,883 14,990,495,511 14,780,603,810 -0.81 14,717,660,245 14,510,604,831

attributable to

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2015 Annual Report

shareholders

of the

Company

Total assets 59,020,752,259 58,024,869,184 56,145,227,254 1.72 50,946,979,065 49,154,736,687

Weighted 4,390,294,584 4,390,294,584 4,390,294,584 0 4,390,294,584 4,390,294,584

Average

Shareholders¡¯

Equtiy(Unit:

Share)

(2) Major Financial Indicators

2014 Growth over 2013

same period

Major financial index 2015

After Before end prior year After Before

adjustment adjustment (%) adjustment adjustment

Basic EPS (Yuan/share) 0.05 0.05 0.05 0.00 0.03 0.03

Diluted EPS (Yuan/share) 0.05 0.05 0.05 0.00 0.03 0.03

Basic EPS after deducting -0.05 -0.02 -0.02 Not applicabl -0.23 -0.23

non-recurring e

gains/losses(Yuan/share)

ROE£¨%£© 1.41 1.36 1.36 Increase 0.98 0.97

0.05%

Weighted average net -1.45 -0.54 -0.54 Increase -7.03 -7.03

assets earnings ratio after 0.91%

deducting non-recurring

gains/losses£¨%£©

Description of the main accounting data and financial indicators for the first three years at the

end of the reporting period

Note: this year, the company acquired 32.51% of the equity of CCCC Tianhe Co., Ltd, and obtained its control

rights through a concerted action agreement. Since China Communication Construction Co., Ltd is the

controlling shareholder of the Company and CCCC Tianhe Co., Ltd before the acquisition, so this is the

acquisition under the same control. The assets and liabilities of CCCC Tianhe acquired are accounted as the

historical cost and included in the consolidated financial statements, namely regarded CCCC Tianhe as a part

of the Company and the presented in the earliest period. Accordingly, the company has relisted the beginning

balance of the corresponding data.

8. Accounting data difference in domestic and international accounting standards

Difference of net profit and net assets attributable to shareholders of listed company in the

financial report disclosed according to international accounting standards and domestic

accounting standards

¡õApplicable¡ÌNot applicable

Net profit and net assets attributable to shareholders of listed company disclosed in

accordance with the foreign and domestic accounting standards

¡õApplicable¡ÌNot applicable

9. Quarterly Major Financial Indicator in 2015

Q1 Q2 Q3 Q4

£¨Jan-Mar£© £¨Apr-June£© £¨July-Sept£© £¨Oct-Dec£©

Operating Income 4,305,540,016 6,018,401,385 5,854,664,693 7,093,788,583

Net profit attributable

to shareholders of 45,147,040 64,846,770 54,522,285 47,895,872

the Company

Net profit attributable

to shareholders of

listed company after -227,336,493 -67,514,433 67,598,370 12,842,952

deducting

non-recurring gains

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2015 Annual Report

and losses

Net cash generated

from operating -1,411,408,163 -342,824,025 -254,369,311 176,640,026

activities

Description of difference between quarterly data and disclosed periodic data

¡õApplicable¡ÌNot applicable

10 Items and amount of non-recurring gains/losses

¡ÌApplicable¡õNot applicable

Unit:Yuan Currency:RMB

Items of non-recurring gains/losses 2015 2014 2013

Gains and losses on disposal of 9,338,797 13,948,136 241,193,949

non-current assets

Government subsidy on current profit 22,847,200 20,316,889 47,878,876

and loss statement except for those

closely related to the Company¡äs

operation, enjoyed by certain state

standard or certain quota.

Current net profit and loss of the 55,523,666 15,289,013 20,588,282

subsidiary under the same control of

the company from the beginning to

the consolidated day

Gains/losses on fair value movement 445,766,951 286,253,779 326,109,601

of tradable financial assets, tradable

financial liabilities held except for valid

hedging business related with

company¡¯s normal operation, and

investment income acquired from

disposal of tradable financial assets,

tradable financial liabilities and

financial assets available for sale.

Investment income acquired from 0 0 749,942,782

disposal of subsidiaries

Non-operation revenue/expense apart 15,490,536 15,164,034 3,993,654

from above

Minor shareholder¡äs equity impact -31,568,397 -9,922,714 -12,668,755

Income tax impact -90,577,182 -59,244,729 -221,914,133

Total 426,821,571 281,804,408 1,155,124,256

11. Items calculated by fair value

Unit:Yuan Currency:RMB

Beginning Balance Closing Current Impact on

Item name

£¨reclassified£© Balance movement Current Profit

Forward foreign 25,735,001 676,082 -25,058,919 -25,058,919

exchange

contract-Fair Value

appraisal income

Forward foreign -28,752,000 -24,918,115 3,833,885 3,833,885

exchange

contract-Fair Value

appraisal income

loss

Equity Instrument 159,932,631 337,650,826 177,718,195 34,083,478

available for

sale-Jiangxi Huawu

Equity Instrument 273,247,822 298,821,560 25,573,738 0

available for

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2015 Annual Report

sale-Qingdao port

Equity Instrument 0 530,976,235 530,976,235 0

available for

sale-CRSC

Equity Instrument 200,000 1,734,399 1,534,399 0

available for

sale-Shenwan

Hongyuan

Equity Instrument 5,686,257,756 46,000,000 -5,640,257,756 393,033,507

available for sale-

financial products

Total 6,116,621,210 1,190,940,987 -4,925,680,223 405,891,951

Chapter III Business Profile

1. The Company engaged in the main business, operation model and industry profile of the

Company during the reporting period

The company is a well-known enterprise of heavy equipment manufacturing industry, and

state-owned listed company holding A, B shares, headquartered in Shanghai. There are

eight production bases in Shanghai, Nantong, Jiangyin, Zhangjiagang and other cities.

Since 1998, it has been in the first place in global container crane order ranking. To seek for

further development, the company actively explored the large steel structure and offshore

heavy equipment market while consolidated the port machinery market. The company

business scope includes: design, construction, installation and contracting of large port

loading system and equipment, offshore heavy equipment, engineering machinery,

engineering ships and large metal structural parts and their components and spare parts,

ship repair; self-produced crane rental business, sales of the company products;

international shipment by available machine special transportation ships, steel structure

engineering professional contracting (operate the business if the related license is

required).

2. Analysis on the core competence during the reporting period

There is no significant change in core competitiveness of the Company during the

reporting period.

Chapter IV Discussion and Analysis of the Board of Directors

1. Discussion and analysis of the Board

During the reporting period, facing the complicated situation both at home and abroad, the

Company Board of Director and the management led all the employees to deeply implement

¡°4321¡±and ¡°1521¡±strategy and fully apply the 24 letters principle: ¡°firm foudations, always

innovate, adjust structure, change mode, integrate resources, reinforce management, develop

culture and increase quality¡±.With focus on the enhancement of operation quality and core

7

2015 Annual Report

competitiveness, the Company aim to build a world-class company with international

competition strength base on the assurance of the company¡äs stable and healthy continuous

development in new state, reform and development.

During the reporting period, the market structure was effectively adjusted, and the reform

as deepened, the layout was gradually optimized and the ability to allocate the global resources

was improved. Various business sectors achieved remarkable results while the profit increased

steadily. The company took the outstanding advantages in the port machinery market, leading

the trend of building automation ports and continued to maintain the absolute leading position in

the global market. The products were sold in 90 countries and regions in the world; severely

affected by the falling international crude oil price, the global marine industry developed slowly

and the new contract amounts signed decreased on yearly basis in the market. However, the

high-end marine vessels had many highlights, undertaking a number of projects with strategic

significance. The big heavy special steel structure projects had more expansion and layout.

There were highlights in the system integration and general contracting market. Our investment

portfolio benefit from the early attention on profitable project ,the shipping, installation and

offshore wind power market have a high level of potential and the electrical market undergoing

a steady development . The layout of the integrated services market was improved further.

2. Operation Perfomance during reporting period

In period of report, the Company realized operation revenue 23.272 billion RMB,

decreased 8.65%; realized net profits 212 million RMB which belongs to parent company,

increased by 5.04%.

(1) Major business analysis

P&L and Cash Flow Statement related item movement analysis

Unit: Yuan Currency: RMB

Item Report Year Prior Year Growth £¨%£©

Operating Income 23,272,394,677 25,477,011,081 -8.65

Operating Cost 19,717,314,855 22,028,685,642 -10.49

Selling expense 79,388,743 73,363,873 8.21

Management expense 1,551,222,564 1,507,675,531 2.89

Financial expenses 1,532,851,096 1,307,738,538 17.21

Net cash flow from operating -1,831,961,473 -863,628,925 112.12

activities

Net cash flow from investment 2,565,598,510 -1,856,470,193 -238.20

activities

Net cash flow from financing -318,811,177 1,144,491,991 -127.86

activities

R&D expenses 717,412,492 780,894,035 -8.13

Operation taxes and surcharges 24,550,179 136,632,500 -82.03

Changes in fair value gains and -21,225,034 -123,542,084 -82.82

losses - net

Gain on investment 498,236,958 370,922,986 34.32

Operating profit 206,687,965 121,854,057 69.62

Total profit 271,735,564 177,791,974 52.84

Income tax expense 77,529,876 21,205,926 265.60

Net profit achieved before the 42,357,907 8,537,647 396.13

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2015 Annual Report

merging by the consolidated

under the same control

Minority interest -18,206,279 -45,637,225 -60.11

Net amount after tax of other -106,570,702 70,602,113 -250.95

comprehensive income

Total comprehensive income 87,634,986 227,188,161 -61.43

Analysis:

1 ¡¢ The operation revenues and costs are decreased because NanjingNing High-tech

¡°construction-transfer¡± project was completed at the end of last year and the amount of orders

on offshore heavy equipment are decreased.

2¡¢The sales expense is increased due to the expansion on global market.

3¡¢The management expenses are increased because the tax and the agency fee are increased

this year.

4¡¢The financial expenses are increased because of the exchange loss caused by depreciation

of the RMB against the USD.

5¡¢The cash flow net amount in operation changes because the raw materials purchasing

expenses and payment of engineering expense are increased.

6¡¢The cash flow net amount in investment changes because bank financial product purchased

by the company becomes due and the profit is increased.

7¡¢The cash flow net amount in financing changes because the repayment of bank loan is

increased this year.

8¡¢ The R&D expenses are decreased because the R&D projects are decreased this year.

9. The operation taxes and surcharges the R&D projects are dNanjingNing High-tech

¡°construction-transfer¡± project was completed.

10. The fair value gains and losses ¨C net amount is increased because the forward foreign

exchange contracts are overdue.

11. The gain on investment is increased because the bank financial product purchase by the

company becomes due and the profit is increased.

12. The operating profitt is increased because the bank financial product purchase by the co

13. The total profit is increased because the gross profit of the product is increased.

14. The income tax expense is increased because the total profit this year is increased.

15. The net profit achieved before the merging by the consolidated day under the same control

is increased because the net profit of the acquisition of CCCC Tianhe before the consolidated

day is increased.

16. The minority interest changes because the total net profit of the non-wholly owned

subsidiaries of the Company is increased.

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2015 Annual Report

17. The net amount after tax of other comprehensive income is decreased because the bank

financial product purchase by the company becomes due and turned into the investment gain.

18. The total comprehensive income is decreased because the bank financial product purchase

by the company becomes due and turned into the investment gain.

1 Revenue and cost analysis

(1) Major business by industry, product and region

Major business by products

Opera Opera

tion ting

reven cost

Gros

ue increa Gross margin

Operation s

By product Operation cost increa se increase over prior

revenue margi

n

se over year £¨%£©

over prior

£¨%£© prior year

year £¨%£©

£¨%£©

Container cranes 14,994,515,929 12,039,998,425 19.70 21.96 17.21 Increased by 3.24

percentage points

Heavy equipment 3,985,411,881 3,950,151,042 0.88 -20.04 -9.97 Decreased by 11.09

percentage points

Bulk-cargo 2,013,370,826 1,862,388,384 7.50 -44.03 -45.48 Increased by 2.46

machinery parts percentage points

Construction- 514,064,790 447,701,799 12.91 -82.18 -81.66 Decreased by 2.49

transfer project percentage points

Steel structure and 826,175,120 796,465,278 3.60 -21.98 -21.86 Decreased by 0.15

related income percentage points

Vessel shipping 680,776,778 376,525,357 44.69 45.70 15.16 Increased by 14.67

and others percentage points

Total 23,014,315,324 19,473,230,285 15.39 -8.99 -10.93 Increased by 1.84

percentage points

Major business by region

Opera Opera

tion ting

reven cost

ue increa Gross margin

Operation Gross

By region Operation cost increa se increase over prior

revenue margi

se over year £¨%£©

n£¨%£© over prior

prior year

year £¨%£©

£¨%£©

Mainland, China 8,270,356,698 6,727,867,350 18.65 -14.44 -21.26 Increased by 7.05

percentage points

Asia (Excluding 5,854,518,426 4,778,826,831 18.37 -20.86 -23.75 Increased by 3.09

Mainland, China) percentage points

America 4,555,300,460 4,118,589,876 9.59 33.45 53.41 Decreased by 11.76

percentage points

Europe 2,264,289,477 2,203,795,267 2.67 -5.62 -7.20 Increased by 1.65

percentage points

10

2015 Annual Report

Mainland, China 1,072,367,341 858,011,937 19.99 -24.78 -30.92 Increased by 7.11

(export) percentage points

Africa 835,520,769 655,801,848 21.51 6.49 11.63 Decreased by 3.61

percentage points

Oceania 161,962,153 130,337,176 19.53 -19.82 -19.62 Decreased by 0.21

percentage points

Total 23,014,315,324 19,473,230,285 15.39 -8.99 -10.93 Increased by 1.84

percentage points

Description of main business by industry, product, and region

Note: the amounts in the ¡°Mainland, China (export)¡± in 2014 and 2015 mean the main operation income and

cost exported to the overseas subsidiaries or affiliates, and then sold to the domestic customers.

(2) Production volume and sales volume analysis

The Company mainly manufactures and sells the large port equipment, heavy equipment

and steel structure, the "Accounting Standards - Construction Contract" is applicable. The

income shall be confirmed according to the completion percentage, so this table is not

applicable.

(3) Cost analysis statement

Unit: Yuan

Product category

Report

Total period

Report cost in amount

period the compare

Cost Report period Amount in the

Product rate in same d with

composition amount same period last

total period same

year

cost(%) last period

year last r

(%) year

ratio (%)

Raw 12,039,998,425 61.83 10,271,871,264 46.98 17.21

Contain

material,

er

labor ,produc

cranes

tion cost

Raw 3,950,151,042 20.29 4,387,726,757 20.07 -9.97

Offshore

material,

heavy

labor

equipme

production

nt

cost

Raw 1,862,388,384 9.56 3,415,989,051 15.62 -45.48

Bulk-car

material,

go

labor

machine

production

ry parts

cost

Nanjing 447,701,799 2.30 2,441,043,673 11.17 -81.66

Subcontracti

Ninggao

ng expenses,

BT

raw materials

project

Raw 796,465,278 4.09 1,019,229,739 4.66 -21.86

Steel material,

structure labor,

s production

cost

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2015 Annual Report

Vessel Labor, fuel 376,525,357 1.93 326,965,634 1.50 15.16

shipping consumption,

and depreciation

others etc.

Total - 19,473,230,285 100.00 21,862,826,118 100.00 -10.93

Other description of cost analysis

2 R&D expenses

R&D expenses breakdown

Unit: RMB

R&D into cost expenses 717,412,492

R&D into capital expenses 0

R&D expenses total 717,412,492

Total R&D expenses ratio in operation 3.08

revenue £¨%£©

R&D employees quantity 1,650

R&D employees ratio in the total 21.79

employees (%)

R&D expenses ratio in capital (%) 0

(1) Deliberation

During the reporting period, the company technology level was improved completely. Lots

of creative technologies were adopted in port machinery products; The port automation

technology was recognized and trusted by the market. The national science and technology

support project with the topic of " key technology development and application of high-power

port crane special inverter " was approved formally by the national Ministry of Science and

Technology and was successfully selected as one of"National Torch Plan Key High-tech

Enterprises" organized by Ministry of Science and Technology. The " key technology research

and application of large self-elevating platform lifting system " won the first prize of Shanghai

Scientific and Technological Progress.

3 Cash flow

The net cash flow from operating activities is 1.832 billion Yuan, mainly due to increasing order

and payment for the purchase of raw materials and engineering costs. The net cash flows from

the investment activities is 2.566 billion Yuan£¬mainly due to increasing payment of the bank

financial product due. The net cash flow from the financing activities is -319 million Yuan,

mainly due to the increasing repayment of bank loan.

(2) Description of non-major business causing significant change to profit

¡õApplicable¡ÌNot applicable

(III) Assets and liabilities analysis

Assets/liabilities statements

Unit: Yuan

Closing Report Closing Prior Report

Item balance at period end balance at prior period period end

report period over total period end end over amount

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2015 Annual Report

end assets total over prior

£¨%£© assets period end

£¨%£© amount

change

ratio £¨%£©

At fair 676,082 0.001 25,735,001 0.04 -97.37

value through

profit or loss of

financial assets

Interest 0 0 51,859,503 0.09 -100

receivable

Completed but 11,217,591,85 19.01 8,052,408,424 13.88 39.31

not settled 6

payment

Non-current 2,625,135,212 4.45 2,302,500 0.004 113,912.39

assets due within

one year

Other current 553,205,272 0.94 5,976,300,841 10.3 -90.74

assets

Available-for-sale 1,212,177,180 2.05 455,820,453 0.79 165.93

financial assets

Long-term 3,558,501,537 6.03 5,339,170,148 9.2 -33.35

receivables

Long-term equity 1,597,134,817 2.71 925,350,083 1.59 72.6

investment

Advance 423,603,129 0.72 318,636,126 0.55 32.94

payment

Interest payable 289,590,733 0.49 602,520,456 1.04 -51.94

Dividend payable 32,237,912 0.05 854,881 0.001 3,671.04

Other payable 1,604,523,386 2.72 451,394,650 0.78 255.46

Non-current 6,837,115,692 11.58 2,636,660,000 4.54 159.31

liabilities due

within one year

Long term loans 1,761,904,000 2.99 2,550,090,000 4.39 -30.91

Bond payable 0 0 3,799,615,401 6.55 -100

Total non-current 3,177,376,053 5.38 6,965,094,683 12 -54.38

liabilities

Other 207,660,237 0.35 319,540,042 0.55 -35.01

comprehensive

income

Minority equity 917,076,421 1.55 618,105,524 1.07 48.37

Analysis:

1. The financial assets counting at fair value and its change contained in current financial loss

decreased mainly because the long-term foreign exchange contract at fair value is reduced this

year.

2. The interest receivable is decreased mainly because the time deposit is due this year.

3. Completed but not settled payment is increased mainly because the construction progress

is increased of the new projects this year.

13

2015 Annual Report

4. The non-current assets due within one year is increased mainly because the receivable of the

long-term receivables of the NanjingNing High-tech ¡°construction-transfer¡± project is due

5. Other current assets are decreased mainly because the financing products purchased by the

Company are due this year.

6. The financial assets for sale are increased mainly because the Company has purchased

equity tools for sale this year.

7. The long-term receivables are decreased mainly because the receivable from the Nanjing

¡°construct-transfer¡± project is due and listed in the non-current assets due within one year.

8. The long-term equity investment is increased mainly because the Company had more

investment in overseas corporate and gains from associates and joint ventures adjusted on

equity basis.

9. The advance payment is increased mainly because the spare parts sales and the

advancement contractual payment are increased this year.

10. The interest payable is decreased mainly because the Company paid the loan interest this

year.

11. The dividend payable is increased because the dividend of CCCC Tianhe Co., Ltd under the

same control is increased this year.

12. The other payables are increased because the Company receives the more capital from

affiliated party this year.

13. Non-current liabilities due within one year is increased because the long-term loans and

bond that would be due within one year are reclassified into non-current liabilities due within one

year.

14. The long-term loan is decreased because the long-term loan of the Company is due within

one year and reclassified into non-current liabilities due within one year.

15. The dividend payable decreases because the dividend payable is due within one year and

reclassified into non-current liabilities due within one year.

16. The other comprehensive income is decreased because the financing products purchased

by the Company are due this year and turned into investment gain.

17. The minority equity is increased because the capital investment of the minority shareholders

is increased this year.

(4)Industry Competitiveness analysis

In 2015, the Company signed the new contract of port machinery with amount of 3.29

billion USD, increased by 19.46% on yearly basis. The port machinery products continue to

remain the leading position in the world. The Company signed new contracts of marine

engineering products and steel structure with amount of 827 million USD, decreased by 55% on

yearly basis. The products were sold in 90 countries and regions in the world.

14

2015 Annual Report

The domestic economic grew slowly in 2015 while the international market is readjusted,

but the port machinery market made a breakthrough in the stable situation, mainly relying on the

port automation projects in Qingdao and Yangshan and orders from several important

customers , such as PSA, DPW and Maersk.

The recent years witnessed the weak trade growth, which has direct impact on the

investment of the port. Looking into 2016, the economy of the developed countries will continue

to rise, with slow recovery. The emerging markets and the economic entities in developing will

continue to decline, with expanded scope. Although speed of the economy in China is in the

"shift period" and " adjustment period¡±, fundamentals of growing China's economic development

has not changed, with the basic characteristics of good economic toughness, high potential and

large room for maneuver remained. The good support and conditions for a sustained economic

growth does not change, and the economic structure adjustment and optimization remains.

The general international and domestic economic situation didn¡¯t provide good support to

the port investment, and the domestic ports capacity tends to saturation, with excessive local

capacity. Meanwhile, the industry situation is impacted by the decreasing price of ore and oil,

the shipping industry has excessive capacity while the trade in many ports keeps declining, so

the purchase demand of port machinery is restrained. It is predicted that the general domestic

orders may be less than that of 2015.

The decreasing oil price caused pressure on the entire marine industry chain since

2015. In 2016, the company will face greater challenges in the marine industry market

exploration. Looking into the future, the upstream market capacity will be decreased

significantly with the dropping oil prices. The reduction of total investment in oil and gas

development has led to declining situation in exploration, drilling, production, oil services and

other market segments. Each segment will involve the changes of the orders of the equipment.

In 2015, the order and the amount of all kinds of marine equipment are decreased respectively

by nearly 65% and 70%. Among them, the performance of the drilling platform, OSV (ocean

support vessel), OCV (ocean working vessel) is the most declining. The shrinking of the drilling

market made the owner of the ship give up the right to increase the order and to withdraw most

of the investment plan in order to cope with the declining market. The oil production platform

EPCI and a number of high-cost oil field development projects are delayed, and the total

contract is decreased dramatically. The oil service market has suspended a large number of

PSV, OSV, and the market for piping vessel is also affected. The fleet utilization rate is declined,

with lower rent and decreasing the value of marine ships, which will confuse the owner. The

marine market declining may continue to 2017.

As for the steel structure, although the large investment projects in Europe and other

developed countries slowed down, the domestic market provided a significant opportunity for

the large heavy and special steel structure since the government investment boosts the

economy, and "The Belt and Road" policy supports the neighboring countries economic

15

2015 Annual Report

development, to some extent which relieved the declining international market impact on steel

structure business.

(5) Investment analysis

1¡¢ External equity investment overall analysis

Unit: Yuan

Investment amount as of period end 2,809,311,997

Investment amount movement 1,428,141,461

Investment amount same period prior

1,381,170,536

year

Investment amount movement ratio (%) 103

Invested companies

Equity ratio in

Name of invested company Operational activities invested

company (%)

Engaged in port equipment sales and

Cranetech Global Sdn. Bhd. 49.99

maintenance service

China Communications Engaged in project construction of port,

24

Construction USA Inc. waterway, highway and bridge

Engaged in electric power industry,

high-tech industry, electric automobile

manufacturing industry, culture and

Hunan Fengri Power Electric Co.,

Ltd education industry, real estate, hotel and

tourism investment; R&D of new

materials, biotechnology; information

consulting service 6.38

CRSC Engaged in design and R&D of rail transit

1.4

control system

(6) Key subsidiaries and share-participating companies

Unit: Yuan Currency: RMB

Company Major product or service Registered Asset scale Net

capital profit/(loss)

Shanghai

Design, manufacturing and sales of

Zhenhua Port HKD 50,000,00

port machinery, engineering vessel, 5,177,464,174 102,570,480

Machinery (Hong 0

steel structure and other parts

Kong) Co., Ltd

Operation of sea transportation in

Shanghai coastal waters; ordinary transportation

Zhenhua in the middle and lower reaches of 120,000,000 1,846,650,412 39,085,629

Shipping Co., Ltd Yangtze River; transportation of port

machinery.

Installation of heavy port equipment,

engineering vessels, heavy metal

Nantong

structure and its parts; Gear box,

Zhenghua Heavy

container yard crane, super

Equipment 854,936,900 1,606,841,262 -49,903,649

heavy-duty bridge steel structure,

Manufacturing

heavy marine machinery equipment,

Co., Ltd

weaving, installation; lease of cranes;

contracting of steel structures etc.

Shanghai Construction and installation of

Zhenhua Heavy large-scale port equipment,

Industries Group engineering vessels, offshore heavy 300,000,000 2,513,721,844 24,325,654

(Nantong) equipment, machinery and

Transmitter Co., equipment, wind power generation

16

2015 Annual Report

Ltd equipment to use gear box; large

slewing bearings, transmission,

dynamic positioning, large anchor

cutter, offshore oil platform lifting

device and components, accessories

related weaving.

International land, air, maritime freight

forwarding, business, domestic freight

forwarding, undertaking large-scale

port equipment, marine equipment,

Shanghai

marine engineering materials sales,

Zhenhua Heavy

marine construction and engineering 100,000,000 311,936,423 -19,606,737

Industries Vessel

and ship leasing, engaged in import

Transport Co., Ltd

and export of goods and technologies,

transit trade, trade between

enterprises and trade agents within

the free trade zone

Design, construction, installation and

contracting large port handling

systems and equipment, engineering

vessels and large metal structure very

Shanghai parts, accessories; special heavy-duty

Zhenhua Heavy Steel, Bridge structure, the waving of

Industries Group heavy machinery and equipment by 300,000,000 258,324,501 -30,261,590

(Nantong) Co., sea, the installation; engineering ship,

Ltd lifting machinery leasing; engineering

consulting service, Steel structure

engineering contractor; cargo storage

and handling, loading and unloading

containers.

Zhenhua

USD 16,326,53

Pufeng Wind

Offshore wind turbine installation 1 7,102,170 -35,858,936

Energy (Hong

Kong) Co., Ltd

Integration design, R&D and

manufacturing of shield machine

system with diameter of over 6m;

integration design, R&D and

manufacturing of tunnel boring

machine (TBM) system with diameter

of over 5m; design, R&D and

manufacturing of marine machinery

and parts, cranes and parts, bridges

and high damping bracket for

buildings; sales of self-produced

CCCC Tianhe

products; wholesales and import &

Mechanical

export business of marine machinery

Equipment 681,627,100 2,252,666,444 42,357,907

and parts, cranes and parts, bridges

Manufacturing

and high damping bracket for

Co., Ltd

buildings (if the state-operated trade

commodities, design quota and

license management is not involved,

the related national rules will prevail);

installation, maintenance, leasing,

consulting, technical services for our

products. (foreign capital proportion is

less than 25%) (as for the items

requiring the approval, carry out the

business activities after obtaining the

approval from the authorities)

Shanghai Sales of port loading machine, bulk

Zhenhua Heavy cargo and container machine, port

Port Machinery engineering vessels (including floating

2,184,730,000 2,262,598,988 -70,908,737

General engineering crane), material handling

Equipment Co. mechanical products and parts, sales

Ltd. and technical services, installation

17

2015 Annual Report

and maintenance, technical

consultation of all types of machine

and equipment, key parts of the raw

materials and accessories equipment

Nanjing Ninggao Engaged in construction, investment

New Channel and management of Ninggao New 100,000,000 5,692,624,960 87,276,916

Construction Co., Channel project

Ltd

ZPMC Heavy

Industries Qidong Machinery manufacturing 303,000,000 1,769,639,742 -178,008,700

Marine Co., Ltd

Jiangsu Steel structure fabrication and

LongYuan installation, Foundation construction

Zhenhua Marine of offshore wind power facilities,

Engineering Co., equipment installation and

Ltd maintenance, submarine cable 260,000,000 694,048,120 17,309,696

system construction, maintenance,

marine construction, equipment

installation and maintenance, and

installation of equipment leasing

CCCC Properties Engaged in real estate development

Yixing Co., Ltd 900,000,000 1,049,106,720 54,873

CCCC Financial Financing lease

11,763,360,28

Leasing Co., Ltd. 3,600,000,000 167,967,410

4

China

Communications Construction of port, waterway,

Construction USA highway and bridge USD 50,000,000

Inc. 314,875,262 -8,535,897

III.Board of Director¡äs discussion and analysis of the Company¡äs future development

(¢ñ)Sector competition pattern and development trend

The world economic development is still in the deep adjustment period after the financial

crisis,and the recovery weak state will continue for a long time, with uncertainty. As the

beginning of ¡°13th Five-year Plan¡±, the macroscopic tone will increase with stable development

in 2016 in China.

Sector and market analysis

1. The rapid development trends in the field of transportation infrastructure provide good

chance to explore and develop the investment, shipping, general contracting, steel structure,

rail transportation equipment market.

2. The equipment manufacturing industry is in the restructuring and transformation

stage of the industry, and the market, product and industry chain distribution will change

dramatically. Although the manufacturing industry in China is facing many challenges, China

has the most improved industrial system and supporting capacity worldwide, this is the solid

foundation for China to transform to powerful player from a large player.

3. The energy field is in the industry adjustment period. The oil energy continues to

suppress the new energy represented by shale oil, wind power with the high yield and low price.

This adjustment will continue to the middle of ¡°13th Five-year Plan¡±, when the oil production and

prices will return to a rational balance.

18

2015 Annual Report

4. The economic cyclical fluctuation in the shipping filed is in a slow recovery stage, but

the foundation of recovery is not strong since it is affected by the international economic

balance and the local political factors.

5. The financial sector is still in the adjustment period after the international financial

crisis, and the strict control is the common state of the financial sector. There are many

variables between the dollar, euro, yen and Yuan.

(¢ò) The Company¡¯s development strategy

The Board systematically and scientifically studied the basic situation both at home and

abroad, analyzed domestic reform status, analyzed major competitions and self-owned

advantages and disadvantages. The Board clearly set the overall development concept, key

tasks and guarantee measures in 2016, focusing on innovating drive, transformation and

upgrade, improving the quality and efficiency, which ensures the stable development of

the Company in new common state, reform and development.

1¡¢To build the Company into an excellent international company, and build the industry

layout of vertical integration, horizontal correlation limited diversification and

internationalization;build No. 1 general contractor of port machinery manufacturing and

automated port system; world-famous and domestic leading marine engineering equipment

integrator; world-famous and Asia No. 1 marine engineering services and new energy

engineering general contractor; world-famous and domestic leading electrical system general

contractor; world-famous special overseas developer and industry well-known equipment

manufacturer and transit infrastructure investment operator.

2¡¢ The overall working concept for 2016: Establish innovative, coordinative, green,

open and sharing development concept, surrounding ¡°one center¡±, promote ¡°three

industrialization¡± target, emphasize the ¡°4 main lines¡±, establish ¡°6 driving forces¡± and improve

¡°6 capacities¡±, insist on ¡°24 word¡äs principle¡±, continue to act as a powerful player, lay

foundation to become the world excellent company with international competition.

3¡¢2016 major tasks:

(1)Continuously center on reform and innovation principle and focus on organization

construction and structure adjustment.

(2) Continuously center on overall cost efficiency and focus on basis management and

benefit increasing.

(3) Continuously center on solid foundation and improve the operation quality

£¨4£©Continuously strengthen team building and improve the human resources

management ability.

19

2015 Annual Report

(¢ó) Business planning

In 2016, the Company plans to achieve steady growth in revenue, and signs more new

orders, implements "insist on the innovation and development, the coordinated development,

the green development, open development and sharing development" ; insist on five

development concepts to accelerate the innovation, mergers and acquisitions, digitalization and

internationalization development r, focus on reform and innovation, deepen the organizational

structure adjustment, reduce the cost and improve the efficiency, consolidate the foundation,

enhance the operation quality, accelerate the integration of resources, increase the gross profit

margin, to ensure the stable development of the company in new common state, reform and

development.

(¢ô) Possible risks

Daily operating expenses and capital expenditure are mainly the Company¡¯s own funds, as well

as through a variety of means of financing; capital expenditure is mainly used for items such as

capital construction of the production base of the Company.

Market risk: the international economy is still in the declining state with limited growth,

the slow economic development may become the ¡°new ordinary state¡±in the domestic

market. The industry trend is impacted by the decreasing ore and oil prices. The

shipping capacity is excessive and the port machinery market increased a little. The

marine heavy industry is in the low position in the market. As for the offshore oil and gas

service, the large piece handing and movement transportation market decreases with

excessive capacity. The port machinery market is still in main position in scale and profit

contribution, but other markets are still being cultivated.

Solution: facing the market challenges at home and abroad, the Company will deepen the

reform, consolidate the basic management and enhance the risk resistance, focus on

¡°1.5.2.1¡±for optimal adjustment of market and business structure; to promote the four transition

from selling products to sell excellent products (Technology); from selling equipment to selling

system; from selling hardware to selling software (service); from the production mode,

management mode, the business model in Industry 2.0 change to new model, profit model

innovation in Industry 4.0, promote structure adjustment and resources integration, drive

structure adjustment and resource integration; drive enterprise sustainable development by

transformation and upgrade.

Financial risks: credit risk and exchange rate risk, increased volatility of the RMB

bidirectional fluctuation of exchange rate and large load capacity.

Solution: As for credit risk, by reducing raw material reserves, compression of infrastructure

spending, adjusting the company¡¯s debt structure through a variety of ways (such as

medium-term notes, short-term bonds), reducing financing costs, strengthening the collection of

accounts receivable, gradually reducing the amount of bank debt, reduce business risks.

20

2015 Annual Report

develop rational planning for forward rate look, control exchange rate risk, emphasis on

research on policies and strategies of foreign exchange risk management, pay close attention

to change in exchange rates, regularly complete analysis of exchange rate movements,

conduct strict implementation of financial derivatives related to the approval process, produce

good statistics on product current exchange rate, further reinforce the basic work of foreign

exchange management, and reduce the company¡¯s exchange rate risk. By arranging favorable

settlement terms in the contract (such as the signing of a contract with the RMB exchange rate

pegged, increase the prepayments proportion plus early settlement, etc.), or within the range

permitted by the country¡¯s financial foreign exchange policy, make use of hedging, foreign

exchange factoring and other appropriate financial instruments or means to control and lock the

exchange rate risk.

III. Explanation of the case and reasons that company does not disclose due to

rules not applicable or special reasons

¡õApplicable¡ÌNot applicable

Chapter ¢õ Substantial Events

¢ñ. Pre-plan for profit distribution or capital reserve transfer to increase capital stock

(¢ñ)Cash dividend policy formulation, implementation and adjustment

According to CSRC Notification on further implementation of issues concerning listed company

cash dividends sharing (Zhengjian Fa [2012]37), as proposed by the 10th meeting of the

Company¡¯s fifth session of Board held on August 21, 2012, amendment would be made to the

Articles of Association of the Company concerning profit distribution and cash dividends policy,

and as result dividends sharing standard and proportion are clear, related decision making

program and mechanism compete, with full maintenance of small shareholders¡¯ legitimate rights

and interests, giving them full excess to expressing their views and demands.

(¢ò) Profit distribution pre-plan or plan, capital reserve converted into share capital plan

or preplan of the Company for last three years (including report period)

Unit: Yuan Currency: RMB

Net profit

Shares

Bonus share Dividend for Cash attributable to

converted for

for every 10 every 10 shares dividend listed company

Year every 10

shares (Yuan)(before amount shareholders in

shares

(share) tax) (before tax) profit-sharing

(share)

year

2015 0 0 0 0 212,411,967

2014 0 0 0 0 202,223,273

2013 0 0 0 0 145,905,039

21

2015 Annual Report

(III) The profit in the report period and the profit that can be distributed by common

shareholders of parent company are positive, if the cash profit distribution plan of

common stock is not proposed, the company shall disclose the reasons, purpose

and use plan of the profit not distributed in details

¡ÌApplicable ¡õNot applicable

Reason for profit in the report period and the profit that can be

distributed by common shareholders of parent company are Purpose and use plan of

positive but the common stock cash profit distribution plan is not profits not distributed

proposed

Although the company made profit in 2015, the company was in For the daily operation of

the important period of adjustment of the business structure. The the company

bank liability with interest is still large, accounting for a higher

proportion of the total liabilities. In order to effectively reduce the

turnover of capital and operating risk, the profits: distribution plan

in 2015 is:, not distributed or capital reserve for capital stock

II. Commitment performance

¡õApplicable¡ÌNot applicable

III. Capital occupied situation and clearing arrears progress in the report period

¡õApplicable¡ÌNot applicable

IV. Notes of the board of directors for "non-standard audit report" of the accounting firm

(I) Note of the board of directors and the board of supervisors for "non-standard audit report" of

the accounting firm.

¡õApplicable¡ÌNot applicable

(II) Analysis of the reasons and impact of the board of directors on the changes of accounting

policies, accounting estimates and accounting methods

¡õApplicable¡ÌNot applicable

(III) Analysis of the reasons and impact of the board of directors on error correction in early

stage

¡õApplicable¡ÌNot applicable

V. Appointment and dismissal of accounting firm

Unit: Yuan Currency: RMB

Current appointment

Domestic accounting firm PricewaterhouseCoopers Zhong Tian CPAs

Co. Ltd.

(Special general partnership )

Domestic accounting firm payment 4,200,000

Domestic accounting firm audit period 22

Name Payment

Internal control audit PricewaterhouseCoopers Zhong Tian CPAs 500,000

accounting firm Co. Ltd.

(Special general partnership )

Appointment and dismissal of accounting firm

¡õApplicable¡ÌNot applicable

VI. Bankruptcy reorganization related matters

¡õApplicable¡ÌNot applicable

VII. Substantial lawsuits, arbitrations

¡ÌApplicable ¡õNot applicable

22

2015 Annual Report

(I) Lawsuits, arbitrations disclosed in the provisional announcement without subsequent

progress

Events overview Index

Substantial lawsuits about Flour Company Shanghai Stock Exchange website:

offshore wind power project www.sse.com.cn and Shanghai Securities

News and Hong Kong Wen Wei Po on Sep.

30, 2014.

(II) Lawsuits, arbitrations not disclosed in the provisional announcement with

subsequent progress

Unit: Yuan Currency: RMB

In the report period

Suit

Suit

Pros Type (arbitrati Suit Suit

Party Suit (arbitr

ecut of on) (arbit (arbitrati

with Suit (arbitrati ation)

or Defen suing constitu ratio on)

joint (arbitration) on) ruling

(app dant or tes n) ruling

liabili profiles amount imple

lican arbitra project progr and

ties involved mentat

t) tion liabilitie ess impact

ion

s or not

Shang Jiangsu No Arbitratio Szuzhong 0 Court Not yet Not yet

hai Suzhong n Construction 7.444 milli to be ruled ruled

Zhenh Construc Group Co., Ltd. on Yuan + open

ua tion (Hereinafter 162 million soon

Heavy Group referred to as and relate

Indusri Co., Ltd ¡°Suzhong d interests

es(Gro Construction¡±)

up) contracted the

Co.,Lt project

d construction of

the industrial R&

D Building in

2008, but the two

sides entered into

dispute ate

settlement upon

completion. In

September 2013

the Company filed

a request

Shanghai

Arbitration

Commission for

Suzhong

Construction to

pay an overdue

fine of 7,444

million Yuan due

to delays of

construction and

so on, while in

February 2014

Suzhong

Construction filed

a counterclaim to

Shanghai

Arbitration

Commission

requesting the

Company to pay

about 162 million

Yuan for the

project settlement

and related

interest costs; the

arbitration case

will be heard

shortly

23

2015 Annual Report

VIII. Punishment and correction of listed company and its directors, supervisors and senior

executives, the controlling shareholder, actual controller and purchasers

¡õApplicable¡ÌNot applicable

IX. Company equity incentive plan, employee ownership plan or other employee incentive

situations and its influence

¡õApplicable¡ÌNot applicable

X. Magnificent related transactions

¡ÌApplicable ¡õNot applicable

(¢ñ)Related transactions in connection with routine operations

1. Events disclosed in the provisional announcement and without changes or

progresses of following-up implementation

Events overview Index

The fifth meeting of sixth Board of Directors Shanghai Stock Exchange website:

on Mar. 24th, 2014 approved ¡°Proposal to www.sse.com.cn and Shanghai Securities

Invest and Establish CCCC (Qidong) News and Hong Kong Wen Wei Po on Aug

Investment and Development Co., Ltd.¡± to 29, 2015.

invest PPP project of surround port in Lvsi

Port, Qidong, Jiangsu

The seventh meeting of sixth Board of Shanghai Stock Exchange website:

Directors on October 30, 2015 approved www.sse.com.cn and Shanghai Securities

¡°Proposal to Invest Jiangsu Zhongguancun News and Hong Kong Wen Wei Po on Oct

Science and Technology Industrial Park 31, 2015.

Infrastructure and Public Utility Phase I¡±.

2. . Events not disclosed in the provisional announcement

¡ÌApplicable ¡õNot applicable

Unit: Yuan Currency: RMB

Pricing

Type of Content of Price of Related

Related party Incidence principle of

related related related transaction

transaction relation related

transaction transaction transaction amount (%)

transaction

CHUWA Sell goods Purchase Based on 331,102,486 1.42

BUSSAN Parent port market

company limited company¡äs machinery price

wholly-owned from the

subsidiary Company

CCCC Second Parent Sell goods Purchase Based on 277,237,614 1.19

Harbor company¡äs port market

Engineering Co., wholly-owned machinery price

Ltd subsidiary from the

Company

CCCC Third Parent 257,912,687 1.11

Harbor company¡äs Sell goods Purchase Based on

Engineering Co., wholly-owned port market

Ltd subsidiary machinery price

from the

Company

Friede & Purchase 140,108,319 0.6

Goldman, Llc. Parent Sell goods port Based on

company¡äs machinery market

wholly-owned from the price

subsidiary Company

CCCC SHEC 75,530,025 0.32

24

2015 Annual Report

Second Parent Sell goods Purchase Based on

Engineering Co., company¡äs port market

Ltd wholly-owned machinery price

subsidiary from the

Company

CCCC Second Parent 56,534,225 0.24

Highway company Sell goods Purchase Based on

Engineering Co., port market

Ltd machinery price

from the

Company

Jiangsu 53,734,600 0.23

LongYuan Joint venture Sell goodsPurchase Based on

Zhenhua Marine port market

Engineering Co., machinery price

Ltd from the

Company

CCCC Tunnel Parent Purchase Based on 52,226,007 0.22

Engineering Co., company¡äs Sell goods port market

Ltd wholly-owned machinery price

subsidiary from the

Company

CCCC Fourth Parent Providing 44,663,030 0.19

Harbor company¡äs service Purchase Based on

Engineering Co., share port market

Ltd controlled machinery price

branch from the

company Company

CCCC Third 38,213,139 0.16

Highway Parent Sell goods Purchase Based on

Engineering Co., company¡äs port market

Ltd wholly-owned machinery price

subsidiary from the

Company

China Harbor 34,099,381 0.15

Engineering Co., Parent Sell goods Purchase Based on

Ltd company¡äs port market

wholly-owned machinery price

subsidiary from the

Company

Second 24,687,230 0.11

Engineering Parent Sell goods Purchase Based on

Company of company¡äs port market

CCCC Fourth wholly-owned machinery price

Harbor subsidiary from the

Engineering Co., Company

Ltd

Third 18,699,952 0.08

Engineering Parent Provide Purchase Based on

Company of company¡äs labor port market

CCCC Fourth wholly-owned machinery price

Harbor subsidiary from the

Engineering Co., Company

Ltd

Hainan CCCC Parent 17,202,584 0.07

Fourth Harbor company¡äs Sell goods Purchase Based on

25

2015 Annual Report

Construction wholly-owned port market

Co., Ltd subsidiary machinery price

from the

Company

Nanjing CCCC 15,362,383 0.07

Weisanlu River Parent Provide Purchase Based on

Tunnel Co., Ltd company¡äs labor port market

wholly-owned machinery price

subsidiary from the

Company

China 14,436,561 0.06

Communications Parent Sell goods Purchase Based on

Construction company port market

Company machinery price

Limited from the

Company

CCCC Parent Sell goods Purchase Based on 12,020,237 0.05

Financial company¡äs port market

Leasing CO., wholly-owned machinery price

Ltd subsidiary from the

Company

CCCC Third Parent Sell goods Purchase Based on 4,515,993 0.02

Harbor company¡äs port market

Consultants Co., wholly-owned machinery price

Ltd subsidiary from the

Company

Second Parent Sell goods Purchase Based on 3,678,378 0.02

Engineering company¡äs port market

Company of wholly-owned machinery price

CCCC Second subsidiary from the

Harbor Company

Engineering Co.,

Ltd

First Parent Sell goods Purchase Based on 3,173,735 0.01

Engineering company¡äs port market

Company of wholly-owned machinery price

CCCC First subsidiary from the

Harbor Company

Engineering Co.,

Ltd

CCCC Shanghai Parent Sell goods Entrusted Based on 1,222,449 0.01

Equipment company¡äs processing market

Engineering Co., wholly-owned for the price

Ltd subsidiary Company

China Road and Parent Sell goods Purchase Based on 1,089,606 0

Bridge Co., Ltd company¡äs port market

wholly-owned machinery price

subsidiary from the

Company

Second Parent Sell goods Purchase Based on 643,333 0

Engineering company¡äs port market

Company of wholly-owned machinery price

CCCC First subsidiary from the

Harbor Company

Engineering Co.,

Ltd

26

2015 Annual Report

Zhenhua Marine Joint venture Other Lease the 67,924,038 0.29

Energy (Hong ships from Based on

Kong) Co., Ltd the market

Company price

Third Parent Other Lease the Based on 19,671,628 0.08

Engineering company¡äs shield from market

Company of wholly-owned the price

CCCC Second subsidiary Company

Harbor

Engineering Co.,

Ltd

CCCC Tunnel Parent Other Lease the Based on 14,365,684 0.06

Engineering Co., company¡äs shield from market

Ltd wholly-owned the price

subsidiary Company

China Other Lease the Based on 3,384,615 0.01

Communications Parent ships from market

Construction company the price

Company Company

Limited

CCCC Tianjin Parent Receiving Entrusting Based on 202,023,996 1.02

Dredging Co., company¡äs labor company market

Ltd wholly-owned for price

subsidiary processing

CCCC East Parent Receiving Entrusting Based on 30,900,000 0.16

China company¡äs labor company market

Investment Co., wholly-owned for price

Ltd subsidiary processing

China Parent Receiving Entrusting Based on 15,608,642 0.08

Communications company¡äs labor company market

Construction wholly-owned for price

Company subsidiary processing

Limited

CCCC Second Parent Receiving Entrusting Based on 10,713,240 0.05

Highway company¡äs labor company market

Engineering Co., wholly-owned for price

Ltd subsidiary processing

CHUWA Parent Purchase Supply Based on 291,769,656 1.48

BUSSAN company¡äs goods materials to market

company limited wholly-owned Company price

subsidiary

CCCC Shanghai Parent Purchase Supply Based on 137,622,776 0.7

Equipment company¡äs goods materials to market

Engineering Co., wholly-owned Company price

Ltd subsidiary

Shanghai Joint venture Purchase Supply Based on 104,139,666 0.53

Zhenhua Heavy goods materials to market

Industry Company price

Changzhou

Painting Co., Ltd

China Parent Purchase Supply Based on 16,721,301 0.08

Communication company¡äs goods materials to market

Materials & wholly-owned Company price

Shipment Co., subsidiary

Ltd

Total / 2,392,939,196 5.57

27

2015 Annual Report

Details about the returned sales with high amount

Explanation of Note: May 8, 2013, the Company 2012 Annual General Meeting approved

related trade ¡°Motion on the Company Signing Framework Agreement with CHINA

COMMUNICATIONS CONSTRUCTION CO., LTD on Routine Related

Transactions.¡±From 2013 to 2015, our company and its subordinate units and

the China Communications Corporation and its subsidiary bodies could

undertake related party transactions in the daily operation on annual basis with

transaction amount not exceeding 8 billion Yuan from 2013~2015. The Annual

General Meeting has authorized the Company¡äs management to handle

relevant specific matters.

(¢ò) Associated transactions of asset or equity acquisition, sales

1¡¢ Events disclosed in the provisional announcement and without changes or

progresses of follow-up implementation.

Events overview Index

The eighth meeting of sixth Board of Directors Shanghai Stock Exchange website:

on December 30, 2015 approved the www.sse.com.cn and Shanghai Securities

¡°Proposal to Increase Capital and Substitute News and Hong Kong Wen Wei Po on Jan 4,

Equity of CCCC Tianhe Equipment 2016.

Manufacturing Co., Ltd ¡±.

2¡¢ Events not disclosed in the provisional announcement

¡õApplicable¡ÌNot applicable

£¨¢ó£©Current accounts of credits and liabilities with related parties

1¡¢ Events disclosed in the provisional announcement and without changes or

progresses of follow-up implementation

Events overview Index

The twenty-fifth meeting of fifth Board of Shanghai Stock Exchange website:

Directors meeting on Mar. 24th, 2014, www.sse.com.cn and Shanghai Securities

approved the ¡°Proposal on Company signing News and Hong Kong Wen Wei Po on Mar.

Deposit Services Framework Agreement and 26, 2014

Loan Services Framework Agreement with

CCCC Financial Co., Ltd¡±and discussed and

passed by 2013 general meeting of

shareholders.

2¡¢ Events not disclosed in the provisional announcement

Unit: Yuan Currency: RMB

The Company

providing fund to Related party providing fund to the

related party Company

Incidence

Related party Begi

relation Curr Endi

nnin

ent ng Beginning Current Ending

g

amo bala balances amount balance

bala

unt nce

nces

CCCC Financial Parent 120,4 14,11 134,5 0 0 0

Leasing Co., Ltd company¡äs 20,50 4,145 34,64

4 9

wholly-owned

subsidiary

CCCC Jianrong Joint venture 0 0 0 100,000,000 1,018,000,000 1,118,000,000

Leasing Co., Ltd

28

2015 Annual Report

CCCC Leasing Parent 0 0 0 0 383,838,000 383,838,000

Jiahuayi Co., Ltd company¡äs

wholly-owned

subsidiary

CCCC Leasing Parent 0 0 0 0 383,838,000 383,838,000

Jiahuayi Co., Ltd company¡äs

wholly-owned

subsidiary

China Parent 0 0 0 31,599,363 72,840,872 104,440,235

Communication company

Construction

Company

Shanghai Jiang Parent 0 0 0 17,586,085 0 17,586,085

Tian Industrial Co., company¡äs

Ltd wholly-owned

subsidiary

CHUWA BUSSAN Parent 0 0 0 0 6,269,873 6,269,873

COMPANY company¡äs

LIMITED wholly-owned

subsidiary

Tianjin Waterway Parent 0 0 0 0 25,079,494 25,079,494

Co., Ltd company¡äs

wholly-owned

subsidiary

Hong Kong Parent 0 0 0 346,005 0 346,005

Zhenhua company¡äs

Engineering Co., wholly-owned

Ltd subsidiary

Macau Zhenhua Parent 0 0 0 6,593 0 6,593

Harbor Engineering company¡äs

Co., Ltd wholly-owned

subsidiary

120,4 14,11 134,5 149,538,046 1,889,866,239 2,039,404,285

Total 20,50 4,145 34,64

4 9

Reasons of related credits and Dividends payable by the Company to related parties,investment of

liabilities the cancellation of s subsidiary and current amount loan.

Impact of related credits and

liabilities on company

XI. Major contracts and their implantation

(1) Entrusting, contracting and leasing

¡ÌApplicable ¡õNot applicable

1. Entrusting

¡õApplicable ¡ÌNot applicable

The Company had no entrusting this year.

2. Contracting

¡õApplicable ¡ÌNot applicable

3. Leasing

¡ÌApplicable ¡õNot applicable

29

2015 Annual Report

Unit: Yuan Currency: RMB

Rental Rental Whether

Lease Amount Lease

Lease income revenue related

d involving termi Rental

Lessor Lessee start determin impact on party

asset leased nation income

date ed by the transacti

s assets date

Protocol company ons

Compa Shanghai Housi 183,024,841 2012. 2025. 43,047,9 Protocol 43,047,966

ny Zhenlong ng 08.10 07.09 66 agreed No

Asset rental

Management

Co., Ltd. And

other

companies

(2) Guaranty

¡ÌApplicable ¡õNot applicable

Unit: Yuan Currency: RMB

Relati

onshi

Guar

p

anty Wheth Rel

betwe Wheth Wheth Wheth

curre Guar er ate

en Guara Guara Guara er er er

Guara Guara nt anty there d

guara nty nty nty guara guara guara

nty nteed date classi is rela

nty amou start termin nty is nty ntee to

party party (agre ficati counte tion

party nt date al date finishe overdu related

emen on r shi

and d e party

t sign guara p

listed

date) ntee

corpor

ation

Compa Home Jiangs 19,184, 11, 11, 11, With No No No No

ny office u 000 Nov. Nov. Nov. joint

Yanwei 2014 2014 2017 respo

Port nsibilit

Co., y

Ltd

Compa Home Zhenh 165,91 14 Sep 14 Sep 14 Mar. Gener No No Yes Yes Join

ny office ua 7,974 2014 2015 2017 al t

Marine guara corp

Energy nty orati

(Hong on

Kong)

Co.,

Ltd

Total guaranties for subsidiaries incurred in 165,917,974

report period (excluding those for held

subsidiaries)

Total Guarantee balance at the end of report 185,101,974

period (A)

Guaranty of the company and subsidiaries

Total guaranties for subsidiaries incurred in 2,842,115,536

report period

Total guaranties for subsidiary balance at the 2,842,115,536

end of report period (B)

Company guaranty total amount (guaranty for subsidiaries )

Total guarantee amount (A+B) 3,027,217,510

30

2015 Annual Report

Proportion of net assets of the Company (%) 19.18

In which

Amount guaranties to shareholders, effective 0

controller and its related parties (C)

Direct or indirect guarantees for the 3,008,033,510

guaranteed parties with an assets-liabilities

ration over 70% (D)

Amount of guaranties exceeding 50% of net 0

assets (E)

Total of the above 3 kinds of guarantee

3,008,033,510

(C+D+E)

Guarantee status explanation Note: the first interim general meeting of

stockholders held on September 22, 2008 approved

"Proposal of Company Providing Financing

Guarantee to Subsidiary Shanghai Zhenhua Port

Machinery (Hong Kong) Co., Ltd. ", and agreed to

provide financing support to Hong Kong subsidiary.

The bank will issue guarantee for the loan with the

upper limit of 500 million USD. The Company will

provide the guarantee to Hong Kong subsidiary in

the report period. The twenty-ninth and thirtieth

meeting of fifth Board of Directors meeting approved

other guarantees.

Non-financial companies entrusted investment financing and derivatives

(1) Entrusted financing

Unit: Yuan Currency: RMB

Source

Rel

The of

ate

Financi amount Suit funds

Starti Re Expect Principal d

ng Amo Ending of provisi invol and

Partner ng wa ed actually tra

product unt day on for ved whethe

day rd profit covered de

type impairme or r it is

or

nt not fund-rai

not

sing

A Bank Bank 500,0 2014/ 2015/2/ Inte 500,000 32,638,356 Yes 0 No No

Financial 00,00 2/14 10 rest ,000

Product 0 upo

n

mat

urit

y

F Bank Bank 770,0 2014/ 2015/2/ Inte 770,000 42,233,973 Yes 0 No No

Financial 00,00 2/13 12 rest ,000

Product 0 upo

n

mat

urit

y

F Bank Bank 790,0 2014/ 2015/2/ Inte 790,000 45,030,000 Yes 0 No No

Financial 00,00 2/25 25 rest ,000

Product 0 upo

n

mat

urit

y

A Bank Bank 750,0 2014/ 2015/2/ Inte 750,000 45,537,329 Yes 0 No No

Financial 00,00 2/28 12 rest ,000

31

2015 Annual Report

Product 0 upo

n

mat

urit

y

A Bank Bank 620,0 2014/ 2015/3/ Inte 620,000 38,675,770 Yes 0 No No

Financial 00,00 3/20 13 rest ,000

Product 0 upo

n

mat

urit

y

B Bank Bank 991,0 2014/ 2015/3/ Inte 991,040 53,222,921 Yes 0 No No

Financial 40,00 3/28 26 rest ,000

Product 0 upo

n

mat

urit

y

A Bank Bank 1,000 2014/ 2015/4/ Inte 1,000,0 65,971,644 Yes 0 No No

Financial ,000, 4/10 2 rest 00,000

Product 000 upo

n

mat

urit

y

C Bank Bank 350,0 2015/ 2015/7/ Inte 350,000 9,397,260 Yes 0 No No

Financial 00,00 1/16 10 rest ,000

Product 0 upo

n

mat

urit

y

A Bank Bank 500,0 2015/ 2015/7/ Inte 500,000 14,456,164 Yes 0 No No

Financial 00,00 1/29 21 rest ,000

Product 0 upo

n

mat

urit

y

E Bank Bank 200,0 2015/ 2015/12 Inte 200,000 8,344,200 Yes 0 No No

Financial 00,00 3/24 /30 rest ,000

Product 0 upo

n

mat

urit

y

A Bank Bank 400,0 2015/ 2015/11 Inte 400,000 11,967,123 Yes 0 No No

Financial 00,00 5/6 /4 rest ,000

Product 0 upo

n

mat

urit

y

D Bank Bank 420,0 2015/ 2015/11 Inte 420,000 11,391,781 Yes 0 No No

Financial 00,00 5/22 /18 rest ,000

Product 0 upo

n

mat

urit

y

D Bank Bank 80,00 2015/ 2015/11 Inte 80,000, 1,893,699 Yes 0 No No

Financial 0,000 5/22 /18 rest 000

Product upo

n

mat

32

2015 Annual Report

urit

y

D Bank Bank 450,0 2015/ 2015/12 Inte 450,000 12,273,287 Yes 0 No No

Financial 00,00 6/9 /6 rest ,000

Product 0 upo

n

mat

urit

y

G Bank Bank 44,00 2015/ 2016/1/ Inte 0 0 Yes 0 No No

Financial 0,000 12/31 12 rest

Product upo

n

mat

urit

y

G Bank Bank 2,000 2015/ 2016/3/ Inte 0 0 Yes 0 No No

Financial ,000 12/31 21 rest

Product upo

n

mat

urit

y

Total 7,867 7,821,0 393,033,507 0

/ ,040, / / / 40,000 / / /

000

Principal not withdrew overdue and accumulated income 0

amount (Yuan)

Description of the entrusted financing Note: the twenty- third, the twenty-sixth session, the thirty-fourth

meeting of fifth Board of Directors meeting and 2013 general

meeting of shareholders, 2014 general meeting of shareholders

approved the relevant amount of the entrusted financing issues in

the table above by the report day.

a) Entrusted loans

¡õApplicable ¡ÌNot applicable

3. Investment in other financing investments and derivatives

¡õApplicable ¡ÌNot applicable

(4) Other substantial contracts

1¡¢On June 30, 2015, the Company published announcement signed general contracting

contract of automation loading system with Qingdao Qianwan Smart Container Port Co., Ltd,

details see Shanghai Securities News and Hong Kong Wen Wei Po.

2¡¢On July 14, 2015, the Company published announcement signed sales contract of

automation container crane with DP World, details see Shanghai Securities News and Hong

Kong Wen Wei Po.

3¡¢On August 11, 2015, the Company published announcement signed sales contract of

automation port loading contract about Phase 4 of Yangshan Port of Shanghai International

Shipping Center with Shanghai Dual-Port International Trade Co.,Ltd, details see Shanghai

Securities News and Hong Kong Wen Wei Po.

4¡¢ On September 1, 2015, the Company published announcement winning the bid of PPP

project of surrounding port of Lvsi Port of Qidong, Jiangsu, details see Shanghai Securities

News and Hong Kong Wen Wei Po.

33

2015 Annual Report

XII. Other substantial issues

¡ÌApplicable ¡õNot applicable

The Company received the announcement of a contract termination letter from Petrofac

JSD6000 Limited (hereinafter referred to as "Petrofac") on October 13, 2015, refer to the

"Shanghai Securities News", "Hong Kong Wen Wei Po" for details. Fraprete honored the

demand guarantee issued related to the project from the guarantee open bank on December 29,

2015, with a total amount of 44720000 USD.

The Company attaches great importance to this case and sets up a special working group

and hired domestic and foreign lawyers team, to actively advocate the company's rights, protect

the company's legitimate rights and interests. The Company applied for arbitration to the

London international arbitration court filed in January 2016, requesting Fraprete to return the

guarantee money, and compensating for the corresponding losses. At present, the case is in

the process of preparation, was not in session yet.

XIII. Active fulfillment of social responsibilities

(¢ñ) Social responsibility work

The Company actively fulfills its social responsibilities, effectively adjusts industrial

structure and business arrangement, optimizes development strategy, forms 8 business sectors

arrangements; increases investment in R&D; enhances the innovation capacity; promote

technological progress; actively promote the overseas center construction, improve the service

response speed to the global customers and provide customers with high quality and rapid

services.

The Company actively creates development platform for employees, encourages

employees to innovate, build innovation pattern and forms good enterprise atmosphere;

strengthens employee¡äs humanistic care, builds workers¡ä sports and leisure center to enrich

leisure life for workers and strives to create a culture of safety production, working and living

environment; in hot season, sending cooling gifts to workers to ease the high temperature,

showing car for the health of the employees.

XIV. Negotiable company bonded

¡õApplicable¡ÌNot applicable

34

2015 Annual Report

Chapter ¢ö Equity Movement and Shareholder¡äs Profile

¢ñ. Particular about equity movement:

(¢ñ) Particular about capital stock change

(1) Particular about capital

In report period, Company share numbers and equity structure do not change.

(II) Stock with sales limit change

¡õApplicable¡ÌNot applicable

II. Particulars about shareholder and effective controller of the Company

(¢ñ) Number of shareholders

Number of shareholders at period end 281,106

Total shareholders end of 5th trading day prior 280,954

to release day of current annual report

(¢ò) End to report period, shareholding profile of top 10 shareholders and top 10 current

shareholders (or Tradable shareholders)

Unit: share

Shareholding profile of top 10 shareholders

Share Share

s held pledged or

frozen

Movement subjec

Total shares Shareholde

Shareholder¡äs Name During the

held

Ratio( t to r¡¯s Nature

Year %) conditi Share Am

onal status ount

sales

China Communications

0 1,265,637,849 28.83 0 None 0 State legal

Construction Co., Ltd.

ZHEN HUA

Overseas

ENGINEERING 0 749,677,500 17.08 0 None 0

institution

COMPANY LIMITED

Central Huijin Assets 74,482,2 Unkn

74,482,200 1.70 own

Unknown

Management Co., Ltd 00

China Securities Finance 56,788,4 Unkn

Co., Ltd

56,788,474 1.29 own

Unknown

74

BOSARE FUNDS-£­

agricultural bank£­

BOSARE China 16,546,6 Overseas

16,546,600 0.38 0 None 0

institution

Securities Financial 00

Assets Management

Plan

Dacheng Funds£­

agricultural bank£­

Dacheng China 16,546,6 Unkn

16,546,600 0.38 own

Unknown

Securities Financial 00

Assets Management

Plan

35

2015 Annual Report

ICBC Credit Suisse

Fund£­agricultural

bank£­ICBC Credit 16,546,6 Unkn

Suisse China 16,546,600 0.38 own

Unknown

00

Securities Financial

Assets Management

Plan

GF Fund£­agricultural

bank£­GF China 16,546,6 Unkn

Securities Financial 16,546,600 0.38 own

Unknown

00

Assets Management

Plan

China Asset

Management£­

agricultural bank£­

China Asset 16,546,6 Unkn

16,546,600 0.38 own

Unknown

Management China 00

Securities Financial

Assets Management

Plan

Harvest Fund£­

agricultural bank£­

Harvest Fund China 16,546,6 Unkn

16,546,600 0.38 own

Unknown

Securities Financial 00

Assets Management

Plan

Southern Fund£­

agricultural bank£­

Southern Fund China 16,546,6 Unkn

16,546,600 0.38 own

Unknown

Securities Financial 00

Assets Management

Plan

E fund management£­

agricultural bank£­E

fund management 16,546,6 Unkn

16,546,600 0.38 own

Unknown

China Securities 00

Financial Assets

Management Plan

Yinhua Fund£­

agricultural bank£­

Yinhua Fund China 16,546,6 Unkn

16,546,600 0.38 own

Unknown

Securities Financial 00

Assets Management

Plan

Lombarda China Fund

Management£­

agricultural bank£­

Lombarda China Fund 16,546,6 Unkn

16,546,600 0.38 own

Unknown

Management China 00

Securities Financial

Assets Management

Plan

Particulars about top 10 shareholders of shares not subject to conditional sales

Shareholder¡¯s Name Shares not subject to Type and quantity of shares

36

2015 Annual Report

conditional sales held at period Qua

Type

end ntity

China Communications Construction 1,265,637,849

Co., Ltd RMB common

shares

ZHEN HUA ENGINEERING 749,677,500

COMPANY LIMITED Shares with foreign

investment listed on

domestic market

Central Huijin Assets Management Co., 74,482,200

Ltd RMB common

shares

China Securities Finance Co., Ltd 56,788,474

RMB common

shares

BOSARE FUNDS-£­agricultural bank 16,546,600

£­BOSARE China Securities Financial RMB common

Assets Management Plan shares

Dacheng Fund£­agricultural bank£­ 16,546,600

Dacheng China Securities Financial RMB common

Assets Management Plan shares

ICBC Credit Suisse Fund£­agricultural 16,546,600

bank£­ICBC Credit Suisse China RMB common

Securities Financial Assets shares

Management Plan

GF Fund£­agricultural bank£­GF 16,546,600

China Securities Financial Assets RMB common

Management Plan shares

China Asset Management£­agricultural 16,546,600

bank£­China Asset Management RMB common

China Securities Financial Assets shares

Management Plan

Harvest Fund£­agricultural bank£­ 16,546,600

Harvest Fund China Securities RMB common

Financial Assets Management Plan shares

Southern Fund£­agricultural bank£­ 16,546,600

RMB common

Southern Fund China Securities shares

Financial Assets Management Plan

E fund management£­agricultural bank 16,546,600

£­E fund management China RMB common

Securities Financial Assets shares

Management Plan

Yinhua Fund£­agricultural bank£­ 16,546,600

RMB common

Yinhua Fund China Securities Financial shares

Assets Management Plan

Lombarda China Fund Management£­ 16,546,600

agricultural bank£­Lombarda China RMB common

Fund Management China Securities shares

Financial Assets Management Plan

37

2015 Annual Report

Explanation on the above related relationship 1¡¢.Among above top 10 shareholders, CHINA

or consistent action COMMUNICATIONS CONSTRUCTION CO.,LTD. Constitutes

related party relationship with ZHEN HUA ENGINEERING

COMPANY LIMITED¡¢ZHEN HWA HARBOUR

CONSTRUCTION COMPANY LIMITED, with ultimate controller

being China Communications Group Corporation. The Company

is not aware of whether they have associated relationship among

them or belong to the consistent actionists as defined in

Administrative Rules on Disclosure of Information on Stock

Change of Listed Company¡äs Shareholders.

2¡¢. On January 8, 2014, the Company disclosed the

¡°Announcement on Changes in Shareholders¡ä Equity¡±,

according to which Hong Kong £¨ZHEN HUA ENGINEERING

COMPANY LIMITED£© was to transfer all the shares it held to

CCCC International (Hong Kong) Holdings Limited. After the

transfer of shares, the controlling shareholder of the Company

and the actual controller remain unchanged. The share transfer

is required to obtain the SAC of the State Council and other

department for approval.

¢ó. Controlling shareholders and actual controllers

(¢ñ) Particulars about the corporate controlling shareholder

1 Legal Person

Unit: Yuan Currency: RMB

Name China Communications Construction Co., Ltd

The person in charge of Liu Qitao

the unit/legal

representative

Date of incorporation 2006-10-8

Organizational Code 71093436-9

Registered capital 16,174,735,425

Principal business Engaging in the general contracting of construction projects for ports, channels,

highways and bridges both home and abroad, including technical and economic

consultation of engineering, feasibility study, survey, construction, supervision,

procurement and supply for related complete set of equipment or materials, and

equipment installation: undertaking the general contracting of the construction of

industrial and civil works, railway, metallurgy, petrochemical, power and water

conservancy facilities, channel, mine and municipal works; import and export

business; real estate development and property management, investment and

management of logistics, transportation, hotel and tourist industries.

2. Block diagram of property right and control relationship between Company and

controlling shareholders

38

2015 Annual Report

CCCC

Shareholding 100% Shareholding 100%

Hong Kong Zhenhua Engineering Co.,Ltd Macao Zhenhua Harbor Engineering Co.,Ltd

Shareholding Shareholding

28.83% Shareholding 0.33%

17.08%

Shanghai Zhenhua Heavy Industry (Group)Co., Ltd

£¨II£©Particulars about the actual controllers

1. Legal Person

Name China Communications Construction Co., Ltd

The person in charge of Liu Qitao

the unit/legal

representative

Date of incorporation 2006-10-8

Organizational Code 71093436-9

Registered capital 16,174,735,425

Principal business Engaging in the general contracting of construction projects for ports, channels,

highways and bridges both home and abroad, including technical and economic

consultation of engineering, feasibility study, survey, construction, supervision,

procurement and supply for related complete set of equipment or materials, and

equipment installation: undertaking the general contracting of the construction of

industrial and civil works, railway, metallurgy, petrochemical, power and water

conservancy facilities, channel, mine and municipal works; import and export

business; real estate development and property management, investment and

management of logistics, transportation, hotel and tourist industries.

2. Block diagram of property right and control relationship between Company and actual

controllers.

SASAC of the State

Council

CCCC Group

CCCC

Shareholding 100% Shareholding 100%

Hong Kong Zhenhua Engineering Co.,Ltd Macao Zhenhua Harbor Engineering Co.,Ltd

Shareholding Shareholding

17.08% 28.83% Shareholding 0.33%

Shanghai Zhenhua Heavy Industry (Group)Co., Ltd

39

2015 Annual Report

¢ô. Other corporate shareholders holding over 10% of the Company¡äs shares

Unit: Yuan Currency: RMB

Person in

Main business and

Corporate charge or Date of Organization Registered

management

shareholders legal establishment code Capital

activities

representative

ZHEN HUA Wang Yan 1982-05-14 - Marine works, roads

35,000,000

ENGINEERING and bridges, dredging

COMPANY LIMITED and site formation,

port machinery,

survey and design.

Explanation China Communications Construction Co., Ltd. Holds 100% stake of ZHEN HUA

ENGINEERING COMPANY LIMITED, the ultimate shareholder is China

Communications Construction Group Co., Ltd

V. Share limit reduction

¡õApplicable¡ÌNot applicable

Chapter VII Preferred stock information

¡õApplicable¡ÌNot applicable

40

2015 Annual Report

Chapter ¢÷I Directors, Supervisors, Senior Executives and Employees

¢ñ. Change of holdings and remuneration

(¢ñ) Shareholding changes and remuneration of directors, supervisors and senior executives under employment or retired during report

period.

¡ÌApplicable ¡õNot applicable

Unit: share

Total paid Remunera Whether

by the tion paid by

Chan Company calculatio related

Shares

Shares at ge in during n period parties of

held at the

Name Title (note) Sex Age Start of Tenure End of Tenure end of report report remark the

beginning

year perio period Company

of year

d (RMB

10,000)(bef

ore tax)

Song Hailiang Chairman of the M 51 2015-4-21 2018-4-20 0 0 0 49.8 Jan-Dec Yes

Board

Zhu Lianyu Vice Chairman of M 46 2015-4-21 2018-4-20 0 0 0 38.5 May-Dec Yes

the Board, Party

Secretary

Huang Qingfeng Director, M 41 2015-4-21 2018-4-20 0 0 0 89.4 Jan-Dec No

President

Chen Qi Director F 54 2015-4-21 2018-4-20 0 0 0 0 Jan-Dec Yes

Yan Yunfu Director, Chief M 57 2015-4-21 2018-4-20 0 0 0 84.5 Jan-Dec No

Engineer

Liu Qizhong Director, Vice M 52 2015-4-21 2018-4-20 0 0 0 87.5 Jan-Dec No

President

Dai Wenkai Director, Vice P M 49 2015-4-21 2018-4-20 0 0 0 84.5 Jan-Dec No

resident

Wang Jue Director, CFO, M 52 2015-4-21 2018-4-20 0 0 0 87.5 Jan-Dec No

Board Secretary

41

2015 Annual Report

She Lian Independent M 57 2015-4-21 2018-4-20 0 0 0 12 Jan-Dec No

Director

Gu Wei Independent M 59 2015-4-21 2018-4-20 0 0 0 12 Jan-Dec No

director

Ge Ming Independent M 65 2015-4-21 2018-4-20 0 0 0 8 May-Dec No

director

Ling He Independent M 64 2015-4-21 2018-4-20 0 0 0 8 May-Dec No

director

Yang Jun Independent M 59 2015-4-21 2018-4-20 0 0 0 8 May-Dec No

director

Cui Wei Supervisor, M 40 2015-4-21 2018-4-20 0 0 0 32.4 May-Dec No

deputy secretary

of the Party

committee,

commission for

Discipline

Inspection, trade

union chairman

Zhang Minghai Supervisor M 54 2015-4-21 2018-4-20 20,259 20,259 0 72.9 Jan-Dec No

Xiang Xudong Supervisor M 40 2015-4-21 2018-4-20 0 0 0 26.8 May-Dec No

Liu Jianbo Vice president M 53 2015-4-21 2018-4-20 0 0 0 84.5 Jan-Dec No

Zhou Qi Vice president M 44 2015-4-21 2018-4-20 0 0 0 84.5 Jan-Dec No

Chen Bin Vice president M 42 2015-4-21 2018-4-20 89,440 89,440 0 77.9 Jan-Dec No

Shan Jianguo Vice president M 52 2015-4-21 2018-4-20 0 0 0 33.84 May-Dec No

Zhang Jian Vice president M 47 2015-4-21 2018-4-20 0 0 0 32.8 May-Dec No

Fei Guo Chief engineer M 54 2015-4-21 2018-4-20 0 0 0 79.5 Jan-Dec No

Li Ruixiang Chief economist M 41 2015-4-21 2018-4-20 0 0 0 33.1 May-Dec No

Sun Li General counsel M 44 2015-4-21 2018-4-20 0 0 0 77.5 Jan-Dec No

Bao Qifan Former M 65 2011-5-20 2015-4-20 0 0 0 0 Jan-Apr No

independent

director

Liu Ningyuan Former M 58 2011-5-20 2015-4-20 0 0 0 4 Jan-Apr No

independent

director

Zhao Guangjing Former M 55 2011-5-20 2015-4-20 0 0 0 22.7 Jan-Apr No

42

2015 Annual Report

supervisor

Cao Weizhong Former vice M 60 2011-5-20 2015-4-20 0 0 0 14.8 Jan-Apr No

president

Chen Gang Former vice M 49 2011-5-20 2015-3-30 0 0 0 7.5 Jan-Mar No

president

Total / / / / / 109,699 109,699 0 1,254.44 / /

1. Song Hailiang, born in 1965, male, Ph.D., professor-level senior engineer, began his career in July 1987, served as engineer, Design Office

director, Vice President, President, member of Party Committee, Vice Secretary of the Party Committee, Chairman of the Board and simultaneously

General Manager with CCCC Water Transportation Planning and Design Institute Co., Ltd.; current vice President of China Communications

Construction Co., Ltd. and simultaneously General Manager of Equipment Manufacturing Marine Heavy Industry Department and Chairman of the

Board of Zhenhua Heavy Industries.

2. Zhu Lianyu, born in 1970, male, Ph.D., professor-level senior engineer; began his career in September 1992, served as engineer, equipment leader

of overseas project, vice chief of Marine Machine Department, manager of Enterprise Development Department of CCCC First Harbor Engineering Co.,

Ltd; general manager of CCCC International Shipping Co., Ltd, general manager of Equipment Manufacturing Marine Heavy Industry Department of

China Communications Construction Co., Ltd.; current vice Chairman of the Board and secretary of Party Committee.

3. Huang Qingfeng, born in 1975, male, EMBA, senior engineer; began his career in August 1996, used to be quality project chief, director of field

bridge office of quality management department; deputy manager of after-sales department, general manager of Quality Inspection Company; vice

director of off-shore office, director of Quality Safety Department, director of Product Service Center and assistant president of the Group; from Jan.

2005 on is VP of the Company and executive vice president and director of Production and Project Management Center since 2014, current director

and president of the Company.

4. Chen Qi, born in 1962, female, master degree, senior engineer, was project manager of China Harbor Engineering Co., Ltd. Import and Export Port

Machinery Division, China Harbor (Group) Co., Ltd. Industry and Trade Business Unit deputy general manager, General manager; China

Communications Construction Co., Ltd Industry and Trade Business Unit general manager; has been director of the Company since 2011, current

executive general manager of Equipment Manufacturing Marine Heavy Industry Department of China Communications Construction Co., Ltd.

5. Yan Yunfu, born in 1959, male, EMBA, professor-level senior engineer£¬served as Vice Chief of Technical Department, Manager of Mechanical

Design Department, Vice General Engineer, General Engineer and VP of the Company, President of Land Heavy Industry Equipment Design Institute,

is director of board of the Company since 2004, current director and general engineer.

6. Liu Qizhong, born in 1964, male, bachelor degree, senior economist; was Vice Manager, Manager of Operating Department, was director of the

Company since 1997, current director and VP of Company.

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

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

8. Wang Jue, born in 1964, male, MBA, CPA and senior accountant, successively held the posts of director and General Accountant of the Financial

Office of No.3 Engineering Co., Ltd. Of CCCC Third Harbor Engineering Co., Ltd., Chief of Audit Department, Chief of Financial Department and Vice

43

2015 Annual Report

General Accountant; is the Chief Financial Executive and Secretary of the Board of Directors of the Company since November of 2005; director of

Company from 2006 to 2011, current director, CFO and Secretary of the Board of Directors of the Company.

9. She Lian, born in 1959, male, professor, doctoral tutor; from 1995 on, enjoys special government allowances from the State Council since 1995;

deputy director and Party Secretary of the Department of Business Administration, Wuhan University of Communications Science; chief editor of

"Transportation Enterprise Management" magazine run by Ministry of Transportation; director of Early Warning Management Research Center,

Wuhan University of Technology, Professor of Management, doctoral tutor; director of Early Warning Management Research Center, Huazhong

University of Science and Technology, Professor of Management, doctoral tutor; Professor of CEIBS Emergency Management Institute incumbent

National School of Administration, doctoral tutor, current independent director of the Company.

10. Gu Wei, orn in 1957, male, Ph.D., professor and doctoral tutor; since 1982, has been teaching at Shanghai Maritime University; since the year

2000, enjoys special government allowances from the State Council, and the IEEE Society member, MTS Society member and the British Royal

Physical Society member, senior member of China Electro technical Society, senior member of Chinese Society of Naval Architects, senior member of

Chinese Mechanical Engineering Society; is currently director of the Key Laboratory of the Ministry of Transportation's Shipping Technology and

Control Engineering; member of China Electro technical Society's Vessel Electrical Committee; member of the Committee of Experts of Shanghai

Jiaotong Electronics Industry Association; procurement consulting expert of Shanghai Municipal Government; member of the Committee of Experts of

Ministry of Transport East China Sea Rescue Bureau and other duties; current independent director of the Company.

11. Ge Ming: born in 1951, male, master of Western Accounting of Financial Science Research Institute of Ministry of Finance. In 1983, obtained

Chinese CPA qualification, the senior accountant qualification awarded by the Ministry of Finance, chairman (special general partnership), managing

partner and chief accountant of EY, Expert Advisory Committee member of Second listed company acquisitions and restructuring of China Securities

Regulatory Commission, is the executive director of China Institute of Certified Public Accountants, member of CPA Examination Committee of

Ministry of Finance, Vice director of Beijing Institute of Certified Public Accountants Industry Development Committee, member of China Securities

Regulatory Commission third listed company acquisitions advisory committee members and chairman of board of Beijing Huaming Fulong Accounting

Consultation Co., Ltd, current independent director of the Company.

12. Ling he, born in 1952, male, professor, senior editor (Senior professional title) of Liberation Daily, director of Shanghai Journalists Association,

director of Shanghai Institute of Essays, served as member, assistant chief editor, director of Editing Department of the democratic and legal magazine

agency, vice director and director of Comment Department of Liberation Daily,main editor of Liberation Daily, chief editor of Liberty Forum; with honor

of the first National 100 Journalists,China News first prize for three times, Shanghai News first prize for 15 times, current independent director of the

Company.

13. Yang Jun, born in 1957, male, master degree, served as intermediate and Senior court judge of Shanghai Court, president and members of the

judicial committee member, Property Trade Operation Director of Shanghai United Property Rights Exchange, now is the assistant president of

Shanghai United Property Rights Exchange, general manager of Beijing HQ, director of Financial Property Rights Trade Center, arbitrator of China

International Economic and Trade Arbitration Commission, Shanghai International Economic and Trade Arbitration Commission, arbitrator of Shanghai

Arbitration Commission, Shanghai Financial Arbitration Court, expert of China domain name dispute resolution center, director of Intellectual Property

Association of China Law Society, director of Company Law Research Society of Shanghai Law Society, director of Shanghai Patent / Trademark /

Copyright Association, current independent director of the Company.

44

2015 Annual Report

14. Cui Wei: born in 1976, male, bachelor degree, began his career in 2000, served as deputy director (hosting) of general manager office, legal

consultant office of CCCC First Harbor Co., Ltd, director and minister of Party Work Department and President Affair Office of Zhenhua Heavy Industry

Co., Ltd, current chief supervisors, deputy secretary of the Party committee, secretary of Commission for Discipline Inspection, chairman of Trade

Union

15. Zhang Minghai, born in1962, male, master degree£¬professor-level senior engineer; formerly Shanghai Port Machinery Plant Technology Division

engineer; mechanical office deputy manager, deputy chief engineer, general manager of Mechanical Office Shore Bridge First Company, of the

machinery to do the shore bridge, general manager of Land-base Heavy Industry Co., Ltd. with Shanghai Zhenhua Heavy Industries (Group) Co., Ltd.;

currently Land-based Heavy Industry Research Design vice president and also Shore Bridge Design Institute director; chief supervisor of the Company

since 2011.

16. Xiang Xudong: born in 1976, male, bachelor degree, senior engineer; served as Vice Director and Vice Manager of Quality Department, General

manager of Zhenhua Heavy Industry Inspection Co., Ltd, current employee representative supervisor, Party Secretary and Vice General Manager of

Zhenhua Heavy Industry Changxin branch.

17. Liu Jianbo, born in 1963, male, master degree£¬senior engineer; was engineer at technological office of Shanghai Port Machinery Plant; assistant

director in engineering with Technology Office of Shanghai Container Dock Co. Ltd., deputy general manager and general manager of ZPMC

Changxing Base; current VP of the Company and chairman of board of Shanghai Zhenhua Marine Engineering Service Co., Ltd.

18. Zhou Qi, born in 1972, male, EMBA, senior engineer; was manager and deputy general engineer, general manager and chief engineer of the

Electric Appliance Office of the Company; current VP of the Company and chairman of Company Electric Group.

19. Chen Bin, born in 1974 , male, EMBA, senior engineer; project quality leader of Quality Control office, deputy manager of tire crane office of quality

control office, manager of quality control office, deputy general manager and general manager of quality control company, vice director of quality and

safety office, manager of Quality Safety Office; supervisor of the Company, general manager of Shanghai Zhenhua Shipment Co., Ltd, president

assistant of the Company, current VP of Company and general manager of Shanghai Zhenhua Marine Engineering Service Co., Ltd.

20. Shan Jianguo: born in 1964, male, bachelor degree, served in Shanghai Port Machinery Manufacturing Plant, started to work in Shanghai Zhenhua

Port Machinery Co., Ltd from 1992, served as engineer, chief engineer of Machinery Office, general manager of Design company, deputy director and

director of Machinery Office, manager of budget assessment department, is now the VP and president of Land Heavy Industry Institute.

21. Zhang Jian, born in 1969, male, MBA, served as technician, production planner and assistant of director of No. 2 Panel beater of Shanghai Port

Machinery Manufacturing Plant, chief of Changzhou Plant of Shanghai Port Machinery Manufacturing Plant, vice general manager of Shanghai Port

Machinery Co., Ltd, vice general manager of Shanghai Port Machinery Heavy Industry Co., Ltd, general manager, assistant of president of Port

Machinery Co., Ltd, current VP.

22. Fei Guo, born in 1962, male, EMBA, professor level senior engineer, served as engineer of Shanghai Port Machinery Plant, director of No. 5

electrical office, vice chief engineer, director of Development Office of Shanghai Zhenhua Port Machinery Co., Ltd, VP and executive director of

Shanghai Zhenhua Heavy Industry Electric Co., Ltd, current chief engineer of Company.

23. Li Ruixiang: born in 1975, male, bachelor degree, served as vice manager of Manufacturing Department, vice director of Quality Safety Office of

Zhangjiagang Base of Shanghai Machinery Plant; manager of Quality Inspection Company, vice director of Quality and Safety Office, vice general

manager, generally manager, of machinery supporting base£¬Party branch secretary and president assistant, current chief economist and general

manager of budget assessment department

45

2015 Annual Report

24. Sun Li, born in 1972, male, EMBA, senior engineer; was project supervisor of Operating Department, vice manager and assistant of General

Manager of the Company, Vice President and director of the Company , current Chief Legal Counsel of Company

Other description

The remuneration of the added new staff and resigned staff in this session are paid according to the term of service, the remuneration of other staff are

calculated on annual basis.

(II). Stock ownership incentive awarded for the directors, supervisors and senior executives during the reporting period

¡õApplicable¡ÌNot applicable

¢ò. Office holding profile of directors, supervisors and senior executives in office or retired during report period

(¢ñ) Particulars about office-holding with shareholding companies

¡ÌApplicable ¡õNot applicable

Name Name of shareholder Starting date of service term

Title in the shareholding company

Song Hailiang China Communication Construction Co., Vice president 2014-01-27

Ltd

Chen Qi China Communications Construction Co., General manager of Industry and 2009-12-29

ltd. Trade Department

Description of the position held

(¢ò) Particulars about office-holding with other companies

¡ÌApplicable ¡õNot applicable

Name Name of companies Title

She Lian CEIBS Emergency Management Institute incumbent Professor, doctoral tutor

National School of Administration

Gu Wei Shipping Technology and Engineering key Lab of Director, professor, doctoral tutor, council member,

Ministry of Transportation, Vessel Electrical Committee committee member

of China Electro technical Society, Control Committee

of Experts of Shanghai Jiaotong Electronics Industry

46

2015 Annual Report

Association; procurement consulting expert of Shanghai

Municipal Government; Committee of Experts of

Ministry of Transport East China Sea Rescue Bureau

and other duties

Ge Ming China Institute of Certified Public Accountants , CPA Executive director, committee member, deputy

Examination Committee of Ministry of Finance, Beijing director, committee member, chairman of the board,

Institute of Certified Public Accountants Industry etc.

Development Committee, Expert Advisory Committee

member of third listed company acquisitions and

restructuring of China Securities Regulatory

Commission, Beijing Huaming Fulong Accounting

Consultation Co., Ltd

Ling He Liberation Daily, Shanghai Journalists Association, Senior editor (Senior professional title), director

Shanghai Institute of Essays.

Yang Jun Shanghai United Property Rights Exchange, Financial Assistant president, general manager, director,

Property Rights Trade Center, China International arbitrator, expert, director

Economic and Trade Arbitration Commission, Shanghai

International Economic and Trade Arbitration

Commission, Shanghai Arbitration Commission,

Shanghai Arbitration Institute of finance, the Chinese

domain name dispute solution center, jurisprudence of

China Intellectual Property Association, Company Law

Association of Shanghai Law Society, Shanghai Patent

/ Trademark / Copyright Association.

Description of position held in other

companies and institutions

¢ó. Remuneration of Directors, Supervisors and senior executives

Decision-making procedures for remuneration of Directors, In accordance with the Articles of Association, the remuneration of Directors and

Supervisors and senior executives Supervisors are subject to the Annual Shareholder¡äs General Meeting and the

remuneration of the management are assessed and approved by the President.

47

2015 Annual Report

Calculation basis for remuneration of Directors, Supervisors and Basic salary plus performance bonus, combined with assessment utilizing

senior executives quantizing index of production and operation.

Total remuneration received by all directors, supervisors and Chairman Song Hailiang, vice chairman Zhu Lianyu and director Chen Qi are not

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

executives are paid by the Company

Total remuneration received by all directors, supervisors and

senior executives at period end 12544400 Yuan

V. Particulars about changes of directors, supervisors and senior executives

Name Title Change Reason

Zhu Lianyu Director Appointment Election

Huang Qingfeng Director Appointment Election

Wang Jue Director Appointment Election

Ge Ming Independent director Appointment Election

Ling He Independent director Appointment Election

Yang Jun Independent director Appointment Election

Liu Wensheng Director Leaving post Election

Bao Qifan Independent director Leaving post Election

Liu Ningyuan Independent director Leaving post Election

Chen Bin Supervisor Leaving post Election

Zhao Guangjing Supervisor Leaving post Election

Cao Weizhong Vice president Leaving post Election

Chen Gang Vice president Leaving post Post change

Chen Bin Senior executives Appointment New appointment

Shan Jianguo Senior executives Appointment New appointment

Zhang Jian Senior executives Appointment New appointment

Li Ruixiang Senior executives Appointment New appointment

1¡¢ On March 2015, Mr. Chen Gang didn¡¯t serve as vice president of the Company due to the position change.

2¡¢ The Company has completed the election of new Board of Directors and Board of Supervisors on April 20, 2015, appointing Song Hailiang, Huang

Qing Feng, Zhu Lianyu, Chen Qi, Yan Yunfu, Liu Qizhong, Dai Wenkai, Wang Jue, She Lian, Gu Wei, Ge Ming, Ling He, Yang Jun as the sixth session

of the board of directors of the Company, Cui Wei, Zhang Minghai, Xiang Xudong as the supervisors of the sixth Board of Supervisors, hired Huang

48

2015 Annual Report

Qingfeng as the president of the Company, Zhu Lianyu, Liu Qizhong, Dai Wenkai, Liu Jianbo, Zhou Qi, Chen Bin, Shan Jianguo, and Zhang Jian as

the vice presidents, Wang Jue as CFO, Yan Yunfu and Fei Guo as chief engineers, Li Ruixiang as the chief economist, Sun Li as chief legal counsel.

¢õ. Punishment in the recent three years by securities regulatory agencies

¡õApplicable ¡ÌNot applicable

49

2015 Annual Report

¢ö. Employee status of the Parent Company and its key subsidiaries

(1) Particulars about employees

Number of employees of Parent Company in 3,161

service

Number of employees of key subsidiaries in 4,412

service

Total headcount in employment 7,573

Number of retired employees with the cost 0

borne by the parent company and subsidiaries

In specialties

Classification Number

Production staff 2,273

Sales staff 161

Technical staff 4,359

Financial staff 119

Administrative staff 661

Total 7,573

Educational level

Education Number (person)

Technical secondary school 2,032

Junior College 2,075

Undergraduate 3,013

Master 429

Doctor 24

Total 7,573

(¢ò) Remuneration policies

In line with the Company¡äs development strategy, continuously perfect distribution

incentive system, perfect performance assessment system, establish a system linking

performance distribution and unit or office performance, staff performance, industrial characters

and post value; establish a salary incentive system linking staff achievement, position duty and

value contribution and establish a distribution mode integrating with market.

(¢ó) Training program

At each year start, the Company sets up all-staff annual educational and training plan and

implements according to the plan to improve the competence level and professional quality of

50

2015 Annual Report

staff at various levels. In line with the Company¡äs development strategy, gradually establish a

rigid staff training system with systematic, directional and continuous features.

(¢ô) Labor outsourcing situation

Labor outsourcing hours 13,768,667 hour

Total Labor outsourcing remuneration 413,060,000 Yuan

Chapter IX Company Governance

I. Company governance profile

The Company strictly followed the regulations specified in "Company law", "Securities

Law", "Stock Listing Rules", Company Articles of Association" and the legal requirements of

China Securities Regulatory Commission in the report period, to standardize the company's

daily operation, further establish and improve the internal control system, improve the internal

control management and corporate governance structure, strengthen the insider information

management, strengthen the information disclosure, continuously improve the company

governance, making efforts to improve the construction of legal person governance structure,

and gradually establish a modern enterprise system, earnestly protect the legal rights and

interests of the company and all the shareholders, ensuring the sustainable and stable

development.

In order to standardize the insider information management and enhance the confidentiality,

the Company developed Shanghai Zhenhua Heavy Industry Co., Ltd Insider Information

Management System. After the inspection, the staffs who know the insider information didn¡¯t

trade the stocks of the company before significant price information is disclosed.

There is no difference between the company governance and the regulation of the China

Securities Regulatory Commission

II. Shareholders conference

Query index of the

Disclosure date of

Session Date specified website with

resolution publication

resolution published

2014 shareholders April 20, 2015 www.sse.com.cn , enter April 21, 2015

conference the stock code

51

2015 Annual Report

III. Directors duties performance

(1) Participation of directors in the Board of Directors and the

shareholders conference

Participation

in the

Participation in the Board of Directors

shareholders

conference

Independent Not

Name director or Desired participated

Participation Participation

not participation Participation Entrusted in the

numbers in Absence time in

time in the time in participation meeting in

communication times shareholders

Board of person numbers person for

way conference

Directors continuous

two times?

Song

No 9 2 7 0 0 No 1

Hailiang

Zhu

No 8 0 7 1 0 No 1

Lianyu

Huang

No 8 1 7 0 0 No 1

Qingfeng

Chen Qi No 9 2 7 0 0 No 1

Yan Yunfu No 9 2 7 0 0 No 1

Liu Qizong No 9 2 7 0 0 No 1

Dai

No 9 2 7 0 0 No 1

Wenkai

Wang Jue No 8 1 7 0 0 No 1

She Lian Yes 9 1 7 1 0 No 1

Gu Wei Yes 9 2 7 0 0 No 1

Ge Ming Yes 8 0 7 1 0 No 0

Ling He Yes 8 1 7 0 0 No 1

Yang Jun Yes 8 0 7 1 0 No 0

Liu

No 1 0 0 1 0 No 0

Wensheng

Bao Qifan Yes 1 1 0 0 0 No 0

Liu

Yes 1 0 0 1 0 No 0

Ningyuan

Number of directors meeting held in the year 9

In which: onsite meeting 2

meetings held in communication 7

method

52

2015 Annual Report

(2) Objection proposed by independent director to the company issues

During the report period, the independent directors didn¡¯t propose any objection to the

proposals of from the board of directors of the year and other proposals not from the board of

directors meeting.

IV. Evaluation system of senior executives, the establishment and implementation

of incentive system in the report period

The Company appoints the directors, supervisors and senior executives in accordance

with the provisions of Company Law and the Articles of Association, has built up a preliminary

the cultivation, selection, supervision, assessment, reward and punishment, constraint system

for the company's senior executives suitable for the actual situation. The Company formulated

the administrative methods for relevant senior executives. According to the production and

development need of the Company, the senior executives are appointed, resigned and

assessed following the principles of ¡°from top to bottom integrating the virtue and talent¡±. The

Company assessed the senior executives according to the due diligence and job performance,

the company will gradually improve the existing performance evaluation system and salary

system, promote medium- and long term incentive system for all senior executives and the core

technical personnel of the company, to continue to stimulate the enthusiasm of the senior

executives, to create new performance, and ensure the benefit maximization and standardize

the operation of the company.

V. Disclose the internal control self-assessment report

¡ÌApplicable ¡õNot applicable

2015 Company Annual Internal Control Evaluation Report" is published in the Shanghai

Stock Exchange website http://www.sse.com.cn¡£

Significant defect of internal control in the report period

¡õApplicable¡ÌNot applicable

VI. Internal control audit report description

The Company hired PricewaterhouseCoopers Zhong Tian CPA firm (special general

partnership) to audit the effectiveness of the internal control of the financial report on December

31, 2015, issued a standard internal control audit report without advice (see Appendix).

Disclose the internal control audit report or not: Yes

53

2015 Annual Report

Chapter XII Documents for reference

Documents for Accounting statements with the signatures and seals of the legal

reference representative, the person in charge of the accounting and the person in

contents charge of the accounting firm

Documents for

The original audit report with the seal of the accounting firm, the signature and

reference

seal of the certified public accountant

contents

Documents for All the original documents and the original announcement of the Company

reference disclosed by newspaper designated by China Securities Regulatory

contents Commission in the report period.

Chairman of Board: Song Hailiang

Report Date£º2016-3-29

54

Shanghai Zhenhua Heavy Industries Co., Ltd.

Dec 31, 2015 consolidated and company assets balance sheet

(Unless otherwise specified, the amount units is RMB)

Dec 31, 2015 Dec 31, 2014 Dec 31, 2015 Dec 31, 2014

Assets Note consolidated consolidated company company

(iterated)

Current assets

Monetary capital IV (1) 2,458,333,716 3,490,967,443 1,905,662,392 2,597,001,684

Financial assets measured at

fair value with the change IV (2) 676,082 25,735,001 192,133 25,735,001

Notes receivable IV (3) 243,159,622 291,899,440 226,205,622 283,662,738

Receivables IV (5)¡¢Ê®IV (1) 3,894,762,468 3,690,107,952 6,782,715,639 6,005,595,333

Prepayment IV (7) 1,226,345,632 1,273,042,238 2,237,777,316 1,881,878,541

Interest receivable IV (4) - 51,859,503 - 45,655,159

Other receivables IV (6), XIV (2) 667,660,167 727,758,519 11,305,096,974 8,721,426,218

Stock IV (8) 5,785,699,346 4,467,214,018 6,093,661,038 4,768,572,615

Construction completed account not closed(9) 11,217,591,856 8,052,408,424 8,529,348,226 6,846,110,101

Non-current assets due within one yearIV (12) 2,625,135,212 2,302,500 - -

Other current assets IV (10) 553,205,272 5,976,300,841 170,144,226 5,847,224,344

Total current assets 28,672,569,373 28,049,595,879 37,250,803,566 37,022,861,734

Non-current assets

Financial assets available-for -sale IV (11) 1,212,177,180 455,820,453 380,644,986 182,372,631

Long-term receivables IV (12) 3,558,501,537 5,339,170,148 - -

Long-term stock ownership investment(13), XIV (3) 1,597,134,817 925,350,083 7,390,184,826 6,205,231,635

Real estate as investment IV (14) 361,172,808 374,881,869 361,172,808 374,881,869

Fixed assets IV (15) 15,655,536,876 16,070,559,169 6,084,245,840 6,532,874,684

Projects in process IV (16) 3,577,371,504 2,808,786,716 759,763,993 921,306,519

Intangible assets IV (17) 3,819,437,866 3,440,342,040 1,691,754,895 1,264,092,505

Long-term prepaid expenses 4,592,043 - - -

Deferred corporate tax IV (19) 413,045,299 411,149,871 398,842,987 399,100,325

Goodwill IV (18) 149,212,956 149,212,956 - -

Total non-current assets 30,348,182,886 29,975,273,305 17,066,610,335 15,879,860,168

Total assets 59,020,752,259 58,024,869,184 54,317,413,901 52,902,721,902

-1-

Shanghai Zhenhua Heavy Industries Co., Ltd.

Dec 31, 2015 consolidated and company assets balance sheet

(Unless otherwise specified, the amount units is RMB)

Dec 31, 2015 Dec 31, 2014 Dec 31, 2015 Dec 31, 2014

Liabilities and stockholders¡¯ equity Note

consolidated consolidated company company

Current liabilities

Short term loans IV (21) 18,216,928,490 21,267,073,940 14,899,812,954 17,265,833,765

Financial liabilities measured at

fair value with its change IV (2) 24,918,115 28,752,000 22,611,400 28,752,000

Notes payable IV (22) 1,785,201,236 1,989,118,156 1,804,985,262 1,925,331,179

Payables IV (23) 5,471,141,022 4,969,164,694 7,717,863,159 5,915,107,284

Pre-received payment IV (24) 423,603,129 318,636,126 221,831,681 174,334,030

Construction not completed account closed 2,866,437,832 2,719,392,340 3,564,886,225 3,288,089,572

Employee remuneration payable IV (25) 257,822,610 245,562,935 247,867,168 236,198,026

Tax payables IV (26) 251,551,006 222,043,288 33,357,053 6,577,373

Interest payable IV (27) 289,590,733 602,520,456 274,442,941 578,367,210

Dividend payable IV (28) 32,237,912 854,881 352,598 352,598

Other payables IV (29) 1,604,523,386 451,394,650 1,623,119,170 1,360,934,528

Non-current liabilities due within one year(30) 6,837,115,692 2,636,660,000 5,514,245,635 1,139,520,000

Other current liabilities IV (31) 1,995,655,739 - 1,995,655,739 -

Total current liabilities 40,056,726,902 35,451,173,466 37,921,030,985 31,919,397,565

Non-current liabilities

Long-term loans IV (32) 1,761,904,000 2,550,090,000 778,404,000 1,773,090,000

Bond payables IV (33) - 3,799,615,401 - 3,799,615,401

Long-term payables IV (34) 719,861,943 - - -

Predicted liabilities IV (35) 220,141,178 212,244,416 213,158,056 191,656,260

Deferred corporate tax liabilities IV (19) 70,042,985 62,796,958 - -

Deferred profit IV (36) 405,425,947 340,347,908 274,380,601 233,929,227

Total non-current liabilities 3,177,376,053 6,965,094,683 1,265,942,657 5,998,290,888

Total liabilities 43,234,102,955 42,416,268,149 39,186,973,642 37,917,688,453

Shareholders' equity

Share capital IV (37) 4,390,294,584 4,390,294,584 4,390,294,584 4,390,294,584

Contributed surplus IV (38) 5,526,978,575 5,738,241,686 5,792,527,600 5,789,984,601

Other comprehensive profits IV (39) 207,660,237 319,540,042 279,006,839 351,090,634

Surplus reserves IV (40) 1,576,100,786 1,554,606,025 1,575,592,513 1,554,097,752

Profit not distributed IV (41) 3,168,538,701 2,987,813,174 3,093,018,723 2,899,565,878

Total shareholders' equity attributed to parent company 14,990,495,511 15,130,440,259 14,985,033,449

Minority equity 917,076,421 618,105,524 - -

Total shareholders' equity 15,786,649,304 15,608,601,035 15,130,440,259 14,985,033,449

Total liabilities and shareholders' equity 59,020,752,259 58,024,869,184 54,317,413,901 52,902,721,902

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

Enterprise principal: Song Hailiang Accounting principal£ºHuang Qingfeng Accounting firm principal£ºWang Jue

-2-

Shanghai Zhenhua Heavy Industries Co., Ltd.

2015 consolidated and company profit sheet

(Unless otherwise specified, the amount units is RMB)

2015 2014 2015 2014

Item Note

consolidated(iterated

consolidated ) company company

1. Operating revenue IV (42), XIV (4) 23,272,394,677 25,477,011,081 21,869,889,813 22,795,548,087

IV (42), IV (47),

Less: Operating cost XIV (4) (19,717,314,855) (22,028,685,642) (19,069,970,322) (19,845,306,991)

Business tax and charges IV (43) (24,550,179) (136,632,500) (10,246,519) (10,482,359)

Selling expenses IV (44), IV (47) (79,388,743) (73,363,873) (63,655,157) (61,207,168)

General expenses IV (45), IV (47) (1,551,222,564) (1,507,675,531) (1,054,137,881) (1,036,025,654)

Financial expenses - Net IV (46) (1,532,851,096) (1,307,738,538) (1,311,666,888) (1,263,434,946)

Assets impairment loss IV (50), IV (20) (637,391,199) (548,441,842) (634,618,962) (548,851,542)

Add: Fair value change loss -Net IV (48) (21,225,034) (123,542,084) (19,402,267) (109,771,041)

Investment gains IV (49), XIV (5) 498,236,958 370,922,986 499,257,330 383,101,264

In which: net investment

gains/(loss) to affiliated

companies and joint ventures 55,252,057 14,737,413 61,885,725 26,846,917

2. Operating profit 206,687,965 121,854,057 205,449,147 303,569,650

Add: Non-operating income IV (51) 70,713,471 61,454,591 24,915,350 22,347,516

Less: Non-operating expense IV (52) (5,665,872) (5,516,674) (1,940,975) (237,801)

In which: non-current assets disposal loss (4,789,746) (293,220) - -

3. Total profit 271,735,564 177,791,974 228,423,522 325,679,365

Less: Corporate income tax expenses IV (53) (77,529,876) (21,205,926) (13,475,916) 18,902,271

4. Net profit 194,205,688 156,586,048 214,947,606 344,581,636

In which: net profit of

consolidated party before

consolidation under the V (1) 42,357,907 8,537,647 - -

same control

Net profit/(loss) attributed

to parent company

shareholders IV (41) 212,411,967 202,223,273 214,947,606 344,581,636

Minority profit and loss (18,206,279) (45,637,225) - -

Net of other other

5. Net amount amount ofintegrated IV (39) (106,570,702) 70,602,113 (72,083,795) 102,201,212

integrated profit after tax

Other to parent

attributedintegrated profits

after re classification in the

profit and loss

Fair value change profit

or loss of financial assets

available for sale (123,536,363) 72,752,627 (73,498,300) 102,201,212

NetConversionof difference of foreign currency statements 11,656,558

amount other (2,140,634) 1,414,505 -

integrated profit after tax

attributed to minority 5,309,103 (9,880) - -

6. Total integratedintegrated profit 87,634,986 227,188,161 142,863,811 446,782,848

attributed to parent

company shareholders 100,532,162 272,835,266 142,863,811 446,782,848

Total integrated profit

attributed to minority

shareholders (12,897,176) (45,647,105) - -

7. Total profit per share

Basic earning per share IV (54) 0.05 0.05 ¡ª¡ª ¡ª¡ª

Diluted earnings per share IV (54) 0.05 0.05 ¡ª¡ª ¡ª¡ª

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

Enterprise principal: Song Hailiang Accounting principal£ºHuang Qingfeng Accounting firm principal£ºWang Jue

-3-

Shanghai Zhenhua Heavy Industries Co., Ltd.

2015 consolidated and company cash flow

(Unless otherwise specified, the amount units is RMB)

Item Note 2015 2014 2015 2014

consolidated consolidated(itera company company

1. Cash flow from the operating activities

Cash receipt from products sales and labor provision 19,506,900,429 18,785,538,656 17,397,816,931 17,831,248,876

Tax return received 984,630,764 585,386,816 977,076,832 553,762,828

Cash receipt related with other operational activitiesIV (55)(a) 447,191,781 422,634,138 389,419,585 259,416,523

Subtotal of cash receipt from operation activities 20,938,722,974 19,793,559,610 18,764,313,348 18,644,428,227

Cash payment of purchase commodity and receiving labor (20,174,319,424) (18,255,857,629) (19,747,089,361) (16,805,992,872)

Cash payment to and for the employee (1,753,695,004) (1,586,749,924) (980,395,055) (812,328,705)

Tax payment (269,565,520) (327,381,713) (47,632,264) (42,716,867)

Cash payment related with other operational activities(55)(b) (573,104,499) (487,199,269) (560,532,424) (266,403,800)

Subtotal cash disburse of operating activities (22,770,684,447) (20,657,188,535) (21,335,649,104) (17,927,442,244)

IV (56)(a)¡¢XIV

Net cash flow of operating activities (6)(a) (1,831,961,473) (863,628,925) (2,571,335,756) 716,985,983

2. Cash flow of investment

Cash receipt of investment return 8,014,070,972 5,783,534,659 7,822,070,972 5,783,534,659

Net cash receipt of disposal of fixed assets

and intangible assets 51,566,366 43,341,800 39,046,255 12,452,238

Net cash receipt of disposal of subsidiaries - 672,193,178 - 403,315,906

Cash receipt of obtaining investment gains 444,664,901 357,668,907 439,051,605 357,737,681

Net cash received by subsidiaries acquisition IV (56)(c) - 57,873,562 - -

Cash receipt related with other investment activitiesIV (55)(c) 93,974,040 63,740,660 98,461,064 61,174,796

Subtotal of investment cash receipt 8,604,276,279 6,978,352,766 8,398,629,896 6,618,215,280

construction of fixed assets, project in

process and intangible assets (2,068,707,329) (828,210,297) (462,866,404) (241,274,254)

Net cash paid by obtaining subsidiary (76,606,000) - (165,000,000) -

Cash payment of investment (3,893,364,440) (8,006,612,662) (3,301,502,230) (8,489,702,190)

Subtotal of cash disburse of investment (6,038,677,769) (8,834,822,959) (3,929,368,634) (8,730,976,444)

Net cash flow of investment 2,565,598,510 (1,856,470,193) 4,469,261,262 (2,112,761,164)

3. Cash flow of financing activities

Cash receipt of loans 31,419,366,773 35,240,469,949 25,288,627,079 29,379,507,992

Cash received from issuing bonds 2,000,000,000 - 2,000,000,000 -

Receipt of other cash related to financing activitiesV (55)(d) 4,740,276,534 3,800,077,433 2,418,923,970 3,690,587,843

Subtotal of cash receipt of financing activities 38,159,643,307 39,040,547,382 29,707,551,049 33,070,095,835

Cash to pay the debts (35,746,949,298) (31,471,335,366) (28,697,183,212) (27,289,929,378)

Cash payment of dividend distribution or interest (1,591,961,686) (1,446,907,477) (1,263,355,113) (1,167,219,204)

Payment of other cash related to financing activities (55)(e) (1,139,543,500) (4,977,812,548) (1,139,543,500) (4,680,480,148)

Subtotal of cash disburse of financing activities (38,478,454,484) (37,896,055,391) (31,100,081,825) (33,137,628,730)

Net cash flow of financing activities (318,811,177) 1,144,491,991 (1,392,530,776) (67,532,895)

4. Influence of exchange rate change to cash 40,816,432 (5,533,265) 28,442,821 (941,298)

IV (56)(b), XIV

5. Cash net (decrease)/increase (6)(b) 455,642,292 (1,581,140,392) 533,837,551 (1,464,249,374)

Add: starting cash balance 1,882,283,319 3,463,423,711 1,272,228,765 2,736,478,139

6. Closing cash balance IV (56)(d), XIV (6)(b) 2,337,925,611 1,882,283,319 1,806,066,316 1,272,228,765

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

Enterprise principal: Song Hailiang Accounting principal£ºHuang Qingfeng Accounting firm principal£ºWang Jue

-4-

Shanghai Zhenhua Heavy Industries Co., Ltd.

2015 consolidated shareholders' equity sheet

(Unless otherwise specified, the amount units is RMB)

Shareholders' equity attributed to parent company

Total shareholders'

Item Note Contributed Other integrated Minority equity

equity

Capital stock surplus profits Surplus reserves Undistributed profit

Jan 1, 2014 starting balance 4,390,294,584 5,543,176,483 248,928,049 1,520,147,861 2,808,057,854 203,105,074 14,713,709,905

Consolidated adjustment of companies under the same control - 195,065,203 - - 11,990,211 429,842,198 636,897,612

Jan 1, 2014 starting balance(iterated) 4,390,294,584 5,738,241,686 248,928,049 1,520,147,861 2,820,048,065 632,947,272 15,350,607,517

2014 movement

Total integrated profits

Net profit IV (41) - - - - 202,223,273 (45,637,225) 156,586,048

Other integrated profits

- Fair value change profit or loss of financial assets (39) for sale - - 72,752,627 - - - 72,752,627

- Conversion difference of foreign currency statements - - (2,140,634) - - (9,880) (2,150,514)

Total integrated profits - - 70,611,993 - 202,223,273 (45,647,105) 227,188,161

Capital increased and reduced by shareholders

Capital increased by shareholders VI (1) - - - - - 30,805,357 30,805,357

Profit distributed

Picking surplus reserves IV (41) - - - 34,458,164 (34,458,164) - -

Dec 31, 2014 closing balance(iterated) 4,390,294,584 5,738,241,686 319,540,042 1,554,606,025 2,987,813,174 618,105,524 15,608,601,035

Jan 1, 2015 starting balance(iterated) 4,390,294,584 5,738,241,686 319,540,042 1,554,606,025 2,987,813,174 618,105,524 15,608,601,035

2015 movement

Total integrated profits

Net profit V (40) - - - - 212,411,967 (18,206,279) 194,205,688

Other integrated profits

- Fair value change profit or loss of financial assets(39) for sale - - (123,536,363) - - - (123,536,363)

- Conversion difference of foreign currency statements - - 11,656,558 - - 5,309,103 16,965,661

Total integrated profits - - (111,879,805) - 212,411,967 (12,897,176) 87,634,986

Capital increased and reduced by shareholders

Capital increased by shareholders VI (1) - - - - - 273,402,314 273,402,314

Profit distributed

Picking surplus reserves IV (41) - - - 21,494,761 (21,494,761) - -

Distributed to shareholders - - - - (10,191,679) (21,191,352) (31,383,031)

Consolidation impact of companies under the same control - (211,263,111) - - - 59,657,111 (151,606,000)

Dec 31, 2015 closing balance 4,390,294,584 5,526,978,575 207,660,237 1,576,100,786 3,168,538,701 917,076,421 15,786,649,304

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

Enterprise principal: Song Hailiang Accounting principal£ºHuang Qingfeng Accounting firm principal£ºWang Jue

-5-

Shanghai Zhenhua Heavy Industries Co., Ltd.

2015 company shareholders' equity change list

(Unless otherwise specified, the amount units is RMB)

Item Note Capital stock Contributed surplusOther integrated Surplus reserves Undistributed profitTotal shareholders' equity

Jan 1, 2014 starting balance 4,390,294,584 5,789,984,601 248,889,422 1,519,639,588 2,589,442,406 14,538,250,601

2014 movement

Total integrated profits

Net profit - - - - 344,581,636 344,581,636

Other integrated profits

- Fair value change profit or loss of financial assets available for sale - 102,201,212 - - 102,201,212

Total integrated profits - - 102,201,212 - 344,581,636 446,782,848

Profit distributed

Picking surplus reserves - - - 34,458,164 (34,458,164) -

Dec 31, 2014 closing balance 4,390,294,584 5,789,984,601 351,090,634 1,554,097,752 2,899,565,878 14,985,033,449

Jan 1, 2015 starting balance 4,390,294,584 5,789,984,601 351,090,634 1,554,097,752 2,899,565,878 14,985,033,449

2015 movement

Total integrated profits

Net profit - - - - 214,947,606 214,947,606

Other integrated profits - - - - - -

- Fair value change profit or loss of financial assets available for sale - (73,498,300) - - (73,498,300)

- Conversion difference of foreign currency statements - - 1,414,505 - - 1,414,505

Total integrated profits - - (72,083,795) - 214,947,606 142,863,811

Profit distributed

Picking surplus reserves - - - 21,494,761 (21,494,761) -

Consolidation impact of companies under the same control - 2,542,999 - - - 2,542,999

Dec 31, 2015 closing balance 4,390,294,584 5,792,527,600 279,006,839 1,575,592,513 3,093,018,723 15,130,440,259

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

Enterprise principal: Song Hailiang Accounting principal£ºHuang Qingfeng Accounting firm principal£ºWang Jue

-6-

Audit Report

PricewaterhouseCoopers Zhongtian Shenzi (2016) No. 10027

(Page 1 of 2)

To the shareholders of Shanghai Zhenhua Heavy Industries Co., Ltd,

We have audited the accompanying consolidated as well as company¡¯s financial statement of

Shanghai Zhenhua Heavy Industries Co., Ltd , including the company¡¯s and the consolidated

balance sheets as of 31. December 2015, 2015 ¡äs P&L and company¡¯s income statement,

shareholders¡ä equity movement statements, cash flow statements and notes to the financial

statements.

I. The Management responsibilities on the statements

Preparing and fairly stating financial statements are the responsibilities of the management of

Shanghai Zhenhua Heavy Industries Co., Ltd. These responsibilities include:

(1) The preparation of financial statements in accordance with the provisions of the corporate

accounting standards, and to achieve a fair reflection;

(2) Design, implement and maintain the necessary internal controls, to material misstatement

due to fraud or error in the financial statements.

II. The CPA¡äs Responsibilities

Our responsibilities are to provide audit opinions based on our auditing. We conducted the

audit on the basis of China CPA Norms, which requires us to abide by professional virtues and

norms to plan and conduct audit to ensure there exist no serious reporting errors in the financial

statements.

The audit includes implementing the audit procedures to acquire financial statements figures

and audit evidence. Audit procedures are chose based on CPA¡äs judgment, including the

estimate of risks for possible misreports due to cheating or errors. When estimating risks,

certified public accountants consider internal control related to the financial statements

preparation and fair presentation, in order to design audit procedures that are appropriate, but

not to provide opinions on effectiveness of the interior controls. The audit also Includes the

evaluating of the appropriateness of utilization of accounting policies and accounting estimates

by the management, and the evaluating of the total reporting of the financial statements.

We believe that we have acquired sufficient and appropriate audit evidences, which provide the

basis for the auditor¡¯s opinions.

PrincewaterhouseCoopers China Limited accounting firm (special general partnership)

11/F., PricewaterhouseCoopers Center,2 Corporate Avenue,202 Hu Bin Road, Huangpu District, Shanghai, PRC, Postal

code: 200021

Tel: +86 (21) 2323 8888, Fax: +86 (21) 2323 8800, www.pwccn.com

Audit Report (continued)

PricewaterhouseCoopers Zhongtian Shenzi (2016) No. 10027

(Page 2 of 2)

III. Auditor¡äs Opinions

In our opinion, the accompanying financial statements of Zhenhua Heavy Industries has been

prepared according to stipulations of the enterprise accounting norms and present fairly, in all

material respects, the financial position of the Consolidation and Zhenhua Heavy Industries as of

31, December 2015 and of the results of its operations and its cash flows in 2015.

PrincewaterhouseCoopers China Limited CPA__________________

The accounting firm (special general partnership) Zhao Bo

Shanghai, China CPA________________________

March, 28, 2016 Jin Wen

-2-

Shanghai Zhenhua Heavy Industries Co., Ltd.

FINANCIAL STATEMENTS & AUDITORS REPORT 2015

Shanghai Zhenhua Heavy Industries Co., Ltd.

FINANCIAL STATEMENTS & AUDITORS REPORT 2015

Page

Auditor¡äs Report 1-2

Financial Statements 2015

Consolidated and Company's B/S 1-2

Consolidated and Company's P/L 3

Consolidated and Company's Cash Flow Statements 4

Consolidated Shareholder's Equity Movement Statements 5

Company Shareholder's Equity Movement 6

Financial Statements Notes 7 - 145

Supplementary Information 1

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

I The Company¡äs basic situation

Shanghai Zhenhua Heavy Industries (Group) Co., Ltd. (hereinafter ¡°the

Company¡±) was established in Shanghai, on 8 September 1997 as part of an

exercise to reorganize its predecessor, Shanghai Zhenhua Port Machinery

Company Limited. The Company is registered in P. R. China¡¯s Shanghai.

As approved by ZhengWeiFaZi (1997) No. 42 document issued by the Securities

Commission under the State Council, the Company issued 100 million listed

foreign investment shares (B-shares) to overseas investors from July 15, 1997 till

July 17, 1997. The B-shares were listed for trading at Shanghai Stock Exchange

on Aug. 5, 1997.

As approved by GongsiZi (2000) No. 200 of China Securities Regulatory

Commission, the Company added issuing of 88 million RMB common shares (A-

shares) to domestic investors in Dec. 2000. The A-shares were listed for trading

at Shanghai Stock Exchange on Dec. 21, 2000.

In accordance with ZhenJianFaXingZi (2004) No. 165 by China Securities

Regulatory Commission, the Company issued 114,280,000 A-shares to domestic

investors on Dec. 23, 2004. The said issuances were listed at Shanghai Stock

Exchange respectively on Dec. 31, 2004 and Jan. 31, 2005 for trading.

In accordance with ZhenJianFaXingZi (2007) No. 346 by China Securities

Regulatory Commission, the Company issued 125,515,000 A-shares to domestic

investors on Oct. 15, 2007. The said issuances were listed at Shanghai Stock

Exchange respectively on Oct. 23, 2007 and Jan. 23, 2008 for trading.

As approved by CSRC Zheng Jian Xuke (2009) No. 71 document, the Company

issued non-publicly 169,794,680 A-shares on Sep. 22, 2008, to its controller

China Communications Construction Co., Ltd. (¡°China Communications

Corporation¡±). From Mar. 20, 2012 on, limitation term expires for above-mentioned

A-shares which are listed at Shanghai Stock Exchange for trading (Note 5(34)).

As of Dec. 31, 2014, after all issues of shares and bonus shares distribution,

capital stock of the Company is increased to 4,390,294,584 shares, par value per

share 1 Yuan, totally 4,390,294,584 Yuan.

On Dec. 18, 2005, China Road and Bridge Construction Group General Company

combined with the company¡¯s controlling holder China Harbor Construction

(Group) General Company after reorganization into China Transportation

Construction (Group) Co. Ltd. (hereafter called Communications Group). In

accordance with the Reply to Issue Concerning Listing of China Communications

Construction Co. Ltd. Entirely after Reorganization on Both Domestic and

Overseas Market (Guozi Gaige [2006] No. 1063) by State Assets Commission on

Aug. 16, 2006, Reply to Issue Concerning Management of State Stock of China

Communications Construction Co. Ltd. (Guozi Chanquan [2006] No. 1072) on

Sep. 30, 2006, which granted the reorganization proposal of Communications

Group, and in addition to the Reply to Approve China Communications

-7-

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

Construction Co. Ltd.¡¯s Announcement of Purchase Report of Road and Bridge

Construction Co. Ltd. and Shanghai Zhenhua Port Machinery (Group) Co. Ltd.

and the Exemption of Purchase Offer Obligations (Zhengjian Gongsi Zi [2006] No.

227), on Oct. 8, 2006 Communications Group solely initiated the establishment of

China Communications Construction Co. Ltd. (hereafter Communications

Company), and invested the stock rights of the Company it held into the newly

established Communications Company. With completion of reorganization,

Communications Company thus becomes the controlling shareholder of the

Company.

The Company and its subsidiaries (jointly called ¡°the Group¡±) are engaged in

design, building, installation of heavy port handling system and machinery, heavy

ocean equipment, engineering machinery, engineering vessels, large metal

structures & components, parts; leasing of self-manufactured cranes; sales of

self-produced products; professional contracting of international ocean shipping

and steel structure engineering with special vessels for whole-machine

transportation.

Refer to Note 6 for main subsidiaries in scope of consolidation this year. The

company covered in scope of consolidation is Shanghai Zhenhua Heavy Qidong

Marine Engineering limited Company (Qidong Marine Company). Refer to Note

¢õ(1) and (2) for details.

This financial report is disclosed on Mar. 28, 2016 through approval by the

Company¡¯s board of directors.

II Major accounting policies and accounting estimates

The Group determines concrete accounting policies and accounting estimates

based on production and operating characters. It mainly shows in provision for

bad debts of accounts receivable (Note ¢ò(10)), inventory valuation method (Note

¢ò(11)), judgment standard of impairment of available for sale equity instruments

impairment (Note ¢ò(9)), depreciation of fixed assets and amortization of

intangible assets (Note ¢ò(15)and (18)), judgment standard of development

expenditure capitalized (Note ¢ò(18)), measurement of investment real estate

(Note ¢ò(14)) and Recognition of income (Note ¢ò(24)), etc.

Refer to Note ¢ò (29) for key assumptions used in important accounting

estimates by Group

(1) Basis of preparation for financial statements

(a) Standards and rules for financial statements establishment

The financial statements are prepared on the basis of Enterprise Accounting

Standards ¨C Basic Standards and 38 concrete accounting standards issued on

Feb. 15, 2006, guidelines and explanation of the accounting standards, and other

related stipulations (hereafter totally called ¡°Enterprise Accounting Standards¡±)

and CSSRC¡¯s Listed Company with Public Securities Information Disclosure

-8-

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

Coding Rules No. 15 ¨C General Rules on Financial Report (Revised in 2010).

During the year, the Company acquired 32.51% stock right of CCCC Tianhe

Company in cash and obtained the control right through concerted action

agreement. Before the acquisition, CCCC Stock was the controlling shareholder o

the Company and the CCCC Tianhe Company, therefore the acquisition belonged

to enterprises combination under the same controlling (further detailed in Note 5).

Acquired CCC Tianhe Company's assets and liabilities are accounted in historical

cost and included in consolidated financial statements of the company, which is

always means CCC Tianhe is treated as a part of the Group and reflected in

report in the earliest period. Accordingly, the company has relisted the

comparative data of consolidated financial statements in 2014.

(b) Going concern basis

As of December 31, 2015, the Group's current liabilities exceed current assets by

about 11.38 billion Yuan and net cash flow caused in operating is about 1.83

billion Yuan. In the preparation of the financial statements for the year, given the

amount of bank credit, financing record the Group has achieved to obtain, good

cooperation relationship with banks and financial institutions and the operating

performance, the board of directors of the Company consider that the Group is

able to continue to acquire sufficient operating cash flow and sources of financing,

to ensure funds required for repayment of debt maturity and capital expenditure.

Therefore, the board of directors of the Company ensures that the Group will

continue to operate, and thus to base the preparation of the financial statements

for the year on sustainable operation. The annual financial statements do not

include any adjustment of the Group and the Company which fails to meet the

conditions included in continuous operation.

(2) Declaration on abiding by the Enterprise Accounting Standards

The Company follows the requirements of enterprise accounting standards in

preparing 2015 financial statements, which authentically and completely reflect

the consolidated and the Company¡¯s financial status on Dec. 31 of 2015 and the

consolidated and the Company¡¯s operating result and cash flow during 2015.

(3) Accounting period

Calendar year, from January 1 till December 31

(4) Recording currency

RMB is the monetary currency of the Group

(5) Enterprise merger

(a) Merger of enterprises under the same controller

Merger consideration paid and the net assets acquired by the merger party are

valued by book value. The difference between the book value of the net assets

-9-

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

acquired by the merger party and the merger consideration paid is adjusted to the

capital reserve. When capital reserve is not sufficient to compensate, retained

interest is thus adjusted. Direct expenses related to enterprise merger are booked

into current P&L at the time of incurrence. Transaction expenses from issuing

equity securities or liability securities for the purpose of enterprise merger are

booked into initially recognized amount of equity securities or liability securities.

(b) Merger of enterprises not under the same controller

Merger cost of the merger party and recognizable net assets acquired in the

merger are valued by fair value. The difference of the merger cost larger than fair

value of the recognizable assets of the purchased on purchase day is confirmed

as goodwill. The difference of the merger cost smaller than fair value of the

recognizable assets of the purchased on purchase day is booked into current

P&L. Direct expenses related to enterprise merger are booked into enterprise

merger cost. Transaction expenses from issuing equity securities or liability

securities for the purpose of enterprise merger are booked into initially recognized

amount of equity securities or liability securities.

(6) Preparation of consolidated statements

The consolidated statements consist of those of the Company and the

consolidated subsidiaries.

Subsidiary is consolidated from the date on which effective control over the

subsidiary is exercised by the Company; subsidiary is no longer consolidated from

the date when that control ceases. All material intercompany transactions,

balance and unrealized profit on transactions between group companies are

compensated. In the consolidated statements, minority interests which are not

owned by the Company are listed under shareholder¡¯s equity as individual entry.

When there is discrepancy between accounting policies adopted by subsidiaries

and the Company, statements of subsidiaries is adjusted according to the

Company¡¯s policies upon consolidation. When subsidiary acquired through

merger of enterprise not under the same controller, its financial statements are

adjusted on the basis of fair value of the recognizable net assets as of purchase

day.

All significant accounts¡¯ balance, transaction and unrealized profit within the

Group are off-set in preparation of the consolidated statements. Owners¡¯ equity of

subsidiaries and that part of the current net profit and loss not attributable to the

Company is shown under shareholders¡¯ equity and net profit in consolidated

financial and current net profit and loss statements as minority interest and

minority gains and losses. As for the unrealized profit and loss of internal

transaction that the subsidiaries sell assets to the Company, it is distributed and

off-set in the net profit attributed to the shareholders of the Company and the

profit and loss of minority shareholders according to the proportion attributed to

the subsidiaries. As for the unrealized profit and loss of internal transaction that

the subsidiaries sell assets to each other, it is distributed and off-set in the net

profit attributed to the shareholders of the parent Company and the profit and loss

- 10 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

of minority shareholders according to the proportion of the subsidiaries.

The transaction shall be adjusted from the point of the Group if the Group or

Company or subsidiaries has different reorganization for the same transaction as

the accounting main body.

- 11 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

II Major accounting policies and accounting estimates (continued)

(7) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, deposits readily available for

the payment of and investment holdings of short-term, highly liquid and readily

convertible to known amounts of cash, with an insignificant risk of changes in

value.

(8) Foreign currency translation

(a) Foreign currency transaction

Transactions denominated in foreign currencies are translated into RMB by the

sight rate on the transaction day.

Monetary assets and liabilities denominated in foreign currencies at the balance

sheet date are translated into RMB at the exchange rates at sight. Exchange

differences from special borrowing of foreign currency for the purpose of

purchasing or manufacturing assets meeting qualifications for loan expenses

capitalization are capitalized during the period of capitalization; other exchange

differences are directly booked into current P&L. Non-currency items of foreign

currency calculated on historical cost basis are translated at the rate at sight on

the date of transaction. Amount of impact of exchange rate fluctuation on cash

amount is separated in the cash flow statements.

(b) Foreign currency financial statements translation

For Assets/liabilities items in the Assets/liabilities statements for business

operating abroad, exchange rate at sight on the Assets/liabilities statements date

is used for translation. In the shareholders ' equity, except retained earnings

items, other items are translated using the spot exchange rate at the time of

incurrence. Overseas operating revenues and expenses items in the income

statements are translated using spot exchange rate on the day of incurrence.

Difference of foreign currency statement translation mentioned above is shown as

a separate item in the shareholders ' equity. Overseas operation cash flow items

are translated by the spot exchange rate on the day of cash flows incurrence.

Effect of exchange rate changes on cash amount is shown separately in the cash

flow statements.

(9) Financial instruments

(a) Financial assets

(i) Classification on financial assets

The Group¡äs financial assets are classified at the beginning of recognition into:

Financial assets calculated by fair value whose movement booked into current

income statement, Receivables, Available-for-sale financial assets and the held to

maturity investment. Classification of financial assets is determined by the

- 12 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

intention and capability of the group in holding the financial assets. The Group

does not held maturity investment.

Financial assets calculated by fair value, changes of which booked into current

income statement

Financial assets calculated by fair value, whose movement booked into current

income statement, refer to the financial assets originated from derivative financial

instruments, which are shown in B/S as marketable financial assets.

- 13 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

II Major accounting policies and accounting estimates (continued)

(9) Financial instruments (continued)

(a) Financial assets (continued)

(i) Classification on financial assets (continued)

Receivables

Receivables are non-derivative financial assets which have no quotation on active

market, whose collectable amount is fixed or can be determined.

Available-for-sale financial assets

Available-for-sale financial assets are marketable non-derivative financial assets

fixed at the beginning of recognition and financial assets not classified into Others.

Available-for-sale financial assets to be sold within 12 months from B/S day are

booked in B/S as Other current assets.

(ii) Recognition and Measurement

Financial assets at the time when the Group becomes a party to the contract of

financial instruments are recognized in the balance sheet at fair value. Of the

financial assets whose amount initially recognized fair value and changes into

current profit or loss statement, related transaction costs incurred at acquisition

are included directly in current profit or loss; other financial assets transaction

costs are included in the initially recognized amount.

Financial assets measured at fair value and whose changes booked into current

profit or loss and financial assets available-for-sale are subsequently measured at

fair value, but equity instrument investments which are not quoted in an active

market and whose fair value cannot be reliably measured are measured at cost;

receivables are measured by cost after amortization, using the effective interest

rate method.

Changes in fair value of financial assets measured by fair value and whose

changes include in the current profit or loss are included in current profit or loss as

gains/losses of fair value change; interest or cash dividends in the asset holding

period, as well as disposal gains and losses at disposal are included in the current

profit and loss.

In addition to impairment losses and the exchange gains and losses from foreign

currency monetary financial assets, fair value changes of financial assets

available for sale are recognized directly in shareholders¡¯ equity, and upon de-

recognition of the said financial assets, the cumulative amount of changes in the

fair value formerly recorded in shareholder¡¯s equity is reversed into current P&L.

Cash dividends which the investment units have declared issuing related to equity

instruments available for sale investment are included in current profit or loss as

investment income.

- 14 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

II Major accounting policies and accounting estimates (continued)

(9) Financial instruments (continued)

(a) Financial assets (continued)

(iii) Financial assets impairment

Apart from financial assets measured by fair value and whose changes included in

current profit or loss, the Group conducts, on balance sheet date, check up over

the carrying value of the financial assets. If there is objective evidence that

particular financial assets are impaired, provision for impairment is made.

Objective evidence that a financial asset is impaired, refers to matters that after

initial recognition of the financial asset the actual financial assets incurred, the

estimated future cash flows affected, and the Group can reliably measure the

effect.

Objective evidence proving impairment of available-for-sale equity instruments

investments includes serious or non-temporary decline in fair value with equity

instruments investments. This Group checks separately various available-for-sale

equity instrument investments as of B/S day. In case the fair value of equity

instrument investment on the B/S day is more than 50% (including 50%) of the

initial investment cost or during of fair value being lower than its initial investment

exceeds more than one year (including one year), it indicates that impairment

incurs; In case the fair value of equity instrument investment on the B/S day is

more than 20% (inclusive) but not yet to 50% of the initial investment cost, the

group will take into account other relevant factors such as price volatility, to

determine whether the investment in equity instruments are impaired. The Group

values the initial investment cost of tradable equity tools on weighted average

basis.

When financial assets carried at amortized cost is impaired, provision for

impairment is made according to the difference of the present value of the

estimated future cash flows (not including the future credit losses that have not yet

occurred) lower than the book value. If there is objective evidence that the

financial assets value has been restored, and it is objectively related with the

events incurred after the confirmation of the loss, the previously recognized

impairment loss is reversed into current profit or loss.

When impairment of available for sale financial assets measured by fair value

incurs, the cumulative loss originally included directly in shareholders ' equity due

to decline in the fair value is transferred out and included in the impairment loss.

For available-for-sale debt investments whose impairment loss has been

confirmed, when in future period fair value increases and is objectively related to

the events following the impairment loss confirmation, the impairment loss

previously recognized shall be reversed and accounted for in current P&L. For

impairment loss of available-for-sale equity instruments investments confirmed,

increased fair value in future period is directly carried forward to shareholders '

- 15 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

equity.

When the financial assets available for sales accounted as cost decrease in value,

the difference between the book value and the actual value confirmed by the cash

flow realization in future according to the current market profit rate of similar

financial assets is regarded as value decrease loss, accounted in the current profit

and loss. The occurred value decrease loss is not returned in the next period.

(a) Financial assets (continued)

(iv) Termination of recognition of financial assets

When financial assets meet one of the following conditions, recognition is

terminated: (1) contractual right to receive the financial assets cash flow

terminates; (2) the said financial assets have been transferred and the Group has

transferred almost all of the risks and rewards concerning the financial assets

ownership to the transferee; or (3) the financial assets have been transferred,

although the Group has neither transferred nor retained almost all of the risks and

rewards concerning the financial assets ownership, has given up the control over

the Financial assets.

When the Financial assets are derecognized, the difference between the book

value and the sum of the equity price received and the cumulative amount of fair

value change originally booked in equity is booked in current profit or loss.

(b) Financial liabilities

Financial liabilities are classified at the initial recognition into financial liabilities

measured by fair value and booked into current P&L, and other financial liabilities.

Financial liabilities of the group mainly include financial liabilities calculated by fair

value, whose movement booked into current income statement and other financial

liabilities.

Financial Liabilities calculated by fair value, whose movement booked into current

income statement

Financial liabilities calculated by fair value, whose movement booked into current

income statement, refer to the financial liabilities originated from derivative

financial instruments. Financial Liabilities calculated by fair value, whose

movement booked into current income statement, valued by fair value initially, and

calculated by faire value.

Other Financial Liabilities

Other Financial Liabilities include: payables, loans and bonds payable. Payables

include accounts payable, other payables, valued by fair value initially, followed

up by valuing post-amortization cost on the basis of actual interest rate.

- 16 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

Loans and bonds payable are initially valued by the amount of fair value after

deducting transaction expenses, and followed up by valuing post-amortization

cost on the basis of actual interest rate.

Other financial liabilities due less than one year (inclusive) are listed as current

liabilities; those due within more than one year but due within one year from the

balance sheet date (inclusive) are listed as non-current liabilities due within one

year; the rest are listed as non-current liabilities.

When present obligation of financial liabilities is entirely or partially dismantled, the

related financial liabilities or those whose obligation has been dismantled are

terminated as recognition. The difference between the book value of the those

terminated and the consideration paid is booked into current P&L.

- 17 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

II Major accounting policies and accounting estimates (continued)

(9) Financial instruments (continued)

(c) Confirmation of the fair value of financial instruments

Financial instruments with active market decide their fair value by the quotation on

the active market, while financial instruments without active market decide its fair

value by evaluation technology. When estimating the value, the Group adopts the

applicable value estimation technology with enough data and supported by other

information, select the input value in accordance with the assets or debt feature

considered in the related assets or debt transaction of the participants in the

market. The related observable input value shall take the priority. If it is not

possible and practical to obtain the related observable input value, use the input

value not observable.

(10) Receivables

Receivables refer to accounts receivable and other receivables. The Group

confirms the initial amount of accounts receivable from exported goods or

provided labor by the fair value of contracted agreed upon price receivable from

purchaser or labor acceptor.

(a) Accounts receivable

(i) Accounts receivable with big single amount and individual bad debt provision is

made

As of accounts receivable with single big amount, individual test is made on value

depreciation. When proof shows the Group is not able to collect the account

receivable as prescribed, bad debt provision is made.

Standard of single big amount: top 5 of the receivable from third party

Method of bad debt provision being made with big single amount: based on the

difference of the present value of the expected future cash flow of the account

receivable lower than its book value.

(ii) Accounts receivable whose bad debt provision is totally made in group

Accounts receivable not with big single amount, together with accounts receivable

whose value is not decreased after being individual test, are classified into groups

by credit risk features and bad debt provision is made, on the basis of actual loss

rate of prior period accounts receivable of the same or similar kind, with similar

credit risk features, combining present situation.

Credit risk groups are determined by the following criteria:

Group 1 Accounts receivable from related party

Group 2 Accounts receivable from third party

- 18 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

II Major accounting policies and accounting estimates (continued)

(10) Receivables (continued)

(a) Accounts receivable (continued)

(ii) Accounts receivable whose bad debt provision is totally made in group (continued)

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

Group 1 Bad debt provision shall not be made of accounts

receivable from related party except proof shows the

Group is not able to collect them.

Group 2 Debt age analysis method (considering future

collection)

Among the groups, proportion of accrual on aging analysis basis is listed as

follows:

Debt age

Provision proportion

1£­6 months -

7£­12 months 1%

1£­2 years 15%

2£­3 years 30%

3£­4 years 50%

4£­5 years 75%

Over 5 years 100%

(iii) Accounts receivable not of big single amount but individually provided for bad

debt:

Reason for individual accrual of bad debt provision: proof shows the Group will not

be able to the accounts receivable on the basis of former clauses.

Method of accrual of bad debt provision: accrued according to the difference

between the present value of its expected future cash flow lower than its book

value

(b) Other receivables

(i) Other receivables of big single amount and individually provided for bad debt:

As for other receivables of big single amount, individual impairment test is made.

When proof exists to show the Group will not be able to collect them according to

prescribed clauses, bad debt provision is made.

- 19 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

Standard of single big amount: top 5 of the receivable from third party

Method of bad debt provision being made with big single amount: based on the

difference of the present value of the expected future cash flow of the other

receivables lower than its book value.

II Major accounting policies and accounting estimates (continued)

(10) Accounts receivable (continued)

(b) Other accounts receivable (continued)

(ii) Other accounts receivable whose bad debt provision is totally made in group

Other accounts receivable not with big single amount, together with accounts

receivable whose value is not decreased after being individual test, are classified

into groups by credit risk features and bad debt provision is made, on the basis of

actual loss rate of prior period accounts receivable of the same or similar kind,

with similar credit risk features, combining present situation.

Credit risk groups are determined by the following criteria:

Guarantee deposit (not include quality guarantee

Group 1

deposit)

Group 2 Employee¡äs loan and reserve fund

Group 3 Other accounting receivable in other nature

The provision method of bad debt provision by credit risk portfolio

Group 1 Except for that the objective evidence proves that the

Group can¡¯t retake the payment according to the original

articles of other receivables, the Group shall not make

bad debt provision for the cash deposit (excluding

quality cash deposit)

Group 2 Bad debt provision shall not be made of accounts

receivable from employee¡¯s loan and reserve fund

except proof shows the Group is not able to collect

them.

Group 3 Debt age analysis method

Among the groups, proportion of accrual on aging analysis basis is listed as

follows:

Debt age

Provision proportion

1£­6 months -

7£­12 months 1%

1£­2 years 15%

2£­3 years 30%

- 20 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

3£­4 years 50%

4£­5 years 75%

Over 5 years 100%

- 21 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

II Major accounting policies and accounting estimates (continued)

(10) Accounts receivable (continued)

(b) Other accounts receivable (continued)

(iii) Bad debt provision of other receivables not of big single amount but individually

provided for bad debt

Reason for individual accrual of bad debt provision: proof shows the Group will not

be able to the other receivables on the basis of former clauses.

Method of accrual of bad debt provision: accrued according to the difference

between the present value of its expected future cash flow lower than its book

value

(c) Bad debt loss confirmation standard

To the proven non-collectable receivables such as when debtors dissolved or

bankrupt or insufficient assets to cover debts or insufficient cash flow, bad debt

loss is confirmed and will offset accrued corresponding bad debt provision.

(d) Transfer of receivables

In case of account receivable the Group transfers to financial institutions with no

retrospective rights retained, the difference between the transaction amount and

the moved receivables¡¯ book value and related taxes is taken into current period

income statement.

(11) Stock

(a) Classification

Stock includes raw materials purchased spare parts and semi-products, reported

in the lower between cost and cashable net value.

(b) Valuation method of issuing stock

Cost of goods in stock and semi-products includes raw material cost, direct labour

cost and manufacturing cost calculated in systematic way under normal

productivity.

(c) Basis on deciding cashable present value of stock and accrual of inventory

depreciation reserve:

- 22 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

When stock cost is higher than net realizable value, the part less than the net

realizable value is provided as impairment provision. Stock impairment provision

is made based on individual items when cost higher than net realizable value. The

net realizable value of items in normal manufacturing process is calculated on the

amount of estimated selling price deducting future cost, selling expenses and

taxes till the completeness of the manufacture.

(d) The Group's stock inventory system adopts a perpetual inventory system.

- 23 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

II Major accounting policies and accounting estimates (continued)

(11) Stock (continued)

(e) Amortization of perishables and packing materials

Turn-over materials include perishables and packing materials etc. Perishables are

amortized by turns while packing is amortized at one time.

(12) Building contracts

For customized large port equipment with fixed price, because the start and the

finishing of the project are in different accounting years, the Company uses building-

contract method to calculate the revenue and the cost.

(a) If the selling result of individual building contract can be reliably estimated, the

revenue and expenses can be recognized in proportion of completeness on the day

of balance sheet.

(i) Project progress proportion is made on the report day according to the revenue

recognition stage stipulated in the contract. The Company confirmed the following 3

revenue recognition stages:

Stage 1: body steel structure completed and erected;

Stage 2: manufacturing, installation and initial testing completed, product ex-plant

qualification certificate issued, shipping documents acquired, product ready to be

shipped;

Stage 3: product finally delivered after being checked and approved by purchaser,

final delivery certificate issued by purchaser acquired.

The Group will analyze the building contracts completed in prior year and recognize

progress proportion of each revenue recognition stage on the basis of the proportion

of the cost of the revenue recognition stage in real total costs and recognize it as the

progress proportion at various stages in current period.

(ii) For heavy equipment and construction project, progress of completeness is

recognized by the proportion of accumulated cost incurred in total expected cost.

The accumulated cost does not include that related to contract future activities.

(iii) Progress of completeness of steel structures is determined by the proportion of

cumulative tons of processing completed in total tons of processing.

(b) When individual building contract result is not able to be reliably estimated, the

following methods are used:

(i) When contract cost can be covered, contract revenue is recognized according to

real contract cost that can be covered, contract cost is recognized as expenses in

the period when cost incurs.

(ii) When contract cost cannot be covered, it can be recognized as expenses

- 24 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

immediately when it incurs; no contract revenue is confirmed.

(c) When expected total contract cost exceeds total revenue, the expected losses

should be immediately recognized as expenses in current period.

- 25 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

II Major accounting policies and accounting estimates (continued)

(12) Building contracts (continued)

(d) When contract value is settled in installments, the settled installment is recognized

as settled value, which will be transferred and set off with related accumulated costs

and confirmed margin on the day of building contract completed. On the balance

sheet day, when the addition of accumulated costs and confirmed margin exceeds

the accumulated settled value, the difference is listed as completed but not yet

settled item in current assets. Otherwise, it will be listed in settled but not completed

item in current liabilities.

(13) Long term equity investment

Long term equity investment including: Long term equity investment into the

Company¡¯s subsidiaries; Long term equity investment into the joint undertaking;

Long term equity investment for which the Group exercises no control or co-

control over the investee company

Subsidiary is the investee company over which the Company exercises control; a

joint undertaking is an investee over which the Company exercises control

together with other parties. Investment to subsidiaries is recorded in the amount

confirmed by cost method in the Company¡¯s individual financial statements, and

consolidated after adjustment in equity method while compiling consolidated

statements.

Investment in subsidiaries is listed by the amount determined according to cost

method of company financial statements and consolidated after adjustment

according to equity method in preparation of the consolidated financial

statements; investment in joint ventures and the associates shall be accounted by

the equity method.

(a) Confirmation of investment cost

As of long-term equity investments from enterprise merger: long-term equity

investment obtained from the merger of enterprises under the same controller,

investment costs are recognized by the share of the owner's equity book value as

of the merger date; long-term equity investment obtained from the merger of

enterprises not under the same controller, investment costs are recognized by the

costs of merger.

As of long-term equity investments from other ways rather than enterprise merger:

initial investment costs of long-term equity investment obtained from paying cash

are recognized by the actual purchase price; as of long-term equity investments

from issuing equity securities, their initial costs are recognized by the fair value of

the issued equity securities.

- 26 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

(b) Follow-up valuation and gains/losses recognition method

Long term share investment accounted in cost method is valued by original cost.

Cash dividend or profit announced by the investee is confirmed into current

period¡¯s investment income.

As of long-term equity investment based on equity, when the initial investment

cost is larger than the share of the fair value of recognizable net assets enjoyed of

the investee at the time of the investment, long-term equity investment cost is

recognized by the initial investment cost; when initial investment cost is smaller

than the share of the fair value of recognizable net assets enjoyed of the investee

at the time of the investment, the difference is included in current P&L, and long-

term equity investment cost is adjusted to increase accordingly.

- 27 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

II Major accounting policies and accounting estimates (continued)

(13) Long term equity investment (continued)

(b) Follow-up valuation and gains/losses recognition method (continued)

In equity method, gains/losses of investment are recognized by the amount of

investee¡¯s current period net profit or net loss share enjoyable or bearable by the

Group. The confirmed investee¡¯s net loss is limited to zero in the book value of the

long term share investment. Whereas when the Group bears extra liability for loss

and when the extra liability meets requirements for stipulated probable events,

investment loss and expected liability is further confirmed. For the movement of

investee¡¯s equity other than net gains/losses, when proportion of hold remains

unchanged, the Group calculates the part it enjoys or bears in accordance with its

proportion of share holding and directly book it into capital reserve. The

announced investee¡¯s distributed profit or cash dividends shall correspondingly

deduct the book value of long term equity investment of the Group at the time of

the announcement. However when cash dividends exceed already confirmed

investment gains but do not exceed that part of the investee¡¯s book value profit

realized after the investment is made which is enjoyed by the Group in proportion

of holding, it is confirmed as current period investment income. Gains/losses from

internal transactions between the Group and the investee enjoyed by the group

according to proportion of share-holding are confirmed as investment gains/losses

after setoff is made. When loss from internal transactions between the Group and

the investee belongs to asset impairment loss, the loss is fully confirmed,

unrealized gains/losses from which will not be set off.

(c) Basis for determining the control or co-control over investee

Control means having the power to decide on investee, and thus obtaining the

variable gains from its operation, with the ability to utilize the power of the investee

to influence the gains amount.

Co-control means enjoying control over certain arrangement according to

contract. Such arranged activities must be decided upon agreement of the Group

and the other participants that share the control rights.

Significant effect means that the company possesses the right of decision-making

participation in the financial and operating policies of the investee but is not able

to control or co-control with other party the making of such policies.

(d) Long term equity investment impairment

As of long term equity investment in subsidiary or joint undertaking, when

collectable amount is lower than the book value, the book value is decreased to

the collectable amount (Note II (20)).

- 28 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

II Major accounting policies and accounting estimates (continued)

(14) Real estate as investment

Investment real estate, including leased-out land use right and land and buildings

for rental purposes as well as buildings in the process of being constructed or

developed for rental in the future, initial measurement is made by cost. Subsequent

expenditure relating to investment real estate, when related economic benefits are

likely to flow into the Group and its cost can be measured reliably, is accounted into

the cost of investment real estate; Otherwise, it is included in the current profits and

losses statements.

Cost models for all investment property is adopted by the Group to undertake

follow-up measures; depreciation or amortization is made for buildings and land use

rights according to their estimated useful life and residual value rate. Investment

real estate rate and years of estimated useful life and residual value depreciation

(amortization) rates are listed below:

Estimated Estimated Annual depreciation

useful life residual value (amortization) rate

rate

Building 30 years 0% 3.3%

Land use Land use year 0% Decided by estimated net residual

right s value and land use years

When purpose of investment property changes to self-use, from the date of change,

convert the investment properties to fixed assets or intangible assets. When self-

use property changes to the purpose of earning rentals or for capital appreciation,

from the date of change, convert the fixed assets or intangible assets to investment

properties. Upon conversion, book value before the conversion is the recorded as

the converted value.

The anticipated service life of investment real estate, estimated net residual values

and depreciation (amortization) method is reviewed and made appropriate

adjustments at each year end.

When the investment real estate is disposed of, or permanently terminates its use

and no economic benefits are expected from its disposal, terminate the confirming

of the investment real estate. Disposal income of investment property for sale,

transfer, disposal of scrap or being destroyed is charged to current P&L after

deducting its book value and related taxes.

When the recoverable amount of the investment real estate is below its book value,

book value is written down to its recoverable amount (Note II (20)).

- 29 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

II Major accounting policies and accounting estimates (continued)

(15) Fixed assets

(a) Validation of fixed assets and initial valuation

Fixed assets include buildings and constructions, manufacturing equipment,

transportation facilities, other equipment and office equipment.

Fixed assets are confirmed when financial benefits related will probably flow into the

Group and their costs can be reliably valued. Fixed assets purchased or newly

constructed are initially valued by cost at acquisition. Fixed assets invested by the

state shareholders during the Company¡¯s reconstruction in the form of corporation

are booked by the value appraised by the state-asset managerial authorities

Follow-up expenses related to fixed assets, when related economic benefits will

most probably flow in the Group and related cost can be reliably valued, are

accounted into fixed assets cost; for the replaced part, related book value ceases

confirmation; all other follow-up expenses are booked into current income statement

at the time of incurrence

(b) Fixed assets depreciation method

Depreciation of fixed assets is made in average year method and is accrued by

deducting expected net residual value from purchase value within the expected

years for use. When impairment provision have been made to fixed assets, the

depreciation ratio and amount will be decided on the net book value after

impairment and the remained years for use.

Fixed assets expected years for use, net residual value ratio and annual

depreciation ratio after changing are listed as below:

Expected Expected net Annual

years for use residual value depreciation ratio

ratio

House and building 20-40 years 0% 2.5%-5%

Manufacturing equipment 3-20 years 0%/ Based on Calculated in

price of wasted average years after

vessel steel purchase value

less net residual

value

Office equipment and 3-5 years 0% 20%-33.3%

electrical equipment

Transportation means 5 years 0% 20%

(other than vessels)

Vessels 10-25 years 5%/10% 3.6%-9.5%

Double check is made to the estimated life of use, estimated net residual value and

method of depreciation at the end of each report year and necessary adjustment is

made.

- 30 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

II Major accounting policies and accounting estimates (continued)

(15) Fixed assets (continued)

(c) When collectable amount of fixed assets is lower than its book value, the book

valued is deducted to the collectable amount (see Note II (20)).

(d) Disposal of fixed assets

Fixed assets terminate recognition when they are disposed of, or expected to

generate no economic benefits. Difference between disposal income from fixed

assets sales, transfer, waste or damage and the book value and taxes is taken

into current period P&L.

(16) Construction in progress

Construction in progress is booked as project costs in real expenditure. Project

costs consist of building expenses, other necessary expenses which make the

construction in progress reach expected status of use, and loan expenses

occurred before it reaches the condition for use which meets qualification of

capitalization. When the project under construction reaches the expected

condition for use, it is transferred into fixed assets items and depreciation will be

made from the following month.

When collectable amount of construction in progress is lower than its book value,

the book valued is deducted to the collectable amount (see Note II (20)).

(17) Loan expenses

Loan expenses incurred from fixed assets which take rather long period of time to

purchase or manufacture in order to reach their expected state of use or sale are

capitalized and booked into the costs of the said assets at the time when asset

expenditure and loan expenses incur and when purchasing or building activities

start as a necessity to make that asset reach expected usable condition. When

the purchased or built fixed asset reached expected usable condition,

capitalization stops and loan expenses that follow are taken into current profit/loss

statement. In case purchasing activities of assets ceases accidentally and term of

cease exceeds 3 months on end, capitalization of loan expenses stops until

purchasing activities resume

Amount of expenses of special loans to be capitalized which are borrowed to

purchase fixed assets applicable to be capitalized is determined by the actual

interest expenses in current period minus interest income of those part not yet

used or by the invest income from temporary investment.

Amount of expenses of general loans to be capitalized which are borrowed to

purchase fixed assets applicable to be capitalized is determined by the weighted

average amount of expenses of accumulated asset expenses exceeding that of

special loans to multiply the weighted average actual interest rate of the general

expenses. Actual interest rate means that used to recognize initial amount of the

loans translated by discounted future cash flow in the expected loan existence

term or short applicable term.

- 31 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

II Major accounting policies and accounting estimates (continued)

(18) Intangible assets

Intangible assets consist of land use rights, software use cost and proprietary

technology, booked as cost. The evaluation value confirmed by the state-owned

administration department acts as the book value for the intangible assets

invested by the state-owned shareholders at the re-structuring of the Company. If

the price paid for outsourced land and building is difficult to distribute in a

reasonable way between the land use rights and the building, they are all

regarded as fixed assets.

Intangible assets are amortized in straight line method in the following expected

years for use.

(a) Intangible asset amortization years

Expected years for use

Land use rights Years of land use

Software use cost 5 years

Patented

technologies 10 years

(b) Regular double-check of life in use and amortization method

Double check is made by end of each year to expected life in use and

amortization method of intangible assets with limited use of life and adjustment is

thus made.

(c) R&D

Expenses of internal R&D projects are classified into that in research stage and

that in development stage, according to their nature and whether there exists

much uncertainty in the ultimate intangible assets resulted from the R&D.

Expenses in research stage are put into current P&L at occurrence; expenses in

development stage are capitalized when simultaneously satisfying the following

conditions:

It is technically feasible to complete the intangible assets to make them usable

and marketable;

The management has the intention to complete the intangible assets and to

use them or to sell them

It¡¯s able to prove how the intangible assets yield financial benefits£»

Enough technology and financial resources and other resources support and

will enable the completion of the development of the intangible assets and

- 32 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

make them to be used to sold

Expenses belonging to the intangible assets can be reliably measured.

Expenses of development stage not satisfying the conditions are put into current

P&L. Development expenses booked into P&L of prior years will not be re-

recognized as assets. Expenses of development stage already capitalized are

shown as development expenses on B/S, to be transferred into intangible assets

from the day when the project reaches its planned goal.

- 33 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

II Major accounting policies and accounting estimates (continued)

(18) Intangible assets (continued)

(d) Intangible assets impairment

When collectable amount of intangible assets is lower than its book value, the

book valued is deducted to the collectable amount (Note II (20)).

(19) Long-term prepaid expenses

The long-term prepaid expenses includes all expenses of fixed assets

improvement of operating rent and other expenses that are occurred but shall be

borne in this period and later with the prepaid period of over a year, which is

averagely amortized on installment in expected benefit period and listed in net

amount after actual expenditure subtracting accumulated amortization.

(20) Long-term asset impairment

When signs of impairment exist on B/S day with long term equity investment in

subsidiaries and associates, fixed assets, construction in progress and intangible

assets, simulating test is made to the impairment. Impairment test is made at

least once each year for the intangible assets not reaching the usable state no

matter whether there is sign of impairment. When test result shows collectible

amount is lower than its book value, provision is made on basis of the difference

and booked into impairment loss. The collectible amount is the higher between

net amount of asset¡¯s fair value deducting disposal expenses and the present

value of expected future cash flow. Asset impairment provision is calculated and

confirmed by individual piece of asset. In case collectible amount of individual

asset is difficult to value, collectible amount of asset group to which they said

individual asset belongs is confirmed. Asset group refers to the minimum asset

portfolio which independently generates cash in-flow.

Goodwill individually reported in the financial statements, no matter whether there

exists sign of impairment, test of impairment is conducted at least once a year. In

the test, the book value of the goodwill is amortized into the asset group or asset

portfolio beneficiary from the concord effect at enterprise consolidation day. The

lower part of the collectable amount of the asset group or portfolio in which

goodwill is enclosed over the book value, as shown by the test result, is confirmed

as impairment loss. The loss is firstly to compensate the book value of the

goodwill amortized in the asset group or portfolio, and then to compensate the

book value of other assets in the proportion of the book value of other assets

except for the goodwill in the asset group or portfolio.

Once asset impairment provision is made, it shall not be transferred back even

though the asset value is resumed in later period.

(21) Employee remuneration

- 34 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

The employee remuneration is the salary and compensation in various forms

provided by the Group to the employee for the service provided or rescission of

the labor relationship, including short-term remuneration and benefit after

demission.

- 35 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

II Major accounting policies and accounting estimates (continued)

(21) Employee remuneration (continued)

(a) Short-term remuneration

The short-term remuneration consists of salary, bonus, allowance and subsidy,

benefits, medical insurance, work-related injury insurance, maternity insurance

and housing fund, trade union fund and education fund. The Group takes the

actual short-term remuneration as debt during the accounting period when the

employees provide service. It will be booked in the current profit and loss or

related assets cost, in which the non-currency benefit is accounted according to

the fair value.

(b) Benefit after retirement

The Group classifies the benefit after retirement as set drawing plan and set profit

plan. The set drawing plan is the profit plan that the Group deposits the fixed

money to independent foundation and doesn¡¯t have the further payment

obligation. The set profit plan is the profit plan after retirement rather than the set

drawing plan. Within the report period, the Group¡¯s profit plan after retirement is

the basic endowment insurance, supplementary endowment insurance and

unemployment paid for the employee, belonging to the set deposit plan.

Basic pension insurance

The employees of the Group participated in the social basic endowment insurance

implemented by the local labour and social security departments. The Group pays

the endowment insurance to the local social basic endowment insurance

organization on a monthly basis according to the base and proportion specified by

the local social basic endowment insurance organization. After the employee

retires, the local labour and social security departments are responsible to pay the

basic pension to the retired employees. During the accounting period when the

employees provide service, the Group regards the payable amount based on the

social insurance as debt. It shall be booked in the current profit and loss or related

assets cost.

Supplementary endowment insurance

The Group establishes the enterprise annuity plan based on the related policies of

national annuity system. The Group provides annuity according to the proportion

of the total salary. The payment is booked as current profit and loss.

(c) Demission profit

- 36 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

When the Group proposes rescission of the labor relationship with the employee

before the labor contract expires, or proposes compensation proposal to

encourage employees to voluntarily accept labor cuts, and the Group is unable to

unilaterally withdraw the plan on the cancellation of labor relationship or the layoff

proposal, confirmation is made as of liabilities arising compensation estimated

from the cancellation of the labor relationship with the employee, which is included

in the current cost.

(22) Dividends distribution

Cash dividends approved by general annual meeting are confirmed as liabilities

within the period of the approval.

- 37 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

II Major accounting policies and accounting estimates (continued)

(23) Expected liabilities

When fulfilment of present obligation generated from product quality warranty and

loss contract may possibly cause outflow of financial interest, expected liabilities

are confirmed when the obligation amount can be reliably valued.

Expected liabilities are initially valued by the best estimates to be spent on

fulfillment of related present obligation, combining risks and uncertainty with

probabilities and time value of currency. In case currency¡¯s time value is

significant, best estimate is made by discounted future cash flow-out thus related.

Addition to the book value of expected liabilities generated from recovery of

discount with passing of time is confirmed as interest expense.

The book value of expected liabilities is double-checked and thus adjusted as of

B/S day to reflect present best estimates.

(24) Revenue recognition

Revenue is confirmed by the fair value of the contracted or agreed upon price

related to commodity sales and service providing in routine operating activities of

the Group. Revenue is recorded by the net value after deducting selling discount

and return of sales.

Revenue is confirmed when related benefits can flow into the Group, sales can be

reliably calculated and when revenue meets the special sales income recognition

standards of the following operating activities:

(a) Revenue from sales of large port equipment and ocean heavy equipment is

recognized by the proportion of completeness. (See Note II (12))

(b) Income from ship transportation is recognized at the completion of the voyage.

(c) Income is recognized at the time of delivery for the sale of spare goods or parts.

(d) Interest income is recognized by deposit term and real interest rate.

(e) Operating leasing income is recognized in leasing period by straight line method.

(f) Activities under the construction and transfer of contracts usually include

construction and transfer. As for constructing Item the Group responsible for, in

the construction phase, in accordance with the construction contract standards,

when the results can be estimated reliably, the construction contract revenue

should be valued by the fair value of consideration chargeable, at the same time

to confirm the "Long term receivables", to be written off when payment received

from the owners.

- 38 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

II Major accounting policies and accounting estimates (continued)

(25) Government subsidy

Government subsidy refers to monetary assets or non-monetary assets obtained

from the government free of charge, including tax return and financial subsidies

etc.

Government subsidy is recognized at receipt when satisfy the Group¡¯s conditions.

Monetary assets are booked by amount received or receivable. Non-monetary

assets are booked by fair value; when fair value is not reliable, amount in name is

used.

Government subsidy related to assets refers to the government subsidy obtained

by the enterprise to use for the construction or form long-term assets in other

forms. The government subsidy related to the gains refers to the subsidy rather

than the government subsidy related to assets.

If the government subsidy related to the assets is recognized as deferred income

and distributed within the life time of the assets, it is booked into current P&L. If

the government subsidy is accounted in namely amount, it is booked directly into

current P&L.

Government subsidy related to the income when used to compensate related

expenses or losses in future periods is recognized as deferred income and is

booked into current P&L in the period when related expenses are recognized.

That used to compensate paid expenses or losses is booked directly into current

P&L.

(26) Deferred corporate tax assets and liabilities

The Company confirms deferred income tax assets and deferred income tax

liabilities by the difference between the taxable base and the book value

(provisional difference). Compensable loss which can compensate future periods¡¯

taxable amount by taxable laws and regulations is confirmed as deferred income

taxable asset. In regard to provisional differences generated from initial

confirmation of assets or liabilities as a result of non-enterprise consolidation

transaction which neither influences accounting profit nor affects taxable amount

(or compensable loss), corresponding deferred income tax assets and deferred

income tax liabilities are not confirmed. On B/S day, deferred income tax assets

and deferred income tax liabilities are calculated by tax rate applicable to the

period of term the assets or liabilities are expected to be collected back.

The confirmation of deferred income tax assets is limited to the taxable amount to

compensate compensable provisional difference, compensable loss and setoff of

tax payment.

Deferred income tax liabilities generated from investment-related provisional

difference of subsidiaries, associates and joint ventures are confirmed as

- 39 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

liabilities, except for when the Group is able to control the return time of

provisional difference and when the provisional difference will not be returned in

foreseen future. Deferred income tax assets generated from investment-related

provisional difference of subsidiaries, associates and joint ventures are confirmed

as deferred income tax assets, when the provisional difference is able to be

transferred back in the foreseeable future and when possible taxable income

which is used to compensate the provisional difference can be possibly obtained

in future.

- 40 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

II Major accounting policies and accounting estimates (continued)

(26) Deferred corporate tax assets and liabilities(continued)

Deferred income tax assets and deferred income tax liabilities simultaneously

meeting the following conditions are listed in the offset net amount

Deferred income tax assets and deferred income tax liabilities are related to

the income tax collected to the same tax paying body in the group by the

same taxation collector.

The tax paying body of the Group owns the legal rights to calculated current

period¡¯s income tax assets and current income tax liabilities.

(27) Leases

When all risks and rewards related to assets ownership are actually transferred,

the lease is recognized as financing leasing; other leases are operating ones.

Operating lease expenses are recognized as current expenses on straight line

basis within lease period.

(a) Operating lease

The rental expenses of operating leases are included in the asset cost or the

current P&L according to straight-line method in the lease period.

The rental income of the operating lease is confirmed according to the straight-

line method in the lease period.

(b) Financing lease

The lower one of the fair value of the leased asset and the minimum rental

payment the present value is accounted in the book as the leased assets. The

difference between the booking value of leased assets and the minimum lease

payment is not confirmed as the financing charges. It is amortized within the

leasing period according to the actual interest method. The balance of the

minimum lease payment deducting the unconfirmed financing expenses is listed

as long term payable.

(c) Leasing back after sales

As for the transaction of leasing back after sales for the purpose of financing, if the

assets sales is related to the leasing trade and it is basically confirmed that the

assets can be purchased after the leasing period, the Group will treat it as

mortgage loan as a whole.

(28) Segment information

Operating segment is determined by the Group's internal organizational structure,

management requirements, internal reporting system; and based on the operating

- 41 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

segment, the reporting segment is determined and the disclosure of information of

the segment is made.

An operating segment is an integral part of the Group which at the same time

meets the following conditions: (1) an integral part in daily activities to generate

revenue, and costs incur; (2) the management of the Group is able to regularly

evaluate the components of the operating results in order to decide to allocate

resources, evaluate their performance; (3) the Group is able to obtain accounting

information about the financial condition, results of operations and cash flows of

the segment. Two or more operating segments have similar economic

characteristics and meet certain conditions, they can be a disclosed for

information as one operating segment.

- 42 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

II Major accounting policies and accounting estimates (continued)

(28) Segment information(continued)

The Group determines the Group's business as one operating segment to analyze

and evaluate in accordance with the internal organizational structure, regulatory

requirements and internal reporting system.

(29) Major accounting estimates and key hypotheses

The Group makes continuous valuation to major accounting estimates and key

judgment adopted. Major accounting estimates and key hypotheses are listed as

follows:

(a) Building contract

Revenue and cost of the building of large port equipment is recognized by

proportion of completion. The Group makes continuous double-check and revision

over the estimated building contract cost according to cost of the contract actually

incurred and based on historical actual cost of similar product, in order to make

the estimated cost of the building contract close to the actual eventual cost. In

case the actual total cost of the contract differs from the estimated total cost, the

difference will impact the cost confirmed by the Group for the present year.

At the same time, the Group¡¯s management conducts regular impairment tests to

building contracts. In case the expected total cost of the building contract exceeds

total revenue of the contract, expected contract loss provision will be made. The

change of the expected total cost caused by the continuous double check and

revision may influence the book value of the unsettled payment upon completion/

settled payment not completion, as well as the impairment loss in the estimation

change period.

(b) Receivables impairment

The Group¡¯s management continuously watches over the collectability of

receivables to estimate bad debt provision for the receivables, based on actual

analysis (including but not limited to unit debtor¡¯s clearance capability, age of

receivables and future collection etc.). In case anything happens or changes

showing the estimates adopted have changed, estimates will be made and bad

debt provision for the receivables will be made. If the estimates do not match

former estimates, the difference will affect the book value of the receivables and

the impairment loss during the period of estimate change.

(c) Stock impairment

The Group¡¯s management timely judges the cashable net value of stock to

estimate impairment provision of stock. In case anything happens or changes

showing the stock might not fulfill its value, estimates will be made and bad debt

- 43 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

provision for the stock will be made. If the estimates do not match former

estimates, the difference will affect the book value of the stock and the impairment

loss during the period of estimate change.

- 44 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

II Major accounting policies and accounting estimates (continued)

(29) Major accounting estimates and key hypotheses

(continued)

(d) Fixed assets service years and net residual value

The management of the Group estimates the expected useful life and estimated

net residual values of fixed assets. The estimate is based on the nature and

features of similar fixed assets by their past actual useful life and residual value.

Such estimates may undergo significant change due to technological innovation

and competition due to action taken by the severe industry cycle; the economic

environment, technological environment, as well as other changes in the

environment in which fixed assets are used may cause significant changes in the

expected way of realization of economic benefits associated with the fixed assets.

(e) Fixed assets and construction in progress impairment

The management of the Group conducts impairment test on fixed assets and

construction in progress showing signs of impairment as of B/S day. Collectable

amount refers to the higher between the net value of the fair value of fixed assets

and construction in progress less disposal expenses and the present value of the

expected future cash flow of the fixed assets and construction in progress. It is

estimated by the best information to acquire to reflect the capital amount (less

disposal cost) generated from sales or disposal of fixed assets or construction in

progress on fair trade basis as of B/S days among informant and willing parties or

cash amount from continuously utilizing the fixed assets or construction in

progress until final disposal. The estimate may be adjusted every time when

impairment test is made. If the re-estimated collectable amount is higher than the

former estimate made the management of the Group, the Group shall not reverse

formerly accrued impairment loss provision of the fixed assets and construction in

progress.

(f) Accounting estimate of goodwill impairment provision

The Group conducts the impairment test for the goodwill each year. The

collectable amount including the goodwill assets group and portfolio is the current

value of the expected cash flow in the future. The accounting estimate shall be

used for calculation (Note 4 (18)).

If the management revises the gross profit rate used in the future cash flow

calculation of the assets group and portfolio and the revised gross profit rate is

lower than the current one, the Group may made the goodwill provision or

increase the impairment provision.

If the management revise the pre-tax discount rate used in the cash flow ÕÛÏÖ and

the revised pre-tax discount rate is lower than the current one, the Group may

- 45 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

make the goodwill provision or increase the impairment provision.

If the actual gross profit rate or the pre-tax discount rate is higher or lower than the

estimate from the management, the Group can¡¯t return the original goodwill

impairment loss.

- 46 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

II Major accounting policies and accounting estimates (continued)

(29) Major accounting estimates and key hypotheses

(continued)

(g) Corporate income tax and deferred income tax

The Company was recognized as a hi-tech enterprise in 2014 and a 15% rate of

corporate income tax is set for the Company according to laws and regulations.

As stipulated by laws and regulations, one qualification for a hi-tech enterprise is

that R&D expenses should not be lower than the designated percentage of the

enterprise¡¯s major operating income, e.g. 3% is required for an enterprise whose

annual sales exceeds 200 million Yuan. When taxation authorities find in the

execution of preferential taxation policies the enterprise fails to meet hi-tech

qualification, they shall remind recognizing authorities to double-check, during

which time the enterprise is suspended from enjoying preferential taxation

policies. Actual expenses of the Company in 2014 on R&D are 695,384,050 Yuan,

taking up 3.05% of major operating income of the year. Therefore, the Company is

recognized as a hi-tech and a 15% preferential rate is enjoyed. Meanwhile, in

accordance with related taxation laws and regulations, the Company added a

reduction of R&D expenses totally amounting to 140,225,006 Yuan in the

calculation of 2014 corporate tax, which is subject to confirmation by the taxation

authorities. Shall any difference arise, the difference will impact the corporate tax

expenses of the year.

Besides, the Group calculates corporate tax and deferred corporate tax according

to current laws and regulations, having considering applicable regulations on

corporate tax and taxation preference. In normal operating activities, many taxation

events are not finally certain. Therefore the Group has to make significant

judgments while accruing corporate tax. The Group estimates whether it needs to

pay extra tax on expected taxation adjustment items and confirms corresponding

corporate tax liabilities. In case difference occurs between the final confirmation

and initial booking, the difference will exercise influence over the amount of

corporate tax and deferred corporate tax in the duration concerned.

In the valuation of temporary difference, the Group also takes into consideration the

collectability of deferred tax assets. Temporary difference majorly consists of

difference concerning bad debt provision, prepaid expenses not yet approved for

tax deduction, stock impairment reserve and fixed asset depreciation. Recognition

of deferred corporate assets is based on the Group¡¯s estimate or hypothesis that

the deferred corporate assets be returned by means of acquiring sufficient taxable

amount through sustainable operation in the foreseeable future. At the same time,

the Group also takes into consideration the tax rates of deferred tax assets and

deferred income tax liabilities at reversal. Based on historical experience that the

company for many years was honored high-tech enterprise and continuous

investment in R&D items, the Company reasonably estimates in 2015 and beyond

the Company obtains access to high-tech enterprise qualification, so calculation

and confirmation of deferred tax assets and deferred income tax debt is done

- 47 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

according to the preferential tax rate.

The Group has accrued sufficient corporate tax liabilities and deferred corporate tax

based on existing taxation regulations, best current estimate and hypothesis. It is

possible the corporate tax liabilities and deferred corporate tax be adjusted subject

to the possible change of taxation regulations or other related issues.

- 48 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

III Taxes

Tax types and the ratio applicable to the Group are listed as follows:

(1) VAT

VAT is applicable to the Company¡¯s sales business. Domestic sales output tax

ratio is 17%, export sales output tax ratio is subject to ¡°exemption, compensation,

refund¡±, refunding ratio is 17%. VAT is applicable to the vessel transport business

revenue with the tax ratio of 11%. VAT is applicable for the equipment rental with

tax ratio of 17%.

The Company¡¯s input tax for purchasing raw materials, partial fixed assets, fuel,

power, transportation fee offsets the output tax. The Company¡¯s VAT payable is

the balance after offset between current period¡¯s input and output taxes.

(2) Business tax

Business tax applied to revenues of the Group from shipping and transportation

with rate of 5%.

Business tax is applicable to the revenues of ¡°construction-transfer¡± projects with

rate of 3%.

(3) Urban maintenance and construction tax and education surcharge

The Group calculates and pays city maintenance and construction tax and

education surcharge by 7% and 3% of the payment of VAT and business tax

respectively.

(4) Corporate income tax

Corporate income tax is calculated and paid in accordance with P.R. China

Corporate Income Tax Law (¡°Income Tax Law¡±).

According to the High-tech Enterprise Recognition Management Approaches (Guo

Ke Fa Huo [2008] 172,) and the High-tech Enterprise Recognition Management

Work Guidelines (Guo Ke Fa Huo [2008] 362) and the Notification on Announcing

List of Second Batch of Shanghai Municipality 2011 High-tech Enterprises

Recognition, the Company was recognized as a high-tech enterprise in the year

2011, and was awarded the High-tech Enterprise Certificate (certificate number:

GR201431001646). The certificate is valid for 3 years. According to Article 28 of

the Income Tax Law, the Company actually applied a 15% corporate income tax

rate this year (2013: 15%).

- 49 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

III Taxes (continued)

(4) Corporate income tax(continued)

Corporate income tax rates enjoyed by the Company and its controlled

subsidiaries:

Registered in Applicable Applicable

tax rate in tax rate in

2015 2014

Shanghai Pudong New

The Company Area 15% 15%

Shanghai Zhenhua Port Machinery Heavy Shanghai Chongming

Industry Co., Ltd. County 25% 25%

Shanghai Zhenhua Heavy Industries Machinery Shanghai Chongming

Co., Ltd. County 25% 25%

Shanghai Zhenhua Port Machinery (Hong Kong)

Co., Ltd. (Note I) Hong Kong 16.5% 16.5%

Shanghai Pudong New

Shanghai Zhenhua Shipping Co. Ltd. Area 25% 25%

Nantong Zhenhua Heavy Equipment

Manufacturing Co., Ltd. Jiangsu Nantong 25% 25%

Shanghai Zhenhua Heavy Industries Group

(Nantong) Transmission Machinery Co.,

Ltd.(Note I4) Jiangsu Nantong 15% 15%

Shanghai Zhenhua Heavy Industries Group Jiangsu Nantong

(Nantong) Co., Ltd. 25% 25%

Shanghai Zhenhua Heavy Industries Electric Co., Shanghai Pudong New

Ltd. Area 25% 25%

Nantong ZPMC Steel Structure Processing Co.,

Ltd. Jiangsu Nantong 25% 25%

Jiangyin ZPMC Steel Structure Manufacturing

Co., Ltd. Jiangsu Jiangyin 25% 25%

Shanghai Zhenhua Heavy Industries Steel Shanghai Pudong New

Structure Co., Ltd. Area 25% 25%

Shanghai Zhenhua Heavy Industries Vessel Shanghai Yangshan

Transport Co., Ltd Bonded Port Area 25% 25%

Shanghai Zhenhua Testing Technology Shanghai Pudong New

Consulting Co., Ltd. Area 25% 25%

Rotterdam, the

ZPMC Netherlands B.V.(note 2) Netherlands 20% 20%

Rotterdam, the

Hotel de Herberg B.V.(note 2) Netherlands 20% 20%

Los Barrios de Bureba,

ZPMC Espaa S.L.(note 3) Spain 28% 30%

ZPMC GmbH Hamburg(Note 4) Hamburg, Germany 32.28% 33.76%

ZPMC Lanka Company (Private) Limited(note 5) Colombo, SriLanka 28% 28%

ZPMC North America Inc.(note 6) State of Delaware, USA 15% 15%

ZPMC Korea Co., Ltd.(note 7) Busan, South Korea 10% 10%

ZPMC Engineering Africa (Pty) Ltd.(note 8) Natal, South Africa 28% 28%

ZPMC Engineering (India) Private Limited(note 9) Maharashtra, India 30% 30%

ZPMC Southeast Asia Holding Pte. Ltd.(Note I0) Singapore 17% 17%

ZPMC Southeast Asia Pte. Ltd.(Note I0) Malaysia 17% 17%

ZPMC Engineering (Malaysia) Sdn. Bhd.(Note I1) The New South Wales,

Australia 20% 20%

ZPMC Australia Company (Pty) Ltd.(Note I2) Rotterdam, the

Netherlands 30% 30%

- 50 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

Shanghai Zhenhua Port Machinery General

Equipment Co., Ltd (original: China

Communications Shanghai Port Machinery Shanghai Pudong New

Manufacturing Plant Co., Ltd) Area 25% 25%

Shanghai Zhenhua Port Machinery Heavy Shanghai Pudong New

Industry Co., Ltd Area 25% 25%

Shanghai Zhenhua Heavy Industry (Group)

Zhangjiagang Port Machinery Co., Ltd. Jiangsu Jingang Port Area, 25% 25%

Nanjing Ninggao New Channel Co., Ltd. Jiangsu Nanjing 25% 25%

Qidong Marine Company (Note I3) Jiangsu Nantong 15% 15%

Jiangsu Daoda Marine Engineering Co., Ltd Jiangsu Nantong 25% 25%

Jiahua Shipment Co., Ltd (Note I) Not

applicabl

Hong Kong 16.5% e

Zhenhua Pufeng Wind Power (Hong Kong) Co., Not

Ltd(note1) applicabl

Hong Kong 16.5% e

Zhenhua Shende Offshore Installation Co., Not

Ltd(Note I) applicabl

Hong Kong 16.5% e

ZPMC-OTL Marine Contractor USA Not

Limited(note6) applicabl

American Texas 15% e

ZPMC Brazil Holdings Ltda.(Note I3) Not

applicabl

Rio De Janeiro 13% e

ZPMC Limited Liability Company(Note I4) Not

applicabl

Moscow, Russia 20% e

III Taxes(continued)

(4) Corporate income tax (continued)

Registered in Applicab Applicab

le tax le tax

rate in rate in

2015 2014

ZPMC NA East Coast Inc.(note 6) Not

Delaware 15% applicable

ZPMC NA Huston Inc.(note 6) Not

Delaware 15% applicable

CCCC Tianhe Co., Ltd Not

Jiangsu Changshou 25% applicable

Fujian CCCC Qianda Heavy Industry Co., Ltd Not

Fujian Minhou 25% applicable

CCCC Investment Development Qidong Co., Ltd Not

Jiangsu Nantong 25% applicable

CCCC Not

Liyang City Investment Construction Co., Ltd Jiangsu Liyang 25% applicable

- 51 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

Note 1: Shanghai Zhenhua Port Machinery (Hong Kong) Co., Ltd., Jiahua

Shipping Co., Ltd, Zhenhua Pufeng Wind Power(Hong Kong) Co., Ltd and

Zhenhua Shende Offshore Engineering Installation Co., Ltd. are legal

entities registered in Hong Kong, China. Based on Hong Kong¡¯s taxation

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

actually fits in a profit tax rate of 16.5% (2014£º16.5%).

Note 2: ZPMC Netherlands B.V, Hotel de Herberg B.V. and Daoda (Holland)

Marine Technology Co., Ltd are private limited liability companies registered

in Holland. According to related provisions of the income tax in Holland, the

enterprise revenue tax is collected with the progressive tax rate in excess of

specific amount for the profit of the Company. The tax rate is 20% for the

profit less than 200000 Euro, and 25% for the profit over 200000 Euro. The

actual income tax rate is 20% this year.(2014: 20%)¡£

Note 3: ZPMC Espaa S.L. is the limited liability company registered in Spain.

According to related provisions of the income tax in Spain, the enterprise

revenue tax is collected with the progressive tax rate in excess of specific

amount for the profit of the Company. The tax rate is 25% for the profit less

than 300000 Euro, and 28% for the profit over 300000 Euro. The actual

income tax rate is 28% this year. (2014: The tax rate is 25% for the profit

less than 300000 Euro, and 30% for the profit over 300000 Euro. The actual

income tax rate is 30%)

Note 4: ZPMC GmbH Hamburg is registered in Germany, a limited liability

company; according to Germany¡¯s related provisions of the income tax act,

applicable income tax rate for the year is 30.6%, and on the basis of the

corresponding income tax amount, 5.5% of solidarity surcharge is imposed;

the actual total income tax rate applicable to 32.28% (2014: 33.76%)

Note 5: ZPMC LANKA COMPANY (PRIVATE) LIMITED is a limited liability

company registered in Sri Lanka; according to the related income tax

provisions of Sri Lanka, the applicable income tax rate is 28%. (2014: 28%)

Note 6: ZPMC North American Inc , ZPMC NA East Coast Inc., ZPMC NA Huston

Inc. ¡¢ ZPMC-OTL Marine Contractor USA Limited is a limited liability

company registered in USA; according to the related income tax provisions

of USA, the applicable income tax rate is 15%. (2014:15%)

III Taxes (continued)

(4) Corporate income tax (continued)

- 52 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

Note 7: ZPMC Korea Co., LTD. is limited liability company registered in Korea.

According to related provisions of the income tax in Korea, the enterprise

revenue tax is collected with the progressive tax rate in excess of specific

amount for the profit of the Company. The tax rate is 10% for the profit less

than 200 million won, and 20% for the profit over 200 million won. The

actual income tax rate is 10% this year. (2014: 10%)

Note 8: ZPMC Engineering Africa (PTY) LTD. is a limited liability company

registered in Republic of South Africa; according to the related income tax

provisions of Republic of South Africa, the applicable income tax rate is

28%.(2014: 28%)

Note 9: ZPMC Engineering (India) Private Limited is a limited liability company

registered in India; according to the related income tax provisions of India,

the applicable income tax rate is 30%. (2014: 30%)

Note 10: ZPMC Southeast Asia Holding PTE. LTD. is a limited liability company

registered in Singapore; according to the related income tax provisions of

Singapore, the applicable income tax rate is 17%. (2014: 17%)

Note 11: ZPMC Engineering (Malaysia) Sdn.Bhd is a limited liability company

registered in Malaysia; according to the related income tax provisions of

Malaysia, the applicable income tax rate is 20%.(2014: 20%)

Note 12: ZPMC Australia Company (PTY) LTD. is a limited liability company

registered in Australia; according to the related income tax provisions of

Australia, the applicable income tax rate is 30%.(2014: 30%)

Note 13£ºZPMC Brazil Holdings Ltda. is a limited liability company registered in

Brazil; according to the related income tax provisions of Brazil, the applicable

income tax rate is 13%.

Note 14 £º ZPMC Limited Liability Company is a limited liability company

registered in Russia; according to the related income tax provisions of

Russia, the applicable income tax rate is 20%.

Note:15 Shanghai Qidong Marine Company is recognized as hi-tech enterprise in

November , 2015 and won Hi-tech Enterprise Certificate (No.

GF201532000832) with the valid terms of 3 years. Shanghai Zhenhua

Heavy Industry Group (Nantong) Drive Machinery is recognized as hi-

tech enterprise in August, 2013 and won Hi-tech Enterprise Certificate

(No. GR201332000207) with the valid terms of 3 years. Based on the

regulations in Article 28 of Income Tax Law, the actual applicable

enterprise income tax rate is 15% this year (2014: 15%)

¢ô Notes to major items in the consolidated financial statements

- 53 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

(1) Monetary capital

Dec. 31, 2014 Dec. 31, 2013

(after rearrangeme

nt)

Cash on hand 746,967 626,798

Bank deposit 2,318,579,147 1,846,413,404

Other currency funds 139,007,602 1,643,927,241

In which: total deposit in foreign 299,033,408

countries 280,065,264

2,458,333,716 3,490,967,443

(a) On Dec. 31, 2015, other monetary capital includes:

(i) 120,408,105 Yuan is the margin deposit for the Group to apply for bank L/C and

guarantee letter (Dec.31, 2014, 1,608,684,124Yuan, which includes 84,691,694 Yuan

guarantee letter and 1,523,992,430 Yuan bank deposit over three months);

(ii)Foreign exchange clearance capital of 18,599,497 Yuan deposited in the bank

(December 31, 2014: 35,243,117 Yuan).

(b) Cash and cash equivalents recorded in cash flow statements:

Dec. 31, 2015 Dec. 31,2013

Monetary capital 2,458,333,716 3,490,967,443

Less: restricted deposits(a) (i) (120,408,105) (1,608,684,124)

Final cash balance 2,337,925,611 1,882,283,319

(reclassification)

Less: beginning cash balance

(Note ¢ô56(d)) (after

arrangement)

(1,882,283,319) (3,463,423,711)

Net cash increase (decrease) 455,642,292 (1,581,140,392)

- 54 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

IV Notes to major items in the consolidated financial statements (continued)

(2) Financial assets and debt measured at fair value with its change accounted in

current profit and loss.

Dec. 31, 2015 Dec. 31, 2014

Assets Liabilities Assets Liabilities

Forward foreign exchange contracts

- Fair valuation gains / (losses) 676,082 (24,918,115) 25,735,001 (28,752,000)

On Dec. 31, 2015, in the forward foreign exchange contract established by the Group

with bank but not due:

Total amount of principal in USD for RMB contract is USD 270,000,000 (900,000,000

USD, 2014); agreed exchange rate is 6.3604 to 6.7470(6.1380 to 6.3756, 2014

contract is due between Jan. 20, 2016 and Aug. 25, 2016 (2014: Feb. 27, 2015 and

Dec. 10, 2015)

Closing fair value estimated gains/losses of above forward foreign exchange contracts

are shown in transactional bank confirmed amount or the amount based on end-of

market exchange rate.

(3) Notes receivable

Dec. 31, 2014(after rea

Dec. 31, 2015 rrangement )

Bank acceptance bill 230,959,622 289,549,440

Commercial acceptance bill 12,200,000 2,350,000

243,159,622 291,899,440

As of Dec. 31, 2014£¬the Group had had no draft receivable pledged to banks.

Notes receivable the Group has endorsed to any other party but not yet due on

Dec. 31, 2015 amounts to 302,708,598 Yuan (Dec. 31, 2014: 736,843,666 Yuan),

which are bank acceptance bills. The Group has no acceptance bills not due to

other parties (Dec 31, 2014: N/A)

- 55 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

IV Notes to major items in the consolidated financial statements (continued)

(4) Interest receivable

Dec. 31, Increase Decrease

2014 report year report year

(after arrang Dec. 31.

ement) 2015

Time deposit

interest 51,859,503 53,379,545 (105,239,048) -

As of Dec 31, 2014, the interest receivable balance is the time deposit interest not

due.

(5) Accounts receivable

Dec. 31, 2014

Dec. 31, 2015 (after arrangement)

Accounts receivable 5,031,611,229 4,548,236,229

Less: bad debt provision (1,136,848,761) (858,128,277)

3,894,762,468 3,690,107,952

The debt age analysis of accounts receivable is as follows:

(a) Aging:

Dec.31, 2015 Dec.31, 2014(after arran

gement)

One to six months 2,579,542,464 2,603,794,398

Seven to twelve months 553,868,900 348,568,608

One to two years 621,512,391 753,854,201

Two to three years 501,080,688 185,237,840

Three to four years 172,256,976 137,810,365

Four to Five years 106,602,535 93,290,558

Above Five years 496,747,275 425,680,259

5,031,611,229 4,548,236,229

- 56 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

IV Notes to major items in the consolidated financial statements (continued)

(5) Accounts receivable (continued)

(a) Accounts receivable (continued)

As of Dec. 31, 2015, the receivable is 1,474,329,312 Yuan (Dec. 31, 2014©s

1,088,904,155 Yuan) which is overdue without decrease. Based on the analysis of

the customer financial state and the credit record, the Group considered that it can

be collected. The account age of the receivable analysis is as following:

Dec. 31, 2015 Dec. 31, 2014

(after arrangement)

One to six months 543,110,496 345,908,893

Seven to twelve months 539,196,470 555,500,980

One to two years 299,004,521 103,535,930

Two to three years 72,718,207 45,120,432

Three to four years 20,180,821 38,837,920

Four to Five years 160,797 -

1,474,371,312 1,088,904,155

(b) Accounts receivable listed in type as follows:

Dec. 31, 2015 Dec. 31, 2013

(after arrangement)

book value balance bad debt provision book value balance bad debt provision

Amount propo Amount Provi amount amount Propo

rtion sion proporti rtion

in prop on in of

total ortio total accru

n al

Big single amount,

provided for bad

debt separately 257,212,586 5% (257,212,586) 100% 107,819,500 2% (107,819,500) 100%

Total bad debt

provision

accrued in

groups

Credit risk

portfolio

- related party 716,117,651 14% - - 561,587,696 12% - -

- third party 3,895,457,967 78% (716,813,150) 18% 3,728,115,582 83% (601,986,534) 16%

Single amount,

though not

significant,

separate

provision for

bad debt made 162,823,025 3% (162,823,025) 100% 150,713,451 3% (148,322,243) 98%

5,031,611,229 100% (1,136,848,761) 23% 4,548,236,229 100% (858,128,277) 19%

- 57 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

IV Notes to major items in the consolidated financial statements (continued)

(5) Accounts receivable (continued)

(c) As of Dec. 31, 2015£¬Accounts receivable that big single amount, provided for bad

debt separately is as follows:

Provision

Provision for bad proportio

Book balance debts n Reason

Accounts The other party in

107,819,500 (107,819,500) 100%

receivable 1 funds shortage

Accounts

149,393,086 (149,393,086) 100% Contract dispute

receivable

257,212,586 (257,212,586) 100%

(d) Among account receivable from total bad debt provision made in groups, portfolio

analysis by ages:

Dec. 31, 2015 Dec. 31, 2014 (after arrangement)

book value book value

balance bad debt provision balance bad debt provision

Amount Amount Propo Amount Amount Proportio

rtion n of

of accrual

accru

al

One to six

months 2,039,019,778 - - 2,375,484,470 - -

Seven to

twelve months 486,194,724 (3,811,519) 1% 282,715,685 (2,659,715) 1%

One to two

years 540,630,618 (79,588,609) 15% 376,681,634 (51,856,232) 14%

Two to three

years 173,228,095 (51,968,428) 30% 128,574,367 (38,491,910) 30%

Three to four

years 115,657,539 (56,328,769) 49% 75,898,450 (37,409,225) 49%

Four to five

years 51,739,809 (36,128,421) 70% 63,080,717 (45,889,193) 73%

Above five

years 488,987,404 (488,987,404) 100% 425,680,259 (425,680,259) 100%

3,895,457,967 (716,813,150) 18% 3,728,115,582 (601,986,534) 16%

(e) As of Dec. 31, 2015, major accounts receivable whose single amount not significant

but bad debts provided for:

Book value Bad debt Provision

balance provision proportion Reason

Accounts 50,365,000 (50,365,000) 100% The other party in

receivable 1 funds shortage

Accounts Contract dispute

25,974,465 (25,974,465) 100%

receivable 2

- 58 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

Accounts Contract dispute

20,530,426 (20,530,426) 100%

receivable 3

Accounts Contract dispute

18,235,736 (18,235,736) 100%

receivable 4

Accounts Contract dispute

16,150,830 (16,150,830) 100%

receivable 5

Accounts Contract dispute

9,758,221 (9,758,221) 100%

receivable 6

Accounts Contract dispute

7,260,803 (7,260,803) 100%

receivable 7

Accounts Contract dispute

6,946,886 (6,946,886) 100%

receivable 8

Accounts Contract dispute

4,266,328 (4,266,328) 100%

receivable 9

Accounts Contract dispute

3,334,330 (3,334,330) 100%

receivable 10

162,823,025 (162,823,025) 100%

- 59 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

IV Notes to major items in the consolidated financial statements (continued)

(5) Accounts receivable (continued)

(f) Change of accounts receivable provision bad debt in report period:

Addition

Dec .31, 2014 report

period Deduction report year Dec. 31, 2015

Accrued Reverse (i) Transfer

red

sales

Accounts

receivables

bad debt

provision 858,128,277 287,019,897 (8,299,413) - 1,136,848,761

(i) Among return or collection bad debt preparation, important receivable

or reserved amount are shown as follows:

Reason for Former bad debts Amount of Collection

return or basis and rationality return or mode

collection collection

Vigorous Analysis based on

Accounts recovery aging Monetary fu

receivable 1 2,200,000 nd

Accounts Vigorous Analysis based on Monetary

receivable 2 recovery aging 1,500,000 fund

Accounts Vigorous Analysis based on Monetary

receivable 3 recovery aging 1,297,800 fund

Accounts Vigorous Analysis based on Monetary

receivable 4 recovery aging 1,050,000 fund

Accounts Vigorous Analysis based on Monetary

receivable 5 recovery aging 1,000,000 fund

7,047,800

(g) As of Dec. 31, 2015, the accounts receivable summary analysis of top 5 arrears is

shown as following:

Proportion in to

Bad debt tal accounts re

Amount provision ceivable

Total accounts

receivables of top

5 1,045,784,935 (382,306,518) 21%

- 60 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

¢ô Notes to major items in the consolidated financial statements (continued)

(6) Other receivables

Dec. 31, 2015 Dec. 31, 2014 (after ar

rangement )

Unsettled payment tax receivable 138,270,252 218,718,216

Export tax rebate 104,071,196 69,159,590

Customs guaranty deposit 101,381,047 150,221,658

Products or field service

temporary loans 93,107,920 60,791,249

Employee¡¯s loans receivable 48,042,951 58,617,676

Bid bond payments 45,724,321 44,781,407

Lease receivables 36,490,744 22,454,137

Payments deposit for third party

receivable 33,484,980 32,965,403

Disposal of assets from related

parties receivable 10,000,000 10,000,000

Deposit receivable 3,806,532 4,309,291

Receivable from the parent

company¡¯s stock transfer 81,342,761 82,888,156

695,722,704 754,906,783

Less: bad debt provision (28,062,537) (27,148,264)

667,660,167 727,758,519

(a) Other receivables debt age analysis

Dec. 31, 2015 Dec. 31, 2014 (after r

earrangement)

One to Six months 552,591,379 514,337,715

Seven to twelve months 30,829,138 133,332,269

One to two years 60,426,009 32,455,240

two to three years 6,649,212 6,668,524

Three to four years 1,069,700 16,182,510

Four to five years 4,944,478 34,007,259

Above five years 39,212,788 17,923,266

695,722,704 754,906,783

- 61 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

IV Notes to major items in the consolidated financial statements (continued)

(6) Other receivables (continued)

(a) Other receivables debt age analysis (continued)£º

As of Dec. 31, 2015£¬the other receivables are 19,679,158 Yuan (Dec. 31, 2014©s

111,249,296 Yuan) which is overdue without decrease. Based on the analysis of

the customer financial state and the credit record, the Group considered that it can

be collected. The account age of the receivable analysis is as following:

Dec. 31, 2015 Dec. 31, 2014

Seven to twelve months 3,887,991 106,664,839

One to two years 13,328,426 3,585,875

two to three years 2,242,448 126,599

Three to four years 90,428 260,961

Four to five years 129,865 611,022

Above five years - -

19,679,158 111,249,296

(b) Other receivables listed in type as follows:

Dec. 31, 2015 Dec. 31, 2014 (after arrangement)

Book value balance Bad debt provision Book value balance Bad debt provision

Amount propor Pro Amount propor

tion in port tion in Prop

total ion total ortio

of n of

accr Amo accr

Amount ual unt Amount ual

Big single

amount,

provided for

bad debt

separately - - - - - - - -

Total bad debt

provision

accrued in

groups

Credit risk

portfolio

- Cash

deposit

(excluding

quality cash

deposit) 153,602,049 22% - - 118,250,288 16% - -

-

Employee¡¯s

loan and

reverse fund 141,150,871 20% - - 119,408,925 16% - -

- Others 383,162,682 55% (10,255,435) 3% 498,830,879 66% (8,731,573) 2%

Single amount,

though not

significant,

separate

provision for 100

bad debt made 17,807,102 3% (17,807,102) 100% 18,416,691 2% (18,416,691) %

695,722,704 100% (28,062,537) 4% 754,906,783 100% (27,148,264) 4%

- 62 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

¢ô Notes to major items in the consolidated financial statements (continued)

(6) Other receivables (continued)

(c) As of Dec. 31, 2015, the Company did not accrue bad debt provision for other

receivables with big single amount, and provided for bad debt separately

Among other account receivable from total bad debt provision made in groups,

(d) portfolio analysis by ages as follows:

Dec. 31, 2015 Dec. 31, 2014 (after arrangement)

book value book value bad debt

balance bad debt provision balance provision

Amount Amount Pro Amount Amount Pro

porti porti

on on

of of

accr accr

ual ual

One to Six months 353,228,089 - - 378,850,010 - -

Seven to twelve

months 3,927,262 (39,271) 1% 107,742,262 (1,077,423) 1%

One to two years 15,680,501 (2,352,075) 15% 4,218,676 (632,801) 15%

Two to three years 3,203,485 (961,037) 30% 180,855 (54,256) 30%

Three to four years 180,855 (90,427) 50% 521,922 (260,961) 50%

Four to five years 519,460 (389,595) 75% 2,444,088 (1,833,066) 75%

Above five years 6,423,030 (6,423,030) 100% 4,873,066 (4,873,066) 100%

383,162,682 (10,255,435) 3% 498,830,879 (8,731,573) 2%

(e) As of Dec. 31, 2015, other receivables with single amount, though not significant,

separate provision for bad debt made:

book value bad debt Proportion of

balance provision accrual Reason

Other Contract ca

receivables 1 5,540,286 (5,540,286) 100% ncellation

Other Other party

receivables 2 4,214,642 (4,214,642) 100% bankruptcy

Other Contract

receivables 3 3,037,042 (3,037,042) 100% cancellation

Other Contract

receivables 4 1,692,765 (1,692,765) 100% cancellation

Others 3,322,367 (3,322,367) 100%

17,807,102 (17,807,102) 100%

- 63 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

¢ô Notes to major items in the consolidated financial statements (continued)

( Other receivables continued)

6

)

( As of Dec. 31, 2015, other account receivable summary analysis of top 5 arrear is

f shown as following:

)

Nature Balance Age Bad debt

Proportion provision

in other

receivable

s

Company Customs guarantee Within one

A deposit 90,780,980 year 13% -

Company Leasing payment Within one

B receivable 33,484,980 year 5% -

Company 12,444,088 2% (3,944,088)

C Within one

stock right transfer year and

and equipment over five

sales receivable years

Two to

Company Fixed asset disposal three

D payment receivable 10,000,000 years 1% -

Company Unit borrower Over five y

E receivable 5,540,286 ears 1% (5,540,286)

152,250,334 22% (9,484,374)

(g) As of Dec. 31, 2015, the company has no government subsidies confirmed as

receivables. (Dec. 31, 2014: N/A).

(7) Advances

(a) Advances aging provision:

Dec. 31, 2015 Dec. 31, 2014 (after arrangement)

proportion proportion in

amount in total amount total

within one

year 994,457,189 81% 1,111,287,962 87%

one to two

years 118,979,425 10% 68,499,834 5%

two to three

years 25,983,355 2% 70,598,432 6%

above three 86,925,663 7% 22,656,010 2%

- 64 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

years

1,226,345,632 100% 1,273,042,238 100%

On Dec. 31, 2015, the prepayment with age over a year is 231,888,443 Yuan (Dec.

31, 2014: 161,754,276 Yuan), mainly prepayment for the processing payment of the

vessel used in offshore heavy equipment products imported parts and steel

purchase, not yet settled because purchased product not yet completed, steel

purchased not delivered.

(b) As of Dec. 31, 2015, the advances summary analysis of top 5 arrear is shown as

following:

Amount Proportion in total

Total advances balance of top 5 497,490,559 41%

- 65 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

¢ô Notes to major items in the consolidated financial statements (continued)

(8) Inventories

(a) Inventories classified as follows:

Dec. 31, 2015 Dec. 31, 2014 (after arrangement)

book value Inventories Book value book value Inventories Book value

balance impairment balance impairment

provision provision

Raw

materials

and

purchase

d parts 4,063,294,032 (324,784,792) 3,738,509,240 3,743,728,031 (373,339,801) 3,370,388,230

Semi

products 2,279,404,264 (232,214,158) 2,047,190,106 1,227,636,119 (130,810,331) 1,096,825,788

Inventorie

s goods 11,153,985 (11,153,985) - 11,153,985 (11,153,985) -

6,353,852,281 (568,152,935) 5,785,699,346 4,982,518,135 (515,304,117) 4,467,214,018

Semi products of the Group are marine heavy equipment and semi-products spare

parts in building but order not placed.

(b) Inventories impairment provision:

accrued report deduction report

Dec. 31, 2014 year year Dec. 31, 2015

Raw materials

and

purchased

parts 373,339,801 - (48,555,009) 324,784,792

Semi products 130,810,331 158,448,216 (57,044,389) 232,214,158

Inventories

goods 11,153,985 - - 11,153,985

515,304,117 158,448,216 (105,599,398) 568,152,935

(c) Inventories impairment provision:

Inventory impairment provision based on Reason for return of

impairment provision in

report year

raw materials and the difference between the realizable Sale

purchased parts value of raw material and purchased parts

due to lower product sales price and the

book value

Semi products the difference between the realizable Applicable to the net

value of semi products and the book realizable value is higher

value than the cost of production

Inventories goods the difference between the realizable No

value of Inventories goods and the book

value

- 66 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

IV Notes to major items in the consolidated financial statements (continued)

(9) Construction completed account not closed/Account closed construction not

completed

(a) Construction completed account not closed

Dec. 31, 2015 Dec. 31, 2014 (after ar

rangement)

Accumulated cost incurred 36,191,103,411 35,648,169,397

Add: Accumulated margin

confirmed 3,630,893,816 2,857,385,747

Less: Accumulated settled

payment (28,302,110,279) (30,160,907,344)

Accumulated confirmed

expected contract loss (302,295,092) (292,239,376)

11,217,591,856 8,052,408,424

(b) Account closed construction not completed

Dec. 31, 2015 Dec. 31, 2014

Accumulated settled payment 22,695,320,583 14,402,951,125

Less: Accumulated confirmed

margin (2,354,514,459) (1,103,905,727)

Accumulated cost incurred (17,575,517,723) (10,600,431,627)

Add: Accumulated confirmed

expected contract loss 101,149,431 20,778,569

2,866,437,832 2,719,392,340

(c) Expected contract losses

Addition report Deduction

Dec. 31, 2013 period report year Dec. 31, 2015

Construction

completed

account not

closed

Account

closed

construction

not completed 292,239,376 191,716,159 (181,660,443) 302,295,092

Construction

completed

account not

closed 20,778,569 113,191,465 (32,820,603) 101,149,431

313,017,945 304,907,624 (214,481,046) 403,444,523

- 67 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

IV Notes to major items in the consolidated financial statements (continued)

(9) Construction completed account not closed/Account closed construction not

completed (continued)

(d)

As of Dec. 31, 2015, amount of contracts still in construction is about

40,657,492,935 Yuan (Dec. 31, 2014: 30,342,468,817 Yuan).

Probable fines in case of delay in delivery as contracted:

Dec. 31, 2015 Dec. 31, 2014

bank issued valid guaranty letter 17,808,442,159 16,009,235,246

1,875,250,415 2,356,157,962

19,683,692,574 18,365,393,208

(10) Other current assets

Dec. 31, 2015 Dec. 31, 2014 (after a

rrangement )

VAT to be deducted (Note 4 (26)) 507,205,272 290,043,085

Available-for-sale financial assets

(Notes IV (11))

-

Bank short-term financing

products 46,000,000 5,686,257,756

553,205,272 5,976,300,841

- 68 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

Bank short-term financial products means the financial products with low risk

Company purchased from a bank. Since starting from December 31, 2015, these

short-term financial products are due within 12 months, so they are listed as other

current assets in the B/S.

The fair value of the bank short-term financial products is based on the financial

product principal plus expected income as of the balance sheet date. On Dec. 31,

2015, the Company confirmed 46,000,000 Yuan (Dec. 31, 2014:265,217,756

Yuan) revenue from the short-term bank financing products, and included in the

other integrated profit (Note 4 (39)).

As of Dec. 31, 2015, the short-term bank financing products 3,861,040,000 Yuan

as a pledge to the bank as ( Dec. 31, 2014: 3,870,000,000 Yuan bank financing

products is the collateral of short-term borrowing of 3,870,000,000 Yuan (Note 4

(21)).

- 69 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

IV Notes to major items in the consolidated financial statements (continued)

(11) Available-for-sale financial assets

Dec. 31, 2015 Dec. 31, 2014

Measured at fair value

-

Available-for-sale equity

instruments (a).(b) 1,169,183,020 433,180,453

- Bank short-term financing

products(b) (Note 4 (10)) 46,000,000 5,686,257,756

1,215,183,020 6,119,438,209

Measured as cost

- Available-for-sale equity

instruments (c). 72,994,160 52,640,000

(30,000,000) (30,000,000)

Less: impairment reserve (d) 1,258,177,180 6,142,078,209

Less: assets available for

sale listed in other current

assets (Note 4 (10)) (46,000,000) (5,686,257,756)

1,212,177,180 455,820,453

(a) The available-for-sales equity instruments measured at fair value include:

(i) The Group holds 7.22% shares of stock of Jiangxi Huawu Brake Co.,

Ltd (Dec 31, 2014: 7.93%) and the initial investment cost is 11,071,606

Yuan.

The available-for-sales equity instruments measured at fair value is confirmed by

the closing price of the last trading day of Shenzhen Stock Exchange. As of Dec

31, 2015, the Company has confirmed the profit of 326,579,220 Yuan available-

for-sales equity instruments, accounted in other comprehensive profit (Note 4

(39)).

(ii) The Group holds 2.16% shares of stock of Qingdao Port International

Co., Ltd and the initial investment cost is 308,515,588 Yuan.

The available-for-sales equity instruments measured at fair value is confirmed by

the closing price of the last trading day of Hong Kong Stock Exchange. As of

Dec 31, 2015, the Company has confirmed loss of 9,694,028 Yuan for available-

for-sales equity instruments, accounted in other comprehensive profit (Note

4(39)).

- 70 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

(iii)The Group holds 1.4% shares of stock of CRSC and the initial investment cost

is 617,854,000 Yuan.

The available-for-sales equity instruments measured at fair value is confirmed by

the closing price of the last trading day of Hong Kong Stock Exchange. As of

Dec 31, 2015, the Company has confirmed loss of 86,877,765 Yuan for

available-for-sales equity instruments, accounted in other comprehensive profit

(Note 4(39)).

- 71 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

IV Notes to major items in the consolidated financial statements (continued)

(11) Available-for-sale financial assets (continued)

(a) The available-for-sales equity instruments measured at fair value include:

(continued)£º

(iv)The Group holds less than 0.01% shares of stock of Shenwan Hongyuan

Group and the initial investment cost is 200,000 Yuan.

The available-for-sales equity instruments measured at fair value is confirmed

by the closing price of the last trading day of Shenzhen Stock Exchange. As of

Dec 31, 2015, the Company has confirmed loss of 1,534,399 Yuan for

available-for-sales equity instruments, accounted in other comprehensive profit

(Note 4 (39)).

(b) The available for sale financial assets analysis measured at fair value as follows:

Dec. 31, 2015 Dec. 31, 2014

Available-for-sale equity

instruments

- Fair value 1,169,183,020 433,180,453

- Cost 937,641,194 320,618,166

- Accumulated in Other

comprehensive income 231,541,826 112,562,287

Bank short-term financing

products

- Fair value 46,000,000 5,686,257,756

- Cost 46,000,000 5,421,040,000

- Accumulated in Other

comprehensive income - 265,217,756

Total

- Fair value 1,215,183,020 6,119,438,209

- Cost 983,641,194 5,741,658,166

- Accumulated in Other

comprehensive income 231,541,826 377,780,043

- 72 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

IV Notes to major items in the consolidated financial statements (continued)

(11) Available-for-sale financial assets (continued)

(c) Analysis on financial assets available for sales and measured by costs:

Dec. 31, 2014 Addition report Deduction report Dec. 31, 2015 Invested Current year cash

period year Company dividend

shareholding

ratio

Available for sale equity instruments-costs

21st Century Science and Technology

Investment Co., Ltd 30,000,000 - - 30,000,000 8.96% -

Nantong Zhenhua Hongsheng Heavy Forging

Co., Ltd (i) 13,000,000 - - 13,000,000 10% -

CCCC Highway Bridges National

Engineering Research Centre Co., Ltd (ii) 6,400,000 - - 6,400,000 3.2% -

CCCC Dredging Technology Equipment State

Engineering Research Center Co., Ltd 800,000 - - 800,000 10% -

ongchang Lifting Equipment Co., Ltd. of

Shanghai Zhenhua Port Machinery (Group) 1,500,000 - - 1,500,000 10% -

Shenyang Elevator Co., Ltd of Shanghai Zhenhua

Port Machinery (Group) 740,000 556,000 - 1,296,000 10% 9,465,520

Ningbo Transmission Machinery Co., Ltd of Less than 0.

Shanghai Zhenhua Port Machinery (Group) 200,000 - (200,000) - 01% -

Shenyin Wanguo Corporate Shares - 19,998,160 - 19,998,160 6.38% -

52,640,000 20,554,160 (200,000) 72,994,160 9,465,520

Available for sale equity instruments-

impairment reserve

- 73 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

21st Century Science and Technology

Investment Co., Ltd (30,000,000) - - (30,000,000)

22,640,000 20,554,160 (200,000) 42,994,160

- 74 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

IV Notes to major items in the consolidated financial statements (continued)

(11) Available-for-sale financial assets (continued)

(c) Available-for-sale financial assets¡ªmeasured at cost

(continued)

(i) The Company has increased the stock investment of Shanghai Zhenhua Port Machinery (Group) Ningbo Transmission Machinery Co

Ltd with amount of 556,000 Yuan and increases 10% holding proportion.

(ii) Since the Shenwan Hongyuan Co., Ltd is listed in Shenzhen Stock Exchange, the Shenyin Wanguo legal stock held by the Company

is accounted as fair value this year.

(iii) The Company has increased the stock investment of Hunan Fengri Power Co Ltd with amount of 19,998,160 Yuan and increases

6.38% holding proportion.

The available-for-sale financial assets measured in cost are the non-listed stock investment held by the Group. There is no active

market quotation for the investment. The change range of the reasonable count of fair value is higher. The probability of the fair value

estimate can¡¯t be reasonably confirmed, so the fair value can¡¯t be reliably measured. The Group has no plan to dispose the

investment.

- 75 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

IV Notes to major items in the consolidated financial statements (continued)

(11) Available-for-sale financial assets (continued)

(d) The information analysis of available-for-sale financial assets impairment provision

as follows:

Dec. 31, 2014

Dec., 31, 2014 30,000,000

Provision or reduction of this year -

Dec. 31, 2015

Dec., 31, 2015 30,000,000

(12) Long-term receivables

Dec. 31, 2015 Dec. 31, 2014

¡°Construction - transfer¡± item

receivable

- Principal 5,594,243,805 5,076,938,969

- Interest receivable 589,392,944 262,231,179

The others - 2,302,500

6,183,636,749 5,341,472,648

Less: long term receivables

due within one year (2,625,135,212) (2,302,500)

3,558,501,537 5,339,170,148

The Group in 2013 undertook the Nanjing to Gaochun New Channel project and

Nanjing-Gaochun Inter-city Rail Transit Phase II (cross-lake section) project

(referred to as "Nanjing High Speed 'Construction - transfer' Item"); total

investment of the project 5,918,800,000 Yuan, the construction of Item for a

period of 2 years, repurchase period is 2.5 years, return on investment 3 - 5

year, bank loans surface 30% over benchmark interest rate. The Group

established a wholly owned subsidiary Nanjing Ninggao New Channel

Construction Co., Ltd. responsible for the financing and construction

management of the said project. By Dec 31, 2015, the Group predicted that the

project will be completed in the second half year in 2015 and it is predicted to

collect the payment of the project in 2016.

- 76 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

The Group undertook Jiangsu Qidong Lvsi port surrounded PPP project in

2015, with total investment of 2 billion Yuan. The project construction period is

2 years, and the repurchase period is 10 years, the return on investment is the

bank loans benchmark interest rate increased by 30% for over 5 years. The

Group, CCCC Tianjin Waterway Bureau Co., Ltd. and Jiangsu Qidong Lvsi

Port Economic Development Zone Management Committee jointly established

CCCC Qidong Investment Development Co., Ltd. responsible for the project

investment, financing and construction management.

- 77 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

IV Notes to major items in the consolidated financial statements (continued)

(12) Long-term receivables (continued)

The Group undertook the Phase I of infrastructure and public utilities projects of

Jiangsu Zhongguancun Science and Technology Industrial Park. The project total

investment is 3.7 billion Yuan, with project construction period of 2 years, the

purchase back period is 4 years, the return on investment is the bank loans

benchmark interest rate increased by 30% for over 5 years. The Group, CCCC

Shanghai Waterway Bureau Co., Ltd., CCCC East China Investment Co., Ltd.,

CCCC Second Highway Survey Design and Research Institute Co., Ltd. and

Jiangsu Zhongguancun Science and Technology Industrial Park Administrative

Committee jointly established CCCC Liyang City Investment Construction Co., Ltd.

responsible for the project investment, financing and construction management.

As of Dec. 31, 2015, the long-term receivables refer to the investment amount as

principal the Group invested in Nanjing High Speed "Construction - Transfer" Item,

interest receivable subject to confirmation of financing return according to the contract.

As of Dec. 31, 2015, the long-term receivable 5,680,467,098 Yuan is the pledged in

full amount to the bank as the guarantee of short-term loan of 2,187,000,000 Yuan

and (Dec 31, 2014:500,000,000 Yuan(Note 4(21)) and long-term loan of

1,687,000,000 Yuan (Note 4(32)).

(13) Long term equity investment

Dec. 31, 2015 Dec. 31, 2014

joint ventures (a) 175,387,196 169,883,948

associates (b) 1,421,747,621 755,466,135

1,597,134,817 925,350,083

There are no limits to value realization of the Group¡¯s long term equity

investment.

- 78 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

IV Notes to major items in the consolidated financial statements (continued)

(13) Long term equity investment (continued)

(a) Joint ventures

Dec. 31, 2014 Report year movement Dec.31.2015 impairme

Addition o Net nt

f investme gains/losses provision

nt adjusted on

equity basis

Jiangsu LongYuan Zhenhua Marine

Engineering Co., Ltd. 162,922,641 - 8,654,848 171,577,489 -

ZPMC Mediterranean Liman

Makinalari Ticaret Anonim Sirketi 327,639 - 2,731,788 3,059,427 -

Zhenhua Marine Energy (Hong Kong)

Co., Ltd (i) 6,633,668 - (6,633,668) - -

Cranetech Global Sdn. Bhd.(ii) - 750,280 - 750,280 -

169,883,948 750,280 4,752,968 175,387,196 -

Refer to Note 6 (2) for the information of the rights of the joint ventures.

(i) On May 5, 2015, the subsidiary of the Company and the partner invested to

establish Zhenhua Marine Energy (Hong Kong) Co., Ltd (Zhenhua Marine

Energy). The registered capital is 5,969,998 USD;, the subsidiary of the Company

contributed 3,044,699 USD, holding 51% of the shares. The company focused on

the vessel transportation business. Based on the regulations of the shareholder

agreement, the significant issues of the company shall be agreed by at least 75%

shareholders via voting. The Group has no control rights but joint controls the

company together with the partner.

On January 20, 2016, the Group and BF HK Limited singed the exit contract

about Zhenhua Marine Energy. The Group has the rights to sell 51% of the total

shares of Zhenhua Marine Energy to RBF HK Limited when meeting the related

articles of the exit contract; or purchased 32.5% of the total shares of Zhenhua

Marine Energy from RBF HK Limited.

(ii) On July 30, 2015, the subsidiary of the ÔÚ Company and the partner invested to

establish Cranetech Global Sdn. Bhd.. The registered capital is 1,000,000 MYR;, the

subsidiary of the Company contributed 499,999 MYR, holding 49.99% of the shares.

The company focused on the spare parts sales. Based on the regulations of the

shareholder agreement, the significant issues of the company shall be agreed by

both parties. The Group has no control rights but joint controls the company together

with the partner.

- 79 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

IV Notes to major items in the consolidated financial statements (continued)

(13) Long term equity investment (continued)

(b) Associates

Report year movement

Other Releasing

Net gains/losses comprehensive cash

Addition of investmenadjusted on equity basis Income dividend or Impairment

Dec. 31, 2014 t adjustment profit Dec.31, 2015 provision

CCCC Marine Engineering Vessel Technology

Research Centre Co., Ltd 15,079,243 - 189,957 - - 15,269,200 -

Shanghai Zhenhua Heavy Industries (Group)

Changzhou Paint Co., Ltd. 14,349,607 - 1,956,549 - (1,680,000) 14,626,156 -

CCCC Estate Yixing Co., Ltd. 174,686,810 - 10,975 - - 174,697,785 -

CCCC Financing Rental Co., Ltd(i) 551,350,475 540,000,000 50,390,223 - - 1,141,740,698 -

China Communications Construction

USA Inc.(ii) - 76,206,000 (2,048,615) 1,256,397 - 75,413,782 -

755,466,135 616,206,000 50,499,089 1,256,397 (1,680,000) 1,421,747,621 -

Refer to Note 6 (2) for the information of the rights of the associates.

(i) On May 29, 2015, the Company increased the capital to CCCC Financial Rental Co., Ltd of 540,000,000 Yuan. The registration capital of the

Company is 3,600,000,000 Yuan. The holding proportion is the same, that is 30%.

(ii) On October 8, 2015, the Company invested to establish China Communications Construction USA Inc. The registration capital is 50,000,000

USD, in which the Company invested 12,000,000 USD, holding 24% of the share. The company focuses on port construction business.

- 80 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

IV Notes to major items in the consolidated financial statements (continued)

(14) Real estate as investment

Dec. 31, 2014 Depreciation and Dec. 31, 2015

amortization report

period

Total purchase value 469,885,167 - 469,885,167

House and building 260,039,373 - 260,039,373

Land use rights 209,845,794 - 209,845,794

Total accumulative

depreciation, amortization

(95,003,298) (13,709,061) (108,712,359)

House and building (55,489,717) (8,384,396) (63,874,113)

Land use rights (39,513,581) (5,324,665) (44,838,246)

Total net book value

374,881,869 (13,709,061) 361,172,808

House and building 204,549,656 (8,384,396) 196,165,260

Land use rights 170,332,213 (5,324,665) 165,007,548

Total depreciation and amortization amount of investment real estate in 2015

amounts to 8,384,396 Yuan and 5,324,665 Yuan included in other operating

expenses (2014: 8,785,732 Yuan).

- 81 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

IV Notes to major items in the consolidated financial statements (continued)

(15) Fixed Assets

Transfer from Addition report Accrued report Disposal report Disposal of Dec.31, 2015

Construction in year year yea subsidiaries

Dec. 31, 2014 progress (Note 4 (Note 4 16 )(Note I) transferred out

(Reclassification) 16 )

Total purchase value 25,534,507,747 1,266,510,344 217,316,716 - (854,863,281) (235,662,346) 25,927,809,180

House and building 11,604,062,941 22,188,417 - - - (9,645,962) 11,616,605,396

Manufacturing (854,863,281)

equipment 7,619,840,761 79,192,802 92,012,999 - (162,618,345) 6,773,564,936

Office equipment 224,037,856 348,905 22,587,196 - - (16,904,783) 230,069,174

Transportation -

facilities 299,095,591 806,376 10,147,948 - (46,493,256) 263,556,659

Other equipment -

Vessel 5,787,470,598 1,163,973,844 92,568,573 - - 7,044,013,015

Total accumulative 233,392,840

depreciation (9,463,948,578) - - (1,235,151,343) 193,434,777 (10,272,272,304)

House and building (2,367,995,928) - - (368,126,953) - 2,419,331 (2,733,703,550)

Manufacturing 233,392,840

equipment (4,298,721,160) - - (553,828,270) 145,192,478 (4,473,964,112)

Office equipment (147,156,907) - - (22,112,064) - 9,956,136 (159,312,835)

Transportation -

facilities (216,008,230) - - (3,396,292) 35,866,832 (183,537,690)

Other equipment -

Vessel (2,434,066,353) - - (287,687,764) - (2,721,754,117)

Total net book value 16,070,559,169 1,266,510,344 217,316,716 (1,235,151,343) (621,470,441) (42,227,569) 15,655,536,876

House and building 9,236,067,013 22,188,417 - (368,126,953) - (7,226,631) 8,882,901,846

Manufacturing (621,470,441)

equipment 3,321,119,601 79,192,802 92,012,999 (553,828,270) (17,425,867) 2,299,600,824

Office equipment 76,880,949 348,905 22,587,196 (22,112,064) - (6,948,647) 70,756,339

Transportation -

facilities 83,087,361 806,376 10,147,948 (3,396,292) (10,626,424) 80,018,969

- 82 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

Other equipment -

Vessel 3,353,404,245 1,163,973,844 92,568,573 (287,687,764) - 4,322,258,898

Note 1: the fixed assets that turn into the project in process are the shield machines that shall be upgraded and modified as

requested by the customers.

- 83 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

IV Notes to major items in the consolidated financial statements (continued)

(15) Fixed Assets (continued)

On Dec. 31, 2015, facilities with purchase value of 2,192,650,098 Yuan (Dec. 31,

2014: original price: 2,138,858,322 Yuan) have been fully depreciated but still in

service.

In 2015, depreciation booked into operating costs, selling expenses and general

expenses is respectively 1,167,204,121 Yuan, 135,960 Yuan (Note ¢ô [44]) and

67,811,262 Yuan (Note ¢ô(45)) (2014: 1,120,793,930 Yuan, 856,497 Yuan and

92,467,494 Yuan).

As of Dec. 31, 2015, real estate property right for houses and buildings with net

book value around 3,858,601,419 Yuan (purchase value 4,635,634,326 Yuan)

(Dec. 31, 2014 net book value 4,016,545,318 Yuan, purchase value

4,635,634,326 Yuan) are in the process of approval and therefore certificates are

not granted; the management of the Company believes that the house and

building with unattained certificate shall not impose great impact on the major

operation of the Group.

On Dec. 31, 2015, the fixed assets are regarded as loan mortgage

Original price Book value Loan

Property Amount

Machinery Short term

equipment 688,768,652 542,853,378 loan 500,000,000

Long term

Ship 1,050,416,521 1,036,238,241 payable 779,232,000

1,739,185,173 1,579,091,619 1,279,232,000

As of Dec. 31, 2014£¬the fixed assets are regarded as loan mortgage

Original price Book value Loan

Property

House and

building 314,742,493 259,731,664 Long term loan 130,000,000

(16) Construction in progress

Dec. 31, 2015 Dec. 31, 2014

(reclassification)

- 84 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

book value impairm book value book value impairment book value

balance ent balance provision

provisio

n

Nantong base

infrastructure

construction 29,440,311 - 29,440,311 22,012,970 - 22,012,970

Changxing base

infrastructure

construction 32,251,760 - 32,251,760 361,078,310 - 361,078,310

Base heavy

machinery and

engineering

equipment in

construction 2,889,709,277 - 2,889,709,277 2,422,182,764 - 2,422,182,764

Office buildings and

ancillary facilities 606,274 - 606,274 355,140 - 355,140

Nanhui base

infrastructure

construction 3,893,441 - 3,893,441 3,157,532 - 3,157,532

Nantong base

infrastructure

construction 621,470,441 - 621,470,441 - - -

3,577,371,504 - 3,577,371,504 2,808,786,716 - 2,808,786,716

- 85 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

IV Notes to major items in the consolidated financial statements (continued)

(16) Construction in progress (continued)

(a) Movement of significant projects in progress

Project Name budget Dec. 31, 2014 Addition report Transfer into fixed Transfer into Transfer into Dec. 31, 2015

(reclassification) period assets report year intangible assets fixed assets e

(noteIV(15)) report year report year

(noteIV(15)) (noteIV(17))

Nantong base base

infrastructure

constructionconstruction 6,465,698,000 22,012,970 20,262,621 - (12,835,280) - 29,440,311

Changxing

base Changxing base

infrastructure

constructionconstruction 8,645,540,000 361,078,310 152,687,101 - (17,014,084) (464,499,567) 32,251,760

Base heavy

machinery andBase heavy

engineeringmachinery and

equipment engineering equipment

constructionin construction 3,419,155,861 2,422,182,764 1,699,302,521 - (1,231,776,008) - 2,889,709,277

Office buildings

and ancillaryOffice buildings and

facilities ancillary facilities 5,000,000 355,140 5,136,106 - (4,884,972) - 606,274

Nanhui baseNanhui base

infrastructure

constructionconstruction

504,500,000 3,157,532 735,909 - - - 3,893,441

Large machinery upgrade

Engineering 630,699,732 - - 621,470,441 - - 621,470,441

Information system

development 5,581,847 - 5,581,847 - - (5,581,847) -

2,808,786,716 1,883,706,105 621,470,441 (1,266,510,344) (470,081,414) 3,577,371,504

Note 1: The progress of the project is estimated by budget and accumulated inputs.

IV Notes to major items in the consolidated financial statements (continued)

(17) Intangible Assets

Land use Software use Patented t

rights cost echnologie

s Total

Total purchase value

Dec. 31, 2014

(reclassification) 3,781,845,917 38,176,745 65,201,810 3,885,224,472

Addition report period

Purchase 464,499,567 5,581,847 - 470,081,414

Purchase of increasing

Subsidiaries - 2,461,276 - 2,461,276

Dec. 31, 2015 4,246,345,484 46,219,868 65,201,810 4,357,767,162

- 86 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

Accumulated

amortization

Dec. 31, 2014

(reclassification) (381,984,998) (31,798,450) (31,098,984) (444,882,432)

Addition report period

Provision (85,563,197) (1,296,376) (6,587,291) (93,446,864)

Dec. 31, 2015 (467,548,195) (33,094,826) (37,686,275) (538,329,296)

Book value

Dec. 31, 2014 3,778,797,289 13,125,042 27,515,535 3,819,437,866

Dec. 31,

2015(reclassification) 3,399,860,919 6,378,295 34,102,826 3,440,342,040

In 2015, the Group totally expended 717,412,492 Yuan on R&D (2014:

780,894,035 Yuan). The expenses are not capitalized. Above mentioned intangible

assets do not include any expenditure on R&D.

As of Dec. 31, 2015, there is no mortgage of the loan in the intangible assets .

On Dec. 31, 2014, the book value of intangible assets is 278,828,506 Yuan

(original price: 313,628,134 Yuan) land use rights as the guarantee of long-term

loan of 130,000,000 Yuan (Note 4 (32))

On Dec. 31, 2015, the intangible assets include the land use rights with book

value of 456,757,908 Yuan (original price 464499567 Yuan) (Dec. 31, 2014: N/A).

Since the property application is in the process of approval, the land use rights

certificate is not obtained. The management of the Group believes that the land use

right issue shall have no significant impact on the group's business activities.

- 87 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

¢ô Notes to major items in the consolidated financial statements (continued) )

(18) Goodwill

Dec. 31,2014 Addition Dec. 31,

report Deduction 2015

period report year

Goodwill -

Qidong Marine Company 149,212,956 - - 149,212,956

The goodwill added in report period is caused by purchase shares of Qidong

Marine Company in 2014.

As of Dec, 31, 2014, the Group did not accrue the goodwill impairment

preparation. In impairment testing, the book value of the goodwill is allocated to

asset group benefited from synergistic effect of expected enterprise

consolidation.

The collectable amount in assets group is measured based on five-year period

approved by management and in cash flow forecast method. Cash flow over 5-

year period is calculated based on estimated growth rate.

Key hypotheses of future cash flow discount method:

Growth rate 3%-16.56%

Gross profit rate 10.5%-13.02%

Discount rate 10.8%

The weighted average growth rate adopted by management is in accordance

with the forecast data in industrial report and does not exceeding the industrial

long-term average growth rate. The management determines gross rate

according to forecast to historical experience and market development and

adopts pre tax rate which can reflect related assets group with specific risks as

discount rate. Above hypothesis is used to analyze collectable amount of assets

group.

- 88 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

¢ô Notes to major items in the consolidated financial statements (continued)

(19) Deferred corporate tax assets and liabilities

(a) Deferred corporate tax assets before offset

Dec. 31, 2015 Dec. 31, 2014 (reclassification)

Compensable Deferred Compensable Deferred

provisional corporate tax provisional corporate tax

difference and assets difference and assets

compensated compensated

loss loss

Assets impairment

provision 2,071,800,834 310,888,702 1,573,979,904 236,096,986

Expected liabilities 214,619,364 32,339,037 191,656,260 28,748,439

Salaries and

wages unpaid 286,998,209 43,049,731 272,277,266 40,841,590

Unpaid interest 274,442,941 41,166,441 578,367,210 86,755,082

Financial debt fair

value change

measure at fair

value with its

change

accounted in

current profit

and loss 24,918,115 3,772,318 28,752,000 4,312,800

Movement of fair

value of

financial

liabilities 96,571,793 15,934,346 35,267,767 5,819,181

Compensable loss 53,508,679 12,307,170 47,571,777 11,892,944

Assets impairment

provision 123,919,655 18,918,211 455,169,542 68,319,451

3,146,779,590 478,375,956 3,183,041,726 482,786,473

In which:

Amount returned

within 1

year( including 1

year) 2,913,824,975 438,508,208 2,852,052,275 432,565,019

Amount returned

after 1 year

232,954,615 39,867,748 330,989,451 50,221,454

3,146,779,590 478,375,956 3,183,041,726 482,786,473

- 89 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

¢ô Notes to major items in the consolidated financial statements (continued)

(19) Deferred corporate tax assets and liabilities £¨continued£©

(b) Deferred corporate tax liabilities before offset

Dec. 31, 2015 Dec. 31, 2014

Tax payable Deferred Tax payable Deferred

provisional corporate tax provisional corporate tax

difference liabilities difference liabilities

Fixed assets

depreciation 359,472,141 59,312,902 244,695,939 40,374,830

Financial assets

fair value

change measure

at fair value with

its change

accounted in

current profit

and loss 676,082 108,672 25,735,001 3,860,250

Financial assets

fair value

change

available for

sale 328,113,620 49,370,483 413,047,808 61,957,171

Asset evaluation

increase

generated by

the enterprise

consolidation

under different

control 177,210,567 26,581,585 188,275,408 28,241,309

865,472,410 135,373,642 871,754,156 134,433,560

In which:

Amount returned

within 1

year( including 1

year) 333,168,813 49,975,322 442,090,589 66,313,588

Amount returned after

1 year 532,303,597 85,398,320 429,663,567 68,119,972

865,472,410 135,373,642 871,754,156 134,433,560

(c) Compensable loss of deferred corporate tax assets the Group not confirmed:

Dec. 31, 2015 Dec. 31, 2014

Compensable loss 1,352,502,582 1,050,720,191

- 90 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

IV Notes to major items in the consolidated financial statements (continued)

(19) Deferred corporate tax assets and liabilities (continued)

(d) Compensable loss of deferred corporate tax assets the Group not confirmed will

be due in the following year:

Dec. 31, 2015 Dec. 31, 2014

2015 - 27,980,847

2016 132,359,784 136,625,528

2017 239,989,509 279,163,521

2018 262,745,183 263,474,446

2019 341,568,548 343,475,849

2020 375,839,558 -

1,352,502,582 1,050,720,191

(e) Mutual offset amount of deferred corporate tax assets and deferred corporate tax

liabilities:

Dec. 31, 2015 Dec. 31, 2014

Deferred corporate tax

assets 65,330,657 71,636,602

Deferred corporate tax

liabilities 65,330,657 71,636,602

Net value of deferred corporate tax assets and deferred corporate tax liabilities

after offset:

Dec. 31, 2015 Dec. 31, 2014 (reclassification)

Deferred Temporary Deferred Temporary

corporate tax difference of corporate tax difference of

assets or compensable assets or compensable

liabilities net amount after offset liabilities net amount after

value or taxes payable value offset or taxes

payable

Deferred

corporate tax

assets 413,045,299 2,711,241,877 411,149,871 2,708,991,160

Deferred

corporate tax

liabilities 70,042,985 429,934,697 62,796,958 397,703,580

- 91 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

IV Notes to major items in the consolidated financial statements (continued)

(20) Assets impairment provision

Dec.31, 2014 Addition report Deduction report year Dec. 31, 2015

period

Reverse transferred

sales

Bad debt provision 885,276,541 289,433,716 (9,798,959) - 1,164,911,298

Including: Accounts

receivable 858,128,277 287,019,897 (8,299,413) - 1,136,848,761

Other receivable 27,148,264 2,413,819 (1,499,546) - 28,062,537

Expected contract loss 313,017,945 304,907,624 - (214,481,046) 403,444,523

Inventories impairment

provision 515,304,117 158,448,216 (105,599,398) - 568,152,935

Financial assets

impairment

provision available

for sale 30,000,000 - - - 30,000,000

1,743,598,603 752,789,556 (115,398,357) (214,481,046) 2,166,508,756

(21) Short term loans

Dec. 31, 2015 Dec. 31,

2014(reclassification )

Pledge loans (a) - 4,615,734,175

Guaranteed loans (b) 2,842,115,536 2,727,316,000

Mortgage loans (c) 500,000,000 -

Credit loans 14,874,812,954 13,924,023,765

18,216,928,490 21,267,073,940

(a) As of Dec. 31, 2015, the Group has no bank pledge loan.

As of Dec. 31, 2014, bank pledge loans 3,870,000,000 Yuan is pledged by the

3,861,040,000 Yuan bank short term financial products (Note ¢ô (10)). The bank

pledge loan 500,000,000 Yuan (Dec. 31, 2013: N/A) is the pledge of all long-term

receivable of Nanjing Highway ¡°construction-transfer¡± project (Note ¢ô (10)).

The bank pledge loan is 40,159,205 USD, and 245,734,175 RMB. The time

deposit of 20,000,000 USD, 122,380,000 RMB and the deposit of 135,000,000

RMB consist of the bank pledge. (Note 4 (1))

- 92 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

¢ô Notes to major items in the consolidated financial statements (continued)

(21) Short term loans (continued)

(b) As of Dec. 31, 2015, bank guarantee loan USD 207,260,000 in RMB

1,345,863,536 Yuan (Dec. 31, 2014: USD 214,000,000, in RMB 1,309,466,000

Yuan), is the bank loan by the Company¡¯s subsidiary guaranteed with the letters

of guarantee issued, within the credit lines awarded to the Company.

As of Dec. 31, 2015, bank guarantee loan USD 195,000,000, in RMB

1,266,252,000 Yuan (Dec. 31, 2014: USD 150,000,000, in RMB 917,850,000

Yuan), is the bank loan of the Company¡¯s subsidiary, guaranteed by the

Company.

As of Dec. 31, 2015, the bank guarantee loan of 230,000,000 Yuan is the loan

borrowed from the subsidiary, and the Company provides the guarantee(Dec. 31,

2014: 300,000,000 Yuan is the loan borrowed from the subsidiary, and the

Company provides the guarantee. The bank guarantee loan 200,000,000 Yuan is

the bank loan of the Company¡¯s subsidiary, guaranteed by Nanjing Metro Group

Co., Ltd.)

(c) As of Dec. 31, 2015, the bank mortgage loan of 500,000,000 Yuan is obtained by

mechanical equipment with book value of 542,853,378 Yuan (Original price of

688,768,65 Yuan) (Note 4(15)) selling to CCCC Financial Rental Co., Ltd and

bank in way of rental after sales. The loan term is 1 year. The Group will take

the trade as the mortgage loan.

Weighted average annual interest rate of loans for the Group in 2015 is between

1.12% to 6.00% (2014: 1.56% to 6.72%).

(22) Notes payable

Dec. 31. 2015 Dec. 31. 2014

(reclassification)

Bank acceptance draft 1,785,201,236 1,989,118,156

Above drafts will be due within one year.

- 93 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

¢ô Notes to major items in the consolidated financial statements (continued)

(23) Accounts payable

Dec. 31, 2015 Dec. 31. 2014

(reclassification)

Material purchase and product

Manufacturing payables 5,221,670,634 4,777,278,179

Equipment purchase payables 136,011,638 97,822,895

Infrastructure building payables 73,171,633 76,583,608

Retention payables 34,726,344 13,161,568

Port use payables 5,560,773 4,318,444

5,471,141,022 4,969,164,694

(a) Accounts payable analysed by

age:

Dec. 31, 2015 Dec. 31. 2014 (reclassification)

Proportion in Proportion in

Amount total Amount total

Within

one year 4,233,618,165 77% 4,358,626,848 88%

Above

one year 1,237,522,857 23% 610,537,846 12%

5,471,141,022 100% 4,969,164,694 100%

By Dec. 31, 2015, accounts payable aging above 1 year mainly being

payables of imported parts.

(24) Prepayment received

Dec. 31, 2015 Dec. 31. 2014

(reclassification)

Goods sale prepayment

received 423,603,129 318,636,126

- 94 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

¢ô Notes to major items in the consolidated financial statements (continued)

(24) Accounts payable (continued)

Dec. 31, 2015 Dec. 31. 2014 (reclassification)

Proportion in Proportion in

Amount total Amount total

Within

one year 348,798,640 82% 287,650,012 90%

Above

one year 74,804,489 18% 30,986,114 10%

423,603,129 100% 318,636,126 100%

By Dec. 31, 2015 and 2014, accounts payable aging above 1 year mainly being

payables of imported parts.

(25) Employee remuneration payable

Dec. 31, 2015 Dec. 31. 2014

Short-term remuneration

payable (a) 256,306,845 243,725,463

Set drawing plan payable

(b) 1,515,765 1,837,472

257,822,610 245,562,935

(a) Short-term remuneration payable

Dec. 31, 2014 Increase this Deduction this Dec 31, 2015

year year

Salary, bonus, allowance

and subsidy 210,975,170 1,147,483,869 (1,135,811,172) 222,647,867

Staff welfare - 31,565,042 (31,565,042) -

Social security 928,094 112,537,032 (112,717,997) 747,129

Including: medical

insurance 757,763 95,224,571 (95,367,571) 614,763

Labor injury fund 111,984 9,306,893 (9,320,480) 98,397

Birth insurance 58,347 8,005,568 (8,029,946) 33,969

Housing fund 512,785 97,350,291 (97,427,782) 435,294

Trade union fund and

employee education

fund 31,121,189 16,234,764 (14,879,398) 32,476,555

Other 188,225 11,997,705 (12,185,930) -

243,725,463 1,417,168,703 (1,404,587,321) 256,306,845

As of Dec. 31, 2015, there are no payable arrears in the payable employee

remuneration. The balance at the end of 2015 will be all released or used up.

- 95 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

¢ô Notes to major items in the consolidated financial statements (continued)

(25) Employee remuneration payable (continued)

(b) Set drawing plan

Dec. 31, 2014 Addition report Deduction report

period year Dec. 31, 2015

Pension 1,719,925 194,575,647 (194,865,869) 1,429,703

Auxiliary

pension - 66,460,214 (66,460,214) -

Unemployment

fund 117,547 13,541,199 (13,572,684) 86,062

1,837,472 274,577,060 (274,898,767) 1,515,765

(26) Taxes and charges payable

(a) Taxes and charges payable are summarized as follows:

Dec. 31, 2014 Current year Current year Dec. 31, 2015

(reclassification) amount handed amo

payable unt

Operation tax

payable 105,050,543 8,634,872 (7,910,083) 105,775,332

VAT payable (241,554,296) (102,028,304) (127,242,732) (470,825,332)

Corporate Tax 33,416,853 53,171,303 (39,598,912) 46,989,244

Urban Construction 9,729,023 5,371,459 (6,267,611) 8,832,871

Education Addition 7,632,557 5,180,139 (6,148,429) 6,664,267

Individual Income

Tax 4,699,319 74,174,253 (74,208,916) 4,664,656

Other 13,026,204 94,832,269 (65,613,777) 42,244,696

(67,999,797) 139,335,991 (326,990,460) (255,654,266)

VAT to be deducted

reclassified to

other current

assets (Note

4(10)) 290,043,085 - - 507,205,272

222,043,288 139,335,991 (326,990,460) 251,551,006

(27) Interest payable

Dec. 31, 2015 Dec. 31, 2014

(reclassification)

Interest on loan payable 91,722,905 414,182,956

Bond interest payable 197,867,828 188,337,500

289,590,733 602,520,456

- 96 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

IV Notes to major items in the consolidated financial statements (continued)

(28) Dividends payable

Dec. 31, 2015 Dec. 31, 2014

CCCC Tianjin Waterway

Bureau Co., Ltd 25,079,494 -

Chuwa Bussan Company

Limited 6,269,873 -

CCCC 502,283 502,283

Hong Kong Zhenhua

Engineering Co., Ltd 346,005 346,005

Access Engineering Plc. 33,664 -

Macau Zhenhua Bay

Engineering Co., Ltd. 6,593 6,593

32,237,912 854,881

(29) Other payables

Dec. 31, 2015 Dec. 31, 2014

(reclassification)

Construction deposit 1,118,000,000 100,000,000

Related parties loans 205,692,211 137,534,163

Related parties payables 100,971,833 25,971,833

CCCC investment payment

(i) 50,158,344 131,224,119

Insurance claims 25,997,127 -

Other 103,703,871 56,664,535

1,604,523,386 451,394,650

(i) The Group completed the cancellation of a subsidiary during the year 2011.

The balance of 25,971,833 Yuan shall be accounted into the payable by the

Group attributable to shareholders of the subsidiary of another CCCC

liquidation of the investment; meanwhile, the Group completed the

acquisition of subsidiary of China Communications Corporation (Note 5 (1)).

The balance of 75,000,000 Yuan is the payment of the Group to China

Communications Corporation

- 97 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

IV Notes to major items in the consolidated financial statements (continued)

(29) Other payables (continued)

(a) Other payables analyzed in age:

Dec. 31, 2015 Dec. 31, 2014

(reclassification)

Proporti

Proportio on in

Amount n in total Amount total

Within one year 1,468,169,962 92% 313,471,036 69%

Above one year 136,353,424 8% 137,923,614 31%

1,604,523,386 100% 451,394,650 100%

As of Dec. 31, 2015, other payables aged over one year mainly payables to

related parties, deposits to outsourced construction team and quality guarantee

deposit received.

(30) Non-current liabilities due within one year

Dec. 31, 2015 Dec. 31, 2014

(reclassification)

Long-term loans due within one

year(Note 4 (32)) 2,977,796,000 2,636,660,000

Bonds payable due within one year

(Note 4 (33)) 3,799,949,635 -

Financing payable due within one

year (Note 4 (34)) 59,370,057 -

6,837,115,692 2,636,660,000

- 98 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

¢ô Notes to major items in the consolidated financial statements (continued)

(31) Other current liabilities

Dec. 31, 2015 Dec. 31, 2014

Short term financing bills of stage

I 1,995,655,739 -

Short term bond payable information is as following:

Total book value Distribution cost Distribution cost Dec. 31, 2015

amortization

2

Short-term financing

bonds of stage I

distributed in 2015 2,000,000,000 (5,000,000) 655,739 1,995,655,739

655,739 1,995,655,739

As approved by the No.CP47925 "China Inter-bank Market Dealers Association

File Receiving Registration Notice" issued by China inter-bank market dealers

association in the City Association (2014) , the Company issued 2,000,000,000

Yuan short-term financing bonds, with term of 1 year and the fixed annual

interest rate of 3.5%, principal and interest paid at one time on November 11,

2015.

The bonds above have no mortgage or security.

- 99 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

¢ô Notes to major items in the consolidated financial statements (continued)

(32) Long term loans

Dec. 31, 2015 Dec. 31, 2014

(reclassification)

Guarantee loan (a) 60,000,000 457,140,000

Credit loans 2,492,700,000 2,912,610,000

Pledge loan (b) 2,187,000,000 1,687,000,000

Mortgage loan (c) - 130,000,000

4,739,700,000 5,186,750,000

Less: Long-term loans due

within one year

Guarantee loan (60,000,000) (397,140,000)

Credit loans (1,714,296,000) (1,139,520,000)

Pledge loan (1,203,500,000) (1,050,000,000)

Mortgage loan - (50,000,000)

(2,977,796,000) (2,636,660,000)

1,761,904,000 2,550,090,000

(a) As of Dec. 31, 2015, the bank guarantee loan is 60,000,000 Yuan, which is the

bank loan borrowed from the subsidiary, CCCC Tianjin Waterway Bureau Co., Ltd

provides the guarantee. The interest is paid quarterly, the principal shall be paid

on February 22, 2016 and August 22, 2016.

As of Dec. 31, 2014, the bank guarantee loan 90,000,000 Yuan is the bank loan

borrowed from the subsidiary, CCCC Tianjin Waterway Bureau Co., Ltd provides the

guarantee. The interest is paid quarterly, the principal shall be paid on February 22,

2015, February 22, 2016 and August 22, 2016. The bank guarantee loan

40,000,000 USD (in RMB 244,760,000 Yuan) and 20,000,00 USD (in RMB

122,380,000 Yuan) are the bank loan borrowed by the subsidiary. The bank shall

issue the guarantee in the scope of the credit. The interest is paid quarterly, the

principal shall be paid on June 19, 2015 and June 25, 2015.

- 100 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

(b) As of Dec. 31, 2015, multiple pledge loans of the bank is 2,187,000,000 Yuan in

total as pledge of Nanjing Highway ¡°construction-transfer¡± project long-term

receivable in whole amount (Note 4(12)). The interests are paid quarterly and the

principal shall be paid back from Jun 21, 2016 to Dec. 21, 2018.

As of Dec. 31, 2014, multiple pledge loans of the bank is 1,687,000,000 Yuan (Dec.

31, 2013: N/A) in total as pledge of Nanjing Highway ¡°construction-transfer¡± project

long-term receivable in whole amount (Note 4(12)). The interests are paid quarterly

and the principal shall be paid back from Dec 21, 2015 to Jun 21, 2017.

- 101 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

¢ô Notes to major items in the consolidated financial statements (continued)

(32) Long term loans (continued)

(c) As of Dec. 31, 2015, the Group has no bank mortgage loan. The bank pledge

loan is 80,000,000 Yuan. The contract expiration date is January 18, 2016 and

was paid in advance in 2015.

As of Dec. 31, 2014, the bank mortgage loan 130,000,000 Yuan takes the fixed

assets with account value of 259,731,664 Yuan (original value 314,742,493

Yuan) (Note 4 (15))and intangible assets with account value of 278,828,506 Yuan

(original value 313,628,134 Yuan) (Note 4 (17)) as mortgage. The interests are

paid quarterly and the principal shall be paid back from Jan 19, 2015 to Jan 18,

2016.

(d) Due day of long term loans:

Dec. 31, 2015 Dec. 31, 2014

(reclassification)

one to two years 661,500,000 2,393,090,000

two to five years 1,050,404,000 157,000,000

over five years 50,000,000 -

1,761,904,000 2,550,090,000

(e) Lending rate range:

The long-term lending rate range of the Group is 1.20% ÖÁ 6.91% in 2015

(2014:2.56% to 6.91%)¡£

(33) Bonds payable

Dec. 31, 2015 Dec. 31, 2014

3,799,949,635 3,799,615,401

Bank intermediate-term bills

Less: bonds payable due

within one year (Note 4

(30)) (3,799,949,635) -

- 3,799,615,401

- 102 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

¢ô Notes to major items in the consolidated financial statements (continued)

(33) Bonds payable (continued)

Total face value Issuance cost Issuance cost

Dec. 31, Addition issues amortization report

2014 current period year Dec.31, 2015

2

Issued in

2011 First

Intermedi

ate-term

bills 3,800,000,000 (56,450,000) 3,799,615,401 (11,400,000) 11,734,234 3,799,949,635

As approved by the Zhong Shi Xie Zhu (2011) MTN25 Notification of Registration Filing from

Association of Traders Among Bank of China, the Company publicly issued intermediate-term

bills on Feb,24, 2011, total amount 3,800,000,000 Yuan, term 5 years, fixed annual interest

rate 5.85%, interest to be paid once a year. The issuing cost of the band is paid yearly.

The bond above has no mortgage or guarantee, all paid off in February, 2016.

(34) Long term payable

Dec. 31, 2015 Dec. 31, 2014

Leaseback financing after sales 779,232,000 -

Less: Leaseback financing

after sales due within one year

(Note 4(30)) (59,370,057) -

719,861,943 -

As of Dec. 31, 2015, the long term payable of 779,232,000 Yuan is obtained by

the vessel leasing back after sales with the book value of 1,036,238,241Yuan

(original price 1,050,416,521 Yuan ) (Note 4(15)) from the financing rental

company. The financing term is 6 years. The Group will take the trade as the

mortgage loan

(35) Expected liabilities

Dec. 31, 2014 Addition Deduction Dec. 31, 2015

report period report year

Estimated after-

sales service cost 200,563,933 183,742,973 (168,000,349) 216,306,557

Product quality

cash deposit 2,466,240 306,368 (1,596,137) 1,176,471

Pending litigation

compensation 5,725,890 - (5,725,890) -

- 103 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

Other 3,488,353 - (830,203) 2,658,150

212,244,416 184,049,341 (176,152,579) 220,141,178

- 104 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

IV Notes to major items in the consolidated financial statements (continued)

(36) Deferred income

Dec. 31, 2014 Addition report Deduction Dec. 31, 2015

(reclassification) period report year

Government

subsidy (a) 256,227,380 115,204,307 (48,194,124) 323,237,563

Land

compensation

payment (b) 84,120,528 - (1,932,144) 82,188,384

340,347,908 115,204,307 (50,126,268) 405,425,947

Government

(a) subsidy

Dec. 31, Addition Increase Other move Dec., 31, 201

2014 report of ment report 5

(reclassificat period purchas period (i)

ion) ed

subsidiar

ies

Lifting cable layout

vessel R&D project 94,050,000 - - (1,550,000) 92,500,000

Submarine pipeline

laying R&D project 23,901,800 25,100,000 - (5,876,300) 43,125,500

Automated dock R&D

project 21,900,000 4,320,000 - (600,000) 25,620,000

Floating crane R&D

project 19,510,000 - - - 19,510,000

Nantong Drive R&D

projects 8,700,000 9,200,000 - - 17,900,000

50000 ton semi

submersible ship R&D

projects - 14,000,000 - - 14,000,000

Drilling platform

development project 13,850,000 - (200,000) - 13,650,000

Marine engineering

positioning system

R&D project 10,250,000 - - - 10,250,000

Transportation

positioning system R&D

project 8,000,000 - - - 8,000,000

Drilling package R&D

project 8,000,000 - - - 8,000,000

Large underwater

manipulator system

equipment R&D - 7,000,000 - - 7,000,000

Intelligent equipment for

container yard - 7,200,000 - (1,215,000) 5,985,000

Research project of

deepwater drilling ship

and related equipment - 16,000,000 - (10,640,000) 5,360,000

- 105 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

Development and

industrialization of large

deepwater crane piping

ship 5,340,000 - - - 5,340,000

Comprehensive

standardization of

intelligent manufacturing

for marine engineering

equipment - 10,000,000 - (4,700,000) 5,300,000

Other R&D projects (21,569,92

42,725,580 22,384,307 4) (1,842,900) 41,697,063

(21,769,92

256,227,380 115,204,307 4) (26,424,200) 323,237,563

(i)The other changes are the R&D subsidy allocated to the partner according to the cooperative R&D

agreement.

(b) The land compensation income is Land Reservation obtained by the subsidiary of

the Group. Such compensation is amortized in 50 years of the land use right on

average.

- 106 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

¢ô Notes to major items in the consolidated financial statements (continued)

(37) Capital stock

Report year

Dec. 31, 2014 movement Dec. 31, 2015

Shares without sales

limitation

-

RMB common

share 2,768,331,384 2,768,331,384

Foreign investment -

shares listed on

domestic market 1,621,963,200 1,621,963,200

4,390,294,584 - 4,390,294,584

Report year

Dec. 31,2013 movement Dec. 31, 2014

- Shares with sales

limitation -

State corporate shares 2,768,331,384 - 2,768,331,384

Foreign investment -

shares 1,621,963,200 1,621,963,200

4,390,294,584 - 4,390,294,584

(38) Capital reserve

Dec. 31, 2014 Report year Dec. 31, 2015

(reclassification) movement

Capital stock premium 5,415,833,470 - 5,415,833,470

Other Capital reserve

- purchase subsidiary

Minority interest 195,060,000 (211,263,111) (16,203,111)

-

Transfer from capital

reserve based on

former norms (711,345) - (711,345)

Capital stock premium 128,059,561 - 128,059,561

5,738,241,686 (211,263,111) 5,526,978,575

Dec. 31,2013 Report year Dec. 31, 2014

(reclassification) movement (reclassification)

Capital stock premium 5,415,833,470 - 5,415,833,470

Other Capital reserve

- purchase subsidiary

Minority interest 195,060,000 - 195,060,000

- Transfer from capital (711,345) - (711,345)

- 107 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Note for 2015 financial statements

( Unless otherwise specified, the amount unit is RMB.)

reserve based on

former norms

Capital stock premium 128,059,561 - 128,059,561

5,738,241,686 - 5,738,241,686

- 108 -

ÉϺ£Õñ»ªÖع¤(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾

2015 Äê¶È²ÆÎñ±¨±í¸½×¢

(³ýÌرð×¢Ã÷Í⣬½ð¶îµ¥Î»ÎªÈËÃñ±ÒÔª)

¢ô Notes to major items in the consolidated financial statements (continued)

(39) Other integrated profits

Other integrated profit in assets liabilities Other integrated profits in 2015 income statement

Dec. 31, Tax Dec. 31, Pre-tax Less: other Less: income Tax Tax

2014 attributable 2015 amount in integrated tax expenses attributable attributable

to the parent report period income to the parent to the

company transferred-in company minority

profit or loss shareholder

listed in prior s

period

Other integrated profits after re

classification in the profit and loss

- Fair value change profit or loss

of financial assets available for

sale (Note 4(11), IV(49)) 321,642,049 (123,536,363) 198,105,686 280,878,768 (363,049,437) (41,365,694) (123,536,363) -

- Conversion difference of foreign

currency statements (2,102,007) 11,656,558 9,554,551 16,965,661 - - 11,656,558 5,309,103

319,540,042 (111,879,805) 207,660,237 297,844,429 (363,049,437) (41,365,694) (111,879,805) 5,309,103

Other integrated profits in assets liabilities Other integrated profits in 2013 income statement

Dec. 31, Tax Dec. 31, Pre-tax Less: other Less: income Tax Tax

2013 attributable 2014 amount in integrated tax expenses attributable attributable

to the parent report period income to the parent to the

company transferred-in company minority

profit or loss shareholder

listed in prior s

period

Other integrated profits after re

classification in the profit and loss

- 109 -

ÉϺ£Õñ»ªÖع¤(¼¯ÍÅ)¹É·ÝÓÐÏÞ¹«Ë¾

2015 Äê¶È²ÆÎñ±¨±í¸½×¢

(³ýÌرð×¢Ã÷Í⣬½ð¶îµ¥Î»ÎªÈËÃñ±ÒÔª)

- air value change profit or loss of

financial assets available for

sale (Note 4(11), IV(49)) 248,889,422 72,752,627 321,642,049 438,891,023 (300,833,759) (65,304,637) 72,752,627 -

- Conversion difference of foreign

currency statements 38,627 (2,140,634) (2,102,007) (2,150,514) - - (2,140,634) (9,880)

248,928,049 70,611,993 319,540,042 436,740,509 (300,833,759) (65,304,637) 70,611,993 (9,880)

- 110 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

IV Notes to major items in the consolidated financial statements (continued)

(40) Surplus reserve

Report year

Dec. 31, 2014 movement Dec. 31, 2015

Statutory surplus reserve 1,262,227,357 21,494,761 1,283,722,118

Discretionary surplus

reserve 292,378,668 - 292,378,668

1,554,606,025 21,494,761 1,576,100,786

Report year

Dec. 31, 2013 movement Dec. 31, 2014

Statutory surplus reserve 1,227,769,193 34,458,164 1,262,227,357

Discretionary surplus

reserve 292,378,668 - 292,378,668

1,520,147,861 34,458,164 1,554,606,025

According to P. R. China Company Law, the Company¡¯s Article of Association

and board meeting decisions, the Company accrues 10% of its net profit as

statutory surplus reserve. When statutory surplus reserve accumulated reached

50% of the Capital stock, the Company can stop accruing. Statutory surplus

reserve can be used to compensate loss upon approval, or to increase Capital

stock. The Company¡äs statutory surplus reserve is 21,494,761 Yuan in 2015

(2014: 34,458,164 Yuan).

(41) Undistributed profit

2015 2014

(reclassification)

Starting undistributed profit 2,987,813,174 2,808,057,854

Add: net loss / profit

attributable to parent

company report year - 11,990,211

Starting undistributed profit 2,987,813,174 2,820,048,065

Add: net loss / profit

attributable to parent

company report year 212,411,967 202,223,273

Less: statutory surplus

reserve (21,494,761) (34,458,164)

Closing undistributed profit (10,191,679) -

Less: statutory surplus

reserve 3,168,538,701 2,987,813,174

- 111 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

(a) The undistributed profit at the beginning of 2014 includes 11,990,211

Yuan balance of surplus reserve attributable to parent company¡¯s

subsidiaries (Note 5 (1))

(b) The cash dividends payable this year is the section that shall be borne by

the Group and distributed to minority shareholder before the consolidated

day of subsidiary CCCC Tianhe Co., Ltd under the same control.

- 112 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

IV Notes to major items in the consolidated financial statements (continued)

(42) Operating revenue and operating cost

2015 2014

(reclassification)

Major operating income 23,014,315,324 25,288,331,611

Other operating income 258,079,353 188,679,470

23,272,394,677 25,477,011,081

2015 2014

(reclassification)

Major operating income 19,473,230,285 21,862,826,118

Other operating income 244,084,570 165,859,524

19,717,314,855 22,028,685,642

(a) Major operating income and major operating cost

In products:

2015 2014

(reclassification)

Major operating Major operating Major operating Major operating

income cost income cost

Container cranes 14,994,515,929 12,039,998,425 12,295,041,201 10,271,871,264

Marine heavy

equipment 3,985,411,881 3,950,151,042 4,984,474,241 4,387,726,757

Bulk machinery 2,013,370,826 1,862,388,384 3,597,166,505 3,415,989,051

Nanjing High Speed

¡°Construction ¨C

transfer¡± Item 514,064,790 447,701,799 2,885,494,223 2,441,043,673

Steel structures and

related income 826,175,120 796,465,278 1,058,895,961 1,019,229,739

Vessel shipping and

others 680,776,778 376,525,357 467,259,480 326,965,634

23,014,315,324 19,473,230,285 25,288,331,611 21,862,826,118

(b) Other operating income and other operating cost

2015 2014

(reclassification)

Other operating Other operating Other operating Other operating

income cost income cost

Equipment

leasing and 132,403,534 146,110,137 68,454,629 136,994,221

- 113 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

others

Sales of

materials 125,675,819 97,974,433 120,224,841 28,865,303

258,079,353 244,084,570 188,679,470 165,859,524

- 114 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

¢ô Notes to major items in the consolidated financial statements (continued)

(42) Operating revenue and operating cost (continued)

(c) Operating income of the Group from top 10 clients:

Operating income from top 10 construction contract clients is 4,562,073,570 Yuan

(for 2014: 7,147,657,326 Yuan), taking 19% (as of 2014: 29%) of total sales income

of the Group. Details are as follows:

Operating revenue

Proportion in total

operating income of

the Group (%)

Company A 834,840,444 4%

Company B 625,815,227 3%

Company C 527,726,911 2%

Company D 503,776,173 2%

Company E 415,913,854 2%

Company F 404,230,358 2%

Company G 330,829,148 1%

Company H 321,006,393 1%

Company I 300,144,838 1%

Company J 297,790,224 1%

4,562,073,570 19%

(43) Business tax and charges

2015 2014

(reclassification)

Business tax 10,974,073 104,429,550

Urban maintenance and

construction tax 6,074,911 16,456,001

Education charges 5,496,235 13,346,462

Others 2,004,960 2,400,487

24,550,179 136,632,500

- 115 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

¢ô Notes to major items in the consolidated financial statements (continued)

(44) Selling expenses

2015 2014

(reclassification)

Employee remuneration 44,644,978 37,903,990

Travel expenses 22,084,463 19,337,611

Tender expenses 3,739,877 1,321,657

Advert expenses 2,176,378 1,496,290

Exhibition expenses 1,797,466 3,335,851

Office expenses 1,651,244 1,584,604

Fixed assets depreciation (Notes ¢ô

(15)) 285,529 1,260,095

Other 179,725 1,881,812

Employee remuneration 135,960 856,497

Travel expenses 2,693,123 4,385,466

79,388,743 73,363,873

(45) General expenses

2015 2014

(reclassification)

R&D expenses 717,412,492 780,894,035

Employee remuneration 344,563,366 316,736,711

Taxes 109,946,415 67,150,559

Intangible assets amortization (Note 93,446,864 86,143,687

4(17))

Fixed assets depreciation (Note 4 67,811,262 92,467,494

(15))

Expenses on employing 54,836,758 20,686,894

intermediary

Office expenses 43,037,316 35,748,385

Business entertainment expenses 14,853,947 15,056,980

Travel expenses 16,708,445 10,963,041

Informatization expenses 10,445,654 5,746,312

Insurance expenses 8,582,832 2,501,076

Consultation expenses 5,869,779 3,511,139

Maintenance expense 3,626,881 4,695,575

Conference expenses 1,589,710 1,064,617

Other 58,490,843 64,309,026

1,551,222,564 1,507,675,531

- 116 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

¢ô Notes to major items in the consolidated financial statements (continued)

(44) Financial expenses/(income)-- Net

2015 2014

(reclassification)

- Interests expenses 1,279,031,963 1,547,091,452

Less: interest income (369,131,564) (347,974,328)

Foreign exchange loss 785,579,233 147,744,148

Less: foreign exchange income (223,053,557) (135,267,523)

Amortization of issue cost of intermediate-

term bills (Note ¢ô (31) (33)) 12,389,973 19,749,727

Other 48,035,048 76,395,062

1,532,851,096 1,307,738,538

(47) Expenses classified by nature

Operating costs, sales expenses and management expenses in profit statements are

classified by nature as follows:

2015 2014

(reclassification)

Expendable raw material and low value

consumables 14,623,452,686 14,082,018,189

Employee remuneration (Note 4(25)) 1,691,745,763 1,555,445,181

Depreciation and amortization expenses

(Note 4(14), IV(15), IV(17)) 1,342,307,268 1,314,372,005

External coordination costs 911,640,427 3,342,518,952

Transportation expenses 749,214,023 714,157,063

Technical R & D expenses 717,412,492 780,894,035

Energy expenses 280,917,025 240,794,047

On-site installation expenses 194,104,215 312,848,259

Rental fee 162,684,322 191,171,569

After-sales costs 125,219,471 83,611,224

Taxes 109,946,415 67,150,559

Expenses on employing intermediary 54,836,758 20,686,894

Office expenses 51,688,823 41,101,302

Travel expenses 38,792,908 30,300,652

Business entertainment expenses 14,853,947 15,056,980

- 117 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

informatization expense 10,445,654 5,746,312

Bidding fee 1,797,466 3,335,851

Other expenses 266,866,499 808,515,972

21,347,926,162 23,609,725,046

¢ô Notes to major items in the consolidated financial statements (continued)

(48) Financial expenses/(income)-- Net

2015 2014

Financial assets measured at fair value with

its change accounted in current profit and

loss -

Fair value change loss (Note 4(2)) (25,058,919) (95,434,488)

Financial debt measured at fair value with

its change accounted in current profit and

loss -

Fair value change loss (Note 4(2)) 3,833,885 (28,107,596)

(21,225,034) (123,542,084)

(49) Investment gains

2015 2014

On cost basis accounting basis other long

term equity investment income (Note

4(11)(c)) 9,465,520 1,103,460

On equity basis accounting basis Long

term equity investment gains/ loss

(Note 4 (13)(a)(b)) 55,252,057 14,737,413

Investment gains from disposal financial

assets available-for-sale¨Cequity tool

period 6,402,396 1,160,044

Investment gains from disposal financial

assets available-for-sale¨Cbank financial

products (Note 4 (39)) 393,033,507 278,843,280

Profit obtained from disposal of the

financial assets available for sale 34,083,478 75,078,789

498,236,958 370,922,986

(50) Assets impairment loss

2015 2014

Inventory price reduction loss(Note 4(20)) 52,848,818 91,143,610

- 118 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

Receivable bad debt provision loss (Note

4(20)) 279,634,757 132,518,366

Predicted contract loss (Note 4(20)) 304,907,624 324,779,866

637,391,199 548,441,842

- 119 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

¢ô Notes to major items in the consolidated financial statements (continued)

(51) Non-operating income

2015 2014 Amount booked

(reclassificatio into 2015 non-

n) recurring

gains/losses

Non Current assets

disposal income 14,128,543 14,241,356 14,128,543

Including: land and building

levy compensation

income 14,128,543 14,241,356 14,128,543

Government subsidy(a) 40,881,189 28,177,176 40,881,189

Subsidies provided by

organizations rather than

government 2,549,000 4,865,410 2,549,000

Other 13,154,739 14,170,649 13,154,739

70,713,471 61,454,591 70,713,471

(a) Government subsidy specifications:

2015 2014 Related to

(reclassificatio assets/

n) Related to gains

Financial allocation 36,449,045 13,316,867 Related to gains

Science and technology 2,500,000 12,928,165

subsidy Related to gains

1,932,144 1,932,144

Land compensation

(Note¢ô (36)) Related to assets

40,881,189 28,177,176

- 120 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

¢ô Notes to major items in the consolidated financial statements (continued)

(52) Non-operating expense

2015 2014 Amount

(reclassification booked into

) 2015 non-

recurring

gains/losses

Non Current assets

disposal loss 4,789,746 293,220 4,789,746

Including: Losses from

disposal of fixed assets 4,789,746 293,220 4,789,746

Other 530,000 - 530,000

Non Current assets

disposal loss 39,593 2,642,598 39,593

Including: Losses from

disposal of fixed assets 306,533 2,580,856 306,533

5,665,872 5,516,674 5,665,872

(53) Corporate income tax expenses

2015 2014

(reclassificatio

n)

Current period corporate tax 49,477,423 24,909,512

Deferred corporate tax 28,052,453 (3,703,586)

77,529,876 21,205,926

2015 2014

(reclassificatio

n)

Total profit 271,735,564 177,791,974

Corporate tax expenses calculated by the

rate of 15% 40,760,335 26,668,796

Impact of tax rate differences on corporate

tax expenses 20,241,955 (6,294,103)

Addition and deduction of technological

development expenses (22,840,801) (24,280,514)

Non-taxable income (15,907,809) (2,470,332)

- 121 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

Non-deductible cost, expenses and loss 3,305,801 7,349,319

Compensable loss of deferred corporate tax

assets unconfirmed current period 56,375,934 67,271,399

Temporary differences of unconfirmed

deferred income tax (2,795,677) (52,915,856)

Adjustment of final settlement prior year (1,562,576) -

Corporate income tax expenses (47,286) 5,877,217

Total profit 77,529,876 21,205,926

- 122 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

¢ô Notes to major items in the consolidated financial statements (continued)

(54) Earning per share

(a) Basic Earnings per share

Basic / earnings per share is calculated by dividing consolidated net / earnings

belonging to common share holders of parent company by the weighted average

number of common shares publicly issued by parent company:

2015 2014

(reclassification

)

Consolidated net gains belonging to

common share holders of parent

company 212,411,967 202,223,273

weighted average number of common

shares publicly issued by parent company 4,390,294,584 4,390,294,584

Basic Earnings per share 0.05 0.05

(b) Diluted earnings per share

Diluted earnings per action is calculated by the consolidated net earnings

attributable to parent company common shareholders after adjustment upon diluting

potential common shares divided by the average number of common shares. In

2014 and 2015 the Company had no diluting potential common shares. Thus, diluted

earnings per share equal basic earnings per share.

(55) Cash flow statements notes

(a) Cash receipt related with other operational activities

2015 2014

(reclassification)

Cash receipt of government allowance

and bonus 288,908,075 115,195,983

Collected house deposit 132,383,428 116,387,049

Cash receipt from income from fines 10,574,725 165,257,305

Customs deposits received 7,958,851 6,310,578

Others - 6,944,000

Cash receipt of government allowance

and bonus 7,366,702 12,539,223

- 123 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

447,191,781 422,634,138

- 124 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

IV Notes to major items in the consolidated financial

statements (continued)

(55) Cash flow statements notes(continued)

(b) Cash payment related with other operational activities

2015 2014

(reclassification)

Customs guarantee deposit 323,819,681 172,479,388

Selling and general expenses 188,362,388 228,117,521

Financial expenses formality cost 48,035,048 76,395,062

R&D subsidy paid to cooperation units 6,476,300 -

Others 6,411,082 10,207,298

573,104,499 487,199,269

(c) Cash receipt related with other investment activities

2015 2014

(reclassification)

Interest income 93,974,040 63,740,660

(d) Receipt of other cash related to financing activities

2015 2014

(reclassification)

Recovery of restricted bank deposits 2,681,198,220 3,695,754,203

Related parties loan received 1,785,676,000 100,000,000

Capital invested by minority shareholders 273,402,314 4,323,230

4,740,276,534 3,800,077,433

(e) Payment of other cash related to financing activities

2015 2014

(reclassification)

Restricted bank deposits made 1,123,143,500 4,931,355,621

Intermediate term notes issuance cost

expenses 16,400,000 11,400,000

Withdrawal share expenditure of original

shareholder of subsidiaries - 35,056,927

1,139,543,500 4,977,812,548

- 125 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

IV Notes to major items in the consolidated financial

statements (continued)

(56) Supplementary information of cash flow statements

(a) The net profit adjusted to cash flow from operating activities

2015 2014

(reclassification)

Net profit 194,205,688 156,586,048

Add/(less): assets impairment provision 637,391,199 548,441,842

Fixed assets and Investment

property depreciation 1,248,860,404 1,228,228,318

Intangible assets amortization 93,446,864 86,143,687

Disposal of fixed assets and

intangible assets net profit (9,338,797) (13,948,136)

Fair value change loss/(income) 21,225,034 123,542,084

Financial expenses 1,752,677,447 1,255,224,300

Investment gains (498,236,958) (370,922,986)

Building contract amount

increase/ (decrease) 28,052,453 (3,703,586)

Operating receivables increase (1,371,334,146) 21,218,400

Operating payables increase (3,108,564,518) (1,608,507,946)

Net cash flow from operation activities (902,563,051) (3,306,786,677)

Building contract amount

increase / (decrease) 82,216,908 1,020,855,727

Operating receivables increase (1,831,961,473) (863,628,925)

Significant investment and capital raising

not involved cash revenue and

expenditure

2015 2014

Inventory ¨C semi-product transferred to

project in process - 1,507,237,257

Inventory ¨Cpick the raw material to project

in process - 95,952,993

Deferred income tax debt caused by

asset estimate increasing - 29,725,076

- 126 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

¢ô Notes to major items in the consolidated financial

statements (continued)

(56) Supplementary information of cash flow statements

(continued)

(b) Net cash movement

2015 2014

(reclassification)

Closing cash balance 2,337,925,611 1,882,283,319

Less: starting cash balance (1,882,283,319) (3,463,423,711)

Net cash £¨decrease£©/increase 455,642,292 (1,581,140,392)

(c) Subsidiaries acquisition

2015

Payable cash and cash equivalents caused in enterprise

merger in this year 76,606,000

Price of subsidiaries acquisition in 2014 211,263,111

Net cash received by subsidiaries acquisition

2015

Current assets 1,134,335,686

Non-current assets 1,118,330,758

Current liabilities (1,462,753,598)

Non-current liabilities (43,115,047)

Net assets 746,797,799

Less: minority shareholders' equity (504,254,800)

Net assets of subsidiary 242,542,999

- 127 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

¢ô Notes to major items in the consolidated financial statements (continued)

(56) Supplementary information of cash flow statements (continued)

(d) Cash

Dec. 31, 2015 Dec. 31, 2014

(reclassification)

Including: cash in hand 746,967 626,798

Bank deposits disposable 2,318,579,147 1,846,413,404

Other monetary funds

disposable 18,599,497 35,243,117

Closing cash balance 2,337,925,611 1,882,283,319

(57) Foreign currency monetary items

Dec. 31, 2015

Foreign curren

cy bala

nce Rate RMB balance

Monetary fund -

USD 137,115,012 6.4936 890,370,042

Euro 57,367,233 7.0952 407,031,992

Pound 2,514,663 9.6159 24,180,748

Oman riyal 580,139 16.8966 9,802,377

Sri Lankan rupee 201,277,172 0.0460 9,258,750

Singapore dollar 1,592,667 4.5875 7,306,360

Rouble 53,495,135 0.0885 4,734,319

South Korean won 668,453,325 0.0055 3,676,493

Real 937,867 1.6483 1,545,886

Australian dollar 310,654 4.7276 1,468,648

Rand 3,036,362 0.4174 1,267,377

India rupee 11,372,514 0.0977 1,111,095

Hong Kong dollar 221,140 0.8378 185,271

Canadian dollar 15,452 4.6814 72,337

Yen 521,999 0.0539 28,136

New Zealand Dollar 625 4.4426 2,777

1,362,042,608

- 128 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

¢ô Notes to major items in the consolidated financial statements (continued)

(57) Foreign currency monetary items (continued)

Dec. 31, 2015

Foreign currency Conversion RMB balance

balance rate

s

Accounts receivable -

USD 284,106,383 6.4936 1,844,873,209

Euro 50,889,618 7.0952 361,072,018

Singapore dollar 36,803,153 4.5875 168,834,464

CAD 5,267,000 4.6814 24,656,934

Saudi Riyal 6,132,462 1.7356 10,643,501

Rand 9,836,195 0.4174 4,105,628

South Korea won 501,139,157 0.0055 2,756,265

Sri Lankan rupee 50,964,343 0.0460 2,344,360

Australian dollar 326,303 4.7276 1,542,630

Pound 87,474 9.6159 841,141

India rupee 5,413,116 0.0977 528,861

Hong Kong dollar 206,025 0.8378 172,608

Real 65,200 1.6483 107,469

2,422,479,088

Other accounts receivables -

USD 8,784,474 6.4936 57,042,860

Euro 3,930,049 7.0952 27,884,484

Singapore dollar 652,109 4.5875 2,991,550

Australian dollar 375,870 4.7276 1,776,963

OMR 33,018 16.8966 557,892

South Korea won 45,916,744 0.0055 252,542

Pound 8,346 9.6159 80,254

Canadian dollar 3,500 4.6814 16,385

90,602,930

Other accounts receivables

USD 135,530,187 6.4936 880,078,822

Euro 42,578,241 7.0952 302,101,136

Singapore dollar 2,848,622 4.5875 13,068,053

Dirham 2,136,087 1.6719 3,571,324

yen 10,150,520 0.0539 547,113

South Koreas won 44,915,818 0.0055 247,037

Pound 22,236 9.6159 213,819

Australia dollar 40,888 4.7276 193,302

Hong Kong dollar 78,850 0.8378 66,061

Rouble 85,295 0.0885 7,549

1,200,094,216

- 129 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

IV Notes to major items in the

consolidated financial statements

(continued)

(57) Foreign currency monetary items

(continued)

Dec. 31, 2015

Foreign currency Conversion RMB balance

balance rate

s

Other accounts receivables -

USD 4,456,481 6.4936 28,938,605

Euro 3,144,887 7.0952 22,313,602

Singapore dollar 982,209 4.5875 4,505,884

Pound 36,849 9.6159 354,336

56,112,427

Short-term loan

USD 1,767,690,890 6.4936 11,478,677,563

Euro 15,961,626 7.0952 113,250,929

11,591,928,492

Long-term loan due within one year

USD 110,000,000 6.4936 714,296,000

Long-term loan-

USD 9,142,857 6.4936 59,370,057

Long-term loan -

Euro 20,000,000 7.0952 141,904,000

Long-term payment-

USD 110,857,143 6.4936 719,861,943

(58) Assets with restricted ownership

Dec. 31, 2014 Addition Deduction report Dec. 31, 2015

(reclassification) report period year

Other monetary capital

restricted 1,608,684,124 1,999,519,732 (3,487,795,751) 120,408,105

Restricted other current

assets 3,861,040,000 - (3,861,040,000) -

- 130 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

Restricted fixed assets 259,731,664 1,579,091,619 (259,731,664) 1,579,091,619

Restricted intangible

assets 278,828,506 - (278,828,506) -

Restricted long-term

receivables 5,339,170,148 341,296,950 - 5,680,467,098

11,347,454,442 3,919,908,301 (7,887,395,921) 7,379,966,822

- 131 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

¢õ Consolidation scope change

(1) Enterprise consolidation not under the same group

(a) Enterprise consolidation not under the same group this year

Acquiree Acquisiti Basis of Purchase Determin Revenue of Net profit of Acquiree¡äs Acquiree¡äs Operating Operating cash

on equity corporate day ation acquiree from acquiree from income in Net Profit in cash flow from flow net from

proportio merger foundatio Jan 1, 2015 to Jan 1, 2015 to 2014 2014 purchase day purchase day on

n under the n consolidated consolidated on Jan, 1, Jan, 1, 2015

same day day 2015

control

Controlled Dec, 31, 20

by the 15 Gain

same control

CCCC Tianhe parent rights

Co., Ltd 32.51% company (Note I) 802,736,221 42,357,907 407,589,594 8,537,647 68,610,363 160,429,666

Note 1: as of Dec. 31, 2015, the Group has completed the procedures of stock change of CCCC Tianhe Co., Ltd. The Group obtained 55.98% of the shareholders' meeting and 80%

of the board's voting rights via amendment of Articles of Association of CCCC Tianhe Co., Ltd, reconstruction of Board of directors and signing the agreement of the concerted

action with China Communications Corporation, one of the shareholders of CCCC Tianhe Co., Ltd. Based on the Articles of Association, the Group has obtained the control

rights of the company and the company and its subsidiary : Fujian CCCC Qianda Heavy Industry Co., Ltd is consolidated.

- 132 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

V Consolidation scope change (continued)

(1) Enterprise consolidation under the same group (continued)

(b) Consolidation costs and goodwill confirmation as follows:

CCCC Tianhe Co., Ltd

Consolidation costs -

Cash 211,263,111

(c) Acquiree¡äs assets and liabilities on purchase day as follows:

(i) CCCC Tianhe Co., Ltd

Purchase day

Dec. 31, 2014

Book value Book value

Monetary capital 175,258,178 277,103,985

Receivable 16,954,000 2,600,000

Interest receivable - 6,204,344

Payable 251,162,515 72,857,400

Prepayments 67,606,419 21,424,410

Other receivables 5,453,511 7,851,478

Inventory 169,703,175 174,824,826

Account closed construction not

completed 448,197,888 137,300,556

Non-current liabilities due within one year - 2,302,500

Other current assets - 15,539,215

Fixed assets 412,643,977 1,088,755,662

Projects in process 637,023,408 3,296,217

Intangible assets 56,322,752 57,578,344

Deferred income tax assets 12,173,954 12,002,993

Long stay 166,667 -

Less: short term loans (475,000,000) (608,234,175)

Notes payable (145,709,351) (54,886,977)

Payable (453,297,586) (298,818,033)

Payment in advance (222,650,360) (45,102,460)

Account closed construction not

completed (53,728,168) -

Tax payable (14,892,527) (876,076)

Interest payable (31,349,367) -

Other payable (5,451,486) (79,788,346)

Non-current liabilities due within one

year (60,000,000) (30,000,000)

Interest payable (674,753) (6,968,827)

Long term loans - (60,000,000)

Estimated liabilities (306,368) -

Deferred income (42,808,679) (47,571,777)

Net assets 746,797,799 647,395,259

Less: minority interest (504,254,800) (437,503,558)

Gain net assets 242,542,999 209,891,701

- 133 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

V Consolidation scope change(continued)

(2) Consolidation scope change for other reasons

On May 29, 2015, the Company spent 1,500,000 USD to establish wholly-owned

subsidiary ZPMC North America Inc.

On Apr 29, 2015, the Company spent 1,500,000 USD to establish wholly-owned

subsidiary ZPMC NA Huston Inc.

On May, 4, 2015, the Company spent 517,025 USD to establish wholly-owned subsidiary

ZPMC Marine Contractor USA Limited.

On October, 2015, the Company spent 42,500,000 RUR to establish the holding

subsidiary ZPMC Limited Liability Company with Russia port-service Company.

On September 16, 2015, the Company spent 1,570,000 BRL to establish wholly-owned

subsidiary ZPMC Brazil Holdings Ltda. with the subsidiary.

On April 9, 2015, the subsidiary spent 3,336,000 USD to establish the holding subsidiary

Jiahua Shipment Co., Ltd with CIMC International Shipping Co., Ltd.

On April 15, 2015, the subsidiary spent 1,020,000 USD to establish the holding subsidiary

Zhenhua Pufeng Wind Power (Hong Kong) Co., Ltd with Profundo Offshore Contractor

Ltd.

On April 9, 2015, the subsidiary and Offshore Tech Llc. Jointly invested to establish the

holding subsidiary Zhenhua Shende Offshore Engineering Installation Co., Ltd.

On November 12, 2015, the Company spent 47,500,000 Yuan to establish the holding

subsidiary CCCC Investment Development Qidong Co., Ltd with CCCC Tianjin Waterway

Bureau Co., Ltd and Qidong Costal Development Co., Ltd.

On December 28, 2015, the Company spent 183,000,000 Yuan to establish the holding

subsidiary CCCC Liyang City Investment Construction Co., Ltd with CCCC Shanghai

Waterway Bureau Co., Ltd., CCCC East China Investment Co., Ltd., CCCC Second

Highway Survey and Design Institute Co., Ltd. and Jiangsu Zhongguancun Science and

Technology Industrial Park Administrative Committee.

The subsidiary has completed the cancellation of Daoda (Holland) Marine Science and

Technology Co., Ltd., so this company is not covered in the financial statements

consolidation scope after the cancellation day.

- 134 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

VI Interests in Other Entities

(1) Interests in subsidiary

(a) Interests in subsidiary

Name Main operating Registered in Shareholding ratio Gain mode

address Business natur

e

Direct Indirect

Shanghai Zhenhua Port Machinery Shanghai Shanghai Machiner 90% -

Heavy Industry Co., Ltd. Chongming Chongming y Investment to

County County manufacturing set up

Shanghai Zhenhua Heavy Shanghai Shanghai Machiner 100% -

Industries Machinery Co., Ltd. Chongming Chongming y Investment to

County County manufacturing set up

Shanghai Zhenhua Port Machinery Hong Kong Hong Kong Machiner 99.99% -

(Hong Kong) Co., Ltd. y Investment to

manufacturing set up

Shanghai Zhenhua Shipping Co. Shanghai Shanghai Ship 55% -

Ltd. Pudong New Pudong New transportation Investment to

Area Area set up

Nantong Zhenhua Heavy Nantong Nantong Machiner 100% -

Equipment Manufacturing Co., Ltd. y Investment to

manufacturing set up

Shanghai Zhenhua Heavy Nantong Nantong Machiner 100% - Investment to

Industries Group (Nantong) y set up

Transmission Machinery Co., Ltd manufacturing

Shanghai Zhenhua Heavy Nantong Nantong Machiner 100% -

Industries Group (Nantong) Co., y Investment to

Ltd. manufacturing set up

- 135 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

Shanghai Zhenhua Heavy Shanghai Shanghai Electrical 100% -

Industries Electric Co., Ltd. Pudong New Pudong New equipment Investment to

Area Area R&D set up

Nantong ZPMC Steel Structure Nantong Nantong Machiner 75% 25%

Processing Co., Ltd. y Investment to

manufacturing set up

Jiangyin ZPMC Steel Structure Jiangyin Jiangyin Machiner 75% 25%

Manufacturing Co., Ltd. y Investment to

manufacturing set up

Shanghai Zhenhua Heavy Shanghai Shanghai Machiner - 49%

Industries Steel Structure Co., Pudong New Pudong New y Investment to

Ltd.(Note 1) Area Area manufacturing set up

Shanghai Zhenhua Heavy Shanghai Shanghai Ship 100% - Investment to

Industries Vessel Transport Co., Yangshan Yangshan transportation set up

Ltd Bonded Port Bonded Port

Area Area

Shanghai Zhenhua Testing Shanghai Shanghai Technica 100% -

Technology Consulting Co., Ltd. Pudong New Pudong New l consultation Investment to

Area Area set up

Investment to

ZPMC Netherlands B.V. Rotterdam Rotterdam Trade sales 100% - set up

Investment to

Hotel de Herberg B.V. Rotterdam Rotterdam Trade sales - 100% set up

Note 1: Based on constitution of Shanghai Zhenhua Heavy Industries Steel Structure Co., Ltd, Company has right to appoint and dismiss most members in

board of directors. In fact, Company obtains control right, so Company is included in Group financial statements consolidation scale.

- 136 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

VI Interests in Other Entities (continued)

(1) Enterprise Group composition (continued)

(a) Enterprise Group composition (continued)

Name Main operating Registered in Business Shareholding Gain mode

address nature ratio

Direct Indirect

ZPMC Espaa S.L. Spanish Los Barrios Spanish Los Barrios Trade

sales - 100% Investment to set up

ZPMC GmbH Hamburg Germany Hamburg Germany Hamburg Trade

sales 100% - Investment to set up

ZPMC Lanka Company (Private) Limited Sri Lanka Sri Lanka Trade

sales 70% - Investment to set up

ZPMC North America Inc. USA Delaware USA Delaware Trade

sales 100% - Investment to set up

ZPMC Korea Co., Ltd. South Korea Busan South Korea Busan Trade

sales 70% - Investment to set up

ZPMC Engineering Africa (Pty) Ltd. Kwazulu-Natal Kwazulu-Natal Trade 100% - Investment to set up

Province, Republic Province, Republic sales

of South Africa of South Africa

ZPMC Engineering (India) Private Limited India Maharashtra India Maharashtra Trade

sales 100% - Investment to set up

ZPMC Southeast Asia Holding Pte. Ltd. Singapore Singapore Trade

sales 100% - Investment to set up

ZPMC Southeast Asia Pte. Ltd. Singapore Singapore Trade

sales - 70% Investment to set up

ZPMC Engineering (Malaysia) Sdn. Bhd. Malaysia Malaysia Trade

sales - 70% Investment to set up

- 137 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

ZPMC Australia Company (Pty) Ltd. New South Wales, New South Wales, Trade

Australia Australia sales 100% - Investment to set up

Shanghai Zhenhua Port Machinery General Shanghai Pudong New Shanghai Pudong Machiner

Equipment Co., Ltd Area New Area y

manufact Enterprise consolidation

uring 100% - under the same control

Shanghai Zhenhua Heavy Industries Group Shanghai Pudong New Shanghai Pudong Machiner

Transmission Machinery Co., Ltd Area New Area y

manufact Enterprise consolidation

uring - 74.02% under the same control

Shanghai Zhenhua Heavy Industries Zhangjiagang jingang Zhangjiagang jingang Machiner

(Group) Zhangjiagang Port Machinery Co., county county y

Ltd manufact Enterprise consolidation

uring 90% - under the same control

Nanjing Ninggao New Passage Jiangsu Nanjing Jiangsu Nanjing Trade

Construction Co., Ltd sales 100% - Investment to set up

Shanghai Zhenhua Heavy Industries Qidong Jiangsu Nantong Jiangsu Nantong Machiner

Marine Engineering Co., Ltd y

manufact Enterprise consolidation

uring 67% - not under the same control

Jiangsu Daoda Marine Equipment Jiangsu Nantong Jiangsu Nantong Ship desi Enterprise consolidation

Technology Co., Ltd gn - 100% not under the same control

VI Interests in Other Entities (continued)

(1) Interests in subsidiary (continued)

(a) Enterprise Group composition (continued)

Name Main operating Registered in Business Shareholding ratio Gain mode

address nature

Direct Indirect

- 138 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

Jiahua Marine Shipment Co., Ltd Hong Kong Hong Kong Ship

transportatio

n - 70% Investment to set up

Zhenhua Pufeng Wind Power (Hong Hong Kong Hong Kong Ship - 51% Investment to set up

Kong) Co., Ltd transportatio

n

Zhenhua Shende Offshore Hong Kong Hong Kong Ship - 70% Investment to set up

Engineering Installation Co., Ltd transportatio

n

ZPMC-OTL Marine Contractor USA American American Texas Trade sales - 100% Investment to set up

Limited Texas

ZPMC Brazil Holdings Ltda. Rio De Janeiro Rio De Janeiro Trade sales 99% 1% Investment to set up

ZPMC Limited Liability Company Moscow, Moscow, Russia Trade sales Investment to set up

Russia 85% -

ZPMC NA East Coast lnc. Virginia state Delaware Trade sales - 100% Investment to set up

ZPMC NA Huston lnc. Texas state Delaware Trade sales - 100% Investment to set up

CCCC Tianhe Co., Ltd(Note 5(1)) Jiangsu Jiangsu Machinery 32.51% - Enterprise consolidation under

Changshou Changshou manufacturin the same control

g

Fujian CCCC Qianda Heavy Industry Fujian Minhou Fujian Minhou Machinery - 51% Enterprise consolidation under

Co., Ltd (Note 5(1)) manufacturin the same control

g

CCCC Investment Development Qidong Jiangsu Jiangsu Engineering Investment to set up

Co., Ltd(note 2) Nantong Nantong construction

47.5% -

CCCC Liyang City Investment Jiangsu Liyang Jiangsu Liyang Engineering 48% - Investment to set up

Construction Co., Ltd(note 3) construction

Note 2£ºThe Group obtained 95% of the shareholders' meeting and 100% the voting rights of the board of directors by signing concerted action agreement

with CCCC Tianjin Waterway Bureau Co., Ltd. Based on the Articles of Association, the Group obtained the control rights of the company and includes

it into the consolidation scope.

- 139 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

Note 3£º The Group obtained 76% of the shareholders' meeting and 71% the voting rights of the board of directors by signing concerted action agreement with

CCCC Shanghai Waterway Bureau Co., Ltd.and CCCC East China Investment Co., Ltd.. Based on the Articles of Association, the Group obtained the

control rights of the company and includes it into the consolidation scope.

IV Interests in Other Entities (continued)

(1) Interests in subsidiary (continued)

(b) Subsidiary exists key minority shareholders¡ä interests

Name Shareholding ratio of 2015 gains and losses 2015 dividend to the minority Dec. 31, 2015

minority attributable to the minority shareholders Interests of minority

shareholders share shareholders

CCCC Investment Development Qidong 52.5% 9,421 - 52,509,421

Co., Ltd

CCCC Tianhe Co., Ltd 67.49% 28,251,819 31,349,367 504,254,800

CCCC Liyang City Investment 52% - - 121,800,000

Construction Co., Ltd

Shanghai Zhenhua Heavy Industry 33% (58,742,871) - (95,093,530)

Qidong Marine Engineering Co., Ltd

- 140 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

VI Interests in Other Entities (continued)

(1) Interests in subsidiary (continued)

(b) Subsidiary exists key minority shareholders¡ä interests (continued)

Main financial information of above important non wholly owned subsidiary:

Dec. 31, 2015

Current assets Non-current assets Assets total Current liabilities Non-current liabiliti Liabilities total

es

CCCC Investment Development

Qidong Co., Ltd 61,318,901 203,390,215 264,709,116 (164,691,171) - (164,691,171)

CCCC Tianhe Co., Ltd 1,134,335,686 1,118,330,758 2,252,666,444 (1,462,753,598) (43,115,047) (1,505,868,645)

CCCC Liyang City Investment

Construction Co., Ltd 4,338,012 300,161,988 304,500,000 - - -

Shanghai Zhenhua Heavy

Industry Qidong Marine

Engineering Co., Ltd 581,843,704 1,187,796,038 1,769,639,742 (2,022,161,815) (35,609,837) (2,057,771,652)

2015

Operating income Net profit Total comprehensive Operating cash flow

income

CCCC Investment Development

Qidong Co., Ltd 202,023,996 17,944 17,944 (38,996,331)

- 141 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

CCCC Tianhe Co., Ltd 804,955,947 42,357,907 42,357,907 68,610,363

CCCC Liyang City Investment

Construction Co., Ltd 300,144,838 - - (300,657,100)

Shanghai Zhenhua Heavy

Industry Qidong Marine

Engineering Co., Ltd 433,745,342 (178,008,700) (178,008,700) 296,115,738

- 142 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

VI Interests in Other Entities (continued)

(2) Interests in associates and joint ventures

(a) Basic information of joint venture and associates

Whethe

r it is str

ategic t

Main o Grou

operating Register p opera Shareholding

address ed in Operating nature ting ratio

Indir

Direct ect

Joint venture

Jiangsu Longyuan Jingsu Jingsu Marine No 50% -

Zhenhua Marine Nanton Nantong engineering

Engineering Co., Ltd. g construction

ZPMC Mediterranean Turkey Turkey Port equipment No 50% -

Liman Makinalari Istanbu Istanbul technology

Ticaret Anonim Sirketi l service

Zhenhua Marine Energy Hong K Ship No 51% -

(Hong Kong) Co., Ltd ong Hong K transportation

(Note ¢ô (13)(a)) ong

Cranetech Global Sdn. Malaysi Malaysia Port 49.99% -

Bhd. a equipm

ent

technol

ogy

service

Associates ¨C

CCCC Marine Shang Shangha Vessel technology No 25% -

Engineering Vessel hai Pud i Pudong development

Technology Research ong consultation

Centre Co., Ltd

CCCC estate Yixing Co., Jiangs Jiangsu Real estate No 20% -

Ltd. u Wuxi Wuxi development

Shanghai Zhenhua Jiangs Paint No 20% -

Heavy Industries u Chan Jiangsu manufacturing

(Group) Changzhou gzhou Changzh

Paint Co., Ltd. ou

CCCC Financial Rental Leasing No 30% -

Co., Ltd. Shang Shangha

hai Pud i Pudong

ong

China Communications USA USA Port, channel, No 24% -

Construction USA Inc. road, bridge

construction

The Group adopts equity accounting method to equity investments above

- 143 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

VI Interests in Other Entities (continued)

(2) Interests in associates and joint ventures (continued)

(b) Main financial information of important joint ventures

Based on the amount attributable to the parent company in the

consolidated financial statements of the joint venture, the Group calculated

the assets share as per the holding proportion. The amount in the

consolidated financial statements of the joint venture considered the fair

value of the identifiable assets and liabilities and the effect of the uniform

accounting policies of the joint venture in the investment.

Jiangsu Longyuan Zhenhua Marine

Engineering Co., Ltd. Dec. 31, 2015 Dec. 31, 2014

Current assets 186,506,267 211,625,542

Among: cash and cash equivalents 10,413,243 39,958,157

Non-current assets 507,541,853 366,512,542

Assets total 694,048,120 578,138,084

Current liabilities (296,779,801) (151,900,718)

Non-current liabilities (54,113,342) (100,392,085)

Liabilities total (350,893,143) (252,292,803)

Shareholder¡äs interests 343,154,977 325,845,281

Net assets share accounting base on

shareholding ratio 171,577,489 162,922,641

Adjusting items - -

- Other - -

Book value invested to joint venture 171,577,489 162,922,641

Jiangsu Longyuan Zhenhua Marine

Engineering Co., Ltd. 2015 2014

Operating income 143,245,382 281,732,165

Financial expenses (6,886,954) (7,035,737)

Income tax expense (4,085,520) (5,213,649)

Net profit /(loss) 17,309,696 35,438,514

Other integrated income - -

Integrated income/ (loss) total 17,309,696 35,438,514

Receivable associates Company¡¯s

equity of the Group in report period - -

- 144 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

VI Interests in Other Entities (continued)

(2) Interests in associates and joint ventures (continued)

(c) Main financial information of important associates

Based on the amount attributable to the parent company in the consolidated financial statements of the associates, the Group calculated

the assets share as per the holding proportion. The amount in the consolidated financial statements of the associates considered the fair

value of the identifiable assets and liabilities and the effect of the uniform accounting policies of the associates in the investment.

Dec. 31, 2015 Dec. 31, 2014

Main financial CCCC Estate

information of CCCC Financial Yixing Co., Ltd. CCCC Financial Rental

China Communications important Rental Co., Ltd. Co., Ltd

Construction USA Inc. associates

Current assets 299,750,602 1,043,352,567 3,409,763,003 1,013,691,641 1,597,793,808

Non-current assets 15,124,660 5,754,153 8,353,597,281 6,094,038 1,393,369,897

Assets total 314,875,262 1,049,106,720 11,763,360,284 1,019,785,679 2,991,163,705

Current liabilities (651,169) (116,217,795) (4,441,872,270) (86,351,627) (363,662,187)

Non-current liabilities - (59,400,000) (3,515,685,686) (60,000,000) (789,666,600)

Liabilities total (651,169) (175,617,795) (7,957,557,956) (146,351,627) (1,153,328,787)

Shareholder¡äs interests 314,224,093 873,488,925 3,805,802,328 873,434,052 1,837,834,918

Net assets share accounting base on

shareholding ratio 75,413,782 174,697,785 1,141,740,698 174,686,810 551,350,475

Adjusting items

- Other - - - - -

- 145 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

Book value invested to associates equity 75,413,782 174,697,785 1,141,740,698 174,686,810 551,350,475

VI Interests in Other Entities (continued)

(2) Interests in associates and joint ventures (continued)

(c) Main financial information of important associates (continued)

2015 2014

China Communications CCCC Estate Yixing CCCC Estate Yixing CCCC Financial Rental

CCCC Financial

Construction USA Inc. Co., Ltd. Co., Ltd. Co., Ltd.

Rental Co., Ltd.

Operating income - 121,083,446 456,990,739 - 87,247,087

Net (loss)/ profit (8,535,897) 54,873 167,967,410 (16,310,097) 37,841,701

Other integrated income 5,234,988 - - - -

Integrated (loss)/income total (3,300,909) 54,873 167,967,410 (16,310,097) 37,841,701

Receivable associates

Company¡¯s equity of the

Group in report period - - - - -

- 146 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

VI Interests in Other Entities (continued)

(2) Interests in associates and joint ventures (continued)

(d) Summary information of not important joint ventures and associates

2015 2014

Associated enterprise

Investment book value total 3,809,707 6,961,307

Total of the following items

accounted according to

shareholding proportion

Net loss (i) (3,901,880) (12,178,967)

Other integrated income - -

Integrated income total (3,901,880) (12,178,967)

2015 2014

Joint ventures

Investment book value total 29,895,356 29,428,850

Total of the following items

accounted according to

shareholding proportion

Net profit (i) 2,146,506 1,039,205

Other integrated income - -

Integrated income total 2,146,506 1,039,205

(i) Net profit and other integrated income have considered the adjusting

impaction to associates identifiable assets, liabilities fair value and uniform

accounting policies at investment gaining time.¡£

(e) Excess losses occurred in the joint venture

Unconfirmed Unconfirmed Unconfirmed loss

loss at the loss this year at the end of the

beginning of the year

year

Zhenhua Marine

Energy (Hong

Kong) Co., Ltd - 29,698,342 29,698,342

(f) Refer to Note 5II for the unconfirmed commitment related to the investment of

the joint ventures and associates.

- 147 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

¢÷ Related parties and related transaction

(1) Profiles of parent

company

(a) Profiles of parent

company

Registered place Business nature

China No. 88, C Andingmen Wai Port project

Communications Street, Dongcheng District, contracting and

Corporation Beijing related businesses

China Communications Construction Group Corporation is the ultimate

controller of the Company.

(b) Parent company¡¯s registered capital and the movement

2014 Addition report 2015

Name Dec. 31 period Dec. 31

China

Communicati

ons

Corporation 16,174,735,425 - 16,174,735,425

(c) Parent company¡¯s holding proportion and voting proportion in the Company:

Name Dec. 31, 2015 Dec. 31, 2014

Voting Holding Voting

Holding Proportion Proportion Proportion Proportion

China

Communications

Corporation 28.828% 28.828% 28.828% 28.828%

As of Dec. 31, 2015, China Communications Corporation and its controlled

Hong Kong Zhenhua Engineering Co., Ltd. (holding 17.076% stake of the

Company) and Macau Zhenhua Bay Engineering Co., Ltd. (holding 0.325%

stake of the Company) together hold 46.229% of the Company¡¯s stake (Dec. 31,

2014: 46.229%).

(2) Subsidiary profiles

- 148 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

For information of subsidiaries, refer to Note 4.

(3) Joint ventures and associates

For information of Joint ventures and associates, refer to Note 6

- 149 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

VII Related parties and related transaction (continued)

(4) Other related parties

Name Relation with the Group

Hong Kong Zhenhua Engineering Co., Ltd Controlled by the same parent company

Macau Zhenhua Bay Engineering Co., Ltd Controlled by the same parent company

CCCC First Harbor Engineering Co., Ltd. Controlled by the same parent company

No.1 Engineering Co., Ltd. of CCCC First

Harbor Engineering Co., Ltd. Controlled by the same parent company

No.2 Engineering Co., Ltd. of CCCC First

Harbor Engineering Co., Ltd. Controlled by the same parent company

No.5 Engineering Co., Ltd. of CCCC First

Harbor Engineering Co., Ltd. Controlled by the same parent company

Installation Engineering Co., Ltd.of CCCC First

Harbor Engineering Co., Ltd. Controlled by the same parent company

CCCC Second Harbor Engineering Co., Ltd. Controlled by the same parent company

No.2 Engineering Co., Ltd. of CCCC Second

Harbor Engineering Co., Ltd. Controlled by the same parent company

No.3 Engineering Co., Ltd. of CCCC Second

Harbor Engineering Co., Ltd. Controlled by the same parent company

CCCC Second Harbor Engineering Survey and

Design Institute Co., Ltd. Controlled by the same parent company

CCCC Third Harbor Engineering Co., Ltd. Controlled by the same parent company

CCCC Third Harbor Engineering Survey and

Design Institute Co., Ltd. Controlled by the same parent company

CCCC Third Harbor Engineering Xing¡¯an

Construction Engineering Co., Ltd. Controlled by the same parent company

CCCC Fourth Harbor Engineering Co., Ltd. Controlled by the same parent company

Hainan CCCC Fourth Construction Co., Ltd Controlled by the same parent company

CCCC Second Harbor Engineering Co., Ltd. Controlled by the same parent company

No.2 Engineering Co., Ltd. of CCCC Second

Harbor Engineering Co., Ltd. Controlled by the same parent company

No.3 Engineering Co., Ltd. of CCCC Second

Harbor Engineering Co., Ltd. Controlled by the same parent company

CCCC Second Harbor Engineering Survey and

Design Institute Co., Ltd. Controlled by the same parent company

CCCC Third Harbor Engineering Co., Ltd. Controlled by the same parent company

Chuwa Bussan Company Limited Controlled by the same parent company

Yueyang Chenglingji Xingang Co., Ltd. Controlled by the same parent company

China Harbor Engineering Co., Ltd. Controlled by the same parent company

China Communications Water Transportation Controlled by the same parent company

Design & Research Co.,Ltd.

CCCC Highway Consultants Co., Ltd. Controlled by the same parent company

CCCC Tunnel Engineering Co., Ltd. Controlled by the same parent company

Friede & Goldman, Llc. Controlled by the same parent company

China Communications Materials & Equipment Controlled by the same parent company

Co., Ltd.

Shanghai Jiangtian Industrial Co., Ltd. Controlled by the same parent company

Tianjin Dredging Company¡ªBinhai Controlled by the same parent company

Environmental protection Engineering Co., Ltd

- 150 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

No.2 Engineering Co., Ltd. of CCCC Second Controlled by the same parent company

Harbor Engineering Co., Ltd.

- 151 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

¢÷ Related parties and related transaction (continued)

(4) Other related parties (continued)

CCCC Third Highway Engineering Bureau Co., Controlled by the same parent company

Ltd

Nanjing CCCC Weisan Road Crossing River Controlled by the same parent company

Channel Co., Ltd.

China Bridge Engineering Co., Ltd Controlled by the same parent company

CCCC Tianjin Waterway Bureau Co., Ltd Controlled by the same parent company

CCCC East China Investment Co., Ltd Controlled by the same parent company

CCCC Financial Co., Ltd Controlled by the same parent company

CCCC Fourth Harbor Engineering Controlled by the same parent company

Investigation and Design Institute Co., Ltd

Beijing Qiaoyu Science and technology Co., Controlled by the same parent company

Ltd

Shanghai Zhensha Longfu Machinery Co., Ltd Controlled by the same parent company

Shanghai Waterway Logistics Co., Ltd Controlled by the same parent company

CCCC Third Harbor Second Engineering Co., Controlled by the same parent company

Ltd

CCCC Rental Jiahuayi Co., Ltd Controlled by the same parent company

CCCC Rental Jiahuaer Co., Ltd Controlled by the same parent company

CCCC Fourth Harbor Third Engineering Co., Controlled by the same parent company

Ltd

CCCC First Harbor City Traffic Engineering Controlled by the same parent company

Co., Ltd

(5) Related transactions

(a) Related transactions pricing and decision-making procedures

The Group and the related party, the transaction price is based on mutual

agreement and with reference to market price as the pricing basis.

- 152 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

¢÷ Related parties and related transaction (continued)

(5) Related transactions (continued)

(b) Selling goods to Related party

Related party Related 2015 2014

transactions

details (reclassification

)

Chuwa Bussan Company Limited Selling goods 331,102,486 20,807,240

CCCC Second Harbor Engineering Co., Selling goods 277,237,614 4,122,571

Ltd.

CCCC Third Harbor Engineering Co., Selling

Ltd. goods/

providing

labor 257,912,687 69,723,632

Friede & Goldman, Llc. Selling goods 140,108,319 336,411,736

No.2 Engineering Co., Ltd. of CCCC Selling goods 75,530,025 -

Second Harbor Engineering Co., Ltd.

CCCC Second Highway Engineering Selling goods 56,534,225 -

Bureau Co., Ltd.

Jiangsu LongYuan Zhenhua Marine Selling goods 53,734,600 20,528,920

Engineering Co., Ltd.

CCCC Tunnel Engineering Co., Ltd Selling

goods/

providing

labor 52,226,007 23,035,962

CCCC Fourth Harbor Engineering Co., Selling goods 44,663,030 59,751,329

Ltd.

Third Highway Engineering Bureau Co., Selling goods 38,213,139 -

Ltd

China Bay Engineering Co., Ltd Selling goods 34,099,381 246,448,541

No.2 Engineering Co., Ltd. of CCCC Selling goods 24,687,230 12,868,943

Fourth Harbor Engineering Co., Ltd.

CCCC Fourth Harbor Third Engineering providing 18,699,952 -

Co., Ltd labor

Hainan CCCC Fourth Construction Co., Selling goods 17,202,584 16,347,733

Ltd

Nanjing CCCC Weisan Road Crossing providing 15,362,383 -

River Channel Co., Ltd. labor

China Communications Corporation Selling goods 14,436,561 40,062,236

CCCC Financial Rental Co., Ltd Selling goods 12,020,237 112,994,570

CCCC Third Harbor Engineering Selling goods 4,515,993 17,676,832

Investigation and Design Institute Co.,

Ltd

CCCC Second Harbor Second Selling goods 3,678,378 5,383,422

Engineering Co., Ltd

CCCC First Harbor Engineering First Selling goods 3,173,735 34,362,246

Engineering Co., Ltd.

CCCC Shanghai Equipment Engineering Selling goods 1,222,449 -

Co., Ltd.

China Bridge Engineering Co., Ltd Selling goods 1,089,606 -

- 153 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

CCCC First Harbor Second Engineering Selling goods 643,333 -

Co., Ltd

China Communications Water Selling goods - 59,823,097

Transportation Design & Research

Co.,Ltd

CCCC Marine Engineering Vessel Selling goods - 4,880,342

Technology Research Centre Co., Ltd

Tianjin Dredging Company¡ªBinhai Selling goods - 2,649,573

Environmental protection Engineering

Co., Ltd

CCCC Second Harbor Engineering Selling goods - 1,775,726

Investigation and Design Institute Co.,

Ltd

providing - 1,745,283

CCCC First Harbor Engineering Co., Ltd. labor

1,478,093,954 1,091,399,934

- 154 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

¢÷ Related parties and related transaction (continued)

(5) Related transactions (continued)

(c) Related party provided labor service for the Group

Related party Related 2015 2014

transactions

details

CCCC Tianjin Waterway Bureau Accepting

Co., Ltd labor 202,023,996 -

CCCC China East Investment Co., Accepting

Ltd labor 30,900,000 -

China Communications Corporation Accepting

labor 15,608,642 62,727,622

CCCC Second Highway Engineering Accepting

Bureau Co., Ltd. labor 10,713,240 1,212,974,461

No.3 Engineering Co., Ltd. of CCCC

Second Harbor Engineering Co., Accepting

Ltd. labor - 885,245,579

CCCC Third Harbor Engineering Accepting

Co., Ltd. labor - 190,385,882

CCCC Tunnel Engineering Co., Ltd Accepting

labor - 79,835,548

CCCC Third Harbor Engineering

Xing¡¯an Construction Engineering Accepting

Co., Ltd. labor - 4,892,308

259,245,878 2,436,061,400

(d) Purchasing goods from related party

Related party Related 2015 2014

transactions (reclassification

details )

purchasing

Chuwa Bussan Company Limited goods 291,769,656 195,828,127

CCCC Shanghai Equipment purchasing

Engineering Co., Ltd. goods 137,622,776 94,917,511

Shanghai Zhenhua Heavy Industries purchasing

(Group) Changzhou Paint Co., Ltd. goods 104,139,666 94,210,385

China Transportation Materials Co., purchasing

Ltd goods 16,721,301 33,858,763

550,253,399 418,814,786

(e) Selling assets or equity to related parties

Related party Related 2015 2014

transactions

details

China Communications Corporation equity transfer - 32,970,531

- 155 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

asset transfer

(f) Deposits to related party

Related

Related parties transactions

details 2015 2014

Inter-bank dep

CCCC Financial Co., Ltd osit 14,114,145 120,420,504

- 156 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

¢÷ Related parties and related transaction (continued)

(5) Related transactions (continued)

(g) Loan from related parties

Related

Related parties transactions

details 2015 2014

Inter-bank

CCCC Financial Rental Co., Ltd borrowing 1,018,000,000 100,000,000

CCCC Rental Jiahuayi Co., Ltd Inter-bank

borrowing 383,838,000 -

CCCC Rental Jiahuaer Co., Ltd Inter-bank

borrowing 383,838,000 -

1,785,676,000 100,000,000

(h) Pay interest to related parties

Related

Related parties transactions

details 2015 2014

CCCC Financial Co., Ltd Pay interest 616,290 420,079

(i) Pay interest to related parties

Related

Related parties transactions 2015 2014

Payment of

CCCC Financial Rental Co., Ltd interest 53,723,710 2,950,000

Payment of

CCCC Financial Co., Ltd interest 13,594,125 -

CCCC Rental Jiahuayi Co., Ltd Payment of

interest 11,483,154 -

CCCC Rental Jiahuaer Co., Ltd Payment of

interest 11,483,154 -

90,284,143 2,950,000

(j) Leasing

The Group as lessor

Types of leasing

Name of lessee assets 2015 2014

(reclassificatio

n)

Zhenhua Marine Energy (Hong Ship

Kong) Co., Ltd 67,924,038 -

CCCC Second Harbor Engineering

Third Engineering Co., Ltd Shield 19,671,628 78,686,512

CCCC Tunnel Engineering Co., Shield 14,365,684 74,951,392

- 157 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

Ltd

China Communications

Corporation Ship 3,384,615 -

105,345,965 153,637,904

- 158 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

¢÷ Related parties and related transaction (continued)

(5) Related transactions (continued)

(k) Provide guarantee to related parties

Related parties Related Guarantee due da Whether t

transacti te he Guara

on Guarantee a Guarantee start ntee is im

mount date plemente

d

Zhenhua Marine Provide

Energy (Hong guarante

Kong) Co., Ltd e 165,917,974 Sep.14, 2015 Mar., 14, 2017 No

Zhenhua Marine Provide

Energy (Hong guarante

Kong) Co., Ltd e 122,380,000 May. 26, 2014 May 26, 2015 Yes

(l) Key executives¡¯ salaries

2015 2014

Key executives¡¯ salaries 12,544,400 11,346,400

The number of key executives of the Group in 2015 is 29 (2014: 24). The salaries of

the newly added executives and the resigned executives are calculated according to the

tenure. It is calculated on a yearly basis for other employees.

- 159 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

¢÷ Related parties and related transaction (continued)

(6) Balances of receivables and payables from or to related parties

(a) Receivables from related parties:

Dec. 31, 2015 Dec. 31, 2014

(reclassification)

bad debt

book value provisio book value bad debt

balance n balance provision

Account

s

receivab

le Friede & Goldman, Llc. 114,763,068 - 14,297,643 -

CCCC First Harbor

Engineering Co., Ltd 90,636,388 - 108,136,388 -

Zhenhua Marine Energy (Hong

Kong) Co., Ltd 69,319,180 - -

CCCC Second Harbor

Engineering Co., Ltd 56,432,975 - 21,894,975 -

CCCC Third Harbor

Engineering Co., Ltd. 56,419,273 - 71,896,273 -

Jiangsu LongYuan Zhenhua

Marine Engineering Co., Ltd. 45,398,460 - 4,158,337 -

Chuwa Bussan Company

Limited 45,103,892 - 10,625,081 -

No.1 Engineering Co., Ltd. of

CCCC First Harbor Engineering

Co., Ltd. 40,000,000 - 44,000,000 -

CCCC Fourth Harbor

Engineering Investigation

and Design Institute Co., Ltd 29,592,000 - - -

China Communications

Corporation 27,772,867 - 58,739,753 -

CCCC Second Highway

Engineering Bureau Co., Ltd. 25,595,000 - - -

CCCC Fourth Harbor

Engineering Co., Ltd. 19,047,086 - 19,047,086 -

China Bay Engineering Co., Ltd 15,125,880 - 91,815,595 -

No.2 Engineering Co., Ltd. of

CCCC Second Harbor

Engineering Co., Ltd. 14,753,046 - - -

No.6 Engineering Co., Ltd. of

CCCC First Harbor

Engineering Co., Ltd. 13,171,700 - 14,725,599 -

No.2 Engineering Co., Ltd. of

CCCC Fourth Harbor

Engineering Co., Ltd. 10,402,788 - 8,689,705 -

CCCC Second Harbor Second

Engineering Co., Ltd 8,999,544 - 8,180,099 -

CCCC Third harbor

engineering investigation

and Design Institute Co., Ltd 6,000,000 - 9,270,000 -

CCCC First Harbor First

Engineering Co., Ltd 5,760,000 - 6,760,000 -

CCCC First Harbor Second

Engineering Co., Ltd 5,753,557 - 4,034,049 -

- 160 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

CCCC Tunnel Engineering Co.,

Ltd 4,809,915 - 3,422,000 -

CCCC First Harbor City Traffic

Engineering Co., Ltd 4,719,000 - 5,719,000 -

Tianjin Dredging Company¡ª

Binhai Environmental

protection Engineering Co.,

Ltd 2,170,000 - 2,170,000 -

No.3 Engineering Co., Ltd. of

CCCC Second Harbor

Engineering Co., Ltd. 1,245,810 - - -

CCCC Marine Engineering

Vessel Technology Research

Centre Co., Ltd 1,100,000 - 6,810,000 -

CCCC Shanghai Equipment

Engineering Co., Ltd. 1,083,425 - 48,425 -

CCCC First Harbor Engineering

Co., Ltd. 900,797 - 160,797 -

Yueyang Chenglingji Xingang

Co., Ltd. 42,000 - 42,000 -

China Communications Water

Transportation Design &

Research Co.,Ltd - - 28,237,000 -

Hainan CCCC Fourth

Construction Co., Ltd - - 11,954,280 -

CCCC Second harbor

engineering investigation

and Design Institute Co., Ltd - - 6,278,000 -

CCCC Highway Planning and

Design Institute Co., Ltd - - 422,750 -

No.5 Engineering Co., Ltd. of

CCCC First Harbor

Engineering Co., Ltd. - - 52,861 -

716,117,651 - 561,587,696 -

- 161 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

¢÷ Related parties and related transaction (continued)

(6) Balances of receivables and payables from or to related parties (continued)

(a) Receivables from related parties (continued)

Dec. 31, 2015 Dec. 31, 2014

(reclassification)

bad debt

Book value provisio book value bad debt

balance n balance provision

CCCC Financial Co.,

Money fund Ltd 134,534,649 120,420,504

No.1 Engineering Co.,

Ltd. of CCCC First

Accounts Harbor Engineering

receivable Co., Ltd. 10,000,000 - 10,000,000 -

Jiangsu LongYuan

Zhenhua Marine

Engineering Co.,

Ltd. 1,726,800 - - -

Chuwa Bussan

Company Limited - - 758,174 -

CCCC Second

Highway

Engineering Bureau

Co., Ltd. - - 500,000 -

11,726,800 - 11,258,174 -

Advanced China

payment Communications

Corporation 7,192,680 - 33,675,829 -

CCCC Third Harbor

Engineering Xing¡¯an

Construction

Engineering Co.,

Ltd. 2,200,000 - 2,200,000 -

CCCC Shanghai

Equipment

Engineering Co.,

Ltd. 630,000 - -

Chuwa Bussan

Company Limited - - 571,437 -

10,022,680 - 36,447,266 -

- 162 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

¢÷ Related parties and related transaction (continued)

(6) Balances of receivables and payables from or to related parties (continued)

(b) Payables to related parties

Dec. 31, 2015 Dec. 31, 2014

(reclassification)

Accounts

receivabl

e Chuwa Bussan Company Limited 296,437,449 239,092,191

CCCC Second Highway

Engineering Bureau Co., Ltd. 259,445,458 542,740,653

No.3 Engineering Co., Ltd. of

CCCC Second Harbor

Engineering Co., Ltd. 187,941,127 436,381,667

CCCC Tianjin Waterway Bureau

Co., Ltd 162,023,996 -

CCCC Third Harbor Engineering

Co., Ltd. 43,224,566 146,654,846

CCCC Tunnel Engineering Co.,

Ltd 28,854,070 54,054,936

Shanghai Zhenhua Heavy

Industries (Group)

Changzhou Paint Co., Ltd. 24,086,487 16,507,869

CCCC Shanghai Equipment

Engineering Co., Ltd. 32,594,294 15,374,859

China Transportation Materials

Co., Ltd 14,821,551 4,212,579

CCCC Third Harbor

Engineering Xing¡¯an

Construction Engineering

Co., Ltd. 10,051,352 10,051,352

CCCC Marine Engineering

Vessel Technology Research

Centre Co., Ltd 9,363,830 -

Beijing Qiaoyu Science and

Technology Co., Ltd 1,198,882 -

China Communications Water

Transportation Design &

Research Co.,Ltd 160,000 160,000

Shanghai Jiangtian Industrial Co.,

Ltd. 289 -

1,070,203,351 1,465,230,952

Advanced CCCC Tunnel Engineering Co.,

payment Ltd 107,781,197 13,861,978

No.3 Engineering Co., Ltd. of

CCCC Second Harbor

Engineering Co., Ltd. 82,277,608 -

Chuwa Bussan Company Limited 32,378,055 12,747,208

No.1 Engineering Co., Ltd. of 1,788,701 1,194,097

- 163 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

CCCC First Harbor Engineering

Co., Ltd.

China Communications

Corporation 934,516 -

China Bay Engineering Co., Ltd 736,500 -

CCCC Second Harbor Second

Engineering Co., Ltd 699,388 -

Friede & Goldman, Llc. 599,112 -

CCCC Third Harbor

Engineering Xing¡¯an

Construction Engineering

Co., Ltd. 200,000 200,000

Yueyang Chenglingji Xingang

Co., Ltd. - 12,000

CCCC Second Harbor

Engineering Co., Ltd - 18,425,818

227,395,077 46,441,101

- 164 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

¢÷ Related parties and related transaction (continued)

(6) Balances of receivables and payables from or to related parties (continued)

(b) Payables to related parties (continued)

Dec. 31, 2015 Dec. 31, 2014

(reclassification)

Dividends CCCC Tianjin Waterway Bureau

payable Co., Ltd 25,079,494 -

Chuwa Bussan Company Limited 6,269,873 -

China Communications

Corporation 502,283 502,283

Hong Kong Zhenhua Engineering

Co., Ltd. 346,005 346,005

Macau Zhenhua Bay Engineering

Co., Ltd 6,593 6,593

32,204,248 854,881

Interest

payable CCCC Financial Rental Co., Ltd 1,784,054 171,111

Other

payables CCCC Financial Rental Co., Ltd 1,118,000,000 100,000,000

China Communications

Corporation 103,937,952 31,097,080

Shanghai Jiangtian Industrial Co.,

Ltd. 17,586,085 17,586,085

CCCC Second Highway

Engineering Bureau Co., Ltd. 13,750,047 14,796,932

No.3 Engineering Co., Ltd. of

CCCC Second Harbor

Engineering Co., Ltd. 7,912,758 9,052,063

CCCC Third Harbor Engineering

Co., Ltd. 3,376,879 4,437,460

CCCC Tianjin Waterway Bureau

Co., Ltd 2,669,988 372,546

CCCC Tunnel Engineering Co.,

Ltd 1,637,656 1,999,913

Shanghai Zhensha Fulong

Machinery Co., Ltd 257,612 389,056

CCCC Third Harbor

Engineering Xing¡¯an

Construction Engineering

Co., Ltd. 1,200 -

Nanjing CCCC Weisan Road

Crossing River Channel Co., Ltd - 77,464,817

1,269,130,177 257,195,952

Noncurrent

liabilities due

within one

year

- 165 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

CCCC Rental Jiahuayi Co., Ltd 29,685,028 -

CCCC Rental Jiahuaer Co., Ltd 29,685,029 -

59,370,057 -

Long term

payable

CCCC Rental Jiahuayi Co., Ltd 359,930,972 -

CCCC Jiahuaer Co., Ltd 359,930,971 -

719,861,943 -

- 166 -

Shanghai Zhenhua Heavy Industries Co., Ltd.

Notes of 2015 Financial Statements

(Unless otherwise specified, the amount units is RMB)

¢÷ Related parties and related transaction (continued)

(7) Promises with related parties

The following are promises contracted but not necessarily shown on B/S with related parties

as of B/S day:

Related party provided labor service for the

Group Dec. 31, 2015 Dec. 31, 2014

CCCC Third Harbor Engineering Co., Ltd. 79,010,254 37,439,931

CCCC Second Harbor Engineering Co., Ltd 70,313,613 40,226,953

CCCC Third Harbor Engineering Xing¡¯an