Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013 Shanghai Zhenhua Heavy Industries Co., Ltd.
（Stock code：600320 900947）
Annual Report 2013
Mar. 26, 2014
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
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. Directors who failed to attend the Board meeting
Post of director Name of director Name of Reasons of failure who failed to attend who failed to attend entrustee director Liu Wensheng on business trip Song Hailiang director Chen qi on business trip Song Hailiang
III. PricewaterhouseCoopers Zhong Tian LLP. issued standard unqualified audit report for the Company.
IV. The Company’s responsible person Song Hailiang, Finance Department chief Wang Jue and responsible person for finance(Chief Financial Controller) Sun Guangbo 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.
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
Contents
Chapter I Definition and Substantial Risk Reminding ...... 4
Chapter II Company Profiles ...... 5
Chapter III Summary of Accounting Data and Operational Indicators ...... 9
Chapter IV Report of the Board of Directors ...... 错误！未定义书签。1
Chapter V Substantial Events ...... 39
Chapter VI Equity Movement and Shareholder's Profile ...... 51
Chapter VII Directors, Supervisors, Senior Executives and Employees ..... 56
Chapter VIII Corporate Governance ...... 67
Chapter IX Internal Control ...... 72
Chapter X Financial Report ...... 73
Chapter XI Reference Available ...... 74
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
Chapter I Definition and Substantial Risk Reminding
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 Refers to China Communications Construction Co., Ltd. shareholder effective controller Refers to China Communications Construction Group
II. Substantial Risk Reminding
The Company has detailed in this report risks the Company may face. Please consult related description in the chapter of Report of the Board.
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
Chapter II Company Profiles
I. Company information
Statutory company name in Chinese 上海振华重工(集团)股份有限公司
Statutory Chinese Abbreviation of 振华重工 the Company
SHANGHAI ZHENHUA HEAVY INDUSTRIES English name of the Company CO.,LTD.
English abbreviation of the ZPMC Company
Legal representative Song Hailiang
II. Contact information Board secretary Securities Affair Agent
Name Wang Jue Li Min
3261 Dongfang Road, 3261 Dongfang Road, Address Shanghai Shanghai
Tel. 021-50390727 021-50390727
Fax 021-31193316 021-31193316
Email [email protected] [email protected]
III. Basic information of the Company Registered address 3470, Pudong Road South, Shanghai
Post code 200125
Office address 3261 Dongfang Road, Shanghai
Post code 200125
Website http://www.zpmc.com
Email [email protected]
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
IV Information disclosure and reference Designated media for information Shanghai Securities News, Hong Kong Wen Wei Po disclosure
Website designated by China Security Regulatory Commission for disclosure of http://www.sse.com.cn annual report:
Annual report available at Securities and Law Affairs Office of the Company
V. Stock Profiles of the Company Stock Profiles of the Company
Short form of Stock type Stock exchange listed at Short form of stock Share code stock before change
Zhenhua Heavy A-share Shanghai Stock Exchange 600320 ZPMC Industries
B-share Shanghai Stock Exchange Zhenhua B-share 900947 -
VI. Business registration alterations in report period (I) Basic information Registered situation did not change during the reporting period.
(II) Major business operation changes since listing
The Company went public in 1997, and has since 1998 been ranked as first global winner of container crane orders. In search of better development, while searching consolidation of port machinery market, the Company is actively exploring the large steel and heavy marine equipment market; current operating range: design, construction, installation and contracting of large port handling systems and equipment, heavy marine equipment, construction machinery, engineering ships, and large metal structures, their parts and accessories; ship repair; self-produced crane rental business, selling self-made products; engaged in international maritime shipping using special transport ships for shipping whole-machinery; steel structure engineering professional contracting (subject to licensing in case of such requirement).
(III) Successive changes of the controlling shareholders since listing
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
1. Promoter shareholders at incorporation
In July 1997, as approved by the Securities Commission of the State Council coded Zengwei Fa Zi [1997] No. 42, Shanghai Port Machiery, Hong Kong Zhenhua and former Zhonggang Group together with Macau Zhenhua and Rongjin Investment as promoters, incorporated Shanghai Zhenhua Port Machinery Co., Ltd. by way of stock floatation, and issued 100 million b-shares to overseas investors.
2. Successive changes of promoters and controlling shareholders (1) On November 26, 2001, Shanghai Port Machinery signed Equity Transfer Agreement with the former Zhonggang Group, agreed that Shanghai Port Machinery transfer all the founder shares of 96,112,500 shares it held of the Company to the former Zhonggang Group. On February 10, 2002, Ministry of Finance issued Ministry of Finance’s Reply to Issues Concerning Shanghai Zhenhua Port Machinery Co., Ltd. Transfer of State-owned Shares (Cai Qi [2002] No. 41), which stated the approval of the mentioned share transfer. In 2002, former Zhonggang Group signed Equity Transfer Agreement with Rongjin Investment, agreeing that Rongjin Investment transfer all its founder’s shares of 368,500 shares to the former Zhonggang Group. In July 2002, CSRC issued Letter of Exemption of Obligation of China Harbor Engineering Corporation (CHEC) Tender Offer to Purchase "Zhenhua Port Machinery" Stock (Zhengjian Han [2002]123), agreeing on the exemption of obligation of former Zhonggang Group concerning above shares transfer. After the completion of the share transfer, former Zhonggang Group became the Company's largest shareholder, holding 35.17% of the Company's total share capital. (2) As approved by State-owned Asset Commission of State Council via Notification on Reorganization of China Harbor Engineering Corporation (CHEC) and China Road and Bridge Corporation (Guozi Gaige [2005] No. 703), former Zhonggang Group merged with former Road and Bridge Group on December 18, 2005 into China Communications Construction. As approved by State-owned Asset Commission of State Council with Reply to Matters Concerning Changes of Corporate Holders and Equity Transfer of State-owned Shares of 6 Companies including Shanghai Zhenhua Port Machinery Co., Ltd. (Guozi Chanquan [2006] 37), equity of the Company held by former Zhonggang Company is changed to that held by China Communications Construction.
In March 2006, CSRC issued the Reply to Agreement on China Communications Construction Group Announcing on Shanghai Zhenhua Port Machinery Co., Ltd. Purchase Report and Exemption of Its Tender Offer Obligation, agreeing to exempt China Communications Construction from its tender offer obligations.
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
(3) On August 16, 2006, State-owned Asset Commission of State Council issued Reply to Issue on China Communications Construction Co., Ltd. Overall Restructuring and Listing Home and Abroad (Guozi Gaige [2006] 1063), approved the overall reorganization of China Communications Construction, the exclusive incorporation of CCCC program. On September 30, 2006, State-owned Asset Commission of State Council issued Reply to Matters Regarding State-owned Share Management of China Communications Construction Co., Ltd. (Guozi Chanquan [2006] 1072), approved that assets including equity held by China Communications Construction transferred to CCCC. After the CCCC was established on October 8, 2006, China Communications Construction put the equity of the Company it held into CCCC as investment. On October 30, 2006, CSRC issued Reply to Agreement on China Communications Construction Co., Ltd. Announcing Roads and Bridges Group International Construction Company Limited, Shanghai Zhenhua Port Machinery Co., Ltd. Purchase Report and Exemption of Tender Offer Obligations (Zhengjian Gongsi Zi [2006] 227), granting the exemption of CCCC from purchase offer obligations. On Oct. 25, 2006, equity of the Company held by China Communications Construction was transferred to CCCC and thus CCCC became controlling shareholder of the Company.
VII. Miscellaneous:
PricewaterhouseCoopers Zhong Tian Title CPAs Co. Ltd.
CPAs’ employed 11th Floor, No. 202 Hubin Road, Office address by the Company Shanghai (Domestic) Zhao Bo CPAs to sign Jin Wen
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
Chapter III Summary of Accounting Data and Operational Indicators
I. Major accounting data and financial indicators of last three years as of report period end (I) Major accounting data
Unit: RMB yuan Growth over same Major accounting data 2013 2012 2011 period prior year (%) 23,201,555,8 Operating income 18,255,152,096 27.10 19,129,251,012 00 Net profit attributable to 139,836,320 -1,043,665,841 n.a. 30,294,335 shareholders of the listed company Net profit after deducting non-recurring gains/losses -1,009,219,21 -1,259,289,200 n.a. -377,879,951 attributable to shareholders of the 7 listed company Net cash flow from operating 939,176,336 3,065,603,998 -69.36 1,541,917,739 activities Growth over same End of 2013 End of 2012 End of 2011 period end prior year (%) Net asset attributable to 14,510,604,8 14,210,952,596 2.11 15,241,378,606 shareholders of the listed company 31 49,154,736,6 Total assets 46,779,696,343 5.08 44,059,465,622 87 (II) Major financial data Growth over Major financial index 2013 2012 same period prior 2011 year (%) Basic EPS (yuan/share) 0.03 -0.24 n.a. 0.01 Diluted EPS (yuan/share) 0.03 -0.24 n.a. 0.01 Basic EPS after deducting n.a. non-recurring gains/losses -0.23 -0.29 -0.09 (yuan/share) Weighted average net n.a. 0.97 -7.09 0.20 assets earnings ratio (%) Weighted average net n.a. assets earnings ratio after -7.03 -8.56 -2.48 deducting non-recurring gains/losses (%)
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
II. Items and amount of non-recurring gains/losses
Unit: RMB yuan Items of non-recurring gains/losses 2013 Amount 2012 Amount 2011 Amount Gains and losses from disposal of 241,193,949 97,051,399 309,460,277 non-current assets Government subsidy into current profit and loss statement except for those closely related to the Company’s operation, 47,878,876 28,730,126 64,641,129 enjoyed by certain state standard or certain quota Gains/losses from fair value movement of tradable financial assets, tradable financial liabilities held except for valid hedging business related with company’s 326,109,601 143,917,526 101,066,137 normal operation, and investment income acquired from disposal of tradable financial assets, tradable financial liabilities and financial assets available for sale Non-operating income/expense apart 3,993,654 -13,639,165 7,112,466 from above Investment income acquired from 749,942,782 0 disposal of subsidiaries 0 Minor shareholders’ equity impact -70,237 -622,804 -2,141,455 Income tax impact -219,993,088 -39,813,723 -71,964,268 Total 1,149,055,537 215,623,359 408,174,286 III. Items calculated by fair value
Unit: RMB yuan Starting Closing Current Impact on Item name balance balance movement current profit Forward foreign exchange 26,009,477 121,169,489 95,160,012 95,160,012 contract-Fair value appraisal income Forward foreign exchange contract-Fair value appraisal income 0 -644,404 -644,404 -644,404 loss Equity tool available for 124,222,545 172,770,000 48,547,455 1,000,000 sale-Jiangxi Huawu Total 150,232,022 293,295,085 143,063,063 95,515,608
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
Chapter IV Report of the Board of Directors
I. Discussion and analysis of business operation in report period by the Board
In 2013, the global economic recovery was slow, the global shipping market remained still in trough wandering, the trend of re-industrialization among developed countries was obvious, international and domestic market needs remained still insufficient, veteran port machinery manufacturers reappeared on stage, and the marine engineering equipment industry saw increasing competition. Facing above adverse factors, the Board took active initiatives, through research on market prospects and analysis of self pros and cons, challenges and opportunities, and developed the 2013-2015 development strategy, target planning, and overall work ideas in a scientific and systematic way, led the management team and all staff to focus around the "1, 5, 2, 1" marketing strategy, setting hearts meet, adhered to reform and innovate, did its best to increase revenue and control cost, as a result having achieved the goals for a turn from loss to profit, making significant progress in its various work. The Company completed in 2013 an operating income of 23.202 billion yuan, an year-on-year increase of 27.1%, of which exports accounting for 71.99%, achieved a net profit attributed to the parent company owners of 139.8 million yuan, annual net operating cash inflows of 939 million yuan.
(I) Major business analysis
1. P&L and Cash Flow Statements related item movement analysis Unit: RMB yuan
Item Report Year Prior Year Growth (%)
Operating income 23,201,555,800 18,255,152,096 27.10
Operating cost 21,437,017,127 17,362,670,351 23.47
Selling expenses 68,647,704 49,290,059 39.27
General expenses 1,352,925,539 1,126,863,747 20.06
Financial expenses 627,184,455 680,506,612 -7.84
Net cash flow from operating activities 939,176,336 3,065,603,998 -69.36
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
Net cash flow from investment activities -2,688,012,249 -390,855,294 587.73
Net cash flow from financing activities 2,543,699,676 -2,309,758,070 -210.13
R&D expenses, cost of expenses 696,452,611 662,070,789 5.19
Asset impairment losses 785,673,951 394,362,789 99.23
Changes in the fair value gain or 94,515,608 -33,379,693 -383.15 loss-NET
Investment income 898,036,468 141,093,032 536.49
Non-operating income 314,889,951 132,357,962 137.91
Net profit attributable to parent 139,836,320 -1,043,665,841 -113.40 company owners/(loss)
Minority interest gains/losses -5,759,698 -55,392,041 -89.60
Analysis:
1. Revenues increased mainly because the company started in report year the Nanjing Ninggao BT project whose revenue has been confirmed and business volume in maritime container cranes and heavy marine equipment increased. Average gross profit rate rises mainly because revenues from the sale of products of the company increased, standardized management processes engaged and costs are reduced.
2. The increase in selling expenses is mainly because this year product sales increased leading to increase of salespersons ' salary scale.
3. General expenses increased because the Company's spending on research and development, staff salaries and depreciation of fixed assets this year increased.
4. Decrease of financial expenses is mainly caused by renminbi appreciation against the dollar this year resulting in an increased exchange gains.
5. Asset impairment losses increased this year's provision for impairment of stock and provision for bad debt of accounts receivable increased.
6. Fair value change gains/losses decreased mainly due to the increase of fair value of tradable financial assets.
7. Investment income increased mainly because of the sale of subsidiaries of the Company in report year.
8. Non-operating income increased mainly because of the disposal of fixed assets in report
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013 year and the increase of governmental subsidy received in report year.
9. Net gains/losses attributable to owners of the parent company turned from loss to profit primarily due to the company's earnings in report year.
10. Minority shareholders' loss decreased primarily because the affiliated non-wholly-owned subsidiaries saw decrease in losses for report year.
11. Net cash flow from operating activities reduced mainly because orders increased over report year, and payment to buy raw materials increased; however, through efforts to increase payment collection, rational use of program funds, reduced inventory, the Company turned the cash flows from operating activities to net inflows.
12. Changes in net cash flow from investing activities was mainly due to the increase of net expenditures in bank short-term financial products investment in report year.
13. Net amount of cash flow from financing activities changed mainly attributable to increased borrowing in report year.
2. Revenue
(1) Analysis of the factors affecting revenue from products mainly sold in kind
In 2013, the Company completed an operating income of 23.202 billion yuan, up 27.1% against the 18.255 billion yuan in 2012. The income increased main because in report period the Company adjusted structure, changed mode, expanded market, and promoted incremental volume, made full advance and achieved major breakthroughs, with port machinery products continuing to keep absolute leading status for global market share, focusing around the company's completion, integration of industry, pioneering at automatic terminal market and huge progress has been made; leaps and progress has been made for offshore business, successful sales of "Zhenhai No. 1", "Zhenhai No. 2" drilling platforms, winning bid of the 5000 tons of Yantai salvage lifting vessels, export of platform lifting equipment, having consolidated medium and high-end market for offshore equipment and supporting equipment; winning bid of Nanjing Ninggao BT project, which opened the prelude to entering the investment and financing market for the Company.
(2) Orders analysis
During report period, "ZPMC" brand influence was further consolidated in the traditional areas of port machinery, achieved a new leap in marine engineering and other key markets,
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
new business market has been initially developed; in 2013, our full-year new contract amount reached 5.069 billion U.S. dollars, a record high, among which the new contract amount of traditional port machinery market $2.59 billion, down 9.95%, port machinery products continued to maintain global leadership; the company's products marched into 84 countries and regions (newly entered country: Qatar); marine and steel new contracts amounted to $1.53 billion, an increase of 69.06%; new contract amount of Nanjing Ninggao BT project reaching 5.92 billion yuan.
(3) New products and new service impact
The company made new progress in marine business, and in the sales of multiple drilling platforms; opened up new investment markets, won the bid for Nanjing Ninggao BT project, investment and financing market began to show increment, driving the transformation and upgrading has presented as an inevitable direction.
(4) Top buyer analysis
Operating income from top 5 clients is 5.24928 billion yuan, taking up 22% of the Company’s total operating income.
3. Cost
(1) Cost analysis statements Unit: yuan In product category
Report Same period amount Report Same period Cost Report period prior same period Product period rate in total prior year composition period amount year rate in prior year cost (%) amount total cost (%) movement ratio (%)
raw 10,797,268,17 51.15 9,802,797,463 57.49 10.14 container cranes material, labor 4 production cost raw marine heavy material, labor 4,111,296,503 19.48 3,333,677,227 19.55 23.33 equipment production cost raw bulk-cargo material, labor 2,952,903,243 13.99 2,889,954,429 16.95 2.18 machinery parts production cost Contractin Nanjing Ninggao g expenses, 2,117,812,203 10.03 - - - BT project raw materials raw steel structures material, labor 846,489,536 4.01 749,503,259 4.40 12.94 production cost
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
labor, fuel vessel shipping consumption, 283,937,929 1.35 274,886,981 1.61 3.29 and others depreciation etc. 21,109,707,58 100.00 17,050,819,359 100 23.80 Total \ 8 (2) Key suppliers
Purchase from top 5 suppliers is 2.37549 billion yuan, covering 23% of total purchase of the year.
4. R&D expenses
(1) R&D expenses breakdown Unit: yuan
R&D into cost expenses 696,452,611
R&D into capital expenses 0
R&D expenses total 696,452,611
Total R&D expenses ratio in net assets (%) 4.73
Total R&D expenses ratio in Operating 3.00 income (%)
(2) Deliberation
During the reporting period, the company focused on the development and market demand, keenly grasped the issues in the field of industry and product innovation in respective of direction, long term and fundament; focusing on the main direction of advances, investment and integration of advantage resources; keen on innovation, and keen on continuous innovation.
(1) in 2013 there were 21 R&D projects filed and approved on state, local, and China Communications Construction levels.
(2) A number of new products, new technologies were honored as National Key New Products, Shanghai Science and Technology Progress Award First Prize and China Communications Construction Technology Progress Award First Prize, and the Industry Fair Gold Medal.
(3) During the whole year, 103 national level patent items were submitted for approval, an increase of 25%, three patent items winning Shanghai Outstanding Invention Auditions.
(4) After three years' construction, the National Maritime Crane Pipe Laying Core Equipment Engineering Technology Research Center passed a comprehensive site
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013 assessment and acceptance by the Ministry of Science, got formal approval for operation, which is currently the only national Engineering Technology Research Center in the field of marine engineering.
In innovation and development, the Company successfully followed the trend of global containerized freight, large-scale shipping vessels and port machinery and equipment tending to be intelligent, systematic and eco-friendly, always leading the world in the development of port machinery, always keeping the top in the world market share. From the double forty feet container gantry cranes and double-trolley quayside gantry cranes to today's 3E ultra-large quayside gantry cranes, low posture quayside gantry cranes, wharf automated handling systems, each of the above innovations of the company has influenced the innovation of global port machinery industry.
The Company was able to follow the trend of global development of marine resources, give full play to the advantages of technology owned by the Company, and march into the high-end of the marine engineering equipment market. Crane vessels continued to break world record, and pipe-laying vessels were the first of the country to be exported; drilling platform broke Chinese "shell" made history, completed on its own over 75% of the design of the platforms; broke the foreign monopoly in marine equipment core technology, successfully developed self-elevating platform lift systems, offshore platforms drilling package and other key accessories, having contributed its part for its way marching from the "Made in China" to the core, high-end "Created in China".
5. Cash flow
Net cash flows from operating activities is 939 million yuan, down 69.36% over last year, mainly due to increase of orders, leading to increase in payment for the purchase of raw materials, but the Company took measures to increase collection efforts, planned rational use of funds, reduced inventory, so that cash flow from operating activities was a net inflow.
6. Miscellaneous
(1) Detailed description of significant change in the Company's profit composition or source
In 2013 the Company achieved profitability mainly due to: against the unfavorable situation featuring demand in the external market environment in the process of slow recovery, the Company made in-depth judgments over the environment, resources,
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
capabilities and value facing development, conducted clearer top-level design and strategic layout, focused around the "4, 3, 2, 1" strategic positioning and the "1, 5, 2, 1" business development and layout; the main traditional industry market continued to strengthen, the five key markets achieved a new leap forward; newly developed markets and service markets are emerging; the Company's orders, sales revenue increased dramatically; infrastructure management continued to strengthen; and continuously improved the organization of production capacity through the establishment of centers of production control, disposal of inefficient assets, optimized the efficiency of asset allocation, through multi-strategy simultaneously lowering the cost and increasing the efficiency.
(II) Analysis of operation by industry, product or region
1. Major business by industry and product Unit: RMB yuan Major business by products Oper Oper ating ating cost Gross margin Operating Operating Gross income By product increase increase over prior year income cost margin (%) increase over prior （%） over prior year (%) year (%) container cranes 12,264,473,442 10,797,268,174 11.96 14.99 10.14 Up 3.87 percentage points Offshore heavy 4,234,165,039 4,111,296,503 2.90 22.45 23.33 Down 0.7 percentage points equipment bulk-cargo 3,063,018,182 2,952,903,243 3.59 5.36 2.18 Up 3 percentage points machinery parts Nanjing Ninggao BT 2,191,444,746 2,117,812,203 3.36 - - - project steel structures 872,320,624 846,489,536 2.96 36.23 12.94 Up 20.01 percentage points vessel shipping and 296,806,928 283,937,929 4.34 23.69 3.29 Up 18.9 percentage points others Total 22,922,228,961 21,109,707,588 7.91 27.98 23.80 Up 3.11 percentage points
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
2. Major business by region
Unit: RMB yuan
Operating income increase over prior Region Operating income year (%)
Asia (Excluding 7,846,459,461 106.01 Mainland, China)
Mainland, China 6,421,156,627 16.44
America 4,092,730,033 25.89
Europe 2,578,325,273 -6.28
Mainland, China 872,958,359 -6.32 (export) Note 1
Africa 746,562,797 -21.41
Oceania 364,036,411 -48.28
Total 22,922,228,961 27.98
Note 1: In this part, amounts listed in the Mainland China (export) for the years 2013 and 2012 items refer to the major operating income and cost the Company firstly exports to its overseas subsidiaries or related parties, who then sell to domestic customers.
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
(III) Assets and liabilities analysis
1. Assets/liabilities statements
Unit: yuan Report period end Report Prior amount Closing period end Closing period end over prior Item balance at report over total balance at prior over total period end period end period end assets（%） assets（%） amount change ratio（%） Monetary capital 3,515,643,963 7.15 5,380,769,224 11.50 -35 Tradable financial 121,169,489 0.25 26,009,477 0.06 366 assets Notes receivable 334,519,241 0.68 115,069,863 0.25 191 Interest receivable 5,088,988 0.01 33,231,552 0.07 -85 Accounts receivable 3,548,903,103 7.22 3,710,721,111 7.93 -4 Advances paid 1,285,291,251 2.61 995,684,680 2.13 29 Other receivables 1,084,341,531 2.21 413,305,303 0.88 162 Inventory 6,015,690,177 12.24 7,581,683,025 16.21 -21 Work completed 6,766,208,145 13.77 6,620,155,339 14.15 2 payment not cleared Other current assets 4,202,678,325 8.55 1,000,000,000 2.14 320 Available-for-sale 172,770,000 0.35 124,222,545 0.27 39 financial assets Long-term receivables 2,217,619,293 4.51 0 0 100 Long-term equity 380,678,930 0.77 203,719,472 0.44 87 investment Fixed assets 14,079,867,109 28.64 14,075,197,757 30.09 0 Construction in 1,478,006,436 3.01 3,692,553,744 7.89 -60 progress Intangible assets 3,159,277,976 6.43 2,021,511,880 4.32 56 Short-term loans 14,663,865,004 29.83 11,936,687,998 25.52 23 Accounts payable 3,592,110,836 7.31 2,603,418,685 5.57 38 Prepayment received 232,328,686 0.47 1,035,763,588 2.21 -78 Work not completed, 3,143,218,938 6.39 2,389,804,893 5.11 32 payment cleared Staff salary payable 206,241,298 0.42 37,550,139 0.08 449 Taxes and charges -6,519,912 -0.01 -46,966,814 -0.10 -86 payable Interest payable 418,390,614 0.85 315,058,291 0.67 33 Other payables 403,130,541 0.82 292,150,492 0.62 38 Non-current liabilities 4,370,297,863 8.89 3,667,922,000 7.84 19 due within one year Long-term loans 2,113,256,000 4.30 873,684,500 1.87 142 Bonds payable 3,797,777,911 7.73 7,984,665,674 17.07 -52 Analysis:
1. Monetary capital decreased mainly because in report period increase of newly opened projects leading to production investment growth.
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
2. Tradable financial assets increased mainly because the fair value of the newly purchased forward foreign exchange contract increased.
3. Notes receivable increased mainly because the amount of notes receivable from payment of clients in report period increased.
4. Interest receivable decreased mainly because in report period the Company's fixed deposits were due.
5. Accounts receivable decreased mainly because in report year accounts receivable saw more risks of collection thus increased provision for bad debts.
6. Advances paid increased mainly because in report period more advances were made for project processing and purchase of imported parts.
7. Other receivables increased mainly because in report period partial payment from sale of subsidiary was not received.
8. Inventory decreased mainly because in report period consumption of raw materials increased as a result of sales of unsigned orders for marine products and the increase of newly opened projects.
9. Payment not cleared though work completed increased mainly because in report year more projects started and thus more investment made.
10. Other current assets increased mainly because in report period the Company purchased more financing products.
11. Available-for-sale financial assets increased mainly because in report period the fair value of the available-for-sale equity tools the Company held increased.
12. Long-term receivables increased mainly because in report period receivables from the Nanjing Ninggao BT project has been confirmed.
13. Long-term equity investment increased mainly because in report period the Company had more external investment in corporate and gains from associates and joint ventures adjusted on equity basis.
14. Fixed assets increased mainly because in report year partial construction in progress was transferred into fixed assets as a result of completion.
15. Construction in progress decreased mainly because in report year partial construction in progress was carried forward to fixed assets and intangible assets upon completion.
16. Increase of the Company's intangible assets is mainly because partial construction in
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013 progress was completed and thus transferred into intangible assets.
17. increase of short-term loans is mainly because in order to meet capital requirements, the Company increased bank borrowings during the year.
18. Increase in accounts payable of the Company is mainly because newly opened projects increased leading to corresponding increase in material procurement.
19. Decrease of advances mainly because advanced received from customers reached the project node and corresponding settlement was made.
20. Payment settled with work uncompleted increased mainly because of the increase in project construction settlement.
21. Salary of staff payable increased mainly because in report period year-end bonus is accrued.
22. Taxes and charges payable decreased mainly because input tax amount increased as a result of increased in domestic purchase of materials.
23. Interest payable increased mainly because in report year the Company had more bank borrowings.
24. Other payables increased mainly because of increase of government subsidy received which did not satisfy the requirements for recognition of income.
25. Non-current liabilities due within one year increased mainly because part of the long-term loans and bonds payable that would be due within one year are reclassified into non-current liabilities due within one year.
26. Long-term loans increased mainly because of more borrowings from the bank to meet the capital demand for business development.
27. Bonds payable decreased mainly because part of the bonds payable that would be due within one year are reclassified into non-current liabilities due within one year.
(IV) Core competitiveness analysis Since the company was founded 22 years ago, pioneering and continuously hard work has developed into a series of core competence:
(1) Market advantages: container port machinery products remain the global market leader, customers scattered in 84 countries and regions; enjoying high market shares and a solid customer base.
(2) Talents advantages: in the field of design of port machinery the Company owns a
21
Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013 design and R&D team of more than 2000 people with independence, all-round professions and clear task-division; in marine areas the Company is also nurturing and gradually forming a design team with some capacity; In the area of international business, the company has an excellent language, business experienced operating personnel; in the ongoing implementation of major projects at home and abroad, it has been training a group of strong dedication, skilled professional personnel; in terms of manufacturing, it has been training a large number of specialized technicians, technologists and superintendents. In a word, the Company has built up a good environment and platform to attract qualified talents.
(3) The advantages of technological innovation: the Company holds a large number of innovations, patents and a number of the world's first, such as the "Development and Application of Key Technologies of New Generation Port Container Cranes" first prize of national scientific and technological progress and can quickly translate them into higher value added products and services; innovation drives development; innovation system is complete; innovation speed, basis and outcome quality leads the industry.
(4) Platform advantages: after 20 years of development, the Company has the combined strengths consisting of listed-company platform, internationalization platform and national flag manufacturing platform, which provides a big platform and opportunity to attract talents, expand business, invest and finance.
(5) Brand and reputation advantages: ZPMC has created a number of world's firsts, undertaken a large number of mega-engineering projects and flagship projects at home and abroad; it is the container's flagship and port machinery manufacturing leader, the bridge to spread Chinese civilization, culture and friendship; it has widely spread international market, posing great international influence; meanwhile ZPMC is simultaneously the representative of "New Technologies, High Standard, High Credibility". The intangible value of brand and the value space is huge.
(6) Financing and capital advantages: the Company possesses ample, steady cash flow, financing ability, which is conducive to developing new target markets.
(7) Outstanding industry chain comprehensive strength advantage: the Company has an industry chain combining complete design, manufacturing, marketing, research and development facilities, 5 km deepwater coastline, large fleets of transport, installation and after-sales service of machinery etc.; its production capacity is huge and its comprehensive strength is big.
22
Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
(V) Investment analysis
1. External equity investment overall analysis Unit: yuan
Investment amount as of period end 380,678,930
Investment amount movement 176,959,458
investment amount same period prior year 203,719,472
investment amount movement ratio (%) 87%
Invested companies
equity ratio in Name of invested company Operational activities invested company
Turkish Mediterranean Engaged in port equipment technical service 50% Company
CCCC Properties Yixing Co., Engaged in real estate development 20% Ltd.
(1) Equity holding in other listed companies Unit: yuan
Proportion Owner’s Stock Initial Closing book Gains/ loss in Origin of Short form in total equity equity movement Accounting entry Code investment value report period equity （%） in report period
Huawu Available-for-sale 300095 19,400,000 12.71 172,770,000 1,000,000 48,547,455 funding Share financial assets
Total 19,400,000 / 172,770,000 1,000,000 48,547,455 / /
(2) Shares held of non-listed financial enterprises
initial amount held closing equity Name of Equity ratio gains/losses accounting share investment book value movement report shares held （%） report year (yuan) entry origin (yuan) (share) (yuan) year (yuan)
Shenyin & Long-term subscri Wanguo legal 200,000 161,942 0.002978 200,000 0 0 equity investment ption person shares
Total 200,000 161,942 / 200,000 0 0 / /
23
Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
2. Non-financial companies entrusted investment financing and derivatives (1) Entrusted financing Entrusted financial products breakdown
Unit: RMB yuan
related tra related
suit involved or suit involved
procedure
via legal via legal
not not
Starting expected Principal actually Income actually Partner Pro. type Amount Ending day reward
de or
day proceeds covered gained
Bank Financial interest upon A Bank 1,000,000,000 2012-12-18 2013-12-3 47,601,370 1,000,000,000 47,601,370 是 No No Product maturity
Bank Financial interest upon A Bank 1,000,000,000 2013-1-5 2013-6-26 22,987,671 1,000,000,000 22,987,671 是 No No Product maturity
Bank Financial interest upon A Bank 500,000,000 2013-3-11 2013-9-6 11,153,425 500,000,000 11,153,425 是 No No Product maturity
Bank Financial interest upon B Bank 497,034,695 2013-3-18 2014-3-14 20,892,479 是 No No Product maturity
Bank Financial interest upon B Bank 497,202,541 2013-3-21 2014-3-14 20,725,854 是 No No Product maturity
Bank Financial interest upon C Bank 500,000,000 2013-2-6 2013-12-27 20,638,356 500,000,000 20,638,356 是 No No Product maturity
Bank Financial interest upon C Bank 500,000,000 2013-2-7 2013-12-27 20,574,658 500,000,000 20,574,658 是 No No Product maturity
Bank Financial interest upon C Bank 490,000,000 2013-5-15 2013-11-14 11,053,863 490,000,000 11,053,863 是 No No Product maturity
Bank Financial interest upon D Bank 250,000,000 2013-5-27 2013-11-12 4,745,890 250,000,000 4,745,890 是 No No Product maturity
Bank Financial interest upon D Bank 249,990,000 2013-6-3 2013-11-12 5,266,916 249,990,000 5,266,916 是 No No Product maturity
24
Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
Bank Financial interest upon E Bank 310,000,000 2013-3-20 2014-3-18 16,956,575 是 No No Product maturity
Bank Financial interest upon E Bank 310,000,000 2013-3-28 2014-3-26 16,648,274 是 No No Product maturity
Bank Financial interest upon E Bank 740,000,000 2013-4-17 2014-4-14 36,328,932 是 No No Product maturity
Bank Financial interest upon E Bank 610,000,000 2013-5-7 2014-4-23 31,559,227 是 No No Product maturity
Bank Financial interest upon E Bank 290,000,000 2013-5-20 2014-5-19 13,737,260 是 No No Product maturity
Bank Financial interest upon E Bank 720,000,000 2013-5-22 2014-5-21 34,106,301 是 No No Product maturity
Bank Financial interest upon F Bank 194,000,000 2013-1-21 2013-7-19 4,281,287 194,000,000 4,281,287 是 No No Product maturity
Bank Financial interest upon F Bank 89,000,000 2013-3-18 2014-3-18 4,361,000 是 No No Product maturity
Bank Financial interest upon F Bank 80,000,000 2013-3-14 2013-9-13 1,885,151 80,000,000 1,885,151 是 No No Product maturity
Total / 8,827,227,236 / / / 345,504,490 4,763,990,000 150,188,587 / / /
Cumulative amount of principal or proceeds unrecovered upon maturity (yuan) 0 Note: As of the reporting date, the entrusted financing items the table covered had been approved by the ninth meeting, the fifteenth meeting of the fifth session of the Board and the 2013 First Interim General Meeting, all relevant amount approved.
(2) Entrusted loans
25
Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
There exists no such status in report period.
(3) Other investment financing and derivative product investment
There exists no such status in report period.
3. Use of raised funds
In report period, the Company has no raised funds or utilized fund raised in previous period.
4. Key subsidiaries and share-participating companies
Unit: RMB yuan
Registered Company Major product or service Asset scale Net profit capital
Shanghai Zhenhua large container cranes and the gear box 5,500,000 334,579,066 298,474 Port Machinery Heavy gear processing and marketing; ship Industries Co., Ltd manufacturing, processing, marketin
Shanghai Zhenhua Production of precision foundry, metal 5,000,000 365,411,121 272,957 Heavy Industries cutting and cooling process. Machinery Co., Ltd.
Shanghai Zhenhua Design, manufacturing and sales of port HKD 50,000,000 3,498,846,887 21,461,470 Port Machinery (Hong machinery, engineering vessel, steel structure Kong) Co., Ltd. and other parts
Shanghai Zhenhua Operation of sea transportation in coastal 120,000,000 1,608,402,380 -13,207,775 Shipping Co., Ltd. waters; ordinary transportation in the middle and lower reaches of Yangtze River; transportation of port machinery
Nantong Zhenhua Installation of heavy port equipment, 854,936,900 1,108,836,315 -10,113,716 Heavy Equipment engineering vessels, heavy metal structure and Manufacturing Co. its parts; Gear box, container yard crane, super Ltd. heavy-duty bridge steel structure, heavy marine machinery equipment, weaving, installation; lease of cranes; contracting of steel structures etc.
Shanghai Construction and installation of large-scale 300,000,000 2,058,498,634 13,340,773 Zhenhua Heavy port equipment, engineering vessels, offshore Industries Group heavy equipment, machinery and equipment,
26
Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
(Nantong) Transmitter wind power generation equipment to use the Co., Ltd. gearbox; large slewing bearings, transmission, dynamic positioning, large anchor cutter, offshore oil platform lifting device and components, accessories related weaving
Shanghai Zhenhua International land, air, maritime freight 100,000,000 100,101,282 -219 Heavy Industries forwarding business, domestic freight forwarding, Vessel Transport Co., undertaking large-scale port equipment, marine Ltd. equipment, marine engineering materials sales, marine construction and engineering and ship leasing, engaged in import and export of goods and technologies, transit trade, trade between enterprises and trade agents within the free trade zone
Shanghai Zhenhua technical development, technical 7,000,000 7,086,806 187,644 Testing Technology consultancy, technical services, transfer of Consulting Co., Ltd. technology in the field of testing; construction engineering testing, construction project management services, physical and chemical testing of metallic materials and consulting, except metal, mechanical equipment, ships and steel structure equipment (subject to special approval) non-destructive testing services, test equipment sales, maintenance, and self-owned equipment rental (except financial leases), engaged in the import and export of goods and technology business
Shanghai Zhenhua Design, construction, installation and 300,000,000 337,213,813 -27,228,583 Heavy Industries contracting large port handling systems and Group (Nantong) Co. equipment, engineering vessels and large metal Ltd. structure very parts, accessories,; special heavy-duty Steel, bridge structure, the weaving of heavy machinery and equipment by sea, the installation; engineering ship, lifting machinery leasing; engineering consulting service, Steel structure engineering contractor; cargo storage and handling, loading and unloading containers
Shanghai Zhenhua Industrial automation equipment, electrical 50,000,000 47,655,124 27,425 Heavy Industries equipment research and development, design,
27
Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
Electric Co., Ltd. testing, electrical and electrical equipment, computer hardware and software development, manufacturing, sales, technical services, systems integration, engaged in the import and export of goods and technology business
Nantong Zhenhua machinery manufacturing and installing, USD 100,000 79,156,641 143,868 Heavy Industries steel structure processing, hardware processing, Steel Structure de-rusting and painting, machinery engineering Processing Co. Ltd. contracting etc.
Jiangyin Zhenhua Port machinery spare parts production; steel USD 4,596,150 28,432 Steel Structure structure production engineering, mechanical 100,000 Manufacturing Co. equipment, electrical equipment installation; and Ltd. to provide relevant technology and post-sales service
Shanghai Zhenhua Manufacturing and sales of steel structures USD 5,541,358 150,660 Heavy Industries and port machinery parts; installation of electric & 150,000 Steel Structure Co. port machinery equipment; providing related Ltd. technology & service
ZPMC Netherlands Port equipment technical service, sales, EURO 18,000 9,224,777 -590,668 B.V. spare parts, offshore installation and steel structure
ZPMC GmbH Sales, transport, maintenance of port EURO 25,000 20,118,209 3,155,428 Hamburg equipment, ship steel structure parts and other parts
CCCC Shanghai Port Sale of port bulk & container cranes & 2,184,730,00 2,277,133,051 170,446,386 Machinery Plant Co., machinery, port engineering vessel (incl. barge 0 Ltd. engineering vessel), cargo carrying machinery and parts; sale, technical service, maintenance, installation and technical consulting of key parts & original and associate instruments of machinery
Shanghai Port Manufacturing of port cranes and parts; USD 778,554,094 -7,413,884 Machinery Heavy making of cargo carrying machinery & parts, 18,120,000 Industry Co., Ltd. tunnel digging machinery, express railway special equipment, steel structure; repair, design & making of large engineering vessel ( incl. barge crane) & ocean engineering equipment, sales of own products and provides related
28
Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
installation and maintenance service and technical advice.
Shanghai Making, processing, repair and rebuilding of 15,000,000 82,304,804 17,679,559 Zhenhua Heavy port crane, bulk & container machinery Industries (Group) Zhangjiagang Assembly Co., Ltd.
Nanjing Ninggao Engaged in construction, investment and 100,000,000 2,219,560,830 6,801,114 New Channel consulting of Ninggao New Channel project Construction Co., Ltd.
ZPMC LANKA Engaged in port equipment technological Rupee 9,484,976 784,295 COMPANY(PRIVATE) service 184,594,480 LIMITED
ZPMC Engaged in port equipment technological LT 50,000 4,419,459 23,569 Mediterranean Liman service Makinalari Ticaret Anonim Sirketi
CCCC Properties Engaged in real estate development 900,000,000 893,019,143 -10,603,170 Yixing Co., Ltd.
Jiangsu Steel structure fabrication and installation, 260,000,000 460,203,954 -3,706,067 Longyuan Foundation construction of offshore wind power Zhenhua facilities, equipment installation and Marine maintenance, submarine cable system Engineering construction, maintenance, marine construction, Co., Ltd. equipment installation and maintenance, and installation of equipment leasing
CCCC Marine Mainly engaged in steel ships and relevant 60,000,000 60,000,000 111,971 Engineering equipment design, development, marketing and Vessel supply of technology transfer, technology Technology consultation and technology services. Research Centre Co., Ltd.
Shanghai Zhenhua Epoxy, polyurethane resin coating 49,800,000 193,469,744 4,249,622 Heavy Industries manufacturing and processing. (Group) Changzhou Paint Co., Ltd.
29
Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
5. Non-raised funds
During report period the Company’s major non-raised fund investment projects include Nantong, Changxing, Jiangyin base infrastructure construction etc. As of Dec. 30, 2013, project investment, progress are as follows:
Nantong base infrastructure construction, 204.56 million yuan invested in report year, progress 98%;
Changxing base infrastructure construction, 34.88 million yuan invested in report year, progress 80%;
Base large machinery and engineering equipment construction under progress, 169.51 million yuan invested in report year, progress 95%;
Most of above projects started prior year, having increased the production capacity of the Company. Other projects are rather small in amount, belonging to technical reformation and minor filing items.
II. Board of Director’s discussion and analysis of the Company’s future development
(I) Sector competition pattern and development trend
The year 2014 is crucial for the Company's reform; it is also a crutial year to achieve sustained and healthy development and enhance the quality of key development; the overall situation is still facing both challenges and opportunities.
In 2014 the world economy is expected to remain moderate growth; in emerging market development faces various challenges, facing greater downward pressure on the domestic economy, cost of production factors continuously rising; macroeconomic debt continues to increase; suffering more resource and environmental constraints; the direction of change in the RMB exchange rate remains uncertainty, which increase the challenges and difficulties of the manufacturing enterprises.
1 A slight recovery in the shipping industry is seen, but the foundation is not strong, and investors remain more cautious; growth in global container throughput is weak, while container machinery overall market remains stable. Coal, ore and other dry bulk machinery demand will remain increments of a certain size.
2. The strategy of becoming a maritime power and marine economic development has
30
Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013 been fulfilled, providing a huge market space for development of vast ocean engineering, as estimated, marine engineering equipment enjoying a global market between 50 - 60 billion dollars. By 2015, China's marine equipment is expected to reach 200 billion yuan or more. Will The government will focus on supporting market nurturing, financial support, technology research and development, personnel training, and create a good opportunity for the Company to develop marine engineering equipment.
3 The large, heavy and special type steel markets enjoy incremental space, while large building and bridge steel structures and modular structures lead a low-carbon green trend, which is to a nationally encouraged industry for development.
4 Urbanization and urban agglomeration will be the "engine" of China's economic development; for the next 5-6 years it will bring more than 25 trillion yuan of investment, and provide a huge development space for urban rail transport, railway, underground engineering, real estate, infrastructure services, etc..
5 New international market opportunities: for the period of 2013-2030 global infrastructure investment will reach $55 trillion. Roads, bridges, railways, ports and other businesses continue to grow. South Asia, Southeast Asia, Africa, Latin America constitute the key areas of investment. The state will increase the practice of "going out", strengthen political and economic cooperation in the energy, infrastructure, high-end manufacturing and other areas, and pursue the implementation of more government framework programs and business loan programs, which created a rare opportunity for development of international operations for the company.
6 As of the market of matching pieces and paid services, with the increasing tendency of large container ships and the "five types" of port construction, upgrading of the old terminals will be further enhanced, which will bring up increment to the markets of spare parts, paid service and electrics.
7. Strong momentum of development in the new energy market is featured by the U.S. shale gas, shale oil scaled development, and sustainable development of onshore and offshore wind power in Europe. The success of East China Sea, South China Sea experimental shale gas exploration, the success of exploration of mineral resources in some areas has laid a foundation for future large-scale development of energy markets.
31
Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
(II) The Company’s development strategy
The Board systematically and scientifically studied the basic situation, including internal and external environment, domestic reform status, analyzed major competitors, internal self-owned advantages and disadvantage, clearly set the overall development thought, key tasks and ensuring measures, with strength lying in strategic leading, fundament fortifying and base strengthening, deepening reform, improving quality and profitability, to build the Company into an excellent international company.
1. Strategic positioning: focusing on "4, 3, 2, 1" to build the Company into an excellent international company
1) 4 -types -- Stick to "learning-type, innovation-type, high-effectiveness-type, core value point of view-type" to shape Zhenhua Heavy Industries;
2) 3 -ations - Stick to "vertical integration, horizontal correlation limited diversification and internationalization" approach to business and industry layout;
3) 2 -mega's - Stick to "mega-machinery, mega-civil engineering" road of development;
4) 1 -excellent - Stick to building a sustainable and healthy international excellent company, including being the world's leading supplier of equipment, first-class mechanical and electrical systems integrator, engineering contractor and investor.
2. The overall work idea for 2014: to study and implement the spirit of the Party's 18th National Congress, the 18th Congress' Third Plenary Session and the Company's "4321" and "1521" strategies, serving as a precondition and the total requirements; fully implement the total policy of reform, management, stability and development featuring "solid foundation, constant innovation, structural adjustment, mode transmission, resource integration, strong management, nurturing culture, improving quality"; throughout the year to enhance the company's operations quality and core competitiveness, and focus their efforts on the four main management lines to deepen reform and innovation, overall cost efficiency and continuous consolidation of its foundation, strengthen the construction of personnel; aiming at comprehensive, high standard of excellence, to promote the construction of an international company of excellence, to achieve sustainable and healthy development of the company.
(III) Business planning
For the year 2014, the Company plans to achieve steady growth in revenue, and in new contracted orders, to grow around the reform in difficult areas and solid foundation, to seize
32
Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013 the market, accelerate the adjustment of the market and the business structure, strengthen the global market leader position in port machinery, vigorously develop the marine and key spare parts markets, make special efforts to develop steel structure market, actively explore shipping and installation market, make comprehensive planning for electronics markets, steadily march into the investment and services market, accelerate the pace of integration of resources, strengthen internal control, improve gross margins, enhance the Company's overall performance capabilities and development quality.
(IV) The Company’s fund demand for maintaining current business and completing investment in progress
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.
(V) Possible risks and counter measures
Market risk: it mainly is seen as slow international economic recovery and many uncertainties, greater downward pressure on the domestic economy, the rising cost of production factors, continuously increasing macroeconomic debt, more resource and environmental constraints, the global market still in the stable phase for weak demand for container cranes, fierce marine equipment market competition, which constitue greater and harder challenges for manufacturing enterprises.
Solution: facing the tough market challenges at home and abroad, the Company will focus on "1.5.2.1" for optimal adjustment of the market and business structure, "doing fine, and stronger, laying solid foundation, maintaining steady" on port machinery market, while maintaining global port machinery ZPMC's leading position in the market, to consolidate future new growth, maintaining its position for offshore engineering, making good planning, posing great courage to act boldly, continuing to strengthen the steel structure, investment market, the shipping market, the electrical market, to explore a variety of business models, innovate profit model, to promote structural adjustment and resource integration, and promote sustainable development of the enterprise.
Operational risk: it is mainly seen as heavy asset management, profit model depending mainly on the size, weak control system integration capability, too high follow-up risk and service and too low product comprehensive gross margin, the high-quality development task remaining arduous.
33
Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
Solution: deepening the masterstroke of reform and innovation, activating initiatives, transferring mode, accelerating the reform on the modes of corporation system, shareholding system, business division system, and projects system; to innovate marketing, business operations and production organization mode, widen income revenue streams, pursue comprehensive growth in revenue; promote comprehensive cost management, comprehensive budget management, comprehensive performance management; optimize asset structure, improve asset quality, strengthen process management, strengthen production control, optimize process procedures, and refer to management for efficiency.
Financial risks: it is mainly seen as exchange rate risk and credit risk, increased volatility of the RMB bidirectional fluctuation of exchange rate, credit crunch, and rising cost of funds.
Solution: make rational planning for forward rate lock, control exchange rate risk, emphasis on research on policies and strategies of foreign exchange risk management, pay close attention to changes in exchange rates, regularly compile analysis of exchange rate movements, conduct strict implementation of financial derivatives related to the approval process, produce good statistics on product currency exchange rate, further reinforce the basic work of foreign exchange management, and reduce the company's exchange rate risk. By arranging favorable settlement terms in the contract ( such as the signing of a contract with the RMB exchange rate pegged, increase the prepayments proportion plus early settlement, etc.), or within the range permitted by the country's financial foreign exchange policy, make use of hedging, foreign exchange factoring and other appropriate financial instruments or means to control and lock the exchange rate risk. As for credit risk, by reducing raw material reserves, compression of infrastructure spending, adjusting the company's debt structure through a variety of ways ( such as medium-term notes, short-term bonds), reducing financing costs, strengthening the collection of accounts receivable, gradually reducing the amount of bank debt, reduce business risks .
III. Explanation of the Board about the “Non-Standard Auditor’s Report” from the CPAs Firm (I) Remarks from the Board of Directors and the Supervisory Board of the Company on the “Non-standard Audit Report” provided by the CPA firm
√ n.a.
(II) Specification by the Board of Directors on the causes and effects of changes in accounting policies, accounting estimates and accounting method
34
Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
√ n.a.
(III) Specification by the Board of Directors on cause and effect of important corrections of prior period errors √ n.a.
IV. Pre-plan for profit distribution or capital reserve transfer to increase capital stock (I) 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, amendment would be made to the Articles of Association of the Company concerning profit distribution and cash dividends policy, and as a result dividends sharing standard and proportion are clearer, related decision-making program and mechanism complete, with full maintenance of small shareholders’ legitimate rights and interests, giving them full excess to expressing their views and demands.
(II) In case it is profitable in report period and retained profit of parent company is positive but no cash dividend distribution pre-plan is proposed, the company should disclose in detail reasons and the purpose and use plans of undistributed profit Reasons for no cash dividend distribution pre-plan purpose and use plans of although profitable in report period and retained profit of parent undistributed profit company positive
The Company became profitable from loss for 2013, but the company is in an important period of business restructuring, has a large amount of bank interest-bearing liabilities, and Retained profit will be used accounts for a quite high proportion of the company's total for the Company's routine liabilities. In order to reduce liquidity and operational risks, the business operations. Company thus proposes for the year 2013 as its profit distribution plan: no dividend distribution or capital reserve into capital stock.
35
Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
(III) 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: RMB yuan
Shares net profit Bonus Dividend Cash converted for attributable to listed share for every for every 10 dividend Year every 10 company 10 shares shares (yuan) amount shares shareholders in (share) （before tax） (before tax) s(share) profit-sharing year 2013 0 0 0 0 139,836,320
2012 0 0 0 0 -1,043,665,841
2011 0 0 0 0 30,294,335
V. Active fulfillment of social responsibilities (I) Social responsibility work
The Company actively fulfills its social responsibilities, continuously improves sustainable profitability, optimizes development strategy, strengthens the main industry, conducts rational allocation of resources; promote independent innovation and technological progress, and constantly establishes and improves the mechanism of technological innovation, increases investment in research and development, enhances the independent innovation capacity; actively provides customers with high quality services, implements great customer service, and actively carries out customer satisfaction surveys, conducts worldwide layout for service network, business network and manufacturing bases comprehensive network.
The Company actively protects the legitimate rights and interests of its employees, creates equitable development platform for employees, conducts the implementation of open competition system for management positions; builds workers' sports and leisure center to enrich leisure life of workers; conducts full implementation of "safety first, prevention first, comprehensive management" approach, and strives to create a culture of safety production, working and living environment; in the hot season, send cooling gifts to the front-line workers to ease the high temperature, sets up high temperature-easing lounge establishment, showing care for the health of the employees.
36
Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
Chapter V Substantial Events
I. Substantial lawsuits, arbitrations and media generally questioned events:
(I) Lawsuits, arbitrations not disclosed in the provisional announcement or with subsequent progress
Unit: RMB yuan
In the report period：
Suit (arbitration) Suit Suit Suit Suit Prosecutor Party with joint Type of suing constitutes (arbitration) (arbitration) Defendant Suit (arbitration) profiles (arbitration) amount (arbitration) (applicant) liabilities or arbitration projected ruling and ruling involved progress liabilities or impact implementation not
Suzhong Construction Group Co., Ltd. (Hereinafter referred to as "Suzhong Construction") contracted the project construction of the Industrial R&D Building in 2008, but the two sides entered into dispute at settlement upon completion. In September 2013 the Company filed Jiangsu Shanghai a request to Shanghai Arbitration Commission for Court Suzhong Not Not yet Zhenhua Heavy no arbitration Suzhong Construction to pay an overdue fine of 7,444,000 No to be open Construction Group yet ruled ruled Industries Co., Ltd. 7.444 million yuan due to delays of construction soon Co., Ltd. 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.
37
Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
II. Reporting period funds occupancy and debts clearing progress
√ n.a.
III. Restructuring on bankruptcy
The Company has no such events like reorganization upon bankruptcy in report period.
IV. Assets trading and business combination events
（I） Events disclosed in the provisional announcement and without changes or progresses of follow-up implementation
Events overview Index
The twenty-first meeting of the fifth session of the Board of Directors, on October 30, 2013, considered and approved " Motion on the Sale Shanghai Stock Exchange website: of "Zhenfu 7" 4000-tons Floating Crane ", www.sse.com.cn and Shanghai Securities "Motion on Transfer of Stake of Shanghai News and Hong Kong Wen Wei Po on Oct. 31, Jiangtian Industrial Co., Ltd." which were both 2013 approved by the 2013 Second Interim General Meeting.
V. Company's equity incentive in report period
√ n.a.
VI. Magnificent related transactions
(I) Related transactions in connection with routine operations
1. Events disclosed in the provisional announcement and without changes or progresses of follow-up implementation.
Events overview Index
The 17th meeting of the fifth session of the Board of Directors, on May 29, 2013, approved Shanghai Stock Exchange website: the "Proposal on Taking BT Mode to Invest in www.sse.com.cn and Shanghai Securities Constructing the New Channel Project from News and Hong Kong Wen Wei Po on May. 30, Nanjing to Gaochun and Nanjing to Gaochun 2013 Intercity Rail Transportation Phase II (Cross Lake Section) Project"
38
Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
2. Events not disclosed in provisional announcements
Unit: RMB yuan
Pricing Types of Related Related party Incidence Content of principle of Price of related transaction transaction relation related transaction related related transaction transaction amount transaction
Parent Friede & Goldman, company’s Purchase port 205,152,024 0.89 Llc. wholly-owned Sell machinery from the Based on subsidiary goods Company market price
Parent company’s Purchase port 114,440,145 0.5 CCCC First Harbor wholly-owned Sell machinery from the Based on Engineering Co., Ltd. subsidiary goods Company market price
Parent company’s Purchase port 82,764,097 0.36 CCCC Third Harbor wholly-owned Sell machinery from the Based on Engineering Co., Ltd. subsidiary goods Company market price
Parent The CCCC First company’s Purchase port 80,146,121 0.35 Engineering Co., Ltd. wholly-owned Sell machinery from the Based on subsidiary goods Company market price
Parent CCCC Fourth Harbor company’s Purchase port Engineering Co., Ltd. 71,007,524 0.31 wholly-owned Sell machinery from the Based on Second Board subsidiary goods Company market price
Parent China Harbour company’s Purchase port 48,007,343 0.21 Engineering Co., wholly-owned Sell machinery from the Based on Ltd. subsidiary goods Company market price
CCCC Third Harbor Parent Engineering company’s Investigation and Purchase port 47,061,169 0.21 wholly-owned Design Institute Sell machinery from the Based on subsidiary Limited goods Company market price
Parent CCCC Second company’s Purchase port Navigation Second 41,143,743 0.18 wholly-owned Sell machinery from the Based on Engineering Co., Ltd. subsidiary goods Company market price
CCCC First Naviation Parent Sell Purchase port Based on 8,821,784 0.04 Second Engineering company’s goods machinery from the market price
39
Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
Co., Ltd. wholly-owned Company subsidiary
Jiangsu Longyuan Purchase port Zhenhua Marine Joint venture Sell machinery from the Based on 8,362,205 0.04 Engineering Co., Ltd. goods Company market price
Parent company’s Purchase port 6,676,126 0.03 CCCC Fourth Harbor wholly-owned Sell machinery from the Based on Engineering Co., Ltd. subsidiary goods Company market price
Parent CCCC Second company’s Entrusted Highway Engineering 799,509,310 3.79 wholly-owned Receiving processing for the Based on Co., Ltd. subsidiary services Company market price
Parent CCCC Second company’s Entrusted Navigation Third 752,787,495 3.57 wholly-owned Receiving processing for the Based on Engineering Co., Ltd. subsidiary services Company market price
Parent CCCC Tunnel company’s Entrusted 166,222,974 0.79 Engineering Co., Ltd. wholly-owned Receiving processing for the Based on subsidiary services Company market price
Parent company’s Entrusted 99,935,530 0.47 CCCC Third Harbor wholly-owned Receiving processing for the Based on Engineering Co., Ltd. subsidiary services Company market price
Entrusted Parent Receiving processing for the Based on 68,366,760 0.32 Company CCCC services Company market price
Parent The CCCC First company’s Entrusted Navigation Installation 9,029,456 0.04 wholly-owned Receiving processing for the Based on Engineering Co. subsidiary services Company market price
CCCC Third Parent Navigation Xin'an company’s Infrastructure Entrusted 854,701 0 wholly-owned Construction Receiving processing for the Based on subsidiary Engineering Co., Ltd. services Company market price
Parent China Transportation company’s 168,908,244 1.16 Materials Co., Ltd. wholly-owned Purchase Supply material Based on subsidiary s for the Company market price
CCCC Shanghai Parent Purchase Supply material Based on 125,955,250 0.87 Equipment Company’s s for the Company market price
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
Engineering Co., Ltd. controlled subsidiary
Shanghai Zhenhua Heavy Industries Affiliated 74,818,457 0.51 (Group) Changzhou company Purchase Supply material Based on Paint Co., Ltd. s for the Company market price
CCCC Water Parent Transportation company’s 136,752 0 Planning and Design wholly-owned Purchase Supply material Based on Institute Co., Ltd. subsidiary s for the Company market price
Parent The CCCC First company’s Asset Asset Transfer 440,000,000 99 Engineering Co., Ltd. wholly-owned Transfer Based on subsidiary market price
Parent Equity Based on Equity Transfer 840,241,472 100 CCCC Company Transfer market price
Note: May 8, 2013, the Company 2012 Annual General Meeting approved "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. The Annual General Meeting has authorized the Company’s management to handle relevant specific matters.
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
(II) Related transactions involving asset acquisition and disposal
1. Events disclosed in the provisional announcement and without changes or progresses of follow-up implementation.
Events overview Index
The twenty-first meeting of the fifth session of the Board of Directors, on October 30, 2013, considered and approved " Motion on the Sale Shanghai Stock Exchange website: of "Zhenfu 7" 4000-tons Floating Crane ", www.sse.com.cn and Shanghai Securities "Motion on Transfer of Stake of Shanghai News and Hong Kong Wen Wei Po on Oct. 31, Jiangtian Industrial Co., Ltd." which were both 2013 approved by the 2013 Second Interim General Meeting.
(III) Significant related transaction involving joint external investment
1. Events disclosed in the provisional announcement and without changes or progresses of follow-up implementation.
Events overview Index
The Sixteenth Meeting of the Fifth Board, Shanghai Stock Exchange website: on April 26, 2013, approved the "Proposal on www.sse.com.cn and Shanghai Securities Holding Equity in CCCC Real Estate Yixing Co., News and Hong Kong Wen Wei Po on Apr. 27, Ltd." 2013
The Twenty-second Meeting of the Fifth Shanghai Stock Exchange website: Session of the Board, on November 15, 2013, www.sse.com.cn and Shanghai Securities approved the "Proposal on the Company News and Hong Kong Wen Wei Po on Sep. 19, Investing in Overseas Joint Venture Company". 2013
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
(IV) Current accounts of credits and liabilities with related parties
1. Events not disclosed in the provisional announcement.
Unit: RMB yuan
The Company providing Related party providing fund to the Company Related Incidence fund to related party party relation Beginning Current Ending Beginning balances Current amount Ending balance balances amount balance
Parent CCCC 0 0 0 75,536,745 -16,092,898 59,443,847 Company
Shanghai Parent Jiang Tian company’s 0 0 0 0 17,586,085 17,586,085 Industrial Co., wholly-owned Ltd. subsidiary
Hong Parent Kong Zhenhua company’s 0 0 0 346,005 0 346,005 Engineering wholly-owned Co. Ltd. subsidiary
Macau Zhenhua Parent Harbor company’s 0 0 0 6,593 0 6,593 Engineering wholly-owned Co., Ltd. subsidiary
Total 0 0 0 75,889,343 1,493,187 77,382,530
Reasons for the related credits and Dividends payable by the Company to related parties liabilities
VII. Major contracts and their implementation
(I) Entrusting, contracting and leasing
1. Entrusting
This year the Company had no custody
2. Contracting
This year the Company had no contractual matters
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
3. Leasing
Unit: RMB yuan
Amount Rental Rental Whether Leased Lease start Lease Rental Lessor Lessee involving leased income revenue impact related party assets date termination date income assets determined by on the company transactions
Shanghai Zhenlong Asset Housing Protocol Company 183,024,841 2012-08-10 2025-07-09 43,340,809 43,340,809 No Management Co., Ltd. rental agreed and other companies
(II) Guaranty
External guaranty (excluding those for held subsidiaries)
Total guaranties for subsidiaries incurred in report 0 period
Total guarantee balance at the end of report period（A） 0 (excluding those for held subsidiaries)
Guaranties for subsidiaries
Total guaranties for subsidiaries incurred in report 1,975,395,600 period
Total guaranties for subsidiary balance in report period 2,341,209,600 (B)
Total guaranties of the Company（including those for subsidiaries）
Total guarantee amount（A+B） 2,341,209,600
Proportion of net assets of the Company (%) 15.91
Including:
Amount guaranties to shareholders, effective controller 0 and its related parties （C）
Direct or indirect guarantees for the guaranteed parties 2,341,209,600 with an assets-liabilities ratio over 70% (D)
Amount of guaranties exceeding 50% of net assets 0 （E）
Total of the above 3 kinds of guarantee（C+D+E） 2,341,209,600
Note: The 2008 first interval general meeting held on Sep. 22, 2008 reviewed and passed “Proposal on the Company Providing Financial Guaranties to Subsidiary Shanghai Zhenhua Port Machinery (Hong Kong) Co., Ltd.”, agreeing to provide support on financing to Shanghai 44
Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
Zhenhua Port Machinery (Hong Kong) Co., Ltd., providing guaranties for bank loans, maximum $500 million. All guaranties the Company provided in report period are those to Shanghai Zhenhua Port Machinery (Hong Kong) Co., Ltd.
(III) Other substantial contracts
(1) On February 19, 2013, the Company published announcement signed the 128 iron ore barges sales contract with Brazil Girocantex Sociedad Anonima, and signed contracts concerning 5000 ton salvage lifting vessels including design, procurement, construction general contracting with the Ministry of Transportation Yantai Salvage Bureau. For details, please refer to Shanghai Securities News and Hong Kong Wen Wei Po. (2) On March 22, 2013, the Company published announcement concerning the signing of sales contract for automation quay crane equipment, with Mexico APM Terminals Lazaro Cardenas. For details, please refer to Shanghai Securities News and Hong Kong Wen Wei Po. (3) On May 24, 2013, the Company announced a contract of sale for one JU-2000E 400 feet jack-up rig. For details, please refer to Shanghai Securities News and Hong Kong Wen Wei Po. (4) On May 30, 2013, the Company announced winning of a bid to Nanjing Gaochun New Channel investment and construction. For details, please refer to Shanghai Securities News and Hong Kong Wen Wei Po. (5) On August 26, 2013, the Company announced the contract of sale for a Super M2 Type 300 feet jack-up rig with Singapore KS DRILLING PTE LTD. For details, please refer to Shanghai Securities News and Hong Kong Wen Wei Po. (6) On August 28, 2013, the Company announced an agreement with Sichuan Honghua Petroleum Equipment Co., Ltd. agreeing between the parties to conduct a comprehensive deductible calculation and liquidation for projects in pending state, which was approved by the Nineteenth Meeting of the Fifth Board of Directors. For details, please refer to Shanghai Securities News and Hong Kong Wen Wei Po. (7) On October 10, 2013, the Company announced sales contracts for port machinery with Doha New Port Project Management Committee, Guangzhou Port Group, PSA Singapore Port Group. For details, please refer to Shanghai Securities News and Hong Kong Wen Wei Po. (8) On December 30, 2013, the Company announced a sales contract with Hilong Marine Engineering (Hong Kong) Limited for a 3,000 t crane pipe-laying vessel. For details, please refer to Shanghai Securities News and Hong Kong Wen Wei Po.
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
VIII. Commitments
(I) Commitment with shareholders holding over 5% shares in report period or lasting to report period.
Type of The Commitments Fulfillment Commitments
On Oct. 18, 2012 the Company’s controlling shareholder China Communications Construction Co., Ltd. （hereafter CCCC”） via Shanghai Stock Exchange trading platform purchase increased its holding of the Company’s A-shares by 4,999,902 shares, covering 0.114% of the total capital Commitment time stock issued publicly. CCCC plans to continue increasing its and term is 12 months holding of the Company’s shares in the future 12 months starting from Oct. 18, (starting from Oct. 18, 2012) in its own name via the trading Other 2012; Up to now, China platform of Shanghai Stock Exchange. Cumulative holding commitments Communications ratio shall not exceed 2% (including the mentioned increased Corporation has strictly holding) of the Company’s total issuance of capital shares. followed their CCCC promises it will not decrease its holding of the commitments. Company’s shares during the period of increasing shareholding and in lawful period. Such promises were posted on Shanghai Securities News, Hong Kong Wen Wei Po on Oct. 20, 2012 and Shanghai Stock Exchange website (www.sse.com.cn).
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
IX. Appointment and dismissal of accounting firm
Unit: RMB yuan Whether to hire other No accounting firms Former appointment Current appointment PricewaterhouseCoopers PricewaterhouseCoopers Zhong Tian CPAs Co. Domestic accounting firm Zhong Tian CPAs Co. Ltd. Ltd.( Special general partnership) Domestic accounting firm 3,150,000 3,400,000 payment Domestic accounting firm 19 20 audit period
Name Payment
PricewaterhouseCoopers Internal control audit Zhong Tian CPAs (Special 800,000 accounting firm general partnership)
X. Punishment and rectification of the Listing Corporation and its directors, supervisors, senior management personnel, shareholders holding over 5% of the shares, the actual controller, acquirers.
During the reporting period, neither the company nor its directors, supervisors, the senior management personnel, shareholders holding over 5% of the shares, the actual controller, acquirer, have experienced inspection, administrative penalty, notice of criticism by China Securities Regulatory Commission, or public condemnation by the Stock Exchange.
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
XI. Other significant events
1. On March 24, 2014, the Company approved the "Proposal on Changes of Accounting Estimates", the said changes is subject to future-appropriate way for accounting treatment, and has no effect on the 2013 annual financial statements.
2. In 2008 the Company and Flour Limited (hereinafter referred to as "Fluor") British wind power project signed an agreement of sales and installation for wind power steel pipe pile products for the British Wind Power Project. In the project construction process, the Company and Fluor, by way of friendly consultations and in the spirit of good cooperation, maintain dispute handling normal communication mechanism. In June 2010, for the implementation of the contract, after review by the board of directors of the Company, the Company and Fluor signed a mutual exemption letter, and in 2011 settled the remaining payment. Afterwards, Flour produced claim to the Company for quality compensation, and requested the Company to cash the pay-on-claim quality guarantee bond, while the Company rejected the claim. On March 20, 2014 Flour cashed the amount of 23,409,750 euro bond. The Company has consulted professional lawyers, and is planning to claim under the guarantee bond a compensation for principal and interest loss through corresponding legal procedures.
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
Chapter VI Equity Movement and Shareholder's Profile
I. Particulars about equity movement: (I) Particulars about capital stock change 1. Particulars about capital stock change Unit: share
Prior to the movement Increase/Decrease(+,-) After the movement
Transferred Proportion New Proportion Qty Bonus from surplus Others Subtotal Qty (%) Issues (%) reserve
I. Shares subject to 0 0 0 0 conditional sales II. Total of shares not subject 4,390,294,584 100 4,390,294,584 100 to conditional sales 1. A share 2,768,331,384 63.06 2,768,331,384 63.06 2. B share 1,621,963,200 36.94 1,621,963,200 36.94 3. Shares issued in overseas market 4. Others III. Total 4,390,294,584 100 4,390,294,584 100 shares (II) Movement of shares with sales limitations
In report period, the Company has no movement of shares with sales limitations.
II. Particulars about securities issuance and listing of the Company
(I) Stock issuance activities in the Company in the three years before the report period
In the three years before the report period, there were no stock issuance activities in the Company.
(II) Changes of total number of stock and shareholder composition and changes of asset and liability composition
In report period there incurred no change in the Company’s total shares or stock structure as caused by bonus shares or allocated shares.
(III) Existing internal staff shares
By end of report period, there exist no internal employee shares.
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
III. Particulars about shareholder and effective controller of the Company
(I) Number of shareholders and their shareholding profile:
Unit: share
Total shareholders end of 5th trading day prior to Number of shareholders at period end 345,139 339,934 release day of current annual report
Shareholding profile of top 10 shareholders
shares Shares Shareholder’s Ratio Total shares Movement Shareholder’s Name held subject pledged or Nature (%) held During the Year to frozen conditional sales
China Communications State legal None 28.83 1,265,637,849 0 0 Construction Co., Ltd. person shareholder
ZHEN HUA ENGINEERING Overseas None 17.08 749,677,500 0 0 COMPANY LIMITED institution
GIC PRIVATE LIMITED Unknown 0.45 19,541,734 19,541,734 Unknown
SCBHK A/C BBH S/A Unknown VANGUARD EMERGING MARKETS Unknown 0.41 18,121,057 13,029,356 STOCK INDEX FUND
TOYO SECURITIES ASIA LTD. Unknown Unknown 0.35 15,479,369 -6,633,109 A/C CLIENT
ZHEN HWA HARBOUR Overseas CONSTRUCTION COMPANY 0.33 14,285,700 0 0 None institution LIMITED
NAITO SECURITIES CO., LTD. Unknown 0.27 11,702,762 -3,390,791 Unknown
BOCHK INVESTMENT Unknown Unknown FUNDS-BOCHK CHINA GOLDEN 0.17 7,425,081 4,069,773 DRAGON FUND
SCBHK A/C GSIC S/A Unknown Unknown MONETARY AUTHORITY OF 0.16 6,857,891 894,201 SINGAPORE
THE LIBRA GREATER CHINA Unknown Unknown 0.14 6,296,920 6,296,920 FUND LTD
Particulars about top 10 shareholders of shares not subject to conditional sales
Shares not subject to conditional sales held Shareholder’s Name Type and quantity of shares at period end
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
China Communications Construction Co., Ltd. 1,265,637,849 RMB common shares
Shares with foreign investment ZHEN HUA ENGINEERING COMPANY LIMITED 749,677,500 listed on domestic market
Shares with foreign investment GIC PRIVATE LIMITED 19,541,734 listed on domestic market
SCBHK A/C BBH S/A VANGUARD EMERGING Shares with foreign investment 18,121,057 MARKETS STOCK INDEX FUND listed on domestic market
Shares with foreign investment TOYO SECURITIES ASIA LTD. A/C CLIENT 15,479,369 listed on domestic market
ZHEN HWA HARBOUR CONSTRUCTION COMPANY Shares with foreign investment 14,285,700 LIMITED listed on domestic market
Shares with foreign investment NAITO SECURITIES CO., LTD. 11,702,762 listed on domestic market
BOCHK INVESTMENT FUNDS-BOCHK CHINA Shares with foreign investment 7,425,081 GOLDEN DRAGON FUND listed on domestic market
SCBHK A/C GSIC S/A MONETARY AUTHORITY OF Shares with foreign investment 6,857,891 SINGAPORE listed on domestic market
Shares with foreign investment THE LIBRA GREATER CHINA FUND LTD 6,296,920 listed on domestic market
1. Among above top 10 shareholders, CHINA COMMUNICATIONS CONSTRUCTION CO., LTD. constitutes related party relationship with ZHEN HUA ENGINEERING COMPANY LIMITED, ZHEN HWA HARBOUR CONSTRUCTION COMPANY LIMITED, with ultimate controller being China Communications Group Corporation. The Company is not aware of whether they have associated relationship among them or belong to the consistent actionists as defined in Administrative Rules Explanation on the above related relationship or on Disclosure of Information on Stock Change of Listed Company’s Shareholders. consistent action On January 8, 2014, the Company disclosed the "Announcement on Changes in Shareholders' Equity", according to which Hongkong ZHEN HUA ENGINEERING COMPANY LIMITED was to transfer all the shares it held to CCCC International (Hongkong) 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 departments for approval.
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
IV. Controlling shareholders and actual controllers
(I) Particulars about the corporate controlling shareholder
1. Legal person
Unit: RMB yuan
Name China Communications Construction Co., Ltd.
The person in charge of the unit /legal Liu Qitao representative
Date of incorporation 2006-10-8
Organizational Code 71093436-9
Registered capital 14,825,000,000
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 Principal business equipment installation; undertaking the general contracting of the construction of activities 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.
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
(II) Particulars about the actual corporate controller
1. Legal person
Unit: RMB yuan
Name China Communications Construction Group
The person in charge of the unit /legal Liu Qitao representative
Date of incorporation 2005-12-08
Registered capital 710933809
Name 4,754,016,800
International tender for contracting overseas projects and domestic projects; a variety of professional ship general contracting construction, leasing and maintenance of specialized ships, construction machinery; marine towing, marine engineering-related professional services; technical advisory services for ships and port equipment; commitment to domestic and foreign ports, waterway, highway and Principal business bridge construction Item, the general contractor (including the technical and economic activities consulting, feasibility studies, survey, design, construction, supervision and related equipment, materials procurement and supply, equipment installation); commitment to the industrial and civil buildings, railway metallurgy, petrochemical, tunnels, power, mining, water conservancy, municipal construction project contracting; import and export business; real estate development and property management; transport, hotel industry, tourism, investment and management.
V. Other corporate shareholders holding over 10% of the Company’s shares
Unit: HKD yuan
The person Corporate in charge or Date of Organization Registered Main business and shareholders Legal establishment code Capital management activities representative Marine works, roads and bridges, ZHEN HUA Wang dredging and site ENGINEERING 1982-05-14 - 35,000,000 Yan formation, port COMPANY LIMITED machinery, survey and design. China Communications Construction Co. Ltd. holds 100% stake of ZHEN HUA ENGINEERING COMPANY LIMITED, the ultimate shareholder is China Communications Construction Group Co. Ltd.
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
Chapter VII Directors, Supervisors, Senior Executives and Employees
I. Chang of holdings and remuneration
(I) Share holding changes and remuneration of directors, supervisors and senior executives under employment or retired during report period
Unit: share
Total Paid by Total Paid by Chan Shares held at Rea the Company the shareholders Start of End of Shares ge in Name Title Sex Age the beginning of son for during report units Tenure Tenure at end of year report year change period(RMB 10,000) during report period (before tax) period(RMB 10,000) Chairman of the Song 2012-0 2014-0 board, secretary of M 49 0 0 0 0 90.5 Hailiang 9-18 5-20 the party committee Liu 2011-0 2014-0 0 Director M 54 0 0 0 95.62 Wensheng 5-20 5-20 2011-0 2014-0 0 Chen Qi Director F 52 0 0 0 70.61 5-20 5-20 Former Director, - Lu 2011-1 2014-0 President, vice Party M 51 0 0 0 90 Jianzhong 0-20 3-21 Secretary Executive - 2011-0 2014-0 Yan Yunfu director, Vice M 55 0 0 0 81 5-20 5-20 president Executive - Liu 2011-0 2014-0 director, Vice M 50 0 0 0 81 Qizhong 5-20 5-20 president Executive - Dai 2011-0 2014-0 director, Vice M 47 0 0 0 81 Wenkai 5-20 5-20 president Independent 2011-0 2014-0 - Bao Qifan M 63 0 0 0 12 director 5-20 5-20 Independent 2011-0 2014-0 - Li Liguang M 52 0 0 0 5 director 5-20 5-20 Independent 2011-0 2014-0 - Mi Weijian M 58 0 0 0 5 director 5-20 5-20 Liu Independent 2011-0 2014-0 - M 56 0 0 0 12 Ningyuan director 5-20 5-20 Independent 2011-0 2014-0 - Tang Fuxin F 58 0 0 0 12 director 5-20 1-28 Independent 2013-0 2014-0 She Lian M 55 0 0 0 8 director 5-08 5-20 Independent 2013-0 2014-0 Gu Wei M 57 0 0 0 8 director 5-08 5-20 Zhang Chairman of 2011-0 2014-0 - M 52 20,259 20,259 0 48.97 Minghai board of supervisors 5-20 5-20 2011-0 2014-0 - Chen Bin Supervisor M 40 89,440 89,440 0 39.88 5-20 5-20 Zhao 2011-0 2014-0 - Supervisor M 53 0 0 0 36.9 Guangjing 5-20 5-20 Cao 2011-0 2014-0 - Vice president M 58 0 0 0 72 Weizhong 5-20 5-20 Huang 2011-0 2014-0 - Vice president M 60 0 0 0 72 Hongyu 5-20 5-20 2011-0 2014-0 - Sun Li Vice president M 42 0 0 0 72 5-20 5-20 Huang 2011-0 2014-0 - Vice president M 39 0 0 0 72 Qingfeng 5-20 5-20 2011-0 2014-0 - Zhou Qi Vice president M 42 0 0 0 72 5-20 5-20 2011-0 2014-0 - Fei Guo Vice president M 52 0 0 0 72 5-20 5-20 Chen 2011-0 2014-0 - Vice president M 47 0 0 0 72 Gang 5-20 5-20 2011-0 2014-0 - Liu Jianbo Vice president M 51 0 0 0 72 5-20 5-20 - CFO, Secretary 2011-0 2014-0 Wang Jue of the Board of M 50 0 0 0 72 5-20 5-20 Directors,
1168.75 Total / / / / / 109,699 109,699 0 / 256.73
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
1. Song Hailiang, born in1965, male, professor-level senior engineer, B.E. in port machinery design and manufacture at Wuhan Institute of Water Transport Engineering, doctor of management at Tianjin University, started to .work from July 1987, served as engineer, Design Office director, Vice 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.; currently vice President of China Communications Construction Co., Ltd. and simultaneously Chairman of the Board, President and Party Secretary of Zhenhua Heavy Industries.
2. Liu Wensheng, born in 1960, male, MBA, senior engineer; was assistant and deputy director with Tianjin Shipping Channel Bureau, vice chief economist and general manager of planning office with China Harbor Construction (Group) Company, is now secretary of board of directors and chief economist with China Communications Construction Co. Ltd., Chairman of the Board with CCCC International(Hong Kong) Co. Ltd., has been board director of the Company since 2006.
3. Chen Qi, born in 1962, female, master, senior engineer, was project manager of China Harbour Engineering Co., Ltd. Import and Export Port Machinery Division, China Harbour (Group) Co., Ltd. Industry and Trade Business Unit deputy general manager, general manager; is now CHINA COMMUNICATIONS CONSTRUCTION CO., LTD. Industry and Trade Business Unit general manager; has been board director of the Company since 2011
4. Lu Jianzhong, born in 1963, males, MBA, management science and engineering doctor, senior accountant, senior economist; started to work in July 1983, successively CCCC First Highway Engineering Co., Ltd. Beijing-Tianjin-Tanggu Expressway Tianjin viaduct project general manager, director of the Bureau's Corporate Management Division, Bureau deputy chief economist, the ring road of the capital of Ethiopia project general manager, overseas subsidiary General Manager and Secretary of the Party Committee, the Bureau’s chief economist, deputy managing director, local Party committee member; was director, president and vice chairman of Party committee of the Company. Resigned on Mar. 21, 2014.
5. Yan Yunfu, born in 1959, male, master of engineering management and EMBA master, professor-level senior engineer，was Vice Chief of Technical Department, Manager of Mechanical Design Department, Vice General Engineer, General Engineer and VP of
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013 the Company. Is now the company’s standing VP; is director of board of the Company since 2004.
6. Liu Qizhong, born in 1964, male, Doctor, senior economist, doctor; was Vice Manager, Manager of Operating Department and VP of the Company; is now the Company’s standing VP; is board director of the Company since 1997.
7. Dai Wenkai：born in 1967, male, master of physics, MBA, EMBA, senior engineer. Started to work in 1993, was Manger of Operating Department, Vice Chief Economist, Chief Economist, VP of the Company; is now the executive VP of the Company; is board director of the Company and director of F&G since 2012.
8. Bao Qifan: born in 1951, male, master, professor-level senior engineer; former Shanghai Port fourth loading and unloading zone machine repair shop deputy director, Shanghai Port Timber Handling Technology Co., Ltd. technology section chief, deputy manager in technology of Shanghai Port Nanpu Port Co, Ltd., Shanghai Port Longwu Port Co., Ltd. manager, vice director of Shanghai Port Bureau, Shanghai International Port (Group) Co., Ltd. VP; now Shanghai municipal government counselor, part-time vice chairman of Chinese Mechanical Engineering Society, China Water Transport Engineering Association vice chairman, Vice-Chairman of Shanghai Science and Technology Association etc.; independent board director of the Company since 2011.
9. Liu Ningyuan, born in 1958, male, master, professor, instructor of doctorate students; currently East China University of Politics and International Law School Dean and Secretary of the Party committee, part-time Chinese Private International Law Society executive director, Chinese Arbitration Law executive director, Shanghai Law Society International Law Studies vice president, Shanghai Arbitration Commission arbitrator, Shanghai Zhongxin Zhengyi Law Firm lawyer; independent board director of the Company since 2011.
10. Tang Fuxin, born in 1956, female, MBA, senior accountant; served as accountant of Finance Department and vice director of Inspection Division of the Ministry of Posts, former Guoxin Paging Co,, Ltd. finance manager, China Unicom Group financial department deputy general manager and general manager of the department of Finance; China Unicom Co., Ltd. financial department general manager; currently China Unicom Group General Manager of Audit Department, also as China Unicom Co., Ltd. supervisor; independent director of the Company since 2011. Resigned on Jan. 28, 2014.
11. She Lian: born in 1959, male, professor, doctoral tutor; from 1995 on, enjoys
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013 special government allowances from the State Council; 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. has been independent board director of the Company since 2013 onwards.
12. Gu Wei: 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 Electrotechnical 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 Electrotechnical 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; has been independent board director of the Company since 2013.
13. Zhang Minghai, born in1962, male, master，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.
14. Chen Bin, born in 1974 , male, MBA, senior engineer; 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 since 2008.
15. Zhao Guangjing, born in 1961, male, college diploma, served as Shanghai Port
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
Machinery Plant discipline officer; audit department Senior Staff Member; inspection and supervision audit office deputy director(in charge), vice secretary and chief director of the discipline inspection and supervision audit office, the organs of the Party branch secretary, asset management vice general manager; Shanghai Zhenhua Heavy Industries (Group) Co., Ltd. Quality Security Comprehensive Office deputy manager, comprehensive room of the executive office deputy manager; currently Audit and Supervision manager of the company; from 2011 employee supervisor of the Company.
16. Cao Weizhong, born in 1956, male, worked as Vice Manager of Installation Section, Managing General Manager of Jiangyin Base, Vice Manager of Production Department of the Company, General Manager of QC Company, Assistant to General Manager and VP; now standing VP，has been chairman of the Trade Union since 2006.
17. Huang Hongyu, born in 1954, male, master’s degree in engineering administration, senior engineer; worked as Vice General Engineer of the Company. He has been Vice President of the Company since 1997.
18. Sun Li, born in 1972, male, doctor, senior engineer; was Project Supervisor of Operating Department, Vice Manager and Assistant of General Manager of the Company. He has acted as Vice President of the Company since 2001.
19. Huang Qingfeng, born in 1975, male, master, senior engineer; 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, assistant president of the Group; from Jan. 2005 on is VP of the Company.
20. Zhou Qi, born in 1972, male, master’s degree in engineering administration, senior engineer; was manager and deputy general engineer, general manager of the Electric Appliance Office of the Company; is now VP of the Company.
21. Fei Guo, born in 1962, male, master’s degree in engineering administration, professor-level senior engineer; was engineer with Shanghai Port Machinery Plant; director of Electric Appliance Office 5 and vice general engineer with Shanghai Zhenhua Port Machinery Co., Ltd.; is now VP of the Company and simultaneously chairman of the board of Shanghai Zhenhua Heavy Electric Co. Ltd.
22. Chen Gang, born in 1967, male, doctor, professor-level senior engineer; was deputy manager of Technological Office of the Company; Mechanical Design manager,
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
Mechanical Office director, vice chief engineer, chief engineer, is now VP of the Company and director of Jiangxi HuaWu Detent Group Ltd., and director of F&G.
23. Liu Jianbo, born in 1963, male, master’s degree in engineering administration ， 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; is now VP of the Company.
24. Wang Jue, born in 1964, male, MBA, CPA and senior accountant, successively held the posts of director of the Financial Office of No.3 Engineering Co., Ltd. Of CCCC Third Harbor Engineering Co., Ltd., General Accountant of CCCC 5th and 7th Harbor Engineering Co., Ltd., Director of the Audit Section, Director of the Financial Section and Vice General Accountant of Third Harbor Engineering Co., Ltd.; is the Chief Controller and Secretary of the Board of Directors of the Company since November of 2005.
II. Office holding profile of directors, supervisors and senior executives in office or retired during report period
(I) Particulars about office-holding with shareholding companies:
Name of Starting date Name shareholding Title of service term companies
China Song Hailiang Communications Vice President 2014-01-27 Construction Co., Ltd.
China Secretary with Liu Wensheng Communications the Board, Economist 2009-12-29 Construction Co., Ltd. General
China General manager Chen Qi Communications of Industry and Trade 2009-12-29 Construction Co., Ltd. Department
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
(II) Particulars about office-holding with other companies:
Name Name of companies Title
Shanghai Municipal Government, Chinese Mechanical Engineering Society, Counselor, Vice Bao Qifan China Water Transportation Association, Director-General, Vice Shanghai Association for Science & Chairman Technology
International Law Faculty of the East China University of Politics and Law, China Dean and Secretary of Association of Private International Law, China the Party committee, Liu Ningyuan Academy of Arbitration Law, International Law Standing Director, Research Association of Shanghai Law Vice-chairman, arbiter, Society, Shanghai Arbitration Commission, Lawyer Shanghai Trust Justice Law Office
CEIBS Emergency Management Institute She Lian professor, doctoral tutor incumbent National School of Administration
Key Laboratory of the Ministry of Transportation's Shipping Technology and Control Engineering; China Electrotechnical Society's Vessel Electrical Committee; director, professor, Committee of Experts of Shanghai Jiaotong Gu Wei doctoral tutor, council Electronics Industry Association; procurement member, committee member consulting expert of Shanghai Municipal Government; Committee of Experts of Ministry of Transport East China Sea Rescue Bureau and other duties
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
III. Remuneration of Directors, Supervisors and senior executives
Decision-making In accordance with the Articles of Association, the remuneration of procedures for Directors and Supervisors are subject to the approval of Annual remuneration of Shareholder’s General Meeting and the remuneration of the Directors, Supervisors management are assessed and approved by the President. and senior executives
Calculation basis for Basic salary plus performance bonus, combined with assessment remuneration of utilizing quantizing index of production and operation. Directors, Supervisors and senior executives Total pay received Chairman Song Hailiang, Director Chen Qi, Director Liu by all directors, Wensheng are not paid by the Company, whereas all other director, supervisors and senior supervisor and senior executives are paid by the Company. executives Total remuneration received by all directors, 11,687,500 yuan supervisors and senior executives at period end IV. Particulars about changes of directors, supervisors and senior executives
Name Former position The Change Reason
Independent Li Liguang Leaving post Expired resigns director
Independent Mi Weijian Leaving post Expired resigns director
Independent She Lian appointment New appointment director
Independent Gu Wei appointment New appointment director
Lu Jianzhong Director, President Leaving post Resignation
Independent Tang Fuxin Leaving post Resignation director
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
V. Employee status of the Parent Company and its key subsidiaries
(I) Particulars about employees
Number of employees of Parent Company 2,924 in service
Number of employees of key subsidiaries 3,334 in service
Total headcount in employment 6,258
Particulars about staff condition of the 0 Company
In specialties
Classification Number
Production staff 1,909
Selling staff 121
Technical staff 3,494
Financial staff 83
Administrative staff 651
Total 6,258
In educational level
Educational Level Number
Technical secondary school 1,481
Junior College 1,984
Undergraduate 2,511
Master 262
Doctor 20
Total 6,258
(II) Remuneration policies
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
In line with the Company’s development strategy, continuously perfect distribution incentive system, perfect performance assessment system, establish a system linking performance distribution and unit or office performance, staff performance and post value; establish a distribution mode integrating with the market.
(III) Training programs
At each year start, the Company sets up all-staff annual educational and training plan and implements according to the plan to improve the competence level and professional quality of staff at various levels. In line with the Company’s development strategy, gradually establish a rigid staff training system with systematic, directional and continuous features.
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
(IV) Specialty composition chart:
1.33% 10.40% 30.50% production staff selling staff technical staff financial staff 55.83% 1.93% administrative staff
(V) Educational level statistics chart:
4.19% 0.32%
23.67% technical secondary school junior college 40.12% undergraduate master 31.70% doctor
(VI) Labor outsourcing
The total number of man-hours 14,586,000 hours of labor outsourcing
The total remuneration payment 415,723,000 yuan of labor outsourcing
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
Chapter VIII Corporate Governance
I. Corporate governance and information insider registration management
During the report period, the Company has focused on standardizing routine operation, further establish a sound internal control system, improve the management of internal controls and corporate governance structure, established and strengthen the insider information management, enforcing information disclosure, continue to improve the corporate governance standards and the establishment and development of the legal representative management system according to the Company Law, Securities Law, Rules for Listed Securities, Article of Associations and other regulations promulgated by CSRC.
In order to regulate the behavior of insider information management, strengthen the confidentiality of inside information, the company developed the "Shanghai Zhenhua Heavy Industry (Group) Co., Ltd. Insider Information Management System", by self-examination, trading in the Company’s shares with inside informations before the disclosure of significant sensitive information of the Company’s share prize does not exist with the insiders.
There is no difference between the corporate governance status and the requirements of the Commission on corporate governance as follows:
① Shareholders and the Shareholder’ Meeting: The Company treats all shareholders equally, protects the legal benefit for the shareholders, and ensures the sufficient enforcement of their rights. The company established standing orders of shareholders’ meeting. The company convenes the shareholders’ meeting strictly according to the standing orders of shareholders’ meeting. The number of shareholders attended and shares represented conform to the regulation of Company Law and Article of Association. ② Ultimate shareholders and listing: Ultimate shareholder acts in a normal way and strictly respects all rights of the Board of Directors and Shareholder’s General Meeting .It doesn’t perform any illegal or executive function which goes beyond the authorizations granted by the Board of Directors and Shareholder’s General Meeting or intervenes with the significant decision made by the Company and its lawful operations. The Board of Directors, the Supervisory Board and internal institutions can operate independently. In this reporting period, the Company established Related Party Transaction Regulation to ensure the validity of the decision procedure of related party transactions. ③ The Directors and the Board of Directors: The Board of Directors acts independently. The
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
Company has established Standing Orders of the Board of Directors and Regulations on Performance of Independent Director. Every director is able to present the meetings of the Board of Directors and Shareholders’ General Meeting in a critical and responsible manner, and performs obligations and responsibilities as a director. Independent directors fully and independently perform their duties and concern the legal welfare of minority shareholders. ④ Supervisors and the Supervisory Board: The number of the supervisors and member comply with laws and regulations; the Supervisors are able to perform their duties according to Standing Orders of the Supervisory Board. Being responsible to shareholders, the supervisors are able to perform their responsibility with due diligence and supervise the finance, performance of the Directors, managers and other senior executives to ensure the compliance with the laws. ⑤ Performance and incentive system: The Company is positively working on the institution of a fair and open incentive system for the evaluation and motivation of directors, supervisors and managers. Employment of management staff is fair and open according to laws and regulations. ⑥ Other stakeholders: The Company fully respects and protects the rights and interests of banks, creditors, employees, customers and other relative beneficial parties, positively cooperates and effectively communicates with these parties to promote continual and healthy development of the Company. ⑦ Information disclosure and openness: The Company is able to duly perform its obligation on information disclosure according to related regulations. During the report period, the Company attached much importance to the management of investor relationship and established a system which helps investors to keep abreast of the Company, and periodically invites investors to visit and investigate the production bases of the Company. As a result, the Company has built up a smooth communication channel between investors and the Company to improve the management, corporate governance structure of the Company and its core competitiveness.
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
II. Summary of shareholders general meeting
Index of the Session time resolution Date of resolutions Date of meeting Motions of meeting Resolutions of meeting published published website
11 bills including 2012 Board of Directors’ Work Shanghai Report; 2012 Work Report of Stock Exchange 2012 Annual the Supervisory Board; Bill on all approved web: Shareholder’s 2013-5-8 Signing of Daily Related 2013-5-9 after review www.sse.com.cn General Meeting Transactions Framework ，input securities Agreement with China code and search Communications Construction Co., Ltd.
3 bills including Proposal on Taking BT Mode to Invest in Constructing the New Channel Project from Nanjing 2013 First to Gaochun and Nanjing to Interim Gaochun Intercity Rail all approved 2013-8-22 Ditto 2013-8-23 Shareholder’s Transportation Phase II after review General Meeting (Cross Lake Section) Project, Proposal on Buying Low-risk Financial Products and the Proposal on Amendment of the Articles of Associations
2 bills including Motion 2013 Second on the Sale of "Zhenfu 7" Interim 4000-tons Floating Crane, all approved 2013-11-15 Ditto 2013-11-16 Shareholder’s and Motion on Transfer of after review General Meeting Stake of Shanghai Jiangtian Industrial Co., Ltd.
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
III. Duty fulfillment of directors
(I) Attendance of directors at meetings of the Board of Directors:
General meeting of Board of directors in attendance shareholders in Independent attendance Name Director or not Two Number of Number of Expected Actual Entrusted absences in attendances of attendances by Absences attendances attendances attendances succession or general meeting correspondence not of shareholders Song No 9 9 7 0 0 No 3 Hailiang Liu No 9 7 7 2 0 No 0 Wensheng Chen Qi No 9 9 7 0 0 No 2 Lu No 9 8 7 1 0 No 3 Jianzhong Yan Yunfu No 9 9 7 0 0 No 2 Liu No 9 8 7 1 0 No 3 Qizhong Dai No 9 9 7 0 0 No 2 Wenkai Bao Qifan Yes 9 8 7 1 0 No 2 Liu Yes 9 8 7 1 0 No 2 Ningyuan She Lian Yes 7 6 6 1 0 No 2 Gu Wei Yes 7 7 6 0 0 No 2 Tang Yes 9 9 7 0 0 No 2 FuXin Li Liguang Yes 2 2 1 0 0 No 0 Mi Weijian Yes 2 2 1 0 0 No 0
Number of board meetings in report year 9
Including: number of field meetings 2
Number of meetings by correspondence 7
(II) Dissent expressed by Independent Directors on related issues of the Company
During the report period, Independent Directors of the Company did not express dissent on resolutions approved by the Board of Directors and any other issues.
IV. Description of the Supervisory Board of the found risks with the Company
In report period, the Supervisory Board holds no objections to supervisory matters.
V. In report period, the establishment and implementation of evaluation and motivation of senior executives
The Company appointed and removed Directors, Supervisors and senior executives in accordance with Company Law and Article of Associations. It has preliminarily established a
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013 practical system for cultivation, selection, supervision, evaluation, rewards and disciplinary sanctions, and control of senior executives, and promulgated relevant management method of senior executives. Focusing on both political integrity and professional competence, the Company evaluates, appoints and removes senior executives based on actual requirements of its operation and development and the senior executives shall take a lower as well as a higher post. The Company will continuously improve the existing performance assessment and remuneration system and carry out the middle and long range incentive system based on diligence and performance among all the senior executives and core technicians in order to motivate senior executives to create new accomplishments and ensure maximum benefit and standard operation of the Company.
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
Chapter IX Internal Control
I. Internal control responsibility statement and internal control system construction According to the Basic Standards for Corporate Internal Control and its supporting guidelines and other regulatory requirements of internal control, combined with the actual situation of the company, the company developed a "Shanghai Zhenhua Heavy Industry (Group) Co., Ltd. 2013 Internal Control Standards Implementation Plan" and established the internal control regulations leading group and project work group, has evaluated the 2013-12-31 (the internal control evaluation report reference date) Company’s effectiveness of internal control on the basis of the daily supervision and special supervision of internal control and under the leadership of the board of directors of the Company. According to the identification of the company's financial reporting internal control significant deficiencies, there is no significant financial reporting internal control deficiencies on the reference date of internal control evaluation report, the company has maintained the effective financial reporting internal control in all material respects in accordance with the system of internal control standards and related requirements. According to the identification of the company's non-financial reporting internal control significant deficiencies, there is no significant non-financial reporting internal control deficiencies on the reference date of internal control evaluation report. The factors that influence the effectiveness of the internal control evaluation results did not occur since the reference date of the internal control evaluation report till the day that internal control evaluation report issued. The Company's 2013 annual internal control evaluation report detailed in the attachments. II. Explanation about the internal control auditor’s report The employed PricewaterhouseCoopers Zhong Tian CPAs Co. Ltd. Has conducted audit on the effectiveness of internal control in the financial report as of Dec. 31, 2013 and produced unqualified standard auditor’s report (see attachment). III. Explanation about annual report significant error accountability system and the implementation In order to improve the level of corporate governance, strengthen the truthfulness, accuracy, completeness and timeliness of information disclosure, and improve the quality and transparency of annual information disclosure, according to CSRC and Shanghai Stock Exchange documentation requirements, combined with the Company’s realities, the 28th meeting of the fourth session of the Board, held on Mar. 18, 2010, reviewed and approved the Shanghai Zhenhua Heavy Industry Co., Ltd. Annual Information Disclosure Significant Error Accountability System. The Company does not have significant errors of annual information disclosure during the report period.
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
Chapter X Financial Report
（See attachment）
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Shanghai Zhenhua Heavy Industries Co., Ltd. Annual Report 2013
Chapter XI Reference Available
I. Financial statements sealed and signed by the legal representative, CFO and person in charge of accounting organ.
II. Originals of Audit Report with seal and signatures of CPAs’ and CPA’s Firm
III. The originals of all the company’s documents and public bulletins released in the newspapers defined by China Securities Regulation Committee within the report period.
Chairman: Song Hailiang
Shanghai Zhenhua Heavy Industries Co., Ltd. Mar. 26, 2014
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