Tianjin Binhai Teda Logistics : 2016 Annual Report / Environmental, Social and Governance Information/Report(Finance)

天津濱海泰達物流集團股份有限公司‌‌‌‌‌‌‌‌‌‌‌

Tianjin Binhai Teda Logistics (Group) Corporation Limited*

2016

Annual Report

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

Stock Code: 8348

• For identification purposes only

  CHARACTERISTICS OF THE GROWTH ENTERPRISE MARKET ("GEM") OF THE STOCK EXCHANGE OF HONG KONG LIMITED (THE "STOCK EXCHANGE") GEM has been positioned as a market designed to accommodate companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors. Given the emerging nature of the companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM.

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

  This report, for which the directors (the "Directors") of Tianjin Binhai Teda Logistics (Group) Corporation Limited (the "Company") collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on GEM of The Stock Exchange (the "GEM Listing Rules") for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief the information contained in this report is accurate and complete in all material respects and not misleading or deceptive, and there are no any other matters the omission of which would make any statement herein or this report misleading.

  CONTENTS

• Corporate Information

• Group Structure

• Financial Summary

• Chairman's Statement

10 Management Discussion and Analysis

15 Environmental, Social and Governance Report

27 Corporate Governance Report

35 Directors' Report

1. Report of the Supervisory Committee

2. Directors, Supervisors and Senior Management

50 Independent Auditors' Report

1. Consolidated Statement of Profit or Loss and Other Comprehensive Income

2. Consolidated Statement of Financial Position

1. Consolidated Statement of Changes in Equity

2. Consolidated Statement of Cash Flows

3. Notes to the Consolidated Financial Statements

CORPORATE INFORMATION

EXECUTIVE DIRECTOR

Zhang Jian (Chairman)

NON-EXECUTIVE DIRECTORS

Cui Xuesong, Zhang Wang, Tse Ping, Yang Xiaoping

INDEPENDENT NON-EXECUTIVE DIRECTORS

Cheng Xinsheng, Japhet Sebastian Law, Zhou Zisheng

SUPERVISORS

Xu Jianxin, Hai Tianmin, Wang Rui, Wang Rui, Yuan Baolei

GENERAL MANAGER AND DEPUTY GENERAL MANAGER OF THE COMPANY

Zhang Jian (General Manager), Li Yangqian, Tang Zhizhong

COMPANY SECRETARIES

Lo Tai On, Jia Wenxuan

BOARD COMMITTEES

Audit Committee

Zhou Zisheng (Chairman), Cheng Xinsheng, Japhet Sebastian Law

Remuneration Committee

Japhet Sebastian Law (Chairman), Cheng Xinsheng, Zhou Zisheng

Nomination Committee

Zhang Jian (Chairman), Japhet Sebastian Law, Zhou Zisheng

COMPLIANCE OFFICER

Zhang Jian

AUTHORISED REPRESENTATIVES

Zhang Jian, Lo Tai On

AUDITOR

HLB Hodgson Impey Cheng Limited

Certified Public Accountants 31st Floor, Gloucester Tower, The Landmark,

11 Pedder Street, Central, Hong Kong

H SHARE REGISTRAR AND TRANSFER OFFICE

Computershare Hong Kong Investor Services Limited 17/F, Hopewell Centre,

183 Queen's Road East, Wanchai, Hong Kong

REGISTERED ADDRESS

No. 39, Bohai Road,

Tianjin Economic and Technological Development Area

OFFICE AND CORRESPONDENCE ADDRESS

No. 39, Bohai Road,

Tianjin Economic and Technological Development Area 300457

PRINCIPAL OFFICE IN HONG KONG

Unit B, 1st Floor, Neich Tower, 128 Gloucester Road, Wanchai,

Hong Kong

STOCK CODE

08348

COMPANY WEBSITE

http://www.tbtl.cn

PRINCIPAL BANKERS

Tianjin Cui Heng Plaza Branch of the Industrial and Commercial Bank of China

Huang Hai Road Branch of the Agricultural Bank of China

Tianjin Economic and Technological Development Area Sub-branch of the Industrial Bank

Tianjin Free Trade Zone branch of CITIC Bank Tianjin Binhai branch of China Minsheng Bank Tianjin Binhai Sub-branch of the China

Guangfa Bank Co., Ltd.

Tianjin Binhai Branch of Bank of Hebei Co., Ltd.

GROUP STRUCTURE

Tianjin TEDA Investment Holding Co., Ltd. ("TEDA Holding") 42.45%

Chia Tai Pharmaceutical Investment (Beijing) Co., Ltd.

("Chia Tai Pharmaceutical")

21.82%

Chia Tai Land Company Limited ("Chia Tai Land") 8%

Public Shareholders (H share) 27.73%

TEDA

General Bonded Warehouse Co., Ltd. ("Bonded

Tianjin Yuan

Da Xian Dai Logistics Co., Ltd. ("Yuan Da

He Guang Trade and Business Co., Ltd. ("He Guang Trade and

Tedahang Cold Chain Logistics Co., Ltd.

Tianjin Fengtian Logistics Co., Ltd. ("Fengtian

Warehouse")	Logistics")	Business")	("Tedahang")	Logistics")	Forwarding")	Alps")	Alps")	Automobile")	("Tianxin")
100%	100%	100%	60%	52%	51%	50%	50%	40%	30%	18%

Tianjin Teda International Freight Forwarding Co., Ltd. ("International Freight

Tianjin Alps Teda Logistics Co., Ltd. ("Tianjin

Dalian Alps Teda Logistics Co., Ltd. ("Dalian

Tianjin Port Gangwan International Automobile Logistics Co., Ltd. ("Gangwan

Tianjin Tianxin Automobile Inspection Services Co., Ltd.

Tianjin Ferroalloy Exchange Co., Ltd. ("Ferroalloy")

* For identification purposes only

FINANCIAL SUMMARY

RESULTS

A summary of the consolidated results of the Company and its subsidiaries (the "Group") for the five accounting years ended 31 December 2016 prepared under the International Financial Reporting Standards is as follows:

2016 RMB'000	2015 RMB'000	2014 RMB'000	2013 RMB'000	2012 RMB'000
Turnover	2,772,369	3,186,352	3,069,499	2,683,423	1,736,450
Profit before income tax	67,703	71,785	78,571	69,180	76,649
Income tax expense	(10,067)	(12,306)	(16,295)	(13,096)	(5,500)
Profit for the year	57,636	59,479	62,276	56,084	71,149
Profit attributable to Non-controlling interests	14,253	5,795	11,062	9,081	6,485
Owners of the Company Basic earnings per share (RMB)	43,383 0.12	53,684 0.15	51,214 0.14	47,003 0.13	64,664 0.18

ASSETS AND LIABILITIES

A summary of the assets and liabilities of the Group for the five years ended 31 December 2016 prepared under the International Financial Reporting Standards is as follows:

2016 RMB'000	2015 RMB'000	2014 RMB'000	2013 RMB'000	2012 RMB'000
Non-current assets	618,136	631,791	636,012	659,808	701,211
Current assets	1,902,111	1,947,570	1,815,364	1,543,395	1,192,127
Total assets	2,520,247	2,579,361	2,451,376	2,203,203	1,893,338
Non-current liabilities	62,762	6,243	6,597	6,951	7,308
Current liabilities	1,523,960	1,681,942	1,564,814	1,353,572	1,073,561
Non-controlling interests	94,493	84,857	88,061	87,818	83,358
Liabilities and non- controlling interests	1,681,215	1,773,042	1,659,472	1,448,341	1,164,227
Total equity	933,525	891,176	879,965	842,680	812,469

CHAIRMAN'S STATEMENT

On behalf of the board of directors of the Company (the "Board"), I am pleased to present the audited consolidated financial results of the Group for the year ended 31 December 2016 to all shareholders.

RESULTS OF THE YEAR

For the year ended 31 December 2016 (the "Year"), turnover of the Group amounted to approximately RMB2,772,369,000 (2015: RMB3,186,352,000), representing a decrease of approximately 13% as compared with the corresponding period of last year. Profit attributable to the shareholders was approximately RMB43,383,000 (2015: RMB53,684,000) and the earnings per share was approximately RMB0.12 (2015: RMB0.15).

As at 31 December 2016, the total assets and current assets of the Group were approximately R M B2,5 2 0,2 4 7,0 0 0 (2 0 1 5: R M B2,5 7 9,3 6 1,0 0 0) a n d a p p r o x i m a t e l y R M B1,9 0 2,1 1 1,0 0 0 (2 0 1 5:

RMB1,947,570,000), respectively, representing decreases of RMB59,114,000 and RMB45,459,000 from 31 December 2015, respectively. Our net assets attributable to the parent company and net assets per share at the end of the year were approximately RMB839,032,000 (2015: RMB806,319,000) and approximately RMB2.37 (2015: RMB2.28), respectively, both representing an increase of 4% from 31 December 2015.

6 Tianjin Binhai Teda Logistics (Group) CorporationLimited

REVIEW FOR THE YEAR

In 2016, the global market demand remained sluggish with no substantial improvement. The complexity of political environment significantly and adversely affected the global economic development. Although GDP growth of the PRC economy was generally stable, the real economy was still under great downward pressure. In response to the increasingly complex domestic and international political and economic situation, at the beginning of the year the Group put forward the strategy of "adapting to the new normal state, constructing new platform, innovating new culture and seeking new breakthroughs" to take proactive initiatives against the severe economic situation in the new normal state. Adopting the business development strategy of "tactic operation with flexible approaches", the Group made great effort to develop more sophisticated platforms for business development, management, talent development and capital operation through resources integration. The Group also actively adjusted the business structure, strictly controlled business risks and enhanced own- brand business operation, delivering mixed performances across all business segments, with the overall operating results of 2016 achieving expectation.

Keeping abreast with the policy and economic development to adjust macro development strategy

Adhering to the business development strategy of "tactic operation with flexible approaches", the Group scaled down its bulk commodity trade business and adjusted product category, consolidated the electronic components logistics business and vigorously promoted the automobile and cold chain business.

Enhancing joint-venture cooperation

During the reporting period, the Company officially renewed the joint venture contract with the Japanese shareholder of Fengtian Logistics and completed the relevant procedures, extending the term of the joint venture for another twenty years to 2036. In addition, Fengtian Logistics and Tianjin Alps respectively held a grand celebration of the 20th anniversary during the year. The renewal of the joint venture contract and the celebration activities showed their firm confidence about the future of the PRC economy.

Improving the national automobile logistics network and the "river, sea, railway and road" intermodal transportation system

During the reporting period, the Group made great efforts to establish a comprehensive vehicle transportation network combining the "sea, river, railway and road" transportation with Eastern China, Northern China and Southwestern China as the major hubs. The branch company in Changshu City, which was taken as our base in Eastern China, launched the ceremony of maiden voyage in river in April, which marked the commencement of our automobile river transportation business. Combined with the railway transportation business, the Group has preliminarily established the intermodal transportation system combining the "river, sea, railway and road" transportation, which is in compliance with the new traffic regulations promulgated by the PRC on 21 September 2016 and is consistent with the new trend of vehicle transportation in the PRC.

Continuously improving internal management

The Group attached great emphasis on talent training. The Company initially identified the establishment of two position systems consisting of administrative management positions and technical positions. In order to further improve the performance appraisal system, the Company promulgated the annual assessment management approaches for senior management of the Group, middle-level management and general manager assistants of the management department at the headquarters of the Group as well as the daily assessment management approach for junior staff, covering all employees at different levels.

The Group made strenuous efforts in expanding financing channels. In addition to continuous cooperation with banks, the Group introduced medium and long-term funds from non-banking financial institutions through various means including financial leasing and factoring, so as to form a financing model with complementary edges of long, medium and short term financing, with an aim to optimize the overall capital structure of the Group and diversify capital pressure and financing risks.

CHAIRMAN'S STATEMENT

The Group made smooth progress in systematic and institutionalized construction. The Group further improved the construction of the office automation system. On the basis of ISO9001:2008 quality management certification system, the Group made persisting efforts to improve the logical relation of internal authorization system, and implemented the requirements of the institution in the OA system. The whole model was also implemented within the Group to regulate, guide and promote the construction of information system and institutional system.

An internal auditing function was established. The Company set up an internal auditing function and further improved the internal control system and risk management and assessment system, so as to ensure the effectiveness of the internal control system and cultivate a corporate culture of respecting rules.

Efforts were stepped up to push ahead safety production standardization and implementation of safety culture. During the reporting period, the Company completed the evaluation of Grade II accreditation of the safety standardization, since then three member companies of the Group namely the Company, Tedahang and Fengtian Logistics have obtained the Grade II certification of safety production standardization. The Group held a number of joint security emergency drills to strengthen our staff's safety awareness and skills in safety production. The Group also launched a series of safety month activities with a keynote of "strengthening the safety awareness and creating a safety production environment", which consolidated the results of safety education by various way including promotion, training, written examination and drills.

The Group attached great importance to social responsibility. The Company put great emphasis on environmental protection and participation in community activities. We focused on process optimization and reduction of resource consumption in our daily management and business activities. As a director of Hefu Cultural Development Foundation, the Company actively supported their activities on society and public welfare. During the reporting period, the Company conducted a comprehensive review of our affairs on environment, society and governance to better undertake our social responsibility.

PROSPECT AND OUTLOOK

In 2017, with continuous slowdown in the growth of the global economy, sluggish growth in international trade and investment, a more vulnerable financial market and widening gap in income and wealth, there exist great uncertainties around the economic growth, and the Group will still face great challenges. With the PRC economy entering into a new normal state, the Group will adhere to the development philosophy of "advancing steadily by promoting innovation and coordinated development". Focusing on the general work guideline of "advancing forward through consolidation and innovation", we put forward a work strategy of "enhancing business presence, deepening joint-venture cooperation, promoting capital operation and accelerating system construction". To this end, the Group intends to take the following measures:

In 2017, our most outstanding logistics and supply chain services for finished automobiles and components business will seize the policy opportunity to further improve the nationwide automobile logistics network and river-sea intermodal transportation system and consolidate the integrated vehicle transportation network combining the "sea, river, railway and road" transportation with Eastern China, Northern China and Southwestern China as the major hubs. By expanding and leveraging on our existing advantages in technology, network and facilities, the Group will expand its services to cover the whole supply chain of automobile industry, and explore domestic and overseas customer base beyond Japanese car brand. In addition, the Group will proactively participate in the "One Belt and One Road" strategy of the PRC, and play an important role in promoting the implementation of such strategy. As a pioneer in optimizing automobile transportation solution and national network system, the Group will continue to seize opportunities to create new business growth drivers.

In terms of materials procurement and logistics business, the Group will continue to adjust product categories of bulk commodity trade business, increase the variety of items, improve risk resistance capacity and strengthen relationship with logistics entities, so as to continuously expand the variety and scale of the business and make full use of our advantages in facilities and premises, driving the sustainable development of the Group.

In terms of traditional logistics business, the Company will vigorously push ahead the transformation and upgrading of the traditional business, introduce new business resources and projects through joint venture and business innovation and further enrich the portfolio of logistics products.

Despite our efforts to overcome the adverse impact and achieve satisfactory results in 2016, the logistics and supply chain services for electronic components business still faces operation pressure due to the general situation of customers and markets. In the future, the Group will continue to explore new markets and customers, expand business areas, make technological innovation, strengthen the professional training of the staff and seize new market opportunities, with an aim to improve profitability.

The Company will step up efforts to further explore the cold chain logistics business and introduce shareholders' resources. Based on its existing business of "centralized inspection and management warehousing of imported meat at Tianjin Port" and leveraging on its terminal advantage, unique location and function edge, Tedahang will take proactive measures to develop new clients and explore new markets, with an aim to broaden operating revenue and further reduce losses.

Efforts will be made to strengthen internal management of the Company. The Company will continue to improve the human resource management system, and step up efforts in talent cultivation, especially focusing on training of outstanding junior staff and young cadres. Through training of existing staff and introduction of new talents, the Company will expand the talent reserve to build an echelon of talents at all levels and formulate our management succession plan, and efforts will be made to further fine-tune the incentive mechanism and appraisal system. In the construction of information system, the Company will further improve the office automation system implemented within the Group, regulate and strengthen the internal management and integration of the Group, so as to regulate, guide and promote the construction of information system within the Group. The Company will pay more attention to environmental protection and participation in community activities, with an aim to develop itself into an environment-friendly and community-contributing enterprise. Furthermore, the Company will continue to strengthen safety management efforts and the implementation of safety culture by highlighting the responsibility of security principal, pushing forward safety standardization and strengthening daily management and inspection, with an aim to ensure safety production. Meanwhile, adhering to the human-oriented concept, the Company will provide safety protection to all staff and the people involved, and will attach emphasis on personal safety and social security.

In 2017, the Group will take proactive initiatives to adapt to the new economic normal state and establish a systematic and diverse logistic service platform. Leveraging on the opportunities from policy adjustment and upholding the development philosophy of "advancing steadily", the Group will overcome operational risks, alleviate staff pressure, remain cautious, promote operation in the capital market, fully utilise resources and advantages from all partners and innovate business model, adjust its business structure, so as to create new spotlight for development and maintain sustainable development of business. It is expected that the operating results of the Company appears to remain stable in 2017, and the Company is confident in its development in the future.

Finally, I would like to express my sincere gratitude on behalf of the Board to all our staff for their excellent performance and dedicated efforts.

Zhang Jian

Tianjin, the PRC, 24 March 2017

MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS HIGHLIGHTS

The principal businesses of the Group are logistics and supply chain services for finished automobiles and components, logistics and supply chain services for electronic components, materials procurement and related logistics services, cold chain logistics services and other services such as bonded warehouse, container yard, supervision, agency and transportation services. The major customers of the Group include Tong Fang Global

(Tianjin) Logistics Co., Ltd. (同方環球（天津）物流有限公司), Wuxi Leyejia Commercial Co., Ltd. (無錫樂業家商 業有限公司), Tangshan Donghua Steel Group Co., Ltd. (唐山東華鋼鐵企業集團有限公司), Tianjin Tongguang Group Digital Communication Co., Ltd. (天津通廣集團數字通訊有限公司), Toyota Tsusho (Tianjin) Co., Ltd. (豐 田通商（天津）有限公司), etc.

During the reporting period, the operating results of our logistics and supply chain services for finished automobiles and components recorded significant increase, and the logistics services for the imported automobiles which was hit by the 8.12 Explosions in 2015 was on the course of recovery growth with dramatic improvement in the operating results of the imported automobiles business, driving substantial growth in the operating results of that segment. Under the backdrop of industrial structural adjustment and de-capacity policy in China, the Group continued to adjust the business structure of bulk commodity procurement business and compressed the scale of the business, which resulted in periodic slump in the operating income and operating profits from the materials procurement and related logistics services business in the reporting period. The operating results of the bonded warehouse, transportation and supervision business decreased as compared with the corresponding period last year. The branch company in Changshu City recorded losses in the reporting period as it had just started its operation not long ago. The electronic components logistics business of Tianjin Alps Teda Logistics Co., Ltd. and Dalian Alps Teda Logistics Co., Ltd. (both associated companies of the Group) continued to maintain good development momentum, with notable increase in their respective operating results as compared with the corresponding period last year, hence leading to significant increase in the investment income as compared with the corresponding period last year. The cold chain logistics business continued to step up efforts in market exploration and accelerate industrial chain extension. During the reporting period, this business segment achieved substantial increase in turnover and significant decrease in net profit as compared with the corresponding period last year.

While consolidating the traditional logistics service businesses, the Group has actively expanded new areas of the logistics businesses, made use of synergy of its internal resources and acquired quality infrastructure logistics resources to achieve steady but yet rapid growth.

Logistics and Supply Chain Services for Transportation of Finished Automobiles and Components

During the reporting period, the principal businesses income amounted to RMB883,152,000, basically the same as compared to last year. The logistics services for the imported automobiles recovered at a rapid pace, driving substantial growth in the operating results of that segment, with a year-on-year increase of 125%.

Materials Procurement and Related Logistics Services

During the reporting period, the principal business income from the materials procurement and related logistics services amounted to RMB1,818,068,000, representing a decrease of RMB364,089,000 or 17% as compared with last year.

Warehouse, Supervision, Agency and Other Incomes

During the reporting period, other services such as bonded warehouse, container yard, supervision, agency and transportation services recorded an operating income of RMB71,149,000, representing a decrease of RMB24,393,000 or 26% as compared with last year.

Logistics and Supply Chain Services for Electronic Components (Conducted Through Investments in Joint Ventures)

During the reporting period, the logistics and supply chain services for electronic components business of the Group's associates continued to maintain a growth momentum, and its operating income and net profit recorded substantial increase as compared with that of last year, in particular, the results of Tianjin Alps Teda Logistics Co., Ltd. contributed a relatively large portion. During the reporting period, its operating income amounted to RMB790,597,000, representing an increase of 19%, and the net profit amounted to RMB64,756,000, representing an increase of 32%.

FINANCIAL REVIEW

Turnover

For the year ended 31 December 2016, turnover of the Group was RMB2,772 million, representing a decrease of RMB414 million or 13% as compared to RMB3,186 million last year. The decrease in turnover is mainly attributable to the decrease in materials procurement and related logistics services compared to last year.

Cost of sales and gross profit

For the year ended 31 December 2016, the cost of sales of the Group was RMB2,683 million, representing a decrease of RMB403 million or 13% as compared to RMB3,086 million of the corresponding period of last year, which was broadly in line with the decrease of turnover for the year.

For the year ended 31 December 2016, gross profit margin of the Group was 3.23%, substantially the same as compared to last year.

Administrative expenses

The administrative expenses of the Group amounted to RMB58,536,000 in 2016, representing an increase of RMB4,295,000 or 8% as compared to RMB54,241,000 last year. The Group will continue to strengthen its control over part of its administrative expenses.

Finance costs

The Group's finance costs during 2016 amounted to RMB10,427,000, representing an increase of RMB4,585,000 or 78% as compared to RMB5,842,000 last year. The increase in finance costs was mainly because the Group increased the scale of its loans during the reporting period. The Group will continue to improve the efficiency of capital utilisation and strive for the most favorable conditions for bank credits so as to reduce the overall finance costs.