SINOCHEM HONG KONG (GROUP) COMPANY …

1 SINOCHEM HONG KONG (GROUP) COMPANY LIMITEDR eport of the Directors and audited consolidated financial Statements31 december 2016 CONTENTSP agesREPORT OF THE DIRECTORS1 - 2 INDEPENDENT AUDITOR S REPORT3 - 8 audited financial STATEMENTSC onsolidated statement of comprehensive income9 - 10 consolidated statement of financial position11 - 12 consolidated statement of changes in equity13 - 15 consolidated statement of cash flows16 - 18 Notes to consolidated financial statements19 - 1221 SINOCHEM HONG KONG (GROUP) COMPANY LIMITEDREPORT OF THE DIRECTORSThe directors present their report and the audited consolidated financial statements of the COMPANY and its subsidiaries(collectively the Group ) for the year ended 31 december activities and business reviewThe principal activity of the COMPANY is investment holding.

2 Details of the principal activities of the COMPANY s principalsubsidiaries, joint ventures and associates are set out in notes 1, 18 and 19 to the consolidated financial statements,respectively. There were no significant changes in the nature of the Group s principal activities during the and dividendsThe Group s profit for the year ended 31 december 2016 and the Group s financial position at that date are set out in theconsolidated financial statements on pages 9 to amounting to US$50,000,000 (equivalent to HK$387,980,000) were paid to the immediate parent on 28 of dividends distribution during the year are set out in note 9 to the consolidated financial capitalOn 30 June 2016 , the COMPANY allotted 715,400,000 ordinary share with a nominal value of HK$715,400,000 to its soleshareholder, SINOCHEM Corporation for financing the Group s operations.

3 SINOCHEM Corporation made the contribution inthe form of a debt reduction to the amount due from the of movements in the COMPANY s share capital during the year are set out in note 36 to the consolidated reservesAt 31 december 2016 , the COMPANY 's reserves available for distribution, calculated in accordance with the provisions ofsections 291, 297 and 299 of the Hong Kong Companies Ordinance, amounted to HK$18,675,558, directors of the COMPANY during the year and as at the date of this report are as follows:Li LinHu XuejingNing GaoningIn accordance with the COMPANY s articles of association, all the directors shall retire and, being eligible, offer themselvesfor re-election at the forthcoming annual general rights to acquire sharesAt no time during the year was the COMPANY or any of its holding companies, subsidiaries or fellow subsidiaries a party toany arrangement to enable the COMPANY s directors to acquire benefits by means of the acquisition of shares in ordebentures of the COMPANY or any other body corporate, nor were any such rights exercised by HONG KONG (GROUP) COMPANY LIMITEDCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEYear ended 31 december 20169 Notes20162015HK$ 000HK$ 000 REVENUE4319,609,336339,546,096 Cost of sales(307,290,145)(328,396,036)

4 Gross profit12,319,19111,150,060 Other income, gains and losses, net5( 3,084,970)1,690,700 Selling and distribution expenses( 2,039,063)( 2,133,248)Administrative expenses( 3,067,183)( 2,993,184)Fair value changes of investment properties849,8591,254,136 Finance costs:6 Interest expenses( 2,568,328) ( 2,347,471) Transaction costs( 54,648)( 52,821)Share of profits or losses of: Joint ventures( 169,992) ( 182,596) Associates 48,019( 54,284)PROFIT BEFORE TAX72,232,8856,331,292 Income tax expense8( 3,902,798)( 3,471,723)(LOSS)/PROFIT FOR THE YEAR (1,669,913) 2,859,569 Attributable to: Owners of the parent( 2,632,407)(305,167) Non-controlling interests 962,494 3,164,736 (1,669,913) 2,859,569 SINOCHEM HONG KONG (GROUP) COMPANY LIMITEDCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (continued)Year ended 31 december 201610 Note20162015HK$ 000HK$ 000(LOSS)/PROFIT FOR THE YEAR (1,669,913) 2,859,569 OTHER COMPREHENSIVE (LOSS)/INCOMEO ther comprehensive income to be reclassified to profit or loss in subsequent periods:Available-for-sale investments:Changes in fair value20( 260,675)794,205 Reclassification adjustments for losses included in profit orloss.

5 - Disposal of investments-( 804,286)Cash flow hedges, net of tax6,67426,583 Exchange differences on translation of foreign operations( 6,386,351)(5,926,103)Reclassification adjustments of exchange reserve to profit orloss:- De-registration of subsidiaries -( 120,331)Net other comprehensive loss to be reclassified toprofit or loss in subsequent periods( 6,640,352)(6,029,932)Other comprehensive income not to be reclassified to profit orloss in subsequent periods:Gains on property revaluation, net of tax - 274,048 OTHER COMPREHENSIVE LOSS FOR THE YEAR, NET OF TAX( 6,640,352)( 5,755,884)TOTAL COMPREHENSIVE LOSS FOR THE YEAR( 8,310,265)( 2,896,315)Total comprehensive loss attributable to: Owners of the parent( 6,249,890) ( 2,763,390) Non-controlling interests( 2,060,375)( 132,925)( 8,310,265)(2,896,315) SINOCHEM HONG KONG (GROUP)

6 COMPANY LIMITEDCONSOLIDATED STATEMENT OF financial POSITION31 december 20161131 December31 DecemberNotes20162015HK$ 000HK$ 000 NON-CURRENT ASSETSP roperty, plant and equipment1016,084,85819,401,519 Land under development1113,085,05412,814,409 Properties under development1230,096,64422,424,035 Investment properties1325,017,31625,575,355 Prepaid land lease payments142,389,8173,542,449 Goodwill154,015,1654,055,380 Intangible assets162,591,3382,706,606 Oil and gas properties1738,370,78141,104,193 Investments in joint ventures183,399,8781,855,420 Investments in associates1913,748,05616,819,319 Available-for-sale investments202,228,6781,540,668 Amounts due from related parties219,028,45812,034,932 Deferred tax assets342,492,6001,702,386 Amounts due from non-controlling shareholders22345,624-Other non-current assets23 764,937 643,797 Total non-current assets163,659,204166,220,468 CURRENT ASSETSI nventories249,232,8779,269,378 Land under development116,172,1265,567,890 Properties under development1217,875,47123,181,183 Properties held for sale2512,468,2307,539,877 Prepaid land lease payments1474,89175,594 Trade and bills receivables2624,397,13514,663,118 Prepayments, deposits and other receivables2711,522,7968,927,818 Amounts due from related parties2138,508,63525,124,490 Tax recoverable1,755,427482,610 Derivative financial instruments28511,391761,130 Restricted bank balances292,602,9973,291,179 Cash and cash equivalents2923,669,34618,548,767 Other financial assets2379,85247,744 Other deposits - 1,430 Total current assets148,871,174117,482,208continued/.

7 SINOCHEM HONG KONG (GROUP) COMPANY LIMITEDCONSOLIDATED STATEMENT OF CHANGES IN EQUITYYear ended 31 december 201613 continued/..NotesAttributable to owners of the parentAttributable tonon-controlling interestsAssetInvestmentOther PerpetualShare ofShare optionIssuedCapital revaluationMerger Statutory revaluation Translation contributioncapitalHedgingRetained net assets of reserve ofTotalcapitalreservereservereservereser vereservereservereserve securitiesreserveprofitsTotal subsidiariessubsidiariesequityHK$ 000HK$ 000HK$ 000HK$ 000HK$ 000HK$ 000HK$ 000HK$ 000HK$ 000HK$ 000HK$ 000HK$ 000HK$ 000HK$ 000HK$ 000(Note a)(Note b) (Note c)(Note d)At 1 January 201623,753,000(1,205,415) 393,469(3,836,771) 2,602,712 556,9991,204,749 2,429,975 4,619,260 26,583 24,044,84354,589,40447,558,163 19,190102,166,757 Profit/(loss)for theyear----------( 2,632,407)( 2,632,407)

8 962,494-( 1,669,913)Other comprehensive income/(loss) for the yearChange in fair value of available-for-sale investments20-----( 249,274)-----( 249,274)( 11,401)-( 260,675)Cash flow hedges, net of tax---------6,674-6,674--6,674 Exchange differences on translation of foreignoperations - - - - - -(3,374,883) - - - -( 3,374,883)( 3,011,468) -( 6,386,351)Total comprehensive income for the year, net of tax-----( 249,274)(3,374,883)--6,674( 2,632,407)( 6,249,890)( 2,060,375)-( 8,310,265)Issue of shares(Note g)36715,400----------715,400--715,400 Equity-settled share-based payment of subsidiaries------------4,9185,76710,685 Acquisition of non-controlling interests-( 395,428)---------( 395,428)( 3,142,147)-( 3,537,575)De-registration of subsidiaries------ ------( 1)-( 1)Transfer from retained profits----414,462-----( 414,462) --- -Dividends distributed9----------( 387,980)( 387,980)--( 387,980)Transfer of share option reserve upon the forfeiture orexpiry of share options----------8,4208,420-( 8,420) -Dividends declared by subsidiaries to non-controllinginterests-( 33,424)---------( 33,424)( 897,927)-( 931,351)Capital contribution from non-controlling interests-16,599--------- 16,5994,478,135-4,494,734 Issue ofChina Jinmao Holdings Group Limited ( Jinmao ) s perpetual capital securities, net of issue expense (Note h)------------6,237,015-6,237,015 Perpetual capital securities distribution paid----------( 232,950)( 232,950)

9 --( 232,950)Repurchase of Jinmao s perpetual convertiblesecurities (Note f)----------( 80,062)( 80,062)( 1,615,801)-( 1,695,863)Jinmao issued perpetual convertible securities distribution paid------------( 288,858)-( 288,858)Share of associates net assets changes-( 9,081)---------( 9,081)( 9,192)( 18,273)Maintenance and production fund - - - - - - - 3,095 - -( 3,095) - - - -At 31 december 201624,468,400( 1,626,749)* 393,469*(3,836,771)* 3,017,174* 307,725*(2,170,134)* 2,433,070* 4,619,260 33,257*20,302,307*47,941,00850,263,930 16,53798,221,475 SINOCHEM HONG KONG (GROUP) COMPANY LIMITEDCONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)Year ended 31 december 201614continued/.

10 NotesAttributable to owners of the parentAttributable tonon-controlling interestsAssetInvestmentOther PerpetualShare ofShare optionIssuedCapitalrevaluationMerger Statutory revaluation TranslationcontributioncapitalHedgingRet ained net assets ofreserve ofTotalcapital reserve reservereserve reservereservereserve reserve securitiesreserveprofitsTotal subsidiariessubsidiariesequityHK$ 000HK$ 000HK$ 000HK$ 000HK$ 000HK$ 000HK$ 000HK$ 000HK$ 000HK$ 000HK$ 000HK$ 000HK$ 000HK$ 000HK$ 000 (Note a)(Note b)(Note c) (Note d)At 1 January 201523,753,000 640,364 126,617( 3,836,771) 2,227,798 589,791 3,923,6152,449,637 4,619,260 - 25,835,649 60,328,960 43,286,002 20,774103,635,736 Profit/(loss) for the year----------( 305,167)( 305,167)3,164,736-2,859,569 Other comprehensive income/(loss) for the yearChange in fair value of available-for-sale investments20----- 771,494----- 771,494 22,711- 794,205 Reclassification adjustment for losses includedin profit or loss - disposal of investments-----( 804,286)-----( 804,286)--( 804,286)Cash flow hedges, net of tax--------- 26,583- 26,583-- 26,583 Gains on property revaluation, net of tax--266,852--------266,852 7,196-274,048 Exchange differences on translation of foreignoperations - - - - - -( 2,598,535) - - - -( 2,598,535)( 3,327,568) -( 5,926,103)