CHINA COAL SOLUTION (SINGAPORE) PTE. LTD. CCS SUPPLY CHAIN MANAGEMENT CO., LTD.

Transcription

1 CHINA COAL SOLUTION (SINGAPORE) PTE. LTD. INFORMATION MEMORANDUM DATED 16 SEPTEMBER 2014 CHINA COAL SOLUTION (SINGAPORE) PTE. LTD. (Incorporated in the Republic of Singapore on 29 September 2011) (UEN/Company Registration No C) S$300,000,000 Multicurrency Medium Term Note Programme (the Programme ) Unconditionally and irrevocably guaranteed by CCS SUPPLY CHAIN MANAGEMENT CO., LTD. (Incorporated in the People s Republic of China on 21 January 1999) (Company Registration No ) China Coal Solution (HK) Limited (Incorporated in Hong Kong on 25 August 2010) (Company Registration No ) Ina Advanced Holdings Pte. Ltd. (Incorporated in the Republic of Singapore on 20 April 2012) (UEN/Company Registration No C) Rex Coal Pte. Ltd. (Incorporated in the Republic of Singapore on 6 February 2013) (UEN/Company Registration No E) This Information Memorandum has not been and will not be registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this Information Memorandum and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of notes (the Notes ) to be issued from time to time by China Coal Solution (Singapore) Pte. Ltd. (the Issuer ) pursuant to the Programme may not be circulated or distributed, nor may the Notes be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the SFA ), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is: (a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Notes pursuant to an offer made under Section 275 of the SFA except: (1) to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA; (2) where no consideration is or will be given for the transfer; (3) where the transfer is by operation of law; (4) as specified in Section 276(7) of the SFA; or (5) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore. All sums payable in respect of the Notes are unconditionally and irrevocably guaranteed by CCS Supply Chain Management Co., Ltd. ( CCS ) and are unconditionally and irrevocably and jointly and severally guaranteed by China Coal Solution (HK) Limited ( CCS HK ), Ina Advanced Holdings Pte. Ltd. ( Ina ) and Rex Coal Pte. Ltd. ( Rex Coal and, together with CCS, CCS HK and Ina, the Original Guarantors ). Application has been made to the Singapore Exchange Securities Trading Limited (the SGX-ST ) for permission to deal in and quotation for any Notes which are agreed at the time of issue thereof to be so listed on the SGX-ST. Such permission will be granted when such Notes have been admitted to the Official List of the SGX-ST. The SGX-ST assumes no responsibility for the correctness of any of the statements made or opinions expressed or reports contained herein. Admission to the Official List of the SGX-ST and quotation of any Notes on the SGX-ST is not to be taken as an indication of the merits of the Issuer, the Guarantors (as defined herein), their respective subsidiaries (if any), their respective associated companies (if any), the Programme or such Notes. Sole Arranger

2 TABLE OF CONTENTS NOTICE... 1 FORWARD-LOOKING STATEMENTS... 4 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN PRC GAAP AND IFRS... 5 DEFINITIONS... 6 CORPORATE INFORMATION SUMMARY OF THE PROGRAMME TERMS AND CONDITIONS OF THE NOTES THE ISSUER THE GUARANTORS BUSINESS PRC REGULATIONS (INCLUDING PRC REGULATIONS ON THE GUARANTEES) EXCHANGE RATES SELECTED CONSOLIDATED FINANCIAL INFORMATION CAPITALISATION AND INDEBTEDNESS MATERIAL BORROWINGS RISK FACTORS PURPOSE OF THE PROGRAMME AND USE OF PROCEEDS CLEARING AND SETTLEMENT TAXATION SUBSCRIPTION, PURCHASE AND DISTRIBUTION APPENDICES I: GENERAL AND OTHER INFORMATION II: III: IV: Page AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF CCS SUPPLY CHAIN MANAGEMENT CO., LTD. AND ITS SUBSIDIARIES FOR THE FINANCIAL YEAR ENDED 31 DECEMBER AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF CCS SUPPLY CHAIN MANAGEMENT CO., LTD. AND ITS SUBSIDIARIES FOR THE FINANCIAL YEAR ENDED 31 DECEMBER UNAUDITED FINANCIAL STATEMENTS OF CCS SUPPLY CHAIN MANAGEMENT CO., LTD. AND ITS SUBSIDIARIES FOR THE FINANCIAL PERIOD ENDED 30 JUNE V: AUDITED FINANCIAL STATEMENTS OF CHINA COAL SOLUTION (SINGAPORE) PTE. LTD. FOR THE FINANCIAL YEAR ENDED 31 DECEMBER VI: AUDITED FINANCIAL STATEMENTS OF CHINA COAL SOLUTION (SINGAPORE) PTE. LTD. FOR THE FINANCIAL YEAR ENDED 31 DECEMBER

3 NOTICE DBS Bank Ltd. (the Arranger ) has been authorised by the Issuer to arrange the Programme described herein. Under the Programme, the Issuer may, subject to compliance with all relevant laws, regulations and directives, from time to time issue Notes denominated in Singapore dollars and/or any other currencies. All sums payable in respect of the Notes are unconditionally and irrevocably guaranteed by CCS and unconditionally and irrevocably and jointly and severally guaranteed by the other Guarantors (as defined herein). This Information Memorandum contains information with regard to the Obligors (as defined herein), their respective subsidiaries and associated companies (if any), the Programme and the Notes. Each of the Obligors, having made all due and careful enquiries, confirms that this Information Memorandum contains all information which is or may be material in the context of the Programme, the issue and offering of the Notes and the giving of the Guarantees (as defined herein), all the information contained herein is true and accurate in all material respects, the opinions, expectations and intentions expressed in this Information Memorandum have been carefully considered, are based on all relevant considerations and facts existing at the date of its issue and are fairly, reasonably and honestly held by the Obligors, and that there are no other facts the omission of which in the context of the Programme, the issue and offering of the Notes or the giving of the Guarantees would or might make any such information or expressions of opinion, expectation or intention misleading in any material respect. Notes may be issued in series having one or more issue dates and the same maturity date, and on identical terms (including as to listing) except (in the case of Notes other than variable rate notes (as described under the section Summary of the Programme )) for the issue dates, issue prices and/or the dates of the first payment of interest, or (in the case of variable rate notes) for the issue prices and rates of interest. Each series may be issued in one or more tranches on the same or different issue dates. The Notes will be issued in bearer form or registered form and may be listed on a stock exchange. The Notes will initially be represented by either a Temporary Global Note (as defined herein) in bearer form or a Permanent Global Note (as defined herein) in bearer form or a registered Global Certificate (as defined herein) which will be deposited on the issue date with or registered in the name of, or in the name of a nominee of, either CDP (as defined herein) or a common depositary for Euroclear Bank S.A./N.V. ( Euroclear ) and/or Clearstream Banking, société anonyme ( Clearstream, Luxembourg ) or otherwise delivered as agreed between the Issuer and the relevant Dealer (as defined herein). Subject to compliance with all relevant laws, regulations and directives, the Notes may have maturities of such tenor as may be agreed between the Issuer and the relevant Dealer and may be subject to redemption or purchase in whole or in part. The Notes may bear interest at a fixed, floating, variable or hybrid rate or may not bear interest or may be such other notes as may be agreed between the Issuer and the relevant Dealers. The Notes will be repayable at par, at a specified amount above or below par or at an amount determined by reference to a formula, in each case with terms as specified in the Pricing Supplement (as defined herein) issued in relation to each series or tranche of Notes. Details applicable to each series or tranche of Notes will be specified in the applicable Pricing Supplement which is to be read in conjunction with this Information Memorandum. The maximum aggregate principal amount of the Notes to be issued, when added to the aggregate principal amount of all Notes outstanding shall be S$300,000,000 (or its equivalent in any other currencies) or such increased amount in accordance with the terms of the Programme Agreement (as defined herein). No person has been authorised to give any information or to make any representation other than those contained in this Information Memorandum and, if given or made, such information or representation must not be relied upon as having been authorised by any of the Obligors, the Arranger or any of the Dealers. Save as expressly stated in this Information Memorandum, nothing contained herein is, or may be relied upon as, a promise or representation as to the future performance or policies of any of the Obligors or any of their respective subsidiaries or associated companies (if any). Neither this Information Memorandum nor any other document or information (or any part thereof) delivered or supplied under or in relation to the Programme may be used for the purpose of, and does not constitute an offer of, or solicitation or invitation by or on behalf of any of the Obligors, the Arranger or any of the Dealers to subscribe for or purchase, the Notes in any jurisdiction or under any circumstances in which such offer, solicitation or invitation is unlawful, or not authorised or to any person to whom it is unlawful to make such 1

4 offer, solicitation or invitation. The distribution and publication of this Information Memorandum (or any part thereof) or any such other document or information and the offer of the Notes in certain jurisdictions may be restricted by law. Persons who distribute or publish this Information Memorandum or any such other document or information (or any part thereof) or into whose possession this Information Memorandum or any such other document or information (or any part thereof) comes are required to inform themselves about and to observe any such restrictions and all applicable laws, orders, rules and regulations. The Notes and the Guarantees (as defined herein) have not been, and will not be, registered under the Securities Act (as defined herein) or with any securities regulatory authority of any state or other jurisdiction of the U.S. and include Notes in bearer form that are subject to U.S. tax law requirements and restrictions. Subject to certain exceptions, the Notes may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons (as defined in the U.S. Internal Revenue Code of 1986, as amended, and regulations thereunder). Neither this Information Memorandum nor any other document or information (or any part thereof) delivered or supplied under or in relation to the Programme shall be deemed to constitute an offer of, or an invitation by or on behalf of any of the Obligors, the Arranger or any of the Dealers to subscribe for or purchase, any of the Notes. This Information Memorandum and any other documents or materials in relation to the issue, offering or sale of the Notes have been prepared solely for the purpose of the initial sale by the relevant Dealers of the Notes from time to time to be issued pursuant to the Programme. This Information Memorandum and such other documents or materials are made available to the recipients thereof solely on the basis that they are persons falling within the ambit of Section 274 and/or Section 275 of the SFA and may not be relied upon by any person other than persons to whom the Notes are sold or with whom they are placed by the relevant Dealers as aforesaid or for any other purpose. Recipients of this Information Memorandum shall not reissue, circulate or distribute this Information Memorandum or any part thereof in any manner whatsoever. Neither the delivery of this Information Memorandum (or any part thereof) or the issue, offering, purchase or sale of the Notes shall, under any circumstances, constitute a representation, or give rise to any implication, that there has been no change in the prospects, results of operations or general affairs of any of the Obligors or any of their respective subsidiaries or associated companies (if any) or in the information herein since the date hereof or the date on which this Information Memorandum has been most recently amended or supplemented. The Arranger and the Dealers have not separately verified the information contained in this Information Memorandum. None of the Arranger, the Dealers or any of their respective officers or employees is making any representation or warranty expressed or implied as to the merits of the Notes or the subscription for, purchase or acquisition thereof, the creditworthiness or financial condition or otherwise of any of the Obligors or their respective subsidiaries or associated companies (if any). Further, none of the Arranger nor the Dealers makes any representation or warranty as to any of the Obligors or their respective subsidiaries or associated companies (if any) or as to the accuracy, reliability or completeness of the information set out herein (including the legal and regulatory requirements pertaining to Sections 274, 275 and 276 or any other provisions of the SFA) and the documents which are incorporated by reference in, and form part of, this Information Memorandum. Neither this Information Memorandum nor any other document or information (or any part thereof) delivered or supplied under or in relation to the Programme or the issue of the Notes is intended to provide the basis of any credit or other evaluation and should not be considered as a recommendation by any of the Obligors, the Arranger or any of the Dealers that any recipient of this Information Memorandum or such other document or information (or such part thereof) should subscribe for or purchase any of the Notes. A prospective purchaser shall make its own assessment of the foregoing and other relevant matters including the financial condition and affairs and the creditworthiness of the Obligors and their respective subsidiaries and associated companies (if any), and obtain its own independent legal or other advice thereon, and its investment shall be deemed to be based on its own independent investigation of the financial condition and affairs and its appraisal of the creditworthiness of the Obligors and their respective subsidiaries and associated companies (if any). Accordingly, notwithstanding anything herein, none of the Arranger, the Dealers or their respective officers, employees or agents shall be held responsible for any loss or damage suffered or incurred by the recipients of this Information Memorandum 2

5 or such other document or information (or such part thereof) as a result of or arising from anything expressly or implicitly contained in or referred to in this Information Memorandum or such other document or information (or such part thereof) and the same shall not constitute a ground for rescission of any purchase or acquisition of any of the Notes by a recipient of this Information Memorandum or such other document or information (or such part thereof). To the fullest extent permitted by law, neither the Arranger nor any of the Dealers accepts any responsibility for the contents of this Information Memorandum or for any other statement, made or purported to be made by the Arranger or any of the Dealers or on its behalf in connection with the Obligors, the Group (as defined herein), the Programme or the issue and offering of the Notes. Each Arranger and each Dealer accordingly disclaims all and any liability whether arising in tort or contract or otherwise (save as referred to above) which it might otherwise have in respect of this Information Memorandum or any such statement. The following documents published or issued from time to time after the date hereof shall be deemed to be incorporated by reference in, and to form part of, this Information Memorandum: (1) any annual reports, audited consolidated accounts and/or publicly announced unaudited financial statements of CCS and its subsidiaries and associated companies (if any), and (2) any supplement or amendment to this Information Memorandum issued by the Issuer. This Information Memorandum is to be read in conjunction with all such documents which are incorporated by reference herein and, with respect to any series or tranche of Notes, any Pricing Supplement in respect of such series or tranche. Any statement contained in this Information Memorandum or in a document deemed to be incorporated by reference herein shall be deemed to be modified or superseded for the purpose of this Information Memorandum to the extent that a statement contained in this Information Memorandum or in such subsequent document that is also deemed to be incorporated by reference herein modifies or supersedes such earlier statement (whether expressly, by implication or otherwise). Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Information Memorandum. Copies of all documents deemed incorporated by reference herein are available for inspection at the specified office of the Issuing and Paying Agent (as defined herein). Any purchase or acquisition of the Notes is in all respects conditional on the satisfaction of certain conditions set out in the Programme Agreement and the issue of the Notes by the Issuer pursuant to the Programme Agreement. Any offer, invitation to offer or agreement made in connection with the purchase or acquisition of the Notes or pursuant to this Information Memorandum shall (without any liability or responsibility on the part of any of the Obligors, the Arranger or any of the Dealers) lapse and cease to have any effect if (for any other reason whatsoever) the Notes are not issued by the Issuer pursuant to the Programme Agreement. Any discrepancies in the tables included herein between the listed amounts and totals thereof are due to rounding. The attention of recipients of this Information Memorandum is drawn to the restrictions on resale of the Notes set out under the section Subscription, Purchase and Distribution on pages 110 to 111 of this Information Memorandum. Any person(s) who is/are invited to purchase or subscribe for the Notes or to whom this Information Memorandum is sent shall not make any offer or sale, directly or indirectly, of any Notes or distribute or cause to be distributed any document or other material in connection therewith in any country or jurisdiction except in such manner and in such circumstances as will result in compliance with any applicable laws and regulations. It is recommended that persons proposing to purchase or subscribe for any of the Notes consult their own legal and other advisers before purchasing or acquiring the Notes. 3

6 FORWARD-LOOKING STATEMENTS All statements contained in this Information Memorandum that are not statements of historical fact constitute forward-looking statements. Some of these statements can be identified by forwardlooking terms such as expect, believe, plan, intend, estimate, anticipate, may, will, would and could or similar words. However, these words are not the exclusive means of identifying forwardlooking statements. All statements regarding the expected financial position, business strategy, plans and prospects of the any of Obligors and/or the Group (including statements as to any of the Obligors and/or the Group s revenue, profitability, prospects, future plans and other matters discussed in this Information Memorandum regarding matters that are not historical facts and including the financial forecasts, profit projections, statements as to the expansion plans of the any of Obligors and/or the Group, expected growth in the any of Obligors and/or the Group and other related matters), if any, are forward-looking statements and accordingly, are only predictions. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Obligors and/or the Group to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors include, among others: changes in general political, social and economic conditions; changes in currency exchange and interest rates; demographic changes; changes in competitive conditions; and other factors beyond the control of the Obligors and the Group. Some of these factors are discussed in greater detail in this Information Memorandum, in particular, but not limited to, discussion under the section Risk Factors. Given the risks and uncertainties that may cause the actual future results, performance or achievements of the Obligors or the Group to be materially different from the results, performance or achievements expected, expressed or implied by the financial forecasts, profit projections and forward-looking statements in this Information Memorandum, undue reliance must not be placed on those forecasts, projections and statements. The Obligors, the Arranger and the Dealers do not represent or warrant that the actual future results, performance or achievements of any of the Obligors or the Group will be as discussed in those statements. Neither the delivery of this Information Memorandum nor the issue of any Notes by the Issuer shall under any circumstances constitute a continuing representation or create any suggestion or implication that there has been no change in the affairs of any of the Obligors, the Group or any statement of fact or information contained in this Information Memorandum since the date of this Information Memorandum or the date on which this Information Memorandum has been most recently amended or supplemented. Further, the Obligors, the Arranger and the Dealers disclaim any responsibility, and undertake no obligation, to update or revise any forward-looking statements contained herein to reflect any changes in the expectations with respect thereto after the date of this Information Memorandum or to reflect any change in events, conditions or circumstances on which any such statements are based. 4

7 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN PRC GAAP AND IFRS The consolidated financial statements of CCS and the Group (other than the Issuer) included in this Information Memorandum have been prepared and presented in accordance with China Accounting Standards for Business Enterprises ( PRC GAAP ). PRC GAAP are substantially in line with International Financial Reporting Standards ( IFRS ), except for certain modifications which reflect the PRC s unique circumstances and environment. The following is a general summary of certain differences between PRC GAAP and IFRS on recognition and presentation as applicable to CCS and the Group. CCS and the Group are responsible for preparing the summary below. Since the summary is not meant to be exhaustive, there is no assurance regarding the completeness of the financial information and related footnote disclosure between PRC GAAP and IFRS and no attempt has been made to quantify such differences. Had any such quantification or reconciliation been undertaken by CCS and the Group, other potentially significant accounting and disclosure differences may have been required that are not identified below. Additionally, no attempt has been made to identify possible future differences between PRC GAAP and IFRS as a result of prescribed changes in accounting standards. Regulatory bodies that promulgate PRC GAAP and IFRS have significant ongoing projects that could affect future comparisons or events that may occur in the future. Accordingly, no assurance is provided that the following summary of differences between PRC GAAP and IFRS is complete. In making an investment decision, each investor must rely upon its own examination of the Group, the terms of the offering and other disclosure contained herein. Each investor should consult its own professional advisors for an understanding of the differences between PRC GAAP and IFRS and/or between PRC GAAP and other generally accepted accounting principles, and how those differences might affect the financial information contained herein. Reversal of an impairment loss Under PRC GAAP, once an impairment loss is recognised for a long term asset (including fixed assets, intangible assets and goodwill, etc.), it shall not be reversed in any subsequent period. Under IFRS, an impairment loss recognised in prior periods for an asset other than goodwill could be reversed if there has been a change in the estimates used to determine the asset s recoverable amount since the last impairment loss was recognised. Related party disclosures Under PRC GAAP, government-related entities are not treated as related parties. Under IFRS, government-related entities are still treated as related parties. 5

8 DEFINITIONS The following definitions have, where appropriate, been used in this Information Memorandum: Additional Guarantors : Principal Subsidiaries (other than the Original Guarantors and any Principal Subsidiaries of CCS incorporated within the PRC) which have acceded to the Offshore Deed of Guarantee, the Trust Deed, the Programme Agreement and the Agency Agreement pursuant to the Trust Deed. Agency Agreement : The Agency Agreement dated 16 September 2014 between (1) the Issuer, as issuer, (2) the Original Guarantors and acceded to by Additional Guarantors from time to time by the execution of a Deed of Accession, as guarantors, (3) the Issuing and Paying Agent, as issuing and paying agent, (4) the Agent Bank, as agent bank, (5) the Registrar, as registrar and transfer agent, and (6) the Trustee, as trustee, as amended, varied or supplemented from time to time. Agent Bank : DBS Bank Ltd. Alternative Stock Exchange : In the case of the shares of CCS, if they are not at any time listed and traded on the Shanghai Stock Exchange, the Shenzhen Stock Exchange, The Stock Exchange of Hong Kong Limited, the SGX-ST or any other internationally recognised, regularly operating and regulated stock exchange which is the principal stock exchange or securities market of which the shares are then listed or quoted or dealt in. Arranger : DBS Bank Ltd. Bearer Notes : Notes in bearer form. CCS : CCS Supply Chain Management Co., Ltd. CCS HK : China Coal Solution (HK) Limited CCS Deed of Guarantee : The Deed of Guarantee dated 16 September 2014 executed by CCS, as guarantor, in favour of ( 1) the Arranger, as arranger, ( 2) DBS Bank Ltd., as dealer, ( 3) the Issuing and Paying Agent, as issuing and paying agent, ( 4) the Agent Bank, as agent bank, ( 5) the Registrar, as registrar and transfer agent, and ( 6) the Trustee, as trustee, as amended, varied or supplemented from time to time. CCS Guarantee : The guarantee and indemnity of CCS set out in the CCS Deed of Guarantee. CCS Suspension Agreement : A suspension agreement dated 16 September 2014 entered into between (1) Tianjin China Coal Solution Factoring Co., Ltd., as borrower, and (2) Zhengzhou CCS, as shareholder, as amended, varied or supplemented from time to time. CDP : The Central Depository (Pte) Limited. 6

9 Certificate : A registered certificate representing one or more Registered Notes of the same Series and, save as provided in the terms and conditions of the Notes, comprising the entire holding by a holder of Registered Notes of that Series. Common Depositary : In relation to a Series of the Notes, a depositary common to Euroclear and Clearstream, Luxembourg. Companies Act : The Companies Act, Chapter 50 of Singapore, as amended or modified from time to time. Couponholders : The holders of the Coupons. Coupons : The interest coupons appertaining to an interest bearing Definitive Note. Dealers : Persons appointed as dealers under the Programme. Deed of Accession : A deed of accession substantially in the form set out in Schedule 5 to the Trust Deed pursuant to which an Additional Guarantor agrees to become bound by the Programme Agreement, the Agency Agreement, the Trust Deed and the Offshore Deed of Guarantee. Deeds of Guarantee : The CCS Deed of Guarantee and the Offshore Deed of Guarantee. Definitive Note : A definitive Bearer Note having, where appropriate, Coupons and/or a Talon attached on issue. FY : Financial year ended or ending 31 December. Global Certificate : A Certificate representing Registered Notes of one or more Tranches of the same Series that are registered in the name of, or in the name of a nominee of, (i) CDP (ii) the Common Depositary and/or (iii) any other clearing system. Global Note : A global Note representing Bearer Notes of one or more Tranches of the same Series, being a Temporary Global Note and/or, as the context may require, a Permanent Global Note, in each case without Coupons or a Talon. Group : CCS and its subsidiaries. Guarantees : The CCS Guarantee and the Offshore Guarantee. Guarantors : The Original Guarantors and the Additional Guarantors. Ina : Ina Advanced Holdings Pte. Ltd. Issuer : China Coal Solution (Singapore) Pte. Ltd. Issuing and Paying Agent : DBS Bank Ltd. ITA : Income Tax Act, Chapter 134 of Singapore, as amended or modified from time to time. 7

10 Latest Practicable Date : 31 August MAS : The Monetary Authority of Singapore. MOFCOM : Ministry of Commerce of the People s Republic of China. Noteholders : The holders of the Notes. Notes : The notes issued or to be issued by the Issuer under the Programme. Obligors : The Issuer and the Guarantors. Offshore Deed of Guarantee : T he deed of guarantee dated 16 September 2014 executed by CCS HK, Ina and Rex Coal and acceded to by Additional Guarantors, as guarantors, in favour of ( 1) the Arranger, as arranger, ( 2) DBS Bank Ltd., as dealer, ( 3) the Issuing and Paying Agent, as issuing and paying agent, ( 4) the Agent Bank, as agent bank, ( 5) the Registrar, as registrar and transfer agent, and ( 6) the Trustee, as trustee, as amended, varied or supplemented from time to time. Offshore Guarantee : The guarantee and indemnity of the Offshore Guarantors contained in the Offshore Deed of Guarantee. Offshore Guarantors : CCS HK, Ina, Rex Coal and the Additional Guarantors. Original Guarantors : CCS, CCS HK, Ina and Rex Coal. PBOC : The People s Bank of China. Permanent Global Note : A Global Note representing Bearer Notes of one or more Tranches of the same Series, either on issue or upon exchange of interests in a Temporary Global Note. PRC : The People s Republic of China. Pricing Supplement : In relation to a Tranche or Series, a pricing supplement, to be read in conjunction with this Information Memorandum, specifying the relevant issue details in relation to such Tranche or, as the case may be, Series. Programme : The S$300,000,000 Multicurrency Medium Term Note Programme of the Issuer. Programme Agreement : The Programme Agreement dated 16 September 2014 made between (1) the Issuer, as issuer, (2) the Original Guarantors and acceded to by Additional Guarantors from time to time by the execution of a Deed of Accession, as guarantors, (3) the Arranger, as arranger, and (4) DBS Bank Ltd., as dealer, as amended, varied or supplemented from time to time. Registered Notes : Notes in registered form. Registrar : DBS Bank Ltd. Renminbi or RMB : The lawful currency of the People s Republic of China. 8

11 Rex Coal : Rex Coal Pte. Ltd. SAFE : The State Administration of Foreign Exchange or its local branch. Securities Act : Securities Act of 1933 of the United States, as amended or modified from time to time. Series : (1) (in relation to Notes other than variable rate notes) a Tranche, together with any further Tranche or Tranches, which are (a) expressed to be consolidated and forming a single series and (b) identical in all respects (including as to listing) except for their respective issue dates, issue prices and/or dates of the first payment of interest and (2) (in relation to variable rate notes) Notes which are identical in all respects (including as to listing) except for their respective issue prices and rates of interest. SFA : Securities and Futures Act, Chapter 289 of Singapore, as amended or modified from time to time. SGX-ST : Singapore Exchange Securities Trading Limited. Talons : Talons for further Coupons. Temporary Global Note : A Global Note representing Bearer Notes of one or more Tranches of the same Series on issue. Tranche : Notes which are identical in all respects (including as to listing). Trust Deed : The Trust Deed dated 16 September 2014 made between (1) the Issuer, as issuer, (2) the Original Guarantors and acceded to by Additional Guarantors from time to time by the execution of a Deed of Accession, as guarantors, and (3) the Trustee, as trustee, as amended, varied or supplemented from time to time. Trustee : DBS Trustee Limited. United States or U.S. : United States of America. Zhengzhou CCS : Zhengzhou China Coal Solution Co., Ltd. ( ). S$ and cents : Singapore dollars and cents respectively. US$ or US dollars : United States dollars. % : Per cent. 1H : First six months ended or ending 30 June. Words importing the singular shall, where applicable, include the plural and vice versa, and words importing the masculine gender shall, where applicable, include the feminine and neuter genders. References to persons shall, where applicable, include corporations. Any reference to a time of day in this Information Memorandum shall be a reference to Singapore time unless otherwise stated. Any reference in this Information Memorandum to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any word defined under the Companies Act or the SFA or any statutory modification thereof and used in this Information Memorandum shall, where applicable, have the meaning ascribed to it under the Companies Act or, as the case may be, the SFA. 9

12 CORPORATE INFORMATION The Issuer Board of Directors : Wan Yongxing Miao Chunyan Liu Yi Company Secretar y : Ximen Yaxuan Registered Office : 2 Battery Road #30-01 Maybank Tower Singapore Auditors to the Issuer : Moore Stephens LLP 10 Anson Road #29-15 International Plaza Singapore The Guarantors CCS Board of Directors : Wan Yongxing Liu Yi Yan Gang Wang Dongsheng Zhang Longgen Wen Dingqiu Company Secretar y : Zhang Jufang Registered Office : Shengli Rd HSBC Tower Yantai Shandong, PRC, Auditors to CCS : Ruihua Certified Public Accountants LLP 3-4F, Tower 2 No. 16 Xisihuanzhong Road Haidian District, Beijing, P.R.C. CCS HK Board of Directors : Wan Yongxing Company Secretar y : Maswell Group (Hong Kong) Limited Registered Office : Room 1401 Cambridge House Cameron Rd Tsim Sha Tsui, Kowloon, Hong Kong Ina Board of Directors : Liu Yi Company Secretar y : He Qian Registered Office : 2 Battery Road #30-01 Maybank Tower Singapore

13 Rex Coal Board of Directors : Wan Yongxing Miao Chunyan Liu Yi Company Secretar y : Ximen Yaxuan Registered Office : 2 Battery Road #30-01 Maybank Tower Singapore Arranger and Dealer of the Programme : DBS Bank Ltd. 12 Marina Boulevard, Level 42 Marina Bay Financial Centre Tower 3 Singapore Issuing and Paying Agent, Agent Bank and Registrar : DBS Bank Ltd. 10 Toh Guan Road #04-11 (Level 4B) DBS Asia Gateway Singapore Trustee for the Noteholders : DBS Trustee Limited 12 Marina Boulevard Level 44 Marina Bay Financial Centre Tower 3 Singapore Legal Advisers to the Arranger, the Issuing and Paying Agent, the Agent Bank, the Registrar and the Trustee as to Singapore law Legal Advisers to the Issuer as to Singapore law Legal Advisers to the Arranger, the Issuing and Paying Agent, the Agent Bank, the Registrar and the Trustee as to laws of the PRC Legal Advisers to the Issuer as to laws of the PRC Legal Advisers to the Issuer as to Hong Kong law : Allen & Gledhill LLP One Marina Boulevard #28-00 Singapore : Latham & Watkins LLP 9 Raffles Place #42-02, Republic Plaza Singapore : King & Wood Mallesons 20th Floor, East Tower, World Financial Center No. 1 Dongsanhuan Zhonglu, Chaoyang District Beijing, , People s Republic of China : Zhong Lun Law Firm 36-37/F, SK Tower, 6A Jianguomenwai Avenue Beijing, , People s Republic of China : Latham & Watkins 18 th Floor, One Exchange Square 8 Connaught Place Central, Hong Kong 11

14 SUMMARY OF THE PROGRAMME The following summary is derived from, and should be read in conjunction with, the full text of this Information Memorandum (and any relevant supplement to this Information Memorandum), the Trust Deed, the Agency Agreement and the relevant Pricing Supplement. Issuer : China Coal Solution (Singapore) Pte. Ltd. Guarantors : CCS Supply Chain Management Co., Ltd., China Coal Solution (HK) Limited, Ina Advanced Holdings Pte. Ltd. and Rex Coal Pte. Ltd. Additional Guarantors : Principal Subsidiaries (other than the Original Guarantors and any Principal Subsidiaries of CCS incorporated within the PRC) which have acceded to the Offshore Deed of Guarantee, the Trust Deed, the Programme Agreement and the Agency Agreement pursuant to the Trust Deed. Arranger : DBS Bank Ltd. Dealers : DBS Bank Ltd., and/or such other Dealers as may be appointed by the Issuer in accordance with the Programme Agreement. Trustee : DBS Trustee Limited. Issuing and Paying Agent, Agent Bank and Registrar : DBS Bank Ltd. Description : S$300,000,000 Multicurrency Medium Term Note Programme. Programme Size : The maximum aggregate principal amount of the Notes outstanding at any time shall be S$300,000,000 (or its equivalent in other currencies) or such increased amount in accordance with the terms of the Programme Agreement. Currency : Subject to compliance with all relevant laws, regulations and directives, Notes may be issued in Singapore dollars or any other currency agreed between the Issuer and the relevant Dealer(s). Method of Issue : Notes may be issued from time to time under the Programme on a syndicated or non-syndicated basis. Each Series may be issued in one or more Tranches, on the same or different issue dates. The specific terms of each Series or Tranche will be specified in the relevant Pricing Supplement. Issue Price : Notes may be issued at par or at a discount, or premium, to par. Maturities : Subject to compliance with all relevant laws, regulations and directives, Notes may have maturities of such tenor as may be agreed between the Issuer and the relevant Dealer(s). Mandatory Redemption : Unless previously redeemed or purchased and cancelled, each Note will be redeemed at its redemption amount on the maturity date shown on its face. Interest Basis : Notes may bear interest at fixed, floating, variable or hybrid rates or such other rates as may be agreed between the Issuer and the relevant Dealer(s) or may not bear interest. 12

15 Fixed Rate Notes : Fixed Rate Notes will bear a fixed rate of interest which will be payable in arrear on specified dates and at maturity. Floating Rate Notes : Floating Rate Notes which are denominated in Singapore dollars will bear interest to be determined separately for each Series by reference to S$ SIBOR or S$ SWAP RATE (or in any other case such other benchmark as may be agreed between the Issuer and the relevant Dealer(s)), as adjusted for any applicable margin. Interest periods in relation to the Floating Rate Notes will be agreed between the Issuer and the relevant Dealer(s) prior to their issue. Floating Rate Notes which are denominated in other currencies will bear interest to be determined separately for each Series by reference to such other benchmark as may be agreed between the Issuer and the relevant Dealer(s). Variable Rate Notes : Variable Rate Notes will bear interest at a variable rate determined in accordance with the terms and conditions of the Notes. Interest periods in relation to the Variable Rate Notes will be agreed between the Issuer and the relevant Dealer(s) prior to their issue. Hybrid Notes : Hybrid Notes will bear interest, during the fixed rate period to be agreed between the Issuer and the relevant Dealer(s), at a fixed rate of interest which will be payable in arrear on specified dates and, during the floating rate period to be agreed between the Issuer and the relevant Dealer(s), at the rate of interest to be determined by reference to S$ SIBOR or S$ SWAP RATE (or such other benchmark as may be agreed between the Issuer and the relevant Dealer(s)), as adjusted for any applicable margin (provided that if the Hybrid Notes are denominated in a currency other than Singapore dollars, such Hybrid Notes will bear interest to be determined separately by reference to such benchmark as may be agreed between the Issuer and the relevant Dealer(s)), in each case payable at the end of each interest period to be agreed between the Issuer and the relevant Dealer(s). Zero Coupon Notes : Zero Coupon Notes may be issued at their nominal amount or at a discount to it and will not bear interest other than in the case of late payment. Form and Denomination of Notes : The Notes will be issued in bearer form or registered form and in such denominations as may be agreed between the Issuer and the relevant Dealer(s). Each Tranche or Series of bearer Notes may initially be represented by a Temporary Global Note or a Permanent Global Note. Each Temporary Global Note may be deposited on the relevant issue date with CDP, the Common Depositary and/ or any other agreed clearing system and will be exchangeable, upon request as described therein, either for a Permanent Global Note or definitive Notes (as indicated in the applicable Pricing Supplement). Each Permanent Global Note may be exchanged, unless otherwise specified in the applicable Pricing Supplement, upon request as described therein, in whole (but not in part) for definitive Notes upon the terms therein. Each Tranche or Series of registered Notes will initially be represented by a Global Certificate. Each Global Certificate may be registered in the name of, or in the name of a nominee of, CDP, the Common Depositary and/or any other agreed clearing system. 13

16 Each Global Certificate may be exchanged, upon request as described therein, in whole (but not in part) for Certificates upon the terms therein. Save as provided in the terms and conditions of the Notes, a Certificate shall be issued in respect of each Noteholder s entire holding of registered Notes of one Series. Custody of the Notes : Notes which are to be listed on the SGX-ST may be cleared through CDP. Notes which are to be cleared through CDP are required to be kept with CDP as authorised depository. Notes which are cleared through Euroclear and/or Clearstream, Luxembourg are required to be kept with a common depositary on behalf of Euroclear and/or Clearstream, Luxembourg. Status of the Notes : The Notes and Coupons of all Series will constitute direct, unconditional, unsubordinated and unsecured obligations of the Issuer and shall at all times rank pari passu, without any preference or priority among themselves, and pari passu with all other present and future unsecured obligations (other than subordinated obligations and priorities created by law) of the Issuer. Status of the Guarantees : The payment obligations of CCS under the CCS Guarantee, and the obligations of each Offshore Guarantor under the Offshore Guarantee, constitute direct, unconditional, unsubordinated and unsecured obligations of such Guarantor and shall rank pari passu with all other present and future unsecured obligations (other than subordinated obligations and priorities created by law) of such Guarantor. Negative Pledge : The Obligors have jointly and severally covenanted with the Trustee in the Trust Deed that so long as any of the Notes or Coupons remains outstanding (as defined in the Trust Deed), the Obligors will not, and will ensure that none of their respective subsidiaries will, create or have outstanding any security over the whole or any part of their respective undertakings, assets, property, revenues or rights to receive dividends, present or future, save for (but subject always to the proviso below): (i) (ii) (iii) any security created over any asset existing on the date of the Trust Deed which has been disclosed to the Trustee in writing on or prior to the date of the Trust Deed and any security to be created over such asset in connection with the extension, increase or refinancing of the original credit facilities secured by such asset, provided that, in each case, the amount secured by any such security shall not at any time exceed 70 per cent. of the current market value of such asset at that time (as shown in the most recent valuation report prepared by an independent professional valuer and delivered by the Issuer to the Trustee); any liens or rights of set-off arising solely by operation of law in respect of indebtedness which either (a) has been due for less than 21 days or (b) is being contested in good faith and by appropriate means; any security over any assets acquired and/or developed by it ((in the case of a development of such asset) whether such assets are acquired before or after the date of the Trust Deed) after the date of the Trust Deed for the sole purpose of financing or refinancing the acquisition or 14

17 development of such assets and, in each case, securing a principal amount not exceeding the cost of that acquisition and/or development; (iv) (v) (vi) security interests on, or pledges of, goods, the related documents of title and/or other related documents arising or created in the ordinary course of its business as security only for indebtedness to a bank or financial institution directly relating to the goods or documents on or over which that security interest or pledge exists where such indebtedness is incurred for the purpose of purchasing goods obtained on normal commercial terms in the ordinary course of business; any security created on or over their respective assets for the purpose of securing working capital facilities granted in the ordinary course of business for the purchase of assets and/or trade financing and having a maturity of less than one year, provided that each drawdown under such working capital facility is drawn for the purposes of financing the purchase of assets and/or trade financing and repaid within six months of the date on which such drawdown is made; and any other security created which has been approved by the Noteholders by way of an Extraordinary Resolution (as defined in the Trust Deed), PROVIDED ALWAYS THAT the security permitted to be created pursuant to paragraphs (i) to (vi) above shall not secure any Relevant Indebtedness, or any guarantee or indemnity in respect of any Relevant Indebtedness, unless at the same time or prior thereto the Notes and the Coupons are accorded the same security as is created or subsisting to secure any such Relevant Indebtedness, guarantee or indemnity or such other security as (1) the Trustee shall in its absolute discretion deem not materially less beneficial to the interest of the Noteholders or (2) shall be approved by the Noteholders by way of an Extraordinary Resolution. For further details, please see the section Terms and Conditions of the Notes. Financial Covenants : The Obligors have jointly and severally covenanted with the Trustee in the Trust Deed that for so long as any of the Notes or Coupons remains outstanding, they will ensure that: (i) (ii) the Consolidated Tangible Net Worth (as defined in Condition 4(b) of the Notes) will not at any time be less than RMB1,500,000,000; the ratio of Consolidated Total Borrowings (as defined in Condition 4(b) of the Notes) to Consolidated Total Assets (as defined in Condition 4(b) of the Notes) will not be more than 0.6:1 as at the end of any Test Period (as defined in Condition 4(b) of the Notes); 15

18 ( iii) in respect of each Test Period, the ratio of Consolidated EBIT (as defined in Condition 4(b) of the Notes) to Consolidated Interest Expense (as defined in Condition 4(b) of the Notes) will not be less than 2.5:1 for that Test Period; and ( iv) the Shareholder Amounts (as defined in Condition 4(b) of the Notes) paid in a financial year will not at any time be more than 40 per cent. of Net Income per Annum (as defined in Condition 4(b) of the Notes) for the immediately preceding financial year. For further details, please see the section Terms and Conditions of the Notes. Disposals : The Obligors have jointly and severally undertaken to the Trustee in the Trust Deed that so long as any of the Notes remains outstanding, they will not, and will ensure that none of their respective subsidiaries will, (whether by a single transaction or a number of related or unrelated transactions and whether at one time or over a period of time) consummate an Asset Sale (as defined in Condition 4(c)(ii) of the Notes) unless: (1) no Potential Event of Default (as defined in the Trust Deed) or Event of Default (as defined in the Trust Deed) has occurred and is continuing or would occur as a result of such Asset Sale; (2) the consideration received by the disposing entity is at least equal to the fair market value (being the price that would be paid in an arm s length transaction between an informed and willing seller under no compulsion to sell and informed and willing buyer under no compulsion to buy) of the assets which are the subject of such Asset Sale; (3) such Asset Sale is in the ordinary course of business to third parties at arm s length and on normal commercial terms; (4) at least 75 per cent. of the consideration received for such Asset Sale consists of cash. For purposes of this provision, each of the following will be deemed to be cash: (A) (B) any liabilities, as shown on the Group s most recent consolidated balance sheet, of any Obligor or any member of the Group (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or the Guarantees) that are assumed by the transferee of any such assets pursuant to a customary assumption, assignment, novation or similar agreement that releases such Obligor or, as the case may be, such member of the Group from further liability; and any securities, notes or other obligations received by any Obligor or any member of the Group from such transferee that are promptly, but in any event within 30 days of the date of receipt of such securities, notes or obligations, converted by such Obligor or, as the case may be, such member of the Group into cash, to the extent of the cash received in that conversion; and 16

19 (5) the financial covenants set out in Condition 4(b) of the Notes will be complied with after giving effect to such proposed Asset Sale and (if applicable) any application of the proceeds thereof towards the repayment of Senior Debt (as defined in Condition 4(c)(ii) of the Notes). The proceeds of an Asset Sale permitted under the preceding paragraph that are not, within 360 days after the receipt of such proceeds, applied to either: (1) permanently repay Senior Debt of any member of the Group (and, if such Senior Debt repaid is revolving credit Debt, to correspondingly reduce commitments with respect thereto) owing to a person other than a member of the Group; or (2) acquire or make capital expenditures in respect of properties and assets (other than current assets) that will be used in the Permitted Businesses (as defined in Condition 4(c)(ii) of the Notes), ( Excess Proceeds ) shall be carried forward and accumulated. When accumulated Excess Proceeds exceeds RMB25,000,000 (or its equivalent in other currencies), the Issuer must within five days thereof make an offer to purchase Notes in accordance with Condition 6(c)(iii) of the Notes. CCS Guarantee Covenant : CCS has undertaken to the Trustee in the Trust Deed that (i) it will register or cause to be registered with the State Administration of Foreign Exchange or its local branch the CCS Deed of Guarantee in accordance with, and within the time period prescribed by, the Foreign Exchange Administration Rules on Cross-border Security () ( Cross-border Security Registration ), use its best endeavours to complete the Crossborder Security Registration and obtain a registration record from SAFE on or before the date falling 60 Registration Business Days (as defined in Condition 4(d) of the Notes) from the date of the CCS Deed of Guarantee (the Registration Deadline ) and comply with all applicable PRC laws and regulations in relation to the CCS Deed of Guarantee. CCS shall release, or procure that the Issuer releases, within five Registration Business Days after such delivery, a notice to the Trustee and (if the Trustee so requires) the Noteholders confirming the completion of the Registration Condition. The Trustee shall have no obligation to monitor or ensure the registration of the CCS Deed of Guarantee with SAFE on or before the Registration Deadline and shall not be liable to Noteholders or any other person for not doing so. No Change of Business Covenant : The Obligors have jointly and severally undertaken to the Trustee in the Trust Deed that so long as any of the Notes remains outstanding, the Permitted Businesses shall remain the core business of the Group. Dividend Restriction Covenant : The Obligors have jointly and severally undertaken to the Trustee in the Trust Deed that so long as any of the Notes remains outstanding, each of them will not pay any dividend, whether in cash or in specie, reduce its capital or make any other distribution to its shareholders (other than to a member of the Group for 17

20 the purpose of making payments in respect of the Notes or the Guarantees) (i) while any interest or principal on any of the Notes is overdue and unpaid, or (ii) if an Event of Default occurs and is continuing unwaived or (iii) if such payment results in a breach of Condition 4(b)(iv). CCS Suspension Agreement : Tianjin China Coal Solution Factoring Co., Ltd. ( CCS Tianjin ), a subsidiary of CCS, and Zhengzhou CCS have entered into a suspension agreement dated 16 September 2014 (the CCS Suspension Agreement ) pursuant to which Zhengzhou CCS has agreed not to, inter alia, demand or receive any payment, repayment or prepayment of principal, interest or other amount on or in respect of any indebtedness in respect of borrowed moneys due, owing or incurred by CCS Tianjin to Zhengzhou CCS under or in connection with the loan with a principal amount of RMB1,400,000,000 outstanding as at the date of the Trust Deed (the Zhengzhou CCS Loan ) except for the Permitted Payments (as defined in Condition 4(h) of the Notes). Subordination Covenant : The Obligors have jointly and severally undertaken to the Trustee in the Trust Deed that so long as any of the Notes remains outstanding, each of them shall, and shall procure that each of their respective subsidiaries shall: ( i) ensure that at all times, its indebtedness in respect of borrowed moneys (whether of principal, interest, fee or otherwise) which are or at any time due or owing to any of its shareholders (direct or indirect) (other than a member of the Group) or for which it may be under liability to any of its shareholders (other than a member of the Group), whether actually or contingently, and the respective rights and claims of such shareholders in relation to such indebtedness ( Subordinated Obligations ) are (where relevant) subordinated to the Notes and the Guarantees and to the rights and claims of the Trustee under the Deeds of Guarantee, the Trust Deed and the Notes and (in all cases) it will not make or purport to make any payment, whether in cash or in kind, to any of its shareholders (other than a member of the Group) on account of Subordinated Obligations except for Permitted Payments; ( ii) procure that as and when any member of the Group becomes liable to any of its shareholders (other than a member of the Group) in respect of Subordinated Obligations (other than the Zhengzhou CCS Loan), such shareholder will enter into a suspension agreement in form and substance similar to the CCS Suspension Agreement or a subordination deed in form and substance satisfactory to the Trustee and will further procure that such shareholder will do all such acts and will execute all such documents as the Trustee may consider necessary for giving full effect to such suspension agreement or subordination deed; and ( iii) ensure that it has the right to defer interest payable in respect of such Subordinated Obligations (including the Zhengzhou CCS Loan) in the event that a payment of interest is not permitted pursuant to Condition 4(h) of the Notes. 18

21 For the avoidance of doubt, payments of interest and principal in respect of the Zhengzhou CCS Loan and the other Subordinated Obligations may be made if the Notes are no longer outstanding. Purchase at the Option of Noteholders in the event of Excess Proceeds : In the event that there are Excess Proceeds (as defined in Condition 4(c)(ii) of the Notes) exceeding RMB25,000,000 (or its equivalent in other currencies) pursuant to Condition 4(c)(ii) of the Notes, the Issuer shall within 10 business days of such accumulation notify the Noteholders thereof and shall make an Offer to Purchase (as defined in Condition 6(c)(iii) of the Notes) Notes of all Series in an aggregate principal amount equal to the Excess Proceeds. Excess Proceeds shall be applied by the Issuer in and towards payment of the purchase price for Notes of all Series tendered for purchase on a pro rata basis and, in respect of each Series of Notes, on a pro rata basis between the Notes tendered for purchase. For further details, please see the section Terms and Conditions of the Notes. Redemption and Purchase : If so provided on the face of the Note and the relevant Pricing Supplement, Notes may be redeemed (either in whole or in part) prior to their stated maturity at the option of the Issuer and/ or the holders of the Notes. Further, if so provided on the face of the Note and the relevant Pricing Supplement, Notes may be purchased by the Issuer (either in whole or in part) prior to their stated maturity at the option of the Issuer and/or the holders of the Notes. Redemption at Option of Noteholders upon a Change of Control Event : If, for any reason, a Change of Control Event occurs, the Issuer will within seven days of such occurrence give notice to the Noteholders of the occurrence of such event (the Change of Control Event Notice ) (provided that failure by the Issuer to give such notice shall not prejudice the Noteholder of such option) and shall, at the option of the holder of any Note, redeem such Note at 101 per cent. of its principal amount, together with interest accrued to the date fixed for redemption, on the date falling 60 days from the date of the Change of Control Event Notice (or if such date is not a business day, on the next day which is a business day). For the purposes of the paragraph above, a Change of Control Event occurs when: (1) Wan Yongxing (), Liu Yi () and their respective spouses, children, adopted children, step-children, siblings and parents (collectively, the Shareholders ) cease to have in aggregate an interest (whether directly or indirectly) of at least 40 per cent. of the voting rights in respect of the issued share capital of CCS; or (2) the Shareholders cease to have in aggregate the largest interest (whether directly or indirectly) of the voting rights in respect of the issued share capital of CCS. For further details, please see the section Terms and Conditions of the Notes. 19

22 Redemption at Option of Noteholders upon Cessation or Suspension of Trading of Shares : In the event that (i) the shares of CCS cease to be traded on the Shanghai Stock Exchange or an Alternative Stock Exchange or (ii) trading in the shares of CCS on the Shanghai Stock Exchange or an Alternative Stock Exchange is suspended for a continuous period of more than seven market days (as defined in Condition 6(g) of the Notes) as a result of a breach of the listing rules of the Shanghai Stock Exchange or, as the case may be, such Alternative Stock Exchange or a pending or threatened delisting or any action taken by the Shanghai Stock Exchange or, as the case may be, such Alternative Stock Exchange or any other relevant regulator, the Issuer shall, at the option of the holder of any Note, redeem such Note at its Redemption Amount together with interest accrued to the date fixed for redemption on any date on which interest is due to be paid on such Notes or, if earlier, the date falling 30 days after the Effective Date (as defined in Condition 6(g) of the Notes). For further details, please see the section Terms and Conditions of the Notes. Redemption for Taxation Reasons : The Notes may be redeemed at the option of the Issuer in whole, but not in part, on any Interest Payment Date or, if so specified on the face of the Note, at any time on giving not less than 30 nor more than 60 days notice to the Noteholders (which notice shall be irrevocable), at their Redemption Amount or (in the case of Zero Coupon Notes) Early Redemption Amount (as defined in Condition 6(i) of the Notes) (together with interest accrued to (but excluding) the date fixed for redemption), if (i) the Issuer has or will become obliged to pay additional amounts as provided or referred to in Condition 8 of the Notes, or increase the payment of such additional amounts or (if the Guarantee was called) any of the relevant Guarantors has or will become obliged to pay additional amounts as provided or referred to in Condition 8 of the Notes, or increase the payment of such additional amounts, as a result of any change in, or amendment to, the laws (or any regulations, rulings or other administrative pronouncements promulgated thereunder) of the relevant Tax Jurisdiction (as defined in Condition 8 of the Notes), or any change in the application or official interpretation of such laws, regulations, rulings or other administrative pronouncements, which change or amendment is made public on or after the Issue Date or any other date specified in the Pricing Supplement, and (ii) such obligations cannot be avoided by the Issuer or, as the case may be, such Guarantor taking reasonable measures available to it, provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer or, as the case may be, such Guarantor would be obliged to pay such additional amounts were a payment in respect of the Notes then due. Events of Default : See Condition 10 of the Notes. For further details, please see the section Terms and Conditions of the Notes. Taxation : All payments in respect of the Notes and the Coupons by the Issuer or, as the case may be, the Guarantors shall be made free and clear of, and without deduction or withholding for or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, 20

23 collected, withheld or assessed by or within any Tax Jurisdiction (as defined in Condition 8 of the Notes), unless such deduction or withholding is required by law. In such event, the Issuer or, as the case may be, the Guarantors shall pay such additional amounts as will result in the receipt by the Noteholders and the Couponholders of such amounts as would have been received by them had no such deduction or withholding been required, save for certain exceptions. For further details, please see the section on Taxation herein. Listing : Each Series of the Notes may, if so agreed between the Issuer and the relevant Dealer(s), be listed on the SGX-ST or any stock exchange(s) as may be agreed between the Issuer and the relevant Dealer(s), subject to all necessary approvals having been obtained. Selling Restrictions : For a description of certain restrictions on offers, sales and deliveries of Notes and the distribution of offering material relating to the Notes, see the section on Subscription, Purchase and Distribution herein. Further restrictions may apply in connection with any particular Series or Tranche of Notes. Governing Law : The Programme and any Notes issued under the Programme will be governed by, and construed in accordance with, the laws of Singapore. 21

24 TERMS AND CONDITIONS OF THE NOTES The following is the text of the terms and conditions which, subject to completion and amendment and as supplemented or varied in accordance with the provisions of the relevant Pricing Supplement, will be endorsed on the Notes in definitive form issued in exchange for the Global Note(s) or the Global Certificate(s) representing each Series. Either (i) the full text of these terms and conditions together with the relevant provisions of the Pricing Supplement or (ii) these terms and conditions as so completed, amended, supplemented or varied (and subject to simplification by the deletion of non-applicable provisions), shall be endorsed on such Notes. Unless otherwise stated, all capitalised terms that are not defined in these Conditions will have the meanings given to them in the relevant Pricing Supplement. Those definitions will be endorsed on such Bearer Notes or on the Certificates relating to such Registered Notes. References in the Conditions to Notes are to the Notes of one Series only, and not to all Notes that may be issued under the Programme, details of the relevant Series being shown on the face of the relevant Notes and in the relevant Pricing Supplement. The Notes are constituted by a Trust Deed (as amended, restated or supplemented from time to time, the Trust Deed ) dated 16 September 2014 made between (1) China Coal Solution (Singapore) Pte. Ltd. (the Issuer ), (2) CCS Supply Chain Management Co., Ltd. ( CCS ), China Coal Solution (HK) Limited ( CCS HK ), Ina Advanced Holdings Pte. Ltd. ( Ina ) and Rex Coal Pte. Ltd. ( Rex Coal and, together with CCS, CCS HK and Ina, the Original Guarantors ) and acceded to by Additional Guarantors (as defined below) from time to time by the execution of a Deed of Accession (as defined therein) (the Original Guarantors and the Additional Guarantors, the Guarantors and each, a Guarantor ) and (3) DBS Trustee Limited (the Trustee, which expression shall wherever the context so admits include such company and all other persons for the time being the trustee or trustees of the Trust Deed), as trustee for the Noteholders (as defined below), and the Notes are issued with the benefit of (a) a Deed of Guarantee (as amended, restated or supplemented from time to time, the CCS Deed of Guarantee ) dated 16 September 2014 executed by CCS, as guarantor, in favour of (1) DBS Bank Ltd., as arranger, (2) DBS Bank Ltd., as dealer, (3) DBS Bank Ltd., as issuing and paying agent, (4) DBS Bank Ltd., as agent bank, (5) DBS Bank Ltd., as registrar and transfer agent, and (6) the Trustee, as trustee, (b) a Deed of Guarantee (as amended, restated or supplemented from time to time, the Offshore Deed of Guarantee ) dated 16 September 2014 executed by CCS HK, Ina and Rex Coal and acceded to by certain subsidiaries of CCS (the Additional Guarantors ), in favour of (1) DBS Bank Ltd., as arranger, (2) DBS Bank Ltd., as dealer, (3) DBS Bank Ltd., as issuing and paying agent, (4) DBS Bank Ltd., as agent bank, (5) DBS Bank Ltd., as registrar and transfer agent, and (6) the Trustee, as trustee, and (where applicable) (c) a deed of covenant (as amended, varied or supplemented from time to time, the Deed of Covenant ) dated 16 September 2014, relating to the Notes executed by the Issuer. These terms and conditions (the Conditions ) include summaries of, and are subject to, the detailed provisions of the Trust Deed, which includes the form of the Bearer Notes, Certificates, Coupons and Talons referred to below. The Issuer and the Original Guarantors have entered into an Agency Agreement (as amended, restated or supplemented from time to time, the Agency Agreement ) dated 16 September 2014 made between (1) the Issuer, (2) the Original Guarantors and acceded to by Additional Guarantors from time to time by the execution of a Deed of Accession and (3) DBS Bank Ltd., as issuing and paying agent (in such capacity, the Issuing and Paying Agent and, together with any other paying agents that may be appointed, the Paying Agents ), (4) DBS Bank Ltd., as agent bank (in such capacity, the Agent Bank ), (5) DBS Bank Ltd., as registrar and transfer agent (the Registrar and, together with any other transfer agents that may be appointed, the Transfer Agents ), and ( 6) the Trustee, as trustee for the Noteholders. The Noteholders and the holders (the Couponholders ) of the coupons (the Coupons ) appertaining to the interest-bearing Notes in bearer form and, where applicable in the case of such Notes, talons for further Coupons (the Talons ) are bound by and are deemed to have notice of all of the provisions of the Trust Deed, the Agency Agreement, the CCS Deed of Guarantee, the Offshore Deed of Guarantee and the Deed of Covenant. Copies of the Trust Deed, the Agency Agreement, the CCS Deed of Guarantee, the Offshore Deed of Guarantee and the Deed of Covenant are available for inspection at the principal office of the Trustee for the time being and at the specified office of the Issuing and Paying Agent for the time being. 22

25 1. Form, Denomination and Title (a) Form and Denomination (i) The Notes of the Series of which this Note forms part (in these Conditions, the Notes ) are issued in bearer form ( Bearer Notes ) or in registered form ( Registered Notes ), in each case in the Denomination Amount shown hereon. (b) (ii) (iii) (iv) Title (i) (ii) (iii) This Note is a Fixed Rate Note, a Floating Rate Note, a Variable Rate Note, a Hybrid Note or a Zero Coupon Note (depending upon the Interest Basis shown on its face). Bearer Notes are serially numbered and issued with Coupons (and, where appropriate, a Talon) attached, save in the case of Notes that do not bear interest in which case references to interest (other than in relation to default interest referred to in Condition 7(h)) in these Conditions are not applicable. Registered Notes are represented by registered certificates ( Certificates ) and, save as provided in Condition 2(c), each Certificate shall represent the entire holding of Registered Notes by the same holder. Title to the Bearer Notes and the Coupons and Talons appertaining thereto shall pass by delivery. Title to the Registered Notes shall pass by registration in the register that the Issuer shall procure to be kept by the Registrar in accordance with the provisions of the Agency Agreement (the Register ). Except as ordered by a court of competent jurisdiction or as required by law, the holder of any Note, Coupon or Talon shall be deemed to be and may be treated as the absolute owner of such Note, Coupon or Talon, as the case may be, for the purpose of receiving payment thereof or on account thereof and for all other purposes, whether or not such Note, Coupon or Talon shall be overdue and notwithstanding any notice of ownership, theft, loss or forgery thereof or any writing thereon made by anyone, and no person shall be liable for so treating the holder. For so long as any of the Notes is represented by a Global Note (as defined below) or, as the case may be, a Global Certificate (as defined below), and such Global Note or Global Certificate is held by a common depositary for Euroclear Bank S.A./N.V. ( Euroclear ) and/or Clearstream Banking, société anonyme ( Clearstream, Luxembourg ) and/or The Central Depository (Pte) Limited (the Depository ), each person who is for the time being shown in the records of Euroclear, Clearstream, Luxembourg and/or the Depository as the holder of a particular principal amount of such Notes (in which regard any certificate or other document issued by Euroclear, Clearstream, Luxembourg and/or the Depository as to the principal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated by the Issuer, the Guarantors, the Issuing and Paying Agent, the other Paying Agents, the Agent Bank, the Registrar, the other Transfer Agents, all other agents of the Issuer, the Guarantors and the Trustee as the holder of such principal amount of Notes other than with respect to the payment of principal, premium, interest, distribution, redemption, purchase and/or any other amounts in respect of the Notes, for which purpose the bearer of the Global Note or, as the case may be, the person whose name is shown on the Register shall be treated by the Issuer, the Guarantors, the Issuing and Paying Agent, the other Paying Agents, the Agent Bank, the Registrar, the other Transfer Agents, all other agents of the Issuer, the Guarantors and the Trustee as the holder of such Notes in accordance with and subject to the terms of the Global Note or, as the case may be, the Global Certificate (and the expressions Noteholder and holder of Notes and related expressions shall be construed accordingly). Notes which are represented by the Global Note or, as the case may be, the Global Certificate will be transferable only in accordance with the rules and procedures for the time being of Euroclear, Clearstream, Luxembourg and/or the Depository. 23

26 (iv) (v) In these Conditions, Global Note means the relevant Temporary Global Note representing each Series or the relevant Permanent Global Note representing each Series, Global Certificate means the relevant Global Certificate representing each Series that is registered in the name of, or in the name of a nominee of, (1) a common depositary for Euroclear and/or Clearstream, Luxembourg, (2) the Depository and/or (3) any other clearing system, Noteholder means the bearer of any Bearer Note or the person in whose name a Registered Note is registered (as the case may be) and holder (in relation to a Note, Coupon or Talon) means the bearer of any Bearer Note, Coupon or Talon or the person in whose name a Registered Note is registered (as the case may be), Series means (A) (in relation to Notes other than Variable Rate Notes) a Tranche, together with any further Tranche or Tranches, which are (aa) expressed to be consolidated and forming a single series and (bb) identical in all respects (including as to listing) except for their respective issue dates, issue prices and/or dates of the first payment of interest and (B) (in relation to Variable Rate Notes) Notes which are identical in all respects (including as to listing) except for their respective issue prices and rates of interest and Tranche means Notes which are identical in all respects (including as to listing). Words and expressions defined in the Trust Deed or used in the applicable Pricing Supplement shall have the same meanings where used in these Conditions unless the context otherwise requires or unless otherwise stated and provided that, in the event of inconsistency between the Trust Deed and the applicable Pricing Supplement, the applicable Pricing Supplement will prevail. 2. No Exchange of Notes and Transfers of Registered Notes (a) No Exchange of Notes: Registered Notes may not be exchanged for Bearer Notes. Bearer Notes of one Denomination Amount may not be exchanged for Bearer Notes of another Denomination Amount. Bearer Notes may not be exchanged for Registered Notes. (b) (c) Transfer of Registered Notes: Subject to Conditions 2(e) and 2(f) below, one or more Registered Notes may be transferred upon the surrender (at the specified office of the Registrar or any other Transfer Agent) of the Certificate representing such Registered Notes to be transferred, together with the form of transfer endorsed on such Certificate (or another form of transfer substantially in the same form and containing the same representations and certifications (if any), unless otherwise agreed by the Issuer) duly completed and executed and any other evidence as the Registrar or such other Transfer Agent may require to prove the title of the transferor and the authority of the individuals that have executed the form of transfer. In the case of a transfer of part only of a holding of Registered Notes represented by one Certificate, a new Certificate shall be issued to the transferee in respect of the part transferred and a further new Certificate in respect of the balance of the holding not transferred shall be issued to the transferor. All transfers of Notes and entries on the Register will be made subject to the detailed regulations concerning transfers of Notes scheduled to the Agency Agreement. The regulations may be changed by the Issuer, with the prior written approval of the Registrar and the Trustee. A copy of the current regulations will be made available by the Registrar to any Noteholder upon request. Exercise of Options or Partial Redemption in Respect of Registered Notes: In the case of an exercise of the Issuer s or Noteholders option in respect of, or a partial redemption of, a holding of Registered Notes represented by a single Certificate, a new Certificate shall be issued to the holder to reflect the exercise of such option or in respect of the balance of the holding not redeemed. In the case of a partial exercise of an option resulting in Registered Notes of the same holding having different terms, separate Certificates shall be issued in respect of those Notes of that holding that have the same terms. New Certificates shall only be issued against surrender of the existing Certificates to the Registrar or any other Transfer Agent. In the case of a transfer of Registered Notes to a person who is already a holder of Registered Notes, a new Certificate representing the enlarged holding shall only be issued against surrender of the Certificate representing the existing holding. 24

27 (d) (e) (f) Delivery of New Certificates: Each new Certificate to be issued pursuant to Condition 2(b) or 2(c) shall be available for delivery within five business days of receipt of the form of transfer or Exercise Notice (as defined in Condition 6(e)) and surrender of the Certificate for exchange. Delivery of the new Certificate(s) shall be made at the specified office of the Registrar or such other Transfer Agent (as the case may be) to whom delivery or surrender of such form of transfer, Exercise Notice or Certificate shall have been made or, at the option of the holder making such delivery or surrender as aforesaid and as specified in the relevant form of transfer, Exercise Notice or otherwise in writing, be mailed by uninsured post at the risk of the holder entitled to the new Certificate to such address as may be so specified, unless such holder requests otherwise and pays in advance to the Registrar or the relevant Transfer Agent the costs of such other method of delivery and/or such insurance as it may specify. In this Condition 2(d), business day means a day (other than a Saturday or Sunday) on which banks are open for business in the place of the specified office of the Registrar or the other relevant Transfer Agent (as the case may be). Transfers Free of Charge: Transfers of Notes and Certificates on registration, transfer, exercise of an option or partial redemption shall be effected without charge by or on behalf of the Issuer, the Registrar or the other Transfer Agents, but upon payment of any tax or other governmental charges that may be imposed in relation to it (or the giving of such indemnity and/or security and/or prefunding as the Registrar or the other relevant Transfer Agent may require) in respect of tax or charges. Closed Periods: No Noteholder may require the transfer of a Registered Note to be registered (i) during the period of 15 days prior to any date on which Notes may be called for redemption by the Issuer at its option pursuant to Condition 6(d), (ii) after any such Note has been called for redemption or (iii) during the period of seven days ending on (and including) any Record Date (as defined in Condition 7(b)(ii)). 3. Status and Guarantee (a) Status The Notes and Coupons of all Series constitute direct, unconditional, unsubordinated and unsecured obligations of the Issuer and shall at all times rank pari passu, without any preference or priority among themselves, and pari passu with all other present and future unsecured obligations (other than subordinated obligations and priorities created by law) of the Issuer. (b) Guarantee (i) Each Principal Subsidiary (as defined in Condition 10) (other than the Original Guarantors and any Principal Subsidiary of CCS incorporated within the PRC (as defined in Condition 4(b)) shall, to the extent legally possible, accede to the Offshore Deed of Guarantee, the Trust Deed, the Programme Agreement (as defined in the Trust Deed) and the Agency Agreement by the delivery of a duly executed Deed of Accession within 30 days of becoming a Principal Subsidiary. Upon the execution of a Deed of Accession, such Principal Subsidiary shall become an Additional Guarantor and shall guarantee the obligations of the Issuer under the Trust Deed, the Notes and the Coupons in the manner described in Condition 3(b)(ii) below. The Issuer and CCS may request that an Additional Guarantor ceases to be a Guarantor by delivering to the Trustee a release letter. The Trustee shall, at the request and cost of the Obligors, execute such documents as may be required to release that Additional Guarantor if (1) such Additional Guarantor has ceased to be a Principal Subsidiary and (2) no Potential Event of Default (as defined in the Trust Deed) or Event of Default (as defined in Condition 10) has occurred and is continuing or would result from the acceptance of such release letter, and in each case, the Issuer and CCS has confirmed that this is the case. (ii) The payment of all sums expressed to be payable by the Issuer under the Trust Deed, the Notes and the Coupons are unconditionally and irrevocably guaranteed by CCS and are unconditionally and irrevocably and jointly and severally guaranteed by CCS HK, Ina, Rex Coal and the Additional Guarantors (together, the Offshore Guarantors ). The obligations of CCS in respect of the Trust Deed, the Notes and the Coupons (the CCS Guarantee ) are set out in the CCS Deed of Guarantee and the obligations of the Offshore Guarantors 25

28 in respect of the Trust Deed, the Notes and the Coupons (the Offshore Guarantee and, together with the CCS Guarantee, the Guarantees ) are set out in the Offshore Deed of Guarantee. The payment obligations of CCS under the CCS Guarantee, and the obligations of each Offshore Guarantor under the Offshore Guarantee, constitute direct, unconditional, unsubordinated and unsecured obligations of such Guarantor and shall rank pari passu with all other present and future unsecured obligations (other than subordinated obligations and priorities created by law) of such Guarantor. 4. Covenants (a) Negative Pledge The Issuer and the Guarantors (the Obligors ) have jointly and severally covenanted with the Trustee in the Trust Deed that so long as any of the Notes or Coupons remains outstanding (as defined in the Trust Deed), the Obligors will not, and will ensure that none of their respective subsidiaries will, create or have outstanding any security over the whole or any part of their respective undertakings, assets, property, revenues or rights to receive dividends, present or future, save for (but subject always to the proviso below): (i) (ii) (iii) (iv) (v) (vi) any security created over any asset existing on the date of the Trust Deed which has been disclosed to the Trustee in writing on or prior to the date of the Trust Deed and any security to be created over such asset in connection with the extension, increase or refinancing of the original credit facilities secured by such asset, provided that, in each case, the amount secured by any such security shall not at any time exceed 70 per cent. of the current market value of such asset at that time (as shown in the most recent valuation report prepared by an independent professional valuer and delivered by the Issuer to the Trustee); any liens or rights of set-off arising solely by operation of law in respect of indebtedness which either ( 1) has been due for less than 21 days or ( 2) is being contested in good faith and by appropriate means; any security over any assets acquired and/or developed by it ((in the case of a development of such asset) whether such assets are acquired before or after the date of the Trust Deed) after the date of the Trust Deed for the sole purpose of financing or refinancing the acquisition or development of such assets and, in each case, securing a principal amount not exceeding the cost of that acquisition and/or development; security interests on, or pledges of, goods, the related documents of title and/or other related documents arising or created in the ordinary course of its business as security only for indebtedness to a bank or financial institution directly relating to the goods or documents on or over which that security interest or pledge exists where such indebtedness is incurred for the purpose of purchasing goods obtained on normal commercial terms in the ordinary course of business; any security created on or over their respective assets for the purpose of securing working capital facilities granted in the ordinary course of business for the purchase of assets and/or trade financing and having a maturity of less than one year, provided that each drawdown under such working capital facility is drawn for the purposes of financing the purchase of assets and/or trade financing and repaid within six months of the date on which such drawdown is made; and any other security created which has been approved by the Noteholders by way of an Extraordinary Resolution (as defined in the Trust Deed), PROVIDED ALWAYS THAT the security permitted to be created pursuant to paragraphs (i) to (vi) above shall not secure any Relevant Indebtedness, or any guarantee or indemnity in respect of any Relevant Indebtedness, unless at the same time or prior thereto the Notes and the Coupons are accorded the same security as is created or subsisting to secure any such Relevant Indebtedness, guarantee or indemnity or such other security as ( A) the Trustee shall in its absolute discretion deem not materially less beneficial to the interest of the Noteholders or ( B) shall be approved by the Noteholders by way of an Extraordinary Resolution. 26

29 In these Conditions: ( 1) Relevant Indebtedness means any indebtedness which is in the form of, or represented or evidenced by, bonds, notes, debentures, loan stock or other securities which for the time being are, or are intended to be or capable of being, quoted, listed or dealt in or traded on any stock exchange or over-the-counter or other securities market; and ( 2) subsidiary has the meaning ascribed to it in the Trust Deed. (b) Financial Covenants The Obligors have jointly and severally covenanted with the Trustee in the Trust Deed that for so long as any of the Notes or Coupons remains outstanding, they will ensure that: (i) (ii) (iii) (iv) the Consolidated Tangible Net Worth will not at any time be less than RMB1,500,000,000; the ratio of Consolidated Total Borrowings to Consolidated Total Assets will not be more than 0.6:1 as at the end of any Test Period; in respect of each Test Period, the ratio of Consolidated EBIT to Consolidated Interest Expense will not be less than 2.5:1 for that Test Period; and the Shareholder Amounts paid in a financial year will not at any time be more than 40 per cent. of Net Income per Annum for the immediately preceding financial year. For the purposes of the Trust Deed and the Conditions: (1) borrowed moneys means any indebtedness (A) for or in respect of money borrowed or raised (whether or not for cash), by whatever means (including acceptances, deposits, discounting, factoring, finance leases, hire purchase, sale-and-leaseback, sale-andrepurchase, bills of exchange (or other instruments upon which a person is liable as a drawer, acceptor or endorser), notes payable and any form of off-balance sheet financing) or (B) for the deferred purchase price of assets or services (other than goods or services obtained on normal commercial terms in the ordinary course of trading); (2) Consolidated EBIT means, in relation to any Test Period, the aggregate of the net earnings of the Group on its ordinary activities during such Test Period before taking into account Consolidated Interest Expense and income tax expense; (3) Consolidated Interest Expense means, in relation to any Test Period, the consolidated aggregate amount of interest and other financing charges accrued, paid or payable in respect of indebtedness (including any capitalised interest and commissions paid or payable but excluding any interest paid on Subordinated Debt in accordance with the provisions of Condition 4(h)) by the Group during that Test Period; (4) Consolidated Tangible Net Worth means the amount (expressed in Renminbi) for the time being, calculated in accordance with generally accepted accounting principles in the PRC, equal to the aggregate of: (A) (B) the amount paid up or credited as paid up on the issued share capital of CCS; and the amounts standing to the credit of the capital and revenue reserves (including capital redemption reserve fund, revaluation reserves and profit and loss account) of the Group on a consolidated basis, all as shown in the then latest audited consolidated balance sheet of the Group but after: (aa) making such adjustments as may be appropriate in respect of any variation in the issued and paid up share capital and the capital and revenue reserves set out in paragraph (B) above of the Group since the date of the latest audited consolidated balance sheet of the Group; 27

30 (bb) (cc) (dd) excluding any sums set aside for future taxation; excluding any amounts attributable to non-controlling interests; and deducting: (I) (II) (III) an amount equal to any distribution by any member of the Group out of profits earned prior to the date of the latest audited consolidated balance sheet of the Group and which have been declared, recommended or made since that date except so far as provided for in such balance sheet and/or paid or due to be paid to members of the Group; all goodwill and other intangible assets; and any debit balances on consolidated profit and loss account; (5) Consolidated Total Assets means, at any particular time, the consolidated amount of the book values of all the assets of the Group, determined as assets in accordance with generally accepted accounting principles in the PRC; (6) Consolidated Total Borrowings means, in relation to the Group, an amount (expressed in Renminbi) for the time being, calculated on a consolidated basis, in accordance with generally accepted accounting principles in the PRC, equal to the aggregate of: (A) (B) (C) bank overdrafts and all other indebtedness in respect of any borrowed moneys; the principal amount of any notes, bonds or debentures of any member of the Group whether issued for cash or a consideration other than cash (including the liabilities of the Issuer and the Guarantors under the Trust Deed, the Notes and the Guarantees); and any redeemable preference shares issued by any member of the Group and which is regarded by generally accepted accounting principles in the PRC as debt or other liability of the Group, but excluding Subordinated Debt; (7) Fair Market Value means, with respect to any asset, security, option, other right or property on any date, the fair market value of that asset, security, option, other right or property as determined in good faith by (in the case where the fair market value is less than RMB5,000,000) the principal financial officer of CCS and certified by such officer on behalf of CCS and (in any other case) by an Independent Financial Institution provided, that (A) the Fair Market Value of a cash dividend paid or to be paid shall be the amount of such cash dividend; (B) the Fair Market Value of any other cash amount shall be equal to such cash amount; and (C) where shares, options, warrants or other rights are publicly traded in a market of adequate liquidity (as determined by the Independent Financial Institution) the fair market value of such shares, options, warrants or other rights shall equal the arithmetic mean of the daily closing prices of such options, warrants or other rights on the relevant market on which such shares, options, warrants or other rights are publicly traded during the period of five Trading Days ending on such date; and in the case of proviso (A) of this definition translated into Renminbi (if declared or paid in a currency other than Renminbi) at the rate of exchange used to determine the amount payable to shareholders who were paid or are to be paid or are entitled to be paid the cash dividend in Renminbi; and in the case of provisos (B) and (C) above, converted into Renminbi (if expressed in a currency other than Renminbi) at such rate of exchange as may be determined in good faith by an Independent Financial Institution to be the spot rate applicable at the close of business on that date (or if no such rate is available on that date the equivalent rate on the immediately preceding date on which such a rate is available); 28

31 (8) Group means CCS and its subsidiaries and member of the Group shall be construed accordingly; (9) Independent Financial Institution means an independent investment or commercial bank or appraisal firm of international repute selected by CCS (at the expense of CCS) and approved in writing by the Trustee; (10) Net Income per Annum means the profit of CCS after deduction of all expenses, finance costs and taxes in a financial year; (11) PRC means the People s Republic of China, and for the purposes of these Conditions only, excluding the Hong Kong Special Administrative Region of the People s Republic of China, the Macau Special Administrative Region of the People s Republic of China and Taiwan; (12) Shareholder Amounts means the aggregate of: ( A) any interest paid to CCS shareholders in respect of Subordinated Debt; and ( B) any dividend or distribution of cash or other property or assets or evidences of CCS indebtedness to its shareholders, whenever paid or made and however described provided that where a cash dividend is announced which is to be, or may at the election of a shareholder or shareholders be, satisfied by the delivery of shares (other than shares in CCS) or other property or assets owned by the Group, then the dividend in question shall be treated as a dividend of ( aa) such cash dividend or ( bb) the Fair Market Value (on the date of announcement of such dividend or, if later, the date on which the number of shares (or amount of property or assets, as the case may be) which may be delivered is determined) of such shares or other property or assets if such Fair Market Value is greater than the Fair Market Value of such cash dividend; (13) Subordinated Debt means any indebtedness in respect of borrowed moneys owing by a member of the Group to its shareholders which has been subordinated to the Notes or the Guarantees under the Trust Deed and Condition 4(h); (14) Test Period means each period of four consecutive financial quarters ending on the last day of each financial quarter of the Group; and (15) Trading Day means a day when the relevant stock exchange is open for business, but does not include a day when no such last transaction price or closing bid and offered prices is/are reported. (c) (i) Disposals The Obligors have jointly and severally covenanted with the Trustee in the Trust Deed that so long as any of the Notes remains outstanding, they will not, and will ensure that none of their respective subsidiaries will, (whether by a single transaction or a number of related or unrelated transactions and whether at one time or over a period of time) consummate an Asset Sale unless: (1) no Potential Event of Default or Event of Default has occurred and is continuing or would occur as a result of such Asset Sale; (2) the consideration received by the disposing entity is at least equal to the fair market value (being the price that would be paid in an arm s length transaction between an informed and willing seller under no compulsion to sell and informed and willing buyer under no compulsion to buy) of the assets which are the subject of such Asset Sale; (3) such Asset Sale is in the ordinary course of business to third parties at arm s length and on normal commercial terms; 29

32 (4) at least 75 per cent. of the consideration received for such Asset Sale consists of cash. For purposes of this provision, each of the following will be deemed to be cash: (A) (B) any liabilities, as shown on the Group s most recent consolidated balance sheet, of any Obligor or any member of the Group (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or the Guarantees) that are assumed by the transferee of any such assets pursuant to a customary assumption, assignment, novation or similar agreement that releases such Obligor or, as the case may be, such member of the Group from further liability; and any securities, notes or other obligations received by any Obligor or any member of the Group from such transferee that are promptly, but in any event within 30 days of the date of receipt of such securities, notes or obligations, converted by such Obligor or, as the case may be, such member of the Group into cash, to the extent of the cash received in that conversion; and (5) the financial covenants set out in Condition 4(b) will be complied with after giving effect to such proposed Asset Sale and (if applicable) any application of the proceeds thereof towards the repayment of Senior Debt. (ii) The proceeds of an Asset Sale permitted under Condition 4(c)(i) that are not, within 360 days after the receipt of such proceeds, applied to either: (1) permanently repay Senior Debt of any member of the Group (and, if such Senior Debt repaid is revolving credit Debt, to correspondingly reduce commitments with respect thereto) owing to a person other than a member of the Group; or (2) acquire or make capital expenditures in respect of properties and assets (other than current assets) that will be used in the Permitted Businesses, ( Excess Proceeds ) shall be carried forward and accumulated. When accumulated Excess Proceeds exceeds RMB25,000,000 (or its equivalent in other currencies), the Issuer must within 10 business days thereof make an offer to purchase Notes in accordance with Condition 6(c)(iii). For the purposes of these Conditions: (A) Asset Sale means the sale, transfer, conveyance or disposal of any assets, but excluding: (aa) a transfer of assets among CCS and its Principal Subsidiaries; (bb) issuance of equity interests by a Principal Subsidiary to CCS or to another Principal Subsidiary or issuance of equity interests by any other subsidiary of CCS to a subsidiary of CCS (other than a Principal Subsidiary); (cc) (dd) (ee) (ff) the sale, lease or other transfer of cash or cash equivalents, products, services or accounts receivable in the ordinary course of business and any sale or other disposition of damaged, worn-out or obsolete assets in the ordinary course of business; any surrender or waiver of contract rights or settlement, release, recovery on or surrender of contract, tort or other claims in the ordinary course of business; the granting of security not prohibited by Condition 4(a); and without prejudice to Condition 10, any disposal arising from foreclosure, condemnation or similar action with respect to any property or other assets, or exercise of termination rights under any lease, licence, concession or other agreement; 30

33 (B) Debt means all indebtedness of the Group in respect of: (aa) the principal amount of any notes, bonds or debentures of any member of the Group whether issued for cash or a consideration other than cash (including the liabilities of the Issuer and the Guarantors under the Trust Deed, the Notes and the Guarantees); (bb) indebtedness in respect of any derivative transactions entered into in connection with protection against or benefit from fluctuation in any rate or price; (cc) (dd) all indebtedness whatsoever of the Group for borrowed moneys; and any redeemable preference shares issued by any member of the Group and which is regarded by generally accepted accounting principles in the PRC as debt or other liability of the Group; (C) (D) Permitted Businesses means the businesses in which the Group is engaged as at the date of the Trust Deed, together with any other business activities ancillary or reasonably related thereto; and Senior Debt means all Debt other than (aa) Debt which is, in the instrument creating or evidencing such Debt, expressed to be junior in right of payment to the Notes or the Guarantees, (bb) Debt owed to any member of the Group, (cc) trade payables, (dd) Debt incurred in violation of any of the Issue Documents and (ee) Subordinated Debt. (d) CCS Guarantee CCS has covenanted with the Trustee in the Trust Deed that it will register or cause to be registered with the State Administration of Foreign Exchange or its local branch ( SAFE ) the CCS Deed of Guarantee in accordance with, and within the time period prescribed by, the Foreign Exchange Administration Rules on Cross-border Security () ( Cross-border Security Registration ), use its best endeavours to complete the Cross-border Security Registration and obtain a registration record from SAFE on or before the date falling 60 Registration Business Days from the date of the Trust Deed (the Registration Deadline ) and comply with all applicable PRC laws and regulations in relation to the CCS Deed of Guarantee. CCS shall release, or procure that the Issuer releases, within five Registration Business Days after such delivery, a notice to the Trustee and (if the Trustee so requires) the Noteholders confirming the completion of the Registration Condition. The Trustee shall have no obligation to monitor or ensure the registration of the CCS Deed of Guarantee with SAFE on or before the Registration Deadline and shall not be liable to Noteholders or any other person for not doing so. In these Conditions: Registration Business Day means a day (other than a Saturday or Sunday) on which government offices are open for general business in Shandong ; and Registration Condition means the receipt by each of the Guaranteed Parties of a certificate signed by a Director of CCS confirming the completion of the Cross-border Security Registration together with a copy of the relevant SAFE registration record. (e) No Change of Business The Obligors have jointly and severally covenanted with the Trustee in the Trust Deed that so long as any of the Notes remains outstanding, the Permitted Businesses shall remain the core business of the Group. 31

34 (f) Accounts The Obligors have jointly and severally covenanted with the Trustee in the Trust Deed that so long as any of the Notes remains outstanding, the Issuer and CCS shall: (i) (ii) (iii) as soon as the same are published, but in any event no later than (in the case of the audited accounts of the Issuer) 150 days and (in the case of the audited consolidated accounts of CCS) 120 days after the end of each financial year, make available to the Trustee copies of the audited unconsolidated accounts of the Issuer and the audited consolidated accounts of CCS for that year, prepared in accordance with generally accepted accounting principles and practices in force in the jurisdiction of incorporation of the relevant Obligor or International Financial Reporting Standards consistently applied (except as otherwise stated in such accounts or the notes thereto) and a copy of the report of the relevant Obligor s auditors thereon (with an English version of the audited consolidated accounts of CCS and report thereon to be made available to the Trustee no later than 150 days after the end of each financial year); as soon as the same are published, but in any event no later than (in the case of the unaudited half yearly accounts of the Issuer) 75 days and (in the case of the unaudited half yearly consolidated accounts of CCS) 60 days after the end of each financial half year, make available to the Trustee copies of the unaudited half yearly unconsolidated accounts of the Issuer and unaudited half yearly consolidated accounts of CCS (with an English of the unaudited half yearly consolidated accounts of CCS to be made available to the Trustee no later than 75 days after the end of each financial half year); and as soon as the same are published, but in any event no later than 45 days after the end of each financial quarter, make available to the Trustee copies of the unaudited quarterly consolidated accounts of CCS, provided that CCS is so required to publish under any law, regulation or rule, including the listing rules of any relevant stock exchange (together with an English version of such accounts). (g) (h) Dividend restriction The Obligors have jointly and severally covenanted with the Trustee in the Trust Deed that so long as any of the Notes remains outstanding, each of them will not pay any dividend, whether in cash or in specie, reduce its capital or make any other distribution to its shareholders (other than to a member of the Group for the purpose of making payments in respect of the Notes or the Guarantees) (i) while any interest or principal on any of the Notes is overdue and unpaid, or (ii) if an Event of Default occurs and is continuing unwaived or (iii) if such payment results in a breach of Condition 4(b)(iv). Subordination (i) Tianjin China Coal Solution Factoring Co., Ltd. ( CCS Tianjin ), a subsidiary of CCS, and Zhengzhou China Coal Solution Co., Ltd. () (the Shareholder ) have entered into a suspension agreement dated 16 September 2014 (the CCS Suspension Agreement ) pursuant to which the Shareholder has agreed not to, inter alia, demand or receive any payment, repayment or prepayment of principal, interest or other amount on or in respect of any indebtedness in respect of borrowed moneys due, owing or incurred by CCS Tianjin to the Shareholder under or in connection with the loan with a principal amount of RMB1,400,000,000 outstanding as at the date of the Trust Deed (the Zhengzhou CCS Loan ), except that CCS Tianjin may make Permitted Payments (as defined in Condition 4(h) (ii)(1)). (ii) The Obligors have jointly and severally covenanted with the Trustee in the Trust Deed that so long as any of the Notes remains outstanding, each of them shall, and shall procure that each of their respective subsidiaries shall: (1) ensure that at all times, its indebtedness in respect of borrowed moneys (whether of principal, interest, fee or otherwise) which are or at any time due or owing to any of its shareholders (direct or indirect) (other than a member of the Group) or for which it may be under liability to any of its shareholders (other than a member of 32

35 the Group), whether actually or contingently, and the respective rights and claims of such shareholders in relation to such indebtedness ( Subordinated Obligations ) are (where relevant) subordinated to the Notes and the Guarantees and to the rights and claims of the Trustee under the Deeds of Guarantee, the Trust Deed and the Notes and (in all cases) it will not make or purport to make any payment, whether in cash or in kind, to any of its shareholders (other than a member of the Group) on account of Subordinated Obligations except that each of them may: (A) (B) refinance any shareholder loan granted to it using the proceeds of loan(s) granted by one or more of its shareholders (direct or indirect) which are not members of the Group ( Refinancing Shareholder Loan ), provided that the Refinancing Shareholder Loan is subordinated to the Notes and the Guarantees in accordance with Condition 4(h)(ii)(2); and make payments of interest in respect of Subordinated Obligations if: ( aa) no Potential Event of Default or Event of Default has occurred and is continuing or will occur as a result of such payment; and ( bb) the amount of interest to be paid out of net income, when aggregated with all other Shareholder Amounts paid in that financial year, does not exceed 40 per cent. of the Net Income per Annum of the immediately preceding financial year (which shall be positive). (each, a Permitted Payment ); (2) procure that as and when any member of the Group becomes liable to any of its shareholders (other than a member of the Group) in respect of Subordinated Obligations (other than the Zhengzhou CCS Loan), such shareholder will enter into a suspension agreement in form and substance similar to the CCS Suspension Agreement or a subordination deed in form and substance satisfactory to the Trustee and will further procure that such shareholder will do all such acts and will execute all such documents as the Trustee may consider necessary for giving full effect to such suspension agreement or subordination deed; and (3) ensure that it has the right to defer interest payable in respect of such Subordinated Obligations (including the Zhengzhou CCS Loan) in the event that a payment of interest is not permitted pursuant to Condition 4(h)(ii)(1)(B). For the avoidance of doubt, payments of interest and principal in respect of the Zhengzhou CCS Loan and the other Subordinated Obligations may be made if the Notes are no longer outstanding. 5. Interest and Other Calculations (I) Interest on Fixed Rate Notes (a) Interest Rate and Accrual Each Fixed Rate Note bears interest on its principal amount outstanding from the Interest Commencement Date in respect thereof and as shown on the face of such Note at the rate per annum (expressed as a percentage) equal to the Interest Rate shown on the face of such Note payable in arrear on each Interest Payment Date or Interest Payment Dates shown on the face of such Note in each year and on the Maturity Date shown on the face of such Note if that date does not fall on an Interest Payment Date. The first payment of interest will be made on the Interest Payment Date next following the Interest Commencement Date (and if the Interest Commencement Date is not an Interest Payment Date, will amount to the Initial Broken Amount shown on the face of such Note), unless the Maturity Date falls before the date on which the first payment of interest would otherwise be due. If the Maturity Date is not an Interest Payment Date, interest from the 33

36 preceding Interest Payment Date (or from the Interest Commencement Date, as the case may be) to the Maturity Date will amount to the Final Broken Amount shown on the face of the Note. Interest will cease to accrue on each Fixed Rate Note from the due date for redemption thereof unless, upon due presentation thereof and subject to the provisions of the Trust Deed, payment of the principal is improperly withheld or refused, in which event interest at such rate will continue to accrue (as well after as before judgment) at the rate and in the manner provided in this Condition 5(I) to the Relevant Date (as defined in Condition 8). (b) (II) (a) Calculations In the case of a Fixed Rate Note, interest in respect of a period of less than one year will be calculated on the Day Count Fraction specified hereon. The amount of interest payable per Calculation Amount in respect of any Note shall be calculated by multiplying the product of the Interest Rate and the Calculation Amount, by the Day Count Fraction shown on the Note and rounding the resultant figure to the nearest sub-unit of the Relevant Currency. Interest on Floating Rate Notes or Variable Rate Notes Interest Payment Dates Each Floating Rate Note or Variable Rate Note bears interest on its principal amount outstanding from the Interest Commencement Date in respect thereof and as shown on the face of such Note, and such interest will be payable in arrear on each interest payment date ( Interest Payment Date ). Such Interest Payment Date(s) is/are either shown hereon as Specified Interest Payment Date(s) or, if no Specified Interest Payment Date(s) is/are shown hereon, Interest Payment Date shall mean each date which (save as mentioned in these Conditions) falls the number of months specified as the Interest Period on the face of the Note (the Specified Number of Months ) after the preceding Interest Payment Date or, in the case of the first Interest Payment Date, after the Interest Commencement Date (and which corresponds numerically with such preceding Interest Payment Date or the Interest Commencement Date, as the case may be), provided that the Agreed Yield (as defined in Condition 5(II)(c)) in respect of any Variable Rate Note for any Interest Period (as defined below) relating to that Variable Rate Note shall be payable on the first day of that Interest Period. If any Interest Payment Date referred to in these Conditions that is specified to be subject to adjustment in accordance with a Business Day Convention would otherwise fall on a day that is not a business day (as defined below), then if the Business Day Convention specified is (1) the Floating Rate Business Day Convention, such date shall be postponed to the next day which is a business day unless it would thereby fall into the next calendar month, in which event (i) such date shall be brought forward to the immediately preceding business day and (ii) each subsequent such date shall be the last business day of the month in which such date would have fallen had it not been subject to adjustment, (2) the Following Business Day Convention, such date shall be postponed to the next day that is a business day, (3) the Modified Following Business Day Convention, such date shall be postponed to the next day that is a business day unless it would thereby fall into the next calendar month, in which event such date shall be brought forward to the immediately preceding business day or (4) the Preceding Business Day Convention, such date shall be brought forward to the immediately preceding business day. The period beginning on the Interest Commencement Date and ending on the first Interest Payment Date and each successive period beginning on an Interest Payment Date and ending on the next succeeding Interest Payment Date is herein called an Interest Period. Interest will cease to accrue on each Floating Rate Note or Variable Rate Note from the due date for redemption thereof unless, upon due presentation and subject to the provisions of the Trust Deed, payment of the Redemption Amount is improperly withheld or refused, in which event interest will continue to accrue (as well after as before judgment) at the rate and in the manner provided in this Condition 5(II) to the Relevant Date. 34

37 (b) Rate of Interest - Floating Rate Notes (i) Each Floating Rate Note bears interest at a floating rate determined by reference to a Benchmark as stated on the face of such Floating Rate Note, being (in the case of Notes which are denominated in Singapore dollars) SIBOR (in which case such Note will be a SIBOR Note) or Swap Rate (in which case such Note will be a Swap Rate Note) or in any other case (or in the case of Notes which are denominated in a currency other than Singapore dollars) such other Benchmark as is set out on the face of such Note. Such floating rate may be adjusted by adding or subtracting the Spread (if any) stated on the face of such Note. The Spread is the percentage rate per annum specified on the face of such Note as being applicable to the rate of interest for such Note. The rate of interest so calculated shall be subject to Condition 5(V)(a) below. The rate of interest payable in respect of a Floating Rate Note from time to time is referred to in these Conditions as the Rate of Interest. (ii) The Rate of Interest payable from time to time in respect of each Floating Rate Note will be determined by the Agent Bank on the basis of the following provisions: (1) in the case of Floating Rate Notes which are SIBOR Notes: (A) (B) (C) the Agent Bank will, at or about the Relevant Time on the relevant Interest Determination Date in respect of each Interest Period, determine the Rate of Interest for such Interest Period which shall be the offered rate for deposits in Singapore dollars for a period equal to the duration of such Interest Period which appears on the Bloomberg Screen Swap Offer and SIBOR (ABSIRFIX) Page under the column headed SGD SIBOR (or such other replacement page thereof for the purpose of displaying SIBOR or such other Screen Page as may be provided hereon) and as adjusted by the Spread (if any); if no such rate appears on the Bloomberg Screen Swap Offer and SIBOR (ABSIRFIX) Page (or such other replacement page as aforesaid) or if the Bloomberg Screen Swap Offer and SIBOR (ABSIRFIX) Page (or such other replacement page as aforesaid) is unavailable for any reason, the Agent Bank will, at or about the Relevant Time on the relevant Interest Determination Date in respect of each Interest Period, determine the Rate of Interest for such Interest Period which shall be the offered rate for deposits in Singapore dollars for a period equal to the duration of such Interest Period which appears on the Reuters Screen ABSIRFIX01 Page under the caption ABS SIBOR FIX - SIBOR AND SWAP OFFER RATES - RATES AT 11:00 HRS SINGAPORE TIME and under the column headed SGD SIBOR (or such other replacement page thereof for the purpose of displaying SIBOR or such other Screen Page as may be provided hereon) and as adjusted by the Spread (if any); if no such rate appears on the Reuters Screen ABSIRFIX01 Page under the column headed SGD SIBOR (or such other replacement page as aforesaid) or if the Reuters Screen ABSIRFIX01 Page (or such other replacement page as aforesaid) is unavailable for any reason, the Agent Bank will request the principal Singapore offices of each of the Reference Banks to provide the Agent Bank with the rate at which deposits in Singapore dollars are offered by it at approximately the Relevant Time on the Interest Determination Date to prime banks in the Singapore interbank market for a period equivalent to the duration of such Interest Period commencing on such Interest Payment Date in an amount comparable to the aggregate principal amount of the relevant Floating Rate Notes. The Rate of Interest for such Interest Period shall be the arithmetic mean 35

38 (rounded up, if necessary, to the nearest 1/16 per cent.) of such offered quotations and as adjusted by the Spread (if any), as determined by the Agent Bank; (D) (E) if on any Interest Determination Date, two but not all the Reference Banks provide the Agent Bank with such quotations, the Rate of Interest for the relevant Interest Period shall be determined in accordance with (C) above on the basis of the quotations of those Reference Banks providing such quotations; and if on any Interest Determination Date, one only or none of the Reference Banks provides the Agent Bank with such quotation, the Rate of Interest for the relevant Interest Period shall be the rate per annum which the Agent Bank determines to be the arithmetic mean (rounded up, if necessary, to the nearest 1/16 per cent.) of the prime lending rates for Singapore dollars quoted by the Reference Banks at or about the Relevant Time on such Interest Determination Date and as adjusted by the Spread (if any); (2) in the case of Floating Rate Notes which are Swap Rate Notes: (A) (B) (C) the Agent Bank will, at or about the Relevant Time on the relevant Interest Determination Date in respect of each Interest Period, determine the Rate of Interest for such Interest Period as being the rate which appears on the Bloomberg Screen Swap Offer and SIBOR (ABSIRFIX) Page under the column headed SGD Swap Offer (or such replacement page thereof for the purpose of displaying the swap rates of leading reference banks) at or about the Relevant Time on such Interest Determination Date and for a period equal to the duration of such Interest Period and as adjusted by the Spread (if any); if on any Interest Determination Date no such rate is quoted on the Bloomberg Screen Swap Offer and SIBOR (ABSIRFIX) Page (or such other replacement page as aforesaid) or the Bloomberg Screen Swap Offer and SIBOR (ABSIRFIX) Page (or such other replacement page as aforesaid) is unavailable for any reason, the Agent Bank will, at or about the Relevant Time on the relevant Interest Determination Date in respect of each Interest Period, determine the Rate of Interest for such Interest Period as being the rate which appears on the Reuters Screen ABSFIX01 Page under the caption SGD SOR rates as of 11:00hrs London Time under the column headed SGD SOR (or such replacement page thereof for the purpose of displaying the swap rates of leading reference banks) at or about the Relevant Time on such Interest Determination Date and for a period equal to the duration of such Interest Period and as adjusted by the Spread (if any); if on any Interest Determination Date no such rate is quoted on Reuters Screen ABSFIX01 Page (or such other replacement page as aforesaid) or Reuters Screen ABSFIX01 Page (or such other replacement page as aforesaid) is unavailable for any reason, the Agent Bank will determine the Rate of Interest for such Interest Period as being the rate (or, if there is more than one rate which is published, the arithmetic mean of those rates (rounded up, if necessary, to the nearest 1/16 per cent.)) for a period equal to the duration of such Interest Period published by a recognised industry body where such rate is widely used (after taking into account the industry practice at that time), or by such other relevant authority as may be agreed between the Agent Bank and the Issuer; and 36

39 (D) if on any Interest Determination Date the Agent Bank is otherwise unable to determine the Rate of Interest under paragraph (b)(ii)(2)(c) above or if no agreement on the relevant authority is reached between the Agent Bank and the Issuer under paragraph (b)(ii)(2)(c) above, the Rate of Interest shall be determined by the Agent Bank to be the rate per annum equal to the arithmetic mean (rounded up, if necessary, to the nearest 1/16 per cent.) of the rates quoted by the Singapore offices of the Reference Banks or those of them (being at least two in number) to the Agent Bank at or about a.m. (Singapore time) on the first business day following such Interest Determination Date as being their cost (including the cost occasioned by or attributable to complying with reserves, liquidity, deposit or other requirements imposed on them by any relevant authority or authorities) of funding, for the relevant Interest Period, an amount equal to the aggregate principal amount of the relevant Floating Rate Notes for such Interest Period by whatever means they determine to be most appropriate and as adjusted by the Spread (if any), or if on such day one only or none of the Singapore offices of the Reference Banks provides the Agent Bank with such quotation, the Rate of Interest for the relevant Interest Period shall be the rate per annum equal to the arithmetic mean (rounded up, if necessary, to the nearest 1/16 per cent.) of the prime lending rates for Singapore dollars quoted by the Singapore offices of the Reference Banks at or about a.m. (Singapore time) on such Interest Determination Date and as adjusted by the Spread (if any); (3) in the case of Floating Rate Notes which are not SIBOR Notes or Swap Rate Notes or which are denominated in a currency other than Singapore dollars, the Agent Bank will determine the Rate of Interest in respect of any Interest Period at or about the Relevant Time on the Interest Determination Date in respect of such Interest Period as follows: (A) if the Primary Source (as defined below) for the Floating Rate is a Screen Page (as defined below), subject as provided below, the Rate of Interest in respect of such Interest Period shall be: (aa) the Relevant Rate (as defined below) (where such Relevant Rate on such Screen Page is a composite quotation or is customarily supplied by one entity); or (bb) the arithmetic mean of the Relevant Rates of the persons whose Relevant Rates appear on that Screen Page, in each case appearing on such Screen Page at the Relevant Time on the Interest Determination Date, and as adjusted by the Spread (if any); (B) if the Primary Source for the Floating Rate is Reference Banks or if paragraph (b)(ii)(3)(a)(aa) applies and no Relevant Rate appears on the Screen Page at the Relevant Time on the Interest Determination Date or if paragraph (b)(ii)(3)(a)(bb) applies and fewer than two Relevant Rates appear on the Screen Page at the Relevant Time on the Interest Determination Date, subject as provided below, the Rate of Interest shall be the rate per annum which the Agent Bank determines to be the arithmetic mean (rounded up, if necessary, to the nearest 1/16 per cent.) of the Relevant Rates that each of the Reference Banks is quoting to leading banks in the Relevant Financial Centre (as defined below) at the Relevant Time on the Interest Determination Date and as adjusted by the Spread (if any); and 37

40 (C) if paragraph (b)(ii)(3)(b) applies and the Agent Bank determines that fewer than two Reference Banks are so quoting Relevant Rates, the Rate of Interest shall be the Rate of Interest determined on the previous Interest Determination Date. (iii) (iv) On the last day of each Interest Period, the Issuer will pay interest on each Floating Rate Note to which such Interest Period relates at the Rate of Interest for such Interest Period. For the avoidance of doubt, in the event that the Rate of Interest in relation to any Interest Period is less than zero, the Rate of Interest in relation to such Interest Period shall be equal to zero. (c) Rate of Interest - Variable Rate Notes (i) Each Variable Rate Note bears interest at a variable rate determined in accordance with the provisions of this paragraph (c). The interest payable in respect of a Variable Rate Note on the first day of an Interest Period relating to that Variable Rate Note is referred to in these Conditions as the Agreed Yield and the rate of interest payable in respect of a Variable Rate Note on the last day of an Interest Period relating to that Variable Rate Note is referred to in these Conditions as the Rate of Interest. (ii) The Agreed Yield or, as the case may be, the Rate of Interest payable from time to time in respect of each Variable Rate Note for each Interest Period shall, subject as referred to in paragraph (c)(iv) below, be determined as follows: (1) not earlier than 9.00 a.m. (Singapore time) on the ninth business day nor later than 3.00 p.m. (Singapore time) on the third business day prior to the commencement of each Interest Period, the Issuer and the Relevant Dealer (as defined below) shall endeavour to agree on the following: (A) (B) (C) whether interest in respect of such Variable Rate Note is to be paid on the first day or the last day of such Interest Period; if interest in respect of such Variable Rate Note is agreed between the Issuer and the Relevant Dealer to be paid on the first day of such Interest Period, an Agreed Yield in respect of such Variable Rate Note for such Interest Period (and, in the event of the Issuer and the Relevant Dealer so agreeing on such Agreed Yield, the Interest Amount (as defined below) for such Variable Rate Note for such Interest Period shall be zero); and if interest in respect of such Variable Rate Note is agreed between the Issuer and the Relevant Dealer to be paid on the last day of such Interest Period, a Rate of Interest in respect of such Variable Rate Note for such Interest Period (an Agreed Rate ) and, in the event of the Issuer and the Relevant Dealer so agreeing on an Agreed Rate, such Agreed Rate shall be the Rate of Interest for such Variable Rate Note for such Interest Period; and (2) if the Issuer and the Relevant Dealer shall not have agreed either an Agreed Yield or an Agreed Rate in respect of such Variable Rate Note for such Interest Period by 3.00 p.m. (Singapore time) on the third business day prior to the commencement of such Interest Period, or if there shall be no Relevant Dealer during the period for agreement referred to in (1) above, the Rate of Interest for such Variable Rate Note for such Interest Period shall automatically be the rate per annum equal to the Fall Back Rate (as defined below) for such Interest Period. 38

41 (iii) The Issuer has undertaken to the Issuing and Paying Agent and the Agent Bank that it will as soon as possible after the Agreed Yield or, as the case may be, the Agreed Rate in respect of any Variable Rate Note is determined, but not later than a.m. (Singapore time) on the next following business day: (1) notify the Guarantors, the Issuing and Paying Agent and the Agent Bank of the Agreed Yield or, as the case may be, the Agreed Rate for such Variable Rate Note for such Interest Period; and (2) cause such Agreed Yield or, as the case may be, Agreed Rate for such Variable Rate Note to be notified by the Issuing and Paying Agent to the relevant Noteholder at its request. (iv) For the purposes of sub-paragraph (ii) above, the Rate of Interest for each Interest Period for which there is neither an Agreed Yield nor Agreed Rate in respect of any Variable Rate Note or no Relevant Dealer in respect of the Variable Rate Note(s) shall be the rate (the Fall Back Rate ) determined by reference to a Benchmark as stated on the face of such Variable Rate Note(s), being (in the case of Variable Rate Notes which are denominated in Singapore dollars) SIBOR (in which case such Variable Rate Note(s) will be SIBOR Note(s)) or Swap Rate (in which case such Variable Rate Note(s) will be Swap Rate Note(s)) or (in any other case or in the case of Variable Rate Notes which are denominated in a currency other than Singapore dollars) such other Benchmark as is set out on the face of such Variable Rate Note(s). Such rate may be adjusted by adding or subtracting the Spread (if any) stated on the face of such Variable Rate Note. The Spread is the percentage rate per annum specified on the face of such Variable Rate Note as being applicable to the rate of interest for such Variable Rate Note. The rate of interest so calculated shall be subject to Condition 5(V)(a) below. The Fall Back Rate payable from time to time in respect of each Variable Rate Note will be determined by the Agent Bank in accordance with the provisions of Condition 5(II)(b)(ii) above (mutatis mutandis) and references therein to Rate of Interest shall mean Fall Back Rate. (v) (vi) If interest is payable in respect of a Variable Rate Note on the first day of an Interest Period relating to such Variable Rate Note, the Issuer will pay the Agreed Yield applicable to such Variable Rate Note for such Interest Period on the first day of such Interest Period. If interest is payable in respect of a Variable Rate Note on the last day of an Interest Period relating to such Variable Rate Note, the Issuer will pay the Interest Amount for such Variable Rate Note for such Interest Period on the last day of such Interest Period. For the avoidance of doubt, in the event that the Rate of Interest in relation to any Interest Period is less than zero, the Rate of Interest in relation to such Interest Period shall be equal to zero. (d) Definitions As used in these Conditions: Benchmark means the rate specified as such in the applicable Pricing Supplement; business day means, in respect of each Note, (i) a day (other than a Saturday or Sunday) on which Euroclear, Clearstream, Luxembourg and the Depository, as applicable, are operating, (ii) a day (other than a Saturday or Sunday) on which banks and foreign exchange markets are open for general business in the country of the Issuing and Paying Agent s specified office and (iii) (if a payment is to be made on that day) (1) (in the case of Notes denominated in Singapore dollars) a day (other than a Saturday or Sunday) on which banks and foreign exchange markets are open for general business in Singapore, (2) (in the case of Notes denominated in Euros) a day (other than a Saturday or Sunday) on which the TARGET 39

42 System is open for settlement in Euros and (3) (in the case of Notes denominated in a currency other than Singapore dollars and Euros) a day (other than a Saturday or Sunday) on which banks and foreign exchange markets are open for general business in Singapore and the principal financial centre for that currency; Calculation Amount means the amount specified as such on the face of any Note, or if no such amount is so specified, the Denomination Amount of such Note as shown on the face thereof; Interest Commencement Date means the Issue Date or such other date as may be specified as the Interest Commencement Date on the face of such Note; Interest Determination Date means, in respect of any Interest Period, that number of business days prior thereto as is set out in the applicable Pricing Supplement or on the face of the relevant Note; Primary Source means the Screen Page specified as such in the applicable Pricing Supplement and (in the case of any Screen Page provided by any information service other than the Bloomberg agency or the Reuters Monitor Money Rates Service ( Reuters )) agreed to by the Agent Bank; Reference Banks means the institutions specified as such hereon or, if none, three major banks selected by the Agent Bank in the interbank market that is most closely connected with the Benchmark; Relevant Currency means the currency in which the Notes are denominated; Relevant Dealer means, in respect of any Variable Rate Note, the Dealer party to the Programme Agreement referred to in the Agency Agreement with whom the Issuer has concluded or is negotiating an agreement for the issue of such Variable Rate Note pursuant to the Programme Agreement; Relevant Financial Centre means, in the case of interest to be determined on an Interest Determination Date with respect to any Floating Rate Note or Variable Rate Note, the financial centre with which the relevant Benchmark is most closely connected or, if none is so connected, Singapore; Relevant Rate means the Benchmark for a Calculation Amount of the Relevant Currency for a period (if applicable or appropriate to the Benchmark) equal to the relevant Interest Period; Relevant Time means, with respect to any Interest Determination Date, the local time in the Relevant Financial Centre at which it is customary to determine bid and offered rates in respect of deposits in the Relevant Currency in the interbank market in the Relevant Financial Centre; Screen Page means such page, section, caption, column or other part of a particular information service (including, but not limited to, the Bloomberg agency and Reuters) as may be specified hereon for the purpose of providing the Benchmark, or such other page, section, caption, column or other part as may replace it on that information service or on such other information service, in each case as may be nominated by the person or organisation providing or sponsoring the information appearing there for the purpose of displaying rates or prices comparable to the Benchmark; and TARGET System means the Trans-European Automated Real-Time Gross Settlement Express Transfer (known as TARGET 2) System which was launched on 19 November 2007 or any successor thereto. 40

43 (III) (a) (b) Interest on Hybrid Notes Interest Rate and Accrual Each Hybrid Note bears interest on its principal amount outstanding from the Interest Commencement Date in respect thereof and as shown on the face of such Note. Fixed Rate Period (i) In respect of the Fixed Rate Period shown on the face of such Note, each Hybrid Note bears interest on its principal amount outstanding from the first day of the Fixed Rate Period at the rate per annum (expressed as a percentage) equal to the Interest Rate shown on the face of such Note payable in arrear on each Interest Payment Date or Interest Payment Dates shown on the face of the Note in each year and on the last day of the Fixed Rate Period if that date does not fall on an Interest Payment Date. (ii) (iii) (iv) The first payment of interest will be made on the Interest Payment Date next following the first day of the Fixed Rate Period (and if the first day of the Fixed Rate Period is not an Interest Payment Date, will amount to the Initial Broken Amount shown on the face of such Note), unless the last day of the Fixed Rate Period falls before the date on which the first payment of interest would otherwise be due. If the last day of the Fixed Rate Period is not an Interest Payment Date, interest from the preceding Interest Payment Date (or from the first day of the Fixed Rate Period, as the case may be) to the last day of the Fixed Rate Period will amount to the Final Broken Amount shown on the face of the Note. Where the due date of redemption of any Hybrid Note falls within the Fixed Rate Period, interest will cease to accrue on the Note from the due date for redemption thereof unless, upon due presentation and subject to the provisions of the Trust Deed, payment of principal (or Redemption Amount, as the case may be) is improperly withheld or refused, in which event interest at such rate will continue to accrue (as well after as before judgment) at the rate and in the manner provided in this Condition 5(III) to the Relevant Date. In the case of a Hybrid Note, interest in respect of a period of less than one year will be calculated on the Day Count Fraction specified hereon during the Fixed Rate Period. (c) Floating Rate Period (i) In respect of the Floating Rate Period shown on the face of such Note, each Hybrid Note bears interest on its principal amount outstanding from the first day of the Floating Rate Period, and such interest will be payable in arrear on each interest payment date ( Interest Payment Date ). Such Interest Payment Date(s) is/are either shown hereon as Specified Interest Payment Date(s) or, if no Specified Interest Payment Date(s) is/are shown hereon, Interest Payment Date shall mean each date which (save as mentioned in these Conditions) falls the number of months specified as the Interest Period on the face of the Note (the Specified Number of Months ) after the preceding Interest Payment Date or, in the case of the first Interest Payment Date, after the first day of the Floating Rate Period (and which corresponds numerically with such preceding Interest Payment Date or the first day of the Floating Rate Period, as the case may be). If any Interest Payment Date referred to in these Conditions that is specified to be subject to adjustment in accordance with a Business Day Convention would otherwise fall on a day that is not a business day, then if the Business Day Convention specified is (1) the Floating Rate Business Day Convention, such date shall be postponed to the next day which is a business day unless it would thereby fall into the next calendar month, in which event (i) such date shall be brought forward to the immediately preceding business day and (ii) each subsequent such date shall be the last business day of the month in which such date would have fallen had it not been subject to adjustment, (2) the Following Business Day Convention, such date shall be postponed to the next day that is a business day, (3) the Modified Following Business Day Convention, such date shall be postponed to the next day that is a 41

44 business day unless it would thereby fall into the next calendar month, in which event such date shall be brought forward to the immediately preceding business day or (4) the Preceding Business Day Convention, such date shall be brought forward to the immediately preceding business day. (ii) (iii) (iv) The period beginning on the first day of the Floating Rate Period and ending on the first Interest Payment Date and each successive period beginning on an Interest Payment Date and ending on the next succeeding Interest Payment Date is herein called an Interest Period. Where the due date of redemption of any Hybrid Note falls within the Floating Rate Period, interest will cease to accrue on the Note from the due date for redemption thereof unless, upon due presentation, payment of principal (or Redemption Amount, as the case may be) is improperly withheld or refused, in which event interest will continue to accrue (as well after as before judgment) at the rate and in the manner provided in this Condition 5(III) and the Agency Agreement to the Relevant Date. The provisions of Condition 5(II)(b) shall apply to each Hybrid Note during the Floating Rate Period as though references therein to Floating Rate Notes are references to Hybrid Notes. (IV) (V) (a) (b) Zero Coupon Notes Where a Note the Interest Basis of which is specified to be Zero Coupon is repayable prior to the Maturity Date and is not paid when due, the amount due and payable prior to the Maturity Date shall be the Early Redemption Amount of such Note (determined in accordance with Condition 6(i)). As from the Maturity Date, the rate of interest for any overdue principal of such a Note shall be a rate per annum (expressed as a percentage) equal to the Amortisation Yield (as defined in Condition 6(i)). Calculations Determination of Rate of Interest and Calculation of Interest Amounts The Agent Bank will, as soon as practicable after the Relevant Time on each Interest Determination Date, determine the Rate of Interest and calculate the amount of interest payable (the Interest Amounts ) in respect of each Calculation Amount of the relevant Floating Rate Notes, Variable Rate Notes or (where applicable) Hybrid Notes for the relevant Interest Period. The amount of interest payable in respect of any Floating Rate Note, Variable Rate Note or (where applicable) Hybrid Note shall be calculated by multiplying the product of the Rate of Interest and the outstanding principal amount of such Note, by the Day Count Fraction shown on the Note and rounding the resultant figure to the nearest sub-unit of the Relevant Currency. The determination of any rate or amount, the obtaining of each quotation and the making of each determination or calculation by the Agent Bank shall (in the absence of manifest error) be final and binding upon all parties. Notification The Agent Bank will cause the Rate of Interest and the Interest Amounts for each Interest Period and the relevant Interest Payment Date to be notified to the Issuing and Paying Agent, the Trustee and the Issuer as soon as possible after their determination but in any event later than the fourth business day thereafter. In the case of Floating Rate Notes, the Issuer shall, or shall procure the Agent Bank to, cause the Rate of Interest and the Interest Amounts for each Interest Period and the relevant Interest Payment Date to be notified to Noteholders in accordance with Condition 16 as soon as possible after their determination. The Interest Amounts and the Interest Payment Date so notified may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without notice in the event of an extension or shortening of the Interest Period by reason of any Interest Payment Date not being a business day. If the Floating Rate Notes, Variable Rate Notes or, as the case may be, Hybrid Notes become due and payable under Condition 10, the Rate of Interest and Interest Amounts payable in respect of the Floating Rate Notes, Variable Rate Notes or, as 42

45 the case may be, Hybrid Notes shall nevertheless continue to be calculated as previously in accordance with this Condition but no publication of the Rate of Interest and Interest Amounts need to be made unless the Trustee requires otherwise. (c) (d) Determination or Calculation by the Trustee If the Agent Bank does not at any material time determine or calculate the Rate of Interest for an Interest Period or any Interest Amount, the Trustee shall do so. In doing so, the Trustee shall apply the provisions of this Condition, with any necessary consequential amendments, to the extent that, in its opinion, it can do so, and in all other respects, it shall do so in such manner as it shall deem fair and reasonable in all the circumstances. Agent Bank and Reference Banks The Issuer will procure that, so long as any Floating Rate Note, Variable Rate Note or Hybrid Note remains outstanding, there shall at all times be three Reference Banks (or such other number as may be required) and, so long as any Floating Rate Note, Variable Rate Note, Hybrid Note or Zero Coupon Note remains outstanding, there shall at all times be an Agent Bank. If any Reference Bank (acting through its relevant office) is unable or unwilling to continue to act as a Reference Bank or the Agent Bank is unable or unwilling to act as such or if the Agent Bank fails duly to establish the Rate of Interest for any Interest Period or to calculate the Interest Amounts, the Issuer will appoint another bank with an office in the Relevant Financial Centre to act as such in its place. The Agent Bank may not resign from its duties without a successor having been appointed as aforesaid. 6. Redemption and Purchase (a) Final Redemption Unless previously redeemed or purchased and cancelled as provided below, this Note will be redeemed at its Redemption Amount on the Maturity Date shown on its face (if this Note is shown on its face to be a Fixed Rate Note, Hybrid Note (during the Fixed Rate Period) or Zero Coupon Note) or on the Interest Payment Date falling in the Redemption Month shown on its face (if this Note is shown on its face to be a Floating Rate Note, Variable Rate Note or Hybrid Note (during the Floating Rate Period)). (b) Purchase at the Option of Issuer If so provided hereon, the Issuer shall have the option to purchase all or any of the Fixed Rate Notes, Floating Rate Notes, Variable Rate Notes or Hybrid Notes at their Redemption Amount on any date on which interest is due to be paid on such Notes and the Noteholders shall be bound to sell such Notes to the Issuer accordingly. To exercise such option, the Issuer shall give irrevocable notice to the Noteholders within the Issuer s Purchase Option Period shown on the face hereof. Such Notes may be held, resold or surrendered to the Issuing and Paying Agent for cancellation. The Notes so purchased, while held by or on behalf of the Issuer, shall not entitle the holder to vote at any meetings of the Noteholders and shall not be deemed to be outstanding for the purposes of calculating quorums at meetings of the Noteholders or for the purposes of Conditions 10, 11 and 12. In the case of a purchase of some only of the Notes, the notice to Noteholders shall also contain the certificate numbers of the Bearer Notes or, in the case of Registered Notes, shall specify the principal amount of Registered Notes drawn and the holder(s) of such Registered Notes, to be purchased, which shall have been drawn by or on behalf of the Issuer in such place and in such manner as may be agreed between the Issuer and the Trustee, subject to compliance with any applicable laws. So long as the Notes are listed on the Singapore Exchange Securities Trading Limited (the SGX-ST ) or any other or further stock exchange on which the Notes are listed and which is for the time being approved for the purposes of the Trust Deed by the Trustee (a Stock Exchange ), the Issuer shall comply with the rules of such Stock Exchange in relation to the publication of any purchase of such Notes. 43

46 (c) Purchase at the Option of Noteholders (i) Each Noteholder shall have the option to have all or any of his Variable Rate Notes purchased by the Issuer at their Redemption Amount on any Interest Payment Date and the Issuer will purchase such Variable Rate Notes accordingly. To exercise such option, a Noteholder shall deposit (in the case of Bearer Notes) such Variable Rate Notes to be purchased (together with all unmatured Coupons and unexchanged Talons) with the Issuing and Paying Agent or any other Paying Agent at its specified office or (in the case of Registered Notes) the Certificate representing such Variable Rate Note(s) to be purchased with the Registrar or any other Transfer Agent at its specified office, together with a duly completed option exercise notice in the form obtainable from the Issuing and Paying Agent, any Paying Agent, the Registrar or any Transfer Agent (as applicable) within the Noteholders VRN Purchase Option Period shown on the face hereof. Any Variable Rate Notes or Certificates representing such Variable Rate Notes so deposited may not be withdrawn (except as provided in the Agency Agreement) without the prior consent of the Issuer. Such Variable Rate Notes may be held, resold or surrendered for cancellation, in the case of Bearer Notes, by surrendering each such Variable Rate Note (together with all unmatured Coupons and unexchanged Talons) to the Issuing and Paying Agent and, in the case of Registered Notes, by surrendering the Certificate representing such Variable Rate Notes to the Registrar. The Variable Rate Notes so purchased, while held by or on behalf of the Issuer, shall not entitle the holder to vote at any meetings of the Noteholders and shall not be deemed to be outstanding for the purposes of calculating quorums at meetings of the Noteholders or for the purposes of Conditions 10, 11 and 12. (ii) (iii) If so provided hereon, each Noteholder shall have the option to have all or any of his Fixed Rate Notes, Floating Rate Notes or Hybrid Notes purchased by the Issuer at their Redemption Amount on any date on which interest is due to be paid on such Notes and the Issuer will purchase such Notes accordingly. To exercise such option, a Noteholder shall deposit (in the case of Bearer Notes) such Note to be purchased (together with all unmatured Coupons and unexchanged Talons) with the Issuing and Paying Agent or any other Paying Agent at its specified office or (in the case of Registered Notes) the Certificate representing such Note(s) to be purchased with the Registrar or any other Transfer Agent at its specified office, together with a duly completed option exercise notice in the form obtainable from the Issuing and Paying Agent, any Paying Agent, the Registrar or any Transfer Agent (as applicable) within the Noteholders Purchase Option Period shown on the face hereof. Any Notes or Certificates so deposited may not be withdrawn (except as provided in the Agency Agreement) without the prior consent of the Issuer. Such Notes may be held, resold or surrendered for cancellation, in the case of Bearer Notes, by surrendering such Note (together with all unmatured Coupons and unexchanged Talons) to the Issuing and Paying Agent and, in the case of Registered Notes, by surrendering the Certificate representing such Notes to the Registrar. The Notes so purchased, while held by or on behalf of the Issuer, shall not entitle the holder to vote at any meetings of the Noteholders and shall not be deemed to be outstanding for the purposes of calculating quorums at meetings of the Noteholders or for the purposes of Conditions 10, 11 and 12. In the event that there are Excess Proceeds exceeding RMB25,000,000 (or its equivalent in other currencies) pursuant to Condition 4(c)(ii), the Issuer shall within 10 business days of such accumulation notify the Noteholders thereof and shall make an Offer to Purchase Notes of all Series in an aggregate principal amount equal to the Excess Proceeds. Excess Proceeds shall be applied by the Issuer in and towards payment of the purchase price for Notes of all Series tendered for purchase on a pro rata basis and, in respect of each Series of Notes, on a pro rata basis between the Notes tendered for purchase. For the purposes of these Conditions, Offer to Purchase means an offer to purchase Notes of all Series by the Issuer from the Noteholders commenced by the Issuer notifying the Noteholders in accordance with Condition 16 of such offer (the Excess Proceeds Notice ), which shall state: 44

47 (1) the purchase price and the date of purchase (which shall be a business day no earlier than 30 days nor later than 60 days from the date of such Excess Proceeds Notice) (the Excess Proceeds Purchase Payment Date ); (2) that any Note not tendered will continue to accrue interest pursuant to its terms; (3) that, unless the Issuer defaults in the payment of the purchase price, any Note accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest on and after the Excess Proceeds Purchase Payment Date; and (4) the ISIN number of the Notes. The offer price in any Offer to Purchase will be equal to the Redemption Amount of the Notes plus accrued and unpaid interest to the date of purchase, and will be payable in cash. If any proceeds remain after consummation of an Offer to Purchase, the Issuer may use those proceeds for any purpose not otherwise prohibited by the Issue Documents. If the aggregate principal amount of Notes tendered in such Offer to Purchase exceeds the amount of such proceeds, the Notes to be purchased shall be purchased on a pro rata basis and will reduce the outstanding principal amount of each purchased Note with effect from the date of such payment. To exercise such option or accept the Issuer s offer to purchase Notes, a Noteholder shall deposit (in the case of Bearer Notes) such Note to be purchased (together with all unmatured Coupons and unexchanged Talons) with the Issuing and Paying Agent or any other Paying Agent at its specified office or (in the case of Registered Notes) the Certificate representing such Note(s) to be purchased with the Registrar or any other Transfer Agent at its specified office, together with a duly completed option exercise notice in the form obtainable from the Issuing and Paying Agent, any Paying Agent, the Registrar or any Transfer Agent (as applicable) no later than 14 days from the date of the Excess Proceeds Notice. Any Notes or Certificates so deposited may not be withdrawn (except as provided in the Agency Agreement) without the prior consent of the Issuer. Such Notes may be held, resold or surrendered for cancellation, in the case of Bearer Notes, by surrendering such Note (together with all unmatured Coupons and unexchanged Talons) to the Issuing and Paying Agent and, in the case of Registered Notes, by surrendering the Certificate representing such Notes to the Registrar. The Notes so purchased, while held by or on behalf of the Issuer, shall not entitle the holder to vote at any meetings of the Noteholders and shall not be deemed to be outstanding for the purposes of calculating quorums at meetings of the Noteholders or for the purposes of Conditions 10, 11 and 12. On the Excess Proceeds Purchase Payment Date, the Issuer shall accept for payment on a pro rata basis Notes or portions thereof tendered pursuant to an Offer to Purchase. The Issuer will publicly announce the results of an Offer to Purchase as soon as practicable after the Excess Proceeds Purchase Payment Date. The Issuer will comply with any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that the Issuer is required to repurchase Notes pursuant to an Offer to Purchase. The Offer to Purchase is required to contain or incorporate by reference information concerning the business of the Obligors and the Group which the Issuer in good faith believes will assist such Noteholders to make an informed decision with respect to the Offer to Purchase, including a brief description of the events requiring the Issuer to make the Offer to Purchase, and any other information required by applicable law to be included therein. The Offer to Purchase is required to contain all instructions and materials necessary to enable such Noteholders to tender Notes pursuant to the Offer to Purchase. 45

48 (d) Redemption at the Option of the Issuer If so provided hereon, the Issuer may, on giving irrevocable notice to the Noteholders falling within the Issuer s Redemption Option Period shown on the face hereof, redeem all or, if so provided, some of the Notes at their Redemption Amount or integral multiples thereof and on the date or dates so provided. Any such redemption of Notes shall be at their Redemption Amount, together with interest accrued to the date fixed for redemption. All Notes in respect of which any such notice is given shall be redeemed on the date specified in such notice in accordance with this Condition. In the case of a partial redemption of the Notes, the notice to Noteholders shall also contain the certificate numbers of the Bearer Notes or, in the case of Registered Notes, shall specify the principal amount of Registered Notes drawn and the holder(s) of such Registered Notes, to be redeemed, which shall have been drawn by or on behalf of the Issuer in such place and in such manner as may be agreed between the Issuer and the Trustee, subject to compliance with any applicable laws. So long as the Notes are listed on any Stock Exchange, the Issuer shall comply with the rules of such Stock Exchange in relation to the publication of any redemption of such Notes. (e) Redemption at the Option of Noteholders (i) If so provided hereon, the Issuer shall, at the option of the holder of any Note, redeem such Note on the date or dates so provided at its Redemption Amount, together with interest accrued to the date fixed for redemption. To exercise such option, the holder must deposit (in the case of Bearer Notes) such Note (together with all unmatured Coupons and unexchanged Talons) with the Issuing and Paying Agent or any other Paying Agent at its specified office or (in the case of Registered Notes) the Certificate representing such Note(s) with the Registrar or any other Transfer Agent at its specified office, together with a duly completed option exercise notice ( Exercise Notice ) in the form obtainable from the Issuing and Paying Agent, any other Paying Agent, the Registrar, any other Transfer Agent or the Issuer (as applicable) within the Noteholders Redemption Option Period shown on the face hereof. Any Note or Certificate so deposited may not be withdrawn (except as provided in the Agency Agreement) without the prior consent of the Issuer. (ii) If, for any reason, a Change of Control Event occurs, the Issuer will within seven days of such occurrence give notice to the Noteholders of the occurrence of such event (the Change of Control Event Notice ) (provided that failure by the Issuer to give such notice shall not prejudice the Noteholder of such option) and shall, at the option of the holder of any Note, redeem such Note at 101 per cent. of its principal amount, together with interest accrued to the date fixed for redemption, on the date falling 60 days from the date of the Change of Control Event Notice (or if such date is not a business day, on the next day which is a business day). To exercise such option, the holder must deposit (in the case of Bearer Notes) such Note (together with all unmatured Coupons and unexchanged Talons) with the Principal Paying Agent at its specified office, together with a duly completed option exercise notice in the form obtainable from the Issuing and Paying Agent, any other Paying Agent, the Registrar, any other Transfer Agent or the Issuer (as applicable), no later than 30 days from the date of the Change of Control Event Notice. Any Note so deposited may not be withdrawn (except as provided in the Agency Agreement) without the prior consent of the Issuer. For the purposes of this Condition 6(e)(ii), a Change of Control Event occurs when: (1) Wan Yongxing (), Liu Yi () and their respective spouses, children, adopted children, step-children, siblings and parents (collectively, the Shareholders ) cease to have in aggregate an interest (whether directly or indirectly) of at least 40 per cent. of the voting rights in respect of the issued share capital of CCS; or (2) the Shareholders cease to have in aggregate the largest interest (whether directly or indirectly) of the voting rights in respect of the issued share capital of CCS. 46

49 (f) Redemption for Taxation Reasons If so provided hereon, the Notes may be redeemed at the option of the Issuer in whole, but not in part, on any Interest Payment Date or, if so specified hereon, at any time on giving not less than 30 nor more than 60 days notice to the Noteholders (which notice shall be irrevocable), at their Redemption Amount or (in the case of Zero Coupon Notes) Early Redemption Amount (as defined in Condition 6(i) below) (together with interest accrued to (but excluding) the date fixed for redemption), if (i) the Issuer has or will become obliged to pay additional amounts as provided or referred to in Condition 8, or increase the payment of such additional amounts or (if the Guarantee was called) any of the relevant Guarantors has or will become obliged to pay additional amounts as provided or referred to in Condition 8, or increase the payment of such additional amounts, as a result of any change in, or amendment to, the laws (or any regulations, rulings or other administrative pronouncements promulgated thereunder) of the relevant Tax Jurisdiction (as defined in Condition 8), or any change in the application or official interpretation of such laws, regulations, rulings or other administrative pronouncements, which change or amendment is made public on or after the Issue Date or any other date specified in the Pricing Supplement, and (ii) such obligations cannot be avoided by the Issuer or, as the case may be, such Guarantor taking reasonable measures available to it, provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer or, as the case may be, such Guarantor would be obliged to pay such additional amounts were a payment in respect of the Notes then due. Prior to the publication of any notice of redemption pursuant to this paragraph, the Issuer shall deliver to the Trustee and the Issuing and Paying Agent: (i) (ii) a certificate signed by a duly authorised director or officer of the Issuer or, as the case may be, the relevant Guarantor, stating that the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer so to redeem have occurred; and an opinion of independent legal, tax or any other professional advisers of recognised standing to the effect that the Issuer or, as the case may be, the relevant Guarantor has or is likely to become obliged to pay such additional amounts as a result of such change or amendment. (g) Redemption upon Cessation or Suspension of Trading of Shares In the event that (i) the shares of CCS cease to be traded on the Shanghai Stock Exchange or an Alternative Stock Exchange or (ii) trading in the shares of CCS on the Shanghai Stock Exchange or an Alternative Stock Exchange is suspended for a continuous period of more than seven market days as a result of a breach of the listing rules of the Shanghai Stock Exchange or, as the case may be, such Alternative Stock Exchange or a pending or threatened de-listing or any action taken by the Shanghai Stock Exchange or, as the case may be, such Alternative Stock Exchange or any other relevant regulator, the Issuer shall, at the option of the holder of any Note, redeem such Note at its Redemption Amount together with interest accrued to the date fixed for redemption on any date on which interest is due to be paid on such Notes or, if earlier, the date falling 30 days after the Effective Date. The Issuer shall within seven days after the Effective Date, give notice to the Trustee, the Issuing and Paying Agent and the Noteholders of the occurrence of the event specified in this paragraph (g) (provided that any failure by the Issuer to give such notice shall not prejudice any Noteholder of such option). To exercise such option, the holder must deposit (in the case of Bearer Notes) such Note (together with all unmatured Coupons and unexchanged Talons) with any Paying Agent at its specified office or (in the case of Registered Notes) the Certificate representing such Note(s) with the Registrar or any other Transfer Agent at its specified office, together with an Exercise Notice in the form obtainable from the Issuing and Paying Agent, any other Paying Agent, the Registrar or any other Transfer Agent or the Issuer (as applicable), no later than 21 days after the Effective Date. Any Note or Certificate so deposited may not be withdrawn (except as provided in the Agency Agreement) without the prior consent of the Issuer. In this Condition 6(g) : 47

50 (i) (ii) (iii) Alternative Stock Exchange means at any time, in the case of the shares of CCS, if they are not at that time listed and traded on the Shanghai Stock Exchange, the Shenzhen Stock Exchange, The Stock Exchange of Hong Kong Limited, the SGX-ST or any other internationally recognised, regularly operating and regulated stock exchange which is the principal stock exchange or securities market of which the shares are then listed or quoted or dealt in; Effective Date means (where the shares of CCS cease to be traded on the Shanghai Stock Exchange or an Alternative Stock Exchange) the date of cessation of trading or (where trading in the shares of CCS on the Shanghai Stock Exchange or an Alternative Stock Exchange is suspended for a continuous period of more than seven market days) the business day immediately following the expiry of such continuous period of seven market days; and market day means a day on which the Shanghai Stock Exchange or an Alternative Stock Exchange (as applicable) is open for securities trading. (h) Purchases The Issuer, the Guarantors and/or any of their respective subsidiaries may at any time purchase Notes at any price (provided that they are purchased together with all unmatured Coupons and unexchanged Talons relating to them) in the open market or otherwise, provided that in any such case such purchase or purchases is in compliance with all relevant laws, regulations and directives. Notes purchased by the Issuer, the Guarantors and/or any of their respective subsidiaries may be surrendered by the purchaser through the Issuer to, in the case of Bearer Notes, the Issuing and Paying Agent and, in the case of Registered Notes, the Registrar for cancellation or may at the option of the Issuer. the Guarantors or relevant related corporation be held or resold. For the purposes of these Conditions, directive includes any present or future directive, regulation, request, requirement, rule or credit restraint programme of any relevant agency, authority, central bank department, government, legislative, minister, ministry, official public or statutory corporation, self-regulating organisation, or stock exchange. (i) Early Redemption of Zero Coupon Notes (i) The Early Redemption Amount payable in respect of any Zero Coupon Note, the Early Redemption Amount of which is not linked to an index and/or formula, upon redemption of such Note pursuant to Condition 6(f) or upon it becoming due and payable as provided in Condition 10, shall be the Amortised Face Amount (calculated as provided below) of such Note unless otherwise specified hereon. (ii) (iii) Subject to the provisions of sub-paragraph (iii) below, the Amortised Face Amount of any such Note shall be the scheduled Redemption Amount of such Note on the Maturity Date discounted at a rate per annum (expressed as a percentage) equal to the Amortisation Yield (which, if none is shown hereon, shall be such rate as would produce an Amortised Face Amount equal to the issue price of the Notes if they were discounted back to their issue price on the Issue Date) compounded annually. If the Early Redemption Amount payable in respect of any such Note upon its redemption pursuant to Condition 6(f) or upon it becoming due and payable as provided in Condition 10 is not paid when due, the Early Redemption Amount due and payable in respect of such Note shall be the Amortised Face Amount of such Note as defined in sub-paragraph (ii) above, except that such sub-paragraph shall have effect as though the date on which the Note becomes due and payable were the Relevant Date. The calculation of the Amortised Face Amount in accordance with this sub-paragraph will continue to be made (as well after as before judgment) until the Relevant Date, unless the Relevant Date falls on or after the Maturity Date, in which case the amount due and payable shall be the scheduled Redemption Amount of such Note on the Maturity Date together with any interest which may accrue in accordance with Condition 5(IV). 48

51 Where such calculation is to be made for a period of less than one year, it shall be made on the basis of the Day Count Fraction shown hereon. (j) Cancellation All Notes purchased by or on behalf of the Issuer, the Guarantors and/or any of their respective subsidiaries may be surrendered for cancellation, in the case of Bearer Notes, by surrendering each such Note together with all unmatured Coupons and all unexchanged Talons to the Issuing and Paying Agent at its specified office and, in the case of Registered Notes, by surrendering the Certificate representing such Notes to the Registrar and, in each case, if so surrendered, shall, together with all Notes redeemed by the Issuer, be cancelled forthwith (together with all unmatured Coupons and unexchanged Talons attached thereto or surrendered therewith). Any Notes or Certificates so surrendered for cancellation may not be reissued or resold. 7. Payments (a) Principal and Interest in respect of Bearer Notes Payments of principal and interest (which shall include the Redemption Amount and the Early Redemption Amount) in respect of Bearer Notes will, subject as mentioned below, be made against presentation and surrender of the relevant Notes or Coupons, as the case may be, at the specified office of any Paying Agent by a cheque drawn in the currency in which payment is due on, or, at the option of the holders, by transfer to an account maintained by the holder in that currency with, a bank in the principal financial centre for that currency. (b) Principal and Interest in respect of Registered Notes (i) Payments of principal in respect of Registered Notes will, subject as mentioned below, be made against presentation and surrender of the relevant Certificates at the specified office of any of the Transfer Agents or of the Registrar and in the manner provided in Condition 7(b)(ii). (ii) Interest on Registered Notes shall be paid to the person shown on the Register at the close of business on the fifteenth day before the due date for payment thereof (the Record Date ). Payments of interest on each Registered Note shall be made by a cheque drawn in the currency in which payment is due on and mailed to the holder (or to the first named of joint holders) of such Note at its address appearing in the Register. Upon application by the holder to the specified office of the Registrar or any other Transfer Agent before the Record Date, such payment of interest may be made by transfer to an account maintained by the holder in that currency with, a bank in the principal financial centre for that currency. (c) (d) Payments subject to Law etc. All payments are subject in all cases to any applicable fiscal or other laws, regulations and directives, but without prejudice to the provisions of Condition 8. No commission or expenses shall be charged to the Noteholders or Couponholders in respect of such payments. Appointment of Agents The Issuing and Paying Agent, the Agent Bank and the Registrar initially appointed by the Issuer and the Guarantors and their specified offices are listed below. The Issuer and the Guarantors reserve the right at any time to vary or terminate the appointment of the Issuing and Paying Agent, any other Paying Agent, the Agent Bank, any Transfer Agent and the Registrar and to appoint additional or other Issuing and Paying Agents, Agent Banks, Transfer Agents and Registrars; provided that it will at all times maintain (i) an Issuing and Paying Agent having a specified office in Singapore, (ii) an Agent Bank having a specified office in Singapore, (iii) a Transfer Agent in relation to Registered Notes, having a specified office in Singapore and (iv) a Registrar in relation to Registered Notes having a specified office in Singapore. Notice of any such change or any change of any specified office will promptly be given by the Issuer to the Noteholders in accordance with Condition 16. The Agency Agreement may be amended by the Issuer, the Guarantors, the Issuing and Paying Agent, the Agent Bank, the Transfer Agent, the Registrar and the Trustee, without the consent of the holder of any holders for the purpose of curing any ambiguity or of curing, correcting or 49

52 supplementing any defective provision contained therein or in any manner which the Issuer, the Guarantors, the Issuing and Paying Agent, the Agent Bank, the Transfer Agent, the Registrar and the Trustee may mutually deem necessary or desirable and which does not, in the opinion of the Issuer, the Guarantors, the Issuing and Paying Agent, the Agent Bank, the Transfer Agent, the Registrar and the Trustee, adversely affect the interests of the holders of the Notes or the Coupons. (e) Unmatured Coupons and Unexchanged Talons (i) Bearer Notes which comprise Fixed Rate Notes and Hybrid Notes should be surrendered for payment together with all unmatured Coupons (if any) relating to such Notes (and, in the case of Hybrid Notes, relating to interest payable during the Fixed Rate Period), failing which an amount equal to the face value of each missing unmatured Coupon (or, in the case of payment not being made in full, that proportion of the amount of such missing unmatured Coupon which the sum of principal so paid bears to the total principal due) will be deducted from the Redemption Amount due for payment. Any amount so deducted will be paid in the manner mentioned above against surrender of such missing Coupon within a period of five years from the Relevant Date for the payment of such principal (whether or not such Coupon has become void pursuant to Condition 9). (ii) (iii) (iv) (v) Subject to the provisions of the relevant Pricing Supplement upon the due date for redemption of any Bearer Note comprising a Floating Rate Note, Variable Rate Note or Hybrid Note, unmatured Coupons relating to such Note (and, in the case of Hybrid Notes, relating to interest payable during the Floating Rate Period) (whether or not attached) shall become void and no payment shall be made in respect of them. Upon the due date for redemption of any Bearer Note, any unexchanged Talon relating to such Note (whether or not attached) shall become void and no Coupon shall be delivered in respect of such Talon. Where any Bearer Note comprising a Floating Rate Note, Variable Rate Note or Hybrid Note is presented for redemption without all unmatured Coupons, and where any Bearer Note is presented for redemption without any unexchanged Talon relating to it (and, in the case of Hybrid Notes, relating to interest payable during the Floating Rate Period), redemption shall be made only against the provision of such indemnity as the Issuer may require. If the due date for redemption or repayment of any Note is not a due date for payment of interest, interest accrued from the preceding due date for payment of interest or the Interest Commencement Date, as the case may be, shall only be payable against presentation (and surrender if appropriate) of the relevant Bearer Note or Certificate. (f) (g) (h) Talons On or after the Interest Payment Date for the final Coupon forming part of a Coupon sheet issued in respect of any Bearer Note, the Talon forming part of such Coupon sheet may be surrendered at the specified office of the Issuing and Paying Agent on any business day in exchange for a further Coupon sheet (and if necessary another Talon for a further Coupon sheet) (but excluding any Coupons that may have become void pursuant to Condition 9). Non-business Days Subject as provided in the relevant Pricing Supplement or subject as otherwise provided in these Conditions, if any date for the payment in respect of any Note or Coupon is not a business day, the holder shall not be entitled to payment until the next following business day and shall not be entitled to any further interest or other payment in respect of any such delay. Default Interest If on or after the due date for payment of any sum in respect of the Notes, payment of all or any part of such sum is not made against due presentation of the Notes or, as the case may be, the Coupons, the Issuer shall pay interest on the amount so unpaid from such due date up to the day of actual receipt by the relevant Noteholders or, as the case may be, Couponholders (as well after as before judgment) at a rate per annum determined by the Issuing and Paying Agent to be equal 50

53 to two per cent. per annum above (in the case of a Fixed Rate Note or a Hybrid Note during the Fixed Rate Period) the Interest Rate applicable to such Note, (in the case of a Floating Rate Note or a Hybrid Note during the Floating Rate Period) the Rate of Interest applicable to such Note or (in the case of a Variable Rate Note) the variable rate by which the Agreed Yield applicable to such Note is determined or, as the case may be, the Rate of Interest applicable to such Note, or in the case of a Zero Coupon Note, as provided for in the relevant Pricing Supplement. So long as the default continues then such rate shall be re-calculated on the same basis at intervals of such duration as the Issuing and Paying Agent may select, save that the amount of unpaid interest at the above rate accruing during the preceding such period shall be added to the amount in respect of which the Issuer is in default and itself bear interest accordingly. Interest at the rate(s) determined in accordance with this paragraph shall be calculated on the Day Count Fraction specified hereon and the actual number of days elapsed, shall accrue on a daily basis and shall be immediately due and payable by the Issuer. 8. Taxation All payments in respect of the Notes and the Coupons by the Issuer or, as the case may be, any Guarantor shall be made free and clear of, and without deduction or withholding for or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or within any Tax Jurisdiction, unless such deduction or withholding is required by law. In such event, the Issuer or, as the case may be, the relevant Guarantor shall pay such additional amounts as will result in the receipt by the Noteholders and the Couponholders of such amounts as would have been received by them had no such deduction or withholding been required, except that no such additional amounts shall be payable in respect of any Note or Coupon presented (or in respect of which the Certificate representing it is presented) for payment: (a) (b) by or on behalf of a holder who is subject to such taxes, duties, assessments or governmental charges by reason of his being connected with a Tax Jurisdiction otherwise than by reason only of the holding of such Note or Coupon or the receipt of any sums due in respect of such Note or Coupon (including, without limitation, the holder being a resident of, or a permanent establishment in, Singapore); or more than 30 days after the Relevant Date except to the extent that the holder thereof would have been entitled to such additional amounts on presenting the same for payment on the last day of such period of 30 days. As used in these Conditions: Relevant Date in respect of any Note or Coupon means the date on which payment in respect thereof first becomes due or (if any amount of the money payable is improperly withheld or refused) the date on which payment in full of the amount outstanding is made or (if earlier) the date falling seven days after that on which notice is duly given to the Noteholders in accordance with Condition 16 that, upon further presentation of the Note (or relative Certificate) or Coupon being made in accordance with the Conditions, such payment will be made, provided that payment is in fact made upon presentation, and references to principal shall be deemed to include any premium payable in respect of the Notes, all Redemption Amounts, Early Redemption Amounts and all other amounts in the nature of principal payable pursuant to Condition 6, interest shall be deemed to include all Interest Amounts and all other amounts payable pursuant to Condition 5 and any reference to principal and/or premium and/or Redemption Amounts and/or interest and/or Early Redemption Amounts shall be deemed to include any additional amounts which may be payable under these Conditions; and Tax Jurisdiction means, in respect of any Obligor, its jurisdiction of incorporation or any political subdivision or any authority thereof or therein having power to tax. 9. Prescription Claims against the Issuer for payment in respect of the Notes and Coupons (which, for this purpose, shall not include Talons) shall be prescribed and become void unless made within five years from the appropriate Relevant Date for payment. 51

54 10. Events of Default If any of the following events ( Events of Default ) occurs the Trustee at its discretion may, and if so requested by holders of at least 25 per cent. in principal amount of the Notes then outstanding or if so directed by an Extraordinary Resolution shall, give notice to the Issuer that the Notes are immediately repayable, whereupon the Redemption Amount of such Notes or (in the case of Zero Coupon Notes) the Early Redemption Amount of such Notes together with accrued interest to the date of payment shall become immediately due and payable: (a) (b) (c) the Issuer or any of the Guarantors does not pay any sum payable by it under any of the Notes at the place at and in the currency in which it is expressed to be payable (in the case of principal) when due and (in any other case) within five business days of its due date; the Issuer or any of the Guarantors does not perform or comply with any one or more of its obligations (other than the payment obligation of the Issuer or the Guarantors referred to in paragraph (a)) under any of the Issue Documents or any of the Notes and, if that default is capable of remedy, it is not remedied within 30 days of the Trustee giving written notice of the failure to perform or comply to the relevant Obligor; any representation, warranty or statement by the Issuer or any of the Guarantors in any of the Issue Documents or any of the Notes or in any document delivered under any of the Issue Documents or any of the Notes is not complied with in any respect or is or proves to have been incorrect in any respect when made or deemed repeated and, if the circumstances resulting in such non-compliance or incorrectness is capable of remedy, it is not remedied within 30 days of the Trustee giving notice of the failure to perform or comply to the relevant Obligor; (d) (i) any other indebtedness of the Issuer, any of the Guarantors or any of the Principal Subsidiaries in respect of borrowed moneys is or is declared to be or is capable of being rendered due and payable prior to its stated maturity by reason of any actual or potential default, event of default or the like (however described) or is not paid when due or, as a result of any actual or potential default, event of default or the like (however described), any facility relating to any such indebtedness is or is declared to be or is capable of being cancelled or terminated before its normal expiry date or any person otherwise entitled to use any such facility is not so entitled; or (ii) the Issuer, any of the Guarantors or any of the Principal Subsidiaries fails to pay when properly called upon to do so any guarantee of indebtedness for borrowed moneys, provided however that no Event of Default will occur under this paragraph (d) unless and until the aggregate amount of the indebtedness in respect of which one or more of the events mentioned above in this paragraph (d) has/have occurred equals or exceeds RMB50,000,000 (or its equivalent in any other currency or currencies); (e) (f) the Issuer, any of the Guarantors or any of the Principal Subsidiaries is (or is, or could be, deemed by law or a court to be) insolvent or unable to pay its debts, stops, suspends or threatens to stop or suspend payment of all or any material part of its indebtedness, begins negotiations or takes any other step with a view to the deferral, rescheduling or other readjustment of all or any material part of its indebtedness (or of any material part which it will be unable to pay when due), proposes or makes a general assignment or an arrangement or composition with or for the benefit of the relevant creditors or a moratorium is agreed or declared in respect of or affecting all or any material part of the indebtedness of the Issuer, any of the Guarantors or any of the Principal Subsidiaries; a distress, attachment, execution or other legal process is levied, enforced or sued out on or against all or any material part of the property, assets or revenues of the Issuer, any of the Guarantors or any of the Principal Subsidiaries and is not discharged or stayed within 30 days; 52

55 (g) (h) (i) (j) (k) (l) (m) (n) (o) (p) (q) any security on or over the whole or any part of the property or assets of the Issuer, any of the Guarantors or any of the Principal Subsidiaries becomes enforceable or any step is taken to enforce it (including the taking of possession or the appointment of a receiver, manager or other similar person), provided however that no Event of Default will occur under this paragraph (g) unless and until the aggregate amount of the indebtedness secured by any security in respect of which one or more of the events mentioned in this paragraph (g) has/have occurred equals or exceeds RMB50,000,000 (or its equivalent in any other currency or currencies); a meeting is convened, a petition or originating summons is presented, an order is made, a resolution is passed or any other similar step is taken by any person with a view to the winding-up or dissolution of the Issuer, any of the Guarantors or any of the Principal Subsidiaries (except for the purposes of and followed by a reconstruction, amalgamation, reorganisation or consolidation on terms approved by the Trustee or the Noteholders by way of an Extraordinary Resolution) or for the appointment of a liquidator (including a provisional liquidator), receiver, manager, judicial manager, trustee, administrator, agent or similar officer of the Issuer, any of the Guarantors or any of the Principal Subsidiaries or over the whole or any material part of the property or assets of the Issuer, any of the Guarantors or any of the Principal Subsidiaries; the Issuer, any of the Guarantors or any of the Principal Subsidiaries ceases or threatens to cease to carry on all or substantially all of the Permitted Businesses other than in accordance with Condition 4(c); any step is taken by any person acting under the authority of any national, regional or local government with a view to the seizure, compulsory acquisition, expropriation or nationalisation of all or any material part of the assets of the Issuer, any of the Guarantors or any of the Principal Subsidiaries; any action, condition or thing (including the obtaining of any necessary consent) at any time required to be taken, fulfilled or done for any of the purposes stated in Clause 15.3 of the Trust Deed is not taken, fulfilled or done, or any such consent ceases to be in full force and effect without modification or any condition in or relating to any such consent is not complied with (unless that consent or condition is no longer required or applicable); it is or will become unlawful for the Issuer or any of the Guarantors to perform or comply with any one or more of its obligations under any of the Issue Documents or any of the Notes; any of the Issue Documents or any of the Notes ceases for any reason (or is claimed by the Issuer or any of the Guarantors not) to be the legal and valid obligations of the Issuer or any of the Guarantors, binding upon it in accordance with its terms; any litigation, arbitration or administrative proceeding (other than those of a frivolous or vexatious nature which are contested in good faith) against the Issuer, any of the Guarantors or any of the Principal Subsidiaries is current or pending (i) to restrain the exercise of any of the rights and/or the performance or enforcement of or compliance with any of the obligations of the Issuer or any of the Guarantors under any of the Issue Documents or any of the Notes or (ii) which has or could reasonably be expected to have a material adverse effect on the Issuer or any of the Guarantors; any Guarantee is not (or is claimed by any of the relevant Guarantors not to be) in full force and effect; any event occurs which, under the law of any relevant jurisdiction, has an analogous or equivalent effect to any of the events mentioned in paragraph (e), (f), (g), (h) or (j); the Issuer, any of the Guarantors or any of the Principal Subsidiaries is declared by the Minister of Finance to be a declared company under the provisions of Part IX of the Companies Act, Chapter 50 of Singapore; 53

56 (r) (s) the Issuer ceases to be a wholly-owned subsidiary of CSS, any Original Guarantor ceases to be a subsidiary of CCS or (other than in accordance with Condition 4(c)) any Additional Guarantor ceases to be a subsidiary of CSS; and any requirement set out in Condition 4(d) is not fulfilled. In these Conditions, Principal Subsidiary means any subsidiary of CCS: (1) whose total assets, as shown by the accounts of such subsidiary (consolidated in the case of a subsidiary which itself has subsidiaries), based upon which the latest audited consolidated accounts of the Group have been prepared, are at least five per cent. of the total assets of the Group as shown by such audited consolidated accounts; or (2) whose total revenue, as shown by the accounts of such subsidiary (consolidated in the case of a subsidiary which itself has subsidiaries), based upon which the latest audited consolidated accounts of the Group have been prepared, are at least five per cent. of the total revenue of the Group as shown by such audited consolidated accounts; or (3) whose profit before tax, as shown by the accounts of such subsidiary (consolidated in the case of a subsidiary which itself has subsidiaries), based upon which the latest audited consolidated accounts of the Group have been prepared, is at least five per cent. of the profit before tax of the Group as shown by such audited consolidated accounts, provided that if any such subsidiary (the transferor ) shall at any time transfer the whole or any part of its business, undertaking or assets to another subsidiary or CCS (the transferee ) then: (A) (B) if the whole of the business, undertaking and assets of the transferor shall be so transferred, the transferor shall thereupon cease to be a Principal Subsidiary and the transferee (unless it is CCS) shall thereupon become a Principal Subsidiary; and if a part only of the business, undertaking and assets of the transferor shall be so transferred, the transferor shall remain a Principal Subsidiary and the transferee (unless it is CCS) shall thereupon become a Principal Subsidiary. Any subsidiary which becomes a Principal Subsidiary by virtue of (A) above or which remains or becomes a Principal Subsidiary by virtue of (B) above shall continue to be a Principal Subsidiary until the date of issue of the first audited consolidated accounts of the Group prepared as at a date later than the date of the relevant transfer which show the total assets, total revenue or, as the case may be, profit before tax as shown by the accounts of such subsidiary (consolidated in the case of a subsidiary which itself has subsidiaries), based upon which such audited consolidated accounts have been prepared, to be less than five per cent. of the total assets, the total revenue or, as the case may be, the profit before tax of the Group, as shown by such audited consolidated accounts. A report by the Auditors (as defined in the Trust Deed), who shall also be responsible for producing any pro-forma accounts required for the above purposes, that in their opinion a subsidiary is or is not a Principal Subsidiary shall, in the absence of manifest error, be conclusive. 11. Enforcement of Rights At any time after an Event of Default shall have occurred or after the Notes shall have become due and payable, the Trustee may, at its discretion and without further notice, institute such proceedings against the Issuer or the Guarantors as it may think fit to enforce repayment of the Notes, together with accrued interest, or to enforce the provisions of the Issue Documents but it shall not be bound to take any such proceedings unless (a) it shall have been so directed by an Extraordinary Resolution of the Noteholders or so requested in writing by Noteholders holding not less than 25 per cent. in principal amount of the Notes outstanding and (b) it shall have been indemnified and/ or secured and/or pre-funded to its satisfaction. No Noteholder or Couponholder shall be entitled to proceed directly against the Issuer or the Guarantors unless the Trustee, having become bound to do so, fails or neglects to do so within a reasonable period and such failure or neglect shall be continuing. 54

57 12. Meeting of Noteholders and Modifications The Trust Deed contains provisions for convening meetings of Noteholders of a Series to consider any matter affecting their interests, including modification by Extraordinary Resolution of the Notes of such Series (including these Conditions insofar as the same may apply to such Notes) or any of the provisions of the Trust Deed. The Trustee, the Issuer or the Guarantors at any time may, and the Trustee upon the request in writing by Noteholders holding not less than one-tenth of the principal amount of the Notes of any Series for the time being outstanding and after being indemnified and/or secured and/or pre-funded to its satisfaction against all costs and expenses shall, convene a meeting of the Noteholders of that Series. An Extraordinary Resolution duly passed at any such meeting shall be binding on all the Noteholders of the relevant Series, whether present or not and on all relevant Couponholders, except that any Extraordinary Resolution proposed, inter alia, (a) to amend the dates of maturity or redemption of the Notes or any date for payment of interest or Interest Amounts on the Notes, (b) to reduce or cancel the principal amount of, or any premium payable on redemption of, the Notes, (c) to reduce the rate or rates of interest in respect of the Notes or to vary the method or basis of calculating the rate or rates of interest or the basis for calculating any Interest Amount in respect of the Notes, (d) to vary any method of, or basis for, calculating the Redemption Amount or the Early Redemption Amount including the method of calculating the Amortised Face Amount, (e) to vary the currency or currencies of payment or denomination of the Notes, (f) to take any steps that as specified hereon may only be taken following approval by an Extraordinary Resolution to which the special quorum provisions apply, (g) to modify the provisions concerning the quorum required at any meeting of Noteholders or the majority required to pass the Extraordinary Resolution, or (h) to modify or cancel any Guarantee, will only be binding if passed at a meeting of the Noteholders of the relevant Series (or at any adjournment thereof) at which a special quorum is present. The Trustee may agree, without the consent of the Noteholders or Couponholders, to (i) any modification of any of the provisions of the Trust Deed or any of the other Issue Documents which in the opinion of the Trustee is of a formal, minor or technical nature, is made to correct a manifest error or to comply with mandatory provisions of Singapore law or is required by Euroclear and/ or Clearstream, Luxembourg and/or the Depository and/or any other clearing system in which the Notes may be held and (ii) any other modification (except as mentioned in the Trust Deed) to the Trust Deed and any of the other Issue Documents, and any waiver or authorisation of any breach or proposed breach, of any of the provisions of the Trust Deed or any of the other Issue Documents, which is in the opinion of the Trustee not materially prejudicial to the interests of the Noteholders. Any such modification, authorisation or waiver shall be binding on the Noteholders and the Couponholders and, if the Trustee so requires, such modification, authorisation or waiver shall be notified to the Noteholders as soon as practicable. In connection with the exercise of its functions (including but not limited to those in relation to any proposed modification, waiver, authorisation or substitution) the Trustee shall have regard to the interests of the Noteholders as a class and shall not have regard to the consequences of such exercise for individual Noteholders or Couponholders. These Conditions may be amended, modified, or varied in relation to any Series of Notes by the terms of the relevant Pricing Supplement in relation to such Series. In the Trust Deed and the Conditions, an Extraordinary Resolution means a resolution passed at a meeting duly convened and held in accordance with the Trust Deed by a majority of at least 75 per cent. of the votes cast and a special quorum means Noteholders representing at least 75 per cent. of the Notes of the Series in respect of which a meeting has been called, except that where a meeting has previously been adjourned through want of a quorum, Noteholders representing at least 25 per cent. of the Notes of the relevant Series shall be a special quorum. 13. Replacement of Notes, Certificates, Coupons and Talons If a Note, Certificate, Coupon or Talon is lost, stolen, mutilated, defaced or destroyed it may be replaced, subject to applicable laws, regulations and stock exchange or other relevant authority regulations, at the specified office of the Issuing and Paying Agent (in the case of Bearer Notes, Coupons or Talons) and of the Registrar (in the case of Certificates), or at the specified office 55

58 of such other Paying Agent or Transfer Agent, as the case may be, as may from time to time be designated by the Issuer for the purpose and notice of whose designation is given to Noteholders in accordance with Condition 16, on payment by the claimant of the fees and costs incurred in connection therewith and on such terms as to evidence, undertaking, security and indemnity (which may provide, inter alia, that if the allegedly lost, stolen or destroyed Note, Certificate, Coupon or Talon is subsequently presented for payment, there will be paid to the Issuer on demand the amount payable by the Issuer in respect of such Note, Certificate, Coupon or Talon) and otherwise as the Issuer may require. Mutilated or defaced Notes, Certificates, Coupons or Talons must be surrendered before replacements will be issued. 14. Further Issues The Issuer may from time to time without the consent of the Noteholders or Couponholders create and issue further notes having the same terms and conditions as the Notes of any Series and so that the same shall be consolidated and form a single Series with such Notes, and references in these Conditions to Notes shall be construed accordingly. 15. Indemnification of the Trustee The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility, including provisions relieving it from taking proceedings to enforce repayment and from taking action to convene meetings unless indemnified and/or secured and/or pre-funded to its satisfaction. The Trust Deed also contains a provision entitling the Trustee or any corporation related to it to enter into business transactions with the Issuer, the Guarantors or any of their respective related corporations without accounting to the Noteholders or Couponholders for any profit resulting from such transactions. Each Noteholder shall be solely responsible for making and continuing to make its own independent appraisal and investigation into the financial condition, creditworthiness, condition, affairs, status and nature of the Issuer, and the Trustee shall not at any time have any responsibility for the same and each Noteholder shall not rely on the Trustee in respect thereof. 16. Notices Notices to the holders of Registered Notes shall be valid if mailed to them at their respective addresses in the Register and deemed to have been given on the fourth weekday (being a day other than a Saturday or a Sunday) after the date of mailing. Notwithstanding the foregoing, notices to the holders of Notes will be valid if published in a daily newspaper of general circulation in Singapore (or, if the holders of any Series of Notes can be identified, notices to such holders will also be valid if they are given to each of such holders). It is expected that such publication will be made in The Business Times. Notices will, if published more than once or on different dates, be deemed to have been given on the date of the first publication in such newspaper as provided above. Couponholders shall be deemed for all purposes to have notice of the contents of any notice to the holders of Bearer Notes in accordance with this Condition 16. So long as the Notes are represented by a Global Note or a Global Certificate and such Global Note or Global Certificate is held in its entirety on behalf of Euroclear, Clearstream, Luxembourg and/or the Depository, there may be substituted for such publication in such newspapers the delivery of the relevant notice to Euroclear, Clearstream, Luxembourg and/or (subject to the agreement of the Depository) the Depository for communication by it to the Noteholders, except that if the Notes are listed on the SGX-ST and the rules of such exchange so require or permit, notice will in any event be published in accordance with the first paragraph above. Any such notice shall be deemed to have been given to the Noteholders on the seventh day after the day on which the said notice was given to Euroclear, Clearstream, Luxembourg and/or the Depository. Notices to be given by any Noteholder pursuant hereto (including to the Issuer) shall be in writing and given by lodging the same, together with the relative Note or Notes, with the Issuing and Paying Agent (in the case of Bearer Notes) or the Registrar (in the case of Certificates). Whilst the Notes are represented by a Global Note or a Global Certificate, such notice may be given by any Noteholder to the Issuing and Paying Agent or, as the case may be, the Registrar through 56

59 Euroclear, Clearstream, Luxembourg and/or the Depository in such manner as the Issuing and Paying Agent or, as the case may be, the Registrar and Euroclear, Clearstream, Luxembourg and/ or the Depository may approve for this purpose. Notwithstanding the other provisions of this Condition, in any case where the identities and addresses of all the Noteholders are known to the Issuer, notices to such holders may be given individually by recorded delivery mail to such addresses and will be deemed to have been given two days from the date of despatch to the Noteholders. 17. Contracts (Rights of Third Parties) Act No person shall have any right to enforce any term or condition of the Notes under the Contracts (Rights of Third Parties) Act, Chapter 53B of Singapore. 18. Governing Law and Jurisdiction (a) Governing Law The Trust Deed, the CCS Deed of Guarantee, the Offshore Deed of Guarantee, the Notes, the Coupons and the Talons are governed by, and shall be construed in accordance with, the laws of Singapore. (b) (c) Jurisdiction The courts of Singapore are to have non-exclusive jurisdiction to settle any disputes that may arise out of or in connection with the Trust Deed, any Guarantee, any Notes, Coupons or Talons and accordingly any legal action or proceedings arising out of or in connection with the Trust Deed, the Guarantees, Notes, Coupons or Talons may be brought in such courts. Each of the Issuer and the Guarantors has in the Trust Deed, CCS has in the CCS Deed of Guarantee, and each Offshore Guarantor has in the Offshore Deed of Guarantee, irrevocably submitted to the jurisdiction of such courts. No Immunity Each of the Issuer and the Guarantors agrees that in any legal action or proceedings arising out of or in connection with the Trust Deed, the CCS Deed of Guarantee, the Offshore Deed of Guarantee, the Notes and the Coupons against it or any of its assets, no immunity from such legal action or proceedings (which shall include, without limitation, suit, attachment prior to award, other attachment, the obtaining of an award, judgment, execution or other enforcement) shall be claimed by or on behalf of the Issuer or such Guarantor or with respect to any of its assets and irrevocably waives any such right of immunity which it or its assets now have or may hereafter acquire or which may be attributed to it or its assets and consent generally in respect of any such legal action or proceedings to the giving of any relief or the issue of any process in connection with such action or proceedings including, without limitation, the making, enforcement or execution against any property whatsoever (irrespective of its use or intended use) of any order, award or judgment which may be made or given in such action or proceedings. 57

60 THE ISSUER HISTORY The Issuer was incorporated in Singapore under the Companies Act on 29 September The Issuer primarily engages in the trading of coal, minerals, construction materials and office equipment and the provision of coal supply chain management, investment and technology consulting services, mainly outside the PRC. SHAREHOLDING AND CAPITAL As at the date of this Information Memorandum, the issued share capital of the Issuer is US$7.8 million. The Issuer is an indirect wholly -owned subsidiary of CCS. For further details of the Group s corporate structure, see the section Business Market Capitalisation of CCS, Principal Shareholders and Corporate Structure. 58

61 THE GUARANTORS HISTORY CCS was incorporated in the PRC on 21 January 1999 and was initially listed on the Shanghai Stock Exchange under its former name, Shandong Jiufa Edible Fungus Co., Ltd ( Shandong Jiufa ). In 2012, following the completion of the reverse takeover by Zhengzhou CCS, Shandong Jiufa was renamed CCS Supply Chain Management Co., Ltd. For further details on CCS and its subsidiaries, please see the section Business. CCS HK was incorporated in Hong Kong on 25 August Ina was incorporated in Singapore under the Companies Act on 20 April Rex Coal was incorporated in Singapore under the Companies Act on 6 February SHAREHOLDING AND CAPITAL As at the Latest Practicable Date, the market capitalisation of CCS was RMB10.53 billion. As at the date of this Information Memorandum, the issued share capital of CCS HK is HK$1.00, and CCS HK is an indirect wholly-owned subsidiary of CCS. As at the date of this Information Memorandum, the issued share capital of Ina is US$100,000, and 82.35% and 17.65% of the issued ordinary shares in the capital of Ina are held by the Issuer and an individual, Yan Tao, respectively. As at the date of this Information Memorandum, the issued share capital of Rex Coal is US$5 million. All of the issued ordinary shares in the capital of Rex Coal are held by the Issuer. 59

62 BUSINESS Overview The Group believes that it is the largest non-state owned coal supply chain business group in the PRC based on the Group s total coal sales volume of 13.6 megatonnes ( Mt ) in According to the BP Statistical Review of World Energy 2014, the PRC is the largest producer and consumer of coal in the world, comprising approximately half of the world s coal consumption in The Group expects that coal will continue to be the main energy source in the PRC for the next 20 years. As a market leader in the coal supply chain service industry, the Group believes that it is well positioned to capitalise on the opportunities arising from the growing demand for coal supply chain services in the PRC which will be driven by the PRC s dependence on coal. The Group is a fully integrated coal supply chain business and serves as a one-stop service to its customers by being able to provide its customers with coal supply chain management services, which encompasses a full suite of coal supply chain services ranging from procurement, storage, logistics, processing and distribution, and coal supply chain finance services which includes factoring services. As a fully integrated coal supply chain business, the Group s services enable its customers to improve the allocation of coal resources and the efficiency of the utilisation of coal, and to lower their coal procurement costs. The following table sets forth the key milestones in the development and growth of the Group s business. MILESTONES The Group began coal procurement and sales services in the PRC The Group developed a network for a supply chain of thermal coal to end-users in PRC and commenced utilising large-scale and direct transportation of thermal coal to customers by railway The Group diversified to begin providing coking coal supply management chain services The Group s customer base expanded to include customers in the chemical and construction materials industries The Group began delivering coal by vessels, and established an international supply chain network from other countries, including Indonesia, Australia, South Korea, the United States, South Africa and Mongolia The Group established a business presence in Singapore and Indonesia as part of its international expansion Following a reverse takeover, CCS was the first coal supply chain company to be listed on the Shanghai Stock Exchange The Group developed its coal supply chain service platform, and began offering factoring services and thermal coal futures capabilities. The Group acquired a 9.79% interest in Xin yu Rural Commercial Bank Co., Ltd. for approximately RMB287 million and also established a joint venture company with the Zhengzhou government pursuant to which the Group owns a 49% interest The Group continued to develop its coal supply chain finance service to further enhance its supply chain platform. The Group s subsidiary, Jiangsu Jinhe Power and Fuel Co., Ltd. was awarded a licence from the Zhengzhou Commodity Exchange as an approved warehouse operator for coal futures. 60

63 Coal is an important source of energy for the generation of electricity, manufacturing of steel and cement and other commercial and domestic uses. The PRC s coal production is mainly consumed domestically and primarily imports coal from Indonesia, Australia, Vietnam, Mongolia and Russia, and exports coal to Japan and Korea. Coal resources and production in the PRC are mainly located in the northern and western regions, while coal consumption is primarily in the eastern and south-central regions. As a result of such disparity, coal is primarily transported through the rail network and waterways from major supply centres in northern and western PRC to major demand centres in eastern and central-southern PRC. Coal supply chain service providers who have secured reliable and sufficient access to rail and port transportation are able to enjoy a significant competitive advantage. The coal supply chain service industry in the PRC is highly fragmented. Since 2005, the PRC government has adopted measures and policies to intensify mergers and consolidation in the PRC s coal industry to eliminate outdated production capacity and improve efficiency. The Group expects consolidation in the PRC s coal industry will drive the consolidation in the PRC s coal supply chain service industry by creating opportunities for large coal supply chain service companies in the PRC to expand their coal supply network, and to develop long-term relationship with major coal suppliers. The Group has grown its business by capitalising on the PRC s demand for coal through providing its customers, the majority of whom are end-users of coal in the PRC, with coal procurement services pursuant to which the Group will purchase coal from coal producers in the PRC. The Group believes that the PRC s coal supply chain services industry will continue to grow and such growth will be driven by the PRC s dependence on coal, principally due to the demand for a range of coal products from the PRC s downstream coal consumers, a geographic mismatch between coal supply and demand in the PRC and reductions in tariffs on imported coal. The Group believes that these trends, together with the liberalisation of coal prices in the PRC, will drive the demand for coal supply chain services. The Group believes that its consistent business and operational track record has allowed it to establish itself as a reliable source of demand for a variety of coal products to its upstream suppliers, and a reliable and cost-effective supplier of coal to its downstream customers. The Group has built a stable and growing customer base, which includes companies in the power generation, metallurgical, chemical and construction materials industries. The Group has been able to increase its coal supply sources from suppliers and producers that are located in the PRC and from other countries such as Indonesia, Australia, South Korea, the United States and Mongolia. As the Group has been able to leverage on its diversified customer base within the PRC and internationally, extensive coal supply network in the PRC and from international markets, the Group has been able to increase its coal trading volumes and financial performance. For the years ended 31 December 2011, 2012 and 2013 and the six months ended 30 June 2014, the Group s coal sales volume amounted to 4.91 Mt, 8.71 Mt, Mt and 7.28 Mt, respectively. For the years ended 31 December 2011, 2012 and 2013 and the six months ended 30 June 2014, the Group s total revenue was RMB3,311.6 million, RMB5,281.2 million, RMB6,490.7 million and RMB3,247.5 million, respectively, and the Group s profit attributable to owners of the company for the corresponding periods was RMB316.2 million, RMB381.8 million, RMB471.2 million and RMB133.3 million, respectively. The Group s coal supply chain management service and coal supply chain finance service business segments accounted for 99.1% and 0.9%, respectively, of the Group s total revenue for the year ended 31 December In 2013, the Group established a joint venture company with the Zhengzhou government pursuant to which the Group owns a 49% interest. The Group has facilities and offices in Beijing, Shanghai, Shenzhen, Tianjin, Zhengzhou of Henan province, Taiyuan of Shanxi province and Xuzhou of Jiangsu province in the PRC, and Singapore, Indonesia and Hong Kong. The table below sets forth selected information on some of the facilities and properties that the Group leases or owns for its operations. 61

64 Property (Location) Owned Properties Shandong provi nce, Yantai Mouping logistics area Property Type / Use Land use rights with a gross floor area of 90, square feet / Logistics Leasehold Tenure (if applicable) N.A. Leased Properties Dong Tian Liang coal station Storage, transshipment 3 years City Station Transshipment 3 years Wuyang coal station Transshipment, coal blending 3 years Rui gang washing plant Coal processing, coal blending 3 years Jiyuan yard Storage, transshipment, coal blending 1 year Pizhou port Storage, transshipment, coal blending No long term tenure, and charged on a per use basis The port of Wanzhai Storage, transshipment, coal blending No long term tenure, and charged on a per use basis Shanghai Luojing port Storage, transshipment, coal blending No long term tenure, and charged on a per use basis Xiamen port Storage, transshipment No long term tenure, and charged on a per use basis Putian Dongwu port Storage, transshipment No long term tenure, and charged on a per use basis Fang cheng Port Storage, transshipment, coal blending No long term tenure, and charged on a per use basis Guangzhou Xinsha port Storage, transshipment No long term tenure, and charged on a per use basis Quanzhou port Storage, transshipment, coal blending No long term tenure, and charged on a per use basis Shidongkou ( port of power plant) Transshipment No long term tenure, and charged on a per use basis Huizhou port Storage, transshipment No long term tenure, and charged on a per use basis Taicang (port of power plant) Transshipment No long term tenure, and charged on a per use basis Beilun port Storage, transshipment No long term tenure, and charged on a per use basis Longkon port Storage, transshipment, coal blending No long term tenure, and charged on a per use basis Fuzhou port Storage, transshipment No long term tenure, and charged on a per use basis 62

65 The following map sets forth the provinces and municipalities in the PRC covered by the Group s supply chain business as at 30 June Regional/Country Office Trans-shipment Port Changzhi Jiyuan Xuzhou Taicang Inland Transfer Centre and Inland Port Guangzhou Huizhou Fuzhou Quanzhou Xiamen Chaozhou Fangchenggang Nagqu Xining ing Taiyuan Qinyang ng Beijing Tianjin Yantai Zhengzhou Xuzhou Taizhou Shanghai Ningbo Shenzhen Hong Kong Singapore East Kalimantan Jakarta 63

66 Market Capitalisation of CCS, Principal Shareholders and Corporate Structure As at the Latest Practicable Date, CCS s market capitalisation was RMB10.53 billion, and CCS s principal shareholder is Zhengzhou CCS, which owns 70.38% of CCS. Zhengzhou CCS is part of a group of companies, owned by Mr. Wan Yongxing and Mr. Liu Yi, who are engaged in other businesses, such as real estate and chemical processing. The Group s corporate structure as at the Latest Practicable Date is set out below: Wan Yongxing Liu Yi 70% 30% Henan Zhongrui Investment Co., Ltd. 100% Zhengzhou China Coal Solution Co., Ltd % Public 29.62% CCS Supply Chain Management Co., Ltd. 64 Pizhou Fengyuan Power and Fuel Co., Ltd. 100% 100% Xuzhou Yifeng Trading Co., Ltd. 100% 40% Jiangsu Jinhe Power and Fuel Co., Ltd. Beijing Zhongrui Ruixing Supply Chain Management Co., Ltd. Henan Tengrui Energy Industry Development Co., Ltd. Xuzhou Yuguang Material Trading Co., Ltd. Yantai CCS Supply Chain Management Co., Ltd. 100% 100% Yantai Xingrui Logistics Co., Ltd. 100% 100% China Coal Solution (HK) Limited 100% China Coal Solution (Singapore) Pte. Ltd. 100% 100% 82.35% Rex Coal Pte. Ltd. Ina Advanced Holdings Pte. Ltd. 99% PT. China Coal Solution Indonesia 100% 100% Zhejiang Yuneng Power and Fuel Co., Ltd. 25% 75% Tianjin CCS Finance Lease Co., Ltd. 1% 100% Naqu Ruichang Coal Transportation and Sale Co., Ltd. Shanxi CCS Supply Chain Co., Ltd. 75% 25% Shanghai CCS Finance Lease Co., Ltd. 100% Helue E-Commerce (Shanghai) Co., Ltd. Xining Dexiang Commerce and Trade Co., Ltd. 5% 95% Jiangsu Fengtai Material Trading Co., Ltd. 100% 100% Tianjin CCS Commercial Factoring Co., Ltd. Shenzhen Qianhai CCS Supply Chain Platform Service Co., Ltd. 40% Qingyang Energy and Chemical Group CCS Supply Chain Management Co., Ltd. 100% 9.79% 49% Zhengzhou Airport Zone Xingrui Industrial Co., Ltd. 100% Shanghai CCS Supply Chain Management Co., Ltd. 100% Zhejiang Hehui Power and Fuel Co., Ltd. 100% Wuhan CCS Supply Chain Management Co., Ltd. 100% Beijing CCS Supply Chain Management Co., Ltd. Xinyu Rural Commercial Bank Co., Ltd. 100% Zhengzhou Jiarui Supply Chain Management Co., Ltd.

67 Competitive Strengths The Group believes that the following strengths have contributed to its success in the PRC s coal supply chain industry. Fully integrated coal supply chain business model. The Group has established a fully integrated coal supply chain business model and provides a one-stop service to its customers. As the Group is able to offer its customers (i) a full suite of supply chain services ranging from procurement, storage, logistics, processing and distribution, (ii) a wide variety of coal products which can be customised to its customers specification, and (iii) a reliable distribution service through the Group s extensive network of suppliers and customers, the Group enjoys competitive advantages over other traditional coal trade operators who are typically only focused on coal procurement and coal sales, have limited variety of coal products, and are more vulnerable to supply and demand risks as they are reliant on a limited number of suppliers and buyers. As a result of these competitive advantages and the one stop service, the Group s customers regard it as a preferred business partner. The Group believes that its integrated coal supply chain business model allows it to maximise returns from each segment of the supply chain by implementing targeted strategies that enhances the Group s profitability. For example, the direct procurement from coal producers eliminates the need for the Group to purchase coal from intermediaries, which in turn results in costs savings and allows the Group to have greater control in designing the most efficient transportation route. Further, through the coal s processing facilities, the Group has the ability to separate impurities and by-products from coal products to improve the quality of the coal product as well as reduce the overall weight of the processed coal, which in turn leads to a reduction in the Group s transportation costs. In addition, the Group s ability to blend coal of lower calorific value with coal of higher calorific value, and to supply such blended coal to meet the desired specification of the Group s customers, allows the Group to efficiently utilise its varied range of coal products, lower its procurement costs and increase profit margins. Long established relationships with leading coal consuming companies in the PRC. The Group has a large and diverse client base that includes enterprises in the power generation, metallurgical, chemical and construction materials industries, many of which have established longterm strategic cooperation relationships with the Group. Such customers include the six largest state-owned power companies in the PRC, namely, China Datang Corporation, China Guodian Corporation, China Huaneng Group, China Huadian Corporation, China Power Investment Corporation, and China Resources Power Group. The Group has had on average at least 10 years of business relationships with these companies. The Group has also entered into long-term strategic alliance agreements with a number of its customers, such as Henan Yu neng Holdings Company Limited, An hui Province Energy Group Co.,Ltd. and Jiang xi Ganneng Co., Ltd. Under these strategic alliance agreements, the Group intends to supply such customers with different grades of coal with the actual volume and price to be determined at a later date based on such customers requirements. The Group believes that these arrangements will strengthen its relationships with these customers, which will in turn enhance customer loyalty. Most of the Group s customers are end-users of coal in the PRC, who typically require coal on a consistent basis and who are also of strong credit quality, in contrast with many of the Group s competitors who also sell coal products to coal trading companies and other market intermediaries. Well-established and stable coal procurement and sales network with direct procurement from coal producers. The Group purchases the majority of its coal directly from domestic and overseas coal producers, and not from coal traders. This enables the Group to realise maximum value from its supply chain by significantly lowering its coal procurement costs. The Group believes that its ability to purchase coal directly from coal producers enables it to select the most economical mode of transportation thereby resulting in a cost advantage for the Group and its customers, compared to other coal suppliers in the PRC who focus principally either on domestic or international sources of coal, thereby subjecting themselves to fluctuations in the international and/or domestic coal and freight markets. The Group has long-term strategic partnerships with major coal producers in the Shanxi, Shaanxi, Inner Mongolia, Gansu, Ningxia and Xinjiang provinces in the PRC, which include Shanxi Coal Transportation Group Co., LtdJin cheng Anthracite Mining Group, Shanxi Xiang Ore Refco Group LtdInner Mongolia Yitai Group Co., Ltd and Shanxi Coal International Energy Group Co., Ltd. The Group s international coal supply sources 65

68 are from Indonesia, Australia, South Korea, the United States and Mongolia, and the Group s international suppliers include the Banpu Group, BHP Billiton Group, Indika Group, Mercuria Group, Noble Group, Peabody Energy Group, Rio Tinto Group and RWE Group. The Group s ability to source for a range of thermal and coking coal from domestic and international markets allows it to supply its customers with a variety of coal products at competitive prices. Prudent approach to coal procurement and price volatility and risk management. The Group believes that its prudent approach to coal procurement has allowed the Group to generate stable cash flows from operations in each of the past three years. As the Group s policy is to typically only procure coal after it concludes the price at which it is to purchase from its customers, the Group is able to minimise speculative procurement and manage price volatility. See - Operations Coal Supply Chain Management Service Customer Contracts and Pricing. In addition, the Group s risk management framework requires it to (i) procure coal based on the contracted volume and price and enter into opportunistic hedging to mitigate the risk of coal price declines which would cause the Group s inventory value to decrease, (ii) continue strengthening and investing in its integrated supply chain model to mitigate the risk of an open PRC coal market resulting from the de-regularisation by the PRC government, (iii) analyse market trends, adjust its market strategies and to continue to build an inter-regional supply chain network to mitigate the risk of slow global economic and weak domestic growth resulting in weak demand for coal and depressed coal prices, (iv) monitor foreign currency movements and disseminate currency trend information to its employees for their decision making to mitigate exchange rate risks caused by the mismatch between the sales cycle of imported and domestic coal due to the longer delivery period for imported coal, and (v) assess and monitor the credit worthiness of customers utilising the Group s supply chain finance services and to request for collateral to mitigate the risk of customers with deteriorating credit quality. Experienced management team supported by committed sponsors and highly-skilled employees. The Group s management team has extensive experience in the coal industry. Mr. Wan Yongxing, the Group s chairman, has more than 15 years of experience in the coal supply chain services industry. Through the successful execution of corporate and operational strategies, the Group s management has successfully increased the Group s coal sales volume from 4.9 Mt in 2011 to 13.6 Mt in As at 30 June 2014, the Group has approximately 400 employees with an average age of 30 years, approximately 90% of which have at least an undergraduate qualification and with senior employees being MBA or EMBA graduates from the Peking University, Tsinghua University, Yangtze and other renowned institutions. The Group believes that the commitment, experience and qualifications of its management team and employees has been and will continue to be a key factor in contributing to its continued growth and success. Integrated and advanced information technology system allowing the Group to adjust business strategies quickly. The Group has established an integrated and advanced information technology system, which comprises (i) a system that improves the entire supply chain process, from procurement, storage, logistics and processing to sales, (ii) a system, which enables all employees at different locations to work on the same platform at different times, (iii) a coal market monitoring system that enables real-time monitoring of market changes, and (iv) a capital management system to centralise the management and allocation of capital resources. The Group also believes that this system enables it to quickly adjust its business strategies based on changes in coal prices, availability of the Group s processing capacity, levels of inventory, logistics and distribution network and the demand for coal from downstream customers. Strategies While the Group continues to evaluate other potential businesses on an opportunistic basis, the Group seeks to continue to consolidate its position as a leading specialised coal supply chain service provider in the PRC with international transportation and sourcing capabilities. The Group intends to accomplish this through the following strategies: Continue expanding the Group s procurement and sales network in the PRC and overseas. The Group intends to capitalise on the geographic mismatch between coal supply and demand in the PRC by expanding the its procurement and sales network in the PRC and overseas. Within the PRC, the Group intends to continue to diversify its coal supply sources by expanding its coal 66

69 procurement networks in the Shanxi, Inner Mongolia, Shaanxi, Xinjiang and Gansu provinces. Internationally, the Group intends to further develop other coal procurement channels in Indonesia and other countries. The Group seeks to expand its international coal supply by establishing new supply networks in other markets, such as the United States, Russia, Australia and South Africa. The Group also seeks to consolidate its position with existing international suppliers by entering into long-term supply relationship with such international suppliers to offtake their coal products. The Group also intends to strengthen its marketing capabilities and increase its coal trading volumes by developing more sales channels in the PRC, India, Thailand and South Korea. Strengthen and improve coal supply chain management services. The Group intends to continue to strengthen its logistics and transportation capabilities by expanding its coal storage and processing facilities, coal transhipment bases and coal loading stations at various locations in the PRC (including at areas where the Group s customers are located), and by forming joint ventures with large coal producers and railway bureaus for the transportation and sale of coal in the PRC. In addition, the Group intends to develop and implement an information technology system to collect market data on a real-time basis, based on which the Group can adjust its coal procurement and sales plans and select the delivery methods that are most cost-effective. The Group believes that this information technology system will improve its logistics management and the processing of coal purchase orders, and will allow it to market its coal products in a more efficient manner. Develop the supply chain finance service platform to improve the Group s coal supply chain services capabilities. From time to time, the Group s major upstream suppliers, including stateowned coal producers and large private coal producers in the PRC require factoring services as an additional source of funding for their businesses. The Group began offering these services to some of its customers in The Group intends to develop the Group s coal supply chain finance services to offer factoring services to all of its major customers, and to begin offering finance leasing and short-term financing services as the Group believes that these services will increase customer loyalty and improve the Group s profitability. Operations The Group is principally engaged in providing coal supply chain services and coal supply chain finance services. These services include the procurement of coal from domestic and international coal producers, coal storage, coal transhipment and transportation and factoring services. As the Group has business operations strategically located in Beijing, Shanghai, Zhengzhou, Shenzhen, Taiyuan, Tianjin and Xuzhou in the PRC, and Singapore, Indonesia and Hong Kong, it is able to source for coal in the PRC and the international markets for sales to customers in the PRC. Coal Sales and Customers The Group primarily sells thermal and coking coal sourced from both the PRC and international markets to its customers. The Group s customer list includes companies in the power, metallurgical, chemical and construction materials industries. Power plants purchase coal for their use in combustion processes to produce steam for power and heat. Companies in the metallurgical, chemical and construction materials industries consume thermal coal as a primary fuel for their production processes. Companies in the power, metallurgical, construction materials and chemical industries accounted for 71%, 19%, 8% and 2%, respectively, of the Group s total revenue for the year ended 31 December The following table sets forth the Group s top 10 customers by volume and the type and amount of coal sold to such customers in Name Type Amount (in Mt) Percentage 1 Huaneng Qinbei Power Generation Co., Ltd.... Thermal coal % 2 Hunan Datang Fuel Development Co., Ltd.... Thermal coal % 3 Huan eng Power International, Inc., Jianggangshan Power Plant... Thermal coal % 4 Huan eng Yueyang Power Generation Co., Ltd.... Thermal coal % 67

70 Name Type Amount (in Mt) Percentage 5 Datang Anyang Power Generation Co., Ltd.... Thermal coal % 6 Jiaozuo Wangfang Power Generation Co., Ltd.... Thermal coal % 7 Guodian Yiyang Power Generation Co., Ltd.... Thermal coal % 8 Huaneng Jinling Power Generation Co., Ltd.... Thermal coal % 9 Guodian Hanchuan Power Generation Co., Ltd.... Thermal coal % 10 Xia nyou Fuel Co., Ltd.... Thermal coal % Most of the Group s customers are located in the PRC and include the six largest state-owned power companies in the PRC, namely, China Datang Corporation, China Guodian Corporation, China Huaneng Group, China Huadian Corporation, China Power Investment Corporation, and China Resources Power Group. The following chart sets forth the Group s revenue breakdown from power companies for the financial year ended 31 December 2013: 68

71 Coal Supply Chain Management Service The following diagram sets forth the typical steps of the Group s coal supply chain management service operations. Customer Contracts and Pricing The Group s coal supply chain management services typically commence, in the case of annual framework agreements, with the determination of the price per shipment under such annual framework agreements with customers, and in the case of spot coal sales transactions, with the Group s entry into spot coal sales agreement with customers at an agreed price. The Group typically enters into annual framework agreements with its long-term customers, which will generally bind the Group to an annual and monthly sales volumes, payment methods and quality requirements. For the Group s other customers, the Group enters into spot coal sales agreements. The Group agrees with its customers the selling price of coal under its annual framework agreements on a monthly or quarterly basis, based on the quality and prevailing market prices of coal and freight (if applicable), and after factoring in the Group s fees for procuring the coal and providing other related services. For spot coal sales agreement, the selling price of coal is determined with reference to the prevailing market price for coal on a per contract or per shipment basis, and after factoring in the Group s fees for procuring the coal and providing other related services. Where the selling price under the coal sales agreement is index-linked, the Group similarly seeks to procure coal from its suppliers based on prices that are index-linked. Where the selling price under the coal sales agreement is based on a fixed price, the Group seeks to procure coal from its suppliers with lower coal prices or on an index-linked basis when the Group is reasonably certain of the coal price trends. In addition, in order to mitigate exposure to coal price fluctuations, the Group enters, on an opportunistic basis, into coal price futures contracts to hedge against such fluctuations. In certain circumstances, the Group may also sell coal to local suppliers and/or traders, in order to minimise its exposure to inventory and price risks. 69

72 To leverage further on the Group s advanced information technology system and extensive experience in the coal supply chain industry, the Group has established a system where decision making with respect to price is decentralised to its trading teams based in regions with strong demand for coal, such as eastern PRC, central PRC and southern PRC. The Group s procurement centres update the traders with the latest pricing for coal products on a daily basis. While these traders have the authority to negotiate and determine the selling prices of coal for the Group s contracts, the other key terms of the contracts have to be approved by the Group s risk management department. The Group believes that this enables it to better manage its inventory and react quickly to changes in coal prices. The traders are also responsible for maintaining relationships with high-end customers and developing new customer relationships. Suppliers and Procurement Once the coal sales price with a customer is determined, the Group begins sourcing for coal from domestic and international suppliers based on the agreed pricing and the required coal specification and quantity. The Group typically takes one to two days between the time it agrees on the price of coal with its customer and the time it enters into a procurement contract with its suppliers. In the PRC, the Group purchases coal primarily from coal producers in the Shanxi, Shaanxi, Inner Mongolia, Gansu, Ningxia and Xinjiang provinces. The Group s domestic suppliers include Shanxi Coal Transportation Group Co., LtdJin cheng Anthracite Mining Group, Shanxi Xiang Ore Refco Group Ltd, Inner Mongolia Yitai Group Co., Ltd and Shanxi Coal International Energy Group Co., Ltd. The Group also imports coal from coal producers and coal trading companies in Indonesia, South Korea, the United States, South Africa and Mongolia. The Group s international suppliers include the Banpu Group, BHP Billiton Group, Indika Group, Mercuria Group, Noble Group, Peabody Energy Group, Rio Tinto Group and RWE Group. In 2013, the Group purchased 6.67 Mt and 6.93 Mt of coal from suppliers in the PRC and internationally, respectively. The Group s procurement centre at its headquarters in Zhengzhou formulates the Group s annual, quarterly and monthly coal procurement plans based on the conditions and trends of domestic and international coal markets and customer demand estimates. The Group s coal procurement personnel report market changes to management on a daily basis, which allows the Group to react quickly to changes in the domestic and international coal markets. The Group has entered into framework coal procurement agreements with various large state-owned coal producers and local bureaus of mines. These framework agreements are generally entered into for a period of one year, and provide for required specifications and quantities of coal to be delivered annually in the aggregate. To ensure consistency of supply, the Group typically also requires its suppliers to deliver to a minimum quantity of coal per month or per quarter, which allows the Group to more effectively meet its supply obligations to its customers. The prices of the coal that the Group is required to purchase under these procurement agreements are subject to monthly negotiation, and will generally be determined with reference to the prices at which the Group sells the coal products to its customers so as to ensure that the Group realises an appropriate margin under its agreements with its customers. See - Operations Coal Supply Chain Management Service Customer Contracts and Pricing. Following the purchase of coal from its suppliers, the Group arranges for the transportation of coal (from both domestic or international suppliers) to its coal transhipment bases, which includes ports and coal storage facilities, where the Group stores, processes and/or blends the supplied coal prior to the delivery to customers. Transportation The delivery and transportation of coal traded by the Group generally involves transportation by rail, sea and truck. The coal products purchased from domestic suppliers are usually delivered to the Group s transhipment ports at Pizhou and Wanzhai, which are part of the Xuzhou port. Coal products transhipped via the Xuzhou port are sourced from major coal production areas in the PRC, such as Henan, Shanxi, Shaanxi and Inner Mongolia, which are then sold to Subei, Huaian and the Yangtze River Delta regions of the PRC. The coal products that the Group sources from international suppliers are transported by sea and delivered to transhipment ports in Shanghai, Guangzhou, Xiamen and Guangxi. Typically, once coal has been delivered and payment has been made, title and risk of the coal will pass to the Group. With respect to the Group s customers, title and risk of the coal products that are supplied by the Group will be passed upon delivery to the customers. 70

73 The Group does not own the ships and/or railways that transport the coal and relies on third party service providers to handle the transportation arrangements. Such transportation service providers include Zhengzhou Railway Bureau, COSCO (HK) Shipping Co. Ltd. and Fujian Air China Ocean Shipping (Group) Limited. As there are numerous shipping companies in the PRC, the price for transportation arrangements are competitive as such prices are agreed based on, among others, the Baltic Dry Index. For this reason, the Group s reliance on third party transportation service providers enables the Group to design the most reliable, efficient and cost-effective route to deliver coal to customers. This in turn also allows the Group to minimise capital expenditure and labour costs as the Group would not be required to maintain or invest in transportation assets. Coal Storage and Processing The Group utilises coal storage facilities, which are owned by third parties, at its transhipment bases for coal storage and to conduct coal processing services. The coal processing generally consists of the following: (i) (ii) (iii) separation of lump coal from slack coal and the removal of impurities and by-products from coal. By-products from the coal may be sold by the Group to companies in the construction and power generation industries; coal cleaning to increase the calorific value and other specifications of the coal to be delivered by the Group. The Group has entered into long-term cooperative relationship with Jiangsu Ruigang Coal Washing and Processing Co., Ltd. to conduct coal cleaning at its facilities, which has an aggregate annual coal cleaning capacity of between 0.6 Mt and 0.8 Mt; and coal blending, which is a process by which coal products of differing grades are mixed to obtain the desired specification. These processes allow the Group to ensure that the coal supplied to customers is of the quality requested by the customers, and allows the Group to lower its operating costs. After the processing is complete, the Group arranges for the delivery of the processed coal to its customers primarily via railways, and partly by roads and inland waterways. Quality Control The Group adopts strict quality control measures to test and monitor the quality of coal throughout the coal procurement, storage, processing and transportation process. The Group s coal procurement personnel collects samples of coal for testing by professional coal testing agencies, and makes procurement decisions based on the test results. The coal procured from suppliers is sampled and tested by third party coal testing agencies again upon arrival at the Group s transhipment bases to ensure its moisture and sulphur content are within acceptable ranges. Where coal is being processed or blended, the processed or blended coal is further tested before it is loaded and delivered to the Group s customers. The Group s policy is to monitor closely the process of loading onto the railways and trucks to control coal attrition. The Group typically requires the transportation companies to bear losses in relation to attrition in excess of certain agreed-upon levels, depending on the methods of transportation. For example, in the event that the testing agency certifies that there has been a deterioration in the quality of the coal that is unloaded from the vessel, the Group will require the transportation company to bear losses from the attrition of the coal. Inventory The Group has an inventory policy to maintain a certain amount of coal to fulfil customers demands from time to time. The Group formulates its purchase and inventory strategies by considering various factors, including current market demand and supply and anticipation of the market and price trends in the PRC and international markets. Such factors may change during a particular year and the Group makes necessary adjustments according to the market and price trends. The Group also adjusts its purchase and sales volumes from time to time in order to have a flexible inventory management policy. 71

74 The Group is focused on managing its inventory holding costs, and also seeks to maintain a range of coal products to ensure the prompt delivery of products to customers. The Group s average inventory turnover days for the storage of coal was approximately 17.1 days, 15.0 days, 14.9 days and 34.2 days for the years ended 31 December 2011, 2012 and 2013 and the six months ended 30 June Other Services The Group also offers coal supply management and execution services for its customers from time to time. In addition, the Group also provides market intelligence to its major suppliers and customers. Coal Supply Chain Finance Service To complement the Group s coal supply chain management services, the Group developed its coal supply chain finance services by offering accounts receivable factoring services to some of its customers and suppliers in the PRC in The Group believes that its customers who utilise its factoring services are able to have alternative source of financing (other than bank financing), competitive payment terms and improved cash flow. The Group s factoring service process typically begins with a request by the owner of the receivable, followed by the Group s assessment of the terms of the factoring arrangement, credit worthiness, length of relationship and financial position of the customer requiring the factoring services. Upon the acceptance by the Group of the terms of the factoring arrangement, the Group will enter into a tripartite agreement with the customer assigning the receivable to the Group, and the payer of the receivable who confirms the payment terms under which the payer is to pay the Group for the assigned receivable. Customers who utilise the Group s factoring services are primarily state-owned independent coal producers and their trading companies who supply coal to state-owned power companies in the PRC. Competition The coal supply chain industry is highly competitive. The Group principally competes with other coal supply chain management companies in the PRC, such as China Qinfa Group Limited and Dalian Trader Coal Net Co., Ltd. As the Group expands its business internationally, the Group will also face competition from foreign supply chain management companies, such as the Noble Group, Mercuria Energy Group and Gunver Energy Group. Intellectual Property Rights As at 30 June 2014, the Group has registered one trademark, namely CCS, in the PRC. The Group is not aware of any pending or threatened claims against the Group relating to the infringement of intellectual property rights that are licenced from third parties. Some of the Group s employment contracts and procurement contracts contain confidentiality provisions to protect the Group s confidential information and know-how. Insurance The Group maintains property and transportation insurance policies, and generally renews its insurance policies on an annual basis. The Group considers its current insurance coverage to be adequate and in line with the industry practice. As the Group s business expands, the Group will continue to regularly review and assess its risk portfolio and adjust its insurance practice based on the Group s needs and industry practice. Environmental Matters As a coal supply chain service provider, the Group is not subject to the environmental laws and regulations that are generally applicable to coal producers. Employees and Safety The Group is committed to recruiting, training and retaining skilled and experienced employees throughout its operations. The Group intends to achieve this by offering competitive remuneration packages as well as by focusing on training and career development. 72

75 As at 30 June 2014, the Group had approximately 400 employees, with an average age of 30 years, based in the PRC, Hong Kong, Singapore and Indonesia. Approximately 90% of the Group s employees have at least an undergraduate qualification and with senior employees being MBA or EMBA graduates from the Peking University, Tsinghua University, Yangtze and other renowned institutions. The Group recruits employees primarily through campus recruiting, internal reference and the Internet. The Group conducts annual review of its employees to provide them with feedback on their performance. The Group invests in continuing education and training programs for its management and other employees to update periodically their skills and knowledge. For example, in 2012, the Group launched a leadership programme in consultation with the Hay Group. The Group participates in employee benefit plans mandated by the PRC government, including basic pension insurance, work-related injury insurance, maternity insurance, basic medical insurance, unemployment insurance and housing provident fund scheme. The Group is required to comply with work safety laws and regulations imposed by the government authorities in the PRC and other countries in which the Group operates. The Group has implemented various occupational health and safety procedures to maintain a safe work environment. Legal Proceedings From time to time, the Group may be a party to various legal proceedings in the course of its business. The Group does not expect any proceeding, if determined adversely against it, to have a material adverse effect on the Group s consolidated financial position and the results of operations. The Group vigorously defends all claims and make provision for potential liabilities when probable and reasonably estimable, based on the state of proceedings, currently available information and legal advice received from time to time. Management The following table sets forth information regarding CCS s directors, supervisors and executive officers. Name Age Position/Title Directors Wan Yongxing 42 Chairman of the board of directors Liu Yi 41 Vice chairman of the board of directors Yan Gang 35 Director, general manager Wang Dongsheng 35 Director, vice general manager Zhang Longgen 49 Independent director Wen Dingqiu 62 Independent director Supervisors Liu Jing 44 Chairman of the supervisory committee Wang Xinyan 37 Supervisor Ling Lin 34 Supervisor Executive officers Yan Gang 35 Director, general manager Wang Dongsheng 35 Director, vice general manager Li Qunli 31 Vice general manager Cao Shixiong 41 Vice general manager Li Aijun 41 Chief fi nancial offi cer Zhang Jufang 32 Secretary of the board of directors 73

76 Directors Wan Yongxing has served as the chairman of CCS s board of directors since August He has also served as the chairman of the board of directors in several other companies, including Rail Holdings Co., Ltd., Rail Capital Co., Ltd., and Zhengzhou CCS. Mr. Wang obtained an executive EMBA degree from Peking University in China in 2006 and a bachelor s degree in Economics from Henan University of Economics and Law in Liu Yi has served as the vice chairman of CCS s board of directors since August He has also served as the vice chairman of the board of directors of Rail Holdings Co., Ltd., Rail Capital Co., Ltd. and Zhengzhou CCS since December Mr. Liu obtained an executive EMBA degree from Qinghua University in China in 2008 and a bachelor s degree in Management from Central South University in Yan Gang has served as CCS s director and general manager since August From December 2010 to August 2012, Mr. Yan served in various positions, including director, manager and president, at Zhengzhou CCS. From July 2007 to December 2010, Mr. Yan served as the president of Rail Holdings Co., Ltd. Mr. Yan obtained an executive MBA degree from Zhengzhou University in 2009, an executive EMBA degree from China Europe International Business School in China in 2011, and a bachelor s degree in management from Henan University of Economics and Law in Wang Dongsheng has served as CCS s director and deputy general manager since October From December 2010 to August 2012, Mr. Wan served as the general manager of the north-west division of Jiangsu Jinhe Power Fuel Co., Ltd. He served as a deputy general manager of Rail Holdings Co., Ltd., and the manager of the Changzhi office of Rail Holdings Co., Ltd. from April 2004 to December Zhang Longgen has served as CCS s independent director since August Mr. Prior to joining CCS, Mr. Zhang has served as the chief financial officer of JingkoSolar Holding Co., Ltd. from September From August 2006 to October 2008, Mr. Zhang served as the chief financial officer of Xinyuan Real Estate Co., Ltd. He served as a director and the chief financial officer at Crystal Window and Door Systems, Ltd. in New York from 2002 to Mr. Zhang received a master s degree in professional accounting in 1992 and a master s degree in business administration in 1994 from West Texas A&M University, and a bachelor s degree in economic management from Nanjing University in China. Mr. Zhang is a U.S. certified public accountant. Wen Dingqiu has served as CCS s independent director since August From 2007 to 2011, Mr. Wen was an advisor of Huaneng International Power Development Corporation. Prior to that, he served as an executive director and the general manager of Huaneng Jilin Power Generation Co., Ltd. from 2007 to 2009, deputy head of the construction department of China Huaneng Group from 2004 to 2006, and the general manager of Jinggangshan Huaneng Power Generation Co., Ltd. from 1994 to Mr. Wen received a master s degree in science from Wuhan University of Hydraulic and Electrical Engineering in Supervisors Liu Jing has served as the chairman of CCS s supervisory committee since August Ms. Liu has also served as a supervisor of Zhengzhou CCS since February From August 2004 to January 2011, Ms. Liu served as the chief financial officer of Rail Holdings Co., Ltd. Wang Xinyan has served as CCS s supervisor since August Ms. Wang has also served as a supervisor of Zhengzhou CCS since December From July 2009 to December 2010, Ms. Wang served as the manager of the audit department of Rail Holdings Co., Ltd. Prior to that, she served as an assistant to the deputy general manager of Zhengzhou Synear Food Co., Ltd. from October 2007 to July Mr. Wang received a master s degree in Wuhan University Ling Lin has served as CCS s supervisor since August Mr. Ling has also served as a supervisor of Zhengzhou CCS since June From January 2010 to May 2011, Mr. Ling served as a deputy general manager of Rail Holdings Co., Ltd. Prior to that, he was a researcher at the research center for public assets of Tsinghua University from October 2006 to August Mr. Ling received a master s degree in management from Tsinghua University in 2009 and a bachelor s degree in Electronic and Information Engineering from Xiangtan University in

77 Executive officers Yan Gang has served as CCS s director and deputy manager since August See above for further details. Wang Dongsheng has served as CCS s director and deputy manager since October See above for further details. Li Qunli has served as CCS s deputy general manager since October Mr. Li served as the general manager of the Beijing division of Jiangsu Jinhe Power Fuel Co., Ltd. from December 2010 to August From September 2005 to December 2010, he served in various positions, including manager, assistant to the president, and the manager of the administrative and human resources department at Rail Holdings Co., Ltd. Cao Shixiong has served as CCS s deputy general manager since From March 2013 to November 2013, Mr. Cao served as the general manager of coal division in Baocheng Futures Co.,Ltd. From September 2009 to March 2013, he served as the vice president in China Chengxin Information Technology Co., Ltd. Mr. Cao received a doctor degree in Economics from Zhongnan University of Economics and Law and a Master degree from Tsinghua University. Li Aijun has served as CCS s chief financial officer since August Ms. Li served as the chief financial officer of Zhengzhou CCS from December 2010 to August 2012, and the finance manager of Rail Holdings Co., Ltd. from October 2007 to December She is a China certified public accountant. Zhang Jufang has served as CCS s secretary to the board of directors since August From November 2011 to August 2012, Ms. Zhang served as the manager of the administrative and legal affairs department of Zhengzhou CCS. Prior to that, she served as the head of the legal department of Rail Holdings Co., Ltd. from June 2009 to October Ms. Zhang received a master s degree in Law School of Liaoning University. 75

78 PRC REGULATIONS (INCLUDING PRC REGULATIONS ON THE GUARANTEES) Below is a summary of the relevant PRC laws and regulations material to the business and operations of CCS and to the CCS Guarantee. Intra-Group Lending According to Section 73 of the General Principals of Loans () promulgated by the PBOC in 1996, lending and capital raising among non-financial institutions is prohibited. Therefore intra-group lending, in particular the agreed interest rate (if any), may not be fully protected by the PRC law and upheld by the PRC courts. SAFE Regulation CCS s ability to satisfy its obligations under the Notes and the CCS Guarantee mainly depends upon the ability of its PRC subsidiaries to obtain and remit sufficient foreign currency to pay dividends to it. The PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency to jurisdictions outside China. Under existing PRC foreign exchange regulations, payments of certain current account items can be made in foreign currencies without prior approval from the local branch of the SAFE, by complying with certain procedural requirements. However, approval from the appropriate government authorities is required where Renminbi is to be converted into foreign currency and remitted to a jurisdiction outside China to pay capital expenses such as the repayment of bank loans denominated in foreign currencies. The PRC government may also, at its discretion, restrict access to foreign currencies for current account transactions in the future. CCS s PRC subsidiaries must present certain documents to the SAFE, its authorised branch, or the designated foreign exchange bank, for approval before they can obtain and remit foreign currencies out of China. If the PRC foreign exchange control system prevents CCS s from obtaining sufficient foreign currency, or if CCS s PRC subsidiaries for any reason fails to satisfy any of the PRC legal requirements for remitting foreign currency payments, CCS s ability to satisfy its obligations under the Notes and the CCS Guarantee may be affected. SAFE Regulation on Current Account RMB Remittance Under the applicable PRC foreign exchange control regulations, current account items refer to any transaction for international receipts and payments involving goods, services, earnings and other frequent transfers. Since July 2009, the PRC has commenced a pilot scheme pursuant to which Renminbi may be used for settlement of imports and exports of goods between approved pilot enterprises in five designated cities in the PRC including Shanghai, Guangzhou, Dongguan, Shenzhen and Zhuhai and enterprises in designated offshore jurisdictions including Hong Kong and Macau. On 17 June 2010, the PRC government promulgated the Circular on Issues concerning the Expansion of the Scope of the Pilot Programme of Renminbi Settlement of Cross-Border Trades (Yin Fa (2010) No. 186) ( ) (the Circular ), pursuant to which (i) Renminbi settlement of imports and exports of goods and of services and other current account items became permissible, (ii) the list of designated pilot districts were expanded to cover 20 provinces and cities, and (iii) the restriction on designated offshore districts has been uplifted. Accordingly, any enterprises in the designated pilot districts and offshore enterprises are entitled to use Renminbi to settle imports and exports of goods and services and other current account items between them. Renminbi remittance for exports of goods from the PRC may only been effected by approved pilot enterprises in designated pilot districts in the PRC. In August 2011, the PRC government promulgated the Circular on Expanding the Regions of Cross-border Trade Renminbi Settlement () to further expand Renminbi crossborder trade settlement nationwide. SAFE Regulation on Capital Account RMB Remittance Under the applicable PRC foreign exchange control regulations, capital account items include crossborder transfers of capital, direct investments, securities investments, derivative products and loans. Capital account payments are generally subject to approval or registration of the relevant PRC authorities. 76

79 Settlements for capital account items are generally required to be made in foreign currencies. For instance, foreign investors (including any Hong Kong investors) are required to make any capital contribution to foreign invested enterprises in a foreign currency in accordance with the terms set out in the relevant joint venture contracts and/or articles of association as approved by the relevant authorities. Foreign invested enterprises or relevant PRC parties are also generally required to make capital item payments including proceeds from liquidation, transfer of shares, reduction of capital, interest and principal repayment to foreign investors in a foreign currency. That said, the relevant PRC authorities may grant approval or registration for a foreign entity to make a capital contribution or a shareholder s loan to a foreign invested enterprise with Renminbi lawfully obtained by it outside the PRC and for the foreign invested enterprise to service interest and principal repayment to its foreign investor outside the PRC in Renminbi on a trial basis. The foreign invested enterprise may be required to complete a registration and verification process with the relevant PRC authorities before such Renminbi remittances. On 7 April 2011, SAFE promulgated the Circular on Issues Concerning the Capital Account Items in connection with Cross-Border Renminbi ( ) (the SAFE Circular ), which became effective on 1 May According to the SAFE Circular, in the event that foreign investors intend to use cross-border Renminbi (including offshore Renminbi and onshore Renminbi held in the capital accounts of non-prc residents) to make a contribution to an onshore enterprise or make payment for the transfer of equity interest of an onshore enterprise by a PRC resident, such onshore enterprise shall be required to submit the relevant MOFCOM s prior written consent to the relevant local branches of SAFE of such onshore enterprise and register for a foreign invested enterprise status. Further, the SAFE Circular clarifies that the foreign debts borrowed, and the external guarantee provided by onshore entities (including financial institutions) in Renminbi shall, in principle, be regulated under the current PRC foreign debt and external guarantee regime. On 12 October 2011, MOFCOM promulgated the Circular on Issues in relation to Crossborder Renminbi Foreign Direct Investment () (the MOFCOM Renminbi FDI Circular ). In accordance with the MOFCOM Renminbi FDI Circular, MOFCOM and its local counterparts are authorised to approve Renminbi Foreign Direct Investment ( Renminbi FDI ) in accordance with existing PRC laws and regulations regarding foreign investment, with the following exceptions which require the preliminary approval by the provincial counterpart of MOFCOM and the consent of MOFCOM: (i) Renminbi FDI with the capital contribution in Renminbi of RMB300 million or more; (ii) Renminbi FDI in financing guarantee, financing lease, micro financing or auction industries; (iii) Renminbi FDI in foreign invested investment companies, venture capital or equity investment enterprises; or (iv) Renminbi FDI in cement, iron & steel, electrolytic aluminum, shipbuilding or other policy sensitive sectors. In addition, Renminbi FDI in the real estate sector is allowed following the existing rules and regulations of foreign investment in real estate, although Renminbi foreign debt remains unavailable to foreign invested real estate enterprises. The proceeds of Renminbi FDI may not be used towards investment in securities, financial derivatives or entrustment loans in the PRC, except for investments in PRC domestic listed companies through private placements or share transfers by agreement under the PRC strategic investment regime. On 13 October 2011, the PBOC promulgated the Measures for Administration of RMB Settlement Business in Relation to Foreign Direct Investment () (the PBOC Renminbi FDI Measures ), pursuant to which, PBOC special approval for Renminbi FDI and shareholder loans which was required by the PBOC Notice concerning Clarification of Certain Issues on Cross-border Renminbi Settlement () (the PBOC Notice ) promulgated on 3 June 2011 is no longer necessary. The PBOC Renminbi FDI Measures provide that, among others, foreign invested enterprises are required to conduct registrations with the local branch of the PBOC within ten working days after obtaining the business licenses for the purpose of Renminbi settlement. Under the measures, a foreign investor is allowed to open a Renminbi preliminary expense account () to reimburse some expenses before the establishment of a foreign invested enterprise and the balance in such an account can be transferred to the Renminbi capital account () of such foreign invested enterprise when it is established. Commercial banks can remit a foreign investor s Renminbi proceeds from distribution (dividends or otherwise) by its PRC subsidiaries out of the PRC after reviewing certain requisite documents. If a foreign investor intends to use its Renminbi proceeds from distribution (dividends or otherwise) by its PRC subsidiaries, the foreign investor may open a Renminbi re-investment account ( ) to pool the Renminbi proceeds, and the PRC parties selling stock in domestic enterprises to foreign 77

80 investors can open Renminbi accounts and receive the purchase price in Renminbi paid by foreign investors. The PBOC Renminbi FDI Measures also state that the foreign debt quota of a foreign invested enterprise constitutes its Renminbi debt and foreign currency debt from its offshore shareholders, offshore affiliates and offshore financial institutions, and a foreign invested enterprise may open a Renminbi account () to receive its Renminbi proceeds borrowed offshore by submitting the Renminbi loan contract to the commercial bank and make repayments of principal of and interest on such debt in Renminbi by submitting certain documents as required to the commercial bank. On 14 June 2012, the PBOC promulgated the Notice concerning Clarification of Renminbi Settlement in relation to Foreign Direct Investment () (the PBOC Notice 2012 ), which provides more detailed requirements with respect to all accounts concerning capital injection, payment of purchase price in the merger and acquisition of PRC domestic enterprises, remittance of dividends and distribution, as well as Renminbi denominated crossborder loans. Foreign investors, foreign enterprises and domestic shareholders must check and clarify all the existing Renminbi accounts and provide supplementary documents to open an account or modify the information within three months after the promulgation of the PBOC Notice For those who have more than one preliminary expense account (), capital account (), merger and acquisition account () or equity transfer account (), they are required to choose one of them and close all of the other accounts. The funds in the accounts for Renminbi capital and Renminbi denominated cross-border loan ( ) shall not be used for investment in securities, financial derivatives, entrusted loans, financial products or properties of non-self use. In addition, the foreign-invested noninvestment enterprises shall not use the funds in the Renminbi capital account and Renminbi denominated cross-border loan account () for reinvestment in the PRC. On 10 May 2013, SAFE promulgated the Provisions on Foreign Exchange Administration over Direct Investment Made by Foreign Investors in China () (the SAFE Provisions ), which became effective on 13 May According to the SAFE Provisions, a Foreigninvested Enterprise that needs to remit funds abroad due to capital reduction, liquidation, advance recovery of investment, profit distribution, etc. may purchase foreign exchange and make external payment with the relevant bank after going through corresponding registration. On 3 December 2013, MOFCOM promulgated the Announcement on Issues in relation to Crossborder Renminbi Foreign Direct Investment () (the Announcement ), which became effective and implemented from 1 January According to the Announcement, foreigninvested enterprises shall not use the capital invested through Renminbi FDI to directly or indirectly invest in securities, financial derivatives(except for strategic invest in listed companies) or entrustment loans in the PRC. The MOFCOM Renminbi FDI Circular and the Circular on Issues in relation to the MOFCOM system of Cross-border Renminbi Foreign Direct Investment ( ) will cease to be effective from the date of the implementation of the Announcement. EIT and Withholding Tax Under the Enterprise Income Tax Law (the EIT Law ), the Issuer may be classified as a resident enterprise of China. Such classification could result in unfavourable tax consequences to it and its non-prc Noteholders. Under the EIT Law, an enterprise established outside of China with a de facto management organisation located within China will be considered a resident enterprise, and consequently will be treated in a manner similar to a Chinese enterprise for EIT purposes. The implementing rules of the EIT Law define de facto management as substantial and overall management and control over the production and operations, personnel, accounting, and properties of the enterprise. However, it is still unclear how the PRC tax authorities will determine whether an entity will be classified as a resident enterprise. If the PRC tax authorities determine that the Issuer is a resident enterprise for PRC enterprise income tax purposes, a number of unfavourable PRC tax consequences could follow. The Issuer will generally be subject to EIT at a rate of 25 per cent. on its worldwide taxable income as well as PRC EIT reporting obligations. In the present case, this would mean that income such as interest from any investment of any portion of the offering proceeds and other income sourced out of the PRC would be subject to PRC EIT at a rate of 25 per cent. If the Issuer is considered a resident enterprise, interest payable to certain non-resident enterprise holders of the Notes may be treated as income derived from sources within China and be subject to PRC withholding tax at a rate of 10 per cent., or a lower rate for holders who qualify for the benefits of a double-taxation treaty with China, and capital gains realised by 78

81 such holders of the Notes may be treated as income derived from sources within China and be subject to a 10 per cent. PRC tax. Furthermore, if the Issuer is considered a resident enterprise, interest or gains earned by non-resident individuals may be treated as income derived from sources within China and be subject to PRC income tax (which in the case of interest may be withheld at source) at a rate of 20 per cent., a lower rate or an exclusion for holders who qualify for the benefits of a double-taxation treaty with China. Cross-border Security Laws On 12 May 2014, the SAFE promulgated the Notice concerning the Foreign Exchange Administration Rules on Cross-Border Security and the relating implementation guidelines ( ) (collectively the New Regulations ). The New Regulations, which come into force on 1 June 2014, replace twelve other regulations regarding crossborder security and introduce a number of significant changes, including: (i) abolishing prior SAFE approval and quota requirements for cross-border security; (ii) requiring SAFE registration for two specific types of crossborder security only; (iii) removing eligibility requirements for providers of cross-border security; (iv) the validity of any cross-border security agreement is no longer subject to SAFE approval, registration, filing, and any other SAFE administrative requirements; (v) removing SAFE verification requirement for performance of cross-border security. A cross-border guarantee is a form of security under the New Regulations. The New Regulations classify cross-border security into three types: Onshore Guarantee For Offshore Indebtedness () ( Onshore Guarantee ): security/guarantee provided by an onshore security provider for a debt owing by an offshore debtor to an offshore creditor. Offshore Guarantee For Onshore Indebtedness () : security/guarantee provided by an offshore security provider for a debt owing by an onshore debtor to an onshore creditor. Other Types of Cross-border Security (): any cross-border security/ guarantee other than Onshore Guarantee and Offshore Guarantee For Onshare Indebtedness. In respect of Onshore Guarantee, in the case where the onshore security provider is a non-financial institution, it shall conduct a registration of the relevant security/guarantee with SAFE within 15 working days after its execution (or 15 working days after the date of any change to the security). The funds borrowed offshore shall not be directly or indirectly repatriated to or used onshore by means of loans, equity investments or securities investments without SAFE approval. The onshore security provider can pay to the offshore creditor directly (by effecting remittance through an onshore bank) where the Onshore Guarantee has been registered with SAFE. In addition, if any onshore security provider under an Onshore Guarantee provides any security or guarantee for an offshore bond issuance, the offshore issuer s equity shares must be fully or partially held directly or indirectly by the onshore security provider. Moreover, the proceeds from any such offshore bond issuance must be applied towards the offshore project(s), where an onshore entity holds equity interest, and in respect of which the relevant approval, registration, record, or confirmation have been obtained from or made with the competent PRC authorities in compliance with PRC laws. All sums payable in respect of the Notes are unconditionally and irrevocably guaranteed by CCS. CCS s obligations in respect of the Notes, the Trust Deed, the Programme Agreement and the Agency Agreement are contained in the CCS Deed of Guarantee. The CCS Deed of Guarantee has been executed by CCS on or before the date of this Information Memorandum. Under the New Regulations, the CCS Deed of Guarantee does not require any pre-approval by SAFE and is binding and effective upon execution under its governing law. CCS is required to submit the CCS Deed of Guarantee to the local SAFE for registration within 15 working days after its execution. The SAFE registration is merely a post signing registration requirement, which is not a condition to the effectiveness of the CCS Guarantee. Under the New Regulations, the local SAFE will go through a procedural review (as opposed to a substantive approval process) of CCS s application for registration. Upon completion of the review, the local SAFE will issue a registration notice or record to CCS to confirm the completion of the registration. CCS has been advised by its PRC legal advisors that there are no foreseeable obstacles to the completion of the registration so long as all relevant documents have been duly submitted to SAFE. 79

82 Under the New Regulations: non-registration does not render the CCS Guarantee ineffective or invalid under its governing law although SAFE may impose penalties on CCS if registration is not carried out within the stipulated time frame of 15 working days; and there may be logistical hurdles at the time of remittance (if any cross-border payment is to be made by CCS under the CCS Guarantee) as domestic banks may require evidence of SAFE registration in order to effect such remittance, although this does not affect the validity of the CCS Guarantee itself. The terms and conditions of the Notes provide that CCS will register or cause to be registered with SAFE or its local branch the CCS Deed of Guarantee in accordance with, and within the time period prescribed by, the New Regulations and use its best endeavours to complete the registration and obtain a registration record from SAFE on or before the date falling 60 Registration Business Days after the date of the Trust Deed (the Registration Deadline ). It shall be an Event of Default under Condition 10 of the Notes if CCS fails to complete the SAFE registration before the Registration Deadline (see Condition 10(s) in the section Terms and Conditions of the Notes ). 80

83 EXCHANGE RATES PRC The PBOC sets and publishes daily a base exchange rate with reference primarily to the supply and demand of Renminbi against a basket of currencies in the markets during the prior day. The PBOC also takes into account other factors such as the general conditions existing in the international foreign exchange market. Since 1994, the conversion of Renminbi into foreign currencies, including Hong Kong dollars and US dollars, has been based on rates set by the PBOC, which are set daily based on the previous day s inter-bank foreign exchange market rates and current exchange rates in the world financial markets. From 1994 to 20 July 2005, the official exchange rate for the conversion of Renminbi to US dollars was generally stable. On 21 July 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to that of the US dollar, to allow the value of the Renminbi to fluctuate within a narrow and managed band based on market supply and demand and by reference to a basket of currencies. This change in policy has resulted in a significant appreciation of the Renminbi against the US dollar. The PRC government has made further adjustments to the exchange rate system. The PBOC authorised the China Foreign Exchange Trading Center, effective since 4 January 2006, to announce the central parity exchange rate of certain foreign currencies against the Renminbi at 9:15 a.m. each business day. This rate is set as the central parity for the trading against the Renminbi in the inter-bank foreign exchange spot market and the over the counter exchange rate for that business day. On 18 May 2007, the PBOC enlarged, effective on 21 May 2007, the floating band for the trading prices in the inter-bank spot exchange market of Renminbi against the US dollar from 0.3% to 0.5% around the central parity rate. This allows the Renminbi to fluctuate against the US dollar by up to 0.5% above or below the central parity rate published by the PBOC. On 19 June 2010, the PBOC announced that in view of the recent economic situation and financial market developments in China and abroad, and the balance of payments situation in China, it has decided to proceed further with reform of the Renminbi exchange rate regime and to enhance the Renminbi exchange rate flexibility. According to the announcement, the exchange rate floating bands will remain the same as previously announced but the PBOC will place more emphasis to reflecting the market supply and demand with reference to a basket of currencies. On 12 April 2012, the PBOC announced that effective on 16 April 2012, the floating band for the trading prices in the interbank spot exchange market of Renminbi against the US dollar is enlarged from 0.5% to 1.0% around the central parity rate, which allows the Renminbi to fluctuate against the US dollar by up to 1.0% above or below the central parity rate published by the PBOC. The PRC government may in the future make further adjustments to the exchange rate system. Although the PRC governmental policies have been introduced in 1996 to reduce restrictions on the convertibility of the Renminbi into foreign currency for current account items, conversion of the Renminbi into foreign currency for capital items, such as foreign direct investment, loans or security, requires the approval of the SAFE and other relevant authorities. The following table sets forth certain information concerning the exchange rates between Renminbi and Singapore dollars for the periods indicated. 81

84 Exchange Rate Period Period End Average (1) High Low (RMB per S$1.00) August Aug July Jul June Jun May May April Apr March Mar Six months ended June Jun Dec Dec Dec Dec Dec Note: (1) Averages are calculated by averaging the daily rates during the relevant period. 82

85 SELECTED CONSOLIDATED FINANCIAL INFORMATION The following sets out the audited consolidated financial statements of the Group for the financial years ended 31 December 2011, 31 December 2012 and 31 December 2013 and the six months ended 30 June 2013 and 30 June An English translation of the unaudited consolidated financial statements for the six months ended 30 June 2014 of the Group is set out in Appendix IV of this Information Memorandum. Such consolidated interim financial information has not been audited or reviewed and has been translated by an external translator. Accordingly, there can be no assurance that, had an audit or review been conducted in respect of such financial information, the information presented therein would not have been materially different. Results for the interim period should not be considered indicative of results for any other period or for the full financial year. Consolidated Profit and Loss Statements for the financial years ended 31 December 2011, 31 December 2012 and 31 December 2013 and the six months ended 30 June 2013 and 30 June 2014 For the financial year ended 31 December For the six months ended 30 June (RMB) Revenue 3,311,555,242 5,281,242,580 6,490,705,970 2,369,818,134 3,247,461,473 Less: Cost of sales... 2,774,131,157 4,541,933,909 5,521,994,859 2,059,125,586 2,815,790,717 Taxes and surcharge for main operations... 6,411,331 7,129,580 21,602,726 5,868,977 8,612,174 Operating expenses ,465, ,579, ,938, ,300, ,450,312 General and administrative expenses... 33,533,081 57,749,541 97,337,356 44,622,853 54,008,517 Financial expenses... 3,579,667 9,218,509 20,220,224 (6,193,750) 67,675,388 Losses arising from assets impairment ,628 11,610,152 4,147,183 (11,922,304) Add: Profit / (loss) from changes in fair value ,363 (4,906,725) Investment income... 23,018,931 89,822,802 Operating profit ,434, ,957, ,808,293 96,946, ,762,744 Add: Non-operating income... 22,063,453 72,376,503 82,106,525 25,056,834 6,313,877 Less: Non-operating expenditure... 2,404, ,693 50, ,601 Income before tax ,093, ,334, ,119, ,953, ,301,020 Less: Income tax... 38,858,438 86,538,451 75,969,032 24,769,490 33,036,131 Net income ,235, ,795, ,150,092 97,184, ,264,888 83

86 Consolidated Balance Sheets as at 31 December 2011, 31 December 2012, 31 December 2013 and 30 June 2014 As at 31 December As at 30 June (RMB) Current Assets Monetary funds ,164, ,164,163 1,207,285, ,967,915 Tradable financial assets ,363 1,193,160 Notes receivable... 86,023, ,075, ,846, ,320,415 Accounts receivable ,882, ,250, ,052, ,719,298 Advances to suppliers ,253, ,293, ,337, ,327,873 Other receivables... 67,555,843 62,209, ,751, ,724,117 Inventories ,820, ,529, ,933, ,994,255 Other current assets... 13,301,784 6,360,480 2,177,038,596 1,826,220,914 Total current assets... 1,606,001,272 2,014,883,480 5,873,032,827 5,375,467,951 Non-current assets Available-for-sale financial assets ,000,000 Long-term equity investments ,594, ,074,684 Fixed assets... 7,903,050 10,402,295 11,939,871 15,108,183 Intangible assets ,508 12, ,650, ,712,540 Long-term prepayments , ,694 Deferred tax assets ,407 8,056,984 5,090,369 Other non-current assets... Total non-current assets... 8,020,938 10,583, ,725, ,181,472 Total assets... 1,614,022,211 2,025,466,682 6,629,758,017 6,365,649,423 Current liabilities Short-term loans ,748, ,571,058 1,052,539,661 1,377,949,995 Tradable financial liabilities... 5,312,522 Notes payable... 45,898, ,227,858 1,147,021, ,477,253 Accounts payable... 83,542, ,475, ,534, ,877,054 Advances from customers ,351,315 68,244, ,592, ,394,763 Accrued payroll ,110 1,318,970 3,446,848 4,006,877 Taxes payable... 25,695,118 42,166,950 58,599,258 18,559,183 Interest payable... 22,072,749 88,179,738 Other payables... 14,261,055 13,511,126 2,077,402,573 1,668,606,034 Total current liabilities ,309, ,516,043 4,863,209,116 4,416,363,423 Non-current liabilities Deferred tax liabilities , ,290 Other long-term liabilities... 20,000,000 20,000,000 Total non-current liabilities... 20,164,070 20,298,290 Total liabilities ,309, ,516,043 4,883,373,186 4,436,661,713 Paid-in capital ,133, ,123, ,223, ,263,893 Capital surplus... 27,184,100 72,373,133 Surplus reserve... 7,792,022 12,273,904 24,811,770 48,917,480 Undistributed profit ,787, ,364, ,992, ,150,721 Total owners equity ,713,096 1,244,950,638 1,746,384,831 1,928,987,709 Total liabilities and owner s equity... 1,614,022,211 2,025,466,682 6,629,758,017 6,365,649,423 84

87 For the financial year ended 31 December For the six months ended 30 June (RMB) Net cash flows from operating activities... (311,778,111.92) 432,924, (1,883,813,120.68) (418,435,807.97) 228,909, Net cash flows from investing activities... (72,722,247.50) (3,598,631.36) (717,779,742.10) (3,289,393.63) (148,360,895.72) Net cash flows from financing activities ,970, (311,514,644.37) 2,310,430, ,747, (88,472,816.74) Effect of changes in foreign exchange rate on cash... (1,157,417.17) (811,453.96) (2,479,484.85) (8,246,313.29) 760, Net increase in cash and cash equivalents ,313, ,999, (293,641,568.85) (408,223,792.44) (7,163,350.59) Cash and cash equivalents at the beginning of the year/period ,851, ,164, ,164, ,164, ,522, Cash and cash equivalents at the end of the year/period ,164, ,164, ,522, ,940, ,359, Review of the Group s performance and financial position for six months ended 30 June 2014 ( 6M2014 ) Revenue was RMB3,247.5 million in 6M2014, representing an increase of 37.03% from RMB2,369.8 million in the six months ended 30 June 2013 ( 6M2013 ), mainly due to the higher coal sales volume achieved. CCS made an investment income of RMB89.8 million for 6M2014. This was due to the income from our hedging activities in the futures market. As at 30 June 2014, total assets was RMB6,365.6 million, largely similar to RMB6,629.8 million as at FY2013. Long-term equity investment was RMB819.1 million due to investments in two new joint venture companies, Zhengzhou Airport Zone Xingrui Industrial Co., Ltd and Qingyang Energy and Chemical Group CCS Supply Chain Management Co., Ltd. Total equity was RMB1,929.0 million as at 30 June 2014, representing an increase of 10.4% from RMB1,746.4 million as at 31 December The increase was primarily attributable to higher undistributed profit. Net cash flows from operating activities was RMB228.9 million in 6M2014 compared to negative net cash flows from operating activities of RMB418.4 million in 6M2013. This was due to the Group s improved business. Review of the Group s performance and financial position for the year ended 31 December 2013 ( FY2013 ) Revenue was RMB6,490.7 million in FY2013, representing an increase of 22.90% from RMB5,281.2 million in the year ended 31 December 2012 ( FY2012 ), on the back of higher coal sales volume achieved. CCS made an investment income of RMB23.0 million in FY2013. This was due to the income the Group gained from the sale of a trust product issued by Zheshang Huiyue Wealth Management Co,. Ltd. As at 31 December 2013, total assets was RMB6,629.8 million compared to RMB2,025.5 million as at 31 December Notes receivables was RMB386.8 million as at 31 December 2013 compared to RMB136.1 million as at 31 December The increase was attributable to the Group s acceptance of the use of bank acceptances or letters of credit as a form of settlement for payment to the Group. Accounts receivable was RMB911.1 million as at 31 December 2013 compared to RMB455.3 million as at 31 December The increase was attributable to the higher revenue achieved. Advances to suppliers was RMB772.3 million as at 31 December 2013 compared to RMB323.3 million as at 31 December The increase was due to the increase in the business scale and coal procurement activities of the Group. Other current assets was RMB2,177.0 million as at 31 December 2013 compared to RMB6.3 million as at 31 December

88 The increase was attributable to the receivables assigned to the Group following the commencement of the factoring business. As at 31 December 2013, available for sale financial assets was RMB200.0 million, which comprises of the financial trust products of the National Trust Limited purchased by CCS s subsidiary, Naqu Ruichang Coal Transportation and Sale Co., Ltd. As at 31 December 2013, long term equity investment was RMB385.6 million as a result of the investment in Zhengzhou Airport Zone Xingrui Industrial Co., Ltd for RMB98.0 million and the acquisition of approximately 10% stake in Xinyu Rural Commercial Bank Co., Ltd. in Jiangxi for RMB287.5 million, respectively. Short-term loans was RMB1,053.5 million as at 31 December 2013 compared to RMB132.6 million as at 31 December The increase in loan facilities was used to support the growth of the Group s business. Notes payable was RMB1,147.0 million as at 31 December 2013 compared to RMB278.2 million as at 31 December The increase was attributable to the increase in bank acceptances used to finance coal procurement from suppliers. Advances from customers was RMB171.6 million as at 31 December 2013 compared to RMB68.2 million as at 31 December The increase was due to the increase in prepayments from customers. Other payables was RMB2,077.4 million as at 31 December 2013 compared to RMB13.5 million as at 31 December The increase was due to the increase of shareholders loans from Zhengzhou China Coal Solution Co., Ltd. extended to Tianjin China Coal Solution Factoring Co., Ltd. Total equity was RMB1,746.4 million as at 31 December 2013, representing an increase of 40.28% from RMB1,245.0 as at 31 December The increase was attributable to increased undistributed profit. Net cash flows from operating activities was negative at RMB1,883.8 million in FY2013 compared to net cash flows from operating activities of RMB432.9 million in FY2012. This was due to the incorporation of a new subsidiary for the purposes of conducting the factoring business and higher receivables in connection with the factoring business. Review of the Group s performance and financial position for the year ended 31 December 2012 ( FY2012 ) Revenue was RMB 5,281.2 million in FY2012, representing an increase of 59.5% from RMB3,311.6 million in the year ended 31 December 2011 ( FY2011 ), mainly due to the higher coal sales volume achieved. As at 31 December 2012, total assets was RMB2,025.5 million compared to RMB1,614.0 million as at 31 December Notes receivables was RMB136.1 million as at 31 December 2012 compared to RMB86.0 million as at 31 December The increase was mainly due to higher sales volume in FY2012, enlarged customers base and improved payment terms. Accounts receivable was RMB455.3 million as at 31 December 2012 compared to RMB206.9 million as at 31 December The increase was due to higher sales volume and revenues from outside the PRC and the longer invoicing cycle. Short-term loans was RMB132.6 million as at 31 December 2012 compared to RMB408.7 million as at 31 December Notes payable was RMB278.2 million as at 31 December 2012 compared to RMB45.9 million as at 31 December The decrease in short-term loans, and increase in notes payable, was due to the Group utilising notes payables as a form of financing over short-term loans to support the Group s business growth. Accounts payable was RMB244.5 million as at 31 December 2012 compared to RMB83.5 million as at 31 December The increase was due to the growth of the Group s business and the longer invoicing cycle. Advances from customers was RMB68.2 million as at 31 December 2012 compared to RMB152.4 million as at 31 December The decrease was due to the change in sales strategy in 2012 and drop in volume of sales transactions based on a prepayment basis. Total equity as at 31 December 2012 was RMB1,245.0 million, representing an increase of 41.04% from RMB882.7 million as at 31 December The increase was due to the reverse takeover exercise of CCS, resulting in an increase in the paid-in capital. Net cash flows from operating activities was RMB432.9 million in FY2012 compared to negative net cash flows from operating activities of RMB311.8 million in FY2011. The increase was due to stronger revenue achieved. 86

89 CAPITALISATION AND INDEBTEDNESS The following table sets forth CCS consolidated capitalisation and indebtedness as at 30 June 2014 on an actual basis. The following table should be read in conjunction with CCS consolidated financial statements and related notes included in this Information Memorandum and the section Selected Consolidated Financial Information. Borrowings As at 30 June 2014 Actual (RMB) (unaudited) Current... 1,377,949,995 Non-current... - Total borrowings... 1,377,949,995 Total equity... 1,928,987,709 Total capitalisation... 3,306,937,704 Note: Total borrowings does not include notes payable amounting to RMB545,477,253 as at 30 June Except for the decrease in the outstanding amount under the Zhengzhou CCS Loan from RMB1,660,000,000 as at 30 June 2014 to RMB1,400,000,000 as at 31 August 2014, there has been no material change in the consolidated capitalisation and indebtedness of CCS since 30 June

90 MATERIAL BORROWINGS Except as otherwise indicated, the following sets out certain details relating to the Group s borrowings for facilities with a committed or outstanding amount of at least RMB100.0 million or S$20 million. Naqu Ruichang Coal Transportation and Sale Co., Ltd. has a factoring loan facility from China Minsheng Bank, Zhengzhou for a total committed amount of RMB150.0 million with a tenor of one year. The amount outstanding under the facility was RMB66.1 million as at 30 June Naqu Ruichang Coal Transportation and Sale Co., Ltd. has a factoring loan facility from China Everbright Bank, Zhengzhou for a total committed amount of RMB100.0 million with a tenor of one year. The amount outstanding under the facility was RMB89.6 million as at 30 June Xining Dexiang Commerce and Trade Co., Ltd. has a loan facility from the Bank of China, Xining for a total committed amount of RMB200.0 million with a tenor of one year. The amount outstanding under the facility was RMB100.0 million as at 30 June Xining Dexiang Commerce and Trade Co., Ltd. has a letter of credit facility from Agricultural Bank of China, Xining for a total committed amount of RMB230.0 million with a tenor of one year. The amount outstanding under the facility was RMB215.9 million as at 30 June Xining Dexiang Commerce and Trade Co., Ltd. has a letter of credit facility from the Industrial and Commercial Bank of China, Xining for a total committed amount of RMB100.0 million with a tenor of one year. The amount outstanding under the facility was RMB75.7 million as at 30 June Naqu Ruichang Coal Transportation and Sale Co., Ltd. has a loan facility from the subsidiaries of Wanjia Co-win Fund for a total committed amount of RMB299.3 million with a tenor of one year. There were no amounts outstanding under the facility as at 30 June Xining Dexiang Commerce and Trade Co., Ltd. has a loan facility from Lujiazui International Trust Corporation Limited for a total committed amount of RMB110.0 million with a tenor of two years (subject to redemption one year before the expiry). There were no amounts outstanding under the facility as at 30 June The Issuer has a letter of credit facility from Deutsche Bank, Singapore Branch with the validity of the letters of credit issued thereunder expiring from 12 July 2014 to 3 November The amount outstanding under the facility was S$25.6 million as at 30 June Tianjin China Coal Solution Factoring Co., Ltd. has a shareholder loan from Zhengzhou CCS for a tenor of one year. The amount outstanding under the loan was RMB1,400 million as at 31 August See Condition 4(b) in the section Terms and Conditions of the Notes for details of the subordination of and interest payments permitted under this loan. The debt agreements governing the facilities described above contain restrictions on the Group s operations and such restrictions include the prohibition against the relevant borrower declaring dividends without prior notification to the lender, provision of the audited accounts of certain subsidiaries within a specified time frame. As at the date of this Information Memorandum, the Group is in compliance with its debt agreements. 88

91 RISK FACTORS Prior to making an investment or divestment decision, prospective investors or existing holders of the Notes should carefully consider all the information set forth in this Information Memorandum including the risk factors set out below. Any of the following risks could adversely affect any of the Obligors and/or the Group s business, financial condition, results of operations or prospects and investors could, as a result, lose all or part of their investment. The risk factors set out below do not purport to be complete or comprehensive of all the risk factors that may be involved in the business, assets, financial condition, performance or prospects of the Obligors and their respective subsidiaries or the properties owned by the Group or any decision to purchase, own or dispose of the Notes. Additional risk factors and uncertainties which the Issuer is currently unaware of may also impair its business, assets, financial condition, performance or prospects. If any of the following risk factors develop into actual events, the business, assets, financial condition, performance or prospects of the Obligors and/or the Group could be materially and adversely affected. In such cases, the ability of the Issuer to comply with its obligations under the Trust Deed and the Notes may be adversely affected. Limitations of this Information Memorandum This Information Memorandum does not purport to nor does it contain all information that a prospective investor in or existing holder of the Notes may require in investigating the Obligors or the Group, prior to making an investment or divestment decision in relation to the Notes issued under the Programme. Neither this Information Memorandum nor any document or information (or any part thereof) delivered or supplied under or in relation to the Programme or the Notes (or any part thereof) is intended to provide the basis of any credit or other evaluation and should not be considered a recommendation by any of the Obligors, the Arranger or any of the Dealers that any recipient of this Information Memorandum or any such other document or information (or such part thereof) should subscribe for or purchase or sell any of the Notes. This Information Memorandum is not, and does not purport to be, investment advice. A prospective investor should make an investment in the Notes only after it has determined that such investment is suitable for its investment objectives. Determining whether an investment in the Notes is suitable is a prospective investor s responsibility, even if the investor has received information to assist it in making such a determination. Each person receiving this Information Memorandum acknowledges that such person has not relied on the Obligors, their respective subsidiaries and/or their respective associated companies (if any), the Arranger or any of the Dealers or any person affiliated with each of them in connection with its investigation of the accuracy or completeness of the information contained herein or of any additional information considered by it to be necessary in connection with its investment or divestment decision. Any recipient of this Information Memorandum contemplating subscribing for or purchasing or selling the Notes should determine for itself the relevance of the information contained in this Information Memorandum and any such other document or information (or any part thereof) and its investment or divestment should be, and shall be deemed to be, based solely on its own independent investigation of the financial condition and affairs, and its own appraisal of the credit worthiness of the Obligors and the Group, the terms and conditions of the Notes and any other factors relevant to its decision, including the merits and risks involved. A prospective investor should consult with its legal, tax and/or other advisers prior to deciding to make an investment in the Notes. RISKS RELATING TO THE ISSUER S AND THE GROUP S BUSINESS, FINANCIAL CONDITION AND/ OR RESULTS OF OPERATIONS The Group s operations may be adversely affected by global and domestic economic conditions. The Group s results of operations are affected by economic conditions in the PRC and elsewhere around the world. Although nations around the world have adopted various economic policies to mitigate the adverse influences caused by factors such as the slowdown of world economy and the European financial crisis, it is uncertain how quickly the world economy would grow going forward. The Group s operations may also be adversely affected by factors such as certain countries trade protection policies which may affect export and certain regional trade agreements which may affect import. 89

92 The Group faces intense competition in its business and the Group may not be able to compete effectively. The coal supply chain industry is highly competitive in the PRC. In addition, as the Group expands its business internationally, the Group faces competition from foreign supply chain management companies, some of which have longer operating histories, larger customer base, greater access to suppliers, wider range of services, and greater financial resources than the Group. The Group generally competes with its competitors on, among other things, coal quality, price, delivery speed and transportation network. There is no assurance that the Group can continue to compete against its competitors successfully in the future. Increased competition may result in lower demand for the Group s services, lower profit margins and/or loss of market share. If the Group fails to compete effectively, and to maintain or grow the Group s market share, the Group s business, results of operations and prospects will be adversely affected. The Group s business, results of operations and financial condition may be adversely impacted by fluctuations in domestic and international coal markets. The Group s business and operating results are dependent on the supply of and demand for coal in the PRC, and the supply of coal in the international coal markets. The supply of and demand for coal is affected by various factors, including general economic conditions, government policies, coal production and transportation costs, the performance of coal-consuming industries, the availability and prices of alternative energy sources and the influence of the PRC government through its regulation of on-grid tariffs and the allocation of transportation capacity on the national rail system. The Group s business could be adversely affected by a decrease in global or domestic coal supply or a reduction in demand for coal from key coal consuming industries. For example, the demand for thermal coal from the power industry in the PRC has been affected negatively in the second half of 2008 and the first quarter of 2009 as a result of slowing economic growth and slackening industrial production growth. The growth of demand for coal in the PRC has also slowed down in recent years, resulting in an increase in coal inventories and a substantial decline in coal prices since There is no assurance that the demand for and the prices of coal will not further decline, which could materially adversely affect the Group s results of operations. In addition, the Group may encounter interruption, delay or shortage of coal supplies in overseas countries where the Group purchases coal, such as Indonesia, United States, South Africa and Mongolia, which would adversely affect the Group s results of operations and financial condition. The Group does not have long-term purchase commitments from its customers. As is typical in the coal industry in the PRC, the Group does not enter into long-term purchase commitments and typically enters into annual framework agreements with its customers. Following the expiry of these annual agreements, there is no assurance that any of such customers will renew these agreements or continue to place orders with the Group in the future at the same level as in previous periods. As a result, the Group s results of operations may fluctuate significantly in the future which may make period-to-period comparisons less meaningful. Such fluctuations may also adversely affect the Group s results of operations and financial condition. The Group may be unable to continue to procure coal supplies at acceptable prices and quality in a timely manner or pass increased costs to its customers due to fluctuations of coal prices. The Group s success depends on its ability to obtain from suppliers sufficient quantities of coal at acceptable prices and quality in a timely manner, in order to fulfil the Group s obligations to its customers. In particular, given that the Group s coal procurement contracts with its customers generally only stipulate procedures for quality and quantity controls, sampling and weighing, and payment method, the Group is exposed to the market risk of the price fluctuation on coal as the Group generally only commences sourcing for coal supplies after the coal sales price with its customer is determined. Coal supplies which are critical to the Group s operations are subject to substantial pricing cyclicality and the Group does not have long-term contracts with its suppliers. As a result, the price and availability of coal may vary significantly due to factors including customer demands, supplier capacity and market conditions. There is no assurance that the Group will be able to continue to obtain sufficient quantities of coal supplies from its existing suppliers or from alternative sources at prevailing or acceptable prices, in a timely manner, or at all. In addition, there is no assurance that the Group will not encounter difficulties in obtaining quality coal or experience shortages of coal, or that the Group will be able to absorb any increase in coal prices or pass them on to its customers. 90

93 In addition, the Group formulates its coal purchase policies by considering various factors, including current market demand and supply and anticipation of the market and price trends in the domestic and overseas markets. The Group adjusts its purchase and sales volumes from time to time based on its projections and judgment on coal market trends. Any unexpected trends in coal price that have not been anticipated in the Group s projections and its analysis on market trends may adversely affect the Group s financial performance. Any major disruption of the methods of transportation which the Group relies on to deliver coal to its customers, may adversely affect its business and results of operations. The Group utilises the PRC national railway system, the PRC road and shipping networks to deliver coal to customers and the Group also relies on third party service providers to handle its transportation arrangements. Any significant increase in transportation costs could have a negative impact on the competitiveness of the Group s services, which may in turn have an adverse effect on its business and results of operations. Railway infrastructure and capacity in the PRC have in the past been affected by extreme weather conditions, earthquakes and major rail accidents. The road and shipping networks in the PRC could also be affected by similar extreme weather conditions. Furthermore, the development of the PRC railway system has not kept pace with the coal industry s transportation requirements. Currently, transportation capacity on major rail lines is allocated by the PRC government and the Group may not be able to continue to secure sufficient railway transportation capacity. There can be no assurance that these problems will not recur or that new problems will not arise, or that the Group will be able to secure economically feasible alternative transportation arrangements in case of any disruptions. Any delay in the Group s delivery of coal to customers as a result of disruptions to the Group s transport arrangements may have a material adverse effect on the Group s business and results of operations. The Group relies on a number of third-party transportation companies to transport coal to its customers in the PRC. Any major disruption of their business or increase in transportation costs may adversely affect the Group s business and results of operations. In addition to railway transportation, the Group also relies on a number of third-party transportation companies to transport coal from the Group s suppliers mines to the Group s transshipment points at the border crossings or to PRC sea ports and to the Group s customers within the PRC. Although the Group has not experienced any major disruption in respect of the transportation services provided, there can be no assurance that sufficient transportation services will remain available to the Group. Any major disruption of the third-party transportation companies business and operation may adversely affect the Group s business and results of operations and if the Group cannot replace them with alternative transport capacity, the Group s business and results of operations may be adversely affected. In addition, should such third party service providers increase their prices which the Group is unable to pass on to its customers or suppliers, it may have a material adverse effect on the Group s business and results of operations. The Group is exposed to risk related to decreased inventory value. The Group s inventory primarily consists of coal products. While the Group has policies and measures in place to manage the Group s inventory levels and hedge against coal price fluctuations, any significant decline in coal prices will decrease its inventory value, which will in turn adversely affect the Group s results of operations and financial condition. Disruptions in global financial markets may affect the Group s ability to obtain financing to fund the Group s operations. The Group relies on short term financing and internally generated cash flow to fund its businesses. The Group s future liquidity, payment of trade and other payables and repayment of the Group s outstanding debt obligations as and when they become due will primarily depend on the Group s ability to maintain adequate cash inflows from its operating activities and adequate external financing. Any disruption in international capital markets may lead to reduced liquidity and a reduction of available financing. Any credit tightening environment may affect the Group s ability to obtain financing, and the Group s existing lenders may even reduce the amount of or discontinue the banking facilities currently 91

94 available to the Group. This could adversely affect the Group s ability to secure sufficient financing to fund its operations. In addition, the Group s ability to obtain financing is subject to a variety of uncertainties, including: the Group s future financial condition and credit rating; general market conditions for financing activities; and the PRC government policies and regulations relating to coal operators and lending in general. The Group may not be able to obtain financing, on acceptable terms, or at all. If the Group is unable to obtain financing in a timely manner, the Group may be unable to grow its business and remain competitive, which will have a material adverse effect on the Group s ability to grow its revenue. The Group s business may be adversely affected if it fails to maintain sufficient levels of working capital in the future. The Group spends a significant amount of cash in its operations, principally to fund its coal purchases. The Group generally funds most of its working capital requirements out of cash flow generated from operations. If the Group fails to generate sufficient sales, or if the Group s suppliers stop to offer credit terms, or if the Group was to experience difficulties in collecting its accounts receivables, the Group may not have sufficient cash flow to fund its operating costs and its business could be adversely affected. The Group may incur substantial additional indebtedness in the future, which could adversely affect its financial health and ability to generate sufficient cash to satisfy outstanding and future debt obligations. The Group may from time to time incur substantial additional indebtedness. If the Group incurs additional debt, the risks that the Group faces as a result of such indebtedness and leverage could intensify. The increase in the amount of the Group s indebtedness could adversely affect its financial condition and ability to generate sufficient cash. For example, it could: increase the Group s vulnerability to adverse general economic and industry conditions; require the Group to dedicate a substantial portion of its cash flow from operations to servicing and repaying indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures, dividend payments and other general corporate purposes; limit the Group s flexibility in planning for or reacting to changes in the businesses and the industries in which the Group operates; place the Group at a competitive disadvantage compared to its competitors which have less debt; limit, along with the financial and other restrictive covenants of such indebtedness, the Group s ability to borrow additional funds; and increase the cost of additional financing. The Group s ability to generate sufficient cash to satisfy its outstanding and future debt obligations will depend upon its future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, many of which are beyond the Group s control. The Group may not generate sufficient cash flow to meet its anticipated operating expenses or to service its debt obligations as they become due. If the Group is unable to service its indebtedness, the Group will be forced to adopt an alternative strategy that may include actions such as reducing or delaying capital expenditures, selling assets, restructuring or refinancing existing indebtedness or seeking equity capital. These strategies, if implemented, may not be instituted on satisfactory terms. Any of these constraints upon the Group could materially and adversely affect its ability to satisfy its outstanding and future debt obligations. 92

95 If the Group experiences a prolonged interruption in the operation of its information technology systems, its business, financial condition and results of operations could be adversely affected. The efficient operation of the Group s business depends on its information technology systems. Any prolonged failure of the Group s information technology systems to perform as anticipated could disrupt the Group s business and could result in decreased sales and increased overhead costs, all of which could adversely affect the Group s business, financial condition and results of operations. In addition, the Group s information technology systems are vulnerable to damage or interruption from earthquake, fire, flood and other natural disasters, attacks by computer viruses or hackers, power loss and computer systems or data network failure. Any prolonged interruption could adversely affect the Group s business, financial condition and results of operations. Future fluctuations in the value of the RMB could have an adverse effect on the Group s financial condition and results of operations. While the Group conducts substantially all of its business operations in the PRC, the Group converts RMB into foreign currencies to purchase coal overseas. As a result, fluctuations in exchange rates, particularly between the RMB and U.S. dollar, could affect the Group s profitability and may result in foreign currency exchange losses of the Group s foreign currency-denominated assets and liabilities. The exchange rate of the RMB against the U.S. dollar and other currencies fluctuates and is affected by, among other things, changes in the PRC s, as well as, international, political and economic conditions and the PRC government s fiscal and currency policies. On 21 July 2005, the PRC government introduced a floating exchange rate system to allow the value of RMB to fluctuate within a regulated band based on market supply and demand and by reference to a basket of foreign currencies. Since 2005, the value of RMB has appreciated significantly against U.S. dollar. On 19 June 2010, PBOC decided to further promote the reform of the RMB exchange rate formation mechanism, and improve the flexibility of RMB exchange rate. On 15 March 2014, the PBOC announced to further widen RMB s daily trading band against U.S. dollar from 1% to 2% on either side of the daily reference rate, allowing for greater fluctuations of the exchange rate. There remains significant international pressure on the PRC government to adopt a more flexible currency policy, which could result in significant fluctuations of the RMB against the U.S. dollar. Since the Group purchases a significant portion of coal from international suppliers, and the purchase prices are benchmarked to U.S. dollar-denominated international prices, fluctuations in the exchange rate of RMB against U.S. dollars and certain other foreign currencies may materially and adversely affect the Group s coal purchase costs. The Group s expansion and investment strategies may not be successful. As part of the Group s strategy, the Group is seeking to expand the geographic reach of its coal procurement network, and to expand its coal storage facilities, coal transshipment bases and coal loading stations. The Group is also considering entering into new business areas, such as trading of other commodities. Such endeavours may involve significant risks and uncertainties, including distraction of management from current operations, greater than expected liabilities and expenses, inadequate return of capital, and unidentified issues not discovered in the Group s investigations and evaluations of those strategies and investments. The Group may decide to make minority investments, including through joint ventures, in which the Group has limited or no management or operational control. The controlling person in such a case may have business interests, strategies or goals that are inconsistent with the Group, and decisions of the company or venture in which the Group invested may result in harm to the Group s reputation or adversely affect the value of the Group s investment. Any failure or delay of the Group s expansion plans could materially adversely affect its prospects and financial position. The Group requires skilled and experienced personnel to expand its business, and the failure to attract additional personnel could prevent the Group from growing its business. As the Group expects to expand its operations internationally, the Group will need to attract and retain experienced and skilled employees with experience in international operations. Competition for personnel in the coal supply chain industry is intense, and the availability of suitable and qualified candidates is limited. The Group may need to increase its total compensation costs to attract and retain experienced personnel required to achieve its business objectives and failure to do so could severely disrupt its business and growth. 93

96 The Group faces operational risks that may not be covered by its insurance policies and the Group may not have adequate insurance to cover all kinds of losses and claims in its operations. The Group s property and transportation insurance coverage is typical and in line with the industry practice for similar operations and is adequate for its operations. However, the Group s insurance policies may not fully cover the consequences of damage to persons or property, business interruptions, failure of counterparties to perform their contractual obligations or other liabilities incurred in the Group s operations. If the Group has a significant claim or number of claims on its policies, the Group may be subject to significant increases in its premiums or even find it difficult, prohibitively expensive or even impossible to obtain sufficient levels of coverage. If the Group s insurance coverage is not sufficient for any reason, the Group could incur significant out of pocket expenses, which could have a material adverse effect on its business, results of operations and financial condition. Natural disasters, epidemics, acts of war or terrorism or other factors beyond the Group s control may have a material adverse effect on its business operations, results of operations and financial condition. Natural disasters, epidemics, acts of war or terrorism or other factors beyond the Group s control may adversely affect the economy, infrastructure and livelihood of the people in the regions that the Group conducts its business. These regions may be under the threat of typhoon, tornado, snow storm, earthquake, flood, drought, power shortages or failures, or are susceptible to epidemics, such as severe acute respiratory syndrome, avian influenza, H1N1 influenza, H5N1 influenza, H7N9 influenza or Ebola, potential wars or terrorist attacks, riots, disturbances or strikes. Serious natural disasters may result in a tremendous loss of lives and injury and destruction of assets and disrupt the Group s business and operations. Severe communicable disease outbreaks could result in a widespread health crisis that could materially adversely affect the Group s business activities in the affected regions. Acts of war or terrorism, riots or disturbances may also injure or loss of lives to the Group s employees, and disrupt the Group s business network and operations. Any of these factors and other factors beyond the Group s control could have an adverse effect on the overall business environment, and materially and adversely impact its business, financial condition and results of operations. RISKS RELATING TO THE PRC Adverse changes in the PRC s economic, political and social conditions as well as governmental policies could have a material adverse effect on the PRC s overall economic growth, which could in turn adversely affect the Group s financial condition and results of operations. Most of the Group s assets are located in the PRC, and the Group derives substantially all of its revenue from operations in the PRC. Accordingly, the Group s results of operations, financial condition and prospects are subject to economic, political and legal developments in the PRC. The PRC s economy differs from the economies of developed countries in many respects, including the extent of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. While the PRC s economy has experienced significant growth in the past 30 years, growth has been uneven across different regions and economic sectors and there is no assurance that such growth can be sustained. Since the second half of 2008, the global economic slowdown, continued weakness in the United States economy and the sovereign debt crisis in Europe have collectively added downward pressure to the PRC s economic growth. The PRC s real GDP growth rate declined from 9.3% in 2011 to 7.8% in 2012 and 7.7% in If the business environment in the PRC deteriorates as a result of the slowdown in the PRC s economic growth, the Group s business may be materially adversely affected. Concerns over the PRC s high growth and measures taken by the PRC government may lead to an increase in interest rates and a slowdown in economic growth. In response to concerns regarding the PRC s high rate of growth in industrial production, bank credit, fixed investment and money supply, the PRC government has taken measures to slow down economic growth to a more manageable level. Among the measures that the PRC government has taken are restrictions on bank loans in certain sectors. These measures and any additional such measures, including a possible increase in interest rates, could contribute to a slowdown in the Chinese economy, which in turn could adversely affect the Group s operations and profitability. 94

97 Government control of currency conversion may adversely affect the Group s operations and financial results. Currently, the RMB is not a freely convertible currency. The Group conducts substantially all of its business operations in the PRC, and receives a significant majority of its revenues in RMB. A portion of such revenues will need to be converted into other currencies to purchase coal overseas and to meet the Group s debt service obligations. The existing foreign exchange regulations have significantly reduced government foreign exchange controls for transactions under the current account, including trade and service-related foreign exchange transactions and payment of dividends. Foreign exchange transactions under the capital account, including principal payments in respect of foreign currency-denominated obligations, continue to be subject to significant foreign exchange controls and require the approval of SAFE. These limitations could affect the Group s ability to obtain foreign exchange through debt or equity financing, or to obtain foreign exchange for capital expenditures. The PRC government has stated publicly that it intends to make the RMB freely convertible in the future. However, the Group cannot predict whether the PRC government will continue its existing foreign exchange policy or when the PRC government will allow free conversion of RMB. Uncertainties with respect to the PRC legal system could materially adversely affect the Group. PRC laws and regulations govern the Group s operations in the PRC. Most of the Group s operating subsidiaries are organised under PRC laws. The PRC legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. The PRC government has promulgated laws and regulations over the past 20 years regarding matters such as corporate organization and governance, issuance and trading of securities, shareholders rights, foreign investment, commerce, taxation and trade. However, many of these laws and regulations are relatively new and evolving, are subject to different interpretations and may be inconsistently implemented and enforced. In addition, only a limited volume of published court decisions may be cited for reference, and such cases have limited precedential value as they are not binding on subsequent cases. These uncertainties relating to the interpretation, implementation and enforcement of the PRC laws and regulations and a system of jurisprudence that gives only limited precedential value to prior court decisions can affect the legal remedies and protections available to us. In addition, any litigation in the PRC can be protracted and result in substantial costs and diversion of resources and management. It may be difficult to effect service of process upon, or to enforce against, the Group or its directors or members of its senior management who reside in the PRC in connection with judgments obtained in non-prc courts. Most of the Group s assets and subsidiaries are located in the PRC. In addition, most of the Group s directors and senior management reside within the PRC, and the assets of such directors and senior management may also be located within the PRC. As a result, it may not be possible to effect service of process outside the PRC upon most of the Group s directors and senior management, including for matters arising under applicable securities law. A judgment of a court of another jurisdiction may be reciprocally recognised or enforced if the jurisdiction has a treaty with the PRC or if judgments of the PRC courts have been recognised before in that jurisdiction, subject to the satisfaction of other requirements. However, the PRC does not have treaties providing for the reciprocal enforcement of judgments of courts with Singapore, Japan, the United Kingdom, the United States and many other countries. As a result, recognition and enforcement in the PRC of judgments from various jurisdictions is uncertain. RISKS RELATING TO THE NOTES AND THE GUARANTEES If the Group is unable to comply with the restrictions and covenants in its debt agreements, including, among others, the Trust Deed, there could be a default under the terms of these agreements or the Trust Deed, which could cause repayment of the Group s debt to be accelerated. The Group s debt agreements contain covenants that restrict the Group s business activities. The Group s ability to comply with such covenants depends on Group s future operating performance. If the Group is unable to comply with the restrictions and covenants in the Group s current or future debt and other agreements (some of which are secured), or the Trust Deed, there could be a default under the terms of these agreements. In the event of a default under these agreements, the holders of the debt could terminate their commitments to lend to the Group, accelerate repayment of the debt and declare all amounts borrowed due and payable, terminate the agreements or exercise their enforcement or 95

98 foreclosure remedies, as the case may be. Furthermore, some of the Group s debt agreements, including the Trust Deed, contain cross-acceleration or cross-default provisions. As a result, the Group s default under one debt agreement may cause the acceleration of repayment of debt or result in a default under the other debt agreements, including the Trust Deed. If any of these events occur, there is no assurance that the Group s assets and cash flow would be sufficient to repay in full all of its indebtedness, or that the Group would be able to find alternative financing. Even if the Group could obtain alternative financing, there is no assurance that it would be on terms that are favourable or acceptable to the Group. The Offshore Guarantors do not currently have significant operations and Additional Guarantors may not have significant operations. The Offshore Guarantors that will guarantee the Notes do not have significant operations. There is no assurance that the Offshore Guarantors or any subsidiaries that may become Guarantors in the future will have the funds necessary to satisfy the Issuer s financial obligations under the Notes if the Issuer is unable to do so. The insolvency laws of Singapore, the PRC, Hong Kong and other local insolvency laws may differ from those of another jurisdiction with which the holders of the Notes are familiar. As the Issuer, Ina and Rex Coal were incorporated under the laws of Singapore, CCS was incorporated under the laws of the PRC, CCS HK was incorporated under the laws of Hong Kong and Additional Guarantors may be incorporated in any jurisdiction (other than the PRC), any insolvency proceeding relating to any of the Obligors may involve insolvency laws of Singapore, the PRC, Hong Kong or any other jurisdiction, the procedural and substantive provisions of which may differ from comparable provisions of the local insolvency laws of jurisdictions with which the holders of the Notes are familiar. The Notes and the Guarantees are unsecured obligations. The Notes and the Guarantees are unsecured obligations of the Obligors. The payment obligations under the Notes and the Guarantees may be adversely affected if: any of the Obligors enters into bankruptcy, liquidation, reorganisation or other winding-up proceedings; there is a default in payment under the future secured indebtedness or other unsecured indebtedness of any of the Obligors; or there is an acceleration of any indebtedness of any of the Obligors. If any of these events were to occur, the assets of the Obligors may not be sufficient to pay amounts due on the Notes. The Obligors may not be able to redeem the Notes upon the due date for redemption thereof. Following the occurrence of a Change of Control Event (as defined in Condition 6(e)(ii) of the Notes) or a delisting or cessation of trading of the shares of CCS as set out in Condition 6(g) of the Notes, the Issuer may, at the option of the holder of any Note, be required to redeem such Note in accordance with the Conditions of the Notes. If such event(s) were to occur, the Issuer may not have sufficient cash in hand and may not be able to arrange financing to redeem the Notes in time, or on acceptable terms, or at all. There is also no assurance that the Guarantors would have sufficient liquidity at such time to make the required redemption of the Notes. The ability to redeem the Notes in such event may also be limited by the terms of other debt instruments. The Issuer s and the Guarantors failure to repay, repurchase or redeem Notes could constitute an event of default under the Notes, which may also constitute a default under the terms of other indebtedness of any of the Obligors or the Group. If CCS fails to complete the SAFE registration in connection with the CCS Guarantee within the time period prescribed by SAFE, there may be logistical hurdles for cross-border payment under the CCS Guarantee. Pursuant to the CCS Deed of Guarantee executed by CCS, CCS will unconditionally and irrevocably guarantee the due payment of all sums expressed to be payable by the Issuer under the Notes and the Trust Deed. CCS is required to submit the CCS Deed of Guarantee to the local SAFE for registration in accordance with, and within the time period prescribed by, the Foreign Exchange Administration Rules 96

99 on Cross-border Security. Although the non-registration does not render the CCS Guarantee ineffective or invalid under PRC law, SAFE may impose penalties on CCS if registration is not carried out within the stipulated time frame. CCS intends to register the CCS Guarantee as soon as practicable and in any event before the Registration Deadline (as defined in the terms and conditions of the Notes) (being 60 Registration Business Days (as defined in the terms and conditions of the Notes) after the date of the CCS Deed of Guarantee). In addition, if CCS fails to complete the SAFE registration, there may be logistical hurdles at the time of remittance of funds (if any cross-border payment is to be made by CCS under the CCS Guarantee) as domestic banks may require evidence of SAFE registration in connection with the CCS Deed of Guarantee in order to effect such remittance, although this does not affect the validity of the CCS Guarantee itself. There may be less publicly available information about the Obligors than is available in certain other jurisdictions. Each of the Issuer, CCS HK, Ina and Rex Coal is a private company, and therefore there is less publicly available information about the Issuer, CCS HK, Ina and Rex Coal than would be available for publicly listed companies. The disclosure requirements of the Shanghai Stock Exchange, on which the shares of CCS are listed, may differ from the listing rules of stock exchanges with which investors are familiar. The consolidated financial statements of CCS and the Group have been prepared and presented in accordance with PRC GAAP, which are different from IFRS in certain respects. The consolidated financial statements of CCS and the Group (other than the Issuer) included in this Information Memorandum have been prepared and presented in accordance with PRC GAAP. PRC GAAP are substantially in line with IFRS, except for certain modifications which reflect the PRC s unique circumstances and environment. See the section Summary of Significant Differences between PRC GAAP and IFRS for details. Each investor should consult its own professional advisors for an understanding of the differences between PRC GAAP and IFRS and/or between PRC GAAP and other generally accepted accounting principles, and how those differences might affect the financial information contained herein. Any published unaudited interim financial statements which are deemed to be incorporated by reference in this Information Memorandum will not have been audited. Any published unaudited interim financial statements in respect of the Obligors, their respective subsidiaries and/or associated companies (if any) which have been included in this Information Memorandum or which are, from time to time, deemed to be incorporated by reference in this Information Memorandum will not have been reviewed or audited by the auditors of the Obligors, their respective subsidiaries and/or associated companies. Accordingly, there can be no assurance that, had an audit been conducted in respect of such financial statements, the information presented therein would not have been materially different. The financial statements of CCS and the Group included in this Information Memorandum have been translated from the Chinese language. The financial statements of CCS and the Group were originally prepared in the Chinese language and have been extracted and translated into the English language by an external translator for inclusion in this Information Memorandum. The translations have not been certified, verified or reviewed by the auditors of CCS and the Group or by any other person. Words and terms in the Chinese language may not have equivalent terms in the English language. Words or terms in the financial statements translated into the English language and included in this Information Memorandum may not accurately represent, or may represent a materially different meaning from, the intended meaning of the original Chinese language words or terms. The Trustee s right to request for information from the Obligors is limited The Trustee may only request from the Obligors such information as it shall require for the purpose of the discharge of the duties, powers, trusts, authorities and discretions vested in the Trustee by the Trust Deed or by operation of law, provided that so long as no Potential Event of Default or Event of Default has occurred, such information shall not extend to information which is of a proprietary or price sensitive nature or information which is confidential (whether arising from a contractual obligation or otherwise). As such, the Noteholders may not be able to request for information through the Trustee in certain circumstances. 97

100 The Notes may not be a suitable investment for all investors. Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should: have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained or incorporated by reference in this Information Memorandum or any applicable supplement to this Information Memorandum; have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact such investment will have on its overall investment portfolio; have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including Notes with principal or interest payable in one or more currencies, or where the currency for principal or interest payments is different from the potential investor s currency; understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant indices and financial markets; and be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks. Some Notes are complex financial instruments. Sophisticated institutional investors generally do not purchase complex financial instruments as stand-alone investments. They purchase complex financial instruments as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of risk to their overall portfolios. A potential investor should not invest in Notes which are complex financial instruments unless it has the expertise (either alone or with a financial adviser) to evaluate how the Notes will perform under changing conditions, the resulting effects on the value of the Notes and the impact such investment will have on the potential investor s overall investment portfolio. Investment activities may be subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (1) Notes are legal investments for them, (2) Notes can be used as collateral for various types of borrowing and (3) other restrictions apply to its purchase of any Notes. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of Notes under any applicable risk-based capital or similar rules. Provisions in the Trust Deed and the terms and conditions of the Notes may be modified. The terms and conditions of the Notes contain provisions for calling meetings of Noteholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary to the majority. The terms and conditions of the Notes also provide that the Trustee may agree, without the consent of the Noteholders or Couponholders, to (i) any modification of any of the provisions of the Trust Deed which in the opinion of the Trustee is of a formal, minor or technical nature, is made to correct a manifest error or to comply with mandatory provisions of Singapore law or is required by Euroclear and/or Clearstream, Luxembourg and/or CDP and/or any other clearing system in which the Notes may be held, and (ii) any other modification (except as mentioned in the Trust Deed), and any waiver or authorisation of any breach or proposed breach, of any of the provisions of the Trust Deed which is in the opinion of the Trustee not materially prejudicial to the interests of the Noteholders. A change in Singapore law which governs the Notes may adversely affect Noteholders. The Notes are governed by Singapore law in effect as at the date of issue of the Notes. No assurance can be given as to the impact of any possible judicial decision or change to Singapore law or administrative practice after the date of issue of the Notes. 98

101 The Notes may be represented by Global Notes or Global Certificates and holders of a beneficial interest in a Global Note or Global Certificate must rely on the procedures of the relevant Clearing System (as defined below). Notes issued under the Programme may be represented by one or more Global Notes or Global Certificates. Such Global Notes or Global Certificates will be deposited with or registered in the name of, or in the name of a nominee of, Common Depositary, or lodged with CDP (each of Euroclear, Clearstream, Luxembourg and CDP, a Clearing System ). Except in the circumstances described in the relevant Global Note or Global Certificate, investors will not be entitled to receive Definitive Notes. The relevant Clearing System will maintain records of their accountholders in relation to the Global Notes and Global Certificates. While the Notes are represented by one or more Global Notes or Global Certificates, investors will be able to trade their beneficial interests only through the relevant Clearing System. While the Notes are represented by one or more Global Notes or Global Certificates, the Issuer will discharge its payment obligations under the Notes by making payments to the Common Depositary or, as the case may be, to CDP, for distribution to their accountholders or, as the case may be, to the Issuing and Paying Agent for distribution to the holders as appearing in the records of the relevant Clearing System. A holder of a beneficial interest in a Global Note or Global Certificate must rely on the procedures of the relevant Clearing System to receive payments under the relevant Notes. The Issuer bears no responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in the Global Notes or Global Certificates. Holders of beneficial interests in the Global Notes and Global Certificates will not have a direct right to vote in respect of the relevant Notes. Instead, such holders will be permitted to act only to the extent that they are enabled by the relevant Clearing System to appoint appropriate proxies. The Notes issued under the Programme may have limited liquidity. There can be no assurance as to the liquidity of the Notes or that an active trading market will develop. If such a market were to develop, the Notes may trade at prices that may be higher or lower than the initial issue price depending on many factors, including prevailing interest rates, the Issuer s operations and the market for similar securities. The Dealers are not obliged to make a market in the Notes and any such market making, if commenced, may be discontinued at any time at the sole discretion of the relevant Dealer(s). No assurance can be given as to the liquidity of, or trading market for, the Notes. The market value of the Notes issued under the Programme may fluctuate. Trading prices of the Notes are influenced by numerous factors, including the operating results and/ or financial condition of the Issuer, its subsidiaries and/or associated companies (if any), political, economic, financial and any other factors that can affect the capital markets, the industry, the Issuer, its subsidiaries and/ or associated companies generally. Adverse economic developments, in Singapore as well as countries in which the Issuer, its subsidiaries and/or associated companies (if any) operate or have business dealings, could have a material adverse effect on the business, financial performance and financial condition of the Issuer, its subsidiaries and associated companies (if any). An investment in the Notes is subject to interest rate risk. Noteholders may suffer unforeseen losses due to fluctuations in interest rates. Generally, a rise in interest rates may cause a fall in note prices, resulting in a capital loss for the Noteholders. However, the Noteholders may reinvest the interest payments at higher prevailing interest rates. Conversely, when interest rates fall, note prices may rise. The Noteholders may enjoy a capital gain but interest payments received may be reinvested at lower prevailing interest rates. An investment in the Notes is subject to inflation risk. Noteholders may suffer erosion on the return of their investments due to inflation. Noteholders would have an anticipated rate of return based on expected inflation rates on the purchase of the Notes. An unexpected increase in inflation could reduce the actual returns. 99

102 The market prices of Notes issued at a substantial discount or premium tend to fluctuate more in relation to general changes in interest rates than do prices for conventional interest-bearing securities. The market values of securities issued at a substantial discount or premium to their nominal amount tend to fluctuate more in relation to general changes in interest rates than do prices for conventional interestbearing securities. Generally, the longer the remaining term of the securities, the greater the price volatility as compared to conventional interest-bearing securities with comparable maturities. Exchange rate risks and exchange controls may result in Noteholders receiving less interest or principal than expected. The Issuer will pay principal and interest on the Notes in the currency specified. This presents certain risks relating to currency conversions if Noteholder s financial activities are denominated principally in a currency or currency unit (the Investor s Currency ) other than the currency in which the Notes are denominated. These include the risk that exchange rates may significantly change (including changes due to devaluation of the currency in which the Notes are denominated or revaluation of the Investor s Currency) and the risk that authorities with jurisdiction over the Investor s Currency may impose or modify exchange controls. An appreciation in the value of the Investor s Currency relative to the currency in which the Notes are denominated would decrease (i) the Investor s Currency equivalent yield on the Notes, (ii) the Investor s Currency equivalent value of the principal payable on the Notes and (iii) the Investor s Currency equivalent market value of the Notes. Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, Noteholders may receive less interest or principal than expected, or no interest or principal. Changes in market interest rates may adversely affect the value of fixed rate Notes. Investment in fixed rate Notes involves the risk that subsequent changes in market interest rates may adversely affect the value of fixed rate Notes. The Singapore tax treatment of the Notes may change. The Notes to be issued from time to time under the Programme during the period from the date of this Information Memorandum to 31 December 2018 are, pursuant to the ITA and MAS Circular FSD Cir 02/2013 entitled Extension and Refinement of Tax Concessions for Promoting the Debt Market issued by MAS on 28 June 2013, intended to be qualifying debt securities for the purposes of the ITA, subject to the fulfilment of certain conditions more particularly described in the section Taxation Singapore Taxation. However, there is no assurance that such Notes will continue to enjoy the tax concessions in connection therewith should the relevant tax laws or MAS circulars be amended or revoked at any time. Notes subject to optional redemption may have a lower market value than Notes that cannot be redeemed. An optional redemption feature is likely to limit the market value of the Notes. During any period when the Issuer elects to redeem the Notes, the market value of those Notes generally will not rise substantially above the price at which they can be redeemed. This also may be true prior to any redemption period. The Issuer may redeem the Notes when its cost of borrowing is lower than the interest rate on the Notes. At that time, Noteholders generally would not be able to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Notes being redeemed and may only be able to do so at a significantly lower rate. Noteholders should consider reinvestment risk in light of other investments available at that time. 100

103 PURPOSE OF THE PROGRAMME AND USE OF PROCEEDS The net proceeds arising from the issue of Notes under the Programme (after deducting expenses incurred in connection with the issue of the Notes) will be used entirely for the offshore corporate purposes of CCS and its subsidiaries outside the PRC in compliance with the relevant regulations issued by SAFE. 101

104 CLEARING AND SETTLEMENT Clearance and Settlement under the Depository System In respect of Notes which are accepted for clearance by CDP in Singapore, clearance will be effected through an electronic book-entry clearance and settlement system for the trading of debt securities ( Depository System ) maintained by CDP. Notes that are to be listed on the SGX-ST may be cleared through CDP. CDP, a wholly-owned subsidiary of Singapore Exchange Limited, is incorporated under the laws of Singapore and acts as a depository and clearing organisation. CDP holds securities for its accountholders and facilitates the clearance and settlement of securities transactions between accountholders through electronic book-entry changes in the securities accounts maintained by such accountholders with CDP. In respect of Notes which are accepted for clearance by CDP, the entire issue of the Notes is to be held by CDP in the form of a Global Note or a Global Certificate for persons holding the Notes in securities accounts with CDP ( Depositors ). Delivery and transfer of Notes between Depositors is by electronic book-entries in the records of CDP only, as reflected in the securities accounts of Depositors. Although CDP encourages settlement on the third business day following the trade date of debt securities, market participants may mutually agree on a different settlement period if necessary. Settlement of over-the-counter trades in the Notes through the Depository System may only be effected through certain corporate depositors ( Depository Agents ) approved by CDP under the Companies Act to maintain securities sub-accounts and to hold the Notes in such securities sub-accounts for themselves and their clients. Accordingly, Notes for which trade settlement is to be effected through the Depository System must be held in securities sub-accounts with Depository Agents. Depositors holding the Notes in direct securities accounts with CDP, and who wish to trade Notes through the Depository System, must transfer the Notes to be traded from such direct securities accounts to a securities sub-account with a Depository Agent for trade settlement. CDP is not involved in money settlement between Depository Agents (or any other persons) as CDP is not a counterparty in the settlement of trades of debt securities. However, CDP will make payment of interest and repayment of principal on behalf of issuers of debt securities. Although CDP has established procedures to facilitate transfer of interests in the Notes in global form among Depositors, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. None of the Obligors, the Issuing and Paying Agent or any other agent will have the responsibility for the performance by CDP of its obligations under the rules and procedures governing its operations. Clearance and Settlement under Euroclear and/or Clearstream, Luxembourg Euroclear and Clearstream, Luxembourg each holds securities for participating organisations and facilitates the clearance and settlement of securities transactions between their respective participants through electronic book-entry changes in the accounts of such participants, thereby eliminating the need for physical movements of certificates and any risks from lack of simultaneous transfer. Euroclear and Clearstream, Luxembourg provide to their respective participants, among other things, services for safekeeping, administration, clearance and settlement of internationally-traded securities and securities lending and borrowing. Euroclear and Clearstream, Luxembourg each also deals with domestic securities markets in several countries through established depository and custodial relationships. The respective systems of Euroclear and Clearstream, Luxembourg have established an electronic bridge between their two systems which enables their respective participants to settle trades with one another. Euroclear and Clearstream, Luxembourg participants are financial institutions throughout the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organisations. Indirect access to Euroclear or Clearstream, Luxembourg is also available to other financial institutions, such as banks, brokers, dealers and trust companies which clear through or maintain a custodial relationship with a Euroclear or Clearstream, Luxembourg participant, either directly or indirectly. 102

105 A participant s overall contractual relations with either Euroclear or Clearstream, Luxembourg are governed by the respective rules and operating procedures of Euroclear or Clearstream, Luxembourg and any applicable laws. Both Euroclear and Clearstream, Luxembourg act under those rules and operating procedures only on behalf of their respective participants, and have no record of, or relationship with, persons holding any interests through their respective participants. Distributions of principal with respect to book-entry interests in the Notes held through Euroclear or Clearstream, Luxembourg will be credited, to the extent received by the relevant Paying Agent, to the cash accounts of the relevant Euroclear or Clearstream, Luxembourg participants in accordance with the relevant system s rules and procedures. 103

106 TAXATION The statements below are general in nature and are based on certain aspects of current tax laws in Singapore, the PRC and Hong Kong and (in the case of Singapore) administrative guidelines and circulars issued by MAS in force as at the date of this Information Memorandum and are subject to any changes in such laws, administrative guidelines or circulars, or the interpretation of those laws, guidelines or circulars, occurring after such date, which changes could be made on a retroactive basis. These laws, guidelines and circulars are also subject to various interpretations and the relevant tax authorities or the courts could later disagree with the explanations or conclusions set out below. Neither these statements nor any other statements in this Information Memorandum are intended or are to be regarded as advice on the tax position of any holder of the Notes or of any person acquiring, selling or otherwise dealing with the Notes or on any tax implications arising from the acquisition, sale or other dealings in respect of the Notes. The statements made herein do not purport to be a comprehensive or exhaustive description of all the tax considerations that may be relevant to a decision to subscribe for, purchase, own or dispose of the Notes and do not purport to deal with the tax consequences applicable to all categories of investors, some of which (such as dealers in securities or financial institutions in Singapore which have been granted the relevant Financial Sector Incentive(s)) may be subject to special rules or tax rates. Holders or prospective holders of the Notes are advised to consult their own professional tax advisers as to the Singapore, PRC, Hong Kong or other tax consequences of the acquisition, ownership of or disposal of the Notes, including, in particular, the effect of any foreign, state or local tax laws to which they are subject. It is emphasised that none of the Obligors, the Arranger and any other persons involved in the Programme accepts responsibility for any tax effects or liabilities resulting from the subscription for, purchase, holding or disposal of the Notes. SINGAPORE TAXATION 1. Interest and Other Payments Subject to the following paragraphs, under Section 12(6) of the ITA, the following payments are deemed to be derived from Singapore: (a) (b) any interest, commission, fee or any other payment in connection with any loan or indebtedness or with any arrangement, management, guarantee, or service relating to any loan or indebtedness which is (i) borne, directly or indirectly, by a person resident in Singapore or a permanent establishment in Singapore (except in respect of any business carried on outside Singapore through a permanent establishment outside Singapore or any immovable property situated outside Singapore) or (ii) deductible against any income accruing in or derived from Singapore; or any income derived from loans where the funds provided by such loans are brought into or used in Singapore. Such payments, where made to a person not known to the paying party to be a resident in Singapore for tax purposes, are generally subject to withholding tax in Singapore. The rate at which tax is to be withheld for such payments (other than those subject to the 15.0 per cent. final withholding tax described below) to non-resident persons (other than non-resident individuals) is currently 17.0 per cent. The applicable rate for non-resident individuals is currently 20.0 per cent. However, if the payment is derived by a person not resident in Singapore otherwise than from any trade, business, profession or vocation carried on or exercised by such person in Singapore and is not effectively connected with any permanent establishment in Singapore of that person, the payment is subject to a final withholding tax of 15.0 per cent. The rate of 15.0 per cent. may be reduced by applicable tax treaties. However, certain Singapore-sourced investment income derived by individuals from financial instruments is exempt from tax, including: (a) interest from debt securities derived on or after 1 January 2004; (b) discount income (not including discount income arising from secondary trading) from debt securities derived on or after 17 February 2006; and 104

107 (c) prepayment fee, redemption premium and break cost from debt securities derived on or after 15 February 2007, except where such income is derived through a partnership in Singapore or is derived from the carrying on of a trade, business or profession. In addition, as the Programme as a whole is arranged by DBS Bank Ltd., which is a Financial Sector Incentive (Standard Tier) Company or Financial Sector Incentive (Capital Market) Company (as defined in the ITA) at such time, any tranche of the Notes ( Relevant Notes ) issued as debt securities under the Programme during the period from the date of this Information Memorandum to 31 December 2018 would be, pursuant to the ITA and MAS Circular FSD Cir 02/2013 entitled Extension and Refinement of Tax Concessions for Promoting the Debt Market issued by MAS on 28 June 2013 (the MAS Circular ), qualifying debt securities ( QDS ) for the purposes of the ITA, to which the following treatment shall apply: (i) (ii) (iii) subject to certain prescribed conditions having been fulfilled (including the furnishing of a return on debt securities for the Relevant Notes in the prescribed format within such period as the relevant authorities may specify and such other particulars in connection with the Relevant Notes as the relevant authorities may require to MAS and such other relevant authorities as may be prescribed, and the inclusion by the Issuer in all offering documents relating to the Relevant Notes of a statement to the effect that where interest, discount income, prepayment fee, redemption premium or break cost from the Relevant Notes is derived by a person who is not resident in Singapore and who carries on any operation in Singapore through a permanent establishment in Singapore, the tax exemption for qualifying debt securities shall not apply if the non-resident person acquires the Relevant Notes using the funds and profits of such person s operations through the Singapore permanent establishment), interest, discount income (not including discount income arising from secondary trading), prepayment fee, redemption premium and break cost (collectively, the Qualifying Income ) from the Relevant Notes paid by the Issuer and derived by a holder who is not resident in Singapore and who (aa) does not have any permanent establishment in Singapore or (bb) carries on any operation in Singapore through a permanent establishment in Singapore but the funds used by that person to acquire the Relevant Notes are not obtained from such person s operation through a permanent establishment in Singapore, are exempt from Singapore tax; subject to certain conditions having been fulfilled (including the furnishing of a return on debt securities for the Relevant Notes in the prescribed format within such period as the relevant authorities may specify and such other particulars in connection with the Relevant Notes as the relevant authorities may require to MAS and such other relevant authorities as may be prescribed), Qualifying Income from the Relevant Notes paid by the Issuer and derived by any company or body of persons (as defined in the ITA) in Singapore is subject to income tax at a concessionary rate of 10.0 per cent. (except for holders of the relevant Financial Sector Incentive(s) who may be taxed at different rates); and subject to: (aa) the Issuer including in all offering documents relating to the Relevant Notes a statement to the effect that any person whose interest, discount income, prepayment fee, redemption premium or break cost derived from the Relevant Notes is not exempt from tax shall include such income in a return of income made under the ITA; and (bb) the furnishing of a return on debt securities for the Relevant Notes in the prescribed format within such period as the relevant authorities may specify and such other particulars in connection with the Relevant Notes as the relevant authorities may require to MAS and such other relevant authorities as may be prescribed, payments of Qualifying Income derived from the Relevant Notes are not subject to withholding of tax by the Issuer. 105

108 Notwithstanding the foregoing: (A) (B) if during the primary launch of any tranche of Relevant Notes, the Relevant Notes of such tranche are issued to fewer than four persons and 50.0 per cent. or more of the issue of such Relevant Notes is beneficially held or funded, directly or indirectly, by related parties of the Issuer, such Relevant Notes would not qualify as QDS; and even though a particular tranche of Relevant Notes are QDS, if, at any time during the tenure of such tranche of Relevant Notes, 50.0 per cent. or more of the issue of such Relevant Notes is held beneficially or funded, directly or indirectly, by any related party(ies) of the Issuer, Qualifying Income derived from such Relevant Notes held by: (I) (II) any related party of the Issuer; or any other person where the funds used by such person to acquire such Relevant Notes are obtained, directly or indirectly, from any related party of the Issuer, shall not be eligible for the tax exemption or concessionary rate of tax as described above. The term related party, in relation to a person, means any other person who, directly or indirectly, controls that person, or is controlled, directly or indirectly, by that person, or where he and that other person, directly or indirectly, are under the control of a common person. The terms prepayment fee, redemption premium and break cost are defined in the ITA as follows: prepayment fee, in relation to debt securities and qualifying debt securities, means any fee payable by the issuer of the securities on the early redemption of the securities, the amount of which is determined by the terms of the issuance of the securities; redemption premium, in relation to debt securities and qualifying debt securities, means any premium payable by the issuer of the securities on the redemption of the securities upon their maturity; and break cost, in relation to debt securities and qualifying debt securities, means any fee payable by the issuer of the securities on the early redemption of the securities, the amount of which is determined by any loss or liability incurred by the holder of the securities in connection with such redemption. References to prepayment fee, redemption premium and break cost in this Singapore tax disclosure have the same meaning as defined in the ITA. Where interest, discount income, prepayment fee, redemption premium or break cost (i.e. the Qualifying Income) is derived from the Relevant Notes by any person who is not resident in Singapore and who carries on any operations in Singapore through a permanent establishment in Singapore, the tax exemption available for QDS under the ITA (as mentioned above) shall not apply if such person acquires such Relevant Notes using the funds and profits of such person s operations through a permanent establishment in Singapore. Any person whose interest, discount income, prepayment fee, redemption premium or break cost (i.e. the Qualifying Income) derived from the Relevant Notes is not exempt from tax is required to include such income in a return of income made under the ITA. Under the Qualifying Debt Securities Plus Scheme ( QDS Plus Scheme ), subject to certain conditions having been fulfilled (including the furnishing of a return on debt securities in respect of the QDS in the prescribed format within such period as the relevant authorities may specify and such other particulars in connection with the QDS as the relevant authorities may require to MAS and such other relevant authorities as may be prescribed), income tax exemption is granted on Qualifying Income from QDS (excluding Singapore Government Securities) which: (a) are issued during the period from 16 February 2008 to 31 December 2018; 106

109 (b) (c) (d) have an original maturity of not less than 10 years; cannot be redeemed, called, exchanged or converted within 10 years from the date of their issue; and cannot be re-opened with a resulting tenure of less than 10 years to the original maturity date. However, even if a particular tranche of the Relevant Notes are QDS which qualify under the QDS Plus Scheme, if, at any time during the tenure of such tranche of Relevant Notes, 50.0 per cent. or more of the issue of such Relevant Notes is held beneficially or funded, directly or indirectly, by any related party(ies) of the Issuer, Qualifying Income from such Relevant Notes derived by: (i) (ii) any related party of the Issuer; or any other person where the funds used by such person to acquire such Relevant Notes are obtained, directly or indirectly, from any related party of the Issuer, shall not be eligible for the tax exemption under the QDS Plus Scheme as described above. The MAS Circular states that, with effect from 28 June 2013, the QDS Plus Scheme will be refined to allow QDS with certain standard early termination clauses (as prescribed in the MAS Circular) to qualify for the QDS Plus Scheme at the point of issuance of such debt securities. MAS has also clarified that if such debt securities are subsequently redeemed prematurely pursuant to such standard early termination clauses before the 10 th year from the date of issuance of such debt securities, the tax exemption granted under the QDS Plus Scheme to Qualifying Income accrued prior to such redemption will not be clawed back. Under such circumstances, the QDS Plus status of such debt securities will be revoked prospectively for such outstanding debt securities (if any), and holders thereof may still enjoy the tax benefits under the QDS scheme if the QDS conditions continue to be met. MAS has stated that, notwithstanding the above, QDS with embedded options with economic value (such as call, put, conversion or exchange options which can be triggered at specifi ed prices or dates and are built into the pricing of such debt securities at the onset) which can be exercised within 10 years from the date of issuance of such debt securities will continue to be excluded from the QDS Plus Scheme from such date of issuance. 2. Capital Gains Any gains considered to be in the nature of capital made from the sale of the Notes will not be taxable in Singapore. However, any gains derived by any person from the sale of the Notes which are gains from any trade, business, profession or vocation carried on by that person, if accruing in or derived from Singapore, may be taxable as such gains are considered revenue in nature. Holders of the Notes who apply or are required to apply the Financial Reporting Standard 39 Financial Instruments: Recognition and Measurement ( FRS 39 ), may for Singapore income tax purposes be required to recognise gains or losses (not being gains or losses in the nature of capital) on the Notes, irrespective of disposal, in accordance with FRS 39. Please see the section below on Adoption of FRS 39 Treatment for Singapore Income Tax Purposes. 3. Adoption of FRS 39 Treatment for Singapore Income Tax Purposes The Inland Revenue Authority of Singapore has issued a circular entitled Income Tax Implications Arising from the Adoption of FRS 39 - Financial Instruments: Recognition & Measurement (the FRS 39 Circular ). The ITA has since been amended to give effect to the FRS 39 Circular. The FRS 39 Circular generally applies, subject to certain opt-out provisions, to taxpayers who are required to comply with FRS 39 for financial reporting purposes. Holders of the Notes who may be subject to the tax treatment under the FRS 39 Circular should consult their own accounting and tax advisers regarding the Singapore income tax consequences of their acquisition, holding or disposal of the Notes. 107

110 4. Estate Duty Singapore estate duty has been abolished with respect to all deaths occurring on or after 15 February PRC TAXATION The following summary describes certain PRC tax consequences of ownership and disposition of the Notes by beneficial owners who, or which, are not residents of mainland China for PRC tax purposes. These beneficial owners are referred to as non-prc Noteholders in this Taxation PRC Taxation section. In considering whether to invest in the Notes, investors should consult their own tax advisors with regard to the application of PRC tax laws to their particular situations as well as any tax consequences arising under the laws of any other tax jurisdiction. Pursuant to the EIT Law and its implementation regulations, enterprises that are established under laws of foreign countries and regions (including Hong Kong, Macau and Taiwan) but whose de facto management body are within the territory of China are treated as PRC tax resident enterprises for the purpose of the EIT Law and must pay PRC enterprise income tax at the rate of 25% in respect of their taxable income. Although the rules are not entirely clear, dividends from a PRC tax resident enterprise should be excluded from the taxable income of a recipient that is also a PRC tax resident enterprise. If relevant PRC tax authorities decide, in accordance with applicable tax rules and regulations, that the de facto management body of the Issuer is within the territory of PRC, the Issuer may be treated as a PRC tax resident enterprise for the purpose of the EIT Law, and the Issuer may be subject to PRC enterprise income tax at the rate of 25% on its taxable income. At the date of this Information Memorandum, the Issuer has not been notified or informed by the PRC tax authorities that it is considered as a PRC tax resident enterprise for the purpose of the EIT Tax Law. However, there is no assurance that the Issuer will not be treated as a PRC tax resident enterprise under the EIT Law and related implementation regulations in the future. Pursuant to the EIT Law and its implementation regulations, any non-resident enterprise without an establishment within the PRC or whose income has no connection to its establishment inside the PRC must pay enterprise income tax on income sourced within the PRC, and such income tax must be withheld at source by the PRC payer. Accordingly, if the Issuer is treated as a PRC tax resident enterprise by the PRC tax authorities, the Issuer may be required to withhold income tax from the payments of interest in respect of the Notes to any non-prc Noteholder, and gain from the disposition of the Notes may be subject to PRC tax, if the income or gain is treated as PRC-source. The tax rate is generally 10% for non-resident enterprise Noteholders and 20% in the case of non-resident individuals, subject to the provisions of an applicable tax treaty. The Issuer has agreed to pay additional amounts to Noteholders, subject to certain exceptions, so that they would receive the full amount of the scheduled payment, as further set out in the Terms and Conditions of the Notes. In addition, as CCS is currently regarded as a PRC tax resident enterprise, if the Issuer is not able to make payments under the Notes and CCS fulfils the payment obligations under the CCS Guarantee, CCS must withhold PRC income tax on payments with respect to the Notes to non-resident enterprise holders generally at the rate of 10% (and possibly at a rate of 20% in the case of payments to non-resident individual holders), subject to the provisions of any applicable tax treaty. HONG KONG TAXATION 1. Withholding tax No withholding tax is payable in Hong Kong on payments of principal or interest on the Notes. 2. Profits tax Hong Kong profits tax is charged on every person carrying on a trade, profession or business in Hong Kong in respect of assessable profits arising in or derived from Hong Kong from such trade, profession or business. 108

111 Under the Inland Revenue Ordinance (Chapter 112 of the Laws of Hong Kong) (the Inland Revenue Ordinance ) as it is currently applied, Hong Kong profits tax may be charged on assessable profits arising on the sale, disposal or redemption of the Notes where such sale, disposal or redemption is or forms part of a trade, profession or business carried on in Hong Kong. Interest on the Notes will be subject to Hong Kong profits tax where such interest has a Hong Kong source, and is received by or accrues to: a financial institution (as defined in the Inland Revenue Ordinance) and arises through or from the carrying on by the financial institution of its business in Hong Kong, notwithstanding that the moneys in respect of which the interest is received or accrues are made available outside Hong Kong; or a corporation carrying on a trade, profession or business in Hong Kong by way of interest derived from Hong Kong; or a person, other than a corporation, carrying on a trade, profession or business in Hong Kong by way of interest derived from Hong Kong and such interest is in respect of the funds of the trade, profession or business. 3. Stamp duty No Hong Kong stamp duty will be chargeable upon the issue or transfer of a Note. 109

112 SUBSCRIPTION, PURCHASE AND DISTRIBUTION The Programme Agreement provides for Notes to be offered from time to time through one or more Dealers. The price at which a Series or Tranche will be issued will be determined prior to its issue between the Issuer and the relevant Dealer(s). The obligations of the Dealers under the Programme Agreement will be subject to certain conditions set out in the Programme Agreement. Each Dealer (acting as principal) will subscribe or procure subscribers for Notes from the Issuer pursuant to the Programme Agreement. United States The Notes and the Guarantees have not been and will not be registered under the Securities Act, and the Notes may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions exempt from the registration requirements of the Securities Act. Terms used in this paragraph have the meaning given to them by Regulation S under the Securities Act. Bearer Notes are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to a United States person, except in certain transactions permitted by U.S. tax regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code of 1986, as amended, and regulations thereunder. Each Dealer has agreed, and each further Dealer appointed under the Programme will be required to agree that, except as permitted by the Programme Agreement, it will not offer, sell or deliver the Notes, (i) as part of their distribution at any time or (ii) otherwise until 40 days after the completion of the distribution of an identifiable tranche of which such Notes are a part, as determined and certified to the Issuing and Paying Agent by such Dealer (or, in the case of an identifiable tranche of Notes sold to or through more than one Dealer, by each of such Dealers with respect to Notes of an identifiable tranche purchased by or through it, in which case the Issuing and Paying Agent shall notify such Dealer when all such Dealers have so certified), within the United States or to, or for the account or benefit of, U.S. persons, and it will have sent to each Dealer to which it sells Notes during the distribution compliance period a confirmation or other notice setting out the restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons. Terms used in this paragraph have the meaning given to them by Regulation S under the Securities Act. In addition, until 40 days after the commencement of the offering of any identifiable tranche of Notes, an offer or sale of Notes within the United States by any dealer (whether or not participating in the offering of such Notes) may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with an available exemption from registration requirements under the Securities Act. Hong Kong Each Dealer has represented and agreed, and each further Dealer appointed under the Programme will be required to represent, warrant and agree, that: (i) (ii) it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any Notes other than (a) to professional investors as defined in the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the SFO ) and any rules made under the SFO; or (b) in circumstances which do not result in the document being a prospectus as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong) or which do not constitute an offer to the public within the meaning of that ordinance; and it has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the Notes, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors as defined in the SFO and any rules made thereunder. 110

113 PRC Each Dealer has represented, warranted and agreed that the Notes are not being offered or sold and may not be offered or sold, directly or indirectly, in the PRC (for such purposes, not including the Hong Kong and Macau Special Administrative Regions or Taiwan), except as permitted by the securities laws of the PRC and approved by the competent PRC authorities. Singapore Each Dealer has acknowledged that this Information Memorandum has not been registered as a prospectus with the MAS. Accordingly, each Dealer has represented, warranted and agreed that it has not offered or sold any Notes or caused the Notes to be made the subject of an invitation for subscription or purchase and will not offer or sell any Notes or cause the Notes to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, this Information Memorandum or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Notes, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the SFA, (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. General Each Dealer understands that no action has been taken in any jurisdiction that would permit a public offering of any of the Notes or possession or distribution of this Information Memorandum or any other document or any Pricing Supplement, in any country or jurisdiction where action for that purpose is required. Each Dealer has agreed that it will comply with all applicable securities laws, regulations and directives in each jurisdiction in which it subscribes for, purchases, offers, sells or delivers Notes or any interest therein or rights in respect thereof or has in its possession or distributes or publishes any prospectus, circular, advertisement or any offer document (including the Information Memorandum or any Pricing Supplement). Any person who may be in doubt as to the restrictions set out in the SFA or the laws, regulations and directives in each jurisdiction in which it subscribes for, purchases, offers, sells or delivers the Notes or any interest therein or rights in respect thereof and the consequences arising from a contravention thereof should consult his own professional advisers and should make his own inquiries as to the laws, regulations and directives in force or applicable in any particular jurisdiction at any relevant time. 111

114 APPENDIX I GENERAL AND OTHER INFORMATION INFORMATION ON DIRECTORS AND SUBSTANTIAL SHAREHOLDERS 1. The directors of CCS are not related by blood or marriage to one another nor are they related to any substantial shareholder of CCS. 2. The interests of the directors of CCS and the substantial shareholders of CCS in the shares of CCS as at 30 June 2014 are as follows: Directors of CCS Direct Interest Number of Shares % Yan Gang 1,200, Wan Dongsheng 600, Substantial Shareholders Direct Interest Number of Shares % Zhengzhou China Coal Solution Co., Ltd. ( 618,133, ) (1) (1) As of the date of this Information Memorandum, Zhengzhou China Coal Solution Co., Ltd is a wholly owned subsidiary of Henan Zhongrui Investment Co., Ltd, which is 70% and 30% owned by Messrs. Wan Yongxing and Liu Yi, respectively. BORROWINGS 3. Save as disclosed in Appendix III, the Group had as at 31 December 2013, no other borrowings or indebtedness in the nature of borrowings including bank overdrafts and liabilities under acceptances (other than normal trading bills) or acceptance credits, mortgages, charges, hire purchase commitments, guarantees or other material contingent liabilities. WORKING CAPITAL 4. The directors of CCS are of the opinion that, after taking into account the present banking facilities and the net proceeds of the issue of the Notes, CCS will have adequate working capital for its present requirements. CHANGES IN ACCOUNTING POLICIES 5. There has been no significant change in the accounting policies of the Group since its audited consolidated financial statements for the financial year ended 31 December LITIGATION 6. There are no legal or arbitration proceedings pending or threatened against any of the Obligors or any of their respective subsidiaries the outcome of which may have or have had during the 12 months prior to the date of this Information Memorandum a material adverse effect on the financial position of the Group. 112

115 MATERIAL ADVERSE CHANGE 7. There has been no material adverse change in the financial condition or business of CCS or the Group since 31 December CONSENTS 8. Each of Moore Stephens LLP and Ruihua Certified Public Accountants LLP has given and has not withdrawn its written consent to the issue of this Information Memorandum with the references herein to its name and, where applicable, reports in the form and context in which they appear in this Information Memorandum. DOCUMENTS AVAILABLE FOR INSPECTION 9. Copies of the following documents may be inspected at the registered office of the Issuer at 2 Battery Road #30-01 Maybank Tower Singapore during normal business hours for a period of six months from the date of this Information Memorandum: (a) (b) (c) (d) the Memorandum and Articles of Association of the Issuer; the Trust Deed; each letter of consent referred to in paragraph 8 above; and the audited consolidated financial statements of CCS and the Issuer for the financial years ended 31 December 2012 and 31 December FUNCTIONS, RIGHTS AND OBLIGATIONS OF THE TRUSTEE 10. The functions, rights and obligations of the Trustee are set out in the Trust Deed. 113

116 APPENDIX II AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF CCS SUPPLY CHAIN MANAGEMENT CO., LTD. AND ITS SUBSIDIARIES FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012 The information in this Appendix II has been extracted from the auditor s report on the consolidated financial statements of CCS Supply Chain Management Co., Ltd. and its subsidiaries for the financial year ended 31 December 2012 and has not been specifically prepared for inclusion in this Information Memorandum. 114

117

118

119

120 Trader % 118

121

122 2012 Shandong CCS Supply Chain Management Co., Ltd. CCS ir@ccsoln.com ir@ccsoln.com ir@ccsoln.com A () X 120

123 X () 1999 () "" (),

124 2012 () (%) ,281,242, ,311,555, ,032,285, ,795, ,235, ,081, ,555, ,399, ,999, ,924, ,778, ,399, (%) 1,244,762, ,713, ,114, ,025,466, ,614,022, ,097, () (%) % % ,719, ,556,959 2,811, ,250, ,973,

125 , ,397, ,998, ,136, ,573, , ,240, ,835, ,081,

126 % % % % Trader Trader Trader Trader 2013 Trader % % () 1 : % 124

127 2012 5,281,242, ,311,555, ,541,933, ,774,131, ,579, ,465, ,749, ,533, ,218, ,579, ,924, ,778, ,598, ,722, ,514, ,970, (1) 2012 Trader (2) % 3 (1) (%) (%) : (%) 2,262,688, ,515,818, ,279,245, ,258,302, % 4 125

128 % FOB % % () 1 (%) : : (%) 2,450,298, ,262,688, ,830,944, ,279,245, % : : 1,380,829, ,643,467, ,203, ,123,741, () 1 : % % % 136,075, ,023, ,250, ,882,

129 ,571, ,748, ,227, ,898, ,166, ,695, ,475, ,542, ,244, ,351, () / % MBA

130 SAP ERP OA () 1 (1) (2) 2 3 () % %

131 % GDP 7% 7.5% % () () Trader () Trader 129

132 % () () 130

133 2012 () () () () () 10 (%) , , ,

134 2012 () () ( ) () AA ( ) () 7,275,000 : : () () () () 132

135 % () 1 100% ,000, : : (%) 0 ()

136 () () () () () 5%

137

138 : : 300, , % 5% 136

139 2012 () 1 (%) (%) 31,837, ,133,813-31,837, ,295, ,133, ,837, ,133,813-31,837, ,295, ,133, ,837, ,133,813-31,837, ,295, ,133, ,152, ,837,961 31,837, ,990, ,152, ,837,961 31,837, ,990,

140 ,990, ,133, ,133, ,123, / 618,133, ,133, ,837,961 31,837,961 () ,133, ,133,813 31,837,961 31,837, ,837,961 31,837, ,133, ,133,813 / / () ,133, : 618,133,813 () ,133, ,133, ,837,961 31,837,961 () 138

141 2012 () (%) 5 15, ,133, ,133, ,133, ,400,000 37,400, ,617,861-10,220, ,000,000 12,000, ,000,000 12,000, ,220,000 10,220, ,498, ,230,000 6,230, ,100,000 5,100, ,565, , ,510,069 12,000,000 12,000,000 37,400,000 37,400,

142 ,617,861 21,617,861 12,000,000 12,000,000 12,000,000 12,000,000 10,220,000 10,220,000 9,498,900 9,498,900 6,230,000 6,230,000 5,100,000 5,100,000 4,565,853 4,565,853 2,641,580 2,641, ,133, ,133,813 : () ,000, ,133,813 () 1 140

143

144 2012 ()

145 / / / / / / Metiom,Inc.()ScientCorp()Crystal XINJKS CFO ()

146 () 144

147 2012 ()

148 2012 () () 146

149 < >

150

151

152 2012 () ()

153 2012 (2013 A 0012 ""

154 : : :.() 820,164, ,164, ().1 136,075, ,023, () 455,250, ,882, ( 323,293, ,253, () 62,209, ,555, () 211,529, ,820, () 6,360, ,301, ,014,883, ,606,001, ().() 10,402, ,903,

155 2012.() 12, , ( 168, ,583, ,020, ,025,466, ,614,022, ( ).( ).( ).( ).( ).( ).( ) 132,571, ,748, ,227, ,898, ,475, ,542, ,244, ,351, ,318, , ,166, ,695, ,511, ,261,

156 ,516, ,309, ,516, ,309, ( ).( ).( ) 188, ,123, ,133, ,273, ,792, ,364, ,787, ,244,762, ,713, ,244,950, ,713, ,025,466, ,614,022, : : : 160, ,280,

157 2012.() 537, , ,280, () 51, ,988,000, ,886, ,988,051, ,886, ,988,748, ,167,

158 , , , , ,667, ,006, ,788, ,125, ,788, ,125, ,123, ,990, ,388,930, ,064, ,047, ,047, ,140, ,059, ,963,960, ,041, ,988,748, ,167, : : 156

159 2012 5,281,242, ,311,555, ( ) 5,281,242, ,311,555, ,885,285, ,976,120, ( ) 4,541,933, ,774,131, ( ) 7,129, ,411, ,579, ,465, ( ).( ).( ) 57,749, ,533, ,218, ,579, , ,957, ,434, ( ) 72,376, ,063, () ,404, ,334, ,093, ( 86,538, ,858,

160 2012 ) 381,795, ,235, ,795, ,235, ( ).( ) : : 5,195, ,588, , () 163,113, , ,918, ,481, ,918, ,481,

161 ,918, ,481, : : 5,210,435, ,846,119, ( ) 89,791, ,092, ,300,226, ,874,211,

162 2012 4,242,003, ,647,387, ,797, ,340, ,021, ,397, ( ).( ) 303,480, ,864, ,867,302, ,185,989, ,924, ,778, , , ,885, ,722, ,000,

163 2012 3,885, ,722, ,598, ,722, , ,000, ,517, ,494, ,705, ,494, ,099,432, ,614, ( ) 18,788, ,908, ,000,000 4,000, ,134,220, ,523, ,514, ,970, , ,157, ,999, ,313, ,164, ,851, ,164, ,164,

164 : : 3, () 3,500, , ,500, , , , ,250, ,695, ,569, ,835, ,069, ,802, ,004, ,004,

165 , , , , , , ,120, ,725, ,280, ,006, , ,280,

166 : : 618,133, ,792, ,787, ,713, ,133, ,792, ,787, ,713, ,990, ,481, ,577, , ,237, ,795, ,795, ,795, ,795, ,990, , ,178, ,990, , ,178,

167 ,481, ,481, ,481, ,481, ,736, ,736, ,736, ,736, ,123, ,273, ,364, , ,244,950, : : 618,133, ,954, ,624, ,713,096.35

168 ,133, ,954, ,624, ,713, ,837, ,837, ,837, ,837, ,837, ,837,

169 ,133, ,792, ,787, ,713, : : 250,990, ,064, ,047, ,059, ,041, ,990, ,064, ,047, ,059, ,041, ,133, ,023,866, ,918, ,799,918, ,918, ,918, ,918, ,918, ,133, ,023,866, ,642,000, ,133, ,023,866, ,642,000,

170 ,123, ,388,930, ,047, ,140, ,963,960, : : 250,990, ,064, ,047, ,577, ,523, ,990, ,064, ,047, ,577, ,523,838.49

171 ,481, ,481, ,481, ,481, ,481, ,481, ,990, ,064, ,047, ,059, ,041,899.71

172 [1998] [1998]147 [1998] ,200 ( 320 ) ,900, , [2000]141 18,758, ,158, ,990, (2008) (2008) 6-4, % 100% % % DZ % 100% 100% 2,988,000, % ,133, % 170

173 () () () () () : : () 1 171

174 2012 "" "" () () : " " () 172

175 ()

176 % % % % % 5 100% % 1% % 1% 12 10% 10% 23 20% 20% 34 40% 40% 45 60% 60% 5 100% 100% 3 ()

177 (1) (2) ()

178 % 50% 4 () " """ () 1 ( ) 2 % % 176

179 % 9.50%-19.00% % 9.50%-19.00% 3-5 5% 19.00%-31.67% 3 () () : 3 () 177

180 2012 () 1 1 () 178

181 2012 () ()

182 2012 () () / a. b. 180

183 2012 () () () 1 2 () 1 181

184 () 17% 5% 7% 5% 7% 5% 10%15% 25% () "" [2001] % % 15% ChinaCoalSolution(Singapore)Pte.Ltd 10% AAdvancedHoldingPte.Ltd. 10% () 1 : : 182

185 ChinaCoalSolution(HK)Limite d ChinaCoalSolution(Singapore) Pte.Ltd. 10,000, (%) (%) ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,800, ,800,

186 INAAdvancedHoldingPte.Ltd. 60,000, ,000, ,000, ,000, ,000, ,000, , , , ,000, ,000, ,000, ,000,

187 2012 () () () / / 1,031, / / 72, / / 1,031, / / 72, / / 434,423, / / 522,362, / / 426,784, / / 501,300, ,088, ,844, ,324, ,947, , , , , / / 384,708, / / 180,729, / / 257,794, / / 180,729, ,191, ,914, / / 820,164, / / 703,164, () 1 136,075, ,023,

188 ,075, ,023, () : 1 (%) (%) (%) (%) 1 450,849, ,882, ,849, ,882, ,890, , ,739, / 489, / 206,882, / 0 / 2 5%( 5%) 5%( 5%) 3 90,987, ,550, ,404, ,304, ,740, / 280,986, /

189 2012 () 1 (%) (%) (%) (%) 62,394, , ,555, ,394, , ,555, ,394, / 184, / 67,555, / 0 / (%) (%) ,673, , ,555, ,673, , ,555, ,721, ,394, , ,555, %( 5%) 5%( 5%) 3 (%) 5,409, ,875, ,548, ,041,

190 2012 4,000, / 22,874, / () 1 (%) (%) 1 316,917, ,411, ,533, ,841, ,841, ,293, ,253, ,594, ,839, ,576, ,523, ,982, / 163,515, / / 3 5%( 5%) 5%( 5%) () 1 211,529, ,529, ,820, ,820, ,529, ,529, ,820, ,820,

191 2012 () 6,360, ,301, ,360, ,301, () : 1 230,000, ,000, ,000, ,000,000 60,000, ,000, ,000,000 60,000, ,000, () : 1 8,627, ,885, ,512, ,721, , ,483, ,543, ,034, ,578, , , , , ,386, ,110,

192 , , ,283, , , , , , , ,903, / / 10,402, / / 6,272, / / 6,199, ,465, / / 4,044, , / / 157, / / / / / / / / / / 7,903, / / 10,402, / / 6,272, / / 6,199, ,465, / / 4,044, , / / 157, ,442, () 1 325, , , , , , , , , , , , () / 190

193 (1) 168, , (2) 673, , , , () : 0 673, ,

194 , , () 1 39,005, ,216, ,244, ,531, ,320, ,571, ,748, IF IF Z ,791, Z ,414, China(Singapore)CoalSolutionPte.Ltd. DBSBANKLTD DEEDOFCHARGEANDASSIGNMENT 7,210, () 278,227, ,898, ,227, ,898, ,227, () 1 244,475, ,542, ,475, ,542, %( 5%) 192

195 2012 5%( 5%) () 1 68,244, ,351, ,244, ,351, %( 5%) 5%( 5%) () 592, ,729, ,648, , ,099, ,099, ,922, ,922, ,922, ,922, , , , , , , , ,979, ,473, ,318, , () 18,495, ,876, ,846, ,563, , , , , , , , , , , , ,166, ,695,

196 2012 () 1 6,352, ,125, ,235, , , , , ,731, ,511, ,261, %( 5%) 5%( 5%) 3 % LAURITZEN BULKER A/S 2,907, ,145, ,090, SINGAPORE OCEAN SHIPPING PTE LTD 754, , () ,133, ,990, ,990, ,123, () 194

197 2012 7,792, ,481, ,273, ,792, ,481, ,273, () 256,787, / 256,787, / 381,795, / 4,481, ,736, ,364, / () 1 5,281,242, ,311,375, , ,541,933, ,774,131, ,281,242, ,541,933, ,311,375, ,774,121, ,450,298, ,262,688, ,588,213, ,515,818, ,830,944, ,279,245, ,723,161, ,258,302, ,281,242, ,541,933, ,311,375, ,774,121,

198 2012 1,380,829, ,191,976, ,351,794, ,107,224, ,643,467, ,384,719, ,135,808, ,463, ,203, ,928, ,157, ,171, ,123,741, ,849,308, ,614, ,262, ,281,242, ,541,933, ,311,375, ,774,121, ,087, ,445, ,116, ,329, ,803, ,824,781, () 2,800, ,053, % 5% 1,409, ,421, % 2,230, ,492, % 689, , % 7,129, ,411, / () 2,126, ,441, ,144, ,483, ,404, , , ,815,

199 2012 2,598, ,554, , , , ,593, ,361, ,579, ,465, () 19,852, ,782, ,386, , ,300, ,571, ,944, ,556, ,931, ,888, ,227, , ,697, ,745, ,562, ,720, ,495, , , ,593, ,749, ,533, () 19,190, ,449, ,128, ,919, , ,369, ,848, ,418, ,218, ,579, () 673,

200 , () 1 71,719, ,056, ,719, , , , ,376, ,063, ,376, ,950, ,200,000 21,835, ,993,859 29,577, ,100 2,312, ,354, , ,719, ,056, / ,313, % ,950, ,835, ,577, () 50 4, ,400, ,404, ,404, % 2,400, () 86,706, ,858,

201 , ,538, ,858, () () 1 2,286, ,719, ,128, ,400 89,791, ,453, ,300, ,495, ,931,

202 2012 1,697, ,944, ,562, ,848, , ,480, , , ,000,000 16,000,000 () ,795, ,235, , ,386, , , , ,337, ,544, , ,709, ,616, ,846, ,380, ,350, ,354, ,157, ,924, ,778,

203 ,164, ,164, ,164, ,851, ,999, ,313, ,000, ,164, ,164, ,031, , ,423, ,362, ,708, ,729,

204 ,164, ,164, () (%) : : (%) 360,000, () ChinaCoalSolution(HK)Limited : : (%) (%) ,000, ,000,

205 ,000, ,000, ,000, ,000, ChinaCoalSolution(Singapore)Pte.Ltd. 7,800, ,000, ,000,

206 2012 INAAdvancedHoldingPte.Ltd. 230,000, , ,000, ,000, () ,000, ,000, ,000, ,000, ,000, () 204

207 2012 : : : 0 ()

208 2012 () ,531, ,571, %( 5%) () 1 (%) (%) (%) (%) 6 537, , , / / / / 2 5%( 5%) 5%( 5%) 3 (%) 500, , , , / 537, / 100 () 206

209 2012 2,868,000, ,000, ,000, ,000, ,886, ,868,000, ,000, ,000, ,886, ,868,000, ,000, ,000, ,113, () 1 163,113, , ,113, , () 207

210 ,918, ,481, ,113, , , ,243, ,662, ,069, ,802, , ,280, ,280, ,006, ,120, ,725, () ,719, ,556,959 2,811, ,250, ,973, , ,397, ,998,

211 ,136, ,573, , ,240, ,835, ,081, () %

212

213 APPENDIX III AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF CCS SUPPLY CHAIN MANAGEMENT CO., LTD. AND ITS SUBSIDIARIES FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013 The information in this Appendix III has been extracted and translated from the auditor s report on the consolidated financial statements of CCS Supply Chain Management Co., Ltd. and its subsidiaries for the financial year ended 31 December 2013 and has not been specifically prepared for inclusion in this Information Memorandum. 211

214 CCS Supply Chain Management Co., Ltd. Financial Statements with Auditors Report For The Year Ended 31 December 2013 (English Translation for Reference Only) 212

215 CONTENTS 1. AUDITOR S REPORT 1 2. AUDITED FINANCIAL STATEMENTS Balance Sheet 2-3 Income Statement and Statement of Profit Distribution 4 Cash Flow Statement 5 Statement of Changes in Owners Equity 6 Notes to the Financial Statements CALCULATION OF TAXABLE INCOME

216 AUDITOR S REPORT To The Board of Directors of CCS Supply Chain Management Co., Ltd. We have audited the accompanying financial statements of CCS Supply Chain Management Co., Ltd. (the Company ), Which comprise the consolidated and the balance sheets as at 31 December 2013, the consolidated and the Income statements, the consolidated and the cash flow statements and the consolidated and the statements of changes in owners equity for the year then ended and other explanatory notes. 1. Management's responsibility for the financial statements Management of the Company is responsible for the preparation and fair presentation of these financial statements. This responsibility includes: (1) preparing the financial statements in accordance with Accounting Standards for Business Enterprises to achieve fair presentation of the financial statements; (2) designing, implementing and maintaining internal control that is necessary to enable the financial statements that are free from material misstatement, whether due to fraud or error. 2. Auditor's responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with China Standards on Auditing. Those standards require that we comply with the Code of Ethics for Chinese Certified Public Accountants and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control relevant to the preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 3. Opinion In our opinion, the financial statements of the Company present fairly, in all material respects, the financial position of the Company as of 31 December 2013, and the results of its operations and cash flows for the year then ended in accordance with Accounting Standards for Business Enterprises. Ruihua Certified Public Accountants LLP Beijing, China 24th March,

217 Balance sheet as at 31 December 2013 Currency: RMB ASSETS Notes 31 Dec Dec 2012 Current assets Monetary funds 7.1 1,207,285, ,164, Tradable financial assets 787, Notes receivable ,846, ,075, Accounts receivable ,052, ,250, Advances to suppliers ,337, ,293, Interest receivable - - Dividend receivable - - Other receivables ,751, ,209, Inventories ,933, ,529, Long-term debt investment due within a year - - Other current assets 2,177,038, ,360, Total current assets 5,873,032, ,014,883, Non-current assets Available-for-sale financial assets 200,000, Held-to-maturity investments - - Long-term accounts receivable - - Long-term equity investments 385,594, Investment property - - Fixed assets ,939, ,402, Construction in progress Construction materials Fixed assets held for disposal - - Productive biological assets - - Petrol assets - - Intangible assets ,650, , Development costs - - Goodwill - Long-term prepayments , Deferred tax assets 8,056, , Other non-current assets - - Total non-current assets 756,725, ,583, TOTAL ASSETS 6,629,758, ,025,466, The notes to the accounts form an integral part of the financial statements 2 215

218 Balance sheet as at 31 December 2013 (continued) Currency: RMB LIABILITIES AND OWNERS' EQUITY Notes 31 Dec Dec 2012 Current liabilities - - Short-term loans 1,052,539, ,571, Tradable financial liabilities - - Notes payable 1,147,021, ,227, Accounts payable 330,534, ,475, Advances from customers 171,592, ,244, Accrued payroll 3,446, ,318, Taxes payable 58,599, ,166, Interest payable 22,072, Dividend payable - - Other payables 2,077,402, ,511, Long-term liabilities due within a year - - Other current liabilities - - Total current liabilities 4,863,209, ,516, Non-current liabilities - - Long-term borrowings - - Bonds payable - - Long-term payables - - Special payables - - Estimated liabilities - - Deferred tax liabilities 164, Other long-term liabilities 20,000, Total non-current liabilities 20,164, TOTAL LIABILITIES 4,883,373, ,516, Owner s equity - - Paid-in capital 872,223, ,123, Capital surplus 27,184, Surplus reserve 24,811, ,273, Undistributed profit 821,992, ,364, TOTAL OWNERS EQUITY 1,746,384, ,244,950, TOTAL LIABILITIES AND OWNERS EQUITY 6,629,758, ,025,466, The notes to the accounts form an integral part of the financial statements 3 216

219 Income statement for the year ended 31 December 2013 Currency: RMB Notes Revenue 6,490,705, ,281,242, Less: Cost of sales 5,521,994, ,541,933, Taxes and surcharge for main operations 21,602, ,129, Operating expenses 375,938, ,579, General and administrative expenses 97,337, ,749, Financial expenses 20,220, ,218, Losses arising from assets impairment 11,610, , Add: Profit / (loss) from changes in fair value 787, Investment income/ (losses) 23,018, Of which: income from associates and joint ventures 99, Operating profit / (loss) 465,808, ,957, Add: Non-operating revenue 82,106, ,376, Less: Non-operating expenditure 795, Of which: losses arising from disposal of non-current assets Income / (loss) before tax 547,119, ,334, Less: Income tax 75,969, ,538, Net income / (loss) 471,150, ,795, The notes to the accounts form an integral part of the financial statements 4 217

220 CCS Supply Chain Management Cashflow statement for the year ended 31 December 2013 Currency: RMB Cash flows from operating activities Cash received from the sale of goods or rendering of services 5,546,202, ,210,435, Refunds of taxes - - Other cash receipts relating to operating activities 233,282, ,791, Sub-total of cash inflows 5,779,484, ,300,226, Cash paid for goods and services 4,734,210, ,242,003, Cash paid to and on behalf of employees 28,404, ,797, Payments of all types of taxes 164,487, ,021, Other cash payments relating to operating activities 2,736,195, ,480, Sub-total of cash outflows 7,663,297, ,867,302, Net cash flows from operating activities -1,883,813, ,924, Cash flows from investing activities Cash received from return of investments 103,066, Cash received from return on investment 23,117, Net cash received from the sale of fixed, intangible and other long-term assets - - Other cash receipts relating to investing activities - 286, Sub-total of cash inflows 126,184, , Cash paid to acquire fixed, intangible and other long-term assets 154,643, ,885, Cash paid to acquire investments 689,320, Other cash payments relating to investing activities - - Sub-total of cash outflows 843,963, ,885, Net cash flows from investing activities -717,779, ,598, Cash flows from financing activities Cash received from investments by others 12,028, , Cash received from borrowings 2,388,261, ,517, Other cash receipts relating to financing activities 2,090,000, Sub-total of cash inflows 4,490,289, ,705, Cash repayments of amounts borrowed 1,466,941, ,099,432, Cash paid for distribution of dividends or profits and for interest expenses 32,153, ,788, Other cash payments relating to financing activities 680,762, ,000, Sub-total of cash outflows 2,179,858, ,134,220, Net cash flows from financing activities 2,310,430, ,514, ,479, , Effect of changes in foreign exchange rate on cash -293,641, ,999, ,164, ,164, Net increase in cash and cash equivalents 526,522, ,164, The notes to the accounts form an integral part of the financial statements 5 218

221 Statement of changes in owners equity for the year ended 31 December 2013 Paid in capital Capital surplus Legal reserves Undistributed profit Currency: RMB Total At 31 December ,990, ,064, ,047, ,059, ,041, Current year movement 618,133, ,023,866, ,918, ,799,918, Paid in capital 618,133, ,023,866, ,642,000, Other equity from investment company under equity method Fair value changes on available-for sale financial assets Profit / (loss) for the year ,918, ,918, At 31 December ,123, ,388,930, ,047, ,140, ,963,960, Current year movement 3,100, ,184, ,822, ,462, Paid in capital 3,100, ,928, ,028, Other equity from investment company under equity method Fair value changes on available-for sale financial assets - 18,256, ,256, Profit / (loss) for the year ,822, ,822, At 31 December ,223, ,416,114, ,047, ,963, ,965,422, The notes to the accounts form an integral part of the financial statements 6 219

222 CCS Supply Chain Management Co., Ltd. Calculation of Taxable Income for the year ended 31 December 2013 Currency: RMB Prepared by the Management of the Company Note 1 General CCS Supply Chain Management Co., Ltd. (hereinafter referred to as The Company" or "Company") is formerly known as the Shandong Jiufa Edible Fungus Co. Shandong Jiufa Edible Fungus Co. obtained approval from the People s Government of ShanDong Province(LU ZHENG ZI[1998]NO 90).Shandong Jiufa Group as the main sponsor carried out joint-stock system reorganization on wholly owned subsidiary Yantai Jiufa Edible Fungus Co., Ltd and China Township Enterprises Corporation as joint co-sponsored to raise the establishment of the joint stock limited company. Shandong Jiufa Edible Fungus Co. registered in Shandong Province Industry and Commerce Administration Bureau on June 25, Shandong Jiufa Edible Fungus Co. obtained approval from the China Securities Regulatory Commission ZHENG JIAN FA ZI [1998] No. 147 and [1998] No. 148, made initial public offering by the Shanghai Stock Exchange on June 8, 1998, which issued 32 million public shares including 320 ten thousand employee shares, and public traded in the Shanghai stock Exchange on July 3, In 1999, Shandong Jiufa Edible Fungus Co. distributed profits through stock dividend to pay dividend according 3 shares for each 10 shares and to transfer of capital reserve to common shares according to 3 shares for each 10 shares. Total number of share capital is on the base of 11,900 million in the end of After the above, total share capital of Shandong Jiufa Edible Fungus Co. was changed to 19,040 ten thousand shares. A approval certificate [China Securities Regulatory Commission] [2000] No. 141] were obtained on placement of ordinary shares to all shareholders 18,758,400 shares. After the above, total share capital of Shandong Jiufa Edible Fungus Co. was changed to 209,158,400 shares. In 2001, Shandong Jiufa Edible Fungus Co. distributed profits in the mid-period, transfer capital reserve to common shares according to 2 shares for each 10 shares. After the above, total share capital of Shandong Jiufa Edible Fungus Co. was changed to 250,990,080 shares. On September 28, 2008, application by the creditors, according to Yantai Intermediate People's Court (2008) YAN MIN PO ZI NO. 6-1 civil judgment ruling, Shandong Jiufa Edible Fungus Co. began to enter into bankruptcy reorganization process. In December 9, 2008, "Draft of reorganization plan" was approved by the Yantai Intermediate People's Court (2008) YAN MIN PO ZI NO. 6-14, Shandong Jiufa Edible Fungus Co. entered the restructuring implementation period. In June 1, 2009, according to ruling judgment of Shandong Province Intermediate People's Court (2008) YAN MIN PO ZI NO. 6-14, Shandong Jiufa Edible Fungus Co. Management supervisory duties has been terminated, the reorganization plan has been completed on June 1, On December 24, 2011, Yantai Intermediate People's Court issued civil mediation (2011) YAN TAI JIAN ZI No. 35:Since there was the problem of 100% stake of Yantai Zichen, Shandong Jiufa Edible Fungus Co., has never substantial control of Yantai Zichen. Shandong Jiufa Edible Fungus Co. has no the operation business and failed to be going concern, which did not meet the target and principle of "Restructure Plan of Shandong Jiufa Edible Fungus Co., ". To implement the Reorganization plan" as soon as possible, Shandong Jiufa Edible Fungus Co returned 100% stake investment of Yantai Zichen to Yantai Saishang. Shandong Jiufa Edible Fungus Co., separate select reorganization direction. Shandong Jiufa Edible Fungus Co. injected 330 million yuan of assets without compensation on behalf of the Zhengda Wumao to repay debt amounted to RMB 330 million yuan. Shandong Jiufa Edible Fungus Co., and ZHENGZHOU CHINA COAL SOLUTION CO., LTD.signed "Debt compensatory agreement" and "Agreement of acquisition assets by issuing shares" on December 26, According to the "Debt compensatory agreement", ZHENGZHOU CHINA COAL SOLUTION CO., LTD. injected 330 million yuan of assets without compensation on behalf of Shandong Muping Zhengda Wumao Center to repay debt to Shandong Jiufa Edible Fungus Co.,. Simultaneously Shandong Jiufa Edible Fungus Co returned 100% stake Investment of Yantai Zichen to Zhengda Wumao. The assets of 330 million is the % of the total shares of Xuzhou Yifeng Trading Co., Ltd. Pizhou Fengyuan Power Fuel Co., Ltd., JiangSu JinHe Power And Electricity Fuel Co., Ltd held by ZHENGZHOU CHINA COAL SOLUTION CO., LTD.According to "Business Valuation Report ( ZI BING BAO ZI No. DZ )" issued by Oriental Appraisal Co.,Ltd. Total net asset value of 100% equity share of Xuzhou Yifeng Trading Co., Ltd., and 100% equity share of Fengyuan Power Fuel Co., Ltd., and 100% equity share of JiangSu JinHe Power And Electricity Fuel Co., Ltd held by ZHENGZHOU CHINA COAL SOLUTION CO., LTD..amounted to 2,988,000,000 yuan. According to Agreement of acquisition assets by issuing shares", the remaining % total equity of Xuzhou Yifeng Trading Co., Ltd., and Fengyuan Power Fuel Co., Ltd., and JiangSu JinHe Power And Electricity Fuel Co., Ltd was acquired by issuing shares from ZHENGZHOU CHINA COAL SOLUTION CO., LTD. On August 6, 2012, according to "On the approval of Shandong Jiufa Edible Fungus Co. issuance of shares to acquire assets of ZHENGZHOU CHINA COAL SOLUTION CO., LTD.." (Zheng Jian Xu Ke [2012] No. 1042) documents, issued by the China Securities Regulatory Commission. Shandong Jiufa Edible Fungus Co., was approved to issue 618,133,813 shares to acquire the assets from ZHENGZHOU CHINA COAL SOLUTION CO., LTD.After the completion of the reorganization, the company has been a management company, holding the core assets of 100% stake of Xuzhou Yifeng Trading Co., Ltd.., and Fengyuan Power Fuel Co., Ltd., and JiangSu JinHe Power And Electricity Fuel Co.,LTD The notes to the accounts form an integral part of the financial statements 7 220

223 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB On August 26, 2012, Shandong Jiufa Edible Fungus Co., passed a resolution to change the company name to "Shandong China Coal Solution Supply Chain Management Ltd" at the Third Extraordinary General Meeting in 2012.On September 16, 2012, Shandong Jiufa Edible Fungus Co., identified the company name as "CHINA COAL SOLUTION(SHANDONG) SUPPLY CHAIN MANGEMENT LTD." at the Fourth Extraordinary General Meeting in 2012.On December 31, 2012, Shandong Rui Mao Supply Chain Management Co., Ltd changed the company name to "China Coal Solution Supply Chain Management Co., Ltd." at the Sixth Extraordinary General Meeting in The parent company is ZHENGZHOU CHINA COAL SOLUTION CO., LTD.., and the actual controller is Wang Yongxing. The Company's industry is: Coal supply chain management. The operating range is: Coal wholesale business, asset management, coal information consulting, coal supply chain management. The Company's legal representative: Wang Yongxing. The Company registered address: HSBC Tower, Shengli Road, and Yantai City, Shandong Province Note 2 Basis of reporting for financial statements The financial statements of the Company are prepared in accordance with the going concern basis and the actual transactions and events of the period by the Accounting Standards for Business Enterprises - Basic Standard and38 specific accounting standards; Application Guide and of Accounting Standards subsequently issued by the Ministry of Finance on 15 February 2006(Hereinafter referred to as Accounting Standards for Business Enterprises ; disclosure in accordance with " Rules No. 15 of Information Disclosure for Public Offering Securities Company- General provisions of the Financial Report" (2010 Amendment) issued by the China Securities Regulatory Commission. According to the relevant provisions of Accounting Standards, the accrual basis is adopted. The financial statements are measured at historical cost basis except for certain financial instruments. If the assets are impaired, the Company makes the provision for impairment in accordance with relevant provisions. Note 3 Compliance with Accounting Standards for Business Enterprises The financial statements provided by the Company comply with the requirements of Accounting Standards for Business Enterprises ( ASBE ), which truly and completely reflected its financial position of the Company as of 31 December 2013, and the results of business operations and cash flows. In addition, the financial statements of the Company disclose in all material respects in accordance with " Rules No. 15 of Information Disclosure for Public Offering Securities Company- General provisions of the Financial Report" (2010 Amendment) issued by the China Securities Regulatory Commission. Note 4 Principal accounting policies and accounting estimates 4.1 Financial year Accounting periods of the Company are distinguished into annual period and interim period. Interim period is the accounting periods shorter than one full fiscal year. The Company has adopted the calendar year as its accounting year, i.e. from 1 January to 31 December. 4.2 Reporting currency The reporting currency of the Company is the Renminbi or RMB ( ). The currency of the Company to prepare of financial statements is the Renminbi or RMB ( ) as well. 4.3 Treatments for consolidated financial statements The accounting treatment of business combinations Business combination refers to a transaction or event of two or more separate entities combine into a reporting entity. Business combinations are classified into business combinations under the same control and not under the same control. 1Business combination under the same control Business combination under the same control is that companies involved in the merger before and after the merger are subject to the same party or ultimate controlled by the same multiparty, which the control is not temporary. For companies under the same control, combining party refers to achieve the control rights of other party at the combining date. Combined party refers to other companies involved in the combination. The "combining date" refers to the date on which the combining party actually obtains control on the combined party. The notes to the accounts form an integral part of the financial statements 8 221

224 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 The notes to the accounts form an integral part of the financial statements 9 Monetary Unit: RMB Assets and liabilities obtained are measured at the carrying amount of the combined party at the combining date. The difference between the carrying amount and the book value of combination consideration (or total face value of issued shares) should be recognized in the capital reserve (share premium).if the capital surplus (share premium) is insufficient, any excess should be adjusted to retained earnings. The direct costs of the business combination for the combined party should be recognized in profit or loss. 2Business combination not under common control Business combination not under the same control is that companies involved in the merger before and after the merger are not subject to the same party or ultimate controlled by the same multiparty. For companies not under the same control, combining party refers to achieve the control rights of other party at the combining date. Combined party refers to other companies involved in the combination. The "combining date" refers to the date on which the combining party actually obtains control on the combined party. For combinations of entities not under common control: The costs of combinations shall be the fair values of the assets surrendered, the liabilities incurred or assumed, and the equity securities issued by the acquirer. Commissions and other relevant administrative expenditures incurred from business combinations, including audit fees, legal service charges, valuation and consultancy costs, etc., shall be recognized in profit or loss for the current period. Transaction costs incurred from issuance of equity securities or debt securities as part of consideration for business combinations shall be included in the initial costs of relevant securities. Contingent consideration for business combinations should be recognized the combination cost at the fair value at the acquisition date. If there is new or update evidence to make adjustment within 12 months after the acquisition date, the Company shall adjust the contingent consideration and combined goodwill as well. For multiple exchange transactions of a business combination realized step by step: In the Company's consolidated financial statements, the equity acquired prior to the acquisition date should be re-measured at fair value at the acquisition date. The difference between the fair value and carrying amount should be recognized in the current investment income of the acquisition date. Simultaneously other comprehensive income related to equity before the acquisition date shall be transferred into the acquiree's current investment income. Cost of consolidated is the combination of fair value of equity of aquiree held by the acquirer prior to the acquisition date and fair value of the additional equity of aquiree at the acquisition date. Consolidated cost of the acquirer and the acquired identifiable net assets should be measured at the fair value of acquisition date. If cost of a business combination exceeds the fair value of acquired identifiable net assets, the difference should be recognized as goodwill. When cost of a business combination is less than the cost fair value of the acquiree's identifiable net assets, First, the fair value and consolidated cost of the identifiable assets, liabilities and contingent liabilities of the acquiree should be reviewed. Secondly, after review, if consolidated cost is still less than fair value of acquiree's identifiable net of assets, the difference amount should be recognized in profit or loss. For acquirer has obtained deductible temporary differences of the acquire and fail to recognize as deferred tax assets as the company do not meet the conditions If there is new or update evidence indicates that the economic profit to deduct temporary differences could realise within 12 months since the acquisition date, deferred tax asset should be recognized and the goodwill should decrease. If there is insufficient goodwill to offset, the difference should be recognized as profit or loss. Addition to the above, the deferred tax assets related to the business combination should be recognized as profit or loss. 4.4 Preparation of Consolidated Financial Statements 1Determine the scope of the principle of consolidated financial statements The scope of the consolidated financial statements is based on the control. The term control refers to the power to govern the financial and operating policies so as to obtain benefits from investee s operating activities.scope of consolidation includes the Company and all of its subsidiaries. A subsidiary is an enterprise or body controlled by the Company. 2The method of preparation consolidated financial statements Once obtaining the actual control over the net assets of acquiree and business operating decision, the subsidiary should be included in the scope of consolidation. The subsidiary should be included in the scope of consolidation since the date of loss of control. For the disposal of subsidiaries, pre-operating results and cash flows should be properly included in the consolidated income statement and consolidated cash flow statement. For the disposal of subsidiaries during the period, it is unnecessary to adjust the beginning of the consolidated balance sheet. For the additional subsidiary of business combination not under the same control, the post-operating results and cash flows should be properly included in the consolidated income statement and consolidated cash flow statement. It is unnecessary to adjust the beginning amount and comparative amount of the consolidated balance sheet. For the additional subsidiary of business combination under the same control, the post-operating results and cash flows should be properly included in the consolidated income statement and consolidated cash flow statement. It is necessary to adjust the beginning amount and comparative amount of the consolidated balance sheet 222

225 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB In preparing the consolidated financial statements, if there is inconsistent of accounting policies or accounting period between the Company and subsidiary. Financial statements of subsidiaries should make the necessary adjustments in accordance to the accounting policies and accounting period of the Company s. For subsidiaries not under common control, financial statements of subsidiaries should make adjustments on the basis of fair value of identifiable net assets. All significant inter-company balances, transactions and unrealized profits should be eliminated in the consolidated financial statements. Shareholders' equity of subsidiaries and net profits or losses not attributable to the Company should be listed separately, as minority interests and minority interests income in both consolidated equity and consolidated profit. Share of the profit or loss of subsidiaries attributable to minority interests in the consolidated income statement should be listed in the net profit as "minority interests. If losses of the subsidiaries minority exceed the beginning amount of the minority shareholders, the difference should offset against minority interests. For disposal of part of the equity investment or other reasons to lost control over a subsidiary, the remaining shares should be re-measured according to its fair value at the date of loss of control. The difference between proceed of disposal of shares and the fair value of the equity remaining subtracting the original shareholding proportion of net asset of subsidiary since the acquisition date should be recognized in the investment income of the control lost period. Other comprehensive income related to the former subsidiary's equity investments should be transferred to current investment income in the control lost period. After all above, the remaining shares should be measured according to the following: Accounting Standards for Enterprises No. 2 - Long-term equity investments Enterprise Accounting Standards No. 22," Financial Recognition and Measurement Tools etc. - for subsequent measurement, Refer to the relevant provisions of this Note IV ", or, 10 "long-term equity investment" or this note four, seven, "financial Instruments." When the company disposal the equity investment until the loss of control of a subsidiary through multiple transactions, it is necessary to distinguish between whether it belong to package deal to disposal of equity investments. If it does not belong to a package deal, the following accounting treatment should be used: For each of them, respectively, in accordance to "without losing control over part of the disposal of long-term equity investments in subsidiaries' (refer to Note IV, 10, (2)) Refer to principles and applicable accounting treatments of due to the disposal of part of the equity investment or other reasons, the loss of control over a subsidiary (refer preceding paragraph). If it does belong to a package deal, several transactions should be treated as one transaction, accounting treatment should refer to as a disposal of a subsidiary and the loss of control. However, before the date control lost of the subsidiary, the differences between the each proceed of the disposal of investments and net asset attributable to the parent should be recognized in the other comprehensive income in the consolidated financial statements, and transferred to the profit and loss in the control lost period. Note 5 Cash and cash equivalents Cash and cash equivalents include cash and investments which are short-term maturity within three months since the acquisition date, highly liquid and easy to convert to known amounts of cash, insignificant changes risk. Note 6 Accounting treatment of foreign currency transactions Translation of foreign currency transactions Initial recognition of a foreign currency transaction, the amount in the foreign currency is translated into Renminbi at the spot exchange rate of the transaction date, which is the daily mid-rate published by People's Bank of China. When the company undertake foreign currency exchange business or transactions involving foreign exchange, the amount in the foreign currency should be translated into Renminbi using the actual exchange rate. Treatments for the foreign currency monetary items and Non-monetary items Foreign currency monetary items should be translated at the spot exchange rate on the balance sheet date. The exchange difference arising from the difference between the spot exchange rate on the balance sheet date and the spot exchange rate at the time of initial recognition or prior to the balance sheet date should be recorded as profit or loss in the current period., except exchange movements in foreign currency loans that qualify for capitalisation during construction under ASBE 17 Borrowing Costs. The notes to the accounts form an integral part of the financial statements

226 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Non-monetary items denominated in foreign currency measured at historical cost are translated at the spot exchange rate on the transaction date with no further change. Where non-monetary items are measured at fair value, they are converted to the functional currency at the exchange rate prevailing on the date that fair value was last determined. Gains and losses resulting are recognised in the current period income or other comprehensive income including the capital reserve as changes in fair value (including changes in exchange rate) Translation of foreign currency financial statements When preparing of the consolidated financial statements with substantially foreign currency monetary investment in the overseas business operations: - Differences arising due to exchange rate changes are recognised in owners equity Currency translation differences - Gain or loss are recognised in the current period income when disposal of a overseas business operations. When translating foreign currency financial statements into Renminbi (RMB), the Company adopts the following methodology: - Assets and liabilities in the balance sheets are translated at the exchange rate of balance sheet date; - The other components of owners equity, except "undistributed profits", are translated at the relevant historic exchange rate; - Income statement items are translated at the spot exchange rate of the transaction date. Opening retained earnings for the year are the translated undistributed profits of the last year. Retained earnings of the year end are listed by translated distribution items of profits. The total difference of translated of assets and liabilities and equity shareholders should be recognized as foreign currency translation differences and other comprehensive income. It should be listed separately in shareholders' equity in the balance sheet. When disposal of a foreign operation and lost control, the differences of foreign currency translation listed under shareholders' equity or related to the oversea operating activities should be recognized in the income statement in whole or proportion of the disposal of the oversea operating activities. The cash flow statement denominated in foreign currency should be translated at the spot rate of cash flows generated date. The impacts of the exchange rate movements should be recorded as reconciling item and it should be presented separately in the cash flow statement. The amount of beginning of the year and ending of the last year should be presented according to the translated amounts of the financial statements of the last year. Note 7 Financial instruments 1) Fair value identifications of financial assets financial liabilities In the fair trade, fair value is the amounts for which they are applied between knowledgeable, willing parties in an arm s length transaction to exchange of assets or of repay debt. For financial assets measured at fair value, the fair values are measured with direct reference to the quoted prices in the active market. Where there is no active market, the fair values of the financial instruments are measured by estimation with reference to amounts for which they are applied between knowledgeable, willing parties in an arm s length transaction, fair values of other substantially same financial instruments, using estimated present values of cash flows, using option pricing model, etc. 2) Classification and recognition, and measurement of financial instruments The notes to the accounts form an integral part of the financial statements

227 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 The notes to the accounts form an integral part of the financial statements 12 Monetary Unit: RMB Purchasing and disposal of the financial assets conventionally should be recognized or derecognized on the trading day respectively. Financial assets and liabilities initially measured at fair value are classified into the following categories: the financial assets or financial liabilities measured at fair value through profit and loss, held for trading, held-to-maturity investments, receivables, financial assets available for sale and other financial liabilities, etc. Financial assets should be initially measured at fair value when they are acquired. Changes in fair value should be charged to profit or loss for the current period. Relevant transaction costs should be charged to profit or loss for the current period. Other financial liabilities should be initially recognized at fair values plus transaction costs. Financial assets measured at fair value through profit and loss Including both the held for trading and financial assets and financial liabilities measured at fair value through current profit and loss: Held for trading refers to the financial assets to meet one of the following requirements: The purpose of the acquisition is mainly for sale in the near future; Identifiable parts of centralized financial instrument group and obvious evidence to support that Company manage the group by short-term profit seeking As derivatives only arise from effective hedging instruments and financial guarantee contract except that equity derivatives without quotation and its fair value cannot be reliable measure which settlement only by equity derivatives delivery If one of the following conditions can be met, financial assets should be measured at fair value initially when acquired and changes in fair values charged to profit or loss for the current period. The interest or cash dividends received are recognized as investment income during the holding period. Changes in fair value are charged to profit or loss for the current period at year end. The designation eliminates or significantly reduces the inconsistency in measurement or recognition of related gains and losses due to different measurement basis of the financial assets. There is formal written statement in the risk management or investment strategy document that management of the financial asset/liability group is on fair value basis, which should be reviewed and reported to the key management personal. Financial assets which are initially measured at fair value and changes of the fair value are charged to profit or loss for the current period should be measured at fair value subsequently. Gain or loss of changes in fair value and interests income and relevant dividends should be charged to profit or loss for the current period. Held-to-maturity investments Held-to-maturity investments is non-derivative financial assets with the fixed maturity date and predetermined or fixed recovery amount, which company has the obvious intention and ability to hold to maturity. Held-to-maturity investments should be measured using effective interest method. Amortized cost should be measure subsequently. Gains or losses of derecognition, impairment or amortization should be charged to profit or loss for the current period. The effective interest method is a method of financial assets or financial liabilities (including a group of financial assets or financial liabilities) using effective interest rate to calculate the amortized cost and interest income or expense. The effective interest is the rate used to discount the cash flow of financial assets or financial liabilities to their book value during the expected remaining period or a shorter period if applicable. Expected cash flows are based on all the financial assets or financial liabilities contractual terms to calculate the effective interest rate without considering default risk. Expected cash flows should also include the payment and receipt of transaction costs and other premiums or discounts between the two parties to calculate effective interest rate as well. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable amount, in an active market without quotation, including accounts receivable, notes receivable, interest receivable, dividends receivable, other receivables.,etc. Loans and receivables should be measured using effective interest method. Amortized cost should be measure subsequently. Gains or losses of derecognition, impairment or amortization should be charged to profit or loss for the current period. Available-for-sale Non-derivative financial assets should be designated as available for sale initially, if they cannot be measure as one of the following: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity financial investments assets. 225

228 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Available-for-sale should be measured at amortized cost method initially by deduct principal repayment, plus or minus the cumulative amortization amount of difference between the initial and the maturity date using the effective interest method, deduct the impairment loss amount.ending costs of available for sale equity instruments is the same as its initial acquisition cost. Available-for-sale financial assets are measured at fair value subsequently. Gain and loss of changes in fair value should be charged to the capital reserves (other comprehensive income). Meanwhile, the accumulated amount should be transferred to gain or loss on investment and charged to profit or loss for the current period, when derecognize. The interest and cash dividends declared and received during the holding period are recognized as investment income. When there are changes in company s intention and ability or fair value of hold to maturity cannot be measured reliable, they should be reclassified as available-for-sale according to Rule 16 of Accounting Standards No Financial Instruments Recognition and Measurement. If it is more than two fiscal years since reclassification day, financial assets should be measured at cost or amortized cost instead of fair value. Cost or amortized cost of the financial assets should base on the fair value or book value at the reclassification day If financial assets with a fixed maturity date, gain or loss recognized originally in other comprehensive income should be recognized in profit or loss by using effective interest method to amortize the amount during the remaining period. The difference between the amortized cost and the amount at the maturity date should be recognized in profit or loss by using effective interest method to amortize during the remaining period. If financial assets with no a fixed maturity date, any gain or loss should be recognized originally in other comprehensive income should be recognized in shareholders' equity, and transferred and charged to profit or loss for the current period when disposal. 3) Impairment of financial assets Except for Financial assets measured at fair value and changes charged to profit or loss for the current period, the Company carries out an inspection on the carrying amount of r financial assets on each balance sheet day. When there is any obvious evidence described below proving that such financial asset has been impaired, an impairment provision should be made. For individually significant financial assets should be tested for impairment separately; individually insignificant financial assets should be tested for impairment separately or be tested in a group of with similar credit risk features. Both significant and non-significant financial assets not impaired in the separately test should be tested again in a group. Financial assets recognized impairment loss individually should not be tested in a group of financial assets with similar credit risk characteristics. Impairment of held-to-maturity investments, loans and receivables If financial assets are measured at cost or amortized cost, carrying value will be written down to its present value of estimated cash flows. Reduced amount should be recognized as an impairment loss in profit or loss. If there is obvious evidence that a financial asset has been recovered and the related to event since the impairment recognized, previously recognized impairment loss should be reversed. The carrying amount will not exceed the amortized cost of financial asset at the reversal date as if no impairment loss was made. Impairment of available for sale Considering comprehensively, once there is significantly decline or Non-temporary decline in the fair value, impairment of the available for sale should be made. Significantly decline is the percentage of cumulative fair value of available for sale more than 20%.Non-temporary decline is the period of continuous decline in the fair value more than 12 months. When available for sale is impaired, the originally accumulated losses recognized in capital reserve should be reversed and recognized in profit or loss. The balance of the accumulated loss is the initial cost of the asset net of any principal repayment and amortization, the current fair value and impairment losses recognized in profit or loss prior. If there is obvious evidence that a financial asset has been recovered and the related to event since the impairment recognized, previously recognized impairment loss should be reversed. Equity instruments reversal of impairment losses should be recognized as other comprehensive income; however debt instruments should be recognized in profit or loss. If there is no quotation in an active market and fair value cannot be measured reliably, or derivative settlement must be done by equity instruments delivery, financial assets impairment loss shall not be reversed. 4) Recognition and measurement for transfer of financial assets The notes to the accounts form an integral part of the financial statements

229 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Financial assets should be derecognized, if one of the following conditions is filled: Termination of contractual rights to receive cash flows from the financial asset; If the Company has transferred nearly all of the risks and rewards relating to the ownership of the financial assets to the transferee Company neither transferred nor retained nearly all of the risks and rewards relating to the ownership of the financial assets to the transferee, but loss control of the financial asset. Neither transferred nor retained ownership of the financial assets of almost all the risks and rewards, and did not loss control of the financial asset. The extent of its continuing involvement in the transferred should be recognized on financial assets/ liabilities accordingly. Continuing involvement in the transferred financial assets refers to the risk of the company as changes in the value of financial assets. If the transfer of entire financial assets satisfy the criteria for derecognition, differences between the amounts of the following two items shall be recognized in profit or loss for the current period: The carrying amount of the transferred financial asset; The aggregate consideration received from the transfer plus the cumulative amounts of the changes in the fair values originally recognized in the owners equity (in other comprehensive income). If the partial transfer of financial assets satisfy the criteria for derecognition, the carrying amounts of the entire financial assets transferred shall be split into the derecognized and recognized parts according to their respective fair values and differences between the amounts of the following two items are charged to profit or loss for the current period: The carrying amounts of the derecognized parts; The aggregate consideration for the derecognized parts plus the portion of the accumulative amounts of the changes in the fair values of the derecognized parts which are originally recognized in the owners equity (in other comprehensive income). The company sale financial assets with recourse, financial assets are transferred by endorsement. It is necessary to determine whether almost all of the risks and rewards of ownership of the financial assets has been transferred. If the Company has transferred nearly all of the risks and rewards relating to the ownership of the financial assets to the transferee, they shall be derecognized. If the Company retains nearly all of the risks and rewards relating to the ownership of the financial assets, they shall not be derecognized. If the Company neither transferred nor retained nearly all of the risks and rewards relating to the ownership of the financial assets to the transfereeit is necessary to judge whether to give up control of the financial asset. Accounting treatment should be used in accordance with the principles described in the preceding paragraphs 5) Classification and measurement of financial liabilities The notes to the accounts form an integral part of the financial statements

230 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Financial liabilities shall be initial recognized as financial liabilities at fair value through profit or loss and other financial liabilities. Financial liabilities should be initially recognized at fair value. For financial liabilities at fair value through profit or loss, transaction costs should be directly recognized in profit or loss. For other financial liabilities, the transaction costs should be included in the amount recognized initially. Financial liabilities at fair value through profit or loss The conditions of initial recognition d as financial liabilities at fair value through profit or loss is consistent with financial assets ones. Financial liabilities at fair value through profit or loss are subsequently measured at fair value. Gains or losses arising from changes in fair value and related dividends and interest expense should be recognized profit or loss for the current period. Other financial liabilities There is no quotation in an active market and fair value cannot be measured reliably, and derivative settlement must be done by equity instruments delivery. Other financial liabilities using the effective interest method should be subsequently measured at amortized cost. Gains or losses of derecognition should be recognized in profit or loss for the current period. Financial guarantee contracts and loan commitments Both financial guarantee contracts not classed as financial liabilities at fair value through profit or loss and loans commitment with below-market rate not classed as financial liabilities at fair value through profit or loss should be recognized at fair value initially. The higher of the amount of initial recognition in accordance with "Accounting Standards for Enterprises No Contingencies" and the balance of the amount initially recognized deduct accumulated amortization in accordance with "Enterprise Accounting Standards No. 14 income should be use in the subsequent measurement. 6) Derecognition of financial liabilities Financial liabilities shall be entirely or partially derecognized if the present obligations derived from them are entirely or partially discharged. Where the Company enters into an agreement with a creditor so as to substitute the current financial liabilities with new ones, and the contract clauses of which are substantially different from those of the current ones, it shall recognize the new financial liabilities in place of the current ones. Upon entire or partial derecognition of financial liabilities, differences between the carrying amounts of the derecognized financial liabilities and the consideration paid (including non-monetary assets surrendered or new financial liabilities assumed) are charged to profit or loss for the current period. 7) Derivatives and embedded derivatives Derivative is initially measured at fair value since the contract date and measured at fair value subsequently. For hedging instruments and highly effective hedging derivatives, gains or losses arising from changes in fair value should be determined during the formation of profit or loss in accordance with the nature of the hedging and accounting treatment requirements. Changes in the fair value of other derivative instruments should be recognized in profit or loss. Embedded derivatives should be separated from the combined tool as an individual instrument, if hybrid instruments including embedded derivatives are: Not designated as financial assets or financial liabilities at fair value through profit or loss; Not closely relationship between the embedded derivative and the underlying contract in the economic characteristics and risks; In the same conditions with the embedded derivative; Individual instrument meets the definition of derivative. If embedded derivatives cannot be measured at fair value initially and subsequently, the hybrid instruments should be wholly recognized as a financial asset or financial liability at fair value through profit or loss. 8) Offsetting financial assets and financial liabilities The company has a legal right to offset the recognized financial assets and financial liabilities, which is currently the enforceable. While the company plans to net settlement or to realize the asset and settle the financial liabilities, the offset balance should be presented in the balance sheet. In addition, financial assets and financial liabilities should be separately in the balance sheet instead offset one. 9) Equity instruments The notes to the accounts form an integral part of the financial statements

231 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Equity instrument is a contract that proves the remaining ownership of assets after deducting all the liabilities of the Company. In the business combination, transaction costs of issuing equity instruments of the issuer could offset the premium income of equity. If the premium is insufficient to offset, then to offset the retained earnings. For the other equity instruments, the consideration received at issue should less transaction costs to increase shareholders' equity. The various distribution to the instruments holder of the company's equity (not including stock dividends) will reduce shareholders' equity. The Company does not recognize changes in the fair value of equity instruments. NOTE 8 Accounts receivable Receivables include accounts receivable and other receivables. Criteria for recognition of bad debts (1)The debtor has been revoked, bankruptcy or death, still unable to recover after bankruptcy liquidation of property or inheritance (2)Debtor fails to fulfil repayment obligations, there is any obvious evidence described below proving that such accounts receivable has been impaired, an impairment provision should be made. If there is exact evidence that accounts receivable has been impaired, after approval by the prescribed procedures, an impairment provision should be made. The allowance method is adopted to account for bad debts. Individually significant amount of accounts receivable and other receivables should be tested separately. If there is obvious evidence that impairment has occurred, and the impairment loss recognized in profit or loss. Insignificant accounts receivable and other receivables, as well as significant accounts tested separately without impairment should be divided into group according to the credit risk and test for impairment as a whole. (3)Criteria for recognition of bad debts The Company carries out an inspection on the carrying amount of accounts receivable on the balance sheet day,; where there is any obvious evidence described below proving that such accounts receivable has been impaired, an impairment provision should be made. A serious financial difficulty occurs to the debtor, The debtor breaches any of the contractual stipulations, for example, fails to pay or delays payments etc., The debtor will probably become bankrupt or carry out other financial reorganizations, Other obvious evidences showing the impairment of the accounts receivable. (4)Provision of bad debt Recognition and measurement for accounts receivable impairment provision of significant individual amount Individually accounts receivable more than 5 million yuan accounts and other receivables more than 1 million yuan should be recognized as significant. Individually significant amount of accounts receivable should be tested separately. If there is no impairment, individually significant amount of accounts receivable should be collected into group test for impairment as a whole according to the credit risk. Recognition and measurement for accounts receivable impairment provision of group test as a whole according to the credit risk. ARecognition basis of the group according to the credit risk Insignificant accounts receivable and other receivables, as well as significant accounts tested separately without impairment should be divided into group according to the credit risk and test for impairment as a whole. Credit risk reflects the debtors' ability to pay due according to the contractual terms which is relevant to expected cash flows of the assets. The basis for determining the different group Items Aging Group Basis for determining group According to the aging of receivables The notes to the accounts form an integral part of the financial statements

232 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB B. Recognition of group impairment provision test according to the credit risk. When to implement group impairment provision test, bad debts estimation should be based on the group structure and similar credit risk characteristics which debtor has ability to pay debts under terms of the contract, and experience of historical loss,and current economic conditions,and the loss of existing loss of account receivable. The method used for provision of the different group Items Aging Group Basis for determining group According to the aging of receivables a. The aging analysis method used for provision of the different group r Ageing AR Percentage of provision% OAR Percentage of provision% Within 6 month yearincluding 6 month 0 0 Within 1 yearincluding 1 year years years years years Over 5 years The notes to the accounts form an integral part of the financial statements

233 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Individually insignificant but individual provision for bad debts Individually insignificant amount of receivable and other receivables with significant risk, which not reflect the actual impairment by using aging analysis, should be tested separately. If present value of future cash flows is less than the book value, the difference should be recognized impairment loss.there is no provision for bad debt of employee petty cash. (5)Reversal of bad debts If there is obvious evidence that a receivable has been recovered and the related to event since the impairment recognized, previously recognized impairment loss should be reversed. The carrying amount will not exceed the amortized cost of receivable at the reversal date as if no impairment loss was made. For bills of other receivables, prepayments, if present value of future cash flows is less than the book value, an impairment loss should be recognized Note 9 Inventory 1Classification of inventory The Company s inventories comprise raw materials; work in process, finished goods, goods for resale, etc. 2Measurement of inventories The inventories are initially measured at cost. The cost of inventory consists of purchase costs, processing costs and other costs. In determining the cost of inventories transferred out or issued, the specific projects acquired or manufactured inventories with no substitute should be determined by specific identification method. The others situation the actual costs are determined by the moving weighted average method. Revolving materials are the materials repeatedly used, which transfer its value gradually but maintain the original form not recognized as fixed assets, including low-value consumables and packing materials, etc., The low-value and short-lived consumables and packaging materials are amortized by applying immediate write-off method when using these items. (3)Recognition and measurement for inventory net realizable value and impairment provision Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated expenses and related taxes necessary to make the sale. Net realizable value of inventories should be measured on the basis of the obtained conclusive evidence, taking into account the purpose of holding inventories and the impact of event after the balance sheet date. On balance sheet date, the inventories are measured at lower of cost and net realisable value. If the cost of inventories is higher than the net realizable value, then a provision is made and recorded in the current period income statement. For large quantity and low individual cost inventories, inventories impairment loss provision is measured and recognised by category. For inventories in the same production and sale region having the same or similar end use or purpose, which are difficult to separate measure, should be combined to make provision. After provision for inventory impairment being made, if the factors resulting in impairment no longer exist and the net realizable value of inventories is higher than its book value, the related provision should be reversed in the current period income statement. (4)Stock counting is performed using the perpetual inventory system. (5)Amortization of low-value consumables and packing materials The low-value and short-lived consumables and packaging materials should be amortized by applying immediate write-off method when using these items. The notes to the accounts form an integral part of the financial statements

234 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Note 10 1 Measurement of long-term equity investments (1)Recognition of investment cost For combinations of entities under common control: the initial costs of investments shall be recognized at the proportionate share of the carrying amounts of the owners equity of the acquiree. For combinations of entities not under common control: the initial costs of investments shall be stated at the combination costs determined at the acquisition date. The costs of combinations shall be the fair values of the assets surrendered, the liabilities incurred or assumed, and the equity securities issued by the acquirer. Commissions and other relevant administrative expenditures incurred from business combinations, including audit fees, legal service charges, valuation and consultancy costs, etc., shall be recognized in profit or loss for the current period. Transaction costs incurred from issuance of equity securities or debt securities as part of consideration for business combinations shall be included in the initial costs of relevant securities. Long-term equity investments acquired by other methods are initially measured at cost depend on the different way to achieve long term investments. The initial costs of a long-term equity investments obtained by payments of cash shall be the purchase prices actually paid. The initial costs of long-term equity investments in equity securities shall be stated at their fair values. The initial costs of long-term equity investments made by investors shall be stated at the values stipulated in the investment contracts or agreements. The initial costs of long-term equity investments shall be the fair value of the investment itself. The initial investment costs shall be measured fair value or the carrying amounts of the assets traded out. Taxes and other necessary expenses related to long-term equity investment are also included in the investment cost. (2)Subsequent measurement and recognition of gains and losses For long-term equity investments in which the investors have no joint control or significant influence over the investees, and for which there are no quoted prices in the active market, nor can their fair value be reliably measured, they are measured by the cost method. Long-term equity investments in which the investors have joint control or significant influence over the investees are measured under the equity method. For long-term equity investments in which the investors have no joint control or significant influence over the investees, and for which their fair value be reliably measured, they should be classed as Financial assets- available for sale or financial assets -fair value through profit or loss. In addition, for long-term equity investments in which the investors have control over the investees, they are measured by the cost method. Long-term equity investments measured by the cost method. Under the cost method, Long-term equity investments should be measured at the initial investment cost.the Company s share of cash dividends or profits declared by the investees shall be recognized as the investment income of the current period, except cash dividends or profits declared but not yet distributed which are included in the payments or consideration of the investments. long-term equity investments measured by the equity method. If the initial costs of long-term equity investments are higher than the investors share of the fair values of identifiable net assets of the investees, no adjustment is necessary. Otherwise, differences between the initial costs of long-term equity investments and the investors share of the fair values of identifiable net assets of the investees shall be recognized in profit or loss for the current period, and makes adjustments to carrying amounts of the long-term equity investments accordingly Under the equity method, the investment income for the current period is the share of the investee's net profits or losses of the current year. The Company s share of net profits or losses of the investees to recognize should base on the fair value of identifiable assets investee. The Company shall make corresponding adjustments to the investees financial statements to recognize the profit. For the unrealized profits from internal transaction with associates or joint ventures, unrealized gains in accordance with the shareholding of this company are eliminated. The Company s share of net profits or losses of the investees can be reasonably determined. For the unrealized losses from internal transaction with associates or joint ventures, in accordance with "Accounting Standards for Enterprises No. 8 - Impairment of Assets" unrealized losses should be transferred to Impairment of Assets not to be eliminated. For the other comprehensive income, book value of long-term equity investments should be adjusted recognized in other comprehensive income and included in capital surplus. When the Company has share of losses of the investee, the loss should be deducted from book values or other substantially form net equity investments to zero. In addition, after the above treatment, if the Company assumes other obligations according to investment contracts or agreements, they should be recognized as expected liabilities and charged to losses on investments of the current period. If the investees are profitable in subsequent accounting periods, the Company shall recognize the investment income after deducting its share of unrecognized losses. The notes to the accounts form an integral part of the financial statements

235 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB For the company has already held long-term equity investments in associates and joint ventures prior to the implementation of the new accounting standards. If there is any debit balance associated with the equity investment, the remaining amount should be amortized using straight-line methods and recognized in profit or loss. Acquisition of minority interests In preparing the consolidated financial statements, difference between new long-term equity investment of acquisition a minority stake and ownership of the net assets calculated in accordance with the new share percentage from the acquisition date (or combination date) should adjustment capital reserve, if capital reserve is insufficient, any excess is to adjusted retained earnings. Disposal of long-term equity investments In the consolidated financial statements, the parent company of partial disposal of long-term equity investments of subsidiaries without loss of control, the difference amount between proceeds of disposal of long-term equity investment and net assets of subsidiaries attributable to the parent should be recognized in shareholders' equity. For disposal of a subsidiary of the parent company's long-term equity investments lead to loss of control of a subsidiary, see appendix four, four, (2) and accounting principle of "approach of the consolidated financial statements". Disposal of long-term equity investments under other circumstances, the difference between the book value and the purchase price should be recognized in the profit or loss. For long-term equity investments using the equity method, the amount of other comprehensive income original recognized in the shareholders' equity should be transferred to the income statement according to the corresponding proportion.for the remaining stake, carrying amount should recognized as a long-term equity investment or other related financial assets. Subsequently measure should be according to the previous accounting policy of long-term equity investments or financial assets. When remaining equity measured from cost method to the equity method, the retroactive adjustment should be made in accordance with relevant regulations. 3Definition of joint control or significant influence over the investees The term control refers to the power to govern the financial and operating policies so as to obtain benefits from its operating activities. The term joint control refers to the contractually agreed sharing of control over an economic activity, which exists only when the investing parties involved in the economic activity reach a consensus on sharing control over critical financial and operating policies concerning that activity. The term significant influence means the power to participate in decision-making on the financial and operating policies of an investee, but with no control or joint control over the formulation of these policies. To determine whether significant influence to the investee has, the Company should also consider the voting rights of convertible bonds and current executable warrants held by the Company and other parties. 4Impairment test and provision methods for impairment losses The company should check any indication of impairment of the asset at each balance sheet date. If there is any sign of possible assets impairment exists, the recoverable amount is estimated. For long-term equity investments in which the investors have no significant influence or quoted prices in active market, and whose fair values cannot be reliably measured, the impairment losses shall be measured at the differences between their carrying amounts and present values of future cash flows discounted at the prevailing market rate of return on investment of similar financial assets. If the recoverable amounts of long-term equity investments are lower than their carrying amounts, the differences are recognized as impairment losses. Impairment losses on long-term equity investments shall not be reversed once recognized. The notes to the accounts form an integral part of the financial statements

236 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Note 11 Investment Properties Investment properties are properties to earn rentals or for capital appreciation or both. Examples include land leased out under operating leases, land held for long-term capital appreciation, buildings leased out under operating leases. Furthermore, for the vacant buildings held by the company to lease out, if there is a written resolution of board of directors or similar body to state that the intention of holding properties is to rent under operating leases and the intention will not changes in the short term, should be recognized also as an investment real estate presentation. Investment property is initially measured at cost. If the economic benefits related with the fixed asset are probably to flow to the enterprise and cost of the fixed asset can be measured reliably, subsequent expenditure related should be measure as the cost of investment property. The others subsequent expenditure should be recognized in the profit or loss. For investment properties subsequent measurement under the cost model, the Company adopts the same depreciation policy as that of fixed assets, and adopts the same amortization policy for land use rights as that of intangibles. Impairment test method and Impairment provision methods are in Note IV, 17 "Impairment of non-current and non-financial assets." When convert owner-occupied property or inventories to investment property or convert back, the entry value will be the carrying amounts before the conversion. An investment property converts to owner-occupied property; it should be recognized as fixed assets or intangible assets since the change of date. An owner-occupied property converts to investment property for earn rentals or capital appreciation; it should be recognized as fixed assets or intangible assets investment property since the conversion date. For investment properties measured under the cost model, the entry value should be the carrying amounts before conversion. For investment properties measured under the fair value model, the entry value should be the fair value of the conversion date. When the investment property is disposed or permanently withdrawn from being used and no future economic benefits expected from its disposal, investment property should be derecognized. For sale, transfer, disposal or damage of the investment property, income deducting the carrying amounts and related taxes should be recognized in profit or loss for the current period. Note 12 Fixed assets (1)Recognition Fixed assets are tangible assets that have useful life more than one year, and are held for use in the production or supply of goods or services. (2)Depreciation The initial measurement of a fixed asset shall be at cost method considering the disposal cost. Since bringing the asset to the expected conditions for use, depreciation is provided monthly using the straight-line method. The estimated residual value rate, useful life and annual depreciation rate of each category of fixed assets are as follows: The notes to the accounts form an integral part of the financial statements

237 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Category of fixed assets Residual value rate (%) Useful life (year) Depreciation rate (%) Machinery equipment Transportation Equipment and Electronic equipment Residual value is the amount obtained deducting the expected costs of disposal, as if fixed assets could use full estimated useful life and be in the expected condition at the end of life. (3) Impairment test method and provision methods of fixed assets Impairment test method and provision methods of fixed assets refer to Note 17 "Impairment of non-current non-financial assets." (4) Recognition and measurement of finance lease Finance lease is the lease that transfer all the substantially risks and rewards of ownership of an asset leases, which ownership may eventually transferor not. The depreciation policy for assets held under finance leases should be consistent with that for owned assets. If there is reasonable certainty that the lessee will obtain ownership at the end of the lease, the asset should be depreciated over the useful life of the leased asset. If there is no reasonable certainty that the lessee will obtain ownership at the end of the lease, the asset should be depreciated over the shorter of the lease term or the useful life of the leased asset. (5)Additional Notes Subsequent expenditures related to fixed assets should be recognized when all the following conditions are met: The economic benefits related to intangible assets are probably to flow to the Company, The cost of assets can be measured reliably, The Company will derecognize the carrying amount of substitute component part.the other subsequent expenditure shall be recognized as an expense in the current period when actual incurred. The Company will review the useful life, estimated residual value and deprecation method of the fixed assets at the year end. If there is any difference is accounted for as a change in accounting estimate. Assets shall be derecognized if one of the following conditions is to fill: Disposal of fixed assets, There is no economic benefit generate through use or disposal of fixed assets, Income of sale, transfer, disposal or damage of shall be recognized in its income statement deducting the carrying amount and related taxes. NOTE 13 Construction in progress Construction in progress should be recorded at full actual cost including all expenses incurred for construction, capitalized borrowing costs and other related expenses. When construction in progress is ready for use, it should be transferred into assets at actual cost. Impairment test method and impairment provision, refer to Note 17 "Impairment of non-current and non-financial assets." Note 14 Borrowing costs Borrowing costs include interest on bank overdrafts and borrowings, amortization of discounts or premiums, finance charges and exchange differences on foreign currency borrowings. Borrowing costs of purchase, construction or manufacturing of assets are eligible for capitalization. Capitalization should commence when: Expenditures are being incurred, which comprise disbursements incurred in the form of payments of cash, transfer of non-monetary assets or assumption of interest-bearing debts; Borrowing costs are being incurred, and; Purchase, construction or manufacturing activities that are necessary to prepare the assets for their intended use or sale are in progress. The notes to the accounts form an integral part of the financial statements

238 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 The notes to the accounts form an integral part of the financial statements 23 Monetary Unit: RMB Capitalization should cease when substantially all of the purchase, construction or manufacturing activities necessary to prepare the assets for their intended use or sale are complete. Other borrowing costs are recognized as expenses are charged to profit or loss in the current period. Where funds are borrowed specifically for purchase, construction or manufacturing of assets eligible for capitalization, costs eligible for capitalization are the actual costs incurred less any income earned on the temporary investment of such borrowings. Where funds allocated for purchase, construction or manufacturing of assets eligible for capitalization are part of a general pool, the eligible amounts are determined by applying a capitalization rate to the weighted average excess of accumulated capital expenditures over those on specific borrowings. The capitalization rate will be the weighted average of the borrowing costs applicable to the general pool. Where funds are borrowed specifically, exchange differences on foreign currency borrowings shall be capitalized. Where funds allocated general pool, currency exchange differences are recognized in profit or loss. Assets are always fixed assets, investment property, inventories and other assets, which are eligible for capitalization taking a long time to prepare the assets for their intended use or sale including purchase, construction or manufacturing activities necessary. Capitalization should cease when there is abnormal suspension in the purchase, construction or manufacturing of assets eligible for capitalization and period of suspension is more than three month. Capitalization should commence as the restart of purchase, construction or manufacturing activities. Note 15 Intangible assets (1)Intangible asset Intangible asset is the identifiable nonmonetary assets without physical substance possessed or controlled by the Company. Intangible assets are recognized when all the following conditions are met: Meet the intangible asset definition, The economic benefits related to intangible assets are probably to flow to the Company, The cost of intangible assets can be measured reliably, The other expenditures shall be recorded in the profit or loss when actual incurred. Land use rights are usually recognized as an intangible asset. For self-constructed factories and other buildings, the relevant expenditure of land use right and the buildings were recognized as intangible assets and fixed assets accordingly. The related payments purchasing houses and buildings should be allocated between the land use rights and buildings. If it is impossible to allocate, it shall be recognized as fixed assets. There is amortization for Intangible assets with finite use life since they are available for use. The amortization amount of intangible assets equals to its cost minus the expected residual value, and a future deduction of the accumulative amount of impairment provision for an impaired intangible asset. The Company applies the straight-line method for the amortization. There is no amortization for Intangible assets with indefinite use life but an impairment test at the end of the period. The Company will review useful life and amortization method of intangible assets at each period end. Any change will be treated as changes in accounting estimates. In addition, the useful life of intangible assets with indefinite useful life shall be reviewed.if there is evidence that the economic benefits related to intangible assets are probably to flow to the Company, the Company will estimated useful life of intangible assets and apply amortization policy. (2)Research and development projects Costs incurred by the Company on internal research and development projects can be classified into research costs and development costs. Expenditures incurred during the research phase of internal research and development projects shall be written off to profit or loss for the current period. Expenditures arising from development phase on internal research and development projects must be capitalized if the Company can satisfy all of the following criteria: There is technical feasibility of completing the intangible assets (so that they will be available for use or sale); There is intention to complete and use or sell the assets; The method that the intangible assets generate economic benefits, including existence of a market for products produced by the intangible assets or for the intangible assets themselves, shall be proved. Or, if to be used internally, the usefulness of the assets shall be proved; Adequate technical, financial, and other resources are available to complete the assets, and the Company has the ability to use or sell the assets; and 236

239 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB The costs of the assets can be measured reliably. Expenditures incurred, which cannot distinguish between the research phase of internal research and development projects shall be written off to profit or loss for the current period. (3)Impairment test method and impairment provision methods of intangible assets Impairment test method and impairment provision methods of intangible assets refer to Note 17 "Impairment of non-current and non-financial assets." When the sale of intangible assets, the difference between the price acquired and the carrying amount should be recognized through profit or loss. When intangible assets which not expected to bring economic interests too company, then the carrying amount of intangible assets shall be written off. Note 16 Long-term prepaid expenses The long-term prepaid expenses of the Company are expenses for current and future periods that have been disbursed but will be amortised over one year (not include 1 year). Except the pre-operation expense charged in lump sum in profit or loss in the first month of operation, other long-term prepayments are recorded as actual costs. If there is no benefit arising from long-term prepaid expenses for subsequent accounting period, the residual amount which has not been amortized should fully transferred to the income statement. Note 17 Impairment of non-financial non-current assets For the non-current and non-financial assets should be measured as following: Be measured at cost method, Fixed assets, construction in progress, intangible assets with finite useful life, Investment properties and subsidiaries, joint ventures, associates and other long-term equity investments, The Company will judge whether there is evidence to impairment at the balance sheet date. If there is an indication of impairment exists, impairment testing shall be made to the estimated recoverable amount. Goodwill, intangible assets with indefinite useful life and intangible assets not ready for use, regardless of whether there is any indication or not, should be tested for impairment annually. After impairment test, if net realisable valued of the asset is less than its carrying amount, the difference should be recognized impairment loss. Net realisable valued is the higher of fair value deducting the disposal cost and present value of expected cash flow. In the fair trade, fair value is the amounts for which they are applied between knowledgeable, willing parties in an arm s length transaction to exchange according to the sales agreements. Where there are no sales agreements, the fair values are measured with the buyer quoted prices in the active market. Where there is no active market, the fair values are measured by estimation with reference to information available. Disposal costs include legal costs related to the disposal activities, related taxes, handling charges and direct costs attributable for bringing the assets to sale condition. Present value of expected future cash flows is determined by using appropriate discount rate to discount the cash flow generating from continuous use and final disposal of the asset. Assets impairment should be tested individually. If it is impossible to estimate recoverable amount individually, the asset group should be used to determine the asset's group recoverable amount, which asset group is the smallest group of assets capable of generating independent cash inflows. Goodwill should present separately in the financial statements, In the impairment test, the carrying value of goodwill should be allocated to the asset group or combination of asset groups expected to benefit from the synergies of the business combination. If the recoverable amount of asset or asset group is less than its carrying value, impairment loss should be recognized accordingly. The amount of impairment loss is first to deduct carrying amount of goodwill allocated to the asset group or combination of asset groups, then offset the carrying value according to the book value proportion of the asset group or combination of asset groups. Once impairment loss is recognized, it shall not be reversed in subsequent periods even if the value is restored. The notes to the accounts form an integral part of the financial statements

240 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Note 18 Assets transfer with repurchase conditions (1)Buying back the sale of financial assets According to the agreement commitments buying back the sale of financial assets shall no longer be recognised in the balance sheet at the specified date in the future. Acquisition cost including interest should be recognized in the balance sheet in the buying back the sale of financial assets account. The difference between the buying back price and the selling price shall be recognized as effective interest in the finance cost. (2)Financial assets sold for repurchase According to the agreement commitments financial assets sold for repurchase shall no longer be derecognised in the balance sheet at the specified date in the future. Proceeding from sale including interest should be recognized in the balance sheet in the financial assets sold for repurchase account. The difference between the repurchase price and the selling price shall be recognized as effective interest in the finance cost. Note 19 Estimated Liabilities The Company should recognize an obligation in relation to contingencies as an estimated liability when all the following conditions are satisfied: (1)That obligation is a present obligation of the Company; (2)It is probable that an outflow of economic benefits from the Company will be required to settle the obligation; (3)A reliable estimate can be made of the amount of the obligation. To determine the best estimates, the Company shall take into full account the risks, uncertainties, time value of money, and other factors relating to the contingencies at the balance sheet date. The Company s estimated liabilities shall be measured at the best estimates of the necessary expenditures for the fulfilment of the present obligations. Where some or all of the expenditure required settling a provision is expected to be reimbursed by another party, the reimbursement shall be recognized when and only when, it is virtually certain that reimbursement will be received if the Company settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognized for the reimbursement shall not exceed the amount of the provision. (1)Loss contract Loss contract obligations are arising from where expected economic benefits are less than unavoidable cost. When executory contracts become onerous one, obligations could meet criteria above, the excess amount between expected losses and recognized provision of underlying asset in the contract shall be recognized as estimated liabilities. (2)Restructuring obligation For detailed, formal restructuring plan, which has already made public announcement and met estimated liabilities recognition criteria, estimated liabilities of restructuring-related expenses should be recognized directly. For the sale of part of the business, only when the company made the commitment to sell part of the business and signed a binding sale agreement, estimated liabilities of restructuring should be recognized. The notes to the accounts form an integral part of the financial statements

241 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Note 20 Share-based payment 1Types of share-based payment Share-based payments is to grants equity instruments or undertake liabilities transactions on the basis of equity instruments for services of employees or other parties. Share-based payments include equity-settled payments and cash-settled payments. Equity-settled share-based payments Equity-settled share-based payments to employees are to exchange for services provided by employee. Equity-settled share-based payments should be measured at fair value at the grant date. The fair value of share-based payments can be exercised after the vest period or specified performance achieved. During the vest period, the number of equity instruments to vest should base on the best estimate. Straight-line method should be used to calculate costs or expenses. If the option is immediately to exercise at the grant date, it should be recognized in the relevant costs or expenses and increase capital reserve For equity-settled share-based payment in exchange for services provided by other parties. If the fair value of other party services can be reliably measured, equity-settled share-based payment should be measured at the fair value of the date to obtain the service of other parties. If the fair value of the services cannot be reliably, but the fair value of the equity instruments can be measured reliably, equity-settled share-based payment should be recognized relevant costs or expenses and increase in shareholders' equity, measured at the fair value of the date to obtain the service. When the fair value of the equity instruments granted cannot be reliably measured, change of intrinsic value of the equity instruments should be recognized in profit or loss at the date to obtain the service, and subsequent balance sheet date and settlement date. The notes to the accounts form an integral part of the financial statements

242 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Cash-settled share-based payment Cash-settled share-based payment should be measured at fair value of the liabilities on the basis of company's commitment to the shares or other equity instruments. If exercised immediately after the grant, cash-settled share-based payment should be recognized as costs or expenses and increase in liabilities at the grate date. The fair value of share-based payments can be exercised after the vest period or specified performance achieved. On the each balance sheet date during the vesting period, the company should recognize the service received in the cost or expense and increase in liabilities. The amount of liabilities undertake by the company should be measured at fair value based on the best estimate of the vesting conditions. Assets and liabilities should be re-measured at fair value on each balance sheet date before the settlement date. Any changes should be recognized in profit or loss in the current period. (2)Determination the fair value of equity instruments The Company use the binomial option pricing model to price the granted share options, refer to Note 10. (3)The best estimate to confirm to exercise the option of equity instruments The Company make the best estimates based on changes in the number of workers and amendment of number of equity instruments expected to vest on each balance sheet date during the vesting period. (4)Accounting treatment of Implement, modification, termination of the share-based payment When the Company is plan to modify its share-based payment plans, if the modification increases the fair value of the equity instruments granted, increase of services should be recognized in accordance with the increase in the fair value of equity instruments. Increase in the fair value of equity instruments is the difference of fair value of before and after modification. If the modification reduces the fair value of the shares of the total payment or being unfavorable to employees, the Company shall continue to make accounting treatment, as if the change had not occurred, unless the Company cancels some or all of the granted equity. In the vesting period, if the equity instruments granted is cancelled, the Company should accelerate the vesting process. The amount of the remaining vesting period should be recognized immediately in profit or loss, while recognized in the capital reserve. Employees or other parties who can choose non-exercise condition fail to meet the conditions in the vesting period; the Company should treat as termination of equity instruments granted. (5)Accounting treatment of the share-based payment transactions between Company and the shareholders of the Company or the actual controller When it comes to share-based payment transactions between Company and the shareholders of the Company or the actual controller, for settlement enterprise and service accept enterprise, if one company is included in the company and other is excluded of the Company, Company's consolidated financial statements are accounted in accordance with the following: If the settlement companies settled in its own equity instruments share-based payment transactions should be recognized as equity-settled payment. In addition, it should be recognized as a cash-settled payment. If the settlement companies are investors of the receiving services companies, fair value of equity instruments or liabilities to undertake should be measured at the grant date as the long-term equity investment to the service received companies, and capital reserve (other capital reserve) or liabilities should be recognized simultaneously. If the service received companies do not have the obligation to settlement or grant its own equity instruments to the enterprise employees, the share-based payment transactions should be recognized as equity-settled payment. If the service received companies do have the obligation to settlement or grant other equity instruments to the enterprise employees, the share-based payment transactions should be recognized as cash-settled payment. When there are share-based payment transactions within the company, service received companies and settlement companies are not the same enterprise, transaction payment should be recognized and measured separately in financial statements of service received companies and settlement company, considering the principles mentioned above. Note 21 Revenues (1)Revenue recognition for sale of goods Revenue from the sale of goods shall be recognized when all the following conditions have been satisfied: The significant risks and rewards of ownership of the goods have been transferred to the buyer by the Company; The Company retains neither continuous managerial involvement to the degree usually associated with the ownership nor effective control over the sold goods; The amount of revenue can be measured reliably; It is probable that the economic benefits associated with the transaction will flow to the Company; The notes to the accounts form an integral part of the financial statements

243 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB The costs incurred or to be incurred in respect of the transaction can be measured reliably. (2)Revenue recognition for rendering of services When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction shall be recognized by reference to the stage of completion of the transaction at the balance sheet date. The Company measures the completion percentage of service rendered by reference to the proportion that service performed to the balance sheet date compared with the total services to be performed. Rendering of services can be estimated reliably when all the following conditions have been satisfied: The amount of revenue can be measured reliably; It is probable that the economic benefits associated with the transaction will flow to the Company; and The costs incurred or to be incurred in respect of the transaction can be measured reliably. If the Company cannot reliable estimate the service performed the date of the balance sheet, the Company applies the following treatment: If the service expenses incurred are recoverable, the revenue from rendering of services shall be recognised to the extent of the expenses incurred and the cost of sale transferred at the same amount; or If the service expenses incurred are not recoverable, the expenses incurred shall be recognized in the income statement and no revenue from rendering of services shall be recognised. The Company enter into contract or agreement with other companies, including the sale of goods and rendering of services. If sale of goods and rendering of services can be distinguished and measured separately, it shall be treated separately. If sale of goods and the rendering of services cannot be distinguished from each other, or cannot be measured separately, it shall be treated as sale of goods. (3) Revenues arising from the use by others of the Company s assets Interest and royalties should be recognized when both the following conditions have been satisfied: the economic benefits associated with the transactions will flow to the Company, and the amounts of the revenues can be measured reliably. Interest and royalty revenues should be accounted for as follows: Interest should be measured based on the length of time for which the Company's cash is used by others and the applicable interest rate; and Royalties should be measured according to the period and method of charging as stipulated in the relevant agreements or contracts. NOTE 22 Government grants Government grants refer to the monetary or non-monetary assets obtained by the Company from the government for free, not including government invest as capital owner. Government grants are classified into asset-related government grants and income-related government grants. Government grants shall be recognized when all the following conditions have been satisfied: (1) The company can meet the conditions attached to government grants; (2) The company can receive government grants. Government grants relating to purchase or construction of long-term assets, such as fixed assets and intangible assets, etc., shall be recognized as asset-related government grants, others is recognized as income-related government grants. If the file not states the objects of government grants clearly, Government grants shall be divided into the income-related government grants and asset-related government grants as following: It is clearly government grants for specific project in the documents. Ratio should be calculated according to the relative proportion of expenditure between classification income and asset in the budget the ratio should be reviewed at each balance sheet date changing when it is necessary. It is only common statement for use of government grants in the documents, no specify particular project. Government grant should be recognized to the related revenue. Government grants is monetary assets including the amount received or receivable. Government grants for non-monetary assets should be measured at fair value. If fair value cannot be measured reliable, it should be measured at the nominal amount. Nominal amount shall be recognized to profit or loss for the current period Government grants should usually be recognized and measured when actually received. However, if there is conclusive evidence that the company can meet the conditions of the financial support policies and regulations. Government grants should usually be recognized and measured on the accrual basis through account receivables. If government subsidies shall be measured by receivable if the Company can satisfy all of the following criteria: The notes to the accounts form an integral part of the financial statements

244 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB The amounts of receivable have been confirmed by document of government authority departments. It is reasonably to estimate in accordance with the relevant release of official fiscal authority and calculate without significant uncertainty. The amounts of receivable are based on the "Government Information Disclosure Regulations" of local fiscal authority, which officially released. The regulations should be inclusive (Any company compliance with the conditions of any business can apply), rather than for specify particular company. There is clear commitment to the disbursement period of grants, which fund is guaranteed by the particular fiscal budget. The company could receive the grant within the prescribed period under reasonable assurance. The company should meet the other relevant conditions (if any). Government grants relating to assets shall be recognized as deferred income and amortized over the useful lives of assets and recognized in the profit or loss for the current period. Government grants relating to income to compensate future expenses or losses shall be recognized as deferred income and shall be charged to profit or loss during the period when the relevant expenses are incurred. The government grants relating to income to compensate incurred expenses or losses shall be directly recognized as profit or loss in the current period. When the government grants recognized the need to return back, the Company shall: If there is the deferred income balance, the Company should offset against the carrying amount of the related deferred income balance. Any excess amount should be recognized in profit or loss. If there is no deferred income balance, amount should be recognized in profit or loss directly. The notes to the accounts form an integral part of the financial statements

245 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Note 23 Deferred tax assets/liabilities (1)Current tax expenses Current tax liabilities (or assets) for the current or prior accounting periods should be measured at the amounts expected to be paid to (recovered from) taxation authorities under the applicable tax laws at the balance sheet date. Current tax expenses are calculated on the basis of taxable profit, which is calculated after appropriate adjustments to accounting profit before tax by the applicable tax laws. (2)Deferred tax assets and deferred tax liabilities The Company uses the balance-sheet approach to recognize deferred tax assets/liabilities. The difference between the carrying value of certain assets and liabilities and their tax bases, as well as the difference between the carrying value of certain assets and liabilities unrecognized in the balanced sheet and the tax base of assets and liabilities recognized in accordance with the tax law, are the all temporary differences. The Company recognizes a deferred liability for all taxable temporary differences, except to the extent that the deferred tax liability arise from: The initial recognition of goodwill; The initial recognition of assets or liabilities arising in a transaction when all the following conditions satisfied: The transaction is not a business combination; At the time of transaction, the transaction affects neither accounting profit nor taxable result. The Company recognizes the taxable temporary difference associated with investments in subsidiaries, branches and associates, and interests in joint ventures as deferred tax liability, except the following condition all satisfied: The Company can control the time of the reverse of temporary differences; and The temporary differences are unlikely to be reversed in the excepted future. The Company recognize a deferred tax asset for deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised, except that the deferred tax asset arise from initial reorganization of an asset or liability in a transaction with all following features: It is not a business combination; and At the time of the transaction, affects neither accounting profit nor taxable profit (tax loss); The Company recognizes deferred income tax asset for deductible temporary difference related with investment in subsidiaries, associates and join ventures if all the following conditions satisfied: The temporary differences are unlikely to be reversed in the expected future; and It is probable that taxable profit will not be available in future against the deductible temporary difference. The carried forward of unused tax losses and unused tax credits shall be recorded as deductible temporary difference. A deferred tax asset shall be recognized to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized. According to the tax law, at the balance sheet date, applicable tax rates to determine deferred tax assets and deferred tax liabilities should be measured using the tax rate for the period of recovery assets or settlement liabilities. The carrying value of deferred tax assets is reviewed, at the balance sheet date. If taxable profit will not be available in future against the deductible temporary difference, the Company should write-downs the carrying value of the deferred tax asset. It taxable profit will be available in future against the deductible temporary difference, the write-downs amount should be reversed. (3)Income tax expenses Income tax expenses comprise current tax expenses and deferred tax expenses. The current income tax and deferred income tax expense or income in profit or loss, except that: Activities recognized in other comprehensive income or shareholders' equity transaction and related income tax and deferred income tax recognized in other comprehensive income or shareholders' equity directly; Deferred tax adjust carrying value of goodwill arising consolidation. (4)Offset current tax assets and current tax liabilities When the Company has the statutory right to account for current tax assets and current tax liabilities with their net amounts, and has the intention to do so or the recovery of assets and the settlement of liabilities are achieved simultaneously, The Company shall present its current tax assets and current tax liabilities at the net amounts as the result of one offsetting another. The notes to the accounts form an integral part of the financial statements

246 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB When the Company has the statutory right to account for current tax assets and current tax liabilities with their net amounts, and the deferred tax assets and the deferred tax liabilities are related to income taxes imposed on the same taxpayer by the same tax authority or albeit they are related to income taxes imposed on different taxpayers, they have the intention to account for current tax assets and current tax liabilities with their net amounts or the recovery of assets and the settlement of liabilities are achieved simultaneously during each accounting period in the future when material deferred tax assets and deferred liabilities are reversed, the Company shall present its current tax assets and current tax liabilities at the net amounts as the result of offsetting each other. Note 24 Leases Finance lease is the lease that transfer all the substantially risks and rewards of ownership of an asset leases, which ownership may eventually transferor not. The term "operating lease" shall refer to a lease other than a financing lease. (1)Accounting treatments for Lessees of operating leases The lease payments should be recognized as expenses of the current period over the lease terms (including rent-free periods) on a straight-line basis Initial direct costs relating to lease transactions incurred by the Company shall be recognized as expenses of the current period. Contingent rent shall be recorded in the profit or loss when actual incurred. (2)Accounting treatments for Lessors of operating leases Lease income under an operating lease shall be recognized as income on a straight-line basis over the lease term for lessor in the current period. The initial direct cost shall be capitalised in the current period. Then initial significant direct cost shall be amortised and recognized as expenses in accordance with the rental income recognized in profit or loss on the basis of instalments. Other insignificant initial direct costs should be recognized expensed as incurred. Contingent rent shall be recorded in the profit or loss when actual incurred. (3)Accounting treatments for Lessees of finance leases At commencement of the lease term, the leased asset should be recorded at the lower of the fair value of the asset and the present value of the minimum lease payments. The present value of minimum lease payment is recorded as long term payable. The difference between the recorded amount of the leased asset and the long term payable is recorded as unrecognised finance charges. Initial direct costs that are directly attributable to negotiating and arranging a lease shall be added to the carrying amount of the leased asset. Present value of the minimum lease payments deducting unrecognized finance charge should be recognized in either long-term liabilities or long-term debt due within one year separately. Unrecognised finance charges shall be allocated to each period during the lease term using the effective interest rate. Contingent rent shall be recorded in the profit or loss when actual incurred. (4) Accounting treatments for Lessors of finance leases At commencement of the lease term, finance leases should be recorded the sum of the minimum lease payment receivables and initial direct cost as financial lease receivables and also record unguaranteed residual vale. The difference between sum of minimum lease payment receivables, initial direct cost and unguaranteed residual vale and the present value of sum of these three is recorded as unrecognized finance charges. Financial lease receivables deducting unrecognized finance charge should be recognized in either long-term liabilities or long-term debt due within one year separately. Unearned finance income shall be recognized in each period during the lease term using the effective interest rate. Contingent rent shall be recorded in the profit or loss when actual incurred. Note 25 Assets held for trading The Company recognizes non-current assets as assets held for trading while all the following conditions are satisfied: The Company has made resolutions on the sale of these assets; The Company has signed irrevocable agreements with the counterparty to transfer these assets; The transfer will be completed within one year. There is no depreciation or amortization, held for trading should be measured at the lower of their carrying amounts or their fair values less costs to sell. Non-current assets as held for sale include individual assets and asset groups. In accordance with "Accounting Standards for Enterprises No. 8 - Impairment of Assets, if the disposal group is a group of asset groups or a business of asset groups, goodwill acquired in a business combination should be allocate to the group. The disposal group includes goodwill of business combination. An asset or disposal group classified as held for sale can no longer fill the conditions of non-current assets. The Company shall derecognize it as held for sale. It shall be measure at the lower of the amount of: The notes to the accounts form an integral part of the financial statements

247 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 The notes to the accounts form an integral part of the financial statements 32 Monetary Unit: RMB 1The carrying amount of the asset or disposal group prior to classified as held for sale, should be recognized depreciation, amortization or impairment; as if it was not classified as held for sale 2The recoverable amount of the date to decide not to sell. Note 26 Employee benefits Employee benefits payable shall be recognized as liabilities in the accounting periods during which the employees provide services to the Company. The Company participates in employee social insurance systems established by the Chinese government, which comprise basic endowment insurance, health insurance, housing provident funds and other social insurance systems. The relevant expenditures shall be included in costs of relevant assets or charged to profit or loss for the current period. In the event that the Company terminates the employment relationship with employees unilaterally before the end of the employment contracts, or offers to compensate the employees in order to encourage them to accept voluntary redundancy, if the Company has formally formulated plans for termination of the employment relationship or offer for voluntary redundancy, and the plans will be implemented shortly afterwards, compensations for redundancy shall be recognized as estimated liabilities and charged to profit or loss for the current period. The plan for early retirement of employees shall be treated in the same way as the above compensations for redundancy. The salaries and social insurance premiums paid by the Company to employees subject to early retirement during the period from termination of service provision to normal retirement shall be recognized as estimated liabilities and charged to profit or loss for the current period (compensations for redundancy). Note 27 Changes in significant accounting policies and accounting estimates 1Changes in accounting policies There is no significant change in accounting policies during the current reporting period. 2Changes in accounting estimates There is no significant change in accounting estimates during the current reporting period. Note 28 Corrections of prior period errors There is no significant correction of prior period errors during the current reporting period. NOTE 29 Significant accounting judgments and estimates In applying accounting policies, as there is inherent uncertainty within the business activities, it is necessary for the Company needs to make judgments, estimates and assumptions to carrying amount which cannot be measured accurately. These judgments, estimates and assumptions are based on past history experience of the company's management and considering other relevant factors. These judgments, estimates and assumptions will affect the reporting amount of the balance sheet date and revenues, expenses, assets and liabilities and disclosure of contingence liabilities. However, the uncertainty of estimation will cause significant adjustments to the carrying amount of the asset or liability affected by the uncertainty. The company will regularly review the above judgments, estimates and assumptions on the going concern basis. If the change in accounting estimate only affects the current period, it should be recognized in the current accounting. If the change in accounting estimate will affect both current and future periods, it should be recognized in the current accounting period and future periods respectively. At the balance sheet date, the company needs to make judgments, estimates and assumptions as follows: 1Classification of leases According to the regulations of "ASBE No.21 - Leases", lease should be categorized as financing leases and operating leases. When performing classification, management should analyze and judge whether all the risks and rewards of the leased assets are substantially transferred to the lessee or held by the Company actually. Finance lease is the lease that transfer all the substantially risks and rewards of ownership of an asset leases, which ownership may eventually transferor not. The term "operating lease" shall refer to a lease other than a financing lease. 2Provision for bad debt The allowance method is adopted to account for bad debts, according to the accounting policies of the Company's accounts receivables. Impairment of receivables is based on the assessment of the recoverability of accounts receivable. Impairment amount of accounts receivable should base on judgments and estimates of management. The difference between the actual results and original estimated will affect carrying amount of accounts receivable, bad debt provision and reversal amount for the period of estimation changed. 3Inventory impairment provision 245

248 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB In accordance with inventory accounting company policy the inventories are measured at lower of cost and net realisable value. If the cost of inventories is higher than the net realizable value, then a provision should be made and recorded. Impairment of inventories to net realizable value is based on an assessment of inventory available for sale and its net realizable value. Net realizable value of inventories should be measured on the basis of the obtained conclusive evidence, taking into account the purpose of holding inventories and the impact of event after the balance sheet date. Difference between the actual results and the original estimated will affect carrying amount of accounts inventories, inventory impairment provision and reversal amount for the period of estimation changed. 4The fair value of financial instruments If there is no active trading market for financial instruments, the Company should measure t fair value by using valuation method, including discounted cash flow model. The company should estimate future cash flow, credit risk, market volatility and correlations prospectively etc., and select the appropriate discount rate. These are uncertainties in the underlying assumptions to cause the change the fair value of financial instruments. 5Held to maturity investments Non-derivative financial assets with fixed or predetermined payments and with fixed maturity date and the Company has the intention and ability to hold to maturity should be classified as held-to-maturity. This classification involves a lot of work to make judgments. The Company will evaluate both the willingness and ability of hold to maturity. Except for specific situations such as the sale of insignificant amount investment close to the maturity date, if the Company fails to hold these investments to maturity, all such investments shall be reclassified to available for sale. Financial assets classified as available for sale should not revert to held-to-maturity within the current fiscal year and the next two fiscal years as well. In such case, it may have a significant impact on the value of the underlying assets reported on the financial statements and may have impact on the Company's financial instruments risk management strategy. 6Impairment of held-to-maturity investments The Company determines whether the impairment of held-to-maturity investments rely on the judgment of management heavily. Obvious evidence of impairment should include that the issuer has serious financial difficulties so that financial assets cannot continue trading in an active market, unable to fulfill the terms of the contract (for example, default of interest or principal of payment) and etc.,. The Company needs to assess whether the obvious evidence will affect future cash flows in making this judgment. 7Impairment of financial assets available for sale The Company determines the impairment of available for sale financial assets rely on management's judgment and assumptions heavily. It is necessary for the company to make judgments and assumptions on the duration and the fair value of the investment below its cost, as well as the short-term business financial forecast and industry environments, technological innovation, credit rating, defaults risk and counterparty risk. 8Impairment of non-financial and non-current assets The company determines whether the impairment indications for non-current assets, except for financial assets at the balance sheet date. For the indefinite life intangible assets, it is necessary to make regular annual impairment test. In addition, if there are indications of impairment, impairment should be tested as well. For other financial assets except for non-current assets, when there are indications that the carrying amount may not be recoverable, the impairment should be tested. When the carrying amount of the individual asset or asset group exceeds their recoverable value, which is the higher of the fair value less costs of disposal and the present value of expected future cash flows, there is the impairment. The net fair value less costs of disposal is measured with direct reference to fair trade contract price of similar assets and observable market price to minus the incremental disposal costs. It is necessary to make significant judgments on the present value of expected future cash flows, price and quantity of asset (or asset group), related operating costs and the discount rate used. The company will try to obtain all relevant information to estimated recoverable amount, based on reasonable and supportable assumptions including estimation of production, selling price and related operating expenses. Goodwill should be tested for impairment at least annually. It is necessary to estimate present value of future cash flows for asset group or combination of asset group s allocated goodwill. When using the present value method, the Company should estimate future cash flows of the asset group or combinations of assets, and select the appropriate discount rate to determine the present value of future cash flows. 9Depreciation and amortization The notes to the accounts form an integral part of the financial statements

249 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB The company uses the straight-line method over the useful life to make depreciation and amortization to investment property, fixed assets and intangible assets, after considering the residual value. The Company reviews their economic use life regularly in order to determine the amount of depreciation and amortization in each reporting period. Economic use life should be based on past experience of similar assets and the expectation of technical update. If there are significant changes in the previous accounting estimations, adjustment for depreciation and amortization should be recognized in the future periods 10Development expenditure The management of the company needs to make the assumptions on the expected cash flow, discount rate applicable and estimated benefit period to determine the amount of capitalization 11Deferred tax assets If it is probably for the company to have sufficient taxable profits to offset the prior losses, deferred tax assets should be recognized for all of the Company as tax assets. It is necessary for the company's management to use a lot of judgment to estimate the timing and amount of future taxable profits, considering with tax planning strategies to determine the amount of deferred tax assets. 12Income tax There are certain uncertainties in final tax treatment and calculation in the normal operating activities. There are some items require to be approval by the tax authorities. If there are the differences between ultimately identified results and the amount estimated initially, the differences will cause an ultimately impact on current tax and deferred tax recognized during the period. 13Accrued liabilities According to the terms of the contract, the Company makes provision for the accrued liabilities using existing knowledge and historical experience, warranty of product quality, estimated contract losses, penalty for delay to delivery. If the contingency formed a present obligation, it is to is likely to lead to the economic benefits outflow of the Company to fulfill these obligations. The Company should recognize the amount as accrued liabilities, according to the best estimate of expenditure to settle the present obligation. It is based on judgment of management heavily to recognize and measure the accrued liabilities. The company needs to assess risks of uncertainties and time value of money and other factors as well. Wherein the company will recognize the accrual liabilities on commitment of quality warranty of after-sales, maintenance and renovation service. The company could take into account the data of recent maintenance experience, however, recent experience may not be useful to forecast the future. Any increase or decrease amounts of the provision are likely to affect profit or loss in the future year. Note 30 Principal taxation 1. Main taxes and tax rates Main taxes Specific tax rate Value Added Tax Urban maintenance and construction tax The applicable tax rate for domestic sales is 17%VAT payable or receivable is the net difference between periodic output and deductible input VAT Surcharge are levied at [ 5%] and [ 7 %] of the applicable turnover taxes payable Enterprise income tax The applicable income tax rate is 15%-25%. The notes to the accounts form an integral part of the financial statements

250 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB 2. Tax benefits and approval documents According to the policy of "Xining Economic and Technological Development Zone investment incentives" (Green politics [2001] No. 34)the subsidiary company Xining Dexiang business trade LLC are exempt from the urban construction and maintenance tax and education surcharge since2010 to The subsidiary company Naqu Ruichang Coal Transportation Co., enjoyed preferential tax rate of 15% in 2013, complying with the country's western development tax incentives policy. 3. Additional Notes The overseas subsidiary China Coal Solution (HK).Ltd applicable Hong Kong income tax rate is 16.5%. China Coal Solution (Singapore) Pte.Ltd applicable income tax rate is 10%.Ina Advanced Holdings Pte.Ltd applicable income tax rate is 10%.Rex Coal Pte.Ltd applicable income tax rate is 10%. China Coal Solution (Indonesia) Pte.Ltd applicable income tax rate is 10%. NOTE 31 1Subsidiaries acquired through establishment or investment Full name of subsidiary Xuzhou Yifeng Trading Co. China Coal Solution(HK).Ltd Pizhou Fengyuan Power Fuel Co., Ltd. Henan Tengrui Energy Industry Development Co., Ltd. Xuzhou Yuguang Trading Co., Ltd. China Coal Solution(Singapor e) Pte.Ltd Ina Advanced Holdings Pte.Ltd Rex coal Pte.Ltd China Coal Solution(Indonesia ) Pte.Ltd Yantai Ruimaotong Supply Chain Co., Ltd. JiangSu JinHe Power And Electricity Fuel Co.,LTD Shanxi Ruimaotong Supply Chain Co., Ltd. ZHEJIANG YUNENG POWER AND Subsidiaries type Wholly owned Wholly owned Wholly owned Wholly owned Wholly owned Wholly owned control Wholly owned Wholly owned Wholly owned Wholly owned Wholly owned Wholly owned Location registration Xuzhou Hong Kong Pizhou Qinyang Pizhou Singapore Singapore Singapore Indonesia Yantai Taizhou Taiyuan Ningbo Nature of Business Coal procurement and sales Coal procurement and sales Coal procurement and sales Coal procurement and sales Coal procurement and sales Coal procurement and sales Coal procurement and sales Coal procurement and sales Coal procurement and sales Coal Supply Chain Management Registered Capital 60,000, HK ,000, ,000, ,000, USD 7,800, USD 100, USD 30,000, Coal procurement 230,000, and sales Coal Products Sales Coal procurement and sales The notes to the accounts form an integral part of the financial statements 35 Business Scope Coal sales Purchase and sale of coal Retail coal, coke, steel, building materials sales Coal sales Unit: RMB Yuan Other projects essentially Legal The end of the Organization constitute the Representativ actual Code net balance of e contribution investments in subsidiaries Wang Dongsheng ,000, Wan Yongxing HK 1.00 Wu Wenquan ,000, Liu Fei yue Coal supply Wang chain Ruichen management, coal information, logistics information consulting Coal sales Wang Dongsheng Enterprise Qinjing Fu management consulting, 20,000, technology consulting coal utilization, coal products sales Coal wholesale 10,000, business ,000, Yan Zhenfeng ,000, USD 7,800, USD 70, USD 30,000, ,000, ,000, Ding Zhixiong ,000,

251 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB ELECTRICITY FUEL CO.,LTD Xining Dexiang business trade LLC TIANJIN CHINA COAL SOLUTION FACTORING CO., LTD. Naqu Ruichang Coal Transportation and Marketing Co. Jiangsu Fengtai Materials Trading Co., Ltd. ZHEJIANG HEHUI ELECTRICITY MATERIAL CO.,LTD Shen Zhen Qian Hai CHINA COAL SOLUTION Supply Chain Service Platform Co.,LTD. Wholly owned Wholly owned Wholly owned Wholly owned Wholly owned Wholly owned Xining Coal procurement and sales 10,000, Tianjin Trade Finance 300,000, Naqu Hongze Ningbo Shenzhen Coal procurement and sales Coal procurement and sales Coal procurement and sales 50,000, ,000, ,000, Supply chain management 50,000, Coal wholesale business Mi Changbin ,000, Trade accounts receivable financing, accounts receivable and payment settlement, management and collection Coal distribution and sales Coal wholesale Coal wholesale business Supply chain management and related services, domestic and international Logistics Mi Changbin ,000, Wang Dongsheng ,000, Yu Xuefeng ,000, Zhang Shouling Wang Dongsheng ,000, ,000, (Continued) Full name of subsidiary Shareholding ratio (%) Voting rights (%) Xuzhou Yifeng Trading Co China Coal Solution(HK).Ltd Pizhou Fengyuan Power Fuel Co., Ltd. Henan Tengrui Energy Industry Development Co., Ltd. Xuzhou Yuguang Trading Co., Ltd. China Coal Solution(Singapore) Pte.Ltd Ina Advanced Holdings Pte.Ltd Whether the consolidate d financial statements Yes Yes Yes Yes Yes Yes Minority interests Yes 173, Rex coal Pte.Ltd Yes China Coal Solution(Indonesia) Pte.Ltd Yantai Ruimaotong Supply Chain Co., Ltd. JiangSu JinHe Power And Electricity Fuel Co.,LTD Mao Shan Desiree Supply Chain Co., Ltd. ZHEJIANG YUNENG POWER AND ELECTRICITY FUEL CO.,LTD. Xining Dexiang business trade LLC TIANJIN CHINA COAL SOLUTION FACTORING CO., LTD. Naqu Ruichang Coal Transportation and Marketing Co Yes Yes Yes Yes Yes Yes Yes Yes The share of losses exceeds the minority shareholders' Minority interests in the equity of the beginning of the amount deducted from Comments minority equity year, should continue deduct from shareholders 'equity share The notes to the accounts form an integral part of the financial statements

252 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Jiangsu Fengtai Materials Trading Co., Ltd. ZHEJIANG HEHUI ELECTRICITY MATERIAL CO.,LTD Shen Zhen Qian Hai CHINA COAL SOLUTION Supply Chain Service Platform Co.,LTD Yes Yes Yes 2. Note of the change in scope of consolidation The main changes in the scope of consolidation period should be consolidation for the additional subsidiary. The establishment of five new subsidiaries are TIANJIN CHINA COAL SOLUTION FACTORING CO., LTD.. CHINA COAL SOLUTION(YANTAI) SUPPLY CHAIN MANGEMENT LTD. Shen Zhen Qian Hai CHINA COAL SOLUTION Supply Chain Service Platform Co.,LTD., Rex Coal Pte.Ltd, China Coal Solution (Indonesia) Pte.Ltd. 3.New bodies included in the scope of consolidation in the reporting period Name of the company 31 Dec 2013 net asset Profit of 2013 Rex Coal Pte.Ltd 30,487, , China Coal Solution(Indonesia) Pte.Ltd -1,014, ,014, TIANJIN CHINA COAL SOLUTION FACTORING CO., LTD.. CHINA COAL SOLUTION (YANTAI) SUPPLY CHAIN MANGEMENT LTD. Shenzhen before Mao Hai Tong supply chain platform Services Limited, 213,855, ,855, ,832, ,431, ,085, , Note 32 Notes to the consolidated financial statements The following notes project (including the Company's financial statements NOTES), unless otherwise indicated, at the beginning refers to the of January 1, 2013, at the end refers to the December 31, Monetary funds Items Foreign currency 01 Jan Dec 2013 Exchange rate Domestic currency The notes to the accounts form an integral part of the financial statements 37 Foreign currency Exchange rate Domestic currency Cash on hand 2,005, ,031, CNY 2,005, ,031, USD Cash in bank 488,357, ,423, CNY 469,396, ,784, USD 3,065, ,727, ,088, ,844, SGD 44, , , , EUR IDR 43,756, , Other monetary funds 716,922, ,708, CNY 641,365, ,794, USD 12,363, ,376, ,191, ,914, SGD 37, ,

253 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Total 1,207,285, ,164, Note: There is amounted to RMB 680,762, including restricted funds in the other monetary funds, bankers' acceptances, deposit, letter of credit deposit. 3. Trading financial assets Items Equity instrument investment -held for trading Fair value at 31 Dec 2013 Derivative financial instruments 787, Fair value at 01 Jan 2013 Total 787, NOTE: Financial assets should be measured at the fair value changing with the thermal coal futures contracts held by the Company. 3. Notes receivable 1Classification of notes receivable Items 31 Dec Jan 2013 Bankers' acceptance bills 386,846, ,075, Commercial acceptance bills Total 386,846, ,075, NOTE: As at December 31, 2013, bills discounted by the Company amounted to RMB 356,460, As at December 31, 2013, bills pledged by the Company amounted to RMB 364,279, Top five items of notes receivable pledged by the Company Drawer entities Drawing dates Maturity dates Amounts Notes Changzhou Feng Wu Landscaping Engineering Co., Ltd. Wuxi City Sadat of Pipe Manufacturing Co., Ltd. Wuxi City Sadat of Pipe Manufacturing Co., Ltd. Jiangsu Shen Hong Kong Boiler Co., Ltd ,000, ,000, ,000, ,000, Hangzhou Boiler Group Co., Ltd ,000, Total 50,000, Top five items of notes endorsed by the Company to a third party but not yet matured at the period end Drawer entities Drawing dates Maturity dates Amounts Whether derecognized or not Jiangsu Yonggang Group Co., Ltd ,000, YES Hubei Chu Ceramic Building Materials Co., Ltd. Luoyang Wan Kitt kinds of Aluminum Ltd. Ningbo Bao Yi Trading Co., Ltd. Railway Bureau II Ltd ,000, ,000, ,000, ,000, YES YES YES YES Notes Total 50,000, The notes to the accounts form an integral part of the financial statements

254 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB 4.Accounts receivable 1Accounts receivable by category Categories Bad debts provision of significant accounts receivable as individual Bad debt provision of accounts receivable group Carrying amounts As at 31 Dec 2013 Amounts Proportions% Provisions for bad debts Amounts Proportions% Aging group 911,614, , Subtotal 911,614, , Bad debts provision of insignificant accounts receivable as individual (Continued) Total 911,614, , Categories Carrying amounts As at 01 Jan 2013 Provisions for bad debts Amounts Proportions% Amounts Proportions% Bad debts provision of significant accounts receivable as individual Bad debt provision of accounts receivable group Aging group 455,739, , Subtotal 455,739, , Bad debts provision of insignificant accounts receivable as individual Total 455,739, , Aging analysis of accounts receivable As at 31 Dec 2013 As at 01 Jan 2013 Categories Amounts Proportions% Amounts Proportions% Within 6 month 905,970, ,849, month to 1year 25, to 2 years 5,618, ,890, to 3 years Over 3 years Total 911,614, ,739, Provision for bad debts Bad debt provision of accounts receivable group Aging analysis of bad debt provision of accounts receivable group: Aging As at 31 Dec 2013 As at 01 Jan 2013 The notes to the accounts form an integral part of the financial statements

255 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Carrying amount Carrying amount Bad debt Amounts Proportions provision Amounts Proportions % % Within 6 month 905,970, ,849, Bad debt provision 6 month to 1year 25, to 2 years 2 to 3 years Over 3 years Total 5,618, , ,890, ,614, , ,739, , , There is no year-end closing balance of accounts receivable holding more than five percent voting shares. 5Top five items of accounts receivable Company Name Relationship y Amounts Aging Proportions% Jiangxi Electric Power Fuel Co., Ltd. customer 120,123, Within 1 year Huaneng Qinbei Power Generation customer Within 1 year 76,803, Limited Liability Company 8.43 Jinggangshan Huaneng Power Plant customer 55,391, Within 1 year 6.08 Wuhan Huaneng Power Generation Co. customer Within 1 year 29,938, Ltd Yiyang State Power Generation Co., Ltd. customer 29,393, Within 1 year 3.22 Total 311,650, Foreign currency accounts receivable amounts in the local currency and exchange rates Items As at 31 Dec 2013 As at 01 Jan 2013 Foreign currency Exchange rate Domestic currency Foreign currency Exchange rate Domestic currency USD 5,945, ,247, ,720, ,667, HKD JPY EUR 5. Other receivables Ageing analysis of other receivables: 1Other receivables by category Categories As at 31 Dec 2013 Carrying amounts Amounts Proportions % Provisions for bad debts Amounts Proportions % Bad debts provision of significant accounts receivable as individual Bad debt provision of accounts receivable group Aging group 178,173, , The notes to the accounts form an integral part of the financial statements

256 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Categories As at 31 Dec 2013 Carrying amounts Amounts Proportions % Provisions for bad debts Amounts Proportions % Subtotal 178,173, , Bad debts provision of insignificant accounts receivable as individual Total 178,173, , (Continued) Categories As at 01 Jan 2013 Carrying amounts Amounts Proportions % Provisions for bad debts Amounts Proportions % Bad debts provision of significant accounts receivable as individual Bad debt provision of accounts receivable group Aging group 62,394, , Subtotal 62,394, , Bad debts provision of insignificant accounts receivable as individual Total 62,394, , Aging analysis of accounts other receivable As at 31 Dec 2013 As at 01 Jan 2013 Categories Amounts Proportions% Amounts Proportions% Within 6 month 173,956, ,673, month to 1year 1 to 2 years 4,216, ,721, to 3 years Over 3 years Total 178,173, ,394, Provision for bad debts Aging analysis of bad debt provision of accounts other receivable group: Aging As at 31 Dec 2013 As at 01 Jan 2013 Carrying amount Amounts Proportions % Bad debt provision Carrying amount Amounts Proportions % Within 6 month 173,956, ,673, month to 1year Bad debt provision 1 to 2 years 4,216, , ,721, , to 3 years The notes to the accounts form an integral part of the financial statements

257 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Over 3 years Total 178,173, , ,394, , There is no year-end closing balance of accounts other receivables holding more than five percent voting shares. 5Top five items of accounts other receivable Company Name Relationship Amounts Aging Proportions % Jiangsu Ruigang coal processing Ltd. Customs Office of People's Republic of China Shantou Huilai East Branch of China Sinotrans Jinling Ltd. China Longkou, Sinotrans Ltd. Shandong Branch Huangpu Laogang Customs People's Republic of China Non-related parties Non-related parties Non-related parties Non-related parties Non-related parties 100,000, ,700, ,943, ,777, ,260, Within 6 month Within 6 month Within 6 month Within 6 month Within 6 month Total 119,681, Other receivables from related parties Company Name Relationship y Amounts Aging ZHENGZHOU CHINA COAL SOLUTION CO., LTD.. The Parent company 2,070,000, Advances to suppliers Ageing analysis of advances to suppliers: Categories As at 31 Dec 2013 As at 01 Jan 2013 Amounts Proportions% Amounts Proportions % within 1year 769,618, ,917, to 2 years 2,719, ,533, to 3 years 3,841, Over 3 years Total 772,337, ,293, Top five items of accounts Advances to suppliers Company Name Relationship y Amounts Prepayment Time Huadian Coal Industry distribution Group Limited Lianyungang Sanbang Logistics Ltd. Pang Xin Corporation Limited Shanxi Changzhi Energy Industry Group Co., Ltd. Shanxi Jiexiu Xin Yingyugou Coal Industry Co., Ltd. supplier 27,239, supplier supplier supplier supplier The notes to the accounts form an integral part of the financial statements 32,300, ,205, ,338, ,000, The reason for not settled Before settlement date Before settlement date Before settlement date Before settlement date Before settlement date Total 558,083, There is no year-end closing balance of accounts advances to suppliers holding more than five percent voting 255

258 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB shares 7. Inventories Inventory Classification As at 31 Dec 2013 Items Amounts Provision Carrying value Merchandise inventories 239,933, ,933, Low-cost consumables Total 239,933, ,933, (Continued) Items As at 01 Jan 2013 Amounts Provision Carrying value Finish goods 211,529, ,529, Low-cost consumables Total 211,529, ,529, Other current assets Items Nature (or content) As at 31 Dec 2013 As at 01 Jan 2013 Transfer of account receivable by factoring Pending deductible input tax Transfer of account receivable by factoring Pending deductible input tax 2,109,878, Total 2,177,038, ,160, ,360, Note: For the account receivable transfer to the factor could not receive interest expense timely, bad debt provision should be prepared amounted to RMB 11,300, at 1% proportion of account receivable at 31 Dec Financial assets -available for sale Items Fair value at 31 Dec 2013 Fair value at 01 Jan 2013 Available for sale-bond Available for sale- equity Financial Trust products 200,000, Less: Provision for impairment Less: financial assets available for sale due within one year Total 200,000, Note: Trust financial products on the closing balance are based on the resolution of nineteenth of the fifth session of the Board. The subsidiary Company Naqu Ruichang Coal Transportation and Marketing Co. purchased the financial trust products of the National Trust Limited. 10. Long-term equity investments 1Classification of long-term equity investments Items As at January 1, 2013 Increase in 2013 Decrease in 2013 The notes to the accounts form an integral part of the financial statements 43 As at 31 Dec 2013 Joint ventures 98,099, ,099,

259 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Associates Items As at January 1, 2013 Increase in 2013 Decrease in 2013 As at 31 Dec 2013 Other equity investments 287,495, ,495, Less: provisions for impairment losses Total 385,594, ,594, Breakdown of long-term equity investments Accounting Initial investment As at January 1, As at 31 Dec Investee entities Movements methods costs Zhengzhou Air Port Xing Rui Equity 98,000, ,099, ,099, Industrial Co., Ltd. method Xinyu Rural Commercial Bank Cost method 287,495, ,495, ,495, Co., Ltd. Total 385,495, ,594, ,594, (Continued) Investee entities Zhengzhou Air Port Xing Rui Industrial Co., Ltd. Xinyu Rural Commercial Bank Co., Ltd. Total Proportion to Proportion to registered capital of voting rights of the investees (%) the investee (%) Note for inconsistency Provisions for impairment Provisions for impairment of 2013 Cash dividends of 2013 Notes: The Company's subsidiary, JiangSu JinHe Power And Electricity Fuel Co.,LTD and Xinyu Rural Commercial Bank Co., Ltd. signed the Agreement of investment share. The subsidiary company paid investment in share capital amounted to RMB121, 820,000 yuan and investment in capital reserve amounted to RMB 165,675,200 yuan, which is total amounted to 287,495,200 on December 20, As at December 31, 2013, all related procedures above were being processed. 3Investment in joint ventures and associates Joint ventures Investee entities Zhengzhou Air Port Xing Rui Industrial Co., Ltd. Business Type Ltd. Registered address Legal Representative Zhengzhou Wang Ruichen Nature of Business Registered Capital Proportion to registered capital of the investees(%) Proportion to voting rights of the investee (%) supply chain management 20 million and related services (Continued) Investee entities Zhengzhou Air Port Xing Rui Industrial Co., Ltd. As at 31 Dec 2013 total assets As at 31 Dec 2013total liabilities As at 31 Dec 2013 total net assets Revenue of 2013 Profit for ,392, , ,202, ,433, , Relationship Organiza tion Code 11.Fixed assets The notes to the accounts form an integral part of the financial statements

260 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB 1Fixed assets Items As at January 1, 2013 Increase in 2013 Decrease in 2013 As at 31 Dec original carrying amount 12,512, ,060, ,573, whichmachinery equipment 6,180, , ,244, Vehicles 4,578, ,420, ,999, Electronic equipment and other 1,753, , ,329, Additional for Charge for 2. Accumulated depreciation 2,110, the year the year 2,523, ,633, whichmachinery equipment 971, , ,667, Vehicles 533, ,543, ,076, Electronic equipment and other 605, , , net carrying amount 10,402, ,939, whichmachinery equipment 5,209, ,577, Vehicles 4,044, ,922, Electronic equipment and other 4. impairment whichmachinery equipment Vehicles Electronic equipment and other 1,148, ,439, carrying value 10,402, ,939, whichmachinery equipment 5,209, ,577, Vehicles 4,044, ,922, Electronic equipment and other 1,148, ,439, Note: Depreciation expenses for the current period amounted to RMB 2,523, Intangible assets.intangible assets Items As at January 1, 2013 Increase in 2013 Decrease in 2013 As at 31 Dec Total original carrying amount 325, ,650, ,975, Land use rights 150,650, ,650, Financial software 325, , Total accumulated amortization 313, , , Land use rights Financial software 313, , , Total cumulative impairment amount Land use rights The notes to the accounts form an integral part of the financial statements

261 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Financial software Items As at January 1, 2013 Increase in 2013 Decrease in 2013 As at 31 Dec Total carrying value 12, ,650, Land use rights 150,650, Financial software 12, Note The amortization amount of the intangible asset is RMB 12, yuan in The subsidiary company CHINA COAL SOLUTION(YANTAI) SUPPLY CHAIN MANGEMENT LTD. achieved the land use right (A1 plots)through the auction, which is as following: Located in the north of Liancheng road and Zhi Guan Xi Road in the Yantai City; Which Title number is "Yan (2013) 3057"; Land area of approximately 90,195.5 square meters; Nature of the land is for residential / commercial services; Useful life for residential is 70 years and useful life for commercial service is 40 years, respectively; CHINA COAL SOLUTION(YANTAI) SUPPLY CHAIN MANGEMENT LTD. and Yantai City Land Resources Bureau signed confirmation letter of auction transaction of state-owned construction land use right on December 16, Long-term prepayments Items As at January 1, 2013 Increase in 2013 Decrease in 2013 As at 31 Dec 2013 Items Rent 315, , Maintenance costs 199, , , Insurance 7, , Other reasons for the reduction Total 522, , , Deferred tax assets and deferred tax liabilities 1Recognized deferred tax assets and deferred tax liabilities Recognized deferred tax assets Items Deferred tax assets As at 31 Dec 2013 As at January 1, 2013 Deductible temporary differences and tax losses Deferred tax assets Deductible temporary differences and tax losses Impairment of assets 3,056, ,283, , , Offset internal unrealized profits Deferred income 5,000, ,000, Total 8,056, ,283, , , Recognized deferred tax assets As at 31 Dec 2013 As at January 1, 2013 Items Deductible temporary Deferred tax assets differences and tax Deferred tax assets losses Changes in the fair value of trading financial assets 164, , Total 164, , Deductible temporary differences and tax losses The notes to the accounts form an integral part of the financial statements

262 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB 2Breakdown unrecognized deferred tax assets Items As at 31 Dec 2013 As at January 1, 2013 Deductible loss 9,939, Total 9,939, (3)Deductible tax loss not recognized as deferred tax assets, will expire in the following years Year As at 31 Dec 2013 As at January 1, 2013 Note ,681, Total 8,681, Asset impairment Breakdown Items As at January 1, 2013 Charge for the year Decrease in 2013 Reversal Written off As at 31 Dec 2013 Provision for bad debts 673, ,610, ,283, Inventory impairment Total 673, ,610, ,283, Ownership or right to use restricted assets Items As at 31 Dec 2013 The reason for restriction Subtotal assets used as collateral: 468,719, Notes receivable 364,279, Letters of credit for the pledge Accounts receivable 84,440, Pledged for borrowings Inventories 20,000, Pledged for borrowings Subtotal of ownership or right to restricted assets Other monetary funds Total 691,351, ,351, ,160,071, Deposit of bankers' acceptances, letters of credit 17. Short-term loans SHORT TERM LOANS CLASSIFICATION Items As at 31 Dec 2013 As at January 1, 2013 Pledge loans 351,327, ,005, Mortgage loans The notes to the accounts form an integral part of the financial statements

263 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Guaranteed loans 400,000, ,244, Unsecured loans 301,212, ,320, Total 1,052,539, ,571, Notes 1.According to "Domestic factoring business contract" (ID: 2013 Zheng ICBC Plains (Factoring) No. 01) signed by Naqu Ruichang Coal Transportation and Marketing Co., Ltd. and Zhengzhou Road Branch of Bank of China Ltd, Naqu Ruichang Coal Transportation and Marketing Co., pledged loan of accounts receivable amounted to RMB 10,000, According to "RMB working capital loan contract" (ID: 2013 Yu Zi No ) signed by Naqu Ruichang Coal Transportation Co., Ltd. and Zhengzhou Branch of CITIC Bank Corporation Limited, Naqu Ruichang Coal Transportation Co., Ltd. borrowed RMB 100,000, from Zhengzhou Branch of China CITIC Bank. Above loan guaranteed by the following contract: "Guaranteed maximum contract" signed by Zhengzhou Branch of China CITIC Bank Corporation Limited and ZHENGZHOU CHINA COAL SOLUTION CO., LTD.., Henan Zhong Rui Investment Co., Ltd., Wan Yongxing, Liu Yi. (Contract ID: 2013 YU YIN ZUI BAO ZI No , 2013 YU YIN ZUI BAO ZI No , 2013 XIN YIN ZHENG ZUI GAO BAO ZI No , 2013 XIN YIN ZHENG ZUI GAO BAO ZI No ). "The maximum pledge of rights contract" (ID: 2013 YU YIN QUAN ZUI GAO ZI No ) signed by ZHENGZHOU CHINA COAL SOLUTION CO., LTD.ZHENGZHOU CHINA COAL SOLUTION CO., LTD.and Zhengzhou Branch of CITIC Bank Co., Ltd. to offers stock security collateral loan. 3. ZHEJIANG HEHUI ELECTRICITY MATERIAL CO.,LTD pledged loan of account amounted to RMB74, 440, from Ningbo Free Trade Zone Branch of Industrial and Commercial Bank of China Limited, according to the contracts signed by ZHEJIANG HEHUI ELECTRICITY MATERIAL CO.,LTD and Ningbo Free Trade Zone Branch of Industrial and Commercial Bank of China Limited (Contract ID: (EFR) No , (EFR) No , (EFR) No , (EFR) No , (EFR) No , (EFR) No , (EFR) No ). 4.Pizhou Fengyuan Power Fuel Co. pledged goods and signed a commodity finance pledge supervision agreement to borrow RMB20,000, from Xuzhou Branch of Communications the Bank Co., Ltd. according to "Small business working capital loan contract" (ID: S323580M ) signed by Pizhou Fengyuan Power Fuel Co., Ltd. and Xuzhou Branch of Communications Bank Co., Ltd. 5.According to the "Working capital loan contract" (ID: 2013 QING ZHONG YIN QUAN JIE ZI No. 033) signed by Xining Dexiang business trade LLC., and Qinghai Branch of Bank of China Ltd, Xining Dexiang business trade LLC., borrowed RMB 100,000, from Qinghai Branch of Bank of China Ltd.. Above loan guaranteed by the following contract: "Guaranteed contract" (ID: 2013 QING ZHONG YIN BAO No. 013)signed by Z ZHENGZHOU CHINA COAL SOLUTION CO., LTD.., and the Qinghai branch of Bank of China to provide assurance; "Pledge contract" (ID: 2013 QING ZHONG YIN ZI ZI No. 005) signed by ZHENGZHOU CHINA COAL SOLUTION CO., LTD.ZHENGZHOU CHINA COAL SOLUTION CO., LTD.and Qinghai Branch of China Bank to provides security collateral loan. 6.According to the "Working capital loan contract" (ID: GUANG ZHENG DONG FENG ZHI DK ) signed by Xining Dexiang business trade LLC., and Dongfeng Branch of China Everbright Bank Co., Ltd.,Xining Dexiang business trade LLC., borrowed RMB 20,000, from Dongfeng Branch of China Everbright Bank Co., Ltd. Above loan guaranteed by the following contract: "Guaranteed maximum contract" (ID: GUANG ZHENG DONG FENG ZHI ZB )signed by ZHENGZHOU CHINA COAL SOLUTION CO., LTD.., and the Dongfeng Branch of China Everbright Bank Co., Ltd to provide assurance; "Maximum amount pledge contract" (ID: 2013 GUANG ZHENG DONG FENG ZHI No. 005) signed by ZHENGZHOU CHINA COAL SOLUTION CO., LTD. and Dongfeng Branch of China Everbright Bank Co., Ltd to provides security collateral loan. 7.According to "RMB working capital loan contract" (ID: 2013 YU YIN DAI ZI No ) signed by Naqu The notes to the accounts form an integral part of the financial statements

264 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Ruichang Coal Transportation Co., Ltd. and Zhengzhou Branch of CITIC Bank Ltd, Naqu Ruichang Coal Transportation Co., Ltd. borrowed RMB 100,000, from Zhengzhou Branch of China CITIC Bank. Above loan guaranteed by the following contract: "Guaranteed maximum contract" signed by Zhengzhou Branch of CITIC Bank Ltd and ZHENGZHOU CHINA COAL SOLUTION CO., LTD.., Wan Yongxing, Liu Yi.(Contract ID: 2013 YU YIN ZUI BAO ZI No , 2013 YU YIN ZUI BAO ZI No , 2013 XIN YIN ZHENG ZUI GAO BAO ZI No ). "Mortgage contract t" (ID: 2013 YU YIN DI ZI No ) signed by Anhui Ruichang Real Estate Development Co., Ltd. and Zhengzhou Branch of CITIC Bank Co., Ltd. to provide land use rights collateral. 8.According to "RMB working capital loan contract" (ID: 2013 YU YIN DAI ZI No ) signed by Henan Teng Rui Energy Industry Development Co., Ltd. and Zhengzhou Branch of CITIC Bank Ltd, Henan Teng Rui Energy Industry Development Co., Ltd. borrowed RMB 50,000, from Zhengzhou Branch of China CITIC Bank. Above loan guaranteed by the following contract: "Guaranteed maximum contract" signed by Zhengzhou Branch of CITIC Bank Ltd and ZHENGZHOU CHINA COAL SOLUTION CO., LTD.., Wan Yongxing, Liu Yi.(Contract ID: 2013 YU YIN ZUI BAO ZI No , 2013 YU YIN ZUI BAO ZI No , 2013 XIN YIN ZHENG ZUI GAO BAO ZI No ). 9. CHINA (SINGAPORE) COAL SOLUTION PTE.LTD pledged its accounts receivable to borrowed $ 49,404, from DBS BANK LTD, according to "DEED OF CHARGE AND ASSIGNMENT signed by CHINA (SINGAPORE) COAL SOLUTION PTE.LTD and DBS BANK LTD. 18. Notes payable Items As at 31 Dec 2013 As at January 1, 2013 Bank acceptance bills 1,147,021, ,227, Commercial acceptance bills Total 1,147,021, ,227, Note: The amount of notes payable in the next accounting period will expire amounted to RMB 1,147,021, Accounts payable (1)BREAKDOWN OF ADVANCE PAYMENTS Items As at 31 Dec 2013 As at January 1, 2013 Coal prepaid payments 330,534, ,475, Total 330,534, ,475, There is no year-end closing balance of accounts payable holding more than five percent(equal 5%) voting shares Accounts payable 3Foreign currency balances included as follows As at 31 Dec 2013 As at January 1, 2013 Items Exchange Foreign currency Exchange Domestic Foreign currency rate Domestic currency rate currency USD 32,057, ,448, ,031, ,760, HK JPY EUR Total 195,448, ,760, The notes to the accounts form an integral part of the financial statements

265 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB 20. Advances from customers BREAKDOWN OF ADVANCE PAYMENTS Items As at 31 Dec 2013 As at January 1, 2013 Coal advances from customers 171,592, ,244, Total 171,592, ,244, There is no year-end closing balance of accounts advances from customers holding more than five percent(equal 5%) voting shares Accounts payable 21Employee benefits payable Items As at January 1, 2013 Increase in 2013 Decrease in 2013 As at 31 Dec 2013 First, wages, bonuses, allowances and subsidies 672, ,190, ,101, ,760, Second, the employee benefits 955, , Third, social insurance 2,477, ,477, Among them: 1a medical insurance 670, , basic old-age insurance 1,540, ,540, Unemployment insurance 149, , injury insurance 38, , maternity insurance 78, , Fourth, the housing fund 1,074, ,035, , Five, union funds and employee education funds Six non-monetary benefits Seven, termination benefits Eight to cash-settled share-based payment Nine others 646, , Total 1,318, ,697, ,569, ,446, Taxes payable Items As at 31 Dec 2013 As at January 1, 2013 Value added tax 1,092, ,495, Sales Tax 8,414, Corporate Income Tax 47,181, ,846, Individual income tax 138, , Urban maintenance and construction tax 837, , Education surtax 363, , Additional local education 457, , Other 113, Total 58,599, ,166, The notes to the accounts form an integral part of the financial statements

266 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB 23Interest payable Item As at 31 Dec 2013 As at January 1, 2013 Interest payable of factoring borrow money 22,072, Total 22,072, The subsidiary company, TIANJIN CHINA COAL SOLUTION FACTORING CO., LTD. borrowed money from parent company ZHENGZHOU CHINA COAL SOLUTION CO., LTD.., which interest payable amounted to RMB 22,072, Other payables Break down of other payables Item As at 31 Dec 2013 As at January 1, 2013 Borrowings 2,070,000, Shipping costs 3,339, ,352, Information fee 785, ,235, Deposit 500, , Rent 647, , Intermediary costs 338, , Others 1,791, ,731, Total 2,077,402, ,511, The borrowings from parent company ZHENGZHOU CHINA COAL SOLUTION CO., LTD.., amounted to RMB 2,070,000, at year-end. Description of aging over 1 year Creditor Amounts Reasons for not repayment Whether return after the balance sheet date China Securities Journal Information fee 595, No Total 595, FOR LARGER AMOUNTS OF OTHER PAYABLES Creditor As at 31 Dec 2013 Nature or content ZHENGZHOU CHINA COAL SOLUTION Borrowings 2,070,000, CO., LTD.. Wuzhi Kai-fu Motor Transport Co. 1,955, Shipping costs Hong Leong Finance 886, Car payments Luohe Jin Cheng Logistics Co., Ltd. 847, Shipping costs Total 2,073,689, Others non - current liabilities Item Nature As at 31 Dec 2013 As at January 1, 2013 Deferred income Project of coal supply chain network platform and information technology 20,000, Total 20,000, The notes to the accounts form an integral part of the financial statements

267 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Among them, the deferred income details are as follows: Liabilities items Project of coal supply chain network platform and information technology As at January 1, 2013 Amount of additional subsidy of ,000, Amount credited operating income of 2013 Other changes As at 31 Dec ,000, Related to assets / income-related Related to assets Note The Core Port Management Committee of Taizhou Port of Taizhou City issued " Special guidance funding notice of the development of modern service industry (TAI GANG HE GUANG WEI FA[2013] 63) at September 18, 2013.The subsidiary of the Company, JiangSu JinHe Power And Electricity Fuel Co.,LTD was granted special guidance modern service fund( RMB2,000 ten thousand ) to the new project on network platform of the coal supply chain and information technology. 26. Share capital Items I. Restricted shares 1.State-owned shares 2.State-owned legal person shares 3.Other domestic holding shares Of which:domestic legal person shares Domestic natural person shares 4. foreign shareholding Of which: overseas legal person shares Overseas natural person shares Total restricted shares the unrestricted shares 1.RMB ordinary shares 2.Domestic listed foreign shares 3. foreign shares overseas listed 4.Others Total shares unrestricted Total number of shares As at January 1, 2013 Increase or decrease in 2013 As at 31 Dec 2013 Amount Proport ion (%) Issue of new shares stock divid end Transfe rred from reserv es Other Subtotal Amount Proporti on (%) 618,133, ,100, ,100, ,233, ,133, ,100, ,100, ,233, ,133, ,100, ,100, ,233, ,990, ,990, ,990, ,990, ,123, ,100, ,100, ,223, The notes to the accounts form an integral part of the financial statements

268 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB The company has considered and approved "on the company's stock options and restricted stock incentive plan (revised draft) and a summary of the motions," in 2012 Sixth Extraordinary General Meeting. The company has also considered and approved granting of incentive stock options and restricted stock motion," at the Seventh meeting of the Fifth Board of Directors at the January 6, All the motions have been filed by the China Securities Regulatory Commission. The Company has granted 310 ten thousand shares of restricted stock to incentive Yan Gang, Li Aijun, Wang Dongsheng, Zhang Jufang all above five people at RMB 3.88 yuan/share in the reporting period. The capital replenishment has been verified by ([2013] in the test C Lei Zi No. 0006) audit report issued by Zhonglei Certified Public Accountants Co., Ltd in the reporting period. 27. Capital surplus Items As at January 1, 2013 Increase in 2013 Decrease in 2013 As at 31 Dec 2013 Capital premium 8,928, ,928, Capital contributed by investors 8,928, ,928, Other capital reserves 18,256, ,256, Of which: equity incentive 18,256, ,256, Total 27,184, ,184, The reasons for increase the amount of capital reserves: The Company has granted 310 ten thousand shares of restricted stock to incentive Yan Gang, Li Aijun, Wang Dongsheng, Zhang Jufang all above five people at RMB 3.88 yuan/share, increasing capital reserves of RMB 8,928, yuan. The Company has implementation of equity incentive to increase capital reserves RMB 18,256, yuan. 28. Surplus reserve Items As at January 1, 2013 Increase in 2013 Decrease in 2013 As at 31 Dec 2013 Statutory surplus reserves 12,273, ,537, ,811, Discretionary surplus reserves Total 12,273, ,537, ,811, Note: The company statutory surplus reserve is 10% of net profit by 29. Retained earnings Retained earnings Changes Items As at 31 Dec 2013 As at January 1, 2013 Retained profit as at December 31,2012 before adjustments 363,364, ,787, Adjustments to total of retained profit as at January 1, 2011 (+ for increases and - for decreases Retained profit as at January 1, 2012 after adjustments 363,364, ,787, Plus: Net profit attributable to shareholders of the parent company 471,165, ,795, Surplus reserves make up losses Other transfer Extraction or distribution ratio (%) The notes to the accounts form an integral part of the financial statements

269 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Items As at 31 Dec 2013 As at January 1, 2013 Less: Statutory surplus reserve Discretionary surplus reserve Dividends payable on ordinary shares Extraction or distribution ratio (%) 12,537, ,481, Internal owners' equity transfer 270,736, Retained profit as at December 31, ,992, ,364, Revenues from operations and costs of operations Revenues from operations and costs of operations Items Revenues from operations 6,490,705, ,281,242, Revenues from other operating Total Revenue 6,490,705, ,281,242, costs of operations 5,521,994, ,541,933, costs from other operating Total operating costs 5,521,994, ,541,933, Revenues from operations and costs of operations are listed by industry Industrial Classification Revenues Costs Revenues Costs Commercial Service Industry Subtotal Less: Internal offset amount Total 6,138,670, ,499,922, ,281,242, ,541,933, ,035, ,072, ,490,705, ,521,994, ,281,242, ,541,933, ,490,705, ,521,994, ,281,242, ,541,933, Revenues from operations and costs of operations are listed by product Product Name Revenues Costs Revenues Costs Coal sales by direct transport Coal blending, processing sales Management of supply chain services platform Supply chain finance business Subtotal Less: Internal offset amount Total 2,450,298, ,262,688, ,138,670, ,499,922, ,830,944, ,279,245, ,909, ,126, ,072, ,490,705, ,521,994, ,281,242, ,541,933, ,490,705, ,521,994, ,281,242, ,541,933, Operating income of the top five customers The notes to the accounts form an integral part of the financial statements

270 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Years Operating income of the top five customers the proportion of total revenue (%) of the same period ,687,889, ,824,781, Business taxes and surcharges Items Business tax Urban maintenance and construction tax Education surcharge Additional local education Price adjustment fund Total ,401, ,121, ,800, ,448, ,409, ,632, ,230, , ,602, ,129, Note: Criteria detail of business tax and surcharges is in Note 5. 32Selling and distribution expenses Items Labor costs 1,519, ,126, Transport fees 308,013, ,441, Harbor dues 27,168, ,483, Stacking handling fee 21,826, ,815, Agent commission fee 1,418, ,598, Verification appraisal fees 3,274, , Lease fee 1,138, , Entry and exit quarantine fee 1,133, , Import port construction fees 7,608, Other 2,836, ,481, Total 375,938, ,579, General and administrative expenses Items Labor costs (salaries) 30,446, ,852, Depreciation and amortization 2,574, ,386, Business entertainment expenses 16,603, ,300, Car expenses 4,950, ,944, The notes to the accounts form an integral part of the financial statements

271 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Items Travel 7,650, ,931, Taxes 2,372, ,227, Office expenses 2,538, ,697, Consulting and intermediary services fee 5,458, ,562, Lease fee 3,827, ,495, Equity Incentive 18,256, Other 2,657, , Total 97,337, ,749, Financial expenses Items Interest expense 35,007, ,190, Less: Interest income 9,617, ,128, Less: Capitalized interest Foreign exchange gains and losses -15,427, , Less: Capitalized exchange gains and losses Fee 9,958, ,848, Total 19,920, ,218, Changes in fair value gains Sources of revenue generated from changes in fair value Trading financial assets 787, Among them: Change in fair value of financial derivative Trading financial liabilities Investment property measure at fair value Total 787, Investment income 1Breakdown of investment income Items Gains from long-term equity investments under the equity method Investment income arising from disposal of financial assets held for trading Investment income arising from disposal of held-to-maturity investments Investment income arising from disposal of financial assets available for sale 99, ,919, ,000, Total 23,018, Note: There are no significant restrictions on remittance of investment income of the company. The notes to the accounts form an integral part of the financial statements

272 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB 2Gains from long-term equity investments under the equity method Investees Reason for the change Zhengzhou Air Port Xing Rui Industrial Co., Ltd. 99, Total 99, Recognized shareholding ratio 37. Impairment of assets Item Bad debt losses 11,610, , Inventory impairment loss Total 11,610, , Non-operating incomes Item Non-recurring gains and losses recognized in the income amount Gains on disposal of non-current assets Total Of which: Gains on disposal of fixed assets Gains on disposal of intangible assets Non-monetary assets exchange gains Government grants (see table below: government grants list) 81,522, ,719, Donations income 220, Other 363, , Total 82,106, ,376, Among them, the government subsidy details Item Relating to assets / income-related Ningbo Free Trade Zone financial support fund 8,069, ,950, Related to income Taizhou local financial support fund 1,748, ,835, Related to income Xining local financial support fund 14,542, ,577, Related to income Hongze local financial support fund 3,463, ,312, Related to income Pizhou local financial support fund 713, ,354, Related to income Qinyang local financial support fund 25, , Related to income Naqu local financial support fund 10,928, Related to income Yantai local financial support fund 42,000, Related to income Singapore government subsidies for innovation 32, Related to income Total 81,522, ,719, The notes to the accounts form an integral part of the financial statements

273 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Notes1. T Naqu Ruichang Coal Transportation and Marketing Co., enjoyed preferential income tax rate of 15%and the corresponding tax return policy for financial assistance, according to ZHANG ZENG FA No. [2011] 14 " Notice of income tax issues of the corporate in our region " and " Provisions of the Regulations of the Qinghai-Tibet Railway Naqu logistics center investment," NA QU LIU FU [2012] No. 03 " Approval on Naqu Ruichang Coal Transportation and Marketing Co., enjoyed preferential policies and other related matters of Naqu logistics center " 2. Xining Dexiang business trade LLC., enjoyed corresponding financial support enterprise development fund, in line with the relevant provisions of the conditions, according to "Investment Agreement" singed by Xining Economic and Technological Development Zone Industrial Park Nanchuan Management Committee and the Xining Dexiang business trade LLC., 3. Jiangsu Fengtai Material Trading Co., Ltd. enjoyed fiscal support in line with the relevant provisions of the conditions to pay taxes, according to relevant regulations of "Hongze County business enterprise investment agreement". 4JiangSu JinHe Power And Electricity Fuel Co.,LTD pay taxes in line with the relevant provisions of the conditions and enjoyed the corresponding local incentives funds, according to "cooperation agreement" signed by Taizhou Gaogang integrated logistics park and the JiangSu JinHe Power And Electricity Fuel Co.,LTD 5. CHINA COAL SOLUTION(YANTAI) SUPPLY CHAIN MANGEMENT LTD. enjoyed fiscal incentives fund amounted to 42 million,according to the Muping People's Government Office meeting minutes No China Coal Solution (singapore) Pte.Ltd has obtained 32, of Singapore government innovation subsidy. 7. Pizhou Fengyuan Power Fuel Co., Ltd., and Xuzhou Yuguang Trading Co., Ltd. enjoyed the corresponding local funding policies according to the documents of Opinion to speed up transport and port logistics of Pizhou coal market " (PI Zheng Fa [2008] 69 related condition number) issued by Pizhou Municipal People's Government. 8.Zhejiang Hui Power Fuel Co., Ltd., and ZHEJIANG YUNENG POWER AND ELECTRICITY FUEL CO.,LTD enjoyed the corresponding local funding policies, according to the documents of "Several Opinions on Encouraging Operations Center Development" (Yong Bao Zheng [2010] on the 13th) issued by Ningbo Free Trade Zone Management Committee. 39. Non-operating expenditure Items Total Losses on disposal of non-current assets Including: Losses on disposal of fixed assets Losses on disposal of intangible assets Claims expenditure 567, Abnormal gains and losses recognized in the income amount Donation expenditure 50, Other 178, Total 795, Income tax Items Current income tax calculated according to the tax law and related regulations 83,693, ,706, Deferred tax adjustment -7,724, , Total 75,969, ,538, Basic earnings per share and diluted earnings per share The notes to the accounts form an integral part of the financial statements

274 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Basic earnings per share is equal to the Company's net profit attributable to ordinary shareholders divided by the weighted average number of ordinary shares outstanding. According to the specific terms of the contract, the number of new issued ordinary shares should be calculated since the date of accounts receivable consideration, usually as stock issue date. The molecular of diluted earnings per share should be based on the Company's current net profit attributable to ordinary shares after adjusting the following factors: (1) Potential dilutive ordinary shares recognized as interest expense in the current period, (2) Conversion income or expense of the potential dilutive ordinary shares, (3) Income tax adjustments related. The denominator of diluted earnings per share is equal to the sum of the following two items: (1) basic earnings per share -issued weighted average number of ordinary shares of the parent company (2) potential dilutive ordinary shares- the increase in the weighted average number of ordinary shares. When calculate the potential dilutive ordinary shares conversion into ordinary shares, increasing in the number of weighted average number of ordinary shares. If the potential dilutive ordinary shares issued in prior periods, the conversion date is assumed at the beginning of the year. If the potential dilutive ordinary shares issued in the year, the conversion date is assumed at issue date. 1Basic earnings per share and diluted earnings per share amounts of each period presented Reporting Profit Net profit attributable to ordinary shareholders Net profit attributable to ordinary shareholders after deducting abnormal gains and losses Basic EPS Diluted EPS Basic EPS Diluted EPS 2Earnings per share calculation and diluted earnings per share When calculating basic earnings per share, net profit attributable to ordinary shareholders as follows: Items Net current profit attributable to ordinary shareholders 471,165, ,795, Among them: Net profit attributable to going concern 471,165, ,795, Net profit attributable to discontinued operations Net profit attributable to ordinary shareholders after deducting abnormal gains and losses 407,773, ,555, Among them: Net profit attributable to going concern 407,773, ,555, Net profit attributable to discontinued operations Calculating the diluted EPS, net current profit attributable to ordinary shareholders Items Net profit attributable to ordinary shareholders 471,165, ,795, Interest expense recognized in the current period, the dividend of potential dilutive ordinary shares attributable to the ordinary shareholders, after deducting income tax Conversion income or expense of potential dilutive ordinary shares attributable to the ordinary shareholders after deducting the tax Among them: Net profit attributable to going concern 471,165, ,795, Net profit attributable to discontinued operations The notes to the accounts form an integral part of the financial statements

275 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Calculating basic earnings per share, the denominator is the weighted average number of ordinary shares outstanding, calculated as follows: Items At the beginning number of ordinary shares issued outside Add: Weighted average number of ordinary shares issued in the year Less: Weighted average number of ordinary shares repurchased in the year At the end weighted average number of common shares outstanding 869,123, ,133,813 2,841, ,990, ,965, ,797,173 Calculating diluted earnings per share, the weighted average for the issued ordinary shares as follows: Items Calculation weighted average number of ordinary shares of basic earnings per share Plus: additional the weighted average number of ordinary shares assuming that potential dilutive ordinary shares convert into ordinary shares in issue Among them: additional weighted average number of ordinary shares of convertible bonds additional weighted average number of ordinary shares exercising warrants / stock options Additional weighted average number of common shares performing commitment to repurchase Calculation weighted average number of ordinary shares of diluted earnings per share 871,965, ,797,173 1,950,411 1,950, ,915, ,797,173 At the twenty-second meeting of the fifth Board,the Company passed the " The motion of adjustment the number of stock options first granted " and ""The motion to unlock in the first phase of restricted stock of equity incentive plan and exercise the option in the first vesting period The company adjusted the object of first granted incentive stock options from 76 people to 73 people, the corresponding number of stock options granted adjusted from 1,535 ten thousand to1,510 ten thousand.the conditions to exercise stock options granted of the first phase of the equity incentive plan have been met after inspection. There were 6,040,000 stock options to exercise since January 7, 2014 to January 6, 2015 exercisable The number of the first unlocked is 124 ten thousand shares, representing 0.14% of the total share capital of the company. The unlocking day is the trading day at the January 20, Notes to the statement of cash flows 1Other cash receipts relating to operating activities Items Open credit 141,777, ,286, Government grants 81,522, ,719, Interest income 9,617, ,128, Others 363, , Total 233,282, ,791, Other cash payments relating to operating activities Items Open credit 184,182, Sales expenses 369,587, ,453, Factoring expenditure of transferee of receivables 2,127,683, The notes to the accounts form an integral part of the financial statements

276 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Items Business entertainment expenses 16,603, ,300, Lease fee 3,827, ,495, Travel 7,650, ,931, Office expenses 2,538, ,697, Car expenses 4,950, ,944, Intermediary agencies fees 5,458, ,562, Charge expenditure 10,257, ,848, Others 3,453, , Total 2,736,195, ,480, Other cash receipts relating to operating activities Items Cash balances of original JIU FA stock at the purchase day 286, Total 286, Other cash receipts relating to financing activities Items Government special guide capital receipts 20,000, Factoring company borrowing money 2,070,000, Total 2,090,000, Other cash payments relating to financing activities Items Intermediary agencies fee associated with company restructuring 16,000, Payment of bankers' acceptances, letters of credit 680,762, Total 680,762, ,000, Cash Flow Supplementary Information 1Reconciliation of net income to cash flows from operating activities Items Reconciliation of net income to cash flows from operating activities Net income 471,150, ,795, Add: 11,610, , Depreciation of fixed assets, Petrol assets and productive biological assets 2,523, ,386, Amortisation of intangible assets 105, Amortisation of long-term prepayments 38, Losses / (gains) on disposal of fixed, intangible and other long-term assets -220, The notes to the accounts form an integral part of the financial statements

277 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Losses / (gains) on scrapping of fixed assets Items Losses / (gains) on changes of the fair value -787, Financial expenses / (income) 27,383, ,337, Investments losses / (gains) -23,018, Decrease / (increase) in deferred income tax assets -7,888, , Increase / (decrease) in deferred income tax liabilities 164, Decrease / (increase) in inventories -35,894, ,709, Decrease / (increase) in operating receivables -3,994,177, ,846, Increase / (decrease) in operating payables 1,647,047, ,350, Others 18,256, Net cash flows from operating activities -1,883,813, ,924, Investing and financing activities not resulting in cash flows Conversion of debt into capital Convertible bonds to be expired within one year Fixed assets under finance lease Net increase in cash and cash equivalents Cash at the end of the period 526,522, ,164, Less: Cash at the beginning of the period 820,164, ,164, Plus: Cash equivalents at the end of the period Less: Cash equivalents at the beginning of the period Net increase in cash and cash equivalents -293,641, ,999, Acquisition/ Disposal of subsidiaries and other business entities Items Acquisition of subsidiaries and other business entities A The price for the acquisition of subsidiaries and other business entities B Cash and cash equivalents paid for the acquisition of subsidiaries and other business entities LessCash and cash equivalents held by subsidiaries and other business entities CNet cash paid for the acquisition of subsidiaries and other business entities D Net assets from the acquisition of subsidiaries Current assets Non-current assets Current liabilities Non-current liabilities Disposal of subsidiaries and other business entities A The price for the disposal of subsidiaries and other business entities BCash and cash equivalents received from the disposal of subsidiaries and other business entities LessCash and cash equivalents held by subsidiaries and The notes to the accounts form an integral part of the financial statements ,000,

278 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB other business entities Items CNet cash received from the disposal of subsidiaries and other business entities DNet assets from the disposal of subsidiaries -Current assets -Non-current assets -Current liabilities -Non-current liabilities 3Disclosure of cash and cash equivalents Items Cash 526,522, ,164, Cash on hand 2,005, ,031, Bank deposit that are available for payment at any time 488,357, ,423, Other monetary terms that are available for payment at any time 36,159, ,708, Cash equivalents -Bond investments due within 3 months Cash and cash equivalents at the end of the period 526,522, ,164, Related parties and related party transactions 1.The parent of the Company Company name Relationship Company type Registered address ZHENGZHOU Direct CHINA COAL Limited liability controlling SOLUTION CO., company shareholder LTD.. Zhengzhou Legal representative Wan Yongxing Business nature (Continued) Company name ZHENGZHOU CHINA COAL SOLUTION CO., LTD.. Registered capital Percentage of shareholding in the Company Percentage of shareholding with voting rights in the Company 360,000, Ultimate controller Wan Yongxing Organization code Note: The ultimate controlling party of the Company is Henan Rui Investment Co., Ltd. Mr. Wan Yongxing holding 70.00% share of Henan Rui Investment Co. is the actual controller of the Company's 2. Subsidiary of the Company Please refer to Note VI-subsidiary. 3. Associates and joint ventures of the Company Please refer to Note 15-long-term equity investments The notes to the accounts form an integral part of the financial statements

279 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB 4. Other related parties of the Company Company name Relationship Organization code Anhui Ruichang Real Estate Development Co., Ltd. Controlled by the ultimate controlling party 5. Guarantees with related parties 1Guarantees with related parties Name of the guarantor ZHENGZHOU CHINA COAL SOLUTION CO., LTD.. ZHENGZHOU CHINA COAL SOLUTION CO., LTD.. ZHENGZHOU CHINA COAL SOLUTION CO., LTD.. Wan Yongxing Liuyi ZHENGZHOU CHINA COAL SOLUTION CO., LTD... ZHENGZHOU CHINA COAL SOLUTION CO., LTD.. ZHENGZHOU CHINA COAL SOLUTION CO., LTD.. ZHENGZHOU CHINA COAL SOLUTION CO., LTD.. ZHENGZHOU CHINA COAL SOLUTION CO., LTD.. Henan Zhongrui Investment Co. Wan Yongxing Wan Yongxing Liuyi Name of the guarantee ZHEJIANG YUNENG POWER AND ELECTRICITY FUEL CO.,LTD Jiangsu Fengtai Materials Trading Co.,Ltd. Jiangsu Fengtai Materials Trading Co., Ltd. Jiangsu Fengtai Materials Trading Co., Ltd. Jiangsu Fengtai Materials Trading Co., Ltd. Xining Dexiang business trade LLC Xining Dexiang business trade LLC Xining Dexiang business trade LLC Naqu Ruichang Coal Transportation and Marketing Ltd. Naqu Ruichang Coal Transportation and Marketing Ltd. Naqu Ruichang Coal Transportation and Marketing Ltd. Naqu Ruichang Coal Transportation and Marketing Ltd. Naqu Ruichang Coal Transportation and Marketing Ltd. Naqu Ruichang Coal Transportation and Guarantee amount The notes to the accounts form an integral part of the financial statements 64 Start date of the guarantee End date of the guarantee 180,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000, Whether the guarantee has been fulfilled YES YES YES YES YES YES YES YES YES 585,000, NO 520,000, ,000, ,000, ,000, NO NO NO NO 277

280 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Name of the guarantor Liuyi Anhui Ruichang Real Estate Development Co., Ltd. ZHENGZHOU CHINA COAL SOLUTION CO., LTD.. Wan Yongxing Liuyi Name of the guarantee Marketing Ltd. Naqu Ruichang Coal Transportation and Marketing Ltd. Naqu Ruichang Coal Transportation and Marketing Ltd. Henan Teng Rui Energy Industry Development Co., Ltd. Henan Teng Rui Energy Industry Development Co., Ltd. Henan Teng Rui Energy Industry Development Co., Ltd. Guarantee amount Start date of the guarantee End date of the guarantee 650,000, ,000, ,000, ,000, ,000, Whether the guarantee has been fulfilled NO NO NO NO NO The notes to the accounts form an integral part of the financial statements

281 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Notes1. ZHENGZHOU CHINA COAL SOLUTION CO., LTD.., has made commitment to provide guarantee amount to RMB180, 000, for ZHEJIANG YUNENG POWER AND ELECTRICITY FUEL CO.,LTD to the Zhengzhou Yellow River Road Branch of Guangdong Development Bank Co., Ltd in order to guarantee obligations of credit contract"(id: Z029 )and its the amended or supplemented items signed between " ZHEJIANG YUNENG POWER AND ELECTRICITY FUEL CO.,LTD and Zhengzhou Yellow River Road Branch of Guangdong Development Bank Co., Ltd. in October ZHENGZHOU CHINA COAL SOLUTION CO., LTD..has made commitment to provide guarantee amount to RMB50,000, for Jiangsu Fengtai Materials Trading Co., Ltd., to the Zhengzhou Yellow River Road Branch of Guangdong Development Bank Co., Ltd in order to guarantee obligations of credit contract(id: Z028)and its the amended or supplemented items signed between Jiangsu Fengtai Materials Trading Co.,Ltd. and Zhengzhou Yellow River Road Branch of Guangdong Development Bank Co., Ltd. in October 15, ZHENGZHOU CHINA COAL SOLUTION CO., LTD.., Wan Yongxing, Liu Yi have made commitment to provide guarantee amount to RMB300, 000, for Jiangsu Fengtai Materials Trading Co., Ltd., in order to ensure a series of debt of Zhengzhou Branch of CITIC Bank credit to Jiangsu Fengtai Materials Trading Co., Ltd. including, but not limited to, various types of loans, notes, guarantees, letters of credit and other banking services since 10 July 2012 to 31 December ZHENGZHOU CHINA COAL SOLUTION CO., LTD.., Henan Zhong Rui Investment Co., Ltd., Wan Xing, Liu Yi have made commitment to provide guarantee amount to RMB 520,000, for Naqu Ruichang Coal Transportation and Marketing Co., Ltd. in order to ensure continuous multi-debt between Zhengbian Road Branch of CITIC Bank and Naqu Ruichang Coal Transportation and Marketing Co., Ltd. at since May 7, 2013 to 31 December 2014, since May 7, 2013 to May 7, 2015, since July 4, 2013 to July 4, ZHENGZHOU CHINA COAL SOLUTION CO., LTD.., Henan Zhong Rui Investment Co., Ltd., Wan Xing, Liu Yi have made commitment to provide guarantee amount to RMB 585,000, for Naqu Ruichang Coal Transportation and Marketing Co., Ltd. in order to ensure continuous multi-debt between Zhengbian Road Branch of CITIC Bank and Naqu Ruichang Coal Transportation and Marketing Co., Ltd. at since September 25, 2013 to September 25, Anhui Ruichang Real Estate Development Co., Ltd mortgage its land use right to provide collateral amount to RMB 350,000, for Naqu Ruichang Coal Transportation and Marketing Co., Ltd.; in order to guarantee obligations of RMB working capital loan contract (ID: 2013 YU YIN DAI ZI DI ) between Zhengzhou branches of CITIC Bank and Naqu Ruichang Coal Transportation and Marketing Co., Ltd. 7. ZHENGZHOU CHINA COAL SOLUTION CO., LTD. has made commitment to provide guarantee amount to RMB 390,000, for Xining Dexiang business trade LLC in order to ensure continuous multi-debt between Xining Dexiang business trade LLC and Zhengzhou branches of CITIC Bank. 8. CCS Supply Chain Management Co., Ltd. in the Company pledged 2,062 ten thousand stock to provide security and provide joint liability guarantee for Xining Dexiang business trade LLC to ensure the fulfillment of "working capital loan contract" No.2013QING ZHONG YIN DUAN JIE 033 (loan amount of $ 100,000,000.00), signed between number Qinghai Branch of Bank of China and Xining Dexiang business trade LLC 9. CCS Supply Chain Management Co., Ltd. in the Company pledged1,800 ten thousand stock to provide security and provide joint liability guarantee for Xining Dexiang business trade LLC to ensure the fulfillment of "working capital loan contract" No.2013 GUANG ZHENG DONG FENG ZHI 2H (loan amount of $ 200,000,000.00), signed between number China Dongfeng Branch of Everbright Bank Co., Ltd., and Zhengzhou and Xining Dexiang business trade LLC 10. ZHENGZHOU CHINA COAL SOLUTION CO., LTD..., Wan Xing and Liu Yi have made commitment to provide guarantee amount to RMB 65,000, and RMB650,000, respectively for Henan Teng Rui Energy Industry Development Co., Ltd. in order to ensure continuous multi-debt between Zhengbian Road Branch of CITIC Bank and Henan Teng Rui Energy Industry Development Co., Ltd. since September 26, 2013 to September 26, Borrowings and lending with related parties Borrowings Related parties Borrowed amounts Start dates End dates Notes ZHENGZHOU CHINA COAL SOLUTION CO., LTD.. 2,070,000, Installments within one year The notes to the accounts form an integral part of the financial statements

282 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Notes Borrowing funds was used by the subsidiary, TIANJIN CHINA COAL SOLUTION FACTORING CO., LTD.. at a rate of 6% (APR), to repay installment for one year, 3Other related party transactions The Company's subsidiary, TIANJIN CHINA COAL SOLUTION FACTORING CO., LTD.. confirmed to pay Zhengzhou ZHENGZHOU CHINA COAL SOLUTION CO., LTD.charges amount for the use of funds of 22,072, in Receivables and payables with related parties Receivables and payables with related parties Items Other payables ZHENGZHOU CHINA COAL SOLUTION CO., LTD.. Interest payable ZHENGZHOU CHINA COAL SOLUTION CO., LTD.. 2,070,000, ,072, Share-based payment 1. Overall share-based payment Items Total equity instruments of the company granted in the year Total equity instruments to exercise the company in the year Total equity instruments invalid in the year Total equity instruments outstanding at the end of year Total equity instruments can be exercised at the end of year The price range to exercise stock options outstanding and the remaining term of the contract at the end of year The price range to exercise other equity instrument options outstanding and the remaining term of the contract at the end of year Detailed The Company has granted 15,350,000 stock options to the 76 core business personnel and 310 million shares of restricted stock to five senior managers Yan Gang, Li Aijun, Li Qun Li, Wang Dongsheng, Zhang Jufang at January 7, The Company has granted grant 310 million shares of restricted stock to Yan Gang, Li Aijun, Li Qun Li, Wang Dongsheng, Zhang Jufang during the period at the price of RMB 3.88 per share to increase the capital of the company. During the period, three staff has resigned, involving 250,000 stock options invalid. 15,100,000 shares The exercise price of stock option outstanding is 7.83 yuan / share at end year. The incentive plan is valid for three years since January 7, None The notes to the accounts form an integral part of the financial statements

283 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Other notes: At December 31, 2012, the Company adopted the "CHINA COAL SOLUTION(SHANDONG) SUPPLY CHAIN MANGEMENT LTD. stock options and restricted stock incentive plan (revised draft)" at the Sixth Extraordinary General Meeting of At January 6, 2013, the Company approved "on the right incentive stock options and restricted stock granted the motion," at the seventh meeting of the fifth session of the Board of Directors.The Company has granted 15,350,000 stock options to the 76 core business personnel and 310 million shares of restricted stock to five senior managers Yan Gang, Li Aijun, Li Qun Li, Wang Dongsheng, Zhang Jufang at January 7, The Company has granted 15,350,000 stock options and 3.1 million restricted stock to incentive 81 person including company directors, senior management and key personnel core business, but excluding independent directors. Each option has the right to purchase company's stock at exercise price 7.83 yuan per share from the date of vesting within three years. The participants of share incentive plan can exercise 40% of granted options of the first batch from the grant date first year to the second year. The participants of share incentive plan can exercise 30% of granted options of the second batch from the second year to the third year. The participants of share incentive plan can exercise 30% of granted options of the third batch from the third year to the fourth year. The Company has granted restricted stock at the price of RMB 3.88 per share. The first unlock period is from the date of grant in the first year to the second year. The second unlock period is from the second year to the third year. The third unlock period is from the third to the fourth year. Only if the indicators of performance measure of stock options and restricted stock incentive plan could be achieved, stock options and restricted stock will be unlocked. Performance measurement indicators of stock options and restricted stock for each year as follows: Exercise period (unlocking period) The first option exercise period (first unlocking period) The second option exercise period (second unlocking period) The second option exercise period (second unlocking period) Performance measurement indicators Revenues is not less than 4.6 billion yuan in 2012; Net profit is not less than 380 million yuan in 2012; Weighted average of ROE is not less than 19% in 2012; Revenues is not less than 6 billion yuan in 2013; Net profit is not less than 450 million yuan in 2013; Weighted average of ROE is not less than 19.5% in 2013; Revenues is not less than 7.3 billion yuan in 2013; Net profit is not less than 500 million yuan in 2013; Weighted average of ROE is not less than 20% in 2013; Share-based payment Items Detailed Method for determining the fair value of the equity Using Black-Scholes option pricing model instruments at the granted day Best estimate of the methods for determining the The total number of options is 15,350,000.First time 6.14 number of vested equity instruments million options expect to vest., including the valid option of three departure staff. The amount of option will decrease 150, 000,considering the departure staff. The option to exercise at second and third period is 9,060,000. Reasons for significant difference between this year None and last year The cumulative amount of capital reserve to for 18,256, share-based payment The total cost of share-based payment 18,256, The notes to the accounts form an integral part of the financial statements

284 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB 2. Share-based payment scheme The company implemented a stock option and restricted stock incentive plan to improve corporate governance structure to incentive staff to be enthusiasm and creativity, to promote sustained growth of the company and to achieve development for both company and employees. The Company has granted 15,350,000 stock options to the 76 core business personnel and 310 million shares of restricted stock to five senior managers Yan Gang, Li Aijun, Li Qun Li, Wang Dongsheng, Zhang Jufang at January 7, The exercise price of stock option outstanding is 7.83 yuan / share at end year.the Company has granted restricted stock at the price of RMB 3.88 per share. Stock options and restricted stock have been granted at January 7, The valid period is about 36 months since the first date of stock options and restricted stock granted, unless the valid period is canceled or modified. 10. Contingencies 1. In the December 9, 2013, CITIC Bank subsidiary of the Company, issued the amount of $ 20 million irrevocable letter of guarantee to Henan Zhengzhou Branch Teng Rui Energy Industry Development Co., Ltd, which its number was 45000LG and guarantee period is to December 9, In the December 9, 2013, CITIC Bank subsidiary of the Company, issued the amount of $ 20 million irrevocable letter of guarantee to Henan Zhengzhou Branch Teng Rui Energy Industry Development Co., Ltd, which its number was 45000LG and guarantee period is to December 16, Commitments The main categories Controlling shareholder Controlling shareholder Controlling shareholder actual controller, related parties Significant commitments Commitments party Commitments Share lock-term commitment: The ZHENGZHOU subscription of shares CHINA COAL of listed companies SOLUTION CO., can not be transferred LTD.. within 36 months from the date of issued ZHENGZHOU Commitments to CHINA COAL compensate earnings SOLUTION CO., forecast if necessary. LTD... ZHENGZHOU Commitments to avoid CHINA COAL the competition in the SOLUTION CO., samewith the listed LTD..,,Wan company industry. Yongxing, Liu Yi Time of commitments undertaken December 21, 2011 December 26, 2011, May 9, 2012 December 21, 2011 The period to complete Commitments 36 months since the end of date of issue shares (ie, August 29, 2012 to August 28, 2015) Commitments to the restructuring injected assets to achieve net profit in 2011, 2012, 2013, 2014 as follows: 31, ten thousand yuan, 37, ten thousand yuan, 44, ten thousand yuan, 48, ten thousand yuan Effective period as controlling shareholder, actual controller, related parties of CHINA COAL SOLUTION(ZHENGZ HOU) SUPPLY CHAIN MANGEMENT LTD., The fulfillment of commitments Until December 31, 2013, ZHENGZHOU CHINA COAL SOLUTION CO., LTD.have not transferred shares of the Company Inject assets restructuring has been completed the earnings forecast in 2011, 2012 and The controlling shareholder will fulfill its commitments strictly. Until December 31, 2013, Zhengzhou China Coal Solution Co., Ltd.Wan Xing, Liu Yi have been strictly to fulfill the commitments, without any violation of commitments. The notes to the accounts form an integral part of the financial statements

285 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB The main categories Controlling shareholder actual controller, related parties Controlling shareholder actual controller, related parties Commitments party Commitments ZHENGZHOU Commitments to CHINA COAL standardize the SOLUTION CO., LTD..Wan Yongxing, Liu Yi related transaction with the listed company ZHENGZHOU Commitment to CHINA COAL safeguard the SOLUTION CO., independence of listed LTD..,Wan companies Yongxing, Liu Yi Time of commitments undertaken December 21, 2011 December 21, 2011 The period to complete Commitments Effective period as controlling shareholder, actual controller, related parties of ZHENGZHOU CHINA COAL SOLUTION CO., LTD.., Effective period as controlling shareholder, actual controller, related parties of ZHENGZHOU CHINA COAL SOLUTION CO., LTD.., The fulfillment of commitments Until December 31, 2013, ZHENGZHOU CHINA COAL SOLUTION CO., LTD.., Wan Xing, Liu Yi have been strictly to fulfill the commitments, without any violation of commitments. Until December 31, 2013, ZHENGZHOU CHINA COAL SOLUTION CO., LTD.., Wan Xing, Liu Yi have been strictly to fulfill the commitments, without any violation of commitments. 12. Subsequent events occurring after the balance sheet date None 13.Notes on other significant events 1. Convertible financial instruments issued outstanding at the year end Share payment of the Company is in the Note9. 2Assets and liabilities measured at fair value Financial assets Items 2012 Changes in fair value of the year Cumulative changes in fair value recognized in equity Impairment charge for the year Financial assets measured at fair value with changes recorded in profit or loss (excluding derivative financial assets) Financial derivative 787, , Available for sale 200,000, Subtotal of financial assets 787, Investment property Productive biological asset Other Total above 787, ,787, Financial liabilities Foreign currency financial assets and foreign currency financial liabilities Financial assets Items 2012 Changes in fair value of the year Cumulative changes in fair value recognized in equity Impairment charge for the year 2013 The notes to the accounts form an integral part of the financial statements

286 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Items 2012 Changes in fair value of the year Cumulative changes in fair value recognized in equity Impairment charge for the year Financial derivative assets 131, , Loans and receivables 166,170, ,282, Available for sale Held to maturity 2013 Subtotal of financial assets Financial liabilities: 166,170, , ,413, Short-term borrowings 132,571, ,212, Accounts payable 188,760, ,448, Major notes to financial statements of the parent company 1. Other receivables 1Other receivables listed by categories As at 31 Dec 2013 Types Significant individually amount and provision for bad debts of other receivables Group of provision for bad debts of other receivables Carrying amount Amount Proportion (%) Aging group 27,715, Subtotal 27,715, Individually insignificant but individual provision for bad debts of other receivables Total 27,715, Provision for bad debts Amount Proportion (%) (Continued) Types As at January 1, 2013 Significant individually amount and provision for bad debts of other receivables Group of provision for bad debts of other receivables Aging group 537, Subtotal 537, Individually insignificant but individual provision for bad debts of other receivables Total 537, Amount Proportion (%) Amount Proportion (%) Amount Proportion (%) 2Other receivables presented by aging The notes to the accounts form an integral part of the financial statements

287 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Item As at 31 Dec 2013 As at January 1, 2013 Amount Proportion (%) Amount Proportion (%) Within 6 months 27,715, , months to 1 year 1-2 years 2-3 years More than 3 years Total 27,715, , Provision for bad debts In the groups, according to age analysis provision for bad debts of other receivables: As at 31 Dec 2013 As at January 1, 2013 Aging Carrying amount Provision Carrying amount Amount Proportion for bad Amount Proportion (%) debts (%) Within 6 months 27,715, , months to 1 year 1-2 years 2-3 years More than 3 years Provision for bad debts Total 27,715, , There is no more than five percent voting shares in balance of other receivables at the year-end. 5Top five of other receivables Company Name Relationship with the Company Amount Aging Proportion (%) Henan Tengrui Energy Industry Subsidiaries Development Co., Ltd. 17,800, ZHEJIANG HEHUI ELECTRICITY Subsidiaries MATERIAL CO.,LTD 9,155, China Railway Engineering Consulting Non-related Group Co., Ltd., Zhengzhou Institute parties 550, Henan Poly Art Center Management Co. Non-related parties 82, Henan Sheng Yu Culture Media Co., Ltd. Non-related parties 39, Total 27,627, Receivables from related parties Relationship with the Company Name Company Henan Tengrui Energy Industry Subsidiaries Development Co., Ltd. ZHEJIANG HEHUI ELECTRICITYSubsidiaries MATERIAL CO.,LTD Amount Aging 17,800, ,155, Total 26,155, The notes to the accounts form an integral part of the financial statements

288 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB 2Long-term equity investments 1Long-term equity investments Categories Items As at January 1, 2013 Increase in 2013 Decrease in 2013 Subsidiaries 2,988,000, ,988,000, Joint ventures Associates Other equity investments Less: provisions for impairment losses Total 2,988,000, ,988,000, Breakdown of long-term equity investments Accounting Investee entities methods Pizhou Fengyuan Cost method Power Fuel Co., Ltd. Xuzhou Yifeng Trading Cost method Co. JiangSu JinHe Power Cost method And Electricity Fuel Co.,LTD Total Initial investment costs As at January 1, ,868,000, ,868,000, Movements As at 31 Dec ,868,000, ,000, ,000, ,000, ,000, ,000, ,000, ,988,000, ,988,000, ,988,000, (Continued) Investee entities Pizhou Fengyuan Power Fuel Co., Ltd. Xuzhou Yifeng Trading Co. JiangSu JinHe Power And Electricity Fuel Co.,LTD Proportion to Proportion to registered capital voting rights of the of the investee (%) investees(%) Total Note for inconsistency Provisions for impairment Provisions for impairment of 2013 Cash dividends of Investment income Investment income Investee entities Gains from long-term equity investments under the cost method Gains from long-term equity investments under the equity method Investment income arising from disposal oflong-term equity investments 163,113, Total 163,113, Supplementary Cash Flow Information Items The notes to the accounts form an integral part of the financial statements

289 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Items Reconciliation of net income to cash flows from operating activities Net income -28,822, ,918, Add: Depreciation of fixed assets, Petrol assets and productive biological assets Amortisation of intangible assets Amortisation of long-term prepayments Losses / (gains) on disposal of fixed, intangible and other long-term assets Losses / (gains) on scrapping of fixed assets Losses / (gains) on changes of the fair value Financial expenses / (income) 35, Investments losses / (gains) -163,113, Decrease / (increase) in deferred income tax assets Increase / (decrease) in deferred income tax liabilities Decrease / (increase) in inventories Decrease / (increase) in operating receivables 470, , Increase / (decrease) in operating payables 4,897, ,662, Others 18,256, Net cash flows from operating activities -5,162, ,069, Investing and financing activities not resulting in cash flows Conversion of debt into capital Convertible bonds to be expired within one year Fixed assets under finance lease Net increase in cash and cash equivalents Cash at the end of the period 6,855, , Less: Cash at the beginning of the period 160, ,280, Plus: Cash equivalents at the end of the period Less: Cash equivalents at the beginning of the period Net increase in cash and cash equivalents 6,694, ,120, Supplementary information 1. Extraordinary gain and loss schedule Gains on disposal of non-current assets Items Unauthorized approval, or without official approval document, or occasional tax return, tax relief Government grants recognized in the profit or loss, excluding closely related to the normal business operations, sustaining to enjoy government grants according to certain fixed amounts in line with state policies and regulations, Funds occupied charge of the non-financial company recognized in the profit or loss Gain from the investment cos of subsidiaries, associates and joint venture less than fair value of identifiable net assets of the investee Gains and losses of non-monetary assets transaction The notes to the accounts form an integral part of the financial statements 74 81,522, ,719,

290 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Items Investment gains and losses of assets entrust others to manage Due to force majeure, asset impairment provision, such as natural disasters Gains and losses of debt restructuring Corporate restructuring costs, expenses such as employee placement fees, integration costs Gain or loss arising from significant unfair trading price exceeds the fair value Net profit or loss of subsidiaries under the same control from year beginning to the merger date Gains and losses arising from unrelated activities to business operations or contingences of the company Except effective hedging of business operations, changes in fair value of held for trading, trading financial liabilities, disposal of trading financial assets and financial liabilities, disposal of held for trading and disposal of available-for-sale Reversal of impairment provision of receivables individually tested Loss of commissioned loans Gains from changes in fair value of investment property using the fair value model for subsequent measurement Impact of one-time adjustment to the profit and loss,according to tax, accounting,laws and other regulations Management fee income achieved of custodian fiduciary 787, Other operating income and expenses in addition the above -212, , Other profit and loss items in line with the definition of abnormal gains and losses Subtotal 82,098, ,376, Tax effect -18,706, ,136, Minority interests (after tax) Total 63,391, ,240, Note: Non-recurring items in the number "+" indicates that earnings and income, "-" indicates losses or expenses. The Company recognized a non-recurring items in accordance with the regulation of "public offering of securities of the Company Disclosure Explanatory Notice No. 1 - non-recurring gains and losses" (CSRC Announcement [2008] No. 43). 2.Return on equity and earnings per share Reporting Profit Net profit attributable to ordinary shareholders Net profit attributable to ordinary shareholders after deducting non-recurring gains and losses Weighted average return on net assets Earnings per share (Yuan / share) Basic earnings per share Diluted earnings per share 31.24% % Calculation of basic earnings per share and diluted earnings is in Note Explanation of abnormal of the Company's consolidated financial statements 1Consolidated financial statements The notes to the accounts form an integral part of the financial statements

291 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Change Items Reasons range (%) Monetary funds Increase the amount of 1,207,285, ,164, money Notes receivable 386,846, ,075, Increase in bills settlement Accounts receivable 911,052, ,250, Increase business volume Prepayments 772,337, ,293, Increased purchasing volume Other receivables 177,751, ,209, Increase in current accounts Other current assets Available for sale 200,000, financial assets Long-term equity investments 385,594, ,177,038, ,360, Increase in receivables under factoring Trust Investment Investment of Xinyu agricultural firms and other joint ventures Intangible assets 150,650, , Acquire land use rights Deferred tax assets Deferred income and 8,056, , impairment of assets recognized ; increase in deferred income tax assets Short-term borrowings 1,052,539, ,571, Increased borrowing Notes payable Increase the number of 1,147,021, ,227, issued bankers' acceptances Accounts payable 330,534, ,475, Increased purchasing volume Advances from customers Employee benefits payable Interest payable Other payables 171,592, ,244, ,446, ,318, ,072, ,077,402, ,511, Increase of advances from customers Increase unpaid wages Interest payable to ZHENGZHOU CHINA COAL SOLUTION CO., LTD. Borrow amount of TIANJIN CHINA COAL SOLUTION FACTORING CO., LTD.. from ZHENGZHOU CHINA COAL SOLUTION CO., LTD.. Deferred income Other non-current liabilities 20,000, Capital reserve 27,184, Issue restricted stock Surplus reserve 24,811, ,273, Increase in net profit Retained earnings 821,992, ,364, Increase in net profit 2Consolidated Income statement, Consolidated cash flow statement Items Change Reasons range (%) Operating income 6,490,705, ,281,242, Increase business volume Cost of sales 5,521,994, ,541,933, Increase business volume Business tax and Increase in service fees and 21,602, ,129, surcharges interest income Selling expenses Increase costs caused by the 375,938, ,579, increase in business volume Administrative expenses Increase costs caused by the 97,337, ,749, increase in business volume Finance costs 20,220, ,218, Interest expense increased Impairment of assets 11,610, , The notes to the accounts form an integral part of the financial statements 76 Increased provision for bad debts 289

292 CCS SUPPLY CHAIN MANAGEMENT CO., LTD. Notes to the Financial Statements for the year ended 31 December 2013 Monetary Unit: RMB Items Change range (%) Investment income 23,018, Cash payments of purchase of goods services Cash payments to employees 4,734,210, ,242,003, Reasons Income of disposal trust and futures contracts Increased purchasing volume 28,404, ,797, Increases of both employees number and benefit Payments of taxes 164,487, ,021, Enjoy low tax incentives rate Other cash paid relating to operating activities Cash received from 103,066, investments Cash received from investment income 23,117, ,061,879, ,480, Cash payments of acquisition fixed assets, intangible assets and 154,643, other long-term assets Cash paid for investments 689,320, Cash received from investment absorption 12,028, , Cash received from borrowings 2,388,261, ,517, Cash repayments of debt 1,466,941, ,099,432, Cash dividends payment, or interest 32,153, ,788, payments Other cash paid related to financing activites 680,762, ,000, , Increase the amount of selling expenses, administrative expenses, payment transactions Recover Trust Investment funds Receive transfer income of trust investments, investment income of futures Acquisition land use rights Investment of Xinyu agricultural firms and other joint ventures Issue restricted stock Increase borrow money Increase the repayment amount Increase interest payments Increasing the deposit to issue bank acceptance and letter of credit Approval of the financial statements The financial statements were approved by the board of directors of the Company. The notes to the accounts form an integral part of the financial statements

293 APPENDIX IV UNAUDITED FINANCIAL STATEMENTS OF CCS SUPPLY CHAIN MANAGEMENT CO., LTD. AND ITS SUBSIDIARIES FOR THE SIX MONTHS ENDED 30 JUNE 2014 The information set forth in this Appendix IV has been extracted and translated from the unaudited financial statements of CCS Supply Chain Management Co., Ltd. and its subsidiaries for the six months ended 30 June 2014 and has not been specifically prepared for inclusion in this Information Memorandum. 291

294 Section IX Financial Report (Unaudited) Part One:Financial Statements Consolidated Statement of financial position June 30, 2014 Prepared by:ccs Supply Chain Management Co., Ltd. Unit: Yuan Currency: RMB Items Notes June 30, 2014 December 31, 2013 Current assets Monetary funds SIX.1 744,967, ,207,285, Settlement funds Lending funds Tradable financial assets SIX.2 1,193, , Notes receivable SIX.3 238,320, ,846, Accounts receivable SIX.4 567,719, ,052, Advances to suppliers SIX.6 980,327, ,337, Premium receivables Reinsurance receivables Reinsurance contract reserve Interest receivable Dividend receivable Other receivables SIX.5 202,724, ,751, Buying back the sale of financial assets Inventories SIX.7 813,994, ,933, Long-term debt investment due within a year Other current assets SIX.8 1,826,220, ,177,038, Total current assets 5,375,467, ,873,032, Non-current assets Issuing of entrusted loans and advances Available-for-sale financial assets SIX.9 200,000, Held-to-maturity investments Long-term accounts receivable Long-term equity investments SIX ,074, ,594, Investment property Fixed assets SIX.12 15,108, ,939, Construction in progress Construction materials Fixed assets held for disposal 292

295 Productive biological assets Petrol assets Intangible assets SIX ,712, ,650, Development costs Goodwill Long-term prepayments SIX , , Deferred tax assets SIX.10 5,090, ,056, Other non-current assets Total non-current assets 990,181, ,725, ASSETS 6,365,649, ,629,758, Current liabilities Short-term loans SIX. 1,377,949, ,052,539, Borrowing from the central bank Deposit taking of interbank Borrowing funds Tradable financial liabilities SIX.18 5,312, Notes payable SIX ,477, ,147,021, Accounts payable SIX ,877, ,534, Advances from customers SIX ,394, ,592, Sell and repurchasfinancial assets Payment of fees and commissions Accrued payroll SIX.22 4,006, ,446, Taxes payable SIX.23 18,559, ,599, Interest payable SIX.24 88,179, ,072, Dividend payable Other payables SIX.25 1,668,606, ,077,402, Dividend payable for reinsurance Insurance contract reserve Acting trading securities Acting underwriting securities Long-term liabilities due within a year Other current liabilities Total current liabilities 4,416,363, ,863,209, Non-current liabilities Long-term borrowings Bonds payable Long-term payables Special payables Estimated liabilities Deferred tax liabilities SIX15 298, ,

296 Other long-term liabilities SIX.26 20,000, ,000, Total non-current liabilities 20,298, ,164, Total liabilities 4,436,661, ,883,373, Paid-in capital SIX ,263, ,223, Capital surplus SIX.28 72,373, ,184, Less: treasury stock Special reserves Surplus reserve SIX.29 48,917, ,811, General risk provisions Undistributed profit SIX ,150, ,992, Currency translation differences -1,891, Total equity attributable to equity holders 1,928,814, ,746,211, Minority interests 173, , ,928,987, ,746,384, TOTAL LIABILITIES 6,365,649, ,629,758, Legal representative: Wang Yongxin In charge of accounting: Li Aijun In charge of accounting department: Liu Jianhui Financial position of the Parent Company June 30, 2014 Prepared by:ccs Supply Chain Management Co., Ltd. Unit: Yuan Currency: RMB Items Notes June 30, 2014 December 31, 2013 Current assets: Monetary funds 353, ,855, Trading financial assets Notes receivable Accounts receivable Twelve. 1 Prepayments Interest receivable Dividends receivable 633,068, Other receivables Twelve ,340, ,715, Inventories Non-current assets due within one year Other current assets Total current assets 727,762, ,570, Non-current assets: Available for sale financial assets Held to maturity investments 294

297 Long-term receivables Long-term equity Twelve.. investments 3 2,988,000, ,988,000, Investment property Fixed assets 229, , Construction in progress Construction materials Disposal of fixed assets Production of biological assets Oil and gas assets Intangible assets Development expenditure Goodwill Long-term prepaid expenses Deferred tax assets Other non-current assets Total non-current assets 2,988,229, ,988,186, Total assets 3,715,991, ,022,756, Current liabilities: Short-term borrowings Trading financial liabilities Notes payable Accounts payable Advances from customers Employee benefits payable 117, , Taxes payable 39, , Interest payable Dividends payable Other payables 76,163, ,208, Non-current liabilities due within one year Other current liabilities Total current liabilities 76,320, ,334, Non-current liabilities: Long-term borrowings Bonds payable Long-term payables Special payables Accrued liabilities Deferred tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities 76,320, ,334, Owners 'equity (or shareholders' equity): Paid-up capital (or equity) 878,263, ,223, Capital reserve 2,461,303, ,416,114,

298 Less: treasury stock Special reserves Surplus reserve 83,152, ,047, General risk provisions Retained earnings 216,951, ,963, Total Owners 'equity (or shareholders' equity) 3,639,671, ,965,422, Total Liabilities and owners 'equity (or 3,715,991, ,022,756, shareholders' equity) Legal representative: Wang Yongxin In charge of accounting: Li Aijun In charge of accounting department: Liu Jianhui Consolidated Income Statement Unit: Yuan Currency: RMB Items Notes June 30, 2014 December 31, 2013 Total operating income 3,247,461, ,369,818, Of which: Operating income SIX.30 3,247,461, ,369,818, Interest income Earned premiums Fee and commission income Total operating costs 3,171,614, ,272,871, Including: Operating costs SIX.31 2,815,790, ,059,125, Interest expense Fee and commission expenses surrender value Net expenditure Net insurance contract reserve extract Expenditures dividend policy Reinsurance expenses Business tax and surcharges SIX.32 8,612, ,868, Selling expenses SIX ,450, ,300, Administrative expenses SIX.34 54,008, ,622, Finance costs SIX.35 67,675, ,193, Impairment of assets SIX38-11,922, ,147, Add: Fair value gains (losses "-" for SIX.36 loss) -4,906, Investment income (loss' - "for loss) SIX.37 89,822, Including: Investment income from associates and joint ventures 1,480, Foreign exchange gains (losses "-" for loss) Three operating profit ("-" for loss) 160,762, ,946, Plus: Non-operating income SIX.39 6,313, ,056, Less: Non-operating expenses SIX , , Including: Loss on disposal of non-current assets 296

299 Total profit before tax (loss with "-" for loss) 166,301, ,953, Less: Income tax expense SIX.41 33,036, ,769, Net profit (net loss "-" for loss) 133,264, ,184, Net profit attributable to owners of the parent company 133,264, ,191, Minority interests , earnings per share: (A) Basic earnings per share SIX (B) Diluted earnings per share SIX Other comprehensive income SIX.43-1,891, Total comprehensive income 131,373, ,184, Total comprehensive income attributable to owners of the parent 131,373, ,191, Total comprehensive income attributable to minority shareholders , Legal representative: Wang Yongxin In charge of accounting: Li Aijun In charge of accounting department: Liu Jianhui Income Statement of Parent Company Unit: Yuan Currency: RMB Items Notes June 30, 2014 December 31, 2013 Operating income Less: Cost of sales Business tax and surcharges Selling expenses Administrative expenses 10,855, ,967, Finance costs -22, , Impairment of assets Add: Fair value gains (losses "-" for loss) Investment income (loss' - "for loss) Tewlve ,068, Including: Investment income from associates and joint ventures Operating profit ("-" for loss) 622,235, ,954, Plus: Non-operating income 785, Less: Non-operating expenses 50, Including: Loss on disposal of non-current assets Total profit before tax (loss with "-" for loss) 623,020, ,004, Less: Income tax expense Net Profit. (Net loss "-" for loss) 623,020, ,004, Earnings per share: (A) Basic earnings per share (B) Diluted earnings per share Other comprehensive income 297

300 Total comprehensive income 623,020, ,004, Legal representative: Wang Yongxin In charge of accounting: Li Aijun In charge of accounting department: Liu Jianhui Consolidated Cash Flow Statement Unit: Yuan Currency: RMB Items Notes June 30, 2014 December 31, 2013 Cash flows from operating activities: Sales of goods. Provides services received in cash SIX.44 3,286,037, ,498,093, Customer deposits and interbank deposit equivalents Net increase in borrowings from the central bank Net increase of capital borrowed from other financial institutions Cash received of the original insurance contract Net cash received from reinsurance business Net increase in policyholders' deposits and investments Net increase in disposal of financial assets Cash interest charges. Fees and commissions Net increase of capital borrowed Net increase in repurchase operations funds Tax Refund Other cash received relating to operating 1,077,705, ,291, activities Subtotal of cash inflow from operating activities 4,363,743, ,529,384, Buy goods. Accept cash payment services 3,080,238, ,636,058, Net increase in loans and advances to customers Central banks and interbank payments equivalents Original insurance contract paid in cash payments 298

301 Cash interest payments. Fees and commissions Cash dividends paid to policyholders Cash payments to employees and for 23,000, ,161, employees paid Payments of taxes 214,169, ,396, Other cash paid relating to operating activities 817,425, ,204, Cash outflows from operating activities 4,134,834, ,947,820, Net cash flow from operating activities 228,909, ,435, Cash flows from investing activities: Cash received from investments 200,000, Cash received from investment income 88,324, Net cash from disposal of fixed assets, intangible assets and other long-term assets Net cash from disposal of subsidiaries and other business units of Other cash received relating to investing activities Subtotal of cash inflow from investing activities 288,324, Purchase of fixed assets. Intangible assets and other long-term assets to pay 4,685, ,289, cash Cash paid for investments 432,000, Net increase in loans Net cash used in other business units and subsidiaries made payments Other cash paid relating to investing activities Cash outflows from investing activities 436,685, ,289, Net cash flows from investing activities -148,360, ,289, Cash flows from financing activities: Cash received from investment absorption 47,293, ,100,

302 Including: Cash received from minority shareholders of Cash received from borrowings 2,010,719, ,780, Cash received from issuance of bonds Other cash received relating to financing 295,000, activities Subtotal of cash inflow from financing activities 2,353,012, ,880, Cash repayments of 1,687,109, ,642, Distribution of dividends. Cash profits or interest 49,376, ,490, payments Including: dividends paid to minority shareholders of profits. Other cash paid relating to financing activities 705,000, Cash outflows from financing activities 2,441,485, ,133, Net cash flow from financing activities -88,472, ,747, Effect of exchange rate changes on cash and cash 760, ,246, equivalents Cash and cash equivalents -7,163, ,223, Add: Cash and cash equivalents 526,522, ,164, Cash and cash equivalents at end of period 519,359, ,940, Legal representative: Wang Yongxin In charge of accounting: Li Aijun In charge of accounting department: Liu Jianhui Parent Company Cash Flow Unit: Yuan Currency: RMB Items Notes June 30, 2014 December 31, 2013 Cash flows from operating activities: Sales of goods. Provides services received in cash Tax Refund Other cash received relating to operating activities Subtotal of cash inflow from operating activities Twelve. 5 97,608, ,014, ,608, ,014,

303 Buy goods. Accept cash payment services Cash payments to employees and for 1,764, ,575, employees paid Payments of taxes 124, , Other cash paid relating to operating activities 149,434, ,207, Cash outflows from operating activities 151,323, ,784, Net cash flow from operating activities -53,714, ,769, Cash flows from investing activities: Cash received from investments Cash received from investment income Net cash from disposal of fixed assets, intangible assets and other long-term assets Net cash from disposal of subsidiaries and other business units of Other cash received relating to investing activities Subtotal of cash inflow from investing activities Purchase of fixed assets. Intangible assets and other long-term assets to pay 79, , cash Cash paid for investments Net cash used in other business units and subsidiaries made payments Other cash paid relating to investing activities Cash outflows from investing activities 79, , Net cash flows from investing activities -79, , Cash flows from financing activities: Cash received from investment absorption 47,293, ,028, Cash received from borrowings Cash received from 301

304 issuance of bonds Other cash received relating to financing activities Subtotal of cash inflow from financing activities 47,293, ,028, Cash repayments of Distribution of dividends. Cash profits or interest payments Other cash paid relating to financing activities Cash outflows from financing activities Net cash flow from financing activities 47,293, ,028, Effect of exchange rate changes on cash and cash equivalents Cash and cash equivalents -6,501, ,081, Add: Cash and cash equivalents 6,855, , Cash and cash equivalents at end of period 353, ,241, Legal representative: Wang Yongxin In charge of accounting: Li Aijun In charge of accounting department: Liu Jianhui 302

305 303 Items Paid-up capital (or equity) Capital reserve Changes in consolidated equity Equity attributable to parent company Less: General Special Surplus treasury risk reserves reserve stock provisions Retained earnings Other Unit: Yuan Currency: RMB Minority interests Total equity One. Prior year end 872,223, ,184, ,811, ,992, , ,746,384, balance Plus: Changes in accounting policies Correction of errors Other Two. Balance at beginning of 872,223, ,184, ,811, ,992, , ,746,384, year Three Movements during the period 6,040, ,189, ,105, ,158, ,891, ,602, (reduced to "-" for loss) (A) Net profit 133,264, ,264, (B) Other comprehensive -1,891, ,891, income Above (a) and (b) Subtotal 133,264, ,891, ,373, (C) the owner 6,040, ,189, ,229,033.23

306 304 of the capital investment and reduce 1. Owners invested capital 2. Shares included in the owners' equity 3. Other (D) the distribution of profits 1. Surplus reserves 2. General reserve 3. Distribution to owners (or shareholders) 4. Other (Five) inside the carry-over of owners' equity 1. New increase of capital (or equity) 2. Surplus reserves to capital (or equity) 3. Surplus 6,040, ,253, ,293, ,935, ,935, ,105, ,105, ,105, ,105,709.93

307 reserves make up losses 4. Other (SIX) Special reserve 1. Extraction period 2. Current use (7) Other Four. Current ending balance 878,263, ,373, ,917, ,150, ,891, , ,928,987, Items One. Prior year end balance Plus: Changes in accounting policies Correction of errors Other Two. Balance at beginning of year Three Movements during the period Paid-up capital (or equity) Capital reserve The amount of same period prior year Equity attributable to parent company Less: Special Surplus General Retained treasury reserves reserve risk earnings stock provisions Other Unit: Yuan Currency: RMB Minority interests Total equity 869,123, ,273, ,364, , ,244,950, ,123, ,273, ,364, , ,244,950, ,100, ,907, ,191, , ,191,528.69

308 306 (reduced to "-" for loss) (A) Net profit 97,191, , ,184, (B) Other comprehensive income Above (a) and (b) Subtotal 97,191, , ,184, (C) the owner of the capital investment and reduce 3,100, ,907, ,007, Owners invested capital 3,100, ,928, ,028, Shares included in the 8,979, ,979, owners' equity 3. Other (D) the distribution of profits 1. Surplus reserves 2. General reserve 3. Distribution to owners (or shareholders) 4. Other (Five) inside the carry-over of owners' equity

309 New increase of capital (or equity) 2. Surplus reserves to capital (or equity) 3. Surplus reserves make up losses 4. Other (SIX) Special reserve 1. Extraction period 2. Current use (7) Other Four. Current ending balance 872,223, ,907, ,273, ,555, , ,363,142, Legal representative: Wang Yongxin In charge of accounting: Li Aijun In charge of accounting department: Liu Jianhui Items One. prior year end balance Paid-up capital (or equity) Capital reserve The parent company of changes in equity Less: treasury stock Special reserves Surplus reserve General risk provisions Retained earnings Unit: Yuan Currency: RMB Total equity 872,223, ,416,114, ,047, ,963, ,965,422,326.34

310 308 Plus: Changes in accounting policies Correction of errors Other Two. Balance at beginning of 872,223, ,416,114, ,047, ,963, ,965,422, year Three Movements during the period 6,040, ,189, ,105, ,914, ,249, (reduced to "-" for loss) (A) Net profit 623,020, ,020, (B) Other comprehensive income Above (a) and (b) Subtotal 623,020, ,020, (C) the owner of the capital investment 6,040, ,189, ,229, and reduce 1. Owners invested 6,040, ,253, ,293, capital 2. Shares included in the 3,935, ,935, owners' equity 3. Other (D) the distribution of 24,105, ,105,709.93

311 309 profits 1. Surplus reserves 2 Withdrawal of general risk provision 3. Distribution to owners (or shareholders) 4. Other (Five) inside the carry-over of owners' equity 1. New increase of capital (or equity) 2. Surplus reserves to capital (or equity) 3. Surplus reserves make up losses 4. Other (SIX) Special reserve 1. Extraction period 2. Current use (7) Other Four. Current ending balance 24,105, ,105, ,263, ,461,303, ,152, ,951, ,639,671,505.28

312 310 Items Paid-up capital (or equity) Capital reserve Less: treasury stock The amount of same period prior year Special Surplus reserves reserve General risk provisions Retained earnings Unit: Yuan Currency: RMB Total equity One. prior year end 869,123, ,388,930, ,047, ,140, ,963,960, balance Plus: Changes in accounting policies Correction of errors Other Two. Balance at beginning of 869,123, ,388,930, ,047, ,140, ,963,960, year Three Movements during the period 3,100, ,907, ,004, ,002, (reduced to "-" for loss) (A) Net profit -14,004, ,004, (B) Other comprehensive income Above (a) and (b) Subtotal (C) the owner of the capital investment -14,004, ,004, ,100, ,907, ,007,400.00

313 311 and reduce 1. Owners invested capital 2. Shares included in the owners' equity 3. Other (D) the distribution of profits 1. Surplus reserves 2 Withdrawal of general risk provision 3. Distribution to owners (or shareholders) 4. Other (Five) inside the carry-over of owners' equity 1. New increase of capital (or equity) 2. Surplus reserves to capital (or equity) 3. Surplus reserves make 3,100, ,928, ,028, ,979, ,979,400.00

314 up losses 4. Other (SIX) Special reserve 1. Extraction period 2. Current use (7) Other Four. Current ending balance 872,223, ,406,837, ,047, ,145, ,970,962, Legal representative: Wang Yongxin In charge of accounting: Li Aijun In charge of accounting department: Liu Jianhui 312

315 Part Two. Company status CCS Supply Chain Management Co., Ltd. is formerly known as the Shandong Jiufa Edible Fungus Co. Shandong Jiufa Edible Fungus Co. obtained ShanDong Province(LU ZHENG ZI[1998]NO 90).Shandong Jiufa Group as the main sponsor carried out joint-stock system reorganization on wholly owned subsidiary Yantai Jiufa Edible Fungus Co., Ltd and China Township Enterprises Corporation as joint co-sponsored to raise the establishment of the joint stock limited company. Shandong Jiufa Edible Fungus Co. registered in Shandong Province Industry and Commerce Administration Bureau on June 25, Shandong Jiufa Edible Fungus Co. obtained approval from the China Securities Regulatory Commission ZHENG JIAN FA ZI [1998] No. 147 and [1998] No. 148, made initial public offering by the Shanghai Stock Exchange on June 8, 1998, which issued 32 million public shares including 320 ten thousand employee shares, and public traded in the Shanghai stock Exchange on July 3, 1998.In 1999,Shandong Jiufa Edible Fungus Co. distributed profits through stock dividend to pay dividend according 3 shares for each 10 shares and to transfer of capital reserve to common shares according to 3 shares for each 10 shares. Total number of share capital is on the base of 11,900 million in the end of After the above, total share capital of Shandong Jiufa Edible Fungus Co. was changed to 19,040 ten thousand shares. A approval certificate [China Securities Regulatory Commission] [2000] No. 141] were obtained on placement of ordinary shares to all shareholders 18,758,400 shares. After the above, total share capital of Shandong Jiufa Edible Fungus Co. was changed to 209,158,400 shares. In 2001, Shandong Jiufa Edible Fungus Co. distributed profits in the mid-period, transfer capital reserve to common shares according to 2 shares for each 10 shares. After the above, total share capital of Shandong Jiufa Edible Fungus Co. was changed to 250,990,080 shares. On September 28, 2008, application by the creditors, according to Yantai Intermediate People's Court (2008) YAN MIN PO ZI NO. 6-1 civil judgment ruling, Shandong Jiufa Edible Fungus Co. began to enter into bankruptcy reorganization process. In December 9, 2008, "Draft of reorganization plan" was approved by the Yantai Intermediate People's Court (2008) YAN MIN PO ZI NO. 6-14, Shandong Jiufa Edible Fungus Co. entered the restructuring implementation period. In June 1, 2009, according to ruling judgment of Shandong Province Intermediate People's Court (2008) YAN MIN PO ZI NO. 6-14, Shandong Jiufa Edible Fungus Co. Management supervisory duties has been terminated, the reorganization plan has been completed on June 1, On December 24, 2011, Yantai Intermediate People's Court issued civil mediation (2011) YAN TAI JIAN ZI No. 35:Since there was the problem of 100% stake of Yantai Zichen, Shandong Jiufa Edible Fungus Co., has never substantial control of Yantai Zichen. Shandong Jiufa Edible Fungus Co. has no the operation business and failed to be going concern, which did not meet the target and principle of "Restructure Plan of Shandong Jiufa Edible Fungus Co., ". Shandong Jiufa Edible Fungus Co returned 100% stake investment of Yantai Zichen to Yantai Saishang. Shandong Jiufa Edible Fungus Co., separate select reorganization direction. Shandong Jiufa Edible Fungus Co. injected 330 million yuan of assets without compensation on behalf of the Zhengda Wumao to repay debt amounted to RMB 330 million yuan. 313

316 Shandong Jiufa Edible Fungus Co., and ZHENGZHOU CHINA COAL SOLUTION CO., LTD. signed "Debt compensatory agreement" and " Agreement of acquisition assets by issuing shares." on December 26, 2011.According to the" Debt compensatory agreement ", ZHENGZHOU CHINA COAL SOLUTION CO., LTD. injected 330 million yuan of assets without compensation on behalf of Shandong Muping Zhengda Wumao Center to repay debt to Shandong Jiufa Edible Fungus Co.,. Simultaneously Shandong Jiufa Edible Fungus Co returned 100% stake Investment of Yantai Zichen to Zhengda Wumao. The assets of 330 million is the % of the total shares of Xuzhou Yifeng Trading Co., Ltd. Pizhou Fengyuan Power Fuel Co., Ltd., JiangSu JinHe Power And Electricity Fuel Co.,LTD held by ZHENGZHOU CHINA COAL SOLUTION CO., LTD. According to "Business Valuation Report ( ZI BING BAO ZI No. DZ )" issued by Oriental Appraisal Co.,Ltd. Total net asset value of 100% equity share of Xuzhou Yifeng Trading Co., Ltd.., and 100% equity share of Fengyuan Power Fuel Co., Ltd., and 100% equity share of Jiangsu, 100% equity share of JiangSu JinHe Power And Electricity Fuel Co.,LTD held by ZHENGZHOU CHINA COAL SOLUTION CO., LTD. amounted to of acquisition assets by issuing shares", the remaining % total equity of Xuzhou Yifeng Trading Co., Ltd.., and Fengyuan Power Fuel Co., Ltd., and JiangSu JinHe Power And Electricity Fuel Co.,LTD was acquired by issuing shares from ZHENGZHOU CHINA COAL SOLUTION CO., LTD. On August 6, 2012, according to "On the approval of Shandong Jiufa Edible Fungus Co. issuance of shares to acquire assets of ZHENGZHOU CHINA COAL SOLUTION CO., LTD." (Zheng Jian Xu Ke [2012] No. 1042) documents, issued by the China Securities Regulatory Commission. Shandong Jiufa Edible Fungus Co., was approved to issue 618,133,813 shares to acquire the assets from ZHENGZHOU CHINA COAL SOLUTION CO., LTD. After the completion of the reorganization, the company has been a management company, holding the core assets of 100% stake of Xuzhou Yifeng Trading Co., Ltd.., and Fengyuan Power Fuel Co., Ltd., and JiangSu JinHe Power And Electricity Fuel Co.,LTD On August 26, 2012, Shandong Jiufa Edible Fungus Co., passed a resolution to change the company name to "Shandong China Coal Solution Supply Chain Management Ltd" at the Third Extraordinary General Meeting in 2012.On September 16, 2012, Shandong Jiufa Edible Fungus Co., identified the company name as "CHINA COAL SOLUTION(SHANDONG) SUPPLY CHAIN MANGEMENT LTD." at the Fourth Extraordinary General Meeting in 2012.On December 31, 2012, Shandong Rui Mao Supply Chain Management Co., Ltd changed the company name to "China Coal Solution Supply Chain Management Co., Ltd." at the Sixth Extraordinary General Meeting in The parent company is CHINA COAL SOLUTION (ZHENGZHOU) SUPPLY CHAIN MANGEMENT LTD., and the actual controller is Wang Yongxing. The Company's industry is: Coal supply chain management. The operating range is: Coal wholesale business, asset management, coal information consulting, coal supply chain management. The Company's legal representative: Wang Yongxing, The Company registered address: HSBC Tower, ShengliRoad, and Yantai City, Shandong Province Part Three: The main accounting policies and accounting estimates and previous errors 314

317 1. Basis of reporting for financial statements The financial statements of the Company are prepared in accordance with the going concern basis and the - Basic ; Application Guide and of Accounting Standards subsequently issued by the Ministry of Finance on 15 February 2006(Hereinafter referred to as Accounting disclosure in accordance with " Rules No. 15 of Information Disclosure for Public Offering Securities Company- General provisions of the Financial Report" (2010 Amendment) issued by the China Securities Regulatory Commission. According to the relevant provisions of Accounting Standards, the accrual basis is adopted. The financial statements are measured at historical cost basis except for certain financial instruments. If the assets are impaired, the Company makes the provision for impairment in accordance with relevant provisions. 2. Compliance with Accounting Standards for Business Enterprises The financial statements provided by the Company comply with the requirements of Accounting Standards its financial position of the Company as of 30 June 2014, and the results of business operations and cash flows. In addition, the financial statements of the Company disclose in all material respects in accordance with " Rules No. 15 of Information Disclosure for Public Offering Securities Company- General provisions of the Financial Report" (2010 Amendment) issued by the China Securities Regulatory Commission. 3. Financial year Accounting periods of the Company are distinguished into annual period and interim period. Interim period is the accounting periods shorter than one full fiscal year. The Company has adopted the calendar year as its accounting year, i.e. from 1 January to 31 December. 4. Reporting currency The reporting currency of the Company is the Renminbi or RMB ( ). The currency of the Company to prepare of financial statements is the Renminbi or RMB ( ) as well. 5. Accounting treatment under common control and business combinations not under common control method Business combination refers to two or more separate entities into a transaction or event of a reporting entity. Business combinations are classified into business combinations under common control and common control business combination. 1The accounting treatment of business combinations 315

318 Business combination refers to a transaction or event of two or more separate entities combine into a reporting entity. Business combinations are classified into business combinations under the same control and not under the same control. 1Business combination under the same control Business combination under the same control is that companies involved in the merger before and after the merger are subject to the same party or ultimate controlled by the same multiparty, which the control is not temporary.for companies under the same control, combining party refers to achieve the control rights of other party at the combining date. Combined party refers to other companies involved in the combination. The "combining date" refers to the date on which the combining party actually obtains control on the combined party. Assets and liabilities obtained are measured at the carrying amount of the combined party at the combining date. The difference between the carrying amount and the book value of combination consideration (or total face value of issued shares) should be recognized in the capital reserve (share premium).if the capital surplus (share premium) is insufficient, any excess should be adjusted to retained earnings. The direct costs of the business combination for the combined party should be recognized in profit or loss. 2Business combination not under common control Business combination not under the same control is that companies involved in the merger before and after the merger are not subject to the same party or ultimate controlled by the same multiparty. For companies not under the same control, combining party refers to achieve the control rights of other party at the combining date. Combined party refers to other companies involved in the combination. The "combining date" refers to the date on which the combining party actually obtains control on the combined party. For combinations of entities not under common control: The costs of combinations shall be the fair values of the assets surrendered, the liabilities incurred or assumed, and the equity securities issued by the acquirer. Commissions and other relevant administrative expenditures incurred from business combinations, including audit fees, legal service charges, valuation and consultancy costs, etc., shall be recognized in profit or loss for the current period. Transaction costs incurred from issuance of equity securities or debt securities as part of consideration for business combinations shall be included in the initial costs of relevant securities. Contingent consideration for business combinations should be recognized the combination cost at the fair value at the acquisition date. If there is new or update evidence to make adjustment within 12 months after the acquisition date, the Company shall adjust the contingent consideration and combined goodwill as well. For multiple exchange transactions of a business combination realized step by step: In the Company's consolidated financial statements, the equity acquired prior to the acquisition date should be re-measured at fair value at the acquisition date. The difference between the fair value and carrying amount should be recognized in the current investment income of the acquisition date. Simultaneously other comprehensive income related to equity before the acquisition date shall be transferred into the acquiree's current investment income. Cost of consolidated is the combination of fair value of equity of aquiree held by the acquirer prior to the acquisition date and fair value of the additional equity of aquiree at the acquisition date. Consolidated cost of the acquirer and the acquired identifiable net assets should be measured at the fair value of acquisition date. If cost of a business combination exceeds the fair value of acquired identifiable net assets, the difference should be recognized as goodwill. When cost of a business combination is less than the cost fair value of the acquiree's identifiable net assets, First, the fair value and consolidated cost of the identifiable assets, liabilities and contingent liabilities of the acquiree should be reviewed. Secondly, after review, if consolidated cost is still less than fair value of acquiree's identifiable net of assets, the difference amount should be recognized in profit or loss. For acquirer has obtained deductible temporary differences of the acquire and fail to recognize as deferred tax assets as the company do not meet the conditions If there is new or update evidence indicates that the economic profit to deduct temporary differences could realise within 12 months since the acquisition date, deferred tax asset should be recognized and the goodwill should decrease. If there is insufficient goodwill to offset, the difference should be recognized as profit or loss. Addition to the above, the deferred tax assets related to the business combination should be recognized as profit or loss. 316

319 6.Preparation of Consolidated Financial Statements 1Determine the scope of the principle of consolidated financial statements The scope of the consolidated financial statements is based on the control. the power to govern the financial and operating policies so as to obtain benefits from investees operating activities.scope of consolidation includes the Company and all of its subsidiaries. A subsidiary is an enterprise or body controlled by the Company. 2The method of preparation consolidated financial statements Once obtaining the actual control over the net assets of acquiree and business operating decision, the subsidiary should be included in the scope of consolidation. The subsidiary should be included in the scope of consolidation since the date of loss of control. For the disposal of subsidiaries, pre-operating results and cash flows should be properly included in the consolidated income statement and consolidated cash flow statement. For the disposal of subsidiaries during the period, it is unnecessary to adjust the beginning of the consolidated balance sheet. For the additional subsidiary of business combination not under the same control, the post-operating results and cash flows should be properly included in the consolidated income statement and consolidated cash flow statement. It is unnecessary to adjust the beginning amount and comparative amount of the consolidated balance sheet. For the additional subsidiary of business combination under the same control, the post-operating results and cash flows should be properly included in the consolidated income statement and consolidated cash flow statement. It is necessary to adjust the beginning amount and comparative amount of the consolidated balance sheet In preparing the consolidated financial statements, if there is inconsistent of accounting policies or accounting period between the Company and subsidiary. Financial statements of subsidiaries should make the necessary adjustments in accordance to For subsidiaries not under common control, financial statements of subsidiaries should make adjustments on the basis of fair value of identifiable net assets. All significant inter-company balances, transactions and unrealized profits should be eliminated in the consolidated financial statements. Shareholders' equity of subsidiaries and net profits or losses not attributable to the Company should be listed separately, as minority interests and income in both consolidated equity and consolidated profit. Share of the profit or loss of subsidiaries attributable to minority interests in the consolidated income statement should be listed in If losses of the subsidiaries minority exceed the beginning amount of the minority shareholders, the difference should offset against minority interests. For disposal of part of the equity investment or other reasons to lost control over a subsidiary, the remaining shares should be re-measured according to its fair value at the date of loss of control. The difference between proceed of disposal of shares and the fair value of the equity remaining subtracting the original shareholding proportion of net asset of subsidiary since the acquisition date should be recognized in the investment income of the control lost period. Other comprehensive income related to the former subsidiary's equity investments should be transferred to current investment income in the control lost period. After all above, the remaining shares should be measured according to the following: Accounting Standards for Enterprises No. 2 - Long-term equity investments Enterprise Accounting Standards No. 22," Financial Recognition and Measurement Tools etc. - for subsequent measurement, 317

320 Refer to the relevant provisions of this Note IV ", or, 10 "long-term equity investment" or this note four, seven, "financial Instruments." When the company disposal the equity investment until the loss of control of a subsidiary through multiple transactions, it is necessary to distinguish between whether it belong to package deal to disposal of equity investments. If it does not belong to a package deal, the following accounting treatment should be used: For each of them, respectively, in accordance to "without losing control over part of the disposal of long-term equity investments in subsidiaries' (refer to Note IV, 10, (2)) Refer to principles and applicable accounting treatments due to the disposal of part of the equity refer preceding paragraph). If it does belong to a package deal, several transactions should be treated as one transaction, accounting treatment should refer to as a disposal of a subsidiary and the loss of control. However, before the date control lost of the subsidiary, the differences between the each proceed of the disposal of investments and net asset attributable to the parent should be recognized in the other comprehensive income in the consolidated financial statements, and transferred to the profit and loss in the control lost period. 7. Cash and cash equivalents Cash and cash equivalents include cash and investments which are short-term maturity within three months since the acquisition date, highly liquid and easy to convert to known amounts of cash, insignificant changes risk. 8.Foreign currency transactions and foreign currency translation Translation of foreign currency transactions Initial recognition of a foreign currency transaction, the amount in the foreign currency is translated into Renminbi at the spot exchange rate of the transaction date, which is the daily mid-rate published by People's Bank of China. When the company undertakes foreign currency exchange business or transactions involving foreign exchange, the amount in the foreign currency should be translated into Renminbi using the actual exchange rate. 2Treatments for the foreign currency monetary items and Non-monetary items Foreign currency monetary items should be translated at the spot exchange rate on the balance sheet date. The exchange difference arising from the difference between the spot exchange rate on the balance sheet date and the spot exchange rate at the time of initial recognition or prior to the balance sheet date should be recorded as profit or loss in the current period., except exchange movements in foreign currency. Non-monetary items denominated in foreign currency measured at historical cost are translated at the spot exchange rate on the transaction date with no further change. Where non-monetary items are measured at fair value, they are converted to the functional currency at the exchange rate prevailing on the date that fair value was last determined. Gains and losses resulting are recognised in the current period income or other comprehensive income including the capital reserve as changes in fair value (including changes in exchange rate) 3Translation of foreign currency financial statements 318

321 When preparing of the consolidated financial statements with substantially foreign currency monetary investment in the overseas business operations: - Differences arising due to exchange rate changes are recog translation differences - Gain or loss are recognised in the current period income when disposal of a overseas business operations. When translating foreign currency financial statements into Renminbi (RMB), the Company adopts the following methodology: - Assets and liabilities in the balance sheets are translated at the exchange rate of balance sheet date; - The other, are translated at the relevant historic exchange rate; - Income statement items are translated at the spot exchange rate of the transaction date. Opening retained earnings for the year are the translated undistributed profits of the last year. Retained earnings of the year end are listed by translated distribution items of profits. The total difference of translated of assets and liabilities and equity shareholders should be recognized as foreign currency translation differences and other comprehensive income. It should be listed separately in shareholders' equity in the balance sheet. When disposal of a foreign operation and lost control, the differences of foreign currency translation listed under shareholders' equity or related to the oversea operating activities should be recognized in the income statement in whole or proportion of the disposal of the oversea operating activities. The cash flow statement denominated in foreign currency should be translated at the spot rate of cash flows generated date. The impacts of the exchange rate movements should be recorded as reconciling item and it should be presented separately in the cash flow statement. The amount of beginning of the year and ending of the last year should be presented according to the translated amounts of the financial statements of the last year. 9.Financial instruments 1Fair value identifications of financial assets financial liabilities In the fair trade, fair value is the amounts for which they are applied between knowledgeable, willing at fair value, the fair values are measured with direct reference to the quoted prices in the active market. Where there is no active market, the fair values of the financial instruments are measured by estimation with reference to amounts for which they are applied between knowledgeable, willing pa transaction, fair values of other substantially same financial instruments, using estimated present values of cash flows, using option pricing model, etc. 2Classification and recognition, and measurement of financial instruments Purchasing and disposal of the financial assets conventionally should be recognized or derecognized on the trading day respectively. Financial assets and liabilities initially measured at fair value are classified into the following categories: the financial assets or financial liabilities measured at fair value through profit and loss, held for trading, held-to-maturity investments, receivables, financial assets available for sale and other financial liabilities, etc. Financial assets should be initially measured at fair value when they are acquired. Changes in fair value should be charged to profit or loss for the current period. Relevant transaction costs should be charged to profit or loss for the current period. Other financial liabilities should be initially recognized at fair values plus transaction costs. Financial assets measured at fair value through profit and loss 319

322 Including both the held for trading and financial assets and financial liabilities measured at fair value through current profit and loss: Held for trading refers to the financial assets to meet one of the following requirements: The purpose of the acquisition is mainly for sale in the near future; Identifiable parts of centralized financial instrument group and obvious evidence to support that Company manage the group by short-term profit seeking As derivatives only arise from effective hedging instruments and financial guarantee contract except that equity derivatives without quotation and its fair value cannot be reliable measure which settlement only by equity derivatives delivery If one of the following conditions can be met, financial assets should be measured at fair value initially when acquired and changes in fair values charged to profit or loss for the current period. The interest or cash dividends received are recognized as investment income during the holding period. Changes in fair value are charged to profit or loss for the current period at year end. The designation eliminates or significantly reduces the inconsistency in measurement or recognition of related gains and losses due to different measurement basis of the financial assets. There is formal written statement in the risk management or investment strategy document that management of the financial asset/liability group is on fair value basis, which should be reviewed and reported to the key management personal. Financial assets which are initially measured at fair value and changes of the fair value are charged to profit or loss for the current period should be measured at fair value subsequently. Gain or loss of changes in income and relevant dividends should be charged to profit or loss for the current period. Held-to-maturity investments Held-to-maturity investments is non-derivative financial assets with the fixed maturity date and predetermined or fixed recovery amount, which company has the obvious intention and ability to hold to maturity. Held-to-maturity investments should be measured using effective interest method. Amortized cost should be measure subsequently. Gains or losses of derecognition, impairment or amortization should be charged to profit or loss for the current period. The effective interest method is a method of financial assets or financial liabilities (including a group of financial assets or financial liabilities) using effective interest rate to calculate the amortized cost and interest income or expense. The effective interest is the rate used to discount the cash flow of financial assets or financial liabilities to their book value during the expected remaining period or a shorter period if applicable. Expected cash flows are based on all the financial assets or financial liabilities contractual terms to calculate the effective interest rate without considering default risk. Expected cash flows should also include the payment and receipt of transaction costs and other premiums or discounts between the two parties to calculate effective interest rate as well. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable amount, in an active market without quotation, including accounts receivable, notes receivable, interest receivable, dividends receivable, other receivables.,etc. Loans and receivables should be measured using effective interest method. Amortized cost should be measure subsequently. Gains or losses of derecognition, impairment or amortization should be charged to profit or loss for the current period. Available-for-sale 320

323 Non-derivative financial assets should be designated as available for sale initially, if they cannot be measure as one of the following: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity financial investments assets. Available-for-sale should be measured at amortized cost method initially by deduct principal repayment, plus or minus the cumulative amortization amount of difference between the initial and the maturity date using the effective interest method, deduct the impairment loss amount.ending costs of available for sale equity instruments is the same as its initial acquisition cost. Available-for-sale financial assets are measured at fair value subsequently. Gain and loss of changes in fair value should be charged to the capital reserves (other comprehensive income). Meanwhile, the accumulated amount should be transferred to gain or loss on investment and charged to profit or loss for the current period, when derecognize. The interest and cash dividends declared and received during the holding period are recognized as investment income. and ability or fair value of hold to maturity cannot be measured reliable, they should be reclassified as available-for- Standards No since reclassification day, financial assets should be measured at cost or amortized cost instead of fair value. Cost or amortized cost of the financial assets should base on the fair value or book value at the reclassification day If financial assets with a fixed maturity date, gain or loss recognized originally in other comprehensive income should be recognized in profit or loss by using effective interest method to amortize the amount during the remaining period. The difference between the amortized cost and the amount at the maturity date should be recognized in profit or loss by using effective interest method to amortize during the remaining period. If financial assets with no a fixed maturity date, any gain or loss should be recognized originally in other comprehensive income should be recognized in shareholders' equity, and transferred and charged to profit or loss for the current period when disposal. 3Impairment of financial assets Except for Financial assets measured at fair value and changes charged to profit or loss for the current period, the Company carries out an inspection on the carrying amount of r financial assets on each balance sheet day. When there is any obvious evidence described below proving that such financial asset has been impaired, an impairment provision should be made. For individually significant financial assets should be tested for impairment separately; individually insignificant financial assets should be tested for impairment separately or be tested in a group of with similar credit risk features. Both significant and non-significant financial assets not impaired in the separately test should be tested again in a group. Financial assets recognized impairment loss individually should not be tested in a group of financial assets with similar credit risk characteristics. Impairment of held-to-maturity investments, loans and receivables If financial assets are measured at cost or amortized cost, carrying value will be written down to its present value of estimated cash flows. Reduced amount should be recognized as an impairment loss in profit or loss. If there is obvious evidence that a financial asset has been recovered and the related to event since the impairment recognized, previously recognized impairment loss should be reversed. The carrying amount will not exceed the amortized cost of financial asset at the reversal date as if no impairment loss was made. Impairment of available for sale 321

324 Considering comprehensively, once there is significantly decline or Non-temporary decline in the fair value, impairment of the available for sale should be made. Significantly decline is the percentage of cumulative fair value of available for sale more than 20%.Non-temporary decline is the period of continuous decline in the fair value more than 12 months. When available for sale is impaired, the originally accumulated losses recognized in capital reserve should be reversed and recognized in profit or loss. The balance of the accumulated loss is the initial cost of the asset net of any principal repayment and amortization, the current fair value and impairment losses recognized in profit or loss prior. If there is obvious evidence that a financial asset has been recovered and the related to event since the impairment recognized, previously recognized impairment loss should be reversed. Equity instruments reversal of impairment losses should be recognized as other comprehensive income; however debt instruments should be recognized in profit or loss. If there is no quotation in an active market and fair value cannot be measured reliably, or derivative settlement must be done by equity instruments delivery, financial assets impairment loss shall not be reversed. 322

325 4Recognition and measurement for transfer of financial assets Financial assets should be derecognized, if one of the following conditions is filled: Termination of contractual rights to receive cash flows from the financial asset; If the Company has transferred nearly all of the risks and rewards relating to the ownership of the financial assets to the transferee Company neither transferred nor retained nearly all of the risks and rewards relating to the ownership of the financial assets to the transferee, but loss control of the financial asset. Neither transferred nor retained ownership of the financial assets of almost all the risks and rewards, and did not loss control of the financial asset. The extent of its continuing involvement in the transferred should be recognized on financial assets/ liabilities accordingly. Continuing involvement in the transferred financial assets refers to the risk of the company as changes in the value of financial assets. If the transfer of entire financial assets satisfy the criteria for derecognition, differences between the amounts of the following two items shall be recognized in profit or loss for the current period: The carrying amount of the transferred financial asset; The aggregate consideration received from the transfer plus the cumulative amounts of the changes in If the partial transfer of financial assets satisfy the criteria for derecognition, the carrying amounts of the entire financial assets transferred shall be split into the derecognized and recognized parts according to their respective fair values and differences between the amounts of the following two items are charged to profit or loss for the current period: The carrying amounts of the derecognized parts; The aggregate consideration for the derecognized parts plus the portion of the accumulative amounts equity (in other comprehensive income). The company sale financial assets with recourse, financial assets are transferred by endorsement. It is necessary to determine whether almost all of the risks and rewards of ownership of the financial assets has been transferred. If the Company has transferred nearly all of the risks and rewards relating to the ownership of the financial assets to the transferee, they shall be derecognized. If the Company retains nearly all of the risks and rewards relating to the ownership of the financial assets, they shall not be derecognized. If the Company neither transferred nor retained nearly all of the risks and rewards relating to the ownership of the financial assets to the transfereeit is necessary to judge whether to give up control of the financial asset. Accounting treatment should be used in accordance with the principles described in the preceding paragraphs 5Classification and measurement of financial liabilities 323

326 Financial liabilities shall be initial recognized as financial liabilities at fair value through profit or loss and other financial liabilities. Financial liabilities should be initially recognized at fair value. For financial liabilities at fair value through profit or loss, transaction costs should be directly recognized in profit or loss. For other financial liabilities, the transaction costs should be included in the amount recognized initially. Financial liabilities at fair value through profit or loss The conditions of initial recognition d as financial liabilities at fair value through profit or loss is consistent with financial assets ones. Financial liabilities at fair value through profit or loss are subsequently measured at fair value. Gains or losses arising from changes in fair value and related dividends and interest expense should be recognized profit or loss for the current period. Other financial liabilities There is no quotation in an active market and fair value cannot be measured reliably, and derivative settlement must be done by equity instruments delivery. Other financial liabilities using the effective interest method should be subsequently measured at amortized cost. Gains or losses of derecognition should be recognized in profit or loss for the current period. Financial guarantee contracts and loan commitments Both financial guarantee contracts not classed as financial liabilities at fair value through profit or loss and loans commitment with below-market rate not classed as financial liabilities at fair value through profit or loss should be recognized at fair value initially. The higher of the amount of initial recognition in accordance with "Accounting Standards for Enterprises No Contingencies" and the balance of the amount initially recognized deduct accumulated amortization in accordance with "Enterprise Accounting Standards No. 14 6Derecognition of financial liabilities Financial liabilities shall be entirely or partially derecognized if the present obligations derived from them are entirely or partially discharged. Where the Company enters into an agreement with a creditor so as to substitute the current financial liabilities with new ones, and the contract clauses of which are substantially different from those of the current ones, it shall recognize the new financial liabilities in place of the current ones. Upon entire or partial derecognition of financial liabilities, differences between the carrying amounts of the derecognized financial liabilities and the consideration paid (including non-monetary assets surrendered or new financial liabilities assumed) are charged to profit or loss for the current period. 7Derivatives and embedded derivatives Derivative is initially measured at fair value since the contract date and measured at fair value subsequently. For hedging instruments and highly effective hedging derivatives, gains or losses arising from changes in fair value should be determined during the formation of profit or loss in accordance with the nature of the hedging and accounting treatment requirements. Changes in the fair value of other derivative instruments should be recognized in profit or loss. Embedded derivatives should be separated from the combined tool as an individual instrument, if hybrid instruments including embedded derivatives are: Not designated as financial assets or financial liabilities at fair value through profit or loss; Not closely relationship between the embedded derivative and the underlying contract in the economic characteristics and risks; In the same conditions with the embedded derivative; Individual instrument meets the definition of derivative. If embedded derivatives cannot be measured at fair value initially and subsequently, the hybrid instruments should be wholly recognized as a financial asset or financial liability at fair value through profit or loss. 8Offsetting financial assets and financial liabilities 324

327 The company has a legal right to offset the recognized financial assets and financial liabilities, which is currently the enforceable. While the company plans to net settlement or to realize the asset and settle the financial liabilities, the offset balance should be presented in the balance sheet. In addition, financial assets and financial liabilities should be separately in the balance sheet instead offset one. 9Equity instruments Equity instrument is a contract that proves the remaining ownership of assets after deducting all the liabilities of the Company. In the business combination, transaction costs of issuing equity instruments of the issuer could offset the premium income of equity. If the premium is insufficient to offset, then to offset the retained earnings. For the other equity instruments, the consideration received at issue should less transaction costs to increase shareholders' equity. The various distributions to the instruments holder of the company's equity (not including stock dividends) will reduce shareholders' equity. The Company does not recognize changes in the fair value of equity instruments. (10 Receivables: 1.Individually dramatic and individual provision for bad debts of: Recognition and measurement for accounts receivable impairment provision of significant individual amount Significant single amount and provision for bad debts of the withdrawal method Individually accounts receivable more than 5 million yuan accounts and other receivables more than 1 million yuan should be recognized as significant. Individually significant amount of accounts receivable should be tested separately. If there is no impairment, individually significant amount of accounts receivable should be collected into group test for impairment as a whole according to the credit risk. 2. According to a combination of bad debts receivable: The method used for provision of the different group The basis for determining the different group Aging Group Basis for determining group Aging Group According to the aging of receivables Withdrawal method according to a combination of provision for bad debts: Aging Group Method used Aging Group The aging analysis method The aging analysis method used for provision of the different group Ageing Within 6 month yearincluding 6 month AR Percentage of provision% OAR Percentage of provision % 0 0 Within 1 yearincluding 1 year years years years

328 4-5 years Over 5 years Individually insignificant but individual provision for bad debts Individually insignificant amount of receivable and other receivables with significant risk, which not The reason for individual provision for reflect the actual impairment by using aging analysis, should be tested separately. If present value of future cash flows is less than the book value, the difference should be recognized Provision method impairment loss.there is no provision for bad debt of employee petty cash. (11)Inventories: 1.Classification of inventory finished goods, goods for resale, etc. 2. The method of inventory valuation issue The weighted average method The inventories are initially measured at actual cost. The cost of inventory consists of purchase costs, processing costs and other costs. In determining the cost of inventories transferred out or issued, the specific projects acquired or manufactured inventories with no substitute should be determined by specific identification method. The others situation the actual costs are determined by the moving weighted average method. Revolving materials are the materials repeatedly used, which transfer its value gradually but maintain the original form not recognized as fixed assets, including low-value consumables and packing materials, etc., The low-value and short-lived consumables and packaging materials are amortized by applying immediate write-off method when using these items. 3. Recognition and measurement for inventory net realizable value and impairment provision Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated expenses and related taxes necessary to make the sale. Net realizable value of inventories should be measured on the basis of the obtained conclusive evidence, taking into account the purpose of holding inventories and the impact of event after the balance sheet date. On balance sheet date, the inventories are measured at lower of cost and net realisable value. If the cost of inventories is higher than the net realizable value, then a provision is made and recorded in the current period income statement. For large quantity and low individual cost inventories, inventories impairment loss provision is measured and recognised by category. For inventories in the same production and sale region having the same or similar end use or purpose, which are difficult to separate measure, should be combined to make provision. After provision for inventory impairment being made, if the factors resulting in impairment no longer exist and the net realizable value of inventories is higher than its book value, the related provision should be reversed in the current period income statement. 4Stock counting is performed using the perpetual inventory system. 5. mortization of low-value consumables and packing materials The low-value and short-lived consumables and packaging materials should be amortized by applying immediate write-off method when using these items. 326

329 (12) Long-term equity investments (1)Recognition of investment cost For combinations of entities under common control: the initial costs of investments shall be recognized For combinations of entities not under common control: the initial costs of investments shall be stated at the combination costs determined at the acquisition date. The costs of combinations shall be the fair values of the assets surrendered, the liabilities incurred or assumed, and the equity securities issued by the acquirer. Commissions and other relevant administrative expenditures incurred from business combinations, including audit fees, legal service charges, valuation and consultancy costs, etc., shall be recognized in profit or loss for the current period. Transaction costs incurred from issuance of equity securities or debt securities as part of consideration for business combinations shall be included in the initial costs of relevant securities. Long-term equity investments acquired by other methods are initially measured at cost depend on the different way to achieve long term investments. The initial costs of a long-term equity investments obtained by payments of cash shall be the purchase prices actually paid. The initial costs of long-term equity investments in equity securities shall be stated at their fair values. The initial costs of long-term equity investments made by investors shall be stated at the values stipulated in the investment contracts or agreements. The initial costs of long-term equity investments shall be the fair value of the investment itself. The initial investment costs shall be measured fair value or the carrying amounts of the assets traded out. Taxes and other necessary expenses related to long-term equity investment are also included in the investment cost. 2. Subsequent measurement and recognition of gains and losses For long-term equity investments in which the investors have no joint control or significant influence over the investees, and for which there are no quoted prices in the active market, nor can their fair value be reliably measured, they are measured by the cost method. Long-term equity investments in which the investors have joint control or significant influence over the investees are measured under the equity method. For long-term equity investments in which the investors have no joint control or significant influence over the investees, and for which their fair value be reliably measured, they should be classed as Financial assets- available for sale or financial assets -fair value through profit or loss. In addition, for long-term equity investments in which the investors have control over the investees, they are measured by the cost method. Long-term equity investments measured by the cost method. Under the cost method, Long-term equity investments should be measured at the initial investment cost.t investment income of the current period, except cash dividends or profits declared but not yet distributed which are included in the payments or consideration of the investments. long-term equity investments measured by the equity method. 327

330 If the initial costs of long-term of identifiable net assets of the investees, no adjustment is necessary. Otherwise, differences between the initial costs of long- the fair values of identifiable net assets of the investees shall be recognized in profit or loss for the current period, and makes adjustments to carrying amounts of the long-term equity investments accordingly Under the equity method, the investment income for the current period is the share of the investee's net profits or losses of the current year. T to recognize should base on the fair value of identifiable assets investee. The Company shall make to recognize the profit. For the unrealized profits from internal transaction with associates or joint ventures, unrealized gains in accordance with the shareholding of this company are can be reasonably determined. For the unrealized losses from internal transaction with associates or joint ventures, in accordance with "Accounting Standards for Enterprises No. 8 - Impairment of Assets" unrealized losses should be transferred to Impairment of Assets not to be eliminated. For the other comprehensive income, book value of long-term equity investments should be adjusted recognized in other comprehensive income and included in capital surplus. When the Company has share of losses of the investee, the loss should be deducted from book values or other substantially form net equity investments to zero. In addition, after the above treatment, if the Company assumes other obligations according to investment contracts or agreements, they should be recognized as expected liabilities and charged to losses on investments of the current period. If the investees are profitable in subsequent accounting periods, the Company shall recognize the investment income after deducting its share of unrecognized losses. For the company has already held long-term equity investments in associates and joint ventures prior to the implementation of the new accounting standards. If there is any debit balance associated with the equity investment, the remaining amount should be amortized using straight-line methods and recognized in profit or loss. Acquisition of minority interests In preparing the consolidated financial statements, difference between new long-term equity investment of acquisition a minority stake and ownership of the net assets calculated in accordance with the new share percentage from the acquisition date (or combination date) should adjustment capital reserve, if capital reserve is insufficient, any excess is to adjusted retained earnings. Disposal of long-term equity investments In the consolidated financial statements, the parent company of partial disposal of long-term equity investments of subsidiaries without loss of control, the difference amount between proceeds of disposal of long-term equity investment and net assets of subsidiaries attributable to the parent should be recognized in shareholders' equity. Partial disposal of a subsidiary of the parent company's long-term equity investments result in loss of control of the subsidiary. 3Definition of joint control or significant influence over the investees nancial and operating policies so as to obtain sharing of control over an economic activity, which exists only when the investing parties involved in the economic activity reach a consensus on sharing control over critical financial and operating decision-making on the financial and operating policies of an investee, but with no control or joint control over the formulation of these policies. To determine whether significant influence to the investee has, the Company should also consider the voting rights of convertible bonds and current executable warrants held by the Company and other parties. 328

331 4Impairment test and provision methods for impairment losses The company should check any indication of impairment of the asset at each balance sheet date. If there is any sign of possible assets impairment exists, the recoverable amount is estimated.if the recoverable amounts of long-term equity investments are lower than their carrying amounts, the differences are recognized as impairment losses. Impairment losses on long-term equity investments shall not be reversed once recognized. (13nvestment Properties Investment properties are properties to earn rentals or for capital appreciation or both. Examples include land leased out under operating leases, land held for long-term capital appreciation, buildings leased out under operating leases. Furthermore, for the vacant buildings held by the company to lease out, if there is a written resolution of board of directors or similar body to state that the intention of holding properties is to rent under operating leases and the intention will not changes in the short term, should be recognized also as an investment real estate presentation. Investment property is initially measured at cost. If the economic benefits related with the fixed asset are probably to flow to the enterprise and cost of the fixed asset can be measured reliably, subsequent expenditure related should be measure as the cost of investment property. The others subsequent expenditure should be recognized in the profit or loss. For investment properties subsequent measurement under the cost model, the Company adopts the same depreciation policy as that of fixed assets, and adopts the same amortization policy for land use rights as that of intangibles. Impairment test method and Impairment provision methods are in Note IV, 17 "Impairment of non-current and non-financial assets." When convert owner-occupied property or inventories to investment property or convert back, the entry value will be the carrying amounts before the conversion. An investment property converts to owner-occupied property; it should be recognized as fixed assets or intangible assets since the change of date. An owner-occupied property converts to investment property for earn rentals or capital appreciation; it should be recognized as fixed assets or intangible assets investment property since the conversion date. For investment properties measured under the cost model, the entry value should be the carrying amounts before conversion. For investment properties measured under the fair value model, the carrying amount entry value should be the fair value of the conversion date. When the investment property is disposed or permanently withdrawn from being used and no future economic benefits expected from its disposal, investment property should be derecognized. For sale, transfer, disposal or damage of the investment property, income deducting the carrying amounts and related taxes should be recognized in profit or loss for the current period. 14. Fixed assets 1. Recognition of fixed assets and depreciation methods: Fixed assets are tangible assets that have useful life more than one year, and are held for use in the production or supply of goods or services. The initial measurement of a fixed asset shall be at cost method considering the disposal cost. Since bringing the asset to the expected conditions for use, depreciation is provided monthly using the straight-line method. 329

332 2 Category of fixed assets Residual value rate (%) Useful life (year) Depreciation rate (%) Machinery and equipment Transportation Equipment Electronic equipment Impairment test method and provision methods of fixed assets Impairment test method and provision methods of fixed assets refer to Note 17 "Impairment of non-current non-financial assets." 4.Recognition and measurement of finance lease Finance lease is the lease that transfer all the substantially risks and rewards of ownership of an asset leases, which ownership may eventually transferor not. The depreciation policy for assets held under finance leases should be consistent with that for owned assets. If there is reasonable certainty that the lessee will obtain ownership at the end of the lease, the asset should be depreciated over the useful life of the leased asset. If there is no reasonable certainty that the lessee will obtain ownership at the end of the lease, the asset should be depreciated over the shorter of the lease term or the useful life of the leased asset. 5.Additional Notes Subsequent expenditures related to fixed assets should be recognized when all the following conditions are met: The economic benefits related to intangible assets are probably to flow to the Company, The cost of assets can be measured reliably, The Company will derecognize the carrying amount of substitute component part.the other subsequent expenditure shall be recognized as an expense in the current period when actual incurred. The Company will review the useful life, estimated residual value and deprecation method of the fixed assets at the year end. If there is any difference is accounted for as a change in accounting estimate. Assets shall be derecognized if one of the following conditions is to fill: Disposal of fixed assets, There is no economic benefit generate through use or disposal of fixed assets, Income of sale, transfer, disposal or damage of shall be recognized in its income statement deducting the carrying amount and related taxes. (15)Construction Construction in progress should be recorded at full actual cost including all expenses incurred for construction, capitalized borrowing costs and other related expenses. When construction in progress is ready for use, it should be transferred into assets at actual cost. Impairment test method and impairment provision, refer to Note 17 "Impairment of non-current and non-financial assets." 330

333 16.Borrowing costs Borrowing costs include interest on bank overdrafts and borrowings, amortization of discounts or premiums, finance charges and exchange differences on foreign currency borrowings. Borrowing costs of purchase, construction or manufacturing of assets are eligible for capitalization. Capitalization should commence when: Expenditures are being incurred, which comprise disbursements incurred in the form of payments of cash, transfer of non-monetary assets or assumption of interest-bearing debts; Borrowing costs are being incurred, and; Purchase, construction or manufacturing activities that are necessary to prepare the assets for their intended use or sale are in progress. Capitalization should cease when substantially all of the purchase, construction or manufacturing activities necessary to prepare the assets for their intended use or sale are complete. Other borrowing costs are recognized as expenses are charged to profit or loss in the current period. Where funds are borrowed specifically for purchase, construction or manufacturing of assets eligible for capitalization, costs eligible for capitalization are the actual costs incurred less any income earned on the temporary investment of such borrowings. Where funds allocated for purchase, construction or manufacturing of assets eligible for capitalization are part of a general pool, the eligible amounts are determined by applying a capitalization rate to the weighted average excess of accumulated capital expenditures over those on specific borrowings. The capitalization rate will be the weighted average of the borrowing costs applicable to the general pool. Where funds are borrowed specifically, exchange differences on foreign currency borrowings shall be capitalized. Where funds allocated general pool, currency exchange differences are recognized in profit or loss. Assets are always fixed assets, investment property, inventories and other assets, which are eligible for capitalization taking a long time to prepare the assets for their intended use or sale including purchase, construction or manufacturing activities necessary. Capitalization should cease when there is abnormal suspension in the purchase, construction or manufacturing of assets eligible for capitalization and period of suspension is more than three month. Capitalization should commence as the restart of purchase, construction or manufacturing activities. 17. Intangible assets (1)Intangible asset Intangible asset is the identifiable nonmonetary assets without physical substance possessed or controlled by the Company. Intangible assets are recognized when all the following conditions are met: Meet the intangible asset definition, The economic benefits related to intangible assets are probably to flow to the Company, The cost of intangible assets can be measured reliably, The other expenditures shall be recorded in the profit or loss when actual incurred. Land use rights are usually recognized as an intangible asset. For self-constructed factories and other buildings, the relevant expenditure of land use right and the buildings were recognized as intangible assets and fixed assets accordingly. The related payments purchasing houses and buildings should be allocated between the land use rights and buildings. If it is impossible to allocate, it shall be recognized as fixed assets. There is amortization for Intangible assets with finite use life since they are available for use. The amortization amount of intangible assets equals to its cost minus the expected residual value, and a future deduction of the accumulative amount of impairment provision for an impaired intangible asset. The Company applies the straight-line method for the amortization. There is no amortization for Intangible assets with indefinite use life but an impairment test at the end of the period. 331

334 The Company will review useful life and amortization method of intangible assets at each period end. Any change will be treated as changes in accounting estimates. In addition, the useful life of intangible assets with indefinite useful life shall be reviewed.if there is evidence that the economic benefits related to intangible assets are probably to flow to the Company, the Company will estimated useful life of intangible assets and apply amortization policy. (2)Research and development projects Costs incurred by the Company on internal research and development projects can be classified into research costs and development costs. Expenditures incurred during the research phase of internal research and development projects shall be written off to profit or loss for the current period. Expenditures arising from development phase on internal research and development projects must be capitalized if the Company can satisfy all of the following criteria: There is technical feasibility of completing the intangible assets (so that they will be available for use or sale); There is intention to complete and use or sell the assets; The method that the intangible assets generate economic benefits, including existence of a market for products produced by the intangible assets or for the intangible assets themselves, shall be proved. Or, if to be used internally, the usefulness of the assets shall be proved; Adequate technical, financial, and other resources are available to complete the assets, and the Company has the ability to use or sell the assets; and The costs of the assets can be measured reliably. Expenditures incurred, which cannot distinguish between the research phase of internal research and development projects shall be written off to profit or loss for the current period. (3)Impairment test method and impairment provision methods of intangible assets Impairment test method and impairment provision methods of intangible assets refer to Note 17 "Impairment of non-current and non-financial assets." When the sale of intangible assets, the difference between the price acquired and the carrying amount should be recognized through profit or loss. When intangible assets which not expected to bring economic interests too company, then the carrying amount of intangible assets shall be written off. 18. Long-term prepaid expenses The long-term prepaid expenses of the Company are expenses for current and future periods that have been disbursed but will be amortised over one year (not include 1 year). Except the pre-operation expense charged in lump sum in profit or loss in the first month of operation, other long-term prepayments are recorded as actual costs. If there is no benefit arising from long-term prepaid expenses for subsequent accounting period, the residual amount which has not been amortized should fully transferred to the income statement. 19. Assets transfer with repurchase conditions (1)Buying back the sale of financial assets According to the agreement commitments buying back the sale of financial assets shall no longer be recognised in the balance sheet at the specified date in the future. Acquisition cost including interest should be recognized in the balance sheet in the buying back the sale of financial assets account. The difference between the buying back price and the selling price shall be recognized as effective interest in the finance cost. (2)Financial assets sold for repurchase 332

335 According to the agreement commitments financial assets sold for repurchase shall no longer be derecognised in the balance sheet at the specified date in the future. Proceeding from sale including interest should be recognized in the balance sheet in the financial assets sold for repurchase account. The difference between the repurchase price and the selling price shall be recognized as effective interest in the finance cost. 20. Estimated Liabilities The Company should recognize an obligation in relation to contingencies as an estimated liability when all the following conditions are satisfied: (1)That obligation is a present obligation of the Company; (2)It is probable that an outflow of economic benefits from the Company will be required to settle the obligation; (3)A reliable estimate can be made of the amount of the obligation. To determine the best estimates, the Company shall take into full account the risks, uncertainties, time estimated liabilities shall be measured at the best estimates of the necessary expenditures for the fulfilment of the present obligations. Where some or all of the expenditure required settling a provision is expected to be reimbursed by another party, the reimbursement shall be recognized when and only when, it is virtually certain that reimbursement will be received if the Company settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognized for the reimbursement shall not exceed the amount of the provision. (1)Loss contract Loss contract obligations are arising from where expected economic benefits are less than unavoidable cost. When executory contracts become onerous one, obligations could meet criteria above, the excess amount between expected losses and recognized provision of underlying asset in the contract shall be recognized as estimated liabilities. (2)Restructuring obligation For detailed, formal restructuring plan, which has already made public announcement and met estimated liabilities recognition criteria, estimated liabilities of restructuring-related expenses should be recognized directly. For the sale of part of the business, only when the company made the commitment to sell part of the business and signed a binding sale agreement, estimated liabilities of restructuring should be recognized. 333

336 21. Share-based payment Types of share-based payment Share-based payments is to grants equity instruments or undertake liabilities transactions on the basis of equity instruments for services of employees or other parties. Share-based payments include equity-settled payments and cash-settled payments. Equity-settled share-based payments Equity-settled share-based payments to employees are to exchange for services provided by employee. Equity-settled share-based payments should be measured at fair value at the grant date. The fair value of share-based payments can be exercised after the vest period or specified performance achieved. During the vest period, the number of equity instruments to vest should base on the best estimate. Straight-line method should be used to calculate costs or expenses. If the option is immediately to exercise at the grant date, it should be recognized in the relevant costs or expenses and increase capital reserve For equity-settled share-based payment in exchange for services provided by other parties. If the fair value of other party services can be reliably measured, equity-settled share-based payment should be measured at the fair value of the date to obtain the service of other parties. If the fair value of the services cannot be reliably, but the fair value of the equity instruments can be measured reliably, equity-settled share-based payment should be recognized relevant costs or expenses and increase in shareholders' equity, measured at the fair value of the date to obtain the service. When the fair value of the equity instruments granted cannot be reliably measured, change of intrinsic value of the equity instruments should be recognized in profit or loss at the date to obtain the service, and subsequent balance sheet date and settlement date. Cash-settled share-based payment Cash-settled share-based payment should be measured at fair value of the liabilities on the basis of company's commitment to the shares or other equity instruments. If exercised immediately after the grant, cash-settled share-based payment should be recognized as costs or expenses and increase in liabilities at the grate date. The fair value of share-based payments can be exercised after the vest period or specified performance achieved. On the each balance sheet date during the vesting period, the company should recognize the service received in the cost or expense and increase in liabilities. The amount of liabilities undertake by the company should be measured at fair value based on the best estimate of the vesting conditions. Assets and liabilities should be re-measured at fair value on each balance sheet date before the settlement date. Any changes should be recognized in profit or loss in the current period. (2)Determination the fair value of equity instruments The Company use the binomial option pricing model to price the granted share options, refer to Note 10. (3)The best estimate to confirm to exercise the option of equity instruments The Company make the best estimates based on changes in the number of workers and amendment of number of equity instruments expected to vest on each balance sheet date during the vesting period. 4Accounting treatment of Implement, modification, termination of the share-based payment When the Company is plan to modify its share-based payment plans, if the modification increases the fair value of the equity instruments granted, increase of services should be recognized in accordance with the increase in the fair value of equity instruments. Increase in the fair value of equity instruments is the difference of fair value of before and after modification. If the modification reduces the fair value of the shares of the total payment or being unfavorable to employees, the Company shall continue to make accounting treatment, as if the change had not occurred, unless the Company cancels some or all of the granted equity. In the vesting period, if the equity instruments granted is cancelled, the Company should accelerate the vesting process. The amount of the remaining vesting period should be recognized immediately in profit or loss, while recognized in the capital reserve. Employees or other parties who can choose non-exercise condition fail to meet the conditions in the vesting period; the Company should treat as termination of equity instruments granted. 334

337 22. Revenues (1)Revenue recognition for sale of goods Revenue from the sale of goods shall be recognized when all the following conditions have been satisfied: The significant risks and rewards of ownership of the goods have been transferred to the buyer by the Company; The Company retains neither continuous managerial involvement to the degree usually associated with the ownership nor effective control over the sold goods; The amount of revenue can be measured reliably; It is probable that the economic benefits associated with the transaction will flow to the Company; The costs incurred or to be incurred in respect of the transaction can be measured reliably. 2Revenue recognition for rendering of services When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction shall be recognized by reference to the stage of completion of the transaction at the balance sheet date. The Company measures the completion percentage of service rendered by reference to the proportion that service performed to the balance sheet date compared with the total services to be performed. Rendering of services can be estimated reliably when all the following conditions have been satisfied: The amount of revenue can be measured reliably; It is probable that the economic benefits associated with the transaction will flow to the Company; and Degree of completion of the transaction can be reliably determined The costs incurred or to be incurred in respect of the transaction can be measured reliably. If the Company cannot reliable estimate the service performed the date of the balance sheet, the Company applies the following treatment: If the service expenses incurred are recoverable, the revenue from rendering of services shall be recognised to the extent of the expenses incurred and the cost of sale transferred at the same amount; or If the service expenses incurred are not recoverable, the expenses incurred shall be recognized in the income statement and no revenue from rendering of services shall be recognised. The Company enters into contract or agreement with other companies, including the sale of goods and rendering of services. If sale of goods and rendering of services can be distinguished and measured separately, it shall be treated separately. If sale of goods and the rendering of services cannot be distinguished from each other, or cannot be measured separately, it shall be treated as sale of goods. Interest and royalties should be recognized when both the following conditions have been satisfied: the economic benefits associated with the transactions will flow to the Company, and the amounts of the revenues can be measured reliably. Interest and royalty revenues should be accounted for as follows: Interest should be measured based on the length of time for which the Company's cash is used by others and the applicable interest rate; and Royalties should be measured according to the period and method of charging as stipulated in the relevant agreements or contracts. Interest income funds using our currency by others time and the actual interest rate; royalty income under the relevant contract or agreement, according to accrual revenue recognition occurs. 335

338 23 Government grants Government grants refer to the monetary or non-monetary assets obtained by the Company from the government for free, not including government invest as capital owner. Government grants are classified into asset-related government grants and income-related government grants. Government grants shall be recognized when all the following conditions have been satisfied: (1) The company can meet the conditions attached to government grants; (2) The company can receive government grants. Government grants relating to purchase or construction of long-term assets, such as fixed assets and intangible assets, etc., shall be recognized as asset-related government grants, others is recognized as income-related government grants. If the file not states the objects of government grants clearly, Government grants shall be divided into the income-related government grants and asset-related government grants as following: It is clearly government grants for specific project in the documents. Ratio should be calculated according to the relative proportion of expenditure between classification income and asset in the budget the ratio should be reviewed at each balance sheet date changing when it is necessary. It is only common statement for use of government grants in the documents, no specify particular project. Government grant should be recognized to the related revenue. Government grants is monetary assets including the amount received or receivable. Government grants for non-monetary assets should be measured at fair value. If fair value cannot be measured reliable, it should be measured at the nominal amount. Nominal amount shall be recognized to profit or loss for the current period Government grants should usually be recognized and measured when actually received. However, if there is conclusive evidence that the company can meet the conditions of the financial support policies and regulations. Government grants should usually be recognized and measured on the accrual basis through account receivables. If government subsidies shall be measured by receivable if the Company can satisfy all of the following criteria: The amounts of receivable have been confirmed by document of government authority departments. It is reasonably to estimate in accordance with the relevant release of official fiscal authority and calculate without significant uncertainty. The amounts of receivable are based on the "Government Information Disclosure Regulations" of local fiscal authority, which officially released. The regulations should be inclusive (Any company compliance with the conditions of any business can apply), rather than for specify particular company. There is clear commitment to the disbursement period of grants, which fund is guaranteed by the particular fiscal budget. The company could receive the grant within the prescribed period under reasonable assurance. The company should meet the other relevant conditions (if any). Government grants relating to assets shall be recognized as deferred income and amortized over the useful lives of assets and recognized in the profit or loss for the current period. Government grants relating to income to compensate future expenses or losses shall be recognized as deferred income and shall be charged to profit or loss during the period when the relevant expenses are incurred. The government grants relating to income to compensate incurred expenses or losses shall be directly recognized as profit or loss in the current period. 336

339 When the government grants recognized the need to return back, the Company shall: If there is the deferred income balance, the Company should offset against the carrying amount of the related deferred income balance. Any excess amount should be recognized in profit or loss. If there is no deferred income balance, amount should be recognized in profit or loss directly. 24.Deferred tax assets/liabilities (1)Current tax expenses Current tax liabilities (or assets) for the current or prior accounting periods should be measured at the amounts expected to be paid to (recovered from) taxation authorities under the applicable tax laws at the balance sheet date. Current tax expenses are calculated on the basis of taxable profit, which is calculated after appropriate adjustments to accounting profit before tax by the applicable tax laws. (2)Deferred tax assets and deferred tax liabilities The Company uses the balance-sheet approach to recognize deferred tax assets/liabilities. The difference between the carrying value of certain assets and liabilities and their tax bases, as well as the difference between the carrying value of certain assets and liabilities unrecognized in the balanced sheet and the tax base of assets and liabilities recognized in accordance with the tax law, are the all temporary differences. The Company recognizes a deferred liability for all taxable temporary differences, except to the extent that the deferred tax liability arise from: The initial recognition of goodwill; The initial recognition of assets or liabilities arising in a transaction when all the following conditions satisfied: The transaction is not a business combination; At the time of transaction, the transaction affects neither accounting profit nor taxable result. The Company recognizes the taxable temporary difference associated with investments in subsidiaries, branches and associates, and interests in joint ventures as deferred tax liability, except the following condition all satisfied: The Company can control the time of the reverse of temporary differences; and The temporary differences are unlikely to be reversed in the excepted future. The Company recognize a deferred tax asset for deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised, except that the deferred tax asset arise from initial reorganization of an asset or liability in a transaction with all following features: It is not a business combination; and At the time of the transaction, affects neither accounting profit nor taxable profit (tax loss); 337

340 The Company recognizes deferred income tax asset for deductible temporary difference related with investment in subsidiaries, associates and join ventures if all the following conditions satisfied: The temporary differences are unlikely to be reversed in the expected future; and It is probable that taxable profit will not be available in future against the deductible temporary difference. The carried forward of unused tax losses and unused tax credits shall be recorded as deductible temporary difference. A deferred tax asset shall be recognized to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized. According to the tax law, at the balance sheet date, applicable tax rates to determine deferred tax assets and deferred tax liabilities should be measured using the tax rate for the period of recovery assets or settlement liabilities. The carrying value of deferred tax assets is reviewed, at the balance sheet date. If taxable profit will not be available in future against the deductible temporary difference, the Company should write-downs the carrying value of the deferred tax asset. It taxable profit will be available in future against the deductible temporary difference, the write-downs amount should be reversed. (3)Income tax expenses Income tax expenses comprise current tax expenses and deferred tax expenses. The current income tax and deferred income tax expense or income in profit or loss, except that: Activities recognized in other comprehensive income or shareholders' equity transaction and related income tax and deferred income tax recognized in other comprehensive income or shareholders' equity directly; Deferred tax adjust carrying value of goodwill arising consolidation. (4)Offset current tax assets and current tax liabilities When the Company has the statutory right to account for current tax assets and current tax liabilities with their net amounts, and has the intention to do so or the recovery of assets and the settlement of liabilities are achieved simultaneously, The Company shall present its current tax assets and current tax liabilities at the net amounts as the result of one offsetting another. When the Company has the statutory right to account for current tax assets and current tax liabilities with their net amounts, and the deferred tax assets and the deferred tax liabilities are related to income taxes imposed on the same taxpayer by the same tax authority or albeit they are related to income taxes imposed on different taxpayers, they have the intention to account for current tax assets and current tax liabilities with their net amounts or the recovery of assets and the settlement of liabilities are achieved simultaneously during each accounting period in the future when material deferred tax assets and deferred liabilities are reversed, the Company shall present its current tax assets and current tax liabilities at the net amounts as the result of offsetting each other. 338

341 25.Leases Finance lease is the lease that transfer all the substantially risks and rewards of ownership of an asset leases, which ownership may eventually transferor not. The term "operating lease" shall refer to a lease other than a financing lease. (1)Accounting treatments for Lessees of operating leases The lease payments should be recognized as expenses of the current period over the lease terms (including rent-free periods) on a straight-line basis Initial direct costs relating to lease transactions incurred by the Company shall be recognized as expenses of the current period. Contingent rent shall be recorded in the profit or loss when actual incurred. (2)Accounting treatments for Lessors of operating leases Lease income under an operating lease shall be recognized as income on a straight-line basis over the lease term for lessor in the current period. The initial direct cost shall be capitalised in the current period. Then initial significant direct cost shall be amortised and recognized as expenses in accordance with the rental income recognized in profit or loss on the basis of instalments. Other insignificant initial direct costs should be recognized expensed as incurred. Contingent rent shall be recorded in the profit or loss when actual incurred. (3)Accounting treatments for Lessees of finance leases At commencement of the lease term, the leased asset should be recorded at the lower of the fair value of the asset and the present value of the minimum lease payments. The present value of minimum lease payment is recorded as long term payable. The difference between the recorded amount of the leased asset and the long term payable is recorded as unrecognised finance charges. Initial direct costs that are directly attributable to negotiating and arranging a lease shall be added to the carrying amount of the leased asset. Present value of the minimum lease payments deducting unrecognized finance charge should be recognized in either long-term liabilities or long-term debt due within one year separately. Unrecognised finance charges shall be allocated to each period during the lease term using the effective interest rate. Contingent rent shall be recorded in the profit or loss when actual incurred. (4) Accounting treatments for Lessors of finance leases At commencement of the lease term, finance leases should be recorded the sum of the minimum lease payment receivables and initial direct cost as financial lease receivables and also record unguaranteed residual vale. The difference between sum of minimum lease payment receivables, initial direct cost and unguaranteed residual vale and the present value of sum of these three is recorded as unrecognized finance charges. Financial lease receivables deducting unrecognized finance charge should be recognized in either long-term liabilities or long-term debt due within one year separately. Unearned finance income shall be recognized in each period during the lease term using the effective interest rate. Contingent rent shall be recorded in the profit or loss when actual incurred. 339

342 26Assets held for trading The Company recognizes non-current assets as assets held for trading while all the following conditions are satisfied: The Company has made resolutions on the sale of these assets; The Company has signed irrevocable agreements with the counterparty to transfer these assets; The transfer will be completed within one year. There is no depreciation or amortization, held for trading should be measured at the lower of their carrying amounts or their fair values less costs to sell. Non-current assets as held for sale include individual assets and asset groups. In accordance with "Accounting Standards for Enterprises No. 8 - Impairment of business combination should be allocate to the group. The disposal group includes goodwill of business combination. An asset or disposal group classified as held for sale can no longer fill the conditions of non-current assets. The Company shall derecognize it as held for sale. It shall be measure at the lower of the amount of: 1The carrying amount of the asset or disposal group prior to classified as held for sale, should be recognized depreciation, amortization or impairment; as if it was not classified as held for sale 2The recoverable amount of the date to decide not to sell. 27.HANGES IN SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES 1Changes in accounting policies There is no significant change in accounting policies during the current reporting period. 2Changes in accounting estimates There is no significant change in accounting estimates during the current reporting period. 28.Preliminary correction of accounting errors 1 retroactive restatement method No 2 prospective application method No 340

343 29. Other significant accounting policies and accounting estimates and preparation of financial statements In applying accounting policies, as there is inherent uncertainty within the business activities, it is necessary for the Company needs to make judgments, estimates and assumptions to carrying amount which cannot be measured accurately. These judgments, estimates and assumptions are based on past history experience of the company's management and considering other relevant factors. These judgments, estimates and assumptions will affect the reporting amount of the balance sheet date and revenues, expenses, assets and liabilities and disclosure of contingence liabilities. However, the uncertainty of estimation will cause significant adjustments to the carrying amount of the asset or liability affected by the uncertainty. The company will regularly review the above judgments, estimates and assumptions on the going concern basis. If the change in accounting estimate only affects the current period, it should be recognized in the current accounting. If the change in accounting estimate will affect both current and future periods, it should be recognized in the current accounting period and future periods respectively. At the balance sheet date, the company needs to make judgments, estimates and assumptions as follows: 1Classification of leases According to the regulations of "ASBE No.21 - Leases", lease should be categorized as financing leases and operating leases. When performing classification, management should analyze and judge whether all the risks and rewards of the leased assets are substantially transferred to the lessee or held by the Company actually. Wether the Company has essentially assumed the lease of all the risks and rewards of ownership of assets related to the analysis and judgment. 2Provision for bad debt The allowance method is adopted to account for bad debts, according to the accounting policies of the Company's accounts receivables. Impairment of receivables is based on the assessment of the recoverability of accounts receivable. Impairment amount of accounts receivable should base on judgments and estimates of management. The difference between the actual results and original estimated will affect carrying amount of accounts receivable, bad debt provision and reversal amount for the period of estimation changed. 3Inventory impairment provision In accordance with inventory accounting company policy the inventories are measured at lower of cost and net realisable value. If the cost of inventories is higher than the net realizable value, then a provision should be made and recorded. Impairment of inventories to net realizable value is based on an assessment of inventory available for sale and its net realizable value. Net realizable value of inventories should be measured on the basis of the obtained conclusive evidence, taking into account the purpose of holding inventories and the impact of event after the balance sheet date. Difference between the actual results and the original estimated will affect carrying amount of accounts inventories, inventory impairment provision and reversal amount for the period of estimation changed. 4The fair value of financial instruments 341

344 If there is no active trading market for financial instruments, the Company should measure t fair value by using valuation method, including discounted cash flow model. The company should estimate future cash flow, credit risk, market volatility and correlations prospectively etc., and select the appropriate discount rate. These are uncertainties in the underlying assumptions to cause the change the fair value of financial instruments. 5Held to maturity investments Non-derivative financial assets with fixed or predetermined payments and with fixed maturity date and the Company has the intention and ability to hold to maturity should be classified as held-to-maturity. This classification involves a lot of work to make judgments. The Company will evaluate both the willingness and ability of hold to maturity. Except for specific situations such as the sale of insignificant amount investment close to the maturity date, if the Company fails to hold these investments to maturity, all such investments shall be reclassified to available for sale. Financial assets classified as available for sale should not revert to held-to-maturity within the current fiscal year and the next two fiscal years as well. In such case, it may have a significant impact on the value of the underlying assets reported on the financial statements and may have impact on the Company's financial instruments risk management strategy. 6Impairment of held-to-maturity investments The Company determines whether the impairment of held-to-maturity investments rely on the judgment of management heavily. Obvious evidence of impairment should include that the issuer has serious financial difficulties so that financial assets cannot continue trading in an active market, unable to fulfill the terms of the contract (for example, default of interest or principal of payment) and etc.,. The Company needs to assess whether the obvious evidence will affect future cash flows in making this judgment. 7Impairment of financial assets available for sale The Company determines the impairment of available for sale financial assets rely on management's judgment and assumptions heavily. It is necessary for the company to make judgments and assumptions on the duration and the fair value of the investment below its cost, as well as the short-term business financial forecast and industry environments, technological innovation, credit rating, defaults risk and counterparty risk. 8Impairment of non-financial and non-current assets The company determines whether the impairment indications for non-current assets, except for financial assets at the balance sheet date. For the indefinite life intangible assets, it is necessary to make regular annual impairment test. In addition, if there are indications of impairment, impairment should be tested as well. For other financial assets except for non-current assets, when there are indications that the carrying amount may not be recoverable, the impairment should be tested. When the carrying amount of the individual asset or asset group exceeds their recoverable value, which is the higher of the fair value less costs of disposal and the present value of expected future cash flows, there is the impairment. The net fair value less costs of disposal is measured with direct reference to fair trade contract price of similar assets and observable market price to minus the incremental disposal costs. It is necessary to make significant judgments on the present value of expected future cash flows, price and quantity of asset (or asset group), related operating costs and the discount rate used. The company will try to obtain all relevant information to estimated recoverable amount, based on reasonable and supportable assumptions including estimation of production, selling price and related operating expenses. 342

345 Goodwill should be tested for impairment at least annually. It is necessary to estimate present value of future cash flows for using the present value method, the Company should estimate future cash flows of the asset group or combinations of assets, and select the appropriate discount rate to determine the present value of future cash flows. 9Depreciation and amortization The company uses the straight-line method over the useful life to make depreciation and amortization to investment property, fixed assets and intangible assets, after considering the residual value. The Company reviews their economic use life regularly in order to determine the amount of depreciation and amortization in each reporting period. Economic use life should be based on past experience of similar assets and the expectation of technical update. If there are significant changes in the previous accounting estimations, adjustment for depreciation and amortization should be recognized in the future periods 10Development expenditure The management of the company needs to make the assumptions on the expected cash flow, discount rate applicable and estimated benefit period to determine the amount of capitalization. 11Deferred tax assets In probably have enough profits to offset taxable within the limits of losses, deferred tax assets are recognized for all of the Company unutilized tax losses. This requires the a large number of the company's management judgment to estimate the timing and amount of future taxable profits, combined with tax planning strategies to determine the amount of deferred tax assets. 12Income tax There are certain uncertainties in final tax treatment and calculation in the normal operating activities. There are some items require to be approval by the tax authorities. If there are the differences between ultimately identified results and the amount estimated initially, the differences will cause an ultimately impact on current tax and deferred tax recognized during the period. 13Accrued liabilities According to the terms of the contract, the Company makes provision for the accrued liabilities using existing knowledge and historical experience, warranty of product quality, estimated contract losses, penalty for delay to delivery. If the contingency formed a present obligation, it is likely to lead to the economic benefits outflow of the Company to fulfill these obligations. The Company should recognize the amount as accrued liabilities, according to the best estimate of expenditure to settle the present obligation. It is based on judgment of management heavily to recognize and measure the accrued liabilities. The company needs to assess risks of uncertainties and time value of money and other factors as well. Wherein the company will recognize the accrual liabilities on commitment of quality warranty of after-sales, maintenance and renovation service. The company could take into account the data of recent maintenance experience, however, recent experience may not be useful to forecast the future. Any increase or decrease amounts of the provision are likely to affect profit or loss in the future year. Four. Taxation 1. Main taxes and tax rates Main taxes Value Added Tax Business tax Specific tax rate The applicable tax rate for domestic sales is 17%VAT payable or receivable is the net difference between periodic output and deductible input VAT Acording to 5%of the taxable revenue Urban maintenance and construction tax Surcharge are levied at [ 5%] and [ 7 %] of the applicable turnover taxes payable 343

346 Enterprise income tax The applicable income tax rate is 15%-25%. 2. Tax benefits and approval documents 9%. The subsidiary company Nagqu Ruichang Coal Transportation Co., enjoyed preferential tax rate of The company overseas subsidiaries China Coal Solution (HK) Limited Hong Kong profits tax rate applicable is 16.5%.China Coal Solution (Singapore) Pte.Ltd. applicable income tax rate is 10%.Ina Advanced Holdings Pte.Ltd. applicable income tax rate of is 10%.Rex Coal Pte.Ltd. applicable income tax rate is 10%.China Coal Solution (Indonesia) Pte.Ltd. applicable income tax rate is 10%. Tax incentives and approvals of Further (Tax [2011] No. 58) Nagqu Ruichang can enjoy a 15% corporate income tax ratet since the establishment of the company on31 December 2020, 344

347 345 Five. Business combinations and consolidated financial statements (A) Subsidiaries 1 Subsidiaries acquired through establishment or investment approach Unit: Yuan Currency: RMB Full name of subsidiary Xuzhou Yifeng Trading Co. China Coal Solution(HK)Limited Pizhou Fengyuan Power Fuel Co., Ltd. Henan Tengrui Energy Industry Development Co., Ltd. Xuzhou Yuguang Trading Co., Ltd. China Coal Solution(Singapore) Pte.Ltd. Ina Advanced Holdings Pte.Ltd. Rex coal Pte.Ltd. China Coal Solution(Indonesia) Pte.Ltd. CHINA COAL SOLUTION(YANNTAI) BUSINESS FACTORING LTD JiangSu JinHe Power And Electricity Fuel Co.,LTD CHINA COAL SOLUTION(SHANXI) BUSINESS FACTORING Subsidiarie s type Wholly owned Wholly owned Wholly owned Wholly owned Wholly owned Wholly owned Owned subsidiary Wholly owned Wholly owned Wholly owned Wholly owned Wholly owned Location registrati on xuzhou HK PIZHOU QIYAN G PIZHOU Singapor e Singapor e Singapor e Indonesi a YANTAI TAIZHO U TAIYUA N Nature of Business Coal Sales Purchase Coal Sales Purchase Coal Sales Purchase Coal Sales Purchase Coal Sales Purchase Coal Sales Purchase Coal Sales Purchase Coal Sales Purchase Coal Sales Purchase Coal Supply Chain Manage ment Coal Sales Purchase Coal Products Sales Registered Capital 60,000, Full name of subsidiary Coal Sales The end of the actual contribution Other projects essentially constitute the net balance of investments in subsidiaries Shareholding ratio (%) 60,000, HK 1.00HK ,000, ,000, ,000, ,800, USD 100, USD 5,000, USD 1,000, USD 30,000,000.00USD 230,000, ,000, Purchase and sale of coal 60,000, Coal retail. Coke steel. Building materials sales Coal Sales Coal supply chain management. Coal Information Logistics Information Coal Sales Enterprise management consulting. 10,000, ,000, ,800,000.00US D Voting rights (%) Whether the consolidate d financial statements YES YES YES YES YES YES 100,000.00USD YES 5,000,000.00US D 1,000,000.00US D 30,000,000.00US D ,000, ,000, YES YES YES YES YES Minor ity interes ts 173, Minority interests in the amount deducted from minority equity The share of losses exceeds the minority shareholders' equity of the beginning of the year, should continue deduct from shareholders 'equity share

348 346 LTD ZHEJIANG YUNENG POWER AND ELECTRICITY FUEL CO.,LTD. Xining Dexiang business trade LLC TIANJIN CHINA COAL SOLUTION FACTORING CO., LTD. Nagqu Ruichang Coal Transportation and Marketing Co. Jiangsu Fengtai Materials Trading Co., Ltd. Shen Zhen Qian Hai CHINA COAL SOLUTION Supply Chain Service Platform Co.,LTD. ZHEJIANG HEHUI ELECTRICITY MATERIAL CO.,LTD Yantai Xing Rui Logistics Ltd. CHINA COAL SOLUTION(SHANGHAI) BUSINESS FACTORING LTD. CHINA COAL SOLUTION(BEIJING) BUSINESS FACTORING LTD. CHINA COAL SOLUTION(WUHAN) Wholly owned Wholly owned Wholly owned Wholly owned Wholly owned Wholly owned Wholly owned Wholly owned Wholly owned Wholly owned Wholly owned Ningbo Xining Tianjin Nagqu Hongze Shenzhe n Ningbo YANTAI Shanghai Beijing Wuhan Coal Sales Purchase Coal Sales Purchase Trade Finance Coal Sales Purchase Coal Sales Purchase 10,000, ,000, ,000, ,000, ,000, Supply chain managem ent 500,000, Coal Sales Purchase Logistics and transport Coal Supply Chain Manage ment Coal Supply Chain Manage ment Coal Supply 50,000, ,000, ,000, ,000, ,000, Coal utilization technology consulting. Coal products sales Coal wholesale business 10,000, Coal wholesale business 10,000, Trade accounts receivable financing accounts receivable and 300,000, payment settlement. Administratio n and collection Coal distribution 50,000, and sales Coal wholesale 10,000, Supply chain management and related services. International and domestic freight forwarders 100,000, Wholesale coal business 50,000, Logistics and transport 10,000, Coal Supply Chain Management Coal Supply Chain Management Coal Supply Chain 10,000, YES YES YES YES YES YES YES YES YES YES YES

349 BUSINESS FACTORING LTD. Zhengzhou Jiarui Supply Chain Management Co., Ltd., TIANJIN CHINA COAL SOLUTION FACTORING CO., LTD. CHINA COAL SOLUTION(SHANGHAI) BUSINESS FACTORING LTD Wholly owned Wholly owned Wholly owned Zhengzh ou Tianjin Shanghai Chain Manage ment Coal Supply Chain Manage ment Finance leases 10,000, ,000, Finance leases 170,000, Management Coal Supply Chain Management 10,000, Finance leases Finance leases 20,070, ,000, YES YES YES 347

350 1Subsidiaries acquired through establishment or investment Full name of subsidiary Subsidiaries type Location registration Nature of Business Registered Capital Business Scope Legal Organization Representat Code ive The end of the actual contribution Unit: RMB Yuan Other projects essentially constitute the net balance of investments in subsidiaries Xuzhou Yifeng Trading Co. Wholly owned Xuzhou Coal procurement 60,000, and sales Coal sales Wang Dongsheng ,000, China Coal Soiution(HK).Ltd Wholly owned Hong Kong Coal procuremen HK 1.00 Wan Yongxing HK 1.00 t and sales Pizhou Fengyuan Power Fuel Co., Ltd. Wholly owned Pizhou Coal procuremen 60,000, t and sales Purchase and sale of coal Wu Wenquan ,000, Henan Tengrui Energy Industry Development Co., Ltd. Wholly owned Qinyang Coal procuremen 10,000, t and sales Retail coal, Liu Fei yue coke, steel, building materials sales ,000, Xuzhou Yuguang Trading Co., Ltd. Wholly owned Pizhou Coal procuremen 10,000, Coal sales Yan Zhenfeng ,000, t and sales China Coal Soiution(Singapor e) Pte.Ltd Wholly owned Singapore Coal USD procuremen 7,800, t and sales USD 7,800, Ina Advanced Holdings Pte.Ltd control Singapore Coal procuremen t and sales USD 100, USD 70, Coal Rex coal Pte.Ltd Wholly owned Singapore procuremen t and sales China Coal Soiution(Indonesia ) Pte.Ltd Wholly owned Indonesia Coal procuremen t and sales Coal supply Wang Yantai Ruimaotong Supply Chain Co., Ltd. Wholly owned Yantai Coal Supply USD Chain 30,000, Manageme nt chain management, coal information, logistics information Ruichen USD 30,000, consulting JiangSu JinHe Power And Electricity Fuel Co.,LTD Wholly owned Taizhou Coal 230,000, procuremen Coal sales Wang Dongsheng ,000,

351 t and sales Enterprise Qinjing Fu management Shanxi Ruimaotong Supply Chain Co., Ltd. Wholly owned Taiyuan Coal Products Sales 20,000, consulting, technology consulting coal ,000, utilization, coal products sales ZHEJIANG YUNENG POWER AND ELECTRICITY FUEL CO.,LTD Wholly owned Ningbo Coal procuremen 10,000, t and sales Coal wholesale Ding business Zhixiong ,000, Xining Dexiang business trade LLC Wholly owned Xining Coal procuremen 10,000, t and sales Coal wholesale business Mi Changbin ,000, Trade accounts receivable financing, TIANJIN CHINA COAL SOLUTION FACTORING CO., LTD. Wholly owned Tianjin Trade Finance 300,000, accounts receivable and payment Mi Changbin ,000, settlement, management and collection Nagqu Ruichang Coal Transportation and Marketing Co. Wholly owned Nagqu Coal procuremen 50,000, t and sales Coal distribution and sales Wang Dongsheng ,000, Jiangsu Fengtai Materials Trading Co., Ltd. Wholly owned Hongze Coal procuremen 10,000, t and sales Coal wholesale Yu Xuefeng ,000, ZHEJIANG HEHUI ELECTRICITY MATERIAL CO.,LTD Wholly owned Ningbo Coal procuremen 50,000, t and sales Coal wholesale business Zhang Shouling ,000, Supply chain management Shen Zhen Qian Hai CHINA COAL SOLUTION Supply Chain Service Platform Co.,LTD. Wholly owned Shenzhen Supply chain 50,000, management and related services, domestic and Wang Dongsheng ,000, international Logistics (Continued) Full name of subsidiary Shareholding ratio (%) Voting rights (%) Whether the consolidate d financial statements Minority interests The share of losses exceeds the minority shareholders' Minority interests in the equity of the beginning of the amount deducted from minority equity year, should continue deduct from shareholders 'equity share Comment s 349

352 Xuzhou Yifeng Trading Co Yes China Coal Soiution(HK).Ltd Yes Pizhou Fengyuan Power Fuel Co., Ltd Yes Henan Tengrui Energy Industry Development Co., Yes Ltd. Xuzhou Yuguang Trading Co., Ltd Yes China Coal Soiution(Singapore) Yes Pte.Ltd Ina Advanced Holdings Pte.Ltd Yes 173, Rex coal Pte.Ltd Yes China Coal Soiution(Indonesia) Yes Pte.Ltd Yantai Ruimaotong Supply Chain Co., Ltd Yes JiangSu JinHe Power And Electricity Fuel Co.,LTD Yes Mao Shan Desiree Supply Chain Co., Ltd Yes ZHEJIANG YUNENG POWER AND ELECTRICITY FUEL Yes CO.,LTD. Xining Dexiang business trade LLC Yes TIANJIN CHINA COAL SOLUTION FACTORING Yes CO., LTD. Nagqu Ruichang Coal Transportation and Yes Marketing Co. Jiangsu Fengtai Materials Trading Co., Ltd Yes ZHEJIANG HEHUI ELECTRICITY MATERIAL Yes CO.,LTD Shen Zhen Qian Hai CHINA COAL SOLUTION Supply Chain Service Platform Co.,LTD Yes (2) Note the change in scope of consolidation The main changes in the scope of consolidation period should be consolidation for the additional subsidiary. The establishment of six new subsidiaries areyantai Xing Rui Logistics Ltd.;CHINA COAL SOLUTION(SHANGHAI) BUSINESS FACTORING LTD.;CHINA COAL SOLUTION(BEIJING) BUSINESS FACTORING LTD.;CHINA COAL SOLUTION(WUHAN) BUSINESS FACTORING LTD.;Zhengzhou Jiarui Supply Chain Management Co., Ltd., ;CHINA COAL SOLUTION(SHANGHAI) BUSINESS FACTORING LTD (3) New bodies included in the scope of consolidation in the reporting period 1. Issue new consolidated subsidiaries;special purpose entities;control by entrusted with the operation or leased by other means Unit: Yuan Currency: RMB Name of the company June 30, 2014 net asset Current Profit Purchase date Yantai Xing Rui Logistics Ltd. 9,405, , CHINA COAL SOLUTION(SHANGHAI) BUSINESS FACTORING LTD. -41, ,

353 CHINA COAL SOLUTION(BEIJING) BUSINESS FACTORING LTD. CHINA COAL SOLUTION(WUHAN) BUSINESS FACTORING LTD. Zhengzhou Jiarui Supply Chain Management Co., Ltd., CHINA COAL SOLUTION(SHANGHAI) BUSINESS FACTORING LTD -60, , ,152, , ,001, , ,000, Part Six. Notes to the consolidated financial statements (1) Monetary funds Unit: Yuan 31 Dec Error! Items 30 June 2014 Reference source not found. Foreign currency Exchange rate Domestic currency Domestic currency Cash on hand / / 6,354, ,005, CNY / / 6,205, ,005, IDR 287,234, , Cash in bank / / 255,036, ,357, CNY / / 241,585, ,396, USD 2,113, ,005, ,727, IDR 16,427, , , SGD 87, , , Other monetary funds / / 483,576, ,922, CNY / / 459,127, ,365, USD 3,943, ,262, ,376, SGD 37, , , Total / / 744,967, ,207,285, (2) Trading financial assets 1. Trading financial assets Items 1.Trading bonds 2.Trading equity instruments Unit: Yuan Currency: RMB Fair value at 31 Dec Fair value at 30 June Error! Reference source 2014 not found. 351

354 3.Designated as financial assets at fair value through profit or loss 4.Derivative financial assets 1,193, , Hedging instruments 6. Other Total 1,193, , (3) Notes receivable 1. Classification of notes receivable: Unit: Yuan Currency: RMB Items 30 June Dec 2013 Equity instrument investment -held for trading 238,320, ,846, Derivative financial instruments Total 238,320, ,846, Bills pledged by the Company Unit: Yuan Currency: RMB Drawer entities Drawing dates Maturity dates Amounts Notes Shanghai International Trade Co., Ltd. Takumi Zhangjiagang Sand King Heavy Plate Co., Ltd. Huangjinbu State Power Generation Co. Huangjinbu State Power Generation Co. Jiangxi World Long Industrial Co., Ltd. May 12, 2014 November 12, Nagqu Minsheng 10,000, pledge April 15, 2014 October 15, ITC CITIC pledge 5,000, May 29, 2014 August 28, 2014 ITC CITIC pledge 5,000, May 29, 2014 August 28, 2014 ITC CITIC pledge 5,000, May 14, 2014 November 14, 2014 ITC CITIC pledge 5,000, Total / / 30,000, / 3. Inability Compliance of the issuers convert bills into accounts receivable, and bills endorsed to the other party but not yet due Unit: Yuan Currency: RMB Drawer entities Drawing dates Maturity dates Amounts Notes Bills endorsed to the other party but not yet due May 16, 2014 November 16, Endorsement to Jiangxi Ping Steel 2014 Shanxi Jincheng 5,000, Industrial Co., Ltd. Anthracite Mining Group Co., Ltd. ZHEJIANG June 9, 2014 December 9, 2014 Endorsement to HEHUI ELECTRICITY 5,000, Gansu Huating Coal Co. 352

355 MATERIAL CO.,LTD ZHEJIANG HEHUI June 9, 2014 December 9, 2014 Lexus of endorsement to the ELECTRICITY MATERIAL CO.,LTD 5,000, Shanxi Coal Industry Co., Ltd. Shandong Heze June 18, 2014 December 18, Endorsement to Power Plant 2014 QIYANG City, 6,000, Shanxi Coal Coal Logistics Co., Ltd. Acer St. Suzhou river June 11, 2014 December 11, 2014 Endorsed to think Materials Co., Ltd. of a Trade Co., 5,000, Ltd. Zhangjiagang Free Trade Zone Total / / 26,000, / () Accounts receivable: 1. Accounts receivable by category Unit: Yuan Currency: RMB 30 June Dec 2013 Items Carrying amounts Provisions for bad debts Carrying amounts Provisions for bad debts Amounts Proportions Amounts Proportions Amounts Proportions Amounts Proportions % % % % Significant single amount and provision for bad debts of accounts receivable According to a combination of provision for bad debts of accounts receivable: Aging portfolio 567,719, ,614, , Subtotal 567,719, ,614, , Total 567,719, / / 911,614, / 562, / 353

356 In the groups, aging analysis of accounts receivable bad debt provision: Unit: Yuan Currency: RMB 30 June Dec 2013 Carrying amounts Provisions Carrying amounts Provisions Aging Amounts Proportions for bad debts Proportions for bad Amounts % % debts debts Within one year Of which Within 6 month 567,717, ,970, month to 1year 1, , Within one year 567,719, ,996, to 2 years 5,618, , Total 567,719, ,614, , Reversed or withdraw in the current period Unit: Yuan Currency: RMB Accounts Reversed or Determined in Reversed or receivable recovered accordance recovered content reasons with the original regognized the cumulative Recoverable amount Reversed bad debts Amount provision for bad debts provision for bad debts t Jinan Railway Calls back Long aging Materials Corporation , Rizhao Steel Recovery after Long aging Holding Group the 561, ,618, , Co., Ltd. reorganization Total / / 562, / / 2. The situation of the year-end closing balance of accounts receivable holding is or not more than five percent voting shares There is no year-end closing balance of accounts receivable holding more than five percent voting shares. 4. Top five items of accounts receivable Unit: Yuan Currency: RMB Company Name Relationship Amounts Aging Proportions% 354

357 Customers one Non-related parties 29,289, Within 1 year 5.16 Customer two Non-related parties 25,187, Within 1 year 4.44 Customer three Non-related parties 24,936, Within 1 year 4.39 Customers four Non-related parties 23,555, Within 1 year 4.15 Customers five Non-related parties 22,050, Within 1 year 3.88 Total / 125,019, / (5) Other receivables 1. Other receivables by category Unit: Yuan Currency: RMB 30 June Dec 2013 Categories Provisions for bad debts Carrying amounts Provisions for bad debts Amounts Proportions Amounts Proportions Amounts Proportions Amounts Proportions % % % % Significant single amount and provision for bad debts of other receivables Provision for bad debts according to a combination of other receivables Aging portfolio 203,085, , ,173, , Subtotal 203,085, , ,173, , Total 203,085, / 361, / 178,173, / 421, / In the groups, aging analysis of other receivables provision for bad debts Unit: Yuan Currency: RMB 30 June Dec 2013 Carrying amounts Provisions Carrying amounts Aging Provisions for Amounts Proportions for bad Amounts Proportions bad debts % debts % With in one year Of which Within 6 month 173,956, month to 1year 199,470, With in one year 199,470, ,956,

358 1 to 2 3,614, , ,216, , years Total 203,085, , ,173, , Reversed or withdraw in the current period Unit: Yuan Currency: RMB Accounts Reversed or receivable content recovered reasons Xuzhou Receipt the Jinchuan invoice and Construction balance has Engineering been cleared Co., Ltd. Determined in Reversed or accordance recovered with the regognized the original cumulative provision for provision for bad debts bad debts t Long aging Recoverable Reversed bad amount debts Amount 60, , , Deposit Deposit refund Long aging , Total / / 60, / / 3. The situation of the year-end closing balance of accounts other receivable holding is or not more than five percent voting shares There is no year-end closing balance of accounts other receivable holding more than five percent voting shares. 4. Top five items of accounts other receivable Unit: Yuan Currency: RMB Company Name Relationship Amounts Aging Proportions% Customers One Non-related parties 13,023, Within 6 month 6.42 Customer Two Non-related parties 12,959, Within 6 month 6.39 Customer Three Non-related parties 12,356, Within 6 month 6.10 Customers Four Non-related parties 11,369, Within 6 month 5.61 Customers Five Non-related parties 10,582, Within 6 month 5.22 Total / 60,292, / (6) Advances to suppliers Ageing analysis of advances to suppliers: Unit: Yuan Currency: RMB Categories 30 June Dec 2013 Amounts Proportions% Amounts Proportions% within 1year 977,647, ,618, to 2 years 2,680, ,719, Total 980,327, ,337,

359 2. Top five items of accounts Advances to suppliers Unit: Yuan Currency: RMB The reason for not Company Name Relationship Amounts Prepayment Time settled Customers One Customer Two Customer Three Customers Four Customers Five Non-related parties Non-related parties Non-related parties Non-related parties Non-related parties 343,924, Within 1 year 100,000, ,001, ,670, ,279, Not yet reached the settlement period Within 1 year Not yet reached the settlement period Within 1 year Not yet reached the settlement period Within 1 year Not yet reached the settlement period Within 1 year Not yet reached the settlement period Total / 568,875, / / 3. The situation of the year-end closing balance of accounts advances to suppliers holding is or not more than five percent voting shares There is no year-end closing balance of accounts advances to suppliers holding more than five percent voting shares (7) Inventories 1. Inventory Classification Items Merchandise inventories Unit: Yuan Currency: RMB 30 June Dec 2013 Amounts Provision Carrying value Amounts Provision Carrying value 813,994, ,994, ,933, ,933, Total 813,994, ,994, ,933, ,933, (8) Other current assets Unit: Yuan Currency: RMB Items Nature (or content) 30 June Dec 2013 Transfer of account receivable Transfer of account by factoring receivable by factoring 1,797,815, ,109,878, Pending deductible input tax Pending deductible input tax 28,405, ,160, Total 1,826,220, ,177,038, (9) Financial assets -available for sale 1. Financial assets -available for sale Unit: Yuan Currency: RMB Items Fair value at 30 June 2014 Fair value at 31 Dec

360 others 200,000, Total 200,000, Investe e entities () Investment in joint ventures and associates: Proportio n to registered capital of the investees (%) ONE.joint ventures TWO.associates Zhengz hou Air Port Xing Rui Industri al Co., Ltd. Mao Rui Qingya ng Energy Chemic al Group Supply Chain Manage ment Co., Ltd. Proportion to voting rights of the investee (%) As at 30 June 2014 total assets ,082,072, As at30 June 2014 total liabilities 78,810, Unit: Yuan Currency: RMB Revenue of Profit of curret As a30 June 2014 curret period period total net assets 1,003,261, ,646,748, ,368, , ,953, ,252, ,058, , (11) Long-term equity investments: Long-term equity investments Cost method of accounting: Unit: Yuan Currency: RMB Proportion Proportion Investee entities Initial investment costs As at Dec31, 2013 Movements As at 30 June 2014 Provisions for impairment to registered capital of the to voting rights of the investee investees (%) 358

361 Xinyu Rural Commercial Bank Co., Ltd. (%) 287,495, ,495, According to the equity method: Investee entities Zhengzhou Air Port Xing Rui Industrial Co., Ltd. Mao Rui Qingyang Energy Chemical Group Supply Chain Management Co., Ltd. Initial investment costs As at Dec31, 2013 Movements As at 30 June 2014 Provisions for impairment Proportion to registered capital of the investees Proportion to voting rights of the investee (%) (%) 3,920,000, ,099, ,498, ,598, ,000, ,981, ,981, Unit: Yuan Currency: RMB (12) Fixed assets: 1. Fixed assets Items 1. original carrying amount Among them: houses and buildings whichmachinery equipment Unit: Yuan Currency: RMB As at 31 Dec Increase in 2014 Decrease in 2014 As at 30 June ,573, ,629, ,203, ,244, ,244,

362 Vehicles 7,999, ,066, ,065, Electronic equipment and other 2,329, ,563, ,892, Accumulated depreciation Additional Current period The period Charge for 4,633, ,461, ,094, Among them: houses and buildings whichmachinery equipment 1,667, , ,008, Vehicles 2,076, , ,994, Electronic equipment and other 889, , ,091, net carrying amount Among them: houses and buildings whichmachinery equipment 11,939, / / / / 4,577, / / Vehicles 5,922, / / Electronic equipment and other 1,439, / / 4. impairment / / Among houses buildings them: and whichmachinery equipment / / / / Vehicles / / Electronic equipment other and 5.carrying value 11,939, / / 15,108, Among houses buildings them: and whichmachinery equipment / / 4,577, / / 4,236, Vehicles 5,922, / / 8,070, Electronic 1,439, / / 2,800,

363 equipment and other Depreciation for the current period: 1,461, yuan. From construction in progress transferred to fixed assets in the current period ia amounted to t: $ (13) Intangible assets 1. Intangible assets Unit: Yuan Currency: RMB Items As at 31 Dec 2013 Increase in 2014 Decrease in 2014 As at 30 June Total original carrying amount 150,975, , ,039, Land use rights 150,650, ,650, Financial software 325, , , Total accumulated 325, , , amortization Land use rights Financial software 325, , , Net book value of intangible assets 150,650, , ,712, Land use rights 150,650, ,650, Financial software 62, , Total cumulative impairment amount Land use rights Financial software 4.Total carrying value 150,650, , ,712, Land use rights 150,650, ,650, Financial software 62, , Amortization amount: 1, yuan. (14) Long-term prepayments: Unit: Yuan Currency: RMB Items As at 31 Dec Increase in Decrease in As at 30 June Amortization Rent 315, , , Maintenance costs 161, , , Insurance 6, , , ROAD TAX , , ,

364 Total 483, , , , (15) Deferred tax assets and deferred tax liabilities 1. Deferred tax assets and deferred tax liabilities are not presented on a net basis after offsetting (1) Deferred tax assets and deferred tax liabilitiesrecognized deferred tax assets and deferred tax liabilities Recognized deferred tax assets Unit: Yuan Currency: RMB Items As at 30 June 2014 As at 31 Dec 2013 deferred tax assets Impairment of assets 90, ,056, Deferred income 5,000, ,000, SubtTotal 5,090, ,056, deferred tax liability Valuation of trading financial instruments and derivative 298, , financial instruments Total 298, , (2) Unrecognized deferred tax assets Unit: Yuan Currency: RMB Items As at 30 June 2014 As at 31 Dec 2013 Deductible loss 71,993, ,939, Total 71,993, ,939, (3) Unrecognized tax losses of deferred tax assets will expire in the following years: Unit: Yuan Currency: RMB Items As at 30 June 2014 As at 31 Dec 2013 Notes , ,452, ,082, ,197, ,681, ,972, Total 71,993, ,681, / (16) Asset impairment Breakdown: Unit: Yuan Currency: RMB Items As at 31 Dec Charge for the Decrease in 2014 As at 30 June 2013 year Reversal Written off 2014 Provision for bad debts 12,283, ,922, ,

365 Inventory impairment Impairment of financial assets available for sale ready Impairment of investments held to maturity Long-term equity investment impairment Investment property impairment Fixed asset impairment Engineering material impairment In construction engineering impairment Productive biological asset impairment Of which: impaired production of mature biological assets ready Impairment of oil and gas properties Impairment of intangible assets Impairment of goodwill Other Total 12,283, ,922, , () Notes payable 1. Notes payable Unit: Yuan Currency: RMB 363

366 Items As at 30 June 2014 As at 31 Dec 2013 Pledge loans 860,240, ,327, Guaranteed loans 307,271, ,000, Unsecured loans 210,438, ,212, Total 1,377,949, ,052,539, (18) Trading financial liabilities Unit: Yuan Currency: RMB Items As at 30 June 2014 As at 31 Dec 2013 Trading of bonds issued Designated as financial liabilities at fair value through profit or loss Derivative financial liabilities 5,312, Other financial liabilities Total 5,312, () Notes payable Unit: Yuan Currency: RMB Items As at 30 June 2014 As at 31 Dec 2013 Bank acceptance bills 545,477, ,147,021, Total 545,477, ,147,021, The amount of the next accounting period (the second half) will expire 545,477, yuan () Accounts payable 1. Accounts payable Unit: Yuan Currency: RMB Items As at 30 June 2014 As at 31 Dec 2013 Coal payment 401,877, ,534, Total 401,877, ,534, The situation of the year-end closing balance of accounts accounts payable is or not more than five percent voting shares There is no year-end closing balance of accounts payable holding more than five percent(equal 5%) voting shares Accounts payable (). Advances from customers 1.. Advances from customers Unit: Yuan Currency: RMB Items As at 30 June 2014 As at 31 Dec 2013 Coal advances from customers 306,394, ,592, Total 306,394, ,592,

367 2. The situation of the year-end closing balance of accounts advances holding is or not more than five percent voting shares There is no year-end closing balance of accounts advances holding more than five percent voting share. (22) Employee benefits payable Unit: Yuan Currency: RMB Items As at 31 Dec Increase in Decrease in As at 30 June First, wages, bonuses, allowances and subsidies 2,760, ,759, ,195, ,324, Second, the employee benefits 1,204, ,204, Third, social insurance 1,484, ,484, Among them: 1a medical insurance 407, , basic old-age insurance 912, , Unemployment insurance 90, , injury insurance 28, , maternity insurance 45, , Fourth, the housing fund 39, , , , Dismission welfare Nine others Seven,Five, union funds and employee education funds 646, , , , Total 3,446, ,560, ,000, ,006, (23) Taxes payable Unit: Yuan Currency: RMB Items As at 30 June 2014 As at 31 Dec 2013 Value added tax 784, ,092, Sales Tax 4,049, ,414, Corporate Income Tax 12,282, ,181, Individual income tax 320, , Urban maintenance and construction tax 508, , Education surtax 223, , Additional local education 364, , Tax adjustment fund Other 25, , Total 18,559, ,599,

368 (24) Interest payable Unit: Yuan Currency: RMB Items As at 30 June 2014 As at 31 Dec 2013 Interest payment of short-term loan 5,941, Interest payable of factoring borrow money 82,237, ,072, Total 88,179, ,072, The Company's subsidiaries CHINA COAL SOLUTION (TIANJING) BUSINESS FACTORING LTD borrow money from parent company CHINA COAL SOLUTION (ZHENGZHOU) SUPPLY CHAIN MANGEMENT LTD, which interest payment amounted to 82,237, (25) Other payables 1. Break down of other payables Unit: Yuan Currency: RMB Item As at 30 June 2014 As at 31 Dec 2013 Borrowings 1,660,492, ,070,000, Shipping costs 5,702, ,339, Information fee 785, Deposit 500, Rent 647, , Intermediary costs 264, , Others 1,498, ,791, Total 1,668,606, ,077,402, The situation of the year-end closing balance of Other payables holding is or not more than five percent voting shares There is no year-end closing balance of Other payables holding more than five percent voting share. Unit: Yuan Currency: RMB Creditor As at 30 June 2014 As at 31 Dec 2013 CHINA COAL SOLUTION (ZHENGZHOU) SUPPLY 1,660,000, ,070,000, CHAIN MANGEMENT LTD Total 1,660,000, ,070,000, Description of over 1 year of age other payables Company Name Items Amount Outstanding reasons Whether return in the future Chang Zhong Jia Yan Zhao Zhang Qingli plus Lirui Lan (rental fee)rental fee 647, Not paid yet YES Total 647,

369 4. Describtion for larger amounts of other payables Company Name Items Amount CHINA COAL SOLUTION (ZHENGZHOU) Borrowing SUPPLY CHAIN MANGEMENT LTD 1,660,000, Hong Leong Finance Car payments 667, Jiaozuo City Hongda Transport Co. Freight 3,091, Total 1,663,758, (26) Others non - current liabilities Unit: Yuan Currency: RMB Items As at 30 June 2014 As at 31 Dec 2013 Deferred income 20,000, ,000, Total 20,000, ,000, Note The Core Port Management Committee of Taizhou Port of Taizhou City issued " Special guidance funding notice of the development of modern service industry (TAI GANG HE GUANG WEI FA[2013] 63) at September 18, 2013.The subsidiary of the Company, JiangSu JinHe Power And Electricity Fuel Co.,LTD was granted special guidance modern service fund( RMB2,000 ten thousand ) to the new project on network platform of the coal supply chain and information technology. (27) Share capital Unit: Yuan Currency: RMB Increase or decrease in 2014 As at 31 Dec 2013 Issue of new shares stock dividend Transferred from reserves Other Subtotal As at 30 June 2014 Total number of shares 872,223, ,040, ,040, ,263, The company has considered and approved " Incentive plan (revised draft) and a summary of the motions on the company's stock options and restricted stock," in 2012 Sixth Extraordinary General Motion of granting of incentive stock options and restricted stock" Motion of equity incentive plan on the company restricted stock and stock options to unlock the first period vesting "at the Seventh meeting of the Fifth Board of Directors at the January 6, 2013.The exercisable stock options of CCS Supply Chain Management Co., Ltd.holding by Zhang Yi initial stock and other equity incentive plan 73 incentive target was amounted to 6,040,000 total number of shares of the first row, at the 7.83 yuan of exercise price. The capital replenishment has been verified by ([2014] RUI HUA YANZI No ) audit report issued by Zhonglei Certified Public Accountants Co., Ltd in the reporting period. 367

370 (28) Capital surplus Unit: Yuan Currency: RMB Items As at 31 Dec 2013 Increase in 2013 Decrease in 2013 As at 30 June 2014 Capital premium (share premium) 8,928, ,253, ,181, Other capital reserves 18,256, ,935, ,191, Total 27,184, ,189, ,373, The reasons for increase the amount of capital reserves: (1)The Company has granted to 73 people of restricted stock to including Zhangyi at RMB 7.83 yuan/share, increasing 604 ten thousands number shares and increasing capital reserves 41,253, yuan. (2) Current equity incentive increase capital reserves 3,935, yuan. (29) Surplus reserve Unit: Yuan Currency: RMB Items As at 31 Dec 2013 Increase in 2013 Decrease in 2013 As at 30 June 2014 Statutory surplus reserves 24,811, ,105, ,917, Total 24,811, ,105, ,917, (30) Retained earnings Unit: Yuan Currency: RMB Items Amount Extraction or distribution ratio (%) Retained profit as at December 31,2013 before adjustments 821,992, / Retained profit as at January 1, 2014 after adjustments 821,992, / Plus: Net profit attributable to shareholders of the parent 133,264, / company Surplus reserves make up losses 24,105, Retained profit as at 30 June ,150, / (31) Revenues from operations and costs of operations Revenues from operations and costs of operations Unit: Yuan Currency: RMB Items Revenues from operations 3,247,461, ,369,818, costs of operations 2,815,790, ,059,125,

371 2. Main business (Products) Unit: Yuan Currency: RMB Product Name Revenues Costs Revenues Costs Coal supply chain operations management and 3,167,231, ,755,625, ,360,753, ,059,125, service Supply chain finance business 80,230, ,164, ,064, Total 3,247,461, ,815,790, ,369,818, ,059,125, Top five customers operating income Unit: Yuan Currency: RMB Customer Name Operating income Proportion of total revenue (%) Customer One 370,176, Customer Two 182,848, Customer Three 130,885, Customers Four 125,625, Customers Five 111,437, Total 920,972, (32) Business taxes and surcharges Unit: Yuan Currency: RMB Items Tax rate Business tax According to taxable 5,756, , revenue Urban maintenance and construction tax 1,629, ,074, The actual payment is 7% or 5% of turnover tax Education surcharge The actual sales tax is 1,186, ,494, the. 5% of VAT Others 40, Total 8,612, ,868, / (33) Selling and distribution expenses Unit: Yuan Currency: RMB Items Immigration and quarantine fees 988, , Agent commission fee 1,392, , Port Construction (Service) costs 19,781, ,526, Verification appraisal fees 1,682, , Transport fees 195,463, ,512,

372 Stockpiling handling fee 14,788, ,515, Lease fee 971, Other 2,382, ,103, Total 237,450, ,300, (34) General and administrative expenses Unit: Yuan Currency: RMB Items Office expenses 2,155, ,607, Travel 3,886, ,278, Equity Incentive 3,935, ,979, Other 130, , Car expenses 2,420, ,454, Labor costs 21,917, ,205, Taxes 1,505, ,117, Business entertainment expenses 8,711, ,257, Depreciation and amortization 1,511, ,184, Consulting and intermediary services 4,979, ,839, Lease fee 2,854, ,680, Total 54,008, ,622, (35) Financial expenses Unit: Yuan Currency: RMB Items Interest expense 49,351, ,490, Interest income -5,828, ,234, Charges 11,038, ,668, Foreign exchange gains and losses 13,113, ,117, Total 67,675, ,193, (36) Changes in fair value gains Unit: Yuan Currency: RMB Sources of revenue generated from changes in fair value Among them: Change in fair value of financial derivative -4,906, Total -4,906, (37) Investment income 1. Breakdown of investment income Unit: Yuan Currency: RMB Gains from long-term equity investments under the cost 1,827,

373 method Gains from long-term equity investments under the equity method 1,480, Investment income from disposal of trading financial assets 50,515, Investment income arising from disposal of financial assets available for sale 36,000, Total 89,822, Gains from long-term equity investments under the cost method Unit: Yuan Currency: RMB Investees Reason for the change Xinyu Rural Commercial Bank Co., Ltd., There was no investment in the last period. 1,827, There is one and dividend distribution in the current period. Total 1,827, / 3. Gains from long-term equity investments under the equity method Unit: Yuan Currency: RMB Investees Reason for the change Mao Rui Qingyang There was no investment in Energy Chemical Group the last period. -18, Supply Chain Management Co., Ltd. Zhengzhou Air Port Xing There was no investment in 1,498, Rui Industrial Co., Ltd. the last period. Total 1,480, / (38) Impairment of assets Unit: Yuan Currency: RMB Impairment of assets One. bad debt losses -11,922, ,147, Two.Inventory impairment loss Three.Impairment losses of financial assets available for sale Four.Held-to-maturity investment impairment losses Five.Impairment of long-term equity investment loss Six.Investment impairment loss of property Seven. fixed asset impairment losses 371

374 Eight. Impairment losses Engineering Materials Nine.Impairment loss works in progress Ten.Productive biological asset impairment losses Eleven. Impairment loss of oil and gas assets Twelve. Intangible assets impairment losses Thirteen. Impairment loss on goodwill Fourteen Other Total -11,922, ,147, (39) Non-operating incomes 1. Non-operating incomes Unit: Yuan Currency: RMB Item Non-recurring gains and losses recognized in the income amount Government grants 3,401, ,056, ,401, Other 2,912, ,912, Total 6,313, ,056, ,313, Details of government grants Unit: Yuan Currency: RMB Item Notes Ningbo Bonded financial support fund 2,914, Related to income 7,100, TAIZHOU local financial support fund 69, Related to income 1,751, Xining local financial support fund 50, Related to income 5,045, Hongze local financial support fund 339, Related to income 2,487, Nagqu local financial support fund Related to income 8,273, PIZHOU local financial support fund Related to income 372, xuzhou local financial support fund Related to income 15, QIYANG local financial support fund Related to income 12, Singapore Government 29, Related to income 372

375 Innovation subsidies Total 3,401, ,056, / (40) Non-operating expenditure Unit: Yuan Currency: RMB Item Non-recurring gains and losses recognized in the income amount Foreign Donations 50, Overdue fine, penalty 775, , Other Total 775, , , (41) Income tax Unit: Yuan Currency: RMB Item Current income tax calculated according to the tax law and 29,935, ,806, related regulations Deferred tax adjustment 3,100, ,036, Total 33,036, ,769, (42) The calculation ofbasic earnings per share and diluted earnings per share Before deduction of non-current After deduction of non-current Net profit attributable to parent company 133,264, ,647, Basic number of shares 873,230, Basic earnings per share Number of diluted shares 876,400, Diluted earnings per share The basic number of shares 873,230, = Beginning of shares stock options 6,040,000 * 1/6 Diluted earnings per share = net profit attributable to the parent 133,540, / (number of shares stock 6,040,000 stock options * 1/6 + equity incentive shares outstanding 3,170,242); Equity incentive shares outstanding 3,170,242 = (Incentive total number of shares failure incentives number of shares ) * 0.6 (Incentive total number of shares ailure incentives number of shares ) * 0.6 * 7.83 exercise price / average share price (Incentive total number of shares Incentive total number of shares 1,700,000 * 9.7 / average share price of the current period 11.59) * 5/6 373

376 (43) Other comprehensive income Unit: Yuan Currency: RMB Items Gains (losses) on available for sale financial assets amount Less: Income tax impact of available for sale financial assets Previously recognized in other comprehensive income, net profit and loss transfer Subtotal 2 in accordance with the share of equity method investees in other comprehensive income attributable Less: Income tax impact of share in accordance with the equity method of accounting for investments in other comprehensive income generated attributable Previously recognized in other comprehensive income, net profit and loss transfer Subtotal 3. Profits (or losses) generated cash flow hedging instruments amounts Less: Income tax effect of cash flow hedging instruments generated Previously recognized in other comprehensive income, net profit and loss transfer The hedged item to initial recognition amount of adjustment Subtotal 4. Foreign currency translation differences of financial statements -1,891, Less: disposal of foreign operations transferred to profit or net profit Subtotal -1,891, Other Less: Income tax influence by other recognized in other comprehensive income generated Other pre-counted in other comprehensive income into net loss Subtotal Total -1,891, (44) Notes to the cash flow statement: Other operating activities Cash receipt Items Unit: Yuan Currency: RMB Amount 374

377 Factoring recover 940,000, Interest income 5,828, Current account 125,563, Government grants 3,401, Other 2,912, Total 1,077,705, Other operating activities Cash payment Unit: Yuan Currency: RMB Items Amount Factoring Loans 536,000, Selling expenses 236,777, Fee and commission expense 10,934, Business entertainment expenses 8,711, Consulting services 4,619, Travel 3,885, Lease fee 2,854, Car expenses 2,420, Office expenses 1,131, Other 1,850, Current account 8,239, Total 817,425, Other cash receipt relating to financing activities Unit: Yuan Currency: RMB Items Amount Borrowing from Zhengzhou Rui Mao Supply Chain 295,000, Co., Ltd. Total 295,000, Other cash payment relating to financing activities of: Unit: Yuan Currency: RMB Items Amount Return Zhengzhou Rui Mao-supply chain Limited 705,000, Borrowing Total 705,000, (45) Cash Flow Supplementary Information 1. Supplementary Cash Flow Information Unit: Yuan Currency: RMB Item Reconciliation of net income to cash flows from operating activities 375

378 Net income 133,264, ,184, Add: -11,922, ,147, Depreciation of fixed assets, Petrol assets and productive biological assets 1,461, ,184, Amortisation of intangible assets 1, , Amortisation of long-term prepayments 292, Losses / (gains) on disposal of fixed, intangible and other long-term assets Losses / (gains) on scrapping of fixed assets Losses / (gains) on changes of the fair value Financial expenses / (income) 49,376, ,117, Investments losses / (gains) -89,822, Decrease / (increase) in deferred income tax assets 2,966, ,036, Increase / (decrease) in deferred income tax liabilities 134, Decrease / (increase) in inventories -574,060, ,435, Decrease / (increase) in operating receivables 259,778, ,669, Increase / (decrease) in operating payables 453,505, ,918, Others 3,935, ,979, Net cash flows from operating activities 228,909, ,435, Investing and financing activities not resulting in cash flows Conversion of debt into capital Convertible bonds to be expired within one year Fixed assets under finance lease Net increase in cash and cash equivalents Cash at the end of the period 519,359, ,940, Less: Cash at the beginning of the period 526,522, ,164, Plus: Cash equivalents at the end of the period Less: Cash equivalents at the beginning of the period Net increase in cash and cash equivalents -7,163, ,223, Disclosure of cash and cash equivalents Unit: Yuan Currency: RMB Item Cash 519,359, ,522, Cash on hand 6,343, ,005, Bank deposit that are available for payment at any time 255,047, ,357, Other monetary terms that are available for payment at any time 257,968, ,159,

379 Central banks can be used to pay Due from banks Placements with banks Cash equivalents -Bond investments due within 3 months Cash and cash equivalents at the end of the period 519,359, ,522, Related parties and related party transactions (1) The parent of the Company Unit: Yuan Currency: RMB Company type Registered Legal representative Business nature Registered Percentage of Percentage of Ultimate Organization Company address capital shareholding in shareholding with controller code name the Company voting rights in the Company ZHENGZHOU CHINA COAL SOLUTION CO., LTD. Limited liability company Zhengzhou Wan Yongxing Enterprise Management Consulting 360,000, Wan Yongxing Note: The company ultimately controlled by Wan Mr. Yongxing. (2) Subsidiary of the Company Unit: Yuan Currency: RMB Company name Company type Registered address Legal representative Business nature Registered capital Percentage of shareholding in the Company Percentage of shareholding with voting rights in the Company Organization code Xuzhou Yifeng Trading Co. Limited liability company xuzhou Wang Dongsheng Coal Sales. Procurement 60,000, China Coal Solution(HK) Limited Limited liability company HK Wan Yongxing Coal Sales. Procurement 1.00HK Pizhou Fengyuan Power Fuel Co., Ltd. Limited liability company PIZHOU Wu Wenquan Coal Sales. Procurement 60,000, Henan Tengrui Energy Industry Development Co., Ltd. Limited liability company QIYANG Liu Feiyue Coal Sales. Procurement 10,000, Xuzhou Yuguang Co., Ltd. Trading Limited liability company PIZHOU Yan Zhenfeng Coal Procurement Sales. 10,000, China Coal Solution(Singapore) Pte.Ltd. Limited liability company Singapore Coal Procurement Sales. 7,800, USD Ina Advanced Holdings Limited liability Singapore Coal Sales. 100,000.00US

380 Pte.Ltd. company Procurement D Rex coal Pte.Ltd. Limited liability company Singapore Coal Sales. Procurement 5,000, USD China Coal Solution(Indonesia) Pte.Ltd. Limited liability company Coal Sales. Procurement 1,000, USD CHINA COAL Wang Ruichen Coal Supply SOLUTION(YANNTAI) BUSINESS FACTORING Limited liability company YANTAI Chain Management 30,000, USD LTD JiangSu JinHe Power And Electricity Fuel Co.,LTD Limited liability company TAIZHOU Wang Dongsheng Coal Sales. Procurement 230,000, CHINA COAL Qinjing Fu Coal Products SOLUTION(SHANXI) BUSINESS FACTORING Limited liability company TAIYUAN Sales 20,000, LTD ZHEJIANG YUNENG Ningbo Ding Zhixiong Coal Sales. POWER ELECTRICITY AND FUEL Limited liability company Procurement 10,000, CO.,LTD. Xining Dexiang business trade LLC Limited liability company Xining Mi Changbin Coal Procurement Sales. 10,000, TIANJIN CHINA COAL SOLUTION FACTORING CO., LTD. Limited liability company Tianjin Mi Changbin Trade Finance 300,000, Nagqu Ruichang Coal Transportation and Marketing Co. Limited liability company Nagqu Wang Weidong Coal Sales. Procurement 50,000, Jiangsu Fengtai Materials Trading Co., Ltd. Limited liability company Hongze Yue Xuefeng Coal Procurement Sales. 10,000, ZHEJIANG HEHUI ELECTRICITY MATERIAL CO.,LTD Limited liability company Ningbo Zhang Shouling Coal Sales. Procurement 50,000, Shen Zhen Qian Hai CHINA Shenzhen Wang Dongsheng Supply chain COAL SOLUTION Supply Chain Service Platform Limited liability company management 50,000, Co.,LTD. Yantai Xing Rui Logistics Ltd. Limited liability company YANTAI Li Dongping Supply Chain Logistics 10,000, CHINA COAL Shanghai Supply chain SOLUTION(SHANGHAI) BUSINESS FACTORING Limited liability company Wang xingyun management 50,000, LTD. CHINA COAL Limited liability Beijing Jiqing Supply chain 10,000,

381 SOLUTION(BEIJING) company management BUSINESS FACTORING LTD. CHINA COAL Wuhan Supply chain SOLUTION(WUHAN) BUSINESS FACTORING Limited liability company Huangxing management 10,000, X LTD. Zhengzhou Jiarui Supply Chain Management Co., Ltd., Limited liability company Zhengzhou Hou Zhi put Supply chain management 10,000, TIANJIN CHINA COAL SOLUTION FACTORING CO., LTD. Limited liability company Tianjin Wang Weidong Finance leases 100,000, CHINA COAL Shanghai Wang Weidong Finance leases SOLUTION(SHANGHAI) BUSINESS FACTORING Limited liability company 170,000, LTD (3) Joint ventures and associates Unit: Yuan Currency: RMB Company name Company Registered Legal Business nature Registered Percentage of Percentage of Organization type address representative capital shareholding in shareholding with code the Company voting rights in the Company 2. associates Zhengzhou Air Port Xing Limited Zhengzhou Wang Ruichen Supply chain Rui Industrial Co., Ltd. liability management and 1,000,000, company related services Mao Rui Qingyang Energy Chemical Group Supply Chain Management Co., Ltd. Limited liability company Qingyang LiuTao Supply chain management and related services 100,000, (4) The companies other related parties Other related party name Henan and prosperous real estate development co., LTD Henan yi feng real estate development co., LTD Wuhan period prosperous real estate development co., LTD Anhui huachang real estate development co., LTD Relationship with other related party Organization code Others Inter-group company X Inter-group company X Inter-group company

382 Anhui temporal real estate development co., LTD Inter-group company Jiangsu and prosperous real estate development co., LTD Inter-group company Yangzhou huachang real estate development co., LTD Inter-group company Henan hing prosperous real estate co., LTD Inter-group company Beijing building glory real estate co., LTD Inter-group company X Henan yi chang real estate co., LTD Inter-group company Henan temporal real estate co., LTD Inter-group company Henan gen and real estate co., LTD Inter-group company In the henan group co., LTD Inter-group company Zhejiang wisdom abundant trade co., LTD Inter-group company Beijing rui ruixing supply chain management co., LTD other Shanghai far appropriate international trade co., LTD other Appropriate industrial development (Shanghai) co., LTD Inter-group company Jia ruixing investment co., LTD. And Beijing Inter-group company Ruixing and jia (Beijing) investment fund management co., LTD Inter-group company Shanghai yu hui investment management center (limited partnership) Inter-group company Beijing rui and jia asset management co., LTD Inter-group company Zhengzhou JingChang enterprise management consulting co., LTD Inter-group company Henan and prosperous enterprise management consulting co., LTD Inter-group company Tong Run International Limited (with embellish International co., LTD.) Inter-group company In the henan province investment co., LTD Same chairman Antai in dalian petrochemical co., LTD Wholly owned X Shanghai runhai appropriate petrochemical co., LTD Wholly owned Kaifeng city huarui chemical new material co., LTD other Jia temporal investment management co., LTD. And Beijing other And your asset management co., LTD in Shanghai Inter-group company JinkoSolar Holding Co., Ltd. (crystal energy other 380

383 holdings Co., Ltd.) The Max Finance Ltd. other Jessie International Ltd. other Beijing ruixing and jia network technology co., LTD other X Beijing Hejiaruixing Investment Limited holds 100% stake of Hejiaruixing Investment Limited. On June 26, 2014 Hejiaruixing Investment Limited has transferred its 100% equity interest.the company no longer existedthereafter relationship, the company has been changed to "Beijing's Henan Hechang Real Estate Development Co., hold 100% equity of Beijing Hechang Investment Management Limited. On July 3, 2014 Hechang Real Estate Development Co., has transferred its 100% equity interest.there was no relationship with the Company. (5) Guarantees with related parties 1. Guarantees with related parties Unit: Yuan Currency: RMB Name of the guarantor Name of the Guarantee Whether the guarantee amount Guarantee period guarantee has been fulfilled ZHEJIANG January 4, YUNENG December 31, 2014 ZHENGZHOU CHINA POWER AND COAL SOLUTION CO., 16, ELECTRICITY LTD. FUEL NO CO.,LTD. Xining October 9, ZHENGZHOU CHINA Dexiang October 9, 2014 COAL SOLUTION CO., 10, NO business trade LTD. LLC Xining July 24, July ZHENGZHOU CHINA Dexiang 24, 2014 COAL SOLUTION CO., 10, business trade LTD. LLC NO Xining September 23, 2013 ZHENGZHOU CHINA Dexiang - September 23, COAL SOLUTION CO., 20, business trade 2014 LTD. LLC NO Nagqu May 7, ZHENGZHOU CHINA Ruichang Coal December 31, 2014 COAL SOLUTION CO., Transportation 52, NO LTD. and Marketing Co. ZHENGZHOU CHINA Nagqu 58, September 25, 2013 NO 381

384 COAL SOLUTION CO., Ruichang Coal - September 25, LTD. Transportation 2015 and Marketing Co. Nagqu July 4, July ZHENGZHOU CHINA Ruichang Coal 4, 2014 COAL SOLUTION CO., Transportation 23, NO LTD. and Marketing Co. Nagqu September 2, 2013 ZHENGZHOU CHINA Ruichang Coal - September 2, COAL SOLUTION CO., Transportation 15, NO LTD. and Marketing Co. Nagqu July 31, July ZHENGZHOU CHINA Ruichang Coal 31, 2014 COAL SOLUTION CO., Transportation 3, NO LTD. and Marketing Co. Nagqu December 2, ZHENGZHOU CHINA Ruichang Coal December 1, 2014 COAL SOLUTION CO., Transportation 2, NO LTD. and Marketing Co. Henan ZhongRui Investment Nagqu July 4, July Co. Ruichang Coal 4, 2014 Transportation 52, NO and Marketing Co. Wan Yongxing Nagqu May 7, May Ruichang Coal 7, 2015 Transportation 52, NO and Marketing Co. Liu Yi Nagqu May 7, May Ruichang Coal 7, 2015 Transportation 52, NO and Marketing Co. Wan Yongxing Nagqu September 25, 2013 Ruichang Coal - September 25, Transportation 65, NO and Marketing Co. 382

385 Liu Yi Nagqu September 25, 2013 Ruichang Coal - September 25, Transportation 65, NO and Marketing Co. Wan Yongxing Nagqu December 2, Ruichang Coal December 1, 2014 Transportation 1, NO and Marketing Co. Anhui Ruichang Real Estate Nagqu September 27, 2013 Development Co., Ruichang Coal - September 27, Transportation 35, NO and Marketing Co. Henan Tengrui September 26, 2013 ZHENGZHOU CHINA Energy - September 26, COAL SOLUTION CO., Industry 6, NO LTD. Development Co., Ltd. Wan Yongxing Henan Tengrui September 26, 2013 Energy - September 26, Industry 65, NO Development Co., Ltd. Liu Yi Henan Tengrui September 26, 2013 Energy - September 26, Industry 65, NO Development Co., Ltd. Henan ZhongRui Investment Nagqu March 12, Co. Ruichang Coal March 12, 2017 Transportation 3, NO and Marketing Co. Henan ZhongRui Investment Nagqu February 21, Co. Ruichang Coal February 20, 2015 Transportation 1, NO and Marketing Co. ZHENGZHOU CHINA COAL SOLUTION CO., LTD. Nagqu Ruichang Coal Transportation and Marketing 3, March 12, March 12, 2017 NO 383

386 Co. 2. Borrowings and lending with related parties Related parties Borrowed amounts Unit: Yuan Currency: RMB Start dates End dates Notes Borrowings ZHENGZHOU CHINA COAL SOLUTION CO., LTD. 70,000, January 15, 2014 January 14, 2015 Carrying amount as of the reporting period: 70,000, yuan ZHENGZHOU CHINA COAL SOLUTION CO., LTD. 200,000, April 4, 2014 April 3, 2015 Carrying amount as of the reporting period: 200,000, yuan ZHENGZHOU CHINA COAL SOLUTION CO., LTD. 25,000, April 4, 2014 April 3, 2015 Carrying amount as of the reporting period: 25,000, yuan March 28, 2014 May 20, 2014 Carrying amount as of Tong Run International Limited 2,460, the reporting period: 0.00 yuan March 28, 2014 August 28, 2014 Carrying amount as of Tong Run International Limited 492, the reporting period: 492, yuan (SIX) Receivables and payables with related parties Listed companies related parties: Unit: Yuan Currency: RMB Items Related parties Closing balance Balance Beginning Balance Factoring loans ZHENGZHOU CHINA COAL 1,660,000, ,070,000, SOLUTION CO., LTD. Money lending Tong Run International Limited 492, Share-based payment (1) Overall share-based payment Total equity instruments of the company granted in the year Total equity instruments to exercise the company in the year Company Closing outstanding share options exercisable at a price range and the remaining term of the contract 1,700,000 6,040,000 The first grant of 9.06 million shares not yet exercised the option, the issue price of 7.83 yuan / share, The batch option is valid for four years from January 7, 2013 starting, Reserved part of the grant of 1.7 million stock options, the issue price of 9.70 yuan / share, the batch option is valid for three years from January 2, 2014 starting. 384

387 The categories main Commitments party Commitments Time of The period to complete Commitments commitments undertaken The fulfillment of commitments Controlling ZHENGZHOU CHINA COAL Share lock-term shareholder SOLUTION CO., LTD. commitment: The subscription of 36 months since the end of date of issue Until December 31, 2013, shares of listed December 21, shares ZHENGZHOU CHINA COAL companies can not 2011 (ie, August 29, 2012 to August 28, SOLUTION CO., LTD. have not be transferred 2015) transferred shares of the Company within 36 months from the date of issued Controlling ZHENGZHOU CHINA COAL Commitments to December 21, ZHENGZHOU CHINA COAL Effective period as controlling shareholderactual SOLUTION CO., LTD.,,Wan Yongxing, avoid the 2011 SOLUTION CO., LTD., Wan Xing, Liu shareholder, actual controller, related controller, related Liu Yi competition in the Yi have been strictly to fulfill the parties same industry. with parties of ZHENGZHOU CHINA COAL commitments, without any violation of SOLUTION CO., LTD., the listed company commitments. Controlling ZHENGZHOU CHINA COAL Commitments to December 21, ZHENGZHOU CHINA COAL Effective period as controlling shareholderactual SOLUTION CO., LTD. Wan Yongxing, standardize the 2011 SOLUTION CO., LTD., Wan Xing, Liu shareholder, actual controller, related controller, related Liu Yi related transaction Yi have been strictly to fulfill the parties of ZHENGZHOU CHINA COAL parties with the listed commitments, without any violation of SOLUTION CO., LTD., company commitments. Controlling ZHENGZHOU CHINA COAL Commitment to December 21, Effective period as controlling ZHENGZHOU CHINA COAL shareholderactual SOLUTION CO., LTD.,Wan Yongxing, safeguard the 2011 shareholder, actual controller, related SOLUTION CO., LTD., Wan Xing, Liu controller, related Liu Yi independence of parties of ZHENGZHOU CHINA COAL Yi have been strictly to fulfill the parties listed companies SOLUTION CO., LTD., commitments, without any violation of commitments. Controlling ZHENGZHOU CHINA COAL Commitments to Commitments to the restructuring Inject assets restructuring has been shareholder SOLUTION CO., LTD.. compensate injected assets to achieve net profit in completed the earnings forecast in 2011, earnings forecast if 2011, 2012, 2013, 2014 as follows: 2012 and The controlling December 26, necessary. 31, ten thousand yuan, 37, shareholder will fulfill its commitments 2011, May 9, 2012 ten thousand yuan, 44, ten strictly. thousand yuan, 48, ten thousand yuan Refer to Important in this report, "equity incentive and its impact." (2) Equity-settled share-based payment Unit: Yuan Currency: RMB Items Detailed The total shares of stock options for 10,760,000. Stock options expected to meet the assessment Best estimate of the methods for determining the criteria of the first grant for the second vesting is number of vested equity instruments 453 ten thousand shares, the number of third vesting is 453 ten thousand shares. The total numberis

388 million shares. Number of stock options expected to meet the assessment criteria for the first time period granted for 85 ten thousand. Number of options exercisable for a second 85 ten thousand shares, The total numberis 170 ten thousand shares. Reasons for significant difference between this year None and last year The cumulative amount of capital reserve to for 22,191, share-based payment The total cost of share-based payment 22,191, Contingencies None 10. Commitments (1) Significant commitments 11. Subsequent events occurring after the balance sheet date (1) Distribution of profits after balance sheet shows the Unit: Yuan Currency: RMB Proposed allocation of profits or dividends 149,304, Profits or dividends declared by consideration and 149,304, approval (2) Other Post balance sheet items Description As of June 30, 2014, the parent company undistributed profits 216,951, yuan, calculated in accordance with the total share capital of 878,263,893 shares.the company distributed 1.70 yuan (including tax) for every 10 shares.total distributable profit was 149,304, yuan. The profit distribution not involved capital reserve transfer into share capital, not involved profits bonus issue. 12. Major notes to financial statements of the parent company (1) Accounts receivable 1. The situation of the year-end closing balance of accounts receivable holding is or not more than five percent voting shares There is no year-end closing balance of accounts receivable holding more than five percent voting shares. () Other receivables 386

389 1. Other receivables listed by categories Unit: Yuan Currency: RMB As at 30 June 2014 As at 31 Dec 2013 Carrying amount Provision for bad Carrying amount Provision for bad Types debts debts Amount Proportion (%) Amount Proportion (%) Amount Proportion (%) Amount Proportion (%) Provision for bad debts by a combination of other receivables The aging 94,340, ,715, analysis Subtotal 94,340, ,715, Total 94,340, / / 27,715, / / Aging analysis of other receivables provision for bad debtsunit: Yuan Currency: RMB As at 30 June 2014 As at 31 Dec 2013 Aging Carrying amount Provision Carrying amount Provision Amount Proportion for bad Amount Proportion for bad (%) debts (%) debts Within 1 year Which Within 6 months 94,340, ,715, months to 1 year Within 1 year 94,340, ,715, Total 94,340, ,715, Other Accounts receivable 1. The situation of the year-end closing balance of accounts other receivable holding is or not more than five percent voting shares There is no year-end closing balance of accounts other receivable holding more than five percent voting shares. 3. Top five of other receivables Company Name Relationship with the Company JiangSu JinHe Subsidiaries Power And Electricity Fuel Co.,LTD ZHEJIANG Subsidiaries HEHUI ELECTRICITY Unit: Yuan Currency: RMB Amount Aging Proportion (%) 39,226, Within 6 month Within 6 month 20,155,

390 MATERIAL CO.,LTD Henan Tengrui Subsidiaries Within 6 month Energy Industry Development Co., Ltd. 17,800, Nagqu Ruichang Subsidiaries Within 6 month Coal Transportation and Marketing Co. 14,172, China Railway Non-related units Within 6 month Engineering Consulting Group Co., Ltd., 1,550, Zhengzhou Institute Total / 92,904, / Receivables from related parties Unit: Yuan Currency: RMB Company Name Relationship with the Company Amount Aging JiangSu JinHe Power And Subsidiaries Electricity Fuel Co.,LTD 39,226, ZHEJIANG HEHUI Subsidiaries ELECTRICITY MATERIAL CO.,LTD 20,155, Henan Tengrui Energy Subsidiaries Industry Development Co., Ltd. 17,800, Nagqu Ruichang Coal Subsidiaries Transportation and 14,172, Marketing Co. Shen Zhen Qian Hai Non-related units CHINA COAL SOLUTION Supply Chain Service Platform Co.,LTD. 550, CHINA COAL Subsidiaries SOLUTION(SHANGHAI) BUSINESS FACTORING 100, LTD. / 92,004, (3) Long-term equity investments 388

391 Cost method of accounting Unit: Yuan Currency: RMB Initial investment As at 31 Dec 2013 Movements As at 30 June 2014 Provisions for Provisions Proportion to Proportion to voting rights Investee entities costs impairment charged for current period registered capital of the of the investee (%) investees (%) JiangSu JinHe Power And Electricity Fuel Co.,LTD Xuzhou Yifeng Trading Co., Ltd Pizhou Fengyuan Power Fuel Co., Ltd 2,868,000, ,868,000, ,868,000, ,000, ,000, ,000, ,000, ,000, ,000, (4) Investment income: 1 Investment income details Unit: Yuan Currency: RMB As at 30 June 2014 As at 31 Dec 2013 Long-term equity investment income cost method 633,068, Total 633,068, (5) Supplementary Cash Flow Information:Unit: Yuan Currency: RMB Supplementary As at 30 June 2014 As at 31 Dec 2013 Reconciliation of net income to cash flows from operating activities Net income 623,020, ,004, Plus: Provision for impairment of assets Depreciation of fixed assets, Petrol assets and productive biological assets 36, , Amortisation of intangible assets Amortisation of long-term prepayments Losses / (gains) on disposal of fixed, intangible and other long-term assets Losses / (gains) on scrapping of fixed assets Losses / (gains) on changes of the fair value Financial expenses / (income) Investments losses / (gains) -633,068, Decrease / (increase) in deferred income tax assets Increase / (decrease) in deferred income tax liabilities Decrease / (increase) in inventories Decrease / (increase) in operating receivables -66,624, ,984, Increase / (decrease) in operating payables 18,985, ,226, Others 3,935, ,979,

392 Net cash flows from operating activities -53,714, ,769, Investing and financing activities not resulting in cash flows Conversion of debt into capital Convertible bonds to be expired within one year Fixed assets under finance lease Net increase in cash and cash equivalents Cash at the end of the period 353, ,241, Less: Cash at the beginning of the period 6,855, , Plus: Cash equivalents at the end of the period Less: Cash equivalents at the beginning of the period Net increase in cash and cash equivalents -6,501, ,081, Supplementary information (1) List of non-recurring gains and losses for current period Unit: Yuan Currency: RMB Non-recurring items Amount Profit or loss of government subsidies closely related to the company's normal business, excep in line with national policy 3,401, according to certain fixed amounts Associated with the held for trading financial assets, changes in fair value of trading financial liabilities arising from disposal of trading financial assets. Trading financial liabilities and available-for-sale 81,608, financial assets investment income, not including effectively hedge the company's normal business operations Except to the above other operating income and expenses 2,136, Effect of income tax -15,530, Total 71,616, (2) ROE and earnings per share Report Profit Net profit attributable to ordinary shareholders Net profit after deducting non-recurring gains and losses attributable to ordinary shareholders Weighted average Earnings per share return on net assets (%) Basic earnings per share Diluted earnings per share

393 APPENDIX V AUDITED FINANCIAL STATEMENTS OF CHINA COAL SOLUTION (SINGAPORE) PTE. LTD. AND ITS SUBSIDIARIES FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012 The information in this Appendix V has been reproduced from the auditor s report on the financial statements of China Coal Solution (Singapore) Pte. Ltd. and its subsidiaries for the financial year ended 31 December 2012 and has not been specifically prepared for inclusion in this Information Memorandum. 391

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428 APPENDIX VI AUDITED FINANCIAL STATEMENTS OF CHINA COAL SOLUTION (SINGAPORE) PTE. LTD. AND ITS SUBSIDIARIES FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013 The information in this Appendix VI has been reproduced from the auditor s report on the financial statements of China Coal Solution (Singapore) Pte. Ltd. and its subsidiaries for the financial year ended 31 December 2013 and has not been specifically prepared for inclusion in this Information Memorandum. 426

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