ENGLISH TRANSLATION OF FINANCIAL STATEMENTS FOR THE YEAR 1 JANUARY 2017 TO 31 DECEMBER 2017 IF THERE IS ANY CONFLICT BETWEEN THE CHINESE VERSION AND ITS ENGLISH TRANSLATION, THE CHINESE VERSION WILL PREVAIL
KPMG Huazhen LLP 8th Floor, KPMG Tower Oriental Plaza 1 East ChangAn Avenue Beijing 100738 China Telephone +86 (10) 8508 5000 Fax +86 (10) 8518 5111 Internet kpmg.com/cn 毕马威华振会计师事务所 ( 特殊普通合伙 ) 中国北京东长安街 1 号东方广场毕马威大楼 8 层邮政编码 :100738 电话 +86 (10) 8508 5000 传真 +86 (10) 8518 5111 网址 kpmg.com/cn AUDITOR S REPORT 毕马威华振审字第 1802243 号 The Shareholders of : Opinion We have audited the accompanying financial statements of ( Wuhan Boiler Company ), which comprise the consolidated and company balance sheets as at 31 December 2017, the consolidated and company income statements, the consolidated and company cash flow statements, the consolidated and company statements of changes in shareholders equity for the year then ended, and notes to the financial statements. In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated and company financial position of Wuhan Boiler Company as at 31 December 2017, and the consolidated and company financial performance and cash flows of Wuhan Boiler Company for the year then ended in accordance with Accounting Standards for Business Enterprises issued by the Ministry of Finance of the People s Republic of China. Basis for Opinion We conducted our audit in accordance with China Standards on Auditing for Certified Public Accountants ( CSAs ). Our responsibilities under those standards are further described in the Auditor s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of Wuhan Boiler Company in accordance with the China Code of Ethics for Certified Public Accountants ( the Code ), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. The auditor s report and the accompanying financial statements are English translation of the corresponding Chinese version. If there is any conflict between the Chinese version and its English translation, the Chinese version will prevail. Page 1 of 4
AUDITOR S REPORT (continued) 毕马威华振审字第 1802243 号 Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with the Accounting Standards for Business Enterprises, and for the design, implementation and maintenance of such internal control necessary to enable that the financial statements are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing Wuhan Boiler Company s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate Wuhan Boiler Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing Wuhan Boiler Company s financial reporting process. Auditor s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with CSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with CSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit 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 Wuhan Boiler Company s internal control. The auditor s report and the accompanying financial statements are English translation of the corresponding Chinese version. If there is any conflict between the Chinese version and its English translation, the Chinese version will prevail. Page 2 of 4
AUDITOR S REPORT (continued) 毕马威华振审字第 1802243 号 Auditor s Responsibilities for the Audit of the Financial Statements (continued) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on Wuhan Boiler Company s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor s report. However, future events or conditions may cause Wuhan Boiler Company to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within Wuhan Boiler Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. The auditor s report and the accompanying financial statements are English translation of the corresponding Chinese version. If there is any conflict between the Chinese version and its English translation, the Chinese version will prevail. Page 3 of 4
AUDITOR S REPORT (continued) 毕马威华振审字第 1802243 号 Auditor s Responsibilities for the Audit of the Financial Statements (continued) We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. KPMG Huazhen LLP Certified Public Accountants Registered in the People s Republic of China Wang Wenli Beijing, China Yang Li Date: 24 April 2018 The auditor s report and the accompanying financial statements are English translation of the corresponding Chinese version. If there is any conflict between the Chinese version and its English translation, the Chinese version will prevail. Page 4 of 4
Consolidated balance sheet as at 31 December 2017 (Expressed in Renminbi Yuan) Assets Note 2017 2016 Current assets Cash at bank V.1 96,112,619.64 16,517,402.72 Financial assets at fair value through profit or loss V.46 5,935.82 - Bills receivable V.2 70,230,066.61 79,452,000.00 Accounts receivable V.3 63,922,312.54 270,180,404.46 Prepayments V.4 17,031,061.84 111,065,769.39 Other receivables V.5 8,417,521.21 13,642,890.58 Inventories V.6 188,873,182.09 64,748,400.29 Other current assets V.7 35,855,153.17 43,648,647.66 Total current assets 480,447,852.92 599,255,515.10 ------------------------ ------------------------ Non-current assets Fixed assets V.8 638,252,905.72 666,328,226.59 Construction in progress V.9 167,521.37 487,631.32 Intangible assets V.10 56,646,107.97 60,584,933.95 Deferred tax assets V.11 23,467,677.98 36,128,496.90 Other non-current assets V.46 1,744,903.95 3,218,824.21 Total non-current assets 720,279,116.99 766,748,112.97 ------------------------ ------------------------ Total assets 1,200,726,969.91 1,366,003,628.07 The notes on pages 23 to 102 form part of these financial statements. 1
Consolidated balance sheet as at 31 December 2017 (continued) (Expressed in Renminbi Yuan) Liabilities and shareholders equity Note 2017 2016 Current liabilities Short-term loans V.12 1,624,800,000.00 1,489,590,000.00 Financial liabilities at fair value through profit or loss V.46 716,317.43 - Bills payable V.13 99,911,367.88 130,619,704.26 Accounts payable V.14 329,921,660.91 292,624,858.43 Advances from customers V.15 255,926,770.40 659,771,587.39 Employee benefits payable V.16 13,969,778.38 9,496,707.89 Taxes payable V.17 5,810,947.64 14,485,260.65 Interest payable V.18 1,704,036.82 3,191,324.34 Dividends payable V.19 562,000.00 562,000.00 Other payables V.20 106,746,820.52 106,582,211.90 Other current liabilities V.21 11,620,345.76 31,875,499.06 Total current liabilities 2,451,690,045.74 2,738,799,153.92 ------------------------ ------------------------ Non-current liabilities Long-term employee benefits payable V.22 17,616,135.28 20,576,911.56 Deferred income V.23 11,203,632.00 11,481,408.00 Other non-current liabilities V.24 1,950,253.64 4,224,109.81 Total non-current liabilities 30,770,020.92 36,282,429.37 ------------------------ ------------------------ Total liabilities 2,482,460,066.66 2,775,081,583.29 ------------------------ ------------------------ The notes on pages 23 to 102 form part of these financial statements. 2
Consolidated balance sheet as at 31 December 2017 (continued) (Expressed in Renminbi Yuan) Liabilities and shareholders equity (continued) Note 2017 2016 Shareholders equity Share capital V.25 297,000,000.00 297,000,000.00 Capital reserve V.26 174,659,407.46 174,659,407.46 Other comprehensive income V.27 2,935,272.11 3,492,272.11 Specific reserve V.28 - - Surplus reserve V.29 39,418,356.83 39,418,356.83 Retained earnings ( - Accumulated loss) V.30 (1,795,851,139.58) (1,923,770,307.07) Total equity attributable to shareholders of the Company (1,281,838,103.18) (1,409,200,270.67) Non-controlling interests 105,006.43 122,315.45 Total shareholders equity (1,281,733,096.75) (1,409,077,955.22) ------------------------ ------------------------ Total liabilities and shareholders equity 1,200,726,969.91 1,366,003,628.07 These financial statements were approved by the Board of Directors. Stuart Adam Connor Legal Representative Feng Zheng The person in charge of accounting affairs Zhang Ke The head of the accounting department (Signature and stamp) (Signature and stamp) (Signature and stamp) (Company stamp) Date: 24 April 2018 The notes on pages 23 to 102 form part of these financial statements. 3
Company balance sheet as at 31 December 2017 (Expressed in Renminbi Yuan) Assets Note 2017 2016 Current assets Cash at bank 93,245,025.92 13,658,394.87 Financial assets at fair value through profit or loss 5,935.82 - Bills receivable 70,230,066.61 79,452,000.00 Accounts receivable XIII.1 63,922,312.54 270,180,404.46 Prepayments 17,031,061.84 111,065,769.39 Other receivables XIII.2 8,636,014.56 13,929,491.61 Inventories 188,873,182.09 64,748,400.29 Other current assets 35,855,153.17 43,648,647.66 Total current assets 477,798,752.55 596,683,108.28 ------------------------ ------------------------ Non-current assets Long-term equity investments XIII.3 24,984,500.00 24,984,500.00 Fixed assets 638,409,882.71 666,485,203.58 Construction in progress 167,521.37 487,631.32 Intangible assets 56,646,107.97 60,584,933.95 Deferred tax assets 23,467,677.98 36,128,496.90 Other non-current assets 1,744,903.95 3,218,824.21 Total non-current assets 745,420,593.98 791,889,589.96 ------------------------ ------------------------ Total assets 1,223,219,346.53 1,388,572,698.24 The notes on pages 23 to 102 form part of these financial statements. 4
Company balance sheet as at 31 December 2017 (continued) (Expressed in Renminbi Yuan) Liabilities and shareholders equity Note 2017 2016 Current liabilities Short-term loans 1,624,800,000.00 1,489,590,000.00 Financial liabilities at fair value through profit or loss 716,317.43 - Bills payable 99,911,367.88 130,619,704.26 Accounts payable 330,357,660.91 293,060,858.43 Advances from customers 255,926,770.40 659,771,587.39 Employee benefits payable 13,800,182.40 9,327,111.91 Taxes payable 5,810,947.64 14,485,260.65 Interest payable 1,704,036.82 3,191,324.34 Other payables 144,619,513.84 144,454,905.22 Other current liabilities 11,620,345.76 31,875,499.06 Total current liabilities 2,489,267,143.08 2,776,376,251.26 ------------------------ ------------------------ Non-current liabilities Long-term employee benefits payable 17,616,135.28 20,576,911.56 Deferred income 11,203,632.00 11,481,408.00 Other non-current liabilities 1,950,253.64 4,224,109.81 Total non-current liabilities 30,770,020.92 36,282,429.37 ------------------------ ------------------------ Total liabilities 2,520,037,164.00 2,812,658,680.63 ------------------------ ------------------------ The notes on pages 23 to 102 form part of these financial statements. 5
Company balance sheet as at 31 December 2017 (continued) (Expressed in Renminbi Yuan) Liabilities and shareholders equity (continued) Note 2017 2016 Shareholders equity Share capital 297,000,000.00 297,000,000.00 Capital reserve 174,854,304.12 174,854,304.12 Other comprehensive income 2,935,272.11 3,492,272.11 Specific reserve - - Surplus reserve 39,418,356.83 39,418,356.83 Retained earnings ( - Accumulated loss) (1,811,025,750.53) (1,938,850,915.45) Total shareholders equity (1,296,817,817.47) (1,424,085,982.39) ------------------------ ------------------------ Total liabilities and shareholders equity 1,223,219,346.53 1,388,572,698.24 These financial statements were approved by the Board of Directors. Stuart Adam Connor Legal Representative Feng Zheng The person in charge of accounting affairs Zhang Ke The head of the accounting department (Signature and stamp) (Signature and stamp) (Signature and stamp) (Company stamp) Date: 24 April 2018 The notes on pages 23 to 102 form part of these financial statements. 6
Consolidated income statement for the year ended 31 December 2017 (Expressed in Renminbi Yuan) Note 2017 2016 I. Operating income V.31 1,469,899,569.27 1,444,699,375.15 II. Less: Operating costs V.31 1,212,631,364.34 1,317,040,691.00 Taxes and surcharges V.32 16,519,160.71 22,433,259.69 Selling and distribution expenses V.33 15,006,300.60 20,089,020.39 General and administrative expenses V.34 32,180,432.07 30,394,378.94 Financial expenses V.35 66,178,776.65 65,924,950.32 Impairment losses ( - Reversal of impairment) V.36 (32,841,484.62) (45,594,297.08) Add: Gains from changes in fair value ( - for losses) V.37 (2,782,431.88) (6,081,965.69) Investment income ( - for losses) V.38 (28,194,760.08) - Including: Income from investment in associates and joint ventures - - Other income V.39 2,846,811.00 - III. Operating profit ( - for losses) 132,094,638.56 28,329,406.20 Add: Non-operating income V.40 8,468,038.83 5,133,351.55 Less: Non-operating expenses V.40-240,537.44 IV. Profit before income tax ( - for losses) 140,562,677.39 33,222,220.31 Less: Income tax expenses V.41 12,660,818.92 27,774,437.93 V. Net profit for the year ( - for net losses) 127,901,858.47 5,447,782.38 ------------------------ ------------------------ (1) Net profit classified by continuity of operations 1. Net profit from continuing operations ( - for losses) 127,901,858.47 5,447,782.38 2. Net profit from discontinued operations ( - for losses) - - (2) Net profit classified by ownership 1. Non-controlling interests (17,309.02) (140,420.35) 2. Shareholders of the Company 127,919,167.49 5,588,202.73 The notes on pages 23 to 102 form part of these financial statements. 7
Consolidated income statement for the year ended 31 December 2017 (continued) (Expressed in Renminbi Yuan) Note 2017 2016 VI. Other comprehensive income, net of tax V.27 (557,000.00) 904,000.00 Other comprehensive income (net of tax) attributable to shareholders of the Company (557,000.00) 904,000.00 (1) Items that will not be reclassified to profit or loss: (557,000.00) 904,000.00 1. Remeasurement of defined benefit plan liability (557,000.00) 904,000.00 ------------------------ ------------------------ The notes on pages 23 to 102 form part of these financial statements. 8
Consolidated income statement for the year ended 31 December 2017 (continued) (Expressed in Renminbi Yuan) Note 2017 2016 VII. Total comprehensive income for the year 127,344,858.47 6,351,782.38 Attributable to: Shareholders of the Company 127,362,167.49 6,492,202.73 Non-controlling interests (17,309.02) (140,420.35) VIII. Earnings per share (1) Basic earnings per share V.42 0.43 0.02 (2) Diluted earnings per share V.42 0.43 0.02 These financial statements were approved by the Board of Directors. Stuart Adam Connor Legal Representative Feng Zheng The person in charge of accounting affairs Zhang Ke The head of the accounting department (Signature and stamp) (Signature and stamp) (Signature and stamp) (Company stamp) Date: 24 April 2018 The notes on pages 23 to 102 form part of these financial statements. 9
Company income statement for the year ended 31 December 2017 (Expressed in Renminbi Yuan) Note 2017 2016 I. Operation income XIII.4 1,469,899,569.27 1,444,699,375.15 Less: Operating costs XIII.4 1,212,631,364.34 1,317,040,691.00 Taxes and surcharges 16,519,160.71 22,433,259.69 Selling and distribution expenses 15,006,300.60 20,089,020.39 General and administrative expenses 32,180,432.07 30,394,378.94 Financial expenses 66,186,924.52 65,933,280.09 Impairment losses ( - Reversal of impairment) (32,772,938.94) (45,386,229.43) Add: Gains from changes in fair value ( - for losses) (2,782,431.88) (6,081,965.69) Investment income ( - for losses) (28,194,760.08) - Including: Income from investments in associates and joint ventures - - Other income 2,846,811.00 - II. Operating profit ( - for losses) 132,017,945.01 28,113,008.78 Add: Non-operating income 8,468,038.83 5,133,351.55 Less: Non-operating expenses - 240,537.44 III. Profit before income tax ( - for losses) 140,485,983.84 33,005,822.89 Less: Income tax expenses 12,660,818.92 27,774,437.93 IV. Net profit for the year ( - for net losses) 127,825,164.92 5,231,384.96 The notes on pages 23 to 102 form part of these financial statements. 10
Company income statement for the year ended 31 December 2017 (continued) (Expressed in Renminbi Yuan) Note 2017 2016 V. Other comprehensive income, net of tax (557,000.00) 904,000.00 Items that will not be reclassified to profit or loss: (557,000.00) 904,000.00 - Remeasurement of defined benefit plan liability (557,000.00) 904,000.00 VI. Total comprehensive income for the year 127,268,164.92 6,135,384.96 These financial statements were approved by the Board of Directors of the Company. Stuart Adam Connor Legal Representative Feng Zheng The person in charge of accounting affairs Zhang Ke The head of the accounting department (Signature and stamp) (Signature and stamp) (Signature and stamp) (Company stamp) Date: 24 April 2018 The notes on pages 23 to 102 form part of these financial statements. 11
Consolidated cash flow statement for the year ended 31 December 2017 (Expressed in Renminbi Yuan) Note 2017 2016 I. Cash flows from operating activities: Proceeds from sale of goods and rendering of services 1,433,569,704.25 1,290,923,924.96 Refund of taxes 59,640,714.00 47,836,992.91 Proceeds from other operating activities V.44(1) 11,033,655.03 45,650,493.30 Sub-total of cash inflows 1,504,244,073.28 1,384,411,411.17 ------------------------ ------------------------ Payment for goods and services (1,187,740,309.12) (1,185,753,689.66) Payment to and for employees (208,872,552.81) (186,887,484.67) Payment of various taxes (22,528,812.43) (39,276,146.76) Payment for other operating activities V.44(2) (40,559,113.08) (50,754,513.89) Sub-total of cash outflows (1,459,700,787.44) (1,462,671,834.98) ------------------------ ------------------------ Net cash inflow / (outflow) from operating activities V.45(1) 44,543,285.84 (78,260,423.81) ------------------------ ------------------------ The notes on pages 23 to 102 form part of these financial statements. 12
Consolidated cash flow statement for the year ended 31 December 2017 (continued) (Expressed in Renminbi Yuan) Note 2017 2016 II. Cash flows from investing activities: Net proceeds from disposal of fixed assets, intangible assets and other long-term assets 3,418.80 138,841.51 Proceeds from other investing activities V.44(3) 196,390.21 246,218.17 Sub-total of cash inflows 199,809.01 385,059.68 ------------------------ ------------------------ Payment for acquisition of fixed assets, intangible assets and other long-term assets (6,561,799.60) (10,002,369.09) Payment for other investing activities (28,194,292.12) - Sub-total of cash outflows (34,756,091.72) (10,002,369.09) ------------------------ ------------------------ Net cash outflow from investing activities (34,556,282.71) (9,617,309.41) ------------------------ ------------------------ The notes on pages 23 to 102 form part of these financial statements. 13
Consolidated cash flow statement for the year ended 31 December 2017 (continued) (Expressed in Renminbi Yuan) Note 2017 2016 III. Cash flows from financing activities: Proceeds from borrowings 470,000,000.00 604,509,993.00 Sub-total of cash inflows 470,000,000.00 604,509,993.00 ------------------------ ------------------------ Repayments of borrowings (334,790,000.00) (604,251,517.84) Payment for dividends, profit distributions or interest (58,285,279.68) (59,438,742.47) Sub-total of cash outflows (393,075,279.68) (663,690,260.31) ------------------------ ------------------------ Net cash inflow from financing activities 76,924,720.32 (59,180,267.31) ------------------------ ------------------------ The notes on pages 23 to 102 form part of these financial statements. 14
Consolidated cash flow statement for the year ended 31 December 2017 (continued) (Expressed in Renminbi Yuan) Note 2017 2016 IV. Effect of foreign exchange rate changes on cash and cash equivalents (7,316,506.53) (8,634,421.84) ------------------------ ------------------------ V. Net increase in cash and cash equivalents ( - for decreases) V.45(1) 79,595,216.92 (155,692,422.37) Add: Cash and cash equivalents at the beginning of the year 16,517,402.72 172,209,825.09 VI. Cash and cash equivalents at the end of the year V.45(2) 96,112,619.64 16,517,402.72 These financial statements were approved by the Board of Directors. Stuart Adam Connor Legal Representative Feng Zheng The person in charge of accounting affairs Zhang Ke The head of the accounting department (Signature and stamp) (Signature and stamp) (Signature and stamp) (Company stamp) Date: 24 April 2018 The notes on pages 23 to 102 form part of these financial statements. 15
Company cash flow statement for the year ended 31 December 2017 (Expressed in Renminbi Yuan) 2017 2016 I. Cash flows from operating activities: Proceeds from sale of goods and rendering of services 1,433,569,704.25 1,290,863,281.30 Refund of taxes 59,640,714.00 47,836,992.91 Proceeds from other operating activities 11,033,655.03 45,650,493.30 Sub-total of cash inflows 1,504,244,073.28 1,384,350,767.51 ------------------------ ------------------------ Payment for goods and services (1,187,740,309.12) (1,185,753,689.66) Payment to and for employees (208,872,552.81) (186,887,484.67) Payment of various taxes (22,528,812.43) (39,276,146.76) Payment for other operating activities (40,559,113.08) (50,698,750.23) Sub-total of cash outflows (1,459,700,787.44) (1,462,616,071.32) ------------------------ ------------------------ Net cash inflow / (outflow) from operating activities 44,543,285.84 (78,265,303.81) ------------------------ ------------------------ The notes on pages 23 to 102 form part of these financial statements. 16
Company cash flow statement for the year ended 31 December 2017 (continued) (Expressed in Renminbi Yuan) 2017 2016 II. Cash flows from investing activities: Net proceeds from disposal of fixed assets, intangible assets and other long-term assets 3,418.80 138,841.51 Proceeds from other investing activities 187,804.34 237,526.40 Sub-total of cash inflows 191,223.14 376,367.91 ------------------------ ------------------------ Payment for acquisition of fixed assets, intangible assets and other long-term assets (6,561,799.60) (10,002,369.09) Payment for other investing activities (28,194,292.12) - Sub-total of cash outflows (34,756,091.72) (10,002,369.09) ------------------------ ------------------------ Net cash outflow from investing activities (34,564,868.58) (9,626,001.18) ------------------------ ------------------------ The notes on pages 23 to 102 form part of these financial statements. 17
Company cash flow statement for the year ended 31 December 2017 (continued) (Expressed in Renminbi Yuan) III. 2017 2016 Cash flows from financing activities: Proceeds from borrowings 470,000,000.00 604,509,993.00 Sub-total of cash inflows 470,000,000.00 604,509,993.00 ------------------------ ------------------------ Repayments of borrowings (334,790,000.00) (604,251,517.84) Payment for dividends or interest (58,285,279.68) (59,438,742.47) Payment for other financing activities Sub-total of cash outflows (393,075,279.68) (663,690,260.31) ------------------------ ------------------------ IV. Net cash inflow from financing activities 76,924,720.32 (59,180,267.31) ------------------------ ------------------------ Effect of foreign exchange rate changes on cash and cash equivalents (7,316,506.53) (8,634,421.84) ------------------------ ------------------------ V. Net increase in cash and cash equivalents ( - for decreases) 79,586,631.05 (155,705,994.14) Add: Cash and cash equivalents at the beginning of the year 13,658,394.87 169,364,389.01 VI. Cash and cash equivalents at the end of the year 93,245,025.92 13,658,394.87 These financial statements were approved by the Board of Directors. Stuart Adam Connor Legal Representative Feng Zheng The person in charge of accounting affairs Zhang Ke The head of the accounting department (Signature and stamp) (Signature and stamp) (Signature and stamp) (Company stamp) Date: 24 April 2018 The notes on pages 23 to 102 form part of these financial statements. 18
Consolidated statement of changes in shareholders equity for the year ended 31 December 2017 (Expressed in Renminbi Yuan) Note Share capital Capital reserve Attributable to shareholders of the Company Other comprehensive income Specific reserve Surplus reserve Retained earnings Sub-total Non-controlling interests Total I. Balance at the beginning of the year 297,000,000.00 174,659,407.46 3,492,272.11-39,418,356.83 (1,923,770,307.07) (1,409,200,270.67) 122,315.45 (1,409,077,955.22) II. Changes in equity during the year ( - for decreases) - - (557,000.00) - - 127,919,167.49 127,362,167.49 (17,309.02) 127,344,858.47 1. Total comprehensive income - - (557,000.00) - - 127,919,167.49 127,362,167.49 (17,309.02) 127,344,858.47 2. Specific reserve V28 (1) Appropriation during the year - - - 3,369,899.57 - - 3,369,899.57-3,369,899.57 (2) Utilization during the year - - - (3,369,899.57) - - (3,369,899.57) - (3,369,899.57) III. Balance at the end of the year 297,000,000.00 174,659,407.46 2,935,272.11-39,418,356.83 (1,795,851,139.58) (1,281,838,103.18) 105,006.43 (1,281,733,096.75) These financial statements were approved by the Board of Directors. Stuart Adam Connor Legal Representative Feng Zheng The person in charge of accounting affairs Zhang Ke The head of the accounting department (Signature and stamp) (Signature and stamp) (Signature and stamp) (Company stamp) Date: 24 April 2018 The notes on pages 23 to 102 form part of these financial statements. 19
Consolidated statement of changes in shareholders equity for the year ended 31 December 2016 (Expressed in Renminbi Yuan) Note Share capital Capital reserve Attributable to shareholders of the Company Other comprehensive income Specific reserve Surplus reserve Retained earnings Sub-total Non-controlling interests Total I. Balance at the beginning of the year 297,000,000.00 174,659,407.46 2,588,272.11-39,418,356.83 (1,929,358,509.80) (1,415,692,473.40) 262,735.80 (1,415,429,737.60) II. Changes in equity during the year ( - for decreases) - - 904,000.00 - - 5,588,202.73 6,492,202.73 (140,420.35) 6,351,782.38 1. Total comprehensive income - - 904,000.00 - - 5,588,202.73 6,492,202.73 (140,420.35) 6,351,782.38 2. Specific reserve (1) Appropriation during the year - - - - - - - - - (2) Utilization during the year - - - - - - - - - III. Balance at the end of the year 297,000,000.00 174,659,407.46 3,492,272.11-39,418,356.83 (1,923,770,307.07) (1,409,200,270.67) 122,315.45 (1,409,077,955.22) These financial statements were approved by the Board of Directors. Stuart Adam Connor Legal Representative Feng Zheng The person in charge of accounting affairs Zhang Ke The head of the accounting department (Signature and stamp) (Signature and stamp) (Signature and stamp) (Company stamp) Date: 24 April 2018 The notes on pages 23 to 102 form part of these financial statements. 20
Company statement of changes in shareholders equity for the year ended 31 December 2017 (Expressed in Renminbi Yuan) Share capital Capital reserve Other comprehensive income Specific reserve Surplus reserve Retained earnings Total I. Balance at the beginning of the year 297,000,000.00 174,854,304.12 3,492,272.11-39,418,356.83 (1,938,850,915.45) (1,424,085,982.39) II. Changes in equity during the year ( - for decreases) - - (557,000.00) - - 127,825,164.92 127,268,164.92 1. Total comprehensive income - - (557,000.00) - - 127,825,164.92 127,268,164.92 2. Specific reserve (1) Appropriation during the year - - - 3,369,899.57 - - 3,369,899.57 (2) Utilization during the year - - - (3,369,899.57) - - (3,369,899.57) III. Balance at the end of the year 297,000,000.00 174,854,304.12 2,935,272.11-39,418,356.83 (1,811,025,750.53) (1,296,817,817.47) These financial statements were approved by the Board of Directors. Stuart Adam Connor Legal Representative Feng Zheng The person in charge of accounting affairs Zhang Ke The head of the accounting department (Signature and stamp) (Signature and stamp) (Signature and stamp) (Company stamp) Date: 24 April 2018 The notes on pages 23 to 102 form part of these financial statements. 21
Company statement of changes in shareholders equity for the year ended 31 December 2016 (Expressed in Renminbi Yuan) Share capital Capital reserve Other comprehensive income Specific reserve Surplus reserve Retained earnings Total I. Balance at the beginning of the year 297,000,000.00 174,854,304.12 2,588,272.11-39,418,356.83 (1,944,082,300.41) (1,430,221,367.35) II. Changes in equity during the year ( - for decreases) - - 904,000.00 - - 5,231,384.96 6,135,384.96 1. Total comprehensive income - - 904,000.00 - - 5,231,384.96 6,135,384.96 2. Specific reserve (1) Appropriation during the year - - - - - - - (2) Utilization during the year - - - - - - - III. Balance at the end of the year 297,000,000.00 174,854,304.12 3,492,272.11-39,418,356.83 (1,938,850,915.45) (1,424,085,982.39) These financial statements were approved by the Board of Directors. Stuart Adam Connor Legal Representative Feng Zheng The person in charge of accounting affairs Zhang Ke The head of the accounting department (Signature and stamp) (Signature and stamp) (Signature and stamp) (Company stamp) Date: 24 April 2018 The notes on pages 23 to 102 form part of these financial statements. 22
Notes to the financial statements (Expressed in Renminbi Yuan unless otherwise indicated) I. Company status (the Company ) is a company limited by shares established in Wuhan with its head office located at Wuhan. The parent of the Company is ALSTOM (China) Investment Co., Ltd., and its ultimate holding company is General Electric Company. The principal activities of the Company and its subsidiary (referred to as the Group ) are research, design, development and manufacturing of power plant boilers, special boilers, pressure vessel of Type Ⅰ, Ⅱ and Ⅲ, boiler auxiliary equipment and desulphurization equipment, and sales of self-manufactured product (related governmental permit shall be obtained before engaging in the projects required mandatory license). No changes occurred to the main business model and business line of the Company in the report period. Please refer to Note VI for details of the subsidiary of the Company. No change occurred to the Group s subsidiary during the reporting period. II. Basis of preparation As at 31 December 2017, the Group suffered an accumulated loss of RMB1,795,851,139,58, its total liabilities exceeded its total assets by RMB1,281,733,096.75 and its current liabilities exceeded its current assets by RMB1,971,242,192.82. The Group has reviewed the current performance and cashflow projections as part of assessment of its ability to continue as a going concern, and after carefully considering the matters described below, the Group has a reasonable expectation that it is able to continue as a going concern for at least next twelve months from the end of the reporting period and to meet its obligations, as and when they fall due, having regard to the following: - the Group generated net cash inflows from operating activities of RMB44,543,285.84 during the year ended 31 December 2017 and expects to continue to improve its working capital management and generate positive operating cash flows for the next twelve months; - As at 31 December 2017, the Group s main liability is the entrusted loan provided by the parent company, ALSTOM (China) Investment Co., Ltd., the loan balance is RMB1,624,800,000.00 and the total loan facility is RMB1,800,000,000.00. The loan is renewable. - GE Albany Global Holding B.V., the controlling shareholder of ALSTOM (China) Investment Co., Ltd., confirms to provide adequate financial support to the Group as is necessary to ensure its continuing operation for a period of at least twelve months from the end of the reporting period. 23
Consequently, the Group has adequate resources to continue in operational existence for the foreseeable future and that there are no material uncertainties related to events or conditions which, individually or collectively, may cast significant doubt on the Group s ability to continue as a going concern. Thus, the financial statements have been prepared on the going concern basis. III. Significant accounting policies and accounting estimates 1 Statement of compliance The financial statements have been prepared in accordance with the requirements of Accounting Standards for Business Enterprises or referred to as China Accounting Standards ( CAS ) issued by the Ministry of Finance ( MOF ). These financial statements present truly and completely the consolidated financial position and financial position of the Company as at 31 December 2017, and the consolidated financial performance and financial performance and the consolidated cash flows and cash flows of the Company for the year ended. These financial statements also comply with the disclosure requirements of Regulation on the Preparation of Information Disclosures by Companies Issuing Securities, No. 15: General Requirements for Financial Reports as revised by the China Securities Regulatory Commission ( CSRC ) in 2014. 2 Accounting period The accounting period is from 1 January to 31 December. 3 Operating cycle The normal operating cycle starts from the purchase of the assets / materials to the realization of sales revenue (receiving the cash and cash equivalents). Due to the characteristics of the industry the Group is involved, the construction cycle of the real estate projects is longer than one year. The normal operating cycle is 2 or 3 years in general. The Group classifies the relevant assets as the current assets despite the fact that it takes more than one year to realize, sale / consume these assets, likewise, the liabilities settled more one year later than the balance sheet date are classified as current liabilities. Besides, the Group s other business cycle is within one year. For the business cycle is less than one year, the assets and liabilities are classified as current assets and current liabilities when the assets converted and the liabilities settled within one year. 4 Functional currency The Group s functional currency is Renminbi and these financial statements are presented in Renminbi. Functional currency is determined by the Group and its subsidiary on the basis of the currency in which major income and costs are denominated and settled. 24
5 Consolidated financial statements (1) General principles The scope of consolidated financial statements is based on control and the consolidated financial statements comprise the financial statements for the year ended 31 December 2017 of the Company and its subsidiary. A subsidiary is an entity that is controlled by the Group (such as enterprises, deemed separate branch, and structured entities controlled by the Group). Control exists when the investor has all of following: power over the investee; exposure, or rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. When assessing whether the Group has power, only substantive rights (held by the Group and other parties) are considered. Non-controlling interests are presented separately in the consolidated balance sheet within shareholders equity. Net profit or loss attributable to non-controlling shareholders is presented separately in the consolidated income statement below the net profit line item. Total comprehensive income attributable to non-controlling shareholders is presented separately in the consolidated income statement below the total comprehensive income line item. When the amount of loss for the current period attributable to the non-controlling shareholders of a subsidiary exceeds the non-controlling shareholders share of the opening owners equity of the subsidiary, the excess is still allocated against the noncontrolling interests. (2) Preparation of consolidated financial statements The consolidated financial statements are prepared by the Group, based on the financial statements of the Company and its subsidiary, according to other relevant information. Considering the Group as one accounting entity, the Company prepares the consolidated financial statements to reflect the financial position, the operating results and the cash flows of the entire group in accordance with the unified accounting policy, as well as the recognition, measurement and presentation requirements of the relevant accounting standards. When the accounting period or accounting policies of a subsidiary are different from those of the Company, the Company makes necessary adjustments to the financial statements of the subsidiary based on the Company s own accounting period or accounting policies. Where a subsidiary was acquired during the reporting period, through a business combination involving entities not under common control, the identifiable assets and liabilities of the acquired subsidiaries are included in the scope of consolidation from the date that control commences, based on the fair value of those identifiable assets and liabilities at the acquisition date. 6 Recognition standards for cash and cash equivalents Cash comprises cash on hand and deposits that can be readily drawn on demand. Cash equivalents are the short-term (normally matured within three months after purchase date), highly-liquid investment which is readily convertible into known amounts of cash, subject to an insignificant risk of fluctuation in value. 25
7 Foreign currency business and translations of financial statements in foreign currencies Any foreign currency transaction is converted into the reporting currency according to the spot rate on the occurrence date of the transaction. The Group prepares monetary items and non-monetary items in accordance with the following provisions: Monetary items denominated in foreign currencies are translated to Renminbi at the spot exchange rate at the balance sheet date. Foreign exchange gains and losses arising from the difference between the balance sheet date exchange rate and the exchange rate ruling at the time of initial recognition or the exchange rate ruling at the last balance sheet date are recognized in income statement; Non-monetary items that are measured at historical cost in foreign currencies are translated to Renminbi using the exchange rate at the transaction date. Non-monetary items that are measured at fair value in foreign currencies are translated using the exchange rate at the date the fair value is determined. The resulting exchange differences (Including exchange rate variations) are recognised in profit or loss. During the capitalization period, exchange differences on the principal and interest of foreign currency specific borrowings are capitalized and included in the cost of assets eligible for capitalization. 8 Financial instruments (1) Recognition of financial instrument The Group recognizes a financial asset or financial liability on its balance sheet when, and only when, the Group becomes a contractual party of financial instrument. (2) Classification and measurement of financial assets (a) For the purpose of risks management, investment strategies and objective of holding the financial assets and for other reasons, the Group classifies the financial assets into the following four Category: financial assets at fair value through profit or loss, held-tomaturity investments, loans and receivables and available-for-sale financial assets. - Financial assets at fair value through profit or loss A financial asset is classified as at fair value through profit or loss if it is acquired or incurred principally for the purpose of selling or repurchasing in the near term or if it is a derivative, unless the derivative is a designated and effective hedging instrument, or a financial guarantee contract, or a derivative that is linked to and must be settled by delivery of an equity instrument that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured. - Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Group has the positive intention and ability to hold to maturity. - Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. 26
- Available-for-sale financial assets Available-for-sale financial assets are those non-derivative financial assets that are designated as available for sale and other financial assets which do not fall into any of the above categories. Once the initial recognition of a certain financial asset has been classified as financial assets at fair value through profit or loss by the Group, it shall not be reclassified as other financial assets; other financial assets could not be reclassified as financial assets at fair value through profit or loss. The Group did not hold available-for-sale financial assets and held-to-maturity investments during the reporting period and the comparative period. (b) (c) The financial assets are initially recognized at fair value. In the case of financial assets at fair value through profit or loss, the related transaction costs are recognized in profit or loss for the current period. For other financial assets, transaction costs that are attributable to the acquisition of the financial assets are included in the initial recognition amounts. Subsequently measurement - Financial assets at fair value through profit or loss include financial assets held for trading and those designated upon initial recognition as at fair value through profit or loss. This kind of financial assets are subsequently measured at fair value, all realized and unrealized gains and losses arising from a change in the fair value of a financial asset are recognized in profit or loss for the current period. - Loans and receivables are subsequently measured at amortized cost using the effective interest method. Gains or losses arising from de-recognition, impairment or amortization are recognized in profit or loss for the current period. (d) Impairment of financial assets For the calculation method of impairment of receivables, refer to Note III.10. The impairment of other financial assets is measured as follows: - The Group assesses the carrying amount of the financial assets except the financial asset at fair value through profit or loss at each balance sheet date, if there is any objective evidence that a financial asset or group of financial assets is impaired, the Group shall recognize impairment loss. - The objective evidences that the Group uses to determine the impairment are as follows. (i) (ii) (iii) Significant financial difficulty of the issuer or obligor; A breach of contract, such as a default or delinquency in interest or principal payments; The lender, for economic or legal reasons relating to the borrower's financial difficulty, granting to the borrower a concession that the lender would not otherwise consider; 27
(iv) (v) (vi) It becomes probable that the borrower will enter bankruptcy or other financial reorganization; The disappearance of an active market for that financial asset because of financial difficulties; Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group, including: (I) Adverse changes in the payment status of borrowers in the group or (ii) an increase in the unemployment rate in the geographical area of the borrowers, a decrease in property prices for mortgages in the relevant area, or adverse changes in industry conditions that affect the borrowers. (vii) Significant changes with an adverse effect that have taken place in the technological, market, economic or legal environment in which the borrower operates, and indicates that the cost of the investment in the equity instrument may not be recovered; (viii) A significant or non-temporary decrease in fair value of equity investment instruments; (ix) (x) Other objective evidences showing the impairment of the financial assets. Provision for impairment of loans and receivables (financial assets subsequently measured at amortized cost) is recognized in the profit or loss for the current period, based on the difference between the expected future cash flow of the financial asset and its book value. For the method of impairment provision of accounts receivables, refer to Note Ⅲ.16. (3) Classification and measurement of financial liabilities (a) The Group s financial liabilities are classified as: financial liabilities at fair value through profit or loss or other financial liabilities. Financial liabilities at fair value through profit or loss include trading financial liabilities and financial liabilities designated as at fair value through profit or loss in the initial recognition. A financial liability is classified as at fair value through profit or loss if it is acquired or incurred principally for the purpose of selling or repurchasing in the near term or if it is a derivative, unless the derivative is a designated and effective hedging instrument, or a financial guarantee contract, or a derivative that is linked to and must be settled by delivery of an equity instrument that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured. Once the initial recognition of a certain financial liability has been classified as financial liabilities at fair value through profit or loss by the Group, it shall not be reclassified as other financial liabilities; other financial liabilities could not be reclassified as financial liabilities at fair value through profit or loss. 28
(b) (c) Financial liabilities are initially measured at fair value. For the financial liabilities at fair value through profit or loss at its fair value, relevant transaction costs are recognized as expense when it incurred. For the other financial liabilities, relevant transaction costs are recognized as costs. Subsequent measurement of financial liabilities - Financial liabilities at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss. - Other financial liabilities are measured by amortized cost using effective interest rate. (4) Disclosure of financial assets and financial liabilities Financial assets and financial liabilities are separately presented in the balance sheet and are not offset by each other. However, if the following conditions are satisfied, the net amount after offsetting each other shall be listed in the balance sheet: - The Group has the legal right to offset the confirmed amount, and the legal right is currently enforceable; - The Group plans to have net settlement, or realize the financial assets and liquidate the financial liabilities at the same time. (5) Termination of recognition of financial liabilities When one of the following conditions is met, the Group derecognizes the financial asset: - Termination of contractual rights to receive cash flows from this financial asset; - The financial assets have been transferred, and the Group transfers almost all the risks and rewards of ownership of the financial assets to the transferee. - The financial asset has been transferred. Although the Group has neither transferred nor retained almost all risks and rewards of ownership of the financial asset, it has given up control of the financial asset. If the overall transfer of financial assets satisfies the conditions for termination of recognition, the Group shall account the difference between the following two amounts in the current profit and loss: - Book value of the transferred financial assets. - The consideration received due to the transfer. If all or part of the current obligations of a financial liability have been discharged, the Group derecognizes the financial liability fully or partly. 29